Genesis Energy, L.P. (NYSE: GEL) today announced its fourth
quarter results.
We generated the following financial results for the fourth
quarter of 2019:
- Net Income Attributable to Genesis Energy, L.P. of $22.4
million for the fourth quarter of 2019 compared to Net Loss
Attributable to Genesis Energy, L.P. of $24.8 million for the same
period in 2018.
- Cash Flows from Operating Activities of $50.6 million for the
fourth quarter of 2019 compared to $82.5 million for the same
period in 2018.
- Total Segment Margin in the fourth quarter of 2019 of $179.8
million.
- Available Cash before Reserves to common unitholders of $87.7
million for the fourth quarter of 2019, which provided 1.30X
coverage for the quarterly distribution of $0.55 per common unit
attributable to the fourth quarter.
- We declared cash distributions on our preferred units of
$0.7374 for each preferred unit, which equates to a cash
distribution of approximately $18.7 million and is reflected as a
reduction to Available Cash before Reserves to common
unitholders.
- Adjusted EBITDA of $167.6 million in the fourth quarter of
2019. Our bank leverage ratio, calculated consistent with our
credit agreement, is 5.11X as of December 31, 2019 and is discussed
further in this release.
Grant Sims, CEO of Genesis Energy, said, “For the quarter, our
diversified businesses in total performed slightly better than our
expectations, and we ended the year towards the high-end of our
revised annual guidance for Adjusted EBITDA.
In our offshore pipeline transportation segment, we saw strong
volumes across our platforms and pipelines as newer projects
continued to ramp and sub-sea tiebacks and infield drilling more
than offset any natural decline in our dedicated fields. We
continue to actively pursue and contract new developments which can
access our existing capacity and represent meaningful margin
contribution to us at minimal or no capital, such as BP’s Argos
platform, coming on in 2021, and Murphy’s King’s Quay platform,
coming on in 2022.
The offshore midstream infrastructure business is significantly
different than that in most onshore basins given, among other
things, its cost of entry. Additionally, our systems in the central
Gulf of Mexico have available capacity, and very economic capacity
expansions, that can offer new shippers firm capacity to shore with
the flexibility to go to multiple markets in either Louisiana or
Texas. Generally speaking, our rates per barrel in our new
contracts are going up, we have terms that are typically for the
life-of-lease (some 30 to 40 years), and we are able to include
annual escalators, which, due to the mechanics of compounding, tend
to flatten out the financial contributions over time, even as
volumes decline in the later contract years.
In our onshore facilities and transportation segment, we
experienced a ramp in crude-by-rail volumes throughout the quarter
as a result of curtailment relief granted in Alberta, Canada and we
exited the year averaging approximately one train a day. We have
experienced a continued ramp above that in January and February,
and would otherwise anticipate these levels at least through March.
The provincial government of Alberta is scheduled to review its
self-imposed production curtailments policies in the March/April
2020 time frame. Additionally, the practical capacity of existing
pipelines out of Canada increases in the second and third quarter
as less diluent is needed to move the same amount of bitumen due to
higher ambient temperatures. As a result of these two items, we
could possibly see a reduction in volumes mid-year before a
reasonably expected re-ramp into the end of 2020. We also saw
increased volumes in the fourth quarter on our Texas pipeline.
Otherwise, the rest of our businesses reported in onshore
facilities and transportation segment performed consistent with our
expectations.
Our marine transportation segment continued to perform as
expected and reported increased segment margin for the eighth
consecutive quarter. We experienced strong utilization and
improving day rates across our inland and offshore fleets. IMO 2020
appears to be having a positive impact on our inland, black oil
barges as refiners need to get the intermediate refined barrel to
the right location. Upwards of 90% of our barges are typically
contracted to provide services to refiners moving their
intermediate products from one location to another.
We see improving fundamentals into 2020 for both fleets. The
Army Corps of Engineers is undertaking significant repair and
maintenance of locks on the Mississippi River and its major
tributaries this summer. As a result, we anticipate a near-term
reduction in “practical supply” as movements in and out of such
region take longer and are less efficient than normal. As a result,
demand and day-rates in our brown water fleet should improve. We
are also seeing increased demand for our blue water vessels. Our
clean fleet is benefiting from certain competitive dynamics on the
East Coast as well as more required product movements because of
the closure of refining capacity in Philadelphia. Our larger
offshore vessels are benefiting from increased movements of crude
oil as more and more barrels reach the Gulf Coast, where the Gulf
Coast refiners basically have limited incremental demand for those
types of barrels.
