Attached files
LOCAP LLC
Condensed Financial Statements
As of June 30, 2017
LOCAP LLC
Index of Condensed Financial Statements
Page(s)
Condensed Financial Statements
Condensed Balance Sheets at June 30, 2017 and December 31, 2016............................................... 2
Condensed Statements of Income and Members’ Equity for the Six Months Ended June 30, 2017
and 2016 ................................................................................................................................................ 3
Condensed Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016 ................ 4
Notes to Condensed Financial Statements........................................................................................ 5–7
LOCAP LLC
Condensed Balance Sheets (Unaudited)
June 30, 2017 and December 31, 2016
June 30 | December 31 | ||||||
2017 | 2016 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 710,830 | $ | 1,002,365 | |||
Receivables from affiliates | 4,672,261 | 3,247,030 | |||||
Receivables from nonaffiliates | 2,582,576 | 2,948,358 | |||||
Materials and supplies | 1,372,367 | 1,170,198 | |||||
Prepayments | 3,099,261 | 182,448 | |||||
Total current assets | 12,437,295 | 8,550,399 | |||||
Property, plant, and equipment net of accumulated depreciation | 39,832,363 | 39,666,934 | |||||
Construction in progress | 9,990,443 | 5,706,964 | |||||
Net property, plant, and equipment | 49,822,806 | 45,373,898 | |||||
Other assets | 224,666 | 1,201,795 | |||||
Total assets | $ | 62,484,767 | $ | 55,126,092 | |||
Liabilities and Members' Equity | |||||||
Current liabilities | |||||||
Accounts payable and accrued expenses | $ | 5,340,053 | $ | 3,877,326 | |||
Commercial paper | 32,957,375 | 34,986,350 | |||||
Total current liabilities | 38,297,428 | 38,863,676 | |||||
Deferred income taxes | 11,020,702 | 9,351,828 | |||||
Line of credit | 4,000,000 | — | |||||
Deferred revenue | 3,762,678 | 3,841,136 | |||||
Total liabilities | 57,080,808 | 52,056,640 | |||||
Members' equity | 5,403,959 | 3,069,452 | |||||
Total liabilities and members' equity | $ | 62,484,767 | $ | 55,126,092 | |||
The accompanying notes are an integral part of these condensed financial statements.
2
LOCAP LLC
Condensed Statements of Income and Members' Equity (Unaudited)
June 30, 2017 and 2016
Six Months Ended June 30 | |||||||
2017 | 2016 | ||||||
Operating revenue | |||||||
Transportation | $ | 26,427,096 | $ | 25,207,197 | |||
Rental and other | 96,534 | 30,278 | |||||
Total operating revenue (Affiliate revenue was approximately $18,892,000 and $16,528,000 in 2017 and 2016, respectively) | 26,523,630 | 25,237,475 | |||||
Operating expenses | |||||||
Materials and supplies | 235,622 | 171,887 | |||||
Outside services | 2,927,399 | 3,968,335 | |||||
Fuel and power | 1,537,402 | 743,078 | |||||
Maintenance materials | 260,246 | 414,816 | |||||
Rentals | 174,103 | 183,629 | |||||
Depreciation | 773,727 | 693,672 | |||||
Insurance and uninsured losses | 6,804 | 6,124 | |||||
Taxes - other than income | 1,761,572 | 1,746,678 | |||||
Total operating expenses (Affiliate expenses were approximately $4,587,000 and $3,017,000 for 2017 and 2016, respectively) | 7,676,875 | 7,928,219 | |||||
Income from operations | 18,846,755 | 17,309,256 | |||||
Interest | |||||||
Income | 55,364 | 106,860 | |||||
Expense | (320,957 | ) | (316,688 | ) | |||
Net interest expense | (265,593 | ) | (209,828 | ) | |||
Income before income taxes | 18,581,162 | 17,099,428 | |||||
Provision for income taxes | 7,246,655 | 6,666,239 | |||||
Net income | $ | 11,334,507 | $ | 10,433,189 | |||
Members' equity | |||||||
Beginning of year | $ | 3,069,452 | $ | 2,225,250 | |||
Distributions | (9,000,000 | ) | (10,000,000 | ) | |||
End of period | $ | 5,403,959 | $ | 2,658,439 | |||
The accompanying notes are an integral part of these condensed financial statements.
