Genesis Energy, L.P. Reports Second Quarter 2018 Results HOUSTON
Genesis Energy, L.P. (NYSE: GEL) today announced its second quarter
results.
We generated the following financial results for the second quarter of
20181:
-
Net Income Attributable to Genesis Energy, L.P. of $11.0 million for
the second quarter of 2018 compared to $33.7 million for the same
period in 2017.
-
Cash Flows from Operating Activities of $64.5 million for the second
quarter of 2018 compared to $115.3 million for the same period in
2017, a decrease of $50.8 million, or 44%, principally due to an
increase in working capital needs during the 2018 Quarter.
-
Available Cash before Reserves of $101.0 million for the second
quarter of 2018 compared to $99.3 million for the same period in 2017,
an increase of $1.7 million, or 2%. During the second quarter of 2017,
Available Cash before Reserves included the effects of certain one
time items with a net benefit of $14.0 million, which is further
discussed and defined below. Available Cash before Reserves provided
1.55X coverage for the quarterly distribution of $0.53 per common unit
attributable to the second quarter. We will pay distributions on our
convertible preferred units in the form of 511,935 additional
convertible preferred units.
-
As described in more detail below, in exchange for a $30 million
payment, we granted a third party a limited option to acquire certain
of our non-core assets. We currently expect that third party to
exercise its option and close that sale in the third quarter. We
currently plan to apply the related net proceeds to reduce the balance
outstanding under our revolving credit facility, which we project will
reduce our bank leverage ratio by approximately 0.3 times.
-
Adjusted EBITDA of $163.8 million for the second quarter of 2018
compared to $140.5 million for the same period in 2017, an increase of
$23.3 million, or 16.5%.
1 We have recast our prior period non-GAAP measures to
conform to our revised approach to defining and presenting such
measures, which we adopted in the fourth quarter of 2017. For additional
information, please refer to the section entitled “Non-GAAP Measures,”
below.
Grant Sims, CEO of Genesis Energy, said, “On August 7, 2018, we granted
a third party a time-limited option to acquire certain of our non-core
assets in exchange for an option payment of $30 million. If that third
party timely exercises its option, it will be obligated to purchase
those assets for a specified sum less $30 million, subject to customary
conditions to closing. There is no guaranty (i) that that third party
will exercise its option or (ii) if that third party exercises its
option, that the conditions to closing will be satisfied or the closing
will otherwise occur.
Turning to our financial results, businesses in the quarter continued to
perform well and delivered financial results that provided 1.55 times
coverage of our sequentially increased quarterly distribution.
Something that we are focused on is performance below our expectations
in our offshore business. Three particular major fields have
underperformed our expectations over the last two or three quarters. One
field we believe is underperforming as a result of reservoir quality
degradation and not due to mechanical factors. Offsetting this in future
years are two subsea tie-backs to the same dedicated in-field production
facility scheduled to come online; one in early 2019 and one later in
2019. Between now and then, however, our segment margin will be around
$5 million a quarter less than what we had previously anticipated.
The other two large underperforming fields we think are predominantly
timing related. To maximize reserve recoveries, the operator appears to
be producing at a slower rate than communicated to us last year. This
lower current level, and yet consistent longer-term production,
nonetheless has negatively affected our reasonably anticipated segment
margin by approximately $5 million a quarter.
Longer term we are quite bullish on, and pleased with, the activity in
and around our substantial footprint of assets in the Gulf of Mexico.
Additionally, we are currently seeing increasing demand for our assets
from production that is currently dedicated to 3rd party pipelines but
is unable to get to shore due to such competitive pipelines being, in
our estimation, oversubscribed. Given our excess capacity and
connectivity on certain of our systems, we expect to benefit from this
takeaway capacity constraint in future periods.
Our recently acquired soda ash operations have continued to exceed
expectations. We believe we are on track to produce $165-$175 million in
margin for 2018, up from the previously discussed range of $155-$165
million. Our refinery services business continues to perform well and
benefits from many of the macro factors and worldwide economic activity
that also positively affects soda ash.
Volumes through our onshore terminals and in our pipelines have
increased from the year earlier period and sequentially, although to
date not at the levels we had previously anticipated. However, based
upon July and known nominations for the remainder of the third quarter,
we would expect to see meaningful growth in future quarters, especially
at our Scenic Station facility servicing the ExxonMobil Baton Rouge
refinery in Louisiana. We would anticipate volumes to increase later
this year and into 2019 in Texas as integrity work is completed on a
downstream pipeline which currently has constrained physical flows to
under the minimum volume commitment of our customer.
Margin in our marine segment actually increased slightly on a sequential
quarterly basis for the second quarter in a row. While we are reasonably
hopeful we've put in a bottom for the quarterly segment margin from our
entire fleet of assets, we have no expectation of the fundamentals for
marine transportation showing any significant improvement through at
least the next several years.
The net effect of this financial performance is slightly lower
quarterly, and cumulative, EBITDA than we had expected when we announced
our capital reallocation plan last fall. While the coverage of our
distribution is strong, the pace of our natural de-levering is slower.
We will continue to target and ultimately move to around 4 times or less
on our leverage calculation, but it could take a little longer than we
had originally reasonably anticipated.
