NuStar GP Holdings, LLC (NYSE: NSH) today announced fourth quarter 2016 net income of $6.0 million, or $0.14 per unit, which was impacted by a reduction of $8.7 million in equity in earnings of NuStar Energy L.P. related to NuStar Energy L.P.’s $58.7 million non-cash charge to reduce the value of its term loan to Axeon due to the announced sale of Axeon’s asphalt marketing business that NuStar Energy L.P. sold to Axeon in 2014. For the year ended December 31, 2016, net income was $55.1 million, or $1.28 per unit.

Distributable cash flow (DCF) available to unitholders for the fourth quarter of 2016 and for the year ended December 31, 2016 was $23.3 million and $92.5 million, respectively.

As previously announced on January 27, 2017, the fourth quarter 2016 distribution of $0.545 per unit will be paid on February 15, 2017 to holders of record as of February 8, 2017.

“NuStar GP Holdings, LLC’s fourth quarter and full year 2016 results were primarily driven by strong performance from NuStar Energy L.P.’s base pipeline and storage operations,” said Brad Barron, President and Chief Executive Officer of NuStar Energy L.P. and NuStar GP Holdings, LLC.

A conference call with management is scheduled for 9:00 a.m. CT today, January 31, 2017, to discuss the financial and operational results for the fourth quarter of 2016. Investors interested in listening to the discussion may dial toll-free 844/889-7787, passcode 48334486. International callers may access the discussion by dialing 661/378-9931, passcode 48334486. The company intends to have a playback available following the discussion, which may be accessed by dialing toll-free 855/859-2056, passcode 48334486. International callers may access the playback by dialing 404/537-3406, passcode 48334486. The playback will be available until 1:00 p.m. CT on March 2, 2017.

Investors interested in listening to the live discussion or a replay via the internet may access the discussion directly at http://edge.media-server.com/m/p/9594wmas or by logging on to NuStar GP Holdings, LLC’s website at www.nustargpholdings.com.

The discussion will disclose certain non-GAAP financial measures. Reconciliations of certain of these non-GAAP financial measures to U.S. GAAP may be found in this press release, with additional reconciliations located on the Financials page of the Investors section of NuStar GP Holdings, LLC’s website at www.nustargpholdings.com.

NuStar GP Holdings, LLC is a publicly traded limited liability company that owns the general partner interest, an approximate 13 percent common limited partner interest and the incentive distribution rights in NuStar Energy L.P., one of the largest independent liquids terminal and pipeline operators in the nation. NuStar has operations in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, and the United Kingdom. For more information, visit NuStar GP Holdings, LLC’s website at www.nustargpholdings.com.

This release serves as qualified notice to nominees under Treasury Regulation Sections 1.1446-4(b)(4) and (d). Please note that 100% of NuStar GP Holdings, LLC’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of NuStar GP Holdings, LLC’s distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate for individuals and corporations, as applicable. Nominees, and not NuStar GP Holdings, LLC, are treated as the withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.

Cautionary Statement Regarding Forward-Looking Statements

This press release includes and/or the related conference call will include forward-looking statements regarding future events, such as the future performance of NuStar Energy L.P. and NuStar GP Holdings, LLC. All forward-looking statements are based on the company’s beliefs as well as assumptions made by and information currently available to the company. These statements reflect the company’s current views with respect to future events and are subject to various risks, uncertainties and assumptions. These risks, uncertainties and assumptions are discussed in NuStar Energy L.P.’s and NuStar GP Holdings, LLC’s 2015 annual reports on Form 10-K and subsequent filings with the Securities and Exchange Commission. Actual results may differ materially from those described in the forward-looking statements.

   
NuStar GP Holdings, LLC and Subsidiaries
Consolidated Financial Information
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)
 
Three Months Ended December 31, Year Ended December 31,
2016   2015 2016   2015
Statement of Income Data:
Equity in earnings of NuStar Energy L.P. $ 6,671 $ 17,389 $ 56,096 $ 79,673
 
General and administrative expenses (669 ) (641 ) (3,046 ) (3,338 )
Other income (expense), net 266 (2,869 ) 3,021 (2,333 )
Interest expense, net (280 ) (232 ) (1,069 ) (893 )
 
Income before income tax benefit (expense) 5,988 13,647 55,002 73,109
Income tax benefit (expense) 11   (688 ) 66   (901 )
Net income $ 5,999   $ 12,959   $ 55,068   $ 72,208  
 
Basic and diluted net income per unit $ 0.14   $ 0.30   $ 1.28   $ 1.68  
 
Equity in Earnings of NuStar Energy L.P.:
General partner interest $ (480 ) $ 973 $ 2,091 $ 5,270

General partner incentive distribution

10,907   10,805   43,407   43,220  

General partner’s interest in earnings and incentive distributions of NuStar Energy L.P.

