Form 8-K VALERO ENERGY PARTNERS For: Nov 12
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November�12, 2014
VALERO ENERGY PARTNERS LP
(Exact name of registrant as specified in its charter)
Delaware | 1-36232 | 90-1006559 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
One Valero Way San Antonio, Texas | 78249 | |
(Address of principal executive offices) | (Zip Code) | |
Registrants telephone number, including area code: (210) 345-2000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
� | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
� | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
� | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
� | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 2.02����Results of Operations and Financial Condition.
On November�12, 2014, Valero Energy Partners LP (NYSE: VLP, the Partnership) issued a press release announcing the Partnerships financial and operating results for the third quarter ended September�30, 2014. A copy of the press release is furnished with this report as Exhibit�99.01 and is incorporated herein by reference.
The information in this report is being furnished, not filed, pursuant to Item�2.02 of Form�8-K. Accordingly, the information in this report, including the press release, will not be incorporated by reference into any registration statement filed by the Partnership under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.
Item 9.01����Financial Statements and Exhibits.
(d) | Exhibits. |
99.01����Press release dated November�12, 2014.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
VALERO ENERGY PARTNERS LP | |||
By: | Valero Energy Partners GP LLC | ||
its general partner | |||
Date: | November�12, 2014 | By: | /s/ Donna M. Titzman |
Donna M. Titzman | |||
Senior Vice President, Chief Financial Officer, | |||
and Treasurer | |||
3
Exhibit 99.01
Valero Energy Partners LP Reports Third Quarter 2014 Results
SAN ANTONIO, November 12, 2014 - Valero Energy Partners LP (NYSE: VLP, the Partnership), today reported third quarter 2014 net income of $17.5�million, or $0.30 per limited partner unit. The Partnership generated earnings before interest, income taxes, depreciation, and amortization (EBITDA) of $22.2�million and distributable cash flow of $21.1�million. The Partnerships coverage ratio for the third quarter of 2014 was 1.50x.
Third quarter 2014 revenues were $33.7�million versus third quarter 2013 revenues of $32.0�million. The increase was related primarily to higher throughput volumes in the Memphis and Port Arthur Logistics Systems.
Total operating expenses in the third quarter of 2014 were $8.6�million, general and administrative expenses were $3.1�million, and depreciation expense was $4.3�million. Combined, these expenses were $1.0�million greater than those for the third quarter of 2013, mainly due to additional costs of operating as a separate publicly traded limited partnership, incremental costs related to the management fee charged by Valero Energy Corporation (Valero), and costs related to the acquisition of the Texas Crude Systems Business on July 1, 2014.
Consistent with its growth strategy, the Partnership closed its acquisition of the Texas Crude Systems Business from subsidiaries of Valero for total cash consideration of $154�million. The acquired assets included the McKee Crude System, the Three Rivers Crude System, and the Wynnewood Products System. Similar to the existing assets, the acquired assets are high quality and highly integrated with key Valero refineries.
We delivered strong throughput and revenue growth during the third quarter, said Chairman and CEO Joe Gorder. We also completed our first acquisition and increased the quarterly distribution by nearly eight percent to $0.24 per unit. Were executing our growth strategy.
As of September 30, 2014, the Partnership had $531�million of total liquidity consisting of $231�million in cash and cash equivalents and $300�million in an undrawn revolving credit facility. Capital expenditures are expected to be approximately $14�million for 2014, including $6.7�million for maintenance projects. The Partnership expects 2015 capital expenditures to be approximately $9�million, including approximately $4�million for maintenance projects.
The Partnerships senior management will host a conference call at 3 p.m. ET today to discuss this earnings release. A live broadcast of the conference call will be available on the Partnerships web site at www.valeroenergypartners.com.
1
About Valero Energy Partners LP
Valero Energy Partners LP is a fee-based, growth-oriented, traditional master limited partnership formed by Valero Energy Corporation to own, operate, develop, and acquire crude oil and refined petroleum products pipelines, terminals, and other transportation and logistics assets. With headquarters in San Antonio, the Partnerships assets include crude oil and refined petroleum products pipeline and terminal systems in the Gulf Coast and Mid-Continent regions of the United States that are integral to the operations of several of Valeros refineries.
