USDP USD Partners LP

USD Partners LP (NYSE: USDP) (the “Partnership”) announced today its operating and financial results for the three and nine months ended September 30, 2022. Financial highlights with respect to the third quarter of 2022 include the following:

• Generated Net Cash Provided by Operating Activities of $13.5 million, Adjusted EBITDA(1) of $12.3 million and Distributable Cash Flow(1) of $9.6 million
• Reported a Net loss of $69.4 million due primarily to a non-cash impairment of the Partnership’s intangible and long-lived assets associated with the Casper terminal
• Declared a quarterly cash distribution of $0.1235 per unit ($0.494 per unit on an annualized basis) with approximately 2.3x Distributable Cash Flow Coverage(2)

“Despite recent volatility in global crude oil markets, we continue to project future heavy crude oil production in Western Canada to exceed the associated availability of egress alternatives, and we believe that the Partnership’s strategically located assets will be well-positioned to renew, extend or replace agreements that have expired during 2022 and those that are set to expire next year, sometime during the first half of 2023,” said Dan Borgen, the Partnership’s Chief Executive Officer. “In addition, we continue to have detailed discussions regarding our DRUbit™ by Rail™ network with new and existing customers to provide safer and economically beneficial Canadian crude transportation options. As always, we look forward to sharing additional announcements around our DRU program and other initiatives with you before the end of the year.”

Commercial Update

At the end of June 2022, contracts representing approximately 26% of the combined Hardisty Terminal’s capacity expired. In addition, the remaining contracted capacity at the Stroud Terminal also expired at the end of June 2022. Management is focused on renewing, extending or replacing the agreements that have expired in mid-2022 or are set to expire at the Hardisty and Stroud Terminals in mid-2023 with new, multi-year, take or pay commitments and is actively engaged with current and new customers. Given current and expected market conditions, the Partnership’s estimates for future heavy crude oil production in Western Canada and the current availability of egress alternatives, management believes that the Partnership will have the opportunity to renew and extend or replace the agreements that expired during the first half of 2023.

Partnership’s Third Quarter 2022 Liquidity, Operational and Financial Results

Substantially all of the Partnership’s cash flows are generated from multi-year, take-or-pay terminalling services agreements related to its crude oil terminals, which include minimum monthly commitment fees. The Partnership’s customers include major integrated oil companies, refiners and marketers, the majority of which are investment-grade rated.

The Partnership’s financial statements have been retrospectively recast to include the pre-acquisition results of the Hardisty South acquisition that occurred in the second quarter of 2022 because the acquisition represented a business combination between entities under common control.

The Partnership’s revenues for the third quarter of 2022 relative to the same quarter in 2021 were lower primarily due to lower revenues at the combined Hardisty Terminal due to a reduction in contracted capacity at both the legacy Hardisty and Hardisty South terminals that was effective July 1, 2022. Revenues were also lower at the Hardisty terminal due to an unfavorable variance in the Canadian exchange rate on the Partnership’s Canadian-dollar denominated contracts during the third quarter of 2022 as compared to the third quarter of 2021, coupled with a deferral of revenues in the current quarter associated with the make-up right options the Partnership granted to its customers with no similar occurrence in 2021. Revenue was also lower at the Stroud Terminal due to the conclusion of the Partnership’s terminalling services contracts with the sole customer effective July 1, 2022. The Partnership also had lower storage revenue generated at its Casper Terminal associated with the end of one of its customer contracts that occurred in September 2021. Partially offsetting these decreases in revenue was higher revenue at the Partnership’s West Colton Terminal resulting from the commencement of the renewable diesel contract that occurred in December 2021.

The Partnership experienced higher operating costs during the third quarter of 2022 as compared to the third quarter of 2021 primarily attributable to the non-cash impairment of the intangible and long-lived assets associated with the Casper terminal recognized in the third quarter of 2022, resulting from recurring periods where cash flow projections were not met due to adverse market conditions at the terminal.

