| Acquisitions and Divestitures | Note 4 – Acquisitions and Divestitures 2017 Acquisitions Permian Acquisition On March 1, 2017, Targa completed the purchase of 100% of the membership interests of Outrigger Delaware Operating, LLC, Outrigger Southern Delaware Operating, LLC (together “New Delaware”) and Outrigger Midland Operating, LLC (“New Midland” and together with New Delaware, the “Permian Acquisition”). We paid $484.1 million in cash at closing on March 1, 2017, and paid an additional $90.0 million in cash on May 30, 2017 (collectively, the “initial purchase price”). Subject to certain performance-linked measures and other conditions, additional cash of up to $935.0 million may be payable to the sellers of New Delaware and New Midland in potential earn-out payments that would occur in 2018 and 2019. The potential earn-out payments will be based upon a multiple of realized gross margin from contracts that existed on March 1, 2017. New Delaware’s gas gathering and processing and crude gathering assets are located in Loving, Winkler, Pecos and Ward counties in Texas. The operations are backed by producer dedications of more than 145,000 acres under long-term, largely fee-based contracts, with an average weighted contract life of 14 years. The New Delaware assets include 70 MMcf/d of processing capacity. New Midland’s gas gathering and processing and crude gathering assets are located in Howard, Martin and Borden counties in Texas. The operations are backed by producer dedications of more than 105,000 acres under long-term, largely fee-based contracts, with an average weighted contract life of 13 years. The New Midland assets include 10 MMcf/d of processing capacity. Currently, there is 40 MBbl/d of crude gathering capacity on the New Midland system. Since March 1, 2017, financial and statistical data of New Midland have been included in SAOU operations. New Delaware’s gas gathering and processing assets were connected to our Sand Hills system in the first quarter of 2017, and the New Midland’s gas gathering and processing assets were connected to our WestTX system in October 2017. We believe connecting the acquired assets to our legacy Permian footprint creates operational and capital synergies, and is expected to afford enhanced flexibility in serving our producer customers. On January 26, 2017, Targa completed a public offering of 9,200,000 shares of its common stock (including the shares sold pursuant to the underwriters’ overallotment option) at a price to the public of $57.65, providing net proceeds of $524.2 million. Targa used the net proceeds from this public offering to fund the cash portion of the Permian Acquisition purchase price due upon closing and for general corporate purposes. The acquired businesses, which contributed revenues of $127.9 million and a net loss of $31.5 million to us for the period from March 1, 2017 to December 31, 2017, are included in our Gathering and Processing segment. As of December 31, 2017, we had incurred $5.6 million of acquisition-related costs. These expenses are included in Other expense in our Consolidated Statements of Operations for the year ended December 31, 2017. Pro Forma Impact of Permian Acquisition on Consolidated Statements of Operations The following summarized unaudited pro forma Consolidated Statements of Operations information for the years ended December 31, 2017 and December 31, 2016 assumes that the Permian Acquisition occurred as of January 1, 2016. We prepared the following summarized unaudited pro forma financial results for comparative purposes only. The summarized unaudited pro forma information may not be indicative of the results that would have occurred had we completed this acquisition as of January 1, 2016, or that would be attained in the future.
December 31,
2017
2016
Pro Forma
Pro Forma
Revenues
$
8,829.0
$
6,725.6
Net income (loss)
(252.2
)
(284.5
) The pro forma consolidated results of operations amounts have been calculated after applying our accounting policies, and making the following adjustments to the unaudited results of the acquired businesses for the periods indicated:
•
Reflect the amortization expense resulting from the fair value of intangible assets recognized as part of the Permian Acquisition.
•
Reflect the change in depreciation expense resulting from the difference between the historical balances of the Permian Acquisition’s property, plant and equipment, net, and the fair value of property, plant and equipment acquired.
