NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
USD Partners LP and its consolidated subsidiaries, collectively referred to herein as we, us, our, the Partnership and USDP, is a fee-based, growth-oriented master limited partnership formed in 2014 by US Development Group, LLC, or USD, through its wholly-owned subsidiary, USD Group LLC, or USDG. We were formed to acquire, develop and operate midstream infrastructure and complementary logistics solutions for crude oil, biofuels and other energy-related products. We generate substantially all of our operating cash flows from multi-year, take-or-pay contracts with primarily investment grade customers, including major integrated oil companies, refiners and marketers. Our network of crude oil terminals facilitate the transportation of heavy crude oil from Western Canada to key demand centers across North America. Our operations include railcar loading and unloading, storage and blending in onsite tanks, inbound and outbound pipeline connectivity, truck transloading, as well as other related logistics services. We also provide our customers with leased railcars and fleet services to facilitate the transportation of liquid hydrocarbons by rail. We do not generally take ownership of the products that we handle, nor do we receive any payments from our customers based on the value of such products. We may on occasion enter into buy-sell arrangements in which we take temporary title to commodities while in our terminals. We expect such arrangements to be at fixed prices where we do not take commodity price exposure.
A substantial amount of the operating cash flows related to the terminalling services that we provide are generated from take-or-pay contracts with minimum monthly commitment fees and, as a result, are not directly related to actual throughput volumes at our crude oil terminals. Throughput volumes at our terminals are primarily influenced by the difference in price between Western Canadian Select, or WCS, and other grades of crude oil, commonly referred to as spreads, rather than absolute price levels. WCS spreads are influenced by several market factors, including the availability of supplies relative to the level of demand from refiners and other end users, the price and availability of alternative grades of crude oil, the availability of takeaway capacity, as well as transportation costs from supply areas to demand centers.
Basis of Presentation
Our accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim consolidated financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete consolidated financial statements. In the opinion of our management, they contain all adjustments, consisting only of normal recurring adjustments, which our management considers necessary to present fairly our financial position as of June 30, 2021, our results of operations for the three and six months ended June 30, 2021 and 2020, and our cash flows for the six months ended June 30, 2021 and 2020. We derived our consolidated balance sheet as of December 31, 2020 from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Our results of operations for the three and six months ended June 30, 2021 and 2020 should not be taken as indicative of the results to be expected for the full year due to fluctuations in the supply of and demand for crude oil and biofuels, timing and completion of acquisitions, if any, changes in the fair market value of our derivative instruments and the impact of fluctuations in foreign currency exchange rates. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
COVID-19 Update
During 2020, the COVID-19 pandemic adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets. As a result, beginning in March 2020, there was significant reductions in demand for crude oil, natural gas and natural gas liquids, which led to a decline in commodity prices. This drove Canadian producers to curtail production, which in turn resulted in lower crude oil supply levels and led
to lower throughput volume through our facilities. However, the decline in throughput volumes at our facilities did not have a material impact on our results of operations or cash flows during 2020, as a substantial amount of our terminalling services operating cash flows are generated from take-or-pay contracts with minimum monthly commitment fees with mainly investment grade customers. There still remains significant uncertainty given the unprecedented and evolving nature of the COVID-19 pandemic and the state of the commodity markets. As such, we will continue to actively monitor their impact on our operations and financial condition.
Foreign Currency Translation
We conduct a substantial portion of our operations in Canada, which we account for in the local currency, the Canadian dollar. We translate most Canadian dollar denominated balance sheet accounts into our reporting currency, the U.S. dollar, at the end of period exchange rate, while most accounts in our statement of operations accounts are translated into our reporting currency based on the average exchange rate for each monthly period. Fluctuations in the exchange rates between the Canadian dollar and the U.S. dollar can create variability in the amounts we translate and report in U.S. dollars.
Within these consolidated financial statements, we denote amounts denominated in Canadian dollars with “C$” immediately prior to the stated amount.
US Development Group, LLC
USD and its affiliates are engaged in designing, developing, owning and managing large-scale multi-modal logistics centers and energy-related infrastructure across North America. USD is the indirect owner of our general partner through its direct ownership of USDG and is currently owned by Energy Capital Partners, Goldman Sachs and certain of USD’s management team.
2. RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
Income Taxes (ASU 2019-12)
In December 2019, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2019-12, or ASU 2019-12, which amends the FASB Accounting Standards Codification, or ASC, Topic 740, by removing certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. In addition, under the provisions of ASU 2019-12, single-member limited liability companies and similar disregarded entities that are not subject to income tax are not required to recognize an allocation of consolidated income tax expense in their separate financial statements, but they could elect to do so. The pronouncement is effective for fiscal years beginning after December 15, 2020, or for any interim periods within those fiscal years, with early adoption permitted.
We adopted the provisions of ASU 2019-12 on January 1, 2021. Our adoption of this standard did not have an impact on our financial statements.
3. NET INCOME (LOSS) PER LIMITED PARTNER INTEREST
We allocate our net income or loss among our general partner and limited partners using the two-class method in accordance with applicable authoritative accounting guidance. Under the two-class method, we allocate our net income or loss and any net income or loss in excess of distributions to our limited partners, our general partner and the holder of the incentive distribution rights, or IDRs, according to the distribution formula for available cash as set forth in our partnership agreement. We allocate any distributions in excess of earnings for the period to our limited partners and general partner based on their respective proportionate ownership interests in us, as set forth in our partnership agreement after taking into account distributions to be paid with respect to the IDRs.
The formula for distributing available cash as set forth in our partnership agreement is as follows:
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Distribution Targets
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Portion of Quarterly
Distribution Per Unit
|
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Percentage Distributed to Limited Partners
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|
Percentage Distributed to
General Partner
(including IDRs) (1)
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Minimum Quarterly Distribution
|
|
Up to $0.2875
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98%
|
|
2%
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First Target Distribution
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|
> $0.2875 to $0.330625
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|
98%
|
|
2%
|
Second Target Distribution
|
|
> $0.330625 to $0.359375
|
|
85%
|
|
15%
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Third Target Distribution
|
|
> $0.359375 to $0.431250
|
|
75%
|
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25%
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Thereafter
|
|
Amounts above $0.431250
|
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50%
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|
50%
|
(1)Calculated as if our general partner holds the original 2% general partner interest in us, which is currently 1.7%.
We determined basic and diluted net income (loss) per limited partner unit as set forth in the following tables:
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|
|
|
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|
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|
|
For the Three Months Ended June 30, 2021
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Common
Units
|
|
Subordinated
Units (7)
|
|
|
|
General
Partner
Units
|
|
Total
|
|
|
(in thousands, except per unit amounts)
|
Net income attributable to general and limited partner interests in USD Partners LP (1)
|
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$
|
6,605
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|
|
$
|
—
|
|
|
|
|
$
|
111
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|
|
$
|
6,716
|
|
Less: Distributable earnings (2)
|
|
3,319
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|
|
—
|
|
|
|
|
56
|
|
|
3,375
|
|
Excess net income
|
|
$
|
3,286
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|
|
$
|
—
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|
|
|
|
$
|
55
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|
|
$
|
3,341
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|
Weighted average units outstanding (3)
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|
27,224
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|
|
—
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|
|
|
|
461
|
|
|
27,685
|
|
Distributable earnings per unit (4)
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|
$
|
0.12
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|
$
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—
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|
|
|
|
|
|
Underdistributed earnings per unit (5)
|
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0.12
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—
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|
|
|
|
|
|
Net income per limited partner unit (basic and diluted) (6)
|
|
$
|
0.24
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|
|
$
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—
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|
|
|
|
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|
(1)Represents net income allocated to each class of units based on the actual ownership of the Partnership during the period. There were no amounts attributed to the general partner for its incentive distribution rights.
(2)Represents the distributions payable for the period based upon the quarterly distribution amounts of $0.116 per unit or $0.464 per unit on an annualized basis. Amounts presented for each class of units include a proportionate amount of the $164 thousand distributable to holders of the Equity classified Phantom Units pursuant to the distribution equivalent rights granted under the USD Partners LP 2014 Amended and Restated Long-Term Incentive Plan.
(3)Represents the weighted average units outstanding for the period.
(4)Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.
(5)Represents the additional amount per unit necessary to distribute the excess net income for the period among our limited partners and our general partners according to the distribution formula for available cash as set forth in our partnership agreement.
(6)Our computation of net income per limited partner unit excludes the effects of 1,411,618 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.
(7)In February 2020, the final tranche of 2,092,709 subordinated units were converted into common units and therefore there were no subordinated units outstanding during 2021. Refer to Note 16. Partners' Capital for more information.
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|
|
|
|
|
|
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|
|
For the Three Months Ended June 30, 2020
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|
|
Common
Units
|
|
Subordinated
Units (7)
|
|
|
|
General
Partner
Units
|
|
Total
|
|
|
(in thousands, except per unit amounts)
|
Net income attributable to general and limited partner interests in USD Partners LP (1)
|
|
$
|
1,166
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|
|
$
|
—
|
|
|
|
|
$
|
20
|
|
|
$
|
1,186
|
|
Less: Distributable earnings (2)
|
|
3,129
|
|
|
—
|
|
|
|
|
54
|
|
|
3,183
|
|
Distributions in excess of earnings
|
|
$
|
(1,963)
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|
|
$
|
—
|
|
|
|
|
$
|
(34)
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|
|
$
|
(1,997)
|
|
Weighted average units outstanding (3)
|
|
26,844
|
|
|
—
|
|
|
|
|
461
|
|
|
27,305
|
|
Distributable earnings per unit (4)
|
|
$
|
0.12
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Overdistributed earnings per unit (5)
|
|
(0.07)
|
|
|
—
|
|
|
|
|
|
|
|
Net income per limited partner unit (basic and diluted) (6)
|
|
$
|
0.05
|
|
|
$
|
—
|
|
|
|
|
|
|
|
(1)Represents net income allocated to each class of units based on the actual ownership of the Partnership during the period. There were no amounts attributed to the general partner for its incentive distribution rights.
