Westlake Chemical Reports Second Quarter Results

Westlake Chemical Reports Second Quarter Results

HOUSTON, Aug. 3 /PRNewswire-FirstCall/ -- Westlake Chemical Corporation (NYSE: WLK) today reported net income of $48.5 million, or $0.74 per diluted share, and income from operations of $82.8 million on net sales of $580.7 million for the second quarter of 2005. This compares favorably with second quarter 2004 net income of $34.4 million, or $0.69 per diluted share, and income from operations of $65.9 million on net sales of $449.4 million. The improvement in net sales and income from operations was primarily the result of increased sales volumes and increased selling prices, which outpaced higher feedstock and energy costs. PVC pipe sales volume increased driven by strong end-markets and by the August 2004 acquisition of the assets of Bristolpipe Corporation. Westlake Chemical uses the first-in, first-out (FIFO) method for valuing inventory. The FIFO method had a minimal negative impact on its second quarter results as compared with utilizing the last-in, first-out (LIFO) method used by some of our competitors.

Second quarter 2005 net income decreased $12.6 million, or $0.20 per diluted share from the $61.1 million net income, or $0.94 per diluted share, reported in the first quarter of 2005. Second quarter 2005 income from operations and net sales decreased $18.9 million and $37.9 million respectively, from the income from operations of $101.7 million and net sales of $618.6 million reported in the first quarter of 2005. These decreases were due primarily to lower selling prices for ethylene and polyethylene and higher raw material costs, which were partially offset by higher sales volumes in both segments and higher selling prices in our Vinyls segment.

Albert Chao, President and Chief Executive Officer, stated, "We are pleased to report another solid quarter as our results continue to significantly outpace the prior year. Although our Olefins segment results were below first quarter performance, we have seen positive signs in June and July of improved business activity, higher selling prices and reduced industry inventories."

For the six months ended June 30, 2005, net income was $109.7 million, or $1.68 per diluted share, on net sales of $1,199.3 million. This compares favorably with the six months ended June 30, 2004 net income of $45.1 million, or $0.91 per diluted share, on net sales of $850.3 million. Income from operations was $184.5 million for the six months ended June 30, 2005 as compared to $92.8 million for the six months ended June 30, 2004. These increases were primarily due to higher sales volumes in our Vinyls segment and higher selling prices for all of our olefins and vinyls products which outpaced higher feedstock and energy costs.

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) for the second quarter of 2005 was $101.9 million compared to $85.5 million in the second quarter of 2004 and $122.9 million in the first quarter of 2005. A reconciliation of EBITDA to reported net income and to cash flow from operating activities can be found in the financial tables at the end of this press release.

The company generated strong cash flow from operations of $143.7 million in the first six months of 2005 and repaid $30.6 million of its senior secured notes during that period, leaving it with $109.7 million of cash and $267.5 million of debt on the balance sheet as of June 30, 2005.

OLEFINS SEGMENT

Income from operations for the Olefins segment decreased by $6.5 million to $32.0 million in the second quarter of 2005 from $38.5 million in the second quarter of 2004. This decrease was primarily due to higher raw material costs for ethane, propane and benzene, higher energy costs and lower sales volumes for ethylene and polyethylene, which were partially offset by higher selling prices and higher styrene sales volumes.

Second quarter 2005 income from operations for the Olefins segment decreased by $30.4 million from the $62.4 million income from operations reported in the first quarter of 2005. The decrease was primarily due to lower selling prices for ethylene and polyethylene, lower ethylene sales volumes and higher raw material and energy costs. These decreases were partially offset by higher styrene prices and higher polyethylene and styrene sales volumes.

Income from operations for the Olefins segment increased by $24.9 million to $94.4 million for the six months ended June 30, 2005 from $69.5 million for the six months ended June 30, 2004. This increase was primarily due to higher olefins selling prices, which outpaced higher raw material and energy costs. Sales volumes were relatively unchanged with slightly lower ethylene and polyethylene sales volumes essentially offset by higher styrene sales volumes. Merchant ethylene sales volumes were lower for the six months ended June 30, 2005 as compared to the six months ended June 30, 2004 due to the increase in internal ethylene consumption at the Geismar facility.

VINYLS SEGMENT

Income from operations for the Vinyls segment increased by $22.9 million to $51.0 million in the second quarter of 2005 from $28.1 million in the second quarter of 2004. This increase was primarily due to higher selling prices and higher sales volumes for all of the company's vinyls products. These increases were partially offset by higher energy and raw material costs.

Second quarter income from operations for the Vinyls segment increased by $9.3 million from the $41.7 million income from operations reported in the first quarter of 2005. The increase was primarily due to higher selling prices for caustic, PVC pipe and other PVC fabricated products and higher sales volumes for VCM and PVC pipe. These increases were partially offset by higher raw material costs.

