2013.03.31 10Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
 
Form 10-Q
 
 
 
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2013
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from                    to                    
Commission File No. 001-32260
 
 
 
 
 
Westlake Chemical Corporation
(Exact name of Registrant as specified in its charter)
 
 
 
 
 

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

x
  
Accelerated filer
 
¨
Non-accelerated filer

¨  (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)     Yes   ¨     No   x
The number of shares outstanding of the registrant's sole class of common stock as of April 30, 2013 was 66,777,348.



INDEX
 
 
 
Item
Page
 
 
 
 


Table of Contents


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
March 31,
2013
 
December 31,
2012
 
 
(in thousands of dollars, except
par values and share amounts)
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
777,887

 
$
790,078

Marketable securities
 
94,903

 
124,873

Accounts receivable, net
 
407,580

 
400,159

Inventories
 
408,074

 
399,298

Prepaid expenses and other current assets
 
14,536

 
14,700

Deferred income taxes
 
22,298

 
22,305

Total current assets
 
1,725,278

 
1,751,413

Property, plant and equipment, net
 
1,629,309

 
1,510,048

Equity investments
 
43,914

 
43,736

Other assets, net
 


 


Intangible assets, net
 
48,108

 
48,292

Deferred charges and other assets, net
 
112,616

 
58,707

Total other assets, net
 
160,724

 
106,999

Total assets
 
$
3,559,225

 
$
3,412,196

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
232,061

 
$
217,050

Accrued liabilities
 
167,754

 
181,460

Total current liabilities
 
399,815

 
398,510

Long-term debt
 
763,790

 
763,761

Deferred income taxes
 
355,975

 
326,290

Other liabilities
 
49,854

 
51,379

Total liabilities
 
1,569,434

 
1,539,940

Commitments and contingencies (Notes 7 and 15)
 


 


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

 

Common stock, $0.01 par value, 150,000,000 shares authorized;
   67,232,590 and 67,187,224 shares issued at March 31, 2013
   and December 31, 2012, respectively
 
672

 
672

Common stock, held in treasury, at cost; 284,493 shares
   at March 31, 2013 and December 31, 2012
 
(13,302
)
 
(13,302
)
Additional paid-in capital
 
503,187

 
496,254

Retained earnings
 
1,510,266

 
1,399,472

Accumulated other comprehensive loss
 
(11,032
)
 
(10,840
)
Total stockholders' equity
 
1,989,791

 
1,872,256

Total liabilities and stockholders' equity
 
$
3,559,225

 
$
3,412,196

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

1

Table of Contents


WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2013
 
2012
 
 
(in thousands of dollars, except per share data and share amounts)
Net sales
 
$
864,647

 
$
1,034,867

Cost of sales
 
636,838

 
862,230

Gross profit
 
227,809

 
172,637

Selling, general and administrative expenses
 
33,754

 
27,012

Income from operations
 
194,055

 
145,625

Other income (expense)
 
 
 
 
Interest expense
 
(6,281
)
 
(12,177
)
Other income, net
 
3,519

 
1,347

Income before income taxes
 
191,293

 
134,795

Provision for income taxes
 
67,946

 
46,982

Net income
 
$
123,347

 
$
87,813

Earnings per share:
 
 
 
 
Basic
 
$
1.84

 
$
1.32

Diluted
 
$
1.84

 
$
1.31

Weighted average shares outstanding:
 
 
 
 
Basic
 
66,625,536

 
66,109,297

Diluted
 
66,908,869

 
66,558,517

Dividends per common share
 
$
0.1875

 
$
0.0738

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

2

Table of Contents


WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2013
 
2012
 
 
(in thousands of dollars)
Net income
 
$
123,347

 
$
87,813

Other comprehensive income (loss)
 
 
 
 
Pension and other post-retirement benefits liability
 
 
 
 
Amortization of benefits liability
 
614

 
578

Income tax provision on pension and other
   post-retirement benefits liability
 
(236
)
 
(222
)
Foreign currency translation adjustments
 
(570
)
 
512

Available-for-sale investments
 
 
 
 
Unrealized holding gains on investments
 

 
25,473

Income tax provision on unrealized
   holding gains
 

 
(9,135
)
Other comprehensive (loss) income
 
(192
)
 
17,206

Comprehensive income
 
$
123,155

 
$
105,019

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

3

Table of Contents


WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2013
 
2012
 
 
(in thousands of dollars)
Cash flows from operating activities
 
 
 
 
Net income
 
$
123,347

 
$
87,813

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
35,356

 
35,394

Provision for (recovery of) doubtful accounts
 
393

 
(155
)
Amortization of debt issuance costs
 
365

 
400

Stock-based compensation expense
 
1,499

 
1,651

Loss from disposition of fixed assets
 
2,387

 
481

Deferred income taxes
 
29,466

 
791

Windfall tax benefits from share-based payment arrangements
 
(3,844
)
 
(4,481
)
Equity in (income) loss of joint ventures
 
(178
)
 
702

Changes in operating assets and liabilities
 
 
 
 
Accounts receivable
 
(7,917
)
 
(37,720
)
Inventories
 
(8,776
)
 
68,372

Prepaid expenses and other current assets
 
(2,077
)
 
(1,611
)
Accounts payable
 
14,733

 
(28,138
)
Accrued liabilities
 
(14,670
)
 
(21,647
)
Other, net
 
(53,832
)
 
3,724

Net cash provided by operating activities
 
116,252

 
105,576

Cash flows from investing activities
 
 
 
 
Additions to property, plant and equipment
 
(150,784
)
 
(64,902
)
Proceeds from disposition of assets
 
2

 
3

Proceeds from repayment of loan to affiliate
 
167

 
167

Proceeds from sales and maturities of securities
 
124,873

 

Purchase of securities
 
(94,903
)
 
(2,961
)
Settlements of derivative instruments
 
(679
)
 
511

Net cash used for investing activities
 
(121,324
)
 
(67,182
)
Cash flows from financing activities
 
 
 
