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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): May 3, 2018

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 May 3, 2018, Westlake Chemical Partners LP (the "Partnership") issued a press release announcing its 2018 first quarter results. 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 May 3, 2018 to discuss its 2018 first 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 May 3, 2018.






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:
May 3, 2018
 
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 First Quarter 2018 Results
Increased quarterly cash distribution by 2.9% sequentially, or 12% compared to the first quarter 2017 distribution, to $0.3975 per unit, the thirteenth consecutive quarterly increase in distributions
Quarterly net income attributable to the Partnership of $12.3 million
Quarterly MLP distributable cash flow of $14.5 million
Quarterly distribution coverage ratio of 1.13x
Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported net income attributable to the Partnership of $12.3 million, or $0.36 per limited partner unit, for the three months ended March 31, 2018, an increase of $2.5 million compared to first quarter 2017 net income attributable to the Partnership of $9.8 million. The increase in net income attributable to the Partnership was primarily due to the Partnership's increased ownership interest in Westlake Chemical OpCo LP ("OpCo") effective as of July 1, 2017 and increased production as compared to the prior-year period. Cash flows provided by operating activities in the first quarter of 2018 were $106.2 million, a decrease of $42.9 million compared to first quarter 2017 cash flows provided by operating activities of $149.1 million. The decrease in cash flows provided by operating activities was due to a decrease in working capital that occurred in the first quarter of 2017 as OpCo collected certain reimbursements from Westlake Chemical Corporation (“Westlake”) associated with the turnaround and 250 million pound expansion of OpCo’s Petro 1 facility in Lake Charles, Louisiana during 2016. For the three months ended March 31, 2018, MLP distributable cash flow was $14.5 million, an increase of $3.1 million compared to first quarter 2017 MLP distributable cash flow of $11.4 million. The increase in MLP distributable cash flow as compared to the prior-year period was primarily due to the Partnership's increased ownership interest in OpCo. The first quarter of 2017 was negatively impacted by the turnaround and 100 million pound expansion of OpCo’s Calvert City facility, which began in March and was completed in April 2017.
First quarter 2018 net income attributable to the Partnership of $12.3 million, or $0.36 per limited partner unit, decreased by $3.2 million from fourth quarter 2017 net income attributable to the Partnership of $15.5 million due to lower third party sales prices and decreased production resulting from a power outage and supply constraints for industrial gases. First quarter 2018 cash flows provided by operating activities of $106.2 million decreased by $29.2 million compared to fourth quarter 2017 cash flows from operations of $135.4 million. The decrease in cash flows provided by operations was primarily due to lower third party sales prices, decreased production and changes in working capital. First quarter 2018 MLP distributable cash flow of $14.5 million decreased by $2.3 million compared to fourth quarter 2017 MLP distributable cash flow of $16.8 million due to lower third party sales prices and decreased production.
On September 29, 2017, the Partnership 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 $600 million senior unsecured revolving credit agreement with a subsidiary of Westlake to acquire an additional 5% interest in OpCo for $229.2 million, effective as of July 1, 2017.

i



On April 30, 2018, the Board of Directors of Westlake Chemical Partners GP LLC, the general partner of the Partnership, announced a quarterly distribution for the first quarter of 2018 of $0.3975 per limited partner unit to be payable on May 24, 2018 to unit holders of record as of May 10, 2018. The first quarter 2018 distribution increased 12% compared to the first quarter 2017 distribution and 2.9% compared to the fourth quarter 2017 distribution. MLP distributable cash flow provided coverage of 1.13x the declared distributions for the first 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 for the first quarter of 2018. We continue to benefit from the 350 million pounds of ethylene capacity that has been added over the past two years and the additional ownership in OpCo acquired in the third quarter of 2017. This quarter we increased our distribution for the thirteenth consecutive quarter and are evaluating all opportunities available to continue to grow our cash flows and distributions," 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 those with respect to opportunities to continue to grow our cash flows and distributions, 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.


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 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' first quarter 2018 results will be held Thursday, May 3, 2018 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 6086876.
This call will be available for replay beginning at 2:00 PM Eastern Time until 11:59 PM Eastern Time on May 10, 2018. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 6086876.
The conference call will also be available via webcast at: https://edge.media-server.com/m6/p/kuk4tmwe and the earnings release can be obtained via the Partnership web page at: http://investors.wlkpartners.com/CorporateProfile.


iii




WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2018
 
2017
 
 
 
 
 
 
 
(In thousands of dollars, except per unit data)
Revenue
 
 
 
 
Net sales—Westlake Chemical Corporation ("Westlake")
 
$
235,031

 
$
212,930

Net co-product, ethylene and other sales—third parties
 
49,241

 
64,518

Total net sales
 
284,272

 
277,448

Cost of sales
 
191,767

 
179,487

Gross profit
 
92,505

 
97,961

Selling, general and administrative expenses
 
7,133

 
7,828

Income from operations
 
85,372

 
90,133

Other income (expense)
 
 
 
 
Interest expense—Westlake
 
(4,866
)
 
(5,460
)
Other income, net
 
491

 
1,658

Income before income taxes
 
80,997

 
86,331

Provision for income taxes
 
283

 
303

Net income
 
80,714

 
86,028

Less: Net income attributable to noncontrolling interests in
   Westlake Chemical OpCo LP ("OpCo")
 
68,419

 
76,264

Net income attributable to Westlake Partners
 
$
12,295

 
$
9,764

 
 
 
 
