Westlake Chemical's Q4 2013 net income up 79.4% year-over-year to US$171M, driven by higher PE and PVC resin sales prices, lower ethane costs; net sales up 18.8% to US$951.6M
HOUSTON
,
February 21, 2014
(press release)
–
- Record quarterly net income of $171.0 million in the fourth quarter, or $2.54 per diluted share
- Record annual net income of $610.4 million, or $9.09 per diluted share
- Generated cash flow from operations of $752.7 million in 2013 Westlake Chemical Corporation (NYSE: WLK) today reported net income for the three months ended December 31, 2013 of $171.0 million, or $2.54 per diluted share, compared to net income of $95.3 million, or $1.42 per diluted share, reported for the fourth quarter of 2012. Net sales for the three months ended December 31, 2013 of $951.6 million increased $150.6 million compared to net sales of $801.0 million in the same period of 2012, primarily due to higher sales prices for polyethylene, styrene and PVC resin and higher sales volumes for most of our major products. Income from operations was $257.6 million for the fourth quarter of 2013 compared to $156.2 million for the fourth quarter of 2012. The increase in income from operations in the fourth quarter of 2013 was primarily a result of higher polyethylene and PVC resin sales prices as well as lower ethane costs, which were partially offset by higher propane costs as compared to the same period in 2012.
Net income for the fourth quarter of 2013 of $171.0 million, or $2.54 per diluted share, increased $0.7 million from the $170.3 million net income, or $2.54 per diluted share, reported for the third quarter of 2013. Net sales in the fourth quarter of 2013 of $951.6 million decreased $52.6 million from net sales of $1,004.2 million in the third quarter of 2013, primarily as a result of lower sales volumes for polyethylene, PVC resin and building products, partially offset by higher polyethylene sales prices and higher ethylene sales volumes. Fourth quarter 2013 income from operations was $257.6 million as compared to $266.6 million reported for the third quarter of 2013, a decrease of $9.0 million. The decrease in operating income in the fourth quarter of 2013 as compared to the third quarter was primarily the result of lower integrated vinyls margins resulting from higher propane costs, which were partially offset by higher polyethylene sales prices.
For the year ended December 31, 2013, net income was $610.4 million, or $9.09 per diluted share, an increase in net income of $224.8 million, or $3.34 per diluted share, from 2012 net income of $385.6 million, or $5.75 per diluted share. Net sales for the year ended December 31, 2013 increased $188.5 million to $3,759.5 million compared to net sales for 2012 of $3,571.0 million, primarily due to higher sales prices for most products, higher sales volumes for styrene, caustic and PVC resin and sales contributed by the specialty PVC pipe business, which was acquired in May 2013. Income from operations was $953.5 million for the year ended December 31, 2013 as compared to $615.4 million for 2012, an increase of $338.1 million. Income from operations benefited mainly from higher olefins and vinyls integrated product margins, predominantly due to a significant decrease in ethane costs as average industry ethane prices decreased 34.3% in 2013 as compared to 2012. The increase in income from operations in 2013 was partially offset by the lost production and unabsorbed costs associated with the planned turnaround and expansion of one of the Lake Charles, Louisiana ethylene units in the first quarter of 2013.
Albert Chao, President and Chief Executive Officer, said, "We are pleased to report a strong finish to a record year for Westlake. We continue to benefit from lower-cost, ethane-based ethylene production resulting from increased North American natural gas liquids production, which we expect to continue for the foreseeable future. Our Olefins segment achieved record annual income from operations while our Vinyls business continues to improve, as we see gradual recovery in the construction industry. In 2013, we completed the expansion of one of our ethylene units at our Lake Charles, Louisiana site in the first quarter and also started-up our new world scale Geismar, Louisiana chlor-alkali plant in the fourth quarter. The completion of these two projects and the planned conversion to ethane feedstock and expansion of our ethylene and PVC capacity at our Calvert City, Kentucky facility in the second quarter of 2014 are expected to improve the profitability of our Vinyls business."
EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $302.7 million for the fourth quarter of 2013 increased $111.7 million compared to $191.0 million in the fourth quarter of 2012. EBITDA for the fourth quarter of 2013 decreased $4.3 million compared to EBITDA of $307.0 million in the third quarter of 2013. A reconciliation of EBITDA to reported net income and to net cash provided by operating activities can be found in the financial schedules at the end of this press release. EBITDA of $1,118.1 million for the year 2013 increased $345.3 million compared to EBITDA of $772.8 million for the year 2012.
Net cash provided by operating activities was $752.7 million in 2013. Capital expenditures for the year 2013 were $679.2 million. At December 31, 2013, we had cash, cash equivalents and marketable securities of $700.7 million and our long-term debt was $763.9 million.
OLEFINS SEGMENT
The Olefins segment reported income from operations of $247.3 million in the fourth quarter of 2013, an increase of $104.1 million compared to $143.2 million reported in the fourth quarter of 2012. The increase was primarily due to higher integrated olefins margins resulting from higher polyethylene sales prices and lower feedstock costs.
Income from operations for the fourth quarter of 2013 for the Olefins segment of $247.3 million increased $10.1 million from the $237.2 million reported in the third quarter of 2013. The increase was primarily due to higher polyethylene sales prices, partially offset by lower polyethylene sales volumes.
The Olefins segment reported income from operations of $833.2 million for the twelve months ended December 31, 2013 compared to $552.8 million in 2012. This increase was mainly attributable to higher integrated product margins as compared to 2012, primarily as a result of significantly lower feedstock costs. Income from operations for 2013 was negatively impacted by the lost production and expensing of $19.9 million related to unabsorbed costs associated with the planned turnaround and expansion of one of the Lake Charles ethylene units.
VINYLS SEGMENT
The Vinyls segment reported income from operations of $18.6 million in the fourth quarter of 2013 compared to income from operations of $18.2 million in the fourth quarter of 2012, an increase of $0.4 million. Operating income in the fourth quarter benefited from higher sales volumes for caustic and PVC resin. The fourth quarter of 2012 was negatively impacted by the lost PVC resin production and costs due to a scheduled maintenance turnaround at the Geismar vinyls complex.
The Vinyls segment reported income from operations of $18.6 million in the fourth quarter of 2013, a decrease of $21.0 million compared to income from operations of $39.6 million in the third quarter of 2013. The decrease in operating income in the fourth quarter was the result of higher propane costs and seasonally lower sales volumes for PVC resin and building products.
The Vinyls segment reported income from operations of $154.7 million in 2013 as compared to income from operations of $85.9 million in 2012, an increase of $68.8 million. This increase was predominantly driven by lower feedstock costs, higher sales volumes for PVC resin and higher operating rates as compared to 2012.
