Teekay LNG Partners Reports Third Quarter 2015 Results
/EINPresswire.com/ -- HAMILTON, BERMUDA -- (Marketwired) -- 11/05/15 -- Highlights
-- Generated distributable cash flow of $61.1 million in the third quarter
of 2015.
-- In September 2015, the Exmar LPG joint venture took delivery of the
fifth of its 12 LPG carrier newbuildings, which recently commenced its
10-year charter contract with Potash Corporation.
-- Declared third quarter 2015 cash distribution of $0.70 per unit.
-- Secured a new $150 million revolving credit facility to fund future
capital commitments.
Teekay GP L.L.C., the general partner of Teekay LNG Partners L.P. (Teekay LNG or the Partnership) (NYSE: TGP), today reported the Partnership's results for the quarter ended September 30, 2015. During the third quarter of 2015, the Partnership generated distributable cash flow(1) of $61.1 million, compared to $64.2 million in the same period of the prior year. The decrease in distributable cash flow was primarily due to the termination of the charter contract for the Partnership's 52 percent-owned Magellan Spirit liquefied natural gas (LNG) carrier in March 2015 (which termination the Partnership's joint venture with Marubeni Corporation is currently disputing), the scheduled expiration of the charter contract for the Partnership's 52 percent-owned Methane Spirit LNG carrier in March 2015 and the sale of one 2001-built conventional tanker in August 2014. These decreases were partially offset by the lower interest expense resulting from the December 2014 termination of capital leases for, and the subsequent refinancing of, three 70 percent-owned LNG carriers, an increase in the charter rates for two of the Partnership's Suezmax tankers and the acquisition of one liquefied petroleum gas (LPG) carrier, the Norgas Napa, in November 2014.
On October 2, 2015, the Partnership declared a cash distribution of $0.70 per unit for the quarter ended September 30, 2015. The cash distribution will be paid on November 13, 2015 to all unitholders of record on October 13, 2015.
CEO Commentary
"The Partnership generated stronger than expected distribution coverage in the third quarter, primarily due to higher than expected revenues from our Exmar LPG joint venture," commented Peter Evensen, Chief Executive Officer of Teekay GP LLC. "Teekay LNG's distributable cash flow remains stable and growing. The Partnership's diversified portfolio of fee-based contracts, with no direct link to commodity prices, comprises fixed forward revenues of approximately $11.3 billion."
"Our project teams remain focused on the execution of the Partnership's growth portfolio, including delivery of the world's first ever MEGI LNG carrier newbuildings," Mr. Evensen continued. "The first two of the Partnership's MEGI LNG carrier newbuildings are expected to deliver starting in early-2016, with the first vessel having recently commenced sea trials and the second vessel having been launched at the shipyard during the third quarter. These vessels, which we expect will be financed under a new, approximately $360 million long-term lease facility upon delivery, will both operate under fee-based charter contracts with Cheniere Energy to export LNG from Cheniere's Sabine Pass LNG export facility, which is expected to ship its first LNG cargo in early-2016. In addition, with strong support from a broad group of international banks, the Partnership recently secured a new $150 million unsecured credit facility that can be used to finance a portion of our remaining capital commitments."
(1) Distributable cash flow is a non-GAAP financial measure used by certain
investors to measure the financial performance of the Partnership and
other master limited partnerships. Please see Appendix B for a
reconciliation of this non-GAAP measure to the most directly comparable
financial measure under United States generally accepted accounting
principles (GAAP).
Financial Summary
The Partnership reported adjusted net income attributable to the partners(1) of $37.1 million for the quarter ended September 30, 2015, compared to $46.7 million for the same period of the prior year. Adjusted net income attributable to the partners excludes a number of specific items that had the net effect of decreasing net income by $29.6 million and increasing net income by $43.9 million for the three months ended September 30, 2015 and 2014, respectively, primarily relating to unrealized gains and losses on derivative instruments and foreign currency exchange gains and losses, as detailed in Appendix A to this release. Including these items, the Partnership reported net income attributable to the partners, on a GAAP basis, of $7.5 million and $90.6 million for the three months ended September 30, 2015 and 2014, respectively.
Adjusted net income attributable to the partners for the three months ended September 30, 2015 decreased from the same period in the prior year, primarily due to the Magellan Spirit LNG carrier disputed charter contract termination during the first quarter of 2015, the scheduled expiration of the charter contract for the Methane Spirit LNG carrier in mid-March 2015 and the sale of one conventional tanker in August 2014. These decreases were partially offset by higher LPG spot rates earned in 2015 and the addition of four LPG carrier newbuildings that delivered during 2014 and early 2015, net of the sale of four older LPG carriers during 2014 in the Partnership's 50 percent-owned LPG joint venture, Exmar LPG BVBA, the termination of capital leases for, and the subsequent refinancing at a lower interest rate of, three LNG carriers owned by the Partnership's RasGas II joint venture in December 2014, and the acquisition of one LPG carrier, the Norgas Napa, in November 2014.
For accounting purposes, the Partnership is required to recognize the changes in the fair value of its outstanding derivative instruments that are not designated as hedges for accounting purposes in net income. This method of accounting does not affect the Partnership's cash flows or the calculation of distributable cash flow, but results in the recognition of unrealized gains or losses on the consolidated statements of income as detailed in notes 2, 3 and 4 to the Consolidated Statements of Income and Comprehensive Income included in this release.
