Attached files
file | filename |
---|---|
8-K/A - AMENDMENT TO FORM 8-K - NGL Energy Partners LP | a14-20844_18ka.htm |
EX-99.1 - EX-99.1 - NGL Energy Partners LP | a14-20844_1ex99d1.htm |
EX-23.1 - EX-23.1 - NGL Energy Partners LP | a14-20844_1ex23d1.htm |
EX-99.3 - EX-99.3 - NGL Energy Partners LP | a14-20844_1ex99d3.htm |
Exhibit 99.2
Businesses Associated with TransMontaigne Inc. Acquired by NGL Energy Partners LP
Condensed Combined Balance Sheets
(Unaudited and in thousands)
|
|
June 30, |
|
December 31, |
| ||
ASSETS |
| ||||||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
71,549 |
|
$ |
74,762 |
|
Rack sales accounts receivable, net |
|
198,702 |
|
243,520 |
| ||
Pipeline sales accounts receivable |
|
202,795 |
|
684,881 |
| ||
Inventories in pipelines and terminals |
|
542,187 |
|
629,567 |
| ||
Inventories in transit via truck and rail |
|
44,844 |
|
53,216 |
| ||
Derivative contracts |
|
6,375 |
|
47,372 |
| ||
Other pipeline accrued receivables |
|
3,803 |
|
6,123 |
| ||
Other |
|
38,551 |
|
17,548 |
| ||
|
|
1,108,806 |
|
1,756,989 |
| ||
Property, plant and equipment, net |
|
431,486 |
|
445,495 |
| ||
Investment in unconsolidated affiliates |
|
234,002 |
|
211,605 |
| ||
Other assets |
|
16,676 |
|
18,357 |
| ||
|
|
$ |
1,790,970 |
|
$ |
2,432,446 |
|
|
| ||||||
LIABILITIES AND EQUITY |
| ||||||
Current liabilities: |
|
|
|
|
| ||
Accounts payable |
|
$ |
120,656 |
|
$ |
64,351 |
|
Product purchases accounts payable |
|
229,363 |
|
785,112 |
| ||
Excise taxes payable |
|
28,324 |
|
39,648 |
| ||
Inventories due under exchange agreements |
|
5,788 |
|
31,280 |
| ||
Derivative contracts |
|
7,765 |
|
30,066 |
| ||
Accrued environmental obligations |
|
4,208 |
|
4,303 |
| ||
Variation margin payables |
|
16,888 |
|
35,528 |
| ||
Other pipeline accrued payables |
|
12,813 |
|
20,589 |
| ||
Other accrued liabilities |
|
35,320 |
|
23,263 |
| ||
|
|
461,125 |
|
1,034,140 |
| ||
Bank debt |
|
234,000 |
|
212,000 |
| ||
Other |
|
4,491 |
|
9,362 |
| ||
Total liabilities |
|
699,616 |
|
1,255,502 |
| ||
|
|
|
|
|
| ||
Equity: |
|
|
|
|
| ||
Equity attributable to noncontrolling interests |
|
355,624 |
|
359,418 |
| ||
Equity attributable to parent |
|
735,730 |
|
817,526 |
| ||
|
|
1,091,354 |
|
1,176,944 |
| ||
|
|
$ |
1,790,970 |
|
$ |
2,432,446 |
|
See accompanying notes to condensed combined financial statements.
