Business and Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2013 |
Accounting Policies [Abstract] | ' |
Organization | ' |
Organization |
Arc Terminals LP is a Delaware limited partnership formed in March 2007 to operate terminalling and other midstream energy businesses and assets. Arc Logistics Partners LP (“Arc Logistics”) is a Delaware limited partnership formed in July 2013 by Lightfoot Capital Partners, LP and its general partner, Lightfoot Capital Partners GP LLC (the “sponsor” or “Lightfoot”), to own, operate, develop and acquire a diversified portfolio of complementary energy logistics assets. A registration statement on Form S-1, as amended through the time of its effectiveness, was filed by Arc Logistics with the Securities and Exchange Commission (the “SEC”) and was declared effective on November 5, 2013. On November 6, 2013, Arc Logistics’s common units began trading on the New York Stock Exchange under the symbol “ARCX.” On November 12, 2013, Arc Logistics completed its initial public offering (the “IPO”) of 6,000,000 common units representing limited partner interests and on November 18, 2013, Arc Logistics completed the sale of 786,869 additional common units pursuant to the partial exercise of the underwriters’ over-allotment option (together with the IPO, the “Offering”). Following the closing of the IPO, Arc Logistics includes the assets, liabilities and results of operations previously owned and operated by Arc Terminals LP and Arc Terminals GP LLC which consists of 14 terminals and other assets located in the East Coast, Gulf Coast and Midwest regions of the United States relating to the terminalling, storage, throughput and transloading of crude oil and petroleum products. In connection with the IPO, Arc Logistics acquired the LNG Interest (as defined below). |
Unless the context suggests otherwise, references in this report to the “Partnership” for periods prior to the closing of the IPO refer to Arc Terminals LP and its subsidiaries and for periods on and after the closing of the IPO refer to Arc Logistics Partners LP and its subsidiaries. Unless the context suggests otherwise, references to the “general partner” for periods prior to the closing of the IPO refer to Arc Terminals GP LLC which owned the general partner interest in Arc Terminals LP and for periods on and after the closing of the IPO refer to Arc Logistics GP LLC, which owns a non-economic general partner interest in the Partnership and all of the Partnership’s incentive distribution rights. References to “GCAC” refer to Gulf Coast Asphalt Company, L.L.C., which contributed its preferred units in Arc Terminals LP to the Partnership upon the consummation of the IPO. References to “Center Oil” refer to GP&W, Inc., d.b.a. Center Oil, and affiliates, including Center Terminal Company-Cleveland, which contributed its limited partner interests in Arc Terminals LP to the Partnership upon the consummation of the IPO. References to “Gulf LNG Holdings” refer to Gulf LNG Holdings Group, LLC and its subsidiaries, which own a liquefied natural gas regasification and storage facility in Pascagoula, MS, which is referred to herein as the “LNG Facility.” The Partnership used a portion of the proceeds from the IPO to acquire a 10.3% limited liability company interest in Gulf LNG Holdings, which is referred to herein as the “LNG Interest.” |
Basis of Presentation | ' |
Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements include the accounts of the Partnership and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. |
The Partnership’s results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of results expected for the full year of 2013 or for any other period. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which consist only of normal recurring adjustments, necessary to state fairly the results of the interim periods. The unaudited condensed consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and under the rules and regulations of the SEC. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Accordingly, these financial statements do not include all of the disclosures required to be included in annual audited financial statements by GAAP and should be read along with the Partnership’s 2012 audited consolidated financial statements and related notes included in Arc Logistics’ Rule 424(b)(4) prospectus filed with the SEC on November 7, 2013 (the “Prospectus”). |
Use of Estimates | ' |
Use of Estimates |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The most significant estimates relate to the valuation of acquired businesses, goodwill and intangible assets and the useful lives of intangible assets and property, plant and equipment. Actual results could differ from those estimates. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
The Partnership includes demand deposits with banks and all highly liquid investments with original maturities of three months or less in cash and cash equivalents. These balances are valued at cost, which approximates fair value. Cash balances are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of September 30, 2013 and December 31, 2012, the Partnership had balances that were in excess of this limit. |
Trade Accounts Receivable | ' |
Trade Accounts Receivable |
