10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

☐ 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

_______________________________________

  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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None		None

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  ☐   No  ☒

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  ☒ No   ☐

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	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

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.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐ No  ☒.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ☒    No  ☐

Number of shares of common stock, par value $0.01 per share, outstanding as of the close of business on May 1, 2021: 100

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HEXION INC.

INDEX

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Hexion Inc. Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Equity	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4.	Controls and Procedures	33
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35

Hexion Inc. | 2 | Q1 2021 Form 10-Q

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PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements

HEXION INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In millions, except share data)	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents (including restricted cash of $3 and $4, respectively)	$	134	$	204
Accounts receivable (net of allowance for doubtful accounts of $3)	410		331
Inventories:
Finished and in-process goods	196		180
Raw materials and supplies	96		85
Current assets held for sale (see Note 4)	141		114
Other current assets	51		39
Total current assets	1,028		953
Investment in unconsolidated entities	11		10
Deferred tax assets	7		7
Long-term assets held for sale (see Note 4)	325		342
Other long-term assets	77		85
Property and equipment:
Land	78		79
Buildings	122		122
Machinery and equipment	1,260		1,270
	1,460		1,471
Less accumulated depreciation	(244)		(212)
	1,216		1,259
Operating lease assets	100		103
Goodwill	164		164
Other intangible assets, net	1,057		1,079
Total assets	$	3,985	$	4,002
Liabilities and Equity
Current liabilities:
Accounts payable	$	349	$	339
Debt payable within one year	52		82
Interest payable	20		30
Income taxes payable	12		6
Accrued payroll and incentive compensation	49		42
Current liabilities associated with assets held for sale (see Note 4)	88		70
Current portion of operating lease liabilities	19		19
Other current liabilities	99		111
Total current liabilities	688		699
Long-term liabilities:
Long-term debt	1,714		1,710
Long-term pension and post employment benefit obligations	235		250
Deferred income taxes	157		161
Operating lease liabilities	74		76
Long-term liabilities associated with assets held for sale (see Note 4)	74		74
Other long-term liabilities	207		209
Total liabilities	3,149		3,179
Commitments and contingencies (see Note 9)
Equity
Common stock —$0.01 par value; 100 shares authorized, issued and outstanding	—		—
Paid-in capital	1,175		1,169
Accumulated other comprehensive loss	(31)		(27)
Accumulated deficit	(308)		(319)
Total equity	836		823
Total liabilities and equity	$	3,985	$	4,002

See Notes to Condensed Consolidated Financial Statements

Hexion Inc. | 3 | Q1 2021 Form 10-Q

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HEXION INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In millions)	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Net sales	$	753	$	687
Cost of sales (exclusive of depreciation and amortization shown below)	584		565
Selling, general and administrative expense	70		64
Depreciation and amortization	49		49
Asset impairments	—		16
Business realignment costs	5		20
Other operating (income) expense, net	(3)		7
Operating income (loss)	48		(34)
Interest expense, net	24		26
Other non-operating income	(4)		—
Income (loss) from continuing operations before income tax and earnings from unconsolidated entities	28		(60)
Income tax expense (benefit)	16		(3)
Income (loss) from continuing operations before earnings from unconsolidated entities	12		(57)
Earnings from unconsolidated entities, net of taxes	—		1
Income (loss) from continuing operations, net of taxes	12		(56)
Loss from discontinued operations, net of taxes	(1)		(3)
Net income (loss)	$	11	$	(59)

See Notes to Condensed Consolidated Financial Statements

Hexion Inc. | 4 | Q1 2021 Form 10-Q

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HEXION INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(In millions)	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Net income (loss)	$	11	$	(59)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	(9)		(42)
Unrealized gain (loss) on cash flow hedge	5		(15)
Other comprehensive loss	(4)		(57)
Comprehensive income (loss)	$	7	$	(116)

See Notes to Condensed Consolidated Financial Statements

Hexion Inc. | 5 | Q1 2021 Form 10-Q

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HEXION INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In millions)	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Cash flows used in operating activities
Net income (loss)	$	11	$	(59)
Less: Loss from discontinued operations, net of tax	(1)		(3)
Income (loss) from continuing operations	12		(56)
Adjustments to reconcile net loss to net cash used in by operating activities:
Depreciation and amortization	49		49
Non-cash asset impairments	—		16
Deferred tax benefit	—		(2)
(Gain) loss on sale of assets and dispositions	(4)		2
Unrealized foreign currency losses	8		6
Non-cash stock based compensation expense	6		5
Other non-cash adjustments	(1)		—
Net change in assets and liabilities:
Accounts receivable	(88)		(87)
Inventories	(32)		7
Accounts payable	20		(12)
Income taxes payable	10		2
Other assets, current and non-current	(7)		(5)
Other liabilities, current and non-current	(22)		(19)
Net cash used in operating activities from continuing operations	(49)		(94)
Net cash provided by (used in) operating activities from discontinued operations	5		(8)
Net cash used in operating activities	(44)		(102)
Cash flows used in investing activities
Capital expenditures	(24)		(26)
Proceeds from sale of assets and dispositions, net	7		—
Net cash used in investing activities from continuing operations	(17)		(26)
Net cash used in investing activities from discontinued operations	(4)		(6)
Net cash used in investing activities	(21)		(32)
Cash flows (used in) provided by financing activities
Net short-term debt borrowings (repayments)	2		(10)
Borrowings of long-term debt	71		181
Repayments of long-term debt	(76)		(25)
Distribution of affiliate loan (see Note 6)	—		(10)
Net cash (used in) provided by financing activities	(3)		136
Effect of exchange rates on cash and cash equivalents, including restricted cash	(2)		(6)
Change in cash and cash equivalents, including restricted cash	(70)		(4)
Cash, cash equivalents and restricted cash at beginning of period	204		254
Cash, cash equivalents and restricted cash at end of period	$	134	$	250
Supplemental disclosures of cash flow information
Cash paid for:
Interest, net	$	33	$	36
Income taxes, net	6		2

See Notes to Condensed Consolidated Financial Statements

Hexion Inc. | 6 | Q1 2021 Form 10-Q

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HEXION INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

(In millions)	Common Stock		Paid-in Capital		Loan Receivable from Parent		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Shareholder’s Equity
Balance at December 31, 2019	$	—	$	1,165	$	—	$	(1)	$	(89)	$	1,075
Net loss	—		—		—		—		(59)		(59)
Stock-based compensation expense	—		5		—		—		—		5
Other comprehensive loss	—		—		—		(57)		—		(57)
Distribution of affiliate loan (see Note 6)	—		—		(10)		—		—		(10)
Balance at March 31, 2020	$	—	$	1,170	$	(10)	$	(58)	$	(148)	$	954
Balance at December 31, 2020	$	—	$	1,169	$	—	$	(27)	$	(319)	$	823
Net income	—		—		—		—		11		11
Stock-based compensation expense	—		6		—		—		—		6
Other comprehensive loss	—		—		—		(4)		—		(4)
Balance at March 31, 2021	$	—	$	1,175	$	—	$	(31)	$	(308)	$	836

See Notes to Condensed Consolidated Financial Statements

Hexion Inc. | 7 | Q1 2021 Form 10-Q

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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 adhesive, coatings, composites and 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, 2021, the Company had three reportable segments: Adhesives; Coatings and Composites; and Corporate and Other.

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.

In this Quarterly Report on Form 10-Q (“10-Q”, “Q1 2021 Form 10-Q” or “Report”) for the fiscal period ended March 31, 2021, Hexion Inc. is referred to as “Hexion”, the “Company”, “we,” “us” or “our.”

Sale of Phenolic Specialty Resins Business

On September 27, 2020, the Company entered into a definitive agreement (the “Purchase Agreement”) for the sale of its Phenolic Specialty Resins ("PSR"), Hexamine and European-based Forest Products Resins businesses (together with PSR, the “Held for Sale Business”) to Black Diamond Capital Management, LLC and Investindustrial (the “Buyers”) for a purchase price of approximately $425. The consideration consists of $335 in cash and certain assumed liabilities with the remainder in future contingent proceeds based on the performance of the Held for Sale Business. The Company completed the sale of the Held for Sale Business on April 30, 2021. For more information, see Note 4 “Discontinued Operations”.

As of March 31, 2021, the Company classified the assets and liabilities of the Held for Sale Business as held for sale on the unaudited Condensed Consolidated Balance Sheets and reported the results of the operations for the three months ended March 31, 2021 as “Loss from discontinued operations, net of taxes” on the unaudited Condensed Consolidated Statements of Operations. Amounts for prior periods have similarly been retrospectively reclassified for all periods presented.

Additionally, the Company has included $5 and $4 in both “Net sales” and “Cost of sales” within the Company’s continuing operations for the three months ended March 31, 2021 and 2020, respectively, which represents sales from the Company’s continuing operations to the Held for Sale Business that were previously eliminated in consolidation. These reclassifications had no impact on “Net (loss) income” in the unaudited Condensed Consolidated Statements of Operations for any of the periods presented.

Unless otherwise noted, amounts presented within the Notes to the unaudited Condensed Consolidated Financial Statements refer to the Company’s continuing operations.

2. Summary of Significant Accounting Policies

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.

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 $8 and $5 is recorded within “Other current assets” at March 31, 2021 and December 31, 2020 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.

Hexion Inc. | 8 | Q1 2021 Form 10-Q

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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 $3 and $4 at March 31, 2021 and December 31, 2020, represents 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 unaudited Condensed Consolidated Balance Sheets as a component of “Cash and cash equivalents.”

Allowance for Doubtful Accounts— Under adoption of ASU 2016-13, the Company has updated its credit loss methodology to consider a broader range of reasonable and supportable information to determine its credit loss estimates. The Company utilizes a historical aging method disaggregated by portfolio segment of geographic region, and then the Company makes any necessary adjustments for current conditions and forecasts about future economic conditions for calculating its allowance for doubtful accounts. The Company evaluates each pooled receivables’ geographic region by differing regional industrial and economic conditions, overall end market conditions and groups of customers with similar risk profiles related to timing and uncertainty of future collections. If particular accounts receivable balances no longer display risk characteristics that are similar to other pooled receivables, the Company performs individual assessments of expected credit losses for those specific receivables. Receivables are charged against the allowance for doubtful accounts when it is probable that the receivable will not be collected.

The Company’s current expectations and assumptions regarding its business, the economy and other future events and conditions are based on currently available financial, economic and competitive data and current business plans as of March 31, 2021. Actual results could vary materially depending on risks and uncertainties that may affect the Company’s operations, markets, services, prices and other factors.

The Company recorded an allowance for doubtful accounts of $3 at both March 31, 2021 and December 31, 2020, to reduce accounts receivable to their estimated net realizable value. Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. There were no write-offs or recoveries for the three months ended March 31, 2021 and 2020.

Reclassifications— Certain amounts in the unaudited Condensed Consolidated Financial Statements for prior periods have been reclassified to conform with the current presentation. These reclassifications were to record the Held for Sale Business and the results of operations as discontinued operations. See Note 4 for more information.

Subsequent Events—The Company has evaluated events and transactions subsequent to March 31, 2021 through the date of issuance of its unaudited Condensed Consolidated Financial Statements. See Note 4 for more information regarding sale of the Held for Sale Business in April 2021.

Recently Issued Accounting Standards

Newly Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in income tax accounting and improve consistent application of and simplify GAAP for other areas of income tax accounting by clarifying and amending existing guidance. The new guidance was effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2019-12 on January 1, 2021 and the adoption did not have a significant impact on its condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14: Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”). ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The standard was effective for fiscal years ending after December 15, 2020. The Company adopted ASU 2018-14 and the adoption did not have a significant impact on its condensed consolidated financial statements.

3. COVID-19 Impacts

In March 2020, the World Health Organization categorized COVID-19 as a global pandemic. Around the world, local governments’ responses to COVID-19 continue to evolve, which has led to stay-at-home orders, social distancing guidelines and other preventative measures that have disrupted various industries in the global economy and the markets in which our products are manufactured, distributed and sold.

During this pandemic, the Company has implemented additional guidelines to further protect the health and safety of its employees as the Company continues to operate with its suppliers and customers. The Company has maintained a focus on the safety of its employees while minimizing potential disruptions caused by COVID-19. For example, the Company is following all legislatively-mandated travel directives in the various countries where it operates, and the Company has also put additional travel restrictions in place for its associates designed to reduce the risk from COVID-19. Additionally, the Company is utilizing extended work from home options to protect its office associates, while adjusting its meeting protocols and processes at its manufacturing sites.

Hexion Inc. | 9 | Q1 2021 Form 10-Q

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The Company’s businesses have been designated by many governments as essential businesses and the Company’s operations have continued through March 31, 2021. The ultimate impact that COVID-19 will have on the Company’s future financial position, operating results and cash flows involves numerous risks and uncertainties, including new information which may emerge concerning the severity and duration of COVID-19 and actions to contain the virus or treat its impact.

A significant amount of legislative and/or economic actions have been enacted or proposed by the U.S. and other jurisdictions during the 2020 and 2021 tax years. The Company has reviewed the enacted legislation and continues to monitor proposed legislation to evaluate the impact on its financial results, including on its estimated effective tax rate. Currently, the Company does not expect any of the enacted or proposed legislation to have a material impact on its business and financial results. The Company was able to defer $5 of payroll related tax payments to December 2021 and December 2022 under the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020.

Subsequent to March 31, 2021, the United States, and the global regions where the Company operates, continue to be affected by COVID-19. The Company is closely monitoring the COVID-19 pandemic on all aspects of its businesses and geographies, including the impact on its facilities, employees, customers, suppliers, vendors, business partners and distribution.

4. Discontinued Operations

On September 27, 2020, the Company entered into a Purchase Agreement for the sale of PSR, Hexamine and European-based Forest Products Resins businesses (together with PSR, the “Held for Sale Business” or the “Business”) to Black Diamond Capital Management, LLC and Investindustrial (the “Buyers”) for a purchase price of approximately $425. The consideration consists of $335 in cash and certain assumed liabilities with the remainder in future contingent proceeds based on the performance of the Held for Sale Business. The final purchase price is subject to customary post-closing adjustments. The Held for Sale Business was formerly included in the Company’s Adhesives reportable segment.

On April 30, 2021, the Company completed the sale (the “Transaction”) of its Held for Sale Business pursuant to the terms of the Purchase Agreement with the Buyers. The Company received gross cash consideration for the Held for Sale Business in the amount of $304. In addition, the Buyers assumed approximately $31 of certain liabilities, net of preliminary working capital and other closing adjustments as part of the Purchase Agreement. A subsequent post-closing adjustment to the initial cash consideration will be made in accordance with the Purchase Agreement. Hexion expects to use a portion of the net proceeds to invest in its business, and in May 2021, the Company used a portion of its net proceeds to reduce its borrowings under its Senior Secured Term Loan, in accordance with its credit agreement. See Note 8 for further information on reduction to the Company’s Senior Secured Term Loan.

As part of the Transaction, the Company will provide certain transitional services to the Buyers for an initial period of up to six months pursuant to a Transitional Services Agreement, which certain services may be extended two times for an additional three months for each extension by the Buyers. The purpose of these services is to provide short-term assistance to the Buyers in assuming the operations of the Business. These services do not confer to the Company the ability to influence the operating or financial policies of the Business under its new ownership.

Assets included in the transaction are the Company’s manufacturing sites in Barry, United Kingdom; Cowie, United Kingdom; Lantaron, Spain; Botlek, Netherlands; Iserlohn, Germany; Frielendorf, Germany; Solbiate, Italy; Kitee, Finland; Louisville, Kentucky; Acme, North Carolina; and the Company's 50% ownership interest in Hexion Schekinoazot Holding B.V. (the “Russia JV”), a joint venture that manufactures forest products resins in Russia.

The Held for Sale Business produces phenolic specialty resins and engineered thermoset molding compounds used in applications that require extreme heat resistance and strength, such as after-market automotive and original equipment manufacturing (“OEM”) truck brake pads, filtration, aircraft components and foundry resins. The Business is also a significant producer of formaldehyde-based resins in Europe and merchant formaldehyde and formaldehyde derivatives in the Louisville and Acme plants, respectively. Formaldehyde-based resins, also known as forest products resins, are a key adhesive and binding ingredient used in the production of a wide variety of engineered lumber products, including medium density fiberboard (“MDF”), particleboard and oriented strand board (“OSB”). These products are used in a wide range of applications in the construction, remodeling and furniture industries. Merchant formaldehyde and formaldehyde derivatives are intermediate ingredients that are used in a variety of durable and industrial products. The Business generated annual sales of $493 in 2020.

Until the closing date, the Company has agreed to operate the Held for Sale Business in the ordinary course.

As of March 31, 2021, the Company classified the assets and liabilities of the Held for Sale Business as held for sale on the unaudited Condensed Consolidated Balance Sheets and reported the results of the operations for the three months ended March 31, 2021 as “Loss from discontinued operations, net of tax” on the unaudited Condensed Consolidated Statements of Operations. Amounts for prior periods have similarly been retrospectively reclassified for all periods presented.

