Title of each class Name of each exchange on which registered 18, 2015 15, 2015 We regularly consider acquisitions and other internal and external growth opportunities that would be consistent with or complementary to our overall business strategy. In February 2015, we entered into an agreement to acquire an additional 35.7% interest in this joint venture. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments." Product Annual Capacity End Uses Low-Density Polyethylene Styrene site. OpCo owns a 200-mile ethylene pipeline that runs from Mont Belvieu to our Longview site. We purchase electricity for our Lake Charles facility under long-term industrial contracts. segment in Corporation. In February 2015, we entered into an agreement to acquire an additional 35.7% interest in this joint venture. For more information, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments." The following table illustrates our production capacities at End Uses Specialty PVC VCM Chlorine Caustic Soda Building Products the Marcellus shale area. segment in , Mexichem, S.A.B. de C.V., INEOS Group Limited, Kem One SAS and Solvay S.A. emissions to the air; discharges to land or to surface and subsurface waters; other releases into the environment; remediation of contaminated sites; generation, handling, storage, transportation, treatment and disposal of waste materials; and maintenance of safe conditions in the workplace. time to time in the future (but not more than once every five years), institute an arbitration proceeding to adjust that percentage; and (3) we and PolyOne would negotiate a new environmental remediation utilities and services agreement to cover our provision to, or on behalf of, PolyOne of certain environmental remediation services at the site. The current environmental remediation activities at the Calvert City the substances, and identify and implement risk management measures to protect humans and the environment. In the United States, the National Toxicology Program seeks to identify and select for study chemicals and other substances to evaluate potential human health hazards. As of December 31, Category Olefins segment Vinyls segment Corporate " the European economy. Additionally, the export of natural gas liquids from the United States or greater restrictions on hydraulic fracturing could restrict the availability of our raw materials in the United States, thereby increasing our costs. general economic new capacity additions in North America, Asia and the Middle East; competitor action; technological innovations; currency fluctuations; war, terrorism and civil unrest; severe weather and natural disasters; and credit worthiness of customers and vendors. Europe's economic recovery has been slow relative to the United States. If Europe does not experience a meaningful economic recovery, it may have a continued negative effect on our European business. product price; technical support and customer service; quality; reliability of raw material and utility supply; availability of potential substitute materials; and product performance. the emergence of new domestic and international competitors; the rate of capacity additions by competitors; changes in customer base due to mergers; the intensification of price competition in our markets; the introduction of new or substitute products by competitors; the technological innovations of Our production facilities process some volatile and hazardous materials that subject us to operating risks that could adversely affect our operating results. pipeline leaks and ruptures; explosions; fires; severe weather and natural disasters; mechanical failure; unscheduled downtime; labor difficulties; transportation interruptions; chemical spills; discharges or releases of toxic or hazardous substances or gases; storage tank leaks; other environmental risks; compliance. unexpectedly long delivery times for, or shortages of, key equipment, parts or materials; shortages of skilled labor and other personnel necessary to perform the work; failures or delays of third-party equipment vendors or service providers; unforeseen increases in the cost of equipment, labor and raw materials; work stoppages and other labor disputes; unanticipated actual or purported change orders; disputes with contractors and suppliers; design and engineering problems; latent damages or deterioration to equipment and machinery in excess of engineering estimates and assumptions; interference from adverse weather conditions; and difficulties in obtaining necessary permits or in meeting permit conditions. of debt and the limitations imposed on us by our existing or future debt agreements could have significant consequences on our business and future prospects, including the following: a portion of our cash flow from operations will be dedicated to the payment of interest and principal on our debt and will not be available for other purposes, including the payment of dividends; we may not be able to obtain necessary financing in the future for working capital, capital expenditures, acquisitions, debt service requirements or other purposes; our less leveraged competitors could have a competitive advantage because they have greater flexibility to utilize their cash flow to improve their operations; we may be exposed to risks inherent in interest rate fluctuations because some of our borrowings are at variable rates of interest, which would result in higher interest expense in the event of increases in interest rates; we could be vulnerable in the event of a downturn in our business that would leave us less able to take advantage of significant business opportunities and to react to changes in our business and in market or industry conditions; and should we pursue additional expansions of existing assets or acquisition of third party assets, we may not be able to obtain additional liquidity at cost effective interest rates. All of these factors could be magnified if we were to finance any future acquisitions with significant amounts of debt. pay dividends on, redeem or repurchase our capital stock; make investments and other restricted payments; incur additional indebtedness or issue preferred stock; create liens; permit dividend or other payment restrictions on our restricted subsidiaries; engage in transactions with affiliates; and engage in sale-leaseback transactions. businesses, including the operations of Vinnolit. we may fail to integrate the businesses we acquire into a cohesive, efficient enterprise; our resources, including management resources, are limited and may be strained if we engage in a large acquisition or significant number of acquisitions, and acquisitions may divert our our failure to retain key employees and contracts of the businesses we acquire. the composition of our board of directors and, through the board, any determination with respect to our business direction and policies, including the appointment and removal of officers and the determination of compensation; any determinations with respect to mergers or other business combinations or the acquisition or disposition of assets; our financing decisions, capital raising activities and the payment of dividends; and amendments to our amended and restated certificate of incorporation or amended and restated bylaws. business opportunities that may be presented to the principal stockholder affiliates and to our officers and directors associated with the principal stockholder affiliates, and competition between the principal stockholder affiliates and us within the same lines of business; the solicitation and hiring of employees from each other; and agreements with the principal stockholder affiliates relating to corporate services that may be material to our business. future operating rates, margins, cash flow and demand for our products; industry market production capacities; currency devaluation; our ability to meet our liquidity needs; future capacity additions and expansions in the industry; timing, funding and results of capital projects, such as the health of our customer base; pension plan obligations, funding requirements and investment policies; compliance with present and future environmental regulations and costs associated with environmentally related penalties, capital expenditures, remedial actions and proceedings, including any new laws, regulations or treaties that may come into force to limit or control carbon dioxide and other GHG emissions or to address other issues of climate change; effects of pending legal proceedings; and timing of and amount of capital expenditures. general economic and business conditions; the cyclical nature of the chemical industry; the availability, cost and volatility of raw materials and energy; uncertainties associated with the United States, European and worldwide economies, including those due to current and potential governmental regulatory actions in the United States and Europe and regulatory actions and political unrest in other countries; industry production capacity and operating rates; the supply/demand balance for our products; competitive products and pricing pressures; instability in the credit and financial markets; access to capital markets; terrorist acts; operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, spills and releases and other environmental risks); changes in laws or regulations; technological developments; our ability to integrate acquired businesses; creditworthiness of our customers. Location Principal Products Lake Charles, Louisiana Geismar, Louisiana Greensboro, Georgia Janesville, Wisconsin Leola, Pennsylvania Wichita Falls, Texas Yucca, Arizona Lodi, California Our Lake Charles site and its conversion to 100% ethane feedstock capability. OpCo currently plans to upgrade and expand the capacity of the Petro 1 ethylene unit at our Lake Charles site during the first half of 2016. Our Calvert City OpCo's increase in ethylene production at our Calvert City site and to provide additional PVC resin to meet the growing demands of our global customers. 1.5 billion pounds per year and the PVC plants have a combined capacity of 1.7 billion pounds per year. Our principal executive offices are located in Houston, Texas. Our office space is leased, at market rates, from an affiliate managerial and technical positions at Mattel Incorporated, Developmental Bank of Singapore, Singapore Gulf Plastics Pte. Ltd. and Gulf Oil Corporation. Mr. Chao, along with his brother Albert Chao, assisted their father T.T. Chao in founding Westlake Chemical Corporation. Mr. Chao is on the board of Baylor College of Medicine and KIPP (Knowledge Is Power Program). Mr. Chao received his David R. Hansen Equity Securities Year Ended December 31, 2011 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Year Ended December 31, 2010 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Period October 2011 November 2011 December 2011 Total Plan Category Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total Statement of Operations Data: Net sales Gross profit Selling, general and administrative expenses Income (loss) from operations Interest expense Other income, net(2) Income (loss) before income taxes Provision for (benefit from) income taxes Net income (loss) Earnings (Loss) Per Share Basic Diluted Weighted average shares outstanding Basic Diluted Balance Sheet Data (end of period): Cash and cash equivalents Restricted cash Working capital(4) Total assets Total debt Stockholders’ equity Cash dividends declared per share Other Operating Data: Cash flow from: Operating activities Investing activities Financing activities Depreciation and amortization Capital expenditures EBITDA(5) External Sales Volume (millions of pounds): Olefins Segment Polyethylene Ethylene, styrene and other Vinyls Segment PVC, caustic soda and other Building productsxý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2014 For the Fiscal Year Ended December 31, 2011¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to For the Transition Period from to Delaware 76-0346924 Registrant’sRegistrant's telephone number, including area code) Common Stock, $0.01 par value New York Stock Exchange, Inc. No xxýxý No ¨xý No ¨registrant’sregistrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x¨“large"large accelerated filer,” “accelerated filer”" "accelerated filer" and “smaller"smaller reporting company”company" in Rule 12b-2 of the Exchange Act: xýregistrant’sregistrant's voting stock held by non-affiliates of the registrant on June 30, 2011,2014, the end of the registrant’sregistrant's most recently completed second fiscal quarter, based on a closing price on June 30, 20112014 of $51.90$83.76 on the New York Stock Exchange was approximately $1.0 billion.$3.4 billion.66,535,075132,857,937 shares (on a post-split basis) of the registrant’sregistrant's common stock outstanding as of February 17, 2012.registrant’sregistrant's definitive Proxy Statement to be filed pursuant to Regulation 14A with respect to the registrant’s 2012registrant's 2015 Annual Meeting of Stockholders to be held on May 24, 2012.2011.2014. We calculated rated capacity by estimating the number of days in a typical year that a production unit of a plant is expected to operate, after allowing for downtime for regular maintenance, and multiplying that number by an amount equal to the unit’sunit's optimal daily output based on the design feedstock mix. Because the rated capacity of a production unit is an estimated amount, actual production volumes may be more or less than the rated capacity.“GAAP.”"GAAP." For this purpose, a non-GAAP financial measure is generally defined by the Securities and Exchange Commission (“SEC”("SEC") as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measures. In this report, we disclose so-called non-GAAP financial measures, primarily EBITDA.earnings before interest, taxes, depreciation and amortization ("EBITDA"). EBITDA is calculated as net income before interest expense, income taxes, depreciation and amortization. The non-GAAP financial measures described in this Form 10-K are not substitutes for the GAAP measures of earnings and cash flow.businessoperating segments, Olefins and Vinyls,Vinyls. We are highly integrated along our olefins product chain with significant downstream integration into polyethylene and westyrene monomer. We are also an integrated global producer of vinyls with substantial downstream integration into polyvinyl chloride or PVC,("PVC") building products.or VCM,("VCM") plant in Calvert City, Kentucky from the Goodrich Corporation. In 1992, we commenced our Vinyls segment building products operations after acquiring three PVC pipe plants. Since 1986, we have grown rapidly into an integrated global producer of petrochemicals, vinyls, polymers and building products. We achieved this by acquiring existing plants or constructing new plants (including our joint venture in China) and completing numerous capacity or production line expansions.17, 2012,18, 2015, we had 11.819.3 billion pounds per year of aggregate production capacity at 1321 manufacturing sites in North America.America and Europe. We also have a 59% interest in a joint venture in China that operates a vinyls facility.Texas facility. We have two ethylene plants, which are owned by OpCo, two polyethylene plants and one styrene monomer plant at our Lake Charles complex.site. We have three polyethylene plants and a specialty polyethylene wax plantfacility.site. The following table illustrates our production capacities at February 17, 201218, 2015 by principal product and the primary end uses of these materials: (Millions of pounds) 2,5002,740 or EDC,("EDC"), styrene,or LDPE 1,500 or LLDPE 9801,070 Heavy-duty films and bags, general purpose liners 570 Disposables,(1) Production capacity owned by OpCo. world’sworld's most widely used petrochemical in terms of volume. It is the key building block used to produce a large number of higher value-added chemicals including polyethylene, EDC, VCM and styrene. We haveOpCo has the capacity to produce 2.52.7 billion pounds of ethylene per year at our Lake Charles complexsite, and we have the capability to consume all of ourOpCo's production internallythat we purchase at Lake Charles to produce polyethylene and styrene monomer in our Olefins business and to produce VCM and EDC in our Vinyls business. WeOpCo also produceproduces ethylene infor our Vinyls segment at our Calvert City facility,site, and all of whichthe ethylene we purchase from OpCo at Calvert City is used internally in the production of VCM. For OpCo's annual ethylene production that is purchased by us for our Vinyls business, see "Business—Vinyls Business." In addition, we (through OpCo) produce ethylene co-products including chemical grade propylene, crude butadiene, pyrolysis gasoline and hydrogen. We (through OpCo) sell our entire output of these co-products to external customers. In April 2011,Prior to the Westlake Partners IPO, we announced an expansion program to increase the ethane-based ethylene capacity of both of the ethylene units at our Lake Charles complex. We currently expect to completecompleted the expansion of one of the two ethylene units by late 2012. The first cracker expansion is expected to increase ethylene capacity by approximately 230 – 240 million pounds annually, while also increasing feedstock flexibility. The additional capacity from this expansion is expected to provide ethylene for existing internal uses and may also be sold in the merchant market. In addition, we are currently evaluating expansion plans to increase the ethane-based ethylene capacity of the secondPetro 2 ethylene unit at our Lake Charles complex.site and its conversion to 100% ethane feedstock capability. OpCo currently plans to upgrade and expand the capacity of its Petro 1 ethylene unit at our Lake Charles site during the first half of 2016.world’sworld's most widely consumed polymer, is used in the manufacture of a wide variety of film, coatings and molded product applications primarily used in packaging. Polyethylene is generally classified as either LDPE, LLDPE or HDPE.high-density polyethylene ("HDPE"). The density correlates to the relative stiffness of the end-use products. The difference between LDPE and LLDPE is molecular, and products produced from LLDPE, are strongerin general, have higher strength properties than products produced from LDPE. LDPE exhibits better clarity and other physical properties and is used in end products such as bread bags, dry cleaning bags, food wraps, and milk carton coatings and snack package coatings.food packaging. LLDPE is used for higher film strength applications such as stretch film and heavy duty sacks. HDPE is used to manufacture products such as grocery, merchandise and trash bags, rigid plastic containers, plastic closures and pipe.North Americathe Americas based on capacity and, in 2011,2014, our annual capacity of 1.5 billion pounds was available in numerous formulations to meet the needs of our diverse customer base. We also have the capacity to produce 980 million1.1 billion pounds of LLDPE per year in various different formulations. Our Lake Charles facility has the capability to produce High-Density Polyethylene, or HDPE. We produce LDPE and LLDPE at both Lake Charles and Longview. Our Lake Charles and Longview facilities also have the capability to produce HDPE. We sell polyethylene to external customers as a final product in pellet form.OneBoth of ourOpCo's Lake Charles ethylene plants usesuse ethane as itsthe primary feedstock. Pursuant to a feedstock supply agreement between us and the other can useOpCo, OpCo receives ethane ethane/propane mix, propane, butane and naphtha. We receive feedstock at our Lake Charles facilitysite through several pipelines from a variety of suppliers in Texas and Louisiana. We also own a 200-mile ethylene pipeline that runs from Mont Belvieu, Texas to our Longview facility. In addition, we own a 50% interest in a 104-mile natural gas liquids pipeline from Mont Belvieu to our Lake Charles complex.our internallyethylene supplied ethylene,by OpCo, we also acquire ethylene from third parties in order to supply a portion of our ethylene requirements. We acquire butene and hexene to manufacture polyethylene and benzene to manufacture styrene. We receive butene and hexene at the Lake Charles complexsite and hexene at the Longviewcomplex site via rail car from several suppliers. We receive benzene via barges, ships and pipeline pursuant to short-term arrangements. We purchase butene and hexene pursuant to multi-year contracts, some of which are renewable for an additional term subject to either party to the contract notifying the other party that it does not wish to renew the contract.usehave an internal sales force that sells our products directly to our customers. Our polyethylene customers are some of the majoritynation's largest producers of our Lake Charlesfilm and flexible packaging.production in our polyethylene, styrene and VCM operations. We sell the remainder to external customers. In addition, we sell our ethylene co-products to external customers. OurOpCo's primary ethylene co-products are chemical grade propylene, crude butadiene, pyrolysis gasoline and hydrogen. The majority ofOur and OpCo's sales in our Olefins business are made under spot and long-term agreements.our ethylene (through OpCo) and propylene via a pipeline systemsystems that connects ourconnect OpCo's ethylene plants to numerous external customers. Our hydrogen is sold via pipeline to a single customer. We also have storage agreements and exchange agreements that allow us and OpCo access to customers who are not directly connected to the pipeline system. We transport our polyethylene, styrene,OpCo ships crude butadiene and pyrolysis gasoline by rail or truck. Additionally, we transport our polyethylene and styrene by rail or truck. Further, styrene can be transported by barge or ship.We have an internal sales force that sells directly to our customers. Our polyethylene customers are some of the nation’s largest producers of film and flexible packaging. In 2011, nosegment.price, customer service, product deliverability, quality, consistency, performance and performance.price. Our competitors in the ethylene, polyethylene and styrene markets are typically some of the world’sworld's largest chemical companies, including Chevron Phillips Chemical Company, LP, The Dow Chemical Company, ExxonMobil Chemical Company, INEOS (successor to BP Chemicals Ltd.),Group Limited, LyondellBasell Industries, N.V. and NOVA Chemicals Corporation, a subsidiary of The International Petroleum Investment Company of the Emirate of Abu Dhabi.maximizeoptimize product margins and capacity utilization. Our primary North American chemical manufacturing facilities are located in our Calvert City and Geismar, Louisiana complexes.sites. Our Calvert City facilitysite includes an ethylene plant, which is owned by OpCo, a chlor-alkali plant, a VCM plant, a PVC plant and a large diameter PVC pipe plant. Our Geismar facilitysite includes a chlor-alkali plant, an EDC plant, a VCM plant and a PVC plant.17, 2012,18, 2015, we operated and owned 1012 building product facilities and owned a 59% interest in a joint venture in China that produces PVC resin, building products and PVC film and sheet.17, 201218, 2015 by principal product and the end uses of these products: (Millions of pounds) 1,100 1,700 Commodity PVC 2,520 3,320 1,850 PVC 2,200 550 VCM, organic/inorganic chemicals, bleach 2,420 605 630 450 VCM 1,220 1,072 (1) EDC, a VCM intermediate product, is not included in the table. (2) Annual capacity excludes total capacity of 145 million pounds of PVC film and sheet, 300 million pounds of PVC resin and 33 million pounds of building products from the joint venture in China (in which we have a 59% interest). (3) Production capacity owned by OpCo. world’sworld's third most widely used plastic, is an attractive alternative to traditional materials such as glass, metal, wood, concrete and other plastic materials because of its versatility, durability and cost-competitiveness. PVC is produced from VCM, which is, in turn, made from chlorine and ethylene. PVC compounds are made by combining PVC resin with various additives in order to make either rigid and impact-resistant or soft and flexible compounds. The various compounds are then fabricated into end-products through extrusion, calendering, injection-molding or blow-molding. Flexible PVC compounds are used for wire and cable insulation, medical films and packaging, flooring, wall coverings, automotive interior and exterior trims and packaging. Rigid extrusion PVC compounds are commonly used in window frames, vertical blinds and construction products, including pipe and siding. Injection-molding PVC compounds are used in specialty products such as computer housings and keyboards, appliance parts and bottles. We have the capacity to produce 1.11.3 billion pounds and 600 million pounds of commodity PVC per year at our Calvert City facility and 600Geismar facility, respectively. In addition, we have the capacity to produce 1.1 billion pounds of specialty PVC and 620 million pounds of commodity PVC per year at our Geismar facility.European facilities. We have the capacity to use a majority of our North American-produced PVC internally in the production of our building products. The remainder of our PVC, including the PVC produced at our European facilities, is sold to downstream fabricators and the export market.international markets. In 2014, we completed the expansion of the existing PVC plant in Calvert City, which allowed us to take advantage of OpCo's increase in ethylene production at our Calvert City site and to provide additional PVC resin to meet the growing demands of our global customers. The expansion of the Calvert City PVC plant increased PVC resin capacity by approximately 200 million pounds annually.and 550 million pounds per year at our Geismar facility. The majorityfacility and 1.5 billion pounds per year at our European facilities. Substantially all of our VCM is used internally in our PVC operations.facility.Geismar, Gendorf, Germany and Knapsack, Germany facilities. We use our chlorine production in our VCM and EDC plants. We currently have the capacity to supply approximately 50%all of our chlorine requirements internally. We purchase the remaining amount at market prices. Our caustic soda is sold to external customers who use it for, among other things, the production of pulp and paper, organic and inorganic chemicals and alumina. In August 2010, we announced that we intend to proceed with the previously announced construction of a new chlor-alkali plant to be located at our vinyls manufacturing complex in Geismar. The new chlor-alkali unit is designed to produce up to 350,000 ECUs annually upon completion, bringing our total ECU capacity to625,000 per year. The new plant will improve the vertical integration of our vinyls business from chlorine downstream into VCM and PVC and increase caustic soda sales. The project is currently targeted for start-up in the second half of 2013.all of the ethylene we purchase that is produced by OpCo at Calvert City internally to produce VCM, andVCM. OpCo's Calvert City ethylene plant has the capacity to produce approximately 50%40% of the ethylene required for our total VCM production. We obtain the remainder of the ethylene we need for our Vinyls business from our Olefins business.OpCo's Lake Charles plant and from third party purchases. In December 2011,April 2014, we announced plans to performcompleted a major modification of thefeedstock conversion and ethylene production facilityexpansion project at ourOpCo's Calvert City complex. The modification is expected to reduce costs and improve operating efficiency and energy consumption. We currently expectethylene plant. With the modification to be completed by mid-2013. In addition, we are currently evaluating conversion from propane tocompletion of this project, OpCo's Calvert City ethylene plant now utilizes relatively low-cost ethane feedstock forand increased its capacity by approximately 180 million pounds annually. This expansion and feedstock conversion projectethylene production facility at Calvert City in order to capitalize on available low costvinyl chain integration and leverage relatively low-cost ethane and other “light” feedstock being developed in North America.“North"North American Pipe”Pipe" brand and specialty pipe, fittings, profiles and foundation building products under the "North American Specialty Products" brand. We also manufacture and market PVC fence, decking, windows and door profiles under the “Westech"Westech Building Products”Products" brand. All of our building products are sold to external customers. AllPredominantly all of the PVC we require for our building products is produced internally. In June 2011, we closedWe purchase the remainder of our Springfield, Kentucky PVC pipe facility, with an annual capacity of 90 million pounds.requirements at market prices. The combined capacity of our 1012 building products plants is 1.11.2 billion pounds per year.allrequired by our Calvert City and Geismar facilities (through OpCo), and most of the VCM and PVC and approximately 50%all of ourthe chlorine requirements used in our Vinyls business. The remainderWith the 2014 completion of our chlorine requirements is purchased at market prices. Ethylenethe feedstock conversion and ethylene expansion project, ethylene produced at ourOpCo's Calvert City facility currently utilizes propanerelatively low-cost ethane feedstock. We purchase the ethylene required for our European facilities from a number of sources under various contracts. We have access to, and partially own, an ethylene pipeline in Germany. We purchase the salt required for our chlor-alkali plantplants pursuant to a long-term contract.contracts. We purchase electricity for our Calvert City facility production from the Tennessee Valley AuthorityNorth American and European facilities under a long-term contract.We are an integrated producer of vinyls with substantial downstream integration into building products. industrial contracts.volumecapacity in the United States. We sell a majority of our PVC pipe through a combination of manufacturer’smanufacturer's representatives and our internal sales force to distributors who serve the wholesale PVC pipe market. We use a regional sales approach that allows us to provide focused customer service and to meet the specified needs of individual customers.force. We use an internal sales force to market and sell our fence, window and door profiles. We haveare also one of the capacity to use a majoritylargest manufacturers of our PVC internallyfence components by capacity in the production of our building products. The remainder of our PVC is sold to downstream fabricators and the export market.We sell substantially all of our caustic soda production to external customers, concentrating on customers in Calvert City’s geographical area to minimize transportation costs. In 2011, noUnited States.segment.price, product availability, product performance, customer service and customer service.price. We compete in the vinyls market with other producers including Formosa Plastics Corporation, Georgia GulfAxiall Corporation, Oxy Chem, LP, and Shintech, Inc.price, on-time delivery, product quality, customer service, product consistency and product consistency.price. We compete in the building products market with other producers and fabricators including Diamond Plastics Corporation and JM Eagle. We are the second largest manufacturerfederal,international, national, state and local environmental laws, regulations and regulations,directives, which address, among other things, the following:AnUnder one law, the U.S. Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), an owner or operator of property may be held strictly liable for remediating contamination without regard to whether that person caused the contamination, and without regard to whether the practices that resulted in the contamination were legal at the time they occurred. Because several of our production sites have a history of industrial use, it is impossible to predict precisely what effect these legal requirements will have on us.(“Goodrich”("Goodrich") chemical manufacturing complexfacility in Calvert City, Goodrich agreed to indemnify us for any liabilitiescomplex.site. For our part, we agreed to indemnify Goodrich for post-closing contamination caused by our operations. The soil and groundwater at the complex,site, which does not include our nearby PVC facility, had been extensively contaminated under Goodrich’sGoodrich's operations. In 1993, Goodrich spun off the predecessor of PolyOne Corporation (“PolyOne”("PolyOne"), and that predecessor assumed Goodrich’sGoodrich's indemnification obligations relating to preexisting contamination.complexsite do not have a specified termination date but are expected to last for the foreseeable future. The costs incurred by us that have been invoiced to PolyOne to provide the environmental remediation services were $3.3$2.8 million and $3.020112014 and 2013, respectively. By letter dated March 16, 2010, respectively. On March 17, 2010, we received notice of PolyOne’s intention to commencePolyOne notified us that it was initiating an arbitration proceeding under the settlement agreement. In this proceeding, PolyOne seeks to readjust the percentage allocation of costs and to recover approximately $1.4 million from us in reimbursement of previously paid remediation costs. The arbitration is currently stayed.complexsite in Calvert City. In 2003, the Kentucky Environmental and Public Protection Cabinet (the “Cabinet”"Cabinet") re-issued Goodrich’s Resource Conservation and Recovery Act (“RCRA”)Goodrich's RCRA permit which requires Goodrich to remediate contamination at the Calvert City manufacturing complex.site. Both Goodrich and PolyOne challenged various terms of the permit in an attempt to shift Goodrich’sGoodrich's clean-up obligations under the permit to us. We intervened in the proceedings. The Cabinet has suspended all corrective action under the RCRA permit in deference to a remedial investigation and feasibility study (“RIFS”("RIFS") being conducted, under the auspices of the U.S. Environmental Protection Agency ("EPA"), pursuant to an Administrative Settlement Agreement (“AOC”("AOC"), which became effective on December 9, 2009. See “Change in Regulatory Regime”"Federal Administrative Proceedings" below. The proceedings have been postponed. Periodic status conferences will be held to evaluate whether additional proceedings will be required. On September 19, 2011, we filed a motion to dismiss the remaining proceedings, which was denied on December 29, 2011.Change in Regulatory Regime.Federal Administrative Proceedings. In May 2009, the Cabinet sent a letter to the U.S. Environmental Protection Agency (“EPA”)EPA requesting the EPA’sEPA's assistance in addressing contamination at the Calvert City site under the U.S. Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”).CERCLA. In its response to the Cabinet also in May 2009, the EPA stated that it concurred with the Cabinet’sCabinet's request and would incorporate work previously conducted under the Cabinet’sCabinet's RCRA authority into the EPA’sEPA's cleanup efforts under CERCLA. Since 1983, the EPA has been addressing contamination at an abandoned landfill adjacent to our plant which had been operated by Goodrich and which was being remediated pursuant to CERCLA. During the past two years, theThe EPA has directed Goodrich and PolyOne to conduct additional investigation activities at the landfill and at our plant. In June 2009, the EPA notified us that we may have potential liability under section 107(a) of CERCLA at our plant site. Liability under section 107(a) of CERCLA is strict and joint and several. The EPA also identified Goodrich and PolyOne, among others, as potentially responsible parties at the plant site. We negotiated, in conjunction with the other potentially responsible parties, thean AOC and an order to conduct thea RIFS. TheOn July 12, 2013, the parties submitted and receivedseparate draft RIFS reports to the EPA. The EPA approval forhas hired a RIFS work plancontractor to implementcomplete the AOC. The parties are currently conducting the RIFS.remedial investigation report.complexsite would likely be spread out over an extended period. As a result, we believe it is unlikely that any remediation costs allocable to us will be material in terms of expenditures made in any individual reporting period.EPA Audit of Ethylene Units in Lake Charles. During 2007,Potential Flare Modifications. For several years, the EPA conductedhas been conducting an auditenforcement initiative against petroleum refineries and petrochemical plants with respect to emissions from flares. A number of our ethylene units incompanies have entered into consent agreements with the EPA requiring both modifications to reduce flare emissions and the installation of additional equipment to better track flare operations and emissions. On April 21, 2014, we received a Clean Air Act Section 114 Information Request from the EPA which sought information regarding flares at the Calvert City and Lake Charles with a focus on leak detection and repair, or LDAR. In January 2008, the U.S. Department of Justice, or DOJ, notifiedfacilities. The EPA has informed us that the information provided leads the EPA had referredto believe that some of the matter to the DOJ to bring a civil case against us alleging violationsflares are out of various environmental laws and regulations. The DOJ informed us that it would seek monetary penalties and require us to implement an “enhanced LDAR” program for the ethylene units.compliance with applicable standards. The EPA has proposed a settlementdemanded that we conduct additional flare sampling and provided a draft consent decree, which would require our Lake Charles facilities toundertake an enhanced LDAR program and would require payment of a civil penalty.provide supplemental information. We are engagedcurrently in negotiations with the EPA.EPA regarding these demands. The EPA has indicated that it is seeking a consent decree that would obligate us to take corrective actions relating to the alleged noncompliance. We have recorded an accrualnot agreed that any flares are out of compliance or that any corrective actions are warranted. Depending on the outcome of our negotiationsprobable loss relatedglobal settlement of all claims is being discussed. Such global settlement may result in a total civil penalty in excess of $100,000.monetary penalties. Althoughreport their GHG emissions, and to obtain permits with stringent control requirements before constructing or modifying new facilities with significant GHG emissions. In the ultimate amountEuropean Union, the Emissions Trading Scheme obligates certain emitters to obtain GHG emission allowances to comply with a cap and trade system for GHG emissions. As our chemical manufacturing processes result in GHG emissions, these and other GHG laws and regulations could affect our costs of liabilitydoing business.not ascertainable, we believe thatdesigned to identify the resolutionintrinsic properties of this matter will not have a material adverse effect on our financial condition, resultschemical substances, assess hazards and risks of operations or cash flows.expenditures, and we are faced with instances of noncompliance from time to time.expenditures. In 2011,2014, we made capital expenditures of $6.1$16.8 million related to environmental compliance. We estimate that we will make capital expenditures of $6.0approximately $13.0 million in 20122015 and $7.0$14.6 million in 2013,2016, respectively, related to environmental compliance. A significant percentageCapital expenditures related to environmental compliance have been relatively higher in 2014 in large part due to EPA regulations such as the PVC maximum achievable control technology ("MACT") rules and increasingly stringent requirements associated with environmental permits. We expect to incur further capital expenditures related to the PVC MACT rules and other EPA regulations in 2015 and 2016. The remainder of the 20122015 and 20132016 estimated amounts are related to equipment replacement and upgrades. We anticipate that stringent environmental regulations will continue to be imposed on us and the industry in general. Although we cannot predict with certainty future expenditures, management believes that our current spending trends will continue.Employees2011,2014, we had 1,811approximately 3,550 employees in the following areas: Number 800 697 2,600 991 150 12312%28% of our employees are represented by labor unions, and all of these union employees are working under collective bargaining agreements. TheIn the United States, approximately 10% of our employees are represented by labor unions and are working under collective bargaining agreements that will expire in 2014.2019. In Europe, we have multiple collective bargaining agreements, with varying expiration years, covering different groups of our work force. There have been no strikes or lockouts, and we have not experienced any work stoppages throughout our history. We believe that our relationship with the local union officialsour employees and bargaining committeesunions is open and positive.forfrom third-parties, and to improve upon third-partydevelop proprietary technology. Our selection process incorporates many factors, including the cost of the technology, our customers’customers' requirements, raw material and energy consumption rates, product quality, capital costs, maintenance requirements and reliability. Most of the technology licensed from third-party providers is perpetual and has been paid in full. We own a patent portfolio of intellectual property developed by a focused research and process technology development group. We also evaluate and access third-party technology for our Olefins businesses. After acquiring or developing a technology, we devote considerable effort to effectively employ the technology and further its development, with a view towards continuous improvement of our competitive position.We license technology from a number of third-party providers as follows:MW Kellogg technology and ABB Lummus Crest technology for our ethylene plants at Lake Charles;Mobil/Badger technology for our styrene plant at Lake Charles;Badger EBMax technology for our styrene plant at Lake Charles;INEOS technology to produce LLDPE and HDPE at Lake Charles and Longview;Aspen Technology technology for our advanced process control software;Asahi Chemical membrane technology for our chlor-alkali plant at Calvert City; andChlorine Engineers membrane technology for our chlor-alkali plant at Geismar.With the exception of Aspen Technology, Badger EBMax and Chlorine Engineers, all of the other licenses are perpetual andConversely, we have been paid in full.We have also selectively granted licenses to our patented Energx® technology for LLDPE production and for proprietary LDPE reactor mixing technology. We have also, through Vinnolit prior to its acquisition, granted several licenses in the past on EDC/VCM technology, including the direct chlorination process and catalyst, and S-PVC process and technology. (loss) from operations and assets attributable to each of our industry segments, Olefins and Vinyls segments, and geographical information is presented in Note 1921 to our consolidated financial statements included in Item 8 of this Form 10-K.“Investor"Investor Relations/SEC Filings,”" free of charge, our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports and proxy statementsmaterials as soon as reasonably practicable after we electronically file those materials with, or furnish those materials to, the SEC. The SEC also maintains a Web site at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including us.at “Investorunder "Investor Relations/Corporate Governance.”Item 1A.Risk Factorssignificantexcess new capacity additions, leading to reduced operating rates and lower margins.domestic and foreign industry capacity. In general, weak economic conditions either in the United States, Europe or inthe rest of the world tend to reduce demand and put pressure on margins. It is not possible to predict accurately the supply and demand balances, market conditions and other factors that will affect industry operating margins in the future.Someindustry consultants predict that significant increasescapacity additions in worldwide ethylene and ethylene derivative capacity, which have occurred over the past four years, primarily inAsia, the Middle East and Asia,North America, a number of which have been announced in recent years, may continue for the next several years.lead to periods of over-supply and lower profitability. As a result, our Olefins segment operating margins may be negatively impacted. have dropped from peak levels in the second half of 2006 to much lower levels in 2011.2014. In addition, weaknesscontinued slow recovery in the U.S. construction markets which began in the third quarter of 2006, and thesubsequent budgetary constraints in municipal spending have contributed to lower domesticNorth American demand for our vinyls products and negatively impacted our Vinyls segment.products. Likewise, European industry production capacities currently exceed demand in the region, largely due to the weak economic environment in Europe. Looking forward, our Vinyls segment operating rates and margins may continue to be negatively impacted by the slow recovery of the U.S. construction markets and North American PVC capacity additions.only monthly or less often, sometimes with an additional lag in effective dates for increases, have had and may continue to have a negative effect on profitability. Significant volatility in raw material costs tends to place pressure on product margins as sales price increases could lag behind raw material cost increases. Conversely, when raw material costs decrease, customers could seek relief in the form of lower sales prices.and propane feedstock, natural gas, ethylene chlorine and salt to produce several basic chemicals. We also purchase significant amounts of electricity to supply the energy required in our production processes. The cost of these raw materials and energy, in the aggregate, represents a substantial portion of our operating expenses. The prices of raw materials and energy generally follow price trends of, and vary with market conditions for, crude oil and natural gas, which are highly volatile and cyclical. Changes to regulatory policies applicable to the German energy sector for industrial users may also contribute to higher prices for industrial users of energy in the future. Our results of operations have been and could in the future be significantly affected by increases in these costs.