0001176334-18-000056.txt : 20180329 0001176334-18-000056.hdr.sgml : 20180329 20180329160713 ACCESSION NUMBER: 0001176334-18-000056 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20171231 FILED AS OF DATE: 20180329 DATE AS OF CHANGE: 20180329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARTIN MIDSTREAM PARTNERS LP CENTRAL INDEX KEY: 0001176334 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PETROLEUM BULK STATIONS & TERMINALS [5171] IRS NUMBER: 050527861 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-50056 FILM NUMBER: 18723032 BUSINESS ADDRESS: STREET 1: 4200 STONE ROAD CITY: KILGORE STATE: TX ZIP: 75662 BUSINESS PHONE: 9039836252 MAIL ADDRESS: STREET 1: PO BOX 191 CITY: KILGORE STATE: TX ZIP: 75663 10-K/A 1 form10-kadecember312017.htm 10-K/A Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
(Amendment No. 1)
Mark One
Annual Report Pursuant to Section 13 or 15(d) of the
 
ý
Securities Exchange Act of 1934
 
 
For the fiscal year ended December 31, 2017
 
OR
o
Transition Report Pursuant to Section 13 or 15(d) of the
 
 
Securities Exchange Act of 1934
 
  
For the transition period from  _____ to _____.
Commission file number 000-50056
 MARTIN MIDSTREAM PARTNERS L.P.
(Exact name of registrant as specified in its charter)
Delaware
 
05-0527861
State or other jurisdiction of incorporation or organization
 
(I.R.S. Employer Identification No.)
 
4200 Stone Road Kilgore, Texas  75662
(Address of principal executive offices)  (Zip Code)

903-983-6200
(Registrant’s telephone number, including area code)
_______________________
 
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Units representing limited partnership interests
 
NASDAQ Global Select Market
Securities Registered Pursuant to Section 12(g) of the Act:
NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes  o                       No ý
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o                        No ý
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements the past 90 days.
 Yes ý                        No o
 




Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
 Yes ý                        No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ý
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer x
Non-accelerated filer o
Smaller reporting company o
 
 
(Do not check if a smaller reporting company)
 
Emerging growth company o
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o                        No ý
 
As of June 30, 2017, 38,452,112 common units were outstanding.  The aggregate market value of the common units held by non-affiliates of the registrant as of such date approximated $564,892,029 based on the closing sale price on that date.  There were 38,425,812 of the registrant’s common units outstanding as of February 16, 2018.
 
DOCUMENTS INCORPORATED BY REFERENCE:         None.
 





EXPLANATORY NOTE

Martin Midstream Partners L.P.'s (the “Partnership”) Annual Report on Form 10-K for the year ended December 31, 2017, initially filed on February 16, 2018 (“Form 10-K”), is revised by this Amendment No. 1 on Form 10-K/A (“Amendment No. 1”) to include the separate financial statements of West Texas LPG Pipeline Limited Partnership (“WTLPG”), in accordance with Rule 3-09 of Regulation S-X (“Rule 3-09”), as Exhibit 99.1, in Part IV, Item 15, Exhibits, Financial Statements Schedules (“Item 15”).  WTLPG represents an unconsolidated affiliate, accounted for under the equity method of accounting, which met the conditions of a significant subsidiary pursuant to Rule 3-09(a) and Rule 1-02(w) of Regulation S-X for the three year period ended December 31, 2017.  In accordance with Rule 3-09(b)(1), the separate financial statements of WTLPG are being filed as an amendment to the Partnership's Form 10-K, within 90 days after the end of the Partnership's fiscal year, as they were not available prior to the filing of the Partnership's Form 10-K.

Rule 3-09 of Regulation S-X provides that if a 50%-or-less-owned person accounted for by the equity method meets the first or third condition of the significant subsidiary tests set forth in Rule 1-02(w) of Regulation S-X, substituting 20% for 10%, separate financial statements for that 50%-or-less-owned person shall be filed.  The significance tests are calculated as of the end of each of the Partnership's fiscal years with respect to each fiscal year.

The consent of PricewaterhouseCoopers LLP, independent accountants for WTLPG, is also filed as Exhibit 23.2 to this Amendment No. 1 to the Form 10-K.

In addition, this Amendment No. 1 includes new Exhibits 31.1, 31.2, 32.1 and 32.2, certifications of the Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a-14(a) and (b).

