Arc Logistics Partners LP Announces Fourth Quarter and Full Year 2016 Results

Mar 13, 2017

NEW YORK, March 13, 2017 (GLOBE NEWSWIRE) -- Arc Logistics Partners LP ("Arc Logistics" or the "Partnership"), a Delaware limited partnership (NYSE:ARCX) today reported its financial and operating results for the fourth quarter and fiscal year ended December 31, 2016.

During the fourth quarter of 2016, the Partnership accomplished the following:

  • Realized throughput of 154.6 thousand barrels per day (“mbpd”)
  • Reported revenues, net income and Adjusted EBITDA of $26.4 million, $4.1 million and $13.9 million, respectively
  • Invested $2.8 million of expansion capital expenditures to support existing, new and future customer initiatives
  • Generated cash flows from operating activities of $12.5 million and Distributable Cash Flow of $11.0 million
  • Declared a quarterly cash distribution of $0.44 per unit for the fourth quarter ended December 31, 2016

For the full year ended December 31, 2016, the Partnership accomplished the following:

  • Realized throughput of 158.4 mbpd
  • Reported revenues, net income and Adjusted EBITDA of $105.4 million, $21.9 million and $56.7 million, respectively
  • Generated cash flows from operating activities of $55.6 million and Distributable Cash Flow of $40.1 million

For additional information regarding the Partnership’s calculation of Adjusted EBITDA and Distributable Cash Flow, which are non-GAAP financial measures, and a reconciliation of net income to Adjusted EBITDA and cash flows from operating activities to Distributable Cash Flow, please see below in this release and the accompanying tables.

Fourth Quarter and Full Year 2016 Operational and Financial Results

The Partnership’s fourth quarter 2016 reported revenues, net income and Adjusted EBITDA of $26.4 million, $4.1 million and $13.9 million, respectively, which represents a 5% increase, a 6% increase and a 5% increase over the Partnership’s fourth quarter 2015 reported revenues, net income and Adjusted EBITDA, respectively. Operating income increased by approximately $0.7 million for the fourth quarter 2016 when compared to the fourth quarter 2015 operating income of $3.6 million, which increase was principally due to the following:

  • Revenues increased by $1.4 million, or 5%, to $26.4 million as compared to $25.0 million. The year over year increase is related to the following:  (i) a $0.6 million increase in minimum storage and throughput revenue related to the acquisition of the Pennsylvania terminals, the execution of new commercial agreements, amending existing commercial agreements and an increase in capacity under contract offset by previously announced rate reductions in the Gulf Coast terminals, (ii) $0.8 million increase in excess throughput and handling fees related to the acquisition of the Pennsylvania terminals, increased throughput fees associated with new customer agreements and contract amendments offset by reduced throughput activity and marine unloading activity at certain terminals and (iii) a less than $100,000 decrease in ancillary revenue
  • Operating expenses increased by $0.7 million, or 9%, to $8.6 million as compared to $7.9 million. The $0.7 million increase in operating expenses is the result of (i) a $0.4 million increase in operating expenses related to the acquisition of the Pennsylvania terminals, (ii) $0.4 million increase of additive, contract labor and utility expenses due to incremental throughput activity offset, (iii) $0.2 million increase in general maintenance expense, (iv) a $0.2 million increase in property taxes partially offset by (i) a $0.2 million decrease in payroll due to a realignment and optimization of the Partnership’s workforce, (ii) a $0.3 million decrease in tank cleaning expenses and (iii)  a less than $0.1 million decrease in general office expenses
  • Selling, general and administrative expenses decreased by $2.1 million, or 35%, to $4.0 million as compared to $6.2 million. The decrease was related to (i) a $0.5 million decrease of employee compensation expense, (ii) a decrease in legal and professional fees of $1.1 million, and (iii) a decrease in diligence related expenses of $0.6 million partially offset by increased GP expense of $0.1 million
  • Depreciation and amortization expense increased by $0.7 million, or 10%, to $8.0 million as compared to $7.3 million, which increase was principally due to the impact of the Pennsylvania terminals acquisition, the completion of the Joliet and Pawnee terminal acquisitions and the 2016 capital expenditures program which included expansion capital expenditures to upgrade the Brooklyn, Blakeley, Chickasaw, Mobile and Toledo terminals for customer expansion activities and incremental maintenance capital expenditures at the Blakeley, Brooklyn, Chickasaw and Mobile terminals
  • Revaluation of the contingent consideration related to the Joliet terminal acquisition resulted in a non-cash loss of $1.3 million for the quarter ended December 31, 2016 and $1.0 million for the year ended December 31, 2016. The non-cash loss from the fair value changes in the contingent consideration in 2016 was primarily attributable to the changes in discount rates and changes to the Partnership’s estimate in assumed future throughput activity which affects the timing of related revenues.