3
LOCAP LLC
Condensed Statements of Cash Flows (Unaudited)
June 30, 2017 and 2016
Six Months Ended June 30 | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 11,334,507 | $ | 10,433,189 | |||
Adjustments to reconcile net income to net cash provided by operating activities | 773,727 | 693,672 | |||||
Depreciation | |||||||
Deferred income taxes | 1,668,874 | (1,176,869 | ) | ||||
Changes in operating assets and liabilities | |||||||
Receivables from affiliates | (1,425,231 | ) | 256,635 | ||||
Receivables from nonaffiliates | 365,782 | (446,813 | ) | ||||
Materials and supplies | (202,169 | ) | (97,274 | ) | |||
Prepayments | (2,916,813 | ) | (148,982 | ) | |||
Deferred Revenue | (78,458 | ) | (47,845 | ) | |||
Other assets | 977,129 | 111,934 | |||||
Accounts payable, accrued expenses, and other | 1,915,135 | 2,577,624 | |||||
Net cash provided by operating activities | 12,412,483 | 12,155,271 | |||||
Cash flows used in investing activity | |||||||
Capital expenditures | (5,675,043 | ) | (2,409,562 | ) | |||
Cash flows from financing activities | |||||||
Net increase (decrease) in commercial paper | (2,028,975 | ) | 477,773 | ||||
Increase in line of credit | 4,000,000 | — | |||||
Members' distributions | (9,000,000 | ) | (10,000,000 | ) | |||
Net cash used in financing activities | (7,028,975 | ) | (9,522,227 | ) | |||
Net increase (decrease) in cash and cash equivalents | (291,535 | ) | 223,482 | ||||
Cash and cash equivalents | |||||||
Beginning of period | 1,002,365 | 638,294 | |||||
End of period | $ | 710,830 | $ | 861,776 | |||
Noncash transactions | |||||||
Capital expenditures included in accounts payable, accrued expenses and other (net) | $ | (452,408 | ) | $ | (652,219 | ) | |
The accompanying notes are an integral part of these condensed financial statements.
4
LOCAP LLC
Notes to Condensed Financial Statements
June 30, 2017 and 2016
1. Organization and Ownership
LOCAP LLC (LOCAP), headquartered in Covington, Louisiana, owns and operates a federally regulated crude oil pipeline and tank facility in St. James, Louisiana that distributes oil received from LOOP LLC’s (LOOP) storage facilities and other connecting pipelines to nearby refineries and into the midcontinent of the United States of America (U.S.). LOCAP’s owners are Hardin Street Holdings LLC (58.52%) and Shell Pipeline Company LP (41.48%). Hardin Street Holdings LLC is an indirectly wholly owned subsidiary of Marathon Petroleum Corporation. Shell Pipeline Company LP is an indirectly wholly owned subsidiary of Shell Oil Company (Owner Companies).
LOOP acts as operator of LOCAP in accordance with the terms of the Operating Agreement dated
July 1, 1987, as amended (Operating Agreement).
2. Summary of Significant Accounting Policies
Basis of Accounting
The condensed financial statements have been prepared pursuant to generally accepted accounting principles in the United States of America (“U.S. GAAP”) which provide for reduced disclosure for interim periods. LOCAP has no elements of comprehensive income other than net income. These condensed financial statements, including the year-end balance sheet data that was derived from audited financial statements, do not include all necessary disclosures required by U.S. GAAP for annual financial statements.
In management’s opinion, the unaudited financial information for the interim periods presented includes all adjustments necessary for a fair presentation of our results of operations, financial position, and cash flows. All adjustments are of a normal recurring nature unless otherwise disclosed. Revenues, expenses, assets and liabilities can vary during each interim period of the year. Our results of operations for the six months ended June 30, 2017 are not necessarily indicative of results expected for the full year of 2017. For a more complete discussion of the Company’s significant accounting policies and other information, you should read our most recent audited financial statements as of December 31, 2016, which includes all disclosures required by U.S. GAAP.
