e8vk
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported)
November 19, 2007 (November 14, 2007)
TARGA RESOURCES PARTNERS LP
(Exact name of registrant as specified in its charter)
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Delaware
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001-33303
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65-1295427 |
(State or other jurisdiction
of incorporation or organization)
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(Commission
File Number)
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(IRS Employer
Identification No.) |
1000 Louisiana, Suite 4300
Houston, TX 77002
(Address of principal executive office)
(713) 584-1000
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c)) |
TABLE OF CONTENTS
2.02. Results of Operations and Financial Condition.
On
November 14, 2007, Targa Resources Partners LP (the Partnership) issued a press release
regarding its financial results for the three and nine months ended
September 30, 2007 and held a webcast
conference call discussing those results. A copy of the earnings press release is filed as Exhibit
99.1 to this report, which is hereby incorporated by reference into this Item 2.02. A replay of
the webcast will be available through the Investors section of the Partnerships web site
(http://www.targaresources.com) until November 21.
The press release and accompanying schedules and/or the conference call discussions include
the non-generally accepted accounting principles, or non-GAAP, financial measures of distributable
cash flow and EBITDA. The press release provides reconciliations of these non-GAAP financial
measures to their most directly comparable financial measure calculated and presented in accordance
with generally accepted accounting principles in the United States of America (GAAP). Our
non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net
income, operating income, net cash flows provided by operating activities or any other GAAP measure
of liquidity or financial performance.
Item 9.01 Financial Statements and Exhibits.
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Exhibit |
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Description |
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Exhibit 99.1
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Targa Resources Partners LP Press Release dated
November 14, 2007. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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TARGA RESOURCES PARTNERS LP |
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By:
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Targa Resources GP LLC |
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its general partner |
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Dated:
November 19, 2007
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By:
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/s/ Jeffrey J. McParland |
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Jeffrey J. McParland
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Executive Vice President and Chief Financial Officer |
EXHIBIT INDEX
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Exhibit |
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Description |
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Exhibit 99.1
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Targa Resources Partners LP Press
Release dated November 14, 2007. |
exv99w1
Exhibit 99.1
TARGA RESOURCES PARTNERS LP REPORTS
THIRD QUARTER 2007 EARNINGS
HOUSTONNovember 14, 2007Targa Resources Partners LP (Targa Resources Partners or the
Partnership) (NASDAQ: NGLS) today announced its financial results for the three and nine months
ended September 30, 2007. For the third quarter of 2007, the Partnership reported (i) net income of
$3.9 million, or 12¢ per unit on a fully diluted basis, (ii) income from operations of $9.3 million
and (iii) earnings before interest, taxes, depreciation and amortization (EBITDA) of $23.6
million. EBITDA is a non-generally accepted accounting principle (or non-GAAP) financial measure
that is defined and reconciled later in this press release to its most directly comparable GAAP
financial measure net income (loss).
For the first nine months of 2007, the Partnership reported (i) net income of $3.2 million (ii)
income from operations of $26.9 million and (iii) EBITDA of $69.8 million. Results for the nine
month period include the results of the Partnerships predecessor (the Predecessor) from January
1, 2007 through February 13, 2007 (the Pre-IPO Period) and the results of operations since the
completion of its initial public offering (IPO) from February 14, 2007 to September 30, 2007 (the
Post-IPO Period). Unless stated otherwise, the year to date results discussed in this release
are for the full nine month period, including both the Pre-IPO and the Post-IPO periods. Results
for 2006 are for the Predecessor.
As discussed in more detail below, on October 24, 2007 the Partnership announced that it acquired
certain natural gas gathering and processing businesses located in west Texas (SAOU) and
Louisiana (LOU) from Targa Resources, Inc. (Targa) for approximately $705 million, subject to
certain post-closing adjustments. In addition, the Partnership paid approximately $24.2 million to
Targa for the termination of certain hedge transactions. The Partnership financed the acquisition
with the proceeds from its public offering of 13,500,000 common units (the Newly Issued Units)
and borrowings under its increased $750 million senior secured revolving credit facility.