•
Exclude $5.6 million of acquisition-related costs incurred as of December 31, 2017 from pro forma net income for the year ended December 31, 2017. Pro forma net income for the year ended December 31, 2016 was adjusted to include those charges. The following table summarizes the consideration transferred to acquire New Delaware and New Midland:
Fair Value of Consideration Transferred:
Cash paid, net of $3.3 million cash acquired
$
570.8
Contingent consideration valuation as of the acquisition date
416.3
Total
$
987.1
We accounted for the Permian Acquisition as an acquisition of a business under purchase accounting rules. The assets acquired and liabilities assumed related to the Permian Acquisition were recorded at their fair values as of the closing date of March 1, 2017. The fair value of the assets acquired and liabilities assumed at the acquisition date is shown below:
Fair value determination (final):
March 1, 2017
Trade and other current receivables, net
$
6.7
Other current assets
0.6
Property, plant and equipment
255.8
Intangible assets
692.3
Current liabilities
(14.1
)
Other long-term liabilities
(0.8
)
Total identifiable net assets
940.5
Goodwill
46.6
Total fair value of assets acquired and liabilities assumed
$
987.1
Under the acquisition method of accounting, the assets acquired and liabilities assumed are recognized at their estimated fair values, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill . operational and capital synergies. The fair value of assets acquired included trade receivables of $6.7 million, substantially all of which has been subsequently collected. The valuation of the acquired assets and liabilities was prepared using fair value methods and assumptions including projections of future production volumes and cash flows, benchmark analysis of comparable public companies, expectations regarding customer contracts and relationships, and other management estimates. The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and therefore represent Level 3 inputs, as defined in Note 17 – Fair Value Measurements. These inputs require significant judgments and estimates. During the three months ended June 30, 2017, we recorded measurement period adjustments to our preliminary acquisition date fair values due to the refinement of our valuation models, assumptions and inputs, including forecasts of future volumes, capital expenditures and operating expenses. The measurement period adjustments were based upon information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of the amounts recognized at that date. We recognized these measurement period adjustments in the three months ended June 30, 2017, with the effect in our Consolidated Statements of Operations resulting from the change to the provisional amounts calculated as if the acquisition had been completed at March 1, 2017. During the three months ended June 30, 2017, the acquisition date fair value of contingent consideration liability decreased by $45.3 million, intangible assets increased by $66.7 million, and other assets, net, increased by $0.4 million, which resulted in a decrease in goodwill of $112.4 million. These adjustments resulted in an increase in depreciation and amortization expense of $0.4 million recorded for the three months ended June 30, 2017. During the three months ended September 30, 2017, we finalized the purchase price allocation with no additional measurement period adjustments. Contingent Consideration A contingent consideration liability arising from potential earn-out payments in connection with the Permian Acquisition has been recognized at its fair value. We agreed to pay up to an additional $935.0 million in potential earn-out payments that would occur in 2018 and 2019. The acquisition date fair value of the potential earn-out payments of $416.3 million was recorded within Other long-term liabilities on our Consolidated Balance Sheets. Changes in the fair value of this liability (that were not accounted for as revisions of the acquisition date fair value) are included in earnings. During the year ended December 31, 2017, we recognized $99.3 million as Other income related to the change in fair value of the contingent consideration. See Note 11 – Other Long-term Liabilities and Note 14 – Fair Value Measurements for additional discussion of the change in fair value and the fair value methodology. As of December 31, 2017, the fair value of the first potential earn-out payment of $6.8 million has been recorded as a component of Accounts payable and accrued liabilities, which are included within current liabilities on our Consolidated Balance Sheets. As of December 31, 2017, the fair value of the second potential earn-out payment of $310.2 million has been recorded within Other long-term liabilities on our Consolidated Balance Sheets. Flag City