Form 8-K Northern Tier Energy LP For: Nov 03
UNITED 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 3, 2015
Northern Tier Energy LP
(Exact name of registrant as specified in its charter)
Delaware | 001-35612 | 80-0763623 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
1250 W. Washington Street, Suite 300 Tempe, Arizona | 85281 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (602) 302-5450
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:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | 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 3, 2015, Northern Tier Energy LP (the “Partnership”) issued a press release reporting results for the quarter ended September 30, 2015, the text of which is attached hereto as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. Also on November 3, 2015, the Company posted a presentation to its website at www.northerntier.com under the "Investors" tab providing information regarding its results of operations and financial condition for the quarter ended September 30, 2015, as well as information concerning expected future performance. The presentation is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
The information contained in this Current Report on Form 8-K (including the exhibits) is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section. The information contained in this Current Report on Form 8-K (including the exhibits) shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.
ITEM 7.01 Regulation FD Disclosure.
The information set forth under item 2.02 is incorporated by reference as if fully set forth herein.
ITEM 8.01 Other Events.
Effective November 3, 2015, the Board of Directors of Northern Tier Energy GP LLC, the general partner of the Partnership, declared, on behalf of the Partnership, a cash distribution for the quarter ended September 30, 2015, of $1.04 per common unit, to be paid on November 25, 2015, to all unitholders of record at the close of market on November 16, 2015. Also on November 3, 2015, the Partnership issued a press release announcing this cash distribution. A copy of this press release is attached as Exhibit 99.1 and is incorporated herein by reference.
ITEM 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. | Description | |
99.1 | Press release dated November 3, 2015. | |
99.2 | Presentation dated November 3, 2015. | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Northern Tier Energy LP | |||||||
By: | Northern Tier Energy GP LLC, | ||||||
its general partner | |||||||
Date: | November 3, 2015 | By: | /s/ Karen B. Davis | ||||
Karen B. Davis | |||||||
Executive Vice President and Chief Financial Officer | |||||||
EXHIBIT INDEX
Exhibit No. | Description | |
99.1 | Press release dated November 3, 2015. | |
99.2 | Presentation dated November 3, 2015. | |
Exhibit 99.1
Investor and Analyst Contact: | Media Contact: |
Paul Anderson | Gary W. Hanson |
(651) 458-6494 | (602) 286-1777 |
Alpha IR Group | |
(651) 769-6700 | |
Northern Tier Reports Third Quarter 2015 Results
Highlights
• | Third quarter Adjusted Net Income of $140.3 million and Adjusted EBITDA of $173.3 million |
• | Declares third quarter distribution of $1.04 per common unit to be paid in cash on November 25, 2015 |
• | Record retail segment fuel sales and strong retail fuel margins |
• | Approved Solvent Deasphalting unit project at the St. Paul Park refinery |
Tempe, Ariz., Nov. 3, 2015 (Globe Newswire) - Northern Tier Energy LP and its subsidiaries (NYSE: NTI) (collectively, "Northern Tier" or the "Company") today reported third quarter 2015 Net Income of $103.5 million, compared to $96.2 million for third quarter 2014. Results for the 2015 quarter included a $36.8 million non-cash lower of cost or market ("LCM") inventory adjustment, which reduced operating income. Adjusted Net Income, which excludes the LCM adjustment, was $140.3 million for third quarter 2015, compared to $96.2 million for the prior year quarter. Adjusted EBITDA for third quarter 2015 was $173.3 million (excluding the LCM adjustment) compared to $122.8 million for third quarter 2014, due to higher gross margins per barrel. A reconciliation of reported earnings to these non-GAAP performance measures can be found in the accompanying tables.
Dave Lamp, Northern Tier's Chief Executive Officer, said, "This was an outstanding quarter for Northern Tier. We experienced an unplanned shutdown of our No. 2 Crude Unit at the end of September for crude tower repairs but were able to minimize the impact of the downtime by drawing down our finished product inventories. Our retail segment also performed well with our network of company-operated and franchise store locations achieving record fuel sale volumes. With these results, I am pleased to announce a third quarter distribution of $1.04 per unit."
Mr. Lamp continued, "Our general partner's Board of Directors recently approved the purchase and relocation to the St. Paul Park refinery of an existing 5,000 barrel per day Solvent Deasphalting unit, or SDA, for a total installed cost of approximately $63 million. The SDA is expected to be completed in mid-2017 and thereafter should contribute approximately $27 million annually in EBITDA, driven by upgrading residual oils for conversion to gasoline and diesel using our excess FCC capacity. Meanwhile, we continue to make good progress on the organic growth projects we previously announced, including our crude unit desalter and No. 2 crude unit revamp projects as well as the construction of new company-operated retail stores."
Third Quarter Operating Segment Highlights
Refining Segment
Refining operating income excluding the LCM adjustment was $147.1 million ($111.1 million including the LCM adjustment) for third quarter 2015 compared to $107.4 million for the prior year period. Refining gross margin was $24.97 per barrel of throughput for third quarter 2015 ($20.65 per barrel including the LCM adjustment) compared to $18.87 per barrel of throughput for third quarter 2014. Refining Adjusted EBITDA for third quarter 2015 was $165.0 million (excluding the LCM adjustment) compared to $121.4 million for the prior year period. This increase was driven by improved gross margins. Refined product sales for the third quarter 2015 were 99,600 barrels per day, while total throughput averaged 90,600 barrels per day, reflecting the impact of the unplanned shutdown of the No. 2 crude unit in September. Refined product sales and total throughput for the prior year period averaged 100,100 barrels per day and 96,500 barrels per day, respectively.
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Retail Segment
Retail operating income for third quarter 2015, was $9.4 million (excluding the LCM adjustment), compared to $5.8 million for third quarter 2014. Fuel margins were $0.28 per gallon for third quarter 2015 ($0.27 per gallon including the LCM adjustment) compared to $0.20 per gallon for the prior year period. Adjusted EBITDA for the third quarter 2015 was $11.5 million (excluding the LCM adjustment) compared to $7.6 million in the third quarter 2014.
The aggregate of fuel gallons sold at company-operated retail stores plus fuel gallons sold to franchise stores increased 8.2% for the quarter ended September 30, 2015 compared to third quarter 2014 and 10.4% compared to third quarter 2013. This growth was primarily the result of adding 20 SuperAmerica franchise locations. The number of franchise locations totaled 102 as of September 30, 2015, compared to 82 as of September 30, 2014.