In our sodium minerals and sulfur services segment, our legacy
refinery services business performed as expected in the quarter,
and importantly it appears most of the production and market
interruptions it faced in the second half of 2019 are largely
behind us as we move into 2020.
Turning to sodium minerals, as we mentioned on our third quarter
call, we were then seeing signs of slowdown in the demand for soda
ash globally, particularly in Asia. We believed this was tied
mainly to the ongoing economic uncertainty around the US-China
trade war, but also to decelerating GDP resulting from tightening
monetary policies by most central banks in early 2019, which
policies appear to have been reversed in the second half of last
year.
Nonetheless, this demand trend accelerated into the end of the
quarter as customers continued to have excess inventory of soda ash
and their respective finished goods, like flat glass. At the same
time, it appears that Genesis and the other domestic producers made
more soda ash for export in the fourth quarter compared to earlier
quarters. As a result, price fell in the export markets to clear
this demand/supply imbalance, and we experienced our lowest quarter
of financial contribution from our soda ash operations, of just
over $38 million, since we acquired the business in 2017.
Unfortunately, most contract prices for a subsequent year are
negotiated in the prior December and January of that year. Even
though most domestic prices are set on a multi-year basis, many
subject to caps and collars, our export contracts and negotiated
prices are much shorter in duration. Given the dynamics going into
the price negotiations described above, we expect export prices,
which represent approximately half of our total annual sales, to be
significantly lower in 2020 than they have been in the prior two
and half years since we acquired the operations. Experience has
shown, because of the nature of the mix of contracts, it can take
anywhere from 4-8 quarters for the underlying fundamentals to get
prices back on historical trend. We would point out that the
effects of the coronavirus on global demand and supply are not yet
quantifiable, and this exogenous event could impact that
historically observed time interval.
Having said that, we continue to believe in the long term
fundamentals of the business and the cost competitive advantage
natural soda ash enjoys over synthetically produced product. We
remain confident that the market will need, and we can easily and
profitably place, the incremental tons coming from our Granger
expansion beginning in mid-2022.
When we purchased this business, we analyzed the previous twelve
years of its financial history back through 2006, including how it
performed during the Great Recession. The annual EBITDA ranged from
approximately $120 million to $190 million, with an average of
approximately $160 million. Our view then was, and still is, if
around $120 million is the downside on a $1.2 billion acquisition,
net of the working capital acquired, we would make that investment
anytime, especially for a business that has over 70 years of
operating history and a remaining reserve life of potentially
300-400 years.
Looking forward into 2020, we see Adjusted EBITDA coming in a
range of $640-$680 million. This assumes the margin contribution
from our soda ash operations is some $35-$45 million below the $165
million it earned this past year.
As you can therefore surmise, we feel reasonably positive about
our other businesses and their prospects. We would reiterate we
expect the offshore pipeline transportation segment to be $20-$30
million above 2019 levels. The marine transportation segment is
budgeted to improve some $2-$6 million and our legacy refinery
services business could be up a similar amount. Finally, the
onshore facilities and transportation segment is forecasted to be
flat to up $10 million, but such improved results are primarily
dependent on the economics of crude-by-rail out of Canada staying
constructive throughout this year.
As we analyze our financials, we identify recurring cash
obligations for 2020 totaling approximately $620 million, which
includes, among others, cash taxes, interest on bank debt and
bonds, all maintenance capital spent, preferred cash distributions
at the current $0.7374 per unit quarterly payout, and common
distributions at the current $0.55 per unit quarterly payout. At
this point, we have budgeted approximately $25 million of growth
capital outside of the Granger expansion, which dollars are paid
via the redeemable preferred structure at the soda ash operational
level, which requires no cash payments from Genesis during the 36
month estimated construction period. We do have approximately $20
million of non-recurring asset retirement obligations (“ARO”)
budgeted in 2020. However, we reasonably expect to be able to
monetize one of the retired assets by the end of this year or
certainly sometime in 2021 for a multiple of these 2020 ARO
expenditures.
As we look beyond 2020, we have a very good line of sight on
significantly improving financial performance. First, we would
reasonably expect our existing soda ash operations to return to
trend and add some $40-$50 million a year by 2022 at the latest.
