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EX-99.1 - EXHIBIT 99.1 - WESTLAKE CHEMICAL CORPexhibit991_20150930.htm
EX-31.2 - EXHIBIT 31.2 - WESTLAKE CHEMICAL CORPexhibit312_20150930.htm
EX-32.1 - EXHIBIT 32.1 - WESTLAKE CHEMICAL CORPexhibit321_20150930.htm
EX-31.1 - EXHIBIT 31.1 - WESTLAKE CHEMICAL CORPexhibit311_20150930.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 September 30, 2015
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 October 28, 2015 was 130,652,184.



INDEX




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
September 30,
2015
 
December 31,
2014
 
 
 
 
 
 
 
(in thousands of dollars, except
par values and share amounts)
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
961,925

 
$
880,601

Marketable securities
 
285,726

 

Accounts receivable, net
 
520,960

 
560,666

Inventories
 
430,006

 
525,776

Prepaid expenses and other current assets
 
18,272

 
11,807

Deferred income taxes
 
31,541

 
32,437

Total current assets
 
2,248,430

 
2,011,287

Property, plant and equipment, net
 
2,916,630

 
2,757,557

Equity investments
 
9,593

 
61,305

Other assets, net
 
 
 
 
Intangible assets, net
 
218,652

 
218,431

Deferred charges and other assets, net
 
131,100

 
165,410

Total other assets, net
 
349,752

 
383,841

Total assets
 
$
5,524,405

 
$
5,213,990

LIABILITIES AND EQUITY
 
 
 
 
Current liabilities
 
 
 
 
Accounts and notes payable
 
$
244,772

 
$
261,062

Accrued liabilities
 
290,115

 
276,118

Total current liabilities
 
534,887

 
537,180

Long-term debt
 
764,086

 
763,997

Deferred income taxes
 
534,824

 
536,066

Other liabilities
 
170,770

 
174,859

Total liabilities
 
2,004,567

 
2,012,102

Commitments and contingencies (Notes 8 and 19)
 


 


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;
   134,663,244 and 134,679,064 shares issued at September 30, 2015
   and December 31, 2014, respectively
 
1,347

 
1,347

Common stock, held in treasury, at cost; 3,722,899 and 1,787,546 shares
   at September 30, 2015 and December 31, 2014, respectively
 
(217,542
)
 
(96,372
)
Additional paid-in capital
 
540,342

 
530,441

Retained earnings
 
3,022,717

 
2,555,528

Accumulated other comprehensive loss
 
(121,865
)
 
(79,433
)
Total Westlake Chemical Corporation stockholders' equity
 
3,224,999

 
2,911,511

Noncontrolling interests
 
294,839

 
290,377

Total equity
 
3,519,838

 
3,201,888

Total liabilities and equity
 
$
5,524,405

 
$
5,213,990

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

1


WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
 
 
(in thousands of dollars, except per share data and share amounts)
Net sales
 
$
1,188,037

 
$
1,253,227

 
$
3,476,570

 
$
3,279,479

Cost of sales
 
876,761

 
891,707

 
2,527,567

 
2,324,978

Gross profit
 
311,276

 
361,520

 
949,003

 
954,501

Selling, general and administrative expenses
 
57,248

 
54,759

 
170,321

 
132,897

Income from operations
 
254,028

 
306,761

 
778,682

 
821,604

Other income (expense)
 
 
 
 
 
 
 
 
Interest expense
 
(8,211
)
 
(9,486
)
 
(26,760
)
 
(28,182
)
Other income (expense), net
 
2,636

 
(2,670
)
 
33,790

 
4,440

Income before income taxes
 
248,453

 
294,605

 
785,712

 
797,862

Provision for income taxes
 
60,033

 
124,449

 
236,824

 
300,231

Net income
 
188,420

 
170,156

 
548,888

 
497,631

Net income attributable to noncontrolling interests
 
4,816

 
2,399

 
13,847

 
2,399

Net income attributable to
   Westlake Chemical Corporation
 
$
183,604

 
$
167,757

 
$
535,041

 
$
495,232

Earnings per common share attributable to
   Westlake Chemical Corporation:
 
 
 
 
 
 
 
 
Basic
 
$
1.39

 
$
1.26

 
$
4.04

 
$
3.71

Diluted
 
$
1.39

 
$
1.25

 
$
4.02

 
$
3.69

Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
131,664,296

 
133,299,458

 
132,301,814

 
133,199,304

Diluted
 
132,121,235

 
133,846,059

 
132,786,534

 
133,743,145

Dividends per common share
 
$
0.1815

 
$
0.1650

 
$
0.5115

 
$
0.4170

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 September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015

2014
 
 
 
 
 
 
 
 
 
 
 
(in thousands of dollars)
Net income
 
$
188,420

 
$
170,156

 
$
548,888

 
$
497,631

Other comprehensive (loss) income, net of income taxes
 
 
 
 
 
 
 
 
Pension and other post-retirement benefits liability
 
 
 
 
 
 
 
 
Pension and other post-retirement reserves
   adjustment (excluding amortization)
 
(22
)
 