Liquidity and Capital Spending
Northern Tier's primary sources of liquidity are cash generated from operating activities and its ABL Facility ("ABL"). As of September 30, 2015, Northern Tier's cash on hand and availability under the ABL amounted to approximately $322 million as compared to approximately $381 million as of June 30, 2015. Working capital requirements can have a significant impact on the Company's liquidity. During periods of declining crude oil prices, cash from operations is negatively impacted by the timing of crude oil payables versus current product pricing. The reverse is true during periods of rising crude oil prices. Beginning in the fourth quarter of 2014, when the Company's crude oil costs dropped by over $30.00 per barrel, the Board of Directors of Northern Tier's general partner established a working capital reserve to reflect the negative impact on cash earnings for that period and to manage working capital requirements. While the Company considers its current level of liquidity to be adequate to support its continuing operations, the Board anticipates making changes, both increases and decreases, to the working capital reserve in periods when changes in crude oil prices significantly impact cash earnings versus earnings reported in accordance with generally accepted accounting principles ("GAAP"). During the third quarter of 2015, the Company's crude oil costs declined by approximately $19.00 per barrel from the beginning of the quarter to the end of the quarter, resulting in an estimated $40.0 million negative impact on cash earnings for the period. As a result, the Board increased the working capital reserve by $40.0 million, which reduced cash available for distribution for the third quarter 2015 correspondingly.
Capital spending for third quarter 2015 was $17.5 million, including $8.7 million on organic growth projects, compared to third quarter 2014 spending of $9.2 million.
Quarterly Distribution
Effective November 3, 2015, the Board of Directors (the "Board") of Northern Tier Energy GP LLC, the general partner of the Company declared a quarterly distribution of $1.04 per unit that will be paid in cash on November 25, 2015 to common unit holders of record as of the close of business on November 16, 2015. Cash available for distribution totaled $97.4 million for third quarter 2015, including the $40 million increase in the working capital reserve.
Northern Tier Energy LP is a variable distribution master limited partnership. As a result, its quarterly distributions, if any, will vary from quarter-to-quarter as a result of variations in, among other factors, (i) operating performance, (ii) cash flows caused by, among other things, fluctuations in the prices of crude oil and other feedstocks and the prices received for finished products, (iii) working capital requirements including inventory fluctuations, (iv) maintenance and regulatory capital expenditures, (v) organic growth capital expenditures less any amounts we may choose to fund with borrowings from our ABL Facility or by issuance of debt or equity securities and (vi) cash reserves deemed necessary or appropriate by the Board of Directors of our general partner.
Q4 2015 Operating and Capital Expenditure Guidance
For the fourth quarter of 2015, Northern Tier projects total throughput of between 96,000 and 101,000 barrels per day at the St. Paul Park refinery. Direct operating expense per barrel of throughput is expected to be between $4.20 and $4.70, not including turnaround expenditures. Total capital expenditures for the fourth quarter are expected to be between approximately $23 million and approximately $27 million, including between $10 million and $12 million for the organic growth projects. See the accompanying table for additional key metric guidance.
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Conference Call Information
Northern Tier will host a conference call to discuss its quarterly results on Tuesday, November 3, 2015, at 11:30 am Eastern Time. Callers may listen to the live presentation, which will be followed by a question and answer segment, by dialing (877) 728-3739 or (530) 379-4675 and the passcode 48587440. An audio webcast of the call, as well as a slide presentation, will be available on the Investor section of www.northerntier.com under Calendar of Events. An audio replay of the conference call will be available for fourteen days following the call on www.northerntier.com and for seven days following the call by dialing (855) 859-2056 or (404) 537-3406 and the passcode 48587440.
About Northern Tier
Northern Tier Energy LP (NYSE: NTI) is an independent downstream energy company with refining, retail and logistics operations that serves the PADD II region of the United States. Northern Tier operates a 97,800 barrels per stream day refinery located in St. Paul Park, Minnesota. Northern Tier also operates approximately 165 convenience stores and supports approximately 102 franchised convenience stores, primarily in Minnesota and Wisconsin, under the SuperAmerica trademark, and owns a bakery and commissary under the SuperMom's brand. Northern Tier is headquartered in Tempe, Arizona.
More information about Northern Tier is available at www.northerntier.com.
Non-GAAP Measures
This earnings release includes non-GAAP measures including Adjusted Net Income, Adjusted EBITDA, Cash Available for Distribution, Refining Gross Margin, Retail Fuel and Retail Merchandise Gross Margins, and other measures that exclude the impact of non-cash and special items. Northern Tier believes that these non-GAAP financial measures provide useful information about its operating performance. However, these measures have important limitations as analytical tools and should not be viewed in isolation or considered as alternatives to comparable GAAP financial measures. Northern Tier's non-GAAP financial measures may also differ from similarly named measures used by other companies. See the accompanying tables and footnotes in this release for additional information on the non-GAAP measures used in this release and reconciliations to the most directly comparable GAAP measures.
Forward-Looking Statements and Qualified Notice
This press release contains certain "forward-looking statements" which reflect Northern Tier's views and assumptions on the date of this press release regarding future events. These forward-looking statements include statements about, among other things, future: payment of distributions including the amount and timing thereof; finished product inventory levels; organic growth initiatives including the crude unit desalter, the No. 2 crude unit revamp and the solvent deasphalting unit projects and the progress, cost, details, timing and expected operating and financial performance thereof; FCC capacity; construction of new retail stores; franchise growth; liquidity including cash and ABL availability; working capital requirements and reserves relating thereto; crude oil prices; cash reserves including increases and/or decreases thereof; calculations of cash available for distribution; total or other throughput; crude oil charge and inventories; direct operating expenses; turnaround and related expenses; retail and franchise volumes, sales and margins; SG&A, depreciation and amortization; interest expense; income taxes and amounts and types of capital expenditures on maintenance, regulatory, discretionary and organic growth projects or otherwise. They involve known and unknown risks, uncertainties and other factors, many of which may be beyond its control, that may cause actual results to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements. All forward-looking statements speak only as of the date hereof. Northern Tier undertakes no obligation to update or revise publicly any such forward-looking statements. Northern Tier cautions you not to place undue reliance on these forward-looking statements. Please refer to Northern Tier's filings with the SEC for more detailed information regarding these risks, uncertainties and assumptions.
This release serves as a qualified notice to nominees and brokers as provided for under Treasury Regulation Section 1.1446-4(b). Please note that 100 percent of Northern Tier's distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, Northern Tier's distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate.
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NORTHERN TIER ENERGY LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions except per unit amounts, unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2015 | September 30, 2014 | September 30, 2015 | September 30, 2014 | ||||||||||||
REVENUE | $ | 891.6 | $ | 1,547.4 | $ | 2,645.2 | $ | 4,496.2 | |||||||
COSTS, EXPENSES AND OTHER | |||||||||||||||
Cost of sales | 666.6 | 1,334.1 | 1,957.7 | 3,922.4 | |||||||||||
Direct operating expenses | 75.2 | 71.1 | 220.8 | 202.9 | |||||||||||
Turnaround and related expenses | 7.8 | 4.6 | 9.4 | 6.0 | |||||||||||
Depreciation and amortization | 11.0 | 10.7 | 32.6 | 30.8 | |||||||||||
Selling, general and administrative expenses | 20.5 | 22.8 | 62.9 | 72.5 | |||||||||||
Reorganization and related costs | — | — | — | 12.9 | |||||||||||
Income from equity method investment | (4.2 | ) | (0.9 | ) | (12.0 | ) | — | ||||||||
Other loss | 0.1 | 0.2 | 0.4 | 0.5 | |||||||||||
OPERATING INCOME | 114.6 | 104.8 | 373.4 | 248.2 | |||||||||||
Interest expense, net | (7.5 | ) | (6.7 | ) | (22.5 | ) | (19.1 | ) | |||||||
INCOME BEFORE INCOME TAXES | 107.1 | 98.1 | 350.9 | 229.1 | |||||||||||
Income tax provision | (3.6 | ) | (1.9 | ) | (7.3 | ) | (3.5 | ) | |||||||
NET INCOME | $ | 103.5 | $ | 96.2 | $ | 343.6 | $ | 225.6 | |||||||
Net earnings per common unit, basic | $ | 1.11 | $ | 1.04 | $ | 3.70 | $ | 2.44 | |||||||
Net earnings per common unit, diluted | $ | 1.11 | $ | 1.04 | $ | 3.69 | $ | 2.44 | |||||||
See notes to earnings release tables.
