UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended ~~September 30, 2013~~March 31, 2014



¨	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 ~~November 1, 2013~~April 29, 2014 was ~~66,770,803~~133,429,082 (on a post-split basis).

INDEX




Item	Page
PART I. FINANCIAL INFORMATION
1) Financial Statements	1
2) Management's Discussion and Analysis of Financial Condition and Results of Operations	2422
3) Quantitative and Qualitative Disclosures about Market Risk	3330
4) Controls and Procedures	3430

PART II. OTHER INFORMATION
1) Legal Proceedings	3531
1A) Risk Factors	3531
2) Unregistered Sales of Equity Securities and Use of Proceeds	3531
6) Exhibits	3632

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2013			December 31, 2012			March 31, 2014			December 31, 2013
	(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	$	591,556		$	790,078		$	532,643		$	461,301
Marketable securities	125,597			124,873			243,694			239,388
Accounts receivable, net	433,025			400,159			421,879			428,457
Inventories	451,571			399,298			439,009			471,879
Prepaid expenses and other current assets	18,809			14,700			15,880			13,888
Deferred income taxes	22,293			22,305			34,158			34,169
Total current assets	1,642,851			1,751,413			1,687,263			1,649,082
Property, plant and equipment, net	1,952,918			1,510,048			2,150,643			2,088,014
Equity investments	65,488			43,736			67,560			66,875
Other assets, net
Intangible assets, net	159,376			48,292			157,086			159,046
Deferred charges and other assets, net	102,816			58,707			109,404			97,892
Total other assets, net	262,192			106,999			266,490			256,938
Total assets	$	3,923,449		$	3,412,196		$	4,171,956		$	4,060,909
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	258,067		$	217,050		$	211,952		$	249,613
Accrued liabilities	174,619			181,460			147,982			155,245
Total current liabilities	432,686			398,510			359,934			404,858
Long-term debt	763,849			763,761			763,909			763,879
Deferred income taxes	410,166			326,290			447,203			437,976
Other liabilities	51,691			51,379			32,338			35,593
Total liabilities	1,658,392			1,539,940			1,603,384			1,642,306
Commitments and contingencies (Notes 7 and 16)
Commitments and contingencies (Notes 7 and 15)
Stockholders' equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares issued and outstanding	—			—			—			—
Common stock, $0.01 par value, 150,000,000 shares authorized; 67,276,761 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		)
Common stock, $0.01 par value, 150,000,000 shares authorized; 134,682,004 and 134,580,208 shares issued at March 31, 2014 and December 31, 2013, respectively (Note 1)							1,347			1,346
Common stock, held in treasury, at cost; 1,252,922 shares at March 31, 2014 and December 31, 2013 (Note 1)							(46,220		)	(46,220		)
Additional paid-in capital	509,295			496,254			519,323			511,432
Retained earnings	1,798,721			1,399,472			2,095,904			1,954,661
Accumulated other comprehensive loss	(10,921		)	(10,840		)	(1,782		)	(2,616		)
Total stockholders' equity	2,265,057			1,872,256			2,568,572			2,418,603
Total liabilities and stockholders' equity	$	3,923,449		$	3,412,196		$	4,171,956		$	4,060,909

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

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WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2013			2012			2013			2012			2014			2013
	(in thousands of dollars, except per share data and share amounts)												(in thousands of dollars, except per share data and share amounts)
Net sales	$	1,004,165		$	821,175		$	2,807,859		$	2,770,000		$	1,027,676		$	864,647
Cost of sales	699,694			648,996			2,002,092			2,223,288			740,666			636,838
Gross profit	304,471			172,179			805,767			546,712			287,010			227,809
Selling, general and administrative expenses	37,869			29,662			109,883			87,592			38,955			33,754
Income from operations	266,602			142,517			695,884			459,120			248,055			194,055
Other income (expense)
Interest expense	(3,297		)	(11,934		)	(14,921		)	(35,682		)	(9,157		)	(6,281		)
Debt retirement costs	—			(7,082		)	—			(7,082		)
Gain from sales of equity securities	—			477			—			16,429
Other (expense) income, net	(287		)	1,222			3,137			3,676
Other income, net													2,509			3,519
Income before income taxes	263,018			125,200			684,100			436,461			241,407			191,293
Provision for income taxes	92,728			38,236			244,647			146,183			83,375			67,946
Net income	$	170,290		$	86,964		$	439,453		$	290,278		$	158,032		$	123,347
Earnings per share:
Earnings per share (Note 1):
Basic	$	2.55		$	1.30		$	6.57		$	4.36		$	1.18		$	0.92
Diluted	$	2.54		$	1.30		$	6.54		$	4.33		$	1.18		$	0.92
Weighted average shares outstanding:
Weighted average shares outstanding (Note 1):
Basic	66,628,747			66,311,958			66,628,027			66,240,225			133,072,254			133,251,071
Diluted	66,905,554			66,656,760			66,903,379			66,621,520			133,612,924			133,817,737
Dividends per common share	$	0.2250		$	0.1875		$	0.6000		$	0.3350
Dividends per common share (Note 1)													$	0.1260		$	0.0938

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 September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2013			2012			2013			2012			2014			2013
	(in thousands of dollars)												(in thousands of dollars)
Net income	$	170,290		$	86,964		$	439,453		$	290,278		$	158,032		$	123,347
Other comprehensive (loss) income
Other comprehensive income (loss), net of income taxes
Pension and other post-retirement benefits liability
Pension and other post-retirement reserves adjustment (excluding amortization)	(489		)	72			(978		)	142
Amortization of benefits liability	695			584			2,004			1,747			219			614
Income tax provision on pension and other post-retirement benefits liability	(78		)	(252		)	(394		)	(725		)	(84		)	(236		)
Foreign currency translation adjustments	546			865			(844		)	928			(898		)	(570		)
Reclassification of net cash flow hedge losses to net income, net of income tax benefit	—			521			—			—
Available-for-sale investments
Unrealized holding gains on investments	205			339			205			14,582			2,467			—
Income tax provision on unrealized holding gains	(74		)	(121		)	(74		)	(5,229		)
Reclassification of net realized gain to net income	—			(306		)	—			(10,538		)
Reclassification of net realized loss to net income													25			—
Income tax provision on available-for-sale investments													(895		)	—
Other comprehensive income (loss)	805			1,702			(81		)	907			834			(192		)
Comprehensive income	$	171,095		$	88,666		$	439,372		$	291,185		$	158,866		$	123,155

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

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WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2013			2012			2014			2013
	(in thousands of dollars)						(in thousands of dollars)
Cash flows from operating activities
Net income	$	439,453		$	290,278		$	158,032		$	123,347
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	116,294			109,601			45,972			35,356
Provision for (recovery of) doubtful accounts	3,600			(536		)
(Recovery of) provision for doubtful accounts							(144		)	393
Amortization of debt issuance costs	1,093			1,149			365			365
Stock-based compensation expense	4,804			4,640			2,222			1,499
Loss from disposition of fixed assets	4,679			1,945			855			2,387
Gain from sales of equity securities	—			(16,429		)
Write-off of debt issuance costs	—			1,277
Deferred income taxes	83,443			4,385			8,275			29,466
Windfall tax benefits from share-based payment arrangements	(5,056		)	(7,792		)	(3,512		)	(3,844		)
Equity in loss of joint ventures	1,586			2,567
Income from equity method investments, net of dividends							(685		)	(178		)
Other loss, net							444			—
Changes in operating assets and liabilities
Accounts receivable	(18,874		)	13,732			5,332			(7,917		)
Inventories	(26,325		)	119,240			32,870			(8,776		)
Prepaid expenses and other current assets	(5,038		)	(1,977		)	(1,478		)	(2,077		)
Accounts payable	19,518			(35,651		)	(29,706		)	14,733
Accrued liabilities	(15,755		)	20,077			(4,952		)	(14,670		)
Other, net	(55,922		)	(13,675		)	(1,385		)	(53,832		)
Net cash provided by operating activities	547,500			492,831			212,505			116,252
Cash flows from investing activities
Acquisition of business	(178,309		)	—
Additions to equity investments	(23,338		)	—
Additions to property, plant and equipment	(498,290		)	(235,463		)	(110,741		)	(150,784		)
Construction of assets pending sale-leaseback	(136		)	(5,484		)
Proceeds from disposition of assets	78			435			12			2
Proceeds from repayment of loan to affiliate	167			763			—			167
Proceeds from sales and maturities of securities	239,764			47,655			30,119			124,873
Purchase of securities	(232,286		)	(2,961		)	(49,025		)	(94,903		)
Settlements of derivative instruments	(2,297		)	471			(409		)	(679		)
Net cash used for investing activities	(694,647		)	(194,584		)	(130,044		)	(121,324		)
Cash flows from financing activities
Capitalized debt issuance costs	—			(2,221		)
Dividends paid	(40,204		)	(22,345		)	(16,789		)	(12,553		)
Proceeds from debt issuance	—			248,818
Proceeds from exercise of stock options	3,182			6,627			2,158			1,590
Repayment of debt	—			(250,000		)
Repurchase of common stock for treasury	(19,409		)	(10,784		)
Utilization of restricted cash	—			96,433
Windfall tax benefits from share-based payment arrangements	5,056			7,792			3,512			3,844
Net cash (used for) provided by financing activities	(51,375		)	74,320
Net (decrease) increase in cash and cash equivalents	(198,522		)	372,567
Net cash used for financing activities							(11,119		)	(7,119		)
Net increase (decrease) in cash and cash equivalents							71,342			(12,191		)
Cash and cash equivalents at beginning of period	790,078			825,901			461,301			790,078
Cash and cash equivalents at end of period	$	591,556		$	1,198,468		$	532,643		$	777,887

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~~2013 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~~2013 (the "~~2012~~2013 Form 10-K"), filed with the SEC on February ~~22, 2013.~~21, 2014. 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~~2013.

In the opinion of the Company's management, the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company's financial position as of ~~September 30, 2013~~March 31, 2014, its results of operations for the ~~three and~~ ~~nine~~three months ended ~~September 30,~~March 31, 2014 and 2013 ~~and 2012~~ and the changes in its cash position for the ~~nine~~three months ended ~~September 30,~~March 31, 2014 and 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~~2014 or any other interim period. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

~~Revisions~~

~~The consolidated statement of cash flows for the nine months ended September 30, 2012 has been revised to correct the presentation of windfall tax benefits from share-based compensation of~~ ~~$7,792~~ ~~in financing activities, instead of operating activities. The Company has determined that this revision was immaterial to~~On February 14, 2014, the Company's ~~previously issued~~Board of Directors authorized a two-for-one split of the Company's common stock. Stockholders of record as of February��28, 2014 were entitled to one additional share for every share outstanding, which was distributed on March 18, 2014. The total number of authorized common stock shares and associated par value were unchanged by this stock split. All share amounts and per share data included in the accompanying consolidated financial ~~statements.~~statements and related notes have been restated to reflect the effect of the stock split.

Recent Accounting Pronouncements

~~Disclosures about Offsetting Assets and Liabilities~~

~~In December 2011, the Financial Accounting Standards Board ("FASB")~~There are no recently issued an accounting standards ~~update on disclosures for offsetting assets and liabilities. The new accounting guidance requires companies~~which are expected 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~~2. Financial Instruments

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. Cash Equivalents

The Company ~~adopted the new indefinite-lived intangible assets test guidance~~had $411,527 and $263,967 of held-to-maturity securities with original maturities of three months or less, primarily consisting of corporate debt securities, classified as ~~of January 1,~~cash equivalents at March 31, 2014 and December 31, 2013 ~~and the adoption did not have a material impact on the~~, respectively. The Company's ~~consolidated financial position, results of operations or cash flows.~~investments in held-to-maturity securities are held at amortized cost, which approximates fair value.

