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What changed in WESTLAKE CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of WESTLAKE CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+385 added−367 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-22)

Top changes in WESTLAKE CORP's 2023 10-K

385 paragraphs added · 367 removed · 284 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

62 edited+27 added−11 removed87 unchanged
Biggest changeThe following table illustrates our Performance and Essential Materials segment production capacities at February 15, 2023 by principal product and the end uses of these products: Product (1) Annual Capacity (2) End Uses Principal Manufacturing Facilities (4) (5) (6) (Millions of pounds) Ethylene (3) 4,820 VCM, polyethylene, EDC, styrene, ethylene oxide/ethylene glycol Calvert City, Kentucky Lake Charles, Louisiana 2 Table of Contents Product (1) Annual Capacity (2) End Uses Principal Manufacturing Facilities (4) (5) (6) (Millions of pounds) Chlorine 7,400 VCM, EDC, organic/inorganic chemicals, bleach and water treatment Calvert City, Kentucky Geismar, Louisiana Lake Charles, Louisiana Plaquemine, Louisiana Natrium, West Virginia Gendorf and Knapsack, Germany Caustic Soda 8,140 Pulp and paper, organic/inorganic chemicals, neutralization and alumina Calvert City, Kentucky Geismar, Louisiana Lake Charles, Louisiana Plaquemine, Louisiana Natrium, West Virginia Gendorf and Knapsack, Germany VCM 7,940 PVC, PVC Compounds Calvert City, Kentucky Geismar, Louisiana Lake Charles, Louisiana Plaquemine, Louisiana Gendorf and Knapsack, Germany Specialty PVC 980 Automotive sealants, cable sheathing, medical applications and other applications Burghausen, Cologne, and Gendorf, Germany Commodity PVC 6,820 Construction materials including pipe, siding, profiles for windows and doors, film and sheet for packaging and other applications Calvert City, Kentucky Geismar, Louisiana Plaquemine, Louisiana Aberdeen, Mississippi Cologne and Knapsack, Germany Low-Density Polyethylene ("LDPE") 1,500 High clarity packaging and bags, shrink films, food packaging, coated paper board, cup stock, paper folding cartons, lids, closures and general purpose molding Lake Charles, Louisiana Longview, Texas Linear Low-Density Polyethylene ("LLDPE") 1,070 Heavy-duty films and bags, general purpose liners Lake Charles, Louisiana Longview, Texas Chlorinated Derivative Materials 2,290 Coatings, flavorants, films, refrigerants, water treatment applications, chemicals and pharmaceutical production Lake Charles, Louisiana Natrium, West Virginia Styrene 570 Consumer disposables, packaging material, appliances, paints and coatings, resins and building materials Lake Charles, Louisiana Epoxy Specialty Resins 580 Protective Coatings and Adhesive Applications; Building and bridge construction, flooring, transportation, oil & gas Electrical Applications; Generators and bushings, transformers, medium and high-voltage switch gear components Composites Epoxy Resins; Wind energy, automotive, aerospace, construction, industrial applications Lakeland, Florida Argo, Illinois Duisburg and Esslingen, Germany Onsan, South Korea Barbostro, Spain Base Epoxy Resins and Intermediaries (BERI) 1,280 Electrocoat; Automotive, general industry Powder coatings; White goods, pipes for oil and gas transformation, general industry Heat Cured Coatings; Metal packaging and coil coated steel for construction and general industry Deer Park, Texas Pernis, Rotterdam, The Netherlands 3 Table of Contents ______________________________ (1) EDC, a VCM intermediate product, is not included in the table.
Biggest changeAs of February 14, 2024, we (directly and through OpCo, our investment in LACC, and our 95%- and 60%-owned joint ventures in China and Taiwan, respectively) had approximately 43.3 billion pounds per year of aggregate production capacity at numerous manufacturing sites in North America, Europe and Asia in our Performance and Essential Materials segment. 2 Ta ble of Contents The following table illustrates our Performance and Essential Materials segment production capacities at February 14, 2024 by principal product and the end uses of these products: Product (1) Annual Capacity (2) End Uses Principal Manufacturing Facilities (4) (5) (6) (Millions of pounds) Ethylene (3) 4,820 VCM, polyethylene, EDC, styrene, ethylene oxide/ethylene glycol Calvert City, Kentucky Lake Charles, Louisiana Chlorine 7,400 VCM, EDC, organic/inorganic chemicals, bleach and water treatment Calvert City, Kentucky Geismar, Louisiana Lake Charles, Louisiana Plaquemine, Louisiana Natrium, West Virginia Gendorf and Knapsack, Germany Caustic Soda 8,140 Pulp and paper, organic/inorganic chemicals, neutralization and alumina Calvert City, Kentucky Geismar, Louisiana Lake Charles, Louisiana Plaquemine, Louisiana Natrium, West Virginia Gendorf and Knapsack, Germany VCM 7,940 PVC, PVC Compounds Calvert City, Kentucky Geismar, Louisiana Lake Charles, Louisiana Plaquemine, Louisiana Gendorf and Knapsack, Germany Specialty PVC 980 Automotive sealants, cable sheathing, medical applications and other applications Burghausen, Cologne, and Gendorf, Germany Commodity PVC 6,820 Construction materials including pipe, siding, profiles for windows and doors, film and sheet for packaging and other applications Calvert City, Kentucky Geismar, Louisiana Plaquemine, Louisiana Aberdeen, Mississippi Cologne and Knapsack, Germany Low-Density Polyethylene ("LDPE") 1,500 High clarity packaging and bags, shrink films, food packaging, coated paper board, cup stock, paper folding cartons, lids, closures and general purpose molding Lake Charles, Louisiana Longview, Texas Linear Low-Density Polyethylene ("LLDPE") 1,070 Heavy-duty films and bags, general purpose liners Lake Charles, Louisiana Longview, Texas Chlorinated Derivative Materials 2,190 Coatings, flavorants, films, refrigerants, water treatment applications, chemicals and pharmaceutical production Lake Charles, Louisiana Natrium, West Virginia Styrene 570 Consumer disposables, packaging material, appliances, paints and coatings, resins and building materials Lake Charles, Louisiana 3 Ta ble of Contents Product (1) Annual Capacity (2) End Uses Principal Manufacturing Facilities (4) (5) (6) (Millions of pounds) Epoxy Specialty Resins 580 Protective Coatings and Adhesive Applications; Building and bridge construction, flooring, transportation, oil & gas Electrical Applications; Generators and bushings, transformers, medium and high-voltage switch gear components Composites Epoxy Resins; Wind energy, automotive, aerospace, construction, industrial applications Lakeland, Florida Argo, Illinois Duisburg and Esslingen, Germany Onsan, South Korea Barbostro, Spain Base Epoxy Resins and Intermediaries (BERI) 1,280 Electrocoat; Automotive, general industry Powder coatings; White goods, pipes for oil and gas transmission, general industry Heat Cured Coatings; Metal packaging and coil coated steel for construction and general industry Deer Park, Texas Pernis, Rotterdam, The Netherlands ______________________________ (1) EDC, a VCM intermediate product, is not included in the table.
Our other major roofing name brands include NewPoint ® , Concrete Roof Tile, US Tile ® Clay Roofing Products, Unified Steel TM , and Stone Coated Roofing among others. Windows. We are a regional fabricator of vinyl windows in the South and Southeast markets of the United States.
Our other major roofing name brands include NewPoint TM , Concrete Roof Tile, US Tile ® Clay Roofing Products, Unified Steel TM , and Stone Coated Roofing among others. Windows. We are a regional fabricator of vinyl windows in the South and Southeast markets of the United States.
Prior to the Transaction, we owned approximately 12% of the membership interests in LACC. On March 15, 2022, the Company completed the acquisition of an additional 3.2% membership interest in LACC from Lotte for approximately $89 million. As of December 31, 2022, we owned an aggregate 50% membership interest in LACC.
Prior to the Transaction, we owned approximately 12% of the membership interests in LACC. On March 15, 2022, the Company completed the acquisition of an additional 3.2% membership interest in LACC from Lotte for approximately $89 million. As of December 31, 2023, we owned an aggregate 50% membership interest in LACC.
Our stone brands include Cultured Stone ® , Eldorado Stone ® , Versetta Stone ® , StoneCraft Industries TM and Dutch Quality Stone ® , among others. Roofing. Our DaVinci ® Roofscapes is a premium composite roofing. Additional product offerings include concrete and clay roof tiles and stone coated steel roofing.
Our stone brands include Cultured Stone ® , Eldorado Stone ® , Versetta Stone ® , StoneCraft Industries ® and Dutch Quality Stone ® , among others. Roofing. Our DaVinci ® Roofscapes is a premium composite roofing. Additional product offerings include concrete and clay roof tiles and stone coated steel roofing.
There were no strikes, lockouts or work stoppages in 2022, and we believe that our relationship with our employees and unions is open and positive. Attracting, developing and retaining talented people is crucial to executing our strategy. Our ability to recruit and retain such talent depends on a number of factors, including compensation and benefits, career opportunities and work environment.
There were no strikes, lockouts or work stoppages in 2023, and we believe that our relationship with our employees and unions is open and positive. Attracting, developing and retaining talented people is crucial to executing our strategy. Our ability to recruit and retain such talent depends on a number of factors, including compensation and benefits, career opportunities and work environment.
We are a leading producer of LDPE by capacity in North America and predominantly use the autoclave technology (versus tubular technology), which is capable of producing higher-margin specialty polyethylene products. In 2022, our annual capacity of approximately 1.5 billion pounds of LDPE was available in numerous formulations to meet the needs of our diverse customer base.
We are a leading producer of LDPE by capacity in North America and predominantly use the autoclave technology (versus tubular technology), which is capable of producing higher-margin specialty polyethylene products. In 2023, our annual capacity of approximately 1.5 billion pounds of LDPE was available in numerous formulations to meet the needs of our diverse customer base.
During the third quarter of 2019, the LACC ethylene plant began its commercial operations. At December 31, 2022, we, through one of our subsidiaries, owned 50% of the membership interests in LACC. We receive our proportionate share in ethylene production on a cash-cost basis and primarily use it to produce VCM.
During the third quarter of 2019, the LACC ethylene plant began its commercial operations. At December 31, 2023, we, through one of our subsidiaries, owned 50% of the membership interests in LACC. We receive our proportionate share in ethylene production on a cash-cost basis and primarily use it to produce VCM.
The expected 2023 and 2024 capital expenditures are relatively higher than the amounts we have spent related to environmental compliance in recent years in large part due to capital expenditures related to previously existing and new Environmental Protection Agency (the "EPA") regulations and corrective actions required by the EPA to resolve the flare enforcement matter discussed below.
The expected 2024 and 2025 capital expenditures are relatively higher than the amounts we have spent related to environmental compliance in recent years in large part due to capital expenditures related to previously existing and new Environmental Protection Agency (the "EPA") regulations and corrective actions required by the EPA to resolve the flare enforcement matter discussed below.
In North America, we operate 38 leased and 7 owned distribution centers and warehouses that service and supply our products to local customers, contractors and distributors. We also engage in advertising programs primarily directed at trade professionals and homeowners that are intended to develop awareness and interest in our products. In addition, we display our products at trade shows.
In North America, we operate 38 leased and 6 owned distribution centers and warehouses that service and supply our products to local customers, contractors and distributors. We also engage in advertising programs primarily directed at trade professionals and homeowners that are intended to develop awareness and interest in our products. In addition, we display our products at trade shows.
Manufacturing We operate 61 manufacturing locations primarily in the United States and Canada where we produce siding, trim and mouldings, stone, roofing, windows, outdoor living products, PVC pipes, specialty PVC pipes and fittings. In addition, we have 12 manufacturing locations across the world where we produce PVC compounds, including locations in North America, Europe and Asia.
Manufacturing We operate 58 manufacturing locations primarily in the United States and Canada where we produce siding, trim and mouldings, stone, roofing, windows, outdoor living products, PVC pipes, specialty PVC pipes and fittings. In addition, we have 12 manufacturing locations across the world where we produce PVC compounds, including locations in North America, Europe and Asia.
("LASCO"), a manufacturer of injected-molded PVC fittings that serve the plumbing, pool and spa, industrial, irrigation and retail markets in the United States from Aalberts U.S. Holding Corp. and Aalberts N.V. (the "LASCO Acquisition"). The total closing purchase consideration was $277 million.
("LASCO"), a manufacturer of injected-molded PVC fittings that serve the plumbing, pool and spa, industrial, irrigation and retail markets in the United States from Aalberts U.S. Holding Corp. and Aalberts N.V. (the "LASCO Acquisition"). The total consideration was $277 million.
We have been a public company for 18 years, but we still think of our employees as members of our extended family. We value the integrity, creativity, dedication and diversity of ideas that our employees bring to work every day.
We have been a public company for 19 years, but we still think of our employees as members of our extended family. We value the integrity, creativity, dedication and diversity of ideas that our employees bring to work every day.
With respect to the COVID-19 pandemic, we adopted safety guidelines and practices, including safety and health training for existing and new employees, remote working, health screening of employees, contact tracing for reported exposure, enforcing self-isolation after exposure, provisions for mask wearing, modifications to the in-office work environment, social distancing, increased sanitation stations and increased cleaning of offices and workstations. 11 Table of Contents Intellectual Property and Technology We rely upon both trademark and service mark protection to protect our brands, and have registered or applied to register many of these on a world-wide basis.
With respect to the COVID-19 pandemic, we adopted safety guidelines and practices, including safety and health training for existing and new employees, remote working, health screening of employees, contact tracing for reported exposure, enforcing self-isolation after exposure, provisions for mask wearing, modifications to the in-office work environment, social distancing, increased sanitation stations and increased cleaning of offices and workstations. 12 Ta ble of Contents Intellectual Property and Technology We rely upon both trademark and service mark protection to protect our brands, and have registered or applied to register many of these on a world-wide basis.
The remainder of the 2023 and 2024 estimated expenditures are related to equipment replacement and upgrades. We anticipate that stringent environmental regulations will continue to be imposed on us and the industry in general.
The remainder of the 2024 and 2025 estimated expenditures are related to equipment replacement and upgrades. We anticipate that stringent environmental regulations will continue to be imposed on us and the industry in general.
Item 1. Business General We are a vertically integrated global manufacturer and marketer of performance and essential materials and housing and infrastructure products that enhances the lives of people every day.
Item 1. Business General We are a vertically integrated global manufacturer and marketer of performance and essential materials and housing and infrastructure products that enhance the lives of people every day.
(4) Except as noted in notes (5) and (6) below, we own each of these facilities. (5) We lease the land on which our Gendorf, Burghausen, Knapsack, Cologne and Esslingen, Germany facilities, Longview and Deer Park, Texas facilities and Argo, Illinois facility are located. We also lease the Esslingen, Germany building.
(4) Except as noted in notes (5) and (6) below, we own each of these facilities. (5) We lease the land on which our Gendorf, Burghausen, Knapsack, Cologne and Esslingen, Germany facilities, Pernis, Rotterdam, The Netherlands facility, Longview and Deer Park, Texas facilities and Argo, Illinois facility are located. We also lease the Esslingen, Germany building.
In addition to ethylene supplied by OpCo and LACC, we also acquire ethylene from third parties in order to supply a portion of our ethylene requirements. In Germany, we have access to, and partially own, an ethylene pipeline. 5 Table of Contents We acquire butene and hexene to manufacture polyethylene and benzene to manufacture styrene.
In addition to ethylene supplied by OpCo and LACC, we also acquire ethylene from third parties in order to supply a portion of our ethylene requirements. In Germany, we have access to, and partially own, an ethylene pipeline. We acquire butene and hexene to manufacture polyethylene and benzene to manufacture styrene.
On October 1, 2021, we completed the acquisition of the Boral Target Companies. The total closing purchase consideration was $2,140 million in an all-cash transaction.
On October 1, 2021, we completed the acquisition of the Boral Target Companies. The total consideration was $2,140 million in an all-cash transaction.
We have over 1,600 active and pending trademark registrations worldwide for our various business segments. We also rely on a combination of patents and un-patented proprietary know-how and trade secrets to preserve our competitive technology position in the market. We have over 1,200 issued patents and pending-patent applications in the United States and several other countries.
We have over 1,650 active and pending trademark registrations worldwide for our various business segments. We also rely on a combination of patents and un-patented proprietary know-how and trade secrets to preserve our competitive technology position in the market. We have over 1,300 issued patents and pending-patent applications in the United States and several other countries.
The assets acquired and liabilities assumed and the results of operations of this business are included in the Housing and Infrastructure Products segment. 1 Table of Contents On August 19, 2021, we completed the acquisition of, and acquired all of the equity interests in LASCO Fittings, Inc.
The assets acquired and liabilities assumed and the results of operations of this business are included in the Housing and Infrastructure Products segment. 1 Ta ble of Contents On August 19, 2021, we completed the acquisition of, and acquired all of the equity interests in LASCO Fittings, Inc.
As an Asian American and Pacific Islander ("AAPI")-controlled business, we feel a special commitment to ensuring that Westlake continues to offer opportunities for employees of all backgrounds and experiences. As of December 31, 2022, approximately 37% of our employees in the United States and Canada self-identified as Black, Indigenous, Hispanic, or AAPI.
As an Asian American and Pacific Islander ("AAPI")-controlled business, we feel a special commitment to ensuring that Westlake continues to offer opportunities for employees of all backgrounds and experiences. As of December 31, 2023, approximately 36% of our employees in the United States and Canada self-identified as Black, Indigenous, Hispanic, or AAPI.
As of December 31, 2022, approximately 68% were employed in the United States. Approximate ly 28% of our employees are represented by labor unions, including works councils in Europe, and our collective bargaining agreements in Europe, North America and Asia expire at various times through 2026.
As of December 31, 2023, approximately 68% were employed in the United States. Approximate ly 27% of our employees are represented by labor unions, including works councils in Europe, and our collective bargaining agreements in Europe, North America and Asia expire at various times through 2026.
Composites are a fast-growing class of materials that are used in a wide variety of applications ranging from wind energy, automotive, aerospace, construction and industrial applications. We produce epoxy specialty resins at our Duisburg and Esslingen plants in Germany, Barbastro plant in Spain, Onsan plant in South Korea, and Lakeland and Argo plants in the United States.
Composites are used in a wide variety of applications ranging from wind energy, automotive, aerospace, construction and industrial applications. We produce epoxy specialty resins at our Duisburg and Esslingen plants in Germany, Barbastro plant in Spain, Onsan plant in South Korea, and Lakeland and Argo plants in the United States.
We produce base epoxies and intermediaries at our Deer Park, United States and Pernis, the Netherlands plants, where we have the capacity to produce approximately 1,280 million pounds per year. Product and Application Development: Our product and application development activities are geared towards developing and enhancing products, processes and applications.