The Held for Sale Business had $14 of goodwill at both March 31, 2021 and December 31, 2020 and $61 of other intangible assets at both March 31, 2021 and December 31, 2020. Goodwill was allocated based on the relative fair value of the European-based Forest Products Resins businesses, included in the Held for Sale Business, which is part of the Company’s Forest Product Resins reporting unit. Other intangible assets were specifically identified based on customer relationships within the Company’s Forest Products Resins reporting unit that are associated with the Held for Sale Business.

Hexion Inc. | 10 | Q1 2021 Form 10-Q

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As a result of entering into the Purchase Agreement, the Company recognized a pre-tax charge of $16 during the three months ended March 31, 2021 within discontinued operations, representing the difference between the fair value of the Held for Sale Business, less costs to sell, and the carrying value of net assets held for sale as of March 31, 2021 for a total impairment charge of $91 since entering into the Purchase Agreement. Fair value represents the expected net cash proceeds, excluding any future contingent proceeds, from the sale of the Held for Sale Business. The Company has made an accounting policy election to account for the initial and subsequent measurement of the future contingent proceeds, of up to $90, as a gain contingency. Under this model, any future contingent consideration is not recognized until all future conditions are met and the Company has earned the proceeds. The contingent proceeds are based on performance targets of the Held for Sale Business over each of the next three years, fiscal years 2021, 2022 and 2023, as specified in the Purchase Agreement. Thus, for purposes of this impairment analysis the fair value of the future contingent proceeds was not considered in determination of the disposal group impairment. Further, the Company concluded that the impairment of the Held for Sale Business assets did not represent an impairment triggering event for the Company’s continuing operations.

The following table reconciles the carrying amounts of major classes of assets and liabilities of discontinued operations to total assets and liabilities of discontinued operations that are classified as held for sale in the Company’s unaudited Condensed Consolidated Balance Sheets:

	March 31, 2021		December 31, 2020
Carrying amounts of major classes of assets held for sale:
Accounts receivable	$	86	$	66
Finished and in-process goods	20		18
Raw materials and supplies	24		17
Other current assets	11		12
Total current assets	141		113
Investment in unconsolidated entities	6		5
Deferred tax assets	8		2
Other long-term assets	7		7
Property, plant and equipment, net	307		310
Operating lease assets	13		13
Goodwill	14		14
Other intangible assets, net	61		61
Discontinued operations impairment	(91)		(75)
Total long-term assets	325		337
Total assets held for sale	$	466	$	450
Carrying amounts of major classes of liabilities held for sale:
Accounts payable	$	69	$	52
Income taxes payable	2		1
Accrued payroll	6		3
Current portion of operating lease liabilities	3		2
Other current liabilities	8		9
Total current liabilities	88		67
Long-term pension and post employment benefit obligations	35		36
Deferred income taxes	26		22
Operating lease liabilities	5		5
Other long-term liabilities	8		8
Total long-term liabilities	74		71
Total liabilities held for sale	$	162	$	138

Hexion Inc. | 11 | Q1 2021 Form 10-Q

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The following table shows the financial results of discontinued operations for the periods presented:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Major line items constituting pretax income of discontinued operations:
Net sales	$	163	$	145
Cost of sales (exclusive of depreciation and amortization)	137		121
Selling, general and administrative expense	11		11
Depreciation and amortization	—		9
Asset impairments	16		—
Business realignment costs	—		1
Other operating income, net	(1)		—
Income from discontinued operations before income tax, earnings from unconsolidated entities	—		3
Income tax expense	2		6
Loss from discontinued operations, net of tax	$	(2)	$	(3)
Earnings from unconsolidated entities, net of tax	1		—
Net loss attributable to discontinued operations	$	(1)	$	(3)

Equity Method Investments

The Company's 50% ownership interest in the Russia JV, accounted for using the equity method of accounting, is included in the Held for Sale Business. Summarized financial data for the Russia JV are shown in the following tables:

	March 31, 2021		December 31, 2020
Current assets	$	7	$	7
Non-current assets	1		1
Current liabilities	1		2
Non-current liabilities	6		6

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Net sales	$	9	$	9
Gross profit	2		2
Pre-tax income (loss)	1		(1)
Net income (loss)	1		(1)

5. Asset Impairments

During the first quarter of 2020, the Company indefinitely idled certain assets within its Adhesives segment. These represented triggering events resulting in impairment evaluations of the fixed assets within both the oilfield and phenolic specialty resins asset groups. As a result, asset impairments totaling $16 were recorded in “Asset impairments” in the unaudited Condensed Consolidated Statements of Operations during the three months ended March 31, 2020. See Note 4 for discussion of the discontinued operations impairment charge recorded in the first quarter of 2021.

6. Related Party Transactions

2020 Affiliate Loan

In March 2020, the Company entered into a $10 short term affiliate loan with its Parent at a 0% interest rate to fund Parent share repurchases. In June 2020, the Company made a $10 non-cash distribution to its Parent treated as a return of capital to settle this affiliate loan. This return of capital reduced “Paid-in capital” in the unaudited Condensed Consolidated Balance Sheet at March 31, 2020.

Transactions with Joint Ventures

The Company sells products and provides services to, and purchases products from, its joint ventures which are recorded under the equity method of accounting. Sales to joint ventures were less than $1 for the both the three months ended March 31, 2021 and 2020. Purchases from joint ventures were less than $1 for the three months ended March 31, 2020. There were no purchases from joint ventures for three months ended March 31, 2021. Accounts receivable from joint ventures was less than $1 at both March 31, 2021 and December 31, 2020. There were no accounts payable at both March 31, 2021 and December 31, 2020. Activity from joint ventures is primarily comprised of the Russia JV included in the Held for Sale Business.

In addition to the accounts receivable from joint ventures disclosed above, the Company had a loan receivable of $4 as of both March 31, 2021 and December 31, 2020, respectively, from the Russia JV. These loan receivables have been included in “Long-term assets held for sale” within the unaudited Condensed Consolidated Balance Sheets.

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7. 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.

Derivative Financial Instruments

The Company is exposed to certain risks related to its ongoing business operations. The primary risks managed by using derivative instruments are interest rate risk, foreign currency exchange risk and commodity price risk. The Company does not hold or issue derivative financial instruments for trading purposes.

Recurring Fair Value Measurements

As of March 31, 2021, 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, 2021 or 2020.

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, 2021 and December 31, 2020, 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.

Interest Rate Swap

The Company will from time to time use interest rate swaps to alter interest rate exposures between floating and fixed rates on certain long-term debt. Under interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts calculated using an agreed-upon notional principal amount. The counter-parties to the interest rate swap agreements are financial institutions with investment grade ratings.

In October 2019, the Company executed an interest rate swap syndication agreement where by Hexion receives a variable 3-month LIBOR, and pays fixed interest rate swaps, beginning January 1, 2020 through January 1, 2025 (the “Hedge”) for a total notional amount of $300. The purpose of this arrangement is to hedge the variability caused by quarterly changes in cash flow due to associated changes in LIBOR for $300 of the Company’s variable rate Senior Secured Term Loan denominated in USD ($700 outstanding at March 31, 2021). The Company has evaluated this transaction and designated this derivative instrument as a cash flow hedge under Accounting Standard Codification, No. 815, “Derivatives and hedging,” (“ASC 815”). For the Hedge, the Company records changes in the fair value of the derivative in other comprehensive income (“OCI”) and will subsequently reclassify gains and losses from these changes in fair value from OCI to the unaudited Condensed Consolidated Statement of Operations in the same period that the hedged transaction affects net (loss) income and in the same unaudited Condensed Consolidated Statement of Operations category as the hedged item, “Interest expense, net”.

The following tables summarize the Company’s derivative financial instrument designated as a hedging instrument:

		March 31, 2021				December 31, 2020
	Balance Sheet Location	Notional Amount		Fair Value Liability		Notional Amount		Fair Value Liability
Derivatives designated as hedging instruments
Interest Rate Swap	Other current (liabilities)/assets	$	300	$	(10)	$	300	$	(15)
Total derivatives designated as hedging instruments				$	(10)			$	(15)

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	Amount of Gain (Loss) Recognized in OCI on Derivatives
Derivatives designated as hedging instruments	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Interest Rate Swaps
Interest Rate Swap	$	5	$	(15)
Total	$	5	$	(15)

In both the three months ended March 31, 2021 and 2020 the Company reclassified a loss of $1 from OCI to “Interest expense, net” on the Condensed Consolidated Statement of Operations related to the settlement of a portion of the Hedge.     

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, 2021
Debt	$	1,766	$	—	$	1,756	$	52	$	1,808
December 31, 2020
Debt	$	1,792	$	—	$	1,767	$	55	$	1,822

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, accounts receivable, accounts payable and other accrued liabilities are classified as Level 1 and are considered reasonable estimates of their fair values due to the short-term maturity of these financial instruments.

8. Debt Obligations

Debt outstanding at March 31, 2021 and December 31, 2020 is as follows:

	March 31, 2021				December 31, 2020
	Long-Term		Due Within One Year		Long-Term		Due Within One Year
Senior Secured Credit Facilities:
ABL Facility	$	—	$	—	$	—	$	—
Senior Secured Term Loan - USD due 2026 (includes $6 of unamortized debt discount)	699		7		701		7
Senior Secured Term Loan - EUR due 2026 (includes $4 of unamortized debt discount)	495		—		515		—
Senior Notes:
7.875% Senior Notes due 2027	450		—		450		—
Other Borrowings:
Australia Facility due 2026(1)	30		—		—		30
Brazilian bank loans	1		22		2		22
Lease obligations (2)	39		13		42		14
Other	—		10		—		9
Total(3)	$	1,714	$	52	$	1,710	$	82

(1)In February 2021, the Company extended its Australian Term Loan Facility through February 2026.

(2)Lease obligations include finance leases and sale leaseback financing arrangements.

(3)The foreign exchange translation impact of the Company’s foreign currency denominated debt instruments resulted in a decrease of $23 and an increase of $46 as of March 31, 2021 and December 31, 2020, respectively.

May 2021 Transaction

In May 2021, in connection with the sale of its Held for Sale Business, the Company used a portion of the net proceeds to pay down the aggregate principal of the euro denominated tranche Senior Secured Term Loan - EUR for $150. See Note 4 for more information regarding sale of the Held for Sale Business in April 2021.

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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, 2021 and December 31, 2020:

	Liability				Range of Reasonably Possible Costs at March 31, 2021
Site Description	March 31, 2021(1)		December 31, 2020(1)		Low		High
Geismar, LA	$	12	$	12	$	9	$	22
Superfund and offsite landfills – allocated share:
Less than 1%	3		3		2		6
Equal to or greater than 1%	7		6		6		14
Currently-owned	4		8		4		15
Formerly-owned:
Remediation	17		18		14		34
Monitoring only	—		—		—		1
Total	$	43	$	47	$	35	$	92

(1)    The table includes approximately $2 of environmental remediation liabilities related to the Held for Sale Business at both March 31, 2021 and December 31, 2020. These associated liabilities have been included in “Long-term liabilities associated with assets held for sale” within the unaudited Condensed Consolidated Balance Sheets.

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, 2021 and December 31, 2020, $14 of these liabilities have been included in “Other current liabilities” with the remaining amount included in “Other long-term liabilities” within the unaudited Condensed Consolidated Balance Sheets.

Following is a discussion of the Company’s environmental liabilities and the related assumptions at March 31, 2021:

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.

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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 for a portion of 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 $7. The final costs to the Company will depend on natural variations in remediation costs, 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.

Non-Environmental Legal Matters

The Company’s continuing operations is involved in various legal proceedings in the ordinary course of business and had reserves of $1 at both March 31, 2021 and December 31, 2020, for all non-environmental legal defense costs incurred and settlement costs that it believes are probable and estimable. At March 31, 2021 and December 31, 2020, $3 and $2, respectively, has 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.

Other Commitments and Contingencies

The Company has contractual agreements with third parties to purchase feedstocks, tolling arrangements or other services. The terms of these different agreements can vary and may be extended at the Company’s request and are cancellable by either party as provided for in each agreement. While the agreements vary by scope and terms, early cancellation of contractual agreements could result in one-time contract termination costs.

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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, net” within the Company’s unaudited Condensed Consolidated Statements of Operations. The Company recognized less than $1 of net non-pension postretirement benefit cost for the three months ended March 31, 2021 and 2020.

Following are the components of net pension benefit cost recognized by the Company for the three months ended March 31, 2021 and 2020:

	Pension Benefits
	Three Months Ended March 31, 2021				Three Months Ended March 31, 2020
	U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans
Service cost	$	1	$	6	$	1	$	4
Interest cost on projected benefit obligation	1		1		1		2
Expected return on assets	(3)		(4)		(3)		(3)
Net (benefit) expense(1)	$	(1)	$	3	$	(1)	$	3

(1)    Includes less than $1 of net pension expense for non-U.S. plans related to the Held for Sale Business during the three months ended March 31, 2021 and 2020, respectively. These associated costs have been included in “Loss from discontinued operations, net of taxes” within the unaudited Condensed Consolidated Statements of Operations.

As of March 31, 2021 and December 31, 2020, the Company had a prepaid pension asset of $55 and $52 included in “Other Current Assets” within the Company’s unaudited Condensed Consolidated Balance Sheets which represents an over funded position within the Company’s Netherlands defined benefit pension plans as a result of excess contributions and favorable interest rate conditions.

As of March 31, 2021 and December 31, 2020, the Company had a pension liability of $223 and $238, respectively, and a non-pension postretirement benefit liability of $12 for both periods. These liabilities are included in “Long-term pension and post employment benefit obligations” within the Company’s unaudited Condensed Consolidated Balance Sheets.

11. Stock Based Compensation

The Company grants stock-based compensation to employees, directors, and other key service providers under the Hexion Holdings Corporation 2019 Omnibus Incentive Plan (the “2019 Incentive Plan”). Under the 2019 Incentive Plan, the Company may grant stock options, restricted stock units, performance stock units and other equity-based awards to be awarded from time to time as the Board of Directors of Hexion Holdings (the “Board”) determines. The restricted and performance stock units are deemed to be equivalent to one share of common stock of Hexion Holdings. The awards contain restrictions on transferability and other typical terms and conditions.

In the first quarter of 2021, Hexion Holdings granted 463,603 Restricted Stock Units (“RSUs”) to certain employees that time vest over three years with a weighted average grant date fair value of $15.37 per share. Additionally, Hexion Holdings granted 695,409 Performance Stock Units (“PSUs”) to certain employees that vest based on performance conditions with a weighted average grant date fair value of $15.37 per share. Compensation cost will be recognized over the service period of the PSUs once the satisfaction of the applicable performance condition is deemed probable. As of March 31, 2021, the Company’s performance conditions underlying the PSU's were not considered probable of occurring and thus no PSU expense has been recorded for the 2021 grant.

The Company recognized $6 and $5, respectively, of stock-based compensation costs for the three months ended March 31, 2021 and 2020. The amounts are included in “Selling, general and administrative expense” in the unaudited Condensed Consolidated Statements of Operations.

The Company’s Parent had 57,568,295 shares of common stock outstanding and approximately 10,177,908 warrants outstanding as of March 31, 2021. The Company’s Parent had 2,332,713 RSUs and 3,868,490 PSUs outstanding as of March 31, 2021.

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12. Segment Information

The Company’s reporting segments are aligned around our two growth platforms: (i) Adhesives and (ii) Coatings and Composites. At March 31, 2021, the Company’s continuing operations had three reportable segments, which consist of the following businesses:

•Adhesives: these businesses are focused on the global adhesives market. They include the Company’s global wood adhesives business, which also includes the oilfield technologies group, as well as the forest products resin assets in North America, Latin America, Australia and New Zealand; and global formaldehyde.

•Coatings and Composites: these businesses are focused on the global coatings and composites market. They include the Company’s base and specialty epoxy resins and Versatic™ Acids and Derivatives businesses.

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

Reportable Segments

Following are net sales and Segment EBITDA for continuing operations by reportable segment. Segment EBITDA is defined as EBITDA (earnings before interest, income taxes, depreciation and amortization) 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 and foreign exchange gains and losses not allocated to continuing segments.

Net Sales (1):

Following is continuing operations 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, 2021						Three Months Ended March 31, 2020
	Adhesives		Coatings and Composites		Total		Adhesives		Coatings and Composites		Total
North America	$	273	$	139	$	412	$	253	$	154	$	407
Europe	7		178		185		5		154		159
Asia Pacific	37		75		112		33		50		83
Latin America	44		—		44		38		—		38
Total	$	361	$	392	$	753	$	329	$	358	$	687

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

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Reconciliation of Net Income (Loss) to Segment EBITDA:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Reconciliation:
Net income (loss)	$	11	$	(59)
Less: Net loss from discontinued operations	(1)		(3)
Net income (loss) from continuing operations	$	12	$	(56)
Income tax expense	16		(3)
Interest expense, net	24		26
Depreciation and amortization (1)	49		49
EBITDA	101		16
Adjustments to arrive at Segment EBITDA:
Asset impairments	$	—	$	16
Business realignment costs (2)	5		20
Transaction costs (3)	—		2
Realized and unrealized foreign currency losses	4		6
Other non-cash items (4)	10		11
Other (5)	(6)		2
Total adjustments	13		57
Segment EBITDA	$	114	$	73
Segment EBITDA:
Adhesives	$	68	$	55
Coatings and Composites	65		39
Corporate and Other	(19)		(21)
Total	$	114	$	73

(1)For the three months ended March 31, 2020, accelerated depreciation of $2 has been included in “Depreciation and amortization.”

