What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-03-02 compared with 2020-02-28 · 194 added, 124 removed, 602 unchanged (35% of the section changed)

41 unchanged sentences

A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

1 unchanged sentence

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue from the Ethylene Sales Agreement

As described in Notes 2 and 11 to the consolidated financial statements, the Partnership recognized net sales to Westlake Chemical Corporation ("Westlake") of $888 million for the year ended December 31, 2020, including a buyer deficiency fee of $70 million.

The Ethylene Sales Agreement requires Westlake to purchase a minimum volume of ethylene each year equal to 95% of Westlake Chemical OpCo LP's ("OpCo") planned ethylene production per year, subject to certain exceptions and a maximum commitment of 3.8 billion pounds per year.

The fee for each pound of ethylene purchased by Westlake from OpCo will equal (i) the actual price OpCo pays Westlake to purchase ethane, (ii) plus the actual price OpCo pays Westlake to purchase natural gas, (iii) plus OpCo's estimated operating costs divided by OpCo's planned ethylene production for the year, (iv) plus a five-year average of OpCo's expected future maintenance capital expenditures and other turnaround expenditures divided by OpCo's planned ethylene production capacity for the year, (v) less the proceeds received by OpCo from the sale of co-products associated with producing the ethylene purchased by Westlake, (vi) plus a $0.10 per pound margin.

Two of the Partnership's facilities were impacted by Hurricanes Laura and Delta, which resulted in force majeure events under the Ethylene Sales Agreement.

As a result of the force majeure events, the Partnership recognized a buyer deficiency fee.

The buyer deficiency fee represents fixed margin and unavoided operating and maintenance capital expenditures and maintenance expenses per pound of volume committed by Westlake during the force majeure event.

The principal considerations for our determination that performing procedures relating to revenue from the Ethylene Sales Agreement is a critical audit matter are the significant audit effort in performing procedures and evaluating the calculation of the fee for each pound of ethylene and the buyer deficiency fee.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the accuracy of the fees used to determine revenue from the Ethylene Sales Agreement.

These procedures also included, among others, testing the completeness and accuracy of underlying inputs used in the price and buyer deficiency fee calculation, and testing the accuracy of the minimum volume of ethylene purchased by Westlake as part of the Ethylene Sales Agreement.

/s/PricewaterhouseCoopers LLP

Houston, Texas

February 28, 2020

March 2, 2021

We have served as the Partnership's auditor since 2014.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

2020 December 31,

(in thousands of dollars,

6 unchanged sentences

Accounts receivable, net—third parties 11,029 9,914

Inventories 3,474 2,484

Prepaid expenses and other current assets 392 470

1 unchanged sentence

Property, plant and equipment, net 1,050,677 1,102,995

Goodwill 5,814 5,814

Deferred charges and other assets, net 36,692 46,236

Total assets $ 1,356,488 $ 1,393,456

Current liabilities

10 unchanged sentences

and outstanding at December 31, 2020 and December 31, 2019, respectively)

471,701 471,736

Common unitholder—Westlake ( 14,122,230 and 14,122,230 units issued and outstanding at

December 31, 2020 and December 31, 2019, respectively)

48,270 48,350

General partner—Westlake ( 242,572 ) ( 242,572 )

1 unchanged sentence

Noncontrolling interest in Westlake Chemical OpCo LP ("OpCo") 637,738 674,621

Total equity 915,137 952,135

Total liabilities and equity $ 1,356,488 $ 1,393,456

3 unchanged sentences

Year Ended December 31,

2020 2019 2018

(in thousands of dollars,

4 unchanged sentences

Cost of sales 587,787 712,443 908,463

Gross profit 378,883 379,428 377,159

Selling, general and administrative expenses 25,895 29,278 27,590

5 unchanged sentences

Provision for income taxes 564 728 22

Net income 341,119 332,895 330,571

Net income attributable to noncontrolling interest in OpCo 274,952 271,914 281,224

3 unchanged sentences

unit (basic and diluted)

Subordinated units

Common units $ 1.88 $ 1.77 $ 1.51

Weighted average limited partner units outstanding

2 unchanged sentences

Common units—Westlake 14,122,230 14,122,230 14,122,230

Subordinated units—Westlake

The accompanying notes are an integral part of the consolidated financial statements.

