Delek Logistics Partners, LP Reports Fourth Quarter and Full-Year 2012 Results
Delek Logistics Partners, LP Reports Fourth Quarter and Full-Year 2012 Results
BRENTWOOD, Tenn.--(BUSINESS WIRE)-- Delek Logistics Partners, LP (NYS: DKL) ("Delek Logistics"), a growth-oriented master limited partnership focused on owning and operating midstream energy infrastructure, today announced financial results for the fourth quarter and full year 2012.
Delek Logistics commenced operations on November 7, 2012 upon the successful completion of its initial public offering. For the 55 day period beginning November 7, 2012 and ended December 31, 2012 (the "post-closing period"), Delek Logistics reported net income of $8.4 million, or $0.34 per common partner unit.
For the post-closing period, distributable cash flow was $8.1 million and earnings before interest, taxes depreciation and amortization ("EBITDA") was $10.2 million. Delek Logistics paid its first regular cash distribution of $5.5 million, or $0.224 per unit on February 14, 2013. This distribution was pro-rated for the post-closing period and corresponds to Delek Logistics' minimum quarterly distribution of $0.375 per unit, or $1.50 per unit on an annualized basis.
Uzi Yemin, Chairman and Chief Executive Officer of Delek Logistics' general partner, remarked: "The strong cash flow we generated since the initial public offering reflects a great start for us. Delek Logistics' EBITDA and distributable cash flow exceeded our expectations as our west Texas marketing business performed well and SALA Gathering System volumes were higher than expected. In addition, our cash flow was benefited by lower maintenance capital expenditures than forecast. Going forward, our focus will remain on delivering both growth and value as we explore opportunities to expand. We currently expect to recommend to the Board of Directors of Delek Logistics' general partner an increase in our quarterly distribution to $0.385 per unit for the quarter ending March 31, 2013, which would represent a 2.7 percent increase from our minimum quarterly distribution."
Financial Results
Delek Logistics commenced operations on November 7, 2012 upon successful completion of its initial public offering (the "offering") and the concurrent contribution of certain assets from its sponsor, Delek US Holdings, Inc. (NYS: DK) . For accounting purposes, the results of operations prior to November 7, 2012 from the assets and entities that were contributed to us concurrent with the offering, were attributed to Delek Logistics Partners, LP Predecessor (our "Predecessor"). Therefore, results from operations for the three months and twelve months ended December 31, 2012 include results for both the Predecessor and Delek Logistics. Because results presented from prior periods are not comparable, this earnings release focuses on results from operations during the post-closing period. A reconciliation of the post-closing period to the full fourth quarter 2012 results is provided in tables attached to this release.
Revenues during the post-closing period were $111.2 million and contribution margin was $11.3 million. The Pipeline and Transportation segment's performance during this period primarily benefited from elevated throughput of 21,595 barrels per day in the SALA Gathering System relative to the forecast provided in the prospectus filed with the Securities and Exchange Commission on November 1, 2012, pro-rated for a 55 day period.
In addition, performance in the Wholesale Marketing and Terminalling segment benefited from a $3.14 per barrel margin in west Texas as demand for refined products benefited from a robust economy in that area as oil drilling activity has increased. The east Texas business sold 61,399 barrels per day of refined product under the marketing agreement with Delek US' Tyler, Texas refinery, which was higher than expected. This combination contributed to better than expected performance for this segment during this period relative to the forecast provided in the prospectus pro-rated for a 55 day period.
Total operating expenses of $2.9 million and general and administrative expenses of $1.2 million for the post-closing period were in line with the prior forecast.
As of December 31, 2012, Delek Logistics had a cash balance of $23.5 million of which $6.3 million is owed to Delek US for working capital related to the initial public offering. Total debt was $90.0 million.