(2)Represents the distributions paid for the period based upon the quarterly distribution amount of $0.111 per unit or $0.444 per unit on an annualized basis. Amounts presented for each class of units include a proportionate amount of the $152 thousand distributable to holders of the Equity classified Phantom Units pursuant to the distribution equivalent rights granted under the USD Partners LP 2014 Amended and Restated Long-Term Incentive Plan.
(3)Represents the weighted average units outstanding for the period.
(4)Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.
(5)Represents the distributions in excess of earnings divided by the weighted average number of units outstanding for the period.
(6)Our computation of net income per limited partner unit excludes the effects of 1,367,230 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.
(7)In February 2020, the final tranche of 2,092,709 subordinated units were converted into common units. Refer to Note 16. Partners' Capital for more information.
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|
|
|
|
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|
|
For the Six Months Ended June 30, 2021
|
|
|
Common
Units
|
|
Subordinated
Units (7)
|
|
|
|
General
Partner
Units
|
|
Total
|
|
|
(in thousands, except per unit amounts)
|
Net income attributable to general and limited partner interests in USD Partners LP (1)
|
|
$
|
13,809
|
|
|
$
|
—
|
|
|
|
|
$
|
235
|
|
|
$
|
14,044
|
|
Less: Distributable earnings (2)
|
|
6,567
|
|
|
—
|
|
|
|
|
112
|
|
|
6,679
|
|
Excess net income
|
|
$
|
7,242
|
|
|
$
|
—
|
|
|
|
|
$
|
123
|
|
|
$
|
7,365
|
|
Weighted average units outstanding (3)
|
|
27,128
|
|
|
—
|
|
|
|
|
461
|
|
|
27,589
|
|
Distributable earnings per unit (4)
|
|
$
|
0.24
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Underdistributed earnings per unit (5)
|
|
0.27
|
|
|
—
|
|
|
|
|
|
|
|
Net income per limited partner unit (basic and diluted) (6)
|
|
$
|
0.51
|
|
|
$
|
—
|
|
|
|
|
|
|
|
(1)Represents net income allocated to each class of units based on the actual ownership of the Partnership during the period. There were no amounts attributed to the general partner for its incentive distribution rights.
(2)Represents the per unit distribution paid of $0.1135 per unit for the three months ended March 31, 2021 and $0.116 per unit distributable for the three months ended June 30, 2021, representing a year-to-date distribution of $0.2295 per unit. Amounts presented for each class of units include a proportionate amount of the $161 thousand distributed and $164 thousand distributable to holders of the Equity classified Phantom Units pursuant to the distribution equivalent rights granted under the USD Partners LP 2014 Amended and Restated Long-Term Incentive Plan.
(3)Represents the weighted average units outstanding for the period.
(4)Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.
(5)Represents the additional amount per unit necessary to distribute the excess net income for the period among our limited partners and our general partners according to the distribution formula for available cash as set forth in our partnership agreement.
(6)Our computation of net income per limited partner unit excludes the effects of 1,411,618 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.
(7)In February 2020, the final tranche of 2,092,709 subordinated units were converted into common units and therefore there were no subordinated units outstanding during 2021. Refer to Note 16. Partners' Capital for more information.
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|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2020
|
|
|
Common
Units
|
|
Subordinated
Units (7)
|
|
|
|
General
Partner
Units
|
|
Total
|
|
|
(in thousands, except per unit amounts)
|
Net loss attributable to general and limited partner interests in USD Partners LP (1)
|
|
$
|
(32,029)
|
|
|
$
|
(15)
|
|
|
|
|
$
|
(551)
|
|
|
$
|
(32,595)
|
|
Less: Distributable earnings (2)
|
|
6,258
|
|
|
—
|
|
|
|
|
107
|
|
|
6,365
|
|
Distributions in excess of earnings
|
|
$
|
(38,287)
|
|
|
$
|
(15)
|
|
|
|
|
$
|
(658)
|
|
|
$
|
(38,960)
|
|
Weighted average units outstanding (3)
|
|
26,180
|
|
|
575
|
|
|
|
|
461
|
|
|
27,216
|
|
Distributable earnings per unit (4)
|
|
$
|
0.24
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Overdistributed earnings per unit (5)
|
|
(1.46)
|
|
|
(0.03)
|
|
|
|
|
|
|
|
Net loss per limited partner unit (basic and diluted)(6)
|
|
$
|
(1.22)
|
|
|
$
|
(0.03)
|
|
|
|
|
|
|
|
(1)Represents net loss allocated to each class of units based on the actual ownership of the Partnership during the period. There were no amounts attributed to the general partner for its incentive distribution rights.
(2)Represents the per unit distribution paid of $0.111 per unit for the three months ended March 31, 2020 and $0.111 distributed for the three months ended June 30, 2020, representing a year-to-date distribution of $0.222 per unit. Amounts presented for each class of units include a proportionate amount of the $304 thousand distributed to holders of the Equity-classified Phantom Units pursuant to the distribution equivalent rights granted under the USD Partners LP 2014 Amended and Restated Long-Term Incentive Plan.
(3)Represents the weighted average units outstanding for the period.
(4)Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.
(5)Represents the distributions in excess of earnings divided by the weighted average number of units outstanding for the period.
(6)Our computation of net loss per limited partner unit excludes the effects of 1,367,230 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.
(7)In February 2020, the final tranche of 2,092,709 subordinated units were converted into common units. Refer to Note 16. Partners' Capital for more information.
4. REVENUES
Disaggregated Revenues
We manage our business in two reportable segments: Terminalling services and Fleet services. Our segments offer different services and are managed accordingly. Our chief operating decision maker, or CODM, regularly reviews financial information about both segments in order to allocate resources and evaluate performance. As such, we have concluded that disaggregating revenue by reporting segments appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Refer to Note 14. Segment Reporting for our disaggregated revenues by segment. Additionally, the below tables summarize the geographic data for our revenues:
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|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021
|
|
U.S.
|
|
Canada
|
|
Total
|
|
(in thousands)
|
Third party
|
$
|
9,854
|
|
|
$
|
21,345
|
|
|
$
|
31,199
|
|
Related party
|
$
|
2,322
|
|
|
$
|
—
|
|
|
$
|
2,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020
|
|
U.S.
|
|
Canada
|
|
Total
|
|
(in thousands)
|
Third party
|
$
|
6,653
|
|
|
$
|
15,771
|
|
|
$
|
22,424
|
|
Related party
|
$
|
2,115
|
|
|
$
|
2,897
|
|
|
$
|
5,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
|
U.S.
|
|
Canada
|
|
Total
|
|
(in thousands)
|
Third party
|
$
|
17,492
|
|
|
$
|
41,992
|
|
|
$
|
59,484
|
|
Related party
|
$
|
4,636
|
|
|
$
|
—
|
|
|
$
|
4,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020
|
|
U.S.
|
|
Canada
|
|
Total
|
|
(in thousands)
|
Third party
|
$
|
13,702
|
|
|
$
|
33,629
|
|
|
$
|
47,331
|
|
Related party
|
$
|
4,420
|
|
|
$
|
5,891
|
|
|
$
|
10,311
|
|
Remaining Performance Obligations
The transaction price allocated to the remaining performance obligations associated with our terminalling and fleet services agreements as of June 30, 2021 are as follows for the periods indicated:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended December 31, 2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
|
(in thousands)
|
Terminalling Services (1) (2) (3)
|
$
|
48,677
|
|
|
$
|
75,775
|
|
|
$
|
38,063
|
|
|
$
|
19,528
|
|
|
$
|
126,932
|
|
|
$
|
308,975
|
|
Fleet Services
|
455
|
|
|
1,195
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,650
|
|
Total
|
$
|
49,132
|
|
|
$
|
76,970
|
|
|
$
|
38,063
|
|
|
$
|
19,528
|
|
|
$
|
126,932
|
|
|
$
|
310,625
|
|
(1)A significant portion of our terminalling services agreements are denominated in Canadian dollars. We have converted the remaining performance obligations associated with these Canadian dollar-denominated contracts using the year-to-date average exchange rate of 0.802 U.S. dollars for each Canadian dollar at June 30, 2021.
(2)Includes fixed monthly minimum commitment fees per contracts and excludes constrained estimates of variable consideration for rate-escalations associated with an index, such as the consumer price index, as well as any incremental revenue associated with volume activity above the minimum volumes set forth within the contracts. Also excludes estimated constrained variable consideration included in certain of our terminalling services agreements that is based on crude oil pricing index differentials.
(3)Assumes USD’s Diluent Recovery Unit project goes into service in the second half of 2021, which will result in certain terminalling services agreements of our Hardisty Terminal being automatically extended through mid-2031 and certain agreements at our Stroud Terminal having a termination right in June 2022.
We have applied the practical expedient that allows us to exclude disclosure of performance obligations that are part of a contract that has an expected duration of one year or less.
Contract Assets
Our contract assets represent cumulative revenue that has been recognized in advance of billing the customer due to tiered billing provisions. In such arrangements, revenue is recognized using a blended rate based on the billing tiers of the agreement, as the services are consistently provided throughout the duration of the contractual arrangement.
We had the following amounts outstanding associated with our contract assets on our consolidated balance sheets in the financial statement line items presented below in the following table for the indicated periods:
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|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(in thousands)
|
Other current assets
|
$
|
173
|
|
|
$
|
1,622
|
|
|
|
|
|
|
|
|
|
Deferred Revenue
Our deferred revenue is a form of a contract liability and consists of amounts collected in advance from customers associated with their terminalling and fleet services agreements and deferred revenues associated with
make-up rights, which will be recognized as revenue when earned pursuant to the terms of our contractual arrangements. We currently recognize substantially all of the amounts we receive for minimum volume commitments as revenue when collected, since breakage associated with these make-up rights is currently approximately 100% based on our expectations around usage of these options. Accordingly, we had no deferred revenues at June 30, 2021 for estimated breakage associated with the make-up rights options we granted to our customers. In addition, we had no deferred revenues associated with make-up rights at December 31, 2020.