2 unchanged sentences

Common Unitholders -

Public and Privately Held

Common Unitholder -

Subordinated Unitholder -

Public and Privately Held Common Unitholder -

Westlake General

Westlake Accumulated

Comprehensive

Noncontrolling Interest

Income Noncontrolling Interest

in OpCo Total

(in thousands of dollars)

Balances at December 31, 2017 $ 411,228 $ 50,265 $ ( 241,958 ) $ 279 $ 778,935 $ 998,749

Net income 27,320 21,294 733 — 281,224 330,571

Net effect of cash flow hedge — — — ( 279 ) — ( 279 )

Proceeds from secondary public offering, net of finance and other offering costs

Subordinated unit conversion

Units issued for vested phantom units

291 — — — — 291

Quarterly distribution to unitholders ( 29,231 ) ( 22,785 ) ( 1,347 ) — — ( 53,363 )

Quarterly distribution to noncontrolling interest retained in OpCo by Westlake

— — — — ( 341,888 ) ( 341,888 )

Balances at December 31, 2018 $ 409,608 $ 48,774 $ ( 242,572 ) $ — $ 718,271 $ 934,081

Net effect of cash flow hedge

Net income 35,978 25,003 — — 271,914 332,895

Units issued for vested phantom units 146 — — — — 146

Net proceeds from private placement of common units

62,661 — — — — 62,661

Quarterly distribution to unitholders ( 36,657 ) ( 25,427 ) — — — ( 62,084 )

Quarterly distribution to noncontrolling interest retained in OpCo by Westlake

— — — — ( 315,564 ) ( 315,564 )

Balances at December 31, 2019 $ 471,736 $ 48,350 $ ( 242,572 ) $ — $ 674,621 $ 952,135

Net income 39,618 26,549 — — 274,952 341,119

Units issued for vested phantom units 81 — — — — 81

Net proceeds from private placement of common units

Quarterly distribution to unitholders ( 39,734 ) ( 26,629 ) — — — ( 66,363 )

Quarterly distribution to noncontrolling interest retained in OpCo by Westlake

— — — — ( 311,835 ) ( 311,835 )

Balances at December 31, 2020 $ 471,701 $ 48,270 $ ( 242,572 ) $ — $ 637,738 $ 915,137

3 unchanged sentences

Year Ended December 31,

2020 2019 2018

(in thousands of dollars)

Cash flows from operating activities

Net income $ 341,119 $ 332,895 $ 330,571

Adjustments to reconcile net income to net cash provided by

6 unchanged sentences

Net accounts receivable—Westlake ( 71,975 ) 2,358 ( 442 )

Inventories ( 990 ) 1,126 1,202

Prepaid expenses and other current assets 78 ( 100 ) ( 56 )

1 unchanged sentence

Accrued and other liabilities 1,672 985 ( 1,974 )

Other, net ( 3,686 ) ( 1,188 ) ( 488 )

Net cash provided by operating activities 373,397 450,807 436,151

1 unchanged sentence

Additions to property, plant and equipment ( 36,968 ) ( 43,707 ) ( 39,862 )

Maturities of investments with Westlake under the Investment Management

Investments with Westlake under the Investment Management Agreement ( 349,000 ) ( 529,445 ) ( 384,000 )

Net cash used for investing activities

Maturities of investments with Westlake under the Investment Management

Agreement 388,000 515,445 372,050

Net cash provided by (used for) investing activities 2,032 ( 57,707 ) ( 51,812 )

Cash flows from financing activities

1 unchanged sentence

Proceeds from debt payable to Westlake — 123,511 3,648

Repayment of debt payable to Westlake

Quarterly distributions to noncontrolling interest retained in OpCo by

Westlake ( 311,835 ) ( 315,564 ) ( 341,888 )

Quarterly distributions to unitholders ( 66,363 ) ( 62,084 ) ( 53,363 )

Repayment of debt payable to Westlake — ( 201,445 ) —

Net cash used for financing activities ( 378,198 ) ( 392,921 ) ( 391,603 )

31 unchanged sentences

Cash equivalents consist of highly liquid investments that are readily convertible into cash and have a maturity of three months or less at the date of acquisition.

Allowance for Doubtful Accounts

The determination of the allowance for doubtful accounts is based on estimation of the amount of accounts receivable that the Partnership believes are unlikely to be collected.

Estimating this amount requires analysis of the financial strength of the Partnership's customers, the use of historical experience, the Partnership's accounts receivable aged trial balance and specific collectability analysis.

The allowance for doubtful accounts is reviewed quarterly.

Allowance for Credit Losses

The determination of the allowance for credit losses is based on estimation of the amount of accounts receivable that the Partnership believes are unlikely to be collected.

The allowance for credit losses is reviewed quarterly.

Past due balances over 90 days and high risk accounts, as determined by the analysis of financial strength of customers, are reviewed individually for collectability.

10 unchanged sentences

Capitalized interest costs are included in property, plant and equipment and are depreciated over the useful life of the related asset.

Capitalized interest was $ 0 , $ 175 and $ 435 for the years ended December 31, 2019 , 2018 and 2017 .

Capitalized interest was zero for the years ended December 31, 2020 and 2019 and $ 175 for the year ended December 31, 2018.

Repair and maintenance costs are charged to operations as incurred.

