Westlake Chemical Corporation Announces First Quarter Earnings

Westlake Chemical Corporation Announces First Quarter Earnings

--First quarter 2010 highlights - Earnings significantly improved from year ago quarter and last quarter results. - Net sales increased 59% versus first quarter 2009 and 24% versus the previous quarter. - Olefins margins improved primarily due to increased domestic demand.

HOUSTON, May 4, 2010 /PRNewswire via COMTEX/ --Westlake Chemical Corporation (NYSE: WLK) today reported net income for the three months ended March 31, 2010 of $17.6 million, or $0.27 per diluted share, on sales of $778.3 million. This represents an improvement in net income of $23.7 million from the quarter ended March 31, 2009 net loss of $6.1 million, or $0.09 per diluted share, on sales of $488.3 million. Sales for the first quarter of 2010 increased $290.0 million compared to the first quarter of 2009 due primarily to higher sales prices and sales volumes for most major products driven by higher feedstock prices and rising demand. Income from operations was $34.4 million for the first quarter of 2010 as compared to a loss from operations of $0.9 million for the first quarter of 2009. Income from operations in the first quarter of 2010 as compared to the first quarter of 2009 benefited from improved production rates, a 20.2% increase in sales volume and higher olefins margins. These increases were partially offset by lower caustic margins and an unscheduled outage caused by freezing temperatures at one of the Company's ethylene units in Lake Charles in the first quarter of 2010. As a result of the Lake Charles outage, the Company lost 21 days of ethylene production and expensed repairs and unabsorbed fixed manufacturing costs of $6.9 million. The first quarter of 2009 was negatively impacted by an unscheduled outage at the Company's Calvert City facility and a turnaround at an ethylene unit in Lake Charles.

First quarter 2010 earnings of $17.6 million, or $0.27 per diluted share, are an improvement over the $12.5 million, or $0.19 per diluted share, reported by the Company in the fourth quarter of 2009. First quarter 2010 sales of $778.3 million compare to sales of $630.0 million in the fourth quarter of 2009, an increase of $148.3 million. The increase in sales was largely due to higher sales prices for most of our major products and a 7.2% increase in sales volume. First quarter 2010 sales volumes benefited from continued strength in domestic polyethylene markets and seasonal increases in PVC resin and pipe sales volumes. First quarter 2010 income from operations of $34.4 million was an increase of $11.4 million over the income from operations in the fourth quarter of 2009 of $23.0 million. The increase in income from operations as compared to the fourth quarter of 2009 was primarily due to higher sales volume and prices, which were partially offset by an increase in feedstock costs and the unscheduled outage at one of the ethylene units at our Lake Charles facility.

Albert Chao, President and Chief Executive Officer, said, "We are pleased to report a significant improvement in earnings in the first quarter of 2010 as sales volume improved, and we were able to implement price increases for most of our products in order to offset the increases in feedstock costs. We continue to see low producer and converter polyethylene inventories and a tight ethylene supply, which has resulted in improved Olefins margins. Although construction markets remain challenged, the Vinyls segment experienced higher seasonal sales volumes and improved operating rates, but margins remain under pressure. We are optimistic that we will see moderate growth in the U.S. economy in 2010. We will continue our conservative fiscal management of the Company while looking for opportunities to expand our business."

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) for the first quarter of 2010 increased $11.5 million to $67.6 million from $56.1 million in the fourth quarter of 2009. EBITDA for the first quarter of 2010 increased $37.0 million compared to the EBITDA of $30.6 million in the first quarter of 2009. A reconciliation of EBITDA to reported net income (loss) and to cash flows from operating activities can be found in the financial schedules at the end of this press release.

Operating activities used cash of $55.1 million in the first quarter of 2010 primarily due to an increase in accounts receivable as a result of the increased product prices and sales volume. Capital expenditures for the first quarter of 2010 were $14.7 million. At March 31, 2010, the Company had $233.9 million of net debt. Net debt is long-term debt of $515.4 million less cash balances of $281.5 million ($96.2 million of the cash balances are restricted for qualifying investments).

OLEFINS SEGMENT

Income from operations increased by $42.1 million to $58.2 million in the first quarter of 2010 from $16.1 million in the first quarter of 2009. This increase was primarily due to a 57.6% increase in average sales prices, higher operating rates and a 17.3% increase in sales volume. These increases were partially offset by higher feedstock costs and the unscheduled outage at one of the ethylene units in Lake Charles. Sales volume benefited from low polyethylene inventories and increased domestic demand. Trading activity resulted in a gain of $0.5 million in the first quarter of 2010 as compared to a gain of $4.0 million in the first quarter of 2009. The first quarter of 2009 was negatively impacted by the turnaround at one of our ethylene units in Lake Charles.

The income from operations for the first quarter of 2010 for the Olefins segment of $58.2 million was an increase of $3.1 million from the $55.1 million reported in the fourth quarter of 2009. This increase was primarily due to increased polyethylene sales volume and margins in the first quarter of 2010 as compared to the fourth quarter of 2009.

