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Delek Logistics Partners, LP Reports Fourth Quarter and Full-Year 2012 Results

BRENTWOOD, Tenn.--(BUSINESS WIRE)--Mar. 5, 2013-- Delek Logistics Partners, LP (NYSE: DKL) ("Delek Logistics"), a growth-oriented master limited partnership focused on owning and operating midstream energy infrastructure, today announced financial results for the fourth quarter and full year 2012.

Delek Logistics commenced operations on November 7, 2012 upon the successful completion of its initial public offering. For the 55 day period beginning November 7, 2012 and ended December 31, 2012 (the "post-closing period"), Delek Logistics reported net income of $8.4 million, or $0.34 per common partner unit.

For the post-closing period, distributable cash flow was $8.1 million and earnings before interest, taxes depreciation and amortization (“EBITDA”) was $10.2 million. Delek Logistics paid its first regular cash distribution of $5.5 million, or $0.224 per unit on February 14, 2013. This distribution was pro-rated for the post-closing period and corresponds to Delek Logistics' minimum quarterly distribution of $0.375 per unit, or $1.50 per unit on an annualized basis.

Uzi Yemin, Chairman and Chief Executive Officer of Delek Logistics' general partner, remarked: “The strong cash flow we generated since the initial public offering reflects a great start for us. Delek Logistics' EBITDA and distributable cash flow exceeded our expectations as our west Texas marketing business performed well and SALA Gathering System volumes were higher than expected. In addition, our cash flow was benefited by lower maintenance capital expenditures than forecast. Going forward, our focus will remain on delivering both growth and value as we explore opportunities to expand. We currently expect to recommend to the Board of Directors of Delek Logistics' general partner an increase in our quarterly distribution to $0.385 per unit for the quarter ending March 31, 2013, which would represent a 2.7 percent increase from our minimum quarterly distribution.”

Financial Results

Delek Logistics commenced operations on November 7, 2012 upon successful completion of its initial public offering (the “offering”) and the concurrent contribution of certain assets from its sponsor, Delek US Holdings, Inc. (NYSE:DK). For accounting purposes, the results of operations prior to November 7, 2012 from the assets and entities that were contributed to us concurrent with the offering, were attributed to Delek Logistics Partners, LP Predecessor (our “Predecessor”). Therefore, results from operations for the three months and twelve months ended December 31, 2012 include results for both the Predecessor and Delek Logistics. Because results presented from prior periods are not comparable, this earnings release focuses on results from operations during the post-closing period. A reconciliation of the post-closing period to the full fourth quarter 2012 results is provided in tables attached to this release.

Revenues during the post-closing period were $111.2 million and contribution margin was $11.3 million. The Pipeline and Transportation segment's performance during this period primarily benefited from elevated throughput of 21,595 barrels per day in the SALA Gathering System relative to the forecast provided in the prospectus filed with the Securities and Exchange Commission on November 1, 2012, pro-rated for a 55 day period.

In addition, performance in the Wholesale Marketing and Terminalling segment benefited from a $3.14 per barrel margin in west Texas as demand for refined products benefited from a robust economy in that area as oil drilling activity has increased. The east Texas business sold 61,399 barrels per day of refined product under the marketing agreement with Delek US' Tyler, Texas refinery, which was higher than expected. This combination contributed to better than expected performance for this segment during this period relative to the forecast provided in the prospectus pro-rated for a 55 day period.

Total operating expenses of $2.9 million and general and administrative expenses of $1.2 million for the post-closing period were in line with the prior forecast.

As of December 31, 2012, Delek Logistics had a cash balance of $23.5 million of which $6.3 million is owed to Delek US for working capital related to the initial public offering. Total debt was $90.0 million.

Growth Strategy

Yemin continued, “Our strategy to provide continued growth and value is focused on generating a stable cash flow through a combination of organic expansion opportunities and acquisitions. During the first quarter 2013, we completed our Nettleton pipeline reversal project, as well as the pipeline connection for the rail offloading facility at Delek US' El Dorado, Arkansas refinery. In addition, we expect our agreements with our sponsor, Delek US, will give us the opportunity to purchase multiple logistics assets from Delek US over the next two years, beginning in the second half of this year. We believe that these assets have a combined potential EBITDA of $25 to $30 million annually, as we continue to explore additional third party opportunities.”

