Company Quick10K Filing
Quick10K
Hexion
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$18.50 33 $612
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-19 Regulation FD, Exhibits
8-K 2019-07-01 Enter Agreement, Leave Agreement, Bankruptcy, Off-BS Arrangement, Sale of Shares, Shareholder Rights, Officers, Other Events, Exhibits
8-K 2019-07-01 Regulation FD, Exhibits
8-K 2019-06-24 Regulation FD, Exhibits
8-K 2019-06-20 Regulation FD, Exhibits
8-K 2019-06-19 Regulation FD, Exhibits
8-K 2019-06-10 Regulation FD, Exhibits
8-K 2019-05-29 Regulation FD, Exhibits
8-K 2019-05-22 Regulation FD, Exhibits
8-K 2019-05-01 Officers
8-K 2019-04-03 Enter Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2019-03-22 Regulation FD, Exhibits
8-K 2019-03-18 Officers, Officers
8-K 2019-02-11 Officers, Officers
8-K 2019-02-08 Officers
8-K 2019-01-10 Officers
8-K 2018-11-30 Officers
8-K 2018-11-13 Earnings, Exhibits
8-K 2018-08-07 Earnings, Exhibits
8-K 2018-03-30 Officers, Officers
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PEGI Pattern Energy Group 2,180
CNXN PC Connection 935
WSR Whitestone REIT 503
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MSC 2019-03-31
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollar Amounts in Millions)
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information (Dollar Amounts in Millions)
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 exhibit101.htm
EX-10.2 exhibit102.htm
EX-31.1(A) exhibit311a.htm
EX-31.1(B) exhibit311b.htm
EX-32.1 exhibit321.htm

Hexion Earnings 2019-03-31

MSC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 hexion10q.htm 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number 1-71
_______________________________________
viewupdatedlogoa02.gif
  HEXION INC.
(Exact name of registrant as specified in its charter)
________________________________________
New Jersey
 
13-0511250
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
180 East Broad St., Columbus, OH 43215
 
614-225-4000
(Address of principal executive offices including zip code)
 
(Registrant’s telephone number including area code)
 
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  o   No  x
Explanatory Note:  While the registrant is not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, it has filed all reports required to be filed by such filing requirements during the preceding 12 months.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
o
  
Accelerated filer
 
o
 
 
 
 
 
 
Non-accelerated filer
 
x
  
Smaller reporting company
 
o
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
o
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o No  x.
Number of shares of common stock, par value $0.01 per share, outstanding as of the close of business on May 1, 2019: 82,556,847
Securities registered pursuant to Section 12(b) of the Act: None



HEXION INC.
INDEX
 
 
 
Page
PART I – FINANCIAL INFORMATION
 
 
 
 
Item 1.
Hexion Inc. Condensed Consolidated Financial Statements (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II – OTHER INFORMATION
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.

2


PART I - FINANCIAL INFORMATION
Item 1.    Financial Statements
HEXION INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions, except share data)
March 31,
2019
 
December 31,
2018
Assets
 
 

Current assets:
 
 

Cash and cash equivalents (including restricted cash of $15)
$
111

 
$
128

Accounts receivable (net of allowance for doubtful accounts of $15 and $16, respectively)
496

 
412

Inventories:
 
 

Finished and in-process goods
258

 
240

Raw materials and supplies
94

 
94

Other current assets
67

 
57

Total current assets
1,026

 
931

Investment in unconsolidated entities
20

 
19

Other long-term assets
40

 
34

Property and equipment:
 
 

Land
90

 
89

Buildings
285

 
285

Machinery and equipment
2,289

 
2,293


2,664

 
2,667

Less accumulated depreciation
(1,840
)
 
(1,826
)

824

 
841

Operating lease assets (see Note 8)
99

 

Goodwill
108

 
109

Other intangible assets, net
25

 
27

Total assets
$
2,142

 
$
1,961

Liabilities and Deficit
 
 

Current liabilities:
 
 

Accounts payable
$
354

 
$
384

Debt payable within one year
3,875

 
3,716

Interest payable
100

 
82

Income taxes payable
8

 
5

Accrued payroll and incentive compensation
47

 
52

Current portion of operating lease liabilities (see Note 8)
23

 

Other current liabilities
105

 
106

Total current liabilities
4,512

 
4,345

Long-term liabilities:
 
 

Long-term debt
94

 
99

Long-term pension and post employment benefit obligations
215

 
221

Deferred income taxes
15

 
15

Operating lease liabilities (see Note 8)
76

 

Other long-term liabilities
196

 
195

Total liabilities
5,108

 
4,875

Commitments and contingencies (see Note 9)
 
 

Deficit
 
 

Common stock—$0.01 par value; 300,000,000 shares authorized, 170,605,906 issued and 82,556,847 outstanding at March 31, 2019 and December 31, 2018
1

 
1

Paid-in capital
526

 
526

Treasury stock, at cost—88,049,059 shares
(296
)
 
(296
)
Accumulated other comprehensive loss
(18
)
 
(18
)
Accumulated deficit
(3,177
)
 
(3,125
)
Total Hexion Inc. shareholder’s deficit
(2,964
)
 
(2,912
)
Noncontrolling interest
(2
)
 
(2
)
Total deficit
(2,966
)
 
(2,914
)
Total liabilities and deficit
$
2,142

 
$
1,961

See Notes to Condensed Consolidated Financial Statements

3


HEXION INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 
 
Three Months Ended March 31,
(In millions)
2019
 
2018
Net sales
$
886

 
$
946

Cost of sales
750

 
789

Gross profit
136

 
157

Selling, general and administrative expense
91

 
82

Gain on disposition

 
(44
)
Asset impairments

 
25

Business realignment costs
4

 
9

Other operating expense, net
8

 
9

Operating income
33

 
76

Interest expense, net
80

 
83

Other non-operating income, net
(1
)
 
(1
)
Loss before income tax and earnings from unconsolidated entities
(46
)
 
(6
)
Income tax expense
7

 
8

Loss before earnings from unconsolidated entities
(53
)
 
(14
)
Earnings from unconsolidated entities, net of taxes
1

 
1

Net loss
$
(52
)
 
$
(13
)
See Notes to Condensed Consolidated Financial Statements

4


HEXION INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)

 
Three Months Ended March 31,
(In millions)
2019
 
2018
Net loss
$
(52
)
 
$
(13
)
Other comprehensive income, net of tax:
 
 
 
Foreign currency translation adjustments

 
14

Other comprehensive income

 
14

Comprehensive (loss) income
$
(52
)
 
$
1

See Notes to Condensed Consolidated Financial Statements

5


HEXION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
Three Months Ended March 31,
(In millions)
2019

2018
Cash flows used in operating activities

 

Net loss
$
(52
)
 
$
(13
)
Adjustments to reconcile net loss to net cash used in operating activities:

 

Depreciation and amortization
26

 
30

Non-cash asset impairments

 
25

Deferred tax expense

 
1

Gain on disposition

 
(44
)
Amortization of deferred financing fees

 
4

Unrealized foreign currency losses

 
3

Other non-cash adjustments

 
(1
)
Net change in assets and liabilities:

 
 
Accounts receivable
(84
)
 
(36
)
Inventories
(20
)
 
(30
)
Accounts payable
(21
)
 
(28
)
Income taxes payable
4

 
2

Other assets, current and non-current
(9
)
 
(10
)
Other liabilities, current and long-term
2

 
14

Net cash used in operating activities
(154
)
 
(83
)
Cash flows (used in) provided by investing activities

 

Capital expenditures
(19
)
 
(25
)
Proceeds from disposition, net

 
49

Proceeds from sale of assets, net

 
1

Net cash (used in) provided by investing activities
(19
)
 
25

Cash flows provided by financing activities

 