 
Dividends paid
 
(12,553
)
 
(4,914
)
Proceeds from exercise of stock options
 
1,590

 
480

Utilization of restricted cash
 

 
30,800

Windfall tax benefits from share-based payment arrangements
 
3,844

 
4,481

Net cash (used for) provided by financing activities
 
(7,119
)
 
30,847

Net (decrease) increase in cash and cash equivalents
 
(12,191
)
 
69,241

Cash and cash equivalents at beginning of period
 
790,078

 
825,901

Cash and cash equivalents at end of period
 
$
777,887

 
$
895,142

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

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


1. Basis of Financial Statements
The accompanying unaudited consolidated interim financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim periods. Accordingly, certain information and footnotes required for complete financial statements under generally accepted accounting principles in the United States have not been included. These interim consolidated financial statements should be read in conjunction with the December 31, 2012 financial statements and notes thereto of Westlake Chemical Corporation (the "Company") included in the annual report on Form 10-K for the fiscal year ended December 31, 2012 (the "2012 Form 10-K"), filed with the SEC on February 22, 2013. These financial statements have been prepared in conformity with the accounting principles and practices as disclosed in the notes to the consolidated financial statements of the Company for the fiscal year ended December 31, 2012.
In the opinion of the Company's management, the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company's financial position as of March 31, 2013, its results of operations for the three months ended March 31, 2013 and 2012 and the changes in its cash position for the three months ended March 31, 2013 and 2012.
Results of operations and changes in cash position for the interim periods presented are not necessarily indicative of the results that will be realized for the fiscal year ending December 31, 2013 or any other interim period. The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Revisions
The consolidated statement of cash flows for the three months ended March 31, 2012 has been revised to correct the presentation of windfall tax benefits from share-based compensation of $4,481 in financing activities, instead of operating activities. This revision also impacts the consolidated statements of cash flows for the six months ended June 30, 2012 and nine months ended September 30, 2012 by $6,468 and $7,792, respectively, as well as the years ended December 31, 2010, 2011 and 2012 by $326, $3,361 and $11,967, respectively. The Company has determined that these revisions were immaterial to the Company's previously issued financial statements.
Recent Accounting Pronouncements
Disclosures about Offsetting Assets and Liabilities
In December 2011, the Financial Accounting Standards Board ("FASB") issued an accounting standards update on disclosures for offsetting assets and liabilities. The new accounting guidance requires companies to disclose both gross and net information about (1) instruments and transactions eligible for offset in the statement of financial position, and (2) instruments and transactions subject to an agreement similar to a master netting arrangement. The FASB issued another accounting standards update clarifying the scope of the assets and liabilities offset disclosure requirements in January 2013. The effective date of the disclosure requirements remains unchanged. The Company adopted the new guidance as of January 1, 2013, and the adoption did not have an impact on the Company's consolidated financial position, results of operations or cash flows.
Testing Indefinite-Lived Intangible Assets for Impairment
In July 2012, the FASB issued an accounting standards update to simplify how entities test indefinite-lived intangible assets for impairment and to improve consistency in impairment testing guidance among long-lived asset categories. The new accounting guidance provides an entity with an option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test under current accounting guidance. If an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with current accounting guidance. Also under this new accounting guidance, an entity has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test, but may resume performing the qualitative assessment in any subsequent period. The Company adopted the new indefinite-lived

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

intangible assets test guidance as of January 1, 2013, and the adoption did not have a material impact on the Company's consolidated financial position, results of operations or cash flows.
Reclassifications Out of Accumulated Other Comprehensive Income
In February 2013, the FASB issued an accounting standards update on reporting items reclassified out of accumulated other comprehensive income. The new accounting guidance requires companies to present either parenthetically on the face of the financial statements or in the notes, significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification, with certain exceptions. The Company adopted the new guidance as of January 1, 2013, and the adoption did not have an impact on the Company's consolidated financial position, results of operations or cash flows.
2. Current Marketable Securities
The Company owned current marketable securities of $94,903 and $124,873 at March 31, 2013 and December 31, 2012, respectively, consisting of short-term corporate debt securities with maturities exceeding three months at the date of acquisition. These debt securities are classified as held-to-maturity and are carried at amortized cost, which approximates their fair value.

3. Accounts Receivable
Accounts receivable consist of the following:
 
 
March 31,
2013
 
December 31,
2012
Trade customers
 
$
384,413

 
$
388,949

Affiliates
 
297

 
258

Allowance for doubtful accounts
 
(11,562
)
 
(11,172
)
 
 
373,148

 
378,035

Federal and state taxes
 
22,480

 
4,011

Other
 
11,952

 
18,113

Accounts receivable, net
 
$
407,580

 
$
400,159

4. Inventories
Inventories consist of the following:
 
 
March 31,
2013
 
December 31,
2012
Finished products
 
$
198,639

 
$
200,940

Feedstock, additives and chemicals
 
154,304

 
143,912

Materials and supplies
 
55,131

 
54,446

Inventories
 
$
408,074

 
$
399,298

5. Property, Plant and Equipment
As of March 31, 2013, the Company had property, plant and equipment, net totaling $1,629,309. The Company assesses these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, including when negative conditions such as significant current or projected operating losses exist. Other factors considered by the Company when determining if an impairment assessment is necessary include significant changes or projected changes in supply and demand fundamentals (which would have a negative impact on operating rates or margins), new technological developments, new competitors with significant raw material or other cost advantages, adverse changes associated with the U.S. and world economies and uncertainties associated with governmental actions. Long-lived assets assessed for impairment are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

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

Depreciation expense on property, plant and equipment of $30,920 and $30,171 is included in cost of sales in the consolidated statements of operations for the three months ended March 31, 2013 and 2012, respectively.
6. Other Assets
Amortization expense on intangible and other assets of $4,801 and $5,623 is included in the consolidated statements of operations for the three months ended March 31, 2013 and 2012, respectively.
7. Long-Term Debt
Long-term debt consists of the following:
 
