PR Newswire | May 4, 2021 04:16PM EDT

05/04 15:15 CDT

Delek Logistics Partners, LP Reports First Quarter 2021 Results- Reported first quarter net income attributable to all partners of $36.3 million; represents a 30% increase y/y- EBITDA of $58.7 million represented an increase of 21% y/y- Agreement with Baker Hughes offers scalable organic growth opportunities with minimal capital- First quarter distributable cash flow coverage ratio of 1.3x and total leverage ratio of approximately 3.7x- Declared first quarter distribution of $0.92 per limited partner unit; reflects 3.4 percent increase y/y- Reiterating 5% distribution growth in 2021 versus year-ago levels BRENTWOOD, Tenn., May 4, 2021

BRENTWOOD, Tenn., May 4, 2021 /PRNewswire/ -- Delek Logistics Partners, LP (NYSE: DKL) ("Delek Logistics") today announced its financial results for the first quarter 2021. For the three months ended March 31, 2021, Delek Logistics reported net income attributable to all partners of $36.3 million, or $0.83 per diluted common limited partner unit. This compares to net income attributable to all partners of $27.8 million, or $0.76 per diluted common limited partner unit, in the first quarter 2020. Net cash from operating activities was $61.7 million in the first quarter 2021 compared to $34.8 million in the first quarter 2020. Distributable cash flow was $52.5 million in the first quarter 2021, compared to $35.5 million in the first quarter 2020. Reconciliation of net cash from operating activities as reported under U.S. GAAP to distributable cash flow is included in the financial tables attached to this release.

For the first quarter 2021, earnings before interest, taxes, depreciation and amortization ("EBITDA") was $58.7 million compared to $48.7 million in the first quarter 2020. Results improved on a year-over-year basis primarily due to the drop down of the Big Spring Gathering System and the Trucking Assets. Reconciliation of net income attributable to all partners as reported under U.S. GAAP to EBITDA is included in the financial tables attached to this release.

Uzi Yemin, Chairman, President and Chief Executive Officer of Delek Logistics' general partner, remarked: "Winter Storm Uri had a negative impact on results in the first quarter in addition to maintenance at the Paline pipeline. We expect these factors to normalize into the second quarter. With major planned refinery maintenance for the year now complete at Delek US, utilization rates are poised to run at significantly higher levels versus the first quarter. This should provide a corresponding tailwind for DKL in terms of both volumes and cash contribution."

Mr. Yemin continued, "Distribution growth in the quarter was 3.4% on a year-over-year basis and we remain committed to 5% distribution growth on a full-year basis. We are excited to announce an exclusive agreement with Baker Hughes utilizing proprietary intellectual property allowing us to meet IMO regulations through blending competencies. This creates an attractive organic growth opportunity with minimal capital requirements and attractive return potential."

Distribution and Liquidity

On April 29, 2021, Delek Logistics declared a quarterly cash distribution of $0.92 per common limited partner unit for the first quarter 2021, which equates to $3.68 per common limited partner unit on an annualized basis. This distribution will be paid on May 14, 2021 to unitholders of record on May 10, 2021. This represents a 1.1% increase from the fourth quarter 2020 distribution of $0.91 per common limited partner unit, or $3.64 per common limited partner unit on an annualized basis, and a 3.4% increase over Delek Logistics' first quarter 2020 distribution of $0.89 per common limited partner unit, or $3.56 per common limited partner unit annualized. For the first quarter 2021, the total cash distribution declared to all partners was approximately $40.0 million, resulting in a distributable cash flow coverage ratio of 1.3x.

As of March 31, 2021, Delek Logistics had total debt of approximately $983.4 million and cash of $13.4 million. Additional borrowing capacity, subject to certain covenants, under the $850.0 million credit facility was $112.5 million. The total leverage ratio was within the requirements of the maximum allowable leverage ratio under the credit facility.

Financial Results

Contribution margin in the first quarter 2021 was $57.7 million compared to $47.4 million in the first quarter 2020. Results improved on a year-over-year basis primarily due to the drop down of the Big Spring Gathering System (dropped on March 31, 2020) and Trucking Assets (dropped on May 1, 2020). This was partially offset by lower throughput primarily due to lower refinery utilization caused by Winter Storm Uri, the El Dorado turnaround at Delek US and planned maintenance on the Paline pipeline.

Pipelines and Transportation Segment

Contribution margin in the first quarter 2021 was $41.7 million compared to $30.4 million in the first quarter 2020. The drop downs of the Big Spring Gathering System (dropped on March 31, 2020) and the Trucking Assets (dropped on May 1, 2020) were the primary drivers behind the year-over-year growth.

Wholesale Marketing and Terminalling Segment

During the first quarter 2021, contribution margin was $16.0 million compared to $17.0 million in the first quarter 2020. The decrease in contribution margin was primarily due to a decrease to the revenue volumes in the West Texas wholesale market.