On October 23, 2007, the board of Targa Resources Partners general partner declared a cash
distribution of $0.3375 per common unit, or $1.35 per unit on an annualized basis, for the third
quarter payable to all unitholders, including holders of the Newly Issued Units. Distributable cash
flow for the third quarter of 2007, which does not include distributable cash flow from the LOU and
SAOU systems, was $14.8 million, corresponding to distribution coverage of 1.4 times excluding the
Newly Issued Units or 1.0 times if the Newly Issued Units are included. Distributable cash flow 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 income (loss). In addition, management has
recommended an 18% increase in the fourth quarter 2007 distribution (which will be paid in the
first quarter of 2008) to 39.75¢, or $1.59 annually. The board has indicated their support of the
recommendation which remains subject to final board approval following a review of fourth quarter
financial results.
Review of Third Quarter Results
Revenues were $107.7 million for the three-month period ended September 30, 2007, 6% higher than
revenues of $102.0 million for the three months ended September 30, 2006. Income from
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operations
for the third quarter of 2007 increased by 32% to $9.3 million
from $7.0 million in 2006.
The primary drivers for these improvements were increases of 1%, 5% and 4% % in average
realized natural gas, NGL and condensate prices, respectively, including the impacts of our hedging
program.
Net income for the third quarter was $3.9 million versus a net loss of $12.2 million for the same
period last year. The net loss in 2006 is principally due to interest expense totaling $18.7
million for the three months ended September 30, 2006 that is related to debt that was allocated to
the Predecessor by Targa. In connection with the IPO, the Partnership repaid a portion of this
indebtedness and the balance was retired and treated as a capital contribution to the Partnership.
For the quarter ended September 30, 2007, gathering throughput (the volume of natural gas gathered
and passed through natural gas gathering pipelines), was 165.7 MMcf/d compared to 170.1 MMcf/d for
the same period in 2006. For the same periods, plant natural gas inlet (the volume of natural gas
passing through the meter located at the inlet of a processing plant) was 160.8 MMcf/d compared to
164.0 MMcf/d. During the third quarter a major producer conducted a multi-well workover program
slightly reducing volumes available for processing.
Gross NGL production of 19.2 MBbl/d for the three months ended September 30, 2007 compares to NGL
production of 19.1 MBbl/d for the three months ended September 30, 2006. Natural gas sales
volumes of 75.6 BBtu/d in the quarter ended September 30, 2007 were slightly lower than the 76.6
BBtu/d sold in the comparable 2006 period. Conversely, condensate sales of 1.6 MBbl/d for the
third quarter of 2007 were higher than the 1.5 MBbl/d sold in the same 2006 period.
Review of First Nine Months Results
For the nine months ended September 30, 2007 revenues were $307.7 million, 6% higher than revenues
of $290.9 million for the nine months ended September 30, 2006. Income from operations for the
first nine months of 2007 increased by 29%, to $26.9 million from $20.9 million in 2006. The
primary drivers for these improvements were increases of 7%, 5% and 2% in realized natural gas, NGL
and condensate prices, respectively, including the impacts of our hedging program.
Net income for the nine months ended September 30, 2007 was $3.2 million versus a net loss of $35.4
million for the same period last year. The 2007 total includes affiliate interest expense of $9.8
million during the Pre-IPO Period. The 2006 net loss is primarily due to interest expense totaling
$54.4 million for the nine months ended September 30, 2006 that is related to debt that was
allocated to the Predecessor by Targa. In connection with the IPO, the Partnership repaid a
portion of this indebtedness and the balance was retired and treated as a capital contribution to
the Partnership.
For the nine months ended September 30, 2007, gathering throughput was 166.1 MMcf/d and plant
natural gas inlet was 160.3 MMcf/d, approximately 1% lower than levels in the same 2006 period. In
addition to the impacts of producer well workover activities mentioned above, year-to-date 2007
throughput and inlet volumes were adversely impacted by unseasonable amounts of rain in the second
quarter and by freezing weather during the first quarter which reduced wellhead volumes and impeded
new well connections.
