NS 1Q13 10-Q

Table of Contents

 
 
 
 
 
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 March 31, 2013
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
 
£
 
 
 
 
 
 
Non-accelerated filer
 
o  (Do not check if a smaller reporting company)
Smaller reporting company
 
£
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 April 30, 2013 was 77,886,078.
 
 
 
 
 



Table of Contents

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

2


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, Except Unit Data)
 
March 31,
2013
 
December 31,
2012
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
116,513

 
$
83,602

Accounts receivable, net of allowance for doubtful accounts of $837
and $808 as of March 31, 2013 and December 31, 2012, respectively
336,759

 
387,943

Receivable from related parties
89,366

 
109,833

Inventories
227,626

 
173,228

Income tax receivable
1,186

 
1,265

Other current assets
46,351

 
65,238

Assets held for sale
2,847

 
118,334

Total current assets
820,648

 
939,443

Property, plant and equipment, at cost
4,319,606

 
4,287,859

Accumulated depreciation and amortization
(1,080,051
)
 
(1,049,399
)
Property, plant and equipment, net
3,239,555

 
3,238,460

Intangible assets, net
88,935

 
92,435

Goodwill
950,586

 
951,024

Investment in joint ventures
87,572

 
102,945

Deferred income tax asset
3,832

 
3,108

Note receivable from related party
159,200

 
95,711

Other long-term assets, net
196,702

 
189,963

Total assets
$
5,547,030

 
$
5,613,089

Liabilities and Partners’ Equity
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
282,245

 
$
286,422

Accounts payable
428,843

 
397,633

Payable to related party
11,758

 
1,408

Accrued interest payable
30,538

 
23,741

Accrued liabilities
80,401

 
124,203

Taxes other than income tax
7,772

 
9,893

Income tax payable
4,813

 
2,671

Total current liabilities
846,370

 
845,971

Long-term debt, less current portion
2,136,072

 
2,124,582

Long-term payable to related party
18,806

 
18,071

Deferred income tax liability
30,288

 
32,114

Other long-term liabilities
6,314

 
7,356

Commitments and contingencies (Note 5)

 

Partners’ equity:
 
 
 
Limited partners (77,886,078 common units outstanding
as of March 31, 2012 and December 31, 2012)
2,501,684

 
2,573,263

General partner
56,301

 
57,986

Accumulated other comprehensive loss
(60,968
)
 
(58,865
)
Total NuStar Energy L.P. partners’ equity
2,497,017

 
2,572,384

Noncontrolling interest
12,163

 
12,611

Total partners’ equity
2,509,180

 
2,584,995

Total liabilities and partners’ equity
$
5,547,030

 
$
5,613,089

See Condensed Notes to Consolidated Financial Statements.

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Table of Contents

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)
 
Three Months Ended March 31,
 
2013
 
2012
Revenues:
 
 
 
Service revenues:
 
 
 
Third parties
$
225,272

 
$
209,022

Related party
2,011

 
697

Total service revenues
227,283

 
209,719

Product sales
772,427

 
1,399,686

Total revenues
999,710

 
1,609,405

Costs and expenses:
 
 
 
Cost of product sales
752,254

 
1,354,530

Operating expenses:
 
 
 
Third parties
84,583

 
88,337

Related party
32,991

 
36,777

Total operating expenses
117,574

 
125,114

General and administrative expenses:
 
 
 
Third parties
8,710

 
8,018

Related party
18,784

 
19,149

Total general and administrative expenses
27,494

 
27,167

Depreciation and amortization expense
42,926

 
43,575

Total costs and expenses
940,248

 
1,550,386

Operating income
59,462

 
59,019

Equity in (loss) earnings of joint ventures
(11,143
)
 
2,386

Interest expense, net
(31,235
)
 
(21,377
)
Interest income from related party
1,122

 

Other income, net
368

 
1,367

Income from continuing operations before income tax expense
18,574

 
41,395

Income tax expense
2,536

 
3,443

Income from continuing operations
16,038

 
37,952

Income (loss) from discontinued operations, net of tax
8,366

 
(11,698
)
Net income
24,404

 
26,254

Less net loss attributable to noncontrolling interest
(161
)
 
(97
)
Net income attributable to NuStar Energy L.P.
$
24,565

 
$
26,351

Net income (loss) per unit applicable to limited partners:
 
 
 
Continuing operations
$
0.06

 
$
0.39

Discontinued operations
0.11

 
(0.16
)
Total (Note 10)
$
0.17

 
$
0.23

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

 
70,756,078

 
 
 
 
Comprehensive income (loss)
$
22,014

 
$
(10,772
)
Less comprehensive (loss) income attributable to noncontrolling interest
(448
)
 
1,022

Comprehensive income (loss) attributable to NuStar Energy L.P.
$
22,462

 
$
(11,794
)
See Condensed Notes to Consolidated Financial Statements.