(31
)
 
(208
)
 
(62
)
Amortization of benefits liability
 
692

 
240

 
2,019

 
685

Income tax provision on pension and other
   post-retirement benefits liability
 
(232
)
 
(81
)
 
(621
)
 
(240
)
Foreign currency translation adjustments
 
(1,920
)
 
(37,792
)
 
(43,746
)
 
(37,882
)
Available-for-sale investments
 
 
 
 
 
 
 
 
Unrealized holding (losses) gains on
   investments
 
(716
)
 
2,129

 
3,987

 
6,960

Reclassification of net realized gain to
   net income
 

 

 
(3,795
)
 
(1,212
)
Income tax benefit (provision) on available-
   for-sale investments
 
257

 
(766
)
 
(68
)
 
(2,066
)
Other comprehensive loss
 
(1,941
)
 
(36,301
)
 
(42,432
)
 
(33,817
)
Comprehensive income
 
186,479

 
133,855

 
506,456

 
463,814

Comprehensive income attributable to
   noncontrolling interests, net of tax
 
4,816

 
2,399

 
13,847

 
2,399

Comprehensive income attributable to
   Westlake Chemical Corporation
 
$
181,663

 
$
131,456

 
$
492,609

 
$
461,415

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

3


WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
 
 
 
 
 
 
(in thousands of dollars)
Cash flows from operating activities
 
 
 
 
Net income
 
$
548,888

 
$
497,631

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
 
Depreciation and amortization
 
180,229

 
148,394

Provision for doubtful accounts
 
778

 
295

Amortization of debt issuance costs
 
1,504

 
1,172

Stock-based compensation expense
 
7,544

 
6,856

Loss from disposition of fixed assets
 
2,590

 
2,635

Gain from sales of securities
 
(3,795
)
 

Gain on acquisition, net of loss on the fair value remeasurement
   of preexisting equity interest
 
(21,045
)
 

Impairment of equity method investment
 
4,925

 

Deferred income taxes
 
7,585

 
34,459

Windfall tax benefits from share-based payment arrangements
 
(2,452
)
 
(6,670
)
Income from equity method investments, net of dividends
 
(1,016
)
 
(3,199
)
Other losses (gains), net
 
3,584

 
(495
)
Changes in operating assets and liabilities
 
 
 
 
Accounts receivable
 
54,937

 
6,055

Inventories
 
105,899

 
80,492

Prepaid expenses and other current assets
 
(5,496
)
 
458

Accounts payable
 
(30,511
)
 
(98,769
)
Accrued liabilities
 
(10,893
)
 
111,965

Other, net
 
(1,955
)
 
(5,155
)
Net cash provided by operating activities
 
841,300

 
776,124

Cash flows from investing activities
 
 
 
 
Acquisition of business, net of cash acquired
 
15,782

 
(611,087
)
Additions to property, plant and equipment
 
(329,236
)
 
(311,183
)
Proceeds from disposition of assets
 
17

 
145

Proceeds from disposition of equity method investment
 
27,865

 

Proceeds from repayment of loan acquired
 

 
45,923

Proceeds from sales and maturities of securities
 
16,056

 
342,045

Purchase of securities
 
(282,542
)
 
(117,332
)
Settlements of derivative instruments
 
(1,535
)
 
(689
)
Net cash used for investing activities
 
(553,593
)
 
(652,178
)
Cash flows from financing activities
 
 
 
 
Capitalized debt issuance costs
 

 
(1,167
)
Dividends paid
 
(67,852
)
 
(55,690
)
Distributions to noncontrolling interests
 
(10,982
)
 

Net proceeds from issuance of Westlake Chemical Partners LP common units
 

 
286,088

Proceeds from exercise of stock options
 
984

 
5,502

Proceeds from issuance of notes payable
 
19,483

 

Repayment of notes payable
 
(32,954
)
 

Repurchase of common stock for treasury
 
(114,254
)
 
(9,495
)
Windfall tax benefits from share-based payment arrangements
 
2,452

 
6,670

Net cash (used for) provided by financing activities
 
(203,123
)
 
231,908

Effect of exchange rate changes on cash and cash equivalents
 
(3,260
)
 
(3,687
)
Net increase in cash and cash equivalents
 
81,324

 
352,167

Cash and cash equivalents at beginning of period
 
880,601

 
461,301

Cash and cash equivalents at end of period
 
$
961,925

 
$
813,468

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, 2014 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, 2014 (the "2014 Form 10-K"), filed with the SEC on February 25, 2015. 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, 2014.
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 September 30, 2015, its results of operations for the three and nine months ended September 30, 2015 and 2014 and the changes in its cash position for the nine months ended September 30, 2015 and 2014.
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, 2015 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.
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. In July 2015, the FASB deferred the effective date for the revenue recognition standard. The accounting standard will now be effective for reporting periods beginning after December 15, 2017. 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.
Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items
In January 2015, the FASB issued an accounting standards update to simplify income statement classification by removing the concept of extraordinary items from U.S. GAAP. Under the new standard, an unusual and infrequent event or transaction is no longer allowed to be separately disclosed as "extraordinary." The standard retains the existing requirement to separately present items that are of an unusual nature or occur infrequently on a pre-tax basis within income from continuing operations. The new guidance also requires similar separate presentation of items that are both unusual and infrequent on a pre-tax basis within income from continuing operations. The standard allows for either prospective or retrospective application. If adopted prospectively, both the nature and amount of any subsequent adjustments to previously reported extraordinary items must be disclosed. The accounting standard will be effective for reporting periods beginning after December 15, 2015 and is not expected to have an impact on the Company's 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)