Except as described above, no other amendments are being made to the Form 10-K.  This Amendment No. 1 does not intend to update or modify the disclosure contained in the Partnership's Form 10-K in any way other than as required to reflect the items discussed above and does not reflect events occurring after the February 16, 2018 filing of the Partnership's Form 10-K.  Accordingly this Form 10-K/A should be read in conjunction with the Partnership's other filings.






Item 15.
Exhibits, Financial Statement Schedules
(a)    Financial Statements, Schedules
(1)
The following financial statements of Martin Midstream Partners L.P. are included in Part II, Item 8:
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2017 and 2016
Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Changes in Capital for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015
Notes to the Consolidated Financial Statements
(2)
Financial Statements of West Texas LPG Pipeline Limited Partnership for the years ended December 31, 2017, 2016 and 2015.






















(b)    Exhibits
Exhibit
Number
Exhibit Name
 
 
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
3.14
3.15
3.16
3.17




3.18
3.19
3.20
3.21
3.22
3.23
3.24
3.25
3.26
3.27
3.28
3.29
4.1
Specimen Unit Certificate for Common Units (contained in Exhibit 3.2).
4.2
4.3
4.4
4.5
10.1




10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17†




10.18†
10.19
10.20
10.21
10.22(1)
10.23(1)
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32(1)
10.33(1)
10.34(1)
10.35†
10.36**
21.1**




23.1**
23.2*
31.1*
31.2*
32.1*
32.2*
99.1*
101**
Interactive Data: the following financial information from Martin Midstream Partners L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, formatted in Extensible Business Reporting Language: (1) the Consolidated Balance Sheets; (2) the Consolidated Statements of Income; (3) the Consolidated Statements of Cash Flows; (4) the Consolidated Statements of Capital; and (6) the Notes to Consolidated Financial Statements.
*
Filed or furnished herewith.
**
Filed with the Partnership's Annual Report on Form 10-K, for the year ended December 31, 2017, and incorporated, herein by reference, originally filed with the SEC on February 16, 2018, which is being amended hereby.
As required by Item 15(a)(3) of Form 10-K, this exhibit is identified as a compensatory plan or arrangement.

(1) Material has been redacted from this exhibit and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, which has been granted.









SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused this Report to be signed on our behalf by the undersigned, thereunto duly authorized representative.
Martin Midstream Partners L.P.
(Registrant)
By:    Martin Midstream GP LLC
It's General Partner        
Date: March 29, 2018                    By:    /s/ Ruben S. Martin        
Ruben S. Martin
President and Chief Executive Officer                     
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 30th day of March, 2018.











Signature
 
Title
 
 
 
/s/ Ruben S. Martin
 
President, Chief Executive Officer and Director of Martin Midstream GP LLC (Principal Executive Officer)
Ruben S. Martin
 
 
 
 
 
/s/ Robert D. Bondurant
 
Executive Vice President, Director, and Chief Financial Officer of Martin Midstream GP LLC (Principal Financial Officer, Principal Accounting Officer)
Robert D. Bondurant
 
 
 
 
 
/s/ Zachary S. Stanton
 
Director of Martin Midstream GP LLC
Zachary S. Stanton
 
 
 
 
 
/s/ James M. Collingsworth
 
Director of Martin Midstream GP LLC
James M. Collingsworth
 
 
 
 
 
/s/ Sean P. Dolan
 
Director of Martin Midstream GP LLC
Sean P. Dolan
 
 
 
 
 
/s/ Byron R. Kelley
 
Director of Martin Midstream GP LLC
Byron R. Kelley
 
 
 
 
 
/s/ C. Scott Massey
 
Director of Martin Midstream GP LLC
C. Scott Massey
 
 



EX-23.2 2 exhibit232auditorsconsent-.htm EXHIBIT 23.2 Exhibit





Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-21140) and Form S-8 (No 333-218693, 333- 203857 and 333-140152) of Martin Midstream Partners L.P. of our report dated March 29, 2018 relating to the financial statements of West Texas LPG Pipeline Limited Partnership, which appears in this Annual Report on Form 10-K/A of Martin Midstream Partners L.P.