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Gross NGL production of 18.0 MBbl/d for the first nine months of 2007 was 4% lower than the
comparable 2006 production of 18.8 MBbl/d, while natural gas sales of 75.8 BBtu/d for the nine
months ended September 30, 2007 were up from the 75.2 BBtu/d of natural gas sales during the nine
months ended September 30, 2006. The decline in gross NGL production and related increase in
natural gas sales were primarily due to operational issues with a liquids treater during the first
quarter of 2007 which limited our liquids recovery. The operational issues with the treater were
resolved during March of 2007. Finally, condensate sales for the nine months ended September 30,
2007 of 1.8 MBbl/d were 13% higher than the 1.6 MBbl/d sold during the first nine months of 2006.
Contract Mix, Hedges and Realized Prices
Approximately 97% of the Partnerships gathered volumes are processed under percent-of-proceeds
contracts with the balance covered by keep-whole and fee-for-service contracts. Under
percent-of-proceeds contracts, we receive a portion of the natural gas and/or NGLs as payment for
our services. As a result, we are exposed to price risk on the portion of commodities that we
receive as payment, which we refer to as our equity volumes. To mitigate the impact of commodity
price fluctuations on our business, we enter into hedging contracts.
For the three months ended September 30, 2007 our average realized prices, including the impact of
hedges, for natural gas, NGL and condensate were $5.93 per MMBtu, $1.00 per gallon and $60.93 per
barrel, respectively, compared to $5.85 per MMBtu, 95¢ per gallon and $58.66 per barrel,
respectively, in the third quarter of 2006.
Capitalization
In conjunction with the Partnerships IPO, we entered into a five-year, $500 million senior secured
revolving credit facility (the Credit Facility), the full amount of which is available for the
issuance of letters of credit. Total funded debt at September 30, 2007 was approximately $294.5
million, approximately 28% of total book capitalization.
In conjunction with the acquisition of SAOU and LOU from Targa, the Partnership increased the
aggregate commitments under the Credit Facility by $250 million to $750 million and borrowed an
additional $378.8 million bringing total funded debt to $673.3 million or approximately 54% of
total book capitalization on a pro forma basis as of September 30, 2007.
Recent Acquisition
As mentioned above, on October 24, 2007 the Partnership recently acquired the SAOU and LOU systems
from Targa for approximately $705 million, subject to certain post-closing adjustments. In
addition, the Partnership paid approximately $24.2 million to Targa for the termination of certain
hedge transactions. Total consideration paid by the Partnership consisted of cash of approximately
$721.7 million (including the hedge termination payment) and approximately 275,000 general partner
units issued to Targa to maintain its 2% general partner interest in the Partnership.
For the six month period ended June 30, 2007, the acquired businesses generated Adjusted EBITDA of
approximately $38.4 million and pro forma distributable cash flow of approximately $22.4 million.
Adjusted EBITDA is a non-GAAP financial measure that is defined and reconciled later in
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this press release to its most directly comparable financial measure calculated and presented in
accordance GAAP net income (loss).
The SAOU system consists of (i) the approximately 1,350 mile San Angelo natural gas gathering
system, which is located in the Permian Basin of west Texas, and (ii) the Mertzon, Sterling and
Conger processing plants with aggregate processing capacity of approximately 135 MMcf/d. The LOU
system consists of (i) an approximately 700-mile natural gas gathering system, which is located in
southwest Louisiana, (ii) the Gillis and Acadia processing plants with aggregate processing
capacity of approximately 260 MMcf/d and (iii) an integrated fractionation facility at the Gillis
processing plant with processing capacity of approximately 13 MBbls/d.
Recent Volumes and Development Activities
As a result of certain of our development activities and increased production in our areas of
operations, fourth quarter operating results to date have been well in excess of the third quarter
and first nine months of 2007. From October 1 through November 10, average daily plant inlet
volumes for the Chico and Shackelford plants were 171.6 MMcf/d. Additionally, plant inlet for
SAOU and LOU for the month of October was approximately 287.7 MMcf/d.
