HOUSTON, Aug. 5 TX-WLK-2Q-2008-earns
HOUSTON, Aug. 5 /PRNewswire-FirstCall/ -- Westlake Chemical Corporation
(NYSE: WLK) today reported net income of $47.3 million, or $0.72 per diluted
share, for the second quarter of 2008. This represents an increase from the
second quarter of 2007 net income of $37.9 million, or $0.58 per diluted
share. Sales for the second quarter of 2008 were $1,106.4 million and income
from operations for the second quarter of 2008 was $73.6 million. This
compares with net sales of $782.7 million and income from operations of
$62.3 million in the second quarter 2007. The increase in sales was primarily
due to higher selling prices and volumes for most major products. Income from
operations increased in the second quarter as compared to the second quarter
of 2007 as higher polyethylene and styrene selling prices outpaced higher
feedstock, natural gas and electricity costs. In addition, the second quarter
of 2007 was adversely impacted by a major turnaround lasting approximately
30 days at one of the ethylene units in Lake Charles, Louisiana. These
increases in second quarter 2008 operating income were partially offset by
continued weakness in the construction markets, which negatively impacted
Vinyls segment margins. Vinyls margins were lower in the second quarter of
2008 as compared to the prior year period as PVC pipe selling prices declined
slightly in spite of higher feedstock costs. PVC resin and caustic selling
prices and PVC resin and pipe sales volumes, however, were higher in the
second quarter of 2008 as compared to the second quarter of 2007. The second
quarter of 2008 was negatively impacted by trading losses of $7.0 million as
compared to a $4.1 million gain reported in the second quarter of 2007. The
second quarter 2008 net income benefited from the reversal of $2.7 million of
tax reserves due to tax settlements, which reduced income tax expense for the
period.
Second quarter 2008 net income increased $41.9 million, or $0.64 per
diluted share, from the $5.4 million net income, or $0.08 per diluted share,
reported in the first quarter of 2008. Second quarter 2008 income from
operations increased $59.7 million from the $13.9 million reported in the
first quarter of 2008, while net sales increased by $191.3 million from the
$915.1 million reported in the first quarter of 2008. The increase in sales
was largely due to higher selling prices for polyethylene, styrene, PVC resin
and caustic and higher sales volumes for all major products. PVC pipe sales
volumes increased substantially in the second quarter as compared to the first
quarter as construction activities picked up after an extended winter. Styrene
sales volume returned to more normal levels after the styrene facility in Lake
Charles, Louisiana underwent a major maintenance turnaround and revamp project
during the first quarter designed to increase energy efficiency and boost
capacity. Income from operations increased in the second quarter of 2008 as
compared to the first quarter of 2008 as selling price increases outpaced
higher feedstock and energy costs. The first quarter of 2008 was negatively
impacted by the turnaround of the styrene plant in Lake Charles and the
closure of the Pawling, New York window and door component manufacturing
facility.
For the six months ended June 30, 2008, net income was $52.7 million, or
$0.81 per diluted share, compared to $57.6 million net income, or $0.88 per
diluted share for the six months ended June 30, 2007. Net sales increased
$520.0 million, or 34.6%, to $2,021.5 million for the six months ended
June 30, 2008 from the $1,501.5 million reported in the six months ended
June 30, 2007. Income from operations was $87.4 million for the six months
ended June 30, 2008 as compared to $94.9 million for the six months ended
June 30, 2007. The increase in sales was due to higher selling prices for all
major products and higher sales volumes for ethylene and PVC resin. Income
from operations for the first six months of 2008 was below income from
operations reported in the first six months of 2007 due to, among other
things, higher raw material, natural gas and electricity costs and a loss from
trading activities. Raw material costs for ethane and propane increased by
more than 50% in the first half of 2008 as compared to the first half of 2007
and trading activity resulted in a loss of $6.9 million for the first half of
2008 as compared to a $4.8 million gain for the first half of 2007. The first
half of 2008 was negatively impacted by the turnaround and revamp of the
styrene facility and the closure of the Pawling facility. The first half of
2007 was negatively impacted by a turnaround at one of the ethylene units in
Lake Charles.