Businesses Associated with TransMontaigne Inc. Acquired by NGL Energy Partners LP
Condensed Combined Statements of Comprehensive Loss
(Unaudited and in thousands)
|
|
Six months ended |
|
Six months ended |
| ||
Marketing and distribution: |
|
|
|
|
| ||
Revenues |
|
$ |
4,000,573 |
|
$ |
4,678,070 |
|
Cost of product sold and other direct costs and expenses |
|
(3,948,828 |
) |
(4,648,787 |
) | ||
Net operating margins, exclusive of depreciation and amortization shown separately below |
|
51,745 |
|
29,283 |
| ||
Terminals and pipelines: |
|
|
|
|
| ||
Revenues |
|
33,650 |
|
31,537 |
| ||
Direct costs and expenses |
|
(16,833 |
) |
(15,075 |
) | ||
Net operating margins, exclusive of depreciation and amortization shown separately below |
|
16,817 |
|
16,462 |
| ||
Total net operating margins |
|
68,562 |
|
45,745 |
| ||
Costs and expenses: |
|
|
|
|
| ||
Selling, general and administrative |
|
(41,166 |
) |
(32,060 |
) | ||
Depreciation and amortization |
|
(17,346 |
) |
(17,018 |
) | ||
Gain (loss) on disposition of assets, net |
|
98 |
|
(845 |
) | ||
Earnings from unconsolidated affiliates |
|
1,438 |
|
36 |
| ||
Total costs and expenses |
|
(56,976 |
) |
(49,887 |
) | ||
Operating income (loss) |
|
11,586 |
|
(4,142 |
) | ||
Other income (expenses): |
|
|
|
|
| ||
Interest expense |
|
(3,065 |
) |
(2,625 |
) | ||
Amortization of deferred financing costs |
|
(687 |
) |
(687 |
) | ||
Foreign currency transaction loss |
|
|
|
(8 |
) | ||
Total other expenses |
|
(3,752 |
) |
(3,320 |
) | ||
Earnings (loss) before income taxes |
|
7,834 |
|
(7,462 |
) | ||
Income tax expense |
|
(302 |
) |
(102 |
) | ||
Net income |
|
7,532 |
|
(7,564 |
) | ||
Noncontrolling interests share in earnings of TransMontaigne Partners |
|
(13,677 |
) |
(13,759 |
) | ||
Net loss attributable to parent |
|
(6,145 |
) |
(21,323 |
) | ||
Other comprehensive income foreign currency translation adjustments attributable to noncontrolling interests |
|
|
|
2 |
| ||
Comprehensive loss |
|
$ |
(6,145 |
) |
$ |
(21,321 |
) |
See accompanying notes to condensed combined financial statements.
Businesses Associated with TransMontaigne Inc. Acquired by NGL Energy Partners LP
Condensed Combined Statement of Equity
Six months ended June 30, 2014
(Unaudited and in thousands)
|
|
Equity |
|
Equity |
|
Total |
| |||
Balance at December 31, 2013 |
|
$ |
359,418 |
|
$ |
817,526 |
|
$ |
1,176,944 |
|
Distributions paid to non-controlling TransMontaigne Partners common units |
|
(17,408 |
) |
|
|
(17,408 |
) | |||
Purchase of common units by TransMontaigne Partners long-term incentive plan |
|
(177 |
) |
|
|
(177 |
) | |||
Deferred equity-based compensation related to restricted phantom units and other |
|
114 |
|
|
|
114 |
| |||
Net income (loss) |
|
13,677 |
|
(6,145 |
) |
7,532 |
| |||
Net capital distributed to parent company |
|
|
|
(75,651 |
) |
(75,651 |
) | |||
Balance at June 30, 2014 |
|
$ |
355,624 |
|
$ |
735,730 |
|
$ |
1,091,354 |
|
See accompanying notes to condensed combined financial statements.