(2)Business realignment costs for the periods below included:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Severance costs	$	(1)	$	8
In-process facility rationalizations	1		6
Contractual costs from exited businesses	2		—
Business services implementation	2		4
Legacy environmental reserves	(2)		2
Other	3		—

(3)For the three months ended March 31, 2020, transaction costs included certain professional fees related to strategic projects.

(4)Other non-cash items for the periods presented below included:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Fixed asset write-offs	$	1	$	2
Stock-based compensation costs	6		5
Long-term retention programs	2		3
Other	1		1

(5)Other for the periods presented below included:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Legacy and other non-recurring items	$	—	$	2
IT outage recoveries, net	—		(1)
Gain on sale of assets	(4)		—
Financing fees and other	(2)		1

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13. Changes in Accumulated Other Comprehensive Loss

Following is a summary of changes in “Accumulated other comprehensive loss” for the three months ended March 31, 2021 and 2020:

	Foreign Currency Translation Adjustments		Cash Flow Hedge		Total
Balance at December 31, 2019	$	(3)	$	2	$	(1)
Change in value	(42)		(15)		(57)
Balance at March 31, 2020	$	(45)	$	(13)	$	(58)
Balance at December 31, 2020	$	(11)	$	(16)	$	(27)
Change in value	(9)		5		(4)
Balance at March 31, 2021	$	(20)	$	(11)	$	(31)

14. Income Taxes

The income tax expense (benefit) for the three months ended March 31, 2021 and 2020 was $16 and $(3), respectively. The income tax (benefit) expense is comprised of tax expense on income and tax benefit on losses from certain foreign operations. In 2021 and 2020, 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.

The effective tax rate for the three months ended March 31, 2021 and 2020 was 57% and 5%, respectively. 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 the Company operates. 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.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollar amounts in millions)

The following commentary should be read in conjunction with the audited Consolidated Financial Statements and the accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s most recent Annual Report on Form 10-K.

Within the following discussion, unless otherwise stated, “the first quarter of 2021” refers to the three months ended March 31, 2021 and “the first quarter of 2020” refers to the three months ended March 31, 2020.

Forward-Looking and Cautionary Statements

Certain statements in this report, including without limitation, certain statements made under the caption “Overview and Outlook,” are forward-looking statements within the meaning of and made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, our management may from time to time make oral forward-looking statements. All statements, other than statements of historical facts, are forward-looking statements. Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “project,” “might,” “plan,” “estimate,” “may,” “will,” “could,” “should,” “seek” or “intend” and similar expressions. Forward-looking statements reflect our current expectations and assumptions regarding our business, the economy and other future events and conditions and are based on currently available financial, economic and competitive data and our current business plans. Actual results could vary materially depending on risks and uncertainties that may affect our operations, markets, services, prices and other factors as discussed in the Risk Factors section of this report and our other filings with the SEC. While we believe our assumptions are reasonable, we caution you against relying on any forward-looking statements as it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, a weakening of global economic and financial conditions, interruptions in the supply of or increased cost of raw materials, the loss of, or difficulties with the further realization of, cost savings in connection with our strategic initiatives, the impact of our indebtedness, our failure to comply with financial covenants under our credit facilities or other debt, pricing actions by our competitors that could affect our operating margins, changes in governmental regulations and related compliance and litigation costs, uncertainties related to COVID-19 and the impact of our responses to it and the other factors listed in the Risk Factors section of this report and in our other SEC filings. For a more detailed discussion of these and other risk factors, see the Risk Factors section of this report and our most recent filings made with the SEC. All forward-looking statements are expressly qualified in their entirety by this cautionary notice. The forward-looking statements made by us speak only as of the date on which they are made. Factors or events that could cause our actual results to differ may emerge from time to time. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Overview and Outlook

Business Overview

We are a large participant in the specialty chemicals industry, one of the world’s largest producers of thermosetting resins, or thermosets, and a leading producer of adhesive and structural resins and coatings. Thermosets are a critical ingredient for most paints, coatings, glues and other adhesives produced for consumer or industrial uses. We provide a broad array of thermosets and associated technologies and have significant market positions in all of the key markets that we serve.

Our products are used in thousands of applications and are sold into diverse markets, such as forest products, architectural and industrial paints, packaging, consumer products and automotive coatings, as well as higher growth markets, such as wind energy and electrical composites. Major industry sectors that we serve include industrial/marine, construction, consumer/durable goods, automotive, wind energy, aviation, electronics, architectural, civil engineering, repair/remodeling and oil and gas drilling. Key drivers for our business include general economic and industrial conditions, including housing starts and auto build rates. In addition, due to the nature of our products and the markets we serve, competitor capacity constraints and the availability of similar products in the market may impact our results. As is true for many industries, our financial results are impacted by the effect on our customers of economic upturns or downturns, as well as by the impact on our own costs to produce, sell and deliver our products. Our customers use most of our products in their production processes. As a result, factors that impact their industries can and have significantly affected our results.

Through our worldwide network of strategically located production facilities, we serve more than 2,900 customers in approximately 86 countries. Our global customers include large companies in their respective industries, such as Akzo Nobel, BASF, Norbord, Louisiana Pacific, Bayer, Owens Corning, PPG Industries, Sherwin Williams, Sinoma, Aeolon and Weyerhaeuser.

COVID-19 Impact

In March 2020, the World Health Organization categorized COVID-19 as a global pandemic. Around the world, local governments’ responses to COVID-19 continue to evolve, which has led to stay-at-home orders, social distancing guidelines and other preventative measures that have disrupted various industries in the global economy and the markets in which our products are manufactured, distributed and sold.

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During this pandemic, we have implemented additional guidelines to further protect the health and safety of our employees as we continue to operate with our suppliers and customers. We have committed to maintaining a paramount focus on the safety of our employees while minimizing potential disruptions caused by COVID-19. For example, we are following all legislatively-mandated travel directives in the various countries where we operate, and we have also put additional travel restrictions in place for our associates designed to reduce the risk from COVID-19. Additionally, we are utilizing extended work from home options to protect our office associates, while adjusting our meeting protocols and processes at our manufacturing sites.

Our businesses have been designated by many governments as essential businesses and our operations have continued through March 31, 2021. The ultimate impact that COVID-19 will have on our future financial position, operating results and cash flows involves numerous risks and uncertainties, including new information which may emerge concerning the severity and duration of COVID-19 and actions to contain the virus or treat its impact.

Sale of Phenolic Specialty Resins Business

On September 27, 2020, we entered into a definitive agreement (the “Purchase Agreement”) for the sale of our Phenolic Specialty Resins ("PSR"), Hexamine and European-based Forest Products Resins businesses (together with PSR, the “Held for Sale Business”) to Black Diamond Capital Management, LLC and Investindustrial (the “Buyers”) for a purchase price of approximately $425. The consideration consists of $335 in cash and certain assumed liabilities with the remainder in future contingent proceeds based on the performance of the Held for Sale Business. The final purchase price is subject to customary post-closing adjustments. The Held for Sale Business was formerly included in the Company’s Adhesives reportable segment.

On April 30, 2021, we completed the sale of our Held for Sale Business pursuant to the terms of the Purchase Agreement with the Buyers. We received gross cash consideration for the Held for Sale Business in the amount of $304. In addition, the Buyers assumed approximately $31 of certain liabilities, net of preliminary working capital and other closing adjustments as part of the Purchase Agreement. A subsequent post-closing adjustment to the initial cash consideration will be made in accordance with the Purchase Agreement. Hexion expects to use a portion of the net proceeds to invest in its business, and in May 2021, we used a portion of its net proceeds to reduce our borrowings under our Senior Secured Term Loan, in accordance with our credit agreement.

As of March 31, 2021, we reclassified the assets and liabilities of our Held for Sale Business as held for sale on the unaudited Condensed Consolidated Balance Sheets and reported the results of the operations for the three months ended March 31, 2021 as “Loss from discontinued operations, net of taxes” on the unaudited Condensed Consolidated Statements of Operations. Amounts for prior periods have similarly been retrospectively reclassified for all periods presented.

Unless otherwise noted, the tables and discussion below represent the Company’s continuing operations and excludes the Held for Sale Business.

Reportable Segments in 2021

Our reporting segments are aligned around our two growth platforms: (i) Adhesives and (ii) Coatings and Composites. At March 31, 2021, we have three reportable segments, which consist of the following businesses:

•Adhesives: these businesses are focused on the global adhesives market. They include the Company’s global wood adhesives business, which also includes the oilfield technologies group, as well as the forest products resin assets in North America, Latin America, Australia and New Zealand; and global formaldehyde.

•Coatings and Composites: these businesses are focused on the global coatings and composites market. They include our base and specialty epoxy resins and Versatic™ Acids and Derivatives businesses.

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

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2021 Overview

Following are highlights from our results of continuing operations for the three months ended March 31, 2021 and 2020:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020		$ Change		% Change
Statements of Operations:
Net sales	$	753	$	687	$	66	10	%
Operating income (loss)	48		(34)		82		n/m
Income (loss) before income tax	28		(60)		88		n/m
Net income (loss) from continuing operations	12		(56)		68		n/m
Segment EBITDA:
Adhesives	$	68	$	55	13		24	%
Coatings and Composites	65		39		26		67	%
Corporate and Other	(19)		(21)		2		(10)	%
Total	$	114	$	73	$	41	56	%

•Net Sales—In the first three months of 2021, net sales increased by $66, or 10%, compared to the first three months of 2020. Pricing positively impacted sales by $64 due to raw material price increases contractually passed through to customers across many of our businesses, as well as favorable product mix and improved market conditions in our base epoxy resins and specialty epoxy resins businesses. Foreign currency translation positively impacted net sales by $13 due to the strengthening of various foreign currencies against the U.S. dollar in the first three months of 2021 compared to the first three months of 2020. Volumes negatively impacted net sales by $11, primarily due to the impact of winter storm Uri in the U.S. gulf coast on several of our businesses, offset by volume increases in our specialty epoxy resins and global resins businesses.

•Net Income (Loss) from continuing operations—In the first three months of 2021, net income from continuing operations increased by $68 from a net loss of $56 as compared to the first three months of 2020. The increase was driven by an increase in operating income of $82, primarily due to an increase in gross profit as a result of improved market conditions across many of our businesses mentioned above as well as the absence of a $16 asset impairment charge related to our oilfield and phenolic specialty resins businesses in the first quarter of 2020, and a $15 decrease in business realignment costs driven by lower severance expenses.

•Segment EBITDA—For the first three months of 2021, Segment EBITDA was $114, an increase of 56% compared with $73 in the first three months of 2020. This increase was primarily due to improved market conditions in our base epoxy resins, specialty epoxy resins business, and due to raw material productivity impacting our forest products resins and formaldehyde businesses, partially offset by $6 of repair costs and $12 of lost volume due to temporary manufacturing outages caused by winter storm Uri in the U.S. gulf coast. Additionally, our Corporate and Other charges in the first three months of 2021 decreased by $2 compared to the first three months of 2020.

•Growth Initiatives and New Product Development— We continue to focus on new product development to further strengthen our industry-leading research and development, technical services capabilities, and to strategically invest in our R&D footprint to increase opportunities for innovation and stimulate growth. These growth activities include the following:

◦Our new Adhesives product Armorbuilt™, which is designed to protect the critical utility pole infrastructure against wildfires. We expect incremental growth in 2021 from this product.

◦Extensive conversions were initiated at several major customers in 2020 for next generation OSB PF technology for board surface applications and additional applications are scheduled for 2021 as productivity gains and further reduction in resin usage, positions our products favorably compared to pMDI.

◦As an alternative technology, we have also developed BPA-free alternative coating technologies to address changing consumer preferences.

◦An expansion of our Brimbank, Australia facility to develop fire-resistant cladding materials leveraging proprietary phenolic resin technology.

Short-term Outlook

As we look towards the remainder of 2021, we anticipate continued strong economic recovery from the COVID-19 global pandemic resulting in increased demand in many of our key end markets. While our businesses have been designated by many governments as essential businesses, which has allowed our operations to continue during the pandemic, we saw weak economic conditions develop in the first half of 2020, specifically within automotive and certain industrial markets. In the second half of 2020 and in the first quarter of 2021, we saw sequential improvement in many of the industries in which our businesses operate and year-over-year Segment EBITDA improvement as the overall economy continued to recover from the global pandemic. We expect these strong tailwinds to continue into the second quarter and second half of 2021.

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While we expect these current positive economic trends to continue during 2021, delays in COVID-19 vaccine distributions, increases in COVID-19 cases, hospitalizations, deaths, restrictions on trade or government lock-downs could disrupt the current recovery and our expectations. The ultimate impact that COVID-19 will have on our operating results will depend on the overall severity and duration of the COVID-19 pandemic and actions to contain the virus or treat its impact.

Within our Coatings and Composites segment, we continue to expect significant year over year improvement in our base epoxy business in 2021 due to strong improvements in market conditions. Our Versatic AcidsTM and Derivatives business should continue to benefit from modest growth in architectural coatings. Additionally, within our epoxy specialty resins business we anticipate lower demand in the China wind energy market in the second half of 2021.

Within our Adhesives segment, we anticipate improvement in Segment EBITDA within our North American forest products resins business in 2021 based on the latest expectations in U.S. and Canadian housing starts, remodeling and ongoing macroeconomic recovery from the COVID-19 pandemic. We also expect that continued economic recovery and strong market demand will positively impact our North American formaldehyde business in 2021.

We also anticipate that our businesses will continue to benefit from the savings associated with our restructuring and cost reduction initiatives. Further, we are in the process of implementing various efficiency initiatives, which include process improvement and other productivity projects.

Lastly, we completed the sale of our Phenolic Specialty Resin, Hexamine and European-based Forest Products Resins businesses, on April 30, 2021, which will further streamline our portfolio and improve our specialty product mix. We expect to use the proceeds to further reduce our indebtedness as well as for general corporate purposes including investments in our business.

Matters Impacting Comparability of Results

Raw Material Prices

Raw materials comprise approximately 75% of our cost of sales (excluding depreciation expense). The three largest raw materials used in our production processes are phenol, methanol and urea. These materials represent about half of our total raw material costs. Fluctuations in energy costs, such as volatility in the price of crude oil and related petrochemical products, as well as the cost of natural gas have historically caused volatility in our raw material and utility costs. In the first three months of 2021 compared to the first three months of 2020, the average price of phenol, urea and methanol increased by approximately 3%, 45% and 30%, respectively. The impact of passing through raw material price changes to customers can result in significant variances in sales comparisons from year to year.

We expect long-term raw material cost volatility to continue because of price movements of key feedstocks. To help mitigate raw material volatility, we have purchase and sale contracts and commercial arrangements with many of our vendors and customers that contain periodic price adjustment mechanisms. Due to differences in timing of the pricing trigger points between our sales and purchase contracts, there is often a “lead-lag” impact. In many cases this “lead-lag” impact can negatively impact our margins in the short term in periods of rising raw material prices and positively impact them in the short term in periods of falling raw material prices.

Foreign Currency Exchange

The impact of foreign currency translation is driven by the translation of assets and liabilities of our foreign subsidiaries which are denominated in functional currencies other than the U.S. dollar. Our non-U.S. operations accounted for approximately 56% of our sales in the first three months of 2021. The primary assets and liabilities driving the adjustments are cash and cash equivalents; accounts receivable; inventory; property, plant and equipment; accounts payable; pension and other postretirement benefit obligations and certain intercompany loans payable and receivable. The primary currencies in which these assets and liabilities are denominated are the euro, Brazilian real, Chinese yuan, Canadian dollar and Australian dollar.

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Results of Operations

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended March 31, 2021				Three Months Ended March 31, 2020
	$		% of Net Sales		$		% of Net Sales
Net sales	$	753	100	%	$	687	100	%
Cost of sales (exclusive of depreciation and amortization shown below)	584		78	%	565		82	%
Selling, general and administrative expense	70		9	%	64		9	%
Depreciation and amortization	49		7	%	49		7	%
Asset impairments	—		—	%	16		2	%
Business realignment costs	5		1	%	20		3	%
Other operating (income) expense, net	(3)		—	%	7		1	%
Operating income (loss)	48		6	%	(34)		(5)	%
Interest expense, net	24		3	%	26		4	%
Other non-operating income	(4)		(1)	%	—		—	%
Total non-operating expense	20		3	%	26		4	%
Income (loss) from continuing operations before income tax and earnings from unconsolidated entities	28		4	%	(60)		(9)	%
Income tax expense (benefit)	16		2	%	(3)		—	%
Income (loss) from continuing operations before earnings from unconsolidated entities	12		2	%	(57)		(8)	%
Earnings from unconsolidated entities, net of taxes	—		—	%	1		—	%
Income (loss) from continuing operations, net of taxes	12		2	%	(56)		(8)	%
Loss from discontinued operations, net of taxes	(1)		—	%	(3)		—	%
Net income (loss)	11		1	%	(59)		(9)	%
Other comprehensive loss	$	(4)			$	(57)

Three Months Ended March 31, 2021 vs. Three Months Ended March 31, 2020

Net Sales

In the first three months of 2021, net sales increased by $66, or 10%, compared to the first three months of 2020. Pricing positively impacted sales by $64 due to raw material increases contractually passed through to customers across many of our businesses, as well as favorable product mix and improved market conditions in our base epoxy resins and specialty epoxy resins businesses. Foreign currency translation positively impacted net sales by $13 due to the strengthening of various foreign currencies against the U.S. dollar in the first three months of 2021 compared to the first three months of 2020. Volumes negatively impacted net sales by $11, primarily due to the impact of Winter Storm Uri in the U.S. gulf coast on several of our businesses, offset by volume increases in our specialty epoxy resins and global resins businesses.