Albert Chao, President and Chief Executive Officer, said, "We are pleased
to report a substantial increase in our operating income and earnings per
share in the second quarter of 2008 as compared to our first quarter. Margins
improved due to higher sales volumes for all of our major products and we are
able to increase prices in order to partially offset the rise in feedstock
costs which have reached unprecedented levels. U.S. gas-based ethylene
producers continue to maintain a cost advantage over oil-based ethylene
producers. Global polyethylene prices remain strong with high naphtha costs
and continue to provide U.S. producers with good export opportunities. We do,
however, remain concerned with the high energy prices and the persisting
housing crisis and the weakening effects they have had on the economy."
EBITDA (earnings before interest expense, income taxes, depreciation and
amortization) for the second quarter of 2008 increased $14.9 million to
$103.2 million compared to the $88.3 million in the second quarter of 2007.
EBITDA for the second quarter of 2008 increased $60.9 million from the
$42.3 million of EBITDA in the first quarter of 2008. 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 net use of $8.0 million of cash from operating activities in the first
half of 2008 resulted primarily from increases in working capital requirements
and capitalized turnaround costs incurred at the styrene facility. Capital
additions for the first half of 2008 were $81.8 million. At June 30, 2008, the
Company had $22.5 million of cash and $146.2 million of restricted cash, and
the Company's long-term debt was $549.4 million. The restricted cash is held
by a trustee until such time as the Company requests reimbursement for
qualifying amounts spent for capital additions in Louisiana.
OLEFINS SEGMENT
Income from operations for the Olefins segment increased by $15.1 million
to $57.8 million in the second quarter of 2008 from $42.7 million reported in
the second quarter of 2007. This increase was primarily due to higher selling
prices for polyethylene and styrene, which were partially offset by higher raw
material costs for ethane and propane and higher natural gas and electricity
costs. The second quarter of 2007 was also adversely impacted by the scheduled
turnaround at one of the ethylene units in Lake Charles. Trading activity
resulted in a loss of $7.0 million in the second quarter of 2008 compared to a
$4.1 million gain in the second quarter of 2007.
Second quarter 2008 income from operations for the Olefins segment
increased by $37.6 million from the $20.2 million reported in the first
quarter of 2008. This increase was primarily due to increases in polyethylene
and styrene sales volumes and prices which were partially offset by higher
feedstock costs. The first quarter of 2008 was adversely impacted by the
styrene plant turnaround. Trading activity resulted in a loss in the second
quarter of 2008 of $7.0 million as compared to a $0.1 million gain in the
first quarter of 2008.
Income from operations for the Olefins segment increased by $8.1 million,
or 11.6%, to $78.0 million for the six months ended June 30, 2008 from
$69.9 million for the six months ended June 30, 2007. Selling prices for
polyethylene and styrene outpaced rising feedstock costs in the first half of
2008 as compared to the first half of 2007. Trading activities resulted in a
loss of $6.9 million in the first half of 2008 as compared to a $4.8 million
gain in the same period of 2007. The first half of 2008 was negatively
impacted by the styrene plant turnaround while the first half of 2007 was
negatively impacted by the turnaround at one of the ethylene units in Lake
Charles.
VINYLS SEGMENT
Income from operations for the Vinyls segment decreased by $2.4 million to
$18.4 million for the second quarter of 2008 from the $20.8 million income
reported in the second quarter of 2007. This decrease was primarily due to
significantly higher feedstock costs for propane and ethylene and a slight
decrease in PVC pipe prices. These decreases in income from operations were
partially offset by higher selling prices for PVC resin and caustic and higher
sales volumes for PVC resin and PVC pipe in the second quarter of 2008 as
compared to the prior year period. The Vinyls segment margins continue to be
negatively impacted by the weakness in the construction market.
Second quarter 2008 income from operations for the Vinyls segment improved
by $21.5 million from the $3.1 million loss reported in the first quarter of
2008. This improvement was largely due to higher selling prices for PVC resin
and caustic. In addition, PVC resin and PVC pipe sales volumes increased
significantly in the second quarter as construction activities picked up after
an extended winter. These increases were partially offset by higher feedstock
costs for propane and ethylene. The first quarter of 2008 was negatively
impacted by costs related to the closure of the Pawling facility.
