Delaware (State or other jurisdiction of incorporation) | 001-32225 (Commission File Number) | 20-0833098 (I.R.S. Employer Identification Number) |
2828 N. Harwood, Suite 1300 Dallas, Texas (Address of principal executive offices) | 75201 (Zip code) |
99.1 | — Press Release of the Partnership issued May 1, 2014 announcing first quarter 2014 results.* |
99.1 | — Press Release of the Partnership issued May 1, 2014 announcing first quarter 2014 results.* |
Earnings Release May 1, 2014 | ![]() |
• | Revenues from our refined product pipelines were $35.8 million, an increase of $8.7 million compared to the first quarter of 2013 primarily due to increased volumes. Additionally benefiting refined product revenues were the effect of annual tariff increases and an increase of $2.0 million in deferred revenue recognized. Shipments averaged 189.5 thousand barrels per day (“mbpd”) compared to 147.1 mbpd for the first quarter of 2013. |
• | Revenues from our intermediate pipelines were $7.9 million, an increase of $1.7 million, on shipments averaging 138.6 mbpd compared to 120.8 mbpd for the first quarter of 2013. Revenues increased due to the increased volumes and a $0.7 million increase in deferred revenue recognized. |
• | Revenues from our crude pipelines were $12.6 million, an increase of $1.0 million, on shipments averaging 177.0 mbpd compared to 145.9 mbpd for the first quarter of 2013. |
• | Revenues from terminal, tankage and loading rack fees were $30.7 million, an increase of $1.3 million compared to the first quarter of 2013. Refined products terminalled in our facilities averaged 340.3 mbpd compared to 315.7 mbpd for the first quarter of 2013. |
• | risks and uncertainties with respect to the actual quantities of petroleum products and crude oil shipped on our pipelines and/or terminalled, stored and throughput in our terminals; |
• | the economic viability of HollyFrontier Corporation, Alon USA, Inc. and our other customers; |
• | the demand for refined petroleum products in markets we serve; |
• | our ability to purchase and integrate future acquired operations; |
• | our ability to complete previously announced or contemplated acquisitions; |
• | the availability and cost of additional debt and equity financing; |
• | the possibility of reductions in production or shutdowns at refineries utilizing our pipeline and terminal facilities; |
• | the effects of current and future government regulations and policies; |
• | our operational efficiency in carrying out routine operations and capital construction projects; |
• | the possibility of terrorist attacks and the consequences of any such attacks; |
• | general economic conditions; and |
• | other financial, operations and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission filings. |
Three Months Ended March 31, | Change from | ||||||||||
2014 | 2013 | 2013 | |||||||||
(In thousands, except per unit data) | |||||||||||
Revenues | |||||||||||
Pipelines: | |||||||||||
Affiliates – refined product pipelines | $ | 24,173 | $ | 16,770 | $ | 7,403 | |||||
Affiliates – intermediate pipelines | 7,911 | 6,172 | 1,739 | ||||||||
Affiliates – crude pipelines | 12,618 | 11,579 | 1,039 | ||||||||
44,702 | 34,521 | 10,181 | |||||||||
Third parties – refined product pipelines | 11,618 | 10,343 | 1,275 | ||||||||
56,320 | 44,864 | 11,456 | |||||||||
Terminals, tanks and loading racks: | |||||||||||
Affiliates | 27,130 | 26,991 | 139 | ||||||||
Third parties | 3,554 | 2,443 | 1,111 | ||||||||
30,684 | 29,434 | 1,250 | |||||||||
Total revenues | 87,004 | 74,298 | 12,706 | ||||||||
Operating costs and expenses: | |||||||||||
Operations | 22,812 | 25,865 | (3,053 | ) | |||||||
Depreciation and amortization | 15,588 | 14,154 | 1,434 | ||||||||
General and administrative | 3,151 | 3,232 | (81 | ) | |||||||
41,551 | 43,251 | (1,700 | ) | ||||||||
Operating income | 45,453 | 31,047 | 14,406 | ||||||||
Equity in earnings of SLC Pipeline | 522 | 657 | (135 | ) | |||||||
Interest expense, including amortization | (10,454 | ) | (12,484 | ) | 2,030 | ||||||
Interest income | 3 | 103 | (100 | ) | |||||||
Loss on early extinguishment of debt | (7,677 | ) | — | (7,677 | ) | ||||||
Gain on sale of assets | — | 2,022 | (2,022 | ) | |||||||
Other | 8 | — | 8 | ||||||||
(17,598 | ) | (9,702 | ) | (7,896 | ) | ||||||
Income before income taxes | 27,855 | 21,345 | 6,510 | ||||||||
State income tax expense | (75 | ) | (56 | ) | (19 | ) | |||||
Net income | 27,780 | 21,289 | 6,491 | ||||||||
Allocation of net income attributable to noncontrolling interests | (3,637 | ) | (2,890 | ) | (747 | ) | |||||
Net income attributable to Holly Energy Partners | 24,143 | 18,399 | 5,744 | ||||||||
General partner interest in net income, including incentive distributions(1) | (8,001 | ) | (6,231 | ) | (1,770 | ) | |||||
Limited partners’ interest in net income | $ | 16,142 | $ | 12,168 | $ | 3,974 | |||||
Limited partners’ earnings per unit – basic and diluted:(1) | $ | 0.27 | $ | 0.21 | $ | 0.06 | |||||
Weighted average limited partners’ units outstanding | 58,657 | 56,990 | 1,667 | ||||||||
EBITDA(2) | $ | 57,934 | $ | 44,990 | $ | 12,944 | |||||
Distributable cash flow(3) | $ | 41,808 | $ | 32,385 | $ | 9,423 |
Volumes (bpd) | ||||||||
Pipelines: | ||||||||
Affiliates – refined product pipelines | 123,171 | 94,148 | 29,023 | |||||
Affiliates – intermediate pipelines | 138,608 | 120,777 | 17,831 | |||||
Affiliates – crude pipelines | 176,953 | 145,926 | 31,027 | |||||
438,732 | 360,851 | 77,881 | ||||||
Third parties – refined product pipelines | 66,294 | 52,986 | 13,308 | |||||
505,026 | 413,837 | 91,189 | ||||||