First Quarter 2021 Results | Conference Call Information

Delek Logistics will hold a conference call to discuss its first quarter 2021 results on Wednesday, May 5, 2021 at 7:30 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. 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) first quarter 2021 earnings conference call on Wednesday, May 5, 2021 at 8:30 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 that are based upon current expectations and involve a number of risks and uncertainties. Statements concerning current estimates, expectations and projections about future results, performance, prospects, opportunities, plans, actions and events and other statements, concerns, or matters that are not historical facts are "forward-looking statements," as that term is defined under 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, thereby subjecting us to Delek US' 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; the impact of the COVID-19 outbreak on the demand for crude oil, refined products and transportation and storage services; uncertainties regarding future decisions by OPEC regarding production and pricing disputes between OPEC members and Russia; an inability of Delek US to grow as expected 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. Forward-looking statements include, but are not limited to, statements regarding future growth at Delek Logistics; distributions and the amounts and timing thereof; potential dropdown inventory; expected earnings or returns from joint ventures or other acquisitions; expansion projects; ability to create long-term value for our unit holders; financial flexibility and borrowing capacity; and distribution growth of 5% or at all. Forward-looking statements should not be read as a guarantee of future performance or results and will not be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking information is based on information available at the time and/or management's good faith belief with respect to future events, and is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements. Delek Logistics undertakes no obligation to update or revise any such forward-looking statements to reflect events or circumstances that occur, or which Delek Logistics becomes aware of, after the date hereof, except as required by applicable law or regulation

Non-GAAP Disclosures:

Our management uses certain "non-GAAP" operational measures to evaluate our operating segment performance and non-GAAP financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP. These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:

* Earnings before interest, taxes, depreciation and amortization ("EBITDA") - calculated as net income before net interest expense, income tax expense, depreciation and amortization expense, including amortization of customer contract intangible assets, which is included as a component of net revenues in our accompanying condensed consolidated statements of income. * Distributable cash flow - calculated as net cash flow from operating activities plus or minus changes in assets and liabilities, less maintenance capital expenditures net of reimbursements and other adjustments not expected to settle in cash. Delek Logistics believes this is an appropriate reflection of a liquidity measure by which users of its financial statements can assess its ability to generate cash.

EBITDA and distributable cash flow are non GAAP supplemental financial measures that management and external users of our condensed consolidated 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 our 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 the 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 flow from operating activities or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP.

Non-GAAP measures 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. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures. 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, thereby diminishing their utility. See the accompanying tables in this earnings release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures.

Delek Logistics Partners, LP

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except unit and per unit data)

March 31, 2021December 31, 2020

ASSETS

Current assets:

Cash and cash equivalents $ 13,377 $ 4,243

Accounts receivable 12,322 15,676

Accounts receivable from related parties - 5,932

Inventory 1,867 3,127

Other current assets 525 331

Total current assets 28,091 29,309

Property, plant and equipment:

Property, plant and equipment 699,552 692,282

Less: accumulated depreciation (237,495) (227,470)

Property, plant and equipment, net 462,057 464,812

Equity method investments 251,448 253,675

Operating lease right-of-use assets 24,804 24,199

Goodwill 12,203 12,203

Marketing Contract Intangible, net 121,985 123,788

Rights-of-way 36,791 36,316

Other non-current assets 11,491 12,115

Total assets $ 948,870 $ 956,417



LIABILITIES AND DEFICIT

Current liabilities:

Accounts payable $ 4,155 $ 6,659

Accounts payable to related parties 4,546 -

Interest payable 6,627 2,452

Excise and other taxes payable 3,637 4,969

Current portion of operating lease liabilities 8,446 8,691

Accrued expenses and other current liabilities 5,355 5,529

Total current liabilities 32,766 28,300

Non-current liabilities:

Long-term debt 983,436 992,291

Asset retirement obligations 6,130 6,015

Deferred tax liabilities 681 616

Operating lease liabilities, net of current portion 16,292 15,418

Other non-current liabilities 20,955 22,078

Total non-current liabilities 1,027,494 1,036,418

Total liabilities 1,060,260 1,064,718

Equity (Deficit):

Common unitholders - public; 8,697,468 units issued and outstanding at March 31, 2021 (8,697,468 at 164,100 164,614 December 31, 2020)

Common unitholders - Delek Holdings; 34,745,868 units issued and outstanding at March 31, 2021 (275,490) (272,915) (34,745,868 at December 31, 2020)

Total deficit (111,390) (108,301)

Total liabilities and deficit $ 948,870 $ 956,417

Delek Logistics Partners, LP

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except unit and per unit data)

Three Months Ended March 31,

2021 2020

Net revenues:

Affiliate $ 96,194 $ 106,699

Third-party 56,719 56,702

Net revenues 152,913 163,401

Cost of sales:

Cost of materials and other 81,171 101,293

Operating expenses (excluding depreciation and amortization presented below) 13,495 13,954

Depreciation and amortization 10,247 5,803

Total cost of sales 104,913 121,050

Operating expenses related to wholesale business (excluding depreciation and 561 790 amortization presented below)

General and administrative expenses 4,860 6,130

Depreciation and amortization 492 496

Other operating income, net (83) (107)

Total operating costs and expenses 110,743 128,359

Operating income 42,170 35,042

Interest expense, net 9,737 11,824

Income from equity method investments (4,049) (5,553)

Other expense, net 31 -

Total non-operating expenses, net 5,719 6,271

Income before income tax expense 36,451 28,771

Income tax expense 184 975

Net income attributable to partners $ 36,267 $ 27,796

Comprehensive income attributable to partners $ 36,267 $ 27,796



Less: General partner's interest in net income, including incentive - 9,077 distribution rights

Limited partners' interest in net income $ 36,267 $ 18,719



Net income per limited partner unit:

Common units - basic $ 0.83 $ 0.76

Common units - diluted $ 0.83 $ 0.76



Weighted average limited partner units outstanding:

Common units - basic 43,443,336 24,480,570

Common units - diluted 43,449,059 24,485,336



Cash distribution per limited partner unit $ 0.920 $ 0.890

Delek Logistics Partners, LP

Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)

Three Months Ended March 31,

2021 2020

Cash flows from operating activities

Net income $36,267 $27,796

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 10,739 6,299

Non-cash lease expense 2,018 274

Amortization of customer contract intangible assets 1,803 1,803

Amortization of deferred revenue (538) (473)

Amortization of deferred financing costs and debt discount 625 574

Accretion of asset retirement obligations 115 107

Income from equity method investments (4,049) (5,553)

Dividends from equity method investments 3,730 4,913

Gain on disposal of assets (83) (107)

Deferred income taxes 65 812

Other non-cash adjustments 177 43

Changes in assets and liabilities:

Accounts receivable 3,354 812

Inventories and other current assets 1,020 8,762

Accounts payable and other current liabilities (390) (4,692)

Accounts receivable/payable to related parties 7,359 (6,823)

Non-current assets and liabilities, net (480) 287

Changes in assets and liabilities 10,863 (1,654)

Net cash provided by operating activities 61,732 34,834

Cash flows from investing activities

Asset acquisitions from Delek Holdings, net of assumed liabilities - (100,000)

Purchases of property, plant and equipment (6,119) (4,164)

Proceeds from sales of property, plant and equipment 83 107

Purchases of intangible assets (474) -

Distributions from equity method investments 3,924 110

Equity method investment contributions (1,379) (8,229)

Net cash used in investing activities (3,965) (112,176)

Cash flows from financing activities

Proceeds from issuance of additional units to maintain 2% General Partner - 6 interest

Distributions to general partner - (9,017)

Distributions to common unitholders - public (7,914) (8,081)

Distributions to common unitholders - Delek Holdings (31,619) (13,535)

Proceeds from revolving credit facility 77,500 261,400

Payments on revolving credit facility (86,600) (154,800)

Net cash (used in) provided by financing activities (48,633) 75,973

Net (decrease) increase in cash and cash equivalents 9,134 (1,369)

Cash and cash equivalents at the beginning of the period 4,243 5,545

Cash and cash equivalents at the end of the period $13,377 $4,176

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest $4,937 $6,903

Income taxes $- $3

Non-cash investing activities:

Increase in accrued capital expenditures in accounts payable/receivable related $3,119 $- parties

Decrease in accrued capital expenditures $(1,439) $(1,220)

Equity issuance to Delek Holdings unitholders in connection with Big Spring $- $109,513 Gathering Assets Acquisition

Non-cash financing activities:

Non-cash lease liability arising from obtaining right of use assets during the $2,623 $- period

Delek Logistics Partners, LP

Reconciliation of Amounts Reported Under U.S. GAAP

(In thousands)

Three Months Ended March 31,

2021 2020

Reconciliation of Net Income to EBITDA:

Net income $36,267 $27,796

Add:

Income tax expense 184 975

Depreciation and amortization 10,739 6,299

Amortization of customer contract intangible assets 1,803 1,803

Interest expense, net 9,737 11,824

EBITDA $58,730 $48,697



Reconciliation of net cash from operating activities to distributable cash flow:

Net cash provided by operating activities $61,732 $34,834

Changes in assets and liabilities (10,863) 1,654

Non-cash lease expense (2,018) (274)

Distributions from equity method investments in investing activities 3,924 110

Maintenance and regulatory capital expenditures (515) (857)

Reimbursement from Delek Holdings for capital expenditures 359 39

Accretion of asset retirement obligations (115) (107)