NORTHERN TIER ENERGY LP
SELECTED OPERATING INCOME DATA
(in millions, unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2015 | September 30, 2014 (b) | September 30, 2015 | September 30, 2014 (b) | ||||||||||||
OPERATING INCOME | |||||||||||||||
Refining | $ | 111.1 | $ | 107.4 | $ | 374.7 | $ | 278.0 | |||||||
Retail | 8.6 | 5.8 | 16.9 | 12.5 | |||||||||||
Corporate and unallocated costs | (5.1 | ) | (8.4 | ) | (18.2 | ) | (42.3 | ) | |||||||
TOTAL OPERATING INCOME | 114.6 | 104.8 | 373.4 | 248.2 | |||||||||||
Interest expense, net | (7.5 | ) | (6.7 | ) | (22.5 | ) | (19.1 | ) | |||||||
Income tax provision | (3.6 | ) | (1.9 | ) | (7.3 | ) | (3.5 | ) | |||||||
NET INCOME | $ | 103.5 | $ | 96.2 | $ | 343.6 | $ | 225.6 | |||||||
See notes to earnings release tables.
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NORTHERN TIER ENERGY LP
SELECTED BALANCE SHEET AND CASH FLOW DATA
(in millions, unaudited)
September 30, 2015 | December 31, 2014 | ||||||
Cash and cash equivalents | $ | 114.6 | $ | 87.9 | |||
Total assets | $ | 1,198.9 | $ | 1,180.4 | |||
Total debt and financing obligations | $ | 360.4 | $ | 362.8 | |||
Equity | $ | 497.3 | $ | 403.7 | |||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2015 | September 30, 2014 | September 30, 2015 | September 30, 2014 | ||||||||||||
Net cash provided by operating activities | $ | 114.1 | $ | (19.7 | ) | $ | 317.3 | $ | 134.6 | ||||||
Net cash used in investing activities | (17.5 | ) | (6.7 | ) | (35.2 | ) | (30.4 | ) | |||||||
Net cash used in financing activities | (109.9 | ) | 25.5 | (255.4 | ) | (84.0 | ) | ||||||||
Net increase in cash and cash equivalents | $ | (13.3 | ) | $ | (0.9 | ) | $ | 26.7 | $ | 20.2 | |||||
See notes to earnings release tables.
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NORTHERN TIER ENERGY LP
SUPPLEMENTAL OPERATING DATA
(unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, 2015 | September 30, 2014 | September 30, 2015 | September 30, 2014 | ||||||||||||
REFINING SEGMENT | |||||||||||||||
Key Operating Statistics | |||||||||||||||
Total refinery production (bpd) | 90,362 | 96,625 | 94,451 | 94,314 | |||||||||||
Total refinery throughput (bpd) | 90,590 | 96,464 | 94,538 | 94,054 | |||||||||||
Refined products sold (bpd) | 99,617 | 100,064 | 100,630 | 97,252 | |||||||||||
Per barrel of throughput: | |||||||||||||||
Refining gross margin | $ | 20.65 | $ | 18.87 | $ | 21.15 | $ | 17.35 | |||||||
Refining gross margin excluding lower of cost or market inventory adjustment | $ | 24.97 | $ | 18.87 | $ | 20.70 | $ | 17.35 | |||||||
Direct operating expenses | $ | 4.84 | $ | 4.46 | $ | 4.74 | $ | 4.37 | |||||||
Per barrel of refined products sold: | |||||||||||||||
Refining gross margin | $ | 18.78 | $ | 18.19 | $ | 19.87 | $ | 16.78 | |||||||
Direct operating expenses | $ | 4.40 | $ | 4.30 | $ | 4.46 | $ | 4.23 | |||||||
Refinery product yields (bpd): | |||||||||||||||
Gasoline | 43,914 | 45,440 | 45,155 | 45,055 | |||||||||||
Distillate | 30,404 | 33,423 | 32,791 | 34,511 | |||||||||||
Asphalt | 10,091 | 10,388 | 10,742 | 7,919 | |||||||||||
Other | 5,953 | 7,374 | 5,763 | 6,829 | |||||||||||
Total | 90,362 | 96,625 | 94,451 | 94,314 | |||||||||||
Refinery throughput (bpd): | |||||||||||||||
Crude oil | 89,586 | 94,843 | 92,711 | 92,936 | |||||||||||
Other feedstocks | 1,004 | 1,621 | 1,827 | 1,118 | |||||||||||
Total | 90,590 | 96,464 | 94,538 | 94,054 | |||||||||||
Crude oil by type (bpd): | |||||||||||||||
Light crude oil | 51,701 | 60,067 | 55,779 | 59,125 | |||||||||||
Synthetic crude oil | 14,735 | 11,429 | 12,303 | 14,974 | |||||||||||
Heavy crude oil | 23,150 | 23,347 | 24,629 | 18,837 | |||||||||||
Total | 89,586 | 94,843 | 92,711 | 92,936 | |||||||||||
RETAIL SEGMENT | |||||||||||||||
Company operated stores: | |||||||||||||||
Fuel gallons sold (in millions) | 78.4 | 79.7 | 227.7 | 229.5 | |||||||||||
Fuel margin per gallon | $ | 0.27 | $ | 0.20 | $ | 0.23 | $ | 0.20 | |||||||
Fuel margin per gallon excluding lower of cost or market inventory adjustment | $ | 0.28 | $ | 0.20 | $ | 0.23 | $ | 0.20 | |||||||
Merchandise sales (in millions) | $ | 100.7 | $ | 95.7 | $ | 279.1 | $ | 264.1 | |||||||
Merchandise margin % | 25.8 | % | 25.7 | % | 25.9 | % | 26.0 | % | |||||||
Number of stores at period end | 165 | 165 | 165 | 165 | |||||||||||
Franchise stores: | |||||||||||||||
Fuel gallons sold (in millions) | 29.2 | 19.7 | 80.6 | 52.4 | |||||||||||
Royalty income | $ | 0.9 | $ | 0.8 | $ | 2.6 | $ | 2.1 | |||||||
Number of stores at period end | 102 | 82 | 102 | 82 | |||||||||||
See notes to earnings release tables.