We also have deferred revenue that represents cumulative revenue that has been deferred due to tiered billing provisions. In such arrangements, revenue is recognized using a blended rate based on the billing tiers of the agreement, as the services are consistently provided throughout the duration of the contractual arrangement, which we included in “Other current liabilities” and “Other non-current liabilities” on our consolidated balance sheets.
The following table presents the amounts outstanding on our consolidated balance sheets and changes associated with the balance of our deferred revenue for the six months ended June 30, 2021:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Cash Additions for Customer Prepayments
|
|
Revenue Recognized
|
|
June 30, 2021
|
|
|
(in thousands)
|
Deferred revenue
|
|
$
|
6,367
|
|
|
$
|
5,949
|
|
|
$
|
(6,367)
|
|
|
$
|
5,949
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
$
|
—
|
|
|
$
|
2,122
|
|
|
$
|
—
|
|
|
$
|
2,122
|
|
Other non-current liabilities (1)
|
|
$
|
10,087
|
|
|
$
|
912
|
|
|
$
|
—
|
|
|
$
|
10,999
|
|
(1) Includes cumulative revenue that has been deferred due to tiered billing provisions included in certain of our Canadian dollar-denominated contracts, as discussed above. As such, the change in “Other non-current liabilities” presented has been increased by $281 thousand due to the impact of the change in the end of period exchange rate between December 31, 2020 and June 30, 2021.
Deferred Revenue — Fleet Leases
Our deferred revenue also includes advance payments from customers of our Fleet services business, which will be recognized as Fleet leases revenue when earned pursuant to the terms of our contractual arrangements. We have included $0.4 million at June 30, 2021 and December 31, 2020, in “Deferred revenue — related party” on our consolidated balance sheets associated with customer prepayments for our fleet lease agreements. Refer to Note 7. Leases for additional discussion of our lease revenues.
5. RESTRICTED CASH
We include in restricted cash amounts representing a cash account for which the use of funds is restricted by a facilities connection agreement among us and Gibson Energy Inc., or Gibson, that we entered into during 2014 in connection with the development of our Hardisty Terminal. The collaborative arrangement is further discussed in Note 10. Collaborative Arrangement.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within our consolidated balance sheets to the amounts shown in our consolidated statements of cash flows for the specified periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
2021
|
|
2020
|
|
(in thousands)
|
Cash and cash equivalents
|
$
|
3,131
|
|
|
$
|
3,093
|
|
Restricted Cash
|
7,687
|
|
|
7,153
|
|
Total cash, cash equivalents and restricted cash
|
$
|
10,818
|
|
|
$
|
10,246
|
|
6. PROPERTY AND EQUIPMENT
Our property and equipment is comprised of the following asset classifications as of the dates indicated:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
Estimated
Depreciable Lives
(Years)
|
|
(in thousands)
|
Land
|
$
|
10,371
|
|
|
$
|
10,288
|
|
N/A
|
Trackage and facilities
|
129,238
|
|
|
127,401
|
|
10-30
|
Pipeline
|
32,735
|
|
|
32,735
|
|
20-30
|
Equipment
|
17,708
|
|
|
17,337
|
|
3-20
|
Furniture
|
68
|
|
|
67
|
|
5-10
|
Total property and equipment
|
190,120
|
|
|
187,828
|
|
|
Accumulated depreciation
|
(53,984)
|
|
|
(48,630)
|
|
|
Construction in progress (1)
|
2,004
|
|
|
643
|
|
|
Property and equipment, net
|
$
|
138,140
|
|
|
$
|
139,841
|
|
|
(1)The amounts classified as “Construction in progress” are excluded from amounts being depreciated. These amounts represent property that has not been placed into productive service as of the respective consolidated balance sheet date.
Depreciation expense associated with property and equipment totaled $2.3 million and $2.1 million for the three months ended June 30, 2021 and 2020, respectively, and $4.7 million and $4.3 million for the six months ended June 30, 2021 and 2020, respectively.
7. LEASES
We have noncancellable operating leases for railcars, buildings, storage tanks, offices, railroad tracks, and land.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
Weighted-average discount rate
|
|
|
5.7
|
%
|
Weighted average remaining lease term in years
|
|
|
1.38
|
Our total lease cost consisted of the following items for the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
1,508
|
|
|
$
|
1,492
|
|
|
$
|
2,987
|
|
|
$
|
2,978
|
|
Short term lease cost
|
|
48
|
|
47
|
|
92
|
|
|
92
|
|
Variable lease cost
|
|
9
|
|
2
|
|
27
|
|
|
11
|
|
Sublease income
|
|
(1,348)
|
|
|
(1,342)
|
|
|
(2,696)
|
|
|
(2,683)
|
|
Total
|
|
$
|
217
|
|
|
$
|
199
|
|
|
$
|
410
|
|
|
$
|
398
|
|
The maturity analysis below presents the undiscounted cash payments we expect to make each period for property that we lease from others under noncancellable operating leases as of June 30, 2021 (in thousands):
|
|
|
|
|
|
2021
|
$
|
3,055
|
|
2022
|
4,751
|
|
2023
|
35
|
|
2024
|
2
|
|
|
|
|
|
Total lease payments
|
$
|
7,843
|
|
Less: imputed interest
|
(322)
|
|
Present value of lease liabilities
|
$
|
7,521
|
|
We serve as an intermediary to assist our customers with obtaining railcars. In connection with our leasing of railcars from third parties, we simultaneously enter into lease agreements with our customers for noncancellable terms that are designed to recover our costs associated with leasing the railcars plus a fee for providing this service. In addition to these leases, we also have lease income from storage tanks.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
(in thousands, except weighted average term)
|
Lease income (1)
|
|
$
|
2,169
|
|
|
$
|
2,366
|
|
|
$
|
4,354
|
|
|
$
|
4,552
|
|
Weighted average remaining lease term in years
|
|
|
|
|
|
|
|
3.46
|
(1)Lease income presented above includes lease income from related parties. Refer to Note 12. Transactions with Related Parties for additional discussion of lease income from a related party. Lease income associated with crude oil storage tanks we lease to customers of our terminals totaling $1.2 million and $1.4 million for the three months ended June 30, 2021 and 2020, and $2.4 million and $2.5 million for the six months ended June 30, 2021 and 2020, respectively, is included in “Terminalling services” revenues on our consolidated statements of operations.
The maturity analysis below presents the undiscounted future minimum lease payments we expect to receive from customers each period for property they lease from us under noncancellable operating leases as of June 30, 2021 (in thousands):
|
|
|
|
|
|
2021
|
$
|
4,127
|
|
2022
|
7,660
|
|
2023
|
2,656
|
|
2024
|
2,663
|
|
2025
|
2,656
|
Thereafter
|
2,430
|
Total
|
$
|
22,192
|
|
8. INTANGIBLE ASSETS
The composition, gross carrying amount and accumulated amortization of our identifiable intangible assets are as follows as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(in thousands)
|
Carrying amount:
|
|
|
|
Customer service agreements
|
$
|
125,960
|
|
|
$
|
125,960
|
|
Other
|
106
|
|
|
106
|
|
Total carrying amount
|
126,066
|
|
|
126,066
|
|
Accumulated amortization:
|
|
|
|
Customer service agreements
|
(70,818)
|
|
|
(64,520)
|
|
Other
|
(59)
|
|
|
(54)
|
|
Total accumulated amortization
|
(70,877)
|
|
|
(64,574)
|
|
Total intangible assets, net
|
$
|
55,189
|
|
|
$
|
61,492
|
|
Amortization expense associated with intangible assets totaled $3.2 million for the three months ended June 30, 2021 and 2020, and $6.3 million for the six months ended June 30, 2021 and 2020.
9. DEBT
In November 2018, we amended and restated our senior secured credit agreement, which we originally established at the time of our initial public offering in October 2014. We refer to the amended and restated senior secured credit agreement executed in November 2018 as the Credit Agreement and the original senior secured credit agreement as the Previous Credit Agreement. Our Credit Agreement is a $385 million revolving credit facility (subject to limits set forth therein) with Citibank, N.A., as administrative agent, and a syndicate of lenders. Our Credit Agreement amends and restates in its entirety our Previous Credit Agreement.
Our Credit Agreement is a four year committed facility that initially matures on November 2, 2022. Our Credit Agreement provides us with the ability to request two one-year maturity date extensions, subject to the satisfaction of certain conditions, and allows us the option to increase the maximum amount of credit available up to a total facility size of $500 million, subject to receiving increased commitments from lenders and satisfaction of certain conditions.
Our Credit Agreement and any issuances of letters of credit are available for working capital, capital expenditures, general partnership purposes and continue the indebtedness outstanding under the Previous Credit Agreement. The Credit Agreement includes an aggregate $20 million sublimit for standby letters of credit and a $20 million sublimit for swingline loans. Obligations under the Credit Agreement are guaranteed by our restricted subsidiaries (as such term is defined therein) and are secured by a first priority lien on our assets and those of our restricted subsidiaries, other than certain excluded assets.