5 unchanged sentences

Depreciation is provided by utilizing the straight-line method over the estimated useful lives of the assets as follows:

Classification

Classification Years

Buildings and improvements 40

9 unchanged sentences

Assets to be disposed of are reported at the lower of the carrying amount or estimated fair value less costs to sell.

Impairment of Goodwill and Intangible Assets

Impairment of Goodwill

The accounting guidance requires that goodwill be tested for impairment at least annually, or when events or changes in circumstances indicate the fair value of a reporting unit with goodwill has been reduced below its carrying value.

The impairment test for the recorded goodwill was performed in October 2020 and did not indicate impairment of the goodwill.

Other intangible assets with finite lives are amortized over their estimated useful life and reviewed for impairment in accordance with the provisions of the accounting guidance.

As of December 31, 2020, the Partnership's recorded goodwill was $ 5,814 .

7 unchanged sentences

The costs related to the significant overhaul and refurbishment activities include maintenance materials, parts and direct labor costs.

The costs of the turnaround are deferred when incurred at the time of the turnaround and amortized (within depreciation and amortization) on a straight-line basis until the next planned turnaround, which ranges from three to six years .

Deferred turnaround costs are presented as a component of other assets, net.

16 unchanged sentences

The Ethylene Sales Agreement is intended to generate a long-term, fixed cash margin per pound.

See Note 2 for a description of the terms of the Ethylene Sales Agreement.

Partnership's direct commodity price risk is limited to the sales to third parties.

See the Partnership's consolidated statement of operations for the disaggregation of net sales to Westlake and net sales to third parties.

Prior to the adoption of ASU No.

2014-09, Revenue from Contracts with Customers ("ASC 606"), on January 1, 2018, the revenue was recognized when persuasive evidence of an arrangement existed, products were delivered to the customer, the sales price was fixed or determinable, and collectability was reasonably assured.

Title and risk of loss had passed to the customer upon delivery under executed customer purchase orders or contracts.

Transportation and Freight

1 unchanged sentence

Transportation and freight costs incurred by the Partnership on outbound shipments are included in cost of sales in the consolidated statements of operations.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Derivative Instruments

3 unchanged sentences

Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings currently.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Environmental Costs

14 unchanged sentences

Actual results could differ from those estimates.

On March 11, 2020, the World Health Organization declared the ongoing coronavirus (COVID-19) outbreak a pandemic and recommended containment and mitigation measures worldwide.

The COVID pandemic resulted in widespread adverse impacts on the global economy and on our employees, customers and suppliers in 2020.

The Partnership did not experience significant disruptions to its business operations in 2020 and does not expect significant disruptions.

However, the impact that COVID-19 will have on the Partnership's financial condition, results of operations and cash flows cannot be estimated with certainty at this time as it will depend on future developments, including, among others, the ultimate duration, geographic spread and severity of the virus, the actions to contain the virus, the consequences of governmental and other measures designed to prevent the spread of the virus, the development of effective treatments and vaccines and their roll out, the impact on the operation of OpCo facilities, Westlake, customers, suppliers and other third parties and the timing and extent to which normal economic and operating conditions resume.

Other Comprehensive Income

1 unchanged sentence

Recent Accounting Pronouncements

Reference Rate Reform (ASU No.

In March 2020, the FASB issued an accounting standards update to provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform, if certain criteria are met.

The amendments in this update are effective for all entities from January 1, 2020 through December 31, 2022.

The Partnership is in the process of evaluating the adoption of this optional accounting standards update as certain exceptions provided under this guidance may be applicable to future reference rate reform related transitions.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Recently Adopted Accounting Standards

Credit Losses (ASU No.

2 unchanged sentences

The standard also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination.

The accounting standard is effective for reporting periods beginning after December 15, 2019 and is not expected to have a material impact on the Partnership's consolidated financial position, results of operations and cash flows.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

The accounting standard became effective for reporting periods beginning after December 15, 2019.

The Partnership adopted this accounting standard effective January 1, 2020 and the adoption did not have a material impact on the Partnership's consolidated financial position, results of operations and cash flows.

Fair Value Measurement (ASU No.

In August 2018, the FASB issued an accounting standards update to modify the disclosure requirements on fair value measurements.

The amendments are effective for reporting periods beginning after December 15, 2019.

The amendments became effective for reporting periods beginning after December 15, 2019.

An entity is permitted to early adopt any removed or modified disclosures and delay adoption of the additional disclosures until the effective date.

Most amendments should be applied retrospectively but certain amendments should be applied prospectively.

The new accounting guidance is not expected to have a material impact on the Partnership's consolidated financial position, results of operations and cash flows.

Recently Adopted Accounting Standards

Leases (ASU No.

In February 2016, the FASB issued an accounting standards update on lease accounting that supersedes the previously issued lease guidance.

The new standard requires lessees to recognize assets and liabilities for all long-term operating leases.

An asset is recognized for the right to use an underlying leased asset and a liability is recognized for the obligation to make payments over the lease term.

