Westlake Chemical Reports Third Quarter Results

Westlake Chemical Reports Third Quarter Results

HOUSTON, Nov. 3 /PRNewswire-FirstCall/ -- Westlake Chemical Corporation (NYSE: WLK) today reported third quarter net income of $28.3 million or $0.50 per diluted share and operating income of $68.9 million on net sales of $572.0 million for the third quarter of 2004. This compares favorably with the third quarter 2003 net loss of $9.3 million or negative $0.19 per diluted share and operating income of $8.3 million on net sales of $358.6 million. The third quarter of 2004 includes an after tax charge of $9.3 million related to the early retirement of debt. This charge reduced earnings per diluted share for the quarter by $0.16 per diluted share. The third quarter of 2003 included an after tax charge of $7.1 million related to the early retirement of debt, which negatively impacted earnings per share by $0.14. The improvement in net sales and operating income was a result of increased selling prices and higher sales volumes, which outpaced higher feedstock and energy costs. PVC pipe sales volume increased due to the acquisition of the assets of Bristolpipe Corporation, which was completed on August 2, 2004.

In the third quarter of 2004 Westlake Chemical Corporation completed its initial public offering (IPO). Net proceeds from the IPO of $181.3 million and available cash were used to retire $133.0 million of our 8 3/4% senior notes, $28.0 million on our $120.0 million senior secured term loan and a $27.0 million bank loan. The debt retirement costs in the third quarter of 2004 consist of a pre-tax $11.6 million pre-payment premium on the senior notes and a pre-tax write off of $3.1 million in previously capitalized debt issuance cost.

Third quarter 2004 net income decreased $6.1 million from the $34.4 million net income reported in the second quarter of 2004 due to the $9.3 million after tax debt retirement costs incurred in the third quarter of 2004. Third quarter net sales and operating income compared favorably to the second quarter net sales of $449.4 million and operating income of $65.9 million primarily due to higher selling prices and volumes, which were partially offset by higher feedstock prices.

For the nine months ended September 30, 2004, net income was $73.4 million or $1.41 per diluted share including an after tax charge of $9.3 million, or $0.18 per diluted share on net sales of $1,422.3 million. This compares favorably with the nine months ended September 30, 2003 net income of $4.1 million or $0.08 per diluted share, which included an after tax charge of $7.1 million, or $0.14 per diluted share, on net sales of $1,057.2 million. Operating income was $161.8 million for the nine months ended September 30, 2004 as compared to $40.9 million for nine months ended September 30, 2003. These increases were due to higher selling prices and volumes, which more than offset higher raw material and energy costs.

OLEFINS SEGMENT

Income from operations for the Olefins segment increased by $35.7 million to $44.7 million in the third quarter of 2004 from $9.0 million in the third quarter of 2003. This increase was primarily due to higher selling prices and higher sales volumes in polyethylene and styrene, which were partially offset by higher raw material costs for ethane, propane and benzene.

Third quarter 2004 income from operations increased $6.2 million from the $38.5 million income from operations reported in the second quarter of 2004. The increase was primarily due to higher selling prices and volumes, which were partially offset by higher feedstock and energy costs.

Income from operations for the Olefins segment increased by $77.8 million to $114.2 million for the nine months ended September 30, 2004 from $36.4 million for the nine months ended September 30, 2003. This increase was due to price increases and higher sales volumes for ethylene, polyethylene and styrene, reduced by higher raw material costs of ethane, propane and benzene.

VINYLS SEGMENT

Income from operations for the Vinyls segment increased by $26.5 million to $26.3 million in the third quarter of 2004 from a $0.2 million loss in the third quarter of 2003. This increase was primarily due to higher selling prices for PVC pipe, PVC resin and VCM and higher sales volumes for PVC pipe and VCM. These increases were partially offset by higher energy costs and higher raw material costs for propane.

Third quarter income from operations decreased $1.8 million from the $28.1 million income from operations reported in the second quarter of 2004. The decrease was primarily due to margin deterioration in PVC resin and PVC pipe that was partially offset by caustic price increases. Results were also impacted by the costs associated with the phased start-up of our VCM and PVC facilities in Geismar, Louisiana. PVC pipe sales volumes increased due to the acquisition of the assets of Bristolpipe Corporation, which was completed on August 2, 2004.

