NS 1Q14 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, 2014
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 April 30, 2014 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.
 
 

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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,
2014
 
December 31,
2013
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
42,598

 
$
100,743

Accounts receivable, net of allowance for doubtful accounts of $252
and $1,224 as of March 31, 2014 and December 31, 2013, respectively
304,056

 
281,310

Receivable from related parties
212

 
51,084

Inventories
102,647

 
138,147

Income tax receivable
3,520

 
826

Other current assets
36,786

 
39,452

Assets held for sale
19,920

 
21,987

Total current assets
509,739

 
633,549

Property, plant and equipment, at cost
4,551,390

 
4,500,837

Accumulated depreciation and amortization
(1,231,272
)
 
(1,190,184
)
Property, plant and equipment, net
3,320,118

 
3,310,653

Intangible assets, net
68,104

 
71,249

Goodwill
617,429

 
617,429

Investment in joint ventures
70,342

 
68,735

Deferred income tax asset
4,083

 
5,769

Note receivable from related party

 
165,440

Other long-term assets, net
324,819

 
159,362

Total assets
$
4,914,634

 
$
5,032,186

Liabilities and Partners’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
196,529

 
$
298,751

Payable to related party
13,608

 
8,325

Accrued interest payable
27,399

 
33,113

Accrued liabilities
29,509

 
38,632

Taxes other than income tax
8,998

 
9,745

Income tax payable
5,362

 
4,006

Total current liabilities
281,405

 
392,572

Long-term debt
2,710,117

 
2,655,553

Long-term payable to related party
39,441

 
41,139

Deferred income tax liability
28,348

 
27,350

Other long-term liabilities
11,839

 
11,778

Commitments and contingencies (Note 5)

 

Partners’ equity:
 
 
 
Limited partners (77,886,078 common units outstanding
as of March 31, 2014 and December 31, 2013)
1,864,824

 
1,921,726

General partner
42,422

 
43,804

Accumulated other comprehensive loss
(64,868
)
 
(63,394
)
Total NuStar Energy L.P. partners’ equity
1,842,378

 
1,902,136

Noncontrolling interest
1,106

 
1,658

Total partners’ equity
1,843,484

 
1,903,794

Total liabilities and partners’ equity
$
4,914,634

 
$
5,032,186

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
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)
 
Three Months Ended March 31,
 
2014
 
2013
Revenues:
 
 
 
Service revenues
$
229,338

 
$
225,759

Product sales
619,875

 
772,427

Total revenues
849,213

 
998,186

Costs and expenses:
 
 
 
Cost of product sales
594,959

 
752,254

Operating expenses:
 
 
 
Third parties
77,406

 
81,804

Related party
28,659

 
31,713

Total operating expenses
106,065

 
113,517

General and administrative expenses:
 
 
 
Third parties
6,762

 
8,710

Related party
14,094

 
18,784

Total general and administrative expenses
20,856

 
27,494

Depreciation and amortization expense
46,230

 
41,563

Total costs and expenses
768,110

 
934,828

Operating income
81,103

 
63,358

Equity in loss of joint ventures
(4,306
)
 
(11,143
)
Interest expense, net
(34,417
)
 
(30,991
)
Interest income from related party
1,055

 
1,122

Other income, net
3,678

 
344

Income from continuing operations before income tax expense
47,113

 
22,690

Income tax expense
4,117

 
3,091

Income from continuing operations
42,996

 
19,599

(Loss) income from discontinued operations, net of tax
(3,359
)
 
4,805

Net income
39,637

 
24,404

Less net loss attributable to noncontrolling interest
(107
)
 
(161
)
Net income attributable to NuStar Energy L.P.
$
39,744

 
$
24,565

Net income (loss) per unit applicable to limited partners:
 
 
 
Continuing operations
$
0.40

 
$
0.10

Discontinued operations
(0.04
)
 
0.07

Total (Note 10)
$
0.36

 
$
0.17

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

 
77,886,078

 
 
 
 
Comprehensive income
$
37,718

 
$
22,014

Less comprehensive loss attributable to noncontrolling interest
(552
)
 
(448
)
Comprehensive income attributable to NuStar Energy L.P.
$
38,270

 
$
22,462

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,
 
2014
 
2013
Cash Flows from Operating Activities:
 
 
 
Net income
$
39,637

 
$
24,404

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization expense
46,230

 
42,926

Amortization of debt related items
2,424

 
(1,173
)
Gain from sale or disposition of assets
(24
)
 
(9,204
)
Asset impairment loss
2,067

 

Deferred income tax expense (benefit)
3,054

 
(1,192
)
Equity in loss of joint ventures
4,306

 
11,143

Distributions of equity in earnings of joint ventures
2,366

 
4,652

Changes in current assets and current liabilities (Note 11)
(38,795
)
 