(“FIFO”("FIFO") method of inventory accounting, during periods of falling raw material prices and declining sales prices, our results of operations for a particular reporting period could be negatively impacted as the lower sales prices would be reflected in operating income more quickly than the corresponding drop in feedstock costs. We use derivative instruments in an attempt to reduce price volatility risk on some feedstock commodities. In the future, we may decide not to hedge any of our raw material costs or any hedges we enter into may not have successful results. Also, our hedging activities involve credit risk associated with our hedging counterparties, and a deterioration in the financial markets could adversely affect our hedging counterparties and their abilities to fulfill their obligations to us.In addition, higherabilityUnited States outside of many domestic chemical producers to compete internationally since U.S. producers are disproportionately reliant on natural gas and natural gas liquids as an energy source and as a raw material.the United States. In addition to the impact that this has on our exports from the United States, reduced competitiveness of U.S. producers also has in the past increased the availability of chemicals in North America, as U.S. production that would otherwise have been sold overseas was instead offered for sale domestically, resulting in excess supply and lower prices in North America. We could also face the threat of imported products from countries that have a cost advantage.conditions;abroad;Europe;during recent yearssince 2006 and continued economic weakness in Europe has had an adverse effect on demand and margins for our products. If the global economy worsens in general, or the U.S. residential housing market or the European economy worsens in particular, demand for our products and our income and cash flow could be adversely affected to an even greater degree. Since 2007 we have closed a PVC window and door components plant and three PVC pipe plants. Temporary outages sometimes last for several quarters or, in certain cases, longer and cause us to incur costs, including the expenses of maintaining and restarting these facilities. Factors such as increases in raw material costs or lower demand in the future may cause us to further reduce operating rates, idle facilities or exit uncompetitive businesses.and/the Commonwealth of Independent States (including Ukraine) or elsewhere or the occurrence, or threat of occurrence, of terrorist attacks such as those against the United States on September 11, 2001 could adversely affect the economies of the United States, Europe and other developed countries. A lower level of economic activity could result in a decline in demand for our products, which could adversely affect our net sales and margins and limit our future growth prospects. In addition, these risks have increased in the past, and may continue to increase in the future. Volatility in prices for crude oil and natural gas could also result in increased feedstock costs. Furthermore, sustained lower prices of crude oil, such as the prices experienced in the second half of 2014, may lead to lower margins in the United States. In addition, these risks could cause increased instability in the financial and insurance markets and could adversely affect our ability to access capital and to obtain insurance coverage that we consider adequate or is otherwise required by our contracts with third parties.Thedownturn has had andconditions may continue to have a negative impact on our business and financial condition.Thedownturn has had, andconditions, including continued economic weakness in Europe, may continue to have ana negative impact on our business and our financial condition. Our ability to access the capital markets may be severely restricted at a time when we would like, or need, to access such markets, which could have an impact on our flexibility to react to changing economic and business conditions. In addition, the availability of additional financing at cost effective interest rates cannot be assured. TheA deterioration in global economic downturnconditions, including continued economic weakness in Europe, could have an impact on the lenders under our revolving credit facility or on our customers and suppliers, causing them to fail to meet their obligations to us. Additionally, thea deterioration in global economic downturn resultedconditions could result in reduced demand for our products, which hadwould have a negative impact on our revenues and profits. Further, reduced levels of accounts receivables and inventory may affect our credit facility borrowing base. Our credit facility allows us to borrow up to (1) 85% of the net amount of eligible accounts receivable, plus (2) the lesser of (a) 70% of the value of the lower of cost or market of eligible inventory, or (b) 85% of the appraised net orderly liquidation value of all eligible inventory, plus (3) 100% of cash held in an account with the agent under the credit facility and subject to a control agreement with the agent, minus (4) such reserves as the agent may establish.world’sworld's largest chemical companies and chemical industry joint ventures. Competition within the petrochemical industry and in the manufacturing of building products is affected by a variety of factors, including:competitors; andthe adoption of new environmental laws and regulatory requirements.majorchemical manufacturing facilities: our olefins complexsites in Lake Charles, our polyethylene complexthe United States and six chemical manufacturing sites in Longview, our vinyls complex in Calvert City and our vinyls facility in Geismar.Europe. Our operations are subject to the usual hazards associated with commodity chemical and plastics manufacturing and the related use, storage, transportation and disposal of feedstocks, products and wastes, including:terrorist attacks.Mexico.Mexico and other weather and natural disaster hazards worldwide. If this materializes, severe weather and natural disaster hazards could pose an even greater risk for our facilities, particularly those in Louisiana.four major operatingchemical manufacturing facilities would have a material adverse effect on us. We maintain property, business interruption and casualty insurance that we believe is in accordance with customary industry practices, but we cannot be fully insured against all potential hazards incident to our business, including losses resulting from war risks or terrorist acts. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our financial position.federal,international, national, state and local laws, regulations and regulationsdirectives pertaining to pollution and protection of the environment, health and safety, which govern, among other things, emissions to the air, discharges onto land or waters, the maintenance of safe conditions in the workplace, the remediation of contaminated sites, and the generation, handling, storage, transportation, treatment and disposal of waste materials. Some of these laws, regulations and regulationsdirectives are subject to varying and conflicting interpretations. Many of these laws, regulations and regulationsdirectives provide for substantial fines and potential criminal sanctions for violations and require the installation of costly pollution control equipment or operational changes to limit pollution emissions and/or reduce the likelihood or impact of hazardous substance releases, whether permitted or not. For example, all four of our petrochemical facilities in Lake Charles, Longview, Calvert Citythe United States and Geismar,Europe may require improvements to comply with certain changes in process safety management requirements.On February 14,Environmental Protection Agency (“EPA”) finalized maximum achievable control technology (“MACT”)EPA promulgated MACT standards for major sources and generally available control technology (“GACT”("GACT") standards for area sources of PVC production. The rule sets emission limits and work practice standards for total organic air toxics and for three specific air toxics: vinyl chloride, chlorinated di-benzo dioxins and furans (“("CD/DF”DF"), and hydrogen chloride and includes requirements to demonstrate initial and continuous compliance with the emission standards. We are currently evaluating the effect these new standards could have on our business. This rule or other new or proposed rules may result in an increase in regulations, which could increase our costs or reduce our production, which could have a material adverse effect on our business, financial condition, operating results or cash flow. In addition, we cannot accurately predict future developments, such as increasingly strict environmental and safety laws or regulations, and inspection and enforcement policies, as well as resulting higher compliance costs, which might affect the handling, manufacture, use, emission, disposal or remediation of products, other materials or hazardous and non-hazardous waste, and we cannot predict with certainty the extent of our future liabilities and costs under environmental, health and safety laws and regulations. These liabilities and costs may be material.of greenhouse gases (“GHGs”) has also been introduced in the U.S.United States Congress, and there has been a wide-ranging policy debate both in the U.S. and internationally, regarding the impact of these gases and possible means for their regulation. Some of the proposals would require industries to meet stringent new In addition, effortsbeen madeconsidered or adopted laws and continue to be made in the international community toward the adoption of international treaties or protocols that would address globalclimate change issues, such as the United Nations Climate Change Conference in Durban in 2011. In the U.S., the EPA has adopted rules requiring the reporting ofregulations on GHG emissions, from specified large GHG emission sources, on an annual basis, beginning in 2011 for emissions occurring after January 1, 2010, as well as from certain oil and natural gas production facilities, on an annual basis, beginning in 2012 for emissions occurring in 2011. Further, following a finding by the EPA that certain GHGs represent an endangerment to human health, the EPA finalized a rule to address permitting of GHG emissions from stationary sources under the Clean Air Act’s New Source Review Prevention of Significant Deterioration (“PSD”) and Title V programs. This final rule “tailors” the PSD and Title V programs to apply to certain stationary sources of GHG emissions in a multi-step process, with the largest sources first subjectgeneral aim of reducing such emissions. The EPA currently requires certain industrial facilities to permitting. Facilities required to obtain PSD permits forreport their GHG emissions, also will be requiredand to reduce those emissions accordingobtain permits with stringent control requirements before constructing or modifying new facilities with significant GHG emissions. In the European Union, the Emissions Trading Scheme obligates certain emitters to “best available control technology” standardsobtain GHG emission allowances to comply with a cap and trade system for GHGs that will be established by the states or,GHG emissions. As our chemical manufacturing processes result in some instances, by the EPA on a case-by-case basis.Legislation or regulation by the EPA, and any international agreements to which the United States may become a party, that control or limit GHG emissions, or otherwise seek to address climate changethese and other GHG laws and regulations could adversely affect our energy supply and costs, the costs of raw materials derived from fossil fuels,doing business.generalEuropean facilities. In addition, under the Environmental Liability Directive, European Union member states can require the remediation of soil and groundwater contamination in certain circumstances, under the "polluter pays principle." We are unable to predict the impact these requirements and concepts may have on our future costs of production and the demand for our products. The cost of complying with any new law, regulation or treaty will depend on the details of the particular program.In addition, the federal CERCLA, and similar state laws and certain European directives impose joint and several liability for the costs of remedial investigations and actions on the entities that generated waste, arranged for disposal of the wastes, transported to or selected the disposal sites and the past and present owners and operators of such sites. All such potentially responsible parties (or any one of them, including us) may be required to bear all of such costs regardless of fault, legality of the original disposal or ownership of the disposal site. In addition, CERCLA, and similar state laws and certain European directives could impose liability for damages to natural resources caused by contamination.“Business—"Business—Environmental and Other Regulation.”We may not be able to complete an acquisition of Georgia Gulf Corporation and, even if such a transaction is completed, we may not realize the benefits of such a transaction; we could have difficulties in integrating the operations of Georgia Gulf; and an acquisition of Georgia Gulf could have other adverse consequences for us, including the use of a significant amount of our cash and the incurrence of additional debt.We submitted a proposal to Georgia Gulf Corporation (“Georgia Gulf”) to acquire all of its outstanding shares for $30.00 per share in cash, or a total of approximately $1.1 billion, with the expectation that completingsuch an acquisition would result in various benefits, including, among other things, synergies, cost savings and operating efficiencies. Georgia Gulf rejected our proposal on January 16, 2012 and adopted a stockholder rights plan. On February 1, 2012, we submitted a new proposal to Georgia Gulf, increasing our offer to $35.00 per share in cash, or a total of approximately $1.2 billion, with the possibility of offering our common stock as part of the offer consideration. On that date, Georgia Gulf also publicly rejected our increased offer. We may not be able to complete such an acquisition on the terms in our proposal, or at all, and the failure to complete the acquisition could have adverse consequences for us, including a decline in the market value of our common stock. Even if we do complete such an acquisition, we may not achieve the benefits we anticipated at the levels expected or at all. See “We may pursue acquisitions, dispositions and joint ventures and other transactions that may impact our results of operations and financial condition.”In addition, we could have difficulties or experience delays in connection with the integration of the operations of Georgia Gulf, if acquired. See “We may have difficulties integrating the operations of acquired businesses.” Any unexpected difficulties or delays incurred in connection with the integration of such an acquisition could have an adverse effect on our business, results of operations or financial condition.Further, an acquisition of Georgia Gulf could require the use of a significant amount of our cash and the incurrence of additional debt, which could have adverse consequences for us. See “Our level of debt could adversely affect our ability to operate our business” and “To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.” Risks related to our indebtedness could impact us to an even greater degree if such an acquisition is completed.Expansion and construction" and/or construction plans for our Lake Charles Geismar and Calvert City complexes.facility. Expansion and construction projects may be subject to delays or cost overruns, including delays or cost overruns resulting from any one or more of the following:construction delays and performance issues;2011,2014, we had total outstanding debt of $764.6$764.0 million, and our debt represented approximately 30%19% of our total capitalization. Our annual interest expense for 20112014 was $51.0$37.4 million, net of interest capitalized of $7.1 million. Our levelfuture.future, including any distributions that we may receive from Westlake Partners. This is subject to general economic, financial, currency, competitive, legislative, regulatory and other factors that are beyond our control.opportunities.opportunities or acquisitions. A breach of any of these covenants could result in a default in respect of the related debt. If a default occurred, the relevant lenders could elect to declare the debt, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing that debt. In addition, any acceleration of debt under our credit facility will constitute a default under some of our other debt, including the indenture governing our senior notes.targets in the United States.targets. As a result, the chemical industry responded to the issues surrounding the terrorist attacks of September 11, 2001 by startingimplementing initiatives relating to the security of chemicals industry facilities and the transportation of hazardous chemicals in the United States.chemicals. Simultaneously, local, state, national and federalinternational governments beganput into effect a regulatory process that led to new regulations impacting the security of chemical plant locations and the transportation of hazardous chemicals. Our business or our customers’customers' businesses could be adversely affected because of the cost of complying with these regulations.We may pursue acquisitions, dispositions and joint ventures and other transactions that may impact our results of operations and financial condition.We seek opportunities to maximize efficiency and create stockholder value through various transactions. These transactions may include various domestic and international business combinations, purchases or sales of assets or contractual arrangements or joint ventures that are intended to result in the realization of synergies, the creation of efficiencies or the generation of cash to reduce debt. To the extent permitted under our credit facility, the indenture governing our senior notes and other debt agreements, some of these transactions may be financed by additional borrowings by us. Although these transactions are expected to yield longer-term benefits if the expected efficiencies and synergies of the transactions are realized, they could adversely affect our results of operations in the short term because of the costs associated with such transactions. Other transactions may advance future cash flows from some of our businesses, thereby yielding increased short-term liquidity, but consequently resulting in lower cash flows from these operations over the longer term. These transactions may not yield the business benefits, synergies or financial benefits anticipated by management.businesses.management’smanagement's attention from initiating or carrying out programs to save costs or enhance revenues; and“principal stockholder”"principal stockholder") and its affiliates (the “principal"principal stockholder affiliates”affiliates") own a majority of our outstanding common stock, they will be able to exert significant control over us, and our other stockholders, by themselves, will not be able to affect the outcome of any stockholder vote. As a result, the principal stockholder, subject to any fiduciary duty owed to our minority stockholders under Delaware law, will be able to control all matters affecting us (some of which may present conflicts of interest), including:“believes,” “intends,” “may,” “should,” “could,” “anticipates,” “expected”"believes," "intends," "may," "should," "could," "anticipates," "expected" or comparable terminology, or by discussions of strategies or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Forward-looking statements relate to matters such as:outlook;our proposal to acquire Georgia Gulf;impact of our acquisition of a 50% interest in the pipeline from Mont Belvieu to Lake Charles;planned new chlor-alkali plant in Geismar;timing, funding and results of acquisitions, such as the planned ethane-based ethylene capacity expansion in Lake Charles;timing, funding and results of the planned ethylene production facility upgrade in Calvert City;our evaluation of the conversion from propane to ethane feedstock for our ethylene production at Calvert City;the utilization of net operating loss carryforwards;“Risk Factors”"Risk Factors" and those described from time to time in our other filings with the SEC including, but not limited to, the following:the global economic slowdownpolitical tensions and political tensionsunrest in the Middle East, the Commonwealth of Independent States (including Ukraine) and elsewhere;Item 1B.Unresolved Staff Comments Ethylene, polyethylene, styrene Polyethylene, polyethylene wax PVC, VCM, EDC, chlorine, caustic soda, ethylene, PVC pipe PVC, VCM, and EDC, chlorine, caustic sodaPVC, VCM, EDC, chlorine, caustic soda PVC PVC, VCM, EDC, chlorine, caustic soda PVC PVC PVC Booneville, Mississippi PVC pipe PVC pipe PVC pipe PVC pipe PVC pipe PVC pipe PVC pipe PVC pipe and fittings McPherson, Kansas PVC pipe and fittings Evansville, Indiana Fence and deck components (3)(4) Window and door components (1) We lease the land on which our Longview facility isfacilities are located.(2) We lease a portion of the land on which our Calvert City facility.facility is located.(3) Facility currently idled. (4) We lease our Calgary facility. Olefinscomplexsite consists of three tracts on over 1,3001,400 acres in Lake Charles, each within two miles of one another. The complexsite includes two ethylene plants, which are owned by OpCo, two polyethylene plants and a styrene monomer plant. The combined capacity of ourOpCo's two Lake Charles ethylene plants is approximately 2.52.7 billion pounds per year. The capacity of our two polyethylene plants is approximately 1.41.5 billion pounds per year and the capacity of our styrene plant is approximately 570 million pounds per year. Our newestOne of our polyethylene plantplants has two production units that use gas phase technology with the capability to manufacture both LLDPE and HDPE. In April 2011,Prior to the initial public offering of Westlake Partners, we announced an expansion program to increase the ethane-based ethylene capacity of both of the ethylene units at our Lake Charles complex. We currently expect to completecompleted the expansion of one of the two ethylene units by late 2012. The first cracker expansion is expected to increase ethylene capacity by approximately 230 – 240 million pounds annually, while also increasing feedstock flexibility. The additional capacity from this expansion is expected to provide ethylene for existing internal uses and may also be sold in the merchant market. In addition, we are currently evaluating expansion plans to increase the ethane-based ethylene capacity of the secondPetro 2 ethylene unit at our Lake Charles complex.complexsite includes a marine terminal that provides for worldwide shipping capabilities. The complexsite also is located near rail transportation facilities, which allows for efficient delivery of raw materials and prompt shipment of ourcomplexsite is connected by pipeline systems to our ethylene feedstock sources in both Texas and Louisiana. Within the complex, oursite, OpCo's ethylene plants are connected by pipeline systems to our polyethylene and styrene plants.facilitysite consists of three polyethylene plants, a specialty polyethylene wax plant, and a 200-mile ethylene pipeline owned by OpCo that runs from Mont Belvieu to our Longview facility.site. The plants are located inside a large Eastman Chemical Company (“Eastman”("Eastman") facility where Eastman produces a number of other chemical products. We can access ethylene to support our polyethylene operations either by purchasing ethylene from Eastman at the site or by transporting ethylene from ourOpCo's Lake Charles plant into the Gulf Coast grid and by transporting ethylene through our ethylene pipeline into our Longview facility. The technologies we use to produce polyethylene at Longview are similar to the technologies that we employ at Lake Charles. The Longview facility has a total capacity of 1.1 billion pounds per year.Vinylscomplexsite is situated on 550approximately 590 acres on the Tennessee River in Kentucky and includes an ethylene plant, which is owned by OpCo, a chlor-alkali plant, a VCM plant, a PVC plant and a large diameter PVC pipe plant. The capacity of ourOpCo's Calvert City ethylene plant is 450630 million pounds per year and the capacity of our chlor-alkali plant is 550 million pounds of chlorine and 605 million pounds of caustic soda per year. Our chlorine plant utilizes efficient, state-of-the-art membrane technology. Our VCM plant has a capacity of 1.3 billion pounds per year and our Calvert City PVC plant has a capacity of 1.11.3 billion pounds per year. Our large diameterIn April 2014, we completed a feedstock conversion and ethylene expansion project at OpCo's Calvert City ethylene plant. With the completion of this project, OpCo's Calvert City ethylene plant now utilizes relatively low-cost ethane feedstock. In addition, in 2014, we completed the expansion of the existing PVC pipe facility has a capacityplant in Calvert City, which allowed us to take advantage of approximately 77 million pounds per year.River. The siteRiver and includes a PVCchlor-alkali plant, with a capacity of 600 million pounds per year and a VCM plant withand a capacity of 550 million pounds per year with related EDC capacity. In August 2010, we announced that we intend to proceed with the previously announced construction of a newPVC plant. Our Geismar chlor-alkali plant to be located at our vinyls manufacturing complex in Geismar. The new chlor-alkali unit is designed to produce up to 350,000 ECUs annually upon completion, bringing our total ECU capacity to 625,000700 million pounds of chlorine and 770 million pounds of caustic soda per year. Our chlorine plant utilizes efficient, state-of-the-art membrane technology. Our Geismar VCM plant has a capacity of 550 million pounds per year, and our Geismar PVC plant has a capacity of 600 million pounds per year.new plant will improve the vertical integrationchlor-alkali plants have a combined capacity of our vinyls business from950 million pounds of chlorine downstream into VCM and PVC, and increase1.0 billion pounds of caustic soda sales. The project is currently targeted for start-up inper year, the second halfVCM plants have a combined capacity of 2013.17, 2012,18, 2015, we operated 10owned 12 building products plants, consisting of eight PVC pipe plants, two specialty PVC pipe and foundation building products plants and two profiles plants producing PVC fence, decking, windows and door profiles. The majority of our plants are strategically located near our Calvert City complexmajor markets and serve customers throughout the middle United States.States and Canada. The combined capacity of our building product plants is 1.11.2 billion pounds per year.In June 2011, we closed our Springfield PVC pipe facility, with an annual capacity of 90 million pounds.Headquartersunder a lease that expires on December 31, 2014.of our principal stockholder. See Note 1517 to the audited consolidated financial statements appearing elsewhere in this Form 10-K and “Certain"Certain Relationships and Related Transactions”Transactions" in our proxy statement to be filed with the SEC within 120 days of December 31, 2011 pursuant to Regulation 14A with respect to our 20122015 annual meeting of stockholders (the “Proxy Statement”"Proxy Statement").Item 3.Legal Proceedings“Business—"Business—Environmental and Other Regulation,”" we are involved in various routine legal proceedings incidental to the conduct of our business. We do not believe that any of these routine legal proceedings will have a material adverse effect on our financial condition, results of operations or cash flows.Item 4.Mine Safety Disclosure(age 64) (age 67). Mr. Chao has been our Chairman of the Board of Directors since July 2004 and became a director in June 2003. He previouslyFrom May 1996 to July 2004, he served as our Vice Chairman of the Board since May 1996.Chairman. Mr. Chao also has responsibility for the oversight of our Vinyls business. Mr. Chao has over 40 years of global experience in the chemical industry. In addition, Mr. Chao has been the Chairman of the Board of Westlake Partners' general partner since its formation in March 2014. From June 2003 until November 2010, Mr. Chao resigned aswas the Executive Chairmanexecutive chairman of Titan Chemicals Corp. Bhd., a position he held since June 2003. Prior to June 2003, he served as Titan’s Managing Director. He has served as a Special Assistant to the Chairman of China General Plastics Group and worked in various financial,Bachelor of ScienceB.S. degree from the Massachusetts Institute of Technology and an M.B.A. from Columbia University.(age 62) (age 65). Mr. Chao has been our President since May 1996 and a director since June 2003. Mr. Chao became our Chief Executive Officer in July 2004. Mr. Chao has over 3540 years of global experience in the chemical industry. In 1985, Mr. Chao assisted his father T.T. Chao and his brother James Chao in founding Westlake Chemical Corporation, where he served as Executive Vice President until he succeeded James Chao as President. In addition, Mr. Chao has been the President, Chief Executive Officer and a director of Westlake Partners' general partner since its formation in March 2014. He has held positions in the Controller’sController's Group of Mobil Oil Corporation, in the Technical Department of Hercules Incorporated, in the Plastics Group of Gulf Oil Corporation and has served as Assistant to the Chairman of China General Plastics Group and Deputy Managing Director of a plastics fabrication business in Singapore. He was also previouslyMr. Chao is a directortrustee of Titan Chemicals Corp. Bhd., a position he resigned from in November 2010.Rice University. Mr. Chao received a bachelor’sbachelor's degree from Brandeis University and an M.B.A. from Columbia University. Mr. Chao is a trustee emeritus of Rice University.(age 55) (age 58). Mr. Bender has been our Senior Vice President, and Chief Financial Officer and Treasurer since February 2008. In addition, Mr. Bender has served as our Treasurer since July 2011, a position he also held from February 2008 until December 2010. From February 2007 to February 2008, Mr. Bender served as our Vice President, Chief Financial Officer and Treasurer and from June 2005 to February 2007, he served as our Vice President and Treasurer. In addition, Mr. Bender has been the Senior Vice President, Chief Financial Officer and a director of Westlake Partners' general partner since its formation in March 2014. From June 2002 until June 2005, Mr. Bender served as Vice President and Treasurer of KBR, Inc., and from 1996 to 2002 he held the position of Assistant Treasurer for Halliburton Company. Prior to that, he held various financial positions within that company. Additionally, he was employed by Texas Eastern Corporation for over a decade in a variety of increasingly responsible audit, finance and treasury positions. Mr. Bender received a Bachelor of Business Administration from Texas A&M University and an M.B.A. from Southern Methodist University. Mr. Bender is also a Certified Public Accountant.(age 55) (age 58). Mr. Buesinger has been our Senior Vice President, Vinyls since joining us in April 2010. Prior to joining us, Mr. Buesinger served as the General Manager and President of Chevron Phillips Chemical Company L.P.’s's Performance Pipe Division from February 2010 to March 2010. From June 2008 to January 2010, Mr. Buesinger held the position of General Manager in the Alpha Olefins and Poly Alpha Olefins business of Chevron Phillips Chemical Company L.P. From April 2005 to May 2008, he served as the President and Managing Director of Chevron Phillips Singapore Chemicals Pte. Ltd. and Asia Region General Manager for Chevron Phillips Chemical Company L.P. Prior to that, he held various technical and sales management positions within that company. Mr. Buesinger holds a B.S. in Chemical Engineering from Tulane University.Donald M. Condon, Jr.(age 62). Mr. Condon has been our Senior Vice President, Olefins and Corporate Business Development since July 2008. From July 2006 to July 2008, Mr. Condon was our Senior Vice President, Corporate Planning and Business Development. Prior to joining us, Mr. Condon served as the Managing Director of Titan Chemicals Corp. Bhd. from July 2003 to June 2006 and President & General Manager of Conoco Energy Ventures from 1998 until July 2003. He previously was employed by Conoco and Dupont in a variety of management and executive positions. In 2010, Mr. Condon was named a non-executive director of The Manitowoc Company, Inc. He was also previously a director of Titan Chemicals Corp. Bhd., a position he resigned from in November 2010. Mr. Condon holds a B.B.A. from the University of Wisconsin.(age 61) (age 64). Mr. Hansen has been our Senior Vice President, Administration, since September 1999 and served as Vice President, Human Resources from 1993 to 1999. From August 2003 until July 2004 he was also our Secretary. In addition, Mr. Hansen has been the Senior Vice President, Administration, of Westlake Partners' general partner since July 2014. Prior to joining us in 1990, Mr. Hansen served as Director of Human Resources & Administration for Agrico Chemical Company and held various human resources and administrative management positions within the Williams Companies. He has over 30 years of administrative management experience in the oil, gas, energy, chemicals, pipeline, plastics and computer industries. He received his Bachelor of Science degree in Social Science from the University of Utah and has completed extensive graduate work toward an M.S. in Human Resources Management.(age 58) (age 61). Mr. Taylor has been our Senior Vice President, Polyethylene since April 2008. From January 2003 to April 2008, Mr. Taylor served as our Vice President, Polyethylene. Mr. Taylor joined us in March 2002 as Manager, Polyethylene Marketing. Mr. Taylor joined us after a 25-year career with Chevron Phillips Chemical Company where he served as the Vice President, Polyethylene, Americas from 2000 to 2001 and Marketing Manager—PolyethyleneManager-Polyethylene from 1999 to 2000. During his career, he has held a variety of sales, marketing, operations and general management assignments. He is a graduate of the University of Delaware with a B.S. in Business Administration and a B.A. in Mathematics.47)50). Mr. Kenner has been our Vice President, Manufacturing since July 2008. Prior to joiningMr. Kenner joined us Mr. Kennerafter a 19-year career at Valero Energy Corporation where he served as Vice President and General Manager of Valero Energy Corporation’sValero's Delaware City Refinery from September 2005 to July 2008. From August 2004 to September 2005, Mr. Kenner held the position of Vice President and General Manager of Valero’sValero's Houston Refinery and from August 2003 to August 2004, he served as Operations Director for Valero’s Texas City Refinery. Mr. Kenner holds a B.S. in Aerospace Engineering from Texas A&M University and a M.S. in Chemical Engineering from the University of Texas at Austin.(age 61) (age 64). Mr. Mangieri has been our Vice President and Chief Accounting Officer since February 2007. From April 2000 to February 2007, he was Vice President and Controller. In addition, Mr. Mangieri has been the Vice President and Chief Accounting Officer of Westlake Partners' general partner since its formation in March 2014. Prior to joining us, Mr. Mangieri served as Vice President and Controller of Zurn Industries, Inc. from 1998 to 2000. He previously was employed as Vice President and Controller for Imo Industries, Inc. in New Jersey, and spent over 10 years in public accounting with Ernst & Young LLP, where he served as Senior Manager. He received his Bachelor of Science degree from Monmouth College and is a Certified Public Accountant.Stephen Wallace (age 65). Mr. Wallace has been our Vice PresidentGeneral Counsel since December 2003 and our Secretary since July 2004. He began his legal career over 25 years ago at the law firmIssuer Purchases of Baker Botts L.L.P., which he left as a partner in 1993. He subsequently held senior corporate legal positions with Transworld Oil U.S.A., Inc. (1993-1996; 2002-2003), Oman Oil Company Ltd. (1996-1997), and Enron Global Exploration & Production Inc. and its affiliates (1997-2002). Mr. Wallace holds a B.A. from Rice University and a Ph.D. from Cornell University in linguistics, and received his J.D. from the University of Houston.PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities17, 2012,18, 2015, there were 5442 holders of record of our common stock. Our common stock is listed on the New York Stock Exchange under the symbol “WLK.”"WLK." Set forth below are the high and low closing prices for our common stock, as reported on the New York Stock Exchange composite tape for the periods indicated and the cash dividends declared in these periods. High Low Year Ended December 31, 2014 4th Quarter $ 83.43 $ 53.67 $ 0.1650 3rd Quarter 97.96 84.22 0.1650 2nd Quarter 84.77 62.36 0.1260 1st Quarter 68.73 57.66 0.1260 Year Ended December 31, 2013 $ 61.04 $ 52.48 $ 0.1125 53.41 48.86 0.1125 48.97 39.31 0.0938 48.61 40.87 0.0938 High Low Cash Dividends
Declared $ 43.63 $ 32.31 $ 0.0738 54.91 34.28 0.0738 66.18 48.76 0.0635 56.20 38.55 0.0635 $ 43.59 $ 29.52 $ 0.0635 30.13 17.56 0.0635 29.77 18.55 0.0575 25.79 19.66 0.0575 (1) On February 14, 2014, our Board of Directors authorized a two-for-one split of our common stock. Stockholders of record as of February 28, 2014 were entitled to one additional share for every share outstanding, which was distributed on March 18, 2014. Per share data for the prior year periods have been restated to reflect the effect of a two-for-one stock split. “Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt”Debt" for additional information.2011:2014:Period October 2014 245,316 $ 78.93 245,316 $ 13,234,000 November 2014 124,844 $ 65.32 124,844 $ 255,080,000 December 2014 65,506 $ 60.00 65,506 $ 251,150,000 Total 435,666 $ 72.18 435,666 Total Number
of Shares
Purchased Average Price
Paid Per
Share Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs(1) Maximum Number
(or Approximate
Dollar Value) of
Shares that
May Yet Be
Purchased Under the
Plans or Programs (1) 15,162 $ 32.98 15,162 $ 97,482,000 — $ — — $ 97,482,000 — $ — — $ 97,482,000 15,162 $ 32.98 15,162 (1) 2011, 69,8162014, 1,924,713 shares (on a post-split basis) of our common stock had been acquired at an aggregate purchase price of approximately $2.5$98.9 million. On November 21, 2014, our Board of Directors approved a new $250.0 million stock repurchase program. Transaction fees and commissions are not reported in the average price paid per share in the table above. Decisions regarding the amount and the timing of purchases under the program will be influenced by our cash on hand, our cash flow from operations, general market conditions and other factors. The program may be discontinued by our Board of Directors at any time. Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights (a) Weighted-average
exercise price of
outstanding
options,
warrants and rights Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a)) 1,133,147 $ 23.26 3,437,573 N/A N/A N/A 1,133,147 $ 23.26 3,437,573 Plan Category Equity compensation plans approved by security holders 1,179,402 $ 24.89 5,927,625 Equity compensation plans not approved by security holders N/A N/A N/A Total 1,179,402 $ 24.89 5,927,625 “Executive Compensation”"Executive Compensation" in our Proxy Statement, which information is incorporated herein by reference. Year Ended December 31, 2014 2013 2012 2011 2010 (dollars in thousands, except share amounts, per share data and volume data) Statement of Operations Data: Net sales $ 4,415,350 $ 3,759,484 $ 3,571,041 $ 3,619,848 $ 3,171,787 Gross profit 1,317,350 1,101,438 736,960 559,006 482,683 Selling, general and administrative expenses 193,359 147,974 121,609 112,210 104,319 Income from operations 1,123,991 953,464 615,351 446,796 378,364 Interest expense (37,352 ) (18,082 ) (43,049 ) (50,992 ) (39,875 ) Debt retirement costs — — (7,082 ) — — Gain from sales of equity securities — — 16,429 — — (2,721 ) 6,790 3,520 5,628 4,471 Income before income taxes 1,083,918 942,172 585,169 401,432 342,960 Provision for income taxes 398,902 331,747 199,614 142,466 121,567 Net income 685,016 610,425 385,555 258,966 221,393 6,493 — — — — $ 678,523 $ 610,425 $ 385,555 $ 258,966 $ 221,393 Basic $ 5.09 $ 4.57 $ 2.89 $ 1.95 $ 1.68 Diluted $ 5.07 $ 4.55 $ 2.88 $ 1.94 $ 1.67 Basic 133,111,230 133,224,256 132,578,858 131,854,842 130,945,750 Diluted 133,643,414 133,779,250 133,282,990 132,600,316 131,353,328 Balance Sheet Data (end of period): Cash and cash equivalents $ 880,601 $ 461,301 $ 790,078 $ 825,901 $ 630,299 Marketable securities — 239,388 124,873 — — Restricted cash — — — 96,283 150,288 1,474,107 1,244,224 1,352,903 1,391,561 1,152,382 Total assets 5,213,990 4,060,909 3,412,196 3,266,821 2,954,144 Total debt 763,997 763,879 763,761 764,563 764,482 2,911,511 2,418,603 1,872,256 1,756,312 1,505,070 $ 0.5820 $ 0.4125 $ 2.1363 $ 0.1373 $ 0.1210 Other Operating Data: Cash flow from: Operating activities $ 1,032,376 $ 752,729 $ 612,087 $ 358,935 $ 282,958 Investing activities (773,205 ) (1,002,238 ) (466,971 ) (202,785 ) (80,275 ) Financing activities 164,640 (79,268 ) (180,939 ) 39,452 182,024 Depreciation and amortization 208,486 157,808 144,541 131,397 128,732 Capital expenditures 431,104 679,222 386,882 176,843 81,269 1,329,756 1,118,062 772,759 583,821 511,567 Year Ended December 31, 2014 2013 2012 2011 2010 (dollars in thousands, except share amounts, per share data and volume data) Olefins Segment Polyethylene 2,364 2,244 2,230 2,272 2,320 Styrene, feedstock and other 941 1,094 925 753 938 Vinyls Segment PVC, caustic soda and other 3,174 1,995 1,822 1,749 1,542 Building products 572 487 423 403 593 Item 6.Selected Financial and Operational Data(1) Year Ended December 31, 2011 2010 2009 2008 2007 (dollars in thousands, except per share and volume data) $ 3,619,848 $ 3,171,787 $ 2,325,723 $ 3,692,353 $ 3,192,178 559,006 482,683 195,128 69,368 271,400 112,210 104,319 87,871 98,908 96,679 446,796 378,364 107,257 (29,540 ) 174,721 (50,992 ) (39,875 ) (34,957 ) (33,957 ) (18,422 ) 5,628 4,471 6,453 5,475 2,658 401,432 342,960 78,753 (58,022 ) 158,957 142,466 121,567 25,758 (28,479 ) 44,228 $ 258,966 $ 221,393 $ 52,995 $ (29,543 ) $ 114,729
Information:(3) $ 3.89 $ 3.35 $ 0.80 $ (0.45 ) $ 1.75 $ 3.87 $ 3.34 $ 0.80 $ (0.45 ) $ 1.75 65,927,421 65,472,875 65,323,101 65,273,485 65,234,828 66,300,158 65,676,664 65,421,390 65,273,485 65,314,485 $ 825,901 $ 630,299 $ 245,592 $ 90,239 $ 24,914 96,283 150,288 101,149 134,432 199,450 1,391,561 1,152,382 701,812 586,701 650,923 3,266,821 2,954,144 2,446,356 2,286,989 2,569,335 764,563 764,482 515,400 510,319 511,414 1,756,312 1,505,070 1,284,982 1,239,060 1,286,670 $ 0.2746 $ 0.2420 $ 0.2200 $ 0.2050 $ 0.1800 $ 362,296 $ 283,284 $ 235,522 $ 186,089 $ 62,166 (202,785 ) (80,275 ) (103,186 ) (171,952 ) (124,805 ) 36,091 181,698 23,017 51,188 34,907 131,397 128,732 123,199 111,926 103,514 176,843 81,269 99,769 172,561 135,725 583,821 511,567 236,909 87,861 280,893 2,272 2,320 2,211 2,231 2,447 753 938 741 971 948 1,749 1,542 1,346 1,538 1,467 403 593 613 627 756 (1) The historical selected financial and operational data should be read together with Item 7, Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations, and Item 8, Financial Statements and Supplementary Data included in this annual report on Form 10-K.(2) Other (expense) income, net is composed of interest income, insurance proceeds,income or loss from equity income,method investments, foreign exchange currency gains or losses, impairment of equity method investment, management fee income and other gains and losses.
