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EX-32.02 - EXHIBIT 32.02 - NuStar Energy L.P.ns3q1510-qex3202.htm
EX-31.02 - EXHIBIT 31.02 - NuStar Energy L.P.ns3q1510-qex3102.htm
EX-12.01 - EXHIBIT 12.01 - NuStar Energy L.P.ns3q1510-qex1201.htm
EX-10.01 - EXHIBIT 10.01 - NuStar Energy L.P.ns3q1510-qex1001.htm
EX-32.01 - EXHIBIT 32.01 - NuStar Energy L.P.ns3q1510-qex3201.htm
EX-31.01 - EXHIBIT 31.01 - NuStar Energy L.P.ns3q1510-qex3101.htm

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _________________________________________
 FORM 10-Q
 _________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
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 1-16417
  _________________________________________
NUSTAR ENERGY L.P.
(Exact name of registrant as specified in its charter)
  _________________________________________
 
Delaware
 
74-2956831
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
19003 IH-10 West
San Antonio, Texas
 
78257
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (210) 918-2000
 _________________________________________
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 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act:
Large accelerated filer
 
x
Accelerated filer
 
o
 
 
 
 
 
 
Non-accelerated filer
 
o  (Do not check if a smaller reporting company)
Smaller reporting company
 
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
The number of common units outstanding as of October 31, 2015 was 77,886,078.
 
 
 
 
 



NUSTAR ENERGY L.P.
FORM 10-Q
TABLE OF CONTENTS
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 2.
 
 
 
Item 6.
 
 

2


PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, Except Unit Data)
 
September 30,
2015
 
December 31,
2014
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
116,425

 
$
87,912

Accounts receivable, net of allowance for doubtful accounts of $8,154
and $7,808 as of September 30, 2015 and December 31, 2014, respectively
133,973

 
208,314

Receivable from related parties

 
164

Inventories
53,876

 
55,713

Other current assets
34,083

 
35,944

Assets held for sale

 
1,100

Total current assets
338,357

 
389,147

Property, plant and equipment, at cost
5,136,964

 
4,815,396

Accumulated depreciation and amortization
(1,480,691
)
 
(1,354,664
)
Property, plant and equipment, net
3,656,273

 
3,460,732

Intangible assets, net
115,471

 
58,670

Goodwill
704,404

 
617,429

Investment in joint venture

 
74,223

Deferred income tax asset
3,144

 
4,429

Other long-term assets, net
317,482

 
314,166

Total assets
$
5,135,131

 
$
4,918,796

Liabilities and Partners’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
97,883

 
$
162,056

Payable to related party
16,418

 
15,128

Short-term debt
42,000

 
77,000

Accrued interest payable
27,921

 
33,345

Accrued liabilities
50,802

 
61,025

Taxes other than income tax
17,560

 
14,121

Income tax payable
2,789

 
2,517

Total current liabilities
255,373

 
365,192

Long-term debt
3,109,359

 
2,749,452

Long-term payable to related party
30,550

 
33,537

Deferred income tax liability
24,497

 
27,308

Other long-term liabilities
61,452

 
27,097

Commitments and contingencies (Note 5)

 

Partners’ equity:
 
 
 
Limited partners (77,886,078 common units outstanding
as of September 30, 2015 and December 31, 2014)
1,699,483

 
1,744,810

General partner
37,726

 
39,312

Accumulated other comprehensive loss
(83,309
)
 
(67,912
)
Total partners’ equity
1,653,900

 
1,716,210

Total liabilities and partners’ equity
$
5,135,131

 
$
4,918,796

See Condensed Notes to Consolidated Financial Statements.

3


NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
Service revenues
$
288,574

 
$
266,651

 
$
833,128

 
$
755,551

Product sales
204,992

 
527,771

 
785,993

 
1,637,829

Total revenues
493,566

 
794,422

 
1,619,121

 
2,393,380

Costs and expenses:
 
 
 
 
 
 
 
Cost of product sales
193,958

 
509,794

 
738,074

 
1,578,508

Operating expenses:
 
 
 
 
 
 
 
Third parties
87,730

 
84,570

 
254,658

 
246,541

Related party
34,904

 
31,394

 
100,761

 
91,025

Total operating expenses
122,634

 
115,964

 
355,419

 
337,566

General and administrative expenses:
 
 
 
 
 
 
 
Third parties
8,535

 
7,567

 
25,188

 
20,044

Related party
15,144

 
17,400

 
50,237

 
48,942

Total general and administrative expenses
23,679

 
24,967

 
75,425

 
68,986

Depreciation and amortization expense
52,301

 
48,599

 
157,523

 
142,765

Total costs and expenses
392,572

 
699,324

 
1,326,441

 
2,127,825

Operating income
100,994

 
95,098

 
292,680

 
265,555

Equity in earnings of joint ventures

 
2,749

 

 
1,737

Interest expense, net
(33,448
)
 
(33,007
)
 
(98,309
)
 
(100,546
)
Interest income from related party

 

 

 
1,055

Other income (expense), net
1,776

 
(1,388
)
 
61,892

 
1,816

Income from continuing operations before income tax
    expense
69,322

 
63,452

 
256,263

 
169,617

Income tax expense
4,306

 
4,335

 
9,797

 
10,317

Income from continuing operations
65,016

 
59,117

 
246,466

 
159,300

Income (loss) from discontinued operations, net of tax

 
2,831

 
774

 
(2,316
)
Net income
65,016

 
61,948

 
247,240

 
156,984

Less net loss attributable to noncontrolling interest

 
(173
)
 

 
(395
)
Net income attributable to NuStar Energy L.P.
$
65,016

 
$
62,121

 
$
247,240

 
$
157,379

Net income (loss) per unit applicable to limited partners:
 
 
 
 
 
 
 
Continuing operations
$
0.68

 
$
0.61

 
$
2.68

 
$
1.59

Discontinued operations

 
0.03

 
0.01

 
(0.03
)
Total (Note 10)
$
0.68

 
$
0.64

 
$
2.69

 
$
1.56

Weighted-average limited partner units outstanding
77,886,078

 
77,886,078

 
77,886,078

 
77,886,078

 
 
 
 
 
 
 
 
Comprehensive income
$
38,878

 
$
58,167

 
$
231,843

 
$
159,811

Less comprehensive loss attributable to
     noncontrolling interest

 
(159
)
 

 
(828
)
Comprehensive income attributable to
    NuStar Energy L.P.
$
38,878

 
$
58,326

 
$
231,843

 
$
160,639

See Condensed Notes to Consolidated Financial Statements.

