- Increased quarterly cash distribution
by 2.9% sequentially, or 12% compared to the fourth quarter 2017
distribution, to $0.4328 per unit, the 16th consecutive quarterly
increase in distributions
- Trailing twelve-month coverage ratio of
1.12x
- Achieved record production at OpCo in
2018
Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership")
today reported net income attributable to the Partnership of $11.9
million, or $0.37 per limited partner unit, for the three months
ended December 31, 2018, a decrease of $3.6 million compared
to fourth quarter 2017 net income attributable to the Partnership
of $15.5 million. The decrease in net income was primarily due
to lower margins on Westlake Chemical OpCo LP’s (“OpCo”) third
party sales and higher interest expense when compared to the
prior-year period. Cash flows from operating activities in the
fourth quarter of 2018 were $106.1 million, a decrease of
$29.3 million compared to fourth quarter 2017 cash flows from
operating activities of $135.4 million. This decrease in cash flow
from operations is primarily attributable to a reduction in
receivables from Westlake Chemical Corporation (“Westlake”) in the
fourth quarter of 2017 and lower margins on OpCo’s third party
sales volumes, partially offset by increased production at OpCo, as
compared to the prior-year period. For the three months ended
December 31, 2018, MLP distributable cash flow of
$14.5 million decreased by $2.3 million from fourth quarter
2017 MLP distributable cash flow of $16.8 million. This
decrease was primarily due to lower margins on OpCo’s third party
sales volumes, partially offset by increased production at
OpCo.
Fourth quarter 2018 net income attributable to the Partnership
was $11.9 million, a decrease of $0.5 million from third
quarter 2018 net income attributable to the Partnership of $12.4
million. Fourth quarter 2018 cash flows from operating activities
of $106.1 million decreased by $3.3 million compared to third
quarter 2018 cash flows from operating activities of $109.4
million. This decrease was primarily due to lower margins on OpCo’s
third party sales volumes and a reduction in receivables from
Westlake, partially offset by an increase in third party
receivables. Fourth quarter 2018 MLP distributable cash flow of
$14.5 million decreased by $0.5 million compared to third
quarter 2018 MLP distributable cash flow of $15.0 million,
primarily due to higher maintenance capital, partially offset by
higher production at OpCo.
Net income attributable to the Partnership of $49.3 million, or
$1.51 per limited partner unit, for the twelve months ended
December 31, 2018 increased by $0.6 million compared to 2017
net income attributable to the Partnership of $48.7 million. The
increase in net income attributable to the Partnership as compared
to the prior year was primarily due to the Partnership’s increased
ownership in OpCo following the acquisition of an additional 5%
interest in the third quarter of 2017 and record production at
OpCo, partially offset by lower margins on OpCo’s third party sales
volumes. Cash flows from operating activities for 2018 were
$436.2 million, a decrease of $101.2 million compared to
2017 cash flows from operating activities of $537.4 million. This
decrease was primarily due to a reduction in receivables from
Westlake that occurred in 2017 and lower margins on OpCo’s third
party sales volumes, partially offset by higher production at OpCo
and lower turnaround expenditures. For the twelve months ended
December 31, 2018, MLP distributable cash flow of
$60.0 million increased by $5.3 million compared to 2017
MLP distributable cash flow of $54.7 million. The increase in MLP
distributable cash flow as compared to the prior year was due to
the Partnership’s increased ownership in OpCo and record production
and lower maintenance capital expenditures at OpCo, partially
offset by lower margins on OpCo’s third party sales.
On July 27, 2018, the Board of Directors of Westlake
Chemical Partners GP LLC, the general partner of the Partnership,
and Westlake, the Partnership’s sponsor and holder of the
Partnership’s incentive distribution rights (“IDRs”), agreed to
reset the Partnership’s target distribution tiers pursuant to which
the IDRs are calculated, with the first target quarterly
distribution threshold increasing from $0.3163 to $1.2938 per unit.
This reset is expected to allow the Partnership to increase its
distribution per unit in line with historical growth rates for over
10 years before the next IDR payment may occur.
On January 25, 2019, the Board of Directors of Westlake Chemical
Partners GP LLC announced a quarterly distribution for the fourth
quarter of 2018 of $0.4328 per limited partner unit to be payable
on February 20, 2019 to unit holders of record as of
February 5, 2019. The fourth quarter 2018 distribution increased by
12% compared to the fourth quarter 2017 distribution and 2.9%
compared to the third quarter 2018 distribution. MLP distributable
cash flow provided trailing twelve month coverage of 1.12x the
declared distributions for the fourth quarter of 2018.