| (3) |
| (4) | Working capital equals current assets less current liabilities. |
| (5) | Cash dividends declared for the year ended December 31, 2012 includes a special dividend of $1.875 per share (on a post-split basis) paid on December 12, 2012. |
| (6) | EBITDA (a non-GAAP financial measure) is calculated as net income before interest expense, income taxes, depreciation and amortization. The body of accounting principles generally accepted in the United States is commonly referred to as |
EBITDA Less: (Provision for) benefit from income taxes Interest expense Depreciation and amortization Net income (loss) Changes in operating assets and liabilities Equity in income of joint ventures Deferred income taxes Impairment of long-lived assets Loss from disposition of fixed assets Gain on involuntary conversion of assets Amortization of debt issue costs Stock-based compensation expense Provision for doubtful accounts Cash flow from operating activities costs effectively. the availability of feedstock from shale gas and oil drilling;(Loss) and Year Ended December 31, 2011 2010 2009 2008 2007 (dollars in thousands) $ 583,821 $ 511,567 $ 236,909 $ 87,861 $ 280,893 (142,466 ) (121,567 ) (25,758 ) 28,479 (44,228 ) (50,992 ) (39,875 ) (34,957 ) (33,957 ) (18,422 ) (131,397 ) (128,732 ) (123,199 ) (111,926 ) (103,514 ) 258,966 221,393 52,995 (29,543 ) 114,729 76,898 40,134 143,813 204,818 (59,830 ) (427 ) (2,212 ) (3,818 ) (621 ) (2,796 ) 14,114 14,153 31,207 (13,879 ) 5,286 1,975 — — — — 1,375 581 2,711 4,900 724 — — (455 ) — — 1,683 2,154 1,461 954 760 6,391 6,164 5,638 4,178 2,873 1,321 917 1,970 15,282 420 $ 362,296 $ 283,284 $ 235,522 $ 186,089 $ 62,166 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations Year Ended December 31, 2014 2013 2012 2011 2010 (dollars in thousands) EBITDA $ 1,329,756 $ 1,118,062 $ 772,759 $ 583,821 $ 511,567 Less: Provision for income taxes (398,902 ) (331,747 ) (199,614 ) (142,466 ) (121,567 ) Interest expense (37,352 ) (18,082 ) (43,049 ) (50,992 ) (39,875 ) Depreciation and amortization (208,486 ) (157,808 ) (144,541 ) (131,397 ) (128,732 ) Net income 685,016 610,425 385,555 258,966 221,393 273,083 34,453 244,683 76,898 40,134 (Income) loss from equity method investments (424 ) 199 3,005 (427 ) (2,212 ) (6,704 ) (5,449 ) (11,967 ) (3,361 ) (326 ) Deferred income taxes 58,967 93,732 (5,793 ) 14,114 14,153 Write-off of debt issuance costs — — 1,277 — — Impairment of equity method investment 6,747 — — — — Impairment of long-lived assets — — — 1,975 — Gain from sales of equity securities — — (16,429 ) — — Loss from disposition of fixed assets 4,181 5,039 3,886 1,375 581 Stock-based compensation expense 9,261 6,966 6,127 6,391 6,164 Amortization of debt issuance costs 1,673 1,459 1,514 1,683 2,154 Provision for doubtful accounts 301 5,514 229 1,321 917 Other loss, net 275 391 — — — Cash flows from operating activities $ 1,032,376 $ 752,729 $ 612,087 $ 358,935 $ 282,958 businessoperating segments are Olefins and Vinyls. We use the majority of our internally-produced basic chemicals to produce higher value-added chemicals and building products.over the past 25 years.since we began operations in 1986. Our olefins and vinyls products are some of the most widely used chemicals in the world and are upgraded into a wide variety of higher value-added chemical products used in many end-markets. Petrochemicals are typically manufactured in large volume by a number of different producers using widely available technologies. The petrochemical industry exhibits cyclical commodity characteristics, and margins are influenced by changes in the balance between supply and demand and the resulting operating rates, the level of general economic activity and the price of raw materials. The cycle is generally characterized by periods of tight supply, leading to high operating rates and margins, followed by a decline in operating rates and margins primarily as a result of significantexcess new capacity additions. Due to the significant size of new plants, capacity additions are built in large increments and typically require several years of demand growth to be absorbed.Beginning in2011,2014, a cost advantage for natural gas-basedethane-based ethylene producers over naphtha-based ethylene producers has allowed a strong export market for polyethylene, ethylene derivatives and higher margins for North American chemical producers, including Westlake. IncreasedContinued strong global demand for polyethylene in 2010 and 2011has resulted in increased sales volumes and improved operating margins and cash flow for our Olefins segment. However, somesegment in recent years. Looking forward, new olefins industry consultants predict that significant increasescapacity additions in worldwide ethylene and ethylene derivative capacity, which have occurred over the past four years, primarily inAsia, the Middle East and Asia,North America, a number of which have been announced in recent years, may continue for the next several years.lead to periods of over-supply and lower profitability. As a result, our Olefins segment operating margins may be negatively impacted.Weakness However, with the significant drop in crude oil prices beginning the third quarter of 2014 and potentially continuing through 2015, we expect a reduction in the cost advantage enjoyed by North American ethane-based ethylene producers in 2015. Further, falling crude oil prices may create volatility in the North American and global markets, which may result in reduced prices and margins in 2015. On the other hand, our European operations rely primarily on feedstock derived from naphtha-based ethylene crackers and may benefit from lower crude oil prices.which began in the third quarter of 2006, and the subsequent budgetary constraints in municipal spending have contributed to lower domesticNorth American demand for our vinyls products. In addition, increases in feedstock costs, combined with the industry’s inabilityproducts, which may continue to sufficiently raise domestic prices for PVC resin and building products in order to offset cost increases, significantly impactednegatively impact our Vinyls segment’ssegment operating resultsrates and margins. Likewise, European industry production capacities currently exceed demand in 2010 and 2011. Sincethe region, largely due to the weak economic environment in Europe. However, since late 2010, the PVC industry in North America has experienced an increase in PVC resin export demand, driven largely by more competitive ethylenefeedstock and energy cost positions in North America. In addition, PVC resin capacity in Japan was negatively impacted for a period following the tsunami in early 2011, which tightened global PVC resin availability. As a consequence, prices and margins for domestic PVC resin and building products improved in 2011. Looking forward, our Vinyls segment operating rates and margins may continue to be negatively impacted by the slow recovery of U.S. construction markets and North American PVC capacity additions.Whileresin industry operating rates have improved since 2010, largely due to higher PVC resin export shipments. In addition, the completion of our new world-scale Geismar chlor-alkali plant and the ethane feedstock conversion and ethylene expansion project at OpCo's Calvert City ethylene plant have contributed to improved operating margins and cash flow for our Vinyls segment.continuesin the United States and globally appears to be challenging forslowly improving. However, depending on the performance of the global economy in the remainder of 2015 and beyond, our customers, we believe our customer base remains generally healthy.financial condition, results of operations or cash flows may still be negatively impacted. In addition, the European economy has been slower to recover than the U.S. economy. As we continue to manage our business in this environment, including the slowdown in construction activity in the United States and economic weakness in Europe, we have taken steps designed to address the changes in demand and margins in our Vinyls segment and its resulting impact on our operations by matching production with sales demand and continuing to operate our plants in an efficient manner. WeIn addition, we continue to monitorseek to manage our cost management programs and discretionary capital spending. The impact of the global economic environment has been challenging to our business and, depending on the performance of the economy in 2012 and beyond, could have a negative effect on our financial condition, results of operations or cash flows.and propane feedstock, natural gas, ethylene chlorine and salt from external suppliers for use in production of basic chemicals in the olefins and vinyls chains. We also purchase significant amounts of electricity to supply the energy required in our production processes. While we have agreements providing for the supply of ethane and propane feedstocks,feedstock, natural gas, ethylene, chlorine, salt and electricity, the contractual prices for these raw materials and energy vary with market conditions and may be highly volatile. Factors that have caused volatility in our raw material prices in the past, and which may do so in the future include:
ethane and liquefied natural gas exports;
the general level of business and economic activity; and
the direct or indirect effect of governmental regulation.
We also regularly look at acquisition opportunities that would be consistent with or complimentary to our overall business strategies. Depending on the size of the acquisition, any such acquisitions could require external financing.
On January 13, 2012,
In December 2011, we announced plans to perform a major modification of theLake Charles site; (2) one ethylene production facility at our Calvert City complex.site; and (3) a 200-mile common carrier ethylene pipeline that runs from Mont Belvieu to our Longview site. We retained an 89.4% limited partner interest in OpCo, a 52.2% limited partner interest in Westlake Partners (common and subordinated units), a general partner interest in Westlake Partners and incentive distribution rights. OpCo used the net proceeds from the purchase of its limited partner interest to establish a cash reserve of approximately $55.4 million for turnaround expenditures, to reimburse us approximately $151.7 million for capital expenditures incurred with respect to certain of the assets contributed to OpCo and to repay intercompany debt of approximately $78.9 million. The modificationinitial public offering represented the sale of 47.8% of the common units in Westlake Partners.
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| (dollars in thousands, except per share data) | ||||||||||||
| Net external sales | ||||||||||||
| Olefins | ||||||||||||
| Polyethylene | $ | 1,922,535 | $ | 1,750,292 | $ | 1,658,551 | ||||||
| Styrene, feedstock and other | 801,155 | 803,377 | 841,427 | |||||||||
| Total Olefins | 2,723,690 | 2,553,669 | 2,499,978 | |||||||||
| Vinyls | ||||||||||||
| PVC, caustic soda and other | 1,203,332 | 800,658 | 743,275 | |||||||||
| Building products | 488,328 | 405,157 | 327,788 | |||||||||
| Total Vinyls | 1,691,660 | 1,205,815 | 1,071,063 | |||||||||
| Total | $ | 4,415,350 | $ | 3,759,484 | $ | 3,571,041 | ||||||
| Income (loss) from operations | ||||||||||||
| Olefins | $ | 1,013,825 | $ | 833,249 | $ | 552,762 | ||||||
| Vinyls | 142,740 | 154,684 | 85,942 | |||||||||
| Corporate and other | (32,574 | ) | (34,469 | ) | (23,353 | ) | ||||||
| Total income from operations | 1,123,991 | 953,464 | 615,351 | |||||||||
| Interest expense | (37,352 | ) | (18,082 | ) | (43,049 | ) | ||||||
| Debt retirement costs | — | — | (7,082 | ) | ||||||||
| Gain from sales of equity securities | — | — | 16,429 | |||||||||
| Other (expense) income, net | (2,721 | ) | 6,790 | 3,520 | ||||||||
| Provision for income taxes | 398,902 | 331,747 | 199,614 | |||||||||
| Net income | 685,016 | 610,425 | 385,555 | |||||||||
| Net income attributable to noncontrolling interests | 6,493 | — | — | |||||||||
| Net income attributable to Westlake Chemical Corporation | $ | 678,523 | $ | 610,425 | $ | 385,555 | ||||||
Diluted earnings per share (1) | $ | 5.07 | $ | 4.55 | $ | 2.88 | ||||||
| (1) | Per share data for the prior years have been restated to reflect the effect of a two-for-one stock split on March 18, 2014. See Note 8 to the consolidated financial statements for additional information. |
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | |||||||||||
Average Sales Price | Volume | Average Sales Price | Volume | |||||||||
Product sales price and volume percentage change from prior year | ||||||||||||
| Olefins | +7.4 | % | -0.8 | % | +3.3 | % | -1.1 | % | ||||
| Vinyls | +0.6 | % | +39.7 | % | +1.5 | % | +11.1 | % | ||||
| Company average | +5.2 | % | +12.2 | % | +2.8 | % | +2.5 | % | ||||
| Year Ended December 31, | |||||||||
| 2014 | 2013 | 2012 | |||||||
Average industry prices (1) | |||||||||
| Ethane (cents/lb) | 9.0 | 8.8 | 13.4 | ||||||
| Propane (cents/lb) | 24.7 | 23.7 | 23.7 | ||||||
Ethylene (cents/lb) (2) | 58.4 | 57.1 | 56.9 | ||||||
Polyethylene (cents/lb) (3) | 108.8 | 101.0 | 94.3 | ||||||
Styrene (cents/lb) (4) | 82.1 | 83.2 | 77.0 | ||||||
Caustic ($/short ton) (5) | 589.4 | 604.2 | 575.0 | ||||||
Chlorine ($/short ton) (6) | 233.5 | 250.8 | 264.8 | ||||||
PVC (cents/lb) (7) | 68.8 | 60.8 | 55.3 | ||||||
| (1) | Industry pricing data was obtained through IHS Chemical. We have not independently verified the data. |
| (2) | Represents average North American spot prices of ethylene over the period as reported by IHS Chemical. |
| (3) | Represents average North American contract prices of polyethylene low density film over the period as reported by IHS Chemical. |
| (4) | Represents average North American contract prices of styrene over the period as reported by IHS Chemical. |
| (5) | Represents average North American undiscounted contract prices of caustic soda over the period as reported by IHS Chemical. During the first quarter of 2013, IHS Chemical discontinued the previous caustic soda industry index that we used. For comparability, the average 2012 caustic data is based on the current index. |
| (6) | Represents average North American contract prices of chlorine (into chemicals) over the period as reported by IHS Chemical. |
| (7) | Represents average North American contract prices of PVC over the period as reported by IHS Chemical. |
external financing. As of
December 31, 2014, OpCo had incurred a total cost of approximately $53.1 million on this capital project.In June 2011, as a result
In May 2011, we completed a planned major maintenance activity, or turnaround, at our Calvert City facility. The ethylene, VCM and PVC units were shut down for a total of 16 days each to perform the planned major maintenance activities. The chlor-alkali unit was down for a shorter period.
In April 2011, one of the ethylene units at our Lake Charles facility experienced an unscheduled shut down caused by a weather related power supply failure from a third party power provider. We restarted the ethylene unit three days later but operated the unit at reduced capacity, until we returned it to normal operations in late May. In addition to the lost production resulting from the outage, we incurred repair costs and unabsorbed fixed manufacturing costs which negatively impacted income from operations.
In April 2011, we announced an expansion program to increase the ethane-based ethylene capacity of both of the ethylene units at our Lake Charles complex. We currently expect to complete the expansion of one of the two ethylene units by late 2012. The first cracker expansion is expected to increase ethylene capacity by approximately 230 – 240 million pounds annually, while also increasing feedstock flexibility. The additional capacity from this expansion is expected to provide ethylene for existing internal uses and may also be sold in the merchant market. We expect this project will be funded with cash on hand, cash flow from operations, the net proceeds from the revenue bonds of the Louisiana Local Government Environmental Facility and Development Authority (the “Authority”), a political subdivision of the State of Louisiana, and if necessary, our revolving credit facility and other external financing. In addition, we are currently evaluating expansion plans to increase the ethane-based ethylene capacity of the second ethylene unit at our Lake Charles complex.
In August 2010, we announced that we intend to proceed with the previously announced construction of a new chlor-alkali plant to be located at our vinyls manufacturing complex in Geismar. In December 2011, we announced that we were increasing the planned capacity of the chlor-alkali plant. The new chlor-alkali unit is designed to produce up to 350,000 ECUs annually upon completion, bringing our total ECU capacity to 625,000 per year. The new plant will improve the vertical integration of our vinyls business from chlorine downstream into VCM and PVC and increase caustic soda sales. The project is currently targeted for start-up in the second half of 2013. We expect this project will be funded with cash on hand, cash flow from operations, the net proceeds from the revenue bonds of the Authority, and if necessary, our revolving credit facility and other external financing.
Results of Operations
Segment Data
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
| (dollars in thousands) | ||||||||||||
Net external sales | ||||||||||||
Olefins | ||||||||||||
Polyethylene | $ | 1,772,144 | $ | 1,656,203 | $ | 1,210,706 | ||||||
Ethylene, styrene and other | 795,698 | 605,009 | 400,745 | |||||||||
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Total olefins | 2,567,842 | 2,261,212 | �� | 1,611,451 | ||||||||
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Vinyls | ||||||||||||
PVC, caustic soda and other | 757,314 | 558,156 | 398,825 | |||||||||
Building products | 294,692 | 352,419 | 315,447 | |||||||||
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Total vinyls | 1,052,006 | 910,575 | 714,272 | |||||||||
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Total | $ | 3,619,848 | $ | 3,171,787 | $ | 2,325,723 | ||||||
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Income (loss) from operations | ||||||||||||
Olefins | $ | 459,266 | $ | 460,027 | $ | 177,101 | ||||||
Vinyls | 4,012 | (62,429 | ) | (57,445 | ) | |||||||
Corporate and other | (16,482 | ) | (19,234 | ) | (12,399 | ) | ||||||
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Total income from operations | 446,796 | 378,364 | 107,257 | |||||||||
Interest expense | (50,992 | ) | (39,875 | ) | (34,957 | ) | ||||||
Other income, net | 5,628 | 4,471 | 6,453 | |||||||||
Provision for income taxes | 142,466 | 121,567 | 25,758 | |||||||||
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Net income | $ | 258,966 | $ | 221,393 | $ | 52,995 | ||||||
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Earnings per diluted share | $ | 3.87 | $ | 3.34 | $ | 0.80 | ||||||
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| Year Ended December 31, | ||||||||||||||||
| 2011 | 2010 | |||||||||||||||
| Average Sales Price | Volume | Average Sales Price | Volume | |||||||||||||
Product sales price and volume percentage change from prior year | ||||||||||||||||
Olefins | +16.1 | % | -2.6 | % | +34.7 | % | +5.6 | % | ||||||||
Vinyls | +19.2 | % | -3.7 | % | +18.7 | % | +8.8 | % | ||||||||
Company average | +17.0 | % | -2.9 | % | +29.8 | % | +6.6 | % | ||||||||
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Average industry prices(1) | ||||||||||||
Ethane (cents/lb) | 25.8 | 20.2 | 16.2 | |||||||||
Propane (cents/lb) | 34.6 | 27.6 | 19.9 | |||||||||
Ethylene (cents/lb)(2) | 54.3 | 45.9 | 33.9 | |||||||||
Polyethylene (cents/lb)(3) | 97.3 | 88.7 | 70.1 | |||||||||
Styrene (cents/lb)(4) | 71.9 | 62.7 | 49.6 | |||||||||
Caustic ($/short ton)(5) | 547.5 | 365.4 | 394.6 | |||||||||
Chlorine ($/short ton)(6) | 330.2 | 322.9 | 288.1 | |||||||||
PVC (cents/lb)(7) | 75.0 | 66.3 | 51.3 | |||||||||
Summary
For the year ended December 31, 2011, we had net income of $259.0 million, or $3.87 per diluted share, on net sales of $3,619.8 million. This represents an increase in net income of $37.6 million, or $0.53 per diluted share, from 2010 net income of $221.4 million, or $3.34 per diluted share, on net sales of $3,171.8 million. Net sales for the year ended December 31, 2011 increased $448.0 million to $3,619.8 million compared to net sales for 2010 of $3,171.8 million, primarily due to higher sales prices for all our major products and higher sales volume for PVC resin, partially offset by lower building products sales volume. Income from operations was $446.8 million for the year ended December 31, 2011 as compared to $378.4 million for 2010. Income from operations benefited primarily from improved caustic margins, higher PVC resin and building products sales prices and higher PVC resin sales volume as compared to the year ended December 31, 2010, partially offset by higher feedstock costs. The 2011 income from operations was negatively impacted by the lost production, lost sales and higher operating costs associated with four separate events: an unscheduled outage at one of our ethylene units in Lake Charles, the turnaround of our Calvert City facility, a fire at a third-party storage facility in Mont Belvieu and the closure of our Springfield PVC pipe production facility. The 2010 results were negatively impacted by an unscheduled outage at one of our ethylene units in Lake Charles caused by severe weather.
2011 Compared with 2010
Net Sales.Net sales increased by $448.0 million, or 14.1%, to $3,619.8 million in 2011 from $3,171.8 million in 2010. This increase was mainly driven by higher sales prices for all major products and higher sales volume for PVC resin, partially offset by lower building products and ethylene sales volume as compared to 2010. Average sales prices for 2011 increased by 17.0% as compared to 2010. Overall sales volume decreased by 2.9% in 2011 as compared to 2010, primarily caused by lower building products sales volume attributable to weakness in the U.S. construction markets.
Gross Profit. Gross profit margin percentage improved slightly to 15.4% in 2011 from 15.2% in 2010. The improvement in gross profit percentage was primarily due to improved Vinyls margins resulting from higher PVC resin, building products and caustic sales prices and higher PVC resin sales volume, mostly offset by higher feedstock costs, the unscheduled Lake Charles outage, the Calvert City turnaround, the closure of our Springfield PVC pipe facility and the fire at a third-party storage facility in Mont Belvieu. Our raw material costs in both segments normally track industry prices, which experienced an increase of 27.7% for ethane and 25.4% for propane in 2011 as compared to 2010. Average sales prices for 2011 increased by 17.0% as compared to 2010.
Selling, General and Administrative Expenses.Selling, general and administrative expenses increased $7.9 million, or 7.6%, in 2011 as compared to 2010. The increase was mainly attributable to an increase in payroll and related labor costs, including incentive compensation, partially offset by a decrease in legal and consulting fees.
Interest Expense.Interest expense increased by $11.1 million to $51.0 million in 2011 from $39.9 million in 2010, primarily due to higher average debt outstanding for 2011 as a result of the issuance of our senior notes in July 2010 and December 2010.
Other Income, Net.Other income, net increased by $1.1 million to $5.6 million in 2011 from $4.5 million in 2010, mainly due to higher interest income earned from higher cash balances and higher equity in income from our joint ventures, partially offset by foreign exchange currency losses.
Income Taxes.The effective income tax rate was 35.5% in 2011 as compared to 35.4% in 2010. The effective income tax rate for 2011 was above the statutory rate of 35.0% primarily due to state income taxes, offset by state tax credits and the domestic manufacturing deduction. The effective income tax rate for 2010 was above the statutory rate of 35.0% primarily due to state income taxes, offset by state tax credits and the domestic manufacturing deduction.
Olefins Segment
Net Sales. Net sales increased by $306.6 million, or 13.6%, to $2,567.8 million in 2011 from $2,261.2 million in 2010. This increase was primarily due an increase in sales prices for all major products, partially offset by lower ethylene and polyethylene sales volumes. Average sales prices for the Olefins segment increased by 16.1% in 2011 as compared to 2010, while average sales volumes decreased by 2.6% in 2011 as compared to 2010.
Income from Operations.Income from operations was $459.3 million in 2011 as compared to $460.0 million in 2010 as higher polyethylene and styrene sales prices were mostly offset by higher feedstock costs as compared to 2010. In addition, income from operations for 2011 was negatively impacted by the unscheduled outage at one of our ethylene units in Lake Charles and the fire at a third-party storage facility at Mont Belvieu. Trading activity for 2011 resulted in a gain of $2.0 million as compared to a gain of $0.1 million for 2010. Results for 2010 were negatively impacted by the unscheduled outage at one of our ethylene units in Lake Charles caused by severe weather.
Vinyls Segment
Net Sales. Net sales increased by $141.4 million, or 15.5%, to $1,052.0 million in 2011 from $910.6 million in 2010. This increase was primarily driven by higher sales prices for all major products and an increase in sales volume for PVC resin, partially offset by lower building products sales volume as compared to 2010. Average sales prices for the Vinyls segment increased by 19.2% in 2011 as compared to 2010, while average sales volumes decreased by 3.7% in 2011 as compared to 2010, primarily caused by lower building products sales volume.
Income (Loss) from Operations. Income from operations improved by $66.4 million to $4.0 million in 2011 as compared to a loss from operations of $62.4 million in 2010. This change was primarily attributable to improved caustic, PVC resin and building products margins and higher PVC resin sales volume as compared to 2010, partially offset by the negative impact of the turnaround at our Calvert City facility and the closure of our Springfield PVC pipe facility. PVC resin sales volume benefited from a stronger export market in 2011. In addition, income from operations benefited from a change in the intersegment market pricing methodology used to account for intersegment sales of ethylene. Additional information appears in Note 19 to the audited consolidated financial statements appearing elsewhere in this Form 10-K. Overall, Vinyls margins remained under pressure in 2011 due to the continued weakness in the U.S. construction markets and budgetary constraints in municipal spending.
2010 Compared with 2009
Net Sales.Net sales increased by $846.1 million, or 36.4%, to $3,171.8 million in 2010 from $2,325.7 million in 2009. This increase was primarily due to higher sales prices for all major products, except caustic, and higher sales volume for polyethylene and PVC resin. Average sales prices for 2010 increased by 29.8% as compared to 2009. Overall sales volume increased by 6.6% in 2010 as compared to 2009, mainly driven by increased demand for polyethylene, PVC resin and caustic soda.
Gross Profit. Gross profit margin percentage increased to 15.2% in 2010 from 8.4% in 2009. The improvement in gross profit percentage was primarily due to improved Olefins segment integrated product margins resulting from higher sales prices, higher polyethylene sales volumes and higher production rates for most of our major products, partially offset by higher feedstock and energy costs. In addition, the 2010 gross profit percentage was impacted by the lost ethylene production, repair costs and unabsorbed fixed manufacturing costs incurred due to the Lake Charles outage in the first quarter of 2010 and a negative change of $5.2 million in trading activity. Our raw material costs in both segments normally track industry prices, which experienced an increase of 24.7% for ethane and 38.7% for propane in 2010 as compared to 2009. Average sales prices for 2010 increased by 29.8% as compared to 2009.
Selling, General and Administrative Expenses.Selling, general and administrative expenses increased $16.4 million, or 18.7%, in 2010 as compared to 2009. The increase was mainly attributable to an increase in payroll and related labor costs and higher legal and professional fees.
Interest Expense.Interest expense increased by $4.9 million to $39.9 million in 2010 from $35.0 million in 2009, primarily due to higher average debt outstanding for the period as a result of the issuance of our senior notes in July 2010 and December 2010.
Other Income, Net.Other income, net decreased by $2.0 million to $4.5 million in 2010 from $6.5 million in 2009 primarily due to lower equity in income from our joint venture in China.
Income Taxes.The effective income tax rate was 35.4% in 2010 as compared to 32.7% in 2009. The effective income tax rate for 2010 was above the statutory rate of 35.0% primarily due to state income taxes, offset by state tax credits and the domestic manufacturing deduction. The effective income tax rate for 2009 was below the statutory rate of 35.0% primarily due to state tax credits, a lower foreign tax rate and a reduction of gross unrecognized tax benefits, partially offset by state income taxes.
Olefins Segment
Net Sales. Net sales increased by $649.7 million, or 40.3%, to $2,261.2 million in 2010 from $1,611.5 million in 2009. This increase was primarily due to an increase in sales prices for all major products and higher polyethylene sales volume. Average sales prices for the Olefins segment increased by 34.7% in 2010 as compared to 2009, while average sales volumes increased by 5.6% in 2010 as compared to 2009.
Income from Operations.Income from operations increased by $282.9 million to $460.0 million in 2010 from $177.1 million in 2009. This increase was mainly attributable to improved Olefins segment integrated product margins due to higher sales prices, increased polyethylene sales volume and higher operating rates. The increase was partially offset by higher feedstock costs and the unscheduled outage at one of our ethylene units in Lake Charles during the first quarter of 2010. In addition, trading activity for 2010 resulted in a gain of $0.1 million as compared to a gain of $5.3 million for 2009. Results for 2009 were negatively impacted by the turnaround at one of our ethylene units in Lake Charles.
Vinyls Segment
Net Sales. Net sales increased by $196.3 million, or 27.5%, to $910.6 million in 2010 from $714.3 million in 2009. This increase was primarily driven by higher sales prices for most of our major vinyls products and higher PVC resin sales volume. Average sales prices for the Vinyls segment increased by 18.7% in 2010 as compared to 2009, while average sales volumes increased by 8.8% in 2010 as compared to 2009.
Loss from Operations. The Vinyls segment incurred a loss from operations of $62.4 million in 2010 as compared to a loss from operations of $57.4 million in 2009. Operating results for 2010 were negatively impacted by lower integrated PVC resin margins primarily attributable to higher feedstock and energy costs, which were only partially offset by higher product prices. Vinyls margins remain under pressure due to the continued weakness in the U.S. construction markets, budgetary constraints in municipal spending and the industry’s inability to raise prices for PVC resin and other downstream building products sufficiently in order to offset feedstock and energy cost increases.
Cash Flows
Operating Activities
Operating activities provided cash of $362.3 million in 2011 compared to $283.3 million in 2010. The $79.0 million increase in cash flows from operating activities was primarily due to an increase in income from operations and a decrease in working capital requirements, as compared to 2010, partially offset by higher income taxes paid. Income from operations increased by $68.4 million in 2011 as compared to 2010 primarily as a result of improved caustic margins, higher PVC resin and PVC pipe sales prices and higher PVC resin sales volume. Changes in components of working capital, which we define for purposes of this cash flow discussion as accounts receivable, net, inventories, prepaid expenses and other current assets, less accounts payable and accrued liabilities, used cash of $44.4 million in 2011, compared to $85.8 million of cash used in 2010, a favorable change of $41.4 million. This change was primarily the result of an increase in inventory during the 2011 period that was smaller than the increase in inventory during the 2010 period. Income taxes paid was $126.3 million in 2011 as compared to $108.2 million in 2010.
Operating activities provided cash of $283.3 million in 2010 compared to $235.5 million in 2009. The $47.8 million increase in cash flows from operating activities was primarily due to an increase in income from operations and reduced turnaround spending, mostly offset by an increase in cash used for working capital and income taxes paid. Income from operations increased by $271.1 million in 2010 as compared to 2009 primarily as a result of improved production rates for most of our major products and higher Olefins segment integrated product margins. Changes in components of working capital used cash of $85.8 million in 2010, compared to $39.3 million of cash provided in 2009, a change of $125.1 million. This change was largely due to an increase in accounts receivable and inventory primarily attributable to the increase in average product prices, sales volumes and feedstock costs as compared to 2009. Income taxes paid was $108.2 million in 2010 as compared to refunds received of $40.7 million in 2009 and deferred turnaround costs were $0.4 million in 2010 as compared to $20.3 million in 2009.
Investing Activities
Net cash used for investing activities during 2011 was $202.8 million as compared to net cash used of $80.3 million in 2010. Capital expenditures were $176.8 million in 2011 compared to $81.3 million in 2010. The higher capital expenditures in 2011 were largely attributable to capital expenditures incurred on the construction of the new chlor-alkali plant at our Geismar facility, the expansion of the ethylene unit at our Lake Charles complex and expenditures related to other capital projects to improve production capacity or reduce costs at our various facilities. The remaining capital expenditures in 2011 and capital expenditures in 2010 primarily related to maintenance, safety and environmental projects. We expect to incur capital expenditures related to environmental compliance of $6.0 million and $7.0 million in 2012 and 2013, respectively. A significant percentage of the 2012 and 2013 estimated amounts are related to equipment replacement and upgrades to maintain environmental compliance. Purchases of equity securities, primarily comprised of shares of Georgia Gulf common stock, and other investments totaled $30.3 million in 2011. As of February 17, 2012, we held shares representing approximately 4.8% of the outstanding shares of common stock of Georgia Gulf.
Net cash used for investing activities during 2010 was $80.3 million as compared to net cash used of $103.2 million in 2009. Capital expenditures were $81.3 million in 2010 compared to $99.8 million in 2009. The higher capital expenditures in 2009 were largely attributable to expenditures related to capital projects performed during the turnaround at one of our ethylene facilities in Lake Charles and the completion of our PVC pipe facility and PVC resin plant expansion in Yucca, Arizona and Calvert City, respectively. Capital expenditures in 2010 and the remaining capital expenditures in 2009 primarily related to maintenance, safety and environmental projects. Other investing activities in 2010 included a $10.2 million investment in our natural gas liquids pipeline joint venture and proceeds of $9.5 million for the settlement of derivative instruments.
Financing Activities
Net cash provided by financing activities during 2011 was $36.1 million as compared to net cash provided of $181.7 million in 2010. The 2011 activity was primarily related to a $54.2 million draw-down of our restricted
cash for use for eligible capital expenditures and proceeds of $5.3 million from the exercise of stock options. Net cash provided by financing activities was partially offset by the $18.3 million payment of cash dividends, $2.5 million of repurchases of shares of our common stock and fees incurred in connection with the amendment and restatement of our revolving credit facility in 2011. The 2010 activity was primarily related to a $197.3 million draw-down of our restricted cash, partially offset by the payment of cash dividends and debt issuance costs associated with the issuance of our senior notes in July 2010 and December 2010.
Net cash provided by financing activities during 2010 was $181.7 million as compared to net cash provided of $23.0 million in 2009. The 2010 activity was primarily related to a $197.3 million draw-down of our restricted cash for use for eligible capital expenditures, which included the reimbursement of eligible capital expenditures incurred in prior years. Cash provided by financing activities was partially offset by the $16.0 million payment of cash dividends and $3.3 million of debt issuance costs associated with the issuance of our senior notes in July 2010 and December 2010. The 2009 activity was primarily related to a $38.9 million draw-down of our restricted cash, partially offset by the payment of cash dividends as well as fees incurred in connection with the issuance by the Authority of $5.0 million of variable rate tax-exempt revenue bonds due August 1, 2029 (the “Initial Series 2009A Revenue Bonds”) in August 2009 under the Gulf Opportunity Zone Act of 2005 (the “GO Zone Act”) and the amendment of our revolving credit facility.
