USDP USD Partners LP

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

• Closed acquisition of the Hardisty South Terminal entities from its Sponsor, effective April 1, 2022
• Generated Net Cash Provided by Operating Activities of $6.2 million, Adjusted EBITDA(1) of $11.6 million and Distributable Cash Flow(1) of $10.2 million
• Reported Net Income of $3.8 million
• Declared a quarterly cash distribution of $0.1235 per unit ($0.494 per unit on an annualized basis) with approximately 2.5x Distributable Cash Flow Coverage(2)

“We are pleased to announce another eventful quarter at the Partnership,” said Dan Borgen, the Partnership’s Chief Executive Officer. “During the second quarter, we closed the acquisition of Hardisty South from our Sponsor as well as the simplification of the Partnership’s financial structure by eliminating its IDRs and economic GP interest. We feel that this was an appropriate step to maintain our momentum in 2022 and 2023 as 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.”

Acquisition of Hardisty South

On April 6, 2022, the Partnership announced that it had closed the acquisition of the Hardisty South Terminal assets (“Hardisty South”) from USD Group LLC (“USDG” or the “Sponsor”), and exchanged the Sponsor’s economic general partner interest in the Partnership (“GP Interest”) for a non-economic GP Interest and eliminated the Sponsor’s incentive distribution rights (“IDRs”) in the Partnership for total consideration of $75 million in cash and approximately 5.75 million common units (the “Transaction”). The cash portion of the transaction was funded with borrowings under the Partnership’s $275 million senior secured credit facility.

The Transaction was approved by the Board of Directors of the general partner of the Partnership based on the approval and recommendation of its Conflicts Committee, which consists entirely of independent directors.

Today, the Partnership’s combined Hardisty Terminal has the designed takeaway capacity of three and one-half unit trains per day, or approximately 262,500 barrels per day, including the newly-acquired Hardisty South Terminal. The acquisition of the Hardisty South Terminal increases the size, scale and growth capacity of the Partnership’s asset base, while optimizing operational and commercial synergies of the Hardisty Terminal in order to capitalize on the potential future growth benefits associated with the Sponsor’s Diluent Recovery Unit (“DRU”) program.

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 or are set to expire at the Hardisty and Stroud Terminals in mid-2022 and mid-2023 with new, multi-year, take or pay commitments and is actively engaging 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 recently expired during the second half of 2022 or in early 2023.

Partnership’s Second 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 because the acquisition represented a business combination between entities under common control.

The Partnership’s operating results for the second quarter of 2022 relative to the same quarter in 2021 were primarily influenced by lower revenue at Hardisty South due to revenue that was recognized in the second quarter of 2021 associated with an early contract cancellation payment with no similar occurrence in 2022. In addition, revenue at the Stroud Terminal was lower in the second quarter 2022 associated with a decrease in contracted volume commitments at the terminal that became effective August 2021. 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 coupled with lower throughput volumes at the terminal. 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 lower operating costs during the second quarter of 2022 as compared to the second quarter of 2021 primarily attributable to a decrease in selling, general and administrative costs (“SG&A costs”) associated with the Hardisty South entities as well as a decrease in pipeline fee expenses. The lower pipeline fee expense is directly attributable to the relative decrease in Hardisty South revenue previously discussed, as compared to the second quarter of 2021. In addition, subcontracted rail services costs were lower due to decreased throughput at the terminals.

The second 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. Partially offsetting this decrease were higher corporate SG&A costs incurred in the second quarter of 2022 for legal and consulting fees related to the aforementioned acquisition of Hardisty South of approximately $2.6 million.

Partially offsetting the decreases mentioned above were higher operating and maintenance costs at the Hardisty and Hardisty South terminals for increased operational supplies, fuel and utilities costs primarily due to increased inflation rates.

Net income decreased in the second quarter of 2022 as compared to the second quarter of 2021 primarily because of the operating factors discussed above coupled with higher interest expense incurred during the second 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 second quarter of 2021. Partially offsetting the decrease was a non-cash gain associated with the Partnership’s interest rate derivatives recognized in the second quarter of 2022 as compared to a non-cash loss recognized during the same period of 2021.

Net Cash Provided by Operating Activities for the quarter decreased 74% relative to the second quarter of 2021, primarily due to the operating factors discussed above and the general timing of receipts and payments of accounts receivable, accounts payable and deferred revenue balances.

Adjusted EBITDA and Distributable Cash Flow (“DCF”) both decreased by 29% for the quarter relative to the second quarter of 2021. The decrease in Adjusted EBITDA and DCF was primarily a result of the factors discussed above. Adjusted EBITDA and DCF for the three months ended June 30, 2022 include the impact of the aforementioned $2.6 million of transaction expenses incurred during the period associated with the recent acquisition of Hardisty South. Additionally, DCF was positively impacted by lower cash paid for interest, taxes and maintenance capital expenditures during the quarter.