Amendments to the Consolidation Analysis
In February 2015, the FASB issued an accounting standards update making certain changes to the current consolidation guidance. The amendments affect both the variable interest entity and voting interest entity consolidation models. The new standard changes the consideration of substantive rights, related party interests and fees paid to the decision maker when applying the variable interest entity consolidation model and eliminates certain guidance for limited partnerships and similar entities under the voting interest consolidation model. The accounting standard will be effective for annual periods beginning after December 15, 2015 and is not expected to have an impact on the Company's consolidated financial position, results of operations and cash flows.
Simplifying the Presentation of Debt Issuance Costs
In April 2015, the FASB issued an accounting standards update on simplifying the presentation of debt issuance costs, which requires all costs incurred to issue debt to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. The accounting standard will be effective for reporting periods beginning after December 15, 2015 and is not expected to have an impact on the Company's consolidated financial position, results of operations and cash flows.
Simplifying the Measurement of Inventory
In July 2015, the FASB issued an accounting standards update that requires entities to measure inventory at the lower of cost or net realizable value rather than at the lower of cost or market. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Under the new standard, entities will no longer need to calculate other measures of "market." The new accounting guidance applies only to inventories for which cost is determined by methods other than last-in first-out and the retail inventory method. The accounting standard will be effective for reporting periods beginning after December 15, 2016 and is not expected to have a significant impact on the Company's consolidated financial position, results of operations and cash flows.
Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
In August 2015, the FASB issued final guidance incorporating into the Accounting Standards Codification a June 2015 SEC staff announcement that the SEC staff will not object to an entity presenting the cost of securing a revolving line of credit as an asset, regardless of whether a balance is outstanding. The announcement came in response to questions that arose after the FASB issued the Simplifying the Presentation of Debt Issuance Costs standard in April 2015, which standard requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset. That standard, as issued, did not address revolving lines of credit, which may not have outstanding balances. An entity that repeatedly draws on a revolving credit facility and then repays the balance could also present the cost as an asset and reclassify all or a portion of it as a direct deduction from the liability whenever a balance is outstanding. Regardless of asset or contra-liability presentation, debt issuance costs should be amortized over the term of the arrangement. The accounting standard became effective upon announcement in June 2015 and is not expected to have an impact on the Company's consolidated financial position, results of operations and cash flows.
Simplifying the Accounting for Measurement-Period Adjustments
In September 2015, the FASB issued an accounting standards update that requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The guidance requires that the acquirer record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The new guidance further requires specific disclosure pertaining to the measurement period adjustments. The accounting standard will be effective for reporting periods beginning after December 15, 2015 and is not expected to have a significant impact on the Company's consolidated financial position, results of operations and cash flows.

6

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 $530,806 and $509,811 of held-to-maturity securities with original maturities of three months or less, primarily consisting of corporate debt securities, classified as cash equivalents at September 30, 2015 and December 31, 2014, 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:
 
September 30,
2015
 
December 31,
2014
Current
$
285,726

 
$

Non-current
4,098

 
15,414

Total available-for-sale securities
$
289,824

 
$
15,414

The cost, gross unrealized gains, gross unrealized losses and fair value of the Company's available-for-sale securities were as follows:
 
 
September 30, 2015
 
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Debt securities
 
 
 
 
 
 
 
 
Corporate bonds
 
$
194,310

 
$
306

 
$
(171
)
 
$
194,445

U.S. government debt
 
55,073

 
80

 
(2
)
 
55,151

Asset-backed securities
 
36,081

 
66

 
(17
)
 
36,130

Equity securities
 
3,804

 
294

 

 
4,098

Total available-for-sale securities
 
$
289,268

 
$
746

 
$
(190
)
 
$
289,824

 
 
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

As of September 30, 2015 and December 31, 2014, net unrealized gains on the Company's available-for-sale securities of $357 and $233, respectively, net of income tax expense of $199 and $131, respectively, were recorded in accumulated other comprehensive income. See Note 13 for the fair value hierarchy of the Company's available-for-sale securities.
As of September 30, 2015, the corporate bond securities held by the Company had maturities ranging between two months to three years, the U.S. government debt securities held by the Company, excluding U.S. government agency mortgage-backed securities, had maturities ranging between four months to three years, the U.S. government agency mortgage-backed securities held by the Company had maturities ranging between five to six years and the asset-backed securities held by the Company had maturities ranging between one to 26 years.

