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Press release from PR Newswire

Westlake Announces Third Quarter 2013 Earnings

Thursday, November 07, 2013

Westlake Announces Third Quarter 2013 Earnings

06:00 EST Thursday, November 07, 2013

- Record quarterly earnings per share of $2.54
- Net income increased 96% vs Q3 2012 and 17% vs Q2 2013

HOUSTON, Nov. 7, 2013 /PRNewswire/ -- Westlake Chemical Corporation (NYSE: WLK) today reported record quarterly net income of $170.3 million, or $2.54 per diluted share, on net sales of $1,004.2 million for the quarter ended September 30, 2013. This represents an increase in net income of $83.3 million, or $1.24 per diluted share, compared to the quarter ended September 30, 2012 net income of $87.0 million, or $1.30 per diluted share, on net sales of $821.2 million. Net sales for the third quarter of 2013 increased by $183.0 million compared to net sales for the third quarter of 2012, mainly attributable to higher sales volumes for styrene and caustic, higher sales prices for most of our major products and sales contributed by our specialty PVC pipe business, which we acquired in May 2013. Styrene sales volumes for the third quarter of 2012 were negatively impacted by a turnaround of the styrene plant in Lake Charles, Louisiana. Income from operations was $266.6 million for the third quarter of 2013 as compared to $142.5 million for the third quarter of 2012. Income from operations for the third quarter of 2013 benefited primarily from improved olefins and vinyls integrated product margins, largely due to higher sales prices for most of our major products and lower overall feedstock costs as compared to the prior year period.

Third quarter 2013 net income of $170.3 million, or $2.54 per diluted share, increased from the net income of $145.8 million, or $2.17 per diluted share, reported in the second quarter of 2013. Third quarter 2013 sales of $1,004.2 million increased by $65.2 million compared to sales of $939.0 million in the second quarter of 2013. The increase in sales was largely due to higher sales volumes of polyethylene. Third quarter 2013 income from operations of $266.6 million increased by $31.4 million over the income from operations in the second quarter of 2013 of $235.2 million. This increase in income from operations was primarily attributable to lower feedstock costs and higher polyethylene sales volumes as compared to the second quarter of 2013.

For the nine months ended September 30, 2013, net income was $439.5 million, or $6.54 per diluted share, on net sales of $2,807.9 million. This represents an increase in net income of $149.2 million, or $2.21 per diluted share, from the nine months ended September 30, 2012 net income of $290.3 million, or $4.33 per diluted share, on net sales of $2,770.0 million. Net sales for the nine months ended September 30, 2013 increased by $37.9 million compared to the prior year period mainly due to higher sales volumes and sales prices for styrene, PVC resin and caustic, higher polyethylene sales prices and sales contributed by our specialty PVC pipe business, mostly offset by lower feedstock, ethylene and ethylene co-products sales volumes. Income from operations was $695.9 million for the nine months ended September 30, 2013 as compared to $459.1 million for the nine months ended September 30, 2012. The increase in income from operations was primarily attributable to higher olefins and vinyls integrated product margins, predominantly due to a significant decrease in feedstock costs as industry ethane prices decreased 40.4% and industry propane prices decreased 10.1% in the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012.

Albert Chao, President and Chief Executive Officer, stated, "Westlake achieved record quarterly earnings for the third quarter of 2013 largely due to strong demand for most of our major products and low feedstock costs, resulting from shale gas production. We believe North American shale gas production will continue to give our business a significant cost advantage for the foreseeable future. We continue to invest to capture this advantageous cost position with the planned start-up of our chlor-alkali unit in Geismar, Louisiana before the end of this year and the planned conversion to ethane feedstock and expansion of our ethylene and PVC capacity at our Calvert City, Kentucky facility in 2014."

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $307.0 million for the third quarter of 2013 increased by $131.4 million compared to EBITDA of $175.6 million for the third quarter of 2012. EBITDA for the third quarter of 2013 increased by $31.7 million compared to the $275.3 million reported in the second quarter of 2013. A reconciliation of EBITDA to 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 $547.5 million in the first nine months of 2013. Capital expenditures for the first nine months of 2013 were $498.3 million. In addition, in the second quarter of 2013, we acquired our specialty PVC pipe business for $178.3 million. As of September 30, 2013, our cash, cash equivalents and current marketable securities totaled $717.2 million, and our long-term debt was $763.8 million.

OLEFINS SEGMENT

Income from operations for the Olefins segment increased by $112.7 million, or 90.5%, to $237.2 million in the third quarter of 2013 from $124.5 million in the third quarter of 2012. This increase was mainly attributable to higher olefins integrated product margins as compared to the prior year period, primarily as a result of higher sales prices for most of our major products and significantly lower feedstock costs. In addition, olefins integrated margins benefited from the increased ethylene production at our Lake Charles complex after the completion of the expansion project to increase the ethane-based ethylene capacity of one of the ethylene units at that complex in the first quarter of 2013.

