Company Quick10K Filing
Magellan Midstream Partners
Price1.00 EPS-734,404,000
Shares-0 P/E-0
MCap-0 P/FCF-0
Net Debt4,514 EBIT737
TEV4,514 TEV/EBIT6
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-01
10-K 2019-12-31 Filed 2020-02-18
10-Q 2019-09-30 Filed 2019-10-31
10-Q 2019-06-30 Filed 2019-08-01
10-Q 2019-03-31 Filed 2019-05-01
10-K 2018-12-31 Filed 2019-02-15
10-Q 2018-09-30 Filed 2018-11-01
10-Q 2018-06-30 Filed 2018-08-02
10-Q 2018-03-31 Filed 2018-05-03
10-K 2017-12-31 Filed 2018-02-16
10-Q 2017-09-30 Filed 2017-11-02
10-Q 2017-06-30 Filed 2017-08-02
10-Q 2017-03-31 Filed 2017-05-03
10-K 2016-12-31 Filed 2017-02-17
10-Q 2016-09-30 Filed 2016-11-02
10-Q 2016-06-30 Filed 2016-08-02
10-Q 2016-03-31 Filed 2016-05-04
10-K 2015-12-31 Filed 2016-02-19
10-Q 2015-09-30 Filed 2015-11-03
10-Q 2015-06-30 Filed 2015-08-06
10-Q 2015-03-31 Filed 2015-05-05
10-K 2014-12-31 Filed 2015-02-20
10-Q 2014-09-30 Filed 2014-10-31
10-Q 2014-06-30 Filed 2014-08-05
10-Q 2014-03-31 Filed 2014-05-06
10-K 2013-12-31 Filed 2014-02-24
10-Q 2013-09-30 Filed 2013-11-01
10-Q 2013-06-30 Filed 2013-08-02
10-Q 2013-03-31 Filed 2013-05-03
10-K 2012-12-31 Filed 2013-02-22
10-Q 2012-09-30 Filed 2012-11-01
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-03
10-K 2011-12-31 Filed 2012-02-27
10-Q 2011-09-30 Filed 2011-11-07
10-Q 2011-06-30 Filed 2011-08-04
10-Q 2011-03-31 Filed 2011-05-04
10-K 2010-12-31 Filed 2011-02-25
10-Q 2010-06-30 Filed 2010-08-03
10-Q 2010-03-31 Filed 2010-05-04
10-K 2009-12-31 Filed 2010-02-24
8-K 2020-06-15
8-K 2020-05-20
8-K 2020-05-06
8-K 2020-05-04
8-K 2020-05-01
8-K 2020-04-28
8-K 2020-03-25
8-K 2020-01-30
8-K 2020-01-21
8-K 2019-10-31
8-K 2019-08-19
8-K 2019-08-08
8-K 2019-08-01
8-K 2019-05-21
8-K 2019-05-17
8-K 2019-05-01
8-K 2019-04-25
8-K 2019-03-26
8-K 2019-03-25
8-K 2019-01-31
8-K 2019-01-18
8-K 2019-01-11
8-K 2018-11-01
8-K 2018-10-25
8-K 2018-08-20
8-K 2018-08-02
8-K 2018-05-03
8-K 2018-04-26
8-K 2018-02-01

MMP 10Q Quarterly Report

Part I
Item 1. Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex-311x1q20.htm
EX-31.2 ex-312x1q20.htm
EX-32.1 ex-321x1q20.htm
EX-32.2 ex-322x1q20.htm

Magellan Midstream Partners Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
10.08.06.04.02.00.02012201420172020
Assets, Equity
0.80.60.50.30.20.02012201420172020
Rev, G Profit, Net Income
0.50.30.1-0.2-0.4-0.62012201420172020
Ops, Inv, Fin

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ________________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File No.: 1-16335
 __________________________________
 Magellan Midstream Partners, L.P.
(Exact name of registrant as specified in its charter)
Delaware
 
73-1599053
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification No.)
One Williams Center, P.O. Box 22186, Tulsa, Oklahoma 74121-2186
(Address of principal executive offices and zip code)
(918) 574-7000
(Registrant’s telephone number, including area code)

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
 
MMP
 
New York Stock Exchange

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

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 and post such files).    Yes  x    No  
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     Non-accelerated filer      
Smaller reporting company  Emerging growth company 
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Yes      No  x
As of April 30, 2020, there were 225,056,287 common units outstanding.
 
