XNYS:NS NuStar Energy, L.P. Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _________________________________________
 FORM 10-Q
 _________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2012
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______            
Commission File Number 1-16417
  _________________________________________
NUSTAR ENERGY L.P.
(Exact name of registrant as specified in its charter)
  _________________________________________
 
Delaware
 
74-2956831
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
2330 North Loop 1604 West
San Antonio, Texas
 
78248
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (210) 918-2000
 _________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act:
Large accelerated filer
 
x
Accelerated filer
 
£
 
 
 
 
 
 
Non-accelerated filer
 
o  (Do not check if a smaller reporting company)
Smaller reporting company
 
£
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o   No  x
The number of common units outstanding as of March 31, 2012 was 70,756,078.
 
 
 
 
 



NUSTAR ENERGY L.P. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
 

2


PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, Except Unit Data)
 
March 31,
2012
 
December 31,
2011
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
37,696

 
$
17,497

Accounts receivable, net of allowance for doubtful accounts of $1,774
and $2,147 as of March 31, 2012 and December 31, 2011, respectively
495,982

 
547,808

Inventories
774,008

 
587,785

Income tax receivable
9,221

 
4,148

Other current assets
51,489

 
43,685

Total current assets
1,368,396

 
1,200,923

Property, plant and equipment, at cost
4,526,182

 
4,413,305

Accumulated depreciation and amortization
(1,026,553
)
 
(982,837
)
Property, plant and equipment, net
3,499,629

 
3,430,468

Intangible assets, net
36,900

 
38,923

Goodwill
849,040

 
846,717

Investment in joint venture
69,073

 
66,687

Deferred income tax asset
10,479

 
9,141

Other long-term assets, net
249,911

 
288,331

Total assets
$
6,083,428

 
$
5,881,190

Liabilities and Partners’ Equity
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt
$
831,374

 
$
364,959

Accounts payable
528,376

 
454,326

Payable to related party
15,312

 
6,735

Accrued interest payable
24,283

 
29,833

Accrued liabilities
75,711

 
71,270

Taxes other than income tax
13,014

 
13,455

Income tax payable
4,620

 
3,222

Total current liabilities
1,492,690

 
943,800

Long-term debt, less current portion
1,690,038

 
1,928,071

Long-term payable to related party
13,672

 
14,502

Deferred income tax liability
36,670

 
35,437

Other long-term liabilities
86,140

 
95,045

Commitments and contingencies (Note 5)

 

Partners’ equity:
 
 
 
Limited partners (70,756,078 common units outstanding
as of March 31, 2012 and December 31, 2011)
2,755,526

 
2,817,069

General partner
61,088

 
62,539

Accumulated other comprehensive loss
(65,552
)
 
(27,407
)
Total NuStar Energy L.P. partners’ equity
2,751,062

 
2,852,201

Noncontrolling interest
13,156

 
12,134

Total partners’ equity
2,764,218

 
2,864,335

Total liabilities and partners’ equity
$
6,083,428

 
$
5,881,190

See Condensed Notes to Consolidated Financial Statements.

3


NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)
 
 
Three Months Ended March 31,
 
2012
 
2011
Revenues:
 
 
 
Service revenues:
 
 
 
Third parties
$
205,448

 
$
198,263

Related party
697

 
130

Total service revenues
206,145

 
198,393

Product sales
1,529,547

 
1,036,223

Total revenues
1,735,692

 
1,234,616

Costs and expenses:
 
 
 
Cost of product sales
1,489,837

 
992,367

Operating expenses:
 
 
 
Third parties
86,734

 
85,130

Related party
38,932

 
35,109

Total operating expenses
125,666

 
120,239

General and administrative expenses:
 
 
 
Third parties
8,018

 
9,035

Related party
19,169

 
16,948

Total general and administrative expenses
27,187

 
25,983

Depreciation and amortization expense
44,681

 
40,296

Total costs and expenses
1,687,371

 
1,178,885

Operating income
48,321

 
55,731

Equity in earnings of joint venture
2,386

 
2,388

Interest expense, net
(22,350
)
 
(20,457
)
Other income (expense), net
1,368

 
(5,499
)
Income before income tax expense
29,725

 
32,163

Income tax expense
3,471

 
3,647

Net income
26,254

 
28,516

Less net (loss) income attributable to noncontrolling interest
(97
)
 
14

Net income attributable to NuStar Energy L.P.
$
26,351

 
$
28,502

Net income per unit applicable to limited partners (Note 11)
$
0.23

 
$
0.30

Weighted-average limited partner units outstanding
70,756,078

 
64,610,549

 
 
 
 
Comprehensive (loss) income
$
(10,772
)
 
$
40,499

Less comprehensive income attributable to noncontrolling interest
1,022

 
566

Comprehensive (loss) income attributable to NuStar Energy L.P.
$
(11,794
)
 
$
39,933

See Condensed Notes to Consolidated Financial Statements.