As of December 31, 2016, the Partnership's storage capacity was approximately 7.8 million barrels, which represents a 0.9 million barrel, or 13%, increase when compared to its capacity at December 31, 2015. The increase in storage capacity is related to the acquisition of the Pennsylvania terminals, three newly constructed biodiesel tanks at the Pennsylvania terminals and a newly constructed tank at the Pawnee terminal.

The Partnership's throughput activity increased by 41.5 mbpd, or 37%, to 154.6 mbpd during the fourth quarter of 2016 compared to the fourth quarter of 2015. The 41.5 mbpd increase was due to the following: (i) a 24.7 mbpd increase in crude oil throughput, (ii) a 12.5 mbpd increase in gasoline and distillates throughput at the newly acquired Pennsylvania terminals, (iii) a 1.4 mbpd increase in distillate throughput at a number of the Partnership’s refined products terminals, (iv) a 4.2 mbpd increase in gasoline throughput at a number of the Partnership’s refined products terminals partially offset by a reduction in asphalt and industrial products throughput due to seasonality and timing of shipments.

For the year ended December 31, 2016, the Partnership reported net income of $21.9 million, an increase of $11.2 million over the full year 2015 net income of $10.7 million. For the full year 2016, the Partnership generated $56.7 million of Adjusted EBITDA, a 29% increase over the full year 2015 Adjusted EBITDA of $44.1 million. The Partnership’s throughput activity increased by 40.2 mbpd, or 34%, to 158.4 mpbd during the full year 2016 compared to full year 2015 throughput activity of 118.2 mbpd. The Partnership's revenues for the full year 2016 increased by $23.6 million to $105.4 million, or 29%, compared to the full year 2015 revenues of $81.8 million. The Partnership’s operating expenses for the full year 2016 increased by $4.8 million to $33.7 million, or 16%, compared to the full year 2015 operating expenses of $29.0 million.

In January 2017, the Partnership declared a quarterly cash distribution of $0.44 per unit, or $1.76 per unit on an annualized basis, for the period from October 1, 2016 through December 31, 2016. The fourth quarter distribution is in line with the fourth quarter 2015 cash distribution of $0.44 per unit.  The distribution was paid on February 15, 2017 to unitholders of record on February 8, 2017.

In 2015, the Partnership completed its acquisition of the Joliet rail terminal, which included an earn-out payment obligation to the seller thereof. At December 31, 2016, the Partnership identified a material weakness in its internal control over financial reporting related to the revaluation of the earn-out obligation associated with business combinations. Specifically, the Partnership did not properly design and maintain controls to revalue, either on a quarterly or annual basis, the fair value of such earn-out obligation and record the related gain or loss in the fair value as an adjustment to earnings, as applicable. The material weakness resulted in a non-cash adjustment of approximately $1.0 million for the year ended December 31, 2016, and the revision of the interim financial statements for the periods ended March 31, 2016, June 30 2016 and September 30, 2016. Management has commenced designing and implementing additional internal controls as part of its remediation plans to address the material weakness in its internal control over financial reporting pertaining to the periodic revaluation of the earn-out obligation. If management fails to design and implement effective internal controls as part of its remediation plan, this control deficiency could result in a misstatement of the aforementioned account balances, which could result in a material misstatement to the Partnership’s annual or interim consolidated financial statements.

