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Westlake Chemical Partners LP Announces Third Quarter 2019 Results

November 5, 2019

HOUSTON--(BUSINESS WIRE)--Nov 5, 2019--

Westlake Chemical Partners LP (NYSE: WLKP) (the “Partnership”) today reported net income attributable to the Partnership of $14.9 million, or $0.42 per limited partner unit, for the three months ended September 30, 2019, an increase of $2.5 million compared to third quarter 2018 net income attributable to the Partnership of $12.4 million. The increase in net income attributable to the Partnership was primarily due to the Partnership’s increased ownership interest in Westlake Chemical OpCo LP (“OpCo”) resulting from the acquisition of an additional 4.5% interest in OpCo in the first quarter of 2019 (the “Acquisition”), and higher production volumes. Cash flows from operating activities in the third quarter of 2019 were $121.5 million, an increase of $12.1 million compared to third quarter 2018 cash flows from operating activities of $109.4 million, primarily due to a decrease in working capital. For the three months ended September 30, 2019, MLP distributable cash flow of $20.5 million increased by $5.5 million from third quarter 2018 MLP distributable cash flow of $15.0 million. This increase was primarily due to the Acquisition, partially offset by increased interest expense.

Third quarter 2019 net income attributable to the Partnership of $14.9 million increased by $1.2 million from second quarter 2019 net income attributable to the Partnership of $13.7 million, primarily due to higher production at OpCo and lower SG&A expense. Third quarter 2019 cash flows from operating activities of $121.5 million increased by $21.3 million compared to second quarter 2019 cash flows from operating activities of $100.2 million, primarily due to higher production volumes at OpCo and a decrease in working capital. Third quarter 2019 MLP distributable cash flow of $20.5 million increased by $4.1 million compared to second quarter 2019 MLP distributable cash flow of $16.4 million, primarily due to lower SG&A expense and a reduction in maintenance capital spending.

Net income attributable to the Partnership of $43.6 million, or $1.27 per limited partner unit, for the nine months ended September 30, 2019 increased by $6.1 million compared to the first nine months of 2018 net income attributable to the Partnership of $37.5 million. The increase in net income attributable to the Partnership as compared to the prior-year period was primarily due to the Acquisition and higher ethylene margins, partially offset by higher SG&A expenses. Cash flows from operating activities in the first nine months of 2019 were $335.2 million, an increase of $5.2 million compared to the first nine months of 2018 cash flows from operating activities of $330.0 million, primarily due to a reduction in working capital. For the nine months ended September 30, 2019, MLP distributable cash flow of $54.4 million increased by $8.9 million compared to the first nine months of 2018 MLP distributable cash flow of $45.5 million. The increase in MLP distributable cash flow as compared to the prior-year period was primarily due to the Acquisition and higher production at OpCo, partially offset by the timing of maintenance capital expenditures and one-time costs associated with the Acquisition.

On October 31, 2019, the Board of Directors of Westlake Chemical Partners GP LLC announced a quarterly distribution with respect to the third quarter of 2019 of $0.4646 per unit to be payable on November 26, 2019 to unitholders of record as of November 12, 2019. The third quarter 2019 distribution increased by 1.5% compared to the second quarter 2019 distribution, or by 6.0% on an annualized basis. MLP distributable cash flow provided trailing twelve-month coverage of 1.11x the declared distributions for the third quarter of 2019.

“The acquisition of the incremental interest in OpCo in the first quarter of this year has set us on a path to continue to deliver increasing cash flows and distributions to unitholders throughout the year,” said Albert Chao, President and Chief Executive Officer. “We continue to benefit from the strong relationship with our sponsor, Westlake Chemical, and have taken recent steps to modify and align our distribution growth strategy with the current capital markets to maximize long-term value to unitholders. This quarter we increased our distribution for the 19th consecutive quarter. We intend to retain a sustainable, top-tier distribution growth rate, which reduces our reliance on the equity markets, better aligning our future capital requirements with the availability of today’s MLP equity capital. We continue to evaluate all opportunities available to us, including growth through acquisition and margin expansion, as a means to further grow our cash flows and maintain a path of long-term value creation for our unitholders.”

OpCo’s Ethylene Sales Agreement with Westlake is designed to provide for stable and predictable cash flows. The agreement provides that 95% of OpCo’s ethylene production is sold to Westlake for a cash margin of $0.10 per pound, net of operating costs, maintenance capital expenditures and reserves for future turnaround expenditures.