Since the IPO, the Partnership has added more than 30,000 acres of new dedications and approved
several growth projects including:
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$15.1 million for a new residue pipeline to improve takeaway capacity from the
Chico plant and improve market access points; |
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$5.3 million for the expansion of the Chico plants CO2 amine
treater. With CO2 flows at the Chico plant continuing to increase,
completion of this project has been expedited to the middle of 2008. This project is
supported by treating fees that justify it on a standalone basis, but more importantly,
the project allows us to continue to add producer volumes; |
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$5.7 million for the installation of a pipeline system and the acquisition of a
producer owned pipeline system in Wise and Montague counties. The project includes
over 4,400 acres of dedications; |
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$3.9 million for the installation of a pipeline and compression system in Wise
county which includes a 20,000 acreage dedication in Wise and Southern Montague
counties; and |
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the installation of 4.3 MMcf/d of compression and 10 MMcf/d of dehydration in
Jack and Palo Pinto counties. |
In addition, we are evaluating over $170 million of potential organic growth projects including the
addition of compression and system expansion projects in Jack, Wise, Palo Pinto and Montague
counties.
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Conference Call
Targa Resources Partners will host a conference call for investors and analysts at 10 a.m. ET (9
a.m. CT) on November 14, 2007 to discuss third quarter earnings. The conference call can be
accessed via Webcast through the Investors section of the Partnerships web site at
http://www.targaresources.com or by dialing 800-257-2101. The pass code is 11100295#. Please call
in 5 to 10 minutes prior to the scheduled start time. A replay of the Webcast will be available
through the Investors section of the Partnerships web site approximately 2 hours following
completion of the Webcast and will remain available until November 21.
About Targa Resources Partners
The Partnership was formed by Targa to engage in the business of gathering, compressing, treating,
processing and selling natural gas and fractionating and selling natural gas liquids and natural
gas liquids products. The Partnership currently operates in southwest Louisiana, the Permian Basin
in west Texas and the Fort Worth Basin in north Texas. A subsidiary of Targa is the general partner
of the Partnership. The Partnership owns an extensive network of integrated gathering pipelines,
seven natural gas processing plants and two fractionators.
The Partnerships principal executive offices are located at 1000 Louisiana, Suite 4300, Houston,
Texas 77002 and its telephone number is 713-584-1000.
Use of Non-GAAP Financial Measures
This press release and accompanying schedules include non-GAAP financial measures of EBITDA,
distributable cash flow and Adjusted EBITDA. The press release provides reconciliations of these
non-GAAP financial measures to their most directly comparable financial measure calculated and
presented in accordance with generally accepted accounting principles in the United States of
America (GAAP). Our non-GAAP financial measures should not be considered as alternatives to GAAP
measures such as net income, operating income, net cash flows provided by operating activities or
any other GAAP measure of liquidity or financial performance.
EBITDA We define EBITDA as net income or loss before interest, income taxes, depreciation and
amortization. EBITDA is used as a supplemental financial measure by us and by external users of our
financial statements, such as investors, commercial banks and others, to assess: (i) the financial
performance of our assets without regard to financing methods, capital structures or historical
cost basis; (ii) our operating performance and return on capital as compared to other companies in
the midstream energy sector, without regard to financing or capital structure and (iii) the
viability of acquisitions and capital expenditure projects and the overall rates of return on
alternative investment opportunities. The economic substance behind our use of EBITDA is to measure
the ability of our assets to generate cash sufficient to pay interest costs, support our
indebtedness and make distributions to our investors.
The GAAP measure most directly comparable to EBITDA is net income (loss). Our non-GAAP financial
measure of EBITDA should not be considered as an alternative to GAAP net income (loss). EBITDA is
not a presentation made in accordance with GAAP and has important limitations
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as an analytical tool. You should not consider EBITDA in isolation or as a substitute for analysis
of our results as reported under GAAP. Because EBITDA excludes some, but not all, items that
affect net income and is defined differently by different companies in our industry, our definition
of EBITDA may not be comparable to similarly titled measures of other companies.
We compensate for the limitations of EBITDA as an analytical tool by reviewing the comparable GAAP
measure, understanding the differences between the measures and incorporating these learnings into
our decision making processes.
