WESTLAKE CORP
For the period ended Jun 30, 2024. Filed Aug 9, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 9, 2024
WLK$63.49-4.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-02.
0001262823-24-000025
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0001262823-24-000045
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 136 previous paragraphs and 157 current paragraphs.
103 unchanged; 32 reworded; 18 added; 1 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 6 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (18)
Current report
On June 6, 2024, the Coalition confidentially lodged an antidumping complaint with the European Commission requesting the initiation of an antidumping investigation concerning imports of epoxy resins into the European Union market originating in China, South Korea, Taiwan and Thailand. On July 1, 2024, the European Commission published in the EU Official Journal a notice initiating an antidumping investigation concerning imports of epoxy resins originating in China, South Korea, Taiwan, and Thailand.
Current report
AC and ECH Pernis Units
Current report
On July 2, 2024, management of the Company approved a plan to temporarily cease operations of ("mothball") the allyl chloride ("AC") and epichlorohydrin ("ECH") units at the Company's site in Pernis, the Netherlands (collectively, the "Units") subject to completion of local consultation obligations. The Company will continue to operate the liquid epoxy resin ("LER") and bisphenol A ("BPA") units at the Pernis facility.
Current report
On July 29, 2024, the Company notified the affected employees at the Units that management approved the plan to mothball the Units. The Units are expected to temporarily cease operations in 2025. The Company expects to incur total pre-tax costs of approximately €80 million related to the mothballing of the Units. The mothballing of the Units is expected to result in a workforce reduction of approximately 30 employees. The expected costs related to mothballing the Units consist of employee severance and separation costs of approximately €5 million and charges for environmental remediation and other plant mothballing costs of approximately €75 million.
Current report
The Company expects to record substantially all of these costs during fiscal period Q3 2024 with cash outflows expected to occur over several years starting in 2025. Once completed, the Company expects these actions will materially improve the financial performance of the Pernis, Netherlands site while enabling the Company to continue to serve its customers with BPA, LER, solutions, and epoxy specialty resins as it does now prior to taking these actions.
Current report
For the six months ended June 30, 2024, net income attributable to Westlake was $487 million, or $3.75 per diluted share, on net sales of $6,182 million. This represents a decrease in net income attributable to Westlake of $204 million, or $1.60 per diluted share, compared to the six months ended June 30, 2023 net income attributable to Westlake of $691 million, or $5.35 per diluted share, on net sales of $6,607 million. Income from operations for the six months ended June 30, 2024 was $629 million, a $303 million decrease from income from operations of $932 million for the six months ended June 30, 2023. The decrease in net income and income from operations was primarily due to lower sales prices for our products across both segments. The decreases in net income and income from operations in the six months ended June 30, 2024 were partially offset by higher PVC resin, caustic soda, chlorine, polyethylene, pipe and fittings and siding and trim sales volumes and lower natural gas and feedstock costs. Net income was also favorably impacted by higher interest income. Net sales decreased by $425 million to $6,182 million in the six months ended June 30, 2024 from $6,607 million in the six months ended June 30, 2023, primarily due to lower sales prices for our products, partially offset by higher sales volumes for PVC resin, caustic soda, chlorine, polyethylene, pipe and fittings and siding and trim.
Current report
Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023
Current report
Net Sales. Net sales decreased by $425 million, or 6%, to $6,182 million in the six months ended June 30, 2024 from $6,607 million in the six months ended June 30, 2023, primarily due to lower sales prices for most of our products across both segments. Average sales prices for the six months ended June 30, 2024 decreased by 17% as compared to the six months ended June 30, 2023 as a result of continuing lower demand for several of our products in the Performance and Essential Materials segment, including caustic soda. Sales volumes increased by 10% in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, due to increased demand for PVC resin, caustic soda, chlorine, polyethylene, pipe and fittings and siding and trim.
Current report
Selling, General and Administrative Expenses. Selling, general and administrative expenses of $433 million in the six months ended June 30, 2024 was comparable to $435 million in the six months ended June 30, 2023.
Current report
Other Income, Net. Other income, net increased by $64.0 million to $109 million in the six months ended June 30, 2024 from $45 million in the six months ended June 30, 2023, substantially due to higher average cash and cash equivalents balance and higher interest rates in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.
