10-Q

Table of Contents                 

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 September 30, 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 November 1, 2021: 100

Table of Contents                 

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	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4.	Controls and Procedures	36
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38

Hexion Inc. | 2 | Q3 2021 Form 10-Q

Table of Contents                 

PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements

HEXION INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In millions, except share data)	September 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents (including restricted cash of $2 and $4, respectively)	$	354	$	204
Accounts receivable (net of allowance for doubtful accounts of $3 and $3, respectively)	413		331
Inventories:
Finished and in-process goods	273		180
Raw materials and supplies	122		85
Current assets held for sale (see Note 4)	5		114
Other current assets	51		39
Total current assets	1,218		953
Investment in unconsolidated entities	12		10
Deferred tax assets	7		7
Long-term assets held for sale (see Note 4)	—		342
Other long-term assets	77		85
Property and equipment:
Land	78		79
Buildings	124		122
Machinery and equipment	1,294		1,270
	1,496		1,471
Less accumulated depreciation	(309)		(212)
	1,187		1,259
Operating lease assets	94		103
Goodwill	164		164
Other intangible assets, net	1,025		1,079
Total assets	$	3,784	$	4,002
Liabilities and Equity
Current liabilities:
Accounts payable	$	360	$	339
Debt payable within one year	47		82
Interest payable	19		30
Income taxes payable	38		6
Accrued payroll and incentive compensation	71		42
Current liabilities associated with assets held for sale (see Note 4)	3		70
Current portion of operating lease liabilities	16		19
Other current liabilities	104		111
Total current liabilities	658		699
Long-term liabilities:
Long-term debt	1,546		1,710
Long-term pension and post employment benefit obligations	228		250
Deferred income taxes	147		161
Operating lease liabilities	71		76
Long-term liabilities associated with assets held for sale (see Note 4)	—		74
Other long-term liabilities	207		209
Total liabilities	2,857		3,179
Equity
Common stock —$0.01 par value; 100 shares authorized, issued and outstanding	—		—
Paid-in capital	1,192		1,169
Accumulated other comprehensive loss	(44)		(27)
Accumulated deficit	(221)		(319)
Total equity	927		823
Total liabilities and equity	$	3,784	$	4,002

See Notes to Condensed Consolidated Financial Statements

Hexion Inc. | 3 | Q3 2021 Form 10-Q

Table of Contents                 

HEXION INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In millions)	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Net sales	$	945	$	634	$	2,550	$	1,855
Cost of sales (exclusive of depreciation and amortization shown below)	702		500		1,922		1,514
Selling, general and administrative expense	90		56		243		164
Depreciation and amortization	48		47		148		143
Asset impairments	—		—		—		16
Business realignment costs	6		19		19		57
Other operating expense, net	2		4		2		15
Operating income (loss)	97		8		216		(54)
Interest expense, net	24		25		72		76
Other non-operating income, net	(1)		(8)		(8)		(12)
Income (loss) from continuing operations before income tax and earnings from unconsolidated entities	74		(9)		152		(118)
Income tax expense	26		17		51		8
Income (loss) from continuing operations before earnings from unconsolidated entities	48		(26)		101		(126)
Earnings from unconsolidated entities, net of taxes	1		—		2		2
Income (loss) from continuing operations, net of taxes	49		(26)		103		(124)
Loss from discontinued operations, net of taxes	—		(68)		(5)		(71)
Net income (loss)	$	49	$	(94)	$	98	$	(195)

See Notes to Condensed Consolidated Financial Statements

Hexion Inc. | 4 | Q3 2021 Form 10-Q

Table of Contents                 

HEXION INC.

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

(In millions)	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Net income (loss)	$	49	$	(94)	$	98	$	(195)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(14)		7		(23)		(29)
Unrealized gain (loss) on cash flow hedge	1		(1)		6		(19)
Other comprehensive (loss) income	(13)		6		(17)		(48)
Comprehensive income (loss)	$	36	$	(88)	$	81	$	(243)

See Notes to Condensed Consolidated Financial Statements

Hexion Inc. | 5 | Q3 2021 Form 10-Q

Table of Contents                 

HEXION INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In millions)	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Cash flows provided by (used in) operating activities
Net income (loss)	$	98	$	(195)
Less: Loss from discontinued operations, net of tax	(5)		(71)
Income (loss) from continuing operations	103		(124)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	148		143
Non-cash asset impairments	—		16
Deferred tax (benefit) expense	(3)		5
Loss on sale of assets and dispositions	2		7
Unrealized foreign currency losses (gains)	8		(1)
Non-cash stock based compensation expense	23		13
Other non-cash adjustments	—		(1)
Net change in assets and liabilities:
Accounts receivable	(93)		(55)
Inventories	(139)		31
Accounts payable	34		(14)
Income taxes payable	38		(8)
Other assets, current and non-current	(2)		(27)
Other liabilities, current and non-current	(13)		(22)
Net cash provided by (used in) operating activities from continuing operations	106		(37)
Net cash (used in) provided by operating activities from discontinued operations	(1)		12
Net cash provided by (used in) operating activities	105		(25)
Cash flows provided by (used in) investing activities
Capital expenditures	(80)		(78)
Proceeds from disposition of Held for Sale Business (see Note 4)	304		—
Proceeds from sale of assets and other dispositions	11		2
Net cash provided by (used in) investing activities from continuing operations	235		(76)
Net cash used in investing activities from discontinued operations	(6)		(13)
Net cash provided by (used in) investing activities	229		(89)
Cash flows (used in) provided by financing activities
Net short-term debt repayments	(8)		(12)
Borrowings of long-term debt	131		209
Repayments of long-term debt	(301)		(167)
Return of capital to parent (see Note 6)	—		(10)
Financing fees paid	(1)		—
Net cash (used in) provided by financing activities	(179)		20
Effect of exchange rates on cash and cash equivalents, including restricted cash	—		(2)
Change in cash and cash equivalents, including restricted cash and cash classified within current assets held for sale	155		(96)
Change in cash classified within current assets held for sale	(5)		—
Cash, cash equivalents and restricted cash at beginning of period	204		254
Cash, cash equivalents and restricted cash at end of period	$	354	$	158
Supplemental disclosures of cash flow information
Cash paid for:
Interest, net	$	80	$	88
Income taxes, net	21		12

See Notes to Condensed Consolidated Financial Statements

Hexion Inc. | 6 | Q3 2021 Form 10-Q

Table of Contents                 

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 June 30, 2020	$	—	$	1,164	$	—	$	(55)	$	(190)	$	919
Net loss	—		—		—		—		(94)		(94)
Stock-based compensation expense	—		4		—		—		—		4
Other comprehensive income	—		—		—		6		—		6
Balance at September 30, 2020	$	—	$	1,168	$	—	$	(49)	$	(284)	$	835
Balance at December 31, 2019	$	—	$	1,165	$	—	$	(1)	$	(89)	$	1,075
Net loss	—		—		—		—		(195)		(195)
Stock-based compensation expense	—		13		—		—		—		13
Other comprehensive loss	—		—		—		(48)		—		(48)
Return of capital from parent	—		(10)		—		—		—		(10)
Distribution of affiliate loan (see Note 6)	—		—		(10)		—		—		(10)
Settlement of affiliate loan (see Note 6)	—		—		10		—		—		10
Balance at September 30, 2020	$	—	$	1,168	$	—	$	(49)	$	(284)	$	835
Balance at June 30, 2021	$	—	$	1,184	$	—	$	(31)	$	(270)	$	883
Net income	—		—		—		—		49		49
Stock-based compensation expense	—		8		—		—		—		8
Other comprehensive loss	—		—		—		(13)		—		(13)
Balance at September 30, 2021	$	—	$	1,192	$	—	$	(44)	$	(221)	$	927
Balance at December 31, 2020	$	—	$	1,169	$	—	$	(27)	$	(319)	$	823
Net income	—		—		—		—		98		98
Stock-based compensation expense	—		23		—		—		—		23
Other comprehensive loss	—		—		—		(17)		—		(17)
Balance at September 30, 2021	$	—	$	1,192	$	—	$	(44)	$	(221)	$	927

See Notes to Condensed Consolidated Financial Statements

Hexion Inc. | 7 | Q3 2021 Form 10-Q

Table of Contents                 

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 September 30, 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. We have made rounding adjustments to some of the figures included in this filing. Numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them. 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”, “Q3 2021 Form 10-Q” or “Report”) for the period ended September 30, 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 proceeds of up to $90 is based on the performance of the Held for Sale Business over the three year period after the completion of the sale. Payments will be based on the amount of actual EBITDA (as defined in the Purchase Agreement) above targeted EBITDA amounts of $45, $50 and $60 in 2021, 2022 and 2023, respectively. The maximum payout per year under the earnout are $40, $35 and $15 respectively. The Company completed the sale of the Held for Sale Business on April 30, 2021. For more information, see Note 4 “Discontinued Operations”.

For the nine months ended September 30, 2021, we reported the results of the operations as a “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. As of December 31, 2020, we reclassified the assets and liabilities of our Held for Sale Business as held for sale on the unaudited Condensed Consolidated Balance Sheets.

Additionally, the Company has included $4, $7 and $11 in “Net sales” and “Cost of sales” within the Company’s continuing operations for the three months ended September 30, 2020 and nine months ended September 30, 2021 and 2020, respectively. There were no sales included for the three months ended September 30, 2021. These represent 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 income (loss)” 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

Hexion Inc. | 8 | Q3 2021 Form 10-Q

Table of Contents                 

will result in the Company recording a contract asset. A contract asset balance of $11 and $5 is recorded within “Other current assets” at September 30, 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 $2 and $4 at September 30, 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 September 30, 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 September 30, 2021 and December 31, 2020 to reduce accounts receivable for estimated expected credit losses. Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. There were $1 of write-offs for the three and nine months ended September 30, 2021 and no write-offs for the three and nine months ended September 30, 2020.

Financial Statement Presentation — In the fourth quarter 2020, we identified certain errors within our condensed consolidated financial statements for the three and nine months ended September 30, 2020:

•Approximately $13 associated with an insurance premium financing arrangement was incorrectly disclosed as a non-cash financing activity but should have been classified as an operating cash outflow from continuing operations and financing cash inflow;

•“Net cash used in operating activities from continuing operations” was overstated by approximately $13 and “Net cash (used in) provided by operating activities from discontinued operations” was understated by approximately $13 due to activity within “Other assets, current and non-current” being incorrectly classified; and

•The impairment charge recognized with respect to our Held for Sale Business was overstated by approximately $8 which also resulted in an understatement of the Assets Held for Sale as of September 30, 2020.

Based upon quantitative and qualitative assessments, we determined that these adjustments were not material to the previously issued interim financial statements. The impacts to the previously issued interim financial statements are shown in the tables below.

Condensed Consolidated Statement of Cash Flows (Nine Months Ended September 30, 2020) (unaudited)

Line Item	As Previously Reported		Adjustments		As Revised
Net income (loss)	$	(203)	$	8	$	(195)
Loss from discontinued operations, net of taxes	(79)		8		(71)
Other assets, current and non-current	(1)		(26)		(27)
Net cash provided by (used in) operating activities from continuing operations	(11)		(26)		(37)
Net cash (used in) provided by operating activities from discontinued operations	(1)		13		12
Net cash provided by (used in) operating activities	$	(12)	$	(13)	$	(25)
Net short-term debt repayments	$	(25)	$	13	$	(12)
Net cash (used in) provided by financing activities	$	7	$	13	$	20

Hexion Inc. | 9 | Q3 2021 Form 10-Q

Table of Contents                 

Condensed Consolidated Statement of Operations (Three Months Ended September 30, 2020) (unaudited)

Line Item	As Previously Reported		Adjustment (1)		As Revised
Loss from discontinued operations, net of taxes	$	(76)	$	8	$	(68)
Net income (loss)	(102)		8		(94)
Net loss attributable to Hexion Inc.	(102)		8		(94)

Condensed Consolidated Statement of Operations (Nine Months Ended September 30, 2020) (unaudited)

Line Item	As Previously Reported		Adjustment (1)		As Revised
Loss from discontinued operations, net of taxes	$	(79)	$	8	$	(71)
Net income (loss)	(203)		8		(195)
Net loss attributable to Hexion Inc.	(203)		8		(195)

(1)The $8 adjustment summarized above impacts the “Asset impairments” caption within the financial results table in the Discontinued Operations footnote. The adjustment also impacts “Comprehensive loss” and “Accumulated deficit.”

Subsequent Events—The Company has evaluated events and transactions subsequent to September 30, 2021 through the date of issuance of its unaudited Condensed Consolidated Financial Statements.

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.

The Company’s businesses have been designated by many governments as essential businesses, and the Company’s operations have continued through September 30, 2021. Though the Company’s strong results reflect a recovering economy, the impact of COVID-19 continues to evolve, and its ultimate impact 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 its variants 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.

Hexion Inc. | 10 | Q3 2021 Form 10-Q

Table of Contents                 

Subsequent to September 30, 2021, the United States, and the global regions where the Company operates, continue to be affected by COVID-19 and its variants. 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 received to date consists of $335 in cash and certain assumed liabilities. The remainder in future proceeds of up to $90 is based on the performance of the Held for Sale Business over the three year period after the completion of the sale. Payments will be based on the amount of actual EBITDA (as defined in the Purchase Agreement) above targeted EBITDA amounts of $45, $50 and $60 in 2021, 2022, and 2023, respectively. The maximum payout per year under the earnout are $40, $35, and $15, respectively. 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 positive subsequent post-closing adjustment to the purchase price of $2 was 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 provided certain transitional services to the buyers for an initial period of six months which ended in October 2021 pursuant to the Transitional Services Agreement, certain services have been extended for an additional three months and may be extended an additional period 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 disposed in the transaction included 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 Held for Sale Business generated sales of $216 and $360 through the disposition date of April 30, 2021 for the nine months ended September 30, 2021 and for the nine months ended September 30, 2020, respectively. Until the closing date, the Company operated the Held for Sale Business in the ordinary course.

For the nine months ended September 30, 2021, we reported the results of the operations as a “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. As of December 31, 2020, we reclassified the assets and liabilities of our Held for Sale Business as held for sale on the unaudited Condensed Consolidated Balance Sheets.

The Held for Sale business reported $14 of goodwill and $61 of other intangible assets at 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 was 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 the Company completed the sale on April 30, 2021, there were no balances reported on the unaudited Condensed Consolidated Balance Sheet at September 30, 2021.