Contacts
Investors:
John Locke, Executive Director - Investor Relations, 210-345-3077
Karen Ngo, Manager - Investor Relations, 210-345-4574
Media:
Bill Day, Vice President - Communications, 210-345-2928
To download our investor relations mobile app, which offers access to U.S. Securities and Exchange Commission filings, press releases, unit quotes, and upcoming events, please visit Apples iTunes App Store for your iPhone and iPad or Googles Play Store for your Android mobile device.
Safe-Harbor Statement
This release contains forward-looking statements within the meaning of federal securities laws. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other forward-looking information. You can identify forward-looking statements by words such as anticipate, believe, estimate, expect, forecast, project, could, may, should, would, will or other similar expressions that convey the uncertainty of future events or outcomes. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Partnerships control and are difficult to predict. These statements are often based upon various assumptions, many of which are based, in turn, upon further assumptions, including examination of historical operating trends made by the management of the Partnership. Although the Partnership believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies, which are difficult or impossible to predict and are beyond its control, the Partnership cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements contained in the Partnerships filings with the U.S. Securities and Exchange Commission, including the Form S-1 and prospectus relating to the initial public offering of the Partnerships common units and the Partnerships annual report on Form 10-K for the year ended December�31, 2013. These risks could cause the Partnerships actual results to differ materially from those contained in any forward-looking statement.
2
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Statement of income data (a): | ||||||||||||||||
Operating revenues related party | $ | 33,666 | $ | 32,012 | $ | 94,998 | $ | 91,916 | ||||||||
Costs and expenses: | ||||||||||||||||
Operating expenses (b) | 8,553 | 9,085 | 24,027 | 22,611 | ||||||||||||
General and administrative expenses (c) | 3,065 | 1,797 | 9,392 | 5,026 | ||||||||||||
Depreciation expense (d) | 4,318 | 4,028 | 12,087 | 12,032 | ||||||||||||
Total costs and expenses | 15,936 | 14,910 | 45,506 | 39,669 | ||||||||||||
Operating income | 17,730 | 17,102 | 49,492 | 52,247 | ||||||||||||
Other income, net (e) | 156 | 61 | 1,315 | 111 | ||||||||||||
Interest expense (f) | (214 | ) | (37 | ) | (663 | ) | (139 | ) | ||||||||
Income before income taxes | 17,672 | 17,126 | 50,144 | 52,219 | ||||||||||||
Income tax expense (g) | 129 | 156 | 436 | 1,734 | ||||||||||||
Net income | 17,543 | 16,970 | 49,708 | 50,485 | ||||||||||||
Less: Net income attributable to Predecessor | 16,970 | 9,483 | 50,485 | |||||||||||||
Net income attributable to partners | 17,543 | $ | 40,225 | $ | ||||||||||||
Less: General partners interest in net income | 351 | 805 | ||||||||||||||
Limited partners interest in net income | $ | 17,192 | $ | 39,420 | ||||||||||||
Net income per limited partner unit (basic and diluted): | ||||||||||||||||
Common units | $ | 0.30 | $ | 0.68 | ||||||||||||
Subordinated units | $ | 0.30 | $ | 0.68 | ||||||||||||
Weighted-average limited partner units outstanding: | ||||||||||||||||
Common units public (basic) | 17,250 | 17,250 | ||||||||||||||
Common units public (diluted) | 17,251 | 17,251 | ||||||||||||||
Common units Valero (basic and diluted) | 11,540 | 11,540 | ||||||||||||||
Subordinated units Valero (basic and diluted) | 28,790 | 28,790 | ||||||||||||||
See Notes to Earnings Release on Table Page 5.