Current report
Income Taxes. The effective income tax rate was 22.7% for the six months ended June 30, 2024 as compared to 20.0% for the six months ended June 30, 2023. The effective tax rate in the six months ended June 30, 2024 was higher compared to the six months ended June 30, 2023 primarily due to higher foreign taxes partially offset by lower state taxes for the six months ended June 30, 2024. The reduction of reserves for uncertain income tax positions, as a result of a closed federal income tax audit in the six months ended June 30, 2023, also contributed to lower effective income tax rate for the six months ended June 30, 2023.
Current report
Performance and Essential Materials Segment
Current report
Net Sales. Net sales for the Performance and Essential Materials segment decreased by $541 million, or 12%, to $3,944 million in the six months ended June 30, 2024 from $4,485 million in the six months ended June 30, 2023. Average sales prices for the Performance and Essential Materials segment decreased by 20% in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Lower Performance Materials sales prices were primarily due to lower PVC resin and epoxy sales prices. Lower Essential Materials sales prices were primarily due to lower caustic soda sales prices. Sales volumes for the Performance and Essential Materials segment increased by 8% in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 primarily due to higher PVC resin, caustic soda and chlorine and polyethylene sales volumes.
Current report
Income from Operations. Income from operations for the Performance and Essential Materials segment decreased by $439 million to $179 million in the six months ended June 30, 2024 from $618 million in the six months ended June 30, 2023. This decrease in income from operations in the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to lower sales prices for our major products, particularly PVC resin, caustic soda and epoxy. These decreases were partially offset by higher sales volumes for PVC resin, caustic soda, chlorine and polyethylene and lower natural gas and feedstock costs.
Current report
Housing and Infrastructure Products Segment
Current report
Net Sales. Net sales for the Housing and Infrastructure Products segment increased by $116 million, or 5%, to $2,238 million in the six months ended June 30, 2024 from $2,122 million in the six months ended June 30, 2023. Average sales prices for the Housing and Infrastructure Products segment decreased by 9% in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to lower sales prices across all of our products in this segment. Sales volumes for the Housing and Infrastructure Products segment increased by 15% in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 primarily due to strong demand in housing end markets, particularly for pipe and fittings and siding and trim.
Current report
Income from Operations. Income from operations for the Housing and Infrastructure Products segment increased by $143 million to $476 million in the six months ended June 30, 2024 from $333 million in the six months ended June 30, 2023. This increase in income from operations in the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to higher sales volumes for pipe and fittings and siding and trim and lower raw material costs.
Current report
•results of mothballing of the AC and ECH Units (such as timing and amount of recognition of related costs, expectation of material improvement of the financial performance of our Pernis, Netherlands site).
Removed paragraphs (1)
Previous report
•results of acquisitions;
Reworded paragraphs (32)
Previous wording
During 2022 and 2023 our European businesses were impacted by higher energy prices, inflation and reduced demand. Our North American businesses, where we derive a significant portion of our revenue, also experienced the impacts of high energy costs and interest rates and slower demand for most of our products since the second half of 2022. However, since the second half of 2023 we have experienced lower energy costs in Europe and North America as prices for electricity and natural gas have declined following the elevated 2022 levels and inflation has eased since the 2022 levels, although it still remains a concern. In the near term, we expect that the volatility in energy prices, higher interest rates, inflation and other macroeconomic conditions will continue to impact margins and demand for most of our products.
Current wording
Since 2022 our European businesses were impacted by higher energy prices, inflation and reduced demand. Our North American businesses, where we derive a significant portion of our revenue, also experienced the impacts of high energy costs and interest rates and slower demand for most of our products since the second half of 2022. However, since the second half of 2023 we have experienced lower energy costs in Europe and North America as prices for electricity and natural gas have declined following the elevated 2022 levels and inflation has eased since the 2022 levels, although it still remains a concern. In the near term, we expect that the volatility in energy prices, higher interest rates, inflation and other macroeconomic conditions will continue to impact margins and demand for most of our products.
Previous wording
On April 3, 2024, the U.S. Epoxy Resin Producers Ad Hoc Coalition, of which we are a member, filed petitions with the U.S. Department of Commerce and the U.S. International Trade Commission requesting the initiation of antidumping investigations regarding imports of certain epoxy resins from China, India, South Korea, Taiwan, and Thailand and countervailing duty investigations regarding imports of the same products from China, India, South Korea, and Taiwan.
Current wording
On April 3, 2024, the U.S. Epoxy Resin Producers Ad Hoc Coalition (the"Coalition"), of which we are a member, filed petitions with the U.S. Department of Commerce and the U.S. International Trade Commission requesting the initiation of antidumping investigations regarding imports of certain epoxy resins from China, India, South Korea, Taiwan, and Thailand and countervailing duty investigations regarding imports of the same products from China, India, South Korea, and Taiwan.
