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

11/04 15:15 CDT

Delek Logistics Partners, LP Reports Third Quarter 2021 Results-- Reported third quarter net income attributable to all partners of $43.6 million-- EBITDA of $69.9 million represented an increase of 3% y/y-- Third quarter distributable cash flow coverage ratio of 1.34x and total leverage ratio of approximately 3.4x-- Performance demonstrates stability and continuity of existing asset base-- Declared third quarter distribution of $0.95 per limited partner unit; reflects 5.0% increase y/y-- On-track to deliver 5% distribution growth in 2021 versus 2020 distributions-- Unit price recently hit all-time high leading to improved cost of capital BRENTWOOD, Tenn., Nov. 4, 2021

BRENTWOOD, Tenn., Nov. 4, 2021 /PRNewswire/ -- Delek Logistics Partners, LP (NYSE: DKL) ("Delek Logistics") today announced its financial results for the third quarter 2021. For the three months ended September 30, 2021, Delek Logistics reported net income attributable to all partners of $43.6 million, or $1.00 per diluted common limited partner unit. This compares to net income attributable to all partners of $46.3 million, or $1.26 per diluted common limited partner unit, in the third quarter 2020. Net cash from operating activities was $74.8 million in the third quarter 2021 compared to $62.3 million in the third quarter 2020. Distributable cash flow was $55.5 million in the third quarter 2021, compared to $59.1 million in the third quarter 2020.

For the third quarter 2021, earnings before interest, taxes, depreciation and amortization ("EBITDA") was $69.9 million compared to $67.8 million in the third quarter 2020.

Uzi Yemin, Chairman, President and Chief Executive Officer of Delek Logistics' general partner, remarked: "DKL continues delivering stable performance. Strong demand for oil and oil products is driving healthy utilization rates of both refining and logistics assets thereby benefiting the DKL portfolio."

"The recent increase in the quarterly distribution to $0.95/unit, keeps us on-track for a 5% distribution increase on a full-year basis in 2021. Even with a long history of continuous distribution growth to shareholders, our leverage and coverage ratios remain healthy and broadly in-line with most midstream peers. DKL units recently traded at an all-time high reflecting investor confidence in our company and leading to a lower cost of capital."

Distribution and Liquidity

On October 26, 2021, Delek Logistics declared a quarterly cash distribution of $0.95 per common limited partner unit for the third quarter 2021, which equates to $3.80 per common limited partner unit on an annualized basis. This distribution will be paid on November 10, 2021 to unitholders of record on November 5, 2021. This represents a 1.1% increase from the second quarter 2021 distribution of $0.94 per common limited partner unit, or $3.76 per common limited partner unit on an annualized basis, and a 5.0% increase over Delek Logistics' third quarter 2020 distribution of $0.905 per common limited partner unit, or $3.62 per common limited partner unit annualized. For the third quarter 2021, the total cash distribution declared to all partners was approximately $41.3 million, resulting in a distributable cash flow coverage ratio of 1.34x.

As of September 30, 2021, Delek Logistics had total debt of approximately $901.4 million and cash of $4.9 million. Additional borrowing capacity, subject to certain covenants, under the $850.0 million credit facility was $589.1 million, which was enhanced by the recent notes offering. The total leverage ratio was well within the requirements of the maximum allowable leverage ratio under the credit facility.

Financial Results

Contribution margin in the third quarter 2021 was $67.2 million compared to $67.3 million in the third quarter 2020. Overall performance benefited from higher pipeline throughput offset by expenses related to pipeline integrity work.

Pipelines and Transportation Segment

Contribution margin in the third quarter 2021 was $47.4 million compared to $46.4 million in the third quarter 2020. Compared to year-ago levels, pipeline throughput was higher, partially offset by higher expenses related to pipeline integrity work.

Wholesale Marketing and Terminalling Segment

During the third quarter 2021, contribution margin was $19.8 million compared to $21.0 million in the third quarter 2020. Overall performance was broadly in line with year-ago levels.

Third Quarter 2021 Results | Conference Call Information

Delek Logistics will hold a conference call to discuss its third quarter 2021 results on Friday, November 5, 2021 at 7:00 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) third quarter 2021 earnings conference call on Friday, November 5, 2021 at 8:00 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.

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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.