Net short-term debt borrowings

 
(15
)
Borrowings of long-term debt
196

 
166

Repayments of long-term debt
(40
)
 
(96
)
Long-term debt and credit facility financing fees paid

 
(1
)
Net cash provided by financing activities
156

 
54

Effect of exchange rates on cash and cash equivalents

 
2

Change in cash and cash equivalents
(17
)
 
(2
)
Cash, cash equivalents and restricted cash at beginning of period
128

 
115

Cash, cash equivalents and restricted cash at end of period
$
111

 
$
113

Supplemental disclosures of cash flow information

 

Cash paid for:

 

Interest, net
$
62

 
$
61

Income taxes, net
5

 
5

See Notes to Condensed Consolidated Financial Statements

6


HEXION INC.
CONDENSED CONSOLIDATED STATEMENT OF DEFICIT (Unaudited)

(In millions)
Common
Stock
 
Paid-in
Capital
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Accumulated
Deficit
 
Total Hexion Inc. Deficit
 
Noncontrolling Interest
 
Total
Balance at December 31, 2017
$
1

 
$
526

 
$
(296
)
 
$
(8
)
 
$
(2,964
)
 
$
(2,741
)
 
$
(1
)
 
$
(2,742
)
Net loss

 

 

 

 
(13
)
 
(13
)
 

 
(13
)
Other comprehensive income

 

 

 
14

 

 
14

 

 
14

Impact of change in accounting policy

 

 

 

 
1

 
1

 

 
1

Balance at March 31, 2018
$
1

 
$
526

 
$
(296
)
 
$
6

 
$
(2,976
)
 
$
(2,739
)
 
$
(1
)
 
$
(2,740
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
$
1

 
$
526

 
$
(296
)
 
$
(18
)
 
$
(3,125
)
 
$
(2,912
)
 
$
(2
)
 
$
(2,914
)
Net loss

 

 

 

 
(52
)
 
(52
)
 

 
(52
)
Balance at March 31, 2019
$
1

 
$
526

 
$
(296
)
 
$
(18
)
 
$
(3,177
)
 
$
(2,964
)
 
$
(2
)
 
$
(2,966
)

See Notes to Condensed Consolidated Financial Statements

7


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In millions, except share data)
1. Background and Basis of Presentation
Based in Columbus, Ohio, Hexion Inc. (“Hexion” or the “Company”) serves global industrial markets through a broad range of thermoset technologies, specialty products and technical support for customers in a diverse range of applications and industries. The Company’s business is organized based on the products offered and the markets served. At March 31, 2019, the Company had three reportable segments: Epoxy, Phenolic and Coating Resins; Forest Products Resins; and Corporate and Other.
The Company’s direct parent is Hexion LLC, a holding company and wholly owned subsidiary of Hexion Holdings LLC (“Hexion Holdings”), the ultimate parent entity of Hexion. Hexion Holdings is controlled by investment funds managed by affiliates of Apollo Management Holdings, L.P. (together with Apollo Global Management, LLC and its subsidiaries, “Apollo”).
The unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries in which minority shareholders hold no substantive participating rights. Intercompany accounts and transactions are eliminated in consolidation. In the opinion of management, all adjustments consisting of normal, recurring adjustments considered necessary for a fair statement have been included. Results for the interim periods are not necessarily indicative of results for the entire year.
Year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the accompanying notes included in the Company’s most recent Annual Report on Form 10-K.
Going Concern
The Company previously disclosed, based on its financial condition and its projected operating results, the defaults under its debt agreements, and the risks and uncertainties surrounding its Chapter 11 proceedings (see Note 2), that there was substantial doubt as to the Company’s ability to continue as a going concern as of December 31, 2018. At March 31, 2019, the Company continues to believe that substantial doubt exists as to the Company’s ability to continue as a going concern for the next twelve months.
The accompanying Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q have been prepared under the basis of accounting assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company has made certain adjustments to the Condensed Consolidated Financial Statements including the reclassification of certain outstanding debt to current liabilities and the write-off of unamortized deferred financing costs related to such debt. To address the risk of not being able to continue as a going concern, the Company has undertaken steps to restructure its balance sheet (see Note 2).
2. Chapter 11 Bankruptcy Filing (Subsequent Event)
Bankruptcy Petitions
On April 1, 2019 (the “Petition Date”), the Company, Hexion Holdings LLC, Hexion LLC and certain of the Company’s subsidiaries (collectively, the “Debtors”), filed voluntary petitions (the “Bankruptcy Petitions”) for reorganization under Chapter 11 (“Chapter 11”) of the U.S. Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware, (the "Bankruptcy Court"). The Chapter 11 proceedings are being jointly administered under the caption In re Hexion Holdings LLC, No. 19-10684 (the “Chapter 11 Cases”). The Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
Operation and Implications of the Bankruptcy Filing
The filing of the Bankruptcy Petitions constitutes an event of default that accelerated the Company’s obligations under the following debt instruments (the “Debt Instruments”):
Amended and Restated Asset-Based Revolving Credit Agreement, dated as of December 21, 2016, by and among Hexion LLC, the Company, certain subsidiaries of the Company, the lenders party thereto and the other parties thereto with respect to approximately $296 of borrowings outstanding as of March 31, 2019, plus accrued and unpaid interest thereon;
Indenture, dated as of December 15, 1987, by and between the Company and The Bank of New York, as trustee, with respect to an aggregate principal amount of approximately $74 of 9.20% Debentures due 2021 and approximately $189 of 7.875% Debentures due 2023, in each case, plus accrued and unpaid interest thereon;


