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 March 31, 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 April 29, 2015 was 132,861,942 .


INDEX

 
 
Item
Page
 
 
 
 

Table of Contents


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
March 31,
2015
 
December 31,
2014
 
 
 
 
 
 
 
(in thousands of dollars, except
par values and share amounts)
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
945,649

 
$
880,601

Accounts receivable, net
 
527,127

 
560,666

Inventories
 
480,380

 
525,776

Prepaid expenses and other current assets
 
18,018

 
11,807

Deferred income taxes
 
30,988

 
32,437

Total current assets
 
2,002,162

 
2,011,287

Property, plant and equipment, net
 
2,751,486

 
2,757,557

Equity investments
 
64,721

 
61,305

Other assets, net
 
 
 
 
Intangible assets, net
 
207,254

 
218,431

Deferred charges and other assets, net
 
154,162

 
165,410

Total other assets, net
 
361,416

 
383,841

Total assets
 
$
5,179,785

 
$
5,213,990

LIABILITIES AND EQUITY
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
247,493

 
$
261,062

Accrued liabilities
 
205,714

 
276,118

Total current liabilities
 
453,207

 
537,180

Long-term debt
 
764,027

 
763,997

Deferred income taxes
 
534,679

 
536,066

Other liabilities
 
157,130

 
174,859

Total liabilities
 
1,909,043

 
2,012,102

Commitments and contingencies (Notes 7 and 16)
 


 


Stockholders' equity
 
 
 
 
Preferred stock, $0.01 par value, 50,000,000 shares authorized;
   no shares issued and outstanding
 
—

 
—

Common stock, $0.01 par value, 300,000,000 shares authorized;
   134,679,064 and 134,679,064 shares issued at March 31, 2015
   and December 31, 2014, respectively
 
1,347

 
1,347

Common stock, held in treasury, at cost; 1,817,122 and 1,787,546 shares
   at March 31, 2015 and December 31, 2014, respectively
 
(98,275
)
 
(96,372
)
Additional paid-in capital
 
534,542

 
530,441

Retained earnings
 
2,679,906

 
2,555,528

Accumulated other comprehensive loss
 
(137,662
)
 
(79,433
)
Total Westlake Chemical Corporation stockholders' equity
 
2,979,858

 
2,911,511

Noncontrolling interests
 
290,884

 
290,377

Total equity
 
3,270,742

 
3,201,888

Total liabilities and equity
 
$
5,179,785

 
$
5,213,990

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

1
Table of Contents


WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
 
 
 
 
 
(in thousands of dollars, except per share data and share amounts)
Net sales
 
$
1,103,531

 
$
1,027,676

Cost of sales
 
818,985

 
740,666

Gross profit
 
284,546

 
287,010

Selling, general and administrative expenses
 
55,266

 
38,955

Income from operations
 
229,280

 
248,055

Other income (expense)
 
 
 
 
Interest expense
 
(9,591
)
 
(9,157
)
Other income, net
 
9,096

 
2,509

Income before income taxes
 
228,785

 
241,407

Provision for income taxes
 
78,378

 
83,375

Net income
 
150,407

 
158,032

Net income attributable to noncontrolling interests
 
4,065

 
—

Net income attributable to Westlake Chemical Corporation
 
$
146,342

 
$
158,032

Earnings per common share attributable to Westlake Chemical Corporation:
 
 
 
 
Basic
 
$
1.10

 
$
1.18

Diluted
 
$
1.10

 
$
1.18

Weighted average common shares outstanding:
 
 
 
 
Basic
 
132,714,566

 
133,072,254

Diluted
 
133,205,306

 
133,612,924

Dividends per common share
 
$
0.1650

 
$
0.1260

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

2
Table of Contents


WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
 
 
 
 
 
(in thousands of dollars)
Net income
 
$
150,407

 
$
158,032

Other comprehensive income (loss), net of income taxes
 
 
 
 
Pension and other post-retirement benefits liability
 
 
 
 
Amortization of benefits liability
 
652

 
219

Income tax provision on pension and other post-retirement benefits liability
 
(225
)
 
(84
)
Foreign currency translation adjustments
 
(59,698
)
 
(898
)
Available-for-sale investments
 
 
 
 
Unrealized holding gains on investments
 
1,626

 
2,467

Reclassification of net realized loss to net income
 
—

 
25

Income tax provision on available-for-sale investments
 
(584
)
 
(895
)
Other comprehensive (loss) income
 
(58,229
)
 
834

Comprehensive income
 
92,178

 
158,866

Comprehensive income attributable to noncontrolling interests, net of tax
 
4,065

 
—

Comprehensive income attributable to Westlake Chemical Corporation
 
$
88,113

 
$
158,866

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

3
Table of Contents


WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
 
 
 
 
 
(in thousands of dollars)
Cash flows from operating activities
 
 
 
 
Net income
 
$
150,407

 
$
158,032

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
 
Depreciation and amortization
 
58,641

 
45,972

Recovery of doubtful accounts
 
(9
)
 
(144
)
Amortization of debt issuance costs
 
501

 
365

Stock-based compensation expense
 
2,340

 
2,222

Loss from disposition of fixed assets
 
133

 
855

Deferred income taxes
 
5,331

 
8,275

Windfall tax benefits from share-based payment arrangements
 
(1,701
)
 
(3,512
)
Income from equity method investments, net of dividends
 
(3,416
)
 
(685
)
Other (losses) gains, net
 
(554
)
 
444

Changes in operating assets and liabilities
 
 
 
 
Accounts receivable
 
18,517

 
5,332

Inventories
 
35,979

 
32,870

Prepaid expenses and other current assets
 
(6,202
)
 
(1,478
)
Accounts payable
 
(3,625
)
 
(29,706
)
Accrued liabilities
 
(59,585
)
 
(4,952
)
Other, net
 
(6,201
)
 
(1,385
)
Net cash provided by operating activities
 
190,556

 
212,505

Cash flows from investing activities
 
 
 
 
Additions to property, plant and equipment
 
(95,822
)
 
(110,741
)
Proceeds from disposition of assets
 
—

 
12

Proceeds from sales and maturities of securities
 
—

 
30,119

Purchase of securities
 
—

 
(49,025
)
Settlements of derivative instruments
 
(833
)
 
(409
)
Net cash used for investing activities
 
(96,655
)
 
(130,044
)
Cash flows from financing activities
 
 
 
 
Dividends paid
 
(21,964
)
 
(16,789
)
Distributions to noncontrolling interests
 
(3,558
)
 
—

Proceeds from exercise of stock options
 
157

 
2,158

Repurchase of common stock for treasury
 
(2,000
)
 
—

Windfall tax benefits from share-based payment arrangements
 
1,701

 
3,512

Net cash used for financing activities
 
(25,664
)
 
(11,119
)
Effect of exchange rate changes on cash and cash equivalents
 
(3,189
)
 
—

Net increase in cash and cash equivalents
 
65,048

 
71,342

Cash and cash equivalents at beginning of period
 
880,601

 
461,301

Cash and cash equivalents at end of period
 
$
945,649

 
$
532,643

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

4
Table of Contents
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 March 31, 2015 , its results of operations for the three months ended March 31, 2015 and 2014 and the changes in its cash position for the three months ended March 31, 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. 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.
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
Table of Contents
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. 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 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 interim periods within those fiscal years, and is not expected to have an impact on the Company's consolidated financial position, results of operations and cash flows.
2. Financial Instruments
Cash Equivalents
The Company had $496,843 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 March 31, 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:
 
March 31,
2015
 
December 31,
2014
Non-current
$
17,033

 
$
15,414

Total available-for-sale securities
$
17,033

 
$
15,414

The cost, gross unrealized gains, gross unrealized losses and fair value of the Company's available-for-sale securities were as follows:
 
 
March 31, 2015
 
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Equity securities
 
$
15,043

 
$
1,990

 
$
—

 
$
17,033

Total available-for-sale securities
 
$
15,043

 
$
1,990

 
$
—

 
$
17,033

 
 
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 March 31, 2015 and December 31, 2014 , net unrealized gains on the Company's available-for-sale securities of $1,276 and $233 , respectively, net of income tax expense of $714 and $131 , respectively, were recorded in accumulated other comprehensive income. See Note 12 for the fair value hierarchy of the Company's available-for-sale securities.

6
Table of Contents
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. There were no sales or maturities of available-for-sale securities during the three months ended March 31, 2015 .
 
 
Three Months Ended March 31,
 
 
2015
 
2014
Proceeds from sales and maturities of securities
 
$
—

 
$
30,119

Gross realized gains
 
—

 
13

Gross realized losses
 
—

 
(38
)
3. Accounts Receivable
Accounts receivable consist of the following:
 
 
March 31,
2015
 
December 31,
2014
Trade customers
 
$
500,262

 
$
525,546

Affiliates
 
449

 
437

Allowance for doubtful accounts
 
(13,259
)
 
(13,468
)
 
 
487,452

 
512,515

Federal and state taxes
 
21,289

 
8,919

Other
 
18,386

 
39,232

Accounts receivable, net
 
$
527,127

 
$
560,666

4. Inventories
Inventories consist of the following:
 
 
March 31,
2015
 
December 31,
2014
Finished products
 
$
278,501

 
$
300,909

Feedstock, additives and chemicals
 
135,903

 
158,635

Materials and supplies
 
65,976

 
66,232

Inventories
 
$
480,380

 
$
525,776

5. Property, Plant and Equipment
As of March 31, 2015 , the Company had property, plant and equipment, net totaling $2,751,486 . 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 $49,658 and $38,061 is included in cost of sales in the consolidated statements of operations for the three months ended March 31, 2015 and 2014 , respectively.
6. Other Assets
Amortization expense on intangible and other assets of $9,484 and $8,276 is included in the consolidated statements of operations for the three months ended March 31, 2015 and 2014 , respectively.

7
Table of Contents
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

Goodwill
Goodwill for the Olefins segment was $29,990 at March 31, 2015 and December 31, 2014 . Goodwill for the Vinyls segment was $32,026 at March 31, 2015 and December 31, 2014 . There were no changes in the carrying amount of goodwill by operating segments for the three months ended March 31, 2015 .
7. Long-Term Debt
Long-term debt consists of the following:
 
 
March 31,
2015
 
December 31,
2014
3.60% senior notes due 2022
 
$
249,138

 
$
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
 
$
764,027

 
$
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 March 31, 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 March 31, 2015 , the Company had outstanding letters of credit totaling $29,959 and borrowing availability of $370,041 under the revolving credit facility.  

8
Table of Contents
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

8. Stockholders' Equity
Changes in stockholders' equity for the three months ended March 31, 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
 
—

 
—

 
—

 
146,342

 
—

 
4,065

 
150,407

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

 
—

 
—

 
—

 
427

 
—

 
427

Foreign currency
   translation adjustments
 
—

 
—

 
—

 
—

 
(59,698
)
 
—

 
(59,698
)
Net unrealized holding
   gains on investments
 
—

 
—

 
—

 
—

 
1,042

 
—

 
1,042

Common stock repurchased
 
—

 
(2,000
)
 
—

 
—

 
—

 
—

 
(2,000
)
Shares issued—stock-
   based compensation
 
—

 
97

 
60

 
—

 
—

 
—

 
157

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

 
—

 
4,041

 
—

 
—

 
—

 
4,041

Dividends paid
 
—

 
—

 
—

 
(21,964
)
 
—

 
—

 
(21,964
)
Distributions to noncontrolling
   interests
 
—

 
—

 
—

 
—

 
—

 
(3,558
)
 
(3,558
)
Balances at March 31, 2015
 
$
1,347

 
$
(98,275
)
 
$
534,542

 
$
2,679,906

 
$
(137,662
)
 
$
290,884

 
$
3,270,742

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

 
$
(46,220
)
 
$
511,432

 
$
1,954,661

 
$
(2,616
)
 
$
2,418,603

Net income
 
—

 
—

 
—

 
158,032

 
—

 
158,032

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

 
—

 
—

 
—

 
135

 
135

Foreign currency translation adjustments
 
—

 
—

 
—

 
—

 
(898
)
 
(898
)
Net unrealized holding gains on
   investments
 
—

 
—

 
—

 
—

 
1,597

 
1,597

Shares issued—stock-based compensation
 
1

 
—

 
2,157

 
—

 
—

 
2,158

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

 
—

 
5,734

 
—

 
—

 
5,734

Dividends paid
 
—

 
—

 
—

 
(16,789
)
 
—

 
(16,789
)
Balances at March 31, 2014
 
$
1,347

 
$
(46,220
)
 
$
519,323

 
$
2,095,904

 
$
(1,782
)
 
$
2,568,572


9
Table of Contents
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 three months ended March 31, 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
 
—

 
(59,698
)
 
1,042

 
(58,656
)
Amounts reclassified from accumulated other
   comprehensive loss
 
427

 
—

 
—

 
427

Net other comprehensive income (loss) for the period
 
427

 
(59,698
)
 
1,042

 
(58,229
)
Balances at March 31, 2015
 
$
(23,015
)
 
$
(115,922
)
 
$
1,275

 
$
(137,662
)
 
 
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
 
—

 
(898
)
 
1,581

 
683

Amounts reclassified from accumulated other
   comprehensive loss
 
135

 
—

 
16

 
151

Net other comprehensive income (loss) for the period
 
135

 
(898
)
 
1,597

 
834

Balances at March 31, 2014
 
$
(6,561
)
 
$
3,006

 
$
1,773

 
$
(1,782
)
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 months ended March 31, 2015 and 2014 :
Details about Accumulated Other Comprehensive
   Income (Loss) Components
 
Location of Reclassification
(Income (Expense)) in
Consolidated Statements
of Operations
 
Three Months Ended March 31,
 
2015
 
2014
Amortization of pension and other post-retirement items
 
 
 
 
 
 
Prior service costs
 
(1)
 
$
—

 
$
(87
)
Net loss
 
(1)
 
(652
)
 
(132
)
 
 
 
 
(652
)
 
(219
)
 
 
Provision for income taxes
 
225

 
84

 
 
 
 
(427
)
 
(135
)
Net unrealized gains on available-for-sale investments
 
 
 
 
 
 
Realized loss on available-for-sale investments
 
Other income, net
 
—

 
(25
)
 
 
Provision for income taxes
 
—

 
9

 
 
 
 
—

 
(16
)
Total reclassifications for the period
 
 
 
$
(427
)
 
$
(151
)
_____________
(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.

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

9. 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 March 31,
 
 
2015
 
2014
 
 
U.S. Plans
 
Non-U.S. Plans
 
U.S. Plans
Service cost
 
$
28

 
$
422

 
$
84

Interest cost
 
544

 
535

 
595

Expected return on plan assets
 
(819
)
 
—

 
(809
)
Amortization of prior service cost
 
—

 
—

 
74

Amortization of net loss
 
290

 
266

 
63

Net periodic benefit cost
 
$
43

 
$
1,223

 
$
7

The Company made no contribution to the U.S. salaried pension plan in the first three months of 2015 . The Company contributed $388 to the U.S. salaried pension plan in the first three months of 2014 . The Company contributed $112 and $290 to the U.S. wage pension plan in the first three 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 additional contributions of approximately $237 to the wage pension plan during 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 March 31,
 
 
2015
 
2014
 
 
U.S. Plans
 
U.S. Plans
Service cost
 
$
6

 
$
5

Interest cost
 
149

 
181

Amortization of prior service cost
 
—

 
13

Amortization of net loss
 
96

 
69

Net periodic benefit cost
 
$
251

 
$
268

10. 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 $2,340 and $2,222 for the three months ended March 31, 2015 and 2014 , respectively.
11. 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.

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

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 three months ended March 31, 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 months ended March 31, 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 March 31, 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
 
 
March 31,
2015
 
December 31,
2014
Not designated as hedging instruments
 
 
 
 
 
 
Commodity forward contracts
 
Accounts receivable, net
 
$
2,927

 
$
3,145

Commodity forward contracts

 
Deferred charges and
   other assets, net
 
1,557

 
—

Total derivative assets
 
 
 
$
4,484

 
$
3,145

 
 
Derivative Liabilities
 
 
Balance Sheet Location
 
Fair Value as of
 
 
March 31,
2015
 
December 31,
2014
Not designated as hedging instruments
 
 
 
 
 
 
Commodity forward contracts
 
Accrued liabilities
 
$
5,060

 
$
6,549

Commodity forward contracts
 
Other liabilities
 
1,801

 
3,559

Total derivative liabilities
 
 
 
$
6,861

 
$
10,108

 
 
 
 
 
 
 
 
 
 
 
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 March 31,
2015
 
2014
Commodity forward contracts
 
Gross profit
 
$
4,241

 
$
(611
)
See Note 12 for the fair value of the Company's derivative instruments.

