Attached files
Exhibit 99.3
LOCAP LLC
Condensed Financial Statements (Unaudited)
For the Nine Months Ended September 30, 2017 and 2016
Table of Contents
Unaudited Condensed Balance Sheets at September 30, 2017 and December 31, 2016 | 2 | ||
Unaudited Condensed Statements of Income and Members' Equity for the Nine Months Ended September 30, 2017 and 2016 | 3 | ||
Unaudited Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016 | 4 | ||
Notes to Unaudited Condensed Financial Statements | 5-7 | ||
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Exhibit 99.3
LOCAP LLC
CONDENSED BALANCE SHEETS (UNAUDITED)
September 30, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 2,014,612 | $ | 1,002,365 | ||||
Receivables from affiliates | 3,640,539 | 3,247,030 | ||||||
Receivables from nonaffiliates | 2,342,112 | 2,948,358 | ||||||
Materials and supplies | 1,351,220 | 1,170,198 | ||||||
Prepayments | 249,834 | 182,448 | ||||||
Total current assets | 9,598,317 | 8,550,399 | ||||||
Property, plant and equipment, net of accumulated depreciation | 37,749,847 | 39,666,934 | ||||||
Construction in progress | 13,169,476 | 5,706,964 | ||||||
Property, plant and equipment, net | 50,919,323 | 45,373,898 | ||||||
Other assets | 184,381 | 1,201,795 | ||||||
Total assets | $ | 60,702,021 | $ | 55,126,092 | ||||
LIABILITIES and MEMBERS' EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 7,795,259 | $ | 3,877,326 | ||||
Commercial paper | 22,470,938 | 34,986,350 | ||||||
Total current liabilities | 30,266,197 | 38,863,676 | ||||||
Deferred income taxes | 8,983,947 | 9,351,828 | ||||||
Line of credit | 8,000,000 | — | ||||||
Deferred revenue | 1,937,720 | 3,841,136 | ||||||
Total liabilities | 49,187,864 | 52,056,640 | ||||||
Members' equity | 11,514,157 | 3,069,452 | ||||||
Total liabilities and members' equity | $ | 60,702,021 | $ | 55,126,092 | ||||
The accompanying notes are an integral part of these condensed financial statements.
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Exhibit 99.3
LOCAP LLC
CONDENSED STATEMENTS OF INCOME AND MEMBERS' EQUITY (UNAUDITED)
Nine Months Ended | ||||||||
September 30, | ||||||||
2017 | 2016 | |||||||
Operating revenue | ||||||||
Transportation | $ | 41,154,638 | $ | 38,757,749 | ||||
Rental | 199,018 | 48,552 | ||||||
Total operating revenue (Affiliate revenue was approximately $25,014,000 and $25,529,000 in 2017 and 2016, respectively) | 41,353,656 | 38,806,301 | ||||||
Operating expenses | ||||||||
Materials and supplies | 403,198 | 262,092 | ||||||
Outside services | 4,317,070 | 5,590,273 | ||||||
Fuel and power | 2,629,270 | 1,227,990 | ||||||
Maintenance materials | 685,258 | 657,819 | ||||||
Rentals | 515,419 | 501,349 | ||||||
Depreciation | 1,212,125 | 1,044,607 | ||||||
Insurance and uninsured losses | 10,201 | 9,526 | ||||||
Taxes- other than income | 2,583,289 | 2,631,027 | ||||||
Total operating expenses (Affiliate expenses were approximately $5,151,000 and $4,843,000 for 2017 and 2016, respectively) | 12,355,830 | 11,924,683 | ||||||
Income from operations | 28,997,826 | 26,881,618 | ||||||
Interest | ||||||||
Income | 64,510 | 141,062 | ||||||
Expense | (464,455 | ) | (444,367 | ) | ||||
Net interest expense | (399,945 | ) | (303,305 | ) | ||||
Income before income taxes | 28,597,881 | 26,578,313 | ||||||
Provision for income taxes | 11,153,176 | 10,365,543 | ||||||
Net Income | $ | 17,444,705 | $ | 16,212,770 | ||||
Members' equity | ||||||||
Beginning of year | $ | 3,069,452 | $ | 2,225,250 | ||||
Distributions | (9,000,000 | ) | (10,000,000 | ) | ||||
End of year | $ | 11,514,157 | $ | 8,438,020 | ||||
The accompanying notes are an integral part of these condensed financial statements.
