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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 (Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
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
  _________________________________________
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12897185&doc=13
NUSTAR ENERGY L.P.
(Exact name of registrant as specified in its charter)
  _________________________________________
 
Delaware
 
74-2956831
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
19003 IH-10 West
San Antonio, Texas
 
78257
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (210) 918-2000
 _______________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
 
x
Accelerated filer
 
o
 
 
 
 
 
 
Non-accelerated filer
 
o  
Smaller reporting company
 
o
 
 
 
 
 
 
 
 
 
Emerging growth company
 
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o   No  x
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common units
Fixed-to-floating rate cumulative redeemable perpetual preferred units
 
NS
NSprA, NSprB and NSprC
 
New York Stock Exchange
New York Stock Exchange
The number of common units outstanding as of April 30, 2019 was 107,763,005.



Table of Contents

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

2


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, Except Unit Data)
 
March 31,
2019
 
December 31,
2018
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
15,822

 
$
13,644

Accounts receivable, net of allowance for doubtful accounts of $11,702
and $9,412 as of March 31, 2019 and December 31, 2018, respectively
163,739

 
148,308

Inventories
25,023

 
22,713

Prepaid and other current assets
21,361

 
17,493

Total current assets
225,945

 
202,158

Property, plant and equipment, at cost
6,051,532

 
6,338,312

Accumulated depreciation and amortization
(1,907,267
)
 
(2,049,690
)
Property, plant and equipment, net
4,144,265

 
4,288,622

Intangible assets, net
720,200

 
733,056

Goodwill
1,005,853

 
1,036,976

Other long-term assets, net
220,636

 
88,328

Total assets
$
6,316,899

 
$
6,349,140

Liabilities, Mezzanine Equity and Partners’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
176,871

 
$
143,121

Short-term debt and current portion of finance leases
9,335

 
18,500

Accrued interest payable
31,162

 
36,293

Accrued liabilities
82,734

 
101,993

Taxes other than income tax
16,139

 
19,083

Income tax payable
5,145

 
4,445

Total current liabilities
321,386

 
323,435

Long-term debt
3,333,220

 
3,111,996

Deferred income tax liability
11,787

 
12,428

Other long-term liabilities
193,536

 
79,558

Total liabilities
3,859,929

 
3,527,417

 
 
 
 
Commitments and contingencies (Note 6)

 

 
 
 
 
Series D preferred limited partners (23,246,650 preferred units outstanding as of
March 31, 2019 and December 31, 2018) (Note 10)
568,293

 
563,992

 
 
 
 
Partners’ equity (Note 11):
 
 
 
Preferred limited partners (9,060,000 Series A preferred units, 15,400,000 Series B preferred units and 6,900,000 Series C preferred units outstanding as of March 31, 2019 and December 31, 2018)
756,301

 
756,301

Common limited partners (107,762,875 and 107,225,156 common units outstanding
as of March 31, 2019 and December 31, 2018, respectively)
1,192,080

 
1,556,308

Accumulated other comprehensive loss
(59,704
)
 
(54,878
)
Total partners’ equity
1,888,677

 
2,257,731

Total liabilities, mezzanine equity and partners’ equity
$
6,316,899

 
$
6,349,140

See Condensed Notes to Consolidated Financial Statements.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)
 
Three Months Ended March 31,
 
2019
 
2018
Revenues:
 
 
 
Service revenues
$
298,405

 
$
291,413

Product sales
188,064

 
184,468

Total revenues
486,469

 
475,881

Costs and expenses:
 
 
 
Costs associated with service revenues:
 
 
 
Operating expenses (excluding depreciation and amortization expense)
113,937

 
108,884

Depreciation and amortization expense
72,287


69,897

Total costs associated with service revenues
186,224

 
178,781

Cost of product sales
176,789


176,728

Asset impairment loss
297,317

 

Goodwill impairment loss
31,123

 

General and administrative expenses (excluding depreciation and amortization expense)
25,996

 
19,774

Other depreciation and amortization expense
2,119

 
2,118

Total costs and expenses
719,568

 
377,401

Operating (loss) income
(233,099
)
 
98,480

Interest expense, net
(44,268
)
 
(47,772
)
Other income, net
787

 
79,752

(Loss) income before income tax expense
(276,580
)
 
130,460

Income tax expense
1,283

 
4,327

Net (loss) income
$
(277,863
)
 
$
126,133

 
 
 
 
Basic net (loss) income per common unit (Note 12)
$
(2.91
)
 
$
1.15

Basic weighted-average common units outstanding
107,531,619

 
93,181,781

 
 
 
 
Comprehensive (loss) income
$
(282,689
)
 
$
147,057

See Condensed Notes to Consolidated Financial Statements.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, Thousands of Dollars)
 
Three Months Ended March 31,
 
2019
 
2018
Cash Flows from Operating Activities:
 
 
 
Net (loss) income
$
(277,863
)
 
$
126,133

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation and amortization expense
74,406

 
72,015

Unit-based compensation expense
2,982

 
2,091

Amortization of debt related items
1,310

 
1,413

Asset impairment loss
297,317

 

Goodwill impairment loss
31,123

 

Gain from insurance recoveries

 
(78,756
)
Deferred income tax (benefit) expense
(847
)
 
842

Changes in current assets and current liabilities (Note 13)
(33,403
)
 
10,691

Increase in other long-term assets
(74
)
 
(829
)
Increase (decrease) in other long-term liabilities
9,275

 
(10,214
)
Other, net
(658
)
 
(222
)
Net cash provided by operating activities
103,568

 
123,164

Cash Flows from Investing Activities:
 
 
 
Capital expenditures
(159,429
)
 
(137,874
)
Change in accounts payable related to capital expenditures
19,401

 
(12,018
)
Proceeds from sale or disposition of assets
79

 
19

Proceeds from insurance recoveries

 
78,419

Net cash used in investing activities
(139,949
)
 
(71,454
)
Cash Flows from Financing Activities:
 
 
 
Proceeds from long-term debt borrowings
230,000

 
119,711

Proceeds from short-term debt borrowings
81,500

 
230,000

Long-term debt repayments
(63,600
)
 
(79,421
)
Short-term debt repayments
(94,500
)
 
(195,000
)
Distributions to preferred unitholders
(30,423
)
 
(16,680
)
Distributions to common unitholders and general partner
(64,367
)
 
(115,272
)
Payment of tax withholding for unit-based compensation
(6,366
)
 
(51
)
Decrease in cash book overdrafts
(3,608
)
 
(1,009
)
Other, net
(1,519
)
 
(3,124
)
Net cash provided by (used in) financing activities
47,117

 
(60,846
)
Effect of foreign exchange rate changes on cash
154

 
(28
)
Net increase (decrease) in cash, cash equivalents and restricted cash
10,890

 
(9,164
)
Cash, cash equivalents and restricted cash as of the beginning of the period
13,644

 
24,292

Cash, cash equivalents and restricted cash as of the end of the period
$
24,534

 
$
15,128


See Condensed Notes to Consolidated Financial Statements.

