Genesis Energy, L.P. (AMEX:GEL) today announced its second
quarter results. Significant events for the quarter ended June 30,
2010 included the following items:
- For the second quarter of 2010,
we generated total Available Cash before Reserves of $26.1 million.
Available Cash for the same period in 2009 was $22.2 million. All
of our segments reported improved results from the prior year
period. Available Cash before Reserves is a non-GAAP measure that
is defined and reconciled later in this press release to its most
directly comparable GAAP financial measure, net cash provided by
operating activities. Net cash utilized in operating activities was
$2.6 million for the second quarter of 2010 and net cash provided
by operating activities was $15.9 million for the second quarter of
2009.
- Net income attributable to the
Partnership for the second quarter of 2010 was $14.2 million, or
$0.29 per common unit, as compared to net income attributable to
the Partnership of $4.5 million, or $0.13 per unit, for the second
quarter of 2009. See the Calculation of Net Income per Common Unit
included in the tables at the end of this press release.
- On June 29, 2010, we
restructured our senior secured revolving credit agreement. Our
credit agreement is now a $525 million facility, with an accordion
feature whereby the total credit available can be increased up to
$650 million. Among other changes, our new credit agreement
includes a $75 million sublimit tranche for crude oil and petroleum
products inventory and it now matures in June 2015.
- On August 13, 2010, we will pay
a total quarterly distribution of $17.8 million attributable to our
financial and operational results for the second quarter of 2010,
including $14.8 million payable to our common unitholders based on
our quarterly distribution rate of $0.375 per unit, and $3.0
million payable to our general partner, which includes its
incentive distribution amount. Our distribution coverage ratio --
Available Cash before Reserves divided by our total distribution
attributable to the second quarter -- was approximately 1.5
times.
- Our distribution attributable to
the second quarter of 2010 will be our twentieth consecutive
quarter with an increase in the per unit distribution. The
quarterly distribution of $0.375 per unit represents a 2.0%
increase in the distribution paid relative to the previous quarter
and an approximately 8.7% increase over the year earlier
period.
Grant Sims, CEO said, “As you can see from the attached, each of
our segments reported improved financial performance over the 2009
period driven primarily by real increases in the demand for our
products and service capabilities. Absent a significant double-dip
in economic activity, we would hope to be able to build upon these
financial results as we continue to integrate our services across
existing and new customers.”
Mr. Sims added, “Late in the quarter, we successfully accessed
the capital markets and extended and amended our bank facility
including extending the term to mid 2015, adding additional total
commitments, and providing for the more efficient financing of the
inventories used in our crude oil and refined products businesses.
Given our conservative credit metrics and committed financial
flexibility, we hope to be opportunistic as we identify internal
and external opportunities that we believe would build long-term
value for the Partnership.”
Sims continued, “As we announced last week, we acquired the 51%
interest in DG Marine that we did not already own for $25.5 million
in cash plus $44.4 million paid to the lender group at the DG joint
venture level. We believe that such transaction, under current
market conditions, can add some $2.5 million to a full quarter’s
Available Cash before Reserves in future periods.”
Sims concluded, “Our employees and their commitment to always
work safely, reliably and responsibly, are the real key to the
Partnership’s continuing success. We’re all very proud to have
delivered the twentieth consecutive increase in our quarterly
distribution. Together, we will continue to work creatively and
tirelessly to try and create value for all of our
stakeholders.”
Financial Results
The primary components impacting Available Cash before Reserves
(a non GAAP measure) are Segment Margin, corporate general and
administrative expenses (excluding non-cash charges) and
maintenance capital expenditures.
Segment Margin
Segment Margin is defined below and reconciled later in this
press release to income before income taxes. For the second
quarters of 2010 and 2009, Segment Margin was as follows:
Pipeline Refinery Supply &
Industrial Transportation Services Logistics Gases Total (in
thousands)
Segment margin (1)
Three months ended June 30, 2010 $ 11,437 $ 16,190 $ 7,221 $
3,001 $ 37,849 Three months ended June 30, 2009 $ 10,347 $
13,190 $ 6,600 $ 2,869 $ 33,006 (1) Segment Margin was
calculated as revenues less cost of sales, operating expenses and
segment general and administrative expenses, plus our share of the
distributable cash generated by our equity investees. Segment
Margin excludes the non-cash effects of our equity-based
compensation plans and unrealized gains and losses from derivative
transactions, and includes the non-income portion of payments
received under direct financing leases. A reconciliation of Segment
Margin to income before income taxes is presented in the table at
the end of this release.