8


Indenture, dated as of November 5, 2010, by and among the Company, as successor issuer, Hexion Nova Scotia Finance, ULC, a Nova Scotia unlimited liability company, as the Nova Scotia issuer, certain subsidiaries of the Company and Wilmington Trust Company, as trustee, with respect to an aggregate principal amount of approximately $574 of 9.00% Second-Priority Senior Secured Notes due 2020 plus accrued and unpaid interest thereon;
Indenture, dated as of March 14, 2012, by and among the Company, as successor issuer, certain subsidiaries of the Company and Wilmington Trust, National Association, as trustee, with respect to an aggregate principal amount of approximately $1,550 of 6.625% First-Priority Senior Secured Notes due 2020 plus accrued and unpaid interest thereon;
Indenture, dated as of April 15, 2015, by and among the Company, certain subsidiaries of the Company and Wilmington Trust, National Association, as trustee, with respect to an aggregate principal amount of approximately $315 of 10.00% First-Priority Senior Secured Notes due 2020 plus accrued and unpaid interest thereon;
Indenture, dated as of February 8, 2017, by and among the Company, as successor issuer, certain subsidiaries of the Company and Wilmington Trust, National Association, as trustee, with respect to an aggregate principal amount of approximately $560 of 10.375% First-Priority Senior Secured Notes due 2022 plus accrued and unpaid interest thereon; and
The 1.5 Lien Indenture, with respect to an aggregate principal amount of approximately $225 of 13.75% Senior Secured Notes due 2022 plus accrued and unpaid interest thereon.
The Debt Instruments provide that as a result of the Bankruptcy Petitions the principal and interest due thereunder shall be immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the Bankruptcy Petitions and the creditors’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code.
The accompanying Condensed Consolidated Financial Statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a going concern is contingent upon the Debtors ability to comply with the financial and other covenants contained in the DIP ABL Facility described below, the development of, and the Bankruptcy Court’s approval of, a Chapter 11 plan and the Debtors ability to successfully implement a restructuring plan and obtain new financing, among other factors. Such conditions raise substantial doubt as to the Company’s ability to continue as a going concern.
Subsequent to the Petition Date, the Company received approval from the Bankruptcy Court to pay or otherwise honor certain pre-petition obligations generally designed to stabilize the Company’s operations, such as certain employee wages, salaries and benefits, certain taxes and fees, customer obligations, obligations to logistics providers and pre-petition amounts owed to certain critical vendors. The Company also expects to honor payments to vendors and other providers in the ordinary course of business for goods and services received after the Petition Date. The Company has received Bankruptcy Court approval to retain legal and financial professionals to advise the Company in connection with the Chapter 11 Cases and certain other professionals to provide services and advice in the ordinary course of business. From time to time, the Company may seek Court approval to retain additional professionals as deemed necessary.
Debtor-in-Possession Financing
DIP Term Loan Facility
In connection with the filing of the Bankruptcy Petitions, on April 3, 2019, the Company entered into a New York law-governed senior secured term loan agreement (the “DIP Term Loan Facility”), among Hexion LLC (“Holdings”), the Company, Hexion International Holdings B.V. (the “Dutch Borrower”), which was amended on April 17, 2019, the lenders party thereto and JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent and collateral agent (the “Term Loan Agent”). The proceeds of the DIP Term Loan Facility were loaned by the Dutch Borrower to the Company pursuant to an intercompany loan agreement (the “Intercompany Loan Agreement”) and were used in part to repay in full the outstanding obligations under the Company’s existing asset-based revolving credit agreement ABL Facility (“ABL Facility”).
The DIP Term Loan Facility has an 18-month term unless, prior to the end of such 18 month period, a plan of reorganization filed in the Chapter 11 Cases is confirmed pursuant to an order entered by the Bankruptcy Court, in which case, the DIP Term Loan Facility will terminate on the effective date of such plan. The amount committed and made available under the DIP Term Loan Facility is $350. The DIP Term Loan Facility bears interest based on, at the Company’s option, an adjusted LIBOR plus 2.75%.
The DIP Term Loan Facility has a minimum liquidity covenant of $35 tested at the close of each business day. Liquidity is defined as global unrestricted cash plus DIP ABL Facility excess availability.
The security arrangements for the DIP Term Loan Facility include a Dutch-law governed pledge over the equity of the Dutch Borrower’s direct subsidiary Hexion Holding B.V., a Dutch-law governed pledge over the Dutch Borrower’s rights and interest under the Intercompany Loan Agreement and first-priority liens on the unencumbered equity interests directly owned by, and all other unencumbered tangible and intangible property that is neither Notes Priority Collateral nor ABL Priority Collateral (as such terms are defined in the Company’s existing ABL Intercreditor Agreement, dated as of March 28, 2013, by and among JPMorgan, as the ABL facility collateral agent, Wilmington Trust, National Association, as applicable first-lien agent and first-lien collateral agent, the Company and its subsidiaries party thereto) of, the Debtors, in each case subject to certain exceptions and permitted liens.

9


DIP ABL Facility
In connection with the filing of the Bankruptcy Petitions, on April 3, 2019, Holdings, the Company and certain of its subsidiaries (collectively, the “Borrowers”), the lenders party thereto, JPMorgan, as administrative agent, and JPMorgan, as collateral agent (the “DIP ABL Collateral Agent” and together with the DIP Term Loan Facility, the “Credit Facilities”), entered into an amended and restated senior secured debtor-in-possession asset-based revolving credit agreement , which was further amended on May 10, 2019 (the “DIP ABL Facility”), which amended and restated the Company’s ABL Facility among Holdings, the Company, the Borrowers, the lenders party thereto, JPMorgan, as administrative agent, and JPMorgan, as collateral agent.
The DIP ABL Facility has an 18-month term unless, prior to the end of such 18 month period, a plan of reorganization filed in the Chapter 11 Cases is confirmed pursuant to an order entered by the Bankruptcy Court, in which case, the DIP ABL Facility will terminate on the effective date of such plan. Availability under the ABL Facility is $350. The DIP ABL Facility is also subject to a borrowing base that is based on a specified percentage of eligible accounts receivable and inventory and, in certain foreign jurisdictions, machinery and equipment.
The DIP ABL Facility bears interest based on, at the Company’s option, an adjusted LIBOR rate plus an applicable margin of 2.00% to 2.50% based on excess availability or an alternate base rate plus an applicable margin of 1.00% to 1.50% based on excess availability. In addition to paying interest on outstanding principal under the DIP ABL Facility, the Company will be required to pay a commitment fee to the lenders in respect of the unutilized commitments at an initial rate equal to 0.50% per annum, subject to adjustment depending on the usage.
The DIP ABL Facility also has a minimum liquidity covenant of $35 tested at the close of each business day.
The DIP ABL Facility is secured by, among other things, first-priority liens on most of the inventory and accounts receivable and related assets of the Company, its domestic subsidiaries and certain of its foreign subsidiaries, and, in the case of certain foreign subsidiaries, machinery and equipment (the “DIP ABL Priority Collateral”), and second-priority liens on certain collateral that generally includes most of the Company’s, its domestic subsidiaries’ and certain of its foreign subsidiaries’ assets other than DIP ABL Priority Collateral (the “DIP Term Loan Priority Collateral”), in each case subject to certain exceptions and permitted liens.
Restructuring Support Agreement
On April 1, 2019, the Debtors entered into a Restructuring Support Agreement (the “Support Agreement”) with equityholders that beneficially own more than a majority of the Company’s outstanding equity (the “Consenting Sponsors”) and creditors holding more than a majority of the aggregate outstanding principal amount of each of the Company’s 6.625% Notes and 10.00% Notes, (the “1L Notes”), 13.750% 1.5 lien notes due 2022 issued by Hexion Inc. (the “1.5L Notes”), 9.00% second lien notes due 2020 issued by Hexion Inc. (the “2L Notes”), 9.20% Debentures due 2021 and/or 7.875% Debentures due 2023 issued by Borden, Inc. (the “Unsecured Notes”) (the “Consenting Creditors” and, together with the Consenting Sponsors, the “Consenting Parties”). The Support Agreement incorporates the economic terms regarding a restructuring of the Debtors agreed to by the parties reflected in a term sheet attached as Exhibit A to the Support Agreement. The restructuring transactions will be effectuated through a plan of reorganization (the “Plan”) to be proposed by the Debtors.
Pursuant to the Support Agreement, each of the Debtors and the Consenting Parties has made certain customary commitments to each other. The Debtors have agreed to, among other things, use commercially reasonable efforts to make all requisite filings with the Bankruptcy Court and continue to involve and update the Consenting Creditors’ representatives in the bankruptcy process; respond to diligence requests from certain of the Consenting Creditors’ representatives; and satisfy certain other covenants set forth in the Support Agreement. The Consenting Parties have committed to support and vote for the Plan and have agreed to use commercially reasonable efforts to take, or refrain from taking, certain actions in furtherance of such support.
The Support Agreement contains milestones for the progress of the Chapter 11 Cases (the “Milestones”), which include the dates by which the Debtors are required to, among other things, obtain certain orders of the Bankruptcy Court and consummate the Debtors’ emergence from bankruptcy. Among other dates set forth in the Support Agreement, the agreement contemplates that the Bankruptcy Court shall have entered the Disclosure Statement Order (as defined therein) no later than 90 days after April 1, 2019 and that the Company shall have emerged from bankruptcy no later than 150 days after April 1, 2019, both of which are subject to an extension of up to the number of days (not to exceed 35 days) by which the Company’s deadline to file its schedules of assets and liabilities and statements of financial affairs is extended beyond 45 days, in the event the Company receives such an extension from the Bankruptcy Court.
Each of the parties to the Support Agreement may terminate the agreement (and thereby their support for the Plan) under certain limited circumstances. Any Debtor may terminate the Support Agreement upon, among other circumstances:
Its board of directors, after consultation with legal counsel, determining in good faith that performance under the Support Agreement would be inconsistent with its fiduciary duties;
The failure of Consenting Creditors to hold, in the aggregate, at least 66 2/3% of the aggregate principal amount outstanding of each of the (a) 1L Notes, (b) 1.5L Notes, and (c) 2L Notes and the Unsecured Notes, in each case, at any time after April 5, 2019; and
Certain actions by the Bankruptcy Court, including dismissing the Chapter 11 Cases or converting the Chapter 11 Cases into cases under chapter 7 of the Bankruptcy Code.

