Westlake Chemical Reports Third Quarter Results

Westlake Chemical Reports Third Quarter Results

HOUSTON, Nov. 3 /PRNewswire-FirstCall/ -- Westlake Chemical Corporation (NYSE: WLK) today reported net income of $43.5 million, or $0.67 per diluted share, and income from operations of $70.1 million on net sales of $605.4 million for the third quarter of 2005. This compares favorably with third quarter 2004 net income of $28.3 million, or $0.50 per diluted share, and income from operations of $68.9 million on net sales of $572.0 million. The improvement in net sales and income from operations was primarily the result of increased selling prices, which outpaced higher energy and feedstock costs, and higher PVC resin and PVC pipe sales volumes. PVC pipe sales volumes were higher due to strong end-markets and the August 2004 acquisition of the assets of Bristolpipe Corporation. These increases were partially offset by lower ethylene, polyethylene, styrene, VCM and caustic sales volumes, and feedstock related trading losses. Third quarter 2005 net income also benefited from lower interest expense largely due to lower debt balances.

In the third quarter of 2005, results were positively impacted by the utilization of first-in, first-out (FIFO) inventory accounting as compared with utilizing the last-in, first-out (LIFO) method used by some of the company's competitors. Third quarter 2004 net income includes an after-tax charge of $9.3 million related to the early retirement of debt. This charge reduced earnings per diluted share in the third quarter of 2004 by $0.16 per diluted share.

Albert Chao, President and Chief Executive Officer, stated, "We are pleased to report a strong quarter in spite of the effects that Hurricanes Katrina and Rita had on energy prices and the economy as a whole. The chemical industry has responded with pricing initiatives to compensate for the increases in cost. Although our Vinyls segment results were below second quarter 2005 performance, we have seen positive signs of improved business activity and higher selling prices."

On September 22, 2005, the company shut down its vinyls facilities at its Geismar, Louisiana complex and its olefins facilities at its Lake Charles complex due to Hurricane Rita. Both complexes sustained minimal damage from the hurricane; however, the lack of electrical power and other utilities caused extended outages at the complexes. The Geismar operations were re- started on September 30, 2005. The facilities at Lake Charles, Louisiana were re-started on October 14, 2005. The production outages had a minimal impact on the company's third quarter results and Westlake is currently assessing the impact on the fourth quarter.

Third quarter 2005 net income decreased $5.0 million, or $0.07 per diluted share from the $48.5 million net income, or $0.74 per diluted share, reported in the second quarter of 2005. Third quarter 2005 income from operations decreased $12.7 million from the income from operations of $82.8 million reported in the second quarter of 2005 while net sales increased by $24.7 million from the $580.7 million reported in the second quarter of 2005. The decreases in operating income and net income were due primarily to energy and raw material price spikes caused by Hurricanes Katrina and Rita and feedstock related trading losses. These decreases were partially offset by higher selling prices for ethylene and polyethylene and higher sales volumes for ethylene, polyethylene, PVC resin and PVC pipe.

For the nine months ended September 30, 2005, net income was $153.2 million, or $2.35 per diluted share, on net sales of $1,804.7 million. This compares favorably with the nine months ended September 30, 2004 net income of $73.4 million, or $1.41 per diluted share, on net sales of $1,422.3 million, which included an after-tax charge of $9.3 million, or $0.18 per diluted share related to the early retirement of debt. Income from operations was $254.5 million for the nine months ended September 30, 2005 as compared to $161.8 million for the nine months ended September 30, 2004. These increases were primarily due to higher sales volumes in the company's Vinyls segment and higher selling prices for all of the company's olefins and vinyls products which outpaced higher feedstock and energy costs. Year-to-date net income for 2005 also benefited from lower interest expense resulting from lower debt balances. Additionally, net income for the third quarter and the nine months ended September 30, 2005 benefited from adjustments to depreciation and income tax expense related to prior periods, which increased net income by $3.8 million or $0.06 per diluted share.

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) for the third quarter of 2005 was $90.1 million compared to $77.2 million in the third quarter of 2004 and $101.9 million in the second quarter of 2005. 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.

The company generated strong cash flows from operations of $175.1 million in the first nine months of 2005 and repaid $30.9 million of its senior secured term loan during that period, leaving it with $123.3 million of cash and $267.2 million of debt on the balance sheet as of September 30, 2005.

OLEFINS SEGMENT

Income from operations for the Olefins segment increased by $0.4 million to $45.1 million in the third quarter of 2005 from $44.7 million in the third quarter of 2004. This increase was primarily due to ethylene and polyethylene price increases and an adjustment of $2.5 million related to prior periods which reduced depreciation expense. These increases were partially offset by higher raw material costs for ethane and propane, higher energy costs, lower sales volumes, and feedstock related trading losses.

Third quarter 2005 income from operations for the Olefins segment increased by $13.1 million from the $32.0 million income from operations reported in the second quarter of 2005. This increase was primarily due to higher selling prices and sales volumes for ethylene and polyethylene, which was partially offset by higher energy and raw material costs, lower selling prices and sales volumes for styrene, and feedstock related trading losses.

