Notes to the Unaudited Condensed Consolidated Financial Statements
1. Organization and Operations
Cypress Energy Partners, L.P. (the “Partnership”) is a Delaware limited partnership formed in 2013 to provide independent pipeline inspection and integrity services to producers, public utility companies, and pipeline companies and to provide salt water disposal and other water and environmental services to U.S. onshore oil and natural gas producers and trucking companies. Trading of our common units began January 15, 2014 on the New York Stock Exchange under the symbol “CELP.”
Our business is organized into the Pipeline Inspection (“Pipeline Inspection”), Integrity Services (“Integrity Services”), and Water Services (“Water Services”) segments. Pipeline Inspection provides pipeline inspection and other services to energy exploration and production (“E&P”) companies, public utility companies, and midstream companies and their vendors throughout the United States and Canada. The inspectors of Pipeline Inspection perform a variety of inspection services on midstream pipelines, gathering systems and distribution systems, including data gathering and supervision of third-party construction, inspection, and maintenance and repair projects. Integrity Services provides independent integrity services to major natural gas and petroleum pipeline companies and to pipeline construction companies located throughout the United States. Field personnel in this segment primarily perform hydrostatic testing on newly-constructed and existing natural gas and petroleum pipelines. Water Services is comprised of eight commercial saltwater disposal facilities in the Bakken Shale region of the Williston Basin in North Dakota and one saltwater disposal facility in the Permian Basin in Texas. These facilities provide services to oil and natural gas producers and trucking companies. All of the facilities utilize specialized equipment and remote monitoring to minimize the facilities' downtime and increase the facilities' efficiency for peak utilization. These facilities also have equipment that uses oil skimming processes that remove oil from water delivered to the sites. We sell the oil produced from the skimming processes, which contributes to our revenues. In addition to these saltwater disposal facilities, we provide management and staffing services to a saltwater disposal facility in which we own a 25% equity interest (see Note 7).
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Unaudited Condensed Consolidated Financial Statements as of and for the three months ended March 31, 2018 and 2017 include our accounts and those of our controlled subsidiaries. All significant intercompany transactions and account balances have been eliminated in consolidation. The Unaudited Condensed Consolidated Balance Sheet at December 31, 2017 is derived from our audited financial statements.
The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim consolidated financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. Investments over which we exercise significant influence, but do not control, are accounted for using the equity method of accounting. The Unaudited Condensed Consolidated Financial Statements include all adjustments considered necessary for a fair presentation of the consolidated financial position and consolidated results of operations for the interim periods presented. Such adjustments consist only of normal recurring items, unless otherwise disclosed herein. Accordingly, the Unaudited Condensed Consolidated Financial Statements do not include all of the information and notes required by GAAP for complete consolidated financial statements. However, we believe that the disclosures made are adequate to make the information not misleading. These interim Unaudited Condensed Consolidated Financial Statements should be read in conjunction with our audited financial statements as of and for the year ended December 31, 2017 included in our Form 10-K. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year.
In April of 2018, we obtained an additional $10.0 million in commitments under our proposed new credit facility and anticipate closing the new credit facility prior to the expiration of the bank commitments. Please see Footnote 4 for additional
Refinancing
discussions.
Use of Estimates in the Preparation of Financial Statements
The preparation of the Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.
Significant Accounting Policies
Our significant accounting policies are consistent with those disclosed in Note 2 to our audited financial statements as of and for the year ended December 31, 2017 included in our Form 10-K, except for the adoption of Accounting Standards Update ("ASU") 2014-09 -
Revenue from Contracts with Customers
on January 1, 2018. Under ASU 2014-09, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Based on this new accounting guidance, our revenue is earned and recognized through the service offerings of our three reportable business segments. See Note 12 for disaggregated revenue reported by segment. The adoption and application of this ASU had no effect on our Unaudited Condensed Consolidated Financial Statements, other than additional disclosures included in this Form 10-Q.
Revenue Recognition
Pipeline Inspection
- We generate revenue in the Pipeline Inspection segment primarily by providing inspection services on midstream pipelines, gathering systems and distributions systems, including data gathering and supervision of third-party construction, inspection, and maintenance and repair projects. We charge our customers on a per-inspector basis, including per diem charges, mileage, and other reimbursement items. Generally, revenues are recognized when the services are performed.
Integrity Services
- We generate revenue in the Integrity Services segment primarily by providing hydrostatic testing services to major natural gas and petroleum companies and pipeline construction companies of newly-constructed and existing natural gas and petroleum pipelines. We generally charge our customers in this segment on a fixed-bid basis, depending on the size and length of the pipeline being inspected, the complexity of services provided, and the utilization of our work force and equipment. Generally, revenues are recognized when the services are performed.
Water Services
- We generate revenue in the Water Services segment primarily by treating flowback and produced water and injecting the saltwater into our saltwater disposal facilities. Our results are driven primarily by the volumes of produced water and flowback water we inject into our saltwater disposal facilities and the fees we charge for these services. These fees are charged on a per-barrel basis under contracts that are short-term in nature and vary based on the quantity and type of saltwater disposed, competitive dynamics, and operating costs. In addition, for minimal marginal cost, we generate revenue by selling residual oil we recover from the water. We also generate revenue managing a saltwater disposal facility for a fee. Water disposal revenues are recognized upon receipt of the wastewater at our disposal facilities. Revenues from sales of oil that is recovered in the process of treating wastewater are recognized when the oil is delivered to the customer. Management fee revenue is recorded when the services are performed.
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
Income Taxes
As a limited partnership, we generally are not subject to federal, state, or local income taxes. The tax on our net income is generally borne by the individual partners. Net income for financial statement purposes may differ significantly from taxable income of the partners as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income (loss) allocation requirements under our partnership agreement. The aggregated difference in the basis of our net assets for financial and tax reporting purposes cannot be readily determined because information regarding each partner’s tax attributes is not available to us.
The income of Tulsa Inspection Resources – Canada, ULC, our Canadian subsidiary, is taxable in Canada. Tulsa Inspection Resources – PUC, LLC, a subsidiary of our Pipeline Inspection segment that performs pipeline inspection services for utility customers, and Brown Integrity – PUC, LLC, a subsidiary where we own a 51% interest, have elected to be taxed as corporations for U.S. federal income tax purposes, and therefore, these subsidiaries are subject to U.S. federal and state income taxes. The amounts recognized as income tax expense, income taxes payable, and deferred taxes in our Unaudited Condensed Consolidated Financial Statements include the Canadian income taxes and U.S. federal income taxes referred to above, as well as partnership-level taxes levied by various states, which include most notably, franchise taxes assessed by the state of Texas.
As a publicly-traded partnership, we are subject to a statutory requirement that 90% of our total gross income classify as “qualifying income” (as defined by the Internal Revenue Code, related Treasury Regulations, and Internal Revenue Service pronouncements), determined on a calendar year basis. If our qualifying income does not meet this statutory requirement, we could be taxed as a corporation for federal and state income tax purposes. Our income has met the statutory qualifying income requirement each year since our IPO.
Noncontrolling Interest
We own a 51% interest in Brown Integrity, LLC (“Brown”) and a 49% interest in CF Inspection Management, LLC (“CF Inspection”). The accounts of these subsidiaries have been consolidated in our Unaudited Condensed Consolidated Financial Statements. The portion of the net income (loss) of these entities that is attributable to outside owners is reported in
N
et income (loss) attributable to noncontrolling interests
in our Unaudited Condensed Consolidated Statements of Operations, and the portion of the net assets of these entities that is attributable to outside owners is reported in
N
oncontrolling interests
in our Unaudited Condensed Consolidated Balance Sheets.
Property and Equipment
Property and equipment consists of land, land and leasehold improvements, buildings, facilities, wells and related equipment, field equipment, computer and office equipment, and vehicles. We record property and equipment at cost. Costs of renewals and improvements that substantially extend the useful lives of the assets are capitalized. Maintenance and repairs are expensed as incurred. We depreciate these assets on a straight-line basis over the estimated useful lives of the assets. Upon retirement, disposition, or impairment of an asset, we remove the cost and related accumulated depreciation from the balance sheet and report the resulting gain or loss, if any, in the Unaudited Condensed Consolidated Statement of Operations.
We review property and equipment for impairment whenever events or circumstances indicate that the asset group to which they relate may be impaired. To perform an impairment assessment, we first determine whether the cash flows expected to be generated from the asset group exceed the carrying value of the asset group. If such estimated cash flows do not exceed the carrying value of the asset group, we reduce the carrying values of the assets to their fair values and record a corresponding impairment loss, which reduces income on our Unaudited Condensed Consolidated Statements of Operations and reduces the carrying value of total assets on our Unaudited Condensed Consolidated Balance Sheets.