10


The Consenting Parties also have specified termination rights, including certain termination rights similar to the Debtors. The Consenting Creditors’ termination rights may be exercised by the Required Consenting First Lien Noteholders, the Required Consenting 1.5L Noteholders or the Required Consenting Crossholder Noteholders (each as defined in the Support Agreement). Additionally, such parties may terminate the Support Agreement upon any acceleration or termination of the Credit Facilities or if any of the Milestones have not been achieved, extended, or waived within three business days after such Milestone.
The Support Agreement is subject to approval by the Bankruptcy Court, among other conditions. Accordingly, no assurance can be given that the transactions described therein will be consummated.
Significant Bankruptcy Court Actions
Following the Commencement Date, the Bankruptcy Court entered certain interim and final orders facilitating the Debtors’ operational transition into Chapter 11. These orders authorized the Debtors to, among other things, pay certain pre-petition employee expenses and benefits, use their existing cash management system, maintain and administer customer programs, pay certain critical and foreign vendors, honor insurance-related obligations, and pay certain pre-petition taxes and related fees on a final basis, and approved the Credit Facilities on an interim basis. The Bankruptcy Court approved the Credit Facilities on a final basis on May 1, 2019.
3. Summary of Significant Accounting Policies
Revenue Recognition—The Company follows the principles-based five step model to recognize revenue upon the transfer of promised goods or services to customers and in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. Revenue, net of estimated allowances and returns, is recognized when the Company has completed its performance obligations under a contract and control of the product is transferred to the customer. Substantially all revenue is recognized at the time shipment is made or upon delivery as risk and title to the product transfer to the customer. Sales, value add, and other taxes that are collected concurrently with revenue-producing activities are excluded from revenue. Contract terms for certain transactions, including sales made on a consignment basis, result in the transfer of control of the finished product to the customer prior to the point at which the Company has the right to invoice for the product. In these cases, timing of revenue recognition will differ from the timing of invoicing to customers and will result in the Company recording a contract asset. A contract asset balance of $11 is recorded within “Other current assets” at both March 31, 2019 and December 31, 2018 in the unaudited Condensed Consolidated Balance Sheet. Refer to Note 12 for additional discussion of the Company’s net sales by reportable segment disaggregated by geographic region.
Use of Estimates—The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and also requires the disclosure of contingent assets and liabilities at the date of the financial statements. In addition, it requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Subsequent Events—The Company has evaluated events and transactions subsequent to March 31, 2019 through the date of issuance of its unaudited Condensed Consolidated Financial Statements.
Cash and Cash Equivalents— The Company considers all highly liquid investments that are purchased with an original maturity of three months or less to be cash equivalents. The Company’s restricted cash balance of $15 as of March 31, 2019 and December 31, 2018, respectively, represent deposits to secure certain bank guarantees issued to third parties to guarantee potential obligations of the Company primarily related to the completion of tax audits and environmental liabilities. These balances will remain restricted as long as the underlying exposures exist and are included in the Consolidated Balance Sheets as a component of “Cash and cash equivalents.”
Recently Issued Accounting Standards
Newly Adopted Accounting Standards
In February 2016, the FASB issued Accounting Standards Board Update No. 2016-02: Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 supersedes the existing lease guidance in Topic 840. According to the new guidance, all leases, with limited scope exceptions, will be recorded on the balance sheet in the form of a liability to make lease payments (lease liability) and a right-of-use asset representing the right to use the underlying asset for the lease term. The guidance was effective for annual and interim periods beginning on or after December 15, 2018.
The Company adopted ASU 2016-02 using a modified retrospective adoption method at January 1, 2019. Under this method of adoption, there is no impact to the comparative Condensed Consolidated Statement of Operations and the Condensed Consolidated Balance Sheets. The Company also determined that there was no cumulative-effect adjustment to beginning retained earnings on the Condensed Consolidated Balance Sheet. The Company will continue to report periods prior to January 1, 2019 in its financial statements under prior guidance as outlined in Accounting Standards Codification Topic 840, “Leases”. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward its historical lease classification. The Company also elected the hindsight practical expedient to determine the lease term for existing leases. Adoption of the new standard resulted in the recording of right of use assets and offsetting lease liabilities of $105 as of January 1, 2019.

11


In February 2018, the FASB issued Accounting Standards Board Update No. 2018-02: Income Statement-Reporting Comprehensive Income (Topic 220) (“ASU 2018-02”). ASU 2018-02 was issued in response to the United States tax reform legislation, the Tax Cuts and Jobs Act (“Tax Reform”), enacted in December 2017. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the new tax legislation. The guidance is effective for annual and interim periods beginning on or after December 15, 2018, and early adoption is permitted. The Company adopted ASU 2018-02 as of January 1, 2019 and it did not have a material impact on the financial statements.
Newly Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13: Financial Instruments - Credit Losses (Topic 820): “Measurement of Credit Losses on Financial Instruments," (“ASU 2016-13”). The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. New disclosures are also required with this standard. The standard is effective for annual and interim periods beginning after December 15, 2019. The Company is currently assessing the potential impact of adopting this standard.
In August 2018, the FASB issued ASU 2018-15: Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”). ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted and an entity can elect to apply the new guidance on a prospective or retrospective basis. The Company is currently assessing the potential impact of adopting this standard.
4. Restructuring & Business Realignment
    
Restructuring Activities

In November 2017, the Company initiated new restructuring actions with the intent to optimize its cost structure. The total one-time cash costs expected to be incurred for these restructuring activities are estimated at $27, consisting primarily of workforce reduction costs.
    
The following table summarizes restructuring information by reporting segment:
 
Epoxy, Phenolic and Coating Resins
 
Forest Products Resins
 
Corporate and Other
 
Total
Total restructuring costs expected to be incurred
$
14

 
$
9

 
$
4

 
$
27

Total restructuring costs incurred through March 31, 2019
$
14

 
$
8

 
$
4

 
$
26

 
 
 
 
 
 
 
 
Accrued liability at December 31, 2018
$
2

 
$
2

 
$
2

 
$
6

Restructuring charges
1

 

 

 
1

Payments
(1
)
 

 
(1
)
 
(2
)
Accrued liability at March 31, 2019
$
2

 
$
2

 
$
1

 
$
5


Oilfield
    
During the first quarter of 2018, the Company indefinitely idled an oilfield manufacturing facility within its Epoxy, Phenolic and Coating Resins segment, and production was shifted to another facility within the oilfield manufacturing group. This represented a triggering event resulting in an impairment evaluation of the fixed and intangible assets within the U.S. oilfield asset group. As a result, an asset impairment of $20 was recorded in the first quarter of 2018 related to the fixed assets at the idled manufacturing facility. In addition, the remaining U.S. oilfield asset group was evaluated for impairment utilizing a discounted cash flow approach, resulting in an additional impairment of $5 that was recorded during the first quarter of 2018 related to an existing customer relationship intangible asset. Overall, the Company incurred $25 of total impairment related to these assets, which is included in “Asset impairments” in the unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2018.
5. Related Party Transactions
Administrative Service, Management and Consulting Arrangement
The Company is subject to a Management Consulting Agreement with Apollo (the “Management Consulting Agreement”) that renews on an annual basis, unless notice to the contrary is given by either party. Under the Management Consulting Agreement, the Company receives certain structuring and advisory services from Apollo and its affiliates. The Management Consulting Agreement provides indemnification to Apollo, its affiliates and their directors, officers and representatives for potential losses arising from these services. Apollo is entitled to an annual fee equal to the greater of $3 or 2% of the Company’s Adjusted EBITDA. Apollo elected to waive charges of any portion of the annual management fee due in excess of $3 for the calendar year 2018.

