ABERDEEN, Scotland--(BUSINESS WIRE)--
Highlights
For the three months ended September 30, 2016, KNOT Offshore Partners LP
(“KNOT Offshore Partners” or the “Partnership”):
|
|
•
|
|
Generated highest ever quarterly revenues of $43.6 million,
operating income of $21.2 million and net income of $19.4 million.
|
|
|
•
|
|
Generated highest ever quarterly Adjusted EBITDA of $35.1 million.1
EBITDA, Adjusted EBITDA and distributable cash flow are non-GAAP
financial measures used by management and external users of our
financial statements. Please see Appendix A for definitions of
EBITDA, Adjusted EBITDA and distributable cash flow and a
reconciliation to net income, the most directly comparable GAAP
financial measure.
|
|
|
•
|
|
Generated highest ever quarterly distributable cash flow of $20.3
million1 with a distribution coverage ratio of 1.35.2
Distribution coverage ratio is equal to distributable cash flow
divided by distributions declared for the period presented.
|
|
|
•
|
|
Achieved strong operational performance with 100% utilization of the
fleet.
|
Other events:
|
|
•
|
|
On September 13, 2016, Statoil ASA exercised its option to extend
the time charter of the vessel Bodil Knutsen for two
additional years in accordance with the existing time charter,
thereby extending the firm contract period for the time charter from
May 2017 to May 2019.
|
|
|
•
|
|
On October 13, 2016, the Partnership declared a cash distribution of
$0.52 per unit with respect to the quarter ended September 30, 2016
to be paid on November 14, 2016 to unitholders of record as of the
close of business on November 1, 2016.
|
|
|
•
|
|
On November 1, 2016, the Partnership’s wholly owned subsidiary, KNOT
Shuttle Tankers AS, entered into a share purchase agreement with
Knutsen NYK Offshore Tankers AS (“Knutsen NYK”) to acquire Knutsen
Shuttle Tankers 19 AS (“KNOT 19”), the company that owns the shuttle
tanker, Raquel Knutsen, from Knutsen NYK (the “Acquisition”).
The Partnership expects the Acquisition to close within
approximately 30 days, subject to customary closing conditions.
|
Financial Results Overview
Total revenues were $43.6 million for the three months ended September
30, 2016 (the “third quarter”) compared to $43.1 million for the three
months ended June 30, 2016 (the “second quarter”), an increase of $0.5
million. The increase was mainly due to one additional calendar day
during the third quarter.
Vessel operating expenses for the third quarter of 2016 were $7.6
million, compared to $8.0 million in the second quarter of 2016, a
decrease of $0.4 million that was mainly attributable to decreases of
$0.1 million in technical expenses and $0.3 million in crew expenses.
General and administrative expenses of $0.9 million for the third
quarter of 2016 were in line with the second quarter of 2016.
As a result, operating income for the third quarter of 2016 was $21.2
million compared to $20.2 million in the second quarter of 2016.
Net income for the three months ended September 30, 2016 was $19.4
million compared to $11.6 million for the three months ended June 30,
2016. Net income was impacted by the recognition of realized and
unrealized gain on derivative instruments of $3.6 million in the third
quarter of 2016, compared to a loss of $3.2 million in the second
quarter of 2016. The unrealized non-cash element of the mark-to-market
gain was a $4.4 million gain for the three months ended September 30,
2016 and a $1.6 million loss for the three months ended June 30, 2016.
Of the unrealized gain for the third quarter of 2016, $2.7 million
related to mark-to-market gain on interest rate swaps due to an increase
in long term interest rates, and an unrealized gain of $1.7 million
related to foreign exchange contracts due to strengthening of the
Norwegian Kroner (NOK) against the U.S. Dollar.
Net income for the three months ended September 30, 2016 increased by
$10.6 million compared to net income for the three months ended
September 30, 2015. The increase was primarily due to (i) an increase in
operating income of $1.9 million due to earnings from the Ingrid
Knutsen being included in the Partnership’s results of operations
from October 15, 2015, (ii) a decrease in operating income excluding the
results of the Ingrid Knutsen of $0.4 million mainly due an
increase of operating expenses due to receipt of insurance proceeds in
third quarter of 2015, and (iii) a $9.1 million decrease in total
finance expense primarily caused by a $3.6 million realized and
unrealized gain on derivative instruments in the three months ended
September 30, 2016 compared to a $6.5 million realized and unrealized
loss on derivative instruments in the three months ended September 30,
2015.
All ten of the Partnership’s vessels operated well throughout the third
quarter of 2016 with 100% utilization of the fleet.
Distributable cash flow was $20.3 million for the third quarter of 2016,
compared to $18.5 million for the second quarter of 2016. The
distribution declared for the third quarter of 2016 was $0.52 per unit,
equivalent to an annualized distribution of $2.08.
