- Quarterly net income attributable to
the Partnership of $10.9 million, or $0.39 per unit
- Quarterly MLP distributable cash flow
of $11.8 million
- Increased quarterly cash distribution
by 2.89% to $0.3450 per unit
- Final Internal Revenue Service
regulations uphold previous favorable private letter ruling granted
on ethylene to Westlake Chemical Corporation
Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership")
today reported net income attributable to the Partnership of $10.9
million, or $0.39 per limited partner unit, for the three months
ended December 31, 2016, an increase of $0.1 million
compared to fourth quarter 2015 net income attributable to the
Partnership of $10.8 million. The increase in net income
attributable to the Partnership as compared to the prior-year
period was primarily due to higher production volumes at Westlake
Chemical OpCo LP’s (“OpCo”) Petro 1 facility in Lake Charles,
Louisiana resulting from the 250 million pound ethylene expansion
completed in July 2016. For the three months ended
December 31, 2016, cash flow from operations was
$110.4 million, a decrease of $10.9 million compared to fourth
quarter 2015 cash flow from operations of $121.3 million. This
decrease in cash flow from operations was due to an increase in
working capital, partially offset by increased production. For the
three months ended December 31, 2016, MLP distributable
cash flow was $11.8 million, an increase of $1.7 million
compared to fourth quarter 2015 MLP distributable cash flow of
$10.1 million. The increase in MLP distributable cash flow as
compared to the prior-year period was primarily due to higher
production volumes at Petro 1 resulting from the 250 million pound
ethylene expansion project.
The fourth quarter 2016 net income attributable to the
Partnership of $10.9 million, or $0.39 per limited partner unit,
increased by $2.2 million from third quarter 2016 net income
attributable to the Partnership of $8.7 million, or $0.32 per
limited partner unit. Fourth quarter 2016 cash flow from operations
of $110.4 million increased by $118.3 million compared to third
quarter 2016 cash flow from operations of $(7.9) million. Fourth
quarter 2016 MLP distributable cash flow of $11.8 million increased
by $5.0 million compared to third quarter 2016 MLP distributable
cash flow of $6.8 million. The increase in net income attributable
to the Partnership, cash flow from operations and MLP distributable
cash flow as compared to the prior quarter was primarily due to
higher production volumes, lower capital expenditures at Petro 1
and a decrease in working capital following the completion of the
250 million pound ethylene expansion at Petro 1 in July 2016.
For the full year 2016, net income attributable to the
Partnership of $40.9 million, or $1.50 per limited partner unit,
increased by $1.1 million when compared to full year 2015 net
income attributable to the Partnership of $39.8 million, or $1.47
per unit. Cash flow from operations of $287.7 million for 2016
decreased by $164.7 million when compared to cash flow from
operations of $452.4 million for 2015 due to lower production at
Petro 1 and an unplanned outage at OpCo’s facility in Calvert City,
Kentucky, increases in working capital and turnaround expenditures
at Petro 1. MLP distributable cash flow of $32.4 million for 2016
decreased by $5.3 million, when compared to 2015 MLP distributable
cash flow of $37.7 million, primarily as a result of lower
production due to the Petro 1 expansion project as well as the
unplanned outage at Calvert City in June and July 2016.
On January 19, 2017, the Internal Revenue Service
(“IRS”) and U.S. Department of Treasury (“Treasury”) issued final
regulations under section 7704(d)(1)(E) of the Internal Revenue
Code (the “Code”) relating to qualifying income from the
processing, refining and transportation of minerals or natural
resources, which allows a business to be treated as a partnership
for U.S. federal tax purposes. Our sponsor, Westlake Chemical
Corporation (“Westlake”), previously requested and received a
favorable private letter ruling from the IRS prior to the formation
and initial public offering of the Partnership to the effect that
the production, transportation, storage and marketing of ethylene
constitutes “qualifying income” within the meaning of section
7704(d)(1)(E). The final regulations issued by the IRS and Treasury
uphold Westlake’s private letter ruling and holds that the
Partnership’s activities constitute “qualifying income.”
On January 27, 2017, the Board of Directors of
Westlake Chemical Partners GP LLC, the general partner of the
Partnership, announced a quarterly distribution for the fourth
quarter of 2016 of $0.3450 per limited partner unit to be payable
on February 22, 2017 to unit holders of record as of
February 7, 2017. The fourth quarter 2016 distribution
increased 12.0% compared to the fourth quarter 2015 distribution
and 2.89% compared to the third quarter 2016 distribution. MLP
distributable cash flow provided coverage of 1.26x the declared
distributions for the fourth quarter of 2016. The increase in cash
distributions is in line with the Partnership's targeted low
double-digit distribution growth.