4


NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, Thousands of Dollars)
 
 
Three Months Ended March 31,
 
2012
 
2011
Cash Flows from Operating Activities:
 
 
 
Net income
$
26,254

 
$
28,516

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Depreciation and amortization expense
44,681

 
40,296

Amortization of debt related items
(2,912
)
 
(1,973
)
Deferred income tax benefit
(1,042
)
 
(551
)
Equity in earnings of joint venture
(2,386
)
 
(2,388
)
Distributions of equity in earnings of joint venture

 
2,923

Changes in current assets and current liabilities (Note 12)
(76,458
)
 
(232,899
)
Other, net
2,250

 
278

Net cash used in operating activities
(9,613
)
 
(165,798
)
Cash Flows from Investing Activities:
 
 
 
Reliability capital expenditures
(6,805
)
 
(7,372
)
Strategic capital expenditures
(93,479
)
 
(65,874
)
Acquisitions

 
(52,577
)
Investment in other long-term assets
(94
)
 
(636
)
Other, net

164

 
58

Net cash used in investing activities
(100,214
)
 
(126,401
)
Cash Flows from Financing Activities:
 
 
 
Proceeds from long-term debt borrowings
454,118

 
343,680

Proceeds from short-term debt borrowings
56,430

 
31,600

Proceeds from senior note offering, net of issuance costs
247,408

 

Long-term debt repayments
(453,944
)
 
(82,394
)
Short-term debt repayments
(56,430
)
 
(31,600
)
Distributions to unitholders and general partner
(89,076
)
 
(79,616
)
Payments for termination of interest rate swaps
(25,358
)
 

Other, net
(3,228
)
 
(1,144
)
Net cash provided by financing activities
129,920

 
180,526

Effect of foreign exchange rate changes on cash
106

 
989

Net increase (decrease) in cash and cash equivalents
20,199

 
(110,684
)
Cash and cash equivalents as of the beginning of the period
17,497

 
181,121

Cash and cash equivalents as of the end of the period
$
37,696

 
$
70,437

See Condensed Notes to Consolidated Financial Statements.

5


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

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization and Operations
NuStar Energy L.P. (NuStar Energy) (NYSE: NS) is engaged in the terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and petroleum refining and marketing. Unless otherwise indicated, the terms “NuStar Energy,” “the Partnership,” “we,” “our” and “us” are used in this report to refer to NuStar Energy L.P., to one or more of our consolidated subsidiaries or to all of them taken as a whole. NuStar GP Holdings, LLC (NuStar GP Holdings) (NYSE: NSH) owns our general partner, Riverwalk Logistics, L.P., and owns a 16.2% total interest in us as of March 31, 2012.
We conduct our operations through our subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline Operating Partnership L.P. (NuPOP). We have three business segments: storage, transportation, and asphalt and fuels marketing.
Basis of Presentation
These unaudited condensed consolidated financial statements include the accounts of the Partnership and subsidiaries in which the Partnership has a controlling interest. Noncontrolling interests are separately disclosed on the financial statements. Inter-partnership balances and transactions have been eliminated in consolidation. We account for investments in 50% or less-owned entities using the equity method.
These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included, and all disclosures are adequate. All such adjustments are of a normal recurring nature unless disclosed otherwise. Financial information for the three months ended March 31, 2012 and 2011 included in these Condensed Notes to Consolidated Financial Statements is derived from our unaudited condensed consolidated financial statements. Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. The consolidated balance sheet as of December 31, 2011 has been derived from the audited consolidated financial statements as of that date. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2011.

2. NEW ACCOUNTING PRONOUNCEMENTS

Fair Value Measurements
In May 2011, the Financial Accounting Standards Board issued amended guidance and disclosure requirements for fair value measurements. The new guidance results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between GAAP and International Financial Reporting Standards. These changes were effective for interim and annual periods beginning on or after December 15, 2011. Accordingly, we adopted these provisions January 1, 2012, and they did not have a material impact on our financial position, results of operations or disclosures.

3. INVENTORIES

Inventories consisted of the following:
 
March 31,
2012
 
December 31,
2011
 
(Thousands of Dollars)
Crude oil
$
270,351

 
$
157,297

Finished products
493,826

 
421,288

Materials and supplies
9,831

 
9,200

Total
$
774,008

 
$
587,785



6

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


4. DEBT

Revolving Credit Agreements
During the three months ended March 31, 2012, we borrowed an aggregate $436.1 million under our $1.2 billion five-year revolving credit agreement (the 2007 Revolving Credit Agreement) to fund working capital requirements, our capital expenditures and distributions. Additionally, we repaid $203.9 million during the three months ended March 31, 2012. The 2007 Revolving Credit Agreement bears interest, at our option, based on either an alternative base rate or a LIBOR-based rate. As of March 31, 2012, our weighted average borrowing interest rate was 0.8%, and we had $411.6 million available for borrowing under the 2007 Revolving Credit Agreement. Due to a covenant in our 2007 Revolving Credit Agreement that requires us to maintain, as of the end of any four consecutive fiscal quarters, a consolidated debt coverage ratio not to exceed 5.00-to-1.00, we may not be able to borrow the maximum available amount. As of March 31, 2012, our consolidated debt coverage ratio was 4.6x.

NuStar Logistics 4.75% Senior Notes
On February 2, 2012, NuStar Logistics issued $250.0 million of 4.75% senior notes under our May 13, 2010 shelf registration statement. The net proceeds of $247.4 million were used to repay the outstanding principal amount of NuPOP’s 7.75% senior notes due February 15, 2012. The interest on the 4.75% senior notes is payable semi-annually in arrears on February 1 and August 1 of each year beginning on August 1, 2012. The notes will mature on February 1, 2022. The 4.75% senior notes do not have sinking fund requirements. These notes rank equally with existing senior unsecured indebtedness of NuStar Logistics and contain restrictions on NuStar Logistics’ ability to incur secured indebtedness unless the same security is also provided for the benefit of holders of the senior notes. In addition, the senior notes limit NuStar Logistics’ ability to incur indebtedness secured by certain liens and to engage in certain sale-leaseback transactions. At the option of NuStar Logistics, the 4.75% senior notes may be redeemed in whole or in part at any time at a redemption price, which includes a make-whole premium, plus accrued and unpaid interest to the redemption date. The 4.75% senior notes are fully and unconditionally guaranteed by NuStar Energy and NuPOP.
 