Income from operations for the Olefins segment increased by $25.3 million to $139.5 million for the nine months ended September 30, 2005 from $114.2 million for the nine months ended September 30, 2004. This increase was primarily due to price increases for all of the segment's products. These increases were partially offset by slightly lower sales volumes, higher raw material costs and higher energy costs. Merchant ethylene sales volumes were lower for the nine months ended September 30, 2005 as compared to the nine months ended September 30, 2004 largely due to the increase in internal ethylene consumption at the Geismar facility.

VINYLS SEGMENT

Income from operations for the Vinyls segment increased by $2.6 million to $28.9 million in the third quarter of 2005 from $26.3 million in the third quarter of 2004. This increase was primarily due to higher sales volumes for PVC resin and PVC pipe and higher selling prices for all of the segment's products. These increases were partially offset by higher energy costs and higher raw material costs for propane.

Third quarter income from operations for the Vinyls segment decreased by $22.1 million from the $51.0 million income from operations reported in the second quarter of 2005. This decrease was primarily due to higher raw material costs for propane and ethylene and lower selling prices for PVC resin and PVC pipe. These decreases were partially offset by higher sales volumes for PVC resin and PVC pipe. Ethylene is purchased in the company's Vinyls segment directly from its Olefins segment.

Income from operations for the Vinyls segment increased by $70.4 million to $121.5 million for the nine months ended September 30, 2005 from $51.1 million for the nine months ended September 30, 2004. This increase was primarily due to higher selling prices for all of the segment's products and higher sales volumes for VCM, PVC resin and PVC pipe. These increases were partially offset by higher raw material and energy costs. The first nine 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 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 third quarter results will be held Thursday, November 3, 2005 at 11:00 a.m. EST (10:00 a.m. CST). To access the conference call, dial (800) 295-4740, or (617) 614-3925 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 78298181.

A replay of the conference call will be available beginning an hour after its conclusion until 11:59 p.m. EST (10:59 p.m. CST) on Thursday, November 10, 2005. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 63476770.

The conference call will also be available via webcast at:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol- eventDetails&c=180248&eventID=1150493
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 - Steve Bender
Media - David R. Hansen




                        WESTLAKE CHEMICAL CORPORATION

                    CONSOLIDATED STATEMENTS OF OPERATIONS

                             (unaudited, in $000)


                        Three Months Ended      Nine Months Ended
                          September 30,           September 30,
                         2005        2004        2005        2004

    Net sales          $605,391    $572,031  $1,804,666  $1,422,284
    Cost of sales       516,127     487,520   1,496,139   1,217,437
    Gross profit         89,264      84,511     308,527     204,847

    Selling, general
     and administrative
     expenses            19,202      15,055      53,994      41,251
    Impairment of
     long-lived assets      ---         516         ---       1,830

    Income from
     operations          70,062      68,940     254,533     161,766

    Interest expense     (5,834)    (10,144)    (17,867)    (32,261)
    Debt retirement cost    ---     (14,685)       (646)    (14,685)
    Other expense, net      888       1,801         322         445

    Income before
     income taxes        65,116      45,912     236,342     115,265

    Provision for
     income taxes        21,590      17,595      83,147      41,869

    Net Income          $43,526     $28,317    $153,195     $73,396


    Basic earnings
     per share            $0.67       $0.50       $2.36       $1.41
    Diluted earnings
     per share            $0.67       $0.50       $2.35       $1.41

    Weighted average
     shares outstanding
       Basic         65,026,962  56,903,270  64,987,068  51,985,368
       Diluted       65,261,382  57,027,343  65,252,220  52,027,027



                          WESTLAKE CHEMICAL CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                              (unaudited, in $000)

                                                 Unaudited
                                                September 30,     December 31,
                                                    2005              2004

    Current Assets
      Cash and cash equivalents                   $123,348           $43,396
      Accounts receivable (net)                    356,034           234,247
      Inventories                                  286,588           319,816
      Other current assets                          23,768            74,479
        Total current assets                       789,738           671,938
    Property, plant and equipment (net)            855,846           855,052
    Other assets (net)                              58,215            65,463

          Total assets                          $1,703,799        $1,592,453


       LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities
      Accounts payable and accrued liabilities    $269,494          $249,015
      Current portion of long-term debt              1,200             1,200
        Total current liabilities                  270,694           250,215
    Long-term debt                                 265,989           296,889
    Other liabilities                              245,080           275,952

          Total liabilities                        781,763           823,056

    Stockholders' equity                           922,036           769,397

    Total liabilities and stockholders' equity  $1,703,799        $1,592,453



                          WESTLAKE CHEMICAL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                              (unaudited, in $000)

                                                       Nine Months Ended
                                                         September 30,
                                                    2005              2004

    Cash flows from operating activities
    Net income                                    $153,195           $73,396

