EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

WESTLAKE CHEMICAL CORPORATION

Contact – (713) 960-9111

Investors – Steve Bender

Media – David R. Hansen

 

 

WESTLAKE CHEMICAL REPORTS THIRD QUARTER EARNINGS

Westlake Chemical Corporation (NYSE: WLK) today reported net income of $29.8 million, or $0.45 per diluted share, on net sales of $632.6 million for the third quarter of 2009. Third quarter 2009 net income increased $12.9 million from the $16.9 million net income, or $0.26 per diluted share, reported for the second quarter of 2009. Third quarter 2009 income from operations was $49.0 million as compared to the $36.2 million reported for the second quarter of 2009, while net sales increased by $57.7 million from the $574.9 million reported for the second quarter of 2009. The increase in sales was largely due to higher sales prices for most of the Company’s major products except caustic. The increase in income from operations in the third quarter of 2009 compared to the second quarter of 2009 was due to higher polyethylene and PVC resin margins, which were partially offset by a 53% drop in industry caustic prices and lower PVC pipe margins. Vinyls downstream margins continue to be negatively impacted by weakness in construction activity.

Albert Chao, President and Chief Executive Officer, said, “We are pleased with our third quarter earnings considering the current economic environment. Olefins segment operating margins improved in the third quarter as increases in polyethylene prices outpaced the increase in feedstock costs. In addition, gas-based ethylene producers, like Westlake, continue to have a cost advantage over naptha-based producers. Vinyls segment operating results were negatively impacted by a significant drop in caustic prices and continued weakness in construction markets. We maintain a cautious outlook on the economy and as a result we continue to focus on controlling our costs, working capital and discretionary capital spending in order to conserve cash. We increased our cash balance by $48.2 million in the third quarter to $365.2 million, including restricted cash, and have no borrowings under our line of credit.”

Net income for the three months ended September 30, 2009 of $29.8 million, or $0.45 per diluted share, increased $2.4 million compared to net income of $27.4 million, or $0.42 per diluted share, for same period of 2008. Third quarter 2009 net income benefited as the effective income tax rate of 29% for the third quarter of 2009 was below the third quarter 2008 effective tax rate of 35%. The lower effective income tax rate resulted in a $2.5 million, or $0.04 per diluted share, benefit to net income in the third quarter of 2009


as compared to the third quarter of 2008. Sales for the three months ended September 30, 2009 of $632.6 million decreased $441.1 million compared to sales of $1,073.7 million in the same period of 2008. The decrease was primarily due to substantially lower sales prices for all major products. Income from operations was $49.0 million for the third quarter of 2009 compared to $48.8 million for the third quarter of 2008. Operating margins benefited from significantly lower energy and feedstock costs in the third quarter of 2009, which was mostly offset by lower sales prices and significantly lower caustic margins resulting from a 78% decrease in industry caustic prices compared to the third quarter of 2008. The third quarter of 2008 was negatively impacted by outages caused by Hurricanes Gustav and Ike at our Lake Charles and Geismar facilities. Trading activity resulted in a loss of $0.4 million in the third quarter of 2009 as compared to a loss of $0.9 million in the third quarter of 2008.

Net income for the nine months ended September 30, 2009 was $40.5 million, or $0.61 per diluted share, on net sales of $1,695.7 million. This represents a decrease in net income of $39.5 million, or $0.61 per diluted share, from the nine months ended September 30, 2008 net income of $80.0 million, or $1.22 per diluted share, on net sales of $3,095.2 million. Sales for the nine months ended September 30, 2009 decreased $1,399.5 million compared to the first nine months of 2008 largely due to lower sales prices for all major products and lower sales volumes for all major products except caustic and styrene. Income from operations was $84.3 million for the first nine months of 2009 as compared to $136.2 million for the first nine months of 2008. The decrease in income from operations was attributable to a number of factors, including reduced demand for our major products due to the current economic downturn, an unscheduled outage caused by an ice storm at our Calvert City, Kentucky complex in the first quarter of 2009 and a turnaround at one of our ethylene units in Lake Charles in the first quarter of 2009. This decrease was partially offset by a gain from trading activity of $3.6 million during the first nine months of 2009 compared to a loss of $7.8 million during the first nine months of 2008. The Calvert City outage and Lake Charles turnaround resulted in repair costs and the expensing of unabsorbed fixed manufacturing costs of $19.5 million during the first quarter of 2009. A turnaround and revamp of our styrene facility in Lake Charles and the effects of Hurricanes Gustav and Ike negatively impacted income from operations in the first nine months of 2008.

