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EXCEL - IDEA: XBRL DOCUMENT - WESTLAKE CHEMICAL CORPFinancial_Report.xls
EX-32.1 - EXHIBIT 32.1 - WESTLAKE CHEMICAL CORPexhibit321_20140630.htm
EX-31.2 - EXHIBIT 31.2 - WESTLAKE CHEMICAL CORPexhibit312_20140630.htm
EX-31.1 - EXHIBIT 31.1 - WESTLAKE CHEMICAL CORPexhibit311_20140630.htm
EX-4.1 - EXHIBIT 4.1 - WESTLAKE CHEMICAL CORPexhibit41_20140630.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
Form 10-Q
 
 
 
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2014
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from                    to                    
Commission File No. 001-32260
 
 
 
 
 
Westlake Chemical Corporation
(Exact name of Registrant as specified in its charter)
 
 
 
 
 

Delaware
 
76-0346924
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
2801 Post Oak Boulevard, Suite 600
Houston, Texas 77056
(Address of principal executive offices, including zip code)
(713) 960-9111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer
 
x
 
Accelerated filer
 
¨
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)     Yes   ¨     No   x
The number of shares outstanding of the registrant's sole class of common stock as of July 30, 2014 was 133,486,747 (on a post-split basis).



INDEX




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
June 30,
2014
 
December 31,
2013
 
 
 
 
 
 
 
(in thousands of dollars, except
par values and share amounts)
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
876,067

 
$
461,301

Marketable securities
 

 
239,388

Accounts receivable, net
 
454,281

 
428,457

Inventories
 
437,519

 
471,879

Prepaid expenses and other current assets
 
20,468

 
13,888

Deferred income taxes
 
34,168

 
34,169

Total current assets
 
1,822,503

 
1,649,082

Property, plant and equipment, net
 
2,217,049

 
2,088,014

Equity investments
 
68,867

 
66,875

Other assets, net
 


 


Intangible assets, net
 
155,394

 
159,046

Deferred charges and other assets, net
 
105,556

 
97,892

Total other assets, net
 
260,950

 
256,938

Total assets
 
$
4,369,369

 
$
4,060,909

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
219,600

 
$
249,613

Accrued liabilities
 
167,329

 
155,245

Total current liabilities
 
386,929

 
404,858

Long-term debt
 
763,938

 
763,879

Deferred income taxes
 
458,790

 
437,976

Other liabilities
 
31,639

 
35,593

Total liabilities
 
1,641,296

 
1,642,306

Commitments and contingencies (Notes 7 and 15)
 


 


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;
   134,681,372 and 134,580,208 shares issued at June 30, 2014
   and December 31, 2013, respectively (Note 1)
 
1,347

 
1,346

Common stock, held in treasury, at cost; 1,197,617 and 1,252,922 shares
   at June 30, 2014 and December 31, 2013, respectively (Note 1)
 
(45,181
)
 
(46,220
)
Additional paid-in capital
 
523,526

 
511,432

Retained earnings
 
2,248,513

 
1,954,661

Accumulated other comprehensive loss
 
(132
)
 
(2,616
)
Total stockholders' equity
 
2,728,073

 
2,418,603

Total liabilities and stockholders' equity
 
$
4,369,369

 
$
4,060,909

The accompanying notes are an integral part of these consolidated financial statements.

1


WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
(in thousands of dollars, except per share data and share amounts)
Net sales
 
$
998,576

 
$
939,047

 
$
2,026,252

 
$
1,803,694

Cost of sales
 
692,605

 
665,560

 
1,433,271

 
1,302,398

Gross profit
 
305,971

 
273,487

 
592,981

 
501,296

Selling, general and administrative expenses
 
39,183

 
38,260

 
78,138

 
72,014

Income from operations
 
266,788

 
235,227

 
514,843

 
429,282

Other income (expense)
 
 
 
 
 
 
 
 
Interest expense
 
(9,539
)
 
(5,343
)
 
(18,696
)
 
(11,624
)
Other income (expense), net
 
4,601

 
(95
)
 
7,110

 
3,424

Income before income taxes
 
261,850

 
229,789

 
503,257

 
421,082

Provision for income taxes
 
92,407

 
83,973

 
175,782

 
151,919

Net income
 
$
169,443

 
$
145,816

 
$
327,475

 
$
269,163

Earnings per share (Note 1):
 
 
 
 
 
 
 
 
Basic
 
$
1.27

 
$
1.09

 
$
2.45

 
$
2.01

Diluted
 
$
1.26

 
$
1.09

 
$
2.44

 
$
2.01

Weighted average shares outstanding (Note 1):
 
 
 
 
 
 
 
 
Basic
 
133,223,705

 
133,259,218

 
133,148,398

 
133,255,322

Diluted
 
133,767,890

 
133,791,190

 
133,690,836

 
133,804,546

Dividends per common share (Note 1)
 
$
0.1260

 
$
0.0938

 
$
0.2520

 
$
0.1875

The accompanying notes are an integral part of these consolidated financial statements.

2


WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
(in thousands of dollars)
Net income
 
$
169,443

 
$
145,816

 
$
327,475

 
$
269,163

Other comprehensive income (loss), net of income taxes
 
 
 
 
 
 
 
 
Pension and other post-retirement benefits liability
 
 
 
 
 
 
 
 
Pension and other post-retirement reserves
   adjustment (excluding amortization)
 
(31
)
 
(489
)
 
(31
)
 
(489
)
Amortization of benefits liability
 
226

 
695

 
445

 
1,309

Income tax provision on pension and other
   post-retirement benefits liability
 
(75
)
 
(80
)
 
(159
)
 
(316
)
Foreign currency translation adjustments
 
808

 
(820
)
 
(90
)
 
(1,390
)
Available-for-sale investments
 
 
 
 
 
 
 
 
Unrealized holding gains on investments
 
2,364

 

 
4,831

 

Reclassification of net realized gains to
   net income
 
(1,237
)
 

 
(1,212
)
 

Income tax provision on available-for-sale
   investments
 
(405
)
 

 
(1,300
)
 

Other comprehensive income (loss)
 
1,650

 
(694
)
 
2,484

 
(886
)
Comprehensive income
 
$
171,093

 
$
145,122

 
$
329,959

 
$
268,277

The accompanying notes are an integral part of these consolidated financial statements.

