Guarantor Non-Guarantor Subsidiary Financial Information (Tables)

9 Months Ended

Sep. 30, 2018

Sep. 30, 2017

Guarantor Non Guarantor Subsidary Financial Information [Abstract]

HEXION INC.

SEPTEMBER 30, 2018

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 $16, respectively)	$	34		$	1		$	102		$	—		$	137
Accounts receivable, net	120			1			342			—			463
Intercompany accounts receivable	64			—			49			(113		)	—
Intercompany loans receivable—current portion	69			—			—			(69		)	—
Inventories:
Finished and in-process goods	123			—			168			—			291
Raw materials and supplies	43			—			62			—			105
Other current assets	28			—			34			—			62
Total current assets	481			2			757			(182		)	1,058
Investment in unconsolidated entities	144			13			19			(157		)	19
Deferred income taxes	—			—			9			—			9
Other assets, net	13			7			20			—			40
Intercompany loans receivable	1,121			—			135			(1,256		)	—
Property and equipment, net	365			—			478			—			843
Goodwill	52			—			57			—			109
Other intangible assets, net	21			—			8			—			29
Total assets	$	2,197		$	22		$	1,483		$	(1,595	)	$	2,107
Liabilities and Deficit
Current liabilities:
Accounts payable	$	117		$	1		$	273		$	—		$	391
Intercompany accounts payable	49			—			64			(113		)	—
Debt payable within one year	13			—			71			—			84
Intercompany loans payable within one year	—			—			69			(69		)	—
Interest payable	99			—			2			—			101
Income taxes payable	4			—			3			—			7
Accrued payroll and incentive compensation	29			—			34			—			63
Other current liabilities	62			—			49			—			111
Total current liabilities	373			1			565			(182		)	757
Long-term liabilities:
Long-term debt	3,536			—			174			—			3,710
Intercompany loans payable	135			—			1,121			(1,256		)	—
Accumulated losses of unconsolidated subsidiaries in excess of investment	812			157			—			(969		)	—
Long-term pension and post employment benefit obligations	28			—			219			—			247
Deferred income taxes	2			—			10			—			12
Other long-term liabilities	112			—			70			—			182
Total liabilities	4,998			158			2,159			(2,407		)	4,908
Total deficit	(2,801		)	(136		)	(676		)	812			(2,801		)
Total liabilities and deficit	$	2,197		$	22		$	1,483		$	(1,595	)	$	2,107

HEXION INC.

DECEMBER 31, 2017

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 $18, respectively)	$	13		$	—		$	102		$	—		$	115
Accounts receivable, net	126			1			335			—			462
Intercompany accounts receivable	121			—			80			(201		)	—
Intercompany loans receivable—current portion	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
Investment 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

Condensed Consolidating Statement of Operations

HEXION INC.

THREE MONTHS ENDED SEPTEMBER 30, 2018

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)



	Hexion Inc.			Combined Subsidiary Guarantors		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	438		$	—	$	562		$	(48	)	$	952
Cost of sales	361			—		483			(48		)	796
Gross profit	77			—		79			—			156
Selling, general and administrative expense	28			—		44			—			72
Asset impairments	—			—		3			—			3
Business realignment costs	3			—		2			—			5
Other operating expense, net	2			—		4			—			6
Operating income	44			—		26			—			70
Interest expense, net	80			—		3			—			83
Intercompany interest (income) expense, net	(21		)	—		21			—			—
Other non-operating income, net	—			—		(1		)	—			(1		)
(Loss) income before tax and (losses) earnings from unconsolidated entities	(15		)	—		3			—			(12		)
Income tax expense	—			—		6			—			6
Loss before (losses) earnings from unconsolidated entities	(15		)	—		(3		)	—			(18		)
(Losses) earnings from unconsolidated entities, net of taxes	(3		)	—		1			2			—
Net loss	$	(18	)	$	—	$	(2	)	$	2		$	(18	)
Comprehensive loss	$	(24	)	$	—	$	(11	)	$	11		$	(24	)

HEXION INC.

THREE MONTHS ENDED SEPTEMBER 30, 2017

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)



	Hexion Inc.			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	400		$	—		$	558		$	(44	)	$	914
Cost of sales	360			—			481			(44		)	797
Gross profit	40			—			77			—			117
Selling, general and administrative expense	29			—			48			—			77
Asset impairments	13			—			—			—			13
Business realignment costs	6			—			4			—			10
Other operating expense (income), net	3			—			(2		)	—			1
Operating (loss) income	(11		)	—			27			—			16
Interest expense, net	78			—			4			—			82
Intercompany interest (income) expense, net	(20		)	—			20			—			—
Other non-operating (income) expense, net	(25		)	—			20			—			(5		)
Loss before income tax and (losses) earnings from unconsolidated entities	(44		)	—			(17		)	—			(61		)
Income tax expense	3			—			6			—			9
Loss before (losses) earnings from unconsolidated entities	(47		)	—			(23		)	—			(70		)
(Losses) earnings from unconsolidated entities, net of taxes	(23		)	(18		)	1			40			—
Net loss	$	(70	)	$	(18	)	$	(22	)	$	40		$	(70	)
Comprehensive loss	$	(60	)	$	(18	)	$	(22	)	$	40		$	(60	)

HEXION INC.