Income from operations for the Vinyls segment decreased by $13.3 million,
or 46.5%, to $15.3 million for the six months ended June 30, 2008 from
$28.6 million for the six months ended June 30, 2007. This decrease was
primarily due to higher raw material costs for propane and ethylene and lower
sales volumes for PVC pipe. In addition, the shutdown of the Pawling facility
negatively impacted operating income in the first six months of 2008. These
decreases were partially offset by higher sales volumes for PVC resin and
higher selling prices for PVC resin and caustic.
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; the effect and results of
litigation and settlements of litigation; 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, 2007, which was filed with the SEC in February
2008.
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 second
quarter results will be held Tuesday, August 5, 2008 at 11:00 a.m. EDT
(10:00 a.m. CDT). To access the conference call, dial (800) 659-2056, or
(617) 614-2714 for international callers, approximately 10 minutes prior to
the scheduled start time and reference passcode 82398295.
A replay of the conference call will be available beginning an hour after
its conclusion until 1:00 p.m. EDT on Tuesday, August 12, 2008. To hear a
replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The
replay passcode is 52344617.
The conference call will also be available via webcast at:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-
eventDetails&c=180248&eventID=1903600 and the earnings release can be obtained
via the company's Web page at:
http://www.westlake.com/fw/main/IR_Home_Page-123.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.westlake.com.
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30,June 30,
2008200720082007
(In thousands of dollars, except per share data)
Net sales $1,106,449$782,664 $2,021,510 $1,501,466
Cost of sales 1,009,989 698,233 1,888,346 1,359,146
Gross profit 96,460 84,431 133,164 142,320
Selling, general and
administrative
expenses 22,884 22,152 45,729 47,375
Income from operations 73,576 62,279 87,435 94,945
Interest expense (9,287) (4,495)(17,815) (8,088)
Other income
(expense), net 2,199(292) 4,607 699
Income before income
taxes 66,488 57,492 74,227 87,556
Provision for income
taxes 19,215 19,602 21,567 29,994
Net income$47,273 $37,890 $52,660 $57,562
Basic and diluted
earnings per share $0.72 $0.58 $0.81 $0.88
Weighted average
shares outstanding
Basic 65,264,781 65,224,697 65,262,169 65,221,365
Diluted 65,296,743 65,324,714 65,292,816 65,324,616
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30,December 31,
2008 2007
(In thousands of dollars)
ASSETS
Current Assets
Cash and cash equivalents$22,462 $24,914
Accounts receivable, net 641,504 507,463
Inventories, net 514,462 527,871
Other current assets 39,07231,937
Total current assets1,217,500 1,092,185
Property, plant and equipment, net 1,159,799 1,126,212
Restricted Cash146,150 199,450
Other assets, net 162,523 151,488
Total assets $2,685,972$2,569,335
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities (accounts payable
and accrued liabilities) $465,001 $441,262
Long-term debt 549,438 511,414
Other liabilities 337,105 329,989
Total liabilities 1,351,544 1,282,665
Stockholders' equity 1,334,428 1,286,670
Total liabilities and
stockholders' equity $2,685,972$2,569,335
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2008 2007
(In thousands of dollars)
Cash flows from operating activities
Net income $52,660 $57,562
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 53,37850,716
Deferred income taxes 9,08814,417
Other balance sheet changes (123,173) (88,517)
Net cash (used for) provided
by operating activities (8,047) 34,178
Cash flows from investing activities
Additions to property, plant and
equipment (81,751) (50,483)
Addition to equity investment- (308)
Settlement of acquisition purchase price - 8,043
