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 ~~June~~September 30, 2013



¨	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):

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 ~~July 24,~~November 1, 2013 was ~~66,812,858~~66,770,803.

INDEX




Item	Page
PART I. FINANCIAL INFORMATION
1) Financial Statements	1
2) Management's Discussion and Analysis of Financial Condition and Results of Operations	2324
3) Quantitative and Qualitative Disclosures about Market Risk	3233
4) Controls and Procedures	3234

PART II. OTHER INFORMATION
1) Legal Proceedings	3435
1A) Risk Factors	3435
2) Unregistered Sales of Equity Securities and Use of Proceeds	3435
6) Exhibits	3536

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2013			December 31, 2012			September 30, 2013			December 31, 2012
	(in thousands of dollars, except par values and share amounts)						(in thousands of dollars, except par values and share amounts)
ASSETS
Current assets
Cash and cash equivalents	$	625,501		$	790,078		$	591,556		$	790,078
Marketable securities	29,969			124,873			125,597			124,873
Accounts receivable, net	475,638			400,159			433,025			400,159
Inventories	427,139			399,298			451,571			399,298
Prepaid expenses and other current assets	20,773			14,700			18,809			14,700
Deferred income taxes	22,103			22,305			22,293			22,305
Total current assets	1,601,123			1,751,413			1,642,851			1,751,413
Property, plant and equipment, net	1,785,574			1,510,048			1,952,918			1,510,048
Equity investments	48,480			43,736			65,488			43,736
Other assets, net
Intangible assets, net	161,324			48,292			159,376			48,292
Deferred charges and other assets, net	111,834			58,707			102,816			58,707
Total other assets, net	273,158			106,999			262,192			106,999
Total assets	$	3,708,335		$	3,412,196		$	3,923,449		$	3,412,196
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	247,007		$	217,050		$	258,067		$	217,050
Accrued liabilities	147,449			181,460			174,619			181,460
Total current liabilities	394,456			398,510			432,686			398,510
Long-term debt	763,820			763,761			763,849			763,761
Deferred income taxes	386,789			326,290			410,166			326,290
Other liabilities	50,784			51,379			51,691			51,379
Total liabilities	1,595,849			1,539,940			1,658,392			1,539,940
Commitments and contingencies (Notes 7 and 16)
Stockholders' equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued and outstanding	—			—			—			—
Common stock, $0.01 par value, 150,000,000 shares authorized; 67,258,512 and 67,187,224 shares issued at June 30, 2013 and December 31, 2012, respectively	673			672
Common stock, held in treasury, at cost; 446,825 and 284,493 shares at June 30, 2013 and December 31, 2012, respectively	(26,585		)	(13,302		)
Common stock, $0.01 par value, 150,000,000 shares authorized; 67,276,761 and 67,187,224 shares issued at September 30, 2013 and December 31, 2012, respectively							673			672
Common stock, held in treasury, at cost; 506,525 and 284,493 shares at September 30, 2013 and December 31, 2012, respectively							(32,711		)	(13,302		)
Additional paid-in capital	506,609			496,254			509,295			496,254
Retained earnings	1,643,515			1,399,472			1,798,721			1,399,472
Accumulated other comprehensive loss	(11,726		)	(10,840		)	(10,921		)	(10,840		)
Total stockholders' equity	2,112,486			1,872,256			2,265,057			1,872,256
Total liabilities and stockholders' equity	$	3,708,335		$	3,412,196		$	3,923,449		$	3,412,196

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

Table of Contents

WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012			2013			2012			2013			2012
	(in thousands of dollars, except per share data and share amounts)												(in thousands of dollars, except per share data and share amounts)
Net sales	$	939,047		$	913,958		$	1,803,694		$	1,948,825		$	1,004,165		$	821,175		$	2,807,859		$	2,770,000
Cost of sales	665,560			712,062			1,302,398			1,574,292			699,694			648,996			2,002,092			2,223,288
Gross profit	273,487			201,896			501,296			374,533			304,471			172,179			805,767			546,712
Selling, general and administrative expenses	38,260			30,918			72,014			57,930			37,869			29,662			109,883			87,592
Income from operations	235,227			170,978			429,282			316,603			266,602			142,517			695,884			459,120
Other income (expense)
Interest expense	(5,343		)	(11,571		)	(11,624		)	(23,748		)	(3,297		)	(11,934		)	(14,921		)	(35,682		)
Debt retirement costs													—			(7,082		)	—			(7,082		)
Gain from sales of equity securities	—			15,952			—			15,952			—			477			—			16,429
Other (expense) income, net	(95		)	1,107			3,424			2,454			(287		)	1,222			3,137			3,676
Income before income taxes	229,789			176,466			421,082			311,261			263,018			125,200			684,100			436,461
Provision for income taxes	83,973			60,965			151,919			107,947			92,728			38,236			244,647			146,183
Net income	$	145,816		$	115,501		$	269,163		$	203,314		$	170,290		$	86,964		$	439,453		$	290,278
Earnings per share:
Basic	$	2.18		$	1.73		$	4.02		$	3.05		$	2.55		$	1.30		$	6.57		$	4.36
Diluted	$	2.17		$	1.72		$	4.01		$	3.03		$	2.54		$	1.30		$	6.54		$	4.33
Weighted average shares outstanding:
Basic	66,629,609			66,298,633			66,627,661			66,203,965			66,628,747			66,311,958			66,628,027			66,240,225
Diluted	66,895,595			66,648,896			66,902,273			66,603,706			66,905,554			66,656,760			66,903,379			66,621,520
Dividends per common share	$	0.1875		$	0.0738		$	0.3750		$	0.1475		$	0.2250		$	0.1875		$	0.6000		$	0.3350

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

Table of Contents

WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012			2013			2012			2013			2012
	(in thousands of dollars)												(in thousands of dollars)
Net income	$	145,816		$	115,501		$	269,163		$	203,314		$	170,290		$	86,964		$	439,453		$	290,278
Other comprehensive (loss) income
Pension and other post-retirement benefits liability
Pension and other post-retirement reserves adjustment (excluding amortization)	(489		)	71			(489		)	71			(489		)	72			(978		)	142
Amortization of benefits liability	695			584			1,309			1,162			695			584			2,004			1,747
Income tax provision on pension and other post-retirement benefits liability	(80		)	(251		)	(316		)	(473		)	(78		)	(252		)	(394		)	(725		)
Foreign currency translation adjustments	(820		)	(449		)	(1,390		)	63			546			865			(844		)	928
Cash flow hedges
Net unrealized losses on hedges	—			(813		)	—			(813		)
Income tax benefit on hedges	—			292			—			292
Reclassification of net cash flow hedge losses to net income, net of income tax benefit													—			521			—			—
Available-for-sale investments
Unrealized holding (losses) gains on investments	—			(11,231		)	—			14,243
Income tax benefit (provision) on unrealized holding (losses) gains	—			4,028			—			(5,108		)
Unrealized holding gains on investments													205			339			205			14,582
Income tax provision on unrealized holding gains													(74		)	(121		)	(74		)	(5,229		)
Reclassification of net realized gain to net income	—			(10,232		)	—			(10,232		)	—			(306		)	—			(10,538		)
Other comprehensive loss	(694		)	(18,001		)	(886		)	(795		)
Other comprehensive income (loss)													805			1,702			(81		)	907
Comprehensive income	$	145,122		$	97,500		$	268,277		$	202,519		$	171,095		$	88,666		$	439,372		$	291,185

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

Table of Contents

WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(in thousands of dollars)						(in thousands of dollars)
Cash flows from operating activities
Net income	$	269,163		$	203,314		$	439,453		$	290,278
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	75,566			71,177			116,294			109,601
Provision for (recovery of) doubtful accounts	3,607			(161		)	3,600			(536		)
Amortization of debt issuance costs	729			801			1,093			1,149
Stock-based compensation expense	3,124			3,125			4,804			4,640
Loss from disposition of fixed assets	4,125			688			4,679			1,945
Gain from sales of equity securities	—			(15,952		)	—			(16,429		)
Write-off of debt issuance costs							—			1,277
Deferred income taxes	60,425			6,720			83,443			4,385
Windfall tax benefits from share-based payment arrangements	(4,576		)	(6,468		)	(5,056		)	(7,792		)
Equity in loss of joint ventures	1,369			1,926			1,586			2,567
Changes in operating assets and liabilities
Accounts receivable	(61,494		)	(11,105		)	(18,874		)	13,732
Inventories	(1,893		)	83,653			(26,325		)	119,240
Prepaid expenses and other current assets	(7,947		)	(2,920		)	(5,038		)	(1,977		)
Accounts payable	5,217			(17,043		)	19,518			(35,651		)
Accrued liabilities	(32,382		)	(6,369		)	(15,755		)	20,077
Other, net	(59,553		)	4,760			(55,922		)	(13,675		)
Net cash provided by operating activities	255,480			316,146			547,500			492,831
Cash flows from investing activities
Acquisition of business	(178,309		)	—			(178,309		)	—
Additions to equity investments	(6,113		)	—			(23,338		)	—
Additions to property, plant and equipment	(297,873		)	(140,568		)	(498,290		)	(235,463		)
Construction of assets pending sale-leaseback	(136		)	(1,760		)	(136		)	(5,484		)
Proceeds from disposition of assets	62			415			78			435
Proceeds from repayment of loan to affiliate	167			596			167			763
Proceeds from sales and maturities of securities	209,785			46,027			239,764			47,655
Purchase of securities	(114,881		)	(2,961		)	(232,286		)	(2,961		)
Settlements of derivative instruments	(1,588		)	511			(2,297		)	471
Net cash used for investing activities	(388,886		)	(97,740		)	(694,647		)	(194,584		)
Cash flows from financing activities
Capitalized debt issuance costs	—			(98		)	—			(2,221		)
Dividends paid	(25,120		)	(9,838		)	(40,204		)	(22,345		)
Proceeds from debt issuance							—			248,818
Proceeds from exercise of stock options	2,656			4,508			3,182			6,627
Repayment of debt							—			(250,000		)
Repurchase of common stock for treasury	(13,283		)	(10,784		)	(19,409		)	(10,784		)
Utilization of restricted cash	—			75,975			—			96,433
Windfall tax benefits from share-based payment arrangements	4,576			6,468			5,056			7,792
Net cash (used for) provided by financing activities	(31,171		)	66,231			(51,375		)	74,320
Net (decrease) increase in cash and cash equivalents	(164,577		)	284,637			(198,522		)	372,567
Cash and cash equivalents at beginning of period	790,078			825,901			790,078			825,901
Cash and cash equivalents at end of period	$	625,501		$	1,110,538		$	591,556		$	1,198,468

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

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WESTLAKE CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(in thousands of dollars, except share amounts and per share data)

1. Basis of Financial Statements

The accompanying unaudited consolidated interim financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim periods. Accordingly, certain information and footnotes required for complete financial statements under generally accepted accounting principles in the United States ("U.S. GAAP") have not been included. These interim consolidated financial statements should be read in conjunction with the December 31, 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 ~~June~~September 30, 2013, its results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012 and the changes in its cash position for the ~~six~~nine months ended ~~June~~September 30, 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~~U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

Revisions

The consolidated statement of cash flows for the ~~six~~nine months ended ~~June~~September 30, 2012 has been revised to correct the presentation of windfall tax benefits from share-based compensation of $~~6,468~~7,792 in financing activities, instead of operating activities. The Company has determined that this revision was 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 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.

Table of Contents

WESTLAKE CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

(in thousands of dollars, except share amounts and per share data)

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’s investments in current marketable securities were classified as follows:



	September 30, 2013		December 31, 2012
Available-for-sale securities	$	120,602	$	—
Held-to-maturity securities	4,995		124,873
Marketable securities	$	125,597	$	124,873

Available-for-Sale Securities

The cost, gross unrealized gains, gross unrealized losses and fair value of the Company’s available-for-sale securities were as follows:



	September 30, 2013
	Cost		Gross Unrealized Gains		Gross Unrealized Losses ⁽¹⁾			Fair Value
Debt securities
Corporate bonds	$	11,888	$	191	$	(21	)	$	12,058
U.S. government debt ⁽²⁾	26,400		23		(6		)	26,417
Asset-backed securities	82,109		27		(9		)	82,127
Total available-for-sale securities	$	120,397	$	241	$	(36	)	$	120,602

_____________


(1)	All unrealized loss positions were held at a loss for less than 12 months.


(2)	U.S. Treasury obligations, U.S. government agency obligations and U.S government agency mortgage-backed securities.

As of September 30, 2013, net unrealized gains on the Company's available-for-sale securities of $131, net of income tax expense of $74, were recorded in accumulated other comprehensive income. See Note 10 for the fair value hierarchy of the Company’s available-for-sale securities.

As of September 30, 2013, the corporate bond securities held by the Company had maturities between one to five years, U.S. government debt securities, excluding U.S. government agency mortgage-backed securities, had maturities of less than one year, U.S. government agency mortgage-backed securities had maturities between four to 26 years and asset-backed securities had maturities between two to five years.

Held-to-Maturity Securities

The Company owned ~~current marketable~~held-to-maturity securities of $~~29,969~~4,995 and $124,873 at ~~June~~September 30, 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.

