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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): February 19, 2019

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 February 19, 2019, Westlake Chemical Partners LP (the "Partnership") issued a press release announcing its 2018 fourth quarter and full year 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 February 19, 2019 to discuss its 2018 fourth quarter and full year 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 February 19, 2019.






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:
February 19, 2019
 
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 Fourth Quarter 2018 Results

Increased quarterly cash distribution by 2.9% sequentially, or 12% compared to the fourth quarter 2017 distribution, to $0.4328 per unit, the 16th consecutive quarterly increase in distributions
Trailing twelve-month coverage ratio of 1.12x
Achieved record production at OpCo in 2018
HOUSTON--(BUSINESS WIRE)-- Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported net income attributable to the Partnership of $11.9 million, or $0.37 per limited partner unit, for the three months ended December 31, 2018, a decrease of $3.6 million compared to fourth quarter 2017 net income attributable to the Partnership of $15.5 million. The decrease in net income was primarily due to lower margins on Westlake Chemical OpCo LP’s (“OpCo”) third party sales and higher interest expense when compared to the prior-year period. Cash flows from operating activities in the fourth quarter of 2018 were $106.1 million, a decrease of $29.3 million compared to fourth quarter 2017 cash flows from operating activities of $135.4 million. This decrease in cash flow from operations is primarily attributable to a reduction in receivables from Westlake Chemical Corporation (“Westlake”) in the fourth quarter of 2017 and lower margins on OpCo’s third party sales volumes, partially offset by increased production at OpCo, as compared to the prior-year period. For the three months ended December 31, 2018, MLP distributable cash flow of $14.5 million decreased by $2.3 million from fourth quarter 2017 MLP distributable cash flow of $16.8 million. This decrease was primarily due to lower margins on OpCo’s third party sales volumes, partially offset by increased production at OpCo.
Fourth quarter 2018 net income attributable to the Partnership was $11.9 million, a decrease of $0.5 million from third quarter 2018 net income attributable to the Partnership of $12.4 million. Fourth quarter 2018 cash flows from operating activities of $106.1 million decreased by $3.3 million compared to third quarter 2018 cash flows from operating activities of $109.4 million. This decrease was primarily due to lower margins on OpCo’s third party sales volumes and a reduction in receivables from Westlake, partially offset by an increase in third party receivables. Fourth quarter 2018 MLP distributable cash flow of $14.5 million decreased by $0.5 million compared to third quarter 2018 MLP distributable cash flow of $15.0 million, primarily due to higher maintenance capital, partially offset by higher production at OpCo.
Net income attributable to the Partnership of $49.3 million, or $1.51 per limited partner unit, for the twelve months ended December 31, 2018 increased by $0.6 million compared to 2017 net income attributable to the Partnership of $48.7 million. The increase in net income attributable to the Partnership as compared to the prior year was primarily due to the Partnership’s increased ownership in OpCo following the acquisition of an additional 5% interest in the third quarter of 2017 and record production at OpCo, partially offset by lower margins on OpCo’s third party sales volumes. Cash flows from operating activities for 2018 were $436.2 million, a decrease of $101.2 million compared to 2017 cash flows from operating activities of $537.4 million. This decrease was primarily due to a reduction in receivables from Westlake that occurred in 2017 and lower margins on OpCo’s third party sales volumes, partially offset by higher production at OpCo and lower turnaround expenditures. For the twelve months ended December 31, 2018, MLP distributable cash flow of $60.0 million increased by $5.3 million compared to 2017 MLP distributable cash flow of $54.7 million. The increase in MLP distributable cash flow as compared to the prior year was due to the Partnership’s increased ownership in OpCo and record production and lower maintenance capital expenditures at OpCo, partially offset by lower margins on OpCo’s third party sales.

i



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 Partnership’s incentive distribution rights (“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 is expected to allow the Partnership to increase its distribution per unit in line with historical growth rates for over 10 years before the next IDR payment may occur.
On January 25, 2019, the Board of Directors of Westlake Chemical Partners GP LLC announced a quarterly distribution for the fourth quarter of 2018 of $0.4328 per limited partner unit to be payable on February 20, 2019 to unit holders of record as of February 5, 2019. The fourth quarter 2018 distribution increased by 12% compared to the fourth quarter 2017 distribution and 2.9% compared to the third quarter 2018 distribution. MLP distributable cash flow provided trailing twelve month coverage of 1.12x the declared distributions for the fourth 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 in 2018. As we enter 2019, we are continuing to reap benefits of the investments made over the past few years to grow our earnings, cash flows and production, including the expansion of OpCo’s ethylene facilities in both Lake Charles, Louisiana and Calvert City, Kentucky, and increasing our ownership interest in OpCo in both 2015 and 2017," said Albert Chao, President and Chief Executive Officer. “Demonstrated by the resetting of our IDRs and previous drop downs, Westlake has established an ongoing commitment to the Partnership. This has allowed continued distribution growth to unitholders - with distribution growth of over 150% since our IPO just over four years ago.”
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, the potential for future drop-down transaction 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' fourth quarter and full year 2018 results will be held Tuesday, February 19, 2019 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 2638219.
A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on February 26, 2019. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 2638219.
The conference call will also be available via webcast at: https://edge.media-server.com/m6/p/x5mphzie 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 December 31,
 