4


NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, Thousands of Dollars)
 
Nine Months Ended September 30,
 
2015
 
2014
Cash Flows from Operating Activities:
 
 
 
Net income
$
247,240

 
$
156,984

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization expense
157,523

 
142,765

Amortization of debt related items
6,693

 
7,015

Gain from sale or disposition of assets
(1,632
)
 
(3,840
)
Gain associated with the Linden Acquisition
(56,277
)
 

Asset impairment loss

 
2,067

Deferred income tax expense
626

 
2,453

Equity in earnings of joint ventures

 
(1,737
)
Distributions of equity in earnings of joint ventures
2,500

 
5,879

Changes in current assets and current liabilities (Note 11)
19,803

 
1,080

Other, net
(352
)
 
2,529

Net cash provided by operating activities
376,124

 
315,195

Cash Flows from Investing Activities:
 
 
 
Capital expenditures
(240,671
)
 
(229,548
)
Change in accounts payable related to capital expenditures
(7,802
)
 
10,910

Acquisitions
(142,500
)
 

Increase in other long-term assets
(3,587
)
 

Proceeds from sale or disposition of assets
17,125

 
25,975

Increase in note receivable from Axeon

 
(13,328
)
Other, net

 
(853
)
Net cash used in investing activities
(377,435
)
 
(206,844
)
Cash Flows from Financing Activities:
 
 
 
Proceeds from long-term debt borrowings
747,779

 
537,436

Proceeds from short-term debt borrowings
622,000

 
205,200

Long-term debt repayments
(365,410
)
 
(451,269
)
Short-term debt repayments
(657,000
)
 
(183,800
)
Distributions to unitholders and general partner
(294,153
)
 
(294,153
)
(Decrease) increase in cash book overdrafts
(12,281
)
 
3,470

Other, net
(792
)
 
(930
)
Net cash provided by (used in) financing activities
40,143

 
(184,046
)
Effect of foreign exchange rate changes on cash
(10,319
)
 
638

Net increase (decrease) in cash and cash equivalents
28,513

 
(75,057
)
Cash and cash equivalents as of the beginning of the period
87,912

 
100,743

Cash and cash equivalents as of the end of the period
$
116,425

 
$
25,686

See Condensed Notes to Consolidated Financial Statements.

5


NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization and Operations
NuStar Energy L.P. (NuStar Energy) (NYSE: NS) is a publicly held Delaware limited partnership engaged in the transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum products and the marketing of petroleum products. Unless otherwise indicated, the terms “NuStar Energy,” “the Partnership,” “we,” “our” and “us” are used in this report to refer to NuStar Energy L.P., to one or more of our consolidated subsidiaries or to all of them taken as a whole. NuStar GP Holdings, LLC (NuStar GP Holdings) (NYSE: NSH) owns our general partner, Riverwalk Logistics, L.P., and owns a 15.0% total interest in us as of September 30, 2015.

We conduct our operations through our subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline Operating Partnership L.P. (NuPOP). We have three business segments: pipeline, storage and fuels marketing.

Basis of Presentation
These unaudited condensed consolidated financial statements include the accounts of the Partnership and subsidiaries in which the Partnership has a controlling interest. Noncontrolling interests are separately disclosed on the financial statements. Inter-partnership balances and transactions have been eliminated in consolidation. We account for investments in joint ventures using the equity method of accounting.

These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included, and all disclosures are adequate. All such adjustments are of a normal recurring nature unless disclosed otherwise. Financial information for the three and nine months ended September 30, 2015 and 2014 included in these Condensed Notes to Consolidated Financial Statements is derived from our unaudited condensed consolidated financial statements. Operating results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The consolidated balance sheet as of December 31, 2014 has been derived from the audited consolidated financial statements as of that date. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014.

New Accounting Pronouncements
In September 2015, the Financial Accounting Standards Board (FASB) issued amended guidance for business combinations that eliminates the requirement to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment be recognized in the reporting period in which the adjustment is identified. The changes are effective for annual and interim periods beginning after December 15, 2015, and early adoption is permitted for financial statements that have not been issued. We will adopt these provisions January 1, 2016, and we do not expect the amended guidance to have a material impact on our financial position, results of operations or disclosures.

In July 2015, the FASB issued amended guidance that requires inventory to be measured at the lower of cost or net realizable value. The changes are effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted. We will adopt these provisions January 1, 2017, and we do not expect the amended guidance to have a material impact on our financial position, results of operations or disclosures.

In April 2015, the FASB issued amended guidance for the presentation of debt issuance costs. Under the amended guidance, debt issuance costs will be presented on the balance sheet as a deduction from the carrying value of the associated debt liability. In August 2015, the FASB issued amended guidance that would allow debt issuance costs related to line-of-credit agreements to continue to be presented as an asset on the balance sheet. The changes are effective for annual and interim periods beginning after December 15, 2015, and retrospective application is required. Early adoption is permitted. We will adopt these provisions January 1, 2016, and we do not expect the amended guidance to have a material impact on our financial position, results of operations or disclosures.


6

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

In February 2015, the FASB issued new consolidation guidance that modifies the criterion involved in a reporting organization’s evaluation of whether certain legal entities are subject to consolidation under the standard. The standard is effective for public companies for annual and interim reporting periods beginning after December 15, 2015, using one of two retrospective transition methods. Early adoption is permitted. We will adopt these provisions January 1, 2016, and we do not expect the guidance to have a material impact on our financial position, results of operations or disclosures.

In May 2014, the FASB and the International Accounting Standards Board jointly issued a comprehensive new revenue recognition standard. In August 2015, the FASB deferred the effective date by one year. The standard is now effective for public entities for annual and interim periods beginning after December 15, 2017, using one of two retrospective transition methods. Early adoption is permitted, but not before the original effective date. We are currently assessing the impact of this new guidance on our financial statements and disclosures, and we have not yet selected a transition method.

