Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement, Noncash Expense [Abstract]

Under the Westlake Chemical Corporation 2013 Omnibus Incentive Plan (as amended and restated in 2017, the "2013 Plan"), all employees and non-employee directors of the Company, as well as certain individuals who have agreed to become the Company's employees, are eligible for awards. Shares of common stock may be issued as authorized in the 2013 Plan. At the discretion of the administrator of the 2013 Plan, employees and non-employee directors may be granted awards in the form of stock options, stock appreciation rights, stock awards, restricted stock units or cash awards (any of which may be a performance award). Outstanding stock option awards have a 10-year term and vest (1) ratably on an annual basis over a three-year period or (2) at the end of a five-year period. Outstanding restricted stock units and performance stock units vest either (1) ratably on an annual basis over a two to five-year period or (2) at the end of a three or six-year period. In accordance with accounting guidance related to share-based payments, stock-based compensation expense for all stock-based compensation awards is based on estimated grant-date fair value. The Company recognizes these stock-based compensation costs net of a forfeiture rate and on a straight-line basis over the requisite service period of the award for only those shares expected to vest. For the years ended December 31, 2019, 2018 and 2017, the total recognized stock-based compensation expense related to equity awards issued under the 2013 Plan was $24, $18 and $14, respectively.

Option activity and changes during the year ended December 31, 2019 were as follows:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2018	1,115,954		$	54.82
Granted	296,598		79.83
Exercised	(18,635	)	35.04
Cancelled	(7,969	)	79.94
Outstanding at December 31, 2019	1,385,948		$	60.29	5.9	$	23
Exercisable at December 31, 2019	888,093		$	47.64	4.5	$	22

For options outstanding at December 31, 2019, the options had the following range of exercise prices:



Range of Prices	Options Outstanding	Weighted Average Remaining Contractual Life (Years)
$10.26 - $30.05	264,334	1.0
$40.38 - $44.42	218,047	6.1
$45.70 - $61.87	295,620	6.5
$63.98 - $68.18	145,171	4.7
$79.83 - $107.75	462,776	8.8

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company's closing stock price on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2019. This amount changes based on the fair market value of the Company's common stock. For the years ended December 31, 2019, 2018 and 2017, the total intrinsic value of options exercised was $1, $21 and $24, respectively.

As of December 31, 2019, $6 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 1.8 years. Income tax benefits of $0, $4 and $8 were realized from the exercise of stock options during the years ended December 31, 2019, 2018 and 2017, respectively.

The Company used the Black-Scholes option pricing model to value its options. The table below presents the weighted average value and assumptions used in determining each option's fair value. Volatility was calculated using historical trends of the Company's common stock price.



	Stock Option Grants
	Year Ended December 31,
	2019			2018			2017
Weighted average fair value	$	21.02		$	28.94		$	15.84
Risk-free interest rate	2.5		%	2.7		%	2.1		%
Expected life in years	5			5			5
Expected volatility	28.9		%	27.6		%	29.2		%
Expected dividend yield	1.2		%	0.7		%	1.2		%

Non-vested restricted stock units as of December 31, 2019 and changes during the year ended December 31, 2019 were as follows:



	Number of Units		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2018	702,789		$	65.79
Granted	205,517		77.59
Vested	(415,593	)	56.70
Forfeited	(29,430	)	73.28
Non-vested at December 31, 2019	463,283		$	78.69

As of December 31, 2019, there was $15 of unrecognized stock-based compensation expense related to non-vested restricted stock units. This cost is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of restricted stock units that vested during the years ended December 31, 2019, 2018 and 2017 was $28, $10 and $6, respectively.

Performance stock unit payout is based on the greater of the average annual economic-value added results for the Company (equal to net operating profit after tax less a capital charge based upon the weighted average cost of capital) and relative total shareholder return as compared to a peer group of companies. The units have payouts that range from zero to 200 percent of the target award.

Non-vested performance stock units as of December 31, 2019 and changes during the year ended December 31, 2019 were as follows:



	Number of Units		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2018	—		$	—
Granted	78,328		114.38
Vested	—		—
Forfeited	(1,111	)	114.38
Non-vested at December 31, 2019	77,217		$	114.38

As of December 31, 2019, there was $6 of unrecognized stock-based compensation expense related to non-vested performance stock units. This cost is expected to be recognized over a weighted-average period of 2.1 years. There were no such awards issued during the years ended December 31, 2018 and 2017.

The Company used a Monte Carlo simulation model to value the performance stock units on the grant date. The table below presents the assumptions used in determining grant date fair value. Volatility was calculated using historical trends of the Company's common stock price.



	Year Ended December 31, 2019 Performance Stock Units
Risk-free interest rate	2.5		%
Expected life in years	2.88
Expected volatility of Westlake Chemical Corporation common stock	30.3		%
Expected volatility of peer companies	14.5% - 47.8%
Average correlation coefficient of peer companies	0.49
Grant date fair value	$	114.38

Liability Classified Awards

Certain of the Company's restricted stock unit awards are classified as liability awards for accounting purposes and are re-measured at each reporting date until they vest. Total stock-based compensation expense recognized related to these restricted stock units during the years ended December 31, 2019, 2018, and 2017 was $1, $4 and $9, respectively.

Non-vested liability classified restricted stock awards as of December 31, 2019 and changes during the year ended December 31, 2019 were as follows:



	Number of Units		Weighted Average Fair Value
Non-vested at December 31, 2018	49,528		$	66.46
Vested	(49,292	)	68.22
Cancelled	(236	)	76.77
Non-vested at December 31, 2019	—		—

As of December 31, 2019, there was no unrecognized stock-based compensation expense related to non-vested liability classified restricted stock awards. The total fair value of liability classified restricted stock awards that vested during the years ended December 31, 2019, 2018 and 2017 was $3, $6 and $11, respectively. The total fair value of liability classified restricted stock awards cancelled during the year ended December 31, 2019 was $0.

Westlake Chemical Partners LP Awards

The Company's wholly-owned subsidiary and the general partner of Westlake Partners, Westlake Chemical Partners GP LLC ("Westlake Partners GP"), maintains a unit-based compensation plan for directors and employees of WLKP GP and Westlake Partners.

The Westlake Partners 2014 Long-term Incentive Plan ("Westlake Partners 2014 Plan") permits various types of equity awards including but not limited to grants of phantom units and restricted units. Awards granted under the Westlake Partners 2014 Plan may be settled with Westlake Partners units or in cash or a combination thereof. Compensation expense for these awards was not material to the Company's consolidated financial statements for the years ended December 31, 2019, 2018 and 2017.