Businesses Associated with TransMontaigne Inc. Acquired by NGL Energy Partners LP
Condensed Combined Statements of Cash Flows
(Unaudited and in thousands)
|
|
Six months ended |
|
Six months ended |
| ||
Net cash provided by (used in) operating activities |
|
$ |
94,190 |
|
$ |
(98,771 |
) |
Cash flows from investing activities: |
|
|
|
|
| ||
Investments in unconsolidated affiliates |
|
(23,397 |
) |
(70,956 |
) | ||
Capital expenditures |
|
(3,755 |
) |
(12,912 |
) | ||
Proceeds from sale of assets |
|
1 |
|
89 |
| ||
Net cash used in investing activities |
|
(27,151 |
) |
(83,779 |
) | ||
Cash flows from financing activities: |
|
|
|
|
| ||
Borrowings of bank debt |
|
56,000 |
|
119,500 |
| ||
Repayments of bank debt |
|
(34,000 |
) |
(49,500 |
) | ||
Net capital contributed by (distributed to) parent company |
|
(74,667 |
) |
185,059 |
| ||
Distributions paid to non-controlling TransMontaigne Partners common units |
|
(17,408 |
) |
(15,016 |
) | ||
Purchase of common units by TransMontaigne Partners long-term incentive plan |
|
(177 |
) |
(166 |
) | ||
Other |
|
|
|
(398 |
) | ||
Net cash provided by (used in) financing activities |
|
(70,252 |
) |
239,479 |
| ||
Increase (decrease) in cash and cash equivalents |
|
(3,213 |
) |
56,929 |
| ||
Foreign currency translation effect on cash |
|
|
|
46 |
| ||
Cash and cash equivalents at beginning of period |
|
74,762 |
|
15,156 |
| ||
Cash and cash equivalents at end of period |
|
$ |
71,549 |
|
$ |
72,131 |
|
|
|
|
|
|
| ||
Supplemental disclosures of cash flow information: |
|
|
|
|
| ||
Cash paid for interest |
|
$ |
3,140 |
|
$ |
2,426 |
|
Property, plant and equipment acquired with accounts payable |
|
$ |
75 |
|
$ |
246 |
|
See accompanying notes to condensed combined financial statements.
Notes to Condensed Combined Financial Statements
As of June 30, 2014 and December 31, 2013 and for the six months ended June 30, 2014 and 2013 (unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Nature of business
The accompanying combined interim financial statements include the accounts of all operations of the Businesses Associated with TransMontaigne Inc. Acquired by NGL Energy Partners LP (collectively, the Company, we, us or our). On July 1, 2014, Morgan Stanley consummated the sale of its indirect 100% ownership interest in the Business to NGL Energy Partners LP (NGL). TransMontaigne Inc. is the indirect parent and sole member of TransMontaigne GP L.L.C., which is the sole general partner (General Partner) of TransMontaigne Partners L.P. (TLP or the Partnership), a publicly traded master limited partnership. The sale also included Morgan Stanleys limited partnership interests in TLP, the assignment from an affiliate of Morgan Stanley to NGL of certain terminaling services agreements with TLP, and the transfer of certain inventory owned by Morgan Stanley (collectively, the Transaction). The Transaction does not involve the sale or purchase of any of the limited partnership units in TLP held by the public and the TLP limited partnership units continue to trade on the New York Stock Exchange.
TransMontaigne Inc., (TransMontaigne) is a Delaware corporation headquartered in Denver, Colorado, that was formed in 1995 as a refined petroleum products marketing and distribution company. TransMontaigne and its wholly-owned subsidiaries conduct operations in the United States primarily in the Southeast, Florida, and Midwest regions. TransMontaigne primarily provides integrated marketing and distribution services to end-users of refined petroleum products and, to a lesser extent, users of crude oil and renewable fuels.
TransMontaignes less than wholly-owned subsidiary includes the publicly traded master limited partnership of TLP. TLP was formed in February 2005 as a Delaware limited partnership to own and operate refined petroleum products terminaling and transportation facilities. TLP conducts its operations in the United States along the Gulf Coast, in the Midwest, in Houston and Brownsville, Texas, along the Mississippi and Ohio rivers and in the Southeast. TLP provides integrated terminaling, storage, transportation and related services for companies engaged in the trading, distribution and marketing of light refined petroleum products, heavy refined petroleum products, crude oil, chemicals, fertilizers and other liquid products. TransMontaigne and NGL, subsequent to the Transaction, have an interest in TLP through the ownership of approximately 20% of the limited partner interests, a 2% general partner interest and the incentive distribution rights.
