Attached files
LOOP LLC
Financial Statements
Years Ended December 31, 2016, 2015 and 2014
LOOP LLC
Index
Years Ended December 31, 2016, 2015 and 2014
Page(s)
Report of Independent Auditors for the year ended December 31, 2016 ............................................. 1
Report of Independent Auditors for the years ended December 31, 2015 and 2014 ........................... 2
Financial Statements
Balance Sheets ............................................................................................................................................ 3
Statements of Income .................................................................................................................................. 4
Statements of Comprehensive Income ........................................................................................................ 5
Statements of Changes in Members’ Equity................................................................................................. 6
Statements of Cash Flows ........................................................................................................................... 7
Notes to Financial Statements ............................................................................................................... 8–23
Report of Independent Auditors
To the Management of LOOP LLC
We have audited the accompanying financial statements of LOOP LLC, which comprise the balance sheet as of December 31, 2016, and the related statements of income, of comprehensive income, of members’ equity and of cash flows for the year then ended.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of LOOP LLC as of December 31, 2016, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matter
The financial statements of the Company as of December 31, 2015 and for the years ended December 21, 2015 and 2014 were audited by other auditors whose report, dated March 31, 2016, expressed an unmodified opinion on those statements.
/s/ PricewaterhouseCoopers LLP
New Orleans, Louisiana
February 10, 2017
1
Independent Auditors’ Report
The Owners of LOOP LLC:
We have audited the accompanying financial statements of LOOP LLC, which comprise the balance sheet as of December 31, 2015, and the related statements of income, comprehensive income, changes in members’ equity, and cash flows for the two-year period ended December 31, 2015, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of LOOP LLC as of December 31, 2015, and the results of its operations and its cash flows for the two-year period ended December 31, 2015 in accordance with U.S. generally accepted accounting principles.
/s/KPMG LLP
New Orleans, Louisiana
March 31, 2016
2
LOOP LLC
Balance Sheets
Years Ended December 31, 2016 and 2015
2016 | 2015 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 27,438,056 | $ | 53,042,282 | ||||
Receivables from affiliates | 11,002,371 | 14,340,359 | ||||||
Receivables from nonaffiliates | 10,595,533 | 13,418,007 | ||||||
Materials and supplies | 15,189,596 | 13,940,778 | ||||||
Prepayments | 6,159,982 | 5,802,124 | ||||||
Restricted cash | 8,384,000 | 5,009,500 | ||||||
Oil inventory | 37,902,796 | — | ||||||
Total Current Assets | 116,672,334 | 105,553,050 | ||||||
Property plant and equipment net of accumulated depreciation and amortization | 754,871,328 | 685,406,041 | ||||||
Construction in progress | 56,256,759 | 62,719,793 | ||||||
Net property, plant and equipment | 811,128,087 | 748,125,834 | ||||||
Other assets | 153,319 | 14,807,871 | ||||||
Total Assets | $ | 927,953,740 | $ | 868,486,755 | ||||
Liabilities and Members' Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 25,124,185 | $ | 27,094,242 | ||||
Deferred revenue | 6,523,000 | — | ||||||
Interest payable | 1,290,742 | 1,243,624 | ||||||
Current maturities of long-term debt | 94,710,000 | 20,000,000 | ||||||
Total current liabilities | 127,647,927 | 48,337,866 | ||||||
Noncurrent Liabilities | ||||||||
Long-term debt | 270,016,077 | 364,437,592 | ||||||
Pension and benefits | 40,226,441 | 37,649,546 | ||||||
Asset retirement obligation | 18,919,413 | 17,611,260 | ||||||
Deferred revenue | 1,643,674 | 5,350,636 | ||||||
Other | 5,378,504 | 5,413,168 | ||||||
Total noncurrent liabilities | 336,184,109 | 430,462,202 | ||||||
Members' Equity | 464,121,704 | 389,686,687 | ||||||
Total Liabilities and Members' Equity | $ | 927,953,740 | $ | 868,486,755 | ||||
The accompanying notes are an integral part of these condensed financial statements.
3
LOOP LLC
Statements of Income
Years Ended December 31, 2016, 2015 and 2014
2016 | 2015 | 2014 | ||||||||||
Operating revenues | ||||||||||||
Offloading | $ | 94,391,083 | $ | 91,010,164 | $ | 87,784,531 | ||||||
Pipeline receipts | 49,406,559 | 46,024,132 | 33,480,004 | |||||||||
Tank storage fees | 45,230,000 | 43,533,710 | 44,066,946 | |||||||||
Cavern storage fees | 44,304,189 | 48,249,665 | 28,739,812 | |||||||||
Storage futures trading | 19,378,786 | 3,007,402 | — | |||||||||
Port fees, blending, and incidental | 9,453,065 | 12,333,534 | 8,948,670 | |||||||||
Allowance oil | 13,344,569 | 14,453,266 | 33,195,997 | |||||||||
Management fees | 4,380,061 | 4,218,293 | 4,152,899 | |||||||||
Total operating revenues (Affiliate revenue was approximately $119,209,000, $113,014,000 and $143,814,000 in 2016, 2015 and 2014, respectively) | 279,888,312 | 262,830,166 | 240,368,859 | |||||||||
Operating expenses | ||||||||||||
Salaries and wages | 26,857,529 | 24,592,556 | 23,499,388 | |||||||||
Materials and supplies | 5,375,485 | 4,534,446 | 3,733,475 | |||||||||
Outside services | 58,970,356 | 53,413,194 | 52,510,528 | |||||||||
Fuel and power | 8,794,552 | 11,909,762 | 13,827,559 | |||||||||
Maintenance materials | 5,413,496 | 5,366,958 | 3,654,797 | |||||||||
Rentals | 12,389,556 | 12,607,372 | 12,107,650 | |||||||||
Oil loss allowance | (9,229,377 | ) | 15,372,917 | 1,059,908 | ||||||||
Depreciation, amortization, and accretion | 26,285,324 | 28,122,716 | 20,386,227 | |||||||||
Pension and benefits | 9,870,247 | 10,110,959 | 8,680,372 | |||||||||
Insurance and uninsured losses | 1,988,686 | 1,787,234 | 1,496,051 | |||||||||
Taxes - other than income | 4,578,235 | 4,477,876 | 4,417,421 | |||||||||
Total operating expenses (Affiliate expense was approximately $1,606,000, $0 and $0 in 2016, 2015 and 2014, respectively) | 151,294,089 | 172,295,990 | 145,373,376 | |||||||||
Income from operations | 128,594,223 | 90,534,176 | 94,995,483 | |||||||||
Interest and other | ||||||||||||
Other income | 2,206,185 | 2,405,433 | 1,866,513 | |||||||||
Interest income | 123,041 | 55,331 | 65,217 | |||||||||
Interest expense | (5,038,509 | ) | (5,946,343 | ) | (6,586,849 | ) | ||||||
Net interest expense and other | (2,709,283 | ) | (3,485,579 | ) | (4,655,119 | ) | ||||||
Net income | $ | 125,884,940 | $ | 87,048,597 | $ | 90,340,364 | ||||||
The accompanying notes are an integral part of these condensed financial statements.