Pipeline transportation Segment Margin for the second quarter of
2010 increased $1.1 million as compared to the second quarter of
2009. Increased volumes on the Jay System combined with the effects
of higher crude oil market prices on sales of pipeline loss
allowance volumes and increased tariff rates effective in July 2009
were the primary factors resulting in the increase.
Refinery services Segment Margin increased from $13.2 million in
the 2009 second quarter to $16.2 million in the 2010 period. NaHS
sales volumes increased more than 80% over 2009 second quarter
levels. Improvements in world-wide macroeconomic conditions
positively impacted the demand for copper and molybdenum, thereby
increasing NaHS demand used in mining applications. Industrial
activities including the pulp and paper and tanning industries have
improved, also contributing to increased NaHS demand. Caustic soda
(NaOH) sales volumes also increased over the prior year quarter
reflecting improved industrial activities
Supply and logistics Segment Margin was $7.2 million in the
second quarter of 2010 compared to $6.6 million in the second
quarter of 2009. Volumes of crude oil and petroleum products
increased 5.1% as compared to the second quarter of 2009, although
the contribution of these additional volumes was slightly mitigated
by the narrowing of quality differentials and contango pricing
conditions during the 2010 period. The contribution of our barge
operations to Segment Margin increased as compared to the second
quarter of 2009 by approximately $0.3 million as average charter
rates improved in 2010 over the low rates in the same period of
2009. While DG Marine’s barge operations are included in Segment
Margin, they are excluded from Available Cash before Reserves.
Beginning in August 2010, available cash generated by DG Marine
will be included in Available Cash before Reserves as a result of
the acquisition of the remaining 51% interest in the joint
venture.
Segment Margin from the industrial gases segment increased
slightly between the quarters primarily due to an increase in
volumes delivered to our customers. Volumes increased 5.8% between
the two quarterly periods as customers increased purchases in
response to improving economic conditions. The average sales price
of CO2 was consistent between the quarters.
Other Components of Available
Cash
Available Cash before Reserves is also affected by income taxes
to be paid in cash (which did not vary significantly from the 2009
period), interest costs, and corporate general and administrative
expenses (excluding non-cash charges or credits). Additionally, our
maintenance capital expenditures, net of proceeds from sales of
surplus assets, are subtracted in calculating Available Cash before
Reserves. The effect of interest costs on Available Cash before
Reserves was $0.5 million greater in the 2010 period due to higher
debt levels. In the second quarter of 2010, corporate general and
administrative expenses (excluding non-cash items) were $0.9
million greater than in the 2009 second quarter. This difference
related primarily to an increase in personnel and other
compensation related. In the 2010 period, proceeds from idle asset
disposals totaled $0.7 million more than the 2009 quarterly
period.
Several adjustments to net income attributable to the
Partnership are required to calculate Available Cash before
Reserves. The calculation of Available Cash before Reserves for the
quarters ended June 30, 2010 and 2009 is as follows:
Three Months Ended June 30, 2010 June 30, 2009 (in
thousands) Net income attributable to Genesis Energy, L.P. $
14,238 $ 4,456 Depreciation and amortization 13,606 16,133
Cash received from direct
financing leases not included in income
1,038 929 Cash effects of sales of certain assets 795 52
Effects of available cash
generated by equity method investees not included in income
188 170 Cash effects of stock appreciation rights plan (117 ) (3 )
Non-cash tax expense 228 627 Earnings of DG Marine in excess of
distributable cash (1,481 ) (904 )
Other non-cash items, net,
including equity-based compensation
(1,502 ) 2,222 Maintenance capital expenditures (918 )
(1,474 ) Available Cash before Reserves $ 26,075 $
22,208
Other Components of Net
Income
In addition to the factors impacting Available Cash before
Reserves, net income included the effect of several non-cash
charges and credits. Depreciation and amortization expense totaled
$13.6 million for the second quarter of 2010, as compared to $16.1
in the 2009 period. The decrease in depreciation and amortization
expense between the quarterly periods results from lower
amortization expense on intangible assets. We amortize our
intangible assets over the period during which we expect them to
contribute to cash flows. As a result, amortization of those assets
declines over their lives as we expect a greater contribution in
the initial years following their acquisition.