Terminals and loading racks: | ||||||||
Affiliates | 262,635 | 260,242 | 2,393 | |||||
Third parties | 77,704 | 55,459 | 22,245 | |||||
340,339 | 315,701 | 24,638 | ||||||
Total for pipelines and terminal assets (bpd) | 845,365 | 729,538 | 115,827 |
(1) | Net income attributable to Holly Energy Partners is allocated between limited partners and the general partner interest in accordance with the provisions of the partnership agreement. Net income allocated to the general partner includes incentive distributions declared subsequent to quarter end. General partner incentive distributions were $7.7 million and $6.0 million for the three months ended March 31, 2014 and 2013, respectively. |
(2) | Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as net income attributable to Holly Energy Partners plus (i) interest expense, net of interest income, (ii) state income tax and (iii) depreciation and amortization (excluding Predecessor amounts). EBITDA is not a calculation based upon GAAP. However, the amounts included in the EBITDA calculation are derived from amounts included in our consolidated financial statements. EBITDA should not be considered as an alternative to net income attributable to Holly Energy Partners or operating income, as an indication of our operating performance or as an alternative to operating cash flow as a measure of liquidity. EBITDA is not necessarily comparable to similarly titled measures of other companies. EBITDA is presented here because it is a widely used financial indicator used by investors and analysts to measure performance. EBITDA also is used by our management for internal analysis and as a basis for compliance with financial covenants. |
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
(In thousands) | |||||||
Net income attributable to Holly Energy Partners | $ | 24,143 | $ | 18,399 | |||
Add (subtract): | |||||||
Interest expense | 9,943 | 11,105 | |||||
Interest Income | (3 | ) | (103 | ) | |||
Amortization of discount and deferred debt charges | 511 | 530 | |||||
Loss on early extinguishment of debt | 7,677 | — | |||||
Amortization of unrecognized loss attributable to terminated cash flow hedge | — | 849 | |||||
State income tax | 75 | 56 | |||||
Depreciation and amortization | 15,588 | 14,154 | |||||
EBITDA | $ | 57,934 | $ | 44,990 |
(3) | Distributable cash flow is not a calculation based upon GAAP. However, the amounts included in the calculation are derived from amounts presented in our consolidated financial statements, with the general exception of maintenance capital expenditures. Distributable cash flow should not be considered in isolation or as an alternative to net income attributable to Holly Energy Partners or operating income, as an indication of our operating performance, or as an alternative to operating cash flow as a measure of liquidity. Distributable cash flow is not necessarily comparable to similarly titled measures of other companies. Distributable cash flow is presented here because it is a widely accepted financial indicator used by investors to compare partnership performance. It also is used by management for internal analysis and our performance units. We believe that this measure provides investors an enhanced perspective of the operating performance of our assets and the cash our business is generating. |
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
(In thousands) | |||||||
Net income attributable to Holly Energy Partners | $ | 24,143 | $ | 18,399 | |||
Add (subtract): | |||||||
Depreciation and amortization | 15,588 | 14,154 | |||||
Amortization of discount and deferred debt charges | 511 | 530 | |||||
Loss on early extinguishment of debt | 7,677 | — | |||||
Amortization of unrecognized loss attributable to terminated cash flow hedge | — | 849 | |||||
Increase (decrease) in deferred revenue attributable to shortfall billings | (5,898 | ) | (1,224 | ) | |||
Maintenance capital expenditures* | (849 | ) | (2,335 | ) | |||
Billed crude revenue settlement | — | 918 | |||||
Other non-cash adjustments | 636 | 1,094 | |||||
Distributable cash flow | $ | 41,808 | $ | 32,385 |
* | Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets in order to maintain the existing operating capacity of our assets and to extend their useful lives. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and pipeline integrity, and safety and to address environmental regulations. |
March 31, | December 31, | ||||||
2014 | 2013 | ||||||
(In thousands) | |||||||
Balance Sheet Data | |||||||
Cash and cash equivalents | $ | 4,879 | $ | 6,352 | |||
Working capital | $ | 12,943 | $ | (6,604 | ) | ||
Total assets | $ | 1,378,731 | $ | 1,382,508 | |||
Long-term debt | $ | 833,790 | $ | 807,630 | |||
Partners' equity(4) | $ | 356,826 | $ | 369,446 |
(4) | As a master limited partnership, we distribute our available cash, which historically has exceeded our net income attributable to Holly Energy Partners because depreciation and amortization expense represents a non-cash charge against income. The result is a decline in partners’ equity since our regular quarterly distributions have exceeded our quarterly net income attributable to Holly Energy Partners. Additionally, if the assets contributed and acquired from HollyFrontier while we were a consolidated variable interest entity of HollyFrontier had been acquired from third parties, our acquisition cost in excess of HollyFrontier’s basis in the transferred assets of $305.3 million would have been recorded as increases to our properties and equipment and intangible assets at the time of acquisition instead of decreases to partners’ equity. |