Identifiable Intangible Assets
Our intangible assets consist primarily of customer relationships, trade names, and our database of inspectors. We recorded these intangible assets as part of our accounting for the acquisitions of businesses, and we amortize these assets on a straight-line basis over their estimated useful lives, which typically range from 5 – 20 years.
We review our intangible assets for impairment whenever events or circumstances indicate that the asset group to which they relate may be impaired. To perform an impairment assessment, we first determine whether the cash flows expected to be generated from the asset group exceed the carrying value of the asset group. If such estimated cash flows do not exceed the carrying value of the asset group, we reduce the carrying values of the assets to their fair values and record a corresponding impairment loss, which reduces income on our Unaudited Condensed Consolidated Statements of Operations and reduces the carrying value of total assets on our Unaudited Condensed Consolidated Balance Sheets.
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
Goodwill
Goodwill is not amortized, but is subject to an annual review for impairment on November 1 (or at other dates if events or changes in circumstances indicate that the carrying value of goodwill may be impaired) at a reporting unit level. The reporting units used to evaluate and measure goodwill for impairment are determined primarily from the manner in which the business is managed or operated. We have determined that our Pipeline Inspection, Integrity Services, and Water Services segments are the appropriate reporting units for testing goodwill impairment.
To perform a goodwill impairment assessment, we first evaluate qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit exceeds its carrying value. If this assessment reveals that it is more likely than not that the carrying value of a reporting unit exceeds its fair value, we then determine the estimated fair market value of the reporting unit. If the carrying amount exceeds the reporting unit’s fair value, we record a goodwill impairment charge for the excess (not exceeding the carrying value of the reporting unit’s goodwill).
Accrued Payroll and Other
Accrued payroll and other
on our Unaudited Condensed Consolidated Balance Sheets includes the following:
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
(in thousands)
|
|
Accrued payroll
|
|
$
|
8,119
|
|
|
$
|
6,893
|
|
Customer deposits
|
|
|
1,445
|
|
|
|
1,510
|
|
Other
|
|
|
727
|
|
|
|
706
|
|
|
|
$
|
10,291
|
|
|
$
|
9,109
|
|
Foreign Currency Translation
Our Unaudited Condensed Consolidated Financial Statements are reported in U.S. dollars. We translate our Canadian dollar-denominated assets and liabilities into U.S. dollars at the exchange rate in effect at the balance sheet date. We translate our Canadian dollar-denominated revenues and expenses into U.S. dollars at the average exchange rate in effect during the period in which the applicable revenues and expenses were recorded.
Our Unaudited Condensed Consolidated Balance Sheet at March 31, 2018 includes $2.6 million of accumulated other comprehensive losses associated with accumulated currency translation adjustments, all of which relate to our Canadian operations. If at some point in the future, we were to sell or substantially liquidate our Canadian operations, we would reclassify the balance in
A
ccumulated other comprehensive loss
to other accounts within
Partners’ Capital
, which would be reported in the Unaudited Condensed Consolidated Statement of Operations as a reduction to net income.
Our Canadian subsidiary has certain intercompany payables to our U.S.-based subsidiaries. These intercompany payables and receivables among our consolidated subsidiaries are eliminated in our Unaudited Condensed Consolidated Balance Sheets. Beginning April 1, 2017, with the loss of our largest Canadian customer, we report currency translation adjustments on these intercompany payables and receivables within
F
oreign currency losses
in our Unaudited Condensed Consolidated Statements of Operations. Prior to April 1, 2017, we reported currency translation adjustments on these intercompany payables and receivables within
Other comprehensive loss
on our Unaudited Condensed Consolidated Statement of Owners’ Equity. We continue to report currency translations adjustments in other Canadian activity and balances in
Other comprehensive loss
in our Unaudited Condensed Consolidated Statement of Owners’ Equity.
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
New Accounting Standards
On January 1, 2018, we adopted the following new accounting standard issued by the Financial Accounting Standards Board (“FASB”):
The FASB issued ASU 2014-09 –
Revenue from Contracts with Customers
in May 2014. ASU 2014-09 is intended to clarify the principles for recognizing revenue and to develop a common standard for recognizing revenue for GAAP and International Financial Reporting Standards that is applicable to all organizations. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. We adopted this new standard beginning January 1, 2018 utilizing the modified retrospective transition approach. The adoption of this ASU had no effect on our Unaudited Condensed Consolidated Financial Statements other than additional disclosures included in this Form 10-Q.
Other accounting guidance proposed by the FASB that may impact our Unaudited Condensed Consolidated Financial Statements, which we have not yet adopted include:
The FASB issued ASU 2016-02 –
Leases
in February 2016. This guidance attempts to increase transparency and comparability among organizations by recognizing certain lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The main difference between previous GAAP methodology and the method proposed by this new guidance is the recognition on the balance sheet of certain lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact this ASU will have on our Unaudited Condensed Consolidated Balance Sheets.
3. Impairments
During the three months ended March 31, 2017, the largest customer of TIR-Canada, the Canadian subsidiary of our Pipeline Inspection segment, completed a bid process and selected different service providers for its inspection projects. During the three months ended March 31, 2017, pipeline inspection services to this customer accounted for approximately $12.9 million of revenue and $0.9 million of gross margin, which represented approximately 90% of the revenues and 90% of the gross margin of our Canadian operations (and approximately 20% of our consolidated revenues and 14% of our consolidated gross margin for the three months ended March 31, 2017). In consideration of the loss of this contract, we recorded impairments to the carrying values of certain intangible assets of $1.3 million during the three months ended March 31, 2017. Of this amount, $1.1 million related to customer relationships and $0.2 million related to trade names. We continue to perform inspection and integrity work for customers in Canada.
During the three months ended March 31, 2017, we recorded an impairment to the remaining $1.6 million carrying value of the goodwill of the Integrity Services segment. Revenues of this segment were lower than we had expected for the first quarter of 2017. In addition, for this segment, the level of bidding activity for work is typically high in March and April once customers have finalized their budgets for the upcoming year. While we won bids on a number of projects and our backlog began to improve, the improvement in the backlog was slower than we had originally anticipated and we revised downward our expectations of the near-term operating results of the segment. We estimated the fair value of the Integrity Services segment utilizing the income approach (discounted cash flows valuation method), which is a Level 3 input as defined in ASC 820 -
Fair Value Measurement
. Significant inputs in the valuation included projections of future revenues, anticipated operating costs and appropriate discount rates. Significant assumptions included a 2% annual growth rate of cash flows and a discount rate of 18%. We determined through this analysis that the fair value of goodwill of the Integrity Services segment was fully impaired. These calculations represent Level 3 non-recurring fair value measurements.
During the three months ended March 31, 2017, we recorded an impairment of $0.7 million to the property, plant and equipment at one of our saltwater disposal facilities. We have experienced low volumes at this facility due to competition in the area and to low levels of exploration and production activity near the facility. The impairment reduced the carrying value of the facility to $0.1 million, all of which is attributable to land.
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
4. Credit Agreement
We are party to a credit agreement (as amended, the “Credit Agreement”) that provides up to $200.0 million in borrowing capacity, subject to certain limitations. The Credit Agreement includes a working capital revolving credit facility (“Working Capital Facility”), which provides up to $75.0 million in borrowing capacity to fund working capital needs, and an acquisition revolving credit facility (“Acquisition Facility”), which provides up to $125.0 million in borrowing capacity to fund acquisitions and expansion projects. In addition, the Credit Agreement contains an accordion feature that allows us to increase the availability under the facilities by an additional $125.0 million if lenders agree to increase their commitments in the future. The Credit Agreement matures December 24, 2018.
Outstanding borrowings at March 31, 2018 and December 31, 2017 under the Credit Agreement were as follows:
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
(in thousands)
|
|
Working Capital Facility
|
|
$
|
48,000
|
|
|
$
|
48,000
|
|
Acquisition Facility
|
|
|
84,900
|
|
|
|
88,900
|
|
Total borrowings
|
|
|
132,900
|
|
|
|
136,900
|
|
Debt issuance costs
|
|
|
453
|
|
|
|
607
|
|
Long-term debt, including current portion
|
|
|
132,447
|
|
|
|
136,293
|
|
Current portion of long-term debt
|
|
|
132,447
|
|
|
|
136,293
|
|
Long-term debt
|
|
$
|
—
|
|
|
$
|
—
|
|
The carrying value of our debt approximates fair value, as the borrowings under the Credit Agreement are considered to be priced at market for debt instruments having similar terms and conditions (Level 2 of the fair value hierarchy).