VINYLS SEGMENT

The Vinyls segment incurred a loss from operations of $14.9 million in the first quarter of 2010 compared to a loss from operations of $15.4 million in the first quarter of 2009. Operating results benefited from a 25.8% increase in sales volume and higher operating rates driven largely by increased customer demand. These increases were mostly offset by lower caustic margins, resulting from a 66.7% decrease in industry caustic prices, and higher feedstock costs. The first quarter of 2009 was negatively impacted by the unscheduled outage at the Calvert City facility.

The Vinyls segment loss of $14.9 million in the first quarter of 2010 was an improvement as compared to the loss of $29.2 million in the fourth quarter of 2009. The improved results were primarily due to seasonal increases in sales volumes for PVC resin and PVC pipe and higher sales prices for major vinyls products as compared to the fourth quarter of 2009, which were partially offset by an increase in feedstock costs.

The statements in this release relating to matters that are not historical facts, including statements regarding the U.S. economy, cost control, financial management and opportunities to expand Westlake's business, 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; uncertainties associated with the United States and worldwide economies, including those due to global economic and financial conditions; governmental regulatory actions and 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, 2009, which was filed with the SEC in February 2010.

In this release, Westlake refers to non-GAAP financial measures, EBITDA and net debt. 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 (loss) and to cash flow from operating activities. The Company has presented net debt because management believes that net debt is helpful in analyzing leverage and uses it as a performance measure. Net debt should not be considered as an alternative to total debt determined in accordance with GAAP.

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation's first quarter 2010 results will be held Tuesday, May 4, 2010 at 11:00 a.m. EDT (10:00 a.m. CDT). To access the conference call, dial (866) 730-5770, or (857) 350-1594 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 78777034.

A replay of the conference call will be available beginning an hour after its conclusion until 1:00 p.m. EDT on Tuesday, May 11, 2010. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 59464821.

The conference call will also be available via webcast at: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=180248&eventID =2974233 and the earnings release can be obtained via the company's Web page at: http://www.westlake.com/fw/main/IR_Home_Page-123.html.


      WESTLAKE CHEMICAL CORPORATION

       CONSOLIDATED STATEMENTS OF OPERATIONS
      (Unaudited)



                                              Three Months Ended
                                                  March 31,
                                                  ---------
                                               2010               2009
                                               ----               ----
                                           (In thousands of dollars,
                                           except per share data and
                                              shares outstanding)

    Net sales                              $778,334           $488,251
    Cost of sales                           720,654            468,187
                                            -------            -------
    Gross profit                             57,680             20,064

    Selling, general and
     administrative expenses                 23,251             20,967
                                             ------             ------

    Income (loss) from operations            34,429               (903)

    Interest expense                         (8,788)            (8,596)
    Other income, net                         1,094              2,477
                                              -----              -----

    Income (loss) before income
     taxes                                   26,735             (7,022)

    Provision for (benefit from)
     income taxes                             9,088               (947)
                                              -----               ----

    Net income (loss)                       $17,647            $(6,075)
                                            =======            =======

    Basic and diluted earnings
     (loss) per share                         $0.27             $(0.09)

    Weighted average shares
     outstanding
       Basic                             66,038,045         65,797,273
                                         ==========         ==========

       Diluted                           66,167,153         65,797,273
                                         ==========         ==========


                       WESTLAKE CHEMICAL CORPORATION

                         CONSOLIDATED BALANCE SHEETS
                                (Unaudited)



                                                                    December
                                                   March 31,           31,
                                                         2010            2009
                                                         ----            ----
                                                        (In thousands of
                                                            dollars)
    ASSETS
    Current assets
      Cash and cash equivalents                      $185,263        $245,592
      Accounts receivable, net                        405,288         339,796
      Inventories, net                                398,412         369,417
      Other current assets                             38,670          33,573
                                                       ------          ------
         Total current assets                       1,027,633         988,378
    Property, plant and equipment, net              1,183,345       1,194,311
    Restricted cash                                    96,220         101,149
    Other assets, net                                 159,757         162,518
                                                      -------         -------

         Total assets                              $2,466,955      $2,446,356
                                                   ==========      ==========


    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities (accounts payable
     and accrued liabilities)                        $289,664        $286,566
    Long-term debt                                    515,420         515,400
    Other liabilities                                 358,486         359,408
                                                      -------         -------

         Total liabilities                          1,163,570       1,161,374
                                                    ---------       ---------

    Stockholders' equity                            1,303,385       1,284,982



             Total liabilities and stockholders'
              equity                               $2,466,955      $2,446,356
                                                   ==========      ==========


                     WESTLAKE CHEMICAL CORPORATION

                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Unaudited)



                                                         Three Months Ended
                                                             March 31,
                                                             ---------
                                                            2010         2009
                                                            ----         ----
                                                          (In thousands of
                                                              dollars)
    Cash flows from operating activities
    Net income (loss)                                    $17,647      $(6,075)
    Adjustments to reconcile net income
     (loss) to net cash (used for) provided
     by operating activities:
      Depreciation and amortization                       32,028       28,987
      Deferred income taxes                                  664        8,105
      Other balance sheet changes                       (105,417)      89,286
                                                        --------       ------
           Net cash (used for) provided by operating
            activities                                   (55,078)     120,303

