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WESTLAKE CORP - Quarter Report: 2015 September (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
Form 10-Q
 
 
 
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2015
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from                    to                    
Commission File No. 001-32260
 
 
 
 
 
Westlake Chemical Corporation
(Exact name of Registrant as specified in its charter)
 
 
 
 
 

Delaware
 
76-0346924
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
2801 Post Oak Boulevard, Suite 600
Houston, Texas 77056
(Address of principal executive offices, including zip code)
(713) 960-9111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer
 
x
 
Accelerated filer
 
¨
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)     Yes   ¨     No   x
The number of shares outstanding of the registrant's sole class of common stock as of October 28, 2015 was 130,652,184.


INDEX

 
 
Item
Page
 
 
 
 

Table of Contents


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

 
$
880,601

Marketable securities
 
285,726

 
—

Accounts receivable, net
 
520,960

 
560,666

Inventories
 
430,006

 
525,776

Prepaid expenses and other current assets
 
18,272

 
11,807

Deferred income taxes
 
31,541

 
32,437

Total current assets
 
2,248,430

 
2,011,287

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

 
2,757,557

Equity investments
 
9,593

 
61,305

Other assets, net
 
 
 
 
Intangible assets, net
 
218,652

 
218,431

Deferred charges and other assets, net
 
131,100

 
165,410

Total other assets, net
 
349,752

 
383,841

Total assets
 
$
5,524,405

 
$
5,213,990

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

 
$
261,062

Accrued liabilities
 
290,115

 
276,118

Total current liabilities
 
534,887

 
537,180

Long-term debt
 
764,086

 
763,997

Deferred income taxes
 
534,824

 
536,066

Other liabilities
 
170,770

 
174,859

Total liabilities
 
2,004,567

 
2,012,102

Commitments and contingencies (Notes 8 and 19)
 


 


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

 
—

Common stock, $0.01 par value, 300,000,000 shares authorized;
   134,663,244 and 134,679,064 shares issued at September 30, 2015
   and December 31, 2014, respectively
 
1,347

 
1,347

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

 
530,441

Retained earnings
 
3,022,717

 
2,555,528

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

 
2,911,511

Noncontrolling interests
 
294,839

 
290,377

Total equity
 
3,519,838

 
3,201,888

Total liabilities and equity
 
$
5,524,405

 
$
5,213,990

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

1
Table of Contents


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

 
$
1,253,227

 
$
3,476,570

 
$
3,279,479

Cost of sales
 
876,761

 
891,707

 
2,527,567

 
2,324,978

Gross profit
 
311,276

 
361,520

 
949,003

 
954,501

Selling, general and administrative expenses
 
57,248

 
54,759

 
170,321

 
132,897

Income from operations
 
254,028

 
306,761

 
778,682

 
821,604

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

 
(2,670
)
 
33,790

 
4,440

Income before income taxes
 
248,453

 
294,605

 
785,712

 
797,862

Provision for income taxes
 
60,033

 
124,449

 
236,824

 
300,231

Net income
 
188,420

 
170,156

 
548,888

 
497,631

Net income attributable to noncontrolling interests
 
4,816

 
2,399

 
13,847

 
2,399

Net income attributable to
   Westlake Chemical Corporation
 
$
183,604

 
$
167,757

 
$
535,041

 
$
495,232

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

 
$
1.26

 
$
4.04

 
$
3.71

Diluted
 
$
1.39

 
$
1.25

 
$
4.02

 
$
3.69

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

 
133,299,458

 
132,301,814

 
133,199,304

Diluted
 
132,121,235

 
133,846,059

 
132,786,534

 
133,743,145

Dividends per common share
 
$
0.1815

 
$
0.1650

 
$
0.5115

 
$
0.4170

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

2
Table of Contents


WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015

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

 
$
170,156

 
$
548,888

 
$
497,631

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

 
240

 
2,019

 
685

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

 
3,987

 
6,960

Reclassification of net realized gain to
   net income
 
—

 
—

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

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

 
133,855

 
506,456

 
463,814

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

 
2,399

 
13,847

 
2,399

Comprehensive income attributable to
   Westlake Chemical Corporation
 
$
181,663

 
$
131,456

 
$
492,609

 
$
461,415

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

3
Table of Contents


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

 
$
497,631

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

 
148,394

Provision for doubtful accounts
 
778

 
295

Amortization of debt issuance costs
 
1,504

 
1,172

Stock-based compensation expense
 
7,544

 
6,856

Loss from disposition of fixed assets
 
2,590

 
2,635

Gain from sales of securities
 
(3,795
)
 
—

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

Impairment of equity method investment
 
4,925

 
—

Deferred income taxes
 
7,585

 
34,459

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

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

 
6,055

Inventories
 
105,899

 
80,492

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

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

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

 
776,124

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

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

 
145

Proceeds from disposition of equity method investment
 
27,865

 
—

Proceeds from repayment of loan acquired
 
—

 
45,923

Proceeds from sales and maturities of securities
 
16,056

 
342,045

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

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

Net proceeds from issuance of Westlake Chemical Partners LP common units
 
—

 
286,088

Proceeds from exercise of stock options
 
984

 
5,502

Proceeds from issuance of notes payable
 
19,483

 
—

Repayment of notes payable
 
(32,954
)
 
—

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

 
6,670

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

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

 
352,167

Cash and cash equivalents at beginning of period
 
880,601

 
461,301

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

 
$
813,468

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

4
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 September 30, 2015, its results of operations for the three and nine months ended September 30, 2015 and 2014 and the changes in its cash position for the nine months ended September 30, 2015 and 2014.
Results of operations and changes in cash position for the interim periods presented are not necessarily indicative of the results that will be realized for the fiscal year ending December 31, 2015 or any other interim period. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Recent Accounting Pronouncements
Revenue from Contracts with Customers
In May 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standards update on a comprehensive new revenue recognition standard that will supersede the existing revenue recognition guidance. The new accounting guidance creates a framework by which an entity will allocate the transaction price to separate performance obligations and recognize revenue when each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation and determining when an entity satisfies its performance obligations. The standard allows for either "full retrospective" adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch-up as of the earliest period presented, or "modified retrospective" adoption, meaning the standard is applied only to the most current period presented in the financial statements with a cumulative catch-up as of the current period. In July 2015, the FASB deferred the effective date for the revenue recognition standard. The accounting standard will now be effective for reporting periods beginning after December 15, 2017. The Company is in the process of evaluating the impact that the new accounting guidance will have on its consolidated financial position, results of operations and cash flows.
Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items
In January 2015, the FASB issued an accounting standards update to simplify income statement classification by removing the concept of extraordinary items from U.S. GAAP. Under the new standard, an unusual and infrequent event or transaction is no longer allowed to be separately disclosed as "extraordinary." The standard retains the existing requirement to separately present items that are of an unusual nature or occur infrequently on a pre-tax basis within income from continuing operations. The new guidance also requires similar separate presentation of items that are both unusual and infrequent on a pre-tax basis within income from continuing operations. The standard allows for either prospective or retrospective application. If adopted prospectively, both the nature and amount of any subsequent adjustments to previously reported extraordinary items must be disclosed. The accounting standard will be effective for reporting periods beginning after December 15, 2015 and is not expected to have an impact on the Company's consolidated financial position, results of operations and cash flows.

5
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 and is not expected to have an impact on the Company's consolidated financial position, results of operations and cash flows.
Simplifying the Presentation of Debt Issuance Costs
In April 2015, the FASB issued an accounting standards update on simplifying the presentation of debt issuance costs, which requires all costs incurred to issue debt to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. The accounting standard will be effective for reporting periods beginning after December 15, 2015 and is not expected to have an impact on the Company's consolidated financial position, results of operations and cash flows.
Simplifying the Measurement of Inventory
In July 2015, the FASB issued an accounting standards update that requires entities to measure inventory at the lower of cost or net realizable value rather than at the lower of cost or market. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Under the new standard, entities will no longer need to calculate other measures of "market." The new accounting guidance applies only to inventories for which cost is determined by methods other than last-in first-out and the retail inventory method. The accounting standard will be effective for reporting periods beginning after December 15, 2016 and is not expected to have a significant impact on the Company's consolidated financial position, results of operations and cash flows.
Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements
In August 2015, the FASB issued final guidance incorporating into the Accounting Standards Codification a June 2015 SEC staff announcement that the SEC staff will not object to an entity presenting the cost of securing a revolving line of credit as an asset, regardless of whether a balance is outstanding. The announcement came in response to questions that arose after the FASB issued the Simplifying the Presentation of Debt Issuance Costs standard in April 2015, which standard requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset. That standard, as issued, did not address revolving lines of credit, which may not have outstanding balances. An entity that repeatedly draws on a revolving credit facility and then repays the balance could also present the cost as an asset and reclassify all or a portion of it as a direct deduction from the liability whenever a balance is outstanding. Regardless of asset or contra-liability presentation, debt issuance costs should be amortized over the term of the arrangement. The accounting standard became effective upon announcement in June 2015 and is not expected to have an impact on the Company's consolidated financial position, results of operations and cash flows.
Simplifying the Accounting for Measurement-Period Adjustments
In September 2015, the FASB issued an accounting standards update that requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The guidance requires that the acquirer record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The new guidance further requires specific disclosure pertaining to the measurement period adjustments. The accounting standard will be effective for reporting periods beginning after December 15, 2015 and is not expected to have a significant impact on the Company's consolidated financial position, results of operations and cash flows.