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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)

3. Accounts Receivable

Accounts receivable consist of the following:


	June 30, 2013			December 31, 2012			September 30, 2013			December 31, 2012
Trade customers	$	441,840		$	388,949		$	404,678		$	388,949
Affiliates	310			258			333			258
Allowance for doubtful accounts	(9,834		)	(11,172		)	(9,832		)	(11,172		)
	432,316			378,035			395,179			378,035
Federal and state taxes	29,802			4,011			20,421			4,011
Other	13,520			18,113			17,425			18,113
Accounts receivable, net	$	475,638		$	400,159		$	433,025		$	400,159

4. Inventories

Inventories consist of the following:


	June 30, 2013		December 31, 2012		September 30, 2013		December 31, 2012
Finished products	$	203,434	$	200,940	$	198,762	$	200,940
Feedstock, additives and chemicals	166,213		143,912		194,558		143,912
Materials and supplies	57,492		54,446		58,251		54,446
Inventories	$	427,139	$	399,298	$	451,571	$	399,298

5. Property, Plant and Equipment

As of ~~June~~September 30, 2013, the Company had property, plant and equipment, net totaling $~~1,785,574~~1,952,918. The Company assesses these assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, including when negative conditions such as significant current or projected operating losses exist. Other factors considered by the Company when determining if an impairment assessment is necessary include, but are not limited to, significant changes or projected changes in supply and demand fundamentals (which would have a negative impact on operating rates or margins), new technological developments, new competitors with significant raw material or other cost advantages, adverse changes associated with the U.S. and world economies and uncertainties associated with governmental actions. Long-lived assets assessed for impairment are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

Depreciation expense on property, plant and equipment of $~~32,615~~32,460 and $~~30,387~~30,055 is included in cost of sales in the consolidated statements of operations for the three months ended ~~June~~September 30, 2013 and 2012, respectively. Depreciation expense on property, plant and equipment of $~~63,535~~95,995 and $~~60,559~~90,615 is included in cost of sales in the consolidated statements of operations for the ~~six~~nine months ended ~~June~~September 30, 2013 and 2012, respectively.

6. Other Assets

Amortization expense on intangible and other assets of $8,634 and $8,717 is included in the consolidated statements of operations for the three months ended September 30, 2013 and 2012, respectively. Amortization expense on intangible and other assets of $21,392 and $20,135 is included in the consolidated statements of operations for the nine months ended September 30, 2013 and 2012, respectively.

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WESTLAKE CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

(in thousands of dollars, except share amounts and per share data)

~~6. Other Assets~~

~~Amortization expense on intangible and other assets of~~ ~~$7,959~~ ~~and~~ ~~$5,795~~ ~~is included in the consolidated statements of operations for the~~ ~~three months ended June 30, 2013 and 2012, respectively. Amortization expense on intangible and other assets of~~ ~~$12,760~~ ~~and~~ ~~$11,419~~ ~~is included in the consolidated statements of operations for the~~ ~~six months ended June 30, 2013 and 2012, respectively.~~

7. Long-Term Debt

Long-term debt consists of the following:


	June 30, 2013		December 31, 2012		September 30, 2013		December 31, 2012
3.60% senior notes due 2022	$	248,931	$	248,872	$	248,960	$	248,872
6 ½% senior notes due 2029	100,000		100,000		100,000		100,000
6 ¾% senior notes due 2032	250,000		250,000		250,000		250,000
6 ½% senior notes due 2035 (the "6 ½% GO Zone Senior Notes Due 2035")	89,000		89,000		89,000		89,000
6 ½% senior notes due 2035 (the "6 ½% IKE Zone Senior Notes Due 2035")	65,000		65,000		65,000		65,000
Loan related to tax-exempt waste disposal revenue bonds due 2027	10,889		10,889		10,889		10,889
Long-term debt, net	$	763,820	$	763,761	$	763,849	$	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 ~~June~~September 30, 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 ~~June~~September 30, 2013, the Company had outstanding letters of credit totaling $16,921 and borrowing availability of $383,079 under the revolving credit facility.

8. Stock-Based Compensation

Under the Westlake Chemical Corporation 2013 Omnibus Incentive Plan (as amended and restated, the "2013 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 2013 Plan. At the discretion of the administrator of the 2013 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 2013 Plan was $~~1,626~~1,680 and $~~1,475~~1,515 for the three months ended ~~June~~September 30, 2013 and 2012, respectively, and $~~3,124~~4,804 and $~~3,125~~4,640 for the ~~six~~nine months ended ~~June~~September 30, 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 and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012. As of ~~June~~September 30, 2013, the Company had ~~21,420,000~~10,710,000 gallons of feedstock forward contracts designated as fair value hedges.

~~Table of Contents~~

~~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 and ~~six~~nine months ended ~~June~~September 30, 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

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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)

differential on the volume of the commodities covered. In any event, the Company would continue to receive the market price on the actual volume hedged. The Company also bears the risk that it could lose the benefit of market improvements over the fixed derivative price for the term and volume of the derivative instruments (as such improvements would accrue to the benefit of the counterparty).

Disclosures related to the Company's derivative assets and derivative liabilities subject to enforceable master netting arrangements have not been presented as they are not material to the Company's consolidated balance sheets at ~~June~~September 30, 2013 and December 31, 2012.

The fair values of derivative instruments in the Company's consolidated balance sheets were as follows:


	Derivative Assets					Derivative Assets
	Balance Sheet Location	Fair Value as of				Balance Sheet Location	Fair Value as of
		June 30, 2013		December 31, 2012			September 30, 2013		December 31, 2012
Designated as hedging instruments
Commodity forward contracts	Accounts receivable, net	$	6,720	$	13,032	Accounts receivable, net	$	3,208	$	13,032
Not designated as hedging instruments
Commodity forward contracts	Accounts receivable, net	2,330		1,395		Accounts receivable, net	2,541		1,395
Total derivative assets		$	9,050	$	14,427		$	5,749	$	14,427


	Derivative Liabilities					Derivative Liabilities
	Balance Sheet Location	Fair Value as of				Balance Sheet Location	Fair Value as of
		June 30, 2013		December 31, 2012			September 30, 2013		December 31, 2012
Designated as hedging instruments
Commodity forward contracts	Accrued liabilities	$	—	$	399	Accrued liabilities	$	—	$	399
Not designated as hedging instruments
Commodity forward contracts	Accrued liabilities	7,244		13,295		Accrued liabilities	2,090		13,295
Total derivative liabilities		$	7,244	$	13,694		$	2,090	$	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 and ~~six~~nine months ended ~~June~~September 30, 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 June 30,						Six Months Ended June 30,						Location of Gain (Loss) Recognized in Income on Derivative	Three Months Ended September 30,						Nine Months Ended September 30,
		2013			2012			2013			2012				2013			2012			2013			2012
Commodity forward contracts	Cost of sales	$	1,533		$	2,397		$	(110	)	$	12,860		Cost of sales	$	(232	)	$	(515	)	$	(342	)	$	12,345

Hedged Items in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income on Hedged Items	Three Months Ended June 30,						Six Months Ended June 30,						Location of Gain (Loss) Recognized in Income on Hedged Items	Three Months Ended September 30,						Nine Months Ended September 30,
		2013			2012			2013			2012				2013			2012			2013			2012
Firm commitment designated as the hedged item	Cost of sales	$	(1,615	)	$	(2,397	)	$	(220	)	$	(14,061	)	Cost of sales	$	236		$	515		$	15		$	(13,546	)

The impact of derivative instruments that have not been designated as hedges on the Company's consolidated statements of operations were as follows:



Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	Three Months Ended September 30,				Nine Months Ended September 30,
Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivative	2013		2012		2013		2012
Commodity forward contracts	Cost of sales	$	4,854	$	249	$	9,897	$	(783	)

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)

~~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 June 30, Six Months Ended June 30,
2013 2012 2013 2012
Commodity forward contracts Cost of sales $ 9,382
$ (1,592 ) $ 16,717
$ (1,031 )

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

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:


	June 30, 2013									September 30, 2013
	Level 1			Level 2			Total			Level 1			Level 2			Total
Derivative instruments
Risk management assets - Commodity forward contracts	$	1,740		$	7,310		$	9,050		$	1,808		$	3,941		$	5,749
Risk management liabilities - Commodity forward contracts	(15		)	(7,229		)	(7,244		)	(74		)	(2,016		)	(2,090		)
Firm commitments
Hedged portion of firm commitment	—			(6,720		)	(6,720		)	—			(3,208		)	(3,208		)
Marketable securities
Available-for-sale securities										14,998			105,604			120,602

	December 31, 2012									December 31, 2012
	Level 1			Level 2			Total			Level 1			Level 2			Total
Derivative instruments
Risk management assets - Commodity forward contracts	$	1,395		$	13,032		$	14,427		$	1,395		$	13,032		$	14,427
Risk management liabilities - Commodity forward contracts	—			(13,694		)	(13,694		)	—			(13,694		)	(13,694		)
Firm commitments
Hedged portion of firm commitment	—			399			399			—			399			399
Hedged portion of firm commitment	—			(13,032		)	(13,032		)	—			(13,032		)	(13,032		)

The Level 2 measurements for the Company's commodity contracts are derived using forward curves supplied by ~~industry recognized~~industry-recognized and unrelated third-party services. The Level 2 measurements for the Company's available-for-sale securities are derived using market-based pricing provided by unrelated third-party services.

There were no transfers in and out of Levels 1 and 2 of the fair value hierarchy for the ~~six~~nine months ended ~~June~~September 30, 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.

910

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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)


	June 30, 2013				December 31, 2012				September 30, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
3.60% senior notes due 2022	$	248,931	$	238,690	$	248,872	$	251,125	$	248,960	$	238,228	$	248,872	$	251,125
6 ½% senior notes due 2029	100,000		117,484		100,000		119,738		100,000		107,800		100,000		119,738
6 ¾% senior notes due 2032	250,000		268,750		250,000		283,168		250,000		267,465		250,000		283,168
6 ½% GO Zone Senior Notes Due 2035	89,000		104,480		89,000		102,095		89,000		94,209		89,000		102,095
6 ½% IKE Zone Senior Notes Due 2035	65,000		76,305		65,000		74,564		65,000		68,804		65,000		74,564
Loan related to tax-exempt waste disposal revenue bonds due 2027	10,889		10,889		10,889		10,889		10,889		10,889		10,889		10,889

11. Income Taxes

The effective income tax rate was ~~36.1%~~35.8% for the ~~six~~nine months ended ~~June~~September 30, 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 ~~34.7%~~33.5% for the ~~six~~nine months ended ~~June~~September 30, 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~~partially offset by state income taxes.

There was no material change to the total gross unrecognized tax benefits for the ~~six~~nine months ended ~~June~~September 30, 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 ~~June~~September 30, 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 June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012			2013			2012			2013			2012
Net income	$	145,816		$	115,501		$	269,163		$	203,314		$	170,290		$	86,964		$	439,453		$	290,278
Less:
Net income attributable to participating securities	(512		)	(606		)	(1,091		)	(1,240		)	(587		)	(452		)	(1,691		)	(1,682		)
Net income attributable to common shareholders	$	145,304		$	114,895		$	268,072		$	202,074		$	169,703		$	86,512		$	437,762		$	288,596

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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 June 30,				Six Months Ended June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012		2013		2012		2013		2012
Weighted average common shares—basic	66,629,609		66,298,633		66,627,661		66,203,965		66,628,747		66,311,958		66,628,027		66,240,225
Plus incremental shares from:
Assumed exercise of options	265,986		350,263		274,612		399,741		276,807		344,802		275,352		381,295
Weighted average common shares—diluted	66,895,595		66,648,896		66,902,273		66,603,706		66,905,554		66,656,760		66,903,379		66,621,520

Earnings per share:
Basic	$	2.18	$	1.73	$	4.02	$	3.05	$	2.55	$	1.30	$	6.57	$	4.36
Diluted	$	2.17	$	1.72	$	4.01	$	3.03	$	2.54	$	1.30	$	6.54	$	4.33

Excluded from the computation of diluted earnings per share are options to purchase ~~71,456~~68,662 and ~~327,669~~168,362 shares of common stock for the three months ended ~~June~~September 30, 2013 and 2012, respectively, and ~~54,000~~57,759 and ~~346,957~~293,062 shares of common stock for the ~~six~~nine months ended ~~June~~September 30, 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 June 30,										Six Months Ended June 30,										Three Months Ended September 30,										Nine Months Ended September 30,
	Pension						Post-retirement Healthcare				Pension						Post-retirement Healthcare				Pension						Post-retirement Healthcare				Pension						Post-retirement Healthcare
	2013			2012			2013		2012		2013			2012			2013		2012		2013			2012			2013		2012		2013			2012			2013		2012
Service cost	$	275		$	250		$	2	$	2	$	539		$	504		$	5	$	5	$	275		$	250		$	2	$	2	$	815		$	754		$	7	$	7
Interest cost	515			645			147		185		1,016			1,291			294		370		515			645			147		185		1,531			1,936			442		555
Expected return on plan assets	(713		)	(623		)	—		—		(1,427		)	(1,244		)	—		—		(713		)	(623		)	—		—		(2,140		)	(1,867		)	—		—
Amortization of prior service cost	74			74			21		21		148			148			42		42		74			74			21		21		223			223			63		63
Amortization of net loss	510			445			90		44		940			884			179		88		510			445			90		44		1,449			1,329			269		132
Net periodic benefit cost	$	661		$	791		$	260	$	252	$	1,216		$	1,583		$	520	$	505	$	661		$	791		$	260	$	252	$	1,878		$	2,375		$	781	$	757

