10-Q 1 bkep-06x30x19x10q.htm 10-Q Document
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2019  
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 001-33503 
BLUEKNIGHT ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
 
20-8536826
(IRS Employer
Identification No.)
 
 
 
6060 American Plaza, Suite 600
Tulsa, Oklahoma 74135
(Address of principal executive offices, zip code)
 
Registrant’s telephone number, including area code: (918) 237-4000

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 for the past 90 days.    Yes    x    No   o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   x   No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o
 
Accelerated filer x 
Non-accelerated filer o   
 
Smaller reporting company o
 
 
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o  No x 
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Units
BKEP
The Nasdaq Global Market
Series A Preferred Units
BKEPP
The Nasdaq Global Market
 
 As of August 1, 2019, there were 35,125,202 Series A Preferred Units and 40,813,488 common units outstanding.   

 






Table of Contents
 
 
Page
FINANCIAL INFORMATION
Unaudited Condensed Consolidated Financial Statements
 
Condensed Consolidated Balance Sheets as of December 31, 2018, and June 30, 2019
 
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018 and 2019
 
Condensed Consolidated Statements of Changes in Partners’ Capital (Deficit) for the Three and Six Months Ended June 30, 2018 and 2019
 
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2019
 
Notes to the Unaudited Condensed Consolidated Financial Statements
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Controls and Procedures
 
 
 
OTHER INFORMATION
Legal Proceedings
Risk Factors
Exhibits





i


PART I. FINANCIAL INFORMATION

Item 1.    Unaudited Condensed Consolidated Financial Statements
BLUEKNIGHT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
 
As of
 
As of
 
December 31, 2018
 
June 30, 2019
 
(unaudited)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,455

 
$
1,542

Accounts receivable, net
35,683

 
26,661

Receivables from related parties, net
1,043

 
1,121

Other current assets
9,345

 
7,477

Total current assets
47,526

 
36,801

Property, plant and equipment, net of accumulated depreciation of $263,554 and $273,420 at December 31, 2018, and June 30, 2019, respectively
248,261

 
241,130

Goodwill
6,728

 
6,728

Debt issuance costs, net
3,349

 
2,846

Operating lease assets

 
12,009

Intangible assets, net
16,834

 
15,461

Other noncurrent assets
606

 
1,287

Total assets
$
323,304

 
$
316,262

LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
3,707

 
$
3,793

Accounts payable to related parties
2,263

 
3,125

Accrued crude oil purchases
13,949

 
5,518

Accrued crude oil purchases to related parties
10,219

 
10,180

Accrued interest payable
465

 
394

Accrued property taxes payable
3,089

 
3,098

Unearned revenue
3,206

 
2,244

Unearned revenue with related parties
4,835

 
7,739

Accrued payroll
3,667

 
3,083

Current operating lease liability

 
2,682

Other current liabilities
3,465

 
3,331

Total current liabilities
48,865

 
45,187

Long-term unearned revenue with related parties
1,714

 
1,607

Other long-term liabilities
4,010

 
3,662

Noncurrent operating lease liability

 
9,402

Contingent liability with related party (Note 10)
10,019

 
11,980

Long-term debt
265,592

 
261,592

Commitments and contingencies (Note 16)

 

Partners’ capital:
 
 
 
Common unitholders (40,424,372 and 40,714,857 units issued and outstanding at December 31, 2018, and June 30, 2019, respectively)
370,972

 
360,861

Preferred Units (35,125,202 units issued and outstanding at both dates)
253,923

 
253,923

General partner interest (1.6% interest with 1,225,409 general partner units outstanding at both dates)
(631,791
)
 
(631,952
)
Total partners’ capital
(6,896
)
 
(17,168
)
Total liabilities and partners’ capital
$
323,304


$
316,262

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1


BLUEKNIGHT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
 
Three Months ended June 30,
 
Six Months ended June 30,
 
2018
 
2019
 
2018
 
2019
 
(unaudited)
Service revenue:
 
 
 
 
 
 
 
Third-party revenue
$
14,103

 
$
15,727

 
$
31,421

 
$
31,613

Related-party revenue
6,063

 
4,082

 
12,384

 
8,301

Lease revenue:
 
 
 
 
 
 
 
Third-party revenue
10,237

 
9,819

 
20,041

 
19,582

Related-party revenue
7,475

 
4,812

 
15,178

 
9,752

Product sales revenue:
 
 
 
 
 
 
 
Third-party revenue
45,615

 
59,636

 
49,129

 
118,560

Total revenue
83,493

 
94,076

 
128,153

 
187,808

Costs and expenses:
 
 
 
 
 
 
 
Operating expense
28,988

 
25,915

 
60,123

 
53,158

Cost of product sales
20,041

 
20,510

 
22,678

 
45,097

Cost of product sales from related party
23,747

 
36,421

 
23,747

 
67,195

General and administrative expense
4,486

 
2,962

 
8,707

 
6,655

Asset impairment expense

 
1,114

 
616

 
2,233

Total costs and expenses
77,262

 
86,922

 
115,871

 
174,338

Gain on sale of assets
599

 
81

 
363

 
1,805

Operating income
6,830

 
7,235

 
12,645

 
15,275

Other income (expenses):
 
 
 
 
 
 
 
Other income

 
268

 

 
268

Gain on sale of unconsolidated affiliate

 

 
2,225

 

Interest expense
(5,024
)
 
(4,134
)
 
(8,593
)
 
(8,405
)
Income before income taxes
1,806

 
3,369

 
6,277

 
7,138

Provision for income taxes
21

 
13

 
50

 
25

Net income
$
1,785

 
$
3,356

 
$
6,227

 
$
7,113

 
 
 
 
 
 
 
 
Allocation of net income for calculation of earnings per unit:
 
 
 
 
 
 
 
General partner interest in net income
$
28

 
$
53

 
$
259

 
$
158

Preferred interest in net income
$
6,279

 
$
6,279

 
$
12,557

 
$
12,558

Net loss available to limited partners
$
(4,522
)
 
$
(2,976
)
 
$
(6,589
)
 
$
(5,603
)
 
 
 
 
 
 
 
 
Basic and diluted net loss per common unit
$
(0.11
)
 
$
(0.07
)
 
$
(0.16
)
 
$
(0.13
)
 
 
 
 
 
 
 
 
Weighted average common units outstanding - basic and diluted
40,324

 
40,715

 
40,306

 
40,696


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


2


BLUEKNIGHT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (DEFICIT)
(in thousands)
 
Common Unitholders
 
Series A Preferred Unitholders
 
General Partner Interest
 
Total Partners’ Capital (Deficit)
 
(unaudited)
Balance, March 31, 2018
$
446,471

 
$
253,923

 
$
(703,539
)
 
$
(3,145
)
Net income (loss)
(4,681
)
 
6,279

 
187

 
1,785

Equity-based incentive compensation
636

 

 
10

 
646

Distributions
(6,010
)
 
(6,279
)
 
(362
)
 
(12,651
)
Balance, June 30, 2018
$
436,416

 
$
253,923

 
$
(703,704
)
 
$
(13,365
)
 
 
 
 
 
 
 
 
Balance, December 31, 2017
$
454,358

 
$
253,923

 
$
(703,597
)
 
$
4,684

Net income (loss)
(6,745
)
 
12,557

 
415

 
6,227

Equity-based incentive compensation
669

 

 
18

 
687

Distributions
(11,958
)
 
(12,557
)
 
(723
)
 
(25,238
)
Capital contributions

 

 
183

 
183

Proceeds from sale of 21,246 common units pursuant to the Employee Unit Purchase Plan
92

 

 

 
92

Balance, June 30, 2018
$
436,416

 
$
253,923

 
$
(703,704
)
 
$
(13,365
)
 
 
 
 
 
 
 
 
Balance, March 31, 2019
$
365,220

 
$
253,923

 
$
(631,882
)
 
$
(12,739
)
Net income (loss)
(2,976
)
 
6,279

 
53

 
3,356

Equity-based incentive compensation
289

 

 
5

 
294

Distributions
(1,672
)
 
(6,279
)
 
(128
)
 
(8,079
)
Balance, June 30, 2019
$
360,861

 
$
253,923

 
$
(631,952
)
 
$
(17,168
)
 
 
 
 
 
 
 
 
Balance, December 31, 2018
$
370,972

 
$
253,923

 
$
(631,791
)
 
$
(6,896
)
Net income (loss)
(5,557
)
 
12,558

 
112

 
7,113

Equity-based incentive compensation
353

 

 
10

 
363

Distributions
(4,980
)
 
(12,558
)
 
(283
)
 
(17,821
)
Proceeds from sale of 63,340 common units pursuant to the Employee Unit Purchase Plan
73

 

 

 
73

Balance, June 30, 2019
$
360,861

 
$
253,923

 
$
(631,952
)
 
$
(17,168
)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


BLUEKNIGHT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Six Months ended June 30,
 
