Westlake Chemical Partners LP Announces First Quarter 2020 Results

Westlake Chemical Partners LP Announces First Quarter 2020 Results

  • Maintained quarterly distribution of $0.4714 per unit

HOUSTON--(BUSINESS WIRE)--May 4, 2020-- Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported net income attributable to the Partnership of $17.7 million, or $0.50 per limited partner unit, for the three months ended March 31, 2020, an increase of $2.7 million compared to first quarter 2019 net income attributable to the Partnership of $15.0 million. The increase in net income attributable to the Partnership was primarily due to the increased production at Westlake Chemical OpCo LP ("OpCo") and higher third party sales margins. Cash flows from operating activities in the first quarter of 2020 were $111.0 million, a decrease of $2.5 million compared to first quarter 2019 cash flows from operating activities of $113.5 million. This decrease in cash flows from operating activities was primarily attributable to an increase in working capital. For the three months ended March 31, 2020, MLP distributable cash flow of $18.3 million increased by $0.7 million from first quarter 2019 MLP distributable cash flow of $17.6 million.

First quarter 2020 net income attributable to the Partnership of $17.7 million increased by $0.3 million from fourth quarter 2019 net income attributable to the Partnership of $17.4 million. First quarter 2020 cash flows from operating activities of $111.0 million decreased by $4.7 million compared to fourth quarter 2019 cash flows from operating activities of $115.7 million, primarily due to an increase in working capital. First quarter 2020 MLP distributable cash flow of $18.3 million decreased by $0.5 million compared to fourth quarter 2019 MLP distributable cash flow of $18.8 million.

"We are pleased with the Partnership's solid performance in the first quarter of 2020. The long-term ethylene sales agreement we have with Westlake Chemical provided reliable earnings and cash flows to the Partnership," said Albert Chao, President and Chief Executive Officer. "With the outbreak of COVID-19, our first priority is to ensure the health and safety of our employees around the world who continue to work diligently to serve our customers. The COVID-19 pandemic and the response thereto has impacted both equity and commodities markets as a whole. In these evolving market conditions, we maintained our current distribution and by doing so maintain our financial strength and flexibility. This measure allows us to preserve the inherent value of the Partnership and the significant opportunities available through our four levers of growth."

On April 30, 2020, the Partnership announced that the Board of Directors of Westlake Chemical Partners GP LLC had approved a quarterly distribution for the first quarter of 2020 of $0.4714 per unit to be payable on May 26, 2020 to unitholders of record as of May 11, 2020. MLP distributable cash flow provided trailing twelve-month coverage of 1.13x the declared distributions for the first quarter of 2020.

OpCo's Ethylene Sales Agreement with Westlake is designed to provide for stable and predictable cash flows. The agreement provides that 95% of OpCo's ethylene production is sold to Westlake for a cash margin of $0.10 per pound, net of operating costs, maintenance capital expenditures and reserves for future turnaround expenditures.

The statements in this release and the related teleconference relating to matters that are not historical facts, such as those with respect to resumption of distribution growth, inherent value of the Partnership and levers of growth 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, the COVID-19 pandemic and the response thereto; operating difficulties; the volume of ethylene that we are able to sell; the price at which we are able to sell ethylene; changes in the price and availability of feedstocks; changes in prevailing economic conditions; actions of Westlake Chemical Corporation; actions of third parties; inclement or hazardous weather conditions, including flooding, and the physical impacts of climate change; environmental hazards; changes in laws and regulations (or the interpretation thereof); inability to acquire or maintain necessary permits; inability to obtain necessary production equipment or replacement parts; technical difficulties or failures; labor disputes; difficulty collecting receivables; inability of our customers to take delivery; fires, explosions or other industrial accidents; our ability to borrow funds and access capital markets; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to the Partnership's Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC in February 2020.

This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of the Partnership's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

Use of Non-GAAP Financial Measures

This release makes reference to certain "non-GAAP" financial measures, such as MLP distributable cash flow and EBITDA. For this purpose, a non-GAAP financial measure is generally defined by the Securities and Exchange Commission ("SEC") as a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that (1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the registrant; or (2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. 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 MLP distributable cash flow and EBITDA, provide useful supplemental information to investors regarding the underlying business trends and performance of our 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. We define MLP distributable cash flow as distributable cash flow less distributable cash flow attributable to Westlake's noncontrolling interest in OpCo and distributions attributable to the incentive distribution rights holder. MLP distributable cash flow does not reflect changes in working capital balances. We define EBITDA as net income before interest expense, income taxes, depreciation and amortization. MLP distributable cash flow and EBITDA are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess our operating performance as compared to other publicly traded partnerships, our ability to incur and service debt and fund capital expenditures and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. Reconciliations of MLP distributable cash flow to net income and to net cash provided by operating activities and of EBITDA to net income, income from operations and net cash provided by operating activities can be found in the financial schedules at the end of this press release.