The statements in this release and the related teleconference relating to matters that are not historical facts, such as those with respect to the potential for future growth of cash flows and distributions, are forward-looking statements. These forward-looking statements are subject to significant risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to, operating difficulties; the volume of ethylene that we are able to sell; the price at which we are able to sell ethylene; changes in the price and availability of feedstocks; changes in prevailing economic conditions; actions of Westlake Chemical Corporation; actions of third parties; inclement or hazardous weather conditions, including flooding, and the physical impacts of climate change; environmental hazards; changes in laws and regulations (or the interpretation thereof); inability to acquire or maintain necessary permits; inability to obtain necessary production equipment or replacement parts; technical difficulties or failures; labor disputes; difficulty collecting receivables; inability of our customers to take delivery; fires, explosions or other industrial accidents; our ability to borrow funds and access capital markets; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with the SEC in March 2019.

This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of the Partnership’s distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership’s distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

Use of Non-GAAP Financial Measures

This release makes reference to certain “non-GAAP” financial measures, such as MLP distributable cash flow and EBITDA. For this purpose, a non-GAAP financial measure is generally defined by the Securities and Exchange Commission (“SEC”) as a numerical measure of a registrant’s historical or future financial performance, financial position or cash flows that (1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the registrant; or (2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. We report our financial results in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), but believe that certain non-GAAP financial measures, such as MLP distributable cash flow and EBITDA, provide useful supplemental information to investors regarding the underlying business trends and performance of our ongoing operations and are useful for period-over-period comparisons of such operations. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with U.S. GAAP. We define MLP distributable cash flow as distributable cash flow less distributable cash flow attributable to Westlake’s noncontrolling interest in OpCo and distributions attributable to the incentive distribution rights holder. MLP distributable cash flow does not reflect changes in working capital balances. We define EBITDA as net income before interest expense, income taxes, depreciation and amortization. MLP distributable cash flow and EBITDA are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

our operating performance as compared to other publicly traded partnerships;
• our ability to incur and service debt and fund capital expenditures; and
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

Reconciliations of MLP distributable cash flow to net income and to net cash provided by operating activities and of EBITDA to net income, income from operations and net cash provided by operating activities can be found in the financial schedules at the end of this press release.

Westlake Chemical Partners LP

Westlake Chemical Partners is a limited partnership formed by Westlake Chemical Corporation to operate, acquire and develop ethylene production facilities and other qualified assets. Headquartered in Houston, the Partnership owns an 22.8% interest in Westlake Chemical OpCo LP. Westlake Chemical OpCo LP’s assets consist of three ethylene production facilities in Calvert City, Kentucky, and Lake Charles, Louisiana and an ethylene pipeline. For more information about Westlake Chemical Partners LP, please visit http://www.wlkpartners.com.

Westlake Chemical Partners LP Conference Call Information:

A conference call to discuss Westlake Chemical Partners’ third quarter 2019 results will be held Tuesday, November 5, 2019 at 12:00 PM Eastern Time (11:00 AM Central Time). To access the conference call, dial (855) 765-5686 or (234) 386-2848 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 976 44 56.

A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on November 12, 2019. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 976 44 56.

The conference call will also be available via webcast at: https://edge.media-server.com/mmc/p/i28xs6p4 and the earnings release can be obtained via the Partnership web page at: http://investors.wlkpartners.com/CorporateProfile.

WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

(In thousands of dollars, except per unit data)

Revenue

 

 

 

 

 

 

 

 

Net sales—Westlake Chemical Corporation ("Westlake")

 

$

216,678

 

 

$

313,381

 

 

$

703,765

 

 

$

802,085

 

Net co-product, ethylene and other sales—third parties

 

33,247

 

 

50,269

 

 

115,308

 

 

147,812

 

Total net sales

 

249,925

 

 

363,650

 

 

819,073

 

 

949,897

 

Cost of sales

 

156,706

 

 

269,743

 

 

543,242

 

 

666,367

 

Gross profit

 

93,219

 

 

93,907

 

 

275,831

 

 

283,530

 

Selling, general and administrative expenses

 

6,822

 

 

5,909

 

 

21,434

 

 

20,417

 

Income from operations

 

86,397

 

 

87,998

 

 

254,397

 

 

263,113

 

Other income (expense)

 

 

 

 

 

 

 

 

Interest expense—Westlake

 

(4,411

)

 

(5,639

)

 

(15,436

)

 

(16,052

)

Other income, net

 

565

 

 

668

 

 

2,533

 

 

1,742

 

Income before income taxes

 