2. ACQUISITIONS AND DISPOSITIONS

Acquisitions
Linden Acquisition. On January 2, 2015, we acquired full ownership of ST Linden Terminal, LLC (Linden), which owns a refined products terminal in Linden, NJ with 4.3 million barrels of storage capacity (the Linden Acquisition). Linden is located on a 44-acre facility that provides deep-water terminalling capabilities in the New York Harbor and primarily stores petroleum products, including gasoline, jet fuel and fuel oils. Prior to the Linden Acquisition, Linden operated as a joint venture between us and Linden Holding Corp, with each party owning 50%.

In connection with the Linden Acquisition, we ceased applying the equity method of accounting and consolidated Linden, which is included in our storage segment. The condensed consolidated statements of comprehensive income include the results of operations for Linden commencing on January 2, 2015. On the acquisition date, we remeasured our existing 50% equity investment in Linden to its fair value of $128.0 million and we recognized a gain of $56.3 million in “Other income (expense), net” in the condensed consolidated statements of comprehensive income for the nine months ended September 30, 2015. We estimated the fair value using a market approach, which estimates the enterprise value based on an earnings multiple. We funded the acquisition with borrowings under our revolving credit agreement. The acquisition complements our existing storage operations, and having sole ownership of Linden strengthens our presence in the New York Harbor and the East Coast market.

We accounted for the Linden Acquisition using the acquisition method. The purchase price has been allocated based on the estimated fair values of the individual assets acquired and liabilities assumed at the date of the acquisition. The purchase price allocation was as follows (in thousands of dollars):
Cash paid for the Linden Acquisition
$
142,500

Fair value of liabilities assumed
22,865

Consideration
165,365

Acquisition date fair value of previously held equity interest
128,000

Total
$
293,365

 
 
Current assets
$
1,746

Property, plant and equipment
134,484

Goodwill
86,975

Intangible assets (a)
70,050

Other long-term assets
110

Purchase price allocation
$
293,365

(a) Intangible assets primarily consist of customer contracts and relationships and are being amortized over 10 years.

Dispositions
Discontinued Operations. In January 2015, we sold our terminal in Alamogordo, NM with storage capacity of 0.1 million barrels for proceeds of $1.1 million. We classified the associated property, plant and equipment as “Assets held for sale” on the consolidated balance sheet as of December 31, 2014. In 2014, we divested our terminals in Mobile, AL, Wilmington, NC and Dumfries, VA and our 75% interest in our facility in Mersin, Turkey (the Turkey Sale). We recognized a gain of $3.7 million on the Turkey Sale for the three and nine months ended September 30, 2014. We presented the results of operations for those

7

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

facilities as discontinued operations. We allocated interest expense of $0.1 million and $0.8 million for the three and nine months ended September 30, 2014, respectively, to discontinued operations based on the ratio of net assets discontinued to consolidated net assets.

The following table summarizes the results from discontinued operations:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(Thousands of Dollars)
Revenues
$

 
$
276

 
$
208

 
$
3,456

Income (loss) before income tax expense
$

 
$
2,831

 
$
774

 
$
(2,316
)

2014 Asphalt Sale. On February 26, 2014, we sold our remaining 50% ownership interest in NuStar Asphalt LLC to Lindsay Goldberg LLC (Lindsay Goldberg), a private investment firm (the 2014 Asphalt Sale). Effective February 27, 2014, NuStar Asphalt LLC changed its name to Axeon Specialty Products LLC (Axeon). Lindsay Goldberg now owns 100% of Axeon. As a result of the 2014 Asphalt Sale, we ceased applying the equity method of accounting.

3. INVENTORIES

Inventories consisted of the following:
 
September 30,
2015

December 31,
2014
 
(Thousands of Dollars)
Crude oil
$
2,326

 
$
3,527

Finished products
42,721

 
43,206

Materials and supplies
8,829

 
8,980

Total
$
53,876

 
$
55,713


4. DEBT

Revolving Credit Agreement
During the nine months ended September 30, 2015, the balance under our $1.5 billion five-year revolving credit agreement (the Revolving Credit Agreement) increased by $306.6 million, which we used for general partnership purposes and to fund a portion of strategic capital expenditures, including the Linden Acquisition. The Revolving Credit Agreement matures on October 29, 2019 and bears interest, at our option, based on an alternative base rate, a LIBOR-based rate or a EURIBOR-based rate. The interest rate on the Revolving Credit Agreement is subject to adjustment if our debt rating is downgraded (or upgraded) by certain credit rating agencies. As of September 30, 2015, our weighted-average interest rate was 2.0% and we had $908.1 million outstanding.

The Revolving Credit Agreement contains customary restrictive covenants, such as limitations on indebtedness, liens, mergers, asset transfers and certain investing activities. In addition, the Revolving Credit Agreement requires us to maintain, as of the end of each rolling period of four consecutive fiscal quarters, a consolidated debt coverage ratio (consolidated debt to consolidated EBITDA, each as defined in the Revolving Credit Agreement) not to exceed 5.00-to-1.00. If we consummate one or more acquisitions for an aggregate net consideration of at least $50.0 million, the maximum consolidated debt coverage ratio will increase to 5.50-to-1.00 for two rolling periods. The requirement not to exceed a maximum consolidated debt coverage ratio may limit the amount we can borrow under the Revolving Credit Agreement to an amount less than the total amount available for borrowing. As of September 30, 2015, our consolidated debt coverage ratio was 4.4x, and we had $561.0 million available for borrowing.

Gulf Opportunity Zone Revenue Bonds
In 2008, 2010 and 2011, the Parish of St. James, Louisiana issued, pursuant to the Gulf Opportunity Zone Act of 2005, tax-exempt revenue bonds (the GoZone Bonds) associated with our St. James, Louisiana terminal expansions. The GoZone Bonds bear interest based on a weekly tax-exempt bond market interest rate, and interest is paid monthly. The weighted-average interest rate was 0.1% as of September 30, 2015. Following the issuance, the proceeds were deposited with a trustee and are disbursed to us upon our request for reimbursement of expenditures related to our St. James terminal expansion. We include the

8

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

amount remaining in trust in “Other long-term assets, net,” and we include the amount of bonds issued in “Long-term debt” on the consolidated balance sheets. For the nine months ended September 30, 2015, we received $13.6 million from the trustee. As of September 30, 2015, the amount remaining in trust totaled $57.9 million.

