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Guarantor Non-Guarantor Subsidiary Financial Information
6 Months Ended
Jun. 30, 2017
Guarantor Non Guarantor Subsidary Financial Information [Abstract]  
Guarantees [Text Block]
Guarantor/Non-Guarantor Subsidiary Financial Information
The Company’s 6.625% First-Priority Senior Secured Notes due 2020, 10.00% First-Priority Senior Secured Notes due 2020, 10.375% First-Priority Senior Secured Notes due 2022, 13.75% Senior Secured Notes due 2022 and 9.00% Second-Priority Senior Secured Notes due 2020 are guaranteed by certain of its U.S. subsidiaries.
The following information contains the condensed consolidating financial information for Hexion Inc. (the parent), the combined subsidiary guarantors (Hexion Investments Inc.; Lawter International, Inc.; HSC Capital Corporation (dissolved in April 2017); Hexion International Inc.; Hexion CI Holding Company (China) LLC; 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 guarantors are 100% owned by Hexion Inc. 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, New Zealand, Brazilian and China subsidiaries contain certain restrictions related to 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.
These financial statements are prepared on the same basis as the consolidated financial statements of the Company except that investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions.
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.
HEXION INC.
June 30, 2017
CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
 
 
Hexion
Inc.
 
Combined
Subsidiary
Guarantors
 
Combined
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents (including restricted cash of $0 and $18, respectively)
$
12

 
$
—

 
$
116

 
$
—

 
$
128

Accounts receivable, net
126

 
2

 
369

 
—

 
497

Intercompany accounts receivable
135

 
—

 
25

 
(160
)
 
—

Intercompany loans receivable - current portion
4

 
—

 
—

 
(4
)
 
—

Inventories:
 
 
 
 
 
 
 
 


Finished and in-process goods
101

 
—

 
143

 
—

 
244

Raw materials and supplies
39

 
—

 
63

 
—

 
102

Other current assets
16

 
—

 
29

 
—

 
45

Total current assets
433

 
2

 
745

 
(164
)
 
1,016

Investment in unconsolidated entities
128

 
13

 
19

 
(141
)
 
19

Deferred income taxes
—

 
—

 
12

 
—

 
12

Other assets, net
16

 
6

 
25

 
—

 
47

Intercompany loans receivable
1,075

 
—

 
254

 
(1,329
)
 
—

Property and equipment, net
436

 
—

 
479

 
—

 
915

Goodwill
66

 
—

 
59

 
—

 
125

Other intangible assets, net
37

 
—

 
10

 
—

 
47

Total assets
$
2,191

 
$
21

 
$
1,603

 
$
(1,634
)
 
$
2,181

Liabilities and Deficit
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
134

 
$
—

 
$
252

 
$
—

 
$
386

Intercompany accounts payable
25

 
—

 
135

 
(160
)
 
—

Debt payable within one year
—

 
—

 
114

 
—

 
114

Intercompany loans payable within one year
—

 
—

 
4

 
(4
)
 
—

Interest payable
78

 
—

 
3

 
—

 
81

Income taxes payable
6

 
—

 
1

 
—

 
7

Accrued payroll and incentive compensation
4

 
—

 
27

 
—

 
31

Other current liabilities
80

 
—

 
53

 
—

 
133

Total current liabilities
327

 
—

 
589

 
(164
)
 
752

Long-term liabilities:
 
 
 
 
 
 
 
 
 
Long-term debt
3,482

 
—

 
103

 
—

 
3,585

Intercompany loans payable
254

 
—

 
1,075

 
(1,329
)
 
—

Accumulated losses of unconsolidated subsidiaries in excess of investment
575

 
141

 
—

 
(716
)
 
—

Long-term pension and post employment benefit obligations
40

 
—

 
218

 
—

 
258

Deferred income taxes
5

 
—

 
8

 
—

 
13

Other long-term liabilities
107

 
—

 
66

 
—

 
173

Total liabilities
4,790

 
141

 
2,059

 
(2,209
)
 
4,781

Total Hexion Inc. shareholder’s deficit
(2,599
)
 
(120
)
 
(455
)
 
575

 
(2,599
)
Noncontrolling interest
—

 
—

 
(1
)
 
—

 
(1
)
Total deficit
(2,599
)
 
(120
)
 
(456
)
 
575

 
(2,600
)
Total liabilities and deficit
$
2,191

 
$
21

 
$
1,603

 
$
(1,634
)
 
$
2,181






HEXION INC.
DECEMBER 31, 2016
CONDENSED CONSOLIDATING BALANCE SHEET
 
 
Hexion
Inc.
 