/s/ PricewaterhouseCoopers LLP

Tulsa, Oklahoma
March 29, 2018









EX-31.1 3 exhibit31_1201710ka.htm EXHIBIT 31.1 Exhibit


Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Pursuant to 17 CFR 240.13a-14(a)/15d-14(a)
(Section 302 of the Sarbanes-Oxley Act of 2002)
 
I, Ruben S. Martin, certify that:
 
1.  I have reviewed this annual report on Form 10-K/A of Martin Midstream Partners L.P.;
 
2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a.  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b.  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c.  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d.  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a.  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:     March 29, 2018
 
 
 
/s/ Ruben S. Martin
 
Ruben S. Martin, President and
 
Chief Executive Officer of
 
Martin Midstream GP LLC,
 
the General Partner of Martin Midstream Partners L.P.
 


EX-31.2 4 exhibit31_2201710ka.htm EXHIBIT 31.2 Exhibit


Exhibit 31.2
 
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Pursuant to 17 CFR 240.13a-14(a)/15d-14(a)
(Section 302 of the Sarbanes-Oxley Act of 2002)

I, Robert D. Bondurant, certify that:
 
1.  I have reviewed this annual report on Form 10-K/A of Martin Midstream Partners L.P.;
 
2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a.  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b.  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c.  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d.  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a.  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b.  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date:     March 29, 2018
 
 
 
/s/ Robert D. Bondurant
 
Robert D. Bondurant, Executive Vice President and
 
Chief Financial Officer of
 
Martin Midstream GP LLC,
 
the General Partner of Martin Midstream Partners L.P.
 


EX-32.1 5 exhibit32_1201710ka.htm EXHIBIT 32.1 Exhibit


Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C.  SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

In connection with the Annual Report of Martin Midstream Partners L.P., a Delaware limited partnership (the “Partnership”), on Form 10-K/A for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (the “Report”), I, Ruben S. Martin, Chief Executive Officer of Martin Midstream GP LLC, the general partner of the Partnership, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to my knowledge:

(1)          the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)          the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
 
 
/s/ Ruben S. Martin
 
 
Ruben S. Martin,
 
Chief Executive Officer of Martin Midstream GP LLC,
 
General Partner of Martin Midstream Partners L.P.
 
 
 
March 29, 2018

*A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.



EX-32.2 6 exhibit32_2201710ka.htm EXHIBIT 32.2 Exhibit


Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C.  SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

In connection with the Annual Report of Martin Midstream Partners L.P., a Delaware limited partnership (the “Partnership”), on Form 10-K/A for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (the “Report”), I, Robert D. Bondurant, Chief Financial Officer of Martin Midstream GP LLC, the general partner of the Partnership, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to my knowledge:

(1)          the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)          the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

 
 
/s/ Robert D. Bondurant
 
 
Robert D. Bondurant,
 
Chief Financial Officer
 
of Martin Midstream GP LLC,
 
General Partner of Martin Midstream Partners L.P.
 
 
 
March 29, 2018

*A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request.



EX-99.1 7 ex991wtlpgfinancialstateme.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1












West Texas LPG Pipeline Limited Partnership
Financial Statements
The years ended December 31, 2017, 2016 (unaudited) and 2015







Report of Independent Auditors

To the Partnership Committee of West Texas LPG Pipeline Limited Partnership:

We have audited the accompanying financial statements of West Texas LPG Limited Partnership, which comprise the balance sheet as of December 31, 2017, and the related statements of operations, changes in partners’ capital and cash flows for the years ended December 31, 2017 and December 31, 2015.

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 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 audits 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 Partnership’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 Partnership’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 West Texas LPG Limited Partnership as of December 31, 2017 and December 31, 2015, and the results of its operations and its cash flows for the years ended December 31, 2017 and December 31, 2015 in accordance with accounting principles generally accepted in the United States of America.

Other Matter

The accompanying balance sheet of the Partnership as of December 31, 2016, and the related statements of operations, changes in partners’ capital and cash flows for the year then ended are presented for purposes of complying with Rule 3-09 of SEC Regulation S-X; however, Rule 3-09 does not require the 2016 financial statements to be audited and they are therefore not covered by this report.