(b) Basis of presentation and use of estimates
In preparing the accompanying unaudited condensed combined financial statements, we have followed the accounting policies of Morgan Stanley, a broker-dealer, and TransMontaigne Inc., which are in accordance with United States generally accepted accounting principles or GAAP for interim financial information. Accordingly, the unaudited condensed combined financial statements do not include all the information and notes required by GAAP for complete annual financial statements. However, we believe that the disclosures made are adequate to make the information not misleading. The combined financial statements of the Company have been prepared from the separate records maintained by Morgan Stanley and TransMontaigne Inc. and may not necessarily be indicative of the conditions that would have existed, or the results of operations, if the Company had been operated as an unaffiliated entity. Because a direct ownership relationship did not exist among all the various assets comprising the Company, Morgan Stanleys net investment in the Company is shown as net parent equity, in lieu of owners equity, in the combined financial statements. All intercompany balances have been eliminated. Transactions between us and Morgan Stanley operations have been identified in the combined financial statements as transactions between affiliates. In the opinion of management, all adjustments have been reflected that are necessary for a fair presentation of the combined financial statements.
The preparation of financial statements in conformity with GAAP requires us 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 periods. The following estimates, in our opinion, are subjective in nature and require the exercise of judgment: allowance for doubtful accounts; fair value of inventories; fair value of derivative contracts; useful lives of our plant and equipment; and accrued environmental obligations. Changes in these estimates and assumptions will occur as a result of the passage of time and the occurrence of future events. Actual results could differ from these estimates.
(c) Significant accounting policies
The Companys significant accounting policies are consistent with those disclosed in Note 1 of the Companys audited combined financial statements for the years ended December 31, 2013 and 2012.
(2) INVENTORIES
Our inventories are carried at fair value, and the classes of inventories are as follows (amounts and volume of barrels in thousands):
Inventories in pipelines and terminals:
|
|
June 30, |
|
December 31, |
| ||||||
|
|
Amount |
|
Barrels |
|
Amount |
|
Barrels |
| ||
Gasoline |
|
$ |
306,119 |
|
2,477 |
|
$ |
400,120 |
|
3,618 |
|
Distillate |
|
218,843 |
|
1,758 |
|
220,702 |
|
1,736 |
| ||
Ethanol |
|
17,196 |
|
228 |
|
7,946 |
|
98 |
| ||
Crude oil |
|
|
|
|
|
799 |
|
8 |
| ||
Other |
|
29 |
|
2 |
|
|
|
|
| ||
|
|
$ |
542,187 |
|
4,465 |
|
$ |
629,567 |
|
5,460 |
|
Inventories in transit via truck and rail:
|
|
June 30, |
|
December 31, |
| ||||||
|
|
Amount |
|
Barrels |
|
Amount |
|
Barrels |
| ||
Gasoline |
|
$ |
|
|
|
|
$ |
16,725 |
|
176 |
|
Distillate |
|
15,680 |
|
127 |
|
13,516 |
|
111 |
| ||
Ethanol |
|
7,554 |
|
87 |
|
17,193 |
|
218 |
| ||
Crude oil |
|
21,610 |
|
208 |
|
5,782 |
|
59 |
| ||
|
|
$ |
44,844 |
|
422 |
|
$ |
53,216 |
|
564 |
|
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net is as follows (in thousands):
|
|
June 30, |
|
December 31, |
| ||
Land |
|
$ |
57,568 |
|
$ |
57,568 |
|
Terminals, pipelines and equipment |
|
603,812 |
|
601,921 |
| ||
Furniture, fixtures and equipment |
|
21,366 |
|
20,941 |
| ||
Construction in progress |
|
4,487 |
|
3,691 |
| ||
|
|
687,233 |
|
684,121 |
| ||
Less accumulated depreciation |
|
(255,747 |
) |
(238,626 |
) | ||
|
|
$ |
431,486 |
|
$ |
445,495 |
|
(4) DERIVATIVE CONTRACTS
The Company purchases and sells commodities, such as gasoline, distillate, ethanol and crude oil. The Company generally follows a policy of using over-the-counter commodity derivatives as components of market strategies designed to enhance margins. The results of these strategies can be significantly impacted by factors such as the volatility of the relationship between the value of commodity derivatives and the prices of the underlying commodities, counterparty contract defaults, and volatility of transportation markets.
