NYSE: MMP
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Date: | | April 27, 2005 |
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Contact: | | Paula Farrell |
| | | (918) 574-7650 |
| | | paula.farrell@magellanlp.com |
Magellan Midstream Partners Reports Record Quarterly Earnings
TULSA, Okla. – Magellan Midstream Partners, L.P. (NYSE: MMP) today reported record quarterly operating profit, net income and earnings per limited partner unit for the first quarter of 2005.
First-quarter 2005 operating profit was $54.0 million compared to $34.6 million for first-quarter 2004, representing a 56% increase. Net income increased to $42.1 million during first-quarter 2005 from $25.8 million in the corresponding 2004 period, a 63% increase. Earnings per limited partner unit were 54 cents during first-quarter 2005 compared to 44 cents during 2004, for a 23% increase.
“Magellan’s base refined products businesses continued to produce strong results. In addition, the pipeline systems we acquired late last year from Shell also performed very well, enabling us to set several all-time financial records,” said Don Wellendorf, chief executive officer. “We were also pleased to be able to increase the cash distribution for the quarter by 5% over last quarter’s distribution amount due to our strong cash generation.”
An analysis of variances by segment comparing first-quarter 2005 to first-quarter 2004 is provided below based on operating margin, a financial measure that reflects operating profit before general and administrative (G&A) expenses and depreciation and amortization:
Petroleum products pipeline system. Pipeline operating margin was $62.7 million, an increase of $22.4 million. Operating results from the pipeline system acquired during Oct. 2004 and higher product margins were the primary contributors to the increase. Although the partnership generally does not own the product it transports, its petroleum products management business and third-party supply agreement benefited from the sale of product during the current high price environment. Operating margin also increased due to additional management fee revenue associated with operating third-party pipelines and higher ancillary revenues, partially offset by higher system integrity and power costs.
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Page 2/2 Magellan Midstream Partners Reports Record Quarterly Earnings
Petroleum products terminals. Terminals operating margin was $17.6 million, an increase of $4.2 million. The 2005 period benefited from higher utilization and rates at the partnership’s marine terminals and increased throughput at its inland terminals. First-quarter 2005 also benefited from additional earnings resulting from 2004 acquisitions and higher ancillary revenues.
Ammonia pipeline system. Ammonia operating margin was $1.0 million, a decrease of $1.6 million. Revenues declined as a result of lower shipments due in part to planned maintenance work at a customer’s ammonia production facility during the current quarter. Higher system integrity costs and additional environmental accruals related to a fourth-quarter 2004 pipeline release also contributed to the unfavorable variance.
Depreciation, amortization, G&A and interest expenses increased between the first quarter of 2005 and 2004, all principally due to acquisitions completed during 2004.
Based on first-quarter results and expectations for the remainder of 2005, management is raising its annual earnings guidance from $1.90 to $2.05 per limited partner unit, while remaining committed to its goal of raising distributions by at least 10 percent annually. Earnings for second-quarter 2005 are currently expected to be approximately 51 cents per unit.
An analyst call with management regarding first-quarter 2005 earnings is scheduled today at 1:30 p.m. Eastern. To participate, dial (800) 406-5356 and provide code 1566420. Investors also may listen to the call via the partnership’s web site athttp://www.magellanlp.com/investors/calendar.asp.
Audio replays of the conference call will be available from 4:30 p.m. Eastern today through midnight on May 3. To access the replay, dial (888) 203-1112 and provide code 1566420. The replay also will be available athttp://www.magellanlp.com.
Management believes that investors benefit from having access to the same financial measures being utilized by the partnership. As a result, this news release includes a discussion of operating margin, which is an important performance measure used by management to evaluate the economic success of the partnership’s core operations. Operating margin is a non-GAAP measure that reflects operating profit before G&A expenses and depreciation and amortization. A reconciliation of operating margin to operating profit accompanies this release.
About Magellan Midstream Partners, L.P.
Magellan Midstream Partners, L.P. is a publicly traded partnership formed to own, operate and acquire a diversified portfolio of energy assets. The partnership primarily transports, stores and distributes refined petroleum products. More information is available athttp://www.magellanlp.com.
