This discussion and analysis should be read in conjunction with information contained in the accompanying unaudited consolidated interim financial statements ofWestlake Chemical Corporation and the notes thereto and the consolidated financial statements and notes thereto ofWestlake Chemical Corporation included inWestlake Chemical Corporation's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 (the "2020 Form 10-K"). Unless otherwise indicated, references in this report to "we," "our," "us" or like terms refer toWestlake Chemical Corporation ("Westlake" or the "Company"). The following discussion contains forward-looking statements. Please read "Forward-Looking Statements" for a discussion of limitations inherent in such statements. We are a vertically-integrated global manufacturer and marketer of basic chemicals, vinyls, polymers and building products. Our two principal operating segments are Vinyls and Olefins. We use the majority of our internally-produced basic chemicals to produce higher value-added chemicals, polymers and building products. Consumption of the basic chemicals that we manufacture in the commodity portions of our vinyls and olefins processes has increased significantly since we began operations in 1986. Our vinyls and olefins products are some of the most widely used chemicals in the world and are upgraded into a wide variety of higher value-added chemical products used in many end-markets. Chlor-alkali and petrochemicals are typically manufactured in large volume by a number of different producers using widely available technologies. The chlor-alkali and petrochemical industries exhibit cyclical commodity characteristics, and margins are influenced by changes in the balance between supply and demand and the resulting operating rates, the level of general economic activity and the price of raw materials. Due to the significant size of new plants, capacity additions are built in large increments and typically require several years of demand growth to be absorbed. The cycle is generally characterized by periods of tight supply, leading to high operating rates and margins, followed by a decline in operating rates and margins primarily as a result of excess new capacity additions. Westlake is the second-largest chlor-alkali producer and the second-largest PVC producer in the world. Demand for vinyl products in the first half of 2020 was negatively impacted by the onset of the coronavirus ("COVID-19") pandemic. Global demand for most of our vinyls products started strengthening in the second half of 2020 and remained strong through the third quarter of 2021, and we expect global demand for most of our vinyls products to remain robust through the remainder of 2021 and well into 2022. Depending on the performance of the global economy, potential changes in international trade and tariffs policies, the trend of crude oil prices, the timing of the new capacity additions in 2021 and beyond, and the sustainability of the current, strong demand for most of our products, our financial condition, results of operations or cash flows could be negatively or positively impacted. Ethane-based ethylene producers have in the recent past experienced a cost advantage over naphtha-based ethylene producers during periods of higher crude oil prices. This cost advantage has resulted in a strong export market for polyethylene and other ethylene derivatives and has benefited operating margins and cash flows for our Olefins segment during such periods. However, we have seen a significant reduction in the cost advantage enjoyed by North American ethane-based ethylene producers during periods of lower crude oil prices. In the past year, we have seen volatility in ethane and ethylene prices, primarily due to changes in demand resulting from the COVID-19 pandemic, anticipated timing for certain new ethylene capacity additions and availability of natural gas liquids, as well as fluctuation in the price of crude oil. Additionally, we have seen volatility in ethane and ethylene prices in 2021 due to winter storm Uri and Hurricane Ida that resulted in shutdowns of many industry production facilities on theGulf Coast and delayed or extended the timing of planned turnarounds of various ethylene crackers. Global demand for most of our olefins products started strengthening in the second half of 2020 and remained strong through the third quarter of 2021, and we expect global demand for most of our olefins products to remain robust through the remainder of 2021 and the first half of 2022. However, new ethylene and polyethylene capacity additions inNorth America ,Asia and theMiddle East will add additional supply and may contribute to periods of lower profitability in our Olefins segment. 24
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Significant Developments COVID-19, Industry Conditions and Our Business OnMarch 11, 2020 , theWorld Health Organization declared the ongoing COVID-19 outbreak a pandemic and recommended containment and mitigation measures worldwide. The pandemic has resulted in widespread adverse impacts on the global economy. We experienced significant disruptions in the second quarter of 2020 as the pandemic and its impact on the global economy spread through most of our markets. We were designated as an essential industry by many governments based on the nature of the products we manufacture. While demand for some of our products used in cleaning, packaging and medical applications and manufacturing continued to be firm, we expected lower demand for certain of our other products that led us to proactively temporarily idle production at several of our smaller non-integrated plants and reduce operating rates at others in the beginning of the second quarter of 2020. Since the middle of the second quarter of 2020, a general ease in government restrictions in many jurisdictions across the world has resulted in a gradual increase in demand for our products. As a result, all of our idled plants recommenced production. Except for the impact of the winter storm Uri and Hurricane Ida, operating rates have improved for most of our plants since the second half of 2020 due to continuing increase in demand for our products. Though the government restrictions across the world generally eased through the third quarter of 2021, there is considerable uncertainty regarding the extent to which COVID-19 will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of the virus. Factors that could impact the spread of COVID-19 include timing and logistics with respect to the distribution of vaccines globally and the efficacy of the available vaccines (including with respect to the more recent variants of COVID-19) and other treatments. We continue to monitor the volatile environment and may reduce operating rates or idle production if the pandemic and its financial impacts persist or worsen. Considering the uncertain and volatile environment, we could continue to experience significant disruptions to our business operations in the near future. For additional discussion regarding our operations and COVID-19, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of the 2020 Form 10-K. For additional discussion regarding risks associated with the COVID-19 pandemic, see Item 1A. Risk Factors in Part I of the 2020 Form 10-K. Acquisitions Acquisition of Boral Target Companies OnJune 20, 2021 ,Royal Building Products (USA) Inc. ("RBP"), one of our wholly-owned subsidiaries, entered into that certain Equity Purchase Agreement (the "Boral Purchase Agreement") by and amongBoral Building Products Inc. , aMichigan corporation,Boral Stone Products LLC , aDelaware limited liability company,Boral Lifetile Inc. , aCalifornia corporation,Boral Windows LLC , aUtah limited liability company,Boral Industries Inc. , aCalifornia corporation ("Boral Industries "), RBP and, solely for the limited purposes set forth therein, Westlake and Boral Limited, an Australian corporation ("Boral"). Pursuant to the terms of the Boral Purchase Agreement, RBP agreed to acquire fromBoral Industries 100% of the issued and outstanding equity interests of certain subsidiaries ofBoral Industries engaged in Boral's North