10-QPeriod: Q1 FY2015

Targa Resources Corp. Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 7, 2015For Securities:TRGP

Summary

Targa Resources Corp. reported its first quarter 2015 results, marked by the significant completion of the Atlas mergers on February 27, 2015. This transformative event substantially increased the company's asset base and complexity. While reported revenues decreased year-over-year due to lower commodity prices, the pro forma results and operational metrics reflect the combined entity's expanded scale and reach across key midstream infrastructure assets. Key financial shifts include a significant increase in total assets, property, plant, and equipment, and goodwill, driven by the Atlas acquisitions. Long-term debt also saw a substantial rise to finance these transactions. Despite a lower net income available to common shareholders compared to the prior year, the company highlighted its adjusted EBITDA and distributable cash flow, which provide a view of operational cash flow generation potential, especially considering the new, larger operational footprint.

Financial Highlights

52 data points
Beta

Net Income

$3.20M

EPS (Diluted)

$0.07

Total Assets

$13.37B

Cash & Equivalents

$172.40M

Free Cash Flow

$83.70M

Financial Statements
Beta
Gross Profit$421.10M
Operating Expenses$1.54B
Operating Income$138.50M
Net Income$3.20M
EPS (Basic)$0.07
EPS (Diluted)$0.07
Shares Outstanding (Basic)45.80M
Shares Outstanding (Diluted)45.90M

Key Highlights

  • 1Completion of Atlas mergers (ATLS and APL) on February 27, 2015, significantly expanding the company's midstream operations and asset base.
  • 2Total assets more than doubled from $6.45 billion at year-end 2014 to $13.63 billion at March 31, 2015, largely due to the Atlas acquisitions.
  • 3Long-term debt increased substantially from $2.89 billion to $5.84 billion to support the financing of the Atlas mergers.
  • 4Reported revenues for the three months ended March 31, 2015, decreased to $1.68 billion from $2.29 billion in the prior year, primarily due to lower commodity prices, partially offset by increased volumes and contribution from the acquired TPL operations.
  • 5Net income available to Targa Resources Corp. common shareholders declined to $3.2 million ($0.07 per diluted share) from $19.6 million ($0.47 per diluted share) in the prior year's quarter.
  • 6The company reported $628.5 million in goodwill and $1.6 billion in intangible assets (net) as of March 31, 2015, reflecting the accounting for the Atlas acquisitions.
  • 7Liquidity remains strong with $170.7 million in cash and cash equivalents and significant available credit facilities.

Frequently Asked Questions

The primary driver was the completion of the Atlas mergers (ATLS and APL) on February 27, 2015. These acquisitions substantially increased the company's assets, including property, plant, and equipment, goodwill, and intangible assets, while also significantly increasing its long-term debt to finance the transactions.

While the acquired operations contributed to revenues, overall reported revenues decreased to $1.68 billion from $2.29 billion due to lower commodity prices. Net income available to common shareholders also decreased to $3.2 million from $19.6 million, reflecting the impact of lower commodity prices, increased interest expenses, and other acquisition-related costs, despite the expanded operational scale.

Targa Resources maintained a strong liquidity position with $170.7 million in cash and cash equivalents as of March 31, 2015. Additionally, the company had significant borrowing capacity available under its credit facilities, providing substantial financial flexibility.

The company's subsidiary, Targa Resources Partners LP, employs commodity risk management activities, primarily through derivative instruments (swaps, options, collars), to hedge a portion of its expected natural gas, NGL, and condensate equity volumes. These hedges are intended to mitigate the impact of commodity price fluctuations on operating cash flow.