The following table presents a reconciliation of EBITDA to net income (loss) for the periods shown:
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Three Months |
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Three Months |
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Nine Months |
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Nine Months |
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Ended September |
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Ended September |
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Ended September |
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Ended September |
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30, 2007 |
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30, 2006 |
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30, 2007 |
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30, 2006 |
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(in millions) |
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(unaudited) |
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Reconciliation of Non-GAAP Measures |
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Reconciliation of net income to EBITDA: |
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Net loss
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$ |
3.9 |
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$ |
(12.2 |
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$ |
3.2 |
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$ |
(35.4 |
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Add: |
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Interest expense, net |
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5.0 |
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18.7 |
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22.7 |
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54.4 |
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Deferred income tax expense |
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0.3 |
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0.5 |
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1.0 |
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2.0 |
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Depreciation and amortization expense |
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14.4 |
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14.3 |
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42.9 |
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41.7 |
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EBITDA |
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$ |
23.6 |
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$ |
21.3 |
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$ |
69.8 |
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$ |
62.7 |
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Distributable Cash Flow Distributable cash flow is a significant performance metric used by us
and by external users of our financial statements, such as investors, commercial banks, research
analysts and others to compare basic cash flows generated by us (prior to the establishment of any
retained cash reserves by our general partner) to the cash distributions we expect to pay our
unitholders. Using this metric, management can quickly compute the coverage ratio of estimated
cash flows to planned cash distributions. Distributable cash flow is also an important non-GAAP
financial measure for our unitholders because it serves as an indicator of our success in providing
a cash return on investment. Specifically, this financial measure indicates to investors whether
or not we are generating cash flow at a level that can sustain or support an increase in our
quarterly distribution rates. Distributable cash flow is also a quantitative standard used
throughout the investment community with respect to publicly-traded partnerships and limited
liability companies because the value of a unit of such an entity is generally determined by the
units yield (which in turn is based on the amount of cash distributions the entity pays to a
unitholder). The economic substance behind our use of distributable cash flow is to measure the
ability of our assets to generate cash flows sufficient to make distributions to our investors.
The GAAP measure most directly comparable to distributable cash flow is net income (loss). Our
non-GAAP measure of distributable cash flow should not be considered as an alternative to GAAP net
income (loss). Distributable cash flow is not a presentation made in accordance with GAAP and has
important limitations as an analytical tool. You should not consider distributable cash flow in
isolation or as a substitute for analysis of our results as reported under GAAP. Because
distributable cash flow excludes some but not all, items that affect net income (loss) and is
defined
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differently by different companies in our industry, our definition of distributable cash flow may
not be comparable to similarly titled measures of other companies, thereby diminishing its utility.
We compensate for the limitations of distributable cash flow as an analytical tool by reviewing the
comparable GAAP measures, understanding the differences between the measures and incorporating
these learnings into our decision-making processes.
The following table presents a reconciliation of distributable cash flow to net income (loss) for
the Partnership for the periods shown:
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Three Months |
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Three Months |
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Nine Months |
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Nine Months |
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Ended September |
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Ended September |
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Ended September |
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Ended September |
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30, 2007 |
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30, 2006 |
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30, 2007 |
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30, 2006 |
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(in millions) |
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(unaudited) |
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Reconciliation of Distributable cash flow to net income (loss): |
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Net income (loss) |
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$ |
3.9 |
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$ |
(12.2 |
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$ |
3.2 |
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$ |
(35.4 |
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Depreciation and amortization expense |
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14.4 |
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14.3 |
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42.9 |
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41.7 |
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Deferred income tax expense |
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0.3 |
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0.5 |
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1.0 |
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2.0 |
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Amortization of debt issue costs |
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0.2 |
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1.3 |
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0.5 |
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3.9 |
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Maintenance capital expenditures |
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(4.0 |
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(2.7 |
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(9.3 |
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(9.0 |
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Distributable cash flow |
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$ |
14.8 |
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$ |
1.2 |
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$ |
38.3 |
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$ |
3.2 |
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The following table presents a reconciliation of distributable cash flow to net income (loss) for
LOU and SAOU for the periods shown:
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Six Months |
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Ended June |
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$ in millions |
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30, 2007 |
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Pro forma net income (loss) |
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(3 0 |
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Non cash mark-to-market hedge adjustment |
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21.0 |
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Depreciation and amortization expense |
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7.2 |
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Deferred tax
expense |
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0.0 |
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Incremental debt issue costs * |
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0.3 |
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Accretion expense |
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0.1 |
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Maintenance capital expenditures |
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(3.2 |
) |
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Distributable
cash flow |
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22.4 |
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Adjusted EBITDA. We define Adjusted EBITDA as net income before interest, income taxes,
depreciation and amortization and non-cash income or loss related to derivative instruments.