Unrealized gains on derivative transactions that were excluded
in the computation of Available Cash before Reserves totaled $1.6
million for the 2010 quarter compared to $0.3 million in the 2009
second quarter. For the 2009 second quarter, charges for non-cash
compensation for employees totaled $3.2 million as compared to $0.2
million in the 2010 period. Most of this variation related to a
compensation arrangement with our senior management team and the
former owner of our general partner that was settled in the first
quarter of 2010.
Distributions
Over the last four quarters, we have increased the distribution
rate on our common units by a total of $0.03 per unit, or 8.7%.
Distributions paid over the last four quarters, and the
distribution to be paid for the second quarter of 2010, are as
follows:
Per Unit
Distribution For
Date Paid
Amount Second quarter 2010 August 2010 $ 0.3750 First quarter 2010
May 2010 $ 0.3675 Fourth quarter 2009 February 2010 $ 0.3600 Third
quarter 2009 November 2009 $ 0.3525 Second quarter 2009 August 2009
$ 0.3450
The second quarter 2010 distribution will be paid August 13,
2010 to unitholders of record on August 3, 2010.
Earnings Conference Call
We will broadcast our Earnings Conference Call on Thursday,
August 5, 2010, at 1:00 p.m. Central time. This call can be
accessed at www.genesisenergy.com. Choose the Investor Relations
button. Listeners should go to this website at least fifteen
minutes before this event to download and install any necessary
audio software. 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
engages in four business segments. The Pipeline Transportation
Division is engaged in the pipeline transportation of crude oil and
carbon dioxide. The Refinery Services Division primarily processes
sour gas streams to remove sulfur at refining operations,
principally located in Texas, Louisiana, and Arkansas. The Supply
and Logistics Division is engaged in the transportation, storage
and supply of energy products, including crude oil and refined
products. The Industrial Gases Division produces and supplies
industrial gases such as carbon dioxide and syngas. Genesis’
operations are primarily located in Texas, Louisiana, Arkansas,
Mississippi, Alabama, and Florida.
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Although we
believe that our expectations are based upon reasonable
assumptions, we can give no assurance that our goals will be
achieved. Important factors that could cause actual results to
differ materially from those in the forward looking statements
herein include the timing and extent of changes in commodity prices
for oil, ability to obtain adequate credit facilities, managing
operating costs, completion of capital projects on schedule and
within budget, consummation of accretive acquisitions, capital
spending, environmental risks, government regulation, our ability
to meet our stated business goals and other risks noted from time
to time in our Securities and Exchange Commission filings. Actual
results may vary materially. We undertake no obligation to publicly
update or revise any forward-looking statement.
Genesis Energy, L.P.
Condensed Consolidated Statements of Operations - Unaudited
(in thousands except per unit amounts and volumes) Three
Months Ended Three Months Ended June 30, 2010 June 30, 2009
Revenues $ 456,538 $ 342,204 Costs of sales 417,894 309,957 General
and administrative expenses 6,801 8,306 Depreciation and
amortization expense 13,606 16,133 (Gain) loss from disposal of
surplus assets (62 ) 60
OPERATING
INCOME 18,299 7,748 Equity in earnings of joint ventures 363
264 Interest expense (3,760 ) (3,373 )
Income
before income taxes 14,902 4,639 Income tax expense (981
) (817 )
NET INCOME 13,921 3,822 Net loss
attributable to noncontrolling interests 317 634
NET INCOME
ATTRIBUTABLE TO
GENESIS ENERGY, L.P. $ 14,238 $ 4,456
NET INCOME PER COMMON UNIT - BASIC AND DILUTED $ 0.29
$ 0.13
Volume data: Crude oil pipeline
barrels per day (total) 65,795 58,535 Mississippi Pipeline System
barrels per day 23,493 24,159 Jay Pipeline System barrels per day
14,400 9,307 Texas Pipeline System barrels per day 27,902 25,069
Free State CO2 System Mcf per day 133,009 134,570 NaHS dry short
tons sold 38,307 20,908 NaOH (caustic soda) dry short tons sold
23,969 19,763 Crude oil and petroleum products barrels per day
50,383 47,941 CO2 sales Mcf per day 74,724 70,621
Genesis Energy, L.P. Condensed Consolidated Statements of
Operations - Unaudited (in thousands except per unit amounts
and volumes) Six Months Ended Six Months Ended June
30, 2010 June 30, 2009 Revenues $ 923,069 $ 595,697 Costs of
sales 854,607 532,474 General and administrative expenses 13,095
17,060 Depreciation and amortization expense 27,012 31,552 Loss
(gain) from disposal of surplus assets 18 (158
)
OPERATING INCOME 28,337 14,769 Equity in earnings of joint
ventures 545 2,170 Interest expense (6,964 ) (6,408 )
Income before income taxes 21,918 10,531 Income tax expense
(1,672 ) (1,408 )
NET INCOME 20,246 9,123 Net
loss attributable to noncontrolling interests 877 623
NET INCOME
ATTRIBUTABLE TO GENESIS ENERGY, L.P. $
21,123 $ 9,746
NET INCOME PER COMMON UNIT
- BASIC AND DILUTED $ 0.36 $ 0.29
Volume data: Crude oil pipeline barrels per day (total)
61,884 61,562 Mississippi Pipeline System barrels per day 23,789
24,758 Jay Pipeline System barrels per day 14,493 9,369 Texas
Pipeline System barrels per day 23,602 27,435 Free State CO2 System
Mcf per day 154,013 152,830 NaHS dry short tons sold 71,414 47,137
NaOH (caustic soda) dry short tons sold 45,336 36,663 Crude oil and
petroleum products barrels per day 53,799 45,257 CO2 sales Mcf per
day 67,847 70,229
Genesis Energy, L.P.