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Table of Contents

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS’ EQUITY AND MEZZANINE EQUITY
Three Months Ended March 31, 2019
(Thousands of Dollars)
 
Limited Partners
 
 
 
 
 
Mezzanine Equity
 
 
 
Preferred
 
Common
 
Accumulated
Other
Comprehensive
Loss
 
Total Partners’ Equity
(Note 11)
 
Series D Preferred Limited Partners (Note 10)
 
Total
Balance as of January 1, 2019
$
756,301

 
$
1,556,308

 
$
(54,878
)
 
$
2,257,731

 
$
563,992

 
$
2,821,723

Net income (loss)
16,033

 
(308,286
)
 

 
(292,253
)
 
14,390

 
(277,863
)
Other comprehensive loss

 

 
(4,826
)
 
(4,826
)
 

 
(4,826
)
Distributions to partners:
 
 
 
 
 
 

 
 
 

Series A preferred ($0.53125 per unit)
(4,813
)
 

 

 
(4,813
)
 

 
(4,813
)
Series B preferred ($0.47657 per unit)
(7,339
)
 

 

 
(7,339
)
 

 
(7,339
)
Series C preferred ($0.56250 per unit)
(3,881
)
 

 

 
(3,881
)
 

 
(3,881
)
Common ($0.60 per unit)

 
(64,367
)
 

 
(64,367
)
 

 
(64,367
)
Series D preferred ($0.619 per unit)

 

 

 

 
(14,390
)
 
(14,390
)
Unit-based compensation

 
13,540

 

 
13,540

 

 
13,540

Series D Preferred Unit accretion

 
(4,302
)
 

 
(4,302
)
 
4,302

 

Other

 
(813
)
 

 
(813
)
 
(1
)
 
(814
)
Balance as of March 31, 2019
$
756,301

 
$
1,192,080

 
$
(59,704
)
 
$
1,888,677

 
$
568,293

 
$
2,456,970


NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS’ EQUITY
Three Months Ended March 31, 2018
(Thousands of Dollars)
 
Limited Partners
 
 
 
 
 
 
 
Preferred
 
Common
 
General
Partner
 
Accumulated
Other
Comprehensive
Loss
 
Total Partners’ Equity
(Note 11)
Balance as of January 1, 2018
$
756,603

 
$
1,770,587

 
$
37,826

 
$
(84,927
)
 
$
2,480,089

Net income
15,990

 
107,940

 
2,203

 

 
126,133

Other comprehensive income

 

 

 
20,924

 
20,924

Distributions to partners:
 
 
 
 
 
 
 
 

Series A preferred ($0.53125 per unit)
(4,813
)
 

 

 

 
(4,813
)
Series B preferred ($0.47657 per unit)
(7,339
)
 

 

 

 
(7,339
)
Series C preferred ($0.56250 per unit)
(3,838
)
 

 

 

 
(3,838
)
Common ($1.095 per unit)
and general partner

 
(102,034
)
 
(13,238
)
 

 
(115,272
)
Unit-based compensation

 
1,286

 

 

 
1,286

Other
(109
)
 
(4,905
)
 
(99
)
 

 
(5,113
)
Balance as of March 31, 2018
$
756,494

 
$
1,772,874

 
$
26,692

 
$
(64,003
)
 
$
2,492,057


See Condensed Notes to Consolidated Financial Statements.

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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. (NYSE: NS) is a publicly held Delaware limited partnership engaged in the transportation of petroleum products and anhydrous ammonia, and the terminalling, storage and marketing of petroleum products. Unless otherwise indicated, the terms “NuStar Energy,” “NS,” “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.

On July 20, 2018, we completed the merger of NuStar GP Holdings, LLC (NuStar GP Holdings or NSH) with a subsidiary of NS. Consequently, NSH, which indirectly owns our general partner, became a wholly owned subsidiary of ours. Under the terms of the merger agreement, NSH unitholders received 0.55 of a common unit representing a limited partner interest in NS in exchange for each NSH unit owned at the effective time of the merger, resulting in approximately 13.4 million incremental NS common units outstanding after the merger.

We conduct our operations through our subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline Operating Partnership L.P. (NuPOP). We have three business segments: pipeline, storage and fuels marketing.

Basis of Presentation
These unaudited condensed consolidated financial statements include the accounts of the Partnership and subsidiaries in which the Partnership has a controlling interest. Inter-partnership balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included, and all disclosures are adequate. All such adjustments are of a normal recurring nature unless disclosed otherwise. Financial information for the three months ended March 31, 2019 and 2018 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, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The consolidated balance sheet as of December 31, 2018 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, 2018.

New Accounting Policy
As of March 31, 2019, we have restricted cash representing legally restricted funds that are unavailable for general use totaling $8.7 million, which is included in “Prepaid and other current assets” on the consolidated balance sheet.

2. NEW ACCOUNTING PRONOUNCEMENTS

Securities and Exchange Commission Disclosure Update and Simplification
In August 2018, the Securities and Exchange Commission (SEC) issued final rules regarding disclosure requirements that were redundant, duplicative, overlapping or superseded by other SEC requirements or GAAP. The final rules primarily eliminated or reduced certain disclosure requirements, although they also required some additional disclosures. The guidance became effective on November 5, 2018, with an exception for the new disclosure requirement to present changes in partners’ equity in interim periods, which permits entities to begin disclosing this information in the quarter that begins after the effective date of the final rules. We elected to utilize this exception, and began presenting statements of partners’ equity on an interim basis beginning with the quarter ending March 31, 2019. These final rules did not have an impact on our financial position or results of operations.

Cloud Computing Arrangements
In August 2018, the Financial Accounting Standards Board (FASB) issued guidance addressing a customer’s accounting for implementation costs incurred in a cloud computing arrangement (CCA) that is considered a service contract. Under the new guidance, implementation costs for a CCA should be evaluated for capitalization using the same approach as implementation costs associated with internal-use software and expensed over the term of the hosting arrangement. The guidance is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. Prospective adoption for eligible

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

costs incurred on or after the date of adoption or retrospective adoption are permitted. We are currently evaluating whether we will adopt these provisions early and whether we will elect prospective or retrospective adoption, but we do not expect the guidance to have a material impact on our financial position, results of operations or disclosures.

Disclosures for Defined Benefit Plans
In August 2018, the FASB issued amended guidance that makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. The guidance is effective for annual periods beginning after December 15, 2020, with early adoption permitted, using a retrospective approach. We are currently evaluating whether we will adopt these provisions early, but we do not expect the guidance to have a material impact on our financial position, results of operations or disclosures.