 
 
 
 





TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
 
ITEM 1.
CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 
 
 
CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS:
 
 
1.
 
 
2.
 
 
3.
 
 
4.
 
 
5.
 
 
6.
 
 
7.
 
 
8.
 
 
9.
 
 
10.
 
 
11.
 
 
12.
 
 
13.
 
 
14.
 
 
15.
 
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 
 
 
 
 
 
 
 
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4.
CONTROLS AND PROCEDURES
PART II
OTHER INFORMATION
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
INDEX TO EXHIBITS
SIGNATURES
 

1




Forward-Looking Statements

Except for statements of historical fact, all statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may be identified by words like “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “guidance,” “intends,” “may,” “might,” “plans,” “potential,” “projected,” “scheduled,” “should,” “will” and other similar expressions. The absence of such words or expressions does not necessarily mean the statements are not forward-looking. Although we believe our forward-looking statements are reasonable, statements made regarding future results are not guarantees of future performance and are subject to numerous assumptions, uncertainties and risks that are difficult to predict, including those described in Part II, Item 1A – Risk Factors of this Quarterly Report on Form 10-Q. Actual outcomes and results may be materially different from the results stated or implied in such forward-looking statements included in this report. You should not put any undue reliance on any forward-looking statement.
 
The following are among the important factors that could cause future results to differ materially from any expected, projected, forecasted, estimated or budgeted amounts, events or circumstances we have discussed in this report:
 
overall demand for refined products, crude oil and liquefied petroleum gases;
price fluctuations for refined products, crude oil and liquefied petroleum gases and expectations about future prices for these products;
changes in the production of crude oil in the basins served by our pipelines;
changes in general economic conditions, interest rates and price levels;
changes in the financial condition of our customers, vendors, derivatives counterparties, lenders or joint venture co-owners;
our ability to secure financing in the credit and capital markets in amounts and on terms that will allow us to execute our business strategy, refinance our existing obligations when due and maintain adequate liquidity;
development of alternative energy sources, including but not limited to natural gas, solar power, wind power, electric and battery-powered engines and geothermal energy, increased use of biofuels such as ethanol and biodiesel, increased conservation or fuel efficiency, increased use of electric vehicles, as well as regulatory developments or other trends that could affect demand for our services;
changes in population in the markets served by our refined products pipeline system and changes in consumer preferences, driving patterns or rates of automobile ownership;
changes in the product quality, throughput or interruption in service of refined products or crude oil pipelines owned and operated by third parties and connected to our assets;
changes in demand for transportation or storage in our refined products or crude oil segments;
changes in supply and demand patterns for our facilities due to geopolitical events, the activities of the Organization of the Petroleum Exporting Countries, changes in U.S. trade policies or in laws governing the importing and exporting of petroleum products, technological developments or other factors;
our ability to manage interest rate and commodity price exposures;
changes in our tariff rates or other terms of service implemented by the Federal Energy Regulatory Commission or state regulatory agencies;
shut-downs or cutbacks at refineries, oil wells, petrochemical plants or other customers or businesses that use or supply our services;
the effect of weather patterns and other natural phenomena, including climate change, on our operations and demand for our services;
an increase in the competition our operations encounter, including the effects of capacity over-build in the areas where we operate;
the occurrence of natural disasters, epidemics, terrorism, sabotage, protests or activism, operational hazards, equipment failures, system failures or unforeseen interruptions;
changes in general economic conditions, including market and macro-economic disruptions resulting from the COVID-19 pandemic and related governmental responses;