American building products businesses in roofing, siding, trim and shutters, decorative stone and windows (the "Boral Target Companies") for a purchase price of$2.15 billion in cash, subject to working capital post-closing adjustment, as well as a potential earn-out payment from RBP toBoral Industries of up to$65 million if Boral's windows business generates EBITDA in excess of a specified target in its fiscal year endingJune 30, 2024 (the "Boral Acquisition"). OnOctober 1, 2021 , we completed the acquisition of, and acquired all of the equity interests in, the Boral Target Companies. Other AcquisitionsLASCO Fittings, Inc. OnJuly 4, 2021 ,North American Pipe Corporation ("NAPCO"), one of our wholly-owned subsidiaries, entered into that certain Equity Purchase Agreement withAalberts U.S. Holding Corp. , aDelaware corporation ("Aalberts") and wholly-owned subsidiary of Aalberts N.V., pursuant to which NAPCO agreed to acquireLASCO Fittings, Inc. , aDelaware corporation ("LASCO"), from Aalberts. OnAugust 19, 2021 , we completed the acquisition of, and acquired all of the equity interests in, LASCO. The total closing purchase consideration was$277 million (the "LASCO Acquisition"). The assets acquired and liabilities assumed and the results of operations of LASCO are included in the Vinyls segment. LASCO is a manufacturer of injected-molded PVC fittings that serve the plumbing, pool and spa, industrial, irrigation and retail markets inthe United States . 25
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Dimex Inc. OnAugust 2, 2021 ,Rome Delaware Corp. ("Rome"), one of our wholly-owned subsidiaries, entered into that certain Stock Purchase Agreement (the "Dimex Purchase Agreement") withDX Acquisition Corp. , aDelaware corporation ("Dimex"), each ofDimex's stockholders, and for limited purposes, Westlake andGrey Mountain Partners Fund III Holdings, L.P. , pursuant to whichRome agreed to acquireDimex . OnSeptember 10, 2021 , we completed the acquisition of, and acquired all of the equity interests in,Dimex . The total closing purchase consideration was$172 million , subject to working capital post-closing adjustments (the "Dimex Acquisition" and, together with the Boral Acquisition and the LASCO Acquisition, the "Acquisitions"). The assets acquired and liabilities assumed and the results of operations ofDimex are included in the Vinyls segment.Dimex is a producer of various consumer products made from post-industrial-recycled polyvinyl chloride, polyethylene and thermoplastic elastomer materials, including, landscape edging; industrial, home and office matting; marine dock edging; and masonry joint controls. Senior Notes Offering OnAugust 19, 2021 , we completed the registered public offering of$300 million aggregate principal amount of 0.875% senior notes due 2024 (the "0.875% 2024 Senior Notes"),$350 million aggregate principal amount of 2.875% senior notes due 2041 (the "2.875% 2041 Senior Notes"),$600 million aggregate principal amount of 3.125% senior notes due 2051 (the "3.125% 2051 Senior Notes") and$450 million aggregate principal amount of 3.375% senior unsecured notes due 2061 (the "3.375% 2061 Senior Notes" and, together with the 0.875% 2024 Senior Notes, the 2.875% 2041 Senior Notes and the 3.125% 2051 Senior Notes, the "Notes"). The net proceeds from the offering of the Notes were used to fund a portion of the purchase prices of the Acquisitions. See "Liquidity and Capital Resources-Debt" below and Note 8 to the consolidated financial statements included in this Form 10-Q for more information. Hurricane Ida OnAugust 29, 2021 , Hurricane Ida made a landfall inLouisiana as a category 4 storm. Due to Hurricane Ida, several of our facilities in the region experienced disruption to their operations, resulting in lost production and sales and higher maintenance expense in the three months endedSeptember 30, 2021 . Our facilities impacted by Hurricane Ida have since resumed production. Petro 2 Facility Flash Fire InSeptember 2021 ,Westlake Chemical OpCo LP's Petro 2 ethylene unit commenced turnaround activities. OnSeptember 27, 2021 , shortly after the turnaround commenced, there was a flash fire at the quench tower of the Petro 2 facility. Several contractors working on the quench tower were injured. Although there was no sustained fire or offsite impact resulting from the incident and the quench tower did not sustain significant damage, due to the subsequent investigation by theOccupational Safety and Health Administration , the duration of the turnaround has been extended and is now expected to conclude in December. There are five lawsuits pending in connection with the flash fire at the quench tower during the Petro 2 turnaround. 26
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Non-GAAP Financial Measures The body of accounting principles generally accepted inthe United States is commonly referred to as "GAAP." For this purpose, a non-GAAP financial measure is generally defined by theSecurities and Exchange Commission ("SEC") as one that purports to measure historical or future financial performance, financial position or cash flows that (1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the registrant; or (2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this report, we disclose non-GAAP financial measures, primarily earnings before interest, taxes, depreciation and amortization ("EBITDA"). We define EBITDA as net income before interest expense, income taxes, depreciation and amortization. The non-GAAP financial measures described in this Form 10-Q are not substitutes for the GAAP measures of earnings and cash flows. EBITDA is included in this Form 10-Q because our management considers it an important supplemental measure of our performance and believes that it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, some of which present EBITDA when reporting their results. We regularly evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates by using EBITDA. In addition, we utilize EBITDA in evaluating acquisition targets. Management also believes that EBITDA is a useful tool for measuring our ability to meet our future debt service, capital expenditures and working capital requirements, and EBITDA is commonly used by us and our investors to measure our ability to service indebtedness. EBITDA is not a substitute for the GAAP measures of net income, income from operations and net cash provided by operating activities and is not necessarily a measure of our ability to fund our cash needs. In addition, it should be noted that companies calculate EBITDA differently and, therefore, EBITDA as presented for us may not be comparable to EBITDA reported by other companies. EBITDA has material limitations as a performance measure because it excludes interest expense, depreciation and amortization and income taxes. A reconciliation of EBITDA to net income, income from operations and net cash provided by operating activities is included in the "Results of Operations" section below. 27
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Results of operations
Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (dollars in millions, except per share data) Net external sales Vinyls PVC, caustic soda and other$ 1,834 $ 1,116 $ 4,950 $ 3,333 Building products 514 413 1,406 1,049 Total Vinyls 2,348 1,529 6,356 4,382 Olefins Polyethylene 559 302 1,488 914 Styrene, feedstock and other 148 67 427 243 Total Olefins 707 369 1,915 1,157 Total$ 3,055 $ 1,898 $ 8,271 $ 5,539 Income (loss) from operations Vinyls$ 601 $ 42 $ 1,236 $ 135 Olefins 281 51 738 138 Corporate and other (21) (14) (47) (22) Total income from operations 861 79 1,927 251 Interest expense (61) (37) (130) (108) Other income, net 13 12 35 32 Provision for (benefit from) income taxes 193 (15) 423 (75) Net income 620 69 1,409 250 Net income attributable to noncontrolling interests 13 12 38 33 Net income attributable to Westlake Chemical Corporation$ 607 $ 57 $ 1,371 $ 217 Diluted earnings per share$ 4.69 $ 0.45 $ 10.60 $ 1.69 EBITDA (1)$ 1,077 $ 287 $ 2,562 $ 860 _____________
(1) See âReconciliation of EBITDA to net income, operating income and net cash provided by operating activitiesâ below.
