Exhibit 99.1
WESTLAKE CHEMICAL CORPORATION
Contact — (713) 960-9111
Finance — Ruth I. Dreessen
Media — David R. Hansen
WESTLAKE CHEMICAL REPORTS FOURTH QUARTER RESULTS
Houston, TX (February 18, 2005) — Westlake Chemical Corporation (NYSE: WLK) today reported fourth quarter net income of $47.3 million or $0.73 per diluted share and operating income of $81.4 million on net sales of $563.1 million for the fourth quarter of 2004. This compares favorably with the fourth quarter 2003 net income of $10.6 million or $0.21 per diluted share and operating income of $24.9 million on net sales of $365.9 million. The improvement in net sales and operating income was primarily the result of increased selling prices, which outpaced higher feedstock and energy costs. In addition, PVC pipe sales increased due to the August 2004 acquisition of the assets of Bristolpipe Corporation. Included in the 2004 fourth quarter results are several non-operating items that resulted in a net benefit of $2.1 million after tax, or $0.03 per diluted share.
Fourth quarter 2004 net income increased $19.0 million from the $28.3 million net income or $0.50 per diluted share reported in the third quarter of 2004 primarily due to increased selling prices which were partially offset by higher feedstock and energy costs. The third quarter of 2004 was adversely impacted by a $9.3 million after tax charge that was related to the early retirement of debt. This charge reduced earnings per diluted share for the third quarter by $0.16. Fourth quarter net sales were unfavorable compared to the third quarter net sales of $572.0 million due to lower sales volumes while operating income compared favorably to the third quarter operating income of $68.9 million primarily due to higher margins.
For the year ended December 31, 2004 net income was $120.7 million or $2.18 per diluted share including an after tax charge of $10.0 million related to the early retirement of debt, or $0.18 per diluted share on net sales of $1,985.4 million. This compares favorably with the year ended December 31, 2003 net income of $14.8 million or $0.30 per diluted share, which included an after tax charge of $7.1 million related to the early retirement of debt, or $0.14 per diluted share, on net sales of $1,423.0 million. Operating income was $243.2 million for the year ended December 31, 2004 as compared to $65.8 million for the year ended December 31, 2003. These increases were primarily due to higher selling prices and volumes, which more than offset higher raw material and energy costs.
As a result of the successful completion of Westlake’s initial public offering (IPO) in August 2004 and record earnings for the year ended December 31, 2004, Westlake was able to reduce its debt by $239 million from $537 million at December 31, 2003 to $298 million at December 31, 2004. The company ended 2004 with $43 million of cash on the balance sheet.
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OLEFINS SEGMENT
Income from operations for the Olefins segment increased by $46.5 million to $65.4 million in the fourth quarter of 2004 from $18.9 million in the fourth quarter of 2003. This increase was primarily due to higher selling prices for our products and higher sales volumes in ethylene, which were partially offset by lower sales volumes in polyethylene and styrene and higher raw material costs for ethane, propane and benzene.
Fourth quarter 2004 income from operations increased $20.7 million from the $44.7 million of income from operations reported in the third quarter of 2004. The increase was primarily due to higher selling prices, which were partially offset by higher feedstock and energy costs and lower sales volumes.
Income from operations for the Olefins segment increased by $124.3 million to $179.6 million for the year ended December 31, 2004 from $55.3 million for the year ended December 31, 2003. This increase was primarily due to price increases and higher sales volumes for ethylene, polyethylene and styrene, partially reduced by higher raw material costs of ethane, propane and benzene.
VINYLS SEGMENT
Income from operations for the Vinyls segment increased by $13.9 million to $18.7 million in the fourth quarter of 2004 from $4.8 million in the fourth quarter of 2003. This increase was primarily due to higher selling prices for all of our vinyls products and higher sales volumes for PVC pipe. These increases were partially offset by higher energy costs and higher raw material costs for propane.
Fourth quarter 2004 income from operations decreased $7.6 million from the $26.3 million of income from operations reported in the third quarter of 2004. The decrease was primarily due to higher propane feedstock costs and costs associated with the phased start-up of our VCM and PVC facilities in Geismar, Louisiana, which was partially offset by a $2.0 million pre-tax gain from the sale of equipment.
Income from operations for the Vinyls segment increased by $56.1 million to $69.7 million for the year ended December 31, 2004 from $13.6 million for the year ended December 31, 2003. This increase was primarily due to vinyls product price increases, 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
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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 table below reconciles EBITDA to net income and to cash flow from operating activities.