Proceeds from disposition of assets34633
Settlements of derivative instruments 535 3,673
Net cash used for investing activities (80,870) (39,042)
Cash flows from financing activities
Proceeds from exercise of stock options -62
Dividends paid (6,563) (5,229)
Proceeds from borrowings 620,235 191,684
Repayments of borrowings (582,252) (191,684)
Utilization of restricted cash 55,045 -
Net cash provided by (used
for) financing activities 86,465(5,167)
Net decrease in cash and cash equivalents (2,452) (10,031)
Cash and cash equivalents at beginning of
period 24,91452,646
Cash and cash equivalents at end of period $22,462 $42,615
WESTLAKE CHEMICAL CORPORATION
SEGMENT INFORMATION
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
(In thousands of dollars)
Net Sales to External
Customers
Olefins$765,962 $514,840 $1,426,783 $999,066
Vinyls 340,487 267,824594,727 502,400
$1,106,449 $782,664 $2,021,510 $1,501,466
Income (Loss) from
Operations
Olefins $57,804 $42,716$77,956 $69,935
Vinyls 18,35420,817 15,269 28,609
Corporate and Other (2,582) (1,254)(5,790) (3,599)
$73,576 $62,279$87,435 $94,945
Depreciation and
Amortization
Olefins $19,182 $17,487$36,843 $33,143
Vinyls8,143 8,838 16,441 17,499
Corporate and Other 5236 94 74
$27,377 $26,361$53,378 $50,716
Other Income (Expense), net
Olefins $42 $119$58 $170
Vinyls 6728166 90
Corporate and Other 2,090 (439) 4,383 439
$2,199 $(292)$4,607 $699
WESTLAKE CHEMICAL CORPORATION
RECONCILIATION OF EBITDA TO NET INCOME AND TO CASH FLOW FROM
OPERATING ACTIVITIES
(Unaudited)
Three Months Three Months Six Months
Ended Ended Ended
March 31, June 30,June 30,
2008 2008 2007 2008 2007
(In thousands of dollars)
EBITDA $42,268 $103,152 $88,348 $145,420 $146,360
Less:
Provision for income
taxes 2,35219,215 19,60221,56729,994
Interest expense 8,528 9,2874,49517,815 8,088
Depreciation and
amortization 26,00127,377 26,36153,37850,716
Net income 5,38747,273 37,89052,66057,562
Changes in operating
assets and liabilities(34,804) (34,991) 28,061 (69,795) (37,801)
Deferred income taxes1,163 7,925 10,641 9,08814,417
Cash flow from operating
activities $(28,254) $20,207 $76,592 $(8,047) $34,178
WESTLAKE CHEMICAL CORPORATION
SUPPLEMENTAL INFORMATION
Product Sales Price and Volume Variance by Operating Segments
Second Quarter Second Quarter
2008 vs. 2008 vs.
Second QuarterFirst Quarter
2007 2008
Average Average
SalesSales
Price Volume Price Volume
Olefins+38.9%+9.9% +9.4%+6.5%
Vinyls +14.6% +12.5% +6.3% +27.6%
Company+30.6% +10.8% +8.5% +12.4%
Average Quarterly Industry Prices (1)
Quarter Ended
June September December March June
20072007 2007 2008 2008
Ethane (cents/lb) 24.327.6 35.2 34.1 35.4
Propane (cents/lb) 26.729.0 35.7 34.8 40.2
Ethylene (cents/lb) (2)44.750.2 60.2 60.5 65.7
Polyethylene (cents/lb) (3)72.779.0 86.3 88.0 94.7
Styrene (cents/lb) (4) 71.368.1 68.8 72.5 78.8
Caustic ($/ short ton) (5)405.0 450.0 485.8554.2 641.7
Chlorine ($/ short ton) (6) 322.5 322.5 322.5300.0 275.0
PVC (cents/lb) (7) 59.061.3 66.7 54.3 58.7
(1) Industry pricing data was obtained through the Chemical Market
Associates, Inc., or CMAI. We have not independently verified the data.
(2) Represents average North America spot prices of ethylene over the
period as reported by CMAI.
(3) Represents average North America contract prices of polyethylene low
density film over the period as reported by CMAI.
(4) Represents average North American contract prices of styrene over the
period as reported by CMAI.
(5) Represents average North America spot prices of caustic soda
(diaphragm grade) over the period as reported by CMAI.
(6) Represents average North America contract prices of chlorine (into
chemicals) over the period as reported by CMAI.
(7) Represents average North America contract prices of PVC over the
period as reported by CMAI. In the first quarter of 2008, CMAI made a 16 cent
per pound downward, non-market related adjustment to PVC resin prices.
SOURCE Westlake Chemical Corporation