6
Table of Contents
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

2. Financial Instruments
Cash Equivalents
The Company had $530,806 and $509,811 of held-to-maturity securities with original maturities of three months or less, primarily consisting of corporate debt securities, classified as cash equivalents at September 30, 2015 and December 31, 2014, respectively. The Company's investments in held-to-maturity securities are held at amortized cost, which approximates fair value.
Available-for-Sale Marketable Securities
Investments in available-for-sale securities were classified as follows:
 
September 30,
2015
 
December 31,
2014
Current
$
285,726

 
$
—

Non-current
4,098

 
15,414

Total available-for-sale securities
$
289,824

 
$
15,414

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

 
$
306

 
$
(171
)
 
$
194,445

U.S. government debt
 
55,073

 
80

 
(2
)
 
55,151

Asset-backed securities
 
36,081

 
66

 
(17
)
 
36,130

Equity securities
 
3,804

 
294

 
—

 
4,098

Total available-for-sale securities
 
$
289,268

 
$
746

 
$
(190
)
 
$
289,824

 
 
December 31, 2014
 
 
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Equity securities
 
$
15,050

 
$
364

 
$
—

 
$
15,414

Total available-for-sale securities
 
$
15,050

 
$
364

 
$
—

 
$
15,414

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

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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)

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

 
$
—

 
$
16,056

 
$
342,045

Gross realized gains
 
—

 
—

 
3,795

 
1,311

Gross realized losses
 
—

 
—

 
—

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

 
$
525,546

Affiliates
 
—

 
437

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

 
512,515

Federal and state taxes
 
19,819

 
8,919

Other
 
19,790

 
39,232

Accounts receivable, net
 
$
520,960

 
$
560,666

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

 
$
300,909

Feedstock, additives and chemicals
 
118,498

 
158,635

Materials and supplies
 
72,837

 
66,232

Inventories
 
$
430,006

 
$
525,776

5. Property, Plant and Equipment
As of September 30, 2015, the Company had property, plant and equipment, net totaling $2,916,630. The Company assesses these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, including when negative conditions such as significant current or projected operating losses exist. Other factors considered by the Company when determining if an impairment assessment is necessary include, but are not limited to, significant changes or projected changes in supply and demand fundamentals (which would have a negative impact on operating rates or margins), new technological developments, new competitors with significant raw material or other cost advantages, adverse changes associated with the U.S. and world economies and uncertainties associated with governmental actions. Long-lived assets assessed for impairment are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
Depreciation expense on property, plant and equipment of $52,208 and $45,080 is included in cost of sales in the consolidated statements of operations for the three months ended September 30, 2015 and 2014, respectively. Depreciation expense on property, plant and equipment of $153,129 and $123,000 is included in cost of sales in the consolidated statements of operations for the nine months ended September 30, 2015 and 2014, respectively.

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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)

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

 
$
261,062

Notes payable to banks
 
7,150

 
—

Accounts and notes payable
 
$
244,772

 
$
261,062

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

 
$
249,108

6 ½% senior notes due 2029
 
100,000

 
100,000

6 ¾% senior notes due 2032
 
250,000

 
250,000

6 ½% senior notes due 2035 (the "6 ½% GO Zone Senior Notes Due 2035")
 
89,000

 
89,000

6 ½% senior notes due 2035 (the "6 ½% IKE Zone Senior Notes Due 2035")
 
65,000

 
65,000

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

 
10,889

Long-term debt, net
 
$
764,086

 
$
763,997

Revolving Credit Facility
The Company has a $400,000 senior secured revolving credit facility. The facility includes a provision permitting the Company to increase the size of the facility, up to four times, in increments of at least $25,000 each (up to a maximum of $200,000) under certain circumstances if the lenders agree to commit to such an increase. At September 30, 2015, the Company had no borrowings outstanding under the revolving credit facility. Any borrowings under the facility will bear interest at either LIBOR plus a spread ranging from 1.25% to 1.75%, provided that so long as the Company is rated investment grade, the margin for LIBOR loans will not exceed 1.50%, or a base rate plus a spread ranging from 0.00% to 0.50%. The revolving credit facility also requires an unused commitment fee of 0.25% per annum. All interest rates under the facility are subject to monthly grid pricing adjustments based on prior month average daily loan availability. The revolving credit facility matures on July 17, 2019. As of September 30, 2015, the Company had outstanding letters of credit totaling $29,953 and borrowing availability of $346,374 under the revolving credit facility. 

9
Table of Contents
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

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

 
$
(96,372
)
 
$
530,441

 
$
2,555,528

 
$
(79,433
)
 
$
290,377

 
$
3,201,888

Net income
 
—

 
—

 
—

 
535,041

 
—

 
13,847

 
548,888

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

 
—

 
—

 
—

 
1,190

 
—

 
1,190

Foreign currency
   translation adjustments
 
—

 
—

 
—

 
—

 
(43,746
)
 
—

 
(43,746
)
Net unrealized holding
   gains on investments
 
—

 
—

 
—

 
—

 
124

 
—

 
124

Common stock repurchased
 
—

 
(122,249
)
 
—

 
—

 
—

 
—

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

 
1,079

 
(95
)
 
—

 
—

 
—

 
984

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

 
—

 
9,996

 
—

 
—

 
—

 
9,996

Dividends paid
 
—

 
—

 
—

 
(67,852
)
 
—

 
—

 
(67,852
)
Distributions to noncontrolling
   interests
 
—

 
—

 
—

 
—

 
—

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

 
—

 
—

 
—

 
—

 
1,597

 
1,597

Balances at September 30, 2015
 
$
1,347

 
$
(217,542
)
 
$
540,342

 
$
3,022,717

 
$
(121,865
)
 
$
294,839

 
$
3,519,838

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

 
$
(46,220
)
 
$
511,432

 
$
1,954,661

 
$
(2,616
)
 
$
—

 
$
2,418,603

Net income
 
—

 
—

 
—

 
495,232

 
—

 
2,399

 
497,631

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

 
—

 
—

 
—

 
383

 
—

 
383

Foreign currency
   translation adjustments
 
—

 
—

 
—

 
—

 
(37,882
)
 
—

 
(37,882
)
Net unrealized holding
   gains on investments
 
—

 
—

 
—

 
—

 
3,682

 
—

 
3,682

Common stock repurchased
 
—

 
(9,495
)
 
—

 
—

 
—

 
—

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

 
2,467

 
3,034

 
—

 
—

 
—

 
5,502

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

 
—

 
13,526

 
—

 
—

 
—

 
13,526

Dividends paid
 
—

 
—

 
—

 
(55,690
)
 
—

 
—

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

 
—

 
—

 
—

 
—

 
286,088

 
286,088

Balances at September 30, 2014
 
$
1,347

 
$
(53,248
)
 
$
527,992

 
$
2,394,203

 
$
(36,433
)
 
$
288,487

 
$
3,122,348


10
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 nine months ended September 30, 2015 and 2014 were as follows:
 
 
Benefits
Liability,
Net of Tax
 
Cumulative
Foreign
Currency
Exchange
 
Net Unrealized
Holding Gains
on Investments,
Net of Tax
 
Total
Balances at December 31, 2014
 
$
(23,442
)
 
$
(56,224
)
 
$
233

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

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

 
—

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

 
(43,746
)
 
124

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

 
$
(121,865
)
 
 
Benefits
Liability,
Net of Tax
 
Cumulative
Foreign
Currency
Exchange
 
Net Unrealized
Holding Gains
on Investments,
Net of Tax
 
Total
Balances at December 31, 2013
 
$
(6,696
)
 
$
3,904

 
$
176

 
$
(2,616
)
Other comprehensive (loss) income before
   reclassifications
 
(39
)
 
(37,882
)
 
4,459

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

 
—

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

 
(37,882
)
 
3,682

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

 
$
(36,433
)
The following table provides the details of the amounts reclassified from accumulated other comprehensive income (loss) into net income in the consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014:
Details about Accumulated
   Other Comprehensive
   Income (Loss) Components
 
Location of Reclassification
(Income (Expense)) in
Consolidated Statements
of Operations
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Amortization of pension and
   other post-retirement items
 
 
 
 
 
 
 
 
 
 
Prior service costs
 
(1)
 
$
—

 
$
(87
)
 
$
—

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

 
92

 
701

 
263

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

 
—

 
3,795

 
1,212

 
 
Provision for income
   taxes
 
—

 
—

 
(1,363
)
 
(435
)
 
 
 
 
—

 
—

 
2,432

 
777

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

 
$
355


11
Table of Contents
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

_____________
(1)
These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost. For additional information, please read Note 10 (Employee Benefits) to the financial statements included in the 2014 Form 10-K.
10. Pension and Post-Retirement Benefit Costs
Defined Benefit Plans
Components of net periodic benefit cost for the Company's pension plans are as follows:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
U.S.
Plans
 
Non-U.S.
Plans
 
U.S.
Plans
 
Non-U.S.
Plans
 
U.S.
Plans
 
Non-U.S.
Plans
 
U.S.
Plans
 
Non-U.S.
Plans
Service cost
 
$
—

 
$
416

 
$
83

 
$
248

 
$
29

 
$
1,248

 
$
250

 
$
248

Interest cost
 
487

 
528

 
576

 
562

 
1,519

 
1,585

 
1,747

 
562

Expected return on plan assets
 
(712
)
 
—

 
(777
)
 
—

 
(2,237
)
 
—

 
(2,363
)
 
—

Amortization of prior
   service cost
 
—

 
—

 
74

 
—

 
—

 
—

 
223

 
—

Amortization of net loss
 
333

 
263

 
71

 
—

 
942

 
789

 
204

 
—

Net periodic benefit cost
 
$
108

 
$
1,207

 
$
27

 
$
810

 
$
253

 
$
3,622

 
$
61

 
$
810

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

 
$
6

 
$
17

 
$
16

Interest cost
 
149

 
185

 
448

 
548

Amortization of prior service cost
 
—

 
13

 
—

 
38

Amortization of net loss
 
96

 
82

 
288

 
220

Net periodic benefit cost
 
$
251

 
$
286

 
$
753

 
$
822

11. Stock-Based Compensation
Under the Westlake Chemical Corporation 2013 Omnibus Incentive Plan (as amended and restated, the "2013 Plan"), all employees and non-employee directors of the Company, as well as certain individuals who have agreed to become the Company's employees, are eligible for awards. Shares of common stock may be issued as authorized in the 2013 Plan. At the discretion of the administrator of the 2013 Plan, employees and non-employee directors may be granted awards in the form of stock options, stock appreciation rights, stock awards, restricted stock units or cash awards (any of which may be a performance award). Total stock-based compensation expense related to the 2013 Plan was $2,639 and $2,346 for the three months ended September 30, 2015 and 2014, respectively, and $7,544 and $6,856 for the nine months ended September 30, 2015 and 2014, respectively.

