NuStar Energy L.P. (NYSE: NS) (the “Partnership” or “NS”) and
NuStar GP Holdings, LLC (NYSE: NSH) (“NSH”) today announced a
definitive agreement that would result in the merger of NSH with a
wholly owned subsidiary of the Partnership through a unit-for-unit
exchange. The merger would result in NSH becoming a wholly owned
subsidiary of the Partnership and the cancellation of the 2%
economic general partner interest in the Partnership, the incentive
distribution rights in the Partnership and approximately 10.2
million Partnership common units currently owned by NSH and its
subsidiaries.
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Under the terms of the definitive agreement, NSH unitholders
would receive 0.55 of a Partnership common unit in exchange for
each NSH unit they own at closing, representing a premium of
approximately 1.7% based on the closing prices of the Partnership’s
common units and of NSH’s units on February 7, 2018. The
transaction would result in approximately 23.6 million additional
common units being issued by the Partnership. In connection with
this transaction, William E. Greehey, the Chairman of the Board of
both NSH and the Partnership, who controls approximately 21% of the
outstanding NSH units, has executed a support agreement pursuant to
which he has agreed to vote the NSH units controlled by him in
favor of the merger.
“After much discussion and deliberation, the NS and NSH Boards
reached an agreement to simplify in a way that we believe will
allow us to capitalize on attractive growth opportunities and to
best manage our business over the long term,” said Brad Barron,
president and chief executive officer of the Partnership and NSH.
“Simplifying our corporate structure and eliminating incentive
distribution rights will lower our cost of capital and create a
more efficient and transparent structure.”
Board Chairman Bill Greehey agreed. “While my decision to
support the simplification and reset was difficult, I firmly
believe it was the right decision,” said Greehey. “As the largest
unitholder of NSH, I did not come to this decision lightly. I have
always been a buyer of NSH and have never sold a unit. And I will
continue to buy NuStar units. I would not recommend a
simplification and reset if I did not truly believe that it will
significantly improve the company’s long-term health and growth, as
well as long-term unitholder value.
“NuStar has a bright future. We have great assets, great
management and great employees. We just completed a major
acquisition in the Permian, which I feel will transform the
company. It is meeting, and in some cases, exceeding our
expectations and will continue to be a great platform for growth.
The simplification and reset will enhance our ability to fund that
growth with cash generated by our operations as well as through our
enhanced access to lower cost capital. The economy is strong and
oil prices are strengthening, so we should see our earnings
increase and our unit value go up, which should set the stage for
strong distribution growth going forward,” said Greehey.
Barron noted that the merger is expected to provide many
benefits to current Partnership unitholders and, upon exchange of
their NSH units for Partnership common units at closing of the
merger, current NSH unitholders, including:
- lowering the Partnership’s long-term
cost of capital through the permanent elimination of the incentive
distribution rights, allowing the Partnership to enhance its cash
accretion from investments in organic growth projects and
acquisitions;
- attracting a broader investor base to a
single, larger entity;
- allowing the Partnership to maintain
its competitive position when pursuing growth opportunities by
increasing access to the equity markets, while simultaneously
decreasing the need to access the equity markets;
- simplifying the Partnership’s
structure, which reduces complexity and enhances transparency for
investors;
- reducing general and administrative
costs by approximately $1 million per year primarily from
eliminating public company expenses associated with NSH;
- maintaining the Partnership’s financial
flexibility as the unit-for-unit exchange finances 100% of the
purchase with the Partnership’s equity; and
- providing the Partnership’s unitholders
the right to elect all of its directors.
The merger also provides NSH unitholders with:
- liquidity and less volatility by
exchanging NSH units for Partnership common units;
- an opportunity to benefit from
potential price appreciation and increased distributions through
ownership of Partnership common units, which should benefit from
the lower cost of capital associated with the permanent
cancellation of the incentive distribution rights; and
- a premium of 1.7% through the exchange
of 0.55 of a Partnership common unit for each NSH unit based on
closing prices for both equity securities on February 7, 2018.
The completion of the merger is subject to the approval of
holders of at least a majority of the outstanding NSH units and
other closing conditions, and is expected to occur during the
second quarter of 2018. The merger agreement may be terminated by
either NSH or the Partnership if the merger has not closed on or
prior to August 8, 2018 and for other limited circumstances set
forth in the merger agreement.