Gulf Opportunity Zone Revenue Bonds
The Parish of St. James, Louisiana issued, pursuant to the Gulf Opportunity Zone Act of 2005, tax-exempt revenue bonds in 2010 and 2011 (GoZone Bonds) associated with our St. James terminal expansions. The GoZone Bonds bear interest based on a weekly tax-exempt bond market interest rate, and we pay interest monthly. The interest rate was 0.1% as of March 31, 2012. The proceeds are deposited with a trustee and disbursed to us upon our request for reimbursement of expenditures related to our St. James terminal expansions. We include the amount remaining in trust related to the GoZone Bonds in “Other long-term assets, net,” and the amount of bonds issued in “Long-term debt, less current portion” in our consolidated balance sheets. For the three months ended March 31, 2012, we received $18.0 million from the trustee. As of March 31, 2012, the amount remaining in trust totaled $155.3 million.

Lines of Credit
As of March 31, 2012, we had one short-term line of credit with an uncommitted borrowing capacity of up to $20.0 million. We had no outstanding borrowings on this line of credit as of March 31, 2012. During the three months ended March 31, 2012, we borrowed and repaid $56.4 million related to this line of credit.

5. COMMITMENTS AND CONTINGENCIES

Contingencies
We have contingent liabilities resulting from various litigation, claims and commitments, the most significant of which is discussed below. We record accruals for loss contingencies when losses are considered probable and can be reasonably estimated. Legal fees associated with defending the Partnership in legal matters are expensed as incurred. As of March 31, 2012, we have accrued $43.6 million for contingent losses. The amount that will ultimately be paid related to these matters may differ from the recorded accruals, and the timing of such payments is uncertain.

Grace Energy Corporation Matter. In 1997, Grace Energy Corporation (Grace Energy) sued subsidiaries of Kaneb Pipeline Partners, L.P. (KPP) and Kaneb Services LLC (KSL and collectively with KPP and their respective subsidiaries, Kaneb) in Texas state court. We acquired Kaneb on July 1, 2005. The complaint sought recovery of the cost of remediation of fuel leaks in the 1970s from a pipeline that had once connected a former Grace Energy terminal with Otis Air Force Base in Massachusetts (Otis AFB). Grace Energy alleges the Otis AFB pipeline and related environmental liabilities had been transferred in 1978 to an entity that was part of Kaneb’s acquisition of Support Terminal Services, Inc. and its subsidiaries from Grace Energy in 1993. Kaneb contends that it did not acquire the Otis AFB pipeline and never assumed any responsibility for any associated environmental damage.

7

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



In 2000, the court entered final judgment that: (i) Grace Energy could not recover its own remediation costs of $3.5 million, (ii) Kaneb owned the Otis AFB pipeline and its related environmental liabilities and (iii) Grace Energy was awarded $1.8 million in attorney costs. Both Kaneb and Grace Energy appealed the final judgment of the trial court to the Texas Court of Appeals in Dallas. In 2001, Grace Energy filed a petition in bankruptcy, which created an automatic stay of actions against Grace Energy. In September 2008, Grace Energy filed its Joint Plan of Reorganization and Disclosure Statement.

The Otis AFB is a part of a Superfund Site pursuant to the Comprehensive Environmental Response Compensation and Liability Act (CERCLA). The site contains a number of groundwater contamination plumes, two of which are allegedly associated with the Otis AFB pipeline. Relying on the final judgment of the Texas state court assigning ownership of the Otis AFB pipeline to Kaneb, the United States Department of Justice (the DOJ) advised Kaneb in 2001 that it intends to seek reimbursement from Kaneb for the remediation costs associated with the two plumes. In November 2008, the DOJ forwarded information to us indicating that the past and estimated future remediation expenses associated with one plume are $71.9 million. The DOJ has indicated that they will not seek recovery of remediation costs for the second plume. We reached an agreement to settle the claims of the United States government with respect to the Otis AFB pipeline and to resolve the underlying dispute between Kaneb and Grace. Pursuant to the settlement, we agreed to pay $11.7 million plus interest to the United States. The settlement was approved by the United States Bankruptcy Court for the District of Delaware and a proposed consent decree has been filed with the United States District Court for the District of Massachusetts. We are hopeful that the consent decree will be entered and that the settlement will be finalized in the near term.

Other
We are also a party to additional claims and legal proceedings arising in the ordinary course of business. Due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on our results of operations, financial position or liquidity. It is possible that if one or more of the matters described above were decided against us, the effects could be material to our results of operations in the period in which we would be required to record or adjust the related liability and could also be material to our cash flows in the periods we would be required to pay such liability.

6. FAIR VALUE MEASUREMENTS

We segregate the inputs used in measuring fair value into three levels: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists. We consider counterparty credit risk and our own credit risk in the determination of all estimated fair values.