12
Table of Contents
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

12. Derivative Instruments
Commodity Risk Management
The Company uses derivative instruments to reduce price volatility risk on raw materials and products as a substantial portion of its raw materials and products are commodities whose prices fluctuate as market supply and demand fundamentals change. Business strategies to protect against such instability include ethylene product feedstock flexibility and moving downstream into the olefins and vinyls products where pricing is more stable. The Company does not use derivative instruments to engage in speculative activities.
For derivative instruments that are designated and qualify as fair value hedges, the gains or losses on the derivative instruments, as well as the offsetting losses or gains on the hedged items attributable to the hedged risk, are included in cost of sales in the consolidated statement of operations. The Company had no derivative instruments that were designated as fair value hedges for the nine months ended September 30, 2015 and 2014.
Gains and losses from changes in the fair value of derivative instruments that are not designated as hedging instruments were included in gross profit in the consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014.
The exposure on commodity derivatives used for price risk management includes the risk that the counterparty will not pay if the market declines below the established fixed price. In such case, the Company would lose the benefit of the derivative differential on the volume of the commodities covered. In any event, the Company would continue to receive the market price on the actual volume hedged. The Company also bears the risk that it could lose the benefit of market improvements over the fixed derivative price for the term and volume of the derivative instruments (as such improvements would accrue to the benefit of the counterparty).
Disclosures related to the Company's derivative assets and derivative liabilities subject to enforceable master netting arrangements have not been presented as they are not material to the Company's consolidated balance sheets at September 30, 2015 and December 31, 2014.
The fair values of derivative instruments in the Company's consolidated balance sheets were as follows:
 
 
Derivative Assets
 
 
Balance Sheet Location
 
Fair Value as of
 
 
September 30,
2015
 
December 31,
2014
Not designated as hedging instruments
 
 
 
 
 
 
Commodity forward contracts
 
Accounts receivable, net
 
$
2,722

 
$
3,145

Commodity forward contracts

 
Deferred charges and
   other assets, net
 
2,017

 
—

Total derivative assets
 
 
 
$
4,739

 
$
3,145

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

 
$
6,549

Commodity forward contracts
 
Other liabilities
 
9,846

 
3,559

Total derivative liabilities
 
 
 
$
15,267

 
$
10,108

 
 
 
 
 
 
 
 
 
 
 

13
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 impact of derivative instruments that have not been designated as hedges on the Company's consolidated statements of operations were as follows:
Derivatives Not Designated as
   Hedging Instruments
 
Location of Gain (Loss)
Recognized in 
Income on Derivative
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
2015
 
2014
 
2015
 
2014
Commodity forward contracts
 
Gross profit
 
$
(9,314
)
 
$
(6,937
)
 
$
(4,478
)
 
$
(7,308
)
See Note 13 for the fair value of the Company's derivative instruments.
13. Fair Value Measurements
The Company reports certain assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Under the accounting guidance for fair value measurements, inputs used to measure fair value are classified in one of three levels:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The following tables summarize, by level within the fair value hierarchy, the Company's assets and liabilities that were accounted for at fair value on a recurring basis:
 
 
September 30, 2015
 
 
Level 1
 
Level 2
 
Total
Derivative instruments
 
 
 
 
 
 
Risk management assets—Commodity forward contracts
 
$
4,700

 
$
39

 
$
4,739

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

 
232,091

 
289,824

 
 
 
 
 
 
 
 
 
December 31, 2014
 
 
Level 1
 
Level 2
 
Total
Derivative instruments
 
 
 
 
 
 
Risk management assets—Commodity forward contracts
 
$
3,143

 
$
2

 
$
3,145

Risk management liabilities—Commodity forward contracts
 
—

 
(10,108
)
 
(10,108
)
Marketable securities
 
 
 
 
 
 
Available-for-sale securities
 
15,414

 
—

 
15,414

The Level 2 measurements for the Company's commodity contracts are derived using forward curves supplied by industry-recognized and unrelated third-party services. The Level 2 measurements for the Company's available-for-sale securities are derived using market-based pricing provided by unrelated third-party services.
There were no transfers in or out of Levels 1 and 2 of the fair value hierarchy for the nine months ended September 30, 2015 and 2014.
In addition to the financial assets and liabilities above, the Company has other financial assets and liabilities subject to fair value measures. These financial assets and liabilities include cash and cash equivalents, accounts receivable, net, accounts and notes payable and long-term debt, all of which are recorded at carrying value. The amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, net and accounts and notes payable approximate their fair value due to the short maturities of these instruments. The carrying and fair values of the Company's long-term debt are summarized in the table below. The Company's long-term debt instruments are publicly-traded. A market approach, based upon quotes from financial reporting services, is used to measure the fair value of the Company's long-term debt. Because the

14
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's long-term debt instruments may not be actively traded, the inputs used to measure the fair value of the Company's long-term debt are classified as Level 2 inputs within the fair value hierarchy.
 
 
September 30, 2015
 
December 31, 2014
 
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
3.60% senior notes due 2022
 
$
249,197

 
$
246,843

 
$
249,108

 
$
248,630

6 ½% senior notes due 2029
 
100,000

 
116,663

 
100,000

 
116,384

6 ¾% senior notes due 2032
 
250,000

 
273,655

 
250,000

 
285,545

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

 
103,740

 
89,000

 
106,504

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

 
74,719

 
65,000

 
77,784

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

 
10,889

 
10,889

 
10,889

14. Income Taxes
The effective income tax rate was 24.2% for the three months ended September 30, 2015. The effective income tax rate for the three months ended September 30, 2015 was below the U.S. federal statutory rate of 35.0% primarily due to the benefit of state tax credits, the domestic manufacturing deduction, income attributable to noncontrolling interests, the foreign earnings rate differential, the increased benefit in certain prior years' deductions due to a change in the calculation methodology of the domestic manufacturing deduction and adjustments related to prior years' tax returns as filed, partially offset by state income taxes. The effective income tax rate was 42.2% for the three months ended September 30, 2014. The effective income tax rate for the three months ended September 30, 2014 was above the U.S. federal statutory rate of 35.0% primarily due to state income taxes, partially offset by the domestic manufacturing deduction.
The effective income tax rate was 30.1% for the nine months ended September 30, 2015. The effective income tax rate for the 2015 period was below the U.S. federal statutory rate of 35.0% primarily due to the benefit of state tax credits, the domestic manufacturing deduction, income attributable to noncontrolling interests, the non-recognition of tax related to the bargain purchase of a controlling interest in Suzhou Huasu Plastics Co., Ltd., the increased benefit in certain prior years' deductions due to a change in the calculation methodology of the domestic manufacturing deduction and adjustments related to prior years' tax returns as filed and the foreign earnings rate differential, partially offset by state income taxes. The effective income tax rate was 37.6% for the nine months ended September 30, 2014. The effective income tax rate for the 2014 period was above the U.S. federal statutory rate of 35.0% primarily due to state income taxes, partially offset by the domestic manufacturing deduction.
There were no unrecognized tax benefits for the nine months ended September 30, 2015. The Company recognizes penalties and interest accrued related to unrecognized tax benefits in income tax expense. As of September 30, 2015, the Company had no accrued interest and penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions. The Company is no longer subject to examinations by tax authorities before the year 2010.
15. Earnings per Share
The Company has unvested shares of restricted stock and restricted stock units outstanding that are considered participating securities and, therefore, computes basic and diluted earnings per share under the two-class method. Basic earnings per share for the periods are based upon the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share include the effect of certain stock options.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Net income attributable to
   Westlake Chemical Corporation
 
$
183,604

 
$
167,757

 
$
535,041

 
$
495,232

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

 
$
167,404

 
$
534,388

 
$
494,133


15
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 following table reconciles the denominator for the basic and diluted earnings per share computations shown in the consolidated statements of operations:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Weighted average common shares—basic
 
131,664,296

 
133,299,458

 
132,301,814

 
133,199,304

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

 
546,601

 
484,720

 
543,841

Weighted average common shares—diluted
 
132,121,235

 
133,846,059

 
132,786,534

 
133,743,145

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

 
$
1.26

 
$
4.04

 
$
3.71

Diluted
 
$
1.39

 
$
1.25

 
$
4.02

 
$
3.69

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

 
$
341

 
$
3,383

 
$
2,669

Dividend income
 
—

 
—

 
3,328

 
—

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

 
(6,695
)
Income from equity method investments
 
664

 
3,304

 
5,278

 
7,244

Impairment of equity method investment
 
—

 
—

 
(4,925
)
 
—

Gain on acquisition and related expenses, net
 
—

 
—

 
20,430

 
—

Gain from sales of equity securities
 
—

 
—

 
3,795

 
—

Other
 
1,072

 
135

 
1,361

 
1,222

Other income (expense), net
 
$
2,636

 
$
(2,670
)
 
$
33,790

 
$
4,440


16
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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)

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

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

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

 
 
$
17,467

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

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

Property, plant and equipment
 
19,786

Other assets
 
7,760

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

Bargain purchase gain on acquisition
 
$
22,550

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

17
Table of Contents
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

18. Insurance Recovery
During the second and third quarters of 2015, the Company's production rates and operating costs at its Knapsack, Germany and Cologne, Germany facilities were negatively impacted due to an interruption of feedstock supply as a result of a fire at a third-party supplier's ethylene production facility. For the three and nine months ended September 30, 2015, the Company recognized approximately $3,347 and $7,809, respectively, as a partial insurance recovery related to business interruption costs, primarily for additional costs incurred to procure the necessary feedstock and other costs as a result of the fire at the third-party facility. The partial insurance recovery is included in cost of sales in the consolidated statements of operations.
19. Commitments and Contingencies
The Company is subject to environmental laws and regulations that can impose civil and criminal sanctions and that may require it to mitigate the effects of contamination caused by the release or disposal of hazardous substances into the environment. Under one law, the U.S. Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), an owner or operator of property may be held strictly liable for remediating contamination without regard to whether that person caused the contamination, and without regard to whether the practices that resulted in the contamination were legal at the time they occurred. Because several of the Company's production sites have a history of industrial use, it is impossible to predict precisely what effect these legal requirements will have on the Company.
European Regulations. Under the Industrial Emission Directive ("IED"), European Union member state governments are expected to adopt rules and implement environmental permitting programs relating to air, water and waste for industrial facilities. In this context, concepts such as BAT ("best available technique") are being explored. Future implementation of these concepts may result in technical modifications in the Company's European facilities. In addition, under the Environmental Liability Directive, European Union member states can require the remediation of soil and groundwater contamination in certain circumstances, under the "polluter pays principle." The Company is unable to predict the impact these requirements and concepts may have on its future costs of compliance.
Contract Disputes with Goodrich and PolyOne. In connection with the 1990 and 1997 acquisitions of the Goodrich Corporation ("Goodrich") chemical manufacturing facility in Calvert City, Kentucky, Goodrich agreed to indemnify the Company for any liabilities related to preexisting contamination at the site. For its part, the Company agreed to indemnify Goodrich for post-closing contamination caused by the Company's operations. The soil and groundwater at the site, which does not include the Company's nearby PVC facility, had been extensively contaminated under Goodrich's operations. In 1993, Goodrich spun off the predecessor of PolyOne Corporation ("PolyOne"), and that predecessor assumed Goodrich's indemnification obligations relating to preexisting contamination.
In 2003, litigation arose among the Company, Goodrich and PolyOne with respect to the allocation of the cost of remediating contamination at the site. The parties settled this litigation in December 2007 and the case was dismissed. In the settlement the parties agreed that, among other things: (1) PolyOne would pay 100% of the costs (with specified exceptions), net of recoveries or credits from third parties, incurred with respect to environmental issues at the Calvert City site from August 1, 2007 forward; (2) either the Company or PolyOne might, from time to time in the future (but not more than once every five years), institute an arbitration proceeding to adjust that percentage; and (3) the Company and PolyOne would negotiate a new environmental remediation utilities and services agreement to cover the Company's provision to, or on behalf of, PolyOne of certain environmental remediation services at the site. The current environmental remediation activities at the Calvert City site do not have a specified termination date but are expected to last for the foreseeable future. The costs incurred by the Company that have been invoiced to PolyOne to provide the environmental remediation services were $2,805 in 2014. By letter dated March 16, 2010, PolyOne notified the Company that it was initiating an arbitration proceeding under the settlement agreement. In this proceeding, PolyOne seeks to readjust the percentage allocation of costs and to recover approximately $1,400 from the Company in reimbursement of previously paid remediation costs. The arbitration is currently stayed.
State Administrative Proceedings. There are several administrative proceedings in Kentucky involving the Company, Goodrich and PolyOne related to the same manufacturing site in Calvert City. In 2003, the Kentucky Environmental and Public Protection Cabinet (the "Cabinet") re-issued Goodrich's Resource Conservation and Recovery Act ("RCRA") permit which requires Goodrich to remediate contamination at the Calvert City manufacturing site. Both Goodrich and PolyOne challenged various terms of the permit in an attempt to shift Goodrich's clean-up obligations under the permit to the Company. The Company intervened in the proceedings. The Cabinet has suspended all corrective action under the RCRA permit in deference to a remedial investigation and feasibility study ("RIFS") being conducted, under the auspices of the U.S. Environmental Protection Agency ("EPA"), pursuant to an Administrative Settlement Agreement ("AOC"), which became effective on