The Company contributed $~~388~~776 and $~~1,021~~2,283 to the Salaried pension plan in the first ~~six~~nine months of 2013 and 2012, respectively, and contributed $~~350~~640 and $~~659~~1,542 to the Wage pension plan in the first ~~six~~nine months of 2013 and 2012, respectively. The Company expects to make additional contributions of $~~776~~388 to the Salaried pension plan and $~~580~~290 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~~ ~~six months ended June 30, 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 (301 ) (1,390 ) (1,691 )
Amounts reclassified from accumulated other comprehensive loss 805
—
805
Net other comprehensive income (loss) for the period 504
(1,390 ) (886 )
Balances at June 30, 2013 $ (15,847 ) $ 4,121
$ (11,726 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

(in thousands of dollars, except share amounts and per share data)

14. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2013 were as follows:



	Benefits Liability, Net of Tax			Cumulative Foreign Currency Exchange			Net Unrealized Holding Gains on Investments, Net of Tax		Total
Balances at December 31, 2012	$	(16,351	)	$	5,511		$	—	$	(10,840	)
Other comprehensive (loss) income before reclassifications	(601		)	(844		)	131		(1,314		)
Amounts reclassified from accumulated other comprehensive loss	1,233			—			—		1,233
Net other comprehensive income (loss) for the period	632			(844		)	131		(81		)
Balances at September 30, 2013	$	(15,719	)	$	4,667		$	131	$	(10,921	)

The following table provides the details of the amounts reclassified from accumulated other comprehensive income (loss) into net income in the consolidated statements of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2013:


Details about Accumulated Other Comprehensive Income (Loss) Components	Location of Reclassification (Income (Expense)) in Consolidated Statements of Operations	Three Months Ended June 30, 2013			Six Months Ended June 30, 2013			Location of Reclassification (Income (Expense)) in Consolidated Statements of Operations	Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013
Amortization of pension and other post-retirement items
Prior service costs	(1)	$	(95	)	$	(190	)	(1)	$	(95	)	$	(286	)
Net loss	(1)	(600		)	(1,119		)	(1)	(600		)	(1,718		)
		(695		)	(1,309		)		(695		)	(2,004		)
	Provision for income taxes	268			504			Provision for income taxes	267			771
Total reclassifications for the period		$	(427	)	$	(805	)		$	(428	)	$	(1,233	)

_____________


(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. Acquisitions

On May 1, 2013, the Company acquired assets comprising CertainTeed Corporation's Pipe and Foundation Group ("PFG") business and accounted for the asset acquisition as a business combination. The PFG acquisition includes the PVC pipe, fittings, profiles and foundation business and associated facilities in Lodi, California and McPherson, Kansas with production capacity of approximately 150 million pounds per year. The Company also acquired technologies and intellectual property for the production of a number of specialized products, including Certa-Lok® restrained joint pipe and Yelomine™ branded products for a variety of end-market applications. The Company's management believes that this acquisition will enhance the Company's building products portfolio by adding new specialty product lines and supporting technology.

The closing date purchase price of $178,309 was paid with available cash on hand. This amount is subject to a post-closing working capital adjustment. The acquisition is being accounted for under the acquisition method of accounting. The assets acquired and liabilities assumed and the results of operations of this acquired business are included in the Vinyls segment. The revenue and earnings of the PFG business included in the consolidated statement of operations since the acquisition date have not been presented separately as they are not material to the Company's consolidated statements of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2013. The pro forma impact of this business combination has not been presented as it is not material to the Company's consolidated statements of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2013 and 2012.

For the ~~six~~nine months ended ~~June~~September 30, 2013, the Company recognized $~~991~~1,124 of acquisition-related costs. These costs are included in selling, general and administrative expenses in the consolidated statement of operations for the ~~six~~nine months ended ~~June~~September 30, 2013.

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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 summarizes the consideration transferred and the estimated fair value of identified assets acquired and liabilities assumed at the date of acquisition. The final determination of fair value for certain assets and liabilities will be completed as soon as the information necessary to complete the analysis is obtained. These amounts will be finalized as soon as possible, but no later than one year from the acquisition date.

~~Table of Contents~~

~~WESTLAKE CHEMICAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(Unaudited)~~

~~(in thousands of dollars, except share amounts and per share data)~~


Fair value of consideration transferred:
Cash	$	178,309		$	178,309

Preliminary allocation of consideration transferred to net assets acquired:
Accounts receivable ⁽¹⁾	$	17,695		$	17,695
Inventories	25,948			25,948
Property, plant and equipment	31,416			31,261
Intangible assets:
Customer relationships (weighted average life of 15 years)	58,200			57,600
Trademarks	5,200			5,200
Developed technology (weighted average life of 15 years)	18,900			18,900
Other intangibles (weighted average life of 2 years)	300
Other intangibles (weighted average life of two years)				300
Current liabilities	(10,595		)	(10,595		)
Other liabilities	(26		)	(26		)
Total identifiable net assets	147,038			146,283
Goodwill ⁽²⁾	31,271			32,026
Consideration transferred	$	178,309		$	178,309

_____________


(1)	The fair value of accounts receivable acquired is $17,695, with the gross contractual amount being $17,772. The Company expects $77 to be uncollectible.

(2)

The goodwill recognized is primarily attributable to synergies from the Company's vinyls integration strategy expected to arise from the Company's PFG acquisition, as well as intangible assets that do not qualify for separate recognition. The goodwill is expected to be deductible for income tax purposes. The Company has not yet completed the process of assigning the goodwill to its reporting units.

Supplemental Noncash Investing Cash Flow Information

In conjunction with the acquisition, liabilities assumed consist of the following:



Fair value of assets acquired	$	188,930
Cash paid	(178,309		)
Liabilities assumed	$	10,621

16. Commitments and Contingencies

The Company is subject to environmental laws and regulations that can impose civil and criminal sanctions and that may require it to mitigate the effects of contamination caused by the release or disposal of hazardous substances into the environment. Under one law, 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.~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

(in thousands of dollars, except share amounts and per share data)

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. 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. On July 12, 2013, the parties submitted separate draft RIFS reports to the EPA.

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 settled this matter by paying a cash penalty of ~~$500~~ ~~in the quarter ended June 30, 2013.~~

~~Table of Contents~~

~~WESTLAKE CHEMICAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(Unaudited)~~

~~(in thousands of dollars, except share amounts and per share data)~~

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.

Table of Contents

WESTLAKE CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

(in thousands of dollars, except share amounts and per share data)

17. 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 June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012			2013			2012			2013			2012
Net external sales
Olefins
Polyethylene	$	413,693		$	398,023		$	834,461		$	843,443		$	460,105		$	431,614		$	1,294,566		$	1,275,057
Styrene, feedstock and other	209,648			274,696			371,725			561,547			219,234			108,171			590,959			669,718
Total Olefins	623,341			672,719			1,206,186			1,404,990			679,339			539,785			1,885,525			1,944,775
Vinyls
PVC, caustic soda and other	205,104			163,623			400,350			378,006			212,041			191,310			612,391			569,316
Building products	110,602			77,616			197,158			165,829			112,785			90,080			309,943			255,909
Total Vinyls	315,706			241,239			597,508			543,835			324,826			281,390			922,334			825,225
	$	939,047		$	913,958		$	1,803,694		$	1,948,825		$	1,004,165		$	821,175		$	2,807,859		$	2,770,000

Intersegment sales
Olefins	$	74,870		$	69,443		$	145,153		$	170,900		$	85,454		$	76,771		$	230,607		$	247,671
Vinyls	444			388			708			776			403			391			1,111			1,167
	$	75,314		$	69,831		$	145,861		$	171,676		$	85,857		$	77,162		$	231,718		$	248,838

Income (loss) from operations
Olefins	$	187,661		$	155,891		$	348,719		$	285,098		$	237,239		$	124,452		$	585,958		$	409,550
Vinyls	52,906			22,583			96,569			43,665			39,554			24,059			136,123			67,724
Corporate and other	(5,340		)	(7,496		)	(16,006		)	(12,160		)	(10,191		)	(5,994		)	(26,197		)	(18,154		)
	$	235,227		$	170,978		$	429,282		$	316,603		$	266,602		$	142,517		$	695,884		$	459,120

Depreciation and amortization
Olefins	$	26,554		$	24,070		$	49,900		$	47,833		$	26,515		$	27,070		$	76,415		$	74,903
Vinyls	13,534			11,589			25,418			23,098			14,089			11,232			39,507			34,330
Corporate and other	122			124			248			246			124			122			372			368
	$	40,210		$	35,783		$	75,566		$	71,177		$	40,728		$	38,424		$	116,294		$	109,601

Other income (expense), net
Olefins	$	1,151		$	1,001		$	5,162		$	1,957		$	728		$	806		$	5,889		$	2,764
Vinyls	(520		)	(272		)	(946		)	(31		)	(742		)	146			(1,687		)	115
Corporate and other	(726		)	378			(792		)	528			(273		)	270			(1,065		)	797
	$	(95	)	$	1,107		$	3,424		$	2,454		$	(287	)	$	1,222		$	3,137		$	3,676

Provision for (benefit from) income taxes
Olefins													$	82,553		$	36,092		$	208,170		$	130,612
Vinyls													10,710			6,556			44,120			18,989
Corporate and other													(535		)	(4,412		)	(7,643		)	(3,418		)
													$	92,728		$	38,236		$	244,647		$	146,183

1516

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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)


	Three Months Ended June 30,					Six Months Ended June 30,
	2013			2012		2013			2012
Provision for (benefit from) income taxes
Olefins	$	70,140		$	52,345	$	125,617		$	94,520
Vinyls	19,690			6,417		33,410			12,433
Corporate and other	(5,857		)	2,203		(7,108		)	994
	$	83,973		$	60,965	$	151,919		$	107,947	Three Months Ended September 30,				Nine Months Ended September 30,
											2013		2012		2013		2012
Capital expenditures
Olefins	$	28,040		$	27,821	$	78,080		$	45,302	$	27,577	$	46,867	$	105,656	$	92,168
Vinyls	118,983			45,994		219,300			92,834		172,565		47,001		391,864		139,836
Corporate and other	66			1,851		493			2,432		276		1,027		770		3,459
	$	147,089		$	75,666	$	297,873		$	140,568	$	200,418	$	94,895	$	498,290	$	235,463

A reconciliation of total segment income from operations to consolidated income before income taxes is as follows:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012			2013			2012			2013			2012
Income from operations	$	235,227		$	170,978		$	429,282		$	316,603		$	266,602		$	142,517		$	695,884		$	459,120
Interest expense	(5,343		)	(11,571		)	(11,624		)	(23,748		)	(3,297		)	(11,934		)	(14,921		)	(35,682		)
Debt retirement costs													—			(7,082		)	—			(7,082		)
Gain from sales of equity securities	—			15,952			—			15,952			—			477			—			16,429
Other (expense) income, net	(95		)	1,107			3,424			2,454			(287		)	1,222			3,137			3,676
Income before income taxes	$	229,789		$	176,466		$	421,082		$	311,261		$	263,018		$	125,200		$	684,100		$	436,461


	June 30, 2013		December 31, 2012		September 30, 2013		December 31, 2012
Total assets
Olefins	$	1,561,993	$	1,439,308	$	1,560,303	$	1,439,308
Vinyls	1,421,784		1,030,912		1,577,549		1,030,912
Corporate and other	724,558		941,976		785,597		941,976
	$	3,708,335	$	3,412,196	$	3,923,449	$	3,412,196

18. Goodwill

The changes in the carrying amount of goodwill for the ~~six~~nine months ended ~~June~~September 30, 2013 were as follows:


	Olefins Segment		Vinyls Segment		Total		Olefins Segment		Vinyls Segment		Total
Balance at December 31, 2012	$	29,990	$	—	$	29,990	$	29,990	$	—	$	29,990
Goodwill acquired during the period	—		31,271		31,271		—		32,026		32,026
Balance at June 30, 2013	$	29,990	$	31,271	$	61,261
Balance at September 30, 2013							$	29,990	$	32,026	$	62,016

19. Subsequent Events

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

1617

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

(in thousands of dollars, except share amounts and per share data)

20. 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 ~~June~~September 30, 2013


	Westlake Chemical Corporation		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated		Westlake Chemical Corporation		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Balance Sheet
Current assets
Cash and cash equivalents	$	592,311	$	3,464	$	29,726	$	—		$	625,501	$	560,261	$	4,494	$	26,801	$	—		$	591,556
Marketable securities	29,969		—		—		—			29,969		125,597		—		—		—			125,597
Accounts receivable, net	16,924		681,485		6,087		(228,858		)	475,638		5,373		694,473		5,489		(272,310		)	433,025
Inventories	—		411,030		16,109		—			427,139		—		435,540		16,031		—			451,571
Prepaid expenses and other current assets	130		18,569		2,074		—			20,773		468		15,931		2,410		—			18,809
Deferred income taxes	431		21,581		91		—			22,103		431		21,744		118		—			22,293
Total current assets	639,765		1,136,129		54,087		(228,858		)	1,601,123		692,130		1,172,182		50,849		(272,310		)	1,642,851
Property, plant and equipment, net	—		1,777,888		7,686		—			1,785,574		—		1,945,405		7,513		—			1,952,918
Equity investments	2,464,841		81,679		31,769		(2,529,809		)	48,480		2,635,954		98,823		31,634		(2,700,923		)	65,488
Other assets, net	17,537		261,704		1,112		(7,195		)	273,158		16,969		251,703		506		(6,986		)	262,192
Total assets	$	3,122,143	$	3,257,400	$	94,654	$	(2,765,862	)	$	3,708,335	$	3,345,053	$	3,468,113	$	90,502	$	(2,980,219	)	$	3,923,449
Current liabilities
Accounts payable	$	243,394	$	227,969	$	9,845	$	(234,201	)	$	247,007	$	311,357	$	220,106	$	4,322	$	(277,718	)	$	258,067
Accrued liabilities	13,332		127,893		881		5,343			147,449		15,679		151,654		1,878		5,408			174,619
Total current liabilities	256,726		355,862		10,726		(228,858		)	394,456		327,036		371,760		6,200		(272,310		)	432,686
Long-term debt	752,931		10,889		—		—			763,820		752,960		10,889		—		—			763,849
Deferred income taxes	—		393,249		735		(7,195		)	386,789		—		416,404		748		(6,986		)	410,166
Other liabilities	—		50,744		40		—			50,784		—		51,640		51		—			51,691
Stockholders' equity	2,112,486		2,446,656		83,153		(2,529,809		)	2,112,486		2,265,057		2,617,420		83,503		(2,700,923		)	2,265,057
Total liabilities and stockholders' equity	$	3,122,143	$	3,257,400	$	94,654	$	(2,765,862	)	$	3,708,335	$	3,345,053	$	3,468,113	$	90,502	$	(2,980,219	)	$	3,923,449

