Document - Cover
Document - Cover - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 01, 2020 | |
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 | Jun. 30, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q2 | |
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 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash and cash equivalents (including restricted cash of $3 and $4, respectively) | $ 295 | $ 254 |
Accounts receivable (net of allowance for doubtful accounts of $3) | 365 | 365 |
Inventories: | ||
Finished and in-process goods | 230 | 232 |
Raw materials and supplies | 89 | 100 |
Other current assets | 45 | 51 |
Total current assets | 1,024 | 1,002 |
Investment in unconsolidated entities | 18 | 17 |
Deferred Tax Assets, Net | 6 | 6 |
Other assets, net | 54 | 55 |
Property and equipment | ||
Land | 110 | 116 |
Buildings | 177 | 172 |
Machinery and equipment | 1,392 | 1,368 |
Property, plant and equipment, gross | 1,679 | 1,656 |
Less accumulated depreciation | (182) | (78) |
Property, plant and equipment, net | 1,497 | 1,578 |
Operating Lease, Right-of-Use Asset | 117 | 122 |
Goodwill | 178 | 178 |
Other intangible assets, net | 1,150 | 1,188 |
Total assets | 4,044 | 4,146 |
Current liabilities | ||
Accounts payable | 290 | 341 |
Debt payable within one year | 76 | 70 |
Interest payable | 31 | 35 |
Income taxes payable | 14 | 17 |
Accrued payroll and incentive compensation | 39 | 48 |
Operating Lease, Liability, Current | 22 | 22 |
Other current liabilities | 124 | 105 |
Total current liabilities | 596 | 638 |
Long-term liabilities | ||
Long-term debt | 1,839 | 1,715 |
Long-term pension and post employment benefit obligations | 246 | 252 |
Deferred income taxes | 153 | 164 |
Operating Lease, Liability, Noncurrent | 82 | 86 |
Other long-term liabilities | 209 | 216 |
Total liabilities | $ 3,125 | $ 3,071 |
Common Stock, Shares, Issued | 100 | 100 |
Shares, Outstanding | 100 | |
Deficit | ||
Common stock —$0.01 par value; 100 shares authorized, issued and outstanding | $ 0 | $ 0 |
Paid-in capital | 1,164 | 1,165 |
Accumulated other comprehensive loss | (55) | (1) |
Accumulated deficit | (190) | (89) |
Total deficit | 919 | 1,075 |
Total liabilities and deficit | 4,044 | 4,146 |
net allowance for doubtful accounts | $ 3 | $ 3 |
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
shares authorized | 100 | 100 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 | Jul. 01, 2019 | Jun. 30, 2019 |
Cash and Cash Equivalents | ||||
Restricted Cash and Cash Equivalents, Current | $ 3 | $ 4 | ||
Accounts Receivable | ||||
net allowance for doubtful accounts | $ 3 | $ 3 | ||
Common Stock | ||||
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 | $ 0.01 | |
shares authorized | 100 | 100 | ||
Common Stock, Shares, Issued | 100 | 100 | ||
Shares, Outstanding | 100 | 100 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Net sales | $ 628 | $ 892 | $ 1,454 | $ 1,778 |
Cost of Goods and Service, Excluding Depreciation, Depletion, and Amortization | 528 | 735 | 1,208 | 1,462 |
Selling, general and administrative expense (see Note 2) | 55 | 57 | 130 | 145 |
Depreciation and amortization | 56 | 26 | 114 | 52 |
Asset impairments | 0 | 0 | 16 | 0 |
Business realignment costs | 18 | 11 | 39 | 15 |
Other operating expense, net | (4) | (8) | (11) | (16) |
Operating (loss) income | (33) | 55 | (64) | 88 |
Interest expense, net | (25) | (9) | (51) | (89) |
Other non-operating income, net | 4 | 10 | 4 | 11 |
Loss before income tax and earnings from unconsolidated entities | (54) | (100) | (111) | (146) |
Income tax (benefit) expense | (11) | 8 | (8) | 15 |
Loss before earnings from unconsolidated entities | (43) | (108) | (103) | (161) |
Earnings from unconsolidated entities, net of taxes | 1 | 1 | 2 | 2 |
Net loss | (42) | (108) | (101) | (160) |
Net income attributable to noncontrolling interest | 0 | 1 | 0 | 1 |
Net loss attributable to Hexion Inc. | (42) | (107) | (101) | (159) |
Reorganization Items | 0 | 156 | 0 | 156 |
Pension Benefits | ||||
Net expense (benefit) | 1 | 1 | 1 | 1 |
Accumulated Deficit [Member] | ||||
Net loss | $ (42) | $ (108) | $ (101) | $ (160) |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Net loss | $ (42) | $ (108) | $ (101) | $ (160) |
Other comprehensive (loss) income, net of tax: | ||||
Foreign currency translation adjustments | 6 | (8) | (36) | (8) |
AOCI, Cash Flow Hedge, Cumulative Gain (Loss), after Tax | (3) | 0 | (18) | 0 |
Other comprehensive income (loss) | 3 | (8) | (54) | (8) |
Comprehensive loss | (39) | (116) | (155) | (168) |
Net income attributable to noncontrolling interest | 0 | 1 | 0 | 1 |
Net Income (Loss) Attributable to Parent | (42) | (107) | (101) | (159) |
Comprehensive Income (Loss), Net of Tax, Attributable to Noncontrolling Interest | 0 | (1) | 0 | (1) |
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent | $ (39) | $ (115) | $ (155) | $ (167) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash flows provided by (used in) operating activities | ||
Net loss | $ (101) | $ (160) |
Adjustments to reconcile net income to net cash used in operating activities: | ||
Depreciation and amortization | 114 | 52 |
Non-cash asset impairments | 16 | 0 |
Noncash reorganization items net [Line Items] | 139 | |
Deferred Income Tax Expense (Benefit) | (7) | 0 |
Loss on sale of assets | (9) | (3) |
Unrealized foreign currency losses (gains) | (4) | (7) |
Restricted Stock or Unit Expense | 9 | 0 |
Amortization of deferred financing fees | 0 | 13 |
Other non-cash adjustments | (1) | (2) |
Net change in assets and liabilities: | ||
Accounts receivable | 16 | 88 |
Inventories | (5) | 19 |
Accounts payable | (34) | (28) |
Income taxes payable | (3) | 8 |
Other assets, current and non-current | 6 | 8 |
Other liabilities, current and long-term | (8) | (17) |
Net cash used in operating activities | (19) | (113) |
Cash flows provided by (used in) investing activities | ||
Capital expenditures | 61 | 43 |
Proceeds from sale of assets, net | 0 | 1 |
Net cash (used in) provided by investing activities | (61) | (42) |
Cash flows provided by financing activities | ||
Net short-term debt borrowings | (14) | (4) |
Borrowings of long-term debt | 181 | 667 |
Repayments of long-term debt | 32 | 527 |
Return of Capital from parent | (10) | 0 |
Due from Officers or Stockholders, Noncurrent | (10) | |
Settlement of affiliate loan | 10 | |
Long-term debt and credit facility financing fees | 0 | 13 |
Net cash provided by financing activities | 125 | 123 |
Effect of exchange rates on cash and cash equivalents, including restricted cash | (4) | 0 |
Change in cash and cash equivalents, including restricted cash | 41 | (32) |
Cash, cash equivalents and restricted cash at beginning of period | 254 | 128 |
Cash, cash equivalents and restricted cash at end of period | 295 | 96 |
Supplemental disclosures of cash flow information | ||
Interest, net | 53 | 66 |
Income taxes, net of cash refunds | 4 | 10 |
Cash paid for reorganization items | 0 | 17 |
Reorganization Items | 0 | 156 |
Net Income (Loss) Attributable to Parent | $ (101) | $ (159) |
Condensed Consolidated Statem_4
Condensed Consolidated Statement of Equity (Deficit) - USD ($) $ in Millions | Total | Common Stock [Member] | Paid-in Capital [Member] | Treasury Stock [Member] | Notes Receivable From Parent [Member] | Accumulated Other Comprehensive Income [Member] | Accumulated Deficit [Member] | Parent [Member] | Noncontrolling Interest [Member] |
Balance at Dec. 31, 2018 | $ (2,914) | $ 1 | $ 526 | $ (296) | $ 0 | $ (18) | $ (3,125) | $ (2,912) | $ (2) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Net loss | (160) | 0 | 0 | 0 | 0 | 0 | (160) | (160) | 1 |
Other comprehensive income | (8) | 0 | 0 | 0 | 0 | (8) | 0 | (8) | 0 |
Balance at Jun. 30, 2019 | (3,081) | 1 | 526 | (296) | 0 | (26) | (3,285) | (3,080) | (1) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Return of Capital from parent | 0 | ||||||||
Net Income (Loss) Attributable to Parent | (159) | ||||||||
Balance at Mar. 31, 2019 | (2,966) | 1 | 526 | (296) | 0 | (18) | (3,177) | (2,964) | (2) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Net loss | (108) | 0 | 0 | 0 | 0 | 0 | (108) | (108) | 1 |
Other comprehensive income | (8) | 0 | 0 | 0 | 0 | (8) | 0 | (8) | 0 |
Balance at Jun. 30, 2019 | (3,081) | 1 | 526 | (296) | 0 | (26) | (3,285) | (3,080) | (1) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Net Income (Loss) Attributable to Parent | (107) | ||||||||
Balance at Dec. 31, 2019 | 1,075 | 0 | 1,165 | 0 | 0 | (1) | (89) | 1,075 | 0 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Net loss | (101) | 0 | 0 | 0 | 0 | 0 | (101) | (101) | 0 |
Other comprehensive income | (54) | 0 | 0 | 0 | 0 | (54) | 0 | (54) | 0 |
Due from Officers or Stockholders, Noncurrent | (10) | 0 | 0 | 0 | (10) | 0 | 0 | (10) | 0 |