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Table of Contents

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, Thousands of Dollars)
 
Three Months Ended March 31,
 
2013
 
2012
Cash Flows from Operating Activities:
 
 
 
Net income
$
24,404

 
$
26,254

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization expense
42,926

 
44,681

Amortization of debt related items
(1,173
)
 
(2,912
)
Gain from sale or disposition of assets
(9,204
)
 
(137
)
Deferred income tax benefit
(1,192
)
 
(1,042
)
Equity in loss (earnings) of joint ventures
11,143

 
(2,386
)
Distributions of equity in earnings of joint ventures
4,652

 

Changes in current assets and current liabilities (Note 11)
73,586

 
(76,458
)
Other, net
(742
)
 
2,387

Net cash provided by (used in) operating activities
144,400

 
(9,613
)
Cash Flows from Investing Activities:
 
 
 
Reliability capital expenditures
(5,742
)
 
(6,805
)
Strategic capital expenditures
(46,822
)
 
(93,479
)
Investment in other long-term assets

 
(94
)
Proceeds from the San Antonio Refinery Sale
112,715

 

Increase in note receivable from related party
(63,489
)
 

Other, net
220

 
164

Net cash used in investing activities
(3,118
)
 
(100,214
)
Cash Flows from Financing Activities:
 
 
 
Proceeds from long-term debt borrowings
334,226

 
454,118

Proceeds from short-term debt borrowings

 
56,430

Proceeds from note offering, net of issuance costs
391,217

 
247,408

Long-term debt repayments
(718,205
)
 
(453,944
)
Short-term debt repayments
(577
)
 
(56,430
)
Distributions to unitholders and general partner
(98,051
)
 
(89,076
)
Payments for termination of interest rate swaps
(16,255
)
 
(25,358
)
Other, net
76

 
(3,228
)
Net cash (used in) provided by financing activities
(107,569
)
 
129,920

Effect of foreign exchange rate changes on cash
(802
)
 
106

Net increase in cash and cash equivalents
32,911

 
20,199

Cash and cash equivalents as of the beginning of the period
83,602

 
17,497

Cash and cash equivalents as of the end of the period
$
116,513

 
$
37,696

See Condensed Notes to Consolidated Financial Statements.

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Table of Contents

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 engaged in the terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and fuels marketing. 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 March 31, 2013.
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: storage, pipeline 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 50% or less-owned entities using the equity method.

These unaudited condensed consolidated financial statements have been prepared in accordance with United States 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 months ended March 31, 2013 and 2012 included in these Condensed Notes to Consolidated Financial Statements is derived from our unaudited condensed consolidated financial statements. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. The consolidated balance sheet as of December 31, 2012 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, 2012.

New Accounting Pronouncements
Balance Sheet Offsetting. In December 2011, the Financial Accounting Standards Board (FASB) amended the disclosure requirements about offsetting assets and liabilities. The amended guidance requires new disclosures to enable users of financial statements to reconcile differences in the offsetting requirements under U.S. GAAP and International Financial Reporting Standards. The new disclosure requirements mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the balance sheet as well as instruments and transactions subject to an agreement similar to a master netting arrangement. In January 2013, the FASB further amended and clarified the scope of balance sheet offsetting disclosure requirements. The amended guidance limits the scope of the new balance sheet offsetting disclosures to derivatives, repurchase agreements, and securities lending transactions to the extent that they are offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement. The disclosures are required irrespective of whether the transactions are offset in the consolidated balance sheets. The amended guidance is effective for annual and interim reporting periods beginning on or after January 1, 2013, and retrospective application is required. Accordingly, we adopted the amended guidance January 1, 2013, and it did not have a material impact on our disclosures.

Other Comprehensive Income. In February 2013, the FASB further amended the disclosure requirements for the presentation of comprehensive income. The amended guidance requires that entities present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification. The amended guidance is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. Accordingly, we adopted the amended guidance January 1, 2013, and it did not have a material impact on our disclosures.




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


2. DISPOSITIONS

San Antonio Refinery
On January 1, 2013, we sold our fuels refinery in San Antonio, Texas (the San Antonio Refinery) and related assets, which included inventory, a terminal in Elmendorf, Texas and a pipeline connecting the terminal and refinery for approximately $117.0 million (the San Antonio Refinery Sale). We have presented the results of operations for the San Antonio Refinery and related assets, previously reported in the fuels marketing and pipeline segments, as discontinued operations for all periods presented, none of which were attributable to the noncontrolling interest. For the three months ended March 31, 2012, we allocated interest expense of $1.0 million to discontinued operations based on the ratio of net assets sold to consolidated net assets. We recognized a gain of $9.2 million on the sale, which is included in discontinued operations for the three months ended March 31, 2013.

The following table summarizes the results from discontinued operations:
 
Three Months Ended March 31,
 
2013
 
2012
 
(Thousands of Dollars)
Revenues
$
185

 
$
126,287

 
 
 
 
Income (loss) before income tax expense
$
8,366

 
$
(11,670
)

As of December 31, 2012, we reclassified the assets related to the San Antonio Refinery as “Assets held for sale” on the consolidated balance sheet. The liabilities held for sale related to the San Antonio Refinery are included within “Accrued liabilities” on the consolidated balance sheet. The total assets and liabilities held for sale consisted of the following:
 
December 31, 2012
 
(Thousands of Dollars)
Inventories
$
15,939

Property, plant and equipment, net
93,899

Other long-term assets, net
5,650

Assets held for sale
$
115,488

 
 
Accrued liabilities (environmental reserve)
$
289

Other long-term liabilities (environmental reserve)
7,621

Liabilities held for sale
$
7,910


3. INVENTORIES

Inventories consisted of the following:
 
March 31,
2013
 
December 31,
2012
 
(Thousands of Dollars)
Crude oil
$
973

 
$
447

Finished products
218,631

 
164,894

Materials and supplies
8,022

 
7,887

Total
$
227,626

 
$
173,228



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


4. DEBT

Revolving Credit Agreement
During the three months ended March 31, 2013, we borrowed an aggregate $330.0 million under our $1.5 billion five-year revolving credit agreement (the 2012 Revolving Credit Agreement) to fund our capital expenditures and repay our $229.9 million 6.05% senior notes due March 15, 2013. Additionally, we repaid $488.3 million of the outstanding borrowings under the 2012 Revolving Credit Agreement during the three months ended March 31, 2013. The 2012 Revolving Credit Agreement bears interest, at our option, based on either an alternative base rate or a LIBOR-based rate. The interest rate on the 2012 Revolving Credit Agreement is subject to adjustment if our debt rating is downgraded (or subsequently upgraded) by certain credit rating agencies. As of March 31, 2013, our weighted average interest rate was 2.2%, which reflects current interest rate adjustments, including a credit rating downgrade by Moody’s Investor Service (Moody’s) in January 2013.