12


During the three months ended March 31, 2019 and 2018, the Company recognized expense under the Management Consulting Agreement of $1. This amount is included in “Other operating expense, net” in the unaudited Condensed Consolidated Statements of Operations. In conjunction with the Company’s Chapter 11 proceedings and the Support Agreement filed on April 1, 2019, Apollo has agreed to waive its annual management fee for 2019. In addition, as part of the Support Agreement, Apollo will receive a $2.5 senior unsecured note maturing on March 31, 2020, payable upon an initial public offering or listing on NYSE or NASDAQ.
Transactions with MPM
Shared Services Agreement
On October 1, 2010, the Company entered into a shared services agreement with Momentive Performance Materials Inc. (“MPM”) (which, from October 1, 2010 through October 24, 2014, was a subsidiary of Hexion Holdings), as amended in October 2014 (the “Shared Services Agreement”). Under this agreement, the Company provided to MPM, and MPM provided to the Company, certain services, including, but not limited to, executive and senior management, administrative support, human resources, information technology support, accounting, finance, legal and procurement services. The Shared Services Agreement established certain criteria upon which the costs of such services are allocated between the Company and MPM.
On February 11, 2019, MPM provided notice of its intention to terminate the Shared Services Agreement, effective March 14, 2019. The termination triggers a period of up to 14 months during which time the parties will work together to facilitate an orderly transition of services provided under the Shared Services Agreement.
Pursuant to the Shared Services Agreement, the below table summarizes the transactions between the Company and MPM:
 
Three Months Ended March 31,
 
2019
2018
Total cost pool - Hexion (1)
$
6

 
$
8

Total cost pool - MPM (1)
5

 
7

(1)     Included in the net costs incurred during the three months ended March 31, 2019 and 2018, were net billings from Hexion to MPM of $3 to bring the percentage of total net incurred costs for shared services under the Shared Services Agreement to the applicable agreed upon allocation percentage.
 
March 31, 2019
 
December 31, 2018
Accounts receivable from MPM
$
2

 
$
2


Sales and Purchases of Products with MPM
The Company also sells products to, and purchases products from, MPM. There were no products sold during the three months ended March 31, 2019 and during the three months ended March 31, 2018, the Company sold less than $1 of products to MPM. During the three months ended March 31, 2019 and 2018, the Company earned less than $1 from MPM as compensation for acting as distributor of products. Refer to the below table for the summary of the purchases of products with MPM:
 
Three Months Ended March 31,
 
2019
2018
Purchases from MPM
$
7

 
$
7

 
March 31, 2019
 
December 31, 2018
Accounts payable to MPM
$
3

 
$
3

Purchases and Sales of Products and Services with Apollo Affiliates Other than MPM
The Company sells products to various Apollo affiliates other than MPM. These sales were $1 for both the three months ended March 31, 2019 and March 31, 2018. Accounts receivable from these affiliates were $1 and less than $1 at March 31, 2019 and December 31, 2018, respectively.

13


Other Transactions and Arrangements
The Company sells products and provides services to, and purchases products from, its joint ventures which are recorded under the equity method of accounting. Refer to the below table for a summary of the sales and purchases with the Company and its joint ventures which are recorded under the equity method of accounting:
 
Three Months Ended March 31,
 
2019
 
2018
Sales to joint ventures
$
1

 
$
3

Purchases from joint ventures
1

 
2

 
March 31, 2019
 
December 31, 2018
Accounts receivable from joint ventures
$
3

 
$
2

Accounts payable to joint ventures
< 1

 
<1

In addition to the accounts receivable from joint ventures disclosed above, the Company had a loan receivable of $8 and $7 as of March 31, 2019 and December 31, 2018, respectively, from its unconsolidated forest products joint venture in Russia.
6. Fair Value
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value measurement provisions establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This guidance describes three levels of inputs that may be used to measure fair value:
Level 1: Inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date.
Level 3: Unobservable inputs that are supported by little or no market activity and are developed based on the best information available in the circumstances. For example, inputs derived through extrapolation or interpolation that cannot be corroborated by observable market data.
Recurring Fair Value Measurements
As of March 31, 2019, the Company had derivative assets related to foreign exchange, electricity and natural gas contracts of $1, which were measured using level 2 inputs, and consisted of derivative instruments transacted primarily in over-the-counter markets. There were no transfers between Level 1, Level 2 or Level 3 measurements during the three months ended March 31, 2019 or 2018.
The Company calculates the fair value of its Level 2 derivative liabilities using standard pricing models with market-based inputs, adjusted for nonperformance risk. When its financial instruments are in a liability position, the Company evaluates its credit risk as a component of fair value. At both March 31, 2019 and December 31, 2018, no adjustment was made by the Company to reduce its derivative position for nonperformance risk.
When its financial instruments are in an asset position, the Company is exposed to credit loss in the event of nonperformance by other parties to these contracts and evaluates their credit risk as a component of fair value.
Non-derivative Financial Instruments
The following table summarizes the carrying amount and fair value of the Company’s non-derivative financial instruments:
 
 
Carrying Amount
 
Fair Value
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
March 31, 2019
 
 
 
 
 
 
 
 
 
 
Debt
 
$
3,969

 
$

 
$
2,716

 
$
62

 
$
2,778

December 31, 2018
 
 
 
 
 
 
 
 
 
 
Debt
 
$
3,815

 
$

 
$
2,679

 
$
66

 
$
2,745

Fair values of debt classified as Level 2 are determined based on other similar financial instruments, or based upon interest rates that are currently available to the Company for the issuance of debt with similar terms and maturities. Level 3 amounts represent finance leases and sale leaseback financing arrangements whose fair value is determined through the use of present value and specific contract terms. The carrying amount and fair value of the Company’s debt is exclusive of unamortized deferred financing fees. The carrying amounts of cash and cash equivalents, short term investments, accounts receivable, accounts payable and other accrued liabilities are considered reasonable estimates of their fair values due to the short-term maturity of these financial instruments.

14


7. Debt Obligations
Debt outstanding at March 31, 2019 and December 31, 2018 is as follows:
 
 
March 31, 2019
 
December 31, 2018
 
 
Long-Term
 
Due Within
One Year
 
Long-Term
 
Due Within
One Year
ABL Facility
 
$

 
$
296

 
$

 
$
137

Senior Secured Notes:
 
 
 
 
 
 
 
 
6.625% First-Priority Senior Secured Notes due 2020
 

 
1,550

 


 
1,550

10.00% First-Priority Senior Secured Notes due 2020
 

 
315

 

 
315

10.375% First-Priority Senior Secured Notes due 2022
 

 
560

 

 
560

13.75% Senior Secured Notes due 2022
 

 
225

 

 
225

9.00% Second-Priority Senior Secured Notes due 2020
 

 
574

 

 
574

Debentures:
 
 
 
 
 
 
 
 
9.2% debentures due 2021
 

 
74

 

 
74

7.875% debentures due 2023
 

 
189

 

 
189

Other Borrowings:
 
 
 
 
 
 
 
 
Australia Facility due 2021
 
30

 
4

 
30

 
4

Brazilian bank loans
 
11

 
42

 
12

 
41

Lease obligations(1)
 
52

 
9

 
56

 
10

Other
 
1

 
37

 
1

 
37

Total
 
$
94

 
$
3,875

 
$
99

 
$
3,716

(1)    Lease obligations include finance leases and sale leaseback financing arrangements. Amounts reflected for December 31, 2018 represent capital lease obligations and sale leaseback financing arrangements as recorded under ASC 840.
As discussed in Note 1, the Company believes there is substantial doubt about its ability to continue as a going concern for the next twelve months, including its ability to fund its debt service obligations. The inability of the Company to fund such debt service obligations is an event of default under the ABL Facility (described below) and under the indentures that govern the Company’s notes. As such, all outstanding debt as of March 31, 2019 and December 31, 2018 related to the ABL Facility, the Senior Secured Notes and Debentures has been classified as “Debt payable within one year” in the Condensed Consolidated Balance Sheets and related footnote disclosures.

