USD Partners LP Announces First Quarter 2017 Results

Category:

Wednesday, May 3, 2017 4:28 pm EDT

Dateline:

HOUSTON

Public Company Information:

NYSE:
USDP
US9033181036
"The Partnership’s results continue to benefit from stable and predictable cash flows from high-quality customers"

HOUSTON--(BUSINESS WIRE)--USD Partners LP (NYSE: USDP) (the “Partnership”) announced today its operating and financial results for the three months ended March 31, 2017. Highlights with respect to the first quarter of 2017 include the following:

  • Generated Net cash provided by operating activities of $12.8 million, Adjusted EBITDA of $15.4 million and Distributable cash flow of $12.3 million
  • Reported Net income of $5.2 million
  • Increased quarterly cash distribution for eighth consecutive quarter to $0.335 per unit ($1.34 per unit on an annualized basis)
  • Ended quarter with $192.2 million of available liquidity

“The Partnership’s results continue to benefit from stable and predictable cash flows from high-quality customers,” said Dan Borgen, the Partnership’s Chief Executive Officer. “This enabled us to deliver another quarter of distribution growth, with approximately 1.6x coverage, while remaining well-positioned to execute on accretive growth opportunities.”

First Quarter 2017 Operational and Financial Results

Substantially all of the Partnership’s cash flows are generated from multi-year, take-or-pay terminal service agreements related to the Hardisty and Casper terminals, which include minimum monthly commitment fees. The Partnership’s customers include major integrated oil companies, refiners and marketers, the majority of which are investment grade rated.

For the first quarter of 2017 relative to the first quarter of 2016, Net cash provided by operating activities increased by 39%, while Adjusted EBITDA and Distributable cash flow increased by 7% and 12%, respectively. These increases were primarily driven by a reduction in operating expenses due to one-time costs associated with the integration of the Casper terminal during the first quarter of 2016 and were partially offset by higher interest expense associated with the Partnership’s revolving credit facility.

Distributable cash flow for the first quarter of 2017 also benefited from an approximate $1.1 million decrease in Cash paid for income taxes, primarily due to the receipt of the remaining C$0.9 million tax refund, as well as lower Canadian income taxes paid during the quarter.

Net income, which increased 142% for the first quarter of 2017 relative to 2016, also benefited from additional Terminalling services revenue due to the recognition of greater amounts of previously deferred revenues in the current period as compared to the prior year. Additionally, the value of the Canadian dollar relative to the U.S. dollar strengthened to a lesser extent during the first quarter of 2017 relative to 2016, which resulted in smaller non-cash losses from changes in the fair value of the Partnership’s derivative instruments.

On April 27, 2017, the Partnership declared a quarterly cash distribution of $0.335 per unit ($1.34 per unit on an annualized basis), which represents growth of 1.5% relative to the fourth quarter of 2016 and 8.9% relative to the first quarter of 2016. The distribution is payable on May 12, 2017, to unitholders of record as of the close of business on May 8, 2017.

During March 2017, the Partnership repaid all amounts previously outstanding on its term loan facility. As a result, the Partnership’s revolving credit facility comprises the full $400.0 million of capacity under its credit agreement, subject to limits set forth therein.

As of March 31, 2017, the Partnership had total available liquidity of $192.2 million, including $4.2 million of unrestricted cash and cash equivalents and undrawn borrowing capacity of $188.0 million on its $400.0 million senior secured credit facility, subject to continued compliance with financial covenants. The Partnership is in compliance with its financial covenants and has no maturities under its senior secured credit facility until October 2019.

First Quarter 2017 Conference Call Information

The Partnership will host a conference call and webcast regarding first quarter 2017 results at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Thursday, May 4, 2017.

To listen live over the Internet, participants are advised to log on to the Partnership’s website at www.usdpartners.com and select the “Events & Presentations” sub-tab under the “Investors” tab. To join via telephone, participants may dial (877) 266-7551 domestically or +1 (339) 368-5209 internationally, conference ID 14385750. Participants are advised to dial in at least five minutes prior to the call.

An audio replay of the conference call will be available for thirty days by dialing (800) 585-8367 domestically or +1 (404) 537-3406 internationally, conference ID 14385750. In addition, a replay of the audio webcast will be available by accessing the Partnership's website after the call is concluded.

About USD Partners LP

USD Partners LP is a fee-based, growth-oriented master limited partnership formed in 2014 by US Development Group LLC to acquire, develop and operate energy-related logistics assets, including rail terminals and other high-quality and complementary midstream infrastructure. The Partnership’s assets consist primarily of: (i) a crude oil origination terminal in Hardisty, Alberta, Canada, with capacity to load up to two 120-railcar unit trains per day, (ii) a crude oil terminal in Casper, Wyoming, with unit train-capable railcar loading capacity in excess of 100,000 barrels per day and six customer-dedicated storage tanks with 900,000 barrels of total capacity and (iii) a unit train-capable ethanol destination rail terminal in West Colton, California. In addition, the Partnership provides railcar services through the management of a railcar fleet that is committed to customers on a long-term basis.

