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Section 1: 8-K (8-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): November 7, 2017

Westlake Chemical Partners LP
(Exact name of registrant as specified in its charter)

Delaware
 
001-36567
 
32-0436529
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification No.)

2801 Post Oak Boulevard, Suite 600
Houston, Texas
 
77056
(Address of principal executive offices)
 
(Zip Code)
Registrant's telephone number, including area code: (713) 585-2900

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company ◻
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

 







Item 2.02. Results of Operations and Financial Condition.
On November 7, 2017, Westlake Chemical Partners LP (the "Partnership") issued a press release announcing its 2017 third quarter earnings. A copy of the press release is furnished with this Current Report as Exhibit 99.1.
The information furnished pursuant to this Current Report, including Exhibit 99.1, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any filing by Westlake Chemical Partners LP under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, unless specifically identified as being incorporated therein.
Item 7.01. Regulation FD Disclosure.
The Partnership is holding a conference call on November 7, 2017 to discuss its 2017 third quarter results. Information about the call can be found in the press release furnished with this Current Report as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibit is furnished herewith:
99.1    Press release issued on November 7, 2017.






SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
 
WESTLAKE CHEMICAL PARTNERS LP
 
 
 
 
By: Westlake Chemical Partners GP LLC
Date:
November 7, 2017
 
By:
/S/ ALBERT CHAO
 
 
 
 
Albert Chao
President and Chief Executive Officer





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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


EXHIBIT 99.1
WESTLAKE CHEMICAL PARTNERS LP

Contact—(713) 585-2900
Investors—Steve Bender
Media—L. Benjamin Ederington


 

Westlake Chemical Partners LP Announces Third Quarter 2017 Earnings
Increased quarterly cash distribution by 2.9% sequentially, or 12% annually, to $0.3756 per unit, the eleventh consecutive quarterly increase in distributions
Acquired an additional 5% interest in Westlake Chemical OpCo LP (“OpCo”) and concluded $113.9 million follow-on equity offering
Record quarterly net income attributable to the Partnership of $13.4 million, or $0.47 per unit
Record quarterly MLP distributable cash flow of $15.5 million
Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported record net income attributable to the Partnership of $13.4 million, or $0.47 per limited partner unit, for the three months ended September 30, 2017, an increase of $4.7 million compared to third quarter 2016 net income attributable to the Partnership of $8.7 million. The increase in net income attributable to the Partnership as compared to the prior-year period was primarily due to the Partnership’s increased ownership of OpCo that was effective as of July 1, 2017, and increased production at all of OpCo’s facilities, partially offset by certain reimbursements received by OpCo from Westlake Chemical Corporation (“Westlake”) in the third quarter of 2016 in accordance with the Ethylene Sales Agreement between OpCo and Westlake. Cash flow from operations in the third quarter of 2017 was $139.6 million, an increase of $147.5 million compared to third quarter of 2016 cash flow from operations of $(7.9) million. The increase in cash flow from operations was due to increased production at OpCo’s facilities, a decrease in working capital and a decrease in turnaround expenditures following the turnaround and 250 million pound expansion project at OpCo’s Petro 1 facility in Lake Charles, Louisiana, which was completed in July 2016. For the three months ended September 30, 2017, MLP distributable cash flow was a record $15.5 million, an increase of $8.7 million compared to third quarter 2016 MLP distributable cash flow of $6.8 million. The increase in MLP distributable cash flow as compared to the prior-year period was due to the Partnership’s increased ownership interest in OpCo, higher production volumes at all of OpCo’s facilities and lower maintenance capital expenditures.
The third quarter 2017 net income attributable to the Partnership of $13.4 million, or $0.47 per limited partner unit, increased by $3.4 million from second quarter 2017 net income attributable to the Partnership of $10.0 million due to the Partnership’s increased ownership interest in OpCo, which was effective as of July 1, 2017. Third quarter 2017 cash flow from operations of $139.6 million increased by $26.4 million compared to second quarter 2017 cash flow from operations of $113.2 million. The increase in cash flow from operations was due to increased production at OpCo’s facilities and a decrease in working capital. Third quarter 2017 MLP distributable cash flow of $15.5 million increased by $4.5 million compared to second quarter 2017 MLP distributable cash flow of $11.0 million due to the Partnership’s increased ownership interest in OpCo.

