Guarantor Non-Guarantor Subsidiary Financial Information

6 Months Ended

Jun. 30, 2014

Guarantor Non Guarantor Subsidary Financial Information [Abstract]

Guarantees [Text Block]

Guarantor/Non-Guarantor Subsidiary Financial Information

The Company and certain of its U.S. subsidiaries guarantee debt issued by its wholly owned subsidiaries Hexion Nova Scotia, ULC and Hexion U.S. Finance Corporation (together, the “Subsidiary Issuers”), which includes the 6.625% First-Priority Senior Secured Notes due 2020, 8.875% Senior Secured Notes due 2018 and the 9.00% Second-Priority Senior Secured Notes due 2020.

The following information contains the condensed consolidating financial information for MSC (the parent), the Subsidiary Issuers, the combined subsidiary guarantors (Momentive Specialty Chemical Investments Inc.; Borden Chemical Foundry, LLC; Lawter International, Inc.; HSC Capital Corporation; Momentive International, Inc.; Momentive CI Holding Company; NL COOP Holdings LLC and Oilfield Technology Group, Inc.) and the combined non-guarantor subsidiaries, which includes all of the Company’s foreign subsidiaries.

All of the Subsidiary Issuers and Subsidiary Guarantors are 100% owned by MSC. All guarantees are full and unconditional, and are joint and several. There are no significant restrictions on the ability of the Company to obtain funds from its domestic subsidiaries by dividend or loan. While the Company’s Australian and Brazilian subsidiaries are restricted in the payment of dividends and intercompany loans due to the terms of their credit facilities, there are no material restrictions on the Company’s ability to obtain cash from the remaining non-guarantor subsidiaries.

This information includes allocations of corporate overhead to the combined non-guarantor subsidiaries based on net sales. Income tax expense has been provided on the combined non-guarantor subsidiaries based on actual effective tax rates.

MOMENTIVE SPECIALTY CHEMICALS INC.

JUNE 30, 2014

CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers		Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents (including restricted cash of $0, $0 and $16, respectively)	$	30		$	2	$	—		$	103		$	—		$	135
Short-term investments	—			—		—			4			—			4
Accounts receivable, net	213			3		2			510			—			728
Intercompany accounts receivable	115			89		—			370			(574		)	—
Intercompany loans receivable - current portion	211			—		—			245			(456		)	—
Inventories:
Finished and in-process goods	124			—		—			207			—			331
Raw materials and supplies	65			—		—			89			—			154
Other current assets	23			—		—			45			—			68
Total current assets	781			94		2			1,573			(1,030		)	1,420
Investment in unconsolidated entities	359			—		32			30			(372		)	49
Deferred income taxes	—			—		—			19			—			19
Other assets, net	23			58		1			56			—			138
Intercompany loans receivable	1,165			3,364		30			2,517			(7,076		)	—
Property and equipment, net	517			—		—			565			—			1,082
Goodwill	66			—		—			60			—			126
Other intangible assets, net	59			—		—			32			—			91
Total assets	$	2,970		$	3,516	$	65		$	4,852		$	(8,478	)	$	2,925
Liabilities and (Deficit) Equity
Current liabilities:
Accounts payable	$	160		$	—	$	—		$	350		$	—		$	510
Intercompany accounts payable	136			4		—			434			(574		)	—
Debt payable within one year	20			—		—			117			—			137
Intercompany loans payable within one year	56			—		—			400			(456		)	—
Interest payable	9			73		—			1			—			83
Income taxes payable	4			—		—			13			—			17
Accrued payroll and incentive compensation	26			—		—			36			—			62
Other current liabilities	64			—		—			55			—			119
Total current liabilities	475			77		—			1,406			(1,030		)	928
Long-term liabilities:
Long-term debt	354			3,326		—			29			—			3,709
Intercompany loans payable	3,402			—		8			3,666			(7,076		)	—
Accumulated losses of unconsolidated subsidiaries in excess of investment	699			—		266			—			(965		)	—
Long-term pension and post employment benefit obligations	43			—		—			183			—			226
Deferred income taxes	8			2		—			12			—			22
Other long-term liabilities	105			6		—			46			—			157
Total liabilities	5,086			3,411		274			5,342			(9,071		)	5,042
Total Momentive Specialty Chemicals Inc. shareholders (deficit) equity	(2,116		)	105		(209		)	(489		)	593			(2,116		)
Noncontrolling interest	—			—		—			(1		)	—			(1		)
Total (deficit) equity	(2,116		)	105		(209		)	(490		)	593			(2,117		)
Total liabilities and (deficit) equity	$	2,970		$	3,516	$	65		$	4,852		$	(8,478	)	$	2,925

MOMENTIVE SPECIALTY CHEMICALS INC.