As of June 30, 2022, the Partnership had approximately $4.3 million of unrestricted cash and cash equivalents and undrawn borrowing capacity of $43 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 second quarter of 2022, the Partnership had borrowings of $232.0 million outstanding under its revolving credit facility. The Partnership was in compliance with its financial covenants as of June 30, 2022. 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 will be 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 $47.3 million as of June 30, 2022. Subsequent to quarter end, on July 27, 2022, the Partnership settled its existing interest rate swap for proceeds of $7.7 million. The Partnership plans to use the proceeds from this settlement to pay down outstanding debt on its senior secured credit facility. The Partnership simultaneously entered into a new interest rate swap that was made effective as of August 17, 2022. The new interest rate swap is a five-year contract with a $175.0 million notional value that fixes the secured overnight financing rate, or SOFR, to 2.686% for the notional value of the swap agreement instead of the variable rate that the Partnership pays under the Partnership’s Credit Agreement.

On July 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 August 12, 2022, to unitholders of record at the close of business on August 3, 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, as well as recent changes to the market.

Second Quarter 2022 Conference Call Information

The Partnership will host a conference call and webcast regarding second quarter 2022 results at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Thursday, August 4, 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) 909-7113 domestically or +1 (785) 830-1914 internationally, conference ID 6306282. 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) 839-2434 domestically or +1 (402) 220-7211 internationally, conference ID 6306282. 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 timing of such extensions, new customer agreements and expansions, if at all; 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 the impact of the novel coronavirus (COVID-19) pandemic and related economic downturn and changes in general economic conditions and commodity prices, and the Partnership’s ability to renew, extend or replace customer agreements at the Hardisty and Stroud Terminals, 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 Six Months Ended June 30, 2022 and 2021   (unaudited)         For the Three Months Ended For the Six Months Ended   June 30, June 30,  

2022

2021 (1)

2022

2021 (1)

  (in thousands)   Revenues   Terminalling services

$

31,704

 

$

88,981

 

$

65,527

 

$

130,112

 

  Terminalling services — related party

 

662

 

 

1,111

 

 

1,317

 

 

2,214

 

  Fleet leases — related party

 

913

 

 

983

 

 

1,825

 

 

1,967

 

  Fleet services

 

—

 

 

—

 

 

—

 

 

24

 

  Fleet services — related party

 

299

 

 

228

 

 

598

 

 

455

 

  Freight and other reimbursables

 

163

 

 

210

 

 

260

 

 

368

 

  Total revenues

 

33,741

 

 

91,513

 

 

69,527

 

 

135,140

 

  Operating costs   Subcontracted rail services

 

3,604

 

 

4,704

 

 

7,595

 

 

8,878

 

  Pipeline fees

 

8,389

 

 

26,625

 

 

16,890

 

 

37,566

 

  Freight and other reimbursables

 

163

 

 

210

 

 

260

 

 

368

 

  Operating and maintenance

 

3,090

 

 

2,836

 

 

6,576

 

 

5,983

 

  Operating and maintenance — related party

 

127

 

 

—

 

 

258

 

 

—

 

  Selling, general and administrative

 

4,830

 

 

2,693

 

 

8,252

 

 

5,978

 

  Selling, general and administrative — related party

 

2,565

 

 

39,522

 

 

7,889

 

 

49,370

 

  Depreciation and amortization

 

5,765

 

 

5,773

 

 

11,604

 

 

11,509

 

  Total operating costs

 

28,533

 

 

82,363

 

 

59,324

 

 

119,652

 

  Operating income

 

5,208

 

 

9,150

 

 

10,203

 

 

15,488

 

  Interest expense

 

2,097

 

 

1,745

 

 

3,599

 

 

3,661

 

  Loss (gain) associated with derivative instruments

 

(812

)

 

718

 

 

(6,896

)

 

(2,358

)

  Foreign currency transaction loss (gain)

 

143

 

 

(521

)

 

1,790

 

 

(789

)

  Other expense (income), net

 

(4

)

 

3

 

 

(27

)

 

(16

)

  Income before income taxes

 

3,784

 

 

7,205

 

 

11,737

 

 

14,990

 

  Provision for (benefit from) income taxes

 

(21

)

 

319

 

 

459

 

 

580

 

  Net income

$

3,805

 

$

6,886

 

$

11,278

 

$

14,410

 