Our long-term debt balances included the following components as of the specified dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(in thousands)
|
|
|
|
|
Revolving Credit Facility
|
$
|
179,000
|
|
|
$
|
197,000
|
|
Less: Deferred financing costs, net
|
(1,105)
|
|
|
(1,520)
|
|
Total long-term debt, net
|
$
|
177,895
|
|
|
$
|
195,480
|
|
We determined the capacity available to us under the terms of our Credit Agreement was as follows as of the specified dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(in millions)
|
Aggregate borrowing capacity under Credit Agreement
|
$
|
385.0
|
|
|
$
|
385.0
|
|
Less: Revolving Credit Facility amounts outstanding
|
179.0
|
|
|
197.0
|
|
|
|
|
|
Available under the Credit Agreement based on capacity
|
$
|
206.0
|
|
|
$
|
188.0
|
|
Available under the Credit Agreement based on covenants (1)
|
$
|
97.3
|
|
|
$
|
53.2
|
|
(1) Pursuant to the terms of our Credit Agreement, our borrowing capacity, currently, is limited to 4.5 times our trailing 12-month consolidated EBITDA, which equates to $97.3 million and $53.2 million of borrowing capacity available at June 30, 2021 and December 31, 2020, respectively.
The weighted average interest rate on our outstanding indebtedness was 2.35% and 2.66% at June 30, 2021 and December 31, 2020, respectively, without consideration to the effect of our derivative contracts. In addition to the interest we incur on our outstanding indebtedness, we pay commitment fees of 0.50% on unused commitments, which rate will vary based on our consolidated net leverage ratio, as defined in our Credit Agreement. At June 30, 2021, we were in compliance with the covenants set forth in our Credit Agreement.
Interest expense associated with our outstanding indebtedness was as follows for the specified periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(in thousands)
|
Interest expense on the Credit Agreement
|
$
|
1,384
|
|
|
$
|
2,049
|
|
|
$
|
2,912
|
|
|
$
|
4,581
|
|
|
|
|
|
|
|
|
|
Amortization of deferred financing costs
|
207
|
|
|
207
|
|
|
414
|
|
|
414
|
|
Total interest expense
|
$
|
1,591
|
|
|
$
|
2,256
|
|
|
$
|
3,326
|
|
|
$
|
4,995
|
|
10. COLLABORATIVE ARRANGEMENT
We entered into a facilities connection agreement in 2014 with Gibson under which Gibson developed, constructed and operates a pipeline and related facilities connected to our Hardisty Terminal. Gibson’s storage terminal is the exclusive means by which our Hardisty Terminal receives crude oil. Subject to certain limited exceptions regarding manifest train facilities, our Hardisty Terminal is the exclusive means by which crude oil from Gibson’s Hardisty storage terminal may be transported by rail. We remit pipeline fees to Gibson for the transportation of crude oil to our Hardisty Terminal based on a predetermined formula. Pursuant to our arrangement with Gibson, we incurred pipeline fees of $6.4 million and $5.4 million for the three months ended June 30, 2021 and 2020, respectively, and $12.4 million and $11.7 million for the six months ended June 30, 2021 and 2020, respectively, which are presented as “Pipeline fees” in our consolidated statements of operations. We have included a liability related to this agreement in “Other current liabilities” on our consolidated balance sheets of $0.6 million and $2.3 million at June 30, 2021 and December 31, 2020, respectively. Additionally, we have included an asset related to this agreement in “Other non-current assets” of $3.0 million and $2.9 million at June 30, 2021 and December 31, 2020, respectively, which we will recognize as expense concurrently with the recognition of the associated revenue at out Hardisty Terminal.
11. NONCONSOLIDATED VARIABLE INTEREST ENTITIES
Historically we entered into purchase, assignment and assumption agreements to assign payment and performance obligations for certain operating lease agreements with lessors, as well as customer fleet service payments related to these operating leases, with unconsolidated entities in which we had variable interests. These variable interest entities, or VIEs, included LRT Logistics Funding LLC, USD Fleet Funding LLC, USD Fleet Funding Canada Inc., and USD Logistics Funding Canada Inc. We treated those entities as variable interests under the applicable accounting guidance due to their having an insufficient amount of equity invested at risk to finance their activities without additional subordinated financial support. We were not the primary beneficiary of the VIEs, as we did not have the power to direct the activities that most significantly affected the economic performance of the VIEs, nor did we have the power to remove the managing member under the terms of the VIEs’ limited liability company agreements. Accordingly, we did not consolidate the results of the VIEs in our consolidated financial statements.
As of the end of February 2021, the remaining railcar leases associated with these VIEs were either assigned directly to our customers or have expired. As such, we have terminated our relationship with these VIEs discussed herein effective as of the end of February 2021.
The following table summarizes the total assets and liabilities between us and the VIEs as reflected in our consolidated balance sheet at December 31, 2020, as well as our maximum exposure to losses from entities in which we had a variable interest, but were not the primary beneficiary. Generally, our maximum exposure to losses was limited to amounts receivable for services we provided, reduced by any related liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Total assets
|
|
Total liabilities
|
|
Maximum exposure to loss
|
|
(in thousands)
|
Accounts receivable
|
$
|
43
|
|
|
$
|
—
|
|
|
$
|
33
|
|
|
|
|
|
|
|
Deferred revenue
|
—
|
|
|
10
|
|
|
—
|
|
|
|
|
|
|
|
|
$
|
43
|
|
|
$
|
10
|
|
|
$
|
33
|
|
12. TRANSACTIONS WITH RELATED PARTIES
Nature of Relationship with Related Parties
USD is engaged in designing, developing, owning and managing large-scale multi-modal logistics centers and other energy-related infrastructure across North America. USD is also the sole owner of USDG and the ultimate parent of our general partner. USD is owned by Energy Capital Partners, Goldman Sachs and certain members of its management.
USDG is the sole owner of our general partner and at June 30, 2021, owns 11,557,090 of our common units representing a 41.7% limited partner interest in us. As of June 30, 2021, a value of up to $10.0 million of these common units were pledged as collateral under USDG’s letter of credit facility. USDG also provides us with general and administrative support services necessary for the operation and management of our business.
USD Partners GP LLC, our general partner, currently owns all 461,136 of our general partner units representing a 1.7% general partner interest in us, as well as all of our incentive distribution rights. Pursuant to our partnership agreement, our general partner is responsible for our overall governance and operations. However, our general partner has no obligation to, does not intend to and has not implied that it would, provide financial support to or fund cash flow deficits of the Partnership.
USD Marketing LLC, or USDM, is a wholly-owned subsidiary of USDG organized to promote contracting for services provided by our terminals and to facilitate the marketing of customer products.
USD Terminals Canada II ULC, or USDTC II, is an indirect, wholly-owned Canadian subsidiary of USDG, organized for the purposes of pursuing expansion and other development opportunities associated with our Hardisty Terminal, pursuant to the Development Rights and Cooperation agreement between our wholly-owned subsidiary USD Terminals Canada ULC, or USDTC, and USDG. USDTC owns the legacy crude oil loading facility we refer to as the Hardisty Terminal. USDTC II completed construction of the Hardisty South expansion (“Hardisty South”) which commenced operations in January 2019. Hardisty South, which is owned and operated by USDTC II, added one and one-half 120-railcar unit trains of transloading capacity per day, or approximately 112,500 barrels per day, of takeaway capacity to the terminal by modifying the existing loading rack and building additional infrastructure and trackage.
USD Clean Fuels LLC, or USDCF, is a newly formed subsidiary of USD organized for the purpose of providing production and logistics solutions to the growing market for clean energy transportation fuels.
Omnibus Agreement
We are party to an omnibus agreement with USD, USDG and certain of their subsidiaries, or the Omnibus Agreement, including our general partner, pursuant to which we obtain and make payments for specified services provided to us and for out-of-pocket costs incurred on our behalf. We pay USDG, in equal monthly installments, the annual amount USDG estimates will be payable by us during the calendar year for providing services for our benefit. The Omnibus Agreement provides that this amount may be adjusted annually to reflect, among other things, changes in the scope of the general and administrative services provided to us due to a contribution, acquisition or disposition of assets by us or our subsidiaries, or for changes in any law, rule or regulation applicable to us, which affects the cost of providing the general and administrative services. We also reimburse USDG for any out-of-pocket costs and expenses incurred on our behalf in providing general and administrative services to us. This reimbursement is in addition to the amounts we pay to reimburse our general partner and its affiliates for certain costs and expenses incurred on our behalf for managing our business and operations, as required by our partnership agreement.
In June 2021, we entered into an Amended and Restated Omnibus Agreement, or the Amended Omnibus Agreement, with USD, USDG and certain of their subsidiaries, which amends and restates the Omnibus Agreement, dated October 15, 2014, to extend the termination date of the right of first offer period, or ROFO Period, as defined in the Amended Omnibus Agreement, by an additional five years such that the ROFO Period will terminate on October 15, 2026 unless a Partnership Change of Control, as defined in the Amended Omnibus Agreement, occurs prior to such date.
The total amounts charged to us under the Omnibus Agreement for the three months ended June 30, 2021 and 2020 was $1.6 million and $1.8 million, respectively, and for the six months ended June 30, 2021 and 2020 was $3.3 million and $3.8 million, respectively, which amounts are included in “Selling, general and administrative — related party” in our consolidated statements of operations. We had a payable balance of $0.3 million with respect to these costs at June 30, 2021 and December 31, 2020, included in “Accounts payable and accrued expenses — related party” in our consolidated balance sheets.
Marketing Services Agreement - Stroud Terminal
In connection with our purchase of the Stroud terminal, we entered into a Marketing Services Agreement with USDM, or the Stroud Terminal MSA, in May 2017, whereby we granted USDM the right to market the capacity at the Stroud Terminal in excess of the original capacity of our initial customer in exchange for a nominal per barrel fee. USDM is obligated to fund any related capital costs associated with increasing the throughput or efficiency of the terminal to handle additional throughput. Upon expiration of our contract with the initial Stroud customer in June 2020, the same marketing rights now apply to all throughput at the Stroud Terminal in excess of the throughput necessary for the Stroud Terminal to generate Adjusted EBITDA that is at least equal to the average monthly Adjusted EBITDA derived from the initial Stroud customer during the 12 months prior to expiration. We also granted USDG the right to develop other projects at the Stroud Terminal in exchange for the payment to us of market-based compensation for the use of our property for such development projects. Any such development projects would be wholly-owned by USDG and would be subject to our existing right of first offer with respect to
midstream projects developed by USDG. Payments made under the Stroud Terminal MSA during the periods presented in this Report are discussed below under the heading “Related Party Revenue and Deferred Revenue.”