Adjusted EBITDA is used as a supplemental financial measure by our management and by external users
of our financial statements such as investors, commercial banks and others, to assess: (1) the
financial performance of our assets without regard to financing methods, capital structure or
historical cost basis; (2) our operating performance and return on capital as compared to other
7
companies in the midstream energy sector, without regard to financing or capital structure; and (3)
the viability of acquisitions and capital expenditure projects and the overall rates of return on
alternative investment opportunities.
The economic substance behind managements use of Adjusted EBITDA is to measure the ability of our
assets to generate cash sufficient to pay interest costs, support our indebtedness and make
distributions to our investors. The GAAP measure most directly comparable to Adjusted EBITDA is net
income (loss). Our non-GAAP financial measure of Adjusted EBITDA should not be considered as an
alternative to GAAP net income (loss). Adjusted EBITDA is not a presentation made in accordance
with GAAP and has important limitations as an analytical tool. You should not consider Adjusted
EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because
Adjusted EBITDA excludes some, but not all, items that affect net income and is defined differently
by different companies in our industry, our definition of Adjusted EBITDA may not be comparable to
similarly titled measures of other companies. Management compensates for the limitations of
Adjusted EBITDA as an analytical tool by reviewing the comparable GAAP measures, understanding the
differences between the measures and incorporating these learnings into managements
decision-making processes.
The following table presents a reconciliation of Adjusted EBITDA to net income (loss) for LOU and
SAOU for the periods shown:
|
|
|
|
|
|
|
Six Months |
|
|
|
Ended June |
|
$ in millions |
|
30, 2007 |
|
Pro forma net income (loss) |
|
|
(3.0 |
) |
Add: |
|
|
|
|
Pro forma interest expense * |
|
|
13.2 |
|
Deferred tax expense |
|
|
0.0 |
|
Depreciation and amortization expense |
|
|
7.2 |
|
Non cash mark-to-market hedge adjustment |
|
|
21.0 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
38.4 |
|
|
|
|
|
|
|
|
* |
|
Reflects interest expense on $378.8 million of incremental borrowing |
Forward-Looking Statements
Certain statements in this release are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. All statements, other than statements of historical facts, included in this
release that address activities, events or developments that the Partnership expects, believes or
anticipates will or may occur in the future are forward-looking statements. These forward-looking
statements rely on a number of assumptions concerning future events and are subject to a number of
8
uncertainties, factors and risks, many of which are outside Targa Resources Partners control,
which could cause results to differ materially from those expected by management of Targa Resources
Partners. Such risks and uncertainties include, but are not limited to, weather, political,
economic and market conditions, including declines in the production of natural gas or in the price
and market demand for natural gas and natural gas liquids, the timing and success of business
development efforts, the credit risk of customers and other uncertainties. These and other
applicable uncertainties, factors and risks are described more fully in the Partnerships Annual
Report on Form 10-K for the year ended December 31, 2006 and other reports filed with the
Securities and Exchange Commission. Targa Resources Partners undertakes no obligation to update or
revise any forward-looking statement, whether as a result of new information, future events or
otherwise.
