Guarantor Non-Guarantor Subsidiary Financial Information

9 Months Ended

Sep. 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.

SEPTEMBER 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)	$	9		$	2	$	—		$	106		$	—		$	117
Short-term investments	—			—		—			10			—			10
Accounts receivable, net	220			—		2			503			—			725
Intercompany accounts receivable	87			103		1			82			(273		)	—
Intercompany loans receivable - current portion	248			—		—			29			(277		)	—
Inventories:
Finished and in-process goods	115			—		—			186			—			301
Raw materials and supplies	58			—		—			77			—			135
Other current assets	29			—		—			49			—			78
Total current assets	766			105		3			1,042			(550		)	1,366
Investment in unconsolidated entities	339			—		33			30			(353		)	49
Deferred income taxes	—			—		—			18			—			18
Other assets, net	21			56		1			50			—			128
Intercompany loans receivable	1,083			3,364		28			13			(4,488		)	—
Property and equipment, net	532			—		—			527			—			1,059
Goodwill	66			—		—			56			—			122
Other intangible assets, net	58			—		—			27			—			85
Total assets	$	2,865		$	3,525	$	65		$	1,763		$	(5,391	)	$	2,827
Liabilities and (Deficit) Equity
Current liabilities:
Accounts payable	$	166		$	—	$	—		$	338		$	—		$	504
Intercompany accounts payable	185			4		—			84			(273		)	—
Debt payable within one year	27			—		—			101			—			128
Intercompany loans payable within one year	29			—		—			248			(277		)	—
Interest payable	4			85		—			1			—			90
Income taxes payable	5			—		—			13			—			18
Accrued payroll and incentive compensation	22			—		—			41			—			63
Other current liabilities	66			—		—			52			—			118
Total current liabilities	504			89		—			878			(550		)	921
Long-term liabilities:
Long-term debt	353			3,326		—			27			—			3,706
Intercompany loans payable	3,398			—		6			1,084			(4,488		)	—
Accumulated losses of unconsolidated subsidiaries in excess of investment	641			—		244			—			(885		)	—
Long-term pension and post employment benefit obligations	39			—		—			170			—			209
Deferred income taxes	7			2		—			12			—			21
Other long-term liabilities	106			—		—			48			—			154
Total liabilities	5,048			3,417		250			2,219			(5,923		)	5,011
Total Momentive Specialty Chemicals Inc. shareholders (deficit) equity	(2,183		)	108		(185		)	(455		)	532			(2,183		)
Noncontrolling interest	—			—		—			(1		)	—			(1		)
Total (deficit) equity	(2,183		)	108		(185		)	(456		)	532			(2,184		)
Total liabilities and (deficit) equity	$	2,865		$	3,525	$	65		$	1,763		$	(5,391	)	$	2,827

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 SEPTEMBER 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	$	597		$	—		$	—		$	816		$	(66	)	$	1,347
Cost of sales	531			—			—			723			(66		)	1,188
Gross profit	66			—			—			93			—			159
Selling, general and administrative expense	24			—			—			60			—			84
Business realignment costs	4			—			—			2			—			6
Other operating expense (income), net	1			—			(1		)	4			—			4
Operating income	37			—			1			27			—			65
Interest expense, net	8			68			—			1			—			77
Intercompany interest expense (income), net	45			(68		)	—			23			—			—
Other non-operating expense (income), net	62			—			—			(44		)	—			18
(Loss) income before income tax and earnings from unconsolidated entities	(78		)	—			1			47			—			(30		)
Income tax (benefit) expense	(1		)	(6		)	—			9			—			2
(Loss) income before earnings from unconsolidated entities	(77		)	6			1			38			—			(32		)
Earnings from unconsolidated entities, net of taxes	49			—			26			2			(73		)	4
Net (loss) income	$	(28	)	$	6		$	27		$	40		$	(73	)	$	(28	)
Comprehensive (loss) income	$	(67	)	$	7		$	26		$	35		$	(68	)	$	(67	)

MOMENTIVE SPECIALTY CHEMICALS INC.