7

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

The proceeds from sales and maturities of available-for-sale securities and the gross realized gains and losses included in the consolidated statements of operations are reflected in the table below. The cost of securities sold was determined using the specific identification method.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Proceeds from sales and maturities of securities
 
$
1,019

 
$

 
$
16,056

 
$
342,045

Gross realized gains
 

 

 
3,795

 
1,311

Gross realized losses
 

 

 

 
(99
)
3. Accounts Receivable
Accounts receivable consist of the following:
 
 
September 30,
2015
 
December 31,
2014
Trade customers
 
$
495,318

 
$
525,546

Affiliates
 

 
437

Allowance for doubtful accounts
 
(13,967
)
 
(13,468
)
 
 
481,351

 
512,515

Federal and state taxes
 
19,819

 
8,919

Other
 
19,790

 
39,232

Accounts receivable, net
 
$
520,960

 
$
560,666

4. Inventories
Inventories consist of the following:
 
 
September 30,
2015
 
December 31,
2014
Finished products
 
$
238,671

 
$
300,909

Feedstock, additives and chemicals
 
118,498

 
158,635

Materials and supplies
 
72,837

 
66,232

Inventories
 
$
430,006

 
$
525,776

5. Property, Plant and Equipment
As of September 30, 2015, the Company had property, plant and equipment, net totaling $2,916,630. 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 $52,208 and $45,080 is included in cost of sales in the consolidated statements of operations for the three months ended September 30, 2015 and 2014, respectively. Depreciation expense on property, plant and equipment of $153,129 and $123,000 is included in cost of sales in the consolidated statements of operations for the nine months ended September 30, 2015 and 2014, respectively.

8

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

6. Other Assets
Amortization expense on intangible and other assets of $9,542 and $9,283 is included in the consolidated statements of operations for the three months ended September 30, 2015 and 2014, respectively. Amortization expense on intangible and other assets of $28,604 and $26,566 is included in the consolidated statements of operations for the nine months ended September 30, 2015 and 2014, respectively.
Goodwill
Goodwill for the Olefins segment was $29,990 at September 30, 2015 and December 31, 2014. Goodwill for the Vinyls segment was $32,026 at September 30, 2015 and December 31, 2014. There were no changes in the carrying amount of goodwill by operating segments for the nine months ended September 30, 2015.
7. Accounts and Notes Payable
Accounts and notes payable consist of the following:
 
 
September 30,
2015
 
December 31,
2014
Accounts payable
 
$
237,622

 
$
261,062

Notes payable to banks
 
7,150

 

Accounts and notes payable
 
$
244,772

 
$
261,062

8. Long-Term Debt
Long-term debt consists of the following:
 
 
September 30,
2015
 
December 31,
2014
3.60% senior notes due 2022
 
$
249,197

 
$
249,108

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
 
$
764,086

 
$
763,997

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 $200,000) under certain circumstances if the lenders agree to commit to such an increase. At September 30, 2015, 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 1.25% to 1.75%, provided that so long as the Company is rated investment grade, the margin for LIBOR loans will not exceed 1.50%, or a base rate plus a spread ranging from 0.00% to 0.50%. The revolving credit facility also requires an unused commitment fee of 0.25% 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 July 17, 2019. As of September 30, 2015, the Company had outstanding letters of credit totaling $29,953 and borrowing availability of $346,374 under the revolving credit facility. 

9

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

9. Stockholders' Equity
Changes in stockholders' equity for the nine months ended September 30, 2015 and 2014 were as follows:
 
 
Common
Stock
 
Common
Stock,
Held in
Treasury
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive 
Income (Loss)
 
Noncontrolling
Interests
 
Total
Balances at December 31, 2014
 
$
1,347

 
$
(96,372
)
 
$
530,441

 
$
2,555,528

 
$
(79,433
)
 
$
290,377

 
$
3,201,888

Net income
 

 

 

 
535,041

 

 
13,847

 
548,888

Other comprehensive income
   (loss), net of income taxes:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension and other post-
   retirement benefits
   liability
 

 

 

 

 
1,190

 

 
1,190

Foreign currency
   translation adjustments
 

 

 

 

 
(43,746
)
 

 
(43,746
)
Net unrealized holding
   gains on investments
 

 

 

 

 
124

 

 
124

Common stock repurchased
 

 
(122,249
)
 

 

 

 

 
(122,249
)
Shares issued—stock-
   based compensation
 

 
1,079

 
(95
)
 

 

 

 
984

Stock-based compensation,
   net of tax on stock options
   exercised
 

 

 
9,996

 

 

 

 
9,996

Dividends paid
 

 

 

 
(67,852
)
 

 

 
(67,852
)
Distributions to noncontrolling
   interests
 

 

 

 

 

 
(10,982
)
 
(10,982
)
Noncontrolling interest in
   acquired business
 

 

 

 

 

 
1,597

 
1,597

Balances at September 30, 2015
 
$
1,347

 
$
(217,542
)
 
$
540,342

 
$
3,022,717

 
$
(121,865
)
 
$
294,839

 
$
3,519,838

 
 
Common
Stock
 
Common
Stock,
Held in
Treasury
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive 
Income (Loss)
 