Previous wording
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. Westlake is the second-largest chlor-alkali producer and the second-largest PVC producer in the world, which makes Westlake a leading global chlorovinyls producer. Our performance and essential materials are used by customers in food and specialty packaging; industrial and consumer packaging; medical health applications; PVC pipe applications; consumer durables; mobility and transportation; renewable wind energy; coatings; and housing and construction products. Chlor-alkali and petrochemicals are typically manufactured globally in large volume by a number of different producers using widely available technologies. The chlor-alkali and petrochemical industries exhibit cyclical commodity characteristics, and margins are influenced by changes in the balance between supply and demand and the resulting operating rates, the level of general economic activity and the price of raw materials. Due to the significant size of new plants, capacity additions are built in large increments and typically require several years of demand growth to be absorbed. The cycle is generally characterized by periods of tight supply, leading to high operating rates and margins, followed by a decline in operating rates and margins primarily as a result of excess new capacity additions. Westlake is one of the leading producers of epoxy specialty resins, modifiers and curing agents in Europe, the United States and Asia with a global reach to our end markets. Epoxy resins are the fundamental component of many types of materials and are often used in the automotive, construction, wind energy, aerospace and electronics industries due to their superior adhesion, strength and durability. We are also a leading supplier of Liquid and Solid Epoxy Resin. These base epoxies are used in a wide variety of industrial coatings applications.
Current wording
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. Westlake is the second-largest chlor-alkali producer and the second-largest PVC producer in the world, which makes Westlake a leading global chlorovinyls producer. Our performance and essential materials are used by customers in PVC pipe applications; housing and construction products; food and specialty packaging; industrial and consumer packaging; renewable wind energy; coatings; consumer durables; medical health applications; and mobility and transportation. Chlor-alkali and petrochemicals are typically manufactured globally in large volume by a number of different producers using widely available technologies. The chlor-alkali and petrochemical industries exhibit cyclical commodity characteristics, and margins are influenced by changes in the balance between global supply and demand and the resulting operating rates, the level of general economic activity and the price of raw materials. Due to the significant size of new plants, capacity additions are built in large increments and typically require several years of demand growth to be absorbed. The cycle is generally characterized by periods of tight supply, leading to high operating rates and margins, followed by a decline in operating rates and margins primarily as a result of excess new capacity additions. Westlake is a leading supplier of liquid and solid epoxy resins that are used in a wide variety of industrial coating applications. We are also one of the leading producers of epoxy specialty resins, modifiers and curing agents in Europe, the United States and Asia with a global reach to our end markets. Epoxy resins are the fundamental component of many types of materials and are often used in the automotive, construction, wind energy, aerospace and electronics industries due to their superior adhesion, strength and durability.
Previous wording
Global demand for most of our products started to recover from the effects of the COVID-19 pandemic in the second half of 2020 and remained strong through the first half of 2022. However, since the second half of 2022 and during the early part of 2023, we saw significant volatility in natural gas and electricity costs, particularly in Europe, as well as in ethane and ethylene prices. We have experienced a decline in natural gas and electricity costs since the second half of 2023 through the first quarter of 2024. Since the first half of 2022, we have continued to experience lower prices and weak demand for most of our products globally through the first quarter of 2024. The ongoing conflict between Russia and Ukraine since Russia's invasion of Ukraine in 2022, the conflict in the Middle East, slow economic growth in China, increase in bisphenol-A, epichlorohydrin and base epoxy resin exports out of Asia into European and North American markets, timing of certain new ethylene and polyethylene capacity additions in North America, Asia, and the Middle East, volatility in natural gas and electricity prices, volatility in crude oil prices and inflationary pressures could have a continuing negative impact on the performance of Performance and Essential Materials businesses.
Current wording
Global demand for most of our products started to recover from the effects of the COVID-19 pandemic in the second half of 2020 and remained strong through the first half of 2022. However, since the second half of 2022 and during the early part of 2023, we saw significant volatility in natural gas and electricity costs, particularly in Europe, as well as in ethane and ethylene prices. We have experienced a decline in natural gas and electricity costs since the second half of 2023 through the second quarter of 2024. Since the first half of 2022, we have continued to experience lower prices and weak demand for most of our products globally through the first quarter of 2024, with signs of demand improving in the second quarter of 2024. The ongoing conflict between Russia and Ukraine since Russia's invasion of Ukraine in 2022, the conflict in the Middle East, slow economic growth in China, increase in bisphenol-A, epichlorohydrin and base epoxy resin exports out of Asia into European and North American markets, timing of certain new ethylene and polyethylene capacity additions in North America, Asia, and the Middle East, volatility in natural gas and electricity prices, volatility in crude oil prices and inflationary pressures could have a continuing negative impact on the performance of Performance and Essential Materials businesses.
