SEC Filings

10-Q
WESTLAKE CHEMICAL CORP filed this Form 10-Q on 05/03/2018
Entire Document
 

Summary
For the quarter ended March 31, 2018, net income attributable to Westlake Chemical Corporation was $287 million, or $2.20 per diluted share, on net sales of $2,150 million. This represents an increase in net income attributable to Westlake Chemical Corporation of $149 million, or $1.14 per diluted share, compared to the first quarter of 2017 net income attributable to Westlake Chemical Corporation of $138 million, or $1.06 per diluted share, on net sales of $1,943 million. Net income for the first quarter of 2018 increased versus the prior-year period primarily due to (1) higher sales prices for our major products, resulting in improved margins; (2) a lower income tax provision resulting from the reduced U.S. corporate income tax rate under the Tax Act; (3) higher sales volumes for caustic soda and PVC resin; and (4) a $6 million pre-tax net gain from the redemption of the 2021 Notes. Net sales for the first quarter of 2018 increased by $207 million compared to net sales for the first quarter of 2017, mainly due to higher sales prices for major products and increases in sales volumes for caustic soda and PVC resin, partially offset by lower polyethylene sales volume. Income from operations was $401 million for the first quarter of 2018 as compared to $234 million for the first quarter of 2017. The increase in income from operations for the first quarter of 2018 was mainly a result of higher sales prices for our major products and higher sales volumes for caustic soda and PVC resin, partially offset by lower polyethylene sales volume, as compared to the first quarter of 2017. The first quarter of 2017 was negatively impacted by the unabsorbed fixed manufacturing costs and other costs associated with the turnaround and expansion of OpCo's Calvert City ethylene unit and other planned turnarounds and unplanned outages. Transaction and integration-related costs in the first quarter of 2018 were $7 million, or $0.04 per diluted share.
RESULTS OF OPERATIONS
First Quarter 2018 Compared with First Quarter 2017
Net Sales. Net sales increased by $207 million, or 10.7%, to $2,150 million in the first quarter of 2018 from $1,943 million in the first quarter of 2017, primarily attributable to higher sales prices for major products and higher sales volumes for caustic soda and PVC resin, partially offset by lower polyethylene sales volume. Average sales prices for the first quarter of 2018 increased by 9.0% as compared to the first quarter of 2017. Overall sales volume increased by 1.7% for the first quarter of 2018 as compared to the first quarter of 2017.
Gross Profit. Gross profit margin percentage increased to 25.2% in the first quarter of 2018 from 18.8% in the first quarter of 2017. The first quarter of 2018 gross profit margin was higher primarily due to higher sales prices for major products and higher sales volumes for caustic soda and PVC resin, partially offset by lower polyethylene sales volume, as compared to the first quarter of 2017. The first quarter of 2017 was negatively impacted by the unabsorbed fixed manufacturing costs and other costs associated with the turnaround and expansion of OpCo's Calvert City ethylene unit and other planned turnarounds and unplanned outages.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $9 million to $108 million in the first quarter of 2018 as compared to $99 million in the first quarter of 2017. This increase was mainly due to an increase in employee compensation.
Amortization of Intangibles. The amortization expense of $26 million in the first quarter of 2018 was comparable to $25 million in the first quarter of 2017. Amortization expense is comprised of amortization for customer relationships, trade name and other intangibles assets.
Transaction and Integration-related Costs. The transaction and integration-related costs of $7 million in the first quarter of 2018 were comparable to $8 million in the first quarter of 2017. The transaction and integration-related costs primarily consisted of integration-related consulting fees and severance benefits provided in conjunction with the Axiall merger.
Interest Expense. Interest expense decreased by $3 million to $37 million in the first quarter of 2018 from $40 million in the first quarter of 2017, primarily as a result of lower average debt outstanding in the first quarter of 2018 as compared to the first quarter of 2017. The lower average debt balance in the first quarter of 2018 was mainly due to the redemption of the 2021 Notes in February 2018. See "Liquidity and Capital Resources—Debt" below for further discussion of our indebtedness.
Other Income (Expense), Net. Other income, net increased by $15 million to $22 million in the first quarter of 2018 from $7 million in the first quarter of 2017. The increase was primarily attributable to increased income from unconsolidated subsidiaries, interest income and a net gain of $6 million recognized on the redemption of the 2021 Notes.
Income Taxes. The effective income tax rate was 22.9% for the first quarter of 2018 as compared to 27.9% for the first quarter of 2017. The lower effective tax rate in the first quarter of 2018 was primarily a result of the changes enacted under the Tax Act. The Tax Act was signed into law on December 22, 2017. The Tax Act, among other changes, reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018, and also required a one-time deemed repatriation of foreign earnings at specified rates. The effective income tax rate for the first quarter of 2018 was above the U.S. federal

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