HOUSTON, Aug. 4 /PRNewswire-FirstCall/ -- Westlake Chemical Corporation (NYSE: WLK) today reported net income of $16.9 million, or $0.26 per diluted share, on net sales of $574.9 million for the second quarter of 2009. Second quarter 2009 net income increased $23.0 million from the $6.1 million net loss, or $0.09 loss per diluted share, reported in the first quarter of 2009. Second quarter 2009 income from operations was $36.2 million as compared to the $0.9 million loss reported in the first quarter of 2009, while net sales increased by $86.6 million from the $488.3 million reported in the first quarter of 2009. The increase in sales was largely due to higher sales volumes for all of the Company's major products except styrene and higher sales prices for all of the Company's major products except caustic. The increase in income from operations in the second quarter of 2009 as compared to the first quarter of 2009 was due primarily to sales price and volume increases, which were partially offset by higher feedstock costs. In addition, trading activity resulted in a gain of $9.8 million in the second quarter of 2009 as compared to a gain of $2.5 million in the first quarter of 2009. The first quarter of 2009 was negatively impacted by an unscheduled outage caused by an ice storm at the Calvert City, Kentucky complex and a turnaround at one of our ethylene units in Lake Charles, Louisiana. 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.
Albert Chao, President and Chief Executive Officer, said, "We are pleased to report an improvement in earnings in the second quarter of 2009, as compared to the first quarter, despite the recessionary environment. Gas-based ethylene producers, such as Westlake, continue to benefit from a cost advantage over naphtha-based producers, which has benefited our Olefins segment. Although economic conditions in the construction markets remain weak, the Vinyls segment experienced higher seasonal sales volumes and improved operating rates, but margins remain under pressure. As we continue to manage our business in the current recessionary environment, we have implemented cost reduction programs, temporarily idled some capacity and have reduced discretionary capital spending to preserve cash. In addition, we currently have $317.0 million in cash including restricted cash, and no outstanding borrowings on a revolving credit agreement."
Net income for the three months ended June 30, 2009 of $16.9 million, or $0.26 per diluted share, decreased $30.4 million compared to net income of $47.3 million, or $0.72 per diluted share, for same period last year. Sales for the three months ended June 30, 2009 of $574.9 million decreased $531.5 million compared to sales of $1,106.4 million in the same period last year. The decrease was primarily 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 $36.2 million for the second quarter of 2009 as compared to $73.6 million for the second quarter of 2008. The decrease in income from operations for the three months ended June 30, 2009 was primarily due to reduced demand for polyethylene and vinyls downstream products and significantly lower sales prices, which were partially offset by lower feedstock and energy costs. Also partially offsetting the decrease, trading activity resulted in a gain of $9.8 million in the second quarter of 2009 as compared to a loss of $7.0 million in the second quarter of 2008.
Net income for the six months ended June 30, 2009 was $10.8 million, or $0.16 per diluted share, on net sales of $1,063.1 million. This represents a decrease of $41.9 million compared to the net income of $52.7 million, or $0.80 per diluted share, for the six months ended June 30, 2008. Sales for the six months ended June 30, 2009 decreased $958.4 million from $2,021.5 million in the first six months of 2008, largely due to lower sales prices for all major products except caustic and lower sales volumes for all major products except caustic and styrene. Income from operations was $35.3 million for the first six months of 2009 as compared to $87.4 million for the first six months of 2008. Income from operations for the first six months of 2009 was negatively impacted by a number of factors, including reduced demand for polyethylene, PVC resin and vinyls downstream products due to the impact of the recession, the unscheduled outage at the Calvert City, Kentucky complex and the turnaround in Lake Charles. The decrease in income from operations was partially offset by a gain from trading activity of $12.2 million during the first six months of 2009 compared to a loss of $6.9 million during the first six months of 2008. Costs related to the closure of a PVC fabrication manufacturing facility and a turnaround and revamp of the Company's styrene facility in Lake Charles negatively impacted income from operations for the first six months of 2008.