OpCo's sales agreement with Westlake is designed to provide for
stable and predictable cash flows. The sales 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.
“This quarter we achieved record production for the first full
quarter following the 250 million pound expansion of the Petro 1
facility, which was completed in July 2016. This quarter’s
performance highlights the strength of the Partnership as we saw
the strongest quarterly coverage ratio since our IPO in August of
2014 while continuing to increase our distributions to unit
holders,” said Albert Chao, President and Chief Executive Officer.
Regarding the IRS’s final regulations regarding qualifying income,
Chao stated “We appreciate the thorough process taken by the IRS
and Treasury Department to reach their final decision and are
pleased that the final regulations reconfirm and properly recognize
these industry practices and remove uncertainty that our activities
will continue to generate qualifying income under the Code.”
The statements in this release and the related teleconference
relating to matters that are not historical facts 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, 2015, which
was filed with the SEC in March 2016.
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, as defined in
Regulation G of the U.S. Securities Exchange Act of 1934, as
amended. We report our financial results in accordance with U.S.
generally accepted accounting principles ("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 GAAP. A reconciliation of MLP distributable cash flow and
EBITDA to net income and net cash provided by operating activities
can be found in the financial schedules at the end of this release.
We define distributable cash flow as net income plus depreciation
and amortization, less contributions from turnaround reserves and
maintenance capital expenditures. 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 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. Because MLP
distributable cash flow and EBITDA may be defined differently by
other companies in our industry, our definition of MLP
distributable cash flow and EBITDA may not be comparable to
similarly titled measures of other companies.
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, Texas, the Partnership owns a 13.3%
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' fourth
quarter and full year 2016 results will be held
February 21, 2017 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
55489298.
A replay of the conference call will be available beginning two
hours after its conclusion until 11:59 p.m. Eastern Time on
February 28, 2017. To hear a replay, dial (855) 859-2056
or (404) 537-3406 for international callers. The replay passcode is
55489298.
The conference call will also be available via webcast at:
http://edge.media-server.com/m/p/g6rkz2s6 and the
earnings release can be obtained via the Partnership web page at:
http://westlakepartners.investorroom.com/news-events.
WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended December 31, Twelve
Months Ended December 31, 2016 2015
2016 2015 (In thousands of
dollars, except per unit data) Revenue
Net sales—Westlake Chemical Corporation
("Westlake")
$ 246,860 $ 213,480 $ 853,719 $ 834,918
Net co-product, ethylene and other
sales—third parties
47,077 35,026 133,017 172,303 Total net
sales 293,937 248,506 986,736 1,007,221 Cost of sales 188,202
150,524 595,405 624,339 Gross profit
105,735 97,982 391,331 382,882 Selling, general and administrative
expenses 7,154 5,724 24,887 23,550
Income from operations 98,581 92,258 366,444 359,332
Other
income (expense) Interest expense—Westlake (5,226 ) (1,173 )
(12,607 ) (4,967 ) Other income, net 371 195 601
160 Income before income taxes 93,726 91,280 354,438
354,525 Provision for income taxes 145 105 1,035
672 Net income 93,581 91,175 353,403 353,853
Less: Net income attributable to
noncontrolling interests in Westlake Chemical OpCo LP ("OpCo")
82,730 80,390 312,463 314,022
Net
income attributable to Westlake Partners $ 10,851
$ 10,785 $ 40,940
$ 39,831
Net income per limited partners unit
attributable to Westlake Partners (basic and diluted)
Common units $ 0.39 $ 0.40 $ 1.50 $ 1.47 Subordinated units $ 0.39
$ 0.40 $ 1.50 $ 1.47
Distributions declared per unit $ 0.3450 $ 0.3080 $
1.3230 $ 1.1813 MLP distributable cash flow $
11,762 $ 10,059 $ 32,405 $ 37,730
Distribution declared Limited partner units—public $ 4,463 $
3,985 $ 17,116 $ 15,283 Limited partner units—Westlake 4,872 4,350
18,684 16,683 Incentive distribution rights 142 — 281