Available borrowings under the Working Capital Facility are limited by a monthly borrowing base calculation as defined in the Credit Agreement. If, at any time, outstanding borrowings under the Working Capital Facility exceed our calculated borrowing base, a principal payment in the amount of the excess is due upon submission of the borrowing base calculation. Available borrowings under the Acquisition Facility may be limited by certain financial covenant ratios as defined in the Credit Agreement. The obligations under our Credit Agreement are secured by a first priority lien on substantially all of our assets.
All borrowings under the Credit Agreement bear interest, at our option, on a leveraged based grid pricing at (i) a base rate plus a margin of 1.25% to 2.75% per annum (“Base Rate Borrowings”) or (ii) an adjusted LIBOR rate plus a margin of 2.25% to 3.75% per annum (“LIBOR Borrowings”). The applicable margin is determined based on our leverage ratio, as defined in the Credit Agreement. Generally, the interest rate on our Credit Agreement borrowings ranged between 4.74% and 5.63% for the three months ended March 31, 2018 and 3.90% and 4.73% for the three months ended March 31, 2017. Interest on Base Rate Borrowings is payable monthly. Interest on LIBOR Borrowings is paid upon maturity of the underlying LIBOR contract, but no less often than quarterly. Commitment fees are charged at a rate of 0.50% on any unused credit and are payable quarterly. Interest paid during the three months ended March 31, 2018 and 2017 was $1.8 million and $1.6 million, respectively, including commitment fees.
Our Credit Agreement contains various customary affirmative and negative covenants and restrictive provisions. Our Credit Agreement also requires maintenance of certain financial covenants, including a combined total adjusted leverage ratio (as defined in our Credit Agreement) of not more than 4.0 to 1.0 and an interest coverage ratio (as defined in our Credit Agreement) of not less than 3.0 to 1.0. At March 31, 2018, our combined total adjusted leverage ratio was 3.53 to 1.0 and our interest coverage ratio was 3.01 to 1.0, pursuant to the Credit Agreement. Upon the occurrence and during the continuation of an event of default, subject to the terms and conditions of our Credit Agreement, the lenders may declare any outstanding principal of our Credit Agreement debt, together with accrued and unpaid interest, to be immediately due and payable and may exercise the other remedies set forth or referred to in our Credit Agreement. We were in compliance with all debt covenants as of March 31, 2018. Working capital borrowings, which are fully secured by our net working capital, are subject to a monthly borrowing base and are excluded from our debt compliance ratios.
In addition, our Credit Agreement restricts our ability to make distributions on, or redeem or repurchase, our equity interests. However, we may make distributions of available cash so long as, both at the time of the distribution and after giving effect to the distribution, no default exists under our Credit Agreement, the borrowers and the guarantors are in compliance with the financial covenants, the borrowing base (which includes 100% of cash on hand) exceeds the amount of outstanding credit extensions under the Working Capital Facility by at least $5.0 million, and at least $5.0 million in lender commitments are available to be drawn under the Working Capital Facility.
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
Refinancing
Our current $200 million credit facility matures in December of 2018 and had approximately $132.9 million outstanding at March 31, 2018. In March of 2018, we successfully negotiated commitments for a new revolving credit facility with our existing bank group with a term that extends three years after closing (closing currently targeted before the bank commitment letters expire in the second quarter of 2018).
To reduce leverage, we negotiated the sale of our Pecos, Texas saltwater disposal facility and used the $4.0 million of proceeds to repay principal on our credit facility in January of 2018. In April of 2018, we utilized $5.0 million of cash-on-hand to reduce outstanding borrowings on our credit facility and intend to use the proceeds from the sale of our Orla, Texas saltwater disposal facility (approximately $8.25 million) to reduce our borrowings under our Credit Agreement prior to our closing on the new credit facility anticipated in the second quarter of 2018. The new credit facility will have a maximum capacity of $90.0 million, with a $20.0 million accordion feature (for a total of $110.0 million). Under the new credit facility, we will be able to borrow up to 3.75 times our trailing twelve-month adjusted EBITDA (“TTM EBITDA”) (as adjusted EBITDA is defined in the credit agreement) at the time of closing for senior debt. Additionally, we may incur additional indebtedness other than the new credit facility, provided the pro forma senior secured leverage ratio may not exceed 3.25 times TTM EBITDA and the total borrowings may not exceed 4.75 times TTM EBITDA. As part of the refinancing, Holdings agreed to waive the omnibus fee to support us in the event leverage exceeds 3.75 times trailing twelve-month adjusted EBITDA during the term of the facility. The new credit facility will have customary covenants, including but not limited to a maximum senior leverage ratio of 4.0 times adjusted EBITDA, or 3.25 times senior secured leverage if additional debt not to exceed 1.5 times is incurred, and a minimum interest coverage ratio of 3.0 times adjusted EBITDA. The new facility will no longer have a required borrowing base calculation and borrowings under the new agreement will bear interest, at our option, on a leveraged based grid pricing at (i) a base rate plus a margin of 1.5% to 3.0% per annum or (ii) a LIBOR rate plus a margin of 2.5% to 4.0% per annum. The facility will also include a 50 basis point non-use fee consistent with the current facility, and no amortization will be required during the term. We have received commitment letters from banks for the full amount of the facility, and these commitment letters will remain in effect through May 31, 2018. We expect to borrow approximately $77.1 million on the new credit facility at closing prior to the lapsing of the commitment letters.
To successfully obtain commitments to refinance our existing credit facility, our lenders required that we materially de-leverage the Partnership. To ensure the successful refinancing, we received a commitment from an affiliate of Holdings to invest up to $50.0 million of preferred equity (the “PIPE”). The conflicts committee of our board of directors and their advisors negotiated and approved the final terms of the PIPE. The terms of the PIPE include standard and customary provisions for similar type arrangements and the proposed PIPE does not include any warrants, or require payment of any origination fees. The PIPE will have a conversion premium that is 15% greater than our common unit trailing closing price at the time of issuance. The holder of the preferred units will be entitled to receive quarterly distributions that represent an annual return of 9.5% on the investment. Of this 9.5% annual return, we will be required to pay at least 2.5% in cash and will have the option to pay the remaining 7.0% in kind (in the form of issuing additional preferred units) for the first 12 quarters after closing. After the third anniversary of the closing date, the holder of the preferred units will have the option to convert the preferred units into common units on a one-for-one basis. If certain conditions are met after the third anniversary of the closing date, we will have the option to cause the preferred units to convert to common units. After the third anniversary of the closing date, we will also have the option to redeem the preferred units.
We expect the proceeds from the PIPE and the use of cash on hand to reduce the outstanding balance on the Credit Agreement from $132.9 million at March 31, 2018 to approximately $77.1 million upon closing of the new credit facility. We believe the new credit facility will support our current business requirements. We expect to be able to maintain compliance with the financial ratios and other covenants specified in the new credit facility.
Holdings has continued to support us during the oil and gas economic downturn and provided sponsor support of $6.3 and $4.1 million during the years ended December 31, 2016 and 2017 respectively. The owners of Holdings, who collectively own approximately 64.0% of our common units, will waive the omnibus fee due from us, if needed, as required under the new credit facility in order to help us maintain compliance with the financial ratio covenants through the maturity date of the new credit agreement.
5. Income Taxes
The income tax expense reported in our Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017 differs from the statutory tax rates of 21% in 2018 and 35% in 2017 due to the fact that, as a partnership, we are generally not subject to U.S. federal income taxes. Our income tax provision relates primarily to our corporate subsidiary that services public utility customers, which is subject to U.S. federal income taxes, our Canadian subsidiary, which is subject to Canadian income taxes, and to certain state income taxes, including the Texas franchise tax.
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
6. Equity Compensation
Our General Partner has adopted a long-term incentive plan (“LTIP”) that authorizes the issuance of up to 1,182,600 common units. Certain of our directors and employees have been awarded Phantom Restricted Units under the terms of the LTIP. The fair value of the awards is determined based on the quoted market value of the publicly-traded common units at each grant date, adjusted for forfeiture discounts attributable to the units awarded. Compensation expense is recorded on a straight-line basis over the vesting period of the grant. We recorded expense of $0.2 million and $0.4 million during the three months ended March 31, 2018 and 2017, respectively, related to the unit awards.