3


WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Six Months Ended June 30,
 
 
2014
 
2013
 
 
 
 
 
 
 
(in thousands of dollars)
Cash flows from operating activities
 
 
 
 
Net income
 
$
327,475

 
$
269,163

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
 
Depreciation and amortization
 
94,474

 
75,566

Provision for doubtful accounts
 
311

 
3,607

Amortization of debt issuance costs
 
730

 
729

Stock-based compensation expense
 
4,511

 
3,124

Loss from disposition of fixed assets
 
1,872

 
4,125

Deferred income taxes
 
19,359

 
60,425

Windfall tax benefits from share-based payment arrangements
 
(4,436
)
 
(4,576
)
(Income) loss from equity method investments, net of dividends
 
(1,239
)
 
1,369

Other gains, net
 
(526
)
 

Changes in operating assets and liabilities
 
 
 
 
Accounts receivable
 
(27,367
)
 
(61,494
)
Inventories
 
34,360

 
(1,893
)
Prepaid expenses and other current assets
 
(5,480
)
 
(7,947
)
Accounts payable
 
(21,990
)
 
5,217

Accrued liabilities
 
13,631

 
(32,382
)
Other, net
 
(3,443
)
 
(59,553
)
Net cash provided by operating activities
 
432,242

 
255,480

Cash flows from investing activities
 
 
 
 
Acquisition of business
 

 
(178,309
)
Additions to equity investments
 

 
(6,113
)
Additions to property, plant and equipment
 
(216,912
)
 
(297,873
)
Construction of assets pending sale-leaseback
 

 
(136
)
Proceeds from disposition of assets
 
13

 
62

Proceeds from repayment of loan to affiliate
 

 
167

Proceeds from sales and maturities of securities
 
342,045

 
209,785

Purchase of securities
 
(117,332
)
 
(114,881
)
Settlements of derivative instruments
 
(290
)
 
(1,588
)
Net cash provided by (used for) investing activities
 
7,524

 
(388,886
)
Cash flows from financing activities
 
 
 
 
Dividends paid
 
(33,623
)
 
(25,120
)
Proceeds from exercise of stock options
 
4,187

 
2,656

Repurchase of common stock for treasury
 

 
(13,283
)
Windfall tax benefits from share-based payment arrangements
 
4,436

 
4,576

Net cash used for financing activities
 
(25,000
)
 
(31,171
)
Net increase (decrease) in cash and cash equivalents
 
414,766

 
(164,577
)
Cash and cash equivalents at beginning of period
 
461,301

 
790,078

Cash and cash equivalents at end of period
 
$
876,067

 
$
625,501

The accompanying notes are an integral part of these consolidated financial statements.

4

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(in thousands of dollars, except share amounts and per share data)


1. Basis of Financial Statements
The accompanying unaudited consolidated interim financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim periods. Accordingly, certain information and footnotes required for complete financial statements under generally accepted accounting principles in the United States ("U.S. GAAP") have not been included. These interim consolidated financial statements should be read in conjunction with the December 31, 2013 financial statements and notes thereto of Westlake Chemical Corporation (the "Company") included in the annual report on Form 10-K for the fiscal year ended December 31, 2013 (the "2013 Form 10-K"), filed with the SEC on February 21, 2014. These financial statements have been prepared in conformity with the accounting principles and practices as disclosed in the notes to the consolidated financial statements of the Company for the fiscal year ended December 31, 2013.
In the opinion of the Company's management, the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company's financial position as of June 30, 2014, its results of operations for the three and six months ended June 30, 2014 and 2013 and the changes in its cash position for the six months ended June 30, 2014 and 2013.
Results of operations and changes in cash position for the interim periods presented are not necessarily indicative of the results that will be realized for the fiscal year ending December 31, 2014 or any other interim period. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
On February 14, 2014, the Company's Board of Directors authorized a two-for-one split of the Company's 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. The total number of authorized common stock shares and associated par value were unchanged by this stock split. All share amounts and per share data included in the accompanying consolidated financial statements and related notes have been restated to reflect the effect of the stock split.
Recent Accounting Pronouncements
Revenue from Contracts with Customers
In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update on a comprehensive new revenue recognition standard that will supersede the existing revenue recognition guidance. The new accounting guidance creates a framework by which an entity will allocate the transaction price to separate performance obligations and recognize revenue when each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation and determining when an entity satisfies its performance obligations. The standard allows for either “full retrospective” adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch-up as of the earliest period presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements with a cumulative catch-up as of the current period. The accounting standard will be effective for reporting periods beginning after December 15, 2016. The Company is in the process of evaluating the impact that the new accounting guidance will have on its consolidated financial position, results of operations and cash flows.