Noncontrolling
Interests
 
Total
Balances at December 31, 2013
 
$
1,346

 
$
(46,220
)
 
$
511,432

 
$
1,954,661

 
$
(2,616
)
 
$

 
$
2,418,603

Net income
 

 

 

 
495,232

 

 
2,399

 
497,631

Other comprehensive income
   (loss), net of income taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension and other post-
   retirement benefits
   liability
 

 

 

 

 
383

 

 
383

Foreign currency
   translation adjustments
 

 

 

 

 
(37,882
)
 

 
(37,882
)
Net unrealized holding
   gains on investments
 

 

 

 

 
3,682

 

 
3,682

Common stock repurchased
 

 
(9,495
)
 

 

 

 

 
(9,495
)
Shares issued—stock-
   based compensation
 
1

 
2,467

 
3,034

 

 

 

 
5,502

Stock-based compensation,
   net of tax on stock options
   exercised
 

 

 
13,526

 

 

 

 
13,526

Dividends paid
 

 

 

 
(55,690
)
 

 

 
(55,690
)
Issuance of Westlake Chemical
   Partners LP common units
 

 

 

 

 

 
286,088

 
286,088

Balances at September 30, 2014
 
$
1,347

 
$
(53,248
)
 
$
527,992

 
$
2,394,203

 
$
(36,433
)
 
$
288,487

 
$
3,122,348


10

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

Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2015 and 2014 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, 2014
 
$
(23,442
)
 
$
(56,224
)
 
$
233

 
$
(79,433
)
Other comprehensive (loss) income before
   reclassifications
 
(128
)
 
(43,746
)
 
2,556

 
(41,318
)
Amounts reclassified from accumulated other
   comprehensive loss (income)
 
1,318

 

 
(2,432
)
 
(1,114
)
Net other comprehensive income (loss) for the period
 
1,190

 
(43,746
)
 
124

 
(42,432
)
Balances at September 30, 2015
 
$
(22,252
)
 
$
(99,970
)
 
$
357

 
$
(121,865
)
 
 
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
 
(39
)
 
(37,882
)
 
4,459

 
(33,462
)
Amounts reclassified from accumulated other
   comprehensive loss (income)
 
422

 

 
(777
)
 
(355
)
Net other comprehensive income (loss) for the period
 
383

 
(37,882
)
 
3,682

 
(33,817
)
Balances at September 30, 2014
 
$
(6,313
)
 
$
(33,978
)
 
$
3,858

 
$
(36,433
)
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 nine months ended September 30, 2015 and 2014:
Details about Accumulated
   Other Comprehensive
   Income (Loss) Components
 
Location of Reclassification
(Income (Expense)) in
Consolidated Statements
of Operations
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Amortization of pension and
   other post-retirement items
 
 
 
 
 
 
 
 
 
 
Prior service costs
 
(1)
 
$

 
$
(87
)
 
$

 
$
(261
)
Net loss
 
(1)
 
(692
)
 
(153
)
 
(2,019
)
 
(424
)
 
 
 
 
(692
)
 
(240
)
 
(2,019
)
 
(685
)
 
 
Provision for income
   taxes
 
241

 
92

 
701

 
263

 
 
 
 
(451
)
 
(148
)
 
(1,318
)
 
(422
)
Net unrealized gains on
   available-for-sale
   investments
 
 
 
 
 
 
 
 
 
 
Realized gain on
   available-for-sale
   investments
 
Other income
   (expense), net
 

 

 
3,795

 
1,212

 
 
Provision for income
   taxes
 

 

 
(1,363
)
 
(435
)
 
 
 
 

 

 
2,432

 
777

Total reclassifications for
   the period
 
 
 
$
(451
)
 
$
(148
)
 
$
1,114

 
$
355


11

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

_____________
(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 2014 Form 10-K.
10. Pension and Post-Retirement Benefit Costs
Defined Benefit Plans
Components of net periodic benefit cost for the Company's pension plans are as follows:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
U.S.
Plans
 
Non-U.S.
Plans
 
U.S.
Plans
 
Non-U.S.
Plans
 
U.S.
Plans
 
Non-U.S.
Plans
 
U.S.
Plans
 
Non-U.S.
Plans
Service cost
 
$

 
$
416

 
$
83

 
$
248

 
$
29

 
$
1,248

 
$
250

 
$
248

Interest cost
 
487

 
528

 
576

 
562

 
1,519

 
1,585

 
1,747

 
562

Expected return on plan assets
 
(712
)
 

 
(777
)
 

 
(2,237
)
 

 
(2,363
)
 

Amortization of prior
   service cost
 

 

 
74

 

 

 

 
223

 

Amortization of net loss
 
333

 
263

 
71

 

 
942

 
789

 
204

 