Argos is scheduled to come on-line in the second half of 2021,
which represents potentially $30-$40 million of incremental
annualized EBITDA. King's Quay is scheduled to come on-line in the
first half of 2022, which represents potentially $50-$60 million of
incremental annualized EBITDA. Finally, assuming a return to trend
on soda ash pricing, the Granger expansion is expected to add
potentially $60 million of incremental annualized EBITDA beginning
in mid-2022. Therefore, given a starting point of being very close
to cash flow neutral this year and taking into account the
meaningful new EBITDA discussed above, we believe we will be able
to de-lever our balance sheet and restore and maintain our
financial flexibility to capitalize on future discretionary
opportunities, without ever losing our commitment to safe, reliable
and responsible operations."
1 EBITDA and Adjusted EBITDA are non-GAAP financial
measures. We are unable to provide a reconciliation of the
forward-looking EBITDA and Adjusted EBITDA projections contained in
this press release to their respective most directly comparable
GAAP financial measure because the information necessary for
quantitative reconciliations of the EBITDA and Adjusted EBITDA
measures to their respective most directly comparable GAAP
financial measures is not available to us without unreasonable
efforts. The probable significance of providing these
forward-looking EBITDA and Adjusted EBITDA measures without the
directly comparable GAAP financial measures is that such GAAP
financial measures may be materially different from the
corresponding non-GAAP financial measures.
Financial Results
Segment Margin
Variances between the fourth quarter of 2019 (the “2019
Quarter”) and the fourth quarter of 2018 (the “2018 Quarter”) in
these components are explained below.
Segment margin results for the 2019 Quarter and 2018 Quarter
were as follows:
Three Months Ended December
31,
2019
2018
(in thousands) Offshore pipeline transportation
$
86,045
$
69,276
Sodium minerals and sulfur services
52,306
67,613
Onshore facilities and transportation
25,060
36,296
Marine transportation
16,356
12,272
Total Segment Margin
$
179,767
$
185,457
Offshore pipeline transportation Segment Margin for the 2019
Quarter increased $16.8 million, or 24%, from the 2018 Quarter,
primarily due to higher volumes on our crude oil pipeline systems.
These increased volumes are the result of (i) the ramping of
volumes from the Buckskin and Hadrian North production fields to
expected levels in the second half of 2019, both of which are fully
dedicated to our SEKCO pipeline and further downstream, to our
Poseidon oil pipeline system, and had first oil flow in 2019, and
(ii) the continued receipt of volumes on our CHOPS and Poseidon
pipeline systems due to deliveries from a third party pipeline that
has insufficient capacity to deliver its committed volumes to
shore. During the second half of 2019, we entered into agreements
to move forty thousand barrels per day on CHOPS and twenty thousand
barrels per day on Poseidon that are delivered to us by a
third-party pipeline that has insufficient capacity. The agreements
include ship-or-pay provisions, have terms as long as five years
and required no additional capital on our part.
Sodium minerals and sulfur services Segment Margin for the 2019
Quarter decreased $15.3 million, or 23%, from the 2018 Quarter.
This decrease is primarily due to lower NaHS volumes during the
2019 Quarter in our refinery services business and weakened export
pricing in our Alkali Business due to supply and demand imbalance.
The lower volumes in our refinery services business are
attributable to supply chain disruptions some of our customers
experienced during the 2019 Quarter along with production issues at
several of our host refineries. Soda ash volumes slightly increased
in the 2019 Quarter relative to the 2018 Quarter, but were offset
by the lower pricing we received on our ANSAC volumes, which
negatively impacted margin during the 2019 Quarter.
Onshore facilities and transportation Segment Margin for the
2019 Quarter decreased $11.2 million, or 31%, from the 2018
Quarter. This decrease is primarily due to lower crude oil pipeline
and rail unload volumes during the 2019 Quarter. The lower volumes
in the 2019 Quarter are primarily due to the continued effects of
production curtailments by the Canadian government during 2019
impacting our Louisiana pipeline and rail unload volumes, and our
lower rail unload volumes at our Raceland facility in the 2019
Quarter. This was partially offset by our increased volumes on our
Texas system during the 2019 Quarter, which led to increased margin
contribution as our main customer utilized all of its prepaid
transportation credits prior to December 31, 2019.
Marine transportation Segment Margin for the 2019 Quarter
increased $4.1 million, or 33%, from the 2018 Quarter. This
increase in Segment Margin is primarily attributable to higher
average day rates in the inland and offshore markets that have been
advantageous for both spot and term contracts, while our
utilization was relatively flat between the 2019 Quarter and 2018
Quarter. While we have seen a slight uptick in day rates, 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 still near cyclical
lows. This was partially offset by an increase in operating costs
during the 2019 Quarter relative to the 2018 Quarter due to an
increase in dry-docking costs in both our inland and offshore
fleet.