4
LOOP LLC
Statements of Comprehensive Income
Years Ended December 31, 2016, 2015 and 2014
2016 | 2015 | 2014 | ||||||||||
Net income | $ | 125,884,940 | $ | 87,048,597 | $ | 90,340,364 | ||||||
Other comprehensive income | ||||||||||||
Pension and postretirement benefits adjustments | (1,449,923 | ) | 6,067,118 | (13,252,754 | ) | |||||||
Comprehensive income | $ | 124,435,017 | $ | 93,115,715 | $ | 77,087,610 | ||||||
The accompanying notes are an integral part of these condensed financial statements.
5
LOOP LLC
Statements of Changes in Members’ Equity
Years Ended December 31, 2016, 2015 and 2014
2016 | 2015 | 2014 | ||||||||||
Members' equity | ||||||||||||
Balances at beginning of year | $ | 419,664,718 | $ | 391,616,121 | $ | 357,775,757 | ||||||
Net income | 125,884,940 | 87,048,597 | 90,340,364 | |||||||||
Members' distributions | (50,000,000 | ) | (59,000,000 | ) | (56,500,000 | ) | ||||||
Balances at end of year | 495,549,658 | 419,664,718 | 391,616,121 | |||||||||
Accumulated other comprehensive loss | ||||||||||||
Defined benefit pension and other postretirement plans | ||||||||||||
Balances at beginning of year | (29,978,031 | ) | (36,045,149 | ) | (22,792,395 | ) | ||||||
Other comprehensive income (loss) | (1,449,923 | ) | 6,067,118 | (13,252,754 | ) | |||||||
Balances at end of year | (31,427,954 | ) | (29,978,031 | ) | (36,045,149 | ) | ||||||
Members' equity, end of year | $ | 464,121,704 | $ | 389,686,687 | $ | 355,570,972 | ||||||
The accompanying notes are an integral part of these condensed financial statements.
6
LOOP LLC
Statements of Cash Flows
Years Ended December 31, 2016, 2015 and 2014
2016 | 2015 | 2014 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 125,884,940 | $ | 87,048,597 | $ | 90,340,364 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||||||
Depreciation amortization and accretion | 26,285,324 | 28,122,716 | 20,386,227 | |||||||||
Inventory valuation write-down | — | 10,910,935 | 3,557,572 | |||||||||
Pension and benefits | 2,576,895 | (4,046,454 | ) | (13,776,700 | ) | |||||||
Changes in operating assets and liabilities | ||||||||||||
Receivables from affiliates | 3,337,988 | (2,548,393 | ) | (4,519,830 | ) | |||||||
Receivables from nonaffiliates | 2,822,474 | (1,365,534 | ) | (1,522,759 | ) | |||||||
Materials and supplies | (1,248,818 | ) | 2,895,062 | (1,138,522 | ) | |||||||
Prepayments | (357,858 | ) | (10,748 | ) | (448,380 | ) | ||||||
Other assets | (110,604 | ) | — | (1,568,623 | ) | |||||||
Oil inventory | (23,137,641 | ) | (9,835,119 | ) | 8,336,961 | |||||||
Deferred revenue | 2,816,038 | 2,090,194 | 1,337,342 | |||||||||
Other noncurrent liabilities | (1,196,102 | ) | 5,476,232 | 13,372,416 | ||||||||
Accounts payable, accrued expenses and other | 1,686,918 | 4,905,112 | (535,666 | ) | ||||||||
Interest payable | 47,118 | (72,634 | ) | (259,578 | ) | |||||||
Net cash provided by operating activities | 139,406,672 | 123,569,966 | 113,560,824 | |||||||||
Cash flows from investing activities | ||||||||||||
Capital expenditures | (91,636,398 | ) | (60,722,577 | ) | (29,502,110 | ) | ||||||
Increase in restricted cash | (3,374,500 | ) | (5,009,500 | ) | — | |||||||
Net cash used in investing activities | (95,010,898 | ) | (65,732,077 | ) | (29,502,110 | ) | ||||||
Cash flows from financing activities | ||||||||||||
Members' distributions | (50,000,000 | ) | (59,000,000 | ) | (56,500,000 | ) | ||||||
Payments on long-term debt | (20,000,000 | ) | (10,000,000 | ) | (30,000,000 | ) | ||||||
Net cash used in financing activities | (70,000,000 | ) | (69,000,000 | ) | (86,500,000 | ) | ||||||
Net decrease in cash and cash equivalents | (25,604,226 | ) | (11,162,111 | ) | (2,441,286 | ) | ||||||
Cash and cash equivalents | ||||||||||||
Beginning of year | 53,042,282 | 64,204,393 | 66,645,679 | |||||||||
End of year | $ | 27,438,056 | $ | 53,042,282 | $ | 64,204,393 | ||||||
Noncash transactions | ||||||||||||
Capital expenditures in accounts payable and accrued expenses, net | $ | (3,656,971 | ) | $ | 1,243,655 | $ | 2,695,787 | |||||
The accompanying notes are an integral part of these condensed financial statements.
