Summary of Significant Accounting Policies

Use of Estimates—The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and also requires the disclosure of contingent assets and liabilities at the date of the financial statements. In addition, it requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Change in Accounting Policy—In the first quarter 2015, the Company elected to change its accounting policies related to the recognition of gains and losses for pension and OPEB plans to a more preferable policy under U.S. GAAP. Specifically, such gains and losses historically recognized as a component of “Other comprehensive income (loss)”, and amortized into net income (loss) in future periods, will be recognized in earnings in the period in which they occur. In addition, the Company has changed its policy for recognizing expected returns on plan assets from a market-related value method (based on a five-year smoothing of asset returns), to a fair value method.

Under the new policies, upon the Company’s annual remeasurement of its pension and OPEB plans in the fourth quarter, or on an interim basis as triggering events warrant remeasurement, the Company will immediately recognize gains and losses as a mark-to-market (“MTM”) gain or loss through earnings. As such, under the new policies, the Company’s net periodic pension and OPEB expense recognized on a quarterly basis will consist of i) service cost, interest cost, expected return on plan assets, amortization of prior service cost/credits and ii) MTM adjustments recognized annually in the fourth quarter upon remeasurement of pension and OPEB liabilities or when triggering events warrant remeasurement. The Company believes that these changes are preferable as they provide greater transparency of the Company’s economic obligations in accounting results and better alignment with fair value accounting principles by recognizing the effects of economic and interest rate changes on pension and OPEB assets and liabilities in the year in which the gains and losses are incurred.

The impact of these pension and OPEB accounting policy changes was applied through retrospective application of the new policies to all periods presented. Accordingly, all relevant information as of, and for the three and six months ended, June 30, 2015 and all prior periods has been adjusted to reflect the application of the changes. As of January 1, 2015, the cumulative effect of these changes was a $229 increase to “Accumulated deficit”, a $232 decrease to “Accumulated other comprehensive loss”, a $2 increase to “Finished and in-process goods” and a $1 increase to “Noncontrolling interest” in the unaudited Condensed Consolidated Balance Sheets. The effects of the aforementioned accounting policy changes to the unaudited Condensed Consolidated Financial Statements are as follows:



	Previous Accounting Method			Effect of Accounting Change			As Reported
Unaudited Condensed Consolidated Statement of Operations for the three months ended June 30, 2015:
Cost of sales	$	927		$	(2	)	$	925
Selling, general and administrative expense	$	79		$	(3	)	$	76
Income tax expense	—			1			$	1
Net loss	(6		)	4			(2		)
Unaudited Condensed Consolidated Statement of Comprehensive Loss for the three months ended June 30, 2015:
Net loss	$	(6	)	$	4		$	(2	)
Gain recognized from pension and postretirement benefits	6			(6		)	—
Comprehensive income	13			(2		)	11



	As Previously Reported			Effect of Accounting Change			As Adjusted
Unaudited Condensed Consolidated Statement of Operations for the three months ended June 30, 2014:
Cost of sales	$	1,174		$	(1	)	$	1,173
Selling, general and administrative expense	$	95		$	(2	)	93
Income tax expense	11			(2		)	9
Net loss	(27		)	5			(22		)
Unaudited Condensed Consolidated Statement of Comprehensive Loss for the three months ended June 30, 2014:
Net loss	$	(27	)	$	5		$	(22	)
Gain recognized from pension and postretirement benefits	2			(2		)	—
Comprehensive loss	(29		)	3			(26		)



	Previous Accounting Method			Effect of Accounting Change			As Reported
Unaudited Condensed Consolidated Statement of Operations for the six months ended June 30, 2015:
Cost of sales	$	1,850		$	(2	)	$	1,848
Selling, general and administrative expense	$	164		$	(6	)	$	158
Net loss	(44		)	8			(36		)
Unaudited Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2015:
Net loss	$	(44	)	$	8		$	(36	)
Changes in inventories	6			2			8
Net changes in other liabilities, current and long-term	7			(10		)	(3		)
Unaudited Condensed Consolidated Statement of Comprehensive Loss for the six months ended June 30, 2015:
Net loss	$	(44	)	$	8		$	(36	)
Gain recognized from pension and postretirement benefits	11			(11		)	—
Comprehensive loss	(82		)	(3		)	(85		)