2018
 
2019
 
(unaudited)
Cash flows from operating activities:
 
 
 
Net income
$
6,227

 
$
7,113

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for uncollectible receivables from third parties
1

 

Depreciation and amortization
14,779

 
12,971

Amortization of debt issuance costs
949

 
503

Unrealized (gain) loss related to interest rate swaps
(314
)
 
44

Intangible asset impairment charge
189

 

Fixed asset impairment charge
427

 
2,233

Gain on sale of assets
(363
)
 
(1,805
)
Gain on sale of unconsolidated affiliate
(2,225
)
 

Equity-based incentive compensation
687

 
363

Changes in assets and liabilities:
 
 
 
Decrease (increase) in accounts receivable
(23,680
)
 
7,116

Decrease (increase) in receivables from related parties
1,851

 
(78
)
Decrease (increase) in other current assets
(1,426
)
 
3,425

Decrease in other non-current assets
90

 
1,551

Decrease in accounts payable
(502
)
 
(440
)
Increase (decrease) in payables to related parties
748

 
(20
)
Increase (decrease) in accrued crude oil purchases
9,756

 
(8,431
)
Increase (decrease) in accrued crude oil purchases to related parties
13,363

 
(39
)
Decrease in accrued interest payable
(50
)
 
(71
)
Increase in accrued property taxes
933

 
9

Decrease in unearned revenue
(346
)
 
(1,334
)
Increase in unearned revenue from related parties
3,679

 
2,797

Decrease in accrued payroll
(2,448
)
 
(584
)
Decrease in other accrued liabilities
(1,250
)
 
(2,385
)
Net cash provided by operating activities
21,075

 
22,938

Cash flows from investing activities:
 
 
 
Acquisitions
(21,959
)
 

Capital expenditures
(22,125
)
 
(6,240
)
Proceeds from sale of assets
3,893

 
6,351

Proceeds from sale of unconsolidated affiliate
2,225

 

Net cash provided by (used in) investing activities
(37,966
)
 
111

Cash flows from financing activities:
 
 
 
Payments on other financing activities
(1,113
)
 
(1,214
)
Debt issuance costs
(309
)
 

Borrowings under credit agreement
113,000

 
158,000

Payments under credit agreement
(71,000
)
 
(162,000
)
Proceeds from equity issuance
92

 
73

Capital contributions
183

 

Distributions
(25,238
)
 
(17,821
)
Net cash provided by (used in) financing activities
15,615

 
(22,962
)
Net increase (decrease) in cash and cash equivalents
(1,276
)
 
87

Cash and cash equivalents at beginning of period
2,469

 
1,455

Cash and cash equivalents at end of period
$
1,193

 
$
1,542

 
 
 
 
Supplemental disclosure of non-cash financing and investing cash flow information:
 
 
 
Non-cash changes in property, plant and equipment
$
294

 
$
1,515

Increase in accrued liabilities related to insurance premium financing agreement
$
1,578

 
$
1,912


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 

4


BLUEKNIGHT ENERGY PARTNERS, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1.    ORGANIZATION AND NATURE OF BUSINESS
 
Blueknight Energy Partners, L.P. and subsidiaries (collectively, the “Partnership”) is a publicly traded master limited partnership with operations in 27 states. The Partnership provides integrated terminalling, gathering, transportation and marketing services for companies engaged in the production, distribution and marketing of crude oil and asphalt products. The Partnership manages its operations through four operating segments: (i) asphalt terminalling services, (ii) crude oil terminalling services, (iii) crude oil pipeline services and (iv) crude oil trucking services. The Partnership’s common units and preferred units, which represent limited partnership interests in the Partnership, are listed on the NASDAQ Global Market under the symbols “BKEP” and “BKEPP,” respectively. The Partnership was formed in February 2007 as a Delaware master limited partnership initially to own, operate and develop a diversified portfolio of complementary midstream energy assets.

2.    BASIS OF CONSOLIDATION AND PRESENTATION
 
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  The condensed consolidated balance sheet as of June 30, 2019, the condensed consolidated statements of operations for the three and six months ended June 30, 2018 and 2019, the condensed consolidated statements of changes in partners’ capital (deficit) for the three and six months ended June 30, 2018 and 2019, and the condensed consolidated statements of cash flows for the six months ended June 30, 2018 and 2019, are unaudited.  In the opinion of management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments necessary to state fairly the financial position and results of operations for the respective interim periods.  All adjustments are of a recurring nature unless otherwise disclosed herein.  The 2018 year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP.  These unaudited condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s annual report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2019 (the “2018 Form 10-K”).  Interim financial results are not necessarily indicative of the results to be expected for an annual period.  The Partnership’s significant accounting policies are consistent with those disclosed in Note 3 of the Notes to Consolidated Financial Statements in its 2018 Form 10-K except for new accounting standards adopted in 2019 as discussed Note 3 and Note 14.

Certain reclassifications have been made in the consolidated balance sheet as of December 31, 2018, and the consolidated statement of cash flows for the six months ended June 30, 2018, to conform to the 2019 financial statement presentation. These reclassifications relate to items included in “Other current assets” and “Other noncurrent assets.” Reclassifications on the consolidated statement of cash flows were limited to the “Cash flows from operating activities” section. The reclassifications have no impact on net income.

3.    REVENUE

On January 1, 2019, the Partnership adopted the new accounting standard ASC 842 - Leases and all related amendments (“new lease standard”) using the modified retrospective method. Results for reporting periods beginning on January 1, 2019, are presented under the new lease standard, while prior period amounts are not adjusted and continue to be reported in accordance with the Partnership’s historic accounting under ASC 840 - Leases. The adoption of ASC 842 did not have a material effect on the Partnership’s revenue recognition. The primary impact is a change to the recognition of variable consideration that has both a service and lease component. Previously, the variable consideration related to the service component was estimated at the beginning of the contract year and recognized on a straight-line basis over the year. Under ASC 842, the variable consideration related to the service component is treated as a change in estimate in the period when the facts and circumstances on which the variable payment is based occur.

There are two types of contracts in the asphalt terminalling segment: (i) operating lease contracts, under which customers operate the facilities, and (ii) storage, throughput and handling contracts, under which the Partnership operates the facilities. The operating lease contracts are accounted for in accordance with ASC 842 - Leases. The storage, throughput and handling contracts contain both lease revenue and non-lease service revenue. In accordance with ASC 842 and 606, fixed consideration is allocated to the lease and service components based on their relative stand-alone selling price. The stand-alone selling price of the lease component is calculated using the average internal rate of return under the operating lease agreements. The stand-alone selling price of the service component is calculated by applying an appropriate margin to the expected costs to operate the facility. The service component contains a single performance obligation that consists of a stand-ready obligation to perform

5


activities as directed by the customer, and revenue is recognized on a straight-line basis over time as the customer receives and consumes benefits. The lease component is recognized on a straight-line basis over the term of the initial lease. Fixed consideration, consisting of the monthly storage and handling fees, is billed a month prior to the performance of services and is due by the first day of the month of service. Payments received in advance of the month of service are recorded as unearned revenue until the service is performed, and the service component is treated as a contract liability.

Asphalt storage, throughput and handling contracts also contain variable consideration in the form of reimbursements of utility, fuel and power expenses and throughput fees. Utility, fuel and power reimbursements are allocated entirely to the service component of the contracts. Utility, fuel and power reimbursements relate directly to the distinct monthly service that makes up the overall performance obligation and revenue is recognized in the period in which the service takes place. Variable consideration related to reimbursements of utility, fuel and power expenses is billed in the month subsequent to the period of service, and payment is due within 30 days of billing. Throughput fees are allocated to both the lease and service component of the contracts using the allocation percentages from contract inception. In accordance with ASC 842, the lease component of variable throughput fees is recognized in the period when the changes in facts and circumstances on which the variable payment is based occur. Additionally, under ASC 842, when variable consideration contains both a lease and non-lease service component, the service component cannot be recognized until the period in which the changes in facts and circumstances on which the variable payment is based occur. At that time, it can be recognized in accordance with ASC 606. The service component of variable throughput fees is treated as a change in estimate in the period in when the changes in facts and circumstances on which the variable payment is based occur and is then recognized on a straight-line basis over time as the customer receives and consumes benefits. Payment on variable throughput consideration is due within 30 days of billing.

Certain asphalt storage, throughput and handling contracts contain provisions for reimbursement of specified major maintenance costs above a specified threshold over the life of the contract. Reimbursements of specified major maintenance costs are allocated to both the lease and service component of the contracts using the allocation percentages from contract inception. Reimbursements of specified major maintenance costs are reviewed and paid quarterly, which may result in overpayments that must be paid back to the customer in future years. As such, the service component of this consideration is constrained and recorded in unearned revenue (contract liability) until facts and circumstances indicate it is probable that the minimum threshold will be met. In the event the minimum threshold is not met, the Partnership will return the reimbursement to the customer.