Deferred income taxes (65) -

Other operating income, net 83 107

Distributable Cash Flow $52,522 $35,506

Delek Logistics Partners, LP

Distributable Coverage Ratio Calculation

(In thousands)

Three Months Ended March 31,

Distributions to partners of Delek Logistics, LP2021 2020

Limited partners' distribution on common units $39,968 $21,739

General partner's distributions - 444

General partner's incentive distribution rights - 8,695

Total distributions to be paid ^(1) $39,968 $30,878



Distributable cash flow $52,522 $35,506

Distributable cash flow coverage ratio ^(2) 1.31x 1.15x

The distributions for the three months ended March 31, 2020 reflect the impact of the distribution waiver that waived all of the distributions for the first quarter of 2020 on the 5.0 million Additional Units, related to^ the Big Spring Gathering Assets transaction, with respect to base(1) distributions and the IDRs. In addition, the distributions for the three months ended March 31, 2020 reflect the waiver of distributions in respect of the IDRs associated with the Additional Units for at least two years. Subsequently, the IDRs were eliminated in the Restructuring Transaction on August 13, 2020.

^ Distributable cash flow coverage ratio is calculated by dividing(2) distributable cash flow by distributions to be paid in each respective period.

Delek Logistics Partners, LP

Segment Data (unaudited)

(In thousands)

Three Months Ended March 31,

2021 2020

Pipelines and Transportation

Net revenues:

Affiliate $63,048 $38,502

Third party 1,927 9,465

Total pipelines and transportation 64,975 47,967

Cost of sales:

Cost of materials and other 13,079 6,098

Operating expenses (excluding depreciation and amortization) 10,172 11,456

Segment contribution margin $41,724 $30,413

Total Assets $705,262 $728,069



Wholesale Marketing and Terminalling

Net revenues:

Affiliates ^(1) $33,146 $68,197

Third party 54,792 47,237

Total wholesale marketing and terminalling 87,938 115,434

Cost of sales:

Cost of materials and other 68,092 95,195

Operating expenses (excluding depreciation and amortization) 3,884 3,288

Segment contribution margin $15,962 $16,951

Total Assets $217,384 201,104



Consolidated

Net revenues:

Affiliates $96,194 $106,699

Third party 56,719 56,702

Total consolidated 152,913 163,401

Cost of sales:

Cost of materials and other 81,171 101,293

Operating expenses (excluding depreciation and amortization presented below)14,056 14,744

Contribution margin 57,686 47,364

General and administrative expenses 4,860 6,130

Depreciation and amortization 10,739 6,299

Other operating income, net (83) (107)

Operating income $42,170 $35,042

Other Assets $26,224 $17,063

Total Assets $948,870 $946,236

^ Affiliate revenue for the wholesale marketing and terminalling segment is(1) presented net of amortization expense pertaining to the marketing contract intangible we acquired in connection with the Big Spring acquisition.

Delek Logistics Partners, LP

Segment Capital Spending

(In thousands)

Three Months Ended March 31,

Pipelines and Transportation 2021 2020

Maintenance capital spending $477 $445

Discretionary capital spending 5,368 -

Segment capital spending 5,845 445

Wholesale Marketing and Terminalling

Maintenance capital spending 39 1,130

Discretionary capital spending 1,915 1,453

Segment capital spending 1,954 2,583

Consolidated

Maintenance capital spending 516 1,575

Discretionary capital spending 7,283 1,453

Total capital spending $7,799 $3,028

Delek Logistics Partners, LP

Segment Data (Unaudited)

Three Months Ended March 31,

2021 2020

Pipelines and Transportation Segment:

Throughputs (average bpd)

El Dorado Assets:

Crude pipelines (non-gathered) 44,118 55,471

Refined products pipelines to Enterprise Systems 26,349 54,106

El Dorado Gathering System 11,880 34,906

East Texas Crude Logistics System 26,075 14,174

Big Spring Gathering System 73,724 -

Plains Connection System 108,361 -



Wholesale Marketing and Terminalling Segment:

East Texas - Tyler Refinery sales volumes (average bpd) ^(1)71,963 72,650

Big Spring marketing throughputs (average bpd) 72,927 66,386

West Texas marketing throughputs (average bpd) 10,138 16,081

West Texas gross margin per barrel $3.42 $2.70

Terminalling throughputs (average bpd) ^(2) 144,539 135,329

^ Excludes jet fuel and petroleum coke.(1)

^ Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy(2) and Mount Pleasant, Texas, El Dorado and North Little Rock, Arkansas and Memphis and Nashville, Tennessee terminals.

Information about Delek Logistics Partners, LP can be found on its website (www.deleklogistics.com), investor relations webpage (ir.deleklogistics.com), news webpage ( https://www.deleklogistics.com/news-releases) and its Twitter account (@DelekLogistics).

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SOURCE Delek Logistics