Growth Strategy
Yemin continued, "Our strategy to provide continued growth and value is focused on generating a stable cash flow through a combination of organic expansion opportunities and acquisitions. During the first quarter 2013, we completed our Nettleton pipeline reversal project, as well as the pipeline connection for the rail offloading facility at Delek US' El Dorado, Arkansas refinery. In addition, we expect our agreements with our sponsor, Delek US, will give us the opportunity to purchase multiple logistics assets from Delek US over the next two years, beginning in the second half of this year. We believe that these assets have a combined potential EBITDA of $25 to $30 million annually, as we continue to explore additional third party opportunities."
Fourth Quarter and Full-Year 2012 Results Conference Call Information
Delek Logistics will hold a conference call to discuss its fourth quarter and full-year 2012 results on March 6, 2013 at 10:00 a.m. Central Time. Investors will have the opportunity to listen to the conference call live over the Internet by going to www.DelekLogistics.com and clicking on the Investor Relations tab, at least 15 minutes early to register, download and install any necessary software. For those who cannot listen to the live broadcast, a telephonic replay will be available through June 6, 2013 by dialing (855) 859-2056, passcode 98107477. An archived version of the replay will also be available at www.DelekLogistics.com for 90 days.
About Delek Logistic Partners, LP
Delek Logistics Partners, LP, headquartered in Brentwood, Tennessee, was formed by Delek US Holdings, Inc. (NYS: DK) to own, operate, acquire and construct crude oil and refined products logistics and marketing assets. Delek Logistics' assets and operating results are reported in two segments:
Pipelines and Transportation: Approximately 200 miles of transportation pipelines and a 600 mile crude oil gathering system, in addition to associated storage facilities with 1.7 million barrels of active shell capacity supporting Delek US' El Dorado and Tyler refineries. Additionally, this segment includes the Paline pipeline, a 185 mile crude oil pipeline from Longview to Nederland, Texas.
Wholesale Marketing and Terminalling: Includes a wholesale marketing business in Texas and light product terminals, located in Abilene, Big Sandy and San Angelo, Texas, and in Nashville and Memphis, Tennessee.
Safe Harbor Provisions Regarding Forward-Looking Statements
This press release contains "forward-looking" statements within the meaning of the federal securities laws. These statements contain words such as "possible," "believe," "should," "could," "would," "predict," "plan," "estimate," "intend," "may," "anticipate," "will," "if," "expect" or similar expressions, as well as statements in the future tense, and can be impacted by numerous factors, including, but not limited to, the fact that a substantial majority of Delek Logistics' margin is derived from Delek US, thereby subjecting us to Delek US' business risks, our ability to continue to purchase assets from Delek US, risks relating to the securities markets generally, the impact of adverse market conditions affecting the business of Delek Logistics, adverse changes in laws including with respect to tax and regulatory matters and other risks as disclosed in our filings with the United States Securities and Exchange Commission. There can be no assurance that actual results will not differ from those expected by management of Delek Logistics. Delek Logistics undertakes no obligation to update or revise such forward-looking statements to reflect events or circumstances that occur, or which Delek Logistics becomes aware of, after the date hereof.
Factors Affecting Comparability:
The following tables present financial and operational information for the three months and year ended December 31, 2012 and 2011. For accounting purposes, the results of operations prior to November 7, 2012 from the assets and entities that were contributed to us concurrent with the offering, were attributed to Delek Logistics Partners, LP Predecessor (our "Predecessor"). Because many of these assets were historically a part of the integrated operations of Delek US, the Predecessor generally recognized the costs and most revenue associated with the gathering, pipeline, transportation, terminalling and storage services provided to Delek US on an intercompany basis or charged low or no throughput or storage fees for transportation.
Delek Logistics commenced operations on November 7, 2012 upon successful completion of its initial public offering and the concurrent contribution of certain assets from its sponsor, Delek US. For the 55 day period from November 7, 2012 to December 31, 2012 revenues and costs are recorded on all assets in accordance with new contracts that were in effect upon completion of the initial public offering. The financial and operational information for the three months and year ended December 31, 2012 include results of operations of Delek Logistics for that 55 day period.