Twelve Months Ended December 31,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
 
(In thousands of dollars, except per unit data)
Revenue
 
 
 
 
 
 
 
 
Net sales—Westlake Chemical Corporation ("Westlake")
 
$
272,872

 
$
261,113

 
$
1,074,957

 
$
973,081

Net co-product, ethylene and other sales—third parties
 
62,853

 
47,532

 
210,665

 
199,900

Total net sales
 
335,725

 
308,645

 
1,285,622

 
1,172,981

Cost of sales
 
242,096

 
197,913

 
908,463

 
769,314

Gross profit
 
93,629

 
110,732

 
377,159

 
403,667

Selling, general and administrative expenses
 
7,173

 
7,741

 
27,590

 
29,260

Income from operations
 
86,456

 
102,991

 
349,569

 
374,407

Other income (expense)
 
 
 
 
 
 
 
 
Interest expense—Westlake
 
(5,381
)
 
(4,269
)
 
(21,433
)
 
(21,861
)
Other income (expense), net
 
715

 
(52
)
 
2,457

 
1,792

Income before income taxes
 
81,790

 
98,670

 
330,593

 
354,338

Provision for income taxes
 
208

 
355

 
22

 
1,280

Net income
 
81,582

 
98,315

 
330,571

 
353,058

Less: Net income attributable to noncontrolling interests in
   Westlake Chemical OpCo LP ("OpCo")
 
69,699

 
82,769

 
281,224

 
304,388

Net income attributable to Westlake Partners
 
$
11,883

 
$
15,546

 
$
49,347

 
$
48,670

 
 
 
 
 
 
 
 
 
Net income per limited partner unit attributable to
   Westlake Partners (basic and diluted)
 
 
 
 
 
 
 
 
Common units
 
$
0.37

 
$
0.46

 
$
1.51

 
$
1.72

Subordinated units
 
$

 
$

 
$

 
$
1.43

 
 
 
 
 
 
 
 
 
Distributions declared per unit
 
$
0.4328

 
$
0.3864

 
$
1.6598

 
$
1.4819

 
 
 
 
 
 
 
 
 
MLP distributable cash flow
 
$
14,524

 
$
16,808

 
$
60,024

 
$
54,700

 
 
 
 
 
 
 
 
 
Distribution declared
 
 
 
 
 
 
 
 
Limited partner units—public
 
$
7,845

 
$
6,999

 
$
30,077

 
$
23,114

Limited partner units—Westlake
 
6,112

 
5,457

 
23,439

 
20,928

Incentive distribution rights
 

 
614

 
733

 
1,666

Total distribution declared
 
$
13,957

 
$
13,070

 
$
54,249

 
$
45,708

EBITDA
 
$
113,837

 
$
130,422

 
$
460,868

 
$
490,184


iv




WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
December 31,
2018
 
December 31,
2017
 
 
 
 
 
 
 
(In thousands of dollars)
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
19,744

 
$
27,008

Receivable under the Investment Management Agreement—
   Westlake Chemical Corporation ("Westlake")
 
148,956

 
136,510

Accounts receivable, net—Westlake
 
57,280

 
43,884

Accounts receivable, net—third parties
 
16,404

 
18,083

Inventories
 
4,388

 
5,590

Prepaid expenses and other current assets
 
370

 
314

Total current assets
 
247,142

 
231,389

Property, plant and equipment, net
 
1,148,265

 
1,196,245

Other assets, net
 
66,718

 
87,642

Total assets
 
$
1,462,125

 
$
1,515,276

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities (accounts payable and accrued liabilities)
 
$
48,772

 
$
40,240

Long-term debt payable to Westlake
 
477,608

 
473,960

Other liabilities
 
1,664

 
2,327

Total liabilities
 
528,044

 
516,527

Common unitholders—public
 
409,608

 
411,228

Common unitholder—Westlake
 
48,774

 
50,265

Subordinated unitholder—Westlake
 

 