The following table includes revenue associated with contractual commitments in place related to future performance obligations as of the end of the reporting period, which are expected to be recognized in revenue in the specified periods (in thousands):
 
 
Revenue from Contracts with Customers(1)
 
Revenue from Leases
Remainder of 2019
 
$
15,475

 
$
27,983

2020
 
30,391

 
53,259

2021
 
27,240

 
49,230

2022
 
19,937

 
38,545

2023
 
14,533

 
29,609

Thereafter
 
9,142

 
22,342

Total revenue related to future performance obligations
 
$
116,718

 
$
220,968

____________________
(1)
Excluded from the table is revenue that is either constrained or related to performance obligations that are wholly unsatisfied as of June 30, 2019.

Crude oil terminalling services contracts can be either short- or long-term written contracts. The contracts contain a single performance obligation that consists of a series of distinct services provided over time. Customers are billed a month prior to the performance of terminalling services and payment is due by the first day of the month of service. Payments received in advance of the month of service are recorded as unearned revenue (contract liability) until the service is performed. These contracts also contain provisions under which customers are invoiced for product throughput in the month following the month in which the service is provided. Payment on product throughput is due within 30 days. The Partnership has elected to use the right-to-invoice expedient on crude oil terminalling services contracts as the right to consideration corresponds directly with the value to the customer of performance completed to date.

There are primarily two types of contracts in the crude oil pipeline segment: (i) monthly transportation contracts and (ii) product sales contracts.

6



Under crude oil pipeline services monthly transportation contracts, customers submit nominations for transportation monthly and a contract is created upon the Partnership’s acceptance of the nomination under its published tariffs. Crude oil pipeline services contracts have a single performance obligation to perform the transportation service. The transportation service is provided to the customer in the same month in which the customer makes the related nomination. Revenue is recorded in the month of service and invoiced in the following month. Payment is due within 30 days. The Partnership has elected to use the right-to-invoice expedient on crude oil pipeline services contracts as the right to consideration corresponds directly with the value to the customer of performance completed to date.

The Partnership also purchases crude oil and resells to third parties under written product sales contracts. Product sales contracts have a single performance obligation, and revenue is recognized at the point in time that control is transferred to the customer. Control is considered transferred to the customer on the day of the sale. Customers are invoiced in the following month. Payment is due within 30 days. The Partnership has elected to use the right-to-invoice expedient on product sales contracts as the right to consideration corresponds directly with the value to the customer of performance completed to date.

Services in the crude oil trucking segment are provided under master service agreements with customers that include rate sheets. Contracts are initiated when a customer requests service and both parties are committed upon the Partnership’s acceptance of the customer’s request. Crude oil trucking contracts have a single performance obligation to perform the service, which is completed in a day. Revenue is recorded in the month of service and invoiced in the following month. Payment is due within 30 days. The Partnership has elected to use the right-to-invoice expedient on crude oil trucking revenues as the right to consideration corresponds directly with the value to the customer of performance completed to date.

Disaggregation of Revenue

Disaggregation of revenue from contracts with customers for each operating segment by revenue type is presented as follows (in thousands):
 
 
Asphalt  Terminalling Services
 
Crude Oil Terminalling Services
 
Crude Oil Pipeline Services
 
Crude Oil Trucking Services
 
Total
 
 
Three Months ended June 30, 2018
Third-party revenue:
 
 
 
 
 
 
 
 
 
 
Fixed storage, throughput and other revenue
 
$
4,622

 
$
2,767

 
$

 
$

 
$
7,389

Variable throughput revenue
 
242

 
143

 

 

 
385

Variable reimbursement revenue
 
1,775

 

 

 

 
1,775

Crude oil transportation revenue
 

 

 
1,045

 
3,509

 
4,554

Crude oil product sales revenue
 

 

 
45,612

 
3

 
45,615

Related-party revenue:
 
 
 
 
 
 
 
 
 
 
Fixed storage, throughput and other revenue
 
4,632

 

 
48

 

 
4,680

Variable reimbursement revenue
 
1,349

 

 
34

 

 
1,383

Total revenue from contracts with customers
 
$
12,620

 
$
2,910

 
$
46,739

 
$
3,512

 
$
65,781

 
 
 
 
 
 
 
 
 
 
 

7


 
 
Asphalt  Terminalling Services
 
Crude Oil Terminalling Services
 
Crude Oil Pipeline Services
 
Crude Oil Trucking Services
 
Total
 
 
Six Months ended June 30, 2018
Third-party revenue:
 
 
 
 
 
 
 
 
 
 
Fixed storage, throughput and other revenue
 
$8,171
 
$
6,849

 
$

 
$

 
$
15,020

Variable throughput revenue
 
359

 
647

 

 

 
1,006

Variable reimbursement revenue
 
3,241

 

 

 

 
3,241

Crude oil transportation revenue
 

 

 
3,105

 
9,049

 
12,154

Crude oil product sales revenue
 

 

 
49,120

 
9

 
49,129

Related-party revenue:
 
 
 
 
 
 
 
 
 
 
Fixed storage, throughput and other revenue
 
9,263

 

 
48

 

 
9,311

Variable reimbursement revenue
 
3,039

 

 
34

 

 
3,073

Total revenue from contracts with customers
 
$
24,073

 
$
7,496

 
$
52,307

 
$
9,058

 
$
92,934

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months ended June 30, 2019
Third-party revenue:
 
 
 
 
 
 
 
 
 
 
Fixed storage, throughput and other revenue
 
5,053

 
3,377

 

 

 
8,430

Variable throughput revenue
 
33

 
643

 

 

 
676

Variable reimbursement revenue
 
1,764

 

 

 

 
1,764

Crude oil transportation revenue
 

 

 
1,972

 
2,885

 
4,857

Crude oil product sales revenue
 

 

 
59,636

 

 
59,636

Related-party revenue:
 
 
 
 
 
 
 
 
 
 
Fixed storage, throughput and other revenue
 
2,858

 

 
83

 

 
2,941

Variable reimbursement revenue
 
1,123

 

 
18

 

 
1,141

Total revenue from contracts with customers
 
10,831

 
4,020

 
61,709

 
2,885

 
79,445

 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months ended June 30, 2019
Third-party revenue:
 
 
 
 
 
 
 
 
 
 
Fixed storage, throughput and other revenue
 
10,035

 
6,447

 

 

 
16,482

Variable throughput revenue
 
36

 
1,147

 

 

 
1,183

Variable reimbursement revenue
 
3,760

 

 

 

 
3,760

Crude oil transportation revenue
 

 

 
4,470

 
5,718

 
10,188

Crude oil product sales revenue
 

 

 
118,560

 

 
118,560

Related-party revenue:
 
 
 
 
 
 
 
 
 
 
Fixed storage, throughput and other revenue
 
5,705

 

 
167

 

 
5,872

Variable reimbursement revenue
 
2,393

 

 
36

 

 
2,429

Total revenue from contracts with customers
 
21,929

 
7,594

 
123,233

 
5,718

 
158,474


Contract Balances

The timing of revenue recognition, billings and cash collections result in billed accounts receivable and unearned revenue (contract liabilities) on the unaudited condensed consolidated balance sheets as noted in the contract discussions above. Accounts receivable are reflected in the line items “Accounts receivable” and “Receivables from related parties” on the unaudited condensed consolidated balance sheets. Unearned revenue is included in the line items “Unearned revenue,” “Unearned revenue with related parties,” “Long-term unearned revenue with related parties” and “Other long-term liabilities” on the unaudited condensed consolidated balance sheets.

Billed accounts receivable from contracts with customers were $34.6 million and $23.8 million at December 31, 2018, and June 30, 2019, respectively.

8



The Partnership records unearned revenues when cash payments are received in advance of performance. Unearned revenue related to contracts with customers was $5.9 million and $6.4 million at December 31, 2018, and June 30, 2019, respectively. The change in the unearned revenue balance for the six months ended June 30, 2019, is driven by $3.7 million in cash payments received in advance of satisfying performance obligations, partially offset by $3.2 million of revenues recognized that were included in the unearned revenue balance at the beginning of the period.

Practical Expedients and Exemptions

The Partnership does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which revenue is recognized at the amount to which the Partnership has the right to invoice for services performed. The Partnership is using the right-to-invoice practical expedient on all contracts with customers in its crude oil terminalling services, crude oil pipeline services and crude oil trucking services segments.

4.     RESTRUCTURING CHARGES

During the fourth quarter of 2015, the Partnership recognized certain restructuring charges in its crude oil trucking services segment pursuant to an approved plan to exit the trucking market in West Texas. The restructuring charges included an accrual related to leased vehicles that were idled as part of the restructuring plan. This accrual was being amortized over the remaining lease term of the vehicles. In June 2018, the Partnership purchased the vehicles off lease and resold them to a third party, paying off the remaining liability.