The 2012 Revolving Credit Agreement contains customary restrictive covenants, including requiring us to maintain, as of the end of each rolling period, which consists of any period of four consecutive fiscal quarters, a consolidated debt coverage ratio (consolidated indebtedness to consolidated EBITDA, as defined in the 2012 Revolving Credit Agreement) not to exceed 5.00-to-1.00. However, if we consummate an acquisition 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. As of March 31, 2013, our consolidated debt coverage ratio could not exceed 5.50-to-1.00, as a result of our acquisition of certain crude oil assets from TexStar Midstream Services, LP and certain of its affiliates for approximately $325.0 million in December 2012. The requirement not to exceed a maximum consolidated debt coverage ratio may limit the amount we can borrow under the 2012 Revolving Credit Agreement to an amount less than the total amount available for borrowing. As of March 31, 2013, our consolidated debt coverage ratio was 4.3x, and we had $902.1 million available for borrowing.

NuStar Logistics’ 6.05% Senior Notes
In March 2013, we repaid the $229.9 million of 6.05% senior notes due March 15, 2013 with borrowings under our 2012 Revolving Credit Agreement.

7.625% Fixed-to-Floating Rate Subordinated Notes
On January 22, 2013, NuStar Logistics issued $402.5 million of 7.625% fixed-to-floating rate subordinated notes due January 15, 2043 (the Subordinated Notes), including the underwriters’ option to purchase up to an additional $52.5 million principal amount of the notes, which was exercised in full. We received proceeds of approximately $391.2 million, net of $11.3 million of deferred issuance costs, which were used for general partnership purposes, including repayment of outstanding borrowings under our 2012 Revolving Credit Agreement. The Subordinated Notes are fully and unconditionally guaranteed on an unsecured and subordinated basis by NuStar Energy and NuPOP.
The Subordinated Notes bear interest at a fixed annual rate of 7.625%, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year beginning on April 15, 2013 and ending on January 15, 2018. Thereafter, the Subordinated Notes will bear interest at an annual rate equal to the sum of the three-month LIBOR rate for the related quarterly interest period plus 6.734% payable quarterly on January 15, April 15, July 15 and October 15 of each year, commencing April 15, 2018, unless payment is deferred in accordance with the terms of the notes. NuStar Logistics may elect to defer interest payments on the Subordinated Notes on one or more occasions for up to five consecutive years. Deferred interest will accumulate additional interest at a rate equal to the interest rate then applicable to the Subordinated Notes until paid. If NuStar Logistics elects to defer interest payments, NuStar Energy cannot declare or make cash distributions to its unitholders during the period interest is deferred.
The Subordinated Notes do not have sinking fund requirements and are subordinated to existing senior unsecured indebtedness of NuStar Logistics and NuPOP. The Subordinated Notes do not contain restrictions on NuStar Logistics’ ability to incur additional indebtedness, including debt that ranks senior in priority of payment to the notes. In addition, the Subordinated Notes do not limit NuStar Logistics’ ability to incur indebtedness secured by certain liens or to engage in certain sale-leaseback transactions. At the option of NuStar Logistics, the Subordinated Notes may be redeemed in whole or in part at any time at a redemption price, which may include a make-whole premium, plus accrued and unpaid interest to the redemption date.

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 (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 we pay interest monthly. The interest rate was 0.1% as of March 31, 2013. 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 expansions. We include the amount remaining in trust in

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


“Other long-term assets, net,” and we include the amount of bonds issued in “Long-term debt, less current portion” on the consolidated balance sheets. For the three months ended March 31, 2013, we received $4.2 million from the trustee. As of March 31, 2013, the amount remaining in trust totaled $122.3 million.

Port Authority of Corpus Christi Note Payable
In February 2013, we repaid the remaining principal balance of $0.6 million on our $12.0 million note payable due to the Port of Corpus Christi Authority of Nueces County, Texas.

Other
In January 2013, Moody’s lowered our credit rating to Ba1 from Baa3. This downgrade caused the interest rates on the 2012 Revolving Credit Agreement, NuStar Terminals Limited’s £21 million amended and restated term loan agreement and NuStar Logistics’ $350.0 million of 7.65% senior notes due 2018 to increase by 0.375%, 0.375% and 0.25%, respectively, effective January 2013. This downgrade may also require us to provide additional credit support for certain contracts.

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 March 31, 2013, we have accrued $0.5 million for contingent losses. The amount that will ultimately be paid related to these matters 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.

Recurring Fair Value Measurements
Product Imbalances. We value our assets and liabilities related to product imbalances using quoted market prices in active markets as of the reporting date.

Interest Rate Swaps. We estimate the fair value of both our fixed-to-floating and forward-starting interest rate swaps using discounted cash flows, which use observable inputs such as time to maturity and market interest rates.

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. Derivatives and Risk Management Activities for a discussion of our derivative instruments.