Previous wording
Our Housing and Infrastructure Products segment is primarily comprised of building products, PVC pipes and fittings and PVC compound products. Our sales are affected by the individual decisions of distributors and dealers on the levels of inventory they carry, their views on product demand, their financial condition and the manner in which they choose to manage inventory risk. 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. In recent months, with the stabilization of interest rates and the possibility of interest rate cuts by the U.S. Federal Reserve in the near term, we have seen signs of improvement in the demand for housing products. Performance of our housing and infrastructure products businesses over time are generally reflective of the trends of building permits and housing starts in the New Residential Construction Survey by the U.S. Census Bureau and the Repair and Remodeling Index (RRI) provided by the National Association of Home Builders (the "NAHB") among others. 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 and decade-high mortgage interest rates impacting consumer affordability 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.
Current wording
Our Housing and Infrastructure Products segment is primarily comprised of residential building products, PVC pipes and fittings and PVC compound products. Our sales are affected by new home constructions and home repair and remodeling as well as the decisions of distributors and dealers on the levels of inventory they carry, their views on product demand, their financial condition and the manner in which they choose to manage inventory risk. 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. Since the beginning of 2024, with the stabilization of interest rates and the possibility of interest rate cuts by the U.S. Federal Reserve in the near term, we have seen improvement in the demand for housing products. Performance of our housing and infrastructure products businesses over time are generally reflective of the trends of building permits and housing starts in the New Residential Construction Survey by the U.S. Census Bureau and the Repair and Remodeling Index (RRI) provided by the National Association of Home Builders (the "NAHB") among others. Although we ultimately expect that the Infrastructure Investment and Jobs Act of 2021 and historically low residential housing construction that has resulted in an undersupply of existing housing may have a favorable long-term impact on our Housing and Infrastructure Products segment, the current inflationary environment impacting consumer spending and priorities and decade-high mortgage interest rates impacting consumer affordability 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.
Previous wording
The table below and descriptions that follow represent the consolidated results of operations of the Company for thethree months ended March 31, 2024 and 2023.
Current wording
The table below and descriptions that follow represent the consolidated results of operations of the Company for the three andsix months ended June 30, 2024 and 2023.
Previous wording
The table below presents net external sales on a disaggregated basis for our two principal operating segments. Performance Materials net external sales primarily consist of sales of PVC, polyethylene and epoxy. Essential Materials net external sales primarily consist of sales of caustic soda, styrene, and related derivative materials. Housing Products net external sales primarily consist of sales of housing exterior and interior products, residential pipes and fittings and residential PVC compounds. Infrastructure Products net external sales primarily consist of sales of non-residential pipes and fittings and non-residential PVC compounds.
Current wording
The table below presents net external sales on a disaggregated basis for our two principal operating segments. Performance Materials net external sales primarily consist of sales of PVC, polyethylene and epoxy. Essential Materials net external sales primarily consist of sales of caustic soda, styrene, and related derivative materials. Housing Products net external sales primarily consist of sales of housing exterior and interior products, residential pipes and fittings and residential products utilizing PVC compounds. Infrastructure Products net external sales primarily consist of sales of infrastructure related pipes and fittings and infrastructure products utilizing PVC compounds.
Previous wording
For the quarter ended March 31, 2024, net income attributable to Westlake was $174 million, or $1.34 per diluted share, on net sales of $2,975 million. This represents a decrease in net income attributable to Westlake of $220 million, or $1.71 per diluted share, compared to the quarter ended March 31, 2023 net income attributable to Westlake of $394 million, or $3.05 per diluted share, on net sales of $3,356 million. Income from operations for the quarter ended March 31, 2024 was $223 million, a $313 million decrease from income from operations of $536 million for the quarter ended March 31, 2023. The decrease in net income and income from operations was primarily due to lower sales prices for most of our products. While results in our Performance and Essential Materials segment reflected continued weak global industrial and manufacturing activity, our Housing and Infrastructure Products segment benefited from continued strong demand in housing end markets. The overall decrease in net income and income from operations in the first quarter of 2024 were partially offset by lower natural gas and feedstock costs and lower selling, general and administrative expenses. Net income was also positively impacted by higher interest income. Net sales decreased by $381 million to $2,975 million in the quarter ended March 31, 2024 from $3,356 million in the quarter ended March 31, 2023, primarily due to lower sales prices for most of our products across both segments, partially offset by an increase in sales volumes for some of our products in both segments.