Non-GAAP Financial Measures

The Partnership defines Adjusted EBITDA as Net cash provided by operating activities adjusted for changes in working capital items, changes in restricted cash, interest, income taxes, foreign currency transaction gains and losses, adjustments related to deferred revenue associated with minimum monthly commitment fees and other items which do not affect the underlying cash flows produced by the Partnership’s businesses. Adjusted EBITDA is a non-GAAP, supplemental financial measure used by management and external users of the Partnership’s financial statements, such as investors and commercial banks, to assess:

  • the Partnership’s liquidity and the ability of the Partnership’s businesses to produce sufficient cash flows to make distributions to the Partnership’s unitholders; and
  • the Partnership’s ability to incur and service debt and fund capital expenditures.

The Partnership defines Distributable cash flow, or DCF, as Adjusted EBITDA less net cash paid for interest, income taxes and maintenance capital expenditures. DCF does not reflect changes in working capital balances. DCF is a non-GAAP, supplemental financial measure used by management and by external users of the Partnership’s financial statements, such as investors and commercial banks, to assess:

  • the amount of cash available for making distributions to the Partnership’s unitholders;
  • the excess cash being retained for use in enhancing the Partnership’s existing businesses; and
  • the sustainability of the Partnership’s current distribution rate per unit.

The Partnership believes that the presentation of Adjusted EBITDA and DCF in this press release provides information that enhances an investor's understanding of the Partnership’s ability to generate cash for payment of distributions and other purposes. The GAAP measure most directly comparable to Adjusted EBITDA and DCF is Net cash provided by operating activities. Adjusted EBITDA and DCF should not be considered alternatives to Net cash provided by operating activities or any other measure of liquidity or performance presented in accordance with GAAP. Adjusted EBITDA and DCF exclude some, but not all, items that affect cash from operations and these measures may vary among other companies. As a result, Adjusted EBITDA and DCF may not be comparable to similarly titled measures of other companies.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of U.S. federal securities laws, including statements with respect to the Partnership’s liquidity, the ability of the Partnership to grow and opportunities to grow, and the amount and timing of future distribution payments. Words and phrases such as “is expected,” “is planned,” “believes,” “projects,” and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to the Partnership are based on management’s expectations, estimates and projections about the Partnership, its interests and the energy industry in general on the date this press release was issued. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include those as set forth under the heading “Risk Factors” in the Partnership’s most recent Annual Report on Form 10-K and in our subsequent filings with the Securities and Exchange Commission. The Partnership is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

     
USD Partners LP
Consolidated Statements of Income
For the Three Months Ended March 31, 2017 and 2016
(unaudited)
 
For the Three Months Ended
March 31,
2017 2016

(in thousands)

Revenues
Terminalling services $ 23,559 $ 22,023
Terminalling services — related party 1,740 1,650
Railroad incentives 15 15

Fleet leases

643 643
Fleet leases — related party 890 890
Fleet services 468 69
Fleet services — related party 279 684
Freight and other reimbursables 157 383
Freight and other reimbursables — related party   1   -  
Total revenues   27,752   26,357  
Operating costs
Subcontracted rail services 2,013 2,043
Pipeline fees 5,417 4,714
Fleet leases 1,533 1,533
Freight and other reimbursables 158 383
Operating and maintenance 707 870
Selling, general and administrative 2,315 2,894
Selling, general and administrative — related party 1,432 1,492
Depreciation and amortization   4,941   4,905  
Total operating costs   18,516   18,834  
Operating income 9,236 7,523
Interest expense 2,607 2,183
Loss associated with derivative instruments 211 1,523
Foreign currency transaction loss (gain) 30 (130 )
Other expense, net   5   -  
Income before provision for income taxes 6,383 3,947
Provision for income taxes   1,185   1,797  
Net income $ 5,198 $ 2,150  
     
USD Partners LP
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2017 and 2016
(unaudited)
 
For the Three Months Ended
March 31,
2017 2016
Cash flows from operating activities:

(in thousands)

Net income $ 5,198 $ 2,150
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 4,941 4,905
Loss associated with derivative instruments 211 1,523
Settlement of derivative contracts 299 490
Unit based compensation expense 798 728
Other 282 169
Changes in operating assets and liabilities:
Accounts receivable 35 (62 )
Accounts receivable – related party 213 1,706
Prepaid expenses and other current assets 1,579 330
Accounts payable and accrued expenses 93 (737 )
Accounts payable and accrued expenses – related party 307 (95 )
Deferred revenue and other liabilities (1,120 ) 872
Deferred revenue – related party