EBITDA (earnings before interest expense, income taxes, depreciation and amortization) for the second quarter of 2009 increased $37.8 million to $68.4 million from the $30.6 million of EBITDA in the first quarter of 2009. EBITDA for the second quarter of 2009 decreased $34.8 million to $68.4 million compared to the $103.2 million in the second 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 $153.4 million in the first six months of 2009, an increase of $161.4 million compared with the first six months of 2008. The increase was primarily the result of decreases in working capital. Cash used for investing activities, including capital additions, was $53.3 million for the first half of 2009, compared to $80.9 million for the first half of 2008. At June 30, 2009, the Company had $317.0 million of cash, including $113.0 million of restricted cash, and the Company's long-term debt was $510.4 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
Second quarter 2009 income from operations for the Olefins segment was $44.3 million, an increase of $28.2 million from the $16.1 million reported in the first quarter of 2009. This increase was primarily due to an increase in polyethylene sales volumes, higher sales prices and improved operating rates. These increases were partially offset by higher feedstock costs as compared to the first quarter of 2009. The first quarter of 2009 was negatively impacted by the Lake Charles turnaround. Trading activity resulted in a gain in the second quarter of 2009 of $9.8 million as compared to a $2.5 million gain in the first quarter of 2009.
Income from operations of $44.3 million in the second quarter of 2009 was $13.5 million lower than the $57.8 million in the second quarter of 2008. This decrease was primarily due to lower polyethylene sales volumes and operating rates and the sharp drop in sales prices, partially offset by lower energy and feedstock costs. Also partially offsetting the decrease, trading activity resulted in a gain of $9.8 million for the second quarter of 2009 as compared to a loss of $7.0 million for the second quarter of 2008.
Income from operations decreased by $17.6 million to $60.4 million in the first six months of 2009 from $78.0 million in the first six months of 2008. This decrease was primarily due to lower polyethylene and styrene sales prices and lower operating rates. The lower operating rates were primarily due to reduced polyethylene demand and the turnaround in Lake Charles in the first quarter of 2009. These decreases were partially offset by lower raw material costs and by trading activity. Trading activity resulted in a gain for the first six months of 2009 of $12.2 million as compared to a loss of $6.9 million for the first six months of 2008. The first six months of 2008 were negatively impacted by the styrene plant turnaround in Lake Charles.
VINYLS SEGMENT
The Vinyls segment reported a loss from operations of $4.8 million in the second quarter of 2009 as compared to a loss from operations of $15.4 million reported in the first quarter of 2009. The improvement in the second quarter of 2009 was primarily due to higher sales volumes for PVC resin and pipe in the second quarter of 2009 and the negative impact of the Calvert City ice storm on the first quarter of 2009 operating results. The improvement was partially offset by a significant drop in caustic prices during the second quarter of 2009 compared to the first quarter.
The Vinyls segment produced a loss from operations of $4.8 million in the second quarter of 2009 as compared to income from operations of $18.4 million in the second quarter of 2008, a decline of $23.2 million. The decrease was primarily due to lower sales volumes and lower operating rates. Weakness in the construction markets reduced demand for vinyls downstream products, which resulted in lower operating rates and margins. Also negatively impacting the results from operations for the second quarter of 2009 was a significant decrease in caustic prices compared to the second quarter of 2008.
The Vinyls segment produced a loss from operations of $20.2 million in the first six months of 2009 as compared to income from operations of $15.3 million for the same period in 2008, a decline of $35.5 million. This decrease was primarily due to lower sales prices and volumes for most of the major products and reduced margins in the vinyls downstream businesses due to the continued weakness in the construction market. The decrease was partially offset by higher sales volumes and selling prices for caustic compared to the same period in 2008. In addition, the outage at the Calvert City facility in the first quarter of 2009 adversely impacted production rates for all major products produced at Calvert City and resulted in lost sales and margins due to the reduced production.
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 second quarter results will be held Tuesday, August 4, 2009 at 11:00 a.m. EDT (10:00 a.m. CDT). To access the conference call, dial (866) 770-7146, or (617) 213-8068 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 24978481.