Combined
Subsidiary
Guarantors
 
Combined
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents (including restricted cash of $0 and $17, respectively)
$
28

 
$
—

 
$
168

 
$
—

 
$
196

Accounts receivable, net
119

 
1

 
270

 
—

 
390

Intercompany accounts receivable
106

 
—

 
60

 
(166
)
 
—

Intercompany loans receivable - current portion
—

 
—

 
175

 
(175
)
 
—

Inventories:
 
 
 
 
 
 
 
 


Finished and in-process goods
82

 
—

 
117

 
—

 
199

Raw materials and supplies
31

 
—

 
57

 
—

 
88

Other current assets
26

 
—

 
19

 
—

 
45

Total current assets
392

 
1

 
866

 
(341
)
 
918

Investment in unconsolidated entities
93

 
13

 
18

 
(106
)
 
18

Deferred income taxes
—

 
—

 
10

 
—

 
10

Other long-term assets
17

 
6

 
20

 
—

 
43

Intercompany loans receivable
1,050

 
—

 
180

 
(1,230
)
 
—

Property and equipment, net
448

 
—

 
445

 
—

 
893

Goodwill
65

 
—

 
56

 
—

 
121

Other intangible assets, net
41

 
—

 
11

 
—

 
52

Total assets
$
2,106

 
$
20

 
$
1,606

 
$
(1,677
)
 
$
2,055

Liabilities and Deficit
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
142

 
$
—

 
$
226

 
$
—

 
$
368

Intercompany accounts payable
60

 
—

 
106

 
(166
)
 
—

Debt payable within one year
6

 
—

 
101

 
—

 
107

Intercompany loans payable within one year
175

 
—

 
—

 
(175
)
 
—

Interest payable
69

 
—

 
1

 
—

 
70

Income taxes payable
6

 
—

 
7

 
—

 
13

Accrued payroll and incentive compensation
28

 
—

 
27

 
—

 
55

Other current liabilities
110

 
—

 
49

 
—

 
159

Total current liabilities
596

 
—

 
517

 
(341
)
 
772

Long term liabilities:
 
 
 
 
 
 
 
 
 
Long-term debt
3,378

 
—

 
19

 
—

 
3,397

Intercompany loans payable
180

 
—

 
1,050

 
(1,230
)
 
—

Accumulated losses of unconsolidated subsidiaries in excess of investment
339

 
106

 
—

 
(445
)
 
—

Long-term pension and post employment benefit obligations
42

 
—

 
204

 
—

 
246

Deferred income taxes
4

 
—

 
9

 
—

 
13

Other long-term liabilities
105

 
—

 
61

 
—

 
166

Total liabilities
4,644

 
106

 
1,860

 
(2,016
)
 
4,594

Total Hexion Inc. shareholder’s deficit
(2,538
)
 
(86
)
 
(253
)
 
339

 
(2,538
)
Noncontrolling interest
—

 
—

 
(1
)
 
—

 
(1
)
Total deficit
(2,538
)
 
(86
)
 
(254
)
 
339

 
(2,539
)
Total liabilities and deficit
$
2,106

 
$
20

 
$
1,606

 
$
(1,677
)
 
$
2,055

HEXION INC.
THREE MONTHS ENDED JUNE 30, 2017
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
 
 
Hexion
Inc.
 
Combined
Subsidiary
Guarantors
 
Combined
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$
417

 
$
—

 
$
550

 
$
(55
)
 
$
912

Cost of sales
355

 
—

 
478

 
(55
)
 
778

Gross profit
62

 
—

 
72

 
—

 
134

Selling, general and administrative expense
32

 
—

 
43

 
—

 
75

Business realignment costs
6

 
—

 
4

 
—

 
10

Other operating income, net
3

 
—

 
6

 
—

 
9

Operating income
21

 
—

 
19

 
—

 
40

Interest expense, net
78

 
—

 
4

 
—

 
82

Intercompany interest (income) expense, net
(18
)
 
—

 
18

 
—

 
—

Other non-operating (income) expense, net
(48
)
 
—

 
43

 
—

 
(5
)
Income (loss) before tax and earnings from unconsolidated entities
9

 
—

 
(46
)
 
—

 
(37
)
Income tax expense (benefit)
2

 
—

 
(3
)
 
—

 
(1
)
Income (loss) before earnings from unconsolidated entities
7

 
—

 
(43
)
 
—

 
(36
)
(Losses) earnings from unconsolidated entities, net of taxes
(41
)
 
(32
)
 
1

 
74

 
2

Net loss
$
(34
)
 
$
(32
)
 
$
(42
)
 
$
74

 
$
(34
)
Comprehensive loss
$
(25
)
 
$
(31
)
 
$
(46
)
 
$
77

 
$
(25
)

HEXION INC.
THREE MONTHS ENDED JUNE 30, 2016
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
 
 
Hexion
Inc.
 