We intend to be prudent and diligent in maintaining financial
flexibility to allow the partnership to opportunistically build long
term value for all stakeholders without ever losing our commitment to
safe, reliable and responsible operations.”
Financial Results
Segment Margin
On September 1, 2017, we acquired our trona and trona-based exploring,
mining, processing, producing, marketing and selling business, which we
refer to as our Alkali business, for approximately $1.325 billion. At
the closing, we entered into a transition service agreement to
facilitate a smooth transition of operations and uninterrupted services
for both employees and customers. We report the results of our Alkali
business in our renamed sodium and sulfur services segment, which
includes our Alkali business as well as our sulfur removal refinery
services operations, which remove sulfur from gas streams for refineries.
Variances between the second quarter of 2018 (the “2018 Quarter”) and
the second quarter of 2017 (the “2017 Quarter”) in these components are
explained below.
Segment margin results for the 2018 Quarter and 2017 Quarter were as
follows:
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2018
|
|
2017
|
|
|
(in thousands)
|
Offshore pipeline transportation
|
|
$
|
71,602
|
|
|
$
|
78,211
|
Sodium minerals and sulfur services
|
|
64,542
|
|
|
16,337
|
Onshore facilities and transportation
|
|
25,744
|
|
|
25,296
|
Marine transportation
|
|
11,966
|
|
|
14,156
|
Total Segment Margin
|
|
$
|
173,854
|
|
|
$
|
134,000
|
|
|
|
|
|
|
|
|
Offshore pipeline transportation Segment Margin for the 2018 Quarter
decreased $6.6 million, or 8.5%, from the 2017 Quarter, primarily due to
lower volumes. The 2018 Quarter was negatively impacted by both
temporary downtime and the underperformance at several major fields in
the deepwater Gulf of Mexico affecting our CHOPS and Poseidon pipelines
and certain associated laterals which we own. In addition, the minimum
bill reservation fees we collect on one of our offshore oil pipelines
had a prior year step down, and we collected approximately $2.2 million
less in segment margin relative to the 2017 Quarter.
Sodium minerals and sulfur services Segment Margin for the 2018 Quarter
increased $48.2 million, or 295.1%. This increase is primarily due to
the inclusion of contributions from our Alkali Business during the 2018
Quarter. The contributions thus far from our Alkali Business have
exceeded our expectations and we expect continued strong performance
throughout 2018 as we continue to remain the global leader in natural
soda ash production. Costs impacting the results of our Alkali Business,
many of which are similar in nature to costs related to our sulfur
removal business, include costs associated with processing and producing
soda ash (and other Alkali products) and marketing and selling
activities. In addition, costs include activities associated with mining
and extracting trona ore (including energy costs and employee
compensation).
Our legacy refinery services results improved in the 2018 Quarter. The
2018 Quarter experienced a 24% increase in NaHS volumes relative to the
2017 Quarter, which is primarily due to an uptick in demand from certain
of our international mining customers, primarily located in South
America.
Onshore facilities and transportation Segment Margin increased by $0.4
million, or 1.8%, between the two quarters. This increase is primarily
attributable to a full quarter of contribution to segment margin from
our re-purposed Texas system in 2018, that became operational beginning
in May 2017, along with increased volumes on our pipeline and terminal
infrastructure in the Baton Rouge corridor relative to the 2017 Quarter.
While volumes were down on our Texas system between the three month
periods, due to integrity work being completed on a downstream pipeline,
we were able to recognize three months of our minimum volume commitment
earned during the 2018 Quarter in segment margin. This was partially
offset by lower demand for our services in our historical back-to-back,
or buy/sell, crude oil marketing business associated with aggregating
and trucking crude oil from producers' leases to local or regional
re-sale points, including the effects of ceasing our operations in South
and West Texas.
Marine transportation Segment Margin for the 2018 Quarter decreased $2.2
million, or 15.5%, from the 2017 Quarter. This decrease in Segment
Margin is primarily attributable to our offshore barge fleet entering
into short-term spot price contracts, which can lead to a less favorable
rebill structure and higher operating costs, as our last legacy long
term contract rolled off during the first quarter of 2018. We have
continued to enter into short term contracts (less than a year) in both
the inland and offshore markets because we believe the day rates
currently being offered by the market are at, or approaching, cyclical
lows. While we are reasonably hopeful we've reached a bottom for the
quarterly segment margin from our entire fleet of assets, we have no
expectation of the fundamentals for marine transportation showing any
significant improvement through at least the next several years. This
excludes the M/T American Phoenix which is under long term contract
through September 2020. This was partially offset by higher utilization
on our inland barge operation during the 2018 Quarter.
Other Components of Net Income
In the 2018 Quarter, we recorded Net Income Attributable to Genesis
Energy, L.P. of $11.0 million compared to $33.7 million in the 2017
Quarter. The 2018 Quarter was negatively impacted by an increase in
interest expense and depreciation expense of $19.9 million and $21.5
million, respectively, principally related to the acquisition of our
Alkali business, and an increase in general and administrative expenses
of $4.2 million primarily related to our overall transition and
integration of our Alkali business. These items were partially offset by
our $39.9 million increase in segment margin as discussed above. The
2017 Quarter also included a gain on the sale of assets of $26.7 million
and a non-cash provision for leased items no longer in use of $12.6
million ("Certain one time items").
