Delek Logistics Partners, LP Reports Third Quarter 2021 Results

-- Reported third quarter net income attributable to all partners of $43.6 million
Published: Oct. 7, 2021 at 3:45 PM CDT|Updated: Nov. 4, 2021 at 3:15 PM CDT

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.

1|

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.

2|

Delek Logistics Partners, LP

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except unit and per unit data)



September 30, 2021


December 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
December 31, 2020)


165,281



164,614


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


(270,034)



(272,915)


Total deficit


(104,753)



(108,301)


Total liabilities and deficit


$

930,543



$

956,417


3|

Delek Logistics Partners, LP

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except unit and per unit data)


Three Months Ended
September 30,


Nine Months Ended
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
amortization presented below)

515



536



1,741



2,152


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 distribution rights







18,724


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

43,454,535



36,889,761



43,447,739



30,290,051


Common units - diluted

43,468,289



36,894,043



43,457,857



30,292,261










Cash distribution per limited partner unit

$

0.950



$

0.905



$

3.800



$

2.695


4|

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 interest




10


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 Trucking Assets Acquisition




(47,558)


Distribution to general partner for conversion of its interest and IDR elimination




(45,000)


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 Gathering Assets Acquisition


$



$

109,513


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 period


$

8,750



$

16,644


5|

Delek Logistics Partners, LP

Reconciliation of  Amounts Reported Under U.S. GAAP

(In thousands)


Three Months Ended
September 30,


Nine Months Ended
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
September 30,


Nine Months Ended
September 30,

Distributions to partners of Delek Logistics, LP

2021


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


(1)

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 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.

6|

Delek Logistics Partners, LP

Segment Data (unaudited)

(In thousands)

 


Three Months Ended
September 30,


Nine Months Ended
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




(1)

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

7|

Delek Logistics Partners, LP

Segment Capital Spending

 (In thousands)


Three Months Ended
September 30,


Nine Months Ended
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



$

2,552



9,946



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 Ended
September 30,


Nine Months Ended
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

131,571



104,314



120,905



96,961










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)

144,355



160,843



142,959



145,240


















(1)

Excludes jet fuel and petroleum coke.

(2)

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

8|

Delek Logistics Logo (PRNewsfoto/Delek Logistics)
Delek Logistics Logo (PRNewsfoto/Delek Logistics)

View original content to download multimedia:

SOURCE Delek Logistics

The above press release was provided courtesy of PRNewswire. The views, opinions and statements in the press release are not endorsed by Gray Media Group nor do they necessarily state or reflect those of Gray Media Group, Inc.