UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported): February 10, 2016

 

USA Compression Partners, LP

(Exact Name of Registrant as Specified in Charter)

 

 

 

Registrant’s telephone number, including area code: (512) 473-2662

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

ITEM 2.02.     RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

 

On February 10, 2016, USA Compression Partners, LP issued a press release with respect to its financial and operating results for the fourth quarter of 2016. The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this report, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall such information, including Exhibit 99.1, be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

ITEM 9.01.     FINANCIAL STATEMENTS AND EXHIBITS.

 

(d)  Exhibits

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Dated February 10, 2016

EXHIBIT INDEX

 

 

Exhibit 99.1

 

USA Compression Partners, LP Reports Fourth Quarter 2015 Results and Full-Year 2015 Results;

Adjusted EBITDA and Distributable Cash Flow Exceed 2015 Outlook; 

Provides 2016 Outlook

 

AUSTIN, Texas, February 10, 2016 —USA Compression Partners, LP (NYSE: USAC) (“USA Compression” or the “Partnership”), announced today its financial and operating results for the fourth quarter and full-year 2015.

 

Fourth Quarter and Full-Year 2015 Summary Results

 

 

 

 

 

 

 

Fourth quarter 2015 Financial and Operating Performance

 

Revenues in the fourth quarter of 2015 rose 12.5% to $68.6 million as compared to $61.0 million for the fourth quarter of 2014.  Adjusted EBITDA rose 14.9% to $38.0 million in the fourth quarter of 2015 as compared to $33.0 million for the fourth quarter of 2014.  Distributable Cash Flow increased 6.7% to $28.0 million in the fourth quarter of 2015, compared to $26.3 million for the fourth quarter of 2014.  The Partnership had a net loss of $159.6 million in the fourth quarter of 2015, which included a $172.2 million charge due to non-cash impairment of goodwill.  Excluding this goodwill impairment charge, the Partnership’s net income was $12.6 million in the fourth quarter of 2015, compared with net income of $8.5 million for the fourth quarter of 2014. The $172.2 million goodwill impairment charge is primarily the result of the sustained decline in the market price of the Partnership’s common units. The impairment charge did not impact the Partnership’s cash flows, liquidity position or compliance with debt covenants.  The Partnership did not incur a goodwill impairment charge during the fourth quarter of 2014.

 

“We are reporting Adjusted EBITDA and Distributable Cash Flow at approximately 3% and 5% above the mid-point of our 2015 Outlook, respectively,” said Eric D. Long, USA Compression’s President and Chief Executive Officer.  “While uncertainty across the entire energy sector persists, we have been able to maintain stability in our cash flows due substantially to our geographic focus on shale plays that continue to have stable production and due to a strong focus on maximizing our utilization as well as operating margin.” 

 

“In this environment, we are remaining very disciplined with regards to our capital spending, and at present have only 15,400 horsepower on order for delivery in 2016,” he said.

 

Average revenue generating horsepower increased 7.2% to 1,420,060 for the fourth quarter of 2015 as compared to 1,324,983 for the fourth quarter of 2014, primarily due to organic growth across our compression fleet.  Average revenue per revenue generating horsepower per month increased 0.9% to $15.97 for the fourth quarter of 2015 as compared to $15.82 for the fourth quarter of 2014.  

 

Gross operating margin increased 12.3% to $47.3 million for the fourth quarter of 2015 as compared to $42.1 million for the fourth quarter of 2014. Gross operating margin as a percentage of total revenues was 68.9% for the fourth quarter of 2015, consistent with 69.0% in the fourth quarter of 2014.

 

Expansion capital expenditures (used primarily to purchase new compression units) were $36.8 million, maintenance capital expenditures were $6.0 million and cash interest expense, net was $4.1 million for the fourth quarter of 2015.  

 

On January 21, 2016, the Partnership announced a cash distribution of $0.525 per unit on its common and subordinated units. This fourth quarter distribution corresponds to an annualized distribution rate of $2.10 per unit. The distribution will be paid on February 12, 2016 to unitholders of record as of the close of business on February 2, 2016. USA Compression Holdings, LLC, the owner of approximately 41% of the Partnership’s outstanding limited partner interests, elected to reinvest all of this distribution with respect to its units pursuant to the Partnership’s Distribution Reinvestment Plan (the “DRIP”).  The Distributable Cash Flow Coverage Ratio for the fourth quarter of 2015 was 0.99x and the Cash Coverage Ratio was 2.35x.