1718

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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)

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

1819

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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)

Condensed Consolidating Financial Information for the Three Months Ended ~~June~~September 30, 2013


	Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated			Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Statement of Operations
Net sales	$	—		$	928,782		$	13,684		$	(3,419	)	$	939,047		$	—		$	992,413		$	13,337		$	(1,585	)	$	1,004,165
Cost of sales	—			657,457			11,522			(3,419		)	665,560			—			689,388			11,891			(1,585		)	699,694
Gross profit	—			271,325			2,162			—			273,487			—			303,025			1,446			—			304,471
Selling, general and administrative expenses	552			36,055			1,653			—			38,260			514			35,714			1,641			—			37,869
(Loss) income from operations	(552		)	235,270			509			—			235,227			(514		)	267,311			(195		)	—			266,602
Interest expense	(5,332		)	(11		)	—			—			(5,343		)	(3,292		)	(5		)	—			—			(3,297		)
Other (expense) income, net	(404		)	1,638			(1,329		)	—			(95		)
Other income (expense), net																3,585			(3,821		)	(51		)	—			(287		)
(Loss) income before income taxes	(6,288		)	236,897			(820		)	—			229,789			(221		)	263,485			(246		)	—			263,018
(Benefit from) provision for income taxes	(2,258		)	86,401			(170		)	—			83,973			(70		)	92,849			(51		)	—			92,728
Equity in net income of subsidiaries	149,846			—			—			(149,846		)	—			170,441			—			—			(170,441		)	—
Net income (loss)	$	145,816		$	150,496		$	(650	)	$	(149,846	)	$	145,816		$	170,290		$	170,636		$	(195	)	$	(170,441	)	$	170,290
Comprehensive income (loss)	$	145,122		$	150,622		$	(1,470	)	$	(149,152	)	$	145,122
Comprehensive income																$	171,095		$	170,764		$	351		$	(171,115	)	$	171,095

Condensed Consolidating Financial Information for the Three Months Ended ~~June~~September 30, 2012


	Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated			Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Statement of Operations
Net sales	$	—		$	902,684		$	13,435		$	(2,161	)	$	913,958		$	—		$	809,164		$	13,876		$	(1,865	)	$	821,175
Cost of sales	—			703,421			10,802			(2,161		)	712,062			—			638,892			11,969			(1,865		)	648,996
Gross profit	—			199,263			2,633			—			201,896			—			170,272			1,907			—			172,179
Selling, general and administrative expenses	497			28,933			1,488			—			30,918			498			27,601			1,563			—			29,662
(Loss) income from operations	(497		)	170,330			1,145			—			170,978			(498		)	142,671			344			—			142,517
Interest expense	(11,562		)	(9		)	—			—			(11,571		)	(11,919		)	(15		)	—			—			(11,934		)
Debt retirement costs																(7,082		)	—			—			—			(7,082		)
Gain from sales of equity securities	1			15,951			—			—			15,952			—			477			—			—			477
Other income (expense), net	3,954			(1,279		)	(1,568		)	—			1,107			4,556			(2,744		)	(590		)	—			1,222
(Loss) income before income taxes	(8,104		)	184,993			(423		)	—			176,466			(14,943		)	140,389			(246		)	—			125,200
(Benefit from) provision for income taxes	(3,434		)	65,400			(1,001		)	—			60,965			(4,498		)	42,596			138			—			38,236
Equity in net income of subsidiaries	120,171			—			—			(120,171		)	—			97,409			—			—			(97,409		)	—
Net income	$	115,501		$	119,593		$	578		$	(120,171	)	$	115,501
Net income (loss)																$	86,964		$	97,793		$	(384	)	$	(97,409	)	$	86,964
Comprehensive income	$	97,500		$	102,562		$	129		$	(102,691	)	$	97,500		$	88,666		$	98,109		$	481		$	(98,590	)	$	88,666

1920

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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)

Condensed Consolidating Financial Information for the ~~Six~~Nine Months Ended ~~June~~September 30, 2013


	Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated			Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Statement of Operations
Net sales	$	—		$	1,784,867		$	24,224		$	(5,397	)	$	1,803,694		$	—		$	2,777,280		$	37,561		$	(6,982	)	$	2,807,859
Cost of sales	—			1,286,743			21,052			(5,397		)	1,302,398			—			1,976,131			32,943			(6,982		)	2,002,092
Gross profit	—			498,124			3,172			—			501,296			—			801,149			4,618			—			805,767
Selling, general and administrative expenses	1,062			67,764			3,188			—			72,014			1,576			103,478			4,829			—			109,883
(Loss) income from operations	(1,062		)	430,360			(16		)	—			429,282			(1,576		)	697,671			(211		)	—			695,884
Interest expense	(11,590		)	(34		)	—			—			(11,624		)	(14,882		)	(39		)	—			—			(14,921		)
Other income (expense), net	3,905			1,348			(1,829		)	—			3,424			7,490			(2,473		)	(1,880		)	—			3,137
(Loss) income before income taxes	(8,747		)	431,674			(1,845		)	—			421,082			(8,968		)	695,159			(2,091		)	—			684,100
(Benefit from) provision for income taxes	(3,132		)	155,452			(401		)	—			151,919			(3,202		)	248,301			(452		)	—			244,647
Equity in net income of subsidiaries	274,778			—			—			(274,778		)	—			445,219			—			—			(445,219		)	—
Net income (loss)	$	269,163		$	276,222		$	(1,444	)	$	(274,778	)	$	269,163		$	439,453		$	446,858		$	(1,639	)	$	(445,219	)	$	439,453
Comprehensive income (loss)	$	268,277		$	276,726		$	(2,834	)	$	(273,892	)	$	268,277		$	439,372		$	447,490		$	(2,483	)	$	(445,007	)	$	439,372

Condensed Consolidating Financial Information for the ~~Six~~Nine Months Ended ~~June~~September 30, 2012


	Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated			Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Statement of Operations
Net sales	$	—		$	1,929,016		$	23,278		$	(3,469	)	$	1,948,825		$	—		$	2,738,180		$	37,154		$	(5,334	)	$	2,770,000
Cost of sales	—			1,558,408			19,353			(3,469		)	1,574,292			—			2,197,300			31,322			(5,334		)	2,223,288
Gross profit	—			370,608			3,925			—			374,533			—			540,880			5,832			—			546,712
Selling, general and administrative expenses	1,002			53,688			3,240			—			57,930			1,500			81,288			4,804			—			87,592
(Loss) income from operations	(1,002		)	316,920			685			—			316,603			(1,500		)	459,592			1,028			—			459,120
Interest expense	(23,733		)	(15		)	—			—			(23,748		)	(35,652		)	(30		)	—			—			(35,682		)
Debt retirement costs																(7,082		)	—			—			—			(7,082		)
Gain from sales of equity securities	1			15,951			—			—			15,952			1			16,428			—			—			16,429
Other income (expense), net	7,488			(2,978		)	(2,056		)	—			2,454			12,044			(5,724		)	(2,644		)	—			3,676
(Loss) income before income taxes	(17,246		)	329,878			(1,371		)	—			311,261			(32,189		)	470,266			(1,616		)	—			436,461
(Benefit from) provision for income taxes	(6,607		)	115,633			(1,079		)	—			107,947			(11,105		)	158,228			(940		)	—			146,183
Equity in net income of subsidiaries	213,953			—			—			(213,953		)	—			311,362			—			—			(311,362		)	—
Net income (loss)	$	203,314		$	214,245		$	(292	)	$	(213,953	)	$	203,314		$	290,278		$	312,038		$	(676	)	$	(311,362	)	$	290,278
Comprehensive income (loss)	$	202,519		$	213,908		$	(229	)	$	(213,679	)	$	202,519
Comprehensive income																$	291,185		$	312,017		$	252		$	(312,269	)	$	291,185

2021

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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)

Condensed Consolidating Financial Information for the ~~Six~~Nine Months Ended ~~June~~September 30, 2013


	Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated			Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Statement of Cash Flows
Cash flows from operating activities
Net income (loss)	$	269,163		$	276,222		$	(1,444	)	$	(274,778	)	$	269,163		$	439,453		$	446,858		$	(1,639	)	$	(445,219	)	$	439,453
Adjustments to reconcile net income (loss) to net cash (used for) provided by operating activities
Depreciation and amortization	730			74,298			1,267			—			76,295			1,094			114,432			1,861			—			117,387
Deferred income taxes	(1,230		)	61,610			45			—			60,425			(1,102		)	84,532			13			—			83,443
Net changes in working capital and other	(279,039		)	(153,604		)	7,462			274,778			(150,403		)	(458,336		)	(87,330		)	7,664			445,219			(92,783		)
Net cash (used for) provided by operating activities	(10,376		)	258,526			7,330			—			255,480			(18,891		)	558,492			7,899			—			547,500
Cash flows from investing activities
Acquisition of business	—			(178,309		)	—			—			(178,309		)	—			(178,309		)	—			—			(178,309		)
Additions to equity investments	—			(6,113		)	—			—			(6,113		)	—			(23,338		)	—			—			(23,338		)
Additions to property, plant and equipment	—			(295,859		)	(2,014		)	—			(297,873		)	—			(496,027		)	(2,263		)	—			(498,290		)
Construction of assets pending sale-leaseback	—			(136		)	—			—			(136		)	—			(136		)	—			—			(136		)
Proceeds from disposition of assets	—			2			60			—			62			—			6			72			—			78
Proceeds from repayment of loan to affiliate	—			—			167			—			167			—			—			167			—			167
Proceeds from sales and maturities of securities	209,785			—			—			—			209,785			239,764			—			—			—			239,764
Purchase of securities	(114,881		)	—			—			—			(114,881		)	(232,286		)	—			—			—			(232,286		)
Settlements of derivative instruments	—			(1,588		)	—			—			(1,588		)	—			(2,297		)	—			—			(2,297		)
Net cash provided by (used for) investing activities	94,904			(482,003		)	(1,787		)	—			(388,886		)	7,478			(700,101		)	(2,024		)	—			(694,647		)
Cash flows from financing activities
Intercompany financing	(214,927		)	219,968			(5,041		)	—			—			(130,832		)	139,130			(8,298		)	—			—
Dividends paid	(25,120		)	—			—			—			(25,120		)	(40,204		)	—			—			—			(40,204		)
Proceeds from exercise of stock options	2,656			—			—			—			2,656			3,182			—			—			—			3,182
Repurchase of common stock for treasury	(13,283		)	—			—			—			(13,283		)	(19,409		)	—			—			—			(19,409		)
Windfall tax benefits from share-based payment arrangements	4,576			—			—			—			4,576			5,056			—			—			—			5,056
Net cash (used for) provided by financing activities	(246,098		)	219,968			(5,041		)	—			(31,171		)	(182,207		)	139,130			(8,298		)	—			(51,375		)
Net (decrease) increase in cash and cash equivalents	(161,570		)	(3,509		)	502			—			(164,577		)
Net decrease in cash and cash equivalents																(193,620		)	(2,479		)	(2,423		)	—			(198,522		)
Cash and cash equivalents at beginning of period	753,881			6,973			29,224			—			790,078			753,881			6,973			29,224			—			790,078
Cash and cash equivalents at end of period	$	592,311		$	3,464		$	29,726		$	—		$	625,501		$	560,261		$	4,494		$	26,801		$	—		$	591,556

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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)

Condensed Consolidating Financial Information for the ~~Six~~Nine Months Ended ~~June~~September 30, 2012


	Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated			Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Statement of Cash Flows
Cash flows from operating activities
Net income (loss)	$	203,314		$	214,245		$	(292	)	$	(213,953	)	$	203,314		$	290,278		$	312,038		$	(676	)	$	(311,362	)	$	290,278
Adjustments to reconcile net income (loss) to net cash (used for) provided by operating activities
Depreciation and amortization	801			69,514			1,663			—			71,978			1,149			107,191			2,410			—			110,750
Deferred income taxes	(717		)	7,270			167			—			6,720			(176		)	3,932			629			—			4,385
Net changes in working capital and other	(220,440		)	45,051			(4,430		)	213,953			34,134			(317,955		)	95,909			(1,898		)	311,362			87,418
Net cash (used for) provided by operating activities	(17,042		)	336,080			(2,892		)	—			316,146			(26,704		)	519,070			465			—			492,831
Cash flows from investing activities
Additions to property, plant and equipment	—			(139,876		)	(692		)	—			(140,568		)	—			(234,713		)	(750		)	—			(235,463		)
Construction of assets pending sale-leaseback	—			(1,760		)	—			—			(1,760		)	—			(5,484		)	—			—			(5,484		)
Proceeds from disposition of assets	—			412			3			—			415			—			414			21			—			435
Proceeds from repayment of loan to affiliate	—			—			596			—			596			—			—			763			—			763
Proceeds from sales of equity securities	3			46,024			—			—			46,027			3			47,652			—			—			47,655
Purchase of securities	—			(2,961		)	—			—			(2,961		)	—			(2,961		)	—			—			(2,961		)
Settlements of derivative instruments	—			511			—			—			511			—			471			—			—			471
Net cash provided by (used for) investing activities	3			(97,650		)	(93		)	—			(97,740		)	3			(194,621		)	34			—			(194,584		)
Cash flows from financing activities
Intercompany financing	230,680			(236,256		)	5,576			—			—			317,185			(321,273		)	4,088			—			—
Capitalized debt issuance costs	(98		)	—			—			—			(98		)	(2,221		)	—			—			—			(2,221		)
Dividends paid	(9,838		)	—			—			—			(9,838		)	(22,345		)	—			—			—			(22,345		)
Proceeds from borrowings																248,818			—			—			—			248,818
Proceeds from exercise of stock options	4,508			—			—			—			4,508			6,627			—			—			—			6,627
Repayment of borrowings																(250,000		)	—			—			—			(250,000		)
Repurchase of common stock for treasury	(10,784		)	—			—			—			(10,784		)	(10,784		)	—			—			—			(10,784		)
Utilization of restricted cash	75,975			—			—			—			75,975			96,433			—			—			—			96,433
Windfall tax benefits from share-based payment arrangements	6,468			—			—			—			6,468			7,792			—			—			—			7,792
Net cash provided by (used for) financing activities	296,911			(236,256		)	5,576			—			66,231			391,505			(321,273		)	4,088			—			74,320
Net increase in cash and cash equivalents	279,872			2,174			2,591			—			284,637			364,804			3,176			4,587			—			372,567
Cash and cash equivalents at beginning of period	803,320			2,517			20,064			—			825,901			803,320			2,517			20,064			—			825,901
Cash and cash equivalents at end of period	$	1,083,192		$	4,691		$	22,655		$	—		$	1,110,538		$	1,168,124		$	5,693		$	24,651		$	—		$	1,198,468

2223

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Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion and analysis should be read in conjunction with information contained in the accompanying unaudited consolidated interim financial statements of Westlake Chemical Corporation and the notes thereto and the consolidated financial statements and notes thereto of Westlake Chemical Corporation included in Westlake Chemical Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2012 (the "2012 Form 10-K"). The following discussion contains forward-looking statements. Please read "Forward-Looking Statements" for a discussion of limitations inherent in such statements.

We are a vertically integrated manufacturer and marketer of petrochemicals, polymers and fabricated building products. Our two principal business segments are Olefins and Vinyls. We use the majority of our internally-produced basic chemicals to produce higher value-added chemicals and building products.

Since 2009 and continuing through the ~~second~~third quarter of 2013, a cost advantage for natural gas liquids-based ethylene producers over naphtha-based ethylene producers has allowed a strong export market for ethylene derivatives and higher margins for North American chemical producers, including Westlake. Increased global demand for polyethylene in recent years in particular has resulted in improved operating margins and cash flow for our Olefins segment. However, some olefins industry consultants predict that a significant increase in worldwide ethylene and ethylene derivative capacity may occur within the next decade, with the largest increases in Asia and North America. As a result, our Olefins segment operating margins may be negatively impacted.

Continued weakness in the U.S. construction markets and budgetary constraints in municipal spending have contributed to lower domestic demand for our vinyls products. In addition, increases in feedstock costs, combined with the industry's inability to sufficiently raise domestic prices for ~~PVC~~polyvinyl chloride ("PVC") resin and building products in order to offset cost increases, affected our Vinyls segment's operating results in 2010 and 2011. However, since late 2010, the PVC industry has experienced an increase in PVC resin export demand, driven largely by more competitive feedstock and energy cost positions in North America. As a consequence, domestic PVC resin industry operating rates have improved since 2010, largely due to higher PVC resin export shipments. However, looking forward, our Vinyls segment operating rates and margins may continue to be negatively impacted by the slow recovery of U.S. construction markets.

The current U.S. economic environment, while slowly improving, continues to be somewhat challenging for our customers. However, we believe our customer base is generally healthy. As we continue to manage our business in this environment, including the slowdown in construction activity, we have taken steps designed to address the changes in demand and margins in our Vinyls segment and its resulting impact on our operations by matching production with sales demand and continuing to operate our plants in an efficient manner. We continue to monitor our cost management programs and discretionary capital spending. The impact of the weak global economic environment has been challenging to our business and, depending on the performance of the global economy in the remainder of 2013 and beyond, could have a negative effect on our financial condition, results of operations or cash flows.

Recent Developments

~~On May 1, 2013,~~In August 2008, we ~~acquired assets comprising CertainTeed Corporation's Pipe and Foundation Group ("PFG") business. CertainTeed Corporation is~~announced plans for the construction of a ~~subsidiary~~new chlor-alkali plant at our vinyls manufacturing complex in Geismar, Louisiana. We commenced construction of the ~~French public company, Compagnie de Saint-Gobain.~~plant in 2011. Presently, we expect the new chlor-alkali plant to be operational by the end of 2013. The ~~PFG acquisition includes the PVC pipe, fittings, profiles and foundation business and associated facilities in Lodi, California and McPherson, Kansas with production capacity of approximately 150~~new chlor-alkali plant is designed to produce 350,000 electro chemical units ("ECUs"), or 700 million pounds of chlorine, per ~~year. We also acquired technologies~~annum. The new plant is expected to improve the vertical integration of our vinyls business from chlorine downstream into vinyl chloride monomer ("VCM") and ~~intellectual property for the production of a number of specialized products, including Certa-Lok® restrained joint pipe~~PVC and ~~Yelomine™ branded products for a variety of end-market applications.~~

increase caustic soda sales.

2324

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Results of Operations


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012			2013			2012			2013			2012
	(dollars in thousands, except per share data)												(dollars in thousands, except per share data)
Net external sales
Olefins
Polyethylene	$	413,693		$	398,023		$	834,461		$	843,443		$	460,105		$	431,614		$	1,294,566		$	1,275,057
Styrene, feedstock and other	209,648			274,696			371,725			561,547			219,234			108,171			590,959			669,718
Total Olefins	623,341			672,719			1,206,186			1,404,990			679,339			539,785			1,885,525			1,944,775
Vinyls
PVC, caustic soda and other	205,104			163,623			400,350			378,006			212,041			191,310			612,391			569,316
Building products	110,602			77,616			197,158			165,829			112,785			90,080			309,943			255,909
Total Vinyls	315,706			241,239			597,508			543,835			324,826			281,390			922,334			825,225
Total	$	939,047		$	913,958		$	1,803,694		$	1,948,825		$	1,004,165		$	821,175		$	2,807,859		$	2,770,000

Income (loss) from operations
Olefins	$	187,661		$	155,891		$	348,719		$	285,098		$	237,239		$	124,452		$	585,958		$	409,550
Vinyls	52,906			22,583			96,569			43,665			39,554			24,059			136,123			67,724
Corporate and other	(5,340		)	(7,496		)	(16,006		)	(12,160		)	(10,191		)	(5,994		)	(26,197		)	(18,154		)
Total income from operations	235,227			170,978			429,282			316,603			266,602			142,517			695,884			459,120
Interest expense	(5,343		)	(11,571		)	(11,624		)	(23,748		)	(3,297		)	(11,934		)	(14,921		)	(35,682		)
Debt retirement costs													—			(7,082		)	—			(7,082		)
Gain from sales of equity securities	—			15,952			—			15,952			—			477			—			16,429
Other (expense) income, net	(95		)	1,107			3,424			2,454			(287		)	1,222			3,137			3,676
Provision for income taxes	83,973			60,965			151,919			107,947			92,728			38,236			244,647			146,183
Net income	$	145,816		$	115,501		$	269,163		$	203,314		$	170,290		$	86,964		$	439,453		$	290,278
Diluted earnings per share	$	2.17		$	1.72		$	4.01		$	3.03		$	2.54		$	1.30		$	6.54		$	4.33

	Three Months Ended June 30, 2013						Six Months Ended June 30, 2013						Three Months Ended September 30, 2013						Nine Months Ended September 30, 2013
	Average Sales Price			Volume			Average Sales Price			Volume			Average Sales Price			Volume			Average Sales Price			Volume
Product sales price and volume percentage change from prior year period
Olefins	+0.5		%	-7.8		%	-1.0		%	-13.1		%	+11.5		%	+14.3		%	+2.0		%	-5.1		%
Vinyls	-0.2		%	+31.1		%	-0.2		%	+10.0		%	+6.2		%	+9.3		%	+2.1		%	+9.7		%
Company average	+0.3		%	+2.5		%	-0.8		%	-6.7		%	+9.7		%	+12.6		%	+2.1		%	-0.7		%

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012			2013			2012			2013			2012
Average industry prices ⁽¹⁾
Ethane (cents/lb)	9.2			13.6			8.9			16.3			8.4			11.4			8.7			14.6
Propane (cents/lb)	21.6			23.1			21.0			26.5			24.4			21.2			22.2			24.7
Ethylene (cents/lb) ⁽²⁾	58.5			59.0			60.9			60.6			54.3			52.1			58.7			57.8
Polyethylene (cents/lb) ⁽³⁾	100.0			95.0			98.7			97.0			101.7			91.3			99.7			95.1
Styrene (cents/lb) ⁽⁴⁾	81.8			73.8			83.9			74.0			83.2			77.7			83.6			75.3
Caustic soda ($/short ton) ⁽⁵⁾	625.8			547.5			614.2			559.2			605.8			579.2			611.4			565.8
Chlorine ($/short ton) ⁽⁶⁾	255.0			267.5			255.0			270.8			248.3			262.5			252.8			268.1
PVC (cents/lb) ⁽⁷⁾	62.2			55.5			60.7			56.0			61.5			52.5			60.9			54.8

_____________


(1)	Industry pricing data was obtained through IHS Chemical. We have not independently verified the data.

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(2)	Represents average North American spot prices of ethylene over the period as reported by IHS Chemical.

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(3)	Represents average North American contract prices of polyethylene low density film over the period as reported by IHS Chemical.


(4)	Represents average North American contract prices of styrene over the period as reported by IHS Chemical.


(5)	Represents average North American undiscounted contract prices of caustic soda over the period as reported by IHS Chemical.


(6)	Represents average North American contract prices of chlorine (into chemicals) over the period as reported by IHS Chemical.


(7)	Represents average North American contract prices of PVC over the period as reported by IHS Chemical.

Summary

For the quarter ended ~~June~~September 30, 2013, net income was $~~145.8~~170.3 million, or $~~2.17~~2.54 per diluted share, on net sales of $~~939.0~~1,004.2 million. This represents an increase in net income of $~~30.3~~83.3 million, or $~~0.45~~1.24 per diluted share, compared to the quarter ended ~~June~~September 30, 2012 net income of $~~115.5~~87.0 million, or $~~1.72~~1.30 per diluted share, on net sales of $~~914.0~~821.2 million. Net sales for the ~~second~~third quarter of 2013 increased by $~~25.0~~183.0 million compared to net sales for the ~~second~~third quarter of 2012, mainly attributable to higher sales volumes for ~~building products, PVC resin~~styrene and caustic, ~~partially offset~~higher sales prices for most of our major products and sales contributed by ~~lower feedstock and ethylene sales volumes.~~our specialty PVC pipe business, which we acquired in May 2013. Income from operations was $~~235.2~~266.6 million for the ~~second~~third quarter of 2013 as compared to $~~171.0~~142.5 million for the ~~second~~third quarter of 2012. Income from operations for the ~~second~~third quarter of 2013 benefited primarily from improved olefins and vinyls integrated product margins, predominantly due to higher sales prices for most of our major products and lower overall feedstock costs as compared to the prior year period. ~~Industry ethane prices declined 32.4% and industry propane prices declined 6.5% in the~~ ~~second quarter of 2013~~ ~~as compared to the~~ ~~second quarter of 2012~~. Income from operations for the second quarter of 2013 was negatively impacted by non-recurring PFG acquisition-related costs, including the effect of selling higher cost inventory recorded at fair value, of $5.7 million, or $0.05 per diluted share, after tax.