The Bankruptcy Petitions constitute an event of default that accelerated the Company’s obligations under its ABL Facility and 6.625% First-Priority Senior Secured Notes, 10.00% First-Priority Senior Secured Notes, 10.375% First-Priority Senior Secured Notes, 13.75% Senior Secured Notes, 9.00% Second-Priority Senior Secured Notes, 9.2% debentures and 7.875% debentures. These debt instruments provide that as a result of the Bankruptcy Petitions, the principal and interest due thereunder are immediately due and payable; however, any efforts to enforce such payment obligations under these instruments are automatically stayed as a result of the Bankruptcy Petitions and the creditors’ rights of enforcement in respect of these instruments are subject to the applicable provisions of the Bankruptcy Code.

Debtor-in-Possession Financing
    
In connection with the Bankruptcy Petitions, on April 3, 2019, the Company, Hexion LLC and certain of its subsidiaries entered into the DIP ABL Facility and the DIP Term Loan Facility, as further described in Note 2.
8. Leases
The Company leases certain buildings, warehouses, rail cars, land and operating equipment under both operating and finance leases expiring on various dates through 2044. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the Company recognizes lease expense for these leases on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company combines lease and non-lease components.
The Company determines if a contract is a lease at the inception of the arrangement. The Company reviews all options to extend, terminate, or purchase its right of use assets at the inception of the lease and accounts for these options when they are reasonably certain of being exercised. Nearly all of the Company’s lease contracts do not provide a readily determinable implicit rate. For these contracts, the Company estimates the incremental borrowing rate to discount the lease payments based on information available at lease commencement.

15


Lease Costs    
For the three months ended March 31, 2019, the Company recorded $9 of operating lease expense and $3 of short-term lease expense. The Company had less than $1 of amortization expense and less than $1 of interest expense from finance leases for the three months ended March 31, 2019. Variable lease expense was $1 for the three months ended March 31, 2019. These expense items are included as components of “Operating income” and “Interest expense, net” within the Condensed Consolidated Statements of Operations.
Balance Sheet Classification
The table below presents the lease-related assets and liabilities recorded on the Condensed Consolidated Balance Sheet:
 
 
Classification
 
March 31, 2019(1)
Assets:
 
 
 
 
Operating
 
Operating lease assets
 
$
99

Finance(1)
 
Machinery and Equipment
 
9

           Total leased assets
 
 
 
$
108

Liabilities:
 
 
 
 
Current
 
 
 
 
Operating
 
Current portion of operating lease liabilities
 
$
23

Finance
 
Debt payable within one year
 
2

Noncurrent
 
 
 
 
Operating
 
Operating lease liabilities
 
76

Finance
 
Long-term debt
 
7

           Total leased liabilities
 
 
 
$
108

(1)
Finance lease assets are recorded net of accumulated amortization of $8 as of March 31, 2019.
Other Lease Information
Cash paid for finance leases was $1 and cash paid for operating leases approximated operating lease expense and non-cash right-of-use asset amortization for the three months ended March 31, 2019. Right-of-use assets obtained in exchange for operating lease obligations were less than $1 during the first three months ending March 31, 2019. There were no right-of-use assets obtained in exchange for finance lease obligations during the first three months ending March 31, 2019.
The tables below present supplemental information related to leases for the three months ended March 31, 2019:
 
 
March 31, 2019
Weighted-average remaining lease term (years)
 
 
Operating leases
 
8.8

Finance leases
 
2.5

Weighted-average discount rate
 
 
Operating leases
 
12.19
%
Finance leases
 
9.00
%

16


The table below reconciles the undiscounted cash flows for each of the first five years and the total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet as of March 31, 2019:
Year
 
Minimum Rentals Under Operating Leases
 
Minimum Payments Under Finance Leases(1)
Remaining nine months of 2019
 
$
25

 
$
3

2020
 
24

 
7

2021
 
20

 

2022
 
14

 

2023
 
11

 

2024 and thereafter
 
78

 
1

Total lease payments
 
$
172

 
$
11

Less: Amount representing interest
 
73

 
2

Present value of lease liabilities
 
$
99

 
$
9

(1)     Amounts exclude sale leaseback financing arrangements which are not considered leases under Topic 842.
Disclosures related to periods prior to adoption of ASU 2016-02
The Company adopted ASU 2016-02 using a retrospective adoption method at January 1, 2019. See Note 3 for more information. The following is the minimum lease commitments under the previous lease guidance (ASC 840) as of December 31, 2018, as disclosed in the Company’s most recent Annual Report on Form 10-K.
Year
 
Minimum Rentals
Under Operating
Leases
 
Minimum
Payments Under
Capital Leases
2019
 
$
33

 
$
15

2020
 
24

 
20

2021
 
20

 
13

2022
 
13

 
26

2023
 
10

 
9

2024 and thereafter
 
61

 
1

Total minimum payments
 
$
161

 
84

Less: Amount representing interest
 
 
 
(18
)
Present value of minimum payments
 
 
 
$
66

9. Commitments and Contingencies
Environmental Matters
The Company’s operations involve the use, handling, processing, storage, transportation and disposal of hazardous materials. The Company is subject to extensive environmental regulation at the federal, state and local levels as well as foreign laws and regulations, and is therefore exposed to the risk of claims for environmental remediation or restoration. In addition, violations of environmental laws or permits may result in restrictions being imposed on operating activities, substantial fines, penalties, damages or other costs, any of which could have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.
The following table summarizes all probable environmental remediation, indemnification and restoration liabilities, including related legal expenses, at March 31, 2019 and December 31, 2018:
 
Liability
 
Range of Reasonably Possible Costs at March 31, 2019
Site Description
March 31, 2019
 
December 31, 2018
 
Low
 
High
Geismar, LA
$
13

 
$
13

 
$
9

 
$
22

Superfund and offsite landfills – allocated share:
 
 
 
 
 
 
 
Less than 1%
3

 
3

 
2

 
6

Equal to or greater than 1%
6

 
5

 
5

 
14

Currently-owned
5

 
6

 
4

 
11

Formerly-owned:
 
 
 
 
 
 
 