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Exhibit 99.3
LOCAP LLC
CONDENSED STATEMENTS OF CASH FLOW (UNAUDITED)
Nine Months Ended | ||||||||
September 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 17,444,705 | $ | 16,212,770 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation | 1,212,125 | 1,044,607 | ||||||
Deferred income taxes | (367,881 | ) | (1,614,688 | ) | ||||
Changes in operating assets and liabilities | ||||||||
Receivables from affiliates | (393,509 | ) | 633,014 | |||||
Receivables from nonaffiliates | 606,246 | 940,212 | ||||||
Materials and supplies | (181,022 | ) | (272,105 | ) | ||||
Prepayments | (67,386 | ) | (60,450 | ) | ||||
Deferred revenue | (162,191 | ) | (71,767 | ) | ||||
Other assets | 1,017,414 | 71,944 | ||||||
Accounts payable, accrued expenses and other | 5,426,458 | 4,359,835 | ||||||
Net cash provided by operating activities | 24,534,959 | 21,243,372 | ||||||
Cash flows from investing activities | ||||||||
Capital expenditures | (10,007,300 | ) | (3,085,276 | ) | ||||
Net cash used in investing activities | (10,007,300 | ) | (3,085,276 | ) | ||||
Cash flows from financing activities | ||||||||
Net (increase) decrease in commercial paper | (12,515,412 | ) | (5,506,076 | ) | ||||
Increase in line of credit | 8,000,000 | — | ||||||
Members' distributions | (9,000,000 | ) | (10,000,000 | ) | ||||
Net cash used in financing activities | (13,515,412 | ) | (15,506,076 | ) | ||||
Net increase in cash and cash equivalents | 1,012,247 | 2,652,020 | ||||||
Cash and cash equivalents at beginning of the period | 1,002,365 | 638,294 | ||||||
Cash and cash equivalents at end of the period | $ | 2,014,612 | $ | 3,290,314 | ||||
Supplemental Cash Flow Information | ||||||||
Capital expenditures included in accounts payable, accrued expenses and other (net) | $ | (1,508,525 | ) | $ | (557,086 | ) | ||
The accompanying notes are an integral part of these condensed financial statements.
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Exhibit 99.3
LOCAP LLC
NOTES TO UNUADITED CONDENSED FINANCIAL STATEMENTS
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.). Prior to September 1, 2017, LOCAP’s owners were 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. Effective September 1, 2017, Hardin Street Holdings LLC transferred its 58.52% membership interest in the Company to MPLX Operations LLC, a master limited partnership. Shell Pipeline Company LP is an indirectly wholly owned subsidiary of Shell Oil Company. 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 nine months ended September 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 September 30, 2017 and December 31, 2016.
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.
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:
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Exhibit 99.3
LOCAP LLC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2017 | December 31, 2016 | |||||||
Land and rights-of way | $ | 3,399,740 | $ | 3,399,740 | ||||
Rights-of-way | ||||||||
Line pipe, fittings and pipeline construction | 109,991,671 | 111,828,421 | ||||||
Buildings | 4,576,055 | 4,576,055 | ||||||
Pumping station equipment, tanks and delivery | 59,283,792 | 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 | 13,169,476 | 5,706,964 | ||||||
Total property, plant and equipment | $ | 194,394,404 | $ | 187,732,379 | ||||
Accumulated depreciation | (143,475,081 | ) | (142,358,481 | ) | ||||
Total property, plant and equipment, net | $ | 50,919,323 | $ | 45,373,898 | ||||
LOCAP placed approximately $16 million and $1.8 million in infrastructure and pipeline connections in service during 2017 and 2016, respectively, to allow other carriers (Maurepas, Genesis) to connect to the LOCAP system. Maurepas and Genesis reimbursed these amounts to LOCAP in 2017 and 2016 resulting in zero book value for the reimbursed assets.
4. Debt
LOCAP had commercial paper outstanding of $22,500,000 and $35,000,000 at September 30, 2017 and December 31, 2016 less unamortized discounts of approximately $29,063 and $13,650 at September 30, 2017 and December 31, 2016, respectively. The maturities of the Commercial Paper Notes do not exceed 90 days as of September 30, 2017 and 2016. Cash paid during the year for interest on the commercial paper and line of credit was $480,000 and $450,000 for the nine months ended September 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 $8,000,000 and $0 outstanding on the line of credit at September 30, 2017 and December 31, 2016, respectively. The interest rate is 2.65%. This amount is classified as non-current based on its’ expiration date. The debt covenant on the line of credit requires that LOCAP maintain a positive net worth and LOCAP is in compliance as of September 30, 2017.
5. Income Taxes
LOCAP is a limited liability company that has elected to be taxed as a corporation for income tax purposes. 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 $8,362,000 and $10,030,000 for the nine months ended September 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 $25,014,000 and $25,529,000 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 $5,151,000 and $4,843,000 in 2017 and 2016, respectively. Such amounts are determined on an arm’s length basis and are included primarily in Outside Services in the accompanying statements of income and members’ equity. The LOCAP
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Exhibit 99.3
LOCAP LLC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
Throughput and Deficiency Agreement 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 October 31, 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.
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