73,586

Other, net
2,060

 
(742
)
Net cash provided by operating activities
63,325

 
144,400

Cash Flows from Investing Activities:
 
 
 
Capital expenditures
(54,486
)
 
(52,564
)
Change in accounts payable related to capital expenditures
(8,560
)
 

Proceeds from sale or disposition of assets
66

 
112,715

Increase in note receivable from related party
(13,328
)
 
(63,489
)
Other, net
(23
)
 
220

Net cash used in investing activities
(76,331
)
 
(3,118
)
Cash Flows from Financing Activities:
 
 
 
Proceeds from long-term debt borrowings
245,213

 
334,226

Proceeds from note offering, net of issuance costs

 
391,217

Long-term debt repayments
(189,280
)
 
(718,205
)
Short-term debt repayments

 
(577
)
Distributions to unitholders and general partner
(98,051
)
 
(98,051
)
Payments for termination of interest rate swaps

 
(16,255
)
Other, net
(584
)
 
76

Net cash used in financing activities
(42,702
)
 
(107,569
)
Effect of foreign exchange rate changes on cash
(2,437
)
 
(802
)
Net (decrease) increase in cash and cash equivalents
(58,145
)
 
32,911

Cash and cash equivalents as of the beginning of the period
100,743

 
83,602

Cash and cash equivalents as of the end of the period
$
42,598

 
$
116,513

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 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 14.9% total interest in us as of March 31, 2014.

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 our 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 months ended March 31, 2014 and 2013 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, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. The consolidated balance sheet as of December 31, 2013 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, 2013.

New Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board (FASB) amended the disclosure requirements for discontinued operations. Under the amended guidance, a discontinued operation is defined as the disposal of a component that represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results. The amended guidance also requires expanded disclosures about discontinued operations and disposals of a significant part of an entity that do not qualify as discontinued operations. The amended guidance is effective prospectively to new disposals and new classifications of assets held for sale in annual periods beginning after December 15, 2014, and interim periods within those annual periods. Accordingly, we plan to adopt the amended guidance January 1, 2015.

2. DISPOSITIONS AND DISCONTINUED OPERATIONS

Dispositions
On February 26, 2014, we sold our remaining 50% ownership interest in NuStar Asphalt LLC (Asphalt JV) to Lindsay Goldberg LLC (Lindsay Goldberg), a private investment firm (the Asphalt JV Sale). Lindsay Goldberg now owns 100% of Asphalt JV. 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. Effective February 27, 2014, NuStar Asphalt LLC changed its name to Axeon Specialty Products LLC. As a result of the Asphalt JV Sale, we ceased applying the equity method of accounting. Upon completion of the Asphalt JV Sale, the $250.0 million unsecured revolving credit facility provided by us to Asphalt JV (the NuStar JV Facility) was converted from a revolving credit agreement into a $190.0 million term loan (the NuStar Term Loan). See Note 8 for a discussion of our agreements with Asphalt JV. Also at the time of the sale, the parties agreed to: (i) terminate the terminal services agreements with respect to our terminals in Rosario, NM, Catoosa, OK and Houston, TX; (ii) amend the terminal services agreements for our terminals in Baltimore, MD and Jacksonville, FL; and (iii) transfer ownership of both the Wilmington, NC and Dumfries, VA terminals to Asphalt JV, which were categorized as assets held for sale at December 31, 2013.

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



Discontinued Operations
Terminals Held for Sale. In addition to the terminals located in Wilmington, NC and Dumfries, VA, we have identified and plan to divest of several non-strategic, underperforming terminal facilities. As a result, we have reclassified the associated property, plant and equipment as “Assets held for sale” on the consolidated balance sheet. We presented the results of operations for those facilities, which were previously reported in the storage segment, as discontinued operations for all periods presented. We allocated interest expense of $0.4 million for each of the three months ended March 31, 2014 and 2013 to discontinued operations based on the ratio of net assets discontinued to consolidated net assets.

San Antonio Refinery. On January 1, 2013, we sold our fuels refinery in San Antonio, Texas (the San Antonio Refinery) and related assets 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 as discontinued operations for all periods presented. We recognized a gain of $9.3 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,
 
2014

2013
 
(Thousands of Dollars)
Revenues
$
1,821

 
$
1,709

 
 
 
 
(Loss) income before income tax expense
$
(3,359
)
 
$
4,250


3. INVENTORIES

Inventories consisted of the following:
 
March 31,
2014

December 31,
2013
 
(Thousands of Dollars)
Crude oil
$
6,183

 
$
6,485

Finished products
88,541

 
123,656

Materials and supplies
7,923

 
8,006

Total
$
102,647

 
$
138,147


4. DEBT

Revolving Credit Agreement
During the three months ended March 31, 2014, the balance under our $1.5 billion five-year revolving credit agreement (the 2012 Revolving Credit Agreement) increased by $55.7 million, which we used for general partnership purposes. 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, 2014, our weighted average interest rate was 2.2%.