(1) Adjusted net income attributable to the partners is a non-GAAP financial
measure. Please refer to Appendix A to this release for a reconciliation
of this non- GAAP measure to the most directly comparable financial
measure under GAAP and information about specific items affecting net
income which are typically excluded by securities analysts in their
published estimates of the Partnership's financial results.
Operating Results
The following table highlights certain financial information for Teekay LNG's two segments: the Liquefied Gas Segment and the Conventional Tanker Segment (please refer to the "Teekay LNG's Fleet" section of this release below and Appendices C through F for further details).
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(in thousands of U.S. Three Months Ended
Dollars) September 30, 2015
(unaudited)
------------------------------------------------
Liquefied Conventional
Gas Tanker
Segment Segment Total
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Net voyage revenues(i) 75,142 23,033 98,175
Vessel operating expenses (16,260) (8,059) (24,319)
Depreciation and
amortization (17,268) (5,205) (22,473)
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CFVO from consolidated
vessels(ii) 58,821 10,261 69,082
CFVO from equity accounted
vessels(iii) 45,114 - 45,114
Total CFVO(ii)(iii) 103,935 10,261 114,196
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(in thousands of U.S. Three Months Ended
Dollars) September 30, 2014
(unaudited)
------------------------------------------------
Liquefied Conventional
Gas Tanker
Segment Segment Total
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Net voyage revenues(i) 76,447 23,881 100,328
Vessel operating expenses (14,259) (9,279) (23,538)
Depreciation and
amortization (17,737) (5,572) (23,309)
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CFVO from consolidated
vessels(ii) 62,512 8,943 71,455
CFVO from equity accounted
vessels(iii) 51,829 - 51,829
Total CFVO(ii)(iii) 114,341 8,943 123,284
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(i) Net voyage revenues represents voyage revenues less voyage expenses,
which comprise all expenses relating to certain voyages, including
bunker fuel expenses, port fees, cargo loading and unloading expenses,
canal tolls, agency fees and commissions. Net voyage revenues is a
non-GAAP financial measure used by certain investors to measure the
financial performance of shipping companies. Please see Appendix C for
a reconciliation of this non-GAAP measure as used in this release to
the most directly comparable GAAP financial measure.
(ii) Cash flow from vessel operations (CFVO) from consolidated vessels
represents income from vessel operations before (a) depreciation and
amortization expense, (b) amortization of in-process revenue contracts
included in voyage revenues, (c) adjustments for direct financing
leases to a cash basis, realized gains or losses on the Toledo Spirit
derivative contract and the revenue for two Suezmax tankers recognized
on a cash basis. CFVO is included because certain investors use this
measure to assess a company's financial performance. CFVO is not
required by GAAP and should not be considered as an alternative to net
income, equity income or any other indicator of the Partnership's
performance required by GAAP. Please see Appendix E for a
reconciliation of CFVO from consolidated vessels (a non-GAAP measure)
as used in this release to the most directly comparable GAAP financial
measure.
(iii) The Partnership's equity accounted investments for the three months
ended September 30, 2015 and 2014 include the Partnership 's
proportionate share of its equity accounted vessels' CFVO. Please see
Appendix F for a description and reconciliation of CFVO from equity
accounted vessels (a non-GAAP measure) as used in this release to the
most directly comparable GAAP financial measure.
Liquefied Gas Segment
Cash flow from vessel operations from the Partnership's Liquefied Gas segment, excluding equity accounted vessels, was $58.8 million in the third quarter of 2015 compared to $62.5 million in the same quarter of the prior year. The decrease was primarily due to the depreciation of the Euro against the U.S. Dollar compared to the same quarter of the prior year, partially offset by the acquisition of the Norgas Napa in November 2014.
Cash flow from vessel operations from the Partnership's equity accounted vessels in the Liquefied Gas segment was $45.1 million in the third quarter of 2015 compared to $51.8 million in the same quarter of the prior year. The decrease was primarily due to the disputed termination of the charter contract for the Magellan Spirit in March 2015 and the scheduled expiration of the charter contract for the Methane Spirit in mid-March 2015. Both the Magellan Spirit and Methane Spirit are owned through the Partnership's 52 percent interest in the joint venture with Marubeni Corporation. The decreases was partially offset by increased cash flows from the Partnership's 50 percent interest in Exmar LPG BVBA, as a result of higher LPG spot rates and the addition to the joint venture of four LPG carrier newbuildings that delivered during 2014 and early 2015, net of the sale of four older LPG carriers during 2014.
Conventional Tanker Segment
Cash flow from vessel operations from the Partnership's Conventional Tanker segment increased to $10.3 million in the third quarter of 2015 compared to $8.9 million in the same quarter of the prior year. The increase is due to higher charter rates earned by two of the Partnership's Suezmax tankers, the Bermuda Spirit and Hamilton Spirit, which reverted back to their original charter rates in October 2014 after a two-year reduction, partially offset by the sale of one 2001-built Suezmax tanker in August 2014.
