Guarantor Non-Guarantor Subsidiary Financial Information

12 Months Ended

Dec. 31, 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, New First Lien Notes, New Senior Secured Notes 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. (dissolved in September 2017)) 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 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.

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.

INC.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2017

	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)	$	13		$	—		$	102		$	—		$	115
Accounts receivable, net	126			1			335			—			462
Intercompany accounts receivable	121			—			80			(201		)	—
Intercompany loans receivable	1			—			22			(23		)	—
Inventories:
Finished and in-process goods	85			—			136			—			221
Raw materials and supplies	36			—			56			—			92
Current assets held-for-sale	1			—			5			—			6
Other current assets	19			—			25			—			44
Total current assets	402			1			761			(224		)	940
Investments in unconsolidated entities	158			13			20			(171		)	20
Deferred income taxes	—			—			8			—			8
Long-term assets held for sale	—			—			2			—			2
Other long-term assets	17			8			24			—			49
Intercompany loans receivable	1,114			—			190			(1,304		)	—
Property and equipment, net	410			—			514			—			924
Goodwill	52			—			60			—			112
Other intangible assets, net	32			—			10			—			42
Total assets	$	2,185		$	22		$	1,589		$	(1,699	)	$	2,097
Liabilities and Deficit
Current liabilities:
Accounts payable	$	129		$	—		$	273		$	—		$	402
Intercompany accounts payable	80			—			121			(201		)	—
Debt payable within one year	10			—			115			—			125
Intercompany loans payable within one year	22			—			1			(23		)	—
Interest payable	80			—			2			—			82
Income taxes payable	6			—			6			—			12
Accrued payroll and incentive compensation	22			—			25			—			47
Current liabilities associated with assets held for sale	—			—			2			—			2
Other current liabilities	70			—			65			—			135
Total current liabilities	419			—			610			(224		)	805
Long-term liabilities:
Long-term debt	3,507			—			77			—			3,584
Intercompany loans payable	190			—			1,114			(1,304		)	—
Accumulated losses of unconsolidated subsidiaries in excess of investment	668			171			—			(839		)	—
Long-term pension and post employment benefit obligations	31			—			231			—			262
Deferred income taxes	2			—			9			—			11
Other long-term liabilities	109			—			68			—			177
Total liabilities	4,926			171			2,109			(2,367		)	4,839
Total Hexion Inc. shareholder’s deficit	(2,741		)	(149		)	(519		)	668			(2,741		)
Noncontrolling interest	—			—			(1		)	—			(1		)
Total deficit	(2,741		)	(149		)	(520		)	668			(2,742		)
Total liabilities and deficit	$	2,185		$	22		$	1,589		$	(1,699	)	$	2,097

HEXION INC.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2016

	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	—			—			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
Investments 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

INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2017

	Hexion Inc.			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	1,586		$	—		$	2,203		$	(198	)	$	3,591
Cost of sales	1,374			—			1,914			(198		)	3,090
Gross profit	212			—			289			—			501
Selling, general and administrative expense	134			—			173			—			307
Asset impairments	13			—			—			—			13
Business realignment costs	24			—			28			—			52
Other operating expense (income), net	3			(1		)	15			—			17
Operating income	38			1			73			—			112
Interest expense, net	315			—			14			—			329
Intercompany interest (income) expense, net	(75		)	—			75			—			—
Loss on extinguishment of debt	3			—			—			—			3
Other non-operating (income) expense, net	(65		)	—			65			—			—
Loss before income tax, (losses) earnings from unconsolidated entities	(140		)	1			(81		)	—			(220		)
Income tax (benefit) expense	(7		)	—			25			—			18
(Loss) income before (losses) earnings from unconsolidated entities	(133		)	1			(106		)	—			(238		)
(Losses) earnings from unconsolidated entities, net of taxes	(101		)	(64		)	4			165			4
Net loss	(234		)	(63		)	(102		)	165			(234		)
Comprehensive loss attributable to Hexion Inc.	$	(203	)	$	(63	)	$	(108	)	$	171		$	(203	)

