8-K
WESTLAKE CORP (WLK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): November 3, 2020
Westlake Chemical Corporation
(Exact name of registrant as specified in its charter)
| Delaware | 001-32260 | 76-0346924 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission File Number) | (I.R.S. Employer<br><br>Identification No.) |
| 2801 Post Oak Boulevard, | Suite 600 | |
| --- | --- | --- |
| Houston, | Texas | 77056 |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (713) 960-9111
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value | WLK | The New York Stock Exchange |
| 1.625% Senior Notes due 2029 | WLK29 | The New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Item 2.02. Results of Operations and Financial Condition.
On November 3, 2020, Westlake Chemical Corporation (the "Company") issued a press release announcing its 2020 third quarter results. A copy of the press release is furnished with this Current Report as Exhibit 99.1.
The information furnished pursuant to this Current Report, including Exhibit 99.1, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed by Westlake Chemical Corporation under the Securities Act of 1933, as amended, unless specifically identified as being incorporated therein.
Item 7.01. Regulation FD Disclosure.
The Company is holding a conference call on November 3, 2020 to discuss its 2020 third quarter results. Information about the call can be found in the press release furnished with this Current Report as Exhibit 99.1. In addition, the Company made available an investor presentation regarding its 2020 third quarter results, which is furnished with this Current Report as Exhibit 99.2.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are furnished herewith:
99.1 Press release issued on November 3, 2020.
99.2 Investor Presentation.
104 The cover page from this Current Report on Form 8-K, formatted in Inline XBRL.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| WESTLAKE CHEMICAL CORPORATION | |||
|---|---|---|---|
| Date: | November 3, 2020 | By: | /S/ ALBERT CHAO |
| Albert Chao<br><br>President and Chief Executive Officer |
Exhibit
EXHIBIT 99.1
WESTLAKE CHEMICAL CORPORATION
Contact—(713) 960-9111
Investors—Steve Bender
Media—L. Benjamin Ederington
Westlake Chemical Corporation Reports Third Quarter 2020 Results
| • | Third quarter net income of $57 million, or $0.45 per diluted share |
|---|---|
| • | Lake Charles, Louisiana olefins and vinyls facilities impacted by Hurricane Laura |
| --- | --- |
| • | Third quarter net income includes pre-tax restructuring charges of $34 million, or $0.19 per diluted share |
| --- | --- |
HOUSTON--(BUSINESS WIRE)-- Westlake Chemical Corporation (NYSE: WLK) (the "Company" or "Westlake") today reported net income attributable to Westlake for the three months ended September 30, 2020 of $57 million, or $0.45 per diluted share, on net sales of $1,898 million. Net income in the third quarter of 2020 decreased by $101 million compared to third quarter 2019 net income of $158 million, or $1.22 per share, on net sales of $2,066 million. Income from operations of $79 million for the third quarter of 2020 decreased by $147 million from income from operations of $226 million for the third quarter of 2019. These decreases in net income and operating income were largely attributable to the impacts from Hurricane Laura, which included lost sales and production, increased maintenance expense and other costs resulting from the lower production at our facilities in Lake Charles, Louisiana. In addition, net income and operating income in the third quarter of 2020 were impacted by higher feedstock costs when compared to the prior-year period in addition to pre-tax restructuring charges of $34 million, or $0.19 per share, in our European vinyls business. Partially offsetting the impacts were higher earnings in our downstream vinyls products business driven by strong demand and lower interest rates in addition to lower fuel costs.
Third quarter 2020 net income of $57 million, or $0.45 per share, increased by $42 million from second quarter 2020 net income of $15 million, or $0.11 per share. Income from operations of $79 million for the third quarter of 2020 increased by $43 million from income from operations of $36 million for the second quarter of 2020. The increases in net income and income from operations versus the prior quarter were primarily due to higher prices for our major products, higher sales volume for caustic soda and increased earnings in our downstream vinyls products business driven by strong demand. The increases were partially offset by the impacts from Hurricane Laura and higher restructuring, feedstock and fuel costs.
For the first nine months of 2020, net income of $217 million, or $1.69 per share, decreased by $132 million from the first nine months of 2019 net income of $349 million, or $2.69 per share. Income from operations of $251 million for the first nine months of 2020 decreased by $303 million from income from operations of $554 million for the first nine months of 2019. The decreases in net income and income from operations were primarily due to lower global sales prices for our major products and lower sales volumes for caustic soda, all of which stem from the impact of the COVID-19 pandemic as well as the impacts of Hurricane Laura. Compared to the prior-year period, the first nine months of 2020 benefited from lower feedstock and fuel costs, higher earnings in our downstream vinyls products business and reduced operating costs. Net income further benefited from a lower effective tax rate and a carryback of federal net operating losses of $95 million, or $0.74 per share, resulting from the CARES Act.