Receivables Financing Agreement
On June 15, 2015, NuStar Energy L.P. and NuStar Finance LLC (NuStar Finance), a newly formed special purpose entity and wholly owned subsidiary of NuStar Logistics, entered into a $125.0 million receivables financing agreement with third-party lenders (the Receivables Financing Agreement) and agreements with certain of NuStar Energy’s wholly owned subsidiaries (collectively with the Receivables Financing Agreement, the Securitization Program). Under the Securitization Program, certain of NuStar Energy’s wholly owned subsidiaries, NuStar Logistics, NuPOP, NuStar Energy Services, Inc. and NuStar Supply & Trading LLC (collectively, the Originators), sell their accounts receivable to NuStar Finance on an ongoing basis, and NuStar Finance provides the newly acquired accounts receivable as collateral for its revolving borrowings under the Receivables Financing Agreement. The maximum amount available for borrowing by NuStar Finance under the Receivables Financing Agreement is $125.0 million, with an option for NuStar Finance to request an increase of up to $75.0 million from the lenders (for aggregate total borrowings not to exceed $200.0 million). The amount available for borrowing is based on the availability of eligible receivables and other customary factors and conditions. The Securitization Program contains various customary affirmative and negative covenants and default, indemnification and termination provisions, and the Receivables Financing Agreement provides for acceleration of amounts owed upon the occurrence of certain specified events.

Borrowings by NuStar Finance under the Receivables Financing Agreement bear interest at either the applicable commercial paper rate or the applicable bank rate, each as defined under the Receivables Financing Agreement. The Securitization Program has an initial termination date of June 15, 2018, with the option to renew for additional 364-day periods thereafter. As of September 30, 2015, $98.9 million of our accounts receivable are included in the Securitization Program. The amount of borrowings outstanding under the Receivables Financing Agreement totaled $56.9 million as of September 30, 2015, which is included in “Long-term debt” on the consolidated balance sheet.

NuStar Finance’s sole business consists of purchasing such receivables and providing them as collateral under the Securitization Program. NuStar Finance is a separate legal entity and the assets of NuStar Finance, including these accounts receivable, are not available to satisfy the claims of creditors of NuStar Energy, the Originators or their affiliates.

5. COMMITMENTS AND CONTINGENCIES

Contingencies
We have contingent liabilities resulting from various litigation, claims and commitments. We record accruals for loss contingencies when losses are considered probable and can be reasonably estimated. Legal fees associated with defending the Partnership in legal matters are expensed as incurred. As of September 30, 2015, we have accrued $4.2 million for contingent losses. The amount that will ultimately be paid may differ from the recorded accruals, and the timing of such payments is uncertain. In addition, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on our results of operations, financial position or liquidity.

6. FAIR VALUE MEASUREMENTS

We segregate the inputs used in measuring fair value into three levels: Level 1, defined as observable inputs such as quoted prices for identical assets or liabilities in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active; and Level 3, defined as unobservable inputs in which little or no market data exists. We consider counterparty credit risk and our own credit risk in the determination of all estimated fair values.


9

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Recurring Fair Value Measurements
The following assets and liabilities are measured at fair value on a recurring basis:
 
September 30, 2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Assets:
 
 
 
 
 
 
 
Other current assets:
 
 
 
 
 
 
 
Product imbalances
$
462

 
$

 
$

 
$
462

Commodity derivatives
7,927

 
1,181

 

 
9,108

Other long-term assets, net:
 
 
 
 
 
 
 
Interest rate swaps

 
2,925

 

 
2,925

Total
$
8,389

 
$
4,106

 
$

 
$
12,495

Liabilities:
 
 
 
 
 
 
 
Accrued liabilities:
 
 
 
 
 
 
 
Product imbalances
$
(1,592
)
 
$

 
$

 
$
(1,592
)
Commodity derivatives

 
(1,041
)
 

 
(1,041
)
Other long-term liabilities:
 
 
 
 
 
 
 
Guarantee liability

 

 
(1,286
)
 
(1,286
)
Interest rate swaps

 
(929
)
 

 
(929
)
Total
$
(1,592
)
 
$
(1,970
)
 
$
(1,286
)
 
$
(4,848
)

 
December 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Assets:
 
 
 
 
 
 
 
Other current assets:
 
 
 
 
 
 
 
Product imbalances
$
117

 
$

 
$

 
$
117

Commodity derivatives
11,009

 
5,353

 

 
16,362

Total
$
11,126

 
$
5,353

 
$

 
$
16,479

Liabilities:
 
 
 
 
 
 
 
Accrued liabilities:
 
 
 
 
 
 
 
Product imbalances
$
(1,388
)
 
$

 
$

 
$
(1,388
)
Commodity derivatives

 
(4,623
)
 

 
(4,623
)
Other long-term liabilities:
 
 
 
 
 
 
 
Guarantee liability

 

 
(580
)
 
(580
)
Total
$
(1,388
)
 
$
(4,623
)
 
$
(580
)
 
$
(6,591
)

Product Imbalances. We value our assets and liabilities related to product imbalances using quoted market prices in active markets as of the reporting date. Therefore, we include these product imbalances in Level 1 of the fair value hierarchy.

Interest Rate Swaps. We estimate the fair value of our forward-starting interest rate swaps using discounted cash flows, which use observable inputs such as time to maturity and market interest rates. Therefore, we include these interest rate swaps in Level 2 of the fair value hierarchy.

Commodity Derivatives. We base the fair value of certain of our commodity derivative instruments on quoted prices on an exchange; accordingly, we include these items in Level 1 of the fair value hierarchy. We also have derivative instruments for which we determine fair value using industry pricing services and other observable inputs, such as quoted prices on an exchange for similar derivative instruments. Therefore, we include these derivative instruments in Level 2 of the fair value hierarchy. See Note 7 for a discussion of our derivative instruments.

10

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Guarantees. We provide credit support, such as guarantees, letters of credit and cash collateral, as applicable, of up to $150.0 million to Axeon. As of September 30, 2015 and December 31, 2014, we provided guarantees mainly for commodity purchases, lease obligations and certain utilities for Axeon with an aggregate maximum potential exposure of $55.9 million and $25.3 million, respectively, and two guarantees that do not specify a maximum amount. A majority of these guarantees have no expiration date. We estimated the fair value of guarantees we have issued on behalf of Axeon considering the probability of default by Axeon and an estimate of the amount we would be obligated to pay under the guarantees at the time of default based on the guarantees outstanding as of September 30, 2015 and December 31, 2014. Our estimate of the fair value is based on significant inputs not observable in the market and thus falls within Level 3 of the fair value hierarchy.