The standard also requires expanded lease disclosures.

The standard requires a modified retrospective adoption approach and allows for the election of certain transition expedients.

The Partnership adopted the standard effective January 1, 2019 using the optional transition method, which allows entities to recognize a cumulative adjustment to the opening balance sheet in the period of adoption.

The Partnership elected the package of optional transition expedients and was not required to reassess (1) whether any existing contracts are or contain leases, (2) classification of existing leases as operating or capital or (3) whether initial direct costs for existing leases qualify for capitalization under the new accounting standard.

The Partnership did not elect the use of hindsight to determine the lease term when considering lease renewal or termination options.

Adoption of the new standard did not have a material impact on the Partnership's consolidated financial position, results of operations and cash flows.

The Partnership adopted the accounting standard effective January 1, 2020 and the adoption did not have a material impact on the Partnership's consolidated financial position, results of operations and cash flows.

Agreements with Westlake and Related Parties

11 unchanged sentences

The fee for the Excess Production Option, if exercised, equals OpCo's estimated variable operating costs of producing the incremental ethylene, net of revenues from co-products sales plus a $ 0.10 per pound margin.

The estimated operating costs and the expected future maintenance capital expenditures and other turnaround expenditures will be adjusted at the end of each year, to be applicable for the fee for the next calendar year, to reflect certain changes in forecasted costs.

WESTLAKE CHEMICAL PARTNERS LP

1 unchanged sentence

(in thousands of dollars, except unit amounts and per unit data)

The result of the fee structure is that OpCo should recover the portion of its total operating costs and maintenance capital expenditures and other turnaround expenditures corresponding to the portion of OpCo's aggregate production that is purchased by Westlake.

Any shortfall in recovery of such costs is recognized during the current year and is recoverable from Westlake in the subsequent year.

The Ethylene Sales Agreement has an initial term extending until December 31, 2026 and automatically renews thereafter for successive 12 -month terms unless terminated.

Under the Ethylene Sales Agreement OpCo has the option to curtail up to approximately 5% of its ethylene production annually in the event OpCo reasonably determines that its sales of such ethylene to third parties during the relevant period would be uneconomic.

Pursuant to the Ethylene Sales Agreement, Westlake's obligation to pay for the annual minimum commitment ( 95 % of OpCo's budgeted ethylene production), which is measured on an annual basis, is not reduced for the first 45 days of a force majeure event, but is reduced for the portion of a force majeure event extending beyond the 45th day.

In the event of a force majeure event, the Partnership recognizes buyer deficiency fees representing fixed margin and unavoided operating and maintenance capital expenditures and maintenance expenses per pound of volume committed by Westlake during the force majeure event.

The result of the fee structure is that OpCo should generally recover the portion of its total operating costs and maintenance capital expenditures and other turnaround expenditures corresponding to the portion of OpCo's aggregate production that is purchased by Westlake.

Any shortfall in recovery of such costs is generally recognized during the period in which the related operating, maintenance or turnaround activities occur and is recoverable from Westlake in the subsequent year.

Under the Ethylene Sales Agreement, if production costs billed to Westlake on an annual basis are less than 95 % of the actual production costs incurred by OpCo during the contract year, OpCo is entitled to recover the shortfall in such production costs (proportionate to the volume sold to Westlake) in the subsequent year ("Shortfall").

The Ethylene Sales Agreement provides that, if compliance with any law adopted or modified following our IPO results in OpCo incurring additional costs in excess of $ 500,000 in any contract year, OpCo is entitled to charge Westlake a monthly surcharge following efforts to mitigate the effects of such matter.

The Ethylene Sales Agreement has an initial term extending until December 31, 2026 and automatically renews thereafter for successive 12 -month terms unless terminated.

Feedstock Supply Agreement

13 unchanged sentences

Westlake and OpCo each can terminate the Services and Secondment Agreement under certain circumstances, including if the other party materially defaults on the performance of its obligations and such default continues for a 30 -day period.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Site Lease Agreements

3 unchanged sentences

Each of the site lease agreements may be renewed if agreed by the parties.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Omnibus Agreement

7 unchanged sentences

The Partnership, OpCo GP and Westlake are parties to an agreement of limited partnership for OpCo (the "OpCo LP Agreement").

The OpCo LP Agreement governs the ownership and management of OpCo and designates OpCo GP as the general partner.

The OpCo LP Agreement governs the ownership and management of OpCo and designates OpCo GP as the general partner of OpCo.

OpCo GP generally has complete authority to manage OpCo's business and affairs.

