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TMCNet:  WORLD POINT TERMINALS, LP - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations

[March 26, 2014]

WORLD POINT TERMINALS, LP - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations

(Edgar Glimpses Via Acquire Media NewsEdge) Cautionary Note Regarding Forward-Looking Statements This discussion and analysis contains forward-looking statements that involve risks and uncertainties. You can identify our forward-looking statements by the words "anticipate," "estimate," "believe," "budget," "continue," "could," "intend," "may," "plan," "potential," "predict," "seek," "should," "will," "would," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target" and similar expressions.


Without limiting the generality of the foregoing, these statements are based on certain assumptions made by the Partnership based on management's experience, expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate.

Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following: · · the volumes of light refined products, heavy refined products and crude oil we handle; · the terminaling and storage fees with respect to volumes that we handle; · damage to pipelines facilities, related equipment and surrounding properties caused by hurricanes, earthquakes, floods, fires, severe weather, explosions and other natural disasters and acts of terrorism; · leaks or accidental releases of products or other materials into the environment, whether as a result of human error or otherwise; · planned or unplanned shutdowns of the refineries and industrial production facilities owned by or supplying our customers; · prevailing economic and market conditions; · difficulties in collecting our receivables because of credit or financial problems of customers; · fluctuations in the prices for crude oil and refined petroleum products; · liabilities associated with the risks and operational hazards inherent in gathering, storing, handling and transporting crude oil and refined petroleum products; · curtailment of operations due to severe weather disruption; riots, strikes, lockouts or other industrial disturbances; or failure of information technology systems due to various causes, including unauthorized access or attack; · costs or liabilities associated with federal, state, and local laws and regulations relating to environmental protection and safety, including spills, releases and pipeline integrity; · costs associated with compliance with evolving environmental laws and regulations on climate change; and · other factors discussed below and elsewhere in "Risk Factors" in this Annual Report.

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57 The Initial Public Offering Overview World Point Terminals, LP (the "Partnership") is a Delaware limited partnership that was formed on April 19, 2013 by World Point Terminals, Inc. (our "Parent") and WPT GP, LLC (the "General Partner"). On August 14, 2013, the Partnership completed its initial public offering (the "Offering") of 8,750,000 common units representing limited partner interests in the Partnership. The Partnership filed an initial registration statement and subsequent amendments with the U.S.

Securities and Exchange Commission (the "SEC") on Form S-1. The amended registration statement was declared effective on August 8, 2013. On August 9, 2013, the Partnership's common units began trading on the New York Stock Exchange under the symbol "WPT". On September 11, 2013, the Partnership completed the sale of 1,312,500 common units at $20.00 per common unit pursuant to the full exercise of the underwriters' option to purchase additional common units granted to them in the underwriting agreement dated August 8, 2013. World Point Terminals, LP Predecessor includes the assets, liabilities and results of operations of certain terminals and other assets relating to the storage of light refined products, heavy refined products and crude oil, owned by our primary operating company, Center Point Terminal Company, LLC ("Center Point"), prior to its contribution to the Partnership in connection with the Offering.

Unless otherwise stated or the context otherwise indicates, all references to "World Point Terminals, LP," "the Partnership," "Company", "we," "our," "us," or similar expressions for time periods prior to the Offering refer to World Point Terminals, LP Predecessor, "our Predecessor" for accounting purposes. For time periods subsequent to the Offering, these terms refer to the legal entity World Point Terminals, LP.

Contribution Agreement In connection with the closing of the Offering, the Partnership entered into a Contribution, Conveyance and Assumption Agreement with our parent, CPT 2010, LLC ("CPT 2010"), the General Partner and Center Point, whereby the following transactions, among others, occurred: · CPT 2010 contributed, as a capital contribution, its interest in its Jacksonville and Weirton terminals to the Partnership in exchange for 4,878,250 common units; · Our parent contributed, as a capital contribution, its 32% interest in its Albany terminal and its 49% interest in its Newark terminal to the Partnership in exchange for 1,312,500 common units and the Partnership's assumption of $14,100,000 of our parent's debt; · CPT 2010 contributed, as a capital contribution, a limited liability company interest in Center Point in exchange for (a) 6,423,007 common units, and (b) 16,485,507 subordinated units representing a 69.5% limited partner interest in the Partnership; · the General Partner maintained its 0.0% non-economic general partner interest in the Partnership; · the Partnership issued to our parent, Apex Oil Company, Inc. ("Apex") and PAN Group, L.L.C., 20%, 20% and 60% of the incentive distribution rights of the Partnership; and · the public, through the underwriters, contributed $77,435,000 in cash (or $72,498,519, net of the underwriters' discounts and commissions of $4,936,481) to the Partnership in exchange for the issuance of 3,871,750 common units by the Partnership.

58 The net proceeds from the Offering, including the underwriters' option to purchase additional common units, of approximately $97.1 million, after deducting the underwriting discount and the structuring fee, were used to: (i) pay transaction expenses related to the Offering and our new credit facility in the amount of approximately $4.4 million, (ii) repay indebtedness owed to a commercial bank under a term loan of approximately $8.1 million, (iii) repay indebtedness owed to a related party of approximately $14.1 million, (iv) repay existing payables of approximately $4.3 million, (v) redeem 1,312,500 common units from our parent for approximately $24.6 million, (vi) distribute to CPT 2010 approximately $29.9 million, the majority of which is to reimburse CPT 2010 for costs related to the acquisition or improvement of assets that were contributed to us and (vii) provide the Partnership working capital of approximately $12.0 million.

Terminaling Services Agreements In connection with the Offering, Center Point entered into a terminaling services agreement with Apex (the "Apex Terminaling Services Agreement"), pursuant to which Apex agreed to store light refined products at seven of the Partnership's terminals. Center Point also entered into a terminaling services agreement with Enjet, LLC ("Enjet") (the "Enjet Terminaling Services Agreement" and together with the Apex Terminaling Service Agreements, the "Terminaling Services Agreements"), pursuant to which Enjet agreed to store residual oils at two of the Partnership's terminals.

