HOUSTON--(BUSINESS WIRE)--Westlake Chemical Corporation (NYSE: WLK) today reported net income attributable to Westlake for the three months ended September 30, 2020 of $57 million, or $0.45 per diluted share, on net sales of $1,898 million. Net income in the third quarter of 2020 decreased by $101 million compared to third quarter 2019 net income of $158 million, or $1.22 per share, on net sales of $2,066 million. Income from operations of $79 million for the third quarter of 2020 decreased by $147 million from income from operations of $226 million for the third quarter of 2019. These decreases in net income and operating income were largely attributable to the impacts from Hurricane Laura, which included lost sales and production, increased maintenance expense and other costs resulting from the lower production at our facilities in Lake Charles, Louisiana. In addition, net income and operating income in the third quarter of 2020 were impacted by higher feedstock costs when compared to the prior-year period in addition to pre-tax restructuring charges of $34 million, or $0.19 per share, in our European vinyls business. Partially offsetting the impacts were higher earnings in our downstream vinyls products business driven by strong demand and lower interest rates in addition to lower fuel costs.
Third quarter 2020 net income of $57 million, or $0.45 per share, increased by $42 million from second quarter 2020 net income of $15 million, or $0.11 per share. Income from operations of $79 million for the third quarter of 2020 increased by $43 million from income from operations of $36 million for the second quarter of 2020. The increases in net income and income from operations versus the prior quarter were primarily due to higher prices for our major products, higher sales volume for caustic soda and increased earnings in our downstream vinyls products business driven by strong demand. The increases were partially offset by the impacts from Hurricane Laura and higher restructuring, feedstock and fuel costs.
For the first nine months of 2020, net income of $217 million, or $1.69 per share, decreased by $132 million from the first nine months of 2019 net income of $349 million, or $2.69 per share. Income from operations of $251 million for the first nine months of 2020 decreased by $303 million from income from operations of $554 million for the first nine months of 2019. The decreases in net income and income from operations were primarily due to lower global sales prices for our major products and lower sales volumes for caustic soda, all of which stem from the impact of the COVID-19 pandemic as well as the impacts of Hurricane Laura. Compared to the prior-year period, the first nine months of 2020 benefited from lower feedstock and fuel costs, higher earnings in our downstream vinyls products business and reduced operating costs. Net income further benefited from a lower effective tax rate and a carryback of federal net operating losses of $95 million, or $0.74 per share, resulting from the CARES Act.
"The third quarter of 2020 continued to prove challenging as we were impacted by Hurricane Laura, one of the strongest hurricanes to hit the Gulf Coast in over 40 years, resulting in significant damage to the power and utility infrastructure in the region as well as the homes of many of our employees. As a result of the storm and the extensive damage to the utility infrastructure, many of our facilities in the Lake Charles area suffered outages which significantly reduced production and sales volumes in the quarter. Our Lake Charles footprint is our largest concentration of assets worldwide, comprising approximately one-third of our chemical production capacity. Due to the dedication of our employees at these facilities, we were able to work quickly and begin the process to resume operations at our facilities. I would like to say a special thank you to these employees," said Albert Chao, President and Chief Executive Officer. "In spite of the challenges of the COVID-19 pandemic and recent hurricanes, our employees continue to work diligently to provide the essential materials that serve a number of industries, including building and construction, healthcare, food services and packaging. We are confident that Westlake remains well positioned to serve the needs of our customers while maintaining a solid financial position, which, combined with the strong fundamentals of our business, will enable us to deliver long-term value to our shareholders."
Net cash provided by operating activities was $357 million for the third quarter of 2020 and $866 million for the first nine months of 2020. As of September 30, 2020, cash and cash equivalents were $1,217 million and long-term debt was $3,681 million. Capital expenditures were $112 million and $403 million for the third quarter and first nine months of 2020, respectively.
EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $287 million for the third quarter of 2020 decreased by $138 million compared to third quarter 2019 EBITDA of $425 million. Third quarter 2020 EBITDA increased by $51 million compared to second quarter 2020 EBITDA of $236 million. For the first nine months of 2020, EBITDA of $860 million was $251 million lower than EBITDA for the first nine months of 2019 of $1,111 million. A reconciliation 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.
As part of an ongoing effort to reduce costs, on September 22, 2020, Westlake announced that it had directed the Louisiana Local Governmental Environmental Facilities and Community Development Authority to optionally redeem in full $154 million aggregate principal amount of the Authority's 6.5% Revenue Bonds (the "6.5% Revenue Bonds") at a redemption price of par, plus accrued and unpaid interest, if any, to the redemption date. On November 1, 2020, Westlake purchased the 6.5% Revenue Bonds in lieu of optional redemption. In June 2020, Westlake completed the registered public offering of $300 million aggregate principal amount of its 3.375% Senior Notes due 2030 and used a portion of the net proceeds from the offering of the 3.375% 2030 Senior Notes to fund the purchase in lieu of redemption of the Revenue Bonds. The refinancing, inclusive of another redemption in August, will result in a net interest savings of approximately $6 million per year.
VINYLS SEGMENT
Third quarter 2020 income from operations for the Vinyls segment of $42 million decreased by $111 million from third quarter 2019 income from operations of $153 million. This decrease in income from operations versus the prior-year period was primarily due to the impacts resulting from Hurricane Laura and restructuring costs of $34 million in our European vinyls business. The decreases in operating income were partially offset by increased earnings in our downstream vinyls products businesses and lower fuel costs.
Vinyls income from operations for the third quarter of 2020 of $42 million increased by $22 million from second quarter 2020 income from operations of $20 million, primarily due to higher earnings in our downstream vinyls products businesses, higher sales prices for our major products and higher sales volume for caustic soda, partially offset by the impacts from Hurricane Laura as well as higher restructuring, feedstock and fuel costs.
For the first nine months of 2020, Vinyls income from operations of $135 million decreased by $248 million from income from operations of $383 million for the first nine months of 2019. This decrease in income from operations was primarily due to lower sales prices for our major products, lower sales volumes of caustic soda resulting from the COVID-19 pandemic, the impacts of Hurricane Laura and higher restructuring costs. The impact on operating income was partially offset by lower ethane feedstock, fuel and operating costs when compared to the prior-year period.
OLEFINS SEGMENT
Third quarter 2020 income from operations for the Olefins segment of $51 million decreased by $41 million from third quarter 2019 income from operations of $92 million. This decrease in income from operations versus the prior-year period was primarily due to the impact of Hurricane Laura along with higher feedstock costs.
Olefins income from operations of $51 million in the third quarter of 2020 increased by $26 million from second quarter 2020 income from operations of $25 million. This increase in income from operations versus the prior quarter was primarily due to higher sales prices for polyethylene, partially offset by the impacts of Hurricane Laura.
For the first nine months of 2020, Olefins income from operations of $138 million decreased by $73 million from income from operations of $211 million for the first nine months of 2019. This decrease in income from operations was primarily due to lower sales prices for our major products as a result of the COVID-19 pandemic and the drop in global oil prices, as well as the impacts of Hurricane Laura, which were partially offset by lower feedstock costs.
About Westlake:
Westlake is a global manufacturer and supplier of materials and innovative products that enhance life every day. Headquartered in Houston, we provide the building blocks for vital solutions — from packaging and healthcare products to automotive and consumer goods, to building and construction products. For more information, visit the company's web site at www.westlake.com.