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Net income attributable to the Partnership of $33.1 million, or $1.23 per limited partner common unit, for the nine months ended September 30, 2017, increased $3.0 million compared to the first nine months of 2016 net income attributable to the Partnership of $30.1 million. The increase in net income attributable to the Partnership as compared to the prior-year period was due to the Partnership’s increased ownership interest in OpCo and increased production at all of OpCo’s facilities, partially offset by certain reimbursements from Westlake under the Ethylene Sales Agreement that were recorded in the first nine months of 2016. Cash flow from operations in the first nine months of 2017 was $401.9 million, an increase of $224.5 million compared to the first nine months of 2016 cash flow from operations of $177.4 million. This increase in cash flow from operations was due to increased production at OpCo’s facilities, a decrease in working capital and lower turnaround expenditures. For the nine months ended September 30, 2017, MLP distributable cash flow was $37.9 million, an increase of $17.3 million compared to the first nine months of 2016 MLP distributable cash flow of $20.6 million. The increase in MLP distributable cash flow as compared to the prior-year period was due to the higher production volumes, lower maintenance capital expenditures and the Partnership’s increased ownership interest in OpCo.
On September 29, 2017, WLKP issued and sold 5,175,000 common units representing limited partner interests in the Partnership for $113.9 million. The Partnership used the net proceeds of the public offering and approximately $118.6 million of borrowings under the $300.0 million senior unsecured revolving credit agreement with Westlake Chemical Corporation (the “MLP Revolver”) to acquire an additional 5% interest in OpCo for $229.2 million, effective as of July 1, 2017.
On November 1, 2017, the Board of Directors of Westlake Chemical Partners GP LLC, the general partner of the Partnership, announced a quarterly distribution for the third quarter of 2017 of $0.3756 per limited partner unit to be payable on November 29, 2017 to unit holders of record as of November 14, 2017. The third quarter 2017 distribution increased 12.0% compared to the third quarter 2016 distribution and 2.9% compared to the second quarter 2017 distribution. MLP distributable cash flow provided coverage of 1.28x the declared distributions for the third quarter of 2017 and reflects the Partnership’s increased ownership interest in OpCo following the dropdown transaction completed in September 2017.
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 OpCo’s performance for the quarter. This quarter marks a milestone for the Partnership as we completed the first follow-on offering since our initial public offering in August 2014, and first dropdown transaction since May 2015. The stability in earnings and cash flows provided by our sales agreement with Westlake Chemical provide a foundation for continued growth and we will continue to evaluate opportunities for us to deliver value to our stakeholders,” said Albert Chao, President and Chief Executive Officer.
The statements in this release and the related teleconference relating to matters that are not historical facts, such as distribution 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, 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, 2016, which was filed with the SEC in March 2017.
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.


ii



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 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 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' third quarter 2017 results will be held Tuesday, November 7, 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 97240040.
A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on November 13, 2017. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 97240040.
The conference call will also be available via webcast at: https://edge.media-server.com/m6/p/zepzr3xx and the earnings release can be obtained via the Partnership web page at: http://investors.wlkpartners.com/event.



iii




WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
 
 
(In thousands of dollars, except per unit data)
Revenue
 
 
 
 
 
 
 
 
Net sales—Westlake Chemical Corporation ("Westlake")
 
$
258,049

 
$
193,964

 
$
711,968

 
$
606,859

Net co-product, ethylene and other sales—third parties
 
38,726

 
35,390

 
152,368

 
85,940

Total net sales
 
296,775

 
229,354

 
864,336

 
692,799

Cost of sales
 
201,372

 
142,553

 
571,401

 
407,203

Gross profit
 
95,403

 
86,801

 
292,935

 
285,596

Selling, general and administrative expenses
 
6,805

 
5,788

 
21,519

 
17,733

Income from operations
 
88,598

 
81,013

 
271,416

 
267,863

Other income (expense)
 