Available-for-Sale Marketable Securities

Investments in available-for-sale securities were classified as follows:



	March 31, 2014		December 31, 2013
Current	$	243,694	$	239,388
Non-current	17,195		—
Total available-for-sale securities	$	260,889	$	239,388

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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)

~~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									March 31, 2014
	Cost		Gross Unrealized Gains		Gross Unrealized Losses ⁽¹⁾			Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses ⁽¹⁾			Fair Value
Debt securities
Corporate bonds	$	11,888	$	191	$	(21	)	$	12,058	$	116,669	$	470	$	(41	)	$	117,098
U.S. government debt ⁽²⁾	26,400		23		(6		)	26,417		102,201		133		(46		)	102,288
Asset-backed securities	82,109		27		(9		)	82,127		24,268		47		(7		)	24,308
Equity securities										14,985		2,210		—			17,195
Total available-for-sale securities	$	120,397	$	241	$	(36	)	$	120,602	$	258,123	$	2,860	$	(94	)	$	260,889



	December 31, 2013
	Cost		Gross Unrealized Gains		Gross Unrealized Losses ⁽¹⁾			Fair Value
Debt securities
Corporate bonds	$	108,300	$	340	$	(69	)	$	108,571
U.S. government debt ⁽²⁾	106,335		60		(79		)	106,316
Asset-backed securities	24,478		34		(11		)	24,501
Total available-for-sale securities	$	239,113	$	434	$	(159	)	$	239,388

_____________


(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,~~March 31, 2014 and December 31, 2013, net unrealized gains on the Company's available-for-sale securities of $~~131~~1,773, and $176, respectively, net of income tax expense of $74993, and $99, respectively, 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~~March 31, 2014, the corporate bond securities held by the Company had maturities between one month to five ~~years,~~years; U.S. government debt securities, excluding U.S. government agency mortgage-backed securities, had maturities ~~of less than~~between one month to ~~one~~four ~~year,~~years; U.S. government agency mortgage-backed securities had maturities between ~~four~~one to 2629 ~~years~~years; and asset-backed securities had maturities between ~~two~~one to ~~five~~six years.

~~Held-to-Maturity Securities~~

The ~~Company owned held-to-maturity~~proceeds from sales and maturities of available-for-sale securities and the gross realized gains and losses included in the consolidated statement of ~~$4,995~~ ~~and~~ ~~$124,873~~ at ~~September 30, 2013~~ ~~and~~ ~~December 31, 2012, respectively, consisting~~operations are reflected in the table below. The cost of ~~short-term corporate debt~~ securities ~~with~~sold was determined using the specific identification method. There were no sales or maturities ~~exceeding~~of available-for-sale securities during the three months ~~at the date of acquisition. These debt securities are carried at amortized cost, which approximates their fair value.~~ended March 31, 2013.



	Three Months Ended March 31,
	2014
Proceeds from sales and maturities of securities	$	30,119
Gross realized gains	13
Gross realized losses	(38		)

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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:


	September 30, 2013			December 31, 2012			March 31, 2014			December 31, 2013
Trade customers	$	404,678		$	388,949		$	415,812		$	410,302
Affiliates	333			258			287			315
Allowance for doubtful accounts	(9,832		)	(11,172		)	(11,592		)	(11,741		)
	395,179			378,035			404,507			398,876
Federal and state taxes	20,421			4,011			5,248			20,820
Other	17,425			18,113			12,124			8,761
Accounts receivable, net	$	433,025		$	400,159		$	421,879		$	428,457

4. Inventories

Inventories consist of the following:


	September 30, 2013		December 31, 2012		March 31, 2014		December 31, 2013
Finished products	$	198,762	$	200,940	$	240,339	$	232,658
Feedstock, additives and chemicals	194,558		143,912		139,189		180,646
Materials and supplies	58,251		54,446		59,481		58,575
Inventories	$	451,571	$	399,298	$	439,009	$	471,879

5. Property, Plant and Equipment

As of ~~September 30, 2013~~March 31, 2014, the Company had property, plant and equipment, net totaling $~~1,952,918~~2,150,643. 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 $~~32,460~~38,061 and $~~30,055~~30,920 is included in cost of sales in the consolidated statements of operations for the three months ended ~~September 30,~~March 31, 2014 and 2013 ~~and 2012, respectively. Depreciation expense on property, plant and equipment of~~ ~~$95,995~~ ~~and~~ ~~$90,615~~ ~~is included in cost of sales in the consolidated statements of operations for the~~ ~~nine months ended September 30, 2013 and 2012~~, respectively.

6. Other Assets

Goodwill for the Olefins segment was $29,990 at March 31, 2014 and December 31, 2013. Goodwill for the Vinyls segment was $32,026 at March 31, 2014 and December 31, 2013. There were no changes in the carrying amount of goodwill by operating segments for the three months ended March 31, 2014.

Amortization expense on intangible and other assets of $~~8,634~~8,276 and $~~8,717~~4,801 is included in the consolidated statements of operations for the three months ended ~~September 30,~~March 31, 2014 and 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)

7. Long-Term Debt

Long-term debt consists of the following:


	September 30, 2013		December 31, 2012		March 31, 2014		December 31, 2013
3.60% senior notes due 2022	$	248,960	$	248,872	$	249,020	$	248,990
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	$	763,849	$	763,761	$	763,909	$	763,879

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 ~~September 30, 2013~~March 31, 2014, 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 ~~September 30, 2013~~March 31, 2014, 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 $~~1,680~~2,222 and $~~1,515~~1,499 for the three months ended ~~September 30,~~March 31, 2014 and 2013 ~~and 2012, respectively, and~~ ~~$4,804~~ ~~and~~ ~~$4,640~~ ~~for the~~ ~~nine months ended 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~~statement of operations for the three ~~and~~ ~~nine~~ months ended ~~September 30, 2013 and 2012. As of~~ ~~September 30, 2013, the~~March 31, 2013. The Company had ~~10,710,000~~ ~~gallons of feedstock forward contracts~~no derivative instruments that were designated as fair value ~~hedges.~~hedges for the three months ended March 31, 2014.

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~~gross profit in the consolidated statements of operations for the ~~three and~~ ~~nine~~three months ended ~~September 30,~~March 31, 2014 and 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

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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)

fixed derivative price for the term and volume of the derivative instruments (as such improvements would accrue to the benefit of the counterparty).

Disclosures related to the Company's derivative assets and derivative liabilities subject to enforceable master netting arrangements have not been presented as they are not material to the Company's consolidated balance sheets at ~~September 30, 2013~~March 31, 2014 and December 31, ~~2012~~2013.

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
		September 30, 2013		December 31, 2012			March 31, 2014		December 31, 2013
Designated as hedging instruments
Commodity forward contracts	Accounts receivable, net	$	3,208	$	13,032
Not designated as hedging instruments
Commodity forward contracts	Accounts receivable, net	2,541		1,395		Accounts receivable, net	$	248	$	296
Total derivative assets		$	5,749	$	14,427		$	248	$	296


	Derivative Liabilities					Derivative Liabilities
	Balance Sheet Location	Fair Value as of				Balance Sheet Location	Fair Value as of
		September 30, 2013		December 31, 2012			March 31, 2014		December 31, 2013
Designated as hedging instruments
Commodity forward contracts	Accrued liabilities	$	—	$	399
Not designated as hedging instruments
Commodity forward contracts	Accrued liabilities	2,090		13,295		Accrued liabilities	$	54	$	176
Total derivative liabilities		$	2,090	$	13,694		$	54	$	176

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~~ ~~nine~~ months ended ~~September 30,~~March 31, 2013, ~~and 2012~~, there was no material ineffectiveness with regard to the Company's qualifying fair value hedges.


Derivatives in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivative	Three Months Ended September 30,						Nine Months Ended September 30,						Location of Gain (Loss) Recognized in Income on Derivative	Three Months Ended March 31,
		2013			2012			2013			2012				2014		2013
Commodity forward contracts	Cost of sales	$	(232	)	$	(515	)	$	(342	)	$	12,345		Cost of sales	$	—	$	(1,643	)

Hedged Items in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income on Hedged Items	Three Months Ended September 30,						Nine Months Ended September 30,						Location of Gain (Loss) Recognized in Income on Hedged Items	Three Months Ended March 31,
		2013			2012			2013			2012				2014		2013
Firm commitment designated as the hedged item	Cost of sales	$	236		$	515		$	15		$	(13,546	)	Cost of sales	$	—	$	1,395

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,					Location of Gain (Loss) Recognized in Income on Derivative	Three Months Ended March 31,
		2013		2012		2013		2012				2014			2013
Commodity forward contracts	Cost of sales	$	4,854	$	249	$	9,897	$	(783	)	Gross profit	$	(611	)	$	7,335

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)

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:

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

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



	March 31, 2014
	Level 1		Level 2			Total
Derivative instruments
Risk management assets - Commodity forward contracts	$	—	$	248		$	248
Risk management liabilities - Commodity forward contracts	—		(54		)	(54		)
Available-for-sale marketable securities	100,603		160,286			260,889

	December 31, 2013
	Level 1		Level 2			Total
Derivative instruments
Risk management assets - Commodity forward contracts	$	48	$	248		$	296
Risk management liabilities - Commodity forward contracts	—		(176		)	(176		)
Available-for-sale marketable securities	91,595		147,793			239,388

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

There were no transfers in ~~and~~or out of Levels 1 and 2 of the fair value hierarchy for the ~~nine~~three months ended ~~September 30,~~March 31, 2014 and 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. The amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, net and accounts payable approximate their fair value due to the short maturities of these instruments. The carrying and fair values of the Company's long-term debt are summarized in the table below. The Company's long-term debt instruments are publicly-traded. A market approach, based upon quotes from financial reporting services, is used to measure the fair value of the Company's long-term debt. Because the Company's long-term debt instruments may not be actively traded, the inputs used to measure the fair value of the Company's long-term debt are classified as Level 2 inputs within the fair value hierarchy.



	March 31, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
3.60% senior notes due 2022	$	249,020	$	242,600	$	248,990	$	236,905
6 ½% senior notes due 2029	100,000		113,000		100,000		109,490
6 ¾% senior notes due 2032	250,000		281,775		250,000		265,148
6 ½% GO Zone Senior Notes Due 2035	89,000		101,238		89,000		94,606
6 ½% IKE Zone Senior Notes Due 2035	65,000		73,938		65,000		69,094
Loan related to tax-exempt waste disposal revenue bonds due 2027	10,889		10,889		10,889		10,889

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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)

September 30, 2013 December 31, 2012

Carrying
Value

Fair
Value

Carrying
Value

Fair
Value
3.60% senior notes due 2022 $ 248,960
$ 238,228
$ 248,872
$ 251,125
6 ½% senior notes due 2029 100,000
107,800
100,000
119,738
6 ¾% senior notes due 2032 250,000
267,465
250,000
283,168
6 ½% GO Zone Senior Notes Due 2035 89,000
94,209
89,000
102,095
6 ½% IKE Zone Senior Notes Due 2035 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

11. Income Taxes

The effective income tax rate was ~~35.8%~~34.5% for the ~~nine~~three months ended ~~September 30,~~March 31, 2014. The effective income tax rate for the 2014 period was below the U.S. federal statutory rate of 35.0% primarily due to state tax credits and the domestic manufacturing deduction, mostly offset by state income taxes. The effective income tax rate was 35.5% for the three months ended March 31, 2013. The effective income tax rate for the 2013 period was above the U.S. federal statutory rate of 35.0% primarily due to state income taxes, partially offset by the domestic manufacturing deduction. ~~The effective income tax rate was~~ ~~33.5%~~ ~~for the~~ ~~nine months ended 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, partially offset by state income taxes.~~

There was no material change to the total gross unrecognized tax benefits for the ~~nine~~three months ended ~~September 30, 2013~~March 31, 2014. Management anticipates ~~reductions to~~that all of the ~~total amount of~~gross unrecognized tax benefits of ~~an additional~~ $~~621~~2,501 will be recognized within the next twelve months due to expiring statutes of limitations. The impact from the recognition of these tax benefits on the Company's effective tax rate is expected to be immaterial.

