Westlake Chemical Corporation Announces Record Second Quarter 2015 Net Income

Westlake Chemical Corporation Announces Record Second Quarter 2015 Net Income

- Record quarterly net income of $205.1 million, or $1.54 per diluted share
- Record quarterly Vinyls segment income from operations

HOUSTON, Aug. 4, 2015 /PRNewswire/ -- Westlake Chemical Corporation (NYSE: WLK) today reported record net income for the second quarter of 2015 of $205.1 million, or $1.54 per diluted share, on net sales of $1,185.0 million. This represents an increase in net income attributable to Westlake Chemical Corporation of $35.7 million, or $0.28 per diluted share, compared to the quarter ended June 30, 2014 net income of $169.4 million, or $1.26 per diluted share, on net sales of $998.6 million. Net income for the second quarter of 2015 included a net pre-tax gain of $15.5 million, or $0.13 per diluted share, related to a gain from the acquisition of a controlling interest in Suzhou Huasu Plastics Co., Ltd. ("Huasu"), a Chinese PVC joint venture, and an impairment loss related to an equity investment. The gain from the acquisition was non-taxable and resulted in the lowering of our effective tax rate for the second quarter of 2015 from approximately 34.3% to 31.9%. Net sales for the second quarter of 2015 increased by $186.4 million compared to net sales for the second quarter of 2014, mainly attributable to sales contributed by Vinnolit, our specialty PVC resin business, which we acquired in July 2014, and higher sales volumes for most of our major products, partially offset by lower sales prices for all our major products. Income from operations was $295.4 million for the second quarter of 2015 as compared to $266.8 million for the second quarter of 2014. Income from operations for the second quarter of 2015 benefited from improved vinyls integrated product margins as a result of lower feedstock costs, increased production at our Calvert City, Kentucky facility following the completion of the ethylene expansion project, higher production rates at our Geismar, Louisiana chlor-alkali plant, and the contribution from Vinnolit as compared to the second quarter of 2014. However, this benefit was partially offset by lower olefins integrated product margins as a result of lower sales prices in the second quarter of 2015 as compared to the prior-year period, and costs related to several maintenance turnarounds completed during the second quarter of 2015.

Second quarter 2015 net income of $205.1 million, or $1.54 per diluted share, increased by $58.8 million from the $146.3 million, or $1.10 per diluted share, reported in the first quarter of 2015. Net income for the second quarter of 2015 included the net pre-tax gain of $15.5 million, or $0.13 per diluted share, resulting from the acquisition of Huasu, and the equity investment impairment. Net sales in the second quarter of 2015 were $1,185.0 million compared to sales of $1,103.5 million in the first quarter of 2015, an increase of $81.5 million. The increase in sales was largely due to higher sales prices for polyethylene and PVC and higher sales volumes for most of our major products. Second quarter 2015 income from operations of $295.4 million increased $66.1 million from the first quarter 2015 income from operations of $229.3 million. The increase was due to lower feedstock and energy costs, higher vinyls operating rates, higher polyethylene sales volumes, and higher PVC selling prices as compared to the prior quarter.

For the six months ended June 30, 2015, net income was $351.4 million, or $2.64 per diluted share, on net sales of $2,288.5 million. This represents an increase in net income of $23.9 million, or $0.20 per diluted share, from the six months ended June 30, 2014 net income of $327.5 million, or $2.44 per diluted share, on net sales of $2,026.3 million. Net income for the six months ended June 30, 2015 included the net pre-tax gain of $15.5 million, or $0.13 per diluted share, from the acquisition of Huasu, and the equity investment impairment. Net sales for the six months ended June 30, 2015 increased by $262.2 million compared to the prior-year period primarily due to sales contributed by Vinnolit, higher sales volumes for ethylene, PVC resin and caustic soda, partially offset by lower sales prices for all our major products. Income from operations was $524.7 million for the six months ended June 30, 2015 as compared to $514.8 million for the six months ended June 30, 2014, an increase mainly attributable to improved vinyls integrated product margins, primarily as a result of lower feedstock costs, increased production at our Calvert City facility following the completion of the ethylene expansion project, improved production rates at our Geismar chlor-alkali plant, and the contribution from Vinnolit, partially offset by lower olefins integrated product margins as a result of lower sales prices as compared to the prior-year period. Sales prices in the first six months of 2015 were negatively impacted by the significant decline in crude oil prices.

"We are pleased to report record second quarter results which benefited from our investments over the past several years to further expand our ethylene and chlorine product integration, and from our acquisitions of Vinnolit and North American Specialty Pipe which broaden our market reach into specialty PVC resin and pipe. We continue to benefit from our access to natural-gas based feedstocks, positioning us as a low-cost producer, and from strong demand for our end-products," said Albert Chao, President and Chief Executive Officer.

