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Section 1: 8-K (8-K)

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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): August 2, 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 August 2, 2018, Westlake Chemical Partners LP (the "Partnership") issued a press release announcing its 2018 second 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 August 2, 2018 to discuss its 2018 second 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 August 2, 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:
August 2, 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 Second Quarter 2018 Results
Increased quarterly cash distribution by 2.8% sequentially, or 12% compared to the second quarter 2017 distribution, to $0.4088 per unit, the 14th consecutive quarterly increase in distributions
Reset the target distribution tiers for the Incentive Distribution Rights (“IDRs”) with the first target distribution threshold increasing to $1.2938 per unit from $0.3163
Quarterly distribution coverage ratio of 1.21x
HOUSTON--(BUSINESS WIRE)-- Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported net income attributable to the Partnership of $12.8 million, or $0.40 per limited partner unit, for the three months ended June 30, 2018, an increase of $2.8 million compared to second quarter 2017 net income attributable to the Partnership of $10.0 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 at OpCo, partially offset by lower margins on OpCo’s third party sales volumes when compared to the prior-year period. Cash flows from operating activities in the second quarter of 2018 were $114.4 million, which is comparable to second quarter 2017 cash flows from operating activities of $113.2 million. For the three months ended June 30, 2018, MLP distributable cash flow was $16.0 million, an increase of $5.0 million compared to second quarter 2017 MLP distributable cash flow of $11.0 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, increased production and lower maintenance capital expenditures at OpCo, and the elimination of IDR payments to Westlake Chemical Corporation (“Westlake”) that resulted from the July 2018 amendment of the Partnership’s target distribution tiers. The second quarter of 2017 was negatively impacted by the turnaround and 100 million pound expansion of OpCo’s Calvert City facility, which began in March 2017 and was completed in April 2017.
Second quarter 2018 net income attributable to the Partnership of $12.8 million, or $0.40 per limited partner unit, increased by $0.5 million from first quarter 2018 net income attributable to the Partnership of $12.3 million. This increase in income attributable to the Partnership was due to increased OpCo production, partially offset by lower margins on OpCo’s third party sales volumes. Second quarter 2018 cash flows from operating activities of $114.4 million increased by $8.2 million compared to first quarter 2018 cash flows from operating activities of $106.2 million. The increase in cash flows from operating activities was primarily due to increased production and increases in cash flows resulting from changes in working capital. Second quarter 2018 MLP distributable cash flow of $16.0 million increased by $1.5 million compared to first quarter 2018 MLP distributable cash flow of $14.5 million due to higher production and lower maintenance capital expenditures at OpCo, and the elimination of IDR payments to Westlake.
Net income attributable to the Partnership of $25.1 million, or $0.75 per limited partner unit, for the six months ended June 30, 2018 increased by $5.4 million compared to the first six months of 2017 net income attributable to the Partnership of $19.7 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 OpCo, partially offset by lower margins on OpCo’s third party sales volumes. Cash flows from operating activities in the first six months of 2018 was $220.6 million, a decrease of $41.7 million compared to the first six months of 2017 cash flows from operating activities of $262.3 million. This decrease was due to a reduction in receivables from Westlake to OpCo that occurred in 2017 and lower margins on third party volumes, partially offset by increased production at OpCo and lower turnaround expenditures. For the six months ended June 30, 2018, MLP distributable cash flow of $30.5 million increased by $8.1 million compared to the first six months of 2017 MLP distributable cash flow of $22.4 million. The increase in MLP distributable cash flow as compared to the prior-year period

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was due to the Partnership’s increased ownership in OpCo and higher production and lower maintenance capital expenditures at OpCo, partially offset by lower margins on OpCo’s third party sales volumes.
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.
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 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 would allow the Partnership to increase its distribution per unit in line with historical growth rates for over 10 years before the next IDR payment would occur.
On July 31, 2018, the Board of Directors of Westlake Chemical Partners GP LLC announced a quarterly distribution for the second quarter of 2018 of $0.4088 per limited partner unit to be payable on August 24, 2018 to unit holders of record as of August 10, 2018. The second quarter 2018 distribution increased 12% compared to the second quarter 2017 distribution and 2.8% compared to the first quarter 2018 distribution. MLP distributable cash flow provided coverage of 1.21x the declared distributions for the second 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 second quarter of 2018. We are benefiting from the investments made over the past few years to grow our earnings and cash flows, including adding 350 million pounds of ethylene capacity and increasing our ownership interest in OpCo in both 2015 and 2017," said Albert Chao, President and Chief Executive Officer. “The recent resetting of the distribution targets for the IDRs set the conditions for the Partnership to continue to increase distributions to unitholders through all four levers of growth available to us.”
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 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.