The Company recognizes penalties and interest accrued related to unrecognized tax benefits in income tax expense. As of ~~September 30, 2013~~March 31, 2014, 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 September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2013			2012			2013			2012			2014			2013
Net income	$	170,290		$	86,964		$	439,453		$	290,278		$	158,032		$	123,347
Less:
Net income attributable to participating securities	(587		)	(452		)	(1,691		)	(1,682		)	(384		)	(568		)
Net income attributable to common shareholders	$	169,703		$	86,512		$	437,762		$	288,596		$	157,648		$	122,779

The following table reconciles the denominator for the basic and diluted earnings per share computations shown in the consolidated statements of operations:



	Three Months Ended March 31,
	2014		2013
Weighted average common shares—basic ⁽¹⁾	133,072,254		133,251,071
Plus incremental shares from:
Assumed exercise of options ⁽¹⁾	540,670		566,666
Weighted average common shares—diluted ⁽¹⁾	133,612,924		133,817,737

Earnings per share: ⁽¹⁾
Basic	$	1.18	$	0.92
Diluted	$	1.18	$	0.92

_____________


(1)	Share amounts and per share data for the three months ended March 31, 2013 have been restated to reflect the effect of a two-for-one stock split on March 18, 2014. See Note 1 for additional information.

Excluded from the computation of diluted earnings per share are options to purchase 69,662 and 72,776 shares of common stock for the three months ended March 31, 2014 and 2013, respectively. These options were outstanding during the periods reported but were excluded because the effect of including them would have been antidilutive.

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WESTLAKE CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

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

~~The following table reconciles the denominator for the basic and diluted earnings per share computations shown in the consolidated statements of operations:~~

Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012
Weighted average common shares—basic 66,628,747
66,311,958
66,628,027
66,240,225
Plus incremental shares from:
Assumed exercise of options 276,807
344,802
275,352
381,295
Weighted average common shares—diluted 66,905,554
66,656,760
66,903,379
66,621,520

Earnings per share:
Basic $ 2.55
$ 1.30
$ 6.57
$ 4.36
Diluted $ 2.54
$ 1.30
$ 6.54
$ 4.33

~~Excluded from the computation of diluted earnings per share are options to purchase~~ ~~68,662~~ ~~and~~ ~~168,362~~ ~~shares of common stock for the~~ ~~three months ended September 30, 2013 and 2012, respectively, and~~ ~~57,759~~ ~~and~~ ~~293,062~~ ~~shares of common stock for the~~ ~~nine months ended 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 September 30,										Nine Months Ended September 30,										Three Months Ended March 31,
	Pension						Post-retirement Healthcare				Pension						Post-retirement Healthcare				Pension						Post-retirement Healthcare
	2013			2012			2013		2012		2013			2012			2013		2012		2014			2013			2014		2013
Service cost	$	275		$	250		$	2	$	2	$	815		$	754		$	7	$	7	$	84		$	264		$	5	$	2
Interest cost	515			645			147		185		1,531			1,936			442		555		595			501			181		147
Expected return on plan assets	(713		)	(623		)	—		—		(2,140		)	(1,867		)	—		—		(809		)	(714		)	—		—
Amortization of prior service cost	74			74			21		21		223			223			63		63		74			74			13		21
Amortization of net loss	510			445			90		44		1,449			1,329			269		132		63			429			69		90
Net periodic benefit cost	$	661		$	791		$	260	$	252	$	1,878		$	2,375		$	781	$	757	$	7		$	554		$	268	$	260

The Company contributed $~~776~~ ~~and~~ ~~$2,283~~388 to the Salaried pension plan in the first ~~nine~~three months of ~~2013~~ ~~and~~ ~~2012~~2014, ~~respectively,~~ and contributed $~~640~~290 and $~~1,542~~60 to the Wage pension plan in the first ~~nine~~three months of ~~2013~~2014 and ~~2012~~2013, respectively. The Company did not contribute to the Salaried pension plan in the first three months of 2013. The Company expects to make additional contributions of $~~388~~2,389 to the Salaried pension plan and $~~290~~916 to the Wage pension plan during the fiscal year ending December 31, ~~2013~~2014.

14. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2014 and 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, 2013	$	(6,696	)	$	3,904		$	176	$	(2,616	)
Other comprehensive (loss) income before reclassifications	—			(898		)	1,581		683
Amounts reclassified from accumulated other comprehensive loss	135			—			16		151
Net other comprehensive income (loss) for the period	135			(898		)	1,597		834
Balances at March 31, 2014	$	(6,561	)	$	3,006		$	1,773	$	(1,782	)



	Benefits Liability, Net of Tax			Cumulative Foreign Currency Exchange			Total
Balances at December 31, 2012	$	(16,351	)	$	5,511		$	(10,840	)
Other comprehensive loss before reclassifications	—			(570		)	(570		)
Amounts reclassified from accumulated other comprehensive loss	378			—			378
Net other comprehensive income (loss) for the period	378			(570		)	(192		)
Balances at March 31, 2013	$	(15,973	)	$	4,941		$	(11,032	)

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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)

~~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~~ ~~nine~~three months ended ~~September 30,~~March 31, 2014 and 2013:


Details about Accumulated Other Comprehensive Income (Loss) Components								Location of Reclassification (Income (Expense)) in Consolidated Statements of Operations	Three Months Ended March 31,
	Location of Reclassification (Income (Expense)) in Consolidated Statements of Operations	Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013				2014			2013
Amortization of pension and other post-retirement items
Prior service costs	(1)	$	(95	)	$	(286	)	(1)	$	(87	)	$	(95	)
Net loss	(1)	(600		)	(1,718		)	(1)	(132		)	(519		)
		(695		)	(2,004		)		(219		)	(614		)
	Provision for income taxes	267			771			Provision for income taxes	84			236
									(135		)	(378		)
Net unrealized gains on available-for-sale investments
Realized loss on available-for-sale investments								Other income, net	(25		)	—
								Provision for income taxes	9			—
									(16		)	—
Total reclassifications for the period		$	(428	)	$	(1,233	)		$	(151	)	$	(378	)

_____________


(1)	These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost. For additional information, please read Note 810 (Employee Benefits) to the financial statements included in the ~~2012~~2013 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 ~~nine months ended 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~~ ~~nine months ended September 30, 2013~~ ~~and 2012.~~

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

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

Fair value of consideration transferred:
Cash $ 178,309

Preliminary allocation of consideration transferred to net assets acquired:
Accounts receivable ⁽¹⁾
$ 17,695
Inventories 25,948
Property, plant and equipment 31,261
Intangible assets:
Customer relationships (weighted average life of 15 years) 57,600
Trademarks 5,200
Developed technology (weighted average life of 15 years) 18,900
Other intangibles (weighted average life of two years) 300
Current liabilities (10,595 )
Other liabilities (26 )
Total identifiable net assets 146,283
Goodwill ⁽²⁾
32,026
Consideration transferred $ 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, the U.S. Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), an owner or operator of property may be held strictly liable for remediating contamination without regard to whether that person caused the contamination, and without regard to whether the practices that resulted in the contamination were legal at the time they occurred. Because several of the Company's production sites have a history of industrial use, it is impossible to predict precisely what effect these legal requirements will have on the Company.

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~~polyvinyl chloride ("PVC") facility, had been extensively contaminated under Goodrich's operations. In 1993,

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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)~~

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~~3,284 in ~~2012~~2013. 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.

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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)

State 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, under the auspices of the U.S. Environmental Protection Agency ("EPA"), pursuant to an Administrative Settlement Agreement ("AOC"), which became effective on December 9, 2009. See ~~"Change in Regulatory Regime"~~"Federal Administrative Proceedings" below. The proceedings have been postponed. Periodic status conferences will be held to evaluate whether additional proceedings will be required.

~~Change in Regulatory Regime.~~Federal Administrative Proceedings. In May 2009, the Cabinet sent a letter to the ~~U.S. Environmental Protection Agency ("EPA")~~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").~~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~~three 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. The EPA has hired a contractor to complete the remedial investigation report.

Monetary Relief. Except as noted above with respect to the settlement of the contract litigation among the Company, Goodrich and PolyOne, none of the court, the Cabinet nor the EPA has established any allocation of the costs of remediation among the various parties that are involved in the judicial and administrative proceedings discussed above. At this time, the Company is not able to estimate the loss or reasonable possible loss, if any, on the Company's financial statements that could result from the resolution of these proceedings. Any cash expenditures that the Company might incur in the future with respect to the remediation of contamination at the 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.

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

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

~~17.~~16. Segment Information

The Company operates in two principal ~~business~~operating segments: Olefins and Vinyls. These segments are strategic business units that offer a variety of different products. The Company manages each segment separately as each business requires different technology and marketing strategies.


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2013			2012			2013			2012			2014			2013
Net external sales
Olefins
Polyethylene	$	460,105		$	431,614		$	1,294,566		$	1,275,057		$	487,144		$	420,768
Styrene, feedstock and other	219,234			108,171			590,959			669,718			235,654			162,077
Total Olefins	679,339			539,785			1,885,525			1,944,775			722,798			582,845
Vinyls
PVC, caustic soda and other	212,041			191,310			612,391			569,316			190,527			195,246
Building products	112,785			90,080			309,943			255,909			114,351			86,556
Total Vinyls	324,826			281,390			922,334			825,225			304,878			281,802
	$	1,004,165		$	821,175		$	2,807,859		$	2,770,000		$	1,027,676		$	864,647

Intersegment sales
Olefins	$	85,454		$	76,771		$	230,607		$	247,671		$	56,853		$	70,283
Vinyls	403			391			1,111			1,167			343			264
	$	85,857		$	77,162		$	231,718		$	248,838		$	57,196		$	70,547

Income (loss) from operations
Olefins	$	237,239		$	124,452		$	585,958		$	409,550		$	272,333		$	161,058
Vinyls	39,554			24,059			136,123			67,724			(21,114		)	43,663
Corporate and other	(10,191		)	(5,994		)	(26,197		)	(18,154		)	(3,164		)	(10,666		)
	$	266,602		$	142,517		$	695,884		$	459,120		$	248,055		$	194,055

Depreciation and amortization
Olefins	$	26,515		$	27,070		$	76,415		$	74,903		$	26,647		$	23,346
Vinyls	14,089			11,232			39,507			34,330			19,168			11,884
Corporate and other	124			122			372			368			157			126
	$	40,728		$	38,424		$	116,294		$	109,601		$	45,972		$	35,356

Other income (expense), net
Olefins	$	728		$	806		$	5,889		$	2,764		$	1,454		$	4,010
Vinyls	(742		)	146			(1,687		)	115			(34		)	(425		)
Corporate and other	(273		)	270			(1,065		)	797			1,089			(66		)
	$	(287	)	$	1,222		$	3,137		$	3,676		$	2,509		$	3,519