Fourth Quarter and Full-Year 2012 Results | Conference Call Information

Delek Logistics will hold a conference call to discuss its fourth quarter and full-year 2012 results on March 6, 2013 at 10:00 a.m. Central Time. Investors will have the opportunity to listen to the conference call live over the Internet by going to www.DelekLogistics.com and clicking on the Investor Relations tab, at least 15 minutes early to register, download and install any necessary software. For those who cannot listen to the live broadcast, a telephonic replay will be available through June 6, 2013 by dialing (855) 859-2056, passcode 98107477. An archived version of the replay will also be available at www.DelekLogistics.com for 90 days.

About Delek Logistic 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. Delek Logistics' assets and operating results are reported in two segments:

  • Pipelines and Transportation: Approximately 200 miles of transportation pipelines and a 600 mile crude oil gathering system, in addition to associated storage facilities with 1.7 million barrels of active shell capacity supporting Delek US' El Dorado and Tyler refineries. Additionally, this segment includes the Paline pipeline, a 185 mile crude oil pipeline from Longview to Nederland, Texas.
  • Wholesale Marketing and Terminalling: Includes a wholesale marketing business in Texas and light product terminals, located in Abilene, Big Sandy and San Angelo, Texas, and in Nashville and Memphis, Tennessee.

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, but not limited to, the fact that a substantial majority of Delek Logistics' margin is derived from Delek US, thereby subjecting us to Delek US' business risks, our ability to continue to purchase assets from Delek US, risks relating to the securities markets generally, the impact of adverse market conditions affecting the business of Delek Logistics, adverse changes in laws including with respect to tax and regulatory matters and other risks as disclosed in our 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 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.

Factors Affecting Comparability:

The following tables present financial and operational information for the three months and year ended December 31, 2012 and 2011. For accounting purposes, the results of operations prior to November 7, 2012 from the assets and entities that were contributed to us concurrent with the offering, were attributed to Delek Logistics Partners, LP Predecessor (our “Predecessor”). Because many of these assets were historically a part of the integrated operations of Delek US, the Predecessor generally recognized the costs and most revenue associated with the gathering, pipeline, transportation, terminalling and storage services provided to Delek US on an intercompany basis or charged low or no throughput or storage fees for transportation.

Delek Logistics commenced operations on November 7, 2012 upon successful completion of its initial public offering and the concurrent contribution of certain assets from its sponsor, Delek US. For the 55 day period from November 7, 2012 to December 31, 2012 revenues and costs are recorded on all assets in accordance with new contracts that were in effect upon completion of the initial public offering. The financial and operational information for the three months and year ended December 31, 2012 include results of operations of Delek Logistics for that 55 day period.

Non-GAAP Disclosures:

EBITDA and Distributable Cash Flow. Delek Logistics defines EBITDA as net income (loss) before net interest expense, income tax expense, depreciation and amortization expense. Distributable cash flow is defined as EBITDA less net cash paid for interest, maintenance capital expenditures and income taxes. Distributable cash flow will not reflect changes in working capital balances.

EBITDA and distributable cash flow 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:

  • our 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 our unitholders;
  • our 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 and distributable cash flow provide useful information to investors in assessing our financial condition, our results of operations and cash flow our business is generating. EBITDA and distributable cash flow should not be considered 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 and distributable cash flow 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 companies in our industry, Delek Logistics' definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. 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.

 
Delek Logistics Partners, LP
Reconciliation of Amounts Reported Under U.S. GAAP
      Predecessor    

Delek Logistics

Partners, LP

   

Three Months

Ended

    Year Ended
 
($ in thousands) 10/1/2012 - 11/6/12 11/7/12 - 12/31/12 December 31, 2012 December 31, 2012
Reconciliation of EBITDA to net income:
Net income $ 17,682 $ 8,410 $ 26,092 $ 34,059
Add:
Income tax (benefit) expense (19,271 ) 64 (19,207 ) (14,024 )
Depreciation and amortization 822 1,205 2,027 8,675
Interest Expense, net 410   496   906   2,682  
EBITDA $ (357 ) $ 10,175   $ 9,818   $ 31,392  
 
Reconciliation of EBITDA to net cash from operating activities:
Net cash provided by (used in) operating activities $ 53,806 $ (20,406 ) $ 33,400 $ 34,363
Less: Amortization of unfavorable contract liability to revenue (267 ) (401 ) (668 ) (668 )
Less: Amortization of deferred financing costs 123 112 235 381
Less: Accretion of asset retirement obligations 16 3 19 98
Less: Deferred taxes (1) (96 ) 3 (93 ) (228 )
Less: Loss on asset disposals 4 4 9
Less: Unit-based compensation expense 1 1 93
Less: Changes in assets and liabilities 54,056 (29,739 ) 24,317 10,478
Add: Income tax (benefit) expense (737 ) 64 (673 ) 4,510
Add: Interest expense, net 410   496   906   2,682  
EBITDA $ (357 ) $ 10,175   $ 9,818   $ 31,392  
 