The initial term of the Terminaling Services Agreements with respect to each terminal is between one to five years and will automatically extend for successive twelve month periods, unless either party terminates upon no less than 120 days' prior written notice.

Omnibus Agreement In connection with the Offering, we entered into an omnibus agreement (the "Omnibus Agreement") with the General Partner, our parent, CPT 2010, Apex and Center Point. This agreement addresses the following matters: · a right of first offer to acquire Apex's existing terminaling assets and any terminaling assets that Apex may acquire or construct in the future if it decides to sell them; · a grant to us and our subsidiaries and the General Partner by our parent of a nontransferable, nonexclusive, royalty-free right and license to use the name "World Point Terminals" and related marks in connection with our business; and · an indemnity by our parent and CPT 2010 for certain environmental and other liabilities, and our obligation to indemnify our parent and CPT 2010 for events and conditions associated with the operation of our assets that occur after the Offering and for environmental liabilities related to our assets to the extent our parent and CPT 2010 is not required to indemnify it.

Overview of Business We are a fee-based, growth-oriented Delaware limited partnership recently formed to own, operate, develop and acquire terminals and other assets relating to the storage of light refined products, heavy refined products and crude oil. Our storage terminals are strategically located in the East Coast, Gulf Coast and Midwest regions of the United States and, as of December 31, 2013, had a combined available storage capacity of 12.8 million barrels. Since January 1, 2013, we completed construction of and placed into service 212,000 barrels of available storage capacity at our Galveston facility, acquired an additional 0.9 million barrels of available storage capacity (Jacksonville and Albany), and acquired the 49% interest in the Newark terminal (521,000 barrels), increasing our storage capacity by approximately 14%. We have also expanded blending capabilities at several of our terminals. Most of our terminal facilities are strategically located on major waterways, providing ship or barge access for the movement of petroleum products, and have truck racks with efficient loading logistics. Several of our terminal facilities also have rail or pipeline access.

59 How We Generate Revenues We operate in a single reportable segment consisting primarily of the fee-based storage and terminaling services we perform under contracts with our customers.

We generally do not take title to any of the products we store or handle on behalf of our customers. For the years ended December 31, 2013, 2012 and 2011, we generated approximately 82%, 86% and 86%, respectively, of our revenue from storage services fees. Of our revenue for years ended December 31, 2013, 2012 and 2011, 80%, 84% and 82%, respectively, consisted of base storage services fees, which are fixed monthly fees paid at the beginning of each month to reserve dedicated tanks or storage space and to compensate us for handling up to a base amount of product volume at our terminals. Our customers are required to pay these base storage services fees to us regardless of the actual storage capacity they use or the volume of products that we receive. Our customers also pay us excess storage fees for volumes handled in excess of the amount attributable to their base storage services fees. The remainder of our revenues were generated from (1) ancillary fees for services such as heating, mixing and blending products, transferring products between tanks, rail car loading and dock operations and (2) fees for injecting additives, some of which are mandated by federal, state and local regulations.

Refiners typically use our terminals because they prefer to subcontract terminaling and storage services or their facilities do not have adequate storage capacity, dock infrastructure or do not meet specialized handling requirements for a particular product. We also provide storage services to distributors, marketers and traders that require access to large, strategically located storage capacity in close proximity to demand markets, export markets, transportation infrastructure and refineries. Our combination of geographic location, efficient and well maintained storage assets and access to multiple modes of transportation gives us the flexibility to meet the evolving demands of our existing customers, as well as the demands of prospective customers seeking terminaling and storage services throughout our areas of operation.

On February 24, 2014, a 200,000 barrel tank at our Baton Rouge terminal was returned to service and added to the Enjet Terminaling Services Agreement for an initial term of one year, increasing our total available storage capacity under contract by 1.6%. As of December 31, 2013, approximately 93% of our total available storage capacity was under contract. During the five years ended December 31, 2013, more than 95% of our available storage capacity has been under contract, on average. While many of our contracts provide for a termination right after the expiration of the initial contract period, our long-standing relationships with our customers, including major integrated oil companies, have provided stable revenue. Our top ten customers (including Apex Oil Company, Inc.), which represent over 81% of our revenue for 2013, have used our services for an average of more than ten years.

Factors That Impact Our Business The revenues generated by our storage business are generally driven by our aggregate storage capacity under contract, the commercial utilization of our terminal facilities in relation to their capacity and the prices we receive for our services, which in turn are driven by the demand for the products being shipped through or stored in our facilities. Though substantially all of our terminal service agreements require a customer to pay for tank capacity regardless of use, our revenues can be affected by (1) the length of the underlying service contracts and pricing changes and shifts in the products handled when the underlying storage capacity is recontracted, (2) fluctuations in product volumes to the extent revenues under the contracts are a function of the amount of product stored or transported, (3) changes in demand for additive services, (4) inflation adjustments in storage services contracts and (5) changes in the demand for ancillary services such as product heating, mixing or blending, transferring our customers' products between our tanks, rail car loading and dock operations.

60 We believe key factors that influence our business are (1) the long-term demand for and supply of refined products and crude oil, (2) the indirect impact that changes in refined product and crude oil pricing has on terminal and storage demand and supply, (3) the needs of our customers together with the competitiveness of our service offerings with respect to location, price, reliability and flexibility and (4) our ability and the ability of our competitors to capitalize on growth opportunities and changing market dynamics.

Supply and Demand for Refined Products and Crude Oil Our results of operations are dependent upon the volumes of refined products and crude oil we have contracted to handle and store and, to a lesser extent, on the actual volumes of refined products and crude oil we handle and store for our customers. An important factor in such contracting is the amount of production and demand for refined products and crude oil. The production of and demand for refined products and crude oil are driven by many factors, including the price for crude oil and general economic conditions. To the extent practicable and economically feasible, we generally attempt to mitigate the risk of reduced volumes and pricing by negotiating contracts with minimum payments based on available capacity and with multi-year terms. However, an increase or decrease in the demand for refined products and crude oil in the areas served by our terminals will have a corresponding effect on (1) the volumes we actually terminal and store and (2) the volumes we contract to terminal and store if we are not able to extend or replace our existing customer contracts.

