Westlake Chemical Reports Fourth Quarter Results
HOUSTON, Feb. 21 /PRNewswire-FirstCall/ -- Westlake Chemical Corporation (NYSE: WLK) today reported net income of $73.6 million, or $1.13 per diluted share, and income from operations of $112.5 million on net sales of $636.4 million for the fourth quarter of 2005. This compares favorably with fourth quarter 2004 net income of $47.3 million, or $0.73 per diluted share, and income from operations of $81.4 million on net sales of $563.1 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 Vinyls segment sales volumes. These increases were partially offset by lower ethylene, polyethylene and styrene sales volumes. These lower sales volumes were caused by production outages at the company's Lake Charles facilities resulting from Hurricane Rita. The Lake Charles facilities were shut down for approximately two weeks during the fourth quarter primarily due to the lack of electrical power and other utilities.
In the fourth 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 companies in the industry. The fourth quarter was also positively impacted by a lower effective tax rate. The effective tax rate for the fourth quarter of 2005 was 32.4% as compared to the effective tax rate for the entire year 2005 of 34.3%. The lower fourth quarter tax rate was due to a $4.1 million federal tax benefit not expected to reoccur.
Albert Chao, President and Chief Executive Officer, stated, "We are pleased to report a strong fourth quarter to end the year. In spite of the impacts from Hurricanes Katrina and Rita and the increasing raw material and energy costs, we were able to report record earnings in both our Olefins and Vinyls segments for 2005."
Fourth quarter 2005 net income increased $30.1 million, or $0.46 per diluted share, from the $43.5 million net income, or $0.67 per diluted share, reported in the third quarter of 2005. Fourth quarter 2005 income from operations increased $42.4 million from the income from operations of $70.1 million reported in the third quarter of 2005, while net sales increased by $31.0 million from the $605.4 million reported in the third quarter of 2005. The increases in net sales, operating income and net income were primarily due to increased selling prices for the company's products, which outpaced higher energy and feedstock costs. The higher selling prices were partially offset by lower sales volumes. Sales volumes were adversely impacted by the outages caused by Hurricane Rita.
For the year ended December 31, 2005, net income was $226.8 million, or $3.48 per diluted share, on net sales of $2,441.1 million. This compares favorably with the year ended December 31, 2004 net income of $120.7 million, or $2.18 per diluted share, on net sales of $1,985.4 million. Results for 2004 included an after-tax charge of $10.0 million, or $0.18 per diluted share, related to the early retirement of debt. Income from operations was $367.0 million for the year ended December 31, 2005 as compared to $243.2 million for the year ended December 31, 2004. These increases were primarily due to higher sales volumes in the company's Vinyls segment and higher selling prices for the company's olefins and vinyls products, which outpaced higher feedstock and energy costs. Net income for 2005 also benefited from lower interest expense resulting from lower debt balances.
EBITDA (earnings before interest expense, income taxes, depreciation and amortization) for the fourth quarter of 2005 was $135.4 million compared to $100.7 million in the fourth quarter of 2004 and $90.1 million in the third quarter of 2005. EBITDA for the year ended December 31, 2005 was $450.3 million as compared to $311.1 million for the year ended December 31, 2004. 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 $318.4 million during 2005, invested $85.8 million in capital additions and repaid $31.2 million of the company's senior secured term loan during 2005, leaving the company with $237.9 million of cash and $266.9 million of debt on the balance sheet as of December 31, 2005.
The company completed a refinancing of its long-term debt in the first quarter of 2006. The company issued $250.0 million of new 6 5/8% unsecured senior notes due 2016 and amended its senior secured revolving credit facility to increase the commitment from $200.0 million to $300.0 million. The proceeds from the $250.0 million unsecured senior notes along with cash on hand were used to redeem the entire $247.0 million outstanding of the company's 8 3/4% senior notes due 2011 and repay the term loan balance of $9.0 million. The company expects to incur a one-time non-operating expense in the first quarter of 2006 of approximately $25.7 million before tax for the early retirement of debt and a write-off of previously capitalized debt-issuance cost. The new debt structure is expected to give the company more flexibility and result in lower interest expense in future periods.
Income from operations for the Olefins segment decreased by $9.2 million to $56.2 million in the fourth quarter of 2005 from $65.4 million in the fourth quarter of 2004. This decrease was primarily due to lower production and sales volumes, and higher energy and feedstock costs. The lower production and sales volumes were due to a two week outage in the fourth quarter 2005 at the Lake Charles facilities resulting from the continued impact from Hurricane Rita. These decreases were partially offset by higher selling prices.
Fourth quarter 2005 income from operations for the Olefins segment increased by $11.1 million from the $45.1 million income from operations reported in the third quarter of 2005. This increase was primarily due to higher selling prices, which were partially offset by higher energy and raw material costs and lower sales volumes. The lower sales volumes resulted from the outage caused by Hurricane Rita.