7 unchanged sentences

Trade customers $ 11,344 $ 9,730

Allowance for doubtful accounts

Allowance for credit losses ( 315 ) ( 476 )

Other receivables — 660

Accounts receivable, net—third parties $ 11,029 $ 9,914

Inventories consist of the following:

Finished products

Feedstock, additives and chemicals

WESTLAKE CHEMICAL PARTNERS LP

1 unchanged sentence

(in thousands of dollars, except unit amounts and per unit data)

Inventories consist of the following:

Finished products $ 3,157 $ 2,154

Feedstock, additives and chemicals 317 330

Inventories $ 3,474 $ 2,484

Property, Plant and Equipment

2 unchanged sentences

Plant and equipment 1,856,745 1,825,332

Other 106,078 97,402

1,980,817 1,940,160

Accumulated depreciation ( 971,476 ) ( 882,768 )

1,009,341 1,057,392

Construction in progress 41,336 45,603

4 unchanged sentences

The fair value of the goodwill was calculated using both a discounted cash flow methodology and a market value methodology.

The discounted cash flow projections were based on a ten-year forecast, from 2020 to 2029, to reflect the cyclicality of the Partnership's business.

The discounted cash flow projections were based on a long-term forecast to reflect the cyclicality of the Partnership's business.

The forecast was based on prices and spreads projected by IHS Markit, a chemical industry organization offering market and business advisory services for the chemical market, for the same period, and estimates by management, including their strategic and operational plans.

6 unchanged sentences

Turnaround costs, net $ 32,273 $ 40,416

Other 4,419 5,820

Total deferred charges and other assets $ 36,692 $ 46,236

8 unchanged sentences

2.0 %, scheduled maturity of September 25, 2023)

$ 22,619 $ 22,619

MLP Revolver (variable interest rate of LIBOR plus 2.0 %, scheduled maturity of

April 29, 2021)

March 19, 2023)

377,055 377,055

Long-term debt payable to Westlake $ 399,674 $ 399,674

3 unchanged sentences

On April 29, 2015, the Partnership entered into a $ 300,000 revolving credit facility agreement with an affiliate of Westlake (as subsequently amended, the "MLP Revolver") to fund the Partnership's purchase of an additional 2.7 % newly-issued, limited partner interest in OpCo for $ 135,341 .

The MLP Revolver is scheduled to mature on April 29, 2021.

In 2017, the Partnership entered into an amendment to the MLP Revolver credit agreement, increasing borrowing capacity from $ 300,000 to $ 600,000 .

On March 19, 2020, the Partnership entered into an amendment to the MLP Revolver, to extend the maturity date to March 19, 2023 and add a phase-out provision for LIBOR, which is to be replaced by an alternate benchmark rate.

The amended Credit Agreement bears interest at a variable rate of either (a) LIBOR plus 2.0% or, if LIBOR is no longer available, (b) Alternate Base Rate plus 1.0%.

The MLP Revolver bears interest at LIBOR plus a spread ranging from 2.0 % to 3.0 % (depending on the Partnership's consolidated leverage ratio), payable quarterly.

7 unchanged sentences

As of December 31, 2020, the Partnership had no scheduled maturities of long-term debt until 2023.

The OpCo Revolver is scheduled to mature on September 25, 2023, and the MLP Revolver is scheduled to mature on April 29, 2021.

The OpCo Revolver is scheduled to mature on September 25, 2023, and the MLP Revolver is scheduled to mature on March 19, 2023.

Distributions and Net Income Per Limited Partner Unit

7 unchanged sentences

Year Ended December 31

2020 2019 2018

Net income attributable to the Partnership $ 66,167 $ 60,981 $ 49,347

Limited partners' distribution declared on common units 66,365 64,718 53,516

Limited partners' distribution declared on subordinated units

Distributions declared with respect to the incentive distribution rights — — 733

(Distribution in excess of net income) net income in excess of

Distribution in excess of net income $ ( 198 ) $ ( 3,737 ) $ ( 4,902 )

Net income per unit applicable to common limited partner units and to subordinated limited partner units is computed by dividing the respective limited partners' interest in net income by the weighted-average number of common units and subordinated units outstanding for the period.

4 unchanged sentences

Basic and diluted net income per unit is the same because the Partnership does not have any potentially dilutive units outstanding for the periods presented.

As discussed further in Note 10 , the 12,686,115 subordinated units, all of which were owned by Westlake, were converted into common units effective August 30, 2017.

For purposes of calculating net income per unit, the subordinated units were treated as if they had been converted to common units on July 1, 2017.

Therefore, the subordinated units did not share in the distribution of cash generated from July 1, 2017 to December 31, 2017, and the Partnership did not allocate any earnings to the subordinated unitholders from July 1, 2017 to December 31, 2017 for the determination of net income per unit.

December 31, 2019

Limited Partners' Common Units

Incentive Distribution Rights

All of the subordinated units, which were owned by Westlake, were converted into common units in 2017.