7
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
1. Organization, Operations and Ownership
Organization and Operations
LOOP LLC (LOOP), headquartered in Covington, Louisiana, owns and operates midstream crude oil infrastructure, including a deep water oil port offshore of Louisiana, pipelines, and onshore storage facilities. The deep water oil port offloads crude oil from crude carrying marine vessels destined for onshore storage and pipeline transport to the LOCAP LLC (LOCAP), an affiliate pipeline system, and other connecting carriers for onward delivery to refineries on the United States of America’s (U.S.) Gulf Coast and the Midwest regions. Additionally, LOOP receives and stores oil for onward transport from various other pipeline connections, and manages the operations of LOCAP. LOOP also offers future period cavern storage capacity through auction, providing market participants with the right to store barrels of LOOP Sour Crude at one of their onshore storage facilities for a specific calendar month.
Ownership
Under the Limited Liability Company Agreement and the First Stage Throughput and Deficiency Agreement (T&D), as amended, each owner, as listed below, is obligated in accordance with its ownership percentage to ship oil through LOOP’s midstream crude oil infrastructure in quantities sufficient for LOOP to pay certain of its expenses and obligations, including LOOP’s long-term debt secured by the T&D, or to make cash payments to LOOP for which they receive credit for future throughput. At December 31, 2016, 2015 and 2014 the ownership of LOOP and the associated T&D obligations were as follows:
Ownership | T&D Obligation | |||||
Marathon Petroleum Company LP | 10.0 | % | 50.7 | % | ||
MPL Louisiana Holdings LLC | 40.7 | * | ||||
Valero Terminaling and Distribution Company | 3.2 | 3.2 | ||||
Shell Oil Company | 19.5 | 46.1 | ||||
Shell Pipeline Company LP | 26.6 | ** | ||||
100.0 | % | 100.0 | % | |||
* The T&D obligor is Marathon Petroleum Company LP | ||||||
** The T&D obligor is Shell Oil Company | ||||||
2. Summary of Significant Accounting Policies
Basis of Accounting
LOOP maintains its accounts on the accrual method of accounting in accordance with accounting principles generally accepted in the U.S.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
LOOP recognizes revenue for services as services are rendered, when there is evidence of an arrangement, the price is fixed or determined, and collection of the resulting receivables is reasonably assured.
8
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
Allowance Oil Revenue, Oil Loss Allowance, and Oil Inventory
In accordance with the terms and conditions of service with its customers, LOOP withholds one-tenth of one percent of the oil transported (adjusted for sediment and water content) and records as Allowance oil revenue and Oil inventory. An Oil loss allowance is recorded based on an estimated loss percentage. Oil inventory is stated at the lower of cost or current market value. Cost is determined based on average cost. Lower of cost or current market price adjustments of $0, $10,911,000 and $3,558,000 were recorded in 2016, 2015 and 2014, respectively. Revenue of $7,125,050 was recorded in 2014 resulting from the sale of crude oil. Oil inventory was reclassified to current assets in 2016 as LOOP anticipates selling this inventory in 2017.
LOOP drains and measures all oil physically stored in its caverns, tanks, and line-fill to obtain a comprehensive physical inventory measurement approximately twice every five years. Any difference between oil measured compared to Oil inventory is recorded in the period of measurement. LOOP recorded favorable oil measurements totaling $9,594,718 and $13,650,105 in 2016 and 2014, respectively, resulting from the inventory measurement completed in those years. This amount is included within Oil loss allowance.
Cash and Cash Equivalents
LOOP considers all highly liquid debt instruments with maturities of three months or less at the date of purchase to be cash equivalents. LOOP maintains its cash and cash equivalents at financial institutions. The balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage. Management believes this risk is not significant.
Receivables
LOOP extends credit to customers and other parties in the normal course of business. LOOP regularly reviews outstanding receivables and provides for estimated losses through an allowance for doubtful accounts, if needed. In evaluating the level of established reserves, LOOP makes judgments regarding the customers’ ability to make required payments, economic events and other factors. As the financial condition of these parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required through a charge to operations in the period in which that determination was made. There was no allowance as of December 31, 2016, 2015 and 2014.
Materials and Supplies
Materials and supplies, which consists of spare parts, diesel fuel and other supplies, are stated at cost (average cost method for spare parts and supplies and first-in, first-out method for diesel fuel). LOOP assesses the realizability of its inventories based upon specific usage and future utility. An Operating expense is recorded to reduce the value of material and supplies when factors such as excess or obsolete inventory are identified.
Restricted Cash
The Chicago Mercantile Exchange (CME) requires a cash margin to be posted in an account as security for outstanding futures contracts related to the sale of LOOP Sour Crude Storage Cavern Capacity Contracts (CAC). The margins are released each month following the expiration of the CME settled futures contracts.
Property, Plant, and Equipment
Property, plant and equipment include costs of assets constructed, purchased or leased under a capital lease, related delivery and installation costs and interest incurred on significant capital projects during their construction periods. Expenditures for renewals and betterments also are capitalized, but expenditures for normal repairs and maintenance are expensed as incurred. The cost and accumulated depreciation applicable to assets retired or sold are removed from the respective accounts, and gains or losses thereon are included in operations.
Depreciation is primarily on the units-of-throughput (UTD) basis, based upon estimated total facility throughput. LOOP’s periodically reassesses remaining total facility throughput and adjusts depreciation rates according to revised estimates.
9
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
LOOP evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the net carrying amount of the asset group may not be recoverable. Recoverability of assets is measured by a comparison of the net carrying amount of the asset group to future undiscounted net cash flows expected to be generated from the use and eventual disposition of that asset group. If the carrying amount of the asset group is not recoverable, the fair value of the asset group is measured and if the carrying amount exceeds the fair value, an impairment loss is recognized.
Interest is capitalized in connection with the construction of assets. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life.
Deferred Revenue
Deferred revenue results primarily from the sale of LOOP Sour Storage CACs for future delivery and is recognized as income after services are provided, or at the expiration date of the contract.
Taxes
As a Delaware limited liability company, LOOP has elected to be taxed as a partnership. Therefore, no provision for federal or state income taxes has been made in the accompanying financial statements.