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


The following assets and liabilities are measured at fair value:
 
March 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Other current assets:
 
 
 
 
 
 
 
Product imbalances
$
264

 
$

 
$

 
$
264

Commodity derivatives

 
7,753

 

 
7,753

Other long-term assets, net:
 
 
 
 
 
 
 
Commodity derivatives

 
8,802

 

 
8,802

Accrued liabilities:
 
 
 
 
 
 
 
Product imbalances
(183
)
 

 

 
(183
)
Commodity derivatives
(3,097
)
 
(15,644
)
 

 
(18,741
)
Interest rate swaps

 
(19,968
)
 

 
(19,968
)
Other long-term liabilities:
 
 
 
 
 
 
 
Commodity derivatives

 
(506
)
 

 
(506
)
Total
$
(3,016
)
 
$
(19,563
)
 
$

 
$
(22,579
)

 
December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Other current assets:
 
 
 
 
 
 
 
Product imbalances
$
1,232

 
$

 
$

 
$
1,232

Commodity derivatives
1,001

 
8,357

 

 
9,358

Other long-term assets, net:
 
 
 
 
 
 
 
Commodity derivatives

 
9,206

 

 
9,206

Accrued liabilities:
 
 
 
 
 
 
 
Product imbalances
(1,686
)
 

 

 
(1,686
)
Commodity derivatives

 
(19,210
)
 

 
(19,210
)
Interest rate swaps

 
(40,911
)
 

 
(40,911
)
Total
$
547

 
$
(42,558
)
 
$

 
$
(42,011
)

Fair Value of Financial Instruments
We recognize cash equivalents, receivables, the note receivable from related party, payables and debt in our consolidated balance sheets at their carrying amount. The fair values of these financial instruments, except for our note receivable from related party and debt, approximate their carrying amounts. The estimated fair value and carrying amounts of our note receivable from related party and debt were as follows:
 
March 31, 2013
 
December 31, 2012
 
Fair Value
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
(Thousands of Dollars)
Debt
$
2,448,108

 
$
2,418,317

 
$
2,377,120

 
$
2,411,004

Note receivable from related party
$
115,379

 
$
159,200

 
$
91,705

 
$
95,711


We estimated the fair value of our publicly-traded senior notes based upon quoted prices in active markets; therefore, we determined 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 the fair value falls in Level 2 of the fair value hierarchy.


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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


We estimated the fair value of the note receivable using discounted cash flows, which use inputs such as time to maturity and estimated market interest rates, and determined the fair value falls in Level 3 of the fair value hierarchy. See Note 8. Related Party Transactions for additional information on the NuStar JV Facility.

7. DERIVATIVES AND RISK MANAGEMENT ACTIVITIES

We utilize various derivative instruments to manage our exposure to commodity price risk and interest rate 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 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.
Interest Rate Risk
We are a party to certain interest rate swap agreements to manage our exposure to changes in interest rates, which include forward-starting interest rate swap agreements related to forecasted probable debt issuances in 2013. 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. In connection with the maturity of the 6.05% senior notes due March 15, 2013, we terminated forward-starting interest rate swap agreements with an aggregate notional amount of $125.0 million. We paid $16.3 million in connection with the terminations, which we will amortize into “Interest expense, net” over the lives of forecasted probable debt issuances. As of March 31, 2013 and December 31, 2012, the total aggregate notional amount of forward-starting interest rate swaps is $150.0 million and $275.0 million, respectively.

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. Changes in the fair values are recorded in net income.

To determine the volume represented by commodity contracts, we combined the volume of our long and short open positions on an absolute basis, which totaled 23.6 million barrels and 18.4 million barrels as of March 31, 2013 and December 31, 2012, respectively.


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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


The fair values of our derivative instruments included in our consolidated balance sheets were as follows:
 
 
 
Asset Derivatives
 
Liability Derivatives
 
Balance Sheet Location
 
March 31, 2013
 
December 31, 2012
 
March 31, 2013
 
December 31, 2012
 
 
 
(Thousands of Dollars)
Derivatives Designated as
Hedging Instruments:
 
 
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
$

 
$
1,471

 
$

 
$
(811
)
Commodity contracts
Accrued liabilities
 
182

 

 
(1,446
)
 

Interest rate swaps
Accrued liabilities
 

 

 
(19,968
)
 
(40,911
)
Total
 
 
182

 
1,471

 
(21,414
)
 
(41,722
)
 
 
 
 
 
 
 
 
 
 
Derivatives Not Designated
as Hedging Instruments:
 
 
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
12,019

 
22,269

 
(4,266
)
 
(13,571
)
Commodity contracts
Other long-term assets, net
 
23,867

 
39,322

 
(15,065
)
 
(30,116
)
Commodity contracts
Accrued liabilities
 
27,650

 
17,406

 
(45,127
)
 
(36,616
)
Commodity contracts
Other long-term liabilities
 
8,829

 

 
(9,335
)
 

Total
 
 
72,365

 
78,997

 
(73,793
)
 
(80,303
)
 
 
 
 
 
 
 
 
 
 
Total Derivatives
 
 
$
72,547

 
$
80,468

 
$
(95,207
)
 
$
(122,025
)
 
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
 
March 31,
2013
 
December 31, 2012
 
 
(Thousands of Dollars)
Net amounts of assets presented in the consolidated balance sheets
 
$
16,555

 
$
18,564

Net amounts of liabilities presented in the consolidated balance sheets
 
$
(19,247
)
 
$
(19,210
)


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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 March 31, 2013:
 
 
 
 
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
(1,276
)
 
$
1,636

 
$
360

 
 
 
 
 
 
 
 
 
Three months ended March 31, 2012:
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest expense, net
 
$
2,228

 
$
(2,228
)
 
$

Commodity contracts
 
Cost of product sales
 
(2,587
)
 
2,390

 
(197
)
Total
 
 
 
$
(359
)
 
$
162

 
$
(197
)
 