Year Ended December 31, 2020

Limited Partners' Common Units Incentive Distribution Rights Total

Net income attributable to the Partnership:

Distribution $ 66,365 $ — $ 66,365

Distribution in excess of net income ( 198 ) — ( 198 )

Net income $ 66,167 $ — $ 66,167

Weighted average units outstanding:

2 unchanged sentences

Basic and diluted $ 1.88

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

December 31, 2018

Limited Partners' Common Units

Incentive Distribution Rights

Year Ended December 31, 2019

Limited Partners' Common Units Incentive Distribution Rights Total

Net income attributable to the Partnership:

Distribution $ 64,718 $ — $ 64,718

Distribution in excess of net income ( 3,737 ) — ( 3,737 )

Net income $ 60,981 $ — $ 60,981

Weighted average units outstanding:

2 unchanged sentences

Basic and diluted $ 1.77

December 31, 2017

Limited Partners' Common Units

Limited Partners' Subordinated Units

Incentive Distribution Rights

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Year Ended December 31, 2018

Limited Partners' Common Units Incentive Distribution Rights Total

Net income attributable to the Partnership:

(Distribution in excess of net income) net income

in excess of distribution

Distribution $ 53,516 $ 733 $ 54,249

Distribution in excess of net income ( 4,902 ) — ( 4,902 )

Net income $ 48,614 $ 733 $ 49,347

Weighted average units outstanding:

5 unchanged sentences

Marginal Percentage Interest in Distributions

Total Quarterly Distribution Per Unit

Total Quarterly Distribution Per Unit Unitholders IDR Holders

Above $ 1.2938 up to $ 1.4063

85.0 % 15.0 %

Above $ 1.4063 up to $ 1.6875

75.0 % 25.0 %

Above $ 1.6875

50.0 % 50.0 %

The Partnership's distribution for the three months ended December 31, 2020 did not exceed the $ 1.2938 per unit threshold, and, as a result, no distribution was made with respect to the Partnership's incentive distribution rights to Westlake, as the holder of the Partnership' incentive distribution rights.

2 unchanged sentences

Year Ended December 31,

2020 2019 2018

Distributions per common unit $ 1.8856 $ 1.8005 $ 1.6134

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Partners' Equity

Following the Partnership's cash distribution for the second quarter of 2017, the requirement under the Partnership Agreement for the conversion of all subordinated units was satisfied.

As a result, effective August 30, 2017, the 12,686,115 subordinated units owned by Westlake were converted into common units on a one-for-one basis and thereafter participate on terms equal with all other common units in distributions of available cash.

On September 29, 2017, the Partnership completed its secondary offering of 5,175,000 common units at a price of $ 22.00 per unit.

Net proceeds to the Partnership from the sale of the units were $ 110,739 , net of underwriting discounts, structuring fees and estimated offering expenses of approximately $ 3,111 .

On October 4, 2018, the Partnership and Westlake Chemical Partners GP LLC, the general partner of the Partnership, entered into an Equity Distribution Agreement with UBS Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBC Capital Markets, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC to offer and sell the Partnership's common units, from time to time, up to an aggregate offering amount of $ 50,000 .

The Equity Distribution Agreement was amended on February 28, 2020 to reference a new shelf registration for utilization under this agreement.

No common units were issued under this program as of December 31, 2020.

2 unchanged sentences

TTWF LP, Westlake's principal stockholder and a related party, acquired 1,401,869 common units out of 2,940,818 common units issued in the private placement.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Related Party Transactions

6 unchanged sentences

Year Ended December 31,

2020 2019 2018

Net sales—Westlake $ 888,245 $ 937,625 $ 1,074,957

1 unchanged sentence

On August 4, 2016, OpCo and Westlake entered into an amendment to the Ethylene Sales Agreement in order to provide that certain of the pricing components that make up the price for ethylene sold thereunder would be modified to reflect the portion of OpCo's production capacity that is used to process Westlake's purge gas instead of producing ethylene and to clarify that costs specific to the processing of Westlake's purge gas would be recovered under the Services and Secondment Agreement, and not the Ethylene Sales Agreement.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

During the year ended December 31, 2020, the Lake Charles Petro 1 and Petro 2 facilities were impacted by Hurricanes Laura and Delta, which resulted in force majeure events under the Ethylene Sales Agreement.

As a result of the force majeure events, the Partnership recognized a buyer deficiency fee of $ 69,555 as a component of net sales for the year ended December 31, 2020, representing fixed margin and unavoided operating and maintenance capital expenditures and maintenance expenses per pound of volume committed by Westlake during the force majeure events.

Payment for the buyer deficiency fee was received by the Partnership in January 2021.

