FOR IMMEDIATE RELEASE
Contact: Ross A. Benavides
Chief Financial Officer
(713) 860-2528
GENESIS ENERGY, L.P. REPORTS SECOND QUARTER RESULTS
August 3, 2006 - Genesis Energy, L.P. (AMEX:GEL) announced today that
net income for the second quarter of 2006 was $3.4 million, or $0.24 per unit.
Net income for the six months of 2006 was $6.0 million, or $0.43 per unit. This
compares to net income of $0.7 million, or $0.08 per unit, for the 2005 second
quarter and $3.5 million, or $0.37 per unit, for the six months of 2005.
Mark Gorman, President and CEO said "We are very pleased with our
results for both the second quarter and the six month periods. All segments
reported improved performance from the prior year period. We generated Available
Cash before Reserves, a non-GAAP measure, of $6.1 million or $0.43 per unit,
which exceeds our distribution of $2.7 million or $0.19 per unit for the second
quarter of 2006. This compares to Available Cash before Reserves in the 2005
period of $2.7 million or $0.28 per unit." Available Cash before Reserves is a
non-GAAP financial measure that is defined and reconciled later in this press
release to its most directly comparable GAAP financial measure, net cash
provided by operating activities. Net cash provided by operating activities was
$0.8 million for the second quarter of 2006.
"Since the end of the first quarter of 2006, we completed the
previously announced acquisition of a 50% interest in Sandhill Group, LLC
(Sandhill), which owns a carbon dioxide processing facility that produces food
grade CO2 from CO2 supplied by us under a long-term supply contract we have with
Sandhill."
Financial Results
We generated income for the second quarter of 2006 of $3.4 million, or
$0.24 per unit, compared to income for the second quarter of 2005 of $0.7
million, or $0.08 per unit.
For the six month period, we generated net income for 2006 of $6.0
million, or $0.43 per unit. In the comparable period in 2005, we reported net
income of $3.5 million or $0.37 per unit. Substantially all of the 2006 net
income represented income from continuing operations; however, our 2005 net
income for the same period included income from continuing operations of $3.2
million, or $0.34 per unit, and income from discontinued operations of $0.3
million, or $0.03 per unit.
The following table presents certain selected financial information by
segment for the three month and six month reporting periods for continuing
operations:
Crude Oil
Pipeline Industrial Gathering and
Transportation Gases Marketing Total
(in thousands)
Three Months Ended June 30, 2006
--------------------------------
Segment margin excluding depreciation
and amortization (a)................. $ 3,602 $ 3,026 $ 2,347 $ 8,975
Total capital expenditures.............. $ 257 $ 5,550 $ 35 $ 5,842
Maintenance capital
expenditures......................... $ 126 $ - $ 35 $ 161
Revenues:
External customers...................... $ 6,828 $ 3,894 $ 220,828 $ 231,550
Intersegment............................ 1,793 - - 1,793
---------- --------- ----------- ----------
Total revenues of reportable segments... $ 8,621 $ 3,894 $ 220,828 $ 233,343
========== ========= =========== ==========
Crude Oil
Pipeline Industrial Gathering and
Transportation Gases Marketing Total
(in thousands)
Three Months Ended June 30, 2005
--------------------------------
Segment margin excluding depreciation
and amortization (a)................. $ 2,808 $ 2,009 $ 450 $ 5,267
Total capital expenditures.............. $ 926 $ 13,418 $ 254 $ 14,598
Maintenance capital
expenditures......................... $ 175 $ - $ 25 $ 200
Revenues:
External customers...................... $ 5,957 $ 2,568 $ 247,692 $ 256,217
Intersegment............................ 927 - - 927
--------- --------- --------- ----------
Total revenues of reportable segments... $ 6,884 $ 2,568 $ 247,692 $ 257,144
========= ========= ========= ==========
Crude Oil
Pipeline Industrial Gathering and
Transportation Gases Marketing Total
(in thousands)
Six Months Ended June 30, 2006
------------------------------
Segment margin excluding depreciation
and amortization (a)................. $ 6,404 $ 5,653 $ 4,075 $ 16,132
Total capital expenditures.............. $ 423 $ 5,550 $ 156 $ 6,129
Maintenance capital
expenditures......................... $ 224 $ - $ 156 $ 380
Revenues:
External customers...................... $ 13,926 $ 7,281 $ 473,273 $ 494,480
Intersegment............................ 2,465 - - 2,465
--------- --------- ---------- ----------
Total revenues of reportable segments... $ 16,391 $ 7,281 $ 473,273 $ 496,945
========= ========= ========== ==========
Crude Oil
Pipeline Industrial Gathering and
Transportation Gases Marketing Total
(in thousands)
Six Months Ended June 30, 2005
------------------------------
Segment margin excluding depreciation
and amortization (a)................. $ 5,251 $ 3,534 $ 1,338 $ 10,123
Total capital expenditures.............. $ 4,602 $ 13,418 $ 276 $ 18,296
Maintenance capital
expenditures......................... $ 664 $ - $ 47 $ 711
Revenues:
External customers...................... $ 12,590 $ 4,848 $ 494,700 $ 512,138
Intersegment............................ 1,606 - - 1,606
-------- --------- ---------- ----------
Total revenues of reportable segments... $ 14,196 $ 4,848 $ 494,700 $ 513,744
======== ========= ========== ==========
(a) Segment margin was calculated as revenues less cost of sales and operating
expenses, plus our share of the operating income of our investment in joint
ventures. A reconciliation of segment margin to income from continuing
operations is presented for periods presented in the tables at the end of this
release.