Partially offsetting the increase in operating costs discussed above was a decrease in selling, general and administrative costs (“SG&A costs”) associated with the Hardisty South entities, as discussed in more detail below. The Partnership also experienced lower pipeline fee expense which is directly attributable to the associated decrease in the combined Hardisty terminal revenues previously discussed, as compared to the third quarter of 2021. In addition, subcontracted rail services costs were lower due to decreased throughput at the terminals.

Third quarter 2021 SG&A costs include service fees paid by Hardisty South to our Sponsor related to a services agreement that was in place with our Sponsor prior to the Partnership’s acquisition of Hardisty South. Upon the Partnership’s acquisition of Hardisty South, the services agreement between the acquired entities and the Partnership’s Sponsor was terminated and a similar agreement was established between those entities and the Partnership. This results in the service fee income being allocated to the Partnership, and therefore offsetting the expense in Hardisty South for periods subsequent to the acquisition date of April 1, 2022.

Net income decreased to a net loss in the third quarter of 2022 as compared to the third quarter of 2021 primarily because of the operating factors discussed above coupled with higher interest expense incurred during the third quarter of 2022 resulting from higher interest rates and a higher balance of debt outstanding during the quarter, partially offset by a decrease in commitment fees, as compared to the third quarter of 2021. Partially offsetting the decrease was a higher gain associated with the Partnership’s interest rate derivatives recognized in the third quarter of 2022 that included the cash proceeds from the settlement of the Partnership’s interest rate derivative that occurred in July 2022.

Net Cash Provided by Operating Activities for the quarter increased 53% relative to the third quarter of 2021. The decrease in the Partnership’s operating cash flow resulting from the conclusion of some of the Partnership’s terminalling agreements was offset by the previously mentioned cash settlement of the Partnership’s interest rate derivative that occurred in July 2022. Net cash provided by Operating Activities was also impacted by the general timing of receipts and payments of accounts receivable, accounts payable and deferred revenue balances.

Adjusted EBITDA was slightly lower than the prior period while Distributable Cash Flow (“DCF”) decreased 11% for the current quarter relative to the third quarter of 2021. The slight decrease in Adjusted EBITDA and decrease in DCF was primarily a result of the factors discussed above. Additionally, DCF was impacted by higher cash paid for interest during the quarter partially offset by lower maintenance capital expenditures.

As of September 30, 2022, the Partnership had approximately $4.8 million of unrestricted cash and cash equivalents and undrawn borrowing capacity of $53 million on its $275.0 million senior secured credit facility, subject to the Partnership’s continued compliance with financial covenants. As of the end of the third quarter of 2022, the Partnership had borrowings of $222.0 million outstanding under its revolving credit facility. The Partnership’s acquisition of Hardisty South is treated as a Material Acquisition under the terms of its senior secured credit facility. As a result, the Partnership’s available borrowings is limited to 5.0 times its 12-month trailing consolidated EBITDA through December 31, 2022, at which point it will revert back to 4.5 times the Partnership’s 12-month trailing consolidated EBITDA. As such, the borrowing capacity and available borrowings under the senior secured credit facility, including unrestricted cash and cash equivalents, was approximately $57.8 million as of September 30, 2022. The Partnership was in compliance with its financial covenants as of September 30, 2022.

The Partnership’s senior secured credit facility expires on November 2, 2023. The Partnership is in active discussions with the administrative agent and other banks within the lender group, as well as other potential financing sources, regarding the possible extension, renewal or replacement of the senior secured credit facility and any amendments or waivers that may become required prior to maturity.

Subsequent to quarter end, on October 12, 2022, the Partnership settled its existing interest rate swap for proceeds of $9.0 million. The Partnership plans to use the proceeds from this settlement to pay down outstanding debt on its senior secured credit facility and fund ongoing working capital needs. The Partnership simultaneously entered into a new interest rate swap that was made effective as of October 17, 2022. The new interest rate swap is a five-year contract with the same notional value that fixes the secured overnight financing rate, or SOFR, to 3.956% for the notional value of the swap agreement instead of the variable rate that the Partnership pays under the Partnership’s Credit Agreement.