As a result of entering into the Purchase Agreement, the Company recognized a pre-tax charge of $16 during the nine months ended September 30, 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 the closing date 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 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 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

Hexion Inc. | 11 | Q3 2021 Form 10-Q

Table of Contents                 

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:

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

In addition to the Held for Sale Business assets and liabilities classified as held for sale in the table above, the Company’s unaudited Condensed Consolidated Balance Sheet at September 30, 2021 includes an additional $5 of current assets held for sale and $3 of current liabilities. The Company’s Consolidated Balance Sheet as of December 31, 2020 also includes $1 of current assets held for sale, noncurrent assets held for sale of $5, current liabilities associated with assets held for sale of $3 and noncurrent liabilities associated with assets held for sale of $3. These additional assets and liabilities classified as “held for sale” at September 30, 2021 and December 31, 2020 are related to the Company’s other restructuring activities.

Hexion Inc. | 12 | Q3 2021 Form 10-Q

Table of Contents                 

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

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020(1)		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020(1)
Major line items constituting pretax income of discontinued operations:
Net sales	$	—	$	120	$	216	$	360
Cost of sales (exclusive of depreciation and amortization)	—		100		183		301
Selling, general and administrative expense	—		11		16		33
Depreciation and amortization	—		8		—		26
Loss on sale of business	—		—		10		—
Asset impairments	—		67		16		67
Business realignment costs	—		—		—		1
Operating loss	—		(66)		(9)		(68)
Other non-operating expense (income), net	—		1		(5)		1
Loss from discontinued operations before income tax and earnings from unconsolidated entities	—		(67)		(4)		(69)
Income tax expense	—		2		2		3
Loss from discontinued operations, net of tax	$	—	$	(69)	$	(6)	$	(72)
Earnings from unconsolidated entities, net of tax	—		1		1		1
Net loss attributable to discontinued operations	$	—	$	(68)	$	(5)	$	(71)

(1)The three and nine months ended September 30, 2020 have been revised. See Note 2 for more information.

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 nine months ended September 30, 2020. There were no asset impairments recognized for the three and nine months ended September 30, 2021 or the three months ended September 30, 2020.

6. Related Party Transactions

2020 Affiliate Loan

In March 2020, the Company entered into a $10 short term affiliate loan with Hexion Holdings Corporation (the “Parent” or “Hexion Holdings”) 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 September 30, 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 $1 than for the three months ended September 30, 2021 and $1 for the nine months ended September 30, 2021, and less than $1 for the three and nine months ended September 30, 2020. There were no purchases from joint ventures for the three and nine months ended September 30, 2021. There were no accounts receivable from joint ventures at September 30, 2021 and less than $1 at December 31, 2020. There were no accounts payable at September 30, 2021 and December 31, 2020. Joint venture activity is primarily driven by the Russia JV which the Company sold as part of the sale of its Held for Sale Business. The Company had a loan receivable from the Russia JV of $4 at December 31, 2020, which was recorded in “Long-term assets held for sale,” and was settled with the sale in April 2021.

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.

Hexion Inc. | 13 | Q3 2021 Form 10-Q

Table of Contents                 

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 September 30, 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 nine months ended September 30, 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 September 30, 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 ($708 outstanding at September 30, 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:

		September 30, 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	$	(9)	$	300	$	(15)
Total derivatives designated as hedging instruments				$	(9)			$	(15)

	Amount of Gain (Loss) Recognized in OCI on Derivatives
Derivatives designated as hedging instruments	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Interest Rate Swaps
Interest Rate Swap	$	1	$	(1)	$	6	$	(19)
Total	$	1	$	(1)	$	6	$	(19)

In both the three and nine months ended September 30, 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.     

Hexion Inc. | 14 | Q3 2021 Form 10-Q

Table of Contents                 

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
September 30, 2021
Debt	$	1,593	$	—	$	1,583	$	48	$	1,631
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 September 30, 2021 and December 31, 2020 is as follows:

	September 30, 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 $5 and $6 of unamortized debt discount)	696		7		701		7
Senior Secured Term Loan - EUR due 2026 (includes $2 and $4 of unamortized debt discount)	345		—		515		—
Senior Notes:
7.875% Senior Notes due 2027	450		—		450		—
Other Borrowings:
Australia Facility due 2026(1)	29		—		—		30
Brazilian bank loans	—		13		2		22
Lease obligations (2)	26		22		42		14
Other	—		5		—		9
Total(3)	$	1,546	$	47	$	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 as of September 30, 2021 compared to December 31, 2020.

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 $150 in aggregate principal of the euro denominated Senior Secured Term Loan - EUR . See Note 4 for more information regarding sale of the Held for Sale Business in April 2021.

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.

Hexion Inc. | 15 | Q3 2021 Form 10-Q

Table of Contents                 

The following table summarizes all probable environmental remediation, indemnification and restoration liabilities, including related legal expenses, at September 30, 2021 and December 31, 2020:

	Liability				Range of Reasonably Possible Costs at September 30, 2021
Site Description	September 30, 2021(1)		December 31, 2020(2)		Low		High
Geismar, LA	$	12	$	12	$	9	$	22
Superfund and offsite landfills – allocated share:
Less than 1%	2		3		1		3
Equal to or greater than 1%	7		6		6		14
Currently-owned	5		8		3		15
Formerly-owned:
Remediation	15		18		14		33
Monitoring only	—		—		—		1
Total	$	41	$	47	$	33	$	88

(1)The table includes approximately $3 of environmental remediation liabilities at September 30, 2021 related to assets held for sale related to the Company’s other restructuring activities and are included in the “Current liabilities associated with assets held for sale” within the unaudited Condensed Consolidated Balance Sheets.

(2)The table includes approximately $2 of environmental remediation liabilities related to the Held for Sale Business at 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 September 30, 2021, and December 31, 2020, $12 and $14, respectively, 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 September 30, 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.

Hexion Inc. | 16 | Q3 2021 Form 10-Q

Table of Contents                 

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 is involved in various legal proceedings in the ordinary course of business and had reserves of $1 at both September 30, 2021 and December 31, 2020, for all non-environmental legal defense costs incurred and settlement costs that it believes are probable and estimable. At September 30, 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.

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 and nine months ended September 30, 2021 and 2020.

Hexion Inc. | 17 | Q3 2021 Form 10-Q

Table of Contents                 

Following are the components of net pension benefit cost recognized by the Company for the three and nine months ended September 30, 2021 and 2020:

	Pension Benefits
	Three Months Ended September 30, 2021				Three Months Ended September 30, 2020				Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2020
	U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans
Service cost	$	1	$	5	$	1	$	4	$	2	$	15	$	2	$	13
Interest cost on projected benefit obligation	—		1		1		2		2		4		4		5
Expected return on assets	(3)		(4)		(3)		(4)		(9)		(11)		(9)		(10)
Net (benefit) expense(1)	$	(2)	$	2	$	(1)	$	2	$	(5)	$	8	$	(3)	$	8

(1)Includes less than $1 of net pension expense for non-U.S. plans related to the Held for Sale Business during both the nine months ended September 30, 2021 and the three and nine months ended September 30, 2020. These associated costs have been included in “Loss from discontinued operations, net of taxes” within the unaudited Condensed Consolidated Statements of Operations.

As of September 30, 2021 and December 31, 2020, the Company had a prepaid pension asset of $59 and $52 included in “Other Current Assets” within the Company’s unaudited Condensed Consolidated Balance Sheets related to the Company’s Netherlands’ defined benefit pension plan as a result of required contributions exceeding amounts expensed.

As of September 30, 2021 and December 31, 2020, the Company had a pension liability of $213 and $236, respectively, and a non-pension postretirement benefit liability of $12 and $11, respectively. These liabilities are included in “Long-term pension and post employment benefit obligations” within the Company’s unaudited Condensed Consolidated Balance Sheets. As of December 31, 2020, the Company had $36 of pension obligation classified as held for sale on the Condensed Consolidated Balance Sheet, and these obligations were part of the disposal of the Held for Sale Business on April 30, 2021.

In October 2021, certain amendments related to one of the Company’s foreign pension plans were approved by European Works Councils and unions to go in effect in 2022. The company is evaluating the impact of the change on its projected benefit obligation, but we expect it will result in a curtailment gain and reduce the Company’s projected benefit obligation by an approximate range of $9 to $12.

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 nine months of 2021, Hexion Holdings granted 592,076 Restricted Stock Units (“RSUs”) to certain employees and non-employee directors that time vest over three years with a weighted average grant date fair value of $15.37 per share. Additionally, Hexion Holdings granted 759,390 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 September 30, 2021, the Company’s performance conditions underlying the PSU's were considered probable of occurring and thus stock-based compensation expense has been recorded for the 2020 and 2021 grants.

The Company recognized $8 and $4 of stock-based compensation costs for the three months ended September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021 and 2020, the Company recognized $23 and $13, respectively. The amounts are included in “Selling, general and administrative expense” in the unaudited Condensed Consolidated Statements of Operations.

The Company’s Parent had 58,567,100 shares of common stock outstanding and approximately 10,177,908 warrants outstanding as of September 30, 2021. The Company’s Parent had 2,446,680 RSUs and 3,929,999 PSUs outstanding as of September 30, 2021.

12. Segment Information

The Company’s reporting segments are aligned around our two growth platforms: (i) Adhesives and (ii) Coatings and Composites. At September 30, 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 and global formaldehyde businesses, with assets in North America, Latin America, Australia and New Zealand. Adhesives also includes the oilfield technology group.

•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™ acid and derivatives businesses.

Hexion Inc. | 18 | Q3 2021 Form 10-Q

Table of Contents                 

•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 variable 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 September 30, 2021						Three Months Ended September 30, 2020
	Adhesives		Coatings and Composites		Total		Adhesives		Coatings and Composites		Total
North America	$	325	$	224	$	549	$	221	$	122	$	343
Europe	—		249		249		5		132		137
Asia Pacific	44		44		88		34		87		121
Latin America	59		—		59		33		—		33
Total	$	428	$	517	$	945	$	293	$	341	$	634
	Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
	Adhesives		Coatings and Composites		Total		Adhesives		Coatings and Composites		Total
North America	$	908	$	540	$	1,448	$	670	$	379	$	1,049
Europe	10		632		642		14		393		407
Asia Pacific	123		180		303		96		209		305
Latin America	157		—		157		94		—		94
Total	$	1,198	$	1,352	$	2,550	$	874	$	981	$	1,855

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

Hexion Inc. | 19 | Q3 2021 Form 10-Q

Table of Contents                 

Reconciliation of Net Income (Loss) to Segment EBITDA:

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Reconciliation:
Net income (loss)	$	49	$	(94)	$	98	$	(195)
Less: Net loss from discontinued operations	—		(68)		(5)		(71)
Net income (loss) from continuing operations	$	49	$	(26)	$	103	$	(124)
Income tax expense	26		17		51		8
Interest expense, net	24		25		72		76
Depreciation and amortization (1)	48		47		148		143
EBITDA	147		63		374		103
Adjustments to arrive at Segment EBITDA:
Asset impairments	$	—	$	—	$	—	$	16
Business realignment costs (2)	6		19		19		57
Transaction costs (3)	16		1		23		4
Realized and unrealized foreign currency losses (gains)	5		(3)		9		2
Other non-cash items (4)	11		6		36		29
Other (5)	3		5		1		9
Total adjustments	41		28		88		117
Segment EBITDA	$	188	$	91	$	462	$	220
Segment EBITDA:
Adhesives	$	72	$	58	$	215	$	156
Coatings and Composites	138		50		311		115
Corporate and Other	(22)		(17)		(64)		(51)
Total	$	188	$	91	$	462	$	220

(1)For both the nine months ended September 30, 2021 and 2020, accelerated depreciation of $2 has been included in “Depreciation and amortization.” There was no accelerated depreciation for both the three months ended September 30, 2021 and 2020.

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

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Severance costs	$	1	$	4	$	1	$	14
In-process facility rationalizations	1		3		3		10
Contractual costs from exited businesses	2		2		6		6
Business services implementation	1		6		4		18
Legacy environmental reserves	1		4		1		8
Other	—		—		4		1
Total	$	6	$	19	$	19	$	57

(3)For the nine months ended September 30, 2021, transaction costs represent the costs associated with professional fees related to strategic projects and the set up of our transition services agreement related to the Held for Sale Business. For the three months ended September 30, 2021 and for the three and nine months ended September 30, 2020, transaction costs primarily included certain professional fees related to strategic projects.

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

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Fixed asset write-offs	$	2	$	—	$	7	$	6
Stock-based compensation costs	8		4		23		13
Long-term retention programs	1		1		5		7
Other	—		1		1		3
Total	$	11	$	6	$	36	$	29

Hexion Inc. | 20 | Q3 2021 Form 10-Q

Table of Contents                 

(5)Other for the periods presented below included:

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Legacy and other non-recurring items	$	1	$	2	$	3	$	7
IT outage recoveries, net	—		—		—		(4)
Gain on sale of assets	—		—		(4)		—
Financing fees and other	2		3		2		6
Total	$	3	$	5	$	1	$	9

13. Changes in Accumulated Other Comprehensive Loss

Following is a summary of changes in “Accumulated other comprehensive loss” for the three and nine months ended September 30, 2021 and 2020:

	Foreign Currency Translation Adjustments		Cash Flow Hedge		Total
Balance at June 30, 2020	$	(39)	$	(16)	$	(55)
Change in value	7		(1)		6
Balance at September 30, 2020	$	(32)	$	(17)	$	(49)
Balance at December 31, 2019	$	(3)	$	2	$	(1)
Change in value	(29)		(19)		(48)
Balance at September 30, 2020	$	(32)	$	(17)	$	(49)
Balance at June 30, 2021	$	(20)	$	(11)	$	(31)
Change in value	(14)		1		(13)
Balance at September 30, 2021	$	(34)	$	(10)	$	(44)
Balance at December 31, 2020	$	(11)	$	(16)	$	(27)
Change in value	(23)		6		(17)
Balance at September 30, 2021	$	(34)	$	(10)	$	(44)

14. Income Taxes

The income tax expense (benefit) for the three months ended September 30, 2021 and 2020 was $26 and $17, respectively. The income tax expense (benefit) for the nine months ended September 30, 2021 and 2020 was $51 and $8, respectively. The income tax (benefit) expense is comprised of tax expense on income and tax benefit on losses from certain foreign operations in 2020 and from the United States and certain foreign operations in 2021. In 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. In 2021, losses in 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 September 30, 2021 and 2020 was 35% and (189)%, respectively. The effective tax rate for the nine months ended September 30, 2021 and 2020 was 34% and (7)%, respectively. The difference between the effective rate and the statutory rate in each period was primarily attributable to the amount and distribution of income and losses among the various jurisdictions in which the Company operates. The primary jurisdictions with significantly different effective and statutory tax rates for the three months ended September 30, 2021 were the Netherlands, Brazil, and Canada. 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.

Hexion Inc. | 21 | Q3 2021 Form 10-Q

Table of Contents                 

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 third quarter of 2021” refers to the three months ended September 30, 2021 and “the third quarter of 2020” refers to the three months ended September 30, 2020, “the first nine months of 2021” refers to the nine months ended September 30, 2021 and “the first nine months of 2020” refers to the nine months ended September 30, 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 2,000 customers in approximately 80 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.