Refined Product and Crude Oil Prices Because we generally do not own the refined products or crude oil that we handle and do not engage in the trading of refined products or crude oil, we have minimal direct exposure to risks associated with fluctuating commodity prices.

During 2012 and 2013, one customer contract at our Chesapeake terminal provided for a base storage fee plus additional payments based on the customer's profits from liquid asphalt sales. These additional payments represented approximately 1% of our revenue in 2012 and 2013. Beginning January 1, 2014, the asphalt tankage at Chesapeake is contracted to Apex based on a significantly higher base storage services fee and no profit sharing. In addition, extended periods of depressed or elevated refined product and crude oil prices can lead producers to increase or decrease production of refined products and crude oil, which can impact supply and demand dynamics.

If the future prices of refined products and crude oil are substantially higher than the then-current prices, also called market contango, our customers' demand for excess storage generally increases. If the future prices of refined products and crude oil are lower than the then-current prices, also called market backwardation, our customers' demand for excess storage capacity generally decreases. We seek to mitigate the impact of near-term commodity market price dynamics by generally entering into long-term agreements with our customers that have significant base storage services fee components. However, the market has experienced long periods of contango and backwardation that can impact the demand for and supply of refined product and crude oil terminaling and storage services.

61 Customers and Competition We provide storage and terminaling services for a broad mix of customers, including major integrated oil companies, marketers, distributors and chemical and petrochemical companies. In general, the mix of services we provide to our customers varies depending on market conditions, expectations for future market conditions and the overall competitiveness of our service offerings. The terminaling and storage markets in which we operate are very competitive, and we compete with operators of other terminaling facilities on the basis of rates, terms of service, types of service, supply and market access and flexibility and reliability of service. In addition, we also compete with major integrated oil companies, many of whom are also our customers, that own terminals. We continuously monitor the competitive environment, the evolving needs of our customers, current and forecasted market conditions and the competitiveness of our service offerings in order to maintain the proper balance between optimizing near-term earnings and cash flow and positioning the business for sustainable long term growth. Because of the significant investments we have made in maintaining high quality assets and because terminaling and storage are our core business, we believe that we can be more flexible and responsive to the needs of our customers than many of our competitors.

Organic Growth Opportunities Regional refined products and crude oil supply and demand dynamics shift over time, which can lead to rapid and significant increases in demand for terminaling and storage services. At such times, we believe the terminaling companies that have positioned themselves for organic growth will be at a competitive advantage in capitalizing on the shifting market dynamics. Where feasible, we have designed the infrastructure at our terminals to facilitate future expansion, which we expect to both reduce our overall capital costs per additional barrel of storage capacity and shorten the duration and enhance the predictability of development timelines. Some of the specific infrastructure investments we have made that will facilitate incremental expansion include dock capacity capable of handling various products and easily expandable piping and manifolds to handle additional storage capacity. Our Galveston terminal has over fifty acres of available land that will allow us to greatly increase our storage capacity should market conditions warrant. Accordingly, we believe that we are well positioned to grow organically in response to changing market conditions.

Factors Impacting the Comparability of Our Financial Results Our future results of operations may not be comparable to our historical results of operations for the following reasons: · We anticipate incurring additional costs as a result of being a publicly traded partnership, including external selling, general and administrative expenses of approximately $3.0 million annually. Please read "-Overview of Our Results of Operations-Selling, General and Administrative Expenses." · During 2013, we incurred significant costs related to the IPO. Please read "- Results of Operations-Selling, General and Administrative Expenses." · Our historical consolidated financial statements include state income tax expenses associated with certain corporate operating subsidiaries. Due to our status as a partnership, these subsidiaries will no longer be in corporate form and will not be subject to U.S. federal income tax and certain state income taxes in the future.

· Our historical consolidated financial statements do not include equity earnings from our Cenex joint venture with Apex. The results of operations of the Albany terminal, in which we acquired a 32% interest in August 2013, are represented as equity earnings of the joint venture in our consolidated financial statements.

· Our historical consolidated financial statements reflect the operations of the Partnership prior to the additional tankage added during 2013.

· Our historical consolidated financial statements do not include compensation expense related to our Long Term Incentive Plan ("LTIP"). Awards pursuant to the LTIP will result in compensation expense being recorded over the restriction period, if any, associated with the awards.

62 Overview of Our Results of Operations Our management uses a variety of financial measurements to analyze our performance, including the following key measures: · revenues derived from (i) storage services fees, including excess storage services fees, (ii) ancillary services and (iii) additive services; and · our operating and selling, general and administrative expenses; We do not utilize depreciation and amortization expense in our key measures because we focus our performance management on cash flow generation and our assets have long useful lives. In our period to period comparisons of our revenues and expenses set forth below, we analyze the following revenue and expense components: Revenues We characterize our revenues into three different types, as follows: Storage Services Fees. Our customers pay base storage services fees, which are fixed monthly fees paid at the beginning of each month to reserve storage capacity in our tanks and to compensate us for receiving up to a base product volume on their behalf. Our customers are required to pay these base storage services fees to us regardless of the actual storage capacity they use or the amount of product that we receive. Our customers also pay us additional fees when we handle product volume on their behalf that exceeds the volume contemplated in their monthly base storage services fee.

Ancillary Services Fees. We charge ancillary services fees to our customers for providing services such as (i) heating, mixing and blending our customers' products that are stored in our tanks, (ii) transferring our customers' products between our tanks, (iii) at our Granite City terminal, adding polymer to liquid asphalt and (iv) rail car loading and dock operations. The revenues we generate from ancillary services fees vary based upon the activity levels of our customers.

Additive Services Fees. We generate revenue from fees for injecting generic gasoline, proprietary gasoline, lubricity, red dye and cold flow additives to our customers' products. Certain of these additives are mandated by applicable federal, state and local regulations for all light refined products, and other additives, such as cold flow additive, are required to meet customer specifications. The revenues we generate from additive services fees vary based upon the activity levels of our customers.