On October 20, 2022, the Partnership declared a quarterly cash distribution of $0.1235 per unit ($0.494 per unit on an annualized basis), the same as the amount distributed in the prior quarter. The distribution is payable on November 14, 2022, to unitholders of record at the close of business on November 2, 2022. The Partnership’s board determined to keep the distribution unchanged from the prior quarter and to evaluate the distribution on a quarterly basis going forward and will take into consideration updated commercial progress, including the Partnership’s ability to renew, extend or replace its customer agreements at the Hardisty and Stroud Terminals, current market conditions, and Management’s expectations regarding future performance.

Third Quarter 2022 Conference Call Information

The Partnership will host a conference call and webcast regarding third quarter 2022 results at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Wednesday, November 2, 2022.

To listen live over the Internet, participants are advised to log on to the Partnership’s website at www.usdpartners.com and select the “Events & Presentations” sub-tab under the “Investors” tab. To join via telephone, participants may dial (800) 445-7795 domestically or +1 (203) 518-9814 internationally, conference ID 9104568. Participants are advised to dial in at least five minutes prior to the call.

An audio replay of the conference call will be available for thirty days by dialing (800) 839-5103 domestically or +1 (402) 220-2687 internationally, conference ID 9104568. In addition, a replay of the audio webcast will be available by accessing the Partnership's website after the call is concluded.

About USD Partners LP

USD Partners LP is a fee-based, growth-oriented master limited partnership formed in 2014 by US Development Group, LLC (“USD”) to acquire, develop and operate midstream infrastructure and complementary logistics solutions for crude oil, biofuels and other energy-related products. The Partnership generates substantially all of its operating cash flows from multi-year, take-or-pay contracts with primarily investment grade customers, including major integrated oil companies, refiners and marketers. The Partnership’s principal assets include a network of crude oil terminals that facilitate the transportation of heavy crude oil from Western Canada to key demand centers across North America. The Partnership’s operations include railcar loading and unloading, storage and blending in on-site tanks, inbound and outbound pipeline connectivity, truck transloading, as well as other related logistics services. In addition, the Partnership provides customers with leased railcars and fleet services to facilitate the transportation of liquid hydrocarbons and biofuels by rail.

USD, which owns the general partner of USD Partners LP, is engaged in designing, developing, owning, and managing large-scale multi-modal logistics centers and energy-related infrastructure across North America. USD’s solutions create flexible market access for customers in significant growth areas and key demand centers, including Western Canada, the U.S. Gulf Coast and Mexico. Among other projects, USD is currently pursuing the development of a premier energy logistics terminal on the Houston Ship Channel with capacity for substantial tank storage, multiple docks (including barge and deepwater), inbound and outbound pipeline connectivity, as well as a rail terminal with unit train capabilities. For additional information, please visit texasdeepwater.com. Information on websites referenced in this release is not part of this release.

Non-GAAP Financial Measures

The Partnership defines Adjusted EBITDA as Net Cash Provided by Operating Activities adjusted for changes in working capital items, interest, income taxes, foreign currency transaction gains and losses, and other items which do not affect the underlying cash flows produced by the Partnership’s businesses. Adjusted EBITDA is a non-GAAP, supplemental financial measure used by management and external users of the Partnership’s financial statements, such as investors and commercial banks, to assess:

• the Partnership’s liquidity and the ability of the Partnership’s businesses to produce sufficient cash flows to make distributions to the Partnership’s unitholders; and
• the Partnership’s ability to incur and service debt and fund capital expenditures.

The Partnership defines Distributable Cash Flow, or DCF, as Adjusted EBITDA less net cash paid for interest, income taxes and maintenance capital expenditures. DCF does not reflect changes in working capital balances. DCF is a non-GAAP, supplemental financial measure used by management and by external users of the Partnership’s financial statements, such as investors and commercial banks, to assess:

• the amount of cash available for making distributions to the Partnership’s unitholders;
• the excess cash flow being retained for use in enhancing the Partnership’s existing business; and
• the sustainability of the Partnership’s current distribution rate per unit.