The majority of the Companys commodity purchase and sales contracts qualify as over-the-counter derivative instruments and the change in fair value is reported in cost of product sold within the marketing and distribution section of the
accompanying combined interim statements of comprehensive income (loss). Changes in the fair value of our derivatives are recognized in earnings. The Company reports the fair value of its over-the-counter derivative assets and liabilities on the combined balance sheets as derivative contract assets and liabilities.
The Company has established guidelines to manage and mitigate credit risk within risk tolerances. The Company attempts to mitigate its credit exposure by setting tenor and credit limits commensurate with counterparty financial strength and obtaining master netting agreements. The use of master netting agreements is driven by industry practice, and anticipated volumes and complexity of the business relationship with the counterparty.
The following table provides information about our derivative asset contract positions, net at June 30, 2014 (in thousands):
Derivative type |
|
Gross derivative |
|
Counterparty |
|
Fair value of |
| |||
Bilateral over-the-counter contracts |
|
$ |
11,099 |
|
$ |
(4,724 |
) |
$ |
6,375 |
|
The following table provides information about our derivative asset contract positions, net at December 31, 2013 (in thousands):
Derivative type |
|
Gross derivative |
|
Counterparty |
|
Fair value of |
| |||
Bilateral over-the-counter contracts |
|
$ |
54,119 |
|
$ |
(6,747 |
) |
$ |
47,372 |
|
The following table provides information about our derivative liability contract positions, net at June 30, 2014 (in thousands):
Derivative type |
|
Gross derivative |
|
Counterparty |
|
Fair value of |
| |||
Bilateral over-the-counter contracts |
|
$ |
12,460 |
|
$ |
(4,695 |
) |
$ |
7,765 |
|
The following table provides information about our derivative liability contract positions, net at December 31, 2013 (in thousands):
Derivative type |
|
Gross derivative |
|
Counterparty |
|
Fair value of |
| |||
Bilateral over-the-counter contracts |
|
$ |
36,870 |
|
$ |
(6,804 |
) |
$ |
30,066 |
|
(5) BANK DEBT
TLP Credit Facility
On March 9, 2011, TLP entered into an amended and restated senior secured credit facility, or the TLP credit facility, which has been subsequently amended from time to time. The TLP credit facility provides for a maximum borrowing line of credit
equal to the lesser of (i) $350 million and (ii) 4.75 times Consolidated EBITDA (as defined $345.7 million at June 30, 2014). TLP may elect to have loans under the TLP credit facility that bear interest either (i) at a rate of LIBOR plus a margin ranging from 2% to 3% depending on the total leverage ratio then in effect, or (ii) at the base rate plus a margin ranging from 1% to 2% depending on the total leverage ratio then in effect. TLP also pays a commitment fee on the unused amount of commitments, ranging from 0.375% to 0.5% per annum, depending on the total leverage ratio then in effect. TLPs obligations under the TLP credit facility are secured by a first priority security interest in favor of the lenders in the majority of the TLP assets.
The terms of the TLP credit facility include covenants that restrict TLPs ability to make cash distributions, acquisitions and investments, including investments in joint ventures. TLP may make distributions of cash to the extent of its available cash as defined in the TLP partnership agreement. TLP may make acquisitions and investments that meet the definition of permitted acquisitions; other investments which may not exceed 5% of consolidated net tangible assets; and permitted JV investments. Permitted JV investments include up to $225 million of investments in Battleground Oil Specialty Terminal Company LLC (BOSTCO), the Specified BOSTCO Investment. In addition to the Specified BOSTCO Investment, under the terms of the TLP credit facility, TLP may make an additional $75 million of other permitted JV investments (including additional investments in BOSTCO). The principal balance of loans and any accrued and unpaid interest are due and payable in full on the maturity date, March 9, 2016.