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"The third quarter of 2020 continued to prove challenging as we were impacted by Hurricane Laura, one of the strongest hurricanes to hit the Gulf Coast in over 40 years, resulting in significant damage to the power and utility infrastructure in the region as well as the homes of many of our employees. As a result of the storm and the extensive damage to the utility infrastructure, many of our facilities in the Lake Charles area suffered outages which significantly reduced production and sales volumes in the quarter. Our Lake Charles footprint is our largest concentration of assets worldwide, comprising approximately one-third of our chemical production capacity. Due to the dedication of our employees at these facilities, we were able to work quickly and begin the process to resume operations at our facilities. I would like to say a special thank you to these employees," said Albert Chao, President and Chief Executive Officer. "In spite of the challenges of the COVID-19 pandemic and recent hurricanes, our employees continue to work diligently to provide the essential materials that serve a number of industries, including building and construction, healthcare, food services and packaging. We are confident that Westlake remains well positioned to serve the needs of our customers while maintaining a solid financial position, which, combined with the strong fundamentals of our business, will enable us to deliver long-term value to our shareholders."
Net cash provided by operating activities was $357 million for the third quarter of 2020 and $866 million for the first nine months of 2020. As of September 30, 2020, cash and cash equivalents were $1,217 million and long-term debt was $3,681 million. Capital expenditures were $112 million and $403 million for the third quarter and first nine months of 2020, respectively.
EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $287 million for the third quarter of 2020 decreased by $138 million compared to third quarter 2019 EBITDA of $425 million. Third quarter 2020 EBITDA increased by $51 million compared to second quarter 2020 EBITDA of $236 million. For the first nine months of 2020, EBITDA of $860 million was $251 million lower than EBITDA for the first nine months of 2019 of $1,111 million. A reconciliation 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.
As part of an ongoing effort to reduce costs, on September 22, 2020, Westlake announced that it had directed the Louisiana Local Governmental Environmental Facilities and Community Development Authority to optionally redeem in full $154 million aggregate principal amount of the Authority's 6.5% Revenue Bonds (the "6.5% Revenue Bonds") at a redemption price of par, plus accrued and unpaid interest, if any, to the redemption date. On November 1, 2020, Westlake purchased the 6.5% Revenue Bonds in lieu of optional redemption. In June 2020, Westlake completed the registered public offering of $300 million aggregate principal amount of its 3.375% Senior Notes due 2030 and used a portion of the net proceeds from the offering of the 3.375% 2030 Senior Notes to fund the purchase in lieu of redemption of the Revenue Bonds. The refinancing, inclusive of another redemption in August, will result in a net interest savings of approximately $6 million per year.
VINYLS SEGMENT
Third quarter 2020 income from operations for the Vinyls segment of $42 million decreased by $111 million from third quarter 2019 income from operations of $153 million. This decrease in income from operations versus the prior-year period was primarily due to the impacts resulting from Hurricane Laura and restructuring costs of $34 million in our European vinyls business. The decreases in operating income were partially offset by increased earnings in our downstream vinyls products businesses and lower fuel costs.
Vinyls income from operations for the third quarter of 2020 of $42 million increased by $22 million from second quarter 2020 income from operations of $20 million, primarily due to higher earnings in our downstream vinyls products businesses, higher sales prices for our major products and higher sales volume for caustic soda, partially offset by the impacts from Hurricane Laura as well as higher restructuring, feedstock and fuel costs.
For the first nine months of 2020, Vinyls income from operations of $135 million decreased by $248 million from income from operations of $383 million for the first nine months of 2019. This decrease in income from operations was primarily due to lower sales prices for our major products, lower sales volumes of caustic soda resulting from the COVID-19 pandemic, the impacts of Hurricane Laura and higher restructuring costs. The impact on operating income was partially offset by lower ethane feedstock, fuel and operating costs when compared to the prior-year period.
OLEFINS SEGMENT
Third quarter 2020 income from operations for the Olefins segment of $51 million decreased by $41 million from third quarter 2019 income from operations of $92 million. This decrease in income from operations versus the prior-year period was primarily due to the impact of Hurricane Laura along with higher feedstock costs.
ii
Olefins income from operations of $51 million in the third quarter of 2020 increased by $26 million from second quarter 2020 income from operations of $25 million. This increase in income from operations versus the prior quarter was primarily due to higher sales prices for polyethylene, partially offset by the impacts of Hurricane Laura.