82,551

 

 

83,027

 

 

241,494

 

 

248,803

 

Income tax provision (benefit)

 

72

 

 

(772

)

 

509

 

 

(186

)

Net income

 

82,479

 

 

83,799

 

 

240,985

 

 

248,989

 

Less: Net income attributable to noncontrolling interests in Westlake Chemical OpCo LP ("OpCo")

 

67,557

 

 

71,387

 

 

197,375

 

 

211,525

 

Net income attributable to Westlake Partners

 

$

14,922

 

 

$

12,412

 

 

$

43,610

 

 

$

37,464

 

 

 

 

 

 

 

 

 

 

Net income per limited partners unit attributable to Westlake Partners (basic and diluted)

 

 

 

 

 

 

 

 

Common units

 

$

0.42

 

 

$

0.38

 

 

$

1.27

 

 

$

1.14

 

 

 

 

 

 

 

 

 

 

Distributions declared per unit

 

$

0.4646

 

 

$

0.4207

 

 

$

1.3677

 

 

$

1.2270

 

 

 

 

 

 

 

 

 

 

MLP distributable cash flow

 

$

20,452

 

 

$

15,024

 

 

$

54,429

 

 

$

45,500

 

 

 

 

 

 

 

 

 

 

Distributions declared

 

 

 

 

 

 

 

 

Limited partner units—publicly and privately held

 

$

9,787

 

 

$

7,625

 

 

$

28,812

 

 

$

22,232

 

Limited partner units—Westlake

 

6,561

 

 

5,941

 

 

19,315

 

 

17,327

 

Incentive distribution rights

 

 

 

 

 

 

 

733

 

Total distributions declared

 

$

16,348

 

 

$

13,566

 

 

$

48,127

 

 

$

40,292

 

EBITDA

 

$

113,643

 

 

$

115,558

 

 

$

337,312

 

 

$

347,031

 

WESTLAKE CHEMICAL PARTNERS LP

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

September 30,
2019

 

December 31,
2018

 

 

(In thousands of dollars)

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

18,647

 

 

$

19,744

 

Receivable under the Investment Management Agreement—Westlake

 

164,888

 

 

148,956

 

Accounts receivable, net—Westlake

 

35,001

 

 

57,280

 

Accounts receivable, net—third parties

 

14,543

 

 

16,404

 

Inventories

 

3,698

 

 

4,388

 

Prepaid expenses and other current assets

 

559

 

 

370

 

Total current assets

 

237,336

 

 

247,142

 

Property, plant and equipment, net

 

1,113,010

 

 

1,148,265

 

Other assets, net

 

56,710

 

 

66,718

 

Total assets

 

$

1,407,056

 

 

$

1,462,125

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Current liabilities (accounts payable and accrued liabilities)

 

$

40,938

 

 

$

48,772

 

Long-term debt payable to Westlake

 

399,674

 

 

477,608

 

Other liabilities

 

3,713

 

 

1,664

 

Total liabilities

 

444,325

 

 

528,044

 

Common unitholders—publicly and privately held

 

470,977

 

 

409,608

 

Common unitholder—Westlake

 

47,940

 

 

48,774

 

General partner—Westlake

 

(242,572

)

 

(242,572

)

Total Westlake Partners partners' capital

 

276,345

 

 

215,810

 

Noncontrolling interest in OpCo

 

686,386

 

 

718,271

 

Total equity

 

962,731

 

 

934,081

 

Total liabilities and equity

 

$

1,407,056

 

 

$

1,462,125

 

WESTLAKE CHEMICAL PARTNERS LP

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

2019

 

2018

 

 

(In thousands of dollars)

Cash flows from operating activities

 

 

 

 

Net income

 

$

240,985

 

 

$

248,989

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

80,382

 

 

82,176

 

Other balance sheet changes

 

13,787

 

 

(1,161

)

Net cash provided by operating activities

 

335,154

 

 

330,004

 

Cash flows from investing activities

 

 

 

 

Additions to property, plant and equipment

 

(30,028

)

 

(30,047

)

Maturities of investments with Westlake under the Investment Management Agreement

 

405,445

 

 

270,050

 

Investments with Westlake under the Investment Management Agreement

 

(421,445

)

 

(285,000

)

Other

 

46

 

 

 

Net cash used for investing activities

 

(45,982

)

 

(44,997

)

Cash flows from financing activities

 

 

 

 

Net proceeds from private placement of common units

 

62,661

 

 

 

Proceeds from debt payable to Westlake

 

123,511

 

 