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Portions of this document may constitute forward-looking statements as defined by federal law. Although the partnership believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Additional information about issues that could lead to material changes in performance is contained in the partnership’s filings with the Securities and Exchange Commission.
MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per unit amounts)
(Unaudited)
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| | | Three Months Ended March 31,
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| | | 2004
| | | 2005
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Transportation and terminals revenues | | $ | 88,930 | | | $ | 110,076 | |
Product sales revenues | | | 44,214 | | | | 148,090 | |
Affiliate management fee revenue | | | — | | | | 167 | |
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Total revenues | | | 133,144 | | | | 258,333 | |
Costs and expenses: | | | | | | | | |
Operating | | | 37,000 | | | | 44,255 | |
Environmental | | | 24,205 | | | | 1,200 | |
Environmental reimbursements | | | (23,415 | ) | | | — | |
Product purchases | | | 38,499 | | | | 131,311 | |
Depreciation and amortization | | | 9,522 | | | | 12,970 | |
Affiliate general and administrative | | | 12,887 | | | | 15,126 | |
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Total costs and expenses | | | 98,698 | | | | 204,862 | |
Equity earnings | | | 120 | | | | 518 | |
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Operating profit | | | 34,566 | | | | 53,989 | |
Interest expense | | | 8,515 | | | | 12,418 | |
Interest income | | | (446 | ) | | | (985 | ) |
Debt placement fee amortization | | | 682 | | | | 732 | |
Other income | | | — | | | | (299 | ) |
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Net income | | $ | 25,815 | | | $ | 42,123 | |
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Allocation of net income: | | | | | | | | |
Limited partners’ interest | | $ | 23,874 | | | $ | 35,977 | |
General partner’s interest | | | 1,941 | | | | 6,146 | |
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Net income | | $ | 25,815 | | | $ | 42,123 | |
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Basic net income per limited partner unit | | $ | 0.44 | | | $ | 0.54 | |
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Weighted average number of limited partner units outstanding used for basic net income per unit calculation | | | 54,780 | | | | 66,361 | |
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Diluted net income per limited partner unit | | $ | 0.44 | | | $ | 0.54 | |
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Weighted average number of limited partner units outstanding used for diluted net income per unit calculation | | | 54,872 | | | | 66,467 | |
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MAGELLAN MIDSTREAM PARTNERS, L.P.
OPERATING STATISTICS
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| | | Three Months Ended March 31,
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| | | 2004
| | 2005
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Petroleum products pipeline system: | | | | | | |
Transportation revenue per barrel shipped (dollars per barrel) | | $ | 0.972 | | $ | 1.005 |
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Transportation barrels shipped (million barrels) | | | 52.8 | | | 64.1 |
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Petroleum products terminals: | | | | | | |
Marine terminal average storage capacity utilized per month (million barrels) | | | 15.5 | | | 16.5 |
Marine terminal throughput (million barrels) | | | 5.5 | | | 12.4 |
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Inland terminal throughput (million barrels) | | | 20.5 | | | 26.1 |
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Ammonia pipeline system: | | | | | | |
Volume shipped (thousand tons) | | | 219 | | | 152 |
MAGELLAN MIDSTREAM PARTNERS, L.P.