Changes in the accrued amounts pertaining to the restructuring charges are summarized as follows (in thousands):
 
Three Months ended June 30,
 
Six Months ended June 30,
 
2018
 
2018
Beginning balance
$
237

 
$
286

Cash payments
237

 
286

Ending balance
$

 
$


5.    EQUITY METHOD INVESTMENT
 
The Partnership’s investment in Advantage Pipeline, L.L.C. (“Advantage Pipeline”), over which the Partnership had significant influence but not control, was accounted for by the equity method. The Partnership did not consolidate any part of the assets or liabilities of Advantage Pipeline. On April 3, 2017, Advantage Pipeline was acquired by a joint venture formed by affiliates of Plains All American Pipeline, L.P. and Noble Midstream Partners LP. The Partnership received cash proceeds at closing from the sale of its approximate 30% equity ownership interest in Advantage Pipeline of approximately $25.3 million and recorded a gain on the sale of the investment of $4.2 million. Approximately 10% of the gross sale proceeds were held in escrow, subject to certain post-closing settlement terms and conditions. The Partnership received approximately $1.1 million of the funds held in escrow in August 2017, and approximately $2.2 million for its pro rata portion of the remaining net escrow proceeds in January 2018. The Partnership’s proceeds were used to prepay revolving debt (without a commitment reduction). As of June 30, 2019, the Partnership had no equity investments.


9


6.    PROPERTY, PLANT AND EQUIPMENT
 
Estimated Useful Lives (Years)
 
December 31, 2018
 
June 30,
2019
 
 
 
 
 
 
(dollars in thousands)
Land
N/A
 
$
24,705

 
$
24,705

Land improvements
10-20
 
5,758

 
5,810

Pipelines and facilities
5-30
 
116,155

 
117,448

Storage and terminal facilities
10-35
 
321,096

 
325,247

Transportation equipment
3-10
 
2,798

 
1,782

Office property and equipment and other
3-20
 
26,980

 
27,244

Pipeline linefill and tank bottoms
N/A
 
10,297

 
8,262

Construction-in-progress
N/A
 
4,026

 
4,052

Property, plant and equipment, gross
 
 
511,815

 
514,550

Accumulated depreciation
 
 
(263,554
)
 
(273,420
)
Property, plant and equipment, net
 
 
$
248,261

 
$
241,130

 
Property, plant and equipment under operating leases at June 30, 2019, in which the Partnership is the lessor, had a cost basis of $284.9 million and accumulated depreciation of $175.7 million.

Depreciation expense for the three months ended June 30, 2018 and 2019, was $6.7 million and $5.5 million, respectively. Depreciation expense for the six months ended June 30, 2018 and 2019, was $13.7 million and $11.4 million, respectively.

During the six months ended June 30, 2019, the Partnership recognized asset impairment expense of $2.2 million. A change in estimate of the push-down impairment related to Cimarron Express Pipeline, LLC (“Cimarron Express”) resulted in additional impairment expense of $1.9 million. This impairment is recorded at the corporate level and the estimate is based on the expected amount due to Ergon, Inc. (“Ergon”) if the Put (as defined in Note 10) is exercised (see Note 10 for more information). In addition, flooding at several asphalt plants in the Midwest led to an impairment of $0.3 million.

During the six months ended June 30, 2019, the Partnership sold various surplus assets, including the sale of three truck stations for $1.6 million, which resulted in a gain of $1.5 million, and the sale of pipeline linefill for $1.6 million, which resulted in a gain of $0.2 million. In addition, proceeds received during the six months ended June 30, 2019, included $2.6 million related to a sale of pipeline linefill in December 2018, for which the proceeds were received in January 2019.

On July 12, 2018, the Partnership sold certain asphalt terminals, storage tanks and related real property, contracts, permits, assets and other interests located in Lubbock and Saginaw, Texas and Memphis, Tennessee (the “Divestiture”) to Ergon Asphalt & Emulsion, Inc. for a purchase price of $90.0 million, subject to customary adjustments. The Divestiture does not qualify as discontinued operations as it does not represent a strategic shift that will have a major effect on the Partnership’s operations or financial results. The Partnership used the proceeds from the sale to prepay revolving debt under its credit agreement.

In April 2018, the Partnership sold its producer field services business. The Partnership received cash proceeds at closing of approximately $3.0 million and recorded a gain of $0.4 million. The sale of the producer field services business does not qualify as discontinued operations as it does not represent a strategic shift that will have a major effect on the Partnership’s operations or financial results. The Partnership used the proceeds from the sale to prepay revolving debt under its credit agreement.

In March 2018, the Partnership acquired an asphalt terminalling facility in Oklahoma from a third party for approximately $22.0 million, consisting of property, plant and equipment of $11.5 million, intangible assets of $7.6 million and goodwill of $2.9 million.

7.    DEBT

On May 11, 2017, the Partnership entered into an amended and restated credit agreement. On June 28, 2018, the credit agreement was amended to, among other things, reduce the revolving loan facility from $450.0 million to $400.0 million and amend the maximum permitted consolidated total leverage ratio as discussed below.


10


As of August 1, 2019, approximately $256.6 million of revolver borrowings and $1.0 million of letters of credit were outstanding under the credit agreement, leaving the Partnership with approximately $142.4 million available capacity for additional revolver borrowings and letters of credit under the credit agreement, although the Partnership’s ability to borrow such funds may be limited by the financial covenants in the credit agreement.  The proceeds of loans made under the credit agreement may be used for working capital and other general corporate purposes of the Partnership.

The credit agreement is guaranteed by all of the Partnership’s existing subsidiaries. Obligations under the credit agreement are secured by first priority liens on substantially all of the Partnership’s assets and those of the guarantors.
 
The credit agreement includes procedures for additional financial institutions to become revolving lenders, or for any existing lender to increase its revolving commitment thereunder, subject to an aggregate maximum of $600.0 million for all revolving loan commitments under the credit agreement.
 
The credit agreement will mature on May 11, 2022, and all amounts outstanding under the credit agreement will become due and payable on such date. The credit agreement requires mandatory prepayments of amounts outstanding thereunder with the net proceeds of certain asset sales, property or casualty insurance claims and condemnation proceedings, unless the Partnership reinvests such proceeds in accordance with the credit agreement, but these mandatory prepayments will not require any reduction of the lenders’ commitments under the credit agreement.

Borrowings under the credit agreement bear interest, at the Partnership’s option, at either the reserve-adjusted eurodollar rate (as defined in the credit agreement) plus an applicable margin that ranges from 2.0% to 3.25% or the alternate base rate (the highest of the agent bank’s prime rate, the federal funds effective rate plus 0.5%, and the 30-day eurodollar rate plus 1.0%) plus an applicable margin that ranges from 1.0% to 2.25%.  The Partnership pays a per annum fee on all letters of credit issued under the credit agreement, which fee equals the applicable margin for loans accruing interest based on the eurodollar rate, and the Partnership pays a commitment fee ranging from 0.375% to 0.5% on the unused commitments under the credit agreement.  The applicable margins for the Partnership’s interest rate, the letter of credit fee and the commitment fee vary quarterly based on the Partnership’s consolidated total leverage ratio (as defined in the credit agreement, being generally computed as the ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges).

The credit agreement includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter.

Prior to the date on which the Partnership issues qualified senior notes in an aggregate principal amount (when combined with all other qualified senior notes previously or concurrently issued) that equals or exceeds $200.0 million, the maximum permitted consolidated total leverage ratio will be 5.25 to 1.00 for the fiscal quarter ending June 30, 2019; 5.00 to 1.00 for the fiscal quarters ending September 30, 2019, and December 31, 2019; and 4.75 to 1.00 for the fiscal quarter ending March 31, 2020, and each fiscal quarter thereafter; provided that the maximum permitted consolidated total leverage ratio may be increased to 5.25 to 1.00 for certain quarters after December 31, 2019, based on the occurrence of a specified acquisition (as defined in the credit agreement, but generally being an acquisition for which the aggregate consideration is $15.0 million or more).
From and after the date on which the Partnership issues qualified senior notes in an aggregate principal amount (when combined with all other qualified senior notes previously or concurrently issued) that equals or exceeds $200.0 million, the maximum permitted consolidated total leverage ratio is 5.00 to 1.00; provided that from and after the fiscal quarter ending immediately preceding the fiscal quarter in which a specified acquisition occurs to and including the last day of the second full fiscal quarter following the fiscal quarter in which such acquisition occurred, the maximum permitted consolidated total leverage ratio will be 5.50 to 1.00.

The maximum permitted consolidated senior secured leverage ratio (as defined in the credit agreement, but generally computed as the ratio of consolidated total secured debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) is 3.50 to 1.00, but this covenant is only tested from and after the date on which the Partnership issues qualified senior notes in an aggregate principal amount (when combined with all other qualified senior notes previously or concurrently issued) that equals or exceeds $200.0 million.