NINE MONTHS ENDED SEPTEMBER 30, 2018

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)



	Hexion Inc.			Combined Subsidiary Guarantors		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	1,329		$	—	$	1,715		$	(151	)	$	2,893
Cost of sales	1,088			—		1,477			(151		)	2,414
Gross profit	241			—		238			—			479
Selling, general and administrative expense	108			—		123			—			231
Gain on disposition	(24		)	—		(20		)	—			(44		)
Asset impairments	25			—		3			—			28
Business realignment costs	12			—		7			—			19
Other operating expense, net	5			—		21			—			26
Operating income	115			—		104			—			219
Interest expense, net	239			—		11			—			250
Intercompany interest (income) expense, net	(62		)	—		62			—			—
Other non-operating expense (income), net	17			—		(11		)	—			6
(Loss) income before tax and earnings from unconsolidated entities	(79		)	—		42			—			(37		)
Income tax (benefit) expense	(6		)	—		23			—			17
(Loss) income before earnings earnings from unconsolidated entities	(73		)	—		19			—			(54		)
Earnings from unconsolidated entities, net of taxes	20			14		3			(35		)	2
Net (loss) income	(53		)	14		22			(35		)	(52		)
Net income attributable to noncontrolling interest	—			—		(1		)	—			(1		)
Net (loss) income attributable to Hexion Inc.	$	(53	)	$	14	$	21		$	(35	)	$	(53	)
Comprehensive (loss) income attributable to Hexion Inc.	$	(61	)	$	14	$	26		$	(40	)	$	(61	)

HEXION INC.

NINE MONTHS ENDED SEPTEMBER 30, 2017

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)



	Hexion Inc.			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	1,195		$	—		$	1,651		$	(150	)	$	2,696
Cost of sales	1,037			—			1,425			(150		)	2,312
Gross profit	158			—			226			—			384
Selling, general and administrative expense	96			—			137			—			233
Asset impairments	13			—			—			—			13
Business realignment costs	16			—			11			—			27
Other operating expense, net	—			—			4			—			4
Operating income	33			—			74			—			107
Interest expense, net	236			—			11			—			247
Intercompany interest (income) expense, net	(55		)	—			55			—			—
Loss on extinguishment of debt	3			—			—			—			3
Other non-operating (income) expense, net	(83		)	—			73			—			(10		)
Loss before income tax and (losses) earnings from unconsolidated entities	(68		)	—			(65		)	—			(133		)
Income tax (benefit) expense	(1		)	—			17			—			16
Loss before (losses) earnings from unconsolidated entities	(67		)	—			(82		)	—			(149		)
(Losses) earnings from unconsolidated entities, net of taxes	(79		)	(52		)	3			131			3
Net loss	$	(146	)	$	(52	)	$	(79	)	$	131		$	(146	)
Comprehensive loss	$	(121	)	$	(52	)	$	(71	)	$	123		$	(121	)

Condensed Consolidating Statement of Cash Flows

HEXION INC.

NINE MONTHS ENDED SEPTEMBER 30, 2018

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	$	(303	)		$	1	$	253			$	—		$	(49	)
Cash flows provided by (used in) investing activities
Capital expenditures	(20		)		—		(42		)		—			(62		)
Proceeds from disposition, net	24				—		25				—			49
Proceeds from sale of assets, net	—				—		1				—			1
Return of capital from subsidiary from sales of accounts receivable	243			(a)	—		—				(243		)	—
	247				—		(16		)		(243		)	(12		)
Cash flows provided by (used in) financing activities
Net short-term debt borrowings	—				—		6				—			6
Borrowings of long-term debt	221				—		204				—			425
Repayments of long-term debt	(197		)		—		(146		)		—			(343		)
Net intercompany loan borrowings (repayments)	53				—		(53		)		—			—
Long-term debt and credit facility financing fees paid	—				—		(1		)		—			(1		)
Return of capital to parent from sales of accounts receivable	—				—		(243		)	(a)	243			—
	77				—		(233		)		243			87
Effect of exchange rates on cash and cash equivalents	—				—		(4		)		—			(4		)
Change in cash and cash equivalents	21				1		—				—			22
Cash and cash equivalents at beginning of period	13				—		102				—			115
Cash and cash equivalents at end of period	$	34			$	1	$	102			$	—		$	137

(a)

During the nine months ended September 30, 2018, Hexion Inc. contributed receivables of $243 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the nine months ended September 30, 2018, 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.

NINE MONTHS ENDED SEPTEMBER 30, 2017

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	$	(245	)		$	—	$	41			$	(1	)	$	(205	)
Cash flows provided by (used in) investing activities
Capital expenditures	(33		)		—		(53		)		—			(86		)
Capitalized interest	—				—		(1		)		—			(1		)
Proceeds from sale of assets, net	5				—		—				—			5
Return of capital from subsidiary from sales of accounts receivable	117			(a)	—		—				(117		)	—
	89				—		(54		)		(117		)	(82		)
Cash flows provided by (used in) financing activities
Net short-term debt borrowings	4				—		11				—			15
Borrowings of long-term debt	1,007				—		284				—			1,291
Repayments of long-term debt	(850		)		—		(229		)		—			(1,079		)
Net intercompany loan (repayments) borrowings	(7		)		—		7				—			—
Long-term debt and credit facility financing fees	(20		)		—		(5		)		—			(25		)
Common stock dividends paid	—				—		(1		)		1			—
Return of capital to parent from sales of accounts receivable	—				—		(117		)	(a)	117			—
	134				—		(50		)		118			202
Effect of exchange rates on cash and cash equivalents	—				—		7				—			7
Change in cash and cash equivalents	(22		)		—		(56		)		—			(78		)
Cash and cash equivalents at beginning of period	28				—		168				—			196
Cash and cash equivalents at end of period	$	6			$	—	$	112			$	—		$	118

(a)

During the nine months ended September 30, 2017, Hexion Inc. contributed receivables of $117 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the nine months ended September 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.