Marketing Services Agreement - West Colton Terminal
In June 2021, we entered into a new Terminalling Services Agreement with USDCF that is supported by a minimum throughput commitment to USDCF from an investment-grade rated, refining customer as well as a performance guaranty from USD. The Terminal Services Agreement provides for the inbound shipment of renewable diesel on rail at our West Colton Terminal and the outbound shipment of the product on tank trucks to local consumers. The new terminalling services agreement has an initial term of five years with a target commencement date of December 1, 2021, and we are currently in the process of modifying our existing West Colton Terminal so that it will have the capability to transload renewable diesel in addition to the ethanol that it is currently transloading.
In exchange for the new terminalling agreement at our West Colton Terminal with USDCF discussed above, we also entered into a Marketing Services Agreement in June 2021, or the West Colton MSA, with USDCF pursuant to which we agreed to grant USDCF marketing and development rights pertaining to future renewable diesel opportunities associated with the West Colton Terminal in excess of the initial renewable diesel terminalling services agreement simultaneously executed in June 2021 between us and USDCF. These rights entitle USDCF to market all additional renewable diesel opportunities at the West Colton Terminal during the initial term of the USDCF agreement, and following the initial term of that agreement, all renewable diesel opportunities at the West Colton Terminal in excess of the throughput necessary to generate Adjusted EBITDA for the West Colton Terminal that is at least equal to the average monthly Adjusted EBITDA derived from the initial USDCF agreement during the 12 months prior to expiration of that agreement’s initial five-year term. Pursuant to the West Colton MSA, USDCF will fund any related capital costs associated with increasing the throughput or efficiency of the terminal to handle additional renewable diesel opportunities. In addition, we granted USDCF the right to develop other renewable diesel projects at the West Colton Terminal in exchange for a per barrel fee covering our associated operating costs. Any such development projects would be wholly-owned by USD and would be subject to the right of first offer with respect to midstream infrastructure developed by USD. There have been no payments made under the West Colton MSA during the periods presented in this Report.
Hardisty Terminal Services Agreement
We entered into a terminal services agreement with USDTC II in 2019, whereby Hardisty South will provide terminalling services for a third-party customer of our Hardisty Terminal for contracted capacity that exceeds the transloading capacity currently available. We incurred $2.1 million of expenses pursuant to the arrangement for the three months ended June 30, 2021 and 2020, and $4.2 million and $4.1 million for the six months ended June 30, 2021 and 2020, respectively, which amounts are included in “Operating and maintenance expense — related party” in our consolidated statements of operations. These costs represent the same rate, on a per barrel basis, that we received as revenue from our third-party customer, which is included in “Terminalling Services” revenue in our consolidated statements of operations. Additionally, in conjunction with the agreement, we recorded a contract asset of $2.6 million and $1.7 million at June 30, 2021 and December 31, 2020, respectively, on our consolidated balance sheet in “Other current assets — related party” and “Other non-current assets — related party”, representing prepaid expense associated with this agreement due to tiered billing provisions in the related terminalling services agreements.
Hardisty Shared Facilities Agreement
USDTC facilitates the provision of services on behalf of USDTC II pursuant to the terms of a shared facilities agreement, which includes all subcontracted railcar loading, operating, maintenance, pipeline and management services for the entire Hardisty Terminal, including Hardisty South owned by USDTC II. USDTC passes through a
proportionate amount of the cost of such services to USDTC II. Our financial statements only reflect the cost incurred by USDTC.
Related Party Revenue and Deferred Revenue
We have agreements to provide terminalling and fleet services for USDM with respect to our Hardisty Terminal and terminalling services with respect to our Stroud Terminal, which also include reimbursement to us for certain out-of-pocket expenses we incur.
USDM assumed the rights and obligations for terminalling capacity at our Hardisty Terminal from another customer in June 2017 to facilitate the origination of crude oil barrels by the Stroud customer from our Hardisty Terminal for delivery to the Stroud Terminal. As a result of USDM assuming these rights and obligations and in order to accommodate the needs of the Stroud customer, the contracted term for the capacity held by USDM at our Hardisty Terminal was extended from June 30, 2019 to June 30, 2020. The terms and conditions of these agreements were similar to the terms and conditions of agreements we have with other parties at the Hardisty Terminal that are not related to us. USDM’s agreement with the third party customer was renewed and extended, effective July 1, 2020, and USDM subsequently assigned its terminalling services agreement with the third party customer directly to us and is therefore no longer a customer at our Hardisty Terminal. USDM controlled approximately 25% of the available monthly capacity of the Hardisty Terminal through June 30, 2020.
In connection with our purchase of the Stroud Terminal, we also entered into a Marketing Services Agreement with USDM, as discussed above. Pursuant to the terms of the agreement, we receive a fixed amount per barrel from USDM in exchange for marketing the additional capacity available at the Stroud Terminal. We also received revenue for providing additional terminalling services at our Hardisty Terminal to USDM pursuant to the terms of its agreement with us. Additionally, effective January 2019, we entered into a six month terminalling services agreement with USDM at our Casper Terminal to maximize utilization of available terminalling and storage capacity by offering these services to customers on an uncommitted basis at current market rates. This agreement automatically renews for successive periods of six months on an evergreen basis unless otherwise canceled by either party. We include amounts received pursuant to these arrangements as revenue in the table below under “Terminalling services — related party” in our consolidated statements of operations. Additionally, we received revenue from USDM for the lease of 200 railcars pursuant to the terms of an existing agreement with us, which is included in the table below under “Fleet leases — related party” and “Fleet services — related party” and in our consolidated statements of operations.
Our related party revenues from USD and affiliates are presented below in the following table for the indicated periods:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(in thousands)
|
Terminalling services — related party
|
$
|
1,111
|
|
|
$
|
3,800
|
|
|
$
|
2,214
|
|
|
$
|
7,888
|
|
Fleet leases — related party
|
983
|
|
|
983
|
|
|
1,967
|
|
|
1,967
|
|
Fleet services — related party
|
228
|
|
|
228
|
|
|
455
|
|
|
455
|
|
Freight and other reimbursables — related party
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
$
|
2,322
|
|
|
$
|
5,012
|
|
|
$
|
4,636
|
|
|
$
|
10,311
|
|
We had the following amounts outstanding with USD and affiliates on our consolidated balance sheets as presented below in the following table for the indicated periods:
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|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(in thousands)
|
Accounts receivable — related party
|
$
|
1,442
|
|
|
$
|
2,460
|
|
Accounts payable and accrued expenses — related party (1)
|
$
|
64
|
|
|
$
|
64
|
|
Other current and non-current assets — related party (2)
|
$
|
2,579
|
|
|
$
|
1,721
|
|
Other non-current liabilities — related party (3)
|
$
|
24
|
|
|
$
|
—
|
|
Deferred revenue — related party (4)
|
$
|
410
|
|
|
$
|
410
|
|
(1)Does not include amounts payable to related parties associated with the Omnibus Agreement, as discussed above.
(2)Includes a contract asset associated with the Hardisty Terminal Services Agreement with USDTC II, as discussed above. Also includes a contract asset associated with a lease agreement with USDM. Refer to Note 4. Revenues for further discussion.
(3)Represents a contract liability associated with a lease agreement with USDM and cumulative revenue that has been deferred due to tiered billing provisions. Refer to Note 4. Revenues for further discussion.
(4)Represents deferred revenues associated with our fleet services agreements with USD and affiliates for amounts we have collected from them for their prepaid leases.
Cash Distributions
We paid the following aggregate cash distributions to USDG as a holder of our common units and to USD Partners GP LLC as sole holder of our general partner interest and IDRs.
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|
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|
|
|
|
|
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Distribution Declaration Date
|
|
Record Date
|
|
Distribution
Payment Date
|
|
Amount Paid to
USDG
|
|
Amount Paid to
USD Partners GP LLC
|
|
|
|
|
|
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(in thousands)
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January 28, 2021
|
|
February 10, 2021
|
|
February 19, 2021
|
|
$
|
1,283
|
|
|
$
|
51
|
|
April 22, 2021
|
|
May 5, 2021
|
|
May 14, 2021
|
|
$
|
1,312
|
|
|
$
|
52
|
|
|
|
|
|
|
|
|
|
|
13. COMMITMENTS AND CONTINGENCIES
From time to time, we may be involved in legal, tax, regulatory and other proceedings in the ordinary course of business. We do not believe that we are currently a party to any such proceedings that will have a material adverse impact on our financial condition or results of operations.
14. SEGMENT REPORTING
We manage our business in two reportable segments: Terminalling services and Fleet services. The Terminalling services segment charges minimum monthly commitment fees under multi-year take-or-pay contracts
to load and unload various grades of crude oil into and from railcars, as well as fixed fees per gallon to transload ethanol from railcars, including related logistics services. We also facilitate rail-to-pipeline shipments of crude oil. Our Terminalling services segment also charges minimum monthly fees to store crude oil in tanks that are leased to our customers. The Fleet services segment provides customers with railcars and fleet services related to the transportation of liquid hydrocarbons under multi-year, take-or-pay contracts. Corporate activities are not considered a reportable segment, but are included to present shared services and financing activities which are not allocated to our established reporting segments.