Goodwill
In January 2017, the FASB issued amended guidance that simplifies the accounting for goodwill impairment by eliminating step 2 of the goodwill impairment test. Under the amended guidance, goodwill impairment will be measured as the excess of the reporting unit’s carrying value over its fair value, not to exceed the carrying amount of goodwill for that reporting unit. The changes are effective for annual and interim periods beginning after December 15, 2019, and amendments should be applied prospectively. Early adoption is permitted for any impairment tests performed after January 1, 2017. We early adopted the amended guidance during the first quarter of 2019 and applied the guidance to the goodwill impairment discussed in Note 3.

Credit Losses
In June 2016, the FASB issued amended guidance that requires the use of a “current expected loss” model for financial assets measured at amortized cost and certain off-balance sheet credit exposures. Under this model, entities will be required to estimate the lifetime expected credit losses on such instruments based on historical experience, current conditions, and reasonable and supportable forecasts. This amended guidance also expands the disclosure requirements to enable users of financial statements to understand an entity’s assumptions, models and methods for estimating expected credit losses. The changes are effective for annual and interim periods beginning after December 15, 2019, and amendments should be applied using a modified retrospective approach. We currently expect to adopt the amended guidance on January 1, 2020, and we are assessing the impact of this amended guidance on our financial position, results of operations and disclosures. We plan to provide additional information about the expected impact at a future date.

Leases
In February 2016, the FASB issued amended guidance that requires lessees to recognize the assets and liabilities that arise from most leases on the balance sheet. For lessors, this amended guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The changes are effective for annual and interim periods beginning after December 15, 2018, and amendments should be applied using one of two modified retrospective transition methods. We adopted these provisions on January 1, 2019 through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The transition adjustment related to the adoption was immaterial, and we do not expect the adoption of this guidance to impact the results of our operations going forward. Please refer to Note 7 for further discussion.

3. IMPAIRMENTS

On May 9, 2019, we entered into a Share Purchase and Sale Agreement to sell the equity interests in our wholly owned subsidiaries that own the St. Eustatius terminal and bunkering operations for approximately $250.0 million, subject to adjustment. The terminal operations are included in our storage segment and the bunkering operations are included in our fuels marketing segment. We expect to complete the sale in the second quarter of 2019.

On January 28, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control added Petroleos de Venezuela, S.A. (PDVSA), a customer at our St. Eustatius facility, to its List of Specially Designated Nationals and Blocked Persons (the SDN List). The inclusion of PDVSA on the SDN List required us to wind down our contracts with PDVSA. Prior to winding down such contracts, PDVSA was the St. Eustatius terminal’s largest customer.

The effect of the sanctions issued against PDVSA, combined with the progression in the sale negotiations that occurred during March 2019, resulted in triggering events that caused us to evaluate the long-lived assets and goodwill associated with the St. Eustatius terminal and bunkering operations for potential impairment.

With respect to the terminal operations long-lived assets, our estimates of future expected cash flows included the possibility of a near-term sale, as well as continuing to operate the terminal. The carrying value of the terminal’s long-lived assets exceeded

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

our estimate of the total expected cash flows, indicating the long-lived assets were potentially impaired. To determine an impairment amount, we estimated the fair value of the long-lived assets for comparison to the carrying amount of those assets. Our estimate of the fair value considered the expected sales price as well as estimates generated from income and market approaches using a market participant’s assumptions. The estimated fair values resulting from the market and income approaches were consistent with the expected sales price. Therefore, we concluded that the estimated sales price, which was less than the carrying amount of the long-lived assets, represented the best estimate of fair value at March 31, 2019, and we recorded a long-lived asset impairment charge of $297.3 million in the first quarter of 2019 to reduce the carrying value of the assets to their estimated fair value. Our estimate of the fair value is based on a transaction price in a market that is not active and thus falls within Level 2 of the fair value hierarchy.

With respect to the goodwill in the Statia Bunkering reporting unit, which consists of our bunkering operations at our St. Eustatius terminal facility, we estimated the fair value based on the expected sales price discussed above, which is inclusive of the bunkering operations. As a result, we concluded the goodwill was impaired. Consistent with FASB’s amended goodwill impairment guidance discussed in Note 2, which we adopted in the first quarter of 2019, we measured the goodwill impairment as the difference between the reporting unit’s carrying value and its fair value. Therefore, we recognized a goodwill impairment charge of $31.1 million in the first quarter of 2019 to reduce the goodwill to $0.

The long-lived asset impairment charge is reported in the storage segment, and the goodwill impairment charge is included in the fuels marketing segment.

4. REVENUE FROM CONTRACTS WITH CUSTOMERS

Contract Assets and Contract Liabilities
The following table provides information about contract assets and contract liabilities from contracts with customers:
 
2019
 
2018
 
Contract Assets
 
Contract Liabilities
 
Contract Assets
 
Contract Liabilities
 
(Thousands of Dollars)
Balance as of January 1
$
2,605

 
$
(85,881
)
 
$
2,127

 
$
(57,870
)
 
 
 
 
 
 
 
 
Additions
941

 
(11,094
)
 
460

 
(2,386
)
Transfer to accounts receivable
(1,272
)
 

 
(1,653
)
 

Transfer to revenues

 
34,714

 

 
2,935

Total activity
(331
)

23,620

 
(1,193
)
 
549

 
 
 
 
 
 
 
 
Balance as of March 31
2,274

 
(62,261
)
 
934

 
(57,321
)
Less current portion
1,381

 
(21,798
)
 
749

 
(13,579
)
Noncurrent portion
$
893


$
(40,463
)
 
$
185

 
$
(43,742
)

As previously discussed in Note 3, the inclusion of PDVSA on the SDN List prevents us from providing services to PDVSA until such time as these sanctions are lifted or otherwise modified. As a result, in the first quarter we accelerated the recognition of revenue totaling $16.3 million, representing the amount remaining from a third quarter 2018 settlement we entered into with PDVSA.


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

Remaining Performance Obligations
The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenue as of March 31, 2019 (in thousands of dollars):
2019 (remaining)
 
$
336,361

2020
 
374,486

2021
 
258,906

2022
 
215,033

2023
 
165,288

Thereafter
 
365,808

Total
 
$
1,715,882


Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to service customer contracts that have fixed pricing and fixed volume terms and conditions, generally including contracts with payment obligations for take-or-pay minimum volume commitments.

