Segment and Geographic Information

The Company’s business segments are based on the products that the Company offers and the markets that it serves. At December 31, 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 and items associated with the Company’s reportable segments are as follows:


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

Net Sales⁽¹⁾:



	Year Ended December 31,
	2018		2017		2016
Epoxy, Phenolic and Coating Resins	$	2,115	$	2,052	$	2,094
Forest Products Resins	1,682		1,539		1,344
Total	$	3,797	$	3,591	$	3,438

Segment EBITDA:



	Year Ended December 31,
	2018			2017			2016
Epoxy, Phenolic and Coating Resins ⁽²⁾	$	226		$	174		$	258
Forest Products Resins ⁽³⁾	285			257			240
Corporate and Other	(71		)	(66		)	(65		)
Total	$	440		$	365		$	433

Depreciation and Amortization Expense:



	Year Ended December 31,
	2018		2017		2016
Epoxy, Phenolic and Coating Resins	$	69	$	71	$	87
Forest Products Resins	40		40		40
Corporate and Other	4		4		4
Total	$	113	$	115	$	131

Total Assets:



	As of December 31,
	2018		2017
Epoxy, Phenolic and Coating Resins	$	1,031	$	1,100
Forest Products Resins	779		880
Corporate and Other	151		117
Total	$	1,961	$	2,097

Capital Expenditures⁽⁴⁾:



	Year Ended December 31,
	2018		2017		2016
Epoxy, Phenolic and Coating Resins	$	56	$	73	$	72
Forest Products Resins	31		40		67
Corporate and Other	3		5		2
Total	$	90	$	118	$	141


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


(2)	Included in the Epoxy, Phenolic and Coating Resins Segment EBITDA are “Earnings from unconsolidated entities, net of taxes” of $2, $3 and $11 for the years ended December 31, 2018, 2017, and 2016, respectively.


(3)	Included in the Forest Products Resins Segment EBITDA are “Earnings from unconsolidated entities, net of taxes” of $1, $1 and less than $1 for the years ended December 31, 2018, 2017, and 2016, respectively.


(4)	Includes capitalized interest costs that are incurred during the construction of property and equipment.

Reconciliation of Net Loss to Segment EBITDA:



	Year Ended December 31,
	2018			2017			2016
Net loss attributable to Hexion Inc.	$	(162	)	$	(234	)	$	(38	)
Net loss attributable to noncontrolling interest	1			—			—
Net loss	(163		)	(234		)	(38		)
Income tax expense	40			18			38
Interest expense, net	365			329			310
Depreciation and amortization	113			115			131
Accelerated depreciation	4			14			129
EBITDA	$	359		$	242		$	570
Items not included in Segment EBITDA:
Asset impairments and write-downs	$	32		$	13		$	—
Business realignment costs	29			52			55
Realized and unrealized foreign currency losses (gains)	27			3			(11		)
Gain on dispositions	(44		)	—			(240		)
Loss (gain) on extinguishment of debt	—			3			(48		)
Unrealized (gains) losses on pension and OPEB plan liabilities	(13		)	(4		)	34
Transaction costs	13			8			17
Other	37			48			56
Total adjustments	81			123			(137		)
Segment EBITDA	$	440		$	365		$	433

Segment EBITDA:
Epoxy, Phenolic and Coating Resins	$	226		$	174		$	258
Forest Products Resins	285			257			240
Corporate and Other	(71		)	(66		)	(65		)
Total	$	440		$	365		$	433

Items Not Included in Segment EBITDA

Not included in Segment EBITDA are certain non-cash items and other income and expenses. For 2018 and 2017, these other items primarily included expenses from retention programs, management fees and expenses related to legacy liabilities. For 2016, these other items primarily included expenses from retention programs, management fees and expenses related to legacy liabilities, partially offset by gains on the disposal of assets and a gain on a step acquisition. Transaction costs included certain professional fees related to strategic projects.

Business realignment costs for 2018 and 2017 primarily included costs related to in-process cost reduction programs and certain in-process and recently completed facility rationalizations. Business realignment costs for 2016 primarily included costs related to the rationalization at our Norco, LA manufacturing facility and costs related to certain in-process cost reduction programs.

Geographic Information

Net Sales⁽¹⁾:



	Year Ended December 31,
	2018		2017		2016
United States	$	1,662	$	1,513	$	1,389
Netherlands	628		595		583
Canada	365		344		302
China	230		270		296
Germany	201		198		180
Brazil	194		176		162
Other international	517		495		526
Total	$	3,797	$	3,591	$	3,438


(1)	Sales are attributed to the country in which the individual business locations reside.

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⁽¹⁾:



	Year Ended December 31, 2018						Year Ended December 31, 2017
	Epoxy, Phenolic and Coating Resins		Forest Products Resins		Total		Epoxy, Phenolic and Coating Resins		Forest Products Resins		Total
North America	$	902	$	1,125	$	2,027	$	837	$	1,020	$	1,857
Europe	920		203		1,123		882		194		1,076
Asia Pacific	290		135		425		325		130		455
Latin America	3		219		222		8		195		203
Total	$	2,115	$	1,682	$	3,797	$	2,052	$	1,539	$	3,591


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

Long-Lived Assets:



	As of December 31,
	2018		2017
United States	$	435	$	495
Germany	124		127
Netherlands	120		119
Brazil	62		76
Canada	61		68
Other international	175		195
Total	$	977	$	1,080