The following table summarizes the activity in our Level 3 liabilities:
 
Nine Months Ended September 30, 2015
 
(Thousands of Dollars)
Beginning balance
$
580

Adjustments to guarantee liability
706

Ending balance
$
1,286


Fair Value of Financial Instruments
We recognize cash equivalents, receivables, note receivables, payables and debt in our consolidated balance sheets at their carrying amounts. The fair values of these financial instruments, except for the $190.0 million term loan to Axeon (the Axeon Term Loan) and long-term debt, approximate their carrying amounts. The estimated fair value and carrying amounts of the long-term debt and the Axeon Term Loan were as follows:
 
September 30, 2015
 
December 31, 2014
 
Fair Value
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
(Thousands of Dollars)
Long-term debt
$
3,073,330

 
$
3,109,359

 
$
2,764,242

 
$
2,749,452

Axeon Term Loan
$
169,607

 
$
169,941

 
$
164,386

 
$
169,235


We estimated the fair value of our publicly-traded senior notes based upon quoted prices in active markets; therefore, we determined that the fair value of our publicly-traded senior notes falls in Level 1 of the fair value hierarchy. For our other debt, for which a quoted market price is not available, we estimated the fair value using a discounted cash flow analysis using current incremental borrowing rates for similar types of borrowing arrangements and determined that the fair value falls in Level 2 of the fair value hierarchy.
We estimated the fair value of the Axeon Term Loan using discounted cash flows, which use observable inputs such as time to maturity and market interest rates, and determined the fair value falls in Level 2 of the fair value hierarchy.
As of September 30, 2015, the carrying amount of the receivable for the Axeon Term Loan is $169.9 million, consisting of the following: (i) the outstanding principal amount from the Axeon Term Loan of $190.0 million; (ii) plus the fair value of guarantees of $1.3 million as of September 30, 2015; and (iii) less equity losses from our investment in Axeon of $21.3 million incurred prior to the 2014 Asphalt Sale and after the carrying value of our equity investment in Axeon was reduced to zero. The carrying value of the Axeon Term Loan is included in “Other long-term assets, net” on the consolidated balance sheets. We review the financial information of Axeon monthly for possible credit loss indicators. Axeon failed to make a scheduled principal payment by September 30, 2015, which will increase the interest rate until Axeon makes the payment.

7. DERIVATIVES AND RISK MANAGEMENT ACTIVITIES

We utilize various derivative instruments to manage our exposure to interest rate risk and commodity price risk. Our risk management policies and procedures are designed to monitor interest rates, futures and swap positions and over-the-counter positions, as well as physical commodity volumes, grades, locations and delivery schedules, to help ensure that our hedging activities address our market risks. Our risk management committee oversees our trading controls and procedures and certain aspects of commodity and trading risk management. Our risk management committee also reviews all new commodity and trading risk management strategies in accordance with our risk management policy, as approved by our board of directors.

11

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Interest Rate Risk
We are a party to certain interest rate swap agreements to manage our exposure to changes in interest rates. During the nine months ended September 30, 2015, we entered into forward-starting interest rate swap agreements with an aggregate notional amount of $450.0 million. Under the terms of the swaps, we pay a fixed rate and receive a rate based on three month USD LIBOR. We entered into these swaps in order to hedge the risk of changes in the interest payments attributable to changes in the benchmark interest rate during the period from the effective date of the swap to the issuance of the forecasted debt. These swaps qualified, and we designated them, as cash flow hedges of future interest payments associated with forecasted debt issuances in 2018 and 2020. We record the effective portion of mark-to-market adjustments as a component of “Accumulated other comprehensive income” (AOCI), and the amount in AOCI will be recognized in “Interest expense, net” as the forecasted interest payments occur or if the interest payments are probable not to occur. We had no forward-starting interest rate swap agreements as of December 31, 2014.

Commodity Price Risk
We are exposed to market risks related to the volatility of crude oil and refined product prices. In order to reduce the risk of commodity price fluctuations with respect to our crude oil and finished product inventories and related firm commitments to purchase and/or sell such inventories, we utilize commodity futures and swap contracts, which qualify and we designate as fair value hedges. Derivatives that are intended to hedge our commodity price risk, but fail to qualify as fair value or cash flow hedges, are considered economic hedges, and we record associated gains and losses in net income. The volume of commodity contracts is based on open derivative positions and represents the combined volume of our long and short open positions on an absolute basis, which totaled 6.1 million barrels and 4.7 million barrels as of September 30, 2015 and December 31, 2014, respectively. The fair values of our derivative instruments included in our consolidated balance sheets were as follows:
 
 
 
Asset Derivatives
 
Liability Derivatives
 
Balance Sheet Location
 
September 30,
2015
 
December 31, 2014
 
September 30,
2015
 
December 31, 2014
 
 
 
(Thousands of Dollars)
Derivatives Designated as
Hedging Instruments:
 
 
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
$
1,262

 
$
5,609

 
$
(261
)
 
$

Interest rate swaps - cash flow hedges
Other long-term assets, net
 
2,925

 

 

 

Interest rate swaps - cash flow hedges
Other long-term liabilities
 

 

 
(929
)
 

Total
 
 
4,187

 
5,609

 
(1,190
)
 

 
 
 
 
 
 
 
 
 
 
Derivatives Not Designated
as Hedging Instruments:
 
 
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
15,922

 
38,704

 
(7,815
)
 
(27,951
)
Commodity contracts
Accrued liabilities
 
4,272

 
13,081

 
(5,313
)
 
(17,704
)
Total
 
 
20,194

 
51,785

 
(13,128
)
 
(45,655
)
 
 
 
 
 
 
 
 
 
 
Total Derivatives
 
 
$
24,381

 
$
57,394

 
$
(14,318
)
 
$
(45,655
)
 
Certain of our derivative instruments are eligible for offset in the consolidated balance sheets and subject to master netting arrangements. Under our master netting arrangements, there is a legally enforceable right to offset amounts, and we intend to settle such amounts on a net basis. The following are the net amounts presented on the consolidated balance sheets:
Commodity Contracts
 