We produce base epoxies and intermediaries at our Deer Park, United States and Pernis, the Netherlands plants, where we have the capacity to produce approximately 1,280 million pounds per year. 5 Ta ble of Contents Product and Application Development. Our product and application development activities are geared towards developing and enhancing products, processes and applications.
As of February 15, 2023, Westlake Partners' assets consisted of a 22.8% limited partner interest in Westlake Chemical OpCo LP ("OpCo"), as well as the general partner interest in OpCo. Prior to the Westlake Partners IPO, OpCo's assets were wholly-owned by us.
As of February 14, 2024, Westlake Partners' assets consisted of a 22.8% limited partner interest in Westlake Chemical OpCo LP ("OpCo"), as well as the general partner interest in OpCo. Prior to the Westlake Partners IPO, OpCo's assets were wholly-owned by us.
We are the second-largest PVC producer in the world. With the completion of our previously announced expansion projects at our Geismar and Burghausen plants in 2019, we have the capacity to produce approximately 6.8 billion pounds and 1.0 billion pounds of commodity and specialty PVC per year, respectively, at our various facilities globally.
With the completion of our previously announced expansion projects at our Geismar and Burghausen plants in 2019, we have the capacity to produce approximately 6.8 billion pounds and 1.0 billion pounds of commodity and specialty PVC per year, respectively, at our various facilities globally.
No single customer accounted for 10% or more of net sales for the Performance and Essential Materials segment in 2022. 6 Table of Contents Competition The markets in which our Performance and Essential Materials businesses operate are highly competitive. Competition in the materials market is based on product availability, product quality and consistency, product performance, customer service and price.
No single customer accounted for 10% or more of net sales for the Performance and Essential Materials segment in 2023. Competition The markets in which our Performance and Essential Materials businesses operate are highly competitive. Competition in the materials market is based on product availability, product quality and consistency, product performance, customer service and price.
Although we do not collect race and ethnicity data of our workforces in Latin America, Europe, and Asia, we know that we are a diverse, multinational company. 10 Table of Contents Training and Professional Development As part of our retention and promotion efforts, we invest in internal leadership development.
Although we do not collect race and ethnicity data of our workforces in Latin America, Europe, and Asia, we know that we are a diverse, multinational company. 11 Ta ble of Contents Training and Professional Development As part of our retention and promotion efforts, we invest in internal leadership development.
The following table illustrates the properties owned and leased by the Housing and Infrastructure Products business: Manufacturing Facilities Owned Leased North America 44 22 Europe 3 1 Asia 3 — 8 Table of Contents Marketing, Sales and Distribution We sell a majority of our siding, trim and mouldings, stone, roofing, windows and outdoor living products, PVC pipe, specialty PVC pipe and fittings through a combination of our internal sales force and some manufacturer's representatives.
The following table illustrates the properties owned and leased by the Housing and Infrastructure Products business: Manufacturing Facilities Owned Leased North America 45 18 Europe 2 2 Asia 3 — Marketing, Sales and Distribution We sell a majority of our siding, trim and mouldings, stone, roofing, windows and outdoor living products, PVC pipe, specialty PVC pipe and fittings through a combination of our internal sales force and some manufacturer's representatives.
We manufacture and market pipe for water, sewer, irrigation and conduit pipe products under the Westlake Pipe & Fittings brand name. 7 Table of Contents Specialty PVC Pipe .
We manufacture and market pipe for water, sewer, irrigation and conduit pipe products under the Westlake Pipe & Fittings brand name. Specialty PVC Pipe .
VCM and EDC not used internally are sold externally. PVC. PVC, the world's third most widely used plastic, is an attractive alternative to traditional materials such as glass, metal, wood, concrete and other plastic materials because of its versatility, durability and cost-competitiveness. PVC is produced from VCM, which is, in turn, made from chlorine and ethylene.
VCM and EDC not used internally are sold externally. PVC. PVC, the world's third most widely used plastic, is an attractive alternative to traditional materials such as glass, metal, wood, concrete and other plastic materials because of its versatility, durability and cost-competitiveness.
Our brands include Royal ® Siding, Portsmouth Shake and Shingle™, Foundry ® Specialty Siding, TruExterior ® Siding&Trim, Celect ® Cellular Exteriors, Mid-America ® Exteriors, Tapco Tools ® , and many more. Trim and Mouldings.
Our brands include Royal ® Siding, Portsmouth ® Shake and Shingle™, Foundry ® Specialty Siding, TruExterior ® Siding&Trim, Celect ® Cellular Exteriors, Mid-America ® Exteriors, Tapco Tools ® , and many more. 7 Ta ble of Contents Trim and Mouldings.
In addition, we periodically conduct employee surveys to gauge employee engagement and identify areas for additional focus. Headcount As of December 31, 2022, we had approximately 15,920 employees in the following areas: Category Number Performance and Essential Materials segment 6,800 Housing and Infrastructure Products segment 8,600 Corporate and other 520 Our employees are distributed across 22 countries.
In addition, we periodically conduct employee surveys to gauge employee engagement and identify areas for additional focus. Headcount As of December 31, 2023, we had approximately 15,520 employees in the following areas: Category Number Performance and Essential Materials segment 6,830 Housing and Infrastructure Products segment 8,130 Corporate and other 560 Our employees are distributed across 19 countries.
We compete in the chlor-alkali and PVC markets with other producers including Formosa Plastics Corporation, INOVYN ChlorVinyls Limited, KEM ONE Group SAS, Olin Corporation, Orbia Advanced Corporation, Oxy Chem, LP, Shintech, Inc. and VYNOVA Group.
We compete in the chlor-alkali and PVC markets with other producers including Formosa Plastics Corporation, INOVYN ChlorVinyls Limited, KEM ONE Group SAS, Olin Corporation, Orbia Advance Corporation, Occidental Chemical Corporation, Shintech, Inc. and VYNOVA Group.
In June 2022, the Department of Justice announced that the Company, the EPA and state environmental agencies had reached agreement on a consent decree resolving this matter.
In June 2022, the Department of Justice announced that the Company, the EPA and state environmental agencies had reached agreement on a consent decree resolving this matter. The consent decree was entered by the court and became effective in October 2022.
The assets acquired and liabilities assumed and the results of operations of Dimex are included in the Housing and Infrastructure Products segment. On February 1, 2022, we completed the acquisition of the global epoxy business of Hexion Inc. ("Westlake Epoxy") for a total closing purchase consideration of $1,207 million.
On February 1, 2022, we completed the acquisition of the global epoxy business of Hexion Inc. ("Westlake Epoxy") for a total consideration of $1,207 million. The assets acquired and liabilities assumed and the results of operations of Westlake Epoxy are included in the Performance and Essential Materials segment.
While the final consent decree does provide for stipulated penalties if certain requirements are not met, we do not believe that any stipulated penalties, if incurred and assessed, will have a material adverse effect on our financial condition, results of operations or cash flows.
While the final consent decree does provide for stipulated penalties if certain requirements are not met, we do not believe that any stipulated penalties, if incurred and assessed, will have a material adverse effect on our financial condition, results of operations or cash flows. • Westlake owns and operates salt solution-mining caverns at the Sulphur Brine Dome in Sulphur, Louisiana.
We also have the capacity to produce approximately 1.1 billion pounds of LLDPE per year in various formulations. We produce LDPE and LLDPE at both the Lake Charles and Longview (TX) facilities. Our Lake Charles and Longview facilities also have the capability to produce HDPE.
We also have the capacity to produce approximately 1.1 billion pounds of LLDPE per year in various formulations. We produce LDPE and LLDPE at both the Lake Charles and Longview (TX) facilities. Our Lake Charles and Longview facilities also have the capability to produce HDPE. We sell polyethylene to external customers as a final product in pellet form.
Implementation of the requirements under the decree is estimated to cost approximately $110 million, which includes capital expenditures associated with installation of the flare gas recovery units we are required to install at our Calvert City and Lake Charles facilities.
We estimate that the total cost to implement the requirements under the decree will be approximately $110 million, which includes capital expenditures associated with installation of the flare gas recovery units and monitoring and control equipment we are required to install at our Calvert City and Lake Charles facilities.
Since 1986, we have grown rapidly into an integrated global producer of chemicals and building products. We achieved this growth by acquiring existing plants or constructing new plants and completing numerous capacity or production line expansions. We regularly consider acquisitions and other internal and external growth opportunities that would be consistent with, or complementary to, our overall business strategy.
We achieved this growth by acquiring existing plants or constructing new plants and completing numerous capacity or production line expansions. We regularly consider acquisitions and other internal and external growth opportunities that would be consistent with, or complementary to, our overall business strategy.
("Dimex"), 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 The total closing purchase consideration was $172 million.
("Dimex"), 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 The total consideration was $172 million. The assets acquired and liabilities assumed and the results of operations of Dimex are included in the Housing and Infrastructure Products segment.
Competition The markets in which our housing and infrastructure businesses operate are highly competitive. Competition in the housing and infrastructure products market is based on product quality, product innovation, customer service, product consistency, on-time delivery and price.
Competition in the housing and infrastructure products market is based on product quality, product innovation, customer service, product consistency, on-time delivery and price.
In 2022, we made capital expenditures of $46 million related to environmental compliance. We estimate that we will make capital expenditures of approximately $62 million in 2023 and $78 million in 2024, respectively, related to environmental compliance.
We estimate that we will make capital expenditures of approximately $56 million in 2024 and $74 million in 2025, respectively, related to environmental compliance.
Our 12 PVC Compounds facilities across the world sell through a combination of our internal sales force and distributors. No single customer accounted for 10% or more of net sales for the Housing and Infrastructure Products segment in 2022. Sustainability In 2021, we acquired Dimex LLC, a leading manufacturer of consumer products made from post-industrial, recycled polymers.
Our 12 PVC Compounds facilities across the world sell through a combination of our internal sales force and distributors. No single customer accounted for 10% or more of net sales for the Housing and Infrastructure Products segment in 2023.
In 2022, Westlake established a target 20% reduction in its Scope 1 and Scope 2 CO 2 equivalent emissions per ton of production by 2030 from a 2016 baseline.
We established a target 20% reduction in our Scope 1 and Scope 2 CO 2 equivalent emissions intensity per ton of production by 2030 from a 2016 baseline. As of December 31, 2022, we had achieved a reduction of approximately 18% in such emissions intensity from our 2016 baseline.
We are highly integrated along our materials chain with significant downstream integration from ethylene and chlor-alkali (chlorine and caustic soda) into vinyls, polyethylene and styrene monomer. We also have substantial downstream integration from polyvinyl chloride (" PVC") into our building products, PVC pipes and fittings and PVC compounds in our Housing and Infrastructure Products segment. We began operations in 1986.
Housing and Infrastructure Products includes Westlake Royal Building Products, Westlake Pipe & Fittings, Westlake Global Compounds and Westlake Dimex. We are highly integrated along our materials chain with significant downstream integration from ethylene and chlor-alkali (chlorine and caustic soda) into vinyls, polyethylene and styrene monomer.
We manufacture and market specialty fittings under the Westlake Pipe & Fittings brand name. PVC Compounds. PVC compounds are customized formulations that offer specific end-use properties based on customer-determined manufacturing specifications. PVC compounds are made by combining PVC resin with various additives in order to make either rigid and impact-resistant or soft and flexible compounds.
We manufacture and market specialty fittings under the Westlake Pipe & Fittings brand name. PVC Compound s. PVC compounds are custom blended formulations made by combining PVC resin with functional additives. They offer specific end-use properties based on customer-determined specifications and are used to produce rigid and flexible PVC applications.
Compliance with such laws and regulations has required and will continue to require capital expenditures and increase operating costs. 9 Table of Contents It is our policy to comply with all environmental, health and safety requirements and to provide safe and environmentally sound workplaces for our employees. In some cases, compliance can be achieved only by incurring capital expenditures.
It is our policy to comply with all environmental, health and safety requirements and to provide safe and environmentally sound workplaces for our employees. In some cases, compliance can be achieved only by incurring capital expenditures. In 2023, we made capital expenditures of $54 million related to environmental compliance.
Prices for our main feedstocks are generally driven by the underlying petrochemical benchmark prices and energy costs, which are subject to price fluctuations.
Prices for our main feedstocks are generally driven by the underlying petrochemical benchmark prices and energy costs, which are subject to price fluctuations. Sustainability We continued our efforts to deliver high-value products in increasingly sustainable ways in 2023.
PVC required for the PVC compounds plants is either internally sourced from our North American and Asian facilities within the Performance and Essential Materials segment or externally purchased based on the location of the plants. The remaining raw materials required, including pigments, fillers, stabilizers and other ingredients, are purchased under short-term contracts based on prevailing market prices.
Our raw materials for stone, roofing and accessories, windows, shutters, and specialty tool products are externally purchased. PVC required for the PVC compounds plants is either internally sourced from our North American and Asian facilities within the Performance and Essential Materials segment or externally purchased based on the location of the plants.
National, state or provincial and local standards regulating air, water and land quality affect substantially all of our manufacturing locations around the world.
National, state or provincial and local standards regulating air, water and land quality affect substantially all of our manufacturing locations around the world. Compliance with such laws and regulations has required and will continue to require capital expenditures and increase operating costs.
We have the capacity to produce approximately 2.3 billion pounds of chlorinated derivative products per year, primarily at our Lake Charles, Natrium, Beauharnois and Longview (WA) facilities.
Chlorinated Derivative Materials. Our chlorinated derivative products include ethyl chloride, perchloroethylene, trichloroethylene, tri-ethane ® solvents, VersaTRANS ® solvents, calcium hypochlorite, hydrochloric acid ("HCL") and pelletized caustic soda ("PELS"). We have the capacity to produce approximately 2.2 billion pounds of chlorinated derivative products per year, primarily at our Lake Charles, Natrium, Beauharnois and Longview (WA) facilities.
Our competitors in epoxy resins include Olin Corporation, Nan Ya Plastics Corporation, the Spolchemie Group, Leuna Harze, Aditya Birla (Thai Epoxy), Huntsman Corporation, Swancor, Bohui, Techstorm, Kangda, Evonik Industries AG, Allnex, Kukdo and the Formosa Plastics Corporation.
Our competitors in the epoxy value chain include Olin Corporation, Nan Ya Plastics Corporation, the Spolchemie Group, LEUNA-Harze GmbH, Aditya Birla Chemicals (Thailand) Ltd., Huntsman Corporation, Swancor Holding Company Limited, Ningbo Bohui Chemical Technology Co., Ltd., Techstorm Advanced Material Co., Ltd., Shanghai Kangda Chemical New Material Group Co., Ltd., Evonik Industries AG, Allnex Management GmbH, Kukdo Chemical Co., Ltd., Kumhu Asiana Group and Chang Chun Plastics Co., Ltd.
We have paid all penalties required under the consent decree and have planned, budgeted for and scheduled all compliance requirements going forward.
The substantial majority of the capital expenditures and other costs required to comply with the consent decree were incurred in 2021, 2022 or 2023. We have paid all penalties required under the consent decree and have planned, budgeted for and scheduled all compliance requirements going forward.
Raw Materials and Suppliers Our North American PVC facilities within the Performance and Essential Materials segment supply most of the PVC required by building products for our housing exteriors and PVC pipes and fittings plants. Our raw materials for stone, roofing and accessories, windows, shutters and specialty tool products are externally purchased.
These products include landscape edging; industrial, home and office matting; marine dock edging; and masonry control joints. 8 Ta ble of Contents Raw Materials and Suppliers Our North American PVC facilities within the Performance and Essential Materials segment supply most of the PVC required by building products for our housing exteriors and PVC pipes and fittings plants.
Pursuant to Item 103 of the SEC's Regulation S-K, the following environmental matters involve a governmental authority as a party to the proceedings and potential monetary sanctions that we believe could exceed $1 million (which is less than one percent of our current assets on a consolidated basis as of December 31, 2022): • For several years, the EPA has been conducting an enforcement initiative against petroleum refineries and petrochemical plants with respect to emissions from flares.
Pursuant to Item 103 of the SEC's Regulation S-K, the following environmental matters involve a governmental authority as a party to the proceedings and potential monetary sanctions that we believe could exceed $1 million (which is less than one percent of our current assets on a consolidated basis as of December 31, 2023): • To resolve alleged violations associated with exceedances of discharge limits under the Natrium facility's National Pollutant Discharge Elimination System ("NPDES") permit effective August 2020, we have entered into enforcement negotiations with the West Virginia Department of Environmental Protection ("WVDEP").
The various compounds are then fabricated into end-products through extrusion, calendaring, injection-molding or blow-molding. Flexible PVC compounds are used for wire and cable insulation, medical applications and packaging, flooring, wall coverings, automotive interior and exterior trims and packaging. Rigid extrusion PVC compounds are commonly used in window and door profiles, vertical blinds and construction products, including pipe and siding.
Flexible PVC compounds are used for, but not limited to, the following applications: wire and cable, flooring, roofing, wall coverings, window and door trims, gaskets, industrial applications, automotive interior and exterior trims, footwear and medical applications. Rigid extrusion PVC compounds are commonly used for pipe, window and door profiles, fencing, decking, railing, siding and trim.
Injection-molding PVC compounds are used in specialty products such as computer housings and keyboards, appliance parts and containers. Powder compounds are primarily used in window and door profiles and pipe and fittings. We manufacture and market PVC compounds and specialized formulations under the Westlake Global Compounds and Nakan brand names. Recycled Products.
Injection molding and blow molding PVC compounds are commonly used for pipe fittings, electrical components, industrial applications and packaging for consumer goods. We manufacture and market custom PVC compounds under the Westlake Global Compounds and Nakan brand names. Recycled Products.
Caustic soda and PVC are essential materials found in a variety of applications, including detergent, paper and packaging materials, pharmaceuticals, building products, medical products and water treatment products. Marketing, Sales and Distribution We have a dedicated sales force for our business, organized by product line and region that sells our products directly to our customers.
The Pernis, Netherlands site, for example, received certification by ISCC PLUS for our tracing and handling of bio-based materials in the production of epoxy products. 6 Ta ble of Contents Marketing, Sales and Distribution We have a dedicated sales force for our business, organized by product line and region that sells our products directly to our customers.
Westlake Dimex is a producer of various products made from post-industrial-recycled polyvinyl chloride, polyethylene and thermoplastic elastomer materials. These products include landscape edging; industrial, home and office matting; marine dock edging; and masonry joint controls.
Westlake Dimex is a producer of post-industrial-recycled PVC, PE and thermoplastic elastomer (TPE) compounds in addition to various consumer and professional products made from recycled PVC, PE and TPE materials.
Sustainability After we initially introduced our lower-carbon GreenVin ® Caustic Soda and GreenVin ® PVC products in Germany in early 2021, we expanded our lower-carbon offerings with GreenVin ® bio-attributed PVC, which offers significant CO 2 savings as compared to conventionally produced PVC by Westlake Vinnolit.