Balance at Jun. 30, 2020 | 919 | 0 | 1,164 | 0 | 0 | (55) | (190) | 919 | 0 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Employee Benefits and Share-based Compensation | 9 | 0 | 0 | 0 | 0 | 0 | 9 | 0 | |
Settlement of affiliate loan | 10 | 0 | 0 | 0 | 10 | 0 | 0 | 10 | 0 |
Return of Capital from parent | (10) | 0 | (10) | 0 | 0 | 0 | 0 | (10) | 0 |
Net Income (Loss) Attributable to Parent | (101) | ||||||||
Balance at Mar. 31, 2020 | 954 | 0 | 1,170 | 0 | (10) | (58) | (148) | 954 | 0 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Net loss | (42) | 0 | 0 | 0 | 0 | 0 | (42) | (42) | 0 |
Other comprehensive income | 3 | 0 | 0 | 0 | 0 | 3 | 0 | 3 | 0 |
Balance at Jun. 30, 2020 | 919 | 0 | 1,164 | 0 | 0 | (55) | (190) | 919 | 0 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Employee Benefits and Share-based Compensation | 4 | 0 | 0 | 0 | 0 | 0 | 4 | 0 | |
Settlement of affiliate loan | 10 | 0 | 0 | 0 | 0 | 0 | 10 | 0 | |
Return of Capital from parent | (10) | $ 0 | $ (10) | $ 0 | $ 0 | $ 0 | $ 0 | $ (10) | $ 0 |
Net Income (Loss) Attributable to Parent | $ (42) |
Background and Basis of Present
Background and Basis of Presentation | 3 Months Ended |
Sep. 30, 2019 | |
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. In January 2020, the Company changed its reporting segments to align around its growth platforms. At June 30, 2020, the Company had three reportable segments: Adhesives; Coatings and Composites; and Corporate and Other. The unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries in which minority shareholders hold no substantive participating rights. Intercompany accounts and transactions are eliminated in consolidation. In the opinion of management, all adjustments consisting of normal, recurring adjustments considered necessary for a fair statement have been included. Results for the interim periods are not necessarily indicative of results for the entire year. Year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the accompanying notes included in the Company’s most recent Annual Report on Form 10-K. Emergence from Chapter 11 and Fresh Start Accounting On April 1, 2019, the Company, Hexion Holdings LLC, Hexion LLC and certain of the Company’s subsidiaries (collectively, the “Debtors”) filed voluntary petitions (the “Bankruptcy Petitions”) for reorganization under Chapter 11 (“Chapter 11”) of the U.S. Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware, (the “Bankruptcy Court”). The Chapter 11 proceedings were jointly administered under the caption In re Hexion TopCo, LLC , No. 19-10684 (the “Chapter 11 Cases”). The Debtors continued to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. On June 25, 2019, the Court entered an order (the “Confirmation Order”) confirming the Second Amended Joint Chapter 11 Plan of Reorganization of Hexion Holdings LLC and its Debtor Affiliates under Chapter 11 (the “Plan”). On the morning of July 1, 2019 (the "Effective Date"), in accordance with the terms of the Plan and the Confirmation Order, the Plan became effective and the Debtors emerged from bankruptcy (the “Emergence”). As a result of the Company’s reorganization and emergence from Chapter 11 bankruptcy on the Effective Date, the Company’s direct parent is Hexion Intermediate Holding 2, Inc. (“Hexion Intermediate”), a holding company and wholly owned subsidiary of Hexion Intermediate Holding 1, Inc., a holding company and wholly owned subsidiary of Hexion Holdings Corporation, the ultimate parent of Hexion (“Hexion Holdings” or “Parent”). Prior to its reorganization, the Company’s parent was Hexion LLC, a holding company and wholly owned subsidiary of Hexion Holdings LLC (now known as Hexion TopCo, LLC or “TopCo”), the previous ultimate parent entity of Hexion, which was controlled by investment funds managed by affiliates of Apollo Management Holdings, L.P. (together with Apollo Global Management, Inc. and its subsidiaries, “Apollo”). On the Effective Date, the Company’s existing common stock were cancelled and 100 new shares of common stock were issued at a par value of $0.01 to the Company’s new direct parent Hexion Intermediate in accordance with the Plan. |
Significant Accounting Policies
Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies [Text Block] | Summary of Significant Accounting Policies Use of Estimates —The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and also requires the disclosure of contingent assets and liabilities at the date of the financial statements. In addition, it requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Revenue Recognition —The Company follows the principles-based five step model to recognize revenue upon the transfer of promised goods or services to customers and in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. Revenue, net of estimated allowances and returns, is recognized when the Company has completed its performance obligations under a contract and control of the product is transferred to the customer. Substantially all revenue is recognized at the time shipment is made or upon delivery as risk and title to the product transfer to the customer. Sales, value add, and other taxes that are collected concurrently with revenue-producing activities are excluded from revenue. Contract terms for certain transactions, including sales made on a consignment basis, result in the transfer of control of the finished product to the customer prior to the point at which the Company has the right to invoice for the product. In these cases, timing of revenue recognition will differ from the timing of invoicing to customers and will result in the Company recording a contract asset. A contract asset balance of $8 and $9 is recorded within “Other current assets” at June 30, 2020 and December 31, 2019, respectively, in the unaudited Condensed Consolidated Balance Sheet. Refer to Note 11 for additional discussion of the Company’s net sales by reportable segment disaggregated by geographic region. Cash and Cash Equivalents — The Company considers all highly liquid investments that are purchased with an original maturity of three months or less to be cash equivalents. The Company’s restricted cash balance of $3 and $4 at June 30, 2020 and December 31, 2019, respectively, 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 inform 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. During the three and six months ended June 30, 2020, the Company increased its allowance for doubtful accounts provision for expected credit losses by less than $1, to reflect current business conditions, forecasts of future economic conditions and the impacts related to the global business and market disruptions of the coronavirus disease 2019 (“COVID-19”) pandemic in accordance with ASU 2016-13 (see Note 3 for more information). The Company’s current expectations and assumptions regarding its business, the economy and other future events and conditions and are based on currently available financial, economic and competitive data and current business plans as of June 30, 2020. 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 June 30, 2020 and December 31, 2019, to reduce accounts receivable to their estimated net realizable value. Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. There were no write-offs or recoveries for the Successor three and six months ended June 30, 2020. Goodwill — Goodwill is reviewed annually for impairment of value or more frequently when potential impairment triggering events are present. The Company’s annual impairment testing date is October 1. The Company continuously monitors events which could trigger an interim impairment analysis, such as changing business conditions and environmental factors, which included the impact of the COVID-19 pandemic for the quarter ended June 30, 2020. The Company determined there was no triggering event requiring an interim impairment analysis in the quarter ended June 30, 2020. However, the continued duration and severity of COVID-19 may result in future impairment charges as a prolonged pandemic could have an additional impact on the results of the Company’s operations. Income Statement Presentation — As a result of the application of fresh start accounting upon the Company’s emergence from Chapter 11, the Company elected to change its income statement presentation of depreciation and amortization expense beginning in the Successor period July 2, 2019 through December 31, 2019 and all periods thereafter. As a result, “Depreciation and amortization” has been added as a line item in the unaudited Condensed Consolidated Statements of Operations and “Cost of sales” and “Selling, general and administrative expense” will now exclude all depreciation and amortization expense. In addition, the Company no longer presents “Gross profit” as a subtotal caption. For comparability purposes, this presentation change is applied to all comparable periods presented in this Quarterly Report on Form 10-Q and all future filings. The effects