Although management has concluded that the errors resulting from the material weakness were not material to its previously issued 2016 interim unaudited financial statements, the Partnership will be revising such interim financial statements, and the financial results noted herein reflect such revision. The fair market value adjustment does not impact the Partnership’s Adjusted EBITDA, Distributable Cash Flow or near-term liquidity. Notwithstanding such material weakness and the revision to the 2016 interim unaudited financial statements, the Partnership has concluded that the unaudited consolidated financial statements included in the Form 10-Q filings for the periods ended March 31, 2016, June 30, 2016, and September 30, 2016 presented fairly, in all material respects, its financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

Conference Call

Arc Logistics will hold a conference call and webcast to discuss the fourth quarter 2016 financial results on March 13, 2017, at 5:00 p.m. Eastern. Interested parties may listen to the conference call by dialing (855) 433-0931. International callers may access the conference call by dialing (484) 756-4279. The call may also be accessed live over the internet by visiting the “Investor Relations” page of the Partnership’s website at www.arcxlp.com and will be available for replay for approximately one month.

Arc Logistics Partners LP Schedule K-1s Available

Arc Logistics has completed the 2016 tax packages for its unitholders, including Schedule K-1. The tax packages are available online and may be accessed via Arc Logistics' website at www.arcxlp.com under "Investors >> Tax Information". Arc Logistics has begun the process of mailing the Schedule K-1’s. For additional information, unitholders may also call Partner DataLink at (855) 280-3667 Monday through Friday from 8:00 a.m.5:00 p.m. Central or visit their website at https://www.partnerdatalink.com/ArcLogistics.

About Arc Logistics Partners LP 

Arc Logistics is a fee-based, growth-oriented limited partnership that owns, operates, develops and acquires a diversified portfolio of complementary energy logistics assets. Arc Logistics is principally engaged in the terminalling, storage, throughput and transloading of petroleum products and other liquids. For more information, please visit www.arcxlp.com.

Forward-Looking Statements

Certain statements and information in this press release constitute “forward-looking statements.” Certain expressions including “believe,” “expect,” “intends,” or other similar expressions are intended to identify the Partnership’s current expectations, opinions, views or beliefs concerning future developments and their potential effect on the Partnership. While management believes that these forward-looking statements are reasonable when made, there can be no assurance that future developments affecting the Partnership will be those that it anticipates. The forward-looking statements involve significant risks and uncertainties (some of which are beyond the Partnership’s control) and assumptions that could cause actual results to differ materially from the Partnership’s historical experience and its present expectations or projections. Important factors that could cause actual results to differ materially from forward-looking statements include but are not limited to: (i) adverse economic, capital markets and political conditions; (ii) changes in the market place for the Partnership’s services; (iii) changes in supply and demand of crude oil and petroleum products; (iv) actions and performance of the Partnership’s customers, vendors or competitors; (v) changes in the cost of or availability of capital; (vi) unanticipated capital expenditures in connection with the construction, repair or replacement of the Partnership’s assets; (vii) operating hazards, unforeseen weather events or matters beyond the Partnership’s control; (viii) inability to consummate acquisitions, pending or otherwise, on acceptable terms and successfully integrate acquired businesses into the Partnership’s operations; (ix) effects of existing and future laws or governmental regulations; and (x) litigation. Additional information concerning these and other factors that could cause the Partnership’s actual results to differ from projected results can be found in the Partnership’s public periodic filings with the Securities and Exchange Commission (“SEC”), including the Partnership’s Annual Report on Form 10-K and any updates thereto in the Partnership’s subsequent quarterly reports on Form 10-Q and current reports on Form 8-K.   Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. The Partnership undertakes no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

The Partnership defines Adjusted EBITDA as net income before interest expense, income taxes and depreciation and amortization expense, as further adjusted for other non-cash charges and other charges that are not reflective of its ongoing operations. Adjusted EBITDA is a non-GAAP financial measure that management and external users of the Partnership’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess (i) the performance of the Partnership’s assets without regard to the impact of financing methods, capital structure or historical cost basis of the Partnership’s assets; (ii) the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities; (iii) the Partnership’s ability to make distributions; (iv) the Partnership’s ability to incur and service debt and fund capital expenditures; and (v) the Partnership’s ability to incur additional expenses. The Partnership believes that the presentation of Adjusted EBITDA provides useful information to investors in assessing its financial condition and results of operations.