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' second quarter 2018 results will be held Thursday, August 2, 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 8897985.
A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on August 9, 2018. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 8897985.
The conference call will also be available via webcast at: https://edge.media-server.com/m6/p/m93ujtwb 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 June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
 
(In thousands of dollars, except per unit data)
Revenue
 
 
 
 
 
 
 
 
Net sales—Westlake Chemical Corporation ("Westlake")
 
$
253,673

 
$
240,989

 
$
488,704

 
$
453,919

Net co-product, ethylene and other sales—third parties
 
48,302

 
49,124

 
97,543

 
113,642

Total net sales
 
301,975

 
290,113

 
586,247

 
567,561

Cost of sales
 
204,857

 
190,542

 
396,624

 
370,029

Gross profit
 
97,118

 
99,571

 
189,623

 
197,532

Selling, general and administrative expenses
 
7,375

 
6,886

 
14,508

 
14,714

Income from operations
 
89,743

 
92,685

 
175,115

 
182,818

Other income (expense)
 
 
 
 
 
 
 
 
Interest expense—Westlake
 
(5,547
)
 
(5,942
)
 
(10,413
)
 
(11,402
)
Other income, net
 
583

 
24

 
1,074

 
1,682

Income before income taxes
 
84,779

 
86,767

 
165,776

 
173,098

Provision for income taxes
 
303

 
297

 
586

 
600

Net income
 
84,476

 
86,470

 
165,190

 
172,498

Less: Net income attributable to noncontrolling interests
   in Westlake Chemical OpCo LP ("OpCo")
 
71,719

 
76,495

 
140,138

 
152,759

Net income attributable to Westlake Partners
 
$
12,757

 
$
9,975

 
$
25,052

 
$
19,739

 
 
 
 
 
 
 
 
 
Net income per limited partners unit attributable to
   Westlake Partners (basic and diluted)
 
 
 
 
 
 
 
 
Common units
 
$
0.40

 
$
0.36

 
$
0.75

 
$
0.71

Subordinated units
 
$

 
$
0.36

 
$

 
$
0.71

 
 
 
 
 
 
 
 
 
Distributions declared per unit
 
$
0.4088

 
$
0.3650

 
$
0.8063

 
$
0.7199

 
 
 
 
 
 
 
 
 
MLP distributable cash flow
 
$
15,966

 
$
10,967

 
$
30,476

 
$
22,414

 
 
 
 
 
 
 
 
 
Distributions declared
 
 
 
 
 
 
 
 
Limited partner units—public
 
$
7,406

 
$
4,722

 
$
14,607

 
$
9,314

Limited partner units—Westlake
 
5,773

 
5,155

 
11,386

 
10,167

Incentive distribution rights
 

 
323

 
733

 
554

Total distributions declared
 
$
13,179

 
$
10,200

 
$
26,726

 
$
20,035

EBITDA
 
$
117,912

 
$
120,008

 
$
231,473

 
$
241,949


iv




WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
June 30,
2018
 
December 31,
2017
 
 
 
 
 
 
 
(In thousands of dollars)
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
28,483

 
$
27,008

Receivable under the Investment Management Agreement—Westlake Chemical
   Corporation ("Westlake")
 
143,741

 
136,510

Accounts receivable, net—Westlake
 
47,970

 
43,884

Accounts receivable, net—third parties
 
16,380

 
18,083

Inventories
 
6,128

 
5,590

Prepaid expenses and other current assets
 
54

 
314

Total current assets
 
242,756

 
231,389

Property, plant and equipment, net
 
1,173,330

 
1,196,245

Other assets, net
 
76,089

 
87,642

Total assets
 
$
1,492,175

 
$
1,515,276

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities (accounts payable and accrued liabilities)
 
$
47,615

 
$
40,240

Long-term debt payable to Westlake
 
477,608

 
473,960

Other liabilities
 
2,485

 
2,327

Total liabilities
 
527,708

 
516,527

Common unitholders—public
 
410,754

 
411,228

Common unitholder—Westlake
 
49,848

 
50,265

General partner—Westlake
 
(242,572
)
 