For the ~~six~~nine months ended ~~June~~September 30, 2013, net income was $~~269.2~~439.5 million, or $~~4.01~~6.54 per diluted share, on net sales of $~~1,803.7~~2,807.9 million. This represents an increase in net income of $~~65.9~~149.2 million, or $~~0.98~~2.21 per diluted share, from the ~~six~~nine months ended ~~June~~September 30, 2012 net income of $~~203.3~~290.3 million, or $~~3.03~~4.33 per diluted share, on net sales of $~~1,948.8~~2,770.0 million. Net sales for the ~~six~~nine months ended ~~June~~September 30, 2013 ~~decreased~~increased marginally by $~~145.1~~37.9 million compared to the prior year period mainly due to higher sales volumes and sales prices for styrene, PVC resin and caustic, higher polyethylene sales prices and sales contributed by our specialty PVC pipe business, mostly offset by lower feedstock, ethylene and ethylene co-products sales ~~volumes, partially offset by higher sales volumes for building products and PVC resin and higher caustic sales prices and sales volume.~~volumes. Income from operations was $~~429.3~~695.9 million for the ~~six~~nine months ended ~~June~~September 30, 2013 as compared to $~~316.6~~459.1 million for the ~~six~~nine months ended ~~June~~September 30, 2012. The increase in income from operations was primarily attributable to higher olefins and vinyls integrated product margins, ~~as compared to the prior year period. The improved margins were~~ predominantly due to a significant decrease in feedstock costs as average industry ethane prices decreased ~~45.4%~~40.4% and average industry propane prices decreased ~~20.8%.~~10.1% for the nine months ended September 30, 2013 as compared to the prior year period. The increase in income from operations was partially offset by the lost production and the unabsorbed fixed manufacturing costs and other costs associated with the turnaround and expansion of one of the Lake Charles, Louisiana ethylene units and the specialty PVC pipe business acquisition-related costs, including the effect of selling higher cost inventory recorded at fair value, of $5.8 million, or $0.06 per diluted share, after tax.

RESULTS OF OPERATIONS

~~Second~~Third Quarter 2013 Compared with ~~Second~~Third Quarter 2012

Net Sales. Net sales increased by $~~25.0~~183.0 million, or ~~2.7%~~22.3%, to $~~939.0~~1,004.2 million in the ~~second~~third quarter of 2013 from $~~914.0~~821.2 million in the ~~second~~third quarter of 2012, primarily attributable to higher sales volumes for ~~the~~styrene and caustic, higher sales prices for most of our major ~~Vinyls~~ products and sales contributed by ~~the acquired PFG business, partially offset by lower feedstock and ethylene sales volumes.~~our specialty PVC pipe business. Average sales prices for the ~~second~~third quarter of 2013 increased ~~marginally~~ by ~~0.3%~~9.7% as compared to the ~~second~~third quarter of 2012. Overall sales ~~volume~~volumes increased by ~~2.5%~~12.6% as compared to the ~~second~~third quarter of 2012.

Gross Profit. Gross profit margin percentage increased to ~~29.1%~~30.3% for the ~~second~~third quarter of 2013 from ~~22.1%~~21.0% for the ~~second~~third quarter of 2012, driven mainly by improved olefins and vinyls integrated product margins, primarily attributable to higher sales prices for most of our major products and lower ~~feedstock~~ethane costs, partially offset by higher propane costs. The ~~second~~third quarter 2013 gross profit margin also benefited from higher ~~building products, PVC resin~~styrene and caustic sales volumes. Our raw material cost in both segments normally tracks industry prices, which experienced a decrease of ~~32.4% and 6.5%~~26.3% for ethane and an increase of 15.1% for propane, ~~respectively,~~ as compared to the ~~second~~third quarter of 2012. Sales prices increased an average of ~~0.3%~~9.7% for the ~~second~~third quarter of 2013 as compared to the ~~second~~third quarter of 2012. The gross profit margin for the third quarter of 2012 was negatively impacted by the unabsorbed fixed manufacturing costs associated with a planned outage of our styrene plant in Lake Charles.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the ~~second~~third quarter of 2013 of $~~38.3~~37.9 million increased by $~~7.4~~8.2 million as compared to the ~~second~~third quarter of 2012, mainly due to an increase in payroll and related labor costs, including incentive compensation, and an increase in selling expenses associated with the ~~provision for doubtful accounts.~~increase in sales.

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Interest Expense. Interest expense decreased by $~~6.3~~8.6 million to $~~5.3~~3.3 million in the ~~second~~third quarter of 2013 from $~~11.6~~11.9 million in the ~~second~~third quarter of 2012 largely as a result of increased capitalized interest on major capital projects ~~and lower average interest rates in the second quarter of 2013~~ as compared to the prior year period. Debt balances remained relatively unchanged from the prior year period.

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Other (Expense) Income, Net. Other (expense) income, net was net expense of $~~0.1~~0.3 million in the ~~second~~third quarter of 2013 compared to net income of $~~1.1~~1.2 million in the ~~second~~third quarter of 2012, mainly due to lower investment income and related write-offs and lower interest income ~~and higher losses on foreign exchange~~ in the ~~second~~third quarter of 2013.

Income Taxes. The effective income tax rate was ~~36.5%~~35.3% for the ~~second~~third quarter of 2013. The effective income tax rate for the ~~second~~third quarter of 2013 was above the U.S. federal statutory rate of 35.0% primarily due to state income taxes, ~~partially~~mostly offset by the domestic manufacturing deduction. The effective income tax rate was ~~34.5%~~30.5% for the ~~second~~third quarter of 2012. The effective income tax rate for the ~~second~~third quarter of 2012 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~~and a reduction in state income taxes.

Olefins Segment

Net Sales. Net sales ~~decreased~~increased by $~~49.4~~139.5 million, or ~~7.3%~~25.8%, to $~~623.3~~679.3 million in the ~~second~~third quarter of 2013 from $~~672.7~~539.8 million in the ~~second~~third quarter of 2012, predominantly due to ~~lower feedstock and ethylene~~higher styrene sales volumes ~~partially offset by~~and higher ~~polyethylene~~ sales prices for our major products as compared to the prior year period. Styrene sales volumes for the third quarter of 2012 were negatively impacted by a planned outage of our styrene plant in Lake Charles. Average sales prices for the Olefins segment increased ~~marginally~~ by ~~0.5%~~11.5% in the ~~second~~third quarter of 2013 as compared to the ~~second~~third quarter of 2012. Average sales volumes for the Olefins segment ~~decreased~~increased by ~~7.8%~~14.3% in the ~~second~~third quarter of 2013 as compared to the ~~second~~third quarter of 2012.

Income from Operations. Income from operations increased by $~~31.8~~112.7 million, or ~~20.4%~~90.5%, to $~~187.7~~237.2 million in the ~~second~~third quarter of 2013 from $~~155.9~~124.5 million in the ~~second~~third quarter of 2012. This increase was mainly attributable to higher olefins integrated product margins as compared to the prior year period, primarily as a result of higher sales prices for most of our major products and significantly lower feedstock costs. In addition, olefins integrated margins benefited from the increased ethylene production at our Lake Charles complex after the completion in the first quarter of 2013 of the expansion project to increase the ethane-based ethylene capacity of one of the ethylene units at that complex. Trading activity in the ~~second~~third quarter of 2013 resulted in a gain of $~~9.4~~4.9 million as compared to a ~~loss~~gain of $~~1.6~~0.2 million in the ~~second~~third quarter of 2012. Third quarter 2012 income from operations was negatively impacted by the lost production and unabsorbed fixed manufacturing costs associated with the planned outage of our styrene plant in Lake Charles.

Vinyls Segment

Net Sales. Net sales increased by $~~74.5~~43.4 million, or ~~30.9%~~15.4%, to $~~315.7~~324.8 million in the ~~second~~third quarter of 2013 from $~~241.2~~281.4 million in the ~~second~~third quarter of 2012. This increase was mainly attributable to higher caustic sales ~~volumes for all major products,~~volume, higher ~~sales prices for~~ PVC resin and caustic sales prices and the sales contributed by ~~the acquired PFG~~our specialty PVC pipe business. Sales volume for the second quarter of 2012 was negatively impacted by the lower operating rates at our Geismar, Louisiana vinyls complex as a result of operational issues related to an unscheduled shut down at the complex. Average sales prices for the Vinyls segment ~~decreased marginally~~increased by ~~0.2%~~6.2% in the ~~second~~third quarter of 2013 as compared to the ~~second~~third quarter of 2012. Average sales volumes for the Vinyls segment increased by ~~31.1%~~9.3% in the ~~second~~third quarter of 2013 as compared to the ~~second~~third quarter of 2012.

Income from Operations. Income from operations increased by $~~30.3~~15.5 million, or ~~134.1%~~64.3%, to $~~52.9~~39.6 million in the ~~second~~third quarter of 2013 from $~~22.6~~24.1 million in the ~~second~~third quarter of 2012. This increase was primarily driven by higher vinyls integrated product margins, largely resulting from ~~lower feedstock costs and~~ higher sales ~~volumes~~prices for all major products, higher caustic sales volume and improved operating rates as compared to the prior year period, partially offset by non-recurring PFG acquisition-related costs, including the effect of selling higher cost inventory recorded at fair value. The second quarter 2012 income from operations was negatively impacted by an unscheduled shut down of our Geismar vinyls complex and the expensing of approximately $9.5 million of costs associated with that event. While Vinyls segment operating results for the second quarter of 2013 generally improved as compared to recent quarters, our Vinyls segment remains constrained by weakness in the U.S. construction markets and budgetary constraints in municipal spending.period.

~~Six~~Nine Months Ended ~~June~~September 30, 2013 Compared with ~~Six~~Nine Months Ended ~~June~~September 30, 2012

Net Sales. Net sales ~~decreased~~increased marginally by $~~145.1~~37.9 million, or ~~7.4%~~1.4%, to $~~1,803.7~~2,807.9 million for the ~~six~~nine months ended ~~June~~September 30, 2013 from $~~1,948.8~~2,770.0 million for the ~~six~~nine months ended ~~June~~September 30, 2012, primarily attributable to higher sales volumes and sales prices for styrene, PVC resin and caustic, higher polyethylene sales prices and sales contributed by our specialty PVC pipe business, mostly offset by lower feedstock, ethylene and ethylene co-products sales ~~volumes, partially offset by higher sales volumes for building products and PVC resin and higher caustic sales prices and sales volume.~~volumes. Ethylene and ethylene co-product sales volumes were lower primarily due to the first quarter 2013 turnaround and expansion of one of the Lake Charles ethylene units. Average sales prices for the ~~six~~nine months ended ~~June~~September 30, 2013 increased by 2.1% as compared to the nine months ended September 30, 2012. Overall sales volumes for the nine months ended September 30, 2013 decreased by ~~0.8%~~0.7% as compared to the ~~six~~nine months ended ~~June 30, 2012. Overall sales volume for the~~ ~~six months ended June 30, 2013~~ ~~decreased by~~ ~~6.7%~~ ~~as compared to the~~ ~~six months ended June~~September 30, 2012.

Gross Profit. Gross profit margin percentage of ~~27.8%~~28.7% for the ~~six~~nine months ended ~~June~~September 30, 2013 increased from the ~~19.2%~~19.7% gross profit margin percentage for the ~~six~~nine months ended ~~June~~September 30, 2012. The improvement in gross profit margin percentage was predominantly due to lower feedstock costs. Our raw material cost in both segments normally tracks industry prices, which experienced a decrease of ~~45.4%~~40.4% and ~~20.8%~~10.1% for ethane and propane, respectively, as compared to the ~~six~~nine months

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ended ~~June~~September 30, 2012. Sales prices ~~decreased~~increased an average of ~~0.8%~~2.1% for the ~~six~~nine months ended ~~June~~September 30, 2013 as compared to the prior year period.

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Selling, General and Administrative Expenses. Selling, general and administrative expenses for the ~~six~~nine months ended ~~June~~September 30, 2013 increased by $~~14.1~~22.3 million as compared to the ~~six~~nine months ended ~~June~~September 30, 2012, mainly attributable to an increase in payroll and related labor costs, including incentive compensation, and an increase in the provision for doubtful accounts.

Interest Expense. Interest expense decreased by $~~12.1~~20.8 million to $~~11.6~~14.9 million for the ~~six~~nine months ended ~~June~~September 30, 2013, largely due to increased capitalized interest on major capital projects and lower average interest rates in the first ~~six~~nine months of 2013 as compared to the prior year period. Debt balances remained relatively unchanged from the prior year period.

Other Income, Net. Other income, net ~~increased~~decreased by $~~0.9~~0.6 million to $~~3.4~~3.1 million for the ~~six~~nine months ended ~~June~~September 30, 2013 from $~~2.5~~3.7 million for the ~~six~~nine months ended ~~June~~September 30, 2012. The ~~increase~~decrease was principally due to ~~higher equity in~~lower investment income ~~from our joint ventures~~ and ~~the settlement of a claim against a supplier during the period, partially offset by~~related write-offs, lower interest income and higher losses on foreign exchange as compared to the prior year period, mostly offset by the settlement of a claim against a supplier during the period.

Income Taxes. The effective income tax rate was ~~36.1%~~35.8% for the ~~six~~nine months ended ~~June~~September 30, 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 ~~34.7%~~33.5% for the ~~six~~nine months ended ~~June~~September 30, 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~~partially offset by state income taxes.

Olefins Segment

Net Sales. Net sales decreased by $~~198.8~~59.3 million, or ~~14.1%~~3.0%, to $~~1,206.2~~1,885.5 million for the ~~six~~nine months ended ~~June~~September 30, 2013 from $~~1,405.0~~1,944.8 million for the ~~six~~nine months ended ~~June~~September 30, 2012, mainly due to lower feedstock, ethylene and ethylene co-products sales volumes, partially offset by higher sales volumes for styrene and ~~lower~~higher sales prices for ~~most of our major products. Average sales prices for the Olefins segment decreased by~~ ~~1.0%~~ ~~for the~~ ~~six months ended June 30, 2013~~ ~~as compared to the~~ ~~six months ended June 30, 2012. Average sales volumes for the Olefins segment decreased by~~ ~~13.1%~~ ~~for the~~ ~~six months ended June 30, 2013~~ ~~as compared to the~~ ~~six months ended June 30, 2012~~.polyethylene and styrene. Ethylene and ethylene co-product sales volumes were lower primarily due to the first quarter 2013 turnaround and expansion of one of the Lake Charles ethylene units. Average sales prices for the Olefins segment increased by 2.0% for the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012. Average sales volumes for the Olefins segment decreased by 5.1% for the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012.