18
Table of Contents
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

December 9, 2009. See "Federal Administrative Proceedings" below. The proceedings have been postponed. Periodic status conferences will be held to evaluate whether additional proceedings will be required.
Federal Administrative Proceedings. In May 2009, the Cabinet sent a letter to the EPA requesting the EPA's assistance in addressing contamination at the Calvert City site under CERCLA. In its response to the Cabinet also in May 2009, the EPA stated that it concurred with the Cabinet's request and would incorporate work previously conducted under the Cabinet's RCRA authority into the EPA's cleanup efforts under CERCLA. Since 1983, the EPA has been addressing contamination at an abandoned landfill adjacent to the Company's plant which had been operated by Goodrich and which was being remediated pursuant to CERCLA. The EPA has directed Goodrich and PolyOne to conduct additional investigation activities at the landfill and at the Company's plant. In June 2009, the EPA notified the Company that the Company may have potential liability under section 107(a) of CERCLA at its plant site. Liability under section 107(a) of CERCLA is strict and joint and several. The EPA also identified Goodrich and PolyOne, among others, as potentially responsible parties at the plant site. The Company negotiated, in conjunction with the other potentially responsible parties, an AOC and an order to conduct a RIFS. On July 12, 2013, the parties submitted separate draft RIFS reports to the EPA. The EPA has hired a contractor to complete the remedial investigation report.
Monetary Relief. Except as noted above with respect to the settlement of the contract litigation among the Company, Goodrich and PolyOne, none of the court, the Cabinet nor the EPA has established any allocation of the costs of remediation among the various parties that are involved in the judicial and administrative proceedings discussed above. At this time, the Company is not able to estimate the loss or reasonable possible loss, if any, on the Company's financial statements that could result from the resolution of these proceedings. Any cash expenditures that the Company might incur in the future with respect to the remediation of contamination at the site would likely be spread out over an extended period. As a result, the Company believes it is unlikely that any remediation costs allocable to it will be material in terms of expenditures made in any individual reporting period.
Potential Flare Modifications. For several years, the EPA has been conducting an enforcement initiative against petroleum refineries and petrochemical plants with respect to emissions from flares. A number of companies have entered into consent agreements with the EPA requiring both modifications to reduce flare emissions and the installation of additional equipment to better track flare operations and emissions. On April 21, 2014, the Company received a Clean Air Act Section 114 Information Request from the EPA which sought information regarding flares at the Calvert City and Lake Charles, Louisiana facilities. The EPA has informed the Company that the information provided leads the EPA to believe that some of the flares are out of compliance with applicable standards. The EPA has demanded that the Company conduct additional flare sampling and provide supplemental information. The Company is currently in negotiations with the EPA regarding these demands. The EPA has indicated that it is seeking a consent decree that would obligate the Company to take corrective actions relating to the alleged noncompliance. The Company has not agreed that any flares are out of compliance or that any corrective actions are warranted. Depending on the outcome of the Company's negotiations with the EPA, additional controls on emissions from its flares may be required and these could result in increased capital and operating costs.
Louisiana Notice of Violations. The Louisiana Department of Environmental Quality ("LDEQ") has issued notices of violations ("NOVs") regarding the Company's assets for various air compliance issues. The Company is working with LDEQ to settle these claims, and a global settlement of all claims is being discussed. Such global settlement may result in a total civil penalty of approximately $200.
In addition to the matters described above, the Company is involved in various legal proceedings incidental to the conduct of its business. The Company does not believe that any of these legal proceedings will have a material adverse effect on its financial condition, results of operations or cash flows.

19
Table of Contents
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

20. Segment Information
The Company operates in two principal operating segments: Olefins and Vinyls. These segments are strategic business units that offer a variety of different products. The Company manages each segment separately as each business requires different technology and marketing strategies.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Net external sales
 
 
 
 
 
 
 
 
Olefins
 
 
 
 
 
 
 
 
Polyethylene
 
$
423,631

 
$
498,450

 
$
1,283,545

 
$
1,461,097

Styrene, feedstock and other
 
164,466

 
204,647

 
508,507

 
663,851

Total Olefins
 
588,097

 
703,097

 
1,792,052

 
2,124,948

Vinyls
 
 
 
 
 
 
 
 
PVC, caustic soda and other
 
468,235

 
416,771

 
1,315,101

 
776,060

Building products
 
131,705

 
133,359

 
369,417

 
378,471

Total Vinyls
 
599,940

 
550,130

 
1,684,518

 
1,154,531

 
 
$
1,188,037

 
$
1,253,227

 
$
3,476,570

 
$
3,279,479

 
 
 
 
 
 
 
 
 
Intersegment sales
 
 
 
 
 
 
 
 
Olefins
 
$
28,551

 
$
26,518

 
$
78,654

 
$
118,153

Vinyls
 
341

 
355

 
1,098

 
1,029

 
 
$
28,892

 
$
26,873

 
$
79,752

 
$
119,182

 
 
 
 
 
 
 
 
 
Income (loss) from operations
 
 
 
 
 
 
 
 
Olefins
 
$
196,703

 
$
259,277

 
$
608,744

 
$
770,267

Vinyls
 
67,779

 
59,445

 
202,831

 
76,460

Corporate and other
 
(10,454
)
 
(11,961
)
 
(32,893
)
 
(25,123
)
 
 
$
254,028

 
$
306,761

 
$
778,682

 
$
821,604

 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
 
 
 
Olefins
 
$
27,678

 
$
26,443

 
$
82,240

 
$
79,811

Vinyls
 
33,432

 
27,336

 
97,615

 
68,127

Corporate and other
 
138

 
141

 
374

 
456

 
 
$
61,248

 
$
53,920

 
$
180,229

 
$
148,394

 
 
 
 
 
 
 
 
 
Other income (expense), net
 
 
 
 
 
 
 
 
Olefins
 
$
1,323

 
$
1,609

 
$
3,770

 
$
4,262

Vinyls
 
10

 
1,189

 
6,927

 
942

Corporate and other
 
1,303

 
(5,468
)
 
23,093

 
(764
)
 
 
$
2,636

 
$
(2,670
)
 
$
33,790

 
$
4,440

 
 
 
 
 
 
 
 
 
Provision for (benefit from) income taxes
 
 
 
 
 
 
 
 
Olefins
 
$
45,865

 
$
105,030

 
$
186,534

 
$
282,082

Vinyls
 
15,812

 
21,761

 
55,270

 
22,121

Corporate and other
 
(1,644
)
 
(2,342
)
 
(4,980
)
 
(3,972
)
 
 
$
60,033

 
$
124,449

 
$
236,824

 
$
300,231

 
 
 
 
 
 
 
 
 
Capital expenditures
 
 
 
 
 
 
 
 
Olefins
 
$
69,885

 
$
48,519

 
$
206,719

 
$
121,041

Vinyls
 
53,510

 
44,067

 
114,935

 
187,449

Corporate and other
 
1,909

 
1,685

 
7,582

 
2,693

 
 
$
125,304

 
$
94,271

 
$
329,236

 
$
311,183

A reconciliation of total segment income from operations to consolidated income before income taxes is as follows:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Income from operations
 
$
254,028

 
$
306,761

 
$
778,682

 
$
821,604

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

 
(2,670
)
 
33,790

 
4,440

Income before income taxes
 
$
248,453

 
$
294,605

 
$
785,712

 
$
797,862

 
 
September 30,
2015
 
December 31,
2014
Total assets
 
 
 
 
Olefins
 
$
1,817,303

 
$
1,785,895

Vinyls
 
2,601,263

 
2,618,646

Corporate and other
 
1,105,839

 
809,449

 
 
$
5,524,405

 
$
5,213,990

21. Subsequent Events
Subsequent events were evaluated through the date on which the financial statements were issued.
22. 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.