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

12. 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:
 
 
March 31, 2015
 
 
Level 1
 
Level 2
 
Total
Derivative instruments
 
 
 
 
 
 
Risk management assets—Commodity forward contracts
 
$
4,209

 
$
275

 
$
4,484

Risk management liabilities—Commodity forward contracts
 
(17
)
 
(6,844
)
 
(6,861
)
Marketable securities
 
 
 
 
 
 
Available-for-sale securities
 
17,033

 
—

 
17,033

 
 
 
 
 
 
 
 
 
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.
There were no transfers in or out of Levels 1 and 2 of the fair value hierarchy for the three months ended March 31, 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 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.

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

 
 
March 31, 2015
 
December 31, 2014
 
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
3.60% senior notes due 2022
 
$
249,138

 
$
253,240

 
$
249,108

 
$
248,630

6 ½% senior notes due 2029
 
100,000

 
118,493

 
100,000

 
116,384

6 ¾% senior notes due 2032
 
250,000

 
280,285

 
250,000

 
285,545

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

 
105,298

 
89,000

 
106,504

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

 
76,903

 
65,000

 
77,784

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

 
10,889

 
10,889

 
10,889

13. Income Taxes
The effective income tax rate was 34.3% for the three months ended March 31, 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 and the foreign earnings rate differential, partially offset by state income taxes. The effective income tax rate was 34.5% for the three months ended March 31, 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.
There were no unrecognized tax benefits for the three months ended March 31, 2015 . The Company recognizes penalties and interest accrued related to unrecognized tax benefits in income tax expense. As of March 31, 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 2008.
14. 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 March 31,
 
 
2015
 
2014
Net income attributable to Westlake Chemical Corporation
 
$
146,342

 
$
158,032

Less:
 
 
 
 
Net income attributable to participating securities
 
(200
)
 
(384
)
Net income attributable to common shareholders
 
$
146,142

 
$
157,648

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 March 31,
 
 
2015
 
2014
Weighted average common shares—basic
 
132,714,566

 
133,072,254

Plus incremental shares from:
 
 
 
 
Assumed exercise of options
 
490,740

 
540,670

Weighted average common shares—diluted
 
133,205,306

 
133,612,924

 
 
 
 
 
Earnings per common share attributable to Westlake Chemical Corporation :
 
 
 
 
Basic
 
$
1.10

 
$
1.18

Diluted
 
$
1.10

 
$
1.18


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

Excluded from the computation of diluted earnings per share are options to purchase 241,312 and 69,662 shares of common stock for the three months ended March 31, 2015 and 2014 , respectively. These options were outstanding during the periods reported but were excluded because the effect of including them would have been antidilutive.
15. Supplemental Information
Other Liabilities
Other liabilities were $157,130 and $174,859 at March 31, 2015 and December 31, 2014 , respectively. Non-current pension obligation, which is a component of other liabilities, was $123,207 and $136,296 at March 31, 2015 and December 31, 2014 , respectively. No other component of other liabilities was more than five percent of total liabilities.
16. 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 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 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

15
Table of Contents
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

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. 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.
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 March 31,
 
 
2015
 
2014
Net external sales
 
 
 
 
Olefins
 
 
 
 
Polyethylene
 
$
409,432

 
$
487,144

Styrene, feedstock and other
 
173,645

 
235,654

Total Olefins
 
583,077

 
722,798

Vinyls
 
 
 
 
PVC, caustic soda and other
 
416,988

 
190,527

Building products
 
103,466

 
114,351

Total Vinyls
 
520,454

 
304,878

 
 
$
1,103,531

 
$
1,027,676

 
 
 
 
 
Intersegment sales
 
 
 
 
Olefins
 
$
23,462

 
$
56,853

Vinyls
 
370

 
343

 
 
$
23,832

 
$
57,196

 
 
 
 
 
Income (loss) from operations
 
 
 
 
Olefins
 
$
191,103

 
$
272,333

Vinyls
 
47,086

 
(21,114
)
Corporate and other
 
(8,909
)
 
(3,164
)
 
 
$
229,280

 
$
248,055

 
 
 
 
 
Depreciation and amortization
 
 
 
 
Olefins
 
$
26,939

 
$
26,647

Vinyls
 
31,584

 
19,168

Corporate and other
 
118

 
157

 
 
$
58,641

 
$
45,972

 
 
 
 
 
Other income (expense), net
 
 
 
 
Olefins
 
$
2,552

 
$
1,454

Vinyls
 
5,503

 
(34
)
Corporate and other
 
1,041

 
1,089

 
 
$
9,096

 
$
2,509

 
 
 
 
 
Provision for (benefit from) income taxes
 
 
 
 
Olefins
 
$
66,457

 
$
93,550

Vinyls
 
12,805

 
(10,070
)
Corporate and other
 
(884
)
 
(105
)
 
 
$
78,378

 
$
83,375

 
 
 
 
 
Capital expenditures
 
 
 
 
Olefins
 
$
55,300

 
$
29,074

Vinyls
 
36,855

 
81,120

Corporate and other
 
3,667

 
547

 
 
$
95,822

 
$
110,741

A reconciliation of total segment income from operations to consolidated income before income taxes is as follows:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
Income from operations
 
$
229,280

 
$
248,055

Interest expense
 
(9,591
)
 
(9,157
)
Other income, net
 
9,096

 
2,509

Income before income taxes
 
$
228,785

 
$
241,407

 
 
March 31,
2015
 
December 31,
2014
Total assets
 
 
 
 
Olefins
 
$
1,783,845

 
$
1,785,895

Vinyls
 
2,510,470

 
2,618,646

Corporate and other
 
885,470

 
809,449

 
 
$
5,179,785

 
$
5,213,990

18. Subsequent Events
On April 29, 2015, Westlake Chemical Partners LP ("Westlake Partners") purchased an additional 2.7% newly issued limited partner interest in OpCo for approximately $135,341 , resulting in Westlake Partners holding approximately an aggregate 13.3% limited partner interest in OpCo and the Company holding approximately an aggregate 86.7% limited partner interest in OpCo. In order to fund this purchase, Westlake Partners entered into a revolving credit facility with a subsidiary of the Company, which has a total borrowing capacity of $300,000 .
Subsequent events were evaluated through the date on which the financial statements were issued.
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"). Except for Westlake Chemical OpCo LP ("OpCo"), which is less than 100% owned, each Guarantor Subsidiary is 100% owned by Westlake Chemical Corporation (the " 100% Owned Guarantor Subsidiaries"). The August 4, 2014 initial public offering of Westlake Chemical Partners LP ("Westlake Partners") resulted in OpCo ceasing to be a 100% owned subsidiary of the Company. OpCo has been presented as a less than 100% owned guarantor subsidiary in each of the tables below, including for periods prior to the initial public offering of Westlake Partners. These guarantees are the joint and several obligations of the Guarantor Subsidiaries. The following unaudited condensed consolidating financial information presents the financial condition, results of operations and cash flows of Westlake Chemical Corporation, the 100% owned Guarantor Subsidiaries, OpCo and the remaining subsidiaries that do not guarantee the 3.60% senior notes due 2022 (the "Non-Guarantor Subsidiaries"), together with consolidating eliminations necessary to present the Company's results on a consolidated basis.


16
Table of Contents
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 March 31, 2015
 
 
Westlake
Chemical
Corporation
 
100% Owned
Guarantor
Subsidiaries
 
OpCo
(Less Than
100% Owned
Guarantor
Subsidiary)
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Balance Sheet
 
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
701,622

 
$
2,606

 
$
143,005

 
$
98,416

 
$
—

 
$
945,649

Accounts receivable, net
 
11,605

 
1,497,572

 
54,979

 
128,116

 
(1,165,145
)
 
527,127

Inventories
 
—

 
395,664

 
4,564

 
80,152

 
—

 
480,380

Prepaid expenses and other current assets
 
92

 
18,236

 
122

 
2,160

 
(2,592
)
 
18,018

Deferred income taxes
 
409

 
29,832

 
—

 
747

 
—

 
30,988

Total current assets
 
713,728

 
1,943,910

 
202,670

 
309,591

 
(1,167,737
)
 
2,002,162

Property, plant and equipment, net
 
—

 
1,500,234

 
866,546

 
384,706

 
—

 
2,751,486

Equity investments
 
4,123,427

 
1,232,093

 
—

 
351,048

 
(5,641,847
)
 
64,721

Other assets, net
 
31,209

 
415,180

 
53,832

 
124,633

 
(263,438
)
 
361,416

Total assets
 
$
4,868,364

 
$
5,091,417

 
$
1,123,048

 
$
1,169,978

 
$
(7,073,022
)
 
$
5,179,785

Current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
1,118,864

 
$
153,645

 
$
27,395

 
$
89,383

 
$
(1,141,794
)
 
$
247,493

Accrued liabilities
 
16,504

 
150,074

 
6,104

 
58,975

 
(25,943
)
 
205,714

Total current liabilities
 
1,135,368

 
303,719

 
33,499

 
148,358

 
(1,167,737
)
 
453,207

Long-term debt
 
753,138

 
10,889

 
257,829

 
—

 
(257,829
)
 
764,027

Deferred income taxes
 
—

 
503,540

 
1,902

 
34,846

 
(5,609
)
 
534,679

Other liabilities
 
—

 
38,625

 
—

 
118,505

 
—

 
157,130

Total liabilities
 
1,888,506

 
856,773

 
293,230

 
301,709

 
(1,431,175
)
 
1,909,043

Total Westlake Chemical Corporation stockholders' equity
 
2,979,858

 
4,234,644

 
829,818

 
577,385

 
(5,641,847
)
 
2,979,858

Noncontrolling interests
 
—

 
—

 
—

 
290,884

 
—

 
290,884

Total equity
 
2,979,858

 
4,234,644

 
829,818

 
868,269

 
(5,641,847
)
 
3,270,742

Total liabilities and equity
 
$
4,868,364

 
$
5,091,417

 
$
1,123,048

 
$
1,169,978

 
$
(7,073,022
)
 
$
5,179,785


17
Table of Contents
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, 2014
 
 
Westlake
Chemical
Corporation
 
100% Owned
Guarantor
Subsidiaries
 
OpCo
(Less Than
100% Owned
Guarantor
Subsidiary)
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Balance Sheet
 
 
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
655,947

 
$
3,057

 
$
131,545

 
$
90,052

 
$
—

 
$
880,601

Accounts receivable, net
 
8,451

 
1,454,709

 
56,049

 
135,133

 
(1,093,676
)
 
560,666

Inventories
 
—

 
414,975

 
6,634

 
104,167

 
—

 
525,776

Prepaid expenses and other current assets
 
172

 
9,485

 
212

 
1,938

 
—

 
11,807

Deferred income taxes
 
409

 
29,832

 
—

 
2,196

 
—

 
32,437

Total current assets
 
664,979

 
1,912,058

 
194,440

 
333,486

 
(1,093,676
)
 
2,011,287

Property, plant and equipment, net
 
—

 
1,477,515

 
842,057

 
437,985

 
—

 
2,757,557

Equity investments
 
4,033,378

 
1,237,080

 
—

 
352,550

 
(5,561,703
)
 
61,305

Other assets, net
 
30,543

 
387,325

 
57,733

 
141,948

 
(233,708
)
 
383,841

Total assets
 
$
4,728,900

 
$
5,013,978

 
$
1,094,230

 
$
1,265,969

 
$
(6,889,087
)
 
$
5,213,990

Current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
1,055,527

 
$
160,834

 
$
17,680

 
$
95,856

 
$
(1,068,835
)
 
$
261,062

Accrued liabilities
 
8,754

 
203,608

 
11,225

 
77,372

 
(24,841
)
 
276,118

Total current liabilities
 
1,064,281

 
364,442

 
28,905

 
173,228

 
(1,093,676
)
 
537,180

Long-term debt
 
753,108

 
10,889

 
227,638

 
—

 
(227,638
)
 
763,997

Deferred income taxes
 
—

 
497,919

 
1,848

 
42,369

 
(6,070
)
 
536,066

Other liabilities
 
—

 
43,452

 
—

 
131,407

 
—

 
174,859

Total liabilities
 
1,817,389

 
916,702

 
258,391

 
347,004

 
(1,327,384
)
 
2,012,102

Total Westlake Chemical Corporation stockholders' equity
 
2,911,511

 
4,097,276

 
835,839

 
628,588

 
(5,561,703
)
 
2,911,511

Noncontrolling interests
 
—

 
—

 
—

 
290,377

 
—

 
290,377

Total equity
 
2,911,511

 
4,097,276

 
835,839

 
918,965

 
(5,561,703
)
 
3,201,888

Total liabilities and equity
 
$
4,728,900

 
$
5,013,978

 
$
1,094,230

 
$
1,265,969

 
$
(6,889,087
)
 
$
5,213,990



18
Table of Contents
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 for the Three Months Ended March 31, 2015
 
 
Westlake
Chemical
Corporation
 
100% Owned
Guarantor
Subsidiaries
 
OpCo
(Less Than
100% Owned
Guarantor
Subsidiary)
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Statement of Operations
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
—

 
$
903,492

 
$
258,391

 
$
245,643

 
$
(303,995
)
 
$
1,103,531

Cost of sales
 
—

 
727,399

 
162,164

 
228,269

 
(298,847
)
 
818,985

Gross profit
 
—

 
176,093

 
96,227

 
17,374

 
(5,148
)
 
284,546

Selling, general and administrative expenses
 
413

 
43,684

 
5,046

 
11,271

 
(5,148
)
 
55,266

(Loss) income from operations
 
(413
)
 
132,409

 
91,181

 
6,103

 
—

 
229,280

Interest expense
 
(10,752
)
 
(1
)
 
(1,376
)
 
(42
)
 
2,580

 
(9,591
)
Other income, net
 
6,612

 
2,827

 
5

 
2,232

 
(2,580
)
 
9,096

(Loss) income before income taxes
 
(4,553
)
 
135,235

 
89,810

 
8,293

 
—

 
228,785

(Benefit from) provision for income taxes
 
(1,578
)
 
77,999

 
467

 
1,490

 
—

 
78,378

Equity in net income of subsidiaries
 
149,317

 
79,891

 
—

 
9,452

 
(238,660
)
 
—

Net income
 
146,342

 
137,127

 
89,343

 
16,255

 
(238,660
)
 
150,407

Net income attributable to noncontrolling interests
 
—

 
—

 
—

 
4,065

 
—

 
4,065

Net income attributable to Westlake Chemical Corporation
 
$
146,342

 
$
137,127

 
$
89,343

 
$
12,190

 
$
(238,660
)
 
$
146,342

Comprehensive income (loss) attributable to Westlake Chemical
   Corporation
 
$
88,113

 
$
137,365

 
$
89,343

 
$
(47,319
)
 
$
(179,389
)
 
$
88,113



19
Table of Contents
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 for the Three Months Ended March 31, 2014
 
 
Westlake
Chemical
Corporation
 
100% Owned
Guarantor
Subsidiaries
 
OpCo
(Less Than
100% Owned
Guarantor
Subsidiary)
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Statement of Operations
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
—

 
$
844,342

 
$
560,014

 
$
9,117

 
$
(385,797
)
 
$
1,027,676

Cost of sales
 
—

 
790,577

 
327,700

 
8,186

 
(385,797
)
 
740,666

Gross profit
 
—

 
53,765

 
232,314

 
931

 
—

 
287,010

Selling, general and administrative expenses
 
546

 
29,285

 
7,778

 
1,346

 
—

 
38,955

(Loss) income from operations
 
(546
)
 
24,480

 
224,536

 
(415
)
 
—

 
248,055

Interest expense
 
(8,947
)
 
(210
)
 
(3,591
)
 
—

 
3,591

 
(9,157
)
Other income (expense), net
 
5,006

 
456

 
1,252

 
(614
)
 
(3,591
)
 
2,509

(Loss) income before income taxes
 
(4,487
)
 
24,726

 
222,197

 
(1,029
)
 