Teekay LNG's Fleet
The following table summarizes the Partnership's fleet as of November 1, 2015:
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Number of Vessels
------------------------------------------------
In-
Owned Chartered
Vessels Vessels Newbuildings Total
------------------------------------------------
LNG Carrier Fleet 29 (i) - 21 (i) 50
LPG/Multigas Carrier Fleet 20 (ii) 3 (iii) 7 (iii) 30
Conventional Tanker Fleet 8 - - 8
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Total 57 3 28 88
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(i) The Partnership's ownership interests in these vessels range from 20
percent to 100 percent.
(ii) The Partnership's ownership interests in these vessels range from 50
percent to 99 percent.
(iii) The Partnership's interest in these vessels is 50 percent.
Liquidity and Continuous Offering Program Update
In 2013, the Partnership implemented a continuous offering program (COP) under which the Partnership may issue new common units at market prices up to a maximum aggregate amount of $100 million. During the third quarter of 2015, the Partnership sold an aggregate of 701,496 common units under the COP, generating net proceeds of approximately $18.4 million (including the general partner's 2 percent contribution and net of offering costs). Since initiation of the program, the Partnership has sold an aggregate of 2,315,822 common units under the COP, generating net proceeds of approximately $81.4 million (including the general partner's 2 percent contribution and net of offering costs).
As of September 30, 2015, the Partnership had total liquidity of $206.3 million (comprised of $154.2 million in cash and cash equivalents and $52.1 million in undrawn credit facilities). Subsequent to September 30, 2015, the Partnership secured a new $150 million unsecured revolving credit facility to fund future capital commitments, which is expected to be completed in November 2015.
Conference Call
The Partnership plans to host a conference call on Thursday, November 5, at 11:00 a.m. (ET) to discuss the results for the third quarter of 2015. All unitholders and interested parties are invited to listen to the live conference call by choosing from the following options:
-- By dialing (800) 505-9568 or (416) 204-9271, if outside North America,
and quoting conference ID code 2325564.
-- By accessing the webcast, which will be available on Teekay LNG's
website at www.teekay.com (the archive will remain on the web site for a
period of 30 days).
A supporting Third Quarter 2015 Earnings Presentation will also be available at www.teekay.com in advance of the conference call start time.
The conference call will be recorded and made available until Thursday, November 19, 2015. This recording can be accessed following the live call by dialing (888) 203-1112 or (647) 436-0148, if outside North America, and entering access code 2325564.
About Teekay LNG Partners L.P.
Teekay LNG Partners is one of the world's largest independent owners and operators of LNG carriers, providing LNG, LPG and crude oil marine transportation services primarily under long-term, fixed-rate charter contracts through its interests in 50 LNG carriers (including one LNG regasification unit and 21 newbuildings), 30 LPG/Multigas carriers (including three in-chartered LPG carriers and seven newbuildings) and eight conventional tankers. The Partnership's interests in these vessels range from 20 to 100 percent. Teekay LNG Partners L.P. is a publicly-traded master limited partnership (MLP) formed by Teekay Corporation (NYSE: TK) as part of its strategy to expand its operations in the LNG and LPG shipping sectors.
Teekay LNG Partners' common units trade on the New York Stock Exchange under the symbol "TGP".
Teekay LNG Partners L.P.
Consolidated Statements of Income and Comprehensive Income
(in thousands of U.S. Dollars, except units outstanding)
Three Months Ended Nine Months Ended
------------------------------------------------------------
September September September September
30, June 30, 30, 30, 30,
------------------------------------------------------------
2015 2015 2014 2015 2014
------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------------
Voyage revenues 98,415 98,608 100,776 294,349 303,589
Voyage expenses (240) (373) (448) (931) (2,948)
Vessel operating
expenses (24,319) (24,102) (23,538) (70,055) (72,114)
Depreciation and
amortization (22,473) (23,209) (23,309) (69,251) (70,949)
General and
administrative
expenses (5,676) (7,068) (5,579) (19,452) (18,241)
Restructuring
charges(1) (3,510) - (2,231) (3,510) (2,231)
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Income from
vessel
operations 42,197 43,856 45,671 131,150 137,106
Equity income(2) 13,523 29,002 38,710 60,583 92,007
Interest expense (11,175) (11,153) (14,747) (32,432) (44,646)
Interest income 617 611 1,530 1,962 2,750
Realized and
unrealized
(loss) gain on
derivative
instruments(3) (26,835) 10,888 2,288 (29,979) (21,568)
Foreign exchange
(loss) gain(4) (8,153) (9,546) 23,477 8,231 22,632
Other income 393 335 210 1,171 636
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Net income
before tax
expense 10,567 63,993 97,139 140,686 188,917
Income tax
expense (258) (258) (370) (291) (1,140)
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Net income 10,309 63,735 96,769 140,395 187,777
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Other
comprehensive
(loss) income:
Unrealized
(loss) gain on
qualifying cash
flow hedging
instruments in
equity
accounted joint
ventures net of
amounts
reclassified to
equity income,
net of tax (4,244) 919 549 (3,936) (733)
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Comprehensive
income 6,065 64,654 97,318 136,459 187,044
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Non-controlling
interest in net
income 2,811 5,642 6,182 11,736 15,295
General
Partner's
interest in net
income 7,622 8,568 8,469 24,832 23,152
Limited
partners'
interest in net
income (124) 49,525 82,118 103,827 149,330
Weighted-average
number of
common units
outstanding:
Basic 78,941,689 78,590,812 76,731,913 78,679,813 75,057,369
Diluted 79,009,078 78,659,264 76,776,175 78,741,533 75,126,727
Total number of
common units
outstanding at
end of period 79,513,914 78,813,676 77,302,891 79,513,914 77,302,891
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(1) Restructuring charges primarily relate to seafarer severance payments
upon the charterer's request to change the crew nationality from an
Australian crew to an international crew on the Alexander Spirit for
the three and nine months ended September 30, 2015 and upon the sale
of the Huelva Spirit conventional tanker in August 2014 for the three
and nine months ended September 30, 2014. The restructuring charge
relating to the Alexander Spirit was recovered from the charterer and
is included in voyage revenues.