/s/PricewaterhouseCoopers LLP
Tulsa, Oklahoma
March 29, 2018


West Texas LPG Pipeline Limited Partnership
Balance Sheets
(Dollars in thousands)


 
December 31,
 
2017
 
2016
 
 
 
(unaudited)
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
27,927

 
$
3,157

Trade accounts receivable
17,151

 
13,039

Materials and supplies inventories
2,168

 
1,947

Other current assets
66

 
42

Total current assets
47,312

 
18,185

 
 
 
 
Property and equipment
831,823

 
822,380

Accumulated depreciation
(42,308
)
 
(28,466
)
Property, plant and equipment, net
789,515

 
793,914

 
 
 
 
Other assets
337

 
365

 
 
 
 
Total assets
$
837,164

 
$
812,464

 
 
 
 
Liabilities and Partners' Capital
 
 
 
Current liabilities
 
 
 
Accounts payable
$
40,919

 
$
12,956

Taxes payable
2,396

 
2,170

Other current liabilities
459

 
91

Total current liabilities
43,774

 
15,217

 
 
 
 
Environmental reserve
5,964

 
6,841

Total liabilities
49,738

 
22,058

 
 
 
 
Commitments and contingencies (Note 5)
 
 
 
Partners' capital
787,426

 
790,406

Total liabilities and partners' capital
$
837,164

 
$
812,464


See accompanying notes to the financial statements.


3

West Texas LPG Pipeline Limited Partnership
Statements of Operations
(Dollars in thousands)


 
Year Ended December 31,
 
2017
 
2016
 
2015
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
Revenue
$
87,049

 
$
88,467

 
$
100,708

 
 
 
 
 
 
Costs and expenses
 
 
 
 
 
Cost of services (exclusive of items shown separately below)
12,336

 
11,401

 
10,036

Operations and maintenance
36,510

 
36,824

 
28,217

Depreciation
13,842

 
13,686

 
13,573

Taxes other than income
2,842

 
2,651

 
2,579

Total costs and expenses
65,530

 
64,562

 
54,405

 
 
 
 
 
 
Other income (expense), net
53

 
(22
)
 
(9
)
 
 
 
 
 
 
Net income
$
21,572

 
$
23,883

 
$
46,294


See accompanying notes to the financial statements.


4

West Texas LPG Pipeline Limited Partnership
Statements of Changes in Partners' Capital
(Dollars in thousands)


 
ONEOK Permian NGL Pipeline LP, LLC
 
ONEOK Permian NGL Pipeline GP, LLC
 
Martin Midstream Holdings II, LLC
 
Martin Midstream Holdings, LLC
 
Total
 
 
 
 
 
 
 
 
 
 
Balances - December 31, 2014 (unaudited)
$
644,473

 
$
6,509

 
$
161,119

 
$
1,628

 
$
813,729

 
 
 
 
 
 
 
 
 
 
Net income
36,665

 
371

 
9,166

 
92

 
46,294

Distributions to partners
(44,352
)
 
(448
)
 
(11,088
)
 
(112
)
 
(56,000
)
Balances - December 31, 2015
636,786

 
6,432

 
159,197

 
1,608

 
804,023

 
 
 
 
 
 
 
 
 
 
Net income (unaudited)
18,915

 
191

 
4,729

 
48

 
23,883

Distributions to partners (unaudited)
(29,700
)
 
(300
)
 
(7,425
)
 
(75
)
 
(37,500
)
Balances - December 31, 2016 (unaudited)
626,001

 
6,323

 
156,501

 
1,581

 
790,406

 
 
 
 
 
 
 
 
 
 
Net income
17,086

 
172

 
4,270

 
44

 
21,572

Contributions by partners
1,542

 
16

 
386

 
4

 
1,948

Distributions to partners
(20,988
)
 
(212
)
 
(5,247
)
 
(53
)
 
(26,500
)
Balances - December 31, 2017
$
623,641

 
$
6,299

 
$
155,910

 
$
1,576

 
$
787,426


See accompanying notes to the financial statements.


5

West Texas LPG Pipeline Limited Partnership
Statements of Cash Flows
(Dollars in thousands)


 
Year Ended December 31,
 
2017
 
2016
 
2015
 
 
 
(unaudited)
 
 
Cash flows from operating activities:
 
 
 
 
 
Net income
$
21,572

 
$
23,883

 
$
46,294

Adjustments to reconcile net income and net cash provided by operating activities:
 
 
 
 
 
Depreciation
13,842

 
13,686

 
13,573

Change in assets and liabilities
 
 
 
 
 
Accounts receivable
(4,008
)
 
(4,169
)
 
2,394

Materials and supplies inventories
(221
)
 
59

 
147

Other current assets
(24
)
 
(42
)
 
1,046

Other assets
28

 
(365
)
 