5

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

2. Financial Instruments
Cash Equivalents
The Company had $747,008 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 June 30, 2014 and December 31, 2013, respectively. The Company's investments in held-to-maturity securities are held at amortized cost, which approximates fair value.
Available-for-Sale Marketable Securities
Investments in available-for-sale securities were classified as follows:
 
June 30,
2014
 
December 31,
2013
Current
$

 
$
239,388

Non-current
18,879

 

Total available-for-sale securities
$
18,879

 
$
239,388

The cost, gross unrealized gains, gross unrealized losses and fair value of the Company’s available-for-sale securities were as follows:
 
 
June 30, 2014
 
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Equity securities
 
$
14,985

 
$
3,894

 
$

 
$
18,879

Total available-for-sale securities
 
$
14,985

 
$
3,894

 
$

 
$
18,879

 
 
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

_____________
(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.
As of June 30, 2014 and December 31, 2013, net unrealized gains on the Company's available-for-sale securities of $2,495 and $176, respectively, net of income tax expense of $1,399 and $99, respectively, were recorded in accumulated other comprehensive income. See Note 10 for the fair value hierarchy of the Company’s available-for-sale securities.
The proceeds from sales and maturities of available-for-sale securities and the gross realized gains and losses included in the consolidated statement of operations are reflected in the table below. The cost of securities sold was determined using the specific identification method. There were no sales or maturities of available-for-sale securities during the three and six months ended June 30, 2013.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2014
Proceeds from sales and maturities of securities
 
$
311,926

 
$
342,045

Gross realized gains
 
1,298

 
$
1,311

Gross realized losses
 
(61
)
 
$
(99
)

6

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

3. Accounts Receivable
Accounts receivable consist of the following:
 
 
June 30,
2014
 
December 31,
2013
Trade customers
 
$
445,156

 
$
410,302

Affiliates
 
300

 
315

Allowance for doubtful accounts
 
(12,052
)
 
(11,741
)
 
 
433,404

 
398,876

Federal and state taxes
 
7,512

 
20,820

Other
 
13,365

 
8,761

Accounts receivable, net
 
$
454,281

 
$
428,457

4. Inventories
Inventories consist of the following:
 
 
June 30,
2014
 
December 31,
2013
Finished products
 
$
218,817

 
$
232,658

Feedstock, additives and chemicals
 
159,099

 
180,646

Materials and supplies
 
59,603

 
58,575

Inventories
 
$
437,519

 
$
471,879

5. Property, Plant and Equipment
As of June 30, 2014, the Company had property, plant and equipment, net totaling $2,217,049. The Company assesses these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, including when negative conditions such as significant current or projected operating losses exist. Other factors considered by the Company when determining if an impairment assessment is necessary include, but are not limited to, 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. and world economies and uncertainties associated with governmental actions. 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.
Depreciation expense on property, plant and equipment of $39,859 and $32,615 is included in cost of sales in the consolidated statements of operations for the three months ended June 30, 2014 and 2013, respectively. Depreciation expense on property, plant and equipment of $77,920 and $63,535 is included in cost of sales in the consolidated statements of operation for the six months ended June 30, 2014 and 2013, respectively.
6. Other Assets
Amortization expense on intangible and other assets of $9,008 and $7,959 is included in the consolidated statements of operations for the three months ended June 30, 2014 and 2013, respectively. Amortization expense on intangible and other assets of $17,284 and $12,760 is included in the consolidated statements of operations for the six months ended June 30, 2014 and 2013, respectively.
Goodwill
Goodwill for the Olefins segment was $29,990 at June 30, 2014 and December 31, 2013. Goodwill for the Vinyls segment was $32,026 at June 30, 2014 and December 31, 2013. There were no changes in the carrying amount of goodwill by operating segments for the six months ended June 30, 2014.
The annual impairment test for the Olefins segment's recorded goodwill was performed as of October 31, 2013. The annual impairment test for the Vinyls segment's recorded goodwill was performed as of April 30, 2014. The impairment test

7

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

indicated that the Vinyls segment's goodwill was not impaired. There has been no impairment of the Vinyls segment's goodwill since it was initially recorded.
Vinyls Segment Goodwill
The fair value of the pipe and foundation building products business, the reporting unit assessed, was calculated using both a discounted cash flow methodology and a market value methodology. The discounted cash flow projections were based on a 10-year forecast, from 2014 to 2023, to reflect the cyclicality of the North 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 their 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 8.8%.
The significant assumptions used in determining the fair value of the reporting unit using the market value methodology include the determination of appropriate market comparables and the estimated multiples of EBITDA a willing buyer is likely to pay.
Even if the fair value of the reporting unit decreased by 10%, the carrying value of the reporting unit would not exceed its fair value.
7. Long-Term Debt
Long-term debt consists of the following:
 
 
June 30,
2014
 
December 31,
2013
3.60% senior notes due 2022
 
$
249,049

 
$
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
 
$
763,938

 
$
763,879

Revolving Credit Facility
The Company has a $400,000 senior secured revolving credit facility. 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) under certain circumstances if lenders agree to commit to such an increase. At June 30, 2014, the Company had no borrowings outstanding under the revolving credit facility. Any borrowings under the facility will bear interest at either LIBOR plus a spread ranging from 1.75% to 2.25% or a base rate plus a spread ranging from 0.25% to 0.75%. The revolving credit facility also requires an unused commitment fee of 0.375% per annum. All interest rates under the facility are subject to monthly grid pricing adjustments based on prior month average daily loan availability. The revolving credit facility matures on September 16, 2016. As of June 30, 2014, the Company had outstanding letters of credit totaling $17,773 and borrowing availability of $382,227 under the revolving credit facility. 
Subsequent to June 30, 2014, the Company entered into a third amendment and restatement to the revolving credit facility. See Note 18 for additional information.


