Guarantor/Non-Guarantor Subsidiary Financial Information

12 Months Ended

Dec. 31, 2011

Guarantor/Non-Guarantor Subsidiary Financial Information [Abstract]

Guarantor/Non-Guarantor Subsidiary Financial Information

18. Guarantor/Non-Guarantor Subsidiary Financial Information

The Company and certain of its U.S. subsidiaries guarantee debt issued by its wholly owned subsidiaries Hexion Nova Scotia, ULC and Hexion U.S. Finance Corporation (together, the "Subsidiary Issuers"), which includes the 8.875% first priority senior secured notes due 2018, the floating rate second-priority senior secured notes due 2014 and the 9% second-priority notes due 2020.

The following information contains the condensed consolidating financial information for MSC (the parent), the Subsidiary Issuers, the combined subsidiary guarantors (Momentive Specialty Chemical Investments Inc.; Borden Chemical Foundry; LLC, Lawter International, Inc.; HSC Capital Corporation; Momentive International, Inc.; Momentive CI Holding Company; NL COOP Holdings LLC and Oilfield Technology Group, Inc.) and the combined non-guarantor subsidiaries, which includes all of the Company's foreign subsidiaries and HAI (prior to the deconsolidation of this entity).

All of the subsidiary issuers and subsidiary guarantors are 100% owned by MSC. All guarantees are full and unconditional, and are joint and several, subject to certain customary release provisions set forth in the applicable indenture. There are no significant restrictions on the ability of the Company to obtain funds from its domestic subsidiaries by dividend or loan. While the Company's Australian, New Zealand and Brazilian subsidiaries are restricted in the payment of dividends and intercompany loans due to the terms of their credit facilities, there are no material restrictions on the Company's ability to obtain cash from the remaining non-guarantor subsidiaries.

This information includes allocations of corporate overhead to the combined non-guarantor subsidiaries based on net sales. Income tax expense has been provided on the combined non-guarantor subsidiaries based on actual effective tax rates.

MOMENTIVE SPECIALTY CHEMICALS INC.

Notes to Consolidated Financial Statements

(dollars in millions)

YEAR ENDED DECEMBER 31, 2011

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	2,246		$	—		$	—		$	3,254		$	(293	)	$	5,207
Cost of sales		1,856			—			—			2,910			(293	)		4,473
Gross profit		390			—			—			344			—			734
Selling, general and administrative expense		110			—			—			225			—			335
Asset impairments		4			—			—			28			—			32
Business realignment costs		2			—			—			13			—			15
Other operating (income) expense, net		(20	)		—			(1	)		5			—			(16	)
Operating income		294			—			1			73			—			368
Interest expense, net		69			150			—			43			—			262
Intercompany interest expense (income), net		121			(170	)		(1	)		50			—			—
Other non-operating expense (income), net		8			—			—			(5	)		—			3
Income (loss) before income tax, earnings from unconsolidated entities		96			20			2			(15	)		—			103
Income tax (benefit) expense		(8	)		1			—			10			—			3
Income (loss) before earnings from unconsolidated entities		104			19			2			(25	)		—			100
Earnings from unconsolidated entities, net of taxes		32			—			22			1			(39	)		16
Net income (loss) from continuing operations		136			19			24			(24	)		(39	)		116
Net (loss) income from discontinued operations, net of tax		(18	)		—			—			20			—			2
Net income (loss)	$	118		$	19		$	24		$	(4	)	$	(39	)	$	118

MOMENTIVE SPECIALTY CHEMICALS INC.

Notes to Consolidated Financial Statements

(dollars in millions)

