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Section 1: 8-K (8-K)

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false0001604665 0001604665 2020-08-06 2020-08-06


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 6, 2020

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
 
77056
Houston,
Texas
 
 
(Address of principal executive offices)
 
 
(Zip Code)
Registrant's telephone number, including area code: (713585-2900

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))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common units representing limited partnership interests
WLKP
The New York Stock Exchange

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 6, 2020, Westlake Chemical Partners LP (the "Partnership") issued a press release announcing its 2020 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 6, 2020 to discuss its 2020 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 6, 2020.
104    The cover page from this Current Report on Form 8-K, formatted in Inline XBRL.






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 6, 2020
 
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 2020 Results
Maintained quarterly distribution of $0.4714 per unit with a 1.13x trailing twelve-month distribution coverage
HOUSTON--(BUSINESS WIRE)--Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported net income attributable to the Partnership of $14.9 million, or $0.43 per limited partner unit, for the three months ended June 30, 2020, an increase of $1.2 million compared to second quarter 2019 net income attributable to the Partnership of $13.7 million. The increase in net income attributable to the Partnership was primarily due to higher earnings on ethylene sold to Westlake Chemical Corporation ("Westlake Chemical") from Westlake Chemical OpCo LP ("OpCo") and lower manufacturing and selling, general and administration costs, partially offset by lower ethylene production. Cash flows from operating activities in the second quarter of 2020 were $112.8 million, an increase of $12.6 million compared to second quarter 2019 cash flows from operating activities of $100.2 million. This increase in cash flows from operating activities was primarily attributable to a decrease in working capital. For the three months ended June 30, 2020, MLP distributable cash flow of $16.9 million increased by $0.5 million from second quarter 2019 MLP distributable cash flow of $16.4 million.
Second quarter 2020 net income attributable to the Partnership of $14.9 million decreased by $2.8 million from first quarter 2020 net income attributable to the Partnership of $17.7 million. The decrease in net income attributable to the Partnership was primarily due to lower ethylene production at OpCo. Second quarter 2020 cash flows from operating activities of $112.8 million increased by $1.8 million compared to first quarter 2020 cash flows from operating activities of $111.0 million. Second quarter 2020 MLP distributable cash flow of $16.9 million decreased by $1.4 million compared to first quarter 2020 MLP distributable cash flow of $18.3 million. The decrease in MLP distributable cash flow was primarily due to the lower production at OpCo, partially offset by reduced maintenance capital expenditures.
Net income attributable to the Partnership of $32.6 million, or $0.93 per limited partner unit, for the six months ended June 30, 2020 increased by $3.9 million compared to the first six months of 2019 net income attributable to the Partnership of $28.7 million. The increase in net income attributable to the Partnership as compared to the prior-year period was due to higher earnings on ethylene sold to Westlake Chemical from OpCo, lower manufacturing, selling, general and administrative expenses and interest costs, partially offset by lower ethylene production. Cash flows from operating activities in the first six months of 2020 were $223.7 million, an increase of $10.0 million compared to the first six months of 2019 cash flows from operating activities of $213.7 million. This increase was primarily due to higher earnings during the period. For the six months ended June 30, 2020, MLP distributable cash flow of $35.2 million increased by $1.2 million compared to the first six months of 2019 MLP distributable cash flow of $34.0 million. The increase in MLP distributable cash flow as compared to the prior-year period was primarily attributable to the Partnership's reduced maintenance capital expenditures, partially offset by lower production of ethylene at OpCo and increased turnaround reserves.
"Despite turbulent market conditions that have impacted the overall ethylene value chain, as well as the steep drop in oil prices, we are pleased with the Partnership's performance in the second quarter of 2020. Our long-term ethylene sales agreement with Westlake Chemical continued to deliver reliable earnings and cash flows to the Partnership," said Albert Chao, President and Chief Executive Officer. "Our first priority is to ensure the health and safety of our employees who continue to work diligently to serve our customers who produce essential products in these uncertain times. In these evolving market conditions, we have prioritized bolstering our balance sheet position, while continuing to deliver distributions to our unitholders, allowing us to maintain our financial strength and flexibility. These actions preserve the fundamental value of the Partnership and the opportunities that our four levers of growth can offer."