— Total distribution declared $ 9,477 $ 8,335
$ 36,081 $ 31,966 EBITDA $ 129,690 $
113,026 $ 465,255 $ 440,702
WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
December 31,
2016
December 31,
2015
(In thousands of dollars) ASSETS Current
assets Cash and cash equivalents $ 88,900 $ 169,559 Accounts
receivable, net—Westlake 126,977 39,655 Accounts receivable,
net—third parties 12,085 11,927 Inventories 3,934 3,879 Prepaid
expenses and other current assets 269 267 Total
current assets 232,165 225,287 Property, plant and equipment, net
1,222,238 1,020,469 Other assets, net 100,825 44,593
Total assets $ 1,555,228 $
1,290,349 LIABILITIES AND EQUITY
Current liabilities (accounts payable and accrued liabilities) $
37,777 $ 57,694 Long-term debt payable to Westlake 594,629 384,006
Other liabilities 1,859 1,482 Total liabilities
634,265 443,182 Common unitholders—public 297,367 294,565 Common
unitholder—Westlake 4,813 4,502 Subordinated unitholder—Westlake
42,534 39,786 General partner—Westlake (242,430 ) (242,572 )
Accumulated other comprehensive income 200 280 Total
Westlake Partners partners' capital 102,484 96,561 Noncontrolling
interest in OpCo 818,479 750,606 Total equity 920,963
847,167
Total liabilities and equity $
1,555,228 $ 1,290,349
WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twelve Months Ended December 31, 2016
2015 (In thousands of dollars)
Cash flows from operating activities Net income $ 353,403 $
353,853 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 98,210 81,210
Other balance sheet changes (163,887 ) 17,479 Net cash
provided by operating activities 287,726 452,542
Cash flows from
investing activities Additions to property, plant and equipment
(299,638 ) (231,185 ) Proceeds from disposition of assets 157
— Net cash used for investing activities (299,481 )
(231,185 )
Cash flows from financing activities Proceeds
from debt payable to Westlake 212,175 291,709 Repayment of debt
payable to Westlake (1,552 ) (135,341 ) Quarterly distributions to
noncontrolling interest retained in OpCo by Westlake (244,590 )
(310,842 ) Quarterly distributions to unitholders (34,937 ) (31,074
) Net cash used for financing activities (68,904 ) (185,548 ) Net
(decrease) increase in cash and cash equivalents (80,659 ) 35,809
Cash and cash equivalents at beginning of the year 169,559
133,750 Cash and cash equivalents at end of the year $
88,900 $ 169,559
WESTLAKE CHEMICAL
PARTNERS LP ("WESTLAKE PARTNERS") RECONCILIATION OF
MLP DISTRIBUTABLE CASH FLOW TO NET INCOME AND NET CASH (USED
FOR) PROVIDED BY OPERATING ACTIVITIES (Unaudited)
Three
Months Ended
September 30,
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2016 2016 2015 2016
2015
(In thousands of dollars)
Net cash (used for) provided by
operating activities
$ (7,907 ) $ 110,356 $
121,339 $ 287,726 $ 452,542
Changes in operating assets and
liabilities and other
83,835 (16,820 ) (30,261 ) 66,021 (99,145 ) Deferred income taxes
(69 ) 45 97
(344 ) 456
Net income
$ 75,859 $ 93,581 $
91,175 $ 353,403 $ 353,853 Add:
Distributable cash flow attributable to
noncontrolling interests in OpCo
(55,853 ) (89,620 ) (75,650 ) (258,560 ) (301,215 ) Incentive
distribution rights (91 ) (142 ) — (281 ) — Maintenance capital
expenditures (21,747 ) (16,744 ) (18,989 ) (120,353 ) (67,935 )
Contribution to turnaround reserves (17,625 ) (6,051 ) (7,050 )
(40,014 ) (28,183 ) Depreciation and amortization 26,290
30,738 20,573
98,210 81,210
MLP
distributable cash flow $ 6,833
$ 11,762 $
10,059 $ 32,405
$ 37,730
WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
RECONCILIATION OF EBITDA TO NET INCOME AND NET CASH (USED
FOR) PROVIDED BY OPERATING ACTIVITIES (Unaudited)
Three Months
Ended
September 30,
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2016 2016 2015 2016
2015
(In thousands of dollars)
Net cash (used for) provided by
operating activities
$ (7,907 ) $ 110,356 $
121,339 $ 287,726 $ 452,542
Changes in operating assets and
liabilities and other
83,835 (16,820 ) (30,261 ) 66,021 (99,145 ) Deferred income taxes
(69 ) 45 97
(344 ) 456
Net income $
75,859 $ 93,581 $ 91,175
$ 353,403 $ 353,853 Add: Provision for
income taxes 194 145 105 1,035 672 Interest expense 4,947 5,226
1,173 12,607 4,967 Depreciation and amortization 26,290
30,738 20,573
98,210 81,210
EBITDA
$ 107,290 $
129,690 $ 113,026
$ 465,255 $
440,702
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Westlake Chemical Partners LPInvestorsSteve Bender,
713-585-2900orMediaL. Benjamin Ederington, 713-585-2900
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