Westlake Chemical Corporation Announces First Quarter Earnings

HOUSTON, May 3, 2011 /PRNewswire/ -- Westlake Chemical Corporation (NYSE: WLK) today reported net income for the three months ended March 31, 2011 of $83.5 million, or $1.25 per diluted share, on sales of $867.3 million. This represents an improvement from the quarter ended March 31, 2010 net income of $17.6 million, or $0.27 per diluted share, on sales of $778.3 million. Sales for the first quarter of 2011 increased $89.0 million compared to the first quarter of 2010 primarily due to higher sales prices for all major products and higher caustic and PVC resin sales volumes, partially offset by lower building products sales volume. PVC resin sales volume benefited from a strong export market in the first quarter of 2011. Income from operations was $140.6 million for the first quarter of 2011 as compared to $34.4 million for the first quarter of 2010. Income from operations benefited from improved product margins due primarily to a 14.1% increase in product prices, higher production rates, improved PVC resin sales volume and lower ethane costs. The first quarter of 2010 was negatively impacted by an unscheduled outage at one of our ethylene units in Lake Charles, Louisiana caused by freezing temperatures.

First quarter 2011 net income of $83.5 million, or $1.25 per diluted share, decreased slightly from the $84.1 million, or $1.26 per diluted share, reported by the Company in the fourth quarter of 2010. The reduction in net income was due to higher interest expense related to the issuance of $154.0 million of tax-exempt bonds in December 2010 and slightly higher provision for income taxes, partially offset by an increase in income from operations. First quarter 2011 sales of $867.3 million increased $71.9 million compared to sales of $795.4 million in the fourth quarter of 2010. The increase in sales was largely due to higher sales prices for most major products and an increase in polyethylene, PVC resin and caustic sales volumes. First quarter 2011 income from operations of $140.6 million increased $3.5 million over the income from operations in the fourth quarter of 2010 of $137.1 million. The increase in income from operations was primarily due to higher polyethylene, PVC resin and caustic sales volumes and higher sales prices for most major products in the first quarter of 2011. The increase was partially offset by higher feedstock costs and higher operating costs resulting from a reduction in our ethylene operating rates in Lake Charles due to a fire at a third party storage facility in Mont Belvieu, Texas in the first quarter of 2011. The fire caused an interruption in our normal feedstock supply chain resulting in reduced operating rates and the purchase of higher cost replacement feedstock.

Albert Chao, President and Chief Executive Officer, said, "We are pleased to report record quarterly income from operations for the first quarter of 2011. The Olefins segment continues to benefit from lower cost natural-gas based ethylene production, strong demand for polyethylene, high operating rates and our higher margin specialty polyethylene product mix. Vinyls segment margins benefited from strong export demand for PVC resin and rising caustic and PVC resin export prices. As part of our integration strategy, we recently announced a program to expand our ethylene capacity by debottlenecking our ethylene units and increasing our use of ethane at Lake Charles. We are also evaluating expansion options and the potential upgrade of our ethylene production facilities at Calvert City, Kentucky in order to capitalize on new low cost ethane and other 'light' feedstocks being developed in North America. We will continue to explore opportunities to expand our production base and enhance the quality of our assets."

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $174.4 million for the first quarter of 2011 increased $106.8 million compared to EBITDA of $67.6 million for the first quarter of 2010. EBITDA for the first quarter of 2011 increased $2.0 million over the $172.4 million reported in the fourth quarter of 2010. A reconciliation of EBITDA to reported net income and to net cash provided by (used for) operating activities can be found in the financial schedules at the end of this press release.

Net cash provided by operating activities was $40.7 million in the first quarter of 2011. Capital expenditures for the first quarter of 2011 were $28.8 million. At March 31, 2011, we had $793.7 million of cash including $139.2 million of restricted cash, and our long-term debt was $764.5 million. The restricted cash is designated for qualifying amounts spent for capital additions in Louisiana.

OLEFINS SEGMENT

Income from operations for the Olefins segment was $145.3 million in the first quarter of 2011, an increase of $87.1 million compared to the $58.2 million reported in the first quarter of 2010. This increase was mainly attributable to improved Olefins segment integrated product margins, which benefited from an increase in product prices, higher styrene sales volume, lower ethane costs and higher operating rates when compared to the prior year period. The first quarter of 2010 was negatively impacted by the unscheduled outage at one of our ethylene units in Lake Charles.

Income from operations for the first quarter of 2011 for the Olefins segment was $145.3 million, a decrease of $9.2 million from the $154.5 million reported in the fourth quarter of 2010. This decrease was primarily due to higher operating costs resulting from the reduction in ethylene operating rates in Lake Charles due to the February 2011 fire at a third party storage facility in Mont Belvieu.

VINYLS SEGMENT

The Vinyls segment incurred a loss from operations of $2.8 million in the first quarter of 2011 compared to a loss from operations of $14.9 million in the first quarter of 2010, an improvement of $12.1 million. This improvement was primarily due to higher caustic and PVC resin margins and higher PVC resin sales volume as compared to the prior year period. PVC resin sales volume benefited from a strong export market in the first quarter of 2011. The improvement was partially offset by higher propane costs.

The Vinyls segment loss of $2.8 million in the first quarter of 2011 was an improvement of $9.6 million when compared to the loss of $12.4 million in the fourth quarter of 2010. The improved results were primarily due to higher sales prices for all major products and increases in sales volumes for PVC resin and caustic as compared to the fourth quarter of 2010, partially offset by an increase in feedstock costs.

The statements in this release relating to matters that are not historical facts, including statements regarding the program to expand Westlake's ethylene capacity, expansion options and the potential upgrade of ethylene production facilities at Calvert City and opportunities to expand Westlake's production base and enhance the quality of its assets, 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; uncertainties associated with the United States and worldwide economies, including those due to global economic and financial conditions; governmental regulatory actions and 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, 2010, which was filed with the SEC in February 2011.

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 net cash provided by (used for) operating activities.

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation's first quarter 2011 results will be held Tuesday, May 3, 2011 at 11:00 a.m. EDT (10:00 a.m. CDT). To access the conference call, dial (866) 271-6130, or (617) 213-8894 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 82122359.

A replay of the conference call will be available beginning two hours after its conclusion until 1:00 p.m. EDT on Tuesday, May 10, 2011. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 85290921.

The conference call will also be available via webcast at: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=180248&eventID=3965198 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

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