8

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

8. Stock-Based Compensation
Under the Westlake Chemical Corporation 2013 Omnibus Incentive Plan (as amended and restated, the "2013 Plan"), all employees and nonemployee directors of the Company, as well as certain individuals who have agreed to become the Company's employees, are eligible for awards. Shares of common stock may be issued as authorized in the 2013 Plan. At the discretion of the administrator of the 2013 Plan, employees and nonemployee directors may be granted awards in the form of stock options, stock appreciation rights, stock awards, restricted stock units or cash awards (any of which may be a performance award). Total stock-based compensation expense related to the 2013 Plan was $2,289 and $1,626 for the three months ended June 30, 2014 and 2013, respectively, and $4,511 and $3,124 for the six months ended June 30, 2014 and 2013, respectively.
9. Derivative Instruments
Commodity Risk Management
The Company uses derivative instruments to reduce price volatility risk on raw materials and products as a substantial portion of its raw materials and products are commodities whose prices fluctuate as market supply and demand fundamentals change. Business strategies to protect against such instability include ethylene product feedstock flexibility and moving downstream into the olefins and vinyls products where pricing is more stable. The Company does not use derivative instruments to engage in speculative activities.
For derivative instruments that are designated and qualify as fair value hedges, the gains or losses on the derivative instruments, as well as the offsetting losses or gains on the hedged items attributable to the hedged risk, were included in cost of sales in the consolidated statements of operations for the three and six months ended June 30, 2013. The Company had no derivative instruments that were designated as fair value hedges for the three and six months ended June 30, 2014.
Gains and losses from changes in the fair value of derivative instruments that are not designated as hedging instruments were included in gross profit in the consolidated statements of operations for the three and six months ended June 30, 2014 and 2013.
The exposure on commodity derivatives used for price risk management includes the risk that the counterparty will not pay if the market declines below the established fixed price. In such case, the Company would lose the benefit of the derivative differential on the volume of the commodities covered. In any event, the Company would continue to receive the market price on the actual volume hedged. The Company also bears the risk that it could lose the benefit of market improvements over the fixed derivative price for the term and volume of the derivative instruments (as such improvements would accrue to the benefit of the counterparty).
Disclosures related to the Company's derivative assets and derivative liabilities subject to enforceable master netting arrangements have not been presented as they are not material to the Company's consolidated balance sheets at June 30, 2014 and December 31, 2013.
The fair values of derivative instruments in the Company's consolidated balance sheets were as follows:
 
 
Derivative Assets
 
 
Balance Sheet Location
 
Fair Value as of
 
 
June 30,
2014
 
December 31,
2013
Not designated as hedging instruments
 
 
 
 
 
 
Commodity forward contracts
 
Accounts receivable, net
 
$
937

 
$
296

Total derivative assets
 
 
 
$
937

 
$
296

 
 
Derivative Liabilities
 
 
Balance Sheet Location
 
Fair Value as of
 
 
June 30,
2014
 
December 31,
2013
Not designated as hedging instruments
 
 
 
 
 
 
Commodity forward contracts
 
Accrued liabilities
 
$
924

 
$
176

Total derivative liabilities
 
 
 
$
924

 
$
176


9

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

The following tables reflect the impact of derivative instruments designated as fair value hedges and the related hedged item on the Company's consolidated statements of operations. For the three and six months ended June 30, 2013, there was no material ineffectiveness with regard to the Company's qualifying fair value hedges.
Derivatives in Fair Value
   Hedging Relationships
 
Location of Gain (Loss)
Recognized in 
Income on Derivative
 
Three Months Ended June 30,
 
Six Months Ended June 30,
2014
 
2013
 
2014
 
2013
Commodity forward contracts
 
Cost of sales
 
$

 
$
1,533

 
$

 
$
(110
)
 
 
 
 
 
 
 
 
 
 
 
Hedged Items in Fair Value
   Hedging Relationships
 
Location of Gain (Loss)
Recognized in 
Income on Hedged Items
 
Three Months Ended June 30,
 
Six Months Ended June 30,
2014
 
2013
 
2014
 
2013
Firm commitment designated
   as the hedged item
 
Cost of sales
 
$

 
$
(1,615
)
 
$

 
$
(220
)
The impact of derivative instruments that have not been designated as hedges on the Company's consolidated statements of operations were as follows:
Derivatives Not Designated as
   Hedging Instruments
 
Location of Gain (Loss)
Recognized in 
Income on Derivative
 
Three Months Ended June 30,
 
Six Months Ended June 30,
2014
 
2013
 
2014
 
2013
Commodity forward contracts
 
Gross profit
 
$
240

 
$
9,382

 
$
(371
)
 
$
16,717

See Note 10 for the fair value of the Company's derivative instruments.
10. Fair Value Measurements
The Company reports certain assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). 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 following tables summarize, by level within the fair value hierarchy, the Company's assets and liabilities that were accounted for at fair value on a recurring basis:
 
 
June 30, 2014
 
 
Level 1
 
Level 2
 
Total
Derivative instruments
 
 
 
 
 
 
Risk management assets - Commodity forward contracts
 
$
430

 
$
507

 
$
937

Risk management liabilities - Commodity forward contracts
 

 
(924
)
 
(924
)
Available-for-sale marketable securities
 
18,879

 

 
18,879

 
 
 
 
 
 
 
 
 
December 31, 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
)
Available-for-sale marketable securities
 
91,595

 
147,793

 
239,388

The Level 2 measurements for the Company's commodity contracts are derived using forward curves supplied by industry-recognized and unrelated third-party services. The Level 2 measurements for the Company's available-for-sale securities are derived using market-based pricing provided by unrelated third-party services.

10

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

There were no transfers in or out of Levels 1 and 2 of the fair value hierarchy for the six months ended June 30, 2014 and 2013.
In addition to the financial assets and liabilities above, the Company has other financial assets and liabilities subject to fair value measures. These financial assets and liabilities include cash and cash equivalents, accounts receivable, net, accounts payable and long-term debt, all of which are recorded at carrying value. The amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, net and accounts payable approximate their fair value due to the short maturities of these instruments. The carrying and fair values of the Company's long-term debt are summarized 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.
 