Remediation
22

 
22

 
20

 
39

Monitoring only
1

 
1

 
1

 
4

Total
$
50

 
$
50

 
$
41

 
$
96


17


These amounts include estimates for unasserted claims that the Company believes are probable of loss and reasonably estimable. The estimate of the range of reasonably possible costs is less certain than the estimates upon which the liabilities are based. To establish the upper end of a range, assumptions less favorable to the Company among the range of reasonably possible outcomes were used. As with any estimate, if facts or circumstances change, the final outcome could differ materially from these estimates. At both March 31, 2019 and December 31, 2018, $11 has been included in “Other current liabilities” in the unaudited Condensed Consolidated Balance Sheets, with the remaining amount included in “Other long-term liabilities.”
Following is a discussion of the Company’s environmental liabilities and the related assumptions at March 31, 2019:
Geismar, LA Site—The Company formerly owned a basic chemicals and polyvinyl chloride business that was taken public as Borden Chemicals and Plastics Operating Limited Partnership (“BCPOLP”) in 1987. The Company retained a 1% interest, the general partner interest and the liability for certain environmental matters after BCPOLP’s formation. Under a Settlement Agreement approved by the United States Bankruptcy Court for the District of Delaware among the Company, BCPOLP, the United States Environmental Protection Agency and the Louisiana Department of Environmental Quality, the Company agreed to perform certain tasks related to BCPOLP’s obligations for soil and groundwater contamination at BCPOLP’s Geismar, Louisiana site. The Company bears the sole responsibility for these obligations because there are no other potentially responsible parties (“PRP”) or third parties from whom the Company could seek reimbursement.
A groundwater pump and treat system to remove contaminants is operational, and natural attenuation studies are proceeding. If closure procedures and remediation systems prove to be inadequate, or if additional contamination is discovered, costs that would approach the higher end of the range of possible outcomes could result.
Due to the long-term nature of the project, the reliability of timing and the ability to estimate remediation payments, a portion of this liability was recorded at its net present value, assuming a 3% discount rate and a time period of 20 years. The range of possible outcomes is discounted in a similar manner. The undiscounted liability, which is expected to be paid over the next 20 years, is approximately $16. Over the next five years, the Company expects to make ratable payments totaling $5.
Superfund Sites and Offsite Landfills—The Company is currently involved in environmental remediation activities at a number of sites for which it has been notified that it is, or may be, a PRP under the United States Comprehensive Environmental Response, Compensation and Liability Act or similar state “superfund” laws. The Company anticipates approximately 50% of the estimated liability for these sites will be paid within the next five years, with the remainder over the next twenty-five years. The Company generally does not bear a significant level of responsibility for these sites, and as a result, has little control over the costs and timing of cash flows.
The Company’s ultimate liability will depend on many factors including its share of waste volume, the financial viability of other PRPs, the remediation methods and technology used, the amount of time necessary to accomplish remediation and the availability of insurance coverage. The range of possible outcomes takes into account the maturity of each project, resulting in a more narrow range as the project progresses. To estimate both its current reserves for environmental remediation at these sites and the possible range of additional costs, the Company has not assumed that it will bear the entire cost of remediation of every site to the exclusion of other known PRPs who may be jointly and severally liable. The Company has limited information to assess the viability of other PRPs and their probable contribution on a per site basis. The Company’s insurance provides very limited, if any, coverage for these environmental matters.
Sites Under Current Ownership—The Company is conducting environmental remediation at a number of locations that it currently owns, of which ten sites are no longer in operation. As the Company is performing a portion of the remediation on a voluntary basis, it has some control over the costs to be incurred and the timing of cash flows. The factors influencing the ultimate outcome include the methods of remediation elected, the conclusions and assessment of site studies remaining to be completed, and the time period required to complete the work. No other parties are responsible for remediation at these sites.
Formerly-Owned Sites—The Company is conducting, or has been identified as a PRP in connection with, environmental remediation at a number of locations that it formerly owned and/or operated. Remediation costs at these former sites, such as those associated with the Company’s former phosphate mining and processing operations, could be material. The Company has accrued those costs for formerly-owned sites which are currently probable and reasonably estimable. One such site is the Coronet Industries, Inc. Superfund Alternative Site in Plant City, Florida. The current owner of the site alleged that it incurred environmental costs at the site for which it has a contribution claim against the Company, and that additional future costs are likely to be incurred. The Company signed a settlement agreement in 2016 with the current site owner and a past site owner, pursuant to which the Company paid $10 for past remediation costs and accepted a 40% allocable share of specified future remediation costs at this site. The Company estimates its allocable share of future remediation costs to be approximately $13. The final costs to the Company will depend on natural variations in remediation cots, including unforeseen circumstances, agency requests, new contaminants of concern and the ongoing financial viability of the other PRPs.
Monitoring Only Sites—The Company is responsible for a number of sites that require monitoring where no additional remediation is expected. The Company has established reserves for costs related to these sites. Payment of these liabilities is anticipated to occur over the next ten or more years. The ultimate cost to the Company will be influenced by fluctuations in projected monitoring periods or by findings that are different than anticipated.
Indemnifications—In connection with the acquisition of certain of the Company’s operating businesses, the Company has been indemnified by the sellers against certain liabilities of the acquired businesses, including liabilities relating to both known and unknown environmental contamination arising prior to the date of the purchase. The indemnifications may be subject to certain exceptions and limitations, deductibles and indemnity caps. While it is reasonably possible that some costs could be incurred, except for those sites identified above, the Company has inadequate information to allow it to estimate a potential range of liability, if any.

18


Non-Environmental Legal Matters
The Company is involved in various legal proceedings in the ordinary course of business and had reserves of $2 at March 31, 2019 and December 31, 2018 for all non-environmental legal defense costs incurred and settlement costs that it believes are probable and estimable. At March 31, 2019 and December 31, 2018, $1 and $2, respectively, have been included in “Other current liabilities” in the unaudited Condensed Consolidated Balance Sheets, with the remaining amount included in “Other long-term liabilities.”
Other Legal Matters—The Company is also involved in various product liability, commercial and employment litigation, personal injury, property damage and other legal proceedings, including actions that allege harm caused by products the Company has allegedly made or used, containing silica, vinyl chloride monomer and asbestos. The Company believes it has adequate reserves and that it is not reasonably possible that a loss exceeding amounts already reserved would be material. Furthermore, the Company has insurance to cover claims of these types.
10. Pension and Postretirement Benefit Plans
The Company’s service cost component of net benefit cost is included in “Operating income” and all other components of net benefit cost are included in “Other non-operating (income) expense, net” within the Company’s unaudited Condensed Consolidated Statements of Operations. Following are the components of net benefit cost recognized by the Company for the three months ended March 31, 2019 and 2018:
 
Pension Benefits
 
Non-Pension Postretirement Benefits
 
Three Months Ended March 31,
 
Three Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
 
U.S.
Plans
 
Non-U.S.
Plans
 
U.S.
Plans
 
Non-U.S.
Plans
 
U.S.
Plans
 
Non-U.S.
Plans
 
U.S.
Plans
 
Non-U.S.
Plans
Service cost
$
1

 
$
4

 
$
1

 
$
4

 
$

 
$

 
$

 
$

Interest cost on projected benefit obligation
2

 
2

 
2

 
3

 

 

 

 

Expected return on assets
(3
)
 
(3
)
 
(4
)
 
(3
)
 

 

 

 

Net expense (benefit)
$

 
$
3

 
$
(1
)
 
$
4

 
$

 
$

 
$

 
$

11. Dispositions
ATG
On January 8, 2018, the Company completed the sale of its Additives Technology Group business (“ATG”). ATG was previously included within the Company’s Forest Products Resins segment and includes manufacturing sites located in Somersby, Australia and Sungai Petani, Malaysia. The ATG business produces a range of specialty chemical materials for the engineered wood, paper impregnation and laminating industries, including catalysts, release agents and wetting agents.
The Company received gross cash consideration for the ATG business in the amount of $49, which was used for general corporate purposes. The Company recorded a gain on this disposition of $44 which is included in “Gain on disposition” in the unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2018.
12. 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.

19


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.