Earnings Conference Call
We will broadcast our Earnings Conference Call on Wednesday, August 8,
2018, at 9:00 a.m. Central time (10:00 a.m. Eastern time). This call can
be accessed at www.genesisenergy.com.
Choose the Investor Relations button. For those unable to attend the
live broadcast, a replay will be available beginning approximately one
hour after the event and remain available on our website for 30 days.
There is no charge to access the event.
Genesis Energy, L.P. is a diversified midstream energy master limited
partnership headquartered in Houston, Texas. Genesis’ operations include
offshore pipeline transportation, sodium minerals and sulfur services,
marine transportation and onshore facilities and transportation.
Genesis’ operations are primarily located in Texas, Louisiana, Arkansas,
Mississippi, Alabama, Florida, Wyoming and the Gulf of Mexico.
|
|
|
|
|
GENESIS ENERGY, L.P.
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
|
(in thousands, except per unit amounts)
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
REVENUES
|
|
$
|
752,388
|
|
|
$
|
406,723
|
|
|
$
|
1,478,196
|
|
|
$
|
822,214
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
Costs of sales and operating expenses
|
|
600,279
|
|
|
306,013
|
|
|
1,180,077
|
|
|
602,819
|
|
General and administrative expenses
|
|
13,529
|
|
|
9,338
|
|
|
25,203
|
|
|
19,314
|
|
Depreciation and amortization
|
|
77,680
|
|
|
56,609
|
|
|
152,935
|
|
|
112,721
|
|
Gain on sale of assets
|
|
—
|
|
|
(26,684
|
)
|
|
—
|
|
|
(26,684
|
)
|
OPERATING INCOME
|
|
60,900
|
|
|
61,447
|
|
|
119,981
|
|
|
114,044
|
|
Equity in earnings of equity investees
|
|
8,324
|
|
|
10,426
|
|
|
18,896
|
|
|
21,761
|
|
Interest expense
|
|
(57,909
|
)
|
|
(37,990
|
)
|
|
(114,045
|
)
|
|
(74,729
|
)
|
Other expense
|
|
(188
|
)
|
|
—
|
|
|
(5,432
|
)
|
|
—
|
|
INCOME BEFORE INCOME TAXES
|
|
11,127
|
|
|
33,883
|
|
|
19,400
|
|
|
61,076
|
|
Income tax expense
|
|
(256
|
)
|
|
(303
|
)
|
|
(631
|
)
|
|
(558
|
)
|
NET INCOME
|
|
10,871
|
|
|
33,580
|
|
|
18,769
|
|
|
60,518
|
|
Net loss attributable to noncontrolling interests
|
|
126
|
|
|
153
|
|
|
262
|
|
|
305
|
|
NET INCOME ATTRIBUTABLE TO GENESIS ENERGY, L.P.
|
|
$
|
10,997
|
|
|
$
|
33,733
|
|
|
$
|
19,031
|
|
|
$
|
60,823
|
|
Less: Accumulated distributions attributable to Class A Convertible
Preferred Units
|
|
(17,257
|
)
|
|
—
|
|
|
(34,145
|
)
|
|
—
|
|
NET INCOME(LOSS) AVAILABLE TO COMMON UNITHOLDERS
|
|
$
|
(6,260
|
)
|
|
$
|
33,733
|
|
|
$
|
(15,114
|
)
|
|
$
|
60,823
|
|
NET INCOME(LOSS) PER COMMON UNIT:
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
$
|
(0.05
|
)
|
|
$
|
0.28
|
|
|
$
|
(0.12
|
)
|
|
$
|
0.50
|
|
WEIGHTED AVERAGE OUTSTANDING COMMON UNITS:
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
122,579
|
|
|
122,579
|
|
|
122,579
|
|
|
120,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GENESIS ENERGY, L.P.