—

 
241,407

(Benefit from) provision for income taxes
 
(1,558
)
 
6,787

 
78,323

 
(177
)
 
—

 
83,375

Equity in net income of subsidiaries
 
160,961

 
143,874

 
—

 
—

 
(304,835
)
 
—

Net income (loss) attributable to Westlake Chemical Corporation
 
$
158,032

 
$
161,813

 
$
143,874

 
$
(852
)
 
$
(304,835
)
 
$
158,032

Comprehensive income (loss) attributable to Westlake Chemical
   Corporation
 
$
158,866

 
$
161,948

 
$
143,874

 
$
(1,750
)
 
$
(304,072
)
 
$
158,866




 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 

20
Table of Contents
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 for the Three Months Ended March 31, 2015
 
 
Westlake
Chemical
Corporation
 
100% Owned
Guarantor
Subsidiaries
 
OpCo
(Less Than
100% Owned
Guarantor
Subsidiary)
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Statement of Cash Flows
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
146,342

 
$
137,127

 
$
89,343

 
$
16,255

 
$
(238,660
)
 
$
150,407

Adjustments to reconcile net income to net cash (used for)
   provided by operating activities
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
501

 
29,592

 
19,803

 
9,246

 
—

 
59,142

Deferred income taxes
 
(124
)
 
6,431

 
54

 
(1,030
)
 
—

 
5,331

Net changes in working capital and other
 
(151,572
)
 
(114,779
)
 
6,973

 
(3,606
)
 
238,660

 
(24,324
)
Net cash (used for) provided by operating activities
 
(4,853
)
 
58,371

 
116,173

 
20,865

 
—

 
190,556

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
 
Additions to property, plant and equipment
 
—

 
(47,385
)
 
(39,540
)
 
(8,897
)
 
—

 
(95,822
)
Settlements of derivative instruments
 
—

 
(833
)
 
—

 
—

 
—

 
(833
)
Net cash used for investing activities
 
—

 
(48,218
)
 
(39,540
)
 
(8,897
)
 
—

 
(96,655
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
 
Intercompany financing
 
72,634

 
(99,765
)
 
30,191

 
(3,060
)
 
—

 
—

Dividends paid
 
(21,964
)
 
—

 
—

 
—

 
—

 
(21,964
)
Distributions paid
 
—

 
89,161

 
(95,364
)
 
2,645

 
—

 
(3,558
)
Proceeds from exercise of stock options
 
157

 
—

 
—

 
—

 
—

 
157

Repurchase of common stock for treasury
 
(2,000
)
 
—

 
—

 
—

 
—

 
(2,000
)
Windfall tax benefits from share-based payment arrangements
 
1,701

 
—

 
—

 
—

 
—

 
1,701

Net cash provided by (used for) financing activities
 
50,528

 
(10,604
)
 
(65,173
)
 
(415
)
 
—

 
(25,664
)
Effect of exchange rate changes on cash and cash equivalents
 
—

 
—

 
—

 
(3,189
)
 
—

 
(3,189
)
Net increase (decrease) in cash and cash equivalents
 
45,675

 
(451
)
 
11,460

 
8,364

 
—

 
65,048

Cash and cash equivalents at beginning of period
 
655,947

 
3,057

 
131,545

 
90,052

 
—

 
880,601

Cash and cash equivalents at end of period
 
$
701,622

 
$
2,606

 
$
143,005

 
$
98,416

 
$
—

 
$
945,649


21
Table of Contents
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 for the Three Months Ended March 31, 2014
 
 
Westlake
Chemical
Corporation
 
100% Owned
Guarantor
Subsidiaries
 
OpCo
(Less Than
100% Owned
Guarantor
Subsidiary)
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Statement of Cash Flows
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
158,032

 
$
161,813

 
$
143,874

 
$
(852
)
 
$
(304,835
)
 
$
158,032

Adjustments to reconcile net income (loss) to net cash (used for)
   provided by operating activities
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
365

 
26,394

 
19,014

 
564

 
—

 
46,337

Deferred income taxes
 
(162
)
 
5,220

 
3,267

 
(50
)
 
—

 
8,275

Net changes in working capital and other
 
(165,553
)
 
(169,342
)
 
31,731

 
(1,810
)
 
304,835

 
(139
)
Net cash (used for) provided by operating activities
 
(7,318
)
 
24,085

 
197,886

 
(2,148
)
 
—

 
212,505

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
 
Additions to property, plant and equipment
 
—

 
(59,254
)
 
(51,305
)
 
(182
)
 
—

 
(110,741
)
Proceeds from disposition of assets
 
—

 
12

 
—

 
—

 
—

 
12

Proceeds from sales and maturities of securities
 
30,119

 
—

 
—

 
—

 
—

 
30,119

Purchase of securities
 
(49,025
)
 
—

 
—

 
—

 
—

 
(49,025
)
Settlements of derivative instruments
 
—

 
—

 
(409
)
 
—

 
—

 
(409
)
Net cash used for investing activities
 
(18,906
)
 
(59,242
)
 
(51,714
)
 
(182
)
 
—

 
(130,044
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
 
Intercompany financing
 
106,903

 
(155,387
)
 
46,041

 
2,443

 
—

 
—

Net distributions prior to Westlake Partners initial public offering
 
—

 
192,213

 
(192,213
)
 
—

 
—

 
—

Dividends paid
 
(16,789
)
 
—

 
—

 
—

 
—

 
(16,789
)
Proceeds from exercise of stock options
 
2,158

 
—

 
—

 
—

 
—

 
2,158

Windfall tax benefits from share-based payment arrangements
 
3,512

 
—

 
—

 
—

 
—

 
3,512

Net cash provided by (used for) financing activities
 
95,784

 
36,826

 
(146,172
)
 
2,443

 
—

 
(11,119
)
Net increase in cash and cash equivalents
 
69,560

 
1,669

 
—

 
113

 
—

 
71,342

Cash and cash equivalents at beginning of period
 
420,948

 
6,227

 
—

 
34,126

 
—

 
461,301

Cash and cash equivalents at end of period
 
$
490,508

 
$
7,896

 
$
—

 
$
34,239

 
$
—

 
$
532,643


22
Table of Contents


Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis should be read in conjunction with information contained in the accompanying unaudited consolidated interim financial statements of Westlake Chemical Corporation and the notes thereto and the consolidated financial statements and notes thereto of Westlake Chemical Corporation included in Westlake Chemical Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (the " 2014 Form 10-K"). The following discussion contains forward-looking statements. Please read "Forward-Looking Statements" for a discussion of limitations inherent in such statements.
We are a vertically integrated global manufacturer and marketer of basic chemicals, vinyls, polymers and fabricated building products. Our two principal operating segments are Olefins and Vinyls. We are highly integrated along our olefins product chain with significant downstream integration into polyethylene and styrene monomer. We are also an integrated global producer of vinyls with substantial downstream integration into polyvinyl chloride ("PVC") building products.
Since 2009 and continuing through the first quarter of 2015, a cost advantage for ethane-based ethylene producers over naphtha-based ethylene producers has allowed a strong export market for polyethylene, ethylene derivatives and higher margins for North American chemical producers, including Westlake. Continued strong global demand for polyethylene has resulted in improved operating margins and cash flow for our Olefins segment in recent years. However, with the significant drop in crude oil prices beginning in the third quarter of 2014 and continuing through the first quarter of 2015, we have seen a reduction in the cost advantage enjoyed by North American ethane-based ethylene producers. Further, crude oil price volatility in the North American and global markets may result in reduced prices and margins in 2015. On the other hand, our European operations rely primarily on feedstock derived from naphtha-based ethylene crackers and may benefit from lower crude oil prices.
Continued slow recovery in the U.S. construction markets and budgetary constraints in municipal spending have contributed to lower North American demand for our vinyls products, which may continue to negatively impact our Vinyls segment operating rates and margins. Likewise, European industry production capacities currently exceed demand in the region, largely due to the weak economic environment in Europe. However, since late 2010, the PVC industry in North America has experienced an increase in PVC resin export demand, driven largely by more competitive feedstock and energy cost positions in North America. As a consequence, North American PVC resin industry operating rates have improved since 2010, largely due to higher PVC resin export shipments. In addition, the completion of our new world-scale Geismar, Louisiana chlor-alkali plant and the ethane feedstock conversion and ethylene expansion project at Westlake Chemical OpCo LP's ("OpCo") Calvert City, Kentucky ethylene plant in the fourth quarter of 2013 and in the second quarter of 2014, respectively, have contributed to improved operating margins and cash flow for our Vinyls segment.
The economic environment in the United States and globally appears to be slowly improving. However, depending on the performance of the global economy in the remainder of 2015 and beyond, our financial condition, results of operations or cash flows may still be negatively impacted. In addition, the European economy has been slower to recover than the U.S. economy.
Recent Developments
On April 29, 2015, Westlake Chemical Partners LP ("Westlake Partners") purchased an additional 2.7% newly issued limited partner interest in OpCo for approximately $135.3 million, resulting in Westlake Partners holding approximately an aggregate 13.3% limited partner interest in OpCo and us holding approximately an aggregate 86.7% limited partner interest in OpCo. In order to fund this purchase, Westlake Partners entered into a revolving credit facility with a subsidiary of ours, which has a total borrowing capacity of $300.0 million. See "—Liquidity and Capital Resources—Westlake Partners Credit Arrangements."
In February 2015, we entered into an agreement to acquire INEOS Chlor Vinyls Holdings B.V.'s 35.7% interest in Suzhou Huasu Plastics Co., Ltd., a PVC joint venture based near Shanghai. We currently own a 59% interest in this joint venture. The completion of this acquisition is subject to government approvals.

23
Table of Contents


Results of Operations
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
 
 
 
 
 
(dollars in thousands,
except per share data)
Net external sales
 
 
 
 
Olefins
 
 
 
 
Polyethylene
 
$
409,432

 
$
487,144

Styrene, feedstock and other
 
173,645

 
235,654

Total Olefins
 
583,077

 
722,798

Vinyls
 
 
 
 
PVC, caustic soda and other
 
416,988

 
190,527

Building products
 
103,466

 
114,351

Total Vinyls
 
520,454

 
304,878

Total
 
$
1,103,531

 
$
1,027,676

 
 
 
 
 
Income (loss) from operations
 
 
 
 
Olefins
 
$
191,103

 
$
272,333

Vinyls
 
47,086

 
(21,114
)
Corporate and other
 
(8,909
)
 
(3,164
)
Total income from operations
 
229,280

 
248,055

Interest expense
 
(9,591
)
 
(9,157
)
Other income, net
 
9,096

 
2,509

Provision for income taxes
 
78,378

 
83,375

Net income
 
150,407

 
158,032

Net income attributable to noncontrolling interests
 
4,065

 
—

Net income attributable to Westlake Chemical Corporation
 
$
146,342

 
$
158,032

Diluted earnings per share
 
$
1.10

 
$
1.18

 
 
 
 
 
 
 
Three Months Ended March 31, 2015
 
 
Average
Sales Price
 
Volume
Product sales price and volume percentage change from prior-year period
 
 
 
 
Olefins
 
-26.9
 %
 
+7.6
%
Vinyls
 
-9.0
 %
 
+79.7
%
Company average
 
-21.6
 %
 
+29.0
%
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
2015
 
2014
Average industry prices (1)
 
 
 
 
Ethane (cents/lb)
 
6.3

 
11.4

Propane (cents/lb)
 
12.6

 
30.8

Ethylene (cents/lb) (2)
 
36.6

 
55.1

Polyethylene (cents/lb) (3)
 
76.7

 
107.7

Styrene (cents/lb) (4)
 
54.3

 
86.9

Caustic soda ($/short ton) (5)
 
588.3

 
579.2

Chlorine ($/short ton) (6)
 
239.2

 
236.7

PVC (cents/lb) (7)
 
65.5

 
66.5


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_____________
(1)
Industry pricing data was obtained from IHS Chemical. We have not independently verified the data.
(2)
Represents average North American spot prices of ethylene over the period as reported by IHS Chemical.
(3)
Represents average North American contract prices of polyethylene low density film over the period as reported by IHS Chemical.
(4)
Represents average North American contract prices of styrene over the period as reported by IHS Chemical.
(5)
Represents average North American undiscounted contract prices of caustic soda over the period as reported by IHS Chemical.
(6)
Represents average North American contract prices of chlorine (into chemicals) over the period as reported by IHS Chemical.
(7)
Represents average North American contract prices of PVC over the period as reported by IHS Chemical.
Summary
For the quarter ended March 31, 2015 , net income attributable to Westlake Chemical Corporation was $146.3 million , or $1.10 per diluted share, on net sales of $1,103.5 million . This represents a decrease in net income attributable to Westlake Chemical Corporation of $11.7 million , or $0.08 per diluted share, compared to the quarter ended March 31, 2014 net income attributable to Westlake Chemical Corporation of $158.0 million , or $1.18 per diluted share, on net sales of $1,027.7 million . Net sales for the first quarter of 2015 increase d by $75.8 million compared to net sales for the first quarter of 2014 , mainly attributable to sales contributed by Vinnolit, our specialty PVC resin business, which we acquired in July 2014, partially offset by lower sales prices for our major products. Income from operations was $229.3 million for the first quarter of 2015 as compared to $248.1 million for the first quarter of 2014 . Income from operations for the first quarter of 2015 benefited from improved vinyls integrated product margins, mainly as a result of the cost-advantaged ethane feedstock currently utilized at OpCo's Calvert City ethylene plant following the completion of a feedstock conversion and ethylene expansion project, improved production rates at our Geismar chlor-alkali plant and the contribution from Vinnolit as compared to the first quarter of 2014. However, this benefit was more than offset by lower olefins integrated product margins as a result of lower sales prices in the first quarter of 2015 as compared to the prior-year period. Sales prices in the first quarter of 2015 were negatively impacted by the significant decline in crude oil prices.
RESULTS OF OPERATIONS
First Quarter 2015 Compared with First Quarter 2014
Net Sales . Net sales increase d by $75.8 million , or 7.4% , to $1,103.5 million in the first quarter of 2015 from $1,027.7 million in the first quarter of 2014 , primarily attributable to sales contributed by Vinnolit and higher sales volumes for caustic soda and North American Specialty Products, our specialty PVC pipe business, partially offset by lower sales prices for our major products and lower sales volumes for polyethylene and ethylene co-products. Ethylene co-products sales volumes were lower for the first quarter of 2015 primarily due to the change to ethane feedstock currently utilized at OpCo's Calvert City ethylene plant following the completion of the feedstock conversion and ethylene expansion project. Average sales prices for the first quarter of 2015 decreased by 21.6% as compared to the first quarter of 2014 . Sales prices in the first quarter of 2015 were negatively impacted by the significant decline in crude oil prices. Overall sales volumes increased by 29.0% as compared to the first quarter of 2014 .
Gross Profit . Gross profit margin percentage decrease d to 25.8% for the first quarter of 2015 from 27.9% for the first quarter of 2014 . The first quarter 2015 gross profit benefited from lower average feedstock costs. However, this increase was more than offset by lower sales prices for our major products and the negative impact from lost sales, lower production rates and costs associated with the maintenance turnaround at our Geismar facility. Sales prices decreased an average of 21.6% for the first quarter of 2015 as compared to the first quarter of 2014 .
Selling, General and Administrative Expenses . Selling, general and administrative expenses for the first quarter of 2015 of $55.3 million increase d by $16.3 million as compared to the first quarter of 2014 , mainly due to general and administrative costs incurred by Vinnolit for the first quarter of 2015 , an increase in payroll and related labor costs, including incentive compensation, and an increase in consulting and professional fees.
Interest Expense . Interest expense increase d by $0.4 million to $9.6 million in the first quarter of 2015 from $9.2 million in the first quarter of 2014 largely as a result of decreased capitalized interest on major capital projects as compared to the prior-year period. Debt balances remained relatively unchanged from the prior-year period.