       ______________________________

(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 Six Months Ended June 30, 2022 and 2021   (unaudited)        For the Three Months Ended For the Six Months Ended   June 30, June 30,  

2022

2021 (1)

2022

2021 (1)

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

$

3,805

 

$

6,886

 

$

11,278

 

$

14,410

 

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

 

5,765

 

 

5,773

 

 

11,604

 

 

11,509

 

  Loss (gain) associated with derivative instruments

 

(812

)

 

718

 

 

(6,896

)

 

(2,358

)

  Settlement of derivative contracts

 

(335

)

 

(279

)

 

(608

)

 

(543

)

  Unit based compensation expense

 

1,283

 

 

1,405

 

 

2,520

 

 

2,917

 

  Loss associated with disposal of assets

 

3

 

 

5

 

 

3

 

 

5

 

  Deferred income taxes

 

(311

)

 

(56

)

 

(114

)

 

(59

)

  Amortization of deferred financing costs

 

272

 

 

232

 

 

628

 

 

464

 

  Changes in operating assets and liabilities:   Accounts receivable

 

5,452

 

 

3,678

 

 

398

 

 

2,628

 

  Accounts receivable – related party

 

1,296

 

 

829

 

 

1,717

 

 

1,872

 

  Prepaid expenses, inventory and other assets

 

(5,096

)

 

(249

)

 

(2,727

)

 

648

 

  Other assets – related party

 

—

 

 

—

 

 

—

 

 

15

 

  Accounts payable and accrued expenses

 

(703

)

 

407

 

 

3,361

 

 

497

 

  Accounts payable and accrued expenses – related party

 

(1,759

)

 

8,287

 

 

(1,038

)

 

7,375

 

  Deferred revenue and other liabilities

 

(3,027

)

 

(3,414

)

 

(5,044

)

 

(2,647

)

  Deferred revenue and other liabilities – related party

 

382

 

 

20

 

 

366

 

 

24

 

  Net cash provided by operating activities

 

6,215

 

 

24,242

 

 

15,448

 

 

36,757

 

  Cash flows from investing activities:   Additions of property and equipment

 

(88

)

 

(2,275

)

 

(288

)

 

(3,037

)

  Acquisition of Hardisty South entities from Sponsor

 

(75,000

)

 

—

 

 

(75,000

)

 

—

 

  Net cash used in investing activities

 

(75,088

)

 

(2,275

)

 

(75,288

)

 

(3,037

)

  Cash flows from financing activities:   Distributions

 

(3,636

)

 

(3,303

)

 

(7,154

)

 

(6,486

)

  Payments for deferred financing costs

 

—

 

 

—

 

 

(13

)

 

—

 

  Vested Phantom Units used for payment of participant taxes

 

(39

)

 

—

 

 

(1,091

)

 

(857

)

  Proceeds from long-term debt

 

75,000

 

 

—

 

 

75,000

 

 

—

 

  Repayments of long-term debt

 

(6,000

)

 

(19,384

)

 

(12,396

)

 

(30,444

)

  Net cash provided by (used in) financing activities

 

65,325

 

 

(22,687

)

 

54,346

 

 

(37,787

)

  Effect of exchange rates on cash

 

(108

)

 

(172

)

 

1,057

 

 

(395

)

  Net change in cash, cash equivalents and restricted cash

 

(3,656

)

 

(892

)

 

(4,437

)

 

(4,462

)

  Cash, cash equivalents and restricted cash – beginning of period

 

11,936

 

 

16,929

 

 

12,717

 

 

20,499

 

  Cash, cash equivalents and restricted cash – end of period

$

8,280

 

$

16,037

 

$

8,280

 

$

16,037

 

    ______________________________

(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 June 30, 2022 and December 31, 2021   (unaudited)          June 30, December 31,  

2022

2021 (1)

  ASSETS (in thousands)   Current assets   Cash and cash equivalents

$

4,333

 

$

5,541

 

  Restricted cash

 

3,947

 

 

7,176

 

  Accounts receivable, net

 

6,303

 

 

6,764

 

  Accounts receivable — related party

 

334

 

 

2,051

 

  Prepaid expenses

 

4,572

 

 

4,538

 

  Inventory

 

6,998

 

 

3,027

 

  Other current assets

 

2,353

 

 

129

 

  Total current assets

 

28,840

 

 

29,226

 

  Property and equipment, net

 

149,889

 

 

157,854

 

  Intangible assets, net

 

42,582

 

 

48,886

 

  Operating lease right-of-use assets

 

3,584

 

 

5,658

 

  Other non-current assets

 

8,927

 

 

5,392

 

  Total assets

$

233,822

 

$

247,016

 

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

$

9,097

 

$

7,706

 