i



On July 31, 2020, the Partnership announced that the Board of Directors of Westlake Chemical Partners GP LLC had approved a quarterly distribution for the second quarter of 2020 of $0.4714 per unit to be payable on August 24, 2020 to unitholders of record as of August 10, 2020. MLP distributable cash flow provided trailing twelve-month coverage of 1.13x the declared distributions for the second quarter of 2020.
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.
The statements in this release and the related teleconference relating to matters that are not historical facts, such as those with respect to levers of 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, the COVID-19 pandemic and the response thereto; 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, 2019, which was filed with the SEC in February 2020, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
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.
Use of Non-GAAP Financial Measures
This release makes reference to certain "non-GAAP" financial measures, such as MLP distributable cash flow and EBITDA. For this purpose, a non-GAAP financial measure is generally defined by the Securities and Exchange Commission ("SEC") as a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that (1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the registrant; or (2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. We report our financial results in accordance with U.S. generally accepted accounting principles ("U.S. 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 U.S. GAAP. 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. MLP distributable cash flow and EBITDA are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess our operating performance as compared to other publicly traded partnerships, our ability to incur and service debt and fund capital expenditures and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. Reconciliations of MLP distributable cash flow to net income and to net cash provided by operating activities and of EBITDA to net income, income from operations and net cash provided by operating activities can be found in the financial schedules at the end of this press release.

ii



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 a 22.8% 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 2020 results will be held Thursday, August 6, 2020 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 386 73 18.
A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on Thursday, August 13, 2020. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 386 73 18.
The conference call will also be available via webcast at: https://edge.media-server.com/mmc/p/98vm6ykf 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,
 
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
 
 
(In thousands of dollars, except per unit data)
Revenue
 
 
 
 
 
 
 
 
Net sales—Westlake Chemical Corporation ("Westlake")
 
$
227,431

 
$
230,047

 
$
442,259

 
$
487,087

Net co-product, ethylene and other sales—third parties
 
11,069

 
40,015

 
46,790

 
82,061

Total net sales
 
238,500

 
270,062

 
489,049

 
569,148

Cost of sales
 
148,470

 
178,104

 
295,471

 
386,536

Gross profit
 
90,030

 
91,958

 
193,578

 
182,612

Selling, general and administrative expenses
 
6,139

 
7,639

 
12,335

 
14,612

Income from operations
 
83,891

 
84,319

 
181,243

 
168,000

Other income (expense)
 
 
 
 
 
 
 
 
Interest expense—Westlake
 
(3,431
)
 
(5,125
)
 
(7,381
)
 
(11,025
)
Other income, net
 
123

 
1,153

 
708

 
1,968

Income before income taxes
 
80,583

 
80,347

 
174,570

 
158,943

Income tax provision
 
206

 
237

 
423

 
437

Net income
 
80,377

 
80,110

 
174,147

 
158,506

Less: Net income attributable to noncontrolling interests in Westlake Chemical OpCo LP ("OpCo")
 
65,517

 
66,377

 
141,540

 
129,818

Net income attributable to Westlake Partners
 
$
14,860

 
$
13,733

 
$
32,607

 
$
28,688

 
 
 
 
 
 
 
 
 
Net income per limited partners unit attributable to Westlake Partners (basic and diluted)
 
 
 
 
 
 
 
 
Common units
 
$
0.43

 
$
0.39

 
$
0.93

 
$
0.85

 
 
 
 
 
 
 
 
 
Distributions declared per unit
 
$
0.4714

 
$
0.4579

 
$
0.9428

 
$
0.9031

 
 
 
 
 
 
 
 
 
MLP distributable cash flow
 
$
16,855

 
$
16,422

 
$
35,192

 
$
33,977

 
 
 
 
 
 
 
 
 
Distributions declared
 
 
 
 
 
 
 
 
Limited partner units—publicly and privately held
 
$
9,933

 
$
9,646

 
$
19,867

 
$
19,025

Limited partner units—Westlake
 
6,657

 
6,467

 
13,314

 
12,754

Total distributions declared
 
$
16,590

 
$
16,113

 
$
33,181

 
$
31,779

EBITDA
 
$
109,827

 
$
112,329

 
$
233,795

 
$
223,669


iv




WESTLAKE CHEMICAL PARTNERS LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
June 30,
2020
 
December 31,
2019
 
 
 
 
 
 
 
(In thousands of dollars)
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
23,618

 
$
19,923

Receivable under the Investment Management Agreement—Westlake
 
171,391

 
162,773

Accounts receivable, net—Westlake
 
42,354

 
42,847

Accounts receivable, net—third parties
 
7,007

 
9,914

Inventories
 
1,529

 
2,484

Prepaid expenses and other current assets
 
65

 
470

Total current assets
 
245,964

 
238,411

Property, plant and equipment, net
 
1,077,499

 
1,102,995

Other assets, net
 
45,564

 
52,050

Total assets
 
$
1,369,027

 
$
1,393,456

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities (accounts payable and accrued liabilities)
 
$
31,093

 
$
38,849

Long-term debt payable to Westlake
 
399,674

 
399,674

Other liabilities
 
2,407

 
2,798

Total liabilities
 
433,174

 
441,321

Common unitholders—publicly and privately held
 
471,392

 
471,736

Common unitholder—Westlake
 
48,120

 
48,350

General partner—Westlake
 
(242,572
)
 
