Westlake Chemical's Q1 net income up 28.1% year-over-year to US$158M, mainly attributable to higher sales volumes for PE and ethylene, higher prices and sales within specialty PVC pipe business; net sales up 18.9% to US$1.03B

HOUSTON , May 5, 2014 (press release) – - Earnings per share up 28% over Q1 2013
- Record quarterly Olefins segment income from operations of $272.3 million


Westlake Chemical Corporation (NYSE: WLK) today reported net income for the quarter ended March 31, 2014 of $158.0 million, or $1.18 per diluted share, on net sales of $1,027.7 million. This represents an increase in net income of $34.7 million, or $0.26 per diluted share, compared to first quarter 2013 net income of $123.3 million, or $0.92 per diluted share, on net sales of $864.6 million. Net sales for the first quarter of 2014 increased by $163.1 million compared to net sales for the first quarter of 2013, mainly attributable to higher sales volumes for polyethylene and ethylene, higher sales prices for most of our major products and sales contributed by our specialty PVC pipe business, which we acquired in May 2013. Income from operations was $248.1 million for the first quarter of 2014 as compared to $194.1 million for the first quarter of 2013. Income from operations for the first quarter of 2014 benefited primarily from higher olefins volumes and improved integrated product margins, as higher sales prices more than offset the increase in feedstock and energy costs as compared to the prior year period. The increase in first quarter 2014 income from operations was partially offset by the lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with the planned maintenance turnaround of our Calvert City production facilities for the ethylene plant's feedstock conversion and expansion project and other planned maintenance activities.

First quarter 2014 net income of $158.0 million, or $1.18 per diluted share, decreased from the $171.0 million, or $1.27 per diluted share, reported in the fourth quarter of 2013. First quarter 2014 sales of $1,027.7 million increased $76.1 million compared to sales of $951.6 million in the fourth quarter of 2013. The increase in sales in the first quarter of 2014 was largely due to higher sales prices for most of our major products, as well as higher sales volumes for polyethylene, caustic, and building products as compared to the fourth quarter of 2013. First quarter 2014 income from operations of $248.1 million decreased by $9.5 million from income from operations in the fourth quarter of 2013 of $257.6 million. The decrease in income from operations in the first quarter of 2014 as compared to the fourth quarter of 2013 was primarily due to higher propane feedstock costs, the severe winter weather and the lost sales and associated costs related to the planned maintenance turnaround of our Calvert City production facilities.

Albert Chao, President and Chief Executive Officer, said "We are pleased to report a 28% increase in first quarter net income as compared to the first quarter of last year despite the negative impact on earnings related to elevated propane costs, severe winter weather and the Calvert City planned maintenance turnaround. We also successfully completed the Calvert City ethylene plant conversion to ethane feedstock and its expansion by 180 million pounds a year in capacity in early April which allows our Vinyls segment to capture the advantageous ethylene cost position our Olefins segment has been benefitting from over the past several years and that we expect will continue into the foreseeable future."

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $296.5 million for the first quarter of 2014 increased by $63.6 million compared to $232.9 million in the first quarter of 2013. EBITDA for the first quarter of 2014 decreased by $6.2 million compared to EBITDA of $302.7 million in the fourth 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.

Net cash provided by operating activities was $212.5 million in the first quarter of 2014. Capital expenditures for the first quarter of 2014 were $110.7 million. As of March 31, 2014 we had cash and marketable securities of $776.3 million and our long-term debt was $763.9 million.

OLEFINS SEGMENT

The Olefins segment reported income from operations of $272.3 million in the first quarter of 2014, an increase of $111.2 million compared to $161.1 million reported in the first quarter of 2013. The increase was primarily due to higher olefins integrated product margins as compared to the prior year period, as the increase in sales prices outpaced increases in feedstock and energy costs. In addition, first quarter 2014 income from operations benefited from higher polyethylene and ethylene sales volumes and improved production rates for most of our major products. Income from operations in the first quarter of 2013 was negatively impacted as a result of the lost production, unabsorbed fixed manufacturing costs and other costs associated with the turnaround and expansion of the Lake Charles Petro 2 ethylene unit.

Income from operations for the first quarter of 2014 for the Olefins segment of $272.3 million increased by $25.0 million from the $247.3 million reported in the fourth quarter of 2013. The increase in first quarter income from operations was primarily due to higher polyethylene sales prices and volumes, which were partially offset by higher ethane prices than in the fourth quarter of 2013.

VINYLS SEGMENT

The Vinyls segment reported an operating loss of $21.1 million in the first quarter of 2014 compared to income from operations of $43.7 million in the first quarter of 2013, a decrease of $64.8 million. This decrease was primarily driven by the lost sales, lower production rates and the expensing of $16.9 million related to unabsorbed fixed manufacturing costs and other costs associated with the planned maintenance turnaround of our Calvert City production facilities for the ethylene plant's feedstock conversion and expansion and other planned maintenance activities. In addition, the Vinyls segment's first quarter 2014 operating results were negatively impacted by the severe winter weather and significantly higher propane costs, as average industry prices for propane increased by 50.2% as compared to the prior year period.