The terms of the merger agreement were unanimously approved by
NSH’s Conflicts Committee and by the Partnership’s
Nominating/Governance & Conflicts Committee, each comprised
solely of independent directors, and were approved by both NSH’s
board of directors and the Partnership’s board of directors (in
each case with Mr. Greehey and Mr. Barron recusing themselves).
Financial advisors for this transaction were Baird for NSH’s
Conflicts Committee and Evercore for the Partnership’s
Nominating/Governance & Conflicts Committee. Legal advisors for
this transaction were Wachtell, Lipton, Rosen & Katz for NSH’s
Conflicts Committee; Richards, Layton & Finger, P.A. for the
Partnership’s Nominating/Governance & Conflicts Committee; and
Sidley Austin LLP for the Partnership.
Distribution Reset
Additionally, on February 8, 2018, and in anticipation of the
merger, the Partnership announced that management of the
Partnership anticipated recommending to the Partnership’s board of
directors, and the board of directors expects to adopt, a reset of
its quarterly distribution per common unit to $0.60 ($2.40 on an
annualized basis), starting with the first-quarter distribution
payable in May 2018. After giving effect to the issuance of
Partnership common units in connection with the merger, this
distribution reset is anticipated to reduce annual distribution
outflow by approximately $200 million per year.
“A fundamental shift has occurred in the makeup of the investor
base for MLPs, which has tightened MLP equity markets and access to
equity to finance important capital projects needed to grow and
increase long-term unitholder value,” said Barron. “In addition to
the difficulty in the MLP sector, NuStar’s base business was
significantly impacted last year from the combination of a series
of destructive hurricanes, unexpected turnarounds at our customers’
refineries and a large, unanticipated reliability project on our
ammonia line. And recently, with the widely reported economic
strife in Venezuela and the mounting financial and operational
challenges facing our St. Eustatius terminal anchor tenant, PDVSA,
in an abundance of caution, we have adjusted our forecast on their
utilization of the terminal this year, which significantly lowered
our earnings projections.
“Simultaneously, we have witnessed a paradigm shift in market
sentiment away from strong growth fueled by continuous equity
issuances to a market sentiment that favors strong distribution
coverage and rewards MLPs for low leverage, less dependency on the
equity markets, and increased self-funding of capital projects. So
given the headwinds in our base business, and the changed market
sentiment, we buckled down and put together an actionable plan,
just as we did in 2014 when the dramatic plunge in crude prices
reverberated throughout the energy industry,” said Barron. “We
undertook a thorough, systematic analysis of our best path forward,
taking into account the new MLP market priorities and limitations
and our current strengths and challenges.
“As we carefully considered all the alternatives, in every
scenario, a distribution reset was a necessary part of the overall
prescription to position us for the future,” said Barron.
“Resetting NuStar Energy’s distribution will improve our coverage
ratio immediately, and in the longer term, the reset will also
serve to reduce both our leverage and our future needs to access
the capital markets.
Earnings Results for Fourth Quarter
2017 for the Partnership In Line with Guidance
For the fourth quarter of 2017, the Partnership reported a net
loss applicable to common limited partners of $0.3 million, or
$0.00 per unit, compared to a $24 million net loss applicable to
common limited partners, or $0.31 per unit for the fourth quarter
2016. For the year ended December 31, 2017, the Partnership
reported net income applicable to common limited partners of $57
million, or $0.64 per unit, compared to $99 million, or $1.27 per
unit for the year ended December 31, 2016.
Distributable cash flow (DCF) available to common limited
partners was $42 million for the fourth quarter of 2017, compared
to $88 million for the fourth quarter of 2016. For the year ended
December 31, 2017, DCF available to common limited partners was
$258 million, compared to $365 million for the year ended December
31, 2016.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) were $144 million, up from $83 million for fourth quarter
2016. EBITDA for the year ended December 31, 2017 were $595
million, up from $517 million for the year ended December 31, 2016,
which is within our guidance of $575 million to $625 million.