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) for the third quarter of 2009 increased $13.5 million to $81.9 million from $68.4 million in the second quarter of 2009. EBITDA for the third quarter of 2009 increased $3.7 million to $81.9 million compared to the $78.2 million in the third quarter of 2008. A reconciliation of EBITDA to reported net income and to cash flows from operating activities can be found in the financial schedules at the end of this press release.


Cash provided by operating activities was $213.5 million in the first nine months of 2009, an increase of $136.9 million compared with the first nine months of 2008. The increase was primarily the result of decreases in working capital. Cash used for investing activities, including capital additions, was $66.4 million for the first nine months of 2009, compared to $126.2 million for the first nine months of 2008. At September 30, 2009, the Company had $365.2 million of cash, including $112.3 million of restricted cash, and the Company’s long-term debt was $515.4 million. The restricted cash is held by a trustee until such time as the Company requests reimbursement for qualifying amounts spent for capital additions in Louisiana.

OLEFINS SEGMENT

Income from operations for the third quarter of 2009 for the Olefins segment was $61.7 million, an increase of $17.4 million from the $44.3 million reported in the second quarter of 2009. This increase was primarily due to an increase in polyethylene margins.

Income from operations of $61.7 million in the third quarter of 2009 was $43.5 million higher than the $18.2 million in the third quarter of 2008. This increase was primarily due to lower energy and feedstock costs, partially offset by lower sales prices. In addition, the third quarter of 2008 was negatively impacted by Hurricanes Gustav and Ike.

Income from operations increased by $25.9 million, to $122.0 million, in the first nine months of 2009 compared to income of $96.1 million in the first nine months of 2008. This increase was due to lower energy and feedstock costs, partially offset by lower sales prices for all major products and lower operating rates. Also, the first nine months of 2008 were negatively impacted by Hurricanes Gustav and Ike, as well as the turnaround on the styrene unit at Lake Charles. Trading activity resulted in a gain for the first nine months of 2009 of $3.6 million as compared to a loss of $7.8 million for the first nine months of 2008.

VINYLS SEGMENT

The Vinyls segment reported a loss from operations of $8.1 million in the third quarter of 2009 as compared to a loss from operations of $4.8 million reported in the second quarter of 2009. The change was primarily the result of lower PVC pipe margins and a significant decrease in caustic prices compared to the second quarter of 2009, partially offset by increased PVC resin margins.

The Vinyls segment reported a loss from operations of $8.1 million in the third quarter of 2009 compared to income from operations of $30.5 million in the third quarter of 2008, a decline of $38.6 million. This change was primarily caused by significantly lower


caustic margins due to a 78% drop in industry caustic prices compared to the third quarter of 2008, higher chlorine costs, lower operating rates and asset impairment costs of $3.9 million related to the Company’s PVC pipe business. These decreases were partially offset by an insurance recovery gain of $4.6 million in the third quarter of 2009 related to damage caused by the ice storm at the Calvert City facility in the first quarter of 2009.

The Vinyls segment loss from operations of $28.3 million in the first nine months of 2009 compared to income from operations of $45.8 million for the same period in 2008, a decline of $74.1 million. This decrease was primarily attributable to a significant reduction in caustic margins, lower operating rates, lower sales prices and reduced margins in the Company’s vinyls downstream businesses as a result of the continued weakness in the construction market. Operating rates were negatively impacted by the unscheduled outage at the Calvert City facility in the first quarter of 2009.

The statements in this release relating to matters that are not historical facts are forward-looking statements that are subject to risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to: the cyclical nature of the chemical industry; availability, cost and volatility of raw materials and utilities; governmental regulatory actions and political unrest; global economic conditions; 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; 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, 2008, which was filed with the SEC in February 2009.

In this release, Westlake refers to a non-GAAP financial measure, EBITDA. EBITDA is calculated as net income before interest expense, income taxes, depreciation and amortization. The body of accounting principles generally accepted in the United States is commonly referred to as “GAAP.” For this purpose a non-GAAP financial measure is generally defined by the U.S. Securities and Exchange Commission as one that purports to measure historical and future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measures. We have included EBITDA in this release because our management considers it an important supplemental measure of our performance and believes that it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, some of which present EBITDA when reporting their results. We regularly evaluate our performance as compared to other companies in