Financing and Liquidity
As of September 30, 2016, the Partnership had $62.4 million in available
liquidity which consisted of cash and cash equivalents of $27.4 million
and an undrawn revolving credit facility of $35 million. The undrawn
revolving credit facility is available until June 10, 2019. The
Partnership’s total interest bearing debt outstanding as of September
30, 2016 was $635.2 million ($638.5 million net of debt issuance cost).
The average margin paid on the Partnership’s outstanding debt during the
quarter ended September 30, 2016 was approximately 2.3% over LIBOR.
As of September 30, 2016, the Partnership had entered into foreign
exchange forward contracts, selling a total notional amount of
$35.0 million against the NOK at an average exchange rate of NOK 8.4 per
1.0 U.S. Dollar. These foreign exchange forward contracts are economic
hedges for certain vessel operating expenses and general expenses in NOK.
As of September 30, 2016, the Partnership had entered into various
interest rate swap agreements for a total notional amount of
$407.7 million to hedge against the interest rate risks of its variable
rate borrowings. As of September 30, 2016, the Partnership receives
interest based on three or six month LIBOR and pays a weighted average
interest rate of 1.54% under its interest rate swap agreements, which
have an average maturity of approximately 3.3 years. The
Partnership does not apply hedge accounting for derivative instruments,
and its financial results are impacted by changes in the market value of
such financial instruments.
As of September 30, 2016, the Partnership’s net exposure to floating
interest rate fluctuations on its outstanding debt was approximately
$203.4 million based on total interest bearing debt outstanding of
$638.5 million, less interest rate swaps of $407.7 million and less cash
and cash equivalents of $27.4 million.
The Partnership’s outstanding interest bearing debt of $638.5 million as
of September 30, 2016 is repayable as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
repayment
|
|
|
Balloon
repayment
|
|
(US $ in thousands)
|
|
|
|
|
|
|
|
|
|
Remainder of 2016
|
|
|
$
|
16,463
|
|
|
$
|
—
|
|
2017
|
|
|
|
50,084
|
|
|
|
—
|
|
2018
|
|
|
|
48,495
|
|
|
|
154,927
|
|
2019
|
|
|
|
28,582
|
|
|
|
237,678
|
|
2020
|
|
|
|
17,650
|
|
|
|
—
|
|
2021 and thereafter
|
|
|
|
71,650
|
|
|
|
12,940
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
232,924
|
|
|
$
|
405,545
|
|
|
|
|
|
|
|
|
|
|
Extension of Bodil Knutsen Charter
On September 13, 2016, Statoil ASA exercised its option to extend the
time charter of the vessel Bodil Knutsen for two additional years
in accordance with the existing time charter, thereby extending the firm
contract period for the time charter from May 2017 to May 2019. The
Partnership also granted five additional one-year options to Statoil ASA
to extend the time charter.
Acquisition of Raquel Knutsen
On November 1, 2016, the Partnership’s wholly owned subsidiary, KNOT
Shuttle Tankers AS, entered into a share purchase agreement to acquire
KNOT 19, the company that owns the shuttle tanker, Raquel Knutsen,
from Knutsen NYK. The Partnership expects the Acquisition to close
within approximately 30 days, subject to customary closing conditions.
The purchase price of the Acquisition is $116.5 million, net of
approximately $103.5 million of outstanding indebtedness related to the Raquel
Knutsen. On the closing of the Acquisition, KNOT 19 will repay
approximately $29.0 million of this indebtedness, leaving an aggregate
of approximately $74.5 million of debt outstanding under the secured
credit facility related to the vessel (the “Raquel Facility”). The
Raquel Facility is repayable in quarterly installments with a final
balloon payment of $30.5 million due at maturity in March 2025. The
Raquel Facility bears interest at an annual rate equal to LIBOR plus a
margin of 2.0%.
The purchase price will be settled by way of seller’s credit (the
“Seller’s Credit”) in the amount of approximately $13.0 million. The
purchase price will be subject to certain post-closing adjustments for
working capital, interest rate swaps, certain inter-company balances and
for approximately $1.1 million of capitalized fees related to the
financing of the Raquel Knutsen. In connection with the
Acquisition, Knutsen NYK will provide to KNOT Shuttle Tankers AS a loan
in the amount of approximately $12.0 million (the “Seller’s Loan”). The
Seller’s Credit and the Seller’s Loan are non-amortizing, mature in five
years and have an annual interest rate equal to LIBOR plus a margin of
4.5%.
The Raquel Knutsen was delivered in March 2015 and is operating
in Brazil under a ten-year time charter with Repsol Sinopec Brasil,
B.V., which will expire in the second quarter of 2025. The charterer has
options to extend the charter for one three-year period and one two-year
period.
The Partnership’s board of directors (the “Board”) and the conflicts
committee of the Board (the “Conflicts Committee”) have approved the
purchase price of the Acquisition. The Conflicts Committee retained an
outside financial advisor to assist with its evaluation of the
Acquisition.
The Partnership estimates that the Acquisition will generate
approximately $6.0 million of net income and approximately $13.0 million
of EBITDA3 for the year ending 2017. However, the Partnership
may not realize this level of estimated net income or EBITDA from the
Acquisition in 2017.