Other Components of Net Income
In the 2019 Quarter, we recorded Net Income Attributable to
Genesis Energy, L.P. of $22.4 million compared to Net Loss
Attributable to Genesis Energy, L.P. of $24.8 million in the 2018
Quarter. The 2018 Quarter was negatively impacted by impairment
expense of $120.3 million. The 2018 Quarter also included gains on
asset sales of $38.9 million primarily due to the closing of our
Powder River Basin asset sale during the period and $5.7 million
higher segment margin than the 2019 Quarter as discussed above,
which partially offset the impairment expense recorded.
Additionally, the 2019 Quarter included an unrealized loss of $9.3
million on the valuation of the embedded derivative associated with
our Class A Convertible Preferred Units recorded in other income
(expense), compared to an unrealized gain of $8.6 million recorded
during the 2018 Quarter.
Earnings Conference Call
We will broadcast our Earnings Conference Call on Wednesday,
February 19, 2020, at 9 a.m. Central time (10 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, onshore facilities and transportation
and marine 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 December
31,
Year Ended December 31,
2019
2018
2019
2018
REVENUES
$
604,329
$
689,296
$
2,480,820
$
2,912,770
COSTS AND EXPENSES: Costs of sales and operating
expenses
441,507
511,931
1,835,624
2,278,416
General and administrative expenses
12,590
17,486
52,687
66,898
Depreciation, depletion and amortization
79,293
74,401
319,806
313,190
Impairment expense
-
120,260
-
126,282
Gain on sale of assets
-
(38,901
)
-
(42,264
)
OPERATING INCOME
70,939
4,119
272,703
170,248
Equity in earnings of equity investees
16,611
15,238
56,484
43,626
Interest expense
(53,559
)
(56,327
)
(219,440
)
(229,191
)
Other income (expense)
(9,332
)
8,627
(9,026
)
5,023
Net income attributable to redeemable noncontrolling interests
(1,961
)
-
(2,233
)
-
NET INCOME (LOSS) ATTRIBUTABLE TO GENESIS ENERGY, L.P.
$
22,368
$
(24,783
)
$
95,999
$
(6,075
)
Less: Accumulated distributions attributable to Class A Convertible
Preferred Units
(18,684
)
(18,021
)
(74,467
)
(69,801
)
NET INCOME (LOSS) AVAILABLE TO COMMON UNITHOLDERS
$
3,684
$
(42,804
)
$
21,532
$
(75,876
)
NET INCOME (LOSS) PER COMMON UNIT: Basic and Diluted
$
0.03
($
0.35
)
$
0.18
($
0.62
)
WEIGHTED AVERAGE OUTSTANDING COMMON UNITS: Basic and Diluted
122,579
122,579
122,579
122,579
GENESIS ENERGY, L.P.
OPERATING DATA - UNAUDITED
Three Months Ended December
31,
Year Ended December 31,
2019
2018
2019
2018
Offshore Pipeline Transportation Segment Crude oil
pipelines (barrels/day unless otherwise noted): CHOPS
234,989
202,008
234,301
202,121
Poseidon (1)
291,992
251,512
264,931
234,960
Odyssey (1)
132,441
131,088
144,785
115,239
GOPL
5,283
8,485
8,845
10,147
Offshore crude oil pipelines total
664,705
593,093
652,862
562,467
Natural gas transportation volumes (MMBBtus/d) (1)
365,424
421,104
400,770
432,261
Sodium Minerals and Sulfur Services Segment NaHS (dry
short tons sold)
29,367
36,125
126,443
150,671
Soda Ash volumes (short tons sold)
944,098
929,953
3,590,680
3,669,206
NaOH (caustic soda) volumes (dry short tons sold) (2)
18,756
22,917
78,927
110,107
Onshore Facilities and Transportation Segment Crude
oil pipelines (barrels/day): Texas
95,546
48,877
59,435
33,303
Jay
9,916
12,733
10,461
14,036
Mississippi
6,014
5,879
5,994
6,359
Louisiana (3)
125,417
165,426
117,130
159,754
Wyoming (4)
-
-
-
33,957
Onshore crude oil pipelines total
236,893
232,915
193,020
247,409
Free State- CO2 Pipeline (Mcf/day)
132,388
125,213
97,912
107,674
Crude oil and petroleum products sales (barrels/day)
28,973
37,617
31,681
45,845
Rail unload volumes (barrels/day) (5)
55,155
165,902
79,530
89,082
Marine Transportation Segment Inland Fleet
Utilization Percentage(6)
94.9
%
97.0
%
96.8
%
95.2
%
Offshore Fleet Utilization Percentage(6)
96.0
%
96.5
%
94.6
%
93.5
%
(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 include volumes
sold from our Alkali and Refinery Services businesses.