Hexion Inc. | 22 | Q3 2021 Form 10-Q

Table of Contents                 

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 committed to maintaining a paramount focus on the safety of its employees while minimizing potential disruptions caused by COVID-19. The Company’s businesses have been designated by many governments as essential businesses, and the Company’s operations have continued through September 30, 2021. Though the Company’s strong results reflect a recovering economy, the impact of COVID-19 continues to evolve, and its ultimate impact 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 its variants and actions to contain the virus or treat its impact.

Epoxy Business Separation and Financing

On September 29, 2021 we announced our plan to separate into two independent companies (the “Epoxy Separation”). The two companies will be “Hexion Holdings,” composed of the Company’s Adhesives and Versatic™ Acid and Derivatives product lines, and “Hexion Coatings and Composites (US) Inc.” (“HCC”) or (the “Epoxy Business”), composed of our epoxy-based Coatings and Composites products. The Epoxy Business currently operates within our Coatings & Composites reportable segment. Following the Epoxy Separation, the Epoxy Business will qualify as a discontinued operation and will no longer be a consolidated business of Hexion Inc. The Epoxy Separation remains subject to SEC review, European works councils review, and market conditions.

Prior to the Epoxy Separation, we anticipate that the Epoxy Business will incur new indebtedness (the “Epoxy Financing”) and we will use the proceeds of the Epoxy Financing to repay in full the outstanding €300 million principal amount under our Euro Term Loan Facility.

Parent announces proposed Initial Public Offering (“IPO”)

On August 2, 2021, our Parent announced it has submitted a draft Form S-1 registration statement on a confidential basis to the U.S. Securities and Exchange Commission for a proposed public offering of its common stock. On September 29, 2021 our Parent filed a public draft Form S-1 for this proposed public offering. The planned registered public offering is part of Hexion’s and its Board of Directors’ ongoing and continuous strategic review and evaluation of opportunities to enhance shareholder value. Hexion and its Board of Directors believe that the Company’s strong financial performance, favorable end-market exposure, and continued transformation, makes an IPO or other value-creating strategic opportunities compelling to consider. The IPO remains subject to SEC review, European works councils review, and market conditions. In addition, the Company’s ongoing comprehensive strategic review of the business and each of its segments may impact timing through the consideration of these other alternatives.

Sale of Phenolic Specialty Resins Business

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 received to date consists of $335 in cash and certain assumed liabilities. The remainder in future proceeds of up to $90 is based on the performance of the Held for Sale Business over the three year period after the completion of the sale. Payments will be based on the amount of actual EBITDA (as defined in the Purchase Agreement) above targeted EBITDA amounts of $45, $50 and $60 in 2021, 2022, and 2023, respectively. The maximum payout per year under the earnout are $40, $35, and $15, respectively. 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. In May 2021, we used a portion of the net proceeds to pay down the aggregate principal of the euro denominated tranche of the Term Loan Facility for $150, in accordance with the credit agreement governing the Term Loan Facility. See Note 8 for further information on reduction to the Company’s Senior Secured Term Loan.

For the nine months ended September 30, 2021, we reported the results of the Held for Sale Business as a “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. As of December 31, 2020, we reclassified the assets and liabilities of our Held for Sale Business as held for sale on the unaudited Condensed Consolidated Balance Sheets.

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

Reportable Segments

Our reporting segments are aligned around our two growth platforms: (i) Adhesives and (ii) Coatings and Composites. At September 30, 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 and global formaldehyde businesses, with assets in North America, Latin America, Australia and New Zealand. Adhesives also includes the oilfield technology group.

Hexion Inc. | 23 | Q3 2021 Form 10-Q

Table of Contents                 

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

2021 Overview

Following are highlights from our results of continuing operations for the nine months ended September 30, 2021 and 2020:

	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020		$ Change		% Change
Statements of Operations:
Net sales	$	2,550	$	1,855	$	695	37	%
Operating income (loss)	216		(54)		270		n/m
Income (loss) before income tax	152		(118)		270		n/m
Net income (loss) from continuing operations	103		(124)		227		n/m
Segment EBITDA:
Adhesives	$	215	$	156	59		38	%
Coatings and Composites	311		115		196		170	%
Corporate and Other	(64)		(51)		(13)		25	%
Total	$	462	$	220	$	242	110	%

•Net Sales—In the first nine months of 2021, net sales increased by $695, or 37%, compared to the first nine months of 2020. Pricing positively impacted sales by $544 due to improved market conditions in our epoxy and VersaticTM acid and derivatives businesses and significant material price increases contractually passed through to customers across many of our businesses. Volumes positively impacted net sales by $82, primarily due to strong demand across key end-markets, including housing and general construction, in our North and Latin American resins and formaldehyde businesses driven by recovery from COVID-19’s global economic impact across our various industries and markets compared to the first nine months of 2020. These increases were partially offset by volume decreases in our specialty epoxy product lines mainly driven by lower demand in China and the impacts of Hurricane Ida and Winter Storm Uri in the U.S. Gulf Coast on our formaldehyde and base epoxy product lines, respectively, in the first nine months of 2021. Foreign currency translation positively impacted net sales by $69 due to the strengthening of various foreign currencies against the U.S. dollar in the first nine months of 2021 compared to the first nine months of 2020.

•Net Income (Loss) from Continuing Operations—In the first nine months of 2021, net income from continuing operations increased by $227 from a net loss of $124 as compared to the first nine months of 2020. The increase was driven by an increase in operating income of $270, primarily due to an increase in gross profit resulting from improved market conditions across our key businesses. This increase was partially offset by an increase in selling, general, and administrative expense as a result of increased variable compensation costs.

•Segment EBITDA—For the first nine months of 2021, Segment EBITDA was $462, an increase of 110% compared with $220 in the first nine months of 2020. This increase was primarily due to ongoing COVID economic recovery and improved market conditions, resulting in margin expansion within our base and specialty epoxy businesses and higher volumes within our Adhesives segment. These increases were partially offset by temporary manufacturing outages caused by Hurricane Ida and Winter Storm Uri in the U.S. Gulf Coast. Additionally, our Corporate and Other charges in the first nine months of 2021 increased by $13 compared to the first nine months of 2020 due primarily to increased employee variable compensation awards and employee benefits.

•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, with a total addressable market of approximately $500. We expect future incremental growth from this product.

◦Extensive conversions were initiated at several major customers within our Adhesives segment in 2020 for next generation OSB PF technology for board surface and core applications, and development works continues to position our products favorably compared to pMDI.

◦Expected investment of approximately $35 in the expansion of our Brimbank, Australia facility within our Adhesives segment to develop fire-resistant cladding materials leveraging proprietary phenolic resin technology. Production is expected to start at the facility in 2022.

◦An expansion of formaldehyde capacity at our Geismar location, with an expected cost of approximately $10 and capacity coming on line starting in 2024.

Hexion Inc. | 24 | Q3 2021 Form 10-Q

Table of Contents                 

◦Urea-formaldehyde based polymer for slow-release fertilizer expected to provide modest incremental EBITDA contribution starting in 2023.

◦As an alternative technology, we have also developed BPA-free alternative coating technologies within our Coatings and Composites segment to address changing consumer preferences.

Short-term Outlook

As we look towards the fourth quarter of 2021 and first half of 2022, we anticipate strong performance as market conditions continue to recover from the impacts of the COVID-19 pandemic. In the second half of 2020 and throughout 2021, we have seen year-over-year Segment EBITDA improvement due to the economy’s overall turnaround. We continue to expect strong performance across our businesses and strong demand in our key end markets in the remainder of 2021 and into 2022. Over the short to medium term, we expect our volume growth to generally track domestic GDP growth and our EBITDA growth to outpace domestic GDP growth, with new product development and expansion projects providing the opportunity for incremental growth. Conversely, as the overall economy is experiencing global supply chain disruptions, we could experience negative impacts within our supply chain, affecting our ability to deliver on contractual commitments.

Within our Coatings and Composites segment, we continue to expect significant year over year improvement in both our base and specialty epoxy businesses in the remainder of 2021 as key end-markets recover from COVID-19. Additionally, we expect our VersaticTM acid and derivatives product lines to continue to experience modest growth in architectural coatings.

Within our Adhesives segment, we anticipate improvement in Segment EBITDA within our North and Latin American Wood Adhesives 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 end market demand will positively impact our North American formaldehyde and triazine product lines in the remainder of 2021 and into 2022.

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 nine months of 2021 compared to the first nine months of 2020, the average price of phenol, urea and methanol increased by approximately 50%, 74% and 62%, 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 and the global supply chain disruptions caused by the global COVID-19 pandemic. 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. This “lead-lag” impact can positively or negatively impact our margins in the short term in periods of long “lead-lag” times depending on the rising or falling of raw material prices and the regions where we operate.

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 54% of our sales in the first nine 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.

Hexion Inc. | 25 | Q3 2021 Form 10-Q

Table of Contents                 

Results of Operations

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended September 30, 2021				Three Months Ended September 30, 2020
	$		% of Net Sales		$		% of Net Sales
Net sales	$	945	100	%	$	634	100	%
Cost of sales (exclusive of depreciation and amortization shown below)	702		74	%	500		79	%
Selling, general and administrative expense	90		10	%	56		9	%
Depreciation and amortization	48		5	%	47		7	%
Business realignment costs	6		1	%	19		3	%
Other operating expense, net	2		—	%	4		1	%
Operating income	97		10	%	8		1	%
Interest expense, net	24		3	%	25		4	%
Other non-operating income, net	(1)		—	%	(8)		(1)	%
Total non-operating expense	23		2	%	17		3	%
Income (loss) from continuing operations before income tax and earnings from unconsolidated entities	74		8	%	(9)		(1)	%
Income tax expense	26		3	%	17		3	%
Income (loss) from continuing operations before earnings from unconsolidated entities	48		5	%	(26)		(4)	%
Earnings from unconsolidated entities, net of taxes	1		—	%	—		—	%
Income (loss) from continuing operations, net of taxes	49		5	%	(26)		(4)	%
Loss from discontinued operations, net of taxes	—		—	%	(68)		(11)	%
Net income (loss)	49		5	%	(94)		(15)	%
Other comprehensive (loss) income	$	(13)			$	6

Three Months Ended September 30, 2021 vs. Three Months Ended September 30, 2020

Net Sales

In the third quarter of 2021, net sales increased by $311, or 49%, compared to the third quarter of 2020. Pricing positively impacted sales by $297 due primarily to improved market conditions in our base epoxy resins and specialty epoxy resins businesses and significant raw material price increases contractually passed through to customers across many businesses. Foreign currency translation positively impacted net sales by $16 due primarily to the strengthening of various foreign currencies against the U.S. dollar in the third quarter of 2021 compared to the third quarter of 2020. Volumes negatively impacted net sales by $2, primarily due to volume decreases in our specialty epoxy product lines due to lower demand in China and volume decreases in our formaldehyde products driven by Hurricane Ida’s impacts in the U.S Gulf Coast. These were partially offset by volume increases in our North and Latin American resins and formaldehyde product lines driven by strong market conditions across many key end-markets, increases in our epoxy and VersaticTM acid and derivatives product lines driven by margin optimization and continued recovery from COVID-19’s global economic impact across our various industries and markets compared to the third quarter of 2020.

Operating Income

In the third quarter of 2021, operating income increased by $89 from an operating income of $8 in the third quarter of 2020 to an operating income of $97 in the third quarter of 2021 largely due to an increase in gross profit as a result of improved market conditions across many of our businesses. The increase in gross profit was partially offset by an increase in selling, general and administrative expenses primarily due to increased variable compensation costs.

Income Tax Expense

The income tax expense (benefit) for the three months ended September 30, 2021 and 2020 was $26 and $17, respectively. The income tax expense (benefit) is comprised of tax expense on income and tax benefit on losses from certain foreign operations in 2020 and from the United States and certain foreign operations in 2021. In 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. In 2021, losses in 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 September 30, 2021 and 2020 was 35% and (189)%, respectively. The difference between the effective and the statutory rate in each period was primarily attributable to the amount and distribution of income and losses among the various jurisdictions in which we operate. The primary jurisdictions with significantly different effective and statutory tax rates for the three months ended September 30, 2021 were Netherlands, Brazil, and Canada. The effective tax rates were also impacted by operating

Hexion Inc. | 26 | Q3 2021 Form 10-Q

Table of Contents                 

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 third quarter of 2021, foreign currency translation negatively impacted other comprehensive income by $14 due to the strengthening of the U.S. dollar against various foreign currencies in the third quarter of 2021, partially offset by an unrealized gain of $1 on an interest rate swap designated as a cash flow hedge recorded to other comprehensive loss.

For the third quarter of 2020, foreign currency translation positively impacted other comprehensive loss by $7, due primarily to the strengthening of the euro against the U.S. dollar in the third quarter of 2020, partially offset by an unrealized loss of $1 on an interest rate swap designated as a cash flow hedge recorded to other comprehensive loss.

	Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2020
	$		% of Net Sales		$		% of Net Sales
Net sales	$	2,550	100	%	$	1,855	100	%
Cost of sales (exclusive of depreciation and amortization shown below)	1,922		75	%	1,514		82	%
Selling, general and administrative expense	243		10	%	164		9	%
Depreciation and amortization	148		6	%	143		8	%
Asset impairments	—		—	%	16		1	%
Business realignment costs	19		1	%	57		3	%
Other operating expense, net	2		—	%	15		1	%
Operating income (loss)	216		8	%	(54)		(3)	%
Interest expense, net	72		3	%	76		4	%
Other non-operating income, net	(8)		—	%	(12)		(1)	%
Total non-operating expense	64		3	%	64		3	%
Income (loss) from continuing operations before income tax and earnings from unconsolidated entities	152		6	%	(118)		(6)	%
Income tax expense	51		2	%	8		—	%
Income (loss) from continuing operations before earnings from unconsolidated entities	101		4	%	(126)		(7)	%
Earnings from unconsolidated entities, net of taxes	2		—	%	2		—	%
Income (loss) from continuing operations, net of taxes	103		4	%	(124)		(7)	%
Loss from discontinued operations, net of taxes	(5)		—	%	(71)		(4)	%
Net income (loss)	98		4	%	(195)		(11)	%
Other comprehensive loss	$	(17)			$	(48)

Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020

Net Sales

In the first nine months of 2021, net sales increased by $695, or 37%, compared to the first nine months of of 2020. Pricing positively impacted sales by $544 due primarily to improved market conditions in our epoxy and VersaticTM acid and derivatives businesses and significant material price increases contractually passed through to customers across many of our businesses. Volumes positively impacted net sales by $82 primarily due to strong demand across key end-markets, including housing and general construction, in our North and Latin American resins and formaldehyde businesses driven by recovery from COVID-19’s global economic impact across our various industries and markets compared to the first nine months of 2020. These increases were partially offset by volume decreases in our specialty epoxy product lines mainly driven by lower demand in China and the impacts of Hurricane Ida and Winter Storm Uri in the U.S. Gulf Coast on our formaldehyde and base epoxy product lines, respectively, in the first nine months of 2021. Foreign currency translation positively impacted net sales by $69, due to the strengthening of various foreign currencies against the U.S. dollar in the first nine months of 2021 compared to the first nine months of 2020.