 
June 30, 2014
 
December 31, 2013
 
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
3.60% senior notes due 2022
 
$
249,049

 
$
250,510

 
$
248,990

 
$
236,905

6 ½% senior notes due 2029
 
100,000

 
115,750

 
100,000

 
109,490

6 ¾% senior notes due 2032
 
250,000

 
278,525

 
250,000

 
265,148

6 ½% GO Zone Senior Notes Due 2035
 
89,000

 
104,670

 
89,000

 
94,606

6 ½% IKE Zone Senior Notes Due 2035
 
65,000

 
76,445

 
65,000

 
69,094

Loan related to tax-exempt waste disposal revenue
   bonds due 2027
 
10,889

 
10,889

 
10,889

 
10,889

11. Income Taxes
The effective income tax rate was 34.9% for the six months ended June 30, 2014. The effective income tax rate for the 2014 period was below the U.S. federal statutory rate of 35.0% primarily due to state tax credits and the domestic manufacturing deduction, mostly offset by state income taxes. The effective income tax rate was 36.1% for the six months ended June 30, 2013. The effective income tax rate for the 2013 period was above the U.S. federal statutory rate of 35.0% primarily due to state income taxes, partially offset by the domestic manufacturing deduction.
There was no material change to the total gross unrecognized tax benefits for the six months ended June 30, 2014. Management anticipates that all of the gross unrecognized tax benefits of $2,501 will be recognized within the next twelve months due to expiring statutes of limitations. The impact from the recognition of these tax benefits on the Company's effective tax rate is expected to be immaterial.
The Company recognizes penalties and interest accrued related to unrecognized tax benefits in income tax expense. As of June 30, 2014, the Company had no material accrued interest and penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions. The Company is no longer subject to examinations by tax authorities before the year 2007.


11

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

12. Earnings per Share
The Company has unvested shares of restricted stock and restricted stock units outstanding that are considered participating securities and, therefore, computes basic and diluted earnings per share under the two-class method. Basic earnings per share for the periods are based upon the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share include the effect of certain stock options.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Net income
 
$
169,443

 
$
145,816

 
$
327,475

 
$
269,163

Less:
 
 
 
 
 
 
 
 
Net income attributable to participating securities
 
(360
)
 
(512
)
 
(746
)
 
(1,091
)
Net income attributable to common shareholders
 
$
169,083

 
$
145,304

 
$
326,729

 
$
268,072

The following table reconciles the denominator for the basic and diluted earnings per share computations shown in the consolidated statements of operations:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Weighted average common shares—basic (1)
 
133,223,705

 
133,259,218

 
133,148,398

 
133,255,322

Plus incremental shares from:
 
 
 
 
 
 
 
 
Assumed exercise of options (1)
 
544,185

 
531,972

 
542,438

 
549,224

Weighted average common shares—diluted (1)
 
133,767,890

 
133,791,190

 
133,690,836

 
133,804,546

 
 
 
 
 
 
 
 
 
Earnings per share: (1)
 
 
 
 
 
 
 
 
Basic
 
$
1.27

 
$
1.09

 
$
2.45

 
$
2.01

Diluted
 
$
1.26

 
$
1.09

 
$
2.44

 
$
2.01

_____________
(1)
Share amounts and per share data for the three and six months ended June 30, 2013 have been restated to reflect the effect of a two-for-one stock split on March 18, 2014. See Note 1 for additional information.
Excluded from the computation of diluted earnings per share are options to purchase 134,938 and 142,912 shares of common stock for the three months ended June 30, 2014 and 2013, respectively, and 102,480 and 108,000 shares of common stock for the six months ended June 30, 2014 and 2013, respectively. These options were outstanding during the periods reported but were excluded because the effect of including them would have been antidilutive.
13. Pension and Post-Retirement Benefit Costs
Components of net periodic benefit cost are as follows:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
Pension
 
Post-retirement
Healthcare
 
Pension
 
Post-retirement
Healthcare
 
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Service cost
 
$
84

 
$
275

 
$
5

 
$
2

 
$
167

 
$
539

 
$
11

 
$
5

Interest cost
 
576

 
515

 
181

 
147

 
1,170

 
1,016

 
362

 
294

Expected return on
   plan assets
 
(777
)
 
(713
)
 

 

 
(1,586
)
 
(1,427
)
 

 

Amortization of prior
   service cost
 
74

 
74

 
13

 
21

 
148

 
148

 
25

 
42

Amortization of net loss
 
70

 
510

 
69

 
90

 
134

 
940

 
138

 
179

Net periodic benefit cost
 
$
27

 
$
661

 
$
268

 
$
260

 
$
33

 
$
1,216

 
$
536

 
$
520


12

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

The Company contributed $965 and $388 to the Salaried pension plan in the first six months of 2014 and 2013, respectively, and contributed $580 and $350 to the Wage pension plan in the first six months of 2014 and 2013, respectively. The Company expects to make additional contributions of $1,812 to the Salaried pension plan and $626 to the Wage pension plan during the fiscal year ending December 31, 2014.
14. Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2014 and 2013 were as follows:
 
 
Benefits
Liability,
Net of Tax
 
Cumulative
Foreign
Currency
Exchange
 
Net Unrealized
Holding Gains
on Investments,
Net of Tax
 
Total
Balances at December 31, 2013
 
$
(6,696
)
 
$
3,904

 
$
176

 
$
(2,616
)
Other comprehensive (loss) income before
   reclassifications
 
(20
)
 
(90
)
 
3,096

 
2,986

Amounts reclassified from accumulated other
   comprehensive loss
 
275

 

 
(777
)
 
(502
)
Net other comprehensive income (loss) for the period
 
255

 
(90
)
 
2,319

 
2,484

Balances at June 30, 2014
 
$
(6,441
)
 
$
3,814

 
$
2,495

 
$
(132
)
 
 
Benefits
Liability,
Net of Tax
 
Cumulative
Foreign
Currency
Exchange
 
Total
Balances at December 31, 2012
 
$
(16,351
)
 
$
5,511

 
$
(10,840
)
Other comprehensive loss before reclassifications
 
(301
)
 
(1,390
)
 