Disaggregation of Revenues
The following table disaggregates our revenues:
 
Three Months Ended March 31,
 
2019
 
2018
 
(Thousands of Dollars)
Pipeline segment:
 
 
 
Crude oil pipelines
$
68,478

 
$
53,437

Refined products and ammonia pipelines (excluding lessor revenues)
85,106

 
83,299

Total pipeline segment revenues from contracts with customers
153,584

 
136,736

Lessor revenues
2,667

 
54

Total pipeline segment revenues
156,251

 
136,790

 
 
 
 
Storage segment:
 
 
 
Throughput terminals
21,686

 
20,016

Storage terminals (excluding lessor revenues)
111,132

 
125,350

Total storage segment revenues from contracts with customers
132,818

 
145,366

Lessor revenues
10,193

 
9,962

Total storage segment revenues
143,011

 
155,328

 
 
 
 
Fuels marketing segment:
 
 
 
Revenues from contracts with customers
189,068

 
185,838

 
 
 
 
Consolidation and intersegment eliminations
(1,861
)
 
(2,075
)
 
 
 
 
Total revenues
$
486,469

 
$
475,881


5. DEBT

Revolving Credit Agreement
As of March 31, 2019, we had $921.0 million outstanding under our $1.4 billion revolving credit agreement (the Revolving Credit Agreement). The Revolving Credit Agreement bears interest, at our option, based on an alternative base rate, a LIBOR-based rate or a EURIBOR-based rate. The interest rate on the Revolving Credit Agreement is subject to adjustment if our debt rating is downgraded (or upgraded) by certain credit rating agencies. In April 2019, our credit rating was downgraded by S&P

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Global Ratings from BB to BB-, and our outlook was changed from negative to stable. However, per the terms of the Revolving Credit Agreement, these changes did not impact the interest rate on our Revolving Credit Agreement, which is the only debt arrangement with an interest rate that is subject to adjustment if our debt rating is downgraded (or upgraded) by certain credit rating agencies. As of March 31, 2019, our weighted-average interest rate related to borrowings under the Revolving Credit Agreement was 4.5%.

For the rolling period of four quarters ending March 31, 2019, the consolidated debt coverage ratio (as defined in the Revolving Credit Agreement) could not exceed 5.00-to-1.00 and the consolidated interest coverage ratio (as defined in the Revolving Credit Agreement) must not be less than 1.75-to-1.00. The maximum consolidated debt coverage ratio and minimum consolidated interest coverage ratio requirements may limit the amount we can borrow under the Revolving Credit Agreement to an amount less than the total amount available for borrowing. As of March 31, 2019, we had $475.4 million available for borrowing, and we believe that we are in compliance with the covenants in the Revolving Credit Agreement.

Receivables Financing Agreement
NuStar Energy and NuStar Finance LLC (NuStar Finance), a special purpose entity and wholly owned subsidiary of NuStar Energy, are parties to a $125.0 million receivables financing agreement with third-party lenders (the Receivables Financing Agreement) and agreements with certain of NuStar Energy’s wholly owned subsidiaries (collectively with the Receivables Financing Agreement, the Securitization Program). On April 29, 2019, we amended the Receivables Financing Agreement to extend the scheduled termination date from September 20, 2020 to September 20, 2021 and to amend certain provisions with respect to receivables related to certain customers. NuStar Finance’s sole activity consists of purchasing receivables from NuStar Energy’s wholly owned subsidiaries that participate in the Securitization Program and providing these receivables as collateral for NuStar Finance’s revolving borrowings under the Securitization Program. NuStar Finance is a separate legal entity and the assets of NuStar Finance, including these accounts receivable, are not available to satisfy the claims of creditors of NuStar Energy, its subsidiaries selling receivables under the Securitization Program or their affiliates. The amount available for borrowing is based on the availability of eligible receivables and other customary factors and conditions.

Borrowings by NuStar Finance under the Receivables Financing Agreement bear interest at the applicable bank rate, as defined under the Receivables Financing Agreement. The weighted average interest rate related to outstanding borrowings under the Securitization Program as of March 31, 2019 was 3.4%. As of March 31, 2019, $107.5 million of our accounts receivable are included in the Securitization Program. The amount of borrowings outstanding under the Receivables Financing Agreement totaled $52.2 million as of March 31, 2019, which is included in “Long-term debt” on the consolidated balance sheet.

6. COMMITMENTS AND CONTINGENCIES

We have contingent liabilities resulting from various litigation, claims and commitments. We record accruals for loss contingencies when losses are considered probable and can be reasonably estimated. Legal fees associated with defending the Partnership in legal matters are expensed as incurred. We accrued $2.8 million for contingent losses as of March 31, 2019 and December 31, 2018. The amount that will ultimately be paid related to such matters may differ from the recorded accruals, and the timing of such payments is uncertain. We evaluate each contingent loss at least quarterly, and more frequently as each matter progresses and develops over time, and we do not believe that the resolution of any particular claim or proceeding, or all matters in the aggregate, would have a material adverse effect on our results of operations, financial position or liquidity.

7. LEASE ASSETS AND LIABILITIES

Transition
On January 1, 2019, we adopted Accounting Standards Codification Topic 842, “Leases” (ASC Topic 842) using the modified retrospective method. Results for reporting periods beginning after January 1, 2019 are presented under ASC Topic 842. In accordance with the modified retrospective approach, prior period amounts were not adjusted and are reported under ASC Topic 840, “Leases.” As a result of the adoption of ASC Topic 842, we recorded right-of-use assets and lease liabilities of approximately $207.0 million and $192.0 million, respectively, as of January 1, 2019. The adoption of ASC Topic 842 had an immaterial impact on our results of operations and cash flows.

We elected the following practical expedients permitted under the transition guidance within the new standard:
the package of practical expedients, which, among other things, allowed us to carry forward historical lease classification;
the practical expedient specifically related to land easements, which, among other things, allowed us to carry forward our historical accounting treatment for existing land easement agreement;


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the lessee practical expedient to combine lease and non-lease components for all of our asset classes except the other pipeline and terminal equipment asset class; and
the lessor practical expedient to combine lease and non-lease components and to account for the transaction based on the predominant component (i.e., ASC Topic 842 or ASC Topic 606, “Revenue from Contracts with Customers”). We apply this expedient to certain contracts in which we agree to provide both storage capacity and optional services to customers.

We record all leases on our consolidated balance sheet except for those leases with an initial term of 12 months or less, which are expensed on a straight-line basis over the lease term. We use judgment in determining the reasonably certain lease term and consider factors such as the nature and utility of the leased asset, as well as the importance of the leased asset to our operations. We calculate the present value of our lease liabilities based upon our incremental borrowing rate unless the rate implicit in the lease is readily determinable.

Lessee Arrangements
Our operating leases consist primarily of leases for tugs and barges utilized at our St. Eustatius facility for bunker fuel sales and land and dock leases at various terminal facilities. Tug and barge leases have remaining terms of 1 year to 9 years and include options to extend up to 10 years, and land and dock leases have remaining terms generally ranging from 3 years to 17 years and include options to extend up to 15 years.

The primary component of our finance lease portfolio is a dock at a terminal facility, which includes a commitment for minimum dockage and wharfage throughput volumes. The dock lease has a remaining initial term of 2 years and four additional five-year renewal periods, all of which we are reasonably certain to exercise. We historically accounted for the dock lease under legacy build-to-suit accounting guidance, which was eliminated by ASC Topic 842.