(3)
Total daily volume for the three and
twelve months ended December 31, 2019 includes 42,704 and 51,267
barrels per day, respectively, of intermediate refined products
associated with our Port of Baton Rouge Terminal pipelines. Total
daily volume for the three and twelve months ended December 31,
2018 includes 49,802 and 55,202 barrels per day, respectively, of
intermediate refined products associated with our Port of Baton
Rouge Terminal pipelines.
(4)
Our Powder River Basin midstream assets
were divested during the fourth quarter of 2018. Volumes presented
for the twelve months ended December 31, 2018 represent actual
throughput as of September 30, 2018.
(5)
Indicates total barrels for which fees
were charged for unloading at all rail facilities.
(6)
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)
December 31,2019 December 31,2018
ASSETS Cash, cash
equivalents, and restricted cash
$
56,405
$
10,300
Accounts receivable - trade, net
417,002
323,462
Inventories
65,137
73,531
Other current assets
54,530
35,986
Total current assets
593,074
443,279
Fixed assets and mineral leaseholds, net
4,850,300
4,977,514
Investment in direct financing leases, net
107,702
116,925
Equity investees
334,523
355,085
Intangible assets, net
138,927
162,602
Goodwill
301,959
301,959
Right of use assets, net
177,071
-
Other assets, net
94,085
121,707
Total assets
$
6,597,641
$
6,479,071
LIABILITIES AND CAPITAL Accounts payable - trade
218,737
127,327
Accrued liabilities
196,758
205,507
Total current liabilities
415,495
332,834
Senior secured credit facility
959,300
970,100
Senior unsecured notes, net of debt issuance costs
2,469,937
2,462,363
Deferred tax liabilities
12,640
12,576
Other long-term liabilities
393,850
259,198
Total liabilities
4,251,222
4,037,071
Mezzanine capital: Class A convertible preferred units
790,115
761,466
Redeemable noncontrolling interests
125,133
-
Partners' capital: Common unitholders
1,443,320
1,690,799
Accumulated other comprehensive income (loss)
(8,431
)
939
Noncontrolling interests
(3,718
)
(11,204
)
Total partners' capital
1,431,171
1,680,534
Total liabilities, mezzanine capital and partners' capital
$
6,597,641
$
6,479,071
Common Units Data: Total common units outstanding
122,579,218
122,579,218
GENESIS ENERGY, L.P.
RECONCILIATION OF NET INCOME(LOSS) TO
SEGMENT MARGIN - UNAUDITED
(in thousands)
Three Months Ended December
31,
2019
2018
Net income (loss) attributable to Genesis Energy, L.P.
$
22,368
$
(24,783
)
Corporate general and administrative expenses
12,877
16,997
Depreciation, depletion, amortization and accretion
74,865
70,816
Impairment expense
-
120,260
Interest expense, net
53,559
56,327
Income tax expense (benefit)
(1
)
584
Gain on sale of assets
-
(38,901
)
Equity compensation adjustments
-
(126
)
Provision for leased items no longer in use
(534
)
(434
)
Redeemable noncontrolling interest redemption value adjustments (1)
1,961
-
Plus(minus) Select Items, net
14,672
(15,283
)
Segment Margin (2)
$
179,767
$
185,457
(1)
Includes distributions paid in kind
attributable to the period and accretion on the redemption
feature.
(2)
See definition of Segment Margin later in
this press release.
GENESIS ENERGY, L.P.
RECONCILIATIONS OF NET INCOME (LOSS) TO
ADJUSTED EBITDA AND AVAILABLE CASH BEFORE RESERVES
UNAUDITED
(in thousands)
Three Months Ended December
31,
2019
2018
(in thousands)
Net income (loss) attributable to Genesis Energy, L.P.