For instance, having introduced lower-carbon caustic soda and PVC products since early 2021, in October 2022, we expanded our GreenVin ® bio-attributed PVC, which is produced in Germany with renewable power (under European Guarantees of Origin) and renewable ethylene. The renewable ethylene is derived from biomass.
As a global manufacturer of products in the performance and essential materials and housing and infrastructure products businesses, we understand the importance of reducing the environmental impact of our feedstocks, production and product usage, and developing innovations, together with our customers, to meet their objectives while also reducing the environmental impact.
As a global manufacturer of products in the performance and essential materials and housing and infrastructure products businesses, we continue to build on our core strengths in delivering high-value, essential products for our customers and endeavor to produce and deliver these products in increasingly-sustainable ways.
Removed
Housing and Infrastructure Products includes Westlake Royal Building Products, Westlake Pipe & Fittings, Westlake Global Compounds and Westlake Dimex. Historically, until the fourth quarter of 2021, we had operated under two principal operating segments, Olefins and Vinyls. The change has been retrospectively reflected in the periods presented in this Form 10-K.
Added
We also have substantial downstream integration from polyvinyl chloride (" PVC") into our building products, PVC pipes and fittings and PVC compounds in our Housing and Infrastructure Products segment. We began operations in 1986. Since 1986, we have grown rapidly into an integrated global producer of chemicals and building products.
Removed
The assets acquired and liabilities assumed and the results of operations of Westlake Epoxy are included in the Performance and Essential Materials segment. This acquisition represents a significant strategic expansion of Westlake's Performance and Essential Materials businesses into additional high-growth, innovative and sustainable-oriented applications – such as wind turbine blades and light-weight automotive structural components.
Added
During the fourth quarter of 2023, the Westlake Epoxy business's sales volumes and prices, specifically base epoxy resins in Europe, continued to deteriorate.
Removed
To further these objectives, we strive to manufacture efficiently and utilize recycled or scrap materials when possible in our manufacturing processes. We also develop product innovations designed to fulfill our customers’ sustainability needs, such as products with increased post-industrial recycled (PIR) or post-consumer recycled (PCR) content.
Added
These lower sales volumes and prices were primarily driven by record exports at lower prices of bisphenol-A, epichlorohydrin and base epoxy resins (constituting the epoxy value chain) out of Asia into Europe and North America during the time when demand in the European market was contracting.
Removed
As of February 15, 2023, we (directly and through OpCo, our investment in LACC, and our 95%- and 60%-owned joint ventures in China and Taiwan, respectively) had approximately 43.4 billion pounds per year of aggregate production capacity at numerous manufacturing sites in North America, Europe and Asia in our Performance and Essential Materials segment.
Added
In addition, Westlake Epoxy operations in Europe have experienced sustained high energy and power costs. These factors negatively impacted Westlake Epoxy financial results during 2023.
Removed
We sell polyethylene to external customers as a final product in pellet form. 4 Table of Contents Chlorinated Derivative Materials. Our chlorinated derivative products include ethyl chloride, perchloroethylene, trichloroethylene, tri-ethane ® solvents, VersaTRANS ® solvents, calcium hypochlorite, hydrochloric acid ("HCL") and pelletized caustic soda ("PELS").
Added
Based on these developments, along with management's outlook for the Westlake Epoxy business over the foreseeable future, we determined, in the fourth quarter of 2023, that the carrying amount of long-lived assets of our base epoxy resin business in the Netherlands and all of the goodwill of the Westlake Epoxy business will not be recoverable.
Removed
In addition to using renewable power sources, in 2022 we started to utilize ISCC PLUS-certified renewable ethylene from second generation non-food biomass to produce GreenVin ® bio-attributed PVC.
Added
As a result of this assessment, a goodwill impairment charge of $128 million and a non-cash long-lived asset impairment charge related to Epoxy Netherlands base epoxy resin business assets of $347 million were recognized in the fourth quarter of 2023.
Removed
The use of renewable power sources has resulted in a reduced CO 2 footprint for GreenVin ® PVC and GreenVin ® Caustic Soda of approximately 25% and 30%, respectively, as compared to conventionally produced comparable products by Westlake Vinnolit as certified by TÜV Rheinland.
Added
To further these objectives, we endeavor to reduce the environmental footprint of our operations and enhance the circularity in more of our products, including continuing to focus on recycling opportunities within our businesses, reducing waste at our facilities, incorporating more recycled content into our products, and seeking to incorporate renewable and bio-based materials.
Removed
Westlake Dimex is one of the largest recyclers of plastic materials in the United States, processing 100 million pounds of scrap and waste annually, including an increasing amount of scrap materials from other Westlake businesses, such as Westlake Royal Building Products, DaVinci Roofscapes and Westlake Pipe & Fittings.
Added
PVC is produced from VCM, which is, in turn, made from chlorine and ethylene. 4 Ta ble of Contents We are the second-largest PVC producer in the world.
Removed
Westlake Dimex turns scrap materials into finished products, such as landscape edging and matting for consumer and industrial applications, using a proprietary blending process. Our Westlake Pipe & Fittings business introduced PVCO pipe in late 2021. It is lighter-weight and more durable than conventional PVC pipe.
Added
GreenVin ® bio-attributed PVC is both International Sustainability & Carbon Certification PLUS ("ISCC PLUS") and REDcert2 certified, using the mass balance approach.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

88 edited+25 added−9 removed131 unchanged
Biggest changeExamples of external factors include: • general economic and business conditions, including in North America, Europe and Asia, including inflation, increasing interest rates and possible recession; • new capacity additions in North America, Europe, Asia and the Middle East; 15 Table of Contents • the level of business activity in the industries that use our products; • competitor action; • technological innovations; • currency fluctuations; • the impact of supply chain constraints and workforce availability; • international events and circumstances; • pandemics, such as COVID-19 pandemic, and other public health threats and efforts to contain their transmission; • war, sabotage, terrorism and civil unrest, including the conflict between Russia and Ukraine; • governmental regulation, including in the United States, Europe and Asia; • public attitude towards climate change and safety, health and the environment; • perceptions of our products by potential buyers of our products, as well as the public generally, and related changes in behavior, including with respect to recycling; • severe weather and natural disasters; and • credit worthiness of customers and vendors.
Biggest changeExamples of external factors include: • general economic and business conditions, including in North America, Europe and Asia, including inflation, persistent high interest rates and possible recession; • new capacity additions in North America, Europe, Asia and the Middle East; • the level of business activity in the industries that use our products; • competitor action; • technological innovations; • currency fluctuations; • the impact of supply chain constraints and workforce availability; • international events and circumstances; • pandemics, such as COVID-19 pandemic, and other public health threats and efforts to contain their transmission; • war, sabotage, terrorism and civil unrest, including the conflicts between Russia and Ukraine and in the Middle East; • governmental regulation, including in the United States, Europe and Asia; • public attitude towards climate change and safety, health and the environment; • perceptions of our products by potential buyers of our products, as well as the public generally, and related changes in behavior, including with respect to recycling; • severe weather and natural disasters; • long-term impacts of climate change, including rising sea levels and changes in weather patterns, such as drought and flooding; and • credit worthiness of customers and vendors. 16 Ta ble of Contents A number of our products are highly dependent on durable goods markets, such as housing and construction, which are themselves particularly cyclical.
Westlake Partners' tax treatment depends on its status as a partnership for federal income tax purposes, and it not being subject to a material amount of entity-level taxation.
Westlake Partners' tax treatment depends on its status as a partnership for federal income tax purposes, and it not being subject to a material amount of entity-level taxation.
If the Internal Revenue Service ("IRS") were to treat Westlake Partners as a corporation for federal income tax purposes, or if Westlake Partners became subject to entity-level taxation for state tax purposes, its cash available for distribution would be substantially reduced, which would also likely cause a substantial reduction in the value of its common units that we hold.
If the Internal Revenue Service ("IRS") were to treat Westlake Partners as a corporation for federal income tax purposes, or if Westlake Partners became subject to entity-level taxation for state tax purposes, its cash available for distribution would be substantially reduced, which would also likely cause a substantial reduction in the value of its common units that we hold.
As a result, the principal stockholder, subject to any fiduciary duty owed to our minority stockholders under Delaware law, will be able to control all matters affecting us (some of which may present conflicts of interest), including: • the composition of our Board of Directors and, through the Board, any determination with respect to our business direction and policies, including the appointment and removal of officers and the determination of compensation; • any determinations with respect to mergers or other business combinations or the acquisition or disposition of assets; • our financing decisions, capital raising activities and the payment of dividends; and • amendments to our amended and restated certificate of incorporation or amended and restated bylaws.
As a result, the principal stockholder, subject to any fiduciary duty owed to our minority stockholders under Delaware law, will be able to control all matters affecting us (some of which may present conflicts of interest), including: • the composition of our Board of Directors and, through the Board, any determination with respect to our business direction and policies, including the appointment and removal of officers and the determination of compensation; • any determinations with respect to mergers or other business combinations or the acquisition or disposition of assets; • our financing decisions, capital raising activities and the payment of dividends; and • amendments to our restated certificate of incorporation or amended and restated bylaws.
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), similar state laws and certain European directives impose joint and several liability for the costs of remedial investigations and actions on the entities that generated waste, arranged for disposal of the wastes, transported to or selected the disposal sites and the past and present owners and operators of such sites.
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), similar state laws and certain European directives impose joint and several liability for the costs of remedial investigations and actions on the entities that generated waste, arranged for disposal of the waste, transported to or selected the disposal sites, and the past and present owners and operators of such sites.
These transactions may not yield the business benefits, synergies or financial benefits anticipated by management. Integration of acquired operations could lead to restructuring charges or other costs. Our ability to realize the anticipated benefits of recent acquisitions will depend, to a large extent, on our ability to integrate our business with the acquired businesses.
These transactions may not yield the business benefits, synergies or financial benefits anticipated by management. Integration of acquired operations could lead to restructuring charges or other costs. Our ability to realize the anticipated benefits of acquisitions will depend, to a large extent, on our ability to integrate our business with the acquired businesses.
Our amended and restated certificate of incorporation provides that the principal stockholder affiliates have no duty to refrain from engaging in activities or lines of business similar to ours and that the principal stockholder affiliates will not be liable to us or our stockholders for failing to present specified corporate opportunities to us.
Our restated certificate of incorporation provides that the principal stockholder affiliates have no duty to refrain from engaging in activities or lines of business similar to ours and that the principal stockholder affiliates will not be liable to us or our stockholders for failing to present specified corporate opportunities to us.
Expansion projects may be subject to delays or cost overruns, including delays or cost overruns resulting from any one or more of the following: • unexpectedly long delivery times for, or shortages of, key equipment, parts or materials; • shortages of skilled labor and other personnel necessary to perform the work; • delays and performance issues; • failures or delays of third-party equipment vendors or service providers; • unforeseen increases in the cost of equipment, labor and raw materials; • work stoppages and other labor disputes; • unanticipated actual or purported change orders; • disputes with contractors and suppliers; • design and engineering problems; • latent damages or deterioration to equipment and machinery in excess of engineering estimates and assumptions; 19 Table of Contents • financial or other difficulties of our contractors and suppliers; • sabotage; • terrorist attacks; • interference from adverse weather conditions; and • difficulties in obtaining necessary permits or in meeting permit conditions.
Expansion projects may be subject to delays or cost overruns, including delays or cost overruns resulting from any one or more of the following: • unexpectedly long delivery times for, or shortages of, key equipment, parts or materials; • shortages of skilled labor and other personnel necessary to perform the work; • delays and performance issues; • failures or delays of third-party equipment vendors or service providers; • unforeseen increases in the cost of equipment, labor and raw materials; • work stoppages and other labor disputes; • unanticipated actual or purported change orders; • disputes with contractors and suppliers; • design and engineering problems; • latent damages or deterioration to equipment and machinery in excess of engineering estimates and assumptions; • financial or other difficulties of our contractors and suppliers; • sabotage; • terrorist attacks; • interference from adverse weather conditions; and • difficulties in obtaining necessary permits or in meeting permit conditions.
Future funding obligations related to these obligations could restrict cash available for our operations, capital expenditures or other requirements or require us to borrow additional funds. • If our goodwill, indefinite-lived intangible assets or other intangible assets become impaired in the future, we may be required to record non-cash charges to earnings, which could be significant. • Failure to adequately protect critical data and technology systems could materially affect our operations. • Fluctuations in foreign currency exchange and interest rates could affect our consolidated financial results. • Our property insurance has only partial coverage for acts of terrorism and, in the event of terrorist attack, we could lose net sales and our facilities.
Future funding obligations related to these obligations could restrict cash available for our operations, capital expenditures or other requirements or require us to borrow additional funds. • If our goodwill or other long-lived assets become impaired in the future, we may be required to record non-cash charges to earnings, which could be significant. • Failure to adequately protect critical data and technology systems could materially affect our operations. • Fluctuations in foreign currency exchange and interest rates could affect our consolidated financial results. • Our property insurance has only partial coverage for acts of terrorism and, in the event of terrorist attack, we could lose net sales and our facilities.
The housing market may continue its recent decline or decline further, and any such continuation or decline in the homebuilding industry may adversely affect our operating results. We cannot predict whether and to what extent the housing market in the United States will grow, particularly if interest rates for mortgage loans continue to rise.
The housing market may continue its recent decline or decline further, and any such continuation or decline in the homebuilding industry may adversely affect our operating results. We cannot predict whether and to what extent the housing market in the United States will grow, particularly if interest rates for mortgage loans remain elevated or continue to rise.
The IRA contains several revisions to the Internal Revenue Code, including a 15% corporate minimum income tax for corporations with average annual adjusted financial statement income over a three-tax-year period in excess of $1 billion and is effective for the tax years beginning after December 31, 2022, a 1% excise tax on stock repurchases made by publicly traded U.S. corporations after December 31, 2022, and business tax credits and incentives for the development of clean energy projects and the production of clean energy.
The IRA contains several revisions to the Internal Revenue Code of 1986, as amended (the "Code"), including a 15% corporate minimum income tax for corporations with average annual adjusted financial statement income over a three-tax-year period in excess of $1 billion and is effective for the tax years beginning after December 31, 2022, a 1% excise tax on stock repurchases made by publicly traded U.S. corporations after December 31, 2022, and business tax credits and incentives for the development of clean energy projects and the production of clean energy.
In addition to any conflicts of interest that arise in the foregoing areas, our interests may conflict with those of the principal stockholder affiliates in a number of other areas, including: • business opportunities that may be presented to the principal stockholder affiliates and to our officers and directors associated with the principal stockholder affiliates, and competition between the principal stockholder affiliates and us within the same lines of business; • the solicitation and hiring of employees from each other; and 27 Table of Contents • agreements with the principal stockholder affiliates relating to corporate services that may be material to our business.
In addition to any conflicts of interest that arise in the foregoing areas, our interests may conflict with those of the principal stockholder affiliates in a number of other areas, including: • business opportunities that may be presented to the principal stockholder affiliates and to our officers and directors associated with the principal stockholder affiliates, and competition between the principal stockholder affiliates and us within the same lines of business; • the solicitation and hiring of employees from each other; and • agreements with the principal stockholder affiliates relating to corporate services that may be material to our business.
Risks Related to Taxes • A change in tax laws, treaties or regulations, or their interpretation or application, could have a negative impact on our business and results of operations. 13 Table of Contents • We depend in part on distributions from Westlake Partners to generate cash for our operations, capital expenditures, debt service and other uses.
Risks Related to Taxes • A change in tax laws, treaties or regulations, or their interpretation or application, could have a negative impact on our business and results of operations. • We depend in part on distributions from Westlake Partners to generate cash for our operations, capital expenditures, debt service and other uses.
As a result, we generally are not able to protect our market position for these products by product differentiation and may not be able to pass on cost increases to our customers.
As a result, we generally are not able to protect our market position for most of these products by product differentiation and may not be able to pass on cost increases to our customers.
The U.S. housing market remained strong throughout the COVID-19 pandemic, but began softening at the end of the second quarter of 2022 and continued to decline in the second half of 2022 primarily due to inflationary pricing, rapidly rising interest rates for mortgage loans and increasing construction costs.
The U.S. housing market remained strong throughout the COVID-19 pandemic, but began softening at the end of the second quarter of 2022 and continued to decline throughout 2023 primarily due to inflationary pricing, rapidly rising interest rates for mortgage loans and increasing construction costs.
In addition, we may be liable for existing contamination related to certain of our facilities for which, in some cases, we believe third parties are liable in the event such third parties fail to perform their obligations. 24 Table of Contents Our operations and assets are subject to climate-related risks and uncertainties.
In addition, we may be liable for existing contamination related to certain of our facilities for which, in some cases, we believe third parties are liable in the event such third parties fail to perform their obligations. Our operations and assets are subject to climate-related risks and uncertainties.
As long as TTWF LP (the "principal stockholder") and certain of its affiliates (such affiliates, together with the principal stockholder, the "principal stockholder affiliates"), which as of December 31, 2022, beneficially owned approximately 74% of our common stock, own a majority of our outstanding common stock, they will be able to exert significant control over us, and our other stockholders, by themselves, will not be able to affect the outcome of any stockholder vote.
As long as TTWF LP (the "principal stockholder") and certain of its affiliates (such affiliates, together with the principal stockholder, the "principal stockholder affiliates"), which as of December 31, 2023, beneficially owned approximately 72% of our common stock, own a majority of our outstanding common stock, they will be able to exert significant control over us, and our other stockholders, by themselves, will not be able to affect the outcome of any stockholder vote.
We cannot predict the timing or content of these actions or amendments, or their ultimate cost to, or impact on us. 23 Table of Contents On June 28, 2021, the EPA proposed reporting and recordkeeping requirements for Per- and Polyfluoroalkyl Substances ("PFAS") under TSCA.
We cannot predict the timing or content of these actions or amendments, or their ultimate cost to, or impact on us. On June 28, 2021, the EPA proposed reporting and recordkeeping requirements for Per- and Polyfluoroalkyl Substances ("PFAS") under TSCA.
Our operations may be adversely affected by strikes, work stoppages and other labor disputes. 20 Table of Contents We have certain material pension and other post-retirement employment benefit ("OPEB") obligations. Future funding obligations related to these obligations could restrict cash available for our operations, capital expenditures or other requirements or require us to borrow additional funds .
Our operations may be adversely affected by strikes, work stoppages and other labor disputes. We have certain material pension and other post-retirement employment benefit ("OPEB") obligations. Future funding obligations related to these obligations could restrict cash available for our operations, capital expenditures or other requirements or require us to borrow additional funds .
This is subject to general economic, financial, currency, competitive, legislative, regulatory and other factors that are beyond our control. 25 Table of Contents Our business may not generate sufficient cash flows from operations, we may not receive sufficient distributions from Westlake Partners, and currently anticipated cost savings and operating improvements may not be realized on schedule.