The minimum permitted consolidated interest coverage ratio (as defined in the credit agreement, but generally computed as the ratio of consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges (“credit agreement EBITDA”) to consolidated interest expense) is 2.50 to 1.00.

11


In addition, the credit agreement contains various covenants that, among other restrictions, limit the Partnership’s ability to:
create, issue, incur or assume indebtedness;
create, incur or assume liens;
engage in mergers or acquisitions;
sell, transfer, assign or convey assets;
repurchase the Partnership’s equity, make distributions to unitholders and make certain other restricted payments;
make investments;
modify the terms of certain indebtedness, or prepay certain indebtedness;
engage in transactions with affiliates;
enter into certain hedging contracts;
enter into certain burdensome agreements;
change the nature of the Partnership’s business; and
make certain amendments to the Fourth Amended and Restated Agreement of Limited Partnership of the Partnership (the “Partnership’s partnership agreement”).

At June 30, 2019, the Partnership’s consolidated total leverage ratio was 4.60 to 1.00 and the consolidated interest coverage ratio was 3.68 to 1.00.  The Partnership was in compliance with all covenants of its credit agreement as of June 30, 2019.

Management evaluates whether conditions and/or events raise substantial doubt about the Partnership’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued (the “assessment period”). In performing this assessment, management considered the risk associated with its ongoing ability to meet the financial covenants.

Based on the Partnership’s forecasted credit agreement EBITDA during the assessment period, management believes that it will remain in compliance with these financial covenants (as described below). However, there are certain inherent risks associated with our continued ability to comply with our consolidated total leverage ratio covenant. These risks relate, among other things, to potential future (a) decreases in storage volumes and rates as well as throughput and transportation rates realized; (b) weather phenomenon that may potentially hinder the Partnership’s asphalt business activity; and (c) other items affecting forecasted levels of expenditures and uses of cash resources. Violation of the consolidated total leverage ratio covenant would be an event of default under the credit agreement, which would cause our $261.6 million in outstanding debt, as of June 30, 2019, to become immediately due and payable. If this were to occur, the Partnership would not expect to have sufficient liquidity to repay these outstanding amounts then due, which could cause the lenders under the credit facility to pursue other remedies. Such remedies could include exercising their collateral rights to the Partnership’s assets.

Based on management’s current forecasts, management believes the Partnership will be able to comply with the consolidated total leverage ratio during the assessment period. However, the Partnership cannot make any assurances that it will be able to achieve management’s forecasts. If the Partnership is unable to achieve management’s forecasts, further actions may be necessary to remain in compliance with the Partnership’s consolidated total leverage ratio covenant including, but not limited to, cost reductions, common and preferred unitholder distribution curtailments, and/or asset sales. The Partnership can make no assurances that it would be successful in undertaking these actions or that the Partnership will remain in compliance with the consolidated total leverage ratio during the assessment period.

The credit agreement permits the Partnership to make quarterly distributions of available cash (as defined in the Partnership’s partnership agreement) to unitholders so long as no default or event of default exists under the credit agreement on a pro forma basis after giving effect to such distribution, provided, however, commencing with the fiscal quarter ending September 30, 2018, in no event shall aggregate quarterly distributions in any individual fiscal quarter exceed $10.7 million through, and including, the fiscal quarter ending December 31, 2019. The Partnership is currently allowed to make distributions to its unitholders in accordance with this covenant; however, the Partnership will only make distributions to the extent it has sufficient cash from operations after establishment of cash reserves as determined by the Board of Directors (the “Board”) of Blueknight Energy Partners G.P., L.L.C. (the “general partner”) in accordance with the Partnership’s cash distribution policy, including the establishment of any reserves for the proper conduct of the Partnership’s business.  See Note 9 for additional information regarding distributions.

In addition to other customary events of default, the credit agreement includes an event of default if:


12


(i)
the general partner ceases to own 100% of the Partnership’s general partner interest or ceases to control the Partnership;
(ii)
Ergon ceases to own and control 50% or more of the membership interests of the general partner; or
(iii)
during any period of 12 consecutive months, a majority of the members of the Board of the general partner ceases to be composed of individuals:
(A)
who were members of the Board on the first day of such period;
(B)
whose election or nomination to the Board was approved by individuals referred to in clause (A) above constituting at the time of such election or nomination at least a majority of the Board; or
(C)
whose election or nomination to the Board was approved by individuals referred to in clauses (A) and (B) above constituting at the time of such election or nomination at least a majority of the Board, provided that any changes to the composition of individuals serving as members of the Board approved by Ergon will not cause an event of default.

If an event of default relating to bankruptcy or other insolvency events occurs with respect to the general partner or the Partnership, all indebtedness under the credit agreement will immediately become due and payable.  If any other event of default exists under the credit agreement, the lenders may accelerate the maturity of the obligations outstanding under the credit agreement and exercise other rights and remedies.  In addition, if any event of default exists under the credit agreement, the lenders may commence foreclosure or other actions against the collateral.
 
If any default occurs under the credit agreement, or if the Partnership is unable to make any of the representations and warranties in the credit agreement, the Partnership will be unable to borrow funds or to have letters of credit issued under the credit agreement. 

Upon the execution of the first amendment to its credit agreement in June 2018, the Partnership expensed $0.4 million of debt issuance costs due to the reduction in available borrowing capacity. The Partnership capitalized $0.3 million of debt issuance costs during each of the three and six months ended June 30, 2018. Debt issuance costs are being amortized over the term of the credit agreement. Interest expense related to debt issuance cost amortization for each of the three months ended June 30, 2018 and 2019, was $0.3 million. Interest expense related to debt issuance cost amortization for each of the six months ended June 30, 2018 and 2019, was $0.5 million.
  
During the three months ended June 30, 2018 and 2019, the weighted average interest rate under the Partnership’s credit agreement, excluding the $0.4 million of debt issuance costs in 2018 that were expensed as described above, was 5.39% and 6.27%, respectively, resulting in interest expense of approximately 4.7 million and $4.1 million, respectively. During the six months ended June 30, 2018 and 2019, the weighted average interest rate under the Partnership’s credit agreement, excluding the $0.4 million of debt issuance costs in 2018 that were expensed as described above, was 5.18% and 6.35%, respectively, resulting in interest expense of approximately $8.6 million and $8.4 million, respectively.

The Partnership is exposed to market risk for changes in interest rates related to its credit agreement. Interest rate swap agreements are sometimes used to manage a portion of the exposure related to changing interest rates by converting floating-rate debt to fixed-rate debt. As of June 30, 2019, the Partnership had no interest rate swap agreements; interest rate swap agreements with notional amounts totaling $100.0 million matured on January 28, 2019. During the three months ended June 30, 2018, the Partnership recorded swap interest income of $0.1 million. During the six months ended June 30, 2018 and 2019, the Partnership recorded swap interest income of less than $0.1 million for both periods. The interest rate swaps did not receive hedge accounting treatment under ASC 815 - Derivatives and Hedging.

The following provides information regarding the Partnership’s assets and liabilities related to its interest rate swap agreements as of the periods indicated (in thousands):
Derivatives Not Designated as Hedging Instruments
 
Balance Sheet Location
 
Fair Value of Derivatives
 
 
December 31, 2018
Interest rate swap assets - current
 
Other current assets
 
$
44


Changes in the fair value of the interest rate swaps are reflected in the unaudited condensed consolidated statements of operations as follows (in thousands):

13


Derivatives Not Designated as Hedging Instruments
 
Location of Gain (Loss) Recognized in Net Income on Derivatives
 
Amount of Gain (Loss) Recognized in Net Income on Derivatives
 
 
 
 
Three Months ended June 30,
 
Six Months ended June 30,
 
 
 
 
2018
 
2018
 
2019
Interest rate swaps
 
Interest expense
 
$
(40
)
 
$
314

 
$
(44
)

8.    NET INCOME PER LIMITED PARTNER UNIT

For purposes of calculating earnings per unit, the excess of distributions over earnings or excess of earnings over distributions for each period are allocated to the Partnership’s general partner based on the general partner’s ownership interest at the time. The following sets forth the computation of basic and diluted net income per common unit (in thousands, except per unit data): 
 
Three Months ended June 30,
 
Six Months ended June 30,
 
2018
 
2019
 
2018
 
2019
Net income
$
1,785

 
$
3,356

 
$
6,227

 
$
7,113

General partner interest in net income
28

 
53

 
259

 
158

Preferred interest in net income
6,279

 
6,279

 
12,557

 
12,558

Net loss available to limited partners
$
(4,522
)
 
$
(2,976
)
 
$
(6,589
)
 
$
(5,603
)
 
 
 
 
 
 
 
 
Basic and diluted weighted average number of units:
 
 
 
 
 
 
 
Common units
40,324

 
40,715

 
40,306

 
40,696

Restricted and phantom units
1,133

 
1,076

 
983

 
904

Total units
41,457

 
41,791

 
41,289

 
41,600

 
 
 
 
 
 
 
 
Basic and diluted net loss per common unit
$
(0.11
)
 
$
(0.07
)
 
$
(0.16
)
 
$
(0.13
)

9.    PARTNERS’ CAPITAL AND DISTRIBUTIONS

On July 18, 2019, the Partnership announced that the Board approved a cash distribution of $0.17875 per outstanding preferred unit for the three months ended June 30, 2019.  The Partnership will pay this distribution on August 14, 2019, to unitholders of record as of August 2, 2019. The total distribution will be approximately $6.4 million, with approximately $6.3 million and $0.1 million paid to the Partnership’s preferred unitholders and general partner, respectively.

