|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
______________________________
(1) At our option, we may redeem the notes at any time on or after the specified par call date at a redemption price equal to 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest.
(2) At our option, we may redeem the notes at any time prior to the specified par call date at a redemption price equal to the greater of (i) 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the notes being redeemed that would be due if the notes matured on the specified par call date (not including any portion of such payments of interest accrued as of the redemption date), discounted to the redemption date on an annual basis at the applicable comparable government bond rate plus 30 basis points plus accrued and unpaid interest.
(3) At our option, we may redeem the notes at any time prior to the specified par call date at a redemption price equal to the greater of (i) 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the notes being redeemed that would be due if the notes matured on the specified par call date (excluding accrued and unpaid interest to the redemption date), discounted to the redemption date on a semi-annual basis at the treasury rate plus 20 to 40 basis points plus accrued and unpaid interest.
(4) At our option, we may redeem the notes at any time prior to the specified par call date at a redemption price equal to the greater of (i) 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the notes being redeemed (excluding accrued and unpaid interest to the redemption date), discounted to the redemption date on a semi-annual basis at the treasury rate plus 35 to 45 basis points, plus accrued and unpaid interest.
(5) In the event of a redemption of certain bonds (the "GO Zone Bonds") issued by the Louisiana Local Government Environmental Facility and Development Authority (the "Authority") in 2017, we will redeem notes equal in principal amount to the GO Zone Bonds to be redeemed at a redemption price equal to the redemption price of the GO Zone Bonds to be redeemed, plus accrued interest to the redemption date. The GO Zone Bonds are subject to optional redemption by the Authority upon the direction of the Company at any time on or after November 1, 2027, for 100% of the principal amount plus accrued interest to the redemption date.
(6) 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. The interest rate on the waste disposal revenue bonds at December 31, 2023 was 4.30%.
(7) The 2026 Term Loan has a 5-year maturity and includes a government rate subsidy. The interest rate on the 2026 Term Loan as of December 31, 2023 was 0.95%.
The holders of the 0.875% 2024 Senior Notes, the 3.60% 2026 Senior Notes, the 1.625% 2029 Senior Notes, the 3.375% 2030 Senior Notes, the 3.50% 2032 tax-exempt GO Zone Refunding Senior Notes, the 2.875% 2041 Senior Notes, the 5.00% 2046 Senior Notes, the 4.375% 2047 Senior Notes, the 3.125% 2051 Senior Notes and the 3.375% 2061 Senior Notes may require us to repurchase the notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the respective indentures governing these notes).
The indenture governing the 0.875% 2024 Senior Notes, the 3.60% 2026 Senior Notes, the 1.625% 2029 Senior Notes, the 3.375% 2030 Senior Notes, the 3.50% 2032 tax-exempt GO Zone Refunding Senior Notes, the 2.875% 2041 Senior Notes, the 5.00% 2046 Senior Notes, the 4.375% 2047 Senior Notes, the 3.125% 2051 Senior Notes, and the 3.375% 2061 Senior Notes contains customary events of default and covenants that, among other things and subject to certain exceptions, restrict us and certain of our subsidiaries' ability to (1) incur certain secured indebtedness, (2) engage in certain sale and leaseback transactions and (3) consolidate, merge or transfer all or substantially all of our assets.
As of December 31, 2023, we were in compliance with all of our long-term debt covenants.
Credit Agreement
On June 9, 2022, we entered into a new $1.5 billion revolving credit facility that is scheduled to mature on June 9, 2027 (the "Credit Agreement") and, in connection therewith, terminated our then existing revolving credit agreement. The Credit Agreement bears interest at either (a) Adjusted Term SOFR (as defined in the Credit Agreement) plus a margin ranging from 1.00% to 1.625% per annum or (b) Alternate Base Rate (as defined in the Credit Agreement) plus a margin ranging from 0.00% to 0.625% per annum, in each case depending on the credit rating of the Company. The Credit Agreement contains certain affirmative and negative covenants, including a quarterly total leverage ratio financial maintenance covenant. As of December 31, 2023, we were in compliance with the total leverage ratio financial maintenance covenant.
The Credit Agreement also contains certain events of default and, if and for so long as certain events of default have occurred and are continuing, any overdue amounts outstanding under the Credit Agreement will accrue interest at an increased rate, the lenders can terminate their commitments to lend thereunder and payments of any outstanding amounts thereunder could be accelerated by the lenders. None of our subsidiaries are required to guarantee our obligations under the Credit Agreement.
The Credit Agreement includes a $150 million sub-limit for letters of credit, and any outstanding letters of credit will be deducted from availability under the facility. The Credit Agreement also provides for a discretionary $50 million commitment for swingline loans to be provided on a same-day basis. We may also increase the size of the facility, in increments of at least $25 million, up to a maximum of $500 million, subject to certain conditions and if certain lenders agree to commit to such an increase.
Westlake Chemical Partners LP Credit Arrangements
Our subsidiary, Westlake Chemical Finance Corporation, is the lender party to a $600 million revolving credit facility with Westlake Chemical Partners LP ("Westlake Partners") (the "MLP Revolver") that is scheduled to mature on July 12, 2027. As of December 31, 2023, outstanding borrowings under the credit facility totaled $377 million and bore interest at Secured Overnight Financing Rate, as administered by the Federal Reserve Bank of New York ("SOFR") plus the Applicable Margin plus a 0.10% credit spread adjustment. On July 12, 2022, Westlake Partners entered into the Fourth Amendment (the "MLP Revolver Amendment") to the MLP Revolver. The MLP Revolver Amendment, among other things, extended the maturity date to July 12, 2027 and provided for the replacement of LIBOR with SOFR. Borrowings under the MLP Revolver now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%. The Applicable Margin under the MLP Revolver varies between 1.75% and 2.75%, depending on the Partnership's Consolidated Leverage Ratio.
Our subsidiary, Westlake Polymers LLC, is the administrative agent to a $600 million revolving credit facility with Westlake Chemical OpCo LP ("OpCo") (the "OpCo Revolver") that is scheduled to mature on July 12, 2027. As of December 31, 2023, outstanding borrowings under the credit facility totaled $23 million and bore interest at SOFR plus the Applicable Margin of 1.75% plus a 0.10% credit spread adjustment. On July 12, 2022, OpCo entered into the Second Amendment (the "OpCo Revolver Amendment") to the OpCo Revolver. The OpCo Revolver Amendment, among other things, extended the maturity date to July 12, 2027 and provided for the replacement of LIBOR with SOFR. Borrowings under the OpCo Revolver now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%. The Applicable Margin under the OpCo Revolver is 1.75%
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 from the financial statements upon consolidation.
Contractual and Other Obligations
The Company's material cash requirements for contractual and other obligations in the near term (next 12 months) and the long term period (2024 and thereafter) include long-term debt, interest payments, operating leases, pension benefits funding, post-retirement healthcare benefits, purchase obligations, asset retirement obligations and letters of credit.
Debt Obligations and Interest Payments. As of December 31, 2023, we had $300 million debt obligations due within the near term, and debt obligations of $4,697 million due over the long-term period. At December 31, 2023, long-term debt related interest expense of $158 million was due within the near term, and related interest expense of $2,692 million was due over the long-term period. Maturities of our debt consist of $300 million in 2024, $763 million in 2026 and $11 million in 2027. There are no other scheduled maturities of debt in 2024 through 2028. See Note 11, "Long-Term Debt," in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further information on our debt obligations and the expected timing of future principal and interest payments.
Operating leases. As of December 31, 2023, there was $142 million in operating lease obligations due within the near term, and $768 million due over the long-term period. See Note 7, "Leases," in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further detail of our obligations and the timing of expected future payments.
Pension Benefits Funding and Post-retirement Healthcare Benefits. Pension benefits funding obligations due within the near term were $8 million while post-retirement healthcare benefit payment obligations due within the near term were $8 million as of December 31, 2023. As of December 31, 2023, we had $135 million and $64 million of pension benefit funding and post-retirement healthcare benefit obligations due over the long-term period, respectively. The estimate of the timing of future payments under our defined benefit pension plans which cover certain eligible employees in the United States and non-U.S. countries and our post-retirement healthcare benefits to the employees of certain subsidiaries who meet certain minimum age and service requirements involves the use of certain assumptions, including retirement ages and payout periods. See Note 14, "Employee Benefits," in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further information on our obligations and the timing of expected future payments.
Purchase Obligations. Purchase obligations include agreements to purchase goods and services that are enforceable and legally binding and that specify all significant terms, including a minimum quantity and price. We are party to various obligations to purchase goods and services, including commitments to purchase various feedstock, utilities, nitrogen, oxygen, product storage, pipeline usage and logistic support, in each case in the ordinary course of our business, as well as various purchase commitments for our capital projects. As of December 31, 2023, we had $2,152 million of enforceable and legally binding purchase commitments due within the near term, and $5,976 million due over the long-term period.
Asset Retirement Obligations. As of December 31, 2023, we had $3 million asset retirement obligations due within the near term, and $55 million due over the long-term period. Asset retirement obligations includes the estimated costs and timing of payments to satisfy our recognized asset retirement obligations. We recognize asset retirement obligations in the period in which the liability becomes probable and reasonably estimable. Initially, the asset retirement obligation is recorded at fair value and capitalized as a component of the carrying value of the long-lived asset to which the obligation relates. See Note 1, "Description of Business and Significant Accounting Policies," in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further detail of our asset retirement obligations.
Letters of Credit. As of December 31, 2023, we had $39 million standby letters of credit, made in the ordinary course of business, maturing within the near term, and no standby letters of credit maturing over the long-term period. We had no letters of credit outstanding under our Credit Agreement.
Critical Accounting Policies and Estimates
Critical accounting policies are those that are important to our financial condition and require management's most difficult, subjective or complex judgments. Different amounts would be reported under different operating conditions or under alternative assumptions. We have evaluated the accounting policies used in the preparation of the accompanying consolidated financial statements and related notes and believe those policies are reasonable and appropriate. Our significant accounting policies are summarized in Note 1 to the consolidated financial statements appearing elsewhere in this Form 10-K.
Critical accounting estimates are those estimates made in accordance with the accounting principles generally accepted in the United States ("GAAP") that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operation. Our more critical accounting estimates include those related to business combinations, fair values, long-lived assets, goodwill, accruals for long-term employee benefits, accounts receivable, income taxes and environmental and legal obligations. Inherent in such estimates are certain key assumptions. We periodically update the estimates used in the preparation of the financial statements based on our latest assessment of the current and projected business and general economic environment. We believe the following to be our most critical accounting estimates required for the preparation of our financial statements.
Business Combinations and Intangible Assets Including Goodwill. We account for business combinations using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair value is recorded as goodwill. Any changes in the estimated fair values of the net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will change the amount of the purchase price allocable to goodwill. Any subsequent changes to any purchase price allocations that are material to our consolidated financial results will be adjusted in the same period's financial statements, including 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. All acquisition costs are expensed as incurred and in-process research and development costs are recorded at fair value as an indefinite-lived intangible asset and assessed for impairment thereafter until completion, at which point the asset is amortized over its expected useful life. Separately recognized transactions associated with business combinations are generally expensed subsequent to the acquisition date. The application of business combination accounting requires the use of significant estimates and assumptions. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable. The fair value of the customer relationships acquired are estimated by management through a discounted cash flow model using the multi-period excess earnings methodology, which involves the use of significant estimates and assumptions related to revenue growth rates, operating margins, discount rates, and customer attrition rates, among other items. The fair value of the technology and trade names acquired is estimated by management through a discounted cash flow model using the relief from royalty methodology, which involves the use of significant estimates and assumptions related to revenue growth rates, and discount rates. The results of operations of acquired businesses are included in our consolidated financial statements from the acquisition date.
