• Delek Logistics Partners, LP Reports Third Quarter 2017 Results

    Source: Nasdaq GlobeNewswire / 08 Nov 2017 17:15:14   America/New_York

    • Declared quarterly distribution of $0.715 per limited partner unit; increased by 9.2 percent year-over-year
    • Reported third quarter 2017 net cash from operating activities of $30.5 million and distributable cash flow of $21.6 million

    BRENTWOOD, Tenn., Nov. 08, 2017 (GLOBE NEWSWIRE) -- Delek Logistics Partners, LP (NYSE:DKL) ("Delek Logistics") today announced its financial results for the third quarter 2017. For the three months ended September 30, 2017, Delek Logistics reported net income attributable to all partners of $16.9 million, or $0.50 per diluted common limited partner unit. This compares to net income attributable to all partners of $13.2 million, or $0.41 per diluted common limited partner unit, in the third quarter 2016. Distributable cash flow was $21.6 million in the third quarter 2017, compared to $19.1 million in the prior-year period.  

    For the third quarter 2017, earnings before interest, taxes, depreciation and amortization ("EBITDA") was $29.7 million compared to $22.0 million in the prior-year period. The combination of a higher gross margin per barrel in west Texas, improved performance from the Paline Pipeline and East Texas marketing agreement were the primary factors in the year over year increase.

    Uzi Yemin, Chairman and Chief Executive Officer of Delek Logistics' general partner, remarked: "During the third quarter, we added a truck crude unloading facility to support the Big Spring refinery and are on track to increase the Paline Pipeline capacity to 42,000 barrels per day in the first quarter 2018. In addition to these initiatives, to provide logistics support to a larger refining system at Delek US, we will continue to explore other opportunities. Also, we believe that following our sponsor's, Delek US, acquisition of Alon USA Energy on July 1, there will be an opportunity to grow through future potential dropdowns.  We anticipate that the financial flexibility provided by our balance sheet and focus on growth initiatives should support a distribution per limited partner unit increase of at least 10% annually through 2019."

    Yemin concluded, "Our operations performed well in the third quarter, and our EBITDA was approximately $30.0 million for the second quarter in a row. Our west Texas margins remained strong, and the Paline Pipeline operated near capacity as crude oil differentials remained favorable to support third-party crude oil shipments to the Gulf Coast. We ended the quarter with approximately $533 million of capacity on our credit facility and a total leverage ratio of approximately 3.7 times. This financial position supported the 9.2 percent year-over-year increase in our declared third quarter distribution."

    Distribution and Liquidity
    On October 25, 2017, Delek Logistics declared a quarterly cash distribution for the third quarter of $0.715 per limited partner unit, which equates to $2.86 per limited partner unit on an annualized basis. This distribution is expected to be paid on November 14, 2017 to unitholders of record on November 7, 2017. This represents a 1.4 percent increase from the second quarter 2017 distribution of $0.705 per limited partner unit, or $2.82 per limited partner unit on an annualized basis, and a 9.2 percent increase over Delek Logistics’ third quarter 2016 distribution of $0.655 per limited partner unit, or $2.62 per limited partner unit annualized. For the third quarter 2017, the total cash distribution declared to all partners, including IDRs, was approximately $22.3 million. Based on the declared distribution for the third quarter 2017, the distributable cash flow coverage ratio for the third quarter was 0.97x.

    As of September 30, 2017, Delek Logistics had total debt of approximately $401.3 million and cash of $5.3 million. Additional borrowing capacity, subject to certain covenants, under the $700.0 million credit facility was $532.7 million.

    Financial Results
    Revenue for the third quarter 2017 was $130.6 million compared to $107.5 million in the prior year period. The increase in revenue is primarily due to higher sales prices in the west Texas wholesale business. Total operating expenses were $10.7 million in the third quarter 2017, compared to $9.3 million in the third quarter 2016. This increase was primarily due to outside services and employee related expenses.  Total segment contribution margin was $30.8 million in the third quarter 2017 compared to $24.7 million in the third quarter 2016. General and administrative expenses were $2.8 million for the third quarter 2017, compared to $2.3 million in the prior year period.