The Partnership defines Distributable Cash Flow as Adjusted EBITDA less (i) cash interest expense paid; (ii) cash income taxes paid; (iii) maintenance capital expenditures paid; and (iv) equity earnings from the Partnership’s LNG Interest; plus (v) cash distributions from the LNG Interest. Distributable Cash Flow is a non-GAAP financial measure that management and external users of the Partnership’s consolidated financial statements may use to evaluate whether the Partnership is generating sufficient cash flow to support distributions to its unitholders as well as to measure the ability of the Partnership’s assets to generate cash sufficient to support its indebtedness and maintain its operations.

The GAAP measure most directly comparable to Adjusted EBITDA is net income and to Distributable Cash Flow is cash flows from operating activities. Neither Adjusted EBITDA nor Distributable Cash Flow should be considered an alternative to net income or cash flows from operating activities, respectively. Adjusted EBITDA and Distributable Cash Flow have important limitations as analytical tools because they exclude some but not all items that affect net income. You should not consider Adjusted EBITDA or Distributable Cash Flow in isolation or as a substitute for analysis of the Partnership’s results as reported under GAAP. Additionally, because Adjusted EBITDA and Distributable Cash Flow may be defined differently by other companies in the Partnership’s industry, the Partnership’s definitions of Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. Please see the reconciliation of net income to Adjusted EBITDA and cash flows from operating activities to Distributable Cash Flow in the accompanying tables.

 
ARC LOGISTICS PARTNERS LP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per unit amounts)
(Unaudited)
 
      Three Months Ended   Year Ended
      December 31,   December 31,
        2016       2015       2016       2015  
  Revenues:                
  Third-party customers   $ 22,855     $ 21,299     $ 92,342     $ 70,497  
  Related parties     3,543       3,738       13,039       11,292  
        26,398       25,037       105,381       81,789  
  Expenses:                
  Operating expenses     8,643       7,917       33,749       28,973  
  Selling, general and administrative     2,727       4,922       12,895       17,891  
  Selling, general and administrative - affiliate     1,322       1,261       5,288       4,729  
  Depreciation     4,360       3,587       15,704       11,680  
  Amortization     3,673       3,724       14,714       10,819  
  Loss on revaluation of contingent consideration, net     1,345       -       1,043       -  
  Total expenses     22,070       21,411       83,393       74,092  
  Operating (loss) income     4,328       3,626       21,988       7,697  
  Other income (expense):                
  Equity earnings from unconsolidated affiliate     2,413       2,520       9,852       10,030  
  Other income     2       -       3       9  
  Interest expense     (2,577 )     (2,241 )     (9,811 )     (6,873 )
  Total other income (expenses), net     (162 )     279       44       3,166  
  (Loss) income before income taxes     4,166       3,905       22,032       10,863  
  Income taxes     22       11       124       119  
  Net (loss) income     4,144       3,894       21,908       10,744  
  Net income attributable to non-controlling interests     (1,313 )     (1,959 )     (6,866 )     (4,315 )
  Net (loss) income attributable to partners' capital     2,831       1,935       15,042       6,429  
  Other comprehensive (loss) income     1,448       1,190       1,364       945  
  Comprehensive (loss) income attributable to partners’ capital   $ 4,279     $ 3,125     $ 16,406     $ 7,374  
                   
  Earnings (loss) per limited partner unit:                
  Common units (basic and diluted)   $ 0.22     $ 0.09     $ 0.83     $ 0.39  
  Subordinated units (basic and diluted)   $ (0.30 )   $ 0.09     $ 0.47     $ 0.22  
                   

 

ARC LOGISTICS PARTNERS LP  
CONSOLIDATED BALANCE SHEETS  
(In thousands, except unit amounts)  
(Unaudited)  
   