Fair Value Estimates. We develop estimates of fair value to allocate the purchase price paid to acquire a business to the assets acquired and liabilities assumed in an acquisition, to assess impairment of long-lived assets and goodwill and to record marketable securities and pension plan assets. We use all available information to make these fair value determinations, including the engagement of third-party consultants. In addition, we record all pension plan assets and certain marketable securities at fair value. The fair value of these items is determined by quoted market prices or from observable market-based inputs. See Note 16 to the consolidated financial statements appearing elsewhere in this Form 10-K for more information.
Long-Lived Assets. Key estimates related to long-lived assets include useful lives, recoverability of carrying values and existence of any retirement obligations. Such estimates could be significantly modified. The carrying values of long-lived assets could be impaired by significant changes or projected changes in supply and demand fundamentals (which could 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 United States and global economies, the cyclical nature of the chemical and refining industries and uncertainties associated with governmental actions.
We evaluate long-lived assets for potential impairment indicators 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. Our judgments regarding the existence of impairment indicators are based on legal factors, market conditions and the operational performance of our businesses. Actual impairment losses incurred could vary significantly from amounts estimated. Long-lived assets are assessed for impairment by asset group, the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Additionally, future events could cause us to conclude that impairment indicators exist and that associated long-lived assets of our businesses are impaired. Any resulting impairment loss could have a material adverse impact on our financial condition and results of operations.
During the fourth quarter of 2023, the Westlake Epoxy business's sales volumes and prices, specifically base epoxy resins in Europe, continued to deteriorate. These lower sales volumes and prices were primarily driven by record exports out of Asia into Europe and North America. In addition, Westlake Epoxy operations in Europe have experienced sustained high energy and power costs. These factors negatively impacted Westlake Epoxy financial results during 2023. The Company identified these developments, along with management's outlook for the Westlake Epoxy business over the foreseeable future, as impairment indicators during the fourth quarter of 2023. Recoverability tests were performed for each of Westlake Epoxy's asset groups to compare the carrying amounts of assets to the net undiscounted cash flow projections of the asset group generated from its use and eventual disposition. The undiscounted cash flow projections were based on historical results, estimates made by management of future market conditions, current and future strategic and operational plans and future financial performance projected through the remaining useful life of the primary asset in the asset group. Based on the recoverability tests, we determined that the carrying amount of the primary assets of Westlake Epoxy's Netherlands asset group is not recoverable, and as such, an impairment loss was recorded to reduce the carrying amount of the asset group to its fair value. See Note 6 in the notes to the consolidated financial statements for further details.
The estimated useful lives of long-lived assets range from one to 40 years. Depreciation and amortization of these assets, including amortization of deferred turnaround costs, under the straight-line method over their estimated useful lives totaled $1,097 million, $1,056 million and $840 million in 2023, 2022 and 2021, respectively. If the useful lives of the assets were found to be shorter than originally estimated, depreciation or amortization charges would be accelerated.
We defer the costs of planned major maintenance activities, or turnarounds, and amortize the costs over the period until the next planned turnaround of the affected unit. Total costs deferred on turnarounds were $179 million, $178 million and $215 million in 2023, 2022 and 2021, respectively. As of December 31, 2023, deferred turnaround costs, net of accumulated amortization, totaled $391 million. Amortization in 2023, 2022 and 2021 of deferred turnaround costs was $137 million, $80 million and $56 million, respectively. Expensing turnaround costs as incurred would likely result in greater variability of our quarterly operating results and would adversely affect our financial position and results of operations.
Additional information concerning long-lived assets and related depreciation and amortization appears in Notes 6 and 8 to the consolidated financial statements appearing elsewhere in this Form 10-K.
Goodwill. At December 31, 2023, our recorded goodwill was $2,041 million. Goodwill is evaluated for impairment when events or changes in circumstances indicate the fair value of a reporting unit with goodwill has been reduced below its carrying value, and otherwise at least annually. We perform our annual impairment assessment for both the Performance and Essential Materials and Housing and Infrastructure Products reporting units in October each year. We may elect to perform an optional qualitative assessment to determine whether a quantitative impairment analysis is required. The qualitative assessment considers factors such as macroeconomic conditions, industry and market considerations, cost factors related to raw materials and labor, current and projected financial performance, changes in management or strategy, and market capitalization. Alternatively, we may unconditionally elect to bypass the qualitative assessment and perform a quantitative goodwill impairment assessment in any period.
We evaluated the Westlake Epoxy reporting unit's goodwill for impairment during the fourth quarter of 2023 in line with the timing of our annual goodwill impairment assessment for all reporting units. We performed the quantitative assessment for each of our reporting units within both of our segments during the fourth quarter of 2023. The quantitative analysis compares a reporting unit's fair value to its carrying amount to determine whether goodwill is impaired. The fair values of the reporting units are calculated using both a discounted cash flow methodology and a market value methodology. The discounted cash flow projections are based on a forecast to reflect the cyclicality of the business. The forecast is based on historical results, estimates by management of future market conditions, current and future strategic and operational plans and future financial performance. Significant assumptions used in the discounted cash flow projection included projected sales volumes based on production capacities, future sales prices, feedstock, energy and power costs and capital expenditures to maintain safe and reliable plant operations. The future cash flows are discounted to present value using an applicable discount rate. The significant assumptions used in determining the fair value of the reporting unit using the market value methodology include the determination of appropriate market comparables and the estimated multiples of EBITDA a willing buyer is likely to pay. Based on the quantitative tests performed during the fourth quarter of 2023, an impairment of the Westlake Epoxy reporting unit was identified as the carrying amount of the reporting unit exceeded its fair value. See Note 8 in the notes to the consolidated financial statements for further details. For all reporting units other than Westlake Epoxy, even if the fair values of the reporting units decreased by 10% from the fair values determined for the quantitative tests, the carrying amounts of the reporting units would not have exceeded their fair values. See Item 1A, "Risk Factors—If our goodwill or other long-lived assets become impaired in the future, we may be required to record non-cash charges to earnings, which could be significant."
Long-Term Employee Benefit Costs. Our costs for long-term employee benefits, particularly pension and postretirement medical and life benefits, are incurred over long periods of time and involve many uncertainties over those periods. The net periodic benefit cost attributable to current periods is based on several assumptions about such future uncertainties and is sensitive to changes in those assumptions. It is our responsibility, often with the assistance of independent experts, to select assumptions that represent the best estimates of those uncertainties. It is also our responsibility to review those assumptions periodically and, if necessary, adjust the assumptions to reflect changes in economic or other factors.
Accounting for employee retirement plans involves estimating the cost of benefits that are to be provided in the future and attempting to match, for each employee, that estimated cost to the period worked. To accomplish this, we rely extensively on advice from actuaries, and we make assumptions about inflation, investment returns, mortality, employee turnover and discount rates that ultimately impact amounts recorded. Changes in these assumptions may result in different expense and liability amounts. One of the more significant assumptions relates to the discount rate for measuring benefit obligations. At December 31, 2023, the projected pension benefit obligations for U.S. and non-U.S. plans were calculated using assumed weighted average discount rates of 5.0% and 3.2%, respectively. The discount rates were determined using a benchmark pension discount curve and applying spot rates from the curve to each year of expected benefit payments to determine the appropriate discount rate. As a result of the funding relief provided by the enactment of the Bipartisan Budget Act of 2015, no minimum funding requirements are expected during 2024 for the U.S. pension plans. Additional information on the 2024 funding requirements and key assumptions underlying these benefit costs appear in Note 14 to the consolidated financial statements appearing elsewhere in this Form 10-K.
The following table reflects the sensitivity of the benefit obligation of our pension plans to changes in the actuarial assumptions:
| | | | | | | | | | | | | | |
| | 2023 |
| | U.S. Plans | | Non-U.S. Plans |
| | | | |
| | (In millions of dollars) |
| Projected benefit obligation, end of year | | $ | 494 | | | $ | 629 | |
| Discount rate increases by 100 basis points | | (41) | | | (82) | |
| Discount rate decreases by 100 basis points | | 48 | | | 104 | |
A one-percentage point increase or decrease in assumed healthcare trend rates would not have a significant effect on the amounts reported for the healthcare plans.
While we believe that the amounts recorded in the consolidated financial statements appearing elsewhere in this Form 10-K related to these retirement plans are based on the best estimates and judgments available, the actual outcomes could differ from these estimates.
Income Taxes. We utilize the balance sheet method of accounting for deferred income taxes. Under this method, deferred tax assets or liabilities are recorded based upon temporary differences between the tax basis of assets and liabilities and their carrying values for financial reporting purposes. Deferred tax expense or benefit is the result of changes in the deferred tax assets and liabilities during the period. Valuation allowances are recorded against deferred tax assets when it is considered more likely than not that the deferred tax assets will not be realized. Additional information on income taxes appears in Note 17 to the consolidated financial statements appearing elsewhere in this Form 10-K.
Environmental and Legal Obligations. We consult with various professionals to assist us in making estimates relating to environmental costs and legal proceedings. We accrue an expense when we determine that it is probable that a liability has been incurred and the amount is reasonably estimable. While we believe that the amounts recorded in the accompanying consolidated financial statements related to these contingencies are based on the best estimates and judgments available, the actual outcomes could differ from our estimates. Additional information about certain legal proceedings and environmental matters appears in Note 22 to the consolidated financial statements appearing elsewhere in this Form 10-K.
Asset Retirement Obligations. We recognize asset retirement obligations in the period in which the liability becomes probable and reasonably estimable. Initially, the asset retirement obligation is recorded at fair value and capitalized as a component of the carrying value of the long-lived asset to which the obligation relates. The liability is recorded at its future value each period, and the capitalized cost is depreciated over the estimated useful life of the related asset. Upon settlement of the liability, a gain or loss is recorded. We have conditional asset retirement obligations for the removal and disposal of hazardous materials from certain of our manufacturing facilities. Additional information on asset retirement obligations appears in Note 1, under Asset Retirement Obligations, to the consolidated financial statements appearing elsewhere in this Form 10-K.
We also have conditional asset retirement obligations that have not been recognized because the fair values of the conditional legal obligations cannot be measured due to the indeterminate settlement date of the obligations. Settlements of the unrecognized conditional asset retirement obligations are not expected to have a material adverse effect on our financial condition, results of operations or cash flows in any individual reporting period.
Recent Accounting Pronouncements
See Note 1 to the consolidated financial statements included in Item 8 of this Form 10-K for a full description of recent accounting pronouncements, including expected date of adoption and estimated effect on results of operations and financial condition.