Certain of our leases are subject to variable payment arrangements, the most notable of which include:
dockage and wharfage charges, which are based on volumes moved over leased docks and are included in our calculation of our lease payments based on minimum throughput volumes. We recognize charges on excess throughput volumes in profit or loss in the period in which the obligation for those payments is incurred; and
consumer price index adjustments, which are measured and included in the calculation of our lease payments based on the consumer price index at the adoption date or, after adoption, at the commencement date. We recognize changes in lease payments as a result of changes in the consumer price index in profit or loss in the period in which those payments are made.

As of March 31, 2019, right-of-use assets and lease liabilities included in our consolidated balance sheet were as follows:
 
 
Balance Sheet Location
 
March 31, 2019
 
 
 
 
(Thousands of Dollars)
Right-of-Use Assets:
 
 
 
 
Operating
 
Other long-term assets, net
 
$
125,531

Finance
 
Property, plant and equipment, net of
accumulated amortization of $841
 
$
73,824

 
 
 
 
 
Lease Liabilities:
 
 
 
 
Operating:
 
 
 
 
Current
 
Accrued liabilities
 
$
24,178

Noncurrent
 
Other long-term liabilities
 
101,295

Total operating lease liabilities
 
 
 
$
125,473

Finance:
 
 
 
 
Current
 
Short-term debt and current portion of finance leases
 
$
3,835

Noncurrent
 
Long-term debt
 
55,386

Total finance lease liabilities
 
 
 
$
59,221


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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

As of March 31, 2019, maturities of our operating and finance lease liabilities were as follows:
 
 
Operating Leases
 
Finance Leases
 
 
(Thousands of Dollars)
2019 (remaining)
 
$
22,446

 
$
4,341

2020
 
17,014

 
5,788

2021
 
13,177

 
4,338

2022
 
12,619

 
3,719

2023
 
11,651

 
3,714

Thereafter
 
79,788

 
63,222

Total lease payments
 
$
156,695

 
$
85,122

Less: Interest
 
31,222

 
25,901

Present value of lease liabilities
 
$
125,473

 
$
59,221


Costs incurred for leases were as follows:
 
 
Three Months Ended March 31, 2019
 
 
(Thousands of Dollars)
Operating lease cost
 
$
9,464

Finance lease cost:
 

Amortization of right-of-use assets
 
841

Interest expense on lease liability
 
548

Short-term lease cost
 
4,314

Variable lease cost
 
812

Total lease cost
 
$
15,979


The table below presents additional information regarding our leases:
 
 
Operating Leases
 
Finance Leases
 
 
(Thousands of Dollars, Except Term and Rate Data)
For the three months ended March 31, 2019:
 
 
 
 
Cash outflows from operating activities
 
$
9,248

 
$
364

Cash outflows from financing activities
 
$

 
$
618

Right-of-use assets obtained in exchange for lease liabilities
 
$
1,267

 
$
393

As of March 31, 2019:
 
 
 
 
Weighted-average remaining lease term (in years)
 
12

 
22

Weighted-average discount rate
 
3.6
%
 
3.7
%

Lessor Arrangements
We have entered into certain revenue arrangements where we are considered to be the lessor. Under the largest of these arrangements, we lease certain of our storage tanks in exchange for a fixed fee, subject to an annual consumer price index adjustment. The operating leases commenced on January 1, 2017, and have initial terms of 10 years with successive automatic renewal terms. We recognized lease revenues from these leases of $10.2 million for the three months ended March 31, 2019, which are included in “Service revenues” in the consolidated statements of income. As of March 31, 2019, we expect to receive minimum lease payments totaling $303.2 million, based upon the consumer price index as of the adoption date. We will recognize these payments ratably over the remaining initial lease term of approximately 8 years. As of March 31, 2019, the cost and accumulated depreciation of lease storage assets, which are included in our “Pipeline, storage and terminals” asset class within property, plant and equipment and have an estimated useful life of 30 years, total $233.3 million and $115.2 million, respectively.


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8. DERIVATIVES AND FAIR VALUE MEASUREMENTS

Derivative Instruments
We utilize various derivative instruments to manage our exposure to interest rate risk and commodity price risk. Our risk management policies and procedures are designed to monitor interest rates, futures and swap positions and over-the-counter positions, as well as physical commodity volumes, grades, locations and delivery schedules, to help ensure that our hedging activities address our market risks. Derivative financial instruments associated with commodity price risk with respect to our petroleum product inventories and related firm commitments to purchase and/or sell such inventories were not material for any periods presented.

Interest Rate Risk. We are a party to certain interest rate swap agreements to manage our exposure to changes in interest rates, which include forward-starting interest rate swap agreements related to a forecasted debt issuance in 2020. We entered into these swaps in order to hedge the risk of fluctuations in the required 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. Under the terms of the swaps, we pay a fixed rate and receive a rate based on the three-month USD LIBOR. These swaps qualify as cash flow hedges, and we designate them as such. We record the effective portion of mark-to-market adjustments as a component of “Accumulated other comprehensive income (loss)” (AOCI), and the amount in AOCI will be recognized in “Interest expense, net” as the forecasted interest payments occur or if the interest payments are probable not to occur. As of March 31, 2019 and December 31, 2018, the aggregate notional amount of forward-starting interest rate swaps totaled $250.0 million.

The fair values of our interest rate swaps included in our consolidated balance sheets were as follows:
 
 
Asset Derivatives
 
Liability Derivatives
Balance Sheet Location
 
March 31,
2019
 
December 31,
2018
 
March 31,
2019
 
December 31,
2018
 
 
(Thousands of Dollars)
Other long-term assets, net
 
$

 
$
627

 
$

 
$

Other long-term liabilities
 
$

 
$

 
$
(6,932
)
 
$
(751
)

Our interest rate swaps had the following impact on earnings:
 
Three Months Ended March 31,
 
2019
 
2018
 
(Thousands of Dollars)
(Loss) gain recognized in other comprehensive (loss) income on derivative
$
(6,808
)
 
$
17,421

Loss reclassified from AOCI into interest expense, net
$
(1,078
)
 
$
(1,390
)

As of March 31, 2019, we expect to reclassify a loss of $3.1 million to “Interest expense, net” within the next twelve months associated with unwound forward-starting interest rate swaps.

Fair Value Measurements
We segregate the inputs used in measuring fair value into three levels: Level 1, defined as observable inputs, such as quoted prices for identical assets or liabilities in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active; and Level 3, defined as unobservable inputs for which little or no market data exists. We consider counterparty credit risk and our own credit risk in the determination of all estimated fair values.

Recurring Fair Value Measurements. Because we estimate the fair value of our forward-starting interest rate swaps using discounted cash flows, which use observable inputs such as time to maturity and market interest rates, we include interest rate swaps in Level 2 of the fair value hierarchy.

Non-recurring Fair Value Measurements. Please refer to Note 3 for a discussion of the non-recurring fair value measurement associated with the impairment of long-lived assets related to our St. Eustatius terminal.