This is subject to general economic, financial, currency, competitive, legislative, regulatory and other factors that are beyond our control. Our business may not generate sufficient cash flows from operations, we may not receive sufficient distributions from Westlake Partners, and currently anticipated cost savings and operating improvements may not be realized on schedule.
Competition within the petrochemical industry and in the manufacturing of housing and infrastructure products is affected by a variety of factors, including: • product price; • balance of product supply/demand; • material, technology and process innovation; • technical support and customer service; • quality; • reliability of raw material and utility supply; • availability of potential substitute materials; and • product performance.
Competition within the petrochemical industry and in the manufacturing of housing and infrastructure products is affected by a variety of factors, including: • product price; • balance of product supply/demand; • material, technology and process innovation; • technical support and customer service; 17 Ta ble of Contents • quality; • reliability of raw material and utility supply; • availability of potential substitute materials; and • product performance.
As our chemical manufacturing processes result in GHG emissions, these and other GHG laws and regulations could affect our costs of doing business. Similarly, the Toxic Substances Control Act ("TSCA") imposes reporting, record-keeping and testing requirements, and restrictions relating to the production, handling, and use of chemical substances.
As our chemical manufacturing processes result in GHG emissions, these and other GHG laws and regulations could affect our costs of doing business. 24 Ta ble of Contents Similarly, the Toxic Substances Control Act ("TSCA") imposes reporting, record-keeping and testing requirements, and restrictions relating to the production, handling, and use of chemical substances.
We are subject to increasing climate-related risks and uncertainties, many of which are outside of our control. Climate change may result in more frequent severe weather events, potential changes in precipitation patterns and variability in weather patterns, which can disrupt our operations as well as those of our customers, partners and suppliers.
We are subject to increasing climate-related risks and uncertainties, many of which are outside of our control. Climate change may result in more frequent severe weather events, potential changes in precipitation patterns, flooding, sea level rise, and variability in weather patterns, which can disrupt our operations as well as those of our customers, partners and suppliers.
The Credit Agreement also requires us to maintain a quarterly total leverage ratio. These covenants may adversely affect our ability to finance future business opportunities or acquisitions. A breach of any of these covenants could result in a default in respect of the related debt.
The Credit Agreement also requires us to maintain a quarterly total leverage ratio. 27 Ta ble of Contents These covenants may adversely affect our ability to finance future business opportunities or acquisitions. A breach of any of these covenants could result in a default in respect of the related debt.
We cannot predict the ultimate impact of achieving our emissions reduction goal, or the various implementation aspects, on our financial condition and results of operations. Risks Related to Our Indebtedness Our level of debt could adversely affect our ability to operate our business.
We cannot predict the ultimate impact of achieving our emissions reduction goal, or the various implementation aspects, on our financial condition and results of operations. 26 Ta ble of Contents Risks Related to Our Indebtedness Our level of debt could adversely affect our ability to operate our business.
The unfunded OPEB obligations as of December 31, 2022 were $49 million. We will require future operating cash flows to fund our pension and OPEB obligations, which could restrict available cash for our operations, capital expenditures and other requirements.
The unfunded OPEB obligations as of December 31, 2023 were $44 million. We will require future operating cash flows to fund our pension and OPEB obligations, which could restrict available cash for our operations, capital expenditures and other requirements.
Other factors that might impact the homebuilding industry include uncertainty in domestic and international financial, credit and consumer lending markets amid slow economic growth or recessionary conditions in various regions or industries around the world, including as a result of the COVID-19 pandemic, the conflict between Russia and Ukraine, tight lending standards and practices for mortgage loans that limit consumers' ability to qualify for mortgage financing to purchase a home, higher home prices, population declines or slower rates of population growth or U.S.
Other factors that might impact the homebuilding industry include uncertainty in domestic and international financial, credit and consumer lending markets amid slow economic growth or recessionary conditions in various regions or industries around the world, including as a result of the conflicts in the Middle East and between Russia and Ukraine, higher interest rates, tight lending standards and practices for mortgage loans that limit consumers' ability to qualify for mortgage financing to purchase a home, higher home prices, population declines or slower rates of population growth or U.S.
Our operations are subject to the usual hazards associated with chemical, plastics, housing and infrastructure products manufacturing and the related use, storage, transportation and disposal of feedstocks, products and wastes, including: • pipeline leaks and ruptures; • explosions; • fires; • severe weather and natural disasters; • mechanical failure; • unscheduled downtime; • labor difficulties; 17 Table of Contents • transportation interruptions; • transportation accidents involving our products; • remediation complications; • chemical spills, discharges or releases of toxic or hazardous substances or gases; • other environmental risks; • sabotage; • terrorist attacks; and • political unrest.
Our operations are subject to the usual hazards associated with chemical, plastics, housing and infrastructure products manufacturing and the related use, storage, transportation and disposal of feedstocks, products and wastes, and litigation arising as a result of such hazards, including: • pipeline leaks and ruptures; • explosions; • fires; • severe weather and natural disasters; • mechanical failure; • unscheduled downtime; • labor difficulties; • transportation interruptions; • transportation accidents involving our products; • remediation complications; • chemical spills, discharges or releases of toxic or hazardous substances or gases; • other environmental risks; • sabotage; • terrorist attacks; and • political unrest.
If our goodwill, indefinite-lived intangible assets or other intangible assets are determined to be impaired in the future, we may be required to record non-cash charges to earnings during the period in which the impairment is determined, which could be significant and have an adverse effect on our financial condition and results of operations.
If our goodwill and long-lived assets are determined to be impaired in the future, we may be required to record further non-cash charges to earnings during the period in which the impairment is determined, which could be significant and have an adverse effect on our financial condition and results of operations.
If the judgments and estimates used in our analysis are not realized or change due to external factors, then actual results may not be consistent with these judgments and estimates, and our goodwill and intangible assets may become impaired in future periods.
If the judgments and estimates used in our analysis are not realized or change due to future external factors, then actual results may not be consistent with these judgments and estimates, and our goodwill and other long-lived assets may become further impaired in future periods.
Such risks and costs may adversely affect our operations. • We may pursue acquisitions, dispositions, joint ventures or other transactions that may impact our results of operations and financial condition.
Such risks and costs may adversely affect our operations. 13 Ta ble of Contents • We may pursue acquisitions, dispositions, joint ventures or other transactions that may impact our results of operations and financial condition.
We maintain property, business interruption and casualty insurance that we believe is in accordance with customary industry practices, but we cannot be fully insured against all potential hazards incident to our business, including losses resulting from war risks or terrorist acts.
We maintain property, business interruption and casualty insurance that we believe is in accordance with customary industry practices, but we cannot be fully insured against all potential hazards incident to our business, including losses resulting from wars or terrorist acts, among other things.
We manufacture several of these chemical substances. Although we cannot predict with certainty the extent of our future liabilities and costs at this time, we do not anticipate that the evaluation of these chemical substances will have a material adverse effect on our business, financial condition, operating results or cash flows.
Although we cannot predict with certainty the extent of our future liabilities and costs at this time, we do not anticipate that the Test Order requirements or risk evaluation and management rules of these chemical substances will have a material adverse effect on our business, financial condition, operating results or cash flows.
As of December 31, 2022, our indebtedness, including the current portion, totaled $4.9 billion, and our debt represented approximately 31.8% of our total capitalization. Our annual interest expense for 2022 was $177 million, net of interest capitalized of $4 million.
As of December 31, 2023, our indebtedness, including the current portion, totaled $4.9 billion, and our debt represented approximately 31.3% of our total capitalization. Our annual interest expense for 2023 was $165.0 million, net of interest capitalized of $8.0 million.
Risk Factor Summary Risks Related to Our Business, Industry and Operations • The impact and effects of public health crises, pandemics and epidemics, including the ongoing coronavirus ("COVID-19") pandemic, could adversely affect our business, financial condition and results of operations. • Cyclicality in the petrochemical industry has in the past, and may in the future, result in reduced operating margins or operating losses. • We sell commodity products in highly competitive markets and face significant competition and price pressure. • Volatility in costs of raw materials and energy may result in increased operating expenses and adversely affect our results of operations and cash flows. • External factors beyond our control can cause fluctuations in demand for our products and in our prices and margins, which may negatively affect our results of operations and cash flows. • The housing market may continue its recent decline or decline further, and any such continuation or decline in the homebuilding industry may adversely affect our operating results. • We operate internationally and are subject to related risks, including exchange rate fluctuations, exchange controls, political risk and other risks relating to international operations. • Our inability to compete successfully may reduce our operating profits. • Our production facilities process some volatile and hazardous materials that subject us to operating risks that could adversely affect our operating results. • We rely on a limited number of outside suppliers for specified feedstocks and services. 12 Table of Contents • We rely heavily on third party transportation, which subjects us to risks and costs that we cannot control.
Risk Factor Summary Risks Related to Our Business, Industry and Operations • Cyclicality in the petrochemical industry has in the past, and may in the future, result in reduced operating margins or operating losses. • We sell commodity products in highly competitive markets and face significant competition and price pressure. • Our operations depend on the availability and costs of raw materials, energy and utilities, and volatility in costs of raw materials, energy and utilities and supply chain constraints may result in increased operating expenses and adversely affect our results of operations and cash flows. • External factors beyond our control can cause fluctuations in demand for our products and in our prices and margins, which may negatively affect our results of operations and cash flows. • The housing market may continue its recent decline or decline further, and any such continuation or decline in the homebuilding industry may adversely affect our operating results. • We operate internationally and are subject to related risks, including exchange rate fluctuations, exchange controls, political risk and other risks relating to international operations. • Our inability to compete successfully may reduce our operating profits. • Our production facilities process some volatile and hazardous materials that subject us to operating and litigation risks that could adversely affect our operating results. • We rely on a limited number of outside suppliers for specified feedstocks and services. • We rely heavily on third party transportation, which subjects us to risks and costs that we cannot control.
The total underfunded status of the pension obligations calculated on a projected benefit obligation basis as of December 31, 2022 was $263 million, including the Westlake Defined Benefit Plan and the Vinnolit Pension Plan (locally known as 'Grund- und Zusatzversorgung' in Germany), which were underfunded by $81 million and $107 million, respectively, on an individual plan basis.
The total underfunded status of the pension obligations calculated on a projected benefit obligation basis as of December 31, 2023 was $305 million, including the Westlake Defined Benefit Plan and the Vinnolit Pension Plan (locally known as 'Grund- und Zusatzversorgung' in Germany), which were underfunded by $47 million and $142 million, respectively, on an individual plan basis.
If we are delayed or unable to ship finished products or unable to obtain raw materials as a result of any such new regulations or public policy changes related to transportation safety, or these transportation companies fail to operate properly, or if there were significant changes in the cost of these services due to new or additional regulations, or otherwise, we may not be able to arrange efficient alternatives and timely means to obtain raw materials or ship goods, which could result in a material adverse effect on our business and results of operations. 18 Table of Contents We may pursue acquisitions, dispositions, joint ventures or other transactions that may impact our results of operations and financial condition.
If we are delayed or unable to ship finished products or unable to obtain raw materials as a result of any such new regulations or public policy changes related to transportation safety, or these transportation companies fail to operate properly, or if there were significant changes in the cost of these services due to new or additional regulations, or otherwise, we may not be able to arrange efficient alternatives and timely means to obtain raw materials or ship goods, which could result in a material adverse effect on our business and results of operations.
Among other things, the proposed rule would require work practice standards for the cell rooms and instrumental monitoring of cell room fugitive emissions, modify regulatory provisions regarding startup, shutdown, and malfunctions, and add standards for fugitive chlorine emissions from mercury cell chlor-alkali plants, which are not currently regulated under the NESHAP.
Among other things, the amendments require improvements in work practices to reduce fugitive mercury emissions and work practice standards for the cell rooms and instrumental monitoring of cell room fugitive emissions, modify regulatory provisions regarding startup, shutdown, and malfunctions, and add standards for fugitive chlorine emissions from mercury cell chlor-alkali plants, which are not currently regulated under the NESHAP.
In November 2019, the United States submitted formal notification to the United Nations that it intended to withdraw from the Paris Agreement. The withdrawal took effect in November 2020.
The United States signed the Paris Agreement in April 2016, and the Paris Agreement went into effect in November 2016. In November 2019, the United States submitted formal notification to the United Nations that it intended to withdraw from the Paris Agreement. The withdrawal took effect in November 2020.
Cyber-attacks could include, but are not limited to, ransomware attacks, malicious software, attempts to gain unauthorized access to our data and the unauthorized release, corruption or loss of our data and personal information, interruptions in communication, loss of our intellectual property or theft of our sensitive or proprietary technology, loss or damage to our data delivery systems, or other cybersecurity and infrastructure systems, including our property and equipment.
Cyber-attacks could include, but are not limited to, ransomware attacks, malicious software, attempts to gain unauthorized access to our systems or data or other electronic security breaches that could lead to disruptions in critical systems, unauthorized release, corruption or loss of data including protected information such as personal information of our employees, interruptions in communication, loss of our intellectual property or theft of our sensitive or proprietary technology, loss or damage to our data delivery systems, or other cybersecurity and infrastructure systems, including our property and equipment.
Risk Related to Business, Industry and Operations The impact and effects of public health crises, pandemics and epidemics, including the ongoing coronavirus ("COVID-19") pandemic, could adversely affect our business, financial condition and results of operations. Public health crises, pandemics and epidemics, such as the COVID-19 pandemic, could materially adversely affect our business, financial condition and results of operations.
The impact and effects of public health crises, pandemics and epidemics could adversely affect our business, financial condition and results of operations. Public health crises, pandemics and epidemics, such as the COVID-19 pandemic, could materially adversely affect our business, financial condition and results of operations.
If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our financial condition, results of operations or cash flows. We are exposed to significant losses from products liability, personal injury and other claims relating to the products we manufacture.
If we were to incur a significant liability for which we were not fully insured, or if an insurer was unwilling or unable to meet its obligations, it could have a material adverse effect on our financial condition, results of operations or cash flows. 18 Ta ble of Contents We are exposed to significant losses from products liability, personal injury and other claims relating to the products we manufacture.
Despite the fact that Westlake Partners is organized as a limited partnership under Delaware law, it would be treated as a corporation for U.S. federal income tax purposes unless it satisfies a "qualifying income" requirement.
Despite the fact that Westlake Partners is organized as a limited partnership under Delaware law, it would be treated as a corporation for U.S. federal income tax purposes unless it satisfies a "qualifying income" requirement. Based on Westlake Partners' current operations and current Treasury Regulations, Westlake Partners believes it satisfies the qualifying income requirement.
Historically, there have been a number of mergers, acquisitions, spin-offs and joint ventures in the industry. This restructuring activity has resulted in fewer but more competitive producers, many of which are larger than we are and have greater financial resources than we do. Among our competitors are some of the world's largest chemical companies and chemical industry joint ventures.
Historically, there have been a number of mergers, acquisitions, spin-offs and joint ventures in the industry in which the PEM business operates. This restructuring activity has resulted in fewer but more competitive PEM producers, many of which are larger than we are and have greater financial resources than we do.
We sell our products in highly competitive markets. Due to the commodity nature of many of our products, competition in these markets is based primarily on price and to a lesser extent on performance, product quality, product deliverability and customer service.
We sell most of our commodity products in highly competitive markets and face significant competition and price pressure. We sell most of our commodity products in highly competitive markets. Competition in commodity markets is based primarily on price and to a lesser extent on performance, product quality, product deliverability and customer service.
As of December 31, 2022, the projected benefit obligations for our pension and OPEB plans were $1,048 million and $49 million, respectively. The fair value of pension investment assets was $785 million as of December 31, 2022.
As of December 31, 2023, the projected benefit obligations for our pension and OPEB plans were $1,123 million and $44 million, respectively. The fair value of pension investment assets was $818 million as of December 31, 2023.
We purchase significant amounts of ethane feedstock, natural gas, ethylene and salt to produce several basic chemicals. We also purchase significant amounts of electricity to supply the energy required in our production processes. The cost of these raw materials and energy, in the aggregate, represents a substantial portion of our operating expenses.
We also purchase significant amounts of electricity to supply the energy required in our production processes. The cost of these raw materials and energy, in the aggregate, represents a substantial portion of our operating expenses.
The COVID-19 pandemic, at its peak, resulted in authorities implementing numerous measures to try to contain the disease, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns, among others. There were widespread adverse impacts on the global economy, many of our facilities and on our employees, customers and suppliers.
Such events have resulted in and could again result in authorities implementing numerous measures to try to contain the disease, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns, among others. Such events have had and could again have widespread adverse impacts on the global economy, many of our facilities and on our employees, customers and suppliers.
Based on Westlake Partners' current operations and current Treasury Regulations, Westlake Partners believes it satisfies the qualifying income requirement. 26 Table of Contents Prior to its initial public offering, Westlake Partners requested and obtained a favorable private letter ruling from the IRS to the effect that, based on facts presented in the private letter ruling request, income from the production, transportation, storage and marketing of ethylene and its co-products constitutes "qualifying income" within the meaning of Section 7704 of the Internal Revenue Code of 1986, as amended.
Prior to its initial public offering, Westlake Partners requested and obtained a favorable private letter ruling from the IRS to the effect that, based on facts presented in the private letter ruling request, income from the production, transportation, storage and marketing of ethylene and its co-products constitutes "qualifying income" within the meaning of Section 7704 of the Code.
Additionally, members of the investment community may screen companies such as ours for ESG disclosures and performance before investing in our stock. Over the past few years, there has also been an acceleration in investor demand for ESG investing opportunities, and many large institutional investors have committed to increasing the percentage of their portfolios that are allocated towards ESG investments.
Over the past few years, there has also been an acceleration in investor demand for ESG investing opportunities, and many large institutional investors have committed to increasing the percentage of their portfolios that are allocated towards ESG investments.
If there is limited economic growth, a decline in employment and consumer income, a general change in consumer behavior, including as a result of the COVID-19 pandemic, the conflict between Russia and Ukraine, and/or tightening of mortgage lending standards, practices and regulation, or if interest rates for mortgage loans or home prices rise, there could be a corresponding adverse effect on our financial condition, results of operations or cash flows, including, but not limited to, the amount of revenues or profits we generate in our Housing and Infrastructure Products segment. 16 Table of Contents We operate internationally and are subject to related risks, including exchange rate fluctuations, exchange controls, political risk and other risks relating to international operations.
If there is limited economic growth, a decline in employment and consumer income, a general change in consumer behavior and/or tightening of mortgage lending standards, practices and regulation, or if interest rates for mortgage loans or home prices rise, there could be a corresponding adverse effect on our financial condition, results of operations or cash flows, including, but not limited to, the amount of revenues or profits we generate in our Housing and Infrastructure Products segment.
For example, many states have banned the use of PFAS in certain consumer products and set Maximum Contaminant Levels for PFAS in drinking water.