The following table summarizes the LTIP Unit activity for the three months ended March 31, 2018 and 2017:
|
|
Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Number
of Units
|
|
|
Weighted
Average
Grant
Date Fair
Value / Unit
|
|
|
Number
of Units
|
|
|
Weighted
Average
Grant
Date Fair
Value / Unit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units at January 1
|
|
|
664,509
|
|
|
$
|
8.42
|
|
|
|
573,902
|
|
|
$
|
9.86
|
|
Units granted
|
|
|
16,668
|
|
|
$
|
4.76
|
|
|
|
245,331
|
|
|
$
|
7.16
|
|
Units vested
|
|
|
(54,306
|
)
|
|
$
|
13.14
|
|
|
|
(26,366
|
)
|
|
$
|
15.25
|
|
Units forfeited
|
|
|
(13,971
|
)
|
|
$
|
6.15
|
|
|
|
(9,328
|
)
|
|
$
|
9.50
|
|
Units at March 31
|
|
|
612,900
|
|
|
$
|
8.00
|
|
|
|
783,539
|
|
|
$
|
8.83
|
|
The majority of the common unit awards vest in three tranches, with one-third of the units vesting three years from the grant date, one-third vesting four years from the grant date, and one-third vesting five years from the grant date. However, certain of the awards have different, and typically shorter, vesting periods. Two grants, totaling 77,495 units, vest three years from the grant dates, contingent upon the recipient meeting certain performance targets. Total unearned compensation associated with the LTIP at March 31, 2018 was $2.8 million with an average remaining life of 2.0 years.
During April 2018, as part of our annual review process, we granted 376,816 Phantom Restricted Units to employees and directors.
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
7. Related-Party Transactions
Omnibus Agreement
We are party to an omnibus agreement with Holdings and other related parties. The omnibus agreement governs the following matters, among other things:
|
●
|
our payment of a quarterly administrative fee in the amount of $1.0 million to Holdings, for providing certain partnership overhead services, including certain executive management services by certain officers of our General Partner, and payroll services for substantially all employees required to manage and operate our businesses. This fee also includes the incremental general and administrative expenses we incur as a result of being a publicly traded partnership. For the quarter ended March 31, 2017, Holdings provided sponsor support to us by waiving payment of the quarterly administrative fee;
|
|
●
|
our right of first offer on Holdings’ and its subsidiaries’ assets used in, and entities primarily engaged in, providing saltwater disposal and other water and environmental services; and
|
|
●
|
indemnification of us by Holdings for certain environmental and other liabilities, including events and conditions associated with the operation of assets that occurred prior to the closing of the IPO and our obligation to indemnify Holdings for events and conditions associated with the operation of our assets that occur after the closing of the IPO and for environmental liabilities related to our assets to the extent Holdings is not required to indemnify us.
|
So long as Holdings controls our General Partner, the omnibus agreement will remain in full force and effect, unless we and Holdings agree to terminate it sooner. If Holdings ceases to control our General Partner, either party may terminate the omnibus agreement, provided that the indemnification obligations will remain in full force and effect in accordance with their terms. We and Holdings may agree to further amend the omnibus agreement; however, amendments that the General Partner determines are adverse to our unitholders will also require the approval of the Conflicts Committee of our Board of Directors. As part of our Refinancing (see Note 4 –
Credit Agreement
), Holdings agreed to waive the omnibus fee to support us in the event leverage exceeds 3.75 times our trailing twelve-month Adjusted EBITDA during the term of the facility.
Holdings incurred expenses of $0.9 million on our behalf during the three months ended March 31, 2017. These expenses are reported within
G
eneral and administrative
in the accompanying Unaudited Condensed Consolidated Statements of Operations.
We have also received a commitment from an affiliate of Holdings to invest in the PIPE, as discussed in Note 4.
Alati Arnegard, LLC
We provide management services to Alati Arnegard, LLC ("Arnegard"), an entity that we hold a 25% equity interest. Management fee revenue earned from Arnegard totaled $0.1 million and $0.2 million for the three months ended March 31, 2018 and 2017, respectively. Accounts receivable from Arnegard were $0.2 million and $0.1 million at March 31, 2018 and December 31, 2017, respectively, and are included in
Trade accounts receivable, net
in the Unaudited Condensed Consolidated Balance Sheets.
CF Inspection Management, LLC
We have also entered into a joint venture with CF Inspection, a nationally-qualified minority-owned inspection firm affiliated with one of Holdings' owners. CF Inspection serves energy companies that require a minority-owned vendor. We own 49% of CF Inspection and Cynthia A. Field, the daughter of Charles C. Stephenson, Jr., owns the remaining 51% of CF Inspection. For the three months ended March 31, 2018, CF Inspection represented approximately 2.8% of our consolidated revenue.
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
8. Earnings per Unit and Cash Distributions
Earnings Per Unit
Our net income (loss) is attributable and allocable to three ownership types: (1) our noncontrolling interests in certain subsidiaries, (2) our General Partner and (3) our common unitholders. Income attributable to noncontrolling interests represent 49% of the income (loss) generated by Brown and 51% of the income (loss) generated by CF Inspection. Income attributable to the General Partner includes expenses incurred by Holdings and not charged to us. Income attributable to common units represents our remaining net income (loss), after consideration of amounts attributable to noncontrolling interests and to the General Partner; such amounts were allocated to common units ratably based on the weighted-average number of such units outstanding during the relevant time period. In February 2017, all of the then-outstanding subordinated units converted to common units. Since the subordinated units did not share in the distribution of cash generated subsequent to December 31, 2016, we did not allocate any income or loss subsequent to that date to the subordinated units.
Diluted net income (loss) per common unit includes the dilutive impact of unvested unit awards granted as share-based compensation to employees and directors. Such awards had no dilutive effect during the three months ended March 31, 2017, as we incurred a net loss attributable to limited partners during that period.
Cash Distributions
The following table summarizes the cash distributions declared and paid, or expected to be paid, to our limited partners since our IPO.
Payment Date
|
|
Per Unit Cash Distributions
|
|
|
Total Cash Distributions
|
|
|
Total Cash Distributions to Affiliates (a)
|
|
|
|
|
|
|
(in thousands)
|
|
Total 2014 Distributions
|
|
$
|
1.104646
|
|
|
$
|
13,064
|
|
|
$
|
8,296
|
|
Total 2015 Distributions
|
|
|
1.625652
|
|
|
|
19,232
|
|
|
|
12,284
|
|
Total 2016 Distributions
|
|
|
1.625652
|
|
|
|
19,258
|
|
|
|
12,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 13, 2017
|
|
|
0.406413
|
|
|
|
4,823
|
|
|
|
3,107
|
|
May 13, 2017
|
|
|
0.210000
|
|
|
|
2,495
|
|
|
|
1,606
|
|
August 12, 2017
|
|
|
0.210000
|
|
|
|
2,495
|
|
|
|
1,607
|
|
November 14, 2017
|
|
|
0.210000
|
|
|
|
2,497
|
|
|
|
1,608
|
|
Total 2017 Distributions
|
|
|
1.036413
|
|
|
|
12,310
|
|
|
|
7,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 14, 2018
|
|
|
0.210000
|
|
|
|
2,498
|
|
|
|
1,599
|
|
May 15, 2018 (b)
|
|
|
0.210000
|
|
|
|
2,506
|
|
|
|
1,604
|
|
Total 2018 Distributions (through May 15, 2018)
|
|
|
0.420000
|
|
|
|
5,004
|
|
|
|
3,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Distributions (through May 15, 2018 since IPO)
|
|
$
|
5.812363
|
|
|
$
|
68,868
|
|
|
$
|
44,125
|
|
|
(a)
|
Approximately 64.0% of the Partnership’s outstanding units at March 31, 2018 were held by affiliates.
|
|
(b)
|
First quarter 2018 distribution was declared and will be paid in the second quarter of 2018.
|
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
9. Commitments and Contingencies
Security Deposits
We have various performance obligations which are secured with short-term security deposits of $0.6 million and $0.5 million at March 31, 2018 and December 31, 2017, respectively, included in
Prepaid expenses and other
on the Unaudited Condensed Consolidated Balance Sheets.
Employment Contract Commitments
We have employment agreements with certain executives. These agreements provide for minimum annual compensation for specified terms, after which employment will continue on an “at will” basis. Certain agreements provide for severance payments in the event of specified termination of employment. At March 31, 2018, the aggregate commitment for future compensation and severance was approximately $0.6 million.
Compliance Audit Contingencies
Certain customer master service agreements (“MSAs”) offer our customers the opportunity to perform periodic compliance audits, which include the examination of the accuracy of our invoices. Should our invoices be determined to be inconsistent with the MSA, the MSAs may provide the customer the right to receive a credit or refund for any overcharges identified. At any given time, we may have multiple audits ongoing. As of March 31, 2018 and December 31, 2017, there have been no reserves established for compliance audit contingencies.