Net periodic benefit cost
 
$
108

 
$
1,207

 
$
27

 
$
810

 
$
253

 
$
3,622

 
$
61

 
$
810

The Company made no contribution to the U.S. salaried pension plan in the first nine months of 2015. The Company contributed $2,447 to the U.S. salaried pension plan in the first nine months of 2014. The Company contributed $349 and $916 to the U.S. wage pension plan in the first nine months of 2015 and 2014, respectively. The Company's funding policy for its U.S. plans is consistent with the minimum funding requirements of federal law and regulations, and based on preliminary estimates, the Company expects to make no contribution for the salaried pension plan and no further contribution to the wage pension plan for the fiscal year ending December 31, 2015.
Other Post-retirement Benefits
Components of net periodic benefit cost for the Company's other post-retirement benefits are as follows:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
U.S. Plans
 
U.S. Plans
 
U.S. Plans
 
U.S. Plans
Service cost
 
$
6

 
$
6

 
$
17

 
$
16

Interest cost
 
149

 
185

 
448

 
548

Amortization of prior service cost
 

 
13

 

 
38

Amortization of net loss
 
96

 
82

 
288

 
220

Net periodic benefit cost
 
$
251

 
$
286

 
$
753

 
$
822

11. Stock-Based Compensation
Under the Westlake Chemical Corporation 2013 Omnibus Incentive Plan (as amended and restated, the "2013 Plan"), all employees and non-employee 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 non-employee 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 $2,639 and $2,346 for the three months ended September 30, 2015 and 2014, respectively, and $7,544 and $6,856 for the nine months ended September 30, 2015 and 2014, respectively.

12

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

12. 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, are included in cost of sales in the consolidated statement of operations. The Company had no derivative instruments that were designated as fair value hedges for the nine months ended September 30, 2015 and 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 nine months ended September 30, 2015 and 2014.
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 September 30, 2015 and December 31, 2014.
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
 
 
September 30,
2015
 
December 31,
2014
Not designated as hedging instruments
 
 
 
 
 
 
Commodity forward contracts
 
Accounts receivable, net
 
$
2,722

 
$
3,145

Commodity forward contracts

 
Deferred charges and
   other assets, net
 
2,017

 

Total derivative assets
 
 
 
$
4,739

 
$
3,145

 
 
Derivative Liabilities
 
 
Balance Sheet Location
 
Fair Value as of
 
 
September 30,
2015
 
December 31,
2014
Not designated as hedging instruments
 
 
 
 
 
 
Commodity forward contracts
 
Accrued liabilities
 
$
5,421

 
$
6,549

Commodity forward contracts
 
Other liabilities
 
9,846

 
3,559

Total derivative liabilities
 
 
 
$
15,267

 
$
10,108

 
 
 
 
 
 
 
 
 
 
 

13

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

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 September 30,
 
Nine Months Ended September 30,
2015
 
2014
 
2015
 
2014
Commodity forward contracts
 
Gross profit
 
$
(9,314
)
 
$
(6,937
)
 
$
(4,478
)
 
$
(7,308
)
See Note 13 for the fair value of the Company's derivative instruments.
13. 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:
 
 
September 30, 2015
 
 
Level 1
 
Level 2
 
Total
Derivative instruments
 
 
 
 
 
 
Risk management assets—Commodity forward contracts
 
$
4,700

 
$
39

 
$
4,739

Risk management liabilities—Commodity forward contracts
 
(8,395
)
 
(6,872
)
 
(15,267
)
Marketable securities
 
 
 
 
 
 
Available-for-sale securities
 
57,733

 
232,091

 
289,824

 
 
 
 
 
 
 
 
 
December 31, 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

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.
There were no transfers in or out of Levels 1 and 2 of the fair value hierarchy for the nine months ended September 30, 2015 and 2014.
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 and notes 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 and notes 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

14

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

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.
 
 
September 30, 2015
 
December 31, 2014
 
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
3.60% senior notes due 2022
 
$
249,197

 
$
246,843

 
$
249,108

 
$
248,630

6 ½% senior notes due 2029
 
100,000

 
116,663

 
100,000

 
116,384

6 ¾% senior notes due 2032
 
250,000

 
273,655

 
250,000

 
285,545

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

 
103,740

 
89,000

 
106,504

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

 
74,719

 
65,000

 
77,784

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

 
10,889

 
10,889

 
10,889

14. Income Taxes
The effective income tax rate was 24.2% for the three months ended September 30, 2015. The effective income tax rate for the three months ended September 30, 2015 was below the U.S. federal statutory rate of 35.0% primarily due to the benefit of state tax credits, the domestic manufacturing deduction, income attributable to noncontrolling interests, the foreign earnings rate differential, the increased benefit in certain prior years' deductions due to a change in the calculation methodology of the domestic manufacturing deduction and adjustments related to prior years' tax returns as filed, partially offset by state income taxes. The effective income tax rate was 42.2% for the three months ended September 30, 2014. The effective income tax rate for the three months ended September 30, 2014 was above the U.S. federal statutory rate of 35.0% primarily due to state income taxes, partially offset by the domestic manufacturing deduction.
The effective income tax rate was 30.1% for the nine months ended September 30, 2015. The effective income tax rate for the 2015 period was below the U.S. federal statutory rate of 35.0% primarily due to the benefit of state tax credits, the domestic manufacturing deduction, income attributable to noncontrolling interests, the non-recognition of tax related to the bargain purchase of a controlling interest in Suzhou Huasu Plastics Co., Ltd., the increased benefit in certain prior years' deductions due to a change in the calculation methodology of the domestic manufacturing deduction and adjustments related to prior years' tax returns as filed and the foreign earnings rate differential, partially offset by state income taxes. The effective income tax rate was 37.6% for the nine months ended September 30, 2014. The effective income tax rate for the 2014 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 were no unrecognized tax benefits for the nine months ended September 30, 2015. The Company recognizes penalties and interest accrued related to unrecognized tax benefits in income tax expense. As of September 30, 2015, the Company had no 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 2010.
15. 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 September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Net income attributable to
   Westlake Chemical Corporation
 