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Other Income, Net . Other income, net increase d by $6.6 million to $9.1 million in the first quarter of 2015 from $2.5 million in the first quarter of 2014 mainly due to higher income from our equity method investments and higher gains on foreign exchange.
Income Taxes. The effective income tax rate was 34.3% for the first quarter of 2015 . The effective income tax rate for the first quarter of 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 and the foreign earnings rate differential, partially offset by state income taxes. The effective income tax rate was 34.5% for the first quarter of 2014 . The effective income tax rate for the first quarter of 2014 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.
Olefins Segment
Net Sales . Net sales decrease d by $139.7 million , or 19.3% , to $583.1 million in the first quarter of 2015 from $722.8 million in the first quarter of 2014 , primarily due to lower sales prices for our major products and lower sales volume for polyethylene, partially offset by higher sales volumes for styrene and ethylene, as compared to the prior-year period. Average sales prices for the Olefins segment decreased by 26.9% in the first quarter of 2015 as compared to the first quarter of 2014 . Average sales volumes for the Olefins segment increased by 7.6% in the first quarter of 2015 as compared to the first quarter of 2014 .
Income from Operations . Income from operations decrease d by $81.2 million , or 29.8% , to $191.1 million in the first quarter of 2015 from $272.3 million in the first quarter of 2014 . This decrease was mainly attributable to lower olefins integrated product margins primarily as a result of lower sales prices and lower polyethylene sales volume in the first quarter of 2015 as compared to the prior-year period. Trading activity in the first quarter of 2015 resulted in a gain of $4.2 million as compared to a loss of $0.6 million in the first quarter of 2014 .
Vinyls Segment
Net Sales . Net sales increase d by $215.6 million , or 70.7% , to $520.5 million in the first quarter of 2015 from $304.9 million in the first quarter of 2014 . This increase was mainly attributable to sales contributed by Vinnolit and higher sales volumes for PVC resin, caustic soda and North American Specialty Products, partially offset by lower sales prices for our major products. The increase in net sales in the first quarter of 2015 was also partially offset by the lower ethylene co-products volumes produced, and consequently sold, as a result of the change in feedstock utilized at OpCo's Calvert City ethylene plant from propane to ethane, following the completion of the feedstock conversion project in the second quarter of 2014. Average sales prices for the Vinyls segment decreased by 9.0% in the first quarter of 2015 as compared to the first quarter of 2014 . Average sales volumes for the Vinyls segment increased by 79.7% in the first quarter of 2015 as compared to the first quarter of 2014 , primarily attributable to sales contributed by Vinnolit.
Income (Loss) from Operations. Income from operations was $47.1 million in the first quarter of 2015 as compared to a loss from operations of $21.1 million in the first quarter of 2014 , an improvement of $68.2 million . This improvement was primarily driven by higher vinyls integrated product margins in the first quarter of 2015 mainly as a result of the cost-advantaged ethane feedstock currently utilized at OpCo's Calvert City ethylene plant following the completion of the feedstock conversion and ethylene expansion project, as compared to the prior-year period. In addition, first quarter 2015 income from operations benefited from higher caustic soda sales volume primarily attributable to improved production rates at our Geismar chlor-alkali plant and the contribution from Vinnolit as compared to the first quarter of 2014. First quarter 2015 income from operations was negatively impacted by lost sales, lower production rates and costs associated with the maintenance turnaround at our Geismar facility. The first quarter 2014 income from operations was negatively impacted by lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with a maintenance turnaround at our Calvert City facilities and OpCo's Calvert City ethylene plant's feedstock conversion and expansion project.
CASH FLOW DISCUSSION FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
Cash Flows
Operating Activities
Operating activities provide d cash of $190.6 million in the first three months of 2015 compared to cash provide d of $212.5 million in the first three months of 2014 . The $21.9 million decrease in cash flows from operating activities was mainly due to a decrease in income from operations and an increase in the use of cash for working capital purposes. Income from operations decrease d by $18.8 million in the first three months of 2015 primarily due to lower olefins integrated product margins as a result of lower sales prices as compared to the prior-year period, partially offset by higher vinyls integrated product margins mainly driven by the cost-advantaged ethane feedstock currently utilized at OpCo's Calvert City ethylene

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plant, higher caustic soda sales volume and the contribution from Vinnolit as compared to the first quarter of 2014. Changes in components of working capital, which we define for purposes of this cash flow discussion as accounts receivable, net, inventories, prepaid expenses and other current assets, less accounts payable and accrued liabilities, use d cash of $14.9 million in the first three months of 2015 , compared to $2.0 million of cash provide d in the first three months of 2014 , an unfavorable change of $16.9 million . The change was mainly due to a decrease in accrued liabilities, partially offset by lower inventory and accounts receivable mainly as a result of lower product prices during the 2015 period, as compared to the prior-year period.
Investing Activities
Net cash use d for investing activities during the first three months of 2015 was $96.7 million as compared to net cash use d for investing activities of $130.0 million in the first three months of 2014 . Capital expenditures were $95.8 million in the first three months of 2015 compared to $110.7 million in the first three months of 2014 , a decrease mainly attributable to the completion of the feedstock conversion and ethylene expansion project and PVC plant expansion project at our Calvert City site in the second quarter of 2014. Capital expenditures in the first three months of 2015 were mainly incurred on the planned upgrade and expansion of OpCo's Petro 1 ethylene unit at our Lake Charles, Louisiana site. Capital expenditures in the first three months of 2014 were mainly incurred on OpCo's feedstock conversion and ethylene expansion project and our PVC plant expansion project at our Calvert City site and the planned upgrade and expansion of OpCo's Petro 1 ethylene unit at our Lake Charles site. The remaining capital expenditures in the first three months of 2015 and 2014 primarily related to projects to improve production capacity or reduce costs, maintenance and safety projects and environmental projects at our various facilities. The remaining activity during the first three months of 2014 was primarily related to the purchases of securities and the receipt of proceeds from the sales and maturities of our investments.
Financing Activities
Net cash use d by financing activities during the first three months of 2015 was $25.7 million as compared to net cash use d of $11.1 million in the first three months of 2014 . The activity during the first three months of 2015 was primarily related to the $22.0 million payment of cash dividends, $3.6 million payment of cash distributions to noncontrolling interests and the $2.0 million of cash used for the repurchases of shares of our common stock, partially offset by proceeds of $0.2 million from the exercise of stock options. The activity during the first three months of 2014 was mainly related to the $16.8 million payment of cash dividends, partially offset by proceeds from the exercise of stock options.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Financing Arrangements
Our principal sources of liquidity are from cash and cash equivalents, cash from operations, short-term borrowings under our revolving credit facility and our long-term financing.
In April 2011, we announced an expansion program to increase the ethane-based ethylene capacity of both of OpCo's ethylene units at our Lake Charles site. We completed the expansion of the Petro 2 ethylene unit in the first quarter of 2013. OpCo currently plans to upgrade and expand the capacity of its Petro 1 ethylene unit at our Lake Charles site during the first half of 2016. This project is currently estimated to cost in the range of $275.0 million to $335.0 million and is expected to add approximately 250 million pounds of ethylene capacity. The additional capacity from this expansion is expected to provide ethylene for sales to us and may also be sold in the merchant market. This capital project is expected to be funded with cash on hand, cash flow from operations, and, if necessary, borrowings under each of our revolving credit facility and OpCo's revolving credit facility with another subsidiary of ours and other financing. As of March 31, 2015 , OpCo had incurred a total cost of approximately $74.2 million on this capital project.
In August 2011, our Board of Directors authorized a stock repurchase program totaling $100.0 million (the "2011 Program"). In November 2014, our Board of Directors approved an additional $250.0 million share repurchase program (the "2014 Program"). During the three months ended March 31, 2015 , we repurchased 34,025 shares of our common stock for an aggregate purchase price of approximately $2.0 million under both the 2011 and 2014 Programs. As of March 31, 2015 , we had repurchased 1,944,161 shares of our common stock for an aggregate purchase price of approximately $100.0 million under the 2011 Program, the full amount of the 2011 Program. As of March 31, 2015 , we had repurchased 14,577 shares of our common stock for an aggregate purchase price of approximately $0.9 million under the 2014 Program. Purchases under the 2014 Program may be made either through the open market or in privately negotiated transactions. Decisions regarding the amount and the timing of purchases under the 2014 Program will be influenced by our cash on hand, our cash flow from operations, general market conditions and other factors. The 2014 Program may be discontinued by our Board of Directors at any time.
We believe that our sources of liquidity as described above will be adequate to fund our normal operations and ongoing capital expenditures. Funding of any potential large expansions or any potential acquisitions would likely necessitate and

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therefore depend on our ability to obtain additional financing in the future. We may not be able to access additional liquidity at cost effective interest rates due to the volatility of the commercial credit markets.
Cash and Cash Equivalents
As of March 31, 2015 , our cash and cash equivalents totaled $945.6 million . In addition, we have a revolving credit facility available to supplement cash if needed, as described under "Debt" below.
Debt
As of March 31, 2015 , our long-term debt, including current maturities, totaled $764.0 million , consisting of $250.0 million principal amount of 3.60% senior notes due 2022 (less the unamortized discount of $0.9 million ), $100.0 million of 6 ½% senior notes due 2029, $250.0 million of 6 ¾% senior notes due 2032, $89.0 million of 6 ½% senior notes due 2035 (the "6 ½% GO Zone Senior Notes Due 2035"), $65.0 million of 6 ½% senior notes due 2035 (the "6 ½% IKE Zone Senior Notes Due 2035") (collectively, but excluding the 3.60% senior notes due 2022, the "Senior Notes") and a $10.9 million loan from the proceeds of tax-exempt waste disposal revenue bonds (supported by an $11.3 million letter of credit). The 6 ½% senior notes due 2029, the 6 ¾% senior notes due 2032, the 6 ½% GO Zone Senior Notes Due 2035 and the 6 ½% IKE Zone Senior Notes Due 2035 evidence and secure our obligations to the Louisiana Local Government Environmental Facility and Development Authority (the "Authority"), a political subdivision of the State of Louisiana, under four loan agreements relating to the issuance of $100.0 million, $250.0 million, $89.0 million and $65.0 million aggregate principal amount of the Authority's tax-exempt revenue bonds, respectively. As of March 31, 2015 , debt outstanding under the tax-exempt waste disposal revenue bonds bore interest at a variable rate. As of March 31, 2015 , we were in compliance with all of the covenants with respect to the 3.60% senior notes due 2022, the Senior Notes, our waste disposal revenue bonds and our revolving credit facility.
Our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations and unless we were to undertake a new expansion or large acquisition, we believe our cash flow from operations, available cash and available borrowings under our revolving credit facility will be adequate to meet our normal operating needs for the foreseeable future.
Revolving Credit Facility
We have a $400.0 million senior secured revolving credit facility. The facility includes a provision permitting us to increase the size of the facility, up to four times, in increments of at least $25.0 million each (up to a maximum of $200.0 million) under certain circumstances if certain lenders agree to commit to such an increase.
At March 31, 2015 , we 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 we are rated investment grade, the margin for LIBOR loans will not exceed 1.50%, or a base rate plus a spread ranging from 0.0% 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 March 31, 2015 , we had outstanding letters of credit totaling $30.0 million and borrowing availability of $370.0 million under the revolving credit facility.
Our revolving credit facility generally restricts our ability to make distributions unless, on a pro forma basis after giving effect to the distribution, the borrowing availability under the facility equals or exceeds the greater of (1) 20% of the commitments under the facility and (2) $80.0 million; or the borrowing availability under the facility equals or exceeds the greater of (1) 15% of the commitments under the facility and (2) $60.0 million, and our fixed charge coverage ratio is at least 1.0:1. However, we may make specified distributions up to an aggregate of $78.8 million in 2015, to be increased by 5% in each fiscal year thereafter, on an aggregate basis, for each fiscal year.
In order to make acquisitions or investments, our revolving credit facility provides that (1) we must maintain a minimum borrowing availability of at least the greater of $60.0 million or 15% of the total bank commitments under our revolving credit facility or (2) we must maintain a minimum borrowing availability of at least the greater of $50.0 million or 12.5% of the total bank commitments under our revolving credit facility and meet a minimum fixed charge coverage ratio of 1.0:1 under our revolving credit facility. Notwithstanding the foregoing, we may make investments in the aggregate up to the greater of $50.0 million and 1.25% of tangible assets and acquisitions in the aggregate up to the greater of $100.0 million and 2.5% of tangible assets, if, on a pro forma basis after giving effect to the acquisition or investment, either (X) the borrowing availability under the facility equals or exceeds the greater of (A) 12.5% of the total bank commitments under the facility and (B) $50.0 million, but is less than the greater of (A) 15% of the total bank commitments and (B) $60.0 million, or (Y) our fixed charge coverage ratio is at least 1.0:1.

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The revolving credit facility contains other customary covenants and events of default that impose significant operating and financial restrictions on us. These restrictions, among other things, provide limitations on the occurrence of additional indebtedness and our ability to create liens, to engage in certain affiliate transactions and to engage in sale-leaseback transactions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Debt" in the 2014 Form 10-K for more information on the revolving credit facility.
GO Zone and IKE Zone Bonds
As of March 31, 2015 , we had drawn all the proceeds from the issuance of the 6 ½% senior notes due 2029, 6 ¾% senior notes due 2032, 6 ½% GO Zone Senior Notes Due 2035 and 6 ½% IKE Zone Senior Notes Due 2035. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt" in the 2014 Form 10-K for more information on the 6 ½% senior notes due 2029, the 6 ¾% senior notes due 2032, the 6 ½% GO Zone Senior Notes Due 2035 and the 6 ½% IKE Zone Senior Notes Due 2035. All domestic restricted subsidiaries that guarantee other debt of ours or of another guarantor of the Senior Notes in excess of $5.0 million are guarantors of these notes.
The indentures governing the Senior Notes contain customary covenants and events of default. Accordingly, these agreements generally impose significant operating and financial restrictions on us. These restrictions, among other things, provide limitations on incurrence of additional indebtedness, the payment of dividends, certain investments and acquisitions and sales of assets. However, the effectiveness of certain of these restrictions is currently suspended because the Senior Notes are currently rated investment grade by at least two nationally recognized credit rating agencies. The most significant of these provisions, if it were currently effective, would restrict us from incurring additional debt, except specified permitted debt (including borrowings under our credit facility), when our fixed charge coverage ratio is below 2.0:1. These limitations are subject to a number of important qualifications and exceptions, including, without limitation, an exception for the payment of our regular quarterly dividend of up to $0.10 per share. If the restrictions were currently effective, distributions in excess of $100.0 million would not be allowed unless, after giving pro forma effect to the distribution, our fixed charge coverage ratio is at least 2.0:1 and such payment, together with the aggregate amount of all other distributions after January 13, 2006, is less than the sum of 50% of our consolidated net income for the period from October 1, 2003 to the end of the most recent quarter for which financial statements have been filed, plus 100% of net cash proceeds received after October 1, 2003 as a contribution to our common equity capital or from the issuance or sale of certain securities, plus several other adjustments.
3.60% Senior Notes due 2022
The 3.60% senior notes due 2022 are unsecured and were issued with an original issue discount of $1.2 million. There is no sinking fund and no scheduled amortization of the 3.60% senior notes due 2022 prior to maturity. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt" in the 2014 Form 10-K for more information on the 3.60% senior notes due 2022. All of our domestic subsidiaries that guarantee other indebtedness of ours or of another guarantor of the 3.60% senior notes due 2022 in excess of $5.0 million are guarantors of the 3.60% senior notes due 2022.
The indenture governing the 3.60% senior notes due 2022 contains customary events of default and covenants that will restrict our and certain of our subsidiaries' ability to (1) incur certain secured indebtedness, (2) engage in certain sale-leaseback transactions and (3) consolidate, merge or transfer all or substantially all of our assets.
Revenue Bonds
In December 1997, we entered into a loan agreement with a public trust established for public purposes for the benefit of the Parish of Calcasieu, Louisiana. The public trust issued $10.9 million principal amount of tax-exempt waste disposal revenue bonds in order to finance our construction of waste disposal facilities for an ethylene plant. The waste disposal revenue bonds expire in December 2027 and are subject to redemption and mandatory tender for purchase prior to maturity under certain conditions. Interest on the waste disposal revenue bonds accrues at a rate determined by a remarketing agent and is payable quarterly.
Westlake Partners Credit Arrangements
Our subsidiary, Westlake Chemical Finance Corporation, is the lender party to a $300.0 million revolving credit facility with Westlake Partners, entered into on April 29, 2015. The revolver is scheduled to mature on April 29, 2018. Borrowings under the revolver bear interest at LIBOR plus a spread ranging from 2.0% to 3.0% (depending on Westlake Partners' consolidated leverage ratio), payable quarterly. Westlake Partners may pay all or a portion of the interest on any borrowings in kind, in which case any such amounts would be added to the principal amount of the loan.

