Business Wire | Aug 6, 2020 06:30AM EDT

Westlake Chemical Partners LP Announces Second Quarter 2020 Results

Aug. 06, 2020

HOUSTON--(BUSINESS WIRE)--Aug. 06, 2020--Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported net income attributable to the Partnership of $14.9 million, or $0.43 per limited partner unit, for the three months ended June 30, 2020, an increase of $1.2 million compared to second quarter 2019 net income attributable to the Partnership of $13.7 million. The increase in net income attributable to the Partnership was primarily due to higher earnings on ethylene sold to Westlake Chemical Corporation ("Westlake Chemical") from Westlake Chemical OpCo LP ("OpCo") and lower manufacturing and selling, general and administration costs, partially offset by lower ethylene production. Cash flows from operating activities in the second quarter of 2020 were $112.8 million, an increase of $12.6 million compared to second quarter 2019 cash flows from operating activities of $100.2 million. This increase in cash flows from operating activities was primarily attributable to a decrease in working capital. For the three months ended June 30, 2020, MLP distributable cash flow of $16.9 million increased by $0.5 million from second quarter 2019 MLP distributable cash flow of $16.4 million.

Second quarter 2020 net income attributable to the Partnership of $14.9 million decreased by $2.8 million from first quarter 2020 net income attributable to the Partnership of $17.7 million. The decrease in net income attributable to the Partnership was primarily due to lower ethylene production at OpCo. Second quarter 2020 cash flows from operating activities of $112.8 million increased by $1.8 million compared to first quarter 2020 cash flows from operating activities of $111.0 million. Second quarter 2020 MLP distributable cash flow of $16.9 million decreased by $1.4 million compared to first quarter 2020 MLP distributable cash flow of $18.3 million. The decrease in MLP distributable cash flow was primarily due to the lower production at OpCo, partially offset by reduced maintenance capital expenditures.

Net income attributable to the Partnership of $32.6 million, or $0.93 per limited partner unit, for the six months ended June 30, 2020 increased by $3.9 million compared to the first six months of 2019 net income attributable to the Partnership of $28.7 million. The increase in net income attributable to the Partnership as compared to the prior-year period was due to higher earnings on ethylene sold to Westlake Chemical from OpCo, lower manufacturing, selling, general and administrative expenses and interest costs, partially offset by lower ethylene production. Cash flows from operating activities in the first six months of 2020 were $223.7 million, an increase of $10.0 million compared to the first six months of 2019 cash flows from operating activities of $213.7 million. This increase was primarily due to higher earnings during the period. For the six months ended June 30, 2020, MLP distributable cash flow of $35.2 million increased by $1.2 million compared to the first six months of 2019 MLP distributable cash flow of $34.0 million. The increase in MLP distributable cash flow as compared to the prior-year period was primarily attributable to the Partnership's reduced maintenance capital expenditures, partially offset by lower production of ethylene at OpCo and increased turnaround reserves.

"Despite turbulent market conditions that have impacted the overall ethylene value chain, as well as the steep drop in oil prices, we are pleased with the Partnership's performance in the second quarter of 2020. Our long-term ethylene sales agreement with Westlake Chemical continued to deliver reliable earnings and cash flows to the Partnership," said Albert Chao, President and Chief Executive Officer. "Our first priority is to ensure the health and safety of our employees who continue to work diligently to serve our customers who produce essential products in these uncertain times. In these evolving market conditions, we have prioritized bolstering our balance sheet position, while continuing to deliver distributions to our unitholders, allowing us to maintain our financial strength and flexibility. These actions preserve the fundamental value of the Partnership and the opportunities that our four levers of growth can offer."

On July 31, 2020, the Partnership announced that the Board of Directors of Westlake Chemical Partners GP LLC had approved a quarterly distribution for the second quarter of 2020 of $0.4714 per unit to be payable on August 24, 2020 to unitholders of record as of August 10, 2020. MLP distributable cash flow provided trailing twelve-month coverage of 1.13x the declared distributions for the second quarter of 2020.

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.