|
OPERATING DATA - UNAUDITED
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Offshore Pipeline Transportation Segment
|
|
|
|
|
|
|
|
|
Crude oil pipelines (barrels/day unless otherwise noted):
|
|
|
|
|
|
|
|
|
CHOPS
|
|
181,291
|
|
|
219,693
|
|
|
190,455
|
|
|
228,851
|
|
Poseidon (1)
|
|
225,559
|
|
|
256,727
|
|
|
232,090
|
|
|
258,507
|
|
Odyssey (1)
|
|
90,326
|
|
|
116,663
|
|
|
99,793
|
|
|
115,645
|
|
GOPL
|
|
9,110
|
|
|
6,719
|
|
|
9,431
|
|
|
8,089
|
|
Offshore crude oil pipelines total
|
|
506,286
|
|
|
599,802
|
|
|
531,769
|
|
|
611,092
|
|
|
|
|
|
|
|
|
|
|
Natural gas transportation volumes (MMbtus/d) (1)
|
|
431,853
|
|
|
502,801
|
|
|
453,910
|
|
|
539,347
|
|
|
|
|
|
|
|
|
|
|
Sodium Minerals and Sulfur Services Segment
|
|
|
|
|
|
|
|
|
NaHS (dry short tons sold)
|
|
38,090
|
|
|
30,665
|
|
|
75,304
|
|
|
65,194
|
|
Soda Ash volumes (short tons sold)
|
|
936,000
|
|
|
—
|
|
|
1,853,000
|
|
|
—
|
|
NaOH (caustic soda) volumes (dry short tons sold) (2)
|
|
27,573
|
|
|
17,809
|
|
|
57,833
|
|
|
34,216
|
|
|
|
|
|
|
|
|
|
|
Onshore Facilities and Transportation Segment
|
|
|
|
|
|
|
|
|
Crude oil pipelines (barrels/day):
|
|
|
|
|
|
|
|
|
Texas
|
|
20,643
|
|
|
31,598
|
|
|
25,060
|
|
|
19,822
|
|
Jay
|
|
13,004
|
|
|
14,435
|
|
|
14,947
|
|
|
14,868
|
|
Mississippi
|
|
6,367
|
|
|
8,520
|
|
|
6,986
|
|
|
8,668
|
|
Louisiana (3)
|
|
151,807
|
|
|
131,300
|
|
|
133,598
|
|
|
107,100
|
|
Wyoming
|
|
32,210
|
|
|
20,638
|
|
|
31,703
|
|
|
18,603
|
|
Onshore crude oil pipelines total
|
|
224,031
|
|
|
206,491
|
|
|
212,294
|
|
|
169,061
|
|
|
|
|
|
|
|
|
|
|
Free State- CO2 Pipeline (Mcf/day)
|
|
103,867
|
|
|
60,070
|
|
|
100,308
|
|
|
75,420
|
|
|
|
|
|
|
|
|
|
|
Crude oil and petroleum products sales (barrels/day)
|
|
49,278
|
|
|
48,564
|
|
|
50,818
|
|
|
47,819
|
|
|
|
|
|
|
|
|
|
|
Rail load/unload volumes (barrels/day) (4)
|
|
53,005
|
|
|
69,362
|
|
|
52,844
|
|
|
61,511
|
|
|
|
|
|
|
|
|
|
|
Marine Transportation Segment
|
|
|
|
|
|
|
|
|
Inland Fleet Utilization Percentage (5)
|
|
93.5
|
%
|
|
90.6
|
%
|
|
92.9
|
%
|
|
90.3
|
%
|
Offshore Fleet Utilization Percentage (5)
|
|
92.0
|
%
|
|
99.3
|
%
|
|
93.4
|
%
|
|
97.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Volumes for our equity method investees are presented on a 100%
basis. We own 64% of Poseidon and 29% of Odyssey, as well as equity
interests in various other entities.
|
(2)
|
|
Caustic soda sales volumes for the 2018 Quarter also include volumes
sold from our new Alkali business.
|
(3)
|
|
Total daily volume for the three months ended June 30, 2018 includes
30,532 barrels per day of crude oil transported by our new Raceland
Pipeline which became fully operational in the second quarter of
2017.
|
(4)
|
|
Indicates total barrels for which fees were charged for either
loading or unloading at all rail facilities.
|
(5)
|
|
Utilization rates are based on a 365 day year, as adjusted for
planned downtime and dry-docking.
|
|
|
|
|
|
|
|
|
GENESIS ENERGY, L.P.
|
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
|
(in thousands, except number of units)
|
|
|
|
|
|
|
|
June 30, 2018
|
|
December 31, 2017
|
ASSETS
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,846
|
|
|
$
|
9,041
|
|
Accounts receivable - trade, net
|
|
432,777
|
|
|
495,449
|
|
Inventories
|
|
92,520
|
|
|
88,653
|
|
Other current assets
|
|
42,526
|
|
|
42,890
|
|
Total current assets
|
|
575,669
|
|
|
636,033
|
|
Fixed assets and mineral leaseholds, net
|
|
5,381,003
|
|
|
5,430,535
|
|
Investment in direct financing leases, net
|
|
121,207
|
|
|
125,283
|
|
Equity investees
|
|
362,852
|
|
|
381,550
|
|
Intangible assets, net
|
|
173,685
|
|
|
182,406
|
|
Goodwill
|
|
325,046
|
|
|
325,046
|
|
Other assets, net
|
|
118,170
|
|
|
56,628
|
|
Total assets
|
|
$
|
7,057,632
|
|
|
$
|
7,137,481
|
|
LIABILITIES AND CAPITAL
|
|
|
|
|
Accounts payable - trade
|
|
$
|
239,212
|
|
|
$
|
270,855
|
|
Accrued liabilities
|
|
144,947
|
|
|
185,409
|
|
Total current liabilities
|
|
384,159
|
|
|
456,264
|
|
Senior secured credit facility
|
|
1,306,300
|
|
|
1,099,200
|
|
Senior unsecured notes, net of debt issuance costs
|
|
2,458,614
|
|
|
2,598,918
|
|
Deferred tax liabilities
|
|
12,244
|
|
|
11,913
|
|
Other long-term liabilities
|
|
293,524
|
|
|
256,571
|
|
Total liabilities
|
|
4,454,841
|
|
|
4,422,866
|
|
Mezzanine capital:
|
|
|
|
|
Class A convertible preferred units
|
|
728,459
|
|
|
697,151
|
|
Partners' capital:
|
|
|
|
|
Common unitholders
|
|
1,881,957
|
|
|
2,026,147
|
|
Accumulated other comprehensive loss
|
|
(604
|
)
|
|
(604
|
)
|
Noncontrolling interest
|
|
(7,021
|
)
|
|
(8,079
|
)
|
Total partners' capital
|
|
1,874,332
|
|
|
2,017,464
|
|
Total liabilities, mezzanine capital and partners' capital
|
|
$
|
7,057,632
|
|
|
$
|
7,137,481
|
|
|
|
|
|
|
Common Units Data:
|
|
|
|
|
Total common units outstanding
|
|
122,579,218
|
|
|
122,579,218
|
|
|
|
|
|
|
|
|
|
|
|
GENESIS ENERGY, L.P.