The TLP credit facility also contains customary representations and warranties (including those relating to organization and authorization, compliance with laws, absence of defaults, material agreements and litigation) and customary events of default (including those relating to monetary defaults, covenant defaults, cross defaults and bankruptcy events). The primary financial covenants contained in the credit facility are (i) a total leverage ratio test (not to exceed 4.75 times), (ii) a senior secured leverage ratio test (not to exceed 3.75 times) in the event TLP issues senior unsecured notes, and (iii) a minimum interest coverage ratio test (not less than 3.0 times). If TLP were to fail any financial performance covenant, or any other covenant contained in the TLP credit facility, TLP would seek a waiver from its lenders under such facility. If TLP were unable to obtain a waiver from its lenders and the default remained uncured after any applicable grace period, TLP would be in breach of the TLP credit facility, and the lenders would be entitled to declare all outstanding borrowings immediately due and payable. TLP was in compliance with all of the financial covenants under the credit facility as of June 30, 2014.
At June 30, 2014 and December 31, 2013, TLPs outstanding borrowings under the TLP credit facility were $234 million and $212 million, respectively. At June 30, 2014 and December 31, 2013, TLP had no outstanding letters of credit.
The following table summarizes the assets and liabilities of TLP at June 30, 2014 (in thousands):
Cash and cash equivalents |
|
$ |
1,469 |
|
Trade accounts receivable, net |
|
8,638 |
| |
Receivables from affiliates |
|
3,449 |
| |
Other current assets |
|
3,249 |
| |
Property, plant and equipment, net |
|
394,319 |
| |
Investments in unconsolidated affiliates |
|
234,002 |
| |
Other assets, net |
|
13,167 |
| |
Total assets |
|
$ |
658,293 |
|
|
|
|
| |
Trade accounts payable |
|
$ |
4,868 |
|
Accrued liabilities |
|
10,788 |
| |
Long-term debt |
|
234,000 |
| |
Other noncurrent liabilities |
|
4,753 |
| |
Equity attributable to noncontrolling interests |
|
355,624 |
| |
Equity attributable to parent |
|
48,260 |
| |
Total liabilities and equity |
|
$ |
658,293 |
|
TransMontaigne Credit Facility
TransMontaigne has a senior secured working capital credit facility, or the TransMontaigne credit facility that provides for a maximum borrowing line of credit equal to the lesser of (i) $150 million or (ii) the borrowing base, which is a function of, among other things, restricted cash maintained in a specified account, accounts receivable, inventory and certain reserve adjustments as defined in the facility (as defined: $103.2 million at June 30, 2014). In addition, outstanding letters of credit are counted against the maximum borrowing capacity available at any time. Borrowings under the TransMontaigne credit facility bear interest (at
TransMontaignes option) based on a base rate plus an applicable margin, or LIBOR plus an applicable margin; the applicable margins range from 2% to 3% and are a function of the average excess borrowing base availability. In addition, TransMontaigne pays a commitment fee ranging from 0.50% to 0.625% per annum on the total amount of the unused commitments. Borrowings under the TransMontaigne credit facility are secured by the majority of the TransMontaignes and its wholly-owned subsidiaries assets, which excludes all TLP assets. The principal balance of loans and any accrued and unpaid interest is scheduled to be due and payable in full on the maturity date August 15, 2015. TransMontaigne primarily utilizes the facility to finance its crude oil marketing operations through the issuance of letters of credit to crude oil producers.
At June 30, 2014 and December 31, 2013, TransMontaigne had no outstanding borrowings under the TransMontaigne credit facility. At June 30, 2014 and December 31, 2013, TransMontaignes outstanding letters of credit were approximately $67.1 million and $51.0 million, respectively.