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $377.8 million for the second quarter of 2015 increased $57.9 million compared to $319.9 million in the second quarter of 2014. EBITDA for the second quarter of 2015 increased $80.8 million compared to EBITDA of $297.0 million in the first quarter of 2015. A reconciliation of EBITDA to reported net income and to net cash provided by operating activities can be found in the financial schedules at the end of this press release.

Net cash provided by operating activities was $435.4 million in the first six months of 2015. Capital expenditures for the first six months of 2015 were $203.9 million. As of June 30, 2015, we had cash of $1,026.6 million and our long-term debt was $764.1 million.

OLEFINS SEGMENT

The Olefins segment reported income from operations of $220.9 million in the second quarter of 2015, a decrease of $17.8 million compared to $238.7 million reported in the second quarter of 2014. This decrease was mainly attributable to lower olefins integrated product margins as a result of lower sales prices and from costs related to several polyethylene maintenance turnarounds completed during the second quarter of 2015, partially offset by higher polyethylene sales volumes and lower feedstock and energy costs in the second quarter of 2015 as compared to the prior-year period.

The Olefins segment reported income from operations of $220.9 million for the second quarter of 2015, an increase of $29.8 million from the $191.1 million reported in the first quarter of 2015. The increase in operating income was largely due to higher sales volumes for polyethylene and lower energy costs, partially offset by costs related to the polyethylene maintenance turnarounds completed in the quarter.

The Olefins segment reported income from operations of $412.0 million for the six months ended June 30, 2015 as compared to income from operations of $511.0 million for the six months ended June 30, 2014, a decrease of $99.0 million. This decrease was mainly attributable to lower olefins integrated product margins primarily as a result of lower sales prices, partially offset by higher ethylene and polyethylene sales volume and lower feedstock and energy costs for the six months ended June 30, 2015 as compared to the prior-year period.

VINYLS SEGMENT

The Vinyls segment reported income from operations of $88.0 million in the second quarter of 2015 compared to income from operations of $38.1 million in the second quarter of 2014, an increase of $49.9 million. This increase was primarily driven by higher vinyls integrated product margins in the second quarter of 2015 as compared to the prior-year period mainly as a result of lower feedstock costs and increased ethylene production at our Calvert City facility following the completion of the ethylene expansion project. In addition, second quarter 2015 income from operations benefited from higher caustic soda sales volume attributable to higher production rates at our Geismar chlor-alkali plant and the contribution from Vinnolit as compared to the second quarter of 2014, partially offset by lower sales prices for our major products and costs and reduced volume in Europe related to a maintenance turnaround and ethylene shortage. Income from operations for the three months ended June 30, 2014 was negatively impacted by lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with the maintenance turnaround and ethylene expansion project at our Calvert City facilities and significantly higher propane costs.

The Vinyls segment reported income from operations of $88.0 million in the second quarter of 2015, an increase of $40.9 million compared to an operating income of $47.1 million in the first quarter of 2015. The increase in operating income in the second quarter was mainly the result of higher operating rates and higher integrated vinyls margins as a result of higher PVC selling prices and lower feedstock costs as compared to the prior quarter. In addition, the first quarter 2015 income from operations was negatively impacted by lost sales, lower production rates and costs associated with the maintenance turnaround at our Geismar facility.

The Vinyls segment reported income from operations of $135.1 million for the six month ended June 30, 2015 as compared to income from operations of $17.0 million for the six months ended June 30, 2014, an increase of $118.1 million. This increase was primarily driven by higher vinyls integrated product margins for the six months ended June 30, 2015 mainly as a result of lower feedstock costs, increased production rates at our Calvert City facility following the ethylene expansion project, higher caustic soda sales volume primarily attributable to higher production rates at our Geismar chlor-alkali plant and the contribution from Vinnolit, as compared to the prior-year period. The increase in income from operations for the six months ended June 30, 2015 was partially offset by lost sales, lower production rates and costs associated with the maintenance turnaround at our Geismar facility and lower sales prices for our major products. Income from operations for the six months ended June 30, 2014 was negatively impacted by lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with the maintenance turnaround and ethylene expansion project at our Calvert City facilities and significantly higher propane costs.