Acquisition On May 9, 2017, we purchased all of the equity interests in Flag City Processing Partners, LLC ("FCCP") from Boardwalk Midstream, LLC (“Boardwalk”) and all of the equity interests in FCPP Pipeline, LLC from Boardwalk Field Services, LLC (“BFS”) for a base purchase price of $60.0 million subject to customary closing adjustments. The final adjustment to the base purchase price paid to Boardwalk was an additional $3.6 million. As part of the acquisition (the “Flag City Acquisition”), we acquired a natural gas processing plant with 150 MMcf/d of operating capacity (the “Flag City Plant”) located in Jackson County, Texas; 24 miles of gas gathering pipeline systems and related rights of ways located in Bee and Karnes counties in Texas; 102.1 acres of land surrounding the Flag City Plant; and a limited number of gas supply contracts. The gas processing activities under the Flag City Plant contracts have been redirected to our Silver Oak Plants. We have shut down the Flag City Plant and are moving the plant and its component parts to other Targa locations. In December 2017, ownership of the Flag City plant assets was transferred to Centrahoma Processing, LLC (“Centrahoma”), a joint venture that we operate, and in which we have a 60% ownership interest. The remaining 40% ownership interest in Centrahoma is held by MPLX, LP. In conjunction with the transfer of the plant assets, MPLX, LP made a cash contribution to Centrahoma in order to maintain its 40% ownership interest. Centrahoma is a consolidated subsidiary. The Flag City plant assets will be relocated to, and installed in, Hughes County, Oklahoma, in 2018, and will be renamed the Hickory Hills Plant. The Hickory Hills Plant will process growing natural gas production from the Arkoma Woodford Basin and is expected to begin operations in the fourth quarter of 2018. We accounted for this purchase as an asset acquisition and have capitalized less than $0.1 million of acquisition related costs as a component of the cost of assets acquired, which resulted in an allocation of $52.3 million of property, plant and equipment, $7.7 million of intangible assets for customer contracts and $3.6 million of current assets and liabilities, net. Purchase of Outstanding Silver Oak II Interest Effective as of June 1, 2017, we repurchased from SN Catarina, LLC (a subsidiary of Sanchez Energy Corp.) its 10% interest in our consolidated Silver Oak II Gas processing facility located in Bee County, Texas for a purchase price of $12.5 million. The change in our ownership interest was accounted for as an equity transaction representing the acquisition of a noncontrolling interest and no gain or loss was recognized in our Consolidated Statements of Operations as a result. 2016 Acquisition Purchase of Outstanding Versado Membership Interest On October 31, 2016, we executed a Membership Interest Sale and Purchase Agreement with Chevron U.S.A. Inc. to acquire the remaining 37% membership interest in our consolidated subsidiary Versado Gas Processors, L.L.C. (“Versado”). As we continue to control Versado, the change in our ownership interest was accounted for as an equity transaction representing the acquisition of a noncontrolling interest and no gain or loss was recognized in our Consolidated Statements of Operations. 2015 Acquisition Atlas Mergers On February 27, 2015, Targa completed the transactions contemplated by the Agreement and Plan of Merger, dated as of October 13, 2014 (the “ATLS Merger Agreement”), by and among (i) Targa, Targa GP Merger Sub LLC, a Delaware limited liability company and a wholly-owned subsidiary of Targa (“GP Merger Sub”), Atlas Energy L.P., a Delaware limited partnership (“ATLS”) and Atlas Energy GP, LLC, a Delaware limited liability company and the general partner of ATLS (“ATLS GP”), and (ii) Targa and the Partnership completed the transactions contemplated by the Agreement and Plan of Merger (the “APL Merger Agreement” and, together with the ATLS Merger Agreement, the “Atlas Merger Agreements”) by and among Targa, the Partnership, the Partnership’s general partner, Trident MLP Merger Sub LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Partnership (“MLP Merger Sub”), ATLS, Atlas Pipeline Partners L.P., a Delaware limited partnership (“APL”) and Atlas Pipeline Partners GP, LLC, a Delaware limited liability company and the general partner of APL (“APL GP”). Pursuant to the terms and conditions set forth in the ATLS Merger Agreement, GP Merger Sub merged (the “ATLS merger”) with and into ATLS, with ATLS continuing as the surviving entity and as a subsidiary of Targa. Pursuant to the terms and conditions set forth in the APL Merger Agreement, MLP Merger Sub merged (the “APL merger” and, together with the ATLS merger, the “Atlas mergers”) with and into APL, with APL continuing as the surviving