Liquidity and Capital Resources
Liquidity and Financing Arrangements
Our principal sources of liquidity are from cash and cash equivalents, restricted cash, cash from operations, short-term borrowings under our revolving credit facility and our long-term financing. As we continue to manage our business through the current economic environment, we have maintained our focus on cost control and various initiatives designed to preserve cash and liquidity.
In December 2011, we announced plans to perform a major modification of the ethylene production facility at our Calvert City complex. We currently expect the modification to be completed by mid-2013. This capital project is currently estimated to cost approximately $40.0 million and will be funded with cash on hand, cash flow from operations, and if necessary, our revolving credit facility and other external financing.
In August 2011, our Board of Directors authorized a stock repurchase program totaling $100.0 million. As of December 31, 2011, we had repurchased 69,816 shares of our common stock for an aggregate purchase price of approximately $2.5 million under this program. Purchases under this program may be made either through the open market or in privately negotiated transactions. Decisions regarding the amount and the timing of purchases under the program will be influenced by our cash on hand, our cash flow from operations, general market conditions and other factors. The program may be discontinued by our Board of Directors at any time.
In April 2011, we announced an expansion program to increase the ethane-based ethylene capacity of both of the ethylene units at our Lake Charles complex. We currently expect to complete the expansion of one of the two ethylene units by late 2012. This expansion is currently estimated to cost in the range of $110.0 million to $145.0 million. The additional capacity from this expansion is expected to provide ethylene for existing internal uses and may also be sold in the merchant market. In August 2010, we announced that we intend to proceed with the previously announced plans for the construction of a new chlor-alkali plant at our Geismar facility. The project is currently estimated to cost in the range of $370.0 million to $420.0 million and is targeted for start-up in the second half of 2013. These projects will be funded with cash on hand, cash flow from operations, the net proceeds from certain of the revenue bonds of the Authority, which are currently held as restricted cash, and, if necessary, our revolving credit facility and other external financing.
Contents
Total cash balances were $922.2 million at December 31, 2011, which included2014, our cash and cash equivalents of $825.9totaled $880.6 million and restricted cash of $96.3 million. The restricted cash is held by a trustee until such time as we request reimbursement of amounts used to expand, refurbish and maintain our facilities in Calcasieu and Ascension Parishes of Louisiana.. In addition, we have a revolving credit facility available to supplement cash if needed, as described under “Debt”"Debt" below.
Revolving Credit Facility
In September 2011, we entered into a second amendment
other factors that are beyond our control. Based on our current level of operations and unless we were to undertake a new expansion or large acquisition, we believe our cash flow from operations, available cash and available borrowings under our revolving credit facility will be adequate to meet our normal operating needs for the foreseeable future.
each fiscal year.
the2029, 6 1/2% senior notes ¾% bonds due 20292032 and $250.0 million of the proceeds from the 6 3/4% senior notes ½% bonds due 2032. The balance of the proceeds, plus interest income, remains with a bond trustee pursuant to the terms and provisions of the loan agreements, and is classified on our consolidated balance sheet as a non-current asset, restricted cash, until such time as we request reimbursement of amounts used to expand, refurbish and maintain our facilities in Calcasieu and Ascension Parishes.2035.
6 5/8% Senior Notes
In January 2006, we issued $250.0 million aggregate principal amount of 6 5/8% senior notes due 2016. The 6 5/8% senior notes are unsecured and were issued with an original issue discount of $0.8 million. There is no sinking fund and no scheduled amortization of the notes prior to maturity. The notes are subject to redemption and the holders may require us to repurchase the notes upon a change of control. All domestic restricted subsidiaries that guarantee other debt of ours or of another guarantor of the ½% IKE Zone Senior Notes in excess of $5.0 million are guarantors of the 6 5Due 2035./8% senior notes.
Our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under our revolving credit facility will be adequate to meet our normal operating needs for the foreseeable future.
| Payment Due by Period | ||||||||||||||||||||
| Total | 2012 | 2013-2014 | 2015-2016 | Thereafter | ||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
Contractual Obligations | ||||||||||||||||||||
Long-term debt | $ | 764.6 | $ | — | $ | — | $ | 250.0 | $ | 514.6 | ||||||||||
Operating leases | 102.2 | 19.2 | 33.0 | 19.9 | 30.1 | |||||||||||||||
Pension benefits funding | 6.4 | 4.8 | 1.6 | — | — | |||||||||||||||
Post-retirement healthcare benefits | 16.5 | 1.7 | 4.1 | 4.1 | 6.6 | |||||||||||||||
Unconditional purchase obligations | 151.1 | 59.2 | 62.7 | 29.0 | 0.2 | |||||||||||||||
Interest payments | 780.4 | 50.0 | 100.0 | 91.7 | 538.7 | |||||||||||||||
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Total | $ | 1,821.2 | $ | 134.9 | $ | 201.4 | $ | 394.7 | $ | 1,090.2 | ||||||||||
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Other Commercial Commitments | ||||||||||||||||||||
Standby letters of credit | $ | 15.7 | $ | 15.7 | $ | — | $ | — | $ | — | ||||||||||
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| Payment Due by Period | ||||||||||||||||||||
| Total | 2015 | 2016-2017 | 2018-2019 | Thereafter | ||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||
| Contractual Obligations | ||||||||||||||||||||
| Long-term debt | $ | 764.0 | $ | — | $ | — | $ | — | $ | 764.0 | ||||||||||
| Operating leases | 745.9 | 39.2 | 73.5 | 52.6 | 580.6 | |||||||||||||||
| Capital leases | 2.4 | 0.3 | 0.5 | 0.5 | 1.1 | |||||||||||||||
| Pension benefits funding | 122.9 | 2.7 | 6.3 | 7.4 | 106.5 | |||||||||||||||
| Post-retirement healthcare benefits | 15.7 | 1.8 | 4.1 | 3.9 | 5.9 | |||||||||||||||
| Purchase obligations | 4,149.2 | 481.5 | 520.8 | 286.6 | 2,860.3 | |||||||||||||||
| Interest payments | 673.2 | 42.4 | 84.8 | 84.8 | 461.2 | |||||||||||||||
| Total | $ | 6,473.3 | $ | 567.9 | $ | 690.0 | $ | 435.8 | $ | 4,779.6 | ||||||||||
| Other Commercial Commitments | ||||||||||||||||||||
| Standby letters of credit | $ | 31.4 | $ | 31.4 | $ | — | $ | — | $ | — | ||||||||||
December 31, 2014.
Long-Lived Assets. Key estimates related to long-lived assets include useful lives, recoverability of carrying values and existence of any retirement obligations. Such estimates could be significantly modified. The carrying values of long-lived assets could be impaired by significant changes or projected changes in supply and demand fundamentals (which would have a negative impact on operating rates or margins), new technological developments, new competitors with significant raw material or other cost advantages, adverse changes associated with the U.S.United States and world economies, the cyclical nature of the chemical and refining industries and uncertainties associated with governmental actions.
of impairment indicators are based on legal factors, market conditions and the operational performance of our businesses. Actual impairment losses incurred could vary significantly from amounts estimated. Long-lived assets assessed for impairment are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Additionally, future events could cause us to conclude that impairment indicators exist and that associated long-lived assets of our businesses are impaired. Any resulting impairment loss could have a material adverse impact on our financial condition and results of operations.
future performance of the investments and financial markets and input from our third-party independent actuary and the pension fund trustee. Even withThe non-U.S. plans are unfunded and, therefore, have no plan assets. As a result of the increase in the value ofstrong returns on U.S. plan assets that occurred during 2011,2014 and the funding relief provided by the enactment of the Highway and Transportation Funding Act of 2014, we expect the minimum funding requirements for the U.S. pension plans to increasedecrease in 2012 as a result of our accumulated benefit obligation at December 31, 2011.2015. Additional information on the 20122015 funding requirements and key assumptions underlying these benefit costs appear in Note 710 to the audited consolidated financial statements appearing elsewhere in this Form 10-K.
| 2014 | ||||||||
| U.S. Plans | Non-U.S. Plans | |||||||
| (dollars in millions) | ||||||||
| Projected benefit obligation, end of year | $ | 67.0 | $ | 122.7 | ||||
| Discount rate increases by 100 basis points | 59.6 | 103.8 | ||||||
| Discount rate decreases by 100 basis points | 76.0 | 147.1 | ||||||
Allowance for Doubtful Accounts. In our determination of the allowance for doubtful accounts, and consistent with our accounting policy, we estimate the amount of accounts receivable that we believe are unlikely to be collected and we record an expense of that amount. Estimating this amount requires us to analyze the financial strength of our customers, and, in our analysis, we combine the use of historical experience, our accounts receivable aged trial balance and specific collectibility analysis. We review our allowance for doubtful accounts quarterly. Balances over 90 days past due and accounts determined by our analysis of financial strength of customers to be high risk are reviewed individually for collectibility. By its nature, such an estimate is highly subjective and it is possible that the amount of accounts receivable that we are unable to collect may be different than the amount initially estimated.
fluctuate with changes in the business cycle. We try to protect against such instability through various business strategies. Our strategies include ethylene
| Page | ||||
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Consolidated Balance Sheets as of December 31, | ||||
Consolidated Statements of Operations for the Years Ended December 31, | ||||
| ||||
| Consolidated Statements of Cash Flows for the Years Ended December 31, | ||||
Financial Statement Schedule II—Valuation and Qualifying Accounts | ||||
25, 2015
| December 31, | ||||||||
| 2011 | 2010 | |||||||
(in thousands of dollars, except par values and share amounts) | ||||||||
| ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 825,901 | $ | 630,299 | ||||
Accounts receivable, net | 407,372 | 362,863 | ||||||
Inventories | 490,777 | 450,028 | ||||||
Prepaid expenses and other current assets | 12,495 | 15,482 | ||||||
Deferred income taxes | 19,611 | 17,288 | ||||||
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|
|
| |||||
Total current assets | 1,756,156 | 1,475,960 | ||||||
Property, plant and equipment, net | 1,232,066 | 1,170,334 | ||||||
Equity investments | 46,741 | 46,314 | ||||||
Restricted cash | 96,283 | 150,288 | ||||||
Other assets, net | 135,575 | 111,248 | ||||||
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|
| |||||
Total assets | $ | 3,266,821 | $ | 2,954,144 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 227,034 | $ | 204,774 | ||||
Accrued liabilities | 137,561 | 118,804 | ||||||
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|
| |||||
Total current liabilities | 364,595 | 323,578 | ||||||
Long-term debt | 764,563 | 764,482 | ||||||
Deferred income taxes | 330,791 | 315,518 | ||||||
Other liabilities | 50,560 | 45,496 | ||||||
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| |||||
Total liabilities | 1,510,509 | 1,449,074 | ||||||
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|
| |||||
Commitments and contingencies (Notes 6 and 18) | ||||||||
Stockholders’ equity | ||||||||
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Common stock, $0.01 par value, 150,000,000 shares authorized; 66,601,909 and 66,256,144 shares issued at December 31, 2011 and 2010, respectively | 666 | 663 | ||||||
Common stock, held in treasury, at cost; 69,816 shares at December 31, 2011 | (2,518 | ) | — | |||||
Additional paid-in capital | 467,796 | 452,703 | ||||||
Retained earnings | 1,299,438 | 1,058,737 | ||||||
Accumulated other comprehensive (loss) income | ||||||||
Benefits liability, net of tax | (15,143 | ) | (12,328 | ) | ||||
Cumulative translation adjustment | 4,888 | 5,295 | ||||||
Unrealized holding gains on investments, net of tax | 1,185 | — | ||||||
|
|
|
| |||||
Total stockholders’ equity | 1,756,312 | 1,505,070 | ||||||
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|
|
| |||||
Total liabilities and stockholders’ equity | $ | 3,266,821 | $ | 2,954,144 | ||||
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| |||||
| December 31, | ||||||||
| 2014 | 2013 | |||||||
(in thousands of dollars, except par values and share amounts) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 880,601 | $ | 461,301 | ||||
| Marketable securities | — | 239,388 | ||||||
| Accounts receivable, net | 560,666 | 428,457 | ||||||
| Inventories | 525,776 | 471,879 | ||||||
| Prepaid expenses and other current assets | 11,807 | 13,888 | ||||||
| Deferred income taxes | 32,437 | 34,169 | ||||||
| Total current assets | 2,011,287 | 1,649,082 | ||||||
| Property, plant and equipment, net | 2,757,557 | 2,088,014 | ||||||
| Equity investments | 61,305 | 66,875 | ||||||
| Other assets, net | ||||||||
| Intangible assets, net | 218,431 | 159,046 | ||||||
| Deferred charges and other assets, net | 165,410 | 97,892 | ||||||
| Total other assets, net | 383,841 | 256,938 | ||||||
| Total assets | $ | 5,213,990 | $ | 4,060,909 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 261,062 | $ | 249,613 | ||||
| Accrued liabilities | 276,118 | 155,245 | ||||||
| Total current liabilities | 537,180 | 404,858 | ||||||
| Long-term debt | 763,997 | 763,879 | ||||||
| Deferred income taxes | 536,066 | 437,976 | ||||||
| Other liabilities | 174,859 | 35,593 | ||||||
| Total liabilities | 2,012,102 | 1,642,306 | ||||||
| Commitments and contingencies (Notes 7 and 20) | ||||||||
| Stockholders' equity | ||||||||
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued and outstanding | — | — | ||||||
Common stock, $0.01 par value, 300,000,000 shares authorized; 134,679,064 and 134,580,208 shares issued at December 31, 2014 and 2013, respectively (Note 8) | 1,347 | 1,346 | ||||||
Common stock, held in treasury, at cost; 1,787,546 and 1,252,922 shares at December 31, 2014 and 2013, respectively (Note 8) | (96,372 | ) | (46,220 | ) | ||||
| Additional paid-in capital | 530,441 | 511,432 | ||||||
| Retained earnings | 2,555,528 | 1,954,661 | ||||||
| Accumulated other comprehensive loss | (79,433 | ) | (2,616 | ) | ||||
| Total Westlake Chemical Corporation stockholders' equity | 2,911,511 | 2,418,603 | ||||||
| Noncontrolling interests | 290,377 | — | ||||||
| Total equity | 3,201,888 | 2,418,603 | ||||||
| Total liabilities and equity | $ | 5,213,990 | $ | 4,060,909 | ||||
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
| (in thousands of dollars, except share amounts and per share data) | ||||||||||||
Net sales | $ | 3,619,848 | $ | 3,171,787 | $ | 2,325,723 | ||||||
Cost of sales | 3,060,842 | 2,689,104 | 2,130,595 | |||||||||
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| |||||||
Gross profit | 559,006 | 482,683 | 195,128 | |||||||||
Selling, general and administrative expenses | 112,210 | 104,319 | 87,871 | |||||||||
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|
|
|
| |||||||
Income from operations | 446,796 | 378,364 | 107,257 | |||||||||
Other income (expense) | ||||||||||||
Interest expense | (50,992 | ) | (39,875 | ) | (34,957 | ) | ||||||
Other income, net | 5,628 | 4,471 | 6,453 | |||||||||
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|
|
|
| |||||||
Income before income taxes | 401,432 | 342,960 | 78,753 | |||||||||
Provision for income taxes | 142,466 | 121,567 | 25,758 | |||||||||
|
|
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|
|
| |||||||
Net income | $ | 258,966 | $ | 221,393 | $ | 52,995 | ||||||
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| |||||||
Earnings per common share: | ||||||||||||
Basic | $ | 3.89 | $ | 3.35 | $ | 0.80 | ||||||
Diluted | $ | 3.87 | $ | 3.34 | $ | 0.80 | ||||||
|
|
|
|
|
| |||||||
Weighted average shares outstanding: | ||||||||||||
Basic | 65,927,421 | 65,472,875 | 65,323,101 | |||||||||
Diluted | 66,300,158 | 65,676,664 | 65,421,390 | |||||||||
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| |||||||
Dividends per common share | $ | 0.2746 | $ | 0.2420 | $ | 0.2200 | ||||||
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| |||||||
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
(in thousands of dollars, except share amounts and per share data) | ||||||||||||
| Net sales | $ | 4,415,350 | $ | 3,759,484 | $ | 3,571,041 | ||||||
| Cost of sales | 3,098,000 | 2,658,046 | 2,834,081 | |||||||||
| Gross profit | 1,317,350 | 1,101,438 | 736,960 | |||||||||
| Selling, general and administrative expenses | 193,359 | 147,974 | 121,609 | |||||||||
| Income from operations | 1,123,991 | 953,464 | 615,351 | |||||||||
| Other income (expense) | ||||||||||||
| Interest expense | (37,352 | ) | (18,082 | ) | (43,049 | ) | ||||||
| Debt retirement costs | — | — | (7,082 | ) | ||||||||
| Gain from sales of equity securities | — | — | 16,429 | |||||||||
| Other (expense) income, net | (2,721 | ) | 6,790 | 3,520 | ||||||||
| Income before income taxes | 1,083,918 | 942,172 | 585,169 | |||||||||
| Provision for income taxes | 398,902 | 331,747 | 199,614 | |||||||||
| Net income | 685,016 | 610,425 | 385,555 | |||||||||
| Net income attributable to noncontrolling interests | 6,493 | — | — | |||||||||
| Net income attributable to Westlake Chemical Corporation | $ | 678,523 | $ | 610,425 | $ | 385,555 | ||||||
Earnings per common share attributable to Westlake Chemical Corporation (Note 8): | ||||||||||||
| Basic | $ | 5.09 | $ | 4.57 | $ | 2.89 | ||||||
| Diluted | $ | 5.07 | $ | 4.55 | $ | 2.88 | ||||||
| Weighted average shares outstanding (Note 8) | ||||||||||||
| Basic | 133,111,230 | 133,224,256 | 132,578,858 | |||||||||
| Diluted | 133,643,414 | 133,779,250 | 133,282,990 | |||||||||
| Dividends per common share (Note 8) | $ | 0.5820 | $ | 0.4125 | $ | 2.1363 | ||||||
COMPREHENSIVE INCOME
| Common Stock | Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||||||||||||||||||||
| Number of Shares | Amount | Common Stock, Held in Treasury, at Cost | Additional Paid-in Capital | Retained Earnings | Benefits Liability, Net of Tax | Cumulative Foreign Currency Exchange | Net Unrealized Holding Gains on Investments, Net of Tax | Total | ||||||||||||||||||||||||||||
| (in thousands of dollars, except share amounts) | ||||||||||||||||||||||||||||||||||||
Balances at December 31, 2008 | 65,658,142 | $ | 657 | $ | — | $ | 435,581 | $ | 814,873 | $ | (13,339 | ) | $ | 1,288 | $ | — | $ | 1,239,060 | ||||||||||||||||||
Net income | — | — | — | — | 52,995 | — | — | — | 52,995 | |||||||||||||||||||||||||||
Other comprehensive (loss) income | — | — | — | — | — | (2,517 | ) | 3,063 | — | 546 | ||||||||||||||||||||||||||
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Total comprehensive income | 53,541 | |||||||||||||||||||||||||||||||||||
Stock options exercised | 55,401 | — | — | 879 | — | — | — | — | 879 | |||||||||||||||||||||||||||
Stock-based compensation, net of tax on stock options exercised | 266,408 | 3 | — | 6,009 | — | — | — | — | 6,012 | |||||||||||||||||||||||||||
Dividends paid | — | — | — | — | (14,510 | ) | — | — | — | (14,510 | ) | |||||||||||||||||||||||||
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Balances at December 31, 2009 | 65,979,951 | 660 | — | 442,469 | 853,358 | (15,856 | ) | 4,351 | — | 1,284,982 | ||||||||||||||||||||||||||
Net income | — | — | — | — | 221,393 | — | — | — | 221,393 | |||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 3,528 | 944 | — | 4,472 | |||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||
Total comprehensive income | 225,865 | |||||||||||||||||||||||||||||||||||
Stock options exercised | 173,014 | 2 | — | 3,745 | — | — | — | — | 3,747 | |||||||||||||||||||||||||||
Stock-based compensation, net of tax on stock options exercised | 103,179 | 1 | — | 6,489 | — | — | — | — | 6,490 | |||||||||||||||||||||||||||
Dividends paid | — | — | — | — | (16,014 | ) | — | — | — | (16,014 | ) | |||||||||||||||||||||||||
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Balances at December 31, 2010 | 66,256,144 | 663 | — | 452,703 | 1,058,737 | (12,328 | ) | 5,295 | — | 1,505,070 | ||||||||||||||||||||||||||
Net income | — | — | — | — | 258,966 | — | — | — | 258,966 | |||||||||||||||||||||||||||
Other comprehensive (loss) income | — | — | — | — | — | (2,815 | ) | (407 | ) | 1,185 | (2,037 | ) | ||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||||||
Total comprehensive income | 256,929 | |||||||||||||||||||||||||||||||||||
Common stock repurchased | — | — | (2,518 | ) | — | — | — | — | — | (2,518 | ) | |||||||||||||||||||||||||
Stock options exercised | 274,872 | 3 | — | 5,341 | — | — | — | — | 5,344 | |||||||||||||||||||||||||||
Stock-based compensation, net of tax on stock options exercised | 70,893 | — | — | 9,752 | — | — | — | — | 9,752 | |||||||||||||||||||||||||||
Dividends paid | — | — | — | — | (18,265 | ) | — | — | — | (18,265 | ) | |||||||||||||||||||||||||
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Balances at December 31, 2011 | 66,601,909 | $ | 666 | $ | (2,518 | ) | $ | 467,796 | $ | 1,299,438 | $ | (15,143 | ) | $ | 4,888 | $ | 1,185 | $ | 1,756,312 | |||||||||||||||||
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| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| (in thousands of dollars) | ||||||||||||
| Net income | $ | 685,016 | $ | 610,425 | $ | 385,555 | ||||||
| Other comprehensive (loss) income, net of income taxes | ||||||||||||
| Pension and other post-retirement benefits liability | ||||||||||||
Pension and other post-retirement reserves adjustment (excluding amortization) | (25,766 | ) | 12,969 | (4,301 | ) | |||||||
| Amortization of benefits liability | 924 | 2,712 | 2,340 | |||||||||
Income tax benefit (provision) on pension and other post-retirement benefits liability | 8,096 | (6,026 | ) | 753 | ||||||||
| Foreign currency translation adjustments | (60,128 | ) | (1,607 | ) | 623 | |||||||
| Available-for-sale investments | ||||||||||||
| Unrealized holding gains on investments | 1,301 | 256 | 14,582 | |||||||||
| Reclassification of net realized (gains) loss to net income | (1,212 | ) | 19 | (16,429 | ) | |||||||
| Income tax (provision) benefit on available-for-sale investments | (32 | ) | (99 | ) | 662 | |||||||
| Other comprehensive (loss) income | (76,817 | ) | 8,224 | (1,770 | ) | |||||||
| Comprehensive income | 608,199 | 618,649 | 383,785 | |||||||||
Comprehensive income attributable to noncontrolling interests, net of tax | 6,493 | — | — | |||||||||
| Comprehensive income attributable to Westlake Chemical Corporation | $ | 601,706 | $ | 618,649 | $ | 383,785 | ||||||
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
| (in thousands of dollars) | ||||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 258,966 | $ | 221,393 | $ | 52,995 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
Depreciation and amortization | 131,397 | 128,732 | 123,199 | |||||||||
Provision for doubtful accounts | 1,321 | 917 | 1,970 | |||||||||
Amortization of debt issue costs | 1,683 | 2,154 | 1,461 | |||||||||
Stock-based compensation expense | 6,391 | 6,164 | 5,638 | |||||||||
Loss from disposition of fixed assets | 1,375 | 581 | 2,711 | |||||||||
Impairment of long-lived assets | 1,975 | — | — | |||||||||
Gain on involuntary conversion of assets | — | — | (455 | ) | ||||||||
Deferred income taxes | 14,114 | 14,153 | 31,207 | |||||||||
Equity in income of joint ventures | (427 | ) | (2,212 | ) | (3,818 | ) | ||||||
Changes in operating assets and liabilities | ||||||||||||
Accounts receivable | (45,766 | ) | (33,478 | ) | 5,667 | |||||||
Inventories | (40,749 | ) | (80,611 | ) | (41,450 | ) | ||||||
Prepaid expenses and other current assets | 2,987 | (7,217 | ) | (236 | ) | |||||||
Accounts payable | 20,311 | 25,644 | 67,044 | |||||||||
Accrued liabilities | 18,785 | 9,910 | 8,308 | |||||||||
Other, net | (10,067 | ) | (2,846 | ) | (18,719 | ) | ||||||
|
|
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|
|
| |||||||
Net cash provided by operating activities | 362,296 | 283,284 | 235,522 | |||||||||
|
|
|
|
|
| |||||||
Cash flows from investing activities | ||||||||||||
Acquisition of business | — | — | (6,297 | ) | ||||||||
Additions to equity investments | — | (10,177 | ) | — | ||||||||
Additions to property, plant and equipment | (176,843 | ) | (81,269 | ) | (99,769 | ) | ||||||
Proceeds from disposition of assets | 2,880 | 914 | 3,255 | |||||||||
Proceeds from insurance for involuntary conversion of assets | — | — | 484 | |||||||||
Proceeds from repayment of loan to affiliate | 1,192 | 763 | — | |||||||||
Purchase of securities and other investments | (30,265 | ) | — | — | ||||||||
Settlements of derivative instruments | 251 | 9,494 | (859 | ) | ||||||||
|
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|
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| |||||||
Net cash used for investing activities | (202,785 | ) | (80,275 | ) | (103,186 | ) | ||||||
|
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| |||||||
Cash flows from financing activities | ||||||||||||
Capitalized debt issuance costs | (2,697 | ) | (3,331 | ) | (2,203 | ) | ||||||
Dividends paid | (18,265 | ) | (16,014 | ) | (14,510 | ) | ||||||
Proceeds from exercise of stock options | 5,344 | 3,745 | 879 | |||||||||
Repurchase of common stock for treasury | (2,518 | ) | — | — | ||||||||
Utilization of restricted cash | 54,227 | 197,298 | 38,851 | |||||||||
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|
|
| |||||||
Net cash provided by financing activities | 36,091 | 181,698 | 23,017 | |||||||||
|
|
|
|
|
| |||||||
Net increase in cash and cash equivalents | 195,602 | 384,707 | 155,353 | |||||||||
Cash and cash equivalents at beginning of the year | 630,299 | 245,592 | 90,239 | |||||||||
|
|
|
|
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| |||||||
Cash and cash equivalents at end of the year | $ | 825,901 | $ | 630,299 | $ | 245,592 | ||||||
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| |||||||
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
| (in thousands of dollars) | ||||||||||||
Supplemental cash flow information | ||||||||||||
Cash paid (refunded) during the year for: | ||||||||||||
Interest paid (net of interest capitalized) | $ | 48,431 | $ | 33,980 | $ | 33,394 | ||||||
Income taxes paid (refunded) | 126,283 | 108,218 | (40,741 | ) | ||||||||
Non-cash financing activity: | ||||||||||||
Proceeds from borrowings related to series 2009A revenue bonds (in restricted cash) | $ | — | $ | — | $ | 4,900 | ||||||
Proceeds from borrowings related to the 6 1/2% tax-exempt revenue bonds due 2029 (in restricted cash) | — | 93,943 | — | |||||||||
Proceeds from borrowings related to the GO Zone 6 1/2% tax-exempt revenue bonds due 2035 (in restricted cash) | — | 87,940 | — | |||||||||
Proceeds from borrowings related to the IKE Zone 6 1/2% tax-exempt revenue bonds due 2035 (in restricted cash) | — | 64,209 | — | |||||||||
CHANGES IN STOCKHOLDERS’ EQUITY
| Common Stock | Common Stock, Held in Treasury | Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | At Cost | Additional Paid-in Capital | Retained Earnings | Benefits Liability, Net of Tax | Cumulative Foreign Currency Exchange | Net Unrealized Holding Gains on Investments, Net of Tax | Noncontrolling Interests | Total | ||||||||||||||||||||||||||||||||
| (in thousands of dollars, except share amounts) | ||||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2011 | 133,203,818 | $ | 1,332 | 139,632 | $ | (2,518 | ) | $ | 467,130 | $ | 1,299,438 | $ | (15,143 | ) | $ | 4,888 | $ | 1,185 | — | $ | 1,756,312 | |||||||||||||||||||||
| Net income | — | — | — | — | — | 385,555 | — | — | — | — | 385,555 | |||||||||||||||||||||||||||||||
Other comprehensive (loss) income | — | — | — | — | — | — | (1,208 | ) | 623 | (1,185 | ) | — | (1,770 | ) | ||||||||||||||||||||||||||||
Common stock repurchased | — | — | 429,354 | (10,784 | ) | — | — | — | — | — | — | (10,784 | ) | |||||||||||||||||||||||||||||
Shares issued - stock based compensation | 1,170,630 | 12 | — | — | 10,358 | — | — | — | — | — | 10,370 | |||||||||||||||||||||||||||||||
Stock-based compensation, net of tax on stock options exercised | — | — | — | — | 18,094 | — | — | — | — | — | 18,094 | |||||||||||||||||||||||||||||||
| Dividends paid | — | — | — | — | — | (285,521 | ) | — | — | — | — | (285,521 | ) | |||||||||||||||||||||||||||||
| Balances at December 31, 2012 | 134,374,448 | 1,344 | 568,986 | (13,302 | ) | 495,582 | 1,399,472 | (16,351 | ) | 5,511 | — | — | 1,872,256 | |||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 610,425 | — | — | — | — | 610,425 | |||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | 9,655 | (1,607 | ) | 176 | — | 8,224 | ||||||||||||||||||||||||||||||
Common stock repurchased | — | — | 683,936 | (32,918 | ) | — | — | — | — | — | — | (32,918 | ) | |||||||||||||||||||||||||||||
Shares issued - stock based compensation | 205,760 | 2 | — | — | 3,435 | — | — | — | — | — | 3,437 | |||||||||||||||||||||||||||||||
Stock-based compensation, net of tax on stock options exercised | — | — | — | — | 12,415 | — | — | — | — | — | 12,415 | |||||||||||||||||||||||||||||||
| Dividends paid | — | — | — | — | — | (55,236 | ) | — | — | — | — | (55,236 | ) | |||||||||||||||||||||||||||||
| Balances at December 31, 2013 | 134,580,208 | 1,346 | 1,252,922 | (46,220 | ) | 511,432 | 1,954,661 | (6,696 | ) | 3,904 | 176 | — | 2,418,603 | |||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 678,523 | — | — | — | 6,493 | 685,016 | |||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | (16,746 | ) | (60,128 | ) | 57 | — | (76,817 | ) | ||||||||||||||||||||||||||||
Common stock repurchased | — | — | 671,791 | (52,630 | ) | — | — | — | — | — | — | (52,630 | ) | |||||||||||||||||||||||||||||
Shares issued - stock based compensation | 98,856 | 1 | (137,167 | ) | 2,478 | 3,045 | — | — | — | — | — | 5,524 | ||||||||||||||||||||||||||||||
Stock-based compensation, net of tax on stock options exercised | — | — | — | — | 15,964 | — | — | — | — | — | 15,964 | |||||||||||||||||||||||||||||||
| Dividends paid | — | — | — | — | — | (77,656 | ) | — | — | — | — | (77,656 | ) | |||||||||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | — | — | — | (2,204 | ) | (2,204 | ) | |||||||||||||||||||||||||||||
Issuance of Westlake Chemical Partners LP common units | — | — | — | — | — | — | — | — | — | 286,088 | 286,088 | |||||||||||||||||||||||||||||||
| Balances at December 31, 2014 | 134,679,064 | $ | 1,347 | 1,787,546 | $ | (96,372 | ) | $ | 530,441 | $ | 2,555,528 | $ | (23,442 | ) | $ | (56,224 | ) | $ | 233 | $ | 290,377 | $ | 3,201,888 | |||||||||||||||||||
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| (in thousands of dollars) | ||||||||||||
| Cash flows from operating activities | ||||||||||||
| Net income | $ | 685,016 | $ | 610,425 | $ | 385,555 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
| Depreciation and amortization | 208,486 | 157,808 | 144,541 | |||||||||
| Provision for doubtful accounts | 301 | 5,514 | 229 | |||||||||
| Amortization of debt issuance costs | 1,673 | 1,459 | 1,514 | |||||||||
| Stock-based compensation expense | 9,261 | 6,966 | 6,127 | |||||||||
| Loss from disposition of fixed assets | 4,181 | 5,039 | 3,886 | |||||||||
| Gain from sales of equity securities | — | — | (16,429 | ) | ||||||||
| Impairment of equity method investment | 6,747 | — | — | |||||||||
| Write-off of debt issuance costs | — | — | 1,277 | |||||||||
| Deferred income taxes | 58,967 | 93,732 | (5,793 | ) | ||||||||
| Windfall tax benefits from share-based payment arrangements | (6,704 | ) | (5,449 | ) | (11,967 | ) | ||||||
| (Income) loss from equity method investments, net of dividends | (424 | ) | 199 | 3,005 | ||||||||
| Other loss, net | 275 | 391 | — | |||||||||
| Changes in operating assets and liabilities | ||||||||||||
| Accounts receivable | 33,161 | (14,830 | ) | 6,450 | ||||||||
| Inventories | 51,087 | (46,633 | ) | 91,479 | ||||||||
| Prepaid expenses and other current assets | 7,461 | (475 | ) | (2,205 | ) | |||||||
| Accounts payable | (97,237 | ) | 13,820 | (12,725 | ) | |||||||
| Accrued liabilities | 74,989 | (15,147 | ) | 32,381 | ||||||||
| Other, net | (4,864 | ) | (60,090 | ) | (15,238 | ) | ||||||
| Net cash provided by operating activities | 1,032,376 | 752,729 | 612,087 | |||||||||
| Cash flows from investing activities | ||||||||||||
| Acquisition of business, net of cash acquired | (611,087 | ) | (178,309 | ) | — | |||||||
| Additions to equity investments | — | (23,338 | ) | — | ||||||||
| Additions to property, plant and equipment | (431,104 | ) | (679,222 | ) | (386,882 | ) | ||||||
| Construction of assets pending sale-leaseback | — | (136 | ) | (4,308 | ) | |||||||
| Proceeds from disposition of assets | 181 | 151 | 471 | |||||||||
| Proceeds from repayment of loan acquired | 45,923 | — | — | |||||||||
| Proceeds from repayment of loan to affiliate | — | 167 | 1,192 | |||||||||
| Proceeds from sale-leaseback of assets | — | — | 2,304 | |||||||||
| Proceeds from sales and maturities of securities | 342,045 | 252,519 | 47,655 | |||||||||
| Purchase of securities | (117,332 | ) | (367,150 | ) | (127,834 | ) | ||||||
| Settlements of derivative instruments | (1,831 | ) | (6,920 | ) | 431 | |||||||
| Net cash used for investing activities | (773,205 | ) | (1,002,238 | ) | (466,971 | ) | ||||||
| Cash flows from financing activities | ||||||||||||
| Capitalized debt issuance costs | (1,186 | ) | — | (2,221 | ) | |||||||
| Dividends paid | (77,656 | ) | (55,236 | ) | (285,521 | ) | ||||||
| Distributions to noncontrolling interests | (2,204 | ) | — | — | ||||||||
Net proceeds from issuance of Westlake Chemical Partners LP common units | 286,088 | — | — | |||||||||
| Proceeds from debt issuance | — | — | 248,818 | |||||||||
| Proceeds from exercise of stock options | 5,524 | 3,437 | 10,369 | |||||||||
| Repayment of debt | — | — | (250,000 | ) | ||||||||
| Repurchase of common stock for treasury | (52,630 | ) | (32,918 | ) | (10,784 | ) | ||||||
| Utilization of restricted cash | — | — | 96,433 | |||||||||
| Windfall tax benefits from share-based payment arrangements | 6,704 | 5,449 | 11,967 | |||||||||
| Net cash provided by (used for) financing activities | 164,640 | (79,268 | ) | (180,939 | ) | |||||||
| Effect of exchange rate changes on cash and cash equivalents | (4,511 | ) | — | — | ||||||||
| Net increase (decrease) in cash and cash equivalents | 419,300 | (328,777 | ) | (35,823 | ) | |||||||
| Cash and cash equivalents at beginning of the year | 461,301 | 790,078 | 825,901 | |||||||||
| Cash and cash equivalents at end of the year | $ | 880,601 | $ | 461,301 | $ | 790,078 | ||||||
2014
.WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
Classification | Years | ||||
Buildings and improvements | 25 | ||||
Plant and equipment | 25 | ||||
| Ethylene pipeline | 35 | ||||
| |||||
Other | 3-10 | ||||
Restricted Cash
Restricted cash, which is restricted as to withdrawal or usage, is classified separately from the cash and cash equivalents categorymore information on the Company’s balance sheet. As indicated in Note 6, the proceeds of the 6 3Company's annual goodwill impairment tests./4% senior
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
notes due 2032 and the 6 1/2% senior notes due 2035 issued by the Company, along with their accrued interest income, remain with a trustee, and are classified on the Company’s balance sheet as a non-current asset until such time as the Company submits a request for reimbursement of qualifying amounts spent for facilities in Louisiana.