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Delek Logistics Partners, LP

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except unit and per unit data)

September December 30, 2021 31, 2020

ASSETS

Current assets:

Cash and cash equivalents $ 4,864 $4,243

Accounts receivable 18,421 15,676

Accounts receivable from related parties - 5,932

Inventory 2,222 3,127

Other current assets 1,081 331

Total current assets 26,588 29,309

Property, plant and equipment:

Property, plant and equipment 704,905 692,282

Less: accumulated depreciation (256,696) (227,470)

Property, plant and equipment, net 448,209 464,812

Equity method investments 251,919 253,675

Operating lease right-of-use assets 22,911 24,199

Goodwill 12,203 12,203

Marketing contract intangible, net 118,380 123,788

Rights-of-way 37,062 36,316

Other non-current assets 13,271 12,115

Total assets $ 930,543 $956,417



LIABILITIES AND DEFICIT

Current liabilities:

Accounts payable $ 7,441 $6,659

Accounts payable to related parties 44,574 -

Interest payable 17,037 2,452

Excise and other taxes payable 3,798 4,969

Current portion of operating lease liabilities 7,364 8,691

Accrued expenses and other current liabilities 7,830 5,529

Total current liabilities 88,044 28,300

Non-current liabilities:

Long-term debt 901,404 992,291

Asset retirement obligations 6,361 6,015

Operating lease liabilities, net of current portion 15,489 15,418

Other non-current liabilities 23,998 22,694

Total non-current liabilities 947,252 1,036,418

Total liabilities 1,035,296 1,064,718

Equity (Deficit):

Common unitholders - public; 8,713,195 units issued and outstanding at September 30, 2021 (8,697,468 at 165,281 164,614 December 31, 2020)

Common unitholders - Delek Holdings; 34,745,868 units issued and outstanding at (270,034) (272,915) September 30, 2021 (34,745,868 at December 31, 2020)

Total deficit (104,753) (108,301)

Total liabilities and deficit $ 930,543 $956,417

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Delek Logistics Partners, LP

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except unit and per unit data)

Three Months Ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Net revenues:

Affiliate $ 123,519$ 95,410 $ 308,435$ 289,739

Third-party 66,108 46,858 202,583 133,567

Net revenues 189,627 142,268 511,018 423,306

Cost of sales:

Cost of materials and other 105,129 60,692 274,995 205,877

Operating expenses (excluding depreciation and amortization presented below) 16,830 13,694 45,201 39,271

Depreciation and amortization 9,666 8,931 29,393 22,957

Total cost of sales 131,625 83,317 349,589 268,105

Operating expenses related to wholesale business (excluding depreciation and 515 536 1,741 2,152 amortization presented below)

General and administrative expenses 6,141 6,122 17,018 16,973

Depreciation and amortization 490 528 1,469 1,495

Other operating expense (income), net 273 - 54 (107)

Total operating costs and expenses 139,044 90,503 369,871 288,618

Operating income 50,583 51,765 141,147 134,688

Interest expense, net 14,529 10,360 35,924 32,854

Income from equity method investments (7,261) (4,860) (17,952) (16,875)

Other (income) expense, net (115) 105 (118) 103

Total non-operating expenses, net 7,153 5,605 17,854 16,082

Income before income tax (benefit) expense 43,430 46,160 123,293 118,606

Income tax (benefit) expense (194) (168) 156 67

Net income attributable to partners $ 43,624 $ 46,328 $ 123,137$ 118,539

Comprehensive income attributable to partners $ 43,624 $ 46,328 $ 123,137$ 118,539



Less: General partner's interest in net income, including incentive - - - 18,724 distribution rights

Limited partners' interest in net income $ 43,624 $ 46,328 $ 123,137$ 99,815



Net income per limited partner unit:

Common units - basic $ 1.00 $ 1.26 $ 2.83 $ 3.30

Common units - diluted $ 1.00 $ 1.26 $ 2.83 $ 3.30



Weighted average limited partner units outstanding:

Common units - basic 43,454,53536,889,76143,447,73930,290,051

Common units - diluted 43,468,28936,894,04343,457,85730,292,261



Cash distribution per limited partner unit $ 0.950 $ 0.905 $ 3.800 $ 2.695

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Delek Logistics Partners, LP