|
RECONCILIATION OF NET INCOME TO SEGMENT MARGIN - UNAUDITED
|
(in thousands)
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2018
|
|
2017
|
Net Income Attributable to Genesis Energy, L.P.
|
|
$
|
10,997
|
|
|
$
|
33,733
|
|
Corporate general and administrative expenses
|
|
13,466
|
|
|
7,137
|
|
Depreciation, depletion, amortization and accretion
|
|
79,862
|
|
|
59,382
|
|
Interest expense, net
|
|
57,909
|
|
|
37,990
|
|
Tax expense
|
|
256
|
|
|
303
|
|
Gain on sale of assets
|
|
—
|
|
|
(26,684
|
)
|
Equity compensation adjustments
|
|
50
|
|
|
(51
|
)
|
Provision for leased items no longer in use
|
|
(47
|
)
|
|
12,589
|
|
Plus (minus) Select Items, net
|
|
11,361
|
|
|
9,601
|
|
Segment Margin (1)
|
|
$
|
173,854
|
|
|
$
|
134,000
|
|
|
|
|
|
|
|
|
|
|
(1) See definition of Segment Margin later in this press release.
|
|
|
|
|
|
|
|
|
|
|
|
|
GENESIS ENERGY, L.P.
|
RECONCILIATIONS OF NET INCOME TO ADJUSTED EBITDA AND AVAILABLE
CASH BEFORE RESERVES- UNAUDITED
|
(in thousands)
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2018
|
|
2017
|
|
|
(in thousands)
|
Net income attributable to Genesis Energy, L.P.
|
|
$
|
10,997
|
|
|
$
|
33,733
|
|
Interest expense, net
|
|
57,909
|
|
|
37,990
|
|
Income tax expense
|
|
256
|
|
|
303
|
|
Depreciation, depletion, amortization, and accretion
|
|
79,862
|
|
|
59,382
|
|
EBITDA
|
|
149,024
|
|
|
131,408
|
|
Plus (minus) Select Items, net
|
|
14,742
|
|
|
9,106
|
|
|
|
|
|
|
|
|
Adjusted EBITDA, net
|
|
163,766
|
|
|
140,514
|
|
Maintenance capital utilized(1)
|
|
(4,700
|
)
|
|
(3,120
|
)
|
Interest expense, net
|
|
(57,909
|
)
|
|
(37,990
|
)
|
Cash tax expense
|
|
(150
|
)
|
|
(150
|
)
|
Other
|
|
(7
|
)
|
|
1
|
|
Available Cash before Reserves
|
|
$
|
101,000
|
|
|
$
|
99,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Maintenance capital expenditures in the 2018 Quarter and 2017
Quarter were $22.2 million and $6.8 million, respectively. This
increase principally is a result of expenditures associated with our
Alkali business.
|
|
|
|
|
|
|
GENESIS ENERGY, L.P.
|
RECONCILIATION OF NET CASH FLOWS FROM OPERATING ACTIVITIES TO
ADJUSTED EBITDA - UNAUDITED
|
(in thousands)
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2018
|
|
2017
|
Cash Flows from Operating Activities
|
|
$
|
64,488
|
|
|
$
|
115,281
|
|
Adjustments to reconcile net cash flow provided by operating
activities to Adjusted EBITDA:
|
|
|
|
|
Interest Expense, net
|
|
57,909
|
|
|
37,990
|
|
Amortization of debt issuance costs and discount
|
|
(2,659
|
)
|
|
(2,678
|
)
|
|
|
|
|
|
|
|
Effects of available cash from equity method investees not included
in operating cash flows
|
|
8,551
|
|
|
8,873
|
|
Net effect of changes in components of operating assets and
liabilities
|
|
30,373
|
|
|
(37,381
|
)
|
Non-cash effect of long-term incentive compensation expense
|
|
(1,551
|
)
|
|
2,248
|
|
Expenses related to acquiring or constructing growth capital assets
|
|
2,896
|
|
|
327
|
|
|
|
|
|
|
|
|
Differences in timing of cash receipts for certain contractual
arrangements (1)
|
|
(1,148
|
)
|
|
(3,166
|
)
|
Other items, net
|
|
4,907
|
|
|
(7,664
|
)
|
Gain on sale of assets
|
|
—
|
|
|
26,684
|
|
Adjusted EBITDA
|
|
$
|
163,766
|
|
|
$
|
140,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes the difference in timing of cash receipts from customers
during the period and the revenue we recognize in accordance with
GAAP on our related contracts. For purposes of our Non-GAAP
measures, we add those amounts in the period of payment and deduct
them in the period in which GAAP recognizes them.
|
|
|
|
|
|
|
GENESIS ENERGY, L.P.