Operating Income

In the first nine months of 2021, operating income (loss) increased by $270 from operating loss of $54 in the first nine months of 2020 to an operating income of $216 in the first nine months of 2021. This increase was driven by an increase in gross profit due primarily to favorable market conditions described above, and was partially offset by an increase in selling, general, and administrative expense primarily due to increased variable compensation costs.

Hexion Inc. | 27 | Q3 2021 Form 10-Q

Table of Contents                 

Non-Operating Expense

In the first nine months of 2021, total non-operating expense remained flat compared to the first nine months of 2020 due primarily to a decrease of $4 in interest expense and a decrease of $4 in miscellaneous other non-operating income.

Income Tax Expense

The income tax (benefit) expense for the nine months ended September 30, 2021 and the nine months ended September 30, 2020 was $51 and $8, 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 nine months ended September 30, 2021and 2020 was 34% and (7)%, 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 primary jurisdictions with significantly different effective and statutory tax rates for the nine months ended September 30, 2021 were Germany, Brazil, and Canada. 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 nine months of 2021, foreign currency translation negatively impacted other comprehensive loss by $23, due to an overall weakening of various foreign currencies against the U.S. dollar in the first nine months of 2021 and an unrealized gain of $6 on an interest rate swap designated as a cash flow hedge recorded to other comprehensive loss.

For the first nine months of 2020, foreign currency translation negatively impacted other comprehensive loss by $29, due to an overall weakening of various foreign currencies against the U.S. dollar in the first nine months of 2020 and an unrealized loss of $19 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 variable 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 September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Net Sales (1):
Adhesives	$	428	$	293	$	1,198	$	874
Coatings and Composites	517		341		1,352		981
Total	$	945	$	634	$	2,550	$	1,855
Segment EBITDA:
Adhesives	$	72	$	58	$	215	$	156
Coatings and Composites	138		50		311		115
Corporate and Other	(22)		(17)		(64)		(51)
Total	$	188	$	91	$	462	$	220

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

Three Months Ended September 30, 2021 vs. Three Months Ended September 30, 2020 Segment Results

Following is an analysis of the percentage change in net sales by segment from the three months ended September 30, 2020 to the three months ended September 30, 2021:

	Volume		Price/Mix		Currency Translation		Total
Adhesives	5	%	38	%	3	%	46	%
Coatings and Composites	(5)	%	55	%	2	%	52	%

Hexion Inc. | 28 | Q3 2021 Form 10-Q

Table of Contents                 

Adhesives

Net sales in the third quarter of 2021 increased by $135, or 46%, when compared to the third quarter of 2020. Pricing positively impacted net sales by $110, primarily due to significant raw material price increases contractually passed through to customers across many of our businesses. Volumes positively impacted net sales by $16, due to volume increases in our North American and Latin American resins and formaldehyde product lines driven by strong market conditions across many key end-markets, including housing and general construction, and continued recovery from COVID-19’s global economic impact across our various industries and markets compared to the third quarter of 2020, These increases were partially offset by Hurricane Ida’s impacts in the U.S. Gulf Coast in the third quarter of 2021, primarily effecting the formaldehyde product line. Foreign currency translation positively impacted net sales by $9 mainly due to the strengthening of various foreign currencies against the U.S dollar in the third quarter of 2021 compared to the third quarter of 2020.

Segment EBITDA in the third quarter of 2021 increased by $14, to $72, compared to the third quarter of 2020. This increase was primarily driven by strong demand and continued recovery from COVID-19’s global impact in key end-markets, as discussed above, along with raw material productivity positively impacting our wood adhesives and formaldehyde product lines.

Coatings and Composites

Net sales in the third quarter of 2021 increased by $176, or 52%, when compared to the third quarter of 2020. Pricing positively impacted net sales by $187, due primarily to improved market conditions in our base epoxy and specialty epoxy resins business and raw material price increases contractually passed through to customers. Foreign currency translation positively impacted net sales by $7, due primarily to the strengthening of the euro and Chinese yuan against the U.S. dollar in the third quarter of 2021 compared to the third quarter of 2020. Lastly, volumes negatively impacted net sales by $18, which was primarily related to volume decreases in our specialty epoxy product lines due to lower demand in China, partially offset by increases in our epoxy and VersaticTM acid and derivatives businesses driven by strong global demand and continued global recovery from COVID-19.

Segment EBITDA in the third quarter of 2021 increased by $88 to $138, compared to the third quarter of 2020. These Segment EBITDA increases were primarily driven by margin expansion in our base and specialty epoxy businesses and volume increases in our base epoxy and VersaticTM acid and derivatives businesses.

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 third quarter of 2021 increased $5 compared to the third quarter of 2020 due primarily to increased employee variable compensation awards.

Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020 Segment Results

Following is an analysis of the percentage change in net sales by segment from the nine months ended September 30, 2020 to the nine months ended September 30, 2021:

	Volume		Price/Mix		Currency Translation		Total
Adhesives	12	%	22	%	3	%	37	%
Coatings and Composites	(2)	%	36	%	4	%	38	%

Adhesives

Net sales in the first nine months of 2021 increased by $324, or 37%, when compared to the first nine months of 2020. Pricing positively impacted net sales by $193, primarily due to significant raw material price increases, which we contractually passed through to customers across many of our businesses. Volumes positively impacted net sales by $104, primarily due to strong demand across key end-markets, including housing and general construction, in our North and Latin American resins and formaldehyde product lines primarily driven by recovery from COVID-19’s global economic impact across our various industries and markets compared to the first nine months of 2020. This was partially offset by the impacts of Hurricane Ida and Winter Storm Uri in the Gulf Coast. Lastly, foreign currency translation increased net sales by $27, due to the strengthening of various foreign currencies against the U.S. dollar.

Segment EBITDA in the first nine months of 2021 increased by $59 to $215, when compared to the first nine months of 2020. This increase was primarily driven by strong demand in our North and Latin American resins and global formaldehyde product lines, along with raw material productivity positively impacting our wood adhesives and formaldehyde product lines.

Coatings and Composites

Net sales in the first nine months of 2021 increased by $371, or 38%, when compared to the first nine months of 2020. Pricing positively impacted net sales by $351, primarily due to improved market conditions in our epoxy and VersaticTM acid and derivatives product lines and raw material price increases contractually passed through to customers. Foreign currency translation positively impacted net sales by $42, due primarily to the strengthening of the euro and Chinese yuan against the U.S. dollar in the nine months of 2021 compared to the first

Hexion Inc. | 29 | Q3 2021 Form 10-Q

Table of Contents                 

nine months of 2020. Volumes negatively impacted net sales by $22, which was primarily related to volume decreases in our specialty epoxy product lines due to lower demand in China, partially offset by increases in our epoxy and VersaticTM acid and derivatives product lines driven by strong global demand.

Segment EBITDA in the first nine months of 2021 increased by $196 to $311 compared to the first nine months of 2020. The increase was primarily due to improved market conditions across many of our product lines, as discussed above, partially offset by costs related to the 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 nine months of 2021 increased by $13 compared to the first nine months of 2020 primarily due to an increase in employee incentive compensation costs.

Reconciliation of Net Income (Loss) to Segment EBITDA:

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Reconciliation:
Net income (loss)	$	49	$	(94)	$	98	$	(195)
Less: Net loss from discontinued operations	—		(68)		(5)		(71)
Net income (loss) from continuing operations	$	49	$	(26)	$	103	$	(124)
Income tax expense	26		17		51		8
Interest expense, net	24		25		72		76
Depreciation and amortization (1)	48		47		148		143
EBITDA	147		63		374		103
Adjustments to arrive at Segment EBITDA:
Asset impairments	$	—	$	—	$	—	$	16
Business realignment costs (2)	6		19		19		57
Transaction costs (3)	16		1		23		4
Realized and unrealized foreign currency losses (gains)	5		(3)		9		2
Other non-cash items (4)	11		6		36		29
Other (5)	3		5		1		9
Total adjustments	41		28		88		117
Segment EBITDA	$	188	$	91	$	462	$	220
Segment EBITDA:
Adhesives	$	72	$	58	$	215	$	156
Coatings and Composites	138		50		311		115
Corporate and Other	(22)		(17)		(64)		(51)
Total	$	188	$	91	$	462	$	220

(1)For both the nine months ended September 30, 2021 and 2020, accelerated depreciation of $2 has been included in “Depreciation and amortization.” There was no accelerated depreciation for both the three months ended September 30, 2021 and 2020.

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

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Severance costs	$	1	$	4	$	1	$	14
In-process facility rationalizations	1		3		3		10
Contractual costs from exited businesses	2		2		6		6
Business services implementation	1		6		4		18
Legacy environmental reserves	1		4		1		8
Other	—		—		4		1
Total	$	6	$	19	$	19	$	57

(3)For the nine months ended September 30, 2021, transaction costs represent the costs associated with professional fees related to strategic projects and the set up of our transition services agreement related to the Held for Sale Business. For the three months ended September 30, 2021 and for the three and nine months ended September 30, 2020, transaction costs primarily included certain professional fees related to strategic projects.

Hexion Inc. | 30 | Q3 2021 Form 10-Q

Table of Contents                 

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

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Fixed asset write-offs	$	2	$	—	$	7	$	6
Stock-based compensation costs	8		4		23		13
Long-term retention programs	1		1		5		7
Other	—		1		1		3
Total	$	11	$	6	$	36	$	29

(5)Other for the periods presented below included:

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Legacy and other non-recurring items	$	1	$	2	$	3	$	7
IT outage recoveries, net	—		—		—		(4)
Gain on sale of assets	—		—		(4)		—
Financing fees and other	2		3		2		6
Total	$	3	$	5	$	1	$	9

Hexion Inc. | 31 | Q3 2021 Form 10-Q

Table of Contents                 

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 expect positive cash flow generation in 2021, as a result of our strong results in the first nine months of the year, the anticipation of favorable market conditions in the remainder of the year, the proceeds from the Transaction of our Held for Sale Business, and the seasonality of our business which drives lower working capital in the fourth quarter. 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.

Legislation, or other changes in tax law in the U.S. or abroad, could increase our liability and adversely affect the Company’s after-tax profitability and liquidity position. For example, the U.S. government may enact significant changes to the taxation of business entities including, among others, an increase in the corporate income tax rate, the imposition of minimum taxes or surtaxes on certain types of income, significant changes to the taxation of income derived from international operations and further limitations on the deductibility of business interest. While Congress has publicly released certain draft legislation, which remains in development, we are currently unable to predict whether such changes will occur and, if implemented, the ultimate impact on our effective tax rate, cash tax expenses and net deferred tax assets in future periods.

The following factors have or will impact 2021 cash flows:

•Sales of Assets: In May 2021, we used $150 of the net proceeds to pay down the aggregate principal of the euro denominated tranche Senior Secured Term Loan. We plan to use the remaining proceeds from the transaction 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 $90 to $95 and income tax payments between $30 to $40.

•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 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 built up our working capital in the first nine months and expect to see a decrease in the remainder of 2021, consistent with historical trends.

Our short-term cash needs are expected to include funding operations 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 September 30, 2021, we had $1,593 of outstanding debt and $721 in liquidity consisting of the following:

•$352 of unrestricted cash and cash equivalents (of which $161 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

•$74 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 at September 30, 2021 and December 31, 2020 was $448 and $257, respectively. A summary of the components of our net working capital as of September 30, 2021 and December 31, 2020 is as follows:

	September 30, 2021		% of LTM Net Sales		December 31, 2020		% of LTM Net Sales
Accounts receivable	$	413	13	%	$	331	13	%
Inventories	395		12	%	265		11	%
Accounts payable	(360)		(11)	%	(339)		(14)	%
Net working capital (1)	$	448	14	%	$	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 $191 from December 31, 2020 was driven by an increase in accounts receivable of $82 and increase in inventory of $130, offset by an increase in accounts payable of $21. The increase in accounts receivable was driven by higher volumes and increased selling prices in the third quarter of 2021 as compared to the fourth quarter of 2020, the increase in inventories was driven by raw material price increases in 2021 and inventory buildup as we prepare for turnarounds in the fourth quarter of 2021. The increase in accounts payable was largely related to raw material price increases in 2021 and negotiations with vendors to contractually extend payment

Hexion Inc. | 32 | Q3 2021 Form 10-Q

Table of Contents                 

terms when possible. Additionally, we continue to review inventory safety stock levels to efficiently meet customer demand and negotiate with vendors to contractually extend payment terms whenever possible.

Sources and Uses of Cash

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

	Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Sources (uses) of cash:
Operating activities	$	106	$	(37)
Investing activities	235		(76)
Financing activities	(179)		20
Effect of exchange rates on cash flow	—		(2)
Net change in cash and cash equivalents	$	162	$	(95)

Operating Activities

In the nine months ended September 30, 2021, operations provided $106 of cash. Net income from continuing operations of $103 included $178 of net non-cash expense items, consisting of depreciation and amortization of $148, non-cash stock based compensation expense of $23, loss on sale of assets of $2 and unrealized foreign currency gains of $8, partially offset by a deferred tax benefit of $3. Net working capital used $198, which was driven by an increase in accounts receivable, an increase in inventory, offset by an increase in accounts payable, due primarily to raw material price increases, expanded vendor payment terms and increased volumes. Changes in other assets and liabilities and income taxes payable provided $23 due to the timing of when items were expensed versus paid, which primarily included operating lease expense, interest expense, employee retention programs, variable compensation, pension plan contributions and taxes.

In the nine months ended September 30, 2020, operations used $37 of cash. Net loss from continuing operations of $124 included $182 of net non-cash income items. consisting of depreciation and amortization of $143, non-cash asset impairments of $16, non-cash stock based compensation expense of $13 and a deferred tax expense of $5, partially offset by unrealized foreign currency losses of $1 and other non-cash adjustments of $1. Net working capital used $38, which was driven by an increase in accounts receivable and a decrease in accounts payable, partially offset by a decrease in inventory, due primarily to raw material price decreases. Changes in other assets and liabilities and income taxes payable used $57 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 nine months ended September 30, 2020, we contributed $23 to our defined benefit international pension plans in excess of our pension expense.