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

Nine Months Ended September 30,

2021 2020

Cash flows from operating activities

Net income $123,137 $118,539

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

Depreciation and amortization 30,862 24,452

Non-cash lease expense 6,967 2,236

Amortization of customer contract intangible assets 5,408 5,408

Amortization of deferred revenue (1,475) (1,418)

Amortization of deferred financing costs and debt discount 2,169 1,786

Income from equity method investments (17,952) (16,875)

Dividends from equity method investments 14,849 17,572

Other non-cash adjustments 1,413 1,495

Changes in assets and liabilities:

Accounts receivable (2,745) (4,268)

Inventories and other current assets 109 12,714

Accounts payable and other current liabilities 12,323 (7,638)

Accounts receivable/payable to related parties 47,483 (19,002)

Non-current assets and liabilities, net (272) (347)

Changes in assets and liabilities 56,898 (18,541)

Net cash provided by operating activities 222,276 134,654

Cash flows from investing activities

Asset acquisitions from Delek Holdings, net of assumed liabilities - (100,527)

Purchases of property, plant and equipment (12,352) (6,918)

Proceeds from sales of property, plant and equipment 275 107

Purchases of intangible assets (746) -

Distributions from equity method investments 6,245 2,723

Equity method investment contributions (1,393) (11,804)

Net cash used in investing activities (7,971) (116,419)

Cash flows from financing activities

Proceeds from issuance of additional units to maintain 2% General Partner - 10 interest

Distributions to general partner - (27,635)

Distributions to common unitholders - public (24,153) (23,653)

Distributions to common unitholders - Delek Holdings (96,246) (46,220)

Distributions to Delek Holdings unitholders and general partner related to - (47,558) Trucking Assets Acquisition

Distribution to general partner for conversion of its interest and IDR - (45,000) elimination

Proceeds from revolving credit facility 236,000 515,900

Payments on revolving credit facility (721,700) (343,600)

Proceeds from issuance of senior notes 400,000 -

Deferred financing costs paid in connection with debt issuances (6,216) -

Payments on finance lease (1,369) -

Net cash used in financing activities (213,684) (17,756)

Net increase in cash and cash equivalents 621 479

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

Cash and cash equivalents at the end of the period $4,864 $6,024

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest $19,170 $26,895

Income taxes $- $141

Non-cash investing activities:

Increase (decrease) in accrued capital expenditures and other $1,638 $(948)

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

Non-cash financing activities:

Sponsor contribution of property, plant and equipment $- $1,378

Non-cash lease liability arising from obtaining right of use assets during the $8,750 $16,644 period

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Delek Logistics Partners, LP

Reconciliation of Amounts Reported Under U.S. GAAP

(In thousands)

Three Months Ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Reconciliation of Net Income to EBITDA:

Net income $43,624$46,328$123,137$118,539

Add:

Income tax (benefit) expense (194) (168) 156 67

Depreciation and amortization 10,156 9,459 30,862 24,452

Amortization of customer contract intangible assets 1,802 1,803 5,408 5,408

Interest expense, net 14,529 10,360 35,924 32,854

EBITDA $69,917$67,782$195,487$181,320



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

Net cash provided by operating activities $74,752$62,273$222,276$134,654

Changes in assets and liabilities (16,256)(2,458) (56,898) 18,541

Non-cash lease expense (2,460) (1,596) (6,967) (2,236)

Distributions from equity method investments in investing activities 845 1,033 6,245 2,723

Maintenance and regulatory capital expenditures (850) (27) (3,712) (760)

Reimbursement from Delek Holdings for capital expenditures 11 26 1,588 81

Accretion of asset retirement obligations (116) (106) (346) (320)

Deferred income taxes (138) (47) (203) (990)

Other operating (expense) income, net (273) - (54) 107

Distributable Cash Flow $55,515$59,098$161,929$151,800



Delek Logistics Partners, LP

Distributable Coverage Ratio Calculation

(In thousands)

Three Months Ended Nine Months Ended September 30, September 30,

Distributions to partners of Delek Logistics, LP2021 2020 2021 2020

Limited partners' distribution on common units $41,286$39,307$122,100$87,536

General partner's distributions - - - 986

General partner's incentive distribution rights - - - 17,632

Total distributions to be paid ^(1) $41,286$39,307$122,100$106,154



Distributable cash flow $55,515$59,098$161,929$151,800

Distributable cash flow coverage ratio ^(2) 1.34x 1.50x 1.33x 1.43x

The distributions for the three and nine months ended September 30, 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(1) Gathering Assets transaction, with respect to base 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.