Item 7A. 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 product feedstock flexibility and moving downstream into our other products where pricing is more stable. We use derivative instruments (including commodity swaps and options) in certain instances to reduce price volatility risk on feedstocks and products. Based on our open derivative positions at December 31, 2023, a hypothetical $0.10 increase in the price of a gallon of ethane and a hypothetical $0.10 increase in the price of a million British thermal units of natural gas would not have a material impact on our income before income taxes.
Interest Rate Risk
We are exposed to interest rate risk with respect to fixed and variable rate debt. At December 31, 2023, we had $4,973 million aggregate principal amount of fixed rate debt. We are subject to the risk of higher interest cost if and when this debt is refinanced. If interest rates were 1.0% higher at the time of refinancing, our annual interest expense would increase by approximately $50 million. Also, at December 31, 2023, we had $24 million principal amount of variable rate debt outstanding, which represents the 2026 term loans due 2026 and the tax-exempt waste disposal revenue bonds due 2027. We do not currently hedge our variable interest rate debt, but we may do so in the future. The weighted average variable interest rate for our variable rate debt of $24 million as of December 31, 2023 was 2.48%. A hypothetical 100 basis point increase in the average interest rate on our variable rate debt would not result in a material change in the interest expense.
Secured Overnight Financing Rate ("SOFR") is used as a reference rate for borrowings under our revolving line of credit. We did not have any SOFR-based borrowings outstanding at December 31, 2023.
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, cross-currency swaps 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. A cross-currency swap obligates us to make periodic payments in the local currency and receive periodic payments in our functional currency based on the notional amount of the instrument. In January 2018, we entered into foreign exchange hedging contracts designated as net investment hedges with an aggregate notional value of €220 million designed to reduce the volatility in stockholders' equity from changes in currency exchange rates associated with our net investments in foreign operations. In July 2019, we terminated a portion of the foreign exchange hedging contract with a notional value of €70 million. The notional value of the remaining net investment hedges was €150 million at December 31, 2023. The arrangement is scheduled to settle in 2026.
In July 2019, we completed the registered public offering of €700 million aggregate principal amount of the 1.625% 2029 Senior Notes. We designated this euro-denominated debt as a non-derivative net investment hedge of a portion of our net investments in euro functional-currency denominated subsidiaries to offset foreign currency fluctuations.
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
| | | | | |
| Page |
| |
| |
| |
| Consolidated Financial Statements: | |
| |
| |
| |
| |
| |
| |
Financial statement schedules not included in this Form 10-K have been omitted because they are not applicable or because the required information is shown in the financial statements or notes thereto.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Westlake Corporation is responsible for establishing and maintaining adequate internal control over financial reporting. Westlake's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Westlake management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on its assessment, Westlake's management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2023 based on those criteria.
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the financial statements included in this Annual Report on Form 10-K, has also audited the effectiveness of internal control over financial reporting as of December 31, 2023 as stated in their report that appears on the following page.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Westlake Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Westlake Corporation and its subsidiaries (the "Company") as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income, of changes in stockholders' equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 8. Our responsibility is to express opinions on the Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill Impairment Assessment—Westlake Epoxy Reporting Unit
As described in Notes 1 and 8 to the consolidated financial statements, management tests goodwill for impairment at least annually in the fourth quarter of each year, or when events or changes in circumstances indicate the fair value of a reporting unit with goodwill has been reduced below its carrying amount. The fair value of the reporting unit was determined using both a discounted cash flow methodology and a market value methodology. Significant assumptions used in the discounted cash flow projection included projected sales volumes based on production capacities, future sales prices, feedstock, energy and power costs and capital expenditures to maintain safe and reliable plant operations. The future cash flows were discounted to present value using a discount rate. The significant assumptions used in determining the fair value of the reporting unit using the market value methodology include the determination of appropriate market comparables and the estimated multiples of net income before interest expense, income taxes, depreciation and amortization (EBITDA) a willing buyer is likely to pay. Based on the quantitative tests performed during the fourth quarter of 2023, management determined that the fair value of the Westlake Epoxy reporting unit did not exceed its carrying amount, and as such, a goodwill impairment charge of $128 million was recognized.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Westlake Epoxy reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Westlake Epoxy reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management's significant assumptions related to future sales prices, feedstock cost, the discount rate, and estimated EBITDA; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's goodwill impairment assessment, including controls over the valuation of the Westlake Epoxy reporting unit. These procedures also included, among others (i) testing management's process for developing the fair value estimate of the reporting unit; (ii) evaluating the appropriateness of the discounted cash flow and market value methodologies used by management; (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow and market value methodologies; and (iv) evaluating the reasonableness of the significant assumptions used by management related to future sales prices, feedstock cost, the discount rate, and estimated EBITDA. Evaluating management's assumptions related to future sales prices, feedstock cost, and estimated EBITDA involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Westlake Epoxy reporting unit; (ii) the consistency with external industry data; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow and market value methodologies and (ii) the reasonableness of the discount rate assumption.
/s/
February 21, 2024
We have served as the Company's auditor since 1986, which includes periods before the Company became subject to SEC reporting requirements.
WESTLAKE CORPORATION
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | | | | |
| | December 31, |
| | 2023 | | 2022 |
| | | | |
| | (in millions of dollars, except
par values and share amounts) |
| ASSETS | | | | |
| Current assets | | | | |
| Cash and cash equivalents | | $ | | | | $ | | |
|
| Accounts receivable, net | | | | | | |
| Inventories | | | | | | |
| Prepaid expenses and other current assets | | | | | | |
|
| Total current assets | | | | | | |
| Property, plant and equipment, net | | | | | | |
| Operating lease right-of-use assets | | | | | | |
| Goodwill | | | | | | |
| Customer relationships, net | | | | | | |
| Other intangible assets, net | | | | | | |
| Equity method investments | | | | | | |
| Other assets, net | | | | | | |
| Total assets | | $ | | | | $ | | |
| LIABILITIES AND EQUITY | | | | |
| Current liabilities | | | | |
| Accounts payable | | $ | | | | $ | | |
| Accrued and other liabilities | | | | | | |
| Current portion of long-term debt, net | | | | | | |
|
| Total current liabilities | | | | | | |
| Long-term debt, net | | | | | | |
| Deferred income taxes | | | | | | |
| Pension and other post-retirement benefits | | | | | | |
| Operating lease liabilities | | | | | | |
| Other liabilities | | | | | | |
| Total liabilities | | | | | | |
| Commitments and contingencies (Note 22) | | | | |
| Stockholders' equity | | | | |
Preferred stock, $ par value, shares authorized; shares issued and outstanding | | | | | | |
Common stock, $ par value, shares authorized; and shares issued at December 31, 2023 and 2022, respectively | | | | | | |
Common stock, held in treasury, at cost; and shares at December 31, 2023 and 2022, respectively | | () | | | () | |
| Additional paid-in capital | | | | | | |
| Retained earnings | | | | | | |
| Accumulated other comprehensive loss | | () | | | () | |
| Total Westlake Corporation stockholders' equity | | | | | | |
| Noncontrolling interests | | | | | | |
| Total equity | | | | | | |
| Total liabilities and equity | | $ | | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
WESTLAKE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2023 | | 2022 | | 2021 |
| | | | | | |
| | (in millions of dollars,
except per share data and share amounts) |
| Net sales | | $ | | | | $ | | | | $ | | |
| Cost of sales | | | | | | | | | |
| Gross profit | | | | | | | | | |
| Selling, general and administrative expenses | | | | | | | | | |
Impairment of goodwill and long-lived assets | | | | | | | | | |
| Amortization of intangibles | | | | | | | | | |
| Restructuring, transaction and integration-related costs | | | | | | | | | |
| Income from operations | | | | | | | | | |
| Other income (expense) | | | | | | |
| Interest expense | | () | | | () | | | () | |
| Other income, net | | | | | | | | | |
| Income before income taxes | | | | | | | | | |
Provision for income taxes | | | | | | | | | |
| Net income | | | | | | | | | |
| Net income attributable to noncontrolling interests | | | | | | | | | |
| Net income attributable to Westlake Corporation | | $ | | | | $ | | | | $ | | |
| Earnings per common share attributable to Westlake Corporation: | | | | | | |
| Basic | | $ | | | | $ | | | | $ | | |
| Diluted | | $ | | | | $ | | | | $ | | |
| Weighted average common shares outstanding: | | | | | | |
| Basic | | | | | | | | | |
| Diluted | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
WESTLAKE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2023 | | 2022 | | 2021 |
| | | | | | |
| | (in millions of dollars) |
| Net income | | $ | | | | $ | | | | $ | | |
| Other comprehensive income (loss), net of income taxes | | | | | | |
| Pension and other post-retirement benefits | | | | | | |
| Pension and other post-retirement benefits reserves adjustment | | () | | | | | | | |
| |
| |
| |
| Income tax benefit (provision) on pension and other post-retirement benefits | | () | | | | | | () | |
| |
| Foreign currency translation adjustments | | | | | | |
| Foreign currency translation | | | | | () | | | | |
| Income tax benefit (provision) on foreign currency translation | | | | | () | | | () | |
| |
| Other comprehensive income (loss), net of income taxes | | () | | | () | | | | |
| Comprehensive income | | | | | | | | | |
Comprehensive income attributable to noncontrolling interests, net of tax of $, $ and $ for 2023, 2022 and 2021, respectively | | | | | | | | | |
| Comprehensive income attributable to Westlake Corporation | | $ | | | | $ | | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
WESTLAKE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Common Stock,
Held in Treasury | | | | | | | | | | |
| | Number of
Shares | | Amount | | Number of
Shares | | At Cost | | Additional
Paid-in
Capital | | Retained
Earnings | | Accumulated Other Comprehensive
Income (Loss) | | Noncontrolling Interests | | Total |
| | | | | | | | | | | | | | | | | | |
| | (in millions of dollars, except share amounts) |
| Balances at December 31, 2020 | | | | | $ | | | | | | | $ | () | | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | | |
| | | | | | | | | |
| | | | | | | | | |
| Net income | | — | | | — | | | — | | | — | | | — | | | | | | — | | | | | | | |
| Other comprehensive income | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | | | | |
Common stock repurchased | | — | | | — | | | | | | () | | | — | | | — | | | — | | | — | | | () | |
Shares issued—stock-based compensation | | — | | | — | | | () | | | | | | () | | | — | | | — | | | — | | | | |
| Stock-based compensation | | — | | | — | | | — | | | — | | | | | | — | | | — | | | — | | | | |
| Dividends declared | | — | | | — | | | — | | | — | | | — | | | () | | | — | | | — | | | () | |
Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | () | | | () | |
| Noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | | | | |
| | | | | | | | | |
| Balances at December 31, 2021 | | | | | $ | | | | | | | $ | () | | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | | |
| | | | | | | | | |
| | | | | | | | | |
| Net income | | — | | | — | | | — | | | — | | | — | | | | | | — | | | | | | | |
| Other comprehensive income | | — | | | — | | | — | | | — | | | — | | | — | | | () | | | () | | | () | |
Common stock repurchased | | — | | | — | | | | | | () | | | — | | | — | | | — | | | — | | | () | |
Shares issued—stock-based compensation | | — | | | — | | | () | | | | | | () | | | — | | | — | | | — | | | | |
| Stock-based compensation | | — | | | — | | | — | | | — | | | | | | — | | | — | | | — | | | | |
| Dividends declared | | — | | | — | | | — | | | — | | | — | | | () | | | — | | | — | | | () | |
Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | () | | | () | |
| Noncontrolling interests | | — | | | — | | | — | | | — | | | | | | () | | | — | | | () | | | () | |
| Balances at December 31, 2022 | | | | | $ | | | | | | | $ | () | | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | | |
| Net income | | — | | | — | | | — | | | — | | | — | | | | | | — | | | | | | | |
| Other comprehensive income | | — | | | — | | | — | | | — | | | — | | | — | | | () | | | — | | | () | |
Common stock repurchased | | — | | | — | | | | | | () | | | — | | | — | | | — | | | — | | | () | |
Shares issued—stock-based compensation | | — | | | — | | | () | | | | | | () | | | — | | | — | | | — | | | | |
| Stock-based compensation | | — | | | — | | | — | | | — | | | | | | — | | | — | | | — | | | | |
| Dividends declared | | — | | | — | | | — | | | — | | | — | | | () | | | — | | | — | | | () | |
Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | () | | | () | |
| | | | | | | | | |
| Balances at December 31, 2023 | | | | | $ | | | | | | | $ | () | | | $ | | | | $ | | | | $ | () | | | $ | | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
WESTLAKE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2023 | | 2022 | | 2021 |
| | | | | | |
| | (in millions of dollars) |
| Cash flows from operating activities | | | | | | |
| Net income | | $ | | | | $ | | | | $ | | |
Adjustments to reconcile net income to net cash provided by operating activities | | | | | | |
| Depreciation and amortization | | | | | | | | | |
| Stock-based compensation expense | | | | | | | | | |
| Loss from disposition and write-off of property, plant and equipment | | | | | | | | | |
Impairment of goodwill and long-lived assets | | | | | | | | | |
| Deferred income taxes | | () | | | () | | | | |
Other (gains) losses, net | | () | | | | | | | |
Changes in operating assets and liabilities, net of effect of business acquisitions | | | | | | |
| Accounts receivable | | | | | | | | () | |
| Inventories | | | | | () | | | () | |
| Prepaid expenses and other current assets | | () | | | | | | () | |
| Accounts payable | | () | | | () | | | | |
| Accrued and other liabilities | | | | | | | | | |
| Other, net | | () | | | () | | | () | |
| Net cash provided by operating activities | | | | | | | | | |
| Cash flows from investing activities | | | | | | |
| Acquisition of businesses, net of cash acquired | | | | | () | | | () | |
| Additions to investments in unconsolidated subsidiaries | | () | | | () | | | () | |
| Additions to property, plant and equipment | | () | | | () | | | () | |
| |
| |
| Other, net | | | | | | | | | |
| Net cash used for investing activities | | () | | | () | | | () | |
| Cash flows from financing activities | | | | | | |
| Debt issuance costs | | | | | | | | () | |
| Distributions to noncontrolling interests | | () | | | () | | | () | |
| Dividends paid | | () | | | () | | | () | |
| Proceeds from debt issuance and drawdown of revolver, net | | | | | | | | | |
| |
| |
Proceeds from exercise of stock options | | | | | | | | | |
| |
| Repayment of revolver and senior notes | | | | | () | | | | |
| |
| Repurchase of common stock for treasury | | () | | | () | | | () | |
| Other, net | | | | | () | | | () | |
| Net cash provided by (used for) financing activities | | () | | | () | | | | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | | | | | () | | | () | |
| Net increase in cash, cash equivalents and restricted cash | | | | | | | | | |
| Cash, cash equivalents and restricted cash at beginning of the year | | | | | | | | | |
| Cash, cash equivalents and restricted cash at end of the year | | $ | | | | $ | | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of dollars, except share amounts and per share data)
1.
ethylene production facilities at the Company's Lake Charles, Louisiana site, ethylene production facility at the Company's Calvert City, Kentucky site and a 200-mile common carrier ethylene pipeline that runs from Mont Belvieu, Texas to the Company's Longview, Texas site. As of December 31, 2023, the Company held a % limited partner interest in OpCo and a controlling interest in Westlake Partners. The operations of Westlake Partners are consolidated in the Company's financial statements.% interest in RS Cogen.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
, $ and $ for the years ended December 31, 2023, 2022 and 2021, respectively. Repair and maintenance costs are charged to operations as incurred. Gains and losses on the disposition or retirement of fixed assets are reflected in the consolidated statement of operations when the assets are sold or retired.
| Plant and equipment | | - |
| Other | | - |
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
| | $ | | | | Estimated fair value of warranty liability assumed in acquisition | | | | | | |
| Warranty provisions | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boral Target Companies in North America.
On October 1, 2021, the Company completed its acquisition of Boral Limited's North American building products businesses in roofing, siding, trim and shutters, decorative stone and windows (the "Boral Target Companies") for total consideration of $. The assets acquired and liabilities assumed and the results of operations of the Boral Target Companies are included in the Housing and Infrastructure Products segment.
LASCO Fittings, Inc.
On August 19, 2021, the Company completed its acquisition of LASCO Fittings, Inc., a Delaware corporation ("LASCO"), a manufacturer of injected-molded polyvinyl chloride ("PVC") fittings that serve the plumbing, pool and spa, industrial, irrigation and retail markets in the United States, for total consideration of $. The assets acquired and liabilities assumed and the results of operations of LASCO are included in the Housing and Infrastructure Products segment.
Dimex LLC.
. The assets acquired and liabilities assumed and the results of operations of Dimex are included in the Housing and Infrastructure Products segment.
3.
of held-to-maturity securities with original maturities of three months or less, primarily consisting of corporate debt securities, classified as cash equivalents at December 31, 2023. There were held-to-maturity securities at December 31, 2022. The Company's investments in held-to-maturity securities were held at amortized cost, which approximates fair value.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
4.
| | $ | | |
| Related parties | | | | | | |
| Allowance for credit losses | | () | | | () | |
| | | | | | |
| Federal and state taxes | | | | | | |
| Other | | | | | | |
| Accounts receivable, net | | $ | | | | $ | | |
5.
| | $ | | | | Feedstock, additives, chemicals and other raw materials | | | | | | |
| Materials and supplies | | | | | | |
| Inventories | | $ | | | | $ | | |
6.
| | $ | | | | Buildings and improvements | | | | | | |
| Plant and equipment | | | | | | |
| Other | | | | | | |
| | | | | | |
| Less: Accumulated depreciation | | | | | | |
| | | | | | |
| Construction in progress | | | | | | |
| Property, plant and equipment, net | | $ | | | | $ | | |
Depreciation expense on property, plant and equipment of $, $ and $ is included primarily in cost of sales in the consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021, respectively.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
7.
| | $ | | | | | | | |
| Accrued and other liabilities | | $ | | | | $ | | |
| Operating lease liabilities | | | | | | |
Total operating lease liabilities | | $ | | | | $ | | |
| | | | |
| Weighted Average Remaining Term (in years) | | | | |
| Weighted Average Lease Discount Rate | | | % | | | % |
The Company's operating lease cost is comprised of payments related to operating leases recorded in the consolidated balance sheet and short-term rental payments for leases that are not recorded in the consolidated balance sheet. Variable operating lease cost was not material to the consolidated statements of operations for the years ended December 31, 2023, 2022, and 2021.
| | $ | | | | $ | | | | Short-term lease cost | | | | | | | | | |
Total operating lease cost | | $ | | | | $ | | | | $ | | |
_____________________________
(1)Includes fixed lease payments for operating leases recorded in the consolidated balance sheet.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
| | 2025 | | | |
| 2026 | | | |
| 2027 | | | |
2028 | | | |
| Thereafter | | | |
Total lease payments | | | |
Less: imputed interest | | () | |
Present value of lease liabilities | | $ | | |
Related Party Leases
The Company leases certain assets under operating leases with related parties. Right-of-use assets and the associated operating lease liabilities for related party operating leases were approximately $ and $ as of December 31, 2023 and December 31, 2022, respectively. The Company recognized operating lease cost for fixed lease payments to related parties of $ and $ for the years ended December 31, 2023 and 2022, respectively.
8.
| | $ | | | | $ | | | | Goodwill acquired during the year | | | | | | | | | |
| Measurement period adjustment | | | | | | | | | |
| Effects of changes in foreign exchange rates | | () | | | () | | | () | |
| Balance at December 31, 2022 | | | | | | | | | |
| |
|
|
|
Balance at December 31, 2023 | | $ | | |
Services Provided to LACC and Lotte
The Company provides certain utilities and other services to LACC and Lotte. Pursuant to a construction and reimbursement agreement, LACC and Lotte agreed to reimburse the Company for construction costs over a -year period beginning in 2020. In addition to the reimbursements for construction costs, the Company charges LACC and Lotte certain fixed fees under an operating, maintenance and logistics agreement. The Company accounts for the reimbursement of construction costs and the fixed fees as components of the total transaction price and recognizes it ratably in net sales over approximately years. The remaining performance obligations at December 31, 2023, representing these fixed components of the transaction price, totaled $ and $ from LACC and Lotte, respectively. The associated contract liabilities recorded from LACC and Lotte totaled $ and $ as of December 31, 2023, respectively, and $ and $ as of December 31, 2022, respectively. In addition to the reimbursements for construction costs and other fixed fees, the Company charges LACC and Lotte certain variable fees.
Other Equity Method Investments
In addition to LACC, the Company has other equity method investments amounting to $ and $ as of December 31, 2023 and 2022, respectively. See Note 20 for more detailed information.
10.
| | $ | | | | Accounts payable to related parties | | | | | | |
| Notes payable | | | | | | |
| Accounts payable | | $ | | | | $ | | |
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
11.
|
|
|
|
|
|
|
|
|
|
|
|
| Less: | | | | | | | | |
|
|
| Less current portion: | | | | | | | | |
|
|
| | | |
| | | |
| | | | Credit Agreement
On June 9, 2022, the Company entered into a new $ revolving credit facility that is scheduled to mature on June 9, 2027 (the "Credit Agreement") and, in connection therewith, terminated the Company's then existing revolving credit agreement. The Credit Agreement bears interest at either (a) Adjusted Term SOFR (as defined in the Credit Agreement) plus a margin ranging from % to % per annum or (b) Alternate Base Rate (as defined in the Credit Agreement) plus a margin ranging from % to % per annum, in each case depending on the credit rating of the Company. The Credit Agreement contains certain affirmative and negative covenants, including a quarterly total leverage ratio financial maintenance covenant. As of December 31, 2023, the Company was in compliance with the total leverage ratio financial maintenance covenant. The Credit Agreement also contains certain events of default and, if and for so long as certain events of default have occurred and are continuing, any overdue amounts outstanding under the Credit Agreement will accrue interest at an increased rate, the lenders can terminate their commitments to lend thereunder and payments of any outstanding amounts thereunder could be accelerated by the lenders. None of the Company's subsidiaries are required to guarantee the obligations of the Company under the Credit Agreement.