Income from operations for the Vinyls segment increased by $67.8 million to $92.6 million for the six months ended June 30, 2005 from $24.8 million for the six months ended June 30, 2004. This increase was primarily due to higher selling prices and sales volumes for all of our vinyls products. These increases were partially offset by higher raw material and energy costs. The first six months of 2004 earnings were adversely impacted by a fire at the Calvert City ethylene plant. The estimated impact on operating income of the outage relating to the fire was approximately $8.4 million.

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; 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, 2004, which was filed in March 2005.

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 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 Wednesday, August 3, 2005 at 11:00 a.m. EDT (10:00 a.m. CDT). To access the conference call, dial (800) 260-8140, or (617) 614-3672 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 31164236.

A replay of the conference call will be available beginning an hour after its conclusion until 12:00 p.m. EDT (11:00 a.m. CDT) on Wednesday, August 10, 2005. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 98735767.

The conference call will also be available via webcast at: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=180248&eventID=1104902 and the earnings release can be obtained via the company's Web page at: http://www.westlakechemical.com/investors.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, propylene, caustic, VCM, PVC and PVC pipe, windows and fence. For more information, visit the company's Web site at http://www.westlakechemical.com .

Contact - (713) 960-9111
Investors - Ruth I. Dreessen
Media - David R. Hansen




                        WESTLAKE CHEMICAL CORPORATION

                    CONSOLIDATED STATEMENTS OF OPERATIONS

                             (unaudited, in $000)

                                  Three Months Ended       Six Months Ended
                                       June 30,                June 30,
                                   2005        2004        2005        2004

    Net Sales                    $580,659    $449,359  $1,199,275    $850,253
    Cost of Sales                 481,179     367,830     980,012     729,917
    Gross Profit                   99,480      81,529     219,263     120,336

    Selling, General and
     Administrative Expenses       16,717      14,304      34,792      26,196
    Impairment of long-lived
     assets                           ---       1,314         ---       1,314

    Income from Operations         82,763      65,911     184,471      92,826

    Interest Expense               (5,879)    (11,365)    (12,033)    (22,117)
    Debt Retirement Cost              ---         ---        (646)        ---
    Other expense, net             (1,281)     (1,283)       (566)     (1,356)

    Income before income taxes     75,603      53,263     171,226      69,353

    Provision for income taxes     27,077      18,869      61,557      24,274

    Net Income                    $48,526     $34,394    $109,669     $45,079


    Basic Earnings Per Share        $0.75       $0.69       $1.69       $0.91
    Diluted earnings per share      $0.74       $0.69       $1.68       $0.91

    Weighted Average Shares
     Outstanding
       Basic                   64,995,129  49,499,395  64,966,790  49,499,395
       Diluted                 65,203,447  49,499,395  65,247,563  49,499,395



                        WESTLAKE CHEMICAL CORPORATION

                         CONSOLIDATED BALANCE SHEETS

                             (unaudited, in $000)

                                                 Unaudited
                                                  June 30,        December 31,
                                                    2005              2004

    Current Assets
      Cash and Cash Equivalents                   $109,673           $43,396
      Accounts Receivable (net)                    256,128           234,247
      Inventories, net                             308,194           319,816
      Other Current Assets                          51,605            74,479
        Total Current Assets                       725,600           671,938
    Property, Plant and Equipment (net)            861,819           855,052
    Other Assets (net)                              60,550            65,463

          Total Assets                          $1,647,969        $1,592,453


         LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities
      Accounts Payable and Accrued
       Liabilities                                $235,201          $249,015
      Current Portion of Long-Term Debt              1,200             1,200
        Total Current Liabilities                  236,401           250,215
    Long-Term Debt                                 266,289           296,889
    Other Liabilities                              268,926           275,952

          Total Liabilities                        771,616           823,056

    Stockholders' Equity                           876,353           769,397

    Total Liabilities and Stockholders'
     Equity                                     $1,647,969        $1,592,453



                        WESTLAKE CHEMICAL CORPORATION

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (unaudited, in $000)

                                                        Six Months Ended
                                                            June 30,
                                                     2005               2004

    Cash flows from operating activities
    Net income                                     $109,669           $45,079

    Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation and amortization                  41,544            41,738
      Deferred tax expense                           22,757            22,497
      Other balance sheet changes                   (30,272)          (70,329)
                                                     34,029            (6,094)

    Net cash provided by operating activities       143,698            38,985

    Cash flows from investing activities
    Additions to property, plant and equipment      (44,092)          (19,396)
    Proceeds from disposition of assets                  34             1,006

    Net cash used for investing activities          (44,058)          (18,390)

    Cash flows from financing activities
    Dividends paid                                   (2,763)              ---
    Repayments of borrowings                        (30,600)             (600)

    Net cash used for financing
     activities                                     (33,363)             (600)

    Net increase in cash                             66,277            19,995

    Cash balance at beginning of period              43,396            37,381

    Cash balance at end of period                  $109,673           $57,376



                        WESTLAKE CHEMICAL CORPORATION

                             SEGMENT INFORMATION

                             (unaudited, in $000)