In addition, the Board approved a cash distribution of $0.04 per outstanding common unit for the three months ended June 30, 2019. The Partnership will pay this distribution on August 14, 2019, to unitholders of record on August 2, 2019. The total distribution will be approximately $1.7 million, with approximately $1.6 million and less than $0.1 million to be paid to the Partnership’s common unitholders and general partner, respectively, and less than $0.1 million to be paid to holders of phantom and restricted units pursuant to awards granted under the Partnership’s Long-Term Incentive Plan.
  
10.    RELATED-PARTY TRANSACTIONS

Transactions with Ergon

The Partnership leases asphalt facilities and provides asphalt terminalling services to Ergon. For the three months ended June 30, 2018 and 2019, the Partnership recognized related-party revenues of $13.5 million and $8.8 million, respectively, for services provided to Ergon. For the six months ended June 30, 2018 and 2019, the Partnership recognized related-party revenues of $27.5 million and $17.9 million, respectively, for services provided to Ergon. As of December 31, 2018, and June 30, 2019, the Partnership had receivables from Ergon of $1.0 million and $1.1 million, respectively, net of allowance for doubtful accounts. As of December 31, 2018, and June 30, 2019, the Partnership had unearned revenues from Ergon of $6.5 million and $9.3 million, respectively.

Effective April 1, 2018, the Partnership entered into an agreement with Ergon under which the Partnership purchases crude oil in connection with its crude oil marketing operations. For the three months ended June 30, 2018 and 2019, the Partnership

14


made purchases of crude oil under this agreement totaling $30.5 million and $36.1 million, respectively. For the six months ended June 30, 2018 and 2019, the Partnership made purchases of crude oil under this agreement totaling $30.5 million and $65.8 million, respectively. As of June 30, 2019, the Partnership had payables to Ergon related to this agreement of $10.2 million related to the June crude oil settlement cycle, and this balance was paid in full on July 19, 2019.

The Partnership and Ergon have an agreement (the “Agreement”) that gives each party rights concerning the purchase or sale of Ergon’s interest in Cimarron Express, subject to certain terms and conditions. Cimarron Express was planned to be a new 16-inch diameter, 65-mile crude oil pipeline running from northeastern Kingfisher County, Oklahoma to the Partnership’s Cushing, Oklahoma crude oil terminal, with an originally anticipated in-service date in the second half of 2019. Ergon formed a Delaware limited liability company, Ergon - Oklahoma Pipeline, LLC (“DEVCO”), which holds Ergon’s 50% membership interest in Cimarron Express. Under the Agreement, the Partnership has the right, at any time, to purchase 100% of the authorized and outstanding member interests in DEVCO from Ergon for the Purchase Price (as defined in the Agreement), which shall be computed by taking Ergon’s total investment in the Cimarron Express plus interest, by giving written notice to Ergon (the “Call”). Ergon has the right to require the Partnership to purchase 100% of the authorized and outstanding member interests of DEVCO for the Purchase Price (the “Put”) at any time beginning the earlier of (i) 18 months from the formation, May 9, 2018, of the joint venture company to build the pipeline, (ii) six months after completion of the pipeline, or (iii) the event of dissolution of Cimarron Express. Upon exercise of the Call or the Put, the Partnership and Ergon will execute the Member Interest Purchase Agreement, which is attached to the Agreement as Exhibit B. Upon receipt of the Purchase Price, Ergon shall be obligated to convey 100% of the authorized and outstanding member interests in DEVCO to the Partnership or its designee. As of June 30, 2019, neither Ergon nor the Partnership has exercised their options under the Agreement.

In December 2018, the Partnership and Ergon were informed that Kingfisher Midstream made the decision to suspend future investments in Cimarron Express as Kingfisher Midstream determined that the anticipated volumes from the currently dedicated acreage, and the resultant project economics, did not support additional investment from Kingfisher Midstream. As of December 31, 2018, Cimarron Express had spent approximately $30.6 million on the pipeline project, primarily related to the purchase of steel pipe and equipment, rights of way and engineering and design services. Cimarron Express recorded a $20.9 million impairment charge in the fourth quarter of 2018 to reduce the carrying amount of its assets to their estimated fair value. Ergon recorded a $10.0 million other-than-temporary impairment on its investment in Cimarron Express as of December 31, 2018, to reduce its investment to its estimated fair value. As a result, the Partnership considered the SEC staff’s opinions outlined in SAB 107 Topic 5.T Accounting for Expenses or Liabilities Paid by Principal Stockholders. The Agreement was designed to have the Partnership, ultimately and from the onset, bear any risk of loss on the construction of the pipeline project and eventually own a 50% interest in the pipeline. As a result, the Partnership recorded on a push-down basis a $10.0 million impairment of Ergon’s investment in Cimarron Express in its consolidated results of operations during the year ended December 31, 2018, and a contingent liability payable to Ergon as of December 31, 2018. In April 2019, certain assets from the project were sold to a third party for approximately $1.4 million over the fair market value that was estimated at December 31, 2018, and the Partnership recorded its share, on a push-down basis, based on Ergon’s 50% interest in the assets. Ergon’s interest in DEVCO includes its capital contributions, its share of the cash received for the assets sale discussed above, internal Ergon labor costs and capitalized interest, which brings its investment in DEVCO to approximately $10.7 million through June 30, 2019. During the six months ended June 30, 2019, a change in estimate and accrued interest resulted in the Partnership recording additional impairment expense of $1.9 million. The Partnership’s contingent liability as of June 30, 2019, consists of Ergon’s $10.7 million investment plus accrued interest of $1.3 million, of which $0.4 million of interest relates to the three months ended June 30, 2019.

11.    LONG-TERM INCENTIVE PLAN

In July 2007, the general partner adopted the Long-Term Incentive Plan (the “LTIP”), which is administered by the compensation committee of the Board. Effective April 29, 2014, the Partnership’s unitholders approved an amendment to the LTIP to increase the number of common units reserved for issuance under the incentive plan to 4,100,000 common units, subject to adjustments for certain events.  Although other types of awards are contemplated under the LTIP, currently outstanding awards include “phantom” units, which convey the right to receive common units upon vesting, and “restricted” units, which are grants of common units restricted until the time of vesting. The phantom unit awards also include distribution equivalent rights (“DERs”).
 
Subject to applicable earning criteria, a DER entitles the grantee to a cash payment equal to the cash distribution paid on an outstanding common unit prior to the vesting date of the underlying award. Recipients of restricted and phantom units are entitled to receive cash distributions paid on common units during the vesting period which are reflected initially as a reduction of partners’ capital. Distributions paid on units which ultimately do not vest are reclassified as compensation expense.  Awards granted to date are equity awards and, accordingly, the fair value of the awards as of the grant date is expensed over the vesting period.  


15


In connection with each anniversary of joining the Board, restricted common units are granted to the independent directors. The units vest in one-third increments over three years. The following table includes information on outstanding grants made to the directors under the LTIP:
Grant Date
Number of Units
 
Weighted Average Grant Date Fair Value(1)
 
Grant Date Total Fair Value
(in thousands)
December 2016
10,950

 
$
6.85

 
$
75

December 2017
15,306

 
$
4.85

 
$
74

December 2018
23,436

 
$
1.20

 
$
28

_________________
(1)    Fair value is the closing market price on the grant date of the awards.

In addition, the independent directors received common unit grants that have no vesting requirement as part of their compensation. The following table includes information on grants made to the directors under the LTIP that have no vesting requirement:
Grant Date
Number of Units
 
Weighted Average Grant Date Fair Value(1)
 
Grant Date Total Fair Value
(in thousands)
December 2016
10,220

 
$
6.85

 
$
70

December 2017
14,286

 
$
4.85

 
$
69

December 2018
21,875

 
$
1.20

 
$
26

_________________
(1)    Fair value is the closing market price on the grant date of the awards.

The Partnership also grants phantom units to employees. These grants are equity awards under ASC 718 – Stock Compensation and, accordingly, the fair value of the awards as of the grant date is expensed over the three-year vesting period. The following table includes information on the outstanding grants:
Grant Date
Number of Units
 
Weighted Average Grant Date Fair Value(1)
 
Grant Date Total Fair Value
(in thousands)
March 2017
323,339

 
$
7.15

 
$
2,312

March 2018
457,984

 
$
4.77

 
$
2,185

March 2019
524,997

 
$
1.14

 
$
598

June 2019
46,168

 
$
1.08

 
$
50

_________________
(1)    Fair value is the closing market price on the grant date of the awards.

The unrecognized estimated compensation cost of outstanding phantom and restricted units at June 30, 2019, was $1.4 million, which will be expensed over the remaining vesting period.