-

(329 )
Change in restricted cash   (21 )   (2,426 )
Net cash provided by operating activities   12,815     9,224  
Cash flows from investing activities:
Additions of property and equipment   (126 )   (273 )
Net cash used in investing activities   (126 )   (273 )
Cash flows from financing activities:
Distributions (7,903 ) (7,030 )
Vested phantom units used for payment of participant taxes (1,070 ) (77 )
Proceeds from long-term debt 5,000 5,000
Repayment of long-term debt   (16,342 )   (9,077 )
Net cash used in financing activities   (20,315 )   (11,184 )
Effect of exchange rates on cash   105     325  
Net change in cash and cash equivalents (7,521 ) (1,908 )
Cash and cash equivalents – beginning of period   11,705     10,500  
Cash and cash equivalents – end of period $ 4,184   $ 8,592  
     
USD Partners LP
Consolidated Balance Sheets
(unaudited)
 
March 31, December 31,
2017 2016
ASSETS (in thousands)
Current assets
Cash and cash equivalents $ 4,184 $ 11,705
Restricted cash 5,498 5,433
Accounts receivable, net 4,295 4,321
Accounts receivable — related party - 219
Prepaid expenses 9,737 10,325
Other current assets   1,130     2,562  
Total current assets 24,844 34,565
Property and equipment, net 124,728 125,702
Intangible assets, net 108,767 111,919
Goodwill 33,589 33,589
Other non-current assets   186     192  
Total assets $ 292,114   $ 305,967  
 
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities
Accounts payable and accrued expenses $ 2,498 $ 2,221
Accounts payable and accrued expenses — related party 517 214
Deferred revenue, current portion 26,461 26,928
Deferred revenue, current portion — related party 4,324 4,292
Other current liabilities   3,351     3,513  
Total current liabilities 37,151 37,168
Long-term debt, net 209,981 220,894
Deferred revenue, net of current portion - 264
Deferred income tax liability, net   886     823  
Total liabilities   248,018     259,149  
Commitments and contingencies
Partners’ capital
Common units 101,902 122,802
Class A units 1,300 1,811
Subordinated units (58,306 ) (76,749 )
General partner units 72 111
Accumulated other comprehensive income (loss)   (872 )   (1,157 )
Total partners' capital   44,096     46,818  
Total liabilities and partners' capital $ 292,114   $ 305,967  
     
USD Partners LP
GAAP to Non-GAAP Reconciliations
For the Three Months Ended March 31, 2017 and 2016
(unaudited)
 
For the Three Months Ended
March 31,
2017 2016

(in thousands)

 
Net cash provided by operating activities $ 12,815 $ 9,224
Add (deduct):
Amortization of deferred financing costs (215 ) (215 )
Deferred income taxes (58 ) 46
Changes in accounts receivable and other assets (1,827 ) (1,974 )
Changes in accounts payable and accrued expenses (400 ) 832
Changes in deferred revenue and other liabilities 1,120 (543 )
Change in restricted cash 21 2,426
Interest expense, net 2,603 2,183
Provision for income taxes 1,185 1,797
Foreign currency transaction loss (gain) (1) 30 (130 )
Deferred revenue associated with minimum monthly commitment fees (2)   80     763  
Adjusted EBITDA 15,354 14,409
Add (deduct):
Cash paid for income taxes (3) (616 ) (1,710 )
Cash paid for interest (2,362 ) (1,807 )
Maintenance capital expenditures   (126 )   -  
Distributable cash flow $ 12,250   $ 10,892  
 
(1) Represents foreign exchange transaction gains and losses associated with activities between the Partnership's U.S. and Canadian subsidiaries.
 
(2) Represents deferred revenue associated with minimum monthly commitment fees in excess of throughput utilized, which fees are not refundable to the Partnership's customers. Amounts presented are net of: (a) the corresponding prepaid Gibson pipeline fee that will be recognized as expense concurrently with the recognition of revenue; (b) revenue recognized in the current period that was previously deferred; and (c) expense recognized for previously prepaid Gibson pipeline fees, which correspond with the revenue recognized that was previously deferred.
 
(3)

Includes a partial refund of approximately $0.7 million (representing C$0.9 million) received in the three months ended March 31, 2017, for our 2015 foreign income taxes.

Contact:

USD Partners LP
Adam Altsuler, (281) 291-3995
Vice President, Chief Financial Officer
aaltsuler@usdg.com
or
Ashley Means Zavala, (281) 291-3965
Director, Finance & Investor Relations
ameans@usdg.com