Condensed Consolidated Balance Sheets - Unaudited (in
thousands, except number of units) June 30, 2010
December 31, 2009
ASSETS Cash $ 6,033 $ 4,148 Accounts
receivable, net 124,801 129,865 Inventories 83,156 40,204 Other
current assets 19,433 15,027
Total current
assets 233,423 189,244 Property, net 274,501 284,887 CO2
contracts, net 18,129 20,105 Joint ventures and other investments
14,378 15,128 Investment in direct financing leases 170,785 173,027
Intangible assets, net 127,179 136,330 Goodwill 325,046 325,046
Other assets 11,010 4,360
Total Assets $
1,174,451 $ 1,148,127
LIABILITIES AND PARTNERS'
CAPITAL Accounts payable $ 123,035 $ 117,625 Accrued
liabilities 22,205 23,803
Total current
liabilities 145,240 141,428 Long-term debt 404,900 366,900
Deferred tax liabilities 14,639 15,167 Other liabilities 5,519
5,699 Partners' Capital: Genesis Energy, L.P. partners' capital
581,794 595,877 Noncontrolling interests 22,359
23,056 Total partners' capital 604,153 618,933
Total Liabilities and Partners' Capital $ 1,174,451 $
1,148,127
Units Data: Total common units outstanding
39,585,692 39,487,997
SEGMENT MARGIN
RECONCILIATION TO INCOME BEFORE INCOME TAXES - UNAUDITED
Three Months Ended June 30, 2010 June 30, 2009
(in thousands) Segment margin $ 37,849 $ 33,006
Corporate general and
administrative expenses
(5,975 ) (7,576 )
Non-cash items included in
corporate general and administrative costs
315 2,785
Cash expenditures not included in
EBITDA or net income
(71 ) (155 ) DG Marine contribution to segment margin (2,826
) (2,491 ) Adjusted EBITDA 29,292 25,569 DG Marine
contribution to segment margin 2,826 2,491 Depreciation and
amortization (13,606 ) (16,133 ) Net gain (loss) from disposal of
surplus assets 62 (60 ) Interest expense, net (3,760 ) (3,373 )
Cash expenditures not included in
EBITDA or net income
71 155 Other non-cash items 17 (4,010 ) Income
before income taxes $ 14,902 $ 4,639
CALCULATION OF NET INCOME PER COMMON UNIT - UNAUDITED (in
thousands, except per unit amounts) Three Months
Ended June 30, 2010 June 30, 2009
Numerators for basic and diluted
net income per common unit:
Net income attributable to Genesis Energy, L.P. $ 14,238 $ 4,456
Less: General partner's incentive
distribution to be paid for the period
(2,642 ) (1,427 ) Add: Expense for Class B Membership Awards
301 2,353 Subtotal 11,897 5,382 Less: General
partner 2% ownership (238 ) (108 ) Income available
for common unitholders $ 11,659 $ 5,274
Denominator for basic per common
unit:
Common Units 39,586 39,464
Denominator for diluted per common unit: Common Units 39,586 39,464
Phantom Units - 154 39,586
39,618 Basic net income per common unit
$ 0.29 $ 0.13 Diluted net income per common unit $
0.29 $ 0.13 Six Months Ended June 30, 2010
June 30, 2009
Numerators for basic and diluted
net income per common unit:
Net income attributable to Genesis Energy, L.P. $ 21,123 $ 9,746
Less: General partner's incentive
distribution to be paid for the period
(4,981 ) (2,552 ) Add: (Credit) Expense for Class B Membership
Awards (1,676 ) 4,499 Subtotal 14,466 11,693
Less: General partner 2% ownership (289 ) (234 )
Income available for common unitholders $ 14,177 $ 11,459
Denominator for basic per common unit: Common Units
39,567 39,460 Denominator for
diluted per common unit: Common Units 39,567 39,460 Phantom Units
24 132 39,591
39,592 Basic net income per common unit $ 0.36
$ 0.29 Diluted net income per common unit $ 0.36 $
0.29
GAAP to Non-GAAP Financial Measure
Reconciliation - Unaudited
AVAILABLE CASH BEFORE RESERVES RECONCILIATION TONET
CASH FLOWS FROM OPERATING ACTIVITIES Three Months Ended June
30, 2010 June 30, 2009
(in thousands)
Net cash flows (used in) provided
by operating activities (GAAP measure)
$ (2,577 ) $ 15,909
Adjustments to reconcile net cash