our industry that have different financing and capital structures and/or tax rates by using EBITDA. EBITDA allows for meaningful company-to-company performance comparisons by adjusting for factors such as interest expense, depreciation and amortization and taxes, which often vary from company to company. In addition, we utilize EBITDA in evaluating acquisition targets. Management also believes that EBITDA is a useful tool for measuring our ability to meet our future debt service, capital expenditures and working capital requirements, and EBITDA is commonly used by us and our investors to measure our ability to service indebtedness. EBITDA is not a substitute for the GAAP measures of earnings or of cash flow and is not necessarily a measure of our ability to fund our cash needs. In addition, it should be noted that companies calculate EBITDA differently and, therefore, EBITDA as presented in this release may not be comparable to EBITDA reported by other companies. EBITDA has material limitations as a performance measure because it excludes (1) interest expense, which is a necessary element of our costs and ability to generate revenues because we have borrowed money to finance our operations, (2) depreciation, which is a necessary element of our costs and ability to generate revenues because we use capital assets and (3) income taxes, which is a necessary element of our operations. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA only supplementally. A table included in the financial schedules at the end of this release reconciles EBITDA to net income and to cash flow from operating activities.

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation’s third quarter results will be held Tuesday, November 3rd at 11:00 a.m. EST (10:00 a.m. CST). To access the conference call, dial (866) 783-2138, or (857) 350-1597 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 49346652.

A replay of the conference call will be available beginning an hour after its conclusion until 1:00 p.m. EST on Tuesday, November 10, 2009. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 36570560.

The conference call will also be available via webcast at:

http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=180248&eventID=2496259 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
September 30,
    Nine Months Ended
September 30,
 
      2009     2008     2009     2008  
     (In thousands of dollars, except per share data and shares outstanding)  

Net sales

   $ 632,571      $ 1,073,735      $ 1,695,687      $ 3,095,245   

Cost of sales

     560,033        1,001,948        1,547,423        2,890,294   
                                

Gross profit

     72,538        71,787        148,264        204,951   

Selling, general and administrative expenses

     23,515        22,999        63,969        68,728   
                                

Income from operations

     49,023        48,788        84,295        136,223   

Interest expense

     (8,772     (8,093     (26,163     (25,908

Other income, net

     1,456        1,267        5,236        5,874   
                                

Income before income taxes

     41,707        41,962        63,368        116,189   

Provision for income taxes

     11,941        14,598        22,826        36,165   
                                

Net income

   $ 29,766      $ 27,364      $ 40,542      $ 80,024   
                                

Basic and diluted earnings per share

        

Basic

   $ 0.45      $ 0.42      $ 0.62      $ 1.22   

Diluted

   $ 0.45      $ 0.42      $ 0.61      $ 1.22   

Weighted average shares outstanding

        

Basic

     65,953,303        65,643,001        65,892,470        65,612,984   
                                

Diluted

     66,096,998        65,677,079        65,960,172        65,640,683   
                                


WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

      September 30,
2009
   December 31,
2008
     (In thousands of dollars)

ASSETS

     

Current assets

     

Cash and cash equivalents

   $ 252,873    $ 90,239

Accounts receivable, net

     343,406      347,323

Inventories, net

     312,029      327,967

Other current assets

     37,076      33,460
             

Total current assets

     945,384      798,989

Property, plant and equipment, net

     1,186,010      1,197,452

Restricted cash

     112,294      134,432

Other assets, net

     167,725      156,116
             

Total assets

   $ 2,411,413    $ 2,286,989
             

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

Current liabilities (accounts payable and accrued liabilities)

   $ 263,668    $ 212,288

Long-term debt

     515,380      510,319

Other liabilities

     354,737      325,322
             

Total liabilities

     1,133,785      1,047,929
             

Stockholders’ equity

     1,277,628      1,239,060
             

Total liabilities and stockholders’ equity

   $ 2,411,413    $ 2,286,989
             


WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

      Nine Months Ended
September 30,
 
      2009     2008  
     (In thousands of dollars)  

Cash flows from operating activities

    

Net income

   $ 40,542      $ 80,024   

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

    

Depreciation and amortization

     91,310        81,527   

Deferred income taxes

     27,786        3,096   

Other balance sheet changes

     53,818        (88,061
                

Net cash provided by operating activities

     213,456        76,586   

Cash flows from investing activities

    

Additions to property, plant and equipment

     (65,031     (127,163

Acquisition of business

     (6,297     —     

Proceeds from disposition of assets

     3,255        573   

Insurance proceeds from involuntary conversion of assets

     484        —     

Settlements of derivative instruments

     1,157        344   
                

Net cash used for investing activities

     (66,432     (126,246

Cash flows from financing activities

    

Proceeds from the exercise of stock options

     772        208   

Dividends paid

     (10,716     (10,010

Proceeds from borrowings

     —          851,635   

Repayment of borrowings

     —          (847,162

Utilization of restricted cash

     27,650        55,045   

Capitalized debt issuance costs

     (2,096     (2,518
                

Net cash provided by financing activities

     15,610        47,198   

Net increase (decrease) in cash and cash equivalents

     162,634        (2,462

Cash and cash equivalents at beginning of period

     90,239        24,914   
                

Cash and cash equivalents at end of period

   $ 252,873      $ 22,452   
                


WESTLAKE CHEMICAL CORPORATION

SEGMENT INFORMATION

(Unaudited)