 
March 31,
2013
 
December 31,
2012
3.60% senior notes due 2022
 
$
248,901

 
$
248,872

6 ½% senior notes due 2029
 
100,000

 
100,000

6 ¾% senior notes due 2032
 
250,000

 
250,000

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

 
89,000

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

 
65,000

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

 
10,889

Long-term debt, net
 
$
763,790

 
$
763,761

Revolving Credit Facility
The Company has a $400,000 senior secured revolving credit facility. The facility includes a provision permitting the Company to increase the size of the facility, up to four times, in increments of at least $25,000 each (up to a maximum of $150,000) under certain circumstances if lenders agree to commit to such an increase. At March 31, 2013, the Company had no borrowings outstanding under the revolving credit facility. Any borrowings under the facility will bear interest at either LIBOR plus a spread ranging from 1.75% to 2.25% or a base rate plus a spread ranging from 0.25% to 0.75%. The revolving credit facility also requires an unused commitment fee of 0.375% per annum. All interest rates under the facility are subject to monthly grid pricing adjustments based on prior month average daily loan availability. The revolving credit facility matures on September 16, 2016. As of March 31, 2013, the Company had outstanding letters of credit totaling $16,214 and borrowing availability of $383,786 under the revolving credit facility. 
8. Stock-Based Compensation
Under the Westlake Chemical Corporation 2004 Omnibus Incentive Plan (the "2004 Plan"), all employees and nonemployee directors of the Company, as well as certain individuals who have agreed to become the Company's employees, are eligible for awards. Shares of common stock may be issued as authorized in the 2004 Plan. At the discretion of the administrator of the 2004 Plan, employees and nonemployee directors may be granted awards in the form of stock options, stock appreciation rights, stock awards, restricted stock units or cash awards (any of which may be a performance award). Total stock-based compensation expense related to the 2004 Plan was $1,499 and $1,651 for the three months ended March 31, 2013 and 2012, respectively.
9. Derivative Instruments
Commodity Risk Management
The Company uses derivative instruments to reduce price volatility risk on raw materials and products as a substantial portion of its raw materials and products are commodities whose prices fluctuate as market supply and demand fundamentals change. Business strategies to protect against such instability include ethylene product feedstock flexibility and moving downstream into the olefins and vinyls products where pricing is more stable. The Company does not use derivative instruments to engage in speculative activities.
For derivative instruments that are designated and qualify as fair value hedges, the gains or losses on the derivative instruments, as well as the offsetting losses or gains on the hedged items attributable to the hedged risk, were included in cost of sales in the consolidated statements of operations for the three months ended March 31, 2013 and 2012. As of March 31, 2013, the Company had 32,130,000 gallons of feedstock forward contracts designated as fair value hedges.

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

Gains and losses from changes in the fair value of derivative instruments that are not designated as hedging instruments were included in cost of sales in the consolidated statements of operations for the three months ended March 31, 2013 and 2012.
The exposure on commodity derivatives used for price risk management includes the risk that the counterparty will not pay if the market declines below the established fixed price. In such case, the Company would lose the benefit of the derivative differential on the volume of the commodities covered. In any event, the Company would continue to receive the market price on the actual volume hedged. The Company also bears the risk that it could lose the benefit of market improvements over the fixed derivative price for the term and volume of the derivative instruments (as such improvements would accrue to the benefit of the counterparty).
The fair values of derivative instruments in the Company's consolidated balance sheets were as follows:
 
 
Derivative Assets
 
 
Balance Sheet Location
 
Fair Value as of
 
 
March 31,
2013
 
December 31,
2012
Designated as hedging instruments
 
 
 
 
 
 
Commodity forward contracts
 
Accounts receivable, net
 
$
8,299

 
$
13,032

Not designated as hedging instruments
 
 
 
 
 
 
Commodity forward contracts
 
Accounts receivable, net
 
1,903

 
1,395

Total derivative assets
 
 
 
$
10,202

 
$
14,427

 
 
Derivative Liabilities
 
 
Balance Sheet Location
 
Fair Value as of
 
 
March 31,
2013
 
December 31,
2012
Designated as hedging instruments
 
 
 
 
 
 
Commodity forward contracts
 
Accrued liabilities
 
$

 
$
399

Not designated as hedging instruments
 
 
 
 
 
 
Commodity forward contracts
 
Accrued liabilities
 
9,843

 
13,295

Total derivative liabilities
 
 
 
$
9,843

 
$
13,694

The following tables reflect the impact of derivative instruments designated as fair value hedges and the related hedged item on the Company's consolidated statements of operations. For the three months ended March 31, 2013 and 2012, there was no material ineffectiveness with regard to the Company's qualifying fair value hedges.
Derivatives in Fair Value
   Hedging Relationships
 
Location of Gain (Loss)
Recognized in 
Income on Derivative
 
Three Months Ended March 31,
2013
 
2012
Commodity forward contracts
 
Cost of sales
 
$
(1,643
)
 
$
10,463

 
 
 
 
 
 
 
Hedged Items in Fair Value
   Hedging Relationships
 
Location of Gain (Loss)
Recognized in 
Income on Hedged Items
 
Three Months Ended March 31,
2013
 
2012
Firm commitment designated as the hedged item
 
Cost of sales
 
$
1,395

 
$
(11,664
)
The impact of derivative instruments that have not been designated as hedges on the Company's consolidated statements of operations were as follows:
Derivatives Not Designated as
   Hedging Instruments
 
Location of Gain (Loss)
Recognized in 
Income on Derivative
 
Three Months Ended March 31,
2013
 
2012
Commodity forward contracts
 
Cost of sales
 
$
7,335

 
$
560

See Note 10 for the fair value of the Company's derivative instruments.

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

Disclosure about Offsetting Asset and Liability Derivatives
Certain of the Company's derivative instruments are executed under an International Swaps and Derivatives Association ("ISDA") Master Agreement, which permit the Company and a counterparty to aggregate the amounts owed by each party under multiple transactions and replace them with a single net amount payable by one party to the other. The following tables present the Company's derivative assets and derivative liabilities reported on the consolidated balance sheets and derivative assets and derivative liabilities subject to enforceable master netting arrangements.
 