(2) Equity income includes unrealized gains/losses on non-designated
derivative instruments, any ineffectiveness for derivative instruments
designated as hedges for accounting purposes and gains on sale of
vessels as detailed in the table below:
Three Months Ended Nine Months Ended
September September September September
30, June 30, 30, 30, 30,
2015 2015 2014 2015 2014
------------------------------------------------------------
Equity income 13,523 29,002 38,710 60,583 92,007
Proportionate
share of
unrealized loss
(gain) on non-
designated
derivative
instruments 2,809 (8,082) (4,852) (4,147) (2,820)
Proportionate
share of
ineffective
portion of
hedge accounted
interest rate
swaps 1,122 (394) - 1,122 -
Proportionate
share of gains
on sale of
vessels - - (8,117) - (16,923)
------------------------------------------------------------
Equity income
excluding
unrealized
gains/losses on
designated and
non-designated
derivative
instruments and
gains on sale
of vessels 17,454 20,526 25,741 57,558 72,264
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(3) The realized losses relate to the amounts the Partnership actually
paid to settle derivative instruments and the unrealized (losses)
gains relate to the change in fair value of such derivative
instruments as detailed in the table below:
Three Months Ended Nine Months Ended
September September September September
30, June 30, 30, 30, 30,
2015 2015 2014 2015 2014
------------------------------------------------------------
Realized
(losses) gains
relating to:
Interest rate
swap agreements (7,232) (7,319) (10,092) (21,856) (29,356)
Toledo Spirit
time-charter
derivative
contract 326 - - (244) (224)
------------------------------------------------------------
(6,906) (7,319) (10,092) (22,100) (29,580)
------------------------------------------------------------
Unrealized
(losses) gains
relating to:
Interest rate
swap agreements (12,232) 17,424 13,880 835 12,512
Interest rate
swaption
agreements (5,927) 593 - (5,334) -
Toledo Spirit
time-charter
derivative
contract (1,770) 190 (1,500) (3,380) (4,500)
------------------------------------------------------------
(19,929) 18,207 12,380 (7,879) 8,012
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Total realized
and unrealized
(losses) gains
on derivative
instruments (26,835) 10,888 2,288 (29,979) (21,568)
------------------------------------------------------------
------------------------------------------------------------
(4) For accounting purposes, the Partnership is required to revalue all
foreign currency-denominated monetary assets and liabilities based on
the prevailing exchange rate at the end of each reporting period. This
revaluation does not affect the Partnership's cash flows or the
calculation of distributable cash flow, but results in the recognition
of unrealized foreign currency translation gains or losses in the
Consolidated Statements of Income and Comprehensive Income.
Foreign exchange (loss) gain includes realized losses relating to the
amounts the Partnership paid to settle the Partnership's non-
designated cross-currency swaps that were entered into as economic
hedges in relation to the Partnership's Norwegian Kroner (NOK)
denominated unsecured bonds. The Partnership issued NOK 700 million,
NOK 900 million, and NOK 1,000 million of unsecured bonds between May
2012 and May 2015. Foreign exchange (loss) gain also includes
unrealized losses relating to the change in fair value of such
derivative instruments, partially offset by unrealized gains on the
revaluation of the NOK bonds as detailed in the table below:
Three Months Ended Nine Months Ended
September September September September
30, June 30, 30, 30, 30,
2015 2015 2014 2015 2014
------------------------------------------------------------
Realized losses
on cross-
currency swaps (2,279) (1,488) (458) (5,168) (1,098)
Unrealized
losses on
cross-currency
swaps (31,039) (1,741) (9,974) (49,825) (13,786)
Unrealized gains
on revaluation
of NOK bonds 25,750 1,415 11,896 43,381 14,550
Teekay LNG Partners L.P.