YEAR ENDED DECEMBER 31, 2010

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	2,002		$	—		$	—		$	2,934		$	(339	)	$	4,597
Cost of sales		1,618			—			—			2,587			(339	)		3,866
Gross profit		384			—			—			347			—			731
Selling, general and administrative expense		117			—			—			215			—			332
Terminated merger and settlement income, net		(171	)		—			—			—			—			(171	)
Business realignment costs		5			—			—			15			—			20
Other operating expense (income), net		6			—			—			(2	)		—			4
Operating income		427			—			—			119			—			546
Interest expense, net		92			144			—			40			—			276
Loss on extinguishment of debt		7			5			—			18			—			30
Intercompany interest expense (income), net		123			(169	)		(1	)		47			—			—
Other non-operating (income) expense, net		(18	)		8			—			6			—			(4	)
Income before income tax, earnings from unconsolidated entities		223			12			1			8			—			244
Income tax (benefit) expense		(11	)		10			—			36			—			35
Income (loss) before earnings from unconsolidated entities		234			2			1			(28	)		—			209
(Loss) earnings from unconsolidated entities, net of taxes		(13	)		—			(5	)		—			26			8
Net income (loss) from continuing operations		221			2			(4	)		(28	)		26			217
Net (loss) income from discontinued operations, net of tax		(7	)		—			—			4			—			(3	)
Net income (loss)	$	214		$	2		$	(4	)	$	(24	)	$	26		$	214

MOMENTIVE SPECIALTY CHEMICALS INC.

Notes to Consolidated Financial Statements

(dollars in millions)

YEAR ENDED DECEMBER 31, 2009

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	1,418		$	—		$	—		$	2,475		$	(344	)	$	3,549
Cost of sales		1,248			—			—			2,173			(344	)		3,077
Gross profit		170			—			—			302			—			472
Selling, general and administrative expense		81			—			—			224			—			305
Terminated merger and settlement (income) expense, net		(64	)		—			—			2			—			(62	)
Asset impairments		37			—			—			12			—			49
Business realignment costs		14			—			—			23			—			37
Other operating expense (income), net		7			—			(1	)		1			—			7
Operating income		95			—			1			40			—			136
Interest expense, net		130			62			—			31			—			223
Gain on extinguishment of debt		(76	)		(148	)		—			—			—			(224	)
Intercompany interest expense (income), net		67			(82	)		(1	)		16			—			—
Other non-operating (income) expense, net		(6	)		7			1			(2	)		—			—
(Loss) income before income tax, earnings from unconsolidated entities		(20	)		161			1			(5	)		—			137
Income tax (benefit) expense		(4	)		6			—			(10	)		—			(8	)
(Loss) income before earnings from unconsolidated entities		(16	)		155			1			5			—			145
Earnings from unconsolidated entities, net of taxes		145			—			2			2			(147	)		2
Net income from continuing operations		129			155			3			7			(147	)		147
Net loss from discontinued operations, net of tax		(12	)		—			—			(18	)		—			(30	)
Net income (loss)		117			155			3			(11	)		(147	)		117
Net income attributable to noncontrolling interest		(3	)		—			—			—			—			(3	)
Net income (loss) attributable to Momentive Specialty Chemicals Inc.	$	114		$	155		$	3		$	(11	)	$	(147	)	$	114

MOMENTIVE SPECIALTY CHEMICALS INC.

Notes to Consolidated Financial Statements

(dollars in millions)

DECEMBER 31, 2011

CONDENSED CONSOLIDATING BALANCE SHEET

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents (including restricted cash of $0 and $3, respectively)	$	221		$	—		$	—		$	210		$	—		$	431
Short-term investments		—			—			—			7			—			7
Accounts receivable, net		206			—			—			386			—			592
Inventories:
Finished and in-process goods		116			—			—			138			—			254
Raw materials and supplies		33			—			—			70			—			103
Other current assets		27			—			—			45			—			72
Total current assets		603			—			—			856			—			1,459
Other assets		107			36			40			89			(103	)		169
Property and equipment, net		504			—			—			705			—			1,209
Goodwill		93			—			—			74			—			167
Other intangible assets, net		59			—			—			45			—			104
Total assets	$	1,366		$	36		$	40		$	1,769		$	(103	)	$	3,108
Liabilities and (Deficit) Equity
Current liabilities
Accounts and drafts payable	$	134		$	—		$	—		$	259		$	—		$	393
Intercompany accounts (receivable) payable		(24	)		(42	)		1			65			—			—
Debt payable within one year		17			—			—			100			—			117
Intercompany loans payable (receivable)		35			—			—			(35	)		—			—
Loans payable to affiliates		2			—			—			—			—			2
Interest payable		14			44			—			3			—			61
Income taxes payable		1			—			—			14			—			15
Accrued payroll and incentive compensation		26			—			—			31			—			57
Other current liabilities		69			—			—			63			—			132
Total current liabilities		274			2			1			500			—			777
Long-term debt		1,134			1,688			—			598			—			3,420
Intercompany loans payable (receivable)		1,254			(1,903	)		(16	)		665			—			—
Long-term pension and post employment benefit obligations		99			—			—			124			—			223
Deferred income taxes		30			2			—			40			—			72
Other long-term liabilities		116			6			—			34			—			156
Advance from affiliates		225			—			—			—			—			225
Total liabilities		3,132			(205	)		(15	)		1,961			—			4,873
Total Momentive Specialty Chemicals Inc. shareholder's (deficit) equity		(1,766	)		241			55			(193	)		(103	)		(1,766	)
Noncontrolling interest		—			—			—			1			—			1
Total (deficit) equity		(1,766	)		241			55			(192	)		(103	)		(1,765	)
Total liabilities and (deficit) equity	$	1,366		$	36		$	40		$	1,769		$	(103	)	$	3,108