Outlook
To date, during the fourth quarter of 2016, utilization of the
Partnership’s fleet has been 99.5%. Operating income for the
Partnership’s expect to positively impacted by a full month operation of
Raquel Knutsen. There is no further scheduled off-hire for any of the
Partnership’s vessels for the remainder of 2016.
As of September 30, 2016, the Partnership’s fleet of ten vessels had an
average remaining fixed contract duration of 4.9 years. Including the Raquel
Knutsen, the average remaining fixed contract duration increases to
5.3 years. In addition, the charterers of the Partnership’s time charter
vessels have options to extend their charters by an additional 2.9 years
on average.
The Partnership expects to receive options to acquire four additional
vessels (in addition to the Raquel Knutsen) controlled by Knutsen
NYK pursuant to the terms of the omnibus agreement entered into in
connection with the Partnership's initial public offering (“IPO”). These
vessels are under construction in South Korea and China. As of September
30, 2016, the average remaining fixed contract duration for these four
vessels is 5.0 years. In addition, the charterers have options to extend
these charters by 12.8 years on average.
Pursuant to the omnibus agreement, the Partnership also has the option
to acquire from Knutsen NYK any offshore shuttle tankers that Knutsen
NYK acquires or owns that are employed under charters for periods of
five or more years.
There can be no assurance that the Partnership will acquire any vessels
from Knutsen NYK.
The Board believes that there may be opportunities for growth of the
Partnership, which may include current identified acquisition
candidates, and that the demand for offshore shuttle tankers will
continue to grow over time based on identified projects. Future
developments will influenced by the rate of growth of offshore oil
production activities when the existing projects are completed.
The Board is pleased with the results of operations of the Partnership
for the quarter ended September 30, 2016.
About KNOT Offshore Partners LP
KNOT Offshore Partners owns operates and acquires shuttle tankers under
long-term charters in the offshore oil production regions of the North
Sea and Brazil. KNOT Offshore Partners owns and operates a fleet of ten
offshore shuttle tankers with an average age of 4.8 years.
KNOT Offshore Partners is structured as a publicly traded master limited
partnership. KNOT Offshore Partners’ common units trade on the New York
Stock Exchange under the symbol “KNOP.”
The Partnership plans to host a conference call on Wednesday, November
2, 2016 at noon (Eastern Time) to discuss the results for the third
quarter of 2016, and invites all unitholders and interested parties to
listen to the live conference call by choosing from the following
options:
|
|
•
|
|
By dialing 1-855-209-8259 or 1-412-542-4105, if outside North
America.
|
November 1, 2016
KNOT Offshore Partners L.P.
Aberdeen, United
Kingdom
Questions should be directed to:
John Costain (+44 7496 170 620)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Nine Months Ended
|
|
|
(USD in thousands)
|
|
September
30, 2016
|
|
|
|
June
30, 2016
|
|
|
|
September
30, 2015
|
|
|
|
September
30, 2016
|
|
|
|
September
30, 2015
|
|
|
Time charter and bareboat revenues (1)
|
$
|
|
43,390
|
|
$
|
|
|
42,864
|
|
$
|
|
|
39,281
|
|
|
$
|
|
128,080
|
|
$
|
|
|
112,333
|
|
|
Other income (2)
|
|
|
197
|
|
|
|
|
199
|
|
|
|
|
3
|
|
|
|
|
596
|
|
|
|
|
154
|
|
|
Total revenues
|
|
|
43,587
|
|
|
|
|
43,063
|
|
|
|
|
39,284
|
|
|
|
|
128,676
|
|
|
|
|
112,487
|
|
|
Vessel operating expenses
|
|
|
7,588
|
|
|
|
|
7,975
|
|
|
|
|
5,936
|
|
|
|
|
23,210
|
|
|
|
|
19,907
|
|
|
Depreciation
|
|
|
13,920
|
|
|
|
|
13,913
|
|
|
|
|
12,420
|
|
|
|
|
41,725
|
|
|
|
|
35,380
|
|
|
General and administrative expenses
|
|
|
908
|
|
|
|
|
948
|
|
|
|
|
1,180
|
|
|
|
|
3,164
|
|
|
|
|
3,232
|
|
|
Goodwill impairment charge
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
6,217
|
|
|
Total operating expenses
|
|
|
22,416
|
|
|
|
|
22,836
|
|
|
|
|
