USD Partners LP - 10-K filing on 2016-03-10

Segment Reporting

12 Months Ended

Dec. 31, 2015

SEGMENT REPORTING

We manage our business in two reportable segments: Terminalling services and Fleet services. The Terminalling services segment charges fixed fees to load various grades of crude oil into railcars and transload ethanol from railcars, including related logistics services. Our terminalling services are primarily provided under multi-year, take-or-pay contracts. The Fleet services segment provides customers with railcars and fleet services related to the transportation of liquid hydrocarbons and biofuels under long-term, take-or-pay contracts. Corporate activities are not considered a reportable segment, but are included to present corporate and financing transactions which are not allocated to the established reporting segments.

Our segments offer different services and are managed accordingly. Our chief operating decision maker, or CODM, regularly reviews financial information about both segments in order to allocate resources and evaluate performance. Our CODM assesses segment performance based on Segment Adjusted EBITDA, which we define as net income before depreciation and amortization, interest and other income, interest and other expense, unrealized gains and losses associated with derivative instruments, foreign currency transaction gains and losses, income taxes, non-cash expenses related to our equity compensation programs, discontinued operations, adjustments related to deferred revenue associated with minimum monthly commitment fees and other items which management does not believe reflect the underlying performance of our business.

The following tables summarize our reportable segment data for continuing operations:



	For the Year Ended December 31, 2015
	Terminalling services			Fleet services		Corporate			Total
	(in thousands)
Revenues
Terminalling services	$	58,841		$	—	$	—		$	58,841
Terminalling services — related party	5,228			—		—			5,228
Railroad incentives	434			—		—			434
Fleet leases	—			7,710		—			7,710
Fleet leases — related party	—			4,123		—			4,123
Fleet services	—			622		—			622
Fleet services — related party	—			2,840		—			2,840
Freight and other reimbursables	—			1,880		—			1,880
Freight and other reimbursables — related party	—			85		—			85
Total revenue	64,503			17,260		—			81,763
Operating costs
Subcontracted rail services	7,710			—		—			7,710
Pipeline fees	17,249			—		—			17,249
Fleet leases	—			11,833		—			11,833
Freight and other reimbursables	—			1,965		—			1,965
Selling, general and administrative	5,924			1,035		7,483			14,442
Depreciation and amortization	6,110			—		—			6,110
Total operating costs	36,993			14,833		7,483			59,309
Operating income (loss)	27,510			2,427		(7,483		)	22,454
Interest expense	2,026			—		2,342			4,368
Gain associated with derivative instruments	(5,161		)	—		—			(5,161		)
Foreign currency transaction loss (gain)	166			43		(410		)	(201		)
Provision for income taxes	5,581			173		1			5,755
Income (loss) from continuing operations	$	24,898		$	2,211	$	(9,416	)	$	17,693
Total assets	$	316,232		$	5,719	$	6,447		$	328,398
Capital expenditures	$	1,671		$	—	$	—		$	1,671



	For the Year Ended December 31, 2014
	Terminalling services			Fleet services			Corporate			Total
	(in thousands)
Revenues
Terminalling services	$	18,266		$	—		$	—		$	18,266
Terminalling services — related party	3,499			—			—			3,499
Railroad incentives	719			—			—			719
Fleet leases	—			8,788			—			8,788
Fleet services	—			720			—			720
Fleet services — related party	—			1,501			—			1,501
Freight and other reimbursables	—			2,141			—			2,141
Freight and other reimbursables — related party	—			464			—			464
Total revenue	22,484			13,614			—			36,098
Operating costs
Subcontracted rail services	6,994			—			—			6,994
Pipeline fees	3,625			—						3,625
Fleet leases	—			8,788			—			8,788
Freight and other reimbursables	—			2,605			—			2,605
Selling, general and administrative	6,290			2,650			1,868			10,808
Depreciation	2,631			—			—			2,631
Total operating costs	19,540			14,043			1,868			35,451
Operating income (loss)	2,944			(429		)	(1,868		)	647
Interest expense	3,600			—			1,225			4,825
Gain associated with derivative instruments	(1,536		)	—			—			(1,536		)
Foreign currency transaction loss (gain)	4,406			(17		)	461			4,850
Provision (benefit) for income taxes	47			140			(1		)	186
Loss from continuing operations	$	(3,573	)	$	(552	)	$	(3,553	)	$	(7,678	)
Total assets	$	105,093		$	7,692		$	35,495		$	148,280
Capital expenditures	$	33,736		$	—		$	—		$	33,736