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Table of Contents Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Average Average Sales Price Volume Sales Price Volume Product sales price and volume percentage change from prior-year period Vinyls +53.0 % +0.5 % +41.5 % +3.5 % Olefins +88.1 % +3.6 % +71.8 % -6.2 % Company +59.8 % +1.1 % +47.8 % +1.5 % Average Industry Prices (1) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Average domestic prices Natural gas ($/MMBtu) (2) 4.0 2.0 3.2 1.9 Ethane (cents/lb) (3) 11.7 7.4 9.5 6.2 Propane (cents/lb) (4) 27.6 11.9 23.2 10.1 Ethylene (cents/lb) (5) 48.0 19.3 45.3 15.4 Polyethylene (cents/lb) (6) 109.0 61.0 95.3 54.1 Styrene (cents/lb) (7) 82.0 53.8 83.0 54.8 Caustic soda ($/short ton) (8) 825 697 743 681 Chlorine ($/short ton) (9) 443 176 328 176 PVC (cents/lb) (10) 109.0 73.3 102.3 70.6 Average export prices Polyethylene (cents/lb) (11) 86.0 45.7 84.0 41.2 Caustic soda ($/short ton) (12) 364 260 315 261 PVC (cents/lb) (13) 74.1 38.5 73.2 34.3 _____________ (1)Industry pricing data was obtained through IHS Markit ("IHS"). We have not independently verified the data. (2)Average Burner Tip contract prices of natural gas over the period. (3)Average Mont Belvieu spot prices of purity ethane over the period. (4)Average Mont Belvieu spot prices of non-TET propane over the period. (5)Average North American spot prices of ethylene over the period. (6)Average North AmericanNet Transaction prices of polyethylene low density GP-Film grade over the period. (7)Average North American contract prices of styrene over the period. (8)Average USGC-CSLi index values for caustic soda over the period. As stated by IHS, "the caustic soda price listing represents the USGC-CSLi values. USGC-CSLi does not reflect contract price discounts, implementation lags, caps or other adjustments factors. Additionally, it is not intended to represent a simple arithmetic average of all market transactions occurring during the month. Rather, the USGC-CSLi is most representative of the month-to-month caustic soda price movement for contract volumes of liquid 50% caustic soda rather than the absolute value of contract prices at a particular point in time. It is intended to serve only as a benchmark." (9)Average North American contract prices of chlorine over the period. (10)Average North American contract prices of pipe grade polyvinyl chloride ("PVC") over the period. As stated by IHS, "the contract resin prices posted reflect an "index" or "market" for prices before discounts, rebates, incentives, etc." (11)Average North American export price for low density polyethylene GP-Film grade over the period. (12)Average North American low spot export prices of caustic soda over the period. (13)Average North American spot export prices of PVC over the period. 29
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Reconciliation of EBITDA to Net Income, Income from Operations andNet Cash Provided by Operating Activities The following table presents the reconciliation of EBITDA to net income, income from operations and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated. Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 (dollars in millions) Net cash provided by operating activities$ 755 $ 357 $ 1,637 $ 866 Changes in operating assets and liabilities and other (109) (230) (178) (462) Deferred income taxes (26) (58) (50) (154) Net income 620 69 1,409 250 Less: Other income, net 13 12 35 32 Interest expense (61) (37) (130) (108) Benefit from (provision for) income taxes (193) 15 (423) 75 Income from operations 861 79 1,927 251 Add: Depreciation and amortization 203 196 600 577 Other income, net 13 12 35 32 EBITDA$ 1,077 $ 287 $ 2,562 $ 860 30
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Summary
For the quarter endedSeptember 30, 2021 , net income attributable to Westlake was$607 million , or$4.69 per diluted share, on net sales of$3,055 million . This represents an increase in net income attributable to Westlake of$550 million , or$4.24 per diluted share, compared to the quarter endedSeptember 30, 2020 net income attributable to Westlake of$57 million , or$0.45 per diluted share, on net sales of$1,898 million . Income from operations for the quarter endedSeptember 30, 2021 was$861 million , a$782 million increase from income from operations of$79 million for the quarter endedSeptember 30, 2020 . The increase in net income and income from operations was primarily due to significantly higher global sales prices and integrated margins for most of our major products, caused by the strong demand for our products resulting from continued improvement in global economic activity, strong residential construction and repair and remodeling markets inNorth America , and strong demand from the packaging and other consumer markets. In addition, the third quarter of 2021 net income and operating income were positively impacted by higher margin contribution on ethylene produced by our joint ventureLACC, LLC ("LACC") and were negatively impacted by higher feedstock costs, fuel costs, selling, general and administrative expense. Net sales for the quarter endedSeptember 30, 2021 increased by$1,157 million compared to net sales for the quarter endedSeptember 30, 2020 , mainly due to higher sales prices for our major products, partially offset by lower sales volumes for downstream building products. For the nine months endedSeptember 30, 2021 , net income attributable to Westlake was$1,371 million , or$10.60 per diluted share, on net sales of$8,271 million . This represents an increase in net income attributable to Westlake of$1,154 million , or$8.91 per diluted share, compared to the nine months endedSeptember 30, 2020 net income attributable to Westlake of$217 million , or$1.69 per diluted share, on net sales of$5,539 million . Income from operations for the nine months endedSeptember 30, 2021 was$1,927 million , a$1,676 million increase from income from operations of$251 million for the nine months endedSeptember 30, 2020 . The increase in net income and income from operations was primarily due to significantly higher global sales prices and integrated margins for most of our major products and higher sales volumes for downstream building products and PVC compounds, due to the strengthening of demand for our products resulting from continued improvement in global economic activity from the impact of COVID-19 in 2020, strong residential construction and repair and remodeling markets inNorth America , and strong demand from the packaging and other consumer markets. Net income and income from operations for the nine months endedSeptember 30, 2021 were positively impacted by higher margin contribution on ethylene produced byLACC . Net income and income from operations for the nine months endedSeptember 30, 2021 was negatively impacted by the shutdown of our production facilities in the southernUnited States due to weather-related events in the nine months endedSeptember 30, 2021 , which resulted in lower production for many of our major products including polyethylene. In addition, net income and income from operations for the nine months endedSeptember 30, 2021 was negatively impacted by higher feedstock costs, fuel costs and selling, general and administrative expense. The nine months endedSeptember 30, 2020 net income included an income tax rate benefit of$95 million resulting from the carryback of federal net operating losses permitted by the Coronavirus Aid, Relief, and Economic Security Act ("the CARES Act"). Net sales for the nine months endedSeptember 30, 2021 increased by$2,732 million compared to net sales for the nine months endedSeptember 30, 2020 , mainly due to higher sales prices for our major products, as well as higher sales volumes for downstream building products and PVC compounds, partially offset by lower sales volumes for polyethylene. RESULTS OF OPERATIONS Third Quarter 2021 Compared with Third Quarter 2020Net Sales . Net sales increased by$1,157 million , or 61%, to$3,055 million in the third quarter of 2021 from$1,898 million in the third quarter of 2020, primarily attributable to higher sales prices for our major products, partially offset by lower sales volumes for downstream building products. Average sales prices for the third quarter of 2021 increased by 60% as compared to the third quarter of 2020 due to the strong demand for our products resulting from the continued improvement of global economic activity, strong residential construction and repair and remodeling markets inNorth America , and strong demand from the packaging and other consumer markets. Sales volumes increased by 1% in the third quarter of 2021 as compared to the third quarter of 2020. Gross Profit. Gross profit margin percentage was 33% in the third quarter of 2021 as compared to 13% in the third quarter of 2020. The increase in gross profit margin was primarily due to higher sales prices and margins for our major products. Gross profit margin for the third quarter of 2021 was also positively impacted by higher margin contribution on ethylene produced byLACC and was negatively impacted by higher feedstock and fuel costs. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by$14 million to$122 million in the third quarter of 2021 as compared to$108 million in the third quarter of 2020. This increase was mainly due to higher employee compensation, selling and consulting expenses. 31
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Amortization of Intangibles. Amortization expense was$29 million in the third quarter of 2021, which was comparable to the third quarter of 2020. Restructuring, Transaction and Integration-Related Costs. The restructuring, transaction and integration-related costs of$6 million in the third quarter of 2021 primarily consisted of costs associated with our recent acquisitions. Restructuring, transaction and integration-related costs of$34 million in the third quarter of 2020 primarily related to the closure of a non-integrated PVC plant located inGermany . Interest Expense. Interest expense increased by$24 million to$61 million in the third quarter of 2021 from$37 million in the third quarter of 2020, primarily as a result of higher average debt outstanding in the third quarter of 2021 as compared to the third quarter of 2020 and the settlement of interest rate lock arrangements associated with the issuance of the Notes. Other Income, Net. Other income, net of$13 million in the third quarter of 2021 was comparable to the other income, net in the third quarter of 2020. Income Taxes. The effective income tax rate was an expense of 23.7% for the third quarter of 2021 as compared to a benefit of 27.8% for the third quarter of 2020. The change in effective tax rate in the third quarter of 2021 as compared to the third quarter of 2020 was primarily due to the income tax rate benefit in the third quarter of 2020 resulting from the carryback of federal net operating loss to taxable years that were taxed at theU.S. corporate tax rate of 35.0% as permitted under the CARES Act, partially offset by the reduction in the Internal Revenue Code Section 199 ("Section 199") domestic manufacturing deduction as a result of the net operating loss carryback. Vinyls SegmentNet Sales . Net sales for the Vinyls segment increased by$819 million , or 54%, to$2,348 million in the third quarter of 2021 from$1,529 million in the third quarter of 2020. The increase was mainly due to higher sales prices for our major products, partially offset by lower downstream building products sales volumes, as compared to the prior-year period. Average sales prices for the Vinyls segment increased by 53% in the third quarter of 2021, as compared to the third quarter of 2020, primarily due to continued improvement in global economic activity and strong residential construction and repair and remodeling industry performance. Sales volumes for the Vinyls segment increased by 1% in the third quarter of 2021 as compared to the third quarter of 2020. Income from Operations. Income from operations for the Vinyls segment increased by$559 million to$601 million in the third quarter of 2021 from$42 million in the third quarter of 2020. This increase in income from operations was primarily due to significantly higher sales prices and margins for our major products, including PVC resin, resulting from continued improvement in global economic activity and strong residential construction and repair and remodeling industry performance. The third quarter of 2021 was also positively impacted by higher margin contribution on ethylene produced byLACC , partially offset by higher feedstock and fuel costs. Olefins SegmentNet Sales . Net sales for the Olefins segment increased by$338 million , or 92%, to$707 million in the third quarter of 2021 from$369 million in the third quarter of 2020. Average sales prices for the Olefins segment increased by 88% in the third quarter of 2021 as compared to the third quarter of 2020 primarily due to higher sales prices for our major products. The higher prices were driven by a shortage of ethylene from unplanned shutdowns of many plants in the industry due to the severe winter storm in the first quarter of 2021, and hurricanes in 2020 and 2021, and planned turnarounds compounded by continued improvement in global economic activity. Sales volumes for the Olefins segment increased by 4% in the third quarter of 2021 as compared to the third quarter of 2020. Income from Operations. Income from operations for the Olefins segment increased by$230 million to$281 million in the third quarter of 2021 from$51 million in the third quarter of 2020. This increase in income from operations was due to significantly higher sales prices and margins for our major products, mainly resulting from the ethylene shortage and continued improvement in global economic activity. The increase in income from operations versus the prior-year period was partially offset by higher feedstock and fuel costs. Trading activity for the third quarter of 2021 resulted in a gain of approximately$10 million primarily due to favorable derivative positions as compared to no net gain or loss for the third quarter of 2020. 32
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Nine Months EndedSeptember 30, 2021 Compared with Nine Months EndedSeptember 30, 2020 Net Sales . Net sales increased by$2,732 million , or 49%, to$8,271 million in the nine months endedSeptember 30, 2021 from$5,539 million in the nine months endedSeptember 30, 2020 , primarily attributable to higher sales prices for our major products as well as higher sales volumes for downstream building products and PVC compounds, partially offset by lower sales volumes for polyethylene. Average sales prices for the nine months endedSeptember 30, 2021 increased by 48% as compared to the nine months endedSeptember 30, 2020 due to the strengthening of demand for our products resulting from continued improvement in global economic activity, strong residential construction and repair and remodeling markets inNorth America , and strong demand from the packaging and other consumer markets. Sales volumes increased by 2% for the nine months endedSeptember 30, 2021 as compared to the nine months endedSeptember 30, 2020 . Gross Profit. Gross profit margin percentage was 29% in the nine months endedSeptember 30, 2021 as compared to 13% in the nine months endedSeptember 30, 2020 . The increase in gross profit margin was primarily due to higher sales prices and margins for our major products, as well as the higher sales volumes for downstream building products and PVC compounds. Gross profit margin for the nine months endedSeptember 30, 2021 was also positively impacted by the margin contributed fromLACC's produced ethylene. Gross profit margin for the nine months endedSeptember 30, 2021 was negatively impacted by the lost production due to weather-related events in the nine months endedSeptember 30, 2021 , which resulted in lower plant operating rates, higher maintenance expense and lower production for polyethylene, as well as higher feedstock and fuel costs. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by$51 million to$383 million in the nine months endedSeptember 30, 2021 as compared to$332 million in the nine months endedSeptember 30, 2020 . This increase was mainly due to higher employee compensation, selling and consulting expenses. Amortization of Intangibles. Amortization expense was$83 million in the nine months endedSeptember 30, 2021 , which was comparable to the nine months endedSeptember 30, 2020 . Restructuring, Transaction and Integration-Related Costs. The restructuring, transaction and integration-related costs of$6 million for the nine months endedSeptember 30, 2021 primarily consisted of costs associated with our recent acquisitions. Restructuring, transaction and integration-related costs of$36 million in the nine months endedSeptember 30, 2020 primarily related to the closure of a non-integrated PVC plant located inGermany . Interest Expense. Interest expense increased by$22 million to$130 million in the nine months endedSeptember 30, 2021 from$108 million in the nine months endedSeptember 30, 2020 as a result of higher average debt outstanding in the third quarter of 2021 as compared to the third quarter of 2020 and the settlement of interest rate lock arrangements associated with the issuance of the Notes. Other Income, Net. Other income, net of$35 million in the nine months endedSeptember 30, 2021 was comparable to other income, net in the nine months endedSeptember 30, 2020 . Income Taxes. The effective income tax rate was an expense of 23.1% for the nine months endedSeptember 30, 2021 as compared to a benefit of 42.9% for the nine months endedSeptember 30, 2020 . The change in effective tax rate in the nine months endedSeptember 30, 2021 as compared to the nine months endedSeptember 30, 2020 was primarily due to the income tax rate benefit in the nine months endedSeptember 30, 2020 resulting from the carryback of federal net operating loss to taxable years that were taxed at theU.S. corporate tax rate of 35.0% as permitted under the CARES Act, partially offset by the reduction in the Section 199 domestic manufacturing deduction as a result of the net operating loss carryback. Vinyls SegmentNet Sales . Net sales for the Vinyls segment increased by$1,974 million , or 45%, to$6,356 million in the nine months endedSeptember 30, 2021 from$4,382 million in the nine months endedSeptember 30, 2020 . The increase was mainly due to higher sales prices for our major products and higher sales volumes for downstream building products and PVC compounds, as compared to the prior-year period. The increase in prices were primarily due to continued improvement in global economic activity and strong residential construction and repair and remodeling industry performance. Average sales prices for the Vinyls segment increased by 42% in the nine months endedSeptember 30, 2021 , as compared to the nine months endedSeptember 30, 2020 . Sales volumes for the Vinyls segment increased by 4% in the nine months endedSeptember 30, 2021 as compared to the nine months endedSeptember 30, 2020 . 33
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Income from Operations. Income from operations for the Vinyls segment increased by$1,101 million to$1,236 million in the nine months endedSeptember 30, 2021 from$135 million in the nine months endedSeptember 30, 2020 . This increase in income from operations was primarily due to significantly higher sales prices for our major products, including PVC resin, and higher volumes for downstream building products and PVC compounds, resulting from continued improvement in global economic activity and strong residential construction and repair and remodeling industry performance, higher margin contribution from ethylene produced byLACC , partially offset by higher ethylene feedstock and fuel costs as well as the impacts of the weather related events in the nine months endedSeptember 30, 2021 . Olefins SegmentNet Sales . Net sales for the Olefins segment increased by$758 million , or 66%, to$1,915 million in the nine months endedSeptember 30, 2021 from$1,157 million in the nine months endedSeptember 30, 2020 . The increase was mainly due to higher sales prices for our major products. Average sales prices for the Olefins segment increased by 72% in the nine months endedSeptember 30, 2021 as compared to the nine months endedSeptember 30, 2020 . The higher prices were driven by a shortage of ethylene resulting from shutdowns of many plants in the in the southernUnited States due to the severe winter storm in the first quarter of 2021 and hurricanes in 2020 and in 2021 compounded by continued improvement in global economic activity. The higher feedstock cost also contributed to higher prices in the Olefins segment. Sales volumes for the Olefins segment decreased by 6% in the nine months endedSeptember 30, 2021 as compared to the nine months endedSeptember 30, 2020 , primarily as a result of the lower polyethylene inventory levels, lower production and lower product availability resulting from the continuing inventory shortages. Income from Operations. Income from operations for the Olefins segment increased by$600 million to$738 million in the nine months endedSeptember 30, 2021 from$138 million in the nine months endedSeptember 30, 2020 . This increase in income from operations was primarily due to significantly higher sales prices for our major products, mainly resulting from the ethylene shortage and continued improvement in global economic activity. The increase in income from operations versus the prior-year period was partially offset by the lower polyethylene sales volumes, lower product availability and by higher feedstock and fuel costs. Trading activity for the nine months endedSeptember 30, 2021 resulted in a gain of approximately$26 million as compared to a gain of$1 million for the nine months endedSeptember 30, 2020 . CASH FLOW DISCUSSION FOR THE NINE MONTHS ENDEDSEPTEMBER 30, 2021 AND 2020 Cash Flows Operating Activities Operating activities provided cash of$1,637 million in the first nine months of 2021 compared to cash provided by operating activities of$866 million in the first nine months of 2020. The$771 million increase in cash flows from operating activities was mainly due to an increase in income from operations that was partially offset by working capital changes. Changes in components of working capital, which we define for purposes of this cash flow discussion as accounts receivable, inventories, prepaid expenses and other current assets, less accounts payable and accrued and other liabilities, used cash of$381 million in the first nine months of 2021, compared to$120 million of cash used in the first nine months of 2020, an unfavorable change of$261 million . The majority of the unfavorable changes in the first nine months of 2021 were driven by higher accounts receivable and higher inventories, partially offset by higher accounts payable. The unfavorable change in accounts receivable was primarily driven by higher sales prices resulting in higher trade customer balances. The higher inventories and accounts payable in the first nine months of 2021 were primarily driven by higher inventory cost and an increase in operating activities, as compared to the nine months endedSeptember 30, 2020 . 34