Table Page 1
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Operating highlights (a): | ||||||||||||||||
Pipeline transportation: | ||||||||||||||||
Pipeline transportation revenues | $ | 20,602 | $ | 20,182 | $ | 51,842 | $ | 55,944 | ||||||||
Pipeline transportation throughput (BPD) (h) | 955,285 | 830,885 | 879,192 | 806,533 | ||||||||||||
Average pipeline transportation revenue per barrel (i) | $ | 0.23 | $ | 0.26 | $ | 0.22 | $ | 0.25 | ||||||||
Terminaling: | ||||||||||||||||
Terminaling revenues | $ | 12,827 | $ | 7,045 | $ | 42,343 | $ | 20,557 | ||||||||
Terminaling throughput (BPD) | 479,923 | 247,030 | 560,139 | 241,482 | ||||||||||||
Average terminaling revenue per barrel (i) | $ | 0.29 | $ | 0.31 | $ | 0.28 | $ | 0.31 | ||||||||
Storage revenues (j) | $ | 237 | $ | 4,785 | $ | 813 | $ | 15,415 | ||||||||
Total operating revenues related party | $ | 33,666 | $ | 32,012 | $ | 94,998 | $ | 91,916 | ||||||||
Capital expenditures (a): | ||||||||||||||||
Maintenance | $ | 1,035 | $ | 431 | $ | 3,030 | $ | 1,752 | ||||||||
Expansion | 1,990 | 3,419 | 4,252 | 8,736 | ||||||||||||
Total capital expenditures | 3,025 | 3,850 | 7,282 | 10,488 | ||||||||||||
Less: Capital expenditures attributable to Predecessor (a) | 3,850 | 1,033 | 10,488 | |||||||||||||
Capital expenditures attributable to Partnership | $ | 3,025 | $ | $ | 6,249 | $ | ||||||||||
Other financial information: | ||||||||||||||||
Distribution declared per unit | $ | 0.2400 | n/a | $ | 0.6750 | n/a | ||||||||||
EBITDA attributable to Partnership (k) | $ | 22,204 | n/a | $ | 51,627 | n/a | ||||||||||
Distributable cash flow (k) | $ | 21,131 | n/a | $ | 50,346 | n/a | ||||||||||
Distribution declared: | ||||||||||||||||
Limited partner units public | $ | 4,141 | n/a | $ | 11,647 | n/a | ||||||||||
Limited partner units Valero | 9,679 | n/a | 27,223 | n/a | ||||||||||||
General partner units Valero | 282 | n/a | 793 | n/a | ||||||||||||
Total distribution declared | $ | 14,102 | n/a | $ | 39,663 | n/a | ||||||||||
Coverage ratio (k) | 1.50x | n/a | 1.27x | n/a | ||||||||||||
September 30, 2014 | December 31, 2013 | |||||||||||||||
Balance sheet data (a): | ||||||||||||||||
Cash and cash equivalents | $ | 230,834 | $ | 375,118 | ||||||||||||
Total assets | 593,113 | 737,590 | ||||||||||||||
Total capital lease obligations | 3,085 | 4,127 | ||||||||||||||
Partners capital | 580,248 | 722,164 | ||||||||||||||
Working capital | 232,004 | 372,230 | ||||||||||||||
See Notes to Earnings Release on Table Page 5.