3,648

 

Repayment of debt payable to Westlake

 

(201,445

)

 

 

Quarterly distributions to noncontrolling interest retained in OpCo by Westlake

 

(229,260

)

 

(258,824

)

Quarterly distributions to unitholders

 

(45,736

)

 

(39,798

)

Net cash used for financing activities

 

(290,269

)

 

(294,974

)

Net decrease in cash and cash equivalents

 

(1,097

)

 

(9,967

)

Cash and cash equivalents at beginning of period

 

19,744

 

 

27,008

 

Cash and cash equivalents at end of period

 

$

18,647

 

 

$

17,041

 

WESTLAKE CHEMICAL PARTNERS LP

 

RECONCILIATION OF MLP DISTRIBUTABLE CASH FLOW TO NET INCOME

AND NET CASH PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

 

 

Three Months
Ended June 30,

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2019

 

2019

 

2018

 

2019

 

2018

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

100,173

 

 

$

121,482

 

 

$

109,433

 

 

$

335,154

 

 

$

330,004

 

Changes in operating assets and liabilities and other

 

(20,063

)

 

(39,003

)

 

(25,634

)

 

(94,169

)

 

(81,015

)

Net Income

 

80,110

 

 

82,479

 

 

83,799

 

 

240,985

 

 

248,989

 

Add:

 

 

 

 

 

 

 

 

 

 

Depreciation, amortization and disposition of property, plant and equipment

 

26,903

 

 

26,582

 

 

26,918

 

 

80,787

 

 

82,769

 

Mark-to-market adjustment loss on derivative contracts

 

516

 

 

7,195

 

 

 

 

6,996

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

Contribution to turnaround reserves

 

(3,889

)

 

(3,932

)

 

(4,250

)

 

(11,669

)

 

(12,602

)

Maintenance capital expenditures

 

(11,725

)

 

(5,568

)

 

(8,380

)

 

(28,613

)

 

(22,184

)

Incentive distribution rights

 

 

 

 

 

 

 

 

 

(733

)

Distributable cash flow attributable to noncontrolling interest in OpCo

 

(75,493

)

 

(86,304

)

 

(83,063

)

 

(234,057

)

 

(250,739

)

MLP distributable cash flow

 

$

16,422

 

 

$

20,452

 

 

$

15,024

 

 

$

54,429

 

 

$

45,500

 

WESTLAKE CHEMICAL PARTNERS LP

 

RECONCILIATION OF EBITDA TO NET INCOME, INCOME FROM OPERATIONS AND NET CASH

PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

 

 

 

Three Months
Ended June 30,

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2019

 

2019

 

2018

 

2019

 

2018

 

 

(In thousands of dollars)

Net cash provided by operating activities

 

$

100,173

 

 

$

121,482

 

 

$

109,433

 

 

$

335,154

 

 

$

330,004

 

Changes in operating assets and liabilities and other

 

(20,063

)

 

(39,003

)

 

(25,634

)

 

(94,169

)

 

(81,015

)

Net Income

 

80,110

 

 

82,479

 

 

83,799

 

 

240,985

 

 

248,989

 

Less:

 

 

 

 

 

 

 

 

 

 

Other income, net

 

1,153

 

 

565

 

 

668

 

 

2,533

 

 

1,742

 

Interest expense

 

(5,125

)

 

(4,411

)

 

(5,639

)

 

(15,436

)

 

(16,052

)

Income tax provision (benefit)

 

(237

)

 

(72

)

 

772

 

 

(509

)

 

186

 

Income from operations

 

84,319

 

 

86,397

 

 

87,998

 

 

254,397

 

 

263,113

 

Add:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

26,857

 

 

26,681

 

 

26,892

 

 

80,382

 

 

82,176

 

Other income, net

 

1,153

 

 

565

 

 

668

 

 

2,533

 

 

1,742

 

EBITDA

 

$

112,329

 

 

$

113,643

 

 

$

115,558

 

 

$

337,312

 

 

$

347,031

 

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191105005126/en/

CONTACT: Media Relations – Ben Ederington – 713.585.2900

Investor Relations – Steve Bender – 713.585.2900

KEYWORD: UNITED STATES NORTH AMERICA TEXAS

INDUSTRY KEYWORD: CHEMICALS/PLASTICS OTHER MANUFACTURING MANUFACTURING

SOURCE: Westlake Chemical Partners LP

Copyright Business Wire 2019.

PUB: 11/05/2019 06:30 AM/DISC: 11/05/2019 06:30 AM

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