Operating Income (Loss)

In the first three months of 2021, operating income (loss) increased by $82 from an operating loss of $34 in the first three months of 2020 to an operating income of $48 in the first three months of 2021. This was primarily due to a $16 asset impairment charge related to our oilfield and phenolic specialty resins businesses in the first quarter of 2020, a $15 decrease in business realignment costs driven by lower severance expenses and an increase in gross profit due primarily to improved market across many of our businesses mentioned above.

Non-Operating Expense

In the first three months of 2021, total non-operating expense decreased by $6 due primarily to a decrease in interest expense of $2 as a result of the decrease in our debt obligations, and an increase in miscellaneous non-operating income.

Income Tax Expense

The income tax expense (benefit) for the three months ended March 31, 2021 and 2020 was $16 and $(3), respectively. The income tax expense (benefit) is comprised of tax expense on income and tax benefit on losses from certain foreign operations. In 2021 and 2020, 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.

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The effective tax rate for the three months ended March 31, 2021 and 2020 was 57% and 5%, respectively. 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.

Other Comprehensive Loss

For the first three months of 2021, foreign currency translation negatively impacted other comprehensive loss by $9, due to an overall weakening of various foreign currencies against the U.S. dollar in the first three months of 2021 and an unrealized gain of $5 on an interest rate swap designated as a cash flow hedge recorded to other comprehensive loss.

For the first three months of 2020, foreign currency translation negatively impacted other comprehensive loss by $42, due to an overall weakening of various foreign currencies against the U.S. dollar in the first three months of 2020 and an unrealized loss of $15 on an interest rate swap designated as a cash flow hedge recorded to other comprehensive loss.

Results of Operations by Segment

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 our 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. Segment EBITDA should not be considered a substitute for net loss or other results reported in accordance with U.S. GAAP. Segment EBITDA may not be comparable to similarly titled measures reported by other companies.

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Net Sales (1):
Adhesives	$	361	$	329
Coatings and Composites	392		358
Total	$	753	$	687
Segment EBITDA:
Adhesives	$	68	$	55
Coatings and Composites	65		39
Corporate and Other	(19)		(21)
Total	$	114	$	73

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

Three Months Ended March 31, 2021 vs. Three Months Ended March 31, 2020 Segment Results

Following is an analysis of the percentage change in net sales by segment from the three months ended March 31, 2020 to the three months ended March 31, 2021:

	Volume		Price/Mix		Currency Translation		Total
Adhesives	2	%	8	%	—	%	10	%
Coatings and Composites	(5)	%	11	%	3	%	9	%

Adhesives

Net sales in the first three months of 2021 increased by $32, or 10%, when compared to the first three months of 2020. Pricing positively impacted net sales by $25, primarily due to raw material price increases contractually passed through to customers across many of our businesses. Volumes positively impacted net sales by $7, primarily due to volume increases in our North American and Latin American resins businesses and global formaldehyde business driven by strong demand across many key end markets, largely offset by the impact of winter storm Uri in the U.S. gulf coast. Lastly, foreign currency translation remained flat, due to the strengthening of various foreign currencies against the U.S. dollar, offset by the weakening of the Brazilian real against the U.S dollar in the first three months of 2021 compared to the first three months of 2020.

Segment EBITDA in the first three months of 2021 increased by $13 to $68, when compared to the first three months of 2020. This increase was primarily driven by an improved global demand across many of our end markets, as discussed above, and raw material productivity impacting our forest products resins and formaldehyde businesses.

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Coatings and Composites

Net sales in the first three months of 2021 increased by $34, or 9%, when compared to the first three months of 2020. Pricing positively impacted net sales by $39 due to improved market conditions in our base epoxy resins and specialty epoxy resins businesses. Foreign currency translation positively impacted net sales by $13, due primarily to the strengthening of various foreign currencies against the U.S. dollar in the three months of 2021 compared to the first three months of 2020. Volumes negatively impacted net sales by $18, which was primarily related to volume decreases in our base epoxy business mainly driven by winter storm Uri in the U.S. gulf coast in the first quarter 2021. These decreases in volumes were partially offset by year over year volume increases in our specialty epoxy resins business driven by lower China demand in the first quarter of 2020 due to the global pandemic.

Segment EBITDA in the first three months of 2021 increased by $26 to $65 compared to the first three months of 2020. The increase was primarily due to improved market conditions in our base epoxy resins business and specialty epoxy resins business, as discussed above, partially offset by temporary manufacturing outages caused by winter storm Uri in the U.S. gulf coast.

Corporate and Other

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 and unallocated foreign exchange gains and losses. Corporate and Other charges in the first three months of 2021 decreased by $2 compared to the first three months of 2020 primarily driven by lower compensation and travel costs, partially offset by costs associated with our business services implementation.

Reconciliation of Net Income (Loss) to Segment EBITDA:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Reconciliation:
Net income (loss)	$	11	$	(59)
Less: Net loss from discontinued operations	(1)		(3)
Net income (loss) from continuing operations	$	12	$	(56)
Income tax expense	16		(3)
Interest expense, net	24		26
Depreciation and amortization (1)	49		49
EBITDA	101		16
Adjustments to arrive at Segment EBITDA:
Asset impairments	$	—	$	16
Business realignment costs (2)	5		20
Transaction costs (3)	—		2
Realized and unrealized foreign currency losses	4		6
Other non-cash items (4)	10		11
Other (5)	(6)		2
Total adjustments	13		57
Segment EBITDA	$	114	$	73
Segment EBITDA:
Adhesives	$	68	$	55
Coatings and Composites	65		39
Corporate and Other	(19)		(21)
Total	$	114	$	73

(1)For the three months ended March 31, 2020, accelerated depreciation of $2 has been included in “Depreciation and amortization.”

(2)Business realignment costs for the periods below included:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Severance costs	$	(1)	$	8
In-process facility rationalizations	1		6
Contractual costs from exited businesses	2		—
Business services implementation	2		4
Legacy environmental reserves	(2)		2
Other	3		—

(3)For the three months ended March 31, 2020, transaction costs included certain professional fees related to strategic projects.

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(4)Other non-cash items for the periods presented below included:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Fixed asset write-offs	$	1	$	2
Stock-based compensation costs	6		5
Long-term retention programs	2		3
Other	1		1

(5)Other for the periods presented below included:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Legacy and other non-recurring items	$	—	$	2
IT outage recoveries, net	—		(1)
Gain on sale of assets	(4)		—
Financing fees and other	(2)		1

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Liquidity and Capital Resources

2021 Outlook

We believe we are favorably positioned to fund our ongoing liquidity requirements for the foreseeable future through cash generated from operations, as well as available borrowings under our ABL Facility. We have the operational and financial flexibility to make strategic capital investments, leverage our leadership positions with both our customers and suppliers, optimize our portfolio and drive new growth programs. As the impact of the COVID-19 pandemic on the global economy and our operations evolves, we will continue to assess our liquidity needs.

The following factors will impact 2021 cash flows:

•Sales of Assets: During the third quarter of 2020, we entered in a Purchase Agreement to sell our Phenolic Specialty Resins, Hexamine and European-based Forest Products Resins businesses. We completed the transaction on April 30, 2021 for cash proceeds of $304. In May 2021, we used a portion of the net proceeds to pay down the aggregate principal of the euro denominated tranche Senior Secured Term Loan for $150. We plan to use the remaining proceeds from the transaction to further reduce our indebtedness as well as for general corporate purposes including investments in our business. We will continue to explore options to optimize our portfolio.

•Interest and Income Taxes: We expect cash outflows in 2021 related to interest payments on our debt of approximately $85 to $95 and income tax payments between $20 to $30.

•Capital Spending: Capital spending in 2021 is expected to be between $115 and $125, an increase from 2020 due to our commitment to future investments to productivity and growth projects in our businesses.

•Working Capital: We anticipate working capital to increase modestly during 2021, as compared to 2020, based on expected increased volumes as key end markets continue to recover from COVID-19. During the year, we expect an increase in the first half and a decrease in the second half, consistent with historical trends.

•Restructuring Activities: We expect that the 2021 cost savings associated with our in-process facility rationalizations and the creation of a business service group within the Company to provide certain administrative functions for us going forward will have a net positive impact on our liquidity.

Our short-term cash needs are expected to include funding operations as currently planned and we believe that we will be able to meet our liquidity needs over the next 12 months based on our current projections of cash flow from operations and borrowing availability under financing arrangements.

At March 31, 2021, we had $1,766 of outstanding debt and $483 in liquidity consisting of the following:

•$131 of unrestricted cash and cash equivalents (of which $93 is maintained in foreign jurisdictions);

•$295 of borrowings available under our ABL Facility ($350 borrowing base less $55 of outstanding letters of credit; there were no outstanding borrowings); and

•$57 of time drafts and borrowings available under credit facilities at certain international subsidiaries

Our net working capital (defined as accounts receivable and inventories less accounts payable) from our continuing operations, excluding Assets Held for Sale, at March 31, 2021 and December 31, 2020 was $353 and $257, respectively. A summary of the components of our net working capital as of March 31, 2021 and December 31, 2020 is as follows:

	March 31, 2021		% of LTM Net Sales		December 31, 2020		% of LTM Net Sales
Accounts receivable	$	410	16	%	$	331	13	%
Inventories	292		11	%	265		11	%
Accounts payable	(349)		(14)	%	(339)		(14)	%
Net working capital (1)	$	353	13	%	$	257	10	%

(1)Management believes that this non-GAAP measure is useful supplemental information. This non-GAAP measure should be considered by the reader in addition to but not instead of, the financial statements prepared in accordance with U.S. GAAP.

The increase in net working capital of $96 from December 31, 2020 was driven by an increase in accounts receivable of $79, an increase in inventory of $27 and an increase in accounts payable of $10. The increase in accounts receivable was driven by higher volumes in the first quarter of 2021 as compared to the fourth quarter of 2020, the increase in accounts payable was largely related to raw material price increases in the first quarter of 2021 and timing of vendor payments and the increase in inventories was driven by volume increases in the first quarter of 2021.

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Sources and Uses of Cash

Following are highlights from our unaudited Condensed Consolidated Statements of Cash Flows for continuing operations:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
(Uses) sources of cash:
Operating activities	$	(49)	$	(94)
Investing activities	(17)		(26)
Financing activities	(3)		136
Effect of exchange rates on cash flow	(2)		(6)
Net change in cash and cash equivalents	$	(71)	$	10

Operating Activities

In the three months ended March 31, 2021, operations used $49 of cash. Net income from continuing operations of $12 included $58 of net non-cash expense items, consisting of depreciation and amortization of $49, non-cash stock based compensation expense of $6, and unrealized foreign currency losses of $8, partially offset by a gain on sale of assets and dispositions of $4. Net working capital used $100, which was driven by an increase in accounts receivable, an increase in inventory and an increase in accounts payable, due primarily to raw material price increases and increased volumes. Changes in other assets and liabilities and income taxes payable used $19 due to the timing of when items were expensed versus paid, which primarily included operating lease expense, interest expense, employee retention programs, incentive compensation, pension plan contributions and taxes.

In the three months ended March 31, 2020, operations used $94 of cash. Net loss from continuing operations of $56 included $76 of net non-cash income items. consisting of unrealized foreign currency gains of $6, depreciation and amortization of $49, non-cash asset impairments of $16, non-cash stock based compensation expense of $5 and loss on the sale of assets of $2, partially offset by deferred tax expense of $2. Net working capital used $92, which was largely driven by increases in accounts receivable due primarily to seasonality of our businesses, and decreases in accounts payable related to timing of vendor payments. Changes in other assets and liabilities and income taxes payable used $22 due to the timing of when items were expensed versus paid, which primarily included operating lease expense, interest expense, employee retention programs, incentive compensation, pension plan contributions and taxes.

Investing Activities

In the three months ended March 31, 2021, investing activities used $17 of cash primarily related to capital expenditures of $24, partially offset by proceeds from sale of assets and dispositions of $7.

In the three months ended March 31, 2020, investing activities used $26 of cash related to capital expenditures.

Financing Activities

In the three months ended March 31, 2021, financing activities provided $3 of cash. Net short-term debt borrowings were $2 and net long-term debt borrowings were $5.

In the three months ended March 31, 2020, financing activities provided $136 of cash. Net short-term debt borrowings were $10, net long-term debt borrowings were $156 and distribution of affiliate loan was $10.

There are certain restrictions on the ability of certain of our subsidiaries to transfer funds to Hexion Inc. in the form of cash dividends, loans or otherwise, which primarily arise as a result of certain foreign government regulations or as a result of restrictions within certain subsidiaries’ financing agreements limiting such transfers to the amounts of available earnings and profits or otherwise limit the amount of dividends that can be distributed. In either case, we have alternative methods to obtain cash from these subsidiaries in the form of intercompany loans and/or returns of capital in such instances where payment of dividends is limited to the extent of earnings and profits.

We regularly review our portfolio for optimization through potential divestitures and potential bolt-on acquisitions or mergers. While there is no guarantee of any future transactions, it could include a specific business unit or combination of several businesses. We expect that a portion of the proceeds from any future divestiture transaction or transactions upon completion would be used to help reduce the absolute amount of our debt.

Further, depending upon market, pricing and other conditions, including the current state of the high yield bond market, as well as cash balances and available liquidity, we or our affiliates, may seek to acquire notes or other indebtedness of the Company through open market purchases, privately negotiated transactions, tender offers, redemption or otherwise, upon such terms and at such prices as we or our affiliates may determine (or as may be provided for in the indentures governing the notes), for cash or other consideration.

Hexion Inc. | 30 | Q1 2021 Form 10-Q

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Covenant Compliance

Credit Facilities and Senior Notes

The instruments that govern our indebtedness contain, among other provisions, restrictive covenants (and incurrence tests in certain cases) regarding indebtedness, dividends and distributions, mergers and acquisitions, asset sales, affiliate transactions, capital expenditures and, in the case of our ABL Facility, the maintenance of a financial ratio (depending on certain conditions). Payment of borrowings under the ABL Facility and our notes may be accelerated if there is an event of default as determined under the governing debt instrument. Events of default under the credit agreement governing our ABL Facility includes the failure to pay principal and interest when due, a material breach of representations or warranties, events of bankruptcy, a change of control, and most covenant defaults. Events of default under the indentures governing our notes include the failure to pay principal and interest, a failure to comply with covenants, subject to a 30-day grace period in certain instances, and certain events of bankruptcy.

The indenture that governs our 7.875% Senior Notes due 2027 (the “Indenture”) contains a Pro Forma EBITDA to Fixed Charges ratio incurrence test which may restrict our ability to take certain actions such as incurring additional debt or making acquisitions if we are unable to meet this ratio (measured on a last twelve months, or LTM, basis) of at least 2.0:1. The Pro Forma EBITDA to Fixed Charges Ratio under the Indenture is generally defined as the ratio of (a) Pro Forma EBITDA to (b) net interest expense excluding the amortization or write-off of deferred financing costs, each measured on an LTM basis. See below for our Pro Forma EBITDA to Fixed Charges Ratio calculation.

Our ABL Facility, which is subject to a borrowing base, does not have any financial maintenance covenant other than a minimum fixed charge coverage ratio of 1.0 to 1.0 that would only apply if our availability under the ABL Facility at any time is less than the greater of (a) $30 and (b) 10.0% of the lesser of the borrowing base and the total ABL Facility commitments at such time. The fixed charge coverage ratio under the credit agreement governing the ABL Facility is generally defined as the ratio of (a) Pro Forma EBITDA minus non-financed capital expenditures and cash taxes to (b) debt service plus cash interest expense plus certain restricted payments, each measured for the four most recent quarters for which financial statements have been delivered.

Reconciliation of Last Twelve Months Net Income to Pro Forma EBITDA

Pro Forma EBITDA is defined as EBITDA adjusted for certain non-cash and certain non-recurring items and other adjustments calculated on a pro-forma basis, including the expected future cost savings from business optimization programs or other programs and the expected future impact of acquisitions, in each case as determined under the governing debt instrument. We believe that including the supplemental adjustments that are made to calculate Pro Forma EBITDA provides additional information to investors about our ability to comply with our financial covenants and to obtain additional debt in the future. Pro Forma EBITDA and Fixed Charges are not defined terms under U.S. GAAP. Pro Forma EBITDA is not a measure of financial condition, liquidity or profitability, and should not be considered as an alternative to net income (loss) determined in accordance with U.S. GAAP or operating cash flows determined in accordance with U.S. GAAP. Additionally, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not take into account certain items such as interest and principal payments on our indebtedness, depreciation and amortization expense (because we use capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate revenue), working capital needs, tax payments (because the payment of taxes is part of our operations, it is a necessary element of our costs and ability to operate), non-recurring expenses and capital expenditures. Fixed Charges under the Indenture should not be considered an alternative to interest expense.