Quarterly Comparison
Pipeline transportation segment margin from continuing operations was
$3.6 million for second quarter of 2006 as compared to $2.8 million for the 2005
period. Higher crude oil prices resulted in greater revenues from the sale of
crude oil from volumetric gains. These gains were offset slightly by increased
operating costs on crude oil and natural gas pipelines.
Segment margin from industrial gas activities in the 2006 second quarter
was $3.0 million as compared to $2.0 million for 2005. The additional CO2 sales
contracts acquired in the fourth quarter of 2005 provided most of this margin
increase. Also contributing to the increase was greater earnings from our
investments in joint ventures. We made these investments in the second quarters
of 2006 and 2005.
Segment margin from crude oil gathering and marketing activities was
$2.3 million for the 2006 second quarter, an increase of $1.9 million from 2005
levels. The primary factors increasing segment margin between the two periods
were a decrease in field operating costs of $0.5 million and improved margins
from marketing activities. Marketing margins have improved between the periods
as we have focused on eliminating volumes providing insufficient contribution to
our segment margin.
General and administrative expenses increased by $0.8 million during the
2006 second quarter as compared to the 2005 period, principally due to increased
employee related costs. Compensation increases combined with higher benefits
costs added $0.6 million. Additionally we increased our accrual related to our
stock appreciation rights plan, a non-cash adjustment. We changed our method of
accounting for our stock appreciation rights plan in 2006 due to a new
accounting pronouncement, which resulted in an expense of $0.3 million for the
second quarter of 2006. In the 2005 period, under the previous method of
accounting, we recorded a non-cash expense of approximately $50,000.
Interest costs were $0.2 million lower in the 2006 second quarter than
the 2005 period, due to lower debt balances. Although market interest rates rose
between the periods, our average outstanding borrowing during the quarter was
$14.6 million less than in the 2005 quarter.
Year-to-Date Comparison
For the six-month period, pipeline transportation segment margin
increased in 2006 by $1.2 million. The sale of crude oil from volumetric gains
provided $1.1 million greater revenues due to higher crude oil prices. Increased
tariff revenues and net margin from gas sales totaling $0.3 million was
partially offset by $0.2 million of increased pipeline operating costs.
Our industrial gases activities provided improved segment margin of $2.1
million for the six-month period. The additional CO2 contracts acquired in 2005
provided most of the improvement. The 2006 period also included six months
rather than three months of results from the joint venture acquired on April 1,
2005.
Crude oil gathering and marketing segment margin improved by $2.7
million, to $4.1 million. This significant improvement resulted from lower field
operating costs of $1.0 million and improved margins on transactions of $1.7
million. The majority of the decrease in field operating costs is attributable
to a reduction in the size of our fleet, combined with a $0.4 million reserve
recorded in the 2005 period for environmental contamination of a truck unload
site. Marketing margins improved from eliminating less profitable volumes and
increasing profitability on volumes retained.
General and administrative expenses for the six months in 2006 were $5.9
million, an increase of $2.6 million over 2005. The new method of accounting for
our stock appreciation rights plan resulted in expense in the 2006 period of
$0.4 million. In the 2005 period, under the previous method of accounting, we
recorded a non-cash credit of $1.3 million due to a decrease in our unit price.
The effect of this change in accounting for the plan was an increase in expense
of $1.7 million between the two periods. The remaining increase in general and
administrative expenses related to compensation, benefits costs and bonus
accrual. We also recorded a cumulative effect adjustment of $30,000 of income
for the adoption of the new accounting pronouncement for stock appreciation
rights.