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

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

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

8

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


The following assets and liabilities are measured at fair value:
 
March 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Other current assets:
 
 
 
 
 
 
 
Product imbalances
$
1,661

 
$

 
$

 
$
1,661

Commodity derivatives
21,880

 
329

 

 
22,209

Other long-term assets, net:
 
 
 
 
 
 
 
Commodity derivatives

 
5,377

 

 
5,377

Interest rate swaps

 
581

 

 
581

Accrued liabilities:
 
 
 
 
 
 
 
Product imbalances
(200
)
 

 

 
(200
)
Commodity derivatives
(13,692
)
 
(24,500
)
 

 
(38,192
)
Interest rate swaps

 
(9,796
)
 

 
(9,796
)
Other long-term liabilities:
 
 
 
 
 
 
 
Commodity derivatives

 
(6,539
)
 

 
(6,539
)
Interest rate swaps

 
(11,221
)
 

 
(11,221
)
Total
$
9,649

 
$
(45,769
)
 
$

 
$
(36,120
)

 
December 31, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(Thousands of Dollars)
Other current assets:
 
 
 
 
 
 
 
Product imbalances
$
2,117

 
$

 
$

 
$
2,117

Commodity derivatives
10,282

 
1,830

 

 
12,112

Other long-term assets, net:
 
 
 
 
 
 
 
Commodity derivatives

 
27,084

 

 
27,084

Interest rate swaps

 
2,335

 

 
2,335

Accrued liabilities:
 
 
 
 
 
 
 
Product imbalances
(1,469
)
 

 

 
(1,469
)
Commodity derivatives
(5,424
)
 

 

 
(5,424
)
Interest rate swaps

 
(22,009
)
 

 
(22,009
)
Other long-term liabilities:
 
 
 
 
 
 
 
Interest rate swaps

 
(27,190
)
 

 
(27,190
)
Total
$
5,506

 
$
(17,950
)
 
$

 
$
(12,444
)


9

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


Fair Value of Financial Instruments
We recognize cash equivalents, receivables, payables and debt in our consolidated balance sheets at their carrying amount.
The fair values of these financial instruments, except for debt, approximate their carrying amounts. The estimated fair value and carrying amount of our debt was as follows:
 
March 31,
2012
 
December 31,
2011
 
(Thousands of Dollars)
Fair value
$
2,575,496

 
$
2,377,565

Carrying amount
$
2,521,412

 
$
2,293,030


We estimated the fair value of our publicly-traded senior notes based upon quoted prices in active markets; therefore, we determined the fair value of our publicly-traded senior notes falls in Level 1 of the fair value hierarchy. For our other debt, for which a quoted market price is not available, we estimated the fair value using a discounted cash flow analysis using current incremental borrowing rates for similar types of borrowing arrangements and determined the fair value falls in Level 2 of the fair value hierarchy.

7. DERIVATIVES AND RISK MANAGEMENT ACTIVITIES

We utilize various derivative instruments to: (i) manage our exposure to commodity price risk; (ii) manage our exposure to interest rate risk; and (iii) attempt to profit from market fluctuations. Our risk management policies and procedures are designed to monitor interest rates, futures and swap positions and over-the-counter positions, as well as physical volumes, grades, locations and delivery schedules, to help ensure that our hedging activities address our market risks. Our risk management committee oversees our trading controls and procedures and certain aspects of our commodity and trading risk management. Our risk management committee also reviews all new commodity and trading risk management strategies in accordance with our risk management policy, which was approved by our board of directors.
Interest Rate Risk
We are a party to certain interest rate swap agreements to manage our exposure to changes in interest rates. We enter into fixed-to-floating interest rate swap agreements associated with a portion of our fixed-rate senior notes. During the three months ended March 31, 2012, we entered into fixed-to-floating interest rate swap agreements with an aggregate notional amount of $200.0 million related to the 4.75% senior notes issued on February 2, 2012. Please refer to Note 4. Debt for additional information on the 4.75% senior notes. Under the terms of these interest rate swap agreements, we receive a fixed 4.75% and will pay a variable rate based on one month USD LIBOR plus a percentage that varies with each agreement. We account for our fixed-to-floating interest rate swaps as fair value hedges, and they qualify for the shortcut method of accounting. As a result, changes in the fair value of the swaps will completely offset the changes in the fair value of the underlying hedged debt. As of March 31, 2012 and December 31, 2011, the total aggregate notional amount of the fixed-to-floating interest rate swaps was $470.0 million and $270.0 million, respectively. The weighted-average interest rate that we paid under our fixed-to-floating interest rate swaps was 2.9% as of March 31, 2012.

We are also a party to forward-starting interest rate swap agreements related to forecasted probable debt issuances. We entered into these swaps in order to hedge the risk of changes in the interest payments attributable to changes in the benchmark interest rate during the period from the effective date of the swap to the issuance of the forecasted debt. These swaps are designated and qualify as cash flow hedges. In connection with the issuance of the 4.75% senior notes on February 2, 2012, we terminated some of our outstanding forward-starting interest rate swap agreements with an aggregate notional amount of $225.0 million. We paid $25.4 million in connection with the terminations, which is being amortized into “Interest expense, net” over the life of the 4.75% senior notes. The termination payment is included in cash flows from financing activities on the consolidated statements of cash flows. As of March 31, 2012 and December 31, 2011, the total aggregate notional amount of the forward-starting interest rate swaps was $275.0 million and $500.0 million, respectively.

Commodity Price Risk
We are exposed to market risks related to the volatility of crude oil and refined product prices. In order to reduce the risk of commodity price fluctuations with respect to our crude oil and finished product inventories and related firm commitments to purchase and/or sell such inventories, we utilize commodity futures and swap contracts, which qualify and we designated as fair value hedges.

We also enter into commodity swap contracts to hedge the price risk associated with the San Antonio refinery. These contracts

10

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


fix the purchase price of crude oil and sales prices of refined products for a portion of the expected production of the San Antonio Refinery, thereby attempting to mitigate the risk of volatility of future cash flows associated with hedged volumes. These contracts qualify and we designated them as cash flow hedges.

Derivatives that are intended to hedge our commodity price risk, but fail to qualify as fair value or cash flow hedges, are considered economic hedges, and we record associated gains and losses from such derivatives in net income. We also enter into commodity derivatives in order to attempt to profit from market fluctuations. These derivative instruments are financial positions entered into without underlying physical inventory and are not considered hedges. Changes in the fair values are recorded in net income.