The Vinyls segment reported an operating loss of $21.1 million in the first quarter of 2014, a decrease of $39.7 million compared to income from operations of $18.6 million in the fourth quarter of 2013. The results for the first quarter of 2014 were negatively impacted by higher propane costs as compared to the fourth quarter of 2013 and the lost sales and costs associated with the planned maintenance turnaround of our Calvert City facilities.

The statements in this release and the related teleconference relating to matters that are not historical facts, such as statements regarding the advantageous ethylene cost position our Olefins business has been benefiting from over the past few years and that we expect to continue for the foreseeable future are forward-looking statements. These forward-looking statements are subject to significant risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to: general economic and business conditions; the cyclical nature of the chemical industry; availability, cost and volatility of raw materials and utilities, including natural gas from shale production; uncertainties associated with the United States and worldwide economies, including those due to global economic and financial conditions; governmental regulatory actions, including environmental regulation; political unrest; industry production capacity and operating rates; the supply/demand balance for Westlake's products; competitive products and pricing pressures; access to capital markets; technological developments; the effect and results of litigation and settlements of litigation; operating interruptions; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to Westlake's Annual Report on Form 10-K for the year ended December 31, 2013, which was filed with the SEC in February 2014.

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation's first quarter 2014 results will be held Monday, May 5, 2014 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). To access the conference call, dial (800) 299-9630, or (617) 786-2904 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 25946075.

A replay of the conference call will be available beginning four hours after its conclusion until 11:59 p.m. Eastern Time on Monday, May 12, 2014. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 68118182.

The conference call will also be available via webcast at: http://phx.corporate-ir.net/phoenix.zhtml?c=180248&p=IROL-EventDetails&EventID= 5133048 and the earnings release can be obtained via the company's web page at: http://www.westlake.com/fw/main/IR_Home_Page-123.html.

 

     

WESTLAKE CHEMICAL CORPORATION

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

     
   

Three Months Ended March 31,

   

2014

   

2013

 
   

(In thousands of dollars,

except per share data)

Net sales

 

$

1,027,676

   

$

864,647

 

Cost of sales

 

740,666

   

636,838

 

Gross profit

 

287,010

   

227,809

 

Selling, general and administrative expenses

 

38,955

   

33,754

 

Income from operations

 

248,055

   

194,055

 

Interest expense

 

(9,157)

   

(6,281)

 

Other income, net

 

2,509

   

3,519

 

Income before income taxes

 

241,407

   

191,293

 

Provision for income taxes

 

83,375

   

67,946

 

Net income

 

$

158,032

   

$

123,347

 

Earnings per share: (1)

           

Basic

 

$

1.18

   

$

0.92

 

Diluted

 

$

1.18

   

$

0.92

 
       

(1)

On February 14, 2014, our Board of Directors authorized a two-for-one split of our common stock. Stockholders of record as of February 28, 2014 were entitled to one additional share for every share outstanding, which was distributed on March 18, 2014. Per share data for the three months ended March 31, 2013 have been restated to reflect the effect of the stock split.

 

         

WESTLAKE CHEMICAL CORPORATION

 

CONSOLIDATED BALANCE SHEETS

(Unaudited)

         
   

March 31,

 2014

 

December 31,

 2013

   

(In thousands of dollars)

ASSETS

           

Current assets

           

Cash and cash equivalents

 

$

532,643

   

$

461,301

 

Marketable securities

 

243,694

   

239,388

 

Accounts receivable, net

 

421,879

   

428,457

 

Inventories

 

439,009

   

471,879

 

Other current assets

 

50,038

   

48,057

 

Total current assets

 

1,687,263

   

1,649,082

 

Property, plant and equipment, net

 

2,150,643

   

2,088,014

 

Other assets, net

 

334,050

   

323,813

 

Total assets

 

$

4,171,956

   

$

4,060,909

 
             

LIABILITIES AND STOCKHOLDERS' EQUITY

           

Current liabilities (accounts payable and accrued liabilities)

 

$

359,934

   

$

404,858

 

Long-term debt

 

763,909

   

763,879

 

Other liabilities

 

479,541

   

473,569

 

Total liabilities

 

1,603,384

   

1,642,306

 

Stockholders' equity

 

2,568,572

   

2,418,603

 

Total liabilities and stockholders' equity

 

$

4,171,956

   

$

4,060,909

 

 

     

WESTLAKE CHEMICAL CORPORATION

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

     
   

Three Months Ended March 31,

   

2014

   

2013

 
   

(In thousands of dollars)

Cash flows from operating activities

           

Net income

 

$

158,032

   

$

123,347

 

Adjustments to reconcile net income to net cash provided by operating activities:

           

Depreciation and amortization

 

45,972

   

35,356

 

Deferred income taxes

 

8,275

   

29,466

 

Other balance sheet changes

 

226

   

(71,917)

 

Net cash provided by operating activities

 

212,505

   

116,252

 