For the first nine months of 2020, Olefins income from operations of $138 million decreased by $73 million from income from operations of $211 million for the first nine months of 2019. This decrease in income from operations was primarily due to lower sales prices for our major products as a result of the COVID-19 pandemic and the drop in global oil prices, as well as the impacts of Hurricane Laura, which were partially offset by lower feedstock costs.
The statements in this release and the related teleconference relating to matters that are not historical facts, including statements regarding delivering long-term value to shareholders, 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: the COVID-19 pandemic and the response thereto; general economic and business conditions; the cyclical nature of the chemical industry; availability, cost and volatility of raw materials and utilities, including natural gas and natural gas liquids from shale production; the price of crude oil; uncertainties associated with the United States and worldwide economies, including those due to global economic and financial conditions; governmental regulatory actions, including environmental regulation and changes in trade policies; political unrest; 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; operating interruptions; 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, 2019, which was filed with the SEC in February 2020, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
Use of Non-GAAP Financial Measures
This release makes reference to certain "non-GAAP" financial measures, such as EBITDA, as defined in Regulation G of the U.S. Securities Exchange Act of 1934, as amended. 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 EBITDA, provide useful supplemental information to investors regarding the underlying business trends and performance of the Company's 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. A reconciliation 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.
About Westlake:
Westlake is a global manufacturer and supplier of materials and innovative products that enhance life every day. Headquartered in Houston, we provide the building blocks for vital solutions — from packaging and healthcare products to automotive and consumer goods, to building and construction products. For more information, visit the company's web site at www.westlake.com.
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Westlake Chemical Corporation Conference Call Information:
A conference call to discuss Westlake Chemical Corporation's third quarter 2020 results will be held Tuesday, November 3, 2020 at 11:00 AM Eastern Time (10:00 AM Central Time). To access the conference call, dial (855) 760-8160 or (704) 288-0624 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 189 69 58.
A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on November 10, 2020. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 189 69 58.
The conference call will also be available via webcast at https://edge.media-server.com/mmc/p/wb2cu7ds and the earnings release can be obtained via the Company's web page at: http://www.westlake.com/investor-relations.
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WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| (In millions of dollars, except per share data) | ||||||||||||
| Net sales | $ | 1,898 | $ | 2,066 | $ | 5,539 | $ | 6,235 | ||||
| Cost of sales | 1,650 | 1,695 | 4,839 | 5,225 | ||||||||
| Gross profit | 248 | 371 | 700 | 1,010 | ||||||||
| Selling, general and administrative expenses | 108 | 110 | 332 | 343 | ||||||||
| Amortization of intangibles | 27 | 27 | 81 | 81 | ||||||||
| Restructuring, transaction and integration-related costs | 34 | 8 | 36 | 32 | ||||||||
| Income from operations | 79 | 226 | 251 | 554 | ||||||||
| Interest expense | (37 | ) | (31 | ) | (108 | ) | (89 | ) | ||||
| Other income, net | 12 | 21 | 32 | 32 | ||||||||
| Income before income taxes | 54 | 216 | 175 | 497 | ||||||||
| Provision for (benefit from) income taxes | (15 | ) | 50 | (75 | ) | 120 | ||||||
| Net income | 69 | 166 | 250 | 377 | ||||||||
| Net income attributable to noncontrolling interests | 12 | 8 | 33 | 28 | ||||||||
| Net income attributable to Westlake Chemical Corporation | $ | 57 | $ | 158 | $ | 217 | $ | 349 | ||||
| Earnings per common share attributable to Westlake Chemical Corporation: | ||||||||||||