HEXION INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2016

	Hexion Inc.			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	1,449		$	—		$	2,171		$	(182	)	$	3,438
Cost of sales	1,370			—			1,850			(182		)	3,038
Gross profit	79			—			321			—			400
Selling, general and administrative expense	142			—			186			—			328
Gain on dispositions	(188		)	—			(52		)	—			(240		)
Business realignment costs	39			—			16			—			55
Other operating expense (income), net	18			5			(10		)	—			13
Operating income (expense)	68			(5		)	181			—			244
Interest expense, net	300			—			10			—			310
Intercompany interest (income) expense, net	(72		)	—			72			—			—
Gain on extinguishment of debt	(48		)	—			—			—			(48		)
Other non-operating expense (income), net	17			—			(24		)	—			(7		)
(Loss) income before income tax, earnings from unconsolidated entities	(129		)	(5		)	123			—			(11		)
Income tax (benefit) expense	(3		)	—			41			—			38
(Loss) income before earnings from unconsolidated entities	(126		)	(5		)	82			—			(49		)
Earnings from unconsolidated entities, net of taxes	88			31			5			(113		)	11
Net (loss) income	(38		)	26			87			(113		)	(38		)
Comprehensive (loss) income attributable to Hexion Inc.	$	(62	)	$	25		$	66		$	(91	)	$	(62	)

HEXION INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2015

	Hexion Inc.				Combined Subsidiary Guarantors		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	1,715			$	—	$	2,603		$	(178	)	$	4,140
Cost of sales	1,528				—		2,190			(178		)	3,540
Gross profit	187				—		413			—			600
Selling, general and administrative expense	134				—		172			—			306
Asset impairments	—				—		6			—			6
Business realignment costs	7				—		9			—			16
Other operating expense (income), net	16				—		(4		)	—			12
Operating income	30				—		230			—			260
Interest expense, net	317				—		9			—			326
Intercompany interest (income) expense, net	(80		)		—		80			—			—
Gain on extinguishment of debt	(41		)		—		—			—			(41		)
Other non-operating expense (income), net	94				—		(97		)	—			(3		)
(Loss) income before income tax, earnings from unconsolidated entities	(260		)		—		238			—			(22		)
Income tax (benefit) expense	(2		)		—		36			—			34
(Loss) income before earnings from unconsolidated entities	(258		)		—		202			—			(56		)
Earnings from unconsolidated entities, net of taxes	218				132		1			(334		)	17
Net (loss) income	(40		)		132		203			(334		)	(39		)
Net loss attributable to noncontrolling interest	—			—	—		(1		)	—			(1		)
Net (loss) income attributable to Hexion Inc.	$	(40	)		$	132	$	202		$	(334	)	$	(40	)
Comprehensive (loss) income attributable to Hexion Inc.	$	(128	)		$	133	$	156		$	(289	)	$	(128	)

HEXION INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2017

	Hexion Inc.				Combined Subsidiary Guarantors		Combined Non-Guarantor Subsidiaries				Eliminations			Consolidated
Cash flows (used in) provided by operating activities	$	(278	)		$	—	$	126			$	(1	)	$	(153	)
Cash flows provided by (used in) investing activities
Capital expenditures	(40		)		—		(77		)		—			(117		)
Capitalized interest	—				—		(1		)		—			(1		)
Proceeds from sale of assets, net	5				—		3				—			8
Change in restricted cash	—				—		1				—			1
Return of capital from subsidiary from sales of accounts receivable	182			(a)	—		—				(182		)	—
	147				—		(74		)		(182		)	(109		)
Cash flows provided by (used in) financing activities
Net short-term debt repayments	3				—		18				—			21
Borrowings of long-term debt	1,053				—		376				—			1,429
Repayments of long-term debt	(921		)		—		(330		)		—			(1,251		)
Net intercompany loan borrowings (repayments)	1				—		(1		)		—			—
Common stock dividends paid	—				—		(1		)		1			—
Deferred financing fees paid	(20		)		—		(5		)		—			(25		)
Return of capital to parent from sales of accounts receivable	—				—		(182		)	(a)	182			—
	116				—		(125		)		183			174
Effect of exchange rates on cash and cash equivalents	—				—		6				—			6
Decrease in cash and cash equivalents	(15		)		—		(67		)		—			(82		)
Cash and cash equivalents at beginning of year (including restricted cash of $0 and $17, respectively)	28				—		151				—			179
Cash and cash equivalents at end of year (including restricted cash of $0 and $18, respectively)	$	13			$	—	$	84			$	—		$	97