In connection with the July 1, 2014 sale to NGL, and immediately prior thereto, the TransMontaigne credit facility was terminated.
(6) INCOME TAXES
The difference between the income tax benefit reported in the accompanying combined statements of operations and the federal statutory tax rate of 35% relates primarily to the impact of state income taxes, valuation allowance against deferred tax assets, and to the fact that TLP is treated as a partnership for U.S. federal income tax purposes. Because of this, no provision for U.S. federal income taxes has been reflected in the accompanying combined financial statements related to TLP. As a partnership, all income, gains, losses, expenses, deductions and tax credits generated by TLP flow through to the unitholders of the partnership. Income tax expense recorded relates to current state taxes due from tax returns filed on a legal entity basis.
(7) FAIR VALUE MEASUREMENTS
Generally accepted accounting principles define fair value, establish a framework for measuring fair value and require disclosures about fair value measurements. Generally accepted accounting principles also establish a fair value hierarchy that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The Companys assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect their placement within the fair value hierarchy levels. The three levels of the fair value hierarchy are:
Level 1 Unadjusted quoted prices available in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities. This level primarily consists of financial instruments such as exchange-traded securities and listed derivatives.
Level 2 Pricing inputs include quoted prices for identical or similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs reflect managements best estimate of fair value using its own assumptions about the assumptions a market participant would use in pricing the asset or liability.
The Companys inventory related assets and liabilities, its over-the-counter commodity purchase and sale derivative contracts and its variation margin payables are classified as Level 2 of the fair value hierarchy. The Company estimates fair values based on exchange quoted commodity prices, adjusted as appropriate for contract terms (including maturity) and differences in local markets. These differences are generally valued using inputs from broker or dealer quotations, published indices and consumer pricing services. The determination of the fair values for the derivative contracts and variation margin payables also factor the credit standing of the counterparties involved and the impact of credit enhancements (such as cash deposits, letters of credit, and priority interests), and also the impact of the Companys nonperformance risk on its liabilities. The Company is able to classify these fair value balances based on the observability of inputs.
The following tables set forth by level within the fair value hierarchy the Companys assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2014 and December 31, 2013.
|
|
June 30, 2014 |
| ||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| ||||
Assets carried at fair value (in thousands): |
|
|
|
|
|
|
|
|
| ||||
Inventories in pipelines and terminals |
|
$ |
|
|
$ |
542,187 |
|
$ |
|
|
$ |
542,187 |
|
Inventories in transit via truck and rail |
|
|
|
44,844 |
|
|
|
44,844 |
| ||||
Derivative contracts |
|
|
|
6,375 |
|
|
|
6,375 |
| ||||
Liabilities carried at fair value (in thousands): |
|
|
|
|
|
|
|
|
| ||||
Inventories due under exchange agreements |
|
|
|
5,788 |
|
|
|
5,788 |
| ||||
Derivative contracts |
|
|
|
7,765 |
|
|
|
7,765 |
| ||||
Variation margin payables |
|
|
|
16,888 |
|
|
|
16,888 |
| ||||
|
|
December 31, 2013 |
| ||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| ||||
Assets carried at fair value (in thousands): |
|
|
|
|
|
|
|
|
| ||||
Inventories in pipelines and terminals |
|
$ |
|
|
$ |
629,567 |
|
$ |
|
|
$ |
629,567 |
|
Inventories in transit via truck and rail |
|
|
|
53,216 |
|
|
|
53,216 |
| ||||
Derivative contracts |
|
|
|
47,372 |
|
|
|
47,372 |
| ||||
Liabilities carried at fair value (in thousands): |
|
|
|
|
|
|
|
|
| ||||
Inventories due under exchange agreements |
|
|
|
31,280 |
|
|
|
31,280 |
| ||||
Derivative contracts |
|
|
|
30,066 |
|
|
|
30,066 |
| ||||
Variation margin payables |
|
|
|
35,528 |
|
|
|
35,528 |
| ||||
The Company also has financial instruments that are not accounted for at fair value, which generally accepted accounting principles require we disclose the fair value. The following tables set forth by level within the fair value hierarchy the Companys assets and liabilities that constitute financial instruments and were not accounted for at fair value as of June 30, 2014 and December 31, 2013. We believe the carrying amounts of these financial instruments reasonably approximate their fair values due to their short-term nature, and in the case of our bank debt due to the borrowings bearing interest at current market interest rates.