Absent certain fourth quarter 2016 adjustments pertaining to a
non-cash write-down on the carrying value of a term loan held by
Axeon Specialty Products in conjunction with its sale of the
asphalt marketing business that Axeon purchased from the
Partnership in 2014, fourth quarter 2016 and year ended December
31, 2016 adjusted EBITDA would have been $141 million and $576
million, respectively. Additionally, fourth quarter 2016 and year
ended December 31, 2016 adjusted net income per unit applicable to
common limited partners would have been $0.42 and $2.00,
respectively.
“Our 4th quarter 2017 and full-year 2017 EBITDA results in our
pipeline and storage segments were higher quarter-over-quarter and
year-over-year when compared to 2016,” said Barron. “These higher
results were largely the result of contributions from our Permian
crude system and our December 2016 Martin terminal acquisition.
“In the 4th quarter of 2017 and in January 2018, we received a
total of $100 million in insurance proceeds related to Hurricane
Irma that we expect will cover the cost of repairing the property
damage to our facilities as well as most of our lost revenue, over
our $5 million insurance deductible,” Barron added.
As previously announced on January 29, 2018, the fourth quarter
2017 Series A preferred unit distribution of $0.53125 per unit,
Series B preferred unit distribution of $0.47657 per unit and an
initial Series C preferred unit distribution of $0.65625 per unit
will be paid on March 15, 2018 to holders of record as of March 1,
2018. In addition, the fourth quarter 2017 common unit distribution
of $1.095 per unit will be paid on February 13, 2018 to holders of
record as of February 8, 2018.
Earnings Results for Fourth Quarter
2017 for NSH
NSH today announced fourth quarter 2017 net income of $7
million, or $0.17 per unit, and net income for the year ended
December 31, 2017 of $87 million, or $2.01 per unit. Distributable
cash flow (DCF) available to unitholders for the fourth quarter of
2017 and for the year ended December 31, 2017 was $21 million and
$93 million, respectively.
As previously announced on January 29, 2018, the fourth quarter
2017 distribution of $0.545 per unit will be paid on February 15,
2018 to holders of record as of February 8, 2018.
Final Comments
“As evidenced by these earnings results, the simplification and
reset are needed to allow NuStar to compete with the growing number
of our peers who have already made such structural adjustments,”
said Barron.
“We are confident that the combination of the simplification and
the reset will provide us with the financial strength and
flexibility to compete for good projects and position us to
increase unitholder value, as we have in the past, and for many
years to come,” he concluded.
Conference Call Details
A conference call with management is scheduled for 9:00 a.m. CT
today, February 8, 2018, to discuss the merger, the anticipated
distribution reset and the financial and operational results for
the fourth quarter of 2017. The conference call may be accessed by
dialing toll-free 844/889-7787, reservation passcode 2577134.
International callers may access the conference call by dialing
661/378-9931, reservation passcode 2577134. NSH and the Partnership
intend to have a playback available following the conference call,
which may be accessed by dialing toll-free 855/859-2056,
reservation passcode 2577134. International callers may access the
playback by dialing 404/537-3406, reservation passcode 2577134. The
playback will be available until 12:00 p.m. CT on March 10,
2018.
Investors interested in listening to the live presentation or a
replay via the internet may access the presentation directly at
https://edge.media-server.com/m6/p/yrns5949 or by logging on to
either NuStar Energy L.P.’s website at www.nustarenergy.com or
NuStar GP Holdings, LLC’s website at www.nustargpholdings.com.
The discussion will disclose certain non-GAAP financial
measures. Reconciliations of certain of these non-GAAP financial
measures to U.S. GAAP may be found in this press release, with
additional reconciliations located on the Financials page of the
Investors section of NuStar Energy L.P.’s website at
www.nustarenergy.com and NuStar GP Holdings, LLC’s website at
www.nustargpholdings.com.
About NuStar Energy L.P. and NuStar GP
Holdings, LLC
NuStar Energy L.P., a publicly traded master limited partnership
based in San Antonio, is one of the largest independent liquids
terminal and pipeline operators in the nation. NuStar currently has
more than 9,400 miles of pipeline and 81 terminal and storage
facilities that store and distribute crude oil, refined products
and specialty liquids. The partnership’s combined system has more
than 96 million barrels of storage capacity, and NuStar has
operations in the United States, Canada, Mexico, the Netherlands,
including St. Eustatius in the Caribbean, and the United Kingdom.