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NORTHERN TIER ENERGY LP
RECONCILIATION OF NET INCOME (LOSS) TO
EBITDA AND ADJUSTED EBITDA
(in millions, unaudited)
Three Months Ended September 30, 2015 | ||||||||||||||||
Refining | Retail | Other | Total | |||||||||||||
Net income (loss) | $ | 111.1 | $ | 5.0 | $ | (12.6 | ) | $ | 103.5 | |||||||
Adjustments: | ||||||||||||||||
Interest expense | — | — | 7.5 | 7.5 | ||||||||||||
Income tax provision | — | 3.6 | — | 3.6 | ||||||||||||
Depreciation and amortization | 8.8 | 2.0 | 0.2 | 11.0 | ||||||||||||
EBITDA subtotal | 119.9 | 10.6 | (4.9 | ) | 125.6 | |||||||||||
Lower of cost or market inventory adjustment (c) | 36.0 | 0.8 | — | 36.8 | ||||||||||||
MPL proportionate depreciation expense | 0.7 | — | — | 0.7 | ||||||||||||
Turnaround and related expenses | 7.8 | — | — | 7.8 | ||||||||||||
Equity-based compensation expense | 0.6 | 0.1 | 1.7 | 2.4 | ||||||||||||
Adjusted EBITDA (a) | $ | 165.0 | $ | 11.5 | $ | (3.2 | ) | $ | 173.3 | |||||||
Three Months Ended September 30, 2014 (b) | ||||||||||||||||
Refining | Retail | Other | Total | |||||||||||||
Net income (loss) | $ | 107.4 | $ | 3.9 | $ | (15.1 | ) | $ | 96.2 | |||||||
Adjustments: | ||||||||||||||||
Interest expense | — | — | 6.7 | 6.7 | ||||||||||||
Income tax provision | — | 1.9 | — | 1.9 | ||||||||||||
Depreciation and amortization | 8.7 | 1.8 | 0.2 | 10.7 | ||||||||||||
EBITDA subtotal | 116.1 | 7.6 | (8.2 | ) | 115.5 | |||||||||||
MPL proportionate depreciation expense | 0.7 | — | — | 0.7 | ||||||||||||
Turnaround and related expenses | 4.6 | — | — | 4.6 | ||||||||||||
Equity-based compensation expense, including the effect of award accelerations from reorganization | — | — | 2.0 | 2.0 | ||||||||||||
Adjusted EBITDA (a) | $ | 121.4 | $ | 7.6 | $ | (6.2 | ) | $ | 122.8 | |||||||
Nine Months Ended September 30, 2015 | ||||||||||||||||
Refining | Retail | Other | Total | |||||||||||||
Net income (loss) | $ | 374.7 | $ | 9.6 | $ | (40.7 | ) | $ | 343.6 | |||||||
Adjustments: | ||||||||||||||||
Interest expense | — | — | 22.5 | 22.5 | ||||||||||||
Income tax provision | — | 7.3 | — | 7.3 | ||||||||||||
Depreciation and amortization | 26.3 | 5.7 | 0.6 | 32.6 | ||||||||||||
EBITDA subtotal | 401.0 | 22.6 | (17.6 | ) | 406.0 | |||||||||||
Lower of cost or market inventory adjustment (c) | (11.7 | ) | (0.5 | ) | — | (12.2 | ) | |||||||||
MPL proportionate depreciation expense | 2.1 | — | — | 2.1 | ||||||||||||
Turnaround and related expenses | 9.4 | — | — | 9.4 | ||||||||||||
Equity-based compensation expense | 1.9 | 0.3 | 5.7 | 7.9 | ||||||||||||
Adjusted EBITDA (a) | $ | 402.7 | $ | 22.4 | $ | (11.9 | ) | $ | 413.2 | |||||||
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Nine Months Ended September 30, 2014 (b) | ||||||||||||||||
Refining | Retail | Other | Total | |||||||||||||
Net income (loss) | $ | 278.0 | $ | 9.0 | $ | (61.4 | ) | $ | 225.6 | |||||||
Adjustments: | — | |||||||||||||||
Interest expense | — | — | 19.1 | 19.1 | ||||||||||||
Income tax provision | — | 3.5 | — | 3.5 | ||||||||||||
Depreciation and amortization | 25.0 | 5.2 | 0.6 | 30.8 | ||||||||||||
EBITDA subtotal | 303.0 | 17.7 | (41.7 | ) | 279.0 | |||||||||||
MPL proportionate depreciation expense | 2.1 | — | — | 2.1 | ||||||||||||
Turnaround and related expenses | 6.0 | — | — | 6.0 | ||||||||||||
Equity-based compensation expense, including the effect of award accelerations from reorganization | — | — | 12.3 | 12.3 | ||||||||||||
Reorganization and related costs, excluding equity based compensation | — | — | 8.1 | 8.1 | ||||||||||||
Adjusted EBITDA (a) | $ | 311.1 | $ | 17.7 | $ | (21.3 | ) | $ | 307.5 | |||||||
See notes to earnings release tables.
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NORTHERN TIER ENERGY LP
CASH AVAILABLE FOR DISTRIBUTION
(in millions, unaudited)
Three Months Ended September 30, 2015 | |||
Net income | $ | 103.5 | |
Adjustments: | |||
Interest expense | 7.5 | ||
Income tax provision | 3.6 | ||
Depreciation and amortization | 11.0 | ||
EBITDA subtotal | 125.6 | ||
Lower of cost or market inventory adjustment (c) | 36.8 | ||
MPL proportionate depreciation expense | 0.7 | ||
Turnaround and related expenses | 7.8 | ||
Equity-based compensation expense | 2.4 | ||
Adjusted EBITDA (a) | 173.3 | ||
Cash interest | (7.1 | ) | |
Cash income taxes paid | (0.7 | ) | |
MPL proportionate depreciation expense | (0.7 | ) | |
Increase in working capital reserve (d) | (40.0 | ) | |
Capital expenditures (e) | (12.4 | ) | |
Cash reserve for turnaround and related expenses (f) | (7.5 | ) | |
Cash reserve for organic growth projects (f) | (7.5 | ) | |
Cash available for distribution (g) | $ | 97.4 | |
See notes to earnings release tables.