(242,572
)
Total Westlake Partners partners' capital
 
276,940

 
277,514

Noncontrolling interest in OpCo
 
658,913

 
674,621

Total equity
 
935,853

 
952,135

Total liabilities and equity
 
$
1,369,027

 
$
1,393,456


v




WESTLAKE CHEMICAL PARTNERS LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Six Months Ended June 30,
 
 
2020
 
2019
 
 
 
 
 
 
 
(In thousands of dollars)
Cash flows from operating activities
 
 
 
 
Net income
 
$
174,147

 
$
158,506

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
51,844

 
53,701

Other balance sheet changes
 
(2,272
)
 
1,465

Net cash provided by operating activities
 
223,719

 
213,672

Cash flows from investing activities
 
 
 
 
Additions to property, plant and equipment
 
(20,595
)
 
(25,582
)
Maturities of investments with Westlake under the Investment Management Agreement
 
181,000

 
344,445

Investments with Westlake under the Investment Management Agreement
 
(190,000
)
 
(336,445
)
Other
 

 
46

Net cash used for investing activities
 
(29,595
)
 
(17,536
)
Cash flows from financing activities
 
 
 
 
Net proceeds from private placement of common units
 

 
62,916

Proceeds from debt payable to Westlake
 

 
123,511

Repayment of debt payable to Westlake
 

 
(201,445
)
Quarterly distributions to noncontrolling interest retained in OpCo by Westlake
 
(157,248
)
 
(153,766
)
Quarterly distributions to unitholders
 
(33,181
)
 
(29,623
)
Net cash used for financing activities
 
(190,429
)
 
(198,407
)
Net increase (decrease) in cash and cash equivalents
 
3,695

 
(2,271
)
Cash and cash equivalents at beginning of period
 
19,923

 
19,744

Cash and cash equivalents at end of period
 
$
23,618

 
$
17,473



vi




WESTLAKE CHEMICAL PARTNERS LP
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,
 
 
2020
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
(In thousands of dollars)
Net cash provided by operating activities
 
$
110,961

 
$
112,758

 
$
100,173

 
$
223,719

 
$
213,672

Changes in operating assets and liabilities and other
 
(17,191
)
 
(32,381
)
 
(20,063
)
 
(49,572
)
 
(55,166
)
Net Income
 
93,770

 
80,377

 
80,110

 
174,147

 
158,506

Add:
 
 
 
 
 
 
 
 
 
 
Depreciation, amortization and disposition of property, plant and equipment
 
26,127

 
26,164

 
26,903

 
52,291

 
54,205

Mark-to-market adjustment loss (gain) on derivative contracts
 
(2,491
)
 
704

 
516

 
(1,787
)
 
(199
)
Less:
 
 
 
 
 
 
 
 
 
 
Contribution to turnaround reserves
 
(9,923
)
 
(9,884
)
 
(3,889
)
 
(19,807
)
 
(7,737
)
Maintenance capital expenditures
 
(11,121
)
 
(8,228
)
 
(11,725
)
 
(19,349
)
 
(23,045
)
Distributable cash flow attributable to noncontrolling interest in OpCo
 
(78,025
)
 
(72,278
)
 
(75,493
)
 
(150,303
)
 
(147,753
)
MLP distributable cash flow
 
$
18,337

 
$
16,855

 
$
16,422

 
$
35,192

 
$
33,977



vii



WESTLAKE CHEMICAL PARTNERS LP
RECONCILIATION OF EBITDA TO NET INCOME, INCOME FROM OPERATIONS AND NET CASH
PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
 
 
Three Months Ended March 31,
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
(In thousands of dollars)
Net cash provided by operating activities
 
$
110,961

 
$
112,758

 
$
100,173

 
$
223,719

 
$
213,672

Changes in operating assets and liabilities and other
 
(17,191
)
 
(32,381
)
 
(20,063
)
 
(49,572
)
 
(55,166
)
Net Income
 
93,770

 
80,377

 
80,110

 
174,147

 
158,506

Less:
 
 
 
 
 
 
 
 
 
 
Other income, net
 
585

 
123

 
1,153

 
708

 
1,968

Interest expense
 
(3,950
)
 
(3,431
)
 
(5,125
)
 
(7,381
)
 
(11,025
)
Income tax provision
 
(217
)
 
(206
)
 
(237
)
 
(423
)
 
(437
)
Income from operations
 
97,352

 
83,891

 
84,319

 
181,243

 
168,000

Add:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
26,031

 
25,813

 
26,857

 
51,844

 
53,701

Other income, net
 
585

 
123

 
1,153

 
708

 
1,968

EBITDA
 
$
123,968

 
$
109,827

 
$
112,329

 
$
233,795

 
$
223,669



viii
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