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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