The Partnership’s equity-based incentive compensation expense for the three months ended June 30, 2018 and 2019, was $0.6 million and $0.3 million, respectively. The Partnership’s equity-based incentive compensation expense for the six months ended June 30, 2018 and 2019, was $1.1 million and $0.6 million, respectively.

Activity pertaining to phantom and restricted common unit awards granted under the LTIP is as follows: 
 
Number of Units
 
Weighted Average Grant Date Fair Value
Nonvested at December 31, 2018
998,219

 
$
5.88

Granted
571,165

 
1.14

Vested
366,282

 
4.80

Forfeited
69,624

 
3.24

Nonvested at June 30, 2019
1,133,478

 
$
3.52


16



12.    EMPLOYEE BENEFIT PLANS

Under the Partnership’s 401(k) Plan, which was instituted in 2009, employees who meet specified service requirements may contribute a percentage of their total compensation, up to a specified maximum, to the 401(k) Plan. The Partnership may match each employee’s contribution, up to a specified maximum, in full or on a partial basis. The Partnership recognized expense of $0.3 million for each of the three months ended June 30, 2018 and 2019, for discretionary contributions under the 401(k) Plan. The Partnership recognized expense of $0.6 million for each of the six months ended June 30, 2018 and 2019, for discretionary contributions under the 401(k) Plan.

The Partnership may also make annual lump-sum contributions to the 401(k) Plan irrespective of the employee’s contribution match. The Partnership may make a discretionary annual contribution in the form of profit sharing calculated as a percentage of an employee’s eligible compensation. This contribution is retirement income under the qualified 401(k) Plan. Annual profit sharing contributions to the 401(k) Plan are submitted to and approved by the Board. The Partnership recognized expense of less than $0.1 million and $0.1 million for the three months ended June 30, 2018 and 2019, respectively, for discretionary profit sharing contributions under the 401(k) Plan. The Partnership recognized expense of $0.1 million and $0.3 million for the six months ended June 30, 2018 and 2019, respectively, for discretionary profit sharing contributions under the 401(k) Plan.

Under the Partnership’s Employee Unit Purchase Plan (the “Unit Purchase Plan”), which was instituted in January 2015, employees have the opportunity to acquire or increase their ownership of common units representing limited partner interests in the Partnership. Eligible employees who enroll in the Unit Purchase Plan may elect to have a designated whole percentage, up to a specified maximum, of their eligible compensation for each pay period withheld for the purchase of common units at a discount to the then current market value. A maximum of 1,000,000 common units may be delivered under the Unit Purchase Plan, subject to adjustment for a recapitalization, split, reorganization, or similar event pursuant to the terms of the Unit Purchase Plan. The Partnership recognized compensation expense of less than $0.1 million for the each of the three and six months ended June 30, 2018 and 2019, in connection with the Unit Purchase Plan.
 
13.    FAIR VALUE MEASUREMENTS
 
The Partnership uses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost) to value assets and liabilities required to be measured at fair value, as appropriate. The Partnership uses an exit price when determining the fair value. The exit price represents amounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
 
The Partnership utilizes a three-tier fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1
Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2
Inputs other than quoted prices that are observable for these assets or liabilities, either directly or indirectly.  These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3
Unobservable inputs in which there is little market data, which requires the reporting entity to develop its own assumptions.
 
This hierarchy requires the use of observable market data, when available, to minimize the use of unobservable inputs when determining fair value.  In periods in which they occur, the Partnership recognizes transfers into and out of Level 3 as of the end of the reporting period. There were no transfers during the six months ended June 30, 2019. Transfers out of Level 3 represent existing assets and liabilities that were classified previously as Level 3 for which the observable inputs became a more significant portion of the fair value estimates. Determining the appropriate classification of the Partnership’s fair value measurements within the fair value hierarchy requires management’s judgment regarding the degree to which market data is observable or corroborated by observable market data.


17


The Partnership’s recurring financial assets and liabilities subject to fair value measurements and the necessary disclosures are as follows (in thousands): 
 
Fair Value Measurements as of December 31, 2018
Description
Total
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
  (Level 3)
Assets:
 
 
 
 
 
 
 
Interest rate swap assets
$
44

 
$

 
$
44

 
$

Total swap assets
$
44

 
$

 
$
44

 
$


As of June 30, 2019, the Partnership had no interest rate swap agreements.

Fair Value of Other Financial Instruments

The following disclosure of the estimated fair value of financial instruments is made in accordance with accounting guidance for financial instruments. The Partnership has determined the estimated fair values by using available market information and valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.
 
At June 30, 2019, the carrying values on the unaudited condensed consolidated balance sheets for cash and cash equivalents (classified as Level 1), accounts receivable, and accounts payable approximate their fair value because of their short-term nature.
 
Based on the borrowing rates currently available to the Partnership for credit agreement debt with similar terms and maturities and consideration of the Partnership’s non-performance risk, long-term debt associated with the Partnership’s credit agreement at June 30, 2019, approximates its fair value. The fair value of the Partnership’s long-term debt was calculated using observable inputs (LIBOR for the risk-free component) and unobservable company-specific credit spread information.   As such, the Partnership considers this debt to be Level 3.

14.    LEASES

The Partnership adopted ASU 2016-02, Leases (Topic 842) as of January 1, 2019, using the modified retrospective approach applied at the beginning of the period of adoption. The Partnership elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed it to carry forward the historical lease classification.

Adoption of the new standard resulted in the recording of additional net right of use operating lease assets and operating lease liabilities of approximately $11.8 million and $11.9 million, respectively, as of January 1, 2019. The standard did not materially impact the consolidated statement of operations and had no impact on cash flows.

The Partnership leases certain office space, land and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; lease expense for these leases is recognized as paid over the lease term. For real property leases, the Partnership has elected the practical expedient to not separate nonlease components (e.g., common-area maintenance costs) from lease components and to instead account for each component as a single lease component. For leases that do not contain an implicit interest rate, the Partnership uses its most recent incremental borrowing rate.

Some real property and equipment leases contain options to renew, with renewal terms that can extend indefinitely. The exercise of such lease renewal options is at the Partnership’s sole discretion. Certain equipment leases also contain purchase options and residual value guarantees. The Partnership determines the lease term at the lease commencement date as the non-cancellable period of the lease, including options to extend or terminate the lease when such an option is reasonably certain to be exercised. The Partnership uses various data to analyze these options, including historical trends, current expectations and useful lives of assets related to the lease.

18


 
 
 
As of
 
Classification
 
June 30, 2019
 
 
 
(thousands)
Assets
 
 
 
Operating lease assets
Operating lease assets
 
$
12,009

Finance lease assets
Other noncurrent assets
 
753

Total leased assets
 
 
$
12,762

Liabilities
 
 
 
Current
 
 
 
Operating lease liabilities
Current operating lease liability

 
$
2,682

Finance lease liabilities
Other current liabilities
 
276

Noncurrent
 
 
 
Operating lease liabilities
Noncurrent operating lease liability
 
9,402

Finance lease liabilities
Other long-term liabilities
 
448

Total lease liabilities
 
 
$
12,808


Future commitments, including options to extend lease terms that are reasonably certain of being exercised, related to leases at June 30, 2019, are summarized below (in thousands):
 
Operating Leases
 
Financing Leases
Twelve months ending June 30, 2020
$
2,885

 
$
304

Twelve months ending June 30, 2021
2,475

 
263

Twelve months ending June 30, 2022
1,737

 
171

Twelve months ending June 30, 2023
1,480

 
35

Twelve months ending June 30, 2024
1,123

 
3

Thereafter
6,402

 

Total
16,102

 
776

Less: Interest
4,018

 
52

Present value of lease liabilities
$
12,084

 
$
724


Future non-cancellable commitments related to operating leases at December 31, 2018, are summarized below (in thousands):  
 
Operating Leases
Year ending December 31, 2019
$
2,862

Year ending December 31, 2020
1,904

Year ending December 31, 2021
1,242

Year ending December 31, 2022
640

Year ending December 31, 2023
548

Thereafter
1,259

Total future minimum lease payments
$
8,455



19


The following table summarizes the Partnership’s total lease cost by type as well as cash flow information (in thousands):
 
 
 
Three Months ended June 30,
 
Six Months ended June 30,
 
Classification
 
2019
 
2019
Total Lease Cost by Type:
 
 
 