entity and as a subsidiary of the Partnership. While the Atlas mergers were two separate legal transactions, for GAAP reporting purposes, they are viewed as a single integrated transaction. As such, the financial effects of the ATLS Merger Consideration (as defined below) paid by Targa have been reflected in these financial statements. In connection with the Atlas mergers, APL changed its name to “Targa Pipeline Partners LP,” which we refer to as TPL, and ATLS changed its name to “Targa Energy LP.” TPL is a provider of natural gas gathering, processing and treating services primarily in the Anadarko, Arkoma and Permian Basins located in the southwestern and mid-continent regions of the United States and in the Eagle Ford Shale in South Texas. The Atlas mergers added TPL’s Woodford/SCOOP, Mississippi Lime, Eagle Ford and additional Permian assets to the Partnership’s existing operations. In total, TPL added 2,053 MMcf/d of processing capacity and 12,220 miles of additional pipeline. The operating results of TPL are reported in our Gathering and Processing segment. In addition, prior to the completion of the Atlas mergers, ATLS, pursuant to a separation and distribution agreement entered into by and among ATLS, ATLS GP and Atlas Energy Group, LLC, a Delaware limited liability company (“AEG”), on February 27, 2015, (i) transferred its assets and liabilities other than those related to its “Atlas Pipeline Partners” segment, to AEG and (ii) effected a pro rata distribution to the ATLS unitholders of AEG common units representing a 100% interest in AEG (collectively, the “Spin-Off” and, together with the Atlas mergers, the “Atlas Transactions”). On February 27, 2015, the Partnership Agreement was amended to provide for the issuance of the Special GP Interest representing the contribution to the Partnership of the APL GP interest acquired in the ATLS merger totaling $1.6 billion, which is reflected within General partner equity on the Consolidated Balance Sheets. The Special GP Interest is not entitled to current distributions or allocations of net income or loss, and has no voting rights or other rights except for the limited right to receive deductions attributable to the contribution of APL GP and the right to distributions in liquidation. On December 1, 2016, the Special GP Interest was eliminated with an amendment to the Partnership Agreement. See Note 12 – Partnership Units and Related Matters. We acquired all of the outstanding units of APL for a total purchase price of approximately $5.3 billion (including $1.8 billion of acquired debt and all other assumed liabilities). Of the $1.8 billion of debt acquired and other liabilities assumed, approximately $1.2 billion of the acquired debt was tendered and settled upon the closing of the Atlas mergers via our January 2015 cash tender offers. These tender offers were in connection with, and conditioned upon, the consummation of the merger with APL. The merger with APL, however, was not conditioned on the consummation of the tender offers. On that same date, Targa acquired ATLS for a total purchase price of approximately $1.6 billion (including all assumed liabilities). Pursuant to the APL Merger Agreement, our general partner entered into an amendment to our Partnership Agreement, which we refer to as the IDR Giveback Amendment, in order to reduce aggregate distributions to TRC, as the holder of the Partnership’s IDRs by (a) $9,375,000 per quarter during the first four quarters following the APL merger, (b) $6,250,000 per quarter for the next four quarters, (c) $2,500,000 per quarter for the next four quarters and (d) $1,250,000 per quarter for the next four quarters, with the amount of such reductions to be distributed pro rata to the holders of our outstanding common units. On December 1, 2016, the IDRs were eliminated with an amendment to the Partnership Agreement. See Note 12 – Partnership Units and Related Matters. As a result of the Third A&R Partnership Agreement, the reallocations of IDRs under the IDR Giveback Amendment ceased in the fourth quarter of 2016. The APL merger was a unit-for-unit transaction with an exchange ratio of 0.5846 of our common units (the “APL Unit Consideration”) and $1.26 in cash for each APL common unit (the “APL Cash Consideration” and, with the APL Unit Consideration, the “APL Merger Consideration”), a $128.0 million total cash payment, of which $0.6 million was expensed at the acquisition date as the cash payment representing accelerated vesting of a portion of retained employees’ APL phantom awards. We issued 58,614,157 of our common units and awarded 629,231 replacement phantom unit awards with a combined value of approximately $2.6 billion as consideration for the APL merger (based on the $43.82 closing market price of a common unit on the NYSE on February 27, 2015). The