2




our ability to obtain adequate levels of insurance at a reasonable cost, and the potential for losses to exceed the insurance coverage we do obtain;
the treatment of us as a corporation for federal or state income tax purposes or if we become subject to significant forms of other taxation or more aggressive enforcement or increased assessments under existing forms of taxation;
our ability to identify expansion projects with acceptable expected returns or to complete identified expansion projects on time and at projected costs;
our ability to make and integrate accretive acquisitions and joint ventures and successfully execute our business strategy;
uncertainty of estimates, including accruals and costs of environmental remediation;
our ability to cooperate with and rely on our joint venture co-owners;
actions by rating agencies concerning our credit ratings;
our ability to timely obtain and maintain all necessary approvals, consents and permits required to operate our existing assets and to construct, acquire and operate any new or modified assets;
our ability to promptly obtain all necessary services, materials, labor, supplies and rights-of-way required for maintenance and operation of our current assets and construction of our growth projects, without significant delays, disputes or cost overruns;
risks inherent in the use and security of information systems in our business and implementation of new software and hardware;
changes in laws and regulations or the interpretations of such laws that govern our gas liquids blending activities, including the potential applicability of the Carmack Amendment, which broadly covers claims for damage or loss incurred to goods transported by a carrier in interstate commerce, to such activities, or changes regarding product quality specifications or renewable fuel obligations that impact our ability to produce gasoline volumes through our gas liquids blending activities or that require significant capital outlays for compliance;
changes in laws and regulations to which we or our customers are or could become subject, including tax withholding requirements, safety, security, employment, hydraulic fracturing, derivatives transactions, trade and environmental laws and regulations, including laws and regulations designed to address climate change;
the cost and effects of legal and administrative claims and proceedings against us, our subsidiaries or our joint ventures;
the amount of our indebtedness, which could make us vulnerable to general adverse economic and industry conditions, limit our ability to borrow additional funds, place us at competitive disadvantages compared to our competitors that have less debt or have other adverse consequences;
the effect of changes in accounting policies;
the potential that our internal controls may not be adequate, weaknesses may be discovered or remediation of any identified weaknesses may not be successful;
the ability and intent of our customers, vendors, lenders, joint venture co-owners or other third parties to perform on their contractual obligations to us;
petroleum product supply disruptions;
global and domestic repercussions from terrorist activities, including cyber attacks, and the government’s response thereto; and
other factors and uncertainties inherent in the transportation, storage and distribution of petroleum products and the operation, acquisition and construction of assets related to such activities.
 
This list of important factors is not exhaustive. The forward-looking statements in this Quarterly Report speak only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise, unless required by law.

3




PART I
FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per unit amounts)
(Unaudited)
 
 
Three Months Ended
 
 
March 31,
 
 
2019
 
2020
 
Transportation and terminals revenue
$
460,792

 
$
458,395

 
Product sales revenue
162,995

 
319,120

 
Affiliate management fee revenue
5,148

 
5,291

 
Total revenue
628,935

 
782,806

 
Costs and expenses:
 
 
 
 
Operating
146,025

 
149,508

 
Cost of product sales
169,094

 
249,236

 
Depreciation, amortization and impairment
61,871

 
63,534

 
General and administrative
45,995

 
36,908

 
Total costs and expenses
422,985

 
499,186

 
Other operating income (expense)
6,941

 
(511
)
 
Earnings of non-controlled entities
31,255

 
43,660

 
Operating profit
244,146

 
326,769

 
Interest expense
60,166

 
55,900

 
Interest capitalized
(3,454
)
 
(4,951
)
 
Interest income
(1,660
)
 
(420
)
 
Gain on disposition of assets
(21,788
)
 
(12,887
)
 
Other (income) expense
2,050

 
807

 
Income before provision for income taxes
208,832

 
288,320

 
Provision for income taxes
1,169

 
756

 
Net income
$
207,663

 
$
287,564

 
Basic net income per common unit
$
0.91

 
$
1.26

 
Diluted net income per common unit
$
0.91

 
$
1.26

 
Weighted average number of common units outstanding used for basic net income per unit calculation
228,558

 
227,571

 
Weighted average number of common units outstanding used for diluted net income per unit calculation
228,558

 
227,571

 

    


See notes to consolidated financial statements.