    December 31,   December 31,  
      2016     2015  
  Assets:        
  Current assets:        
  Cash and cash equivalents $ 4,584   $ 5,870  
  Trade accounts receivable   8,257     8,633  
  Due from related parties   1,321     1,532  
  Inventories   397     318  
  Other current assets   2,060     1,162  
  Total current assets   16,619     17,515  
  Property, plant and equipment, net   395,511     380,671  
  Investment in unconsolidated affiliate   75,716     74,399  
  Intangible assets, net   117,716     132,121  
  Goodwill   39,871     39,871  
  Other assets   2,980     3,945  
  Total assets $ 648,413   $ 648,522  
  Liabilities and partners' capital:        
  Current liabilities:        
  Accounts payable $ 2,455   $ 4,085  
  Accrued expenses   5,684     6,857  
  Due to general partner   2,082     638  
  Other liabilities   2,961     3,914  
  Total current liabilities   13,182     15,494  
  Credit facility   249,000     226,063  
  Other non-current liabilities   19,805     21,745  
  Total liabilities   281,987     263,302  
  Commitments and contingencies        
  Partners' capital:        
  General partner interest   -     -  
  Limited partners' interest        
  Common units – (19,477,021 and 13,174,410 units issued and
  outstanding at December 31, 2016 and 2015, respectively)
  282,228     213,281  
  Subordinated units – (0 units and 6,081,081 issued and
  outstanding at December 31, 2016 and 2015, respectively)
  -     85,371  
  Non-controlling interests   81,541     85,275  
  Accumulated other comprehensive income   2,657     1,293  
  Total partners' capital   366,426     385,220  
  Total liabilities and partners' capital $ 648,413   $ 648,522  
           

 

  ARC LOGISTICS PARTNERS LP  
  CONSOLIDATED STATEMENTS OF CASH FLOWS  
  (In thousands)  
  (Unaudited)  
     
      Year Ended  
      December 31,  
        2016       2015    
  Cash flow from operating activities:          
  Net income   $ 21,908     $ 10,744    
  Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
         
  Depreciation     15,704       11,680    
  Amortization     14,714       10,819    
  Equity earnings from unconsolidated affiliate, net of distributions     (262 )     (544 )  
  Amortization of deferred financing costs     1,551       1,031    
  Unit-based compensation     4,112       5,474    
  Net loss on revaluation of contingent consideration     1,043       -    
  Changes in operating assets and liabilities:          
  Trade accounts receivable     376       (4,887 )  
  Due from related parties     211       (631 )  
  Inventories     84       (33 )  
  Other current assets     (898 )     64    
  Accounts payable     (1,923 )     1,248    
  Accrued expenses     (366 )     3,712    
  Due to general partner     1,444       229    
  Other liabilities     (2,063 )     (1,474 )  
  Net cash provided by operating activities     55,635       37,432    
  Cash flows from investing activities:          
  Capital expenditures     (24,348 )     (13,150 )  
  Investment in unconsolidated affiliate     -       (361 )  
  Net cash paid for acquisitions     (8,000 )     (260,332 )  
  Net cash used in investing activities     (32,348 )     (273,843 )  
  Cash flows from financing activities:          
  Distributions     (33,931 )     (27,272 )  
  Deferred financing costs     (586 )     (3,239 )  
  Repayments to credit facility     (7,313 )     -    
  Proceeds from credit facility     30,250       115,000    
  Proceeds from equity offerings, net     -       72,026    
  Equity contribution from non-controlling interests     -       86,960    
  Payments of earn-out liability     (1,373 )     (870 )  
  Distributions paid to non-controlling interests     (10,600 )     (6,000 )  
  Distribution equivalent rights paid on unissued units     (1,020 )     (923 )  
  Net cash (used in) provided by financing activities     (24,573 )     235,682    
  Net increase in cash and cash equivalents     (1,286 )     (729 )  
  Cash and cash equivalents, beginning of period     5,870       6,599    
  Cash and cash equivalents, end of period   $ 4,584     $ 5,870    
             

 

  ARC LOGISTICS PARTNERS LP  
  RECONCILIATION OF ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW  
  (In thousands, except operating data)  
  (Unaudited)  
     
      Three Months Ended   Year Ended  
      December 31,   December 31,  
        2016       2015       2016       2015    
                     