| Basic | $ | 0.45 | $ | 1.22 | $ | 1.69 | $ | 2.70 | ||||
| Diluted | $ | 0.45 | $ | 1.22 | $ | 1.69 | $ | 2.69 |
v
WESTLAKE CHEMICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, <br>2020 | December 31, <br>2019 | |||
|---|---|---|---|---|
| (In millions of dollars) | ||||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 1,217 | $ | 728 |
| Accounts receivable, net | 1,293 | 1,036 | ||
| Inventories | 829 | 936 | ||
| Prepaid expenses and other current assets | 42 | 42 | ||
| Total current assets | 3,381 | 2,742 | ||
| Property, plant and equipment, net | 6,853 | 6,912 | ||
| Other assets, net | 3,460 | 3,607 | ||
| Total assets | $ | 13,694 | $ | 13,261 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities (accounts payable and accrued and other liabilities) | $ | 1,218 | $ | 1,241 |
| Long-term debt, net | 3,681 | 3,445 | ||
| Other liabilities | 2,307 | 2,172 | ||
| Total liabilities | 7,206 | 6,858 | ||
| Total Westlake Chemical Corporation stockholders' equity | 5,949 | 5,860 | ||
| Noncontrolling interests | 539 | 543 | ||
| Total equity | 6,488 | 6,403 | ||
| Total liabilities and equity | $ | 13,694 | $ | 13,261 |
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WESTLAKE CHEMICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
| (In millions of dollars) | ||||||
| Cash flows from operating activities | ||||||
| Net income | $ | 250 | $ | 377 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 577 | 525 | ||||
| Deferred income taxes | 154 | 34 | ||||
| Net loss on disposition and others | 70 | 55 | ||||
| Other balance sheet changes | (185 | ) | (23 | ) | ||
| Net cash provided by operating activities | 866 | 968 | ||||
| Cash flows from investing activities | ||||||
| Acquisition of businesses, net of cash acquired | — | (314 | ) | |||
| Additions to property, plant and equipment | (403 | ) | (604 | ) | ||
| Additions to investments in unconsolidated subsidiaries | — | (45 | ) | |||
| Return of investment from an equity investee | 44 | — | ||||
| Other, net | (7 | ) | 15 | |||
| Net cash used for investing activities | (366 | ) | (948 | ) | ||
| Cash flows from financing activities | ||||||
| Dividends paid | (102 | ) | (98 | ) | ||
| Distributions to noncontrolling interests | (39 | ) | (40 | ) | ||
| Net proceeds from issuance of Westlake Chemical Partners LP common units | — | 63 | ||||
| Net proceeds from debt issuance and drawdown of revolver | 1,299 | 784 | ||||
| Net proceeds from (repayment of) short-term notes payable | (17 | ) | (4 | ) | ||
| Repayment of revolver and senior notes | (1,100 | ) | — | |||
| Repurchase of common stock for treasury | (54 | ) | (30 | ) | ||
| Other, net | (1 | ) | (6 | ) | ||
| Net cash provided by (used for) financing activities | (14 | ) | 669 | |||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 4 | (5 | ) | |||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 490 | 684 | ||||
| Cash, cash equivalents and restricted cash at beginning of period | 750 | 775 | ||||
| Cash, cash equivalents and restricted cash at end of period | $ | 1,240 | $ | 1,459 |
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WESTLAKE CHEMICAL CORPORATION
SEGMENT INFORMATION
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| (In millions of dollars) | ||||||||||||
| Net external sales | ||||||||||||
| Vinyls | $ | 1,529 | $ | 1,618 | $ | 4,382 | $ | 4,851 | ||||
| Olefins | 369 | 448 | 1,157 | 1,384 | ||||||||
| $ | 1,898 | $ | 2,066 | $ | 5,539 | $ | 6,235 | |||||
| Income (loss) from operations | ||||||||||||
| Vinyls | $ | 42 | $ | 153 | $ | 135 | $ | 383 | ||||
| Olefins | 51 | 92 | 138 | 211 | ||||||||
| Corporate and other | (14 | ) | (19 | ) | (22 | ) | (40 | ) | ||||
| $ | 79 | $ | 226 | $ | 251 | $ | 554 | |||||
| Depreciation and amortization | ||||||||||||
| Vinyls | $ | 160 | $ | 141 | $ | 467 | $ | 413 | ||||
| Olefins | 34 | 35 | 104 | 106 | ||||||||
| Corporate and other | 2 | 2 | 6 | 6 | ||||||||
| $ | 196 | $ | 178 | $ | 577 | $ | 525 | |||||
| Other income, net | ||||||||||||
| Vinyls | $ | 7 | $ | 12 | $ | 21 | $ | 18 | ||||
| Olefins | 1 | 1 | 2 | 4 | ||||||||
| Corporate and other | 4 | 8 | 9 | 10 | ||||||||
| $ | 12 | $ | 21 | $ | 32 | $ | 32 |
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WESTLAKE CHEMICAL CORPORATION
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, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||