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Investing Activities Net cash used for investing activities in the first nine months of 2021 was$842 million as compared to net cash used for investing activities of$366 million in the first nine months of 2020. The increase in investing activities in the first nine months of 2021 was primarily due to the acquisitions of LASCO andDimex for$428 million , net of cash acquired. Capital expenditures were$414 million in the first nine months of 2021, which was higher by$11 million as compared to$403 million in the first nine months of 2020. Capital expenditures in the first nine months of 2021 and 2020 were primarily related to projects to improve production capacity or reduce costs, maintenance and safety projects and environmental projects at our various facilities. In the first nine months of 2021, we contributed$17 million toLACC and$2 million to an unconsolidated investee compared to return of investment of$44 million fromLACC in the first nine months of 2020. Financing Activities Net cash provided for financing activities during the first nine months of 2021 was$1,487 million as compared to net cash used by financing activities of$14 million in the first nine months of 2020. The activities during the first nine months of 2021 were primarily related to the registered public offering of$300 million aggregate principal amount of 0.875% 2024 Senior Notes,$350 million aggregate principal amount of 2.875% 2041 Senior Notes,$600 million aggregate principal amount of 3.125% 2051 Senior Notes and$450 million aggregate principal amount of 3.375% 2061 Senior Notes and the payment of debt issuance costs of$18 million related to such Notes. The remaining activities during the nine months endedSeptember 30, 2021 related to the$107 million payment of cash dividends, the$32 million payment of cash distributions to noncontrolling interests and the repurchase of shares of our common stock for an aggregate purchase price of$30 million . In the first nine months of 2020, out of an abundance of caution due to the COVID-19 pandemic, we borrowed$1,000 million under our revolving credit facility, which we subsequently repaid inJune 2020 . We also completed a registered public offering of$300 million aggregate principal amount of the 3.375% 2030 Senior Notes inJune 2020 . The remaining activities in the first nine months of 2020 were primarily related to the$102 million payment of cash dividends, the$39 million payment of cash distributions to noncontrolling interests, repurchases of our common stock of$54 million and$17 million representing repayment of short-term notes payable. LIQUIDITY AND CAPITAL RESOURCES Liquidity and Financing Arrangements Our principal sources of liquidity are from cash and cash equivalents, cash from operations, short-term borrowings under the Credit Agreement and our long-term financing. InNovember 2014 , our Board of Directors authorized a$250 million stock repurchase program (the "2014 Program"). InNovember 2015 , our Board of Directors approved the expansion of the 2014 Program by an additional$150 million . InAugust 2018 , our Board of Directors approved the further expansion of the existing 2014 Program by an additional$150 million . As ofSeptember 30, 2021 , we had repurchased 7,431,520 shares of our common stock for an aggregate purchase price of approximately$449 million under the 2014 Program. During the nine months endedSeptember 30, 2021 , we repurchased shares of our common stock for an aggregate purchase price of$30 million under the 2014 Program. Purchases under the 2014 Program may be made either through the open market or in privately negotiated transactions. Decisions regarding the amount and the timing of purchases under the 2014 Program will be influenced by our cash on hand, our cash flow from operations, general market conditions and other factors. The 2014 Program may be discontinued by our Board of Directors at any time. OnOctober 4, 2018 ,Westlake Chemical Partners LP ("Westlake Partners ") and Westlake Partners GP, the general partner ofWestlake Partners , entered into an Equity Distribution Agreement withUBS Securities LLC ,Barclays Capital Inc. ,Citigroup Global Markets Inc. ,Deutsche Bank Securities Inc. ,RBC Capital Markets, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated andWells Fargo Securities, LLC to offer and sellWLK Partners' common units, from time to time, up to an aggregate offering amount of$50 million . This Equity Distribution Agreement was amended onFebruary 28, 2020 to reference a new shelf registration for utilization under this agreement. No common units have been issued under this program as ofSeptember 30, 2021 . We believe that our sources of liquidity as described above are adequate to fund our normal operations and ongoing capital expenditures and turnaround activities (such as the planned ongoing turnaround of OpCo's Petro 2 ethylene unit inLake Charles ). Funding of any potential large expansions or potential acquisitions would likely necessitate, and therefore depend on, our ability to obtain additional financing in the future. We may not be able to access additional liquidity at cost effective interest rates due to the volatility of the commercial credit markets. OnAugust 19, 2021 , we completed the registered public offering of the Notes. See "Liquidity and Capital Resources-Debt" below for more information. 35
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Cash and Cash Equivalents As ofSeptember 30, 2021 , our cash and cash equivalents totaled$3,571 million . Debt As ofSeptember 30, 2021 , our indebtedness totaled$5.2 billion . See Note 8 to the consolidated financial statements appearing elsewhere in this Form 10-Q for a discussion of our long-term indebtedness. Defined terms used in this section have the definitions assigned to such terms in Note 8 to the consolidated financial statements included in Item 1 of this Form 10-Q. Our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations and unless we were to undertake a new expansion or large acquisition, we believe our cash flows from operations, available cash and available borrowings under the Credit Agreement will be adequate to meet our normal operating needs for the foreseeable future. Credit Agreement OnJuly 24, 2018 , we entered into a$1 billion revolving credit facility that is scheduled to mature onJuly 24, 2023 (the "Credit Agreement"). The Credit Agreement bears interest at either (a) LIBOR plus a spread ranging from 1.00% to 1.75% or (b) Alternate Base Rate plus a spread ranging from 0.00% to 0.75% in each case depending on the credit rating of the Company. As ofSeptember 30, 2021 , we had no borrowings outstanding under the Credit Agreement. As ofSeptember 30, 2021 , we had no outstanding letters of credit and had borrowing availability of$1 billion under the Credit Agreement. The Credit Agreement contains certain affirmative and negative covenants, including a quarterly total leverage ratio financial maintenance covenant. As ofSeptember 30, 2021 , we were in compliance with the total leverage ratio financial maintenance covenant. The Credit Agreement also contains certain events of default and if and for so long as certain events of default have occurred and are continuing, any overdue amounts outstanding under the Credit Agreement will accrue interest at an increased rate, the lenders can terminate their commitments thereunder and payments of any outstanding amounts could be accelerated by the lenders. None of our subsidiaries are required to guarantee our obligations under the Credit Agreement. The Credit Agreement includes a$150 million sub-limit for letters of credit, and any outstanding letters of credit will be deducted from availability under the facility. The Credit Agreement also provides for a discretionary$50 million commitment for swingline loans to be provided on a same-day basis. We may also increase the size of the facility, in increments of at least$25 million , up to a maximum of$500 million , subject to certain conditions and if certain lenders agree to commit to such an increase. 3.60% Senior Notes due 2022 InJuly 2012 , we issued$250 million aggregate principal amount of the 3.60% 2022 Senior Notes. We may optionally redeem the 3.60% 2022 Senior Notes at any time and from time to time prior toApril 15, 2022 (three months prior to the maturity date) for 100% of the principal plus accrued interest and a discounted "make whole" payment. On or afterApril 15, 2022 , we may optionally redeem the 3.60% 2022 Senior Notes for 100% of the principal plus accrued interest. The holders of the 3.60% 2022 Senior Notes may require us to repurchase the 3.60% 2022 Senior Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the indenture governing the 3.60% 2022 Senior Notes). 0.875% Senior Notes due 2024 InAugust 2021 , we completed the registered public offering of$300 million aggregate principal amount of 0.875% 2024 Senior Notes. We may optionally redeem the 0.875% 2024 Senior Notes at any time and from time to time on or afterAugust 15, 2022 for 100% of the principal amount plus accrued and unpaid interest. The holders of the 0.875% 2024 Senior Notes may require us to repurchase the 0.875% 2024 Senior Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the indenture governing the 0.875% 2024 Senior Notes). 36