Hexion Inc. | 31 | Q1 2021 Form 10-Q

Table of Contents                         

The following table reconciles net loss to EBITDA and Pro Forma EBITDA from continuing operations for the twelve month period, and calculates the ratio of Pro Forma EBITDA to Fixed Charges as calculated under our Indenture for the period presented:

	March 31, 2021
	LTM Period
Net loss	$	(160)
Net loss from discontinued operations	(67)
Net loss from continuing operations	(93)
Income tax expense	33
Interest expense, net	98
Depreciation and amortization	191
EBITDA	229
Adjustments to arrive at Pro Forma EBITDA:
Business realignment costs (1)	54
Realized and unrealized foreign currency gains	(2)
Unrealized losses on pension and postretirement benefits (2)	4
Transaction costs (3)	4
Other non-cash items (4)	42
Other (5)	8
Cost reduction programs savings (6)	4
Pro Forma EBITDA	$	343
Pro forma fixed charges (7)	$	81
Ratio of Pro Forma EBITDA to Fixed Charges (8)	4.23

(1)Primarily represents costs related to certain in-process cost reduction activities, including severance costs of $7, $6 related to certain in-process facility rationalizations, $10 of contractual costs for exited businesses, $5 for future environmental clean-up of closed facilities and one-time implementation and transition costs associated with the creation of a business services group within the Company of $20.

(2)Represents non-cash losses resulting from pension and postretirement benefit plan liability remeasurements.

(3)Represents certain professional fees related to strategic projects.

(4)Primarily includes expenses for retention programs of $8, fixed asset disposals of $12 and share-based compensation costs of $18.

(5)Primarily represents $6 of expenses related to legacy expenses and other non-recurring items, $5 of business optimization expense, $7 related to financing fees and other expenses, offset by $3 of IT outage recoveries and $4 of gain on dispositions.

(6)Represents pro forma impact of in-process cost reduction programs savings. Cost reduction program savings represent the unrealized headcount reduction savings and plant rationalization savings related to cost reduction programs and other unrealized savings associated with the Company’s business realignments activities, and represent our estimate of the unrealized savings from such initiatives that would have been realized had the related actions been completed at the beginning of the period presented. The savings are calculated based on actual costs of exiting headcount and elimination or reduction of site costs. We expect the savings to be realized within the next 12 months.

(7)Reflects pro forma interest expense based on interest rates at March 31, 2021 and expected 2021 debt pay downs.

(8)The Company’s ability to incur additional indebtedness, among other actions, is restricted under the Secured Indentures, unless the Company has a Pro Forma EBITDA to Fixed Charges ratio of at least 2.0 to 1.0.

Recently Issued Accounting Standards

See Note 2 in Item 1 of Part I of this Quarterly Report on Form 10-Q for a detailed description of recently issued accounting pronouncements.

Hexion Inc. | 32 | Q1 2021 Form 10-Q

Table of Contents                         

Item 3.        Quantitative and Qualitative Disclosures about Market Risk

There have been no material developments during the first three months of 2021 on the matters we have previously disclosed about quantitative and qualitative market risk in our Annual Report on Form 10-K for the year ended December 31, 2020.

Item 4.        Controls and Procedures

Evaluation of Disclosure Controls and Procedures    

Our management, including the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, performed an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2021. Based upon that evaluation, the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective at March 31, 2021.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Hexion Inc. | 33 | Q1 2021 Form 10-Q

Table of Contents                         

PART II - OTHER INFORMATION

Item 1.        Legal Proceedings

There have been no other material developments during the first quarter of 2021 in any of the ongoing legal proceedings that were included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Item 1A.    Risk Factors

There have been no other material developments during the first quarter of 2021 in the risk factors that were included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.        Defaults upon Senior Securities

None.

Item 4.        Mine Safety Disclosures

This item is not applicable to the registrant.

Item 5.        Other Information

None.

Hexion Inc. | 34 | Q1 2021 Form 10-Q

Table of Contents                         

Item 6.    Exhibits

31.1	Rule 13a-14 Certifications:
	(a) Certificate of the Chief Executive Officer
	(b) Certificate of the Chief Financial Officer
32.1	Section 1350 Certifications
101.INS*	XBRL Instance Document
101.SCH*	XBRL Schema Document
101.CAL*	XBRL Calculation Linkbase Document
101.DEF*	XBRL Definition Linkbase Document
101.LAB*	XBRL Label Linkbase Document
101.PRE*	XBRL Presentation Linkbase Document

*    Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). The financial information in the XBRL-related documents is “unaudited” or “unreviewed.”

† Represents a management contract or compensatory plan or arrangement

Hexion Inc. | 35 | Q1 2021 Form 10-Q

Table of Contents                         

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		HEXION INC.
Date:	May 12, 2021	/s/ George F. Knight
		George F. Knight
		Executive Vice President, Chief Financial Officer
		(Principal Financial Officer)

Hexion Inc. | 36 | Q1 2021 Form 10-Q

EX-31.1A

Exhibit 31.1(A)

Certification of Financial Statements and Internal Controls

I, Craig A. Rogerson, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Hexion Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 12, 2021

/s/ Craig A. Rogerson

Craig A. Rogerson

Chief Executive Officer

EX-31.1B

Exhibit 31.1(B)

Certification of Financial Statements and Internal Controls

I, George F. Knight, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Hexion Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 12, 2021

/s/ George F. Knight

George F. Knight

Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant To

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 Of The Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Hexion Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Craig A. Rogerson	/s/ George F. Knight
Craig A. Rogerson	George F. Knight
Chief Executive Officer	Chief Financial Officer
May 12, 2021	May 12, 2021

A signed original of this statement required by Section 906 has been provided to Hexion Inc. and will be retained by Hexion Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document - Cover - shares	3 Months Ended
	Mar. 31, 2021	May 01, 2021
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Entity Registrant Name	HEXION INC.
Entity Central Index Key	0000013239
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Mar. 31, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Entity Incorporation, State or Country Code	NJ
Entity Tax Identification Number	13-0511250
Entity Address, Address Line One	180 East Broad St.,
Entity Address, City or Town	Columbus,
Entity Address, State or Province	OH
Entity Address, Postal Zip Code	43215
City Area Code	614
Local Phone Number	225-4000
Amendment Flag	false
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Current Reporting Status	No
Entity File Number	1-71
Entity Bankruptcy Proceedings, Reporting Current	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding		100

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Mar. 31, 2021	Dec. 31, 2020
Current assets
Cash and cash equivalents (including restricted cash of $3 and $4, respectively)	$ 134	$ 204
Accounts receivable (net of allowance for doubtful accounts of $3)	410	331
Inventories:
Finished and in-process goods	196	180
Raw materials and supplies	96	85
Total current assets held for sale	141	114
Other current assets	51	39
Total current assets	1,028	953
Investment in unconsolidated entities	11	10
Deferred Tax Assets, Net	7	7
Long-term assets held for sale (see Note 4)	325	342
Other long-term assets	77	85
Property and equipment
Land	78	79
Buildings	122	122
Machinery and equipment	1,260	1,270
Property, plant and equipment, gross	1,460	1,471
Less accumulated depreciation	(244)	(212)
Property, plant and equipment, net	1,216	1,259
Operating lease assets	100	103
Goodwill	164	164
Other intangible assets, net	1,057	1,079
Total assets	3,985	4,002
Current liabilities
Accounts payable	349	339
Debt payable within one year	52	82
Interest payable	20	30
Income taxes payable	12	6
Accrued payroll and incentive compensation	49	42
Current liabilities associated with assets held for sale (see Note 4)	88	70
Current portion of operating lease liabilities	19	19
Other current liabilities	99	111
Total current liabilities	688	699
Long-term liabilities
Long-term debt	1,714	1,710
Long-term pension and post employment benefit obligations	235	250
Deferred income taxes	157	161
Operating lease liabilities	74	76
Long-term liabilities associated with assets held for sale (see Note 4)	74	74
Other long-term liabilities	207	209
Total liabilities	3,149	3,179
Equity
Common stock —$0.01 par value; 100 shares authorized, issued and outstanding	0	0
Paid-in capital	1,175	1,169
Accumulated other comprehensive loss	(31)	(27)
Accumulated deficit	(308)	(319)
Total equity	836	823
Total liabilities and equity	3,985	4,002
net allowance for doubtful accounts	$ 3	$ 3
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
shares authorized	100	100
Common Stock, Shares, Issued	100	100
Shares, Outstanding	100	100

XML

Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Millions	Mar. 31, 2021	Dec. 31, 2020
Cash and Cash Equivalents
Restricted Cash and Cash Equivalents, Current	$ 3	$ 4
Accounts Receivable
net allowance for doubtful accounts	$ 3	$ 3
Common Stock
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
shares authorized	100	100
Common Stock, Shares, Issued	100	100
Shares, Outstanding	100	100

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Net sales	$ 753	$ 687
Cost of Goods and Services Sold	584	565
Selling, general and administrative expense	70	64
Depreciation and amortization	49	49
Asset impairments	0	16
Business realignment costs	5	20
Other operating (income) expense, net	(3)	7
Operating income (loss)	48	(34)
Interest expense, net	24	26
Other non-operating income	(4)	0
Income (loss) from continuing operations before income tax and earnings from unconsolidated entities	28	(60)
Income tax expense (benefit)	16	(3)
Income (loss) from continuing operations before earnings from unconsolidated entities	12	(57)
Earnings from unconsolidated entities, net of taxes	0	1
Income (loss) from continuing operations before earnings from unconsolidated entities	12	(56)
Income (Loss) from Discontinued Operations, Net of Tax, Attributable to Parent	(1)	(3)
Net Income (Loss) Attributable to Parent	11	(59)
Accumulated Deficit [Member]
Net Income (Loss) Attributable to Parent	$ 11	$ (59)

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Net Income (Loss) Attributable to Parent	$ 11	$ (59)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	(9)	(42)
Unrealized gain (loss) on cash flow hedge	5	(15)
Other comprehensive loss	(4)	(57)
Comprehensive income (loss)	$ 7	$ (116)

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash flows provided by (used in) operating activities
Net Income (Loss) Attributable to Parent	$ 11	$ (59)
Loss from discontinued operations, net of taxes	(1)	(3)
Income (Loss) from Continuing Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	12	(56)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	49	49
Non-cash asset impairments	0	16
Deferred Income Tax Expense (Benefit)	0	(2)
(Gain) loss on sale of assets and dispositions	(4)	2
Unrealized foreign currency losses	8	6
Non-cash stock based compensation expense	6	5
Other non-cash adjustments	(1)	0
Net change in assets and liabilities:
Accounts receivable	(88)	(87)
Inventories	(32)	7
Accounts payable	20	(12)
Income taxes payable	10	2
Other assets, current and non-current	(7)	(5)
Other liabilities, current and long-term	(22)	(19)
Net cash used in operating activities from continuing operations	(49)	(94)
Net cash provided by (used in) operating activities from discontinued operations	5	(8)
Net Cash Provided by (Used in) Operating Activities	(44)	(102)
Cash flows provided by (used in) investing activities
Capital expenditures	(24)	(26)
Proceeds from sale of assets and dispositions, net	7	0
Net cash used in investing activities from continuing operations	(17)	(26)
Net cash used in investing activities from discontinued operations	(4)	(6)
Net cash used in investing activities	(21)	(32)
Cash flows (used in) provided by financing activities
Net short-term debt borrowings	2	(10)
Borrowings of long-term debt	71	181
Repayments of long-term debt	(76)	(25)
Return of Capital from parent	0	(10)
Net cash (used in) provided by financing activities	(3)	136
Effect of exchange rates on cash and cash equivalents, including restricted cash	(2)	(6)
Change in cash and cash equivalents, including restricted cash	(70)	(4)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning Balance	204	254
Cash, cash equivalents and restricted cash at end of period	134	250
Supplemental disclosures of cash flow information
Interest, net	33	36
Income taxes, net of cash refunds	$ 6	$ 2

XML

Condensed Consolidated Statement of Equity (Deficit) - USD ($) $ in Millions	Total	Common Stock [Member]	Paid-in Capital [Member]	Notes Receivable From Parent [Member]	Accumulated Other Comprehensive Income [Member]	Accumulated Deficit [Member]
Balance at Dec. 31, 2019	$ 1,075	$ 0	$ 1,165	$ 0	$ (1)	$ (89)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss) Attributable to Parent	(59)	0	0	0	0	(59)
APIC, Share-based Payment Arrangement, Increase for Cost Recognition	5	0	5	0	0	0
Other comprehensive income	(57)	0	0	0	(57)	0
Return of Capital from parent	(10)	0	0	(10)	0	0
Balance at Mar. 31, 2020	954	0	1,170	(10)	(58)	(148)
Balance at Dec. 31, 2020	823	0	1,169	0	(27)	(319)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss) Attributable to Parent	11	0	0	0	0	11
APIC, Share-based Payment Arrangement, Increase for Cost Recognition	6	0	6	0	0	0
Other comprehensive income	(4)	0	0	0	(4)	0
Return of Capital from parent	0
Settlement of affiliate loan	10
Balance at Mar. 31, 2021	$ 836	$ 0	$ 1,175	$ 0	$ (31)	$ (308)

XML

Background and Basis of Presentation

3 Months Ended

Mar. 31, 2021

Background and Basis of Presentation [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Background and Basis of Presentation

Based in Columbus, Ohio, Hexion Inc. (“Hexion” or the “Company”) serves global adhesive, coatings, composites and 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, 2021, the Company had three reportable segments: Adhesives; Coatings and Composites; and Corporate and Other.

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.

In this Quarterly Report on Form 10-Q (“10-Q”, “Q1 2021 Form 10-Q” or “Report”) for the fiscal period ended March 31, 2021, Hexion Inc. is referred to as “Hexion”, the “Company”, “we,” “us” or “our.”

Sale of Phenolic Specialty Resins Business

On September 27, 2020, the Company entered into a definitive agreement (the “Purchase Agreement”) for the sale of its Phenolic Specialty Resins ("PSR"), Hexamine and European-based Forest Products Resins businesses (together with PSR, the “Held for Sale Business”) to Black Diamond Capital Management, LLC and Investindustrial (the “Buyers”) for a purchase price of approximately $425. The consideration consists of $335 in cash and certain assumed liabilities with the remainder in future contingent proceeds based on the performance of the Held for Sale Business. The Company completed the sale of the Held for Sale Business on April 30, 2021. For more information, see Note 4 “Discontinued Operations”.

As of March 31, 2021, the Company classified the assets and liabilities of the Held for Sale Business as held for sale on the unaudited Condensed Consolidated Balance Sheets and reported the results of the operations for the three months ended March 31, 2021 as “Loss from discontinued operations, net of taxes” on the unaudited Condensed Consolidated Statements of Operations. Amounts for prior periods have similarly been retrospectively reclassified for all periods presented.

Additionally, the Company has included $5 and $4 in both “Net sales” and “Cost of sales” within the Company’s continuing operations for the three months ended March 31, 2021 and 2020, respectively, which represents sales from the Company’s continuing operations to the Held for Sale Business that were previously eliminated in consolidation. These reclassifications had no impact on “Net (loss) income” in the unaudited Condensed Consolidated Statements of Operations for any of the periods presented.

Unless otherwise noted, amounts presented within the Notes to the unaudited Condensed Consolidated Financial Statements refer to the Company’s continuing operations.

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Summary of Significant Accounting Policies

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.

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 $8 and $5 is recorded within “Other current assets” at March 31, 2021 and December 31, 2020 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.

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 $3 and $4 at March 31, 2021 and December 31, 2020, represents 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 unaudited Condensed Consolidated Balance Sheets as a component of “Cash and cash equivalents.”

Allowance for Doubtful Accounts— Under adoption of ASU 2016-13, the Company has updated its credit loss methodology to consider a broader range of reasonable and supportable information to determine its credit loss estimates. The Company utilizes a historical aging method disaggregated by portfolio segment of geographic region, and then the Company makes any necessary adjustments for current conditions and forecasts about future economic conditions for calculating its allowance for doubtful accounts. The Company evaluates each pooled receivables’ geographic region by differing regional industrial and economic conditions, overall end market conditions and groups of customers with similar risk profiles related to timing and uncertainty of future collections. If particular accounts receivable balances no longer display risk characteristics that are similar to other pooled receivables, the Company performs individual assessments of expected credit losses for those specific receivables. Receivables are charged against the allowance for doubtful accounts when it is probable that the receivable will not be collected.

The Company’s current expectations and assumptions regarding its business, the economy and other future events and conditions are based on currently available financial, economic and competitive data and current business plans as of March 31, 2021. Actual results could vary materially depending on risks and uncertainties that may affect the Company’s operations, markets, services, prices and other factors.

The Company recorded an allowance for doubtful accounts of $3 at both March 31, 2021 and December 31, 2020, to reduce accounts receivable to their estimated net realizable value. Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. There were no write-offs or recoveries for the three months ended March 31, 2021 and 2020.

Reclassifications— Certain amounts in the unaudited Condensed Consolidated Financial Statements for prior periods have been reclassified to conform with the current presentation. These reclassifications were to record the Held for Sale Business and the results of operations as discontinued operations. See Note 4 for more information.