The volume of commodity contracts is based on open derivative positions and represents the combined volume of our long and short positions on an absolute basis, which totaled 42.3 million barrels and 27.8 million barrels as of March 31, 2012 and December 31, 2011, respectively.

As of March 31, 2012 and December 31, 2011, we had $6.6 million and $1.1 million, respectively, of margin deposits related to our derivative instruments.

The fair values of our derivative instruments included in our consolidated balance sheets were as follows:
 
 
 
Asset Derivatives
 
Liability Derivatives
 
Balance Sheet Location
 
March 31, 2012
 
December 31, 2011
 
March 31, 2012
 
December 31, 2011
 
 
 
(Thousands of Dollars)
Derivatives Designated as
Hedging Instruments:
 
 
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
$

 
$
36,116

 
$

 
$
(33,616
)
Commodity contracts
Other long-term assets, net
 
25,634

 
86,052

 
(20,257
)
 
(66,175
)
Interest rate swaps
Other long-term assets, net
 
581

 
2,335

 

 

Commodity contracts
Accrued liabilities
 
640

 

 
(24,286
)
 

Interest rate swaps
Accrued liabilities
 

 

 
(9,796
)
 
(22,009
)
Commodity contracts
Other long-term liabilities
 

 

 
(5,665
)
 

Interest rate swaps
Other long-term liabilities
 

 

 
(11,221
)
 
(27,190
)
Total
 
 
26,855

 
124,503

 
(71,225
)
 
(148,990
)
 
 
 
 
 
 
 
 
 
 
Derivatives Not Designated
as Hedging Instruments:
 
 
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
30,863

 
15,568

 
(8,654
)
 
(5,956
)
Commodity contracts
Other long-term assets, net
 

 
7,207

 

 

Commodity contracts
Accrued liabilities
 
21,831

 
519

 
(36,377
)
 
(5,943
)
Commodity contracts
Other long-term liabilities
 

 

 
(874
)
 

Total
 
 
52,694

 
23,294

 
(45,905
)
 
(11,899
)
 
 
 
 
 
 
 
 
 
 
Total Derivatives
 
 
$
79,549

 
$
147,797

 
$
(117,130
)
 
$
(160,889
)
 

11

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


The earnings impact of our derivative activity was as follows:
Derivatives Designated as Fair Value Hedging Instruments
 
Income Statement
Location
 
Amount of Gain
(Loss) Recognized
in Income on
Derivative
(Effective Portion)
 
Amount of  Gain
(Loss)
Recognized in
Income on
Hedged Item
 
Amount of Gain
(Loss) Recognized
in Income  on
Derivative
(Ineffective Portion)
 
 
 
 
(Thousands of Dollars)
Three months ended March 31, 2012:
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest expense, net
 
$
2,228

 
$
(2,228
)
 
$

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

 
(197
)
Total
 
 
 
$
(359
)
 
$
162

 
$
(197
)
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2011:
 
 
 
 
 
 
 
 
Interest rate swaps
 
Interest expense, net
 
$
(5,914
)
 
$
5,960

 
$
46

Commodity contracts
 
Cost of product sales
 
(12,066
)
 
12,370

 
304

Total
 
 
 
$
(17,980
)
 
$
18,330

 
$
350

 
Derivatives Designated as Cash Flow Hedging Instruments
 
Amount of Gain
(Loss) Recognized in
OCI on Derivative
(Effective Portion)
 
Income Statement
Location (a)
 
Amount of Gain
(Loss) Reclassified
from
Accumulated OCI
into  Income
(Effective Portion)
 
Amount of Gain
(Loss) Recognized
in Income  on
Derivative
(Ineffective Portion)
 
 
(Thousands of Dollars)
 
 
 
(Thousands of Dollars)
Three months ended March 31, 2012:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
3,298

 
Interest expense, net
 
$
(423
)
 
$

Commodity contracts
 
(57,121
)
 
Cost of product sales
 
(7,344
)
 
4,010

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

 
 
 
 
 
 
 
 
 
Three months ended March 31, 2011:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
2,878

 
Interest expense, net
 
$

 
$

(a)
Amounts are included in specified location for both the gain (loss) reclassified from accumulated other comprehensive income (OCI) into income (effective portion) and the gain (loss) recognized in income on derivative (ineffective portion).
Derivatives Not Designated as Hedging Instruments
 
Income Statement
Location
 
Amount of Gain (Loss)
Recognized in Income
 
 
 
 
(Thousands of Dollars)
Three months ended March 31, 2012:
 
 
 
 
Commodity contracts
 
Revenues
 
$
510

Commodity contracts
 
Cost of product sales
 
(4,318
)
 
 
 
 
$
(3,808
)
 
 
 
 
 
Three months ended March 31, 2011:
 
 
 
 
Commodity contracts
 
Revenues
 
$
264

Commodity contracts
 
Cost of product sales
 
(15,629
)
Commodity contracts
 
Operating expenses
 
46

 
 
 
 
$
(15,319
)

For derivatives designated as cash flow hedging instruments, once a hedged transaction occurs, we reclassify the effective portion from accumulated OCI to “Cost of product sales” or “Interest expense, net.” As of March 31, 2012, we expect to reclassify a loss of $24.3 million to “Cost of product sales” and a loss of $2.5 million to “Interest expense, net” within the next

12

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


twelve months. The maximum length of time over which we are hedging our exposure to the variability in future cash flows is approximately three years for our commodity contracts and one year for our forward-starting interest rate swaps.