20


13. Changes in Accumulated Other Comprehensive (Loss) Income
Following is a summary of changes in “Accumulated other comprehensive (loss) income” for the three months ended March 31, 2019 and 2018:
 
Three Months Ended March 31, 2019
 
Three Months Ended March 31, 2018
 
Defined Benefit Pension and Postretirement Plans
 
Foreign Currency Translation Adjustments
 
Total
 
Defined Benefit Pension and Postretirement Plans
 
Foreign Currency Translation Adjustments
 
Total
Beginning balance
$
(1
)
 
$
(17
)
 
$
(18
)
 
$
1

 
$
(9
)
 
$
(8
)
Other comprehensive income before reclassifications, net of tax

 

 

 

 
14

 
14

Ending balance
$
(1
)
 
$
(17
)
 
$
(18
)
 
$
1

 
$
5

 
$
6

14. Income Taxes
On December 22, 2017, the United States enacted tax reform legislation (“Tax Reform”) that included a broad range of business tax provisions, including but not limited to a reduction in the U.S. federal tax rate from 35% to 21% as well as provisions that limit or eliminate various deductions or credits. The legislation also causes U.S. expenses, such as interest and general administrative expenses, to be taxed and imposes a new tax on U.S. cross-border payments.
During 2018, the Company recognized income tax expense of $40, primarily as a result of income from certain foreign operations. In the United States, as a result of Tax Reform, disallowed interest expense resulted in current year taxable income which utilized a net operating loss carryforward. The disallowed interest expense carryforward of $283 generated a deferred tax asset. The decrease in the valuation allowance due to the net operating loss utilization was offset by an increase in the valuation allowance recorded on the interest expense carryforward deferred tax asset. Tax Reform also resulted in the inclusion of Global Intangible Low Tax Income (“GILTI”) of $21, which was fully offset by our net operating loss. This further reduced our valuation allowance.
Additionally, certain provisions of Tax Reform were not effective until 2018. During 2018, the Company evaluated and recorded the impact of these provisions in the financial statements and the Company has made its accounting policy elections with respect to these items. The Company elected to account for GILTI as a current period expense in the reporting period in which the tax is incurred.
The effective tax rate was (15)% and (133)% for the three months ended March 31, 2019 and 2018, respectively. For both periods, the change in the effective tax rate was primarily attributable to the amount and distribution of income and losses among the various jurisdictions in which we operate. The effective tax rates were also impacted by operating gains and losses generated in jurisdictions where no tax expense or benefit was recognized due to the maintenance of a full valuation allowance.
For the three months ended March 31, 2019 and 2018, income tax expense relates primarily to income from certain foreign operations. In 2019 and 2018, losses in the United States and certain foreign jurisdictions had no impact on income tax expense as no tax benefit was recognized due to the maintenance of a full valuation allowance.
15. 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, 10.375% First Priority Senior Secured Notes due 2022, 13.75% Senior Secured Notes due 2022 and 9.00% Second-Priority Senior Secured Notes due 2020 are guaranteed by certain of its U.S. and foreign 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.; Hexion Deer Park LLC (became a subsidiary guarantor in June 2018); Hexion International Inc.; Hexion CI Holding Company (China) LLC and NL COOP Holdings LLC) and the combined non-guarantor subsidiaries, which includes a majority 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.

21


HEXION INC.
MARCH 31, 2019
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 $15, respectively)
$
16

 
$

 
$
95

 
$

 
$
111

Accounts receivable, net
130

 

 
366

 

 
496

Intercompany accounts receivable
46

 

 
56

 
(102
)
 

Intercompany loans receivablecurrent portion
44

 

 
133

 
(177
)
 

Inventories:
 
 
 
 
 
 
 
 


Finished and in-process goods
100

 

 
158

 

 
258

Raw materials and supplies
38

 

 
56

 

 
94

Other current assets
21

 

 
46

 

 
67

Total current assets
395

 

 
910

 
(279
)
 
1,026

Investment in unconsolidated entities
121

 
14

 
20

 
(135
)
 
20

Other assets, net
11

 
7

 
22

 

 
40

Intercompany loans receivable
1,132

 

 
52

 
(1,184
)
 

Property and equipment, net
355

 

 
469

 

 
824

Operating lease assets (see Note 8)
44

 

 
55

 

 
99

Goodwill
52

 

 
56

 

 
108

Other intangible assets, net
18

 

 
7

 

 
25

Total assets
$
2,128

 
$
21

 
$
1,591

 
$
(1,598
)
 
$
2,142

Liabilities and Deficit
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
96

 
$

 
$
258

 
$

 
$
354

Intercompany accounts payable
56

 

 
46

 
(102
)
 

Debt payable within one year
3,589

 

 
286

 

 
3,875

Intercompany loans payable within one year
133

 

 
44

 
(177
)
 

Interest payable
99

 

 
1

 

 
100

Income taxes payable
2

 

 
6

 

 
8

Accrued payroll and incentive compensation
12

 

 
35

 

 
47

Current portion of operating lease liabilities (see Note 8)
11

 

 
12

 

 
23

Other current liabilities
64

 

 
41

 

 
105

Total current liabilities
4,062

 

 
729

 
(279
)
 
4,512

Long-term liabilities:
 
 
 
 
 
 
 
 
 
Long-term debt
50

 

 
44

 

 
94

Intercompany loans payable
52

 

 
1,132

 
(1,184
)
 

Accumulated losses of unconsolidated subsidiaries in excess of investment
734

 
135

 

 
(869
)
 

Long-term pension and post employment benefit obligations
33

 

 
182

 

 
215

Deferred income taxes
11

 

 
4

 

 
15

Operating lease liabilities (see Note 8)
33

 

 
43

 

 
76

Other long-term liabilities
117

 

 
79

 

 
196

Total liabilities
5,092

 
135

 
2,213

 
(2,332
)
 
5,108

Total Hexion Inc. shareholder’s deficit
(2,964
)
 
(114
)
 
(620
)
 
734

 
(2,964
)
Noncontrolling interest

 

 
(2
)
 

 
(2
)
Total deficit
(2,964
)
 
(114
)
 
(622
)
 
734

 
(2,966
)
Total liabilities and deficit
$
2,128

 
$
21

 
$
1,591

 
$
(1,598
)
 
$
2,142






22


HEXION INC.
DECEMBER 31, 2018
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 $15, respectively)
$
20

 
$

 
$
108

 
$

 
$
128

Accounts receivable, net
98

 

 
314

 

 
412

Intercompany accounts receivable
40

 

 
66

 
(106
)
 

Intercompany loans receivablecurrent portion
82

 

 
101

 
(183
)
 

Inventories:
 
 
 
 
 
 
 
 


Finished and in-process goods
100

 

 
140

 

 
240

Raw materials and supplies
36

 

 
58

 

 
94

Other current assets
28

 

 
29

 

 
57

Total current assets
404

 

 
816

 
(289
)
 
931

Investment in unconsolidated entities
134

 
12

 
19

 
(146
)
 
19

Deferred income taxes

 

 

 

 

Other long-term assets
10

 
7

 
17

 

 
34

Intercompany loans receivable
1,114

 

 

 
(1,114
)
 

Property and equipment, net
363

 

 
478

 

 
841

Goodwill
53

 

 
56

 

 
109

Other intangible assets, net
19

 

 
8

 

 
27

Total assets
$
2,097

 
$
19

 
$
1,394

 
$
(1,549
)
 
$
1,961

Liabilities and Deficit
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable
$
126

 
$

 
$
258

 
$

 
$
384

Intercompany accounts payable
66

 

 
40

 
(106
)
 

Debt payable within one year
3,563

 

 
153

 

 
3,716

Intercompany loans payable within one year
101

 

 
82

 
(183
)
 

Interest payable
81

 

 
1

 

 
82

Income taxes payable
3

 

 
2

 

 
5

Accrued payroll and incentive compensation
22

 

 
30

 

 
52

Other current liabilities
61

 

 
45

 

 
106

Total current liabilities
4,023

 

 
611

 
(289
)
 
4,345

Long term liabilities:
 
 
 
 
 
 
 
 
 
Long-term debt
52

 

 
47

 

 
99

Intercompany loans payable

 

 
1,114

 
(1,114
)
 

Accumulated losses of unconsolidated subsidiaries in excess of investment
781

 
146

 

 
(927
)
 

Long-term pension and post employment benefit obligations
34

 

 
187

 

 
221

Deferred income taxes
2

 

 
13

 

 
15

Other long-term liabilities
117

 

 
78

 

 
195

Total liabilities
5,009

 
146

 
2,050

 
(2,330
)
 
4,875

Total Hexion Inc. shareholder’s deficit
(2,912
)
 
(127
)
 
(654
)
 
781

 
(2,912