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
Fair Value Measurement
In May 2011, the FASB issued new accounting guidance changing some fair value measurement principles, such as by prohibiting the application of a blockage factor in fair value measurements and only requiring the application of the highest and best use concept when measuring nonfinancial assets. The accounting guidance will require, for recurring Level 3 fair value measurements, disclosure of quantitative information about unobservable inputs used, a description of the valuation processes used and a qualitative discussion about the sensitivity of the measurements. The accounting guidance further requires new disclosures about the use of a nonfinancial asset measured or disclosed at fair value if its use differs from its highest and best use. In addition, entities must report the fair value hierarchy level of assets and liabilities not recorded at fair value but where fair value is disclosed. The accounting standards updatestandard will be effective for reporting periods beginning after December 15, 2011 and2016. The Company is not expected toin the process of evaluating the impact that the new accounting guidance will have a material impact on the Company’sits consolidated financial position, or results of operations.
Presentationoperations and cash flows.
Uncertainties about an Entity's Ability to Continue as a Going Concern
Testing Goodwill for Impairment
In September 2011, the FASB issued
Disclosures about Offsetting Assets and Liabilities
In December 2011, the FASB issued an accounting standards update on disclosures for offsetting assets and liabilities. The new accounting guidance requires companies to disclose both gross and net information about (1) instruments and transactions eligible for offset in the statement of financial position, and (2) instruments and transactions subject to an agreement similar to a master netting arrangement. The accounting standards update will be effective for reporting periods beginning on or after January 1, 20132016 and is not expected to have an impact on the Company’sCompany's consolidated financial position, or results of operations.
operations and cash flows.
Accounts receivable consist$509,811 and $263,967 of held-to-maturity securities with original maturities of three months or less, primarily consisting of corporate debt securities, classified as cash equivalents at December 31, 2014 and 2013, respectively. The Company's investments in held-to-maturity securities are held at amortized cost, which approximates fair value.
| 2014 | 2013 | ||||||
| Current | $ | — | $ | 239,388 | |||
| Non-current | 15,414 | — | |||||
| Total available-for-sale securities | $ | 15,414 | $ | 239,388 | |||
| December 31, 2014 | ||||||||||||||||
| Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| Equity securities | $ | 15,050 | $ | 364 | $ | — | $ | 15,414 | ||||||||
| Total available-for-sale securities | $ | 15,050 | $ | 364 | $ | — | $ | 15,414 | ||||||||
| December 31, 2013 | ||||||||||||||||
| Cost | Gross Unrealized Gains | Gross Unrealized Losses (1) | Fair Value | |||||||||||||
| Debt securities | ||||||||||||||||
| Corporate bonds | $ | 108,300 | $ | 340 | $ | (69 | ) | $ | 108,571 | |||||||
U.S. government debt (2) | 106,335 | 60 | (79 | ) | 106,316 | |||||||||||
| Asset-backed securities | 24,478 | 34 | (11 | ) | 24,501 | |||||||||||
| Total available-for-sale securities | $ | 239,113 | $ | 434 | $ | (159 | ) | $ | 239,388 | |||||||
| 2011 | 2010 | |||||||
Trade customers | $ | 391,401 | $ | 353,035 | ||||
Affiliates | 122 | 475 | ||||||
Allowance for doubtful accounts | (10,969 | ) | (9,710 | ) | ||||
|
|
|
| |||||
| 380,554 | 343,800 | |||||||
Federal and state taxes | 16,113 | 15,499 | ||||||
Other | 10,705 | 3,564 | ||||||
|
|
|
| |||||
Accounts receivable, net | $ | 407,372 | $ | 362,863 | ||||
|
|
|
| |||||
3. Inventories
Inventories consist
| (1) | All unrealized loss positions were held at a loss for less than 12 months. |
| (2) | U.S. Treasury obligations, U.S. government agency obligations and U.S government agency mortgage-backed securities. |
| Year Ended December 31, | ||||||||
| 2014 | 2013 | |||||||
| Proceeds from sales and maturities of securities | $ | 342,045 | $ | 7,770 | ||||
| Gross realized gains | 1,311 | $ | 20 | |||||
| Gross realized losses | (99 | ) | $ | (39 | ) | |||
| 2014 | 2013 | |||||||
| Trade customers | $ | 525,546 | $ | 410,302 | ||||
| Affiliates | 437 | 315 | ||||||
| Allowance for doubtful accounts | (13,468 | ) | (11,741 | ) | ||||
| 512,515 | 398,876 | |||||||
| Federal and state taxes | 8,919 | 20,820 | ||||||
| Other | 39,232 | 8,761 | ||||||
| Accounts receivable, net | $ | 560,666 | $ | 428,457 | ||||
| 2014 | 2013 | |||||||
| Finished products | $ | 300,909 | $ | 232,658 | ||||
| Feedstock, additives and chemicals | 158,635 | 180,646 | ||||||
| Materials and supplies | 66,232 | 58,575 | ||||||
| Inventories | $ | 525,776 | $ | 471,879 | ||||
| 2011 | 2010 | |||||||
Land | $ | 13,509 | $ | 12,897 | ||||
Building and improvements | 135,049 | 129,881 | ||||||
Plant and equipment | 2,039,050 | 1,963,186 | ||||||
Other | 147,342 | 133,241 | ||||||
|
|
|
| |||||
| 2,334,950 | 2,239,205 | |||||||
Less: Accumulated depreciation | (1,196,845 | ) | (1,098,792 | ) | ||||
|
|
|
| |||||
| 1,138,105 | 1,140,413 | |||||||
Construction in progress | 93,961 | 29,921 | ||||||
|
|
|
| |||||
Property, plant and equipment, net | $ | 1,232,066 | $ | 1,170,334 | ||||
|
|
|
| |||||
| 2014 | 2013 | |||||||
| Land | $ | 21,211 | $ | 18,576 | ||||
| Building and improvements | 244,101 | 173,933 | ||||||
| Plant and equipment | 3,454,462 | 2,829,049 | ||||||
| Other | 213,707 | 180,452 | ||||||
| 3,933,481 | 3,202,010 | |||||||
| Less: Accumulated depreciation | (1,531,331 | ) | (1,379,255 | ) | ||||
| 2,402,150 | 1,822,755 | |||||||
| Construction in progress | 355,407 | 265,259 | ||||||
| Property, plant and equipment, net | $ | 2,757,557 | $ | 2,088,014 | ||||
The Company recorded asset impairment charges
5.
| 2011 | 2010 | Weighted Average Life | ||||||||||||||||||||||||||
| Cost | Accumulated Amortization | Net | Cost | Accumulated Amortization | Net | |||||||||||||||||||||||
Intangible assets: | ||||||||||||||||||||||||||||
Technology licenses | $ | 44,827 | $ | (40,860 | ) | $ | 3,967 | $ | 44,762 | $ | (39,763 | ) | $ | 4,999 | 12 | |||||||||||||
Patents | 6,503 | (3,306 | ) | 3,197 | 6,503 | (2,655 | ) | 3,848 | 10 | |||||||||||||||||||
Customer relationships | 17,649 | (6,901 | ) | 10,748 | 17,649 | (5,544 | ) | 12,105 | 13 | |||||||||||||||||||
Goodwill | 29,990 | — | 29,990 | 29,990 | — | 29,990 | ||||||||||||||||||||||
Other | 1,161 | — | 1,161 | 1,161 | — | 1,161 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total intangible assets | 100,130 | (51,067 | ) | 49,063 | 100,065 | (47,962 | ) | 52,103 | ||||||||||||||||||||
Available-for-sale investments | 30,113 | — | 30,113 | — | — | — | ||||||||||||||||||||||
Notes receivable from affiliate | 2,383 | — | 2,383 | 3,575 | — | 3,575 | ||||||||||||||||||||||
Turnaround costs | 86,728 | (57,175 | ) | 29,553 | 85,307 | (49,864 | ) | 35,443 | 5 | |||||||||||||||||||
Debt issuance costs | 20,628 | (8,989 | ) | 11,639 | 17,930 | (7,307 | ) | 10,623 | 10 | |||||||||||||||||||
Other, net | 22,502 | (9,678 | ) | 12,824 | 19,444 | (9,940 | ) | 9,504 | 5 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Other assets, net | $ | 262,484 | $ | (126,909 | ) | $ | 135,575 | $ | 226,321 | $ | (115,073 | ) | $ | 111,248 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
| 2014 | 2013 | Weighted Average Life | ||||||||||||||||||||||||
| Cost | Accumulated Amortization | Net | Cost | Accumulated Amortization | Net | |||||||||||||||||||||
| Intangible assets: | ||||||||||||||||||||||||||
Licenses and intellectual property | $ | 82,611 | $ | (35,732 | ) | $ | 46,879 | $ | 63,765 | $ | (43,190 | ) | $ | 20,575 | 16 | |||||||||||
| Trademarks | 42,790 | (759 | ) | 42,031 | 6,361 | — | 6,361 | 19 | ||||||||||||||||||
| Customer relationships | 75,249 | (17,374 | ) | 57,875 | 75,249 | (12,176 | ) | 63,073 | 14 | |||||||||||||||||
| Goodwill | 62,016 | — | 62,016 | 62,016 | — | 62,016 | ||||||||||||||||||||
| Other | 16,501 | (6,871 | ) | 9,630 | 11,858 | (4,837 | ) | 7,021 | 7 | |||||||||||||||||
| Total intangible assets | 279,167 | (60,736 | ) | 218,431 | 219,249 | (60,203 | ) | 159,046 | ||||||||||||||||||
| Available-for-sale investments | 15,414 | — | 15,414 | — | — | — | ||||||||||||||||||||
| Cost-method investments | 57,147 | — | 57,147 | — | — | — | ||||||||||||||||||||
| Notes receivable from affiliate | 1,025 | — | 1,025 | 1,025 | — | 1,025 | ||||||||||||||||||||
| Turnaround costs | 107,892 | (56,493 | ) | 51,399 | 107,732 | (37,276 | ) | 70,456 | 5 | |||||||||||||||||
| Debt issuance costs | 20,406 | (11,282 | ) | 9,124 | 19,220 | (9,608 | ) | 9,612 | 13 | |||||||||||||||||
| Other | 49,546 | (18,245 | ) | 31,301 | 31,288 | (14,489 | ) | 16,799 | 3 | |||||||||||||||||
Total deferred charges and other assets | 251,430 | (86,020 | ) | 165,410 | 159,265 | (61,373 | ) | 97,892 | ||||||||||||||||||
| Other assets, net | $ | 530,597 | $ | (146,756 | ) | $ | 383,841 | $ | 378,514 | $ | (121,576 | ) | $ | 256,938 | ||||||||||||
is tested for impairment at least annually, or when events or changes in circumstances indicate the fair value of a reporting unit with goodwill has been reduced below its carrying value. The Company performed its annual impairment testtests for the Olefins and Vinyls segments' goodwill in October 2014 and April 2014, respectively, and the impairment tests indicated that the recorded goodwill was performed asnot impaired. There has been no impairment of October 31, 2011. The Company’s impairment test indicated that itsthe Olefins or Vinyls segments' goodwill since the goodwill was not impaired. initially recorded. The gross carrying amounts of goodwill for the years ended December 31, 2014 and 2013 are as follows:
| Olefins Segment | Vinyls Segment | Total | ||||||||||
| Balance at December 31, 2012 | $ | 29,990 | $ | — | $ | 29,990 | ||||||
| Goodwill acquired during the year | — | 32,026 | 32,026 | |||||||||
| Balance at December 31, 2013 | 29,990 | 32,026 | 62,016 | |||||||||
| Changes in goodwill during the year | — | — | — | |||||||||
| Balance at December 31, 2014 | $ | 29,990 | $ | 32,026 | $ | 62,016 | ||||||
Under the discounted cash flow methodology, even
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
Available-for-sale Investments
| December 31, 2011 | ||||||||||||||||
| Cost | Gross Unrealized Gains | Gross Unrealized Losses(1) | Fair Value | |||||||||||||
Available-for-sale equity securities | $ | 28,265 | $ | 1,981 | $ | (133 | ) | $ | 30,113 | |||||||
Becausebased on a 10-year forecast, from 2014 to 2023, to reflect the Company does not intend to sell, nor is it likely to be required to sell, its available-for-sale securities, declines in fair value are considered temporary. The Company regularly evaluates available evidence to determine if its investments are other-than-temporarily impaired. The Company considers the evidence to support the recoverycyclicality of the cost basisNorth American housing and construction markets as the Company's pipe and foundation building products business is significantly influenced by said markets. The forecast was based on historical results and estimates by management, including its strategic and operational plans, and assumed a gradual increase in financial performance based on a housing market recovery in the United States. The future cash flows were discounted to present value using a discount rate of a security including volatility of the stock, the length of time the security has been11.5%.
As the fair value of the equity securities was higher than cost at December 31, 2011, an unrealized gainreporting unit using the market value methodology include the determination of $1,185, netappropriate market comparables and the estimated multiples of income tax expense of $663, was recorded in accumulated other comprehensive income. See Note 11 forEBITDA a willing buyer is likely to pay.
6.reporting unit decreased by 10%, the carrying value of the reporting unit would not exceed its fair value.
| 2011 | 2010 | |||||||
6 5/8% senior notes due 2016 | $ | 249,674 | $ | 249,593 | ||||
6 1/2% senior notes due 2029 | 100,000 | 100,000 | ||||||
6 3/4% senior notes due 2032 | 250,000 | 250,000 | ||||||
6 1/2% senior notes due 2035 (the “2035 GO Zone 6 1/2% Notes”) | 89,000 | 89,000 | ||||||
6 1/2% senior notes due 2035 (the “2035 IKE Zone 6 1/2% Notes”) | 65,000 | 65,000 | ||||||
Loan related to tax-exempt waste disposal revenue bonds due 2027 | 10,889 | 10,889 | ||||||
|
|
|
| |||||
Long-term debt | $ | 764,563 | $ | 764,482 | ||||
|
|
|
| |||||
| 2014 | 2013 | |||||||
| 3.60% senior notes due 2022 | $ | 249,108 | $ | 248,990 | ||||
| 6 ½% senior notes due 2029 | 100,000 | 100,000 | ||||||
| 6 ¾% senior notes due 2032 | 250,000 | 250,000 | ||||||
| 6 ½% senior notes due 2035 (the "6 ½% GO Zone Senior Notes Due 2035") | 89,000 | 89,000 | ||||||
| 6 ½% senior notes due 2035 (the "6 ½% IKE Zone Senior Notes Due 2035") | 65,000 | 65,000 | ||||||
| Loan related to tax-exempt waste disposal revenue bonds due 2027 | 10,889 | 10,889 | ||||||
| Long-term debt, net | $ | 763,997 | $ | 763,879 | ||||
The Company’s senior secured revolving credit facility is currently $400,000.make investments, among other things. The facility includes a provision permitting the Company to increase the size of the facility, up to four times, in increments of at least $25,000 each (up to a maximum of $150,000)$200,000) under certain circumstances if certainthe lenders agree to commit to such an increase.
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
appraised net orderly liquidation value of all eligible inventory, plus (3) 100% of cash held in an account with the agent under the credit facility and subject to a control agreement with the agent, minus (4) such reserves as the agent may establish. Advances on inventory are limited to $325,000. The facility includes a $400,000 sub-limit for letters of credit, and any outstanding letters of credit will be deducted from availability under the facility.
each fiscal year.
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
plus interest income, remains with a bond trustee pursuant to the terms and provisions of the loan agreement, and is classified on the Company’s consolidated balance sheet as a non-current asset, restricted cash, until such time as the Company requests reimbursement of amounts used to expand, refurbish and maintain its facilities in Calcasieu Parish.
6 5/8% Senior Notes
In January 2006, the Company issued $250,000 of aggregate principal amount of 6 5/8% senior notes due 2016. The 6 5/8% senior notes are unsecured and were issued with an original issue discount of $815. There is no sinking fund and no scheduled amortization of the notes prior to maturity. The notes are subject to redemption and the holders may require the Company to repurchase the notes upon a change of control. All domestic restricted subsidiaries that guarantee other debt of the Company or of another guarantor of the ½% IKE Zone Senior Notes in excess of $5,000 are guarantors of the 6 5Due 2035./8% senior notes.
2022.
The Company has a defined contribution savings plan covering all regular full-time and part-time employees whereby eligible employees may elect to contribute up to 100% of their annual compensation. The Company matches 100% of an employee’s contribution up to the first 4% of such employee’s compensation. The
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
Company may, at its discretion, make an additional contribution in an amount as the board of directors may determine. For the years ended December 31, 2011, 2010 and 2009, the Company charged approximately $4,801, $4,556 and $4,450, respectively, to expense for these contributions.
Further, within the defined contribution savings plan, the Company also makes an annual retirement contribution to substantially all employees of one subsidiary and certain employees of another subsidiary who have completed one year of service. The Company’s contributions to the plan are determined as a percentage of employees’ base and overtime pay. For the years ended December 31, 2011, 2010 and 2009, the Company charged approximately $5,234, $5,209 and $5,173, respectively, to expense for these contributions.
The Company has noncontributory defined benefit pension plans that cover certain eligible salaried and wage employees of one subsidiary. Benefits for salaried employees under these plans are based primarily on years of service and employees’ pay near retirement. Benefits for wage employees are based upon years of service and a fixed amount as periodically adjusted. The Company recognizes the years of service prior to the Company’s acquisition of the facilities for purposes of determining vesting, eligibility and benefit levels for certain employees of the subsidiary and for determining vesting and eligibility for certain other employees of the subsidiary. The measurement date for these plans is December 31.
The Company also provides post-retirement healthcare benefits to the employees of two subsidiaries who meet certain minimum age and service requirements. The Company has the right to modify or terminate some of these benefits.
Details of the changes in benefit obligations, plan assets and funded status of the Company’s pension and post-retirement healthcare plans are as follows:
| Pension Benefits | Post-retirement Healthcare | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Change in benefit obligation | ||||||||||||||||
Benefit obligation, beginning of year | $ | 54,033 | $ | 52,059 | $ | 20,047 | $ | 21,048 | ||||||||
Service cost | 930 | 938 | 16 | 45 | ||||||||||||
Interest cost | 2,723 | 2,751 | 840 | 919 | ||||||||||||
Actuarial loss (gain) | 4,358 | 326 | 816 | (656 | ) | |||||||||||
Benefits paid | (2,168 | ) | (2,041 | ) | (1,507 | ) | (1,309 | ) | ||||||||
|
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| |||||||||
Benefit obligation, end of year | $ | 59,876 | $ | 54,033 | $ | 20,212 | $ | 20,047 | ||||||||
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|
| |||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets, beginning of year | $ | 32,867 | $ | 28,580 | $ | — | $ | — | ||||||||
Actual return | 833 | 3,782 | — | — | ||||||||||||
Employer contribution | 3,946 | 2,546 | 1,507 | 1,309 | ||||||||||||
Benefits paid | (2,168 | ) | (2,041 | ) | (1,507 | ) | (1,309 | ) | ||||||||
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Fair value of plan assets, end of year | $ | 35,478 | $ | 32,867 | $ | — | $ | — | ||||||||
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Funded status, end of year | $ | (24,398 | ) | $ | (21,166 | ) | $ | (20,212 | ) | $ | (20,047 | ) | ||||
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| |||||||||
Amounts recognized in the consolidated balance sheet at December 31 | ||||||||||||||||
Current liabilities | $ | — | $ | — | $ | (1,710 | ) | $ | (1,590 | ) | ||||||
Noncurrent liabilities | (24,398 | ) | (21,166 | ) | (18,502 | ) | (18,457 | ) | ||||||||
|
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|
| |||||||||
Net amount recognized | $ | (24,398 | ) | $ | (21,166 | ) | $ | (20,212 | ) | $ | (20,047 | ) | ||||
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WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
| Pension Benefits | Post-retirement Healthcare | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Amounts recognized in accumulated other comprehensive income | ||||||||||||||||
Net loss | $ | 20,325 | $ | 15,791 | $ | 3,523 | $ | 2,825 | ||||||||
Transition obligation | — | — | — | 114 | ||||||||||||
Prior service cost | 890 | 1,187 | 218 | 404 | ||||||||||||
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Total before tax(1) | $ | 21,215 | $ | 16,978 | $ | 3,741 | $ | 3,343 | ||||||||
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The Pension Protection Act of 2006 (the “Pension Protection Act”) established a relationship between a qualified pension plan’s funded status and the actual benefits that can be provided. Restrictions on plan benefits and additional funding and notice requirements are imposed when a plan’s funded status is less than certain threshold levels. For the 2011 plan year, the funded status for the Company’s pension plans are in the 61% to 80% range. Accordingly, the Company’s pension plans are currently restricted from increasing plan benefits, unless the cost of the plan amendment is fully funded by the Company prior to the effective date of the benefit increase. In 2009, the Company amended the pension plan for wage employees to increase, over a three-year period, the monthly benefit multiplier used to compute plan benefits. During 2011, the Company fully funded the benefit increase for the current year prior to the effective date of the benefit increase, so the plan remains in compliance with the Pension Protection Act’s benefit restriction requirements.
Pension plans with an accumulated benefit obligation in excess of plan assets at December 31 are as follows:
| Pension Benefits | ||||||||
| 2011 | 2010 | |||||||
Information for pension plans with an accumulated benefit obligation in excess of plan assets | ||||||||
Projected benefit obligation | $ | (59,876 | ) | $ | (54,033 | ) | ||
Accumulated benefit obligation | (54,508 | ) | (49,602 | ) | ||||
Fair value of plan assets | 35,478 | 32,867 | ||||||
| Pension Benefits | Post-retirement Healthcare | |||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2011 | 2010 | 2009 | |||||||||||||||||||
Components of net periodic benefit cost | ||||||||||||||||||||||||
Service cost | $ | 930 | $ | 938 | $ | 842 | $ | 16 | $ | 45 | $ | 85 | ||||||||||||
Interest cost | 2,723 | 2,751 | 2,465 | 840 | 919 | 1,067 | ||||||||||||||||||
Expected return on plan assets | (2,279 | ) | (1,935 | ) | (1,652 | ) | — | — | — | |||||||||||||||
Net amortization | 1,567 | 1,899 | 1,646 | 418 | 377 | 427 | ||||||||||||||||||
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Net periodic benefit cost | $ | 2,941 | $ | 3,653 | $ | 3,301 | $ | 1,274 | $ | 1,341 | $ | 1,579 | ||||||||||||
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WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
| Pension Benefits | Post-retirement Healthcare | |||||||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2011 | 2010 | 2009 | |||||||||||||||||||
Other changes in plan assets and benefit obligation recognized in other comprehensive income (OCI) | ||||||||||||||||||||||||
Net loss (gain) emerging | $ | 5,804 | $ | (1,521 | ) | $ | 3,804 | $ | 816 | $ | (656 | ) | $ | 1,039 | ||||||||||
Prior service cost | — | — | 1,484 | — | — | — | ||||||||||||||||||
Amortization of net loss | (1,271 | ) | (1,602 | ) | (1,381 | ) | (118 | ) | (51 | ) | (101 | ) | ||||||||||||
Amortization of transition obligation | — | — | — | (114 | ) | (114 | ) | (114 | ) | |||||||||||||||
Amortization of prior service cost | (296 | ) | (297 | ) | (265 | ) | (186 | ) | (212 | ) | (212 | ) | ||||||||||||
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Total recognized in OCI | $ | 4,237 | $ | (3,420 | ) | $ | 3,642 | $ | 398 | $ | (1,033 | ) | $ | 612 | ||||||||||
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Total net periodic benefit cost and OCI | $ | 7,178 | $ | 233 | $ | 6,943 | $ | 1,672 | $ | 308 | $ | 2,191 | ||||||||||||
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The estimated prior service cost and net loss for the defined benefit plans that will be amortized from other comprehensive income into net periodic benefit cost during 2012 are expected to be $297 and $1,755, respectively. The estimated prior service cost and net loss for the post-retirement healthcare benefit plans that will be amortized from other comprehensive income into net periodic benefit cost during 2012 are expected to be $84 and $176, respectively. No transition obligation for the post-retirement healthcare benefit plans will be amortized from other comprehensive income into net periodic benefit cost in 2012.
The weighted-average assumptions used to determine pension and post-retirement healthcare plan obligations and net periodic benefit costs for the plans are as follows:
| Pension Benefits | Post-retirement Healthcare | |||||||||||||||||||||||
| 2011 | 2010 | 2009 | 2011 | 2010 | 2009 | |||||||||||||||||||
Weighted average assumptions used to determine benefit obligations at December 31 | ||||||||||||||||||||||||
Discount rate | 4.5 | % | 5.3 | % | 5.5 | % | 4.0 | % | 4.5 | % | 5.0 | % | ||||||||||||
Expected return on plan assets | 7.0 | % | 7.0 | % | 7.0 | % | — | — | — | |||||||||||||||
Rate of compensation increase | 4.0 | % | 4.0 | % | 4.0 | % | — | — | — | |||||||||||||||
Weighted average assumptions used to determine net periodic benefit costs for years ended December 31 | ||||||||||||||||||||||||
Discount rate | 5.3 | % | 5.5 | % | 6.0 | % | 4.5 | % | 5.0 | % | 5.8 | % | ||||||||||||
Expected return on plan assets | 7.0 | % | 7.0 | % | 7.0 | % | — | — | — | |||||||||||||||
Rate of compensation increase | 4.0 | % | 4.0 | % | 4.0 | % | — | — | — | |||||||||||||||
The Company’s return on asset assumption of 7% is based on historical asset returns, anticipated future performance of the investments and financial markets and input from the Company’s third-party independent actuary and the pension fund trustee. The discount rate is determined using a benchmark pension discount curve and applying spot rates from the curve to each year of expected benefit payments to determine the appropriate discount rate for the Company.
Assumed healthcare trend rates do not have a significant effect on the amounts reported for the healthcare plans because benefits for participants are capped at a fixed amount.
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
The Company’s overall investment strategy is to achieve a balance between moderate income generation and capital appreciation. The investment strategy includes a mix of approximately 65% of investments for long-term growth and 35% for near-term benefit payments with a diversification of asset types. The Company does not believe that there are significant concentrations of risk in the pension plan assets due to its strategy of asset diversification. The pension fund investment policy allows the pension fund trustee a 10% discretionary range in the asset allocation model, with a target of approximately 55% equity securities and 45% fixed income. The Company expects to maintain the 55/45 investment policy for the near future. Equity securities primarily include investments in large-cap and small-cap companies located in the United States and international developed market stocks. Fixed income securities are comprised of investment grade bonds, including U.S. Treasuries and corporate bonds of companies from diversified industries.
Under the accounting guidance for fair value measurements, inputs used to measure fair value are classified in one of three levels:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The investments in the bank collective trust funds are valued using a market approach based on the net asset value of units held. The fair values of the Company’s pension plans assets at December 31, by asset category, are as follows:
| 2011 | 2010 | |||||||||||||||||||||||
| Level 2 | Level 3 | Total | Level 2 | Level 3 | Total | |||||||||||||||||||
Bank collective trust funds—Equity securities: | ||||||||||||||||||||||||
Large-cap index funds(1) | $ | 17,562 | $ | — | $ | 17,562 | $ | 15,007 | $ | — | $ | 15,007 | ||||||||||||
Small-cap index funds(2) | 2,324 | — | 2,324 | 3,220 | — | 3,220 | ||||||||||||||||||
International index funds(3) | 3,367 | — | 3,367 | 3,216 | — | 3,216 | ||||||||||||||||||
Bank collective trust funds—Fixed income: | ||||||||||||||||||||||||
Bond index funds(4) | 11,806 | — | 11,806 | 10,957 | — | 10,957 | ||||||||||||||||||
Short term investment funds | — | 419 | 419 | — | 467 | 467 | ||||||||||||||||||
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| $ | 35,059 | $ | 419 | $ | 35,478 | $ | 32,400 | $ | 467 | $ | 32,867 | |||||||||||||
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Because of the immaterial amount of the Company’s Level 3 pension plans assets, no summary of changes in the fair value of Level 3 pension plans assets is presented.
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
The Company’s funding policy is consistent with the minimum funding requirements of federal law and regulations, and based on preliminary estimates, the Company expects to make contributions of approximately $2,862 for the salaried pension plan and approximately $1,923 for the wage pension plan in 2012.
The following benefit payments are expected to be paid:
| Pension Benefits | Post- retirement Healthcare | |||||||
Estimated future benefit payments: | ||||||||
Year 1 | $ | 2,381 | $ | 1,710 | ||||
Year 2 | 2,651 | 1,937 | ||||||
Year 3 | 2,895 | 2,113 | ||||||
Year 4 | 3,141 | 2,144 | ||||||
Year 5 | 3,303 | 1,999 | ||||||
Years 6 to 10 | 18,698 | 6,594 | ||||||
8. Stockholders’ Equity
The Company’sCompany's board of directors has declared regular quarterly dividends to holders of its common stock aggregating $18,265, $16,014$77,656, $55,236 and $14,510$34,877 for the years ended December 31, 2011, 20102014, 2013 and 2009,2012, respectively.
On November 16, 2012, in addition to a regular quarterly dividend of $0.0938 per share (on a post-split basis), the Company's board of directors declared a special dividend of $1.875 per share (on a post-split basis) to shareholders of record as of November 29, 2012. This special dividend, totaling $250,644 in aggregate, was paid on December 12, 2012.