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. 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, 2014, our consolidated debt coverage ratio was 4.4x, and we had $784.0 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 we pay interest monthly. The interest rate was 0.1% as of March 31, 2014. Following the issuance, the proceeds were deposited with a trustee and are disbursed to us upon our

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


request for reimbursement of expenditures related to our St. James terminal expansions. We include the 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 three months ended March 31, 2014, we received $0.5 million from the trustee. As of March 31, 2014, the amount remaining in trust totaled $83.0 million.

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, 2014, we have accrued $0.8 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.

Recurring Fair Value Measurements
The following assets and liabilities are measured at fair value on a recurring basis:
 
March 31, 2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Other current assets:
 
 
 
 
 
 
 
Product imbalances
$
2,470

 
$

 
$

 
$
2,470

Commodity derivatives
579

 
4,695

 

 
5,274

Other long-term assets, net:
 
 
 
 
 
 
 
Commodity derivatives

 
794

 

 
794

Accrued liabilities:
 
 
 
 
 
 
 
Product imbalances
(2,157
)
 

 

 
(2,157
)
Commodity derivatives

 
(2,574
)
 

 
(2,574
)
Contingent consideration

 

 
(1,318
)
 
(1,318
)
Other long-term liabilities:
 
 
 
 
 
 
 
Commodity derivatives

 
(411
)
 

 
(411
)
Guarantee liability

 

 
(2,620
)
 
(2,620
)
Total
$
892

 
$
2,504

 
$
(3,938
)
 
$
(542
)


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


 
December 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Other current assets:
 
 
 
 
 
 
 
Product imbalances
$
1,980

 
$

 
$

 
$
1,980

Commodity derivatives

 
4,948

 

 
4,948

Other long-term assets, net:
 
 
 
 
 
 
 
Commodity derivatives

 
6,977

 

 
6,977

Accrued liabilities:
 
 
 
 
 
 
 
Product imbalances
(2,190
)
 

 

 
(2,190
)
Commodity derivatives
(1,433
)
 
(800
)
 

 
(2,233
)
Contingent consideration

 

 
(1,318
)
 
(1,318
)
Other long-term liabilities:
 
 
 
 
 
 
 
Commodity derivatives

 
(1,575
)
 

 
(1,575
)
Guarantee liability

 

 
(1,880
)
 
(1,880
)
Total
$
(1,643
)
 
$
9,550

 
$
(3,198
)
 
$
4,709


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

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.

Contingent Consideration. On December 13, 2012, NuStar Logistics acquired certain assets, including 100% of the partnership interest in TexStar Crude Oil Pipeline, LP, from TexStar Midstream Services, LP and certain of its affiliates (collectively, TexStar) for approximately $325.0 million (the TexStar Asset Acquisition), including contingent consideration. In connection with the TexStar Asset Acquisition, we could be obligated to pay additional consideration to TexStar. Such obligations are dependent upon the cost of work required to complete certain assets and obtain outstanding real estate rights (collectively, the Contingent Consideration). We estimated the fair value of the Contingent Consideration based on significant inputs not observable in the market and have therefore reported that amount within Level 3 of the fair value hierarchy. Based on our assessment of the costs necessary to complete the assets in accordance with our agreement with TexStar, and considering the probability of possible outcomes, we determined that it is unlikely we would be obligated to pay a portion of the Contingent Consideration. The undiscounted amount of potential future payments that we could be required to make under the applicable agreements is between $0 and $1.3 million.

Guarantees. As of March 31, 2014, we recorded a liability of $2.6 million representing the fair value of guarantees we have issued on behalf of Asphalt JV. We estimated the fair value considering the probability of default by Asphalt JV and an estimate of the amount we would be obligated to pay under the guarantees at the time of default. We calculated the fair value based on the guarantees outstanding as of March 31, 2014, totaling $111.0 million, plus two guarantees that do not specify a maximum amount, but for which we believe any amounts due would be minimal. 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. See Note 8 for a discussion of our agreements with Asphalt JV.

In the event we are obligated to perform under any of these guarantees, the amount paid by us will be treated as additional borrowings under the NuStar JV Term Loan. As a result, we increased the carrying value of the note receivable from Asphalt JV by the same amount as the liability for the fair value of the guarantees outstanding as of March 31, 2014.
 

