Segment Information

The Company’s business segments are based on the products that the Company offers and the markets that it serves. At March 31, 2019, 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 March 31, 2019						Three Months Ended March 31, 2018
	Epoxy, Phenolic and Coating Resins		Forest Products Resins		Total		Epoxy, Phenolic and Coating Resins		Forest Products Resins		Total
North America	$	209	$	260	$	469	$	233	$	268	$	501
Europe	219		47		266		245		54		299
Asia Pacific	63		33		96		61		31		92
Latin America	—		55		55		1		53		54
Total	$	491	$	395	$	886	$	540	$	406	$	946

(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 March 31,
	2019			2018
Reconciliation:
Net loss	(52		)	(13		)
Income tax expense	7			8
Interest expense, net	80			83
Depreciation and amortization	26			30
EBITDA	$	61		$	108
Items not included in Segment EBITDA:
Asset impairments	$	—		$	25
Business realignment costs	4			9
Gain on disposition	—			(44		)
Transaction costs	23			3
Realized and unrealized foreign currency losses	1			7
Other	14			10
Total adjustments	42			10
Segment EBITDA	$	103		$	118

Segment EBITDA:
Epoxy, Phenolic and Coating Resins	$	52		$	70
Forest Products Resins	68			67
Corporate and Other	(17		)	(19		)
Total	$	103		$	118

Items Not Included in Segment EBITDA

Not included in Segment EBITDA are certain non-cash items and other income and expenses. For the three months ended March 31, 2019 and 2018, these items primarily include expenses from retention programs, management fees and expenses related to legacy liabilities. For three months ended March 31, 2019, transaction costs primarily included certain professional fees and other expenses related to the Company’s Chapter 11 Proceedings. For the three months ended March 31, 2018, transaction costs included certain professional fees related to strategic projects. Business realignment costs for the three months ended March 31, 2019 and 2018 primarily include costs related to certain in-process facility rationalizations and cost reduction programs.