9
NORTHERN TIER ENERGY LP
OTHER NON-GAAP PERFORMANCE MEASURES
(in millions, unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
Refining operating information: | September 30, 2015 | September 30, 2014 | September 30, 2015 | September 30, 2014 | |||||||||||
Refining revenue | $ | 762.3 | $ | 1,425.4 | $ | 2,291.7 | $ | 4,155.7 | |||||||
Refining cost of sales | 590.2 | 1,257.9 | 1,745.8 | 3,710.3 | |||||||||||
Refining gross margin (h) | 172.1 | 167.5 | 545.9 | 445.4 | |||||||||||
Refining lower of cost or market adjustment (c) | 36.0 | — | (11.7 | ) | — | ||||||||||
Refining gross margin excluding lower of cost or market adjustment (h) | $ | 208.1 | $ | 167.5 | $ | 534.2 | $ | 445.4 | |||||||
Total throughput (millions of barrels) | 8.3 | 8.9 | 25.8 | 25.7 | |||||||||||
Refining gross margin per barrel of total throughput | $ | 20.65 | $ | 18.87 | $ | 21.15 | $ | 17.35 | |||||||
Refining gross margin excluding lower of cost or market adjustment per barrel of total throughput | $ | 24.97 | $ | 18.87 | $ | 20.70 | $ | 17.35 | |||||||
Refining direct operating expenses | $ | 40.3 | $ | 39.6 | $ | 122.4 | $ | 112.3 | |||||||
Total throughput (millions of barrels) | 8.3 | 8.9 | 25.8 | 25.7 | |||||||||||
Refining direct operating expenses per barrel of throughput | $ | 4.84 | $ | 4.46 | $ | 4.74 | $ | 4.37 | |||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
Retail gross margin data: | September 30, 2015 | September 30, 2014 | September 30, 2015 | September 30, 2014 | |||||||||||
Retail revenue: | |||||||||||||||
Fuel revenue | $ | 201.8 | $ | 270.4 | $ | 561.7 | $ | 793.5 | |||||||
Merchandise revenue | 100.7 | 95.7 | 279.1 | 264.1 | |||||||||||
Other revenue | 10.3 | 12.5 | 29.0 | 35.7 | |||||||||||
Intercompany eliminations | (5.2 | ) | (5.1 | ) | (14.3 | ) | (13.8 | ) | |||||||
Retail revenue | 307.6 | 373.5 | 855.5 | 1,079.5 | |||||||||||
Retail cost of sales: | |||||||||||||||
Fuel cost of sales | 180.6 | 254.3 | 508.4 | 748.7 | |||||||||||
Merchandise cost of sales | 74.6 | 71.1 | 206.8 | 195.4 | |||||||||||
Other cost of sales | 4.7 | 7.4 | 13.0 | 20.8 | |||||||||||
Intercompany eliminations | (5.2 | ) | (5.1 | ) | (14.3 | ) | (13.8 | ) | |||||||
Retail cost of sales | 254.7 | 327.7 | 713.9 | 951.1 | |||||||||||
Retail gross margin: (i) | |||||||||||||||
Fuel margin | 21.2 | 16.1 | 53.3 | 44.8 | |||||||||||
Merchandise margin | 26.1 | 24.6 | 72.3 | 68.7 | |||||||||||
Other margin | 5.6 | 5.1 | 16.0 | 14.9 | |||||||||||
Intercompany eliminations | — | — | — | — | |||||||||||
Retail gross margin | $ | 52.9 | $ | 45.8 | $ | 141.6 | $ | 128.4 | |||||||
10
Three Months Ended | Nine Months Ended | ||||||||||||||
Retail fuel gross margin per gallon: | September 30, 2015 | September 30, 2014 | September 30, 2015 | September 30, 2014 | |||||||||||
Retail fuel revenue | $ | 201.8 | $ | 270.4 | $ | 561.7 | $ | 793.5 | |||||||
Retail fuel costs of sales | 180.6 | 254.3 | 508.4 | 748.7 | |||||||||||
Retail fuel gross margin (i) | 21.2 | 16.1 | 53.3 | 44.8 | |||||||||||
Lower of cost or market inventory adjustment | 0.8 | — | (0.5 | ) | — | ||||||||||
Adjusted retail fuel gross margin (i) | $ | 22.0 | $ | 16.1 | $ | 52.8 | $ | 44.8 | |||||||
Retail fuel gallons sold (in millions) | 78.4 | 79.7 | 227.7 | 229.5 | |||||||||||
Retail fuel gross margin per gallon | $ | 0.27 | $ | 0.20 | $ | 0.23 | $ | 0.20 | |||||||
Adjusted retail fuel gross margin per gallon | $ | 0.28 | $ | 0.20 | $ | 0.23 | $ | 0.20 | |||||||
Three Months Ended September 30, 2015 | ||||||||||||||||
Supplemental operating income data: | Refining | Retail | Corporate and unallocated costs | Total | ||||||||||||
Operating income | $ | 111.1 | $ | 8.6 | $ | (5.1 | ) | $ | 114.6 | |||||||
Adjusted for special items: | ||||||||||||||||
Lower of cost or market inventory adjustment (c) | 36.0 | 0.8 | — | 36.8 | ||||||||||||
Operating income, adjusted for special items (j) | $ | 147.1 | $ | 9.4 | $ | (5.1 | ) | $ | 151.4 | |||||||
Three Months Ended September 30, 2014 (b) | ||||||||||||||||
Supplemental operating income data: | Refining | Retail | Corporate and unallocated costs | Total | ||||||||||||
Operating income | $ | 107.4 | $ | 5.8 | $ | (8.4 | ) | $ | 104.8 | |||||||
Adjusted for special items: | ||||||||||||||||
Reorganization and related costs | — | — | — | — | ||||||||||||
Operating income, adjusted for special items (j) | $ | 107.4 | $ | 5.8 | $ | (8.4 | ) | $ | 104.8 | |||||||
Nine Months Ended September 30, 2015 | ||||||||||||||||
Supplemental operating income data: | Refining | Retail | Corporate and unallocated costs | Total | ||||||||||||
Operating income | $ | 374.7 | $ | 16.9 | $ | (18.2 | ) | $ | 373.4 | |||||||
Adjusted for special items: | ||||||||||||||||
Lower of cost or market inventory adjustment (c) | (11.7 | ) | (0.5 | ) | — | (12.2 | ) | |||||||||
Operating income, adjusted for special items (j) | $ | 363.0 | $ | 16.4 | $ | (18.2 | ) | $ | 361.2 | |||||||
11
Nine Months Ended September 30, 2014 (b) | ||||||||||||||||
Supplemental operating income data: | Refining | Retail | Corporate and unallocated costs | Total | ||||||||||||
Operating income | $ | 278.0 | $ | 12.5 | $ | (42.3 | ) | $ | 248.2 | |||||||
Adjusted for special items: | ||||||||||||||||
Reorganization and related costs | — | — | 12.9 | 12.9 | ||||||||||||
Operating income, adjusted for special items (j) | $ | 278.0 | $ | 12.5 | $ | (29.4 | ) | $ | 261.1 | |||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
Reconciliation of Net Income to Adjusted Net Income: | September 30, 2015 | September 30, 2014 | September 30, 2015 | September 30, 2014 | |||||||||||
Net Income | $ | 103.5 | $ | 96.2 | $ | 343.6 | $ | 225.6 | |||||||
Adjusted for special items: | |||||||||||||||
Reorganization and related costs | — | — | — | 12.9 | |||||||||||
Lower of cost or market inventory adjustment (c) | 36.8 | — | (12.2 | ) | — | ||||||||||
Adjusted Net Income (j) | $ | 140.3 | $ | 96.2 | $ | 331.4 | $ | 238.5 | |||||||
Weighted-average Units Outstanding (in millions): (k) | 92.9 | 92.5 | 92.8 | 92.4 | |||||||||||
Net earnings per common unit, basic and diluted: | |||||||||||||||
Actual | $ | 1.11 | $ | 1.04 | $ | 3.69 | $ | 2.44 | |||||||
Adjusted | $ | 1.51 | $ | 1.04 | $ | 3.57 | $ | 2.58 | |||||||
Reconciliation of SDA Project annual forecasted net income to annual forecasted Adjusted EBITDA: | |||
Annual forecasted net income (l) | $ | 24.0 | |
Add: estimated depreciation expense | 3.0 | ||
Annual forecasted Adjusted EBITDA (m) | $ | 27.0 | |
See notes to earnings release tables.