Income from operations for the Olefins segment for the third quarter of 2013 was $237.2 million, an increase of $49.5 million from the $187.7 million reported in the second quarter of 2013. Income from operations in the third quarter of 2013 benefited from higher integrated margins, primarily as a result of lower feedstock costs, and higher polyethylene sales volumes compared to the second quarter of 2013.

Income from operations for the Olefins segment increased by $176.4 million, or 43.1%, to $586.0 million for the nine months ended September 30, 2013 from $409.6 million for the nine months ended September 30, 2012. This increase was mainly attributable to higher olefins integrated product margins as compared to the prior year period. Margins improved primarily as a result of significantly lower feedstock costs.

VINYLS SEGMENT

Income from operations for the Vinyls segment increased by $15.5 million, or 64.3%, to $39.6 million in the third quarter of 2013 from $24.1 million in the third quarter of 2012. This increase was primarily driven by higher vinyls integrated product margins, largely resulting from higher sales prices for all major products, higher caustic sales volumes and improved operating rates as compared to the third quarter of 2012.

The Vinyls segment reported income from operations of $39.6 million in the third quarter of 2013, a decrease of $13.3 million compared to the income from operations of $52.9 million in the second quarter of 2013. This decrease was primarily due to higher propane costs and lower PVC resin prices as compared to the second quarter of 2013.

Income from operations for the Vinyls segment increased by $68.4 million to $136.1 million for the nine months ended September 30, 2013 from $67.7 million for the nine months ended September 30, 2012. This increase was predominantly driven by lower feedstock costs, higher sales volumes for caustic and PVC resin and higher operating rates as compared to the prior year period. The Vinyls segment's operating results for the first nine months of 2012 were negatively impacted by the lost production, lost sales and unabsorbed manufacturing and other costs associated with an unscheduled shut down at our Geismar vinyls complex.

The statements in this release relating to matters that are not historical facts, including statements regarding cost advantages related to North American shale gas production, the planned completion of a new chlor-alkali plant and the conversion to ethane feedstock and expansion of our ethylene and PVC capacity in Calvert City, are forward-looking statements that are subject to 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, 2012, which was filed with the SEC on February 22, 2013, and to Westlake's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, which was filed with the SEC on May 7, 2013.

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation's third quarter 2013 results will be held Thursday, November 7, 2013 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). To access the conference call, dial (800) 688-0836, or (617) 614-4072 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 85536130.

A replay of the conference call will be available beginning four hours after its conclusion until 3:00 p.m. Eastern Time on Thursday, November 14, 2013. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 45573736.

The conference call will also be available via webcast at: http://phoenix.corporate-ir.net/phoenix.zhtml?c=180248&p=irol-eventDetails&EventId=5036286 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 CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2013

2012

2013

2012

(In thousands of dollars, except per share data)

Net sales

$

1,004,165

$

821,175

$

2,807,859

$

2,770,000

Cost of sales

699,694

648,996

2,002,092

2,223,288

Gross profit

304,471

172,179

805,767

546,712

Selling, general and administrative expenses

37,869

29,662

109,883

87,592

Income from operations

266,602

142,517

695,884

459,120

Interest expense

(3,297)

(11,934)

(14,921)

(35,682)

Debt retirement costs

?

(7,082)

?

(7,082)

Gain from sales of equity securities

?

477

?

16,429

Other (expense) income, net

(287)

1,222

3,137

3,676

Income before income taxes

263,018

125,200

684,100

436,461

Provision for income taxes

92,728

38,236

244,647

146,183

Net income

$

170,290

$

86,964

$

439,453

$

290,278

Earnings per share:

Basic

$

2.55

$

1.30

$

6.57

$

4.36

Diluted

$

2.54

$

1.30

$

6.54

$

4.33

 

WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

September 30, 2013

December 31, 2012

(In thousands of dollars)

ASSETS

Current assets

Cash and cash equivalents

$

591,556

$

790,078

Marketable securities

125,597

124,873

Accounts receivable, net

433,025

400,159

Inventories

451,571

399,298

Other current assets

41,102

37,005

Total current assets

1,642,851

1,751,413

Property, plant and equipment, net

1,952,918

1,510,048

Other assets, net

327,680

150,735

Total assets

$

3,923,449

$

3,412,196

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities (accounts payable and accrued liabilities)

$

432,686

$

398,510

Long-term debt

763,849

763,761

Other liabilities

461,857

377,669

Total liabilities

1,658,392

1,539,940

Stockholders' equity

2,265,057

1,872,256

Total liabilities and stockholders' equity

$

3,923,449

$

3,412,196

 

WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30,

2013

2012

(In thousands of dollars)

Cash flows from operating activities

Net income

$

439,453

$

290,278

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

Depreciation and amortization

116,294

109,601

Deferred income taxes

83,443

4,385

Other balance sheet changes

(91,690)

88,567

Net cash provided by operating activities

547,500

492,831

Cash flows from investing activities

Acquisition of business

(178,309)

?