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.
"We are pleased with the Partnership's performance in 2018. As
we enter 2019, we are continuing to reap benefits of the
investments made over the past few years to grow our earnings, cash
flows and production, including the expansion of OpCo’s ethylene
facilities in both Lake Charles, Louisiana and Calvert City,
Kentucky, and increasing our ownership interest in OpCo in both
2015 and 2017," said Albert Chao, President and Chief Executive
Officer. “Demonstrated by the resetting of our IDRs and previous
drop downs, Westlake has established an ongoing commitment to the
Partnership. This has allowed continued distribution growth to
unitholders - with distribution growth of over 150% since our IPO
just over four years ago.”
The statements in this release and the related teleconference
relating to matters that are not historical facts, such as those
with respect to increasing distributions, the potential for future
drop-down transaction and the timing of the next IDR payment 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, 2017, which
was filed with the SEC in March 2018.
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, 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, amortization and disposition
of property, plant and equipment, 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 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. Because MLP distributable cash flow and EBITDA may be
defined differently by other companies in our industry, our
definitions 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, the Partnership owns an 18.3% 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 2018 results will be held Tuesday, February
19, 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 2638219.
A replay of the conference call will be available beginning two
hours after its conclusion until 11:59 p.m. Eastern Time on
February 26, 2019. To hear a replay, dial (855) 859-2056
or (404) 537-3406 for international callers. The replay passcode is
2638219.
The conference call will also be available via
webcast at: https://edge.media-server.com/m6/p/x5mphzie 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 December 31,
Twelve Months Ended December
31,
2018 2017 2018
2017 (In thousands of dollars, except per unit
data) Revenue Net sales—Westlake Chemical Corporation
("Westlake") $ 272,872 $ 261,113 $ 1,074,957 $ 973,081 Net
co-product, ethylene and other sales—third parties 62,853
47,532 210,665 199,900
Total net sales 335,725 308,645 1,285,622 1,172,981 Cost of
sales 242,096 197,913 908,463
769,314 Gross profit 93,629 110,732 377,159
403,667 Selling, general and administrative expenses 7,173
7,741 27,590 29,260
Income from operations 86,456 102,991 349,569 374,407
Other income (expense) Interest expense—Westlake (5,381 )
(4,269 ) (21,433 ) (21,861 ) Other income (expense), net 715
(52 ) 2,457 1,792 Income
before income taxes 81,790 98,670 330,593 354,338 Provision for
income taxes 208 355 22
1,280 Net income 81,582 98,315 330,571 353,058
Less: Net income attributable to
noncontrolling interests in
Westlake Chemical OpCo LP ("OpCo")
69,699 82,769 281,224
304,388
Net income attributable to Westlake
Partners $ 11,883 $ 15,546
$ 49,347 $ 48,670
Net income per limited partner unit
attributable to
Westlake Partners (basic and diluted) Common units $ 0.37 $ 0.46 $
1.51 $ 1.72 Subordinated units $ — $ — $ — $
1.43 Distributions declared per unit $ 0.4328
$ 0.3864 $ 1.6598 $ 1.4819 MLP
distributable cash flow $ 14,524 $ 16,808 $ 60,024
$ 54,700 Distribution declared Limited partner
units—public $ 7,845 $ 6,999 $ 30,077 $ 23,114 Limited partner
units—Westlake 6,112 5,457 23,439 20,928 Incentive distribution
rights — 614 733
1,666 Total distribution declared $ 13,957 $ 13,070
$ 54,249 $ 45,708 EBITDA $ 113,837 $
130,422 $ 460,868 $ 490,184
WESTLAKE CHEMICAL PARTNERS LP
("WESTLAKE PARTNERS") CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited) December 31,
2018 December 31, 2017 (In thousands
of dollars) ASSETS Current assets Cash and cash
equivalents $ 19,744 $ 27,008 Receivable under the Investment
Management Agreement— Westlake Chemical Corporation ("Westlake")
148,956 136,510 Accounts receivable, net—Westlake 57,280 43,884
Accounts receivable, net—third parties 16,404 18,083 Inventories