For more information, visit NuStar Energy L.P.’s website at
www.nustarenergy.com.
NuStar GP Holdings, LLC is a publicly traded limited liability
company that owns the general partner interest, an approximate 11
percent common limited partner interest and the incentive
distribution rights in NuStar Energy L.P. For more information,
visit NuStar GP Holdings, LLC’s website at
www.nustargpholdings.com
This release serves as qualified notice to nominees under
Treasury Regulation Sections 1.1446-4(b)(4) and (d). Please note
that 100% of NuStar Energy L.P.’s distributions to foreign
investors are attributable to income that is effectively connected
with a United States trade or business. Accordingly, all of NuStar
Energy L.P.’s distributions to foreign investors are subject to
federal income tax withholding at the highest effective tax rate
for individuals and corporations, as applicable. Nominees, and not
NuStar Energy L.P., are treated as the withholding agents
responsible for withholding on the distributions received by them
on behalf of foreign investors.
Important Information For Investors And
Unitholders
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. The proposed merger and related transactions
between the Partnership and NSH will be submitted to the
unitholders of NSH for their consideration. The Partnership will
file with the Securities and Exchange Commission (the “SEC”) a
registration statement on Form S-4 that will include a proxy
statement of NSH that also constitutes a prospectus of the
Partnership. The Partnership and NSH also plan to file other
documents with the SEC regarding the proposed transaction.
INVESTORS AND SECURITY HOLDERS OF NUSTAR GP HOLDINGS, LLC ARE URGED
TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS
THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and
unitholders will be able to obtain free copies of the proxy
statement/prospectus and other documents containing important
information about the Partnership and NSH once such documents are
filed with the SEC, through the website maintained by the SEC at
http://www.sec.gov. Copies of the documents filed with the SEC by
the Partnership will be available free of charge on the
Partnership’s website at www.nustarenergy.com under the tab
“Investors” or by contacting the Partnership’s investor relations
at investorrelations@nustarenergy.com. Copies of the documents
filed with the SEC by NSH will be available free of charge on NSH’s
website at www.nustargpholdings.com under the tab “Investors” or by
contacting NSH’s investor relations at
investorrelations@nustarenergy.com.
The Partnership and its general partner, the directors and
certain of the executive officers of NuStar GP, LLC and NSH and its
directors and certain of its executive officers, may be deemed to
be participants in the solicitation of proxies from the unitholders
of NSH in connection with the proposed merger. Information about
the directors and executive officers of NuStar GP, LLC is set forth
in the Partnership’s Annual Report on Form 10-K for the year ended
December 31, 2016, which was filed with the SEC on February 23,
2017, and subsequent statements of changes in beneficial ownership
on file with the SEC. Information about the directors and executive
officers of NSH is set forth in NSH’s Proxy Statement for the 2017
annual meeting of unitholders, which was filed with the SEC on
March 9, 2017, and subsequent statements of changes in beneficial
ownership on file with the SEC. These documents can be obtained
free of charge from the source listed above. Other information
regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security
holdings or otherwise, will be contained in the proxy
statement/prospectus and other relevant materials to be filed with
the SEC when they become available.
Cautionary Statement Regarding
Forward-Looking Statements
This press release includes, and the related conference call
will include, forward-looking statements regarding future events,
such as the Partnership’s future performance. All statements, other
than statements of historical fact, included herein that address
activities, events or developments that NuStar Energy L.P. and
NuStar GP Holdings, LLC expects, believes or anticipates will or
may occur in the future, including anticipated benefits and other
aspects of the proposed merger, are forward-looking statements. All
forward-looking statements reflect the Partnership’s and NSH’s
current views with regard to future events and are subject to
various risks, uncertainties and assumptions that may cause actual
results to differ materially, including the possibility that the
merger will not be completed prior to the August 8, 2018 outside
termination date, required approvals by NSH unitholders, the
possibility that the anticipated benefits from the proposed merger
cannot be fully realized, the possibility that costs or
difficulties related to the merger will be greater than expected
and other risk factors included in the reports filed with the SEC
by the Partnership and NSH. Many of the factors that will determine
NuStar Energy L.P.’s and NuStar GP Holdings, LLC’s future results
are beyond the ability of management to control or predict. Readers
should not place undue reliance on forward-looking statements,
which reflect management’s views only as of the date hereof. NuStar
Energy L.P. and NuStar GP Holdings, LLC undertake no obligation to
revise or update any forward-looking statements, or to make any
other forward-looking statements, whether as the result of new
information, future events or otherwise.