The Credit Agreement includes a $ sub-limit for letters of credit, and any outstanding letters of credit will be deducted from availability under the facility. The Credit Agreement also provides for a discretionary $ commitment for swingline loans to be provided on a same-day basis. The Company may also increase the size of the facility, in increments of at least $, up to a maximum of $, subject to certain conditions and if certain lenders agree to commit to such an increase.
As of December 31, 2023, the Company had no borrowings and no letters of credit outstanding, and had borrowing availability of $, under the Credit Agreement.
0.875% Senior Notes due 2024
In August 2021, the Company completed the registered public offering of $ aggregate principal amount of the % 2024 Senior Notes. The Company may optionally redeem the % 2024 Senior Notes at any time and from time to time on or after August 15, 2022 for % of the principal amount plus accrued and unpaid interest.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
Revenue Bonds
In December 1997, the Company 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 $ principal amount of tax-exempt waste disposal revenue bonds in order to finance the Company's 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. The interest rate on the waste disposal revenue bonds at December 31, 2023 and 2022 was % and %, respectively.
1.625% Senior Notes due 2029
On July 17, 2019, the Company completed the registered public offering of € million aggregate principal amount of the % 2029 Senior Notes. The Company received approximately $ of net proceeds from the offering. The % 2029 Senior Notes will accrue interest from July 17, 2019 at a rate of % per annum, payable annually in arrears on July 17 of each year, beginning July 17, 2020. The Company may optionally redeem the % 2029 Senior Notes in accordance with the terms of the % 2029 Senior Notes. The Company designated this euro-denominated debt as a non-derivative net investment hedge of a portion of the Company's net investments in euro functional-currency denominated subsidiaries to offset foreign currency fluctuations.
3.375% Senior Notes due 2030
On June 12, 2020, the Company completed the registered public offering of $ aggregate principal amount of the % 2030 Senior Notes. There is no sinking fund and no scheduled amortization of the % 2030 Senior Notes prior to maturity. The % 2030 Senior Notes accrue interest from June 12, 2020 at a rate of % per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning December 15, 2020. The Company may optionally redeem the % 2030 Senior Notes in accordance with the terms of the % 2030 Senior Notes.
3.50% 2032 GO Zone Refunding Bonds
In November 2017, the Louisiana Local Government Environmental Facility and Development Authority (the "Authority") completed the remarketing of $ aggregate principal amount of % tax-exempt revenue refunding bonds due November 1, 2032 (the "% 2032 GO Zone Bonds"), the net proceeds of which were used to redeem $ aggregate principal amount of the Authority's 6 ¾% tax-exempt revenue bonds due November 1, 2032 issued by the Authority under the GO Zone Act in December 2007. In connection with the remarketing of the % 2032 GO Zone Bonds, the Company issued $ aggregate principal amount of the % 2032 GO Zone Refunding Senior Notes. The % 2032 GO Zone Bonds are subject to optional redemption by the Authority upon the direction of the Company at any time on or after November 1, 2027, for % of the principal amount plus accrued interest.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
4.375% Senior Notes due 2047
In November 2017, the Company completed the registered public offering of $ aggregate principal amount of the % 2047 Senior Notes. The % 2047 Senior Notes are unsecured and mature on November 15, 2047. There is no sinking fund and no scheduled amortization of the % 2047 Senior Notes prior to maturity. The Company may optionally redeem the % 2047 Senior Notes in accordance with the terms of the % 2047 Senior Notes.
3.125% Senior Notes due 2051
In August 2021, the Company completed the registered public offering of $ aggregate principal amount of the % 2051 Senior Notes. The Company may optionally redeem the % 2051 Senior Notes at any time and from time to time prior to February 15, 2051 (six months prior to the maturity date) for a redemption price equal to the greater of (i) % of the principal amount plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the % 2051 Senior Notes being redeemed that would be due if the % 2051 Senior Notes matured on February 15, 2051, discounted to the redemption date on a semi-annual basis, plus basis points, and plus accrued and unpaid interest. In addition, the Company may optionally redeem the % 2051 Senior Notes at any time on or after February 15, 2051 for % of the principal amount plus accrued and unpaid interest.
3.375% Senior Notes due 2061
In August 2021, the Company completed the registered public offering of $ aggregate principal amount of the % 2061 Senior Notes. The Company may optionally redeem the % 2061 Senior Notes at any time and from time to time prior to February 15, 2061 (six months prior to the maturity date) for a redemption price equal to the greater of (i) % of the principal amount plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the % 2061 Senior Notes being redeemed that would be due if the % 2061 Senior Notes matured on February 15, 2061, discounted to the redemption date on a semi-annual basis, plus basis points, and plus accrued and unpaid interest. In addition, the Company may optionally redeem the % 2061 Senior Notes at any time on or after February 15, 2061 for % of the principal amount plus accrued and unpaid interest.
The holders of the % 2024 Senior Notes, the % 2026 Senior Notes, the % 2029 Senior Notes, the % 2030 Senior Notes, the % 2032 GO Zone Refunding Senior Notes, the % 2041 Senior Notes, the % 2046 Senior Notes, the % 2047 Senior Notes, the % 2051 Senior Notes and the % 2061 Senior Notes may require the Company to repurchase the notes at a price equal to % of their principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the respective indentures governing these notes).
The indenture governing the % 2024 Senior Notes, the % 2026 Senior Notes, the % 2029 Senior Notes, the % 2030 Senior Notes, the % 2032 GO Zone Refunding Senior Notes, the % 2041 Senior Notes, the % 2046 Senior Notes, the % 2047 Senior Notes, the % 2051 Senior Notes, and the % 2061 Senior Notes (together, the "Notes") contains customary events of default and covenants that, among other things and subject to certain exceptions, restrict the Company and certain of the Company's subsidiaries' ability to (1) incur certain secured indebtedness, (2) engage in certain sale and leaseback transactions and (3) consolidate, merge or transfer all or substantially all of its assets. The Notes are unsecured and none of the Company's subsidiaries have guaranteed any series of the Notes.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
As of December 31, 2023, the Company was in compliance with all of its long-term debt covenants.
The weighted average interest rate on all long-term debt was % at December 31, 2023 and 2022. Unamortized debt issuance costs on long-term debt were $ and $ at December 31, 2023 and 2022, respectively.
in 2024, $ in 2026 and $ in 2027. There are no other scheduled maturities of debt in 2024 through 2028.
12.
, $ and $ for the years ended December 31, 2023, 2022 and 2021, respectively.Common Stock
Each share of common stock entitles the holder to vote on all matters on which holders are permitted to vote, including the election of directors. There are no cumulative voting rights. Accordingly, holders of a majority of the total votes entitled to vote in an election of directors will be able to elect all of the directors standing for election. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of the common stock will share equally on a per share basis any dividends when, as and if declared by the Board of Directors out of funds legally available for that purpose. If the Company is liquidated, dissolved or wound up, the holders of the Company's common stock will be entitled to a ratable share of any distribution to stockholders, after satisfaction of all the Company's liabilities and of the prior rights of any outstanding class of the Company's preferred stock. The Company's common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Company's common stock.
Preferred Stock
The Company's charter authorizes the issuance of shares of preferred stock. The Company's Board of Directors has the authority, without shareholder approval, to issue preferred shares from time to time in one or more series, and to fix the number of shares and terms of each such series. The Board may determine the designations and other terms of each series including dividend rates, whether dividends will be cumulative or non-cumulative, redemption rights, liquidation rights, sinking fund provisions, conversion or exchange rights and voting rights.
Stock Repurchase Program
In November 2014, the Company's Board of Directors approved a $ share repurchase program (the "2014 Program"). In November 2015, the Company's Board of Directors approved the expansion of the 2014 Program by an additional $. In August 2018, the Company's Board of Directors approved the expansion of the 2014 Program by an additional $. In August 2022, the Company's Board of Directors approved the further expansion of the existing 2014 Program by an additional $. The number of shares repurchased by the Company under the 2014 Program was , and for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, the Company had repurchased a total of shares of its common stock for an aggregate purchase price of approximately $.
Any shares repurchased under the 2014 Program are held by the Company as treasury stock and may be used for general corporate purposes, including for the 2013 Omnibus Incentive Plan. In 2014, the Company began delivering treasury shares to employees and non-employee directors for options exercised, for the settlement of restricted stock units and for the settlement of performance stock units. The cost of treasury shares delivered is determined using the specific identification method.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
13.
| | $ | () | | | $ | () | |
| |
| |
Net other comprehensive income (loss) attributable to Westlake Corporation | | | | | () | | | () | |
| Balances at December 31, 2022 | | | | | () | | | () | |
| |
| |
Net other comprehensive income (loss) attributable to Westlake Corporation | | () | | | | | | () | |
| Balances at December 31, 2023 | | $ | | | | $ | () | | | $ | () | |
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
14.
% of their annual eligible compensation, subject to an annual plan limit in line with the annual elective contribution limit as determined by the Internal Revenue Service. The Company matches its employee's contribution up to a certain percentage of such employee's compensation, per the terms of the plan. The Company may, at its discretion and per the terms of the plan, make an additional non-matching contribution in an amount as the Board of Directors may determine. For the years ended December 31, 2023, 2022 and 2021, the Company recorded approximately $, $ and $, respectively, to expense for these contributions. Further, within the plan, the Company also makes an annual retirement contribution to substantially all employees of certain subsidiaries. The Company's contributions to the plan are determined as a percentage of employees' pay. For the years ended December 31, 2023, 2022 and 2021, the Company charged approximately $, $ and $, respectively, to expense for these contributions.
Non-U.S. Plans
The Company has defined contribution plans in several countries covering eligible employees of the Company. The Company's contributions to the plans are based on applicable laws in each country and eligibility of employees of certain subsidiaries for the annual retirement contribution. Contributions to the Company's non-U.S. defined contribution plans are made by both the employee and the Company. For the years ended December 31, 2023, 2022 and 2021, the Company charged approximately $, $ and $, respectively, to expense for its contributions to these plans. For the years ended December 31, 2023, 2022 and 2021, the Company charged an additional $, $ and $, respectively, to expense related to the annual retirement contributions to these plans.
Defined Benefit Plans
U.S. Plans
The Company has noncontributory defined benefit pension plans that cover certain eligible salaried and wage employees of certain subsidiaries. However, eligibility for the Company's plans has been frozen. Benefits for salaried employees under these plans are based primarily on years of service and employees' pay near retirement. Benefits for wage employees are based upon years of service and a fixed amount as periodically adjusted. The Company recognizes the years of service prior to the Company's acquisition of the subsidiary's facilities for purposes of determining vesting, eligibility and benefit levels for certain employees of the subsidiary and for determining vesting and eligibility for certain other employees of the subsidiary. The measurement date for these plans is December 31.