(1,691
)
Amounts reclassified from accumulated other comprehensive loss
 
805

 

 
805

Net other comprehensive income (loss) for the period
 
504

 
(1,390
)
 
(886
)
Balances at June 30, 2013
 
$
(15,847
)
 
$
4,121

 
$
(11,726
)

13

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

The following table provides the details of the amounts reclassified from accumulated other comprehensive income (loss) into net income in the consolidated statements of operations for the three and six months ended June 30, 2014 and 2013:
Details about Accumulated Other Comprehensive
   Income (Loss) Components
 
Location of Reclassification
(Income (Expense)) in
Consolidated Statements
of Operations
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Amortization of pension and
   other post-retirement items
 
 
 
 
 
 
 
 
 
 
Prior service costs
 
(1)
 
$
(87
)
 
$
(95
)
 
$
(173
)
 
$
(190
)
Net loss
 
(1)
 
(139
)
 
(600
)
 
(272
)
 
(1,119
)
 
 
 
 
(226
)
 
(695
)
 
(445
)
 
(1,309
)
 
 
Provision for income
   taxes
 
86

 
268

 
170

 
504

 
 
 
 
(140
)
 
(427
)
 
(275
)
 
(805
)
Net unrealized gains on
   available-for-sale
   investments
 
 
 
 
 
 
 
 
 
 
Realized gain on
   available-for-sale
   investments
 
Other income, net
 
1,237

 

 
1,212

 

 
 
Provision for income
   taxes
 
(444
)
 

 
(435
)
 

 
 
 
 
793

 

 
$
777

 
$

Total reclassifications for
   the period
 
 
 
$
653

 
$
(427
)
 
$
502

 
$
(805
)
_____________
(1)
These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost. For additional information, please read Note 10 (Employee Benefits) to the financial statements included in the 2013 Form 10-K.
15. Commitments and Contingencies
The Company is subject to environmental laws and regulations that can impose civil and criminal sanctions and that may require it to mitigate the effects of contamination caused by the release or disposal of hazardous substances into the environment. Under 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 the Company's production sites have a history of industrial use, it is impossible to predict precisely what effect these legal requirements will have on the Company.
Contract Disputes with Goodrich and PolyOne. In connection with the 1990 and 1997 acquisitions of the Goodrich Corporation ("Goodrich") chemical manufacturing complex in Calvert City, Kentucky, Goodrich agreed to indemnify the Company for any liabilities related to preexisting contamination at the complex. For its part, the Company agreed to indemnify Goodrich for post-closing contamination caused by the Company's operations. The soil and groundwater at the complex, which does not include the Company's nearby polyvinyl chloride ("PVC") facility, had been extensively contaminated under Goodrich's operations. In 1993, Goodrich spun off the predecessor of PolyOne Corporation ("PolyOne"), and that predecessor assumed Goodrich's indemnification obligations relating to preexisting contamination.
In 2003, litigation arose among the Company, Goodrich and PolyOne with respect to the allocation of the cost of remediating contamination at the site. The parties settled this litigation in December 2007 and the case was dismissed. In the settlement the parties agreed that, among other things: (1) PolyOne would pay 100% of the costs (with specified exceptions), net of recoveries or credits from third parties, incurred with respect to environmental issues at the Calvert City site from August 1, 2007 forward; (2) either the Company or PolyOne might, from time to time in the future (but not more than once every five years), institute an arbitration proceeding to adjust that percentage; and (3) the Company and PolyOne would negotiate a new environmental remediation utilities and services agreement to cover the Company's provision to, or on behalf of, PolyOne of certain environmental remediation services at the site. The current environmental remediation activities at the

14

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

Calvert City complex do not have a specified termination date but are expected to last for the foreseeable future. The costs incurred by the Company that have been invoiced to PolyOne to provide the environmental remediation services were $3,284 in 2013. By letter dated March 16, 2010, PolyOne notified the Company 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 $1,400 from the Company in reimbursement of previously paid remediation costs. The arbitration is currently stayed.
State Administrative Proceedings. There are several administrative proceedings in Kentucky involving the Company, Goodrich and PolyOne related to the same manufacturing complex in Calvert City. In 2003, the Kentucky Environmental and Public Protection Cabinet (the "Cabinet") re-issued Goodrich's Resource Conservation and Recovery Act ("RCRA") permit which requires Goodrich to remediate contamination at the Calvert City manufacturing complex. Both Goodrich and PolyOne challenged various terms of the permit in an attempt to shift Goodrich'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") being conducted, under the auspices of the U.S. Environmental Protection Agency ("EPA"), pursuant to an Administrative Settlement Agreement ("AOC"), which became effective on December 9, 2009. See "Federal Administrative Proceedings" below. The proceedings have been postponed. Periodic status conferences will be held to evaluate whether additional proceedings will be required.
Federal Administrative Proceedings. In May 2009, the Cabinet sent a letter to the EPA requesting the EPA's assistance in addressing contamination at the Calvert City site under CERCLA. In its response to the Cabinet also in May 2009, the EPA stated that it concurred with the Cabinet's request and would incorporate work previously conducted under the Cabinet's RCRA authority into the EPA's cleanup efforts under CERCLA. Since 1983, the EPA has been addressing contamination at an abandoned landfill adjacent to the Company's plant which had been operated by Goodrich and which was being remediated pursuant to CERCLA. During the past three years, the EPA has directed Goodrich and PolyOne to conduct additional investigation activities at the landfill and at the Company's plant. In June 2009, the EPA notified the Company that the Company may have potential liability under section 107(a) of CERCLA at its 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. The Company negotiated, in conjunction with the other potentially responsible parties, the AOC and an order to conduct the RIFS. On July 12, 2013, the parties submitted separate draft RIFS reports to the EPA. The EPA has hired a contractor to complete the remedial investigation report.
Monetary Relief. Except as noted above with respect to the settlement of the contract litigation among the Company, Goodrich and PolyOne, none of the court, the Cabinet nor the EPA has established any allocation of the costs of remediation among the various parties that are involved in the judicial and administrative proceedings discussed above. At this time, the Company is not able to estimate the loss or reasonable possible loss, if any, on the Company's financial statements that could result from the resolution of these proceedings. Any cash expenditures that the Company might incur in the future with respect to the remediation of contamination at the complex would likely be spread out over an extended period. As a result, the Company believes it is unlikely that any remediation costs allocable to it will be material in terms of expenditures made in any individual reporting period.
In addition to the matters described above, the Company is involved in various routine legal proceedings incidental to the conduct of its business. The Company does not believe that any of these routine legal proceedings will have a material adverse effect on its financial condition, results of operations or cash flows.