NuStar Energy L.P. and
Subsidiaries
Consolidated Financial
Information
(Unaudited, Thousands of Dollars,
Except Unit and Per Unit Data)
Three Months Ended December 31, Year Ended
December 31, 2017 2016 2017
2016 Statement of Income Data:
Revenues: Service revenues $ 283,462 $ 268,438 $ 1,128,726 $
1,083,165 Product sales 167,073 203,319 685,293
673,517 Total revenues 450,535 471,757
1,814,019 1,756,682 Costs and expenses: Cost of
product sales 161,236 191,917 651,599 633,653 Operating expenses
115,654 113,052 449,670 448,367 General and administrative expenses
29,038 25,418 112,240 98,817 Depreciation and amortization expense
70,589 55,997 264,232 216,736 Total
costs and expenses 376,517 386,384 1,477,741
1,397,573 Operating income 74,018 85,373 336,278 359,109
Interest expense, net (45,801 ) (34,976 ) (173,083 ) (138,350 )
Other expense, net (396 ) (58,773 ) (5,294 ) (58,783 ) Income
(loss) before income tax expense 27,821 (8,376 ) 157,901 161,976
Income tax expense 2,639 2,680 9,937 11,973
Net income (loss) $ 25,182 $ (11,056 ) $ 147,964
$ 150,003 Net (loss) income applicable to
common limited partners $ (330 ) $ (24,342 ) $ 56,791 $ 99,068
Basic and diluted net (loss) income per common unit: $ — $ (0.31 )
$ 0.64 $ 1.27 Basic weighted-average common units outstanding
93,079,324 78,514,363 88,825,964 78,080,484
Other Data
(Note 1): EBITDA $ 144,211 $ 82,597 $ 595,216 $ 517,062 DCF
available to common limited partners $ 41,672 $ 87,697 $ 257,855 $
365,157
December 31, 2017 2016
Balance Sheet Data: Total debt $ 3,648,059 $ 3,068,364
Partners’ equity $ 2,480,089 $ 1,611,617
NuStar Energy L.P. and
Subsidiaries
Consolidated Financial Information -
Continued
(Unaudited, Thousands of Dollars,
Except Barrel Data)
Three Months Ended December 31, Year Ended
December 31, 2017 2016 2017
2016 Pipeline: Refined products
pipelines throughput (barrels/day) 494,354 546,878 516,736 535,946
Crude oil pipelines throughput (barrels/day) 682,511 374,170
583,323 392,181 Total throughput (barrels/day)
1,176,865 921,048 1,100,059 928,127 Throughput revenues $ 130,882 $
122,721 $ 516,288 $ 485,650 Operating expenses 41,698 37,364
156,432 147,858 Depreciation and amortization expense 36,404
23,858 128,061 89,554 Segment operating income
$ 52,780 $ 61,499 $ 231,795 $ 248,238
Storage: Throughput (barrels/day) 353,617 789,369 325,194
789,065 Throughput terminal revenues $ 21,995 $ 29,279 $ 85,927 $
117,586 Storage terminal revenues 130,897 118,723
531,026 492,456 Total revenues 152,892 148,002
616,953 610,042 Operating expenses 70,516 69,695 270,041 276,578
Depreciation and amortization expense 32,068 30,002
127,473 118,663 Segment operating income $ 50,308
$ 48,305 $ 219,439 $ 214,801
Fuels
Marketing: Product sales and other revenue $ 168,801 $ 205,435
$ 692,884 $ 681,934 Cost of product sales 163,122 194,650
660,844 645,355 Gross margin 5,679 10,785
32,040 36,579 Operating expenses 3,593 7,661 26,057
33,173 Segment operating income $ 2,086 $
3,124 $ 5,983 $ 3,406
Consolidation and
Intersegment Eliminations: Revenues $ (2,040 ) $ (4,401 ) $
(12,106 ) $ (20,944 ) Cost of product sales (1,886 ) (2,733 )
(9,245 ) (11,702 ) Operating expenses (153 ) (1,668 ) (2,860 )
(9,242 ) Total $ (1 ) $ — $ (1 ) $ —
Consolidated
Information: Revenues $ 450,535 $ 471,757 $ 1,814,019 $
1,756,682 Cost of product sales 161,236 191,917 651,599 633,653
Operating expenses 115,654 113,052 449,670 448,367 Depreciation and
amortization expense 68,472 53,860 255,534
208,217 Segment operating income 105,173 112,928 457,216
466,445 General and administrative expenses 29,038 25,418 112,240
98,817 Other depreciation and amortization expense 2,117
2,137 8,698 8,519 Consolidated operating
income $ 74,018 $ 85,373 $ 336,278 $ 359,109
NuStar Energy L.P. and
SubsidiariesConsolidated Financial Information -
Continued(Unaudited, Thousands of Dollars, Except Ratio
Data)
Notes:
1. NuStar Energy L.P. utilizes financial measures, such
as earnings before interest, taxes, depreciation and amortization
(EBITDA), distributable cash flow (DCF) and distribution coverage