Reconciliation of distributable cash flow to EBITDA:
EBITDA $ (357 ) $ 10,175 $ 9,818 $ 31,392
Less: Cash interest, net 287 384 671 2,301
Less: Maintenance and Regulatory capital expenditures 1,179 1,179 2,985
Less: Income tax (benefit) expense (1) (737 ) 64 (673 ) 4,510
Add: Non-cash unit based compensation expense 1 1 93
Less: Amortization of unfavorable contract liability 267   401   668   668  
Distributable cash flow $ (174 ) $ 8,148   $ 7,974   $ 21,021  
 

(1) Deferred taxes and income tax expense represent the period to date deferred taxes and tax expense, excluding a one-time tax benefit of $(18.5) million. The majority of the Partnership's deferred tax assets and liabilities relates to the Predecessor's conversion to a partnership and as a result of such conversion we are not subject to federal income taxes. The conversion from a taxable corporation to a passthrough resulted in this one-time tax benefit.

 
Delek Logistics Partners, LP
Condensed Consolidated Balance Sheets (Unaudited)
      December 31,
2012     2011
Predecessor
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 23,452 $ 35
Accounts receivable 27,725 22,577
Accounts receivable from related party 5,618
Inventory 14,351 18,859
Deferred tax assets 14 733
Other current assets 169   629  
Total current assets 65,711   48,451  
Property, plant and equipment:
Property, plant and equipment 172,300 144,980
Less: accumulated depreciation (18,790 ) (11,300 )
Property, plant and equipment, net 153,510   133,680  
Goodwill 10,454 7,499
Intangible assets, net 12,430 10,025
Other non-current assets 3,664   172  
Total assets $ 245,769   $ 199,827  
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 21,849 $ 26,386
Accounts payable to related parties 10,148
Current portion of revolving credit facility 30,300
Interest payable 17
Fuel and other taxes payable 4,650 4,234
Accrued employee costs 226
Current portion of environmental liabilities 37
Accrued expenses and other current liabilities 3,615   3,084  
Total current liabilities 40,262   64,004  
Non-current liabilities:
Revolving credit facility 90,000
Asset retirement obligations 1,440 1,342
Deferred tax liabilities 17 19,498
Other non-current liabilities 9,625   7,261  
Total non-current liabilities 101,082   28,101  
Equity:
Predecessor division equity 107,722
Common unitholders - public (9,200,000 units issued and outstanding) 178,728
Common unitholders - Delek (2,799,258 units issued and outstanding) (127,129 )
Subordinated unitholders - Delek (11,999,258 units issued and outstanding) 52,875
General partner - Delek (489,766 units issued and outstanding) (49 )  
Total equity 104,425   107,722  
Total liabilities and equity $ 245,769   $ 199,827  
 
Delek Logistics Partners, LP
Condensed Consolidated Statements of Income (Unaudited)
Reconciliation of Partnership to Predecessor
             
Predecessor

Delek Logistics

Partners, LP

Three Months

Ended

10/1/2012 - 11/6/12 11/7/12 - 12/31/12 December 31, 2012
 
(In thousands, except unit and per unit data)
Net sales $ 138,008 $ 111,208 $ 249,216
Operating costs and expenses:
Cost of goods sold 132,751 96,933 229,684
Operating expenses 4,757 2,931 7,688
General and administrative expenses 853 1,169 2,022
Depreciation and amortization 822 1,205 2,027
Loss on sale of assets 4     4  
Total operating costs and expenses 139,187   102,238   241,425  
Operating income (1,179 ) 8,970   7,791  
Interest expense, net 410   496   906  
Net income before income tax expense (1,589 ) 8,474   6,885  
Income tax expense (19,271 ) 64   (19,207 )
Net income $ 17,682   $ 8,410   $ 26,092  
 
Delek Logistics Partners, LP
Condensed Consolidated Statements of Income (Unaudited)
     