of the income statement presentation change on the Predecessor Company’s previously reported unaudited Condensed Consolidated Statements of Operations are presented below. As noted above, a component of this presentation change is removal of the “Gross profit” subtotal. Unaudited Condensed Consolidated Statements of Operations for the three months ended June 30, 2019: Previous Presentation Method Effect of Presentation Change As Reported Cost of sales $ 757 $ (22) $ 735 Selling, general and administrative expense 61 (4) 57 Depreciation and amortization — 26 26 Unaudited Condensed Consolidated Statements of Operations for the six months ended June 30, 2019: Previous Presentation Method Effect of Presentation Change As Reported Cost of sales $ 1,507 $ (45) $ 1,462 Selling, general and administrative expense 152 (7) 145 Depreciation and amortization — 52 52 Subsequent Events— The Company has evaluated events and transactions subsequent to June 30, 2020 through the date of issuance of its unaudited Condensed Consolidated Financial Statements. Recently Issued Accounting Standards Newly Adopted Accounting Standards In June 2016, the FASB issued ASU 2016-13: Financial Instruments - Credit Losses (Topic 820): Measurement of Credit Losses on Financial Instruments , (“ASU 2016-13”). The amendments in this update replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. New disclosures are also required with this standard. The standard is effective for annual and interim periods beginning after December 15, 2019. This standard impacts the Company’s accounts receivables and contract assets. The Company adopted ASU 2016-13 at January 1, 2020, using a modified retrospective adoption method. Under this method of adoption, there is no impact to the comparative Consolidated Statement of Operations and the Consolidated Balance Sheets. There was an immaterial impact of adopting ASU 2016-13 on the date of adoption. In August 2018, the FASB issued ASU 2018-15: Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) : Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”). ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard was effective for annual and interim periods beginning after December 15, 2019. The Company adopted ASU 2018-15 prospectively on January 1, 2020 and the adoption had an immaterial impact on its condensed consolidated financial statements. In March 2020, the FASB issued ASU 2020-04: Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 will provide optional expedients and exceptions for a limited period of time to ease the potential burden in accounting for contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The Company has adopted ASU 2020-04 and the initial adoption of this ASU did not have an impact on our condensed consolidated financial statements. Recently Issued 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 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the potential impact ASU 2019-12 will have 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 is effective for fiscal years ending after December 15, 2020. The Company is currently assessing the potential impact of ASU 2018-14 on its financial statements. |
COVID-19 Impacts (Notes)
COVID-19 Impacts (Notes) | 6 Months Ended |
Jun. 30, 2020 | |
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 June 30, 2020. While the Company has continued to operate during the pandemic, it did incur adverse financial impacts to its sales and profitability results during the three and six months ended June 30, 2020 from COVID-19, primarily related to reduced volumes associated with the pandemic. The pandemic has impacted global economic conditions and lowered demand in many of the end use markets in which the Company operates such as automotive, aerospace, industrial products, oil and gas, construction and housing. The ultimate impact that COVID-19 will have on the Company’s future financial position, operating results and cash flows involves numerous risks and uncertainties, including new information which may emerge concerning the severity and duration of COVID-19 and actions to contain the virus or treat its impact. The Coronavirus Aid, Relief, and Economic Security (the “CARES”) Act was enacted on March 27, 2020 in the U.S. The CARES Act includes several significant provisions, such as delaying certain payroll tax payments, mandatory transition tax payments under the Tax Cuts and Jobs Act, and estimated income tax payments. The Company does not currently expect the CARES Act to have a material impact on its financial results, including on its annual estimated effective tax rate but the Company anticipates delaying approximately $15 of certain tax payments to the second half of 2020 and deferring $5 of certain tax payments to future years. The Company will continue to monitor and assess the CARES Act and similar legislation in other jurisdictions where the Company operates that may impact the Company’s business and financial results. Subsequent to June 30, 2020, the United States, and the global regions where the Company operates, continue to be affected by COVID-19. The Company is closely monitoring the COVID-19 pandemic on all aspects of its businesses and geographies, including the impact on its facilities, employees, customers, suppliers, vendors, business partners and distribution. |
Asset Impairments (Notes)
Asset Impairments (Notes) | 6 Months Ended |
Jun. 30, 2020 | |
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 Successor six months ended June 30, 2020. |
Fair Value
Fair Value | 6 Months Ended |
Jun. 30, 2020 | |
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 June 30, 2020, the Company had derivative assets related to foreign exchange, electricity and natural gas contracts of less than $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 Successor six months ended June 30, 2020 or the Predecessor six months ended June 30, 2019. 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 June 30, 2020 and December 31, 2019, 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 ($717 outstanding at June 30, 2020). 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 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: June 30, 2020 December 31, 2019 Balance Sheet Location Notional Amount Fair Value Liability Notional Amount Fair Value Asset Derivatives designated as hedging instruments Interest Rate Swap Other current (liabilities)/assets $ 300 $ (15) $ 300 $ 3 Total derivatives designated as hedging instruments $ (15) $ 3 Amount of Loss Recognized in OCI on Derivatives Successor Predecessor Successor Predecessor Derivatives designated as hedging instruments Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 Interest Rate Swaps Interest Rate Swap $ (3) $ — $ (18) $ — Total $ (3) $ — $ (18) $ — In the Successor three and six months ended June 30, 2020, the Company reclassified a loss of less than $1 and a gain of less than $1, respectively, from OCI to “Interest expense, net” on the Condensed Consolidated Statement of Operations related to the settlement of a portion of the Hedge. Interest Rate Cap In 2019, the Company executed an interest rate cap derivative instrument for a premium amount of less than $1. This instrument is a derivative under ASC 815 that does not qualify for hedge accounting and as a result, changes in fair value are recognized within earnings throughout the term of the instrument. For the Successor three and six months ended June 30, 2020, the Company recognized an unrealized loss of less than $1 for the change in fair value of the instrument, which is included in “Other operating expense, net” in the unaudited Condensed Consolidated Statement of Operations. Non-derivative Financial Instruments The following table summarizes the carrying amount and fair value of the Company’s non-derivative financial instruments: Carrying Amount Fair Value Level 1 Level 2 Level 3 Total June 30, 2020 Debt $ 1,915 $ — $ 1,831 $ 57 $ 1,888 December 31, 2019 Debt $ 1,785 $ — $ 1,751 $ 64 $ 1,815 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. |
Debt Obligations
Debt Obligations | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Debt Obligations | Debt Obligations Debt outstanding at June 30, 2020 and December 31, 2019 is as follows: June 30, 2020 December 31, 2019 Long-Term Due Within Long-Term Due Within Senior Secured Credit Facilities: ABL Facility $ 164 $ — $ — $ — Senior Secured Term Loan - USD due 2026 (includes $6 and $7, respectively, of unamortized debt discount) 704 7 708 7 Senior Secured Term Loan - EUR due 2026 (includes $4 of unamortized debt discount) 473 — 473 — Senior Notes: 7.875% Senior Notes due 2027 450 — 450 — Other Borrowings: Australia Facility due 2021 — 28 27 4 Brazilian bank loans 5 16 7 34 Lease obligations (1) 43 14 50 14 Other — 11 — 11 Total $ 1,839 $ 76 $ 1,715 $ 70 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2020 | |