(241,958
)
Accumulated other comprehensive income
 
122

 
279

Total Westlake Partners partners' capital
 
218,152

 
219,814

Noncontrolling interest in OpCo
 
746,315

 
778,935

Total equity
 
964,467

 
998,749

Total liabilities and equity
 
$
1,492,175

 
$
1,515,276


v




WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Six Months Ended June 30,
 
 
2018
 
2017
 
 
 
 
 
 
 
(In thousands of dollars)
Cash flows from operating activities
 
 
 
 
Net income
 
$
165,190

 
$
172,498

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
55,284

 
57,449

Other balance sheet changes
 
97

 
32,339

Net cash provided by operating activities
 
220,571

 
262,286

Cash flows from investing activities
 
 
 
 
Additions to property, plant and equipment
 
(16,620
)
 
(43,996
)
Maturities of investments with Westlake under the Investment Management Agreement
 
178,000

 

Investments with Westlake under the Investment Management Agreement
 
(185,000
)
 

Other
 
251

 
1,799

Net cash used for investing activities
 
(23,369
)
 
(42,197
)
Cash flows from financing activities
 
 
 
 
Proceeds from debt payable to Westlake
 
3,648

 
20,384

Repayment of debt payable to Westlake
 

 
(26,733
)
Quarterly distributions to noncontrolling interest retained in OpCo by Westlake
 
(172,758
)
 
(178,388
)
Quarterly distributions to unitholders
 
(26,617
)
 
(19,313
)
Net cash used for financing activities
 
(195,727
)
 
(204,050
)
Net increase in cash and cash equivalents
 
1,475

 
16,039

Cash and cash equivalents at beginning of period
 
27,008

 
88,900

Cash and cash equivalents at end of period
 
$
28,483

 
$
104,939



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 March 31,
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2018
 
2017
 
2018
 
2017
 
 
(In thousands of dollars)
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
106,222

 
$
114,349

 
$
113,208

 
$
220,571

 
$
262,286

Changes in operating assets and
   liabilities and other
 
(25,508
)
 
(29,873
)
 
(26,738
)
 
(55,381
)
 
(89,788
)
Net Income
 
$
80,714

 
$
84,476

 
$
86,470

 
$
165,190

 
$
172,498

Add:
 
 
 
 
 
 
 
 
 
 
Depreciation, amortization and
   disposition of property, plant and
   equipment
 
28,265

 
27,586

 
27,299

 
55,851

 
57,449

Less:
 
 
 
 
 
 
 
 
 
 
Contribution to turnaround reserves
 
(4,148
)
 
(4,204
)
 
(7,624
)
 
(8,352
)
 
(14,863
)
Maintenance capital expenditures
 
(7,979
)
 
(5,825
)
 
(9,764
)
 
(13,804
)
 
(18,254
)
Incentive distribution rights
 
(733
)
 

 
(323
)
 
(733
)
 
(554
)
Distributable cash flow attributable to
   noncontrolling interest in OpCo
 
(81,609
)
 
(86,067
)
 
(85,091
)
 
(167,676
)
 
(173,862
)
MLP distributable cash flow
 
$
14,510

 
$
15,966

 
$
10,967

 
$
30,476

 
$
22,414



vii



WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
RECONCILIATION OF EBITDA TO NET INCOME AND NET CASH
PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
 
 
Three Months Ended March 31,
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2018
 
2017
 
2018
 
2017
 
 
(In thousands of dollars)
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
106,222

 
$
114,349

 
$
113,208

 
$
220,571

 
$
262,286

Changes in operating assets and
   liabilities and other
 
(25,508
)
 
(29,873
)
 
(26,738
)
 
(55,381
)
 
(89,788
)
Net Income
 
$
80,714

 
$
84,476

 
$
86,470

 
$
165,190

 
$
172,498

Add:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
27,698

 
27,586

 
27,299

 
55,284

 
57,449

Interest expense
 
4,866

 
5,547

 
5,942

 
10,413

 
11,402

Provision for income taxes
 
283

 
303

 
297

 
586

 
600

EBITDA
 
$
113,561

 
$
117,912

 
$
120,008

 
$
231,473

 
$
241,949



viii
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