    Pipelines and Transportation Segment
    The contribution margin in the third quarter 2017 was $17.5 million compared to $16.1 million in the third quarter 2016. This change was primarily due to improved performance on the Paline Pipeline, higher volume on the Lion Pipeline System, partially offset by lower volume on the SALA system.  During the third quarter 2017, the Paline Pipeline was a FERC regulated pipeline with a tariff established for potential shippers, compared to the prior year period when 10,000 barrels per day of the pipeline capacity was under contract with a third-party for a monthly fee. The Paline Pipeline was shut down for approximately nine days due to disruption caused by Hurricane Harvey in the Beaumont area in the third quarter 2017. Operating expenses were $8.6 million in the third quarter 2017 compared to $7.7 million in the prior year period.

    Wholesale Marketing and Terminalling Segment
    During the third quarter 2017, contribution margin was $13.3 million, compared to $8.6 million in the third quarter 2016. This increase was primarily due to improved performance in the west Texas wholesale operations and east Texas marketing agreement on a year-over-year basis. Operating expenses increased to $2.1 million in the third quarter 2017, compared to $1.6 million in the prior year period.

    In the west Texas wholesale business, average throughput in the third quarter 2017 was 12,929 barrels per day compared to 12,162 barrels per day in the third quarter 2016. The wholesale gross margin in west Texas increased year-over-year to $4.00 per barrel and included approximately $1.6 million, or $1.32 per barrel, from renewable identification numbers (RINs) generated in the quarter.  During the third quarter 2016, the wholesale gross margin was $1.16 per barrel and included $1.8 million from RINs, or $1.57 per barrel.  On a year-over-year basis, continued growth in drilling activity in the Permian Basin increased fuel demand and improved the supply/demand balance, which combined with higher margins during a period of product supply disruptions associated with Hurricane Harvey, led to improved performance in the west Texas wholesale business.

    Average terminalling throughput volume of 127,229 barrels per day during the quarter increased on a year-over-year basis from 120,099 barrels per day in the third quarter 2016 primarily due to higher throughput at the Tyler, Texas terminal, partially offset by a decline at other locations. During the third quarter 2017, average volume under the east Texas marketing agreement with Delek US was 74,357 barrels per day compared to 67,812 barrels per day during the third quarter 2016.

    Management Appointments
    Alan Moret has been appointed President of the general partner of Delek Logistics. He joined Delek US through the Alon USA transaction and has served as an EVP of Delek Logistics since July 1, 2017. At Alon, Mr. Moret served as Interim CEO of Alon USA Energy, Inc. and Alon USA Energy Partners, LP from January 2017 until July 1, 2017. Prior to these appointments, Mr. Moret served as Senior Vice President of Supply, Trading and Logistics at Alon since 2008 and, prior to that, as Senior Vice President of Alon’s Asphalt Division where he directed the company’s asphalt operations and marketing. Mr. Moret joined Alon USA in August 2006 in connection with Alon USA’s acquisition of Paramount Petroleum Corporation, where he served as President from November 2001 to August 2006. Mr. Moret has more than 40 years of experience with refining, crude oil and refined product trading and marketing, petroleum logistics, and asphalt business.

    Third Quarter 2017 Results | Conference Call Information
    Delek Logistics will hold a conference call to discuss its third quarter 2017 results on Thursday, November 9, 2017 at 8:30 a.m. Central Time. Investors will have the opportunity to listen to the conference call live by going to www.DelekLogistics.com. Participants are encouraged to register at least 15 minutes early to download and install any necessary software. For those who cannot listen to the live broadcast, a telephonic replay will be available through February 9, 2018 by dialing (855) 859-2056, passcode 99812645. An archived version of the replay will also be available at www.DelekLogistics.com for 90 days.    

    Investors may also wish to listen to Delek US’ (NYSE:DK) third quarter 2017 earnings conference call on Thursday, November 9, 2017 at 9:30 a.m. Central Time and review Delek US’ earnings press release. Market trends and information disclosed by Delek US may be relevant to Delek Logistics, as it is a consolidated subsidiary of Delek US. Investors can find information related to Delek US and the timing of its earnings release online by going to www.DelekUS.com.

    About Delek Logistics Partners, LP
    Delek Logistics Partners, LP, headquartered in Brentwood, Tennessee, was formed by Delek US Holdings, Inc. (NYSE:DK) to own, operate, acquire and construct crude oil and refined products logistics and marketing assets.