|
ADJUSTED DEBT-TO-ADJUSTED CONSOLIDATED EBITDA RATIO - UNAUDITED
|
(in thousands)
|
|
|
|
|
|
June 30, 2018
|
Senior secured credit facility
|
|
$
|
1,306,300
|
|
Senior unsecured notes
|
|
2,458,614
|
|
Less: Outstanding inventory financing sublimit borrowings
|
|
(22,400
|
)
|
Less: Cash and cash equivalents
|
|
(7,846
|
)
|
Adjusted Debt (2)
|
|
$
|
3,734,668
|
|
|
|
|
|
|
Pro Forma LTM
|
|
|
June 30, 2018
|
Consolidated EBITDA (per our senior secured credit facility) (3)
|
|
$
|
621,937
|
|
Acquisitions, material projects and other Consolidated EBITDA
adjustments (4)
|
|
40,911
|
|
Adjusted Consolidated EBITDA (per our senior secured credit
facility) (5)
|
|
$
|
662,848
|
|
|
|
|
Adjusted Debt-to-Adjusted Consolidated EBITDA (1)
|
|
5.63
|
x
|
|
|
|
|
|
|
|
(1)
|
|
Had we closed the sale of our non-core assets on or prior to June
30, 2018 and used the proceeds to pay down the balance on our senior
secured credit facility, our pro forma Adjusted Debt to Adjusted
Consolidated EBITDA ratio would have been reduced by approximately
0.3X to approximately 5.3X.
|
|
|
|
(2)
|
|
We define Adjusted Debt as the amounts outstanding under our senior
secured credit facility and senior unsecured notes (including any
unamortized premiums or discounts) less the amount outstanding under
our inventory financing sublimit, less cash and cash equivalents on
hand at the end of the period.
|
|
|
|
(3)
|
|
Consolidated EBITDA for the four-quarter period ending with the most
recent quarter, as calculated under our senior secured credit
facility.
|
|
|
|
(4)
|
|
This amount reflects the adjustment we are permitted to make under
our senior secured credit facility for purposes of calculating
compliance with our leverage ratio. It includes a pro rata portion
of projected future annual EBITDA from material projects (i.e.
organic growth) and includes Adjusted EBITDA (using historical
amounts and other permitted amounts) since the beginning of the
calculation period attributable to each acquisition completed during
such calculation period, regardless of the date on which such
acquisition was actually completed. This adjustment may not be
indicative of future results.
|
|
|
|
(5)
|
|
Adjusted Consolidated EBITDA for the four-quarter period ending with
the most recent quarter, as calculated under our senior secured
credit facility.
|
|
|
|
This press release includes forward-looking statements as defined under
federal law. Although we believe that our expectations are based upon
reasonable assumptions, we can give no assurance that our goals will be
achieved. Actual results may vary materially. All statements, other than
statements of historical facts, included in this press release that
address activities, events or developments that we expect, believe or
anticipate will or may occur in the future are forward-looking
statements, and historical performance is not necessarily indicative of
future performance. Those forward-looking statements rely on a number of
assumptions concerning future events and are subject to a number of
uncertainties, factors and risks, many of which are outside our control,
that could cause results to differ materially from those expected by
management. Such risks and uncertainties include, but are not limited
to, weather, political, economic and market conditions, including a
decline in the price and market demand for products, the timing and
success of business development efforts and other uncertainties. Those
and other applicable uncertainties, factors and risks that may affect
those forward-looking statements are described more fully in our Annual
Report on Form 10-K for the year ended December 31, 2017 filed with the
Securities and Exchange Commission and other filings, including our
Current Reports on Form 8-K and Quarterly Reports on Form 10-Q. We
undertake no obligation to publicly update or revise any forward-looking
statement.
NON-GAAP MEASURES
This press release and the accompanying schedules include non-generally
accepted accounting principle (non-GAAP) financial measures of Adjusted
EBITDA and total Available Cash before Reserves. In this press release,
we also present total Segment Margin as if it were a non-GAAP measure.
Our Non-GAAP measures may not be comparable to similarly titled measures
of other companies because such measures may include or exclude other
specified items. The accompanying schedules provide reconciliations of
these non-GAAP financial measures to their most directly comparable
financial measures calculated in accordance with generally accepted
accounting principles in the United States of America (GAAP). Our
non-GAAP financial measures should not be considered (i) as alternatives
to GAAP measures of liquidity or financial performance or (ii) as being
singularly important in any particular context; they should be
considered in a broad context with other quantitative and qualitative
information. Our Available Cash before Reserves, Adjusted EBITDA and
total Segment Margin measures are just three of the relevant data points
considered from time to time.
When evaluating our performance and making decisions regarding our
future direction and actions (including making discretionary payments,
such as quarterly distributions) our board of directors and management
team have access to a wide range of historical and forecasted
qualitative and quantitative information, such as our financial
statements; operational information; various non-GAAP measures; internal
forecasts; credit metrics; analyst opinions; performance, liquidity and
similar measures; income; cash flow; and expectations for us, and
certain information regarding some of our peers. Additionally, our board
of directors and management team analyze, and place different weight on,
various factors from time to time. We believe that investors benefit
from having access to the same financial measures being utilized by
management, lenders, analysts and other market participants. We attempt
to provide adequate information to allow each individual investor and
other external user to reach her/his own conclusions regarding our
actions without providing so much information as to overwhelm or confuse
such investor or other external user.