Asset Retirement Obligation
LOOP records obligations associated with the retirement of long-lived assets at fair values in the period incurred. The fair value of the obligation is also recorded to the related asset’s carrying amount. Accretion of the liability is recognized as an operating expense and the capitalized cost is amortized over the estimated useful life of the asset on a straight line basis. LOOP revises their estimates of asset retirement obligations as information about material changes to the liability becomes known. Revisions are recorded as adjustments to existing liabilities and to the carrying amount of the related assets. Revisions occurring at or near the end of an asset’s useful life may result in impairments or losses and could materially impact earnings. LOOP’s asset retirement obligations relate to the decommissioning of pipelines, facilities and structures.
Fair Value
LOOP has a number of financial instruments, none of which are held for trading purposes. The reported amounts of certain of LOOP’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate fair value due to their short maturities.
Fair value is determined on an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, the use of market-based information is suggested over entity specific information and a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date is established.
Pension and Other Postretirement Plans
Under authoritative accounting standards, assumptions are made regarding the valuation of benefit obligations and the performance of plan assets. As required, LOOP recognizes a balance sheet asset or liability for their pension and other postretirement benefit (“OPEB”) plans equal to the plan’s funded status as of the measurement date. The primary assumptions are as follows:
• | Discount Rate—The discount rate is used in calculating the present value of benefits, which is based on projections of benefit payments to be made in the future. |
• | Expected Return on Plan Assets—The future return on plan assets are projected based on prior performance and future expectations for the types of investments held by the plans, as well as the expected long-term allocation of plan assets for these investments. These projected returns reduce the net benefit costs recorded currently. |
10
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
• | Rate of Compensation Increase—For salary-related plans, employees’ annual pay increases are projected, which are used to project employees’ pension benefits at retirement. |
• | Mortality Assumptions—Assumptions about life expectancy of plan participants are used in the measurement of related plan obligations. |
Actuarial gains and losses and the remaining components of pension and OPEB plan expense, primarily service cost, interest cost and expected return on assets, are recognized annually as a component of accumulated comprehensive loss in owners’ equity and whenever a plan is determined to qualify for a re-measurement during a fiscal year. The market-related value of assets equals the actual market value as of the date of measurement.
In selecting the discount rate, LOOP considers expected benefit payments. The discount rates for each plan were calculated as the single-equivalent rate that provided for the same plan liability that resulted from the application of a corporate bond yield-curve to the projected benefit payments expected to be paid from each plan. The corporate bond yield-curve is derived from a wide universe of high quality bonds. LOOP believes the selected discount rate is determined using preferred methodology under authoritative accounting guidance and accurately reflect market conditions as of the December 31, 2016, 2015 and 2014 measurement dates.
In estimating the expected return on plan assets, LOOP considers past performance and future expectations for the types of investments held by the plan as well as the expected long-term allocation of plan assets to these investments. In projecting the rate of compensation increase, LOOP considers past experience in light of movements in inflation rates.
In October 2014, the Society of Actuaries (“SOA”) published updated mortality tables which reflect increased life expectancy. LOOP revised the mortality assumptions to incorporate the new set of mortality tables issued by the SOA for purposes of measuring their pension and OPEB obligations at December 31, 2014. Further, the SOA released an updated Mortality Improvement Scale, MP-2015, on October 8, 2015. The updated improvement scale incorporates two additional years of mortality data and reflects a trend toward somewhat smaller improvements in longevity. In addition, the SOA released a set of factors to adjust the RP-2014 Mortality Tables to base year 2006. LOOP revised the mortality assumptions to incorporate these updated mortality improvements for purposes of measuring U.S. pension and OPEB obligations at December 31, 2015.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09 related to recognition of revenue based upon an entity’s contracts with customers to transfer goods or services. Under the new standard update, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective beginning January 1, 2019. LOOP is currently evaluating the impact of this accounting standard update on the financial statements.
In April 2015, the FASB issued ASU No. 2015-3, Simplifying the Presentation of Debt Issuance Costs. The ASU 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, consistent with debt discounts. The pronouncement is effective for annual reporting periods beginning after December 15, 2015. This accounting guidance was effective for LOOP beginning in 2016. The adoption of ASU 2015-03 was applied retrospectively and resulted in a reclassification of debt issuance costs from Other assets to Long-term debt of approximately $1,944,000 and $2,232,000 on the balance sheets of December 31, 2016 and 2015, respectively.
In May 2015, the FASB issued accounting guidance for which investments measured at net asset value per share (or its equivalent) using the practical expedient should no longer be categorized within the fair value hierarchy. This guidance was adopted in 2016 and is to be applied on a retrospective basis. LOOP adopted the ASU provision in these financial statements.
11
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. Changes to the current GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, entities that are not public business entities will no longer be required to disclose the fair value of financial instruments carried at amortized cost. The new guidance will be effective for private companies beginning in 2019, except for a certain provision in the standard that is early adoptable. LOOP early adopted the ASU provision permitting the omission of fair value disclosures for financial instruments at amortized cost in these financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases, which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. The new guidance will be effective in 2020 for private companies, with early adoption permitted. LOOP has not yet determined the potential effects on the financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update do not provide a definition of restricted cash or restricted cash equivalents. The new guidance will be effective in 2018 for private companies, with early adoption permitted. LOOP has not yet determined the potential effects on the financial statements.
3. Property, Plant, and Equipment
As of December 31, 2016 and 2015, gross property, plant, and equipment consisted of the following:
(in thousands) | 2016 | 2015 | ||||||
Land, leases, and rights of way | $ | 13,362 | $ | 13,362 | ||||
Buildings | 77,755 | 75,089 | ||||||
Equipment and communications systems | 33,499 | 31,538 | ||||||
Storage caverns and tanks | 610,191 | 546,747 | ||||||
Delivery equipment | 795,476 | 773,382 | ||||||
Furniture, fixtures, and other | 29,864 | 29,810 | ||||||
Construction in progress | 56,257 | 62,720 | ||||||
Total property, plant, and equipment | $ | 1,616,404 | $ | 1,532,648 | ||||
Accumulated depreciation | 805,276 | 784,522 | ||||||
Net property, plant, and equipment | $ | 811,128 | $ | 748,126 | ||||
Total assets depreciated under the straight-line method have an original cost of approximately $163,521,000 and $167,367,000 at December 31, 2016 and 2015, respectively, and are depreciated over useful lives ranging from 5 to 25 years, with the exception of the Northpark headquarters, which is depreciated over 50 years. The remaining assets are depreciated under the UTD method. At current throughput levels, the remaining depreciable life is approximately 22 years as of December 31, 2016. Interest capitalized was approximately $1,680,000 and $449,000 in 2016 and 2015, respectively.
