Westlake Chemical Corp. (WLK, Financial) filed Quarterly Report for the period ended 2009-03-31.
Westlake Chemical Corporation is a vertically integrated international manufacturer and supplier of petrochemicals polymers and fabricated products. The company's range of products includes ethylene polyethylene styrene vinyl intermediates PVC PVC Pipe PVC windows fence and decking components. Westlake Chemical Corp. has a market cap of $1.31 billion; its shares were traded at around $20 with and P/S ratio of 0.3. The dividend yield of Westlake Chemical Corp. stocks is 1.1%.
Operating activities provided cash of $120.3 million in the first three months of 2009 compared to cash used by operating activities of $28.3 million in the first three months of 2008. The $148.6 million increase in cash flows from operating activities was primarily due to favorable changes in working capital, partially offset by a reduction in income from operations and capitalized turnaround costs of $23.1 million resulting from the turnaround of our ethylene unit in Lake Charles. Income from operations decreased by $14.8 million in the first three months of 2009 as compared to the first three months of 2008. Changes in components of working capital, which we define for purposes of this cash flow discussion as accounts receivable, inventories, prepaid expense and other current assets less accounts payable and accrued liabilities, provided cash of $108.0 million in the first three months of 2009 (including a federal tax refund of $30.0 million, resulting from over payment of 2008 federal income taxes), compared to $48.7 million of cash used in the first three months of 2008, a favorable change of $156.7 million. This change was largely due to lower inventory and reduced accounts receivable primarily due to the decrease in average sales prices and feedstock costs from the prior year period.
$300 million and would be partially funded with funds drawn from the proceeds of the issuance of the 6 3/4% revenue bonds of the Authority, issued in December 2007 for our benefit, which are currently held as restricted cash. We expect the remaining funding will come from our revolving credit facility, cash flow from operations and, possibly, our ability to obtain additional financing in the future. We believe that our sources of liquidity as described above will be adequate to fund our normal operations and on-going capital expenditures. In addition, in response to the declining economic conditions, we have increased our focus on cost cutting and working capital reduction to improve our liquidity. Funding of any potential large expansions or any potential acquisitions of third-party assets may depend on our ability to obtain additional financing in the future. As of March 31, 2009, the indenture governing our senior notes restricted us from incurring additional debt, except for specified permitted debt (including borrowings under our credit facility, additional borrowings under one or more term loan facilities in an amount not to exceed $200 million and $100 million of other debt), because our fixed charge coverage ratio remained below 2.0 at March 31, 2009. We may not be able to access additional liquidity at cost effective interest rates due to the volatility of the commercial credit markets. Despite the current economic downturn and the credit crisis, our management believes that our revolving credit facility should be available up to our borrowing base, if needed. At March 31, 2009, the borrowing base of our credit facility had declined to $235.3 million, which is below the maximum borrowing capacity of $400 million due to our low carrying amount of accounts receivable and inventory, which make up the borrowing base.
As of March 31, 2009, our long-term debt, including current maturities, totaled $510.3 million, consisting of $250.0 million principal amount of 6 5/8% senior notes due 2016 (less the unamortized discount of $0.5 million), $250.0 million of 6 3/4% senior notes due 2032 and a $10.9 million loan from the proceeds of tax-exempt waste disposal revenue bonds (supported by an $11.3 million letter of credit). The 6 3/4% senior notes evidence and secure our obligations to the Authority under a loan agreement relating to the issuance of $250.0 million aggregate principal amount of the Authoritys tax-exempt revenue bonds. Debt outstanding under the tax-exempt waste disposal revenue bonds bears interest at variable rates.
On September 8, 2008, we amended our senior secured revolving credit facility to, among other things, increase the lenders commitments under the facility from $300 million to $400 million. On February 5, 2009, we further amended our revolving credit facility to allow us to make specified distributions when our fixed charge coverage ratio falls below 1.0 but we maintain at least $125 million to $200 million (depending on the amount of the distribution) of borrowing availability, including cash, under the credit facility. At March 31, 2009, we had no borrowings outstanding under the revolving credit facility, and we had outstanding letters of credit totaling $14.2 million and borrowing availability of $235.3 million under the revolving credit facility. Any borrowings under the facility would bear interest at either LIBOR plus a spread ranging from 2.75% to 3.50% or a base rate plus a spread ranging from 1.25% to 2.0%. The revolving credit facility also requires an unused commitment fee ranging from 0.75% to 0.875%, depending on the average daily borrowings. All interest rates under the facility are subject to monthly grid pricing adjustments based on prior month average daily loan availability. The revolving credit facility matures on September 8, 2013.