PFAS chemicals have come under increased scrutiny by federal, state, and local governments. For example, many states have banned the use of PFAS in certain consumer products and set Maximum Contaminant Levels for PFAS in drinking water.
Changes to regulatory policies applicable to the German energy sector for industrial users have contributed to higher prices for industrial users of energy in the past and may continue to do so in the future. Our results of operations have been and could in the future be significantly affected by increases in these costs.
Changes to regulatory policies applicable to the German energy sector for industrial users have contributed to higher prices for industrial users of energy in the past and may continue to do so in the future.
Margins in this industry are sensitive to supply and demand balances both domestically and internationally, which historically have been cyclical. The cycles are generally characterized by periods of tight supply, leading to high operating rates and margins, followed by periods of oversupply primarily resulting from excess new capacity additions, leading to reduced operating rates and lower margins.
The cycles are generally characterized by periods of tight supply, leading to high operating rates and margins, followed by periods of oversupply primarily resulting from excess new capacity additions, leading to reduced operating rates and lower margins.
As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage.
In addition, certain policies may be subject to coverage limitations, which may affect the extent of any recovery thereunder. As a result of market conditions and past claims, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage.
The integration process may disrupt the businesses and, if implemented ineffectively or if impacted by unforeseen negative economic or market conditions or other factors, we may not realize the full anticipated benefits of the acquisitions. Our failure to meet the challenges involved in integrating such businesses could adversely affect our results of operations.
The integration process may disrupt the businesses and, if implemented ineffectively or if impacted by unforeseen negative economic or market conditions or other factors, we may not realize the full anticipated benefits of the acquisitions.
In addition, we are exposed to volatility in interest rates. When appropriate, we may use derivative financial instruments to reduce our exposure to interest rate risks. However, our financial risk management program may not be successful in reducing the risks inherent in exposures to interest rate fluctuations.
In addition, we are exposed to volatility in interest rates. When appropriate, we may use derivative financial instruments to reduce our exposure to interest rate risks.
Legal, Governmental and Regulatory Risks Our operations and assets are subject to extensive environmental, health and safety laws and regulations. We use large quantities of hazardous substances and generate hazardous wastes and emissions in our manufacturing operations.
These and similar events have caused and may again cause supply chain constraints and disruptions and workforce availability issues as well. Legal, Governmental and Regulatory Risks Our operations and assets are subject to extensive environmental, health and safety laws and regulations. We use large quantities of hazardous substances and generate hazardous wastes and emissions in our manufacturing operations.
In this regard, we regularly consider acquisition opportunities that would be consistent or complementary to our existing business strategies. To the extent permitted under our credit facility, the indenture governing our senior notes and other debt agreements, some of these transactions may be financed by additional borrowings by us.
To the extent permitted under our credit facility, the indenture governing our senior notes and other debt agreements, some of these transactions may be financed by additional borrowings by us.
The impact of COVID-19 and the conflict between Russia and Ukraine may lead to further supply chain constraints, supply and demand shifts, workforce availability issues and increased uncertainty in general economic and business conditions including inflationary pressures, increasing interest rates and possible recession. 14 Table of Contents We sell commodity products in highly competitive markets and face significant competition and price pressure.
The impact of COVID-19 and the conflicts in the Middle East and between Russia and Ukraine may lead to further supply chain constraints, supply and demand shifts, workforce availability issues and increased uncertainty in general economic and business conditions, including inflationary pressures, persistent high interest rates and possible recession.
Volatility in costs of raw materials and energy may result in increased operating expenses and adversely affect our results of operations and cash flows. Significant variations in the costs and availability of raw materials and energy may negatively affect our results of operations. These costs have risen significantly in the past due primarily to oil and natural gas cost increases.
Significant variations in the costs and availability of raw materials and energy may negatively affect our results of operations. These costs have risen significantly in the past due primarily to oil and natural gas cost increases. We purchase significant amounts of ethane feedstock, natural gas, ethylene and salt to produce several basic chemicals.
The process of impairment testing for our goodwill and intangible assets involves a number of judgments and estimates made by management including the fair values of assets and liabilities, future cash flows, our interpretation of current economic indicators and market conditions, overall economic conditions and our strategic operational plans with regards to our business units.
In the fourth quarter of 2023, we recorded a goodwill impairment charge in the PEM segment of $128 million related to Westlake Epoxy and a non-cash long-lived asset impairment charge of $347 million related to our base epoxy resin business in the Netherlands. 21 Ta ble of Contents The process of impairment testing for our goodwill and long-lived assets involves a number of judgments and estimates made by management including the fair values of assets and liabilities, future cash flows, our interpretation of current economic indicators and market conditions, overall economic conditions and our strategic operational plans with regards to our business units.
Although we cannot predict the outcome or timing of the legal challenges or EPA reconsideration, the EPA's proposed rule amendments could require us to incur further capital expenditures, or increase our operating costs, to levels higher than what we have previously estimated. 22 Table of Contents In March 2011, the EPA proposed amendments to the national emission standards for hazardous air pollutants ("NESHAPs") for mercury emissions from mercury cell chlor-alkali plants.
Although we cannot predict the outcome or timing of the legal challenges or EPA reconsideration, the EPA's proposed rule amendments could require us to incur further capital expenditures, or increase our operating costs, to levels higher than what we have previously estimated. 23 Ta ble of Contents In April 2023, the EPA proposed amendments to new source performance standards for the synthetic organic chemical manufacturing industry and amendments to the national emissions standards for hazardous air pollutants for the synthetic organic chemical manufacturing industry and group I & II polymers and resins industry.
Our employees, systems, networks, products, facilities and services remain potentially vulnerable to sophisticated cyber-assault, especially while certain employees are working remotely during the COVID-19 pandemic, and, as such, there can be no assurance that a system failure, network disruption or data security breach will not have a material adverse effect on our business, financial condition, operating results or cash flows. 21 Table of Contents Fluctuations in foreign currency exchange and interest rates could affect our consolidated financial results.
Our employees, systems, networks, products, facilities and services remain potentially vulnerable to sophisticated cyber-assault, including the additional cybersecurity risks posed by the increased use of remote networking technologies and services, and, as such, there can be no assurance that a system failure, network disruption or data security breach will not have a material adverse effect on our business, financial condition, operating results or cash flows.
These rules or future new, amended or proposed laws or rules could increase our costs or reduce our production, which could have a material adverse effect on our business, financial condition, operating results or cash flows.
However, increased regulation on the use of plastics could cause reduced demand for our polyethylene products, which could adversely affect our business, operating results and financial condition. 25 Ta ble of Contents These rules or future new, amended or proposed laws or rules could increase our costs or reduce our production, which could have a material adverse effect on our business, financial condition, operating results or cash flows.
Risks Related to the Ownership of Our Securities We will be controlled by our principal stockholder and its affiliates as long as they own a majority of our common stock, and our other stockholders will be unable to affect the outcome of stockholder voting during that time.
Imposition of similar entity-level taxes on Westlake Partners in other jurisdictions in which Westlake Partners conducts operations in the future could substantially reduce its cash available for distribution. 28 Ta ble of Contents Risks Related to the Ownership of Our Securities We will be controlled by our principal stockholder and its affiliates as long as they own a majority of our common stock, and our other stockholders will be unable to affect the outcome of stockholder voting during that time.
Our interests may conflict with those of the principal stockholder and its affiliates, and we may not be able to resolve these conflicts on terms possible in arms-length transactions.
Our interests may conflict with those of the principal stockholder and its affiliates, and we may not be able to resolve these conflicts on terms possible in arms-length transactions. 14 Ta ble of Contents Risk Related to Business, Industry and Operations Cyclicality in the petrochemical industry has in the past, and may in the future, result in reduced operating margins or operating losses.
While separate terrorism insurance coverage is available, premiums for full coverage are very expensive, especially for chemical facilities, and the policies are subject to high deductibles. Available terrorism coverage typically excludes coverage for losses from acts of war and from acts of foreign governments as well as nuclear, biological and chemical attacks.
Our insurance carriers maintain certain exclusions for losses from terrorism from our property insurance policies. While separate terrorism insurance coverage is available, premiums for full coverage are very expensive, especially for chemical facilities, and the policies are subject to high deductibles.
In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships, or diversion of management's attention.
Our failure to meet the challenges involved in integrating such businesses could adversely affect our results of operations. 19 Ta ble of Contents In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships, or diversion of management's attention.
We operate internationally and are subject to the risks of doing business on a global basis.
We operate internationally and are subject to related risks, including exchange rate fluctuations, exchange controls, political risk and other risks relating to international operations. We operate internationally and are subject to the risks of doing business on a global basis.
On January 12, 2023, the EPA published a tentative denial of the 2014 Center for Biological Diversity Petition to regulate discarded PVC as hazardous waste under the Resource Conservation and Recovery Act. We are unable to predict EPA’s final decision in this matter or its impact on us.
On January 12, 2023, the EPA published a tentative denial of the 2014 Center for Biological Diversity Petition to regulate discarded PVC as hazardous waste under the Resource Conservation and Recovery Act. Pursuant to a consent decree entered into by the EPA and the Center for Biological Diversity, the EPA has until April 12, 2024 to issue its final determination.
The resulting Paris Agreement calls for the parties to undertake "ambitious efforts" to limit the average global temperature and to conserve and enhance sinks and reservoirs of greenhouse gases. The United States signed the Paris Agreement in April 2016, and the Paris Agreement went into effect in November 2016.
In December 2015, the United States joined the international community at the 21st Conference of the Parties of the United Nations Framework Convention on Climate Change in Paris, France. The resulting Paris Agreement calls for the parties to undertake "ambitious efforts" to limit the average global temperature and to conserve and enhance sinks and reservoirs of greenhouse gases.
Members of the investment community are increasing their focus on ESG practices and disclosures by public companies, including practices and disclosures related to climate change and sustainability, DEI initiatives and heightened governance standards. As a result, we may continue to face increasing pressure regarding our ESG disclosures and practices.
Because we operate within the petrochemical industry, if these efforts continue or expand, our stock price and our ability to raise capital may be negatively impacted. 20 Ta ble of Contents Members of the investment community are increasing their focus on ESG practices and disclosures by public companies, including practices and disclosures related to climate change and sustainability, DEI initiatives and heightened governance standards.
We have determined that it is not economically prudent to obtain full terrorism insurance, especially given the significant risks that are not covered by such insurance. Where feasible we have secured some limited terrorism insurance coverage on our property where insurers have included it in their overall programs.
Where feasible we have secured some limited terrorism insurance coverage on our property where insurers have included it in their overall programs.
Further, increasing interest rates, inflationary pressures and the possibility of recession can have an unfavorable impact on the demand for housing and our products.
Weakness in the U.S. residential housing market and economic weakness in North America, Europe, Asia and the Middle East could have an adverse effect on demand and margins for our products. Further, persistent high interest rates, inflationary pressures and the possibility of recession can have an unfavorable impact on the demand for housing and our products.
There has also been pressure on lenders and other financial services companies to limit or curtail financing of companies in the industry. Because we operate within the petrochemical industry, if these efforts continue or expand, our stock price and our ability to raise capital may be negatively impacted.
There has also been pressure on lenders and other financial services companies to limit or curtail financing of companies in the industry.
If our goodwill, indefinite-lived intangible assets or other intangible assets become impaired in the future, we may be required to record non-cash charges to earnings, which could be significant. Under GAAP, we review goodwill and indefinite-lived intangible assets for impairment on an annual basis or more frequently if events or circumstances indicate that their carrying value may not be recoverable.
If our goodwill or other long-lived assets become impaired in the future, we may be required to record non-cash charges to earnings, which could be significant.
It is not possible to predict accurately the supply and demand balances, market conditions and other factors that will affect industry operating margins in the future. New capacity additions, principally of olefins in North America, Asia and the Middle East, a number of which have been recently completed, may lead to periods of over-supply and lower profitability.
It is not possible to predict accurately the supply and demand balances, market conditions and other factors that will affect industry operating margins in the future.
Other intangible assets are reviewed if events or circumstances indicate that their carrying value may not be recoverable.
Long-lived assets, including tangible assets and intangible assets with finite lives, are reviewed if events or circumstances indicate that their carrying amount may not be recoverable. Our balance sheet includes significant goodwill and long-lived assets.
We may have difficulties integrating the operations of recently acquired businesses, such as Westlake Epoxy, and future acquired businesses. We seek opportunities to maximize efficiency and create stockholder value through various transactions. These transactions may include domestic and international business combinations, purchases or sales of assets or contractual arrangements or joint ventures.
We may pursue acquisitions, dispositions, joint ventures or other transactions that may impact our results of operations and financial condition. We may have difficulties integrating the operations of acquired businesses. We seek opportunities to maximize efficiency and create stockholder value through various transactions.

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Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeSee Note 20 to the consolidated financial statements appearing elsewhere in this Form 10-K and "Certain Relationships and Related Party Transactions" in our proxy statement to be filed with the SEC pursuant to Regulation 14A with respect to our 2023 annual meeting of stockholders (the "Proxy Statement").
Biggest changeSee Note 20 to the consolidated financial statements appearing elsewhere in this Form 10-K and "Certain Relationships and Related Party Transactions" in our proxy statement to be filed with the SEC pursuant to Regulation 14A with respect to our 2024 annual meeting of stockholders (the "Proxy Statement").

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

13 edited+1 added−4 removed13 unchanged
Biggest changeChao and Dorothy C. Jenkins, father of John T. Chao and uncle of David T. Chao. Mr. Chao is a trustee emeritus of Rice University. Mr. Chao received a bachelor's degree from Brandeis University and an M.B.A. from Columbia University. 28 Table of Contents Roger L. Kearns (age 59). Mr.
Biggest changeChao, father of John T. Chao and Carolyn C. Sabat and uncle of Catherine T. Chao and David T. Chao. Mr. Chao received a bachelor's degree from Brandeis University and an M.B.A. from Columbia University. M. Steven Bender (age 67). Mr. Bender has been our Executive Vice President and Chief Financial Officer since July 2017.
He began his career with Shell International in 1991, where he held a variety of commercial, engineering and planning roles. Mr. Janssens holds a MSc in Chemical Engineering from Eindhoven University of Technology and an MBA from the University of Chicago. Johnathan S. Zoeller (age 47). Mr. Zoeller has been our Vice President and Chief Accounting Officer since March 2020.
He began his career with Shell International in 1991, where he held a variety of commercial, engineering and planning roles. Mr. Janssens holds a MSc in Chemical Engineering from Eindhoven University of Technology and an MBA from the University of Chicago. Johnathan S. Zoeller (age 48). Mr. Zoeller has been our Vice President and Chief Accounting Officer since March 2020.
Bender received a Bachelor of Business Administration from Texas A&M University and an M.B.A. from Southern Methodist University. Mr. Bender is also a Certified Public Accountant. Robert F. Buesinger (age 66) . Mr. Buesinger has been our Executive Vice President, Housing and Infrastructure Products, IT and Digital since February 2022. From July 2017 to February 2022, Mr.
Bender received a Bachelor of Business Administration from Texas A&M University and an M.B.A. from Southern Methodist University. Mr. Bender is also a Certified Public Accountant. Robert F. Buesinger (age 67) . Mr. Buesinger has been our Executive Vice President, Housing and Infrastructure Products, IT and Digital since February 2022. From July 2017 to February 2022, Mr.
From February 2007 to February 2008, Mr. Bender served as our Vice President, Chief Financial Officer and Treasurer and from June 2005 to February 2007, he served as our Vice President and Treasurer. In addition, Mr.
Bender served as our Vice President, Chief Financial Officer and Treasurer and from June 2005 to February 2007, he served as our Vice President and Treasurer. In addition, Mr.
Chao has been our President since May 1996 and a director since June 2003. Mr. Chao became our Chief Executive Officer in July 2004. Mr. Chao has over 40 years of global experience in the chemical industry. In 1985, Mr. Chao assisted his father T.T.
Chao (age 74) . Mr. Chao has been our President since May 1996 and a director since June 2003. Mr. Chao became our Chief Executive Officer in July 2004. Mr. Chao has over 40 years of global experience in the chemical industry. In 1985, Mr. Chao assisted his father T.T.
He began his career with Arthur Andersen LLP in 1998. Mr. Zoeller holds a Bachelor of Accounting degree and a Master of Accounting degree from the University of Mississippi. He is a Certified Public Accountant. 30 Table of Contents PART II
He began his career with Arthur Andersen LLP in 1998. Mr. Zoeller holds a Bachelor of Accounting degree and a Master of Accounting degree from the University of Mississippi. He is a Certified Public Accountant. 32 Table of Contents PART II
Item 4. Mine Safety Disclosure Not Applicable. Information about our Executive Officers James Y. Chao (age 75) . Mr. Chao has been our Chairman of the Board of Directors since July 2004 and became a director in June 2003. From May 1996 to July 2004, he served as our Vice Chairman. Mr.
Item 4. Mine Safety Disclosure Not Applicable. 30 Table of Contents Information about our Executive Officers James Y. Chao (age 76) . Mr. Chao has been our Chairman of the Board of Directors since July 2004 and became a director in June 2003. From May 1996 to July 2004, he served as our Vice Chairman. Mr.
Bender has been our Executive Vice President and Chief Financial Officer since July 2017. From February 2008 to July 2017, Mr. Bender served as our Senior Vice President and Chief Financial Officer. In addition, Mr. Bender served as our Treasurer from July 2011 to April 2017, a position he also held from February 2008 until December 2010.
From February 2008 to July 2017, Mr. Bender served as our Senior Vice President and Chief Financial Officer. In addition, Mr. Bender served as our Treasurer from July 2011 to April 2017, a position he also held from February 2008 until December 2010. From February 2007 to February 2008, Mr.
Ederington holds a B.A. from Yale University and received his J.D. from Harvard University. 29 Table of Contents Thomas J, Janssens (age 57). Mr. Janssens has been our Senior Vice President, Operations- Performance and Essential Material & Corporate Logistics since March 2022. From January 2021 to March 2022, Mr.
Ederington holds a B.A. from Yale University and received his J.D. from Harvard University. Thomas J, Janssens (age 58). Mr. Janssens has been our Senior Vice President, Operations — Performance and Essential Material & Corporate Logistics since March 2022. From January 2021 to March 2022, Mr.
Chao in founding Westlake Corporation (formerly known as Westlake Chemical Corporation). He is the brother of Albert Y. Chao and Dorothy C. Jenkins, father of David T. Chao and uncle of John T. Chao. Mr. Chao received his B.S. degree from Massachusetts Institute of Technology and an M.B.A. from Columbia University. Albert Y. Chao (age 73) . Mr.
Chao in founding Westlake Corporation (formerly known as Westlake Chemical Corporation). He is the brother of Albert Y. Chao, father of Catherine T. Chao and David T. Chao and uncle of John T. Chao and Carolyn C. Sabat. Mr. Chao received his B.S. degree from Massachusetts Institute of Technology and an M.B.A. from Columbia University. Albert Y.