Non-GAAP Disclosures:
EBITDA and Distributable Cash Flow. Delek Logistics defines EBITDA as net income (loss) before net interest expense, income tax expense, depreciation and amortization expense. Distributable cash flow is defined as EBITDA less net cash paid for interest, maintenance capital expenditures and income taxes. Distributable cash flow will not reflect changes in working capital balances.
EBITDA and distributable cash flow are non-U.S. GAAP supplemental financial measures that management and external users of our combined 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 in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;
the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;
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.
Delek Logistics believes that the presentation of EBITDA and distributable cash flow provide useful information to investors in assessing our financial condition, our results of operations and cash flow our business is generating. EBITDA and distributable cash flow should not be considered as alternatives to net income, operating income, cash from operations or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some, but not all items that affect net income and net cash provided by operating activities. Additionally, because EBITDA and distributable cash flow may be defined differently by other companies in our industry, Delek Logistics' definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. Please see the tables below for a reconciliation of EBITDA and distributable cash flow to their most directly comparable financial measures calculated and presented in accordance with U.S. GAAP.
Delek Logistics Partners, LP | |||||||||||||||||||||
Reconciliation of Amounts Reported Under U.S. GAAP | |||||||||||||||||||||
Predecessor | Delek Logistics Partners, LP | Three Months Ended | Year Ended | ||||||||||||||||||
($ in thousands) | 10/1/2012 - 11/6/12 | 11/7/12 - 12/31/12 | December 31, 2012 | December 31, 2012 | |||||||||||||||||
Reconciliation of EBITDA to net income: | |||||||||||||||||||||
Net income | $ | 17,682 | $ | 8,410 | $ | 26,092 | $ | 34,059 | |||||||||||||
Add: | |||||||||||||||||||||
Income tax (benefit) expense | (19,271 | ) | 64 | (19,207 | ) | (14,024 | ) | ||||||||||||||
Depreciation and amortization | 822 | 1,205 | 2,027 | 8,675 | |||||||||||||||||
Interest Expense, net | 410 | 496 | 906 | 2,682 | |||||||||||||||||
EBITDA | $ | (357 | ) | $ | 10,175 | $ | 9,818 | $ | 31,392 | ||||||||||||
Reconciliation of EBITDA to net cash from operating activities: | |||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 53,806 | $ | (20,406 | ) | $ | 33,400 | $ | 34,363 | ||||||||||||
Less: Amortization of unfavorable contract liability to revenue | (267 | ) | (401 | ) | (668 | ) | (668 | ) | |||||||||||||
Less: Amortization of deferred financing costs | 123 | 112 | 235 | 381 | |||||||||||||||||
Less: Accretion of asset retirement obligations | 16 | 3 | 19 | 98 | |||||||||||||||||
Less: Deferred taxes (1) | (96 | ) | 3 | (93 | ) | (228 | ) | ||||||||||||||
Less: Loss on asset disposals | 4 | — | 4 | 9 | |||||||||||||||||
Less: Unit-based compensation expense | — | 1 | 1 | 93 | |||||||||||||||||
Less: Changes in assets and liabilities | 54,056 | (29,739 | ) | 24,317 | 10,478 | ||||||||||||||||
Add: Income tax (benefit) expense | (737 | ) | 64 | (673 | ) | 4,510 | |||||||||||||||
Add: Interest expense, net | 410 | 496 | 906 | 2,682 | |||||||||||||||||
EBITDA | $ | (357 | ) | $ | 10,175 | $ | 9,818 | $ | 31,392 | ||||||||||||
Reconciliation of distributable cash flow to EBITDA: | |||||||||||||||||||||
EBITDA | $ | (357 | ) | $ | 10,175 | $ | 9,818 | $ | 31,392 | ||||||||||||
Less: Cash interest, net | 287 | 384 | 671 | 2,301 | |||||||||||||||||
Less: Maintenance and Regulatory capital expenditures | — | 1,179 | 1,179 | 2,985 | |||||||||||||||||
Less: Income tax (benefit) expense (1) | (737 | ) | 64 | (673 | ) | 4,510 | |||||||||||||||
Add: Non-cash unit based compensation expense | — | 1 | 1 | 93 | |||||||||||||||||
Less: Amortization of unfavorable contract liability | 267 | 401 | 668 | 668 | |||||||||||||||||
Distributable cash flow | $ | (174 | ) | $ | 8,148 | $ | 7,974 | $ | 21,021 | ||||||||||||
(1) Deferred taxes and income tax expense represent the period to date deferred taxes and tax expense, excluding a one-time tax benefit of $(18.5) million. The majority of the Partnership's deferred tax assets and liabilities relates to the Predecessor's conversion to a partnership and as a result of such conversion we are not subject to federal income taxes. The conversion from a taxable corporation to a passthrough resulted in this one-time tax benefit.