                                 Three Months Ended      Six Months Ended
                                      June 30,                June 30,
                                  2005        2004        2005        2004

    Net Sales to External
     Customers
    Olefins                     $317,390    $271,199    $694,057    $531,075
    Vinyls                       263,269     178,160     505,218     319,178
                                $580,659    $449,359  $1,199,275    $850,253

    Income (Loss) from
     Operations
    Olefins                      $32,004     $38,496     $94,416     $69,470
    Vinyls                        50,980      28,057      92,632      24,796
    Corporate and Other             (221)       (642)     (2,577)     (1,440)
                                 $82,763     $65,911    $184,471     $92,826


    Depreciation and
     Amortization
    Olefins                      $12,178     $13,108     $24,932     $26,270
    Vinyls                         8,269       7,629      16,598      15,156
    Corporate and Other               14         103          14         312
                                 $20,461     $20,840     $41,544     $41,738


    Other Income (Expense), net
    Olefins                      $(2,227)    $(1,917)    $(1,928)    $(3,080)
    Vinyls                           435         (45)        465         (35)
    Corporate and Other*             511         679         251       1,759
                                 $(1,281)    $(1,283)    $(1,212)    $(1,356)


     *Debt retirement costs of $646 are included in the six months ended
      June 30, 2005.



                        WESTLAKE CHEMICAL CORPORATION

    RECONCILIATION OF EBITDA TO NET INCOME AND TO CASH FLOW FROM OPERATING
                                  ACTIVITIES

                             (unaudited, in $000)

                        Three Months
                           Ended       Three Months Ended   Six Months Ended
                         March 31,          June 30,            June 30,
                            2005         2005      2004     2005      2004

    EBITDA                $122,860     $101,943   $85,468 $224,803   $133,208
    Less:
    Income tax provision    34,480       27,077    18,869   61,557     24,274
    Interest expense         6,154        5,879    11,365   12,033     22,117
    Depreciation and
     amortization           21,083       20,461    20,840   41,544     41,738

    Net income              61,143       48,526    34,394  109,669     45,079
    Changes in operating
     assets and
     liabilities           (20,162)      31,434   (22,559)  11,272    (28,591)
    Deferred income taxes   11,275       11,482    17,353   22,757     22,497
    Cash flow from
     operating activities  $52,256      $91,442   $29,188 $143,698    $38,985



                        WESTLAKE CHEMICAL CORPORATION

                           SUPPLEMENTAL INFORMATION

       Key Product Sales Price and Volume Variance by Operating Segment

                                           Q2'05 vs Q2'04   Q2'05 vs Q1'05
                                          Average          Average
                                           Sales            Sales
                                           Price   Volume   Price   Volume
    Olefins (1)                            +17.8%    -3.6%   -9.0%   +3.3%
    Vinyls (2)                             +19.7%   +23.4%   +3.4%   +5.3%
    Average                                +18.9%    +7.1%   -3.6%   +4.2%


                      Average Quarterly Industry Prices

                                           Qtr 2   Qtr 3  Qtr 4  Qtr 1  Qtr 2
                                            '04     '04    '04    '05    '05
    Ethane (cents/lb)                        15.3   17.6   20.3   17.6   17.6
    Propane (cents/lb)                       15.4   18.8   20.1   18.7   19.5
    Ethylene (cents/lb) (1)                  31.5   32.8   39.2   41.5   38.3
    Polyethylene (cents/lb) (2)              55.3   55.7   66.0   68.0   62.0
    Styrene (cents/lb) (3)                   52.8   66.0   68.3   51.9   48.6
    Caustic ($/ short ton) (4)              101.7  194.2  300.0  345.0  382.0
    Chlorine ($/ short ton) (5)             270.0  290.0  310.0  330.0  350.0
    VCM (cents/lb) (6)                       31.8   33.1   36.2   38.5   37.5
    PVC (cents/lb) (7)                       45.5   47.5   49.8   53.8   54.2

     Source: CMAI

     (1) Contract-Net Transaction
     (2) Contract Low Density Polyethylene, GP- Film
     (3) Contract-Styrene
     (4) Contract-Diaphragm caustic
     (5) Contract Chlorine
     (6) Contract Vinyl Chloride Monomer
     (7) Contract Polyvinyl Chloride-Pipe Grade


     (1) Includes: ethylene and co-products, polyethylene and styrene.
     (2) Includes: ethylene co-products, caustic, VCM, PVC resin, PVC pipe and
         other fabricated products.

SOURCE Westlake Chemical Corporation
08/03/2005
CONTACT: investors, Ruth I. Dreessen, or media, David R. Hansen, both of
Westlake Chemical Corporation, +1-713-960-9111
/Web site: http://www.westlakechemical.com
http://www.westlakechemical.com/investors.html
(WLK)
CO: Westlake Chemical Corporation

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