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 as of September 30, 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
 
$
647,646

 
$
5,445

 
$
149,482

 
$
159,352

 
$
—

 
$
961,925

Marketable securities
 
285,726

 
—

 
—

 
—

 
—

 
285,726

Accounts receivable, net
 
9,371

 
2,165,248

 
58,514

 
135,837

 
(1,848,010
)
 
520,960

Inventories
 
—

 
333,553

 
3,272

 
93,181

 
—

 
430,006

Prepaid expenses and other current assets
 
1,355

 
15,244

 
382

 
3,576

 
(2,285
)
 
18,272

Deferred income taxes
 
441

 
30,529

 
—

 
647

 
(76
)
 
31,541

Total current assets
 
944,539

 
2,550,019

 
211,650

 
392,593

 
(1,850,371
)
 
2,248,430

Property, plant and equipment, net
 
—

 
1,533,456

 
962,221

 
420,953

 
—

 
2,916,630

Equity investments
 
4,879,268

 
1,204,734

 
—

 
468,760

 
(6,543,169
)
 
9,593

Other assets, net
 
17,541

 
353,506

 
46,542

 
133,196

 
(201,033
)
 
349,752

Total assets
 
$
5,841,348

 
$
5,641,715

 
$
1,220,413

 
$
1,415,502

 
$
(8,594,573
)
 
$
5,524,405

Current liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Accounts and notes payable
 
$
1,847,047

 
$
131,438

 
$
33,476

 
$
80,685

 
$
(1,847,874
)
 
$
244,772

Accrued liabilities
 
16,105

 
168,569

 
21,055

 
86,883

 
(2,497
)
 
290,115

Total current liabilities
 
1,863,152

 
300,007

 
54,531

 
167,568

 
(1,850,371
)
 
534,887

Long-term debt
 
753,197

 
10,889

 
195,154

 
—

 
(195,154
)
 
764,086

Deferred income taxes
 
—

 
503,102

 
1,489

 
36,112

 
(5,879
)
 
534,824

Other liabilities
 
—

 
49,174

 
—

 
121,596

 
—

 
170,770

Total liabilities
 
2,616,349

 
863,172

 
251,174

 
325,276

 
(2,051,404
)
 
2,004,567

Total Westlake Chemical Corporation stockholders' equity
 
3,224,999

 
4,778,543

 
969,239

 
795,387

 
(6,543,169
)
 
3,224,999

Noncontrolling interests
 
—

 
—

 
—

 
294,839

 
—

 
294,839

Total equity
 
3,224,999

 
4,778,543

 
969,239

 
1,090,226

 
(6,543,169
)
 
3,519,838

Total liabilities and equity
 
$
5,841,348

 
$
5,641,715

 
$
1,220,413

 
$
1,415,502

 
$
(8,594,573
)
 
$
5,524,405


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 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



22
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 September 30, 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
 
$
—

 
$
961,036

 
$
248,619

 
$
288,211

 
$
(309,829
)
 
$
1,188,037

Cost of sales
 
—

 
774,726

 
154,474

 
252,618

 
(305,057
)
 
876,761

Gross profit
 
—

 
186,310

 
94,145

 
35,593

 
(4,772
)
 
311,276

Selling, general and administrative expenses
 
804

 
41,429

 
4,941

 
14,846

 
(4,772
)
 
57,248

(Loss) income from operations
 
(804
)
 
144,881

 
89,204

 
20,747

 
—

 
254,028

Interest expense
 
(10,405
)
 
(3
)
 
(217
)
 
(95
)
 
2,509

 
(8,211
)
Other income (expense), net
 
1,239

 
3,971

 
(124
)
 
59

 
(2,509
)
 
2,636

(Loss) income before income taxes
 
(9,970
)
 
148,849

 
88,863

 
20,711

 
—

 
248,453

(Benefit from) provision for income taxes
 
(3,249
)
 
56,372

 
141

 
6,769

 
—

 
60,033

Equity in net income of subsidiaries
 
190,325

 
76,945

 
—

 
11,777

 
(279,047
)
 
—

Net income
 
183,604

 
169,422

 
88,722

 
25,719

 
(279,047
)
 
188,420

Net income attributable to noncontrolling interests
 
—

 
—

 
—

 
4,816

 
—

 
4,816

Net income attributable to Westlake Chemical Corporation
 
$
183,604

 
$
169,422

 
$
88,722

 
$
20,903

 
$
(279,047
)
 
$
183,604

Comprehensive income attributable to
   Westlake Chemical Corporation
 
$
181,663

 
$
169,673

 
$
88,722

 
$
19,170

 
$
(277,565
)
 
$
181,663



23
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 September 30, 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
 
$
—

 
$
1,026,282

 
$
392,008

 
$
208,313

 
$
(373,376
)
 
$
1,253,227

Cost of sales
 
—

 
831,675

 
227,015

 
202,110

 
(369,093
)
 
891,707

Gross profit
 
—

 
194,607

 
164,993

 
6,203

 
(4,283
)
 
361,520

Selling, general and administrative expenses
 
399

 
36,445

 
8,014

 
14,184

 
(4,283
)
 
54,759

(Loss) income from operations
 
(399
)
 
158,162

 
156,979

 
(7,981
)
 
—

 
306,761

Interest expense
 
(10,343
)
 
(2
)
 
(2,137
)
 
(39
)
 
3,035

 
(9,486
)
Other income (expense), net
 
2,138

 
(2,942
)
 
486

 
683

 
(3,035
)
 
(2,670
)
(Loss) income before income taxes
 
(8,604
)
 
155,218

 
155,328

 
(7,337
)
 
—

 
294,605

(Benefit from) provision for income taxes
 
(3,088
)
 
93,366

 
36,309

 
(2,138
)
 
—

 
124,449

Equity in net income of subsidiaries
 
173,273

 
113,157

 
—

 
5,862

 
(292,292
)
 
—

Net income
 
167,757

 
175,009

 
119,019

 
663

 
(292,292
)
 
170,156

Net income attributable to noncontrolling interests
 
—

 
—

 
—

 
2,399

 
—

 
2,399

Net income (loss) attributable to Westlake Chemical Corporation
 
$
167,757

 
$
175,009

 
$
119,019

 
$
(1,736
)
 
$
(292,292
)
 
$
167,757

Comprehensive income (loss) attributable to
   Westlake Chemical Corporation
 
$
131,456

 
$
175,137

 
$
119,019

 
$
(39,528
)
 
$
(254,628
)
 
$
131,456



24
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 Nine Months Ended September 30, 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
 
$
—

 
$
2,862,400

 
$
758,715

 
$
784,219

 
$
(928,764
)
 
$
3,476,570

Cost of sales
 
—

 
2,260,454

 
473,815

 
707,171

 
(913,873
)
 
2,527,567

Gross profit
 
—

 
601,946

 
284,900

 
77,048

 
(14,891
)
 
949,003

Selling, general and administrative expenses
 
1,617

 
127,794

 
15,178

 
40,623

 
(14,891
)
 
170,321

(Loss) income from operations
 
(1,617
)
 
474,152

 
269,722

 
36,425

 
—

 
778,682

Interest expense
 
(31,726
)
 
(8
)
 
(2,449
)
 
(190
)
 
7,613

 
(26,760
)
Other income (expense), net
 
17,627

 
(2,574
)
 
(85
)
 
26,435

 
(7,613
)
 
33,790

(Loss) income before income taxes
 
(15,716
)
 
471,570

 
267,188

 
62,670

 
—

 
785,712

(Benefit from) provision for income taxes
 
(5,226
)
 
231,542

 
567

 
9,941

 
—

 
236,824

Equity in net income of subsidiaries
 
545,531

 
233,635

 
—

 
32,986

 
(812,152
)
 
—

Net income
 
535,041

 
473,663

 
266,621

 
85,715

 
(812,152
)
 
548,888

Net income attributable to noncontrolling interests
 
—

 
—

 
—

 
13,847

 
—

 
13,847

Net income attributable to Westlake Chemical Corporation
 
$
535,041

 
$
473,663

 
$
266,621

 
$
71,868

 
$
(812,152
)
 
$
535,041

Comprehensive income attributable to
   Westlake Chemical Corporation
 
$
492,609

 
$
474,292

 
$
266,621

 
$
28,683

 
$
(769,596
)
 
$
492,609



25
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 Nine Months Ended September 30, 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
 
$
—

 
$
2,809,844

 
$
1,476,157

 
$
229,183

 
$
(1,235,705
)
 
$
3,279,479

Cost of sales
 
—

 
2,476,608

 
832,304

 
221,233

 
(1,205,167
)
 
2,324,978

Gross profit
 
—

 
333,236

 
643,853

 
7,950

 
(30,538
)
 
954,501

Selling, general and administrative expenses
 
1,474

 
123,050

 
21,957

 
16,954

 
(30,538
)
 
132,897

(Loss) income from operations
 
(1,474
)
 
210,186

 
621,896

 
(9,004
)
 
—

 
821,604

Interest expense
 
(29,032
)
 
(8
)
 
(9,833
)
 
(39
)
 
10,730

 
(28,182
)
Other income (expense), net
 
14,488

 
(1,729
)
 
3,135

 
(724
)
 
(10,730
)
 
4,440

(Loss) income before income taxes
 
(16,018
)
 
208,449

 
615,198

 
(9,767
)
 
—

 
797,862

(Benefit from) provision for income taxes
 
(5,686
)
 
109,920

 
198,461

 
(2,464
)
 
—

 
300,231

Equity in net income of subsidiaries
 
505,564

 
410,875

 
—

 
5,862

 
(922,301
)
 
—

Net income (loss)
 
495,232

 
509,404

 
416,737

 
(1,441
)
 
(922,301
)
 
497,631

Net income attributable to noncontrolling interests
 
—

 
—

 
—

 
2,399

 
—

 
2,399

Net income (loss) attributable to Westlake Chemical Corporation
 
$
495,232

 
$
509,404

 
$
416,737

 
$
(3,840
)
 
$
(922,301
)
 
$
495,232

Comprehensive income (loss) attributable to
   Westlake Chemical Corporation
 
$
461,415

 
$
509,787

 
$
416,737

 
$
(41,722
)
 
$
(884,802
)
 
$
461,415



26
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 Nine Months Ended September 30, 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
 
$
535,041

 
$
473,663

 
$
266,621

 
$
85,715

 
$
(812,152
)
 
$
548,888

Adjustments to reconcile net income to net cash (used for)
   provided by operating activities
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
1,504

 
90,247

 
60,637

 
29,345

 
—

 
181,733

Deferred income taxes
 
87

 
4,184

 
(359
)
 
3,673

 
—

 
7,585

Net changes in working capital and other
 
(567,137
)
 
(251,423
)
 
9,315

 
100,187

 
812,152

 
103,094

Net cash (used for) provided by operating activities
 
(30,505
)
 
316,671

 
336,214

 
218,920

 
—

 
841,300

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

 
—

 
—

 
15,782

 
—

 
15,782

Additions to property, plant and equipment
 
—

 
(148,055
)
 
(152,572
)
 
(28,609
)
 
—

 
(329,236
)
Proceeds from disposition of assets
 
—

 
—

 
—

 
17

 
—

 
17

Proceeds from disposition of equity method investment
 
—

 
27,865

 
—

 
—

 
—

 
27,865

Proceeds from sales and maturities of securities
 
16,056

 
—

 
—

 
—

 
—

 
16,056

Purchase of securities
 
(282,542
)
 
—

 
—

 
—

 
—

 
(282,542
)
Settlements of derivative instruments
 
—

 
(1,535
)
 
—

 
—

 
—

 
(1,535
)
Net cash used for investing activities
 
(266,486
)
 
(121,725
)
 
(152,572
)
 
(12,810
)
 
—

 
(553,593
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
 
Intercompany financing
 
467,360

 
(577,898
)
 
102,857

 
7,681

 
—

 
—

Intercompany financing—OpCo
 
—

 
135,341

 
(135,341
)
 