 
 
 
 
 
 
 
Interest expense—Westlake
 
(6,190
)
 
(4,947
)
 
(17,592
)
 
(7,381
)
Other income, net
 
162

 
(13
)
 
1,844

 
230

Income before income taxes
 
82,570

 
76,053

 
255,668

 
260,712

Provision for income taxes
 
325

 
194

 
925

 
890

Net income
 
82,245

 
75,859

 
254,743

 
259,822

Less: Net income attributable to noncontrolling interests in
   Westlake Chemical OpCo LP ("OpCo")
 
68,860

 
67,198

 
221,619

 
229,733

Net income attributable to Westlake Partners
 
$
13,385

 
$
8,661

 
$
33,124

 
$
30,089

 
 
 
 
 
 
 
 
 
Net income per limited partners unit attributable to
   Westlake Partners (basic and diluted)
 
 
 
 
 
 
 
 
Common units
 
$
0.47

 
$
0.32

 
$
1.23

 
$
1.11

Subordinated units
 
$

 
$
0.32

 
$
1.07

 
$
1.11

 
 
 
 
 
 
 
 
 
Distributions declared per unit
 
$
0.3756

 
$
0.3353

 
$
1.0955

 
$
0.9780

 
 
 
 
 
 
 
 
 
MLP distributable cash flow
 
$
15,478

 
$
6,833

 
$
37,892

 
$
20,643

 
 
 
 
 
 
 
 
 
Distribution declared
 
 
 
 
 
 
 
 
Limited partner units—public
 
$
6,803

 
$
4,338

 
$
16,116

 
$
12,653

Limited partner units—Westlake
 
5,304

 
4,735

 
15,471

 
13,812

Incentive distribution rights
 
498

 
91

 
1,052

 
139

Total distribution declared
 
$
12,605

 
$
9,164

 
$
32,639

 
$
26,604

EBITDA
 
$
117,813

 
$
107,290

 
$
359,762

 
$
335,565


iv




WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
September 30,
2017
 
December 31,
2016
 
 
 
 
 
 
 
(In thousands of dollars)
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
17,249

 
$
88,900

Receivable under the Investment Management Agreement—Westlake Chemical
   Corporation ("Westlake")
 
119,009

 

Accounts receivable, net—Westlake
 
60,405

 
126,977

Accounts receivable, net—third parties
 
16,651

 
12,085

Inventories
 
3,881

 
3,934

Prepaid expenses and other current assets
 
413

 
269

Total current assets
 
217,608

 
232,165

Property, plant and equipment, net
 
1,206,246

 
1,222,238

Other assets, net
 
93,844

 
100,825

Total assets
 
$
1,517,698

 
$
1,555,228

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities (accounts payable and accrued liabilities)
 
$
44,920

 
$
37,777

Long-term debt payable to Westlake
 
477,121

 
594,629

Other liabilities
 
2,178

 
1,859

Total liabilities
 
524,219

 
634,265

Common unitholders—public
 
409,684

 
297,367

Common unitholder—Westlake
 
49,025

 
4,813

Subordinated unitholder—Westlake
 

 
42,534

General partner—Westlake
 
(242,074
)
 
(242,430
)
Accumulated other comprehensive income
 
226

 
200

Total Westlake Partners partners' capital
 
216,861

 
102,484

Noncontrolling interest in OpCo
 
776,618

 
818,479

Total equity
 
993,479

 
920,963

Total liabilities and equity
 
$
1,517,698

 
$
1,555,228


v




WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Nine Months Ended September 30,
 
 
2017
 
2016
 
 
 
 
 
 
 
(In thousands of dollars)
Cash flows from operating activities
 
 
 
 
Net income
 
$
254,743

 
$
259,822

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
86,502

 
67,472

Other balance sheet changes
 
60,671

 
(149,924
)
Net cash provided by operating activities
 
401,916

 
177,370

Cash flows from investing activities
 
 
 
 
Additions to property, plant and equipment
 
(56,607
)
 