19,536
|
|
|
|
|
68,099
|
|
|
|
|
64,736
|
|
|
Operating income
|
|
|
21,171
|
|
|
|
|
20,227
|
|
|
|
|
19,748
|
|
|
|
|
60,577
|
|
|
|
|
47,751
|
|
|
Finance income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
6
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
9
|
|
|
|
|
3
|
|
|
Interest expense
|
|
|
(5,129
|
|
)
|
|
|
(5,055
|
|
)
|
|
|
(4,322
|
|
)
|
|
|
(15,213
|
|
)
|
|
|
(12,720
|
)
|
|
Other finance expense
|
|
|
(315
|
|
)
|
|
|
(334
|
|
)
|
|
|
(79
|
|
)
|
|
|
(916
|
|
)
|
|
|
(178
|
)
|
|
Realized and unrealized gain (loss) on derivative instruments(3)
|
|
|
3,613
|
|
|
|
|
(3,176
|
|
)
|
|
|
(6,470
|
|
)
|
|
|
(2,747
|
|
)
|
|
|
(11,840
|
)
|
|
Net gain (loss) on foreign currency transactions
|
|
|
13
|
|
|
|
|
(82
|
|
)
|
|
|
(75
|
|
)
|
|
|
(104
|
|
)
|
|
|
(135
|
)
|
|
Total finance expense
|
|
|
(1,812
|
|
)
|
|
|
(8,646
|
|
)
|
|
|
(10,946
|
|
)
|
|
|
(18,971
|
|
)
|
|
|
(24,870
|
)
|
|
Income before income taxes
|
|
|
19,360
|
|
|
|
|
11,581
|
|
|
|
|
8,802
|
|
|
|
|
41,607
|
|
|
|
|
22,881
|
|
|
Income tax benefit (expense)
|
|
|
(3
|
|
)
|
|
|
(3
|
|
)
|
|
|
—
|
|
|
|
|
(9
|
|
)
|
|
|
(6
|
)
|
|
Net income
|
$
|
|
19,357
|
|
$
|
|
|
11,578
|
|
$
|
|
|
8,802
|
|
$
|
|
|
41,598
|
|
$
|
|
|
22,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average units outstanding (in thousands of units):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common units (4)
|
|
|
27,194
|
|
|
|
|
22,581
|
|
|
|
|
18,807
|
|
|
|
|
22,817
|
|
|
|
|
16,005
|
|
|
Subordinated units(4)
|
|
|
—
|
|
|
|
|
4,613
|
|
|
|
|
8,568
|
|
|
|
|
4,377
|
|
|
|
|
8,568
|
|
|
General partner units
|
|
|
559
|
|
|
|
|
559
|
|
|
|
|
559
|
|
|
|
|
559
|
|
|
|
|
467
|
|
|
(1)
|
|
|
Time charter revenues for the third and second quarter of 2016
include non-cash items: (i) of approximately $0.8 million in
reversal of contract liability provision and income recognition of
prepaid charter hire and (ii) $0.2 million accrued income for the Carmen
Knutsen based on average charter rate for the fixed period. Time
charter revenues for the third quarter of 2015 include a non-cash
item of approximately $0.9 million in reversal of contract liability
provision and income recognition of prepaid charter hire.
|
|
(2)
|
|
|
Other income for the third and second quarter of 2016 is mainly
related to guarantee income from Knutsen NYK. Pursuant to the
omnibus agreement, Knutsen NYK agreed to guarantee the payments of
the hire rate that is equal to or greater than the hire rate payable
under the initial charters of the Bodil Knutsen and the Windsor
Knutsen for a period of five years from the closing date of the
IPO. In October 2015, the Windsor Knutsen commenced operating
under a new BG Group time charter. The hire rate for the new charter
is below the initial charter hire rate and the difference between
the new hire rate and the initial rate is paid by Knutsen NYK.
|
|
(3)
|
|
|
The mark-to-market net loss related to interest rate swaps and
foreign exchange contracts for the three months ended September 30,
2016 includes realized losses of $0.8 million and unrealized gain of
$4.4 million. Of the net unrealized gain for the third quarter of
2016, a $1.7 million gain relates to foreign exchange contracts and
hedging operational costs in NOK. The mark-to-market net loss
related to interest rate swaps and foreign exchange contracts for
the three months ended June 30, 2016 includes realized losses of
$1.6 million and unrealized losses of $1.6 million. Of the net
unrealized loss for the second quarter of 2016, a $0.1 million loss
relates to foreign exchange contracts and hedging operational costs
in NOK. The mark-to-market net loss related to interest rate swaps
and foreign exchange contracts for the three months ended September
30, 2015 includes unrealized loss of $2.2 million and realized loss
of $4.2 million. Of the realized loss for the third quarter of 2015,
$3.2 million relates to foreign exchange contracts hedging
operational costs in NOK.
|
|
(4)
|
|
|
On May 18, 2016, all subordinated units converted into common units
on a one-for-one basis.