—

 
—

 
—

Dividends paid
 
(67,852
)
 
—

 
—

 
—

 
—

 
(67,852
)
Distributions paid
 
—

 
249,999

 
(268,562
)
 
7,581

 
—

 
(10,982
)
Purchase of limited partner interests
 
—

 
—

 
135,341

 
(135,341
)
 
—

 
—

Proceeds from exercise of stock options
 
984

 
—

 
—

 
—

 
—

 
984

Proceeds from issuance of notes payable
 
—

 
—

 
—

 
19,483

 
—

 
19,483

Repayment of notes payable
 
—

 
—

 
—

 
(32,954
)
 
—

 
(32,954
)
Repurchase of common stock for treasury
 
(114,254
)
 
—

 
—

 
—

 
—

 
(114,254
)
Windfall tax benefits from share-based payment arrangements
 
2,452

 
—

 
—

 
—

 
—

 
2,452

Net cash provided by (used for) financing activities
 
$
288,690

 
$
(192,558
)
 
$
(165,705
)
 
$
(133,550
)
 
$
—

 
$
(203,123
)

27
Table of Contents
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

 
 
Westlake
Chemical
Corporation
 
100% Owned
Guarantor
Subsidiaries
 
OpCo
(Less Than
100% Owned
Guarantor
Subsidiary)
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Effect of exchange rate changes on cash and cash equivalents
 
$
—

 
$
—

 
$
—

 
$
(3,260
)
 
$
—

 
$
(3,260
)
Net (decrease) increase in cash and cash equivalents
 
(8,301
)
 
2,388

 
17,937

 
69,300

 
—

 
81,324

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
 
$
647,646

 
$
5,445

 
$
149,482

 
$
159,352

 
$
—

 
$
961,925


28
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 Nine Months Ended September 30, 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)
 
$
495,232

 
$
509,404

 
$
416,737

 
$
(1,441
)
 
$
(922,301
)
 
$
497,631

Adjustments to reconcile net income (loss) to net cash (used for)
   provided by operating activities
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
1,172

 
82,597

 
58,501

 
7,296

 
—

 
149,566

Deferred income taxes
 
(418
)
 
26,991

 
8,267

 
(381
)
 
—

 
34,459

Net changes in working capital and other
 
(509,862
)
 
(919,521
)
 
1,641

 
599,909

 
922,301

 
94,468

Net cash (used for) provided by operating activities
 
(13,876
)
 
(300,529
)
 
485,146

 
605,383

 
—

 
776,124

Cash flows from investing activities
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition of business
 
—

 
—

 
—

 
(611,087
)
 
—

 
(611,087
)
Additions to property, plant and equipment
 
—

 
(160,147
)
 
(144,348
)
 
(6,688
)
 
—

 
(311,183
)
Proceeds from disposition of assets
 
—

 
144

 
—

 
1

 
—

 
145

Proceeds from repayment of loan acquired
 
—

 
—

 
—

 
45,923

 
—

 
45,923

Proceeds from sales and maturities of securities
 
342,045

 
—

 
—

 
—

 
—

 
342,045

Purchase of securities
 
(117,332
)
 
—

 
—

 
—

 
—

 
(117,332
)
Settlements of derivative instruments
 
—

 
(556
)
 
(133
)
 
—

 
—

 
(689
)
Net cash provided by (used for) investing activities
 
224,713

 
(160,559
)
 
(144,481
)
 
(571,851
)
 
—

 
(652,178
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
 
 
Intercompany financing
 
75,104

 
(143,325
)
 
62,221

 
6,000

 
—

 
—

Net distributions prior to Westlake Partners initial public offering
 
—

 
448,101

 
(448,101
)
 
—

 
—

 
—

Capitalized debt issuance costs
 
(1,167
)
 
—

 
—

 
—

 
—

 
(1,167
)
Dividends paid
 
(55,690
)
 
151,729

 
(151,729
)
 
—

 
—

 
(55,690
)
Net proceeds from issuance of Westlake Partners common units
 
—

 
—

 
—

 
286,088

 
—

 
286,088

Purchase of limited partner interests
 
—

 
—

 
286,088

 
(286,088
)
 
—

 
—

Proceeds from exercise of stock options
 
5,502

 
—

 
—

 
—

 
—

 
5,502

Repurchase of common stock for treasury
 
(9,495
)
 
—

 
—

 
—

 
—

 
(9,495
)
Windfall tax benefits from share-based payment arrangements
 
6,670

 
—

 
—

 
—

 
—

 
6,670

Net cash provided by (used for) financing activities
 
$
20,924

 
$
456,505

 
$
(251,521
)
 
$
6,000

 
$
—

 
$
231,908


29
Table of Contents
WESTLAKE CHEMICAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)
(in thousands of dollars, except share amounts and per share data)

 
 
Westlake
Chemical
Corporation
 
100% Owned
Guarantor
Subsidiaries
 
OpCo
(Less Than
100% Owned
Guarantor
Subsidiary)
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Effect of exchange rate changes on cash and cash equivalents
 
$
—

 
$
—

 
$
—

 
$
(3,687
)
 
$
—

 
$
(3,687
)
Net increase (decrease) in cash and cash equivalents
 
231,761

 
(4,583
)
 
89,144

 
35,845

 
—

 
352,167

Cash and cash equivalents at beginning of period
 
420,948

 
6,227

 
—

 
34,126

 
—

 
461,301

Cash and cash equivalents at end of period
 
$
652,709

 
$
1,644

 
$
89,144

 
$
69,971

 
$
—

 
$
813,468


30
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 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 third 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 the resulting lower crude oil prices through the third 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 has already resulted in reduced prices and margins in 2015 and may continue to do so. 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, as well as the acquisition of Vinnolit, an integrated global leader in specialty PVC resins, in July 2014, 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 June 1, 2015, we acquired an additional 35.7% controlling interest in Suzhou Huasu Plastics Co., Ltd. ("Huasu"), a PVC joint venture based near Shanghai, People's Republic of China, from INEOS Chlor Vinyls Holdings B.V., increasing our interest in Huasu to 95.0%. Prior to the acquisition of this 35.7% interest, we owned a 59.3% interest in Huasu. Huasu has a combined annual capacity of 300 million pounds of PVC resin, 145 million pounds of PVC film and sheet and 33 million pounds of building products.

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Results of Operations
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands, except per share data)
Net external sales
 
 
 
 
 
 
 
 
Olefins
 
 
 
 
 
 
 
 
Polyethylene
 
$
423,631

 
$
498,450

 
$
1,283,545

 
$
1,461,097

Styrene, feedstock and other
 
164,466

 
204,647

 
508,507

 
663,851

Total Olefins
 
588,097

 
703,097

 
1,792,052

 
2,124,948

Vinyls
 
 
 
 
 
 
 
 
PVC, caustic soda and other
 
468,235

 
416,771

 
1,315,101

 
776,060

Building products
 
131,705

 
133,359

 
369,417

 
378,471

Total Vinyls
 
599,940

 
550,130

 
1,684,518

 
1,154,531

Total
 
$
1,188,037

 
$
1,253,227

 
$
3,476,570

 
$
3,279,479

 
 
 
 
 
 
 
 
 
Income (loss) from operations
 
 
 
 
 
 
 
 
Olefins
 
$
196,703

 
$
259,277

 
$
608,744

 
$
770,267

Vinyls
 
67,779

 
59,445

 
202,831

 
76,460

Corporate and other
 
(10,454
)
 
(11,961
)
 
(32,893
)
 
(25,123
)
Total income from operations
 
254,028

 
306,761

 
778,682

 
821,604

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

 
(2,670
)
 
33,790

 
4,440

Provision for income taxes
 
60,033

 
124,449

 
236,824

 
300,231

Net income
 
188,420

 
170,156

 
548,888

 
497,631

Net income attributable to noncontrolling interests
 
4,816

 
2,399

 
13,847

 
2,399

Net income attributable to
   Westlake Chemical Corporation
 
$
183,604

 
$
167,757

 
$
535,041

 
$
495,232

Diluted earnings per share
 
$
1.39

 
$
1.25

 
$
4.02

 
$
3.69

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2015
 
Nine Months Ended September 30, 2015
 
 
Average
Sales Price
 
Volume
 
Average
Sales Price
 
Volume
Product sales price and volume percentage change
   from prior-year period
 
 
 
 
 
 
 
 
Olefins
 
-31.3
 %
 
+14.9
%
 
-29.2
 %
 
+13.5
%
Vinyls
 
-19.8
 %
 
+28.9
%
 
-25.4
 %
 
+71.3
%
Company average
 
-26.3
 %
 
+21.0
%
 
-27.9
 %
 
+33.9
%
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Average industry prices (1)
 
 
 
 
 
 
 
 
Ethane (cents/lb)
 
6.4

 
7.9

 
6.3

 
9.7

Propane (cents/lb)
 
9.6

 
24.6

 
11.0

 
26.9

Ethylene (cents/lb) (2)
 
28.2

 
66.6

 
33.6

 
59.1

Polyethylene (cents/lb) (3)
 
75.3

 
89.0

 
76.8

 
87.9

Styrene (cents/lb) (4)
 
64.2

 
85.8

 
61.4

 
85.0

Caustic soda ($/short ton) (5)
 
563.3

 
588.3

 
576.1

 
587.5

Chlorine ($/short ton) (6)
 
275.0

 
232.5

 
260.8

 
233.9

PVC (cents/lb) (7)
 