Cost of Sales from Related Parties

2 unchanged sentences

Year Ended December 31,

2020 2019 2018

Feedstock purchased from Westlake and included in cost of sales $ 255,910 $ 366,031 $ 556,362

Other charges from Westlake and included in cost of sales 103,273 106,564 114,364

Total $ 359,183 $ 472,595 $ 670,726

Services from Related Parties Included in Selling, General and Administrative Expenses

2 unchanged sentences

Year Ended December 31,

2020 2019 2018

Services received from Westlake and included in selling, general and

administrative expenses $ 22,162 $ 26,946 $ 24,618

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Goods and Services from Related Parties Capitalized as Assets

2 unchanged sentences

Year Ended December 31,

2020 2019 2018

Goods and services purchased from Westlake and capitalized as assets $ 1,736 $ 2,503 $ 2,519

6 unchanged sentences

Receivable under the Investment Management Agreement $ 123,228 $ 162,773

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Accounts Receivable

Accounts Receivable from Related Parties

The Partnership's accounts receivable from Westlake result primarily from ethylene sales to Westlake, any shortfall recoverable from Westlake and any buyer deficiency fees, in each case under the Ethylene Sales Agreement.

3 unchanged sentences

Accounts receivable—Westlake $ 108,028 $ 42,847

Accounts Payable

Accounts Payable to Related Parties

The Partnership's accounts payable to Westlake result primarily from feedstock purchases under the Feedstock Supply Agreement and services provided under the Services and Secondment Agreement and the Omnibus Agreement.

1 unchanged sentence

Accounts payable—Westlake $ 7,855 $ 15,201

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Debt Payable to Related Parties

1 unchanged sentence

Interest on related party debt payable balances, net of capitalized interest, for the years ended December 31, 2020, 2019 and 2018 was $ 12,038 , $ 19,623 and $ 21,433 , respectively, and is reflected as a component of other income (expense) in the consolidated and statements of operations.

Interest capitalized as a component of property, plant and equipment on related party debt was $ 0 and $ 175 for the years ended December 31, 2019 and 2018 , respectively.

At December 31, 2019 and 2018 , accrued interest on related party debt was $ 4,187 and $ 5,448 , respectively, and is reflected as a component of accrued liabilities in the consolidated balance sheets.

Interest capitalized as a component of property, plant and equipment on related party debt was zero for the years ended December 31, 2020 and 2019, respectively.

At December 31, 2020 and 2019, accrued interest on related party debt was $ 2,336 and $ 4,187 , and is reflected as a component of accrued liabilities in the consolidated balance sheets.

Debt payable to related parties was as follows:

8 unchanged sentences

During the years ended December 31, 2020, 2019 and 2018, the Partnership reimbursed $ 279 , $ 293 and $ 418 , respectively, to Westlake for certain state tax payments.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

See Note 10 above for an additional related party transaction.

7 unchanged sentences

The Partnership also bears the risk that it could lose the benefit of market improvements over the fixed derivative price for the term and volume of the derivative instruments (as such improvements would accrue to the benefit of the counterparty).

The Partnership had non-hedge designated derivatives covering approximately 39.1 million gallons and 93.0 million pounds of commodities as of December 31, 2019 and 21.0 million gallons and 50.0 million pounds of commodities as of December 31, 2018.

At December 31, 2019, the fair value of these non-hedge designated derivatives recorded as accrued liabilities and accounts receivable, net were $ 1,959 and $ 597 , respectively.

As of December 31, 2020, all non-hedge designated derivatives had been settled.

The Partnership had non-hedge designated derivatives covering approximately 39.1 million gallons and 93.0 million pounds of commodities as of December 31, 2019.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

At December 31, 2019, the fair value of these derivative instruments recorded as accrued liabilities and accounts receivable, net were $ 1,959 and $ 597 , respectively.

The gains related to these derivatives recognized in net sales were $ 836 and $ 253 for the years ended December 31, 2019 and 2018 , respectively, and the losses recognized in cost of sales were $ 3,335 and $ 315 for the years ended December 31, 2019 and 2018 , respectively.

There were no non-hedge designated derivative instruments for the year ended December 31, 2017.

The loss related to these derivatives recognized in net sales was $ 805 for the year ended December 31, 2020 and the gain related to these derivatives recognized in net sales was $ 836 for the year ended December 31, 2019.

The gain recognized in cost of sales was $ 228 for the year ended December 31, 2020 and the loss recognized in cost of sales was $ 3,335 for the year ended December 31, 2019.

The Partnership's commodity contracts are measured using forward curves supplied by industry recognized sources and unrelated third-party services and classified as Level 2 under the fair value measurement guidance.

7 unchanged sentences

The phantom units along with a corresponding number of DERs were granted to certain non-employee directors of the general partner of the Partnership during the years ended December 31, 2020, 2019 and 2018.

These phantom units vest on either the first or third anniversary of the grant date.

These phantom units vest on the first anniversary of the grant date.

There were no forfeitures under the Plan during 2020, 2019 and 2018.

During 2019, the vesting of 4,638 phantom units was accelerated in connection with the retirement of one of the Partnership's non-employee directors.