Legal Proceedings
On October 5, 2017, a former inspector for TIR LLC and Cypress Energy Management - TIR, LLC ("CEM TIR") filed a putative collective action lawsuit alleging that TIR LLC, CEM TIR and Cypress Energy Partners – Texas, LLC failed to pay a class of workers overtime in compliance with the Fair Labor Standards Act (“FLSA”) titled James Fithian, et al v. TIR LLC, et al in the United States District Court for the Western District of Texas, Midland Division. The plaintiff subsequently withdrew his action and filed a similar action in Oklahoma State Court, District of Tulsa County. The plaintiff alleges he was a non-exempt employee of TIR LLC and that he and other potential class members were not paid overtime in compliance with the FLSA. The plaintiff seeks to proceed as a collective action and to receive unpaid overtime and other monetary damages, including attorney’s fees. No estimate of potential loss can be determined at this time and TIR LLC, CEM TIR and Cypress Energy Partners – Texas, LLC deny the claims. On March 28, 2018, the court granted a joint stipulation of dismissal without prejudice in regards to TIR LLC and Cypress Energy Partners – Texas, LLC, as neither of those parties were employers of the plaintiff or the putative class members during the time period that is the subject of the lawsuit. As a result of such dismissal, none of our subsidiaries are parties to the lawsuit.
10. Sale of Saltwater Disposal Facility
In January 2018, we sold Cypress Energy Partners – Pecos SWD, LLC (“Pecos”), which owns our saltwater disposal facility in Pecos, Texas, to an unrelated party. We received $4.0 million of cash proceeds and a royalty interest in the future revenues of the facility. We have treated this as a sale of a business and will record the royalties in the periods in which they are received. We recorded a gain on this transaction of $1.8 million, which represents the cash proceeds less the net book value of assets sold. This gain, net of $0.1 million of charges related to the abandonment of a capital expansion project is presented within
Gain on asset disposals, net
on the Unaudited Condensed Consolidated Statements of Operations. Upon completion of the sale, we used the cash proceeds from the sale to repay $4.0 million of outstanding borrowings under our Credit Agreement.
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
The assets and liabilities of Pecos are presented as held for sale in the December 31, 2017 Unaudited Condensed Consolidated Balance Sheet. Included in the
Assets held for sale
is approximately $2.0 million of allocated goodwill, which we calculated based on the estimated fair value of the Pecos facility relative to the estimated fair value of the Water Services segment as a whole. The following table summarizes the components of assets and liabilities held for sale at December 31, 2017 (in thousands):
Assets:
|
|
|
|
Current assets
|
|
$
|
84
|
|
Property and equipment - net
|
|
|
104
|
|
Goodwill
|
|
|
1,984
|
|
|
|
$
|
2,172
|
|
Liabilities:
|
|
|
|
|
Accounts payable and accrued liabilites
|
|
$
|
79
|
|
Asset retirement obligation
|
|
|
18
|
|
|
|
$
|
97
|
|
The Pecos facility generated revenues of $0.2 million and operating income of approximately $0.1 million during the three months ended March 31, 2017.
11. Subsequent Event
In May 2018, we sold our subsidiary that owns a saltwater disposal facility in Orla, Texas to an unrelated party for $8.25 million. We plan to use the proceeds to repay $8.25 million of outstanding borrowings under our Credit Agreement.
12. Reportable Segments
Our operations consist of three reportable segments: (i) Pipeline Inspection, (ii) Integrity Services and (iii) Water Services.
Pipeline Inspection –
This segment represents our pipeline inspection services operations. This segment provides independent inspection and integrity services to various energy, public utility, and pipeline companies. The inspectors in this segment perform a variety of inspection services on midstream pipelines, gathering and distribution systems, including data gathering and supervision of third-party construction, inspection, and maintenance and repair projects. Our results in this segment are driven primarily by the number and type of inspectors performing services for customers and the fees charged for those services, which depend on the nature and duration of the projects.
Integrity Services
– This segment provides independent hydro-testing integrity services to major natural gas and petroleum pipeline companies, and to pipeline construction companies located throughout the United States. Field personnel in this segment primarily perform hydrostatic testing on newly-constructed and existing natural gas and petroleum pipelines. Results in this segment are driven primarily by field personnel performing services for customers and the fees charged for those services, which depend on the nature, scope, and duration of the projects. Revenue during the three months ended March 31, 2018 included $0.3 million associated with additional billings on a project that we completed in the fourth quarter of 2017 (we recognized the revenue upon receipt of customer acknowledgment of the additional fees.)
Water Services –
This segment includes the operations of saltwater disposal facilities (nine facilities during the three months ended March 31, 2018, and ten facilities during the three months ended March 31, 2017), fees related to the management of a third party saltwater disposal facility, as well as an equity ownership in one managed facility. We aggregate these operating entities for reporting purposes as they have similar long-term economic characteristics and have centralized management and processing. Segment results are driven primarily by the volumes of produced water and flowback water we inject into our saltwater disposal facilities and the fees we charge for our services. These fees are charged on a per barrel basis and vary based on the quantity and type of saltwater disposed, competitive dynamics and operating costs. In addition, for minimal marginal cost, we generate revenue by selling residual oil we recover from the disposed water.
Other
–
These amounts represent general and administrative expenses not specifically allocable to our reportable segments.
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
The following tables show operating income (loss) by reportable segment and a reconciliation of segment operating income (loss) to net income (loss) before income tax expense.
|
|
Pipeline Inspection
|
|
|
Integrity Services
|
|
|
Water Services
|
|
|
Other
|
|
|
Total
|
|
|
|
(in thousands)
|
|
Three months ended March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
57,967
|
|
|
$
|
4,350
|
|
|
$
|
2,509
|
|
|
$
|
—
|
|
|
$
|
64,826
|
|
Costs of services
|
|
|
52,480
|
|
|
|
3,157
|
|
|
|
1,060
|
|
|
|
—
|
|
|
|
56,697
|
|
Gross margin
|
|
|
5,487
|
|
|
|
1,193
|
|
|
|
1,449
|
|
|
|
—
|
|
|
|
8,129
|
|
General and administrative
|
|
|
3,759
|
|
|
|
545
|
|
|
|
836
|
|
|
|
315
|
|
|
|
5,455
|
|
Depreciation, amortization and accretion
|
|
|
573
|
|
|
|
158
|
|
|
|
403
|
|
|
|
—
|
|
|
|
1,134
|
|
Impairments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(Gain) loss on asset disposal, net
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,709
|
)
|
|
|
—
|
|
|
|
(1,709
|
)
|
Operating income (loss)
|
|
$
|
1,155
|
|
|
$
|
490
|
|
|
$
|
1,919
|
|
|
$
|
(315
|
)
|
|
|
3,249
|
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,956
|
)
|
Losses on foreign currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(334
|
)
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
Net income before income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
62,148
|
|
|
$
|
696
|
|
|
$
|
1,878
|
|
|
$
|
—
|
|
|
$
|
64,722
|
|
Costs of services
|
|
|
56,601
|
|
|
|
904
|
|
|
|
888
|
|
|
|
—
|
|
|
|
58,393
|
|
Gross margin
|
|
|
5,547
|
|
|
|
(208
|
)
|
|
|
990
|
|
|
|
—
|
|
|
|
6,329
|
|
General and administrative
|
|
|
3,254
|
|
|
|
446
|
|
|
|
218
|
|
|
|
1,192
|
(a)
|
|
|
5,110
|
|
Depreciation, amortization and accretion
|
|
|
599
|
|
|
|
157
|
|
|
|
415
|
|
|
|
—
|
|
|
|
1,171
|
|
Impairments
|
|
|
1,329
|
|
|
|
1,581
|
|
|
|
688
|
|
|
|
—
|
|
|
|
3,598
|
|
Operating income (loss)
|
|
$
|
365
|
|
|
$
|
(2,392
|
)
|
|
$
|
(331
|
)
|
|
$
|
(1,192
|
)
|
|
|
(3,550
|
)
|
Interest expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,709
|
)
|
Other, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
|
|
Net loss before income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(5,214
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
$
|
123,063
|
|
|
$
|
11,161
|
|
|
$
|
40,272
|
|
|
$
|
(13,135
|
)
|
|
$
|
161,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
$
|
124,669
|
|
|
$
|
10,481
|
|
|
$
|
41,693
|
|
|
$
|
(13,640
|
)
|
|
$
|
163,203
|
|
|
(a)
|
Amount includes $0.9 million of allocated general and administrative expenses incurred by Holdings but not charged to us. For the three months ended March 31, 2017, Holdings waived the administrative fee specified in the omnibus agreement.
|
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
13. Condensed Consolidating Financial Information
We may issue debt securities that would be fully and unconditionally guaranteed, jointly and severally by certain guarantor subsidiaries. There are no restrictions on our ability to obtain cash dividends or other distributions of funds from the guarantor subsidiaries. The following financial information reflects consolidating financial information of the Partnership and its wholly-owned guarantor subsidiaries and non-guarantor subsidiaries for the periods indicated. The information is presented in accordance with the requirements of Rule 3-10 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of financial position, results of operations, or cash flows had the guarantor subsidiaries or non-guarantor subsidiaries operated as independent entities. We have not presented separate financial and narrative information for each of the guarantor subsidiaries or non-guarantor subsidiaries because we believe such financial and narrative information would not provide any additional information that would be material in evaluating the financial sufficiency of the guarantor subsidiaries and non-guarantor subsidiaries to guarantee any debt securities.