Benefits Liability, Net of Tax | Cumulative Foreign Currency Exchange | Net Unrealized Holding Gains on Investments, Net of Tax | Total | |||||||||||||
| Balances at December 31, 2012 | $ | (16,351 | ) | $ | 5,511 | $ | — | $ | (10,840 | ) | ||||||
Other comprehensive income (loss) before reclassifications | 7,986 | (1,607 | ) | 164 | 6,543 | |||||||||||
Amounts reclassified from accumulated other comprehensive loss | 1,669 | — | 12 | 1,681 | ||||||||||||
| Net other comprehensive income (loss) for the year | 9,655 | (1,607 | ) | 176 | 8,224 | |||||||||||
| Balances at December 31, 2013 | (6,696 | ) | 3,904 | 176 | (2,616 | ) | ||||||||||
Other comprehensive (loss) income before reclassifications | (17,314 | ) | (60,128 | ) | 834 | (76,608 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive loss | 568 | — | (777 | ) | (209 | ) | ||||||||||
| Net other comprehensive (loss) income for the year | (16,746 | ) | (60,128 | ) | 57 | (76,817 | ) | |||||||||
| Balances at December 31, 2014 | $ | (23,442 | ) | $ | (56,224 | ) | $ | 233 | $ | (79,433 | ) | |||||
Details about Accumulated Other Comprehensive Income (Loss) Components | Location of Reclassification (Income (Expense)) in Consolidated Statements of Operations | Year Ended December 31, | ||||||||
| 2014 | 2013 | |||||||||
| Amortization of pension and other post-retirement items | ||||||||||
| Prior service costs | (1) | $ | (347 | ) | $ | (381 | ) | |||
| Net loss | (1) | (577 | ) | (2,331 | ) | |||||
| (924 | ) | (2,712 | ) | |||||||
| Provision for income taxes | 356 | 1,043 | ||||||||
| $ | (568 | ) | $ | (1,669 | ) | |||||
| Net unrealized gains on available-for-sale investments | ||||||||||
Realized gain (loss) on available-for-sale investments | Other income, net | $ | 1,212 | $ | (19 | ) | ||||
| Provision for income taxes | (435 | ) | 7 | |||||||
| $ | 777 | $ | (12 | ) | ||||||
| Total reclassifications for the period | $ | 209 | $ | (1,681 | ) | |||||
| (1) | These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost. For additional information, see Note 10. |
| 2014 | 2013 | |||||||||||
| U.S. Plans | Non-U.S. Plans | U.S. Plans | ||||||||||
| Change in benefit obligation | ||||||||||||
| Benefit obligation, beginning of year | $ | 57,946 | $ | — | $ | 65,313 | ||||||
| Benefit obligation assumed with acquisition | — | 117,970 | — | |||||||||
| Service cost | 334 | 602 | 1,091 | |||||||||
| Interest cost | 2,322 | 1,366 | 2,047 | |||||||||
| Actuarial loss (gain) | 9,165 | 15,425 | (8,163 | ) | ||||||||
| Benefits paid | (2,757 | ) | (898 | ) | (2,342 | ) | ||||||
| Foreign exchange effects | — | (11,764 | ) | — | ||||||||
| Benefit obligation, end of year | $ | 67,010 | $ | 122,701 | $ | 57,946 | ||||||
| Change in plan assets | ||||||||||||
| Fair value of plan assets, beginning of year | $ | 49,236 | $ | — | $ | 42,325 | ||||||
| Actual return | 2,953 | — | 7,159 | |||||||||
| Employer contribution | 3,983 | 898 | 2,094 | |||||||||
| Benefits paid | (2,757 | ) | (898 | ) | (2,342 | ) | ||||||
| Fair value of plan assets, end of year | $ | 53,415 | $ | — | $ | 49,236 | ||||||
| Funded status, end of year | $ | (13,595 | ) | $ | (122,701 | ) | $ | (8,710 | ) | |||
| 2014 | 2013 | |||||||||||
| U.S. Plans | Non-U.S. Plans | U.S. Plans | ||||||||||
Amounts recognized in the consolidated balance sheet at December 31 | ||||||||||||
| Noncurrent liabilities | $ | (13,595 | ) | $ | (122,701 | ) | $ | (8,710 | ) | |||
| Net amount recognized | $ | (13,595 | ) | $ | (122,701 | ) | $ | (8,710 | ) | |||
| 2014 | 2013 | |||||||||||
| U.S. Plans | Non-U.S. Plans | U.S. Plans | ||||||||||
Amounts recognized in accumulated other comprehensive income | ||||||||||||
| Net loss | $ | 15,482 | $ | 15,425 | $ | 6,404 | ||||||
| Prior service cost | — | — | 297 | |||||||||
Total before tax (1) | $ | 15,482 | $ | 15,425 | $ | 6,701 | ||||||
| (1) | After-tax totals for pension benefits were $20,315 and $3,994 for 2014 and 2013, respectively, and are reflected in stockholders' equity as accumulated other comprehensive loss. |
| 2014 | 2013 | |||||||||||
Information for pension plans with an accumulated benefit obligation in excess of plan assets | U.S. Plans | Non-U.S. Plans | U.S. Plans | |||||||||
| Projected benefit obligation | $ | (67,010 | ) | $ | (122,701 | ) | $ | (57,946 | ) | |||
| Accumulated benefit obligation | (67,010 | ) | (119,258 | ) | (57,946 | ) | ||||||
| Fair value of plan assets | 53,415 | — | 49,236 | |||||||||
| Year Ended December 31, | ||||||||||||||||
| 2014 | 2013 | 2012 | ||||||||||||||
U.S. Plans | Non-U.S. Plans | U.S. Plans | U.S. Plans | |||||||||||||
| Components of net periodic benefit cost | ||||||||||||||||
| Service cost | $ | 334 | $ | 602 | $ | 1,091 | $ | 1,005 | ||||||||
| Interest cost | 2,322 | 1,366 | 2,047 | 2,580 | ||||||||||||
| Expected return on plan assets | (3,140 | ) | — | (2,854 | ) | (2,490 | ) | |||||||||
| Net amortization | 571 | — | 2,255 | 2,071 | ||||||||||||
| Net periodic benefit cost | $ | 87 | $ | 1,968 | $ | 2,539 | $ | 3,166 | ||||||||
Other changes in plan assets and benefit obligation recognized in other comprehensive income (OCI) | ||||||||||||||||
| Net loss (gain) emerging | $ | 9,352 | $ | 15,425 | $ | (12,468 | ) | $ | 7,765 | |||||||
| Curtailment | — | — | — | (5,484 | ) | |||||||||||
| Amortization of net loss | (274 | ) | — | (1,958 | ) | (1,774 | ) | |||||||||
| Amortization of prior service cost | (297 | ) | — | (297 | ) | (297 | ) | |||||||||
| Total recognized in OCI | $ | 8,781 | $ | 15,425 | $ | (14,723 | ) | $ | 210 | |||||||
| Total net periodic benefit cost and OCI | $ | 8,868 | $ | 17,393 | $ | (12,184 | ) | $ | 3,376 | |||||||
| 2014 | 2013 | 2012 | ||||||||||
U.S. Plans | Non-U.S. Plans | U.S. Plans | U.S. Plans | |||||||||
Weighted average assumptions used to determine benefit obligations at December 31 | ||||||||||||
| Discount rate | 3.5 | % | 1.9 | % | 4.5 | % | 3.3 | % | ||||
| Expected return on plan assets | 7.0 | % | — | % | 7.0 | % | 7.0 | % | ||||
| Rate of compensation increase | — | % | 2.5 | % | 4.0 | % | 4.0 | % | ||||
Weighted average assumptions used to determine net periodic benefit costs for years ended December 31 | ||||||||||||
| Discount rate | 4.5 | % | 2.6 | % | 3.3 | % | 4.5 | % | ||||
| Expected return on plan assets | 7.0 | % | — | % | 7.0 | % | 7.0 | % | ||||
| Rate of compensation increase | — | % | 2.5 | % | 4.0 | % | 4.0 | % | ||||
| 2014 | 2013 | |||||||||||||||
| U.S. Plans | U.S. Plans | |||||||||||||||
| Level 2 | Total | Level 2 | Total | |||||||||||||
| Bank collective trust funds—Equity securities: | ||||||||||||||||
Large-cap index funds (1) | $ | 19,473 | $ | 19,473 | $ | 17,079 | $ | 17,079 | ||||||||
Small-cap index funds (2) | 3,351 | 3,351 | 3,091 | 3,091 | ||||||||||||
International index funds (3) | 8,474 | 8,474 | 7,482 | 7,482 | ||||||||||||
| Bank collective trust funds—Fixed income: | ||||||||||||||||
Bond index funds (4) | 21,495 | 21,495 | 21,333 | 21,333 | ||||||||||||
| Short term investment funds | 622 | 622 | 251 | 251 | ||||||||||||
| $ | 53,415 | $ | 53,415 | $ | 49,236 | $ | 49,236 | |||||||||
| (1) | Substantially all of the assets of these funds are invested in large-cap U.S. companies. The remainder of the assets of these funds is invested in cash reserves. |
| (2) | Substantially all of the assets of these funds are invested in small-cap U.S. companies. The remainder of the assets of these funds is invested in cash reserves. |
| (3) | Substantially all of the assets of these funds are invested in international companies in developed markets (excluding the United States and Canada). The remainder of the assets of these funds is invested in cash reserves. |
| (4) | This category represents investment grade bonds of U.S. issuers, including U.S. Treasury notes. |
| Year Ended December 31, | ||||
| 2014 | ||||
Non-U.S. Plans | ||||
Contributions to multi-employer plans (1) | $ | 2,295 | ||
| (1) | The plan information for both the Pensionskasse der Mitarbeiter der Hoechst-Gruppe VVaG and Pensionskasse der Wacker-Chemie GmbH VVaG plans is publicly available. The plans provide fixed, monthly retirement payments on the basis of the credits earned by the participating employees. To the extent that the plans are underfunded, future contributions to the plans may increase and may be used to fund retirement benefits for employees related to other employers. The Company does not consider either of its multi-employer plans individually significant. |
| 2014 | 2013 | |||||||
| U.S. Plans | U.S. Plans | |||||||
| Change in benefit obligation | ||||||||
| Benefit obligation, beginning of year | $ | 19,958 | $ | 21,383 | ||||
| Service cost | 22 | 30 | ||||||
| Interest cost | 733 | 623 | ||||||
| Actuarial loss (gain) | 989 | (501 | ) | |||||
| Benefits paid | (1,525 | ) | (1,577 | ) | ||||
| Benefit obligation, end of year | $ | 20,177 | $ | 19,958 | ||||
| Change in plan assets | ||||||||
| Fair value of plan assets, beginning of year | $ | — | $ | — | ||||
| Employer contribution | 1,525 | 1,577 | ||||||
| Benefits paid | (1,525 | ) | (1,577 | ) | ||||
| Fair value of plan assets, end of year | $ | — | $ | — | ||||
| Funded status, end of year | $ | (20,177 | ) | $ | (19,958 | ) | ||
| 2014 | 2013 | |||||||
| U.S. Plans | U.S. Plans | |||||||
| Amounts recognized in the consolidated balance sheet at December 31 | ||||||||
| Current liabilities | $ | (1,798 | ) | $ | (1,835 | ) | ||
| Noncurrent liabilities | (18,379 | ) | (18,123 | ) | ||||
| Net amount recognized | $ | (20,177 | ) | $ | (19,958 | ) | ||
| 2014 | 2013 | |||||||
| U.S. Plans | U.S. Plans | |||||||
| Amounts recognized in accumulated other comprehensive income | ||||||||
| Net loss | $ | 5,171 | $ | 4,484 | ||||
| Prior service cost | — | 50 | ||||||
Total before tax (1) | $ | 5,171 | $ | 4,534 | ||||
| (1) | After-tax totals for post-retirement healthcare benefits were $3,127 and $2,702 for 2014 and 2013, respectively, and are reflected in stockholders' equity as accumulated other comprehensive loss. |
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| U.S. Plans | U.S. Plans | U.S. Plans | ||||||||||
| Components of net periodic benefit cost | ||||||||||||
| Service cost | $ | 22 | $ | 30 | $ | 9 | ||||||
| Interest cost | 733 | 623 | 745 | |||||||||
| Net amortization | 353 | 457 | 269 | |||||||||
| Net periodic benefit cost | $ | 1,108 | $ | 1,110 | $ | 1,023 | ||||||
Other changes in plan assets and benefit obligation recognized in other comprehensive income (OCI) | ||||||||||||
| Net loss (gain) emerging | $ | 989 | $ | (501 | ) | $ | 2,021 | |||||
| Amortization of net loss | (303 | ) | (373 | ) | (185 | ) | ||||||
| Amortization of prior service cost | (50 | ) | (84 | ) | (84 | ) | ||||||
| Total recognized in OCI | $ | 636 | $ | (958 | ) | $ | 1,752 | |||||
| Total net periodic benefit cost and OCI | $ | 1,744 | $ | 152 | $ | 2,775 | ||||||
| 2014 | 2013 | 2012 | |||||||
| U.S. Plans | U.S. Plans | U.S. Plans | |||||||
Weighted average assumptions used to determine benefit obligations at December 31 | |||||||||
| Discount rate | 3.3 | % | 4.0 | % | 3.0 | % | |||
Weighted average assumptions used to determine net periodic benefit costs for years ended December 31 | |||||||||
| Discount rate | 4.0 | % | 3.0 | % | 4.0 | % | |||
Pension Benefits | Post- retirement Healthcare | |||||||
| Estimated future benefit payments: | ||||||||
| Year 1 | $ | 9,095 | $ | 1,798 | ||||
| Year 2 | 8,420 | 1,945 | ||||||
| Year 3 | 7,968 | 2,109 | ||||||
| Year 4 | 8,702 | 2,068 | ||||||
| Year 5 | 8,928 | 1,784 | ||||||
| Years 6 to 10 | 41,469 | 5,852 | ||||||
| Options | Weighted Average Exercise Price | Weighted Average Remaining Term (Years) | Aggregate Intrinsic Value | |||||||||||||
Outstanding at December 31, 2010 | 1,314,524 | $ | 20.81 | |||||||||||||
Granted | 99,380 | 45.83 | ||||||||||||||
Exercised | (274,872 | ) | 19.44 | |||||||||||||
Cancelled | (5,885 | ) | 34.41 | |||||||||||||
|
| |||||||||||||||
Outstanding at December 31, 2011 | 1,133,147 | $ | 23.26 | 6.5 | $ | 19,788 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Exercisable at December 31, 2011 | 503,830 | $ | 18.74 | 5.8 | $ | 10,835 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
| Options | Weighted Average Exercise Price | Weighted Average Remaining Term (Years) | Aggregate Intrinsic Value | ||||||||||
| Outstanding at December 31, 2013 | 1,317,230 | $ | 18.99 | ||||||||||
| Granted | 172,768 | 64.86 | |||||||||||
| Exercised | (257,588 | ) | 21.44 | ||||||||||
| Cancelled | (53,008 | ) | 25.19 | ||||||||||
| Outstanding at December 31, 2014 | 1,179,402 | $ | 24.89 | 5.4 | $ | 43,331 | |||||||
| Exercisable at December 31, 2014 | 703,110 | $ | 14.34 | 4.7 | $ | 32,867 | |||||||
Range of Prices | Options Outstanding | Weighted Average Remaining Contractual Life (Years) | ||||||
$14.24 – $19.29 | 505,268 | 6.2 | ||||||
$20.53 – $27.24 | 258,767 | 7.5 | ||||||
$30.07 – $45.83 | 369,112 | 6.2 | ||||||
| Range of Prices | Options Outstanding | Weighted Average Remaining Contractual Life (Years) | |||
| $7.12 - $9.65 | 304,200 | 3.7 | |||
| $10.26 - $18.05 | 384,466 | 3.5 | |||
| $22.92 - $30.05 | 211,360 | 6.7 | |||
| $40.38 - $45.70 | 110,609 | 8.1 | |||
| $63.98 - $68.18 | 168,767 | 9.3 | |||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
As of December 31, 2011, $2,9892014, $3,571 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 1.11.5 years. Income tax benefits of $2,160, $214$4,512, $2,224 and $155$7,009 were realized from the exercise of stock options during the years ended December 31, 2011, 20102014, 2013 and 2009,2012, respectively.
| Stock Option Grants | ||||||||||||
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Weighted average fair value | $ | 19.22 | $ | 8.31 | $ | 5.67 | ||||||
Risk-free interest rate | 2.8% | 2.9% | 2.8% | |||||||||
Expected life in years | 6 | 6 | 6 – 7 | |||||||||
Expected volatility | 41.9% | 41.8% | 42.5% | |||||||||
Expected dividend yield | 0.5% | 1.1% | 1.5% | |||||||||
| Stock Option Grants | ||||||||||||
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| Weighted average fair value | $ | 20.49 | $ | 17.03 | $ | 11.70 | ||||||
| Risk-free interest rate | 1.6 | % | 0.9 | % | 1.0 | % | ||||||
| Expected life in years | 5 | 5 | 5 | |||||||||
| Expected volatility | 35.7 | % | 44.5 | % | 45.7 | % | ||||||
| Expected dividend yield | 0.7 | % | 0.6 | % | 0.5 | % | ||||||
| Number of Shares | Weighted Average Grant Date Fair Value | |||||||
Non-vested at December 31, 2010 | 654,241 | $ | 19.97 | |||||
Granted | 78,828 | 45.03 | ||||||
Vested | (143,121 | ) | 19.64 | |||||
Forfeited | (7,935 | ) | 20.48 | |||||
|
| |||||||
Non-vested at December 31, 2011 | 582,013 | $ | 23.43 | |||||
|
|
|
| |||||
Number of Shares | Weighted Average Grant Date Fair Value | ||||||
| Non-vested at December 31, 2013 | 363,012 | $ | 23.74 | ||||
| Vested | (132,246 | ) | 23.17 | ||||
| Forfeited | (25,710 | ) | 20.38 | ||||
| Non-vested at December 31, 2014 | 205,056 | $ | 24.52 | ||||
Number of Units | Weighted Average Grant Date Fair Value | ||||||
| Non-vested at December 31, 2013 | 336,902 | $ | 51.39 | ||||
| Granted | 101,938 | 69.48 | |||||
| Vested | (4,145 | ) | 50.68 | ||||
| Forfeited | (12,695 | ) | 51.85 | ||||
| Non-vested at December 31, 2014 | 422,000 | $ | 55.75 | ||||
2014
.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued).
(in thousands of dollars, except share amounts and per share data)
Asset Derivatives | ||||||||||
Balance Sheet Location | Fair Value as of December 31, | |||||||||
| 2011 | 2010 | |||||||||
Not designated as hedging instruments | ||||||||||
Commodity forward contracts | Accounts receivable, net | $ | 2,437 | $ | 47 | |||||
|
|
|
| |||||||
Total asset derivatives | $ | 2,437 | $ | 47 | ||||||
|
|
|
| |||||||
Liability Derivatives | ||||||||||
Balance Sheet Location | Fair Value as of December 31, | |||||||||
| 2011 | 2010 | |||||||||
Designated as hedging instruments | ||||||||||
Commodity forward contracts | Accrued liabilities | $ | 3,262 | $ | — | |||||
Not designated as hedging instruments | ||||||||||
Commodity forward contracts | Accrued liabilities | 973 | 46 | |||||||
|
|
|
| |||||||
Total liability derivatives | $ | 4,235 | $ | 46 | ||||||
|
|
|
| |||||||
| Asset Derivatives | ||||||||||
| Balance Sheet Location | Fair Value as of December 31, | |||||||||
| 2014 | 2013 | |||||||||
| Not designated as hedging instruments | ||||||||||
| Commodity forward contracts | Accounts receivable, net | $ | 3,145 | $ | 296 | |||||
| Total asset derivatives | $ | 3,145 | $ | 296 | ||||||
| Liability Derivatives | ||||||||||
| Balance Sheet Location | Fair Value as of December 31, | |||||||||
| 2014 | 2013 | |||||||||
| Not designated as hedging instruments | ||||||||||
| Commodity forward contracts | Accrued liabilities | $ | 6,549 | $ | 176 | |||||
| Commodity forward contracts | Other liabilities | 3,559 | — | |||||||
| Total liability derivatives | $ | 10,108 | $ | 176 | ||||||
Derivatives in Fair Value Hedging Relationships | Location of Gain (Loss) Recognized in Income on Derivative | Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||||
| Commodity forward contracts | Cost of sales | $ | — | $ | (303 | ) | $ | 17,163 | ||||||
Hedged Items in Fair Value Hedging Relationships | Location of Gain (Loss) Recognized in Income on Hedged Items | Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||||
Firm commitment designated as the hedged item | Cost of sales | $ | — | $ | 143 | $ | (18,394 | ) | ||||||
Derivatives in Fair Value | Location of Gain (Loss) | Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||||
Commodity forward contracts | Cost of sales | $ | (4,895 | ) | $ | — | $ | — | ||||||
|
|
|
|
|
| |||||||||
Hedged Items in Fair Value | Location of Gain (Loss) | Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||||
Firm commitment designated as the hedged item | Cost of sales | $ | 5,092 | $ | — | $ | — | |||||||
|
|
|
|
|
| |||||||||
thousands of dollars, except share amounts and per share data)
Derivatives Not Designated as | Location of Gain (Loss) | Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||||
Commodity forward contracts | Cost of sales | $ | 2,043 | $ | 69 | $ | 5,347 | |||||||
|
|
|
|
|
| |||||||||
Derivatives Not Designated as Hedging Instruments | Location of Gain (Loss) Recognized in Income on Derivative | Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||||
| Commodity forward contracts | Gross profit | $ | (9,678 | ) | $ | 5,438 | $ | (11,626 | ) | |||||
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
11.
| 2011 | ||||||||||||
| Level 1 | Level 2 | Total | ||||||||||
Derivative instruments | ||||||||||||
Risk management assets | $ | 1,090 | $ | 1,347 | $ | 2,437 | ||||||
Risk management liabilities | — | (4,235 | ) | (4,235 | ) | |||||||
Firm commitments | ||||||||||||
Hedged portion of firm commitment | — | 3,262 | 3,262 | |||||||||
Marketable securities | ||||||||||||
Available-for-sale equity securities | 30,113 | — | 30,113 | |||||||||
| 2010 | ||||||||||||
| Level 1 | Level 2 | Total | ||||||||||
Derivative instruments | ||||||||||||
Risk management assets | $ | 47 | $ | — | $ | 47 | ||||||
Risk management liabilities | (46 | ) | — | (46 | ) | |||||||
| 2014 | ||||||||||||
| Level 1 | Level 2 | Total | ||||||||||
| Derivative instruments | ||||||||||||
| Risk management assets - Commodity forward contracts | $ | 3,143 | $ | 2 | $ | 3,145 | ||||||
| Risk management liabilities - Commodity forward contracts | — | (10,108 | ) | (10,108 | ) | |||||||
| Marketable securities | ||||||||||||
| Available-for-sale securities | 15,414 | — | 15,414 | |||||||||
| 2013 | ||||||||||||
| Level 1 | Level 2 | Total | ||||||||||
| Derivative instruments | ||||||||||||
| Risk management assets - Commodity forward contracts | $ | 48 | $ | 248 | $ | 296 | ||||||
| Risk management liabilities - Commodity forward contracts | — | (176 | ) | (176 | ) | |||||||
| Marketable securities | ||||||||||||
| Available-for-sale equity securities | 91,595 | 147,793 | 239,388 | |||||||||
See Note 16 for the measurement of certain assets at fair value on a nonrecurring basis.
| 2011 | 2010 | |||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
6 5/8% senior notes due 2016 | $ | 249,674 | $ | 254,890 | $ | 249,593 | $ | 258,438 | ||||||||
6 1/2% senior notes due 2029 | 100,000 | 108,834 | 100,000 | 99,875 | ||||||||||||
6 3/4% senior notes due 2032 | 250,000 | 263,988 | 250,000 | 251,925 | ||||||||||||
2035 GO Zone 6 1/2% Notes | 89,000 | 93,090 | 89,000 | 88,653 | ||||||||||||
2035 IKE Zone 6 1/2% Notes | 65,000 | 67,987 | 65,000 | 64,905 | ||||||||||||
Variable rate tax-exempt waste disposal revenue bonds due 2027 | 10,889 | 10,889 | 10,889 | 10,889 | ||||||||||||
in the table below. The Company's long-term debt instruments are publicly-traded. A market approach, based upon quotes from financial reporting services, is used to measure the fair value of the Company's long-term debt. Because the Company's long-term debt instruments may not be actively traded, the inputs used to measure the fair value of the Company's long-term debt are classified as Level 2 inputs within the fair value hierarchy.
12. Other
| 2014 | 2013 | |||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||
| 3.60% senior notes due 2022 | $ | 249,108 | $ | 248,630 | $ | 248,990 | $ | 236,905 | ||||||||
| 6 ½% senior notes due 2029 | 100,000 | 116,384 | 100,000 | 109,490 | ||||||||||||
| 6 ¾% senior notes due 2032 | 250,000 | 285,545 | 250,000 | 265,148 | ||||||||||||
| 6 ½% GO Zone Senior Notes Due 2035 | 89,000 | 106,504 | 89,000 | 94,606 | ||||||||||||
| 6 ½% IKE Zone Senior Notes Due 2035 | 65,000 | 77,784 | 65,000 | 69,094 | ||||||||||||
Loan related to tax-exempt waste disposal revenue bonds due 2027 | 10,889 | 10,889 | 10,889 | 10,889 | ||||||||||||
Other income, net consists of the following:
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Management services | $ | 400 | $ | 850 | $ | 823 | ||||||
Interest income | 2,865 | 1,510 | 1,382 | |||||||||
Franchise taxes | (893 | ) | (754 | ) | (585 | ) | ||||||
Equity in income of joint ventures | 2,890 | 2,212 | 3,818 | |||||||||
Other | 366 | 653 | 1,015 | |||||||||
|
|
|
|
|
| |||||||
| $ | 5,628 | $ | 4,471 | $ | 6,453 | |||||||
|
|
|
|
|
| |||||||
13. Income Taxes
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Domestic | $ | 404,422 | $ | 339,382 | $ | 72,079 | ||||||
Foreign | (2,990 | ) | 3,578 | 6,674 | ||||||||
|
|
|
|
|
| |||||||
| $ | 401,432 | $ | 342,960 | $ | 78,753 | |||||||
|
|
|
|
|
| |||||||
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| Domestic | $ | 1,102,101 | $ | 944,378 | $ | 586,631 | ||||||
| Foreign | (18,183 | ) | (2,206 | ) | (1,462 | ) | ||||||
| $ | 1,083,918 | $ | 942,172 | $ | 585,169 | |||||||
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Current | ||||||||||||
Federal | $ | 120,018 | $ | 97,822 | $ | (3,049 | ) | |||||
State | 8,729 | 8,128 | (2,306 | ) | ||||||||
Foreign | (395 | ) | 1,464 | (94 | ) | |||||||
|
|
|
|
|
| |||||||
| 128,352 | 107,414 | (5,449 | ) | |||||||||
|
|
|
|
|
| |||||||
Deferred | ||||||||||||
Federal | 6,732 | 7,083 | 29,824 | |||||||||
State | 7,682 | 6,829 | 660 | |||||||||
Foreign | (300 | ) | 241 | 723 | ||||||||
|
|
|
|
|
| |||||||
| 14,114 | 14,153 | 31,207 | ||||||||||
|
|
|
|
|
| |||||||
Total provision | $ | 142,466 | $ | 121,567 | $ | 25,758 | ||||||
|
|
|
|
|
| |||||||
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| Current | ||||||||||||
| Federal | $ | 300,610 | $ | 215,903 | $ | 190,917 | ||||||
| State | 37,351 | 22,249 | 15,327 | |||||||||
| Foreign | 1,974 | (137 | ) | (837 | ) | |||||||
| 339,935 | 238,015 | 205,407 | ||||||||||
| Deferred | ||||||||||||
| Federal | 40,950 | 94,471 | (5,398 | ) | ||||||||
| State | 22,714 | (556 | ) | (519 | ) | |||||||
| Foreign | (4,697 | ) | (183 | ) | 124 | |||||||
| 58,967 | 93,732 | (5,793 | ) | |||||||||
| Total provision | $ | 398,902 | $ | 331,747 | $ | 199,614 | ||||||
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| Provision for federal income tax, at statutory rate | $ | 379,371 | $ | 329,760 | $ | 204,809 | ||||||
| State income tax provision, net of federal income tax effect | 40,012 | 14,364 | 9,625 | |||||||||
| Foreign income tax rate differential | 3,640 | 519 | (201 | ) | ||||||||
| Manufacturing deduction | (24,465 | ) | (16,275 | ) | (14,560 | ) | ||||||
| Contingent tax liability | (1,626 | ) | (404 | ) | — | |||||||
| Noncontrolling interests | (2,255 | ) | — | — | ||||||||
| Other, net | 4,225 | 3,783 | (59 | ) | ||||||||
| $ | 398,902 | $ | 331,747 | $ | 199,614 | |||||||
A reconciliation of taxes computed at the statutory rate to the Company’s income tax expense is as follows:
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Provision for federal income tax at statutory rate | $ | 140,501 | $ | 120,036 | $ | 27,563 | ||||||
State income tax provision net of federal income tax effect | 10,745 | 9,372 | 462 | |||||||||
Foreign tax | (695 | ) | 1,705 | 629 | ||||||||
Foreign losses (earnings) | 1,047 | (1,252 | ) | (2,336 | ) | |||||||
Manufacturing deduction | (9,905 | ) | (8,750 | ) | — | |||||||
Contingent tax liability | (20 | ) | (411 | ) | (1,004 | ) | ||||||
Other, net | 793 | 867 | 444 | |||||||||
|
|
|
|
|
| |||||||
| $ | 142,466 | $ | 121,567 | $ | 25,758 | |||||||
|
|
|
|
|
| |||||||
| 2011 | 2010 | |||||||
Net operating loss carryforward | $ | 13,958 | $ | 15,018 | ||||
Credit carryforward | 769 | 1,729 | ||||||
Accruals | 29,002 | 24,693 | ||||||
Allowance for doubtful accounts | 1,329 | 878 | ||||||
Inventories | 7,321 | 6,893 | ||||||
Other | 5,900 | 6,119 | ||||||
|
|
|
| |||||
Deferred taxes assets—total | 58,279 | 55,330 | ||||||
|
|
|
| |||||
Property, plant and equipment | (344,535 | ) | (328,635 | ) | ||||
Turnaround costs | (11,073 | ) | (13,091 | ) | ||||
Other | (914 | ) | (795 | ) | ||||
|
|
|
| |||||
Deferred tax liabilities—total | (356,522 | ) | (342,521 | ) | ||||
|
|
|
| |||||
Valuation allowance | (12,937 | ) | (11,039 | ) | ||||
|
|
|
| |||||
Total net deferred tax liabilities | $ | (311,180 | ) | $ | (298,230 | ) | ||
|
|
|
| |||||
Balance sheet classifications | ||||||||
Current deferred tax asset | $ | 19,611 | $ | 17,288 | ||||
Deferred tax liability | (330,791 | ) | (315,518 | ) | ||||
|
|
|
| |||||
Total net deferred tax liabilities | $ | (311,180 | ) | $ | (298,230 | ) | ||
|
|
|
| |||||
| 2014 | 2013 | |||||||
| Net operating loss carryforward | $ | 18,200 | $ | 11,324 | ||||
| Credit carryforward | 694 | 708 | ||||||
| Accruals | 62,845 | 32,352 | ||||||
| Allowance for doubtful accounts | 1,998 | 2,068 | ||||||
| Inventories | 11,437 | 15,440 | ||||||
| Other | 7,660 | 6,666 | ||||||
| Deferred taxes assets—total | 102,834 | 68,558 | ||||||
| Property, plant and equipment | (398,683 | ) | (434,561 | ) | ||||
| Turnaround costs | (2,289 | ) | (26,002 | ) | ||||
| Basis difference—consolidated partnerships | (194,480 | ) | — | |||||
| Other | — | (478 | ) | |||||
| Deferred tax liabilities—total | (595,452 | ) | (461,041 | ) | ||||
| Valuation allowance | (11,011 | ) | (11,324 | ) | ||||
| Total net deferred tax liabilities | $ | (503,629 | ) | $ | (403,807 | ) | ||
| Balance sheet classifications | ||||||||
| Current deferred tax asset | $ | 32,437 | $ | 34,169 | ||||
| Noncurrent deferred tax liability | (536,066 | ) | (437,976 | ) | ||||
| Total net deferred tax liabilities | $ | (503,629 | ) | $ | (403,807 | ) | ||
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
Applicablerecord U.S. deferred income taxes and relatedon unremitted income from those foreign dividend withholding taxes have not been provided on approximately $13,223 of undistributed earnings and profitssources. As a result of the Company’s foreign corporate joint ventureacquisition of Vinnolit Holdings GmbH and foreign subsidiaries. Theits subsidiary companies and the formation and initial public offering of Westlake Partners, the Company considersno longer has such earnings to be permanently reinvested outside the United States. The typesintention. Therefore, as of events that would cause the earnings to be subject to
current applicable rules.
| 2011 | 2010 | 2009 | ||||||||||
Beginning balance | $ | 3,141 | $ | 4,873 | $ | 5,054 | ||||||
Additions based on tax position related to current year | — | — | 678 | |||||||||
(Reductions) additions for tax positions for prior years | — | (26 | ) | 711 | ||||||||
Reductions due to tax settlements | — | (1,389 | ) | — | ||||||||
Reductions due to statutes of limitations expiring | (19 | ) | (317 | ) | (1,570 | ) | ||||||
|
|
|
|
|
| |||||||
Ending balance | $ | 3,122 | $ | 3,141 | $ | 4,873 | ||||||
|
|
|
|
|
| |||||||
Management anticipates no material reductions to
| 2014 | 2013 | 2012 | ||||||||||
| Beginning balance | $ | 2,501 | $ | 3,122 | $ | 3,122 | ||||||
| Reductions due to statutes of limitations expiring | (2,501 | ) | (621 | ) | — | |||||||
| Ending balance | $ | — | $ | 2,501 | $ | 3,122 | ||||||
of $2,501 were recognized at
December 31, 2014. The effective tax rate impact is immaterial. The Company recognizes penalties and interest accrued related to unrecognized tax benefits in income tax expense.| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Net income | $ | 258,966 | $ | 221,393 | $ | 52,995 | ||||||
Less: | ||||||||||||
Net income attributable to participating securities | (2,310 | ) | (2,230 | ) | (475 | ) | ||||||
|
|
|
|
|
| |||||||
Net income attributable to common shareholders | $ | 256,656 | $ | 219,163 | $ | 52,520 | ||||||
|
|
|
|
|
| |||||||
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| Net income attributable to Westlake Chemical Corporation | $ | 678,523 | $ | 610,425 | $ | 385,555 | ||||||
| Less: | ||||||||||||
| Net income attributable to participating securities | (1,502 | ) | (2,562 | ) | (2,160 | ) | ||||||
| Net income attributable to common shareholders | $ | 677,021 | $ | 607,863 | $ | 383,395 | ||||||
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
Weighted average common shares—basic (1) | 133,111,230 | 133,224,256 | 132,578,858 | |||||||||
| Plus incremental shares from: | ||||||||||||
Assumed exercise of options (1) | 532,184 | 554,994 | 704,132 | |||||||||
Weighted average common shares—diluted (1) | 133,643,414 | 133,779,250 | 133,282,990 | |||||||||
Earnings per common share attributable to Westlake Chemical Corporation: (1) | ||||||||||||
| Basic | $ | 5.09 | $ | 4.57 | $ | 2.89 | ||||||
| Diluted | $ | 5.07 | $ | 4.55 | $ | 2.88 | ||||||
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Weighted average common shares—basic | 65,927,421 | 65,472,875 | 65,323,101 | |||||||||
Plus incremental shares from: | ||||||||||||
Assumed exercise of options | 372,737 | 203,789 | 98,289 | |||||||||
|
|
|
|
|
| |||||||
Weighted average common shares—diluted | 66,300,158 | 65,676,664 | 65,421,390 | |||||||||
|
|
|
|
|
| |||||||
Earnings per share: | ||||||||||||
Basic | $ | 3.89 | $ | 3.35 | $ | 0.80 | ||||||
Diluted | $ | 3.87 | $ | 3.34 | $ | 0.80 | ||||||
|
|
|
|
|
| |||||||
| (1) | Share amounts and per share data for the years ended December 31, 2013 and 2012 have been restated to reflect the effect of a two-for-one stock split on March 18, 2014. See Note 8 for additional information. |
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| Interest income | $ | 3,468 | $ | 3,086 | $ | 4,010 | ||||||
Foreign exchange currency losses, net (1) | (7,382 | ) | (1,375 | ) | (1,201 | ) | ||||||
| Income from equity method investments | 5,883 | 4,914 | 1,444 | |||||||||
| Impairment of equity method investment | (6,747 | ) | — | — | ||||||||
| Other | 2,057 | 165 | (733 | ) | ||||||||
| Other (expense) income, net | $ | (2,721 | ) | $ | 6,790 | $ | 3,520 | |||||
| (1) | Aggregate foreign exchange currency gains and losses included in the consolidated statements of operations for the years ended December 31, 2014, 2013 and 2012. |
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| Cash paid for: | ||||||||||||
| Interest paid, net of interest capitalized | $ | 35,336 | $ | 16,426 | $ | 42,266 | ||||||
| Income taxes paid | 314,745 | 251,599 | 179,882 | |||||||||
15.following:
| Year Ended December 31, | ||||||||
| 2014 | 2013 | |||||||
| Fair value of assets acquired | $ | 961,823 | $ | 188,930 | ||||
| Cash paid | (736,224 | ) | (178,309 | ) | ||||
| Liabilities assumed | $ | 225,599 | $ | 10,621 | ||||
Purchases from this affiliate were approximately $9,766 and $12,104 for the years ended December 31, 2014 and 2013, respectively. Additional transactions with this affiliate were not material to the consolidated financial statements.
In June 2011,One of our directors serves as Chairman and Chief Executive Officer of American Air Liquide Holdings, Inc. and as a resultSenior Vice President of excess capacity in the PVC pipe marketAir Liquide Group. The Company purchased oxygen, nitrogen and in an effort to reduce costsutilities and optimize operations,leased cylinders from various affiliates of American Air Liquide Holdings, Inc. aggregating approximately $13,862 and $16,407 for the years ended December 31, 2014 and 2013, respectively.