The Partnership believes that the presentation of Adjusted EBITDA and DCF in this press release provides information that enhances an investor's understanding of the Partnership’s ability to generate cash for payment of distributions and other purposes. The GAAP measure most directly comparable to Adjusted EBITDA and DCF is Net Cash Provided by Operating Activities. Adjusted EBITDA and DCF should not be considered alternatives to Net Cash Provided by Operating Activities or any other measure of liquidity presented in accordance with GAAP. Adjusted EBITDA and DCF exclude some, but not all, items that affect Net Cash Provided by Operating Activities and these measures may vary among other companies. As a result, Adjusted EBITDA and DCF may not be comparable to similarly titled measures of other companies. Reconciliations of Net Cash Provided by Operating Activities to Adjusted EBITDA and DCF are presented in this press release.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of U.S. federal securities laws, including statements with respect to the ability of the Partnership and USD to achieve contract extensions, new customer agreements and expansions, and the terms and timing of such extensions, new customer agreements and expansions, if at all; the Partnership’s ability to renew, extend or refinance its senior secured credit facility and obtain an necessary waivers thereunder; the ability of the Partnership and USD to develop existing and future additional projects and expansion opportunities (including successful completion of USD’s DRU) and whether those projects and opportunities developed by USD would be made available for acquisition, or acquired, by the Partnership; volumes at, and demand for, the Partnership’s terminals; the acquisition of the Hardisty South Terminal from USDG and its anticipated benefits, and the amount and timing of future distribution payments and distribution growth. Words and phrases such as “expect,” “plan,” “intent,” “believes,” “projects,” “begin,” “anticipates,” “subject to” and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to the Partnership are based on management’s expectations, estimates and projections about the Partnership, its interests and the energy industry in general on the date this press release was issued. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include our ability to continue as a going concern, the impact of world health events, epidemics and pandemics, such as the novel coronavirus (COVID-19) pandemic, changes in general economic conditions and commodity prices, the Partnership’s ability to renew, extend or replace customer agreements at the Hardisty and Stroud Terminals on favorable terms, if at all, and the Partnership’s ability to renew, extend or refinance its senior secured credit facility and obtain any necessary waives thereunder, as well as those factors set forth under the heading “Risk Factors” and elsewhere in the Partnership’s most recent Annual Report on Form 10-K and in the Partnership’s subsequent filings with the Securities and Exchange Commission (many of which may be amplified by the COVID-19 pandemic and the volatility in demand for and prices of crude oil, natural gas and natural gas liquids). The Partnership is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

_________________

(1)

The Partnership presents both GAAP and non-GAAP financial measures in this press release to assist in understanding the Partnership’s liquidity and ability to fund distributions. See “Non-GAAP Financial Measures” and reconciliations of Net Cash Provided by Operating Activities, the most directly comparable GAAP measure, to Adjusted EBITDA and Distributable Cash Flow in this press release.

(2)

The Partnership calculates quarterly Distributable Cash Flow Coverage by dividing Distributable Cash Flow for the quarter as presented in this press release by the cash distributions declared for the quarter, or approximately $4.1 million.