12
NORTHERN TIER ENERGY LP
Q4 2015 OPERATING AND CAPITAL EXPENDITURE GUIDANCE
Q4 2015 | |||||||
Low | High | ||||||
Refinery Statistics: | |||||||
Total crude charge (bpd) | 94,000 | 97,000 | |||||
Other throughput (bpd) | 2,000 | 4,000 | |||||
Total throughput (bpd) | 96,000 | 101,000 | |||||
Heavy crude oil throughput percentage of total throughput | 25 | % | 27 | % | |||
Direct operating expenses excluding turnaround ($/throughput bbl) | $ | 4.20 | $ | 4.70 | |||
Crude oil inventory (thousands of bbls) | 1,700 | 2,000 | |||||
Retail Statistics: | |||||||
Forecasted gallons (mm): | |||||||
Company-operated stores | 76 | 78 | |||||
Franchise stores | 34 | 36 | |||||
Retail fuel margin ($/gallon): | $ | 0.21 | $ | 0.25 | |||
Merchandise sales ($ in mm) | $ | 95 | $ | 98 | |||
Merchandise gross margin (%) | 26 | % | 27 | % | |||
Direct operating expense ($ in mm) | $ | 34 | $ | 35 | |||
Other Guidance ($ in mm): | |||||||
Reserve for turnaround and related expenses | $ | 5 | $ | 10 | |||
Cash reserve for organic growth projects | $ | 5 | $ | 10 | |||
SG&A | $ | 20 | $ | 22 | |||
Depreciation & amortization | $ | 11 | $ | 12 | |||
Cash interest expense | $ | 7 | $ | 8 | |||
Cash income taxes paid | $ | 1 | $ | 3 | |||
Capital Expenditures ($ in mm): | |||||||
Maintenance, regulatory and other discretionary projects | $ | 13 | $ | 15 | |||
Organic growth projects | 10 | 12 | |||||
Total planned capital expenditures | $ | 23 | $ | 27 | |||
See notes to earnings release tables.
13
NORTHERN TIER ENERGY LP
NOTES TO EARNINGS RELEASE TABLES
(a) Adjusted EBITDA is not a presentation made in accordance with GAAP and Northern Tier’s computation of Adjusted EBITDA may vary from others in its industry. In addition, Adjusted EBITDA contains some, but not all, adjustments that are taken into account in calculating the components of various covenants in the agreements governing Northern Tier’s 2020 Secured Notes and ABL. Northern Tier believes the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industry. The calculation of Adjusted EBITDA generally eliminates the effects of financings, income taxes and the accounting effects of significant turnaround activities which many of Northern Tier’s peers capitalize and therefore exclude from Adjusted EBITDA. Adjusted EBITDA should not be considered as an alternative to operating income or net income as measures of operating performance. In addition, Adjusted EBITDA is not presented as, and should not be considered, an alternative to cash flow from operations as a measure of liquidity. Adjusted EBITDA is defined as net income (loss) before interest expense, income taxes and depreciation and amortization, adjusted for depreciation from the Minnesota Pipe Line operations, lower of cost or market inventory adjustments, turnaround and related expenses and equity-based compensation expense. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation, or as a substitute for analysis of the results as reported under GAAP.
(b) In 2015, the Company modified the methodology whereby corporate costs are allocated to the Refining and Retail segments. This modification resulted in additional costs being allocated to the Refining and Retail segments from the Other segment. The table below presents the increase or (decrease) in Operating income; Operating income, adjusted for special items; Net income (loss); EBITDA; and Adjusted EBITDA in the 2014 periods that would have occurred as a result of this modification if the adjustments had been applied retroactively:
(in millions) | Three Months Ended September 30, 2014 | Nine Months Ended September 30, 2014 | |||||||||||||||||||||
Refining | Retail | Other | Total | Refining | Retail | Other | Total | ||||||||||||||||
Increase (decrease) | (1.5 | ) | (0.8 | ) | 2.3 | — | (6.0 | ) | (3.2 | ) | 9.2 | — | |||||||||||
(c) Represents a non-cash adjustment to record inventory at the lower of cost or market ("LCM") where cost is determined using the last-in, first-out ("LIFO") methodology. The Company's LCM reserve changed from $24.6 million at June 30, 2015 to $61.4 million at September 30, 2015, resulting in a $36.8 million non-cash charge recorded within cost of sales.
(d) Represents an increase in the company's working capital reserve. Working capital requirements are impacted primarily by changes in crude oil prices, which can impact cash generated from operations due to the timing of crude oil payables versus current product pricing. During the third quarter 2015, the Company's crude oil costs decreased, resulting in an estimated $40.0 million reduction in the Company's cash earnings versus earnings reported in accordance with GAAP, based on approximately 2.1 million barrels of crude oil outstanding. As a result, the Board of Directors of Northern Tier's general partner increased the working capital reserve accordingly.
(e) Capital expenditures include maintenance and regulatory capital expenditures on an accrual basis.
(f) Cash reserves are determined by the Board of Directors of Northern Tier's general partner and are primarily for the purpose of funding turnarounds and organic growth projects. Since spending may be significant in any given quarter, reserves are made over several quarters in order to mitigate the impact on cash available for distribution.
(g) Cash available for distribution is a non-GAAP performance measure that Northern Tier believes is important to investors in evaluating its overall cash generation performance. Cash available for distribution should not be considered as an alternative to operating income or net income (loss) as measures of operating performance. In addition, cash available for distribution is not presented as, and should not be considered, an alternative to cash flow from operations as a measure of liquidity. Northern Tier has reconciled cash available for distribution to Adjusted EBITDA and in addition reconciled Adjusted EBITDA to net income. Cash available for distribution has limitations as an analytical tool and should not be considered in isolation, or as a substitute for analysis of the results as reported under GAAP. Northern Tier's calculation of cash available for distribution may differ from similar calculations of other companies in its industry, thereby limiting its usefulness as a comparative measure. Cash available
14
for distribution for each quarter will be determined by the Board of Directors of Northern Tier's general partner following the end of such quarter.
(h) Refining gross margin is calculated by subtracting refining costs of sales from total refining revenues. Refining gross margin excluding lower of cost or market ("LCM") inventory adjustment is calculated by adding back the non-cash LCM inventory adjustment to refining gross margin. Refining gross margin and refining gross margin excluding LCM are non-GAAP performance measures that Northern Tier believes are important to investors in evaluating its refining segment performance as a general indication of the amount above its cost of products that it is able to sell refined products. Northern Tier's calculation of refining gross margin and refining gross margin excluding LCM may differ from similar calculations of other companies in its industry, thereby limiting its usefulness as a comparative measure.