Derivatives Designated as Cash Flow Hedging Instruments
 
Amount of Gain
(Loss) Recognized 
in OCI 
on Derivative
(Effective Portion)
 
Income Statement
Location (a)
 
Amount of Gain
(Loss) Reclassified
from
Accumulated OCI
into  Income
(Effective Portion)
 
Amount of Gain
(Loss) Recognized
in Income  on
Derivative
(Ineffective Portion)
 
 
(Thousands of Dollars)
 
 
 
(Thousands of Dollars)
Three months ended March 31, 2013:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
4,687

 
Interest expense, net
 
$
(487
)
 
$

 
 
 
 
 
 
 
 
 
Three months ended March 31, 2012:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
3,298

 
Interest expense, net
 
$
(423
)
 
$

Commodity contracts
 
(57,121
)
 
Income (loss) from discontinued operations
 
(7,344
)
 
4,010

Total
 
$
(53,823
)
 
 
 
$
(7,767
)
 
$
4,010

(a)
Amounts are included in specified location for both the gain (loss) reclassified from accumulated other comprehensive income (OCI) into income (effective portion) and the gain (loss) recognized in income on derivative (ineffective portion).
Derivatives Not Designated as Hedging Instruments
 
Income Statement Location
 
Amount of Gain (Loss)
Recognized in Income
 
 
 
 
(Thousands of Dollars)
Three months ended March 31, 2013:
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
(6,827
)
Commodity contracts
 
Operating expenses
 
(1
)
Commodity contracts
 
Income (loss) from discontinued operations
 
(218
)
Total
 
 
 
$
(7,046
)
 
 
 
 
 
Three months ended March 31, 2012:
 
 
 
 
Commodity contracts
 
Revenues
 
$
510

Commodity contracts
 
Cost of product sales
 
4,161

Commodity contracts
 
Income (loss) from discontinued operations
 
(8,479
)
Total
 
 
 
$
(3,808
)

For derivatives designated as cash flow hedging instruments, once a hedged transaction occurs, we reclassify the effective portion from accumulated OCI to “Cost of product sales” or “Interest expense, net.” As of March 31, 2013, we expect to reclassify a loss of $5.1 million to “Interest expense, net” within the next twelve months. The maximum length of time over

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


which we are hedging our exposure to the variability in future cash flows is approximately two months for our forward-starting interest rate swaps.

8. RELATED PARTY TRANSACTIONS

The following table summarizes information pertaining to related party transactions:
 
Three Months Ended March 31,
 
2013
 
2012
 
(Thousands of Dollars)
Revenues
$
2,011

 
$
697

Operating expenses
$
32,991

 
$
36,777

General and administrative expenses
$
18,784

 
$
19,149

Interest income
$
1,122

 
$

Expenses included in discontinued operations, net of tax
$
382

 
$
2,175


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.

We had a payable to NuStar GP, LLC of $11.8 million and $1.4 million as of March 31, 2013 and December 31, 2012, respectively, with both amounts representing payroll, employee benefit plan expenses and unit-based compensation. We also had a long-term payable to NuStar GP, LLC as of March 31, 2013 and December 31, 2012 of $18.8 million and $18.1 million, respectively, related to amounts payable for retiree medical benefits and other post-employment benefits.

Asphalt JV
On September 28, 2012, we sold a 50% ownership interest in NuStar Asphalt LLC (Asphalt JV), previously a wholly owned subsidiary. Asphalt JV owns and operates the asphalt refining assets that were previously wholly owned by NuStar Energy, including asphalt refineries located in Paulsboro, New Jersey and Savannah, Georgia. Unless otherwise indicated, the term “Asphalt JV” is used in this report to refer to NuStar Asphalt LLC, to one or more of its consolidated subsidiaries or to all of them taken as a whole.

Financing Agreements and Credit Support. The NuStar JV Facility is an unsecured revolving credit facility provided by NuStar Energy to Asphalt JV in an aggregate principal amount not to exceed $250.0 million for a term of seven years. As of March 31, 2013 and December 31, 2012, our note receivable from Asphalt JV totaled $159.2 million and $95.7 million, respectively, under the NuStar JV Facility.

In addition, during the term of the NuStar JV Facility, NuStar Energy will provide credit support, such as guarantees, letters of credit and cash collateral, as applicable, of up to $150.0 million. As of March 31, 2013, NuStar Energy has provided guarantees for commodity purchases, lease obligations and certain utilities for Asphalt JV with an aggregate maximum potential exposure of $102.3 million. In addition, NuStar Energy has provided two guarantees to suppliers that do not specify a maximum amount, but for which we believe any amounts due would be minimal. A majority of these guarantees have no expiration date. As of March 31, 2013, NuStar Energy has also provided $9.2 million in letters of credit. In the event NuStar Energy must fund its obligation under these guarantees or letters of credit, that amount will be added to borrowings under the NuStar JV Facility, but it will not reduce the availability under the NuStar JV Facility.

Crude Oil Supply Agreement. We entered into a crude oil supply agreement with Asphalt JV (the Asphalt JV Crude Oil Supply Agreement) that commits Asphalt JV to purchase from us a minimum amount of crude oil in a given year. As of March 31, 2013 and December 31, 2012, we had a receivable from Asphalt JV of $82.3 million and $109.4 million, respectively, mainly associated with crude oil sales under the Asphalt JV Crude Oil Supply Agreement.