Westlake Chemical Corporation Conference Call Information:
A conference call to discuss Westlake Chemical Corporation’s fourth quarter results will be held Friday, February 18, 2005 at 11:00 a.m. EST (10:00 a.m. CST). To access the conference call, dial (800) 599-9829, or (617) 847-8703 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 51145952.
A replay of the conference call will be available beginning an hour after its conclusion until 11:59 p.m. EST (10:59 p.m. CST) on Friday, February 25, 2005. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 98300329.
The conference call will also be available via webcast athttp://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=180248&eventID=1008290and the earnings release can be obtained via the company’s Web page athttp://www.westlakechemical.com/investors.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.
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WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in $000)
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Net Sales | $ | 563,069 | $ | 365,879 | $ | 1,985,353 | $ | 1,423,034 | ||||||||
Cost of Sales | 464,731 | 330,235 | 1,682,168 | 1,301,082 | ||||||||||||
Gross Profit | 98,338 | 35,644 | 303,185 | 121,952 | ||||||||||||
Selling, General and Administrative Expenses | 18,987 | 12,538 | 60,238 | 57,014 | ||||||||||||
Gain on Sale of Asset | (2,049 | ) | — | (2,049 | ) | — | ||||||||||
Gain on Legal Settlement | — | (3,162 | ) | — | (3,162 | ) | ||||||||||
Impairment of Long-Lived assets | — | 1,353 | 1,830 | 2,285 | ||||||||||||
Income from Operations | 81,400 | 24,915 | 243,166 | 65,815 | ||||||||||||
Interest Expense | (7,089 | ) | (10,991 | ) | (39,350 | ) | (38,589 | ) | ||||||||
Debt Retirement Cost | (1,106 | ) | — | (15,791 | ) | (11,343 | ) | |||||||||
Other Income, net | 2,192 | 3,015 | 2,637 | 7,620 | ||||||||||||
Income before Taxes | 75,397 | 16,939 | 190,662 | 23,503 | ||||||||||||
Income Tax Provision | 28,071 | 6,304 | 69,940 | 8,747 | ||||||||||||
Net Income | $ | 47,326 | $ | 10,635 | $ | 120,722 | $ | 14,756 | ||||||||
Basic earnings per share | $ | 0.73 | $ | 0.21 | $ | 2.19 | $ | 0.30 | ||||||||
Diluted earnings per share | $ | 0.73 | $ | 0.21 | $ | 2.18 | $ | 0.30 | ||||||||
Weighted Average Shares Outstanding | ||||||||||||||||
Basic | 64,896,489 | 49,499,395 | 55,230,786 | 49,499,395 | ||||||||||||
Diluted | 65,268,328 | 49,499,395 | 55,355,442 | 49,499,395 | ||||||||||||
RECONCILIATION OF EBITDA TO NET INCOME AND TO CASH FLOW FROM OPERATING ACTIVITIES | ||||||||||||||||
EBITDA | $ | 100,712 | $ | 49,566 | $ | 311,087 | $ | 149,385 | ||||||||
Less: | ||||||||||||||||
Income Tax Provision | 28,071 | 6,304 | 69,940 | 8,747 | ||||||||||||
Interest Expense | 7,089 | 10,991 | 39,350 | 38,589 | ||||||||||||
Depreciation and amortization | 18,226 | 21,636 | 81,075 | 87,293 | ||||||||||||
Net Income | 47,326 | 10,635 | 120,722 | 14,756 | ||||||||||||
Changes in operating assets and liabilities | (6,251 | ) | 31,668 | (35,129 | ) | 56,219 | ||||||||||
Deferred income taxes | 26,345 | 5,242 | 65,188 | 7,112 | ||||||||||||
Cash flow from operating activities | $ | 67,420 | $ | 47,545 | $ | 150,781 | $ | 78,087 | ||||||||
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited, in $000)
December 31, | December 31, | |||||||
2004 | 2003 | |||||||
Current Assets | ||||||||
Cash and Cash Equivalents | $ | 43,396 | $ | 37,381 | ||||
Accounts Receivable (net) | 234,247 | 178,633 | ||||||
Inventories | 319,816 | 180,760 | ||||||
Other Current Assets | 67,191 | 16,073 | ||||||
Total Current Assets | 664,650 | 412,847 | ||||||