In the 2005 first half, we disposed of idle assets for net cash
proceeds of $1.3 million, generating $0.7 million of gain. The assets sold
included pipelines that had been idle in 2002 and 2003. $0.3 million of this
gain was reflected as discontinued operations.
Interest costs were $0.5 million lower in the 2006 first half than the
2005 period, due to lower average outstanding debt balances. We made
acquisitions in late 2004 and early 2005 that significantly increased our
outstanding debt balance. In the fourth quarter of 2005, we sold partnership
units and used a portion of the proceeds to repay the debt. Consequently, we had
no outstanding borrowings during a portion of the first half of 2006.
Over the last four quarters, we have increased our distribution by a
total of $0.04 per unit, or 26.7%.
Distribution
Distribution for Payment Date Amount per Unit
Second Quarter 2006 August 2006 $ 0.19
First Quarter 2006 May 2006 $ 0.18
Fourth Quarter 2005 February 2006 $ 0.17
Third Quarter 2005 November 2005 $ 0.16
Second Quarter 2005 August 2005 $ 0.15
The second quarter 2006 distribution will be paid August 14, 2006 to
unitholders of record on July 31, 2006. We generated Available Cash before
Reserves (a non-GAAP measure) during the second quarter of 2006 of $6.1 million
and net cash flow provided by operations was $0.8 million. (Please see the
accompanying schedules for a reconciliation of Available Cash, a non-GAAP
measure, to net cash flow utilized in operations, the comparative GAAP measure.)
Available Cash before Reserves
Several adjustments to net income are required to calculate Available
Cash before Reserves. The calculation of Available Cash before Reserves for the
quarter ended June 30, 2006 is as follows:
Net income $ 3,444,000
Depreciation and amortization expense 2,029,000
Cash from direct financing leases in excess of income
recorded 132,000
Available cash generated by joint ventures in excess of
earnings 420,000
Non-cash charge for incentive compensation plan and
other non-cash items 223,000
Maintenance capital expenditures (161,000)
---------------
Available Cash before reserves $ 6,087,000
===============
Available Cash before Reserves (a non-GAAP liquidity measure) has been
reconciled to net cash flows from operating activities of $753,000 (the GAAP
measure) for the three months ended June 30, 2006 in the financial tables below.
Earnings Conference Call
We will broadcast our Earnings Conference Call on Wednesday, August 3,
2006, at 10 a. m. Central time. This call can be accessed at
www.genesiscrudeoil.com by choosing the Investor Relations button. Listeners
should go to this website at least fifteen minutes before this event to download
and install any necessary audio software. For those unable to attend the live
broadcast, a replay will be available beginning approximately one hour after the
event and remain available on our website or by calling 1-877-660-6853 for 30
days. There is no charge to access the event.
Genesis Energy, L.P. operates crude oil common carrier pipelines and is
an independent gatherer and marketer of crude oil in North America, with
operations concentrated in Texas, Louisiana, Alabama, Florida, and Mississippi.
Genesis Energy, L.P. also operates an industrial gases business.
This press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Although we believe that our expectations are
based upon reasonable assumptions, we can give no assurance that our goals will
be achieved. Important factors that could cause actual results to differ
materially from those in the forward looking statements herein include the
timing and extent of changes in commodity prices for oil, ability to obtain
adequate credit facilities, managing operating costs, completion of capital
projects on schedule and within budget, consummation of accretive acquisitions,
capital spending, environmental risks, government
regulation, our ability to
meet our stated business goals and other risks noted from time to time in our
Securities and Exchange Commission filings. Actual results may vary materially.
We undertake no obligation to publicly update or revise any forward-looking
statement.
(tables to follow)
Genesis Energy, L.P.