USD Partners LP Consolidated Statements of Operations For the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)  

For the Three Months Ended

 

For the Nine Months Ended

September 30,

 

September 30,

2022

 

2021 (1)

 

2022

 

2021 (1)

(in thousands) Revenues Terminalling services

$

19,345

 

$

33,751

 

$

84,872

 

$

163,863

 

Terminalling services — related party

 

670

 

 

313

 

 

1,987

 

 

2,527

 

Fleet leases — related party

 

912

 

 

984

 

 

2,737

 

 

2,951

 

Fleet services

 

—

 

 

—

 

 

—

 

 

24

 

Fleet services — related party

 

298

 

 

227

 

 

896

 

 

682

 

Freight and other reimbursables

 

254

 

 

173

 

 

514

 

 

541

 

Total revenues

 

21,479

 

 

35,448

 

 

91,006

 

 

170,588

 

Operating costs Subcontracted rail services

 

2,742

 

 

4,642

 

 

10,337

 

 

13,520

 

Pipeline fees

 

5,735

 

 

8,431

 

 

22,625

 

 

45,997

 

Freight and other reimbursables

 

254

 

 

173

 

 

514

 

 

541

 

Operating and maintenance

 

2,888

 

 

2,667

 

 

9,464

 

 

8,650

 

Operating and maintenance — related party

 

—

 

 

85

 

 

258

 

 

85

 

Selling, general and administrative

 

2,633

 

 

2,791

 

 

10,885

 

 

8,769

 

Selling, general and administrative — related party

 

2,318

 

 

5,171

 

 

10,207

 

 

54,541

 

Impairment of intangibles and long-lived assets

 

71,612

 

 

—

 

 

71,612

 

 

—

 

Depreciation and amortization

 

5,758

 

 

5,869

 

 

17,362

 

 

17,378

 

Total operating costs

 

93,940

 

 

29,829

 

 

153,264

 

 

149,481

 

Operating income (loss)

 

(72,461

)

 

5,619

 

 

(62,258

)

 

21,107

 

Interest expense

 

3,126

 

 

1,567

 

 

6,725

 

 

5,228

 

Gain associated with derivative instruments

 

(6,904

)

 

(110

)

 

(13,800

)

 

(2,468

)

Foreign currency transaction loss (gain)

 

152

 

 

(54

)

 

1,942

 

 

(843

)

Other expense (income), net

 

(28

)

 

4

 

 

(55

)

 

(12

)

Income (loss) before income taxes

 

(68,807

)

 

4,212

 

 

(57,070

)

 

19,202

 

Provision for income taxes

 

546

 

 

79

 

 

1,005

 

 

659

 

Net income (loss)

$

(69,353

)

$

4,133

 

$

(58,075

)

$

18,543

 

_________________

(1)

 

The Partnership's consolidated financial statements have been retrospectively recast to include the pre-acquisition results of the Hardisty South Terminal Acquisition which we acquired effective April 1, 2022 because the transaction was between entities under common control.

USD Partners LP Consolidated Statements of Cash Flows For the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)  

For the Three Months Ended

 

For the Nine Months Ended

September 30,

 

September 30,

2022

 

2021 (1)

 

2022

 

2021 (1)

Cash flows from operating activities: (in thousands) Net income (loss)

$

(69,353

)

$

4,133

 

$

(58,075

)

$

18,543

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization

 

5,758

 

 

5,869

 

 

17,362

 

 

17,378

 

Gain associated with derivative instruments

 

(6,904

)

 

(110

)

 

(13,800

)

 

(2,468

)

Settlement of derivative contracts

 

7,637

 

 

(286

)

 

7,029

 

 

(829

)

Unit based compensation expense

 

1,183

 

 

1,357

 

 

3,703

 

 

4,274

 

Loss associated with disposal of assets

 

—

 

 

6

 

 

3

 

 

11

 

Deferred income taxes

 

442

 

 

(119

)

 

328

 

 

(178

)

Amortization of deferred financing costs

 

271

 

 

234

 

 

899

 

 

698

 

Impairment of intangibles and long-lived assets

 

71,612

 

 

—

 

 

71,612

 

 

—

 

Changes in operating assets and liabilities: Accounts receivable

 

4,184

 

 

786

 

 

4,582

 

 

3,414

 

Accounts receivable – related party

 

(29

)

 

(856

)

 

1,688

 

 

1,016

 

Prepaid expenses, inventory and other assets

 

7,998

 

 

917

 

 

5,271

 

 

1,565

 

Other assets – related party

 