10,427 11,778 45,498 48,490

Limited partner interest in earnings of NuStar Energy L.P.

(3,035 ) 6,332 13,482 34,067

Amortization of step-up in basis related to NuStar Energy L.P.’s assets and liabilities

(721 ) (721 ) (2,884 ) (2,884 )
Equity in earnings of NuStar Energy L.P. $ 6,671   $ 17,389   $ 56,096   $ 79,673  
 
Weighted average number of common units outstanding 42,936,397 42,916,143 42,932,320 42,914,297
 
Cash Flow Data:
Net cash provided by operating activities 6,162 13,509 49,751 75,899
Net cash provided by investing activities 17,273 9,648 40,286 14,848
Net cash used in financing activities (23,588 ) (23,389 ) (89,864 ) (93,553 )
 
Distributable Cash Flow (Note 1):
Cash distributions from NuStar Energy L.P. associated with:
General partner interest $ 1,979 $ 1,961 $ 7,877 $ 7,844
General partner incentive distribution 10,907 10,805 43,407 43,220
Limited partner interest – common units 11,185   11,227   44,699   45,073  

Total cash distributions expected from NuStar Energy L.P.

24,071 23,993 95,983 96,137
Adjustments:
General and administrative expenses (669 ) (641 ) (3,046 ) (3,338 )
Income tax benefit (expense) 11 (688 ) 66 (901 )
Interest expense, net (280 ) (232 ) (1,069 ) (893 )
Unit-based compensation $ 159   $ —   $ 535   $ —  
DCF $ 23,292   $ 22,432   $ 92,469   $ 91,005  
 
Total distribution to unitholders $ 23,408 $ 23,397 $ 93,601 $ 93,561
 
 

NuStar GP Holdings, LLC and Subsidiaries

Consolidated Financial Information - Continued

(Unaudited, Thousands of Dollars)

 

Note 1: NuStar GP Holdings, LLC utilizes distributable cash flow (DCF) as a financial measure, although it is not defined in U.S. generally accepted accounting principles. Management believes DCF provides useful information to investors and other external users of our financial information because (i) DCF provides additional information about the cash the business is generating and (ii) investors and other external users of our financial statements benefit from having access to the same financial measure being utilized by management and our board of directors when making financial and planning decisions. Our board of directors and management use DCF when assessing our ability to fund distributions and our ability to service debt. DCF is a widely accepted financial indicator used by our industry’s investment community to compare company performance. DCF is used by our industry’s investment community, in part, because the value of our company’s units is partially based on its yield, and its yield is based on the cash distributions a company can pay its unitholders.

 
DCF is not intended to represent cash flows from operations, and is not presented as an alternative to net income. DCF should not be considered in isolation or as a substitute for a measure of performance prepared in accordance with U.S. generally accepted accounting principles. The following is a reconciliation of net income to DCF and net cash provided by operating activities:
   
Three Months Ended December 31, Year Ended December 31,
2016   2015 2016   2015
Net income $ 5,999 $ 12,959 $ 55,068 $ 72,208
Less equity in earnings of NuStar Energy L.P. (6,671 ) (17,389 ) (56,096 ) (79,673 )
Plus cash distributions expected from NuStar Energy L.P. 24,071 23,993 95,983 96,137
Gain related to NuStar Energy L.P.’s issuance of common limited partner units (266 ) — (2,408 ) —
Unit-based compensation items (a) 159   2,869   (78 ) 2,333  
DCF 23,292 22,432 92,469 91,005
Less cash distributions expected from NuStar Energy L.P. (24,071 ) (23,993 ) (95,983 ) (96,137 )
Distributions of equity in earnings of NuStar Energy L.P. 6,671 17,389 56,096 79,673
Changes in current assets and liabilities 196 (2,834 ) (3,336 ) 296
Changes in noncurrent assets and liabilities

and other items

74   515   505   1,062  
Net cash provided by operating activities $ 6,162   $ 13,509   $ 49,751   $ 75,899  
 
(a)   We intend to satisfy the vestings of equity-based awards with the issuance of our units. As such, the expenses related to these awards are considered non-cash and added back to DCF. These awards include distribution equivalent rights (DERs). Payments made in connection with DERs are deducted from DCF. Also included in this item are gains and losses resulting from the satisfaction of certain long-term incentive awards prior to the employee transfer on March 1, 2016.