MOMENTIVE SPECIALTY CHEMICALS INC.

Notes to Consolidated Financial Statements

(dollars in millions)

DECEMBER 31, 2010

CONDENSED CONSOLIDATING BALANCE SHEET

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non- Guarantor Subsidiaries			Eliminations		Consolidated
Assets
Current assets
Cash and cash equivalents (including restricted cash of $0 and $6, respectively)	$	56		$	—		$	—		$	130		$	—	$	186
Short-term investments		—			—			—			6			—		6
Accounts receivable, net		115			—			—			412			—		527
Inventories:
Finished and in-process goods		122			—			—			144			—		266
Raw materials and supplies		35			—			—			74			—		109
Other current assets		31			—			—			48			—		79
Discontinued operations		102			—			—			141			—		243
Total current assets		461			—			—			955			—		1,416
Other assets		6			41			30			73			3		153
Property and equipment, net		497			—			—			770			—		1,267
Goodwill		93			—			—			76			—		169
Other intangible assets, net		62			—			—			70			—		132
Total assets	$	1,119		$	41		$	30		$	1,944		$	3	$	3,137
Liabilities and (Deficit) Equity
Current liabilities
Accounts and drafts payable	$	137		$	—		$	—		$	277		$	—	$	414
Intercompany accounts (receivable) payable		(140	)		(46	)		—			186			—		—
Debt payable within one year		25			—			—			57			—		82
Intercompany loans (receivable) payable		(97	)		—			—			97			—		—
Loans payable to affiliates		2			—			—			—			—		2
Interest payable		21			46			—			2			—		69
Income taxes payable		7			—			—			17			—		24
Accrued payroll and incentive compensation		28			—			—			37			—		65
Other current liabilities		90			—			—			60			—		150
Discontinued operations		37			—			—			22			—		59
Total current liabilities		110			—			—			755			—		865
Long-term debt		1,152			1,687			—			649			—		3,488
Affiliated long-term debt		80			—			—			20			—		100
Intercompany loans payable (receivable)		1,352			(1,887	)		(15	)		550			—		—
Long-term pension and post employment benefit obligations		83			—			—			125			—		208
Deferred income taxes		35			2			—			73			—		110
Other long-term liabilities		104			6			—			50			—		160
Advance from affiliates		225			—			—			—			—		225
Total liabilities		3,141			(192	)		(15	)		2,222			—		5,156
Total Momentive Specialty Chemicals Inc. shareholder's (deficit) equity		(2,022	)		233			45			(281	)		3		(2,022	)
Noncontrolling interest		—			—			—			3			—		3
Total (deficit) equity		(2,022	)		233			45			(278	)		3		(2,019	)
Total liabilities and (deficit) equity	$	1,119		$	41		$	30		$	1,944		$	3	$	3,137

MOMENTIVE SPECIALTY CHEMICALS INC.