Delek Logistics Partners, LP | |||||||||||
Condensed Consolidated Balance Sheets (Unaudited) | |||||||||||
December 31, | |||||||||||
2012 | 2011 | ||||||||||
Predecessor | |||||||||||
(In thousands) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 23,452 | $ | 35 | |||||||
Accounts receivable | 27,725 | 22,577 | |||||||||
Accounts receivable from related party | — | 5,618 | |||||||||
Inventory | 14,351 | 18,859 | |||||||||
Deferred tax assets | 14 | 733 | |||||||||
Other current assets | 169 | 629 | |||||||||
Total current assets | 65,711 | 48,451 | |||||||||
Property, plant and equipment: | |||||||||||
Property, plant and equipment | 172,300 | 144,980 | |||||||||
Less: accumulated depreciation | (18,790 | ) | (11,300 | ) | |||||||
Property, plant and equipment, net | 153,510 | 133,680 | |||||||||
Goodwill | 10,454 | 7,499 | |||||||||
Intangible assets, net | 12,430 | 10,025 | |||||||||
Other non-current assets | 3,664 | 172 | |||||||||
Total assets | $ | 245,769 | $ | 199,827 | |||||||
LIABILITIES AND EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 21,849 | $ | 26,386 | |||||||
Accounts payable to related parties | 10,148 | — | |||||||||
Current portion of revolving credit facility | — | 30,300 | |||||||||
Interest payable | — | 17 | |||||||||
Fuel and other taxes payable | 4,650 | 4,234 | |||||||||
Accrued employee costs | — | 226 | |||||||||
Current portion of environmental liabilities | — | 37 | |||||||||
Accrued expenses and other current liabilities | 3,615 | 3,084 | |||||||||
Total current liabilities | 40,262 | 64,004 | |||||||||
Non-current liabilities: | |||||||||||
Revolving credit facility | 90,000 | — | |||||||||
Asset retirement obligations | 1,440 | 1,342 | |||||||||
Deferred tax liabilities | 17 | 19,498 | |||||||||
Other non-current liabilities | 9,625 | 7,261 | |||||||||
Total non-current liabilities | 101,082 | 28,101 | |||||||||
Equity: | |||||||||||
Predecessor division equity | — | 107,722 | |||||||||
Common unitholders - public (9,200,000 units issued and outstanding) | 178,728 | — | |||||||||
Common unitholders - Delek (2,799,258 units issued and outstanding) | (127,129 | ) | — | ||||||||
Subordinated unitholders - Delek (11,999,258 units issued and outstanding) | 52,875 | — | |||||||||
General partner - Delek (489,766 units issued and outstanding) | (49 | ) | — | ||||||||
Total equity | 104,425 | 107,722 | |||||||||
Total liabilities and equity | $ | 245,769 | $ | 199,827 | |||||||
Delek Logistics Partners, LP | ||||||||||||||||
Condensed Consolidated Statements of Income (Unaudited) | ||||||||||||||||
Reconciliation of Partnership to Predecessor | ||||||||||||||||
Predecessor | Delek Logistics Partners, LP | Three Months Ended | ||||||||||||||