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Our subsidiary, Westlake Development Corporation, is the lender party to a $600.0 million revolving credit facility with OpCo. As of March 31, 2015 , outstanding borrowings under the credit facility totaled $90.7 million and bore interest at the LIBOR rate plus 3.0%, which is accrued in arrears quarterly. The revolving credit facility matures in 2019.
Off-Balance Sheet Arrangements
None.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. Certain of the statements contained in this report are forward-looking statements. All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements can be identified by the use of words such as "believes," "intends," "may," "should," "could," "anticipates," "expected" or comparable terminology, or by discussions of strategies or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Forward-looking statements relate to matters such as:
•
future operating rates, margins, cash flow and demand for our products;
•
industry market outlook, including the price of crude oil;
•
production capacities;
•
currency devaluation;
•
our ability to borrow additional funds under our credit facility;
•
our ability to meet our liquidity needs;
•
our intended quarterly dividends;
•
future capacity additions and expansions in the industry;
•
timing, funding and results of capital projects, such as the expansion program at our Lake Charles facility;
•
results of acquisitions;
•
pension plan obligations, funding requirements and investment policies;
•
compliance with present and future environmental regulations and costs associated with environmentally related penalties, capital expenditures, remedial actions and proceedings, including any new laws, regulations or treaties that may come into force to limit or control carbon dioxide and other greenhouse gases emissions or to address other issues of climate change;
•
effects of pending legal proceedings; and
•
timing of and amount of capital expenditures.
We have based these statements on assumptions and analyses in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe were appropriate in the circumstances when the statements were made. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those described in such statements. These statements are subject to a number of assumptions, risks and uncertainties, including those described in "Risk Factors" in the 2014 Form 10-K and the following:
•
general economic and business conditions;
•
the cyclical nature of the chemical industry;
•
the availability, cost and volatility of raw materials and energy;
•
uncertainties associated with the United States, European and worldwide economies, including those due to political tensions and unrest in the Middle East, the Commonwealth of Independent States (including Ukraine) and elsewhere;
•
current and potential governmental regulatory actions in the United States and Europe and regulatory actions and political unrest in other countries;
•
industry production capacity and operating rates;

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•
the supply/demand balance for our products;
•
competitive products and pricing pressures;
•
instability in the credit and financial markets;
•
access to capital markets;
•
terrorist acts;
•
operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, spills and releases and other environmental risks);
•
changes in laws or regulations;
•
technological developments;
•
our ability to integrate acquired businesses;
•
foreign currency exchange risks;
•
our ability to implement our business strategies; and
•
creditworthiness of our customers.
Many of these factors are beyond our ability to control or predict. Any of the factors, or a combination of these factors, could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. These forward-looking statements are not guarantees of our future performance, and our actual results and future developments may differ materially from those projected in the forward-looking statements. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels. Every forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements.
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
Commodity Price Risk
A substantial portion of our products and raw materials are commodities whose prices fluctuate as market supply and demand fundamentals change. Accordingly, product margins and the level of our profitability tend to fluctuate with changes in the business cycle. We try to protect against such instability through various business strategies. Our strategies include ethylene feedstock flexibility and moving downstream into the olefins and vinyls products where pricing is more stable. We use derivative instruments in certain instances to reduce price volatility risk on feedstocks and products. Based on our open derivative positions at March 31, 2015 , a hypothetical $0.10 increase in the price of a gallon of ethane would have increased our income before taxes by $14.8 million and a hypothetical $0.10 increase in the price of a MMbtu of natural gas would have decreased our income before taxes by $0.9 million. Additional information concerning derivative commodity instruments appears in Notes 11 and 12 to the unaudited consolidated financial statements within this Quarterly Report on Form 10-Q.
Interest Rate Risk
We are exposed to interest rate risk with respect to fixed and variable rate debt. At March 31, 2015 , we had variable rate debt of $10.9 million outstanding. All of the debt outstanding under our revolving credit facility (none was outstanding at March 31, 2015 ) and our loan relating to the tax-exempt waste disposal revenue bonds are at variable rates. We do not currently hedge our variable interest rate debt, but we may do so in the future. The average variable interest rate for our variable rate debt of $10.9 million as of March 31, 2015 was 0.06%. A hypothetical 100 basis point increase in the average interest rate on our variable rate debt would increase our annual interest expense by approximately $0.1 million. Also, at March 31, 2015 , we had $754.0 million aggregate principal amount of fixed rate debt. We are subject to the risk of higher interest cost if and when this debt is refinanced. If interest rates are 1% higher at the time of refinancing, our annual interest expense would increase by approximately $7.5 million.
Foreign Currency Exchange Rate Risk
We are exposed to foreign currency exchange rate risk associated with our international operations. However, the effect of fluctuations in foreign currency exchange rates caused by our international operations has not had a material impact on our overall operating results. We may engage in activities to mitigate our exposure to foreign currency exchange risk in certain instances through the use of currency exchange derivative instruments, including forward exchange contracts, or spot purchases. A forward exchange contract obligates us to exchange predetermined amounts of specified currencies at a stated

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exchange rate on a stated date.

Item 4.
Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Senior Vice President, Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based upon that evaluation, our President and Chief Executive Officer and our Senior Vice President, Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective with respect to (i) the accumulation and communication to our management, including our Chief Executive Officer and our Chief Financial Officer, of information required to be disclosed by us in the reports that we submit under the Exchange Act, and (ii) the recording, processing, summarizing and reporting of such information within the time periods specified in the SEC's rules and forms.
There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
The 2014 Form 10-K, filed on February 25, 2015, contained a description of various legal proceedings in which we are involved, including environmental proceedings at our facilities in Calvert City. See Note 16 to the unaudited consolidated financial statements within this Quarterly Report on Form 10-Q for a description of certain of those proceedings, which information is incorporated by reference herein.
 
Item 1A.
Risk Factors
For a discussion of risk factors, please read Item 1A, "Risk Factors" in the 2014 Form 10-K. There have been no material changes from those risk factors, except as described below.
To service our indebtedness and fund our capital requirements, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures and pay cash dividends will depend on our ability to generate cash in the future, including any distributions that we may receive from Westlake Partners. This is subject to general economic, financial, currency, competitive, legislative, regulatory and other factors that are beyond our control. The U.S. Treasury Department and the IRS recently issued proposed regulations providing guidance on the meaning of "qualifying income" for activities involving natural resources. If the regulations were to become final in their current form, Westlake Partners would likely be treated as a corporation for U.S. federal income tax purposes following a ten-year transition period. If and when that occurs, Westlake Partners may distribute less cash to us and the other holders of its units.
Our business may not generate sufficient cash flow from operations, we may not receive sufficient distributions from Westlake Partners, currently anticipated cost savings and operating improvements may not be realized on schedule and future borrowings may not be available to us under our credit facility in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We also generate revenues denominated in currencies other than that of our indebtedness and may have difficulty converting those revenues into the currency of our indebtedness. We may need to refinance all or a portion of our indebtedness on or before maturity. In addition, we may not be able to refinance any of our indebtedness, including our credit facility and our senior notes, on commercially reasonable terms or at all. All of these factors could be magnified if we were to finance any future acquisitions with significant amounts of debt.
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information on our purchase of equity securities during the quarter ended March 31, 2015 .
Period
 
Total Number
of Shares
Purchased (1) (2)
 
Average Price
Paid Per
Share
 
Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs (2)
 
Maximum Number
(or Approximate
Dollar Value) of
Shares that
May Yet Be
Purchased Under the
Plans or Programs  (2)
January 2015
 
34,193

 
$
58.79

 
34,025

 
$
249,150,000

February 2015
 
34,622

 
$
66.79

 
—

 
$
249,150,000

March 2015
 
—

 
$
—

 
—

 
$
249,150,000

 
 
68,815

 
$
62.81

 
34,025

 
 
_____________
(1)
Represents shares withheld in satisfaction of withholding taxes due upon the vesting of restricted stock and restricted stock units granted to our employees under the 2013 Plan.
(2)
On August 22, 2011, we announced the authorization by our Board of Directors of a $100.0 million stock repurchase program (the "2011 Program"). In the first quarter of 2015, the Company repurchased 19,448 shares under the 2011 Program, bringing the total number of shares repurchased under this program to 1,944,161 at an aggregate purchase price of $100.0 million, the full amount of the 2011 Program. On November 21, 2014, the Company's Board of Directors approved an additional $250.0 million share repurchase program (the "2014 Program"). As of March 31, 2015 , 14,577

33
Table of Contents


shares of common stock had been acquired at an aggregate purchase price of $0.9 million under the 2014 Program. Decisions regarding the amount and the timing of purchases under the 2014 Program will be influenced by our cash on hand, our cash flow from operations, general market conditions and other factors. The 2014 Program may be discontinued by our Board of Directors at any time.
 
Item 6.
Exhibits
Exhibit No.
 
 
 
 
 
10.1
 
Senior Unsecured Revolving Credit Agreement between Westlake Chemical OpCo LP and Westlake Development Corporation (incorporated by reference to Exhibit 10.13 to Westlake Chemical Partners LP's Registration Statement on Form S-1 filed on June 30, 2014, File No. 1-36567)
 
 
 
10.2
 
Senior Unsecured Revolving Credit Agreement by and among Westlake Chemical Partners GP LLC and Westlake Chemical Finance Corporation, dated as of April 29, 2015 (incorporated by reference to Exhibit 10.1 to Westlake Chemical Partners LP's Current Report on Form 8-K filed on April 30, 2015, File No. 1-36567)
 
 
 
10.3†
 
Form of Stock Option Award Letter for 2015 Executive Officer Awards
 
 
 
10.4†
 
Form of Restricted Stock Units Award Letter for 2015 Executive Officer Awards
 
 
 
10.5†
 
Form of Long-Term Cash Performance Award Letter for 2015 Executive Officer Awards
 
 
 
31.1†
 
Rule 13a – 14(a) / 15d – 14(a) Certification (Principal Executive Officer)
 
 
 
31.2†
 
Rule 13a – 14(a) / 15d – 14(a) Certification (Principal Financial Officer)
 
 
 
32.1#
 
Section 1350 Certification (Principal Executive Officer and Principal Financial Officer)
 
 
 
99.1#
 
Unaudited Financial Statements of Non Wholly-Owned Subsidiary Guarantor (Westlake Chemical OpCo LP)
 
 
 
101.INS†
 
XBRL Instance Document
 
 
 
101.SCH†
 
XBRL Taxonomy Extension Schema Document
 
 
 
101.CAL†
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
101.DEF†
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
101.LAB†
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
101.PRE†
 
XBRL Taxonomy Extension Presentation Linkbase Document

______________________________
†
Filed herewith.
#
Furnished herewith.


34
Table of Contents



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 
 
 
 
WESTLAKE CHEMICAL CORPORATION
 
 
 
 
Date:
May 6, 2015
 
 
By:
 
/ S /    A LBERT  C HAO        
 
 
 
 
 
 
Albert Chao
 
 
 
 
 
 
President and Chief Executive Officer
(Principal Executive Officer)
 
 
 
 
Date:
May 6, 2015
 
 
By:
 
/ S /    M. S TEVEN  B ENDER        
 
 
 
 
 
 
M. Steven Bender
 
 
 
 
 
 
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)

35
Table of Contents



EXHIBIT INDEX

Exhibit No.
 
Exhibit
 
 
 
10.1
 
Senior Unsecured Revolving Credit Agreement between Westlake Chemical OpCo LP and Westlake Development Corporation (incorporated by reference to Exhibit 10.13 to Westlake Chemical Partners LP's Registration Statement on Form S-1 filed on June 30, 2014, File No. 1-36567)
 
 
 
10.2
 
Senior Unsecured Revolving Credit Agreement by and among Westlake Chemical Partners GP LLC and Westlake Chemical Finance Corporation, dated as of April 29, 2015 (incorporated by reference to Exhibit 10.1 to Westlake Chemical Partners LP's Current Report on Form 8-K filed on April 30, 2015, File No. 1-36567)
 
 
 
10.3†
 
Form of Stock Option Award Letter for 2015 Executive Officer Awards
 
 
 
10.4†
 
Form of Restricted Stock Units Award Letter for 2015 Executive Officer Awards
 
 
 
10.5†
 
Form of Long-Term Cash Performance Award Letter for 2015 Executive Officer Awards
 
 
 
31.1†
 
Rule 13a – 14(a) / 15d – 14(a) Certification (Principal Executive Officer)
 
 
 
31.2†
 
Rule 13a – 14(a) / 15d – 14(a) Certification (Principal Financial Officer)
 
 
 
32.1#
 
Section 1350 Certification (Principal Executive Officer and Principal Financial Officer)
 
 
 
99.1#
 
Unaudited Financial Statements of Non Wholly-Owned Subsidiary Guarantor (Westlake Chemical OpCo LP)
 
 
 
101.INS†
 
XBRL Instance Document
 
 
 
101.SCH†
 
XBRL Taxonomy Extension Schema Document
 
 
 
101.CAL†
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
101.DEF†
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
101.LAB†
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
101.PRE†
 
XBRL Taxonomy Extension Presentation Linkbase Document

______________________________
†
Filed herewith.
#
Furnished herewith.


36


Exhibit 10.3


[Date]


[Name]
[Title]


Re:
WESTLAKE CHEMICAL CORPORATION
NONQUALIFIED STOCK OPTION AWARD

Dear [Name]:
Westlake Chemical Corporation (the "Company") is pleased to notify you that you have been granted a nonqualified stock option ("Option"), effective February 20, 2015 (the "Award Date"), to purchase XXXX shares of common stock of the Company ("Common Stock") in accordance with the Westlake Chemical Corporation 2013 Omnibus Incentive Plan (the "Plan"). Your Award is more fully described in the attached Appendix A, Terms and Conditions of Nonqualified Stock Option Award.
The price at which you may purchase the shares of Common Stock covered by the Option is $68.09 (the "Grant Price"). Unless otherwise provided in the attached Appendix A, your Option will expire on the tenth anniversary of the Award Date (the "Expiration Date"), and will become exercisable in installments as follows (the "Schedule"):
Period Beginning
Per Cent of Shares Purchasable
February 20, 2016
February 20, 2017
February 20, 2018
33%
33%
34%
You must be in continuous employment with the Company or one of its Subsidiaries (as defined in the Plan) from the Award Date through each date on which your Option becomes exercisable in order for your Option to become exercisable on such date. Fractional shares will be rounded for purposes of vesting in accordance with Plan policy.
Your Award is subject to the terms and conditions set forth in the Plan. Both the Plan and the Prospectus for the Plan have been previously provided to you. Your Award is also subject to any additional terms and conditions set forth in the attached Appendix A and any rules and regulations adopted by the Plan's Administrator (as defined in the Plan). In conjunction with this Award we are also required to provide you with the most current relevant SEC filings by the Company; therefore, we refer you to the SEC Filings section of our web page, www.westlake.com .
This Award letter and the attachment contain the formal terms and conditions of your Award and accordingly should be retained in your files for future reference. If you have any questions regarding this Award, you may contact Mr. David Hansen, Sr. Vice President, Administration, at 713-960-9111.
Very truly yours,

Albert Chao
President & CEO



Appendix A
to Award Letter
dated
[Date]

Terms and Conditions of
Employee Nonqualified Stock Option Award
The nonqualified stock option (the "Option") granted to you by Westlake Chemical Corporation (the "Company") to purchase common stock of the Company ("Common Stock") is subject to the terms and conditions set forth in the Westlake Chemical Corporation 2013 Omnibus Incentive Plan (the "Plan"), any rules and regulations adopted by the Administrator (as defined in the Plan), and any additional terms and conditions set forth in this Appendix A which forms a part of the attached award letter to you (the "Award Letter"). Any terms used in this Appendix A and not defined in the Award Letter or this Appendix A have the meanings set forth in the Plan. In the event there is an inconsistency between the terms of the Plan and this Appendix A, the terms of the Plan will control.
1.
Grant Price
You may purchase the shares of Common Stock covered by the Option for the Grant Price stated in your Award Letter.
2.
Term of Option
Your Option expires on the Expiration Date stated in your Award Letter. However, your Option will terminate prior to the Expiration Date as provided in Paragraph 6 of this Appendix A upon the occurrence of one of the events described in that paragraph. Regardless of the provisions of Paragraph 6, in no event can your Option be exercised after the Expiration Date.
3.
Earn-out of Option
(a)
Unless it becomes vested and exercisable on an earlier date as provided in Paragraph 6 below, your Option will become vested and exercisable in cumulative installments as set forth in the Schedule in your Award Letter.
(b)
To the extent your Option has become vested and exercisable, you may exercise the Option as to all or any part of the shares covered by the Option, at any time on or before the date the Option expires or terminates, subject to any limitations imposed by law or by Company policy regarding transactions in Common Stock.
4.
Exercise of Option
Subject to the limitations and the terms set forth in this Appendix A and the Plan, your Option may be exercised from time to time in accordance with the administrative procedures established by the Company in effect at the time of your exercise. In addition, if you have been notified by the Company that you may be subject to certain exercise restrictions, your Option may only be exercised by written notice signed and delivered by you or another person entitled to exercise the Option to the General Counsel of the Company at its principal executive office in Houston, Texas, or as it may hereafter be located, as set forth below. Such written notice shall (a) state the number of shares of Common Stock with respect to which your Option is being exercised and (b) subject to approval of your request to exercise, be accompanied by a wire transfer, cashier's check, cash, money order or other form of payment deemed acceptable by the Administrator or its designee and made payable to Westlake Chemical Corporation in the full amount of the Grant Price for any shares of Common Stock being acquired and any appropriate withholding taxes (as provided in Paragraph 7 of this Appendix A), or by other consideration in the form and manner approved by the Administrator or its designee pursuant to Paragraphs 5 and 7 of this Appendix A. In the alternative, the Administrator or its designee may prescribe other procedures for exercise of your Option. If any law or regulation requires the Company to take any action with respect to the shares specified in such notice, the time for delivery thereof, which would otherwise be as promptly as possible, shall be postponed for the period of time necessary to take such action. You shall have no rights of a shareholder with respect to shares of Common Stock subject to your Option unless and until such time as your Option has been exercised and ownership of such shares of Common Stock has been transferred to you.