OPERATING MARGIN
(Unaudited, in thousands)
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| | | Three Months Ended March 31,
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| | | 2004
| | | 2005
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Petroleum products pipeline system: | | | | | | | | |
Transportation and terminals revenues(1) | | $ | 64,636 | | | $ | 82,655 | |
Less: Operating expenses(2) | | | (28,456 | ) | | | (35,129 | ) |
Environmental expenses | | | (23,888 | ) | | | (842 | ) |
Add: Environmental expense reimbursement | | | 23,104 | | | | — | |
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Transportation and terminals margin | | | 35,396 | | | | 46,684 | |
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Product sales revenues | | | 42,185 | | | | 145,420 | |
Less: Product purchases | | | (37,375 | ) | | | (130,125 | ) |
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Product margin | | | 4,810 | | | | 15,295 | |
Add: Affiliate management fee revenue | | | — | | | | 167 | |
Equity earnings | | | 120 | | | | 518 | |
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Operating margin | | $ | 40,326 | | | $ | 62,664 | |
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Petroleum products terminals: | | | | | | | | |
Transportation and terminals revenues(1) | | $ | 20,835 | | | $ | 25,510 | |
Less: Operating expenses(2) | | | (8,359 | ) | | | (9,182 | ) |
Environmental expenses | | | (150 | ) | | | (38 | ) |
Add: Environmental expenses reimbursement | | | 150 | | | | — | |
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Transportation and terminals margin | | | 12,476 | | | | 16,290 | |
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Product sales revenues | | | 2,029 | | | | 2,670 | |
Less: Product purchases | | | (1,124 | ) | | | (1,311 | ) |
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Product margin | | | 905 | | | | 1,359 | |
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Operating margin | | $ | 13,381 | | | $ | 17,649 | |
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Ammonia pipeline system: | | | | | | | | |
Total revenues(1) | | $ | 3,600 | | | $ | 2,701 | |
Less: Operating expenses(2) | | | (981 | ) | | | (1,402 | ) |
Environmental expenses | | | (167 | ) | | | (320 | ) |
Add: Environmental expenses reimbursement | | | 161 | | | | — | |
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Operating margin | | $ | 2,613 | | | $ | 979 | |
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Segment operating margin | | $ | 56,320 | | | $ | 81,292 | |
Add: Allocated corporate depreciation costs | | | 655 | | | | 793 | |
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Total operating margin | | | 56,975 | | | | 82,085 | |
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Less: Depreciation and amortization | | | (9,522 | ) | | | (12,970 | ) |
Affiliate general and administrative | | | (12,887 | ) | | | (15,126 | ) |
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Total operating profit | | $ | 34,566 | | | $ | 53,989 | |
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| (1) | Consolidated transportation and terminals revenues for the three months ended March 31, 2005 were $110,076 and consist of segment revenues of $110,866 less intercompany eliminations of $790. Consolidated transportation and terminals revenues for the three months ended March 31, 2004 were $88,930 and consist of segment revenues of $89,071 less intercompany eliminations of $141. |
| (2) | Consolidated operating expenses for the three months ended March 31, 2005 were $44,255 and consist of segment operating expenses of $45,713 less intercompany operating expense eliminations of $665 and depreciation allocations of $793. Consolidated operating expenses for the three months ended March 31, 2004 were $37,000 and consist of segment operating expenses of $37,796 less intercompany operating expense eliminations of $141 and depreciation allocations of $655. |
MAGELLAN MIDSTREAM PARTNERS, L.P.
ALLOCATION OF NET INCOME
(In thousands, unless otherwise noted)
(Unaudited)
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| | | Three Months Ended March 31,
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| | | 2004
| | | 2005
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Net income | | $ | 25,815 | | | $ | 42,123 | |
Direct charges to the general partner: | | | | | | | | |
Transition charges | | | 628 | | | | — | |
Reimbursable general and administrative costs | | | 1,137 | | | | 1,043 | |
Previously indemnified environmental charges | | | — | | | | 461 | |
Depreciation charges associated with previously indemnified capital costs | | | — | | | | 5 | |
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Total direct charges to general partner | | | 1,765 | | | | 1,509 | |
Income before direct charges to the general partner | | | 27,580 | | | | 43,632 | |
General partner’s share of income | | | 13.44 | % | | | 17.54 | % |
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General partner’s allocated share of net income before direct charges | | | 3,706 | | | | 7,655 | |
Direct charges to general partner | | | (1,765 | ) | | | (1,509 | ) |
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Net income allocated to general partner | | $ | 1,941 | | | $ | 6,146 | |
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Net income | | $ | 25,815 | | | $ | 42,123 | |
Less: net income allocated to general partner | | | 1,941 | | | | 6,146 | |
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Net income allocated to limited partners | | $ | 23,874 | | | $ | 35,977 | |
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