Combined
Subsidiary
Guarantors
 
Combined
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$
382

 
$
—

 
$
616

 
$
(46
)
 
$
952

Cost of sales
381

 
—

 
519

 
(46
)
 
854

Gross profit
1

 
—

 
97

 
—

 
98

Selling, general and administrative expense
40

 
—

 
42

 
—

 
82

Gain on dispositions
(188
)
 
—

 
(52
)
 
—

 
(240
)
Business realignment costs
37

 
—

 
5

 
—

 
42

Other operating expense (income), net
2

 
—

 
(6
)
 
—

 
(4
)
Operating income
110

 
—

 
108

 
—

 
218

Interest expense, net
76

 
—

 
4

 
—

 
80

Intercompany interest (income) expense, net
(18
)
 
—

 
18

 
—

 
—

Gain on extinguishment of debt
(21
)
 
—

 
—

 
—

 
(21
)
Other non-operating expense (income), net
24

 
—

 
(27
)
 
—

 
(3
)
Income before income tax and earnings from unconsolidated entities
49

 
—

 
113

 
—

 
162

Income tax expense
—

 
—

 
17

 
—

 
17

Income before earnings from unconsolidated entities
49

 
—

 
96

 
—

 
145

Earnings from unconsolidated entities, net of taxes
101

 
51

 
2

 
(149
)
 
5

Net income
$
150

 
$
51

 
$
98

 
$
(149
)
 
$
150

Comprehensive income
$
124

 
$
52

 
$
76

 
$
(128
)
 
$
124





HEXION INC.
SIX MONTHS ENDED JUNE 30, 2017
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
 
 
Hexion
Inc.
 
Combined
Subsidiary
Guarantors
 
Combined
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$
795

 
$
—

 
$
1,093

 
$
(106
)
 
$
1,782

Cost of sales
677

 
—

 
944

 
(106
)
 
1,515

Gross profit
118

 
—

 
149

 
—

 
267

Selling, general and administrative expense
63

 
—

 
89

 
—

 
152

Business realignment costs
10

 
—

 
7

 
—

 
17

Other operating (income) expense, net
(3
)
 
—

 
6

 
—

 
3

Operating income
48

 
—

 
47

 
—

 
95

Interest expense, net
158

 
—

 
7

 
—

 
165

Intercompany interest (income) expense, net
(35
)
 
—

 
35

 
—

 
—

Loss on extinguishment of debt
3

 
—

 
—

 
—

 
3

Other non-operating (income) expense, net
(54
)
 
—

 
53

 
—

 
(1
)
Loss before tax and earnings from unconsolidated entities
(24
)
 
—

 
(48
)
 
—

 
(72
)
Income tax (benefit) expense
(4
)
 
—

 
11

 
—

 
7

Loss before earnings from unconsolidated entities
(20
)
 
—

 
(59
)
 
—

 
(79
)
(Losses) earnings from unconsolidated entities, net of taxes
(56
)
 
(34
)
 
2

 
91

 
3

Net loss
$
(76
)
 
$
(34
)
 
$
(57
)
 
$
91

 
(76
)
Comprehensive loss
(61
)
 
(34
)
 
(49
)
 
83

 
(61
)


HEXION INC.
SIX MONTHS ENDED JUNE 30, 2016
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
 
 
Hexion
Inc.
 
Combined
Subsidiary
Guarantors
 
Combined
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Net sales
$
763

 
$
—

 
$
1,194

 
$
(96
)
 
$
1,861

Cost of sales
755

 
—

 
997

 
(96
)
 
1,656

Gross profit
8

 
—

 
197

 
—

 
205

Selling, general and administrative expense
79

 
—

 
87

 
—

 
166

Gain on dispositions
(188
)
 
—

 
(52
)
 
—

 
(240
)
Business realignment costs
38

 
—

 
7

 
—

 
45

Other operating expense (income), net
4

 
—

 
(5
)
 
—

 
(1
)
Operating income
75

 
—

 
160

 
—

 
235

Interest expense, net
153

 
—

 
6

 
—

 
159

Intercompany interest (income) expense, net
(37
)
 
—

 
37

 
—

 
—

Gain on extinguishment of debt
(44
)
 
—

 
—

 
—

 
(44
)
Other non-operating (income) expense, net
(11
)
 
—

 
10

 
—

 
(1
)
Income before income tax and earnings from unconsolidated entities
14

 
—

 
107

 
—

 
121

Income tax (benefit) expense
(4
)
 
—

 
28

 
—

 
24

Income before earnings from unconsolidated entities
18

 
—

 
79

 
—

 
97

 Earnings from unconsolidated entities, net of taxes
88

 
46

 
2

 
(127
)
 
9

Net income
$
106

 
$
46

 
$
81

 
$
(127
)
 
$
106

Comprehensive income
$
106

 
$
46

 
$
74

 
$
(120
)
 
$
106

HEXION INC.
SIX MONTHS ENDED JUNE 30, 2017
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)

 
Hexion
Inc.
 