A replay of the conference call will be available beginning an hour after its conclusion until 1:00 p.m. EDT on Tuesday, August 11, 2009. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 71161853.
The conference call will also be available via webcast at: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=180248&eventID =2286200 and the earnings release can be obtained via the company's Web page at: /fw/main/IR_Home_Page-123.html.
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
(In thousands of dollars, except per share
data and shares outstanding)
Net sales $574,865 $1,106,449 $1,063,116 $2,021,510
Cost of sales 519,203 1,009,989 987,390 1,888,346
------- --------- ------- ---------
Gross profit 55,662 96,460 75,726 133,164
Selling, general and
administrative expenses 19,487 22,884 40,454 45,729
------ ------ ------ ------
Income from operations 36,175 73,576 35,272 87,435
Interest expense (8,795) (9,287) (17,391) (17,815)
Other income, net 1,303 2,199 3,780 4,607
----- ----- ----- -----
Income before income taxes 28,683 66,488 21,661 74,227
Provision for income taxes 11,832 19,215 10,885 21,567
------ ------ ------ ------
Net income $16,851 $47,273 $10,776 $52,660
======= ======= ======= =======
Basic and diluted
earnings per share $0.26 $0.72 $0.16 $0.80
Weighted average shares
outstanding
Basic 65,925,121 65,634,070 65,861,550 65,597,811
========== ========== ========== ==========
Diluted 65,982,952 65,657,278 65,890,986 65,621,965
========== ========== ========== ==========
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2009 2008
---- ----
(In thousands of
dollars)
ASSETS
Current assets
Cash and cash equivalents $204,007 $90,239
Accounts receivable, net 321,738 347,323
Inventories, net 286,767 327,967
Other current assets 37,797 33,460
------ ------
Total current assets 850,309 798,989
Property, plant and equipment, net 1,200,958 1,197,452
Restricted cash 112,970 134,432
Other assets, net 170,607 156,116
------- -------
Total assets $2,334,844 $2,286,989
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities (accounts payable and
accrued liabilities) $261,599 $212,288
Long-term debt 510,359 510,319
Other liabilities 315,230 325,322
------- -------
Total liabilities 1,087,188 1,047,929
--------- ---------
Stockholders' equity 1,247,656 1,239,060
--------- ---------
Total liabilities and stockholders'
equity $2,334,844 $2,286,989
========== ==========
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
--------
2009 2008
---- ----
(In thousands of
dollars)
Cash flows from operating activities
Net income $10,776 $52,660
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 59,901 53,378
Deferred income taxes (10,959) 9,088
Other balance sheet changes 93,634 (123,173)
------ --------
Net cash provided by (used for) operating
activities 153,352 (8,047)
Cash flows from investing activities
Additions to property, plant and equipment (50,363) (81,751)
Acquisition of business (6,297) -
Proceeds from disposition of assets 3,251 346
Settlements of derivative instruments 155 535
--- ---
Net cash used for investing activities (53,254) (80,870)
Cash flows from financing activities
Proceeds from the exercise of stock options 42 -
Dividends paid (6,922) (6,563)
Proceeds from borrowings - 620,235
Repayment of borrowings - (582,252)
Utilization of restricted cash 21,979 55,045
Capitalized debt issuance costs (1,429) -
------ ------
Net cash provided by financing activities 13,670 86,465
Net increase (decrease) in cash and cash equivalents 113,768 (2,452)
Cash and cash equivalents at beginning of period 90,239 24,914
------ ------
Cash and cash equivalents at end of period $204,007 $22,462