September 30,
2015
 
December 31, 2014
 
 
(Thousands of Dollars)
Net amounts of assets presented in the consolidated balance sheets
 
$
9,108

 
$
16,362

Net amounts of liabilities presented in the consolidated balance sheets
 
$
(1,041
)
 
$
(4,623
)


12

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The earnings impact of our derivative activity was as follows:
Derivatives Designated as Fair Value Hedging Instruments
 
Income Statement
Location
 
Amount of Gain
(Loss) Recognized
in Income on
Derivative
(Effective Portion)
 
Amount of Gain
(Loss)
Recognized in
Income on
Hedged Item
 
Amount of Gain
(Loss) Recognized
in Income  on
Derivative
(Ineffective Portion)
 
 
 
 
(Thousands of Dollars)
Three months ended September 30, 2015:
 
 
 
 
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
16,005

 
$
(15,479
)
 
$
526

 
 
 
 
 
 
 
 
 
Three months ended September 30, 2014:
 
 
 
 
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
1,219

 
$
(1,058
)
 
$
161

 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2015:
 
 
 
 
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
11,506

 
$
(8,748
)
 
$
2,758

 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2014:
 
 
 
 
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
2,178

 
$
(2,840
)
 
$
(662
)

Derivatives Designated as Cash Flow Hedging Instruments
 
Amount of Gain
(Loss) Recognized 
in Other Comprehensive Income on Derivative(Effective Portion)
 
Amount of Gain
(Loss) Reclassified
from AOCI
into Interest expense, net
(Effective Portion) (a)
 
 
(Thousands of Dollars)
Three months ended September 30, 2015:
 
 
 
 
Interest rate swaps
 
$
(16,757
)
 
$

Unwound interest rate swaps
 

 
(2,405
)
 
 
 
 
 
Three months ended September 30, 2014:
 
 
 
 
Unwound interest rate swaps
 
$

 
$
(2,625
)
 
 
 
 
 
Nine months ended September 30, 2015:
 
 
 
 
Interest rate swaps
 
$
1,996

 
$

Unwound interest rate swaps
 

 
(7,449
)
 
 
 
 
 
Nine months ended September 30, 2014:
 
 
 
 
Unwound interest rate swaps
 
$

 
$
(8,062
)

(a)
As of September 30, 2015, we expect to reclassify a loss of $8.7 million to “Interest expense, net” within the next twelve months associated with unwound forward-starting interest rate swaps.


13

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Derivatives Not Designated as Hedging Instruments
 
Income Statement Location
 
Amount of Gain (Loss)
Recognized in Income
 
 
 
 
(Thousands of Dollars)
Three months ended September 30, 2015:
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
1,151

 
 
 
 
 
Three months ended September 30, 2014:
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
6,680

 
 
 
 
 
Nine months ended September 30, 2015:
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
1,142

 
 
 
 
 
Nine months ended September 30, 2014:
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
2,270


8. RELATED PARTY TRANSACTIONS

We had a payable to related party of $16.4 million and $15.1 million as of September 30, 2015 and December 31, 2014, respectively, mainly representing payroll, employee benefit plan expenses and unit-based compensation. We also had a long-term payable to related party as of September 30, 2015 and December 31, 2014 of $30.6 million and $33.5 million, respectively, representing long-term employee benefits.

The following table summarizes information pertaining to related party transactions:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(Thousands of Dollars)
Revenues
$

 
$

 
$

 
$
929

Operating expenses
$
34,904

 
$
31,394

 
$
100,761

 
$
91,025

General and administrative expenses
$
15,144

 
$
17,400

 
$
50,237

 
$
48,942

Interest income
$

 
$

 
$

 
$
1,055

Revenues included in discontinued operations, net of tax
$

 
$
36

 
$

 
$
528

Expenses included in discontinued operations, net of tax
$

 
$
184

 
$
2

 
$
1,596


NuStar GP, LLC
Our operations are managed by NuStar GP, LLC, the general partner of our general partner. Under a services agreement between NuStar Energy and NuStar GP, LLC, employees of NuStar GP, LLC perform services for our U.S. operations. Certain of our wholly owned subsidiaries employ persons who perform services for our international operations. Employees of NuStar GP, LLC provide services to both NuStar Energy and NuStar GP Holdings; therefore, we reimburse NuStar GP, LLC for all employee costs, other than the expenses allocated to NuStar GP Holdings.

Axeon
As a result of the 2014 Asphalt Sale, we ceased reporting transactions between us and Axeon as related party transactions in our consolidated financial statements on February 26, 2014.

14

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

9. PARTNERS’ EQUITY

Partners Equity Activity
In September 2014, we sold our 75% interest in our facility in Mersin, Turkey. Therefore, we no longer have a noncontrolling interest for the three and nine months ending September 30, 2015. The following table summarizes changes in the carrying amount of equity attributable to NuStar Energy L.P. partners and noncontrolling interest:
 
Three Months Ended September 30, 2015
 
Three Months Ended September 30, 2014
 
Total Partners’
Equity
 
NuStar Energy L.P. Partners’ Equity
 
Noncontrolling Interest
 
Total Partners’
Equity
 
(Thousands of Dollars)
Beginning balance
$
1,713,073

 
$
1,808,370

 
$
989

 
$
1,809,359

Net income (loss)
65,016

 
62,121

 
(173
)
 
61,948

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Foreign currency translation
    adjustment
(11,786
)
 
(6,420
)
 
14

 
(6,406
)
Net unrealized loss on cash flow
    hedges
(16,757
)
 

 

 

Net loss on cash flow hedges
    reclassified into interest expense, net
2,405

 
2,625

 

 
2,625

Total other comprehensive
    (loss) income
(26,138
)
 
(3,795
)
 
14

 
(3,781
)
Cash distributions to partners
(98,051
)
 
(98,051
)
 

 
(98,051
)
Other

 

 
(830
)
 
(830
)
Ending balance
$
1,653,900

 
$
1,768,645

 
$

 
$
1,768,645


 
Nine Months Ended September 30, 2015
 
Nine Months Ended September 30, 2014
 
Total Partners’
Equity
 
NuStar Energy L.P. Partners’ Equity
 
Noncontrolling Interest
 
Total Partners’
Equity
 
(Thousands of Dollars)
Beginning balance
$
1,716,210

 
$
1,902,136

 
$
1,658

 
$
1,903,794

Net income (loss)
247,240

 
157,379

 
(395
)
 