    Cash flows from investing activities
    Additions to property, plant and
     equipment                                           (14,719)    (32,792)
    Acquisition of business                                    -       (6,297)
    Proceeds from repayment of loan to
     affiliate                                               167            -
    Settlements of derivative instruments                  7,785       (1,352)
                                                           -----       ------
           Net cash used for investing activities         (6,767)    (40,441)

    Cash flows from financing activities
    Proceeds from exercise of stock options                  344           14
    Dividends paid                                        (3,802)      (3,461)
    Utilization of restricted cash                         4,974       14,026
    Capitalized debt issuance costs                            -       (1,337)
                                                             ---       ------
           Net cash provided by financing activities       1,516        9,242

    Net (decrease) increase in cash and cash
     equivalents                                         (60,329)      89,104
    Cash and cash equivalents at beginning of
     period                                              245,592       90,239
                                                         -------       ------

    Cash and cash equivalents at end of
     period                                             $185,263     $179,343
                                                        ========     ========


                WESTLAKE CHEMICAL CORPORATION

                     SEGMENT INFORMATION
                         (Unaudited)



                                      Three Months Ended
                                          March 31,
                                          ---------
                                       2010         2009
                                       ----         ----
                                       (In thousands of
                                           dollars)

    Net external sales
    Olefins                        $565,024     $322,769
    Vinyls                          213,310      165,482
                                   $778,334     $488,251
                                   --------     --------


    Income (loss) from operations
    Olefins                         $58,245      $16,074
    Vinyls                         (14,926)     (15,381)
    Corporate and other              (8,890)      (1,596)
                                    $34,429        $(903)
                                    -------        -----


    Depreciation and amortization
    Olefins                         $21,236      $19,724
    Vinyls                           10,645        9,188
    Corporate and other                 147           75
                                    $32,028      $28,987
                                    -------      -------


    Other income, net
    Olefins                             $38         $130
    Vinyls                              383            4
    Corporate and other                 673        2,343
                                     $1,094       $2,477
                                     ------       ------



                          WESTLAKE CHEMICAL CORPORATION

          RECONCILIATION OF EBITDA TO NET INCOME (LOSS) AND TO NET CASH
                   PROVIDED BY (USED FOR) OPERATING ACTIVITIES
                                   (Unaudited)




                            Three Months
                                Ended               Three Months Ended
                            December 31,                March 31,
                            ------------                ---------
                                      2009          2010            2009
                                      ----          ----            ----
                                     (In thousands of dollars)

    EBITDA                         $56,068       $67,551         $30,561
    Less:
    Provision for (benefit
     from) income taxes              2,932         9,088            (947)
    Interest expense                 8,794         8,788           8,596
    Depreciation and
     amortization                   31,889        32,028          28,987
                                    ------        ------          ------
    Net income (loss)               12,453        17,647          (6,075)
    Changes in operating
     assets and liabilities          6,192       (73,389)        118,273
    Deferred income taxes            3,421           664           8,105


    Net cash provided by
     (used for) operating
     activities                    $22,066      $(55,078)       $120,303
                                   =======      ========        ========


                         WESTLAKE CHEMICAL CORPORATION

                           SUPPLEMENTAL INFORMATION

         Product Sales Price and Volume Variance by Operating Segments


                                          First Quarter 2010
             First Quarter 2010 vs.                          vs.
               First Quarter 2009        Fourth Quarter 2009
               ------------------        -------------------
             Average                  Average
              Sales                    Sales
              Price         Volume     Price        Volume
            --------        ------   --------       ------
    Olefins     +57.6%        +17.3%     +18.0%        +4.5%
    Vinyls       +3.1%        +25.8%     +11.7%       +14.6%
    Company     +39.1%        +20.2%     +16.3%        +7.2%




                     Average Quarterly Industry Prices (1)


                                      Quarter Ended
                                      -------------
                         March  June  September     December  March
                           2009  2009      2009          2009   2010
                            ---   ---       ---           ---    ---
    Ethane (cents/lb)      12.0  14.5      15.9          22.3   24.7
    Propane (cents/lb)     16.0  17.3      20.6          25.8   29.4
    Ethylene (cents/lb)
     (2)                   31.5  31.5      32.3          40.5   52.3
    Polyethylene (cents/
     lb) (3)               65.0  68.0      72.3          75.0   86.3
    Styrene (cents/lb)
     (4)                   40.4  46.2      56.5          55.3   67.7
    Caustic ($/short
     ton) (5)             821.7 368.3     171.7         216.7  273.3
    Chlorine ($/short
     ton) (6)             175.0 204.2     388.3         385.0  311.7
    PVC (cents/lb) (7)     45.7  48.5      54.5          56.7   66.3





    (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 average North American acquisition prices of caustic
    soda (diaphragm grade) 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 average North American contract prices of PVC over the
    period as reported by CMAI.


SOURCE Westlake Chemical Corporation

Main menu