Table Page 2
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Reconciliation of net income to EBITDA and distributable cash flow (a)(k): | ||||||||||||||||
Net income | $ | 17,543 | $ | 16,970 | $ | 49,708 | $ | 50,485 | ||||||||
Plus: | ||||||||||||||||
Depreciation expense | 4,318 | 4,028 | 12,087 | 12,032 | ||||||||||||
Interest expense | 214 | 37 | 663 | 139 | ||||||||||||
Income tax expense | 129 | 156 | 436 | 1,734 | ||||||||||||
EBITDA | 22,204 | 21,191 | 62,894 | 64,390 | ||||||||||||
Less: EBITDA attributable to Predecessor | 21,191 | 11,267 | 64,390 | |||||||||||||
EBITDA attributable to Partnership | 22,204 | $ | 51,627 | $ | ||||||||||||
Plus: | ||||||||||||||||
Adjustments related to minimum throughput commitments | (235 | ) | 272 | |||||||||||||
Projects prefunded by Valero | 418 | 2,046 | ||||||||||||||
Less: | ||||||||||||||||
Cash interest paid | 221 | 686 | ||||||||||||||
Income taxes paid | 9 | |||||||||||||||
Maintenance capital expenditures | 1,035 | 2,904 | ||||||||||||||
Distributable cash flow | $ | 21,131 | $ | 50,346 | ||||||||||||
Reconciliation of net cash provided by operating activities to EBITDA and distributable cash flow (a)(k): | ||||||||||||||||
Net cash provided by operating activities | $ | 19,351 | $ | 20,938 | $ | 59,859 | $ | 63,494 | ||||||||
Plus: | ||||||||||||||||
Change in current assets and current liabilities | 2,515 | (25 | ) | 1,935 | 44 | |||||||||||
Change in deferred charges and credits and other operating activities, net | (2 | ) | 1 | 72 | 3 | |||||||||||
Amortization of fair value adjustment to capital lease obligations | 90 | 109 | 270 | 327 | ||||||||||||
Amortization of debt issuance costs | (83 | ) | (247 | ) | ||||||||||||
Unit-based compensation expense | (15 | ) | (51 | ) | ||||||||||||
Interest expense | 214 | 37 | 663 | 139 | ||||||||||||
Current income tax expense | 134 | 131 | 393 | 383 | ||||||||||||
EBITDA | 22,204 | 21,191 | 62,894 | 64,390 | ||||||||||||
Less: EBITDA attributable to Predecessor | 21,191 | 11,267 | 64,390 | |||||||||||||
EBITDA attributable to Partnership | 22,204 | $ | 51,627 | $ | ||||||||||||
Plus: | ||||||||||||||||
Adjustments related to minimum throughput commitments | (235 | ) | 272 | |||||||||||||
Projects prefunded by Valero | 418 | 2,046 | ||||||||||||||
Less: | ||||||||||||||||
Cash interest paid | 221 | 686 | ||||||||||||||
Income taxes paid | 9 | |||||||||||||||
Maintenance capital expenditures | 1,035 | 2,904 | ||||||||||||||
Distributable cash flow | $ | 21,131 | $ | 50,346 | ||||||||||||
See Notes to Earnings Release on Table Page 5. | ||||||||||||||||
Table Page 3
VALERO ENERGY PARTNERS LP
EARNINGS RELEASE
(In Thousands, Except per Unit Amounts, per Barrel Amounts, and Ratios)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Comparison of ratio of net income attributable to partners divided by total distribution declared to coverage ratio (k): | ||||||||||||||||
Net income attributable to partners | $ | 17,543 | n/a | $ | 40,225 | n/a | ||||||||||
Total distribution declared | $ | 14,102 | n/a | $ | 39,663 | n/a | ||||||||||
Ratio of net income attributable to partners divided by total distribution declared | 1.24x | n/a | 1.01x | n/a | ||||||||||||
Coverage ratio: Distributable cash flow divided by total distribution declared | 1.50x | n/a | 1.27x | n/a | ||||||||||||
See Notes to Earnings Release on Table Page 5.
Table Page 4
VALERO ENERGY PARTNERS LP
NOTES TO EARNINGS RELEASE
(a) | References in these notes to the Partnership, we, us, or our refer to Valero Energy Partners LP, one or more of its subsidiaries, or all of them taken as a whole for periods after December 16, 2013, the date the Partnership completed its initial public offering (IPO) of 17,250,000 common units representing limited partner interests. For periods prior to the IPO and periods prior to the Acquisition (defined below), those terms refer to Valero Energy Partners LP Predecessor, our Predecessor for accounting purposes. References in these notes to Valero may refer to Valero Energy Corporation, one or more of its subsidiaries, or all of them taken as a whole, other than Valero Energy Partners LP, any of its subsidiaries, or its general partner. |
On December 16, 2013, Valero contributed certain crude oil and refined petroleum products pipelines, terminals, and other logistics assets (the Contributed Assets) to us, and we completed the IPO of our common units, which represented a 29.4 percent limited partner interest in us. Valero owns the remaining 68.6 percent limited partner interest in us and the 2 percent general partner interest.