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30,
2016
|
|
|
At December 31,
2015
|
|
|
(USD in thousands)
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
27,382
|
|
|
$
|
23,573
|
|
|
Amounts due from related parties
|
|
|
69
|
|
|
|
58
|
|
|
Inventories
|
|
|
758
|
|
|
|
849
|
|
|
Derivative assets
|
|
|
1,645
|
|
|
|
—
|
|
|
Other current assets (1)
|
|
|
1,455
|
|
|
|
1,800
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
31,309
|
|
|
|
26,280
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term assets:
|
|
|
|
|
|
|
|
|
|
Vessels and equipment:
|
|
|
|
|
|
|
|
|
|
Vessels
|
|
|
1,352,165
|
|
|
|
1,351,219
|
|
|
Less accumulated depreciation
|
|
|
(197,518
|
)
|
|
|
(158,292
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net property, plant, and equipment
|
|
|
1,154,647
|
|
|
|
1,192,927
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
|
—
|
|
|
|
695
|
|
|
Accrued income
|
|
|
921
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,186,877
|
|
|
$
|
1,219,902
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
1,453
|
|
|
$
|
1,995
|
|
|
Accrued expenses
|
|
|
3,967
|
|
|
|
3,888
|
|
|
Current portion of long-term debt (1)
|
|
|
48,877
|
|
|
|
48,535
|
|
|
Derivative liabilities
|
|
|
2,621
|
|
|
|
5,138
|
|
|
Income taxes payable
|
|
|
21
|
|
|
|
249
|
|
|
Contract liabilities
|
|
|
1,518
|
|
|
|
1,518
|
|
|
Prepaid charter and deferred revenue
|
|
|
8,954
|
|
|
|
3,365
|
|
|
Amount due to related parties
|
|
|
765
|
|
|
|
848
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
68,176
|
|
|
|
65,536
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
Long-term debt (1)
|
|
|
586,332
|
|
|
|
619,187
|
|
|
Derivative liabilities
|
|
|
4,132
|
|
|
|
1,232
|
|
|
Contract liabilities
|
|
|
8,619
|
|
|
|
9,757
|
|
|
Deferred tax liabilities
|
|
|
957
|
|
|
|
877
|
|
|
Other long-term liabilities
|
|
|
1,427
|
|
|
|
2,543
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
669,643
|
|
|
|
699,132
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
Partners’ equity:
|
|
|
|
|
|
|
|
|
|
Common unitholders
|
|
|
507,045
|
|
|
|
411,317
|
|
|
Subordinated unitholders
|
|
|
—
|
|
|
|
99,158
|
|
|
General partner interest
|
|
|
10,189
|
|
|
|
10,295
|
|
|
|
|
|
|
|
|
|
|
|
|
Total partners’ equity
|
|
|
517,234
|
|
|
|
520,770
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
1,186,877
|
|
|
$
|
1,219,902
|
|
|
(1)
|
|
|
Effective January 1, 2016, the Partnership implemented ASU 2015-03, Interest
– Imputation of Interest (Subtopic 835-30), Simplifying the
Presentation of Debt Issuance Costs, which requires that debt
issuance costs related to a recognized debt liability be presented
in the balance sheet as a direct deduction from the carrying amount
of that debt liability rather than as an asset. The recognition and
measurement guidance for debt issuance costs is not affected.
Therefore, these costs will continue to be amortized as interest
expense using the effective interest method. The new guidance is
applied retrospectively for all periods presented. As of September
30, 2016 and December 31, 2015 the carrying amount of the deferred
debt issuance cost was $3.3 million and $4.0 million, respectively.
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
|
Nine months ended
September 30,
|
|
(USD in thousands)
|
2016
|
|
|
2015
|
|
Cash flows provided by operating activities:
|
|
|
|
|
|
Net income
|
$ 41,598
|
|
|
$ 22,875
|
|
Adjustments to reconcile net income to cash provided by operating
activities:
|
|
|
|
|
|
Depreciation
|
41,725
|
|
|
35,380
|
|
Amortization of contract intangibles / liabilities
|
(1,138)
|
|
|
(1,138)
|
|
Amortization of deferred revenue
|
(1,257)
|
|
|
(1,436 )
|
|
Amortization of deferred debt issuance cost
|
883
|
|
|
859
|
|
Goodwill impairment charge
|
—
|
|
|
6,217
|
|
Drydocking expenditure
|
(2,595)
|
|
|
—
|
|
Income tax expense
|
9
|
|
|
6
|
|
Income taxes paid
|
(241)
|
|
|
(336 )
|
|
Unrealized (gain) loss on derivative instruments
|
(568)
|
|
|
5,254
|
|
Unrealized (gain) loss on foreign currency transactions
|
30
|
|
|
18
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
Decrease (increase) in amounts due from related parties
|
(11)
|
|
|
915
|
|
Decrease (increase) in inventories
|
90
|
|
|
248
|
|
Decrease (increase) in other current assets
|
344
|
|
|
(2,239 )
|
|
Increase (decrease) in trade accounts payable
|
(565)
|
|
|
(554)
|
|
Increase (decrease) in accrued expenses
|
79
|
|
|
730
|
|
Decrease (increase) in accrued revenue
|
(921)
|
|
|
—
|
|
Increase (decrease) prepaid revenue
|
5,730
|
|
|
(1,503)
|
|
Increase (decrease) in amounts due to related parties
|
(82)
|
|
|
(1,526 )
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
83,110
|
|
|
63,770
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Disposals (additions) to vessel and equipment
|
(849)
|
|
|
(1,193)
|
|
Acquisition of Dan Sabia (net of cash acquired)
|
—
|
|
|
(36,843)
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
(849 )
|
|
|
(38,036)
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from long-term debt
|
5,000
|
|
|
—
|
|
Repayment of long-term debt
|
(38,221)
|
|
|
(55,439 )
|
|
Repayment of long-term debt from related parties
|
—
|
|
|
(12,000)
|
|
Payment on debt issuance cost
|
(174)
|
|
|
(8)
|
|
Cash distribution
|
(45,134)
|
|
|
(38,261 )
|
|
Proceeds from public offering, net of underwriters’ discount
|
—
|
|
|
116,924
|
|
Offering cost
|
—
|
|
|
(293 )
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
(78,529 )
|
|
|
10,923
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
77
|
|
|
(206 )
|
|
Net increase in cash and cash equivalents
|
3,732
|
|
|
36,451
|
|
Cash and cash equivalents at the beginning of the period
|
23,573
|
|
|
30,746
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period
|
$ 27,382
|
|
|
$ 67,197
|
|
|
|
|
|
|
APPENDIX A—RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Distributable Cash Flow (“DCF”)
Distributable cash flow represents net income adjusted for depreciation,
unrealized gains and losses from derivatives, unrealized foreign
exchange gains and losses, goodwill impairment charges, other non-cash
items and estimated maintenance and replacement capital expenditures.
