Business Context and Reporting Period
This Form 8-K filing by NGL Energy Partners LP, dated May 31, 2016, addresses a material accounting error requiring the restatement of previously issued financial statements. The filing pertains to the Partnership's fiscal year ended March 31, 2016, and specifically impacts the unaudited interim consolidated financial statements for the quarters ended June 30, 2015, September 30, 2015, and December 31, 2015.
Key Financial Metrics
The filing does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. Instead, it details the qualitative impact of an accounting correction:
- Accounting Adjustment: The correction involves the proper accounting of contingent consideration related to royalty payments in prior business combinations within the Water Solutions segment.
- Balance Sheet Impact: The adjustment results in an increase to goodwill, current liabilities, and long-term liabilities.
- Earnings Impact: The correction results in an increase to earnings for the first three quarters of the fiscal year ended March 31, 2016.
Material Changes Versus Prior Period
The primary material change is the determination that previously filed Form 10-Q reports for the quarters ended June 30, 2015, September 30, 2015, and December 31, 2015, should no longer be relied upon. These statements will be restated within the notes to the consolidated financial statements in the upcoming Annual Report on Form 10-K for the year ended March 31, 2016. The Partnership concluded that the correction was not material to any periods prior to fiscal 2016, though immaterial corrections will be presented for fiscal year 2015 and prior quarters.
Guidance, Outlook, Risks, and Contingencies
Internal Control Weakness: Management concluded that a material weakness existed in internal control over financial reporting during the periods requiring correction. Specifically, the Partnership did not maintain effective controls over the identification of assets acquired and liabilities assumed in business combinations.
Risks and Contingencies: The filing highlights several forward-looking risks, including:
- Potential government inquiries regarding the restatements and accounting practices.
- The impact of the review of accounting entries on the Partnership's ability to file periodic reports timely.
- Broader impacts on the Partnership's business operations.
Management Commentary: The Audit Committee and management have discussed these matters with the independent registered public accounting firm. No separate amendments to the prior 10-Q filings will be made; restated data will appear in the 10-K.
Investor Verification Checklist
- Verify the specific dollar amounts of the restatement adjustments (goodwill, liabilities, and earnings) once the Form 10-K for the year ended March 31, 2016, is filed.
- Monitor for any announcements regarding government inquiries or investigations into the accounting error.
- Review the updated internal control remediation plan to ensure the material weakness has been addressed.
- Confirm the timeline for the filing of the Form 10-K containing the restated quarterly data.