 

The statements in this release and the related teleconference relating to matters that are not historical facts, such as statements regarding cost advantages related to North American natural gas based feedstocks and demand for our end-products are forward-looking statements. These forward-looking statements are subject to significant risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to: general economic and business conditions; the cyclical nature of the chemical industry; availability, cost and volatility of raw materials and utilities, including natural gas from shale production; uncertainties associated with the United States and worldwide economies, including those due to global economic and financial conditions; governmental regulatory actions, including environmental regulation; political unrest; industry production capacity and operating rates; the supply/demand balance for Westlake's products; competitive products and pricing pressures; access to capital markets; technological developments; the effect and results of litigation and settlements of litigation; operating interruptions; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to Westlake's Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC in February 2015.

 

Use of Non-GAAP Financial Measures

This release makes reference to certain non-GAAP financial measures, such as EBITDA, as defined in Regulation G of the U.S. Securities Exchange Act of 1934, as amended. We report our financial results in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), but believe that certain non-GAAP financial measures, such as EBITDA, provide useful supplemental information to investors regarding the underlying business trends and performance of the company's ongoing operations and are useful for period-over-period comparisons of such operations. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with U.S. GAAP. A reconciliation of EBITDA to reported net income and to net cash provided by operating activities can be found in the financial schedules at the end of this press release.

 

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation's second quarter 2015 results will be held Tuesday, August 4, 2015 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). To access the conference call, dial (855) 760-8160, or (704) 288-0624 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 82598901.

A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on Tuesday, August 11, 2015. To hear a replay, dial (855) 859-2056, or (404) 537-3406 for international callers. The replay passcode is 82598901.

The conference call will also be available via webcast at: http://edge.media-server.com/m/p/6bjewxut/lan/en 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 June 30,


Six Months Ended June 30,



2015


2014


2015


2014












(In thousands of dollars, except per share data)

Net sales


$

1,185,002



$

998,576



$

2,288,533



$

2,026,252


Cost of sales


831,821



692,605



1,650,806



1,433,271


Gross profit


353,181



305,971



637,727



592,981


Selling, general and administrative expenses


57,807



39,183



113,073



78,138


Income from operations


295,374



266,788



524,654



514,843


Interest expense


(8,958)



(9,539)



(18,549)



(18,696)


Other income, net


22,058



4,601



31,154



7,110


Income before income taxes


308,474



261,850



537,259



503,257


Provision for income taxes


98,413



92,407



176,791



175,782


Net income


210,061



169,443



360,468



327,475


Net income attributable to noncontrolling interests


4,966





9,031




Net income attributable to Westlake Chemical Corporation


$

205,095



$

169,443



$

351,437



$

327,475











Earnings per common share attributable to Westlake Chemical Corporation:









Basic


$

1.55



$

1.27



$

2.65



$

2.45


Diluted


$

1.54



$

1.26



$

2.64



$

2.44


 

WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)




June 30,
 2015


December 31, 
 2014








(In thousands of dollars)

ASSETS





Current assets





Cash and cash equivalents


$

1,026,569



$

880,601


Accounts receivable, net


600,722



560,666


Inventories


486,297



525,776


Other current assets


52,652



44,244


Total current assets


2,166,240



2,011,287


Property, plant and equipment, net


2,855,508



2,757,557


Other assets, net


389,262



445,146


Total assets


$

5,411,010



$

5,213,990







LIABILITIES AND EQUITY





Current liabilities (accounts payable and accrued liabilities)


$

534,658



$

537,180


Long-term debt


764,056



763,997


Other liabilities


695,121



710,925


Total liabilities


1,993,835



2,012,102


Total Westlake Chemical Corporation stockholders' equity


3,123,388



2,911,511


Noncontrolling interests


293,787



290,377


Total equity


3,417,175



3,201,888


Total liabilities and equity


$

5,411,010



$

5,213,990


 

WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)




Six Months Ended June 30,



2015


2014








(In thousands of dollars)

Cash flows from operating activities





Net income


$

360,468



$

327,475


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





Depreciation and amortization


118,981



94,474


Deferred income taxes


3,088



19,359


Other balance sheet changes


(47,182)



(9,066)


Net cash provided by operating activities


435,355



432,242


Cash flows from investing activities





Additions to property, plant and equipment


(203,933)



(216,912)


Proceeds from sales and maturities of securities


15,037



342,045


Purchase of securities




(117,332)


Other, net


14,608



(277)


Net cash (used for) provided by investing activities


(174,288)



7,524


Cash flows from financing activities





Dividends paid


(43,896)



(33,623)


Distributions to noncontrolling interests


(7,218)




Proceeds from exercise of stock options


831



4,187


Repurchase of common stock for treasury


(62,804)




Other, net


(12)



4,436


Net cash used for financing activities


(113,099)



(25,000)


Effect of exchange rate changes on cash and cash equivalents


(2,000)