    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 the fact that a substantial majority of Delek Logistics' contribution margin is derived from Delek US Holdings, thereby subjecting us to Delek US Holdings' business risks; risks relating to the securities markets generally; risks and costs relating to the age and operational hazards of our assets including, without limitation, costs, penalties, regulatory or legal actions and other effects related to releases, spills and other hazards inherent in transporting and storing crude oil and intermediate and finished petroleum products; the impact of adverse market conditions affecting the utilization of Delek Logistics' assets and business performance, including margins generated by its wholesale fuel business; an inability of Delek to successfully integrate the businesses of Delek and Alon USA Energy, Inc., to grow as expected and realize the synergies and the other anticipated benefits of its merger with Alon, which became effective as of July 1, 2017, as it relates to our potential future growth opportunities, including dropdowns, and other potential benefits; the results of our investments in joint ventures; adverse changes in laws including with respect to tax and regulatory matters and other risks as disclosed in our annual report on Form 10-K, quarterly reports on Form 10-Q and other reports and 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 or described in forward-looking statements 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.

    Non-GAAP Disclosures:
    EBITDA, distributable cash flow and distributable cash flow coverage ratio 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:

    • Delek Logistics' 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 Delek Logistics' unitholders;
       
    • Delek Logistics' 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, distributable cash flow and distributable cash flow coverage ratio provide useful information to investors in assessing its financial condition, its results of operations and cash flow its business is generating. EBITDA, distributable cash flow and distributable cash flow coverage ratio should not be considered in isolation or 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, distributable cash flow and distributable cash flow coverage ratio 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 partnerships in its industry, Delek Logistics' definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other partnerships. 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.  Also, please see the accompanying table providing the calculation of distributable cash flow coverage ratio. 


     
    Delek Logistics Partners, LP
    Condensed Consolidated Balance Sheets (Unaudited)
      September 30, December 31,
      2017 2016
         
      (In thousands)
    ASSETS    
    Current assets:    
    Cash and cash equivalents $5,290  $59 
      Accounts receivable 20,317  19,202 
    Accounts receivable from related parties 714  2,834 
    Inventory 7,891  8,875 
    Other current assets 37  1,071 
    Total current assets 34,249  32,041 
    Property, plant and equipment:    
    Property, plant and equipment 357,532  342,407 
    Less: accumulated depreciation (106,880) (91,378)
    Property, plant and equipment, net 250,652  251,029 
    Equity method investments 106,098  101,080 
    Goodwill 12,203  12,203 
    Intangible assets, net 16,182  14,420 
    Other non-current assets 3,474  4,774 
    Total assets $422,858  $415,547 
    LIABILITIES AND DEFICIT    
    Current liabilities:    
    Accounts payable $14,547  $10,853 
    Accounts payable to related parties    
    Excise and other taxes payable 3,376  4,841 
    Tank inspection liabilities 919  1,013 
    Pipeline release liabilities 1,000  1,097 
    Accrued expenses and other current liabilities 8,897  2,925 
    Total current liabilities 28,739  20,729 
    Non-current liabilities:    
    Long-term debt 401,318  392,600 
    Asset retirement obligations 3,991  3,772 
    Deferred tax liabilities    
    Other non-current liabilities 14,568  11,730 
    Total non-current liabilities 419,877  408,102 
    Total liabilities 448,616  428,831 
    Deficit:    
    Common unitholders - public; 9,067,411 units issued and outstanding at September 30, 2017 (9,263,415 at December 31, 2016) 175,831  188,013 
    Common unitholders - Delek; 15,294,046 units issued and outstanding at September 30, 2017 (15,065,192 at December 31, 2016) (195,217) (195,076)
    General partner - 497,172 units issued and outstanding at September 30, 2017 (496,502 at December 31, 2016) (6,372) (6,221)
    Total deficit (25,758) (13,284)
    Total liabilities and deficit $422,858  $415,547 
     


         
    Delek Logistics Partners, LP    
    Condensed Consolidated Statements of Income (Unaudited)    
      Three Months Ended
    September 30,
     Nine Months Ended
    September 30,
       