ratio, which are not defined in U.S. generally accepted accounting
principles (GAAP). Management believes these financial measures
provide useful information to investors and other external users of
our financial information because (i) they provide additional
information about the operating performance of the partnership’s
assets and the cash the business is generating, (ii) investors and
other external users of our financial statements benefit from
having access to the same financial measures being utilized by
management and our board of directors when making financial,
operational, compensation and planning decisions and (iii) they
highlight the impact of significant transactions.
Our board of directors and management use EBITDA and/or DCF when
assessing the following: (i) the performance of our assets, (ii)
the viability of potential projects, (iii) our ability to fund
distributions, (iv) our ability to fund capital expenditures and
(v) our ability to service debt. In addition, our board of
directors uses a distribution coverage ratio, which is calculated
based on DCF, as one of the factors in its determination of the
company-wide bonus and the vesting of performance units awarded to
management. DCF is a widely accepted financial indicator used by
the master limited partnership (MLP) investment community to
compare partnership performance. DCF is used by the MLP investment
community, in part, because the value of a partnership unit is
partially based on its yield, and its yield is based on the cash
distributions a partnership can pay its unitholders.
None of these financial measures are presented as an alternative
to net income. They should not be considered in isolation or as
substitutes for a measure of performance prepared in accordance
with GAAP. The following is a reconciliation of EBITDA, DCF and
distribution coverage ratio:
Three Months Ended December 31,
Year Ended December 31, 2017
2016 2017 2016 Net income (loss)
$ 25,182 $ (11,056 ) $ 147,964 $ 150,003 Interest expense, net
45,801 34,976 173,083 138,350 Income tax expense 2,639 2,680 9,937
11,973 Depreciation and amortization expense 70,589 55,997
264,232 216,736 EBITDA 144,211 82,597 595,216
517,062 Interest expense, net (45,801 ) (34,976 ) (173,083 )
(138,350 ) Reliability capital expenditures (27,297 ) (12,321 )
(57,497 ) (38,155 ) Income tax expense (2,639 ) (2,680 ) (9,937 )
(11,973 ) Mark-to-market impact of hedge transactions (a) (138 )
3,825 (2,790 ) 10,317 Unit-based compensation (b) 26 2,120 5,354
5,619 Preferred unit distributions (13,532 ) (1,925 ) (40,448 )
(1,925 ) Other items (c) 80 63,943 (4,039 ) 73,846
DCF $ 54,910 $ 100,583 $ 312,776 $ 416,441 Less DCF
available to general partner 13,238 12,886 54,921
51,284 DCF available to common limited partners $
41,672 $ 87,697 $ 257,855 $ 365,157
Distributions applicable to common limited partners $
102,029 $ 86,085 $ 407,681 $ 342,598 Distribution coverage ratio
(d) 0.41x 1.02x 0.63x 1.07x (a) DCF excludes the
impact of unrealized mark-to-market gains and losses that arise
from valuing certain derivative contracts, as well as the
associated hedged inventory. The gain or loss associated with these
contracts is realized in DCF when the contracts are settled. (b) In
connection with the employee transfer from NuStar GP, LLC on March
1, 2016, we assumed obligations related to awards issued under a
long-term incentive plan, and we intend to satisfy the vestings of
equity-based awards with the issuance of our common units. As such,
the expenses related to these awards are considered non-cash and
added back to DCF. Certain awards include distribution equivalent
rights (DERs). Payments made in connection with DERs are deducted
from DCF. (c) Other items primarily consist of adjustments for
throughput deficiency payments and construction reimbursements for
all periods presented and a $58.7 million non-cash impairment
charge on the Axeon term loan in the fourth quarter of 2016. (d)
Distribution coverage ratio is calculated by dividing DCF available
to common limited partners by distributions applicable to common
limited partners.