$
183,604

 
$
167,757

 
$
535,041

 
$
495,232

Less:
 
 
 
 
 
 
 
 
Net income attributable to participating securities
 
(195
)
 
(353
)
 
(653
)
 
(1,099
)
Net income attributable to common shareholders
 
$
183,409

 
$
167,404

 
$
534,388

 
$
494,133


15

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

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 September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Weighted average common shares—basic
 
131,664,296

 
133,299,458

 
132,301,814

 
133,199,304

Plus incremental shares from:
 
 
 
 
 
 
 
 
Assumed exercise of options
 
456,939

 
546,601

 
484,720

 
543,841

Weighted average common shares—diluted
 
132,121,235

 
133,846,059

 
132,786,534

 
133,743,145

 
 
 
 
 
 
 
 
 
Earnings per common share attributable to
   Westlake Chemical Corporation:
 
 
 
 
 
 
 
 
Basic
 
$
1.39

 
$
1.26

 
$
4.04

 
$
3.71

Diluted
 
$
1.39

 
$
1.25

 
$
4.02

 
$
3.69

Excluded from the computation of diluted earnings per share are options to purchase 315,285 and 295,825 shares of common stock for the three and nine months ended September 30, 2015, respectively. These options were outstanding during the periods reported but were excluded because the effect of including them would have been antidilutive. There were no options excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2014.
16. Supplemental Information
Accrued Liabilities
Accrued liabilities were $290,115 and $276,118 at September 30, 2015 and December 31, 2014, respectively. Accrued rebates and accrued incentive compensation, which are components of accrued liabilities, were $39,046 and $43,151 at September 30, 2015, respectively, and $49,900 and $37,626 at December 31, 2014, respectively. No other component of accrued liabilities was more than five percent of total current liabilities.
Other Liabilities
Other liabilities were $170,770 and $174,859 at September 30, 2015 and December 31, 2014, respectively. Non-current pension obligation, which is a component of other liabilities, was $127,235 and $136,296 at September 30, 2015 and December 31, 2014, respectively. No other component of other liabilities was more than five percent of total liabilities.
Other Income (Expense), Net
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Interest income
 
$
1,631

 
$
341

 
$
3,383

 
$
2,669

Dividend income
 

 

 
3,328

 

Foreign exchange currency (losses) gains, net
 
(731
)
 
(6,450
)
 
1,140

 
(6,695
)
Income from equity method investments
 
664

 
3,304

 
5,278

 
7,244

Impairment of equity method investment
 

 

 
(4,925
)
 

Gain on acquisition and related expenses, net
 

 

 
20,430

 

Gain from sales of equity securities
 

 

 
3,795

 

Other
 
1,072

 
135

 
1,361

 
1,222

Other income (expense), net
 
$
2,636

 
$
(2,670
)
 
$
33,790

 
$
4,440


16

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

17. Acquisition
On June 1, 2015, the Company acquired an additional 35.7% equity interest in Suzhou Huasu Plastics Co., Ltd. ("Huasu") from INEOS Chlor Vinyls Holdings B.V., increasing its interest in Huasu to 95.0%. Huasu is a polyvinyl chloride ("PVC") joint venture based near Shanghai, People's Republic of China and has a combined annual capacity of 300 million pounds of PVC resin, 145 million pounds of PVC film and sheet and 33 million pounds of building products.
Prior to the acquisition of this 35.7% interest, the Company owned a 59.3% interest in Huasu. The Company accounted for the investment using the equity method of accounting because Huasu did not meet the definition of a variable interest entity and because contractual arrangements giving certain substantive participatory rights to minority shareholders prevented the Company from exercising a controlling financial interest over Huasu. As a result of the Company obtaining control over Huasu, the Company's 59.3% interest was remeasured to fair value, resulting in a loss of $1,505, which is included in other income (expense), net in the consolidated statements of operations.
The closing date purchase price of $5,518 was paid with available cash on hand. The acquisition is being accounted for under the acquisition method of accounting. The transaction resulted in a bargain purchase acquisition-date gain of $22,550 and is recognized in other income (expense), net in the consolidated statements of operations. The Company believes there are several factors that contributed to this transaction resulting in a bargain purchase acquisition-date gain, including the slowdown in the growth of, and current weakness in, the Chinese economy. The assets acquired and liabilities assumed and the results of operations of this acquired business are included in the Vinyls segment. Huasu's net sales and earnings included in the consolidated statements of operations since the acquisition date have not been presented separately as they are not material to the Company's consolidated statements of operations for the three and nine months ended September 30, 2015. The acquisition-related costs recognized in the consolidated statements of operations for the three and nine months ended September 30, 2015 are not material. The pro forma impact of this business combination has not been presented as it is not material to the Company's consolidated statements of operations for the nine months ended September 30, 2015 and 2014.
The following table summarizes the consideration transferred and the estimated fair value of identified assets acquired and liabilities assumed at the date of acquisition. The final determination of fair value for certain assets and liabilities will be completed as soon as the information necessary to complete the analysis is obtained. These amounts will be finalized as soon as possible, but no later than one year from the acquisition date.
Fair value of consideration transferred—cash
 