4




MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
 
 
Three Months Ended March 31,
 
2019
 
2020
Net income
$
207,663

 
$
287,564

Other comprehensive income (loss):
 
 

Derivative activity:
 
 
 
Net loss on cash flow hedges
(4,376
)
 
(11,914
)
Reclassification of net loss on cash flow hedges to income  
627

 
809

Changes in employee benefit plan assets and benefit obligations recognized in other comprehensive income:
 
 
 
Net actuarial loss

 
(747
)
Curtailment gain

 
1,703

Recognition of prior service credit amortization in income
(45
)
 
(45
)
Recognition of actuarial loss amortization in income
1,348

 
1,531

Recognition of settlement cost in income

 
969

Total other comprehensive income (loss)
(2,446
)
 
(7,694
)
Comprehensive income
$
205,217

 
$
279,870





























See notes to consolidated financial statements.

5




MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
December 31,
2019
 
March 31,
2020
ASSETS
 
 
(Unaudited)
Current assets:
 
 
 
Cash and cash equivalents
$
58,030

 
$
139,254

Trade accounts receivable
125,440

 
94,563

Other accounts receivable
23,887

 
20,478

Inventory
184,399

 
71,153

Commodity derivatives contracts, net

 
61,799

Commodity derivatives deposits
27,415

 

Other current assets
40,237

 
39,743

Total current assets
459,408

 
426,990

Property, plant and equipment
8,431,227

 
8,166,125

Less: accumulated depreciation
2,027,193

 
1,919,014

Net property, plant and equipment
6,404,034

 
6,247,111

Investments in non-controlled entities
1,240,551

 
1,190,803

Right-of-use asset, operating leases
171,868

 
165,512

Long-term receivables
20,782

 
21,406

Goodwill
53,260

 
52,830

Other intangibles (less accumulated amortization of $6,255 and $6,923 at December 31, 2019 and March 31, 2020, respectively)
47,898

 
47,230

Restricted cash
26,569

 
10,303

Other noncurrent assets
13,359

 
23,120

Total assets
$
8,437,729

 
$
8,185,305

 
 
 
 
LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
150,992

 
$
147,893

Accrued payroll and benefits
75,511

 
31,549

Accrued interest payable
64,276

 
47,484

Accrued taxes other than income
66,007

 
46,509

Deferred revenue
109,654

 
113,310

Accrued product liabilities
90,788

 
52,348

Commodity derivatives contracts, net
10,222

 

Commodity derivatives deposits

 
50,345

Current portion of operating lease liability
26,221

 
26,699

Current portion of long-term debt, net

 
550,949

Other current liabilities
73,205

 
72,558

Total current liabilities
666,876

 
1,139,644

Long-term operating lease liability
144,023

 
139,218

Long-term debt, net
4,706,075

 
4,155,437

Long-term pension and benefits
145,992

 
145,709

Other noncurrent liabilities
59,735

 
61,320

Commitments and contingencies

 

Partners’ capital:
 
 
 
Common unitholders (228,403 units and 225,056 units outstanding at December 31, 2019 and March 31, 2020, respectively)
2,877,105

 
2,713,748

Accumulated other comprehensive loss
(162,077
)
 
(169,771
)
Total partners’ capital
2,715,028

 
2,543,977

Total liabilities and partners’ capital
$
8,437,729

 
$
8,185,305

 
 
 
 



See notes to consolidated financial statements.