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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 amounts. The fair values of these financial instruments, except for long-term debt other than finance leases, approximate their carrying amounts. The estimated fair values and carrying amounts of long-term debt, excluding finance leases, were as follows:
 
March 31, 2019
 
December 31, 2018
 
(Thousands of Dollars)
Fair value
$
3,317,920

 
$
3,056,704

Carrying amount
$
3,277,834

 
$
3,111,996


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

9. EMPLOYEE BENEFIT PLANS

NuStar’s Pension Plan is a qualified non-contributory defined benefit pension plan that provides eligible U.S. employees with retirement income as calculated under a cash balance formula. NuStar’s Excess Pension Plan is a nonqualified deferred compensation plan that provides benefits to a select group of management or other highly compensated employees. The Pension Plan and Excess Pension Plan are collectively referred to as the Pension Plans.

Our other postretirement benefit plans include a contributory medical benefits plan for U.S. employees who retired prior to April 1, 2014, and for employees who retire on or after April 1, 2014, a partial reimbursement for eligible third-party health care premiums.

The components of net periodic benefit cost (income) related to our Pension Plans and other postretirement benefit plans were as follows:
 
Pension Plans
 
Other Postretirement
Benefit Plans
 
2019
 
2018
 
2019
 
2018
 
(Thousands of Dollars)
For the three months ended March 31:
 
 
 
 
 
 
 
Service cost
$
2,388

 
$
2,406

 
$
107

 
$
126

Interest cost
1,370

 
1,206

 
114

 
108

Expected return on assets
(2,004
)
 
(1,855
)
 

 

Amortization of prior service credit
(514
)
 
(514
)
 
(287
)
 
(287
)
Amortization of net loss
211

 
544

 
11

 
54

Net periodic benefit cost (income)
$
1,451

 
$
1,787

 
$
(55
)
 
$
1


The service cost component of net periodic benefit cost (income) is presented in the same income statement line items as other current employee compensation costs, but the remaining components of net periodic benefit cost (income) are reported on the consolidated statements of comprehensive income in “Other income, net.”

10. SERIES D CUMULATIVE CONVERTIBLE PREFERRED UNITS

Distributions on the Series D Preferred Units accrue and are cumulative from the issuance dates and are payable on the 15th day (or next business day) of each of March, June, September and December, beginning September 17, 2018 to holders of record on the first business day of each payment month. The distribution rate on the Series D Preferred Units is: (i) 9.75% per annum for the first two years; (ii) 10.75% per annum for years three through five; and (iii) the greater of 13.75% per annum or the distribution per common unit thereafter. While the Series D Preferred Units are outstanding, the Partnership will be prohibited from paying distributions on any junior securities, including the common units, unless full cumulative distributions on the Series D Preferred Units (and any parity securities) have been, or contemporaneously are being, paid or set aside for payment through the most recent Series D Preferred Unit distribution payment date. For the four distribution periods beginning with the

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

initial Series D Preferred Unit distribution, the Series D Preferred Unit distributions may be paid, in the Partnership’s sole discretion, in (i) cash or (ii) a combination of additional Series D Preferred Units and cash, provided that up to 50% of the distribution amount may be paid in additional Series D Preferred Units. Thereafter, any Series D Preferred Unit distributions in excess of $0.635 per unit may be paid, in the Partnership’s sole discretion, in additional Series D Preferred Units, with the remainder paid in cash.

In April 2019, our board of directors declared distributions of $0.619 per Series D Preferred Unit to be paid on June 17, 2019.

11. PARTNERS' EQUITY

Series A, B and C Preferred Units
The following table summarizes financial information related to our 8.50% Series A, 7.625% Series B and 9.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (collectively, the Series A, B and C Preferred Units):
 
Preferred Limited Partners
 
 
 
Series A
 
Series B
 
Series C
 
Total
 
(Thousands of Dollars)
Balance as of January 1, 2019
$
218,307

 
$
371,476

 
$
166,518

 
$
756,301

Net income
4,813

 
7,339

 
3,881

 
16,033

Distributions to partners
(4,813
)
 
(7,339
)
 
(3,881
)
 
(16,033
)
Balance as of March 31, 2019
$
218,307

 
$
371,476

 
$
166,518

 
$
756,301

 
 
 
 
 
 
 
 
 
Preferred Limited Partners
 
 
 
Series A
 
Series B
 
Series C
 
Total
 
(Thousands of Dollars)
Balance as of January 1, 2018
$
218,307

 
$
371,634

 
$
166,662

 
$
756,603

Net income
4,813

 
7,339

 
3,838

 
15,990

Distributions to partners
(4,813
)
 
(7,339
)
 
(3,838
)
 
(15,990
)
Other

 

 
(109
)
 
(109
)
Balance as of March 31, 2018
$
218,307

 
$
371,634

 
$
166,553

 
$
756,494


Distributions on our preferred units are payable out of any legally available funds, accrue and are cumulative from the original issuance dates, and are payable on the 15th day (or next business day) of each of March, June, September and December of each year to holders of record on the first business day of each payment month as follows (until the distribution rate changes to a floating rate):
Units
 
Fixed Distribution Rate Per Unit Per Quarter
 
Fixed Distribution
Per Quarter
 
Date at Which Distribution
Rate Becomes Floating
 
 
 
 
(Thousands of Dollars)
 
 
Series A Preferred Units
 
$
0.53125

 
$
4,813

 
December 15, 2021
Series B Preferred Units
 
$
0.47657

 
$
7,339

 
June 15, 2022
Series C Preferred Units
 
$
0.56250

 
$
3,881

 
December 15, 2022

In April 2019, our board of directors declared distributions with respect to the Series A, B and C Preferred Units to be paid on June 17, 2019.

Common Limited Partners
We make quarterly distributions to common unitholders of 100% of our “Available Cash,” generally defined as cash receipts less cash disbursements, including distributions to our preferred units, and cash reserves established by the general partner, in its sole discretion. These quarterly distributions are declared and paid within 45 days subsequent to each quarter-end. The common unitholders receive a distribution each quarter as determined by the board of directors, subject to limitation by the distributions in arrears, if any, on our preferred units.