$
5,518

Preexisting balances between the Company and Huasu, net
 
(8,538
)
Fair value of the Company's investment in Huasu before the business combination (1)
 
18,890

Fair value of the noncontrolling interest in Huasu (1)
 
1,597

 
 
$
17,467

 
 
 
Preliminary allocation of consideration transferred to net assets acquired:
 
 
Cash
 
$
21,300

Working capital, excluding inventory and cash (2)
 
(5,461
)
Inventories
 
17,717

Property, plant and equipment
 
19,786

Other assets
 
7,760

Notes payable to banks
 
(21,085
)
Total identifiable net assets
 
40,017

Bargain purchase gain on acquisition
 
$
22,550

_____________
(1)
The fair values of the Company's 59.3% equity interest and the noncontrolling interest were estimated using internally developed, unobservable inputs (Level 3 inputs in the fair value hierarchy of fair value accounting) based on a cost approach.
(2)
The fair value of accounts receivable acquired is $2,515, with the gross contractual amount being $3,006. The Company expects $491 to be uncollectible.

17

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

18. Insurance Recovery
During the second and third quarters of 2015, the Company's production rates and operating costs at its Knapsack, Germany and Cologne, Germany facilities were negatively impacted due to an interruption of feedstock supply as a result of a fire at a third-party supplier's ethylene production facility. For the three and nine months ended September 30, 2015, the Company recognized approximately $3,347 and $7,809, respectively, as a partial insurance recovery related to business interruption costs, primarily for additional costs incurred to procure the necessary feedstock and other costs as a result of the fire at the third-party facility. The partial insurance recovery is included in cost of sales in the consolidated statements of operations.
19. 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.
European Regulations. Under the Industrial Emission Directive ("IED"), European Union member state governments are expected to adopt rules and implement environmental permitting programs relating to air, water and waste for industrial facilities. In this context, concepts such as BAT ("best available technique") are being explored. Future implementation of these concepts may result in technical modifications in the Company's European 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." The Company is unable to predict the impact these requirements and concepts may have on its future costs of compliance.
Contract Disputes with Goodrich and PolyOne. In connection with the 1990 and 1997 acquisitions of the Goodrich Corporation ("Goodrich") chemical manufacturing facility in Calvert City, Kentucky, Goodrich agreed to indemnify the Company for any liabilities related to preexisting contamination at the site. 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 site, which does not include the Company's nearby 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 Calvert City site 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 $2,805 in 2014. 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 site 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 site. 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

18

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

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. 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, an AOC and an order to conduct a 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 site 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.
Potential Flare Modifications. For several years, the EPA has been conducting an enforcement initiative against petroleum refineries and petrochemical plants with respect to emissions from flares. A number of companies 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, the Company received a Clean Air Act Section 114 Information Request from the EPA which sought information regarding flares at the Calvert City and Lake Charles, Louisiana facilities. The EPA has informed the Company that the information provided leads the EPA to believe that some of the flares are out of compliance with applicable standards. The EPA has demanded that the Company conduct additional flare sampling and provide supplemental information. The Company is currently in negotiations with the 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 not agreed that any flares are out of compliance or that any corrective actions are warranted. Depending on the outcome of 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.
Louisiana Notice of Violations. The Louisiana Department of Environmental Quality ("LDEQ") has issued notices of violations ("NOVs") regarding the Company's assets for various air compliance issues. The Company is working with LDEQ to settle these claims, and a global settlement of all claims is being discussed. Such global settlement may result in a total civil penalty of approximately $200.
In addition to the matters described above, the Company is involved in various legal proceedings incidental to the conduct of its business. The Company does not believe that any of these legal proceedings will have a material adverse effect on its financial condition, results of operations or cash flows.

19

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

20. 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 September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Net external sales
 
 
 
 
 
 
 
 
Olefins
 
 
 
 
 
 
 
 
Polyethylene
 
$
423,631

 
$
498,450

 
$
1,283,545

 
$
1,461,097

Styrene, feedstock and other
 
164,466

 
204,647

 
508,507

 
663,851

Total Olefins
 
588,097

 
703,097

 
1,792,052

 
2,124,948

Vinyls
 
 
 
 
 
 
 
 
PVC, caustic soda and other
 
468,235

 
416,771

 
1,315,101

 
776,060

Building products
 
131,705

 
133,359

 
369,417