flow provided by operating activities to Available Cash before
reserves:
Maintenance capital expenditures (918 ) (1,474 ) Proceeds from
asset sales 857 52
Amortization of credit facility
issuance costs
(814 ) (481 )
Effects of available cash from
equity investees not included in operating cash flows
132 34 DG Marine earnings in excess of distributable cash (1,481 )
(904 ) Other items affecting Available Cash 584 443
Net effect of changes in operating
accounts not included in calculation of Available Cash
30,292 8,629 Available Cash before Reserves (Non-GAAP measure) $
26,075 $ 22,208 CHANGES IN OPERATING
ACCOUNTS NOT INCLUDED IN CALCULATION OF AVAILABLE CASH BEFORE
RESERVES - UNAUDITED Three Months Ended June 30, 2010 June
30, 2009
(in thousands)
Increase (Decrease) in: Accounts receivable $ 651 $ 11,577
Inventories 35,506 10,534 Other current assets (1,761 ) 3,491
Increase in: Accounts payable (3,646 ) (13,409 ) Accrued
liabilities (458 ) (3,564 )
Net changes in components of
operating assets and liabilities
$ 30,292 $ 8,629
This press release and the accompanying schedules include a
non-generally accepted accounting principle (“non-GAAP”) financial
measures of available cash. The accompanying schedule provides a
reconciliation of this non-GAAP financial measure to its most
directly comparable financial measure calculated in accordance with
generally accepted accounting principles in the United States of
America (“GAAP”). Our non-GAAP financial measure should not be
considered as an alternative to GAAP measures of liquidity or
financial performance. We believe that investors benefit from
having access to the same financial measures being utilized by
management, lenders, analysts and other market participants.
Available cash.
Available Cash before Reserves is a liquidity measure used by
management to compare cash flows generated by us to the cash
distribution paid to our limited partners and general partner. This
is an important financial measure to the external users of
financial statements, such as investors, commercial banks, research
analysts and rating agencies, to assess: (1) the financial
performance of our assets without regard to financing methods,
capital structures, or historical cost basis; (2) the ability of
our assets to generate cash sufficient to pay interest cost and
support our indebtedness; (3) our operating performance and return
on capital as compared to those of other companies in the midstream
energy industry, without regard to financing and capital structure;
and (4) the viability of projects and the overall rates of return
on alternative investment opportunities. Lastly, Available Cash
before Reserves (also referred to as distributable cash flow) is a
quantitative metric used by many in the investment community with
respect to publicly-traded partnerships. Available Cash before
Reserves data presented in this press release may not be comparable
to similarly titled measures of other companies as Available Cash
before Reserves excludes some, but not all items that affect net
income or loss and because these measures may vary among other
companies.
We define available cash as net income or loss as adjusted for
specific items, the most significant of which are the addition of
non-cash expenses (such as depreciation), the substitution of cash
generated by our equity investees in lieu of our equity income
attributable to such equity investees, the elimination of gains and
losses on asset sales (except those from the sale of surplus
assets) and unrealized gains and losses on derivative transactions,
and the subtraction of maintenance capital expenditures, which are
expenditures that are necessary to sustain existing (but not to
provide new sources of) cash flows.
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