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


The following table summarizes the activity in our Level 3 liabilities:
 
Three Months Ended
March 31, 2014
 
(Thousands of Dollars)
Beginning balance
$
3,198

Adjustment to guarantee liability
740

Ending balance
$
3,938


Non-recurring Fair Value Measurements
We reclassified the property, plant and equipment associated with certain terminals as “Assets held for sale” on the consolidated balance sheet and recorded those assets at fair value, less costs to sell. We estimated the fair values of $19.9 million and $22.0 million as of March 31, 2014 and December 31, 2013, respectively, using a weighted-average of values calculated using an income approach and a market approach. The income approach calculates fair value by discounting the estimated net cash flows generated by the related terminal. The market approach involves estimating the fair value measurement on an earnings multiple based on public company transaction data. 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.

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 a note receivable from Asphalt JV and debt, approximate their carrying amounts. The estimated fair value and carrying amounts of the debt and note receivable were as follows:
 
March 31, 2014
 
December 31, 2013
 
Fair Value
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
(Thousands of Dollars)
Debt
$
2,764,360

 
$
2,710,117

 
$
2,636,734

 
$
2,655,553

Note receivable from Asphalt JV
$
144,949

 
$
171,275

 
$
133,416

 
$
165,440


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.
The note receivable related to the NuStar JV Term Loan is recorded at: (i) the outstanding principal amount of $190.0 million; (ii) plus the fair value of guarantees of $2.6 million; and (iii) reduced by equity losses from our investment in Asphalt JV of $21.3 million incurred after the carrying value of our investment in Asphalt JV was reduced to zero. We review the financial information of Asphalt JV monthly for possible non-payment indicators.
We estimated the fair value of the note receivable 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. See Note 8 for additional information on the note receivable from Asphalt JV.

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 were a party to certain interest rate swap agreements to manage our exposure to changes in interest rates, which included forward-starting interest rate swap agreements related to the interest payments associated with forecasted probable debt

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


issuances. These swaps qualified, and we designated them, as cash flow hedges. In 2013, we terminated our remaining forward-starting interest rate swap agreements. We recorded the effective portion of mark-to-market adjustments as a component of “Accumulated other comprehensive loss” (AOCI). The amount accumulated in AOCI is amortized into “Interest expense, net” over the term of the forecasted debt as the interest payments occur or if the interest payments are probable not to occur. As of March 31, 2014, we had no forward-starting interest rate swap agreements.

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 14.1 million barrels and 15.2 million barrels as of March 31, 2014 and December 31, 2013, respectively.

As of March 31, 2014 and December 31, 2013, we had $1.9 million and $3.3 million, respectively, of margin deposits related to our derivative instruments.

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,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
 
 
 
(Thousands of Dollars)
Derivatives Designated as
Hedging Instruments:
 
 
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
$
402

 
$

 
$
(13
)
 
$

Commodity contracts
Accrued liabilities
 

 

 

 
(130
)
Total
 
 
402

 

 
(13
)
 
(130
)
 
 
 
 
 
 
 
 
 
 
Derivatives Not Designated
as Hedging Instruments:
 
 
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
17,941

 
16,168

 
(13,056
)
 
(11,220
)
Commodity contracts
Other long-term assets, net
 
1,151

 
15,883

 
(357
)
 
(8,906
)
Commodity contracts
Accrued liabilities
 
2,215

 
4,523

 
(4,789
)
 
(6,626
)
Commodity contracts
Other long-term liabilities
 
4,568

 
5,448

 
(4,979
)
 
(7,023
)
Total
 
 
25,875

 
42,022

 
(23,181
)
 
(33,775
)
 
 
 
 
 
 
 
 
 
 
Total Derivatives
 
 
$
26,277

 
$
42,022

 
$
(23,194
)
 
$
(33,905
)
 
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,
2014
 
December 31, 2013
 
 
(Thousands of Dollars)
Net amounts of assets presented in the consolidated balance sheets
 
$
6,068

 
$
11,925

Net amounts of liabilities presented in the consolidated balance sheets
 
$
(2,985
)
 
$
(3,808
)


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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 March 31, 2014:
 
 
 
 
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
1,213

 
$
(2,097
)
 
$
(884
)
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2013:
 
 
 
 
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
(1,276
)
 
$
1,636

 
$
360


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 AOCI
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, 2014:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$

 
Interest expense, net
 
$
(2,766
)
 
$

 
 
 
 
 
 
 
 
 
Three months ended March 31, 2013:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
4,687

 
Interest expense, net
 
$
(487
)
 
$

(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, 2014:
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
32

 
 
 
 
 
Three months ended March 31, 2013:
 
 
 
 
Commodity contracts
 
Cost of product sales
 
$
(6,827
)
Commodity contracts
 
Operating expenses
 
(1
)
Commodity contracts
 
(Loss) income from discontinued
operations
 
(218
)
Total
 
 
 
$
(7,046
)

For derivatives designated as cash flow hedging instruments, once a hedged transaction occurs, we reclassify the effective portion from AOCI to “Cost of product sales” or “Interest expense, net.” As of March 31, 2014, we expect to reclassify a loss of $10.4 million to “Interest expense, net” within the next twelve months.