Estimated maintenance and replacement capital expenditures, including
estimated expenditures for drydocking, represent capital expenditures
required to maintain over the long-term the operating capacity of, or
the revenue generated by, the Partnership’s capital assets. The
Partnership believes distributable cash flow is an important measure of
operating performance used by management and investors in
publicly-traded partnerships to compare cash generating performance of
the Partnership from period to period and to compare the cash generating
performance for specific periods to the cash distributions (if any) that
are expected to be paid to our unitholders. Distributable cash flow is a
non-GAAP financial measure and should not be considered as an
alternative to net income or any other indicator of KNOT Offshore
Partners’ performance calculated in accordance with GAAP. The table
below reconciles distributable cash flow to net income, the most
directly comparable GAAP measure.
|
|
|
|
|
|
|
|
|
|
|
(USD in thousands)
|
|
Three Months
Ended September 30,
2016
(unaudited)
|
|
|
Three Months
Ended June 30, 2016
(unaudited)
|
|
|
Net income
|
|
$
|
19,357
|
|
|
$
|
11,578
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
13,920
|
|
|
|
13,913
|
|
|
Other non-cash items; deferred costs amortization debt
|
|
|
310
|
|
|
|
287
|
|
|
Unrealized losses from interest rate derivatives and foreign
exchange currency contracts
|
|
|
—
|
|
|
|
1,608
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Estimated maintenance and replacement capital expenditures
(including drydocking reserve)
|
|
|
(7,894
|
)
|
|
|
(7,894
|
)
|
|
Other non-cash items; deferred revenue
|
|
|
(751
|
)
|
|
|
(787
|
)
|
|
Other non-cash items; accrued income
|
|
|
(216
|
)
|
|
|
(245
|
)
|
|
Unrealized gains from interest rate derivatives and foreign exchange
currency contracts
|
|
|
(4,438
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributable cash flow
|
|
$
|
20,288
|
|
|
$
|
18,460
|
|
|
Distributions declared
|
|
$
|
15,027
|
|
|
$
|
15,027
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution coverage ratio(1)
|
|
|
1.35
|
|
|
|
1.23
|
|
|
|
|
|
|
|
|
|
|
|
(1) Distribution coverage ratio is equal to distributable
cash flow divided by distributions declared for the period presented.
EBITDA and Adjusted EBITDA
EBITDA is defined as earnings before interest, depreciation and taxes.
Adjusted EBITDA refers to earnings before interest, depreciation, taxes,
goodwill impairment charges and other financial items (including other
finance expenses, realized and unrealized gain (loss) on derivative
instruments and net gain (loss) on foreign currency transactions).
EBITDA is used as a supplemental financial measure by management and
external users of financial statements, such as our lenders, to assess
our financial and operating performance and our compliance with the
financial covenants and restrictions contained in our financing
agreements. Adjusted EBITDA is used as a supplemental financial measure
by management and external users of financial statements, such as
investors, to assess our financial and operating performance. The
Partnership believes that EBITDA and Adjusted EBITDA assist its
management and investors by increasing the comparability of its
performance from period to period and against the performance of other
companies in its industry that provide EBITDA and Adjusted EBITDA
information. This increased comparability is achieved by excluding the
potentially disparate effects between periods or companies of interest,
other financial items, taxes, goodwill impairment charges and
depreciation, as applicable, which items are affected by various and
possibly changing financing methods, capital structure and historical
cost basis and which items may significantly affect net income between
periods. The Partnership believes that including EBITDA and Adjusted
EBITDA as financial measures benefits investors in (a) selecting between
investing in the Partnership and other investment alternatives and
(b) monitoring the Partnership’s ongoing financial and operational
strength in assessing whether to continue to hold common units. EBITDA
and Adjusted EBITDA are non-GAAP financial measures and should not be
considered as alternatives to net income or any other indicator of
Partnership performance calculated in accordance with GAAP.