 

      Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
      2009     2008    2009     2008  
     (In thousands of dollars)  

Net external sales

         

Olefins

   $ 440,973      $ 725,063    $ 1,150,284      $ 2,151,846   

Vinyls

     191,598        348,672      545,403        943,399   
                               
   $ 632,571      $ 1,073,735    $ 1,695,687      $ 3,095,245   
                               

Income (loss) from operations

         

Olefins

   $ 61,650      $ 18,190    $ 122,013      $ 96,146   

Vinyls

     (8,079     30,483      (28,289     45,752   

Corporate and other

     (4,548     115      (9,429     (5,675
                               
   $ 49,023      $ 48,788    $ 84,295      $ 136,223   
                               

Depreciation and amortization

         

Olefins

   $ 21,014      $ 19,670    $ 61,630      $ 56,513   

Vinyls

     10,265        8,427      29,424        24,868   

Corporate and other

     130        52      256        146   
                               
   $ 31,409      $ 28,149    $ 91,310      $ 81,527   
                               

Other income (expense), net

         

Olefins

   $ 252      $ 9    $ 415      $ 67   

Vinyls

     (87     64      (56     230   

Corporate and other

     1,291        1,194      4,877        5,577   
                               
   $ 1,456      $ 1,267    $ 5,236      $ 5,874   
                               


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,
 
      2009             2009                     2008                     2009                    2008          
     (In thousands of dollars)  

EBITDA

   $ 68,391      $ 81,888      $ 78,204      $ 180,841    $ 223,624   

Less:

           

Provision for income taxes

     11,832        11,941        14,598        22,826      36,165   

Interest expense

     8,795        8,772        8,093        26,163      25,908   

Depreciation and amortization

     30,913        31,409        28,149        91,310      81,527   
                                       

Net income

     16,851        29,766        27,364        40,542      80,024   

Changes in operating assets and liabilities

     35,262        (8,407     63,261        145,128      (6,534

Deferred income taxes

     (19,064     38,745        (5,992     27,786      3,096   
                                       

Net cash provided by operating activities

   $ 33,049      $ 60,104      $ 84,633      $ 213,456    $ 76,586   
                                       


WESTLAKE CHEMICAL CORPORATION

SUPPLEMENTAL INFORMATION

Product Sales Price and Volume Variance by Operating Segments

 

      Third Quarter 2009 vs.
Third Quarter 2008
    Third Quarter 2009 vs.
Second Quarter 2009
 
      Average
Sales Price
    Volume     Average
Sales Price
    Volume  

Olefins

   -40.9   +1.7   +18.5   -4.3

Vinyls

   -41.3   -3.8   -2.4   +4.1

Company

   -41.0   +0.0   +11.7   -1.6

Average Quarterly Industry Prices (1)

 

      Quarter Ended
      September
2008
   December
2008
   March
2009
   June
2009
   September
2009
              

Ethane (cents/lb)

   36.7    14.1    12.0    14.5    15.9

Propane (cents/lb)

   39.8    18.9    16.0    17.3    20.6

Ethylene (cents/lb) (2)

   68.0    39.2    31.5    31.5    32.3

Polyethylene (cents/lb) (3)

   103.7    71.3    65.0    68.0    72.3

Styrene (cents/lb) (4)

   85.7    55.6    40.4    46.2    56.5

Caustic ($/ short ton) (5)

   786.7    970.0    821.7    368.3    171.7

Chlorine ($/ short ton) (6)

   265.0    236.7    175.0    204.2    388.3

PVC (cents/lb) (7)

   64.0    51.0    45.7    48.5    54.5

 

(1)

Industry pricing data was obtained through the Chemical Market Associates, Inc., or CMAI. We have not independently verified the data.

(2)

Represents average North American contract prices of ethylene over the period as reported by CMAI.

(3)

Represents average North American contract prices of polyethylene low density film over the period as reported by CMAI.

(4)

Represents average North American contract prices of styrene over the period as reported by CMAI.

(5)

Represents North American average acquisition prices of caustic soda over the period as reported by CMAI.

(6)

Represents average North American contract prices of chlorine (into chemicals) over the period as reported by CMAI.

(7)

Represents North American contract prices of PVC over the period as reported by CMAI. During 2008, CMAI made a 16 cent per pound downward, non-market related adjustment to PVC resin prices.