Net increase in cash and cash equivalents


145,968



414,766


Cash and cash equivalents at beginning of period


880,601



461,301


Cash and cash equivalents at end of period


$

1,026,569



$

876,067


 

WESTLAKE CHEMICAL CORPORATION

SEGMENT INFORMATION

(Unaudited)




Three Months Ended June 30,


Six Months Ended June 30,



2015


2014


2015


2014












(In thousands of dollars)

Net external sales









Olefins


$

620,878



$

699,053



$

1,203,955



$

1,421,851


Vinyls


564,124



299,523



1,084,578



604,401




$

1,185,002



$

998,576



$

2,288,533



$

2,026,252


Income (loss) from operations









Olefins


$

220,938



$

238,657



$

412,041



$

510,990


Vinyls


87,966



38,129



135,052



17,015


Corporate and other


(13,530)



(9,998)



(22,439)



(13,162)




$

295,374



$

266,788



$

524,654



$

514,843


Depreciation and amortization









Olefins


$

27,623



$

26,721



$

54,562



$

53,368


Vinyls


32,599



21,623



64,183



40,791


Corporate and other


118



158



236



315




$

60,340



$

48,502



$

118,981



$

94,474


Other income (expense), net









Olefins


$

(104)



$

1,199



$

2,448



$

2,653


Vinyls


1,413



(213)



6,916



(247)


Corporate and other


20,749



3,615



21,790



4,704




$

22,058



$

4,601



$

31,154



$

7,110


 

WESTLAKE CHEMICAL CORPORATION

RECONCILIATION OF EBITDA TO NET INCOME AND TO NET CASH

PROVIDED BY OPERATING ACTIVITIES

(Unaudited)




Three Months Ended
March 31,


Three Months Ended
June 30,


Six Months Ended
June 30,



2015


2015


2014


2015


2014














(In thousands of dollars)

EBITDA


$

297,017



$

377,772



$

319,891



$

674,789



$

616,427


Less:











Provision for income taxes


78,378



98,413



92,407



176,791



175,782


Interest expense


9,591



8,958



9,539



18,549



18,696


Depreciation and amortization


58,641



60,340



48,502



118,981



94,474


Net income


150,407



210,061



169,443



360,468



327,475


Changes in operating assets and liabilities


34,818



36,981



39,210



71,799



85,408


Deferred income taxes


5,331



(2,243)



11,084



3,088



19,359


Net cash provided by operating activities


$

190,556



$

244,799



$

219,737



$

435,355



$

432,242


 

WESTLAKE CHEMICAL CORPORATION

SUPPLEMENTAL INFORMATION

Product Sales Price and Volume Variance by Operating Segments




Second Quarter 2015 vs.
Second Quarter 2014


Second Quarter 2015 vs.
First Quarter 2015



Average

Sales Price


Volume


Average

Sales Price


Volume

Olefins


-29.4%


+18.2%


+0.1%


+6.4%

Vinyls


-11.3%


+99.7%


+9.8%


-1.4%

Company


-24.0%


+42.6%


+4.7%


+2.7%

 

Average Quarterly Industry Prices (1)




Quarter Ended



June 30, 2014


September 30,
2014


December 31, 
2014


March 31,
2015


June 30,
2015

Ethane (cents/lb)


9.8


7.9


7.0


6.3


6.2

Propane (cents/lb)


25.2


24.6


18.1


12.6


10.8

Ethylene (cents/lb) (2)


55.5


66.6


56.2


36.6


36.1

Polyethylene (cents/lb) (3)


109.0


110.0


108.7


76.7


78.3

Styrene (cents/lb) (4)


82.2


85.8


73.5


54.3


65.8

Caustic soda ($/short ton) (5)


595.0


588.3


595.0


588.3


576.7

Chlorine ($/short ton) (6)


232.5


232.5


232.5


239.2


268.3

PVC (cents/lb) (7)


69.5


70.2


69.2


65.5


67.5


________________

(1)

Industry pricing data was obtained from IHS Chemical. We have not independently verified the data

(2)

Represents average North American spot prices of ethylene over the period as reported by IHS Chemical

(3)

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

(4)

Represents average North American contract prices of styrene over the period as reported by IHS Chemical

(5)

Represents average North American undiscounted contract prices of caustic soda over the period as reported by IHS Chemical

(6)

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

(7)

Represents average North American contract prices of PVC over the period as reported by IHS Chemical

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/westlake-chemical-corporation-announces-record-second-quarter-2015-net-income-300122086.html

SOURCE Westlake Chemical Corporation

(713) 960-9111, Investors - Steve Bender, Media - David R. Hansen

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