A- 1
2015 NQSO Award


5.
Satisfaction of Grant Price
(a)
Payment of Cash or Common Stock. Your Option may be exercised by payment in cash (including check, bank draft, money order or wire transfer payable to the Company), in Common Stock, in a combination of cash and Common Stock or in such other manner as the Administrator in its discretion may provide. Payment in Common Stock shall only be permitted if and to the extent authorized by the Administrator.
(b)
Payment of Common Stock. The Fair Market Value of any shares of Common Stock tendered as all or part of the Grant Price shall be determined as provided in the Plan. The certificates evidencing shares of Common Stock tendered must be duly endorsed or accompanied by appropriate stock powers. Only stock certificates issued solely in your name may be tendered in exercise of your Option. Fractional shares may not be tendered in satisfaction of the Grant Price; any portion of the Grant Price which is in excess of the aggregate Fair Market Value of the number of whole shares tendered must be paid in cash. If a certificate tendered in exercise of the Option evidences more shares than are required pursuant to the immediately preceding sentence for satisfaction of the portion of the Grant Price being paid in Common Stock, an appropriate replacement certificate will be issued to you for the number of excess shares.
(c)
Broker-Assisted Exercise . At your request or the request of another person entitled to exercise this Option, and to the extent permitted by applicable law, the Administrator in its discretion may selectively approve "cashless exercise" arrangements with a brokerage firm under which such brokerage firm, on behalf of you or such other person exercising the Option, shall pay to the Company or its designee the Grant Price of the Option or of the portion being exercised, and the Company or its designee, pursuant to an irrevocable notice from you or such other person exercising the Option, shall promptly deliver the shares being purchased to such firm.
6.
Termination of Employment
(a)
General . The following rules apply to your Option in the event of your death, disability or other termination of employment.
(i)
Involuntary Termination Without Cause . If your employment with the Company or a Subsidiary is terminated by the Company or any such Subsidiary without Cause, your Option shall be exercisable to the extent vested on the date of your termination and shall become exercisable with respect to a portion of the previously unexercisable shares that were scheduled to become exercisable on the next vesting date, prorated for the number of full months you were employed from the most recent vesting date until the date of your termination. To the extent vested, regardless whether vested as a result of your termination of employment or vested prior thereto, your Option shall remain exercisable for the longer of (i) 30 days following your termination date or (ii) the period during which you receive salary continuation under any separation agreement, policy, plan or other arrangement with the Company or any of its Subsidiaries, but not to exceed 180 days following your termination date; provided, however, that in no event shall the Option be exercisable after the Expiration Date. Upon expiration of the foregoing period, your Option shall terminate in all respects.
(ii)
Voluntary Termination . Except as provided in Paragraph 6(a)(vi), if you voluntarily terminate employment with the Company or a Subsidiary, your Option shall be exercisable to the extent vested on the date of your termination. To the extent vested, your Option shall remain exercisable until the first to occur of (i) 30 days following your termination date, or (ii) the Expiration Date. Upon expiration of the foregoing period, your Option shall terminate in all respects.
(iii)
Termination with Cause . If your employment with the Company or a Subsidiary is terminated for Cause, your Option shall immediately terminate and shall no longer be exercisable. You forfeit any previously vested and unexercised portion of your Option.
(iv)
Termination by Reason of Death . If your employment terminates by reason of death, your Option will become fully vested and exercisable and will remain exercisable until the first to occur of (i) one year after the date of your termination, or (ii) the Expiration Date.
(v)
Termination by Reason of Disability . If your employment terminates by reason of total and permanent disability (as determined by the Administrator), your Option will be exercisable to the extent vested on

A- 2
2015 NQSO Award


the date of your termination, and will remain exercisable until the first to occur of (i) 180 days after the date of your termination, or (ii) the Expiration Date. Upon expiration of the foregoing period, your Option shall terminate in all respects.
(vi)
Termination by Reason of Normal Retirement . If you voluntarily terminate employment due to Normal Retirement, your Option shall be exercisable to the extent vested on the date of your termination and shall become exercisable with respect to a portion of the previously unexercisable shares, prorated for the number of days you were employed from the Award Date until the date of your termination. With respect to all vested shares, regardless whether vested as a result of your Normal Retirement or vested prior thereto, your Option shall remain exercisable for 30 days following your termination date; provided, however, that in no event shall the Option be exercisable after the Expiration Date. Upon expiration of the foregoing period, your Option shall terminate in all respects.
(vii)
Adjustments by the Administrator . The Administrator may, in its sole discretion, exercised before or after your termination of employment, declare all or any portion of your Option immediately vested and exercisable and/or permit all or any part of your Option to remain exercisable for such period designated by it after the time when the Option would have otherwise terminated as provided in the applicable portion of this Paragraph 6(a), but not beyond the Expiration Date of your Option.
(b)
Administrator Determinations . The Administrator shall have absolute discretion to determine the date and circumstances of termination of your employment, and its determination shall be final, conclusive and binding upon you.
(c)
Cause . For purposes of this Appendix A, Cause shall mean any of the following:
(i)
your conviction by a court of competent jurisdiction of any felony or a crime involving moral turpitude;
(ii)
your knowing failure or refusal to follow reasonable instructions given to you on behalf of the Company or reasonable policies, standards and regulations of the Company or any Subsidiary;
(iii)
your continued failure or refusal to faithfully and diligently perform the usual, customary duties of your employment with the Company or any Subsidiary;
(iv)
continuously conducting yourself in an unprofessional, unethical or immoral manner; or
(v)
any fraudulent conduct or conduct which discredits the Company or any Subsidiary or is detrimental to the reputation, character and standing of the Company or any Subsidiary.
(d)
Normal Retirement . For purposes of this Appendix A, "Normal Retirement" shall mean your termination from employment with the Company and its Subsidiaries for any reason after you have (a) attained at least 65 years of age, and (b) been employed by the Company or a Subsidiary for a continuous period of 10 years or more ending on the date of your termination.
7.
Tax Consequences and Withholding
(a)
You are urged to consult your own tax advisor regarding the application of the tax laws to your particular situation.
(b)
The Option is not intended to be an "incentive stock option," as defined in Section 422 of the Code.
(c)
You must make arrangements satisfactory to the Company to satisfy any applicable federal, state or local withholding tax liability arising from the grant or exercise of your Option. You can either make a cash payment to the Company of the required amount or you can elect to satisfy your withholding obligation by having the Company retain shares of Common Stock having a Fair Market Value (as prescribed by the Plan) equal to the amount of your withholding obligation from the shares otherwise deliverable to you upon the exercise of your Option. You may not elect to have the Company withhold shares of Common Stock having a Fair Market Value in excess of the minimum statutory withholding tax liability.

A- 3
2015 NQSO Award


8.
Restrictions on Resale
There are no restrictions imposed by the Plan on the resale of shares of Common Stock acquired under the Plan. However, under the provisions of the Securities Act of 1933 (the "Securities Act") and the rules and regulations of the Securities and Exchange Commission (the "SEC"), resales of shares acquired under the Plan by certain officers and directors of the Company who may be deemed to be "affiliates" of the Company must be made pursuant to an appropriate effective registration statement filed with the SEC, pursuant to the provisions of Rule 144 issued under the Securities Act, or pursuant to another exemption from registration provided in the Securities Act. At the present time, the Company does not have a currently effective registration statement pursuant to which such resales may be made by affiliates. There are no restrictions imposed by the SEC on the resale of shares acquired under the Plan by persons who are not affiliates of the Company. However, the timing of sales of shares may be restricted by applicable law, and the Company may, from time to time, adopt policies regarding timing of sales of shares by employees.
9.
Effect on Other Benefits
Income recognized by you as a result of exercise of the Option will not be included in the formula for calculating benefits under any of the Company's retirement and disability plans or any other benefit plans.
If you have any questions regarding your Option or would like to obtain additional information about the Plan or the Administrator, please contact the Sr. Vice President, Administration at 713-960-9111. Your Award Letter and this Appendix A contain the formal terms and conditions of your award and accordingly should be retained in your files for future reference.

A- 4
2015 NQSO Award


Exhibit 10.4


[Date]


[Name]
[Title]


Re:
WESTLAKE CHEMICAL CORPORATION
RESTRICTED STOCK UNIT AWARD

Dear [Name]:
Westlake Chemical Corporation (the "Company") is pleased to notify you that you have been granted an award ("Award") of XXXX units ("Restricted Stock Units"), each such unit representing one share of Common Stock of the Company. Upon the vesting of this Award pursuant to Paragraph 2 below, this Award of Restricted Stock Units will be settled by the issuance to you of one share of Common Stock for each Restricted Stock Unit awarded hereunder. This Award is granted effective February 20, 2015 (the "Grant Date"), subject to the following terms and conditions:
1.
Relationship to Plan . This Award is subject to all of the terms, conditions and provisions of the Westlake Chemical Corporation 2013 Omnibus Incentive Plan (the "Plan") and administrative interpretations thereunder, if any, which have been adopted by the Administrator and are in effect on the date hereof. Except as defined herein, capitalized terms shall have the same meanings ascribed to them under the Plan.
2.
Vesting Schedule .
(a)
This Award shall vest in accordance with the following schedule:
Period Beginning
Per Cent of Shares Vested
February 20, 2018
100%
You must be in continuous regular, full-time employment with the Company or any of its Subsidiaries from the Grant Date through the date this Award is scheduled to vest in order for the Award to vest. During the period of time between the Grant Date and the earlier of the date the Restricted Stock Units vest or are forfeited, the Restricted Stock Units will be evidenced by a book entry account in the Company's records. Fractional shares will be rounded for purposes of vesting in accordance with Plan policy.
(b)
All Restricted Stock Units subject to this Award shall vest, irrespective of the limitations set forth in subparagraph (a) above, in the event of your termination of employment with the Company or any of its Subsidiaries due to death.
(c)
Irrespective of the limitations set forth in subparagraph(a) above, in the event of your termination of employment with the Company or any of its Subsidiaries due to Normal Retirement, the Restricted Stock Units subject to this Award shall immediately vest, with such amount multiplied by a fraction, the numerator of which is the number of days of employment with the Company or any of its Subsidiaries you completed after the Grant Date and prior to your Normal Retirement, and the denominator of which is the total number of days in the period from the Grant Date to the date this Award is scheduled to vest. For purposes of this Award, (i) "Normal Retirement" shall mean your termination from employment with the Company and its Subsidiaries for any reason after you have (a) attained at least 65 years of age, and (b) been employed by the Company or a Subsidiary for a continuous period of 10 years or more ending on the date of your termination.



3.
Forfeiture of Award . If your employment terminates other than by reason of death or Normal Retirement, all unvested Restricted Stock Units as of the termination date shall be forfeited.
4.
Distribution Following Termination of Restrictions . Subject to the other provisions of this Award and the Plan, the Restricted Stock Units shall vest as set forth in Paragraph 2, and shares of Common Stock shall be distributed to you (or your beneficiary) as soon as practicable after the Restricted Stock Units vest, but in no event later than March 15th of the year following the year in which the Restricted Stock Units vest. Distribution of Common Stock will be subject to withholding taxes as described in Paragraph 5, and may be in a form selected by the Company, in its discretion, including deposit into a custodial account or delivery of a stock certificate.
5.
Withholding . At the time of issuance of Common Stock upon the vesting of the Restricted Stock Units, the Company shall withhold an appropriate number of shares of Common Stock, having a Fair Market Value determined in accordance with the Plan, equal to the amount necessary to satisfy the minimum federal, state and local tax withholding obligation with respect to this Award. The distribution of Common Stock described in Paragraph 4 will be net of such shares of Common Stock that are withheld to satisfy applicable taxes pursuant to this Paragraph. In lieu of withholding of shares of Common Stock, the Administrator may, in its discretion, authorize tax withholding to be satisfied by a cash payment to the Company, by withholding an appropriate amount of cash from base pay, or by such other method as the Administrator determines may be appropriate to satisfy all obligations for withholding of such taxes.
6.
Assignment of Award. Your rights under the Plan and this Restricted Stock Unit Award are personal; no assignment or transfer of your rights under and interest in this Award may be made by you other than by will or by the laws of descent and distribution.
7.
Dividend Equivalents. You are entitled to receive Dividend Equivalents paid in cash with respect to the Restricted Stock Units from the Grant Date until the earlier of the date that Common Stock is delivered to you in satisfaction of this Award or the date this Award is forfeited.
8.
Voting Rights. You do not have voting rights with respect to the Restricted Stock Units. You will be entitled to vote shares of Common Stock you retain that are issued to you in settlement of this Award.
9.
No Employment Guaranteed . No provision of this Restricted Stock Unit Award shall give you any right to continued employment with the Company or any Subsidiary.
10.
Requirements of Law and Stock Exchanges . Your rights to the Restricted Stock Units and the issuance and delivery of the Common Stock to which such Restricted Stock Units relate are subject to compliance with all applicable requirements of law. In addition, the Company shall not be obligated to deliver any shares of Common Stock if counsel to the Company determines that such delivery would violate any applicable law or any rule or regulations of any governmental authority or any rule or regulation of, or agreement of the Company with, any securities exchange or association upon which the Common Stock is listed or quoted.
11.
Governing Law . This Restricted Stock Unit Award shall be governed by, construed, and enforced in accordance with the laws of the State of Texas.
12.
Section 409A of the Code . This Award is intended to be exempt from or to comply with the provisions of Section 409A of the Code ("Section 409A") and the provisions of this Award shall be administered, interpreted and construed accordingly. Specifically, (i) if you are not Normal Retirement Eligible, the distribution of the Common Stock upon the time of payment specified in Paragraph 4 is exempt from Section 409A as a short-term deferral in compliance with Treasury Regulation Section 1.409A-1(b)(4), and (ii) if you are Normal Retirement Eligible, the time of payment specified with respect to Paragraph 4 is compliant with Treasury Regulation Section 1.409A-3(c)(2) and is complaint with Section 409A as being paid pursuant to a specified time or fixed schedule under Treasury Regulation Section 1.409A-3(i). You will not be considered to have a termination from employment unless such termination meets the requirements for a "separation from service" within the meaning of U.S. Treasury Regulation Section 1.409A-1(h), if applicable. If you are Normal Retirement Eligible and the issuance