Accounts payable
23,971

 
7,797

 
(5,845
)
Taxes other than income
226

 
88

 
191

Other current liabilities
368

 
(219
)
 
310

Environmental reserve
(877
)
 
(1,413
)
 
(581
)
Net cash provided by operating activities
54,877

 
39,305

 
57,529

 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
Payments for property and equipment
(5,555
)
 
(3,946
)
 
(2,370
)
Net cash used in investing activities
(5,555
)
 
(3,946
)
 
(2,370
)
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
Contributions by partners
1,948

 

 

Distributions to partners
(26,500
)
 
(37,500
)
 
(56,000
)
Net cash used in financing activities
(24,552
)
 
(37,500
)
 
(56,000
)
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
24,770

 
(2,141
)
 
(841
)
 
 
 
 
 
 
Cash and cash equivalents at beginning of period
3,157

 
5,298

 
6,139

 
 
 
 
 
 
Cash and cash equivalents at end of period
$
27,927

 
$
3,157

 
$
5,298


See accompanying notes to the financial statements.


6

West Texas LPG Pipeline Limited Partnership
Notes to Financial Statements
(Dollars in thousands, except where otherwise indicated)


(1)
Organization and Basis of Presentation

West Texas LPG Pipeline Limited Partnership (the “Partnership” or “WTLPG”) is a Texas limited partnership. The Partnership was formed in 1999 and owns an approximately 2,300 mile common-carrier pipeline system that transports natural gas liquids (NGLs) from New Mexico and Texas to Mont Belvieu, Texas for fractionation. The partners’ capital interests were owned by the following:
Owner
Interest
 
Interest Type
ONEOK Permian NGL Pipeline GP, L.L.C
0.8
%
 
General Partner
ONEOK Permian NGL Pipeline LP, L.L.C.
79.2
%
 
Limited Partner
Martin Midstream NGL Holdings, LLC
0.2
%
 
General Partner
Martin Midstream NGL Holdings II, LLC
19.8
%
 
Limited Partner
 
100
%
 
 

ONEOK Permian NGL Pipeline GP, L.L.C. and ONEOK Permian NGL Pipeline LP, L.L.C. are wholly owned subsidiaries of ONEOK, Inc. (“ONEOK”). A subsidiary of ONEOK is also the pipeline operator (“Operator”). Martin Midstream NGL Holdings, LLC and Martin Midstream NGL Holdings II, LLC are wholly owned subsidiaries of Martin Midstream Partners, L.P. (“Martin”).
The operating agreement among the partners provides that net income and distributions are to be allocated among the partner interests in proportion to their respective capital interests. Partners’ liabilities are limited to the amount of capital contributed.
The limited partnership agreement of WTLPG provides that distributions to the partners are to be made on a pro rata basis according to each partner’s ownership interest. Cash distributions to the partners are currently declared and paid by WTLPG each calendar quarter. Any changes to, or suspension of, the cash distributions from WTLPG requires the approval of a minimum of 90 percent of the ownership interest and a minimum of two general partners of WTLPG. Cash distributions are equal to 100 percent of distributable cash as defined in the limited partnership agreement of WTLPG.
(2)
Significant Accounting Policies

(a)    Use of Estimates

Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with accounting principles generally accepted in the United States.  Actual results could differ from those estimates.

(b)    Revenue Recognition

The Partnership’s revenue is derived from fees collected for transporting NGLs. Transportation fees charged to shippers are based on either tariffs regulated by governmental agencies, including the Federal Energy Regulatory Commission ("FERC") and the Railroad Commission of Texas (“RRC”), or contractual arrangements.  Our tariffs specify the maximum rates we may charge our customers and the general terms and conditions for NGL transportation service on our pipelines. Revenue is recognized when transportation services are provided.

(c)    Cash and Cash Equivalents

The Partnership considers all highly liquid cash investments with maturities of three months or less at the time of purchase to be cash equivalents.

(d)    Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation.  Our property and equipment are depreciated using the straight-line method over their estimated useful lives. We periodically conduct depreciation studies to assess the

7

West Texas LPG Pipeline Limited Partnership
Notes to Financial Statements
(Dollars in thousands, except where otherwise indicated)


economic lives of our assets.  These depreciation studies are completed as a part of our rate proceedings, and the changes in economic lives, if applicable, are implemented prospectively.  