In October 2009, ascommon units in Westlake Partners. OpCo used the net proceeds from the purchase of its limited partner interest to establish a resultcash reserve of excess capacity dueapproximately $55,419 for turnaround expenditures, to reimburse approximately $151,729 for capital expenditures incurred by the Company with respect to certain of the assets contributed to OpCo and to repay intercompany debt to the weak construction marketCompany of approximately $78,940.
| Total proceeds from the initial public offering | $ | 310,500 | ||
| Less: Offering Costs | (24,412 | ) | ||
| Net proceeds from the initial public offering | 286,088 | |||
| Less: Cash retained by OpCo | (55,419 | ) | ||
| Net proceeds distributed to the Company from the initial public offering | $ | 230,669 | ||
Pro Forma Year Ended December 31, | ||||||||
| 2014 | 2013 | |||||||
| Net sales | $ | 5,152,806 | $ | 4,976,998 | ||||
| Net income | $ | 737,913 | $ | 666,202 | ||||
| Net income attributable to noncontrolling interests | 6,493 | — | ||||||
| Net income attributable to Westlake Chemical Corporation | $ | 731,420 | $ | 666,202 | ||||
| Earnings per common share attributable to Westlake Chemical Corporation: | ||||||||
| Basic | $ | 5.48 | $ | 4.98 | ||||
| Diluted | $ | 5.46 | $ | 4.96 | ||||
| Fair value of consideration transferred: | ||||
| Cash paid to Sellers | $ | 309,619 | ||
Cash deposited in escrow (1) | 13,390 | |||
Retirement of long-term debt as of July 31, 2014, on behalf of the Sellers (2) | 413,215 | |||
| Total purchase consideration | $ | 736,224 | ||
| Preliminary allocation of consideration transferred to net assets acquired: | ||||
| Cash | $ | 125,137 | ||
Working capital, excluding inventory and cash (3) | 15,373 | |||
Inventories (4) | 114,961 | |||
| Property, plant and equipment | 469,484 | |||
| Investments | 51,552 | |||
Other assets (5) | 76,828 | |||
| Intangible assets: | ||||
| Trademarks and trade name (weighted average life of 20 years) | 40,170 | |||
| Developed technologies (weighted average life of 20 years) | 31,600 | |||
| Other intangibles (weighted average life of 9.4 years) | 1,422 | |||
| Deferred income tax asset - current | 7,909 | |||
| Deferred income tax asset - non-current | 27,387 | |||
| Pension obligation | (117,970 | ) | ||
| Other long-term liabilities | (10,723 | ) | ||
Power purchase agreement liability (6) | (10,826 | ) | ||
| Deferred income tax liability - current | (6,845 | ) | ||
| Deferred income tax liability - non-current | (79,235 | ) | ||
| Total identifiable net assets | 736,224 | |||
Goodwill (7) | — | |||
| Consideration transferred | $ | 736,224 | ||
| (1) | None of the cash held in escrow is considered contingent consideration as it is expected to be released to the Sellers pending the Sellers' satisfaction of general representations and warranties made in connection with the execution of the purchase agreement. |
| (2) | Vinnolit's long-term debt paid on behalf of the Sellers was not legally assumed by Westlake in the acquisition and the retirement was a condition of the consummation of the purchase agreement. Therefore, the retirement has been included in the total purchase consideration. |
| (3) | The fair value of accounts receivable acquired is $181,890, with the gross contractual amount being $183,833. The Company expects $1,943 to be uncollectable. |
| (4) | An adjustment of approximately $16,900 was recorded to reflect Vinnolit's inventories at fair value and increased cost of sales by the same amount for the year ended December 31, 2014. |
| (5) | Included in other assets was a loan acquired that was repaid prior to December 31, 2014. |
| (6) | A liability arising from the unfavorable forward purchase contracts for the purchase of power was recognized at fair value. This liability will be amortized over a period of approximately three years, being the weighted-average life of the forward purchase contracts. |
| (7) | Management estimated that the fair value of the net assets acquired equals consideration paid. Therefore, no goodwill was recorded. |
17. Business Interruption Insurance Recoveries
During the first quarter of 2009, the Company’s Calvert City, Kentucky complex experienced an ice storm that caused a power failure at the facilitycomprising CertainTeed Corporation's Pipe and resulted in damage to a compressorFoundation Group ("PFG") business and accounted for the ethylene unit.asset acquisition as a business combination. The PFG acquisition includes the PVC
18.operations for the year ended December 31, 2013.
| Fair value of consideration transferred: | |||
| Cash | $ | 178,309 | |
| Allocation of consideration transferred to net assets acquired: | |||
Accounts receivable (1) | $ | 17,695 | |
| Inventories | 25,948 | ||
| Property, plant and equipment | 31,261 | ||
| Intangible assets: | |||
| Customer relationships (weighted average life of 15 years) | 57,600 | ||
| Trademarks | 5,200 | ||
| Developed technology (weighted average life of 15 years) | 18,900 | ||
| Other intangibles (weighted average life of two years) | 300 | ||
| Current liabilities | (10,595 | ) | |
| Other liabilities | (26 | ) | |
| Total identifiable net assets | 146,283 | ||
Goodwill (2) | 32,026 | ||
| Consideration transferred | $ | 178,309 | |
| (1) | The fair value of accounts receivable acquired is $17,695, with the gross contractual amount being $17,772. The Company expects $77 to be uncollectible. |
| (2) | The goodwill recognized is primarily attributable to synergies from the Company's vinyls integration strategy expected to arise from the Company's PFG acquisition, as well as intangible assets that do not qualify for separate recognition. The goodwill is expected to be deductible for income tax purposes. All of the goodwill is assigned to the Company's Vinyls segment. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
State Administrative Proceedings. There are several administrative proceedings in Kentucky involving the Company, Goodrich and PolyOne related to the same manufacturing complexsite in Calvert City. In 2003, the Kentucky Environmental and Public Protection Cabinet (the “Cabinet”"Cabinet") re-issued Goodrich’sGoodrich's Resource Conservation and Recovery Act (“RCRA”("RCRA") permit which requires Goodrich to remediate contamination at the Calvert City manufacturing complex.site. Both Goodrich and PolyOne challenged various terms of the permit in an attempt to shift Goodrich’sGoodrich's clean-up obligations under the permit to the Company. The Company intervened in the proceedings. The Cabinet has suspended all corrective action under the RCRA permit in deference to a remedial investigation and feasibility study (“RIFS”("RIFS") being conducted, under the auspices of the U.S. Environmental Protection Agency ("EPA"), pursuant to an Administrative Settlement Agreement (“AOC”("AOC"), which became effective on December 9, 2009. See “Change in Regulatory Regime”"Federal Administrative Proceedings" below. The proceedings have been postponed. Periodic status conferences will be held to evaluate whether additional proceedings will be required. On September 19, 2011, the Company filed a motion to dismiss the remaining proceedings, which was denied on December 29, 2011.
remedial investigation report.
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands of dollars, except share amounts and per share data)
EPA regarding these demands. The EPA has indicated that it is seeking a consent decree that would obligate the Company to take corrective actions relating to the alleged noncompliance. The Company has recorded an accrual for a probable loss related to monetary penalties. Although the ultimate amountnot agreed that any flares are out of liability is not ascertainable, the Company believescompliance or that the resolution of this matter will not have a material adverse effectany corrective actions are warranted. Depending on the Company’s financial condition, resultsoutcome of operations or cash flows.
the Company's negotiations with the EPA, additional controls on emissions from its flares may be required and these could result in increased capital and operating costs.
2012 | $ | 19,175 | ||
2013 | 18,818 | |||
2014 | 14,167 | |||
2015 | 10,522 | |||
2016 | 9,354 | |||
Thereafter | 30,119 | |||
|
| |||
| $ | 102,155 | |||
|
|
Rental
Operating Leases | Capital Leases | |||||||
| 2015 | $ | 39,184 | $ | 273 | ||||
| 2016 | 37,909 | 273 | ||||||
| 2017 | 35,570 | 273 | ||||||
| 2018 | 28,547 | 273 | ||||||
| 2019 | 24,055 | 273 | ||||||
| Thereafter | 580,554 | 1,140 | ||||||
| Total minimum lease payments | $ | 745,819 | $ | 2,505 | ||||
| Less: Imputed interest costs | (711 | ) | ||||||
| Present value of net minimum lease payments | $ | 1,794 | ||||||
19.2015, 2016, 2017, 2018 and 2019, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued).
The Company’sCompany's Vinyls segment manufactures and markets PVC, VCM, EDC, chlorine, caustic soda and ethylene. The Company also manufactures and sells products fabricated from PVC that the Company produces, including pipe, fittings, profiles, foundation building products, window and door profilescomponents and fence.fence and deck components. The Company’sCompany's main North American chemical manufacturing complex isfacilities are located in Calvert City. It includes an ethylene plant, a chlor-alkali plant, a VCM plantCity and a PVC plant.Geismar, Louisiana. The Company also operates a PVChas five manufacturing sites in Germany and VCMone manufacturing facilitysite in Geismar, Louisiana. In addition,the United Kingdom. Further, the Company owns a 59% interest in a PVC joint venture in China.
Subsequent to December 31, 2014, the Company entered into an agreement to acquire an additional 35.7% interest in this joint venture. See Note 22 for additional information.
2014
, 2013 or 2012.| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Net external sales | ||||||||||||
Olefins | ||||||||||||
Polyethylene | $ | 1,772,144 | $ | 1,656,203 | $ | 1,210,706 | ||||||
Ethylene, styrene and other | 795,698 | 605,009 | 400,745 | |||||||||
|
|
|
|
|
| |||||||
Total olefins | 2,567,842 | 2,261,212 | 1,611,451 | |||||||||
|
|
|
|
|
| |||||||
Vinyls | ||||||||||||
PVC, caustic soda and other | 757,314 | 558,156 | 398,825 | |||||||||
Building products | 294,692 | 352,419 | 315,447 | |||||||||
|
|
|
|
|
| |||||||
Total vinyls | 1,052,006 | 910,575 | 714,272 | |||||||||
|
|
|
|
|
| |||||||
| $ | 3,619,848 | $ | 3,171,787 | $ | 2,325,723 | |||||||
|
|
|
|
|
| |||||||
Intersegment sales | ||||||||||||
Olefins | $ | 444,889 | $ | 322,125 | $ | 233,746 | ||||||
Vinyls | 1,474 | 1,047 | 1,222 | |||||||||
|
|
|
|
|
| |||||||
| $ | 446,363 | $ | 323,172 | $ | 234,968 | |||||||
|
|
|
|
|
| |||||||
Income (loss) from operations | ||||||||||||
Olefins | $ | 459,266 | $ | 460,027 | $ | 177,101 | ||||||
Vinyls | 4,012 | (62,429 | ) | (57,445 | ) | |||||||
Corporate and other | (16,482 | ) | (19,234 | ) | (12,399 | ) | ||||||
|
|
|
|
|
| |||||||
| $ | 446,796 | $ | 378,364 | $ | 107,257 | |||||||
|
|
|
|
|
| |||||||
Depreciation and amortization | ||||||||||||
Olefins | $ | 86,915 | $ | 86,086 | $ | 82,952 | ||||||
Vinyls | 43,877 | 42,062 | 39,843 | |||||||||
Corporate and other | 605 | 584 | 404 | |||||||||
|
|
|
|
|
| |||||||
| $ | 131,397 | $ | 128,732 | $ | 123,199 | |||||||
|
|
|
|
|
| |||||||
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Other income, net | ||||||||||||
Olefins | $ | 2,813 | $ | 440 | $ | 440 | ||||||
Vinyls | 194 | 399 | 478 | |||||||||
Corporate and other | 2,621 | 3,632 | 5,535 | |||||||||
|
|
|
|
|
| |||||||
| $ | 5,628 | $ | 4,471 | $ | 6,453 | |||||||
|
|
|
|
|
| |||||||
Provision for (benefit from) income taxes | ||||||||||||
Olefins | $ | 149,033 | $ | 147,296 | $ | 44,987 | ||||||
Vinyls | (2,193 | ) | (24,519 | ) | (31,287 | ) | ||||||
Corporate and other | (4,374 | ) | (1,210 | ) | 12,058 | |||||||
|
|
|
|
|
| |||||||
| $ | 142,466 | $ | 121,567 | $ | 25,758 | |||||||
|
|
|
|
|
| |||||||
Capital expenditures | ||||||||||||
Olefins | $ | 90,641 | $ | 37,865 | $ | 40,251 | ||||||
Vinyls | 84,192 | 42,371 | 58,186 | |||||||||
Corporate and other | 2,010 | 1,033 | 1,332 | |||||||||
|
|
|
|
|
| |||||||
| $ | 176,843 | $ | 81,269 | $ | 99,769 | |||||||
|
|
|
|
|
| |||||||
| December 31, 2011 | December 31, 2010 | |||||||
Total assets | ||||||||
Olefins | $ | 1,441,752 | $ | 1,351,088 | ||||
Vinyls | 824,825 | 767,875 | ||||||
Corporate and other | 1,000,244 | 835,181 | ||||||
|
|
|
| |||||
| $ | 3,266,821 | $ | 2,954,144 | |||||
|
|
|
| |||||
In the first quarter
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| Net external sales | ||||||||||||
| Olefins | ||||||||||||
| Polyethylene | $ | 1,922,535 | $ | 1,750,292 | $ | 1,658,551 | ||||||
| Styrene, feedstock and other | 801,155 | 803,377 | 841,427 | |||||||||
| Total olefins | 2,723,690 | 2,553,669 | 2,499,978 | |||||||||
| Vinyls | ||||||||||||
| PVC, caustic soda and other | 1,203,332 | 800,658 | 743,275 | |||||||||
| Building products | 488,328 | 405,157 | 327,788 | |||||||||
| Total vinyls | 1,691,660 | 1,205,815 | 1,071,063 | |||||||||
| $ | 4,415,350 | $ | 3,759,484 | $ | 3,571,041 | |||||||
| Intersegment sales | ||||||||||||
| Olefins | $ | 146,539 | $ | 320,909 | $ | 318,322 | ||||||
| Vinyls | 1,385 | 1,502 | 1,603 | |||||||||
| $ | 147,924 | $ | 322,411 | $ | 319,925 | |||||||
| Income (loss) from operations | ||||||||||||
| Olefins | $ | 1,013,825 | $ | 833,249 | $ | 552,762 | ||||||
| Vinyls | 142,740 | 154,684 | 85,942 | |||||||||
| Corporate and other | (32,574 | ) | (34,469 | ) | (23,353 | ) | ||||||
| $ | 1,123,991 | $ | 953,464 | $ | 615,351 | |||||||
| Depreciation and amortization | ||||||||||||
| Olefins | $ | 106,244 | $ | 102,938 | $ | 97,906 | ||||||
| Vinyls | 101,666 | 54,371 | 46,146 | |||||||||
| Corporate and other | 576 | 499 | 489 | |||||||||
| $ | 208,486 | $ | 157,808 | $ | 144,541 | |||||||
| Other income (expense), net | ||||||||||||
| Olefins | $ | 6,102 | $ | 7,410 | $ | 3,899 | ||||||
| Vinyls | 2,680 | (1,858 | ) | (965 | ) | |||||||
| Corporate and other | (11,503 | ) | 1,238 | 586 | ||||||||
| $ | (2,721 | ) | $ | 6,790 | $ | 3,520 | ||||||
| Provision for (benefit from) income taxes | ||||||||||||
| Olefins | $ | 354,159 | $ | 288,214 | $ | 177,176 | ||||||
| Vinyls | 52,249 | 48,296 | 22,389 | |||||||||
| Corporate and other | (7,506 | ) | (4,763 | ) | 49 | |||||||
| $ | 398,902 | $ | 331,747 | $ | 199,614 | |||||||
| Capital expenditures | ||||||||||||
| Olefins | $ | 188,729 | $ | 145,542 | $ | 135,886 | ||||||
| Vinyls | 237,992 | 531,939 | 246,827 | |||||||||
| Corporate and other | 4,383 | 1,741 | 4,169 | |||||||||
| $ | 431,104 | $ | 679,222 | $ | 386,882 | |||||||
| December 31, 2014 | December 31, 2013 | |||||||
| Total assets | ||||||||
| Olefins | $ | 1,785,895 | $ | 1,557,510 | ||||
| Vinyls | 2,618,646 | 1,740,595 | ||||||
| Corporate and other | 809,449 | 762,804 | ||||||
| $ | 5,213,990 | $ | 4,060,909 | |||||
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Income from operations for reportable segments | $ | 446,796 | $ | 378,364 | $ | 107,257 | ||||||
Interest expense | (50,992 | ) | (39,875 | ) | (34,957 | ) | ||||||
Other income, net | 5,628 | 4,471 | 6,453 | |||||||||
|
|
|
|
|
| |||||||
Income before income taxes | $ | 401,432 | $ | 342,960 | $ | 78,753 | ||||||
|
|
|
|
|
| |||||||
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| Income from operations for reportable segments | $ | 1,123,991 | $ | 953,464 | $ | 615,351 | ||||||
| Interest expense | (37,352 | ) | (18,082 | ) | (43,049 | ) | ||||||
| Debt retirement costs | — | — | (7,082 | ) | ||||||||
| Gain from sales of equity securities | — | — | 16,429 | |||||||||
| Other (expense) income, net | (2,721 | ) | 6,790 | 3,520 | ||||||||
| Income before income taxes | $ | 1,083,918 | $ | 942,172 | $ | 585,169 | ||||||
| Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
Sales to external customers (1) | ||||||||||||
| United States | $ | 3,596,091 | $ | 3,404,378 | $ | 3,176,202 | ||||||
| Foreign | ||||||||||||
| Canada | 217,567 | 214,162 | 294,643 | |||||||||
| Germany | 198,921 | 3,942 | 2,392 | |||||||||
| Switzerland | 89,214 | 54,637 | 32,927 | |||||||||
| Other | 313,557 | 82,365 | 64,877 | |||||||||
| $ | 4,415,350 | $ | 3,759,484 | $ | 3,571,041 | |||||||
| December 31, 2014 | December 31, 2013 | |||||||
| Long-lived assets | ||||||||
| United States | $ | 2,319,572 | $ | 2,081,091 | ||||
| Foreign | ||||||||
| Germany | 417,702 | — | ||||||
| Other | 20,283 | 6,923 | ||||||
| $ | 2,757,557 | $ | 2,088,014 | |||||
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Sales to external customers(1) | ||||||||||||
United States | $ | 3,221,562 | $ | 2,832,980 | $ | 2,088,344 | ||||||
Foreign | ||||||||||||
Canada | 247,357 | 214,662 | 154,972 | |||||||||
Singapore | 29,210 | 32,733 | 27,300 | |||||||||
Other | 121,719 | 91,412 | 55,107 | |||||||||
|
|
|
|
|
| |||||||
| $ | 3,619,848 | $ | 3,171,787 | $ | 2,325,723 | |||||||
|
|
|
|
|
| |||||||
| December 31, 2011 | December 31, 2010 | |||||||
Long-lived assets | ||||||||
United States | $ | 1,223,073 | $ | 1,159,051 | ||||
Foreign | 8,993 | 11,283 | ||||||
|
|
|
| |||||
| $ | 1,232,066 | $ | 1,170,334 | |||||
|
|
|
| |||||
| (1) | Revenues are attributed to countries based on location of customer. |
Balance Sheet Current assets Cash and cash equivalents Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes Total current assets Property, plant and equipment, net Equity investments Restricted cash Other assets, net Total assets Current liabilities Accounts payable Accrued liabilities Total current liabilities Long-term debt Deferred income taxes Other liabilities Stockholders’ equity Total liabilities and stockholders’ equity Balance Sheet Current assets Cash and cash equivalents Accounts receivable, net Inventories Prepaid expenses and other current assets Deferred income taxes Total current assets Property, plant and equipment, net Equity investments Restricted cash Other assets, net Total assets Current liabilities Accounts payable Accrued liabilities Total current liabilities Long-term debt Deferred income taxes Other liabilities Stockholders’ equity Total liabilities and stockholders’ equity Statement of Operations Net sales Cost of sales Gross profit Selling, general and administrative expenses (Loss) income from operations Interest expense Other income (expense), net (Loss) income before income taxes (Benefit from) provision for income taxes Equity in net income of subsidiaries Net income (loss) Statement of Operations Net sales Cost of sales Gross profit Selling, general and administrative expenses (Loss) income from operations Interest expense Other income (expense), net (Loss) income before income taxes (Benefit from) provision for income taxes Equity in net income of subsidiaries Net income Statement of Operations Net sales Cost of sales Gross profit Selling, general and administrative expenses (Loss) income from operations Interest expense Other income (expense), net (Loss) income before income taxes (Benefit from) provision for income taxes Equity in net income of subsidiaries Net income Statement of Cash Flows Cash flows from operating activities Net income (loss) Adjustments to reconcile net income (loss) to net cash (used for) provided by operating activities Depreciation and amortization Deferred income taxes Net changes in working capital and other Net cash (used for) provided by operating activities Cash flows from investing activities Additions to property, plant and equipment Proceeds from disposition of assets Proceeds from repayment of loan to affiliate Purchase of securities and other investments Settlements of derivative instruments Net cash (used for) provided by investing activities Cash flows from financing activities Intercompany financing Capitalized debt issuance costs Dividends paid Proceeds from exercise of stock options Repurchase of common stock for treasury Utilization of restricted cash Net cash provided by (used for) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year Statement of Cash Flows Cash flows from operating activities Net income Adjustments to reconcile net income to net cash (used for) provided by operating activities Depreciation and amortization Deferred income taxes Net changes in working capital and other Net cash (used for) provided by operating activities Cash flows from investing activities Additions to equity investments Additions to property, plant and equipment Proceeds from disposition of assets Proceeds from repayment of loan to affiliate Settlements of derivative instruments Net cash used for investing activities Cash flows from financing activities Intercompany financing Capitalized debt issuance costs Dividends paid Proceeds from exercise of stock options Utilization of restricted cash Net cash provided by (used for) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year Statement of Cash Flows Cash flows from operating activities Net income Adjustments to reconcile net income to net cash (used for) provided by operating activities Depreciation and amortization Deferred income taxes Net changes in working capital and other Net cash (used for) provided by operating activities Cash flows from investing activities Acquisition of business Additions to property, plant and equipment Proceeds from disposition of assets Proceeds from insurance for involuntary conversion of assets Settlements of derivative instruments Net cash used for investing activities Cash flows from financing activities Intercompany financing Capitalized debt issuance costs Dividends paid Proceeds from exercise of stock options Utilization of restricted cash Net cash provided by (used for) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year Net sales Gross profit Income from operations Net income Basic earnings per common share(1) Diluted earnings per common share(1) Net sales Gross profit Income from operations Net income Basic earnings per common share(1) Diluted earnings per common share(1) The information required by Items 10, 11, 12, 13 and 14 is incorporated by reference to the Proxy Statement, which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act within 120 days of December 31, 2014. Accounts Receivable Allowance for Doubtful Accounts 2011 2010 200920.21.Company’sCompany's payment obligations under the Company’s 6 5/8%3.60% senior notes due 2016 is2022 are fully and unconditionally guaranteed by each of its current and future domestic restricted subsidiaries that guarantee other debt of the Company or of another guarantor of the 3.60% senior notes due 2022 in excess of $5,000 (the “Guarantor Subsidiaries”"Guarantor Subsidiaries"). EachExcept for OpCo, which is less than 100% owned, each Guarantor Subsidiary is 100% owned by Westlake Chemical Corporation.Corporation (the "100% Owned Guarantor Subsidiaries"). See Note 18 regarding Westlake Partners' 10.6% limited partnership interest in OpCo. The initial public offering of Westlake Partners resulted in OpCo ceasing to be a 100% owned subsidiary of the Company. OpCo has been presented as a less than 100% owned guarantor subsidiary in each of the tables below, including for periods prior to the initial public offering of Westlake Partners. These guarantees are the joint and several obligations of the Guarantor Subsidiaries. The following unaudited condensed consolidating financial information presents the financial condition, results of operations and cash flows of Westlake Chemical Corporation, the 100% owned Guarantor Subsidiaries, OpCo and the remaining subsidiaries that do not guarantee the 3.60% senior notes due 2022 (the “Non-Guarantor Subsidiaries”"Non-Guarantor Subsidiaries"), together with consolidating adjustmentseliminations necessary to present the Company’sCompany's results on a consolidated basis.20112014 Westlake
Chemical
Corporation Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated $ 803,320 $ 2,517 $ 20,064 $ — $ 825,901 — 1,384,705 949 (978,282 ) 407,372 — 478,229 12,548 — 490,777 363 10,332 1,800 — 12,495 430 19,049 132 — 19,611 804,113 1,894,832 35,493 (978,282 ) 1,756,156 — 1,223,073 8,993 — 1,232,066 2,597,598 53,912 35,650 (2,640,419 ) 46,741 96,283 — — — 96,283 17,650 132,968 2,467 (17,510 ) 135,575 $ 3,515,644 $ 3,304,785 $ 82,603 $ (3,636,211 ) $ 3,266,821 $ 1,005,529 $ 210,476 $ 3,748 $ (992,719 ) $ 227,034 76 120,656 2,392 14,437 137,561 1,005,605 331,132 6,140 (978,282 ) 364,595 753,674 10,889 11,500 (11,500 ) 764,563 — 336,165 636 (6,010 ) 330,791 53 50,458 49 — 50,560 1,756,312 2,576,141 64,278 (2,640,419 ) 1,756,312 $ 3,515,644 $ 3,304,785 $ 82,603 $ (3,636,211 ) $ 3,266,821 Eliminations Consolidated Balance Sheet Current assets Cash and cash equivalents $ 655,947 $ 3,057 $ 131,545 $ 90,052 $ — $ 880,601 Accounts receivable, net 8,451 1,454,709 56,049 135,133 (1,093,676 ) 560,666 Inventories — 414,975 6,634 104,167 — 525,776 Prepaid expenses and other current assets 172 9,485 212 1,938 — 11,807 Deferred income taxes 409 29,832 — 2,196 — 32,437 Total current assets 664,979 1,912,058 194,440 333,486 (1,093,676 ) 2,011,287 Property, plant and equipment, net — 1,477,515 842,057 437,985 — 2,757,557 Equity investments 4,033,378 1,237,080 — 352,550 (5,561,703 ) 61,305 Other assets, net 30,543 387,325 57,733 141,948 (233,708 ) 383,841 Total assets $ 4,728,900 $ 5,013,978 $ 1,094,230 $ 1,265,969 $ (6,889,087 ) $ 5,213,990 Current liabilities Accounts payable $ 1,055,527 $ 160,834 $ 17,680 $ 95,856 $ (1,068,835 ) $ 261,062 Accrued liabilities 8,754 203,608 11,225 77,372 (24,841 ) 276,118 Total current liabilities 1,064,281 364,442 28,905 173,228 (1,093,676 ) 537,180 Long-term debt 753,108 10,889 227,638 — (227,638 ) 763,997 Deferred income taxes — 497,919 1,848 42,369 (6,070 ) 536,066 Other liabilities — 43,452 — 131,407 — 174,859 Total liabilities 1,817,389 916,702 258,391 347,004 (1,327,384 ) 2,012,102 Total Westlake Chemical Corporation stockholders' equity 2,911,511 4,097,276 835,839 628,588 (5,561,703 ) 2,911,511 Noncontrolling interests — — — 290,377 — 290,377 Total equity 2,911,511 4,097,276 835,839 918,965 (5,561,703 ) 3,201,888 Total liabilities and equity $ 4,728,900 $ 5,013,978 $ 1,094,230 $ 1,265,969 $ (6,889,087 ) $ 5,213,990 20102013 Westlake
Chemical
Corporation Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated $ 611,158 $ 53 $ 19,088 $ — $ 630,299 128,628 1,302,314 2,086 (1,070,165 ) 362,863 — 437,130 12,898 — 450,028 162 13,763 1,557 — 15,482 357 16,771 160 — 17,288 740,305 1,770,031 35,789 (1,070,165 ) 1,475,960 — 1,159,051 11,283 — 1,170,334 2,320,094 53,274 35,588 (2,362,642 ) 46,314 150,288 — — — 150,288 16,897 108,352 3,769 (17,770 ) 111,248 $ 3,227,584 $ 3,090,708 $ 86,429 $ (3,450,577 ) $ 2,954,144 $ 952,000 $ 189,852 $ 4,541 $ (941,619 ) $ 204,774 16,868 228,364 2,121 (128,549 ) 118,804 968,868 418,216 6,662 (1,070,168 ) 323,578 753,593 10,889 11,500 (11,500 ) 764,482 — 320,813 972 (6,267 ) 315,518 53 45,435 8 — 45,496 1,505,070 2,295,355 67,287 (2,362,642 ) 1,505,070 $ 3,227,584 $ 3,090,708 $ 86,429 $ (3,450,577 ) $ 2,954,144 Eliminations Consolidated Balance Sheet Current assets Cash and cash equivalents $ 420,948 $ 6,227 $ — $ 34,126 $ — $ 461,301 Marketable securities 239,388 — — — — 239,388 Accounts receivable, net 3,879 666,344 71,812 2,755 (316,333 ) 428,457 Inventories — 339,929 116,377 15,573 — 471,879 Prepaid expenses and other current assets 778 11,055 257 1,798 — 13,888 Deferred income taxes 441 28,974 4,448 306 — 34,169 Total current assets 665,434 1,052,529 192,894 54,558 (316,333 ) 1,649,082 Property, plant and equipment, net — 1,318,119 762,972 6,923 — 2,088,014 Equity investments 2,815,752 636,461 10,411 31,518 (3,427,267 ) 66,875 Other assets, net 15,393 423,901 75,197 1,199 (258,752 ) 256,938 Total assets $ 3,496,579 $ 3,431,010 $ 1,041,474 $ 94,198 $ (4,002,352 ) $ 4,060,909 Current liabilities Accounts payable $ 316,652 $ 100,570 $ 122,564 $ 10,649 $ (300,822 ) $ 249,613 Accrued liabilities 8,334 134,452 26,688 1,282 (15,511 ) 155,245 Total current liabilities 324,986 235,022 149,252 11,931 (316,333 ) 404,858 Long-term debt 752,990 10,889 252,973 — (252,973 ) 763,879 Deferred income taxes — 260,171 182,855 729 (5,779 ) 437,976 Other liabilities — 34,571 962 60 — 35,593 Total equity 2,418,603 2,890,357 455,432 81,478 (3,427,267 ) 2,418,603 Total liabilities and equity $ 3,496,579 $ 3,431,010 $ 1,041,474 $ 94,198 $ (4,002,352 ) $ 4,060,909 20112014 Westlake
Chemical
Corporation Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated $ — $ 3,581,470 $ 42,202 $ (3,824 ) $ 3,619,848 — 3,024,419 40,247 (3,824 ) 3,060,842 — 557,051 1,955 — 559,006 3,762 102,989 5,459 — 112,210 (3,762 ) 454,062 (3,504 ) — 446,796 (50,919 ) (73 ) — — (50,992 ) 10,217 (4,212 ) (377 ) — 5,628 (44,464 ) 449,777 (3,881 ) — 401,432 (11,835 ) 155,313 (1,012 ) — 142,466 291,595 — — (291,595 ) — $ 258,966 $ 294,464 $ (2,869 ) $ (291,595 ) $ 258,966 Condensed Consolidating Financial Information for the Year Ended December 31, 2010 Westlake
Chemical
Corporation Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated $ — $ 3,130,513 $ 44,006 $ (2,732 ) $ 3,171,787 — 2,653,234 38,602 (2,732 ) 2,689,104 — 477,279 5,404 — 482,683 4,257 95,441 4,621 — 104,319 (4,257 ) 381,838 783 — 378,364 (39,829 ) (46 ) — — (39,875 ) 15,045 (12,715 ) 2,141 — 4,471 (29,041 ) 369,077 2,924 — 342,960 (2,471 ) 122,541 1,497 — 121,567 247,963 — — (247,963 ) — $ 221,393 $ 246,536 $ 1,427 $ (247,963 ) $ 221,393 Eliminations Consolidated Statement of Operations Net sales $ — $ 3,727,361 $ 1,749,700 $ 475,401 $ (1,537,112 ) $ 4,415,350 Cost of sales — 3,162,246 1,003,888 447,676 (1,515,810 ) 3,098,000 Gross profit — 565,115 745,812 27,725 (21,302 ) 1,317,350 Selling, general and administrative expenses 2,082 144,987 26,870 40,722 (21,302 ) 193,359 (Loss) income from operations (2,082 ) 420,128 718,942 (12,997 ) — 1,123,991 Interest expense (39,763 ) (10 ) (10,499 ) (492 ) 13,412 (37,352 ) Other income (expense), net 21,001 (4,921 ) 3,151 (8,540 ) (13,412 ) (2,721 ) (Loss) income before income taxes (20,844 ) 415,197 711,594 (22,029 ) — 1,083,918 Provision for (benefit from) income taxes 248 202,501 199,388 (3,235 ) — 398,902 Equity in net income of subsidiaries 699,615 496,244 — 15,962 (1,211,821 ) — Net income (loss) 678,523 708,940 512,206 (2,832 ) (1,211,821 ) 685,016 Net income attributable to noncontrolling interests — — — 6,493 — 6,493 Net income (loss) attributable to Westlake Chemical Corporation $ 678,523 $ 708,940 $ 512,206 $ (9,325 ) $ (1,211,821 ) $ 678,523 $ 601,706 $ 703,148 $ 512,206 $ (80,407 ) $ (1,134,947 ) $ 601,706 20092013 Westlake
Chemical
Corporation Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated $ — $ 2,289,953 $ 38,980 $ (3,210 ) $ 2,325,723 — 2,099,795 34,010 (3,210 ) 2,130,595 — 190,158 4,970 — 195,128 4,185 80,213 3,473 — 87,871 (4,185 ) 109,945 1,497 — 107,257 (34,864 ) (93 ) — — (34,957 ) 14,843 (12,981 ) 4,591 — 6,453 (24,206 ) 96,871 6,088 — 78,753 (6,314 ) 31,620 452 — 25,758 70,887 — — (70,887 ) — $ 52,995 $ 65,251 $ 5,636 $ (70,887 ) $ 52,995 Eliminations Consolidated Statement of Operations Net sales $ — $ 3,195,406 $ 2,127,747 $ 48,016 $ (1,611,685 ) $ 3,759,484 Cost of sales — 2,971,258 1,255,140 43,333 (1,611,685 ) 2,658,046 Gross profit — 224,148 872,607 4,683 — 1,101,438 Selling, general and administrative expenses 2,128 114,211 25,451 6,184 — 147,974 (Loss) income from operations (2,128 ) 109,937 847,156 (1,501 ) — 953,464 Interest expense (18,030 ) (52 ) (8,032 ) — 8,032 (18,082 ) Other income (expense), net 11,798 (2,438 ) 7,701 (2,239 ) (8,032 ) 6,790 (Loss) income before income taxes (8,360 ) 107,447 846,825 (3,740 ) — 942,172 (Benefit from) provision for income taxes (2,031 ) 34,340 300,279 (841 ) — 331,747 Equity in net income of subsidiaries 616,754 546,546 — — (1,163,300 ) — Net income (loss) attributable to Westlake Chemical Corporation $ 610,425 $ 619,653 $ 546,546 $ (2,899 ) $ (1,163,300 ) $ 610,425 $ 618,649 $ 629,308 $ 546,546 $ (4,506 ) $ (1,171,348 ) $ 618,649 20112012 Westlake
Chemical
Corporation Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated $ 258,966 $ 294,464 $ (2,869 ) $ (291,595 ) $ 258,966 1,683 127,807 3,590 — 133,080 190 14,225 (301 ) — 14,114 (291,666 ) (45,667 ) 1,874 291,595 (43,864 ) (30,827 ) 390,829 2,294 — 362,296 — (175,706 ) (1,137 ) — (176,843 ) — 2,877 3 — 2,880 — — 1,192 — 1,192 — (30,265 ) — — (30,265 ) — 251 — — 251 — (202,843 ) 58 — (202,785 ) 186,898 (185,522 ) (1,376 ) — — (2,697 ) — — — (2,697 ) (18,265 ) — — — (18,265 ) 5,344 — — — 5,344 (2,518 ) — — — (2,518 ) 54,227 — — — 54,227 222,989 (185,522 ) (1,376 ) — 36,091 192,162 2,464 976 — 195,602 611,158 53 19,088 — 630,299 $ 803,320 $ 2,517 $ 20,064 $ — $ 825,901 Eliminations Consolidated Statement of Operations Net sales $ — $ 2,788,088 $ 2,249,098 $ 48,205 $ (1,514,350 ) $ 3,571,041 Cost of sales — 2,693,592 1,613,446 41,393 (1,514,350 ) 2,834,081 Gross profit — 94,496 635,652 6,812 — 736,960 Selling, general and administrative expenses 2,004 89,030 24,103 6,472 — 121,609 (Loss) income from operations (2,004 ) 5,466 611,549 340 — 615,351 Interest expense (42,989 ) (60 ) (8,937 ) — 8,937 (43,049 ) Debt retirement costs (7,082 ) — — — — (7,082 ) Gain from sales of equity securities 1 16,428 — — — 16,429 Other income (expense), net 28,171 (16,633 ) 4,186 (3,267 ) (8,937 ) 3,520 (Loss) income before income taxes (23,903 ) 5,201 606,798 (2,927 ) — 585,169 Provision for (benefit from) income taxes 1,825 (11,821 ) 210,878 (1,268 ) — 199,614 Equity in net income of subsidiaries 411,283 395,920 — — (807,203 ) — Net income (loss) attributable to Westlake Chemical Corporation $ 385,555 $ 412,942 $ 395,920 $ (1,659 ) $ (807,203 ) $ 385,555 $ 383,785 $ 410,549 $ 395,920 $ (1,036 ) $ (805,433 ) $ 383,785 20102014 Westlake
Chemical