Westlake Chemical Partners LP

Westlake Chemical Partners is a limited partnership formed by Westlake Chemical Corporation to operate, acquire and develop ethylene production facilities and other qualified assets. Headquartered in Houston, the Partnership owns a 22.8% interest in Westlake Chemical OpCo LP. Westlake Chemical OpCo LP's assets consist of three ethylene production facilities in Calvert City, Kentucky, and Lake Charles, Louisiana and an ethylene pipeline. For more information about Westlake Chemical Partners LP, please visit http://www.wlkpartners.com.

Westlake Chemical Partners LP Conference Call Information:

A conference call to discuss Westlake Chemical Partners' first quarter 2020 results will be held Monday, May 4, 2020 at 1:00 PM Eastern Time (12:00 AM Central Time). To access the conference call, dial (855) 765-5686 or (234) 386-2848 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 647 07 89.

A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on Monday, May 11, 2020. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 647 07 89.

The conference call will also be available via webcast at: https://edge.media-server.com/mmc/p/pz3nynuo and the earnings release can be obtained via the Partnership web page at: http://investors.wlkpartners.com/CorporateProfile.

WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

2020

 

2019

 

 

(In thousands of dollars, except per unit data)

Revenue

 

 

 

 

Net sales—Westlake Chemical Corporation ("Westlake")

 

$

214,828

 

 

$

257,040

 

Net co-product, ethylene and other sales—third parties

 

35,721

 

 

42,046

 

Total net sales

 

250,549

 

 

299,086

 

Cost of sales

 

147,001

 

 

208,432

 

Gross profit

 

103,548

 

 

90,654

 

Selling, general and administrative expenses

 

6,196

 

 

6,973

 

Income from operations

 

97,352

 

 

83,681

 

Other income (expense)

 

 

 

 

Interest expense—Westlake

 

(3,950

)

 

(5,900

)

Other income, net

 

585

 

 

815

 

Income before income taxes

 

93,987

 

 

78,596

 

Income tax provision

 

217

 

 

200

 

Net income

 

93,770

 

 

78,396

 

Less: Net income attributable to noncontrolling interests in Westlake Chemical OpCo LP ("OpCo")

 

76,023

 

 

63,441

 

Net income attributable to Westlake Partners

 

$

17,747

 

 

$

14,955

 

 

 

 

 

 

Net income per limited partners unit attributable to Westlake Partners (basic and diluted)

 

 

 

 

Common units

 

$

0.50

 

 

$

0.46

 

 

 

 

 

 

Distributions declared per unit

 

$

0.4714

 

 

$

0.4452

 

 

 

 

 

 

MLP distributable cash flow

 

$

18,337

 

 

$

17,555

 

 

 

 

 

 

Distributions declared

 

 

 

 

Limited partner units—publicly and privately held

 

$

9,934

 

 

$

9,379

 

Limited partner units—Westlake

 

6,657

 

 

6,287

 

Total distributions declared

 

$

16,591

 

 

$

15,666

 

EBITDA

 

$

123,968

 

 

$

111,340

 

WESTLAKE CHEMICAL PARTNERS LP

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

March 31,
2020

 

December 31,
2019

 

 

(In thousands of dollars)

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

24,081

 

 

$

19,923

 

Receivable under the Investment Management Agreement—Westlake

 

161,759

 

 

162,773

 

Accounts receivable, net—Westlake

 

40,560

 

 

42,847

 

Accounts receivable, net—third parties

 

13,535

 

 

9,914

 

Inventories

 

2,000

 

 

2,484

 

Prepaid expenses and other current assets

 

204

 

 

470

 

Total current assets

 

242,139

 

 

238,411

 

Property, plant and equipment, net

 

1,092,120

 

 

1,102,995

 

Other assets, net

 

48,768

 

 

52,050

 

Total assets

 

$

1,383,027

 

 

$

1,393,456

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities (accounts payable and accrued liabilities)

 

$

30,666

 

 

$

38,849

 

Long-term debt payable to Westlake

 

399,674

 

 

399,674

 

Other liabilities

 

2,596

 

 

2,798

 

Total liabilities

 

432,936

 

 

441,321

 

Common unitholders—publicly and privately held

 

472,428

 

 

471,736

 

Common unitholder—Westlake

 

48,814

 

 

48,350

 