Current wording
For the quarter ended June 30, 2024, net income attributable to Westlake was $313 million, or $2.40 per diluted share, on net sales of $3,207 million. This represents an increase in net income attributable to Westlake of $16 million, or $0.09 per diluted share, compared to the quarter ended June 30, 2023 net income attributable to Westlake of $297 million, or $2.31 per diluted share, on net sales of $3,251 million. Income from operations for the quarter ended June 30, 2024 was $406 million, a $10 million increase from income from operations of $396 million for the quarter ended June 30, 2023. The increase in net income and income from operations was primarily due to higher sales volumes for PVC resin, caustic soda, chlorine, pipe and fittings and siding and trim and lower feedstock and natural gas costs. The overall increase in net income and income from operations in the second quarter of 2024 were partially offset by lower sales prices for our products across both segments and slightly higher selling, general and administrative expenses. Our Housing and Infrastructure Products segment continued to benefit from strong demand in housing end markets while our Performance and Essential Materials segment reflected improvement during the second quarter of 2024. Net income was also positively impacted by higher interest income. Net sales decreased by $44 million to $3,207 million in the quarter ended June 30, 2024 from $3,251 million in the quarter ended June 30, 2023, primarily due to lower sales prices for our products across both segments, partially offset by an increase in sales volumes for PVC resin, caustic soda, chlorine, pipe and fittings and siding and trim.
Previous wording
First Quarter 2024 Compared with First Quarter 2023
Current wording
Second Quarter 2024 Compared with Second Quarter 2023
Previous wording
Net Sales. Net sales decreased by $381 million, or 11%, to $2,975 million in the first quarter of 2024 from $3,356 million in the first quarter of 2023, primarily due to lower sales prices for most of our products across both segments. Average sales prices for the first quarter of 2024 decreased by 19% as compared to the first quarter of 2023 as a result of continuing lower demand for several of our products in the Performance and Essential Materials segment including caustic soda. Sales volumes increased by 8% in the first quarter of 2024 as compared to the first quarter of 2023, due to increased demand for several of our products in the Housing and Infrastructure segment and a slight improvement in sales volume for polyethylene and PVC resins in the Performance and Essential Materials segment.
Current wording
Net Sales. Net sales decreased by $44 million, or 1%, to $3,207 million in the second quarter of 2024 from $3,251 million in the second quarter of 2023, primarily due to lower sales prices for most of our products across both segments. Average sales prices for the second quarter of 2024 decreased by 14% as compared to the second quarter of 2023 as a result of lower sales prices for our products across both segments. Sales volumes increased by 12% in the second quarter of 2024 as compared to the second quarter of 2023, due to higher sales volumes for several of our products in both segments, particularly PVC resin, caustic soda, chlorine, pipe and fittings and siding and trim.
Previous wording
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $13 million to $209 million in the first quarter of 2024 as compared to $222 million in the first quarter of 2023. This decrease was mainly due to lower compensation expenses.
Current wording
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $11 million to $224 million in the second quarter of 2024 as compared to $213 million in the second quarter of 2023. This increase was mainly due to higher professional consulting and selling expenses.
Previous wording
Amortization of Intangibles. Amortization expense in the first quarter of 2024 was comparable with the first quarter of 2023.
Current wording
Amortization of Intangibles. Amortization expense in the second quarter of 2024 was comparable to the second quarter of 2023.
Previous wording
Restructuring, Transaction and Integration-related Costs. Restructuring, transaction and integration-related costs in the first quarter of 2024 were comparable with the first quarter of 2023.
Current wording
Restructuring, Transaction and Integration-related Costs. Restructuring, transaction and integration-related costs in the second quarter of 2024 were comparable to the second quarter of 2023.
Previous wording
Other Income, Net. Other income, net increased by $28 million to $50 million in the first quarter of 2024 from $22 million in the first quarter of 2023, substantially due to higher interest income attributable to a higher average cash and cash equivalents balance and higher interest rates in the first quarter of 2024 as compared to the first quarter of 2023.