| (In millions of dollars) | |||||||||||||||
| Net cash provided by operating activities | $ | 448 | $ | 357 | $ | 501 | $ | 866 | $ | 968 | |||||
| Changes in operating assets and liabilities and other | (454 | ) | (230 | ) | (316 | ) | (462 | ) | (557 | ) | |||||
| Deferred income taxes | 30 | (58 | ) | (19 | ) | (154 | ) | (34 | ) | ||||||
| Net income | 24 | 69 | 166 | 250 | 377 | ||||||||||
| Less: | |||||||||||||||
| Other income, net | 9 | 12 | 21 | 32 | 32 | ||||||||||
| Interest expense | (40 | ) | (37 | ) | (31 | ) | (108 | ) | (89 | ) | |||||
| Benefit from (provision for) income taxes | 19 | 15 | (50 | ) | 75 | (120 | ) | ||||||||
| Income from operations | 36 | 79 | 226 | 251 | 554 | ||||||||||
| Add: | |||||||||||||||
| Depreciation and amortization | 191 | 196 | 178 | 577 | 525 | ||||||||||
| Other income, net | 9 | 12 | 21 | 32 | 32 | ||||||||||
| EBITDA | $ | 236 | $ | 287 | $ | 425 | $ | 860 | $ | 1,111 |
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WESTLAKE CHEMICAL CORPORATION
SUPPLEMENTAL INFORMATION
Product Sales Price and Volume Variance by Operating Segments
| Third Quarter 2020 vs. Third Quarter 2019 | Third Quarter 2020 vs. Second Quarter 2020 | |||||||
|---|---|---|---|---|---|---|---|---|
| Average<br><br>Sales Price | Volume | Average<br><br>Sales Price | Volume | |||||
| Vinyls | -3.5 | % | -1.9 | % | +7.0 | % | +6.5 | % |
| Olefins | +0.4 | % | -18.2 | % | +13.5 | % | -11.3 | % |
| Company | -2.6 | % | -5.4 | % | +8.4 | % | +2.7 | % |
Average Quarterly Industry Prices ^(1)^
| Quarter Ended | |||||
|---|---|---|---|---|---|
| September 30, <br>2019 | December 31, <br>2019 | March 31, <br>2020 | June 30, <br>2020 | September 30, <br>2020 | |
| Average domestic prices | |||||
| Ethane (cents/lb) ^(2)^ | 5.8 | 6.3 | 4.7 | 6.4 | 7.4 |
| Propane (cents/lb) ^(3)^ | 10.3 | 11.8 | 8.8 | 9.6 | 11.9 |
| Ethylene (cents/lb) ^(4)^ | 20.7 | 22.8 | 15.8 | 11.0 | 19.3 |
| Polyethylene (cents/lb) ^(5)^ | 59.0 | 54.0 | 52.3 | 49.0 | 61.0 |
| Styrene (cents/lb) ^(6)^ | 79.9 | 77.1 | 62.3 | 48.3 | 53.8 |
| Caustic soda ($/short ton) ^(7)^ | 692 | 662 | 648 | 698 | 697 |
| Chlorine ($/short ton) ^(8)^ | 175 | 175 | 176 | 175 | 176 |
| PVC (cents/lb) ^(9)^ | 68.8 | 67.8 | 71.8 | 66.5 | 72.5 |
| Average export prices | |||||
| Polyethylene (cents/lb) ^(10)^ | 39.7 | 37.7 | 39.4 | 38.5 | 45.7 |
| Caustic soda ($/short ton) ^(11)^ | 275 | 219 | 203 | 319 | 260 |
| PVC (cents/lb) ^(12)^ | 35.1 | 33.6 | 36.9 | 27.5 | 38.5 |
________________
| (1) | Industry pricing data was obtained through IHS Markit ("IHS"). We have not independently verified the data. |
|---|---|
| (2) | Average Mont Belvieu spot prices of purity ethane over the period. |
| --- | --- |
| (3) | Average Mont Belvieu spot prices of non-TET propane over the period. |
| --- | --- |
| (4) | Average North American spot prices of ethylene over the period. |
| --- | --- |
| (5) | Average North American Net Transaction prices of polyethylene low density GP-Film grade over the period. |
| --- | --- |
| (6) | Average North American contract prices of styrene over the period. |
| --- | --- |
| (7) | Average USGC-CSLi index values for caustic soda over the period. As stated by IHS, "the caustic soda price listing represents the USGC-CSLi values. USGC-CSLi does not reflect contract price discounts, implementation lags, caps or other adjustments factors. Additionally, it is not intended to represent a simple arithmetic average of all market transactions occurring during the month. Rather, the USGC-CSLi is most representative of the month-to-month caustic soda price movement for contract volumes of liquid 50% caustic soda rather than the absolute value of contract prices at a particular point in time. It is intended to serve only as a benchmark." |
| --- | --- |
| (8) | Average North American contract prices of chlorine over the period. |
| --- | --- |
| (9) | Average North American contract prices of pipe grade polyvinyl chloride ("PVC") over the period. As stated by IHS, "the contract resin prices posted reflect an "index" or "market" for prices before discounts, rebates, incentives, etc." |
| --- | --- |
| (10) | Average North American export price for low density polyethylene GP-Film grade over the period. |
| --- | --- |
| (11) | Average North American low spot export prices of caustic soda over the period. |
| --- | --- |