	As Previously Reported			Effect of Accounting Change			As Adjusted
Unaudited Condensed Consolidated Statement of Operations for the six months ended June 30, 2014:
Cost of sales	$	2,303		$	(4	)	$	2,299
Selling, general and administrative expense	191			(4		)	187
Income tax expense	21			(6		)	15
Net loss	(54		)	14			(40		)
Unaudited Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2014:
Net loss	$	(54	)	$	14		$	(40	)
Changes in inventories	(120		)	(2		)	(122		)
Changes in income taxes payable	5			(6		)	(1		)
Net changes in other liabilities, current and long-term	(12		)	(6		)	(18		)
Unaudited Condensed Consolidated Statement of Comprehensive Loss for the six months ended June 30, 2014:
Net loss	$	(54	)	$	14		$	(40	)
Gain recognized from pension and postretirement benefits	5			(5		)	—
Comprehensive loss	(50		)	9			(41		)

In addition, the effect of these accounting changes increased Segment EBITDA by $3 and $6 for the three and six months ended, June 30, 2014, respectively. For additional discussion and a reconciliation of Segment EBITDA to Net loss, see Note 9.

The notes to the unaudited Condensed Consolidated Financial Statements herein have been adjusted to reflect the impact of these changes accordingly.

Subsequent Events—The Company has evaluated events and transactions subsequent to June 30, 2015 through the date of issuance of its unaudited Condensed Consolidated Financial Statements.

Recently Issued Accounting Standards

In May, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Board Update No. 2014-09: Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 supersedes the existing revenue recognition guidance and most industry-specific guidance applicable to revenue recognition. According to the new guidance, an entity will apply a principles-based five step model to recognize revenue upon the transfer of promised goods or services to customers and in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The revised effective date for ASU 2014-09 is for annual and interim periods beginning on or after December 15, 2017, and early adoption will be permitted for annual and interim periods beginning on or after December 15, 2016. Entities will have the option of using either a full retrospective approach or a modified approach to adopt the guidance in ASU 2014-09. The Company is currently assessing the potential impact of ASU 2014-09 on its financial statements.

In January 2015, the FASB issued Accounting Standards Board Update No. 2015-01: Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”). ASU 2015-01 eliminates from U.S. GAAP the concept of extraordinary items and removes the requirement to present extraordinary items separately on the income statement, net of tax. The guidance is effective for annual periods beginning after December 15, 2015, including interim periods within that reporting period. The requirements of ASU 2015-01 are not expected to have a significant impact on the Company’s financial statements.

In February 2015, the FASB issued Accounting Standards Board Update No. 2015-02: Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”). ASU 2015-02 amends the existing consolidation guidance related to (i) limited partnerships and similar legal entities, (ii) the evaluation of fees paid to a decision maker or a service provider as variable interest, (iii) the effect of fee arrangements on the primary beneficiary determination, and (iv) the effect of related parties on the primary beneficiary determination. ASU 2015-02 simplifies the existing guidance by reducing the number of consolidation models from four to two, reducing the extent to which related party arrangements cause an entity to be considered a primary beneficiary, and placing more emphasis on the risk of loss when determining a controlling financial interest. The guidance is effective for annual periods beginning after December 15, 2015, including interim periods within that reporting period. The requirements of ASU 2015-02 are not expected to have a significant impact on the Company’s financial statements.

In April 2015, the FASB issued Accounting Standards Board Update No. 2015-03: Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, and also requires that the amortization of such costs be reported as interest expense. The guidance is effective for annual periods beginning after December 15, 2015, including interim periods within that reporting period, and early adoption is permitted. Based on unamortized debt issuance costs as of June 30, 2015, the Company estimates approximately $60 of debt issuance costs would be reclassified from “Other long-term assets” to “Long term debt” within the Company’s Consolidated Balance Sheets.

In July 2015, the FASB issued Accounting Standards Board Update No. 2015-11: Simplifying the Measurement of Inventory (Topic 330) (“ASU 2015-11”) as part of the overall FASB simplification initiative. ASU 2015-11 replaces the existing concept of market value of inventory (where market was defined as replacement cost, with a ceiling of net realizable value and floor of net realizable value less a normal profit margin) with the single measurement of net realizable value. The guidance is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently assessing the potential impact of ASU 2015-11 on its financial statements.