Investor contact:
Howard Tate
Vice President Finance, Treasurer
713-584-1000
Web site: http://www.targaresources.com
Media contact:
Kenny Juarez
212-371-5999
9
TARGA RESOURCES PARTNERS LP
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(Unaudited) |
|
|
|
(In thousands) |
|
ASSETS
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
28,441 |
|
|
$ |
|
|
Receivables from third parties |
|
|
208 |
|
|
|
1,310 |
|
Receivables from affiliated companies |
|
|
32,437 |
|
|
|
|
|
Inventory |
|
|
919 |
|
|
|
|
|
Assets from risk management activities |
|
|
8,312 |
|
|
|
17,250 |
|
Other |
|
|
373 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
70,690 |
|
|
|
18,560 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, at cost |
|
|
1,146,566 |
|
|
|
1,129,210 |
|
Accumulated depreciation |
|
|
(107,981 |
) |
|
|
(65,102 |
) |
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
1,038,585 |
|
|
|
1,064,108 |
|
|
Long-term assets from risk management activities |
|
|
5,755 |
|
|
|
15,541 |
|
Other long-term assets |
|
|
5,572 |
|
|
|
17,612 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,120,602 |
|
|
$ |
1,115,821 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS CAPITAL
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
2,392 |
|
|
$ |
2,789 |
|
Accrued liabilities |
|
|
37,015 |
|
|
|
28,832 |
|
Current maturities of debt allocated from Parent |
|
|
|
|
|
|
281,083 |
|
Liabilities from risk management activities |
|
|
12,540 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
51,947 |
|
|
|
312,704 |
|
|
|
|
|
|
|
|
|
Long-term debt allocated from Parent |
|
|
|
|
|
|
582,877 |
|
Long-term debt |
|
|
294,500 |
|
|
|
|
|
Long-term liabilities from risk management activities |
|
|
10,094 |
|
|
|
96 |
|
Other long-term liabilities |
|
|
1,834 |
|
|
|
1,684 |
|
Deferred income tax liability |
|
|
3,529 |
|
|
|
2,844 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners capital: |
|
|
|
|
|
|
|
|
Common unitholders (19,336,000 units issued and outstanding at September 30, 2007) |
|
|
373,970 |
|
|
|
|
|
Subordinated unitholders (11,528,231 units issued and outstanding at September 30, 2007) |
|
|
374,201 |
|
|
|
|
|
General partner (629,555 units issued and outstanding at September 30, 2007) |
|
|
20,436 |
|
|
|
|
|
Accumulated other comprehensive income (loss) |
|
|
(9,909 |
) |
|
|
30,843 |
|
Net parent investment |
|
|
|
|
|
|
184,773 |
|
|
|
|
|
|
|
|
Total partners capital |
|
|
758,698 |
|
|
|
215,616 |
|
|
|
|
|
|
|
|
Total liabilities and partners capital |
|
$ |
1,120,602 |
|
|
$ |
1,115,821 |
|
|
|
|
|
|
|
|
10
TARGA RESOURCES PARTNERS LP
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Three Months |
|
|
Nine Months |
|
|
Nine Months |
|
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
|
(Unaudited) |
|
|
|
(In thousands, except
per unit amounts) |
|
Revenues from third parties |
|
$ |
6,951 |
|
|
$ |
3,505 |
|
|
$ |
17,335 |
|
|
$ |
8,233 |
|
Revenues from affiliates |
|
|
100,712 |
|
|
|
98,461 |
|
|
|
290,324 |
|
|
|
282,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
107,663 |
|
|
|
101,966 |
|
|
|
307,659 |
|
|
|
290,890 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product purchases from third parties |
|
|
74,457 |
|
|
|
72,182 |
|
|
|
212,208 |
|
|
|
204,532 |
|
Product purchases from affiliates |
|
|
228 |
|
|
|
270 |
|
|
|
742 |
|
|
|
670 |
|
Operating expenses, excluding DD&A |
|
|
6,543 |
|
|
|
6,362 |
|
|
|
18,576 |
|
|
|
17,905 |
|
Depreciation and amortization expense |
|
|
14,396 |
|
|
|
14,274 |
|
|
|
42,880 |
|
|
|
41,713 |
|
General and administrative expense |
|
|
2,779 |
|
|
|
1,882 |
|
|
|
6,310 |
|
|
|
5,137 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98,403 |
|
|
|
94,970 |
|
|
|
280,716 |
|
|
|
269,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
9,260 |
|
|
|
6,996 |
|
|
|
26,943 |
|
|
|
20,933 |
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
5,059 |
|
|
|
|
|
|
|
12,918 |
|
|
|
|
|
Interest expense from affiliates, net |
|
|
|
|
|
|
|
|
|
|
9,827 |
|
|
|
|
|
Interest expense allocated from Parent |
|
|
|
|
|
|
18,706 |