| WESTLAKE CHEMICAL CORPORATION |
| |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| (Unaudited) |
| |
| |
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
| |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| |
|
(In thousands of dollars, except per share data) |
| Net sales |
|
$ |
951,625 |
|
$ |
801,041 |
|
$ |
3,759,484 |
|
$ |
3,571,041 |
| Cost of sales |
|
655,954 |
|
610,793 |
|
2,658,046 |
|
2,834,081 |
| Gross profit |
|
295,671 |
|
190,248 |
|
1,101,438 |
|
736,960 |
| Selling, general and administrative expenses |
|
38,091 |
|
34,017 |
|
147,974 |
|
121,609 |
| Income from operations |
|
257,580 |
|
156,231 |
|
953,464 |
|
615,351 |
| Interest expense |
|
(3,161) |
|
(7,367) |
|
(18,082) |
|
(43,049) |
| Debt retirement costs |
|
- |
|
- |
|
- |
|
(7,082) |
| Gain from sales of equity securities |
|
- |
|
- |
|
- |
|
16,429 |
| Other income (expense), net |
|
3,653 |
|
(156) |
|
6,790 |
|
3,520 |
| Income before income taxes |
|
258,072 |
|
148,708 |
|
942,172 |
|
585,169 |
| Provision for income taxes |
|
87,100 |
|
53,431 |
|
331,747 |
|
199,614 |
| Net income |
|
$ |
170,972 |
|
$ |
95,277 |
|
$ |
610,425 |
|
$ |
385,555 |
| Earnings per share: |
|
|
|
|
|
| Basic |
|
$ |
2.56 |
|
$ |
1.43 |
|
$ |
9.13 |
|
$ |
5.78 |
| Diluted |
|
$ |
2.54 |
|
$ |
1.42 |
|
$ |
9.09 |
|
$ |
5.75 |
| WESTLAKE CHEMICAL CORPORATION |
| |
| CONSOLIDATED BALANCE SHEETS |
| (Unaudited) |
| |
| |
|
December 31,
2013 |
|
December 31,
2012 |
| |
|
(In thousands of dollars) |
| ASSETS |
|
|
|
| Current assets |
|
|
|
| Cash and cash equivalents |
|
$ |
461,301 |
|
$ |
790,078 |
| Marketable securities |
|
239,388 |
|
124,873 |
| Accounts receivable, net |
|
428,457 |
|
400,159 |
| Inventories |
|
471,879 |
|
399,298 |
| Other current assets |
|
48,057 |
|
37,005 |
| Total current assets |
|
1,649,082 |
|
1,751,413 |
| Property, plant and equipment, net |
|
2,088,014 |
|
1,510,048 |
| Other assets, net |
|
323,813 |
|
150,735 |
| Total assets |
|
$ |
4,060,909 |
|
$ |
3,412,196 |
| |
|
|
|
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
| Current liabilities (accounts payable and accrued liabilities) |
|
$ |
404,858 |
|
$ |
398,510 |
| Long-term debt |
|
763,879 |
|
763,761 |
| Other liabilities |
|
473,569 |
|
377,669 |
| Total liabilities |
|
1,642,306 |
|
1,539,940 |
| Stockholders' equity |
|
2,418,603 |
|
1,872,256 |
| Total liabilities and stockholders' equity |
|
$ |
4,060,909 |
|
$ |
3,412,196 |
| WESTLAKE CHEMICAL CORPORATION |
| |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Unaudited) |
| |
| |
|
Twelve Months Ended December 31, |
| |
|
2013 |
|
2012 |
| |
|
(In thousands of dollars) |
| Cash flows from operating activities |
|
|
|
| Net income |
|
$ |
610,425 |
|
$ |
385,555 |
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
| Depreciation and amortization |
|
157,808 |
|
144,541 |
| Deferred income taxes |
|
93,732 |
|
(5,793) |
| Other balance sheet changes |
|
(109,236) |
|
87,784 |
| Net cash provided by operating activities |
|
752,729 |
|
612,087 |
| Cash flows from investing activities |
|
|
|
| Acquisition of business |