Notes to Consolidated Financial Statements

(dollars in millions)

YEAR ENDED DECEMBER 31, 2011

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows (used in) provided by operating activities	$	(72	)	$	8		$	19		$	196		$	—		$	151
Cash flows provided by (used in) investing activities
Capital expenditures		(74	)		—			—			(65	)		—			(139	)
Capitalized interest		(1	)		—			—			—			—			(1	)
Purchases of debt securities, net		—			—			—			(2	)		—			(2	)
Change in restricted cash		—			—			—			3			—			3
Proceeds from the return of capital from subsidiary		69	(a)		—			—			—			(69	)		—
Dividends from subsidiaries		60			—			—			—			(60	)		—
Capital contribution to subsidiary		(11	)		—			(19	)		—			30			—
Proceeds from the sale of businesses, net of cash transferred		49			—			—			124			—			173
Proceeds from the sale of assets		2			—			—			1			—			3
Dividends from unconsolidated affiliates, net of funds remitted		12			—			12			(4	)		(12	)		8
		106			—			(7	)		57			(111	)		45
Cash flows provided by (used in) financing activities
Net short-term debt (repayments) borrowings		(7	)		—			—			21			—			14
Borrowings of long-term debt		164			—			—			332			—			496
Repayments of long-term debt		(182	)		—			—			(356	)		—			(538	)
Repayments of affiliated debt		(80	)		—			—			(20	)		—			(100	)
Return of capital to parent		—			—			—			(69	)(a)		69			—
Net intercompany loan borrowings (repayments)		51			4			—			(55	)		—			—
Capital contribution from parent		189			—			—			30			(30	)		189
Payments of dividends on common stock		(2	)		(12	)		(12	)		(48	)		72			(2	)
Long-term debt and credit facility financing fees		(2	)		—			—			—			—			(2	)
		131			(8	)		(12	)		(165	)		111			57
Effect of exchange rates on cash and cash equivalents		—			—			—			(5	)		—			(5	)
Increase in cash and cash equivalents		165			—			—			83			—			248
Cash and cash equivalents (unrestricted) at beginning of year		56			—			—			124			—			180
Cash and cash equivalents (unrestricted) at end of year	$	221		$	—		$	—		$	207		$	—		$	428

(a) During the year ended December 31, 2011, Momentive Specialty Chemicals Inc. contributed receivables of $69 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the year ended December 31, 2011, the non-guarantor subsidiary sold the contributed receivables to certain banks under various supplier financing agreements. The cash proceeds were returned to Momentive Specialty Chemicals Inc. by the non-guarantor subsidiary as a return of capital. The sale of receivables has been included within cash flows from operating activities on the Combined non-guarantor subsidiaries. The return of the cash proceeds from the sale of receivables has been included as a financing outflow and an investing inflow on the Combined Non-Guarantor Subsidiaries and Momentive Specialty Chemicals Inc., respectively.

MOMENTIVE SPECIALTY CHEMICALS INC.

Notes to Consolidated Financial Statements

(dollars in millions)

YEAR ENDED DECEMBER 31, 2010

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows (used in) provided by operating activities	$	(465	)	$	19		$	—		$	491		$	—		$	45
Cash flows provided by (used in) investing activities
Capital expenditures		(52	)		—			—			(67	)		—			(119	)
Capitalized interest		—			—			—			(1	)		—			(1	)
Proceeds from matured debt securities, net		—			—			—			4			—			4
Change in restricted cash		—			—			—			2			—			2
Proceeds from the return of capital from subsidiary		367	(a)		—			—			—			(367	)		—
Dividends from subsidiaries		18			—			1			—			(19	)		—
Deconsolidation of variable interest entity		—			—			—			(4	)		—			(4	)
Proceeds from the sale of assets		6			—			—			8			—			14
Investment in unconsolidated affiliates, net		—			—			4			1			—			5
		339			—			5			(57	)		(386	)		(99	)
Cash flows provided by (used in) financing activities
Net short-term debt borrowings (repayments)		3			—			—			(10	)		—			(7	)
Borrowings of long-term debt		290			1,433			—			633			—			2,356
Repayments of long-term debt		(1,108	)		(406	)		—			(663	)		—			(2,177	)
Repayments of affiliated debt		(3	)		—			—			—			—			(3	)
Return of capital to parent		—			—			—			(367	)(a)		367			—
Net intercompany loan borrowings (repayments)		987			(973	)		—			(14	)		—			—
Payments of dividends on common stock		—			(10	)		(5	)		(4	)		19			—
Long-term debt and credit facility financing fees		(9	)		(63	)		—			—			—			(72	)
		160			(19	)		(5	)		(425	)		386			97
Effect of exchange rates on cash and cash equivalents		—			—			—			2			—			2
Increase in cash and cash equivalents		34			—			—			11			—			45
Cash and cash equivalents (unrestricted) at beginning of year		22			—			—			113			—			135
Cash and cash equivalents (unrestricted) at end of year	$	56		$	—		$	—		$	124		$	—		$	180