The statements in this release and the related teleconference relating to matters that are not historical facts, such as those with respect to levers of growth 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; 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, 2019, which was filed with the SEC in February 2020, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

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. 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 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 U.S. GAAP. 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. MLP distributable cash flow and EBITDA are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess our operating performance as compared to other publicly traded partnerships, our ability to incur and service debt and fund capital expenditures and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. Reconciliations of MLP distributable cash flow to net income and to net cash provided by operating activities and 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.

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 a 22.8% 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' second quarter 2020 results will be held Thursday, August 6, 2020 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 386 73 18.

A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on Thursday, August 13, 2020. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 386 73 18.

The conference call will also be available via webcast at: https://edge.media-server.com/mmc/p/98vm6ykf 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 June Six Months Ended June 30, 30,

2020 2019 2020 2019



(In thousands of dollars, except per unit data)

Revenue

Net sales-WestlakeChemical Corporation $ 227,431 $ 230,047 $ 442,259 $ 487,087 ("Westlake")

Net co-product,ethylene and other 11,069 40,015 46,790 82,061 sales-third parties

Total net sales 238,500 270,062 489,049 569,148

Cost of sales 148,470 178,104 295,471 386,536

Gross profit 90,030 91,958 193,578 182,612

Selling, general and 6,139 7,639 12,335 14,612 administrative expenses

Income from operations 83,891 84,319 181,243 168,000

Other income (expense)

Interest (3,431 ) (5,125 ) (7,381 ) (11,025 )expense-Westlake

Other income, net 123 1,153 708 1,968

Income before income 80,583 80,347 174,570 158,943 taxes

Income tax provision 206 237 423 437

Net income 80,377 80,110 174,147 158,506

Less: Net incomeattributable tononcontrolling 65,517 66,377 141,540 129,818 interests in WestlakeChemical OpCo LP("OpCo")

Net income attributable $ 14,860 $ 13,733 $ 32,607 $ 28,688 to Westlake Partners



Net income per limitedpartners unitattributable to Westlake Partners(basic and diluted)

Common units $ 0.43 $ 0.39 $ 0.93 $ 0.85



Distributions declared $ 0.4714 $ 0.4579 $ 0.9428 $ 0.9031 per unit



MLP distributable cash $ 16,855 $ 16,422 $ 35,192 $ 33,977 flow



Distributions declared

Limited partnerunits-publicly and $ 9,933 $ 9,646 $ 19,867 $ 19,025 privately held

Limited partner 6,657 6,467 13,314 12,754 units-Westlake

Total distributions $ 16,590 $ 16,113 $ 33,181 $ 31,779 declared

EBITDA $ 109,827 $ 112,329 $ 233,795 $ 223,669

WESTLAKE CHEMICAL PARTNERS LP



CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)

June 30, December 31, 2020 2019



(In thousands of dollars)

ASSETS

Current assets

Cash and cash equivalents $ 23,618 $ 19,923

Receivable under the Investment Management 171,391 162,773 Agreement-Westlake

Accounts receivable, net-Westlake 42,354 42,847

Accounts receivable, net-third parties 7,007 9,914

Inventories 1,529 2,484

Prepaid expenses and other current assets 65 470

Total current assets 245,964 238,411

Property, plant and equipment, net 1,077,499 1,102,995

Other assets, net 45,564 52,050

Total assets $ 1,369,027 $ 1,393,456



LIABILITIES AND EQUITY

Current liabilities (accounts payable and accrued $ 31,093 $ 38,849 liabilities)

Long-term debt payable to Westlake 399,674 399,674

Other liabilities 2,407 2,798

Total liabilities 433,174 441,321

Common unitholders-publicly and privately held 471,392 471,736

Common unitholder-Westlake 48,120 48,350

General partner-Westlake (242,572 ) (242,572 )

Total Westlake Partners partners' capital 276,940 277,514

Noncontrolling interest in OpCo 658,913 674,621

Total equity 935,853 952,135

Total liabilities and equity $ 1,369,027 $ 1,393,456

WESTLAKE CHEMICAL PARTNERS LP



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

Six Months Ended June 30,

2020 2019



(In thousands of dollars)