    Adjustments to reconcile net income
     to net cash
       Depreciation and amortization                60,649            62,849
       Deferred tax expense                         30,527            38,843
       Other balance sheet changes                 (69,245)          (91,727)
                                                    21,931             9,965

    Net cash provided by operating activities      175,126            83,361

    Cash flows from investing activities
    Additions to property, plant and equipment     (60,732)          (30,912)
    Business acquisitions                              ---           (33,294)
    Proceeds from insurance claims                     ---             1,081
    Proceeds from disposition of assets                 43             1,006

    Net cash used for investing activities         (60,689)          (62,119)

    Cash flows from financing activities
    Proceeds from issuance of common stock, net        ---           181,261
    Proceeds from exercise of stock options            966
    Dividends paid                                  (4,551)              ---
    Repayments of borrowings                       (30,900)         (188,900)

    Net cash used for financing activities         (34,485)           (7,639)

    Net increase (decrease) in cash and
     cash equivalents                               79,952            13,603

    Cash and cash equivalents at
     beginning of period                            43,396            37,381

    Cash and cash equivalents at end of period    $123,348           $50,984



                        WESTLAKE CHEMICAL CORPORATION

                             SEGMENT INFORMATION

                             (unaudited, in $000)

                            Three Months Ended        Nine Months Ended
                               September 30,             September 30,
                              2005      2004         2005           2004

    Net Sales to External
     Customers
    Olefins                 $331,228  $363,170    $1,025,285       $894,245
    Vinyls                   274,163   208,861       779,381        528,039
                            $605,391  $572,031    $1,804,666     $1,422,284

    Income (Loss) from
     Operations
    Olefins                  $45,086   $44,745      $139,502       $114,215
    Vinyls                    28,850    26,273       121,482         51,069
    Corporate and Other       (3,874)   (2,078)       (6,451)        (3,518)
                             $70,062   $68,940      $254,533       $161,766

    Depreciation and
     Amortization
    Olefins                   $9,767   $13,051       $34,699        $39,321
    Vinyls                     9,320     7,965        25,918         23,121
    Corporate and Other           18        95            32            407
                             $19,105   $21,111       $60,649        $62,849

    Other Income (Expense),
     net
    Olefins                     $(67)     $831       $(1,996)       $(2,249)
    Vinyls                      (188)      170           276            135
    Corporate and Other*       1,143   (13,885)        1,396        (12,126)
                                $888  $(12,884)        $(324)      $(14,240)

     *  Debt retirement costs of $646 are included in the nine months ended
        September 30, 2005.  Debt retirement costs of $14,685 are included in
        the three and nine months ended September 30, 2004.



                           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  Nine Months Ended
                               June 30,   September 30,      September 30,
                                 2005     2005     2004      2005      2004

    EBITDA                     $101,943  $90,055  $77,167  $314,858  $210,375
    Less:
    Income tax provision         27,077   21,590   17,595    83,147    41,869
    Interest expense              5,879    5,834   10,144    17,867    32,261
    Depreciation and
     amortization                20,461   19,105   21,111    60,649    62,849

    Net income                   48,526   43,526   28,317   153,195    73,396
    Changes in operating
     assets and liabilities      31,434  (19,868)    (287)   (8,596)  (28,878)
    Deferred income taxes        11,482    7,770   16,346    30,527    38,843
    Cash flow from operating
     activities                 $91,442  $31,428  $44,376  $175,126   $83,361



                         WESTLAKE CHEMICAL CORPORATION
                           SUPPLEMENTAL INFORMATION

       Key Product Sales Price and Volume Variance by Operating Segments

                                           Q3'05 vs Q3'04   Q3'05 vs Q2'05
                                          Average           Average
                                           Sales             Sales
                                           Price    Volume   Price  Volume
    Olefins (1)                            +15.3%   -14.2%   +7.7%   +0.9%
    Vinyls (2)                             +20.7%    +8.7%   +2.0%   +2.1%
    Average                                +17.3%    -5.0%   +5.1%   +1.4%

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



                        Average Quarterly Industry Prices

                                           Qtr 3  Qtr 4  Qtr 1  Qtr 2  Qtr 3
                                            '04    '04    '05    '05    '05
    Ethane (cents/lb)                       17.6   20.3   17.6   17.6   23.1
    Propane (cents/lb)                      18.8   20.1   18.7   19.5   22.9
    Ethylene (cents/lb) (1)                 32.8   39.2   41.5   38.3   41.2
    Polyethylene (cents/lb) (2)             55.7   66.0   68.0   62.0   65.2
    Styrene (cents/lb) (3)                  66.0   68.3   64.5   61.6   60.3
    Caustic ($/ short ton) (4)             194.2  300.0  345.0  382.0  390.0
    Chlorine ($/ short ton) (5)            290.0  310.0  330.0  350.0  350.0
    VCM (cents/lb) (6)                      33.1   36.2   38.5   37.5   37.8
    PVC (cents/lb) (7)                      47.5   49.8   53.8   54.2   53.2

     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

SOURCE Westlake Chemical Corporation

CONTACT: Investors, Steve Bender
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

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