The agreements governing the 6 5/8% and the 6 3/4% senior notes (together the senior notes) and the revolving credit facility each contain customary covenants and events of default. Accordingly, these agreements impose significant operating and financial restrictions on us. These restrictions, among other things, provide limitations on incurrence of additional indebtedness, the payment of dividends, certain investments and acquisitions and sales of assets. One such restriction currently restricts us from incurring additional debt, except specified permitted debt (including borrowings under our credit facility), because our fixed charge coverage ratio remained below 2.0 at March 31, 2009. These limitations are subject to a number of important qualifications and exceptions, including, without limitation, an exception for the payment of our regular quarterly dividend of up to $0.20 per share (currently $0.0525 per share). The senior notes indenture does not allow distributions, unless, after giving pro forma effect to the distribution, our fixed charge coverage ratio is at least 2.0 and such payment, together with the aggregate amount of all other distributions after January 13, 2006, is less than the sum of 50% of our consolidated net income for the period from October 1, 2003 to the end of the most recent quarter for which financial statements have been filed, plus 100% of net cash proceeds received after October 1, 2003 as a contribution to our common equity capital or from the issuance or sale of certain securities, plus several other adjustments. The amount allowed under this restriction would have been $444.3 million at March 31, 2009; however, because our fixed charge coverage ratio was below 2.0, the actual amount allowed was restricted to the payment of our regular quarterly dividend of up to $0.20 per share. The revolving credit facility also restricts distributions unless, after giving effect to such payment, our fixed charge coverage ratio is at least 1.0, provided that we may also make specified distributions when our fixed charge coverage ratio falls below 1.0 but we maintain at least between $125 million to $200 million (depending on the amount of the distributions) of borrowing availability, including cash, under the credit facility. No other agreements require us to maintain specified financial ratios. In addition, the senior notes indenture and the revolving credit facility restrict our ability to create liens, to engage in certain affiliate transactions and to engage in sale-leaseback transactions.
Read the The complete ReportWLK is in the portfolios of Third Avenue Management, Charles Brandes of Brandes Investment.
Westlake Chemical Corporation is a vertically integrated international manufacturer and supplier of petrochemicals polymers and fabricated products. The company's range of products includes ethylene polyethylene styrene vinyl intermediates PVC PVC Pipe PVC windows fence and decking components. Westlake Chemical Corp. has a market cap of $1.31 billion; its shares were traded at around $20 with and P/S ratio of 0.3. The dividend yield of Westlake Chemical Corp. stocks is 1.1%.
Highlight of Business Operations:
For the three months ended March 31, 2009, we incurred a net loss of $6.1 million, or $0.09 per diluted share, on net sales of $488.3 million. This represents a decrease in net income of $11.5 million, or $0.17 per diluted share, from the three months ended March 31, 2008 net income of $5.4 million, or $0.08 per diluted share, on net sales of $915.1 million. The loss from operations was $0.9 million for the first quarter of 2009 as compared to income from operations of $13.9 million for the first quarter of 2008. Sales for the three months ended March 31, 2009 decreased $426.8 million compared to the first three months of 2008 due primarily to significantly lower sales prices for all of our major products except caustic and lower sales volumes for all major products except styrene. The first quarter of 2009 loss from operations reflected lower sales volumes, weakness in the vinyls downstream markets, reduced demand for polyethylene, an unscheduled outage caused by an ice storm at our Calvert City facility and a turnaround at one of our ethylene units in Lake Charles. The Calvert City outage and the Lake Charles turnaround resulted in repair costs and the expensing of unabsorbed fixed manufacturing costs of $19.5 million. The increase in loss from operations was partially offset by a gain from trading activity of $2.5 million during the first quarter of 2009 compared to a gain of $0.1 million during the first quarter of 2008.Operating activities provided cash of $120.3 million in the first three months of 2009 compared to cash used by operating activities of $28.3 million in the first three months of 2008. The $148.6 million increase in cash flows from operating activities was primarily due to favorable changes in working capital, partially offset by a reduction in income from operations and capitalized turnaround costs of $23.1 million resulting from the turnaround of our ethylene unit in Lake Charles. Income from operations decreased by $14.8 million in the first three months of 2009 as compared to the first three months of 2008. Changes in components of working capital, which we define for purposes of this cash flow discussion as accounts receivable, inventories, prepaid expense and other current assets less accounts payable and accrued liabilities, provided cash of $108.0 million in the first three months of 2009 (including a federal tax refund of $30.0 million, resulting from over payment of 2008 federal income taxes), compared to $48.7 million of cash used in the first three months of 2008, a favorable change of $156.7 million. This change was largely due to lower inventory and reduced accounts receivable primarily due to the decrease in average sales prices and feedstock costs from the prior year period.