Summary Consolidated Statements of Operations - Unaudited
(in thousands except per unit amounts and volume data)
Three Months Ended Three Months Ended
June 30, 2006 June 30, 2005
------------- -------------
Revenues $ 233,343 $ 257,144
Cost of sales 224,707 252,129
General & administrative expenses 3,249 2,468
Depreciation and amortization expense 2,029 1,568
Losses (gains) from disposals of surplus assets 1 (27)
-------------- --------------
OPERATING INCOME 3,357 1,006
Equity in earnings of investment in joint ventures 339 252
Interest, net (263) (506)
-------------- -------------
Income from Continuing Operations before income taxes 3,433 752
Income tax benefit 11 -
-------------- -------------
Income from Continuing Operations 3,444 752
Loss from Discontinued Operations - (9)
-------------- --------------
NET INCOME $ 3,444 $ 743
============== =============
NET INCOME PER COMMON UNIT - BASIC AND DILUTED
Continuing Operations $ 0.24 $ 0.08
Discontinued Operations - 0.00
-------------- -------------
Net income per Common Unit - Basic and Diluted $ 0.24 $ 0.08
============== =============
Volume Data:
Crude oil pipeline barrels per day (total) 62,778 64,094
Mississippi Pipeline System barrels per day 16,990 15,655
Jay Pipeline System barrels per day 13,727 15,204
Texas Pipeline System barrels per day 32,061 33,235
CO2 sales Mcf per day 73,495 51,049
Crude oil gathering wellhead barrels per day 33,832 40,323
Total gathering and marketing barrels per day 35,372 55,722
Units Data:
Common units held by Public 12,765,000 8,625,000
Common units held by general partner 1,019,441 688,811
-------------- -------------
Total common units outstanding 13,784,441 9,313,811
============== =============
Genesis Energy, L.P.
Summary Consolidated Statements of Operations - Unaudited
(in thousands except per unit amounts and volume data)
Six Months Ended Six Months Ended
June 30, 2006 June 30, 2005
------------- -------------
Revenues $ 496,945 $ 513,744
Cost of sales 481,465 503,873
General & administrative expenses 5,909 3,326
Depreciation and amortization expense 3,893 3,094
Gains from disposals of surplus assets (49) (398)
-------------- -------------
OPERATING INCOME 5,727 3,849
Equity in earnings of investment in joint ventures 652 252
Interest, net (385) (861)
-------------- -------------
Income from Continuing Operations before income taxes 5,994 3,240
Income tax benefit 11 -
-------------- -------------
Income from Continuing Operations 6,005 3,240
Income from Discontinued Operations - 273
Income from cumulative effect adjustment from adoption of new
accounting principle 30 -
-------------- -------------
NET INCOME $ 6,035 $ 3,513
============== =============
NET INCOME PER COMMON UNIT - BASIC AND DILUTED
Continuing Operations $ 0.43 $ 0.34
Discontinued Operations - 0.03
Cumulative Effect Adjustment - -
-------------- -------------
Net income per Common Unit - Basic and Diluted $ 0.43 $ 0.37
============== =============
Volume Data:
Crude oil pipeline barrels per day (total) 62,420 62,466
Mississippi Pipeline System barrels per day 16,701 15,896
Jay Pipeline System barrels per day 12,577 15,030
Texas Pipeline System barrels per day 33,142 31,540
CO2 sales Mcf per day 70,049 49,437
Crude oil gathering wellhead barrels per day 35,220 41,142
Total gathering and marketing barrels per day 40,303 57,027
Units Data:
Common units held by Public 12,765,000 8,625,000
Common units held by general partner 1,019,441 688,811
-------------- -------------
Total common units outstanding 13,784,441 9,313,811
============== =============
Genesis Energy, L.P.
Summary Consolidated Balance Sheets - Unaudited
(in thousands)
June 30, 2006 December 31, 2005
------------- -----------------
ASSETS
Cash $ 1,716 $ 3,099
Accounts receivable 101,045 82,634
Inventories 8,861 498
Other current assets 3,040 4,218
-------------- -------------
Total Current Assets 114,662 90,449
Net property 32,473 33,769
CO2 contracts 35,612 37,648
Joint ventures and other investments 18,489 13,042
Other assets 6,417 6,869
-------------- -------------
Total Assets $ 207,653 $ 181,777
============== =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 97,661 $ 85,286
Accrued liabilities 8,143 7,325
-------------- -------------
Total Current Liabilities 105,804 92,611
Long-term debt and other liabilities 12,526 955
Minority interest 522 522
Partners' capital 88,801 87,689
-------------- -------------
Total Liabilities and Partners' Capital $ 207,653 $ 181,777
============== =============
Genesis Energy, L.P.