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


8. RELATED PARTY TRANSACTIONS

The following table summarizes information pertaining to related party transactions:
 
Three Months Ended March 31,
 
2014
 
2013
 
(Thousands of Dollars)
Revenues
$
929

 
$
1,241

Operating expenses
$
28,659

 
$
31,713

General and administrative expenses
$
14,094

 
$
18,784

Interest income
$
1,055

 
$
1,122

Revenues included in discontinued operations, net of tax
$
405

 
$
770

Expenses included in discontinued operations, net of tax
$
805

 
$
1,660


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 $13.6 million and $8.3 million as of March 31, 2014 and December 31, 2013, 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, 2014 and December 31, 2013 of $39.4 million and $41.1 million, respectively, related to amounts payable for retiree medical benefits and other post-employment benefits.

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

Financing Agreements and Credit Support. Effective upon the Asphalt JV Sale, the NuStar JV Facility was converted into the NuStar Term Loan. The NuStar Term Loan will step down from $190.0 million over time: first, to $175.0 million on December 31, 2014 and then to $150.0 million on September 30, 2015. While the NuStar Term Loan does not provide for any other scheduled payments, Asphalt JV is required to use all of its excess cash, as defined in the NuStar Term Loan, to repay the NuStar Term Loan. Like the NuStar JV Facility, the NuStar Term Loan must be repaid in full on September 28, 2019. All repayments of the NuStar Term Loan, including those scheduled in 2014 and 2015, are subject to Asphalt JV meeting certain restrictive requirements contained in its third-party credit facility. The carrying value of the NuStar Term Loan is included in “Other long-term assets, net” on the consolidated balance sheet as of March 31, 2014.

NuStar Energy will continue to provide credit support, such as guarantees, letters of credit and cash collateral, as applicable, of up to $150.0 million. Our obligation to provide credit support will be reduced by a minimum of $25.0 million beginning February 2016 and will terminate in full no later than September 28, 2019. As of March 31, 2014, we provided guarantees for commodity purchases, lease obligations and certain utilities for Asphalt JV with an aggregate maximum potential exposure of $111.0 million, plus 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, 2014, we have also provided $11.6 million in letters of credit on behalf of Asphalt JV. In the event we are obligated to perform under any of these guarantees or letters of credit, the amount paid by us will be treated as additional borrowings under the NuStar Term Loan.

Crude Oil Supply Agreement. We were a party to a crude oil supply agreement with Asphalt JV (the Asphalt JV Crude Oil Supply Agreement) that committed Asphalt JV to purchase from us a minimum number of barrels of crude oil in a given year. The Asphalt JV Crude Oil Supply Agreement terminated effective January 1, 2014. As of December 31, 2013, we had a receivable from Asphalt JV of $50.7 million, mainly associated with crude oil sales under the Asphalt JV Crude Oil Supply Agreement.

Services Agreement Between Asphalt JV and NuStar GP, LLC. In conjunction with the Asphalt Sale, NuStar GP, LLC entered into a services agreement with Asphalt JV, effective September 28, 2012 (the Asphalt JV Services Agreement). The Asphalt JV

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


Services Agreement provides that NuStar GP, LLC will furnish certain administrative and other operating services necessary to conduct the business of Asphalt JV. Asphalt JV will compensate NuStar GP, LLC for these services through an annual fee totaling $10.0 million, subject to adjustment based on the annual merit increase percentage applicable to NuStar GP, LLC employees for the most recently completed contract year. Effective upon the Asphalt JV Sale, the Asphalt JV Services Agreement was amended and will terminate on June 30, 2014, with the option to extend the term for an additional three months for certain services with 30 days prior written notice. Asphalt JV provided written notice to reduce the level of services that NuStar GP, LLC provides to Asphalt JV, which is currently at 63% of the original service level.