DECEMBER 31, 2013

CONDENSED CONSOLIDATING BALANCE SHEET

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers		Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents (including restricted cash of $0, $0 and $14, respectively)	$	165		$	5	$	—		$	223		$	—		$	393
Short-term investments	—			—		—			7			—			7
Accounts receivable, net	179			—		—			422			—			601
Intercompany accounts receivable	190			89		—			374			(653		)	—
Intercompany loans receivable - current portion	216			—		—			278			(494		)	—
Inventories:
Finished and in-process goods	105			—		—			152			—			257
Raw materials and supplies	38			—		—			65			—			103
Other current assets	27			—		—			45			—			72
Total current assets	920			94		—			1,566			(1,147		)	1,433
Investment in unconsolidated entities	351			—		29			28			(363		)	45
Deferred income taxes	—			—		—			21			—			21
Other assets, net	31			59		2			42			—			134
Intercompany loans receivable	1,251			3,355		29			4,221			(8,856		)	—
Property and equipment, net	491			—		—			556			—			1,047
Goodwill	52			—		—			60			—			112
Other intangible assets, net	47			—		—			35			—			82
Total assets	$	3,143		$	3,508	$	60		$	6,529		$	(10,366	)	$	2,874
Liabilities and (Deficit) Equity
Current liabilities:
Accounts payable	$	165		$	—	$	—		$	318		$	—		$	483
Intercompany accounts payable	130			—		—			523			(653		)	—
Debt payable within one year	20			—		—			89			—			109
Intercompany loans payable within one year	173			—		—			321			(494		)	—
Interest payable	10			72		—			1			—			83
Income taxes payable	4			—		—			8			—			12
Accrued payroll and incentive compensation	19			—		—			28			—			47
Other current liabilities	65			—		—			62			—			127
Total current liabilities	586			72		—			1,350			(1,147		)	861
Long term liabilities:
Long-term debt	309			3,326		—			30			—			3,665
Intercompany loans payable	3,388			—		7			5,461			(8,856		)	—
Accumulated losses of unconsolidated subsidiaries in excess of investment	762			—		261			—			(1,023		)	—
Long-term pension and post employment benefit obligations	50			—		—			184			—			234
Deferred income taxes	7			2		—			12			—			21
Other long-term liabilities	110			6		—			47			—			163
Total liabilities	5,212			3,406		268			7,084			(11,026		)	4,944
Total Momentive Specialty Chemicals Inc. shareholders (deficit) equity	(2,069		)	102		(208		)	(554		)	660			(2,069		)
Noncontrolling interest	—			—		—			(1		)	—			(1		)
Total (deficit) equity	(2,069		)	102		(208		)	(555		)	660			(2,070		)
Total liabilities and (deficit) equity	$	3,143		$	3,508	$	60		$	6,529		$	(10,366	)	$	2,874

MOMENTIVE SPECIALTY CHEMICALS INC.

THREE MONTHS ENDED JUNE 30, 2014

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	595		$	—		$	—	$	804		$	(62	)	$	1,337
Cost of sales	524			—			—		712			(62		)	1,174
Gross profit	71			—			—		92			—			163
Selling, general and administrative expense	27			—			—		68			—			95
Business realignment costs	10			—			—		2			—			12
Other operating expense (income), net	2			—			—		(3		)	—			(1		)
Operating income	32			—			—		25			—			57
Interest expense, net	7			67			—		2			—			76
Intercompany interest expense (income), net	44			(68		)	—		24			—			—
Other non-operating expense (income), net	5			—			—		(2		)	—			3
(Loss) income before income tax and (losses) earnings from unconsolidated entities	(24		)	1			—		1			—			(22		)
Income tax expense	—			—			—		11			—			11
(Loss) income before (losses) earnings from unconsolidated entities	(24		)	1			—		(10		)	—			(33		)
(Losses) earnings from unconsolidated entities, net of taxes	(3		)	—			5		1			3			6
Net (loss) income	$	(27	)	$	1		$	5	$	(9	)	$	3		$	(27	)
Comprehensive (loss) income	$	(29	)	$	—		$	6	$	(16	)	$	10		$	(29	)

MOMENTIVE SPECIALTY CHEMICALS INC.