156,984

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Foreign currency translation
    adjustment
(24,842
)
 
(4,802
)
 
(433
)
 
(5,235
)
Net unrealized gain on cash flow
    hedges
1,996

 

 

 

Net loss on cash flow hedges
    reclassified into interest expense, net
7,449

 
8,062

 

 
8,062

Total other comprehensive
    (loss) income
(15,397
)
 
3,260

 
(433
)
 
2,827

Cash distributions to partners
(294,153
)
 
(294,153
)
 

 
(294,153
)
Other

 
23

 
(830
)
 
(807
)
Ending balance
$
1,653,900

 
$
1,768,645

 
$

 
$
1,768,645



15

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Accumulated Other Comprehensive Loss
The balance of and changes in the components included in AOCI were as follows:
 
Foreign
Currency
Translation
 
Cash Flow Hedges
 
Total
 
(Thousands of Dollars)
Balance as of January 1, 2015
$
(28,839
)
 
$
(39,073
)
 
$
(67,912
)
Activity
(24,842
)
 
9,445

 
(15,397
)
Balance as of September 30, 2015
$
(53,681
)
 
$
(29,628
)
 
$
(83,309
)

Allocations of Net Income
Our partnership agreement, as amended, sets forth the calculation to be used to determine the amount and priority of cash distributions that the common unitholders and the general partner will receive. The partnership agreement also contains provisions for the allocation of net income and loss to the unitholders and the general partner. For purposes of maintaining partner capital accounts, the partnership agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interests. Normal allocations according to percentage interests are made after giving effect to priority income allocations, if any, in an amount equal to incentive cash distributions allocated 100% to the general partner.

The following table details the calculation of net income applicable to the general partner:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(Thousands of Dollars)
Net income attributable to NuStar Energy L.P.
$
65,016

 
$
62,121

 
$
247,240

 
$
157,379

Less general partner incentive distribution
10,805

 
10,805

 
32,415

 
32,415

Net income after general partner incentive distribution
54,211

 
51,316

 
214,825

 
124,964

General partner interest
2
%
 
2
%
 
2
%
 
2
%
General partner allocation of net income after general
    partner incentive distribution
1,084

 
1,025

 
4,297

 
2,498

General partner incentive distribution
10,805

 
10,805

 
32,415

 
32,415

Net income applicable to general partner
$
11,889

 
$
11,830

 
$
36,712

 
$
34,913


Cash Distributions
The following table reflects the allocation of total cash distributions to the general and limited partners applicable to the period in which the distributions were earned:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(Thousands of Dollars, Except Per Unit Data)
General partner interest
$
1,961

 
$
1,961

 
$
5,883

 
$
5,883

General partner incentive distribution
10,805

 
10,805

 
32,415

 
32,415

Total general partner distribution
12,766

 
12,766

 
38,298

 
38,298

Limited partners’ distribution
85,285

 
85,285

 
255,855

 
255,855

Total cash distributions
$
98,051

 
$
98,051

 
$
294,153

 
$
294,153

 
 
 
 
 
 
 
 
Cash distributions per unit applicable to limited partners
$
1.095

 
$
1.095

 
$
3.285

 
$
3.285



16

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table summarizes information related to our quarterly cash distributions:
Quarter Ended
 
Cash Distributions Per Unit
 
Total Cash Distributions
 
Record Date
 
Payment Date
 
 
 
 
(Thousands of Dollars)
 
 
 
 
September 30, 2015 (a)
 
$
1.095

 
$
98,051

 
November 9, 2015
 
November 13, 2015
June 30, 2015
 
$
1.095

 
$
98,051

 
August 7, 2015
 
August 13, 2015
March 31, 2015
 
$
1.095

 
$
98,051

 
May 8, 2015
 
May 14, 2015
December 31, 2014
 
$
1.095

 
$
98,051

 
February 9, 2015
 
February 13, 2015
(a)
The distribution was announced on October 30, 2015.

10. NET INCOME PER UNIT

We have identified the general partner interest and incentive distribution rights as participating securities and use the two-class method when calculating the net income per unit applicable to limited partners, which is based on the weighted-average number of common units outstanding during the period. Basic and diluted net income per unit applicable to limited partners are the same because we have no potentially dilutive securities outstanding.

The following table details the calculation of earnings per unit:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(Thousands of Dollars, Except Unit and Per Unit Data)
Net income attributable to NuStar Energy L.P.
$
65,016

 
$
62,121

 
$
247,240

 
$
157,379

Less general partner distribution (including incentive
     distribution rights)
12,766

 
12,766

 
38,298

 
38,298

Less limited partner distribution
85,285

 
85,285

 
255,855

 
255,855

Distributions in excess of earnings
$
(33,035
)
 
$
(35,930
)
 
$
(46,913
)
 
$
(136,774
)
 
 
 
 
 
 
 
 
General partner earnings:
 
 
 
 
 
 
 
Distributions
$
12,766

 
$
12,766

 
$
38,298

 
$
38,298

Allocation of distributions in excess of earnings (2%)
(661
)
 
(719
)
 
(939
)
 
(2,736
)
Total
$
12,105

 
$
12,047

 
$
37,359

 
$
35,562

 
 
 
 
 
 
 
 
Limited partner earnings:
 
 
 
 
 
 
 
Distributions
$
85,285

 
$
85,285

 
$
255,855

 
$
255,855

Allocation of distributions in excess of earnings (98%)
(32,374
)
 
(35,211
)
 
(45,974
)
 
(134,038
)
Total
$
52,911

 
$
50,074

 
$
209,881

 
$
121,817

 
 
 
 
 
 
 
 
Weighted-average limited partner units outstanding
77,886,078

 
77,886,078

 
77,886,078

 
77,886,078

 
 
 
 
 
 
 
 
Net income per unit applicable to limited partners
$
0.68

 
$
0.64

 
$
2.69

 
$
1.56



17

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

11. STATEMENTS OF CASH FLOWS
Changes in current assets and current liabilities were as follows:
 
Nine Months Ended September 30,
 
2015
 
2014
 
(Thousands of Dollars)
Decrease (increase) in current assets:
 
 
 
Accounts receivable
$
75,532

 
$
60,010

Receivable from related parties

 
51,037

Inventories
1,654

 
19,865

Other current assets
1,660

 
(1,302
)
Increase (decrease) in current liabilities:
 
 
 
Accounts payable
(45,626
)
 
(134,932
)
Payable to related party
743

 
5,841

Accrued interest payable
(5,424
)
 
(5,611
)
Accrued liabilities
(12,338
)
 
807

Taxes other than income tax
3,239

 
5,319

Income tax payable
363

 
46

Changes in current assets and current liabilities
$
19,803

 
$
1,080


The above changes in current assets and current liabilities differ from changes between amounts reflected in the applicable consolidated balance sheets due to the change in the amount accrued for capital expenditures and the effect of foreign currency translation.