Subsequent Events—The Company has evaluated events and transactions subsequent to March 31, 2021 through the date of issuance of its unaudited Condensed Consolidated Financial Statements. See Note 4 for more information regarding sale of the Held for Sale Business in April 2021.

Recently Issued Accounting Standards

Newly Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in income tax accounting and improve consistent application of and simplify GAAP for other areas of income tax accounting by clarifying and amending existing guidance. The new guidance was effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2019-12 on January 1, 2021 and the adoption did not have a significant impact on its condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14: Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”). ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The standard was effective for fiscal years ending after December 15, 2020. The Company adopted ASU 2018-14 and the adoption did not have a significant impact on its condensed consolidated financial statements.

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

Recently Issued Accounting Standards

Newly Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in income tax accounting and improve consistent application of and simplify GAAP for other areas of income tax accounting by clarifying and amending existing guidance. The new guidance was effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2019-12 on January 1, 2021 and the adoption did not have a significant impact on its condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14: Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”). ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The standard was effective for fiscal years ending after December 15, 2020. The Company adopted ASU 2018-14 and the adoption did not have a significant impact on its condensed consolidated financial statements.

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COVID-19 Impacts (Notes)

3 Months Ended

Mar. 31, 2021

Covid-19 Impacts [Abstract]

Covid-19 [Abstract]

COVID-19 Impacts

In March 2020, the World Health Organization categorized COVID-19 as a global pandemic. Around the world, local governments’ responses to COVID-19 continue to evolve, which has led to stay-at-home orders, social distancing guidelines and other preventative measures that have disrupted various industries in the global economy and the markets in which our products are manufactured, distributed and sold.

During this pandemic, the Company has implemented additional guidelines to further protect the health and safety of its employees as the Company continues to operate with its suppliers and customers. The Company has maintained a focus on the safety of its employees while minimizing potential disruptions caused by COVID-19. For example, the Company is following all legislatively-mandated travel directives in the various countries where it operates, and the Company has also put additional travel restrictions in place for its associates designed to reduce the risk from COVID-19. Additionally, the Company is utilizing extended work from home options to protect its office associates, while adjusting its meeting protocols and processes at its manufacturing sites.

The Company’s businesses have been designated by many governments as essential businesses and the Company’s operations have continued through March 31, 2021. The ultimate impact that COVID-19 will have on the Company’s future financial position, operating results and cash flows involves numerous risks and uncertainties, including new information which may emerge concerning the severity and duration of COVID-19 and actions to contain the virus or treat its impact.

A significant amount of legislative and/or economic actions have been enacted or proposed by the U.S. and other jurisdictions during the 2020 and 2021 tax years. The Company has reviewed the enacted legislation and continues to monitor proposed legislation to evaluate the impact on its financial results, including on its estimated effective tax rate. Currently, the Company does not expect any of the enacted or proposed legislation to have a material impact on its business and financial results. The Company was able to defer $5 of payroll related tax payments to December 2021 and December 2022 under the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020.

Subsequent to March 31, 2021, the United States, and the global regions where the Company operates, continue to be affected by COVID-19. The Company is closely monitoring the COVID-19 pandemic on all aspects of its businesses and geographies, including the impact on its facilities, employees, customers, suppliers, vendors, business partners and distribution.

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Discontinued Operations and Disposal Groups

3 Months Ended

Mar. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure

Discontinued Operations

On September 27, 2020, the Company entered into a Purchase Agreement for the sale of PSR, Hexamine and European-based Forest Products Resins businesses (together with PSR, the “Held for Sale Business” or the “Business”) to Black Diamond Capital Management, LLC and Investindustrial (the “Buyers”) for a purchase price of approximately $425. The consideration consists of $335 in cash and certain assumed liabilities with the remainder in future contingent proceeds based on the performance of the Held for Sale Business. The final purchase price is subject to customary post-closing adjustments. The Held for Sale Business was formerly included in the Company’s Adhesives reportable segment.

On April 30, 2021, the Company completed the sale (the “Transaction”) of its Held for Sale Business pursuant to the terms of the Purchase Agreement with the Buyers. The Company received gross cash consideration for the Held for Sale Business in the amount of $304. In addition, the Buyers assumed approximately $31 of certain liabilities, net of preliminary working capital and other closing adjustments as part of the Purchase Agreement. A subsequent post-closing adjustment to the initial cash consideration will be made in accordance with the Purchase Agreement. Hexion expects to use a portion of the net proceeds to invest in its business, and in May 2021, the Company used a portion of its net proceeds to reduce its borrowings under its Senior Secured Term Loan, in accordance with its credit agreement. See Note 8 for further information on reduction to the Company’s Senior Secured Term Loan.

As part of the Transaction, the Company will provide certain transitional services to the Buyers for an initial period of up to six months pursuant to a Transitional Services Agreement, which certain services may be extended two times for an additional three months for each extension by the Buyers. The purpose of these services is to provide short-term assistance to the Buyers in assuming the operations of the Business. These services do not confer to the Company the ability to influence the operating or financial policies of the Business under its new ownership.

Assets included in the transaction are the Company’s manufacturing sites in Barry, United Kingdom; Cowie, United Kingdom; Lantaron, Spain; Botlek, Netherlands; Iserlohn, Germany; Frielendorf, Germany; Solbiate, Italy; Kitee, Finland; Louisville, Kentucky; Acme, North Carolina; and the Company's 50% ownership interest in Hexion Schekinoazot Holding B.V. (the “Russia JV”), a joint venture that manufactures forest products resins in Russia.

The Held for Sale Business produces phenolic specialty resins and engineered thermoset molding compounds used in applications that require extreme heat resistance and strength, such as after-market automotive and original equipment manufacturing (“OEM”) truck brake pads, filtration, aircraft components and foundry resins. The Business is also a significant producer of formaldehyde-based resins in Europe and merchant formaldehyde and formaldehyde derivatives in the Louisville and Acme plants, respectively. Formaldehyde-based resins, also known as forest products resins, are a key adhesive and binding ingredient used in the production of a wide variety of engineered lumber products, including medium density fiberboard (“MDF”), particleboard and oriented strand board (“OSB”). These products are used in a wide range of applications in the construction, remodeling and furniture industries. Merchant formaldehyde and formaldehyde derivatives are intermediate ingredients that are used in a variety of durable and industrial products. The Business generated annual sales of $493 in 2020.

Until the closing date, the Company has agreed to operate the Held for Sale Business in the ordinary course.

As of March 31, 2021, the Company classified the assets and liabilities of the Held for Sale Business as held for sale on the unaudited Condensed Consolidated Balance Sheets and reported the results of the operations for the three months ended March 31, 2021 as “Loss from discontinued operations, net of tax” on the unaudited Condensed Consolidated Statements of Operations. Amounts for prior periods have similarly been retrospectively reclassified for all periods presented.

The Held for Sale Business had $14 of goodwill at both March 31, 2021 and December 31, 2020 and $61 of other intangible assets at both March 31, 2021 and December 31, 2020. Goodwill was allocated based on the relative fair value of the European-based Forest Products Resins businesses, included in the Held for Sale Business, which is part of the Company’s Forest Product Resins reporting unit. Other intangible assets were specifically identified based on customer relationships within the Company’s Forest Products Resins reporting unit that are associated with the Held for Sale Business.

As a result of entering into the Purchase Agreement, the Company recognized a pre-tax charge of $16 during the three months ended March 31, 2021 within discontinued operations, representing the difference between the fair value of the Held for Sale Business, less costs to sell, and the carrying value of net assets held for sale as of March 31, 2021 for a total impairment charge of $91 since entering into the Purchase Agreement. Fair value represents the expected net cash proceeds, excluding any future contingent proceeds, from the sale of the Held for Sale Business. The Company has made an accounting policy election to account for the initial and subsequent measurement of the future contingent proceeds, of up to $90, as a gain contingency. Under this model, any future contingent consideration is not recognized until all future conditions are met and the Company has earned the proceeds. The contingent proceeds are based on performance targets of the Held for Sale Business over each of the next three years, fiscal years 2021, 2022 and 2023, as specified in the Purchase Agreement. Thus, for purposes of this impairment analysis the fair value of the future contingent proceeds was not considered in determination of the disposal group impairment. Further, the Company concluded that the impairment of the Held for Sale Business assets did not represent an impairment triggering event for the Company’s continuing operations.

The following table reconciles the carrying amounts of major classes of assets and liabilities of discontinued operations to total assets and liabilities of discontinued operations that are classified as held for sale in the Company’s unaudited Condensed Consolidated Balance Sheets:

	March 31, 2021		December 31, 2020
Carrying amounts of major classes of assets held for sale:
Accounts receivable	$	86	$	66
Finished and in-process goods	20		18
Raw materials and supplies	24		17
Other current assets	11		12
Total current assets	141		113
Investment in unconsolidated entities	6		5
Deferred tax assets	8		2
Other long-term assets	7		7
Property, plant and equipment, net	307		310
Operating lease assets	13		13
Goodwill	14		14
Other intangible assets, net	61		61
Discontinued operations impairment	(91)		(75)
Total long-term assets	325		337
Total assets held for sale	$	466	$	450
Carrying amounts of major classes of liabilities held for sale:
Accounts payable	$	69	$	52
Income taxes payable	2		1
Accrued payroll	6		3
Current portion of operating lease liabilities	3		2
Other current liabilities	8		9
Total current liabilities	88		67
Long-term pension and post employment benefit obligations	35		36
Deferred income taxes	26		22
Operating lease liabilities	5		5
Other long-term liabilities	8		8
Total long-term liabilities	74		71
Total liabilities held for sale	$	162	$	138

The following table shows the financial results of discontinued operations for the periods presented:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Major line items constituting pretax income of discontinued operations:
Net sales	$	163	$	145
Cost of sales (exclusive of depreciation and amortization)	137		121
Selling, general and administrative expense	11		11
Depreciation and amortization	—		9
Asset impairments	16		—
Business realignment costs	—		1
Other operating income, net	(1)		—
Income from discontinued operations before income tax, earnings from unconsolidated entities	—		3
Income tax expense	2		6
Loss from discontinued operations, net of tax	$	(2)	$	(3)
Earnings from unconsolidated entities, net of tax	1		—
Net loss attributable to discontinued operations	$	(1)	$	(3)

Equity Method Investments

The Company's 50% ownership interest in the Russia JV, accounted for using the equity method of accounting, is included in the Held for Sale Business. Summarized financial data for the Russia JV are shown in the following tables:

	March 31, 2021		December 31, 2020
Current assets	$	7	$	7
Non-current assets	1		1
Current liabilities	1		2
Non-current liabilities	6		6

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Net sales	$	9	$	9
Gross profit	2		2
Pre-tax income (loss)	1		(1)
Net income (loss)	1		(1)

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Asset Impairments (Notes)	3 Months Ended
	Mar. 31, 2021
Restructuring Cost and Reserve [Line Items]
Asset Impairment Charges [Text Block]	Asset ImpairmentsDuring the first quarter of 2020, the Company indefinitely idled certain assets within its Adhesives segment. These represented triggering events resulting in impairment evaluations of the fixed assets within both the oilfield and phenolic specialty resins asset groups. As a result, asset impairments totaling $16 were recorded in “Asset impairments” in the unaudited Condensed Consolidated Statements of Operations during the three months ended March 31, 2020. See Note 4 for discussion of the discontinued operations impairment charge recorded in the first quarter of 2021.

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Related Party Transactions

3 Months Ended

Mar. 31, 2020

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

2020 Affiliate Loan

In March 2020, the Company entered into a $10 short term affiliate loan with its Parent at a 0% interest rate to fund Parent share repurchases. In June 2020, the Company made a $10 non-cash distribution to its Parent treated as a return of capital to settle this affiliate loan. This return of capital reduced “Paid-in capital” in the unaudited Condensed Consolidated Balance Sheet at March 31, 2020.

Transactions with Joint Ventures

The Company sells products and provides services to, and purchases products from, its joint ventures which are recorded under the equity method of accounting. Sales to joint ventures were less than $1 for the both the three months ended March 31, 2021 and 2020. Purchases from joint ventures were less than $1 for the three months ended March 31, 2020. There were no purchases from joint ventures for three months ended March 31, 2021. Accounts receivable from joint ventures was less than $1 at both March 31, 2021 and December 31, 2020. There were no accounts payable at both March 31, 2021 and December 31, 2020. Activity from joint ventures is primarily comprised of the Russia JV included in the Held for Sale Business.

In addition to the accounts receivable from joint ventures disclosed above, the Company had a loan receivable of $4 as of both March 31, 2021 and December 31, 2020, respectively, from the Russia JV. These loan receivables have been included in “Long-term assets held for sale” within the unaudited Condensed Consolidated Balance Sheets.

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Fair Value

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

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.

Derivative Financial Instruments

The Company is exposed to certain risks related to its ongoing business operations. The primary risks managed by using derivative instruments are interest rate risk, foreign currency exchange risk and commodity price risk. The Company does not hold or issue derivative financial instruments for trading purposes.

Recurring Fair Value Measurements

As of March 31, 2021, 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, 2021 or 2020.

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, 2021 and December 31, 2020, 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.

Interest Rate Swap

The Company will from time to time use interest rate swaps to alter interest rate exposures between floating and fixed rates on certain long-term debt. Under interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts calculated using an agreed-upon notional principal amount. The counter-parties to the interest rate swap agreements are financial institutions with investment grade ratings.

In October 2019, the Company executed an interest rate swap syndication agreement where by Hexion receives a variable 3-month LIBOR, and pays fixed interest rate swaps, beginning January 1, 2020 through January 1, 2025 (the “Hedge”) for a total notional amount of $300. The purpose of this arrangement is to hedge the variability caused by quarterly changes in cash flow due to associated changes in LIBOR for $300 of the Company’s variable rate Senior Secured Term Loan denominated in USD ($700 outstanding at March 31, 2021). The Company has evaluated this transaction and designated this derivative instrument as a cash flow hedge under Accounting Standard Codification, No. 815, “Derivatives and hedging,” (“ASC 815”). For the Hedge, the Company records changes in the fair value of the derivative in other comprehensive income (“OCI”) and will subsequently reclassify gains and losses from these changes in fair value from OCI to the unaudited Condensed Consolidated Statement of Operations in the same period that the hedged transaction affects net (loss) income and in the same unaudited Condensed Consolidated Statement of Operations category as the hedged item, “Interest expense, net”.

The following tables summarize the Company’s derivative financial instrument designated as a hedging instrument:

		March 31, 2021				December 31, 2020
	Balance Sheet Location	Notional Amount		Fair Value Liability		Notional Amount		Fair Value Liability
Derivatives designated as hedging instruments
Interest Rate Swap	Other current (liabilities)/assets	$	300	$	(10)	$	300	$	(15)
Total derivatives designated as hedging instruments				$	(10)			$	(15)

	Amount of Gain (Loss) Recognized in OCI on Derivatives
Derivatives designated as hedging instruments	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Interest Rate Swaps
Interest Rate Swap	$	5	$	(15)
Total	$	5	$	(15)

In both the three months ended March 31, 2021 and 2020 the Company reclassified a loss of $1 from OCI to “Interest expense, net” on the Condensed Consolidated Statement of Operations related to the settlement of a portion of the Hedge.     

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, 2021
Debt	$	1,766	$	—	$	1,756	$	52	$	1,808
December 31, 2020
Debt	$	1,792	$	—	$	1,767	$	55	$	1,822

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, accounts receivable, accounts payable and other accrued liabilities are classified as Level 1 and are considered reasonable estimates of their fair values due to the short-term maturity of these financial instruments.

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Debt Obligations

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Debt Obligations

Debt Obligations

Debt outstanding at March 31, 2021 and December 31, 2020 is as follows:

	March 31, 2021				December 31, 2020
	Long-Term		Due Within One Year		Long-Term		Due Within One Year
Senior Secured Credit Facilities:
ABL Facility	$	—	$	—	$	—	$	—
Senior Secured Term Loan - USD due 2026 (includes $6 of unamortized debt discount)	699		7		701		7
Senior Secured Term Loan - EUR due 2026 (includes $4 of unamortized debt discount)	495		—		515		—
Senior Notes:
7.875% Senior Notes due 2027	450		—		450		—
Other Borrowings:
Australia Facility due 2026(1)	30		—		—		30
Brazilian bank loans	1		22		2		22
Lease obligations (2)	39		13		42		14
Other	—		10		—		9
Total(3)	$	1,714	$	52	$	1,710	$	82

(1)In February 2021, the Company extended its Australian Term Loan Facility through February 2026.

(2)Lease obligations include finance leases and sale leaseback financing arrangements.

(3)The foreign exchange translation impact of the Company’s foreign currency denominated debt instruments resulted in a decrease of $23 and an increase of $46 as of March 31, 2021 and December 31, 2020

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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, 2021 and December 31, 2020:

	Liability				Range of Reasonably Possible Costs at March 31, 2021
Site Description	March 31, 2021(1)		December 31, 2020(1)		Low		High
Geismar, LA	$	12	$	12	$	9	$	22
Superfund and offsite landfills – allocated share:
Less than 1%	3		3		2		6
Equal to or greater than 1%	7		6		6		14
Currently-owned	4		8		4		15
Formerly-owned:
Remediation	17		18		14		34
Monitoring only	—		—		—		1
Total	$	43	$	47	$	35	$	92

(1)    The table includes approximately $2 of environmental remediation liabilities related to the Held for Sale Business at both March 31, 2021 and December 31, 2020. These associated liabilities have been included in “Long-term liabilities associated with assets held for sale” within the unaudited Condensed Consolidated Balance Sheets.