6




MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
Three Months Ended
 
March 31,
 
2019
 
2020
Operating Activities:
 
 
 
Net income
$
207,663

 
$
287,564

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, amortization and impairment expense
61,871

 
63,534

Gain on sale and retirement of assets
(21,759
)
 
(13,002
)
Earnings of non-controlled entities
(31,255
)
 
(43,660
)
Distributions from operations of non-controlled entities
43,069

 
54,743

Equity-based incentive compensation expense
4,914

 
155

Settlement gain, amortization of prior service credit and actuarial loss
1,303

 
1,113

Debt prepayment costs
8,270

 

Changes in operating assets and liabilities:
 
 
 
Trade accounts receivable and other accounts receivable
(36,886
)
 
29,988

Inventory
(9,313
)
 
112,007

Accounts payable
2,909

 
7,926

Accrued payroll and benefits
(39,065
)
 
(43,962
)
Accrued interest payable
(16,470
)
 
(16,792
)
Accrued taxes other than income
(12,020
)
 
(17,673
)
Accrued product liabilities
18,949

 
(38,440
)
Deferred revenue
(2,395
)
 
3,656

Other current and noncurrent assets and liabilities
26,771

 
(2,536
)
Net cash provided by operating activities
206,556

 
384,621

Investing Activities:
 
 
 
Additions to property, plant and equipment, net(1)
(206,436
)
 
(172,671
)
Proceeds from sale and disposition of assets
53,676

 
332,789

Investments in non-controlled entities
(76,634
)
 
(28,325
)
Distributions from returns of investments in non-controlled entities
7,500

 

Net cash provided (used) by investing activities
(221,894
)
 
131,793

Financing Activities:
 
 
 
Distributions paid
(227,832
)
 
(234,774
)
Net commercial paper borrowings
69,000

 

Borrowings under long-term notes
496,855

 

Payments on notes
(550,000
)
 

Debt placement costs
(5,355
)
 

Net payment on financial derivatives
(8,028
)
 

Payments associated with settlement of equity-based incentive compensation
(9,764
)
 
(14,700
)
Debt prepayment costs
(8,270
)
 

Repurchases of common units

 
(201,982
)
Net cash used by financing activities
(243,394
)
 
(451,456
)
Change in cash, cash equivalents and restricted cash
(258,732
)
 
64,958

Cash, cash equivalents and restricted cash at beginning of period
309,261

 
84,599

Cash, cash equivalents and restricted cash at end of period
$
50,529

 
$
149,557

 
 
 
 
Supplemental non-cash investing activities:
 
 
 
(1)   Additions to property, plant and equipment
$
(260,734
)
 
$
(152,292
)
Changes in accounts payable and other current liabilities related to capital expenditures
54,298

 
(20,379
)
Additions to property, plant and equipment, net
$
(206,436
)
 
$
(172,671
)



See notes to consolidated financial statements.

7




MAGELLAN MIDSTREAM PARTNERS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL
(Unaudited, in thousands)


 
 
Common Unitholders
 
 Accumulated Other Comprehensive Loss
 
Total Partners’ Capital
Balance, January 1, 2019
 
$
2,763,925

 
 
$
(120,491
)
 
 
$
2,643,434

Comprehensive income:
 
 
 
 
 
 
 
 
Net income
 
207,663

 
 

 
 
207,663

Total other comprehensive income (loss)
 

 
 
(2,446
)
 
 
(2,446
)
Total comprehensive income (loss)
 
207,663

 
 
(2,446
)
 
 
205,217

Distributions
 
(227,832
)
 
 

 
 
(227,832
)
Equity-based incentive compensation expense
 
4,914

 
 

 
 
4,914

Issuance of common units in settlement of equity-based incentive plan awards
 
480

 
 

 
 
480

Payments associated with settlement of equity-based incentive compensation
 
(9,764
)
 
 

 
 
(9,764
)
Other
 
(194
)
 
 

 
 
(194
)
Three Months Ended March 31, 2019
 
$
2,739,192

 
 