  Accounts payable and accrued expenses — related party

 

588

 

 

14,131

 

  Deferred revenue

 

2,697

 

 

7,575

 

  Deferred revenue — related party

 

398

 

 

—

 

  Long-term debt, current portion

 

—

 

 

4,251

 

  Operating lease liabilities, current

 

2,682

 

 

4,674

 

  Other current liabilities

 

12,407

 

 

9,012

 

  Other current liabilities — related party

 

32

 

 

64

 

  Total current liabilities

 

27,901

 

 

47,413

 

  Long-term debt, net

 

230,548

 

 

167,370

 

  Operating lease liabilities, non-current

 

783

 

 

793

 

  Other non-current liabilities

 

5,335

 

 

9,585

 

  Total liabilities

 

264,567

 

 

225,161

 

  Commitments and contingencies   Partners’ capital   Common units

 

(29,373

)

 

16,355

 

  General partner units

 

—

 

 

5,678

 

  Accumulated other comprehensive loss

 

(1,372

)

 

(178

)

  Total partners’ capital

 

(30,745

)

 

21,855

 

  Total liabilities and partners’ capital

$

233,822

 

$

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 Six Months Ended June 30, 2022 and 2021

(unaudited)

  

 

 

  For the Three Months Ended For the Six Months Ended

 

  June 30, June 30,

 

 

2022

2021 (1)

2022

2021 (1)

  

  (in thousands)

   

 

Net cash provided by operating activities

$

6,215

 

$

24,242

 

$

15,448

 

$

36,757

 

Add (deduct):

Amortization of deferred financing costs

 

(272

)

 

(232

)

 

(628

)

 

(464

)

Deferred income taxes

 

311

 

 

56

 

 

114

 

 

59

 

Changes in accounts receivable and other assets

 

(1,652

)

 

(4,258

)

 

612

 

 

(5,163

)

Changes in accounts payable and accrued expenses

 

2,462

 

 

(8,694

)

 

(2,323

)

 

(7,872

)

Changes in deferred revenue and other liabilities

 

2,645

 

 

3,394

 

 

4,678

 

 

2,623

 

Interest expense, net

 

2,092

 

 

1,744

 

 

3,593

 

 

3,659

 

Provision for (benefit from) income taxes

 

(21

)

 

319

 

 

459

 

 

580

 

Foreign currency transaction loss (gain) (2)

 

143

 

 

(521

)

 

1,790

 

 

(789

)

Non-cash deferred amounts (3)

 

(329

)

 

525

 

 

(1,886

)

 

2,198

 

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

 

—

 

 

(252

)

 

(258

)

 

(714

)

Adjusted EBITDA

 

11,594

 

 

16,323

 

 

21,599

 

 

30,874

 

Add (deduct):

Cash paid for income taxes, net (5)

 

(147

)

 

(248

)

 

(680

)

 

(699

)

Cash paid for interest

 

(1,185

)

 

(1,580

)

 

(2,360

)

 

(3,294

)

Maintenance capital expenditures, net

 

(50

)

 

(235

)

 

(50

)

 

(367

)

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

 

—

 

 

142

 

 

59

 

 

401

 

Distributable cash flow

$

10,212

 

$

14,402

 

$

18,568

 

$

26,915

 

  

 

______________________________

(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 six months ended June 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.

(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 six months ended June 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 June 30, 2021 was $142 thousand of cash paid for interest. Included for the six months ended June 30, 2021 was $165 thousand of cash paid for income taxes, $307 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 monthsended June 30,2021 Six monthsended June 30,2021 Three monthsended March 31,2022   (in thousands)       Net cash provided by (used in) operating activities

$

10,188

 

$

10,058

 

$

(1,475

)

Add (deduct): Amortization of deferred financing costs

 

(25

)

 

(50

)

 

(84

)

Deferred income taxes

 

(16

)

 

(31

)

 

(53

)

Changes in accounts receivable and other assets

 

(4,115

)

 

(5,016

)

 

(217

)

Changes in accounts payable and accrued expenses

 

(8,413

)

 

(7,326

)

 

155

 

Changes in deferred revenue and other liabilities

 

2,824

 

 

3,269

 

 

488

 

Interest expense, net

 

154

 

 

335

 

 

117

 

Provision for income taxes

 

153

 

 

190

 

 

59

 

Foreign currency transaction loss (gain)

 

(480

)

 

(687

)

 

1,600

 

Non-cash deferred amounts (1)

 

(18

)

 

(28

)

 

(332

)

Adjusted EBITDA (2)

$

252

 

$

714

 

$

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 $37.8 million and $45.9 million for the three and six months ended June 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/20220803005743/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