THREE MONTHS ENDED JUNE 30, 2013

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	572		$	—		$	—		$	729		$	(51	)	$	1,250
Cost of sales	485			—			—			664			(51		)	1,098
Gross profit	87			—			—			65			—			152
Selling, general and administrative expense	29			—			—			60			—			89
Asset impairments	—			—			—			7			—			7
Business realignment costs	2			—			—			—			—			2
Other operating (income) expense, net	(1		)	—			—			6			—			5
Operating income (loss)	57			—			—			(8		)	—			49
Interest expense, net	8			67			—			1			—			76
Intercompany interest expense (income), net	47			(67		)	—			20			—			—
Other non-operating (income) expense, net	(8		)	—			—			6			—			(2		)
Income (loss) before income tax and (losses) earnings from unconsolidated entities	10			—			—			(35		)	—			(25		)
Income tax (benefit) expense	(4		)	—			—			10			—			6
Income (loss) before (losses) earnings from unconsolidated entities	14			—			—			(45		)	—			(31		)
(Losses) earnings from unconsolidated entities, net of taxes	(42		)	—			(17		)	1			61			3
Net loss	$	(28	)	$	—		$	(17	)	$	(44	)	$	61		$	(28	)
Comprehensive (loss) income	$	(43	)	$	1		$	(16	)	$	(62	)	$	77		$	(43	)

MOMENTIVE SPECIALTY CHEMICALS INC.

SIX MONTHS ENDED JUNE 30, 2014

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	1,173		$	—		$	—	$	1,576		$	(119	)	$	2,630
Cost of sales	1,029			—			—		1,393			(119		)	2,303
Gross profit	144			—			—		183			—			327
Selling, general and administrative expense	55			—			—		136			—			191
Business realignment costs	15			—			—		3			—			18
Other operating expense, net	3			—			—		—			—			3
Operating income	71			—			—		44			—			115
Interest expense, net	15			134			—		4			—			153
Intercompany interest expense (income), net	87			(136		)	—		49			—			—
Other non-operating expense, net	5			—			—		—			—			5
(Loss) income before income tax and (losses) earnings from unconsolidated entities	(36		)	2			—		(9		)	—			(43		)
Income tax (benefit) expense	(1		)	—			—		22			—			21
(Loss) income before (losses) earnings from unconsolidated entities	(35		)	2			—		(31		)	—			(64		)
(Losses) earnings from unconsolidated entities, net of taxes	(19		)	—			4		2			23			10
Net (loss) income	$	(54	)	$	2		$	4	$	(29	)	$	23		$	(54	)
Comprehensive (loss) income	$	(50	)	$	1		$	5	$	(25	)	$	19		$	(50	)

MOMENTIVE SPECIALTY CHEMICALS INC.

SIX MONTHS ENDED JUNE 30, 2013

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	1,109		$	—		$	—		$	1,437		$	(104	)	$	2,442
Cost of sales	949			—			—			1,302			(104		)	2,147
Gross profit	160			—			—			135			—			295
Selling, general and administrative expense	57			—			—			124			—			181
Asset impairments	—			—			—			7			—			7
Business realignment costs	6			—			—			5			—			11
Other operating expense (income), net	3			(4		)	—			3			—			2
Operating income (loss)	94			4			—			(4		)	—			94
Interest expense, net	18			128			—			4			—			150
Intercompany interest expense (income), net	91			(130		)	—			39			—			—
Loss on extinguishment of debt	2			—			—			4			—			6
Other non-operating expense (income), net	7			—			—			(4		)	—			3
(Loss) income before income tax and (losses) earnings from unconsolidated entities	(24		)	6			—			(47		)	—			(65		)
Income tax (benefit) expense	(42		)	1			—			15			—			(26		)
Income (loss) before (losses) earnings from unconsolidated entities	18			5			—			(62		)	—			(39		)
(Losses) earnings from unconsolidated entities, net of taxes	(50		)	—			(23		)	2			78			7
Net (loss) income	$	(32	)	$	5		$	(23	)	$	(60	)	$	78		$	(32	)
Comprehensive (loss) income	$	(60	)	$	5		$	(23	)	$	(78	)	$	96		$	(60	)

MOMENTIVE SPECIALTY CHEMICALS INC.

SIX MONTHS ENDED JUNE 30, 2014

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)