Our segments offer different services and are managed accordingly. Our chief operating decision maker, or CODM, regularly reviews financial information about both segments in order to allocate resources and evaluate performance. Our CODM assesses segment performance based on the cash flows produced by our established reporting segments using Segment Adjusted EBITDA. Segment Adjusted EBITDA is a measure calculated in accordance with GAAP. We define Segment Adjusted EBITDA as “Net income (loss)” of each segment adjusted for depreciation and amortization, interest, income taxes, changes in contract assets and liabilities, deferred revenues, foreign currency transaction gains and losses and other items which do not affect the underlying cash flows produced by our businesses. As such, we have concluded that disaggregating revenue by reporting segments appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.
Segment Allocation of Certain Selling, General and Administrative Costs
Historically, we have allocated certain selling, general and administrative expenses to our Terminalling services and Fleet services segments that included corporate function personnel costs for managing our business that are allocated to us by our general partner, as well as other administrative expenses including audit fees and certain consulting fees. Beginning with the first quarter in 2021, these selling, general, and administrative expenses that are not directly related to operating our Terminalling services and Fleet services segments will now be allocated to corporate selling, general, and administrative expenses to better reflect the financial results of our Terminalling services and Fleet services segments.
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|
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|
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|
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Three Months Ended June 30, 2021
|
|
Terminalling
services
|
|
Fleet
services
|
|
Corporate
|
|
Total
|
|
(in thousands)
|
Revenues
|
|
|
|
|
|
|
|
Terminalling services
|
$
|
30,992
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,992
|
|
Terminalling services — related party
|
1,111
|
|
|
—
|
|
|
—
|
|
|
1,111
|
|
|
|
|
|
|
|
|
|
Fleet leases — related party
|
—
|
|
|
983
|
|
|
—
|
|
|
983
|
|
Fleet services
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Fleet services — related party
|
—
|
|
|
228
|
|
|
—
|
|
|
228
|
|
Freight and other reimbursables
|
176
|
|
|
31
|
|
|
—
|
|
|
207
|
|
Freight and other reimbursables — related party
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total revenues
|
32,279
|
|
|
1,242
|
|
|
—
|
|
|
33,521
|
|
Operating costs
|
|
|
|
|
|
|
|
Subcontracted rail services
|
3,523
|
|
|
—
|
|
|
—
|
|
|
3,523
|
|
Pipeline fees
|
6,398
|
|
|
—
|
|
|
—
|
|
|
6,398
|
|
Freight and other reimbursables
|
176
|
|
|
31
|
|
|
—
|
|
|
207
|
|
Operating and maintenance
|
3,710
|
|
|
993
|
|
|
—
|
|
|
4,703
|
|
Selling, general and administrative
|
1,055
|
|
|
73
|
|
|
2,908
|
|
|
4,036
|
|
Goodwill impairment loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Depreciation and amortization
|
5,500
|
|
|
—
|
|
|
—
|
|
|
5,500
|
|
Total operating costs
|
20,362
|
|
|
1,097
|
|
|
2,908
|
|
|
24,367
|
|
Operating income (loss)
|
11,917
|
|
|
145
|
|
|
(2,908)
|
|
|
9,154
|
|
Interest expense
|
—
|
|
|
—
|
|
|
1,591
|
|
|
1,591
|
|
Loss associated with derivative instruments
|
—
|
|
|
—
|
|
|
718
|
|
|
718
|
|
Foreign currency transaction loss (gain)
|
57
|
|
|
1
|
|
|
(99)
|
|
|
(41)
|
|
Other expense (income), net
|
5
|
|
|
—
|
|
|
(1)
|
|
|
4
|
|
Provision for income taxes
|
145
|
|
|
21
|
|
|
—
|
|
|
166
|
|
Net income (loss)
|
$
|
11,710
|
|
|
$
|
123
|
|
|
$
|
(5,117)
|
|
|
$
|
6,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020
|
|
Terminalling
services
|
|
Fleet
services
|
|
Corporate
|
|
Total
|
|
(in thousands)
|
Revenues
|
|
|
|
|
|
|
|
Terminalling services
|
$
|
22,309
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22,309
|
|
Terminalling services — related party
|
3,800
|
|
|
—
|
|
|
—
|
|
|
3,800
|
|
|
|
|
|
|
|
|
|
Fleet leases — related party
|
—
|
|
|
983
|
|
|
—
|
|
|
983
|
|
Fleet services
|
—
|
|
|
51
|
|
|
—
|
|
|
51
|
|
Fleet services — related party
|
—
|
|
|
228
|
|
|
—
|
|
|
228
|
|
Freight and other reimbursables
|
32
|
|
|
32
|
|
|
—
|
|
|
64
|
|
Freight and other reimbursables — related party
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Total revenues
|
26,141
|
|
|
1,295
|
|
|
—
|
|
|
27,436
|
|
Operating costs
|
|
|
|
|
|
|
|
Subcontracted rail services
|
2,688
|
|
|
—
|
|
|
—
|
|
|
2,688
|
|
Pipeline fees
|
5,395
|
|
|
—
|
|
|
—
|
|
|
5,395
|
|
Freight and other reimbursables
|
32
|
|
|
33
|
|
|
—
|
|
|
65
|
|
Operating and maintenance
|
3,604
|
|
|
1,025
|
|
|
—
|
|
|
4,629
|
|
Selling, general and administrative
|
1,417
|
|
|
213
|
|
|
2,825
|
|
|
4,455
|
|
Goodwill impairment loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Depreciation and amortization
|
5,203
|
|
|
—
|
|
|
—
|
|
|
5,203
|
|
Total operating costs
|
18,339
|
|
|
1,271
|
|
|
2,825
|
|
|
22,435
|
|
Operating income (loss)
|
7,802
|
|
|
24
|
|
|
(2,825)
|
|
|
5,001
|
|
Interest expense
|
—
|
|
|
—
|
|
|
2,256
|
|
|
2,256
|
|
Loss associated with derivative instruments
|
—
|
|
|
—
|
|
|
332
|
|
|
332
|
|
Foreign currency transaction loss
|
81
|
|
|
3
|
|
|
1,066
|
|
|
1,150
|
|
Other income, net
|
(110)
|
|
|
—
|
|
|
(1)
|
|
|
(111)
|
|
Provision for (benefit from) income taxes
|
208
|
|
|
(20)
|
|
|
—
|
|
|
188
|
|
Net income (loss)
|
$
|
7,623
|
|
|
$
|
41
|
|
|
$
|
(6,478)
|
|
|
$
|
1,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
|
Terminalling
services
|
|
Fleet
services
|
|
Corporate
|
|
Total
|
|
(in thousands)
|
Revenues
|
|
|
|
|
|
|
|
Terminalling services
|
$
|
59,097
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
59,097
|
|
Terminalling services — related party
|
2,214
|
|
|
—
|
|
|
—
|
|
|
2,214
|
|
|
|
|
|
|
|
|
|
Fleet leases — related party
|
—
|
|
|
1,967
|
|
|
—
|
|
|
1,967
|
|
Fleet services
|
—
|
|
|
24
|
|
|
—
|
|
|
24
|
|
Fleet services — related party
|
—
|
|
|
455
|
|
|
—
|
|
|
455
|
|
Freight and other reimbursables
|
300
|
|
|
63
|
|
|
—
|
|
|
363
|
|
Freight and other reimbursables — related party
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total revenues
|
61,611
|
|
|
2,509
|
|
|
—
|
|
|
64,120
|
|
Operating costs
|
|
|
|
|
|
|
|
Subcontracted rail services
|
6,664
|
|
|
—
|
|
|
—
|
|
|
6,664
|
|
Pipeline fees
|
12,444
|
|
|
—
|
|
|
—
|
|
|
12,444
|
|
Freight and other reimbursables
|
300
|
|
|
63
|
|
|
—
|
|
|
363
|
|
Operating and maintenance
|
7,634
|
|
|
1,991
|
|
|
—
|
|
|
9,625
|
|
Selling, general and administrative
|
2,074
|
|
|
165
|
|
|
6,530
|
|
|
8,769
|
|
Goodwill impairment loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Depreciation and amortization
|
10,971
|
|
|
—
|
|
|
—
|
|
|
10,971
|
|
Total operating costs
|
40,087
|
|
|
2,219
|
|
|
6,530
|
|
|
48,836
|
|
Operating income (loss)
|
21,524
|
|
|
290
|
|
|
(6,530)
|
|
|
15,284
|
|
Interest expense
|
—
|
|
|
—
|
|
|
3,326
|
|
|
3,326
|
|
Gain associated with derivative instruments
|
—
|
|
|
—
|
|
|
(2,358)
|
|
|
(2,358)
|
|
Foreign currency transaction loss (gain)
|
190
|
|
|
1
|
|
|
(293)
|
|
|
(102)
|
|
Other income, net
|
(15)
|
|
|
—
|
|
|
(1)
|
|
|
(16)
|
|
Provision from income taxes
|
342
|
|
|
48
|
|
|
—
|
|
|
390
|
|
Net income (loss)
|
$
|
21,007
|
|
|
$
|
241
|
|
|
$
|
(7,204)
|
|
|
$
|
14,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020
|
|
Terminalling
services
|
|
Fleet
services
|
|
Corporate
|
|
Total
|
|
(in thousands)
|
Revenues
|
|
|
|
|
|
|
|
Terminalling services
|
$
|
46,544
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46,544
|
|
Terminalling services — related party
|
7,888
|
|
|
—
|
|
|
—
|
|
|
7,888
|
|
|
|
|
|
|
|
|
|
Fleet leases — related party
|
—
|
|
|
1,967
|
|
|
—
|
|
|
1,967
|
|
Fleet services
|
—
|
|
|
101
|
|
|
—
|
|
|
101
|
|
Fleet services — related party
|
—
|
|
|
455
|
|
|
—
|
|
|
455
|
|
Freight and other reimbursables
|
649
|
|
|
37
|
|
|
—
|
|
|
686
|
|
Freight and other reimbursables — related party
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Total revenues
|
55,081
|
|
|
2,561
|
|
|
—
|
|
|
57,642
|
|
Operating costs
|
|
|
|
|
|
|
|
Subcontracted rail services
|
6,133
|
|
|
—
|
|
|
—
|
|
|
6,133
|
|
Pipeline fees
|
11,742
|
|
|
—
|
|
|
—
|
|
|
11,742
|
|
Freight and other reimbursables
|
649
|
|
|
38
|
|
|
—
|
|
|
687
|
|
Operating and maintenance
|
7,692
|
|
|
2,045
|
|
|
—
|
|
|
9,737
|
|
Selling, general and administrative
|
3,140
|
|
|
526
|
|
|
5,962
|
|
|
9,628
|
|
Goodwill impairment loss
|
33,589
|
|
|
—
|
|
|
—
|
|
|
33,589
|
|
Depreciation and amortization
|
10,625
|
|
|
—
|
|
|
—
|
|
|
10,625
|
|
Total operating costs
|
73,570
|
|
|
2,609
|
|
|
5,962
|
|
|
82,141
|
|
Operating loss
|
(18,489)
|
|
|
(48)
|
|
|
(5,962)
|
|
|
(24,499)
|
|
Interest expense
|
—
|
|
|
—
|
|
|
4,995
|
|
|
4,995
|
|
Loss associated with derivative instruments
|
—
|
|
|
—
|
|
|
3,205
|
|
|
3,205
|
|