THREE MONTHS ENDED SEPTEMBER 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	$	553		$	—		$	—		$	748		$	(52	)	$	1,249
Cost of sales	475			—			—			669			(52		)	1,092
Gross profit	78			—			—			79			—			157
Selling, general and administrative expense	28			—			—			65			—			93
Business realignment costs	2			—			—			2			—			4
Other operating (income) expense, net	—			—			(1		)	3			—			2
Operating income	48			—			1			9			—			58
Interest expense, net	7			68			—			2			—			77
Intercompany interest expense (income), net	31			(69		)	—			38			—			—
Other non-operating (income) expense, net	(25		)	—			—			23			—			(2		)
Income (loss) before income tax and losses from unconsolidated entities	35			1			1			(54		)	—			(17		)
Income tax expense (benefit)	61			—			—			(4		)	—			57
(Loss) income before losses from unconsolidated entities	(26		)	1			1			(50		)	—			(74		)
Losses from unconsolidated entities, net of taxes	(50		)	—			(32		)	—			80			(2		)
Net (loss) income	$	(76	)	$	1		$	(31	)	$	(50	)	$	80		$	(76	)
Comprehensive (loss) income	$	(48	)	$	1		$	(31	)	$	(40	)	$	70		$	(48	)

MOMENTIVE SPECIALTY CHEMICALS INC.

NINE MONTHS ENDED SEPTEMBER 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	$	1,770		$	—		$	—		$	2,392		$	(185	)	$	3,977
Cost of sales	1,560			—			—			2,116			(185		)	3,491
Gross profit	210			—			—			276			—			486
Selling, general and administrative expense	79			—			—			196			—			275
Business realignment costs	19			—			—			5			—			24
Other operating expense (income), net	4			—			(1		)	4			—			7
Operating income	108			—			1			71			—			180
Interest expense, net	23			202			—			5			—			230
Intercompany interest expense (income), net	132			(204		)	—			72			—			—
Other non-operating expense (income), net	67			—			—			(44		)	—			23
(Loss) income before income tax and earnings from unconsolidated entities	(114		)	2			1			38			—			(73		)
Income tax (benefit) expense	(2		)	(6		)	—			31			—			23
(Loss) income before earnings from unconsolidated entities	(112		)	8			1			7			—			(96		)
Earnings from unconsolidated entities, net of taxes	30			—			30			4			(50		)	14
Net (loss) income	$	(82	)	$	8		$	31		$	11		$	(50	)	$	(82	)
Comprehensive (loss) income	$	(117	)	$	8		$	31		$	10		$	(49	)	$	(117	)

MOMENTIVE SPECIALTY CHEMICALS INC.

NINE MONTHS ENDED SEPTEMBER 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	$	1,662		$	—		$	—		$	2,185		$	(156	)	$	3,691
Cost of sales	1,424			—			—			1,971			(156		)	3,239
Gross profit	238			—			—			214			—			452
Selling, general and administrative expense	85			—			—			189			—			274
Asset impairments	—			—			—			7			—			7
Business realignment costs	8			—			—			7			—			15
Other operating expense (income), net	3			(4		)	(1		)	6			—			4
Operating income	142			4			1			5			—			152
Interest expense, net	25			196			—			6			—			227
Intercompany interest expense (income), net	122			(199		)	—			77			—			—
Loss on extinguishment of debt	2			—			—			4			—			6
Other non-operating (income) expense, net	(18		)	—			—			19			—			1
Income (loss) before income tax and (losses) earnings from unconsolidated entities	11			7			1			(101		)	—			(82		)
Income tax expense	19			1			—			11			—			31
(Loss) income before (losses) earnings from unconsolidated entities	(8		)	6			1			(112		)	—			(113		)
(Losses) earnings from unconsolidated entities, net of taxes	(100		)	—			(55		)	2			158			5
Net (loss) income	$	(108	)	$	6		$	(54	)	$	(110	)	$	158		$	(108	)
Comprehensive (loss) income	$	(108	)	$	6		$	(54	)	$	(118	)	$	166		$	(108	)

MOMENTIVE SPECIALTY CHEMICALS INC.

