Note 11 - Operating Segments

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

11. 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. 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 its Mid-Continent pipeline system that gathers 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. Crude oil product sales revenues consist of sales proceeds recognized for the sale of crude oil to

third

-party customers.

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.  Transactions between segments are generally recorded based on prices negotiated between the segments and are similar to prices charged to

third

parties. 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 March 31,
	2019		2020
Asphalt Terminalling Services
Service revenue:
Third-party revenue	$	6,982	$	6,854
Related-party revenue		4,118		4,077
Lease revenue:
Third-party revenue		9,763		9,831
Related-party revenue		4,940		4,921
Total revenue for reportable segment		25,803		25,683
Operating expense, excluding depreciation and amortization		12,285		12,026
Operating margin, excluding depreciation and amortization	$	13,518	$	13,657
Total assets (end of period)	$	147,844	$	143,621
Crude Oil Terminalling Services
Service revenue:
Third-party revenue	$	3,573	$	3,330
Intersegment revenue		298		-
Total revenue for reportable segment		3,871		3,330
Operating expense, excluding depreciation and amortization		1,282		878
Operating margin, excluding depreciation and amortization	$	2,589	$	2,452
Total assets (end of period)	$	67,934	$	61,984

	Three Months Ended March 31,
	2019			2020
Crude Oil Pipeline Services
Service revenue:
Third-party revenue	$	2,498		$	502
Related-party revenue		101			-
Product sales revenue:
Third-party revenue		58,924			47,052
Total revenue for reportable segment		61,523			47,554
Operating expense, excluding depreciation and amortization		2,722			2,123
Intersegment operating expense		1,627			1,425
Third-party cost of product sales		24,587			14,221
Related-party cost of product sales		30,774			28,254
Operating margin, excluding depreciation and amortization	$	1,813		$	1,531
Total assets (end of period)	$	98,722		$	79,180
Crude Oil Trucking Services
Service revenue
Third-party revenue	$	2,833		$	2,543
Intersegment revenue		1,329			1,425
Total revenue for reportable segment		4,162			3,968
Operating expense, excluding depreciation and amortization		4,220			3,818
Operating margin, excluding depreciation and amortization	$	(58	)	$	150
Total assets (end of period)	$	5,156		$	5,287
Total operating margin, excluding depreciation and amortization (1)	$	17,862		$	17,790
Total Segment Revenues	$	95,359		$	80,535
Elimination of Intersegment Revenues		(1,627	)		(1,425	)
Consolidated Revenues	$	93,732		$	79,110

( 1 ) The following table reconciles segment operating margin (excluding depreciation and amortization) to income before income taxes (in thousands):

	Three Months Ended March 31,
	2019			2020
Operating margin, excluding depreciation and amortization	$	17,862		$	17,790
Depreciation and amortization		(6,734	)		(6,094	)
General and administrative expense		(3,693	)		(3,540	)
Asset impairment expense		(1,119	)		(5,122	)
Gain (loss) on sale of assets		1,724			(185	)
Other income		-			558
Interest expense		(4,271	)		(3,399	)
Income before income taxes	$	3,769		$	8