The table below reconciles EBITDA and Adjusted EBITDA to net income, the
most directly comparable GAAP measure.
|
|
|
|
|
|
|
|
|
(USD in thousands)
|
|
Three Months Ended
September 30,
2016
(unaudited)
|
|
|
Three Months Ended
June 30,
2016
(unaudited)
|
|
Net income
|
|
$
|
19,357
|
|
|
$
|
11,578
|
|
Interest income
|
|
|
(6)
|
|
|
|
—
|
|
Interest expense
|
|
|
5,129
|
|
|
|
5,055
|
|
Depreciation
|
|
|
13,920
|
|
|
|
13,913
|
|
Income tax expense
|
|
|
3
|
|
|
|
3
|
|
EBITDA
|
|
|
38,403
|
|
|
|
30,549
|
|
Other financial items (a)
|
|
|
(3,311
|
)
|
|
|
3,592
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
35,092
|
|
|
$
|
34,141
|
|
(a)
|
|
Other financial items consist of other finance expense, realized and
unrealized gain (loss) on derivative instruments and net gain (loss)
on foreign currency transactions
|
Estimated Net Income and Estimated EBITDA for KNOT 19
For KNOT 19, the entity that the Partnership intends to purchase in the
Acquisition, estimated net income and estimated EBITDA for the year
ending December 31, 2017 are based on the following assumptions:
-
closing of the Acquisition and timely receipt of charter hire
specified in the time charter contract;
-
utilization of the Raquel Knutsen of 363 days per year and no
drydocking of the vessel;
-
no realized or unrealized gains or losses on derivative instruments
related to KNOT 19’s financing arrangements;
-
vessel operating costs according to current internal estimates; and
-
general and administrative expenses based on management’s current
internal estimates.
We consider the above assumptions to be reasonable as of the date of
this press release, but if these assumptions prove to be incorrect,
actual net income and EBITDA for KNOT 19 could differ materially from
our estimates. Neither our independent auditors nor any other
independent accountants have compiled, examined, or performed any
procedures with respect to the prospective financial information
contained herein, nor have they expressed any opinion or any other form
of assurance on such information or its achievability and assume no
responsibility for, and disclaim any association with, such prospective
financial information.
The table below reconciles estimated EBITDA to estimated net income, the
most directly comparable GAAP measure, in connection with the intended
acquisition of KNOT 19.
|
|
|
|
|
(USD in thousands)
|
|
Year Ending December
31, 2017
(unaudited)
|
|
Net income
|
|
$
|
6,041
|
|
Interest expense
|
|
|
(2,353)
|
|
Depreciation
|
|
|
(4,614)
|
|
Income tax expense
|
|
|
—
|
|
|
|
|
|
|
EBITDA
|
|
$
|
13,008
|
|
|
|
|
|
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements
concerning future events and KNOT Offshore Partners’ operations,
performance and financial condition. Forward-looking statements include,
without limitation, any statement that may predict, forecast, indicate
or imply future results, performance or achievements, and may contain
the words “believe,” “anticipate,” “expect,” “estimate,” “project,”
“will be,” “will continue,” “will likely result,” “plan,” “intend” or
words or phrases of similar meanings. These statements involve known and
unknown risks and are based upon a number of assumptions and estimates
that are inherently subject to significant uncertainties and
contingencies, many of which are beyond KNOT Offshore Partners’ control.