Non-U.S. Plans
The Company has defined benefit pension plans covering current and former employees associated with the Company's operations. In conjunction with the Westlake Epoxy acquisition on February 1, 2022, as disclosed in Note 2, the Company assumed certain defined benefit pension plans that are incorporated in the information disclosed. Several non-U.S. pension plans are unfunded and have no plan assets. These pension plans are closed to new participants. Benefits for employees for these plans are based primarily on employees' pay near retirement. The measurement date for the non-U.S. plans is December 31.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
| | $ | | | | $ | | | | $ | | | | Benefit obligation assumed with acquisition | | | | | | | | | | | | |
| Service cost | | | | | | | | | | | | |
| Interest cost | | | | | | | | | | | | |
| Actuarial loss (gain) | | () | | | | | | () | | | () | |
| Benefits paid | | () | | | () | | | () | | | () | |
|
| Settlements | | | | | () | | | | | | () | |
| Foreign exchange effects | | | | | | | | | | | () | |
|
| Benefit obligation, end of year | | $ | | | | $ | | | | $ | | | | $ | | |
| | | | | | | | |
| Change in plan assets | | | | | | | | |
| Fair value of plan assets, beginning of year | | $ | | | | $ | | | | $ | | | | $ | | |
| Plan assets assumed with acquisition | | | | | | | | | | | | |
| Actual return | | | | | | | | () | | | () | |
| Employer contribution | | | | | | | | | | | | |
| Benefits paid | | () | | | () | | | () | | | () | |
| Administrative expenses paid | | () | | | | | | () | | | | |
| Settlements | | | | | () | | | | | | () | |
| Foreign exchange effects | | | | | | | | | | | () | |
| Fair value of plan assets, end of year | | $ | | | | $ | | | | $ | | | | $ | | |
| Funded status, end of year | | $ | () | | | $ | () | | | $ | () | | | $ | () | |
The actuarial loss (gain) in the benefit obligation for the periods presented is primarily driven by discount rate assumption changes.
| | $ | | | | $ | | | | $ | | | | Current liabilities | | () | | | () | | | () | | | () | |
| Noncurrent liabilities | | () | | | () | | | () | | | () | |
| Net amount recognized | | $ | () | | | $ | () | | | $ | () | | | $ | () | |
) | | $ | | | | $ | () | | | $ | () | | | Prior service credit | | () | | | () | | | () | | | () | |
|
Total before tax (1) | | $ | () | | | $ | | | | $ | () | | | $ | () | |
______________________________
(1)After-tax totals for pension benefits were a loss of $ and a gain of $ for 2023 and 2022, respectively, and are reflected in stockholders' equity as accumulated other comprehensive income (loss).
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
| | $ | () | | | $ | () | | | $ | () | | | Accumulated benefit obligation | | () | | | () | | | () | | | () | |
| Fair value of plan assets | | | | | | | | | | | | |
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | Administrative expenses | | | | | | | | | | | | | | | | | | |
| Interest cost | | | | | | | | | | | | | | | | | | |
| Expected return on plan assets | | () | | | () | | | () | | | () | | | () | | | () | |
| Net amortization | | () | | | () | | | | | | | | | | | | | |
| | | |
|
|
|
|
|
|
| | | | | | | | |
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 |
| | U.S. Plans | | Non-U.S. Plans |
| | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
| Cash and common stock: | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
| | | | | | | |
Collective investment trust and mutual funds—Equity securities: | | | | | | | | | | | | | | | | |
Large-cap funds (1) | | | | | | | | | | | | | | | | | | | | | | | | |
Small-cap funds (2) | | | | | | | | | | | | | | | | | | | | | | | | |
International funds (3) | | | | | | | | | | | | | | | | | | | | | | | | |
Collective investment trust and mutual funds—Fixed income: | | | | | | | | | | | | | | | | |
Bond funds (4) | | | | | | | | | | | | | | | | | | | | | | | | |
| Short-term investment funds | | | | | | | | | | | | | | | | | | | | | | | | |
| Group insurance contract | | | | | | | | | | | | | | | | | | | | | | | | |
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
______________________________
(1)Substantially all of the assets of these funds are invested in large-cap U.S. companies. The remainder of the assets of these funds is invested in cash reserves.
(2)Substantially all of the assets of these funds are invested in small-cap U.S. companies. The remainder of the assets of these funds is invested in cash reserves.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
The Company's funding policy for its U.S. plans is consistent with the minimum funding requirements of federal law and regulations. Based on preliminary estimates, the Company expects to make contributions of approximately $ and $ for the U.S. and Non-U.S. pension plans, respectively, in 2024.
Multi-employer Plans
Non-U.S. Plans
The Company participates in multi-employer plans, Pensionskasse der Mitarbeiter der Hoechst-Gruppe VVaG and Pensionskasse der Wacker-Chemie GmbH VVaG, which provide benefits to certain of the Company's employees in Germany. These multi-employer plans are closed to new participants. The plans provide fixed, monthly retirement payments on the basis of the credits earned by the participating employees. To the extent that the plans are underfunded, future contributions to the plans may increase and may be used to fund retirement benefits for employees related to other employers. The benefit obligations are covered up to a certain salary threshold by contributions made by the Company and employees to the plans. Contributions to the Company's multi-employer plans are expensed as incurred.
Other Post-retirement Benefits
In the U.S., the Company provides post-retirement healthcare and life insurance benefits for certain employees and their dependents who meet minimum age and service requirements. The Company has the right to modify or terminate some of these benefits. The Company has a post-retirement plan in Canada which is unfunded and provides medical and life insurance benefits for certain employees and their dependents. The Company also has an unfunded post-retirement benefit plan in the Netherlands.
) | | $ | () | | | $ | () | | | $ | () | |
| Noncurrent liabilities | | () | | | () | | | () | | | () | |
| Net amount recognized | | $ | () | | | $ | () | | | $ | () | | | $ | () | |
Estimated Future Benefit Payments
| | $ | | | | Year 2 | | | | | | |
| Year 3 | | | | | | |
| Year 4 | | | | | | |
| Year 5 | | | | | | |
| Years 6 to 10 | | | | | | |
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
15.
term and vest (1) ratably on an annual basis over a period or (2) at the end of a period. Outstanding restricted stock units and performance stock units vest either (1) ratably on an annual basis over a one to period or (2) at the end of a three or period. In accordance with accounting guidance related to share-based payments, stock-based compensation expense for all stock-based compensation awards is based on estimated grant-date fair value. The Company recognizes these stock-based compensation costs net of a forfeiture rate and on a straight-line basis over the requisite service period of the award for only those shares expected to vest. For the years ended December 31, 2023, 2022 and 2021, the total recognized stock-based compensation expense related to equity awards issued under the 2013 Plan was $, $ and $, respectively. | | $ | | | | | | | | Granted | | | | | | | | | | |
| Exercised | | () | | | | | | | | |
| Cancelled | | () | | | | | | | | |
| Outstanding at December 31, 2023 | | | | | $ | | | | | | $ | | |
| Exercisable at December 31, 2023 | | | | | $ | | | | | | $ | | |
- $ | | | | | $ - $ | | | | | |
$ - $ | | | | | |
$ - $ | | | | | |
$ - $ | | | | | |
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company's closing stock price on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2023. This amount changes based on the fair market value of the Company's common stock. For the years ended December 31, 2023, 2022 and 2021, the total intrinsic value of options exercised was $, $ and $, respectively.
As of December 31, 2023, $ of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of years. Income tax benefits of $, $ and $ were realized from the exercise of stock options during the years ended December 31, 2023, 2022 and 2021, respectively.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
| | $ | | | | $ | | | | Risk-free interest rate | | | % | | | % | | | % |
| Expected life in years | | | | | | |
| Expected volatility | | | % | | | % | | | % |
| Expected dividend yield | | | % | | | % | | | % |
| | $ | | | | Granted | | | | | | |
| Vested | | () | | | | |
| Forfeited | | () | | | | |
| Non-vested at December 31, 2023 | | | | | $ | | |
As of December 31, 2023, there was $ of unrecognized stock-based compensation expense related to non-vested restricted stock units. This cost is expected to be recognized over a weighted-average period of years. The total fair value of restricted stock units that vested during the years ended December 31, 2023, 2022 and 2021 was $, $ and $, respectively.
Performance stock unit payout is based on the greater of the average annual economic-value added results for the Company (equal to net operating profit after tax less a capital charge based upon the weighted average cost of capital) and relative total shareholder return as compared to a peer group of companies. The units have payouts that range from zero to 200 percent of the target award.
| | $ | | | | Granted | | | | | | |
| Vested | | () | | | | |
| Forfeited | | () | | | | |
| Non-vested at December 31, 2023 | | | | | $ | | |
As of December 31, 2023, there was $ of unrecognized stock-based compensation expense related to non-vested performance stock units. This cost is expected to be recognized over a weighted-average period of years. The total fair value of performance stock units that vested during the years ended December 31, 2023, 2022 and 2021 was $, $ and $, respectively.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
% | | | % | | | % | | Expected life in years | | | | | | |
| Expected volatility of Westlake Corporation common stock | | | % | | | % | | | % |
| Expected volatility of peer companies | | % - % | | % - % | | % - % |
| Average correlation coefficient of peer companies | | | | | | |
| Grant date fair value | | $ | | | | $ | | | | $ | | |
Westlake Chemical Partners LP Awards
The Company's wholly-owned subsidiary and the general partner of Westlake Partners, Westlake Chemical Partners GP LLC ("Westlake Partners GP"), maintains a unit-based compensation plan for directors and employees of Westlake Partners GP and Westlake Partners.
The Westlake Partners 2014 Long-term Incentive Plan ("Westlake Partners 2014 Plan") permits various types of equity awards including but not limited to grants of phantom units and restricted units. Awards granted under the Westlake Partners 2014 Plan may be settled with Westlake Partners units or in cash or a combination thereof. Compensation expense for these awards was not material to the Company's consolidated financial statements for the years ended December 31, 2023, 2022 and 2021.
16.
| | $ | | | | $ | | | | $ | | |
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
17.
| | $ | | | | $ | | | | Foreign | | () | | | | | | | |
| | $ | | | | $ | | | | $ | | |
| | $ | | | | $ | | | | State | | | | | | | | | |
| Foreign | | | | | | | | | |
Total current | | | | | | | | | |
| Deferred | | | | | | |
| Federal | | () | | | () | | | | |
| State | | () | | | () | | | | |
| Foreign | | () | | | () | | | () | |
Total deferred | | () | | | () | | | | |
| Total provision for (benefit from) income taxes | | $ | | | | $ | | | | $ | | |
| | $ | | | | $ | | | | State income tax provision, net of federal income tax effect | | | | | | | | | |
| Foreign income tax rate differential | | () | | | | | | | |
| |
| |
| Noncontrolling interests | | () | | | () | | | () | |
| |
| Change in valuation allowance | | | | | | | | () | |
| |
| U.S. federal research and development credits | | () | | | () | | | () | |
Uncertain Income Tax Positions | | 14 | | | 6 | | | 2 | |
Goodwill impairment | | | | | | | | | |
| Other, net | | () | | | () | | | | |
Total income tax expense (benefit) | | $ | | | | $ | | | | $ | | |
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
| | $ | | | | Credit carryforward | | | | | | |
| Operating lease liabilities | | | | | | |
| Accruals | | | | | | |
| Pension | | | | | | |
|
| Inventories | | | | | | |
| Research and experimental expenditures | | | | | | |
| Other | | | | | | |
| Deferred taxes assets—total | | | | | | |
| Property, plant and equipment | | () | | | () | |
| Intangibles | | () | | | () | |
| Operating lease right-of-use asset | | () | | | () | |
| Turnaround costs | | () | | | () | |
| Consolidated partnerships | | () | | | () | |
| Equity method investments | | () | | | () | |
| Other | | () | | | () | |
| Deferred tax liabilities—total | | () | | | () | |
| Valuation allowance | | () | | | () | |
| Total net deferred tax liabilities | | $ | () | | | $ | () | |
| | | | |
| Balance sheet classifications | | | | |
|
| Noncurrent deferred tax asset | | $ | | | | $ | | |
| Noncurrent deferred tax liability | | () | | | () | |
| Total net deferred tax liabilities | | $ | () | | | $ | () | |
At December 31, 2023, the Company had federal, foreign and state net operating loss carryforwards ("NOLs") of approximately $, $ and $, respectively. The federal NOL and certain foreign and state NOLs do not expire, while certain other foreign and state NOLs expire in varying amounts between 2024 and 2043. The federal NOL and certain state NOLs are subject to limitations on an annual basis. At December 31, 2023, the Company had various federal and state credit carryforwards of $ and $, respectively, which either do not expire or expire in varying amounts between 2028 and 2033. Management believes the Company will realize the benefit of a portion of the net operating loss and credit carryforwards before they expire, but to the extent that the full benefit may not be realized, a valuation allowance has been recorded. The valuation allowance increased by $ primarily due to the impairment of long-lived assets of Westlake Epoxy's base resin business in the Netherlands, which generated deferred tax assets including net operating loss carryforwards that are not expected to be realized.