 
 
Operating lease cost(1)
Operating Expense
 
$
1,054

 
$
2,196

Finance lease cost
 
 
 
 
 
Amortization of leased assets
Operating Expense
 
81

 
151

Interest on lease liabilities
Interest Expense
 
10

 
17

Net lease cost
 
 
$
1,145

 
$
2,364

Supplemental cash flow disclosures:
 
 
 
 
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
 
 
Operating cash flows from operating leases

 
 
 
 
$
(1,444
)
Operating cash flows from finance leases

 
 
 
 
$
(70
)
Financing cash flows from finance leases

 
 
 
 
$
(145
)
Leased assets obtained in exchange for new operating lease liabilities
 
 
 
 
$
1,678

Leased assets obtained in exchange for new finance lease liabilities

 
 
 
 
$
342

____________________
(1)    Includes short-term and variable lease costs, which are immaterial.
 
 
As of
 
 
June 30, 2019
Lease Term and Discount Rate
 
 
Weighted-average remaining lease term (years)
 
 
Operating leases
 
9.6

Finance leases
 
2.8

Weighted-average discount rate
 
 
Operating leases
 
5.73
%
Finance leases
 
4.64
%

The Partnership also incurs costs associated with acquiring and maintaining rights-of-way. The contracts for these generally either extend beyond one year but can be cancelled at any time should they no longer be required for operations or have no contracted term but contain perpetual annual or monthly renewal options. Rights-of-way generally do not provide for exclusive use of the land and as such are not accounted for as leases.

15.    OPERATING SEGMENTS

The Partnership’s operations consist of four reportable segments: (i) asphalt terminalling services, (ii) crude oil terminalling services, (iii) crude oil pipeline services and (iv) crude oil trucking services.  
 
ASPHALT TERMINALLING SERVICES —The Partnership provides asphalt product and residual fuel terminalling services, including storage, blending, processing and throughput services. On July 12, 2018, the Partnership sold three asphalt facilities. See Note 6 for additional information. The Partnership has 53 terminalling facilities located in 26 states.

CRUDE OIL TERMINALLING SERVICES —The Partnership provides crude oil terminalling services at its terminalling facility located in Oklahoma.

CRUDE OIL PIPELINE SERVICES —The Partnership owns and operates pipeline systems that gather crude oil purchased by its customers and transports it to refiners, to common carrier pipelines for ultimate delivery to refiners or to terminalling facilities owned by the Partnership and others. The Partnership refers to its pipeline system located in Oklahoma and the Texas Panhandle as the Mid-Continent pipeline system. Crude oil product sales revenues consist of sales proceeds recognized for the sale of crude oil to third-party customers.
 

20


CRUDE OIL TRUCKING SERVICES — The Partnership uses its owned and leased tanker trucks to gather crude oil for its customers at remote wellhead locations generally not covered by pipeline and gathering systems and to transport the crude oil to aggregation points and storage facilities located along pipeline gathering and transportation systems.  
 
The Partnership’s management evaluates segment performance based upon operating margin, excluding amortization and depreciation, which includes revenues from related parties and external customers and operating expense, excluding depreciation and amortization. Operating margin, excluding depreciation and amortization (in the aggregate and by segment) is presented in the following table. The Partnership computes the components of operating margin, excluding depreciation and amortization by using amounts that are determined in accordance with GAAP. The Partnership accounts for intersegment product sales as if the sales were to third parties, that is, at current market prices. A reconciliation of operating margin, excluding depreciation and amortization to income before income taxes, which is its nearest comparable GAAP financial measure, is included in the following table. The Partnership believes that investors benefit from having access to the same financial measures being utilized by management. Operating margin, excluding depreciation and amortization is an important measure of the economic performance of the Partnership’s core operations. This measure forms the basis of the Partnership’s internal financial reporting and is used by its management in deciding how to allocate capital resources among segments. Income before income taxes, alternatively, includes expense items, such as depreciation and amortization, general and administrative expenses and interest expense, which management does not consider when evaluating the core profitability of the Partnership’s operations.

The following table reflects certain financial data for each segment for the periods indicated (in thousands):
 
 
Three Months ended June 30,
 
Six Months ended June 30,
 
 
2018
 
2019
 
2018
 
2019
Asphalt Terminalling Services
 
 
 
 
 
 
 
 
Service revenue:
 
 
 
 
 
 
 
 
Third-party revenue
 
$
6,639

 
$
6,850

 
$
11,771

 
$
13,831

Related-party revenue
 
5,981

 
3,981

 
12,302

 
8,098

Lease revenue:
 
 
 
 
 
 
 
 
Third-party revenue
 
10,016

 
9,819

 
19,473

 
19,582

Related-party revenue
 
7,475

 
4,812

 
15,178

 
9,752

Total revenue for reportable segment
 
30,111

 
25,462

 
58,724

 
51,263

Operating expense, excluding depreciation and amortization
 
13,393

 
11,670

 
26,728

 
23,955

Operating margin, excluding depreciation and amortization
 
$
16,718

 
$
13,792

 
$
31,996

 
$
27,308

Total assets (end of period)
 
$
167,849

 
$
149,603

 
$
167,849

 
$
149,603

 
 
 
 
 
 
 
 
 
Crude Oil Terminalling Services
 
 
 
 

 
 
 
 
Service revenue:
 
 
 
 

 
 
 
 
Third-party revenue
 
$
2,910

 
$
4,020

 
$
7,496

 
$
7,594

Intersegment revenue
 
170

 
278

 
170

 
576

Lease revenue:
 
 
 
 
 
 
 
 
Third-party revenue
 
12

 

 
27

 

Total revenue for reportable segment
 
3,092

 
4,298

 
7,693

 
8,170

Operating expense, excluding depreciation and amortization
 
913

 
1,017

 
2,188

 
2,299

Operating margin, excluding depreciation and amortization
 
$
2,179

 
$
3,281

 
$
5,505

 
$
5,871

Total assets (end of period)
 
$
67,150

 
$
67,272

 
$
67,150

 
$
67,272

 
 
 
 
 
 
 
 
 

21


 
 
Three Months ended June 30,
 
Six Months ended June 30,
 
 
2018
 
2019
 
2018
 
2019
Crude Oil Pipeline Services
 
 
 
 

 
 
 
 
Service revenue:
 
 
 
 

 
 
 
 
Third-party revenue
 
$
1,045

 
$
1,972

 
$
3,105

 
$
4,470

Related-party revenue
 
82

 
101

 
82

 
203

Lease revenue:
 
 
 
 
 
 
 
 
Third-party revenue
 
177

 

 
412

 

Product sales revenue:
 
 
 
 
 
 
 
 
Third-party revenue
 
45,612

 
59,636

 
49,120

 
118,560

Total revenue for reportable segment
 
46,916

 
61,709

 
52,719

 
123,233

Operating expense, excluding depreciation and amortization
 
2,542

 
2,749

 
5,327

 
5,471

Intersegment operating expense
 
1,156

 
1,704

 
1,599

 
3,331

Third-party cost of product sales
 
20,041

 
20,510

 
22,678

 
45,097

Related-party cost of product sales
 
23,747

 
36,421

 
23,747

 
67,195

Operating margin, excluding depreciation and amortization
 
$
(570
)
 
$
325

 
$
(632
)
 
$
2,139

Total assets (end of period)
 
$
152,105

 
$
94,436

 
$
152,105

 
$
94,436

 
 
 
 
 
 
 
 
 
Crude Oil Trucking Services
 
 
 
 

 
 
 
 
Service revenue
 
 
 
 

 
 
 
 
Third-party revenue
 
$
3,509

 
$
2,885

 
$
9,049

 
$
5,718

Intersegment revenue
 
986

 
1,426

 
1,429

 
2,755

Lease revenue:
 
 
 
 
 
 
 
 
Third-party revenue
 
32

 

 
129

 

Product sales revenue:
 
 
 
 
 
 
 
 
Third-party revenue
 
3

 

 
9

 

Total revenue for reportable segment
 
4,530

 
4,311

 
10,616

 
8,473

Operating expense, excluding depreciation and amortization
 
4,727

 
4,242

 
11,101

 
8,462

Operating margin, excluding depreciation and amortization
 
$
(197
)
 
$
69

 
$
(485
)
 
$
11

Total assets (end of period)
 
$
3,402

 
$
4,951

 
$
3,402

 
$
4,951

 
 
 
 
 
 
 
 
 
Total operating margin, excluding depreciation and amortization(1)
 
$
18,130

 
$
17,467

 
$
36,384

 
$
35,329

 
 
 
 
 
 
 
 
 
Total Segment Revenues
 
$
84,649

 
$
95,780

 
$
129,752

 
$
191,139

Elimination of Intersegment Revenues
 
(1,156
)
 
(1,704
)
 
(1,599
)
 
(3,331
)
Consolidated Revenues