(a) During the year ended December 31, 2017, Hexion Inc. contributed receivables of $182 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the year ended December 31, 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.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2016

	Hexion Inc.				Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries				Eliminations			Consolidated
Cash flows (used in) provided by operating activities	$	(202	)		$	4		$	182			$	(4	)	$	(20	)
Cash flows provided by (used in) investing activities
Capital expenditures	(67		)		—			(73		)		—			(140		)
Capitalized interest	(1		)		—			—				—			(1		)
Proceeds from dispositions, net	147				—			134				—			281
Cash received on buyer’s note	75				—			—				—			75
Proceeds from sale of assets, net	—				—			5				—			5
Change in restricted cash	—				—			(9		)		—			(9		)
Capital contribution to subsidiary	(13		)		(9		)	—				22			—
Investment in unconsolidated affiliates, net	(1		)		—			—				—			(1		)
Return of capital from subsidiary from sales of accounts receivable	95			(a)	—			—				(95		)	—
	235				(9		)	57				(73		)	210
Cash flows (used in) provided by financing activities
Net short-term debt repayments	(1		)		—			(21		)		—			(22		)
Borrowings of long-term debt	360				—			284				—			644
Repayments of long-term debt	(601		)		—			(255		)		—			(856		)
Net intercompany loan borrowings (repayments)	176				—			(176		)		—			—
Capital contribution from parent	—				9			13				(22		)	—
Common stock dividends paid	—				(4		)	—				4			—
Deferred financing fees paid	(1		)		—			—				—			(1		)
Return of capital to parent from sales of accounts receivable	—				—			(95		)	(a)	95			—
	(67		)		5			(250		)		77			(235		)
Effect of exchange rates on cash and cash equivalents	—				—			(4		)		—			(4		)
Decrease in cash and cash equivalents	(34		)		—			(15		)		—			(49		)
Cash and cash equivalents at beginning of year (including restricted cash of $0 and $8, respectively)	62				—			166				—			228
Cash and cash equivalents at end of year (including restricted cash of $0 and $17, respectively)	$	28			$	—		$	151			$	—		$	179

(a) During the year ended December 31, 2016, Hexion Inc. contributed receivables of $95 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the year ended December 31, 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.

HEXION INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2015

	Hexion Inc.				Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries				Eliminations			Consolidated
Cash flows (used in) provided by operating activities	$	(295	)		$	19		$	508			$	(19	)	$	213
Cash flows provided by (used in) investing activities
Capital expenditures	(91		)		—			(84		)		—			(175		)
Purchase of businesses, net of cash acquired	—				—			(7		)		—			(7		)
Capitalized interest	(3		)		—			(1		)		—			(4		)
Proceeds from sale of investments, net	—				—			6				—			6
Change in restricted cash	—				—			8				—			8
Proceeds from sale of assets	—				—			17				—			17
Capital contribution to subsidiary	(25		)		(17		)	—				42			—
Return of capital from subsidiary from sales of accounts receivable	278			(a)	—			—				(278		)	—
	159				(17		)	(61		)		(236		)	(155		)
Cash flows provided by (used in) financing activities
Net short-term debt repayments	—				—			(3		)		—			(3		)
Borrowings of long-term debt	500				—			23				—			523
Repayments of long-term debt	(445		)		—			(40		)		—			(485		)
Net intercompany loan borrowings (repayments)	131				—			(131		)		—			—
Capital contribution from parent	—				17			25				(42		)	—
Long-term debt and credit facility financing fees	(11		)		—			—				—			(11		)
Common stock dividends paid	—				(19		)	—				19			—
Return of capital to parent from sales of accounts receivable	—				—			(278		)	(a)	278			—
	175				(2		)	(404		)		255			24
Effect of exchange rates on cash and cash equivalents	—				—			(10		)		—			(10		)
Increase in cash and cash equivalents	39				—			33				—			72
Cash and cash equivalents at beginning of year (including restricted cash of $0 and $16, respectively)	23				—			133				—			156
Cash and cash equivalents at end of year (including restricted cash of $0 and $8, respectively)	$	62			$	—		$	166			$	—		$	228

(a) During the year ended December 31, 2015, Hexion Inc. contributed receivables of $278 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the year ended December 31, 2015, 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.