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 June 30, 2020 and December 31, 2019: Liability Range of Reasonably Possible Costs at June 30, 2020 Site Description June 30, 2020 December 31, 2019 Low High Geismar, LA $ 12 $ 12 $ 9 $ 22 Superfund and offsite landfills – allocated share: Less than 1% 3 3 2 6 Equal to or greater than 1% 6 6 5 14 Currently-owned 9 8 4 14 Formerly-owned: Remediation 18 21 14 37 Monitoring only — 1 — 1 Total $ 48 $ 51 $ 34 $ 94 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 June 30, 2020 and December 31, 2019, $19 and $18 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 June 30, 2020: 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 $6. Superfund Sites and Offsite Landfills —The Company is currently involved in environmental remediation activities at a number of sites for which it has been notified that it is, or may be, a PRP under the United States Comprehensive Environmental Response, Compensation and Liability Act or similar state “superfund” laws. The Company anticipates approximately 50% of the estimated liability for these sites will be paid within the next five years, with the remainder over the next twenty-five years. The Company generally does not bear a significant level of responsibility for these sites, and as a result, has little control over the costs and timing of cash flows. The Company’s ultimate liability will depend on many factors including its share of waste volume, the financial viability of other PRPs, the remediation methods and technology used, the amount of time necessary to accomplish remediation and the availability of insurance coverage. The range of possible outcomes takes into account the maturity of each project, resulting in a more narrow range as the project progresses. To estimate both its current reserves for environmental remediation at these sites and the possible range of additional costs, the Company has not assumed that it will bear the entire cost of remediation of every site to the exclusion of other known PRPs who may be jointly and severally liable. The Company has limited information to assess the viability of other PRPs and their probable contribution on a per site basis. The Company’s insurance provides very limited, if any, coverage for these environmental matters. Sites Under Current Ownership —The Company is conducting environmental remediation at a number of locations that it currently owns, of which ten sites are no longer in operation. As the Company is performing a portion of the remediation on a voluntary basis, it has some control over the costs to be incurred and the timing of cash flows. The factors influencing the ultimate outcome include the methods of remediation elected, the conclusions and assessment of site studies remaining to be completed, and the time period required to complete the work. No other parties are responsible for remediation at these sites. Formerly-Owned Sites —The Company is conducting, or has been identified as a PRP in connection with, environmental remediation at a number of locations that it formerly owned and/or operated. Remediation costs at these former sites, such as those associated with the Company’s former phosphate mining and processing operations, could be material. The Company has accrued those costs for formerly-owned sites which are currently probable and reasonably estimable. One such site is the Coronet Industries, Inc. Superfund Alternative Site in Plant City, Florida. The current owner of the site alleged that it incurred environmental costs at the site for which it has a contribution claim against the Company, and that additional future costs are likely to be incurred. The Company signed a settlement agreement in 2016 with the current site owner and a past site owner, pursuant to which the Company paid $10 for past remediation costs and accepted a 40% allocable share of specified future remediation costs at this site. The Company estimates its allocable share of future remediation costs to be approximately $8. 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 $2 at both June 30, 2020 and December 31, 2019 for all non-environmental legal defense costs incurred and settlement costs that it believes are probable and estimable. At both June 30, 2020 and December 31, 2019, $1 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. |
Pension and Postretirement Expe
Pension and Postretirement Expense | 6 Months Ended |
Jun. 30, 2020 | |
Defined Benefit Plan [Abstract] | |
Pension and Other Postretirement Benefit Plans | Pension and Postretirement Benefit Plans The Company’s service cost component of net benefit cost is included in “Operating income” and all other components of net benefit cost are included in “Other non-operating income, net” within the Company’s unaudited Condensed Consolidated Statements of Operations. The Company recognized less than $1 of net non-pension postretirement benefit cost for both the Successor three and six months ended June 30, 2020 and for the Predecessor three and six months ended June 30, 2019. Following are the components of net pension benefit cost recognized by the Company for the Successor three and six months ended June 30, 2020 and for the Predecessor three and six months ended June 30, 2019: Pension Benefits Successor Predecessor Successor Predecessor Three Months Ended Three Months Ended Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Service cost $ 1 $ 4 $ 1 $ 3 $ 1 $ 9 $ 2 $ 7 Interest cost on projected benefit obligation 1 2 2 2 3 3 4 4 Expected return on assets (3) (3) (3) (3) (6) (6) (6) (6) Net (benefit) expense $ (1) $ 3 $ — $ 2 $ (2) $ 6 $ — $ 5 |
Stock Compensation (Notes)
Stock Compensation (Notes) | 6 Months Ended |
Jun. 30, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shareholders' Equity and Share-based Payments [Text Block] | Stock Based Compensation The Company grants stock-based compensation to employees, directors, and other key service providers under the Hexion Holdings Corporation 2019 Omnibus Incentive Plan (the “2019 Incentive Plan”). Under the 2019 Incentive Plan, the Company may grant stock options, restricted stock units, performance stock units and other equity-based awards to be awarded from time to time as the Board of Directors of Hexion Holdings (the “Board”) determines. The restricted and performance stock units are deemed to be equivalent to one share of common stock of Hexion Holdings. The awards contain restrictions on transferability and other typical terms and conditions. In the first quarter of 2020, Hexion Holdings granted 821,758 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 $15.80 per share. Additionally, Hexion Holdings granted 823,619 Performance Stock Units (“PSUs”) to certain employees that vest based on performance conditions with a weighted average grant date fair value of $15.80. 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 June 30, 2020, the Company performance conditions underlying the PSU's were not considered probable of occurring and thus no PSU expense has been recorded. As of June 30, 2020, all RSUs and PSUs were unvested and there were an insignificant number of units forfeited. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2020 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Realignment of Reportable Segments in 2020 As part of the Company’s continuing efforts to drive growth and greater operating efficiencies, in January 2020, the Company changed its reporting segments to align around its two growth platforms: (i) Adhesives and (ii) Coatings and Composites. At June 30, 2020, the Company has three reportable segments, which consist of the following businesses: • Adhesives : these businesses focus on the global adhesives market. They include the Company’s global wood adhesives business, including: forest products resin assets in North America, Latin America, Europe, Australia and New Zealand; global formaldehyde; and the global phenolic specialty resins business, which now also includes the oilfield technologies group. • Coatings and Composites : these businesses focus on the global coatings and composites market. They include the Company’s base and specialty epoxy resins and Versatic™ Acids and Derivatives businesses. • Corporate and Other : primarily corporate general and administrative expenses that are not allocated to the other segments, such as shared service and administrative functions and foreign exchange gains and losses. The Company has recast its Net Sales and Segment EBITDA (as defined below) for the Predecessor three and six months ended June 30, 2019 to reflect the new reportable segments. The recast of previously issued financial information does not represent a correction of error with respect to, and has no impact on, the Company’s previously issued financial statements. Reportable Segments Following are net sales and Segment EBITDA by reportable segment. Segment EBITDA is