Ederington served as our Senior Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary; from December 2015 to July 2017, he served as our Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary and, from October 2013 to December 2015, he served as our Vice President, General Counsel and Corporate Secretary. In addition, Mr.
Ederington served as our Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary; from July 2017 to February 2022; he served as our Senior Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary; from December 2015 to July 2017, he served as our Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary; and, from October 2013 to December 2015, he served as our Vice President, General Counsel and Corporate Secretary.
Prior to that, he held various technical and sales management positions within that company. Mr. Buesinger holds a B.S. in Chemical Engineering from Tulane University. L. Benjamin Ederington (age 52). Mr. Ederington has been our Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary since February 2022. From July 2017 to February 2022, Mr.
Prior to that, he held various technical and sales management positions within that company. Mr. Buesinger holds a B.S. in Chemical Engineering from Tulane University. 31 Table of Contents L. Benjamin Ederington (age 53). Mr. Ederington has been our Executive Vice President, Performance and Essential Materials, General Counsel and Chief Administrative Officer since April 2023.
Ederington has been a director of Westlake Partners' general partner since its formation in March 2014, its Senior Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary since February 2021, and its Vice President, General Counsel and Secretary from March 2014 to February 2021.
In addition, Mr. Ederington has been a director of Westlake Partners' general partner since its formation in March 2014 and its Executive Vice President, Performance and Essential Materials, General Counsel and Chief Administrative Officer since May 2023. Mr.
Removed
Kearns has been our Chief Operating Officer and Executive Vice President, Performance and Essential Materials since February 2022. From January 2021 to February 2022, Mr. Kearns served as our Executive Vice President and Chief Operating Officer and from April 2018 to December 2020, he served as our Executive Vice President, Vinyl Chemicals.
Added
Ederington was Westlake Partners' general partner's Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary from March 2022 to May 2023; Senior Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary from February 2021 to March 2022; and, its Vice President, General Counsel and Secretary from March 2014 to February 2021.
Removed
Prior to joining Westlake, from 2008 to April 2018, he was a member of the Executive Committee at Solvay S.A. in Belgium. From 2013 to 2018, he had responsibility for Solvay's advanced materials business cluster, as well as its corporate research organization and its North America region.
Removed
From 2008 to 2012 he was responsible for overseeing Solvay's Asia-Pacific businesses, including its vinyls operations in the region. Prior to that, from 2004 through 2007, he was President of Solvay Advanced Polymers in the United States and earlier, from 2001 through 2003, he led Solvay's performance compounds business unit.
Removed
Since beginning his career with Solvay in 1986, he held a series of manufacturing, technical, corporate development, marketing and business management positions in the United States, Europe and Asia. Mr. Kearns holds a bachelor's degree in Chemical Engineering from the Georgia Institute of Technology and an MBA from Stanford University. M. Steven Bender (age 66). Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−1 removed2 unchanged
Biggest changeTransaction fees and commissions are not reported in the average price paid per share in the table above. Decisions regarding the amount and the timing of purchases under the 2014 Program will be influenced by our cash on hand, our cash flows from operations, general market conditions and other factors.
Biggest changeDecisions regarding the amount and the timing of purchases under the 2014 Program will be influenced by our cash on hand, our cash flows from operations, general market conditions and other factors. The 2014 Program may be discontinued by our Board of Directors at any time. 33 Table of Contents
Our common stock is listed on the New York Stock Exchange under the symbol "WLK." Unregistered Sales of Equity Securities We did not have any unregistered sales of equity securities during the quarter or fiscal year ended December 31, 2022 that we have not previously reported on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
Our common stock is listed on the New York Stock Exchange under the symbol "WLK." Unregistered Sales of Equity Securities We did not have any unregistered sales of equity securities during the quarter or fiscal year ended December 31, 2023 that we have not previously reported on a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stockholder Matters As of February 15, 2023, there were 32 holders of record of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stockholder Matters As of February 14, 2024, there were 30 holders of record of our common stock.
Issuer Purchases of Equity Securities The following table provides information on our purchase of equity securities during the quarter ended December 31, 2022: 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) October 2022 121,346 $ 90.65 121,346 $ 517,153,685 November 2022 169 101.13 — 517,153,685 December 2022 173,507 103.74 173,470 499,157,587 Total 295,022 $ 98.35 294,816 ______________________________ (1) Represents 169 and 37 shares withheld in November 2022 and December 2022, respectively, in satisfaction of withholding taxes due upon the vesting of restricted stock units granted to our employees under the 2013 Omnibus Incentive Plan.
Issuer Purchases of Equity Securities The following table provides information on our purchase of equity securities during the quarter ended December 31, 2023: 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) October 2023 3,582 $ 122.54 — $ 476,162,426 November 2023 — — — 476,162,426 December 2023 — — — 476,162,426 Total 3,582 $ 122.54 — ______________________________ (1) Represents 3,582 shares withheld in October 2023 in satisfaction of withholding taxes due upon the vesting of restricted stock units granted to our employees under the 2013 Omnibus Incentive Plan.
As of December 31, 2022, 8,511,256 shares of our common stock had been acquired at an aggregate purchase price of approximately $551 million under the 2014 Program. At December 31, 2022, $1 million related to the repurchase of common stock for treasury, was included as a component of accrued and other liabilities on the consolidated balance sheet.
As of December 31, 2023, 8,722,550 shares of our common stock had been acquired at an aggregate purchase price of approximately $574 million under the 2014 Program. Transaction fees and commissions are not reported in the average price paid per share in the table above.
Removed
The 2014 Program may be discontinued by our Board of Directors at any time. 31 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

108 edited+48 added−58 removed96 unchanged
Biggest change(4) In the event of a redemption of certain bonds (the "GO Zone Bonds") issued by the Louisiana Local Government Environmental Facility and Development Authority (the "Authority") in 2017, we will redeem notes equal in principal amount to the GO Zone Bonds to be redeemed at a redemption price equal to the redemption price of the GO Zone Bonds to be redeemed, plus accrued interest to the redemption date.
Biggest change(4) At our option, we may redeem the notes at any time prior to the specified par call date at a redemption price equal to the greater of (i) 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the notes being redeemed (excluding accrued and unpaid interest to the redemption date), discounted to the redemption date on a semi-annual basis at the treasury rate plus 35 to 45 basis points, plus accrued and unpaid interest. 48 Table of Contents (5) In the event of a redemption of certain bonds (the "GO Zone Bonds") issued by the Louisiana Local Government Environmental Facility and Development Authority (the "Authority") in 2017, we will redeem notes equal in principal amount to the GO Zone Bonds to be redeemed at a redemption price equal to the redemption price of the GO Zone Bonds to be redeemed, plus accrued interest to the redemption date.
The investing activities during 2022 were comprised primarily of the acquisition of Westlake Epoxy in February 2022 for $1,163 million, the purchase of an additional 3.2% interest in LACC for $89 million, aggregate contributions of $87 million to LACC, capital expenditures, and other asset acquisitions.
Investing activities during 2022 were comprised primarily of the acquisition of Westlake Epoxy in February 2022 for $1,163 million, the purchase of an additional 3.2% interest in LACC for $89 million, aggregate contributions of $87 million to LACC, capital expenditures, and other asset acquisitions.
A significant portion of our performance in this segment is driven by the activities in the residential construction and repair and remodeling markets in North America which began to decline at the end of the second quarter of 2022 due to the negative effect that rising mortgage rates in the United States had on buyer sentiment.
A significant portion of our performance in this segment is driven by the activities in the residential construction and repair and remodeling markets in North America, which began to decline at the end of the second quarter of 2022 primarily due to the negative effect that rising mortgage rates in the United States had on buyer sentiment.
The New 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 New Credit Agreement will accrue interest at an increased rate, the lenders can terminate their commitments to lend thereunder and payments of any outstanding amounts thereunder could be accelerated by the lenders.
The Credit Agreement also contains certain events of default and, if and for so long as certain events of default have occurred and are continuing, any overdue amounts outstanding under the Credit Agreement will accrue interest at an increased rate, the lenders can terminate their commitments to lend thereunder and payments of any outstanding amounts thereunder could be accelerated by the lenders.
As of December 31, 2022, outstanding borrowings under the credit facility totaled $23 million and bore interest at SOFR plus the Applicable Margin of 1.75% plus a 0.10% credit spread adjustment. On July 12, 2022, OpCo entered into the Second Amendment (the "OpCo Revolver Amendment") to the OpCo Revolver.
As of December 31, 2023, outstanding borrowings under the credit facility totaled $23 million and bore interest at SOFR plus the Applicable Margin of 1.75% plus a 0.10% credit spread adjustment. On July 12, 2022, OpCo entered into the Second Amendment (the "OpCo Revolver Amendment") to the OpCo Revolver.
The activities during 2021 were primarily related to the registered public offering of $300 million aggregate principal amount of the 0.875% 2024 Senior Notes, $350 million aggregate principal amount of the 2.875% 2041 Senior Notes, $600 million aggregate principal amount of the 3.125% 2051 Senior Notes and $450 million aggregate principal amount of the 3.375% 2061 Senior Notes and the payment of debt issuance costs of $18 million related to the Notes.
The activities during 2021 were primarily related to the registered public offering of $300 million aggregate principal amount of the 0.875% 2024 Senior Notes, $350 million aggregate principal amount of the 2.875% 2041 Senior Notes, $600 million aggregate principal amount of the 3.125% 2051 Senior Notes and $450 million aggregate principal amount of the 3.375% 2061 Senior Notes and the payment of debt issuance costs of $18 million related to such notes.
The New Credit Agreement bears interest at either (a) Adjusted Term SOFR (as defined in the New Credit Agreement) plus a margin ranging from 1.00% to 1.625% per annum or (b) Alternate Base Rate (as defined in the New Credit Agreement) plus a margin ranging from 0.00% to 0.625% per annum, in each case depending on the credit rating of the Company.
The Credit Agreement bears interest at either (a) Adjusted Term SOFR (as defined in the Credit Agreement) plus a margin ranging from 1.00% to 1.625% per annum or (b) Alternate Base Rate (as defined in the Credit Agreement) plus a margin ranging from 0.00% to 0.625% per annum, in each case depending on the credit rating of the Company.
The activities during 2022 were primarily related to the redemption of $250 million aggregate principal amount of the 3.60% 2022 Senior Notes, the $169 million payment of cash dividends, the $60 million payment of cash distributions to noncontrolling interests and repurchases of our common stock for an aggregate purchase price of $101 million.
Financing activities during 2022 were primarily related to the redemption of $250 million aggregate principal amount of the 3.60% 2022 Senior Notes, the $169 million payment of cash dividends, the $60 million payment of cash distributions to noncontrolling interests and repurchases of our common stock for an aggregate purchase price of $101 million.
The indenture governing the 0.875% 2024 Senior Notes, the 3.60% 2026 Senior Notes, the 1.625% 2029 Senior Notes, the 3.375% 2030 Senior Notes, the 3.50% 2032 GO Zone Refunding Senior Notes, the 2.875% 2041 Senior Notes, the 5.00% 2046 Senior Notes, the 4.375% 2047 Senior Notes, the 3.125% 2051 Senior Notes, and the 3.375% 2061 Senior Notes contains customary events of default and covenants that, among other things and subject to certain exceptions, restrict us and certain of our subsidiaries' ability to (1) incur certain secured indebtedness, (2) engage in certain sale and leaseback transactions and (3) consolidate, merge or transfer all or substantially all of our assets.
The indenture governing the 0.875% 2024 Senior Notes, the 3.60% 2026 Senior Notes, the 1.625% 2029 Senior Notes, the 3.375% 2030 Senior Notes, the 3.50% 2032 tax-exempt GO Zone Refunding Senior Notes, the 2.875% 2041 Senior Notes, the 5.00% 2046 Senior Notes, the 4.375% 2047 Senior Notes, the 3.125% 2051 Senior Notes, and the 3.375% 2061 Senior Notes contains customary events of default and covenants that, among other things and subject to certain exceptions, restrict us and certain of our subsidiaries' ability to (1) incur certain secured indebtedness, (2) engage in certain sale and leaseback transactions and (3) consolidate, merge or transfer all or substantially all of our assets.
None of our subsidiaries are required to guarantee our obligations under the New Credit Agreement. The New 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.
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.
On October 4, 2018, Westlake Partners and Westlake Partners GP, the general partner of Westlake Partners, entered into an Equity Distribution Agreement with UBS Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBC Capital Markets, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC to offer and sell Westlake Partners common units, from time to time, up to an aggregate offering amount of $50 million.
On October 4, 2018, Westlake Chemical Partners LP ("Westlake Partners") and Westlake Chemical Partners GP LLC, the general partner of Westlake Partners, entered into an Equity Distribution Agreement with UBS Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBC Capital Markets, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC to offer and sell Westlake Partners common units, from time to time, up to an aggregate offering amount of $50 million.
Factors that have caused volatility in our raw material prices in the past, and which may do so in the future include: • the availability of feedstock from shale gas and oil drilling; • supply and demand for crude oil and natural gas; 33 Table of Contents • shortages of raw materials due to increasing demand; • ethane and liquefied natural gas exports; • capacity constraints due to higher construction costs for investments, construction delays, strike action or involuntary shutdowns; • the general level of business and economic activity; and • the direct or indirect effect of governmental regulation.
Factors that have caused volatility in our raw material prices in the past, and which may do so in the future include: • the availability of feedstock from shale gas and oil drilling; • supply and demand for crude oil and natural gas; • shortages of raw materials due to increasing demand; • ethane and liquefied natural gas exports; • capacity constraints due to higher construction costs for investments, construction delays, strike action or involuntary shutdowns; • the general level of business and economic activity; and • the direct or indirect effect of governmental regulation.
(3) At our option, we may redeem the notes at any time prior to the specified par call date at a redemption price equal to the greater of (i) 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the notes being redeemed that would be due if the notes matured on the specified par call date, discounted to the redemption date on a semi-annual basis at the treasury rate plus 20 to 45 basis points plus accrued and unpaid interest.
(3) At our option, we may redeem the notes at any time prior to the specified par call date at a redemption price equal to the greater of (i) 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the notes being redeemed that would be due if the notes matured on the specified par call date (excluding accrued and unpaid interest to the redemption date), discounted to the redemption date on a semi-annual basis at the treasury rate plus 20 to 40 basis points plus accrued and unpaid interest.
As of December 31, 2022, outstanding borrowings under the credit facility totaled $377 million and bore interest at Secured Overnight Financing Rate, as administered by the Federal Reserve Bank of New York ("SOFR") plus the Applicable Margin plus a 0.10% credit spread adjustment.
As of December 31, 2023, outstanding borrowings under the credit facility totaled $377 million and bore interest at Secured Overnight Financing Rate, as administered by the Federal Reserve Bank of New York ("SOFR") plus the Applicable Margin plus a 0.10% credit spread adjustment.
The $1,097 million increase in cash flows from operating activities was mainly due to the increase in income from operations, which was partially offset by working capital changes and an unfavorable change related to the turnaround at OpCo's Petro 2 facility and other turnaround activities.
The $1,001 million increase in cash flows from operating activities was mainly due to the increase in income from operations, which was partially offset by working capital changes and an unfavorable change related to the turnaround at OpCo's Petro 2 facility and other turnaround activities.
The carrying values of long-lived assets could be impaired by 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 United States and world economies, the cyclical nature of the chemical and refining industries and uncertainties associated with governmental actions.
The carrying values of long-lived assets could be impaired by significant changes or projected changes in supply and demand fundamentals (which could have a negative impact on operating rates or margins), new technological developments, new competitors with significant raw material or other cost advantages, adverse changes associated with the United States and global economies, the cyclical nature of the chemical and refining industries and uncertainties associated with governmental actions.
Our 2021 acquisition related activities were higher, as compared to the current year, due to the acquisitions of the Boral Target Companies, LASCO and Dimex for $2,554 million in the aggregate. Capital expenditures were $1,108 million in 2022 compared to $658 million in 2021.
Our 2021 acquisition related activities were higher, as compared to 2022, due to the acquisitions of the Boral Target Companies, LASCO and Dimex for $2,554 million in the aggregate. Capital expenditures were $1,108 million in 2022 compared to $658 million in 2021.
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 our New Credit Agreement will be adequate to meet our normal operating needs for the foreseeable future. 46 Table of Contents Our long-term debt consisted of the following as of December 31, 2022: Principal Amount (in millions) Debt Issuance Date Maturity Date Par Call Date Optional Redemption Terms and Other Matters 0.875% senior notes due 2024 (the "0.875% 2024 Senior Notes") $ 300 August 2021 August 2024 August 15, 2022 (1) 3.60% senior notes due 2026 (the "3.60% 2026 Senior Notes") 750 August 2016 August 2026 May 15, 2026 (1) (3) Loan related to tax-exempt waste disposal revenue bonds due 2027 11 December 1997 December 2027 (5) 1.625% senior notes due 2029 (the "1.625% 2029 Senior Notes") 750 July 2019 July 2029 April 17, 2029 (1) (2) 3.375% senior notes due 2030 (the "3.375% 2030 Senior Notes") 300 June 2020 June 2030 March 15, 2030 (1) (3) 3.50% senior notes due 2032 (the "3.50% 2032 tax-exempt GO Zone Refunding Senior Notes") 250 November 2017 November 2032 November 1, 2027 (4) 2.875% senior notes due 2041 (the "2.875% 2041 Senior Notes") 350 August 2021 August 2041 February 15, 2041 (1) (3) 5.00% senior notes due 2046 (the "5.00% 2046 Senior Notes") 700 August 2016 August 2046 February 15, 2046 (1) (3) 4.375% senior notes due 2047 (the "4.375% 2047 Senior Notes") 500 November 2017 November 2047 May 15, 2047 (1) (3) 3.125% senior notes due 2051 (the "3.125% 2051 Senior Notes") 600 August 2021 August 2051 February 15, 2051 (1) (3) 3.375% senior notes due 2061 (the "3.375% 2061 Senior Notes") 450 August 2021 August 2061 February 15, 2061 (1) (3) Term loan 2026 (the "2026 Term Loan") 15 March 2021 March 2026 Total long-term debt $ 4,976 ______________________________ (1) At our option, we may redeem the notes at any time on or after the specified par call date at a redemption price equal to 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest.