Operating Expenses Our operating expenses are comprised primarily of labor expenses, utility costs, insurance premiums, repairs and maintenance expenses, environmental compliance and property taxes. A large portion of these operating expenses are fixed, but can fluctuate from period to period depending on the mix of activities performed during that period and the timing of these expenses. We seek to manage our maintenance expenses by scheduling maintenance over time to avoid significant variability in our maintenance expenses and minimize their impact on our cash flow.

63 Selling, General and Administrative Expenses Selling, general and administrative expenses include costs not directly attributable to the operations of our facilities and include costs such as professional services, compensation of non-operating personnel and expenses of the overall administration of the Partnership. We expect to incur additional personnel and related costs and incremental external general and administrative expenses of approximately $3.0 million annually as a result of being a publicly traded partnership, consisting of costs associated with SEC reporting requirements, tax return and Schedule K-1 preparation and distribution, registered independent auditor fees, investor relations activities, Sarbanes-Oxley Act compliance, stock exchange listing, registrar and transfer agent fees, incremental director and officer liability insurance and director compensation. These additional personnel and related costs and incremental external selling, general and administrative expenses are not reflected in our historical financial statements.

Results of Operations The following tables and discussion are a summary of our results of operations for the periods indicated: For the Years Ended December 31, 2013 2012 2011 Predecessor Predecessor (in thousands except operating data) REVENUES Third parties $ 55,186 $ 52,591 $ 53,000 Affiliates 28,634 21,518 21,766 83,820 74,109 74,766 Operating costs, expenses and other Operating expenses 23,363 18,318 15,531 Operating expenses reimbursed to affiliates 4,449 5,790 6,672 Selling, general and administrative expenses 3,883 1,385 1,012 Selling, general and administrative expenses reimbursed to affiliates 2,194 1,338 1,338 Depreciation and amortization 18,222 15,363 14,234 Income from joint venture (198) - - Loss on disposition of assets - 476 - Total operating costs, expenses and other 51,913 42,670 38,787 INCOME FROM OPERATIONS 31,709 31,439 35,979 OTHER INCOME (EXPENSE) Interest expense (443) (498) (663) Interest and dividend income 183 135 1,287 Gain (loss) on investments and other-net 142 368 (536) Income before income taxes 31,789 31,444 36,067 (Benefit) / Provision for income taxes (573) 524 588 NET INCOME $ 32,362 $ 30,920 $ 35,479 Operating Data: Available storage capacity, end of period (mbbls) 12,765 11,200 11,200 Average daily terminal throughput (mbbls) 162 122 114 64 The following table details the types and amounts of revenues generated for the periods indicated: For the Years Ended December 31, 2013 2012 2011 (in thousands) Storage services fees: Base storage services fees $ 66,766 $ 62,629 $ 61,142 Excess storage services fees 2,342 1,453 3,132 Ancillary services fees 11,747 8,172 8,923 Additive services fees 2,965 1,855 1,569 Revenue $ 83,820 $ 74,109 $ 74,766 The following table details the types and amounts of our operating expenses for the periods indicated: For the Years Ended December 31, 2013 2012 2011 (in thousands) Operating expenses: Labor $ 10,356 $ 8,808 $ 8,254 Utilities 3,651 3,341 3,755 Insurance premiums 1,396 1,252 1,124 Repairs and maintenance 5,542 4,719 4,383 Property taxes 1,939 2,038 1,690 Other 4,928 3,950 2,997 Total $ 27,812 $ 24,108 $ 22,203 Less operating expenses reimbursed to affiliates (4,449) (5,790) (6,672) Total operating expenses $ 23,363 $ 18,318 $ 15,531 65 Year Ended December 31, 2013 Compared to Year Ended December 31, 2012 and Year Ended December 31, 2012 Compared to Year Ended December 31, 2011 Revenues.

2013 Compared to 2012. Revenues for the year ended December 31, 2013 increased by $9.7 million, or 13%, compared to the year ended December 31, 2012.

Storage Services Fees. Storage services fees increased by $5.0 million for the year ended December 31, 2013.

· Base storage services fees. Base storage services fees for the year ended December 31, 2013 increased by $4.1 million or 7% from the year ended December 31, 2012, primarily as a result of additional contracted capacity at the Galveston terminal, the addition of capacity at the Jacksonville terminal due to the completion of the acquisition of 450,000 barrels of capacity and the addition of a long-term contract at the Weirton terminal in the fourth quarter of 2012 partially offset by unutilized tanks at the Baton Rouge terminal in the first quarter of 2013. Five of the six unutilized tanks became under contract to Apex in the second quarter of 2013.

· Excess storage services fees. Excess storage services fees for the year ended December 31, 2013 increased by $0.9 million or 61% from the year ended December 31, 2012, primarily as a result of increased throughput at the Newark and North Little Rock terminals as well as the expanded operations at the Jacksonville terminal offset by decreased throughput at the Chesapeake terminal.

Ancillary and Additive Services Fees. Ancillary and additive services fees for the year ended December 31, 2013 increased by $4.7 million or 47% compared to the year ended December 31, 2012. All but one of our terminals had increased ancillary and additive services fees, including increases related to the (i) expanded operations at the Galveston and Jacksonville terminals resulting in increased ancillary and additive services fees of $0.6 million and $1.3 million, respectively and (ii) increased volumes throughput at the Newark, Baltimore West, Baton Rouge and Chesapeake terminals resulting in a combined increase of $1.9 million.

2012 Compared to 2011. Revenues for the year ended December 31, 2012 decreased by $0.7 million, or 1%, compared to the year ended December 31, 2011. This decrease was the result of a reduction in excess storage fees of $1.7 million and a reduction in ancillary services fees of $0.8 million, partially offset by an increase in base storage services fees of $1.5 million and an increase in additive services fees of $0.3 million.

Storage Services Fees. Storage services fees decreased slightly for the year ended December 31, 2012 because of a decrease in excess storage services fees.