defined as EBITDA (earnings before interest, income taxes, depreciation and amortization) adjusted for certain non-cash items and other income and expenses. Segment EBITDA is the primary performance measure used by the Company’s senior management, the chief operating decision-maker and the Board of Directors to evaluate operating results and allocate capital resources among segments. Segment EBITDA is also the profitability measure used to set management and executive incentive compensation goals. Corporate and Other is primarily corporate general and administrative expenses that are not allocated to the other segments, such as shared service and administrative functions and foreign exchange gains and losses not allocated to continuing segments. Net Sales (1) : Following is 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: Successor Predecessor Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 (2) Adhesives Coatings and Composites Total Adhesives Coatings and Composites Total North America $ 224 $ 104 $ 328 $ 326 $ 149 $ 475 Europe 69 106 175 103 152 255 Asia Pacific 30 72 102 40 74 114 Latin America 23 — 23 48 — 48 Total $ 346 $ 282 $ 628 $ 517 $ 375 $ 892 Successor Predecessor Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 (2) Adhesives Coatings and Composites Total Adhesives Coatings and Composites Total North America $ 520 $ 258 $ 778 $ 659 $ 285 $ 944 Europe 171 260 431 217 304 521 Asia Pacific 62 122 184 81 129 210 Latin America 61 — 61 103 — 103 Total $ 814 $ 640 $ 1,454 $ 1,060 $ 718 $ 1,778 (1) Intersegment sales are not significant and, as such, are eliminated within the selling segment. (2) Previously reported Net Sales by reportable segment for the Predecessor three and six months ended June 30, 2019 is shown below: Predecessor Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Forest Products Resins Epoxy, Phenolic and Coating Resins Total Forest Products Resins Epoxy, Phenolic and Coating Resins Total North America $ 259 $ 216 $ 475 $ 519 $ 425 $ 944 Europe 43 212 255 90 431 521 Asia Pacific 30 84 114 63 147 210 Latin America 48 — 48 103 — 103 Total $ 380 $ 512 $ 892 $ 775 $ 1,003 $ 1,778 Reconciliation of Net Loss to Segment EBITDA: Successor Predecessor Successor Predecessor Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 Reconciliation: Net loss attributable to Hexion Inc. $ (42) $ (108) $ (101) $ (160) Net income attributable to noncontrolling interest — (1) — (1) Net loss $ (42) $ (107) $ (101) $ (159) Income tax (benefit) expense (11) 8 (8) 15 Interest expense, net 25 9 51 89 Depreciation and amortization (1) 56 26 114 52 EBITDA 28 (64) 56 (3) Adjustments to arrive at Segment EBITDA: Asset impairments $ — $ — $ 16 $ — Business realignment costs (2) 18 11 39 15 Transaction costs (3) 4 3 7 26 Realized and unrealized foreign currency (gains) losses — (7) 6 (6) Reorganization items, net (4) — 156 — 156 Other non-cash items (5) 13 7 25 9 Other (6) 2 6 5 18 Total adjustments 37 176 98 218 Segment EBITDA $ 65 $ 112 $ 154 $ 215 Segment EBITDA (7) : Adhesives $ 51 $ 73 $ 122 $ 149 Coatings and Composites 26 52 65 96 Corporate and Other (12) (13) (33) (30) Total $ 65 $ 112 $ 154 $ 215 (1) For the three and six months ended June 30, 2020, accelerated depreciation of less than $1 and $2, respectively, has been included in “Depreciation and amortization.” (2) Business realignment costs for the three and six months ended June 30, 2020 and 2019 included: Successor Predecessor Successor Predecessor Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 Severance costs $ 2 $ 7 $ 10 $ 9 In-process facility rationalizations 5 1 12 3 Business services implementation 8 — 12 — Legacy environmental reserves 2 1 4 1 Other 1 2 1 2 (3) For the Successor three and six months ended June 30, 2020, transaction costs included certain professional fees related to strategic projects. For the Predecessor three and six months ended June 30, 2019, transaction costs primarily included $2 and $21, respectively, of certain professional fees and other expenses related to the Company’s Chapter 11 Proceedings. (4) Represents incremental costs incurred directly as a result of the Company’s Chapter 11 proceedings after the date of filing. (5) Other non-cash items for the three and six months ended June 30, 2020 and 2019 included: Successor Predecessor Successor Predecessor Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 Fixed asset write-offs $ 6 $ 2 $ 8 $ 3 Stock-based compensation costs 4 — 9 — Long-term retention programs 3 4 6 5 Other — 1 2 1 (6) Other for the three and six months ended June 30, 2020 and 2019 included: Successor Predecessor Successor Predecessor Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 Legacy expenses $ 2 $ — $ 5 $ 3 IT outage costs (recoveries), net (2) 5 (4) 10 Management fees and other 2 1 4 5 (7) Previously reported Segment EBITDA by reportable segment for the Predecessor three and six months ended June 30, 2019 is shown below: Predecessor Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Segment EBITDA: Forest Products Resins $ 66 $ 134 Epoxy, Phenolic and Coating Resins 59 111 Corporate and Other (13) (30) Total $ 112 $ 215 |
Changes in Accumulated Other Co
Changes in Accumulated Other Comprehensive Income (Notes) | 6 Months Ended |
Jun. 30, 2020 | |
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 Successor three and six months ended June 30, 2020 and the Predecessor three and six months ended June 30, 2019: Defined Benefit Pension and Postretirement Plans Foreign Currency Translation Adjustments Cash Flow Hedge Total Predecessor Balance at March 31, 2019 $ (1) $ (17) $ — $ (18) Change in value — (8) — (8) Balance at June 30, 2019 $ (1) $ (25) $ — $ (26) Balance at December 31, 2018 $ (1) $ (17) $ — $ (18) Change in value — (8) — (8) Balance at June 30, 2019 $ (1) $ (25) $ — $ (26) Successor Balance at March 31, 2020 $ — $ (45) $ (13) $ (58) Change in value — 6 (3) 3 Balance at June 30, 2020 $ — $ (39) $ (16) $ (55) Balance at December 31, 2019 $ — $ (3) $ 2 $ (1) Change in value — (36) (18) (54) Balance at June 30, 2020 $ — $ (39) $ (16) $ (55) |
Income Taxes (Notes)
Income Taxes (Notes) | 6 Months Ended |
Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Tax Disclosure [Text Block] | Income Taxes The income tax (benefit) expense for the Successor three months ended June 30, 2020 and the Predecessor three months ended June 30, 2019 was $(11) and $8, respectively. The income tax (benefit) expense for the Successor six months ended June 30, 2020 and the Predecessor six months ended June 30, 2019 was $(8) and $15, 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 2019, 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 Successor three months ended June 30, 2020 and for the Predecessor three months ended June 30, 2019 was 20% and (8)%, respectively. The effective tax rate for the Successor six months ended June 30, 2020 and for the Predecessor six months ended June 30, 2019 was 7% and (10)%, respectively. The change in the effective tax rate was primarily attributable to the amount and distribution of income and losses among the various jurisdictions in which the Company operates. The effective tax rates were also impacted by operating gains and losses generated in jurisdictions where no tax expense or benefit was recognized due to the maintenance of a full valuation allowance. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 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 $8 and $9 is recorded within “Other current assets” at June 30, 2020 and December 31, 2019, respectively, in the unaudited Condensed Consolidated Balance Sheet. Refer to Note 11 for additional discussion of the Company’s net sales by reportable segment disaggregated by geographic region. |
Cash and Cash Equivalents, Policy [Policy Text Block] | Cash and Cash Equivalents — The Company considers all highly liquid investments that are purchased with an original maturity of three months or less to be cash equivalents. The Company’s restricted cash balance of $3 and $4 at June 30, 2020 and December 31, 2019, respectively, 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 inform 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. During the three and six months ended June 30, 2020, the Company increased its allowance for doubtful accounts provision for expected credit losses by less than $1, to reflect current business conditions, forecasts of future economic conditions and the impacts related to the global business and market disruptions of the coronavirus disease 2019 (“COVID-19”) pandemic in accordance with ASU 2016-13 (see Note 3 for more information). The Company’s current expectations and assumptions regarding its business, the economy and other future events and conditions and are based on currently available financial, economic and competitive data and current business plans as of June 30, 2020. 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 June 30, 2020 and December 31, 2019, to reduce accounts receivable to their estimated net realizable value. Accounts receivable balances are written-off against the allowance if a final determination of uncollectibility is made. There were no write-offs or recoveries for the Successor three and six months ended June 30, 2020. |