The Company has recognized a liability for uncertain income tax positions of $ as of December 31, 2023. The Company does not believe it is likely that any material amounts will be paid in 2024. The ultimate resolution and timing of payment for remaining matters continues to be uncertain.
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 2014.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
The impacts of Pillar Two, if any, will begin to be recorded in 2024 as the rules become effective.
18.
| | $ | | | | $ | | | | Less: | | | | | | |
| Net income attributable to participating securities | | | | | | | | | |
| Net income attributable to common shareholders | | $ | | | | $ | | | | $ | | |
| | | | | | | | Plus incremental shares from: | | | | | | |
| Assumed exercise of options and vesting of performance stock units | | | | | | | | | |
| Weighted average common shares—diluted | | | | | | | | | |
| | | | | | |
| Earnings per common share attributable to Westlake Corporation: | | | | | | |
| Basic | | $ | | | | $ | | | | $ | | |
| Diluted | | $ | | | | $ | | | | $ | | |
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
| | $ | | | | $ | | | 19.
and $ at December 31, 2023 and 2022, respectively. Deferred turnaround costs, net of accumulated amortization, included in other assets, net were $ and $ at December 31, 2023 and 2022, respectively.Accrued and Other Liabilities
Accrued and other liabilities were $ and $ at December 31, 2023 and 2022, respectively. Accrued rebates and accrued litigation reserves, which are components of accrued and other liabilities, were $ and $ at December 31, 2023 and $ and $ at December 31, 2022, respectively. No other component of accrued and other liabilities was more than five percent of total current liabilities. Accrued liabilities with related parties were $ and $ at December 31, 2023 and 2022, respectively.
Non-cash Investing Activity
Capital expenditure related liabilities, included in accounts payable and accrued and other liabilities, were $, $, and $ at December 31, 2023, 2022, and 2021, respectively.
Restructuring, Transaction and Integration-related Costs
For the years ended December 31, 2023, 2022 and 2021, the restructuring, transaction and integration-related costs of $, $ and $, respectively. The costs in 2023 are restructuring and integration costs primarily related to plant closures resulting from the Company's manufacturing footprint optimization efforts. The 2022 and 2021 expenses primarily consist of integration-related consulting fees, restructuring expenses and costs associated with the Company's acquisitions in previous years.
Other Income, Net
For the year ended December 31, 2023, other income, net included interest income, insurance recoveries and income from unconsolidated subsidiaries of $, $ and $, respectively. For the year ended December 31, 2022, other income, net included interest income, income from pension and post-retirement plans and income from unconsolidated subsidiaries of $, $ and $, respectively. For the year ended December 31, 2021, other income, net included interest income, income from pension and post-retirement plans and income from unconsolidated subsidiaries of $, $ and $, respectively.
| | $ | | | | $ | | | | Right-of-use assets obtained in exchange for operating lease obligations | | | | | | | | | |
______________________________
(1) Includes cash paid for amounts included in the measurement of operating lease liabilities recorded in the consolidated balance sheets.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
| | $ | | | | $ | | | Income taxes paid | | | | | | | | | |
20.
billion pounds per year of ethylene production capacity. See Note 9 for details of the Company's transactions with LACC.The Company leases office space for management and administrative services from an affiliate of the Company's principal stockholder. For each of the years ended December 31, 2023, 2022 and 2021, the Company incurred lease payments of approximately $.
Cypress Interstate Pipeline L.L.C., a natural gas liquids pipeline joint venture in which the Company owns a % equity interest, transports natural gas liquid feedstocks to the Company's Lake Charles complex through its pipeline. The Company accounts for its investments in Cypress Interstate Pipeline L.L.C. under the equity method of accounting. The investment in Cypress Interstate Pipeline L.L.C. at December 31, 2023 and 2022 was $ and $, respectively. For the years ended December 31, 2023, 2022 and 2021, the Company incurred pipeline lease service fees of approximately $, $ and $, respectively, payable to this joint venture for usage of the pipeline. The amounts due to this joint venture were $ at December 31, 2023 and 2022.
The Company owns an approximately % equity interest in both YNCORIS GmbH & Co. KG (formerly known as InfraServ Knapsack GmbH & Co. KG) and InfraServ Gendorf GmbH & Co. KG (collectively "Infraserv"). The Company accounts for its investments in Infraserv under the equity method of accounting. The Company has service agreements with these entities, including contracts to provide electricity, technical and leasing services to certain of the Company's production facilities in Germany. The investment in Infraserv was $ and $ at December 31, 2023 and 2022, respectively. For the years ended December 31, 2023, 2022 and 2021, the Company incurred charges aggregating approximately $, $ and $, respectively, for these services. The amounts accrued for these related parties were approximately and $ at December 31, 2023 and 2022, respectively.
In conjunction with the Westlake Epoxy acquisition, the Company acquired % equity interest in Westlake UV Coatings (Shanghai) Co., Ltd. (formerly known as Hexion UV Coatings Co., LTD). The investment in Westlake UV Coatings (Shanghai) Co., Ltd. was $ at December 31, 2023. The Company accounts for its investments in Westlake UV Coatings (Shanghai) Co., Ltd. under the equity method of accounting.
Dividends received from equity method investments were $, $ and $ for the years ended December 31, 2023, 2022 and 2021, respectively.
One of the Company's directors serves as Chairman and Chief Executive Officer of American Air Liquide, Inc. and Executive Vice President of the Air Liquide Group ("Air Liquide"). The Company purchased oxygen, nitrogen and utilities and leased cylinders from various affiliates of American Air Liquide, Inc. aggregating approximately $, $ and $ for the years ended December 31, 2023, 2022 and 2021, respectively. The Company also sold certain utilities to Air Liquide aggregating approximately $, $ and $ during the years ended December 31, 2023, 2022 and 2021, respectively. The amounts payable to Air Liquide were $ and $ at December 31, 2023 and 2022, respectively, and the amounts receivable from Air Liquide were $ and $ at December 31, 2023 and 2022, respectively.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
21.
common units. Most recently, on March 29, 2019, Westlake Partners purchased an additional % newly issued limited partner interests in OpCo and completed a private placement of common units. TTWF LP, the Company's principal stockholder and a related party, acquired units out of the common units issued in the private placement. At December 31, 2023, Westlake Partners had a % limited partner interest in OpCo, and the Company retained a % limited partner interest in OpCo and a significant interest in Westlake Partners through the Company's ownership of Westlake Partners' general partner, % of the limited partner interests (consisting of common units) and incentive distribution rights.On October 4, 2018, Westlake Partners and Westlake Partners GP, the general partner of Westlake Partners, entered into an Equity Distribution Agreement with UBS Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBC Capital Markets, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC to offer and sell Westlake Partners' common units, from time to time, up to an aggregate offering amount of $. This Equity Distribution Agreement was amended on February 28, 2020 to reference a new shelf registration for utilization under this agreement. No common units had been issued under this program as of December 31, 2023.
22.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
Ethylene Antitrust. The Company and other ethylene consumers were named as defendants in a civil lawsuit filed by Shell Chemical Europe B.V. ("SCE") in March 2023 in the District Court of Amsterdam, the Netherlands, following the European Commission Decision AT.40410 – Ethylene from July 14, 2020. SCE is a producer of ethylene in the European market and the lawsuit alleges the defendants conspired to lower the purchase price for ethylene and ethylene derivatives by manipulating the monthly contract price. SCE initially sought declaratory relief. In October 2023, SCE amended its claim and is now seeking a judgment establishing that the Company and the co-defendants are jointly and severally liable for alleged damages in the amount of approximately € million with interest compounding daily from January 1, 2020 and continuing until payment in full, as provided by Dutch law, resulting from artificially lowered prices for ethylene and ethylene derivatives during the specified period. SCE is also seeking reimbursement of costs related to the proceeding plus statutory interest. The Company and other ethylene consumers were also named as defendants in a civil lawsuit filed by Stichting Ethylene Claims ("Stichting") in November 2023 in the District Court of Amsterdam, the Netherlands, following the same European Commission decision. Stichting is a foundation under Dutch Law that claims to represent various parties asserting injury by the same alleged conduct of defendants, seeking a declaratory judgment establishing that the Company and other defendants are jointly and severally liable for an unspecified amount of damages. At this time, the Company is not able to estimate the impact, if any, that the SCE lawsuit and/or the Stichting lawsuit could have on the Company's consolidated financial statements either in the current period or in future periods.
Triad Hunter. In April 2018, Triad Hunter, LLC ("Triad Hunter") filed suit against the Company and certain of its subsidiaries in the Court of Common Pleas in Monroe County, Ohio seeking injunctive relief and alleging negligence and trespass at the Natrium Plant with respect to Triad Hunter's well drilling activities in Ohio. On October 27, 2022, the jury returned a verdict finding that the Company had committed trespass and was negligent in conducting salt mining operations at the Natrium Plant. Upon receipt of the jury verdict, the Company reserved approximately $ for the damages awarded to Triad Hunter. The court subsequently denied Triad Hunter's request to enjoin further solution mining from one of the brine fields at the Natrium Plant. On September 12, 2023, final judgment was entered in the amount of $ with interest accruing at the rate of 5% from the date the judgment was rendered, as provided by law. The Company appealed the verdict and sought a stay of execution pending appeal on October 30, 2023.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
Environmental Contingencies. As of December 31, 2023 and 2022, the Company had reserves for environmental contingencies totaling approximately $ and $, respectively, most of which was classified as noncurrent liabilities. The Company's assessment of the potential impact of these environmental contingencies is subject to considerable uncertainty due to the complex, ongoing and evolving process of investigation and remediation, if necessary, of such environmental contingencies, and the potential for technological and regulatory developments.