Income from Operations. Income from operations increased by $~~63.6~~176.4 million, or ~~22.3%~~43.1%, to $~~348.7~~586.0 million for the ~~six~~nine months ended ~~June~~September 30, 2013 from $~~285.1~~409.6 million for the ~~six~~nine months ended ~~June~~September 30, 2012. This increase was mainly attributable to higher olefins integrated product margins as compared to the prior year period. Margins improved primarily as a result of significantly lower feedstock ~~costs, which were only partially offset by lower sales prices.~~costs. Income from operations for the ~~six~~nine months ended ~~June~~September 30, 2013 was negatively impacted by the lost production and the expensing of $19.9 million related to unabsorbed fixed manufacturing costs and other costs associated with the turnaround and expansion of one of the Lake Charles ethylene units. Trading activity for the ~~six~~nine months ended ~~June~~September 30, 2013 resulted in a gain of $~~16.7~~9.9 million as compared to a loss of $~~1.0~~0.8 million for the prior year period. Income from operations for the first nine months of 2012 was negatively impacted by the lost production and unabsorbed fixed manufacturing costs associated with the planned outage of our Lake Charles styrene plant.

Vinyls Segment

Net Sales. Net sales increased by $~~53.7~~97.1 million, or ~~9.9%~~11.8%, to $~~597.5~~922.3 million for the ~~six~~nine months ended ~~June~~September 30, 2013 from $~~543.8~~825.2 million for the ~~six~~nine months ended ~~June~~September 30, 2012. This increase was primarily attributable to higher sales volumes for ~~all~~caustic and PVC resin, higher sales prices for most major products and ~~higher caustic prices~~sales contributed by our specialty PVC pipe business. Sales volumes for the first nine months of 2012 were negatively impacted by the lower operating rates at our Geismar vinyls complex as ~~compared~~a result of operational issues related to the ~~prior year period.~~unscheduled shut down at the complex. Average sales prices for the Vinyls segment ~~decreased marginally~~increased by ~~0.2%~~2.1% for the ~~six~~nine months ended ~~June~~September 30, 2013 as compared to the ~~six~~nine months ended ~~June~~September 30, 2012, while average sales volumes increased by ~~10.0%~~9.7% for the ~~six~~nine months ended ~~June~~September 30, 2013 as compared to the ~~six~~nine months ended ~~June~~September 30, 2012.

Income from Operations. Income from operations increased by $~~52.9~~68.4 million to $~~96.6~~136.1 million for the ~~six~~nine months ended ~~June~~September 30, 2013 from $~~43.7~~67.7 million for the ~~six~~nine months ended ~~June~~September 30, 2012. This increase was predominantly driven by lower feedstock costs, ~~and~~ higher sales volumes for ~~all major products~~caustic and PVC resin and higher operating rates as compared to the prior year ~~period.~~period, partially offset by the specialty PVC pipe business acquisition-related costs, including the effect of selling higher cost inventory recorded at fair value. The Vinyls segment's operating results for the first ~~six~~nine months of 2012 were

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negatively impacted by the lost production, lost sales and unabsorbed manufacturing and other costs associated with anthe unscheduled shut down at our Geismar vinyls complex.

CASH FLOW DISCUSSION FOR THE ~~SIX~~NINE MONTHS ENDED ~~JUNE~~SEPTEMBER 30, 2013 AND 2012

Cash Flows

Operating Activities

Operating activities provided cash of $~~255.5~~547.5 million in the first ~~six~~nine months of 2013 compared to cash provided of $~~316.1~~492.8 million in the first ~~six~~nine months of 2012~~, a~~. The $~~60.6~~54.7 million ~~decrease~~increase in cash flows from operating ~~activities. The decrease~~activities was mainly ~~attributable~~due to ~~the fact that~~ an increase in income from operations, ~~was more than~~partially offset by an increase in the use of cash

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for working capital purposes and deferred turnaround costs from the turnaround of one of our Lake Charles ethylene units. Income from operations increased by $~~112.7~~236.8 million in the first ~~six~~nine months of 2013 primarily as a result of higher olefins and vinyls integrated product margins as compared to the prior year period. Changes in components of working capital, which we define for purposes of this cash flow discussion as accounts receivable, net, inventories, prepaid expenses and other current assets, less accounts payable and accrued liabilities, used cash of $~~98.5~~46.5 million in the first ~~six~~nine months of 2013, compared to $~~46.3~~115.3 million of cash provided in the first ~~six~~nine months of 2012, an unfavorable change of $~~144.8~~161.8 million. The change was caused by higher accounts receivable balances largely attributable to an increase in average sales ~~volume~~volumes during the ~~second~~third quarter of 2013 as compared to the ~~second~~third quarter of 2012 and an increase in inventory during the 2013 period. ~~In addition, inventory decreased during the 2012 period as high cost feedstock in inventory at December 31, 2011 flowed through cost of sales in the first quarter of 2012.~~

Investing Activities

Net cash used for investing activities during the first ~~six~~nine months of 2013 was $~~388.9~~694.6 million as compared to net cash used for investing activities of $~~97.7~~194.6 million in the first ~~six~~nine months of 2012. Capital expenditures were $~~297.9~~498.3 million in the first ~~six~~nine months of 2013 compared to $~~140.6~~235.5 million in the first ~~six~~nine months of 2012. The higher capital expenditures in the first ~~six~~nine months of 2013 were largely attributable to the construction of the new chlor-alkali plant at our Geismar facility (which is expected to be operational by the ~~expansion~~end of ~~one of the ethylene units at our Lake Charles complex and~~2013), the feedstock conversion, PVC plant expansion and ethylene furnaces modernization projects at our Calvert City, Kentucky complex and the expansion of one of the ethylene units at our Lake Charles complex. Capital expenditures in the first ~~six~~nine months of 2012 were mainly incurred on the construction of the new Geismar chlor-alkali plant and the expansion of one of the ethylene units at our Lake Charles complex. The remaining capital expenditures in the first ~~six~~nine months of 2013 and 2012 primarily related to projects to improve production capacity or reduce costs and maintenance, safety and environmental projects at our various facilities. We used $178.3 million of cash to acquire ~~the PFG~~our specialty PVC pipe business. Purchases of securities in the first ~~six~~nine months of 2013 totaled $~~114.9~~232.3 million and were comprised of short-term commercial ~~paper.~~paper and corporate and U.S. government debt securities. We also received aggregate proceeds of $~~209.8~~239.8 million from the maturities of short-term commercial paper in the first ~~six~~nine months of 2013. The activity during the first ~~six~~nine months of 2012 was primarily related to the proceeds received from the sale of equity securities.

Financing Activities

Net cash used for financing activities during the first ~~six~~nine months of 2013 was $~~31.2~~51.4 million as compared to net cash provided of $~~66.2~~74.3 million in the first ~~six~~nine months of 2012. The activity during the first ~~six~~nine months of 2013 was primarily related to the $~~25.1~~40.2 million payment of cash dividends and $~~13.3~~19.4 million of cash used for the ~~repurchases~~repurchase of shares of our common stock, partially offset by proceeds of $~~2.7~~3.2 million from the exercise of stock options. The activity during the first ~~six~~nine months of 2012 was mainly related to the draw-down of our restricted cash and proceeds from the exercise of stock options, partially offset by the $~~9.8~~22.3 million payment of cash dividends, ~~and~~ $10.8 million of repurchases of shares of our common ~~stock.~~stock and $2.2 million of debt issuance costs associated with the issuance of our 3.60% senior notes due 2022.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Financing Arrangements

Our principal sources of liquidity are from cash and cash equivalents, investments in current marketable securities, cash from operations, short-term borrowings under our revolving credit facility and our long-term financing.

In October 2012, we announced a project to convert the feedstock for our Calvert City ethylene plant from propane to ethane and the planned increase in ethylene capacity from 450 million pounds annually to 630 million pounds annually. The ethylene expansion and feedstock conversion project is targeted for start-up in the second quarter of 2014. In addition, we announced an expansion of the existing PVC plant in Calvert City, which should allow us to take advantage of the increased ethylene production at our Calvert City complex and to provide additional PVC resin to meet the growing demands of our global customers. The expansion of the Calvert City PVC plant is expected to increase PVC resin capacity by approximately

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200 million pounds annually and is targeted for completion by ~~late~~the second half of 2014. These projects are currently estimated to cost in the range of $210.0 million to $240.0 million in the aggregate.

In August 2010, we announced that we intend to proceed with the previously announced plans for the construction of a new chlor-alkali plant at our Geismar facility. The project is currently estimated to cost in the range of ~~$390.0~~$400.0 million to ~~$420.0~~$425.0 million and is targeted for start-up in the fourth quarter of 2013.

These capital projects are expected to be funded with cash on hand, cash flow from operations, and, if necessary, borrowings under our revolving credit facility and other external financing. As of ~~June~~September 30, 2013, we had incurred a total cost of approximately ~~$416.6~~$465.3 million on these capital projects.

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In April 2011, we announced an expansion program to increase the ethane-based ethylene capacity of both of the ethylene units at our Lake Charles complex. We completed the expansion of the first ethylene unit in the first quarter of 2013. We are evaluating plans for the expansion of the second ethylene unit at our Lake Charles ~~complex.~~complex in 2015.

In August 2011, our Board of Directors authorized a stock repurchase program totaling $100.0 million. As of ~~June~~September 30, 2013, we had repurchased ~~446,825~~506,525 shares of our common stock for an aggregate purchase price of approximately $~~26.6~~32.7 million under this program. During the three months ended ~~June~~September 30, 2013, we repurchased ~~162,332~~59,700 shares of our common stock for an aggregate purchase price of approximately ~~$13.3~~$6.1 million under this program. Purchases under this program may be made either through the open market or in privately negotiated transactions. Decisions regarding the amount and the timing of purchases under the program will be influenced by our cash on hand, our cash flow from operations, general market conditions and other factors. The program may be discontinued by our Board of Directors at any time.

We believe that our sources of liquidity as described above will be adequate to fund our normal operations and ongoing capital expenditures. Funding of any potential large expansions or any potential acquisitions may depend on our ability to obtain additional financing in the future. We may not be able to access additional liquidity at cost effective interest rates due to the volatility of the commercial credit markets.

Cash, Cash Equivalents and Current Marketable Securities

As of ~~June~~September 30, 2013, our cash, cash equivalents and current marketable securities totaled $~~655.5~~717.2 million. In addition, we have a revolving credit facility available to supplement cash if needed, as described under "Debt" below.

Debt

As of ~~June~~September 30, 2013, our long-term debt, including current maturities, totaled $763.8 million, consisting of $250.0 million principal amount of 3.60% senior notes due 2022 (less the unamortized discount of $1.1 million), $100.0 million of 6 ½% senior notes due 2029, $250.0 million of 6 ¾% senior notes due 2032, $89.0 million of 6 ½% senior notes due 2035 (the "6 ½% GO Zone Senior Notes Due 2035"), $65.0 million of 6 ½% senior notes due 2035 (the "6 ½% IKE Zone Senior Notes Due 2035") (collectively, but excluding the 3.60% senior notes due 2022, the "Senior Notes") and a $10.9 million loan from the proceeds of tax-exempt waste disposal revenue bonds (supported by an $11.3 million letter of credit). The 6 ½% senior notes due 2029, the 6 ¾% senior notes due 2032, the 6 ½% GO Zone Senior Notes Due 2035 and the 6 ½% IKE Zone Senior Notes Due 2035 evidence and secure our obligations to the Louisiana Local Government Environmental Facility and Development Authority (the "Authority"), a political subdivision of the State of Louisiana, under four loan agreements relating to the issuance of $100.0 million, $250.0 million, $89.0 million and $65.0 million aggregate principal amount of the Authority's tax-exempt revenue bonds, respectively. As of ~~June~~September 30, 2013, debt outstanding under the tax-exempt waste disposal revenue bonds bore interest at a variable rate. As of ~~June~~September 30, 2013, we were in compliance with all of the covenants with respect to the 3.60% senior notes due 2022, the Senior Notes, our waste disposal revenue bonds and our revolving credit facility.

Revolving Credit Facility

We have a $400.0 million senior secured revolving credit facility. The facility includes a provision permitting us to increase the size of the facility, up to four times, in increments of at least $25.0 million each (up to a maximum of $150.0 million) under certain circumstances if certain lenders agree to commit to such an increase.

At ~~June~~September 30, 2013, we had no borrowings outstanding under the revolving credit facility. Any borrowings under the facility will bear interest at either LIBOR plus a spread ranging from 1.75% 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 ~~June~~September 30, 2013, we had outstanding letters of credit totaling $16.9 million and borrowing availability of $383.1 million under the revolving credit facility.

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Our revolving credit facility requires us to maintain a minimum fixed charge coverage ratio of 1.0:1 for successive 30-day periods after any date on which the borrowing availability under the facility is less than the greater of (1) 12.5% of the commitments under the facility and (2) $50.0 million, until the borrowing availability exceeds the greater of the amount in clause (1) and the amount in clause (2) for a 30-day period.