Income from operations for the Olefins segment increased by $16.1 million to $195.7 million for the year ended December 31, 2005 from $179.6 million for the year ended December 31, 2004. This increase was primarily due to price increases for all of the segment's products. These increases were partially offset by lower sales volumes, higher raw material costs and higher energy costs. Merchant ethylene sales volumes were lower for 2005 as compared to 2004 largely due to the increase in internal ethylene consumption at the company's Geismar facility. Polyethylene and styrene sales volumes decreased primarily due to the two week outage at the Lake Charles facilities resulting from Hurricane Rita.
Income from operations for the Vinyls segment increased by $39.2 million to $57.9 million in the fourth quarter of 2005 from $18.7 million in the fourth quarter of 2004. This increase was primarily due to higher sales volumes and selling prices for all of the segment's products. These increases were partially offset by higher energy and raw material costs.
Fourth quarter income from operations for the Vinyls segment increased by $29.0 million from the $28.9 million income from operations reported in the third quarter of 2005. This increase was primarily due to higher selling prices in the Vinyls segment, which outpaced higher energy and raw material costs.
Income from operations for the Vinyls segment increased by $109.7 million to $179.4 million for the year ended December 31, 2005 from $69.7 million for the year ended December 31, 2004. The 2004 earnings were adversely impacted by a fire at the Calvert City ethylene plant which resulted in approximately an $8.4 million operating loss. The improvements in 2005 were primarily due to higher selling prices and sales volumes. These increases were partially offset by higher raw material and energy costs.
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 with the SEC 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 fourth quarter results will be held Tuesday, February 21, 2006 at 11:00 a.m. EST (10:00 a.m. CST). To access the conference call, dial (866) 277-1184, or (617) 597-5360 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 43763752.
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 Tuesday, February 28, 2006. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 21963244.
The conference call will also be available via webcast at: http://phx.corporate-ir.net/phoenix.zhtml?p=irol- eventDetails&c=180248&eventID=1207522 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 Year-to-Date December 31, December 31, 2005 2004 2005 2004 Net sales $636,439 $563,069 $2,441,105 $1,985,353 Cost of sales 501,335 464,731 1,997,474 1,682,168 Gross profit 135,104 98,338 443,631 303,185 Selling, general and administrative expenses 22,604 18,987 76,598 60,238 Gain on Sale of Asset --- (2,049) --- (2,049) Impairment of long-lived assets --- --- --- 1,830 Income from operations 112,500 81,400 367,033 243,166 Interest expense (5,850) (7,089) (23,717) (39,350) Debt retirement cost --- (1,106) (646) (15,791) Other income, net 2,336 2,192 2,658 2,637 Income before taxes 108,986 75,397 345,328 190,662 Income tax provision 35,364 28,071 118,511 69,940 Net income $73,622 $47,326 $226,817 $120,722 Basic earnings per share $1.13 $0.73 $3.49 $2.19 Diluted earnings per share $1.13 $0.73 $3.48 $2.18 Weighted average shares outstanding Basic 65,071,115 64,896,489 65,008,253 55,230,786 Diluted 65,262,258 65,268,328 65,251,109 55,355,442 WESTLAKE CHEMICAL CORPORATION CONSOLIDATED BALANCE SHEETS (unaudited, in $000) Unaudited December 31, December 31, 2005 2004 Current Assets Cash and cash equivalents $237,895 $43,396 Accounts receivable (net) 302,779 234,247 Inventories 339,870 319,816 Other current assets 22,319 74,479 Total current assets 902,863 671,938 Property, plant and equipment (net) 863,232 855,052 Other assets (net) 61,094 65,463 Total assets $1,827,189 $1,592,453 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued liabilities $304,649 $249,015 Current portion of long-term debt 1,200 1,200 Total current liabilities 305,849 250,215 Long-term debt 265,689 296,889 Other liabilities 261,545 275,952 Total liabilities 833,083 823,056 Stockholders' equity 994,106 769,397 Total liabilities and stockholders' equity $1,827,189 $1,592,453 WESTLAKE CHEMICAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in $000) Year ended December 31, December 31, 2005 2004 Cash flows from operating activities Net income $226,817 $120,722 Adjustments to reconcile net income to net cash Depreciation and amortization 81,241 81,075 Deferred tax expense 45,745 65,188 Other balance sheet changes (35,356) (116,204) 91,630 30,059 Net cash provided by operating activities 318,447 150,781 Cash flows from investing activities Additions to property, plant and equipment (85,760) (52,710) Addition to equity investment (1,867) --- Business acquisitions --- (33,294) Proceeds from insurance claims --- 2,785 Proceeds from disposition of assets 37 3,256 Net cash used for investing activities (87,590) (79,963) Cash flows from financing activities Proceeds from issuance of common stock, net --- 181,167 Proceeds from exercise of stock options 1,184 --- Proceeds from affiliate borrowings 336 Repayments of affiliate borrowings (5,727) Dividends paid (6,342) (1,379) Repayments of borrowings (31,200) (239,200) Net cash used for financing activities (36,358) (64,803) Net increase in cash and cash equivalents 194,499 6,015 Cash and cash equivalents at beginning of the year 43,396 37,381 Cash and cash equivalents at end of the year $237,895 $43,396 WESTLAKE CHEMICAL CORPORATION SEGMENT INFORMATION (unaudited, in $000) Three Months Ended Year Ended December 31, December 31, 2005 2004 2005 2004 Net Sales to External Customers Olefins $324,757 $357,009 $1,350,042 $1,251,254 Vinyls 311,682 206,060 1,091,063 734,099 $636,439 $563,069 $2,441,105 $1,985,353 Income (Loss) from Operations Olefins $56,168 $65,372 $195,670 $179,587 Vinyls 57,925 18,654 179,407 69,723 Corporate and Other (1,593) (2,626) (8,044) (6,144) $112,500 $81,400 $367,033 $243,166 Depreciation and Amortization Olefins $12,145 $9,892 $46,844 $49,213 Vinyls 8,425 8,550 34,343 31,671 Corporate and Other 22 (216) 54 191 $20,592 $18,226 $81,241 $81,075 Other Income (Expense), net Olefins $63 $1,268 $(1,933) $(981) Vinyls 25 (14) 301 121 Corporate and Other* 2,248 (168) 3,644 (12,294) $2,336 $1,086 $2,012 $(13,154) * Debt retirement costs of $646 are included in the twelve months ended December 31, 2005. Debt retirement costs of $1,106 and $15,791 are included in the three and twelve months ended December 31, 2004, respectively. WESTLAKE CHEMICAL CORPORATION RECONCILIATION OF EBITDA TO NET INCOME AND TO CASH FLOW FROM OPERATING ACTIVITIES (unaudited, in $000) Three Three Twelve Months Ended Months Ended Months Ended Sept. 30, December 31, December 31, 2005 2005 2004 2005 2004 EBITDA $90,055 $135,428 $100,712 $450,286 $311,087 Less: Income tax provision 21,590 35,364 28,071 118,511 69,940 Interest expense 5,834 5,850 7,089 23,717 39,350 Depreciation and amortization 19,105 20,592 18,226 81,241 81,075 Net income 43,526 73,622 47,326 226,817 120,722 Changes in operating assets and liabilities (19,868) 54,481 (6,251) 45,885 (35,129) Deferred income taxes 7,770 15,218 26,345 45,745 65,188 Cash flow from operating activities $31,428 $143,321 $67,420 $318,447 $150,781 WESTLAKE CHEMICAL CORPORATION SUPPLEMENTAL INFORMATION Key Product Sales Price and Volume Variance by Operating Segments Q4'05 vs. Q4'04 Q4'05 vs. Q3'05 Average Average Sales Price Volume Sales Price Volume Olefins (A) +24.7% -22.9% +28.8% -25.4% Vinyls (B) +34.7% +12.3% +17.6% -3.3% Average +27.5% -7.9% +23.0% -15.4% (A) Includes: ethylene and co-products, polyethylene, and styrene (B) Includes: ethylene co-products, caustic, VCM, PVC resin, PVC pipe, and other fabrication products Average Quarterly Industry Prices Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 '04 '05 '05 '05 '05 Ethane (cents/lb) 20.3 17.6 17.6 23.1 25.7 Propane (cents/lb) 20.1 18.7 19.5 22.9 25.2 Ethylene (cents/lb) (A) 39.2 41.5 38.3 41.2 55.8 Polyethylene (cents/lb) (B) 66.0 68.0 62.0 65.2 86.0 Styrene (cents/lb) (C) 68.3 64.5 61.6 60.3 63.8 Caustic ($/ short ton) (D) 300.0 345.0 382.0 390.0 457.5 Chlorine ($/ short ton) (E) 310.0 330.0 350.0 350.0 357.5 VCM (cents/lb) (F) 36.2 38.5 37.5 38.6 48.0 PVC (cents/lb) (G) 49.8 53.8 54.2 53.2 65.8 Source: CMAI (A) Contract-Net Transaction (B) Contract Low Density Polyethylene, GP- Film (C) Contract-Styrene (D) Contract-Diaphragm caustic (E) Contract Chlorine (F) Contract Vinyl Chloride Monomer (G) 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