Foreign currency transaction loss (gain)
|
7
|
|
|
(3)
|
|
|
1,054
|
|
|
1,058
|
|
Other income, net
|
(839)
|
|
|
—
|
|
|
(4)
|
|
|
(843)
|
|
Provision for (benefit from) income taxes
|
161
|
|
|
(480)
|
|
|
—
|
|
|
(319)
|
|
Net income (loss)
|
$
|
(17,818)
|
|
|
$
|
435
|
|
|
$
|
(15,212)
|
|
|
$
|
(32,595)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
The following tables present the computation of Segment Adjusted EBITDA, which is a measure determined in accordance with GAAP, for each of our segments for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
Terminalling Services Segment
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(in thousands)
|
Net income (loss)
|
$
|
11,710
|
|
|
$
|
7,623
|
|
|
$
|
21,007
|
|
|
$
|
(17,818)
|
|
|
|
|
|
|
|
|
|
Interest income (1)
|
—
|
|
|
(2)
|
|
|
(1)
|
|
|
(23)
|
|
Depreciation and amortization
|
5,500
|
|
|
5,203
|
|
|
10,971
|
|
|
10,625
|
|
Provision for income taxes
|
145
|
|
|
208
|
|
|
342
|
|
|
161
|
|
Foreign currency transaction loss (2)
|
57
|
|
|
81
|
|
|
190
|
|
|
7
|
|
Loss associated with disposal of assets
|
5
|
|
|
—
|
|
|
5
|
|
|
—
|
|
Goodwill impairment loss
|
—
|
|
|
—
|
|
|
—
|
|
|
33,589
|
|
|
|
|
|
|
|
|
|
Non-cash deferred amounts (3)
|
543
|
|
|
1,119
|
|
|
2,226
|
|
|
1,556
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
|
$
|
17,960
|
|
|
$
|
14,232
|
|
|
$
|
34,740
|
|
|
$
|
28,097
|
|
(1) Represents interest income associated with our Terminalling Services segment that is included in “Other income, net” in our consolidated statements of operations.
(2) Represents foreign exchange transaction amounts associated with activities between our U.S. and Canadian subsidiaries.
(3) Represents the change in non-cash contract assets and liabilities associated with revenue recognized at blended rates based on tiered rate structures in certain of our customer contracts and deferred revenue associated with deficiency credits that are expected to be used in the future prior to their expiration. Amounts presented are net of the corresponding prepaid Gibson pipeline fee that will be recognized as expense concurrently with the recognition of revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
Fleet Services Segment
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(in thousands)
|
Net income
|
$
|
123
|
|
|
$
|
41
|
|
|
$
|
241
|
|
|
$
|
435
|
|
Provision for (benefit from) income taxes
|
21
|
|
|
(20)
|
|
|
48
|
|
|
(480)
|
|
|
|
|
|
|
|
|
|
Foreign currency transaction loss (gain) (1)
|
1
|
|
|
3
|
|
|
1
|
|
|
(3)
|
|
Segment Adjusted EBITDA
|
$
|
145
|
|
|
$
|
24
|
|
|
$
|
290
|
|
|
$
|
(48)
|
|
|
|
|
|
|
|
|
|
(1) Represents foreign exchange transaction amounts associated with activities between our U.S. and Canadian subsidiaries.
15. DERIVATIVE FINANCIAL INSTRUMENTS
Our net income, or loss, and cash flows are subject to fluctuations resulting from changes in interest rates on our variable rate debt obligations and from changes in foreign currency exchange rates, particularly with respect to the U.S. dollar and the Canadian dollar. We use derivative financial instruments, including futures, forwards, swaps, options and other financial instruments with similar characteristics, to manage the risks associated with market fluctuations in interest rates, foreign currency exchange rates and commodity prices, as well as to reduce volatility in our cash flows. We have not historically designated, nor do we expect to designate, our derivative financial instruments as hedges of the underlying risk exposure. All of our financial instruments are employed in connection with an underlying asset, liability and/or forecasted transaction and are not entered into for speculative purposes.
Interest Rate Derivatives
We use interest rate derivative financial instruments to partially mitigate our exposure to interest rate fluctuations on our variable rate debt. Under our Credit Agreement, one-month LIBOR is used as the index rate for the interest we are charged on amounts borrowed under our Revolving Credit Facility.
In November 2017, we entered into a five-year interest rate collar contract with a $100 million notional value. The collar established a range where we paid the counterparty if the one-month Overnight Index Swap, or OIS, fell below the established floor rate of 1.70%, and the counterparty paid us if the one-month OIS rate exceeded the established ceiling rate of 2.50%. The collar settled monthly through the termination date. No payments or receipts were exchanged on the interest rate collar contracts unless interest rates rose above or fell below the predetermined ceiling or floor rate. Prior to February 2019, our interest rate collar contract discussed above was based on one-month LIBOR, which is being phased out by financial institutions in the United States.
In September 2020, we terminated our existing interest rate collar discussed above and simultaneously entered into a new interest rate swap that was made effective as of August 2020. The new interest rate swap is a five-year contract with a $150 million notional value that fixes our one-month LIBOR to 0.84% for the notional value of the swap agreement instead of the variable rate that we pay under our Credit Agreement. The swap settles monthly through the termination date in August 2025.
Derivative Positions
We record all of our derivative financial instruments at their fair values in the line items specified below within our consolidated balance sheets, the amounts of which were as follows at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(in thousands)
|
|
|
|
|
Other non-current assets
|
153
|
|
|
—
|
|
Other current liabilities
|
$
|
(1,082)
|
|
|
$
|
(1,086)
|
|
Other non-current liabilities
|
—
|
|
|
(2,743)
|
|
|
$
|
(929)
|
|
|
$
|
(3,829)
|
|
We have not designated our derivative financial instruments as hedges of our interest rate exposure. As a result, changes in the fair value of these derivatives are recorded as “Loss (gain) associated with derivative instruments” in our consolidated statements of operations. The gains or losses associated with changes in the fair value of our derivative contracts do not affect our cash flows until the underlying contract is settled by making or receiving a payment to or from the counterparty. In connection with our derivative activities, we recognized the following amounts during the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(in thousands)
|
Loss (gain) associated with derivative instruments
|
$
|
718
|
|
|
$
|
332
|
|
|
$
|
(2,358)
|
|
|
$
|
3,205
|
|
We determine the fair value of our derivative financial instruments using third party pricing information that is derived from observable market inputs, which we classify as level 2 with respect to the fair value hierarchy.
The following table presents summarized information about the fair values of our outstanding interest rate contracts for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
Notional
|
|
Interest Rate Parameters
|
|
Fair Value
|
|
Fair Value
|
|
|
|
|
|
|
(in thousands)
|
Swap Agreements
|
|
|
|
|
|
|
|
|
Swap maturing August 2025
|
|
$
|
150,000,000
|
|
|
0.84
|
%
|
|
$
|
(929)
|
|
|
$
|
(3,829)
|
|
16. PARTNERS’ CAPITAL
Our common units represent and subordinated units represented limited partner interests in us. The holders of common units are and subordinated units were entitled to participate in partnership distributions and to exercise the rights and privileges available to limited partners under our partnership agreement.
All of our subordinated units converted into common units on a one-for-one basis in separate sequential tranches. Each tranche was comprised of 20.0% of the subordinated units issued in conjunction with our IPO. Each separate tranche was eligible to convert on or after December 31, 2015 (but no more frequently than once in any twelve-month period), provided on such date: (i) distributions of available cash from operating surplus on each of the outstanding common units, Class A units, subordinated units and general partner units equaled or exceeded $1.15 per unit (the annualized minimum quarterly distribution) for the four quarter period immediately preceding that date; (ii) the adjusted operating surplus generated during the four quarter period immediately preceding that date equaled or exceeded the sum of $1.15 per unit (the annualized minimum quarterly distribution) on all of the common units, Class A units, subordinated units and general partner units outstanding during that period on a fully diluted basis; and (iii) there were no arrearages in the payment of the minimum quarterly distribution on our common units. For each successive tranche, the four quarter period specified in clauses (i) and (ii) above must have commenced after the four quarter period applicable to any prior tranche of subordinated units. In February 2020, pursuant to the terms set forth in our partnership agreement, we converted the fifth and final tranche of 2,092,709 of our subordinated units into common units upon satisfaction of the conditions established for conversion.