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
Condensed Consolidating Balance Sheet
As of March 31, 2018
(in thousands)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
37
|
|
|
$
|
17,458
|
|
|
$
|
8,645
|
|
|
$
|
—
|
|
|
$
|
26,140
|
|
Trade accounts receivable, net
|
|
|
—
|
|
|
|
34,983
|
|
|
|
5,813
|
|
|
|
(721
|
)
|
|
|
40,075
|
|
Accounts receivable - affiliates
|
|
|
—
|
|
|
|
18,488
|
|
|
|
—
|
|
|
|
(18,488
|
)
|
|
|
—
|
|
Prepaid expenses and other
|
|
|
476
|
|
|
|
1,047
|
|
|
|
21
|
|
|
|
—
|
|
|
|
1,544
|
|
Total current assets
|
|
|
513
|
|
|
|
71,976
|
|
|
|
14,479
|
|
|
|
(19,209
|
)
|
|
|
67,759
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, at cost
|
|
|
—
|
|
|
|
22,042
|
|
|
|
3,090
|
|
|
|
—
|
|
|
|
25,132
|
|
Less: Accumulated depreciation
|
|
|
—
|
|
|
|
8,268
|
|
|
|
1,747
|
|
|
|
—
|
|
|
|
10,015
|
|
Total property and equipment, net
|
|
|
—
|
|
|
|
13,774
|
|
|
|
1,343
|
|
|
|
—
|
|
|
|
15,117
|
|
Intangible assets, net
|
|
|
—
|
|
|
|
21,070
|
|
|
|
3,727
|
|
|
|
—
|
|
|
|
24,797
|
|
Goodwill
|
|
|
—
|
|
|
|
51,928
|
|
|
|
1,467
|
|
|
|
—
|
|
|
|
53,395
|
|
Investment in subsidiaries
|
|
|
27,253
|
|
|
|
(2,898
|
)
|
|
|
—
|
|
|
|
(24,355
|
)
|
|
|
—
|
|
Notes receivable - affiliates
|
|
|
—
|
|
|
|
13,740
|
|
|
|
—
|
|
|
|
(13,740
|
)
|
|
|
—
|
|
Other assets
|
|
|
88
|
|
|
|
186
|
|
|
|
19
|
|
|
|
—
|
|
|
|
293
|
|
Total assets
|
|
$
|
27,854
|
|
|
$
|
169,776
|
|
|
$
|
21,035
|
|
|
$
|
(57,304
|
)
|
|
$
|
161,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND OWNERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
—
|
|
|
$
|
4,545
|
|
|
$
|
1,490
|
|
|
$
|
(693
|
)
|
|
$
|
5,342
|
|
Accounts payable - affiliates
|
|
|
15,758
|
|
|
|
—
|
|
|
|
6,454
|
|
|
|
(18,487
|
)
|
|
|
3,725
|
|
Accrued payroll and other
|
|
|
40
|
|
|
|
9,863
|
|
|
|
417
|
|
|
|
(29
|
)
|
|
|
10,291
|
|
Income taxes payable
|
|
|
—
|
|
|
|
677
|
|
|
|
50
|
|
|
|
—
|
|
|
|
727
|
|
Current portion of long-term debt
|
|
|
(453
|
)
|
|
|
127,400
|
|
|
|
5,500
|
|
|
|
—
|
|
|
|
132,447
|
|
Total current liabilities
|
|
|
15,345
|
|
|
|
142,485
|
|
|
|
13,911
|
|
|
|
(19,209
|
)
|
|
|
152,532
|
|
Notes payable - affiliates
|
|
|
—
|
|
|
|
—
|
|
|
|
13,740
|
|
|
|
(13,740
|
)
|
|
|
—
|
|
Asset retirement obligations
|
|
|
—
|
|
|
|
143
|
|
|
|
—
|
|
|
|
—
|
|
|
|
143
|
|
Total liabilities
|
|
|
15,345
|
|
|
|
142,628
|
|
|
|
27,651
|
|
|
|
(32,949
|
)
|
|
|
152,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total partners’ capital
|
|
|
8,356
|
|
|
|
22,995
|
|
|
|
(6,616
|
)
|
|
|
(20,202
|
)
|
|
|
4,533
|
|
Non-controlling interests
|
|
|
4,153
|
|
|
|
4,153
|
|
|
|
—
|
|
|
|
(4,153
|
)
|
|
|
4,153
|
|
Total owners’ equity
|
|
|
12,509
|
|
|
|
27,148
|
|
|
|
(6,616
|
)
|
|
|
(24,355
|
)
|
|
|
8,686
|
|
Total liabilities and owners’ equity
|
|
$
|
27,854
|
|
|
$
|
169,776
|
|
|
$
|
21,035
|
|
|
$
|
(57,304
|
)
|
|
$
|
161,361
|
|
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
Consolidating Balance Sheet
As of December 31, 2017
(in thousands)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
224
|
|
|
$
|
14,920
|
|
|
$
|
9,364
|
|
|
$
|
—
|
|
|
$
|
24,508
|
|
Trade accounts receivable, net
|
|
|
—
|
|
|
|
38,077
|
|
|
|
4,259
|
|
|
|
(643
|
)
|
|
|
41,693
|
|
Accounts receivable - affiliates
|
|
|
—
|
|
|
|
19,249
|
|
|
|
—
|
|
|
|
(19,249
|
)
|
|
|
—
|
|
Prepaid expenses and other
|
|
|
657
|
|
|
|
1,602
|
|
|
|
35
|
|
|
|
—
|
|
|
|
2,294
|
|
Assets held for sale
|
|
|
—
|
|
|
|
2,172
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,172
|
|
Total current assets
|
|
|
881
|
|
|
|
76,020
|
|
|
|
13,658
|
|
|
|
(19,892
|
)
|
|
|
70,667
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, at cost
|
|
|
—
|
|
|
|
19,673
|
|
|
|
3,027
|
|
|
|
—
|
|
|
|
22,700
|
|
Less: Accumulated depreciation
|
|
|
—
|
|
|
|
7,729
|
|
|
|
1,583
|
|
|
|
—
|
|
|
|
9,312
|
|
Total property and equipment, net
|
|
|
—
|
|
|
|
11,944
|
|
|
|
1,444
|
|
|
|
—
|
|
|
|
13,388
|
|
Intangible assets, net
|
|
|
—
|
|
|
|
21,614
|
|
|
|
3,863
|
|
|
|
—
|
|
|
|
25,477
|
|
Goodwill
|
|
|
—
|
|
|
|
51,930
|
|
|
|
1,505
|
|
|
|
—
|
|
|
|
53,435
|
|
Investment in subsidiaries
|
|
|
28,280
|
|
|
|
(3,155
|
)
|
|
|
—
|
|
|
|
(25,125
|
)
|
|
|
—
|
|
Notes receivable - affiliates
|
|
|
—
|
|
|
|
13,821
|
|
|
|
—
|
|
|
|
(13,821
|
)
|
|
|
—
|
|
Other assets
|
|
|
—
|
|
|
|
209
|
|
|
|
27
|
|
|
|
—
|
|
|
|
236
|
|
Total assets
|
|
$
|
29,161
|
|
|
$
|
172,383
|
|
|
$
|
20,497
|
|
|
$
|
(58,838
|
)
|
|
$
|
163,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND OWNERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
—
|
|
|
$
|
3,401
|
|
|
$
|
1,069
|
|
|
$
|
(713
|
)
|
|
$
|
3,757
|
|
Accounts payable - affiliates
|
|
|
15,824
|
|
|
|
—
|
|
|
|
6,598
|
|
|
|
(19,249
|
)
|
|
|
3,173
|
|
Accrued payroll and other
|
|
|
1
|
|
|
|
8,761
|
|
|
|
277
|
|
|
|
70
|
|
|
|
9,109
|
|
Liabilities held for sale
|
|
|
—
|
|
|
|
97
|
|
|
|
—
|
|
|
|
—
|
|
|
|
97
|
|
Income taxes payable
|
|
|
—
|
|
|
|
591
|
|
|
|
55
|
|
|
|
—
|
|
|
|
646
|
|
Current portion of long-term debt
|
|
|
(607
|
)
|
|
|
131,400
|
|
|
|
5,500
|
|
|
|
—
|
|
|
|
136,293
|
|
Total current liabilities
|
|
|
15,218
|
|
|
|
144,250
|
|
|
|
13,499
|
|
|
|
(19,892
|
)
|
|
|
153,075
|
|
Notes payable - affiliates
|
|
|
—
|
|
|
|
—
|
|
|
|
13,821
|
|
|
|
(13,821
|
)
|
|
|
—
|
|
Asset retirement obligations
|
|
|
—
|
|
|
|
143
|
|
|
|
—
|
|
|
|
—
|
|
|
|
143
|
|
Total liabilities
|
|
|
15,218
|
|
|
|
144,393
|
|
|
|
27,320
|
|
|
|
(33,713
|
)
|
|
|
153,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies - Note 10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owners’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total partners’ capital
|
|
|
10,019
|
|
|
|
24,066
|
|
|
|
(6,823
|
)
|
|
|
(21,201
|
)
|
|
|
6,061
|
|
Non-controlling interests
|
|
|
3,924
|
|
|
|
3,924
|
|
|
|
—
|
|
|
|
(3,924
|
)
|
|
|
3,924
|
|
Total owners’ equity
|
|
|
13,943
|
|
|
|
27,990
|
|
|
|
(6,823
|
)
|
|
|
(25,125
|
)
|
|
|
9,985
|
|
Total liabilities and owners’ equity
|
|
$
|
29,161
|
|
|
$
|
172,383
|
|
|
$
|
20,497
|
|
|
$
|
(58,838
|
)
|
|
$
|
163,203
|
|
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
Condensed Consolidating Statement of Operations