Three Months

Ended December 31,

        Year Ended
2012     2011 2012     2011
Predecessor Predecessor
(In thousands, except unit and per unit data)
Net sales $ 249,216 $ 187,000 $ 1,022,586 $ 744,079
Operating costs and expenses:
Cost of goods sold 229,684 174,272 959,434 700,505
Operating expenses 7,688 4,668 23,362 12,940
General and administrative expenses 2,022 1,835 8,389 5,795
Depreciation and amortization 2,027 1,520 8,675 4,820
Loss on sale of assets 4   (2 ) 9   (2 )
Total operating costs and expenses 241,425   182,293   999,869   724,058  
Operating income 7,791   4,707   22,717   20,021  
Interest expense, net 906   543   2,682   2,011  
Net income before income tax expense 6,885   4,164   20,035   18,010  
Income tax expense (19,207 ) 676   (14,024 ) 5,363  
Net income $ 26,092   $ 3,488   $ 34,059   $ 12,647  
 
Less: Predecessor income prior to initial public offering on November 7, 2012 17,682 25,649
Net income subsequent to initial public offering 8,410 8,410
Less: General partner's interest in net income subsequent to initial public offering 168   168  
Limited partners' interest in net income subsequent to initial public offering $ 8,242   $ 8,242  
 
Net income per limited partner unit:
Common units - (basic and diluted) $ 0.34 $ 0.34
Subordinated units - Delek (basic and diluted) $ 0.34 $ 0.34
 
Weighted average limited partner units outstanding:
Common units - basic 11,999,258 11,999,258
Common units - diluted 11,999,258 11,999,258
Subordinated units - Delek (basic and diluted) 11,999,258 11,999,258
 
Delek Logistics Partners, LP
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
                     
Year Ended December 31,
2012     2011
Predecessor
Cash Flow Data
Cash flows provided (used in) by operating activities: $ 34,363 $ (2,859 )
Cash flows used in investing activities: (34,350 ) (885 )
Cash flows provided by financing activities: 23,404   3,779  
Net increase in cash and cash equivalents $ 23,417   $ 35  
 
Delek Logistics Partners, LP
Pipelines & Transportation Segment Data
(In thousands)
      Pipelines & Transportation
  Predecessor

10/1/12 - 11/6/12

    Delek Logistics Partners, LP

11/7/12 - 12/31/12

   

Three Months Ended

December 31, 2012

Net sales $ 3,886 $ 8,214 $ 12,100
Operating costs and expenses:
Cost of goods sold
Operating expenses 3,777   2,396   6,173
Segment contribution margin $ 109   $ 5,818   $ 5,927
 
Delek Logistics Partners, LP
Wholesale Marketing & Terminalling Segment Data
(In thousands)
      Wholesale Marketing and Terminalling
  Predecessor

10/1/12 - 11/6/12

   

Delek Logistics Partners, LP

11/7/12 - 12/31/12

   

Three Months Ended

December 31, 2012

Net sales $ 134,122 $ 102,994 $ 237,116
Operating costs and expenses:
Cost of goods sold 132,751 96,933 229,684
Operating expenses 980   535   1,515
Segment contribution margin $ 391   $ 5,526   $ 5,917
 
Delek Logistics Partners, LP
Segment Data
(In thousands)
      Three Months Ended December 31, 2012
 

Pipelines &

Transportation

   

Wholesale Marketing

& Terminalling

    Consolidated
Net sales $ 12,100 $ 237,116 $ 249,216
Operating costs and expenses:
Cost of goods sold 229,684 229,684
Operating expenses 6,173   1,515   7,688  
Segment contribution margin $ 5,927   $ 5,917   11,844
General and administrative expenses 2,022
Depreciation and amortization 2,027
Loss on disposal of assets 4  
Operating income $ 7,791  
Total assets $ 147,257   $ 98,512   $ 245,769  
 
Three Months Ended December 31, 2011

Predecessor

 

Pipelines &

Transportation

Wholesale Marketing

& Terminalling

Consolidated
Net sales $ 7,543 179,457 $ 187,000
Operating costs and expenses:
Cost of goods sold 174,272 174,272
Operating expenses 3,649   1,019   4,668  
Segment contribution margin $ 3,894   $ 4,166   8,060
General and administrative expenses 1,835
Depreciation and amortization 1,520
(Gain) on disposal of assets (2 )
Operating income $ 4,707  
Total assets $ 111,564   $ 88,263   $ 199,827  
 
Delek Logistics Partners, LP
Segment Data
(In thousands)
      Year Ended December 31, 2012