In order to make acquisitions or investments, our revolving credit facility provides that (1) we must maintain a minimum borrowing availability of at least the greater of $100.0 million or 25% of the total bank commitments under our revolving credit facility or (2) we must maintain a minimum borrowing availability of at least the greater of $70.0 million or 17.5% of the total bank commitments under our revolving credit facility and meet a minimum fixed charge coverage ratio of 1.0:1 under our revolving credit facility. However, we may make specified distributions up to an aggregate of $25.0 million and specified

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acquisitions up to an aggregate of $25.0 million if either we maintain a minimum borrowing availability of at least the greater of $70.0 million or 17.5% of the total bank commitments under our revolving credit facility or we meet the minimum fixed charge coverage ratio of 1.0:1 under our revolving credit facility. Notwithstanding the foregoing, we may make (1) investments up to $200.0 million in one or more joint ventures that own feedstock, raw material and ethylene pipeline, storage and fractionating facilities and (2) additional investments up to $55.0 million in Suzhou Huasu Plastics Co., Ltd. The revolving credit facility contains other customary covenants and events of default that impose significant operating and financial restrictions on us. These restrictions, among other things, provide limitations on the occurrence of additional indebtedness and our ability to create liens, to engage in certain affiliate transactions and to engage in sale-leaseback transactions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt" in the 2012 Form 10-K for more information on the revolving credit facility.

GO Zone and IKE Zone Bonds

As of ~~June~~September 30, 2013, we had drawn all the proceeds from the issuance of the 6 ½% senior notes due 2029, 6 ¾% senior notes due 2032, 6 ½% GO Zone Senior Notes Due 2035 and 6 ½% IKE Zone Senior Notes Due 2035. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt" in the 2012 Form 10-K for more information on the 6 ½% senior notes due 2029, the 6 ¾% senior notes due 2032, the 6 ½% GO Zone Senior Notes Due 2035 and the 6 ½% IKE Zone Senior Notes Due 2035. All domestic restricted subsidiaries that guarantee other debt of ours or of another guarantor of the Senior Notes in excess of $5.0 million are guarantors of these notes.

The indentures governing the Senior Notes contain customary covenants and events of default. Accordingly, these agreements generally impose significant operating and financial restrictions on us. These restrictions, among other things, provide limitations on incurrence of additional indebtedness, the payment of dividends, certain investments and acquisitions and sales of assets. However, the effectiveness of certain of these restrictions is currently suspended because the Senior Notes are currently rated investment grade by at least two nationally recognized credit rating agencies. The most significant of these provisions, if it were currently effective, would restrict us from incurring additional debt, except specified permitted debt (including borrowings under our credit facility), when our fixed charge coverage ratio is below 2.0:1. These limitations are subject to a number of important qualifications and exceptions, including, without limitation, an exception for the payment of our regular quarterly dividend of up to $0.20 per share (currently $~~0.1875~~0.2250 per share). If the restrictions were currently effective, distributions in excess of $100.0 million would not be allowed unless, after giving pro forma effect to the distribution, our fixed charge coverage ratio is at least 2.0:1 and such payment, together with the aggregate amount of all other distributions after January 13, 2006, is less than the sum of 50% of our consolidated net income for the period from October 1, 2003 to the end of the most recent quarter for which financial statements have been filed, plus 100% of net cash proceeds received after October 1, 2003 as a contribution to our common equity capital or from the issuance or sale of certain securities, plus several other adjustments.

3.60% Senior Notes due 2022

The 3.60% senior notes due 2022 are unsecured and were issued with an original issue discount of $1.2 million. There is no sinking fund and no scheduled amortization of the 3.60% senior notes due 2022 prior to maturity. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt" in the 2012 Form 10-K for more information on the 3.60% senior notes due 2022. All of our domestic subsidiaries that guarantee other indebtedness of ours or of another guarantor of the 3.60% senior notes due 2022 in excess of $5.0 million are guarantors of the 3.60% senior notes due 2022.

The indenture governing the 3.60% senior notes due 2022 contains customary events of default and covenants that will restrict our and certain of our subsidiaries' ability to (1) incur certain secured indebtedness, (2) engage in certain sale-leaseback transactions and (3) consolidate, merge or transfer all or substantially all of our assets.

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Revenue Bonds

In December 1997, we entered into a loan agreement with a public trust established for public purposes for the benefit of the Parish of Calcasieu, Louisiana. The public trust issued $10.9 million principal amount of tax-exempt waste disposal revenue bonds in order to finance our construction of waste disposal facilities for an ethylene plant. The waste disposal revenue bonds expire in December 2027 and are subject to redemption and mandatory tender for purchase prior to maturity under certain conditions. Interest on the waste disposal revenue bonds accrues at a rate determined by a remarketing agent and is payable quarterly.

Our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations, we believe our cash flow from operations,

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available cash and available borrowings under our revolving credit facility will be adequate to meet our normal operating needs for the foreseeable future.

Off-Balance Sheet Arrangements

None.

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. Certain of the statements contained in this report are forward-looking statements. All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements can be identified by the use of words such as "believes," "intends," "may," "should," "could," "anticipates," "expected" or comparable terminology, or by discussions of strategies or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Forward-looking statements relate to matters such as:

future operating rates, margins, cash flow and demand for our products;

industry market outlook;

production capacities;

our ability to borrow additional funds under our credit facility;

our ability to meet our liquidity needs;

our intended quarterly dividends;

future capacity additions and expansions in the industry;

timing, funding and results of the expansion and feedstock conversion programs at our Lake Charles and Calvert City complexes;

timing, funding and results of the planned new chlor-alkali plant in Geismar;

~~results of the PFG acquisition;~~

health of our customer base;

pension plan funding requirements and investment policies;

compliance with present and future environmental regulations and costs associated with environmentally related penalties, capital expenditures, remedial actions and proceedings, including any new laws, regulations or treaties that may come into force to limit or control carbon dioxide and other greenhouse gases emissions or to address other issues of climate change;

~~the utilization of net operating loss carryforwards;~~

effects of pending legal proceedings; and

timing of and amount of capital expenditures.

We have based these statements on assumptions and analyses in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe were appropriate in the circumstances when the statements were made. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those described in such statements. These statements are subject to a number of assumptions, risks and uncertainties, including those described in "Risk Factors" in the 2012 Form 10-K and the following:

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general economic and business conditions;

the cyclical nature of the chemical industry;

the availability, cost and volatility of raw materials and energy;

uncertainties associated with the United States and worldwide economies, including those due to political tensions in the Middle East and elsewhere;

current and potential governmental regulatory actions in the United States and regulatory actions and political unrest in other countries;

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industry production capacity and operating rates;

the supply/demand balance for our products;

competitive products and pricing pressures;

instability in the credit and financial markets;

access to capital markets;

terrorist acts;

operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, spills and releases and other environmental risks);

changes in laws or regulations;

technological developments;

our ability to implement our business strategies; and

creditworthiness of our customers.

Many of these factors are beyond our ability to control or predict. Any of the factors, or a combination of these factors, could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. These forward-looking statements are not guarantees of our future performance, and our actual results and future developments may differ materially from those projected in the forward-looking statements. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels. Every forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Commodity Price Risk

A substantial portion of our products and raw materials are commodities whose prices fluctuate as market supply and demand fundamentals change. Accordingly, product margins and the level of our profitability tend to fluctuate with changes in the business cycle. We try to protect against such instability through various business strategies. Our strategies include ethylene feedstock flexibility and moving downstream into the olefins and vinyls products where pricing is more stable. We use derivative instruments in certain instances to reduce price volatility risk on feedstocks and products. Based on our open derivative positions at ~~June~~September 30, 2013, a hypothetical $0.10 increase in the price of a gallon of ethane would have increased our income before taxes by ~~$4.3~~$2.4 million and a hypothetical $0.10 increase in the price of a pound of ethylene would have decreased our income before taxes by ~~$9.0~~$3.9 million. Additional information concerning derivative commodity instruments appears in Notes 9 and 10 to the unaudited consolidated financial ~~statements.~~statements within this Quarterly Report on Form 10-Q.

Interest Rate Risk

We are exposed to interest rate risk with respect to fixed and variable rate debt. At ~~June~~September 30, 2013, we had variable rate debt of $10.9 million outstanding. All of the debt outstanding under our revolving credit facility (none was outstanding at ~~June~~September 30, 2013) and our loan relating to the tax-exempt waste disposal revenue bonds are at variable rates. We do not currently hedge our variable interest rate debt, but we may do so in the future. The average variable interest rate for our variable rate debt of $10.9 million as of ~~June~~September 30, 2013 was ~~0.17%~~0.16%. A hypothetical 100 basis point increase in the average interest rate on our variable rate debt would increase our annual interest expense by approximately $0.1 million. Also, at ~~June~~September 30, 2013, we had $754.0 million aggregate principal amount of fixed rate debt. We are subject to the risk of higher interest cost if and when this debt is refinanced. If interest rates are 1% higher at the time of refinancing, our annual interest expense would increase by approximately $7.5 million.

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Item 4.	Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Senior Vice President, Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 or 15d-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based upon that evaluation, our President and Chief Executive Officer and our Senior Vice President, Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective with respect to (i) the accumulation and communication to our management, including our Chief Executive Officer and our Chief Financial Officer, of information required to be disclosed by us in the reports that we submit under the Exchange Act, and (ii) the recording, processing, summarizing and reporting of such information within the time periods specified in the SEC's rules and forms.

There were no changes in our internal control over financial reporting that occurred during the three months ended ~~June~~September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION



Item 1.	Legal Proceedings

The 2012 Form 10-K, filed on February 22, 2013, contained a description of various legal proceedings in which we are involved, including environmental proceedings at our facilities in Calvert City. See Note 16 to the unaudited consolidated financial statements within this Quarterly Report on Form 10-Q for a description of certain of those proceedings, which information is incorporated by reference herein.



Item 1A.	Risk Factors

For a discussion of risk factors, please read Item 1A, "Risk Factors" in the 2012 Form 10-K and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013. There have been no material changes from those risk factors.



Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information on our purchase of equity securities during the quarter ended ~~June~~September 30, 2013:

Period
Total Number
of Shares
Purchased ^{(1) (2)}

Average Price
Paid Per
Share

Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs ⁽²⁾

Maximum Number
(or Approximate
Dollar Value) of
Shares that
May Yet Be
Purchased Under the
Plans or Programs ⁽²⁾
April 2013 162,499
$ 81.83
162,332
$ 73,415,000
May 2013 —
$ —
—
$ 73,415,000
June 2013 —
$ —
—
$ 73,415,000
162,499
$ 81.83
162,332



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽¹⁾	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾
July 2013	—	$	—	—	$	73,415,000
August 2013	—	$	—	—	$	73,415,000
September 2013	59,700	$	102.62	59,700	$	67,289,000
	59,700	$	102.62	59,700

_____________


(1)	~~Of these shares, 167 represent shares withheld in satisfaction of withholding taxes due upon the vesting of restricted stock granted to our employees under the 2013 Plan.~~

~~(2)~~

On August 22, 2011, we announced the authorization by our Board of Directors of a $100.0 million stock repurchase program. As of ~~June~~September 30, 2013, ~~446,825~~506,525 shares of common stock had been acquired at an aggregate purchase price of $~~26.6~~32.7 million. Decisions regarding the amount and the timing of purchases under the program will be influenced by our cash on hand, our cash flow from operations, general market conditions and other factors. The program may be discontinued by our Board of Directors at any time.

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Item 6.	Exhibits



Exhibit No.

~~4.1~~		Borrower Joinder Agreement, dated as of May 1, 2013, between North American Specialty Products LLC, a Delaware limited liability company, the Existing Borrowers (as defined therein) and Bank of America, N.A., as administrative agent

~~4.2~~		Supplemental Indenture, dated as of May 1, 2013, among North American Specialty Products LLC, a Delaware limited liability company, the Company, the other Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee

~~4.3~~		Supplemental Indenture, dated as of June 1, 2013, among Westlake Pipeline Investments LLC, a Delaware limited liability company, the Company, the other Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee

~~4.4~~		Supplemental Indenture, dated as of June 1, 2013, among Westlake NG IV Corporation, a Delaware corporation, and Westlake NG V Corporation, a Delaware corporation, the Company, the other Subsidiary Guarantors (as defined therein) and The Bank of New York Mellon Trust Company, N.A., as trustee

~~10.1~~		Westlake Chemical Corporation 2013 Omnibus Incentive Plan (as amended and restated as of May 17, 2013) (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 22, 2013, File No.1-32260)

31.1		Rule 13a – 14(a) / 15d – 14(a) Certification (Principal Executive Officer)

31.2		Rule 13a – 14(a) / 15d – 14(a) Certification (Principal Financial Officer)

32.1		Section 1350 Certification (Principal Executive Officer and Principal Financial Officer)

101.INS		XBRL Instance Document⁽¹⁾

101.SCH		XBRL Taxonomy Extension Schema Document⁽¹⁾

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document⁽¹⁾

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document⁽¹⁾

101.LAB		XBRL Taxonomy Extension Label Linkbase Document⁽¹⁾

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document⁽¹⁾

~~_____________~~


~~(1)~~	Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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SIGNATURES

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



		WESTLAKE CHEMICAL CORPORATION

Date:	~~July 31,~~November 7, 2013	By:	/S/ ALBERT CHAO
			Albert Chao
			President and Chief Executive Officer (Principal Executive Officer)

Date:	~~July 31,~~November 7, 2013	By:	/S/ M. STEVEN BENDER
			M. Steven Bender
			Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

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Period	Total Number of Shares Purchased ^{(1) (2)}	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs ⁽²⁾
April 2013	162,499	$	81.83	162,332	$	73,415,000
May 2013	—	$	—	—	$	73,415,000
June 2013	—	$	—	—	$	73,415,000
	162,499	$	81.83	162,332

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company