12
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
Asset Retirement Obligations
The following table reconciles the beginning and ending aggregate recorded amount of the asset retirement obligations as of December 31, 2016 and 2015:
(in thousands) | Asset Retirement Obligation | |||
December 31, 2014 | $ | 6,901 | ||
Change in estimate | 8,569 | |||
Accretion expense | 2,141 | |||
December 31, 2015 | 17,611 | |||
Change in estimate | — | |||
Accretion expense | 1,308 | |||
December 31, 2016 | $ | 18,919 | ||
13
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
4. Long-Term Debt and Financing Arrangements
The Louisiana Offshore Terminal Authority (the Authority) issued Deepwater Port Revenue Bonds
(the Bonds) for the benefit of LOOP as indicated below:
(in thousands)
Series | Maturity Date | Average Interest Rates for 2016 | Date of Mandatory Put | Outstanding as of December 31, 2016 | |||||||
1997A | September 1, 2017 | 1.10 | % | N/A | $ | 24,710 | |||||
1999 | October 1, 2019 | * | N/A | 24,605 | |||||||
2001 | October 1, 2021 | * | N/A | 23,255 | |||||||
2003D | September 1, 2023 | * | N/A | 22,520 | |||||||
2007A | September 1, 2027 | 0.86 | % | N/A | 81,020 | ||||||
2007B1A1 | October 1, 2037 | * | N/A | 20,000 | |||||||
2007B1A2 | October 1, 2037 | * | N/A | 20,000 | |||||||
2007B1B | October 1, 2037 | * | N/A | 20,000 | |||||||
2007B2A1 | October 1, 2037 | 1.7 | % | October 1, 2019 | 30,000 | ||||||
2007B2A2 | October 1, 2037 | * | N/A | 10,000 | |||||||
2007B2B | October 1, 2037 | * | N/A | 20,000 | |||||||
2010A | October 1, 2018 | 3.95 | % | October 1, 2018 | 22,980 | ||||||
2010B-1 | October 1, 2040 | 2.2 | % | October 1, 2017 | 70,000 | ||||||
2010B-2 | October 1, 2040 | * | N/A | 30,000 | |||||||
2012 | October 1, 2020 | * | N/A | 22,345 | |||||||
2013A | September 1, 2033 | 0.97 | % | N/A | 56,550 | ||||||
2013B | September 1, 2033 | 1.18 | % | N/A | 43,450 | ||||||
2013C | September 1, 2034 | 0.97 | % | N/A | 37,960 | ||||||
$ | 579,395 | ||||||||||
*Less Treasury bonds held by LOOP | (212,725 | ) | |||||||||
Total debt | $ | 366,670 | |||||||||
Less amount due within one year | (94,710 | ) | |||||||||
Less issuance costs | (1,944 | ) | |||||||||
Total long-term debt | $ | 270,016 | |||||||||
Concurrent with the issuance of the Bonds, the Authority placed the proceeds with a trustee in exchange for promissory notes issued by LOOP. The promissory notes are pledged by the Authority to the trustee as security for the Bonds which are collateralized by assignment of certain of LOOP’s rights to receive payments under the T&D except for Series 1999, 2001, 2003D, 2007B 2010A, and 2010B-1&2 Bonds. The Series 1999, 2001, 2007B, and 2010A, B-1&2 Bonds were issued on an unsecured basis. The rights to receive payments under the T&D for the Series 2003D Bonds were released in 2009 as the Series 2003D Bonds are held as Treasury Bonds.
14
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
The terms of the promissory notes require future payments to the trustee for principal payments and/or payments into a sinking fund of the following amounts:
(in thousands) | Annual Amount | ||||
Years | |||||
2017 | $ | 94,710 | * | ||
2018 | 22,980 | ||||
2019 | — | ||||
2020 | — | ||||
Thereafter | 248,980 | ||||
$ | 366,670 | ||||
* The 2017 amount includes $70 million in Series 2010B1 Bonds that mature in 2040; however, are to be remarketed on October 1, 2017, thus are classified as a current liability. Series 1997A Bonds mature on September 1, 2017 and are also classified current.
The Series 1997A, 1999, 2001, 2003D, 2007A, 2007B1A1, 2007B1B, 2007B2A2, 2007B2B, 2007B1B2, 2010B-2, and Series 2013A, B, and C Bonds are redeemable by LOOP, in whole or in part, on any interest payment date at a redemption price equal to the principal amount of the Bonds plus accrued interest. These Bonds are redeemable on any interest payment date after the applicable no-call period (measured from the fixed rate conversion date, as defined in the Bond documents) with a premium of 1% for 1997A, 2007A,2007B1A1,2007B1B, 2007B2A2, 2007B2B, 2007B1B2, and 2013A, B, and C Bonds should they be converted to a multiannual (the interest rate is fixed for a period of one or more years, as defined in the Bond documents) or Fixed Rate Mode, as defined in the Bond documents.
All Bonds are redeemable by LOOP if any extraordinary event as described in the indenture occurs. Interest on the Series 1997A, 1999, 2001, 2003D, 2007A, 2007B1B, 2007B2A2, 2007B2B, 2007B1B2, 2010B-2, and 2013A, B, and C Bonds is variable and is calculated and paid as described in the indenture. Interest payment dates for the Series 2007B and 2010A, B-1&2 Bonds are April 1 and October 1 of each year.