Summary Consolidated Statements of Cash Flows - Unaudited
(in thousands)
Six Months Ended Six Months Ended
June 30, 2006 June 30, 2005
------------- -------------
Net income $ 6,035 $ 3,513
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 3,893 3,094
Amortization of credit facility issuance costs 186 187
Amortization of unearned income (333) (349)
Cash received from direct financing leases 594 593
Distributions from joint ventures in excess of
earnings from those joint ventures 25 (252)
Gains on asset disposals (49) (671)
Other non-cash items 80 (942)
Changes to components of working capital (11,975) (6,028)
-------------- -------------
Net cash used in operating activities (1,544) (855)
-------------- -------------
Additions to property and equipment and other assets (480) (17,899)
Investments in joint ventures and other investments (5,550) -
Distributions from joint ventures that are a return of
investment 153 -
Proceeds from sales of assets 67 1,360
Other, net (26) (53)
-------------- -------------
Net cash used in investing activities (5,836) (16,592)
-------------- -------------
Net borrowings of debt 11,500 19,100
Distributions to partners (4,923) (2,851)
Other, net (580) 748
-------------- -------------
Net cash provided by financing activities 5,997 16,997
-------------- -------------
Net decrease in cash and cash equivalents (1,383) (450)
Cash and cash equivalents at beginning of period 3,099 2,078
-------------- -------------
Cash and cash equivalents at end of period $ 1,716 $ 1,628
============== =============
Genesis Energy, L.P.
Reconciliations
SEGMENT MARGIN EXCLUDING DEPRECIATION AND AMORTIZATION RECONCILIATION TO
INCOME FROM CONTINUING OPERATIONS
Three Months Ended Three Months Ended
June 30, 2006 June 30, 2005
------------- -------------
(in thousands)
Segment margin excluding depreciation and amortization $ 8,975 $ 5,267
General & administrative expenses (3,249) (2,468)
Depreciation and amortization expense (2,029) (1,568)
(Losses) gains from disposals of surplus assets (1) 27
Interest, net (263) (506)
Income tax credit 11 -
-------------- -------------
Income from continuing operations $ 3,444 $ 752
============== =============
Six Months Ended Six Months Ended
June 30, 2006 June 30, 2005
------------- -------------
(in thousands)
Segment margin excluding depreciation and amortization $ 16,132 $ 10,123
General & administrative expenses (5,909) (3,326)
Depreciation and amortization expense (3,893) (3,094)
Gains from disposals of surplus assets 49 398
Interest, net (385) (861)
Income tax credit 11 -
-------------- -------------
Income from continuing operations $ 6,005 $ 3,240
============== =============
GAAP to Non-GAAP Financial Measure Reconciliation
AVAILABLE CASH BEFORE RESERVES RECONCILIATION TO NET
CASH FLOWS FROM OPERATING ACTIVITIES
Three Months Ended
June 30, 2006
(in thousands)
Net cash flows from operating activities (GAAP measure) $ 753
Adjustments to reconcile net cash flow provided by operating activities to
Available Cash before reserves:
Maintenance capital expenditures (161)
Amortization of credit facility issuance costs (94)
Cash effects of stock appreciation rights plan (11)
Available Cash from joint ventures not included in operating cash flows 317
Unrealized gains on fair value hedges 524
Net effect of changes in components of working capital 4,759
-------------
Available Cash before reserves (non-GAAP measure) $ 6,087
=============
This press release and the accompanying schedules include a
non-generally accepted accounting principle ("non-GAAP") financial measures of
available cash. The accompanying schedule provides a reconciliation of this
non-GAAP financial measure to its most directly comparable financial measure
calculated in accordance with generally accepted accounting principles in the
United States of America ("GAAP"). Our non-GAAP financial measure should not be
considered as an alternative to GAAP measures of liquidity or financial
performance. We believe that investors benefit from having access to the same
financial measures being utilized by management, lenders, analysts and other
market participants.
Available cash. Available Cash before Reserves is a liquidity measure
used by management to compare cash flows generated by us to the cash
distribution paid to our limited partners and general partner. This is an
important financial measure to the public unitholders since it is an indicator
of our ability to provide a cash return on their investment. Specifically, this
financial measure aids investors in determining whether or not we are generating
cash flows at a level that can support a quarterly cash distribution to the
partners. Lastly, Available Cash before Reserves (also referred to as
distributable cash flow) is the quantitative standard used throughout the
investment community with respect to publicly-traded partnerships.
We define available cash as net income or loss plus: (1) depreciation
and amortization expense; (2) cash proceeds from the sale of certain assets; (3)
the addition of losses or subtraction of gains relating to the sale of assets;
(4) payments under direct financing leases in excess of the amount recognized as
income; (5) the addition of losses or subtraction of gains on derivative
financial instruments; (6) available cash generated by equity method
investments; (7) the subtraction of maintenance capital expenditures incurred to
replace or enhance partially or fully depreciated assets so as to sustain the
existing operating capacity or efficiency of our assets and extend their useful
lives; and (8) the addition of losses or subtraction of gains relating to other
non-cash amounts affecting net income for the period.
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