—

 

 

—

 

 

—

 

 

15

 

Accounts payable and accrued expenses

 

(7,760

)

 

(405

)

 

(4,399

)

 

92

 

Accounts payable and accrued expenses – related party

 

278

 

 

(2,444

)

 

(760

)

 

4,931

 

Deferred revenue and other liabilities

 

(1,780

)

 

(268

)

 

(6,824

)

 

(2,915

)

Deferred revenue and other liabilities – related party

 

(16

)

 

20

 

 

350

 

 

44

 

Net cash provided by operating activities

 

13,521

 

 

8,834

 

 

28,969

 

 

45,591

 

Cash flows from investing activities: Additions of property and equipment

 

(117

)

 

(1,513

)

 

(405

)

 

(4,550

)

Reimbursement of capital expenditures from collaborative arrangement

 

1,774

 

 

—

 

 

1,774

 

 

—

 

Acquisition of Hardisty South entities from Sponsor

 

—

 

 

—

 

 

(75,000

)

 

—

 

Net cash used in investing activities

 

1,657

 

 

(1,513

)

 

(73,631

)

 

(4,550

)

Cash flows from financing activities: Distributions

 

(4,292

)

 

(3,375

)

 

(11,446

)

 

(9,861

)

Payments for deferred financing costs

 

—

 

 

—

 

 

(13

)

 

—

 

Vested Phantom Units used for payment of participant taxes

 

(5

)

 

(2

)

 

(1,096

)

 

(859

)

Proceeds from long-term debt

 

—

 

 

—

 

 

75,000

 

 

—

 

Repayments of long-term debt

 

(10,000

)

 

(6,012

)

 

(22,396

)

 

(36,456

)

Net cash provided by (used in) financing activities

 

(14,297

)

 

(9,389

)

 

40,049

 

 

(47,176

)

Effect of exchange rates on cash

 

(354

)

 

(175

)

 

703

 

 

(570

)

Net change in cash, cash equivalents and restricted cash

 

527

 

 

(2,243

)

 

(3,910

)

 

(6,705

)

Cash, cash equivalents and restricted cash – beginning of period

 

8,280

 

 

16,037

 

 

12,717

 

 

20,499

 

Cash, cash equivalents and restricted cash – end of period

$

8,807

 

$

13,794

 

$

8,807

 

$

13,794

 

_________________

(1)

 

The Partnership's consolidated financial statements have been retrospectively recast to include the pre-acquisition results of the Hardisty South Terminal Acquisition which we acquired effective April 1, 2022 because the transaction was between entities under common control.

USD Partners LP Consolidated Balance Sheets At September 30, 2022 and December 31, 2021 (unaudited)  

September 30,

 

December 31,

2022

 

2021 (1)

ASSETS (in thousands) Current assets Cash and cash equivalents

$

4,766

 

$

5,541

 

Restricted cash

 

4,041

 

 

7,176

 

Accounts receivable, net

 

2,212

 

 

6,764

 

Accounts receivable — related party

 

362

 

 

2,051

 

Prepaid expenses

 

3,659

 

 

4,538

 

Inventory

 

—

 

 

3,027

 

Other current assets

 

2,603

 

 

129

 

Total current assets

 

17,643

 

 

29,226

 

Property and equipment, net

 

107,586

 

 

157,854

 

Intangible assets, net

 

3,832

 

 

48,886

 

Operating lease right-of-use assets

 

2,247

 

 

5,658

 

Other non-current assets

 

7,367

 

 

5,392

 

Total assets

$

138,675

 

$

247,016

 

  LIABILITIES AND PARTNERS’ CAPITAL Current liabilities Accounts payable and accrued expenses

$

3,370

 

$

7,706

 

Accounts payable and accrued expenses — related party

 

833

 

 

14,131

 

Deferred revenue

 

3,482

 

 

7,575

 

Deferred revenue — related party

 

398

 

 

—

 

Long-term debt, current portion

 

—

 

 