Variable Interest Entity. We determined the equity of Asphalt JV is not sufficient to finance its activities without additional subordinated support, including support provided by us as described above. Therefore, we determined Asphalt JV is a variable

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


interest entity (VIE). We analyzed our relationship with Asphalt JV, including our representation on the board of members, our equity interests and our rights under the various agreements with Asphalt JV and determined that we do not have the power to direct the activities most significant to the economic performance of Asphalt JV. As a result, we are not the primary beneficiary of Asphalt JV, and we report our 50% ownership in Asphalt JV using the equity method of accounting. Therefore, we have presented our investment in Asphalt JV within “Investment in joint ventures” on the consolidated balance sheets as of March 31, 2013 and December 31, 2012.

Our maximum exposure to loss as a result of our involvement with Asphalt JV is approximately $507.1 million, which consists of: (i) our investment in Asphalt JV of $24.8 million as of March 31, 2013; (ii) up to $250.0 million under the NuStar JV Facility; (iii) up to $150.0 million for credit support, including guarantees; and (iv) a receivable from Asphalt JV of $82.3 million as of March 31, 2013.

Other
As of March 31, 2013, we had a receivable of $7.0 million from our 50% joint venture in ST Linden Terminals, LLC.

9. PARTNERS’ EQUITY

Partners Equity Activity
The following table summarizes changes in the carrying amount of equity attributable to NuStar Energy L.P. partners and noncontrolling interest:
 
Three Months Ended March 31, 2013
 
Three Months Ended March 31, 2012
 
NuStar Energy L.P. Partners’ Equity
 
Noncontrolling Interest
 
Total Partners’
Equity
 
NuStar Energy L.P. Partners’ Equity
 
Noncontrolling Interest
 
Total Partners’
Equity
 
(Thousands of Dollars)
Beginning balance
$
2,572,384

 
$
12,611

 
$
2,584,995

 
$
2,852,201

 
$
12,134

 
$
2,864,335

Net (loss) income
24,565

 
(161
)
 
24,404

 
26,351

 
(97
)
 
26,254

Other comprehensive
(loss) income:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation
adjustment
(7,277
)
 
(287
)
 
(7,564
)
 
7,911

 
1,119

 
9,030

Net unrealized gain (loss)
on cash flow hedges
4,687

 

 
4,687

 
(53,823
)
 

 
(53,823
)
Net loss reclassified
on cash flow hedges
into interest expense, net
487

 

 
487

 
423

 

 
423

Net loss reclassified
on cash flow hedges
into income (loss) from
discontinued operations

 

 

 
7,344

 

 
7,344

Total other comprehensive
(loss) income
(2,103
)
 
(287
)
 
(2,390
)
 
(38,145
)
 
1,119

 
(37,026
)
Cash distributions to
partners
(98,051
)
 

 
(98,051
)
 
(89,076
)
 

 
(89,076
)
Other
222

 

 
222

 
(269
)
 

 
(269
)
Ending balance
$
2,497,017

 
$
12,163

 
$
2,509,180

 
$
2,751,062

 
$
13,156

 
$
2,764,218

 
 
 
 
 
 
 
 
 
 
 
 

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


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 March 31,
 
2013
 
2012
 
(Thousands of Dollars)
Net income attributable to NuStar Energy L.P.
$
24,565

 
$
26,351

Less general partner incentive distribution
10,805

 
9,816

Net income after general partner incentive distribution
13,760

 
16,535

General partner interest
2
%
 
2
%
General partner allocation of net income after general partner incentive distribution
276

 
331

General partner incentive distribution
10,805

 
9,816

Net income applicable to general partner
$
11,081

 
$
10,147


Cash Distributions
On February 14, 2013, we paid a quarterly cash distribution totaling $98.1 million, or $1.095 per unit, related to the fourth quarter of 2012. On April 24, 2013, we announced a quarterly cash distribution of $1.095 per unit related to the first quarter of 2013. This distribution will be paid on May 10, 2013 to unitholders of record on May 6, 2013 and will total $98.1 million.

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 March 31,
 
2013
 
2012
 
(Thousands of Dollars, Except Per Unit Data)
General partner interest
$
1,961

 
$
1,782

General partner incentive distribution
10,805

 
9,816

Total general partner distribution
12,766

 
11,598

Limited partners’ distribution
85,285

 
77,478

Total cash distributions
$
98,051

 
$
89,076

 
 
 
 
Cash distributions per unit applicable
to limited partners
$
1.095

 
$
1.095




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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


10. NET INCOME PER UNIT

We have identified the general partner interest and incentive distribution rights (IDR) 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 March 31,
 
2013
 
2012
 
(Thousands of Dollars, Except Unit and Per Unit Data)
Net income attributable to NuStar Energy L.P.
$
24,565

 
$
26,351

Less general partner distribution (including IDR)
12,766

 
11,598

Less limited partner distribution
85,285

 
77,478

Distributions in excess of earnings
$
(73,486
)
 
$
(62,725
)
 
 
 
 
General partner earnings:
 
 
 
Distributions
$
12,766

 
$
11,598

Allocation of distributions in excess of earnings (2%)
(1,469
)
 
(1,255
)
Total
$
11,297

 
$
10,343

 
 
 
 
Limited partner earnings:
 
 
 
Distributions
$
85,285

 
$
77,478

Allocation of distributions in excess of earnings (98%)
(72,017
)
 
(61,470
)
Total
$
13,268

 
$
16,008

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

 
70,756,078

 
 
 
 
Net income per unit applicable to limited partners
$
0.17

 
$
0.23



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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


11. STATEMENTS OF CASH FLOWS
Changes in current assets and current liabilities were as follows:
 
Three Months Ended March 31,
 
2013
 
2012
 
(Thousands of Dollars)
Decrease (increase) in current assets:
 
 
 
Accounts receivable
$
50,811

 
$
52,418

Receivable from related parties
20,448

 

Inventories
(54,416
)
 
(186,135
)
Income tax receivable
50

 
(4,989
)
Other current assets
18,678

 
(9,677
)
Increase (decrease) in current liabilities:
 
 
 
Accounts payable
31,318

 
76,683

Payable to related party
10,369

 
8,566

Accrued interest payable
6,797

 
(5,550
)
Accrued liabilities
(10,491
)
 
(8,513
)
Taxes other than income tax
(2,136
)
 
(664
)
Income tax payable
2,158

 
1,403

Changes in current assets and current liabilities
$
73,586

 
$
(76,458
)
 
The above changes in current assets and current liabilities differ from changes between amounts reflected in the applicable balance sheets due to the effect of foreign currency translation.