Consolidated Balance Sheets
(in thousands of U.S. Dollars)
As at As at
September As at June December
30, 30, 31,
------------------------------------
2015 2015 2014
------------------------------------
(unaudited) (unaudited) (unaudited)
------------------------------------
ASSETS
Current
Cash and cash equivalents 154,173 106,991 159,639
Restricted cash - current 9,699 8,899 3,000
Accounts receivable 10,197 14,519 11,265
Prepaid expenses 5,866 4,055 3,975
Current portion of net investments in
direct financing leases 20,178 19,759 15,837
Advances to affiliates 13,404 10,714 11,942
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Total current assets 213,517 164,937 205,658
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Restricted cash - long-term 60,497 46,323 42,997
Vessels and equipment
At cost, less accumulated depreciation 1,606,482 1,623,301 1,659,807
Vessels under capital leases, at cost,
less accumulated depreciation 89,799 89,040 91,776
Advances on newbuilding contracts 401,054 379,035 237,647
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Total vessels and equipment 2,097,335 2,091,376 1,989,230
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Investment in and advances to equity
accounted joint ventures 864,013 885,550 891,478
Net investments in direct financing
leases 651,440 653,673 666,658
Other assets 39,605 42,343 44,679
Derivative assets 3,297 1,958 441
Intangible assets - net 81,004 83,219 87,646
Goodwill - liquefied gas segment 35,631 35,631 35,631
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Total assets 4,046,339 4,005,010 3,964,418
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LIABILITIES AND EQUITY
Current
Accounts payable 1,707 771 643
Accrued liabilities 31,351 29,561 39,037
Unearned revenue 28,708 16,704 16,565
Current portion of long-term debt 170,432 154,631 157,235
Current obligations under capital lease 60,245 61,354 4,422
Current portion of in-process contracts 10,849 9,296 4,736
Current portion of derivative
liabilities 54,319 39,476 57,678
Advances from affiliates 20,351 35,274 43,205
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Total current liabilities 377,962 347,067 323,521
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Long-term debt 1,824,410 1,805,778 1,766,889
Long-term obligations under capital
lease - - 59,128
Long-term unearned revenue 31,699 32,178 33,938
Other long-term liabilities 72,418 73,833 74,734
In-process contracts 22,943 25,773 32,660
Derivative liabilities 190,097 152,633 126,177
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Total liabilities 2,519,529 2,437,262 2,417,047
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Equity
Limited partners 1,456,322 1,493,532 1,482,647
General Partner 56,084 56,767 56,508
Accumulated other comprehensive loss (5,339) (1,095) (1,403)
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Partners' equity 1,507,067 1,549,204 1,537,752
Non-controlling interest (1) 19,743 18,544 9,619
----------------------------------------------------------------------------
Total equity 1,526,810 1,567,748 1,547,371
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Total liabilities and total equity 4,046,339 4,005,010 3,964,418
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(1) Non-controlling interest includes: a 30 percent equity interest in the
RasGas II joint venture (which owns three LNG carriers); a 31 percent
equity interest in Teekay BLT Corporation (a joint venture which owns
two LNG carriers); and a one percent equity interest in several of the
Partnership's ship-owning subsidiaries or joint ventures, which in
each case represents the ownership interest not owned by the
Partnership.
Teekay LNG Partners L.P.
Consolidated Statements of Cash Flows
(in thousands of U.S. Dollars)
Nine Months Ended
September September
30, 30,
2015 2014
(unaudited) (unaudited)
----------------------------
Cash and cash equivalents provided by (used for)
OPERATING ACTIVITIES
Net income 140,395 187,777
Non-cash items:
Unrealized loss (gain) on derivative
instruments 7,879 (8,012)
Depreciation and amortization 69,251 70,949
Unrealized foreign currency exchange gain (13,917) (25,895)
Equity income, net of dividends received of
$89,041 (2014 - $2,600) 28,458 (89,407)
Amortization of deferred debt issuance costs
and other 3,080 2,800
Change in operating assets and liabilities (26,766) 8,514
Expenditures for dry docking (4,182) (11,572)
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Net operating cash flow 204,198 135,154
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FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 314,412 312,828
Scheduled repayments of long-term debt (88,562) (71,934)
Prepayments of long-term debt (90,000) (230,000)
Debt issuance costs (1,796) (1,513)
Scheduled repayments of capital lease
obligations (3,305) (4,658)
Proceeds from equity offerings, net of offering
costs 34,548 140,484
Increase in restricted cash (24,616) (1,778)
Cash distributions paid (191,094) (179,164)
Novation of derivative liabilities - 2,985
Dividends paid to non-controlling interest (1,612) (9,741)
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Net financing cash flow (52,025) (42,491)
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INVESTING ACTIVITIES
Investments in and additional capital
contributions to equity
accounted joint ventures (25,719) (99,105)
Repayments of advances by equity accounted joint
ventures 23,744 -
Receipts from direct financing leases 10,877 9,588
Expenditures for vessels and equipment (166,541) (45,172)
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Net investing cash flow (157,639) (134,689)
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Decrease in cash and cash equivalents (5,466) (42,026)
Cash and cash equivalents, beginning of the
period 159,639 139,481
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Cash and cash equivalents, end of the period 154,173 97,455
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Teekay LNG Partners L.P.
Appendix A - Specific Items Affecting Net Income
(in thousands of U.S. Dollars)
Set forth below is a reconciliation of the Partnership's unaudited adjusted net income attributable to the partners, a non-GAAP financial measure, to net income attributable to the partners as determined in accordance with GAAP. The Partnership believes that, in addition to conventional measures prepared in accordance with GAAP, certain investors use this information to evaluate the Partnership's financial performance. The items below are also typically excluded by securities analysts in their published estimates of the Partnership's financial results.
Adjusted net income attributable to the partners is intended to provide additional information and should not be considered a substitute for measures of performance prepared in accordance with GAAP.