|
(178,309) |
|
- |
| Additions to equity investments |
|
(23,338) |
|
- |
| Additions to property, plant and equipment |
|
(679,222) |
|
(386,882) |
| Construction of assets pending sale-leaseback |
|
(136) |
|
(4,308) |
| Proceeds from disposition of assets |
|
151 |
|
471 |
| Proceeds from repayment of loan to affiliate |
|
167 |
|
1,192 |
| Proceeds from sale-leaseback of assets |
|
- |
|
2,304 |
| Proceeds from sales and maturities of securities |
|
252,519 |
|
47,655 |
| Purchase of securities |
|
(367,150) |
|
(127,834) |
| Settlements of derivative instruments |
|
(6,920) |
|
431 |
| Net cash used for investing activities |
|
(1,002,238) |
|
(466,971) |
| Cash flows from financing activities |
|
|
|
|
| Capitalized debt issuance costs |
|
- |
|
(2,221) |
| Dividends paid |
|
(55,236) |
|
(285,521) |
| Proceeds from debt issuance |
|
- |
|
248,818 |
| Proceeds from exercise of stock options |
|
3,437 |
|
10,369 |
| Repayment of debt |
|
- |
|
(250,000) |
| Repurchase of common stock for treasury |
|
(32,918) |
|
(10,784) |
| Utilization of restricted cash |
|
- |
|
96,433 |
| Windfall tax benefits from share-based payment arrangements |
|
5,449 |
|
11,967 |
| Net cash used for financing activities |
|
(79,268) |
|
(180,939) |
| Net decrease in cash and cash equivalents |
|
(328,777) |
|
(35,823) |
| Cash and cash equivalents at beginning of the year |
|
790,078 |
|
825,901 |
| Cash and cash equivalents at end of the year |
|
$ |
461,301 |
|
$ |
790,078 |
| WESTLAKE CHEMICAL CORPORATION |
| |
| SEGMENT INFORMATION |
| (Unaudited) |
| |
| |
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
| |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| |
|
(In thousands of dollars) |
| Net external sales |
|
|
|
|
|
|
|
|
| Olefins |
|
$ |
668,144 |
|
$ |
555,203 |
|
$ |
2,553,669 |
|
$ |
2,499,978 |
| Vinyls |
|
283,481 |
|
245,838 |
|
1,205,815 |
|
1,071,063 |
| |
|
$ |
951,625 |
|
$ |
801,041 |
|
$ |
3,759,484 |
|
$ |
3,571,041 |
| Income (loss) from operations |
|
|
|
|
|
|
|
|
| Olefins |
|
$ |
247,291 |
|
$ |
143,212 |
|
$ |
833,249 |
|
$ |
552,762 |
| Vinyls |
|
18,562 |
|
18,218 |
|
154,684 |
|
85,942 |
| Corporate and other |
|
(8,273) |
|
(5,199) |
|
(34,469) |
|
(23,353) |
| |
|
$ |
257,580 |
|
$ |
156,231 |
|
$ |
953,464 |
|
$ |
615,351 |
| Depreciation and amortization |
|
|
|
|
|
|
|
|
| Olefins |
|
$ |
26,523 |
|
$ |
23,003 |
|
$ |
102,938 |
|
$ |
97,906 |
| Vinyls |
|
14,864 |
|
11,816 |
|
54,371 |
|
46,146 |
| Corporate and other |
|
127 |
|
121 |
|
499 |
|
489 |
| |
|
$ |
41,514 |
|
$ |
34,940 |
|
$ |
157,808 |
|
$ |
144,541 |
| Other income (expense), net |
|
|
|
|
|
|
|
|
| Olefins |
|
$ |
1,521 |
|
$ |
1,136 |
|
$ |
7,410 |
|
$ |
3,899 |
| Vinyls |
|
(172) |
|
(1,081) |
|
(1,858) |
|
(965) |
| Corporate and other |
|
2,304 |
|
(211) |
|
1,238 |
|
586 |
| |
|
$ |
3,653 |
|
$ |
(156) |
|
$ |
6,790 |
|
$ |
3,520 |
| WESTLAKE CHEMICAL CORPORATION |
| |
| RECONCILIATION OF EBITDA TO NET INCOME AND TO NET CASH |
| PROVIDED BY OPERATING ACTIVITIES |
| (Unaudited) |
| |
| |
|
Three Months
Ended
September 30, |
|