4,251

 

Operating lease liabilities, current

 

1,399

 

 

4,674

 

Other current liabilities

 

9,673

 

 

9,012

 

Other current liabilities — related party

 

16

 

 

64

 

Total current liabilities

 

19,171

 

 

47,413

 

Long-term debt, net

 

220,820

 

 

167,370

 

Operating lease liabilities, non-current

 

789

 

 

793

 

Other non-current liabilities

 

4,658

 

 

9,585

 

Total liabilities

 

245,438

 

 

225,161

 

Commitments and contingencies Partners’ capital Common units

 

(101,880

)

 

16,355

 

General partner units

 

—

 

 

5,678

 

Accumulated other comprehensive loss

 

(4,883

)

 

(178

)

Total partners’ capital

 

(106,763

)

 

21,855

 

Total liabilities and partners’ capital

$

138,675

 

$

247,016

 

_________________

(1)

 

The Partnership's consolidated financial statements have been retrospectively recast to include the pre-acquisition results of the Hardisty South Terminal Acquisition which we acquired effective April 1, 2022 because the transaction was between entities under common control.

USD Partners LP GAAP to Non-GAAP Reconciliations For the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)  

For the Three Months Ended

 

For the Nine Months Ended

September 30,

 

September 30,

2022

 

2021 (1)

 

2022

 

2021 (1)

(in thousands)   Net cash provided by operating activities

$

13,521

 

$

8,834

 

$

28,969

 

$

45,591

 

Add (deduct): Amortization of deferred financing costs

 

(271

)

 

(234

)

 

(899

)

 

(698

)

Deferred income taxes

 

(442

)

 

119

 

 

(328

)

 

178

 

Changes in accounts receivable and other assets

 

(12,153

)

 

(847

)

 

(11,541

)

 

(6,010

)

Changes in accounts payable and accrued expenses

 

7,482

 

 

2,849

 

 

5,159

 

 

(5,023

)

Changes in deferred revenue and other liabilities

 

1,796

 

 

248

 

 

6,474

 

 

2,871

 

Interest expense, net

 

3,099

 

 

1,566

 

 

6,692

 

 

5,225

 

Provision for income taxes

 

546

 

 

79

 

 

1,005

 

 

659

 

Foreign currency transaction loss (gain) (2)

 

152

 

 

(54

)

 

1,942

 

 

(843

)

Non-cash deferred amounts (3)

 

(1,475

)

 

(165

)

 

(3,361

)

 

2,033

 

Adjusted EBITDA attributable to Hardisty South entities prior to acquisition (4)

 

—

 

 

(76

)

 

(258

)

 

(790

)

Adjusted EBITDA

 

12,255

 

 

12,319

 

 

33,854

 

 

43,193

 

Add (deduct): Cash paid for income taxes, net (5)

 

(186

)

 

(144

)

 

(866

)

 

(843

)

Cash paid for interest

 

(2,513

)

 

(1,388

)

 

(4,873

)

 

(4,682

)

Maintenance capital expenditures, net

 

(6

)

 

(158

)

 

(56

)

 

(525

)

Cash paid for income taxes, interest and maintenance capital expenditures attributable to Hardisty South entities prior to acquisition (6)

 

—

 

 

79

 

 

59

 

 

480

 

Distributable cash flow

$

9,550

 

$

10,708

 

$

28,118

 

$

37,623

 

_________________

(1)

 

The Partnership's consolidated financial statements have been retrospectively recast to include the pre-acquisition results of the Hardisty South Terminal Acquisition which we acquired effective April 1, 2022 because the transaction was between entities under common control.

(2)

 

Represents foreign exchange transaction amounts associated with activities between the Partnership's U.S. and Canadian subsidiaries.

(3)

 

Represents the change in non-cash contract assets and liabilities associated with revenue recognized at blended rates based on tiered rate structures in certain of the Partnership's customer contracts and deferred revenue associated with deficiency credits that are expected to be used in the future prior to their expiration. Amounts presented are net of the corresponding prepaid Gibson pipeline fee that will be recognized as expense concurrently with the recognition of revenue.