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3.60% Senior Notes due 2026 and 5.0% Senior Notes due 2046 InAugust 2016 , we completed the private offering of$750 million aggregate principal amount of our 3.60% 2026 Senior Notes and$700 million aggregate principal amount of our 5.0% 2046 Senior Notes. InMarch 2017 , the Company commenced registered exchange offers to exchange the 3.60% 2026 Senior Notes and the 5.0% 2046 Senior Notes for new notes that are identical in all material respects to the 3.60% 2026 Senior Notes and the 5.0% 2046 Senior Notes, except that the offer and issuance of the newSecurities and Exchange Commission -registered notes have been registered under the Securities Act of 1933, as amended (the "Securities Act"). The exchange offers expired onApril 24, 2017 , and approximately 99.97% of the 3.60% 2026 Senior Notes and 100% of the 5.0% 2046 Senior Notes were exchanged. The notes that were not exchanged in the exchange offers have not been registered under the Securities Act or any state securities laws and may not be offered or sold in theU.S. absent registration or an applicable exemption from registration requirements or a transaction not subject to the registration requirements of the Securities Act or any state securities law. Revenue Bonds InDecember 1997 , we entered into a loan agreement with a public trust established for public purposes for the benefit of the Parish ofCalcasieu, Louisiana . The public trust issued$11 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 inDecember 2027 and are subject to redemption and mandatory tender for purchase prior to maturity under certain conditions. Interest on the waste disposal revenue bonds accrues at a rate determined by a remarketing agent and is payable quarterly. The interest rate on the waste disposal revenue bonds atSeptember 30, 2021 was 0.07% and atDecember 31, 2020 was 0.14%. 1.625% Senior Notes due 2029 InJuly 2019 , we completed the registered public offering of â¬700 million aggregate principal amount of the 1.625% 2029 Senior Notes dueJuly 17, 2029 . The Company received approximately$779 million of net proceeds from the offering. We may optionally redeem the 1.625% 2029 Senior Notes at any time and from time to time prior toApril 17, 2029 (three months prior to the maturity date) for 100% of the principal plus accrued interest and a discounted "make whole" payment. On or afterApril 17, 2029 , we may optionally redeem the 1.625% 2029 Senior Notes for 100% of the principal amount plus accrued interest. The holders of the 1.625% 2029 Senior Notes may require us to repurchase the 1.625% 2029 Senior Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the indenture governing the 1.625% 2029 Senior Notes). 3.375% Senior Notes due 2030 InJune 2020 , we completed the registered public offering of$300 million aggregate principal amount of the 3.375% 2030 Senior Notes dueJune 15, 2030 . We may optionally redeem the 3.375% 2030 Senior Notes at any time and from time to time prior toMarch 15, 2030 (three months prior to the maturity date) for 100% of the principal plus accrued interest and a discounted "make whole" payment. On or afterMarch 15, 2030 , we may optionally redeem the 3.375% 2030 Senior Notes for 100% of the principal amount plus accrued interest. The holders of the 3.375% 2030 Senior Notes may require us to repurchase the 3.375% 2030 Senior Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the indenture governing the 3.375% 2030 Senior Notes). 3.50% 2032 GO Zone Refunding Bonds InNovember 2017 , theLouisiana Local Government Environmental Facility and Development Authority (the "Authority") completed the offering of$250 million aggregate principal amount of 3.50% tax-exempt revenue refunding bonds dueNovember 1, 2032 (the "Refunding Bonds"), the net proceeds of which were used to redeem$250 million aggregate principal amount of the Authority's 6 ¾% tax-exempt revenue bonds dueNovember 1, 2032 issued by the Authority under the GO Zone Act inDecember 2007 . In connection with the issuance of the Refunding Bonds, we issued$250 million of the 3.50% 2032 GO Zone Refunding Senior Notes. The Refunding Bonds are subject to optional redemption by the Authority upon the direction of the Company at any time on or afterNovember 1, 2027 , for 100% of the principal plus accrued interest. 37
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2.875% Senior Notes due 2041 InAugust 2021 , we completed the registered public offering of$350 million aggregate principal amount of 2.875% 2041 Senior Notes. We may optionally redeem the 2.875% 2041 Senior Notes at any time and from time to time prior toFebruary 15, 2041 (six months prior to the maturity date) for a redemption price equal to the greater of (i) 100% of the principal amount plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the 2.875% 2041 Senior Notes being redeemed that would be due if the 2.875% 2041 Senior Notes matured onFebruary 15, 2041 , discounted to the redemption date on a semi-annual basis, plus 20 basis points, and plus accrued and unpaid interest. In addition, we may optionally redeem the 2.875% 2041 Senior Notes at any time on or afterFebruary 15, 2041 for 100% of the principal amount plus accrued and unpaid interest. The holders of the 2.875% 2041 Senior Notes may require us to repurchase the 2.875% 2041 Senior Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the indenture governing the 2.875% 2041 Senior Notes). 4.375% Senior Notes due 2047 InNovember 2017 , we completed the registered public offering of$500 million aggregate principal amount of 4.375% Senior Notes dueNovember 15, 2047 . We may optionally redeem the 4.375% 2047 Senior Notes at any time and from time to time prior toMay 15, 2047 (six months prior to the maturity date) for 100% of the principal plus accrued interest and a discounted "make whole" payment. On or afterMay 15, 2047 , we may optionally redeem the 4.375% 2047 Senior Notes for 100% of the principal amount plus accrued interest. The holders of the 4.375% 2047 Senior Notes may require us to repurchase the 4.375% 2047 Senior Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the indenture governing the 4.375% 2047 Senior Notes). 3.125% Senior Notes due 2051 InAugust 2021 , we completed the registered public offering of$600 million aggregate principal amount of 3.125% 2051 Senior Notes. We may optionally redeem the 3.125% 2051 Senior Notes at any time and from time to time prior toFebruary 15, 2051 (six months prior to the maturity date) for a redemption price equal to the greater of (i) 100% of the principal amount plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the 3.125% 2051 Senior Notes being redeemed that would be due if the 3.125% 2051 Senior Notes matured onFebruary 15, 2051 , discounted to the redemption date on a semi-annual basis, plus 25 basis points, and plus accrued and unpaid interest. In addition, we may optionally redeem the 3.125% 2051 Senior Notes at any time on or afterFebruary 15, 2051 for 100% of the principal amount plus accrued and unpaid interest. The holders of the 3.125% 2051 Senior Notes may require us to repurchase the 3.125% 2051 Senior Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the indenture governing the 3.125% 2051 Senior Notes). 3.375% Senior Notes due 2061 InAugust 2021 , we completed the registered public offering of$450 million aggregate principal amount of 3.375% 2061 Senior Notes. We may optionally redeem the 3.375% 2061 Senior Notes at any time and from time to time prior toFebruary 15, 2061 (six months prior to the maturity date) for a redemption price equal to the greater of (i) 100% of the principal amount plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the 3.375% 2061 Senior Notes being redeemed that would be due if the 3.375% 2061 Senior Notes matured onFebruary 15, 2061 , discounted to the redemption date on a semi-annual basis, plus 25 basis points, and plus accrued and unpaid interest. In addition, we may optionally redeem the 3.375% 2061 Senior Notes at any time on or afterFebruary 15, 2061 for 100% of the principal amount plus accrued and unpaid interest. The holders of the 3.375% 2061 Senior Notes may require us to repurchase the 3.375% 2061 Senior Notes at a price of 101% of their principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the indenture governing the 3.375% 2061 Senior Notes). 38