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

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Delek Logistics Partners, LP

Segment Data (unaudited)

(In thousands)

Three Months Ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Pipelines and Transportation

Net revenues:

Affiliate $70,879 $68,444$199,591$168,285

Third party 5,323 3,035 12,021 14,587

Total pipelines and transportation 76,202 71,479 211,612 182,872

Cost of sales:

Cost of materials and other 15,170 14,342 42,595 31,622

Operating expenses (excluding depreciation and amortization) 13,680 10,749 34,710 31,936

Segment contribution margin $47,352 $46,388$134,307$119,314

Capital spending $2,570 $2,552 $9,946 $3,424



Wholesale Marketing and Terminalling

Net revenues:

Affiliates ^(1) $52,640 $26,966$108,844$121,454

Third party 60,785 43,823 190,562 118,980

Total wholesale marketing and terminalling 113,425 70,789 299,406 240,434

Cost of sales:

Cost of materials and other 89,959 46,350 232,400 174,255

Operating expenses (excluding depreciation and amortization) 3,665 3,481 12,232 9,487

Segment contribution margin $19,801 $20,958$54,774 $56,692

Capital spending $1,566 $676 $4,580 $3,494



Consolidated

Net revenues:

Affiliates $123,519$95,410$308,435$289,739

Third party 66,108 46,858 202,583 133,567

Total consolidated 189,627 142,268 511,018 423,306

Cost of sales:

Cost of materials and other 105,129 60,692 274,995 205,877

Operating expenses (excluding depreciation and amortization presented below)17,345 14,230 46,942 41,423

Contribution margin 67,153 67,346 189,081 176,006

General and administrative expenses 6,141 6,122 17,018 16,973

Depreciation and amortization 10,156 9,459 30,862 24,452

Other operating expense (income), net 273 - 54 (107)

Operating income $50,583 $51,765$141,147$134,688

Capital spending $4,136 $3,228 $14,526 $6,918

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.

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Delek Logistics Partners, LP

Segment Capital Spending

(In thousands)

Three Months EndedNine Months Ended September 30, September 30,

Pipelines and Transportation 2021 2020 2021 2020

Maintenance capital spending $215 $28 $1,141 $467

Discretionary capital spending 2,355 2,524 8,805 2,957

Segment capital spending $2,570$2,5529,946 3,424

Wholesale Marketing and Terminalling

Maintenance capital spending $674 $118 1,394 1,480

Discretionary capital spending 892 558 3,186 2,014

Segment capital spending $1,566$676 4,580 3,494

Consolidated

Maintenance capital spending $889 $146 2,535 1,947

Discretionary capital spending 3,247 3,082 11,991 4,971

Total capital spending $4,136$3,228$14,526$6,918



Delek Logistics Partners, LP

Segment Data (Unaudited)

Three Months EndedNine Months Ended September 30, September 30,

2021 2020 2021 2020

Pipelines and Transportation Segment:

Throughputs (average bpd)

El Dorado Assets:

Crude pipelines (non-gathered) 81,929 78,244 60,344 76,750

Refined products pipelines to Enterprise Systems 62,263 55,740 42,733 55,315

El Dorado Gathering System 14,086 13,659 14,056 13,520

East Texas Crude Logistics System 18,644 22,591 24,045 15,705

Big Spring Gathering System 84,325 90,719 79,251 85,845

Plains Connection System 131,571104,314120,90596,961



Wholesale Marketing and Terminalling Segment:

East Texas - Tyler Refinery sales volumes (average bpd) ^(1)71,847 73,417 72,791 70,376

Big Spring marketing throughputs (average bpd) 81,880 78,659 76,680 73,701

West Texas marketing throughputs (average bpd) 10,560 9,948 10,033 11,718

West Texas gross margin per barrel $ 3.33$ 3.42$ 3.64$ 2.37

Terminalling throughputs (average bpd) ^(2) 144,355160,843142,959145,240



(1) Excludes jet fuel and petroleum coke.

Consists of terminalling throughputs at our Tyler, Big Spring, Big Sandy and(2) 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 (www.deleklogistics.com/news) and its Twitter account (@DelekLogistics).

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SOURCE Delek Logistics