NuStar Energy L.P. and
Subsidiaries
Consolidated Financial Information -
Continued
(Unaudited, Thousands of Dollars,
Except Per Unit Data)
Notes (continued):
The following is a reconciliation of net
income and net income per unit to adjusted net income applicable to
limited partners and adjusted net income per unit:
Three Months Ended
December 31, 2016
Year Ended December 31, 2016
Net (loss) income / net
(loss) income per unit
$ (11,056 ) $ (0.31 ) $ 150,003 $ 1.27 Loss on Axeon
Term Loan 58,655 0.73 58,655 0.73 Adjusted net
income 47,599 208,658 GP interest and incentive (11,806 ) (47,486 )
Distributions to preferred limited partners (1,925 ) (1,925 )
Distribution equivalent rights to restricted units (728 )
(2,697 ) Adjusted net income applicable to common limited
partners / adjusted net income per common
unit
$ 33,140 $ 0.42 $ 156,550 $ 2.00
The following is a reconciliation of EBITDA to adjusted
EBITDA:
Three Months Ended
December 31, 2016
Year Ended
December 31, 2016
EBITDA $ 82,597 $ 517,062 Loss on Axeon Term Loan 58,655
58,655 Adjusted EBITDA $ 141,252 $ 575,717
The following is a reconciliation of projected net income to
projected EBITDA:
Year Ended December 31, 2017 Projected net
income $ 140,000 - 170,000 Projected interest expense, net 170,000
- 175,000 Projected income tax expense 5,000 - 10,000 Projected
depreciation and amortization expense 260,000 - 270,000 Projected
EBITDA $ 575,000 - 625,000
NuStar GP Holdings, LLC and
Subsidiaries
Consolidated Financial
Information
(Unaudited, Thousands of Dollars,
Except Unit and Per Unit Data)
Three Months Ended December 31, Year Ended
December 31, 2017 2016 2017
2016 Statement of Income Data: Equity
in earnings of NuStar Energy L.P. $ 10,304 $ 6,671 $ 51,556 $
56,096 General and administrative expenses (713 ) (669 )
(3,298 ) (3,046 ) Other income, net 339 266 41,942 3,021 Interest
expense, net (453 ) (280 ) (1,587 ) (1,069 ) Income before
income tax (expense) benefit 9,477 5,988 88,613 55,002 Income tax
(expense) benefit (2,035 ) 11 (1,838 ) 66
Net
income $ 7,442 $ 5,999 $ 86,775 $ 55,068
Net income per unit $ 0.17 $ 0.14 $ 2.01 $ 1.28
Weighted average number of common units outstanding 42,961,594
42,936,397 42,954,230 42,932,320
Equity in Earnings of
NuStar Energy L.P.: General partner interest $ 14 $ (480 ) $
1,237 $ 2,091 General partner incentive distribution 10,933
10,907 45,669 43,407 General partner’s
interest in earnings and incentive
distributions of NuStar Energy L.P.
10,947 10,427 46,906 45,498 Limited partner interest in earnings of
NuStar
Energy L.P.