Provision for (benefit from) income taxes
Olefins	$	82,553		$	36,092		$	208,170		$	130,612		$	93,550		$	55,477
Vinyls	10,710			6,556			44,120			18,989			(10,070		)	13,720
Corporate and other	(535		)	(4,412		)	(7,643		)	(3,418		)	(105		)	(1,251		)
	$	92,728		$	38,236		$	244,647		$	146,183		$	83,375		$	67,946

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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 September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2013		2012		2013		2012		2014		2013
Capital expenditures
Olefins	$	27,577	$	46,867	$	105,656	$	92,168	$	29,074	$	50,040
Vinyls	172,565		47,001		391,864		139,836		81,120		100,317
Corporate and other	276		1,027		770		3,459		547		427
	$	200,418	$	94,895	$	498,290	$	235,463	$	110,741	$	150,784

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


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2013			2012			2013			2012			2014			2013
Income from operations	$	266,602		$	142,517		$	695,884		$	459,120		$	248,055		$	194,055
Interest expense	(3,297		)	(11,934		)	(14,921		)	(35,682		)	(9,157		)	(6,281		)
Debt retirement costs	—			(7,082		)	—			(7,082		)
Gain from sales of equity securities	—			477			—			16,429
Other (expense) income, net	(287		)	1,222			3,137			3,676
Other income, net													2,509			3,519
Income before income taxes	$	263,018		$	125,200		$	684,100		$	436,461		$	241,407		$	191,293


	September 30, 2013		December 31, 2012		March 31, 2014		December 31, 2013
Total assets
Olefins	$	1,560,303	$	1,439,308	$	1,556,856	$	1,557,510
Vinyls	1,577,549		1,030,912		1,768,572		1,740,595
Corporate and other	785,597		941,976		846,528		762,804
	$	3,923,449	$	3,412,196	$	4,171,956	$	4,060,909

~~18. Goodwill~~

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

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

~~19.~~17. Subsequent Events

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

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

~~20.~~18. Guarantor Disclosures

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

Condensed Consolidating Financial Information as of ~~September 30, 2013~~March 31, 2014


	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	$	560,261	$	4,494	$	26,801	$	—		$	591,556	$	490,508	$	7,896	$	34,239	$	—		$	532,643
Marketable securities	125,597		—		—		—			125,597		243,694		—		—		—			243,694
Accounts receivable, net	5,373		694,473		5,489		(272,310		)	433,025		58,050		888,829		3,381		(528,381		)	421,879
Inventories	—		435,540		16,031		—			451,571		—		422,166		16,843		—			439,009
Prepaid expenses and other current assets	468		15,931		2,410		—			18,809		889		12,864		2,127		—			15,880
Deferred income taxes	431		21,744		118		—			22,293		441		33,422		295		—			34,158
Total current assets	692,130		1,172,182		50,849		(272,310		)	1,642,851		793,582		1,365,177		56,885		(528,381		)	1,687,263
Property, plant and equipment, net	—		1,945,405		7,513		—			1,952,918		—		2,144,266		6,377		—			2,150,643
Equity investments	2,635,954		98,823		31,634		(2,700,923		)	65,488		2,975,949		101,472		31,056		(3,040,917		)	67,560
Other assets, net	16,969		251,703		506		(6,986		)	262,192		31,493		238,867		1,176		(5,046		)	266,490
Total assets	$	3,345,053	$	3,468,113	$	90,502	$	(2,980,219	)	$	3,923,449	$	3,801,024	$	3,849,782	$	95,494	$	(3,574,344	)	$	4,171,956
Current liabilities
Accounts payable	$	311,357	$	220,106	$	4,322	$	(277,718	)	$	258,067	$	463,650	$	193,020	$	14,351	$	(459,069	)	$	211,952
Accrued liabilities	15,679		151,654		1,878		5,408			174,619		15,782		200,781		731		(69,312		)	147,982
Total current liabilities	327,036		371,760		6,200		(272,310		)	432,686		479,432		393,801		15,082		(528,381		)	359,934
Long-term debt	752,960		10,889		—		—			763,849		753,020		10,889		—		—			763,909
Deferred income taxes	—		416,404		748		(6,986		)	410,166		—		451,597		652		(5,046		)	447,203
Other liabilities	—		51,640		51		—			51,691		—		32,308		30		—			32,338
Stockholders' equity	2,265,057		2,617,420		83,503		(2,700,923		)	2,265,057		2,568,572		2,961,187		79,730		(3,040,917		)	2,568,572
Total liabilities and stockholders' equity	$	3,345,053	$	3,468,113	$	90,502	$	(2,980,219	)	$	3,923,449	$	3,801,024	$	3,849,782	$	95,494	$	(3,574,344	)	$	4,171,956

1817

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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~~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	$	753,881	$	6,973	$	29,224	$	—		$	790,078	$	420,948	$	6,227	$	34,126	$	—		$	461,301
Marketable securities	124,873		—		—		—			124,873		239,388		—		—		—			239,388
Accounts receivable, net	7,933		1,675,274		2,959		(1,286,007		)	400,159		3,879		738,156		2,755		(316,333		)	428,457
Inventories	—		385,140		14,158		—			399,298		—		456,306		15,573		—			471,879
Prepaid expenses and other current assets	389		11,386		2,925		—			14,700		778		11,312		1,798		—			13,888
Deferred income taxes	431		21,581		293		—			22,305		441		33,422		306		—			34,169
Total current assets	887,507		2,100,354		49,559		(1,286,007		)	1,751,413		665,434		1,245,423		54,558		(316,333		)	1,649,082
Property, plant and equipment, net	—		1,502,902		7,146		—			1,510,048		—		2,081,091		6,923		—			2,088,014
Equity investments	3,018,926		65,448		32,923		(3,073,561		)	43,736		2,815,752		100,326		31,518		(2,880,721		)	66,875
Other assets, net	17,033		94,678		1,252		(5,964		)	106,999		15,393		246,125		1,199		(5,779		)	256,938
Total assets	$	3,923,466	$	3,763,382	$	90,880	$	(4,365,532	)	$	3,412,196	$	3,496,579	$	3,672,965	$	94,198	$	(3,202,833	)	$	4,060,909
Current liabilities
Accounts payable	$	1,285,530	$	192,443	$	13,969	$	(1,274,892	)	$	217,050	$	316,652	$	223,134	$	10,649	$	(300,822	)	$	249,613
Accrued liabilities	12,808		178,915		852		(11,115		)	181,460		8,334		161,140		1,282		(15,511		)	155,245
Total current liabilities	1,298,338		371,358		14,821		(1,286,007		)	398,510		324,986		384,274		11,931		(316,333		)	404,858
Long-term debt	752,872		10,889		—		—			763,761		752,990		10,889		—		—			763,879
Deferred income taxes	—		331,320		934		(5,964		)	326,290		—		443,026		729		(5,779		)	437,976
Other liabilities	—		51,312		67		—			51,379		—		35,533		60		—			35,593
Stockholders' equity	1,872,256		2,998,503		75,058		(3,073,561		)	1,872,256		2,418,603		2,799,243		81,478		(2,880,721		)	2,418,603
Total liabilities and stockholders' equity	$	3,923,466	$	3,763,382	$	90,880	$	(4,365,532	)	$	3,412,196	$	3,496,579	$	3,672,965	$	94,198	$	(3,202,833	)	$	4,060,909

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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 March 31, 2014



	Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Statement of Operations
Net sales	$	—		$	1,020,429		$	9,117		$	(1,870	)	$	1,027,676
Cost of sales	—			734,350			8,186			(1,870		)	740,666
Gross profit	—			286,079			931			—			287,010
Selling, general and administrative expenses	546			37,063			1,346			—			38,955
(Loss) income from operations	(546		)	249,016			(415		)	—			248,055
Interest expense	(8,947		)	(210		)	—			—			(9,157		)
Other income (expense), net	5,006			(1,883		)	(614		)	—			2,509
(Loss) income before income taxes	(4,487		)	246,923			(1,029		)	—			241,407
(Benefit from) provision for income taxes	(1,558		)	85,110			(177		)	—			83,375
Equity in net income of subsidiaries	160,961			—			—			(160,961		)	—
Net income (loss)	$	158,032		$	161,813		$	(852	)	$	(160,961	)	$	158,032
Comprehensive income (loss)	$	158,866		$	161,948		$	(1,750	)	$	(160,198	)	$	158,866

Condensed Consolidating Financial Information for the Three Months Ended March 31, 2013



	Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Statement of Operations
Net sales	$	—		$	856,085		$	10,540		$	(1,978	)	$	864,647
Cost of sales	—			629,286			9,530			(1,978		)	636,838
Gross profit	—			226,799			1,010			—			227,809
Selling, general and administrative expenses	510			31,709			1,535			—			33,754
(Loss) income from operations	(510		)	195,090			(525		)	—			194,055
Interest expense	(6,258		)	(23		)	—			—			(6,281		)
Other income (expense), net	4,309			(290		)	(500		)	—			3,519
(Loss) income before income taxes	(2,459		)	194,777			(1,025		)	—			191,293
(Benefit from) provision for income taxes	(874		)	69,051			(231		)	—			67,946
Equity in net income of subsidiaries	124,932			—			—			(124,932		)	—
Net income (loss)	$	123,347		$	125,726		$	(794	)	$	(124,932	)	$	123,347
Comprehensive income (loss)	$	123,155		$	126,104		$	(1,364	)	$	(124,740	)	$	123,155

Table of Contents

WESTLAKE CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

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

Condensed Consolidating Financial Information for the Three Months Ended ~~September 30, 2013~~March 31, 2014

Westlake
Chemical
Corporation

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Statement of Operations
Net sales $ —
$ 992,413
$ 13,337
$ (1,585 ) $ 1,004,165
Cost of sales —
689,388
11,891
(1,585 ) 699,694
Gross profit —
303,025
1,446
—
304,471
Selling, general and administrative
expenses
514
35,714
1,641
—
37,869
(Loss) income from operations (514 ) 267,311
(195 ) —
266,602
Interest expense (3,292 ) (5 ) —
—
(3,297 )
Other income (expense), net 3,585
(3,821 ) (51 ) —
(287 )
(Loss) income before income taxes (221 ) 263,485
(246 ) —
263,018
(Benefit from) provision for income taxes (70 ) 92,849
(51 ) —
92,728
Equity in net income of subsidiaries 170,441
—
—
(170,441 ) —
Net income (loss) $ 170,290
$ 170,636
$ (195 ) $ (170,441 ) $ 170,290
Comprehensive income $ 171,095
$ 170,764
$ 351
$ (171,115 ) $ 171,095

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

Westlake
Chemical
Corporation

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Statement of Operations
Net sales $ —
$ 809,164
$ 13,876
$ (1,865 ) $ 821,175
Cost of sales —
638,892
11,969
(1,865 ) 648,996
Gross profit —
170,272
1,907
—
172,179
Selling, general and administrative
expenses
498
27,601
1,563
—
29,662
(Loss) income from operations (498 ) 142,671
344
—
142,517
Interest expense (11,919 ) (15 ) —
—
(11,934 )
Debt retirement costs (7,082 ) —
—
—
(7,082 )
Gain from sales of equity securities —
477
—
—
477
Other income (expense), net 4,556
(2,744 ) (590 ) —
1,222
(Loss) income before income taxes (14,943 ) 140,389
(246 ) —
125,200
(Benefit from) provision for income taxes (4,498 ) 42,596
138
—
38,236
Equity in net income of subsidiaries 97,409
—
—
(97,409 ) —
Net income (loss) $ 86,964
$ 97,793
$ (384 ) $ (97,409 ) $ 86,964
Comprehensive income $ 88,666
$ 98,109
$ 481
$ (98,590 ) $ 88,666



	Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Statement of Cash Flows
Cash flows from operating activities
Net income (loss)	$	158,032		$	161,813		$	(852	)	$	(160,961	)	$	158,032
Adjustments to reconcile net income (loss) to net cash (used for) provided by operating activities
Depreciation and amortization	365			45,408			564			—			46,337
Deferred income taxes	(162		)	8,487			(50		)	—			8,275
Net changes in working capital and other	(165,553		)	6,263			(1,810		)	160,961			(139		)
Net cash (used for) provided by operating activities	(7,318		)	221,971			(2,148		)	—			212,505
Cash flows from investing activities
Additions to property, plant and equipment	—			(110,559		)	(182		)	—			(110,741		)
Proceeds from disposition of assets	—			12			—			—			12
Proceeds from sales and maturities of securities	30,119			—			—			—			30,119
Purchase of securities	(49,025		)	—			—			—			(49,025		)
Settlements of derivative instruments	—			(409		)	—			—			(409		)
Net cash used for investing activities	(18,906		)	(110,956		)	(182		)	—			(130,044		)
Cash flows from financing activities
Intercompany financing	106,903			(109,346		)	2,443			—			—
Dividends paid	(16,789		)	—			—			—			(16,789		)
Proceeds from exercise of stock options	2,158			—			—			—			2,158
Windfall tax benefits from share-based payment arrangements	3,512			—			—			—			3,512
Net cash provided by (used for) financing activities	95,784			(109,346		)	2,443			—			(11,119		)
Net increase in cash and cash equivalents	69,560			1,669			113			—			71,342
Cash and cash equivalents at beginning of period	420,948			6,227			34,126			—			461,301
Cash and cash equivalents at end of period	$	490,508		$	7,896		$	34,239		$	—		$	532,643

Table of Contents

WESTLAKE CHEMICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

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

Condensed Consolidating Financial Information for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2013

Westlake
Chemical
Corporation

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Statement of Operations
Net sales $ —
$ 2,777,280
$ 37,561
$ (6,982 ) $ 2,807,859
Cost of sales —
1,976,131
32,943
(6,982 ) 2,002,092
Gross profit —
801,149
4,618
—
805,767
Selling, general and administrative
expenses
1,576
103,478
4,829
—
109,883
(Loss) income from operations (1,576 ) 697,671
(211 ) —
695,884
Interest expense (14,882 ) (39 ) —
—
(14,921 )
Other income (expense), net 7,490
(2,473 ) (1,880 ) —
3,137
(Loss) income before income taxes (8,968 ) 695,159
(2,091 ) —
684,100
(Benefit from) provision for income taxes (3,202 ) 248,301
(452 ) —
244,647
Equity in net income of subsidiaries 445,219
—
—
(445,219 ) —
Net income (loss) $ 439,453
$ 446,858
$ (1,639 ) $ (445,219 ) $ 439,453
Comprehensive income (loss) $ 439,372
$ 447,490
$ (2,483 ) $ (445,007 ) $ 439,372

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

Westlake
Chemical
Corporation

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Statement of Operations
Net sales $ —
$ 2,738,180
$ 37,154
$ (5,334 ) $ 2,770,000
Cost of sales —
2,197,300
31,322
(5,334 ) 2,223,288
Gross profit —
540,880
5,832
—
546,712
Selling, general and administrative
expenses
1,500
81,288
4,804
—
87,592
(Loss) income from operations (1,500 ) 459,592
1,028
—
459,120
Interest expense (35,652 ) (30 ) —
—
(35,682 )
Debt retirement costs (7,082 ) —
—
—
(7,082 )
Gain from sales of equity securities 1
16,428
—
—
16,429
Other income (expense), net 12,044
(5,724 ) (2,644 ) —
3,676
(Loss) income before income taxes (32,189 ) 470,266
(1,616 ) —
436,461
(Benefit from) provision for income taxes (11,105 ) 158,228
(940 ) —
146,183
Equity in net income of subsidiaries 311,362
—
—
(311,362 ) —
Net income (loss) $ 290,278
$ 312,038
$ (676 ) $ (311,362 ) $ 290,278
Comprehensive income $ 291,185
$ 312,017
$ 252
$ (312,269 ) $ 291,185



	Westlake Chemical Corporation			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Statement of Cash Flows
Cash flows from operating activities
Net income (loss)	$	123,347		$	125,726		$	(794	)	$	(124,932	)	$	123,347
Adjustments to reconcile net income (loss) to net cash (used for) provided by operating activities
Depreciation and amortization	365			34,766			590			—			35,721
Deferred income taxes	(23		)	29,896			(407		)	—			29,466
Net changes in working capital and other	(129,403		)	(68,474		)	663			124,932			(72,282		)
Net cash (used for) provided by operating activities	(5,714		)	121,914			52			—			116,252
Cash flows from investing activities
Additions to property, plant and equipment	—			(149,113		)	(1,671		)	—			(150,784		)
Proceeds from disposition of assets	—			—			2			—			2
Proceeds from repayment of loan to affiliate	—			—			167			—			167
Proceeds from sales and maturities of securities	124,873			—			—			—			124,873
Purchase of securities	(94,903		)	—			—			—			(94,903		)
Settlements of derivative instruments	—			(679		)	—			—			(679		)
Net cash provided by (used for) investing activities	29,970			(149,792		)	(1,502		)	—			(121,324		)
Cash flows from financing activities
Intercompany financing	(28,120		)	28,553			(433		)	—			—
Dividends paid	(12,553		)	—			—			—			(12,553		)
Proceeds from exercise of stock options	1,590			—			—			—			1,590
Windfall tax benefits from share-based payment arrangements	3,844			—			—			—			3,844
Net cash (used for) provided by financing activities	(35,239		)	28,553			(433		)	—			(7,119		)
Net (decrease) increase in cash and cash equivalents	(10,983		)	675			(1,883		)	—			(12,191		)
Cash and cash equivalents at beginning of period	753,881			6,973			29,224			—			790,078
Cash and cash equivalents at end of period	$	742,898		$	7,648		$	27,341		$	—		$	777,887

Table of Contents

~~WESTLAKE CHEMICAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(Unaudited)~~

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

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

Westlake
Chemical
Corporation

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Statement of Cash Flows
Cash flows from operating activities
Net income (loss) $ 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 1,094
114,432
1,861
—
117,387
Deferred income taxes (1,102 ) 84,532
13
—
83,443
Net changes in working capital
   and other
(458,336 ) (87,330 ) 7,664
445,219
(92,783 )
Net cash (used for) provided by
   operating activities
(18,891 ) 558,492
7,899
—
547,500
Cash flows from investing activities
Acquisition of business —
(178,309 ) —
—
(178,309 )
Additions to equity investments —
(23,338 ) —
—
(23,338 )
Additions to property, plant and
   equipment
—
(496,027 ) (2,263 ) —
(498,290 )
Construction of assets pending
   sale-leaseback
—
(136 ) —
—
(136 )
Proceeds from disposition of assets —
6
72
—
78
Proceeds from repayment of loan
   to affiliate
—
—
167
—
167
Proceeds from sales and maturities of
   securities
239,764
—
—
—
239,764
Purchase of securities (232,286 ) —
—
—
(232,286 )
Settlements of derivative instruments —
(2,297 ) —
—
(2,297 )
Net cash provided by (used for)
   investing activities
7,478
(700,101 ) (2,024 ) —
(694,647 )
Cash flows from financing activities
Intercompany financing (130,832 ) 139,130
(8,298 ) —
—
Dividends paid (40,204 ) —
—
—
(40,204 )
Proceeds from exercise of stock options 3,182
—
—
—
3,182
Repurchase of common stock for treasury (19,409 ) —
—
—
(19,409 )
Windfall tax benefits from share-based
   payment arrangements
5,056
—
—
—
5,056
Net cash (used for) provided by
   financing activities
(182,207 ) 139,130
(8,298 ) —
(51,375 )
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
Cash and cash equivalents at end of period $ 560,261
$ 4,494
$ 26,801
$ —
$ 591,556

~~Table of Contents~~

~~WESTLAKE CHEMICAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(Unaudited)~~

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

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

Westlake
Chemical
Corporation

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries
Eliminations Consolidated
Statement of Cash Flows
Cash flows from operating activities
Net income (loss) $ 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 1,149
107,191
2,410
—
110,750
Deferred income taxes (176 ) 3,932
629
—
4,385
Net changes in working capital
   and other
(317,955 ) 95,909
(1,898 ) 311,362
87,418
Net cash (used for) provided by
   operating activities
(26,704 ) 519,070
465
—
492,831
Cash flows from investing activities
Additions to property, plant and
   equipment
—
(234,713 ) (750 ) —
(235,463 )
Construction of assets pending
   sale-leaseback
—
(5,484 ) —
—
(5,484 )
Proceeds from disposition of assets —
414
21
—
435
Proceeds from repayment of loan
   to affiliate
—
—
763
—
763
Proceeds from sales of equity securities 3
47,652
—
—
47,655
Purchase of securities —
(2,961 ) —
—
(2,961 )
Settlements of derivative instruments —
471
—
—
471
Net cash provided by (used for)
   investing activities
3
(194,621 ) 34
—
(194,584 )
Cash flows from financing activities
Intercompany financing 317,185
(321,273 ) 4,088
—
—
Capitalized debt issuance costs (2,221 ) —
—
—
(2,221 )
Dividends paid (22,345 ) —
—
—
(22,345 )
Proceeds from borrowings 248,818
—
—
—
248,818
Proceeds from exercise of stock options 6,627
—
—
—
6,627
Repayment of borrowings (250,000 ) —
—
—
(250,000 )
Repurchase of common stock for treasury (10,784 ) —
—
—
(10,784 )
Utilization of restricted cash 96,433
—
—
—
96,433
Windfall tax benefits from share-based
   payment arrangements
7,792
—
—
—
7,792
Net cash provided by (used for)
   financing activities
391,505
(321,273 ) 4,088
—
74,320
Net increase in cash and cash equivalents 364,804
3,176
4,587
—
372,567
Cash and cash equivalents at beginning
   of period
803,320
2,517
20,064
—
825,901
Cash and cash equivalents at end of period $ 1,168,124
$ 5,693
$ 24,651
$ —
$ 1,198,468

~~Table of Contents~~


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

This discussion and analysis should be read in conjunction with information contained in the accompanying unaudited consolidated interim financial statements of Westlake Chemical Corporation and the notes thereto and the consolidated financial statements and notes thereto of Westlake Chemical Corporation included in Westlake Chemical Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2012~~2013 (the "~~2012~~2013 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,~~basic chemicals, vinyls, polymers and fabricated building products. Our two principal ~~business~~operating 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 ~~third~~first quarter of ~~2013,~~2014, a cost advantage for ~~natural gas liquids-based~~ethane-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~~slow recovery 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 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~~polyvinyl chloride ("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,~~In the fourth quarter of 2013, we started up our new world scale Geismar, Louisiana chlor-alkali plant. In April 2014, we completed the expansion and conversion of our Calvert City, Kentucky ethylene plant to ethane feedstock (see further discussion in "Recent Developments" below). The completion of these two projects is expected to improve the profitability of our Vinyls ~~segment operating rates and margins may continue to be negatively impacted by the slow recovery of U.S. construction markets.~~segment.

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~~appears to ~~our business and,~~be slowly improving, but depending on the performance of ~~the global economy~~both economies in the remainder of ~~2013~~2014 and beyond, could still have a negative effect on our financial condition, results of operations or cash flows.