The Series 1997A, 1999, 2001, 2003D, 2007A, 2007B1B, 2007B2B, 2007B1B2, 2007B2A2, 2010B-2, and 2013 A, B, and C Bonds may be redeemed at the option of the bondholders on any remarketing date, as defined in the indenture, in which case, replacement Bonds are to be sold by the Remarketing Agent. For Series 1997A and 2013B any principal payments required prior to maturity would first be supported by an irrevocable letter of credit, and if not remarketed by the maturity of the irrevocable letter of credit, by the T&D. Any principal payments required prior to maturity on the Series 2007A and 2013A and C would be supported by the T&D. The Series 1999, 2001, 2003D, 2007B1A1, 2007B1B, 2007B2A2, 2007B2B, 2007B1B2, 2010B-2, and 2012 Bonds which are held as Treasury Bonds are not supported by the T&D.
LOOP currently has two irrevocable letters of credit securing outstanding or contingent obligations. The first letter of credit with a commitment of approximately $25,116,000 provides security for the Series 1997A Bonds and expires on March 31, 2018. The second letter of credit with a commitment of approximately $44,164,000 provides security for the Series 2013B Bonds and expires on August 31, 2019. LOOP also has a $50,000,000 committed line of credit for general corporate purposes. The line of credit expires on December 31, 2017. There were no amounts outstanding on the line of credit at December 31, 2016 and 2015. The credit facilities mentioned above are collateralized by the assignment of certain of LOOP’s rights to receive payments under the T&D (Note 1).
Cash paid for interest was approximately $5,287,000, $5,089,000, and $5,750,000 in 2016, 2015 and 2014, respectively.
15
LOOP LLC
Balance Sheets
Years Ended December 31, 2016 and 2015
5. Related-Party Transactions
Revenues from owners and owner affiliates were approximately $119,209,000, $113,014,000, and $143,814,000 for 2016, 2015 and 2014, respectively. Expenses relating to oil exchange transactions with owner affiliates were approximately $1,606,000, $0 and $0 in 2016, 2015 and 2014, respectively.
LOOP receives a management fee under its contract to manage the operations of LOCAP. The contract is extended automatically from year-to-year unless terminated by either LOCAP or LOOP. LOCAP is the largest pipeline of LOOP’s three outbound connecting carriers and handled 73% of LOOP’s deliveries in 2016, 74% in 2015 and 76% in 2014. Two of LOOP’s owners are also owners of LOCAP. LOOP also receives a management fee under a terminalling agreement for the storage of MARS Oil Pipeline Company crude oil, which is automatically renewed.
6. Employees’ Pension and Other Postretirement Benefits
LOOP sponsors defined benefit pension plans, which cover all employees of LOOP. Benefits for retired employees are based on the average of their highest 36 consecutive months’ earnings in the 120 months preceding retirement. Benefits for active employees are based on their average earnings for the 36 consecutive months preceding the valuation date. In addition, LOOP provides postretirement healthcare and life insurance benefits to all retired employees.
FASB ASC Topic 715, Compensation Retirement Benefits, requires, among other things, the recognition of the funded status of each defined benefit plan, retiree healthcare and other post- retirement benefit plans, and postemployment benefit plans on the balance sheet. Each over funded plan is recognized as an asset and each underfunded plan is recognized as a liability. The initial impact of the standard due to unrecognized prior service costs or credits and net actuarial gains or losses as well as subsequent changes in the funded status is recognized as a component of accumulated comprehensive loss in owners’ equity.
16
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
The following table sets forth the plans’ benefit obligations, fair value of plan assets, and funded status at December 31, 2016 and 2015:
(in thousands) | Pension benefits | Other Postretirement Benefits | ||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Change in projected benefit obligation | ||||||||||||||||
Benefit obligation at January 1 | $ | 85,118 | $ | 87,607 | $ | 15,201 | $ | 14,715 | ||||||||
Service cost | 3,164 | 3,424 | 613 | 619 | ||||||||||||
Interest cost | 3,810 | 3,665 | 664 | 604 | ||||||||||||
Participant contributions | — | — | 192 | 182 | ||||||||||||
Actuarial (gain) loss | 4,847 | (7,180 | ) | 441 | (402 | ) | ||||||||||
Benefit payments | (2,662 | ) | (2,398 | ) | (489 | ) | (517 | ) | ||||||||
Benefit obligation at December 31 | $ | 94,277 | $ | 85,118 | $ | 16,622 | $ | 15,201 | ||||||||
Accumulated benefit obligation | $ | 80,439 | $ | 73,003 | $ | — | $ | — | ||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets at January 1 | $ | 63,015 | $ | 60,626 | $ | — | $ | — | ||||||||
Actual return on plan assets | 6,693 | 656 | — | — | ||||||||||||
Employer contributions | 4,231 | 4,131 | 297 | 335 | ||||||||||||
Participant contributions | — | — | 192 | 182 | ||||||||||||
Benefit payments | (2,662 | ) | (2,398 | ) | (489 | ) | (517 | ) | ||||||||
Fair value of plan assets at December 31 | $ | 71,277 | $ | 63,015 | $ | — | $ | — | ||||||||
Funded status of plans | $ | (23,000 | ) | $ | (22,103 | ) | $ | (16,622 | ) | $ | (15,201 | ) | ||||
Amounts recognized in the balance sheet | ||||||||||||||||
Current assets | $ | — | $ | — | $ | — | $ | — | ||||||||
Noncurrent asset | — | — | — | — | ||||||||||||
Current liability | 30 | 20 | 476 | 476 | ||||||||||||
Noncurrent liability | 22,971 | 22,083 | 16,146 | 14,725 | ||||||||||||
Accumulated other comprehensive loss | 28,734 | 27,658 | 2,694 | 2,320 | ||||||||||||
17
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