2015 RSU Award
Page 2


and delivery of the Common Stock hereunder would be subject to additional taxes and interest under Section 409A because the timing of such payment is not delayed as provided in Section 409A(a)(2)(B) of the Code, then the issuance and delivery of the Common Stock hereunder shall be made on the date that is six months and one day after the date of your Normal Retirement (or if such date does not fall on a business day of the Company, the next following business day of the Company), or such earlier date upon which such amount can be paid or provided under Section 409A without being subject to such additional taxes and interest. For purposes of this Award, "Normal Retirement Eligible" shall mean that you meet the age and service requirements for eligibility for Normal Retirement prior to the calendar year in which any part of this Award is scheduled to vest pursuant to Paragraph 2(a).
In conjunction with this Award we are required to provide you with the latest relevant SEC filings by the Company; therefore, we refer you to the SEC Filings section of our web page, www.westlake.com . If you have any questions regarding this Award, you may contact Mr. David Hansen, Sr. Vice President, Administration, at 713-960-9111.
Very truly yours,

Albert Chao
President & CEO


2015 RSU Award
Page 3


Exhibit 10.5


[Date]


[Name]
[Title]


Re:
WESTLAKE CHEMICAL CORPORATION
LONG-TERM CASH PERFORMANCE AWARD

Dear [Name]:
Westlake Chemical Corporation (the "Company") is pleased to notify you that you have been granted an award for the 2015-2017 performance cycle with a target value of $ XXXX ("Performance Award"). This Performance Award is granted effective February 20, 2015 (the "Grant Date"), subject to the following terms and conditions:
1.
Relationship to Plan . This Performance Award is subject to all of the terms, conditions and provisions of the Westlake Chemical Corporation 2013 Omnibus Incentive Plan (the "Plan") and administrative interpretations thereunder, if any, which have been adopted by the Administrator and are in effect on the date hereof. Except as defined herein, capitalized terms shall have the same meanings ascribed to them under the Plan.
2.
Payment Schedule .
(a)
The amount of the Performance Award shall be calculated based on the Company's achievement of certain performance conditions, as set forth on Exhibit A (the "Performance Condition") during the 2015-2017 performance cycle, which is the period from January 1, 2015 through December 31, 2017 (the "Performance Cycle"). The Performance Award shall be paid to you in cash as soon as practicable following the date the Administrator determines to what extent the Performance Conditions were satisfied, provided , however , that you are employed by the Company or any of its Subsidiaries on such payment date.
For the avoidance of doubt, you must be in continuous regular, full-time employment with the Company or any of its Subsidiaries from the Grant Date through the date this Performance Award is paid in order to be eligible to receive this Performance Award.
(b)
The Performance Award shall be paid to you at the target level, irrespective of the limitations set forth in subparagraph (a) above, in the event of your termination of employment with the Company or any of its Subsidiaries due to death, with such amount multiplied by a fraction, the numerator of which is the number of days of employment with the Company or any of its Subsidiaries you completed during the Performance Cycle and prior to your death, and the denominator of which is the total number of days in the Performance Cycle. Such Performance Award shall be paid to your beneficiary within 70 days following your death.
(c)
The Performance Award shall be paid to you, irrespective of the limitations set forth in subparagraph (a) above, in the event of your termination of employment with the Company or any of its Subsidiaries due to Normal Retirement, with such amount multiplied by a fraction, the numerator of which is the number of days of employment with the Company or any of its Subsidiaries you completed during the Performance Cycle and prior to your Normal Retirement, and the denominator of which is the total number of days in the Performance Cycle. To the extent earned based on the Performance Condition, such Performance Award shall be paid to you on March 15 th of the year immediately following the end of the Performance Cycle. For purposes of this Performance Award, "Normal Retirement" shall mean your termination from employment with the Company and its Subsidiaries for any reason after you



have (a) attained at least 65 years of age, and (b) been employed by the Company or a Subsidiary for a continuous period of 10 years or more ending on the date of your termination.
3.
Forfeiture of Performance Award . If your employment with the Company or any of its Subsidiaries terminates other than by reason of death or your Normal Retirement, your Performance Award shall be forfeited.
4.
Withholding . At the time of the payment of the Performance Award, the Company shall withhold an amount of cash equal to the amount necessary to satisfy the minimum federal, state and local tax withholding obligation with respect to this Performance Award.
5.
Assignment of Performance Award . Your rights under the Plan and this Performance Award are personal; no assignment or transfer of your rights under and interest in this Performance Award may be made by you other than by will or by the laws of descent and distribution.
6.
No Employment Guaranteed . No provision of this Performance Award shall give you any right to continued employment with the Company or any Subsidiary.
7.
Governing Law . This Performance Award shall be governed by, construed, and enforced in accordance with the laws of the State of Texas.
8.
Section 409A . Any payments under Paragraph 2(a) or 2(b) of this Performance Award are intended to be exempt from Section 409A of the Code, by compliance with the short-term deferral exemption as specified in Treas. Reg. § 1.409A-1(b)(4). Any payment under Paragraph 2(c) of this Performance Award is intended to be compliant with Code Section 409A as being paid pursuant to a specified time or fixed schedule under Treas. Reg. § 1.409A-3(i). The provisions of this Performance Award shall be administered, interpreted and construed accordingly.
If you have any questions regarding this award, you may contact Mr. David Hansen, Sr. Vice President, Administration, at 713-960-9111.
Very truly yours,

Albert Chao
President & CEO


2015 LTCPA
Page 2


EXHIBIT A
Performance Condition
1.
Definition of Performance Condition . The Performance Condition for the 2015-2017 performance cycle shall be based on the greater of the average annual economic value added ("EVA") results for Westlake Chemical Corporation and relative total shareholder return ("TSR") as compared to a peer group of companies. EVA is equal to net operating profit after tax ("NOPAT") less a capital charge based upon the weighted average cost of capital. TSR means stock price growth for a defined measurement period, with any dividends paid.
Average annual EVA results will be determined by averaging the annual EVA results for Westlake Chemical Corporation over the 2015-2017 three-year period. For purposes of determining TSR, the stock price shall be calculated based on the daily average stock price for the fourth calendar quarter 2014 and the fourth calendar quarter 2017. TSR shall be measured against the peer companies determined by the Administrator and shall be based on a measurement period starting on January 1, 2015 and ending on December 31, 2017 (the "Determination Date").
2.
Calculation of Performance Award . The amount of the Performance Award shall be determined as set forth on the following chart:
 
Threshold Performance
Target Performance
Maximum Performance
Payment Rate
25% of target value
100% of target value
200% of target value
Performance Rate (relative TSR)
33.3% ile
50% ile
75% ile
Performance Rate (Westlake EVA)

* "1X" equals returns equivalent to the cost of capital
.5X
1X*
>2X
As soon as practicable after the Determination Date, the Administrator shall evaluate the level of achievement of the Performance Condition and if at least a threshold level of the Performance Condition was achieved, the Administrator shall certify the level of achievement of the Performance Condition in writing and shall pay the amount of the Performance Award no later than April 1 after the Determination Date.
The Performance Award for performance between Threshold Performance and Target Performance, or between Target Performance and Maximum Performance, shall be determined by linear interpolation between the values listed in the chart above. However, in no event shall the amount potentially payable to you under this Performance Award exceed the payment rate for Maximum Performance. For the avoidance of doubt, if the Threshold Performance condition is not satisfied, no amount shall be payable to you pursuant to this Performance Award.
3.
Adjustments . If a change in control of the Company occurs, and as a result the Administrator determines that the relative TSR calculation would no longer be fairly representative of the Company's performance, the Administrator may make such adjustments to the Performance Condition as it deems necessary in the calculation of the Company's TSR.

A- 1
2015 LTCPA


Exhibit 31.1
CERTIFICATIONS
I, Albert Chao, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Westlake Chemical Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Date:
May 6, 2015
 
 
 
 
 
/ S /    A LBERT  C HAO        
 
 
 
 
 
 
 
Albert Chao
 
 
 
 
 
 
 
President and Chief Executive Officer
(Principal Executive Officer)




Exhibit 31.2
CERTIFICATIONS
I, M. Steven Bender, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Westlake Chemical Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:
May 6, 2015
 
 
 
 
 
/ S / M. S TEVEN  B ENDER
 
 
 
 
 
 
 
M. Steven Bender
 
 
 
 
 
 
 
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)




Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Westlake Chemical Corporation (the "Company") on Form 10-Q for the fiscal quarter ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Albert Chao, President and Chief Executive Officer of the Company, and I, M. Steven Bender, Senior Vice President, Chief Financial Officer and Treasurer of the Company, certify, to the best of our knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material aspects, the financial condition and results of operations of the Company.

Date:
May 6, 2015
 
 
 
 
 
/ S /    A LBERT  C HAO        
 
 
 
 
 
 
 
Albert Chao
 
 
 
 
 
 
 
President and Chief Executive Officer
(Principal Executive Officer)
 
 
 
 
 
Date:
May 6, 2015
 
 
 
 
 
/ S /    M. S TEVEN  B ENDER        
 
 
 
 
 
 
 
M. Steven Bender
 
 
 
 
 
 
 
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)



Exhibit 99.1



Westlake Chemical OpCo LP
Combined Financial Statements for the three months ended March 31, 2015


Table of Contents


FINANCIAL STATEMENTS
WESTLAKE CHEMICAL OPCO LP
BALANCE SHEETS
(Unaudited)
 
 
March 31,
2015
 
December 31,
2014
 
 
 
 
 
 
 
(in thousands of dollars)
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
143,005

 
$
131,545

Accounts receivable, net—Westlake Chemical Corporation ("Westlake")
 
37,982

 
18,529

Accounts receivable, net—third parties
 
16,997

 
37,520

Inventories
 
4,564

 
6,634

Prepaid expenses and other current assets
 
122

 
212

Total current assets
 
202,670

 
194,440

Property, plant and equipment, net
 
866,546

 
842,057

Other assets, net
 


 


Goodwill
 
5,814

 
5,814

Deferred charges and other assets, net
 
48,018

 
51,919

Total other assets, net
 
53,832

 
57,733

Total assets
 
$
1,123,048

 
$
1,094,230

LIABILITIES
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable—Westlake
 
$
11,827

 
$
5,332

Accounts payable—third parties
 
15,568

 
12,348

Accrued liabilities
 
6,104

 
11,225

Total current liabilities
 
33,499

 
28,905

Long-term debt payable to Westlake
 
257,829

 
227,638

Deferred income taxes
 
1,902

 
1,848

Total liabilities
 
293,230

 
258,391

Commitments and contingencies (Notes 8 and 13)
 


 


EQUITY
 
 
 
 
Limited partners interest—Westlake
 
499,467

 
504,854

Limited partner interest—Westlake Chemical Partners LP
 
330,351

 
330,985

Total equity
 
829,818

 
835,839

Total liabilities and equity
 
$
1,123,048

 
$
1,094,230

The accompanying notes are an integral part of the combined financial statements.

1
Table of Contents


WESTLAKE CHEMICAL OPCO LP
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
 
 
Predecessor
 
 
 
 
 
 
 
(in thousands of dollars)
Revenue
 
 
 
 
Net sales—Westlake
 
$
208,913

 
$
383,927

Net co-product, ethylene and feedstock sales—third parties
 
49,478

 
176,087

Total net sales
 
258,391

 
560,014

Cost of sales
 
162,164

 
327,700

Gross profit
 
96,227

 
232,314

Selling, general and administrative expenses
 
5,046

 
7,778

Income from operations
 
91,181

 
224,536

Other income (expense)
 
 
 
 
Interest expense—Westlake
 
(1,376
)
 
(3,591
)
Other income, net
 
5

 
1,252

Income before income taxes
 
89,810

 
222,197

Provision for income taxes
 
467

 
78,323

Net income
 
$
89,343

 
$
143,874

The accompanying notes are an integral part of the combined financial statements.

2
Table of Contents


WESTLAKE CHEMICAL OPCO LP
COMBINED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
 
 
Predecessor
 
Westlake Chemical OpCo LP
 
 
Net
Investment
 
Limited Partners Interest — Westlake
 
Limited Partner Interest — Westlake Chemical Partners LP
 
Total
 
 
 
 
 
 
 
 
 
 
 
(in thousands of dollars)
Balance as of December 31, 2013
 
$
455,432

 
$
—

 
$
—

 
$
455,432

Net income
 
143,874

 
—

 
—

 
143,874

Net distributions to Westlake
 
(192,213
)
 
—

 
—

 
(192,213
)
Balance as of March 31, 2014
 
$
407,093

 
$
—

 
$
—

 
$
407,093

 
 
 
 
 
 
 
 
 
Balance as of December 31, 2014
 
$
—

 
$
504,854

 
$
330,985

 
$
835,839

Net income
 
—

 
79,890

 
9,453

 
89,343

Quarterly distribution for the period from
   October 1, 2014 to December 31, 2014
 
—

 
(85,277
)
 
(10,087
)
 
(95,364
)
Balance as of March 31, 2015
 
$
—

 
$
499,467

 
$
330,351

 
$
829,818

The accompanying notes are an integral part of the combined financial statements.

3
Table of Contents


WESTLAKE CHEMICAL OPCO LP
COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
 
 
Predecessor
 
 
 
 
 
 
 
(in thousands of dollars)
Cash flows from operating activities
 
 
 
 
Net income
 
$
89,343

 
$
143,874

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
 
Depreciation and amortization
 
19,803

 
19,014

Recovery of doubtful accounts
 
—

 
(60
)
Loss from disposition of fixed assets
 
1

 
353

Deferred income taxes
 
54

 
3,267

Income from equity method investment, net of dividends
 
—

 
72

Changes in operating assets and liabilities
 
 
 
 
Accounts receivable—third parties
 
20,523

 
15,493

Net accounts receivable—Westlake
 
(12,958
)
 
—

Inventories
 
2,070

 
30,707

Prepaid expenses and other current assets
 
90

 
83

Accounts payable
 
855

 
(19,198
)
Accrued and other liabilities
 
(3,301
)
 
877

Other, net
 
(307
)
 
3,404

Net cash provided by operating activities
 
116,173

 
197,886

Cash flows from investing activities
 
 
 
 
Additions to property, plant and equipment
 
(39,540
)
 
(51,305
)
Settlements of derivative instruments
 
—

 
(409
)
Net cash used for investing activities
 
(39,540
)
 
(51,714
)
Cash flows from financing activities
 
 
 
 
Proceeds from debt payable to Westlake
 
30,191

 
46,041

Quarterly distribution for the period from October 1, 2014 to December 31, 2014
 
(95,364
)
 
—

Net distributions to Westlake prior to initial public offering
 
—

 
(192,213
)
Net cash used for financing activities
 
(65,173
)
 
(146,172
)
Net increase in cash and cash equivalents
 
11,460

 
—

Cash and cash equivalents at beginning of period
 
131,545

 
—

Cash and cash equivalents at end of period
 
$
143,005

 
$
—

The accompanying notes are an integral part of the combined financial statements.