Investing Activities

In the nine months ended September 30, 2021, investing activities provided $235 of cash primarily related to proceeds from the sale of our Phenolic Specialty Resins, Hexamine and European-based Forest Product Resins businesses of $304 and proceeds from sale of assets of $11, partially offset by capital expenditures of $80.

In the nine months ended September 30, 2020, investing activities used $76 of cash primarily related to capital expenditures of $78, partially offset by proceeds from sale of assets of $2.

Financing Activities

In the nine months ended September 30, 2021, financing activities used $179 of cash. Net short-term debt payments were $8 and net long-term debt repayments were $170. Net long-term repayments primarily consisted of $150 from the net proceeds of the PSR, Hexamine, and European-based Forest Product Resins businesses sale to pay down the aggregate principal of the euro denominated tranche Senior Secured Term Loan.

In the nine months ended September 30, 2020, financing activities provided $20 of cash. Net short-term debt repayments were $12, net long-term debt borrowings were $42. Our long-term debt borrowings primarily consisted of $67 of ABL borrowings in the first quarter of 2020. The Company distributed a $10 affiliate loan to its Parent, which was used for share repurchases, which was subsequently settled with a return of capital.

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.

As we previously disclosed, our parent company Hexion Holdings Corporation, has filed a public S-1 for an IPO and are also reviewing our portfolio for optimization through potential divestitures, 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

Hexion Inc. | 33 | Q3 2021 Form 10-Q

Table of Contents                 

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.

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. | 34 | Q3 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:

	September 30, 2021
	LTM Period
Net income	$	63
Net loss from discontinued operations	(3)
Net income from continuing operations	66
Income tax expense	57
Interest expense, net	96
Depreciation and amortization	196
EBITDA	415
Adjustments to arrive at Pro Forma EBITDA:
Business realignment costs (1)	31
Realized and unrealized foreign currency gains	6
Unrealized losses on pension and postretirement benefits (2)	4
Transaction costs (3)	25
Other non-cash items (4)	50
Other (5)	11
Pro Forma EBITDA	$	542
Pro forma fixed charges (6)	$	79
Ratio of Pro Forma EBITDA to Fixed Charges (7)	6.86

(1)Primarily represents costs related to certain in-process cost reduction activities, including severance costs of $3, $4 related to certain in-process facility rationalizations, $8 of contractual costs for exited businesses, $2 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 $8.

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

(3)Represents certain professional fees related to strategic projects and the costs associated with the set up of our transition services agreement.

(4)Primarily includes expenses for retention programs of $7, fixed asset disposals of $14 and share-based compensation costs of $27.

(5)Primarily represents $4 of expenses related to legacy expenses and other non-recurring items, $8 of business optimization expense, $4 related to financing fees and other expenses, offset by $4 of gain on dispositions.

(6)Reflects pro forma interest expense based on interest rates at September 30, 2021.

(7)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. | 35 | Q3 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 nine 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 September 30, 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 September 30, 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. | 36 | Q3 2021 Form 10-Q

Table of Contents                 

PART II - OTHER INFORMATION

Item 1.        Legal Proceedings

There have been no other material developments during the third 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 third 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. | 37 | Q3 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.”

Hexion Inc. | 38 | Q3 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:	November 12, 2021	/s/ George F. Knight
		George F. Knight
		Executive Vice President, Chief Financial Officer
		(Principal Financial Officer)

Hexion Inc. | 39 | Q3 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: November 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: November 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 September 30, 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
November 12, 2021	November 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	9 Months Ended
	Sep. 30, 2021	Nov. 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	Sep. 30, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
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	Sep. 30, 2021	Dec. 31, 2020
Current assets
Cash and cash equivalents (including restricted cash of $2 and $4, respectively)	$ 354	$ 204
Accounts receivable (net of allowance for doubtful accounts of $3 and $3, respectively)	413	331
Inventories:
Finished and in-process goods	273	180
Raw materials and supplies	122	85
Total current assets held for sale	5	114
Other current assets	51	39
Total current assets	1,218	953
Investment in unconsolidated entities	12	10
Deferred Tax Assets, Net	7	7
Long-term assets held for sale (see Note 4)	0	342
Other long-term assets	77	85
Property and equipment
Land	78	79
Buildings	124	122
Machinery and equipment	1,294	1,270
Property, plant and equipment, gross	1,496	1,471
Less accumulated depreciation	(309)	(212)
Property, plant and equipment, net	1,187	1,259
Operating lease assets	94	103
Goodwill	164	164
Other intangible assets, net	1,025	1,079
Total assets	3,784	4,002
Current liabilities
Accounts payable	360	339
Debt payable within one year	47	82
Interest payable	19	30
Income taxes payable	38	6
Accrued payroll and incentive compensation	71	42
Current liabilities associated with assets held for sale (see Note 4)	3	70
Current portion of operating lease liabilities	16	19
Other current liabilities	104	111
Total current liabilities	658	699
Long-term liabilities
Long-term debt	1,546	1,710
Long-term pension and post employment benefit obligations	228	250
Deferred income taxes	147	161
Operating lease liabilities	71	76
Long-term liabilities associated with assets held for sale (see Note 4)	0	74
Other long-term liabilities	207	209
Total liabilities	2,857	3,179
Equity
Common stock —$0.01 par value; 100 shares authorized, issued and outstanding	0	0
Paid-in capital	1,192	1,169
Accumulated other comprehensive loss	(44)	(27)
Accumulated deficit	(221)	(319)
Total equity	927	823
Total liabilities and equity	$ 3,784	$ 4,002
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
net allowance for doubtful accounts	$ 3	$ 3

XML

Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Cash and Cash Equivalents
Restricted Cash and Cash Equivalents, Current	$ 2	$ 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		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Net sales	$ 945	$ 634	$ 2,550	$ 1,855
Cost of Goods and Services Sold	702	500	1,922	1,514
Selling, general and administrative expense	90	56	243	164
Depreciation and amortization	48	47	148	143
Asset impairments	0	0	0	16
Business realignment costs	6	19	19	57
Other operating expense, net	2	4	2	15
Operating income (loss)	97	8	216	(54)
Interest expense, net	24	25	72	76
Other non-operating income, net	(1)	(8)	(8)	12
Reorganization Items	0
Income (loss) from continuing operations before income tax and earnings from unconsolidated entities	74	(9)	152	(118)
Income tax expense	26	17	51	8
Income (loss) from continuing operations before earnings from unconsolidated entities	(48)	26	101	(126)
Earnings from unconsolidated entities, net of taxes	1	0	2	2
Income (loss) from continuing operations before earnings from unconsolidated entities	49	(26)	103	(124)
Income (Loss) from Discontinued Operations, Net of Tax, Attributable to Parent	0	(68)	(5)	(71)
Net Income (Loss) Attributable to Parent	$ 49	$ (94)	$ 98	$ (195)

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Net Income (Loss) Attributable to Parent	$ 49	$ (94)	$ 98	$ (195)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	(14)	7	(23)	(29)
Unrealized gain (loss) on cash flow hedge	1	(1)	6	(19)
Other comprehensive (loss) income	(13)	6	(17)	(48)
Comprehensive income (loss)	$ 36	$ (88)	$ 81	$ (243)

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash flows provided by (used in) operating activities
Net Income (Loss) Attributable to Parent	$ 98	$ (195)
Loss from discontinued operations, net of taxes	(5)	(71)
Net income (loss) from continuing operations	103	(124)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	148	143
Non-cash asset impairments	0	16
Deferred Income Tax Expense (Benefit)	(3)	5
Loss on sale of assets and dispositions	2	7
Unrealized foreign currency losses (gains)	8	(1)
Non-cash stock based compensation expense	23	13
Other non-cash adjustments	0	(1)
Net change in assets and liabilities:
Accounts receivable	(93)	(55)
Inventories	(139)	31
Accounts payable	34	(14)
Income taxes payable	38	(8)
Other assets, current and non-current	(2)	(27)
Other liabilities, current and long-term	(13)	(22)
Net cash provided by (used in) operating activities from continuing operations	106	(37)
Net cash (used in) provided by operating activities from discontinued operations	(1)	12
Net Cash Provided by (Used in) Operating Activities	105	(25)
Cash flows provided by (used in) investing activities
Capital expenditures	(80)	(78)
Proceeds from disposition of Held for Sale Business (see Note 4)	304	0
Proceeds from sale of assets and other dispositions	11	2
Net cash provided by (used in) investing activities from continuing operations	235	(76)
Net cash used in investing activities from discontinued operations	(6)	(13)
Net cash provided by (used in) investing activities	229	(89)
Cash flows (used in) provided by financing activities
Net short-term debt borrowings	(8)	(12)
Borrowings of long-term debt	131	209
Repayments of long-term debt	(301)	(167)
Return of Capital from parent	0	(10)
Long-term debt and credit facility financing fees	1	0
Net cash (used in) provided by financing activities	(179)	20
Effect of exchange rates on cash and cash equivalents, including restricted cash	0	(2)
Change in cash and cash equivalents, including restricted cash and cash classified within current assets held for sale	155	(96)
Increase (Decrease) in cash classified as held for sale	(5)	0
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning Balance	204	254
Cash, cash equivalents and restricted cash at end of period	354	158
Supplemental disclosures of cash flow information
Interest, net	80	88
Income taxes, net of cash refunds	$ 21	$ 12

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	(195)
Net income (loss)	(195)	0	0	0	0	(195)
Employee Benefits and Share-based Compensation	13	0	13	0	0	0
Other comprehensive income	(48)	0	0	0	(48)	0
Return of Capital from parent	(10)	0	(10)	0	0	0
Disbursement of affiliate loan	(10)	0	0	(10)	0	0
Settlement of affiliate loan	10	0	0	10	0	0
Balance at Sep. 30, 2020	835	0	1,168	0	(49)	(284)
Balance at Jun. 30, 2020	919	0	1,164	0	(55)	(190)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss) Attributable to Parent	(94)
Net income (loss)	(94)	0	0	0	0	(94)
Employee Benefits and Share-based Compensation	4	0		0	0	0
Other comprehensive income	6	0	0	0	6	0
Balance at Sep. 30, 2020	835	0	1,168	0	(49)	(284)
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	98
Net income (loss)	98	0	0	0	0	98
Employee Benefits and Share-based Compensation	23	0	23	0	0	0
Other comprehensive income	(17)	0	0	0	(17)	0
Return of Capital from parent	0
Balance at Sep. 30, 2021	927	0	1,192	0	(44)	(221)
Balance at Jun. 30, 2021	883	0	1,184	0	(31)	(270)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income (Loss) Attributable to Parent	49
Net income (loss)	49	0	0	0	0	49
Employee Benefits and Share-based Compensation	8	0	8	0	0	0
Other comprehensive income	(13)	0	0	0	(13)	0
Balance at Sep. 30, 2021	$ 927	$ 0	$ 1,192	$ 0	$ (44)	$ (221)

XML

Background and Basis of Presentation

9 Months Ended

Sep. 30, 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 September 30, 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. We have made rounding adjustments to some of the figures included in this filing. Numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them. 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”, “Q3 2021 Form 10-Q” or “Report”) for the period ended September 30, 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 proceeds of up to $90 is based on the performance of the Held for Sale Business over the three year period after the completion of the sale. Payments will be based on the amount of actual EBITDA (as defined in the Purchase Agreement) above targeted EBITDA amounts of $45, $50 and $60 in 2021, 2022 and 2023, respectively. The maximum payout per year under the earnout are $40, $35 and $15 respectively. The Company completed the sale of the Held for Sale Business on April 30, 2021. For more information, see Note 4 “Discontinued Operations”.

For the nine months ended September 30, 2021, we reported the results of the operations as a “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. As of December 31, 2020, we reclassified the assets and liabilities of our Held for Sale Business as held for sale on the unaudited Condensed Consolidated Balance Sheets.

Additionally, the Company has included $4, $7 and $11 in “Net sales” and “Cost of sales” within the Company’s continuing operations for the three months ended September 30, 2020 and nine months ended September 30, 2021 and 2020, respectively. There were no sales included for the three months ended September 30, 2021. These represent 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 income (loss)” 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.

XML

Significant Accounting Policies

9 Months Ended

Sep. 30, 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 $11 and $5 is recorded within “Other current assets” at September 30, 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 $2 and $4 at September 30, 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 September 30, 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 September 30, 2021 and December 31, 2020 to reduce accounts receivable for estimated expected credit losses. Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. There were $1 of write-offs for the three and nine months ended September 30, 2021 and no write-offs for the three and nine months ended September 30, 2020.

Financial Statement Presentation — In the fourth quarter 2020, we identified certain errors within our condensed consolidated financial statements for the three and nine months ended September 30, 2020:

•Approximately $13 associated with an insurance premium financing arrangement was incorrectly disclosed as a non-cash financing activity but should have been classified as an operating cash outflow from continuing operations and financing cash inflow;

•“Net cash used in operating activities from continuing operations” was overstated by approximately $13 and “Net cash (used in) provided by operating activities from discontinued operations” was understated by approximately $13 due to activity within “Other assets, current and non-current” being incorrectly classified; and

•The impairment charge recognized with respect to our Held for Sale Business was overstated by approximately $8 which also resulted in an understatement of the Assets Held for Sale as of September 30, 2020.

Based upon quantitative and qualitative assessments, we determined that these adjustments were not material to the previously issued interim financial statements. The impacts to the previously issued interim financial statements are shown in the tables below.

Condensed Consolidated Statement of Cash Flows (Nine Months Ended September 30, 2020) (unaudited)

Line Item	As Previously Reported		Adjustments		As Revised
Net income (loss)	$	(203)	$	8	$	(195)
Loss from discontinued operations, net of taxes	(79)		8		(71)
Other assets, current and non-current	(1)		(26)		(27)
Net cash provided by (used in) operating activities from continuing operations	(11)		(26)		(37)
Net cash (used in) provided by operating activities from discontinued operations	(1)		13		12
Net cash provided by (used in) operating activities	$	(12)	$	(13)	$	(25)
Net short-term debt repayments	$	(25)	$	13	$	(12)
Net cash (used in) provided by financing activities	$	7	$	13	$	20

Condensed Consolidated Statement of Operations (Three Months Ended September 30, 2020) (unaudited)

Line Item	As Previously Reported		Adjustment (1)		As Revised
Loss from discontinued operations, net of taxes	$	(76)	$	8	$	(68)
Net income (loss)	(102)		8		(94)
Net loss attributable to Hexion Inc.	(102)		8		(94)

Condensed Consolidated Statement of Operations (Nine Months Ended September 30, 2020) (unaudited)

Line Item	As Previously Reported		Adjustment (1)		As Revised
Loss from discontinued operations, net of taxes	$	(79)	$	8	$	(71)
Net income (loss)	(203)		8		(195)
Net loss attributable to Hexion Inc.	(203)		8		(195)

(1)The $8 adjustment summarized above impacts the “Asset impairments” caption within the financial results table in the Discontinued Operations footnote. The adjustment also impacts “Comprehensive loss” and “Accumulated deficit.”

