HOUSTON, Nov. 3 /PRNewswire-FirstCall/ -- Westlake Chemical Corporation (NYSE: WLK) today reported third quarter net income of $28.3 million or $0.50 per diluted share and operating income of $68.9 million on net sales of $572.0 million for the third quarter of 2004. This compares favorably with the third quarter 2003 net loss of $9.3 million or negative $0.19 per diluted share and operating income of $8.3 million on net sales of $358.6 million. The third quarter of 2004 includes an after tax charge of $9.3 million related to the early retirement of debt. This charge reduced earnings per diluted share for the quarter by $0.16 per diluted share. The third quarter of 2003 included an after tax charge of $7.1 million related to the early retirement of debt, which negatively impacted earnings per share by $0.14. The improvement in net sales and operating income was a result of increased selling prices and higher sales volumes, which outpaced higher feedstock and energy costs. PVC pipe sales volume increased due to the acquisition of the assets of Bristolpipe Corporation, which was completed on August 2, 2004.
In the third quarter of 2004 Westlake Chemical Corporation completed its initial public offering (IPO). Net proceeds from the IPO of $181.3 million and available cash were used to retire $133.0 million of our 8 3/4% senior notes, $28.0 million on our $120.0 million senior secured term loan and a $27.0 million bank loan. The debt retirement costs in the third quarter of 2004 consist of a pre-tax $11.6 million pre-payment premium on the senior notes and a pre-tax write off of $3.1 million in previously capitalized debt issuance cost.
Third quarter 2004 net income decreased $6.1 million from the $34.4 million net income reported in the second quarter of 2004 due to the $9.3 million after tax debt retirement costs incurred in the third quarter of 2004. Third quarter net sales and operating income compared favorably to the second quarter net sales of $449.4 million and operating income of $65.9 million primarily due to higher selling prices and volumes, which were partially offset by higher feedstock prices.
For the nine months ended September 30, 2004, net income was $73.4 million or $1.41 per diluted share including an after tax charge of $9.3 million, or $0.18 per diluted share on net sales of $1,422.3 million. This compares favorably with the nine months ended September 30, 2003 net income of $4.1 million or $0.08 per diluted share, which included an after tax charge of $7.1 million, or $0.14 per diluted share, on net sales of $1,057.2 million. Operating income was $161.8 million for the nine months ended September 30, 2004 as compared to $40.9 million for nine months ended September 30, 2003. These increases were due to higher selling prices and volumes, which more than offset higher raw material and energy costs.
Income from operations for the Olefins segment increased by $35.7 million to $44.7 million in the third quarter of 2004 from $9.0 million in the third quarter of 2003. This increase was primarily due to higher selling prices and higher sales volumes in polyethylene and styrene, which were partially offset by higher raw material costs for ethane, propane and benzene.
Third quarter 2004 income from operations increased $6.2 million from the $38.5 million income from operations reported in the second quarter of 2004. The increase was primarily due to higher selling prices and volumes, which were partially offset by higher feedstock and energy costs.
Income from operations for the Olefins segment increased by $77.8 million to $114.2 million for the nine months ended September 30, 2004 from $36.4 million for the nine months ended September 30, 2003. This increase was due to price increases and higher sales volumes for ethylene, polyethylene and styrene, reduced by higher raw material costs of ethane, propane and benzene.
Income from operations for the Vinyls segment increased by $26.5 million to $26.3 million in the third quarter of 2004 from a $0.2 million loss in the third quarter of 2003. This increase was primarily due to higher selling prices for PVC pipe, PVC resin and VCM and higher sales volumes for PVC pipe and VCM. These increases were partially offset by higher energy costs and higher raw material costs for propane.
Third quarter income from operations decreased $1.8 million from the $28.1 million income from operations reported in the second quarter of 2004. The decrease was primarily due to margin deterioration in PVC resin and PVC pipe that was partially offset by caustic price increases. Results were also impacted by the costs associated with the phased start-up of our VCM and PVC facilities in Geismar, Louisiana. PVC pipe sales volumes increased due to the acquisition of the assets of Bristolpipe Corporation, which was completed on August 2, 2004.
Income from operations for the Vinyls segment increased by $42.3 million to $51.1 million for the nine months ended September 30, 2004 from $8.8 million for the nine months ended September 30, 2003. This increase was due to price increases for PVC pipe, PVC resin and VCM, which were partially offset by higher raw material and energy costs.
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 (loss) 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 Wednesday, November 3, 2004 at 11:00 a.m. EST (10:00 a.m. CST). To access the conference call, dial (800) 901-5247, or (617) 786-4501 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 43414193.
A replay of the conference call will be available beginning an hour after its conclusion until 5:00 p.m. EST (4:00 p.m. CST) on Wednesday, November 10, 2004. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 29430397.
The conference call will also be available via webcast at http://phx.corporate-ir.net/phoenix.zhtml?c=180248&p=irol-calendar and the earnings release can be obtained via the company's Web page at, http://www.westlakechemical.com/news.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, vinyl intermediates, PVC and PVC pipe, windows and fence. For more information, visit the company's Web site at www.westlakechemical.com .