      2017 2016 2017 2016
             
      (In thousands, except unit and per unit data)
    Net sales:        
    Affiliate $40,131  $36,360  $116,574  $111,814 
    Third-party 90,495  71,110  270,294  211,565 
    Net sales 130,626  107,470  386,868  323,379 
    Operating costs and expenses:        
    Cost of goods sold 89,120  73,527  266,749  213,381 
    Operating expenses 10,662  9,251  30,986  28,445 
    General and administrative expenses 2,751  2,307  8,255  7,918 
    Depreciation and amortization 5,462  5,356  16,397  15,164 
    (Gain) loss on asset disposals (5) 28  2  (16)
    Total operating costs and expenses 107,990  90,469  322,389  264,892 
    Operating income 22,636  17,001  64,479  58,487 
    Interest expense, net 7,124  3,409  16,657  9,892 
    (Income) loss from equity method investments (1,584) 308  (3,005) 743 
    Other income, net (1)   (1)  
    Income before income tax expense 17,097  13,284  50,828  47,852 
    Income tax expense 174  133  333  360 
    Net income attributable to partners 16,923  13,151  50,495  47,492 
    Comprehensive income attributable to partners $16,923  $13,151  $50,495  $47,492 
             
    Less: General partner's interest in net income, including incentive distribution rights 4,745  3,259  13,406  8,303 
    Limited partners' interest in net income $12,178  $9,892  $37,089  $39,189 
             
    Net income per limited partner unit:        
    Common units - (basic) $0.50  $0.41  $1.52  $1.61 
    Common units - (diluted) $0.50  $0.41  $1.52  $1.60 
    Subordinated units - Delek (basic and diluted) $  $  $  $1.64 
             
    Weighted average limited partner units outstanding:        
    Common units - basic 24,361,457  24,303,740  24,341,921  21,878,935 
    Common units - diluted 24,389,582  24,380,334  24,382,426  21,962,733 
    Subordinated units - Delek (basic and diluted)       2,408,610 
             
    Cash distribution per limited partner unit $0.715  $0.655  $2.110  $1.895 
                     


     
    Delek Logistics Partners, LP
    Condensed Consolidated Statements of Cash Flows (Unaudited)
    (In thousands)
              
          Nine Months Ended
    September 30,
     
          2017 2016 
              
    Cash Flow Data     
    Net cash provided by operating activities $77,904  $86,761  
    Net cash used in investing activities (21,721) (60,161) 
    Net cash used in financing activities (50,952) (26,600) 
     Net increase in cash and cash equivalents $5,231  $  
      


     
    Delek Logistics Partners, LP
    Reconciliation of  Amounts Reported Under U.S. GAAP
      Three Months Ended
    September 30,
     Nine Months Ended
    September 30,
    ($ in thousands) 2017 2016 2017 2016
    Reconciliation of net income to EBITDA:        
    Net income $16,923  $13,151  $50,495  $47,492 
    Add:        
    Income tax expense 174  133  333  360 
    Depreciation and amortization 5,462  5,356  16,397  15,164 
    Interest expense, net 7,124  3,409  16,657  9,892 
    EBITDA $29,683  $22,049  $83,882  $72,908 
             
    Reconciliation of net cash from operating activities to distributable cash flow:        
    Net cash provided by operating activities $30,493  $29,172  $77,904  $86,761 
    Changes in assets and liabilities (8,460) (9,979) (11,141) (22,513)
    Maintenance and regulatory capital expenditures (698) (718) (5,011) (2,351)
    Reimbursement from Delek for capital expenditures 419  726  4,254  1,528 
    Accretion of asset retirement obligations (73) (68) (219) (199)
    Deferred income taxes (39)   (158)  
    Gain (loss) on asset disposals 5  (28) (2) 16 
    Distributable Cash Flow $21,647  $19,105  $65,627  $63,242 
             


    Delek Logistics Partners, LP
    Distributable Coverage Ratio Calculation
     (In thousands)
      Three Months Ended
    September 30,
     Nine Months Ended September 30,
    Distributions to partners of Delek Logistics, LP 2017 2016 2017 2016
    Limited partners' distribution on common units $17,418  $15,920  $51,380  $46,039 
    General partner's distributions 355  325  1,047  940 
    General partner's incentive distribution rights 4,497  3,057  12,650  7,503 
    Total Distributions to be paid $22,270  $19,302  $65,077  $54,482 
             
    Distributable Cash Flow $21,647  $19,105  $65,627  $63,242 
    Distributable cash flow coverage ratio (1) 0.97x 0.99x 1.01x 1.16x
    (1) Distributable cash flow coverage ratio is calculated by dividing distributable cash flow by distributions to be paid in each respective period.    
         