Income Statement Presentation [Policy Text Block] | Income Statement Presentation — As a result of the application of fresh start accounting upon the Company’s emergence from Chapter 11, the Company elected to change its income statement presentation of depreciation and amortization expense beginning in the Successor period July 2, 2019 through December 31, 2019 and all periods thereafter. As a result, “Depreciation and amortization” has been added as a line item in the unaudited Condensed Consolidated Statements of Operations and “Cost of sales” and “Selling, general and administrative expense” will now exclude all depreciation and amortization expense. In addition, the Company no longer presents “Gross profit” as a subtotal caption. For comparability purposes, this presentation change is applied to all comparable periods presented in this Quarterly Report on Form 10-Q and all future filings. The effects of the income statement presentation change on the Predecessor Company’s previously reported unaudited Condensed Consolidated Statements of Operations are presented below. As noted above, a component of this presentation change is removal of the “Gross profit” subtotal. Unaudited Condensed Consolidated Statements of Operations for the three months ended June 30, 2019: Previous Presentation Method Effect of Presentation Change As Reported Cost of sales $ 757 $ (22) $ 735 Selling, general and administrative expense 61 (4) 57 Depreciation and amortization — 26 26 |
Subsequent Events, Policy [Policy Text Block] | Subsequent Events— The Company has evaluated events and transactions subsequent to June 30, 2020 through the date of issuance of its unaudited Condensed Consolidated Financial Statements. |
New Accounting Pronouncements and Changes in Accounting Principles [Text Block] | Recently Issued Accounting Standards Newly Adopted Accounting Standards In June 2016, the FASB issued ASU 2016-13: Financial Instruments - Credit Losses (Topic 820): Measurement of Credit Losses on Financial Instruments , (“ASU 2016-13”). The amendments in this update replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. New disclosures are also required with this standard. The standard is effective for annual and interim periods beginning after December 15, 2019. This standard impacts the Company’s accounts receivables and contract assets. The Company adopted ASU 2016-13 at January 1, 2020, using a modified retrospective adoption method. Under this method of adoption, there is no impact to the comparative Consolidated Statement of Operations and the Consolidated Balance Sheets. There was an immaterial impact of adopting ASU 2016-13 on the date of adoption. In August 2018, the FASB issued ASU 2018-15: Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) : Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”). ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard was effective for annual and interim periods beginning after December 15, 2019. The Company adopted ASU 2018-15 prospectively on January 1, 2020 and the adoption had an immaterial impact on its condensed consolidated financial statements. In March 2020, the FASB issued ASU 2020-04: Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 will provide optional expedients and exceptions for a limited period of time to ease the potential burden in accounting for contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The Company has adopted ASU 2020-04 and the initial adoption of this ASU did not have an impact on our condensed consolidated financial statements. Recently Issued 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 is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the potential impact ASU 2019-12 will have 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 is effective for fiscal years ending after December 15, 2020. The Company is currently assessing the potential impact of ASU 2018-14 on its financial statements. |
Goodwill and Intangible Assets, Goodwill, Policy | Goodwill — Goodwill is reviewed annually for impairment of value or more frequently when potential impairment triggering events are present. The Company’s annual impairment testing date is October 1. The Company continuously monitors events which could trigger an interim impairment analysis, such as changing business conditions and environmental factors, which included the impact of the COVID-19 pandemic for the quarter ended June 30, 2020. The Company determined there was no triggering event requiring an interim impairment analysis in the quarter ended June 30, 2020. However, the continued duration and severity of COVID-19 may result in future impairment charges as a prolonged pandemic could have an additional impact on the results of the Company’s operations. |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Related Party Transaction [Line Items] | |
Schedule of Related Party Transactions [Table Text Block] | Refer to the below table for a summary of the sales and purchases with the Company and its joint ventures which are recorded under the equity method of accounting: Successor Predecessor Successor Predecessor Three Months Ended Three Months Ended Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 Sales to joint ventures $ <1 $ 1 $ 1 $ 2 Purchases from joint ventures 1 1 1 2 June 30, 2020 December 31, 2019 Accounts receivable from joint ventures $ 1 $ 1 Accounts payable to joint ventures <1 <1 |
Fair Value (Tables)
Fair Value (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
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: June 30, 2020 December 31, 2019 Balance Sheet Location Notional Amount Fair Value Liability Notional Amount Fair Value Asset Derivatives designated as hedging instruments Interest Rate Swap Other current (liabilities)/assets $ 300 $ (15) $ 300 $ 3 Total derivatives designated as hedging instruments $ (15) $ 3 Amount of Loss Recognized in OCI on Derivatives Successor Predecessor Successor Predecessor Derivatives designated as hedging instruments Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 Interest Rate Swaps Interest Rate Swap $ (3) $ — $ (18) $ — Total $ (3) $ — $ (18) $ — |
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 June 30, 2020 Debt $ 1,915 $ — $ 1,831 $ 57 $ 1,888 December 31, 2019 Debt $ 1,785 $ — $ 1,751 $ 64 $ 1,815 |
Debt Obligations (Tables)
Debt Obligations (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Debt Instrument, Redemption [Line Items] | |
Schedule of Long-term Debt | Debt outstanding at June 30, 2020 and December 31, 2019 is as follows: June 30, 2020 December 31, 2019 Long-Term Due Within Long-Term Due Within Senior Secured Credit Facilities: ABL Facility $ 164 $ — $ — $ — Senior Secured Term Loan - USD due 2026 (includes $6 and $7, respectively, of unamortized debt discount) 704 7 708 7 Senior Secured Term Loan - EUR due 2026 (includes $4 of unamortized debt discount) 473 — 473 — Senior Notes: 7.875% Senior Notes due 2027 450 — 450 — Other Borrowings: Australia Facility due 2021 — 28 27 4 Brazilian bank loans 5 16 7 34 Lease obligations (1) 43 14 50 14 Other — 11 — 11 Total $ 1,839 $ 76 $ 1,715 $ 70 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
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 June 30, 2020 and December 31, 2019: Liability Range of Reasonably Possible Costs at June 30, 2020 Site Description June 30, 2020 December 31, 2019 Low High Geismar, LA $ 12 $ 12 $ 9 $ 22 Superfund and offsite landfills – allocated share: Less than 1% 3 3 2 6 Equal to or greater than 1% 6 6 5 14 Currently-owned 9 8 4 14 Formerly-owned: Remediation 18 21 14 37 Monitoring only — 1 — 1 Total $ 48 $ 51 $ 34 $ 94 |
Pension and Postretirement Ex_2
Pension and Postretirement Expense (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Defined Benefit Plan [Abstract] | |
Schedule of Components of Net Benefit Cost | Following are the components of net pension benefit cost recognized by the Company for the Successor three and six months ended June 30, 2020 and for the Predecessor three and six months ended June 30, 2019: Pension Benefits Successor Predecessor Successor Predecessor Three Months Ended Three Months Ended Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S. Service cost $ 1 $ 4 $ 1 $ 3 $ 1 $ 9 $ 2 $ 7 Interest cost on projected benefit obligation 1 2 2 2 3 3 4 4 Expected return on assets (3) (3) (3) (3) (6) (6) (6) (6) Net (benefit) expense $ (1) $ 3 $ — $ 2 $ (2) $ 6 $ — $ 5 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Segment Reporting [Abstract] | |