| (12) | Average North American spot export prices of PVC over the period. |
| --- | --- |
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EXHIBIT 99.2 Third Quarter 2020 Earnings Presentation November 3, 2020
EXHIBIT 99.2 Commitment to Social Responsibility and Advancing Sustainability Westlake’s commitment to social responsibility and advancing sustainability is formed by the company’s longstanding core values: . Health, Safety & Environmental - The vigilant stewardship of the environment and sustainability are of utmost importance and at the forefront of everything we do. . Our People - Support, develop and inspire our people to achieve their personal best and treat them with dignity and respect. . Quality & Continuous Improvement – An intensive practice of “never-ending process of improvement.” . Competitiveness - Providing innovative and useful products, maintaining high standards of customer service and operational excellence with a constant focus on managing costs. . Citizenship - Recognizing the importance of supporting the communities in which we work and live and make it a priority to take an active role in making these communities better. . Westlake’s sustainability report can be found at https://www.westlake.com/sustainability Protecting the Environment Westlake has numerous programs designed to promote safe, ethical, environmentally and socially responsible practices including: a worldwide recycling program, operating in an energy efficient manner that stabilizes the power grids and reducing water usage and emissions. Over the past five years, Westlake has reduced Sulphur Dioxide emissions to almost zero, reduced energy usage per ton of global production and achieved a nearly 30% reduction on CO2 emissions. Participating in Multi-Industry Associations for Environmental Protection Westlake is a proud partner with the following organizations to drive sustainable action to eliminate plastic waste, capture more flexible food packaging waste for recycling and support vinyls’ sustainable impact in the world, along with many other initiatives. 2
EXHIBIT 99.2 Westlake Chemical Third Quarter 2020 Highlights Business Highlights . In August 2020, Hurricane Laura, a category 4 hurricane, struck Lake Charles, Louisiana causing wide spread power and utility infrastructure damage. As a result, many of Westlake’s olefins and vinyls facilities in the area were shutdown through September resulting in lost sales and lower production, higher maintenance expense as well as other costs attributable to lower production . In September 2020, Westlake announced its Schkopau, Germany PVC plant would be closing, resulting in a restructuring charge of approximately $34 million. Customers will continue to be supplied from our larger, integrated sites at Burghausen, Gendorf and Cologne, Germany . In August and November 2020, Westlake retired $254 million of GO Zone and Ike Zone revenue bonds as part of a refinancing that delivers annualized interest expense savings of $6 million while maintaining a long dated debt maturity profile Industry Outlook . Strong PVC demand anchored by robust construction activity . Polyethylene’s strong demand continues into the fourth quarter 3
EXHIBIT 99.2 Westlake Chemical Corporation Third Quarter 2020 Financial Highlights 3Q 2020 vs. 2Q 3Q 2020 vs. 3Q YTD YTD YTD 2020 vs. ($ in millions) 3Q 2020 2Q 2020 2020 3Q 2019 2019 2020 2019 YTD 2019 Sales $1,898 $1,709 11% $2,066 (8%) $5,539 $6,235 (11%) Operating Income $79 $36 119% $226 (65%) $251 $554 (55%) Vinyls EBITDA $209 $182 15% $306 (32%) $623 $814 (23%) Olefins EBITDA $86 $60 43% $128 (33%) $244 $321 (24%) Corporate EBITDA ($8) ($6) – ($9) – ($7) ($24) – EBITDA¹ $287 $236 22% $425 (32%) $860 $1,111 (23%) Third Quarter 2020 vs. Third Quarter 2020 vs. Second Quarter 2020 Third Quarter 2019 + Higher sales prices for our major products: – Impacts from Hurricane Laura PVC, caustic soda and polyethylene – Restructuring costs in vinyls business + Increased earnings in our downstream vinyls – Higher feedstock costs products business + Increased earnings in our downstream vinyls – Impacts from Hurricane Laura products businesses – Restructuring charges of $34 million in our + Lower fuel costs European vinyls business – Higher feedstock and fuel costs (1) Reconciliations of EBITDA, Vinyls EBITDA, Olefins EBITDA and Other EBITDA to the applicable GAAP measures can be found on 4 pages 8, 9 and 10