Three Months Ended
December 31, |
|
Twelve Months Ended
December 31, |
| |
|
2013 |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| |
|
(In thousands of dollars) |
| EBITDA |
|
$ |
307,044 |
|
$ |
302,746 |
|
$ |
191,015 |
|
$ |
1,118,062 |
|
$ |
772,759 |
| Less: |
|
|
|
|
|
|
|
|
|
|
| Provision for income taxes |
|
92,728 |
|
87,100 |
|
53,431 |
|
331,747 |
|
199,614 |
| Interest expense |
|
3,297 |
|
3,161 |
|
7,367 |
|
18,082 |
|
43,049 |
| Depreciation and amortization |
|
40,729 |
|
41,513 |
|
34,940 |
|
157,808 |
|
144,541 |
| Net income |
|
170,290 |
|
170,972 |
|
95,277 |
|
610,425 |
|
385,555 |
| Changes in operating assets and liabilities |
|
98,712 |
|
23,968 |
|
34,157 |
|
48,572 |
|
232,325 |
| Deferred income taxes |
|
23,018 |
|
10,289 |
|
(10,178) |
|
93,732 |
|
(5,793) |
| Net cash provided by operating activities |
|
$ |
292,020 |
|
$ |
205,229 |
|
$ |
119,256 |
|
$ |
752,729 |
|
$ |
612,087 |
| WESTLAKE CHEMICAL CORPORATION |
| |
| SUPPLEMENTAL INFORMATION |
| |
| Product Sales Price and Volume Variance by Operating Segments |
| |
| |
|
Fourth Quarter 2013 vs.
Fourth Quarter 2012 |
|
Fourth Quarter 2013 vs.
Third Quarter 2013 |
| |
|
Average Sales Price |
|
Volume |
|
Average Sales Price |
|
Volume |
| Olefins |
|
+9.2% |
|
+11.1% |
|
+2.2% |
|
-3.9% |
| Vinyls |
|
-0.2% |
|
+15.5% |
|
-3.3% |
|
-9.5% |
| Company |
|
+6.3% |
|
+12.5% |
|
+0.5% |
|
-5.7% |
| Average Quarterly Industry Prices (1) |
| |
| |
|
Quarter Ended |
| |
|
December 31, 2012 |
|
March 31, 2013 |
|
June 30, 2013 |
|
September 30, 2013 |
|
December 31, 2013 |
| Ethane (cents/lb) |
|
9.5 |
|
8.7 |
|
9.2 |
|
8.4 |
|
8.8 |
| Propane (cents/lb) |
|
20.9 |
|
20.5 |
|
21.6 |
|
24.4 |
|
28.4 |
| Ethylene (cents/lb) (2) |
|
54.3 |
|
63.3 |
|
58.5 |
|
54.3 |
|
52.3 |
| Polyethylene (cents/lb) (3) |
|
91.7 |
|
97.3 |
|
100.0 |
|
101.7 |
|
105.0 |
| Styrene (cents/lb) (4) |
|
82.3 |
|
85.9 |
|
81.8 |
|
83.2 |
|
81.8 |
| Caustic soda ($/short ton) (5) |
|
602.5 |
|
602.5 |
|
625.8 |
|
605.8 |
|
582.5 |
| Chlorine ($/short ton) (6) |
|
255.0 |
|
255.0 |
|
255.0 |
|
248.3 |
|
245.0 |
| PVC (cents/lb) (7) |
|
56.5 |
|
59.2 |
|
62.2 |
|
61.5 |
|
60.5 |
| ________________ |
| |
|
| (1) |
Industry pricing data was obtained through IHS Chemical. We have not independently verified the data. |
| (2) |
Represents average North American spot prices of ethylene over the period as reported by IHS Chemical. |
| (3) |
Represents average North American contract prices of polyethylene low density film over the period as reported by IHS Chemical. |
| (4) |
Represents average North American contract prices of styrene over the period as reported by IHS Chemical. |
| (5) |
Represents average North American undiscounted contract prices of caustic soda over the period as reported by IHS Chemical. |
| (6) |
Represents average North American contract prices of chlorine (into chemicals) over the period as reported by IHS Chemical. |
| (7) |
Represents average North American contract prices of PVC over the period as reported by IHS Chemical. |
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