Segment Sales by Geographic Region | Following is net sales by reportable segment disaggregated by geographic region: Successor Predecessor Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 (2) Adhesives Coatings and Composites Total Adhesives Coatings and Composites Total North America $ 224 $ 104 $ 328 $ 326 $ 149 $ 475 Europe 69 106 175 103 152 255 Asia Pacific 30 72 102 40 74 114 Latin America 23 — 23 48 — 48 Total $ 346 $ 282 $ 628 $ 517 $ 375 $ 892 Successor Predecessor Six Months Ended June 30, 2020 Six Months Ended June 30, 2019 (2) Adhesives Coatings and Composites Total Adhesives Coatings and Composites Total North America $ 520 $ 258 $ 778 $ 659 $ 285 $ 944 Europe 171 260 431 217 304 521 Asia Pacific 62 122 184 81 129 210 Latin America 61 — 61 103 — 103 Total $ 814 $ 640 $ 1,454 $ 1,060 $ 718 $ 1,778 (1) Intersegment sales are not significant and, as such, are eliminated within the selling segment. (2) Previously reported Net Sales by reportable segment for the Predecessor three and six months ended June 30, 2019 is shown below: Predecessor Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Forest Products Resins Epoxy, Phenolic and Coating Resins Total Forest Products Resins Epoxy, Phenolic and Coating Resins Total North America $ 259 $ 216 $ 475 $ 519 $ 425 $ 944 Europe 43 212 255 90 431 521 Asia Pacific 30 84 114 63 147 210 Latin America 48 — 48 103 — 103 Total $ 380 $ 512 $ 892 $ 775 $ 1,003 $ 1,778 |
Changes in Accumulated Other _2
Changes in Accumulated Other Comprehensive Income (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
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 Successor three and six months ended June 30, 2020 and the Predecessor three and six months ended June 30, 2019: Defined Benefit Pension and Postretirement Plans Foreign Currency Translation Adjustments Cash Flow Hedge Total Predecessor Balance at March 31, 2019 $ (1) $ (17) $ — $ (18) Change in value — (8) — (8) Balance at June 30, 2019 $ (1) $ (25) $ — $ (26) Balance at December 31, 2018 $ (1) $ (17) $ — $ (18) Change in value — (8) — (8) Balance at June 30, 2019 $ (1) $ (25) $ — $ (26) Successor Balance at March 31, 2020 $ — $ (45) $ (13) $ (58) Change in value — 6 (3) 3 Balance at June 30, 2020 $ — $ (39) $ (16) $ (55) Balance at December 31, 2019 $ — $ (3) $ 2 $ (1) Change in value — (36) (18) (54) Balance at June 30, 2020 $ — $ (39) $ (16) $ (55) |
Background and Basis of Prese_2
Background and Basis of Presentation (Details) - Number of Reportable Segments | 6 Months Ended | ||
Jun. 30, 2020Segments$ / shares | Dec. 31, 2019$ / shares | Jul. 01, 2019$ / shares | |
Segment Reporting Information [Line Items] | |||
Number of Reportable Segments | Segments | 3 | ||
Common Stock, Par or Stated Value Per Share | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 |
Significant Accounting Polici_3
Significant Accounting Policies (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Contract with Customer, Asset, after Allowance for Credit Loss | $ 8 | $ 8 | $ 9 | ||
Restricted Cash and Cash Equivalents, Current | 3 | 3 | 4 | ||
Allowance for Doubtful Accounts, Premiums and Other Receivables | 3 | 3 | $ 3 | ||
increase (decrease) in cost of sales | $ (22) | $ (45) | |||
Cost of Goods and Service, Excluding Depreciation, Depletion, and Amortization | 528 | 735 | 1,208 | 1,462 | |
Increase (Decrease) in Selling, General and Administrative expense | (4) | (7) | |||
Selling, general and administrative expense (see Note 2) | 55 | 57 | 130 | 145 | |
Depreciation and amortization | $ 56 | 26 | $ 114 | 52 | |
Previously Reported [Member] | |||||
Cost of Goods and Services Sold | 757 | 1,507 | |||
Previously reported, selling general and administrative expense | $ 61 | $ 152 |
Asset Impairments (Details)
Asset Impairments (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Asset Impairment [Abstract] | ||||
Asset impairments | $ 0 | $ 0 | $ 16 | $ 0 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | Mar. 31, 2019 | |
Related Party Transaction [Line Items] | ||||||
Shared Services Costs Incurred by Hexion | $ 15 | |||||
Shared Services Costs Incurred by MPM | 14 | |||||
Shared Services Net Billings - Hexion to MPM | 11 | |||||
Loan receivable from parent | $ 10 | |||||
Settlement of affiliate loan | $ 10 | $ 10 | ||||
Apollo Affiliates and Other Related Parties [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Revenue from Related Parties | $ 1 | 1 | ||||
Apollo [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Annual management consulting fee | $ 3 | |||||
Annual management consulting fee percentage | 2.00% | |||||
Momentive Performance Materials Inc. [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Related Party Transaction, Purchases from Related Party | 3 | $ 10 | ||||
Revenues from distribution agreement | 1 | |||||
Other joint ventures unconsolidated [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Revenue from Related Parties | 1 | 1 | 1 | 2 | ||
Related Party Transaction, Purchases from Related Party | 1 | $ 1 | 1 | $ 2 | ||
Accounts Receivable, Related Parties | 1 | 1 | $ 1 | |||
Accounts Payable, Related Parties | 1 | 1 | 1 | |||
Loans and Leases Receivable, Related Parties | 6 | 6 | $ 7 | |||
Additional Paid-in Capital [Member] | ||||||
Related Party Transaction [Line Items] | ||||||
Settlement of affiliate loan | $ 0 | $ 0 |
Fair Value (Details)
Fair Value (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||||
AOCI, Cash Flow Hedge, Cumulative Gain (Loss), after Tax | $ (3) | $ 0 | $ (18) | $ 0 | |
Derivative notional amount, Interest Rate Swap | 300 | 300 | $ 300 | ||
Interest Rate Derivative Assets, at Fair Value | 3 | ||||
Interest Rate Derivative Liabilities, at Fair Value | (15) | (15) | |||
Long-term Debt | 1,915 | 1,915 | 1,785 | ||
Long-term Debt, fair value | 1,888 | 1,888 | 1,815 | ||
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 | 1,831 | 1,831 | 1,751 | ||
Fair Value Inputs, Level 3 [Member] | |||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||||
Long-term Debt, fair value | $ 57 | $ 57 | $ 64 |
Debt Obligations (Details)
Debt Obligations (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||
Due Within One Year | $ 76 | $ 70 |
Long-term debt | 1,839 | 1,715 |
ABL Facility [Domain] | ||
Debt Instrument [Line Items] | ||
Due Within One Year | 0 | 0 |
Long-term debt | 164 | 0 |
Senior Secured Term Loan - USD due 2026 [Domain] | ||
Debt Instrument [Line Items] | ||
Due Within One Year | 7 | 7 |
Long-term debt | 704 | 708 |
Debt Instrument, Unamortized Discount | (6) | (7) |
Senior Secured Term Loan - EUR due 2026 [Domain] | ||
Debt Instrument [Line Items] | ||
Long-term debt | 473 | 473 |
Debt Instrument, Unamortized Discount | (4) | |
7.875% Senior Secured Notes due 2027 [Domain] | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 450 | 450 |
Debt Instrument, Interest Rate, Stated Percentage | 7.875% | |
Australia Facility Due 2021 [Member] | ||
Debt Instrument [Line Items] | ||
Due Within One Year | $ 28 | 4 |
Long-term debt | 0 | 27 |
Brazilian Bank Loans [Member] | ||
Debt Instrument [Line Items] | ||
Due Within One Year | 16 | 34 |
Long-term debt | 5 | 7 |
Capital Leases [Member] | ||
Debt Instrument [Line Items] | ||
Due Within One Year | 14 | 14 |
Long-term debt | 43 | 50 |
Other [Member] | ||
Debt Instrument [Line Items] | ||
Due Within One Year | 11 | 11 |
Long-term debt | $ 0 | $ 0 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) - Environmental Liabilities - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2020 | Dec. 31, 2019 | |
Accrued Environmental Loss Contingencies, Current | $ 19 | $ 18 |
Liability | 48 | 51 |
Estimated Litigation Liability, Current | 1 | 1 |
Estimated Litigation Liability | 2 | 2 |
Geismar, LA | ||
Accrual for Environmental Loss Contingencies | $ 12 | 12 |
Discount rate assumed to record at present value | 3.00% | |
Undiscounted Liability Expected to be Paid | next 20 years | |
Accrual for Environmental Loss Contingencies, Gross | $ 16 | |
Accrual for Environmental Loss Contingencies, Undiscounted, Due Ratably over the Next Five Years | 6 | |
Less than 1% | ||
Accrual for Environmental Loss Contingencies | 3 | 3 |
Equal to or greater than 1% | ||
Accrual for Environmental Loss Contingencies | 6 | 6 |
Currently-owned | ||
Accrual for Environmental Loss Contingencies | 9 | 8 |
Remediation | ||
Accrual for Environmental Loss Contingencies | 18 | 21 |
Accrued Environmental Loss Contingencies, Current | 10 | |
Estimated Litigation Liability, Noncurrent | 8 | |
Monitoring only | ||
Accrual for Environmental Loss Contingencies | 0 | $ 1 |
Maximum [Member] | ||
Site Contingency, Loss Exposure Not Accrued, Best Estimate | 94 | |
Maximum [Member] | Geismar, LA | ||
Liability | 22 | |
Maximum [Member] | Less than 1% | ||
Liability | 6 | |
Maximum [Member] | Equal to or greater than 1% | ||
Liability | 14 | |
Maximum [Member] | Currently-owned | ||
Liability | 14 | |
Maximum [Member] | Remediation | ||
Liability | 37 | |
