OPERATING SEGMENTS | OPERATING SEGMENTS The Partnership’s operations consist of four operating segments: (i) asphalt terminalling services, (ii) crude oil terminalling and storage services, (iii) crude oil pipeline services, and (iv) crude oil trucking and producer field services. ASPHALT TERMINALLING SERVICES —The Partnership provides asphalt product and residual fuel terminalling, storage and blending services at its 54 terminalling and storage facilities located in 26 states. CRUDE OIL TERMINALLING AND STORAGE SERVICES —The Partnership provides crude oil terminalling and storage services at its terminalling and storage facility located in Oklahoma. CRUDE OIL PIPELINE SERVICES —The Partnership owns and operates pipeline systems that gather crude oil purchased by its customers and transports it to refiners, to common carrier pipelines for ultimate delivery to refiners or to terminalling and storage facilities owned by the Partnership and others. The Partnership refers to its pipeline system located in Oklahoma and the Texas Panhandle as the Mid-Continent system. Revenue for the sale of crude oil is recognized when title to the crude oil transfers to the customer and is based on contractual prices for the sale of crude oil. The Partnership previously owned and operated the East Texas pipeline system, which is located in Texas. On April 18, 2017, the Partnership sold the East Texas system. See Note 5 for additional information. CRUDE OIL TRUCKING AND PRODUCER FIELD SERVICES — The Partnership uses its owned and leased tanker trucks to gather crude oil for its customers at remote wellhead locations generally not covered by pipeline and gathering systems and to transport the crude oil to aggregation points and storage facilities located along pipeline gathering and transportation systems. Crude oil producer field services consist of a number of producer field services, ranging from gathering condensates from natural gas companies to hauling produced water to disposal wells. The Partnership’s management evaluates performance based upon segment operating margin, which includes revenues from related parties and external customers less operating expenses excluding depreciation and amortization. This measure forms the basis of the Partnership’s internal financial reporting and is used by its management in deciding how to allocate capital resources among segments. The Partnership believes that investors benefit from having access to the same financial measures being utilized by management. The non-GAAP measure of total operating margin, excluding depreciation and amortization, is presented in the following table. Total operating margin, excluding depreciation and amortization, is an important measure of the economic performance of the Partnership’s core operations. The Partnership computes the components of total operating margin by using amounts that are determined in accordance with GAAP. A reconciliation of total operating margin, excluding depreciation and amortization, to income before income taxes, which is its nearest comparable GAAP financial measure, is included in the following table. Income before income taxes, alternatively, includes expense items, such as depreciation and amortization, general and administrative expenses and interest expense, which management does not consider when evaluating the core profitability of the Partnership’s operations. The following table reflects certain financial data for each segment for the periods indicated (in thousands): Three Months ended Six Months ended 2016 2017 2016 2017 Asphalt Terminalling Services Service revenue Third party revenue $ 18,132 $ 13,259 $ 35,438 $ 26,482 Related party revenue 256 13,505 558 26,837 Total revenue for reportable segments 18,388 26,764 35,996 53,319 Operating expense (excluding depreciation and amortization) 6,839 11,935 13,271 24,255 Segment operating margin 11,549 14,829 22,725 29,064 Total assets (end of period) $ 117,096 $ 147,832 $ 117,096 $ 147,832 Crude Oil Terminalling and Storage Services Service revenue Third party revenue $ 3,626 $ 5,726 $ 7,187 $ 11,851 Related party revenue 2,645 — 5,404 — Total revenue for reportable segments 6,271 5,726 12,591 11,851 Operating expense (excluding depreciation and amortization) 1,134 992 2,295 2,003 Segment operating margin 5,137 4,734 10,296 9,848 Total assets (end of period) $ 74,072 $ 69,834 $ 74,072 $ 69,834 Crude Oil Pipeline Services Service revenue Third party revenue $ 2,702 $ 2,720 $ 4,954 $ 5,324 Related party revenue 985 — 3,305 310 Product sales revenue Third party revenue 6,709 2,227 10,454 5,877 Total revenue for reportable segments 10,396 4,947 18,713 11,511 Operating expense (excluding depreciation and amortization) 3,711 3,142 7,939 6,383 Operating expense (intersegment) 235 74 495 244 Cost of product sales 4,089 1,669 7,276 4,808 Cost of product sales (intersegment) 426 — 426 — Segment operating margin 1,935 62 2,577 76 Total assets (end of period) $ 153,706 $ 117,222 $ 153,706 $ 117,222 Crude Oil Trucking and Producer Field Services Service revenue Third party revenue $ 6,394 $ 6,440 $ 13,531 $ 13,151 Related party revenue 1,976 — 3,604 — Intersegment revenue 235 74 495 244 Product sales revenue Third party revenue — — — 385 Intersegment revenue 426 — 426 — Total revenue for reportable segments 9,031 6,514 18,056 13,780 Operating expense (excluding depreciation and amortization) 7,918 6,702 16,722 13,970 Segment operating margin 1,113 (188 ) 1,334 (190 ) Total assets (end of period) $ 13,503 $ 11,208 $ 13,503 $ 11,208 Three Months ended Six Months ended 2016 2017 2016 2017 Total operating margin (excluding depreciation and amortization) (1) $ 19,734 $ 19,437 $ 36,932 $ 38,798 Total segment revenues $ 44,086 $ 43,951 $ 85,356 $ 90,461 Elimination of intersegment revenues (661 ) (74 ) (921 ) (244 ) Consolidated revenues $ 43,425 $ 43,877 $ 84,435 $ 90,217 ____________________ (1) The following table reconciles segment operating margin (excluding depreciation and amortization) to income (loss) before income taxes (in thousands): Three Months ended Six Months ended 2016 2017 2016 2017 Operating margin (excluding depreciation and amortization) $ 19,734 $ 19,437 $ 36,932 $ 38,798 Depreciation and amortization (7,688 ) (7,839 ) (14,823 ) (15,905 ) General and administrative expenses (4,834 ) (4,322 ) (9,579 ) (8,907 ) Asset impairment expense (22,574 ) (17 ) (22,845 ) (45 ) Gain (loss) on sale of assets 14 (754 ) (19 ) (879 ) Equity earnings in unconsolidated affiliate 157 — 781 61 Gain on sale of unconsolidated affiliate — 4,172 — 4,172 Interest expense (3,697 ) (4,265 ) (8,567 ) (7,295 ) Income (loss) before income taxes $ (18,888 ) $ 6,412 $ (18,120 ) $ 10,000 |