Receivables
There was no allowance for doubtful accounts as of June 30, 2017 and December 31, 2016.
Other Noncurrent Liabilities – Deferred Revenue
LOCAP was reimbursed $4.6 million from 2008 through December 31, 2016 by customers for the cost of infrastructure and connections (Plains, Genesis) to LOCAP’s pipeline at St. James, Louisiana. These amounts were recorded as deferred revenue and are being recognized as income over a 30-year period for each connection.
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. LOCAP is currently evaluating the impact of this accounting standard update on the financial statements.
5
LOCAP LLC
Notes to Condensed Financial Statements
June 30, 2017 and 2016
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. LOCAP has not yet determined the potential effects on the financial statements.
3. Property, Plant, and Equipment
Property, plant, and equipment consist of the following:
June 30 | December 31 | ||||||
2017 | 2016 | ||||||
Land and rights-of-way | $ | 3,399,740 | $ | 3,399,740 | |||
Line pipe, fittings, and pipeline construction | 111,828,421 | 111,828,421 | |||||
Buildings | 4,576,055 | 4,576,055 | |||||
Pumping and station equipment, tanks, and delivery | 59,186,685 | 59,186,685 | |||||
Communication systems | 1,953,513 | 1,014,357 | |||||
Office furniture, vehicles, and other assets | 2,020,157 | 2,020,157 | |||||
Construction in progress | 9,990,443 | 5,706,964 | |||||
192,955,014 | 187,732,379 | ||||||
Accumulated depreciation | 143,132,208 | 142,358,481 | |||||
Net property, plant, and equipment | $ | 49,822,806 | $ | 45,373,898 | |||
4. Debt
LOCAP had commercial paper outstanding of $33,000,000 and $35,000,000 at June 30, 2017 and December 31, 2016 less unamortized discounts of approximately $42,625 and $13,650 at June 30, 2017 and December 31, 2016, respectively. The maturities of the Commercial Paper Notes do not exceed 90 days as of June 30, 2017 and 2016. Cash paid during the year for interest on the commercial paper and line of credit was $350,000 and $339,000 for the six months ended June 30, 2017 and 2016, respectively.
Additionally, LOCAP has a line of credit for $60,000,000 with a bank to provide support for its commercial paper program, which expires on October 31, 2021. There was $4,000,000 and $0 outstanding on the line of credit at June 30, 2017 and December 31, 2016, respectively. This amount is classified as non-current based on its’ expiration date.
6
LOCAP LLC
Notes to Condensed Financial Statements
June 30, 2017 and 2016
5. Income Taxes
LOCAP has recognized deferred taxes on the book and tax basis differences of deferred revenue and property, plant, and equipment. No valuation allowance has been provided against deferred tax assets, as management believes it is more likely than not that these assets will be realized through the reversal of taxable temporary differences and income from operations. The difference between the statutory tax rate and the effective tax rate relates to state taxes. Cash paid for income taxes was approximately $7,800,000 and $7,560,000 for the six months ended June 30, 2017 and 2016, respectively.
LOCAP has not recorded reserves for uncertain tax positions as it believes all tax positions are highly certain.
6. Related Party Transactions
Transportation revenue from owners and owner affiliates was approximately $18,892,000 and$16,528,000 in 2017 and 2016, respectively.
Under the Operating Agreement, a portion of the operating costs are to be settled on a fixed fee rather than a direct charge basis. Total payments to LOOP for fees, reimbursable expenses, and purchases made on behalf of LOCAP were approximately $4,587,000 and $3,017,000 in 2017 and 2016, respectively. Such amounts are determined on an arm’s length basis and are included in Outside Services in the accompanying statements of income and members’ equity. The LOCAP T&D obligors are also owners of LOOP either by direct ownership or through a subsidiary; however, in different percentages.
7. Subsequent Events
LOCAP has evaluated all events that occurred prior to August 18, 2017, the date LOCAP’s financial statements were available to be issued, and has determined that there are no other subsequent events that require disclosure.
On September 1, 2017, Marathon Petroleum Corporation dropped its 58.52% ownership in LOCAP LLC by Hardin Street Holdings LLC to MPLX, a master limited partnership.
7