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Three Months Ended
----------------------------
September September
30, 30,
2015 2014
----------------------------
(unaudited) (unaudited)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net income - GAAP basis 10,309 96,769
Less:
Net income attributable to non-controlling
interests (2,811) (6,182)
--------------------------------------------------------------------------
Net income attributable to the partners 7,498 90,587
Add (subtract) specific items affecting net
income:
Unrealized foreign currency exchange losses
(gains)(1) 6,513 (24,023)
Unrealized losses (gains) from derivative
instruments(2) 19,929 (12,380)
Unrealized losses (gains) from non-
designated and designated
derivative instruments and other items
from equity accounted investees(3) 3,931 (12,969)
Restructuring charges(4) - 2,231
Non-controlling interests' share of items
above(5) (750) 3,253
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Total adjustments 29,623 (43,888)
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Adjusted net income attributable to the
partners 37,121 46,699
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(1) Unrealized foreign exchange losses (gains) primarily relate to the
Partnership's revaluation of all foreign currency-denominated monetary
assets and liabilities based on the prevailing exchange rate at the end
of each reporting period and unrealized (gains) losses on the cross-
currency swaps economically hedging the Partnership's NOK bonds and
excludes the realized gains (losses) relating to the cross currency
swaps for the NOK bonds.
(2) Reflects the unrealized losses (gains) due to changes in the mark-to-
market value of derivative instruments that are not designated as
hedges for accounting purposes.
(3) Reflects the unrealized losses (gains) due to changes in the mark-to-
market value of derivative instruments that are not designated as
hedges for accounting purposes and any ineffectiveness for derivative
instruments designated as hedges for accounting purposes within the
Partnership's equity-accounted investments. See note 2 to the
Consolidated Statements of Income and Comprehensive Income included in
this release for further details.
(4) The restructuring charges for the three months ended September 30, 2015
relating to the Alexander Spirit were fully recovered from the
charterer and included as voyage revenues and as a result, there is no
impact on the Partnership's net income. The restructuring charges for
the three months ended September 30, 2014, relate to seafarer severance
payments upon the sale of the Huelva Spirit conventional tanker in
August 2014.
(5) Items affecting net income include items from the Partnership's
consolidated non-wholly-owned subsidiaries. The specific items
affecting net income are analyzed to determine whether any of the
amounts originated from a consolidated non-wholly-owned subsidiary.
Each amount that originates from a consolidated non-wholly-owned
subsidiary is multiplied by the non-controlling interests' percentage
share in this subsidiary to arrive at the non-controlling interests'
share of the amount. The amount identified as "non- controlling
interests' share of items listed above" in the table above is the
cumulative amount of the non-controlling interests' proportionate share
of items listed in the table.
Teekay LNG Partners L.P.
Appendix B - Reconciliation of Non-GAAP Financial Measures Distributable
Cash Flow (DCF)
(in thousands of U.S. Dollars)
Distributable cash flow represents net income adjusted for depreciation and amortization expense, non-cash items, estimated maintenance capital expenditures, unrealized gains and losses from derivatives, distributions relating to equity financing of newbuilding installments, equity income, adjustments for direct financing leases to a cash basis, and foreign exchange related items. Maintenance capital expenditures represent those capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, the Partnership's capital assets. Distributable cash flow is a quantitative standard used in the publicly-traded partnership investment community to assist in evaluating a partnership's ability to make quarterly cash distributions. Distributable cash flow is not required by GAAP and should not be considered as an alternative to net income or any other indicator of the Partnership's performance required by GAAP. The table below reconciles distributable cash flow to net income.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Three Months
--------------------------------
Ended Ended
--------------------------------
September 30, September 30,
--------------------------------
2015 2014
--------------------------------
(unaudited) (unaudited)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income: 10,309 96,769
Add:
Depreciation and amortization 22,473 23,309
Partnership's share of equity accounted
joint ventures' DCF net of estimated
maintenance and capital expenditures(1) 24,390 31,318
Unrealized loss (gain) on derivatives 19,929 (12,380)
Unrealized foreign exchange loss (gain) 6,513 (24,023)
Direct finance lease payments received in
excess of revenue recognized 4,830 4,466
Distributions relating to equity financing
of newbuildings 4,515 3,090
Less:
Estimated maintenance capital expenditures (11,907) (11,759)
Equity income (13,523) (38,710)
Deferred income tax and other non-cash
items (1,111) (3,320)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Distributable Cash Flow before Non-
controlling interest 66,418 68,760
Non-controlling interests' share of DCF
before estimated maintenance
capital expenditures (5,320) (4,574)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Distributable Cash Flow 61,098 64,186
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----------------------------------------------------------------------------
(1) The estimated maintenance capital expenditures relating to the
Partnership's share of equity accounted joint ventures for the three
months ended September 30, 2015 and 2014 were $7.4 million and $6.7
million, respectively.
Teekay LNG Partners L.P.
Appendix C - Reconciliation of Non-GAAP Financial Measures Net Voyage
Revenues
(in thousands of U.S. Dollars)
Net voyage revenues represents voyage revenues less voyage expenses, which comprise all expenses relating to certain voyages, including bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions. Net voyage revenues is included because certain investors use this data to measure the financial performance of shipping companies. Net voyage revenues is not required by GAAP and should not be considered as an alternative to voyage revenues or any other indicator of the Partnership's performance required by GAAP.