(a) In March, June, September and December 2010, Momentive Specialty Chemicals Inc. contributed receivables of $100, $100, $107 and $67, respectively to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the year ended December 31, 2010, the non-guarantor subsidiary sold $374 of the contributed receivables to affiliates of Apollo for net cash of $367. The cash proceeds were returned to Momentive Specialty Chemicals Inc. by the non-guarantor subsidiary as a return of capital. The sale of receivables has been included within cash flows from operating activities on the Combined non-guarantor subsidiaries. The return of the cash proceeds from the sale of receivables has been included as a financing outflow and an investing inflow on the Combined Non-Guarantor Subsidiaries and Momentive Specialty Chemicals Inc., respectively.

MOMENTIVE SPECIALTY CHEMICALS INC.

Notes to Consolidated Financial Statements

(dollars in millions)

YEAR ENDED DECEMBER 31, 2009

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows (used in) provided by operating activities	$	(197	)	$	(16	)	$	—		$	568		$	—		$	355
Cash flows provided by (used in) investing activities
Capital expenditures		(38	)		—			—			(93	)		—			(131	)
Capitalized interest		—			—			—			(5	)		—			(5	)
Purchases of debt securities, net		—			—			—			(2	)		—			(2	)
Change in restricted cash		—			—			—			2			—			2
Proceeds from the return of capital from subsidiary		392	(a)		—			—			—			(392	)		—
Dividend from subsidiary		6			—			5			—			(11	)		—
Proceeds from the sale of assets		4			—			—			—			—			4
		364			—			5			(98	)		(403	)		(132	)
Cash flows (used in) provided by financing activities
Net short-term debt repayments		(2	)		—			—			(8	)		—			(10	)
Borrowings of long-term debt		587			—			—			568			—			1,155
Repayments of long-term debt		(690	)		(24	)		—			(690	)		—			(1,404	)
Borrowings of affiliated debt		84			—			—			20			—			104
Return of capital to parent		—			—			—			(392	)(a)		392			—
Purchase of note receivable due from parent		—			—			—			(24	)		—			(24	)
Payments of dividends on common stock		(10	)		—			(5	)		(6	)		11			(10	)
Long-term debt and credit facility financing fees		(5	)		—			—			—			—			(5	)
Deconsolidation of noncontrolling interest in variable interest entity		(24	)		—			—			—			—			(24	)
Net intercompany loan (repayments) borrowings		(108	)		40			—			68			—			—
Payment of dividends to non-controlling interest		—			—			—			(4	)		—			(4	)
		(168	)		16			(5	)		(468	)		403			(222	)
Effect of exchange rates on cash and cash equivalents		—			—			—			13			—			13
(Decrease) increase in cash and cash equivalents		(1	)		—			—			15			—			14
Cash and cash equivalents (unrestricted) at beginning of year		23			—			—			98			—			121
Cash and cash equivalents (unrestricted) at end of year	$	22		$	—		$	—		$	113		$	—		$	135

(a) In March, June, September, November and December 2009, Momentive Specialty Chemicals Inc. contributed receivables of $70, $85, $110, $33 and $104, respectively to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the year ended December 31, 2009, the non-guarantor subsidiary sold $402 of the contributed receivables to affiliates of Apollo for net cash of $392. The cash proceeds were returned to Momentive Specialty Chemicals Inc. by the non-guarantor subsidiary as a return of capital. The sale of receivables has been included within cash flows from operating activities on the Combined non-guarantor subsidiaries. The return of the cash proceeds from the sale of receivables has been included as a financing outflow and an investing inflow on the Combined Non-Guarantor Subsidiaries and Momentive Specialty Chemicals Inc., respectively.