Actual results may differ materially from those expressed or implied by
such forward-looking statements. Forward-looking statements include
statements with respect to, among other things:
|
|
•
|
|
market trends in the shuttle tanker or general tanker industries,
including hire rates, factors affecting supply and demand, and
opportunities for the profitable operations of shuttle tankers;
|
|
|
•
|
|
Knutsen NYK’s and KNOT Offshore Partners’ ability to build shuttle
tankers and the timing of the delivery and acceptance of any such
vessels by their respective charterers;
|
|
|
•
|
|
forecasts of KNOT Offshore Partners’ ability to make or increase
distributions on its units and the amount of any such distributions;
|
|
|
•
|
|
KNOT Offshore Partners’ ability to integrate and realize the
expected benefits from acquisitions, including the intended
acquisition of KNOT 19;
|
|
|
•
|
|
the estimated net income and estimated EBITDA relating to the
intended acquisition of KNOT 19 for the year ending December 31,
2017;
|
|
|
|
|
|
|
|
•
|
|
KNOT Offshore Partners’ anticipated growth strategies;
|
|
|
•
|
|
the effects of a worldwide or regional economic slowdown;
|
|
|
•
|
|
turmoil in the global financial markets;
|
|
|
•
|
|
fluctuations in currencies and interest rates;
|
|
|
•
|
|
fluctuations in the price of oil;
|
|
|
•
|
|
general market conditions, including fluctuations in hire rates and
vessel values;
|
|
|
•
|
|
changes in KNOT Offshore Partners’ operating expenses, including
drydocking and insurance costs and bunker prices;
|
|
|
•
|
|
KNOT Offshore Partners’ future financial condition or results of
operations and future revenues and expenses;
|
|
|
•
|
|
the repayment of debt and settling of any interest rate swaps;
|
|
|
•
|
|
KNOT Offshore Partners’ ability to make additional borrowings and to
access debt and equity markets;
|
|
|
•
|
|
planned capital expenditures and availability of capital resources
to fund capital expenditures;
|
|
|
•
|
|
KNOT Offshore Partners’ ability to maintain long-term relationships
with major users of shuttle tonnage;
|
|
|
•
|
|
KNOT Offshore Partners’ ability to leverage Knutsen NYK’s
relationships and reputation in the shipping industry;
|
|
|
•
|
|
KNOT Offshore Partners’ ability to purchase vessels from Knutsen NYK
in the future;
|
|
|
•
|
|
KNOT Offshore Partners’ continued ability to enter into long-term
charters, which KNOT Offshore Partners defines as charters of five
years or more;
|
|
|
•
|
|
KNOT Offshore Partners’ ability to maximize the use of its vessels,
including the re-deployment or disposition of vessels no longer
under long-term charter;
|
|
|
•
|
|
the financial condition of KNOT Offshore Partners’ existing or
future customers and their ability to fulfill their charter
obligations;
|
|
|
•
|
|
timely purchases and deliveries of newbuilds;
|
|
|
•
|
|
future purchase prices of newbuilds and secondhand vessels;
|
|
|
•
|
|
any impairment of the value of KNOT Offshore Partners’ vessels;
|
|
|
|
|
|
|
|
•
|
|
KNOT Offshore Partners’ ability to compete successfully for future
chartering and newbuild opportunities;
|
|
|
•
|
|
acceptance of a vessel by its charterer;
|
|
|
•
|
|
termination dates and extensions of charters;
|
|
|
•
|
|
the expected cost of, and KNOT Offshore Partners’ ability to, comply
with governmental regulations, maritime self-regulatory organization
standards, as well as standard regulations imposed by its charterers
applicable to KNOT Offshore Partners’ business;
|
|
|
•
|
|
availability of skilled labor, vessel crews and management;
|
|
|
•
|
|
KNOT Offshore Partners’ general and administrative expenses and its
fees and expenses payable under the technical management agreements,
the management and administration agreements and the administrative
services agreement;
|
|
|
•
|
|
the anticipated taxation of KNOT Offshore Partners and distributions
to KNOT Offshore Partners’ unitholders;
|
|
|
•
|
|
estimated future maintenance and replacement capital expenditures;
|
|
|
•
|
|
KNOT Offshore Partners’ ability to retain key employees;
|
|
|
•
|
|
customers’ increasing emphasis on environmental and safety concerns;
|
|
|
•
|
|
potential liability from any pending or future litigation;
|
|
|
•
|
|
potential disruption of shipping routes due to accidents, political
events, piracy or acts by terrorists;
|
|
|
•
|
|
future sales of KNOT Offshore Partners’ securities in the public
market;
|
|
|
•
|
|
KNOT Offshore Partners’ business strategy and other plans and
objectives for future operations; and
|
|
|
•
|
|
other factors listed from time to time in the reports and other
documents that KNOT Offshore Partners files with the U.S Securities
and Exchange Commission, including its Annual Report on Form 20-F
for the year ended December 31, 2015.
|
All forward-looking statements included in this release are made only as
of the date of this release on. New factors emerge from time to time,
and it is not possible for KNOT Offshore Partners to predict all of
these factors. Further, KNOT Offshore Partners cannot assess the impact
of each such factor on its business or the extent to which any factor,
or combination of factors, may cause actual results to be materially
different from those contained in any forward-looking statement. KNOT
Offshore Partners does not intend to release publicly any updates or
revisions to any forward-looking statements contained herein to reflect
any change in KNOT Offshore Partners’ expectations with respect thereto
or any change in events, conditions or circumstances on which any such
statement is based.
1 EBITDA, Adjusted EBITDA and distributable cash flow are
non-GAAP financial measures used by management and external users of our
financial statements. Please see Appendix A for definitions of EBITDA,
Adjusted EBITDA and distributable cash flow and a reconciliation to net
income, the most directly comparable GAAP financial measure.
2 Distribution coverage ratio is equal to distributable cash
flow divided by distributions declared for the period presented.
3 EBITDA, which represents earnings before interest, taxes
and depreciation, is a non-GAAP financial measure used by management and
external users of our financial statements. Please see Appendix A for
guidance on the underlying assumptions used to derive estimated EBITDA
and estimated net income, and a reconciliation of estimated EBITDA to
estimated net income the most directly comparable GAAP financial measure.
View source version on businesswire.com: http://www.businesswire.com/news/home/20161101006805/en/
Source: Knot Offshore Partners