  Net Income Attributable to Partners' Capital   $   2,831     $   1,935     $   15,042     $   6,429    
  Income taxes       24         11         124         119    
  Interest expense       2,577         2,242         9,811         6,873    
  Depreciation (a)       3,889         3,139         13,867         10,486    
  Amortization (a)       3,055         3,109         12,247         9,175    
  One-time non-recurring expenses (b)       30         1,424         646         5,044    
  Non-cash unit-based compensation       591         1,303         4,119         5,488    
  Non-cash loss on revaluation of contingent consideration, net (a),(c)       807         -         626         -    
  Non-cash deferred rent expense (d)       65         72         262         462    
  Adjusted EBITDA   $   13,869     $   13,235     $   56,744     $   44,076    
  Cash interest expense       (2,349 )       (1,977 )       (8,950 )       (6,112 )  
  Cash income taxes       (24 )       (11 )       (124 )       (119 )  
  Maintenance capital expenditures       (364 )       (2,194 )       (7,350 )       (6,168 )  
  Equity earnings from the LNG Interest       (2,413 )       (2,520 )       (9,852 )       (10,030 )  
  Cash distributions received from the LNG Interest       2,271         2,477         9,590         9,486    
  Distributable Cash Flow   $   10,990     $   9,010     $   40,058     $   31,133    
  Maintenance capital expenditures       364         2,194         7,350         6,168    
  Distributable cash flow attributable to non-controlling interests       3,058         3,024         11,586         7,153    
  Changes in operating assets and liabilities       (2,040 )       (4,008 )       (3,135 )       (1,772 )  
  One-time non-recurring expenses (b)       (30 )       (1,424 )       (646 )       (5,044 )  
  Other non-cash adjustments       111         5         422         (206 )  
  Net Cash Provided by Operating Activities   $   12,453     $   8,801     $   55,635     $   37,432    
                     

_______________

(a) The loss on revaluation of contingent consideration, depreciation and amortization have been adjusted to remove the non-controlling interest portion related to the GE EFS affiliate’s ownership interest in Arc Terminals Joliet Holdings LLC.
(b) The one-time non-recurring expenses relate to amounts incurred as due diligence expenses from acquisitions and other infrequent or unusual expenses incurred.
(c) The non-cash loss on revaluation of contingent consideration is related to the earn-out obligations incurred as a part of the Joliet terminal acquisition.
(d) The non-cash deferred rent expense relates to the accounting treatment for the Portland terminal lease transaction termination fees.

   
   
  ARC LOGISTICS PARTNERS LP
  SUPPLEMENTAL INFORMATION
  (In thousands, except operating data)
  (Unaudited)
   
        Three Months Ended   Year Ended
        December 31,   December 31,
          2016     2015     2016     2015
  Selected Operating Data:                  
  Storage capacity (bbls)       7,842,600     6,925,100     7,842,600     6,925,100
  Throughput (bpd)       154,618     113,099     158,445     118,244
                     
  Throughput Data (bpd):                  
  Asphalts and industrial products       9,419     10,618     14,297     13,074
  Crude oil       80,338     55,676     78,443     56,604
  Distillates       20,592     14,243     21,268     16,919
  Gasoline       44,269     32,561     44,438     31,647
  Total Throughput       154,618     113,099     158,445     118,244
                     
  Revenue Summary:                  
  Minimum storage & throughput services fees     $ 21,783   $ 21,190   $ 87,516   $ 67,485
  Excess throughput & handling fees       3,139     2,337     12,088     8,003
  Total storage & throughput fees       24,922     23,527     99,604     75,488
  Ancillary services fees       1,476     1,510     5,777     6,301
  Total revenue     $ 26,398   $ 25,037   $ 105,381   $ 81,789
                     
  Capital Expenditures:                  
  Maintenance capital expenditures     $ 364   $ 2,194   $ 7,350   $ 6,168
  Growth capital expenditures       2,805     3,645     15,357     9,693
  Total capital expenditures     $ 3,169   $ 5,839   $ 22,707   $ 15,861
                     

 

Investor Contact: 

    IR@arcxlp.com
    www.arcxlp.com
    212-993-1290

 

 

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