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The following table summarizes information about quarterly cash distributions declared for our common limited partners:
Quarter Ended
 
Cash
Distributions
Per Unit
 
Total Cash
Distributions
 
Record Date
 
Payment Date
 
 
 
 
(Thousands of Dollars)
 
 
 
 
March 31, 2019
 
$
0.60

 
$
64,690

 
May 8, 2019
 
May 14, 2019
December 31, 2018
 
$
0.60

 
$
64,336

 
February 8, 2019
 
February 13, 2019

Accumulated Other Comprehensive Income (Loss)
The balance of and changes in the components included in AOCI were as follows:
 
Foreign
Currency
Translation
 
Cash Flow
Hedges
 
Pension and
Other
Postretirement
Benefits
 
Total
 
(Thousands of Dollars)
Balance as of January 1, 2019
$
(47,299
)
 
$
(893
)
 
$
(6,686
)
 
$
(54,878
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassification adjustments
1,476

 
(6,808
)
 

 
(5,332
)
Net gain on pension costs reclassified into other income, net

 

 
(579
)
 
(579
)
Net loss on cash flow hedges reclassified into interest
expense, net

 
1,078

 

 
1,078

Other

 

 
7

 
7

Other comprehensive income (loss)
1,476

 
(5,730
)
 
(572
)
 
(4,826
)
Balance as of March 31, 2019
$
(45,823
)
 
$
(6,623
)
 
$
(7,258
)
 
$
(59,704
)

12. NET (LOSS) INCOME PER COMMON UNIT

Basic net (loss) income per common unit is determined pursuant to the two-class method. Under this method, all earnings are allocated to our limited partners and participating securities based on their respective rights to receive distributions earned during the period. Participating securities include restricted units awarded under our long-term incentive plan. We compute basic net (loss) income per common unit by dividing net (loss) income attributable to common units by the weighted-average number of common units outstanding during the period.

Diluted net (loss) income per common unit is computed by dividing net (loss) income attributable to common units by the sum of (i) the weighted average number of common units outstanding during the period and (ii) the effect of dilutive potential common units outstanding during the period. Dilutive potential common units may include contingently issuable performance unit awards and the Series D Preferred Units.

The Series D Preferred Units are convertible into common units at the option of the holder at any time on or after June 29, 2028. As such, we calculated the dilutive effect of the Series D Preferred Units using the if-converted method. For the three months ended March 31, 2019, the effect of the assumed conversion of the 23,246,650 Series D Preferred Units outstanding as of March 31, 2019 was antidilutive; therefore, we did not include such conversion in the computation of diluted net (loss) income per common unit.


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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table details the calculation of net (loss) income per common unit:
 
Three Months Ended March 31,
 
2019
 
2018
 
(Thousands of Dollars, Except Unit and Per Unit Data)
Net (loss) income
$
(277,863
)
 
$
126,133

Distributions to preferred limited partners
(30,423
)
 
(15,990
)
Distributions to general partner

 
(1,141
)
Distributions to common limited partners
(64,690
)
 
(55,916
)
Distribution equivalent rights to restricted units
(643
)
 
(445
)
Distributions (in excess of) less than (loss) income
$
(373,619
)

$
52,641

 
 
 
 
Distributions to common limited partners
$
64,690

 
$
55,916

Allocation of distributions (in excess of) less than (loss) earnings
(373,619
)

51,148

Series D Preferred Unit accretion
(4,302
)
 

Net (loss) income attributable to common units:
$
(313,231
)
 
$
107,064

 
 
 
 
Basic weighted-average common units outstanding
107,531,619

 
93,181,781

 
 
 
 
Basic net (loss) income per common unit
$
(2.91
)
 
$
1.15


13. STATEMENTS OF CASH FLOWS

Changes in current assets and current liabilities were as follows:
 
Three Months Ended March 31,
 
2019
 
2018
 
(Thousands of Dollars)
Decrease (increase) in current assets:
 
 
 
Accounts receivable
$
(15,028
)
 
$
19,525

Receivable from related party

 
133

Inventories
(2,302
)
 
(2,687
)
Other current assets
4,191

 
3,224

Increase (decrease) in current liabilities:
 
 
 
Accounts payable
17,851

 
(7,681
)
Accrued interest payable
(4,948
)
 
3,552

Accrued liabilities
(30,908
)
 
(6,019
)
Taxes other than income tax
(2,954
)
 
(1,558
)
Income tax payable
695

 
2,202

Changes in current assets and current liabilities
$
(33,403
)
 
$
10,691

The above changes in current assets and current liabilities differ from changes between amounts reflected in the applicable consolidated balance sheets due to:
the change in the amount accrued for capital expenditures;
the effect of foreign currency translation;
changes in the fair values of our interest rate swap agreements; and
the recognition of lease liabilities upon the adoption of ASC Topic 842.


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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Cash flows related to interest and income taxes were as follows:
 
Three Months Ended March 31,
 
2019
 
2018
 
(Thousands of Dollars)
Cash paid for interest, net of amount capitalized
$
47,797

 
$
42,549

Cash paid for income taxes, net of tax refunds received
$
1,717

 
$
2,635


As of March 31, 2019, restricted cash is included in "Prepaid and other current assets" on the consolidated balance sheet. The following table reconciles cash and cash equivalents and restricted cash on the consolidated balance sheets to cash, cash equivalents and restricted cash on the consolidated statements of cash flows:
 
March 31,
2019
 
December 31,
2018
 
(Thousands of Dollars)
Cash and cash equivalents
$
15,822

 
$
13,644

Restricted cash
8,712

 

Cash, cash equivalents and restricted cash
$
24,534

 
$
13,644


14. SEGMENT INFORMATION

Our reportable business segments consist of the pipeline, storage and fuels marketing segments. 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 the transportation of petroleum products and anhydrous ammonia, and the terminalling, storage and marketing of petroleum products. Intersegment revenues result from storage agreements with wholly owned subsidiaries of NuStar Energy at rates consistent with the rates charged to third parties for storage.

19

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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,
 
2019
 
2018
 
(Thousands of Dollars)
Revenues:
 
 
 
Pipeline
$
156,251

 
$
136,790

Storage:
 
 
 
Third parties
141,150

 
153,253

Intersegment
1,861

 
2,075

Total storage
143,011

 
155,328

Fuels marketing
189,068

 
185,838

Consolidation and intersegment eliminations
(1,861
)
 
(2,075
)
Total revenues
$
486,469

 
$
475,881

 
 
 
 
Operating income (loss):
 
 
 
Pipeline
$
67,304

 
$
57,794

Storage
(247,240
)
 
56,261

Fuels marketing
(25,016
)
 
6,320

Consolidation and intersegment eliminations
(32
)
 
(3
)
Total segment operating (loss) income
(204,984
)
 
120,372

General and administrative expenses
25,996

 
19,774

Other depreciation and amortization expense
2,119

 
2,118

Total operating (loss) income
$
(233,099
)
 
$
98,480


Total assets by reportable segment were as follows:
 
March 31,
2019
 
December 31,
2018
 
(Thousands of Dollars)
Pipeline
$
3,738,360

 
$
3,637,226

Storage
2,259,552

 
2,424,342

Fuels marketing
129,860

 
112,906

Total segment assets
6,127,772

 
6,174,474

Other partnership assets
189,127

 
174,666

Total consolidated assets
$
6,316,899

 
$
6,349,140

 

20

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

15. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

NuStar Energy has no operations, and its assets consist mainly of its 100% indirectly owned subsidiaries, NuStar Logistics and NuPOP. The senior and subordinated notes issued by NuStar Logistics are fully and unconditionally guaranteed by NuStar Energy and NuPOP. As a result, the following condensed consolidating financial statements are presented as an alternative to providing separate financial statements for NuStar Logistics and NuPOP.