	For the Year Ended December 31, 2013
	Terminalling services			Fleet services		Corporate			Total
	(in thousands)
Revenues
Terminalling services	$	7,130		$	—	$	—		$	7,130
Terminalling services — related party	—			—		—			—
Fleet leases	—			13,572		—			13,572
Fleet services	—			235		—			235
Fleet services — related party	—			962		—			962
Freight and other reimbursables	—			1,778		—			1,778
Freight and other reimbursables — related party	—			2,624		—			2,624
Total revenue	7,130			19,171		—			26,301
Operating costs
Subcontracted rail services	1,898			—		—			1,898
Fleet leases	—			13,572		—			13,572
Freight and other reimbursables	—			4,402		—			4,402
Selling, general and administrative	3,704			380		374			4,458
Depreciation	502			—		—			502
Total operating costs	6,104			18,354		374			24,832
Operating income (loss)	1,026			817		(374		)	1,469
Interest expense	3,241			—		—			3,241
Foreign currency transaction loss	39			—		—			39
Provision for income taxes	21			9		—			30
Income (loss) from continuing operations	$	(2,275	)	$	808	$	(374	)	$	(1,841	)
Total assets	$	68,995		$	8,197	$	—		$	77,192
Capital expenditures	$	56,114		$	—	$	—		$	56,114

Segment Adjusted EBITDA

The following table provides a reconciliation of Adjusted EBITDA to income (loss) from continuing operations:



	For the Years Ended December 31,
	2015			2014			2013
	(in thousands)
Adjusted EBITDA
Terminalling services	$	45,347		$	15,397		$	1,528
Fleet services	2,427			1,187			817
Corporate activities	(5,022		)	(1,318		)	(374		)
Total Adjusted EBITDA	42,752			15,266			1,971
Add (deduct):
Interest expense	(4,368		)	(4,825		)	(3,241		)
Depreciation and amortization	(6,110		)	(2,631		)	(502		)
Provision for income taxes	(5,755		)	(186		)	(30		)
Gain associated with derivative instruments	5,161			1,536			—
Settlement of derivative contracts ⁽¹⁾	(4,283		)	(344		)	—
Unit based compensation expense	(2,461		)	(550		)	—
Foreign currency transaction gain (loss) ⁽²⁾	201			(4,850		)	(39		)
Unrecovered reimbursable freight costs⁽³⁾	—			(1,616		)	—
Deferred revenue associated with minimum monthly commitment fees ⁽⁴⁾	(7,444		)	(9,478		)	—
Income (loss) from continuing operations	$	17,693		$	(7,678	)	$	(1,841	)


⁽¹⁾	The amounts presented represent the gross proceeds received at the time the derivative contracts were settled and do not consider the amounts paid in connection with the initial purchase of the derivative contracts. We purchased the derivative contracts for $403 thousand and $64 thousand with respect to the contracts settled in the years ended December 31, 2015 and 2014, respectively.


⁽²⁾	Represents foreign exchange transaction gains or losses associated with activities between our U.S. and Canadian subsidiaries.


⁽³⁾	Represents costs incurred with respect to unrecovered reimbursable freight costs associated with the initial delivery of railcars in support of our Hardisty terminal.

⁽⁴⁾

Represents deferred revenue associated with minimum monthly commitment fees in excess of throughput utilized, which fees are not refundable to the customers. Amounts presented are net of: (a) the corresponding prepaid Gibson pipeline fee that will be recognized as expense concurrently with the recognition of revenue; (b) revenue recognized in the current period that was previously deferred; and (c) expense recognized for previously prepaid Gibson pipeline fees, which correspond with the revenue recognized that was previously deferred. Refer to additional discussion of deferred revenue in Note 10 of these consolidated financial statements.

The following tables summarize the geographic data for our continuing operations:



	For the Year Ended December 31, 2015
	U.S.		Canada		Total
	(in thousands)
Revenues
Third party	$	20,134	$	49,353	$	69,487
Related party	$	6,945	$	5,331	$	12,276
Total assets	$	250,309	$	78,089	$	328,398



	For the Year Ended December 31, 2014
	U.S.		Canada		Total
	(in thousands)
Revenues
Third party	$	17,049	$	13,585	$	30,634
Related party	$	1,933	$	3,531	$	5,464
Total assets	$	50,967	$	97,313	$	148,280



	For the Year Ended December 31, 2013
	U.S.		Canada		Total
	(in thousands)
Revenues
Third party	$	22,715	$	—	$	22,715
Related party	$	3,586	$	—	$	3,586
Total assets	$	17,825	$	59,367	$	77,192