Three Months Ended September 30, 2015
------------------------------------------------
(unaudited)
------------------------------------------------
Liquefied Gas Conventional
Segment Tanker Segment Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Voyage revenues 75,142 23,273 98,415
Voyage expenses - (240) (240)
----------------------------------------------------------------------------
Net voyage revenues 75,142 23,033 98,175
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended September 30, 2014
------------------------------------------------
(unaudited)
-----------------------------------------------
Liquefied Gas Conventional
Segment Tanker Segment Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Voyage revenues 76,687 24,089 100,776
Voyage expenses (240) (208) (448)
----------------------------------------------------------------------------
Net voyage revenues 76,447 23,881 100,328
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----------------------------------------------------------------------------
Teekay LNG Partners L.P.
Appendix D - Supplemental Segment Information
(in thousands of U.S. Dollars)
Three Months Ended September 30, 2015
------------------------------------------------
(unaudited)
Conventional
Liquefied Gas Tanker
Segment Segment Total
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net voyage revenues (See
Appendix C) 75,142 23,033 98,175
Vessel operating expenses (16,260) (8,059) (24,319)
Depreciation and
amortization (17,268) (5,205) (22,473)
General and administrative
expenses (3,916) (1,760) (5,676)
Restructuring charges - (3,510) (3,510)
--------------------------------------------------------------------------
Income from vessel
operations 37,698 4,499 42,197
--------------------------------------------------------------------------
Three Months Ended September 30, 2014
------------------------------------------------
(unaudited)
Conventional
Liquefied Gas Tanker
Segment Segment Total
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net voyage revenues (See
Appendix C) 76,447 23,881 100,328
Vessel operating expenses (14,259) (9,279) (23,538)
Depreciation and
amortization (17,737) (5,572) (23,309)
General and administrative
expenses (4,142) (1,437) (5,579)
Restructuring charges - (2,231) (2,231)
--------------------------------------------------------------------------
Income from vessel
operations 40,309 5,362 45,671
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Teekay LNG Partners L.P.
Appendix E - Reconciliation of Non-GAAP Financial Measures Cash Flow from
Vessel Operations from Consolidated Vessels
(in thousands of U.S. Dollars)
Cash flow from vessel operations from consolidated vessels represents income from vessel operations before (a) depreciation and amortization expense, (b) amortization of in-process revenue contracts included in voyage revenues, and includes (c) adjustments for direct financing leases to a cash basis, realized gains or losses on the Toledo Spirit derivative contract, and the revenue for two Suezmax tankers recognized to a cash basis. The
Partnership's direct financing leases for the periods indicated relate to the Partnership's 69 percent interest in two LNG carriers, the Tangguh Sago and Tangguh Hiri, and the two LNG carriers acquired from Awilco. The
Partnership's cash flow from vessel operations from consolidated vessels does not include the Partnership's cash flow from vessel operations from its equity accounted joint ventures. Cash flow from vessel operations is included because certain investors use cash flow from vessel operations to measure a company's financial performance, and to highlight this measure for the Partnership's consolidated vessels. Cash flow from vessel operations from consolidated vessels is not required by GAAP and should not be considered as an alternative to net income or any other indicator of the Partnership's performance required by GAAP.
Three Months Ended September 30, 2015
------------------------------------------------
(unaudited)
------------------------------------------------
Liquefied Gas Conventional
Segment Tanker Segment Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income from vessel
operations (See Appendix D) 37,698 4,499 42,197
Depreciation and
amortization 17,268 5,205 22,473
Amortization of in-process
revenue contracts included
in voyage revenues (975) (278) (1,253)
Direct finance lease
payments received in excess
of revenue recognized 4,830 - 4,830
Realized gain on Toledo
Spirit derivative contract - 326 326
Cash flow adjustment for two
Suezmax tankers(1) - 509 509
----------------------------------------------------------------------------
Cash flow from vessel
operations from
consolidated vessels 58,821 10,261 69,082
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended September 30, 2014
------------------------------------------------
(unaudited)
------------------------------------------------
Liquefied Gas Conventional
Segment Tanker Segment Total
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income from vessel
operations (See Appendix D) 40,309 5,362 45,671
Depreciation and
amortization 17,737 5,572 23,309
Amortization of in-process
revenue contracts included
in voyage revenues - (278) (278)
Direct finance lease
payments received in excess
of revenue recognized 4,466 - 4,466
Cash flow adjustment for two
Suezmax tankers(1) - (1,713) (1,713)
----------------------------------------------------------------------------
Cash flow from vessel
operations from
consolidated vessels 62,512 8,943 71,455
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The Partnership's charter contracts for two of its Suezmax tankers, the
Bermuda Spirit and Hamilton Spirit, were amended in 2012, which had the
effect of reducing the daily charter rates by $12,000 per day for a
duration of 24 months ended September 30, 2014. The cash impact of the
change in hire rates is not fully reflected in the Partnership's
statements of income and comprehensive income as the change in the
lease payments is being recognized on a straight-line basis over the
term of the lease.
Teekay LNG Partners L.P.