8. RELATED PARTY TRANSACTIONS

Our operations are managed by NuStar GP, LLC, the general partner of our general partner. Under a services agreement between NuStar Energy and NuStar GP, LLC, employees of NuStar GP, LLC perform services for our U.S. operations. Certain of our wholly owned subsidiaries employ persons who perform services for our international operations. Employees of NuStar GP, LLC provide services to both NuStar Energy and NuStar GP Holdings; therefore, we reimburse NuStar GP, LLC for all costs related to its employees, other than costs associated with NuStar GP Holdings. Related party revenues result from storage agreements between our Turkey subsidiary and the noncontrolling shareholder.

The following table summarizes information pertaining to related party transactions:
 
Three Months Ended March 31,
 
2012
 
2011
 
(Thousands of Dollars)
Revenues
$
697

 
$
130

Operating expenses
$
38,932

 
$
35,109

General and administrative expenses
$
19,169

 
$
16,948


We had a payable to NuStar GP, LLC of $15.3 million and $6.7 million as of March 31, 2012 and December 31, 2011, respectively, with both amounts representing payroll, employee benefit plan expenses and unit-based compensation. We also had a long-term payable to NuStar GP, LLC as of March 31, 2012 and December 31, 2011 of $13.7 million and $14.5 million, respectively, related to amounts payable for retiree medical benefits and other post-employment benefits.

9. OTHER INCOME (EXPENSE)

Other income (expense), net consisted of the following:
 
Three Months Ended March 31,
 
2012
 
2011
 
(Thousands of Dollars)
Storage agreement early termination costs
$

 
$
(5,000
)
Foreign exchange gains (losses)
380

 
(610
)
Other, net
988

 
111

Other income (expense), net
$
1,368

 
$
(5,499
)

For the three months ended March 31, 2011, “Other income (expense), net” included $5.0 million in costs associated with the early termination of a third-party storage agreement at our Paulsboro, New Jersey asphalt refinery.


13

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


10. PARTNERS’ EQUITY

Partners Equity Activity
The following table summarizes changes in the carrying amount of equity attributable to NuStar Energy L.P. partners and noncontrolling interest:
 
Three Months Ended March 31, 2012
 
Three Months Ended March 31, 2011
 
NuStar Energy L.P. Partners’ Equity
 
Noncontrolling Interest
 
Total Partners’
Equity
 
NuStar Energy L.P. Partners’ Equity
 
Noncontrolling Interest
 
Total Partners’
Equity
 
(Thousands of Dollars)
Beginning balance
$
2,852,201

 
$
12,134

 
$
2,864,335

 
$
2,702,700

 
$

 
$
2,702,700

Acquisition

 

 

 

 
15,000

 
15,000

Net income
26,351

 
(97
)
 
26,254

 
28,502

 
14

 
28,516

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

 
1,119

 
9,030

 
8,553

 
552

 
9,105

Net unrealized (loss) gain
on cash flow hedges
(53,823
)
 

 
(53,823
)
 
2,878

 

 
2,878

Net loss reclassified into
income on cash flow
hedges
7,767

 

 
7,767

 

 

 

Total other comprehensive
(loss) income
(38,145
)
 
1,119

 
(37,026
)
 
11,431

 
552

 
11,983

Cash distributions to
partners
(89,076
)
 

 
(89,076
)
 
(79,616
)
 

 
(79,616
)
Other
(269
)
 

 
(269
)
 

 

 

Ending balance
$
2,751,062

 
$
13,156

 
$
2,764,218

 
$
2,663,017

 
$
15,566

 
$
2,678,583


Allocations of Net Income
Our partnership agreement, as amended, sets forth the calculation to be used to determine the amount and priority of cash distributions that the common unitholders and the general partner will receive. The partnership agreement also contains provisions for the allocation of net income and loss to the unitholders and the general partner. For purposes of maintaining partner capital accounts, the partnership agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interests. Normal allocations according to percentage interests are made after giving effect to priority income allocations, if any, in an amount equal to incentive cash distributions allocated 100% to the general partner. The following table details the calculation of net income applicable to the general partner:
 
Three Months Ended March 31,
 
2012
 
2011
 
(Thousands of Dollars)
Net income attributable to NuStar Energy L.P.
$
26,351

 
$
28,502

Less general partner incentive distribution
9,816

 
8,568

Net income after general partner incentive distribution
16,535

 
19,934

General partner interest
2
%
 
2
%
General partner allocation of net income after general partner incentive distribution
331

 
398

General partner incentive distribution
9,816

 
8,568

Net income applicable to general partner
$
10,147

 
$
8,966


Cash Distributions
On February 10, 2012, we paid a quarterly cash distribution totaling $89.1 million, or $1.095 per unit, related to the fourth quarter of 2011. On April 25, 2012, we announced a quarterly cash distribution of $1.095 per unit related to the first quarter of 2012. This distribution will be paid on May 11, 2012 to unitholders of record on May 8, 2012 and will total $89.1 million.

