Segment Information

The Company’s business segments are based on the products that the Company offers and the markets that it serves. In the fourth quarter of 2017, the Company added Corporate and Other as a reportable segment. At September 30, 2018, the Company had three reportable segments: Epoxy, Phenolic and Coating Resins; Forest Products Resins; and Corporate and Other. A summary of the major products of the Company’s reportable segments follows:


•	Epoxy, Phenolic and Coating Resins: epoxy specialty resins, phenolic encapsulated substrates, versatic acids and derivatives, basic epoxy resins and intermediates and phenolic specialty resins and molding compounds


•	Forest Products Resins: forest products resins and formaldehyde applications


•	Corporate and Other: primarily corporate general and administrative expenses that are not allocated to the other segments, such as shared service and administrative functions, foreign exchange gains and losses and legacy company costs.

Reportable Segments

Following are net sales and Segment EBITDA (earnings before interest, income taxes, depreciation and amortization) by reportable segment. Segment EBITDA is defined as EBITDA adjusted for certain non-cash items and other income and expenses. Segment EBITDA is the primary performance measure used by the Company’s senior management, the chief operating decision-maker and the board of directors to evaluate operating results and allocate capital resources among segments. Segment EBITDA is also the profitability measure used to set management and executive incentive compensation goals. Corporate and Other is primarily corporate general and administrative expenses that are not allocated to the other segments, such as shared service and administrative functions, foreign exchange gains and losses and legacy company costs not allocated to continuing segments.

Net Sales ⁽¹⁾:

Following is revenue by reportable segment. Product sales within each reportable segment share economically similar risks. These risks include general economic and industrial conditions, competitive pricing pressures and the Company’s ability to pass on fluctuations in raw material prices to its customers. A substantial number of the Company’s raw material inputs are petroleum-based and their prices fluctuate with the price of oil. Due to differing regional industrial and economic conditions, the geographic distribution of revenue may impact the amount, timing and uncertainty of revenue and cash flows from contracts with customers.

Following is net sales by reportable segment disaggregated by geographic region:



	Three Months Ended September 30, 2018						Three Months Ended September 30, 2017
	Epoxy, Phenolic and Coating Resins		Forest Products Resins		Total		Epoxy, Phenolic and Coating Resins		Forest Products Resins		Total
North America	$	225	$	294	$	519	$	215	$	254	$	469
Europe	215		49		264		220		49		269
Asia Pacific	80		35		115		91		34		125
Latin America	1		53		54		2		49		51
Total	$	521	$	431	$	952	$	528	$	386	$	914

	Nine Months Ended September 30, 2018						Nine Months Ended September 30, 2017
	Epoxy, Phenolic and Coating Resins		Forest Products Resins		Total		Epoxy, Phenolic and Coating Resins		Forest Products Resins		Total
North America	$	695	$	856	$	1,551	$	623	$	773	$	1,396
Europe	709		155		864		665		145		810
Asia Pacific	218		101		319		243		99		342
Latin America	3		156		159		6		142		148
Total	$	1,625	$	1,268	$	2,893	$	1,537	$	1,159	$	2,696

(1) Intersegment sales are not significant and, as such, are eliminated within the selling segment.

Reconciliation of Net Loss to Segment EBITDA:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Reconciliation:
Net loss attributable to Hexion Inc.	$	(18	)	$	(70	)	$	(53	)	$	(146	)
Net income attributable to noncontrolling interest	—			—			(1		)	—
Net loss	(18		)	(70		)	(52		)	(146		)
Income tax expense	6			9			17			16
Interest expense, net	83			82			250			247
Depreciation and amortization	27			29			85			85
Accelerated depreciation	2			14			2			14
EBITDA	$	100		$	64		$	302		$	216
Items not included in Segment EBITDA:
Asset impairments and write-downs	$	7		$	13		$	32		$	13
Business realignment costs	5			10			19			27
Gain on disposition	—			—			(44		)	—
Realized and unrealized foreign currency losses (gains)	4			(5		)	26			(7		)
Loss on extinguishment of debt	—			—			—			3
Other	12			14			39			39
Total adjustments	28			32			72			75
Segment EBITDA	$	128		$	96		$	374		$	291

Segment EBITDA:
Epoxy, Phenolic and Coating Resins	$	66		$	45		$	208		$	143
Forest Products Resins	76			66			219			195
Corporate and Other	(14		)	(15		)	(53		)	(47		)
Total	$	128		$	96		$	374		$	291

Items Not Included in Segment EBITDA

Not included in Segment EBITDA are certain non-cash items and other income and expenses. For the three and nine months ended September 30, 2018 and 2017, these items primarily include expenses from retention programs and certain professional fees related to strategic projects. Business realignment costs for the three and nine months ended September 30, 2018 and 2017 primarily include costs related to certain in-process facility rationalizations and cost reduction programs.