Genesis Energy, L.P. Reports Annual and Fourth Quarter Results.Energy Editors/Business Editors HOUSTON--(BUSINESS WIRE)--March 7, 2003 Genesis Energy, L.P. (AMEX AMEX See: American Stock Exchange :GEL gel: see colloid. ) today issued the following:
Earnings Highlights
(in thousands except per unit amounts)
Three Months
Ended Year Ended
Dec. 31, Dec. 31,
2002 2001 2002 2001
------- --------- -------- ---------
Net Income (Loss) $1,569 $(49,716) $5,092 $(43,612)
Per Unit $0.18 $(5.65) $0.58 $(4.96)
Items Affecting Comparability
after Minority Interest:
Impairment Charge $- $(45,061) $- $(45,061)
Derivative-related Items - (1,240) (2,094) 2,726
Other operating charges - (1,500) (1,500) (1,500)
Minority Interest Effect on
Special Items - 4 - 4
------- --------- -------- ---------
Total $- $(47,797) $(3,594) $(43,831)
======= ========= ======== =========
Net Income (Loss) Adjusted
for Items Affecting
Comparability $1,569 $(1,919) $8,686 $219
Per Unit $0.18 $(0.22) $0.99 $0.02
Genesis Energy, L.P. announced that its net income for the quarter ended Dec. 31, 2002 was $1,569,000, or $0.18 per unit and net income for the year was $5,092,000, or $0.58 per unit. In the comparable 2001 periods, its net loss was $49,716,000, or $5.65 per unit for the quarter and $43,612,000, or $4.96 for the year. Net income adjusted for items affecting comparability for the quarter ended Dec. 31, 2002, was $1,569,000, or $0.18 per unit. This compares to net loss adjusted for items affecting comparability for the quarter ended Dec. 31, 2001, of $1,919,000, or $0.22 per unit. Net income adjusted for items affecting comparability for the year ended Dec. 31, 2002, was $8,868,000, or $0.99 per unit. Income adjusted for items affecting comparability for 2001 was $219,000, or $0.02 per unit. Items affecting comparability include the change in fair value of derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. and an addition to the accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. for environmental costs associated with a 1999 crude oil spill oil spill: see water pollution. . Based upon a review of contracts existing at Dec. 31, 2002, the Partnership determined that it had no contracts meeting the requirement for treatment as a derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. contract that did not meet hedge requirements under SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 133, "Accounting for Derivative Instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. and Hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. Activities," (as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. and interpreted Translated from source code into machine code one line at a time. See interpreted language and interpreter. interpreted - interpreter ). As a result, the fair value of the Partnership's net asset for derivatives decreased by $2,094,000 for the year ended Dec. 31, 2002. In addition, the Partnership increased its environmental accrual by $1,500,000, primarily as a result of discussions with regulatory agencies regulatory agency Independent government commission charged by the legislature with setting and enforcing standards for specific industries in the private sector. The concept was invented by the U.S. regarding potential fines that may be imposed under the Clean Water Act in connection with the crude oil spill that occurred on its Mississippi Mississippi, state, United States Mississippi (mĭs'əsĭp`ē), one of the Deep South states of the United States. It is bordered by Alabama (E), the Gulf of Mexico (S), Arkansas and Louisiana, with most of the border formed by System in December December: see month. 1999. Items affecting comparability in the 2001 periods included an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of $45,061,000 related to the Partnership's pipeline assets and goodwill, as well as the effects of SFAS No. 133 and $1,500,000 recorded in that year for the environmental accrual for the spill spill - register spilling . Highlights of 2002 "2002 was a very important transition year for Genesis," said Mark J. Gorman Gorman may refer to: People with the surname Gorman
-- Salomon sold our General Partner to a subsidiary of Denbury Resources Inc. ("Denbury") on May 14, 2002. Genesis owns and operates a 219-mile pipeline system in Mississippi adjacent to several of Denbury's existing and prospective oil fields where Denbury is the largest oil and natural gas operator in the state. Average daily throughput on the Mississippi System increased from approximately 6,000 barrels per day during May 2002, to approximately 9,900 barrels per day in December.