Condensed Consolidating Balance Sheets
March 31, 2019
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,363

 
$
1,240

 
$

 
$
13,219

 
$

 
$
15,822

Receivables, net

 
427

 
1,071

 
162,241

 

 
163,739

Inventories

 
1,890

 
5,563

 
17,570

 

 
25,023

Prepaid and other current assets
98

 
17,932

 
899

 
2,432

 

 
21,361

Intercompany receivable

 
1,380,677

 

 
458,238

 
(1,838,915
)
 

Total current assets
1,461

 
1,402,166

 
7,533

 
653,700

 
(1,838,915
)
 
225,945

Property, plant and equipment, net

 
1,972,639

 
608,975

 
1,562,651

 

 
4,144,265

Intangible assets, net

 
46,751

 

 
673,449

 

 
720,200

Goodwill

 
149,453

 
170,652

 
685,748

 

 
1,005,853

Investment in wholly owned
subsidiaries
2,983,036

 
1,751,576

 
1,130,709

 
536,042

 
(6,401,363
)
 

Other long-term assets, net
329

 
113,954

 
32,779

 
73,574

 

 
220,636

Total assets
$
2,984,826

 
$
5,436,539

 
$
1,950,648

 
$
4,185,164

 
$
(8,240,278
)
 
$
6,316,899

Liabilities, Mezzanine Equity and Partners’ Equity
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
5,996

 
$
52,993

 
$
5,258

 
$
112,624

 
$

 
$
176,871

Short-term debt and current portion of finance leases

 
9,302

 
17

 
16

 

 
9,335

Accrued interest payable

 
31,121

 

 
41

 

 
31,162

Accrued liabilities
895

 
27,683

 
8,805

 
45,351

 

 
82,734

Taxes other than income tax
42

 
4,967

 
6,371

 
4,759

 

 
16,139

Income tax payable

 
573

 
2

 
4,570

 

 
5,145

Intercompany payable
461,219

 

 
1,377,696

 

 
(1,838,915
)
 

Total current liabilities
468,152

 
126,639

 
1,398,149

 
167,361

 
(1,838,915
)
 
321,386

Long-term debt

 
3,281,179

 
66

 
51,975

 

 
3,333,220

Deferred income tax liability

 
1,675

 
9

 
10,103

 

 
11,787

Other long-term liabilities

 
83,436

 
16,534

 
93,566

 

 
193,536

Series D preferred units
568,293

 

 

 

 

 
568,293

Total partners’ equity
1,948,381

 
1,943,610

 
535,890

 
3,862,159

 
(6,401,363
)
 
1,888,677

Total liabilities, mezzanine equity and partners’ equity
$
2,984,826

 
$
5,436,539

 
$
1,950,648

 
$
4,185,164

 
$
(8,240,278
)
 
$
6,316,899









21

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

Condensed Consolidating Balance Sheets
December 31, 2018
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,255

 
$
51

 
$

 
$
12,338

 
$

 
$
13,644

Receivables, net

 
2,212

 

 
146,096

 

 
148,308

Inventories

 
1,741

 
5,237

 
15,735

 

 
22,713

Prepaid and other current assets
61

 
14,422

 
908

 
2,102

 

 
17,493

Intercompany receivable

 
1,327,833

 

 
500,583

 
(1,828,416
)
 

Total current assets
1,316

 
1,346,259

 
6,145

 
676,854

 
(1,828,416
)
 
202,158

Property, plant and equipment, net

 
1,858,264

 
615,549

 
1,814,809

 

 
4,288,622

Intangible assets, net

 
49,107

 

 
683,949

 

 
733,056

Goodwill

 
149,453

 
170,652

 
716,871

 

 
1,036,976

Investment in wholly owned
subsidiaries
3,355,636

 
1,750,256

 
1,425,283

 
857,485

 
(7,388,660
)
 

Other long-term assets, net
304

 
54,429

 
26,716

 
6,879

 

 
88,328

Total assets
$
3,357,256

 
$
5,207,768

 
$
2,244,345

 
$
4,756,847

 
$
(9,217,076
)
 
$
6,349,140

Liabilities, Mezzanine Equity and Partners’ Equity
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
6,460

 
$
39,680

 
$
6,331

 
$
90,650

 
$

 
$
143,121

Short-term debt

 
18,500

 

 

 

 
18,500

Accrued interest payable

 
36,253

 

 
40

 

 
36,293

Accrued liabilities
1,280

 
24,858

 
8,082

 
67,773

 

 
101,993

Taxes other than income tax
125

 
7,285

 
4,718

 
6,955

 

 
19,083

Income tax payable

 
457

 
2

 
3,986

 

 
4,445

Intercompany payable
472,790

 

 
1,355,626

 

 
(1,828,416
)
 

Total current liabilities
480,655

 
127,033

 
1,374,759

 
169,404

 
(1,828,416
)
 
323,435

Long-term debt

 
3,050,531

 

 
61,465

 

 
3,111,996

Deferred income tax liability

 
1,675

 
9

 
10,744

 

 
12,428

Other long-term liabilities

 
28,392

 
12,348

 
38,818

 

 
79,558

Series D preferred units
563,992

 

 

 

 

 
563,992

Total partners’ equity
2,312,609

 
2,000,137

 
857,229

 
4,476,416

 
(7,388,660
)
 
2,257,731

Total liabilities, mezzanine equity and partners’ equity
$
3,357,256

 
$
5,207,768

 
$
2,244,345

 
$
4,756,847

 
$
(9,217,076
)
 
$
6,349,140




22

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

Condensed Consolidating Statements of Comprehensive Loss
For the Three Months Ended March 31, 2019
(Thousands of Dollars)
 
NuStar
Energy
 
NuStar
Logistics
 
NuPOP
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenues
$

 
$
117,555

 
$
58,353

 
$
310,748

 
$
(187
)
 
$
486,469

Costs and expenses
676

 
77,411

 
36,050

 
605,618

 
(187
)
 
719,568

Operating (loss) income
(676
)
 
40,144

 
22,303

 
(294,870
)
 

 
(233,099
)
Equity in (loss) earnings of subsidiaries
(277,295
)
 
1,339

 
(294,048
)
 
(274,174
)
 
844,178

 

Interest income (expense), net
108

 
(45,456
)
 
(1,933
)
 
3,013

 

 
(44,268
)
Other income (expense), net

 
754

 
177

 
(144
)
 

 
787

Loss before income tax expense
(277,863
)
 
(3,219
)
 
(273,501
)
 
(566,175
)
 
844,178

 
(276,580
)
Income tax expense

 
117

 

 
1,166

 

 
1,283

Net loss
$
(277,863
)
 
$
(3,336
)