Recent Developments

In ~~August 2008,~~April 2014, we completed the previously announced ~~plans for the construction of a new chlor-alkali plant~~feedstock conversion and ethylene expansion project at our ~~vinyls manufacturing complex in Geismar, Louisiana. We commenced construction~~Calvert City ethylene plant. With the completion of ~~the~~this project, our Calvert City ethylene plant ~~in 2011. Presently, we expect the new chlor-alkali plant to be operational~~now utilizes cost-advantaged ethane feedstock and increased its capacity by ~~the end of 2013. The new chlor-alkali plant is designed to produce 350,000 electro chemical units ("ECUs"), or 700~~approximately 180 million pounds ~~of chlorine, per annum. The new plant~~annually. This expansion and feedstock conversion project is expected to ~~improve~~enhance our vinyl chain integration and leverage low cost ethane being developed in the ~~vertical integration~~Marcellus shale area. The ethylene plant and other production facilities at our Calvert City complex were shut down for approximately 19 days (14 days during the first quarter of 2014) as a result of the feedstock conversion and ethylene expansion project and other planned maintenance turnaround activities. Income from operations for the first quarter of 2014 was negatively impacted by the lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with the feedstock conversion and ethylene expansion project and maintenance turnaround at the Calvert City complex.

On February 14, 2014, our Board of Directors authorized a two-for-one split of our ~~vinyls business from chlorine downstream into vinyl chloride monomer ("VCM")~~common stock. Stockholders of record as of February 28, 2014 were entitled to one additional share for every share outstanding, which was distributed on March 18, 2014. The total number of authorized common stock shares and ~~PVC and increase caustic soda sales.~~associated par value were unchanged by this stock split.

2422

Table of Contents

Results of Operations


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2013			2012			2013			2012				2014			2013
	(dollars in thousands, except per share data)													(dollars in thousands, except per share data)
Net external sales
Olefins
Polyethylene	$	460,105		$	431,614		$	1,294,566		$	1,275,057			$	487,144		$	420,768
Styrene, feedstock and other	219,234			108,171			590,959			669,718				235,654			162,077
Total Olefins	679,339			539,785			1,885,525			1,944,775				722,798			582,845
Vinyls
PVC, caustic soda and other	212,041			191,310			612,391			569,316				190,527			195,246
Building products	112,785			90,080			309,943			255,909				114,351			86,556
Total Vinyls	324,826			281,390			922,334			825,225				304,878			281,802
Total	$	1,004,165		$	821,175		$	2,807,859		$	2,770,000			$	1,027,676		$	864,647

Income (loss) from operations
Olefins	$	237,239		$	124,452		$	585,958		$	409,550			$	272,333		$	161,058
Vinyls	39,554			24,059			136,123			67,724				(21,114		)	43,663
Corporate and other	(10,191		)	(5,994		)	(26,197		)	(18,154		)		(3,164		)	(10,666		)
Total income from operations	266,602			142,517			695,884			459,120				248,055			194,055
Interest expense	(3,297		)	(11,934		)	(14,921		)	(35,682		)		(9,157		)	(6,281		)
Debt retirement costs	—			(7,082		)	—			(7,082		)
Gain from sales of equity securities	—			477			—			16,429
Other (expense) income, net	(287		)	1,222			3,137			3,676
Other income, net														2,509			3,519
Provision for income taxes	92,728			38,236			244,647			146,183				83,375			67,946
Net income	$	170,290		$	86,964		$	439,453		$	290,278			$	158,032		$	123,347
Diluted earnings per share	$	2.54		$	1.30		$	6.54		$	4.33
Diluted earnings per share ⁽¹⁾														$	1.18		$	0.92
_____________
(1) Per share data for the three months ended March 31, 2013 has been restated to reflect the effect of a two-for-one stock split on March 18, 2014. See Note 1 to the unaudited consolidated financial statements within this Quarterly Report on Form 10-Q for additional information.													(1) Per share data for the three months ended March 31, 2013 has been restated to reflect the effect of a two-for-one stock split on March 18, 2014. See Note 1 to the unaudited consolidated financial statements within this Quarterly Report on Form 10-Q for additional information.

	Three Months Ended September 30, 2013						Nine Months Ended September 30, 2013							Three Months Ended March 31, 2014
	Average Sales Price			Volume			Average Sales Price			Volume				Average Sales Price			Volume
Product sales price and volume percentage change from prior year period
Olefins	+11.5		%	+14.3		%	+2.0		%	-5.1		%		+13.3		%	+10.7		%
Vinyls	+6.2		%	+9.3		%	+2.1		%	+9.7		%		+1.7		%	+4.9		%
Company average	+9.7		%	+12.6		%	+2.1		%	-0.7		%		+9.5		%	+8.8		%

	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended March 31,
	2013			2012			2013			2012				2014			2013
Average industry prices ⁽¹⁾
Ethane (cents/lb)	8.4			11.4			8.7			14.6				11.4			8.7
Propane (cents/lb)	24.4			21.2			22.2			24.7				30.8			20.5
Ethylene (cents/lb) ⁽²⁾	54.3			52.1			58.7			57.8				55.1			63.3
Polyethylene (cents/lb) ⁽³⁾	101.7			91.3			99.7			95.1				107.7			97.3
Styrene (cents/lb) ⁽⁴⁾	83.2			77.7			83.6			75.3				86.9			85.9
Caustic soda ($/short ton) ⁽⁵⁾	605.8			579.2			611.4			565.8				579.2			602.5
Chlorine ($/short ton) ⁽⁶⁾	248.3			262.5			252.8			268.1				236.7			255.0
PVC (cents/lb) ⁽⁷⁾	61.5			52.5			60.9			54.8				66.5			59.2

_____________

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

~~Table of Contents~~


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


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


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


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


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


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

Summary

For the quarter ended ~~September 30, 2013~~March 31, 2014, net income was $~~170.3~~158.0 million, or $~~2.54~~1.18 per diluted share, on net sales of $~~1,004.2~~1,027.7 million. This represents an increase in net income of $~~83.3~~34.7 million, or $~~1.24~~0.26 per diluted share, compared to the quarter ended ~~September 30, 2012~~March 31, 2013 net income of $~~87.0~~123.3 million, or $~~1.30~~0.92 per diluted share, on net sales of $~~821.2~~864.6 million. Net sales for the ~~third~~first quarter of ~~2013~~2014 increased by $~~183.0~~163.1 million compared to net sales for the ~~third~~first quarter of ~~2012~~2013, mainly attributable to higher sales volumes for ~~styrene~~polyethylene and ~~caustic,~~ethylene, higher sales prices for most of our major products and sales contributed by our specialty PVC pipe business, which we acquired in May 2013. Income from operations was $~~266.6~~248.1 million for the ~~third~~first quarter of ~~2013~~2014 as compared to $~~142.5~~194.1 million for the ~~third~~first quarter of ~~2012~~2013. Income from operations for the ~~third~~first quarter of ~~2013~~2014 benefited primarily from higher olefins volumes and improved olefins ~~and vinyls~~ integrated product margins, ~~predominantly due to~~as higher sales prices ~~for most of our major products~~more than offset the increase in feedstock and ~~lower overall feedstock costs~~energy costs. The increase in first quarter 2014 income from operations as compared to the ~~prior year period.~~

~~For the~~ ~~nine months ended September 30,~~first quarter of 2013~~, net income was~~ ~~$439.5 million, or~~ ~~$6.54~~ ~~per diluted share, on net sales of~~ ~~$2,807.9 million. This represents an increase in net income of~~ ~~$149.2 million, or~~ ~~$2.21~~ ~~per diluted share, from the~~ ~~nine months ended September 30, 2012~~ ~~net income of~~ ~~$290.3 million, or~~ ~~$4.33~~ ~~per diluted share, on net sales of~~ ~~$2,770.0 million. Net sales for the~~ ~~nine months ended September 30, 2013~~ ~~increased marginally by~~ ~~$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. Income from operations was ~~$695.9 million~~ ~~for the~~ ~~nine months ended September 30, 2013~~ ~~as compared to~~ ~~$459.1 million~~ ~~for the~~ ~~nine months ended September 30, 2012~~. The increase in income from operations was primarily attributable to higher olefins and vinyls integrated product margins, predominantly due to a significant decrease in feedstock costs as average industry ethane prices decreased 40.4% and average industry propane prices decreased 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 sales, lower production ~~and the~~rates, unabsorbed fixed manufacturing costs and other costs associated with the maintenance turnaround at our Calvert City complex and our Calvert City ethylene plant’s feedstock conversion 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.project.

RESULTS OF OPERATIONS

~~Third~~First Quarter ~~2013~~2014 Compared with ~~Third~~First Quarter ~~2012~~
2013

Net Sales. Net sales increased by $~~183.0~~163.1 million, or ~~22.3%~~18.9%, to $~~1,004.2~~1,027.7 million in the ~~third~~first quarter of ~~2013~~2014 from $~~821.2~~864.6 million in the ~~third~~first quarter of ~~2012~~2013, primarily attributable to higher sales volumes for ~~styrene~~polyethylene and ~~caustic,~~ethylene, higher sales prices for most of our major products and sales contributed by our specialty PVC pipe business. Average sales prices for the ~~third~~first quarter of ~~2013~~2014 increased by ~~9.7%~~9.5% as compared to the ~~third~~first quarter of ~~2012~~2013. Overall sales volumes increased by ~~12.6%~~8.8% as compared to the ~~third~~first quarter of ~~2012~~2013.

Gross Profit. Gross profit margin percentage increased to ~~30.3%~~27.9% for the ~~third~~first quarter of ~~2013~~2014 from ~~21.0%~~26.3% for the ~~third~~first quarter of ~~2012~~2013, driven mainly by improved olefins ~~and vinyls~~ integrated product margins ~~primarily attributable to higher~~as an increase in sales prices ~~for most of our major products~~outpaced increases in feedstock and ~~lower ethane costs, partially offset by higher propane~~energy costs. ~~The third quarter 2013 gross profit margin also benefited from higher styrene and caustic sales volumes.~~ Our raw material cost in both segments normally tracks industry prices, which experienced ~~a decrease~~an increase of ~~26.3%~~31.0% for ethane and an increase of ~~15.1%~~50.2% for propane, as compared to the ~~third~~first quarter of ~~2012~~2013. Sales prices increased an average of ~~9.7%~~9.5% for the ~~third~~first quarter of ~~2013~~2014 as compared to the ~~third~~first quarter of ~~2012~~2013. ~~The gross profit margin~~In addition, our margins benefited from the increased ethylene production at our Lake Charles, Louisiana complex after the first quarter 2013 completion of the Petro 2 ethylene unit expansion and its conversion to 100% ethane feedstock capability. Income from operations for the ~~third~~first quarter of ~~2012~~2014 was negatively impacted by the lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with ~~a planned outage of~~the maintenance turnaround at our ~~styrene plant in Lake Charles.~~Calvert City complex and our Calvert City ethylene plant’s feedstock conversion and expansion project.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the ~~third~~first quarter of ~~2013~~2014 of $~~37.9~~39.0 million increased by $~~8.2~~5.2 million as compared to the ~~third~~first quarter of ~~2012~~2013, mainly due to an increase in payroll and related labor costs, including incentive ~~compensation, and an increase in selling expenses associated with the increase in sales.~~compensation.

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Interest Expense. Interest expense ~~decreased~~increased by $~~8.6~~2.9 million to $~~3.3~~9.2 million in the ~~third~~first quarter of ~~2013~~2014 from $~~11.9~~6.3 million in the ~~third~~first quarter of ~~2012~~2013 largely as a result of ~~increased~~decreased capitalized interest on major capital projects as compared to the prior year period. Debt balances remained relatively unchanged from the prior year period.