Cash flows from operating activities

Net income $ 174,147 $ 158,506

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 51,844 53,701

Other balance sheet changes (2,272 ) 1,465

Net cash provided by operating activities 223,719 213,672

Cash flows from investing activities

Additions to property, plant and equipment (20,595 ) (25,582 )

Maturities of investments with Westlake under the 181,000 344,445 Investment Management Agreement

Investments with Westlake under the Investment (190,000 ) (336,445 )Management Agreement

Other - 46

Net cash used for investing activities (29,595 ) (17,536 )

Cash flows from financing activities

Net proceeds from private placement of common units - 62,916

Proceeds from debt payable to Westlake - 123,511

Repayment of debt payable to Westlake - (201,445 )

Quarterly distributions to noncontrolling interest (157,248 ) (153,766 )retained in OpCo by Westlake

Quarterly distributions to unitholders (33,181 ) (29,623 )

Net cash used for financing activities (190,429 ) (198,407 )

Net increase (decrease) in cash and cash 3,695 (2,271 )equivalents

Cash and cash equivalents at beginning of period 19,923 19,744

Cash and cash equivalents at end of period $ 23,618 $ 17,473

WESTLAKE CHEMICAL PARTNERS LP



RECONCILIATION OF MLP DISTRIBUTABLE CASH FLOW TO NET INCOMEAND NET CASH PROVIDED BY OPERATING ACTIVITIES(Unaudited)

Three Months Three Months Ended June Six Months Ended June 30, Ended March 30, 31,

2020 2020 2019 2020 2019



(In thousands of dollars)

Net cashprovided by $ 110,961 $ 112,758 $ 100,173 $ 223,719 $ 213,672 operatingactivities

Changes inoperatingassets and (17,191 ) (32,381 ) (20,063 ) (49,572 ) (55,166 )liabilitiesand other

Net Income 93,770 80,377 80,110 174,147 158,506

Add:

Depreciation,amortizationanddisposition of 26,127 26,164 26,903 52,291 54,205 property,plant andequipment

Mark-to-marketadjustmentloss (gain) on (2,491 ) 704 516 (1,787 ) (199 )derivativecontracts

Less:

Contributionto turnaround (9,923 ) (9,884 ) (3,889 ) (19,807 ) (7,737 )reserves

Maintenancecapital (11,121 ) (8,228 ) (11,725 ) (19,349 ) (23,045 )expenditures

Distributablecash flowattributableto (78,025 ) (72,278 ) (75,493 ) (150,303 ) (147,753 )noncontrollinginterest inOpCo

MLPdistributable $ 18,337 $ 16,855 $ 16,422 $ 35,192 $ 33,977 cash flow

WESTLAKE CHEMICAL PARTNERS LP



RECONCILIATION OF EBITDA TO NET INCOME, INCOME FROM OPERATIONS AND NET CASHPROVIDED BY OPERATING ACTIVITIES(Unaudited)

Three Months Three Months Ended June Six Months Ended June 30, Ended March 30, 31,

2020 2020 2019 2020 2019



(In thousands of dollars)

Net cashprovided by $ 110,961 $ 112,758 $ 100,173 $ 223,719 $ 213,672 operatingactivities

Changes inoperatingassets and (17,191 ) (32,381 ) (20,063 ) (49,572 ) (55,166 )liabilitiesand other

Net Income 93,770 80,377 80,110 174,147 158,506

Less:

Other 585 123 1,153 708 1,968 income, net

Interest (3,950 ) (3,431 ) (5,125 ) (7,381 ) (11,025 )expense

Income tax (217 ) (206 ) (237 ) (423 ) (437 )provision

Income from 97,352 83,891 84,319 181,243 168,000 operations

Add:

Depreciationand 26,031 25,813 26,857 51,844 53,701 amortization

Other 585 123 1,153 708 1,968 income, net

EBITDA $ 123,968 $ 109,827 $ 112,329 $ 233,795 $ 223,669

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