Pursuant to the terms of the USD Partners LP Amended and Restated 2014 Long-Term Incentive Plan, which we refer to as the A/R LTIP, our phantom unit awards, or Phantom Units, granted to directors and employees of our general partner and its affiliates, which are classified as equity, are converted into our common units upon vesting. Equity-classified Phantom Units totaling 557,579 vested during the first six months in 2021, of which 379,726 were converted into our common units after 177,853 Phantom Units were withheld from participants for the payment of applicable employment-related withholding taxes. The conversion of these Phantom Units did not have any economic impact on Partners’ Capital, since the economic impact is recognized over the vesting period. Additional information and discussion regarding our unit based compensation plans is included below in Note 17. Unit Based Compensation.
The board of directors of our general partner has adopted a cash distribution policy pursuant to which we intend to distribute at least the minimum quarterly distribution of $0.2875 per unit ($1.15 per unit on an annualized basis) on all of our units to the extent we have sufficient available cash after the establishment of cash reserves and the payment of our expenses, including payments to our general partner and its affiliates. The board of directors of our general partner may change our distribution policy at any time and from time to time. Our partnership agreement does not require us to pay cash distributions on a quarterly or other basis. The amount of distributions we pay under our cash distribution policy and the decision to make any distribution are determined by our general partner. For the quarter ended June 30, 2021, the board of directors of our general partner determined that we had sufficient available cash after the establishment of cash reserves and the payment of our expenses to distribute $0.116 per unit on all of our units.
17. UNIT BASED COMPENSATION
Long-term Incentive Plan
In 2021 and 2020, the board of directors of our general partner, acting in its capacity as our general partner, approved the grant of 667,543 and 694,140 Phantom Units, respectively, to directors and employees of our general partner and its affiliates under our A/R LTIP. At June 30, 2021, we had 508,347 Phantom Units remaining available for issuance. The Phantom Units are subject to all of the terms and conditions of the A/R LTIP and the Phantom Unit award agreements, which are collectively referred to as the Award Agreements. Award amounts for each of the grants are generally determined by reference to a specified dollar amount based on an allocation formula which included a percentage multiplier of the grantee’s base salary, among other factors, converted to a number of units based on the closing price of one of our common units preceding the grant date, as determined by the board of directors of our general partner and quoted on the NYSE.
Phantom Unit awards generally represent rights to receive our common units upon vesting. However, with respect to the awards granted to directors and employees of our general partner and its affiliates domiciled in Canada, for each Phantom Unit that vests, a participant is entitled to receive cash for an amount equivalent to the closing market price of one of our common units on the vesting date. Each Phantom Unit granted under the Award Agreements includes an accompanying distribution equivalent right, or DER, which entitles each participant to receive payments at a per unit rate equal in amount to the per unit rate for any distributions we make with respect to our common units. The Award Agreements granted to employees of our general partner and its affiliates generally contemplate that the individual grants of Phantom Units will vest in four equal annual installments based on the grantee’s continued employment through the vesting dates specified in the Award Agreements, subject to acceleration upon the grantee’s death or disability, or involuntary termination in connection with a change in control of the Partnership or our general partner. Awards to independent directors of the board of our general partner and an independent consultant typically vest over a one year period following the grant date.
The following tables present the award activity for our Equity-classified Phantom Units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director and Independent Consultant Phantom Units
|
|
Employee Phantom Units
|
|
Weighted-Average Grant Date Fair Value Per Phantom Unit
|
Phantom Unit awards at December 31, 2020
|
40,065
|
|
|
1,324,837
|
|
|
$
|
10.98
|
|
Granted
|
40,065
|
|
|
573,204
|
|
|
$
|
4.82
|
|
Vested
|
(40,065)
|
|
|
(517,514)
|
|
|
$
|
11.33
|
|
Forfeited
|
—
|
|
|
(8,974)
|
|
|
$
|
8.26
|
|
Phantom Unit awards at June 30, 2021
|
40,065
|
|
|
1,371,553
|
|
|
$
|
8.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director and Independent Consultant Phantom Units
|
|
Employee Phantom Units
|
|
Weighted-Average Grant Date Fair Value Per Phantom Unit
|
Phantom Unit awards at December 31, 2019
|
37,139
|
|
|
1,252,544
|
|
|
$
|
11.34
|
|
Granted
|
40,065
|
|
|
594,912
|
|
|
$
|
10.15
|
|
Vested
|
(37,139)
|
|
|
(481,336)
|
|
|
$
|
10.84
|
|
Forfeited
|
—
|
|
|
(38,955)
|
|
|
$
|
11.07
|
|
Phantom Unit awards at June 30, 2020
|
40,065
|
|
|
1,327,165
|
|
|
$
|
10.98
|
|
The following tables present the award activity for our Liability-classified Phantom Units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director and Independent Consultant Phantom Units
|
|
Employee Phantom Units
|
|
Weighted-Average Grant Date Fair Value Per Phantom Unit
|
Phantom Unit awards at December 31, 2020
|
13,136
|
|
|
59,284
|
|
|
$
|
10.58
|
|
Granted
|
13,136
|
|
|
41,138
|
|
|
$
|
4.82
|
|
Vested
|
(13,136)
|
|
|
—
|
|
|
$
|
10.15
|
|
|
|
|
|
|
|
Phantom Unit awards at June 30, 2021
|
13,136
|
|
|
100,422
|
|
|
$
|
7.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director and Independent Consultant Phantom Units
|
|
Employee Phantom Units
|
|
Weighted-Average Grant Date Fair Value Per Phantom Unit
|
Phantom Unit awards at December 31, 2019
|
12,177
|
|
|
44,620
|
|
|
$
|
11.53
|
|
Granted
|
13,136
|
|
|
46,027
|
|
|
$
|
10.15
|
|
Vested
|
(12,177)
|
|
|
—
|
|
|
$
|
11.37
|
|
|
|
|
|
|
|
Phantom Unit awards at June 30, 2020
|
13,136
|
|
|
90,647
|
|
|
$
|
10.76
|
|
The fair value of each Phantom Unit on the grant date is equal to the closing market price of our common units on the grant date. We account for the Phantom Unit grants to independent directors and employees of our general partner and its affiliates domiciled in Canada that are paid out in cash upon vesting, throughout the requisite vesting period, by revaluing the unvested Phantom Units outstanding at the end of each reporting period and recording a charge to compensation expense in “Selling, general and administrative” in our consolidated statements of operations and recognizing a liability in “Other current liabilities” in our consolidated balance sheets. With respect to the Phantom Units granted to consultants, independent directors and employees of our general partner and its affiliates domiciled in the United States, we amortize the initial grant date fair value over the requisite service period using the straight-line method with a charge to compensation expense in “Selling, general and administrative” in our consolidated statements of operations, with an offset to common units within the Partners’ Capital section of our consolidated balance sheet.
For the three months ended June 30, 2021 and 2020, we recognized $1.4 million and $1.6 million, respectively, and for the six months ended June 30, 2021 and 2020, we recognized $2.9 million and $3.3 million, respectively, of compensation expense associated with outstanding Phantom Units. As of June 30, 2021, we have unrecognized compensation expense associated with our outstanding Phantom Units totaling $10.3 million, which we expect to recognize over a weighted average period of 2.45 years. We have elected to account for actual forfeitures as they occur rather than using an estimated forfeiture rate to determine the number of awards we expect to vest.
We made payments to holders of the Phantom Units pursuant to the associated DERs we granted to them under the Award Agreements as follows:
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Three Months Ended June 30,
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Six Months Ended June 30,
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2021
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2020
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2021
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2020
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(in thousands)
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Equity-classified Phantom Units (1)
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$
|
161
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$
|
152
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$
|
313
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|
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$
|
629
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|
Liability-classified Phantom Units
|
13
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|
|
12
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|
|
21
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|
|
33
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Total
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$
|
174
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$
|
164
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$
|
334
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$
|
662
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(1) We reclassified $5 thousand to unit based compensation expense for DERs paid in relation to Phantom Units that have been forfeited for the three months ended June 30, 2021, and $7 thousand and $57 thousand for the six months ended June 30, 2021 and 2020, respectively, for forfeitures. We had no reclassifications to unit based compensation expense for forfeitures for the three months ended June 30, 2020.
18. SUPPLEMENTAL CASH FLOW INFORMATION
The following table provides supplemental cash flow information for the periods indicated:
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Six Months Ended June 30,
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2021
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2020
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(in thousands)
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Cash paid for income taxes
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$
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534
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$
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433
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Cash paid for interest
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$
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2,987
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$
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4,957
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Cash paid for operating leases
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$
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2,983
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$
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3,416
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Non-cash Investing Activities
For the six months ended June 30, 2021 and 2020, we had non-cash investing activities for capital expenditures for property and equipment that were financed through “Accounts payable and accrued expenses” as presented in the table below for the periods indicated:
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Six months ended June 30,
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2021
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2020
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(in thousands)
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Property and equipment financed through accounts payable and accrued expenses
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$
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212
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$
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(252)
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We recorded $0.7 million and $2.8 million of right-of-use lease assets and the associated liabilities on our consolidated balance sheet as of June 30, 2021 and 2020, respectively, representing non-cash activities resulting from either new or extended lease agreements. See Note 7. Leases for further discussion.
19. SUBSEQUENT EVENTS
Distribution to Partners
On July 21, 2021, the board of directors of USD Partners GP LLC, acting in its capacity as our general partner, declared a quarterly cash distribution payable of $0.116 per unit, or $0.464 per unit on an annualized basis, for the three months ended June 30, 2021. The distribution will be paid on August 13, 2021, to unitholders of record at the close of business on August 4, 2021. The distribution will include payment of $1.8 million to our public common unitholders, $1.3 million to USDG as a holder of our common units and $53 thousand to USD Partners GP LLC as a holder of the general partner interest.