Property and equipment on our Balance Sheets includes construction work in process for capital projects that have not yet been placed in service and therefore are not being depreciated. Assets are transferred out of construction work in process when they are substantially complete and ready for their intended use.

Property and equipment consists of the following:
 
 
 
As of December 31,
 
Useful Life
 
2017
 
2016
 
 
 
 
 
(unaudited)
 
 
 
 
 
 
Gathering lines and related equipment
20-88
 
$
813,037

 
$
808,519

General plant and other
71-80
 
8,097

 
7,811

Construction work in process
 
 
10,689

 
6,050

   Property and equipment
 
 
831,823

 
822,380

   Accumulated depreciation
 
 
(42,308
)
 
(28,466
)
  Property and equipment, net
 
 
$
789,515

 
$
793,914


Additions to property and equipment included in accounts payable at December 31, 2017 and 2016 were $3,992 and $486 (unaudited), respectively.
    
(e)    Impairment of Long-Lived Assets

In accordance with ASC 360-10, long-lived assets, such as property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.  Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and would no longer be depreciated.  The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. We determined that there were no asset impairments in 2017 or 2016.

(f)    Asset Retirement Obligations

Asset retirement obligations represent legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the asset.  We are not able to estimate reasonably the fair value of the asset retirement obligations for our assets because the settlement dates are indeterminable given the expected continued use of the assets with proper maintenance. We expect our pipeline assets, for which we are unable to estimate reasonably the fair value of the asset retirement obligation, will continue in operation as long as supply and demand for NGLs exists. Based on the widespread use of NGLs by the petrochemical industry, we expect supply and demand to exist for the foreseeable future.

(g)    Fair Value Measurements and Financial Instruments

We use a valuation framework based upon inputs that market participants use in pricing certain assets and liabilities. These inputs are classified into two categories: observable inputs and unobservable inputs. Observable inputs represent market data obtained from independent sources. Unobservable inputs represent our own market assumptions. Unobservable inputs are used only if observable inputs are unavailable or not reasonably available without undue cost and effort. The two types of inputs are further prioritized into the following hierarchy:


8

West Texas LPG Pipeline Limited Partnership
Notes to Financial Statements
(Dollars in thousands, except where otherwise indicated)


Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that reflect the entity's own assumptions and are not corroborated by market data.

We classify the fair value of an asset or liability based on the lowest level of input significant to its measurement. A fair value initially reported as Level 3 will be subsequently reported as Level 2 if the unobservable inputs become inconsequential to its measurement, or corroborating market data becomes available. Asset and liability fair values initially reported as Level 2 will be subsequently reported as Level 3 if corroborating market data becomes unavailable.

Our financial instruments consist of cash and cash equivalents, accounts receivable, and accounts payable. The carrying amounts of financial instruments approximate fair value due to their short maturities. Our cash and cash equivalents are comprised of bank and money market accounts and are classified as Level 1.

(h)    Operating and Maintenance Expenses

Operating and maintenance expenses are incurred by the Operator and charged to us for the cost of personnel that operate the pipeline and other operating costs.  Where costs are incurred specifically on our behalf, the costs are billed directly to us by the Operator. In other situations, the costs may be allocated to us through a variety of methods, depending upon the nature of the expense and activities. Under our operating agreement, we are required to reimburse the Operator for such operating expenses.

(i)    Environmental Reserves

Our policy is to accrue for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable.  We routinely conduct reviews of potential environmental issues and claims that could impact our assets or operations. These reviews assist us in identifying environmental issues and estimating the costs and timing of remediation efforts. In making environmental liability estimations, we consider the material effect of environmental compliance, pending legal actions against us and potential third-party liability claims. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change.  These revisions are reflected in our income in the period in which they are probable and can be reasonably estimated. Estimated future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.

(j)    Accounts Receivable and Allowance for Doubtful Accounts.

Trade accounts receivable are recorded at the invoiced amount and do not bear interest.  We assess collectability at the inception of an arrangement based upon credit ratings and prior collections history. In general, we conduct business with customers with whom we have a long collection history. As a result, we have not experienced significant credit losses nor has our revenue recognition been impacted due to assessments of collectability. We have not recorded an allowance for doubtful accounts as of December 31, 2017 or 2016, as all accounts receivable were determined to be collectible.