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Partnership reserves for specific trade accounts receivable when it is probable that all or a part of an outstanding balance will not be collected. The Partnership regularly reviews collectability and establishes or adjusts the allowance as necessary using the specific identification method. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. There were no reserves for uncollectible amounts as of September 30, 2013 and December 31, 2012. During the nine months ended September 30, 2013, the Partnership wrote off less than $0.1 million of uncollectible receivables. No other amounts have been deemed uncollectible in the periods presented in the condensed consolidated statements of income. |
Inventories | ' |
Inventories |
Inventories consist of additives which are sold to customers and mixed with the various customer-owned liquid products stored in the Partnership’s terminals. Inventories are stated at the lower of cost or estimated net realizable value. Inventory costs are determined using the first-in, first-out method. |
Other Current Assets | ' |
Other Current Assets |
Other current assets consist primarily of prepaid expenses and deposits. |
Property, Plant and Equipment | ' |
Property, Plant and Equipment |
Property, plant and equipment is recorded at cost, less accumulated depreciation. The Partnership owns a 50% undivided interest in the property, plant and equipment at two terminal locations. At the time of acquisition, these assets were recorded at 50% of the aggregate fair value of the related property, plant and equipment. Expenditures for routine maintenance and repairs are charged to expense as incurred. Major improvements or expenditures that extend the useful life or productive capacity of assets are capitalized. Depreciation is recorded over the estimated useful lives of the applicable assets, using the straight-line method. The estimated useful lives are as follows: |
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Building and site improvements | | | 5–40 years | | | | | |
Tanks and trim | | | 2–40 years | | | | | |
Machinery and equipment | | | 2–25 years | | | | | |
Office furniture and equipment | | | 3–10 years | | | | | |
Capitalized costs incurred by the Partnership during the year for major improvements and capital projects that are not completed as of year-end are recorded as construction in progress. Construction in progress is not depreciated until the related assets or improvements are ready for intended use. Additionally, the Partnership capitalizes interest costs as a part of the historical cost of constructing certain assets and includes such interest in the property, plant and equipment line on the balance sheet. Capitalized interest for the nine months ended September 30, 2013 and 2012 was $0.3 million and $0.1 million, respectively. |
Intangible Assets | ' |
Intangible Assets |
Intangible assets primarily consist of customer relationships, acquired contracts and a covenant not to compete which are amortized on a straight-line basis over the expected life of each intangible asset. |
Impairment of Long-Lived Assets | ' |
Impairment of Long-Lived Assets |
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. No impairment charges were recorded through September 30, 2013 and December 31, 2012. |
Goodwill | ' |
Goodwill |
Goodwill represents the excess of consideration paid over the fair value of net assets acquired in a business combination. Goodwill is not amortized but instead is assessed for impairment at least annually or when facts and circumstances warrant. Goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Partnership uses an analysis of industry valuation metrics, including review of values of comparable businesses to estimate fair value. If the carrying amount of a reporting unit exceeds its fair value, the second step is performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. |
The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. Based on the analysis at December 31, 2012, the Partnership believes that no impairment of goodwill exists and there are no indicators of impairments since this assessment. There were no actual impairments recorded against goodwill through September 30, 2013 and December 31, 2012. |
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| | September 30, | | | December 31, | |
| | 2013 | | | 2012 | |
Beginning Balance | | $ | 6,730 | | | $ | 6,730 | |
Goodwill acquired | | | 8,432 | | | | — | |
Impairment | | | — | | | | — | |
| | | | | | | | |
Ending Balance | | $ | 15,162 | | | $ | 6,730 | |
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Other Assets | ' |
Other Assets |
Other assets consist primarily of debt issuance costs related to a credit facility amendment entered into in February 2013 (see “Note 7—Debt”). Interest expense during the nine months ended September 30, 2013 and September 30, 2012 includes one-time write offs of approximately $0.8 million and $0 million, respectively, representing the unamortized debt issuance costs prior to the refinancing of the debt. Debt issuance costs are capitalized and amortized over the term of the related debt using straight line amortization, which approximates the effective interest rate method. In addition, the Partnership has recorded approximately $1.2 million in deferred costs associated with the Offering. These costs will be offset against any proceeds in the Offering. |
Deferred Revenue | ' |
Deferred Revenue |
Deferred revenue relates to customer contracts under which the customer has paid in advance for services not yet performed. The deferred revenue is recognized as the services are performed over the life of the contract. |
Revenue Recognition | ' |
Revenue Recognition |