14

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


The following table reflects the allocation of total cash distributions to the general and limited partners applicable to the period in which the distributions were earned:
 
Three Months Ended March 31,
 
2012
 
2011
 
(Thousands of Dollars, Except Per Unit Data)
General partner interest
$
1,782

 
$
1,592

General partner incentive distribution
9,816

 
8,568

Total general partner distribution
11,598

 
10,160

Limited partners’ distribution
77,478

 
69,456

Total cash distributions
$
89,076

 
$
79,616

 
 
 
 
Cash distributions per unit applicable
to limited partners
$
1.095

 
$
1.075


11. NET INCOME PER UNIT

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

The following table details the calculation of earnings per unit:
 
Three Months Ended March 31,
 
2012
 
2011
 
(Thousands of Dollars, Except Unit and Per Unit Data)
Net income attributable to NuStar Energy L.P.
$
26,351

 
$
28,502

Less general partner distribution (including IDR)
11,598

 
10,160

Less limited partner distribution
77,478

 
69,456

Distributions greater than earnings
$
(62,725
)
 
$
(51,114
)
 
 
 
 
General partner earnings:
 
 
 
Distributions
$
11,598

 
$
10,160

Allocation of distributions greater than earnings (2%)
(1,255
)
 
(1,023
)
Total
$
10,343

 
$
9,137

 
 
 
 
Limited partner earnings:
 
 
 
Distributions
$
77,478

 
$
69,456

Allocation of distributions greater than earnings (98%)
(61,470
)
 
(50,091
)
Total
$
16,008

 
$
19,365

 
 
 
 
Weighted-average limited partner units outstanding
70,756,078

 
64,610,549

 
 
 
 
Net income per unit applicable to limited partners
$
0.23

 
$
0.30



15

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


12. STATEMENTS OF CASH FLOWS
Changes in current assets and current liabilities were as follows:
 
Three Months Ended March 31,
 
2012
 
2011
 
(Thousands of Dollars)
Decrease (increase) in current assets:
 
 
 
Accounts receivable
$
52,418

 
$
(94,104
)
Inventories
(186,135
)
 
(184,765
)
Income tax receivable
(4,989
)
 

Other current assets
(9,677
)
 
(21,572
)
Increase (decrease) in current liabilities:
 
 
 
Accounts payable
76,683

 
76,922

Payable to related party
8,566

 
1,826

Accrued interest payable
(5,550
)
 
(6,070
)
Accrued liabilities
(8,513
)
 
(5,702
)
Taxes other than income tax
(664
)
 
(830
)
Income tax payable
1,403

 
1,396

Changes in current assets and current liabilities
$
(76,458
)
 
$
(232,899
)
 
Cash flows related to interest and income taxes were as follows:
 
Three Months Ended March 31,
 
2012
 
2011
 
(Thousands of Dollars)
Cash paid for interest, net of amount capitalized
$
31,961

 
$
32,512

Cash paid for income taxes, net of tax refunds received
$
8,106

 
$
2,856


13. SEGMENT INFORMATION

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

16

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


Results of operations for the reportable segments were as follows:
 
Three Months Ended March 31,
 
2012
 
2011
 
(Thousands of Dollars)
Revenues:
 
 
 
Storage:
 
 
 
Third parties
$
127,687

 
$
125,253

Intersegment
17,045

 
11,392

Related party
697

 
130

Total storage
145,429

 
136,775

Transportation:
 
 
 
Third parties
77,761

 
73,010

Intersegment

 

Total transportation
77,761

 
73,010

Asphalt and fuels marketing:
 
 
 
Third parties
1,529,547

 
1,036,223

Intersegment
129

 
3,845

Total asphalt and fuels marketing
1,529,676

 
1,040,068

Consolidation and intersegment eliminations
(17,174
)
 
(15,237
)
Total revenues
$
1,735,692

 
$
1,234,616

 
 
 
 
Operating income:
 
 
 
Storage
$
56,147

 
$
48,696

Transportation
36,951

 
34,397

Asphalt and fuels marketing
(15,775
)
 
118

Consolidation and intersegment eliminations
(1
)
 
65

Total segment operating income
77,322

 
83,276

Less general and administrative expenses
27,187

 
25,983

Less other depreciation and amortization expense
1,814

 
1,562

Total operating income
$
48,321

 
$
55,731


Total assets by reportable segment were as follows:
 
March 31,
2012
 
December 31,
2011
 
(Thousands of Dollars)
Storage
$
2,622,491

 
$
2,597,904

Transportation
1,276,156

 
1,251,474

Asphalt and fuels marketing
1,860,324

 
1,717,960

Total segment assets
5,758,971

 
5,567,338

Other partnership assets
324,457

 
313,852

Total consolidated assets
$
6,083,428

 
$
5,881,190

 

17

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


14. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

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

Condensed Consolidating Balance Sheets
March 31, 2012
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries (a)
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
135

 
$
20

 
$

 
$
37,541

 
$

 
$
37,696

Receivables, net
16

 
41,794

 
8,819

 
464,700

 
(19,347
)
 
495,982

Inventories

 
2,692

 
4,891

 
766,485

 
(60
)
 
774,008

Income tax receivable

 

 

 
9,221

 

 
9,221

Other current assets

 
6,975

 
1,811

 
42,703

 

 
51,489

Intercompany receivable

 
1,205,898

 
541,121

 

 
(1,747,019
)
 

Total current assets
151

 
1,257,379

 
556,642

 
1,320,650

 
(1,766,426
)
 
1,368,396

Property, plant and equipment, net

 
1,210,755

 
591,803

 
1,697,071

 

 
3,499,629

Intangible assets, net

 
1,954

 

 
34,946

 

 
36,900

Goodwill

 
18,094

 
170,652

 
660,294

 

 
849,040

Investment in wholly owned
subsidiaries
3,323,880

 
195,342

 
1,185,526

 
2,252,840

 
(6,957,588
)
 

Investment in joint venture

 

 

 
69,073

 

 
69,073

Deferred income tax asset

 

 

 
10,479

 

 
10,479

Other long-term assets, net
461

 
173,874

 
26,329

 
49,247

 

 
249,911

Total assets
$
3,324,492

 
$
2,857,398

 
$
2,530,952

 
$
6,094,600

 
$
(8,724,014
)
 