EXHIBIT 99.2 Vinyls Segment Performance 3Q 2020 vs. 3Q 2020 vs. YTD YTD YTD 2020 vs. ($ in millions) 3Q 2020 2Q 2020 2Q 2020 3Q 2019 3Q 2019 2020 2019 YTD 2019 Sales $1,529 $1,348 13% $1,618 (6%) $4,382 $4,851 (10%) Operating Income $42 $20 110% $153 (73%) $135 $383 (65%) EBITDA $209 $182 15% $306 (32%) $623 $814 (23%) Third Quarter 2020 vs. Third Quarter 2020 vs. Second Quarter 2020 Third Quarter 2019 + Increased earnings in our downstream vinyls – Impacts from Hurricane Laura products business – Lower global sales prices for our major + Higher sales prices for our major products products – Impacts from Hurricane Laura – Higher restructuring costs – Restructuring charges of $34 million + Increased earnings in our downstream vinyls – Higher feedstock and fuel costs products business + Lower fuel costs 5
EXHIBIT 99.2 Olefins Segment Performance 3Q 2020 vs. 3Q 2020 vs. YTD YTD YTD 2020 vs. ($ in millions) 3Q 2020 2Q 2020 2Q 2020 3Q 2019 3Q 2019 2020 2019 YTD 2019 Sales $369 $361 2% $448 (18%) $1,157 $1,384 (16%) Operating Income $51 $25 104% $92 (45%) $138 $211 (35%) EBITDA $86 $60 43% $128 (33%) $244 $321 (24%) Third Quarter 2020 vs. Third Quarter 2020 vs. Second Quarter 2020 Third Quarter 2019 + Higher sales prices for polyethylene – Impacts from Hurricane Laura – Impacts from Hurricane Laura – Higher feedstock costs 6
EXHIBIT 99.2 Financial Reconciliations
EXHIBIT 99.2 Consolidated Statements of Operations Three months Three months ended September 30, Nine months ended September 30, ended June 30, 2020 2020 2019 2020 2019 (In millions of dollars, except per share data) Net sales $ 1,709 $ 1,898 $ 2,066 $ 5,539 $ 6,235 Cost of sales 1,540 1,650 1,695 4,839 5,225 Gross profit 169 248 371 700 1,010 Selling, general and administrative expenses 104 108 110 332 343 Amortization of intangibles 27 27 27 81 81 Restructuring, transaction and integration-related costs 2 34 8 36 32 Income from operations 36 79 226 251 554 Interest expense (40) (37) (31) (108) (89) Other income, net 9 12 21 32 32 Income before income taxes 5 54 216 175 497 Provision for (benefit from) income taxes (19) (15) 50 (75) 120 Net income 24 69 166 250 377 Net income attributable to noncontrolling interests 9 12 8 33 28 Net income attributable to Westlake Chemical Corporation $ 15 $ 57 $ 158 $ 217 $ 349 Earnings per common share attributable to Westlake Chemical Corporation: Basic $ 0.11 $ 0.45 $ 1.22 $ 1.69 $ 2.70 Diluted $ 0.11 $ 0.45 $ 1.22 $ 1.69 $ 2.69 8
EXHIBIT 99.2 Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash Provided by Operating Activities Three Months Three Months Ended September 30, Nine Months Ended September 30, Ended June 30, 2020 2020 2019 2020 2019 (In millions of dollars) Net cash provided by operating activities $ 448$ 357$ 501$ 866$ 968 Changes in operating assets and liabilities and other (454) (230) (316) (462) (557) Deferred income taxes 30 (58) (19) (154) (34) Net income 24 69 166 250 377 Less: Other income, net 9 12 21 32 32 Interest expense (40) (37) (31) (108) (89) Benefit from (provision for) income taxes 19 15 (50) 75 (120) Income from operations 36 79 226 251 554 Add: Depreciation and amortization 191 196 178 577 525 Other income, net 9 12 21 32 32 EBITDA $ 236$ 287$ 425$ 860$ 1,111 9
EXHIBIT 99.2 Reconciliation of Vinyls, Olefins and Corporate EBITDA to Applicable Operating Income (Loss) Three months ended June 30, Three months ended September 30, Nine months ended September 30, 2020 2020 2019 2020 2019 (In millions of dollars) Vinyls EBITDA $ 182 $ 209 $ 306 $ 623 $ 814 Less: Depreciation and Amortization 154 160 141 467 413 Other Income (Expenses) 8 7 12 21 18 Vinyls Operating Income (Loss) 20 42 153 135 383 Olefins EBITDA 60 86 128 244 321 Less: Depreciation and Amortization 35 34 35 104 106 Other Income (Expenses) 0 1 1 2 4 Olefins Operating Income (Loss) 25 51 92 138 211 Corporate EBITDA (6) (8) (9) (7) (24) Less: Depreciation and Amortization 2 2 2 6 6 Other Income (Expenses) 1 4 8 9 10 Corporate Operating Income (Loss) (9) (14) (19) (22) (40) Vinyls Operating Income (Loss) 20 42 153 135 383 Olefins Operating Income (Loss) 25 51 92 138 211 Corporate Operating Income (Loss) (9) (14) (19) (22) (40) Total Operating Income (Loss) $ 36 $ 79 $ 226 $ 251 $ 554 10
EXHIBIT 99.2 Quarterly Industry Pricing