For the Three Months Ended March 31, 2018
(in thousands)
|
|
Parent
|
|
|
Guarantors
|
|
Non-
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenue
|
|
$
|
—
|
|
|
$
|
59,795
|
|
|
$
|
6,850
|
|
|
$
|
(1,819
|
)
|
|
$
|
64,826
|
|
Costs of services
|
|
|
—
|
|
|
|
52,909
|
|
|
|
5,607
|
|
|
|
(1,819
|
)
|
|
|
56,697
|
|
Gross margin
|
|
|
—
|
|
|
|
6,886
|
|
|
|
1,243
|
|
|
|
—
|
|
|
|
8,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
315
|
|
|
|
4,534
|
|
|
|
606
|
|
|
|
—
|
|
|
|
5,455
|
|
Depreciation, amortization and accretion
|
|
|
—
|
|
|
|
974
|
|
|
|
160
|
|
|
|
—
|
|
|
|
1,134
|
|
Gain on asset disposals, net
|
|
|
—
|
|
|
|
(1,709
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,709
|
)
|
Operating income (loss)
|
|
|
(315
|
)
|
|
|
3,087
|
|
|
|
477
|
|
|
|
—
|
|
|
|
3,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity earnings (loss) in subsidiaries
|
|
|
1,598
|
|
|
|
339
|
|
|
|
—
|
|
|
|
(1,937
|
)
|
|
|
—
|
|
Interest expense, net
|
|
|
(235
|
)
|
|
|
(1,491
|
)
|
|
|
(230
|
)
|
|
|
—
|
|
|
|
(1,956
|
)
|
Foreign currency losses
|
|
|
—
|
|
|
|
(81
|
)
|
|
|
(253
|
)
|
|
|
—
|
|
|
|
(334
|
)
|
Other, net
|
|
|
—
|
|
|
|
66
|
|
|
|
16
|
|
|
|
—
|
|
|
|
82
|
|
Net income (loss) before income tax expense
|
|
|
1,048
|
|
|
|
1,920
|
|
|
|
10
|
|
|
|
(1,937
|
)
|
|
|
1,041
|
|
Income tax expense (benefit)
|
|
|
—
|
|
|
|
87
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
81
|
|
Net income (loss)
|
|
|
1,048
|
|
|
|
1,833
|
|
|
|
16
|
|
|
|
(1,937
|
)
|
|
|
960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interests
|
|
|
—
|
|
|
|
235
|
|
|
|
—
|
|
|
|
—
|
|
|
|
235
|
|
Net income (loss) attributable to limited partners
|
|
$
|
1,048
|
|
|
$
|
1,598
|
|
|
$
|
16
|
|
|
$
|
(1,937
|
)
|
|
$
|
725
|
|
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
Condensed Consolidating Statement of Operations
For the Three Months Ended March 31, 2017
(in thousands)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Revenue
|
|
$
|
—
|
|
|
$
|
49,669
|
|
|
$
|
16,420
|
|
|
$
|
(1,367
|
)
|
|
$
|
64,722
|
|
Costs of services
|
|
|
—
|
|
|
|
44,099
|
|
|
|
15,661
|
|
|
|
(1,367
|
)
|
|
|
58,393
|
|
Gross margin
|
|
|
—
|
|
|
|
5,570
|
|
|
|
759
|
|
|
|
—
|
|
|
|
6,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
1,192
|
|
|
|
3,014
|
|
|
|
904
|
|
|
|
—
|
|
|
|
5,110
|
|
Depreciation, amortization and accretion
|
|
|
—
|
|
|
|
995
|
|
|
|
176
|
|
|
|
—
|
|
|
|
1,171
|
|
Impairments
|
|
|
—
|
|
|
|
688
|
|
|
|
2,910
|
|
|
|
—
|
|
|
|
3,598
|
|
Operating income (loss)
|
|
|
(1,192
|
)
|
|
|
873
|
|
|
|
(3,231
|
)
|
|
|
—
|
|
|
|
(3,550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity earnings (loss) in subsidiaries
|
|
|
(1,667
|
)
|
|
|
(2,498
|
)
|
|
|
—
|
|
|
|
4,165
|
|
|
|
—
|
|
Interest expense, net
|
|
|
(225
|
)
|
|
|
(1,288
|
)
|
|
|
(196
|
)
|
|
|
—
|
|
|
|
(1,709
|
)
|
Other, net
|
|
|
—
|
|
|
|
37
|
|
|
|
8
|
|
|
|
—
|
|
|
|
45
|
|
Net income (loss) before income tax expense
|
|
|
(3,084
|
)
|
|
|
(2,876
|
)
|
|
|
(3,419
|
)
|
|
|
4,165
|
|
|
|
(5,214
|
)
|
Income tax benefit
|
|
|
—
|
|
|
|
(44
|
)
|
|
|
(249
|
)
|
|
|
—
|
|
|
|
(293
|
)
|
Net income (loss)
|
|
|
(3,084
|
)
|
|
|
(2,832
|
)
|
|
|
(3,170
|
)
|
|
|
4,165
|
|
|
|
(4,921
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests
|
|
|
—
|
|
|
|
(1,165
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,165
|
)
|
Net income (loss) attributable to controlling interests
|
|
|
(3,084
|
)
|
|
|
(1,667
|
)
|
|
|
(3,170
|
)
|
|
|
4,165
|
|
|
|
(3,756
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to general partner
|
|
|
(921
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(921
|
)
|
Net income (loss) attributable to limited partners
|
|
$
|
(2,163
|
)
|
|
$
|
(1,667
|
)
|
|
$
|
(3,170
|
)
|
|
$
|
4,165
|
|
|
$
|
(2,835
|
)
|
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
Condensed Consolidating Statement of Comprehensive Income (Loss)
For the Three Months Ended March 31, 2018
(in thousands)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net income (loss)
|
|
$
|
1,048
|
|
|
$
|
1,833
|
|
|
$
|
16
|
|
|
$
|
(1,937
|
)
|
|
$
|
960
|
|
Other comprehensive income (loss) - foreign currency translation
|
|
|
—
|
|
|
|
126
|
|
|
|
(24
|
)
|
|
|
—
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
1,048
|
|
|
$
|
1,959
|
|
|
$
|
(8
|
)
|
|
$
|
(1,937
|
)
|
|
$
|
1,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to noncontrolling interests
|
|
|
—
|
|
|
|
235
|
|
|
|
—
|
|
|
|
—
|
|
|
|
235
|
|
Comprehensive income (loss) attributable to controlling interests
|
|
$
|
1,048
|
|
|
$
|
1,724
|
|
|
$
|
(8
|
)
|
|
$
|
(1,937
|
)
|
|
$
|
827
|
|
Condensed Consolidating Statement of Comprehensive Income (Loss)
For the Three Months Ended March 31, 2017
(in thousands)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Net income (loss)
|
|
$
|
(3,084
|
)
|
|
$
|
(2,832
|
)
|
|
$
|
(3,170
|
)
|
|
$
|
4,165
|
|
|
$
|
(4,921
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) - foreign currency translation
|
|
|
—
|
|
|
|
(57
|
)
|
|
|
118
|
|
|
|
—
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
(3,084
|
)
|
|
$
|
(2,889
|
)
|
|
$
|
(3,052
|
)
|
|
$
|
4,165
|
|
|
$
|
(4,860
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) attributable to noncontrolling interests
|
|
|
—
|
|
|
|
(1,165
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,165
|
)
|
Comprehensive (loss) attributable to general partner
|
|
|
(921
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(921
|
)
|
Comprehensive income (loss) attributable to controlling interests
|
|
$
|
(2,163
|
)
|
|
$
|
(1,724
|
)
|
|
$
|
(3,052
|
)
|
|
$
|
4,165
|
|
|
$
|
(2,774
|
)
|
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2018
(in thousands)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,048
|
|
|
$
|
1,833
|
|
|
$
|
16
|
|
|
$
|
(1,937
|
)
|
|
$
|
960
|
|
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and accretion
|
|
|
—
|
|
|
|
1,116
|
|
|
|
302
|
|
|
|
—
|
|
|
|
1,418
|
|
Gain on asset disposal
|
|
|
—
|
|
|
|
(1,709
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,709
|
)
|
Interest expense from debt issuance cost amortization
|
|
|
153
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
153
|
|