-- On May 14, 2002, the General Partner amended the Limited Partnership Agreement of Genesis Energy, L.P. to broaden the right of the Common Unitholders to remove the general partner of Genesis Energy, L.P. ("GELP"). Prior to this amendment, the general partner could only be removed for cause and with approval by holders of two-thirds or more of the outstanding limited partner interests in GELP. With the approval of a majority of the limited partners in GELP, the Partnership Agreement, as amended, provides that the general partner may be removed without cause.
-- We reached agreement in principal with the US Environmental Protection Agency and the Mississippi Department of Environmental Quality for the payment of fines under environmental laws with respect to the Leaf River Spill in December 1999. Based on this agreement in principal, we have recorded accrued liabilities totaling $3.0 million. While we are pleased with the progress made to resolve the uncertainty of this environmental liability during 2002, no assurance can be made that we will reach final agreement with the government or the specific terms if a final agreement is reached.
-- We completed a major transformation of our gathering and marketing business model during 2002. The primary driver compelling us to make this change was the Dec. 31, 2001, replacement of the $300 million Guaranty Facility from Salomon with a much smaller credit facility. As a result, we reduced credit support from a daily average of $174.5 million in Salomon guarantees in 2001 to a daily average of $30.2 million in letters of credit during 2002. We also reduced the cost of trade credit from $1.2 million in 2001 to $0.6 million in 2002. To achieve this result, we reduced our average bulk and exchange volumes by 86 percent and our average wellhead volumes by 25 percent from the 2001 levels. We also redirected the focus of our lease gathering business to eliminate all volumes that required letters of credit but did not generate sufficient gross margin to support the cost of such credit support. Under the new business model, we generated gathering and marketing gross margin in 2002 that was 96 percent of the gross margin generated in 2001. We also were able to make permanent reductions to general and administrative expenses of $1.0 million.
-- We took several steps to improve the profitability of our pipeline operations. First, we idled or abandoned 338 miles of pipe on our Texas System to reduce cost or risk of operation. Second, we increased our tariffs wherever feasible to achieve an acceptable risk adjusted rate of return. Third, we adjusted our pipeline loss allowances to levels consistent with our peers.
-- We implemented a plan during 2002 to place the Mississippi System in condition to handle increased throughput from expected production increases in the area. Such operational changes will allow us to operate much of the pipeline at significantly reduced pressures and will allow us to monitor and evaluate the system more effectively. We also completed the work necessary to restore the segment idled by the 1999 Leaf River Spill.
-- During 2002, we generated $11.8 million of Available Cash before required debt reductions, reserves, and the special distribution. By retaining this cash we have strengthened our balance sheet and positioned Genesis to move forward.
-- During 2002, we did not make a regular quarterly distribution. In December 2001, we obtained a credit facility from Citicorp North America to replace our Guaranty facility and our existing working capital facility. That facility includes a provision that does not allow us to pay a distribution for any quarter unless the Borrowing Base under the facility exceeded the usage under the facility for every day of the quarter by at least $20 million plus the total amount of the distribution. For the first and second quarters of 2002, we did not meet that covenant and did not pay a distribution. During the third and fourth quarters of 2002, we met the test but did not make a distribution for these periods because of reserves established for future needs of the Partnership.
-- Because some of the Partnership's Unitholders were allocated taxable income for 2002, we made a special distribution in the amount of $0.20 per unit on Dec. 16, 2002, to Unitholders of record as of Dec. 2, 2002. The special distribution was made to mitigate the burden of incurring a tax liability without receiving a cash distribution.