(k)    Transportation Imbalances
In the course of transporting NGLs for others, we may receive for redelivery different quantities of NGLs than the quantities we ultimately redeliver. Beginning in 2016 we record these differences as transportation and exchange imbalance receivables or payables that are subject to cash-out provisions. Imbalance receivables are included in accounts receivable, and imbalance payables are included in accounts payable on the balance sheet at current market prices in effect for the reporting period of the outstanding imbalances. As of December 31, 2017 and 2016, we had imbalance receivables and payables totaling $8,409 and $6,066 (unaudited), respectively.

(l)    Concentration of Credit Risk

Substantially all of our accounts receivable at December 31, 2017 and 2016, results from transportation fees earned from companies in the oil and gas industry and transportation imbalances. This concentration of customers may impact our overall credit risk, either positively or negatively, in that these entities may be similarly affected by industry-wide changes in

9

West Texas LPG Pipeline Limited Partnership
Notes to Financial Statements
(Dollars in thousands, except where otherwise indicated)


economic or other conditions. Such receivables are generally not collateralized. However, we perform credit evaluations on all our customers to minimize exposure to credit risk. During the years ended December 31, 2017 and 2016 (unaudited), credit losses were not material.

As of December 31, 2017, accounts receivable includes receivables from two customers representing 47% and 13% of total accounts receivable. As of December 31, 2016, accounts receivable includes receivables from two customers representing 45% (unaudited) and 15% (unaudited) of total accounts receivable.

For the year ended December 31, 2017, revenue includes transportation fees received from three customers representing 23%, 16% and 15% of total revenue, respectively. For the year ended December 31, 2016, revenue includes transportation fees received from two customers representing 18% (unaudited) and 12% (unaudited) of total revenue, respectively. For the year ended December 31, 2015, revenue includes transportation fees received from two customers representing 32% and 13% of total revenue, respectively.

(m)    Income Taxes

We are a limited partnership for federal and state income taxes. Income taxes are the responsibility of our members and are not reflected in our financial statements. 
(n) Materials and Supplies Inventory

The cost of materials, supplies and other inventories is principally determined using the average-cost method.

(o)    Subsequent Events

We have evaluated subsequent events through March 29, 2018, the date our financial statements were available, and we believe all required subsequent events disclosures have been made.

(p)    Recent Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. This ASU is intended to clarify the presentation of cash receipts and payments in specific situations. The amendments in this ASU are effective for financial statements issued for annual periods beginning after December 15, 2018. We do not anticipate that ASU 2016-15 will have a material effect on our financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases.  This ASU amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2019. The standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief.  We are evaluating the effect that ASU 2016-02 will have on our financial statements and related disclosures.

In July 2015, the FASB issued ASU No. 2015-11, Inventory: Simplifying the Measurement of Inventory, which applies only to inventory for which cost is determined by methods other than last-in, first-out and the retail inventory method. This includes inventory that is measured using first-in, first-out or average cost. Inventory within the scope of this standard is required to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The new standard will be effective on January 1, 2018. We do not expect the financial impact of adopting this guidance to be material.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The standard outlines the principles an entity must apply to measure and recognize revenue for entities that enter into contracts to provide goods or services to their customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for WTLPG on January 1, 2019, however early adoption is permitted. We adopted the standard on January 1, 2018. We have completed a detailed review of the impacts of the application of the new standard for all

10

West Texas LPG Pipeline Limited Partnership
Notes to Financial Statements
(Dollars in thousands, except where otherwise indicated)


tariffs. We have also implemented new controls and processes designed to comply with ASU 2014-09. The adoption of ASU 2014-09 is not expected to be material to our financial statements and related disclosures.

(3)
Related Party Transactions

We provide transportation services to affiliates of our partners. Affiliate services are recorded on the same basis as services to unaffiliated customers.

We do not have any employees; therefore, the Operator’s employees support and maintain our assets as provided by the terms of the operating agreement. We reimburse the Operator for direct costs of all compensation, benefits, employer taxes and other employer expenses for these employees. We also reimburse the Operator for direct third party costs incurred on our behalf such as costs for materials, supplies and other charges. Pursuant to the operating agreement, we pay a management fee, which is reflected in operations and maintenance expenses in our Statements of Operations, to the Operator for administrative costs associated with operating our pipelines.

We also lease an approximate 300 mile pipeline, the Mesquite Pipeline, from affiliates of ONEOK.