	Momentive Specialty Chemicals Inc.				Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries				Eliminations			Consolidated
Cash flows (used in) provided by operating activities	$	(267	)		$	(3	)	$	6		$	84			$	(6	)	$	(186	)
Cash flows provided by (used in) investing activities
Capital expenditures	(41		)		—			—			(37		)		—			(78		)
Acquisition of businesses	(52		)		—			—			(12		)		—			(64		)
Proceeds from sale of debt securities, net	—				—			—			3				—			3
Change in restricted cash	—				—			—			(2		)		—			(2		)
Disbursement of affiliated loan	—				—			—			(50		)		—			(50		)
Repayment of affiliated loan	—				—			—			50				—			50
Capital contribution to subsidiary	(16		)		—			(10		)	—				26			—
Investment in unconsolidated affiliates, net	—				—			—			(2		)		—			(2		)
Return of capital from subsidiary from sales of accounts receivable	186			(a)	—			—			—				(186		)	—
	77				—			(10		)	(50		)		(160		)	(143		)
Cash flows provided by (used in) financing activities
Net short-term debt borrowings	—				—			—			27				—			27
Borrowings of long-term debt	115				—			—			45				—			160
Repayments of long-term debt	(69		)		—			—			(48		)		—			(117		)
Net intercompany loan borrowings (repayments)	9				—			—			(9		)		—			—
Capital contribution from parent	—				—			10			16				(26		)	—
Common stock dividends paid	—				—			(6		)	—				6			—
Return of capital to parent from sales of accounts receivable	—				—			—			(186		)	(a)	186			—
	55				—			4			(155		)		166			70
Effect of exchange rates on cash and cash equivalents	—				—			—			(1		)		—			(1		)
Decrease in cash and cash equivalents	(135		)		(3		)	—			(122		)		—			(260		)
Cash and cash equivalents (unrestricted) at beginning of period	165				5			—			209				—			379
Cash and cash equivalents (unrestricted) at end of period	$	30			$	2		$	—		$	87			$	—		$	119

(a) During the six months ended June 30, 2014, Momentive Specialty Chemicals Inc. contributed receivables of $186 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the six months ended June 30, 2014, the non-guarantor subsidiary sold the contributed receivables to certain banks under various supplier financing agreements. The cash proceeds were returned to Momentive Specialty Chemicals Inc. by the non-guarantor subsidiary as a return of capital. The sale of receivables has been included within cash flows from operating activities on the Combined non-guarantor subsidiaries. The return of the cash proceeds from the sale of receivables has been included as a financing outflow and an investing inflow on the Combined Non-Guarantor Subsidiaries and Momentive Specialty Chemicals Inc., respectively.

MOMENTIVE SPECIALTY CHEMICALS INC.

SIX MONTHS ENDED JUNE 30, 2013

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)

	Momentive Specialty Chemicals Inc.				Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries				Eliminations			Consolidated
Cash flows provided by (used in) operating activities	$	7			$	1		$	13		$	9			$	(95	)	$	(65	)
Cash flows provided by (used in) investing activities
Capital expenditures	(29		)		—			—			(31		)		—			(60		)
Capitalized interest	—				—			—			(1		)		—			(1		)
Purchases of debt securities, net	—				—			—			(1		)		—			(1		)
Capital contribution to subsidiary	(15		)		—			(10		)	—				25			—
Change in restricted cash	—				—			—			15				—			15
Proceeds from sale of assets	—				—			—			1				—			1
Return of capital from subsidiary from sales of accounts receivable	75			(a)	—			—			—				(75		)	—
Investment in unconsolidated affiliates, net	—				—			—			(13		)		—			(13		)
	31				—			(10		)	(30		)		(50		)	(59		)
Cash flows (used in) provided by financing activities
Net short-term debt borrowings	—				—			—			9				—			9
Borrowings of long-term debt	—				1,108			—			19				—			1,127
Repayments of long-term debt	(544		)		(120		)	—			(376		)		—			(1,040		)
Net intercompany loan borrowings (repayments)	467				(882		)	(1		)	416				—			—
Long-term debt and credit facility financing fees	(12		)		(24		)	—			—				—			(36		)
Capital contribution from parent	—				—			10			15				(25		)	—
Common stock dividends paid	—				(83		)	(12		)	—				95			—
Return of capital to parent from sales of accounts receivable	—				—			—			(75		)	(a)	75			—
	(89		)		(1		)	(3		)	8				145			60
Effect of exchange rates on cash and cash equivalents	—				—			—			(5		)		—			(5		)
Decrease in cash and cash equivalents	(51		)		—			—			(18		)		—			(69		)
Cash and cash equivalents (unrestricted) at beginning of period	276				—			—			125				—			401
Cash and cash equivalents (unrestricted) at end of period	$	225			$	—		$	—		$	107			$	—		$	332

(a) During the six months ended June 30, 2013, Momentive Specialty Chemicals Inc. contributed receivables of $75 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the six months ended June 30, 2013, the non-guarantor subsidiary sold the contributed receivables to certain banks under various supplier financing agreements. The cash proceeds were returned to Momentive Specialty Chemicals Inc. by the non-guarantor subsidiary as a return of capital. The sale of receivables has been included within cash flows from operating activities on the Combined non-guarantor subsidiaries. The return of the cash proceeds from the sale of receivables has been included as a financing outflow and an investing inflow on the Combined Non-Guarantor Subsidiaries and Momentive Specialty Chemicals Inc., respectively.