Revenues from leased tank storage and delivery services are recognized as the services are performed. Revenues also include the sale of excess products and additives which are mixed with customer-owned liquid products. Revenues for the sale of excess products and additives are recognized when title and risk of loss passes to the customer. |
Income Taxes | ' |
Income Taxes |
Taxable income or loss of the Partnership generally is required to be reported on the income tax returns of the limited partners in accordance with the terms of the partnership agreement; and accordingly, no provision has been made in the accompanying consolidated financial statements for the limited partners’ federal income taxes. There are certain entity level state income taxes that are incurred at the Partnership level and have been recorded during the nine months ended September 30, 2013 and 2012. |
Tax returns for the years ended December 31, 2012, 2011, 2010, 2009 and 2008 are open to IRS and state audits. The Partnership is not aware of any uncertain tax positions as of September 30, 2013 and December 31, 2012. |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments |
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a specified measurement date. Fair value measurements are derived using inputs and assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. GAAP establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This three-tier hierarchy classifies fair value amounts recognized or disclosed in the financial statements based on the observability of inputs used to estimate such fair values. The classification within the hierarchy of a financial asset or liability is determined based on the lowest level input that is significant to the fair value measurement. The hierarchy considers fair value amounts based on observable inputs (Level 1 and 2) to be more reliable and predictable than those based primarily on unobservable inputs (Level 3). At each balance sheet reporting date, the Partnership categorizes its financial assets and liabilities using this hierarchy. |
The amounts reported in the balance sheet for cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value because of the short-term maturities of these instruments (Level 1). The carrying amount of the Partnership’s prior term loan and line of credit approximated fair value due to its short-term nature and market rate of interest (Level 2). |
The Partnership believes that its valuation methods are appropriate and consistent with the values that would be determined by other market participants. However, the use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. |
Limited Partners' Net Income (Loss) Per Unit | ' |
Limited Partners’ Net Income (Loss) Per Unit |
The Partnership computes limited partners’ net income (loss) per unit by dividing its limited partners’ interest in net income (loss) by the weighted average number of units outstanding during the period. The overall computation, presentation and disclosure of the Partnership’s limited partners’ net income (loss) per unit are made in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260 “Earnings per Share.” |
Recently Issued Accounting Pronouncements | ' |
Recently Issued Accounting Pronouncements |
In December 2011, the FASB issued new guidance which requires an entity to disclose information about financial instruments and derivative financial instruments that have been offset within the balance sheet, or are subject to a master netting arrangement or similar agreement, regardless of whether they have been offset within the balance sheet. In January 2013, the FASB issued standards to clarify the scope of transactions subject to the disclosure provisions including derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria established under GAAP, or that are subject to a master netting arrangement or similar agreement. Both standards are effective for interim and annual periods beginning on or after January 1, 2013, with required disclosures presented retrospectively for all comparative periods presented. The adoption of this guidance has not had a material impact on our financial statements. |
In February 2013, the FASB issued new guidance which requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component; but does not change the current requirements for reporting net income or other comprehensive income in financial statements. The guidance requires presentation of significant amounts reclassified out of accumulated other comprehensive income into earnings by the respective line items of net income, but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. The standard is effective prospectively for reporting periods beginning after December 15, 2012 with early adoption permitted. The adoption of this guidance has not had a material impact on our financial statements. |
In February 2013, the FASB issued new guidance that requires measurement of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the sum of (1) the amount the reporting entity agreed to pay on the basis of its arrangement among co-obligors and (2) any additional amount the reporting entity expects to pay on behalf of its co-obligors. Disclosures are required of the nature and amount of the obligations as well as information about such obligations. The guidance is effective for fiscal years beginning after December 15, 2013 and interim periods within those years, and should be applied retrospectively to all prior periods presented. The Partnership does not expect adoption of the new guidance to have a material impact on its financial position or results of operations. |