Components of net periodic retirement and other post-retirement benefits expense consisted of the following:
(in thousands) | 2016 | 2015 | 2014 | |||||||||
Pension plans | ||||||||||||
Service cost | $ | 3,164 | $ | 3,424 | $ | 2,942 | ||||||
Interest cost | 3,810 | 3,665 | 3,409 | |||||||||
Expected return on assets | (4,795 | ) | (4,456 | ) | (4,071 | ) | ||||||
Amortization of prior service cost | — | — | — | |||||||||
Amortization of actuarial loss | 1,873 | 2,211 | 1,550 | |||||||||
Net periodic pension cost | 4,052 | 4,844 | 3,830 | |||||||||
Other postretirement plans | ||||||||||||
Service cost | 613 | 619 | 497 | |||||||||
Interest cost | 664 | 604 | 551 | |||||||||
Expected return on assets | — | — | — | |||||||||
Amortization of prior service cost | — | — | — | |||||||||
Amortization of actuarial loss | 68 | 74 | — | |||||||||
Net other postretirement plans cost | $ | 1,345 | $ | 1,297 | $ | 1,048 | ||||||
Amounts recognized in accumulated comprehensive loss were as follows:
(in thousands) | Pension benefits | Other Postretirement Benefits | ||||||||||||||||||||||
2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |||||||||||||||||||
Net actuarial loss | $ | (28,734 | ) | $ | (27,658 | ) | $ | (33,249 | ) | $ | (2,694 | ) | $ | (2,320 | ) | $ | (2,796 | ) | ||||||
Net periodic benefit cost recognized and other changes in plan assets and benefit obligations recognized in accumulated other comprehensive loss in 2016, 2015, and 2014 were as follows:
(in thousands) | Pension benefits | Other Postretirement Benefits | ||||||||||||||||||||||||
2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Net periodic benefit cost recognized | $ | 6,974 | $ | 7,089 | $ | 6,351 | $ | 1,277 | 1,223 | $ | 1,223 | 1,048 | $ | 1,048 | ||||||||||||
Other changes in plan assets and benefit obligations recognized in accumulated other comprehensive income | ||||||||||||||||||||||||||
Expected return on plan assets | (4,795 | ) | (4,456 | ) | (4,071 | ) | — | — | — | |||||||||||||||||
Net actuarial loss | 1,873 | 2,211 | 1,550 | 68 | 74 | — | ||||||||||||||||||||
Total recognized in accumulated other comprehensive income | (2,922 | ) | (2,245 | ) | (2,521 | ) | 68 | 74 | — | |||||||||||||||||
Total recognized in net periodic benefit cost and accumulated other comprehensive income | $ | 4,052 | $ | 4,844 | $ | 3,830 | $ | 1,345 | $ | 1,297 | $ | 1,048 | ||||||||||||||
18
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
The net loss and prior service cost for the defined benefit pension plan expected to be recognized from accumulated other comprehensive loss into net periodic benefit cost in 2017 are $1,839,406 and $0, respectively. The net loss for the defined other postretirement benefit plans expected to be recognized from accumulated other comprehensive loss into net periodic benefit cost in 2017 is $79,470. Weighted average assumptions used to determine the benefit obligations for 2016 and 2015 were as follows:
(in thousands) | Pension benefits | Other Postretirement Benefits | ||||||||||
2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |||||||
Weighted average assumptions December 31 | ||||||||||||
Discount Rate - Retirement plan | 4.16% | 4.46% | 4.21% | 4.20% | 4.51% | 4.30% | ||||||
Discount rate - Supplemental retirement plan | 4.01% | 4.46% | 4.21% | |||||||||
Expected return on plan assets | 7.50% | 7.50% | 7.50% | N/A | N/A | N/A | ||||||
Rate of compensation increase - Retirement plan/Postretirement plan | 4.50% | 4.50% | 5.00% | 4.50% | 4.50% | 4.50% | ||||||
Rate of compensation increase - Supplemental retirement plan | 5.00% | 5.00% | 5.00% | |||||||||
Healthcare cost trend rate | N/A | N/A | N/A | 7.50% | 5.60% | 8.00% | ||||||
Rate to which cost trend declines | N/A | N/A | N/A | 5.00% | 5.00% | 5.00% | ||||||
Year rate reaches ultimate trend rate | — | — | — | 2021 | 2021 | 2020 | ||||||
LOOP’s overall expected long-term return on plan assets is 7.5%. The long-term rate of return is determined by using the weighted average of historical real returns for major asset classes based on target asset allocations. The result is then adjusted for the inflation assumption.
LOOP’s overall investment strategy is to achieve a mix of investments with a diversification of asset types. The Plan’s investment strategy will evolve from an objective of maximizing asset returns toward a dynamic liability driven investment (LDI) strategy as the Plan’s funded status improves. The objective is to more closely align the Plan’s assets with its liabilities in terms of how both respond to interest rate changes. In order to achieve the asset allocation appropriate for a dynamic LDI strategy, the following factors will be considered:
1. The Plan’s assets will effectively be divided into two investment categories:
The “LDI” category – comprised primarily of U.S. Treasury STRIPs, Bonds, Notes, and investment grade fixed income investments designed to closely track the Plan’s liability duration sensitivity.
The “Return Seeking” category – comprised of a mix of traditional and alternative asset classes.
2. The Administrative Committee intends to continuously reduce the assets allocated to the “Return Seeking” category, thereby increasing the assets allocated to the “LDI” category based on the overall improvement in the Plan’s funded status reaching the following targets:
Funded Status Target (FST) | <85% | 85–90% | 90–95% | >95% | ||||||||
Equity +/-5% | 65 | % | 60 | % | 55 | % | 50 | % | ||||
Fixed income +/-5% | 35 | 40 | 45 | 50 | ||||||||
Money market instruments are included in the Fixed Income portion of the asset allocation and will generally represent 2% of portfolio assets to meet ongoing liquidity needs.