(i) Retail fuel gross margin and retail merchandise gross margin are non-GAAP performance measures that Northern Tier believes are important to investors in evaluating its retail performance. Northern Tier's calculation of retail fuel margin and retail merchandise margin may differ from similar calculations of other companies in its industry, thereby limiting their usefulness as comparative measures. Retail fuel gross margin and retail fuel gross margin excluding LCM are non-GAAP performance measures that Northern Tier believes are important to investors in evaluating its retail segment performance as a general indication of the amount above its cost of products that it is able to sell retail fuel products. Northern Tier's calculation of retail fuel gross margin and retail fuel gross margin excluding LCM may differ from similar calculations of other companies in its industry, thereby limiting its usefulness as a comparative measure.
(j) Adjusted Net Income and operating income, adjusted for special items are non-GAAP performance measures that Northern Tier believes are important to investors in evaluating its operating performance. Northern Tier's calculation of Adjusted Net Income and operating income, adjusted for special items may differ from similar calculations of other companies in its industry, thereby limiting their usefulness as comparative measures.
(k) Weighted average number of shares outstanding assumes no changes related to accelerated vesting of equity-based compensation awards related to our reorganization.
(l) Annual forecasted net income is based primarily on five-year historical average (2010-2014) prices and differentials for asphalt, asphalt derivative products, pitch, fuel oil, gasoline and diesel. Management believes these assumptions are reasonable based on currently available information. Actual results may differ.
(m) Annual forecasted EBITDA is a non-GAAP financial measure that Northern Tier believes is an important measure that management and external users of the financial statements may use to assess the SDA Project's operating performance and its ability to generate sufficient cash flow to make distributions to Northern Tier's unitholders.
15
Third Quarter 2015 Earnings Conference Call and Webcast November 3, 2015
Forward Looking Statements 1 This presentation contains forward-looking statements which reflect Northern Tier’s views and assumptions on the date of this earnings conference call regarding future events. The forward-looking statements contained herein include statements about, among other things, future: cash available for distribution and payment of distributions including the amount and timing thereof; comparability of 80% and 95% of our products to a 3-2-1 and 6-3-2-1 crack spread, respectively; Q4 2015 operating and capex guidance including total crude oil charge; total, other and heavy crude oil throughput including percentage of heavy crude oil throughput compared to total throughput; crude oil inventory; direct operating expenses; retail gallons sold through company-owned or franchise stores, fuel margin, merchandise sales, merchandise gross margin and direct operating expense; reserves, turnaround and related expenses; organic growth project expenditures and reserves relating thereto; SG&A; depreciation & amortization; cash interest and current tax expenses; maintenance, regulatory, discretionary, organic growth and other capital expenditures and projects; the solvent deasphalting unit project and the progress, timing, details, cost, and expected operating and financial performance thereof and other matters. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” “attempt,” “appears,” “forecast,” “outlook,” “estimate,” “project,” “potential,” “may,” “will,” “are likely” or other similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on management’s current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate, and any and all of our forward-looking statements in this presentation may turn out to be inaccurate. Our forward- looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. These statements are subject to the general risks inherent in our business. These expectations may or may not be realized, and may be based upon assumptions or judgments that prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized, or otherwise materially affect our financial condition, results of operations and cash flows. Other known, unknown or unpredictable factors could have material adverse effects on our future results. Additional information regarding such factors and our uncertainties, risks and assumptions are contained in our filings with the Securities and Exchange Commission. All forward-looking statements are only as of the date hereof, and we do not undertake any obligation to (and expressly disclaim any obligation to) update any forward looking statements to reflect events or circumstances after the date such statements were made, or to reflect the occurrence of unanticipated events. The presentation also includes non-GAAP measures. We believe that these non-GAAP financial measures provide useful information about our operating performance and should not be viewed in isolation or considered as alternatives to comparable GAAP measures. Our non-GAAP financial measures may also differ from similarly names measures used by other companies. See the disclosures included in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q for additional information on the non-GAAP measures used in this presentation and the Appendix to this presentation reconciliations to the most directly comparable GAAP measures. This presentation serves as a qualified notice to nominees and brokers as provided for under Treasury Regulation Section 1.1446-4(b). Please note that 100 percent of Northern Tier Energy LP’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, Northern Tier Energy LP’s distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate.
Q3 Financial Results Selected Balance Sheet & Cash Flow Data 2 Consolidated Financial Results 1See Appendix for reconciliations of Net Income to Adjusted Net Income, Net Income to Adjusted EBITDA, and Operating Income to Operating Income Adjusted for Special Items. See slide 13 for the definition of Adjusted EBITDA. 2Distributions are shown for the period in which they were generated. The Q3 2015 distribution will be paid on 11/25/2015 to unitholders of record on 11/16/15. ($ in millions, except per unit data) Q3 2015 Q3 2014 Net Income $103.5 $96.2 Adjusted Net Income1 140.3 96.2 Operating Income 114.6 104.8 Operating Income Adjusted for Special Items1 151.4 104.8 Adjusted EBITDA1 173.3 122.8 Q3 2015 Cash and Cash Equivalents $114.6 Total Debt (including capital leases) $360.4 Equity $497.3 Adjusted EBITDA (last twelve months) $536.4 Debt to LTM Adjusted EBITDA 0.67x Cash Flow from Operations $114.1 Cash Available for Distribution $97.4 Distribution per Common Unit2 $1.04 Balance Sheet & Cash Flow Data
Q3 2015 Q3 2014 $20.65 $18.87 $4.32 $24.97 Gross Margin1 ($ per throughput barrel) Key Refining Performance Metrics 3 1 Gross margin data for Q3 2015 excludes the impact of the lower of cost or market inventory adjustment of $4.32 per barrel, which is depicted by dotted lines. See Appendix for the components used in this calculation (revenue, cost of sales, and lower of cost or market inventory adjustment). 2Typically, 80% of our products are comparable to a 3-2-1 crack spread, while 95% of our products are comparable to a 6-3-2-1 crack spread, where WTI is the benchmark for crude oil. 3Direct operating expenses per barrel is calculated by dividing direct operating expenses by the total barrels of throughput for the respective periods presented. Group 3 Benchmark Crack Spread2 ($ per barrel) Direct Operating Expenses3 ($ per throughput barrel) Total Refinery Throughput (thousands of barrels per day) Q3 2015 Q3 2014 90.6 96.5 Q3 2015 Q3 2014 $4.84 $4.4625 20 15 10 5 0 Q3 3-2-1 Q3 6-3-2-1 $21.97 $15.77$16.82 $11.37 $24.97