Outlook As stated above, we believe we have successfully changed our business model for the gathering and marketing business to consume less credit support and working capital. We expect this business to continue to perform well during 2003, although perhaps not as well as in 2002. Both volumes and margins are expected be lower during 2003 as this business is likely to be subject to volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the and increased trade credit costs. Additionally, this business may be constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by the need for trade credit if crude oil prices increase above current levels. Pipeline gross margins should decline slightly during 2003. We expect to obtain the benefit of the 2002 tariff tariff, tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic increases for the full year 2003 as well as continued increases to throughput The speed with which a computer processes data. It is a combination of internal processing speed, peripheral speeds (I/O) and the efficiency of the operating system and other system software all working together. 1. . Offsetting these revenue increases will be increased costs for maintenance, insurance and safety. General and Administrative Costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. are expected to remain stable. Offsetting permanent cost reductions from the changed business model will be a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. adjustment for replacing the Citicorp Credit facility with a new bank facility led by Fleet Bank and cost increases for insurance and other costs to comply with SEC regulations mandated by the Sarbanes-Oxley Act See SOX. . An important factor affecting our outlook will be capital expenditures. We previously indicated that we may need to increase capital expenditures as a result of complying with federal pipeline integrity management program (IMP (Interface Message Processor) The first router used in the ARPAnet. It was a Honeywell 516 minicomputer with special interfaces and software written by BBN. Imp of the Perverse perversity as motive for men’s actions. [Am. Lit. ) regulations and other regulatory requirements Regulatory requirements are part of the process of drug discovery and drug development. Regulatory requirements describe what is necessary for a new drug to be approved for marketing in any particular country. . Based on our preliminary experience with the IMP program during 2002, we have established a capital budget of $6.7 million for 2003. For 2004, we expect to make capital expenditures of $8.4 million. After 2004, capital expenditures are expected to return to a normal pattern of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2.0 million per year. Our outlook will also be impacted by our access to capital for growth. We have obtained commitments from a group of banks to enter into a three-year revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility led by Fleet Bank to replace our existing facility that is due to expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. at the end of 2003. This facility is expected to close during March 2003. The new facility will include a restrictive covenant restrictive covenant In property law, an agreement acknowledged in a deed or lease that restricts the free use or occupancy of property, such as by forbidding commercial use or certain types of structures. similar to existing facility such that under this covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the , we may not pay a distribution for any quarter unless the borrowing base exceeds usage under the Credit Agreement by at least $10 million plus the amount of the distribution. The combination of obtaining this new facility and our relationship with Denbury should position us to grow our business. However, based on our experience in obtaining this facility, we believe that it will be important for us to further strengthen our balance sheet and improve our financial metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. before we will have access to significant capital for growth. Distribution We expect to resume regular quarterly distributions during 2003 with an anticipated first quarter distribution of at least $0.05 per unit on May 15, 2003, to unitholders of record as of April 30, 2003. Based on the need for larger than normal capital expenditures to comply with the pipeline regulations during 2003 and 2004 and the need to strengthen our balance sheet to improve our access to capital for growth, and considering the restrictive covenant in our new credit facility, we do not expect to restore the regular distribution to the targeted minimum quarterly distribution amount of $0.20 per quarter for the next year or two. However, if we exceed our expectations for improving the performance of the business, if our capital projects cost less than we currently estimate, or if our access to capital allows us to make accretive acquisitions Accretive Acquisition An acquisition that will increase the acquiring company's EPS. Notes: As they are expected to increase the acquiring company's future earnings, these acquisitions tend to be favorable for the company's market price. , we may be able to restore the targeted minimum quarterly distribution sooner. Other Matters Genesis Energy, L.P. will broadcast its Fourth Quarter and Year End Earnings Announcement Conference Call on Wednesday Wednesday: see week. , March 26, 2003, at 10:00 a.m. Central. This call can be accessed at www.genesiscrudeoil.com. Choose the Investor Relations Investor relations The process by which the corporation communicates with its investors. button. Listeners should go to this Web site at least 15 minutes before this event to download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. For those unable to attend the live broadcast, a replay will be available beginning approximately one hour after the event. Genesis Energy, L.P., operates crude oil common carrier pipelines and is an independent gatherer and marketer of crude oil in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , with operations concentrated in Texas, Louisiana Louisiana (ləwē'zēăn`ə, l  ē'–), state in the S central United States. It is bounded by Mississippi, with the Mississippi R. , Alabama Alabama, indigenous people of North AmericaAlabama (ăləbăm`ə), indigenous people of North America whose language belongs to the Muskogean branch of the Hokan-Siouan linguistic stock (see Native American languages). , Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and , Mississippi and New Mexico New Mexico, state in the SW United States. At its northwestern corner are the so-called Four Corners, where Colorado, New Mexico, Arizona, and Utah meet at right angles; New Mexico is also bordered by Oklahoma (NE), Texas (E, S), and Mexico (S). . This press release includes forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although Genesis believes that its expectations are based upon reasonable assumptions, it can give no assurance that its goals will be achieved. Important factors that could cause actual results to differ materially from those in the forward looking statements herein include the timing and extent of changes in commodity prices for oil, ability to obtain adequate credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities , environmental risks, government regulation, the ability of the Company to meet its stated business goals and other risks noted from time to time in the Company's Securities and Exchange Commission filings. (tables to follow)
Genesis Energy, L.P.