======== =======
WESTLAKE CHEMICAL CORPORATION
SEGMENT INFORMATION
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2009 2008 2009 2008
---- ---- ---- ----
(In thousands of dollars)
Net external sales
Olefins $386,542 $765,962 $709,311 $1,426,783
Vinyls 188,323 340,487 353,805 594,727
------- ------- ------- -------
$574,865 $1,106,449 $1,063,116 $2,021,510
-------- ---------- ---------- ----------
Income (loss) from
operations
Olefins $44,289 $57,804 $60,363 $77,956
Vinyls (4,829) 18,354 (20,210) 15,269
Corporate and other (3,285) (2,582) (4,881) (5,790)
------ ------ ------ ------
$36,175 $73,576 $35,272 $87,435
------- ------- ------- -------
Depreciation and
amortization
Olefins $20,892 $19,182 $40,616 $36,843
Vinyls 9,971 8,143 19,159 16,441
Corporate and other 50 52 126 94
--- --- --- ---
$30,913 $27,377 $59,901 $53,378
------- ------- ------- -------
Other income, net
Olefins $33 $42 $163 $58
Vinyls 28 67 31 166
Corporate and other 1,242 2,090 3,586 4,383
----- ----- ----- -----
$1,303 $2,199 $3,780 $4,607
------ ------ ------ ------
WESTLAKE CHEMICAL CORPORATION
RECONCILIATION OF EBITDA TO NET (LOSS) INCOME AND TO NET CASH
PROVIDED BY (USED FOR) OPERATING ACTIVITIES
(Unaudited)
Three Months Ended Three Months Ended Six Months Ended
March 31, June 30, June 30,
--------- -------- --------
2009 2009 2008 2009 2008
---- ---- ---- ---- ----
(In thousands of dollars)
EBITDA $30,561 $68,392 $103,152 $98,953 $145,420
Less:
(Benefit from)
provision
for income taxes (947) 11,832 19,215 10,885 21,567
Interest expense 8,596 8,795 9,287 17,391 17,815
Depreciation and
amortization 28,987 30,914 27,377 59,901 53,378
------ ------ ------ ------ ------
Net (loss) income (6,075) 16,851 47,273 10,776 52,660
Changes in operating
assets
and liabilities 118,273 35,262 (34,991) 153,535 (69,795)
Deferred income
taxes 8,105 (19,064) 7,925 (10,959) 9,088
----- ------- ----- ------- -----
Net cash provided by
(used for)
operating
activities $120,303 $33,049 $20,207 $153,352 $(8,047)
======== ======= ======= ======== =======
WESTLAKE CHEMICAL CORPORATION
SUPPLEMENTAL INFORMATION
Product Sales Price and Volume Variance by Operating Segments
Second Quarter Second Quarter
2009 vs. 2009 vs.
Second Quarter 2008 First Quarter 2009
------------------- ------------------
Average Average
Sales Sales
Price Volume Price Volume
------- ------ ------- ------
Olefins -37.0% -12.6% +5.8% +13.7%
Vinyls -29.0% -15.7% -12.7% +26.5%
Company -34.5% -13.6% -0.5% +18.0%
Average Quarterly Industry Prices (1)
Quarter Ended
-------------
June September December March June
2008 2008 2008 2009 2009
---- ---- ---- ---- ----
Ethane (cents/lb) 35.4 36.7 14.1 12.0 14.5
Propane (cents/lb) 40.2 39.8 18.9 16.0 17.3
Ethylene (cents/lb) (2) 66.3 68.0 39.2 31.5 31.5
Polyethylene (cents/lb) (3) 94.7 103.7 71.3 65.0 68.0
Styrene (cents/lb) (4) 78.8 85.7 55.6 40.4 46.3
Caustic ($/ short ton) (5) 540.0 786.7 970.0 821.7 368.3
Chlorine ($/ short ton) (6) 275.0 265.0 236.7 175.0 204.2
PVC (cents/lb) (7) 58.7 64.0 51.0 45.7 48.5
(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 America contract prices of ethylene over the
period as reported by CMAI.
(3) Represents average North America 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 America average acquisition prices of caustic soda
over the period as reported by CMAI.
(6) Represents average North America 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.
SOURCE Westlake Chemical Corporation
-0- 08/04/2009
/CONTACT: Investors, Steve Bender, or Media, David R. Hansen, both of Westlake Chemical Corporation, +1-713-960-9111/ /Web Site: http://www.westlake.com / (WLK)