· Base storage services fees. Base storage services fees for the year ended December 31, 2012 increased by $1.5 million, or 2%, from the year ended December 31, 2011, primarily as a result of contract escalators in our storage services contracts and new storage services contracts at several of our facilities. This increase was partially offset by a $0.3 million reduction in base storage revenues due to downtime at the Newark terminal associated with Hurricane Sandy. In addition, revenue was negatively impacted by $0.3 million due to a temporary storage capacity reduction related to higher than usual maintenance activities at one of our facilities.

66 · Excess storage services fees. Excess storage fees for the year ended December 31, 2012 decreased by $1.7 million, or 54%, from the year ended December 31, 2011, primarily as a result of a $1.0 million reduction in the profit sharing fee under a customer contract at the Chesapeake terminal as a result of lower demand for asphalt in 2012 and also $0.5 million of excess storage services fees from temporary customers generated in 2011 that were converted to base storage fees with longer term customers in 2012.

Ancillary and Additive Services Fees. Ancillary and additive services fees for the year ended December 31, 2012 decreased by $0.5 million, or 4%, from the year ended December 31, 2011, primarily as a result of lower heating revenues of $1.6 million attributable to a shift in the mix of products stored by a customer at one of our terminals. This reduction was partially offset by an increase of $1.2 million in revenue from the polymer facility at our Granite City terminal that became operational in the third quarter of 2011 and a $0.3 million increase in fees for injecting additives as a result of higher terminal throughput levels during the year ended December 31, 2012.

Operating Expenses.

2013 Compared to 2012. Operating expenses for the year ended December 31, 2013 increased by $3.7 million, or 15%, compared to the year ended December 31, 2012.

This increase was attributable to (i) a $1.5 million increase in labor costs due to the expanded operations at the Jacksonville terminal and normal wage increases, (ii) a $0.3 million increase in utility costs due to the higher level of heat applied to customers' products, (iii) a $0.8 million increase in repairs and maintenance and (iv) a $1.1 million increase in other operating expenses, primarily in connection with Hurricane Sandy at our Newark terminal.

2012 Compared to 2011. Operating expenses for the year ended December 31, 2012 increased by $1.9 million, or 9%, compared to the year ended December 31, 2011.

This increase was primarily attributable to (i) a $0.6 million increase in labor costs due to normal wage increases and the effect of operating the polymer facility for the entire year in 2012, (ii) a $0.4 million reduction in utility costs due to the lower level of heat applied to customers' products, (iii) a $0.3 million increase in repairs and maintenance due primarily to higher than usual maintenance activities at one of our facilities, (iv) a $0.3 million increase in property taxes as a result of having the Jacksonville terminal in service for the entire year in 2012 and (v) a $0.9 million increase in other operating expenses from storm damage that did not exceed insurance deductibles, primarily in connection with Hurricane Sandy at our Newark terminal.

Selling, General and Administrative Expenses.

2013 Compared to 2012. Selling, general and administrative expenses for the year ended December 31, 2013 increased by $3.4 million, or 123%, compared to the year ended December 31, 2012. The increase in selling, general and administrative expenses is a result of a higher level of due diligence costs related to potential acquisitions and legal and professional fees related to our initial public offering.

67 2012 Compared to 2011. Selling, general and administrative expenses for the year ended December 31, 2012 increased by $0.4 million, or 16%, compared to the year ended December 31, 2011. Selling, general and administrative expenses increased primarily as a result of a higher level of due diligence costs related to potential acquisitions.

Depreciation and Amortization Expense.

2013 Compared to 2012. Depreciation and amortization expense for the year ended December 31, 2013 increased by $2.9 million, or 19%, compared to the year ended December 31, 2012. This increase is due to the assets under construction which were placed in service at the Weirton and Galveston terminals and the acquisition of additional terminal assets adjacent to the Jacksonville terminal.

2012 Compared to 2011. Depreciation and amortization expense for the year ended December 31, 2012 increased by $1.2 million, or 8%, compared to the year ended December 31, 2011. This increase was primarily attributable to capital expenditures during 2012 and a full year of depreciation on major items placed in service during 2011, including added storage capacity at our Jacksonville terminal, a new dock at our Newark terminal that went into service in the first quarter of 2011 and our Granite City polymer plant that became operational in the third quarter of 2011.

Income from Joint Venture.

2013 Compared to 2012 and 2011. Income from joint venture for the year ended December 31, 2013 was $0.2 million resulting from the Partnership's investment in the Cenex joint venture on August 14, 2013. As the investment was made during 2013, there was no income in either 2012 or 2011.

Interest Expense.

2013 Compared to 2012. Interest expense for the year ended December 31, 2013 decreased by $0.1 million, or 11%, compared to the year ended December 31, 2012.

This decrease was due to decreased borrowings period-over-period as a result of scheduled principal payments offset by an increase in commitment fees and amortization of loan fees associated with the revolving credit facility.

2012 Compared to 2011. Interest expense for the year ended December 31, 2012 decreased by $0.2 million, or 25%, compared to the year ended December 31, 2011.

This decrease was due to decreased borrowings period-over-period as a result of scheduled principal payments.

Interest and Dividend Income.

2013 Compared to 2012. Interest and dividend income for the year ended December 31, 2013 increased slightly compared to the year ended December 31, 2012. This increase was attributable to increased amounts of short-term investments during 2013.

2012 Compared to 2011. Interest and dividend income for the year ended December 31, 2012 decreased by $1.2 million, or 90%, compared to the year ended December 31, 2011. This decrease was attributable to lower amounts of invested cash.

68 Gain (Loss) on Investments and Other-Net.

2013 Compared to 2012. Gain (loss) on investments for the year ended December 31, 2013 decreased $0.2 million compared to the year ended December 31, 2012.

The decrease was attributable to a slight mark-to-market loss on investments in 2013 and a 2012 gain on the sale of investments offset by a $0.5 million loss on disposition of assets in 2012.