Current wording
Other Income, Net. Other income, net increased by $36 million to $59 million in the second quarter of 2024 from $23 million in the second quarter of 2023, substantially due to higher interest income attributable to a higher average cash and cash equivalents balance and higher interest rates in the second quarter of 2024 as compared to the second quarter of 2023.
Previous wording
Income Taxes. The effective income tax rate was 20.6% for the first quarter of 2024 as compared to 21.1% for the first quarter of 2023. The effective tax rate in the first quarter of 2024 was lower compared to the first quarter of 2023 primarily due to an increase in U.S. federal research and development credits available to the Company and lower state taxes partially offset by higher foreign taxes.
Current wording
Income Taxes. The effective income tax rate was 23.8% for the second quarter of 2024 as compared to 18.6% for the second quarter of 2023. The effective tax rate in the second quarter of 2024 was higher compared to the second quarter of 2023 primarily due to higher foreign taxes, partially offset by lower state taxes in the second quarter of 2024. The reduction of reserves for uncertain income tax positions, as a result of a closed federal income tax audit in the second quarter of 2023, also contributed to lower effective income tax rate for the second quarter of 2023.
Previous wording
Net Sales. Net sales for the Performance and Essential Materials segment decreased by $418 million, or 18%, to $1,931 million in the first quarter of 2024 from $2,349 million in the first quarter of 2023. Average sales prices for the Performance and Essential Materials segment decreased by 23% in the first quarter of 2024 as compared to the first quarter of 2023. Lower Performance Materials sales prices were primarily due to lower PVC resin, polyethylene and epoxy sales prices. Lower Essential Materials sales prices were primarily due to lower caustic soda sales prices. Sales volumes for the Performance and Essential Materials segment increased by 5% in the first quarter of 2024 as compared to the first quarter of 2023 primarily due to higher polyethylene and PVC resins sales volumes.
Current wording
Net Sales. Net sales for the Performance and Essential Materials segment decreased by $123 million, or 6%, to $2,013 million in the second quarter of 2024 from $2,136 million in the second quarter of 2023. Average sales prices for the Performance and Essential Materials segment decreased by 16% in the second quarter of 2024 as compared to the second quarter of 2023. Lower Performance Materials sales prices were primarily due to lower PVC resin sales prices. Lower Essential Materials sales prices were primarily due to lower caustic soda and chlorine sales prices. Sales volumes for the Performance and Essential Materials segment increased by 11% in the second quarter of 2024 as compared to the second quarter of 2023 primarily due to higher PVC resin, caustic soda and chlorine sales volumes.
Previous wording
Income from Operations. Income from operations for the Performance and Essential Materials segment decreased by $381 million to $22 million in the first quarter of 2024 from $403 million in the first quarter of 2023. This decrease in income from operations in the first quarter of 2024, as compared to the first quarter of 2023, was primarily due to lower sales prices for our major products, particularly caustic soda and epoxy resin. These decreases were partially offset by higher sales volume and lower natural gas and feedstock costs.
Current wording
Income from Operations. Income from operations for the Performance and Essential Materials segment decreased by $58 million to $157 million in the second quarter of 2024 from $215 million in the second quarter of 2023. This decrease in income from operations in the second quarter of 2024, as compared to the second quarter of 2023, was primarily due to lower sales prices for our major products, particularly PVC resin and caustic soda. These decreases were partially offset by higher sales volume for PVC resin and caustic soda and lower natural gas and feedstock costs.
Previous wording
Net Sales. Net sales for the Housing and Infrastructure Products segment increased by $37 million, or 4%, to $1,044 million in the first quarter of 2024 from $1,007 million in the first quarter of 2023. Average sales prices for the Housing and Infrastructure Products segment decreased by 10% in the first quarter of 2024 as compared to the first quarter of 2023, primarily due to lower sales prices across all of our products in this segment. Sales volumes for the Housing and Infrastructure Products segment increased by 14% in the first quarter of 2024 as compared to the first quarter of 2023 primarily due to strong demand in housing end markets, particularly for pipe and fittings and siding and trim.
Current wording
Net Sales. Net sales for the Housing and Infrastructure Products segment increased by $79 million, or 7%, to $1,194 million in the second quarter of 2024 from $1,115 million in the second quarter of 2023. Average sales prices for the Housing and Infrastructure Products segment decreased by 9% in the second quarter of 2024 as compared to the second quarter of 2023, primarily due to lower sales prices across all of our products in this segment. Sales volumes for the Housing and Infrastructure Products segment increased by 16% in the second quarter of 2024 as compared to the second quarter of 2023 primarily due to strong demand in housing end markets, particularly for pipe and fittings and siding and trim.