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 our credit agreement will be adequate to meet our normal operating needs for the foreseeable future. 47 Table of Contents Our long-term debt consisted of the following as of December 31, 2023: Principal Amount (in millions) Debt Issuance Date Maturity Date Par Call Date Optional Redemption Terms and Other Matters 0.875% senior notes due 2024 (the "0.875% 2024 Senior Notes") $ 300 August 2021 August 2024 August 15, 2022 (1) 3.60% senior notes due 2026 (the "3.60% 2026 Senior Notes") 750 August 2016 August 2026 May 15, 2026 (1) (4) Loan related to tax-exempt waste disposal revenue bonds due 2027 11 December 1997 December 2027 (6) 1.625% €700 million senior notes due 2029 (the "1.625% 2029 Senior Notes") 773 July 2019 July 2029 April 17, 2029 (1) (2) 3.375% senior notes due 2030 (the "3.375% 2030 Senior Notes") 300 June 2020 June 2030 March 15, 2030 (1) (3) 3.50% senior notes due 2032 (the "3.50% 2032 tax-exempt GO Zone Refunding Senior Notes") 250 November 2017 November 2032 November 1, 2027 (5) 2.875% senior notes due 2041 (the "2.875% 2041 Senior Notes") 350 August 2021 August 2041 February 15, 2041 (1) (3) 5.00% senior notes due 2046 (the "5.00% 2046 Senior Notes") 700 August 2016 August 2046 February 15, 2046 (1) (4) 4.375% senior notes due 2047 (the "4.375% 2047 Senior Notes") 500 November 2017 November 2047 May 15, 2047 (1) (3) 3.125% senior notes due 2051 (the "3.125% 2051 Senior Notes") 600 August 2021 August 2051 February 15, 2051 (1) (3) 3.375% senior notes due 2061 (the "3.375% 2061 Senior Notes") 450 August 2021 August 2061 February 15, 2061 (1) (3) Term loan 2026 (the "2026 Term Loan") 13 March 2021 March 2026 (7) Total long-term debt $ 4,997 ______________________________ (1) At our option, we may redeem the notes at any time on or after the specified par call date at a redemption price equal to 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest.
The full year interest expense in 2022 associated with the issuance of $1,700 million aggregate principal amount of senior notes in August 2021 was substantially offset by the realization of losses in 2021 on the settlement of interest rate lock arrangements associated with the senior notes issued in August 2021. 41 Table of Contents Other Income, Net.
The full year interest expense in 2022 associated with the issuance of $1,700 million aggregate principal amount of senior notes in August 2021 was substantially offset by the realization of losses in 2021 on the settlement of interest rate lock arrangements associated with the senior notes issued in August 2021. Other Income, Net.
(2) At our option, we may redeem the notes at any time prior to the specified par call date at a redemption price equal to the greater of (i) 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the notes being redeemed that would be due if the notes matured on the specified par call date, discounted to the redemption date on an annual basis at the applicable comparable government bond rate plus 30 basis points plus accrued and unpaid interest.
(2) At our option, we may redeem the notes at any time prior to the specified par call date at a redemption price equal to the greater of (i) 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest and (ii) the sum of the present values of the remaining scheduled payments on the notes being redeemed that would be due if the notes matured on the specified par call date (not including any portion of such payments of interest accrued as of the redemption date), discounted to the redemption date on an annual basis at the applicable comparable government bond rate plus 30 basis points plus accrued and unpaid interest.
The Applicable Margin under the MLP Revolver varies between 1.75% and 2.75%, depending on the Partnership's Consolidated Leverage Ratio. 48 Table of Contents Our subsidiary, Westlake Polymers LLC, is the administrative agent to a $600 million revolving credit facility with Westlake Chemical OpCo LP ("OpCo") (the "OpCo Revolver") that is scheduled to mature on July 12, 2027.
The Applicable Margin under the MLP Revolver varies between 1.75% and 2.75%, depending on the Partnership's Consolidated Leverage Ratio. Our subsidiary, Westlake Polymers LLC, is the administrative agent to a $600 million revolving credit facility with Westlake Chemical OpCo LP ("OpCo") (the "OpCo Revolver") that is scheduled to mature on July 12, 2027.
The decline in gross margin percentage for the year ended December 31, 2022 as compared to the year ended December 31, 2021 was primarily due to higher natural gas, power, feedstock and raw material costs and lower polyethylene sales prices.
Gross profit margin percentage was 26% in 2022 as compared to 30% in 2021. The decline in gross margin percentage for the year ended December 31, 2022 as compared to the year ended December 31, 2021 was primarily due to higher natural gas, power, feedstock and raw material costs and lower polyethylene sales prices.
Funding of any potential large expansions such as our recent acquisitions or potential future acquisitions or the repayment of debt may 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 favorable interest rates due to volatility of the commercial credit market.
Funding of any potential large expansions such as our recent acquisitions or potential future acquisitions or the redemption of debt may 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 favorable interest rates due to volatility of the commercial credit markets.
See Note 14, "Employee Benefits," in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further information on our obligations and the timing of expected future payments. Purchase Obligations.
See Note 14, "Employee Benefits," in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further information on our obligations and the timing of expected future payments. 50 Table of Contents Purchase Obligations.
The New Credit Agreement contains certain affirmative and negative covenants, including a quarterly total leverage ratio financial maintenance covenant. As of December 31, 2022, we were in compliance with the total leverage ratio financial maintenance covenant.
The Credit Agreement contains certain affirmative and negative covenants, including a quarterly total leverage ratio financial maintenance covenant. As of December 31, 2023, we were in compliance with the total leverage ratio financial maintenance covenant.
Recent Accounting Pronouncement See Note 1 to the consolidated financial statements included in Item 8 of this Form 10-K for a full description of recent accounting pronouncement, including expected date of adoption and estimated effect on results of operations and financial condition. 53 Table of Contents
Recent Accounting Pronouncements See Note 1 to the consolidated financial statements included in Item 8 of this Form 10-K for a full description of recent accounting pronouncements, including expected date of adoption and estimated effect on results of operations and financial condition. 54 Table of Contents
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 New Credit Agreement and our long-term financing. 45 Table of Contents In November 2014, our Board of Directors authorized a $250 million stock repurchase program (the "2014 Program").
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. In November 2014, our Board of Directors authorized a $250 million stock repurchase program (the "2014 Program").
Performance and Essential Materials Our performance and essential materials such as ethylene, PVC, polyethylene, epoxy and chlor-alkali are some of the most widely used materials in the world and are upgraded into a wide variety of higher value-added products used in many end-markets.
Performance and Essential Materials Our performance and essential materials such as ethylene, PVC, polyethylene, epoxy and caustic soda are some of the most widely used materials in the world and are upgraded into a wide variety of higher value-added products used in many end-markets.
As of December 31, 2022, there was $129 million in operating lease obligations due within the near term, and $608 million due over the long-term period. See Note 7, "Leases," in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further detail of our obligations and the timing of expected future payments.
As of December 31, 2023, there was $142 million in operating lease obligations due within the near term, and $768 million due over the long-term period. See Note 7, "Leases," in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further detail of our obligations and the timing of expected future payments.
The excess of the purchase price over the estimated fair value is recorded as goodwill. Any changes in the estimated fair values of the net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will change the amount of the purchase price allocable to goodwill.
Any changes in the estimated fair values of the net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will change the amount of the purchase price allocable to goodwill.
Although we ultimately expect that the Infrastructure Investment and Jobs Act of 2021 and historically low residential housing construction may have a favorable long-term impact on certain industries related to our Housing and Infrastructure Products segment, the current inflationary environment impacting consumer spending and priorities, the possibility of recession or financial market instability, rapidly rising interest rates, decade high mortgage interest rates impacting consumer affordability, and ongoing labor and supply chain constraints are expected to have an unfavorable impact on the demand for housing construction in the near term and, as a result, our products produced by this segment. 34 Table of Contents The following table presents annual historical housing starts per the U.S.
Although we ultimately expect that the Infrastructure Investment and Jobs Act of 2021 and historically low residential housing construction may have a favorable long-term impact on certain industries related to our Housing and Infrastructure Products segment, the current inflationary environment impacting consumer spending and priorities, the possibility of recession or financial market instability, rapidly rising interest rates, decade high mortgage interest rates impacting consumer affordability, and ongoing labor and supply chain constraints are expected to have an unfavorable impact on the demand for housing construction in the near term and, as a result, our products produced by this segment.
Expensing turnaround costs as incurred would likely result in greater variability of our quarterly operating results and would adversely affect our financial position and results of operations. Additional information concerning long-lived assets and related depreciation and amortization appears in Notes 6 and 8 to the consolidated financial statements appearing elsewhere in this Form 10-K. Fair Value Estimates.
Expensing turnaround costs as incurred would likely result in greater variability of our quarterly operating results and would adversely affect our financial position and results of operations. Additional information concerning long-lived assets and related depreciation and amortization appears in Notes 6 and 8 to the consolidated financial statements appearing elsewhere in this Form 10-K. 52 Table of Contents Goodwill.
The higher inventories, accounts payable and accrued and other liabilities in 2021 were primarily driven by higher inventory cost and an increase in operating activities, as compared to 2020. Investing Activities Net cash used for investing activities during 2022 was $2,479 million as compared to net cash used of $3,213 million in 2021.
The higher inventories, accounts payable and accrued and other liabilities in 2022 were primarily driven by higher inventory cost and an increase in operating activities, as compared to 2021. Investing Activities Net cash used for investing activities during 2023 was $1,037 million as compared to net cash used of $2,479 million in 2022.
As of December 31, 2022, we had $37 million standby letters of credit, made in the ordinary course of business, maturing within the near term, and no standby letters of credit maturing over the long-term period. We had no letters of credit outstanding under our New Credit Agreement.
Letters of Credit. As of December 31, 2023, we had $39 million standby letters of credit, made in the ordinary course of business, maturing within the near term, and no standby letters of credit maturing over the long-term period. We had no letters of credit outstanding under our Credit Agreement.
Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operation.
Critical accounting estimates are those estimates made in accordance with the accounting principles generally accepted in the United States ("GAAP") that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operation.
Our more critical accounting estimates include those related to long-lived assets, intangible assets, fair value estimates, accruals for long-term employee benefits, accounts receivable, income taxes and environmental and legal obligations. Inherent in such estimates are certain key assumptions.
Our more critical accounting estimates include those related to business combinations, fair values, long-lived assets, goodwill, accruals for long-term employee benefits, accounts receivable, income taxes and environmental and legal obligations. Inherent in such estimates are certain key assumptions.
We periodically update the estimates used in the preparation of the financial statements based on our latest assessment of the current and projected business and general economic environment. We believe the following to be our most critical accounting estimates required for the preparation of our financial statements. Long-Lived Assets.
We periodically update the estimates used in the preparation of the financial statements based on our latest assessment of the current and projected business and general economic environment. We believe the following to be our most critical accounting estimates required for the preparation of our financial statements. Business Combinations and Intangible Assets Including Goodwill.
In August 2022, our Board of Directors approved the further expansion of the existing 2014 Program by an additional $500 million. As of December 31, 2022, we had repurchased 8,511,256 shares of our common stock for an aggregate purchase price of approximately $551 million under the 2014 Program.
In August 2022, our Board of Directors approved the further expansion of the existing 2014 Program by an additional $500 million. As of December 31, 2023, we had repurchased 8,722,550 shares of our common stock for an aggregate purchase price of approximately $574 million under the 2014 Program.
At December 31, 2022, the projected pension benefit obligations for U.S. and non-U.S. plans were calculated using assumed weighted average discount rates of 4.9% and 3.7%, respectively. The discount rates were determined using a benchmark pension discount curve and applying spot rates from the curve to each year of expected benefit payments to determine the appropriate discount rate.
At December 31, 2023, the projected pension benefit obligations for U.S. and non-U.S. plans were calculated using assumed weighted average discount rates of 5.0% and 3.2%, respectively. The discount rates were determined using a benchmark pension discount curve and applying spot rates from the curve to each year of expected benefit payments to determine the appropriate discount rate.
Maturities of our debt consist of $300 million in 2024, $765 million in 2026 and $11 million in 2027. There are no other scheduled maturities of debt in 2023 through 2027.
Maturities of our debt consist of $300 million in 2024, $763 million in 2026 and $11 million in 2027. There are no other scheduled maturities of debt in 2024 through 2028.
Census Bureau and the 2023 and 2024 outlook per the NAHB: Period Single and Multi-family Housing Starts (in thousands of units) % Change 2020 1,380 7% 2021 1,601 16% 2022 1,553 (3)% 2023 Outlook 1,135 2024 Outlook 1,299 North American PVC facilities within the Performance and Essential Materials segment supply most of the PVC required for our building products and PVC pipes and fittings plants.
Census Bureau and the 2024 and 2025 outlook per the NAHB: Period Single and Multi-family Housing Starts (in thousands of units) % Change 2021 1,601 16% 2022 1,553 (3)% 2023 1,420 (9)% 2024 Outlook 1,366 2025 Outlook 1,417 North American PVC facilities within the Performance and Essential Materials segment supply most of the PVC required for our building products and PVC pipes and fittings plants.
Net cash provided by financing activities during 2021 was $1,437 million as compared to net cash used of $216 million in 2020.
Net cash used by financing activities during 2022 was $587 million as compared to net cash provided of $1,437 million in 2021.
Pension Benefits Funding and Post-retirement Healthcare Benefits. Pension benefits funding obligations due within the near term were $12 million while post-retirement healthcare benefit payment obligations due within the near term were $9 million as of December 31, 2022.
Pension Benefits Funding and Post-retirement Healthcare Benefits. Pension benefits funding obligations due within the near term were $8 million while post-retirement healthcare benefit payment obligations due within the near term were $8 million as of December 31, 2023.
See "Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities" below. 38 Table of Contents Year Ended December 31, 2022 2021 Average Sales Price Volume Average Sales Price Volume Product sales price and volume percentage change from prior year Performance and Essential Materials +15 % +13 % +58 % +1 % Housing and Infrastructure Products +35 % +19 % +33 % +19 % Company average +20 % +14 % +51 % +6 % Year Ended December 31, 2022 2021 Domestic US prices percentage change from prior-year period for fuel cost and feedstock Fuel cost (Natural Gas) +67 % +86 % Feedstock (Ethane) +56 % +63 % 39 Table of Contents Reconciliation of EBITDA to Net Income, Income from Operations and Net 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.
See "Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities" below. 39 Table of Contents Year Ended December 31, 2023 2022 Average Sales Price Volume Average Sales Price Volume Product sales price and volume percentage change from prior year Performance and Essential Materials -21 % -3 % +15 % +13 % Housing and Infrastructure Products -3 % -9 % +35 % +19 % Company average -16 % -5 % +20 % +14 % Year Ended December 31, 2023 2022 Domestic US prices percentage change from prior-year period for fuel cost and feedstock Fuel cost (Natural Gas) -59 % +67 % Feedstock (Ethane) -49 % +56 % 40 Table of Contents Reconciliation of EBITDA to Net Income, Income from Operations and Net 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.
Sales volumes increased by 14% in 2022 as compared to 2021, primarily due to the businesses acquired in the second half of 2021 and in the first quarter of 2022, partially offset by lower PVC resin, caustic soda and PVC compounds sales volumes. Gross Profit. Gross profit margin percentage was 26% in 2022 as compared to 30% in 2021.
Sales volumes increased by 14% in 2022 as compared to 2021, primarily due to the businesses acquired in the second half of 2021 and in the first quarter of 2022, partially offset by lower PVC resin, caustic soda and PVC compounds sales volumes. 43 Table of Contents Gross Profit.
During the year ended December 31, 2022, 1,079,736 shares of our common stock were repurchased for an aggregate purchase price of $102 million under the 2014 Program. Purchases under the 2014 Program may be made either through the open market or in privately negotiated transactions.
During the year ended December 31, 2023, 211,294 shares of our common stock were repurchased for an aggregate purchase price of $23 million under the 2014 Program. Purchases under the 2014 Program may be made either through the open market or in privately negotiated transactions.
Non-GAAP Financial Measures The body of accounting principles generally accepted in the United States is commonly referred to as "GAAP." For this purpose, a non-GAAP financial measure is generally defined by the Securities 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.
The market for our products may or may not accept price increases, and as such, our future financial condition, results of operations or cash flows could be materially impacted. 37 Table of Contents Non-GAAP Financial Measures The body of accounting principles generally accepted in the United States is commonly referred to as "GAAP." For this purpose, a non-GAAP financial measure is generally defined by the Securities 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.
As of December 31, 2022, we had $214 million and $47 million of pension benefit funding and post-retirement healthcare benefit obligations due over the long-term period, respectively.
As of December 31, 2023, we had $135 million and $64 million of pension benefit funding and post-retirement healthcare benefit obligations due over the long-term period, respectively.
Year Ended December 31, 2022 2021 2020 (dollars in millions) Net cash provided by operating activities $ 3,395 $ 2,394 $ 1,297 Changes in operating assets and liabilities and other (1,119) (301) (778) Deferred income taxes 21 (23) (146) Net income 2,297 2,070 373 Less: Other income, net 73 53 44 Interest expense (177) (176) (142) Benefit from (provision for) income taxes (649) (607) 42 Income from operations 3,050 2,800 429 Add: Depreciation and amortization 1,056 840 773 Other income, net 73 53 44 EBITDA $ 4,179 $ 3,693 $ 1,246 Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities The following table presents the reconciliation of Free Cash Flow to net cash provided by operating activities, the most directly comparable GAAP financial measure, for each of the periods indicated.
Year Ended December 31, 2023 2022 2021 (In millions of dollars) Net cash provided by operating activities $ 2,336 $ 3,395 $ 2,394 Changes in operating assets and liabilities and other (1,989) (1,119) (301) Deferred income taxes 175 21 (23) Net income 522 2,297 2,070 Less: Other income, net 136 73 53 Interest expense (165) (177) (176) Provision for income taxes (178) (649) (607) Income from operations 729 3,050 2,800 Add: Depreciation and amortization 1,097 1,056 840 Other income, net 136 73 53 EBITDA $ 1,962 $ 4,179 $ 3,693 Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities The following table presents the reconciliation of Free Cash Flow to net cash provided by operating activities, the most directly comparable GAAP financial measure, for each of the periods indicated.
(5) 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. 47 Table of Contents The holders of the 0.875% 2024 Senior Notes, the 3.60% 2026 Senior Notes, the 1.625% 2029 Senior Notes, the 3.375% 2030 Senior Notes, the 3.50% 2032 GO Zone Refunding Senior Notes, the 2.875% 2041 Senior Notes, the 5.00% 2046 Senior Notes, the 4.375% 2047 Senior Notes, the 3.125% 2051 Senior Notes and the 3.375% 2061 Senior Notes may require us to repurchase the notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the respective indentures governing these notes).
The holders of the 0.875% 2024 Senior Notes, the 3.60% 2026 Senior Notes, the 1.625% 2029 Senior Notes, the 3.375% 2030 Senior Notes, the 3.50% 2032 tax-exempt GO Zone Refunding Senior Notes, the 2.875% 2041 Senior Notes, the 5.00% 2046 Senior Notes, the 4.375% 2047 Senior Notes, the 3.125% 2051 Senior Notes and the 3.375% 2061 Senior Notes may require us to repurchase the notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the respective indentures governing these notes).