$
6,083,428

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

 
$
797,791

 
$

 
$
33,583

 
$

 
$
831,374

Payables
88

 
34,702

 
13,400

 
514,845

 
(19,347
)
 
543,688

Accrued interest payable

 
19,374

 
4,896

 
13

 

 
24,283

Accrued liabilities
653

 
17,187

 
3,653

 
54,218

 

 
75,711

Taxes other than income tax
188

 
4,847

 
3,347

 
4,632

 

 
13,014

Income tax payable

 
442

 
8

 
4,170

 

 
4,620

Intercompany payable
506,949

 

 

 
1,240,070

 
(1,747,019
)
 

Total current liabilities
507,878

 
874,343

 
25,304

 
1,851,531

 
(1,766,366
)
 
1,492,690

Long-term debt, less current portion

 
1,437,397

 
252,641

 

 

 
1,690,038

Long-term payable to related party

 
7,203

 

 
6,469

 

 
13,672

Deferred income tax liability

 

 

 
36,670

 

 
36,670

Other long-term liabilities

 
14,189

 
198

 
71,753

 

 
86,140

Total partners’ equity
2,816,614

 
524,266

 
2,252,809

 
4,128,177

 
(6,957,648
)
 
2,764,218

Total liabilities and
partners’ equity
$
3,324,492

 
$
2,857,398

 
$
2,530,952

 
$
6,094,600

 
$
(8,724,014
)
 
$
6,083,428

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

18

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


Condensed Consolidating Balance Sheets
December 31, 2011
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries (a)
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
139

 
$
14

 
$

 
$
17,344

 
$

 
$
17,497

Receivables, net

 
27,533

 
6,877

 
514,477

 
(1,079
)
 
547,808

Inventories

 
2,311

 
6,370

 
579,152

 
(48
)
 
587,785

Income tax receivable

 

 

 
4,148

 

 
4,148

Other current assets

 
9,796

 
2,423

 
31,466

 

 
43,685

Intercompany receivable

 
893,268

 
780,066

 

 
(1,673,334
)
 

Total current assets
139

 
932,922

 
795,736

 
1,146,587

 
(1,674,461
)
 
1,200,923

Property, plant and equipment, net

 
1,150,318

 
596,229

 
1,683,921

 

 
3,430,468

Intangible assets, net

 
1,966

 

 
36,957

 

 
38,923

Goodwill

 
18,094

 
170,652

 
657,971

 

 
846,717

Investment in wholly owned
subsidiaries
3,386,170

 
220,513

 
1,159,620

 
2,216,792

 
(6,983,095
)
 

Investment in joint venture

 

 

 
66,687

 

 
66,687

Deferred income tax asset

 

 

 
9,141

 

 
9,141

Other long-term assets, net
364

 
192,007

 
26,329

 
69,631

 

 
288,331

Total assets
$
3,386,673

 
$
2,515,820

 
$
2,748,566

 
$
5,887,687

 
$
(8,657,556
)
 
$
5,881,190

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

 
$
331,317

 
$
1,060

 
$
32,582

 
$

 
$
364,959

Payables

 
32,590

 
11,512

 
418,038

 
(1,079
)
 
461,061

Accrued interest payable

 
21,332

 
8,489

 
12

 

 
29,833

Accrued liabilities
829

 
42,788

 
4,661

 
22,992

 

 
71,270

Taxes other than income tax
125

 
5,661

 
2,678

 
4,991

 

 
13,455

Income tax payable

 
352

 
7

 
2,863

 

 
3,222

Intercompany payable
506,111

 

 

 
1,167,223

 
(1,673,334
)
 

Total current liabilities
507,065

 
434,040

 
28,407

 
1,648,701

 
(1,674,413
)
 
943,800

Long-term debt, less current portion

 
1,424,891

 
503,180

 

 

 
1,928,071

Long-term payable to related party

 
8,027

 

 
6,475

 

 
14,502

Deferred income tax liability

 

 

 
35,437

 

 
35,437

Other long-term liabilities

 
29,939

 
220

 
64,886

 

 
95,045

Total partners’ equity
2,879,608

 
618,923

 
2,216,759

 
4,132,188

 
(6,983,143
)
 
2,864,335

Total liabilities and
partners’ equity
$
3,386,673

 
$
2,515,820

 
$
2,748,566

 
$
5,887,687

 
$
(8,657,556
)
 
$
5,881,190

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

19

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


Condensed Consolidating Statements of Comprehensive Income
For the Three Months Ended March 31, 2012
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries (a)
 
Eliminations
 
Consolidated
Revenues
$

 
$
80,221

 
$
49,092

 
$
1,612,603

 
$
(6,224
)
 
$
1,735,692

Costs and expenses
435

 
46,374

 
34,957

 
1,611,826

 
(6,221
)
 
1,687,371

Operating (loss) income
(435
)
 
33,847

 
14,135

 
777

 
(3
)
 
48,321

Equity in earnings of subsidiaries
26,786

 
(25,171
)
 
25,905

 
36,057

 
(63,577
)
 

Equity in earnings of joint venture

 

 

 
2,386

 

 
2,386

Interest expense, net

 
(18,078
)
 
(4,171
)
 
(101
)
 

 
(22,350
)
Other income, net

 
189

 
182

 
997

 

 
1,368

Income (loss) before income tax
expense
26,351

 
(9,213
)
 
36,051

 
40,116

 
(63,580
)
 
29,725

Income tax expense

 
90

 
2

 
3,379

 

 
3,471

Net income (loss)
26,351

 
(9,303
)
 
36,049

 
36,737

 
(63,580
)
 
26,254

Less net loss attributable to
noncontrolling interest