Previous wording
Income from Operations. Income from operations for the Housing and Infrastructure Products segment increased by $67 million to $210 million in the first quarter of 2024 from $143 million in the first quarter of 2023. This increase in income from operations in the first quarter of 2024, as compared to the first quarter of 2023, was primarily due to lower raw material costs and higher sales volumes for pipe and fittings and siding and trim.
Current wording
Income from Operations. Income from operations for the Housing and Infrastructure Products segment increased by $76 million to $266 million in the second quarter of 2024 from $190 million in the second quarter of 2023. This increase in income from operations in the second quarter of 2024, as compared to the second quarter of 2023, was primarily due to higher sales volumes for pipe and fittings and siding and trim and lower raw material costs.
Previous wording
Gross Profit. Gross profit margin percentage was 16% in the first quarter of 2024 as compared to 24% in the first quarter of 2023. The decrease in gross profit margin was primarily due to lower prices for most of our products, which was partially offset by lower natural gas and feedstock costs.
Current wording
Gross Profit. Gross profit margin was 18% in the six months ended June 30, 2024 as compared to 22% in the six months ended June 30, 2023. The decrease in gross profit margin was primarily due to lower prices for most of our products, which was partially offset by lower natural gas and feedstock costs.
Previous wording
Interest Expense. Interest expense decreased slightly by $2 million to $40 million in the first quarter of 2024 from $42 million in the first quarter of 2023, primarily due to higher capitalized interest on capital projects.
Current wording
Interest Expense. Interest expense decreased slightly by $3 million to $81 million in the six months ended June 30, 2024 from $84 million in the six months ended June 30, 2023, primarily due to higher capitalized interest on capital projects.
Previous wording
CASH FLOW DISCUSSION FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Current wording
CASH FLOW DISCUSSION FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
Previous wording
Operating activities provided cash of $169 million in the first three months of 2024 compared to cash provided by operating activities of $512 million in the first three months of 2023. The $343 million decrease in cash flows from operating activities was mainly due to lower prices and demand for most of our products and unfavorable changes in working capital in the first three months of 2024. 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 $177 million in the first three months of 2024, compared to $64 million of cash used in the first three months of 2023, an unfavorable change of $113 million. The unfavorable change in the first three months of 2024 was substantially driven by the higher accounts receivables due to an increase in sales towards the end of the first quarter of 2024 and higher inventory volumes at the end of the first quarter of 2024 in the Housing and Infrastructure segment.
Current wording
Operating activities provided cash of $406 million in the first six months of 2024 compared to cash provided by operating activities of $1,067 million in the first six months of 2023. The $661 million decrease in cash flows from operating activities was mainly due to lower prices and demand for most of our products and an unfavorable change in working capital in the six months ended June 30, 2024. 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 $453 million in the first six months of 2024, compared to $30 million of cash provided in the first six months of 2023, an unfavorable change of $483 million. The unfavorable change in the first six months of 2024 was substantially driven by the higher accounts receivables due to an increase in sales towards the end of the six months ended June 30, 2024, higher inventory volumes at the end of the six months ended June 30, 2024 for the Housing and Infrastructure segment and cash outflows related to the 2023 litigation accrual in the six months ended June 30, 2024.
Previous wording
Net cash used for investing activities in the first three months of 2024 was $272 million as compared to net cash used for investing activities of $263 million in the first three months of 2023. The increase in investing activities in the first three months of 2024 as compared to first three months of 2023 was primarily because of capital expenditures in the period. Capital expenditures were $272 million in the first three months of 2024 as compared to $267 million in the first three months of 2023. Capital expenditures in the first three months of 2024 and 2023 were primarily related to projects to increase production capacity or reduce costs, maintenance and safety projects and environmental projects at our various facilities.
Current wording
Net cash used for investing activities in the first six months of 2024 of $495 million was relatively comparable to net cash used for investing activities of $499 million in the first six months of 2023. The investing activities in the first six months of 2024 and the first six months of 2023 were primarily related to capital expenditures in the period. Capital expenditures were $503 million in the first six months of 2024 as compared to $507 million in the first six months of 2023. Capital expenditures in the first six months of 2024 and 2023 were primarily related to projects to increase production capacity or reduce costs, maintenance and safety projects and environmental projects at our various facilities.