$300 million and would be partially funded with funds drawn from the proceeds of the issuance of the 6 3/4% revenue bonds of the Authority, issued in December 2007 for our benefit, which are currently held as restricted cash. We expect the remaining funding will come from our revolving credit facility, cash flow from operations and, possibly, our ability to obtain additional financing in the future. We believe that our sources of liquidity as described above will be adequate to fund our normal operations and on-going capital expenditures. In addition, in response to the declining economic conditions, we have increased our focus on cost cutting and working capital reduction to improve our liquidity. Funding of any potential large expansions or any potential acquisitions of third-party assets may depend on our ability to obtain additional financing in the future. As of March 31, 2009, the indenture governing our senior notes restricted us from incurring additional debt, except for specified permitted debt (including borrowings under our credit facility, additional borrowings under one or more term loan facilities in an amount not to exceed $200 million and $100 million of other debt), because our fixed charge coverage ratio remained below 2.0 at March 31, 2009. We may not be able to access additional liquidity at cost effective interest rates due to the volatility of the commercial credit markets. Despite the current economic downturn and the credit crisis, our management believes that our revolving credit facility should be available up to our borrowing base, if needed. At March 31, 2009, the borrowing base of our credit facility had declined to $235.3 million, which is below the maximum borrowing capacity of $400 million due to our low carrying amount of accounts receivable and inventory, which make up the borrowing base.
As of March 31, 2009, our long-term debt, including current maturities, totaled $510.3 million, consisting of $250.0 million principal amount of 6 5/8% senior notes due 2016 (less the unamortized discount of $0.5 million), $250.0 million of 6 3/4% senior notes due 2032 and a $10.9 million loan from the proceeds of tax-exempt waste disposal revenue bonds (supported by an $11.3 million letter of credit). The 6 3/4% senior notes evidence and secure our obligations to the Authority under a loan agreement relating to the issuance of $250.0 million aggregate principal amount of the Authoritys tax-exempt revenue bonds. Debt outstanding under the tax-exempt waste disposal revenue bonds bears interest at variable rates.
On September 8, 2008, we amended our senior secured revolving credit facility to, among other things, increase the lenders commitments under the facility from $300 million to $400 million. On February 5, 2009, we further amended our revolving credit facility to allow us to make specified distributions when our fixed charge coverage ratio falls below 1.0 but we maintain at least $125 million to $200 million (depending on the amount of the distribution) of borrowing availability, including cash, under the credit facility. At March 31, 2009, we had no borrowings outstanding under the revolving credit facility, and we had outstanding letters of credit totaling $14.2 million and borrowing availability of $235.3 million under the revolving credit facility. Any borrowings under the facility would bear interest at either LIBOR plus a spread ranging from 2.75% to 3.50% or a base rate plus a spread ranging from 1.25% to 2.0%. The revolving credit facility also requires an unused commitment fee ranging from 0.75% to 0.875%, depending on the average daily borrowings. All interest rates under the facility are subject to monthly grid pricing adjustments based on prior month average daily loan availability. The revolving credit facility matures on September 8, 2013.
The agreements governing the 6 5/8% and the 6 3/4% senior notes (together the senior notes) and the revolving credit facility each contain customary covenants and events of default. Accordingly, these agreements impose significant operating and financial restrictions on us. These restrictions, among other things, provide limitations on incurrence of additional indebtedness, the payment of dividends, certain investments and acquisitions and sales of assets. One such restriction currently restricts us from incurring additional debt, except specified permitted debt (including borrowings under our credit facility), because our fixed charge coverage ratio remained below 2.0 at March 31, 2009. These limitations are subject to a number of important qualifications and exceptions, including, without limitation, an exception for the payment of our regular quarterly dividend of up to $0.20 per share (currently $0.0525 per share). The senior notes indenture does not allow distributions, unless, after giving pro forma effect to the distribution, our fixed charge coverage ratio is at least 2.0 and such payment, together with the aggregate amount of all other distributions after January 13, 2006, is less than the sum of 50% of our consolidated net income for the period from October 1, 2003 to the end of the most recent quarter for which financial statements have been filed, plus 100% of net cash proceeds received after October 1, 2003 as a contribution to our common equity capital or from the issuance or sale of certain securities, plus several other adjustments. The amount allowed under this restriction would have been $444.3 million at March 31, 2009; however, because our fixed charge coverage ratio was below 2.0, the actual amount allowed was restricted to the payment of our regular quarterly dividend of up to $0.20 per share. The revolving credit facility also restricts distributions unless, after giving effect to such payment, our fixed charge coverage ratio is at least 1.0, provided that we may also make specified distributions when our fixed charge coverage ratio falls below 1.0 but we maintain at least between $125 million to $200 million (depending on the amount of the distributions) of borrowing availability, including cash, under the credit facility. No other agreements require us to maintain specified financial ratios. In addition, the senior notes indenture and the revolving credit facility restrict our ability to create liens, to engage in certain affiliate transactions and to engage in sale-leaseback transactions.
Read the The complete ReportWLK is in the portfolios of Third Avenue Management, Charles Brandes of Brandes Investment.