 
Derivative Assets
 
 
March 31,
2013
 
December 31,
2012
Derivative assets subject to enforceable master netting arrangements
 
$

 
$

Derivative assets not subject to enforceable master netting arrangements
 
9,057

 
13,032

Total derivative assets
 
$
9,057

 
$
13,032


 
March 31, 2013
 
December 31, 2012
Offsetting of Derivative Assets
 
Gross Amounts of Recognized Assets
 
Gross Amounts Offset in the Consolidated Balance Sheet
 
Net Amounts of Assets Presented in the Consolidated Balance Sheet
 
Gross Amounts of Recognized Assets
 
Gross Amounts Offset in the Consolidated Balance Sheet
 
Net Amounts of Assets Presented in the Consolidated Balance Sheet
Commodity forward contracts
 
$
1,145

 
$
(1,145
)
 
$

 
$
1,395

 
$
(1,395
)
 
$

 
 
Derivative Liabilities
 
 
March 31,
2013
 
December 31,
2012
Derivative liabilities subject to enforceable master netting arrangements
 
$
697

 
$
1,774

Derivative liabilities not subject to enforceable master netting arrangements
 
8,001

 
10,525

Total derivative liabilities
 
$
8,698

 
$
12,299


 
March 31, 2013
 
December 31, 2012
Offsetting of Derivative Liabilities
 
Gross Amounts of Recognized Liabilities
 
Gross Amounts Offset in the Consolidated Balance Sheet
 
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet
 
Gross Amounts of Recognized Liabilities
 
Gross Amounts Offset in the Consolidated Balance Sheet
 
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet
Commodity forward contracts
 
$
1,842

 
$
(1,145
)
 
$
697

 
$
3,169

 
$
(1,395
)
 
$
1,774


 
March 31, 2013
 
December 31, 2012
Derivative Liabilities by Counterparty
 
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet
 
Gross Amounts Not Offset in the Consolidated Balance Sheet
 
Net Amount
 
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet
 
Gross Amounts Not Offset in the Consolidated Balance Sheet
 
Net Amount
Counterparty A
 
$
463

 
$

 
$
463

 
$
1,128

 
$

 
$
1,128

Counterparty B
 
234

 

 
234

 
646

 

 
646

Total
 
$
697

 
$

 
$
697

 
$
1,774

 
$

 
$
1,774



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

10. Fair Value Measurements
The Company reports certain assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Under the accounting guidance for fair value measurements, inputs used to measure fair value are classified in one of three levels:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The following tables summarize, by level within the fair value hierarchy, the Company's assets and liabilities that were accounted for at fair value on a recurring basis:
 
 
March 31, 2013
 
 
Level 1
 
Level 2
 
Total
Derivative instruments
 
 
 
 
 
 
Risk management assets - Commodity forward contracts
 
$
1,145

 
$
9,057

 
$
10,202

Risk management liabilities - Commodity forward contracts
 

 
(9,843
)
 
(9,843
)
Firm commitments
 
 
 
 
 
 
Hedged portion of firm commitment
 

 
(8,299
)
 
(8,299
)
 
 
 
 
 
 
 
 
 
December 31, 2012
 
 
Level 1
 
Level 2
 
Total
Derivative instruments
 
 
 
 
 
 
Risk management assets - Commodity forward contracts
 
$
1,395

 
$
13,032

 
$
14,427

Risk management liabilities - Commodity forward contracts
 

 
(13,694
)
 
(13,694
)
Firm commitments
 
 
 
 
 
 
Hedged portion of firm commitment
 

 
399

 
399

Hedged portion of firm commitment
 

 
(13,032
)
 
(13,032
)
The Level 2 measurements are derived using forward curves supplied by industry recognized and unrelated third-party services. There were no transfers in and out of Levels 1 and 2 of the fair value hierarchy for the three months ended March 31, 2013 and 2012.
In addition to the financial assets and liabilities above, the Company has other financial assets and liabilities subject to fair value measures. These financial assets and liabilities include cash and cash equivalents, accounts receivable, net, accounts payable and long-term debt, all of which are recorded at carrying value. Further, the Company has current marketable securities that are carried at amortized cost. The amounts reported in the consolidated balance sheets for cash and cash equivalents, current marketable securities, accounts receivable, net and accounts payable approximate their fair value due to the short maturities of these instruments. The carrying and fair values of the Company's long-term debt are summarized in the table below. The Company's long-term debt instruments are publicly-traded. A market approach, based upon quotes from financial reporting services, is used to measure the fair value of the Company's long-term debt. Because the Company's long-term debt instruments may not be actively traded, the inputs used to measure the fair value of the Company's long-term debt are classified as Level 2 inputs within the fair value hierarchy.

10

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

 
 
March 31, 2013
 
December 31, 2012
 
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
3.60% senior notes due 2022
 
$
248,901

 
$
252,273

 
$
248,872

 
$
251,125

6 ½% senior notes due 2029
 
100,000

 
115,999

 
100,000

 
119,738

6 ¾% senior notes due 2032
 
250,000

 
286,235

 
250,000

 
283,168

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

 
100,367

 
89,000

 
102,095

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

 
73,302

 
65,000

 
74,564

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

 
10,889

 
10,889

 
10,889

11. Income Taxes
The effective income tax rate was 35.5% for the three months ended March 31, 2013. The effective income tax rate for the 2013 period was above the U.S. federal statutory rate of 35.0% primarily due to state income taxes, partially offset by the domestic manufacturing deduction. The effective income tax rate was 34.9% for the three months ended March 31, 2012. The effective income tax rate for the 2012 period was below the U.S. federal statutory rate of 35.0% primarily due to state tax credits and the domestic manufacturing deduction, mostly offset by state income taxes.
There was no material change to the total gross unrecognized tax benefits for the three months ended March 31, 2013. Management anticipates reductions to the total amount of unrecognized tax benefits of an additional $621 within the next twelve months due to expiring statutes of limitations.
The Company recognizes penalties and interest accrued related to unrecognized tax benefits in income tax expense. As of March 31, 2013, the Company had no material accrued interest and penalties related to uncertain tax positions.
The Company files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions. The Company is no longer subject to examinations by tax authorities before the year 2007.
12. Earnings per Share
The Company has unvested shares of restricted stock and restricted stock units outstanding that are considered participating securities and, therefore, computes basic and diluted earnings per share under the two-class method. Basic earnings per share for the periods are based upon the weighted average number of shares of common stock outstanding during the periods. Diluted earnings per share include the effect of certain stock options.
 