2012 Compared to 2011. Gain (loss) on investments for the year ended December 31, 2012 increased to a gain of $0.4 million from a loss of $0.5 million in 2011. The increase was primarily attributable to a 2012 gain on a sale of investments compared to a 2011 mark-to-market loss on investments.

Income Tax Expense.

2013 Compared to 2012. Income tax expense for the year ended December 31, 2013 decreased by $1.1 million or 209% compared to the year ended December 31, 2012 as a result of the reversal of the deferred tax liabilities associated with the Partnership's operating subsidiary converting from a corporation to a limited liability company as explained in Note 14 to the consolidated financial statements.

2012 Compared to 2011. Income tax expense for the year ended December 31, 2012 decreased by $0.1 million, or 11%, compared to the year ended December 31, 2011.

This decrease was primarily attributed to the lower revenue and higher operating expenses discussed above.

Net Income.

2013 Compared to 2012. Net income for the year ended December 31, 2013 increased $1.4 million, or 5%, compared to the year ended December 31, 2012.

2012 Compared to 2011. Net income for the year ended December 31, 2012 decreased by $4.6 million, or 13%, compared to the year ended December 31, 2011.

Non-GAAP Financial Measure. In addition to the GAAP results provided in this annual report on Form 10-K, we provide a non-GAAP financial measure, Adjusted EBITDA. A reconciliation from GAAP to the non-GAAP measurement is provided below. We define Adjusted EBITDA as net income (loss) before net interest expense, income tax expense and depreciation and amortization expense, as further adjusted to remove gain or loss on investments and on the disposition of assets and non-recurring items, such as the IPO expenses.

Adjusted EBITDA is a non-GAAP supplemental financial measure that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: · our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or financing methods; · the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; · our ability to incur and service debt and fund capital expenditures; and 69 · the viability of acquisitions and other capital expenditure projects and the returns on investment in various opportunities.

We believe that the presentation of Adjusted EBITDA will provide useful information to investors in assessing our financial condition and results of operations. The GAAP measure most directly comparable to Adjusted EBITDA is net income. Our non-GAAP financial measure of Adjusted EBITDA should not be considered as an alternative to GAAP net income. Adjusted EBITDA has important limitations as an analytical tool because it excludes some but not all items that affect net income. You should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

The following table presents a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure for each of the periods indicated.

For the Years Ended December 31, 2013 2012 2011 Reconciliation of Net Income to Adjusted EBITDA: Net income attributable to unitholders / shareholder $ 31,819 $ 30,053 $ 34,212 Depreciation and amortization 18,222 15,363 14,234 Depreciation and amortization - CENEX joint venture 113 - - Provision (benefit) for income taxes (573) 524 588 Interest expense and other 443 498 663 IPO expenses 3,606 - - Interest and dividend income (183) (135) (1,287) Equity based compensation expense 163 - - (Gain) loss of investments and other - net (142) (368) 536 Adjusted EBITDA $ 53,468 $ 45,935 $ 48,946 70 Liquidity and Capital Resources Liquidity Our principal liquidity requirements are to finance current operations, fund capital expenditures, including acquisitions from time to time, and to service our debt. Our sources of liquidity include cash generated by our operations, borrowings under our revolving credit facility and issuances of equity and debt securities. We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements and long-term capital expenditure requirements.

Revolving Credit Facility In connection with our initial public offering on August 14, 2013, we repaid our existing term loan and entered into a new $200 million senior secured revolving credit facility. The revolving credit facility is available to fund working capital and to finance acquisitions and other capital expenditures. Our obligations under the revolving credit facility are secured by a first priority lien on substantially all of our assets. Borrowings under our revolving credit facility bear interest at a rate equal to LIBOR plus an applicable margin. LIBOR and the applicable margin are defined in our revolving credit facility. The unused portion of the revolving credit facility is subject to an annual commitment fee.

The revolving credit facility contains covenants and conditions that, among other things, limit our ability to make cash distributions, incur indebtedness, create liens, make investments and enter into a merger or sale of substantially all of our assets. We are also subject to certain financial covenants, including a consolidated leverage ratio and an interest coverage ratio, and customary events of default under the revolving credit facility. We were in compliance with such covenants as of December 31, 2013.

Term Note The $8.1 million outstanding on our term loan payable to a commercial bank was paid in full from the proceeds from the Offering.

Loan Activity with Affiliate In April 2013, the Partnership borrowed $12.5 million from an affiliate. The liability was assumed by CPT 2010 in connection with the Offering.

71 Capital Expenditures The terminaling and storage business is capital-intensive, requiring significant investment for the maintenance of existing assets and the acquisition or development of new systems and facilities. We categorize our capital expenditures as either: • maintenance capital expenditures, which are cash expenditures (including expenditures for the construction or development of new capital assets or the replacement, improvement or expansion of existing capital assets) made to maintain our long-term operating capacity or operating income; or • expansion capital expenditures, which are cash expenditures incurred for acquisitions or capital improvements that we expect will increase our operating capacity or operating income over the long term.

For the year ended December 31, 2013, our capital expenditures were $37.6 million. Our capital spending program is focused on expanding our existing terminals where sufficient demand exists for our services and maintaining our facilities. Capital expenditure plans are generally evaluated based on regulatory requirements, return on investment and estimated incremental cash flow. We develop annual capital spending plans based on historical trends for maintenance capital, plus identified projects for expansion, technology and revenue-generating capital. In addition to the annually recurring capital expenditures, potential acquisition opportunities are evaluated based on their anticipated return on invested capital, accretive impact to operating results, and strategic fit.

Our capital expenditures for the periods indicated were as follows: For the Years Ended December 31, 2013 2012 2011 (In thousands) Maintenance capital expenditures $ 6,686 $ 4,616 $ 5,099 Expansion capital expenditures 30,933 11,828 6,222 Total $ 37,619 $ 16,444 $ 11,321 Of the $30.9 million of expansion capital expenditures during 2013, $23.0 million related to the purchase of terminal assets adjacent to the Jacksonville terminal and $1.0 million related to expanding the truck bay and connection of the expanded facility. In addition, $1.8 million was used to construct additional tanks and truck racks at our terminals, $2.7 million was used to modify terminal assets in order to have the ability to accept additional products from customers and $2.4 million was used to convert the Weirton terminal to support crude oil gathering operations.