Other ~~(Expense)~~ Income, Net. Other ~~(expense)~~ income, net ~~was net expense~~for the first quarter of 2014 of $~~0.3~~2.5 million inwas mainly comprised of income from our equity method investments. Other income, net for the ~~third~~first quarter of 2013 ~~compared to net income~~ of $~~1.2~~3.5 million included a settlement of a claim, which did not recur in the ~~third~~first quarter of ~~2012~~2014.~~, mainly due to lower investment income and related write-offs and lower interest income in the third quarter~~

Table of ~~2013.~~Contents

Income Taxes. The effective income tax rate was ~~35.3%~~34.5% for the ~~third~~first quarter of ~~2013~~2014. The effective income tax rate for the ~~third~~first quarter of ~~2013~~ ~~was above the U.S. federal statutory rate of~~ ~~35.0%~~ ~~primarily due to state income taxes, mostly offset by the domestic manufacturing deduction. The effective income tax rate was~~ ~~30.5%~~ ~~for the~~ ~~third quarter of 2012. The effective income tax rate for the~~ ~~third quarter of 2012~~2014 was below the U.S. federal statutory rate of 35.0% primarily due to state tax credits and the domestic manufacturing deduction, ~~and a reduction in~~mostly offset by state income taxes.

~~Olefins Segment~~

~~Net Sales. Net sales increased by~~ ~~$139.5 million, or~~ ~~25.8%, to~~ ~~$679.3 million~~ ~~in the~~ ~~third quarter of 2013~~ ~~from~~ ~~$539.8 million~~ ~~in the~~ ~~third quarter of 2012~~, predominantly due to higher styrene sales volumes and higher 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 by ~~11.5%~~ ~~in the~~ ~~third quarter of 2013~~ ~~as compared to the~~ ~~third quarter of 2012. Average sales volumes for the Olefins segment increased by~~ ~~14.3%~~ ~~in the~~ ~~third quarter of 2013~~ ~~as compared to the~~ ~~third quarter of 2012~~.

~~Income from Operations. Income from operations increased by~~ ~~$112.7 million, or~~ ~~90.5%, to~~ ~~$237.2 million~~ ~~in the~~ ~~third quarter of 2013~~ ~~from~~ ~~$124.5 million~~ ~~in the~~ ~~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 ~~third quarter of 2013~~ ~~resulted in a gain of~~ ~~$4.9 million~~ ~~as compared to a gain of~~ ~~$0.2 million~~ ~~in the~~ ~~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~~ ~~$43.4 million, or~~ ~~15.4%, to~~ ~~$324.8 million~~ ~~in the~~ ~~third quarter of 2013~~ ~~from~~ ~~$281.4 million~~ ~~in the~~ ~~third quarter of 2012~~. This increase was mainly attributable to higher caustic sales volume, higher PVC resin and caustic sales prices and the sales contributed by our specialty PVC pipe business. Average sales prices for the Vinyls segment increased by ~~6.2%~~ ~~in the~~ ~~third quarter of 2013~~ ~~as compared to the~~ ~~third quarter of 2012. Average sales volumes for the Vinyls segment increased by~~ ~~9.3%~~ ~~in the~~ ~~third quarter of 2013~~ ~~as compared to the~~ ~~third quarter of 2012~~.

~~Income from Operations.~~ ~~Income from operations increased by~~ ~~$15.5 million, or~~ ~~64.3%, to~~ ~~$39.6 million~~ ~~in the~~ ~~third quarter of 2013~~ ~~from~~ ~~$24.1 million~~ ~~in the~~ ~~third quarter of 2012~~. This increase was primarily driven by higher vinyls integrated product margins, largely resulting from higher sales prices for all major products, higher caustic sales volume and improved operating rates as compared to the prior year period.

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

~~Net Sales. Net sales increased marginally by~~ ~~$37.9 million, or~~ ~~1.4%, to~~ ~~$2,807.9 million~~ ~~for the~~ ~~nine months ended September 30, 2013~~ ~~from~~ ~~$2,770.0 million~~ ~~for the~~ ~~nine months ended 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. 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 ~~nine months ended 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~~ ~~0.7%~~ ~~as compared to the~~ ~~nine months ended September 30, 2012~~.

~~Gross Profit. Gross profit margin percentage of~~ ~~28.7%~~ ~~for the~~ ~~nine months ended September 30, 2013~~ ~~increased from the~~ ~~19.7%~~ ~~gross profit margin percentage for the~~ ~~nine months ended 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 40.4% and 10.1% for ethane and propane, respectively, as compared to the ~~nine months~~

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

~~Selling, General and Administrative Expenses. Selling, general and administrative expenses for the~~ ~~nine months ended September 30, 2013~~ ~~increased by~~ ~~$22.3 million~~ ~~as compared to the~~ ~~nine months ended 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~~ ~~$20.8 million~~ to ~~$14.9 million~~ ~~for the~~ ~~nine months ended September 30, 2013~~, largely due to increased capitalized interest on major capital projects and lower average interest rates in the first 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 decreased by~~ ~~$0.6 million~~ to ~~$3.1 million~~ ~~for the~~ ~~nine months ended September 30, 2013~~ ~~from~~ ~~$3.7 million~~ ~~for the~~ ~~nine months ended September 30, 2012~~. The decrease was principally due to lower investment income and 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 ~~35.8%~~35.5% for the ~~nine months ended September 30,~~first quarter of 2013. The effective income tax rate for the first quarter of 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~~ ~~33.5%~~ ~~for the~~ ~~nine months ended 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, partially offset by state income taxes.~~

Olefins Segment

Net Sales. Net sales ~~decreased~~increased by $~~59.3~~140.0 million, or ~~3.0%~~24.0%, to $~~1,885.5~~722.8 million ~~for~~in the ~~nine months ended September 30, 2013~~first quarter of 2014 from $~~1,944.8~~582.8 million ~~for~~in the ~~nine months ended September 30, 2012~~first quarter of 2013, ~~mainly~~predominantly due to ~~lower feedstock, ethylene~~higher sales prices for most of our major products and ~~ethylene co-products sales volumes, partially offset by~~ higher sales volumes for ~~styrene and higher sales prices for~~ polyethylene and ~~styrene. Ethylene and~~ ethylene ~~co-product~~as compared to the prior year period. Olefins sales volumes for the first quarter of 2013 were lower primarily due to the ~~first quarter 2013~~ turnaround and expansion ~~of one~~ of the Lake Charles ethylene ~~units.~~unit. Average sales prices for the Olefins segment increased by ~~2.0%~~13.3% ~~for~~in the ~~nine months ended September 30, 2013~~first quarter of 2014 as compared to the ~~nine months ended September 30, 2012~~first quarter of 2013. Average sales volumes for the Olefins segment ~~decreased~~increased by ~~5.1%~~10.7% ~~for~~in the ~~nine months ended September 30, 2013~~first quarter of 2014 as compared to the ~~nine months ended September 30, 2012~~first quarter of 2013.

Income from Operations. Income from operations increased by $~~176.4~~111.2 million, or ~~43.1%~~69.0%, to $~~586.0~~272.3 million ~~for~~in the ~~nine months ended September 30, 2013~~first quarter of 2014 from $~~409.6~~161.1 million ~~for~~in the ~~nine months ended September 30, 2012~~first quarter of 2013. This increase was mainly attributable to higher olefins integrated product margins in the first quarter of 2014as compared to the prior year ~~period. Margins~~period, as the increase in sales prices outpaced increases in feedstock and energy costs. In addition, first quarter 2014 income from operations benefited from higher polyethylene and ethylene sales volumes and improved ~~primarily~~production rates for most of our major products as compared to the first quarter of 2013. Trading activity in the first quarter of 2014 resulted in a loss of $0.6 million as compared to a gain of $7.3 million in the first quarter of 2013. Income from operations in the first quarter of 2013 was negatively impacted as a result of ~~significantly lower feedstock costs. Income from operations for the~~ ~~nine months ended 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 Petro 2 ethylene ~~units. Trading activity for the~~ ~~nine months ended September 30, 2013~~ ~~resulted in a gain of~~ ~~$9.9 million~~ ~~as compared to a loss of~~ ~~$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.unit.

Vinyls Segment

Net Sales. Net sales increased by $~~97.1~~23.1 million, or ~~11.8%~~8.2%, to $~~922.3~~304.9 million ~~for~~in the ~~nine months ended September 30, 2013~~first quarter of 2014 from $~~825.2~~281.8 million ~~for~~in the ~~nine months ended September 30, 2012~~first quarter of 2013. This increase was ~~primarily~~mainly attributable to ~~higher sales volumes for caustic and PVC resin, higher sales prices for most major products and~~the sales contributed by our specialty PVC pipe ~~business. Sales volumes for~~business, partially offset by lower ethylene co-product sales volume due to the ~~first nine months~~planned shut down of ~~2012 were negatively impacted by the lower operating rates at~~ our ~~Geismar vinyls complex~~Calvert City ethylene plant as a result of ~~operational issues related to~~ the ~~unscheduled shut down at the complex.~~feedstock conversion and expansion project. Average sales prices for the Vinyls segment increased by ~~2.1%~~1.7% ~~for~~in the ~~nine months ended September 30, 2013~~first quarter of 2014 as compared to the ~~nine months ended September 30, 2012~~first quarter of 2013~~, while average~~. Average sales volumes for the Vinyls segment increased by ~~9.7%~~4.9% ~~for~~in the ~~nine months ended September 30, 2013~~first quarter of 2014 as compared to the ~~nine months ended September 30, 2012~~first quarter of 2013.

Loss/Income from Operations. ~~Income~~The Vinyls segment incurred a loss from operations ~~increased by~~of $~~68.4~~21.1 million in the first quarter of 2014 as compared to income from operations of $~~136.1~~43.7 million ~~for~~in the ~~nine months ended September 30,~~first quarter of 2013 ~~from~~, a negative change of $~~67.7~~64.8 million ~~for the~~ ~~nine months ended September 30, 2012~~. This ~~increase~~decrease was ~~predominantly~~primarily driven by the lost sales, lower production rates and the expensing of $16.9 million related to unabsorbed fixed manufacturing costs and other costs associated with the maintenance turnaround at our Calvert City complex and our Calvert City ethylene plant’s feedstock conversion and expansion project. In addition, the Vinyls segment's first quarter 2014 operating results were negatively impacted by the severe winter weather and significantly higher propane costs, ~~higher sales volumes~~as average industry prices for ~~caustic and PVC resin and higher operating rates~~propane increased by 50.2% as compared to the prior year 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 nine months of 2012 wereperiod.

~~Table of Contents~~

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

CASH FLOW DISCUSSION FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2014 AND 2013 ~~AND 2012~~

Cash Flows

Operating Activities

Operating activities provided cash of $~~547.5~~212.5 million in the first ~~nine~~three months of ~~2013~~2014 compared to cash provided of $~~492.8~~116.3 million in the first ~~nine~~three months of ~~2012~~2013. The $~~54.7~~96.2 million increase in cash flows from operating activities was mainly due to an increase in income from operations ~~partially offset by an increase~~and a decrease in the use of cash for working capital ~~purposes and~~purposes. Income from operations increased by $54.0 million in the first three months of 2014 primarily as a result of higher olefins integrated product margins as compared to the prior year period. Cash flows from operating activities for the first three months of 2013 was negatively impacted by deferred turnaround costs from the turnaround of one of our Lake Charles ethylene units. ~~Income from operations increased by~~ ~~$236.8 million~~ ~~in the~~ ~~first 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~~provided cash of $~~46.5~~2.0 million in the first ~~nine~~three months of ~~2013~~2014, compared to $~~115.3~~18.8 million of cash ~~provided~~used in the first ~~nine~~three months of ~~2012~~2013, ~~an unfavorable~~a favorable change of $~~161.8~~20.8 million. The change was ~~caused by higher accounts receivable balances largely attributable~~mainly due to ~~an increase in average sales volumes during the third quarter of 2013 as compared to the third quarter of 2012 and an increase~~a decrease in inventory during the ~~2013~~2014 period.