 
Three Months Ended March 31,
 
 
2013
 
2012
Net income
 
$
123,347

 
$
87,813

Less:
 
 
 
 
Net income attributable to participating securities
 
(568
)
 
(610
)
Net income attributable to common shareholders
 
$
122,779

 
$
87,203


11

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

The following table reconciles the denominator for the basic and diluted earnings per share computations shown in the consolidated statements of operations:
 
 
Three Months Ended March 31,
 
 
2013
 
2012
Weighted average common shares—basic
 
66,625,536

 
66,109,297

Plus incremental shares from:
 
 
 
 
Assumed exercise of options
 
283,333

 
449,220

Weighted average common shares—diluted
 
66,908,869

 
66,558,517

 
 
 
 
 
Earnings per share:
 
 
 
 
Basic
 
$
1.84

 
$
1.32

Diluted
 
$
1.84

 
$
1.31

Excluded from the computation of diluted earnings per share are options to purchase 36,388 and 67,098 shares of common stock for the three months ended March 31, 2013 and 2012, respectively. These options were outstanding during the periods reported but were excluded because the effect of including them would have been antidilutive.
13. Pension and Post-Retirement Benefit Costs
Components of net periodic benefit cost are as follows:
 
 
Three Months Ended March 31,
 
 
Pension
 
Post-retirement
Healthcare
 
 
2013
 
2012
 
2013
 
2012
Service cost
 
$
264

 
$
254

 
$
2

 
$
2

Interest cost
 
501

 
647

 
147

 
185

Expected return on plan assets
 
(714
)
 
(620
)
 

 

Amortization of prior service cost
 
74

 
74

 
21

 
21

Amortization of net loss
 
429

 
439

 
90

 
44

Net periodic benefit cost
 
$
554

 
$
794

 
$
260

 
$
252

The Company contributed $442 to the Salaried pension plan in the first three months of 2012, and contributed $60 and $278 to the Wage pension plan in the first three months of 2013 and 2012, respectively. The Company did not contribute to the Salaried pension plan in the first three months of 2013. The Company expects to make additional contributions of $1,164 to the Salaried pension plan and $870 to the Wage pension plan during the fiscal year ending December 31, 2013.
14. Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2013 were as follows:
 
 
Benefits
Liability,
Net of Tax
 
Cumulative
Foreign
Currency
Exchange
 
Total
Balances at December 31, 2012
 
$
(16,351
)
 
$
5,511

 
$
(10,840
)
Other comprehensive loss before reclassifications
 

 
(570
)
 
(570
)
Amounts reclassified from accumulated other comprehensive loss
 
378

 

 
378

Net other comprehensive income (loss) for the period
 
378

 
(570
)
 
(192
)
Balances at March 31, 2013
 
$
(15,973
)
 
$
4,941

 
$
(11,032
)

12

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

The following table provides the details of the amounts reclassified from accumulated other comprehensive income (loss) into net income in the consolidated statements of operations for the three months ended March 31, 2013:
Details about Accumulated Other Comprehensive
   Income (Loss) Components
 
Location of Reclassification
(Income (Expense)) in
Consolidated Statements
of Operations
 
Three Months Ended March 31, 2013
Amortization of pension and other post-retirement items
 
 
 
 
Prior service costs
 
(1)
 
$
(95
)
Net loss
 
(1)
 
(519
)
 
 
 
 
(614
)
 
 
Provision for income taxes
 
236

Total reclassifications for the period
 
 
 
$
(378
)
_____________
(1)
These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost. For additional information, please read Note 8 (Employee Benefits) to the financial statements included in the 2012 Form 10-K.

15. Commitments and Contingencies
The Company is subject to environmental laws and regulations that can impose civil and criminal sanctions and that may require it to mitigate the effects of contamination caused by the release or disposal of hazardous substances into the environment. Under one law, an owner or operator of property may be held strictly liable for remediating contamination without regard to whether that person caused the contamination, and without regard to whether the practices that resulted in the contamination were legal at the time they occurred. Because several of the Company's production sites have a history of industrial use, it is impossible to predict precisely what effect these legal requirements will have on the Company.
Contract Disputes with Goodrich and PolyOne. In connection with the 1990 and 1997 acquisitions of the Goodrich Corporation ("Goodrich") chemical manufacturing complex in Calvert City, Kentucky, Goodrich agreed to indemnify the Company for any liabilities related to preexisting contamination at the complex. For its part, the Company agreed to indemnify Goodrich for post-closing contamination caused by the Company's operations. The soil and groundwater at the complex, which does not include the Company's nearby PVC facility, had been extensively contaminated under Goodrich's operations. In 1993, Goodrich spun off the predecessor of PolyOne Corporation ("PolyOne"), and that predecessor assumed Goodrich's indemnification obligations relating to preexisting contamination.
In 2003, litigation arose among the Company, Goodrich and PolyOne with respect to the allocation of the cost of remediating contamination at the site. The parties settled this litigation in December 2007 and the case was dismissed. In the settlement the parties agreed that, among other things: (1) PolyOne would pay 100% of the costs (with specified exceptions), net of recoveries or credits from third parties, incurred with respect to environmental issues at the Calvert City site from August 1, 2007 forward; (2) either the Company or PolyOne might, from time to time in the future (but not more than once every five years), institute an arbitration proceeding to adjust that percentage; and (3) the Company and PolyOne would negotiate a new environmental remediation utilities and services agreement to cover the Company's provision to or on behalf of PolyOne of certain environmental remediation services at the site. The current environmental remediation activities at the Calvert City complex do not have a specified termination date but are expected to last for the foreseeable future. The costs incurred by the Company that have been invoiced to PolyOne to provide the environmental remediation services were $2,687 in 2012. By letter dated March 16, 2010, PolyOne notified the Company that it was initiating an arbitration proceeding under the settlement agreement. In this proceeding, PolyOne seeks to readjust the percentage allocation of costs and to recover approximately $1,400 from the Company in reimbursement of previously paid remediation costs. The arbitration is currently stayed.
Administrative Proceedings. There are several administrative proceedings in Kentucky involving the Company, Goodrich and PolyOne related to the same manufacturing complex in Calvert City. In 2003, the Kentucky Environmental and Public Protection Cabinet (the "Cabinet") re-issued Goodrich's Resource Conservation and Recovery Act ("RCRA") permit which requires Goodrich to remediate contamination at the Calvert City manufacturing complex. Both Goodrich and PolyOne challenged various terms of the permit in an attempt to shift Goodrich's clean-up obligations under the permit to the Company.