We had no material commitments for capital expenditures as of December 31, 2013.

We anticipate that maintenance capital expenditures will be funded primarily with cash from operations. We expect that we will rely primarily upon external financing sources, including borrowings under our revolving credit facility and the issuance of debt and equity securities, to fund any future expansion capital expenditures.

72 Cash Flows Net cash provided by (used in) operating activities, investing activities and financing activities for the years ended December 31, 2013, 2012 and 2011 were as follows: Years Ended December 31, 2013 2012 2011 (in thousands) Net cash provided by operating activities $ 50,014 $ 44,912 $ 45,392 Net cash used in investing activities $ (37,713) $ (18,413) $ (1,112) Net cash provided by (used) in financing activities $ 11,013 $ (25,825) $ (66,139) Year Ended December 31, 2013 Compared to Year Ended December 31, 2012 Cash Flows From Operating Activities. Net cash flows from operating activities for the year ended December 31, 2013 increased by $5.1 million, or 11%, compared to the year ended December 31, 2012. The increase was attributable to a $1.4 million increase in net income, a $2.0 million increase in cash received as reimbursement of capital expenditures recorded as deferred revenue, a $2.9 million increase in depreciation and amortization and a $0.3 million decrease in cash used by working capital offset by a $1.2 million reversal of deferred taxes and a $0.3 million increase in non-cash income.

Cash Flows From Investing Activities. Net cash flows used in investing activities for the year ended December 31, 2013 increased by $19.3 million, or 105%, compared to the year ended December 31, 2012. This increase was attributable to higher capital expenditures of $21.2 million, primarily related to the purchase of the Jacksonville terminal in April of 2013 for $23.0 million, and lower investment sales of $0.2 million offset by lower investment purchases of $2.1 million.

Cash Flows From Financing Activities. Cash flows from financing activities for the year ended December 31, 2013 increased $36.8 million compared to the year ended December 31, 2012. This increase was attributable to advances from affiliates and proceeds from the initial public offering, partially offset by higher distributions.

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011 Cash Flows From Operating Activities. Net cash flows from operating activities for the year ended December 31, 2012 decreased by $0.5 million, or 1%, compared to the year ended December 31, 2011. The decrease was primarily attributable to a $4.6 million decline in net income and a $0.4 million decline in non-cash losses, as described above, partially offset by an increase in the following non-cash items (i) $1.1 million of depreciation and amortization, (ii) $0.1 million in deferred income taxes, and (iii) a $3.3 million decrease in cash used by working capital.

Cash Flows From Investing Activities. Net cash flows used in investing activities for the year ended December 31, 2012 increased by $17.3 million, or 1,556%, compared to the year ended December 31, 2011. This increase was primarily attributable to lower proceeds from sales of short-term investments of $37.5 million, which was partially offset by lower purchases of short-term investments of $25.6 million and higher capital expenditures of $5.1 million.

Cash Flows From Financing Activities. Cash flows used in financing activities for the year ended December 31, 2012 decreased by $40.3 million, or 61%, compared to the year ended December 31, 2011. This decrease was primarily attributable to lower distributions of $47.8 million and lower payments on our debt of $5.9 million, partially offset by loan activities with affiliates of $13.5 million in 2011.

73 Contractual Obligations We have contractual obligations that are required to be settled in cash. Our contractual obligations as of December 31, 2013 were as follows: Payments Due by Period (in thousands) Less than 1-3 4-5 More than Total 1 year years years 5 years Loan commitment fee $ 2,809 $ 608 $ 1,218 $ 983 - Distribution of IPO proceeds to Parent 1,034 1,034 - - - Accrued quarterly distribution 9,918 9,918 - - - Operating lease obligations 1,712 268 528 507 409 Total $ 15,473 $ 11,828 $ 1,746 $ 1,490 $ 409 Future Trends and Outlook We expect that certain trends and economic or industry-wide factors will continue to affect our business, both in the short and long term. We have based our expectations described below on assumptions made by us and on the basis of information currently available to us. To the extent our underlying assumptions about or interpretation of available information prove to be incorrect, our actual results may vary materially from our expected results. Please read "Risk Factors" for additional information about the risks associated with purchasing our common units.

Existing Base Storage Contracts Some of our terminal services agreements currently in effect are operating in the automatic renewal phase of the contract that begins upon the expiration of the primary contract term. While a significant portion of our tankage may only be subject to a one year commitment, historically these customers have continued to renew or expand their business. Our top ten customers have used our services for an average of more than ten years.

The following table details the base storage services fees expected to be generated over the next five years ending December 31, 2018 based on remaining contract terms at February 28, 2014 excluding any consumer price index adjustments.

Expected Revenue under Base Storage Contracts Year ending December 31, (In thousands) 2014 $ 68,083 2015 54,223 2016 24,644 2017 17,244 2018 and beyond 7,523 Supply of Storage Capacity An important factor in determining the value of storage capacity and therefore the rates we are able to charge for new contracts or contract renewals is whether a surplus or shortfall of storage capacity exists relative to the overall demand for storage services in a given market area. We monitor local developments around each of our facilities closely. We believe that significant barriers to entry exist in the refined product and crude oil terminaling and storage business. These barriers include significant costs and execution risk, a lengthy permitting and development cycle, shortage of personnel with the requisite expertise and the finite number of sites that are suitable for development.

74 Entry of Competitors into the Markets in Which We Operate The competitiveness of our service offerings could be significantly impacted by the entry of new competitors into the markets in which our terminals operate. We believe, however, that significant barriers to entry exist in the refined products and crude oil terminaling and storage business, particularly for marine terminals. These barriers include significant costs and execution risk, a lengthy permitting and development cycle, such as environmental permitting, financing challenges, shortage of personnel with the requisite expertise and the finite number of sites with comparable connectivity suitable for development.