Table of Contents

Investing Activities

Net cash used for investing activities during the first ~~nine~~three months of ~~2013~~2014 was $~~694.6~~130.0 million as compared to net cash used for investing activities of $~~194.6~~121.3 million in the first ~~nine~~three months of ~~2012~~2013. Capital expenditures were $~~498.3~~110.7 million in the first ~~nine~~three months of ~~2013~~2014 compared to $~~235.5~~150.8 million in the first ~~nine months of 2012. The higher capital expenditures in the~~ ~~first nine~~three months of 2013 ~~were largely~~, a decrease mainly attributable to the ~~construction~~completion of the new chlor-alkali plant at our Geismar facility ~~(which is expected to be operational by~~in December 2013. Capital expenditures in the ~~end~~first three months of ~~2013),~~2014 were mainly incurred on the feedstock conversion and ethylene expansion project and PVC plant expansion ~~and ethylene furnaces modernization projects~~project at our Calvert City ~~Kentucky~~ complex and the planned upgrade and expansion of ~~one of~~ the second ethylene ~~units~~unit at our Lake Charles complex. Capital expenditures in the first ~~nine~~three months of ~~2012~~2013 were mainly incurred on the construction of the new Geismar chlor-alkali plant, ~~and~~ the expansion of ~~one of~~ the first ethylene ~~units~~unit at our Lake Charles complex and the feedstock conversion and ethylene furnaces modernization projects at our Calvert City complex. The remaining capital expenditures in the first ~~nine~~three months of ~~2013~~2014 and ~~2012~~2013 primarily related to projects to improve production capacity or reduce costs, maintenance and ~~maintenance,~~ safety projects and environmental projects at our various facilities. ~~We used~~ ~~$178.3 million~~ ~~of cash to acquire our specialty PVC pipe business.~~ Purchases of securities in the first ~~nine~~three months of ~~2013~~2014 totaled $~~232.3~~49.0 million and were comprised of ~~short-term commercial paper and~~ corporate and U.S. government debt securities and equity securities. We also received aggregate proceeds of $~~239.8~~30.1 million from the sales and maturities of ~~short-term commercial paper~~our investments in the first ~~nine~~three months of ~~2013~~2014. The activity during the first ~~nine~~three months of ~~2012~~2013 was primarily related to the purchases of, and the receipt of proceeds ~~received~~ from the ~~sale~~maturities of, ~~equity securities.~~short-term commercial paper.

Financing Activities

Net cash used for financing activities during the first ~~nine~~three months of ~~2013~~2014 was $~~51.4~~11.1 million as compared to net cash ~~provided~~used of $~~74.3~~7.1 million in the first ~~nine~~three months of ~~2012~~2013. The activity during the first ~~nine~~three months of ~~2013~~2014 was primarily related to the $~~40.2~~16.8 million payment of cash dividends, ~~and~~ ~~$19.4 million~~ ~~of cash used for the repurchase of shares of our common stock,~~ partially offset by proceeds of $~~3.2~~2.2 million from the exercise of stock options. The activity during the first ~~nine~~three months of ~~2012~~2013 was mainly related to the ~~draw-down~~$12.6 million payment of ~~our restricted~~ cash ~~and~~dividends, partially offset by proceeds from the exercise of stock ~~options, partially offset by the~~ ~~$22.3 million~~ ~~payment of cash dividends,~~ ~~$10.8 million~~ ~~of repurchases of shares of our common stock and~~ ~~$2.2 million~~ ~~of debt issuance costs associated with the issuance of our 3.60% senior notes due 2022.~~options.

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

~~Table of Contents~~

200 million pounds annually and is targeted for completion by 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 $400.0 million to $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~~ ~~September 30, 2013, we had incurred a total cost of approximately $465.3 million on these capital projects.~~

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~~currently plan to upgrade and expand the ~~expansion~~capacity of the ~~second~~other ethylene unit at our Lake Charles complex in ~~2015.~~the late 2015 to early 2016 time frame. This project is currently estimated to cost in the range of $250.0 million to $310.0 million and will add approximately 250 million pounds of ethylene capacity. The additional capacity from this expansion is expected to provide ethylene for existing internal uses and may also be sold in the merchant market. This capital project is expected to be funded with cash on hand, cash flow from operations, and, if necessary, borrowings under our revolving credit facility and other external financing. We have incurred minimal cost on this project as of March 31, 2014.

In August 2011, our Board of Directors authorized a stock repurchase program totaling $100.0 million. As of ~~September 30, 2013~~March 31, 2014, we had repurchased ~~506,525~~1,252,922 shares of our common stock (on a post-split basis) for an aggregate purchase price of approximately $~~32.7~~46.2 million under this program. ~~During~~We did not repurchase any shares under this program during the three months ended ~~September 30, 2013~~March 31, 2014~~, we repurchased 59,700 shares of our common stock for an aggregate purchase price of approximately $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 ~~September 30, 2013~~March 31, 2014, our cash, cash equivalents and current marketable securities totaled $~~717.2~~776.3 million. In addition, we have a revolving credit facility available to supplement cash if needed, as described under "Debt" below.

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Debt

As of ~~September 30, 2013~~March 31, 2014, our long-term debt, including current maturities, totaled $~~763.8~~763.9 million, consisting of $250.0 million principal amount of 3.60% senior notes due 2022 (less the unamortized discount of $~~1.1~~1.0 million), $100.0 million of 6 ½% senior notes due 2029, $250.0 million of 6 ¾% senior notes due 2032, $89.0 million of 6 ½% senior notes due 2035 (the "6 ½% GO Zone Senior Notes Due 2035"), $65.0 million of 6 ½% senior notes due 2035 (the "6 ½% IKE Zone Senior Notes Due 2035") (collectively, but excluding the 3.60% senior notes due 2022, the "Senior Notes") and a $10.9 million loan from the proceeds of tax-exempt waste disposal revenue bonds (supported by an $11.3 million letter of credit). The 6 ½% senior notes due 2029, the 6 ¾% senior notes due 2032, the 6 ½% GO Zone Senior Notes Due 2035 and the 6 ½% IKE Zone Senior Notes Due 2035 evidence and secure our obligations to the Louisiana Local Government Environmental Facility and Development Authority (the "Authority"), a political subdivision of the State of Louisiana, under four loan agreements relating to the issuance of $100.0 million, $250.0 million, $89.0 million and $65.0 million aggregate principal amount of the Authority's tax-exempt revenue bonds, respectively. As of ~~September 30, 2013~~March 31, 2014, debt outstanding under the tax-exempt waste disposal revenue bonds bore interest at a variable rate. As of ~~September 30, 2013~~March 31, 2014, we were in compliance with all of the covenants with respect to the 3.60% senior notes due 2022, the Senior Notes, our waste disposal revenue bonds and our revolving credit facility.

Our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under our revolving credit facility will be adequate to meet our normal operating needs for the foreseeable future.

Revolving Credit Facility

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

At ~~September 30, 2013~~March 31, 2014, 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 ~~September 30, 2013~~March 31, 2014, 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 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~~2013 Form 10-K for more information on the revolving credit facility.

GO Zone and IKE Zone Bonds

As of ~~September 30, 2013~~March 31, 2014, 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

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~~2012~~2013 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~~ ~~$0.2250~~ ~~per share).~~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~~2013 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.

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;

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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 feedstock conversion program at our Calvert City ethylene plant;

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;

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~~2013 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;

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.

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Every forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Commodity Price Risk

A substantial portion of our products and raw materials are commodities whose prices fluctuate as market supply and demand fundamentals change. Accordingly, product margins and the level of our profitability tend to fluctuate with changes in the business cycle. We try to protect against such instability through various business strategies. Our strategies include ethylene feedstock flexibility and moving downstream into the olefins and vinyls products where pricing is more stable. We use derivative instruments in certain instances to reduce price volatility risk on feedstocks and products. Based on our open derivative positions at ~~September 30, 2013~~March 31, 2014, a hypothetical $0.10 increase in the price of a gallon of ethane would have increased our income before taxes by ~~$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 $3.9~~$0.3 million. Additional information concerning derivative commodity instruments appears in Notes 9 and 10 to the unaudited consolidated financial statements within this Quarterly Report on Form 10-Q.

Interest Rate Risk

We are exposed to interest rate risk with respect to fixed and variable rate debt. At ~~September 30, 2013~~March 31, 2014, we had variable rate debt of $10.9 million outstanding. All of the debt outstanding under our revolving credit facility (none was outstanding at ~~September 30, 2013~~March 31, 2014) and our loan relating to the tax-exempt waste disposal revenue bonds are at variable rates. We do not currently hedge our variable interest rate debt, but we may do so in the future. The average variable interest rate for our variable rate debt of $10.9 million as of ~~September 30, 2013~~March 31, 2014 was ~~0.16%~~0.10%. A hypothetical 100 basis point increase in the average interest rate on our variable rate debt would increase our annual interest expense by approximately $0.1 million. Also, at ~~September 30, 2013~~March 31, 2014, 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 ~~September 30, 2013~~March 31, 2014 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~~2013 Form 10-K, filed on February ~~22, 2013,~~21, 2014, contained a description of various legal proceedings in which we are involved, including environmental proceedings at our facilities in Calvert City. See Note 1615 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~~2013 Form ~~10-K and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.~~10-K. There have been no material changes from those risk factors.



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

The following table provides information on our purchase of equity securities during the quarter ended ~~September 30, 2013~~March 31, 2014:. As the transactions presented below were all consummated before the Company’s March 18, 2014 stock-split was effective, all amounts in the table below are presented on a pre-split basis.

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



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 ⁽²⁾	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs ⁽²⁾
January 2014	—	$	—	—	$	53,780,000
February 2014	24,723	$	129.13	—	$	53,780,000
March 2014	—	$	—	—	$	53,780,000
	24,723	$	129.13	—

_____________


(1)	Represents shares withheld in satisfaction of withholding taxes due upon the vesting of restricted stock and restricted stock units granted to our employees under the 2013 Plan.

(2)

On August 22, 2011, we announced the authorization by our Board of Directors of a $100.0 million stock repurchase program. As of ~~September 30, 2013~~March 31, 2014, ~~506,525~~1,252,922 shares of common stock (on a post-split basis) had been acquired at an aggregate purchase price of $~~32.7~~46.2 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. None of the purchases during the first quarter of 2014 were pursuant to this program.

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Item 6.	Exhibits



Exhibit No.

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

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

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

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

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



		WESTLAKE CHEMICAL CORPORATION

Date:	~~November 7, 2013~~May 6, 2014	By:	/S/ ALBERT CHAO
			Albert Chao
			President and Chief Executive Officer (Principal Executive Officer)

Date:	~~November 7, 2013~~May 6, 2014	By:	/S/ M. STEVEN BENDER
			M. Steven Bender
			Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

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	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



	September 30, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
3.60% senior notes due 2022	$	248,960	$	238,228	$	248,872	$	251,125
6 ½% senior notes due 2029	100,000		107,800		100,000		119,738
6 ¾% senior notes due 2032	250,000		267,465		250,000		283,168
6 ½% GO Zone Senior Notes Due 2035	89,000		94,209		89,000		102,095
6 ½% IKE Zone Senior Notes Due 2035	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



Fair value of consideration transferred:
Cash	$	178,309

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



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

Large accelerated filer

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Non-accelerated filer

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Smaller reporting company