Equity-based compensation expense
|
|
|
212
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
212
|
|
Equity in earnings of investee
|
|
|
—
|
|
|
|
(36
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(36
|
)
|
Distributions from investee
|
|
|
—
|
|
|
|
63
|
|
|
|
—
|
|
|
|
—
|
|
|
|
63
|
|
Equity earnings in subsidiaries
|
|
|
(1,598
|
)
|
|
|
(339
|
)
|
|
|
—
|
|
|
|
1,937
|
|
|
|
—
|
|
Foreign currency losses
|
|
|
—
|
|
|
|
81
|
|
|
|
253
|
|
|
|
—
|
|
|
|
334
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
—
|
|
|
|
3,046
|
|
|
|
(1,559
|
)
|
|
|
78
|
|
|
|
1,565
|
|
Receivables from affiliates
|
|
|
—
|
|
|
|
761
|
|
|
|
—
|
|
|
|
(761
|
)
|
|
|
—
|
|
Prepaid expenses and other
|
|
|
93
|
|
|
|
630
|
|
|
|
20
|
|
|
|
(81
|
)
|
|
|
662
|
|
Accounts payable and accrued payroll and other
|
|
|
(26
|
)
|
|
|
1,712
|
|
|
|
529
|
|
|
|
764
|
|
|
|
2,979
|
|
Income taxes payable
|
|
|
—
|
|
|
|
86
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
82
|
|
Net cash provided by (used in) operating activities
|
|
|
(118
|
)
|
|
|
7,244
|
|
|
|
(443
|
)
|
|
|
—
|
|
|
|
6,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from fixed asset disposals
|
|
|
—
|
|
|
|
3,957
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,957
|
|
Purchases of property and equipment
|
|
|
—
|
|
|
|
(1,989
|
)
|
|
|
(69
|
)
|
|
|
—
|
|
|
|
(2,058
|
)
|
Net cash provided by (used in) investing activities
|
|
|
—
|
|
|
|
1,968
|
|
|
|
(69
|
)
|
|
|
—
|
|
|
|
1,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt
|
|
|
—
|
|
|
|
(4,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,000
|
)
|
Taxes paid related to net share settlement of equity-based compensation
|
|
|
(69
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(69
|
)
|
Distributions from subsidiaries
|
|
|
2,498
|
|
|
|
(2,490
|
)
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
—
|
|
Distributions to limited partners
|
|
|
(2,498
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,498
|
)
|
Distributions to noncontrolling members
|
|
|
—
|
|
|
|
—
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
(6
|
)
|
Net cash used in financing activities
|
|
|
(69
|
)
|
|
|
(6,490
|
)
|
|
|
(14
|
)
|
|
|
—
|
|
|
|
(6,573
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of exchange rates on cash
|
|
|
—
|
|
|
|
(184
|
)
|
|
|
(193
|
)
|
|
|
—
|
|
|
|
(377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(187
|
)
|
|
|
2,538
|
|
|
|
(719
|
)
|
|
|
—
|
|
|
|
1,632
|
|
Cash and cash equivalents, beginning of period
|
|
|
224
|
|
|
|
14,920
|
|
|
|
9,364
|
|
|
|
—
|
|
|
|
24,508
|
|
Cash and cash equivalents, end of period
|
|
$
|
37
|
|
|
$
|
17,458
|
|
|
$
|
8,645
|
|
|
$
|
—
|
|
|
$
|
26,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued capital expenditures
|
|
$
|
—
|
|
|
$
|
1,106
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,106
|
|
CYPRESS ENERGY PARTNERS, L.P.
Notes to the Unaudited Condensed Consolidated Financial Statements
Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2017
(in thousands)
|
|
Parent
|
|
|
Guarantors
|
|
|
Non-
Guarantors
|
|
|
Eliminations
|
|
|
Consolidated
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(3,084
|
)
|
|
$
|
(2,832
|
)
|
|
$
|
(3,170
|
)
|
|
$
|
4,165
|
|
|
$
|
(4,921
|
)
|
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and accretion
|
|
|
—
|
|
|
|
1,122
|
|
|
|
311
|
|
|
|
—
|
|
|
|
1,433
|
|
Impairments
|
|
|
—
|
|
|
|
688
|
|
|
|
2,910
|
|
|
|
—
|
|
|
|
3,598
|
|
Loss on asset disposal
|
|
|
—
|
|
|
|
11
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11
|
|
Interest expense from debt issuance cost amortization
|
|
|
146
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
146
|
|
Equity-based compensation expense
|
|
|
357
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
357
|
|
Equity in earnings of investee
|
|
|
—
|
|
|
|
(34
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(34
|
)
|
Equity earnings in subsidiaries
|
|
|
1,667
|
|
|
|
2,498
|
|
|
|
—
|
|
|
|
(4,165
|
)
|
|
|
—
|
|
Deferred tax benefit, net
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
(348
|
)
|
|
|
—
|
|
|
|
(356
|
)
|
Non-cash allocated expenses
|
|
|
921
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
921
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
—
|
|
|
|
1,973
|
|
|
|
(2,711
|
)
|
|
|
(117
|
)
|
|
|
(855
|
)
|
Receivables from affiliates
|
|
|
—
|
|
|
|
1,555
|
|
|
|
—
|
|
|
|
(1,555
|
)
|
|
|
—
|
|
Prepaid expenses and other
|
|
|
—
|
|
|
|
(120
|
)
|
|
|
(6
|
)
|
|
|
(19
|
)
|
|
|
(145
|
)
|
Accounts payable and accrued payroll and other
|
|
|
70
|
|
|
|
1,291
|
|
|
|
155
|
|
|
|
1,691
|
|
|
|
3,207
|
|
Income taxes payable
|
|
|
—
|
|
|
|
(44
|
)
|
|
|
33
|
|
|
|
—
|
|
|
|
(11
|
)
|
Net cash provided by (used in) operating activities
|
|
|
77
|
|
|
|
6,100
|
|
|
|
(2,826
|
)
|
|
|
—
|
|
|
|
3,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from fixed asset disposals
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
Purchases of property and equipment
|
|
|
—
|
|
|
|
(298
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(298
|
)
|
Net cash used in investing activities
|
|
|
—
|
|
|
|
(296
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from subsidiaries
|
|
|
4,823
|
|
|
|
(4,815
|
)
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
—
|
|
Distributions to limited partners
|
|
|
(4,823
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,823
|
)
|
Distributions to noncontrolling members
|
|
|
—
|
|
|
|
—
|
|
|
|
(8
|
)
|
|
|
—
|
|
|
|
(8
|
)
|
Taxes paid related to net share settlement of equity-based compensation
|
|
|
(77
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(77
|
)
|
Net cash used in financing activities
|
|
|
(77
|
)
|
|
|
(4,815
|
)
|
|
|
(16
|
)
|
|
|
—
|
|
|
|
(4,908
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of exchange rates on cash
|
|
|
—
|
|
|
|
(44
|
)
|
|
|
(17
|
)
|
|
|
—
|
|
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
—
|
|
|
|
945
|
|
|
|
(2,859
|
)
|
|
|
—
|
|
|
|
(1,914
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
695
|
|
|
|
20,251
|
|
|
|
5,747
|
|
|
|
—
|
|
|
|
26,693
|
|
Cash and cash equivalents, end of period
|
|
$
|
695
|
|
|
$
|
21,196
|
|
|
$
|
2,888
|
|
|
$
|
—
|
|
|
$
|
24,779
|
|