Cash Available for Distribution Reconciliation For the three months ended September 30, 2015 Net income $103.5 Adjustments: Interest expense 7.5 Income tax provision 3.6 Depreciation and amortization 11.0 EBITDA subtotal $125.6 Lower of cost or market inventory adjustment 36.8 MPL proportionate depreciation expense 0.7 Turnaround and related expenses 7.8 Equity-based compensation expense 2.4 Adjusted EBITDA1 $173.3 Cash interest (7.1) Cash income taxes paid (0.7) MPL proportionate depreciation expense (0.7) Increase in working capital reserve (40.0) Capital expenditures (12.4) Cash reserve for turnaround and related expenses (7.5) Cash reserve for organic growth projects (7.5) Cash available for distribution $97.4 ($ in millions) 4 1See slide 13 for the definition of Adjusted EBITDA
Q4 2015 Operating and Capex Guidance 5 Q4 2015 Low High Refinery Statistics: Total crude oil charge (bpd) 94,000 97,000 Other throughput (bpd) 2,000 4,000 Total throughput (bpd) 96,000 101,000 Heavy crude oil throughput percentage of total throughput 25% 27% Direct operating expense, excluding turnarounds ($/throughput bbl) $4.20 $4.70 Crude oil inventory (mbbls) 1,700 2,000 Retail Statistics: Forecasted gallons (mm): Company-owned stores 76 78 Franchise stores 34 36 Retail fuel margin ($/gallon) $0.21 $0.25 Merchandise sales ($ in mm) $95 $98 Merchandise gross margin (%) 26% 27% Direct operating expense ($ in mm) $34 $35 Other Guidance ($ in mm): Reserve for turnaround and related expenses $5 $10 Cash reserve for organic growth project expenditures $5 $10 SG&A $20 $22 Depreciation & amortization $11 $12 Cash interest expense $7 $8 Current tax expense $1 $3 Capital Program ($ in mm): Maintenance, regulatory and other discretionary projects $13 $15 Organic growth projects 10 12 Total planned capital expenditures $23 $27
APPENDIX
Adjusted EBITDA Reconciliation 7 2014 2015 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Net Income $71.5 $57.9 $96.2 $16.0 $111.2 $128.9 $103.5 Adjustments: Interest Expense 6.2 6.2 6.7 7.5 7.5 7.5 7.5 Income Tax Provision (Benefit) 0.1 1.5 1.9 3.6 0.8 2.9 3.6 Depreciation and Amortization 9.9 10.2 10.7 11.1 10.8 10.8 11.0 EBITDA Subtotal $87.7 $75.8 $115.5 $38.2 $130.3 $150.1 $125.6 MPL Proportionate Depreciation 0.7 0.7 0.7 0.8 0.7 0.7 0.7 Turnaround and Related Expenses 0.5 0.9 4.6 8.9 0.4 1.2 7.8 Equity-based Compensation Expense 7.4 2.9 2.0 1.7 2.6 2.9 2.4 Lower of Cost or Market Inventory Adjustment — — — 73.6 (10.8) (38.2) 36.8 Reorganization and Related Costs 6.3 1.8 — — — — — Adjusted EBITDA1 $102.6 $82.1 $122.8 $123.2 $123.2 $116.7 $173.3 1See slide 13 for the definition of Adjusted EBITDA
Adjusted Net Income & Adjusted Earnings per Unit Reconciliation 8 ($ in millions, except per unit data) 1Weighted average number of shares outstanding assumes no changes related to accelerated vesting equity based compensation. Q3 2015 Q3 2014 Net Income $103.5 $96.2 Adjusted for Special Items: Lower of Cost or Market Inventory Adjustment 36.8 — Adjusted Net Income $140.3 $96.2 Earnings per Unit, Basic and Diluted: Actual $1.11 $1.04 Adjusted $1.51 $1.04 Weighted Average Number of Units Outstanding (mm)1: 92.9 92.5
Operating Income Reconciliation 9 ($ in millions) Q3 2015 Q3 2014 Operating Income $114.6 $104.8 Adjusted for Special Items: Lower of Cost or Market Inventory Adjustment 36.8 — Operating Income Adjusted for Special Items $151.4 $104.8
Refining Operating Information Per Barrel of Throughput Reconciliation Q3 2015 Q3 2014 Refinery Gross Margin per Barrel of Throughput Refinery Revenue $762.3 $1,425.4 Refinery Costs of Sales 590.2 1,257.9 Refinery Gross Margin $172.1 $167.5 Lower of Cost or Market Inventory Adjustment 36.0 — Adjusted Refinery Gross Margin $208.1 $167.5 Total Refinery Throughput (mmbbls) 8.3 8.9 Refinery Gross Margin per Barrel of Throughput ($/bbl) $20.65 $18.87 Adjusted Refinery Gross Margin per Barrel of Throughput ($/bbl) $24.97 $18.87 Refinery Direct Operating Expense per Barrel of Throughput Refinery Direct Operating Expense $40.3 $39.6 Total Refinery Throughput (mmbbls) 8.3 8.9 Refinery Direct Operating Expense per Barrel of Throughput ($/bbl) $4.84 $4.46 ($ in millions, unless otherwise indicated) 10
($ in millions, unless otherwise indicated) Retail Fuel Gross Margin Per Gallon Reconciliation Q3 2015 Q3 2014 Retail Fuel Gross Margin Per Gallon Retail Fuel Revenue $201.8 $270.4 Retail Fuel Costs of Sales 180.6 254.3 Retail Fuel Gross Margin $21.2 $16.1 Lower of Cost or Market Inventory Adjustment 0.8 — Adjusted Retail Fuel Gross Margin $22.0 $16.1 Retail Fuel Gallons Sold (mm gallons) 78.4 79.7 Retail Fuel Gross Margin per Gallon $0.27 $0.20 Adjusted Retail Fuel Gross Margin per Gallon $0.28 $0.20 11
Annual Forecasted Net Income1 $24.0 Add: Estimated Depreciation Expense 3.0 Annual Forecasted EBITDA2 $27.0 Reconciliation of SDA Project Annual Forecasted Net Income to Annual Forecasted EBITDA 1Annual forecasted net income is based primarily on five-year historical average (2010-2014) prices and differentials for asphalt, asphalt derivative products, pitch, fuel oil, gasoline and diesel. Management believes these assumptions are reasonable based on currently available information. Actual results may differ. 2Annual forecasted EBITDA is a non-GAAP financial measure that Northern Tier believes is an important measure that management and external users of the financial statements may use to assess the SDA Project's operating performance and its ability to generate sufficient cash flow to make distributions to Northern Tier's unitholders. 12
13 NTI Adjusted EBITDA Definition Adjusted EBITDA Adjusted EBITDA is defined as net income (loss) before interest expense, income taxes and depreciation and amortization, adjusted for depreciation from the Minnesota Pipe Line operations, lower of cost or market inventory adjustments, turnaround and related expenses, equity-based compensation expense, and reorganization and related costs. Adjusted EBITDA is not a presentation made in accordance with GAAP and our computation of Adjusted EBITDA may vary from others in our industry. In addition, Adjusted EBITDA contains some, but not all, adjustments that are taken into account in calculating the components of various covenants in the agreements governing our 2020 Secured Notes and the ABL Facility. We believe the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. The calculation of Adjusted EBITDA generally eliminates the effects of financings, income taxes and the accounting effects of significant turnaround activities which many of our peers capitalize and therefore exclude from Adjusted EBITDA. Adjusted EBITDA should not be considered as an alternative to operating income or net income as measures of operating performance. In addition, Adjusted EBITDA is not presented as, and should not be considered, an alternative to cash flow from operations as a measure of liquidity. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation, or as a substitute for analysis of the results as reported under GAAP.