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, 2021 and December 31, 2020, $14 of these liabilities have been included in “Other current liabilities” with the remaining amount included in “Other long-term liabilities” within the unaudited Condensed Consolidated Balance Sheets.

Following is a discussion of the Company’s environmental liabilities and the related assumptions at March 31, 2021:

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 for a portion of 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 $7. The final costs to the Company will depend on natural variations in remediation costs, 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.

Non-Environmental Legal Matters

The Company’s continuing operations is involved in various legal proceedings in the ordinary course of business and had reserves of $1 at both March 31, 2021 and December 31, 2020, for all non-environmental legal defense costs incurred and settlement costs that it believes are probable and estimable. At March 31, 2021 and December 31, 2020, $3 and $2, respectively, has 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.

Other Commitments and Contingencies

The Company has contractual agreements with third parties to purchase feedstocks, tolling arrangements or other services. The terms of these different agreements can vary and may be extended at the Company’s request and are cancellable by either party as provided for in each agreement. While the agreements vary by scope and terms, early cancellation of contractual agreements could result in one-time contract termination costs.

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Pension and Postretirement Expense

3 Months Ended

Mar. 31, 2021

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefit Plans

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, net” within the Company’s unaudited Condensed Consolidated Statements of Operations. The Company recognized less than $1 of net non-pension postretirement benefit cost for the three months ended March 31, 2021 and 2020.

Following are the components of net pension benefit cost recognized by the Company for the three months ended March 31, 2021 and 2020:

	Pension Benefits
	Three Months Ended March 31, 2021				Three Months Ended March 31, 2020
	U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans
Service cost	$	1	$	6	$	1	$	4
Interest cost on projected benefit obligation	1		1		1		2
Expected return on assets	(3)		(4)		(3)		(3)
Net (benefit) expense(1)	$	(1)	$	3	$	(1)	$	3

(1)    Includes less than $1 of net pension expense for non-U.S. plans related to the Held for Sale Business during the three months ended March 31, 2021 and 2020, respectively. These associated costs have been included in “Loss from discontinued operations, net of taxes” within the unaudited Condensed Consolidated Statements of Operations.

As of March 31, 2021 and December 31, 2020, the Company had a prepaid pension asset of $55 and $52 included in “Other Current Assets” within the Company’s unaudited Condensed Consolidated Balance Sheets which represents an over funded position within the Company’s Netherlands defined benefit pension plans as a result of excess contributions and favorable interest rate conditions.

As of March 31, 2021 and December 31, 2020, the Company had a pension liability of $223 and $238, respectively, and a non-pension postretirement benefit liability of $12 for both periods. These liabilities are included in “Long-term pension and post employment benefit obligations” within the Company’s unaudited Condensed Consolidated Balance Sheets.

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Stock Compensation (Notes)

3 Months Ended

Mar. 31, 2021

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Shareholders' Equity and Share-based Payments [Text Block]

Stock Based Compensation

The Company grants stock-based compensation to employees, directors, and other key service providers under the Hexion Holdings Corporation 2019 Omnibus Incentive Plan (the “2019 Incentive Plan”). Under the 2019 Incentive Plan, the Company may grant stock options, restricted stock units, performance stock units and other equity-based awards to be awarded from time to time as the Board of Directors of Hexion Holdings (the “Board”) determines. The restricted and performance stock units are deemed to be equivalent to one share of common stock of Hexion Holdings. The awards contain restrictions on transferability and other typical terms and conditions.

In the first quarter of 2021, Hexion Holdings granted 463,603 Restricted Stock Units (“RSUs”) to certain employees that time vest over three years with a weighted average grant date fair value of $15.37 per share. Additionally, Hexion Holdings granted 695,409 Performance Stock Units (“PSUs”) to certain employees that vest based on performance conditions with a weighted average grant date fair value of $15.37 per share. Compensation cost will be recognized over the service period of the PSUs once the satisfaction of the applicable performance condition is deemed probable. As of March 31, 2021, the Company’s performance conditions underlying the PSU's were not considered probable of occurring and thus no PSU expense has been recorded for the 2021 grant.

The Company recognized $6 and $5, respectively, of stock-based compensation costs for the three months ended March 31, 2021 and 2020. The amounts are included in “Selling, general and administrative expense” in the unaudited Condensed Consolidated Statements of Operations.

The Company’s Parent had 57,568,295 shares of common stock outstanding and approximately 10,177,908 warrants outstanding as of March 31, 2021. The Company’s Parent had 2,332,713 RSUs and 3,868,490 PSUs outstanding as of March 31, 2021.

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Segment Information

3 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Segment Information

Segment Information

The Company’s reporting segments are aligned around our two growth platforms: (i) Adhesives and (ii) Coatings and Composites. At March 31, 2021, the Company’s continuing operations had three reportable segments, which consist of the following businesses:

•Adhesives: these businesses are focused on the global adhesives market. They include the Company’s global wood adhesives business, which also includes the oilfield technologies group, as well as the forest products resin assets in North America, Latin America, Australia and New Zealand; and global formaldehyde.

•Coatings and Composites: these businesses are focused on the global coatings and composites market. They include the Company’s base and specialty epoxy resins and Versatic™ Acids and Derivatives businesses.

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

Reportable Segments

Following are net sales and Segment EBITDA for continuing operations by reportable segment. Segment EBITDA is defined as EBITDA (earnings before interest, income taxes, depreciation and amortization) 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 and foreign exchange gains and losses not allocated to continuing segments.

Net Sales (1):

Following is continuing operations 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, 2021						Three Months Ended March 31, 2020
	Adhesives		Coatings and Composites		Total		Adhesives		Coatings and Composites		Total
North America	$	273	$	139	$	412	$	253	$	154	$	407
Europe	7		178		185		5		154		159
Asia Pacific	37		75		112		33		50		83
Latin America	44		—		44		38		—		38
Total	$	361	$	392	$	753	$	329	$	358	$	687

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

Reconciliation of Net Income (Loss) to Segment EBITDA:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Reconciliation:
Net income (loss)	$	11	$	(59)
Less: Net loss from discontinued operations	(1)		(3)
Net income (loss) from continuing operations	$	12	$	(56)
Income tax expense	16		(3)
Interest expense, net	24		26
Depreciation and amortization (1)	49		49
EBITDA	101		16
Adjustments to arrive at Segment EBITDA:
Asset impairments	$	—	$	16
Business realignment costs (2)	5		20
Transaction costs (3)	—		2
Realized and unrealized foreign currency losses	4		6
Other non-cash items (4)	10		11
Other (5)	(6)		2
Total adjustments	13		57
Segment EBITDA	$	114	$	73
Segment EBITDA:
Adhesives	$	68	$	55
Coatings and Composites	65		39
Corporate and Other	(19)		(21)
Total	$	114	$	73

(1)For the three months ended March 31, 2020, accelerated depreciation of $2 has been included in “Depreciation and amortization.”

(2)Business realignment costs for the periods below included:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Severance costs	$	(1)	$	8
In-process facility rationalizations	1		6
Contractual costs from exited businesses	2		—
Business services implementation	2		4
Legacy environmental reserves	(2)		2
Other	3		—

(3)For the three months ended March 31, 2020, transaction costs included certain professional fees related to strategic projects.

(4)Other non-cash items for the periods presented below included:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Fixed asset write-offs	$	1	$	2
Stock-based compensation costs	6		5
Long-term retention programs	2		3
Other	1		1

(5)Other for the periods presented below included:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Legacy and other non-recurring items	$	—	$	2
IT outage recoveries, net	—		(1)
Gain on sale of assets	(4)		—
Financing fees and other	(2)		1

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Changes in Accumulated Other Comprehensive Income (Notes)

3 Months Ended

Mar. 31, 2021

Changes of Accumulated Other Comprehensive Income [Abstract]

Changes in Accumulated Other Comprehensive Loss

Changes in Accumulated Other Comprehensive Loss

Following is a summary of changes in “Accumulated other comprehensive loss” for the three months ended March 31, 2021 and 2020:

	Foreign Currency Translation Adjustments		Cash Flow Hedge		Total
Balance at December 31, 2019	$	(3)	$	2	$	(1)
Change in value	(42)		(15)		(57)
Balance at March 31, 2020	$	(45)	$	(13)	$	(58)
Balance at December 31, 2020	$	(11)	$	(16)	$	(27)
Change in value	(9)		5		(4)
Balance at March 31, 2021	$	(20)	$	(11)	$	(31)

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Income Taxes (Notes)

3 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Income Taxes

The income tax expense (benefit) for the three months ended March 31, 2021 and 2020 was $16 and $(3), respectively. The income tax (benefit) expense is comprised of tax expense on income and tax benefit on losses from certain foreign operations. In 2021 and 2020, 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.

The effective tax rate for the three months ended March 31, 2021 and 2020 was 57% and 5%, respectively. 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 the Company operates. 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.

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

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.

Revenue [Policy Text Block]

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 $8 and $5 is recorded within “Other current assets” at March 31, 2021 and December 31, 2020 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.

Cash and Cash Equivalents, Policy [Policy Text Block]

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 $3 and $4 at March 31, 2021 and December 31, 2020, represents 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 unaudited Condensed Consolidated Balance Sheets as a component of “Cash and cash equivalents.”

Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block]

Allowance for Doubtful Accounts— Under adoption of ASU 2016-13, the Company has updated its credit loss methodology to consider a broader range of reasonable and supportable information to determine its credit loss estimates. The Company utilizes a historical aging method disaggregated by portfolio segment of geographic region, and then the Company makes any necessary adjustments for current conditions and forecasts about future economic conditions for calculating its allowance for doubtful accounts. The Company evaluates each pooled receivables’ geographic region by differing regional industrial and economic conditions, overall end market conditions and groups of customers with similar risk profiles related to timing and uncertainty of future collections. If particular accounts receivable balances no longer display risk characteristics that are similar to other pooled receivables, the Company performs individual assessments of expected credit losses for those specific receivables. Receivables are charged against the allowance for doubtful accounts when it is probable that the receivable will not be collected.

The Company’s current expectations and assumptions regarding its business, the economy and other future events and conditions are based on currently available financial, economic and competitive data and current business plans as of March 31, 2021. Actual results could vary materially depending on risks and uncertainties that may affect the Company’s operations, markets, services, prices and other factors.

The Company recorded an allowance for doubtful accounts of $3 at both March 31, 2021 and December 31, 2020, to reduce accounts receivable to their estimated net realizable value. Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. There were no write-offs or recoveries for the three months ended March 31, 2021 and 2020.

Goodwill and Intangible Assets, Goodwill, Policy

Reclassifications— Certain amounts in the unaudited Condensed Consolidated Financial Statements for prior periods have been reclassified to conform with the current presentation. These reclassifications were to record the Held for Sale Business and the results of operations as discontinued operations. See Note 4 for more information.

Subsequent Events, Policy [Policy Text Block]

Subsequent Events—The Company has evaluated events and transactions subsequent to March 31, 2021 through the date of issuance of its unaudited Condensed Consolidated Financial Statements. See Note 4 for more information regarding sale of the Held for Sale Business in April 2021.

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

Recently Issued Accounting Standards

Newly Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in income tax accounting and improve consistent application of and simplify GAAP for other areas of income tax accounting by clarifying and amending existing guidance. The new guidance was effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2019-12 on January 1, 2021 and the adoption did not have a significant impact on its condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14: Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”). ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The standard was effective for fiscal years ending after December 15, 2020. The Company adopted ASU 2018-14 and the adoption did not have a significant impact on its condensed consolidated financial statements.

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Discontinued Operations and Disposal Groups (Tables)

3 Months Ended

Mar. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations

The following table reconciles the carrying amounts of major classes of assets and liabilities of discontinued operations to total assets and liabilities of discontinued operations that are classified as held for sale in the Company’s unaudited Condensed Consolidated Balance Sheets:

	March 31, 2021		December 31, 2020
Carrying amounts of major classes of assets held for sale:
Accounts receivable	$	86	$	66
Finished and in-process goods	20		18
Raw materials and supplies	24		17
Other current assets	11		12
Total current assets	141		113
Investment in unconsolidated entities	6		5
Deferred tax assets	8		2
Other long-term assets	7		7
Property, plant and equipment, net	307		310
Operating lease assets	13		13
Goodwill	14		14
Other intangible assets, net	61		61
Discontinued operations impairment	(91)		(75)
Total long-term assets	325		337
Total assets held for sale	$	466	$	450
Carrying amounts of major classes of liabilities held for sale:
Accounts payable	$	69	$	52
Income taxes payable	2		1
Accrued payroll	6		3
Current portion of operating lease liabilities	3		2
Other current liabilities	8		9
Total current liabilities	88		67
Long-term pension and post employment benefit obligations	35		36
Deferred income taxes	26		22
Operating lease liabilities	5		5
Other long-term liabilities	8		8
Total long-term liabilities	74		71
Total liabilities held for sale	$	162	$	138

The following table shows the financial results of discontinued operations for the periods presented:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Major line items constituting pretax income of discontinued operations:
Net sales	$	163	$	145
Cost of sales (exclusive of depreciation and amortization)	137		121
Selling, general and administrative expense	11		11
Depreciation and amortization	—		9
Asset impairments	16		—
Business realignment costs	—		1
Other operating income, net	(1)		—
Income from discontinued operations before income tax, earnings from unconsolidated entities	—		3
Income tax expense	2		6
Loss from discontinued operations, net of tax	$	(2)	$	(3)
Earnings from unconsolidated entities, net of tax	1		—
Net loss attributable to discontinued operations	$	(1)	$	(3)

Equity Method Investments

The Company's 50% ownership interest in the Russia JV, accounted for using the equity method of accounting, is included in the Held for Sale Business. Summarized financial data for the Russia JV are shown in the following tables:

	March 31, 2021		December 31, 2020
Current assets	$	7	$	7
Non-current assets	1		1
Current liabilities	1		2
Non-current liabilities	6		6

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Net sales	$	9	$	9
Gross profit	2		2
Pre-tax income (loss)	1		(1)
Net income (loss)	1		(1)

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Fair Value (Tables)

3 Months Ended

Mar. 31, 2021

Derivative Instruments, Gain (Loss) [Line Items]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

The following tables summarize the Company’s derivative financial instrument designated as a hedging instrument:

		March 31, 2021				December 31, 2020
	Balance Sheet Location	Notional Amount		Fair Value Liability		Notional Amount		Fair Value Liability
Derivatives designated as hedging instruments
Interest Rate Swap	Other current (liabilities)/assets	$	300	$	(10)	$	300	$	(15)
Total derivatives designated as hedging instruments				$	(10)			$	(15)

	Amount of Gain (Loss) Recognized in OCI on Derivatives
Derivatives designated as hedging instruments	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Interest Rate Swaps
Interest Rate Swap	$	5	$	(15)
Total	$	5	$	(15)

Non-derivative Financial Instruments Fair Value

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, 2021
Debt	$	1,766	$	—	$	1,756	$	52	$	1,808
December 31, 2020
Debt	$	1,792	$	—	$	1,767	$	55	$	1,822

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Debt Obligations (Tables)

3 Months Ended

Mar. 31, 2021

Debt Instrument, Redemption [Line Items]

Schedule of Long-term Debt

Debt outstanding at March 31, 2021 and December 31, 2020 is as follows:

	March 31, 2021				December 31, 2020
	Long-Term		Due Within One Year		Long-Term		Due Within One Year
Senior Secured Credit Facilities:
ABL Facility	$	—	$	—	$	—	$	—
Senior Secured Term Loan - USD due 2026 (includes $6 of unamortized debt discount)	699		7		701		7
Senior Secured Term Loan - EUR due 2026 (includes $4 of unamortized debt discount)	495		—		515		—
Senior Notes:
7.875% Senior Notes due 2027	450		—		450		—
Other Borrowings:
Australia Facility due 2026(1)	30		—		—		30
Brazilian bank loans	1		22		2		22
Lease obligations (2)	39		13		42		14
Other	—		10		—		9
Total(3)	$	1,714	$	52	$	1,710	$	82

(1)In February 2021, the Company extended its Australian Term Loan Facility through February 2026.

(2)Lease obligations include finance leases and sale leaseback financing arrangements.

(3)The foreign exchange translation impact of the Company’s foreign currency denominated debt instruments resulted in a decrease of $23 and an increase of $46 as of March 31, 2021 and December 31, 2020

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Schedule of Environmental Loss Contingencies by Site

The following table summarizes all probable environmental remediation, indemnification and restoration liabilities, including related legal expenses, at March 31, 2021 and December 31, 2020:

	Liability				Range of Reasonably Possible Costs at March 31, 2021
Site Description	March 31, 2021(1)		December 31, 2020(1)		Low		High
Geismar, LA	$	12	$	12	$	9	$	22
Superfund and offsite landfills – allocated share:
Less than 1%	3		3		2		6
Equal to or greater than 1%	7		6		6		14
Currently-owned	4		8		4		15
Formerly-owned:
Remediation	17		18		14		34
Monitoring only	—		—		—		1
Total	$	43	$	47	$	35	$	92

(1)    The table includes approximately $2 of environmental remediation liabilities related to the Held for Sale Business at both March 31, 2021 and December 31, 2020. These associated liabilities have been included in “Long-term liabilities associated with assets held for sale” within the unaudited Condensed Consolidated Balance Sheets.