EXHIBIT 99.2 Average Quarterly Industry Prices (1) Quarter Ended September 30, December 31, March 31, June 30, September 30, 2019 2019 2020 2020 2020 Average domestic prices Ethane (cents/lb) (2) 5.8 6.3 4.7 6.4 7.4 Propane (cents/lb) (3) 10.3 11.8 8.8 9.6 11.9 Ethylene (cents/lb) (4) 20.7 22.8 15.8 11.0 19.3 Polyethylene (cents/lb) (5) 59.0 54.0 52.3 49.0 61.0 Styrene (cents/lb) (6) 79.9 77.1 62.3 48.3 53.8 Caustic soda ($/short ton) (7) 692 662 648 698 697 Chlorine ($/short ton) (8) 175 175 176 175 176 PVC (cents/lb) (9) 68.8 67.8 71.8 66.5 72.5 Average export prices Polyethylene (cents/lb) (10) 39.7 37.7 39.4 38.5 45.7 Caustic soda ($/short ton) (11) 275 219 203 319 260 PVC (cents/lb) (12) 35.1 33.6 36.9 27.5 38.5 1) Industry pricing data was obtained through IHS Markit ("IHS"). We have not independently verified the data. 2) Average Mont Belvieu spot prices of purity ethane over the period. 3) Average Mont Belvieu spot prices of non-TET propane over the period. 4) Average North American spot prices of ethylene over the period. 5) Average North American Net Transaction prices of polyethylene low density GP-Film grade over the period. 6) Average North American contract prices of styrene over the period. 7) Average USGC-CSLi index values for caustic soda over the period. As stated by IHS, "the caustic soda price listing represents the USGC-CSLi values. USGC-CSLi does not reflect contract price discounts, implementation lags, caps or other adjustments factors. Additionally, it is not intended to represent a simple arithmetic average of all market transactions occurring during the month. Rather, the USGC-CSLi is most representative of the month-to-month caustic soda price movement for contract volumes of liquid 50% caustic soda rather than the absolute value of contract prices at a particular point in time. It is intended to serve only as a benchmark." 8) Average North American contract prices of chlorine over the period. 9) Average North American contract prices of pipe grade polyvinyl chloride ("PVC") over the period. As stated by IHS, "the contract resin prices posted reflect an "index" or "market" for prices before discounts, rebates, incentives, etc." 10) Average North American export price for low density polyethylene GP-Film grade over the period. 11) Average North American low spot export prices of caustic soda over the period. 12) Average North American spot export prices of PVC over the period. 12
EXHIBIT 99.2 Safe Harbor Language This presentation contains certain forward-looking statements including statements regarding PVC and polyethylene pricing and demand. Actual results may differ materially depending on factors such as general economic and business conditions; the cyclical nature of the chemical industry; the availability, cost and volatility of raw materials and energy; uncertainties associated with the United States, Europe and worldwide economies, including those due to political tensions in the Middle East and elsewhere; current and potential governmental regulatory actions in the United States and Europe and regulatory actions and political unrest in other countries; industry production capacity and operating rates; the supply/ demand balance for our products; competitive products and pricing pressures; instability in the credit and financial markets; access to capital markets; terrorist acts; operating interruptions including leaks, explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, spills and releases and other environmental risks; changes in laws or regulations; technological developments; our ability to implement our business strategies; creditworthiness of our customers; and other factors described in our reports filed with the Securities and Exchange Commission. Many of these factors are beyond our ability to control or predict. Any of these factors, or a combination of these factors, could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. These forward-looking statements are not guarantees of our future performance, and our actual results and future developments may differ materially from those projected in the forward-looking statements. Management cautions against putting undue reliance on forward-looking statements. Every forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements. Investor Relations Contacts Steve Bender Jeff Holy Executive Vice President & Vice President & Chief Financial Officer Treasurer Westlake Chemical 2801 Post Oak Boulevard, Suite 600 Houston, Texas 77056 713-960-9111 13
EXHIBIT 99.2