Economic Conditions The condition of credit markets may adversely affect our liquidity. In the recent past, world financial markets experienced a severe reduction in the availability of credit. Although we were not substantially impacted by this situation because of the long-term nature of our customer contracts, possible negative impacts in the future could include a decrease in the availability of credit. In addition, we could experience a tightening of trade credit from our suppliers and our customers' businesses may be effected by their access to credit.

Growth Opportunities We expect to expand the storage capacity at our current terminal facilities over the near and medium term. In addition, we will selectively pursue strategic asset acquisitions from Apex and third parties that complement our existing asset base or provide attractive potential returns in new areas within our geographic footprint. Our long-term strategy includes operating fee-based, qualifying income producing infrastructure assets throughout North America. We believe that we will be well positioned to acquire assets from third parties should such opportunities arise, and identifying and executing acquisitions will be a key part of our strategy. However, if we do not make acquisitions on economically acceptable terms, our future growth will be limited, and it is possible that any acquisitions we do make will reduce, rather than increase, our cash available for distribution per unit.

Demand for Refined Products and Crude Oil In the near-term, we expect demand for refined products and crude oil to remain stable. Even if demand for refined products and crude oil decreases sharply, however, our historical experience during recessionary periods has been that our results of operations are not materially impacted in the near term. We believe this is because of several factors, including: (i) we mitigate the risk of reduced volumes and pricing by negotiating contracts with minimum payments based on available capacity and with multi-year terms, and (ii) sharp decreases in demand for refined products and crude oil generally increase the short and medium-term need for storage of those products, as customers search for buyers at appropriate prices.

Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements.

75 Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon each of the respective consolidated financial statements of us and our Predecessor, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. Estimates and assumptions are evaluated on a regular basis. We and our Predecessor base our respective estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from the estimates and assumptions used in preparation of the consolidated financial statements.

Revenue Recognition. Our principal source of revenues is from storage services fees at our terminals. Typically, our contracts with customers are for a fixed term with pricing provisions based on the volume of product stored or based on the activity conducted at our terminals by the customers. Additional revenues are derived from injecting additives and the provision of ancillary services to our customers, such as the heating and blending of their product.

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the customer is fixed or determinable and collectability is reasonably ensured. Revenues from base storage services fees are recognized on a straight-line basis over the period in which storage services are provided. Additive and ancillary services fees are recognized monthly based on the amount of additive, heating or other services we provided during that month.

Depreciation. We calculate depreciation expense using the straight-line method, based on the estimated useful life of each asset. We assign asset lives based on reasonable estimates when an asset is placed into service. We periodically evaluate the estimated useful lives of our property, plant and equipment and revise our estimates. The determination of an asset's estimated useful life takes a number of factors into consideration, including technological change, normal depreciation and actual physical usage. If any of these assumptions subsequently change, the estimated useful life of the asset could change and result in an increase or decrease in depreciation expense. Subsequent events could cause us to change our estimates, which would impact the future calculation of depreciation expense.

Impairment of Long-Lived Assets. In accordance with Accounting Standards Codification No. 360, "Accounting for the Impairment or Disposal of Long-Lived Assets," we continually evaluate whether events or circumstances have occurred that indicate the carrying value of our long-lived assets, including property and equipment, may be impaired. In determining whether the carrying value of our long-lived assets is impaired, we make a number of subjective assumptions, including whether there is an indication of impairment and the extent of any such impairment.

Factors we consider as indicators of impairment may include, but are not limited to, our assessment of the market value of the asset, operating or cash flow losses and any significant change in the asset's physical condition or use.

We evaluate the potential impairment of long-lived assets by comparison of estimated undiscounted cash flows for the related asset to the asset's carrying value. Impairment is indicated when the estimated undiscounted cash flows to be generated by the asset are less than the asset's carrying value. If the long-lived asset is considered to be impaired, the impairment loss is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset, calculated using a discounted future cash flow analysis.

76 These future cash flow estimates (both undiscounted and discounted) are based on historical results, adjusted to reflect our best estimate of future market and operating conditions. Uncertainty associated with these cash flow estimates include assumptions regarding demand for the refined petroleum products and crude oil that we store for our customers, volatility and pricing of crude oil and its impact on refined products prices, the level of domestic oil production, discount rates (for discounted cash flows) and potential future sources of cash flows.

Although the resolution of these uncertainties historically has not had a material impact on our results of operations or financial condition, we cannot provide assurance that actual amounts will not vary significantly from estimated amounts. During the years ended December 31, 2011, 2012 and 2013 we did not record any impairment on assets.

Environmental and Other Contingent Liabilities. Environmental costs are expensed if they relate to an existing condition caused by past operations and do not contribute to current or future revenue generation. Liabilities are recorded when site restoration, environmental remediation, cleanup or other obligations are either known or considered probable and can be reasonably estimated. At December 31, 2011, 2012 and 2013, we had no material accruals for environmental obligations.

Accruals for contingent liabilities are recorded when our assessment indicates that it is probable that a liability has been incurred and the amount of liability can be reasonably estimated. Such accruals may include estimates and are based on all known facts at the time and our assessment of the ultimate outcome. Our estimates for contingent liability accruals are increased or decreased as additional information is obtained or resolution is achieved.

Presently, there are no material accruals in these areas. Although the resolution of these uncertainties historically has not had a material impact on our results of operations or financial condition, we cannot provide assurance that actual amounts will not vary significantly from estimated amounts.

Among the many uncertainties that impact our estimates of environmental and other contingent liabilities are the potential involvement in lawsuits, administrative proceedings and governmental investigations, including environmental, regulatory and other matters, as well as the uncertainties that exist in operating our storage facilities and related facilities. Our insurance does not cover every potential risk associated with operating our storage facilities and related facilities, including the potential loss of significant revenues. We believe we are adequately insured for public liability and property damage to others with respect to our operations. With respect to all of our coverage, we may not be able to maintain adequate insurance in the future at rates we consider reasonable.

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