On July�1, 2014, we acquired the Texas Crude Systems Business from Valero (the Acquisition). The Acquisition was accounted for as a transfer of a business between entities under common control. As entities under the common control of Valero, we recorded the Acquisition on our balance sheet at Valeros carrying value rather than fair value. Transfers between entities under common control are accounted for as though the transfer occurred as of the beginning of the period of transfer, and prior period financial statements and financial information are retrospectively adjusted to furnish comparative information. Accordingly, the statement of income data, operating highlights, and balance sheet data have been retrospectively adjusted to include the historical results of the Texas Crude Systems Business for all periods presented prior to July�1, 2014.
The Partnerships results of operations may not be comparable to our Predecessors historical results of operations for the reasons described below:
" | Revenues. Our Predecessor generated revenues by providing fee-based transportation and terminaling services to Valero and by leasing certain crude oil and refined petroleum products storage capacity to Valero. Subsequent to the IPO and Acquisition, we entered into new commercial agreements with Valero. Under these new agreements, certain of the historical storage capacity lease arrangements were replaced with terminaling throughput fees. In addition, we began charging a terminaling throughput fee for crude oil delivered to our Lucas terminal for which we did not historically charge a throughput fee, and we revised the rates charged for transportation services provided by certain of our pipelines. |
" | General and administrative expenses. Our Predecessors general and administrative expenses included direct charges for the management and operation of our logistics assets and certain expenses allocated by Valero for general corporate services, such as treasury, accounting, and legal services. These expenses were charged, or allocated, to our Predecessor based on the nature of the expenses. Effective with the IPO, the Partnership pays a fee to Valero for the management of our operations and general corporate services and this fee was increased effective July 1, 2014, in connection with the Acquisition. In addition, the Partnership incurs additional incremental general and administrative expenses as a result of being a separate publicly traded limited partnership. |
(b) | The decrease in operating expenses for the three months ended September�30, 2014 compared to the three months ended September�30, 2013 was due primarily to lower maintenance expense of $1.2�million at our Memphis, Port Arthur, and McKee logistics systems. The decrease in maintenance expense was partially offset by an increase of $721,000 in insurance expense as a result of us acquiring our own insurance policies. Prior to being a separate publicly traded limited partnership, we were allocated a portion of Valeros insurance costs. |
The increase in operating expenses for the nine months ended September�30, 2014 compared to the nine months ended September�30, 2013 was due primarily to an increase of $1.8�million in insurance expense as a result of us
Table Page 5
VALERO ENERGY PARTNERS LP
NOTES TO EARNINGS RELEASE
acquiring our own insurance policies as described above. The increase in insurance expense was partially offset by lower maintenance expense of $193,000 at our Wynnewood products system and McKee logistics system.