Pipelines &

Transportation

   

Wholesale Marketing

& Terminalling

    Consolidated
Net sales $ 33,539 $ 989,047 $ 1,022,586
Operating costs and expenses:
Cost of goods sold 959,434 959,434
Operating expenses 17,862   5,500   23,362  
Segment contribution margin $ 15,677   $ 24,113   39,790
General and administrative expenses 8,389
Depreciation and amortization 8,675
Loss on disposal of assets 9  
Operating income $ 22,717  
 
Year Ended December 31, 2011

Predecessor

Pipelines &

Transportation

Wholesale Marketing

& Terminalling

Consolidated
Net sales $ 21,878 $ 722,201 $ 744,079
Operating costs and expenses:
Cost of goods sold 700,505 700,505
Operating expenses 9,531   3,409   12,940  
Segment contribution margin $ 12,347   $ 18,287   30,634
General and administrative expenses 5,795
Depreciation and amortization 4,820
(Gain) on disposal of assets (2 )
Operating income $ 20,021  
 
Delek Logistics Partners, LP
Capital Expenditures
(In thousands)
     
Predecessor

10/1/12 - 11/6/12

   

Delek Logistics

Partners, LP

11/7/12 - 12/31/12

   

Three Months Ended

December 31, 2012

Maintenance capital spending $ $ 1,179 $ 1,179
Expansion capital spending 604 4,516 5,120
     
Total capital spending $ 604   $ 5,695   $ 6,299
 
Delek Logistics Partners, LP
Capital Expenditures
(In thousands)
 
      Three Months Ended December, 31     Year Ended December 31,
2012     2011 2012     2011
Maintenance capital spending $ 1,179 $ 746 $ 2,985 $ 885
Expansion capital spending 5,120 8,105
       
Total capital spending $ 6,299   $ 746   $ 11,090   $ 885
 
Delek Logistics Partners, LP
Segment Data
 
      Predecessor    

Delek Logistics

Partners, LP

    Three Months Ended December 31,
10/1/12 - 11/6/12 11/7/12 - 12/31/12 2012     2011
  Predecessor
Throughputs (average bpd)
Pipelines and Transportation Segment:
Lion Pipeline System:
Crude pipelines (non-gathered) 43,586 42,880 43,164 59,840
Refined products pipelines to Enterprise Systems 40,062 52,306 47,382 48,383
SALA Gathering System 21,804 21,595 21,679 18,508
East Texas Crude Logistics System 59,013 56,918 57,761 56,067
Wholesale Marketing and Terminalling Segment:
East Texas - Tyler Refinery sales volumes (average bpd) 61,194 61,399 61,317 57,963
West Texas marketing throughputs (average bpd) 20,738 15,013 17,316 15,337
West Texas marketing margin per barrel $ 1.98 $ 3.14 $ 2.67 $ 1.10
Bulk Biofuels 7,517 7,517 3,022
Terminalling throughputs (average bpd) 13,772 11,874 12,637 18,468
 
Delek Logistics Partners, LP
Segment Data
 
      Predecessor    

Delek Logistics

Partners, LP

    Year Ended December 31,
1/1/12 - 11/6/12 11/7/12 - 12/31/12 2012   2011
Predecessor
Throughputs (average bpd)
Pipelines and Transportation Segment:
Lion Pipeline System:
Crude pipelines (non-gathered) 46,584 42,880 46,027 57,442
Refined products pipelines to Enterprise Systems 43,967 52,306 45,220 45,337
SALA Gathering System 20,597 21,595 20,747 17,676
East Texas Crude Logistics System 54,741 56,918 55,068 55,341
Wholesale Marketing and Terminalling Segment:
East Texas - Tyler Refinery sales volumes (average bpd) 56,897 61,399 57,574 57,047
West Texas marketing throughputs (average bpd) 16,791 15,013 16,523 15,493
West Texas marketing margin per barrel $ 2.47 $ 3.14 $ 2.56 $ 1.50
Bulk Biofuels 5,577 5,577 3,022
Terminalling throughputs (average bpd) 16,048 11,874 15,420 17,907

Source: Delek Logistics Partners, LP

Delek Logistics Partners, LP
U.S. Investor / Media Relations Contact
Assi Ginzburg, 615-435-1452
Executive Vice President and Chief Financial Officer
or
Keith Johnson, 615-435-1366
Vice President of Investor Relations
or
Alpha IR Group
Chris Hodges, 312-589-3505
Founder & CEO