Calvert City Proceedings. For several years, the Environmental Protection Agency (the "EPA") has been conducting remedial investigation and feasibility studies at the Company's Calvert City, Kentucky facility pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"). As the current owner of the Calvert City facility, the Company was named by the EPA as a potentially responsible party ("PRP") along with Goodrich Corporation ("Goodrich") and its successor-in-interest, Avient Corporation (formerly known as PolyOne Corporation, "Avient"). On November 30, 2017, the EPA published a draft Proposed Plan, incorporating by reference an August 2015 draft Remedial Investigation ("RI") report, an October 2017 draft Feasibility Study ("FS") report and a Technical Impracticability Waiver document dated December 19, 2017. On June 18, 2018, the EPA published an amendment to its Proposed Plan. The amended Proposed Plan describes a final remedy for the onshore portion of the site comprised of a containment wall, targeted treatment and supplemental hydraulic containment. The amended Proposed Plan also describes an interim approach to address the contamination under the river that would include recovery of any mobile contaminants by an extraction well along with further study of the extent of the contamination and potential treatment options. The EPA's estimated cost of implementation is $, with an estimated $ to $ in annual operation and maintenance ("O&M") costs. In September 2018, the EPA published the Record of Decision ("ROD") for the site, formally selecting the preferred final and interim remedies outlined in the amended Proposed Plan. In October 2018, the EPA issued Special Notice letters to the PRPs for the remedial design phase of work under the ROD. In April 2019, the PRPs and the EPA entered into an administrative settlement agreement and order on consent for remedial design. In October 2019, the PRPs received special notice letters for the remedial action phase of work at the site. The Company, jointly with the other PRPs, submitted a good faith offer response in December 2019. On September 17, 2020, the EPA and the Department of Justice filed a proposed consent decree for the remedial action with the U.S. District Court for the Western District of Kentucky. On November 16, 2020, the Department of Justice filed a motion to approve and enter the consent decree. On January 28, 2021, the Court granted the unopposed motion to enter the consent decree, which became effective the same day. The Company's allocation of liability for remedial and O&M costs at the Calvert City site, if any, is governed by a series of agreements between the Company, Goodrich and Avient. These agreements and the associated litigation are described below.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
On July 10, 2018, Avient sued the Company in the U.S. District Court for the Western District of Kentucky and sought to invalidate the arbitration provisions in the parties' 2007 settlement agreement and enjoin the arbitration it had initiated in 2017. On July 30, 2018, the district court refused to enjoin the arbitration and, on January 15, 2019, the court granted the Company's motion to dismiss Avient's suit. On February 13, 2019, Avient appealed those decisions to the U.S. Court of Appeals for the Sixth Circuit. The court of appeals issued an opinion and final order on September 6, 2019, affirming the district court.
The arbitration hearing began in August 2018 and concluded in December 2018. On May 22, 2019, the arbitration panel issued its final award. It determined that Avient was responsible for % of the allocable costs at issue in the proceeding and that Avient would remain responsible for % of the costs to operate the existing groundwater remedy at the Calvert City site. In August 2019, Avient filed a motion to vacate before the U.S. District Court for the Western District of Kentucky, seeking to invalidate the final award under the Federal Arbitration Act. On February 11, 2020, the U.S. District Court for the Western District of Kentucky denied Avient's motion to vacate and affirmed the arbitration final award. Avient did not file a notice of appeal before the March 10, 2020 deadline to contest the court's decision. Accordingly, the final award was affirmed, and the arbitration proceeding is fully and finally resolved.
In March 2022, the Company filed a demand for arbitration seeking reimbursement for certain allocable costs incurred during the applicable period since May 2017, and which Avient has failed to pay or disputed as not subject to indemnity under the 1990 and 1997 agreements. In April 2022, Avient filed a complaint in the federal district court for the Western District of Kentucky disputing the enforceability of the 2007 settlement agreement and seeking to enjoin arbitration. Avient claims that the allocable costs at issue are up to $, for which Avient claims the Company is totally liable. On September 30, 2023, the court issued an order denying without prejudice the parties' cross motions for summary judgment and set a 30-day deadline for the parties to refile and provide additional briefing on specific aspects of the arguments before the court. The parties each refiled and provided additional briefing by the deadline and the motions are pending before the court. The Company disputes these claims and at this time, the Company believes it is unlikely that any remediation costs allocable to it would result in material expenditures in any individual reporting period.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
Environmental Remediation: Reasonably Possible Matters. The Company's assessment of the potential impact of environmental contingencies is subject to considerable uncertainty due to the complex, ongoing and evolving process of investigation and remediation, if necessary, of such environmental contingencies, and the potential for technological and regulatory developments. As such, in addition to the amounts currently reserved, the Company may be subject to reasonably possible loss contingencies related to environmental matters in the range of $ to $.
Other Commitments
, which included approximately $ in 2024, $ in 2025, $ in 2026, $ in 2027, $ in 2028, and $ thereafter.
23.
principal operating segments, Performance and Essential Materials and Housing and Infrastructure Products. These segments are strategic business units that offer a variety of different materials and products. The Company manages each segment separately as each business requires different technology and marketing strategies. The Company's Performance and Essential Materials segment manufactures and markets polyethylene, styrene monomer, ethylene co-products, PVC, VCM, ethylene dichloride ("EDC"), chlor-alkali (chlorine and caustic soda), chlorinated derivative products and epoxy resins. The Company's ethylene production is used in the Company's polyethylene, styrene and VCM operations. In addition, the Company sells ethylene and ethylene co-products, primarily propylene, crude butadiene, pyrolysis gasoline and hydrogen, to external customers. The Company's primary North American manufacturing facilities are located in its Calvert City, Kentucky; Lake Charles, Plaquemine and Geismar, Louisiana; Longview and Deer Park, Texas; Lakeland, Florida and Argo, Illinois sites. The Company's primary European facilities are located in Germany and the Netherlands. The Company produces ethylene and polyethylene at its facilities in Lake Charles, Louisiana; Calvert City, Kentucky and Longview, Texas. The Company produces chlorine, caustic soda, VCM, EDC, PVC, hydrogen and chlorinated derivative materials at its facilities in Lake Charles, Plaquemine and Geismar, Louisiana; Calvert City, Kentucky; Natrium, West Virginia; Longview, Washington; Beauharnois, Quebec; Aberdeen, Mississippi and in Germany. Epoxy resins primarily comprise of Epoxy Specialty Resins and Base Epoxy Resins and Intermediaries. Epoxy Specialty Resins are produced at manufacturing facilities in Duisburg and Esslingen in Germany; Argo and Lakeland in the United States; one plant in Spain and one plant in South Korea. Base Epoxy Resins and Intermediaries are produced at Company's facilities plants in Pernis, the Netherlands and Deer Park, United States. In addition, the Company also has other manufacturing facilities and product development facilities in North America, Europe and Asia.
single customer accounted for more than 10% of sales in the Performance and Essential Materials segment for the years ended December 31, 2023, 2022 or 2021.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
single customer accounted for more than 10% of sales in the Housing and Infrastructure Products segment for the years ended December 31, 2023, 2022 or 2021.
The accounting policies of the individual segments are the same as those described in Note 1.
WESTLAKE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in millions of dollars, except share amounts and per share data)
| | $ | | | | $ | | | | Essential Materials | | | | | | | | | |
| |
| Total Performance and Essential Materials | | | | | | | | | |
| Housing and Infrastructure Products | | | | | | |
| Housing Products | | | | | | | | | |
| Infrastructure Products | | | | | | | | | |
| Total Housing and Infrastructure Products | | | | | | | | | |
| |
|
|
|
|
|
|
|
|
|
| | | | | | | | |
| Exhibit No. | | Exhibit Index |
| | |
10.16+ | | |
| | |
10.17+ | | |
| | |
10.18+ | | |
| | |
10.19+† | | |
| | |
10.20+† | | |
| | |
| 21† | | |
| | |
| 23.1† | | |
| | |
| 31.1† | | |
| | |
| 31.2† | | |
| | |
| 32.1†† | | |
| | |
97† | | |
| | |
| 101.INS† | | XBRL Instance Document-The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL 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. |
| | |
| 104 | | Cover Page Interactive Data File-The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document and contained in Exhibit 101. |
______________________________
† Filed herewith.
†† Furnished herewith.
+ Management contract, compensatory plan or arrangement.
* On February 18, 2022, Westlake Chemical Corporation changed its corporate name to Westlake Corporation. Accordingly, filings made prior to such date were made under the name Westlake Chemical Corporation.
Item 16. Form 10-K Summary.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 CORPORATION |
| | | |
| Date: | February 21, 2024 | | /S/ ALBERT CHAO |
| | | Albert Chao, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | |
/S/ ALBERT CHAO | | President, Chief Executive Officer and Director
(Principal Executive Officer) | | February 21, 2024 |
| Albert Chao | |
| | |
/S/ M. STEVEN BENDER | | Executive Vice President and Chief Financial
Officer (Principal Financial Officer) | | February 21, 2024 |
| M. Steven Bender | |
| | |
/S/ JOHNATHAN S. ZOELLER | | Vice President and Chief Accounting Officer
(Principal Accounting Officer) | | February 21, 2024 |
| Johnathan S. Zoeller | |
| | |
/S/ JAMES CHAO | | Chairman of the Board of Directors | | February 21, 2024 |
| James Chao | |
| | |
/S/ CATHERINE T. CHAO | | Director | | February 21, 2024 |
Catherine T. Chao | |
| | | | |
/S/ DAVID T. CHAO | | Director | | February 21, 2024 |
| David T. Chao | |
| | |
/S/ JOHN T. CHAO | | Director | | February 21, 2024 |
| John T. Chao | |
| | | | |
/S/ MICHAEL J. GRAFF | | Director | | February 21, 2024 |
| Michael J. Graff | |
| | |
/S/ MARIUS A. HAAS | | Director | | February 21, 2024 |
| Marius A. Haas | |
| | | | |
/S/ KIMBERLY S. LUBEL | | Director | | February 21, 2024 |
| Kimberly S. Lubel | |
| | |
/S/ MARK A. MCCOLLUM | | Director | | February 21, 2024 |
| Mark A. McCollum | |
| | |
/S/ R. BRUCE NORTHCUTT | | Director | | February 21, 2024 |
| R. Bruce Northcutt | |
| | | | |
/S/ CAROLYN C. SABAT | | Director | | February 21, 2024 |
Carolyn C. Sabat | |
| | | | |
/S/ JEFFREY W. SHEETS | | Director | | February 21, 2024 |
| Jeffrey W. Sheets | |
Similar companies
See also INTERNATIONAL FLAVORS & FRAGRANCES INC -
Annual report 2022 (10-K 2022-12-31)
Annual report 2023 (10-Q 2023-09-30)
See also LyondellBasell Industries N.V. -
Annual report 2022 (10-K 2022-12-31)
Annual report 2023 (10-Q 2023-09-30)
See also BRASKEM SA
See also SENSIENT TECHNOLOGIES CORP -
Annual report 2022 (10-K 2022-12-31)
Annual report 2023 (10-Q 2023-09-30)
See also NEWMARKET CORP -
Annual report 2022 (10-K 2022-12-31)
Annual report 2023 (10-Q 2023-09-30)
Open main menu