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

The Company intervened in the proceedings. The Cabinet has suspended all corrective action under the RCRA permit in deference to a remedial investigation and feasibility study ("RIFS") being conducted pursuant to an Administrative Settlement Agreement ("AOC"), which became effective on December 9, 2009. See "Change in Regulatory Regime" below. The proceedings have been postponed. Periodic status conferences will be held to evaluate whether additional proceedings will be required.
Change in Regulatory Regime. In May 2009, the Cabinet sent a letter to the U.S. Environmental Protection Agency ("EPA") requesting the EPA's assistance in addressing contamination at the Calvert City site under the U.S. Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). In its response to the Cabinet also in May 2009, the EPA stated that it concurred with the Cabinet's request and would incorporate work previously conducted under the Cabinet's RCRA authority into the EPA's cleanup efforts under CERCLA. Since 1983, the EPA has been addressing contamination at an abandoned landfill adjacent to the Company's plant which had been operated by Goodrich and which was being remediated pursuant to CERCLA. During the past two years, the EPA has directed Goodrich and PolyOne to conduct additional investigation activities at the landfill and at the Company's plant. In June 2009, the EPA notified the Company that the Company may have potential liability under section 107(a) of CERCLA at its plant site. Liability under section 107(a) of CERCLA is strict and joint and several. The EPA also identified Goodrich and PolyOne, among others, as potentially responsible parties at the plant site. The Company negotiated, in conjunction with the other potentially responsible parties, the AOC and an order to conduct the RIFS. The parties submitted and received EPA approval for a RIFS work plan to implement the AOC. The parties are currently conducting the RIFS.
Monetary Relief. Except as noted above with respect to the settlement of the contract litigation among the Company, Goodrich and PolyOne, none of the court, the Cabinet nor the EPA has established any allocation of the costs of remediation among the various parties that are involved in the judicial and administrative proceedings discussed above. At this time, the Company is not able to estimate the loss or reasonable possible loss, if any, on the Company's financial statements that could result from the resolution of these proceedings. Any cash expenditures that the Company might incur in the future with respect to the remediation of contamination at the complex would likely be spread out over an extended period. As a result, the Company believes it is unlikely that any remediation costs allocable to it will be material in terms of expenditures made in any individual reporting period.
EPA Audit of Ethylene Units in Lake Charles. During 2007, the EPA conducted an audit of the Company's ethylene units in Lake Charles, Louisiana, with a focus on leak detection and repair ("LDAR"). As a result of the audit, the EPA brought allegations that the Company had violated certain environmental laws and regulations pertaining to LDAR. The Company has agreed to settle this matter, subject to court approval, by paying a cash penalty of $500 and has recorded an accrual in such amount.
In addition to the matters described above, the Company is involved in various routine legal proceedings incidental to the conduct of its business. The Company does not believe that any of these routine legal proceedings will have a material adverse effect on its financial condition, results of operations or cash flows.


14

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

16. Segment Information
The Company operates in two principal business segments: Olefins and Vinyls. These segments are strategic business units that offer a variety of different products. The Company manages each segment separately as each business requires different technology and marketing strategies.
 
 
Three Months Ended March 31,
 
 
2013
 
2012
Net external sales
 
 
 
 
Olefins
 
 
 
 
Polyethylene
 
$
420,768

 
$
445,420

Styrene, feedstock and other
 
162,077

 
286,851

Total Olefins
 
582,845

 
732,271

Vinyls
 
 
 
 
PVC, caustic soda and other
 
195,246

 
214,383

Building products
 
86,556

 
88,213

Total Vinyls
 
281,802

 
302,596

 
 
$
864,647

 
$
1,034,867

 
 
 
 
 
Intersegment sales
 
 
 
 
Olefins
 
$
70,283

 
$
101,457

Vinyls
 
264

 
388

 
 
$
70,547

 
$
101,845

 
 
 
 
 
Income (loss) from operations
 
 
 
 
Olefins
 
$
161,058

 
$
129,207

Vinyls
 
43,663

 
21,082

Corporate and other
 
(10,666
)
 
(4,664
)
 
 
$
194,055

 
$
145,625

 
 
 
 
 
Depreciation and amortization
 
 
 
 
Olefins
 
$
23,346

 
$
23,763

Vinyls
 
11,884

 
11,509

Corporate and other
 
126

 
122

 
 
$
35,356

 
$
35,394

 
 
 
 
 
Other income (expense), net
 
 
 
 
Olefins
 
$
4,010

 
$
956

Vinyls
 
(425
)
 
240

Corporate and other
 
(66
)
 
151

 
 
$
3,519

 
$
1,347

 
 
 
 