Cash flows related to interest and income taxes were as follows:
 
Nine Months Ended September 30,
 
2015
 
2014
 
(Thousands of Dollars)
Cash paid for interest, net of amount capitalized
$
105,340

 
$
103,832

Cash paid for income taxes, net of tax refunds received
$
8,987

 
$
9,826


12. SEGMENT INFORMATION

Our reportable business segments consist of pipeline, storage and fuels marketing. Our segments represent strategic business units that offer different services and products. We evaluate the performance of each segment based on its respective operating income, before general and administrative expenses and certain non-segmental depreciation and amortization expense. General and administrative expenses are not allocated to the operating segments since those expenses relate primarily to the overall management at the entity level. Our principal operations include the transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum products and the marketing of petroleum products. Intersegment revenues result from storage agreements with wholly owned subsidiaries of NuStar Energy at lease rates consistent with rates charged to third parties for storage.

18

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Results of operations for the reportable segments were as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(Thousands of Dollars)
Revenues:
 
 
 
 
 
 
 
Pipeline
$
131,395

 
$
125,461

 
$
378,030

 
$
346,218

Storage:
 
 
 
 
 
 
 
Third parties
155,475

 
137,771

 
450,372

 
400,421

Intersegment
6,628

 
6,174

 
19,707

 
20,147

Related party

 

 

 
929

Total storage
162,103

 
143,945

 
470,079

 
421,497

Fuels Marketing
206,696

 
531,190

 
790,719

 
1,645,812

Consolidation and intersegment eliminations
(6,628
)
 
(6,174
)
 
(19,707
)
 
(20,147
)
Total revenues
$
493,566

 
$
794,422

 
$
1,619,121

 
$
2,393,380

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
Pipeline
$
68,536

 
$
65,652

 
$
201,996

 
$
178,878

Storage
59,986

 
49,401

 
161,715

 
141,415

Fuels marketing
(1,819
)
 
7,518

 
10,756

 
21,897

Consolidation and intersegment eliminations
(1
)
 
(25
)
 
41

 
(35
)
Total segment operating income
126,702

 
122,546

 
374,508

 
342,155

General and administrative expenses
23,679

 
24,967

 
75,425

 
68,986

Other depreciation and amortization expense
2,029

 
2,481

 
6,403

 
7,614

Total operating income
$
100,994

 
$
95,098

 
$
292,680

 
$
265,555


Total assets by reportable segment were as follows:
 
September 30,
2015
 
December 31,
2014
 
(Thousands of Dollars)
Pipeline
$
2,029,115

 
$
1,962,821

Storage
2,445,403

 
2,241,573

Fuels marketing
156,434

 
227,642

Total segment assets
4,630,952

 
4,432,036

Other partnership assets
504,179

 
486,760

Total consolidated assets
$
5,135,131

 
$
4,918,796

 

19

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

13. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

NuStar Energy has no operations and its assets consist mainly of its investments in NuStar Logistics and NuPOP, both wholly owned subsidiaries. The senior and subordinated notes issued by NuStar Logistics are fully and unconditionally guaranteed by NuStar Energy and NuPOP. As a result, the following condensed consolidating financial statements are presented as an alternative to providing separate financial statements for NuStar Logistics and NuPOP.

Condensed Consolidating Balance Sheets
September 30, 2015
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
885

 
$
931

 
$

 
$
114,609

 
$

 
$
116,425

Receivables, net

 
465

 

 
133,508

 

 
133,973

Inventories

 
2,157

 
3,669

 
48,050

 

 
53,876

Other current assets
109

 
15,015

 
1,307

 
17,652

 

 
34,083

Intercompany receivable

 
1,591,877

 

 

 
(1,591,877
)
 

Total current assets
994

 
1,610,445

 
4,976

 
313,819

 
(1,591,877
)
 
338,357

Property, plant and equipment, net

 
1,895,471

 
569,231

 
1,191,571

 

 
3,656,273

Intangible assets, net

 
50,671

 

 
64,800

 

 
115,471

Goodwill

 
149,453

 
170,652

 
384,299

 

 
704,404

Investment in wholly owned
subsidiaries
2,244,115

 
47,686

 
1,020,841

 
933,458

 
(4,246,100
)
 

Deferred income tax asset

 

 

 
4,323

 
(1,179
)
 
3,144

Other long-term assets, net
799

 
275,954

 
26,329

 
14,400

 

 
317,482

Total assets
$
2,245,908

 
$
4,029,680

 
$
1,792,029

 
$
2,906,670

 
$
(5,839,156
)
 
$
5,135,131

Liabilities and Partners’ Equity
 
 
 
 
 
 
 
 
 
 
 
Payables
$
26

 
$
41,513

 
$
11,348

 
$
61,414

 
$

 
$
114,301

Short-term debt

 
42,000

 

 

 

 
42,000

Accrued interest payable

 
27,902

 

 
19

 

 
27,921

Accrued liabilities
962

 
24,005

 
7,199

 
18,636

 

 
50,802

Taxes other than income tax
63

 
6,527

 
4,506

 
6,464

 

 
17,560

Income tax payable

 
288

 
6

 
2,495

 

 
2,789

Intercompany payable
507,648

 

 
826,286

 
257,943

 
(1,591,877
)
 

Total current liabilities
508,699

 
142,235

 
849,345

 
346,971

 
(1,591,877
)
 
255,373

Long-term debt

 
3,052,459

 

 
56,900

 

 
3,109,359

Long-term payable to related party

 
25,107

 

 
5,443

 

 
30,550

Deferred income tax liability

 
1,143

 
36

 
24,497
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