In the fourth quarter of 2017, we revised portions of the format and
definitions relating to our presentation of non-GAAP financial measures.
Amounts attributable to prior periods have been recast.
AVAILABLE CASH BEFORE RESERVES
Purposes, Uses and Definition
Available Cash before Reserves, also referred to as distributable cash
flow, is a quantitative standard used throughout the investment
community with respect to publicly traded partnerships and is commonly
used as a supplemental financial measure by management and by external
users of financial statements such as investors, commercial banks,
research analysts and rating agencies, to aid in assessing, among other
things:
(1) the financial performance of our assets;
(2) our operating performance;
(3) the viability of potential projects, including our cash and overall
return on alternative capital investments as compared to those of other
companies in the midstream energy industry;
(4) the ability of our assets to generate cash sufficient to satisfy
certain non-discretionary cash requirements, including interest payments
and certain maintenance capital requirements; and
(5) our ability to make certain discretionary payments, such as
distributions on our units, growth capital expenditures, certain
maintenance capital expenditures and early payments of indebtedness.
We define Available Cash before Reserves ("Available Cash before
Reserves") as Adjusted EBITDA as adjusted for certain items, the most
significant of which in the relevant reporting periods have been the sum
of maintenance capital utilized, net cash interest expense and cash tax
expense.
Disclosure Format Relating to Maintenance Capital
We use a modified format relating to maintenance capital requirements
because our maintenance capital expenditures vary materially in nature
(discretionary vs. non-discretionary), timing and amount from time to
time. We believe that, without such modified disclosure, such changes in
our maintenance capital expenditures could be confusing and potentially
misleading to users of our financial information, particularly in the
context of the nature and purposes of our Available Cash before Reserves
measure. Our modified disclosure format provides those users with
information in the form of our maintenance capital utilized measure
(which we deduct to arrive at Available Cash before Reserves). Our
maintenance capital utilized measure constitutes a proxy for
non-discretionary maintenance capital expenditures and it takes into
consideration the relationship among maintenance capital expenditures,
operating expenses and depreciation from period to period.
Maintenance Capital Requirements
Maintenance Capital Expenditures
Maintenance capital expenditures are capitalized costs that are
necessary to maintain the service capability of our existing assets,
including the replacement of any system component or equipment which is
worn out or obsolete. Maintenance capital expenditures can be
discretionary or non-discretionary, depending on the facts and
circumstances.
Initially, substantially all of our maintenance capital expenditures
were (a) related to our pipeline assets and similar infrastructure, (b)
non-discretionary in nature and (c) immaterial in amount as compared to
our Available Cash before Reserves measure. Those historical
expenditures were non-discretionary (or mandatory) in nature because we
had very little (if any) discretion as to whether or when we incurred
them. We had to incur them in order to continue to operate the related
pipelines in a safe and reliable manner and consistently with past
practices. If we had not made those expenditures, we would not have been
able to continue to operate all or portions of those pipelines, which
would not have been economically feasible. An example of a
non-discretionary (or mandatory) maintenance capital expenditure would
be replacing a segment of an old pipeline because one can no longer
operate that pipeline safely, legally and/or economically in the absence
of such replacement.
As we exist today, a substantial amount of our maintenance capital
expenditures from time to time will be (a) related to our assets other
than pipelines, such as our marine vessels, trucks and similar assets,
(b) discretionary in nature and (c) potentially material in amount as
compared to our Available Cash before Reserves measure. Those
expenditures will be discretionary (or non-mandatory) in nature because
we will have significant discretion as to whether or when we incur them.
We will not be forced to incur them in order to continue to operate the
related assets in a safe and reliable manner. If we chose not make those
expenditures, we would be able to continue to operate those assets
economically, although in lieu of maintenance capital expenditures, we
would incur increased operating expenses, including maintenance
expenses. An example of a discretionary (or non-mandatory) maintenance
capital expenditure would be replacing an older marine vessel with a new
marine vessel with substantially similar specifications, even though one
could continue to economically operate the older vessel in spite of its
increasing maintenance and other operating expenses.
In summary, as we continue to expand certain non-pipeline portions of
our business, we are experiencing changes in the nature (discretionary
vs. non-discretionary), timing and amount of our maintenance capital
expenditures that merit a more detailed review and analysis than was
required historically. Management’s recently increasing ability to
determine if and when to incur certain maintenance capital expenditures
is relevant to the manner in which we analyze aspects of our business
relating to discretionary and non-discretionary expenditures. We believe
it would be inappropriate to derive our Available Cash before Reserves
measure by deducting discretionary maintenance capital expenditures,
which we believe are similar in nature in this context to certain other
discretionary expenditures, such as growth capital expenditures,
distributions/dividends and equity buybacks. Unfortunately, not all
maintenance capital expenditures are clearly discretionary or
non-discretionary in nature. Therefore, we developed a measure,
maintenance capital utilized, that we believe is more useful in the
determination of Available Cash before Reserves. Our maintenance capital
utilized measure, which is described in more detail below, constitutes a
proxy for non-discretionary maintenance capital expenditures and it
takes into consideration the relationship among maintenance capital
expenditures, operating expenses and depreciation from period to period.