78 (3,035 ) 7,534 13,482 Amortization of step-up in basis related
to NuStar Energy
L.P.’s assets and liabilities
(721 ) (721 ) (2,884 ) (2,884 ) Equity in earnings of NuStar Energy
L.P. $ 10,304 $ 6,671 $ 51,556 $ 56,096
Cash Flow Data: Net cash provided by operating
activities 9,797 6,162 47,793 49,751 Net cash provided by investing
activities 13,955 17,273 34,016 40,286 Net cash used in financing
activities (23,548 ) (23,588 ) (81,594 ) (89,864 )
Distributable Cash Flow (Note 1): Cash distributions from
NuStar Energy L.P. associated with: General partner interest $
2,305 $ 1,979 $ 9,252 $ 7,877 General partner incentive
distribution 10,933 10,907 45,669 43,407 Limited partner interest –
common units 11,185 11,185 44,740 44,699
Total cash distributions expected from NuStar Energy L.P.
24,423 24,071 99,661 95,983 Adjustments: General and administrative
expenses (713 ) (669 ) (3,298 ) (3,046 ) Income tax (expense)
benefit (2,035 ) 11 (1,838 ) 66 Interest expense, net (453 ) (280 )
(1,587 ) (1,069 ) Unit-based compensation $ 183 $ 159
$ (207 ) $ 494 DCF $ 21,405 $ 23,292 $ 92,731
$ 92,428 Total distribution to unitholders $
23,423 $ 23,408 $ 93,649 $ 93,601
NuStar GP Holdings, LLC and
SubsidiariesConsolidated Financial Information -
Continued(Unaudited, Thousands of Dollars)
Note 1: NuStar GP Holdings, LLC utilizes distributable
cash flow (DCF) as a financial measure, although it is not defined
in U.S. generally accepted accounting principles. Management
believes DCF provides useful information to investors and other
external users of our financial information because (i) DCF
provides additional information about the cash the business is
generating and (ii) investors and other external users of our
financial statements benefit from having access to the same
financial measure being utilized by management and our board of
directors when making financial and planning decisions. Our board
of directors and management use DCF when assessing our ability to
fund distributions and our ability to service debt. DCF is a widely
accepted financial indicator used by our industry’s investment
community to compare company performance. DCF is used by our
industry’s investment community, in part, because the value of our
company’s units is partially based on its yield, and its yield is
based on the cash distributions a company can pay its
unitholders.
DCF is not intended to represent cash flows from operations, and
is not presented as an alternative to net income. DCF should not be
considered in isolation or as a substitute for a measure of
performance prepared in accordance with U.S. generally accepted
accounting principles. The following is a reconciliation of net
income to DCF and net cash provided by operating activities:
Three Months Ended December 31,
Year Ended December 31, 2017
2016 2017 2016 Net income $
7,442 $ 5,999 $ 86,775 $ 55,068 Less equity in earnings of NuStar
Energy L.P. (10,304 ) (6,671 ) (51,556 ) (56,096 ) Plus cash
distributions expected from NuStar Energy L.P. 24,423 24,071 99,661
95,983 Gain related to NuStar Energy L.P.’s issuance of common
limited partner units
(339 ) (266 ) (41,942 ) (2,408 ) Unit-based compensation items (a)
183 159 643 (78 ) DCF 21,405 23,292 93,581
92,469 Less cash distributions expected from NuStar Energy L.P.
(24,423 ) (24,071 ) (99,661 ) (95,983 ) Distributions of equity in
earnings of NuStar Energy L.P. 10,304 6,671 51,556 56,096 Changes
in current assets and liabilities 378 196 92 (3,336 ) Changes in
noncurrent assets and liabilities
and other items
2,133 74 2,225 505 Net cash provided by
operating activities $ 9,797 $ 6,162 $ 47,793
$ 49,751 (a) We intend to satisfy the vestings
of equity-based awards with the issuance of our units. As such, the
expenses related to these awards are considered non-cash and added
back to DCF. These awards include distribution equivalent rights
(DERs). Payments made in connection with DERs are deducted from
DCF. Also included in this item are gains and losses resulting from
the satisfaction of certain long-term incentive awards prior to the
employee transfer on March 1, 2016.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180208005429/en/
NuStar Energy, L.P., San AntonioInvestors, Chris Russell,
Treasurer and Vice President Investor RelationsInvestor Relations:
210-918-3507orMedia, Mary Rose Brown, Executive Vice President and
Chief Administrative Officer,Corporate Communications:
210-918-2314website: http://www.nustarenergy.com
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