Maximum [Member] | Monitoring only | ||
Liability | 1 | |
Minimum [Member] | ||
Site Contingency, Loss Exposure Not Accrued, Best Estimate | 34 | |
Minimum [Member] | Geismar, LA | ||
Liability | 9 | |
Minimum [Member] | Less than 1% | ||
Liability | 2 | |
Minimum [Member] | Equal to or greater than 1% | ||
Liability | 5 | |
Minimum [Member] | Currently-owned | ||
Liability | 4 | |
Minimum [Member] | Remediation | ||
Liability | 14 | |
Minimum [Member] | Monitoring only | ||
Liability | $ 0 |
Commitments and Contingencies_3
Commitments and Contingencies (Details) - Non-Environmental Liabilities - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 |
Loss Contingencies [Line Items] | ||
Estimated Litigation Liability | $ 2 | $ 2 |
Estimated Litigation Liability, Current | $ 1 | $ 1 |
Pension and Postretirement Ex_3
Pension and Postretirement Expense (Details) - Schedule of Components of Net Benefit Cost - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Pension Benefits | ||||
Pension Benefits and Non-Pension Postretirement Benefits Disclosures Table Text Block [Line Items] | ||||
Net expense (benefit) | $ 1 | $ 1 | $ 1 | $ 1 |
Pension Plan [Member] | U.S. Plans | ||||
Pension Benefits and Non-Pension Postretirement Benefits Disclosures Table Text Block [Line Items] | ||||
Service cost | 1 | 1 | 1 | 2 |
Interest cost on projected benefit obligation | 1 | 2 | 3 | 4 |
Expected return on assets | 3 | 3 | 6 | 6 |
Net expense (benefit) | (1) | 0 | (2) | 0 |
Pension Plan [Member] | Non-U.S. Plans | ||||
Pension Benefits and Non-Pension Postretirement Benefits Disclosures Table Text Block [Line Items] | ||||
Service cost | 4 | 3 | 9 | 7 |
Interest cost on projected benefit obligation | 2 | 2 | 3 | 4 |
Expected return on assets | 3 | 3 | 6 | 6 |
Net expense (benefit) | $ 3 | $ 2 | $ 6 | $ 5 |
Stock Compensation (Details)
Stock Compensation (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Effective Income Tax Rate Reconciliation, Percent | 20.00% | (8.00%) | 7.00% | (10.00%) |
Share-based Compensation Arrangement by Share-based payment award, PSUs, Nonvested, Number | 823,619 | 823,619 | ||
Employee Benefits and Share-based Compensation | $ 4 | $ 9 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number | 821,758 | 821,758 | ||
Performance Shares [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 15.80 | |||
Restricted Stock Units (RSUs) [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 15.80 |
Segment Information (Details) -
Segment Information (Details) - Revenues by Segment - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Segment Reporting Information [Line Items] | ||||
Net sales | $ 628 | $ 892 | $ 1,454 | $ 1,778 |
Coatings and Composites [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 282 | 375 | 640 | 718 |
Adhesives [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 346 | 517 | 814 | 1,060 |
FPD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 380 | 775 | ||
EPCD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 512 | 1,003 | ||
North America | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 328 | 475 | 778 | 944 |
North America | Coatings and Composites [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 104 | 149 | 258 | 285 |
North America | Adhesives [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 224 | 326 | 520 | 659 |
North America | FPD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 259 | 519 | ||
North America | EPCD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 216 | 425 | ||
Europe | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 175 | 255 | 431 | 521 |
Europe | Coatings and Composites [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 106 | 152 | 260 | 304 |
Europe | Adhesives [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 69 | 103 | 171 | 217 |
Europe | FPD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 43 | 90 | ||
Europe | EPCD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 212 | 431 | ||
Asia Pacific | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 102 | 114 | 184 | 210 |
Asia Pacific | Coatings and Composites [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 72 | 74 | 122 | 129 |
Asia Pacific | Adhesives [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 30 | 40 | 62 | 81 |
Asia Pacific | FPD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 30 | 63 | ||
Asia Pacific | EPCD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 84 | 147 | ||
Latin America | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 23 | 48 | 61 | 103 |
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 | $ 23 | 48 | $ 61 | 103 |
Latin America | FPD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 48 | 103 | ||
Latin America | EPCD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | $ 0 | $ 0 |
Segment Information (Details)_2
Segment Information (Details) - EBITDA by Segment - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Segment Reporting Information [Line Items] | ||||
Segment EBITDA | $ 65 | $ 112 | $ 154 | $ 215 |
Adhesives [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Segment EBITDA | 51 | 73 | 122 | 149 |
Coatings and Composites [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Segment EBITDA | 26 | 52 | 65 | 96 |
Corporate and Other [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Segment EBITDA | $ (12) | (13) | $ (33) | (30) |
EPCD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Segment EBITDA | 59 | 111 | ||
FPD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Segment EBITDA | $ 66 | $ 134 |
Segment Information (Details)_3
Segment Information (Details) - Reconciliation of Segment EBITDA to Net Income - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Segment Reporting Information [Line Items] | ||||
Net loss | $ (42) | $ (108) | $ (101) | $ (160) |
Income tax (benefit) expense | (11) | 8 | (8) | 15 |
Interest expense, net | 25 | 9 | 51 | 89 |
Depreciation and amortization (1) | 56 | 26 | 114 | 52 |
EBITDA | 28 | (64) | 56 | (3) |
Non-cash asset impairments | 16 | 0 | ||
Asset impairments | 0 | 0 | 16 | 0 |
Business realignment costs (2) | 18 | 11 | 39 | 15 |
Transaction costs (3) | 4 | 3 | 7 | 26 |
Realized and unrealized foreign currency (gains) losses | 0 | (7) | 6 | (6) |
Other Noncash Expense | 13 | 7 | 25 | 9 |
Other (6) | 2 | 6 | 5 | 18 |
Total adjustments | 37 | 176 | 98 | 218 |
Segment EBITDA | 65 | 112 | 154 | 215 |
accelerated depreciation | 1 | (2) | ||
Net Income (Loss) Attributable to Parent | (42) | (107) | (101) | (159) |
Net Income (Loss) Attributable to Noncontrolling Interest | 0 | (1) | 0 | (1) |
Reorganization Items | 0 | 156 | 0 | 156 |
Adhesives [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Segment EBITDA | 51 | 73 | 122 | 149 |
Coatings and Composites [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Segment EBITDA | 26 | 52 | 65 | 96 |
Corporate and Other [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Segment EBITDA | $ (12) | (13) | $ (33) | (30) |
FPD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Segment EBITDA | 66 | 134 | ||
EPCD [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Segment EBITDA | $ 59 | $ 111 |
Changes in Accumulated Other _3
Changes in Accumulated Other Comprehensive Income (Details) - Summary of Changes in Accumulated Other Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Changes in Accumulated Other Comprehensive Income [Roll Forward] | ||||
Beginning Balance | $ (58) | $ (18) | $ (1) | $ (18) |
Other comprehensive income before reclassifications, net of tax | 3 | (8) | (54) | (8) |
Ending Balance | (55) | (26) | (55) | (26) |
Beginning Balance Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax | (45) | (17) | (3) | (17) |
Foreign currency translation adjustments | 6 | (8) | (36) | (8) |
Ending Balance Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax | (39) | (25) | (39) | (25) |
Beginning Balance Other Comprehensive (Income) Loss, Pension and Other Postretirement Benefit Plans, After Tax | 0 | (1) | 0 | (1) |
Other Comprehensive (Income) Loss, Defined Benefit Plan, after Reclassification Adjustment, after Tax | 0 | 0 | 0 | 0 |
Ending Balance Other Comprehensive (Income) Loss, Pension and Other Postretirement Benefit Plans, After Tax | 0 | (1) | 0 | (1) |
Accumulated Other Comprehensive Income (Loss), Cumulative Changes in Net Gain (Loss) from Cash Flow Hedges, Effect Net of Tax | (13) | 0 | 2 | 0 |
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification, Tax, Parent | (3) | 0 | (18) | 0 |
Accumulated Other Comprehensive Income (Loss), Cumulative Changes in Net Gain (Loss) from Cash Flow Hedges, Effect Net of Tax | $ (16) | $ 0 | $ (16) | $ 0 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Investments, Owned, Federal Income Tax Note [Line Items] | ||||
Income tax (benefit) expense | $ (11) | $ 8 | $ (8) | $ 15 |
Effective Income Tax Rate Reconciliation, Percent | 20.00% | (8.00%) | 7.00% | (10.00%) |