 
Provision for (benefit from) income taxes
 
 
 
 
Olefins
 
$
55,477

 
$
42,175

Vinyls
 
13,720

 
6,016

Corporate and other
 
(1,251
)
 
(1,209
)
 
 
$
67,946

 
$
46,982

 
 
 
 
 

15

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

 
 
Three Months Ended March 31,
 
 
2013
 
2012
Capital expenditures
 
 
 
 
Olefins
 
$
50,040

 
$
17,480

Vinyls
 
100,317

 
46,841

Corporate and other
 
427

 
581

 
 
$
150,784

 
$
64,902

A reconciliation of total segment income from operations to consolidated income before income taxes is as follows:
 
 
Three Months Ended March 31,
 
 
2013
 
2012
Income from operations
 
$
194,055

 
$
145,625

Interest expense
 
(6,281
)
 
(12,177
)
Other income, net
 
3,519

 
1,347

Income before income taxes
 
$
191,293

 
$
134,795

 
 
March 31,
2013
 
December 31,
2012
Total assets
 
 
 
 
Olefins
 
$
1,534,996

 
$
1,439,308

Vinyls
 
1,106,500

 
1,030,912

Corporate and other
 
917,729

 
941,976

 
 
$
3,559,225

 
$
3,412,196

17. Subsequent Events
In March 2013, the Company announced that it had entered into a definitive agreement with CertainTeed Corporation, a subsidiary of the French public company, Compagnie de Saint-Gobain, to purchase its Pipe and Foundation Group business, a leading producer of PVC pipe and fittings for municipal, water well, mining, agriculture and irrigation applications, with an annual production capacity of approximately 150 million pounds, for a cash purchase price of $175,000, including working capital, subject to post-closing adjustments. This transaction closed on May 1, 2013. No pro forma financial information has been provided as the purchase is not significant to the Company's consolidated financial position or results of operations.
Subsequent events were evaluated through the date on which the financial statements were issued.


16

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

18. Guarantor Disclosures
The Company's payment obligations under the 3.60% senior notes due 2022 are fully and unconditionally guaranteed by each of its current and future domestic subsidiaries that guarantee other debt of the Company or of another guarantor of the 3.60% senior notes due 2022 in excess of $5,000 (the "Guarantor Subsidiaries"). Each Guarantor Subsidiary is 100% owned by Westlake Chemical Corporation. These guarantees are the joint and several obligations of the Guarantor Subsidiaries. The following unaudited condensed consolidating financial information presents the financial condition, results of operations and cash flows of Westlake Chemical Corporation, the Guarantor Subsidiaries and the remaining subsidiaries that do not guarantee the 3.60% senior notes due 2022 (the "Non-Guarantor Subsidiaries"), together with consolidating adjustments necessary to present the Company's results on a consolidated basis.

Condensed Consolidating Financial Information as of March 31, 2013
 
 
Westlake
Chemical
Corporation
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Balance Sheet
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
742,898

 
$
7,648

 
$
27,341

 
$

 
$
777,887

Marketable securities
 
94,903

 

 

 

 
94,903

Accounts receivable, net
 
12,629

 
1,644,221

 
4,575

 
(1,253,845
)
 
407,580

Inventories
 

 
393,260

 
14,814

 

 
408,074

Prepaid expenses and other
   current assets
 
223

 
12,588

 
1,725

 

 
14,536

Deferred income taxes
 
431

 
21,581

 
286

 

 
22,298

Total current assets
 
851,084

 
2,079,298

 
48,741

 
(1,253,845
)
 
1,725,278

Property, plant and equipment, net
 

 
1,621,290

 
8,019

 

 
1,629,309

Equity investments
 
3,143,697

 
65,868

 
32,711

 
(3,198,362
)
 
43,914

Other assets, net
 
16,692

 
148,886

 
1,132

 
(5,986
)
 
160,724

Total assets
 
$
4,011,473

 
$
3,915,342

 
$
90,603

 
$
(4,458,193
)
 
$
3,559,225

Current liabilities
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
1,252,908

 
$
221,992

 
$
15,382

 
$
(1,258,221
)
 
$
232,061

Accrued liabilities
 
15,873

 
146,546

 
959

 
4,376

 
167,754

Total current liabilities
 
1,268,781

 
368,538

 
16,341

 
(1,253,845
)
 
399,815

Long-term debt
 
752,901

 
10,889

 

 

 
763,790

Deferred income taxes
 

 
361,450

 
511

 
(5,986
)
 
355,975

Other liabilities
 

 
49,823

 
31

 

 
49,854

Stockholders' equity
 
1,989,791

 
3,124,642

 
73,720

 
(3,198,362
)
 
1,989,791

Total liabilities and
stockholders' equity
 
$
4,011,473

 
$
3,915,342

 
$
90,603

 
$
(4,458,193
)
 
$
3,559,225



17

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

Condensed Consolidating Financial Information as of December 31, 2012
 
 
Westlake
Chemical
Corporation
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Balance Sheet
 
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
753,881

 
$
6,973

 
$
29,224

 
$

 
$
790,078

Marketable securities
 
124,873

 

 

 

 
124,873

Accounts receivable, net
 
7,933

 
1,675,274

 
2,959

 
(1,286,007
)
 
400,159

Inventories
 

 
385,140

 
14,158

 

 
399,298

Prepaid expenses and other
   current assets
 
389

 
11,386

 
2,925

 

 
14,700

Deferred income taxes
 
431

 
21,581

 
293

 

 
22,305

Total current assets
 
887,507

 
2,100,354

 
49,559

 
(1,286,007
)
 
1,751,413

Property, plant and equipment, net
 

 
1,502,902

 
7,146

 

 
1,510,048

Equity investments
 
3,018,926

 
65,448

 
32,923

 
(3,073,561
)
 
43,736

Other assets, net
 
17,033

 
94,678

 
1,252

 
(5,964
)
 
106,999

Total assets
 
$
3,923,466

 
$
3,763,382

 
$
90,880

 
$
(4,365,532
)
 