 

Credit Facility

 

As of December 31, 2015, the outstanding balance under the Partnership’s revolving credit facility was approximately $729 million.

 

Conversion of Subordinated Units

 

Upon the payment of the quarterly distribution on February 12, 2016, the Partnership will satisfy the earnings and distribution tests contained in its partnership agreement for the conversion of all 14,048,588 outstanding subordinated units into common units. As a result, all of the subordinated units will convert to common units on a one-for-one basis on February 16, 2016.

 

Full-Year 2016 Outlook 

 

USA Compression is providing the following full-year 2016 guidance:

 

 

Conference Call

 

The Partnership will host a conference call today beginning at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss its fourth quarter and full-year 2015 performance. The call will be broadcast live over the Internet. Investors may participate either by phone or audio webcast.

 

 

About USA Compression Partners, LP

 

USA Compression Partners, LP is a growth-oriented Delaware limited partnership that is one of the nation’s largest independent providers of compression services in terms of total compression fleet horsepower. The Partnership partners with a broad customer base composed of producers, processors, gatherers and transporters of natural gas and crude oil.  The Partnership focuses on providing compression services to infrastructure applications primarily in high-volume gathering systems, processing facilities and transportation applications.  More information is available at usacompression.com.

 

Non-GAAP Financial Measures

 

This news release includes the non- GAAP financial measures of Adjusted EBITDA, gross operating margin, Distributable Cash Flow,  Distributable Cash Flow Coverage Ratio and Cash Coverage Ratio.

 

The Partnership’s management views Adjusted EBITDA as one of its primary financial measures in evaluating the results of the Partnership’s business, and the Partnership tracks this item on a monthly basis both as an absolute amount and as a percentage of revenue compared to the prior month, year-to-date and prior year and to budget. The Partnership defines EBITDA as net income (loss) before net interest expense, depreciation and amortization expense, and income taxes.  The Partnership defines Adjusted EBITDA as EBITDA plus impairment of compression equipment, impairment of goodwill, interest income, unit-based compensation expense, (gain) loss on sale of assets and transaction expenses. Adjusted EBITDA is used as a supplemental financial measure by the Partnership’s management and external users of its financial statements, such as investors and commercial banks, to assess:

 

 

The Partnership’s management believes that Adjusted EBITDA provides useful information to investors because, when viewed with GAAP results and the accompanying reconciliations, it provides a more complete understanding of the Partnership’s performance than GAAP results alone. The Partnership’s management also believes that external users of its financial statements benefit from having access to the same financial measures that management uses in evaluating the results of the Partnership’s business.

 

Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income (loss), operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP, as measures of operating performance and liquidity. Moreover, Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies.

 

Gross operating margin, a non-GAAP financial measure, is defined as revenue less cost of operations, exclusive of depreciation and amortization expense. The Partnership’s management believes that gross operating margin is useful as a supplemental measure of the Partnership’s performance. Gross operating margin is impacted primarily by the pricing trends for service operations and cost of operations, including labor rates for service technicians, volume and per unit costs for lubricant oils, quantity and pricing of routine preventative maintenance on compression units and property tax rates on compression units. Gross operating margin should not be considered an alternative to, or more meaningful than, operating income or any other measure of financial performance presented in accordance with GAAP. Moreover, gross operating margin as presented may not be comparable to similarly titled measures of other companies. Because the Partnership capitalizes assets, depreciation and amortization of equipment is a necessary element of its costs. To compensate for the limitations of gross operating margin as a measure of the Partnership’s performance, the Partnership’s management believes that it is important to consider operating income determined under GAAP, as well as gross operating margin, to evaluate the Partnership’s operating profitability.

 

Distributable Cash Flow, a non-GAAP measure, is defined as net income (loss) plus non-cash interest expense, non-cash income tax expense, depreciation and amortization expense, unit-based compensation expense, impairment of compression equipment, impairment of goodwill, certain transaction fees, and (gain) loss on sale of equipment, less maintenance capital expenditures. The definition of Distributable Cash Flow is identical to the definition of Adjusted Distributable Cash Flow previously presented.

 

The Partnership’s management believes Distributable Cash Flow is an important measure of operating performance because such measure allows management, investors and others to compare basic cash flows the Partnership generates (prior to the establishment of any retained cash reserves by the Partnership’s general partner and the effect of the DRIP) to the cash distributions the Partnership expects to pay its unitholders.