Additions to equity investments

(23,338)

?

Additions to property, plant and equipment

(498,290)

(235,463)

Construction of assets pending sale-leaseback

(136)

(5,484)

Proceeds from disposition of assets

78

435

Proceeds from repayment of loan to affiliate

167

763

Proceeds from sales and maturities of securities

239,764

47,655

Purchase of securities

(232,286)

(2,961)

Settlements of derivative instruments

(2,297)

471

Net cash used for investing activities

(694,647)

(194,584)

Cash flows from financing activities

Capitalized debt issuance costs

?

(2,221)

Dividends paid

(40,204)

(22,345)

Proceeds from debt issuance

?

248,818

Proceeds from exercise of stock options

3,182

6,627

Repayment of debt

?

(250,000)

Repurchase of common stock for treasury

(19,409)

(10,784)

Utilization of restricted cash

?

96,433

Windfall tax benefits from share-based payment arrangements

5,056

7,792

Net cash (used for) provided by financing activities

(51,375)

74,320

Net (decrease) increase in cash and cash equivalents

(198,522)

372,567

Cash and cash equivalents at beginning of the period

790,078

825,901

Cash and cash equivalents at end of the period

$

591,556

$

1,198,468

 

WESTLAKE CHEMICAL CORPORATION

SEGMENT INFORMATION

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2013

2012

2013

2012

(In thousands of dollars)

Net external sales

Olefins

$

679,339

$

539,785

$

1,885,525

$

1,944,775

Vinyls

324,826

281,390

922,334

825,225

$

1,004,165

$

821,175

$

2,807,859

$

2,770,000

Income (loss) from operations

Olefins

$

237,239

$

124,452

$

585,958

$

409,550

Vinyls

39,554

24,059

136,123

67,724

Corporate and other

(10,191)

(5,994)

(26,197)

(18,154)

$

266,602

$

142,517

$

695,884

$

459,120

Depreciation and amortization

Olefins

$

26,515

$

27,070

$

76,415

$

74,903

Vinyls

14,089

11,232

39,507

34,330

Corporate and other

124

122

372

368

$

40,728

$

38,424

$

116,294

$

109,601

Other income (expense), net

Olefins

$

728

$

806

$

5,889

$

2,764

Vinyls

(742)

146

(1,687)

115

Corporate and other

(273)

270

(1,065)

797

$

(287)

$

1,222

$

3,137

$

3,676

 

WESTLAKE CHEMICAL CORPORATION

RECONCILIATION OF EBITDA TO NET INCOME AND TO NET CASH

PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

Three Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

2013

2013

2012

2013

2012

(In thousands of dollars)

EBITDA

$

275,342

$

307,043

$

175,558

$

815,315

$

581,744

Less:

Provision for income taxes

83,973

92,728

38,236

244,647

146,183

Interest expense

5,343

3,297

11,934

14,921

35,682

Depreciation and amortization

40,210

40,728

38,424

116,294

109,601

Net income

145,816

170,290

86,964

439,453

290,278

Changes in operating assets and liabilities

(37,547)

98,712

92,056

24,604

198,168

Deferred income taxes

30,959

23,018

(2,335)

83,443

4,385

Net cash provided by operating activities

$

139,228

$

292,020

$

176,685

$

547,500

$

492,831

 

WESTLAKE CHEMICAL CORPORATION

SUPPLEMENTAL INFORMATION

Product Sales Price and Volume Variance by Operating Segments

Third Quarter 2013 vs. Third Quarter 2012

Third Quarter 2013 vs. Second Quarter 2013

Average

Sales Price

Volume

Average

Sales Price

Volume

Olefins

+11.5%

+14.3%

-1.0%

+9.9%

Vinyls

+6.2%

+9.3%

-0.2%

+3.1%

Company

+9.7%

+12.6%

-0.7%

+7.7%

 

Average Quarterly Industry Prices (1)

Quarter Ended

September 30, 2012

December 31, 2012

March 31, 2013

June 30, 2013

September 30, 2013

Ethane (cents/lb)

11.4

9.5

8.7

9.2

8.4

Propane (cents/lb)

21.2

20.9

20.5

21.6

24.4

Ethylene (cents/lb) (2)

52.1

54.3

63.3

58.5

54.3

Polyethylene (cents/lb) (3)

91.3

91.7

97.3

100.0

101.7

Styrene (cents/lb) (4)

77.7

82.3

85.9

81.8

83.2

Caustic soda ($/short ton) (5)

579.2

602.5

602.5

625.8

605.8

Chlorine ($/short ton) (6)

262.5

255.0

255.0

255.0

248.3

PVC (cents/lb) (7)

52.5

56.5

59.2

62.2

61.5

________________

(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.

SOURCE Westlake Chemical Corporation

For further information: Investors, Steve Bender, or Media, David R. Hansen, (713) 960-9111

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