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.
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.
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
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
CO: Westlake Chemical Corporation