Subsequent Events—The Company has evaluated events and transactions subsequent to September 30, 2021 through the date of issuance of its unaudited Condensed Consolidated Financial Statements.

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.

XML

COVID-19 Impacts

9 Months Ended

Sep. 30, 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 September 30, 2021. Though the Company’s strong results reflect a recovering economy, the impact of COVID-19 continues to evolve, and its ultimate impact 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 its variants 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 September 30, 2021, the United States, and the global regions where the Company operates, continue to be affected by COVID-19 and its variants. 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.

XML

Discontinued Operations and Disposal Groups

9 Months Ended

Sep. 30, 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 received to date consists of $335 in cash and certain assumed liabilities. The remainder in future proceeds of up to $90 is based on the performance of the Held for Sale Business over the three year period after the completion of the sale. Payments will be based on the amount of actual EBITDA (as defined in the Purchase Agreement) above targeted EBITDA amounts of $45, $50 and $60 in 2021, 2022, and 2023, respectively. The maximum payout per year under the earnout are $40, $35, and $15, respectively. 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 positive subsequent post-closing adjustment to the purchase price of $2 was 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 provided certain transitional services to the buyers for an initial period of six months which ended in October 2021 pursuant to the Transitional Services Agreement, certain services have been extended for an additional three months and may be extended an additional period 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 disposed in the transaction included 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 Held for Sale Business generated sales of $216 and $360 through the disposition date of April 30, 2021 for the nine months ended September 30, 2021 and for the nine months ended September 30, 2020, respectively. Until the closing date, the Company operated the Held for Sale Business in the ordinary course.

For the nine months ended September 30, 2021, we reported the results of the operations as a “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. As of December 31, 2020, we reclassified the assets and liabilities of our Held for Sale Business as held for sale on the unaudited Condensed Consolidated Balance Sheets.

The Held for Sale business reported $14 of goodwill and $61 of other intangible assets at 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 was 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 the Company completed the sale on April 30, 2021, there were no balances reported on the unaudited Condensed Consolidated Balance Sheet at September 30, 2021.

As a result of entering into the Purchase Agreement, the Company recognized a pre-tax charge of $16 during the nine months ended September 30, 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 the closing date 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 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 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:

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

In addition to the Held for Sale Business assets and liabilities classified as held for sale in the table above, the Company’s unaudited Condensed Consolidated Balance Sheet at September 30, 2021 includes an additional $5 of current assets held for sale and $3 of current liabilities. The Company’s Consolidated Balance Sheet as of December 31, 2020 also includes $1 of current assets held for sale, noncurrent assets held for sale of $5, current liabilities associated with assets held for sale of $3 and noncurrent liabilities associated with assets held for sale of $3. These additional assets and liabilities classified as “held for sale” at September 30, 2021 and December 31, 2020 are related to the Company’s other restructuring activities.

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

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020(1)		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020(1)
Major line items constituting pretax income of discontinued operations:
Net sales	$	—	$	120	$	216	$	360
Cost of sales (exclusive of depreciation and amortization)	—		100		183		301
Selling, general and administrative expense	—		11		16		33
Depreciation and amortization	—		8		—		26
Loss on sale of business	—		—		10		—
Asset impairments	—		67		16		67
Business realignment costs	—		—		—		1
Operating loss	—		(66)		(9)		(68)
Other non-operating expense (income), net	—		1		(5)		1
Loss from discontinued operations before income tax and earnings from unconsolidated entities	—		(67)		(4)		(69)
Income tax expense	—		2		2		3
Loss from discontinued operations, net of tax	$	—	$	(69)	$	(6)	$	(72)
Earnings from unconsolidated entities, net of tax	—		1		1		1
Net loss attributable to discontinued operations	$	—	$	(68)	$	(5)	$	(71)

(1)The three and nine months ended September 30, 2020 have been revised. See Note 2 for more information.

XML

Asset Impairments	9 Months Ended
	Sep. 30, 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 nine months ended September 30, 2020. There were no asset impairments recognized for the three and nine months ended September 30, 2021 or the three months ended September 30, 2020.

XML

Related Party Transactions

9 Months Ended

Sep. 30, 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 Hexion Holdings Corporation (the “Parent” or “Hexion Holdings”) 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 September 30, 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 $1 than for the three months ended September 30, 2021 and $1 for the nine months ended September 30, 2021, and less than $1 for the three and nine months ended September 30, 2020. There were no purchases from joint ventures for the three and nine months ended September 30, 2021. There were no accounts receivable from joint ventures at September 30, 2021 and less than $1 at December 31, 2020. There were no accounts payable at September 30, 2021 and December 31, 2020. Joint venture activity is primarily driven by the Russia JV which the Company sold as part of the sale of its Held for Sale Business. The Company had a loan receivable from the Russia JV of $4 at December 31, 2020, which was recorded in “Long-term assets held for sale,” and was settled with the sale in April 2021.

XML

Fair Value

9 Months Ended

Sep. 30, 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 September 30, 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 nine months ended September 30, 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 September 30, 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 ($708 outstanding at September 30, 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:

		September 30, 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	$	(9)	$	300	$	(15)
Total derivatives designated as hedging instruments				$	(9)			$	(15)

	Amount of Gain (Loss) Recognized in OCI on Derivatives
Derivatives designated as hedging instruments	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Interest Rate Swaps
Interest Rate Swap	$	1	$	(1)	$	6	$	(19)
Total	$	1	$	(1)	$	6	$	(19)

In both the three and nine months ended September 30, 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
September 30, 2021
Debt	$	1,593	$	—	$	1,583	$	48	$	1,631
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.

XML

Debt Obligations

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Debt Obligations

Debt Obligations

Debt outstanding at September 30, 2021 and December 31, 2020 is as follows:

	September 30, 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 $5 and $6 of unamortized debt discount)	696		7		701		7
Senior Secured Term Loan - EUR due 2026 (includes $2 and $4 of unamortized debt discount)	345		—		515		—
Senior Notes:
7.875% Senior Notes due 2027	450		—		450		—
Other Borrowings:
Australia Facility due 2026(1)	29		—		—		30
Brazilian bank loans	—		13		2		22
Lease obligations (2)	26		22		42		14
Other	—		5		—		9
Total(3)	$	1,546	$	47	$	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 as of September 30, 2021 compared to December 31, 2020.

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 $150 in aggregate principal of the euro denominated Senior Secured Term Loan - EUR . See Note 4 for more information regarding sale of the Held for Sale Business in April 2021.

XML

Commitments and Contingencies

9 Months Ended

Sep. 30, 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 September 30, 2021 and December 31, 2020:

	Liability				Range of Reasonably Possible Costs at September 30, 2021
Site Description	September 30, 2021(1)		December 31, 2020(2)		Low		High
Geismar, LA	$	12	$	12	$	9	$	22
Superfund and offsite landfills – allocated share:
Less than 1%	2		3		1		3
Equal to or greater than 1%	7		6		6		14
Currently-owned	5		8		3		15
Formerly-owned:
Remediation	15		18		14		33
Monitoring only	—		—		—		1
Total	$	41	$	47	$	33	$	88

(1)The table includes approximately $3 of environmental remediation liabilities at September 30, 2021 related to assets held for sale related to the Company’s other restructuring activities and are included in the “Current liabilities associated with assets held for sale” within the unaudited Condensed Consolidated Balance Sheets.

(2)The table includes approximately $2 of environmental remediation liabilities related to the Held for Sale Business at 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 September 30, 2021, and December 31, 2020, $12 and $14, respectively, 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 September 30, 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 is involved in various legal proceedings in the ordinary course of business and had reserves of $1 at both September 30, 2021 and December 31, 2020, for all non-environmental legal defense costs incurred and settlement costs that it believes are probable and estimable. At September 30, 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.

XML

Pension and Postretirement Expense

9 Months Ended

Sep. 30, 2021

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefit Plans

Pension and Postretirement Benefit PlansThe 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 and nine months ended September 30, 2021 and 2020.

Following are the components of net pension benefit cost recognized by the Company for the three and nine months ended September 30, 2021 and 2020:

	Pension Benefits
	Three Months Ended September 30, 2021				Three Months Ended September 30, 2020				Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2020
	U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans
Service cost	$	1	$	5	$	1	$	4	$	2	$	15	$	2	$	13
Interest cost on projected benefit obligation	—		1		1		2		2		4		4		5
Expected return on assets	(3)		(4)		(3)		(4)		(9)		(11)		(9)		(10)
Net (benefit) expense(1)	$	(2)	$	2	$	(1)	$	2	$	(5)	$	8	$	(3)	$	8

(1)Includes less than $1 of net pension expense for non-U.S. plans related to the Held for Sale Business during both the nine months ended September 30, 2021 and the three and nine months ended September 30, 2020. These associated costs have been included in “Loss from discontinued operations, net of taxes” within the unaudited Condensed Consolidated Statements of Operations.

As of September 30, 2021 and December 31, 2020, the Company had a prepaid pension asset of $59 and $52 included in “Other Current Assets” within the Company’s unaudited Condensed Consolidated Balance Sheets related to the Company’s Netherlands’ defined benefit pension plan as a result of required contributions exceeding amounts expensed.

As of September 30, 2021 and December 31, 2020, the Company had a pension liability of $213 and $236, respectively, and a non-pension postretirement benefit liability of $12 and $11, respectively. These liabilities are included in “Long-term pension and post employment benefit obligations” within the Company’s unaudited Condensed Consolidated Balance Sheets. As of December 31, 2020, the Company had $36 of pension obligation classified as held for sale on the Condensed Consolidated Balance Sheet, and these obligations were part of the disposal of the Held for Sale Business on April 30, 2021.

In October 2021, certain amendments related to one of the Company’s foreign pension plans were approved by European Works Councils and unions to go in effect in 2022. The company is evaluating the impact of the change on its projected benefit obligation, but we expect it will result in a curtailment gain and reduce the Company’s projected benefit obligation by an approximate range of $9 to $12.

XML

Stock Compensation (Notes)

9 Months Ended

Sep. 30, 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 nine months of 2021, Hexion Holdings granted 592,076 Restricted Stock Units (“RSUs”) to certain employees and non-employee directors that time vest over three years with a weighted average grant date fair value of $15.37 per share. Additionally, Hexion Holdings granted 759,390 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 September 30, 2021, the Company’s performance conditions underlying the PSU's were considered probable of occurring and thus stock-based compensation expense has been recorded for the 2020 and 2021 grants.

The Company recognized $8 and $4 of stock-based compensation costs for the three months ended September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021 and 2020, the Company recognized $23 and $13, respectively. The amounts are included in “Selling, general and administrative expense” in the unaudited Condensed Consolidated Statements of Operations.

The Company’s Parent had 58,567,100 shares of common stock outstanding and approximately 10,177,908 warrants outstanding as of September 30, 2021. The Company’s Parent had 2,446,680 RSUs and 3,929,999 PSUs outstanding as of September 30, 2021.

XML

Segment Information

9 Months Ended

Sep. 30, 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 September 30, 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 and global formaldehyde businesses, with assets in North America, Latin America, Australia and New Zealand. Adhesives also includes the oilfield technology group.

•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™ acid 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 variable 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 September 30, 2021						Three Months Ended September 30, 2020
	Adhesives		Coatings and Composites		Total		Adhesives		Coatings and Composites		Total
North America	$	325	$	224	$	549	$	221	$	122	$	343
Europe	—		249		249		5		132		137
Asia Pacific	44		44		88		34		87		121
Latin America	59		—		59		33		—		33
Total	$	428	$	517	$	945	$	293	$	341	$	634
	Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
	Adhesives		Coatings and Composites		Total		Adhesives		Coatings and Composites		Total
North America	$	908	$	540	$	1,448	$	670	$	379	$	1,049
Europe	10		632		642		14		393		407
Asia Pacific	123		180		303		96		209		305
Latin America	157		—		157		94		—		94
Total	$	1,198	$	1,352	$	2,550	$	874	$	981	$	1,855

(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 September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Reconciliation:
Net income (loss)	$	49	$	(94)	$	98	$	(195)
Less: Net loss from discontinued operations	—		(68)		(5)		(71)
Net income (loss) from continuing operations	$	49	$	(26)	$	103	$	(124)
Income tax expense	26		17		51		8
Interest expense, net	24		25		72		76
Depreciation and amortization (1)	48		47		148		143
EBITDA	147		63		374		103
Adjustments to arrive at Segment EBITDA:
Asset impairments	$	—	$	—	$	—	$	16
Business realignment costs (2)	6		19		19		57
Transaction costs (3)	16		1		23		4
Realized and unrealized foreign currency losses (gains)	5		(3)		9		2
Other non-cash items (4)	11		6		36		29
Other (5)	3		5		1		9
Total adjustments	41		28		88		117
Segment EBITDA	$	188	$	91	$	462	$	220
Segment EBITDA:
Adhesives	$	72	$	58	$	215	$	156
Coatings and Composites	138		50		311		115
Corporate and Other	(22)		(17)		(64)		(51)
Total	$	188	$	91	$	462	$	220

(1)For both the nine months ended September 30, 2021 and 2020, accelerated depreciation of $2 has been included in “Depreciation and amortization.” There was no accelerated depreciation for both the three months ended September 30, 2021 and 2020.

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

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Severance costs	$	1	$	4	$	1	$	14
In-process facility rationalizations	1		3		3		10
Contractual costs from exited businesses	2		2		6		6
Business services implementation	1		6		4		18
Legacy environmental reserves	1		4		1		8
Other	—		—		4		1
Total	$	6	$	19	$	19	$	57

(3)For the nine months ended September 30, 2021, transaction costs represent the costs associated with professional fees related to strategic projects and the set up of our transition services agreement related to the Held for Sale Business. For the three months ended September 30, 2021 and for the three and nine months ended September 30, 2020, transaction costs primarily included certain professional fees related to strategic projects.