4
Table of Contents
WESTLAKE CHEMICAL OPCO LP
NOTES TO COMBINED FINANCIAL STATEMENTS
(Unaudited)
(in thousands of dollars)


1. Description of Business and Basis of Presentation
Description of Business
Westlake Chemical OpCo LP ("OpCo") was formed on May 6, 2014 by Westlake. On August 4, 2014, Westlake Chemical Partners LP (the "Partnership" or "WLKP"), a Delaware limited partnership formed in March 2014, completed its initial public offering (the "IPO") of 12,937,500 common units representing limited partner interests in OpCo. In connection with the IPO, the Partnership acquired a 10.6% interest in OpCo and a 100% interest in Westlake Chemical OpCo GP LLC ("OpCo GP"), which is the general partner of OpCo. OpCo owns three ethylene production facilities and a common carrier ethylene pipeline. Westlake's retained 89.4% noncontrolling interest in OpCo.
Basis of Presentation
The accompanying unaudited combined 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 combined financial statements should be read in conjunction with the December 31, 2014 combined financial statements and notes thereto of OpCo included in the Westlake Chemical Corporation annual report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the SEC on February 25, 2015. These combined financial statements have been prepared in conformity with the accounting principles and practices as disclosed in the notes to the combined financial statements of the OpCo for the fiscal year ended December 31, 2014.
Unless the context otherwise requires, references in this report to the "Predecessor" refer to Westlake Chemical Partners LP Predecessor, the Partnership's and OpCo's predecessor for accounting purposes and refer to the time periods prior to the IPO. References in this report to OpCo used in the present tense or prospectively refer to the periods subsequent to the IPO. References to "Westlake" refer collectively to Westlake Chemical Corporation and its subsidiaries, other than the Partnership, OpCo and OpCo GP.
Financial information presented for the periods prior to the IPO on August 4, 2014 consists of the Predecessor's combined results of operations, changes in equity and cash flows. Financial information of the Predecessor is derived from the financial statements and accounting records of Westlake. Subsequent to the IPO, OpCo's financial position, results of operations, changes in equity and cash flows consist of the activities and balances of OpCo.
In the opinion of management, the accompanying unaudited combined financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Predecessor's combined financial statements for the three months ended March 31, 2014 and OpCo's financial statements as of and for the three months ended March 31, 2015 .
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 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 materially 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

5
Table of Contents
WESTLAKE CHEMICAL OPCO LP
NOTES TO COMBINED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars)

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. OpCo is in the process of evaluating the impact that the new accounting guidance will have on its 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 OpCo's financial position, results of operations and cash flows.
2. Financial Instruments
Cash Equivalents
OpCo had $ 95,008 and $ 40,003 of held-to-maturity securities with original maturities of three months or less, primarily consisting of corporate debt securities, classified as cash equivalents at March 31, 2015 and December 31, 2014, respectively. OpCo's investments in held-to-maturity securities are held at amortized cost, which approximates fair value.
3. Accounts Receivable—Third Parties
Accounts receivable—third parties consist of the following:
 
 
March 31,
2015
 
December 31,
2014
Trade customers
 
$
16,997

 
$
37,514

Allowance for doubtful accounts
 
—

 
—

 
 
16,997

 
37,514

Other
 
—

 
6

Accounts receivable, net—third parties
 
$
16,997

 
$
37,520

4. Inventories
Inventories consist of the following:


March 31,
2015

December 31,
2014
Finished products

$
4,264


$
6,257

Feedstock, additives and chemicals

300


377

Inventories

$
4,564


$
6,634

5. Property, Plant and Equipment
As of March 31, 2015 , OpCo had property, plant and equipment, net totaling $866,546 . OpCo 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 OpCo 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.

6
Table of Contents
WESTLAKE CHEMICAL OPCO LP
NOTES TO COMBINED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars)

Depreciation expense on property, plant and equipment of $15,593 and $14,484 is included in cost of sales in the combined statements of operations for the three months ended March 31, 2015 and 2014 , respectively.
6. Other Assets
Amortization expense on other assets of $4,210 and $4,530 is included in the combined statements of operations for the three months ended March 31, 2015 and 2014 , respectively.
Goodwill
The goodwill balance as of March 31, 2015 and December 31, 2014 was $5,814 . There were no changes in the carrying amount of goodwill for the three months ended March 31, 2015 .
7. Related Party Transactions
OpCo regularly enter into related party transactions with Westlake. See below for a description of transactions with related parties.
Sales to Related Parties
OpCo sells ethylene to Westlake under the Ethylene Sales Agreement. Additionally, OpCo from time to time provide other services or products for which it charges Westlake a fee. Prior to the IPO, the Predecessor sold the majority of its ethylene to Westlake for use in Westlake's downstream operations.
Sales to related parties were as follows:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
 
 
Predecessor
Net sales—Westlake
 
$
208,913

 
$
383,927

Cost of Sales from Related Parties
Charges for goods and services purchased by OpCo from Westlake and included in cost of sales relate primarily to feedstock purchased under the Feedstock Supply Agreement and services provided under the services and secondment agreement. Prior to the IPO, services provided by Westlake and included in cost of sales related primarily to services provided by employees of Westlake Management Services, Inc., a subsidiary of Westlake. The cost of services provided by employees of Westlake Management Services, Inc. was allocated to the Predecessor's operations primarily on the basis of direct usage.
Charges from related parties in cost of sales were as follows:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
 
 
Predecessor
Feedstock purchased from Westlake and included in cost of sales
 
$
80,819

 
$
—

Other charges from Westlake and included in cost of sales
 
13,896

 
16,587

Total
 
$
94,715

 
$
16,587

Services from Related Parties Included in Selling, General and Administrative Expenses
Charges for services purchased by OpCo from Westlake and included in selling, general and administrative expenses primarily relate to services Westlake performs on behalf of OpCo under the Omnibus Agreement, including OpCo's finance, legal, information technology, human resources, communication, ethics and compliance, and other administrative functions. Prior to the IPO, the Predecessor was allocated costs incurred by Westlake on its behalf for similar functions. These allocations were based primarily on the basis of direct usage when identifiable, with the remainder allocated on the basis of fixed assets, headcount or other measure. Management believes the allocation of expenses incurred by Westlake on the Predecessor's behalf are reasonable and reflect all costs related to the operations of the Predecessor. Nevertheless, the financial information of the

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WESTLAKE CHEMICAL OPCO LP
NOTES TO COMBINED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars)

Predecessor may not have included all of the expenses that would have been incurred had the Predecessor been a stand-alone company during the periods prior to the IPO.
Charges from related parties included within selling, general and administrative expenses were as follows:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
 
 
Predecessor
Services received from Westlake and included in selling, general and
   administrative expenses
 
$
5,148

 
$
6,476

Goods and Services from Related Parties Capitalized as Assets
Charges for goods and services purchased by OpCo from Westlake which were capitalized as assets relate primarily to the services of Westlake employees under the Services and Secondment Agreement. Prior to the IPO, salaries and benefits of Westlake Management Services, Inc. were allocated to the Predecessor primarily on the basis of direct usage.
Charges from related parties for goods and services capitalized as assets were as follows:
 
 
Three Months Ended March 31,
 
 
2015
 
2014
 
 
 
 
Predecessor
Goods and services purchased from Westlake and capitalized as assets
 
$
962

 
$
1,830

Accounts Receivable from and Accounts Payable to Related Parties
OpCo's accounts receivable from Westlake result primarily from ethylene sales to Westlake under the Ethylene Sales Agreement. OpCo's accounts payable to Westlake result primarily from feedstock purchases under the Feedstock Supply Agreement and services provided under the Services and Secondment Agreement and the Omnibus Agreement.
The related party accounts receivable and accounts payable balances were as follows:


March 31,
2015

December 31,
2014
Accounts receivable, net—Westlake

$
37,982

 
$
18,529

Accounts payable—Westlake

(11,827
)
 
(5,332
)
Debt Payable to Related Parties
OpCo assumed promissory notes payable to Westlake and entered into a senior unsecured revolving credit facility with Westlake in connection with the IPO. Prior to the IPO, the Predecessor funded certain capital expenditures through promissory notes payable to Westlake, a portion of which were assumed by OpCo in connection with the IPO. See Note 8 for description of related party debt payable balances. Interest on related party debt payable balances for the three months ended March 31, 2015 and 2014 were $1,376 and $3,591 , respectively, and is reflected as a component of other income (expense) in the combined statement of operations. Interest capitalized as a component of property, plant and equipment on related party debt was $1,215 for the three months ended March 31, 2015 . At March 31, 2015 and December 31, 2014 , accrued interest on related party debt was $2,591 and $2,403 , respectively, and is reflected as a component accrued liabilities in the balance sheet.
Debt payable to related parties was as follows:
 
 
March 31,
2015
 
December 31,
2014
Long-term debt payable to Westlake
 
$
257,829

 
$
227,638


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WESTLAKE CHEMICAL OPCO LP
NOTES TO COMBINED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars)

General
OpCo, together with other subsidiaries of Westlake not included in these combined financial statements, is a guarantor under Westlake's revolving credit facility and the indentures governing its senior notes. As of March 31, 2015 and December 31, 2014 , Westlake had outstanding letters of credit totaling $29,959 and $32,999 , respectively, under its revolving credit facility and $754,000 and $754,000 , respectively, outstanding under its senior notes (less the unamortized discount of $862 and $921 , respectively).
The indentures governing Westlake's senior notes prevent OpCo from making distributions to the Partnership if any default or event of default (as defined in the indentures) exists. However, Westlake's credit facility does not prevent OpCo from making distributions to the Partnership.
OpCo has entered into two site lease agreements with Westlake in connection with the IPO, and each has a term of 50 years. Pursuant to the site lease agreements, OpCo pays Westlake one dollar per site per year.
8. Long-term Debt Payable to Westlake
Long-term debt payable to Westlake consists of the following:
 
 
March 31,
2015
 
December 31,
2014
August 2013 Promissory Notes (variable interest rate of prime plus 1.5%,
   original scheduled maturity of August 1, 2023)
 
$
167,116

 
$
167,116

Senior unsecured revolving credit facility (variable interest rate of LIBOR
   plus 3.0%, original scheduled maturity of August 4, 2019)

90,713

 
60,522

 
 
$
257,829

 
$
227,638

In 2013, three intercompany promissory notes were issued for capital expenditures incurred by Westlake on behalf of the Predecessor's operations (together, the "August 2013 Promissory Notes"). In connection with the IPO, OpCo assumed a portion of the August 2013 Promissory Notes. Proceeds drawn under the August 2013 Promissory Notes during the three months ended March 31, 2015 and 2014 were used to fund capital expenditures at OpCo's and the Predecessor's ethylene plants.
In connection with the IPO on August 4, 2014, OpCo entered into a senior unsecured revolving credit facility agreement with Westlake. The credit facility accrues interest quarterly at a rate of LIBOR plus 3.0% , which may be paid-in-kind as an addition to the principal at OpCo's option.
As of March 31, 2015 , OpCo was in compliance with all of the covenants with respect to the August 2013 Promissory Notes and the senior unsecured revolving credit facility.
9. Fair Value Measurements
OpCo 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.
There were no assets or liabilities accounted for at fair value on a recurring basis as of March 31, 2015 and December 31, 2014 . There were no transfers in or out of Levels 1 and 2 of the fair value hierarchy for the three months ended March 31, 2015 and 2014 .
OpCo has other financial assets and liabilities subject to fair value measures. These financial assets and liabilities include accounts receivable, net, accounts payable and long-term debt payable to Westlake, all of which are recorded at carrying value. The amounts reported in the balance sheets for accounts receivable, net and accounts payable approximate their fair value due to the short maturities of these instruments. The carrying and fair values of OpCo's long-term debt at March 31, 2015 and

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WESTLAKE CHEMICAL OPCO LP
NOTES TO COMBINED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars)

December 31, 2014 are summarized in the table below. OpCo's long-term debt includes related party promissory notes issued to Westlake and a senior unsecured revolving credit facility that OpCo entered into with Westlake in connection with the IPO. The fair value of debt is determined based on the present value of expected future cash flows using a discounted cash flow methodology. Because OpCo's valuation methodology used for long-term debt requires the use of significant unobservable inputs, the inputs used to measure the fair value of OpCo's long-term debt are classified as Level 3 within the fair value hierarchy. Inputs used to estimate the fair values of OpCo's long-term debt include the selection of an appropriate discount rate.
 
 
March 31, 2015
 
December 31, 2014
 
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
August 2013 Promissory Notes
 
$
167,116

 
$
167,116

 
$
167,116

 
$
167,116

Senior unsecured revolving credit facility
 
90,713

 
103,326

 
60,522

 
60,522

10. Income Taxes
OpCo is a limited partnership and is treated as a partnership for U.S. federal income tax purposes and, therefore, is not liable for entity-level federal income taxes. OpCo is, however, subject to state and local income taxes. The Predecessor's operating results were included in Westlake's consolidated U.S. federal and state income tax returns. Amounts presented in the combined financial statements prior to the IPO relate to income taxes that have been determined on a separate tax return basis, and the Predecessor's contribution to Westlake Chemical Corporation's net operating losses and tax credits have been included in the Predecessor's financial statements.
The effective income tax rate was 0.5% for the first quarter of 2015. The effective income tax rate for the first quarter of 2015 is not comparable to the effective income tax rate for the prior-year period as OpCo is not subject to federal income taxes subsequent to the IPO. The effective income tax rate of the Predecessor was 35.2% for the three months ended March 31, 2014 . The effective income tax rate for the three months ended March 31, 2014 was above the U.S. federal statutory rate of 35.0% primarily due to state income taxes, mostly offset by the domestic manufacturing deduction and state income tax credits.
11. Supplemental Information
Non-cash Operating Activity
OpCo and the Predecessor settled none and $3,342 of its total interest expense incurred on long-term debt payable to Westlake as an addition to principal on debt outstanding for the three months ended March 31, 2015 and 2014 , respectively.
Non-cash Investing Activity
The change in capital expenditure accrual reducing additions to property, plant and equipment was $545 for the three months ended March 31, 2015 . The change in capital expenditure accrual increasing additions to property, plant and equipment was $5,264 for the three months ended March 31, 2014 .
Interest and Income Taxes
Westlake uses a centralized cash management system to finance its operations. Interest paid, net of interest capitalized, and income taxes have been paid directly by Westlake and charged to the Predecessor through related party accounts receivable, net. Related party accounts receivable, net were settled immediately through net investment, and therefore, the Predecessor did not pay cash for interest expense or income tax expense during the three months ended March 31, 2014 . Interest paid, net of interest capitalized was $2,403 for the three months ended March 31, 2015 .
12 . Major Customer and Concentration of Credit Risk
During the three months ended March 31, 2015 and 2014 , Westlake accounted for approximately 80.9% and 68.6% , respectively, of OpCo's and the Predecessor's net sales.
13. Commitments and Contingencies
OpCo 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. Because several of OpCo's production sites have a history of industrial use, it is impossible to predict precisely what effect

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WESTLAKE CHEMICAL OPCO LP
NOTES TO COMBINED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars)

these legal requirements will have on OpCo. Westlake has agreed to indemnify OpCo for liabilities that occurred or existed prior to August 4, 2014.
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, which is a portion of the B.F. Goodrich superfund site, Goodrich agreed to indemnify Westlake for any liabilities related to preexisting contamination at the site. Westlake agreed to indemnify Goodrich for post-closing contamination caused by Westlake's operations. The soil and groundwater at the site 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 Westlake, 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 Westlake 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) Westlake and PolyOne would negotiate a new environmental remediation utilities and services and secondment agreement to cover Westlake'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 Westlake 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 Westlake 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 Westlake in reimbursement of previously paid remediation costs. The arbitration is currently stayed pending the outcome of discussions between other parties and their insurance carriers.
State Administrative Proceedings . There are several administrative proceedings in Kentucky involving Westlake, Goodrich and PolyOne related to the same manufacturing site in Calvert City, which includes OpCo's ethylene production facility 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 Westlake. Westlake 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. 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 the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). In its response to the Cabinet, 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 OpCo'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 Calvert City site. In June 2009, the EPA notified Westlake that Westlake 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. Westlake negotiated, in conjunction with the other potentially responsible parties, an AOC and an order to conduct an RIFS. Due to OpCo's ownership and current operation of the property, OpCo may be subject to additional requirements and liabilities under CERCLA.
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, Westlake received a Clean Air Act Section 114 Information Request from the EPA which sought information regarding flares at the Calvert City and Lake Charles facilities. Westlake submitted information pursuant to such request, including information regarding three flares that OpCo owns. The EPA has

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WESTLAKE CHEMICAL OPCO LP
NOTES TO COMBINED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars)

informed Westlake 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 Westlake conduct additional flare sampling and provide supplemental information. Westlake is currently in negotiations with the EPA regarding these demands, some of which are applicable to OpCo's flares. The EPA has indicated that it is seeking a consent decree with that would obligate Westlake to take corrective actions relating to the alleged noncompliance. Westlake has not agreed that any flares are out of compliance or that any corrective actions are warranted. Depending on the outcome of Westlake's negotiations with the EPA, additional controls on emissions from OpCo's 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 regarding OpCo's assets, and those of Westlake, for various air compliance issues. OpCo and Westlake are working with LDEQ to settle these claims, and a global settlement of all claims is being discussed. While settlement may result in a total civil penalty of approximately $200, such a settlement will likely cover assets owned by OpCo and Westlake, and to the extent it covers OpCo's assets, Westlake has agreed to indemnify OpCo for liabilities to the extent such liabilities occurred or existed prior to August 4, 2014.
In addition to the matters described above, OpCo is involved in various routine legal proceedings incidental to the conduct of its business. OpCo 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.
14. Subsequent Events
Subsequent events were evaluated through the date on which the financial statements were issued.

12