19
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
The Plan’s equity allocation is divided with allocation Targets and allowed Ranges as follows:
Minimum Percentage | Target Percentage | Maximum Percentage | |||||||
Large Cap | 42 | % | 62 | % | 82 | % | |||
Mid Cap | 7 | 15 | 23 | ||||||
Small Cap | 4 | 8 | 12 | ||||||
Non-U.S. | 7 | 15 | 23 | ||||||
Equities | 100 | % | |||||||
The asset allocations of LOOP’s benefit plans as of December 31, 2016 were as follows:
(in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Short-term investment fund (a) | 525 | — | — | 525 | ||||||||||||
Mutual funds (b) | 578 | — | — | 578 | ||||||||||||
Subtotal | $ | 1,103 | $ | — | $ | — | $ | 1,103 | ||||||||
Common/collective trust funds (c) | ||||||||||||||||
S&P 500 index | $ | 6,970 | ||||||||||||||
Liability driven investment | 6,049 | |||||||||||||||
Midcap index | 24,641 | |||||||||||||||
International equity index | 3,659 | |||||||||||||||
Small cap index | 28,855 | |||||||||||||||
Subtotal | $ | 70,174 | ||||||||||||||
Total Assets | $ | 71,277 | ||||||||||||||
20
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
The asset allocations of LOOP’s benefit plans as of December 31, 2015 were as follows:
(in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Common/collective trust funds (a) | $ | — | $ | 6,094 | $ | — | $ | 6,094 | ||||||||
Midcap index | 5,229 | 5,229 | ||||||||||||||
International equity index | 21,731 | 21,731 | ||||||||||||||
Liability driven investment | 3,532 | 3,532 | ||||||||||||||
Small cap index | 25,155 | 25,155 | ||||||||||||||
S&P 500 index | — | |||||||||||||||
Short-term investment fund (b) | 791 | 791 | ||||||||||||||
Mutual funds (c) | 482 | 482 | ||||||||||||||
Total Assets | $ | 1,273 | $ | 61,741 | $ | — | $ | 63,014 | ||||||||
(a) Short-term investment fund
The short-term investment fund is valued as of the closing price each day based on the assets held by the fund and are deemed to be actively traded and are, therefore, categorized in Level 1 of the fair value hierarchy.
(b) Mutual funds
The shares of mutual funds are actively traded and valued using quoted prices for identical securities from the market exchanges. Mutual funds are categorized in Level 1 of the fair value hierarchy.
(c) Common/collective trust funds
The common/collective trust funds (CCTs) are valued based on the quoted redemption value of units owned by the defined benefit pension plan at year-end. Investments that are measured using the net asset value (NAV) per share practical expedient have not been categorized in the fair value hierarchy.
The asset allocations of LOOP’s benefit plans as of December 31, 2016 and December 31, 2015 were as follows:
Plan Assets in Percentage | ||||||||
Asset Category | 2016 | 2015 | Target Allocation | |||||
Equity securities | 65 | % | 64 | % | 30%-65% | |||
Fixed income | 34 | 35 | 30%-70% | |||||
Cash | 1 | 1 | 0%-25% | |||||
100 | % | 100 | % | |||||
LOOP appoints members of a Committee, which is the named fiduciary of the plan. The members of the Committee establish policy for trust funding and plan administration. This Committee is authorized to appoint, discharge, and replace investment advisors and plan trustees. The Committee determines the plan’s short and long-term financial needs regarding assets and communicates them to the Trustee at least annually. The Trustee has exclusive discretion to manage and control actual plan assets in accordance with the plan’s asset allocation policy.
21
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
LOOP’s pension and postretirement plans use a measurement date of December 31.
(in thousands) | Pension benefits | Other Postretirement Benefits | ||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Benefit cost | $ | 4,052 | $ | 4,844 | $ | 1,345 | $ | 1,297 | ||||||||
Employer contributions | 4,231 | 4,131 | 297 | 335 | ||||||||||||
Participant contributions | — | — | 192 | 182 | ||||||||||||
Benefits paid | 2,662 | 2,398 | 489 | 517 | ||||||||||||
LOOP expects to contribute approximately $4,000,000 ($333,333 per month) to its pension plans in 2017, which is in excess of its minimum funding requirement of $0.
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
(in thousands) | Pension Benefits | Other Benefits | ||||||
2017 | $ | 3,009 | $ | 476 | ||||
2018 | 3,566 | 532 | ||||||
2019 | 3,798 | 556 | ||||||
2020 | 3,987 | 622 | ||||||
2021 | 4,323 | 658 | ||||||
Years 2022-2026 | 25,228 | 3,949 | ||||||
LOOP also sponsors a Savings Plan to assist eligible employees in providing for retirement or other future financial needs. Employee contributions (up to 7% of their earnings) are matched by LOOP at a rate of 100%. LOOP’s contributions to the Savings Plan were $1,555,000, $1,431,000, and $1,357,000 in 2016, 2015 and 2014 respectively.
7. Leases
Certain land and vessels are leased. Except for the land lease for the headquarters office building, all leases are operating leases and were entered into in the normal course of business. Each has varying terms, renewal options, and escalation provisions. In 2007, LOOP entered into a 25-year lease in the Northpark Business Park in Covington, Louisiana for the land on which the headquarters’ office building was constructed in 2009, with option to extend for an additional 50 years. LOOP capitalized this lease obligation. The lease provides an option for LOOP to purchase the land after 10 years, which obligates the lessor to sell the land. The parties have agreed that LOOP will purchase the land in March 2017.
LOOP has eight underground salt dome storage caverns at Clovelly Hub. The land for the underground storage caverns are leased from two major oil companies, one of which is an owner of LOOP. The primary lease term is 30 years with an option to renew for two additional 10-year periods. The annual rental is based on storage capacity and a per-barrel fee, and is adjusted annually per changes in storage capacity and the Consumer Price Index. LOOP may cancel the lease at any time by paying a $20,000 cancellation fee.
22
LOOP LLC
Notes to Financial Statements
Years Ended December 31, 2016, 2015 and 2014
LOOP had total operating lease and rental expenses of $21,016,000, $20,496,000, and $19,185,000 for the years ended December 31, 2016, 2015 and 2014, respectively. Of these amounts, operating leases for marine terminal support services were approximately $18,040,000, $17,666,000, and $16,437,000 for the years ended December 31, 2016, 2015 and 2014, respectively. Future minimum lease payments under non-cancellable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of December 31, 2016 are as follows:
(in thousands) | Capital Leases | Operating Leases | ||||||
2017 | $ | 2,000 | $ | 2,946 | ||||
2018 | — | 3,066 | ||||||
2019 | — | 3,190 | ||||||
2020 | — | 3,223 | ||||||
2021 | — | 3,287 | ||||||
Thereafter | — | 22,891 | ||||||
Total minimum lease payments | $ | 2,000 | $ | 38,603 | ||||
8. Subsequent Events
LOOP has evaluated all events that occurred prior to February 10, 2017, the date of issuance of LOOP’s financial statements, and has determined that there are no other subsequent events that require disclosure.
23