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, 2014
 
Three Months Ended March 31, 2013
 
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
$
1,902,136

 
$
1,658

 
$
1,903,794

 
$
2,572,384

 
$
12,611

 
$
2,584,995

Net income (loss)
39,744

 
(107
)
 
39,637

 
24,565

 
(161
)
 
24,404

Other comprehensive
income (loss):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation
adjustment
(4,240
)
 
(445
)
 
(4,685
)
 
(7,277
)
 
(287
)
 
(7,564
)
Net unrealized gain
on cash flow hedges

 

 

 
4,687

 

 
4,687

Net loss on cash flow
hedges reclassified
into interest expense, net
2,766

 

 
2,766

 
487

 

 
487

Total other comprehensive
loss
(1,474
)
 
(445
)
 
(1,919
)
 
(2,103
)
 
(287
)
 
(2,390
)
Cash distributions to
partners
(98,051
)
 

 
(98,051
)
 
(98,051
)
 

 
(98,051
)
Other
23

 

 
23

 
222

 

 
222

Ending balance
$
1,842,378

 
$
1,106

 
$
1,843,484

 
$
2,497,017

 
$
12,163

 
$
2,509,180

 
 
 
 
 
 
 
 
 
 
 
 
Accumulated Other Comprehensive Income
The balance of and changes in the components included in “Accumulated other comprehensive loss” were as follows:
 
Foreign
Currency
Translation
 
Cash Flow Hedges
 
Total
 
(Thousands of Dollars)
Balance as of January 1, 2014
$
(13,658
)
 
$
(49,736
)
 
$
(63,394
)
Activity
(4,240
)
 
2,766

 
(1,474
)
Balance as of March 31, 2014
$
(17,898
)
 
$
(46,970
)
 
$
(64,868
)


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NUSTAR ENERGY L.P. AND SUBSIDIARIES
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,
 
2014
 
2013
 
(Thousands of Dollars)
Net income attributable to NuStar Energy L.P.
$
39,744

 
$
24,565

Less general partner incentive distribution
10,805

 
10,805

Net income after general partner incentive distribution
28,939

 
13,760

General partner interest
2
%
 
2
%
General partner allocation of net income after general partner incentive distribution
579

 
276

General partner incentive distribution
10,805

 
10,805

Net income applicable to general partner
$
11,384

 
$
11,081


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 March 31,
 
2014
 
2013
 
(Thousands of Dollars, Except Per Unit Data)
General partner interest
$
1,961

 
$
1,961

General partner incentive distribution
10,805

 
10,805

Total general partner distribution
12,766

 
12,766

Limited partners’ distribution
85,285

 
85,285

Total cash distributions
$
98,051

 
$
98,051

 
 
 
 
Cash distributions per unit applicable to limited partners
$
1.095

 
$
1.095


The following table summarizes information related to our quarterly cash distributions:
Quarter Ended
 
Cash Distributions Per Unit
 
Total Cash Distributions (Thousands of Dollars)
 
Record Date
 
Payment Date
March 31, 2014 (a)
 
$
1.095

 
$
98,051

 
May 7, 2014
 
May 12, 2014
December 31, 2013
 
$
1.095

 
$
98,051

 
February 10, 2014
 
February 14, 2014
(a)
The distribution was announced on April 23, 2014.


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NUSTAR ENERGY L.P. AND SUBSIDIARIES
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 (loss) per unit:
 
Three Months Ended March 31,
 
2014
 
2013
 
(Thousands of Dollars, Except Unit and Per Unit Data)
Net income attributable to NuStar Energy L.P.
$
39,744

 
$
24,565

Less general partner distribution (including IDR)
12,766

 
12,766

Less limited partner distribution
85,285

 
85,285

Distributions in excess of earnings
$
(58,307
)
 
$
(73,486
)
 
 
 
 
General partner earnings:
 
 
 
Distributions
$
12,766

 
$
12,766

Allocation of distributions in excess of earnings (2%)
(1,166
)
 
(1,469
)
Total
$
11,600

 
$
11,297

 
 
 
 
Limited partner earnings:
 
 
 
Distributions
$
85,285

 
$
85,285

Allocation of distributions in excess of earnings (98%)
(57,141
)
 
(72,017
)
Total
$
28,144

 
$
13,268

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

 
77,886,078

 
 
 
 
Net income per unit applicable to limited partners
$
0.36

 
$
0.17


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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:
 
Three Months Ended March 31,
 
2014
 
2013
 
(Thousands of Dollars)
Decrease (increase) in current assets:
 
 
 
Accounts receivable
$
(22,751
)
 
$
50,811

Receivable from related parties
50,872

 
20,448

Inventories
35,476

 
(54,416
)
Income tax receivable
(2,705
)
 
50

Other current assets
2,663

 
18,678

Increase (decrease) in current liabilities:
 
 
 
Accounts payable
(93,400
)
 
31,318

Payable to related party
5,286

 
10,369

Accrued interest payable
(5,714
)
 
6,797

Accrued liabilities
(9,127
)
 
(10,491
)
Taxes other than income tax
(747
)
 
(2,136
)
Income tax payable
1,352

 
2,158

Changes in current assets and current liabilities
$
(38,795
)
 
$
73,586


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:
 