Property, Plant and Equipment (net) | 855,051 | 879,688 | ||||||
Other Assets (net) | 65,463 | 77,578 | ||||||
Total Assets | $ | 1,585,164 | $ | 1,370,113 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts Payable and Accrued Liabilities | $ | 249,015 | $ | 186,932 | ||||
Current Portion of Long-Term Debt | 1,200 | 28,200 | ||||||
Total Current Liabilities | 250,215 | 215,132 | ||||||
Long-Term Debt | 296,889 | 509,089 | ||||||
Other Liabilities | 268,663 | 178,189 | ||||||
Total Liabilities | 815,767 | 902,410 | ||||||
Minority Interest | — | 22,100 | ||||||
Stockholders’ Equity | 769,397 | 445,603 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 1,585,164 | $ | 1,370,113 | ||||
WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in $000)
Year Ended | ||||||||
December 31, | ||||||||
2004 | 2003 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net Income | $ | 120,722 | $ | 14,756 | ||||
Adjustments to Reconcile Net Income to Net Cash: | ||||||||
Depreciation and Amortization | 81,075 | 87,293 | ||||||
Deferred Tax Expense | 65,188 | 7,112 | ||||||
Other Balance Sheet Changes | (116,204 | ) | (31,074 | ) | ||||
30,059 | 63,331 | |||||||
Net Cash Provided by Operating Activities | 150,781 | 78,087 | ||||||
Cash Flows from Investing Activities: | ||||||||
Additions to Property, Plant and Equipment | (52,710 | ) | (44,931 | ) | ||||
Acquisition of Business Operations | (33,294 | ) | — | |||||
Other | 6,041 | 3,350 | ||||||
Net Cash Used by Investing Activities | (79,963 | ) | (41,581 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from Issuance of Common Stock, net | 181,167 | — | ||||||
Dividends Paid | (1,379 | ) | — | |||||
Proceeds from Borrowings | — | 723,975 | ||||||
Repayment of Borrowings | (239,200 | ) | (719,783 | ) | ||||
Capitalized Debt Costs | — | (14,102 | ) | |||||
Other | (5,391 | ) | (338 | ) | ||||
Net Cash Used in Financing Activities | (64,803 | ) | (10,248 | ) | ||||
Net Increase in Cash | 6,015 | 26,258 | ||||||
Cash Balance at the Beginning of the Period | 37,381 | 11,123 | ||||||
Cash Balance at the End of the Period | $ | 43,396 | $ | 37,381 | ||||
WESTLAKE CHEMICAL CORPORATION
SEGMENT INFORMATION
(unaudited, in $000)
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Net Sales to External Customers | ||||||||||||||||
Olefins | $ | 357,009 | $ | 224,486 | $ | 1,251,254 | $ | 876,968 | ||||||||
Vinyls | 206,060 | 141,393 | 734,099 | 546,066 | ||||||||||||
$ | 563,069 | $ | 365,879 | $ | 1,985,353 | $ | 1,423,034 | |||||||||
Income (Loss) from Operations | ||||||||||||||||
Olefins | $ | 65,372 | $ | 18,910 | $ | 179,587 | $ | 55,298 | ||||||||
Vinyls | 18,654 | 4,822 | 69,723 | 13,583 | ||||||||||||
Corporate and Other | (2,626 | ) | 1,183 | (6,144 | ) | (3,066 | ) | |||||||||
$ | 81,400 | $ | 24,915 | $ | 243,166 | $ | 65,815 | |||||||||
Depreciation and Amortization | ||||||||||||||||
Olefins | $ | 9,892 | $ | 13,353 | $ | 49,213 | $ | 51,088 | ||||||||
Vinyls | 8,550 | 8,161 | 31,671 | 33,118 | ||||||||||||
Corporate and Other | (216 | ) | 122 | 191 | 3,087 | |||||||||||
$ | 18,226 | $ | 21,636 | $ | 81,075 | $ | 87,293 | |||||||||
Other Income (Expense), net | ||||||||||||||||
Olefins | $ | 1,268 | $ | 870 | $ | (981 | ) | $ | 3,459 | |||||||
Vinyls | (14 | ) | (14 | ) | 121 | 629 | ||||||||||
Corporate and Other* | (168 | ) | 2,159 | (12,294 | ) | (7,811 | ) | |||||||||
$ | 1,086 | $ | 3,015 | $ | (13,154 | ) | $ | (3,723 | ) | |||||||
* | Debt retirement costs of $15,791 and $11,343 are included in the year ended December 31, 2004 and 2003, respectively. Debt retirement costs of $1,106 are included in the three months ended December 31, 2004. |