(c) | The increase in general and administrative expenses for the three and nine months ended September�30, 2014 compared to the three and nine months ended September�30, 2013 was due primarily to $516,000 and $2.1�million, respectively, in incremental costs related to the management fee charged to us by Valero effective with the IPO; and $603,000 and $1.8�million, respectively, of additional incremental costs of being a separate publicly traded limited partnership. During the three and nine months ended September�30, 2014, we also incurred $149,000 and $457,000, respectively, in costs related to the Acquisition. |
(d) | The increase in depreciation expense for the three months ended September�30, 2014 compared to the three months ended September�30, 2013 was due to the retirement of $280,000 in net book value of assets primarily at the West Memphis terminal that were replaced during the third quarter of 2014. |
(e) | The increase in other income, net for the three and nine months ended September�30, 2014 compared to the three and nine months ended September�30, 2013 was due primarily to interest income (net of bank fees) of $154,000 and $710,000, respectively, earned on our cash and cash equivalents. Prior to the IPO, our Predecessor participated in Valeros centralized cash management system; therefore, it held no cash or cash equivalents, and no interest income was allocated to our Predecessor by Valero. Incremental income of $296,000 from the sale of scrap metal and $143,000 related to right-of-way fees collected during the nine months ended September�30, 2014 also contributed to the increase. |
(f) | The increase in interest expense for the three and nine months ended September�30, 2014 compared to the three and nine months ended September�30, 2013 was due primarily to commitment fees and amortization of the debt issuance costs related to the Partnerships revolving credit facility, which was entered into in connection with the IPO. |
(g) | Our income tax expense is associated with the Texas margin tax. Our effective tax rate was 1 percent during the nine months ended September�30, 2014 compared to 3 percent during the nine months ended September�30, 2013. The decrease was due primarily to deferred tax expense recorded during the second quarter of 2013 in connection with the initial recognition of a deferred tax liability associated with a change in the law with respect to the Texas margin tax. |
(h) | Represents the sum of volumes transported through each separately tariffed pipeline segment. |
(i) | Management uses average revenue per barrel to evaluate performance and compare profitability to other companies in the industry. There are a variety of ways to calculate average revenue per barrel; different companies may calculate it in different ways. We calculate average revenue per barrel as revenue divided by throughput for the period. Throughput can be derived by multiplying the throughput barrels per day (BPD) by the number of days in the period. Investors and analysts use this financial measure to help analyze and compare companies in the industry on the basis of operating performance. This financial measure should not be considered as an alternative to revenues presented in accordance with U.S. generally accepted accounting principles (GAAP). |
(j) | Prior to the IPO, our Predecessor leased some of our refined petroleum products and crude oil storage capacity to Valero. Subsequent to the IPO, under our commercial agreements with Valero, certain of these storage capacity lease agreements were replaced with terminaling fees. |
(k) | We define EBITDA as net income before income tax expense, interest expense, and depreciation expense. We define distributable cash flow as EBITDA less cash payments during the period for interest, income taxes, and maintenance capital expenditures, plus adjustments related to minimum throughput commitments and capital |
Table Page 6
VALERO ENERGY PARTNERS LP
NOTES TO EARNINGS RELEASE
projects prefunded by Valero. We define coverage ratio as the ratio of distributable cash flow to the total distribution declared.
EBITDA, distributable cash flow, and coverage ratio are supplemental financial measures that are not defined under GAAP; they may be used by management and external users of our financial statements, such as industry analysts, investors, lenders, and rating agencies, to assess:
" | our operating performance as compared to other publicly traded limited partnerships in the transportation and logistics industry, without regard to historical cost basis or, in the case of EBITDA, financing methods; |
" | the ability of our business to generate sufficient cash to support our decision to make distributions to our unitholders; |
" | our ability to incur and service debt and fund capital expenditures; and |
" | the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. |
We believe that the presentation of EBITDA provides useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to EBITDA are net income and net cash provided by operating activities. EBITDA should not be considered an alternative to net income or net cash provided by operating activities presented in accordance with GAAP. EBITDA has important limitations as an analytical tool because it excludes some, but not all, items that affect net income or net cash provided by operating activities. EBITDA should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Additionally, because EBITDA may be defined differently by other companies in our industry, our definition of EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.
We use distributable cash flow to measure whether we have generated from our operations, or earned, an amount of cash sufficient to support the payment of the minimum quarterly distributions. Our partnership agreement contains the concept of operating surplus to determine whether our operations are generating sufficient cash to support the distributions that we are paying, as opposed to returning capital to our partners. Because operating surplus is a cumulative concept (measured from the IPO date and compared to cumulative distributions from the IPO date), we use the term distributable cash flow to approximate operating surplus on a quarterly or annual, rather than a cumulative, basis. As a result, distributable cash flow is not necessarily indicative of the actual cash we have on hand to distribute or that we are required to distribute.
We use the coverage ratio to reflect the relationship between our distributable cash flow and the total distribution declared. We have also provided the ratio of net income attributable to partners, the most directly comparable GAAP measure to distributable cash flow, to the total distribution declared.
Table Page 7
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