Corporation Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated $ 221,393 $ 246,536 $ 1,427 $ (247,963 ) $ 221,393 2,154 125,002 3,730 — 130,886 7,864 6,048 241 — 14,153 (245,113 ) (87,299 ) 1,301 247,963 (83,148 ) (13,702 ) 290,287 6,699 — 283,284 — (10,177 ) — — (10,177 ) — (79,928 ) (1,341 ) — (81,269 ) — 914 — — 914 — — 763 — 763 — 9,494 — — 9,494 — (79,697 ) (578 ) — (80,275 ) 210,360 (210,614 ) 254 — — (3,331 ) — — — (3,331 ) (16,014 ) — — — (16,014 ) 3,745 — — — 3,745 197,298 — — — 197,298 392,058 (210,614 ) 254 — 181,698 378,356 (24 ) 6,375 — 384,707 232,802 77 12,713 — 245,592 $ 611,158 $ 53 $ 19,088 $ — $ 630,299 Eliminations Consolidated Statement of Cash Flows Cash flows from operating activities Net income (loss) $ 678,523 $ 708,940 $ 512,206 $ (2,832 ) $ (1,211,821 ) $ 685,016 Depreciation and amortization 1,673 111,389 77,611 19,486 — 210,159 Deferred income taxes (288 ) 55,344 8,608 (4,697 ) — 58,967 Net changes in working capital and other (706,043 ) (1,077,982 ) 4,879 645,559 1,211,821 78,234 Net cash (used for) provided by operating activities (26,135 ) (202,309 ) 603,304 657,516 — 1,032,376 Cash flows from investing activities Acquisition of business, net of cash acquired — — — (611,087 ) — (611,087 ) Additions to property, plant and equipment — (209,111 ) (202,823 ) (19,170 ) — (431,104 ) Proceeds from disposition of assets — 180 — 1 — 181 Proceeds from repayment of loan acquired — — — 45,923 — 45,923 Proceeds from sales and maturities of securities 342,045 — — — — 342,045 Purchase of securities (117,332 ) — — — — (117,332 ) Settlements of derivative instruments — (1,698 ) (133 ) — — (1,831 ) Net cash provided by (used for) investing activities 224,713 (210,629 ) (202,956 ) (584,333 ) — (773,205 ) Cash flows from financing activities Intercompany financing 155,665 (244,122 ) 102,702 (14,245 ) — — Net distributions prior to Westlake Partners initial public offering — 448,101 (448,101 ) — — — Capitalized debt issuance costs (1,186 ) — — — — (1,186 ) Dividends paid (77,656 ) 151,729 (151,729 ) — — (77,656 ) Distributions paid — 54,060 (57,763 ) 1,499 — (2,204 ) Net proceeds from issuance of Westlake Partners common units — — — 286,088 — 286,088 Purchase of limited partner interests — — 286,088 (286,088 ) — — Proceeds from exercise of stock options 5,524 — — — — 5,524 Repurchase of common stock for treasury (52,630 ) — — — — (52,630 ) Windfall tax benefits from share-based payment arrangements 6,704 — — — — 6,704 Net cash provided by (used for) financing activities 36,421 409,768 (268,803 ) (12,746 ) — 164,640 Condensed Consolidating Financial Information for the Year Ended December 31, 2009 Westlake
Chemical
Corporation Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated $ 52,995 $ 65,251 $ 5,636 $ (70,887 ) $ 52,995 1,461 119,296 3,903 — 124,660 2,086 27,113 2,008 — 31,207 (72,567 ) 27,731 609 70,887 26,660 (16,025 ) 239,391 12,156 — 235,522 — (6,297 ) — — (6,297 ) — (98,555 ) (1,214 ) — (99,769 ) — 3,255 — — 3,255 — 484 — — 484 — (859 ) — — (859 ) — (101,972 ) (1,214 ) — (103,186 ) 137,442 (137,411 ) (31 ) — — (2,203 ) — — — (2,203 ) (14,510 ) — — — (14,510 ) 879 — — — 879 38,851 — — — 38,851 160,459 (137,411 ) (31 ) — 23,017 144,434 8 10,911 — 155,353 88,368 69 1,802 — 90,239 $ 232,802 $ 77 $ 12,713 $ — $ 245,592 Eliminations Consolidated Effect of exchange rate changes on cash and cash equivalents — — — (4,511 ) — (4,511 ) Net increase (decrease) in cash and cash equivalents 234,999 (3,170 ) 131,545 55,926 — 419,300 Cash and cash equivalents at beginning of the year 420,948 6,227 — 34,126 — 461,301 Cash and cash equivalents at end of the year $ 655,947 $ 3,057 $ 131,545 $ 90,052 $ — $ 880,601 22.December 31, 2013 Eliminations Consolidated Statement of Cash Flows Cash flows from operating activities Net income (loss) $ 610,425 $ 619,653 $ 546,546 $ (2,899 ) $ (1,163,300 ) $ 610,425 Depreciation and amortization 1,459 81,897 73,463 2,448 — 159,267 Deferred income taxes 74 56,787 37,054 (183 ) — 93,732 Net changes in working capital and other (622,194 ) (607,033 ) (54,554 ) 9,786 1,163,300 (110,695 ) Net cash (used for) provided by operating activities (10,236 ) 151,304 602,509 9,152 — 752,729 Cash flows from investing activities Acquisition of business — (178,309 ) — — — (178,309 ) Additions to equity investments — (23,338 ) — — — (23,338 ) Additions to property, plant and equipment — (453,538 ) (223,130 ) (2,554 ) — (679,222 ) Construction of assets pending sale-leaseback — (136 ) — — — (136 ) Proceeds from disposition of assets — 75 — 76 — 151 Proceeds from repayment of loan to affiliate — — — 167 — 167 Proceeds from sales and maturities of securities 252,519 — — — — 252,519 Purchase of securities (367,150 ) — — — — (367,150 ) Settlements of derivative instruments — — (6,920 ) — — (6,920 ) Net cash (used for) provided by investing activities (114,631 ) (655,246 ) (230,050 ) (2,311 ) — (1,002,238 ) Cash flows from financing activities Intercompany financing (128,798 ) (100,330 ) 231,067 (1,939 ) — — Net distributions prior to Westlake Partners initial public offering — 603,526 (603,526 ) — — — Dividends paid (55,236 ) — — — — (55,236 ) Proceeds from exercise of stock options 3,437 — — — — 3,437 Repurchase of common stock for treasury (32,918 ) — — — — (32,918 ) Windfall tax benefits from share-based payment arrangements 5,449 — — — — 5,449 Net cash (used for) provided by financing activities (208,066 ) 503,196 (372,459 ) (1,939 ) — (79,268 ) Eliminations Consolidated Net (decrease) increase in cash and cash equivalents (332,933 ) (746 ) — 4,902 — (328,777 ) Cash and cash equivalents at beginning of the year 753,881 6,973 — 29,224 — 790,078 Cash and cash equivalents at end of the year $ 420,948 $ 6,227 $ — $ 34,126 $ — $ 461,301 Eliminations Consolidated Statement of Cash Flows Cash flows from operating activities Net income (loss) $ 385,555 $ 412,942 $ 395,920 $ (1,659 ) $ (807,203 ) $ 385,555 Depreciation and amortization 1,514 77,131 64,257 3,153 — 146,055 Deferred income taxes 45 2,134 (8,096 ) 124 — (5,793 ) Net changes in working capital and other (422,199 ) (345,730 ) 44,740 2,256 807,203 86,270 Net cash (used for) provided by operating activities (35,085 ) 146,477 496,821 3,874 — 612,087 Cash flows from investing activities Additions to property, plant and equipment — (227,479 ) (158,440 ) (963 ) — (386,882 ) Construction of assets pending sale-leaseback — (4,308 ) — — — (4,308 ) Proceeds from disposition of assets — 449 — 22 — 471 Proceeds from repayment of loan to affiliate — — — 1,192 — 1,192 Proceeds from sale-leaseback of assets — 2,304 — — — 2,304 Proceeds from sales of equity securities 3 47,652 — — — 47,655 Purchase of securities (124,873 ) (2,961 ) — — — (127,834 ) Settlements of derivative instruments — (1 ) 432 — — 431 Net cash (used for) provided by investing activities (124,870 ) (184,344 ) (158,008 ) 251 — (466,971 ) Cash flows from financing activities Intercompany financing 291,455 (296,490 ) — 5,035 — — Net distributions prior to Westlake Partners initial public offering — 338,813 (338,813 ) — — — Capitalized debt issuance costs (2,221 ) — — — — (2,221 ) Dividends paid (285,521 ) — — — — (285,521 ) Proceeds from debt issuance 248,818 — — — — 248,818 Proceeds from exercise of stock options 10,369 — — — — 10,369 Repayment of debt (250,000 ) — — — — (250,000 ) Repurchase of common stock for treasury (10,784 ) — — — — (10,784 ) Utilization of restricted cash 96,433 — — — — 96,433 Eliminations Consolidated Windfall tax benefits from share-based payment arrangements 11,967 — — — — 11,967 Net cash provided by (used for) financing activities 110,516 42,323 (338,813 ) 5,035 — (180,939 ) Net (decrease) increase in cash and cash equivalents (49,439 ) 4,456 — 9,160 — (35,823 ) Cash and cash equivalents at beginning of the year 803,320 2,517 — 20,064 — 825,901 Cash and cash equivalents at end of the year $ 753,881 $ 6,973 $ — $ 29,224 $ — $ 790,078 Three Months Ended March 31,
2014 June 30,
2014 September 30,
2014 December 31,
2014Net sales $ 1,027,676 $ 998,576 $ 1,253,227 $ 1,135,871 Gross profit 287,010 305,971 361,520 362,849 Income from operations 248,055 266,788 306,761 302,387 158,032 169,443 167,757 183,291
Westlake Chemical Corporation: (1) Basic $ 1.18 $ 1.27 $ 1.26 $ 1.38 Diluted $ 1.18 $ 1.26 $ 1.25 $ 1.37 Three Months Ended March 31,
2013 June 30,
2013 September 30,
2013 December 31,
2013Net sales $ 864,647 $ 939,047 $ 1,004,165 $ 951,625 Gross profit 227,809 273,487 304,471 295,671 Income from operations 194,055 235,227 266,602 257,580 123,347 145,816 170,290 170,972
Westlake Chemical Corporation: (1) (2) Basic $ 0.92 $ 1.09 $ 1.28 $ 1.28 Diluted $ 0.92 $ 1.09 $ 1.27 $ 1.27 Three Months Ended March 31,
2011 June 30,
2011 September 30,
2011 December 31,
2011 $ 867,252 $ 925,049 $ 968,372 $ 859,175 167,584 167,095 147,067 77,260 140,637 138,369 117,331 50,459 83,544 81,049 67,930 26,443 $ 1.26 $ 1.22 $ 1.02 $ 0.40 $ 1.25 $ 1.21 $ 1.01 $ 0.40 Three Months Ended March 31,
2010 June 30,
2010 September 30,
2010 December 31,
2010 $ 778,334 $ 818,389 $ 779,677 $ 795,387 57,680 126,024 134,855 164,124 34,429 99,537 107,346 137,052 17,647 56,942 62,731 84,073 $ 0.27 $ 0.86 $ 0.95 $ 1.27 $ 0.27 $ 0.86 $ 0.95 $ 1.26 (1) Basic and diluted earnings per common share (“EPS”("EPS") for each quarter is computed using the weighted average shares outstanding during that quarter, while EPS for the year is computed using the weighted average shares outstanding for the year. As a result, the sum of the EPS for each of the four quarters may not equal the EPS for the year.and Chief Financial Officer and Treasurer (our principal financial officer), of the effectiveness of our disclosure controls and procedures pursuant to RuleRules 13a-15 and 15d-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this Form 10-K. In the course of this evaluation, management considered certain internal control areas in which we have made and are continuing to make changes to improve and enhance controls. Based upon that evaluation, our President and Chief Executive Officer and our Senior Vice President, and Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective as of December 31, 20112014 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC's rules and forms, and is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.There20112014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Westlake’s management’s4744 of this Annual Report on Form 10-K. In addition, PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, has also audited the effectiveness of internal control over financial reporting as of December 31, 2011,2014, as stated in their report that appears on page 4845 of this Annual Report on Form 10-K.Item 9B.Other InformationItem 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.Item 13.Certain Relationships and Related Transactions, and Director Independence.Item 14.Principal Accountant Fees and Services.2011.Item 15.Exhibits and Financial Statement Schedules(a)(1) The financial statements listed in the Index to Consolidated Financial Statements in Item 8 of this Form 10-K are filed as part of this Form 10-K. (a)(2) The following schedule is presented as required. All other schedules are omitted because the information is not applicable, not required, or has been furnished in the Consolidated Financial Statements or Notes thereto in Item 8 of this Form 10-K. Accounts Receivable Allowance for Doubtful Accounts 2014 $ 11,741 $ 301 $ 1,426 $ 13,468 2013 11,172 5,514 (4,945 ) 11,741 2012 10,969 229 (26 ) 11,172 Balance at
Beginning
of Year Charged to
Expense Additions/
(Deductions) (1) Balance at
End of
Year $ 9,710 $ 1,321 $ (62 ) $ 10,969 9,167 917 (374 ) 9,710 14,438 1,970 (7,241 ) 9,167 (1) Primarily accounts receivable written off during the period.
| (a)(3) | Exhibits |
Exhibit No. | Exhibit | |
| 2.1 | ||
| 3.1 | Certificate of Incorporation of Westlake as filed with the Delaware Secretary of State on August 6, 2004 (incorporated by reference to | |
| 3.2 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Westlake as filed with the Delaware Secretary of State on May 16, 2014 (incorporated by reference to Westlake's Current Report on Form 8-K, filed on May 16, 2014, File No. 001-32260). | |
| 3.3 | Bylaws of Westlake (incorporated by reference to | |
| 4.1 | Indenture dated as of January 1, 2006 by and among Westlake, the potential subsidiary guarantors listed therein and JPMorgan Chase Bank, National Association, as trustee (incorporated by reference to | |
| 4.2 | First Supplemental Indenture dated as of January 13, 2006 by and among Westlake, the subsidiary guarantors party thereto and JPMorgan Chase Bank, National Association, as trustee (incorporated by reference to | |
| 4.3 | ||
| Second Supplemental Indenture, dated as of November 1, 2007, among the Company, the Subsidiary Guarantors (as defined therein) and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to | ||
| 4.4 | Form of 6 | |
| Third Supplemental Indenture, dated as of July 2, 2010, among the Company, the Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to | ||
| 4.6 | Form of 6 | |
| Fourth Supplemental Indenture, dated as of December 2, 2010, among the Company, the Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to | ||
| 4.8 | Form of 6 | |
| Fifth Supplemental Indenture, dated as of December 2, 2010, among the Company, the Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to | ||
| 4.10 | Form of 6 ½% senior notes due 2035 (the "2035 IKE Zone Notes") (included in Exhibit 4.9). | |
| 4.11 | ||
Supplemental Indenture, dated as of December 31, 2007, among the Company, WPT LLC, Westlake Polymers LLC, Westlake Petrochemicals LLC, Westlake Styrene LLC, the other subsidiary guarantors party thereto and The Bank of New York Trust Company, N.A. related to the 65/8% senior notes (incorporated by reference to Exhibit 4.6 to | ||
|
| |
| Supplemental Indenture, dated as of December 31, 2007, among the Company, WPT LLC, Westlake Polymers LLC, Westlake Petrochemicals LLC, Westlake Styrene LLC, the other subsidiary guarantors party thereto and The Bank of New York Trust Company, N.A. related to the 6 | ||
| 4.13 | Sixth Supplemental Indenture, dated as of July 17, 2012, among the Company, the Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 16, 2012, File No. 1-32260). | |
| 4.14 | Form of the Company's 3.60% Senior Notes due 2022 (included in Exhibit 4.13). | |
| Exhibit No. | Exhibit | |
| 4.15 | Seventh Supplemental Indenture, dated as of February 12, 2013, among the Company, the Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.16 to Westlake's Annual Report on Form 10-K for the year ended December 31, 2012, filed on February 22, 2013, File No. 1-32260). | |
| 4.16 | Supplemental Indenture, dated as of May 1, 2013, among North American Specialty Products LLC, a Delaware limited liability company, the Company, the other Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to Westlake's Current Report on Form 8-K, filed on March 29, 2013, File No. 1-32260). | |
| 4.17 | Supplemental Indenture, dated as of June 1, 2013, among Westlake Pipeline Investments LLC, a Delaware limited liability company, the Company, the other Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.3 to Westlake's Current Report on Form 8-K, filed on March 29, 2013, File No. 1-32260). | |
| 4.18 | Supplemental Indenture, dated as of June 1, 2013, among Westlake NG IV Corporation, a Delaware corporation, and Westlake NG V Corporation, a Delaware corporation, the Company, the other Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.4 to Westlake's Current Report on Form 8-K, filed on March 29, 2013, File No. 1-32260). | |
| 4.19 | Supplemental Indenture dated as of July 17, 2014 among Westlake Chemical OpCo, LP, the Company, the other Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Westlake's Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed on August 6, 2014, File No. 1-32260). | |
| Westlake and its subsidiaries are party to other long-term debt instruments not filed herewith under which the total amount of securities authorized does not exceed 10% of the total assets of Westlake and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, Westlake agrees to furnish a copy of such instruments to the SEC upon request. | ||
| 10.1 | ||
| 10.2 | Borrower Joinder Agreement, dated as of May 1, 2013, between North American Specialty Products LLC, a Delaware limited liability company, the Existing Borrowers (as defined therein) and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 4.1 to Westlake's Current Report on Form 8-K, filed on March 29, 2013, File No. 1-32260). | |
| Loan Agreement, dated as of November 1, 2007, by and between the Company and the Louisiana Local Government Environmental Facilities and Community Development Authority (incorporated by reference to | ||
| Amended and Restated Loan Agreement, dated as of July 2, 2010, by and between the Company and the Louisiana Local Government Environmental Facilities and Community Development Authority (incorporated by reference to | ||
| Loan Agreement, dated as of November 1, 2010, by and between the Company and the Louisiana Local Government Environmental Facilities and Community Development Authority, relating to the 2035 GO Zone Notes (incorporated by reference to | ||
| Loan Agreement, dated as of November 1, 2010, by and between the Company and the Louisiana Local Government Environmental Facilities and Community Development Authority, relating to the 2035 IKE Zone Notes (incorporated by reference to | ||
| Form of Registration Rights Agreement between Westlake and TTWF LP (incorporated by reference to | ||
| 10.8+ | EVA Incentive Plan | |
| 10.9+ | ||
| Westlake Chemical Corporation | ||
Exhibit No. | Exhibit | |
| Form of Employee Nonqualified Option Award Letter Agreement (incorporated by reference to | ||
| Form of Employee Nonqualified Option Award (incorporated by reference to | ||
| Form of Director Option Award Letter (incorporated by reference to | ||
| Form of Director Option Award (incorporated by reference to | ||
| Form of Restricted Stock Unit Award (incorporated by reference to | ||
| Form of Restricted Stock Award letter granted effective as of August 31, 2005, to Directors (incorporated by reference to | ||
| Form of Restricted Stock Award letter granted effective as of August 31, 2005, to Named Executive Officers (incorporated by reference to | ||
| Form of Award | ||
| Form of Restricted Stock Award granted effective as of March 15, 2006, to Named Executive Officers (incorporated by reference to | ||
| Form of Award Letter for Stock Options granted effective as of March 15, 2006, to Named Executive Officers (incorporated by reference to | ||
| Form of Award Letter for Stock Options granted effective as of August 21, 2006, to Non-Management Directors (incorporated by reference to | ||
| Form of Restricted Stock Award granted effective as of August 21, 2006, to Non-Management Directors (incorporated by reference to | ||
| Form of Restricted Stock Award Letter for Special February 2007 Awards (incorporated by reference to | ||
| Form of Stock Option Award Letter for Special February 2007 Awards (incorporated by reference to | ||
| Form of Long-Term Cash Performance Award Letter effective as of February 26, 2010 (incorporated by reference to | ||
|
| |
| Westlake Chemical Corporation Annual Incentive Plan adopted by the Compensation Committee of the Board of Directors on May 15, 2009 (incorporated by reference to | ||
| Form of Long-Term Cash Performance Award Letter effective as of February 18, 2011 (incorporated by reference to | ||
| Westlake Chemical Corporation Amended and Restated Annual Incentive Plan adopted by the Compensation Committee of the Board of Directors on March 24, 2011 (incorporated by reference to | ||
| 10.28+ | Form of Restricted Stock Units Award Letter effective as of February 15, 2013 (incorporated by reference to Exhibit 10.29 to Westlake's Annual Report on Form 10-K for the year ended December 31, 2012, filed on February 22, 2013, File No. 1-32260). | |
| 21† | Subsidiaries of Westlake. | |
| 23.1† | Consent of PricewaterhouseCoopers LLP. | |
| Exhibit No. | Exhibit | |
| 31.1† | Rule 13a-14(a) / 15d-14(a) Certification (Principal Executive Officer). | |
| 31.2† | Rule 13a-14(a) / 15d-14(a) Certification (Principal Financial Officer). | |
| 32.1† | Section 1350 Certification (Principal Executive Officer and Principal Financial Officer). | |
| 99.1† | Financial Statements of Non Wholly-Owned Subsidiary Guarantor (Westlake Chemical OpCo LP) | |
| 101.INS† | XBRL Instance | |
| 101.SCH† | XBRL Taxonomy Extension Schema | |
| 101.CAL† | XBRL Taxonomy Extension Calculation Linkbase | |
| 101.DEF† | XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB† | XBRL Taxonomy Extension Label Linkbase | |
| 101.PRE† | XBRL Taxonomy Extension Presentation Linkbase | |
| † | Filed herewith. |
| + | Management contract, compensatory plan or arrangement. |
Signature Title Date WESTLAKE CHEMICAL CORPORATION WESTLAKE CHEMICAL CORPORATIONDate: February 23, 201225, 2015 /S/ ALBERT CHAO Albert Chao, President and Chief Executive Officer Date/S/ ALBERT CHAOFebruary 25, 2015 Albert Chao February 25, 2015 M. Steven Bender February 25, 2015 George J. Mangieri Chairman of the Board of Directors February 25, 2015 James Chao Director February 25, 2015 Albert Chao Director February 25, 2015 Robert T. Blakely Director February 25, 2015 Michael J. Graff Director February 25, 2015 Dorothy C. Jenkins Director February 25, 2015 Max L. Lukens Director February 25, 2015 R. Bruce Northcutt Director February 25, 2015 H. John Riley, Jr. /S/ ALBERT CHAO Albert Chao President and Chief Executive Officer (Principal Executive Officer) February 23, 2012/S/ M. STEVEN BENDER M. Steven BenderSenior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)February 23, 2012/S/ GEORGE J. MANGIERI George J. MangieriVice President and Chief Accounting Officer (Principal Accounting Officer)February 23, 2012/S/ JAMES CHAO James ChaoChairman of the Board of DirectorsFebruary 23, 2012/S/ ALBERT CHAO Albert ChaoDirectorFebruary 23, 2012/S/ E. WILLIAM BARNETT E. William BarnettDirectorFebruary 23, 2012/S/ ROBERT T. BLAKELY Robert T. BlakelyDirectorFebruary 23, 2012/S/ DOROTHY C. JENKINS Dorothy C. JenkinsDirectorFebruary 23, 2012/S/ MAX L. LUKENS Max L. LukensDirectorFebruary 23, 2012/S/ H. JOHN RILEY, JR. H. John Riley, Jr.DirectorFebruary 23, 2012Exhibit IndexExhibit No.Exhibit2.1 AcquisitionShare Purchase Agreement dated as of October 9, 2006May 28, 2014 by and betweenamong Westlake LongviewGermany GmbH & Co. KG and various entities associated with Advent International Corporation (formerly Westlake NG II Corporation) and Eastman Chemical Company (incorporated by reference to Westlake’s CurrentWestlake's Quarterly Report on Form 8-K,10-Q for the quarter ended June 30, 2014, filed on October 12, 2006,August 6, 2014, File No. 1-32260).3.1 Certificate of Incorporation of Westlake as filed with the Delaware Secretary of State on August 6, 2004 (incorporated by reference to Westlake’sWestlake's Registration Statement on Form S-1/A, filed on August 9, 2004).3.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Westlake as filed with the Delaware Secretary of State on May 16, 2014 (incorporated by reference to Westlake's Current Report on Form 8-K, filed on May 16, 2014, File No. 001-32260). 3.3 Bylaws of Westlake (incorporated by reference to Westlake’sWestlake's Registration Statement on Form S-1/A, filed on August 9, 2004).4.1 Indenture dated as of January 1, 2006 by and among Westlake, the potential subsidiary guarantors listed therein and JPMorgan Chase Bank, National Association, as trustee (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on January 13, 2006, File No. 1-32260).4.2 First Supplemental Indenture dated as of January 13, 2006 by and among Westlake, the subsidiary guarantors party thereto and JPMorgan Chase Bank, National Association, as trustee (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on January 13, 2006, File No. 1-32260).4.3 Form of 6 5/8% senior notes due 2016 (included in Exhibit 4.2).4.4 Second Supplemental Indenture, dated as of November 1, 2007, among the Company, the Subsidiary Guarantors (as defined therein) and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on December 18, 2007, File No. 1-32260).4.5 4.4 Form of 6 3/4% ¾% senior notes due 2032 (included in Exhibit 4.4)4.3).4.64.5 Third Supplemental Indenture, dated as of July 2, 2010, among the Company, the Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on July 8, 2010, File No. 1-32260).4.7 4.6 Form of 6 1/2% ½% senior notes due 2029 (included in Exhibit 4.6)4.5).4.84.7 Fourth Supplemental Indenture, dated as of December 2, 2010, among the Company, the Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on December 8, 2010, File No. 1-32260).4.9 4.8 Form of 6 1/2% ½% senior notes due 2035 (the “2035"2035 GO Zone Notes”Notes") (included in Exhibit 4.8)4.7).4.104.9 Fifth Supplemental Indenture, dated as of December 2, 2010, among the Company, the Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on December 8, 2010, File No. 1-32260).4.10 Form of 6 ½% senior notes due 2035 (the "2035 IKE Zone Notes") (included in Exhibit 4.9). 4.11 Form of 6 1/2% senior notes due 2035 (the “2035 IKE Zone Notes”) (included in Exhibit 4.10).Exhibit No.Exhibit4.12Westlake’sWestlake's Annual Report on Form 10-K for the year ended December 31, 2007, filed on February 20, 2008, File No. 1-32260).4.13 4.12 Supplemental Indenture, dated as of December 31, 2007, among the Company, WPT LLC, Westlake Polymers LLC, Westlake Petrochemicals LLC, Westlake Styrene LLC, the other subsidiary guarantors party thereto and The Bank of New York Trust Company, N.A. related to the 6 3/4% ¾% senior notes (incorporated by reference to Exhibit 4.7 to Westlake’sWestlake's Annual Report on Form 10-K for the year ended December 31, 2007, filed on February 20, 2008, File No. 1-32260).4.13 Sixth Supplemental Indenture, dated as of July 17, 2012, among the Company, the Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 16, 2012, File No. 1-32260). 4.14 Form of the Company's 3.60% Senior Notes due 2022 (included in Exhibit 4.13). Exhibit No. Exhibit 4.15 Seventh Supplemental Indenture, dated as of February 12, 2013, among the Company, the Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.16 to Westlake's Annual Report on Form 10-K for the year ended December 31, 2012, filed on February 22, 2013, File No. 1-32260). 4.16 Supplemental Indenture, dated as of May 1, 2013, among North American Specialty Products LLC, a Delaware limited liability company, the Company, the other Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to Westlake's Current Report on Form 8-K, filed on March 29, 2013, File No. 1-32260). 4.17 Supplemental Indenture, dated as of June 1, 2013, among Westlake Pipeline Investments LLC, a Delaware limited liability company, the Company, the other Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.3 to Westlake's Current Report on Form 8-K, filed on March 29, 2013, File No. 1-32260). 4.18 Supplemental Indenture, dated as of June 1, 2013, among Westlake NG IV Corporation, a Delaware corporation, and Westlake NG V Corporation, a Delaware corporation, the Company, the other Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.4 to Westlake's Current Report on Form 8-K, filed on March 29, 2013, File No. 1-32260). 4.19 Supplemental Indenture dated as of July 17, 2014 among Westlake Chemical OpCo, LP, the Company, the other Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Westlake's Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed on August 6, 2014, File No. 1-32260). Westlake and its subsidiaries are party to other long-term debt instruments not filed herewith under which the total amount of securities authorized does not exceed 10% of the total assets of Westlake and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, Westlake agrees to furnish a copy of such instruments to the SEC upon request. 10.1 SecondThird Amended and Restated Credit Agreement dated as of September 16, 2011July 17, 2014 by and among the financial institutions party thereto, as lenders, Bank of America, N.A., as agent, and Westlake Chemical Corporation and certain of its domestic subsidiaries, as borrowers, relating to a $400.0 million senior secured revolving credit facility (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on September 19, 2011,July 17, 2014, File No. 001-32260).10.2 Borrower Joinder Agreement, dated as of May 1, 2013, between North American Specialty Products LLC, a Delaware limited liability company, the Existing Borrowers (as defined therein) and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 4.1 to Westlake's Current Report on Form 8-K, filed on March 29, 2013, File No. 1-32260). 10.210.3 Loan Agreement, dated as of November 1, 2007, by and between the Company and the Louisiana Local Government Environmental Facilities and Community Development Authority (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on December 18, 2007, File No. 1-32260).10.310.4 Amended and Restated Loan Agreement, dated as of July 2, 2010, by and between the Company and the Louisiana Local Government Environmental Facilities and Community Development Authority (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on July 8, 2010, File No. 1-32260).10.410.5 Loan Agreement, dated as of November 1, 2010, by and between the Company and the Louisiana Local Government Environmental Facilities and Community Development Authority, relating to the 2035 GO Zone Notes (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on December 8, 2010, File No. 1-32260).10.510.6 Loan Agreement, dated as of November 1, 2010, by and between the Company and the Louisiana Local Government Environmental Facilities and Community Development Authority, relating to the 2035 IKE Zone Notes (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on December 8, 2010, File No. 1-32260).10.610.7 Form of Registration Rights Agreement between Westlake and TTWF LP (incorporated by reference to Westlake’sWestlake's Registration Statement on Form S-1/A, filed on July 2, 2004).10.7+ Westlake Group Performance Unit10.8+ EVA Incentive Plan effective January 1, 1991 (incorporated by reference to Westlake’sWestlake's Registration Statement on Form S-4, filed on September 22, 2003).10.8+ EVA Incentive Plan (incorporated by reference to Westlake’s Registration Statement on Form S-4, filed on September 22, 2003).10.9+ Agreement with Stephen Wallace dated November 5, 2003 (incorporated by reference to Westlake’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 26, 2004, File No. 1-32260).Exhibit No.Exhibit10.10+ Westlake Chemical Corporation 20042013 Omnibus Incentive Plan (as amended and restated as of May 17, 2013) (incorporated by reference to Westlake’s Registration StatementExhibit 10.1 to the Company's Current Report on Form S-1/A,8-K filed on August 9, 2004)May 22, 2013, File No.1-32260).10.11+Exhibit No.Exhibit 10.10+ Form of Employee Nonqualified Option Award Letter Agreement (incorporated by reference to Westlake’sWestlake's Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005, File No. 1-32260).10.12+10.11+ Form of Employee Nonqualified Option Award (incorporated by reference to Westlake’sWestlake's Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005, File No. 1-32260).10.13+10.12+ Form of Director Option Award Letter (incorporated by reference to Westlake’sWestlake's Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005, File No. 1-32260).10.14+10.13+ Form of Director Option Award (incorporated by reference to Westlake’sWestlake's Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005, File No. 1-32260).10.15+10.14+ Form of Restricted Stock Unit Award (incorporated by reference to Westlake’sWestlake's Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 16, 2005, File No. 1-32260).10.16+10.15+ Form of Restricted Stock Award letter granted effective as of August 31, 2005, to Directors (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on September 15, 2005, File No. 1-32260).10.17+10.16+ Form of Restricted Stock Award letter granted effective as of August 31, 2005, to Named Executive Officers (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on September 15, 2005, File No. 1-32260).10.18+10.17+ Form of Award letterLetter for stock optionsStock Options granted effective as of August 31, 2005, to Named Executive Officers (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on September 15, 2005, File No. 1-32260).10.19+10.18+ Form of Restricted Stock Award granted effective as of March 15, 2006, to Named Executive Officers (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on March 22, 2006, File No. 1-32260).10.20+10.19+ Form of Award Letter for Stock Options granted effective as of March 15, 2006, to Named Executive Officers (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on March 22, 2006, File No. 1-32260).10.21+10.20+ Form of Award Letter for Stock Options granted effective as of August 21, 2006, to Non-Management Directors (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on August 24, 2006, File No. 1-32260).10.22+10.21+ Form of Restricted Stock Award granted effective as of August 21, 2006, to Non-Management Directors (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on August 24, 2006, File No. 1-32260).10.23+10.22+ Form of Restricted Stock Award Letter for Special February 2007 Awards (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on March 1, 2007, File No. 1-32260).10.24+10.23+ Form of Stock Option Award Letter for Special February 2007 Awards (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on March 1, 2007, File No. 1-32260).10.25+10.24+ Form of Long-Term Cash Performance Award Letter effective as of February 26, 2010 (incorporated by reference to Westlake’sWestlake's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, filed on May 5, 2010, File No. 1-32260).Exhibit No. Exhibit10.26+10.25+ Westlake Chemical Corporation Annual Incentive Plan adopted by the Compensation Committee of the Board of Directors on May 15, 2009 (incorporated by reference to Westlake’sWestlake's Current Report on Form 8-K, filed on May 21, 2009, File No. 1-32260).10.27+10.26+ Form of Long-Term Cash Performance Award Letter effective as of February 18, 2011 (incorporated by reference to Westlake’sWestlake's Annual Report on Form 10-K for the year ended December 31, 2010, filed on February 24, 2011, File No. 1-32260).10.28+10.27+ Westlake Chemical Corporation Amended and Restated Annual Incentive Plan adopted by the Compensation Committee of the Board of Directors on March 24, 2011 (incorporated by reference to Westlake’sWestlake's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed on May 4, 2011, File No. 1-32260).10.28+ Form of Restricted Stock Units Award Letter effective as of February 15, 2013 (incorporated by reference to Exhibit 10.29 to Westlake's Annual Report on Form 10-K for the year ended December 31, 2012, filed on February 22, 2013, File No. 1-32260). 21† Subsidiaries of Westlake. 23.1† Consent of PricewaterhouseCoopers LLP. Exhibit No. Exhibit 31.1† Rule 13a-14(a) / 15d-14(a) Certification (Principal Executive Officer). 31.2† Rule 13a-14(a) / 15d-14(a) Certification (Principal Financial Officer). 32.1† Section 1350 Certification (Principal Executive Officer and Principal Financial Officer). 99.1† Financial Statements of Non Wholly-Owned Subsidiary Guarantor (Westlake Chemical OpCo LP) 101.INS† XBRL Instance Document(1)Document.101.SCH† XBRL Taxonomy Extension Schema Document(1)Document.101.CAL† XBRL Taxonomy Extension Calculation Linkbase Document(1)Document.101.DEF† XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB† XBRL Taxonomy Extension Label Linkbase Document(1)Document.101.PRE† XBRL Taxonomy Extension Presentation Linkbase Document(1)Document.† Filed herewith. + Management contract, compensatory plan or arrangement. (1)Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
104