Cash flows related to interest and income taxes were as follows:
 
Three Months Ended March 31,
 
2013
 
2012
 
(Thousands of Dollars)
Cash paid for interest, net of amount capitalized
$
24,698

 
$
31,961

Cash paid for income taxes, net of tax refunds received
$
1,750

 
$
8,106


12. SEGMENT INFORMATION

Our reportable business segments consist of storage, pipeline (formerly known as the transportation segment), and fuels marketing. In 2013, we renamed the “Asphalt and Fuels Marketing Segment” to the “Fuels Marketing Segment” in order to better reflect the current business in this segment. We believe this name is a more accurate description of the operations that remain after our deconsolidation of Asphalt JV in 2012 and the San Antonio Refinery Sale.

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 terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and fuels marketing. Intersegment revenues result from storage and throughput agreements with wholly owned subsidiaries of NuStar Energy at lease rates consistent with rates charged to third parties for storage and at pipeline tariff rates based upon the applicable published tariff. Related party revenues mainly result from storage agreements with our joint ventures and the noncontrolling shareholder of our Turkey subsidiary.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


Results of operations for the reportable segments were as follows:
 
Three Months Ended March 31,
 
2013
 
2012
 
(Thousands of Dollars)
Revenues:
 
 
 
Storage:
 
 
 
Third parties
$
131,414

 
$
127,687

Intersegment
10,894

 
17,045

Related party
2,011

 
697

Total storage
144,319

 
145,429

Pipeline
93,277

 
77,761

Fuels marketing
773,008

 
1,403,260

Consolidation and intersegment eliminations
(10,894
)
 
(17,045
)
Total revenues
$
999,710

 
$
1,609,405

 
 
 
 
Operating income:
 
 
 
Storage
$
51,178

 
$
56,147

Pipeline
39,881

 
37,216

Fuels marketing
(1,593
)
 
(5,393
)
Consolidation and intersegment eliminations
(12
)
 
30

Total segment operating income
89,454

 
88,000

General and administrative expenses
27,494

 
27,167

Other depreciation and amortization expense
2,498

 
1,814

Total operating income
$
59,462

 
$
59,019


Total assets by reportable segment were as follows:
 
March 31,
2013
 
December 31,
2012
 
(Thousands of Dollars)
Storage
$
2,606,020

 
$
2,627,946

Pipeline
1,690,820

 
1,720,711

Fuels marketing
822,603

 
885,661

Total segment assets
5,119,443

 
5,234,318

Other partnership assets
427,587

 
378,771

Total consolidated assets
$
5,547,030

 
$
5,613,089

 

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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 notes issued by NuStar Logistics and NuPOP are fully and unconditionally guaranteed by NuStar Energy, and each of NuStar Logistics and NuPOP fully and unconditionally guarantee the outstanding senior notes of the other. 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
March 31, 2013
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries (a)
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
7,033

 
$
26,799

 
$

 
$
82,681

 
$

 
$
116,513

Receivables, net

 
151,979

 
5,994

 
286,773

 
(18,621
)
 
426,125

Inventories

 
2,324

 
4,380

 
220,965

 
(43
)
 
227,626

Income tax receivable

 

 

 
1,186

 

 
1,186

Other current assets

 
18,550

 
365

 
27,436

 

 
46,351

Assets held for sale

 
2,847

 

 

 

 
2,847

Intercompany receivable

 
171,904

 
628,671

 

 
(800,575
)
 

Total current assets
7,033

 
374,403

 
639,410

 
619,041

 
(819,239
)
 
820,648

Property, plant and equipment, net

 
1,446,695

 
576,891

 
1,215,969

 

 
3,239,555

Intangible assets, net

 
18,298

 

 
70,637

 

 
88,935

Goodwill

 
145,990

 
170,652

 
633,944

 

 
950,586

Investment in wholly owned
subsidiaries
3,060,312

 
168,455

 
1,216,620

 
2,352,293

 
(6,797,680
)
 

Investment in joint ventures

 
24,764

 

 
62,808

 

 
87,572

Deferred income tax asset

 

 

 
3,832

 

 
3,832

Note receivable from related party

 
159,200

 

 

 

 
159,200

Other long-term assets, net
490

 
155,680

 
26,329

 
14,203

 

 
196,702

Total assets
$
3,067,835

 
$
2,493,485

 
$
2,629,902

 
$
4,972,727

 
$
(7,616,919
)
 
$
5,547,030

Liabilities and Partners’ Equity
 
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$

 
$

 
$
250,390

 
$
31,855

 
$

 
$
282,245

Payables
6

 
123,670

 
14,380

 
321,166

 
(18,621
)
 
440,601

Accrued interest payable

 
25,625

 
4,896

 
17

 

 
30,538

Accrued liabilities
772

 
38,982

 
5,258

 
35,389

 

 
80,401

Taxes other than income tax
188

 
3,792

 
3,524

 
268

 