The following table sets forth the transactions with related parties for the periods indicated:
 
For the years ended December 31,
 
2017
 
2016
 
2015
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
Revenues
$
13,309

 
$
7,606

 
$
6,400

 
 
 
 
 
 
Expenses:
 
 
 
 
 
Operating costs
$
11,096

 
$
11,476

 
$
11,687

Administrative costs
5,608

 
5,546

 
5,454

Total Expenses
$
16,704

 
$
17,022

 
$
17,141


As of December 31, 2017 and 2016, we had accounts payable to the Operator of $39,306 and $11,038 (unaudited), respectively, related to management fees and reimbursements of expenses. As of December 31, 2017 and 2016, we had accounts receivable from affiliates of ONEOK of $8,042 and $5,886 (unaudited), respectively, related to amounts due for transportation services provided and imbalance receivables.

(4)
Operating Leases

We have non-cancelable operating leases primarily for the Mesquite Pipeline and other equipment. The leases generally provide that all expenses related to the equipment are to be paid by the lessee.

Our future minimum lease obligations as of December 31, 2017 consist of the following:
2018
$
2,667

2019
2,646

2020
2,306

2121
920

2022

Thereafter

Total
$
8,539


Lease expense for operating leases for the years ended December 31, 2017, 2016 and 2015 was $8,534, $7,683 (unaudited) and $2,828 respectively.


11

West Texas LPG Pipeline Limited Partnership
Notes to Financial Statements
(Dollars in thousands, except where otherwise indicated)


(5)
Commitments and Contingencies

2015 Rate Complaints - On July 1, 2015, WTLPG began charging market-based common carrier rates under a tariff on file with the Railroad Commission of Texas (RRC). Certain shippers filed complaints with the RRC challenging the increased rates WTLPG implemented effective July 1, 2015. The complainants requested that the rate increases be suspended until the RRC has determined appropriate new rates. On March 8, 2016, the RRC issued an order directing that WTLPG’s rates “in effect prior to July 1, 2015, are the lawful rates for the duration of this docket unless changed by Commission order.” The RRC indicated that WTLPG’s rates should be reviewed on a market basis, without consideration of cost of service, if market information is available.

In September 2017, the Hearings Examiner issued a Proposal for Decision (PFD) that, in aggregate, recommended in an increase in WTLPG’s rates compared with the rates in effect prior to July 1, 2015, and authorized the true-up of the rates that had been in effect since the complaint originated in August 2015. The PFD came before the Commissioners for consideration in January 2018, at which time they declined to vote on the PFD and instead remanded the case back to the Hearings Examiner “for the limited scope of admitting and considering additional relevant evidence on the common carrier market, competition, transportation options, and pricing in the Permian Basin, Barnett Shale and Haynesville Shale markets, including pertinent market studies and/or analysis.” A procedural schedule has not yet been established for the remand proceeding.

Because of the uncertainty surrounding the rate complaints, we cannot estimate a reasonably possible range of potential exposure at this time. However, it is reasonably possible that the ultimate resolution of this matter could result in future charges that may be material to our results of operations.

Occidental Energy Marketing, Inc. v. WTLPG - On December 19, 2014, Occidental Energy Marketing, Inc. (Oxy) filed a lawsuit against WTLPG in state court in Houston, Texas asserting breach of contract and related claims arising from allegations that during a period from 2010 through 2014, WTLPG failed to redeliver approximately 11.7 million gallons of product received by WTLPG from Oxy. Oxy asserts approximately $11 million in damages. In August 2016, the Court granted summary judgment in favor of WTLPG on all of Oxy’s claims. In January 2017, the Court entered Final Judgment in favor of WTLPG, including an award of $257 thousand in attorneys’ fees. Oxy filed a Notice of Appeal in January 2017. All briefs have been filed and the oral argument was heard by the Texas Court of Appeals in November 2017. We are awaiting a decision from the Court.

Because of the uncertainty surrounding the Oxy litigation, we cannot estimate a reasonably possible range of potential exposure at this time. However, it is reasonably possible that the ultimate resolution of this matter could result in future charges that may be material to our results of operations.

Other Legal Proceedings - From time to time, we are involved in legal or administrative proceedings or claims, which arise in the ordinary course of business. While such matters always contain an element of uncertainty, we believe that matters of which we are aware will not individually or in the aggregate have a material adverse effect on our financial position, results of operations or cash flows.

12