Cash flows from investing activities

           

Additions to property, plant and equipment

 

(110,741)

   

(150,784)

 

Proceeds from disposition of assets

 

12

   

2

 

Proceeds from repayment of loan to affiliate

 

   

167

 

Proceeds from sales and maturities of securities

 

30,119

   

124,873

 

Purchase of securities

 

(49,025)

   

(94,903)

 

Settlements of derivative instruments

 

(409)

   

(679)

 

Net cash used for investing activities

 

(130,044)

   

(121,324)

 

Cash flows from financing activities

           

Dividends paid

 

(16,789)

   

(12,553)

 

Proceeds from exercise of stock options

 

2,158

   

1,590

 

Windfall tax benefits from share-based payment arrangements

 

3,512

   

3,844

 

Net cash used for financing activities

 

(11,119)

   

(7,119)

 

Net increase (decrease) in cash and cash equivalents

 

71,342

   

(12,191)

 

Cash and cash equivalents at beginning of period

 

461,301

   

790,078

 

Cash and cash equivalents at end of period

 

$

532,643

   

$

777,887

 

 

     

WESTLAKE CHEMICAL CORPORATION

 

SEGMENT INFORMATION

(Unaudited)

     
   

Three Months Ended March 31,

   

2014

   

2013

 
   

(In thousands of dollars)

Net external sales

           

Olefins

 

$

722,798

   

$

582,845

 

Vinyls

 

304,878

   

281,802

 
   

$

1,027,676

   

$

864,647

 

Income (loss) from operations

           

Olefins

 

$

272,333

   

$

161,058

 

Vinyls

 

(21,114)

   

43,663

 

Corporate and other

 

(3,164)

   

(10,666)

 
   

$

248,055

   

$

194,055

 

Depreciation and amortization

           

Olefins

 

$

26,647

   

$

23,346

 

Vinyls

 

19,168

   

11,884

 

Corporate and other

 

157

   

126

 
   

$

45,972

   

$

35,356

 

Other income (expense), net

           

Olefins

 

$

1,454

   

$

4,010

 

Vinyls

 

(34)

   

(425)

 

Corporate and other

 

1,089

   

(66)

 
   

$

2,509

   

$

3,519

 

 

         

WESTLAKE CHEMICAL CORPORATION

 

RECONCILIATION OF EBITDA TO NET INCOME AND TO NET CASH

PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

         
   

Three Months Ended

December 31,

 

Three Months Ended

March 31,

   

2013

   

2014

   

2013

 
   

(In thousands of dollars)

EBITDA

 

$

302,746

   

$

296,536

   

$

232,930

 

Less:

                 

Provision for income taxes

 

87,100

   

83,375

   

67,946

 

Interest expense

 

3,161

   

9,157

   

6,281

 

Depreciation and amortization

 

41,513

   

45,972

   

35,356

 

Net income

 

170,972

   

158,032

   

123,347

 

Changes in operating assets and liabilities

 

23,968

   

46,198

   

(36,561)

 

Deferred income taxes

 

10,289

   

8,275

   

29,466

 

Net cash provided by operating activities

 

$

205,229

   

$

212,505

   

$

116,252

 

 

         

WESTLAKE CHEMICAL CORPORATION

 

SUPPLEMENTAL INFORMATION

Product Sales Price and Volume Variance by Operating Segments

         
   

First Quarter 2014 vs.

First Quarter 2013

 

First Quarter 2014 vs.

Fourth Quarter 2013

   

Average

Sales Price

 

Volume

 

Average

Sales Price

 

Volume

Olefins

 

+13.3

%

 

+10.7

%

 

+5.2

%

 

+3.0

%

Vinyls

 

+1.7

%

 

+4.9

%

 

+5.1

%

 

+0.9

%

Company

 

+9.5

%

 

+8.8

%

 

+5.2

%

 

+2.3

%

 

     

Average Quarterly Industry Prices (1)

     
   

Quarter Ended

   

March 31,

 2013

 

June 30,

 2013

 

September 30,

 2013

 

December 31,

 2013

 

March 31,

 2014

Ethane (cents/lb)

 

8.7

 

9.2

 

8.4

 

8.8

 

11.4

Propane (cents/lb)

 

20.5

 

21.6

 

24.4

 

28.4

 

30.8

Ethylene (cents/lb) (2)

 

63.3

 

58.5

 

54.3

 

52.3

 

55.1

Polyethylene (cents/lb) (3)

 

97.3

 

100.0

 

101.7

 

105.0

 

107.7

Styrene (cents/lb) (4)

 

85.9

 

81.8

 

83.2

 

81.8

 

86.9

Caustic soda ($/short ton) (5)

 

602.5

 

625.8

 

605.8

 

582.5

 

579.2

Chlorine ($/short ton) (6)

 

255.0

 

255.0

 

248.3

 

245.0

 

236.7

PVC (cents/lb) (7)

 

59.2

 

62.2

 

61.5

 

60.5

 

66.5

         

(1)

Industry pricing data was obtained from 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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