Maintenance Capital Utilized
We believe our maintenance capital utilized measure is the most useful
quarterly maintenance capital requirements measure to use to derive our
Available Cash before Reserves measure. We define our maintenance
capital utilized measure as that portion of the amount of previously
incurred maintenance capital expenditures that we utilize during the
relevant quarter, which would be equal to the sum of the maintenance
capital expenditures we have incurred for each project/component in
prior quarters allocated ratably over the useful lives of those
projects/components.
Because we did not initially use our maintenance capital utilized
measure, our future maintenance capital utilized calculations will
reflect the utilization of solely those maintenance capital expenditures
incurred since December 31, 2013.
ADJUSTED EBITDA
Purposes, Uses and Definition
Adjusted EBITDA is commonly used as a supplemental financial measure by
management and by external users of financial statements such as
investors, commercial banks, research analysts and rating agencies, to
aid in assessing, among other things:
(1) the financial performance of our assets without regard to financing
methods, capital structures or historical cost basis;
(2) our operating performance as compared to those of other companies in
the midstream energy industry, without regard to financing and capital
structure;
(3) the viability of potential projects, including our cash and overall
return on alternative capital investments as compared to those of other
companies in the midstream energy industry;
(4) the ability of our assets to generate cash sufficient to satisfy
certain non-discretionary cash requirements, including interest payments
and certain maintenance capital requirements; and
(5) our ability to make certain discretionary payments, such as
distributions on our units, growth capital expenditures, certain
maintenance capital expenditures and early payments of indebtedness.
We define Adjusted EBITDA (“Adjusted EBITDA”) as earnings before
interest, taxes, depreciation and amortization (including impairment,
write-offs, accretion and similar items, often referred to as EBITDA)
after eliminating other non-cash revenues, expenses, gains, losses and
charges (including any loss on asset dispositions), plus or minus
certain other select items that we view as not indicative of our core
operating results (collectively, "Select Items"). Although, we do not
necessarily consider all of our Select Items to be non-recurring,
infrequent or unusual, we believe that an understanding of these Select
Items is important to the evaluation of our core operating results. The
most significant Select Items in the relevant reporting periods are set
forth below.
The table below includes the Select Items discussed above as applicable
to the reconciliation of Adjusted EBITDA and Available Cash before
Reserves to net income:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
|
|
2018
|
|
2017
|
I.
|
|
|
Applicable to all Non-GAAP Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Differences in timing of cash receipts for certain contractual
arrangements(1)
|
|
$
|
(1,148
|
)
|
|
$
|
(3,166
|
)
|
|
|
|
Adjustment regarding direct financing leases(2)
|
|
1,884
|
|
|
1,709
|
|
|
|
|
Certain non-cash items:
|
|
|
|
|
|
|
|
Unrealized loss on derivative transactions excluding fair value
hedges, net of changes in inventory value
|
|
641
|
|
|
480
|
|
|
|
|
Adjustment regarding equity investees(3)
|
|
10,037
|
|
|
9,140
|
|
|
|
|
Other
|
|
(53
|
)
|
|
1,438
|
|
|
|
|
Sub-total Select Items, net(4) (Segment Margin)
|
|
11,361
|
|
|
9,601
|
|
|
|
|
|
|
|
|
|
|
|
II.
|
|
|
Applicable only to Adjusted EBITDA and Available Cash before Reserves
|
|
|
|
|
|
|
|
Certain transaction costs(5)
|
|
2,896
|
|
|
327
|
|
|
|
|
Equity compensation adjustments
|
|
61
|
|
|
(72
|
)
|
|
|
|
Other
|
|
424
|
|
|
(750
|
)
|
|
|
|
Total Select Items, net(6)
|
|
$
|
14,742
|
|
|
$
|
9,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes the difference in timing of cash receipts from customers
during the period and the revenue we recognize in accordance with
GAAP on our related contracts. For purposes of our Non-GAAP
measures, we add those amounts in the period of payment and deduct
them in the period in which GAAP recognizes them.
|
(2)
|
|
Represents the net effect of adding cash receipts from direct
financing leases and deducting expenses relating to direct financing
leases.
|
(3)
|
|
Represents the net effect of adding distributions from equity
investees and deducting earnings of equity investees net to us.
|
(4)
|
|
Represents all Select Items applicable to Segment Margin.
|
(5)
|
|
Represents transaction costs relating to certain merger,
acquisition, transition, and financing transactions incurred in
acquisition activities.
|
(6)
|
|
Represents Select Items applicable to Adjusted EBITDA and Available
Cash before Reserves.
|
|
|
|
SEGMENT MARGIN
Our chief operating decision maker (our Chief Executive Officer)
evaluates segment performance based on a variety of measures including
Segment Margin, segment volumes where relevant and capital investment.
We define Segment Margin as revenues less product costs, operating
expenses, and segment general and administrative expenses, after
eliminating gain or loss on sale of assets, plus or minus applicable
Select Items. Although, we do not necessarily consider all of our Select
Items to be non-recurring, infrequent or unusual, we believe that an
understanding of these Select Items is important to the evaluation of
our core operating results.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180808005228/en/ Copyright Business Wire 2018
Source: Business Wire
(August 8, 2018 - 6:00 AM EDT)
News by QuoteMedia
www.quotemedia.com
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