$
(122,937
)
 
 
$
2,616,255

 
 
 
 
 
 
 
 
 
Balance, January 1, 2020
 
$
2,877,105

 
 
$
(162,077
)
 
 
$
2,715,028

Comprehensive income:
 
 
 
 
 
 
 
 
Net income
 
287,564

 
 

 
 
287,564

Total other comprehensive income (loss)
 

 
 
(7,694
)
 
 
(7,694
)
Total comprehensive income (loss)
 
287,564

 
 
(7,694
)
 
 
279,870

Distributions
 
(234,774
)
 
 

 
 
(234,774
)
Equity-based incentive compensation expense
 
155

 
 

 
 
155

Repurchases of common units
 
(201,982
)
 
 

 
 
(201,982
)
Issuance of common units in settlement of equity-based incentive plan awards
 
600

 
 

 
 
600

Payments associated with settlement of equity-based incentive compensation
 
(14,700
)
 
 

 
 
(14,700
)
Other
 
(220
)
 
 

 
 
(220
)
Three Months Ended March 31, 2020
 
$
2,713,748

 
 
$
(169,771
)
 
 
$
2,543,977

 
 
 
 
 
 
 
 
 












See notes to consolidated financial statements.

8






MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.
Organization, Description of Business and Basis of Presentation

Organization

Unless indicated otherwise, the terms “our,” “we,” “us” and similar language refer to Magellan Midstream Partners, L.P. together with its subsidiaries. Magellan Midstream Partners, L.P. is a Delaware limited partnership, and its common units are traded on the New York Stock Exchange under the ticker symbol “MMP.” Magellan GP, LLC, a wholly-owned Delaware limited liability company, serves as its general partner.

During first quarter 2020, we completed a reorganization of our reportable segments.  This reorganization was effected to reflect changes in the management of our business in conjunction with the sale of three of our marine terminals.  Following this sale, two of our remaining marine terminals were combined with our refined product segment and one terminal was combined with our crude oil segment based on the predominant types of product stored at the facilities.  Accordingly, we have restated our segment disclosures for all previous periods included in this report.

Description of Business

On March 20, 2020, we sold three marine terminals to a subsidiary of Buckeye Partners, L.P. (“Buckeye”) for $252.6 million. These terminals are located in New Haven, Connecticut, Wilmington, Delaware and Marrero, Louisiana. We recognized a $5.4 million impairment loss related to the sale on our consolidated statements of income.

We are principally engaged in the transportation, storage and distribution of refined petroleum products and crude oil.  As of March 31, 2020, our asset portfolio consisted of:

our refined products segment, comprised of our approximately 9,800-mile refined products pipeline system with 53 connected terminals, as well as 25 independent terminals not connected to our pipeline system and two marine storage terminals (one of which is owned through a joint venture); and

our crude oil segment, comprised of approximately 2,200 miles of crude oil pipelines, a condensate splitter and 37 million barrels of aggregate storage capacity, of which approximately 25 million barrels are used for contract storage. Approximately 1,000 miles of these pipelines, the condensate splitter and 30 million barrels of this storage capacity (including 22 million barrels used for contract storage) are wholly-owned, with the remainder owned through joint ventures.

Terminology common in our industry includes the following terms, which describe products that we transport, store and distribute through our pipelines and terminals:

refined products are the output from crude oil refineries that are primarily used as fuels by consumers. Refined products include gasoline, diesel fuel, aviation fuel, kerosene and heating oil.  Diesel fuel, kerosene and heating oil are referred to as distillates;

transmix is a mixture of refined products that forms when transported in pipelines. Transmix is fractionated and blended into usable refined products;

liquefied petroleum gases, or LPGs, are liquids produced as by-products of the crude oil refining process and in connection with natural gas production. LPGs include butane and propane;


9






MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



blendstocks are products blended with refined products to change or enhance their characteristics such as increasing a gasoline’s octane or oxygen content. Blendstocks include alkylates, oxygenates and natural gasoline;

heavy oils and feedstocks are products used as burner fuels or feedstocks for further processing by refineries and petrochemical facilities. Heavy oils and feedstocks include No. 6 fuel oil and vacuum gas oil;

crude oil, which includes condensate, is a naturally occurring unrefined petroleum product recovered from underground that is used as feedstock by refineries, splitters and petrochemical facilities; and

biofuels, such as ethanol and biodiesel, are fuels derived from living materials and typically blended with other refined products as required by government mandates.