(268,647
)
Proceeds from disposition of assets
 
129

 
157

Proceeds from involuntary conversion of assets
 
1,672

 

Receivables under The Investment Management Agreement - Westlake
 
(119,000
)
 

Net cash used for investing activities
 
(173,806
)
 
(268,490
)
Cash flows from financing activities
 
 
 
 
Net proceeds from equity offerings
 
110,739

 

Proceeds from debt payable to Westlake
 
155,257

 
212,175

Repayment of debt payable to Westlake
 
(272,765
)
 
(1,098
)
Quarterly distributions to noncontrolling interest retained in OpCo by Westlake
 
(263,480
)
 
(188,736
)
Quarterly distributions to unitholders
 
(29,512
)
 
(25,774
)
Net cash used for financing activities
 
(299,761
)
 
(3,433
)
Net decrease in cash and cash equivalents
 
(71,651
)
 
(94,553
)
Cash and cash equivalents at beginning of the period
 
88,900

 
169,559

Cash and cash equivalents at end of the period
 
$
17,249

 
$
75,006



vi




WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
RECONCILIATION OF MLP DISTRIBUTABLE CASH FLOW TO NET INCOME
AND NET CASH PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
 
 
Three Months Ended June 30,
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017
 
2017
 
2016
 
2017
 
2016
 
 
(In thousands of dollars)
 
 
 
 
 
 
 
 
 
 
 
Net cash provided (used) by
   operating activities
 
$
113,208

 
$
139,630

 
$
(7,907
)
 
$
401,916

 
$
177,370

Changes in operating assets and
   liabilities and other
 
(26,630
)
 
(57,222
)
 
83,835

 
(146,810
)
 
82,841

Deferred income tax expense
 
(108
)
 
(163
)
 
(69
)
 
(363
)
 
(389
)
Net Income
 
$
86,470

 
$
82,245

 
$
75,859

 
$
254,743

 
$
259,822

Add:
 
 
 
 
 
 
 
 
 
 
Depreciation, amortization and
   disposition of property, plant and
   equipment
 
27,299

 
31,790

 
26,290

 
89,239

 
67,472

Less:
 
 
 
 
 
 
 
 
 
 
Contribution to turnaround
   reserves
 
(7,624
)
 
(7,778
)
 
(17,625
)
 
(22,641
)
 
(33,963
)
Maintenance capital expenditures
 
(9,764
)
 
(9,827
)
 
(21,747
)
 
(28,081
)
 
(103,609
)
Incentive distribution rights
 
(323
)
 
(498
)
 
(91
)
 
(1,052
)
 
(139
)
Distributable cash flow attributable
   to noncontrolling interest in
   OpCo
 
(85,091
)
 
(80,454
)
 
(55,853
)
 
(254,316
)
 
(168,940
)
MLP distributable cash flow
 
$
10,967

 
$
15,478

 
$
6,833

 
$
37,892

 
$
20,643



vii



WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
RECONCILIATION OF EBITDA TO NET INCOME AND NET CASH
PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
 
 
Three Months Ended June 30,
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2017

2017

2016

2017

2016
 
 
(In thousands of dollars)
 
 
 
 
 
 
 
 
 
 
 
Net cash provided (used) by
   operating activities
 
$
113,208

 
$
139,630

 
$
(7,907
)
 
$
401,916

 
$
177,370

Changes in operating assets and
   liabilities and other
 
(26,630
)
 
(57,222
)
 
83,835

 
(146,810
)
 
82,841

Deferred income tax expense
 
(108
)
 
(163
)
 
(69
)
 
(363
)
 
(389
)
Net Income
 
$
86,470

 
$
82,245

 
$
75,859

 
$
254,743

 
$
259,822

Add:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
27,299

 
29,053

 
26,290

 
86,502

 
67,472

Interest expense
 
5,942

 
6,190

 
4,947

 
17,592

 
7,381

Provision for income taxes
 
297

 
325

 
194

 
925

 
890

EBITDA
 
$
120,008

 
$
117,813

 
$
107,290

 
$
359,762

 
$
335,565



viii
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