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

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Fixed asset write-offs	$	2	$	—	$	7	$	6
Stock-based compensation costs	8		4		23		13
Long-term retention programs	1		1		5		7
Other	—		1		1		3
Total	$	11	$	6	$	36	$	29

(5)Other for the periods presented below included:

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Legacy and other non-recurring items	$	1	$	2	$	3	$	7
IT outage recoveries, net	—		—		—		(4)
Gain on sale of assets	—		—		(4)		—
Financing fees and other	2		3		2		6
Total	$	3	$	5	$	1	$	9

XML

Changes in Accumulated Other Comprehensive Income (Notes)

9 Months Ended

Sep. 30, 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 and nine months ended September 30, 2021 and 2020:

	Foreign Currency Translation Adjustments		Cash Flow Hedge		Total
Balance at June 30, 2020	$	(39)	$	(16)	$	(55)
Change in value	7		(1)		6
Balance at September 30, 2020	$	(32)	$	(17)	$	(49)
Balance at December 31, 2019	$	(3)	$	2	$	(1)
Change in value	(29)		(19)		(48)
Balance at September 30, 2020	$	(32)	$	(17)	$	(49)
Balance at June 30, 2021	$	(20)	$	(11)	$	(31)
Change in value	(14)		1		(13)
Balance at September 30, 2021	$	(34)	$	(10)	$	(44)
Balance at December 31, 2020	$	(11)	$	(16)	$	(27)
Change in value	(23)		6		(17)
Balance at September 30, 2021	$	(34)	$	(10)	$	(44)

XML

Income Taxes (Notes)

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Income Taxes

The income tax expense (benefit) for the three months ended September 30, 2021 and 2020 was $26 and $17, respectively. The income tax expense (benefit) for the nine months ended September 30, 2021 and 2020 was $51 and $8, respectively. The income tax (benefit) expense is comprised of tax expense on income and tax benefit on losses from certain foreign operations in 2020 and from the United States and certain foreign operations in 2021. In 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. In 2021, losses in 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 September 30, 2021 and 2020 was 35% and (189)%, respectively. The effective tax rate for the nine months ended September 30, 2021 and 2020 was 34% and (7)%, respectively. The difference between the effective rate and the statutory rate in each period was primarily attributable to the amount and distribution of income and losses among the various jurisdictions in which the Company operates. The primary jurisdictions with significantly different effective and statutory tax rates for the three months ended September 30, 2021 were the Netherlands, Brazil, and Canada. 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.

XML

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

Sep. 30, 2020

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 $11 and $5 is recorded within “Other current assets” at September 30, 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 $2 and $4 at September 30, 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 September 30, 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 September 30, 2021 and December 31, 2020 to reduce accounts receivable for estimated expected credit losses. Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. There were $1 of write-offs for the three and nine months ended September 30, 2021 and no write-offs for the three and nine months ended September 30, 2020

no

Goodwill and Intangible Assets, Goodwill, Policy

Subsequent Events, Policy [Policy Text Block]

Subsequent Events—The Company has evaluated events and transactions subsequent to September 30, 2021 through the date of issuance of its unaudited Condensed Consolidated Financial Statements.

Financial Statement Presentation

Financial Statement Presentation — In the fourth quarter 2020, we identified certain errors within our condensed consolidated financial statements for the three and nine months ended September 30, 2020:

•Approximately $13 associated with an insurance premium financing arrangement was incorrectly disclosed as a non-cash financing activity but should have been classified as an operating cash outflow from continuing operations and financing cash inflow;

•“Net cash used in operating activities from continuing operations” was overstated by approximately $13 and “Net cash (used in) provided by operating activities from discontinued operations” was understated by approximately $13 due to activity within “Other assets, current and non-current” being incorrectly classified; and

•The impairment charge recognized with respect to our Held for Sale Business was overstated by approximately $8 which also resulted in an understatement of the Assets Held for Sale as of September 30, 2020.

Based upon quantitative and qualitative assessments, we determined that these adjustments were not material to the previously issued interim financial statements. The impacts to the previously issued interim financial statements are shown in the tables below.

Condensed Consolidated Statement of Cash Flows (Nine Months Ended September 30, 2020) (unaudited)

Line Item	As Previously Reported		Adjustments		As Revised
Net income (loss)	$	(203)	$	8	$	(195)
Loss from discontinued operations, net of taxes	(79)		8		(71)
Other assets, current and non-current	(1)		(26)		(27)
Net cash provided by (used in) operating activities from continuing operations	(11)		(26)		(37)
Net cash (used in) provided by operating activities from discontinued operations	(1)		13		12
Net cash provided by (used in) operating activities	$	(12)	$	(13)	$	(25)
Net short-term debt repayments	$	(25)	$	13	$	(12)
Net cash (used in) provided by financing activities	$	7	$	13	$	20

Condensed Consolidated Statement of Operations (Three Months Ended September 30, 2020) (unaudited)

Line Item	As Previously Reported		Adjustment (1)		As Revised
Loss from discontinued operations, net of taxes	$	(76)	$	8	$	(68)
Net income (loss)	(102)		8		(94)
Net loss attributable to Hexion Inc.	(102)		8		(94)

Condensed Consolidated Statement of Operations (Nine Months Ended September 30, 2020) (unaudited)

Line Item	As Previously Reported		Adjustment (1)		As Revised
Loss from discontinued operations, net of taxes	$	(79)	$	8	$	(71)
Net income (loss)	(203)		8		(195)
Net loss attributable to Hexion Inc.	(203)		8		(195)

(1)The $8 adjustment summarized above impacts the “Asset impairments” caption within the financial results table in the Discontinued Operations footnote. The adjustment also impacts “Comprehensive loss” and “Accumulated deficit.”

XML

Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Effect of Fourth Quarter Events

Condensed Consolidated Statement of Cash Flows (Nine Months Ended September 30, 2020) (unaudited)

Line Item	As Previously Reported		Adjustments		As Revised
Net income (loss)	$	(203)	$	8	$	(195)
Loss from discontinued operations, net of taxes	(79)		8		(71)
Other assets, current and non-current	(1)		(26)		(27)
Net cash provided by (used in) operating activities from continuing operations	(11)		(26)		(37)
Net cash (used in) provided by operating activities from discontinued operations	(1)		13		12
Net cash provided by (used in) operating activities	$	(12)	$	(13)	$	(25)
Net short-term debt repayments	$	(25)	$	13	$	(12)
Net cash (used in) provided by financing activities	$	7	$	13	$	20

Condensed Consolidated Statement of Operations (Three Months Ended September 30, 2020) (unaudited)

Line Item	As Previously Reported		Adjustment (1)		As Revised
Loss from discontinued operations, net of taxes	$	(76)	$	8	$	(68)
Net income (loss)	(102)		8		(94)
Net loss attributable to Hexion Inc.	(102)		8		(94)

Condensed Consolidated Statement of Operations (Nine Months Ended September 30, 2020) (unaudited)

Line Item	As Previously Reported		Adjustment (1)		As Revised
Loss from discontinued operations, net of taxes	$	(79)	$	8	$	(71)
Net income (loss)	(203)		8		(195)
Net loss attributable to Hexion Inc.	(203)		8		(195)

(1)The $8 adjustment summarized above impacts the “Asset impairments” caption within the financial results table in the Discontinued Operations footnote. The adjustment also impacts “Comprehensive loss” and “Accumulated deficit.”

XML

Discontinued Operations and Disposal Groups (Tables)

9 Months Ended

Sep. 30, 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:

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

In addition to the Held for Sale Business assets and liabilities classified as held for sale in the table above, the Company’s unaudited Condensed Consolidated Balance Sheet at September 30, 2021 includes an additional $5 of current assets held for sale and $3 of current liabilities. The Company’s Consolidated Balance Sheet as of December 31, 2020 also includes $1 of current assets held for sale, noncurrent assets held for sale of $5, current liabilities associated with assets held for sale of $3 and noncurrent liabilities associated with assets held for sale of $3. These additional assets and liabilities classified as “held for sale” at September 30, 2021 and December 31, 2020 are related to the Company’s other restructuring activities.

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

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020(1)		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020(1)
Major line items constituting pretax income of discontinued operations:
Net sales	$	—	$	120	$	216	$	360
Cost of sales (exclusive of depreciation and amortization)	—		100		183		301
Selling, general and administrative expense	—		11		16		33
Depreciation and amortization	—		8		—		26
Loss on sale of business	—		—		10		—
Asset impairments	—		67		16		67
Business realignment costs	—		—		—		1
Operating loss	—		(66)		(9)		(68)
Other non-operating expense (income), net	—		1		(5)		1
Loss from discontinued operations before income tax and earnings from unconsolidated entities	—		(67)		(4)		(69)
Income tax expense	—		2		2		3
Loss from discontinued operations, net of tax	$	—	$	(69)	$	(6)	$	(72)
Earnings from unconsolidated entities, net of tax	—		1		1		1
Net loss attributable to discontinued operations	$	—	$	(68)	$	(5)	$	(71)

XML

Fair Value (Tables)

9 Months Ended

Sep. 30, 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:

		September 30, 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	$	(9)	$	300	$	(15)
Total derivatives designated as hedging instruments				$	(9)			$	(15)

	Amount of Gain (Loss) Recognized in OCI on Derivatives
Derivatives designated as hedging instruments	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Interest Rate Swaps
Interest Rate Swap	$	1	$	(1)	$	6	$	(19)
Total	$	1	$	(1)	$	6	$	(19)

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
September 30, 2021
Debt	$	1,593	$	—	$	1,583	$	48	$	1,631
December 31, 2020
Debt	$	1,792	$	—	$	1,767	$	55	$	1,822

XML

Debt Obligations (Tables)

9 Months Ended

Sep. 30, 2021

Debt Instrument, Redemption [Line Items]

Schedule of Long-term Debt

Debt outstanding at September 30, 2021 and December 31, 2020 is as follows:

	September 30, 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 $5 and $6 of unamortized debt discount)	696		7		701		7
Senior Secured Term Loan - EUR due 2026 (includes $2 and $4 of unamortized debt discount)	345		—		515		—
Senior Notes:
7.875% Senior Notes due 2027	450		—		450		—
Other Borrowings:
Australia Facility due 2026(1)	29		—		—		30
Brazilian bank loans	—		13		2		22
Lease obligations (2)	26		22		42		14
Other	—		5		—		9
Total(3)	$	1,546	$	47	$	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 as of September 30, 2021 compared to December 31, 2020.

XML

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 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 September 30, 2021 and December 31, 2020:

	Liability				Range of Reasonably Possible Costs at September 30, 2021
Site Description	September 30, 2021(1)		December 31, 2020(2)		Low		High
Geismar, LA	$	12	$	12	$	9	$	22
Superfund and offsite landfills – allocated share:
Less than 1%	2		3		1		3
Equal to or greater than 1%	7		6		6		14
Currently-owned	5		8		3		15
Formerly-owned:
Remediation	15		18		14		33
Monitoring only	—		—		—		1
Total	$	41	$	47	$	33	$	88

(1)The table includes approximately $3 of environmental remediation liabilities at September 30, 2021 related to assets held for sale related to the Company’s other restructuring activities and are included in the “Current liabilities associated with assets held for sale” within the unaudited Condensed Consolidated Balance Sheets.

(2)The table includes approximately $2 of environmental remediation liabilities related to the Held for Sale Business at 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.

XML

Pension and Postretirement Expense (Tables)

9 Months Ended

Sep. 30, 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 and nine months ended September 30, 2021 and 2020:

	Pension Benefits
	Three Months Ended September 30, 2021				Three Months Ended September 30, 2020				Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2020
	U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans		U.S. Plans		Non-U.S. Plans
Service cost	$	1	$	5	$	1	$	4	$	2	$	15	$	2	$	13
Interest cost on projected benefit obligation	—		1		1		2		2		4		4		5
Expected return on assets	(3)		(4)		(3)		(4)		(9)		(11)		(9)		(10)
Net (benefit) expense(1)	$	(2)	$	2	$	(1)	$	2	$	(5)	$	8	$	(3)	$	8

(1)Includes less than $1 of net pension expense for non-U.S. plans related to the Held for Sale Business during both the nine months ended September 30, 2021 and the three and nine months ended September 30, 2020. These associated costs have been included in “Loss from discontinued operations, net of taxes” within the unaudited Condensed Consolidated Statements of Operations.

XML

Segment Information (Tables)

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Segment Sales by Geographic Region

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

	Three Months Ended September 30, 2021						Three Months Ended September 30, 2020
	Adhesives		Coatings and Composites		Total		Adhesives		Coatings and Composites		Total
North America	$	325	$	224	$	549	$	221	$	122	$	343
Europe	—		249		249		5		132		137
Asia Pacific	44		44		88		34		87		121
Latin America	59		—		59		33		—		33
Total	$	428	$	517	$	945	$	293	$	341	$	634
	Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020
	Adhesives		Coatings and Composites		Total		Adhesives		Coatings and Composites		Total
North America	$	908	$	540	$	1,448	$	670	$	379	$	1,049
Europe	10		632		642		14		393		407
Asia Pacific	123		180		303		96		209		305
Latin America	157		—		157		94		—		94
Total	$	1,198	$	1,352	$	2,550	$	874	$	981	$	1,855

(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 September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Reconciliation:
Net income (loss)	$	49	$	(94)	$	98	$	(195)
Less: Net loss from discontinued operations	—		(68)		(5)		(71)
Net income (loss) from continuing operations	$	49	$	(26)	$	103	$	(124)
Income tax expense	26		17		51		8
Interest expense, net	24		25		72		76
Depreciation and amortization (1)	48		47		148		143
EBITDA	147		63		374		103
Adjustments to arrive at Segment EBITDA:
Asset impairments	$	—	$	—	$	—	$	16
Business realignment costs (2)	6		19		19		57
Transaction costs (3)	16		1		23		4
Realized and unrealized foreign currency losses (gains)	5		(3)		9		2
Other non-cash items (4)	11		6		36		29
Other (5)	3		5		1		9
Total adjustments	41		28		88		117
Segment EBITDA	$	188	$	91	$	462	$	220
Segment EBITDA:
Adhesives	$	72	$	58	$	215	$	156
Coatings and Composites	138		50		311		115
Corporate and Other	(22)		(17)		(64)		(51)
Total	$	188	$	91	$	462	$	220

(1)For both the nine months ended September 30, 2021 and 2020, accelerated depreciation of $2 has been included in “Depreciation and amortization.” There was no accelerated depreciation for both the three months ended September 30, 2021 and 2020.

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

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Severance costs	$	1	$	4	$	1	$	14
In-process facility rationalizations	1		3		3		10
Contractual costs from exited businesses	2		2		6		6
Business services implementation	1		6		4		18
Legacy environmental reserves	1		4		1		8
Other	—		—		4		1
Total	$	6	$	19	$	19	$	57

(3)For the nine months ended September 30, 2021, transaction costs represent the costs associated with professional fees related to strategic projects and the set up of our transition services agreement related to the Held for Sale Business. For the three months ended September 30, 2021 and for the three and nine months ended September 30, 2020, transaction costs primarily included certain professional fees related to strategic projects.