 
7,772

Income tax payable

 
477

 
4

 
4,332

 

 
4,813

Intercompany payable
508,884

 

 

 
291,691

 
(800,575
)
 

Total current liabilities
509,850

 
192,546

 
278,452

 
684,718

 
(819,196
)
 
846,370

Long-term debt, less current portion

 
2,136,072

 

 

 

 
2,136,072

Long-term payable to related party

 
13,364

 

 
5,442

 

 
18,806

Deferred income tax liability

 

 

 
30,288

 

 
30,288

Other long-term liabilities

 
887

 
322

 
5,105

 

 
6,314

Total partners’ equity
2,557,985

 
150,616

 
2,351,128

 
4,247,174

 
(6,797,723
)
 
2,509,180

Total liabilities and
partners’ equity
$
3,067,835

 
$
2,493,485

 
$
2,629,902

 
$
4,972,727

 
$
(7,616,919
)
 
$
5,547,030

(a)    Non-guarantor subsidiaries are wholly owned by NuStar Energy, NuStar Logistics or NuPOP.

20

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


Condensed Consolidating Balance Sheets
December 31, 2012
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries (a)
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
7,033

 
$
1,112

 
$

 
$
75,457

 
$

 
$
83,602

Receivables, net

 
157,452

 
10,561

 
340,144

 
(10,381
)
 
497,776

Inventories

 
2,320

 
5,590

 
165,349

 
(31
)
 
173,228

Income tax receivable

 

 

 
1,265

 

 
1,265

Other current assets

 
26,353

 
1,468

 
37,417

 

 
65,238

Assets held for sale

 
35,337

 

 
82,997

 

 
118,334

Intercompany receivable

 
353,384

 
599,599

 

 
(952,983
)
 

Total current assets
7,033

 
575,958

 
617,218

 
702,629

 
(963,395
)
 
939,443

Property, plant and equipment, net

 
1,423,991

 
582,299

 
1,232,170

 

 
3,238,460

Intangible assets, net

 
18,733

 

 
73,702

 

 
92,435

Goodwill

 
145,990

 
170,652

 
634,382

 

 
951,024

Investment in wholly owned
subsidiaries
3,133,097

 
161,957

 
1,208,595

 
2,329,595

 
(6,833,244
)
 

Investment in joint ventures

 
35,883

 

 
67,062

 

 
102,945

Deferred income tax asset

 

 

 
3,108

 

 
3,108

Note receivable from related party

 
95,711

 

 

 

 
95,711

Other long-term assets, net
490

 
148,384

 
26,330

 
14,759

 

 
189,963

Total assets
$
3,140,620

 
$
2,606,607

 
$
2,605,094

 
$
5,057,407

 
$
(7,796,639
)
 
$
5,613,089

Liabilities and Partners’ Equity
 
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
$

 
$
1,313

 
$
250,967

 
$
34,142

 
$

 
$
286,422

Payables
15

 
122,706

 
12,657

 
274,044

 
(10,381
)
 
399,041

Accrued interest payable

 
22,512

 
1,224

 
5

 

 
23,741

Accrued liabilities
862

 
76,322

 
7,542

 
39,477

 

 
124,203

Taxes other than income tax
129

 
5,671

 
2,830

 
1,263

 

 
9,893

Income tax payable

 
247

 

 
2,424

 

 
2,671

Intercompany payable
508,365

 

 

 
444,618

 
(952,983
)
 

Total current liabilities
509,371

 
228,771

 
275,220

 
795,973

 
(963,364
)
 
845,971

Long-term debt, less current portion

 
2,124,582

 

 

 

 
2,124,582

Long-term payable to related party

 
12,629

 

 
5,442

 

 
18,071

Deferred income tax liability

 

 

 
32,114

 

 
32,114

Other long-term liabilities

 
2,701

 
279

 
4,376

 

 
7,356

Total partners’ equity
2,631,249

 
237,924

 
2,329,595

 
4,219,502

 
(6,833,275
)
 
2,584,995

Total liabilities and
partners’ equity
$
3,140,620

 
$
2,606,607

 
$
2,605,094

 
$
5,057,407

 
$
(7,796,639
)
 
$
5,613,089

 
(a)
Non-guarantor subsidiaries are wholly owned by NuStar Energy, NuStar Logistics or NuPOP.


21

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


Condensed Consolidating Statements of Comprehensive Income
For the Three Months Ended March 31, 2013
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries (a)
 
Eliminations
 
Consolidated
Revenues
$

 
$
98,863

 
$
52,626

 
$
856,246

 
$
(8,025
)
 
$
999,710

Costs and expenses
491

 
66,113

 
36,009

 
845,648

 
(8,013
)
 
940,248

Operating (loss) income
(491
)
 
32,750

 
16,617

 
10,598

 
(12
)
 
59,462

Equity in earnings (loss) of
subsidiaries
25,056

 
6,498

 
8,025

 
21,566

 
(61,145
)
 

Equity in (loss) earnings of
joint ventures

 
(11,541
)
 

 
398

 

 
(11,143
)
Interest expense, net

 
(26,790
)
 
(3,023
)
 
(300
)
 

 
(30,113
)
Other income (expense), net

 
2,808

 
(84
)
 
(2,356
)
 

 
368

Income from continuing
operations before income tax
expense
24,565

 
3,725

 
21,535

 
29,906

 
(61,157
)
 
18,574

Income tax expense

 
186

 
2

 
2,348

 

 
2,536

Income from continuing
operations
24,565

 
3,539

 
21,533

 
27,558

 
(61,157
)
 
16,038

Loss from discontinued operations,
 net of tax