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Pension and Postretirement Expense (Tables)

3 Months Ended

Mar. 31, 2021

Retirement Benefits [Abstract]

Schedule of Components of Net Benefit Cost

Following are the components of net pension benefit cost recognized by the Company for the three months ended March 31, 2021 and 2020:

	Pension Benefits
	Three Months Ended March 31, 2021				Three Months Ended March 31, 2020
	U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans
Service cost	$	1	$	6	$	1	$	4
Interest cost on projected benefit obligation	1		1		1		2
Expected return on assets	(3)		(4)		(3)		(3)
Net (benefit) expense(1)	$	(1)	$	3	$	(1)	$	3

(1)    Includes less than $1 of net pension expense for non-U.S. plans related to the Held for Sale Business during the three months ended March 31, 2021 and 2020, respectively. These associated costs have been included in “Loss from discontinued operations, net of taxes” within the unaudited Condensed Consolidated Statements of Operations.

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2021

Segment Reporting [Abstract]

Segment Sales by Geographic Region

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

	Three Months Ended March 31, 2021						Three Months Ended March 31, 2020
	Adhesives		Coatings and Composites		Total		Adhesives		Coatings and Composites		Total
North America	$	273	$	139	$	412	$	253	$	154	$	407
Europe	7		178		185		5		154		159
Asia Pacific	37		75		112		33		50		83
Latin America	44		—		44		38		—		38
Total	$	361	$	392	$	753	$	329	$	358	$	687

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

Reconciliation of Segment EBITDA to Net Income

Reconciliation of Net Income (Loss) to Segment EBITDA:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Reconciliation:
Net income (loss)	$	11	$	(59)
Less: Net loss from discontinued operations	(1)		(3)
Net income (loss) from continuing operations	$	12	$	(56)
Income tax expense	16		(3)
Interest expense, net	24		26
Depreciation and amortization (1)	49		49
EBITDA	101		16
Adjustments to arrive at Segment EBITDA:
Asset impairments	$	—	$	16
Business realignment costs (2)	5		20
Transaction costs (3)	—		2
Realized and unrealized foreign currency losses	4		6
Other non-cash items (4)	10		11
Other (5)	(6)		2
Total adjustments	13		57
Segment EBITDA	$	114	$	73
Segment EBITDA:
Adhesives	$	68	$	55
Coatings and Composites	65		39
Corporate and Other	(19)		(21)
Total	$	114	$	73

(1)For the three months ended March 31, 2020, accelerated depreciation of $2 has been included in “Depreciation and amortization.”

(2)Business realignment costs for the periods below included:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Severance costs	$	(1)	$	8
In-process facility rationalizations	1		6
Contractual costs from exited businesses	2		—
Business services implementation	2		4
Legacy environmental reserves	(2)		2
Other	3		—

(3)For the three months ended March 31, 2020, transaction costs included certain professional fees related to strategic projects.

(4)Other non-cash items for the periods presented below included:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Fixed asset write-offs	$	1	$	2
Stock-based compensation costs	6		5
Long-term retention programs	2		3
Other	1		1

(5)Other for the periods presented below included:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
Legacy and other non-recurring items	$	—	$	2
IT outage recoveries, net	—		(1)
Gain on sale of assets	(4)		—
Financing fees and other	(2)		1

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Changes in Accumulated Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2021

Changes of Accumulated Other Comprehensive Income [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

Following is a summary of changes in “Accumulated other comprehensive loss” for the three months ended March 31, 2021 and 2020:

	Foreign Currency Translation Adjustments		Cash Flow Hedge		Total
Balance at December 31, 2019	$	(3)	$	2	$	(1)
Change in value	(42)		(15)		(57)
Balance at March 31, 2020	$	(45)	$	(13)	$	(58)
Balance at December 31, 2020	$	(11)	$	(16)	$	(27)
Change in value	(9)		5		(4)
Balance at March 31, 2021	$	(20)	$	(11)	$	(31)

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Background and Basis of Presentation (Details) - Number of Reportable Segments	3 Months Ended
	Mar. 31, 2021 Segments $ / shares	Dec. 31, 2020 $ / shares
Segment Reporting Information [Line Items]
Number of Reportable Segments | Segments	3
Common Stock, Par or Stated Value Per Share | $ / shares	$ 0.01	$ 0.01

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Significant Accounting Policies (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Contract with Customer, Asset, after Allowance for Credit Loss	$ 8		$ 5
Restricted Cash and Cash Equivalents, Current	3		$ 4
Selling, general and administrative expense	70	$ 64
Depreciation and amortization	$ 49	$ 49

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Discontinued Operations and Disposal Groups (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Disposal Group, Including Discontinued Operation, Accounts, Notes and Loans Receivable, Net	$ 86		$ 66
Disposal Group, Including Discontinued Operation, Inventory	20		18
disposal group including discontinued operation, raw materials	24		17
Disposal Group, Including Discontinued Operation, Other Assets, Current	11		12
Current assets held for sale (see Note 4)	141		113
disposal group including discontinued operation, investment in unconsolidated entities	6		5
Disposal Group, Including Discontinued Operation, Deferred Tax Assets	8		2
Disposal Group, Including Discontinued Operation, Other Assets, Noncurrent	7		7
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment, Noncurrent	307		310
disposal group including discontinued operation, operating lease asset	13		13
Disposal Group, Including Discontinued Operation, Goodwill	14		14
Disposal Group, Including Discontinued Operation, Intangible Assets	61		61
Tangible Asset Impairment Charges	(91)		(75)
Long-term assets held for sale (see Note 4)	325		337
Disposal Group, Including Discontinued Operation, Assets	466		450
Disposal Group, Including Discontinued Operation, Accounts Payable	69		52
Disposal Group, Including Discontinued Operation, Accrued Income Tax Payable	2		1
disposal group including discontinued operation accrued payroll	6		3
disposal group including discontinued operation operating lease liability, current	3		2
Disposal Group, Including Discontinued Operation, Other Liabilities, Current	8		9
Current liabilities associated with assets held for sale (see Note 4)	88		67
Disposal Group, Including Discontinued Operation, Pension Plan Benefit Obligation	35		36
Disposal Group, Including Discontinued Operation, Accrued Income Tax Payable, Noncurrent	26		22
disposal group including discontinued operation operating lease liability, noncurrent	5		5
Disposal Group, Including Discontinued Operation, Other Liabilities, Noncurrent	8		8
Long-term liabilities associated with assets held for sale (see Note 4)	74		71
Disposal Group, Including Discontinued Operation, Liabilities	162		138
Disposal Group, Including Discontinued Operation, Revenue	163	$ 145
Disposal Group, Including Discontinued Operation, Costs of Goods Sold	137	121
Disposal Group, Including Discontinued Operation, General and Administrative Expense	11	11
Disposal Group, Including Discontinued Operation, Depreciation and Amortization	0	9
Tangible Asset Impairment Charges	16	0
disposal group including discontinued operation business realignment	0	1
Disposal Group, Including Discontinued Operation, Other Income	(1)	0
Discontinued Operation, Income (Loss) from Discontinued Operation, before Income Tax	0	3
Discontinued Operation, Tax Effect of Discontinued Operation	2	6
Income loss from discontinued operations, net of tax, before Earnings from Unconsolidated Entities	(2)	(3)
earnings from unconsolidated entities, net of tax	1	0
Loss from discontinued operations, net of taxes	(1)	(3)
Current Assets of Unconsolidated Affiliates	7		7
Noncurrent Assets of Unconsolidated affiliates	1		1
Current Liabilities of Unconsolidated Affiliate	1		2
Noncurrent liabilities of Unconsolidated Affiliate	6		$ 6
Net sales of Unconsolidated Affiliate	9	9
Gross Profit of Unconsolidated Affiliate	2	2
Pretax income of Unconsolidated Affiliate	1	(1)
Net Income of Unconsolidated Affiliate	$ 1	$ (1)

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Asset Impairments (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Asset Impairment [Abstract]
Asset impairments	$ 0	$ 16

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Related Party Transactions (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Dec. 31, 2019
Related Party Transaction [Line Items]
Revenue from Related Parties	$ 1	$ 1
Related Party Transaction, Purchases from Related Party		$ 1
Accounts Receivable, Related Parties	1		$ 1
Loan receivable from parent	4		$ 4	$ 10
Settlement of affiliate loan	$ 10

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Fair Value (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Unrealized gain (loss) on cash flow hedge	$ 5	$ (15)
Derivative notional amount, Interest Rate Swap	300		$ 300
Interest Rate Derivative Assets, at Fair Value			(15)
Interest Rate Derivative Liabilities, at Fair Value	(10)
Long-term Debt	1,766		1,792
Long-term Debt, fair value	1,808		1,822
Fair Value Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, fair value	0		0
Fair Value Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, fair value	1,756		1,767
Fair Value Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, fair value	$ 52		$ 55

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Debt Obligations (Details) - USD ($) $ in Millions	Mar. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Due Within One Year	$ 52	$ 82
Long-term debt	1,714	1,710
ABL Facility [Domain]
Debt Instrument [Line Items]
Due Within One Year	0	0
Long-term debt	0	0
Senior Secured Term Loan - USD due 2026 [Domain]
Debt Instrument [Line Items]
Due Within One Year	7	7
Long-term debt	699	701
Debt Instrument, Unamortized Discount	6	6
Senior Secured Term Loan - EUR due 2026 [Domain]
Debt Instrument [Line Items]
Long-term debt	495	515
Debt Instrument, Unamortized Discount	4	4
7.875% Senior Secured Notes due 2027 [Domain]
Debt Instrument [Line Items]
Long-term debt	$ 450	450
Debt Instrument, Interest Rate, Stated Percentage	7.875%
Australia Facility Due 2021 [Member]
Debt Instrument [Line Items]
Due Within One Year	$ 0	30
Long-term debt	30	0
Brazilian Bank Loans [Member]
Debt Instrument [Line Items]
Due Within One Year	22	22
Long-term debt	1	2
Capital Leases [Member]
Debt Instrument [Line Items]
Due Within One Year	13	14
Long-term debt	39	42
Other [Member]
Debt Instrument [Line Items]
Due Within One Year	10	9
Long-term debt	$ 0	$ 0

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Commitments and Contingencies (Details) - Environmental Liabilities - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
Accrued Environmental Loss Contingencies, Current	$ 14	$ 14
Liability	43	47
Estimated Litigation Liability, Current	3	2
Estimated Litigation Liability	1	1
Geismar, LA
Accrual for Environmental Loss Contingencies	$ 12	12
Discount rate assumed to record at present value	3.00%
Undiscounted Liability Expected to be Paid	next 20 years
Accrual for Environmental Loss Contingencies, Gross	$ 16
Accrual for Environmental Loss Contingencies, Undiscounted, Due Ratably over the Next Five Years	5
Less than 1%
Accrual for Environmental Loss Contingencies	3	3
Equal to or greater than 1%
Accrual for Environmental Loss Contingencies	7	6
Currently-owned
Accrual for Environmental Loss Contingencies	4	8
Remediation
Accrual for Environmental Loss Contingencies	17	18
Estimated Litigation Liability, Noncurrent	7
Monitoring only
Accrual for Environmental Loss Contingencies	0	$ 0
Maximum [Member]
Site Contingency, Loss Exposure Not Accrued, Best Estimate	92
Maximum [Member] | Geismar, LA
Liability	22
Maximum [Member] | Less than 1%
Liability	6
Maximum [Member] | Equal to or greater than 1%
Liability	14
Maximum [Member] | Currently-owned
Liability	15
Maximum [Member] | Remediation
Liability	34
Maximum [Member] | Monitoring only
Liability	1
Minimum [Member]
Site Contingency, Loss Exposure Not Accrued, Best Estimate	35
Minimum [Member] | Geismar, LA
Liability	9
Minimum [Member] | Less than 1%
Liability	2
Minimum [Member] | Equal to or greater than 1%
Liability	6
Minimum [Member] | Currently-owned
Liability	4
Minimum [Member] | Remediation
Liability	14
Minimum [Member] | Monitoring only
Liability	$ 0

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Commitments and Contingencies (Details) - Non-Environmental Liabilities - USD ($) $ in Millions	Mar. 31, 2021	Dec. 31, 2020
Loss Contingencies [Line Items]
Estimated Litigation Liability	$ 1	$ 1
Estimated Litigation Liability, Current	$ 3	$ 2

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Pension and Postretirement Expense (Details) - Schedule of Components of Net Benefit Cost - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Pension Benefits and Non-Pension Postretirement Benefits Disclosures Table Text Block [Line Items]
Prepaid Pension Asset	$ 55		$ 52
Liability, Defined Benefit Pension Plan	223		238
Other Post retirement Plan Liabilities	12		$ 12
Pension Benefits
Pension Benefits and Non-Pension Postretirement Benefits Disclosures Table Text Block [Line Items]
Net (benefit) expense(1)	1	$ 1
Pension Plan [Member] | U.S. Plans
Pension Benefits and Non-Pension Postretirement Benefits Disclosures Table Text Block [Line Items]
Service cost	1	1
Interest cost on projected benefit obligation	1	1
Expected return on assets	(3)	(3)
Payment for Pension and Other Postretirement Benefits	(1)	(1)
Pension Plan [Member] | Non-U.S. Plans
Pension Benefits and Non-Pension Postretirement Benefits Disclosures Table Text Block [Line Items]
Service cost	6	4
Interest cost on projected benefit obligation	1	2
Expected return on assets	(4)	(3)
Payment for Pension and Other Postretirement Benefits	$ 3	$ 3

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Stock Compensation (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based payment award, PSUs, Nonvested, Number	695,409
APIC, Share-based Payment Arrangement, Increase for Cost Recognition	$ 6	$ 5
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number	463,603
Additional Paid-in Capital [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
APIC, Share-based Payment Arrangement, Increase for Cost Recognition	$ 6	$ 5
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 15.37
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 15.37

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Segment Information (Details) - Revenues by Segment - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Segment Reporting Information [Line Items]
Net sales	$ 753	$ 687
Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Net sales	392	358
Adhesives [Member]
Segment Reporting Information [Line Items]
Net sales	361	329
North America
Segment Reporting Information [Line Items]
Net sales	412	407
North America | Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Net sales	139	154
North America | Adhesives [Member]
Segment Reporting Information [Line Items]
Net sales	273	253
Europe
Segment Reporting Information [Line Items]
Net sales	185	159
Europe | Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Net sales	178	154
Europe | Adhesives [Member]
Segment Reporting Information [Line Items]
Net sales	7	5
Asia Pacific
Segment Reporting Information [Line Items]
Net sales	112	83
Asia Pacific | Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Net sales	75	50
Asia Pacific | Adhesives [Member]
Segment Reporting Information [Line Items]
Net sales	37	33
Latin America
Segment Reporting Information [Line Items]
Net sales	44	38
Latin America | Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Net sales	0	0
Latin America | Adhesives [Member]
Segment Reporting Information [Line Items]
Net sales	$ 44	$ 38

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Segment Information (Details) - EBITDA by Segment - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Segment Reporting Information [Line Items]
Segment EBITDA	$ 114	$ 73
Adhesives [Member]
Segment Reporting Information [Line Items]
Segment EBITDA	68	55
Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Segment EBITDA	65	39
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Segment EBITDA	$ (19)	$ (21)

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Segment Information (Details) - Reconciliation of Segment EBITDA to Net Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Segment Reporting Information [Line Items]
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ 11	$ (59)
Loss from discontinued operations, net of taxes	(1)	(3)
Income (Loss) from Continuing Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	12	(56)
Income tax expense (benefit)	16	(3)
Interest expense, net	24	26
Depreciation and amortization (1)	49	49
EBITDA	101	16
Asset impairments	0	16
Business realignment costs (2)	5	20
Transaction costs (3)	0	2
Realized and unrealized foreign currency losses	4	6
Other Noncash Expense	10	11
Other (5)	(6)	(2)
Total adjustments	13	57
Segment EBITDA	114	73
Adhesives [Member]
Segment Reporting Information [Line Items]
Segment EBITDA	68	55
Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Segment EBITDA	65	39
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Segment EBITDA	$ (19)	$ (21)

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Changes in Accumulated Other Comprehensive Income (Details) - Summary of Changes in Accumulated Other Comprehensive Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	$ (27)	$ (1)
Other comprehensive income before reclassifications, net of tax	(4)	(57)
Ending Balance	(31)	(58)
Beginning Balance Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax	(11)	(3)
Foreign currency translation adjustments	(9)	(42)
Ending Balance Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax	(20)	(45)
Accumulated Other Comprehensive Income (Loss), Cumulative Changes in Net Gain (Loss) from Cash Flow Hedges, Effect Net of Tax	(16)	2
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification, Tax, Parent	5	(15)
Accumulated Other Comprehensive Income (Loss), Cumulative Changes in Net Gain (Loss) from Cash Flow Hedges, Effect Net of Tax	$ (11)	$ (13)

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Investments, Owned, Federal Income Tax Note [Line Items]
Income tax expense (benefit)	$ 16	$ (3)
Effective Income Tax Rate Reconciliation, Percent	57.00%	5.00%