Income from operations for the Vinyls segment increased by $42.3 million to $51.1 million for the nine months ended September 30, 2004 from $8.8 million for the nine months ended September 30, 2003. This increase was due to price increases for PVC pipe, PVC resin and VCM, which were partially offset by higher raw material and energy costs.

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 SEC 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. The following table reconciles EBITDA to net income (loss) and to cash flow from operating activities.

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation's third quarter results will be held Wednesday, November 3, 2004 at 11:00 a.m. EST (10:00 a.m. CST). To access the conference call, dial (800) 901-5247, or (617) 786-4501 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 43414193.

A replay of the conference call will be available beginning an hour after its conclusion until 5:00 p.m. EST (4:00 p.m. CST) on Wednesday, November 10, 2004. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 29430397.

The conference call will also be available via webcast at http://phx.corporate-ir.net/phoenix.zhtml?c=180248&p=irol-calendar and the earnings release can be obtained via the company's Web page at, http://www.westlakechemical.com/news.html .

Westlake Chemical Corporation is a manufacturer and supplier of petrochemicals, polymers and fabricated products with headquarters in Houston, Texas. The company's range of products includes; ethylene, polyethylene, styrene, vinyl intermediates, PVC and PVC pipe, windows and fence. For more information, visit the company's Web site at www.westlakechemical.com .


                        WESTLAKE CHEMICAL CORPORATION

                    CONSOLIDATED STATEMENTS OF OPERATIONS

                             (unaudited, in $000)

                               Three Months Ended        Nine Months Ended
                                  September 30,             September 30,
                                2004         2003         2004         2003

    Net Sales                $572,031     $358,598   $1,422,284   $1,057,155
    Cost of Sales             487,520      338,161    1,217,437      970,847
    Gross Profit               84,511       20,437      204,847       86,308

    Selling, General and
     Administrative
     Expenses                  15,055       12,103       41,251       44,476
    Impairment of Long-
     Lived assets                 516          ---        1,830          932

    Income from
     Operations                68,940        8,334      161,766       40,900

    Interest Expense          (10,144)     (10,148)     (32,261)     (27,598)
    Debt Retirement Cost      (14,685)     (11,343)     (14,685)     (11,343)
    Other Income
     (Expense), net             1,801       (1,704)         445        4,605

    Income (Loss) before
     Taxes                     45,912      (14,861)     115,265        6,564

    Income Tax Provision
     (Benefit)                 17,595       (5,529)      41,869        2,443

    Net Income (Loss)         $28,317      $(9,332)     $73,396       $4,121

    Basic and Diluted
     Earnings (Loss) Per
     Share                      $0.50       $(0.19)       $1.41        $0.08

    Weighted Average
     Shares Outstanding
      Basic                56,903,270   49,499,395   51,985,368   49,499,395
      Diluted              57,027,346   49,499,395   52,027,028   49,499,395


        Reconciliation of EBITDA to Net Income (Loss) and to Cash flow
                          from Operating Activities

    EBITDA                    $77,167      $16,732     $210,375      $99,819
    Less:
    Income Tax Provision
     (Benefit)                 17,595       (5,529)      41,869        2,443
    Interest Expense           10,144       10,148       32,261       27,598
    Depreciation and
     amortization              21,111       21,445       62,849       65,657

    Net Income (Loss)          28,317       (9,332)      73,396        4,121
    Changes in operating
     assets and
     liabilities                 (287)      20,320      (28,878)      24,551
    Deferred income taxes      16,346       (5,641)      38,843        1,870
    Cash flow from
     operating activities     $44,376       $5,347      $83,361      $30,542


                        WESTLAKE CHEMICAL CORPORATION

                         CONSOLIDATED BALANCE SHEETS

                                  (in $000)