     
    Delek Logistics Partners, LP
    Segment Data (unaudited)
       
     (In thousands) Three Months Ended Nine Months Ended
      September 30, September 30,
      2017 2016 2017 2016
    Pipelines and Transportation        
    Net sales:        
      Affiliate $27,805  $25,238  $81,972  $77,680 
      Third party 3,177  3,388  7,910  15,739 
      Total pipelines and transportation 30,982  28,626  89,882  93,419 
      Operating costs and expenses:        
      Cost of goods sold 4,883  4,811  13,691  14,401 
      Operating expenses 8,573  7,678  24,661  22,317 
      Segment contribution margin $17,526  $16,137  $51,530  $56,701 
    Total Assets $344,260  $327,757     
             
    Wholesale Marketing and Terminalling        
    Net sales:        
      Affiliate $12,326  $11,122  $34,602  $34,134 
      Third party 87,318  67,722  262,384  195,826 
      Total wholesale marketing and terminalling 99,644  78,844  296,986  229,960 
      Operating costs and expenses:        
      Cost of goods sold 84,237  68,716  253,058  198,980 
      Operating expenses 2,089  1,573  6,325  6,128 
      Segment contribution margin $13,318  $8,555  $37,603  $24,852 
    Total Assets $78,598  $65,413     
             
    Consolidated        
    Net sales:        
      Affiliate $40,131  $36,360  $116,574  $111,814 
      Third party 90,495  71,110  270,294  211,565 
      Total consolidated 130,626  107,470  386,868  323,379 
      Operating costs and expenses:        
      Cost of goods sold 89,120  73,527  266,749  213,381 
      Operating expenses 10,662  9,251  30,986  28,445 
      Contribution margin 30,844  24,692  89,133  81,553 
      General and administrative expenses 2,751  2,307  8,255  7,918 
      Depreciation and amortization 5,462  5,356  16,397  15,164 
      (Gain) loss on asset disposals (5) 28  2  (16)
      Operating income $22,636  $17,001  $64,479  $58,487 
    Total Assets $422,858  $393,170     
                 


     
    Delek Logistics Partners, LP
    Segment Capital Spending
     (In thousands)
      Three Months Ended
    September 30,
     Nine Months Ended
    September 30,
    Pipelines and Transportation 2017 2016 2017 2016
    Maintenance capital spending $1,521  $2,403  $4,564  $3,628 
    Discretionary capital spending 1,397  210  2,151  409 
    Segment capital spending $2,918  $2,613  $6,715  $4,037 
    Wholesale Marketing and Terminalling        
    Maintenance capital spending $351  $101  $768  $173 
    Discretionary capital spending 517  363  1,213  799 
    Segment capital spending $868  $464  $1,981  $972 
    Consolidated        
    Maintenance capital spending $1,872  $2,504  $5,332  $3,801 
    Discretionary capital spending 1,914  573  3,364  1,208 
    Total capital spending $3,786  $3,077  $8,696  $5,009 
             


     
    Delek Logistics Partners, LP
    Segment Data (Unaudited)
         
      Three Months Ended
    September 30,
     Nine Months Ended
    September 30,
      2017 2016 2017 2016
    Pipelines and Transportation Segment:        
    Throughputs (average bpd)        
    Lion Pipeline System:        
      Crude pipelines (non-gathered) 60,247  55,217  59,653  55,951 
      Refined products pipelines 51,623  47,974  50,933  51,794 
    SALA Gathering System 15,997  17,237  16,160  18,172 
    East Texas Crude Logistics System 15,260  17,026  15,006  13,108 
    El Dorado Rail Offloading Rack        
             
    Wholesale Marketing and Terminalling Segment:        
    East Texas - Tyler Refinery sales volumes (average bpd) 74,357  67,812  71,917  68,137 
    West Texas marketing throughputs (average bpd) 12,929  12,162  13,647  13,039 
    West Texas marketing margin per barrel $4.00  $1.16  $3.62  $1.24 
    Terminalling throughputs (average bpd) 127,229  120,099  123,780  121,791 

    U.S. Investor / Media Relations Contact:
    Keith Johnson
    Vice President of Investor Relations                       
    615-435-1366

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