As of December 31, 2022, we had no debt obligations due within the near term, and debt obligations of $4,976 million due over the long-term period. At December 31, 2022, long-term debt related interest expense of $158 million was due within the near term, and related interest expense of $2,838 million was due over the long-term period.
As of December 31, 2023, we had $300 million debt obligations due within the near term, and debt obligations of $4,697 million due over the long-term period. At December 31, 2023, long-term debt related interest expense of $158 million was due within the near term, and related interest expense of $2,692 million was due over the long-term period.
Plans (dollars in millions) Projected benefit obligation, end of year $ 518 $ 530 Discount rate increases by 100 basis points (45) (69) Discount rate decreases by 100 basis points 53 88 A one-percentage point increase or decrease in assumed healthcare trend rates would not have a significant effect on the amounts reported for the healthcare plans.
Plans (In millions of dollars) Projected benefit obligation, end of year $ 494 $ 629 Discount rate increases by 100 basis points (41) (82) Discount rate decreases by 100 basis points 48 104 A one-percentage point increase or decrease in assumed healthcare trend rates would not have a significant effect on the amounts reported for the healthcare plans.
The significant assumptions used in determining the fair value of the reporting unit using the market value methodology include the determination of appropriate market comparables and the estimated multiples of EBITDA a willing buyer is likely to pay.
The future cash flows are discounted to present value using an applicable discount rate. The significant assumptions used in determining the fair value of the reporting unit using the market value methodology include the determination of appropriate market comparables and the estimated multiples of EBITDA a willing buyer is likely to pay.
The non-GAAP financial measures described in this Form 10-K are not substitutes for the GAAP measures of earnings and cash flows. 35 Table of Contents EBITDA is included in this Form 10-K 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.
EBITDA is included in this Form 10-K 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.
Year Ended December 31, 2022 2021 2020 (dollars in millions) Net cash provided by operating activities $ 3,395 $ 2,394 $ 1,297 Less: Additions to property, plant and equipment (1,108) (658) (525) Free Cash Flow $ 2,287 $ 1,736 $ 772 40 Table of Contents 2022 Compared with 2021 Summary For the year ended December 31, 2022, net income attributable to Westlake Corporation was $2,247 million, or $17.34 per diluted share, on net sales of $15,794 million.
Year Ended December 31, 2023 2022 2021 (In millions of dollars) Net cash provided by operating activities $ 2,336 $ 3,395 $ 2,394 Less: Additions to property, plant and equipment 1,034 1,108 658 Free Cash Flow $ 1,302 $ 2,287 $ 1,736 2023 Compared with 2022 Summary For the year ended December 31, 2023, net income attributable to Westlake Corporation was $479 million, or $3.70 per diluted share, on net sales of $12,548 million.
We develop estimates of fair value to allocate the purchase price paid to acquire a business to the assets acquired and liabilities assumed in an acquisition, to assess impairment of long-lived assets, goodwill and intangible assets and to record marketable securities and pension plan assets.
We develop estimates of fair value to allocate the purchase price paid to acquire a business to the assets acquired and liabilities assumed in an acquisition, to assess impairment of long-lived assets and goodwill and to record marketable securities and pension plan assets. We use all available information to make these fair value determinations, including the engagement of third-party consultants.
Year Ended December 31, 2022 2021 2020 (dollars in millions, except per share data) Net external sales Performance and Essential Materials Performance Materials $ 6,964 $ 5,997 $ 3,428 Essential Materials 4,044 2,673 2,037 Total Performance and Essential Materials 11,008 8,670 5,465 Housing and Infrastructure Products Housing Products 3,864 2,334 1,497 Infrastructure Products 922 774 542 Total Housing and Infrastructure Products 4,786 3,108 2,039 Total $ 15,794 $ 11,778 $ 7,504 Income (loss) from operations Performance and Essential Materials $ 2,416 $ 2,549 $ 231 Housing and Infrastructure Products 675 356 256 Corporate and other (41) (105) (58) Total income from operations 3,050 2,800 429 Interest expense (177) (176) (142) Other income, net 73 53 44 Provision for (benefit from) income taxes 649 607 (42) Net income 2,297 2,070 373 Net income attributable to noncontrolling interests 50 55 43 Net income attributable to Westlake Corporation $ 2,247 $ 2,015 $ 330 Diluted earnings per share $ 17.34 $ 15.58 $ 2.56 EBITDA (1) $ 4,179 $ 3,693 $ 1,246 Free Cash Flow (2) $ 2,287 $ 1,736 $ 772 ______________________________ (1) See above for discussions on non-GAAP financial measures.
Year Ended December 31, 2023 2022 2021 (In millions of dollars, except per share data) Net external sales Performance and Essential Materials Performance Materials $ 4,656 $ 6,964 $ 5,997 Essential Materials 3,680 4,044 2,673 Total Performance and Essential Materials 8,336 11,008 8,670 Housing and Infrastructure Products Housing Products 3,494 3,864 2,334 Infrastructure Products 718 922 774 Total Housing and Infrastructure Products 4,212 4,786 3,108 Total net external sales $ 12,548 $ 15,794 $ 11,778 Income (loss) from operations Performance and Essential Materials $ 59 $ 2,416 $ 2,549 Housing and Infrastructure Products 710 675 356 Corporate and other (40) (41) (105) Total income from operations 729 3,050 2,800 Interest expense (165) (177) (176) Other income, net 136 73 53 Provision for income taxes 178 649 607 Net income 522 2,297 2,070 Net income attributable to noncontrolling interests 43 50 55 Net income attributable to Westlake Corporation $ 479 $ 2,247 $ 2,015 Diluted earnings per share $ 3.70 $ 17.34 $ 15.58 EBITDA (1) $ 1,962 $ 4,179 $ 3,693 Free Cash Flow (2) $ 1,302 $ 2,287 $ 1,736 ______________________________ (1) See above for discussions on non-GAAP financial measures.
As noted above in Item 1A, "Risk Factors," we are subject to extensive environmental regulations, which may impose significant additional costs on our operations in the future.
Depending on the size of the acquisition, any such acquisitions could require external financing. As noted above in Item 1A, "Risk Factors," we are subject to extensive environmental regulations, which may impose significant additional costs on our operations in the future.
The decrease in income from operations versus the prior-year was partially offset by higher sales prices for caustic soda, chlorine and derivative products and income from Westlake Epoxy, which was acquired in the first quarter of 2022. Trading activity in 2022 resulted in a loss of approximately $28 million as compared to a gain of $12 million in 2021.
The decrease in income from operations versus the prior-year was partially offset by higher sales prices for caustic soda, chlorine and derivative products and income from Westlake Epoxy, which was acquired in the first quarter of 2022.
Initially, the asset retirement obligation is recorded at fair value and capitalized as a component of the carrying value of the long-lived asset to which the obligation relates.
Asset Retirement Obligations. We recognize asset retirement obligations in the period in which the liability becomes probable and reasonably estimable. Initially, the asset retirement obligation is recorded at fair value and capitalized as a component of the carrying value of the long-lived asset to which the obligation relates.
While we do not expect any of these enactments or proposals to have a material adverse effect on us in the near term, we cannot predict the longer-term effect of any of these regulations or proposals on our future financial condition, results of operations or cash flows.
While we do not expect any of these enactments or proposals to have a material adverse effect on us in the near term, we cannot predict the longer-term effect of any of these regulations or proposals on our future financial condition, results of operations or cash flows. 36 Table of Contents Housing and Infrastructure Products Our Housing and Infrastructure Products segment is primarily comprised of building products, PVC pipes and fittings and PVC compound products.
Cash and Cash Equivalents As of December 31, 2022, our cash and cash equivalents totaled $2,228 million. In addition to our cash and cash equivalents, our New Credit Agreement is available to provide liquidity as needed, as described under "Debt" below. Debt As of December 31, 2022, our indebtedness totaled $4,879 million.
Cash and Cash Equivalents As of December 31, 2023, our cash and cash equivalents totaled $3,304 million. In addition to our cash and cash equivalents, our credit agreement is available to provide liquidity as needed, as described under "Debt" below. Debt As of December 31, 2023, the carrying value of our indebtedness totaled $4,906 million.
New Credit Agreement On June 9, 2022, we entered into a new $1.5 billion revolving credit facility that is scheduled to mature on June 9, 2027 (the "New Credit Agreement") and, in connection therewith, terminated our existing revolving credit agreement.
As of December 31, 2023, we were in compliance with all of our long-term debt covenants. Credit Agreement On June 9, 2022, we entered into a new $1.5 billion revolving credit facility that is scheduled to mature on June 9, 2027 (the "Credit Agreement") and, in connection therewith, terminated our then existing revolving credit agreement.
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 $383 million in 2021, as compared to $17 million of cash used in 2020, an unfavorable change of $366 million.
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, provided cash of $600 million in 2023, as compared to $174 million of cash provided in 2022, a favorable change of $426 million.
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. Demand for our products in the first half of 2020 was negatively impacted by the onset of the COVID-19 pandemic.
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.
Capital expenditures in 2022 and 2021 were primarily related to expansion projects at various chlor-alkali plants as well as projects to improve production capacity or reduce costs, maintenance and safety projects and environmental projects at our various facilities. Net cash used for investing activities during 2021 was $3,213 million as compared to net cash used of $509 million in 2020.
Capital expenditures in 2022 and 2021 were primarily related to expansion projects at various chlor-alkali plants as well as projects to improve production capacity or reduce costs, maintenance and safety projects and environmental projects at our various facilities.
See Item 1A, "Risk Factors—If our goodwill, indefinite-lived intangible assets or other intangible assets become impaired in the future, we may be required to record non-cash charges to earnings, which could be significant." The results of operations of acquired businesses are included in our consolidated financial statements from the acquisition date. 51 Table of Contents Long-Term Employee Benefit Costs.
See Item 1A, "Risk Factors—If our goodwill or other long-lived assets become impaired in the future, we may be required to record non-cash charges to earnings, which could be significant." Long-Term Employee Benefit Costs.
As of December 31, 2022, we had $2,141 million of enforceable and legally binding purchase commitments due within the near term, and $7,220 million due over the long-term period. Asset Retirement Obligations. As of December 31, 2022, we had no material asset retirement obligations due within the near term, and $47 million due over the long-term period.
As of December 31, 2023, we had $2,152 million of enforceable and legally binding purchase commitments due within the near term, and $5,976 million due over the long-term period. Asset Retirement Obligations. As of December 31, 2023, we had $3 million asset retirement obligations due within the near term, and $55 million due over the long-term period.
We performed the quantitative assessment for both of our segments' reporting units during the fourth quarter of 2021. The quantitative analysis compares a reporting unit's fair value to its carrying amount to determine whether goodwill is impaired. The fair values of the reporting units are calculated using both a discounted cash flow methodology and a market value methodology.
The quantitative analysis compares a reporting unit's fair value to its carrying amount to determine whether goodwill is impaired. The fair values of the reporting units are calculated using both a discounted cash flow methodology and a market value methodology. The discounted cash flow projections are based on a forecast to reflect the cyclicality of the business.
While we believe that the amounts recorded in the accompanying consolidated financial statements related to these contingencies are based on the best estimates and judgments available, the actual outcomes could differ from our estimates.
While we believe that the amounts recorded in the accompanying consolidated financial statements related to these contingencies are based on the best estimates and judgments available, the actual outcomes could differ from our estimates. Additional information about certain legal proceedings and environmental matters appears in Note 22 to the consolidated financial statements appearing elsewhere in this Form 10-K.
Housing and Infrastructure Products Segment Net Sales. Net sales for the Housing and Infrastructure Products segment increased by $1,678 million, or 54%, to $4,786 million in 2022 from $3,108 million in 2021.
Trading activity in 2022 resulted in a loss of approximately $28 million as compared to a gain of $12 million in 2021. 44 Table of Contents Housing and Infrastructure Products Segment Net Sales. Net sales for the Housing and Infrastructure Products segment increased by $1,678 million, or 54%, to $4,786 million in 2022 from $3,108 million in 2021.
Our judgments regarding the existence of impairment indicators are based on legal factors, market conditions and the operational performance of our businesses. Actual impairment losses incurred could vary significantly from amounts estimated. Long-lived assets 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.
Our judgments regarding the existence of impairment indicators are based on legal factors, market conditions and the operational performance of our businesses. Actual impairment losses incurred could vary significantly from amounts estimated.
Goodwill is evaluated for impairment when events or changes in circumstances indicate the fair value of a reporting unit with goodwill has been reduced below its carrying value, and otherwise at least annually. We have historically operated in two principal operating segments, Vinyls and Olefins.
At December 31, 2023, our recorded goodwill was $2,041 million. Goodwill is evaluated for impairment when events or changes in circumstances indicate the fair value of a reporting unit with goodwill has been reduced below its carrying value, and otherwise at least annually.
As of December 31, 2022, deferred turnaround costs, net of accumulated amortization, totaled $359 million. Amortization in 2022, 2021 and 2020 of deferred turnaround costs was $80 million, $56 million and $48 million, respectively.
Total costs deferred on turnarounds were $179 million, $178 million and $215 million in 2023, 2022 and 2021, respectively. As of December 31, 2023, deferred turnaround costs, net of accumulated amortization, totaled $391 million. Amortization in 2023, 2022 and 2021 of deferred turnaround costs was $137 million, $80 million and $56 million, respectively.
Cash Flows Operating Activities Operating activities provided cash of $3,395 million in 2022 as compared to cash provided by operating activities of $2,394 million in 2021. The $1,001 million increase in cash flow from operating activities was mainly due to the increase in income from operations and favorable working capital changes.
Cash Flows Operating Activities Operating activities provided cash of $2,336 million in 2023 as compared to cash provided by operating activities of $3,395 million in 2022. The $1,059 million decrease in cash flow from operating activities was mainly due to lower prices and demand for most of our products, partially offset by favorable changes in working capital.
We also have conditional asset retirement obligations that have not been recognized because the fair values of the conditional legal obligations cannot be measured due to the indeterminate settlement date of the obligations.
Additional information on asset retirement obligations appears in Note 1, under Asset Retirement Obligations, to the consolidated financial statements appearing elsewhere in this Form 10-K. We also have conditional asset retirement obligations that have not been recognized because the fair values of the conditional legal obligations cannot be measured due to the indeterminate settlement date of the obligations.
This Equity Distribution Agreement was amended on February 28, 2020 to reference a new shelf registration for utilization under this agreement. No common units were issued under this program in 2022, 2021 or 2020. We believe that our sources of liquidity as described above are adequate to fund our normal operations and ongoing capital expenditures.
No common units were issued under this program in 2023, 2022 or 2021. 46 Table of Contents We believe that our sources of liquidity as described above are adequate to fund our normal operations and ongoing capital expenditures and turnaround activities.
See Note 1, "Description of Business and Significant Accounting Policies," in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further detail of our asset retirement obligations. 49 Table of Contents Letters of Credit.
Initially, the asset retirement obligation is recorded at fair value and capitalized as a component of the carrying value of the long-lived asset to which the obligation relates. See Note 1, "Description of Business and Significant Accounting Policies," in the Notes to Consolidated Financial Statements in Item 8 of this Form 10-K for further detail of our asset retirement obligations.
Income from operations was also higher due to contributions from the businesses acquired in the second half of 2021.
Income from operations was also higher due to contributions from the businesses acquired in the second half of 2021. The higher income from operations in 2022 as compared to 2021 was partially offset by higher raw material, power and production costs.
The higher capital expenditures in 2021 were primarily associated with the turnaround at OpCo's Petro 2 facility. Capital expenditures in 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.
Capital expenditures in 2023 and 2022 were primarily related to projects to increase production capacity or reduce costs, maintenance and safety projects and environmental projects at our various facilities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIf interest rates were 1.0% higher at the time of refinancing, our annual interest expense would increase by approximately $49 million. Also, at December 31, 2022, we had $26 million principal amount of variable rate debt outstanding, which primarily represents the tax-exempt waste disposal revenue bonds.
Biggest changeIf interest rates were 1.0% higher at the time of refinancing, our annual interest expense would increase by approximately $50 million. Also, at December 31, 2023, we had $24 million principal amount of variable rate debt outstanding, which represents the 2026 term loans due 2026 and the tax-exempt waste disposal revenue bonds due 2027.
A hypothetical 100 basis point increase in the average interest rate on our variable rate debt would not result in a material change in the interest expense. Secured Overnight Financing Rate ("SOFR") is used as a reference rate for borrowings under our revolving line of credit. We did not have any SOFR-based borrowings outstanding at December 31, 2022.
A hypothetical 100 basis point increase in the average interest rate on our variable rate debt would not result in a material change in the interest expense. Secured Overnight Financing Rate ("SOFR") is used as a reference rate for borrowings under our revolving line of credit. We did not have any SOFR-based borrowings outstanding at December 31, 2023.
In July 2019, we completed the registered public offering of €700 million aggregate principal amount of the 1.625% 2029 Senior Notes. We designated this euro-denominated debt as a non-derivative net investment hedge of a portion of our net investments in euro functional-currency denominated subsidiaries to offset foreign currency fluctuations. 54 Table of Contents
In July 2019, we completed the registered public offering of €700 million aggregate principal amount of the 1.625% 2029 Senior Notes. We designated this euro-denominated debt as a non-derivative net investment hedge of a portion of our net investments in euro functional-currency denominated subsidiaries to offset foreign currency fluctuations. 55 Table of Contents
In July 2019, we terminated a portion of the foreign exchange hedging contract with a notional value of €70 million. The notional value of the remaining net investment hedges was €150 million at December 31, 2022. The arrangement is scheduled to settle in 2026.
In July 2019, we terminated a portion of the foreign exchange hedging contract with a notional value of €70 million. The notional value of the remaining net investment hedges was €150 million at December 31, 2023. The arrangement is scheduled to settle in 2026.
Based on our open derivative positions at December 31, 2022, a hypothetical $0.10 increase in the price of a gallon of ethane and a hypothetical $0.10 increase in the price of a million British thermal units of natural gas would not have any material impact on our income before income taxes.
Based on our open derivative positions at December 31, 2023, a hypothetical $0.10 increase in the price of a gallon of ethane and a hypothetical $0.10 increase in the price of a million British thermal units of natural gas would not have a material impact on our income before income taxes.
Interest Rate Risk We are exposed to interest rate risk with respect to fixed and variable rate debt. At December 31, 2022, we had $4,950 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.
Interest Rate Risk We are exposed to interest rate risk with respect to fixed and variable rate debt. At December 31, 2023, we had $4,973 million aggregate principal amount of fixed rate debt. We are subject to the risk of higher interest cost if and when this debt is refinanced.
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 $26 million as of December 31, 2022 was 1.74%.
We do not currently hedge our variable interest rate debt, but we may do so in the future. The weighted average variable interest rate for our variable rate debt of $24 million as of December 31, 2023 was 2.48%.

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