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

 
279

Total Westlake Partners partners' capital
 
215,810

 
219,814

Noncontrolling interest in OpCo
 
718,271

 
778,935

Total equity
 
934,081

 
998,749

Total liabilities and equity
 
$
1,462,125

 
$
1,515,276


v




WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Twelve Months Ended December 31,
 
 
2018
 
2017
 
 
 
 
 
 
 
(In thousands of dollars)
Cash flows from operating activities
 
 
 
 
Net income
 
$
330,571

 
$
353,058

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
108,842

 
113,985

Other balance sheet changes
 
(3,262
)
 
70,314

Net cash provided by operating activities
 
436,151

 
537,357

Cash flows from investing activities
 
 
 
 
Additions to property, plant and equipment
 
(39,862
)
 
(68,858
)
Maturities of investments with Westlake under the Investment Management Agreement
 
372,050

 
62,828

Investments with Westlake under the Investment Management Agreement
 
(384,000
)
 
(199,000
)
Other
 

 
1,801

Net cash used for investing activities
 
(51,812
)
 
(203,229
)
Cash flows from financing activities
 
 
 
 
Net proceeds from common unit offering
 

 
110,698

Proceeds from debt payable to Westlake
 
3,648

 
165,257

Repayment of debt payable to Westlake
 

 
(285,926
)
Quarterly distributions to noncontrolling interest retained in OpCo by Westlake
 
(341,888
)
 
(343,932
)
Quarterly distributions to unitholders
 
(53,363
)
 
(42,117
)
Net cash used for financing activities
 
(391,603
)
 
(396,020
)
Net decrease in cash and cash equivalents
 
(7,264
)
 
(61,892
)
Cash and cash equivalents at beginning of the year
 
27,008

 
88,900

Cash and cash equivalents at end of the year
 
$
19,744

 
$
27,008



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 September 30,
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
 
2018
 
2018
 
2017
 
2018
 
2017
 
 
(In thousands of dollars)
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by
   operating activities
 
$
109,433

 
$
106,147

 
$
135,441

 
$
436,151

 
$
537,357

Changes in operating assets and
   liabilities and other
 
(25,634
)
 
(24,565
)
 
(37,126
)
 
(105,580
)
 
(184,299
)
Net Income
 
$
83,799

 
$
81,582

 
$
98,315

 
$
330,571

 
$
353,058

Add:
 
 
 
 
 
 
 
 
 
 
Depreciation, amortization and
   disposition of property, plant and
   equipment
 
26,918

 
27,922

 
27,889

 
110,691

 
117,128

Mark-to-market adjustment loss on
   derivative contracts
 

 
62

 

 
62

 

Less:
 
 
 
 
 
 
 
 
 
 
Contribution to turnaround
   reserves
 
(4,250
)
 
(4,238
)
 
(7,939
)
 
(16,840
)
 
(30,580
)
Maintenance capital expenditures
 
(8,380
)
 
(9,297
)
 
(9,694
)
 
(31,481
)
 
(37,775
)
Incentive distribution rights
 

 

 
(614
)
 
(733
)
 
(1,666
)
Distributable cash flow attributable
   to noncontrolling interest in
   OpCo
 
(83,063
)
 
(81,507
)
 
(91,149
)
 
(332,246
)
 
(345,465
)
MLP distributable cash flow
 
$
15,024

 
$
14,524

 
$
16,808

 
$
60,024

 
$
54,700



vii



WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
RECONCILIATION OF EBITDA TO NET INCOME AND NET CASH
PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
 
 
Three Months Ended September 30,
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
 
 
2018
 
2018
 
2017
 
2018
 
2017
 
 
(In thousands of dollars)
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by
   operating activities
 
$
109,433

 
$
106,147

 
$
135,441

 
$
436,151

 
$
537,357

Changes in operating assets and
   liabilities and other
 
(25,634
)
 
(24,565
)
 
(37,126
)
 
(105,580
)
 
(184,299
)
Net Income
 
$
83,799

 
$
81,582

 
$
98,315

 
$
330,571

 
$
353,058

Add:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
26,892

 
26,666

 
27,483

 
108,842

 
113,985

Interest expense
 
5,639

 
5,381

 
4,269

 
21,433

 
21,861

Income tax provision (benefit)
 
(772
)
 
208

 
355

 
22

 
1,280

EBITDA
 
$
115,558

 
$
113,837

 
$
130,422

 
$
460,868

 
$
490,184



viii
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