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

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Fixed asset write-offs	$	2	$	—	$	7	$	6
Stock-based compensation costs	8		4		23		13
Long-term retention programs	1		1		5		7
Other	—		1		1		3
Total	$	11	$	6	$	36	$	29

(5)Other for the periods presented below included:

	Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020
Legacy and other non-recurring items	$	1	$	2	$	3	$	7
IT outage recoveries, net	—		—		—		(4)
Gain on sale of assets	—		—		(4)		—
Financing fees and other	2		3		2		6
Total	$	3	$	5	$	1	$	9

XML

Changes in Accumulated Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 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 and nine months ended September 30, 2021 and 2020:

	Foreign Currency Translation Adjustments		Cash Flow Hedge		Total
Balance at June 30, 2020	$	(39)	$	(16)	$	(55)
Change in value	7		(1)		6
Balance at September 30, 2020	$	(32)	$	(17)	$	(49)
Balance at December 31, 2019	$	(3)	$	2	$	(1)
Change in value	(29)		(19)		(48)
Balance at September 30, 2020	$	(32)	$	(17)	$	(49)
Balance at June 30, 2021	$	(20)	$	(11)	$	(31)
Change in value	(14)		1		(13)
Balance at September 30, 2021	$	(34)	$	(10)	$	(44)
Balance at December 31, 2020	$	(11)	$	(16)	$	(27)
Change in value	(23)		6		(17)
Balance at September 30, 2021	$	(34)	$	(10)	$	(44)

XML

Background and Basis of Presentation (Details) - Number of Reportable Segments $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) Segments	Sep. 30, 2020 USD ($)
Segment Reporting Information [Line Items]
Number of Reportable Segments | Segments		3
Discontinued Operations, Intercompany Sales | $	$ 4	$ 7	$ 11

XML

Significant Accounting Policies (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Contract with Customer, Asset, after Allowance for Credit Loss	$ 11		$ 11		$ 5
Restricted Cash and Cash Equivalents, Current	2		2		4
net allowance for doubtful accounts	3		3		$ 3
Selling, general and administrative expense	90	$ 56	243	$ 164
Depreciation and amortization			148	143
Accounts Receivable, Allowance for Credit Loss, Writeoff	1		1
Insurance premium classification adjustment				13
Other assets, reclassification				13
Impairment charge adjustment		8		8
Effect of Fourth Quarter Events [Line Items]
Net income (Loss), previously reported		(102)		(203)
Net Income (Loss) Attributable to Parent, previously reported		(102)		(203)
(Loss) income from discontinued operations, net of taxes, previously reported		(76)		(79)
Increase (Decrease) in other operating assets, as previously reported				(1)
Net cash provided by (used in) operating activities, continuing operations, previously reported				(11)
Net cash (used in) provided by operating activities from discontinued operations				(1)
Net cash provided by (used in) operating activities, previously reported				(12)
Proceeds from (repayments of) short-term debt, previously reported				(25)
Net cash (used in) provided by financing activities, previously reported				7
Impairment charge adjustment		8		8
Discontinued operations Cash Flow Adjustment				13
Cumulative Operating Activity Adjustment				(13)
Insurance premium classification adjustment				13
Adjustment for asset reclassification on changes in other operating assets				(26)
Cumulative Investing Activity adjustment				13
Net income (loss)	49	(94)	98	(195)
Net Income (Loss) Attributable to Parent	49	(94)	98	(195)
Loss from discontinued operations, net of taxes	$ 0	$ (68)	(5)	(71)
Increase (Decrease) in Other Current Assets				(27)
Net Cash Provided by (Used in) Operating Activities, Continuing Operations			106	(37)
Net cash (used in) provided by operating activities from discontinued operations			(1)	12
Net Cash Provided by (Used in) Operating Activities			105	(25)
Net short-term debt borrowings			(8)	(12)
Net Cash Provided by (Used in) Financing Activities			$ (179)	$ 20

XML

Discontinued Operations and Disposal Groups (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Accounts receivable					$ 66
Finished and in-process goods					18
Raw materials and supplies					17
Other current assets					12
Total current assets					113
Investment in unconsolidated entities					5
Deferred tax assets					2
Other long-term assets					7
Property, plant and equipment, net					310
Operating lease assets					13
Goodwill					14
Other intangible assets, net					61
Discontinued operations impairment	$ 91		$ 91		(75)
Total long-term assets					337
Total assets held for sale					450
Accounts payable					52
Income taxes payable					1
Accrued payroll					3
Current portion of operating lease liabilities					2
Other current liabilities					9
Total current liabilities					67
Long-term pension and post employment benefit obligations					36
Deferred income taxes					22
Operating lease liabilities					5
Other long-term liabilities					8
Total long-term liabilities					71
Total liabilities held for sale					138
Net sales	0	$ 120	216	$ 360
Cost of sales (exclusive of depreciation and amortization)	0	100	183	301
Selling, general and administrative expense	0	11	16	33
Depreciation and amortization	0	8	0	26
Loss on sale of business	0	0	10	0
Asset impairments	0	67	16	67
Business realignment costs	0	0	0	1
Operating loss	0	(66)	(9)	(68)
Other non-operating expense (income), net	0	1	(5)	1
Loss from discontinued operations before income tax and earnings from unconsolidated entities	0	(67)	(4)	(69)
Income tax expense	0	2	2	3
Loss from discontinued operations, net of tax	0	(69)	(6)	(72)
Earnings from unconsolidated entities, net of tax	0	1	1	1
Loss from discontinued operations, net of taxes	0	$ (68)	(5)	$ (71)
Disposal Group, Not Discontinued Operation, Disposal Disclosures [Abstract]
Total current assets held for sale	5		5		114
Long-term assets held for sale (see Note 4)	0		0		342
Current liabilities associated with assets held for sale (see Note 4)	$ 3		$ 3		$ 70

XML

Asset Impairments (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Asset Impairment [Abstract]
Asset impairments	$ 0	$ 0	$ 0	$ 16

XML

Related Party Transactions (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2020	Dec. 31, 2020	Mar. 31, 2020
Related Party Transaction [Line Items]
Revenue from Related Parties	$ 1	$ 1	$ 1
Accounts Receivable, Related Parties				$ 1
Loan receivable from parent				$ 4	$ 10
Settlement of affiliate loan			10
Additional Paid-in Capital [Member]
Related Party Transaction [Line Items]
Settlement of affiliate loan			$ 0

XML

Fair Value (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Unrealized gain (loss) on cash flow hedge	$ 1	$ (1)	$ 6	$ (19)
Derivative notional amount, Interest Rate Swap	300		300		$ 300
Interest Rate Derivative Assets, at Fair Value					(15)
Interest Rate Derivative Liabilities, at Fair Value	(9)		(9)
Long-term Debt	1,593		1,593		1,792
Long-term Debt, fair value	1,631		1,631		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		0
Fair Value Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, fair value	1,583		1,583		1,767
Fair Value Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, fair value	$ 48		$ 48		$ 55

XML

Debt Obligations (Details) - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Due Within One Year	$ 47	$ 82
Long-term debt	1,546	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	696	701
Debt Instrument, Unamortized Discount	5	6
Senior Secured Term Loan - EUR due 2026 [Domain]
Debt Instrument [Line Items]
Due Within One Year	0	0
Long-term debt	345	515
Debt Instrument, Unamortized Discount	2	4
7.875% Senior Secured Notes due 2027 [Domain]
Debt Instrument [Line Items]
Due Within One Year	0	0
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	29	0
Brazilian Bank Loans [Member]
Debt Instrument [Line Items]
Due Within One Year	13	22
Long-term debt	0	2
Capital Leases [Member]
Debt Instrument [Line Items]
Due Within One Year	22	14
Long-term debt	26	42
Other [Member]
Debt Instrument [Line Items]
Due Within One Year	5	9
Long-term debt	$ 0	$ 0

XML

Commitments and Contingencies (Details) - Environmental Liabilities - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Accrual for Environmental Loss Contingencies	$ 12	$ 14
Liability	41	47
Estimated Litigation Liability, Current	3	2
Estimated Litigation Liability	1	1
Other current liabilities	104	111
Geismar, LA
Accrual for Environmental Loss Contingencies	$ 12	12
Discount rate assumed to record at present value	3.00%
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	2	3
Equal to or greater than 1%
Accrual for Environmental Loss Contingencies	7	6
Currently-owned
Accrual for Environmental Loss Contingencies	5	8
Remediation
Accrual for Environmental Loss Contingencies	15	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	88
Maximum [Member] | Geismar, LA
Liability	22
Maximum [Member] | Less than 1%
Liability	3
Maximum [Member] | Equal to or greater than 1%
Liability	14
Maximum [Member] | Currently-owned
Liability	15
Maximum [Member] | Remediation
Liability	33
Maximum [Member] | Monitoring only
Liability	1
Minimum [Member]
Site Contingency, Loss Exposure Not Accrued, Best Estimate	33
Minimum [Member] | Geismar, LA
Liability	9
Minimum [Member] | Less than 1%
Liability	1
Minimum [Member] | Equal to or greater than 1%
Liability	6
Minimum [Member] | Currently-owned
Liability	3
Minimum [Member] | Remediation
Liability	14
Minimum [Member] | Monitoring only
Liability	$ 0

XML

Commitments and Contingencies (Details) - Non-Environmental Liabilities - USD ($) $ in Millions	Sep. 30, 2021	Dec. 31, 2020
Loss Contingencies [Line Items]
Estimated Litigation Liability	$ 1	$ 1
Estimated Litigation Liability, Current	$ 3	$ 2

XML

Pension and Postretirement Expense (Details) - Schedule of Components of Net Benefit Cost - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Pension Benefits and Non-Pension Postretirement Benefits Disclosures Table Text Block [Line Items]
Prepaid Pension Asset	$ 59		$ 59		$ 52
Liability, Defined Benefit Pension Plan	213		213		236
Other Post retirement Plan Liabilities	12		12		11
Long-term pension and post employment benefit obligations					$ 36
Pension Plan [Member] | U.S. Plans
Pension Benefits and Non-Pension Postretirement Benefits Disclosures Table Text Block [Line Items]
Service cost	1	$ 1	2	$ 2
Interest cost on projected benefit obligation	0	1	2	4
Expected return on assets	(3)	(3)	(9)	(9)
Payment for Pension and Other Postretirement Benefits		(1)	(5)	(3)
Net (benefit) expense(1)	(2)
Pension Plan [Member] | Non-U.S. Plans
Pension Benefits and Non-Pension Postretirement Benefits Disclosures Table Text Block [Line Items]
Service cost	5	4	15	13
Interest cost on projected benefit obligation	1	2	4	5
Expected return on assets	(4)	(4)	(11)	(10)
Payment for Pension and Other Postretirement Benefits		$ 2	$ 8	$ 8
Net (benefit) expense(1)	$ 2

XML

Stock Compensation (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Benefits and Share-based Compensation	$ 8	$ 4	$ 23	$ 13
APIC, Share-based Payment Arrangement, Increase for Cost Recognition		$ 4
Additional Paid-in Capital [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Benefits and Share-based Compensation	$ 8		$ 23	$ 13

XML

Segment Information (Details) - Revenues by Segment - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Segment Reporting Information [Line Items]
Net sales	$ 945	$ 634	$ 2,550	$ 1,855
Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Net sales	517	341	1,352	981
Adhesives [Member]
Segment Reporting Information [Line Items]
Net sales	428	293	1,198	874
North America
Segment Reporting Information [Line Items]
Net sales	549	343	1,448	1,049
North America | Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Net sales	224	122	540	379
North America | Adhesives [Member]
Segment Reporting Information [Line Items]
Net sales	325	221	908	670
Europe
Segment Reporting Information [Line Items]
Net sales	249	137	642	407
Europe | Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Net sales	249	132	632	393
Europe | Adhesives [Member]
Segment Reporting Information [Line Items]
Net sales	0	5	10	14
Asia Pacific
Segment Reporting Information [Line Items]
Net sales	88	121	303	305
Asia Pacific | Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Net sales	44	87	180	209
Asia Pacific | Adhesives [Member]
Segment Reporting Information [Line Items]
Net sales	44	34	123	96
Latin America
Segment Reporting Information [Line Items]
Net sales	59	33	157	94
Latin America | Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Net sales	0	0	0	0
Latin America | Adhesives [Member]
Segment Reporting Information [Line Items]
Net sales	$ 59	$ 33	$ 157	$ 94

XML

Segment Information (Details) - EBITDA by Segment - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Segment Reporting Information [Line Items]
Segment EBITDA	$ 188	$ 91	$ 462	$ 220
Adhesives [Member]
Segment Reporting Information [Line Items]
Segment EBITDA	72	58	215	156
Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Segment EBITDA	138	50	311	115
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Segment EBITDA	$ (22)	$ (17)	$ (64)	$ (51)

XML

Segment Information (Details) - Reconciliation of Segment EBITDA to Net Income - USD ($) $ in Millions	3 Months Ended			9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2021	Sep. 30, 2020
Segment Reporting Information [Line Items]
Net income (loss)	$ 49	$ (94)		$ 98	$ (195)
Net Income (Loss) Attributable to Noncontrolling Interest	0		$ 0
Loss from discontinued operations, net of taxes	0	(68)		(5)	(71)
Net income (loss) from continuing operations	49	(26)		103	(124)
Income tax expense	26	17		51	8
Interest expense, net	24	25		72	76
Depreciation and amortization (1)	48	47		148	143
EBITDA	147	63		374	103
Asset impairments	0	0		0	16
Business realignment costs (2)	6	19		19	57
Transaction costs (3)	16	1		23	4
Realized and unrealized foreign currency losses (gains)	5	(3)		9	2
Other Noncash Expense	11	6		36	29
Other (5)	3	5		1	9
Total adjustments	41	28		88	117
Segment EBITDA	188	91		462	220
Reorganization Items	0		$ 0
Adhesives [Member]
Segment Reporting Information [Line Items]
Segment EBITDA	72	58		215	156
Coatings and Composites [Member]
Segment Reporting Information [Line Items]
Segment EBITDA	138	50		311	115
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Segment EBITDA	$ (22)	$ (17)		$ (64)	$ (51)

XML

Changes in Accumulated Other Comprehensive Income (Details) - Summary of Changes in Accumulated Other Comprehensive Income - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	$ (31)	$ (55)	$ (27)	$ (1)
Other comprehensive income before reclassifications, net of tax	(13)	6	(17)	(48)
Ending Balance	(44)	(49)	(44)	(49)
Beginning Balance Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax	(20)	(39)	(11)	(3)
Foreign currency translation adjustments	(14)	7	(23)	(29)
Ending Balance Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax	(34)	(32)	(34)	(32)
Accumulated Other Comprehensive Income (Loss), Cumulative Changes in Net Gain (Loss) from Cash Flow Hedges, Effect Net of Tax	(11)	(16)	(16)	2
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification, Tax, Parent	1	(1)	6	(19)
Accumulated Other Comprehensive Income (Loss), Cumulative Changes in Net Gain (Loss) from Cash Flow Hedges, Effect Net of Tax	$ (10)	$ (17)	$ (10)	$ (17)

XML

Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Investments, Owned, Federal Income Tax Note [Line Items]
Income tax expense	$ 26	$ 17	$ 51	$ 8
Effective Income Tax Rate Reconciliation, Percent	35.00%	(189.00%)	34.00%	(7.00%)