Previous wording
Net cash used for financing activities during the first three months of 2024 of $74 million was comparable to the net cash used for financing activities of $75 million in the first three months of 2023. The activities during the first three months of 2024 were primarily related to the $65 million payment of cash dividends, the $10 million payment of cash distributions to noncontrolling interests and inflows of $7 million from the exercise of stock options. The financing activities in the first three months of 2023 were primarily related to the $47 million payment of cash dividends, the $10 million payment of cash distributions to noncontrolling interests and repurchases of our common stock for an aggregate amount of $22 million.
Current wording
Net cash used for financing activities during the first six months of 2024 of $146 million was higher as compared to the net cash used for financing activities of $131 million in the first six months of 2023. The activities during the first six months of 2024 were primarily related to the $130 million payment of cash dividends, the $21 million payment of cash distributions to noncontrolling interests and inflows of $8 million from the exercise of stock options. The financing activities in the first six months of 2023 were primarily related to the $92 million payment of cash dividends, the $24 million payment of cash distributions to noncontrolling interests, repurchases of our common stock for an aggregate amount of $23 million and inflows of $9 million from the exercise of stock options.
Previous wording
As of March 31, 2024, our cash and cash equivalents totaled $3,108 million.
Current wording
As of June 30, 2024, our cash and cash equivalents totaled $3,042 million.
Previous wording
As of March 31, 2024, the carrying value of our indebtedness totaled $4,890 million. See Note 7 to the consolidated financial statements appearing elsewhere in this Form 10-Q for a discussion of our long-term indebtedness.
Current wording
As of June 30, 2024, the carrying value of our indebtedness totaled $4,885 million. See Note 7 to the consolidated financial statements appearing elsewhere in this Form 10-Q for a discussion of our long-term indebtedness.
Previous wording
(6) The waste disposal revenue bonds expire in December 2027 and are subject to redemption and mandatory tender for purchase prior to maturity under certain conditions. Interest on the waste disposal revenue bonds accrues at a rate determined by a remarketing agent and is payable quarterly. The interest rate on the waste disposal revenue bonds at March 31, 2024 was 3.65%.
Current wording
(6) The waste disposal revenue bonds expire in December 2027 and are subject to redemption and mandatory tender for purchase prior to maturity under certain conditions. Interest on the waste disposal revenue bonds accrues at a rate determined by a remarketing agent and is payable quarterly. The interest rate on the waste disposal revenue bonds at June 30, 2024 was 4.15%.
Previous wording
(7) The 2026 Term Loan has a 5-year maturity and includes a government rate subsidy. The interest rate on the 2026 Term Loan as of March 31, 2024 was 0.95%.
Current wording
(7) The 2026 Term Loan has a 5-year maturity and includes a government rate subsidy. The interest rate on the 2026 Term Loan as of June 30, 2024 was 1.08%.
Previous wording
•the ultimate timing, outcome and results of integrating the operations of acquisitions and the ultimate outcome of our operating efficiencies applied to the products and services; the effects of the acquisition, including the combined company's future financial condition, results of operations, strategy and plans; and expected synergies and other benefits from the acquisition and our ability to realize such synergies and other benefits;
Current wording
•the ultimate timing, outcome and results of integrating the operations of any acquisitions and the ultimate outcome of our operating efficiencies applied to the products and services; the effects of any such acquisition, including the combined company's future financial condition, results of operations, strategy and plans; and expected synergies and other benefits from any such acquisition and our ability to realize such synergies and other benefits;
Previous wording
•effects of pending legal proceedings and settlements; and
Current wording
•effects of pending legal proceedings and settlements;
Previous wording
•timing of and amount of capital expenditures.
Current wording
•timing of and amount of capital expenditures; and
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Gross Profit. Gross profit margin was 21% in the second quarter of 2024 as compared to 20% in the second quarter of 2023. The increase in gross profit margin was primarily due to higher sales volumes for several of our products, which was partially offset by lower sales prices for our products across both segments.
Current report — wording carried from elsewhere
Interest Expense. Interest expense in the second quarter of 2024 was comparable to the second quarter of 2023.
Current report — wording carried from elsewhere
Amortization of Intangibles. Amortization expense in the six months ended June 30, 2024 was comparable to the six months ended June 30, 2023.
Current report — wording carried from elsewhere
Restructuring, Transaction and Integration-related Costs. Restructuring, transaction and integration-related costs in the six months ended June 30, 2024 were comparable to the six months ended June 30, 2023.