                                                  Unaudited
                                                September 30,     December 31,
                                                    2004              2003
                  ASSETS
    Current Assets
      Cash and Cash Equivalents                    $50,984           $37,381
      Accounts Receivable (net)                    248,462           178,633
      Inventories                                  249,359           180,760
      Other Current Assets                          16,568            16,073
         Total Current Assets                      565,373           412,847
    Property, Plant and Equipment (net)            872,317           879,688
    Other Assets (net)                              68,176            77,578

            Total Assets                        $1,505,866        $1,370,113


       LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities
      Accounts Payable and Accrued Liabilities    $218,161          $186,932
      Current Portion of Long-Term Debt              1,200            28,200
         Total Current Liabilities                 219,361           215,132
    Long-Term Debt                                 347,189           509,089
    Other Liabilities                              216,378           178,189

            Total Liabilities                      782,928           902,410

    Minority Interest                                  ---            22,100

    Stockholders' Equity                           722,938           445,603

    Total Liabilities and Stockholders' Equity  $1,505,866        $1,370,113


                        WESTLAKE CHEMICAL CORPORATION

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (unaudited, in $000)

                                                       Nine Months Ended
                                                          September 30,
                                                     2004              2003

    Cash Flows from Operating Activities:
    Net Income                                     $73,396            $4,121

    Adjustments to Reconcile Net Income
     to Net Cash:
      Depreciation and Amortization                 62,849            65,657
      Deferred Tax Expense                          38,843             1,870
      Other Balance Sheet Changes                  (91,727)          (41,106)
                                                     9,965            26,421

    Net Cash Provided by Operating Activities       83,361            30,542

    Cash Flows from Investing Activities:
    Additions to Property, Plant and Equipment     (30,912)          (29,717)
    Acquisition of Business Operations             (33,294)              ---
    Other                                            2,087             3,350

    Net Cash Used by Investing Activities          (62,119)          (26,367)

    Cash Flows from Financing Activities:
    Proceeds from Issuance of Common Stock, net    181,261               ---
    Proceeds from Borrowings                           ---           723,475
    Repayment of Borrowings                       (188,900)         (719,099)

    Net Cash (Used) Provided
     by Financing Activities                        (7,639)            4,376

    Net Increase in Cash                            13,603             8,551

    Cash Balance at the Beginning of the Period     37,381            11,123

    Cash Balance at the End of the Period          $50,984           $19,674


                        WESTLAKE CHEMICAL CORPORATION

                             SEGMENT INFORMATION

                             (unaudited, in $000)

                                    Three Months Ended    Nine Months Ended
                                      September 30,         September 30,
                                     2004      2003        2004        2003

    Net Sales to External Customers
    Olefins                        $363,170  $220,394    $894,245    $652,482
    Vinyls                          208,861   138,204     528,039     404,673
                                   $572,031  $358,598  $1,422,284  $1,057,155

    Income (Loss) from Operations
    Olefins                         $44,745    $9,034    $114,215     $36,388
    Vinyls                           26,273      (160)     51,069       8,761
    Corporate and Other              (2,078)     (540)     (3,518)     (4,249)
                                    $68,940    $8,334    $161,766     $40,900

    Depreciation and Amortization
    Olefins                         $13,051   $12,687     $39,321     $37,735
    Vinyls                            7,965     8,260      23,121      24,957
    Corporate and Other                  95       498         407       2,965
                                    $21,111   $21,445     $62,849     $65,657

    Other Income (Expense), net
    Olefins                            $831   $(1,680)    $(2,249)     $2,589
    Vinyls                              170        63         135         643
    Corporate and Other*            (13,885)  (11,430)    (12,126)     (9,970)
                                   $(12,884) $(13,047)   $(14,240)    $(6,738)

     * Debt retirement costs of $14,685 and $11,343 are included in the three
       months and nine months ending September 30, 2004 and 2003,
       respectively.

SOURCE Westlake Chemical Corporation
11/03/2004
CONTACT: finance, Ruth I. Dreessen, or media, David R. Hansen, both of Westlake Chemical Corporation, +1-713-960-9111
Web site: http://www.westlakechemical.com
(WLK)

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