15

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

16. Share Capital
Common Stock
On May 16, 2014, the stockholders of the Company approved an amendment to the Company's Amended and Restated Certificate of Incorporation to increase the Company's authorized shares of common stock from 150,000,000 shares to 300,000,000 shares, par value $0.01 per share. The Company is now authorized to issue 300,000,000 shares of common stock, par value $0.01 per share, of which 134,681,372 and 134,580,208 shares (on a post-split basis) were issued as of June 30, 2014 and December 31, 2013, respectively. Each share of common stock entitles the holder to one vote on all matters on which holders are permitted to vote, including the election of directors.
Stock Repurchase Program
In August 2011, the Company's Board of Directors authorized a stock repurchase program of the Company’s common stock totaling $100,000 (the "2011 Program"). Purchases under the 2011 Program began in September 2011. As of June 30, 2014 and December 31, 2013, the Company had repurchased 1,252,922 shares of its common stock (on a post-split basis) under this program. Shares repurchased under the 2011 Program are held by the Company as treasury stock and may be used for general corporate purposes, including for the 2013 Omnibus Incentive Plan. Beginning in May 2014, the Company began issuing treasury shares to employees and nonemployee directors for options exercised and for the release of restricted stock units. The cost of treasury shares issued was determined using the specific identification method.
17. Segment Information
The Company operates in two principal operating segments: Olefins and Vinyls. These segments are strategic business units that offer a variety of different products. The Company manages each segment separately as each business requires different technology and marketing strategies.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Net external sales
 
 
 
 
 
 
 
 
Olefins
 
 
 
 
 
 
 
 
Polyethylene
 
$
475,503

 
$
413,693

 
$
962,647

 
$
834,461

Styrene, feedstock and other
 
223,550

 
209,648

 
459,204

 
371,725

Total Olefins
 
699,053

 
623,341

 
1,421,851

 
1,206,186

Vinyls
 
 
 
 
 
 
 
 
PVC, caustic soda and other
 
168,762

 
205,104

 
359,289

 
400,350

Building products
 
130,761

 
110,602

 
245,112

 
197,158

Total Vinyls
 
299,523

 
315,706

 
604,401

 
597,508

 
 
$
998,576

 
$
939,047

 
$
2,026,252

 
$
1,803,694

 
 
 
 
 
 
 
 
 
Intersegment sales
 
 
 
 
 
 
 
 
Olefins
 
$
34,782

 
$
74,870

 
$
91,635

 
$
145,153

Vinyls
 
331

 
444

 
674

 
708

 
 
$
35,113

 
$
75,314

 
$
92,309

 
$
145,861

 
 
 
 
 
 
 
 
 
Income (loss) from operations
 
 
 
 
 
 
 
 
Olefins
 
$
238,657

 
$
187,661

 
$
510,990

 
$
348,719

Vinyls
 
38,129

 
52,906

 
17,015

 
96,569

Corporate and other
 
(9,998
)
 
(5,340
)
 
(13,162
)
 
(16,006
)
 
 
$
266,788

 
$
235,227

 
$
514,843

 
$
429,282

 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
 
 
 
Olefins
 
$
26,721

 
$
26,554

 
$
53,368

 
$
49,900

Vinyls
 
21,623

 
13,534

 
40,791

 
25,418

Corporate and other
 
158

 
122

 
315

 
248

 
 
$
48,502

 
$
40,210

 
$
94,474

 
$
75,566

 
 
 
 
 
 
 
 
 
Other income (expense), net
 
 
 
 
 
 
 
 
Olefins
 
$
1,199

 
$
1,151

 
$
2,653

 
$
5,162

Vinyls
 
(213
)
 
(520
)
 
(247
)
 
(946
)
Corporate and other
 
3,615

 
(726
)
 
4,704

 
(792
)
 
 
$
4,601

 
$
(95
)
 
$
7,110

 
$
3,424

 
 
 
 
 
 
 
 
 
Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
Olefins
 
$
83,502

 
$
70,140

 
$
177,052

 
$
125,617

Vinyls
 
10,430

 
19,690

 
360

 
33,410

Corporate and other
 
(1,525
)
 
(5,857
)
 
(1,630
)
 
(7,108
)
 
 
$
92,407

 
$
83,973

 
$
175,782

 
$
151,919

 
 
 
 
 
 
 
 
 
Capital expenditures
 
 
 
 
 
 
 
 
Olefins
 
$
43,448

 
$
28,040

 
$
72,522

 
$
78,080

Vinyls
 
62,262

 
118,983

 
143,382

 
219,300

Corporate and other
 
461

 
66

 
1,008

 
493

 
 
$
106,171

 
$
147,089

 
$
216,912

 
$
297,873

A reconciliation of total segment income from operations to consolidated income before income taxes is as follows:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2014
 
2013
 
2014
 
2013
Income from operations
 
$
266,788

 
$
235,227

 
$
514,843

 
$
429,282

Interest expense
 
(9,539
)
 
(5,343
)
 
(18,696
)
 