$
3,412,196

Current liabilities
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
1,285,530

 
$
192,443

 
$
13,969

 
$
(1,274,892
)
 
$
217,050

Accrued liabilities
 
12,808

 
178,915

 
852

 
(11,115
)
 
181,460

Total current liabilities
 
1,298,338

 
371,358

 
14,821

 
(1,286,007
)
 
398,510

Long-term debt
 
752,872

 
10,889

 

 

 
763,761

Deferred income taxes
 

 
331,320

 
934

 
(5,964
)
 
326,290

Other liabilities
 

 
51,312

 
67

 

 
51,379

Stockholders' equity
 
1,872,256

 
2,998,503

 
75,058

 
(3,073,561
)
 
1,872,256

Total liabilities and
stockholders' equity
 
$
3,923,466

 
$
3,763,382

 
$
90,880

 
$
(4,365,532
)
 
$
3,412,196


 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 













18

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

Condensed Consolidating Financial Information for the Three Months Ended March 31, 2013
 
 
Westlake
Chemical
Corporation
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Statement of Operations
 
 
 
 
 
 
 
 
 
 
Net sales
 
$

 
$
856,085

 
$
10,540

 
$
(1,978
)
 
$
864,647

Cost of sales
 

 
629,286

 
9,530

 
(1,978
)
 
636,838

Gross profit
 

 
226,799

 
1,010

 

 
227,809

Selling, general and administrative
   expenses
 
510

 
31,709

 
1,535

 

 
33,754

(Loss) income from operations
 
(510
)
 
195,090

 
(525
)
 

 
194,055

Interest expense
 
(6,258
)
 
(23
)
 

 

 
(6,281
)
Other income (expense), net
 
4,309

 
(290
)
 
(500
)
 

 
3,519

(Loss) income before income taxes
 
(2,459
)
 
194,777

 
(1,025
)
 

 
191,293

(Benefit from) provision for income taxes
 
(874
)
 
69,051

 
(231
)
 

 
67,946

Equity in net income of subsidiaries
 
124,932

 

 

 
(124,932
)
 

Net income (loss)
 
$
123,347

 
$
125,726

 
$
(794
)
 
$
(124,932
)
 
$
123,347

Comprehensive income (loss)
 
$
123,155

 
$
126,104

 
$
(1,364
)
 
$
(124,740
)
 
$
123,155



Condensed Consolidating Financial Information for the Three Months Ended March 31, 2012
 
 
Westlake
Chemical
Corporation
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Statement of Operations
 
 
 
 
 
 
 
 
 
 
Net sales
 
$

 
$
1,026,332

 
$
9,843

 
$
(1,308
)
 
$
1,034,867

Cost of sales
 

 
854,987

 
8,551

 
(1,308
)
 
862,230

Gross profit
 

 
171,345

 
1,292

 

 
172,637

Selling, general and administrative
   expenses
 
505

 
24,756

 
1,751

 

 
27,012

(Loss) income from operations
 
(505
)
 
146,589

 
(459
)
 

 
145,625

Interest expense
 
(12,171
)
 
(6
)
 

 

 
(12,177
)
Other income (expense), net
 
3,534

 
(1,700
)
 
(487
)
 

 
1,347

(Loss) income before income taxes
 
(9,142
)
 
144,883

 
(946
)
 

 
134,795

(Benefit from) provision for income taxes
 
(3,173
)
 
50,231

 
(76
)
 

 
46,982

Equity in net income of subsidiaries
 
93,782

 

 

 
(93,782
)
 

Net income (loss)
 
$
87,813

 
$
94,652

 
$
(870
)
 
$
(93,782
)
 
$
87,813

Comprehensive income (loss)
 
$
105,019

 
$
111,344

 
$
(358
)
 
$
(110,986
)
 
$
105,019



19

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

Condensed Consolidating Financial Information for the Three Months Ended March 31, 2013
 
 
Westlake
Chemical
Corporation
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Statement of Cash Flows
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
123,347

 
$
125,726

 
$
(794
)
 
$
(124,932
)
 
$
123,347

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

 
34,766

 
590

 

 
35,721

Deferred income taxes
 
(23
)
 
29,896

 
(407
)
 

 
29,466

Net changes in working capital
   and other
 
(129,403
)
 
(68,474
)
 
663

 
124,932

 
(72,282
)
Net cash (used for) provided by
   operating activities
 
(5,714
)
 
121,914

 
52

 

 
116,252

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

 
(149,113
)
 
(1,671
)
 

 
(150,784
)
Proceeds from disposition of assets
 

 

 
2

 

 
2

Proceeds from repayment of loan
   to affiliate
 

 

 
167

 

 
167

Proceeds from sales and maturities of
   securities
 
124,873

 

 

 

 
124,873

Purchase of securities
 
(94,903
)
 

 

 

 
(94,903
)
Settlements of derivative instruments
 

 
(679
)
 

 

 
(679
)
Net cash provided by (used for)
   investing activities
 
29,970

 
(149,792
)
 
(1,502
)
 

 
(121,324
)
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
Intercompany financing
 
(28,120
)
 
28,553

 
(433
)
 

 

Dividends paid
 
(12,553
)
 

 

 

 
(12,553
)
Proceeds from exercise of stock options
 
1,590

 

 

 

 
1,590

Windfall tax benefits from share-based
   payment arrangements
 
3,844

 

 

 

 
3,844

Net cash (used for) provided by
   financing activities
 
(35,239
)
 
28,553

 
(433
)
 

 
(7,119
)
Net (decrease) increase in cash and
   cash equivalents
 
(10,983
)
 
675

 
(1,883
)
 

 
(12,191
)
Cash and cash equivalents at beginning
   of period
 
753,881

 
6,973

 
29,224

 

 
790,078

Cash and cash equivalents at end of period
 
$
742,898

 
$
7,648

 
$
27,341

 
$

 
$
777,887



20

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

Condensed Consolidating Financial Information for the Three Months Ended March 31, 2012