$
22,368
$
(24,783
)
Interest expense, net
53,559
56,327
Income tax (benefit) expense
(1
)
584
Depreciation, depletion, amortization, and accretion
74,865
70,816
Impairment expense
-
120,260
EBITDA
150,791
223,204
Redeemable noncontrolling interest redemption value adjustments (1)
1,961
-
Plus (minus) Select Items, net
14,877
(10,024
)
Adjusted EBITDA, net (2)
167,629
213,180
Maintenance capital utilized(3)
(7,500
)
(5,755
)
Interest expense, net
(53,559
)
(56,327
)
Cash tax expense
(231
)
(301
)
Cash distributions to preferred unitholders(4)
(18,684
)
-
Available Cash before Reserves(5)
$
87,655
$
150,797
(1)
Includes distributions paid in kind
attributable to the period and accretion on the redemption
feature.
(2)
The 2018 Quarter includes a gain on sale
of assets of $38.9 million related to the sale of our Powder River
Basin midstream assets.
(3)
Maintenance capital expenditures in the
2019 Quarter and 2018 Quarter were $33.8 million and $27.3 million,
respectively. Our maintenance capital expenditures are principally
associated with our alkali and marine transportation
businesses.
(4)
Distributions to preferred unitholders
that is attributable to the 2019 Quarter were paid on February 14,
2020 to unitholders of record at the close of business on January
31, 2020.
(5)
Represents the Available Cash before
Reserves to common unitholders.
GENESIS ENERGY, L.P.
RECONCILIATION OF NET CASH FLOWS FROM
OPERATING ACTIVITIES TO ADJUSTED EBITDA - UNAUDITED
(in thousands)
Three Months Ended December
31,
2019
2018
Cash Flows from Operating Activities
$
50,558
$
82,475
Adjustments to reconcile net cash flow provided by operating
activities to Adjusted EBITDA: Interest Expense, net
53,559
56,327
Amortization of debt issuance costs and discount
(2,701
)
(2,676
)
Effects of available cash from equity method investees not included
in operating cash flows
2,918
2,937
Net effect of changes in components of operating assets and
liabilities
65,454
29,482
Non-cash effect of long-term incentive compensation expense
(2,198
)
(832
)
Expenses related to acquiring or constructing growth capital assets
333
2,970
Differences in timing of cash receipts for certain contractual
arrangements (1)
2,408
(1,358
)
Other items, net
(2,702
)
4,954
Gain on sale of assets
-
38,901
Adjusted EBITDA
$
167,629
$
213,180
(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)
December 31, 2019 Senior secured credit facility
$
959,300
Senior unsecured notes
2,469,937
Less: Outstanding inventory financing sublimit borrowings
(4,300
)
Less: Cash and cash equivalents
(8,412
)
Adjusted Debt (1)
$
3,416,525
Pro Forma LTM December 31, 2019 Adjusted Consolidated EBITDA
(per our senior secured credit facility) (2)
$
668,595
Adjusted Debt-to-Adjusted Consolidated EBITDA 5.11X
(1)
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
from our restricted subsidiaries.
(2)
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, including but not limited to statements
relating to future financial and operating results and our strategy
and plans, 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, and the realized benefits of the preferred
equity investment in Alkali Holdings by affiliates of GSO Capital
Partners LP or our ability to comply with the Granger transaction
agreements and maintain control and ownership of our Alkali
Business. 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, 2018 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.
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 preferred and
common 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, cash tax expense, and cash distributions paid to our Class
A convertible preferred unitholders.
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 preferred and common 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(loss):
Three Months Ended December
31,
2019
2018
I.
Applicable to all Non-GAAP Measures Differences in timing of cash
receipts for certain contractual arrangements(1)
$
2,408
$
(1,358
)
Adjustment regarding direct financing leases(2)
2,183
1,979
Certain non-cash items: Unrealized losses (gains) on derivative
transactions excluding fair value hedges, net of changes in
inventory value
8,394
(11,288
)
Adjustment regarding equity investees(3)
2,662
1,442
Other
(975
)
(6,058
)
Sub-total Select Items, net(4)
14,672
(15,283
)
II.
Applicable only to Adjusted EBITDA and Available Cash before
Reserves Certain transaction costs(5)
333
2,970
Equity compensation adjustments
-
(151
)
Other
(128
)
2,440
Total Select Items, net(6)
$
14,877
$
(10,024
)
(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, Adjusted EBITDA and Available Cash before
Reserves.
(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/20200219005284/en/
Genesis Energy, L.P. Ryan Sims SVP - Finance and Corporate
Development (713) 860-2521
Genesis Energy (NYSE:GEL)
Historical Stock Chart
From Mar 2024 to Apr 2024
Genesis Energy (NYSE:GEL)
Historical Stock Chart
From Apr 2023 to Apr 2024