Three Months Ended March 31,
 
2014
 
2013
 
(Thousands of Dollars)
Cash paid for interest, net of amount capitalized
$
38,352

 
$
24,698

Cash paid for income taxes, net of tax refunds received
$
1,998

 
$
1,750



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


12. SEGMENT INFORMATION

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 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. Related party revenues mainly result from storage agreements with our joint ventures.
Results of operations for the reportable segments were as follows:
 
Three Months Ended March 31,
 
2014
 
2013
 
(Thousands of Dollars)
Revenues:
 
 
 
Pipeline
$
102,959

 
$
93,277

Storage:
 
 
 
Third parties
124,354

 
130,660

Intersegment
7,283

 
9,776

Related party
929

 
1,241

Total storage
132,566

 
141,677

Fuels marketing
620,971

 
773,008

Consolidation and intersegment eliminations
(7,283
)
 
(9,776
)
Total revenues
$
849,213

 
$
998,186

 
 
 
 
Operating income:
 
 
 
Pipeline
$
52,990

 
$
39,881

Storage
42,007

 
53,956

Fuels marketing
9,558

 
(1,593
)
Consolidation and intersegment eliminations
(17
)
 
1,106

Total segment operating income
104,538

 
93,350

General and administrative expenses
20,856

 
27,494

Other depreciation and amortization expense
2,579

 
2,498

Total operating income
$
81,103

 
$
63,358


Total assets by reportable segment were as follows:
 
March 31,
2014
 
December 31,
2013
 
(Thousands of Dollars)
Pipeline
$
1,805,749

 
$
1,797,698

Storage
2,265,530

 
2,275,183

Fuels marketing
385,421

 
445,882

Total segment assets
4,456,700

 
4,518,763

Other partnership assets
457,934

 
513,423

Total consolidated assets
$
4,914,634

 
$
5,032,186

 

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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 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
March 31, 2014
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
904

 
$
9

 
$

 
$
41,685

 
$

 
$
42,598

Receivables, net
5

 
34,845

 
9,368

 
264,878

 
(4,828
)
 
304,268

Inventories

 
1,990

 
4,991

 
95,692

 
(26
)
 
102,647

Income tax receivable

 

 

 
3,520

 

 
3,520

Other current assets
63

 
15,778

 
2,574

 
18,371

 

 
36,786

Assets held for sale

 

 

 
19,920

 

 
19,920

Intercompany receivable

 
1,347,350

 

 

 
(1,347,350
)
 

Total current assets
972

 
1,399,972

 
16,933

 
444,066

 
(1,352,204
)
 
509,739

Property, plant and equipment, net

 
1,646,376

 
568,674

 
1,105,068

 

 
3,320,118

Intangible assets, net

 
60,931

 

 
7,173

 

 
68,104

Goodwill

 
149,453

 
170,652

 
297,324

 

 
617,429

Investment in wholly owned
subsidiaries
2,411,520

 
180,745

 
873,241

 
950,247

 
(4,415,753
)
 

Investment in joint venture

 

 

 
70,342

 

 
70,342

Deferred income tax asset

 

 

 
4,083

 

 
4,083

Other long-term assets, net
611

 
290,100

 
26,332

 
7,776

 

 
324,819

Total assets
$
2,413,103

 
$
3,727,577

 
$
1,655,832

 
$
2,886,079

 
$
(5,767,957
)
 
$
4,914,634

Liabilities and Partners’ Equity
 
 
 
 
 
 
 
 
 
 
 
Payables
$

 
$
26,801

 
$
11,050

 
$
177,114

 
$
(4,828
)
 
$
210,137

Accrued interest payable

 
27,346

 

 
53

 

 
27,399

Accrued liabilities
1,059

 
8,998

 
5,907

 
13,545

 

 
29,509

Taxes other than income tax

 
3,602

 
3,541

 
1,855

 

 
8,998

Income tax payable

 
953

 
7

 
4,402

 

 
5,362

Intercompany payable
504,798

 

 
684,864

 
157,688

 
(1,347,350
)
 

Total current liabilities
505,857

 
67,700

 
705,369

 
354,657

 
(1,352,178
)
 
281,405

Long-term debt

 
2,710,117

 

 

 

 
2,710,117

Long-term payable to related party

 
33,999

 

 
5,442

 

 
39,441

Deferred income tax liability

 

 

 
28,348

 

 
28,348

Other long-term liabilities

 
5,641

 
273

 
5,925

 

 
11,839

Total partners’ equity
1,907,246

 
910,120

 
950,190

 
2,491,707

 
(4,415,779
)
 
1,843,484

Total liabilities and
partners’ equity
$
2,413,103

 
$
3,727,577

 
$
1,655,832

 
$
2,886,079

 
$
(5,767,957
)
 