Combined
Subsidiary
Guarantors
 
Combined
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Cash flows used in operating activities
$
(186
)
 
$
—

 
$
(9
)
 
$
—

 
$
(195
)
Cash flows provided by (used in) investing activities
 
 
 
 
 
 
 
 
 
Capital expenditures
(23
)
 
—

 
(34
)
 
—

 
(57
)
Proceeds from sale of assets, net
4

 
—

 
—

 
—

 
4

Change in restricted cash
—

 
—

 
1

 
—

 
1

Return of capital from subsidiary from sales of accounts receivable
68

(a)
—

 
—

 
(68
)
 
—

 
49

 
—

 
(33
)
 
(68
)
 
(52
)
Cash flows provided by (used in) financing activities
 
 
 
 
 
 
 
 
 
Net short-term debt (repayments) borrowings
(5
)
 
—

 
13

 
—

 
8

Borrowings of long-term debt
915

 
—

 
204

 
—

 
1,119

Repayments of long-term debt
(801
)
 
—

 
(127
)
 
—

 
(928
)
Net intercompany loan borrowings (repayments)
31

 
—

 
(31
)
 
—

 
—

Long-term debt and credit facility financing fees paid
(20
)
 
—

 
(4
)
 
—

 
(24
)
Return of capital to parent from sales of accounts receivable
—

 
—

 
(68
)
(a)
68

 
—

 
120

 
—

 
(13
)
 
68

 
175

Effect of exchange rates on cash and cash equivalents
—

 
—

 
3

 
—

 
3

Change in cash and cash equivalents
(17
)
 
—

 
(52
)
 
—

 
(69
)
Cash and cash equivalents (unrestricted) at beginning of period
28

 
—

 
151

 
—

 
179

Cash and cash equivalents (unrestricted) at end of period
$
11

 
$
—

 
$
99

 
$
—

 
$
110


(a)
During the six months ended June 30, 2017, Hexion Inc. contributed receivables of $68 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the six months ended June 30, 2017, the non-guarantor subsidiary sold the contributed receivables to certain banks under various supplier financing agreements. The cash proceeds were returned to Hexion 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 Hexion Inc., respectively.
HEXION INC.
SIX MONTHS ENDED JUNE 30, 2016
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
 
 
Hexion
Inc.
 
Combined
Subsidiary
Guarantors
 
Combined
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Cash flows (used in) provided by operating activities
$
(145
)
 
$
4

 
$
(5
)
 
$
(4
)
 
$
(150
)
Cash flows provided by (used in) investing activities
 
 
 
 
 
 
 
 
 
Capital expenditures
(33
)
 
—

 
(28
)
 
—

 
(61
)
Capitalized interest
(1
)
 
—

 
—

 
—

 
(1
)
Proceeds from dispositions, net
146

 
—

 
135

 
—

 
281

Proceeds from sale of assets, net
—

 
—

 
1

 
—

 
1

Change in restricted cash
—

 
—

 
(10
)
 
—

 
(10
)
Capital contribution to subsidiary
(13
)
 
(9
)
 
—

 
22

 
—

Return of capital from subsidiary from sales of accounts receivable
51

(a)
—

 
—

 
(51
)
 
—

 
150

 
(9
)
 
98

 
(29
)
 
210

Cash flows (used in) provided by financing activities
 
 
 
 
 
 
 
 
 
Net short-term debt repayments
(6
)
 
—

 
(6
)
 
—

 
(12
)
Borrowings of long-term debt
160

 
—

 
175

 
—

 
335

Repayments of long-term debt
(314
)
 
—

 
(125
)
 
—

 
(439
)
Net intercompany loan borrowings (repayments)
136

 
—

 
(136
)
 
—

 
—

Capital contributions
—

 
9

 
13

 
(22
)
 
—

Common stock dividends paid
—

 
(4
)
 
—

 
4

 
—

Return of capital to parent from sales of accounts receivable
—

 
—

 
(51
)
(a)
51

 
—

 
(24
)
 
5

 
(130
)
 
33

 
(116
)
Effect of exchange rates on cash and cash equivalents
—

 
—

 
—

 
—

 
—

Decrease in cash and cash equivalents
(19
)
 
—

 
(37
)
 
—

 
(56
)
Cash and cash equivalents (unrestricted) at beginning of period
62

 
—

 
166

 
—

 
228

Cash and cash equivalents (unrestricted) at end of period
$
43

 
$
—

 
$
129

 
$
—

 
$
172


(a)
During the six months ended June 30, 2016, Hexion Inc. contributed receivables of $51 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the six months ended June 30, 2016, the non-guarantor subsidiary sold the contributed receivables to certain banks under various supplier financing agreements. The cash proceeds were returned to Hexion 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 Hexion Inc., respectively.