Appendix F - Reconciliation of Non-GAAP Financial Measures Cash Flow from
Vessel Operations from Equity Accounted Vessels
(in thousands of U.S. Dollars)
Cash flow from vessel operations from equity accounted vessels represents income from vessel operations before (a) depreciation and amortization expense, (b) amortization of in-process revenue contracts, (c) gain on sale of vessels and includes (d) adjustments for direct financing leases to a cash basis. Cash flow from vessel operations from equity accounted vessels is included because certain investors use cash flow from vessel operations to measure a company's financial performance, and to highlight this measure for the Partnership's equity accounted joint ventures. Cash flow from vessel operations from equity-accounted vessels is not required by GAAP and should not be considered as an alternative to equity income or any other indicator of the Partnership's performance required by GAAP.
Three Months Ended Three Months Ended
September 30, September 30,
--------------------------------------------------------
2015 2014
--------------------------------------------------------
(unaudited) (unaudited)
--------------------------------------------------------
At Partnership's At Partnership's
100% Portion(1) 100% Portion(1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net voyage revenues 137,681 62,806 151,346 70,093
Vessel operating
expenses (41,459) (19,171) (40,720) (18,926)
Depreciation and
amortization (24,296) (12,225) (22,335) (11,329)
Gains on sale of
vessels - - 16,234 8,117
----------------------------------------------------------------------------
Income from vessel
operations of
equity accounted
vessels 71,926 31,410 104,525 47,955
Interest expense -
net (21,055) (9,862) (19,889) (9,249)
Realized and
unrealized (loss)
gain on derivative
instruments (22,849) (7,555) 2 -
Other expense - net (519) (470) 242 4
----------------------------------------------------------------------------
Net income / equity
income of equity
accounted vessels 27,503 13,523 84,880 38,710
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Income from vessel
operations 71,926 31,410 104,525 47,955
Depreciation and
amortization 24,296 12,225 22,335 11,329
Gains on sale of
vessels - - (16,234) (8,117)
Direct finance lease
payments received
in excess of
revenue recognized 8,551 3,102 7,520 2,719
Amortization of in-
process revenue
contracts (3,176) (1,623) (4,047) (2,057)
----------------------------------------------------------------------------
Cash flow from
vessel operations
from equity
accounted vessels 101,597 45,114 114,099 51,829
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The Partnership's equity accounted vessels for the three months ended
September 30, 2015 and 2014 include: the Partnership's 40 percent
interest in Teekay Nakilat (III) Corporation, which owns four LNG
carriers; the Partnership's 50 percent interest in the Excalibur and
Excelsior joint ventures, which owns one LNG carrier and one
regasification unit, respectively; the Partnership's 33 percent
interest in four LNG carriers servicing the Angola LNG project; the
Partnership's 52 percent interest in Malt LNG Netherlands Holding B.V.,
the joint venture between the Partnership and Marubeni Corporation,
which owns six LNG carriers; the Partnership's 50 percent interest in
Exmar LPG BVBA, which owns and in-charters 24 vessels, including seven
newbuildings, as at September 30, 2015, and 24 vessels, including nine
newbuildings, as at September 30, 2014; the Partnership's 30 percent
interest in two LNG carrier newbuildings and 20 percent interest in two
LNG carrier newbuildings for BG Group acquired in June 2014; and the
Partnership's 50 percent interest in six LNG newbuildings in the joint
venture between the Partnership and China LNG Shipping (Holdings)
Limited established in July 2014.
Forward-Looking Statements
This release contains forward-looking statements (as defined in Section 21E of the Securities Exchange Act of
1934, as amended) which reflect management's current views with respect to certain future events and performance, including statements regarding: the timing and certainty of completing the new $150 million unsecured revolving credit facility and the new, approximately $360 million long-term lease facility for the first two
MEGI LNG carrier newbuildings; the stability and growth of the Partnership's future distributable cash flows; the Partnership's expected fixed future revenues; the delivery timing of newbuilding vessels and the commencement of related time charter contracts; the outcome of the Partnership's dispute over the Magellan Spirit charter contract termination; and the timing of the commencement of operations of the Sabine Pass LNG project. The following factors are among those that could cause actual results to differ materially from the forward-looking statements, which involve risks and uncertainties, and that should be considered in evaluating any such statement: potential shipyard construction delays, newbuilding specification changes or cost overruns; changes in production of LNG or LPG, either generally or in particular regions; changes in trading patterns or timing of start- up of new LNG liquefaction and regasification projects significantly affecting overall vessel tonnage requirements; changes in applicable industry laws and regulations and the timing of implementation of new laws and regulations; the potential for early termination of long-term contracts of existing vessels in the Teekay LNG fleet; the inability of charterers to make future charter payments; the inability of the Partnership to renew or replace long-term contracts on existing vessels; failure by the Partnership to complete the new $150 million unsecured revolving credit facility or the approximately $360 million long-term lease facility for the two MEGI LNG carrier newbuildings; factors affecting the outcome of the Partnership's dispute over the Magellan Spirit; the
Partnership's ability to raise financing for its existing newbuildings or to purchase additional vessels or to pursue other projects; and other factors discussed in Teekay LNG Partners' filings from time to time with the SEC, including its Report on Form 20-F for the fiscal year ended December 31, 2014 and its Report on Form 6-K for the quarterly period ended June 30, 2015. The Partnership expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based.
Contacts:
Investor Relations Enquiries
Ryan Hamilton
+1 (604) 609-6442
www.teekay.com
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