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The indenture governing the 3.60% 2022 Senior Notes, the 0.875% 2024 Senior Notes, the 3.60% 2026 Senior Notes, the 1.625% 2029 Senior Notes, the 3.375% 2030 Senior Notes, the 3.50% 2032 GO Zone Refunding Senior Notes, the 2.875% 2041 Senior Notes, the 5.0% 2046 Senior Notes, the 4.375% 2047 Senior Notes, the 3.125% 2051 Senior Notes, and the 3.375% 2061 Senior Notes contains customary events of default and covenants that, among other things and subject to certain exceptions, restrict us and certain of our subsidiaries' ability to (1) incur certain secured indebtedness, (2) engage in certain sale and leaseback transactions and (3) consolidate, merge or transfer all or substantially all of its assets. 8.73% 2022 RS Cogen Debt InJuly 2000 , RS Cogen, our 50%-owned joint venture, entered into a$75 million aggregate principal amount senior credit facility institutional loan at an interest rate of 8.73%. All of the assets of RS Cogen are pledged as collateral under its senior credit facility. Borrowings under this senior credit facility are repayable quarterly over the remaining term. The Company does not guarantee RS Cogen's debt commitments and RS Cogen is not a guarantor for any of the Company's other long-term debt obligations. The balance outstanding under this loan was$24 million atSeptember 30, 2021 . 2026 Term Loans InMarch 2021 ,Taiwan Chlorine Industries, Ltd. , our 60%-owned joint venture, entered into five-year loan agreements for a maximum total limit of approximately$23 million . The interest rate on these loans atSeptember 30, 2021 was 0.2%. The unsecured loans include a government rate subsidy and have a 5-year maturity. The balance outstanding under these loans was approximately$6 million atSeptember 30, 2021 . As ofSeptember 30, 2021 , we were in compliance with all of our long-term debt covenants. Westlake Chemical Partners LP Credit Arrangements Our subsidiary,Westlake Chemical Finance Corporation , is the lender party to a$600 million revolving credit facility withWestlake Partners , originally entered into onApril 29, 2015 and amended in August andDecember 2017 . In addition, onMarch 19, 2020 ,Westlake Partners andWestlake Chemical Finance Corporation entered into an amendment to the revolving credit facility, to extend the maturity date toMarch 19, 2023 and add a phase-out provision for LIBOR, which is to be replaced by an alternate benchmark rate. Borrowings under the revolving credit facility bear interest at LIBOR plus a spread ranging from 2.0% to 3.0% (depending onWestlake Partners' consolidated leverage ratio), payable quarterly.Westlake Partners may pay all or a portion of the interest on any borrowings in kind, in which case any such amounts would be added to the principal amount of the loan. As ofSeptember 30, 2021 , outstanding borrowings under the credit facility totaled$377 million and bore interest at the LIBOR rate plus 2.0%. Our subsidiary,Westlake Polymers LLC , is the administrative agent to a$600 million revolving credit facility withWestlake Chemical OpCo LP ("OpCo"). The revolving credit facility is scheduled to mature inSeptember 2023 . As ofSeptember 30, 2021 , outstanding borrowings under the credit facility totaled$23 million and bore interest at the LIBOR rate plus 2.0%, which is accrued in arrears quarterly. We consolidateWestlake Partners and OpCo for financial reporting purposes as we have a controlling financial interest. As such, the revolving credit facilities described above between our subsidiaries andWestlake Partners and OpCo are eliminated upon consolidation. Off-Balance Sheet Arrangements None. 39
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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: â¢future operating rates, margins, cash flows and demand for our products; â¢industry market outlook, including the price of crude oil; â¢widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the COVID-19 pandemic, and efforts to contain its transmission; â¢our plans to respond to the challenges presented by the COVID-19 pandemic, including planned reductions of costs and increases of operating efficiencies, as well as the duration of the planned ongoing turnaround at our Petro 2 ethylene unit; â¢production capacities; â¢the impact of ongoing supply chain constraints and workforce availability (including any impacts as a result of vaccination requirements) caused by the COVID-19 pandemic; â¢currency devaluation; â¢our ability to borrow additional funds under our credit agreement; â¢our ability to meet our liquidity needs; â¢our ability to meet debt obligations under our debt instruments; â¢our intended quarterly dividends; â¢future capacity additions and expansions in the industries in which we compete; â¢results of acquisitions, including the results, effects and benefits of the of the Boral Target Companies, LASCO andDimex ; â¢timing, funding and results of capital projects; â¢pension plan obligations, funding requirements and investment policies; â¢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 controlcarbon dioxide and other greenhouse gas emissions or to address other issues of climate change; â¢effects of pending legal proceedings; and â¢timing of and amount of capital expenditures. 40
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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. While it is not possible to identify all factors, we continue to face many risks and uncertainties. Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed under "Risk Factors" in the 2020 Form 10-K and those described from time to time in our other filings with theSEC including, but not limited to, the following: â¢the ultimate timing, outcome and results of integrating the operations of the Boral Target Companies, LASCO andDimex and the ultimate outcome of our operating efficiencies applied to the products and services of the Boral Target Companies, LASCO andDimex ; the effects of the Acquisitions, including the combined company's future financial condition, results of operations, strategy and plans; and expected synergies and other benefits from the Acquisitions and our ability to realize such synergies and other benefits; â¢general economic and business conditions; â¢the cyclical nature of the chemical and building products industries; â¢the availability, cost and volatility of raw materials and energy; â¢uncertainties associated withthe United States , European and worldwide economies, including those due to political tensions and unrest in theMiddle East and elsewhere; â¢uncertainties associated with pandemic infectious diseases, particularly COVID-19; â¢current and potential governmental regulatory actions inthe United States and other countries; â¢industry production capacity and operating rates; â¢the supply/demand balance for our products; â¢competitive products and pricing pressures; â¢instability in the credit and financial markets; â¢access to capital markets; â¢terrorist acts; â¢operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, spills and releases and other environmental risks); â¢changes in laws or regulations, including trade policies; â¢technological developments; â¢foreign currency exchange risks; â¢our ability to implement our business strategies; and â¢creditworthiness of our customers. Many of such factors are beyond our ability to control or predict. Any of the factors, or a combination of these factors, could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. These forward-looking statements are not guarantees of our future performance, and our actual results and future developments may differ materially from those projected in the forward-looking statements. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels. Every forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements. 41
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