$
4,914,634



19

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


Condensed Consolidating Balance Sheets
December 31, 2013
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
904

 
$
22,307

 
$

 
$
77,532

 
$

 
$
100,743

Receivables, net

 
87,899

 
13,281

 
231,220

 
(6
)
 
332,394

Inventories

 
2,083

 
2,879

 
133,195

 
(10
)
 
138,147

Income tax receivable

 

 

 
826

 

 
826

Other current assets

 
18,109

 
2,334

 
19,009

 

 
39,452

Assets held for sale

 

 

 
21,987

 

 
21,987

Intercompany receivable

 
1,521,552

 

 

 
(1,521,552
)
 

Total current assets
904

 
1,651,950

 
18,494

 
483,769

 
(1,521,568
)
 
633,549

Property, plant and equipment, net

 
1,556,893

 
573,694

 
1,180,066

 

 
3,310,653

Intangible assets, net

 
16,993

 

 
54,256

 

 
71,249

Goodwill

 
149,453

 
170,652

 
297,324

 

 
617,429

Investment in wholly owned
subsidiaries
2,469,331

 
177,961

 
860,787

 
918,339

 
(4,426,418
)
 

Investment in joint ventures

 

 

 
68,735

 

 
68,735

Deferred income tax asset

 

 

 
5,769

 

 
5,769

Note receivable from related party

 
165,440

 

 

 

 
165,440

Other long-term assets, net
611

 
118,254

 
26,331

 
14,166

 

 
159,362

Total assets
$
2,470,846

 
$
3,836,944

 
$
1,649,958

 
$
3,022,424

 
$
(5,947,986
)
 
$
5,032,186

Liabilities and Partners’ Equity
 
 
 
 
 
 
 
 
 
 
 
Payables
$
123

 
$
84,533

 
$
7,517

 
$
214,909

 
$
(6
)
 
$
307,076

Accrued interest payable

 
33,066

 

 
47

 

 
33,113

Accrued liabilities
585

 
18,850

 
6,133

 
13,064

 

 
38,632

Taxes other than income tax
125

 
6,272

 
2,873

 
475

 

 
9,745

Income tax payable

 
618

 
6

 
3,382

 

 
4,006

Intercompany payable
504,483

 

 
714,847

 
302,222

 
(1,521,552
)
 

Total current liabilities
505,316

 
143,339

 
731,376

 
534,099

 
(1,521,558
)
 
392,572

Long-term debt

 
2,655,553

 

 

 

 
2,655,553

Long-term payable to related party

 
35,696

 

 
5,443

 

 
41,139

Deferred income tax liability

 

 

 
27,350

 

 
27,350

Other long-term liabilities

 
4,961

 
306

 
6,511

 

 
11,778

Total partners’ equity
1,965,530

 
997,395

 
918,276

 
2,449,021

 
(4,426,428
)
 
1,903,794

Total liabilities and
partners’ equity
$
2,470,846

 
$
3,836,944

 
$
1,649,958

 
$
3,022,424

 
$
(5,947,986
)
 
$
5,032,186

 



20

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, 2014
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenues
$

 
$
108,219

 
$
52,421

 
$
696,564

 
$
(7,991
)
 
$
849,213

Costs and expenses
473

 
60,581

 
32,955

 
682,076

 
(7,975
)
 
768,110

Operating (loss) income
(473
)
 
47,638

 
19,466

 
14,488

 
(16
)
 
81,103

Equity in earnings of subsidiaries
40,218

 
2,784

 
12,454

 
31,915

 
(87,371
)
 

Equity in (loss) earnings of
joint ventures

 
(8,278
)
 

 
3,972

 

 
(4,306
)
Interest (expense) income, net

 
(33,497
)
 
14

 
121

 

 
(33,362
)
Other (loss) income, net

 
(7
)
 
(19
)
 
3,704

 

 
3,678

Income from continuing
operations before income tax
expense
39,745

 
8,640

 
31,915

 
54,200

 
(87,387
)
 
47,113

Income tax expense
1

 
191

 
1

 
3,924

 

 
4,117

Income from continuing
operations
39,744

 
8,449

 
31,914

 
50,276

 
(87,387
)
 
42,996

Loss from discontinued
operations, net of tax

 
(168
)
 

 
(3,191
)
 

 
(3,359
)
Net income
39,744

 
8,281

 
31,914

 
47,085

 
(87,387
)
 
39,637

Less net loss attributable to
noncontrolling interest

 

 

 
(107
)
 

 
(107
)
Net income attributable to
NuStar Energy L.P.
$
39,744

 
$
8,281

 
$
31,914

 
$
47,192

 
$
(87,387
)
 
$
39,744

 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
39,744

 
$