 
Net income per limited partners unit attributable to Westlake Partners (basic and diluted)
 
 
 
 
Common units
 
$
0.36

 
$
0.35

Subordinated units
 
$

 
$
0.35

 
 
 
 
 
Distributions declared per unit
 
$
0.3975

 
$
0.3549

 
 
 
 
 
MLP distributable cash flow
 
$
14,510

 
$
11,447

 
 
 
 
 
Distributions declared
 
 
 
 
Limited partner units—public
 
$
7,201

 
$
4,591

Limited partner units—Westlake
 
5,613

 
5,012

Incentive distribution rights
 
733

 
231

Total distributions declared
 
$
13,547

 
$
9,834

EBITDA
 
$
113,561

 
$
121,941


iv




WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
March 31,
2018
 
December 31,
2017
 
 
 
 
 
 
 
(In thousands of dollars)
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
24,980

 
$
27,008

Receivable under the Investment Management Agreement—Westlake Chemical
   Corporation ("Westlake")
 
134,712

 
136,510

Accounts receivable, net—Westlake
 
43,257

 
43,884

Accounts receivable, net—third parties
 
19,017

 
18,083

Inventories
 
5,171

 
5,590

Prepaid expenses and other current assets
 
161

 
314

Total current assets
 
227,298

 
231,389

Property, plant and equipment, net
 
1,183,409

 
1,196,245

Other assets, net
 
81,897

 
87,642

Total assets
 
$
1,492,604

 
$
1,515,276

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities (accounts payable and accrued liabilities)
 
$
37,287

 
$
40,240

Long-term debt payable to Westlake
 
477,608

 
473,960

Other liabilities
 
2,386

 
2,327

Total liabilities
 
517,281

 
516,527

Common unitholders—public
 
410,786

 
411,228

Common unitholder—Westlake
 
49,872

 
50,265

General partner—Westlake
 
(241,839
)
 
(241,958
)
Accumulated other comprehensive income
 
298

 
279

Total Westlake Partners partners' capital
 
219,117

 
219,814

Noncontrolling interest in OpCo
 
756,206

 
778,935

Total equity
 
975,323

 
998,749

Total liabilities and equity
 
$
1,492,604

 
$
1,515,276


v




WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2018
 
2017
 
 
 
 
 
 
 
(In thousands of dollars)
Cash flows from operating activities
 
 
 
 
Net income
 
$
80,714

 
$
86,028

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
27,698

 
30,150

Other balance sheet changes
 
(2,190
)
 
32,900

Net cash provided by operating activities
 
106,222

 
149,078

Cash flows from investing activities
 
 
 
 
Additions to property, plant and equipment
 
(9,679
)
 
(23,168
)
Maturities of investments with Westlake under the Investment Management Agreement
 
112,000

 

Investments with Westlake under the Investment Management Agreement
 
(110,000
)
 

Other
 

 
1,682

Net cash used for investing activities
 
(7,679
)
 
(21,486
)
Cash flows from financing activities
 
 
 
 
Proceeds from debt payable to Westlake
 
3,648

 
17,000

Repayment of debt payable to Westlake
 

 
(11,423
)
Quarterly distributions to noncontrolling interest retained in OpCo by Westlake
 
(91,148
)
 
(89,617
)
Quarterly distributions to unitholders
 
(13,071
)
 
(9,478
)
Net cash used for financing activities
 
(100,571
)
 
(93,518
)
Net increase (decrease) in cash and cash equivalents
 
(2,028
)
 
34,074

Cash and cash equivalents at beginning of period
 
27,008

 
88,900

Cash and cash equivalents at end of period
 
$
24,980

 
$
122,974



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 December 31,
 
Three Months Ended March 31,
 
 
2017
 
2018
 
2017
 
 
(In thousands of dollars)
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
135,441

 
$
106,222

 
$
149,078

Changes in operating assets and liabilities and other
 
(37,126
)
 
(25,508
)
 
(63,050
)
Net Income
 
$
98,315

 
$
80,714

 
$
86,028

Add:
 
 
 
 
 
 
Depreciation, amortization and disposition of property, plant and
   equipment
 
27,889

 
28,265

 
30,150

Less:
 
 
 
 
 
 
Contribution to turnaround reserves
 
(7,939
)
 
(4,148
)
 
(7,239
)
Maintenance capital expenditures
 
(9,694
)
 
(7,979
)
 
(8,490
)
Incentive distribution rights
 
(614
)
 
(733
)
 
(231
)
Distributable cash flow attributable to noncontrolling interest in
   OpCo
 
(91,149
)
 
(81,609
)
 
(88,771
)
MLP distributable cash flow
 
$
16,808

 
$
14,510

 
$
11,447



vii



WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
RECONCILIATION OF EBITDA TO NET INCOME AND NET CASH
PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
 
 
Three Months Ended December 31,
 
Three Months Ended March 31,
 
 
2017
 
2018
 
2017
 
 
(In thousands of dollars)
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
135,441

 
$
106,222

 
$
149,078

Changes in operating assets and liabilities and other
 
(37,126
)
 
(25,508
)
 
(63,050
)
Net Income
 
$
98,315

 
$
80,714

 
$
86,028

Add:
 
 
 
 
 
 
Depreciation and amortization
 
27,483

 
27,698

 
30,150

Interest expense
 
4,269

 
4,866

 
5,460

Provision for income taxes
 
355

 
283

 
303

EBITDA
 
$
130,422

 
$
113,561

 
$
121,941



viii
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