(4)

 

Adjusted EBITDA attributable to the Hardisty South entities for the three months ended March 31, 2022 and the three and nine months ended September 30, 2021 was excluded from the Partnership’s Adjusted EBITDA, as these amounts were generated by the Hardisty South entities prior to the Partnership’s acquisition and therefore, they were not amounts that could be distributed to the Partnership’s unitholders. Refer to the table provided below for a reconciliation of “Net cash provided by operating activities” to Adjusted EBITDA for the Hardisty South entities prior to acquisition.

(5)

 

Includes the net effect of tax refunds of $84 thousand received in the second quarter of 2022 associated with carrying back U.S. net operating losses incurred during 2020 and prior periods allowed for by the provisions of the CARES Act. Also includes the net effect of tax refunds of $31 thousand received in the third quarter of 2022 associated with prior period Canadian taxes.

(6)

 

Cash payments made for income taxes, interest and maintenance capital expenditures attributable to the Hardisty South entities for the three months ended March 31, 2022 and the three and nine months ended September 30, 2021 were excluded from the Partnership’s DCF calculations, as these amounts were generated by the Hardisty South entities prior to the Partnership’s acquisition. Included for the three months ended March 31, 2022 was $59 thousand of cash paid for interest. Included for the three months ended September 30, 2021 was $79 thousand of cash paid for interest. Included for the nine months ended September 30, 2021 was $165 thousand of cash paid for income taxes, $386 thousand of cash paid for interest, partially offset by a net refund of $71 thousand related to maintenance capital expenditures.

The following table sets forth a reconciliation of “Net cash provided by operating activities,” the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA attributable to the Hardisty South entities prior to our acquisition of the entities:

Three months endedSeptember 30, 2021 Nine months endedSeptember 30, 2021 Three months endedMarch 31, 2022 (unaudited; in thousands)   Net cash provided by (used in) operating activities

$

(2,151

)

$

7,907

 

$

(1,475

)

Add (deduct): Amortization of deferred financing costs

 

(26

)

 

(76

)

 

(84

)

Deferred income taxes

 

(16

)

 

(47

)

 

(53

)

Changes in accounts receivable and other assets

 

(534

)

 

(5,550

)

 

(217

)

Changes in accounts payable and accrued expenses

 

2,903

 

 

(4,423

)

 

155

 

Changes in deferred revenue and other liabilities

 

414

 

 

3,683

 

 

488

 

Interest expense, net

 

87

 

 

422

 

 

117

 

Provision for income taxes

 

30

 

 

220

 

 

59

 

Foreign currency transaction loss (gain)

 

(348

)

 

(1,035

)

 

1,600

 

Non-cash deferred amounts (1)

 

(283

)

 

(311

)

 

(332

)

Adjusted EBITDA (2)

$

76

 

$

790

 

$

258

 

_________________

(1)

Represents the change in non-cash contract assets and liabilities associated with revenue recognized at blended rates based on tiered rate structures in certain of the customer contracts.

(2)

Adjusted EBITDA associated with the Hardisty South entities prior the Partnership's acquisition includes the impact of expenses pursuant to a services agreement with USD for the provision of services related to the management and operation of transloading assets. These expenses totaled $3.4 million and $49.3 million for the three and nine months ended September 30, 2021, respectively and $3.2 million for the three months ended March 31, 2022. Upon the Partnership's acquisition of the entities effective April 1, 2022, the services agreement with USD was cancelled and a similar agreement was established with the Partnership.

Category: Earnings

View source version on businesswire.com: https://www.businesswire.com/news/home/20221101005981/en/

Adam Altsuler Executive Vice President, Chief Financial Officer (281) 291-3995 aaltsuler@usdg.com

Jennifer Waller Senior Director, Financial Reporting and Investor Relations (832) 991-8383 jwaller@usdg.com