4,388 5,590 Prepaid expenses and other current assets 370
314 Total current assets 247,142 231,389
Property, plant and equipment, net 1,148,265 1,196,245 Other
assets, net 66,718 87,642
Total
assets $ 1,462,125 $
1,515,276 LIABILITIES AND EQUITY
Current liabilities (accounts payable and accrued liabilities) $
48,772 $ 40,240 Long-term debt payable to Westlake 477,608 473,960
Other liabilities 1,664 2,327 Total
liabilities 528,044 516,527 Common
unitholders—public 409,608 411,228 Common unitholder—Westlake
48,774 50,265 Subordinated unitholder—Westlake — — General
partner—Westlake (242,572 ) (241,958 ) Accumulated other
comprehensive income — 279 Total
Westlake Partners partners' capital 215,810 219,814 Noncontrolling
interest in OpCo 718,271 778,935 Total
equity 934,081 998,749
Total
liabilities and equity $ 1,462,125
$ 1,515,276
WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twelve Months Ended December
31,
2018 2017 (In thousands of
dollars) Cash flows from operating activities Net income
$ 330,571 $ 353,058 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
108,842 113,985 Other balance sheet changes (3,262 )
70,314 Net cash provided by operating activities
436,151 537,357
Cash flows from investing
activities Additions to property, plant and equipment (39,862 )
(68,858 ) Maturities of investments with Westlake under the
Investment Management Agreement 372,050 62,828 Investments with
Westlake under the Investment Management Agreement (384,000 )
(199,000 ) Other — 1,801 Net cash used
for investing activities (51,812 ) (203,229 )
Cash
flows from financing activities Net proceeds from common unit
offering — 110,698 Proceeds from debt payable to Westlake 3,648
165,257 Repayment of debt payable to Westlake — (285,926 )
Quarterly distributions to noncontrolling interest retained in OpCo
by Westlake (341,888 ) (343,932 ) Quarterly distributions to
unitholders (53,363 ) (42,117 ) Net cash used for
financing activities (391,603 ) (396,020 ) Net
decrease in cash and cash equivalents (7,264 ) (61,892 ) Cash and
cash equivalents at beginning of the year 27,008
88,900 Cash and cash equivalents at end of the year $
19,744 $ 27,008
WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE
PARTNERS") RECONCILIATION OF MLP DISTRIBUTABLE CASH
FLOW TO NET INCOME AND NET CASH PROVIDED BY OPERATING
ACTIVITIES (Unaudited)
Three
MonthsEndedSeptember 30,
Three Months Ended December 31,
Twelve Months Ended December
31,
2018 2018 2017 2018
2017 (In thousands of dollars)
Net cash provided by
operating activities $ 109,433 $
106,147 $ 135,441 $ 436,151
$ 537,357
Changes in operating assets and
liabilities and other (25,634 ) (24,565 )
(37,126 ) (105,580 ) (184,299 )
Net Income
$ 83,799 $ 81,582
$ 98,315 $ 330,571
$ 353,058 Add:
Depreciation, amortization and
disposition of property, plant and
equipment 26,918 27,922 27,889 110,691 117,128
Mark-to-market adjustment loss on
derivative contracts — 62 — 62 — Less: Contribution to turnaround
reserves
(4,250 ) (4,238 ) (7,939 ) (16,840 ) (30,580 ) Maintenance capital
expenditures (8,380 ) (9,297 ) (9,694 ) (31,481 ) (37,775 )
Incentive distribution rights — — (614 ) (733 ) (1,666 )
Distributable cash flow attributable
to noncontrolling interest in OpCo (83,063 ) (81,507
) (91,149 ) (332,246 ) (345,465 )
MLP
distributable cash flow $ 15,024 $
14,524 $ 16,808 $
60,024 $ 54,700
WESTLAKE CHEMICAL
PARTNERS LP ("WESTLAKE PARTNERS") RECONCILIATION OF
EBITDA TO NET INCOME AND NET CASH PROVIDED BY OPERATING
ACTIVITIES (Unaudited)
Three
MonthsEndedSeptember 30,
Three Months Ended December 31,
Twelve Months Ended December
31,
2018 2018 2017 2018
2017 (In thousands of dollars)
Net cash provided by
operating activities $ 109,433 $
106,147 $ 135,441 $ 436,151
$ 537,357
Changes in operating assets and
liabilities and other (25,634 ) (24,565 )
(37,126 ) (105,580 ) (184,299 )
Net Income
$ 83,799 $ 81,582
$ 98,315 $ 330,571
$ 353,058 Add: Depreciation and amortization
26,892 26,666 27,483 108,842 113,985 Interest expense 5,639 5,381
4,269 21,433 21,861 Income tax provision (benefit) (772 )
208 355 22 1,280
EBITDA $ 115,558 $
113,837 $ 130,422 $
460,868 $ 490,184
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190219005289/en/
Investors—Steve Bender—(713) 585-2900Media—L. Benjamin
Ederington—(713) 585-2900
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