|
|
June 30, 2014 |
| ||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| ||||
Assets for which the carrying value approximates fair value (in thousands): |
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
|
$ |
71,549 |
|
$ |
|
|
$ |
|
|
$ |
71,549 |
|
Rack sales accounts receivable, net |
|
|
|
198,702 |
|
|
|
198,702 |
| ||||
Pipeline sales accounts receivable |
|
|
|
202,795 |
|
|
|
202,795 |
| ||||
Other pipeline accrued receivables |
|
|
|
3,803 |
|
|
|
3,803 |
| ||||
Other current assets-restricted cash |
|
28,526 |
|
|
|
|
|
28,526 |
| ||||
Liabilities for which the carrying value approximates fair value (in thousands): |
|
|
|
|
|
|
|
|
| ||||
Accounts payable |
|
|
|
120,656 |
|
|
|
120,656 |
| ||||
Product purchases accounts payable |
|
|
|
229,363 |
|
|
|
229,363 |
| ||||
Excise taxes payable |
|
|
|
28,324 |
|
|
|
28,324 |
| ||||
Other pipeline accrued payables |
|
|
|
12,813 |
|
|
|
12,813 |
| ||||
Bank debt |
|
|
|
234,000 |
|
|
|
234,000 |
| ||||
|
|
December 31, 2013 |
| ||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| ||||
Assets for which the carrying value approximates fair value (in thousands): |
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
|
$ |
74,762 |
|
$ |
|
|
$ |
|
|
$ |
74,762 |
|
Rack sales accounts receivable, net |
|
|
|
243,520 |
|
|
|
243,520 |
| ||||
Pipeline sales accounts receivable |
|
|
|
684,881 |
|
|
|
684,881 |
| ||||
Other pipeline accrued receivables |
|
|
|
6,123 |
|
|
|
6,123 |
| ||||
Other current assets-restricted cash |
|
1,000 |
|
|
|
|
|
1,000 |
| ||||
Liabilities for which the carrying value approximates fair value (in thousands): |
|
|
|
|
|
|
|
|
| ||||
Accounts payable |
|
|
|
64,351 |
|
|
|
64,351 |
| ||||
Product purchases accounts payable |
|
|
|
785,112 |
|
|
|
785,112 |
| ||||
Excise taxes payable |
|
|
|
39,648 |
|
|
|
39,648 |
| ||||
Other pipeline accrued payables |
|
|
|
20,589 |
|
|
|
20,589 |
| ||||
Bank debt |
|
|
|
212,000 |
|
|
|
212,000 |
| ||||
Accounts receivable are reported net of an allowance for doubtful accounts. As of June 30, 2014 and December 31, 2013, the allowances for doubtful accounts were $3.4 million and $3.8 million, respectively.
(8) SUBSEQUENT EVENTS
We have evaluated subsequent events through November 5, 2014, which is the date the financial statements were available to be issued.
On July 1, 2014, Morgan Stanley consummated the sale of its indirect 100% ownership interest in TransMontaigne Inc. to NGL. TransMontaigne Inc. is the indirect parent and sole member of TransMontaigne GP L.L.C., which is the sole general partner of TLP, a publicly traded master limited partnership. The sale also included Morgan Stanleys limited partnership interests in TLP, the assignment from an affiliate of Morgan Stanley to NGL of certain terminaling services agreements with TLP, and the transfer of certain inventory owned by Morgan Stanley.
In connection with the July 1, 2014 sale to NGL, and immediately prior thereto, the TransMontaigne credit facility was terminated.