During each of the year 2020 and 2019, the vesting of 4,638 phantom units were accelerated in connection with the retirement of one of the Partnership's non-employee directors.

The total fair value of phantom units that vested during the year ended December 31, 2020 was $ 260 .

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Non-vested phantom unit awards as of December 31, 2020 and 2019 and awards granted during the respective periods were as follows:

Units Weighted

Average Fair Value

Non-vested balance at December 31, 2018 19,677 $ 23.78

Granted 18,272 22.03

Vested ( 24,315 ) 21.90

Non-vested balance at December 31, 2019 13,634 23.24

Granted 20,439 20.17

Vested ( 13,634 ) 19.08

Non-vested balance at December 31, 2020 20,439 22.33

5 unchanged sentences

The unrecognized compensation cost associated with all grants under the Plan at December 31, 2020 was $ 263 and the weighted average remaining term of the units at December 31, 2020 was 0.58 years.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Fair Value Measurements

11 unchanged sentences

Inputs used to estimate the fair values of the Partnership's long-term debt include the selection of an appropriate discount rate.

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Value Carrying

OpCo Revolver $ 22,619 $ 23,301 $ 22,619 $ 23,364

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

MLP Revolver 377,055 383,284 377,055 379,452

The Partnership is a limited partnership and is treated as a partnership for U.S.

3 unchanged sentences

Year Ended December 31,

2020 2019 2018

State and local $ 671 $ 743 $ 578

4 unchanged sentences

Year Ended December 31,

2020 2019 2018

Provision for federal income tax, at statutory rate $ 71,755 $ 70,062 $ 69,425

2 unchanged sentences

Total provision $ 564 $ 728 $ 22

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

The tax effects of the principal temporary differences between financial reporting and income tax reporting are as follows:

8 unchanged sentences

Accrued liabilities were $ 18,768 and $ 17,507 at December 31, 2020 and 2019, respectively.

Accruals related to interest expense, maintenance expenses, taxes, capital expenditures and commodity derivatives, which are components of accrued liabilities, were $ 4,186 , $ 3,225 , $ 2,611 , $ 2,375 and $ 1,959 at December 31, 2019 , respectively, and were $ 5,448 , $ 2,688 , $ 1,564 , $ 2,818 and $ 315 at December 31, 2018 , respectively.

Accruals related to interest expense, maintenance expenses, taxes, and capital expenditures, which are components of accrued liabilities, were $ 2,336 , $ 3,905 , $ 6,207 and $ 2,286 at December 31, 2020, respectively, and were $ 4,186 , $ 3,225 , $ 2,611 and $ 2,375 at December 31, 2019, respectively.

No other component of accrued liabilities was more than five percent of total current liabilities.

3 unchanged sentences

The change in capital expenditure accrual resulted in a decrease in additions to property, plant and equipment by $ 232 for the year ended December 31, 2019.

WESTLAKE CHEMICAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(in thousands of dollars, except unit amounts and per unit data)

Interest and Income Taxes

9 unchanged sentences

The Partnership does not believe that any of these legal proceedings will have a material adverse effect on its financial condition, results of operations or cash flows.

Other Commitments

The Partnership has various purchase commitments for its capital projects and for materials, supplies and services incident to the ordinary conduct of business.

WESTLAKE CHEMICAL PARTNERS LP

1 unchanged sentence

(in thousands of dollars, except unit amounts and per unit data)

Other Commitments

The Partnership has various purchase commitments for its capital projects and for materials, supplies and services incident to the ordinary conduct of business.

Quarterly Financial Information (Unaudited)

Three Months Ended

2020 June 30,

2020 September 30,

2020 December 31,

Net sales $ 250,549 $ 238,500 $ 231,969 $ 245,652

Gross profit 103,548 90,030 100,391 84,914

Income from operations 97,352 83,891 94,136 77,609

Net income 93,770 80,377 91,848 75,124

Net income attributable to Westlake Chemical Partners LP

17,747 14,860 18,535 15,025

Net income attributable to Westlake Chemical Partners LP (1)

1 unchanged sentence

Weighted average limited partner units outstanding (basic

35,194,545 35,194,545 35,194,545 35,197,435

Three Months Ended

2019 June 30,

2019 September 30,

2019 December 31,

Net sales $ 299,086 $ 270,062 $ 249,925 $ 272,798

Gross profit 90,654 91,958 93,219 103,597

Income from operations 83,681 84,319 86,397 95,753

Net income 78,396 80,110 82,479 91,910

Net income attributable to Westlake Chemical Partners LP 14,955 13,733 14,922 17,371

3 unchanged sentences

32,345,398 35,188,189 35,188,189 35,191,487

______________________________

(1) Basic and diluted earnings per common unit ("EPU") for each quarter is computed using the weighted average units outstanding during that quarter, while EPU for the year is computed using the weighted average units outstanding for the year.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data