66.5

 
70.2

 
66.5

 
68.7


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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 GP-Film grade over the period as reported by IHS Chemical. Effective January 1, 2015, IHS Chemical made a non-market downward adjustment of 21 cents per pound to polyethylene low density GP-Film grade prices. For comparability, we adjusted each prior-year period's polyethylene low density GP-Film grade price downward by 21 cents per pound consistent with the IHS Chemical non-market adjustment.
(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 September 30, 2015, net income attributable to Westlake Chemical Corporation was $183.6 million, or $1.39 per diluted share, on net sales of $1.2 billion. This represents an increase in net income attributable to Westlake Chemical Corporation of $15.8 million, or $0.14 per diluted share, compared to the quarter ended September 30, 2014 net income attributable to Westlake Chemical Corporation of $167.8 million, or $1.25 per diluted share, on net sales of $1.3 billion. Net income for the third quarter of 2015 was impacted by a lower effective tax rate and several plant outages as a result of maintenance turnaround activity. The lower effective tax rate was primarily due to several discrete tax items and return to provision and other adjustments which lowered the third quarter 2015 effective tax rate to 24.2%. We estimate the 2015 annual effective tax rate on ordinary income will be approximately 33.5%. Net sales for the third quarter of 2015 decreased by $65.2 million compared to net sales for the third quarter of 2014, mainly due to lower sales prices for all our major products, partially offset by higher sales volumes for most of our major products and sales contributed by our specialty PVC resin business, Vinnolit, which we acquired on July 31, 2014. Income from operations was $254.0 million for the third quarter of 2015 as compared to $306.8 million for the third quarter of 2014. The decrease in income from operations for the third quarter of 2015 was mainly attributable to lower integrated product margins primarily as a result of lower sales prices in the third quarter of 2015, as compared to the prior-year period, and the lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs related to several maintenance turnarounds completed during the third quarter of 2015, partially offset by lower feedstock and energy costs, higher production rates at our Geismar chlor-alkali plant and the contribution from Vinnolit as compared to the third quarter of 2014.
For the nine months ended September 30, 2015, net income attributable to Westlake Chemical Corporation was $535.0 million, or $4.02 per diluted share, on net sales of $3.5 billion. This represents an increase in net income attributable to Westlake Chemical Corporation of $39.8 million, or $0.33 per diluted share, from the nine months ended September 30, 2014 net income attributable to Westlake Chemical Corporation of $495.2 million, or $3.69 per diluted share, on net sales of $3.3 billion. Net income for the nine months ended September 30, 2015 included: (1) a lower effective tax rate primarily due to several discrete tax items and return to provision and other adjustments; (2) plant outages as a result of maintenance turnaround activity; and (3) a net pre-tax gain of $16.0 million, or $0.13 per diluted share, related to the bargain purchase gain from the acquisition of a controlling interest in Huasu, net of related expenses, and the impairment of an equity method investment. The bargain purchase gain on acquisition was non-taxable and, in combination with the benefit from the discrete tax items and return to provision and other adjustments during the period, lowered our effective tax rate for the nine months ended September 30, 2015 to 30.1%. Net sales for the nine months ended September 30, 2015 increased by $197.1 million compared to the prior-year period, primarily due to sales contributed by Vinnolit and higher sales volumes for most of our major products, partially offset by lower sales prices for all our major products. Income from operations was $778.7 million for the nine months ended September 30, 2015 as compared to $821.6 million for the nine months ended September 30, 2014, a decrease mainly attributable to lower olefins integrated product margins, primarily caused by lower sales prices, as compared to the prior-year period, and costs related to several maintenance turnarounds, partially offset by increased production at our Calvert City facilities following the completion of OpCo's feedstock conversion and ethylene expansion project, higher production rates at our Geismar chlor-alkali plant, lower feedstock and energy costs and the contribution from Vinnolit, as compared to the prior-year period. Sales prices in the first nine months of 2015 were negatively impacted by the significant decline in crude oil prices.

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RESULTS OF OPERATIONS
Third Quarter 2015 Compared with Third Quarter 2014
Net Sales. Net sales decreased by $65.2 million, or 5.2%, to $1.2 billion in the third quarter of 2015 from $1.3 billion in the third quarter of 2014, primarily attributable to lower sales prices for all our major products, partially offset by higher sales volumes for most of our major products and sales contributed by Vinnolit and Huasu. Average sales prices for the third quarter of 2015 decreased by 26.3% as compared to the third quarter of 2014. Sales prices in the third quarter of 2015 were negatively impacted by the lower crude oil prices as compared to the prior-year period. Overall sales volumes increased by 21.0% as compared to the third quarter of 2014.
Gross Profit. Gross profit margin percentage decreased to 26.2% for the third quarter of 2015 from 28.8% for the third quarter of 2014. The third quarter 2015 gross profit benefited from lower average feedstock and energy costs. However, this increase was more than offset by lower sales prices for our major products as sales prices decreased an average of 26.3% for the third quarter of 2015 as compared to the third quarter of 2014. In addition, third quarter 2015 gross profit was negatively impacted by the lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with several maintenance turnarounds at our facilities.
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the third quarter of 2015 of $57.2 million increased by $2.4 million as compared to the third quarter of 2014, mainly due to the general and administrative costs incurred by Huasu for the third quarter of 2015 and an increase in payroll and related labor costs, including incentive compensation, partially offset by a decrease in consulting and professional fees, as compared to the prior-year period.
Interest Expense. Interest expense decreased by $1.3 million to $8.2 million in the third quarter of 2015 from $9.5 million in the third quarter of 2014 largely as a result of increased capitalized interest on major capital projects as compared to the prior-year period. Debt balances remained relatively unchanged from the prior-year period.
Other Income (Expense), Net. Other income (expense), net was net income of $2.6 million in the third quarter of 2015 compared to net expense of $2.7 million in the third quarter of 2014, mainly due to lower losses on foreign exchange, partially offset by lower income from our equity method investments.
Income Taxes. The effective income tax rate was 24.2% for the third quarter of 2015. The effective income tax rate for the third 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, the foreign earnings rate differential, the increased benefit in certain prior years' deductions due to a change in the calculation methodology of the domestic manufacturing deduction and adjustments related to prior years' tax returns as filed, partially offset by state income taxes. The effective income tax rate was 42.2% for the third quarter of 2014. The effective income tax rate for the third quarter of 2014 was above the U.S. federal statutory rate of 35.0% primarily due to state income taxes, partially offset by the domestic manufacturing deduction.
Olefins Segment
Net Sales. Net sales decreased by $115.0 million, or 16.4%, to $588.1 million in the third quarter of 2015 from $703.1 million in the third quarter of 2014, primarily due to lower sales prices for our major products, partially offset by higher sales volumes for most of our major products, as compared to the prior-year period. Average sales prices for the Olefins segment decreased by 31.3% in the third quarter of 2015 as compared to the third quarter of 2014. Average sales volumes for the Olefins segment increased by 14.9% in the third quarter of 2015 as compared to the third quarter of 2014.
Income from Operations. Income from operations decreased by $62.6 million, or 24.1%, to $196.7 million in the third quarter of 2015 from $259.3 million in the third quarter of 2014. This decrease was mainly attributable to lower olefins integrated product margins primarily as a result of lower sales prices, partially offset by higher sales volumes for most of our major products and lower feedstock and energy costs as compared to the prior-year period. Trading activity in the third quarter of 2015 resulted in a loss of $9.3 million as compared to a loss of $6.9 million in the third quarter of 2014.
Vinyls Segment
Net Sales. Net sales increased by $49.8 million, or 9.1%, to $599.9 million in the third quarter of 2015 from $550.1 million in the third quarter of 2014. This increase was mainly attributable to sales contributed by Vinnolit and Huasu, as compared to the prior-year period, and higher sales volumes for caustic soda and PVC resin, partially offset by lower sales prices for our major products. Average sales prices for the Vinyls segment decreased by 19.8% in the third quarter of 2015 as compared to the third quarter of 2014. Average sales volumes for the Vinyls segment increased by 28.9% in the third quarter of

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2015 as compared to the third quarter of 2014, primarily attributable to sales contributed by Vinnolit and Huasu, as compared to the prior-year period.
Income (Loss) from Operations. Income from operations increased by $8.4 million to $67.8 million in the third quarter of 2015 from $59.4 million in the third quarter of 2014, mainly attributable to higher caustic soda sales volume, primarily as a result of higher production rates at our Geismar chlor-alkali plant, and the contribution from Vinnolit, as compared to the prior-year period. The increase in third quarter 2015 income from operations was partially offset by the lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with the maintenance turnarounds at our Calvert City, Gendorf, Germany and Burghausen, Germany facilities and lower sales prices for our major products, as compared to the third quarter of 2014. Third quarter 2014 income from operations was negatively impacted by the lost sales, lower production rates and other costs associated with the unplanned outages at our Calvert City and Geismar facilities and the effect of selling higher cost Vinnolit inventory recorded at fair value as a result of the acquisition.
Nine Months Ended September 30, 2015 Compared with Nine Months Ended September 30, 2014
Net Sales. Net sales increased by $197.1 million, or 6.0%, to $3.5 billion for the nine months ended September 30, 2015 from $3.3 billion for the nine months ended September 30, 2014, primarily attributable to sales contributed by Vinnolit and Huasu, as compared to the prior-year period, and higher sales volumes for most of our major products, partially offset by lower sales prices for all our major products. Average sales prices for the nine months ended September 30, 2015 decreased by 27.9% as compared to the nine months ended September 30, 2014. Sales prices in the first nine months of 2015 were negatively impacted by the significant decline in crude oil prices. Overall sales volumes for the nine months ended September 30, 2015 increased by 33.9% as compared to the nine months ended September 30, 2014.
Gross Profit. Gross profit margin percentage of 27.3% for the nine months ended September 30, 2015 decreased from the 29.1% gross profit margin percentage for the nine months ended September 30, 2014. The decrease was mainly the result of lower olefins integrated product margins primarily due to lower sales prices. Sales prices decreased an average of 27.9% for the nine months ended September 30, 2015 as compared to the prior-year period. In addition, gross profit for the nine months ended September 30, 2015 was negatively impacted by lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with maintenance turnarounds at our various facilities. The decrease in gross profit for the nine months ended September 30, 2015 was partially offset by lower average feedstock and energy costs and higher vinyls integrated product margins, primarily attributable to lower feedstock costs, increased production at our Calvert City facilities following the completion of OpCo's feedstock conversion and ethylene expansion project and higher production rates at our Geismar chlor-alkali plant, as compared to the prior-year period.
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the nine months ended September 30, 2015 increased by $37.4 million as compared to the nine months ended September 30, 2014, mainly attributable to general and administrative costs incurred by Vinnolit and Huasu for the nine months ended September 30, 2015, an increase in payroll and related labor costs, including incentive compensation, and an increase in consulting and professional fees, as compared to the prior-year period.
Interest Expense. Interest expense decreased by $1.4 million to $26.8 million for the nine months ended September 30, 2015, largely as a result of increased capitalized interest on major capital projects as compared to the prior-year period. Debt balances remained relatively unchanged from the prior-year period.
Other Income, Net. Other income, net increased by $29.4 million to $33.8 million for the nine months ended September 30, 2015 from $4.4 million for the nine months ended September 30, 2014. The increase from the prior-year period was principally due to the bargain purchase gain from the acquisition of a controlling interest in Huasu, net of related expenses, of approximately $20.4 million, gains on foreign exchange, the gain from the sales of equity securities and dividends received from cost method investments, partially offset by the impairment and loss from the disposition of an equity method investment.
Income Taxes. The effective income tax rate was 30.1% for the nine months ended September 30, 2015. The effective income tax rate for the 2015 period was below the U.S. federal statutory rate of 35.0% primarily due to the benefit of state tax credits, the domestic manufacturing deduction, income attributable to noncontrolling interests, the non-recognition of tax related to the bargain purchase of a controlling interest in Huasu, the increased benefit in certain prior years' deductions due to a change in the calculation methodology of the domestic manufacturing deduction and adjustments related to prior years' tax returns as filed and the foreign earnings rate differential, partially offset by state income taxes. The effective income tax rate was 37.6% for the nine months ended September 30, 2014. The effective income tax rate for the 2014 period was above the U.S. federal statutory rate of 35.0% primarily due to state income taxes, partially offset by the domestic manufacturing deduction.