WESTLAKE CHEMICAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in $000) Three Months Ended Nine Months Ended September 30, September 30, 2004 2003 2004 2003 Net Sales $572,031 $358,598 $1,422,284 $1,057,155 Cost of Sales 487,520 338,161 1,217,437 970,847 Gross Profit 84,511 20,437 204,847 86,308 Selling, General and Administrative Expenses 15,055 12,103 41,251 44,476 Impairment of Long- Lived assets 516 --- 1,830 932 Income from Operations 68,940 8,334 161,766 40,900 Interest Expense (10,144) (10,148) (32,261) (27,598) Debt Retirement Cost (14,685) (11,343) (14,685) (11,343) Other Income (Expense), net 1,801 (1,704) 445 4,605 Income (Loss) before Taxes 45,912 (14,861) 115,265 6,564 Income Tax Provision (Benefit) 17,595 (5,529) 41,869 2,443 Net Income (Loss) $28,317 $(9,332) $73,396 $4,121 Basic and Diluted Earnings (Loss) Per Share $0.50 $(0.19) $1.41 $0.08 Weighted Average Shares Outstanding Basic 56,903,270 49,499,395 51,985,368 49,499,395 Diluted 57,027,346 49,499,395 52,027,028 49,499,395 Reconciliation of EBITDA to Net Income (Loss) and to Cash flow from Operating Activities EBITDA $77,167 $16,732 $210,375 $99,819 Less: Income Tax Provision (Benefit) 17,595 (5,529) 41,869 2,443 Interest Expense 10,144 10,148 32,261 27,598 Depreciation and amortization 21,111 21,445 62,849 65,657 Net Income (Loss) 28,317 (9,332) 73,396 4,121 Changes in operating assets and liabilities (287) 20,320 (28,878) 24,551 Deferred income taxes 16,346 (5,641) 38,843 1,870 Cash flow from operating activities $44,376 $5,347 $83,361 $30,542 WESTLAKE CHEMICAL CORPORATION CONSOLIDATED BALANCE SHEETS (in $000) Unaudited September 30, December 31, 2004 2003 ASSETS Current Assets Cash and Cash Equivalents $50,984 $37,381 Accounts Receivable (net) 248,462 178,633 Inventories 249,359 180,760 Other Current Assets 16,568 16,073 Total Current Assets 565,373 412,847 Property, Plant and Equipment (net) 872,317 879,688 Other Assets (net) 68,176 77,578 Total Assets $1,505,866 $1,370,113 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts Payable and Accrued Liabilities $218,161 $186,932 Current Portion of Long-Term Debt 1,200 28,200 Total Current Liabilities 219,361 215,132 Long-Term Debt 347,189 509,089 Other Liabilities 216,378 178,189 Total Liabilities 782,928 902,410 Minority Interest --- 22,100 Stockholders' Equity 722,938 445,603 Total Liabilities and Stockholders' Equity $1,505,866 $1,370,113 WESTLAKE CHEMICAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in $000) Nine Months Ended September 30, 2004 2003 Cash Flows from Operating Activities: Net Income $73,396 $4,121 Adjustments to Reconcile Net Income to Net Cash: Depreciation and Amortization 62,849 65,657 Deferred Tax Expense 38,843 1,870 Other Balance Sheet Changes (91,727) (41,106) 9,965 26,421 Net Cash Provided by Operating Activities 83,361 30,542 Cash Flows from Investing Activities: Additions to Property, Plant and Equipment (30,912) (29,717) Acquisition of Business Operations (33,294) --- Other 2,087 3,350 Net Cash Used by Investing Activities (62,119) (26,367) Cash Flows from Financing Activities: Proceeds from Issuance of Common Stock, net 181,261 --- Proceeds from Borrowings --- 723,475 Repayment of Borrowings (188,900) (719,099) Net Cash (Used) Provided by Financing Activities (7,639) 4,376 Net Increase in Cash 13,603 8,551 Cash Balance at the Beginning of the Period 37,381 11,123 Cash Balance at the End of the Period $50,984 $19,674 WESTLAKE CHEMICAL CORPORATION SEGMENT INFORMATION (unaudited, in $000) Three Months Ended Nine Months Ended September 30, September 30, 2004 2003 2004 2003 Net Sales to External Customers Olefins $363,170 $220,394 $894,245 $652,482 Vinyls 208,861 138,204 528,039 404,673 $572,031 $358,598 $1,422,284 $1,057,155 Income (Loss) from Operations Olefins $44,745 $9,034 $114,215 $36,388 Vinyls 26,273 (160) 51,069 8,761 Corporate and Other (2,078) (540) (3,518) (4,249) $68,940 $8,334 $161,766 $40,900 Depreciation and Amortization Olefins $13,051 $12,687 $39,321 $37,735 Vinyls 7,965 8,260 23,121 24,957 Corporate and Other 95 498 407 2,965 $21,111 $21,445 $62,849 $65,657 Other Income (Expense), net Olefins $831 $(1,680) $(2,249) $2,589 Vinyls 170 63 135 643 Corporate and Other* (13,885) (11,430) (12,126) (9,970) $(12,884) $(13,047) $(14,240) $(6,738) * Debt retirement costs of $14,685 and $11,343 are included in the three months and nine months ending September 30, 2004 and 2003, respectively.
SOURCE Westlake Chemical Corporation
CONTACT: finance, Ruth I. Dreessen, or media, David R. Hansen, both of Westlake Chemical Corporation, +1-713-960-9111
Web site: http://www.westlakechemical.com