|
|
|
|
|
|
|
54,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
4,201 |
|
|
|
(11,710 |
) |
|
|
4,198 |
|
|
|
(33,436 |
) |
Deferred income tax expense |
|
|
332 |
|
|
|
534 |
|
|
|
997 |
|
|
|
1,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
3,869 |
|
|
$ |
(12,244 |
) |
|
$ |
3,201 |
|
|
$ |
(35,424 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of net income (loss) for the three and nine
months ended September 30, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to the period from
January 1, 2007 to February 13, 2007 |
|
$ |
|
|
|
|
|
|
|
$ |
(6,861 |
) |
|
|
|
|
|
Net income attributable to the period from February
14, 2007 to September 30, 2007 |
|
|
3,869 |
|
|
|
|
|
|
|
10,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,869 |
|
|
|
|
|
|
$ |
3,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General partner interest in net income for the period
from February 14, 2007 to September 30, 2007 |
|
$ |
77 |
|
|
|
|
|
|
$ |
201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common and subordinated unitholders interest in net
income for the period from
February 14, 2007 to September 30, 2007 |
|
$ |
3,792 |
|
|
|
|
|
|
$ |
9,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common and subordinated unit |
|
$ |
0.12 |
|
|
|
|
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common and subordinated unit |
|
$ |
0.12 |
|
|
|
|
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic average number of common and subordinated units
outstanding |
|
|
30,848 |
|
|
|
|
|
|
|
30,848 |
|
|
|
|
|
|
|
|
|
Diluted average number of common and subordinated units
outstanding |
|
|
30,857 |
|
|
|
|
|
|
|
30,855 |
|
|
|
|
|
|
|
|
|
11
TARGA RESOURCES PARTNERS LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Nine Months |
|
|
Nine Months |
|
|
|
Ended |
|
|
Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2007 |
|
|
2006 |
|
|
|
(Unaudited) |
|
|
|
(In thousands) |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
3,201 |
|
|
$ |
(35,424 |
) |
Adjustments to reconcile net income (loss) to net cash
provided by operating activities |
|
|
|
|
|
|
|
|
Depreciation |
|
|
42,880 |
|
|
|
41,713 |
|
Accretion of asset retirement obligations |
|
|
118 |
|
|
|
108 |
|
Amortization of debt issue costs |
|
|
507 |
|
|
|
3,864 |
|
Noncash compensation |
|
|
128 |
|
|
|
|
|
Loss on sale of assets |
|
|
2 |
|
|
|
|
|
Deferred income tax expense |
|
|
997 |
|
|
|
1,988 |
|
Risk management activities |
|
|
198 |
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
7,521 |
|
|
|
369 |
|
Inventory |
|
|
(919 |
) |
|
|
584 |
|
Other |
|
|
(2,307 |
) |
|
|
630 |
|
Accounts payable |
|
|
(397 |
) |
|
|
(10 |
) |
Accrued liabilities |
|
|
8,183 |
|
|
|
(2,675 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
60,112 |
|
|
|
11,147 |
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(17,362 |
) |
|
|
(17,769 |
) |
Other |
|
|
35 |
|
|
|
32 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(17,327 |
) |
|
|
(17,737 |
) |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Proceeds from initial public offering |
|
|
380,768 |
|
|
|
|
|
Costs incurred in connection with public offerings |
|
|
(3,313 |
) |
|
|
|
|
Distributions |
|
|
(15,943 |
) |
|
|
|
|
Proceeds from borrowings under credit facility |
|
|
342,500 |
|
|
|
|
|
Costs incurred in connection with financing arrangements |
|
|
(4,145 |
) |
|
|
|
|
Repayments of loans: |
|
|
|
|
|
|
|
|
Affiliated |
|
|
(665,692 |
) |
|
|
|
|
Credit facility |
|
|
(48,000 |
) |
|
|
|
|
Deemed parent contributions (distributions) |
|
|
(519 |
) |
|
|
6,590 |
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(14,344 |
) |
|
|
6,590 |
|
|
|
|
|
|
|
|
Net change
in cash and cash equivalents |
|
|
28,441 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
28,441 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Net settlement of allocated indebtedness and debt issue costs |
|
$ |
190,493 |
|
|
$ |
256 |
|
Net contribution of affiliated receivables |
|
|
38,856 |
|
|
|
|
|
Noncash long-term debt allocation of payments from Parent |
|
|
|
|
|
|
3,699 |
|
12