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Olefins Segment
Net Sales. Net sales decreased by $332.8 million, or 15.7%, to $1.8 billion for the nine months ended September 30, 2015 from $2.1 billion for the nine months ended September 30, 2014, mainly due to lower sales prices for our major products, partially offset by higher sales volumes for our major products as compared to the prior-year period. Average sales prices for the Olefins segment decreased by 29.2% for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014. Average sales volumes for the Olefins segment increased by 13.5% for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014.
Income from Operations. Income from operations decreased by $161.6 million, or 21.0%, to $608.7 million for the nine months ended September 30, 2015 from $770.3 million for the nine months ended September 30, 2014. This decrease was mainly attributable to lower olefins integrated product margins, primarily as a result of lower sales prices, partially offset by higher sales volumes and lower feedstock and energy costs for the nine months ended September 30, 2015 as compared to the prior-year period.
Vinyls Segment
Net Sales. Net sales increased by $530.0 million, or 45.9%, to $1.7 billion for the nine months ended September 30, 2015 from $1.2 billion for the nine months ended September 30, 2014. This increase was primarily attributable to sales contributed by Vinnolit and Huasu and higher sales volumes for caustic soda and PVC resin, partially offset by lower sales prices for our major products. Average sales prices for the Vinyls segment decreased by 25.4% for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014. Average sales volumes for the Vinyls segment increased by 71.3% for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014, primarily related to sales contributed by Vinnolit and Huasu, as compared to the prior-year period.
Income from Operations. Income from operations increased by $126.3 million to $202.8 million for the nine months ended September 30, 2015 from $76.5 million for the nine months ended September 30, 2014. This increase was primarily driven by higher vinyls integrated product margins for the nine months ended September 30, 2015, mainly attributable to lower feedstock costs and increased production at our Calvert City facilities following the completion of OpCo's feedstock conversion and ethylene expansion project, higher caustic soda sales volume primarily attributable to higher production rates at our Geismar chlor-alkali plant and the contribution from Vinnolit, as compared to the prior-year period. The increase in income from operations for the nine months ended September 30, 2015 was partially offset by lost sales, lower production rates and other costs associated with the maintenance turnarounds at our various North American and European facilities, lower sales prices for our major products and reduced sales volume in Europe related to an ethylene shortage. Income from operations for the nine months ended September 30, 2014 was negatively impacted by the effect of selling higher cost Vinnolit inventory recorded at fair value as a result of the acquisition, the lost sales, lower production rates and other costs associated with the maintenance turnaround at our Calvert City facilities and OpCo's Calvert City ethylene plant's feedstock conversion and expansion project and, prior to the completion of OpCo's Calvert City ethylene plant's feedstock conversion project, lower vinyls integrated product margins attributable to significantly higher propane costs.
CASH FLOW DISCUSSION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
Cash Flows
Operating Activities
Operating activities provided cash of $841.3 million in the first nine months of 2015 compared to cash provided of $776.1 million in the first nine months of 2014. The $65.2 million increase in cash flows from operating activities was mainly due to an increase in net income and a decrease in working capital requirements, as compared to the prior-year period. Cash flows from operating activities for the first nine months of 2014 were negatively impacted by costs related to the formation and initial public offering of Westlake Chemical Partners LP ("Westlake Partners") and costs associated with the acquisition of Vinnolit, our specialty PVC resin business, including the effect of selling higher cost inventory recorded at fair value. 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, provided cash of $113.9 million in the first nine months of 2015, compared to $100.3 million of cash provided in the first nine months of 2014, a favorable change of $13.6 million. The change was mainly due to lower accounts receivable and inventory balances mainly as a result of lower product prices during the 2015 period, partially offset by a decrease in current liabilities (accounts payable and accrued liabilities), as compared to the prior-year period.

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Investing Activities
Net cash used for investing activities during the first nine months of 2015 was $553.6 million as compared to net cash used for investing activities of $652.2 million in the first nine months of 2014. Capital expenditures were $329.2 million in the first nine months of 2015 compared to $311.2 million in the first nine months of 2014. Capital expenditures in the first nine months of 2015 were primarily 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 nine 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 nine 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. We acquired cash of $15.8 million, net of cash paid, in connection with the acquisition of Huasu. Purchases of securities in the first nine months of 2015 totaled $282.5 million and were comprised of corporate and U.S. government debt securities. We also received aggregate proceeds of $16.1 million from the sales and maturities of our investments in the first nine months of 2015. The activity during the first nine months of 2014 was primarily related to the acquisition of Vinnolit, the purchase of securities and the receipt of proceeds from the sales and maturities of our investments.
Financing Activities
Net cash used by financing activities during the first nine months of 2015 was $203.1 million as compared to net cash provided of $231.9 million in the first nine months of 2014. The activity during the first nine months of 2015 was primarily related to the $67.9 million payment of cash dividends, the $11.0 million payment of cash distributions to noncontrolling interests and the $114.3 million of cash used for repurchases of shares of our common stock, partially offset by the receipt of proceeds of $1.0 million from the exercise of stock options. In addition, we repaid $33.0 million of our joint venture's short-term notes payable to banks, partially offset by $19.5 million of proceeds received by our joint venture from the issuance of the notes payable. The activity during the first nine months of 2014 was mainly related to the $286.1 million net proceeds from the initial public offering of Westlake Partners common units and the proceeds from the exercise of stock options, partially offset by the payment of cash dividends and the repurchase of shares of our common stock.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Financing Arrangements
Our principal sources of liquidity are from cash and cash equivalents, investments in current marketable securities, 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 begin the upgrade and capacity expansion of its Petro 1 ethylene unit at our Lake Charles site in the second quarter 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 September 30, 2015, OpCo had incurred a total cost of approximately $150.8 million on this capital project.
In August 2011, our Board of Directors authorized a stock repurchase program totaling $100.0 million (the "2011 Program"). As of March 31, 2015, we had repurchased the full amount of 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 September 30, 2015, we repurchased 1,090,837 shares of our common stock for an aggregate purchase price of approximately $59.4 million under the 2014 Program. As of September 30, 2015, we had repurchased 1,955,871 shares of our common stock for an aggregate purchase price of approximately $121.1 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 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. Our management believes that borrowing

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under our revolving credit facility should be available up to our borrowing base, if needed. At September 30, 2015, the borrowing base of our credit facility was $376.3 million, which is below the maximum borrowing capacity of $400.0 million due to our low carrying amount of accounts receivable and inventory, which make up the borrowing base.
Cash and Cash Equivalents
As of September 30, 2015, our cash, cash equivalents and current marketable securities totaled $1.2 billion. In addition, we have a revolving credit facility available to supplement cash if needed, as described under "Debt" below.
Debt
As of September 30, 2015, our long-term debt, including current maturities, totaled $764.1 million, consisting of $250.0 million principal amount of 3.60% senior notes due 2022 (less the unamortized discount of $0.8 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 September 30, 2015, debt outstanding under the tax-exempt waste disposal revenue bonds bore interest at a variable rate. As of September 30, 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 September 30, 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 September 30, 2015, we had outstanding letters of credit totaling $30.0 million and borrowing availability of $346.4 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,

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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.
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 September 30, 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 revolving credit facility matures 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'

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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. As of September 30, 2015, outstanding borrowings under the credit facility totaled $135.3 million and bore interest at the LIBOR rate plus 2.0%.
Our subsidiary, Westlake Development Corporation, is the lender party to a $600.0 million revolving credit facility with OpCo. The revolving credit facility matures in 2019. As of September 30, 2015, outstanding borrowings under the credit facility totaled $163.4 million and bore interest at the LIBOR rate plus 3.0%, which is accrued in arrears quarterly.
We consolidate Westlake Partners and OpCo for financial reporting purposes as we have a controlling financial interest. As such, the revolving credit facilities described above between our subsidiaries and Westlake Partners and OpCo are eliminated upon consolidation.
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;
•
availability of our revolving credit facility and our ability to meet our liquidity needs;
•
our intended quarterly dividends;
•
our effective tax rate;
•
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;

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•
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;
•
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 September 30, 2015, a hypothetical $0.10 increase in the price of a gallon of ethane would have increased our income before taxes by $18.7 million and a hypothetical $0.10 increase in the price of a MMbtu of natural gas would have increased our income before taxes by $1.3 million. Additional information concerning derivative commodity instruments appears in Notes 12 and 13 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 September 30, 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 September 30, 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 September 30, 2015 was 0.09%. 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 September 30, 2015, we had $754.0 million aggregate principal amount of fixed rate debt. We are subject to the risk of higher interest cost if

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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 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 September 30, 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 19 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 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015. There have been no material changes from those risk factors.
 
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 September 30, 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)
July 2015
 
95,082

 
$
68.66

 
95,019

 
$
181,822,000

August 2015
 
190,989

 
$
57.44

 
190,989

 
$
170,851,000

September 2015
 
804,829

 
$
52.12

 
804,829

 
$
128,901,000

 
 
1,090,900

 
$
53.14

 
1,090,837

 
 
_____________
(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"). As of March 31, 2015, we had repurchased the full amount of the 2011 Program. On November 21, 2014, our Board of Directors approved an additional $250.0 million share repurchase program (the "2014 Program"). As of September 30, 2015, 1,955,871 shares of common stock had been acquired at an aggregate purchase price of $121.1 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.
 

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Item 6.
Exhibits
Exhibit No.
 
 
 
 
 
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.


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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:
November 4, 2015
 
 
By:
 
/S/    ALBERT CHAO        
 
 
 
 
 
 
Albert Chao
 
 
 
 
 
 
President and Chief Executive Officer
(Principal Executive Officer)
 
 
 
 
Date:
November 4, 2015
 
 
By:
 
/S/    M. STEVEN BENDER        
 
 
 
 
 
 
M. Steven Bender
 
 
 
 
 
 
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)

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EXHIBIT INDEX

Exhibit No.
 
Exhibit
 
 
 
31.1†
 
Rule 13a – 14(a) / 15d – 14(a) Certification (Principal Executive Officer)
 
 
 
31.2†
 
Rule 13a – 14(a) / 15d – 14(a) Certification (Principal Financial Officer)
 
 
 
32.1#
 
Section 1350 Certification (Principal Executive Officer and Principal Financial Officer)
 
 
 
99.1#
 
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.


46