(11,624
)
Other income (expense), net
 
4,601

 
(95
)
 
7,110

 
3,424

Income before income taxes
 
$
261,850

 
$
229,789

 
$
503,257

 
$
421,082

 
 
June 30,
2014
 
December 31,
2013
Total assets
 
 
 
 
Olefins
 
$
1,607,210

 
$
1,557,510

Vinyls
 
1,808,849

 
1,740,595

Corporate and other
 
953,310

 
762,804

 
 
$
4,369,369

 
$
4,060,909



16

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

18. Subsequent Events
Initial Public Offering of WLKP
In March 2014, the Company formed Westlake Chemical Partners LP ("WLKP") to operate, acquire and develop ethylene production facilities and related assets. On August 4, 2014, WLKP closed its initial public offering of 12,937,500 common units at a price of $24.00 per unit, which included 1,687,500 units purchased by the underwriters through an over-allotment option. Net proceeds to WLKP from the sale of the units was approximately $286,263, net of underwriting discounts, structuring fees and estimated offering expenses of approximately $24,237. At the consummation of this offering, WLKP's assets consist of a 10.6% limited partner interest in Westlake Chemical OpCo LP ("OpCo"), as well as the general partner interest in OpCo. The Company retained an 89.4% limited partner interest in OpCo and a significant interest in WLKP. OpCo used the net proceeds from the purchase of its limited partner interest to establish a cash reserve of $55,400 for turnaround expenditures, to reimburse approximately $155,700 for capital expenditures incurred by the Company with respect to certain of the assets contributed to OpCo and to repay intercompany debt to the Company of approximately $75,144. The initial public offering represented the sale of a 47.8% interest in WLKP.
Amendment and Restatement of the Revolving Credit Facility
In July 2014, the Company entered into a third amendment and restatement to the revolving credit facility. The amendment and restatement extended the scheduled maturity date of the facility from September 16, 2016 to July 17, 2019, reduced the interest rate and facility fee payable under the facility and, among other things, amended the covenants restricting the Company’s ability to make distributions and acquisitions and investments.
Acquisition of Vinnolit Holdings GmbH Group
In May 2014, the Company announced that it had entered into a definitive agreement to acquire German-based Vinnolit Holdings GmbH and its subsidiary companies ("Vinnolit") for approximately €490,000 from several entities associated with Advent International Corporation. Vinnolit is an integrated global leader in specialty PVC resins, with a combined annual capacity of 1.7 billion pounds of PVC, including specialty paste and suspension grades, 1.5 billion pounds of vinyl chloride monomer ("VCM") and 1.0 billion pounds of caustic soda. This transaction closed on July 31, 2014.
General
Subsequent events were evaluated through the date on which the financial statements were issued.

17

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

19. Guarantor Disclosures
The Company's payment obligations under the 3.60% senior notes due 2022 are fully and unconditionally guaranteed by each of its current and future domestic 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"). Each Guarantor Subsidiary is 100% owned by Westlake Chemical Corporation. 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 Guarantor Subsidiaries and the remaining subsidiaries that do not guarantee the 3.60% senior notes due 2022 (the "Non-Guarantor Subsidiaries"), together with consolidating eliminations necessary to present the Company's results on a consolidated basis.

Condensed Consolidating Financial Information as of June 30, 2014
 
 
Westlake
Chemical
Corporation
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Balance Sheet
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
833,650

 
$
8,819

 
$
33,598

 
$

 
$
876,067

Marketable securities
 

 

 

 

 

Accounts receivable, net
 
12,499

 
995,379

 
4,145

 
(557,742
)
 
454,281

Inventories
 

 
419,659

 
17,860

 

 
437,519

Prepaid expenses and other
   current assets
 
95

 
18,169

 
2,204

 

 
20,468

Deferred income taxes
 
441

 
33,422

 
305

 

 
34,168

Total current assets
 
846,685

 
1,475,448

 
58,112

 
(557,742
)
 
1,822,503

Property, plant and equipment, net
 

 
2,210,754

 
6,295

 

 
2,217,049

Equity investments
 
3,148,210

 
103,650

 
30,186

 
(3,213,179
)
 
68,867

Other assets, net
 
32,535

 
231,938

 
1,249

 
(4,772
)
 
260,950

Total assets
 
$
4,027,430

 
$
4,021,790

 
$
95,842

 
$
(3,775,693
)
 
$
4,369,369

Current liabilities
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
533,491

 
$
204,830

 
$
14,870

 
$
(533,591
)
 
$
219,600

Accrued liabilities
 
12,817

 
177,648

 
1,015

 
(24,151
)
 
167,329

Total current liabilities
 
546,308

 
382,478

 
15,885

 
(557,742
)
 
386,929

Long-term debt
 
753,049

 
10,889

 

 

 
763,938

Deferred income taxes
 

 
462,930

 
632

 
(4,772
)
 
458,790

Other liabilities
 

 
31,599

 
40

 

 
31,639

Stockholders' equity
 
2,728,073

 
3,133,894

 
79,285

 
(3,213,179
)
 
2,728,073

Total liabilities and
stockholders' equity
 
$
4,027,430

 
$
4,021,790

 
$
95,842

 
$
(3,775,693
)
 
$
4,369,369



18

WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

Condensed Consolidating Financial Information as of December 31, 2013
 
 
Westlake
Chemical
Corporation
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
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

 
738,156

 
2,755

 
(316,333
)
 
428,457

Inventories
 

 
456,306

 
15,573

 

 
471,879

Prepaid expenses and other
   current assets
 
778

 
11,312

 
1,798

 

 
13,888

Deferred income taxes
 
441

 
33,422

 
306

 

 
34,169

Total current assets
 
665,434

 
1,245,423

 
54,558

 
(316,333
)
 
1,649,082

Property, plant and equipment, net
 

 
2,081,091

 
6,923