NINE MONTHS ENDED SEPTEMBER 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	$	(349	)		$	(3	)	$	9		$	220			$	(9	)	$	(132	)
Cash flows provided by (used in) investing activities
Capital expenditures	(74		)		—			—			(59		)		—			(133		)
Acquisition of businesses	(52		)		—			—			(12		)		—			(64		)
Purchases of securities, net	—				—			—			(4		)		—			(4		)
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	272			(a)	—			—			—				(272		)	—
	130				—			(10		)	(79		)		(246		)	(205		)
Cash flows provided by (used in) financing activities
Net short-term debt borrowings	8				—			—			17				—			25
Borrowings of long-term debt	155				—			—			58				—			213
Repayments of long-term debt	(110		)		—			—			(64		)		—			(174		)
Net intercompany loan borrowings (repayments)	10				—			—			(10		)		—			—
Capital contribution from parent	—				—			10			16				(26		)	—
Common stock dividends paid	—				—			(9		)	—				9			—
Return of capital to parent from sales of accounts receivable	—				—			—			(272		)	(a)	272			—
	63				—			1			(255		)		255			64
Effect of exchange rates on cash and cash equivalents	—				—			—			(5		)		—			(5		)
Decrease in cash and cash equivalents	(156		)		(3		)	—			(119		)		—			(278		)
Cash and cash equivalents (unrestricted) at beginning of period	165				5			—			209				—			379
Cash and cash equivalents (unrestricted) at end of period	$	9			$	2		$	—		$	90			$	—		$	101

(a) During the nine months ended September 30, 2014, Momentive Specialty Chemicals Inc. contributed receivables of $272 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the nine months ended September 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.

NINE MONTHS ENDED SEPTEMBER 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 (used in) provided by operating activities	$	(33	)		$	1		$	17		$	90			$	(98	)	$	(23	)
Cash flows provided by (used in) investing activities
Capital expenditures	(49		)		—			—			(47		)		—			(96		)
Capitalized interest	—				—			—			(1		)		—			(1		)
Purchases of securities, net	—				—			—			(1		)		—			(1		)
Capital contribution to subsidiary	(15		)		—			(10		)	—				25			—
Change in restricted cash	—				—			—			4				—			4
Proceeds from sale of assets	—				—			—			1				—			1
Return of capital from subsidiary from sales of accounts receivable	126			(a)	—			—			—				(126		)	—
Investment in unconsolidated affiliates, net	—				—			—			(13		)		—			(13		)
	62				—			(10		)	(57		)		(101		)	(106		)
Cash flows (used in) provided by financing activities
Net short-term debt borrowings	—				—			—			16				—			16
Borrowings of long-term debt	—				1,108			—			20				—			1,128
Repayments of long-term debt	(545		)		(120		)	—			(380		)		—			(1,045		)
Net intercompany loan borrowings (repayments)	437				(882		)	(2		)	447				—			—
Long-term debt and credit facility financing fees	(13		)		(24		)	—			—				—			(37		)
Capital contribution from parent	—				—			10			15				(25		)	—
Common stock dividends paid	—				(83		)	(15		)	—				98			—
Return of capital to parent from sales of accounts receivable	—				—			—			(126		)	(a)	126			—
	(121		)		(1		)	(7		)	(8		)		199			62
Effect of exchange rates on cash and cash equivalents	—				—			—			(2		)		—			(2		)
(Decrease) increase in cash and cash equivalents	(92		)		—			—			23				—			(69		)
Cash and cash equivalents (unrestricted) at beginning of period	276				—			—			125				—			401
Cash and cash equivalents (unrestricted) at end of period	$	184			$	—		$	—		$	148			$	—		$	332

(a) During the nine months ended September 30, 2013, Momentive Specialty Chemicals Inc. contributed receivables of $126 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the nine months ended September 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.