Summary Consolidated Statements of Operations
(in thousands except per unit amounts and volumes)
Twelve Months Twelve Months
Ended Ended
Dec. 31, 2002 Dec. 31, 2001
-------------- --------------
Revenues $911,806 $3,340,198
Cost of Sales 888,691 3,320,382
-------------- --------------
Gross Margin 23,115 19,816
General & Administrative
Expenses 8,289 11,691
Depreciation and Amortization
Expense 5,813 7,546
Asset Impairment Charge - 45,061
Other Operating Charges 1,500 1,500
-------------- --------------
Operating Income (Loss) 7,513 (45,982)
Interest, Net (1,035) (527)
Change in Fair Value of
Derivatives (2,094) 2,259
Gains on Asset Sales 708 167
-------------- --------------
Income (Loss) Before Minority
Interest and Cumulative Effect
of Change in Accounting Principle 5,092 (44,083)
Minority Interest - 4
-------------- --------------
Income (Loss) Before Cumulative
Effect of Change in Accounting
Principle 5,092 (44,079)
Cumulative Effect of Change in
Accounting Principle, Net of
Minority Interest Effect - 467
-------------- --------------
Net Income (Loss) $5,092 $(43,612)
============== ==============
Net Income (Loss) per Common
Unit - Basic and Diluted:
Before Cumulative
Effect of Adoption of
Accounting
Principle $0.58 $(5.01)
Cumulative Effect of
Accounting Change - 0.05
-------------- --------------
Net Income (Loss) $0.58 $(4.96)
============== ==============
Wellhead barrels per day 63,911 84,677
Pipeline barrels per day 75,869 84,686
Three Months Three Months
Ended Ended
Dec. 31, 2002 Dec. 31, 2001
-------------- --------------
Revenues $221,882 $667,379
Cost of Sales 216,695 664,240
-------------- --------------
Gross Margin 5,187 3,139
General & Administrative
Expenses 1,937 2,996
Depreciation and Amortization
Expense 1,503 1,916
Asset Impairment Charge - 45,061
Other Operating Charge - 1,500
-------------- --------------
Operating Income (Loss) 1,747 (48,334)
Interest, Net (188) (154)
Change in Fair Value of
Derivatives - (1,240)
Gains on Asset Sales 10 7
-------------- --------------
Income (Loss) Before Minority
Interest 1,569 (49,721)
Minority Interest - 5
-------------- --------------
Net Income (Loss) $1,569 $(49,716)
============== ==============
Net Income (Loss) per Common
Unit-
Basic and Diluted $0.18 $(5.65)
Wellhead barrels per day 62,730 79,593
Pipeline barrels per day 77,304 80,473
Genesis Energy, L.P.
Summary Consolidated Balance Sheets
(in thousands)
Dec. 31, 2002 Dec. 31, 2001
------------- -------------
ASSETS
Cash $1,071 $5,777
Accounts Receivable 80,664 161,798
Inventories 4,952 3,737
Other Current Assets 6,143 10,788
------------- -------------
Total Current Assets 92,830 182,100
Net Property 44,460 45,710
Other Assets 247 2,303
------------- -------------
Total Assets $137,537 $230,113
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Accounts Payable $87,386 173,545
Accrued Liabilities 8,834 10,144
------------- -------------
Total Current Liabilities 96,220 183,689
Long-Term Debt 5,500 13,900
Minority Interest 515 515
Partners' Capital 35,302 32,009
------------- -------------
Total Liabilities and Partners' Capital $137,537 $230,113
============= =============
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