We use the term petroleum products to describe any, or a combination, of the above-noted products.
 
Basis of Presentation

In the opinion of management, our accompanying consolidated financial statements which are unaudited, except for the consolidated balance sheet as of December 31, 2019, which is derived from our audited financial statements, include all normal and recurring adjustments necessary to present fairly our financial position as of March 31, 2020, the results of operations for the three months ended March 31, 2019 and 2020 and cash flows for the three months ended March 31, 2019 and 2020. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year ending December 31, 2020 for several reasons. Profits from our gas liquids blending activities are realized largely during the first and fourth quarters of each year.  Additionally, gasoline demand, which drives transportation volumes and revenues on our refined products pipeline system, generally trends higher during the summer driving months.  Further, the volatility of commodity prices impacts the profits from our commodity activities and the volume of petroleum products we transport on our pipelines.  Finally, we expect the impact of COVID-19 on demand for petroleum products and the decline in commodity prices to be more prevalent in our results of operations in the remaining three quarters of 2020, resulting in decreased transportation and terminalling revenues and reduced profits from our gas liquids blending activities.

Pursuant to the rules and regulations of the Securities and Exchange Commission, the financial statements in this report do not include all of the information and notes normally included with financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). These 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, 2019.

Use of Estimates

The preparation of our consolidated 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 that exist at the date of our consolidated financial statements, as well as their impact on the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.

New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326). The new guidance is effective for reporting periods

10






MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



beginning after December 15, 2019. The standard replaces the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. The standard requires a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We adopted the new guidance as of January 1, 2020 using the modified retrospective approach related to our accounts receivables and contract assets, resulting in no cumulative adjustment to retained earnings. The adoption of this guidance did not have a material impact on our consolidated statements of income. 


2.
Segment Disclosures

During first quarter 2020, we revised our reporting segments. See Note 1 – Organization, Description of Business and Basis of Presentation for a discussion of this matter.

Our reportable segments are strategic business units that offer different products and services. Our segments are managed separately as each segment requires different marketing strategies and business knowledge. Management evaluates performance based on segment operating margin, which includes revenue from affiliates and third-party customers, operating expenses, cost of product sales, other operating (income) expense and earnings of non-controlled entities.
We believe that investors benefit from having access to the same financial measures used by management. Operating margin, which is presented in the following tables, is an important measure used by management to evaluate the economic performance of our core operations. Operating margin is not a GAAP measure, but the components of operating margin are computed using amounts that are determined in accordance with GAAP. A reconciliation of operating margin to operating profit, which is its nearest comparable GAAP financial measure, is included in the tables below (presented in thousands). Operating profit includes depreciation, amortization and impairment expense and general and administrative (“G&A”) expense that management does not consider when evaluating the core profitability of our separate operating segments.
 
Three Months Ended March 31, 2019
 
Refined Products
 
Crude Oil
 
Intersegment
Eliminations
 
Total
Transportation and terminals revenue
$
309,571

 
$
152,159

 
$
(938
)
 
$
460,792

Product sales revenue
157,282

 
5,713

 

 
162,995

Affiliate management fee revenue
1,662

 
3,486

 

 
5,148

Total revenue
468,515

 
161,358

 
(938
)
 
628,935

Operating expenses
102,692

 
45,706

 
(2,373
)
 
146,025

Cost of product sales
162,430

 
6,664

 

 
169,094

Other operating (income) expense
(5,368
)
 