 

Distributable Cash Flow Coverage Ratio, a non-GAAP measure, is defined as Distributable Cash Flow less cash distributions to the Partnership’s general partner and incentive distribution rights (“IDRs”), divided by distributions declared to limited partner unitholders for the period. Cash Coverage Ratio is defined as Distributable Cash Flow less cash distributions to the Partnership’s general partner and IDRs divided by cash distributions paid to limited partner unitholders, after taking into account the non-cash impact of the DRIP. The Partnership’s management believes Distributable Cash Flow Coverage Ratio and Cash Coverage Ratio are important measures of operating performance because they allow management, investors and others to gauge the Partnership’s ability to pay cash distributions to limited partner unitholders using the cash flows the Partnership generates. The Partnership’s Distributable Cash Flow Coverage Ratio and Cash Coverage Ratio as presented may not be comparable to similarly titled measures of other companies.

 

This news release also contains a forward-looking estimate of Adjusted EBITDA and Distributable Cash Flow projected to be generated by the Partnership in its 2016 fiscal year. A reconciliation of the forward-looking estimates of Adjusted EBITDA and Distributable Cash Flow to net cash provided by operating activities is not provided because the items necessary to estimate net cash provided by operating activities, in particular the change in operating assets and liabilities, are not accessible or estimable at this time. The Partnership does not anticipate the changes in operating assets and liabilities to be material, but changes in accounts receivable, accounts payable, accrued liabilities and deferred revenue could be significant, such that the amount of net cash provided by operating activities would vary substantially from the amount of projected Adjusted EBITDA.

 

See “Reconciliation of Non-GAAP Financial Measures” for Adjusted EBITDA reconciled to net income (loss) and net cash provided by operating activities, and net income (loss) reconciled to Distributable Cash Flow,  Distributable Cash Flow Coverage Ratio and Cash Coverage Ratio.

 

Forward-Looking Statements

 

Some of the information in this news release may contain forward‑looking statements. These statements can be identified by the use of forward‑looking terminology including “may,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “continue,” or other similar words, and include the Partnership’s expectation of future performance contained herein, including as described under “Full-Year 2016 Outlook.” These statements discuss future expectations, contain projections of results of operations or of financial condition, or state other “forward‑looking” information. You are cautioned not to place undue reliance on any forward-looking statements, which can be affected by assumptions used or by known risks or uncertainties. Consequently, no forward‑looking statements can be guaranteed. When considering these forward‑looking statements, you should keep in mind the risk factors noted below and other cautionary statements in this news release. The risk factors and other factors noted throughout this news release could cause actual results to differ materially

from those contained in any forward‑looking statement. Known material factors that could cause the Partnership’s actual results to differ materially from the results contemplated by such forward‑looking statements are described in Part I, Item 1A (“Risk Factors”) of the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which the Partnership expects to file on or before the filing deadline,  and include:

 

All forward‑looking statements speak only as of the date of this news release and are expressly qualified in their entirety by the foregoing cautionary statements. Unless legally required, the Partnership undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Unpredictable or unknown factors not discussed herein also could have material adverse effects on forward-looking statements.

 

Investor Contacts:

 

USA Compression Partners, LP

 

 

 

USA COMPRESSION PARTNERS, LP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for unit amounts — Unaudited)

 

 

 

 

 

USA COMPRESSION PARTNERS, LP AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA TO NET INCOME (LOSS) AND NET CASH PROVIDED BY OPERATING ACTIVITIES

(In thousands — Unaudited)

 

The following table reconciles Adjusted EBITDA to net income (loss) and net cash provided by operating activities, its most directly comparable GAAP financial measures, for each of the periods presented:

 

 

 

 

USA COMPRESSION PARTNERS, LP AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

NET INCOME (LOSS) TO DISTRIBUTABLE CASH FLOW

(In thousands, except for per unit amounts — Unaudited)

 

The following table reconciles Distributable Cash Flow to net income (loss) and net cash provided by operating activities, their most directly comparable GAAP financial measures, for each of the periods presented:

 

 

 

 

 

 

 

 

 

 

 

USA COMPRESSION PARTNERS, LP AND SUBSIDIARIES

FULL-YEAR 2016 ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW GUIDANCE RANGE

RECONCILIATION TO NET INCOME

(Unaudited)