Westlake Chemical Reports Second Quarter Earnings

Westlake Chemical Reports Second Quarter Earnings

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: http://www.westlake.com/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)

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