General partner—Westlake

 

(242,572

)

 

(242,572

)

Total Westlake Partners partners' capital

 

278,670

 

 

277,514

 

Noncontrolling interest in OpCo

 

671,421

 

 

674,621

 

Total equity

 

950,091

 

 

952,135

 

Total liabilities and equity

 

$

1,383,027

 

 

$

1,393,456

 

WESTLAKE CHEMICAL PARTNERS LP

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

2020

 

2019

 

 

(In thousands of dollars)

Cash flows from operating activities

 

 

 

 

Net income

 

$

93,770

 

 

$

78,396

 

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

 

 

 

 

Depreciation and amortization

 

26,031

 

 

26,844

 

Other balance sheet changes

 

(8,840

)

 

8,259

 

Net cash provided by operating activities

 

110,961

 

 

113,499

 

Cash flows from investing activities

 

 

 

 

Additions to property, plant and equipment

 

(11,989

)

 

(12,144

)

Maturities of investments with Westlake under the Investment Management Agreement

 

79,000

 

 

80,000

 

Investments with Westlake under the Investment Management Agreement

 

(78,000

)

 

(207,512

)

Other

 

 

 

46

 

Net cash used for investing activities

 

(10,989

)

 

(139,610

)

Cash flows from financing activities

 

 

 

 

Net proceeds from private placement of common units

 

 

 

62,934

 

Proceeds from debt payable to Westlake

 

 

 

123,512

 

Quarterly distributions to noncontrolling interest retained in OpCo by Westlake

 

(79,223

)

 

(81,507

)

Quarterly distributions to unitholders

 

(16,591

)

 

(13,957

)

Net cash provided by (used for) financing activities

 

(95,814

)

 

90,982

 

Net increase in cash and cash equivalents

 

4,158

 

 

64,871

 

Cash and cash equivalents at beginning of period

 

19,923

 

 

19,744

 

Cash and cash equivalents at end of period

 

$

24,081

 

 

$

84,615

 

WESTLAKE CHEMICAL PARTNERS LP

 

RECONCILIATION OF MLP DISTRIBUTABLE CASH FLOW TO NET INCOME

AND NET CASH PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

 

 

Three Months
Ended December 31,

 

Three Months Ended March 31,

 

 

2019

 

2020

 

2019

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

115,653

 

 

$

110,961

 

 

$

113,499

 

Changes in operating assets and liabilities and other

 

(23,743

)

 

(17,191

)

 

(35,103

)

Net Income

 

91,910

 

 

93,770

 

 

78,396

 

Add:

 

 

 

 

 

 

Depreciation, amortization and disposition of property, plant and equipment

 

27,048

 

 

26,127

 

 

27,302

 

Mark-to-market adjustment gain on derivative contracts

 

(5,695

)

 

(2,491

)

 

(715

)

Less:

 

 

 

 

 

 

Contribution to turnaround reserves

 

(3,961

)

 

(9,923

)

 

(3,848

)

Maintenance capital expenditures

 

(11,327

)

 

(11,121

)

 

(11,320

)

Distributable cash flow attributable to noncontrolling interest in OpCo

 

(79,223

)

 

(78,025

)

 

(72,260

)

MLP distributable cash flow

 

$

18,752

 

 

$

18,337

 

 

$

17,555

 

WESTLAKE CHEMICAL PARTNERS LP

 

RECONCILIATION OF EBITDA TO NET INCOME, INCOME FROM OPERATIONS AND NET CASH

PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

 

 

Three Months
Ended December 31,

 

Three Months Ended March 31,

 

 

2019

 

2020

 

2019

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

115,653

 

 

$

110,961

 

 

$

113,499

 

Changes in operating assets and liabilities and other

 

(23,743

)

 

(17,191

)

 

(35,103

)

Net Income

 

91,910

 

 

93,770

 

 

78,396

 

Less:

 

 

 

 

 

 

Other income, net

 

563

 

 

585

 

 

815

 

Interest expense

 

(4,187

)

 

(3,950

)

 

(5,900

)

Income tax provision

 

(219

)

 

(217

)

 

(200

)

Income from operations

 

95,753

 

 

97,352

 

 

83,681

 

Add:

 

 

 

 

 

 

Depreciation and amortization

 

26,938

 

 

26,031

 

 

26,844

 

Other income, net

 

563

 

 

585

 

 

815

 

EBITDA

 

$

123,254

 

 

$

123,968

 

 

$

111,340

 

 

Contact—(713) 585-2900
Investors—Steve Bender
Media—L. Benjamin Ederington

Source: Westlake Chemical Partners LP

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