Westlake Chemical Announces First Quarter Earnings

HOUSTON, May 1, 2012 /PRNewswire/ -- Westlake Chemical Corporation (NYSE: WLK) today reported record net income for the three months ended March 31, 2012 of $87.8 million, or $1.31 per diluted share, on sales of $1,034.9 million. This represents an improvement of $4.3 million over the quarter ended March 31, 2011 net income of $83.5 million, or $1.25 per diluted share, on sales of $867.3 million. Sales for the first quarter of 2012 increased $167.6 million compared to the first quarter of 2011, driven mainly by higher sales prices for our major products and the sale of feedstock. Income from operations was a record $145.6 million for the first quarter of 2012 as compared to $140.6 million for the first quarter of 2011. Income from operations benefited primarily from higher vinyls integrated product margins, partially offset by lower olefins integrated product margins. Earnings in the first quarter of 2011 were negatively impacted as the result of a fire at a third party storage facility in Mont Belvieu, Texas in the quarter.

First quarter 2012 net income of $87.8 million, or $1.31 per diluted share, was a significant increase from the $26.4 million, or $0.40 per diluted share, reported in the fourth quarter of 2011. First quarter 2012 sales of $1,034.9 million increased $175.7 million compared to sales of $859.2 million in the fourth quarter of 2011. The increase in sales was largely driven by higher prices for all of our olefins products and PVC resin, higher sales volumes for PVC resin, building products and caustic and the sale of feedstock. First quarter 2012 income from operations of $145.6 million increased $95.1 million over the income from operations in the fourth quarter of 2011 of $50.5 million. The increase in operating income in the first quarter of 2012 compared to the fourth quarter of 2011 was primarily the result of lower natural gas liquids ("NGL") ethylene feedstock costs, higher integrated olefins margins, higher sales volumes and margins for PVC resin and higher sales volumes for building products and caustic.

Albert Chao, President and Chief Executive Officer, said, "We are pleased to report record quarterly earnings per share in the first quarter of 2012, and our Vinyls segment achieved its highest quarterly operating income since 2008. Our first quarter earnings benefited from a significant drop in ethane and energy costs, strong demand for our products and high operating rates. Due in large part to shale gas production in North America, our natural gas liquids based ethylene production continues to have a significant cost advantage over naphtha based ethylene production. We expect that our integration strategy and the continuing development of shale gas production, NGL facilities and pipelines will give our Olefins and Vinyls businesses a strong competitive advantage for the foreseeable future."

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $182.4 million for the first quarter of 2012 increased $8.0 million compared to $174.4 million in the first quarter of 2011. EBITDA for the first quarter of 2012 increased $97.5 million compared to $84.9 million in the fourth quarter of 2011. A reconciliation of EBITDA to reported net income and to net cash provided by operating activities can be found in the financial schedules at the end of this press release.

Net cash provided by operating activities was $110.1 million in the first quarter of 2012. Capital expenditures in the first quarter of 2012 were $64.9 million. At March 31, 2012, we had cash balances of $960.7 million, including $65.6 million of restricted cash, and our long-term debt was $764.6 million. The restricted cash is designated for qualifying amounts spent for certain capital additions in Louisiana.

OLEFINS SEGMENT
Income from operations for the Olefins segment was $129.2 million in the first quarter of 2012, a decrease of $16.1 million compared to the $145.3 million reported in the first quarter of 2011. This decrease was mainly attributable to lower olefins integrated product margins as compared to the first quarter of 2011. The lower margins were primarily the result of the negative impact of high cost feedstock in inventory at December 31, 2011, which flowed through cost of sales in the first quarter of 2012 as a result of utilizing the first-in-first-out (FIFO) method of inventory accounting. Industry ethane prices dropped from an average of 85.6 cents per gallon in the fourth quarter of 2011 to an average of 56.3 cents per gallon in the first quarter of 2012.

Income from operations for the first quarter of 2012 for the Olefins segment of $129.2 million was an increase of $53.3 million from the $75.9 million reported in the fourth quarter of 2011. This increase was driven primarily by a decrease in ethane feedstock costs and higher polyethylene prices.

VINYLS SEGMENT
Income from operations for the Vinyls segment was $21.1 million, an improvement of $23.9 million over the loss from operations of $2.8 million in the first quarter of 2011. The improvement in operating income was primarily driven by lower feedstock costs, higher sales prices for all of our major products, and higher sales volumes for building products compared to the first quarter of 2011. The first quarter of 2012 income from operations was negatively impacted by the lost production and sales and the expensing of approximately $1.3 million of costs associated with an unscheduled outage at our Geismar VCM unit. Further, we expect the Geismar outage to continue to negatively impact our Vinyls segment results in the second quarter of 2012.

The Vinyls segment's income from operations of $21.1 million in the first quarter of 2012 was an improvement of $40.7 million over the operating loss of $19.6 million reported in the fourth quarter of 2011. The improved results were primarily due to lower propane feedstock costs, higher PVC resin prices and higher sales volumes for all of our major products compared to the fourth quarter of 2011.

The statements in this release relating to matters that are not historical facts, including the significant cost advantage natural gas-based ethylene production continues to have over naptha-based ethylene products and the competitive advantages of our Olefins and Vinyls businesses in the foreseeable future as a result of our integration strategy, shale gas production, NGL facilities and pipelines are forward-looking statements that are subject to risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to: general economic and business conditions; the cyclical nature of the chemical industry; availability, cost and volatility of raw materials and utilities, including natural gas from shale production; uncertainties associated with the United States and worldwide economies, including those due to global economic and financial conditions; governmental regulatory actions, including environmental regulation; political unrest; industry production capacity and operating rates; the supply/demand balance for our products; competitive products and pricing pressures; access to capital markets; technological developments; the effect and results of litigation and settlements of litigation; operating interruptions; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to our Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the SEC in February 2012.

In this release, we refer 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 net cash provided by operating activities.

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation's first quarter 2012 results will be held Tuesday, May 1, 2012 at 11:00 a.m. EDT (10:00 a.m. CDT). To access the conference call, dial (866) 730-5764, or (857) 350-1588 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 59052376.

A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. EDT on Tuesday, May 8, 2012. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 12583170.

The conference call will also be available via webcast at: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=180248&eventID=4757674 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.

SOURCE Westlake Chemical Corporation