(1,573
)
 

 
(6,941
)
(Earnings) loss of non-controlled entities
1,047

 
(32,302
)
 

 
(31,255
)
Operating margin
207,714

 
142,863

 
1,435

 
352,012

Depreciation, amortization and impairment expense
44,427

 
16,009

 
1,435

 
61,871

G&A expense
32,813

 
13,182

 

 
45,995

Operating profit
$
130,474

 
$
113,672

 
$

 
$
244,146

 

11






MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



 
Three Months Ended March 31, 2020
 
Refined Products
 
Crude Oil
 
Intersegment
Eliminations
 
Total
Transportation and terminals revenue
$
314,319

 
$
145,658

 
$
(1,582
)
 
$
458,395

Product sales revenue
312,986

 
6,134

 

 
319,120

Affiliate management fee revenue
1,584

 
3,707

 

 
5,291

Total revenue
628,889

 
155,499

 
(1,582
)
 
782,806

Operating expenses
105,882

 
46,772

 
(3,146
)
 
149,508

Cost of product sales
233,342

 
15,894

 

 
249,236

Other operating (income) expense
(1,892
)
 
2,403

 

 
511

Earnings of non-controlled entities
(14,220
)
 
(29,440
)
 

 
(43,660
)
Operating margin
305,777

 
119,870

 
1,564

 
427,211

Depreciation, amortization and impairment expense
46,059

 
15,911

 
1,564

 
63,534

G&A expense
26,654

 
10,254

 

 
36,908

Operating profit
$
233,064

 
$
93,705

 
$

 
$
326,769


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


3.
Revenue from Contracts with Customers

Statement of Income Disclosures

During first quarter 2020, we revised our reporting segments. See Note 1 – Organization, Description of Business and Basis of Presentation for a discussion of this matter.

The following tables provide details of our revenues disaggregated by key activities that comprise our performance obligations by operating segment (in thousands):

12






MAGELLAN MIDSTREAM PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



 
 
Three Months Ended March 31, 2019
 
 
Refined Products
 
Crude Oil
 
Intersegment Eliminations
 
Total
Transportation
 
$
171,027

 
$
85,158

 
$

 
$
256,185

Terminalling
 
41,297

 
5,246

 

 
46,543

Storage
 
57,376

 
38,599

 
(938
)
 
95,037

Ancillary services
 
32,511

 
6,291

 

 
38,802

Lease revenue
 
7,360

 
16,865

 

 
24,225

Transportation and terminals revenue
 
309,571

 
152,159

 
(938
)
 
460,792

Product sales revenue
 
157,282

 
5,713

 

 
162,995

Affiliate management fee revenue
 
1,662

 
3,486

 

 
5,148

Total revenue
 
468,515

 
161,358

 
(938
)
 
628,935

Revenue not under the guidance of ASC 606, Revenue from Contracts with Customers:
 

 

 
 
 

Lease revenue(1)
 
(7,360
)
 
(16,865
)
 

 
(24,225
)
Losses from futures contracts included in product sales revenue(2)
 
52,109

 
2,402

 

 
54,511

Affiliate management fee revenue
 
(1,662
)
 
(3,486
)
 

 
(5,148
)
Total revenue from contracts with customers under ASC 606
 
$
511,602

 
$
143,409

 
$
(938
)
 
$
654,073


(1) Lease revenue is accounted for under Accounting Standards Codification (“ASC”) 842, Leases.
(2) The impact on product sales revenue from futures contracts falls under the guidance of ASC 815, Derivatives and Hedging.
 
 
Three Months Ended March 31, 2020
 
 
Refined Products
 
Crude Oil
 
Intersegment Eliminations
 
Total
Transportation
 
$
176,005

 
$
77,115

 
$

 
$
253,120

Terminalling
 
40,386

 
2,539

 

 
42,925

Storage
 
57,526

 
38,851

 
(1,582
)
 
94,795