cash component of the APL merger also included $701.4 million for the mandatory repayment and extinguishment at closing of the APL Senior Secured Revolving Credit Facility that was to mature in May 2017 (the “APL Revolver”), $28.8 million of payments related to change of control and $6.4 million of cash paid in lieu of unit issuances in connection with settlement of APL equity awards for AEG employees. In March 2015, Targa contributed $52.4 million to us to maintain its 2% general partner interest. In addition, pursuant to the APL Merger Agreement, APL exercised its right under the certificate of designations of the APL 8.25% Class E cumulative redeemable perpetual preferred units (“Class E Preferred Units”) to redeem the APL Class E Preferred Units immediately prior to the effective time of the APL merger. The ATLS merger was a stock-for-unit transaction with an exchange ratio of 0.1809 of Targa common stock, par value $0.001 per share (the “ATLS Stock Consideration”), and $9.12 in cash for each ATLS common unit (the ATLS Cash Consideration” and, with the ATLS Stock Consideration, the “ATLS Merger Consideration”), (a $514.7 million total cash payment). Targa issued 10,126,532 of its common shares and awarded 81,740 replacement restricted stock units with a combined value of approximately $1.0 billion for the ATLS merger (based on the $99.58 closing market price of a TRC common share on the NYSE on February 27, 2015). The cash component of the ATLS merger also included approximately $149.2 million of payments related to change of control and cash settlements of equity awards, $88.0 million for repayment of a portion of ATLS outstanding indebtedness and $11.0 million for reimbursement of certain transaction expenses. Approximately $4.5 million of the one-time cash payments and cash settlements of equity awards, which represent accelerated vesting of a portion of retained employees’ ATLS phantom units, were expensed at the acquisition date. ATLS owned, directly and indirectly, 5,754,253 APL common units immediately prior to closing. Targa’s acquisition of ATLS resulted in Targa acquiring these common units (converted to 3,363,935 of our common units) valued at approximately $147.4 million (based on the $43.82 closing market price of our common units on the NYSE on February 27, 2015) and the right to receive the units’ one-time cash payment of approximately $7.3 million, which reduced the consolidated purchase price by approximately $154.7 million. All outstanding ATLS equity awards, whether vested or unvested, were adjusted in connection with the Spin-Off on the terms and conditions set forth in an Employee Matters Agreement entered into by ATLS, ATLS GP and AEG on February 27, 2015. Following the Spin-Off-related adjustment and at the effective time of the ATLS merger, each outstanding ATLS option and ATLS phantom unit award, whether vested or unvested, held by a person who became an employee of AEG became fully vested (to the extent not vested) and was cancelled and converted into the right to receive the ATLS Merger Consideration in respect of each ATLS common unit underlying the ATLS option or phantom unit award (in the case of options, net of the applicable exercise price). Each outstanding vested ATLS option held by an employee of APL who became an employee of Targa in connection with the Atlas Transactions (a “Midstream Employee”) was cancelled and converted into the right to receive the ATLS Merger Consideration in respect of each ATLS common unit underlying the vested ATLS option, net of the applicable exercise price. Each outstanding unvested ATLS option and each outstanding ATLS phantom unit award held by a Midstream Employee was cancelled and converted into the right to receive (1) the ATLS Cash Consideration in respect of each ATLS common unit underlying such ATLS option or phantom unit award and (2) a TRC restricted stock unit award with respect to a number of shares of TRC Common Stock equal to the product of the ATLS Stock Consideration multiplied by the number of ATLS common units underlying such ATLS option or phantom unit award (in the case of options, net of the applicable exercise price). In connection with the APL merger, each outstanding APL phantom unit award held by an employee of AEG became fully vested and was cancelled and converted into the right to receive the APL Merger Consideration in respect of each APL common unit underlying the APL phantom unit award. Each outstanding APL phantom unit award held by a Midstream Employee was cancelled and converted into the right to receive (1) the APL Cash Consideration in respect of each APL common unit underlying such APL phantom unit award and (2) a Partnership phantom unit award with respect to a number of our common units equal to the product of the APL Unit Consideration multiplied by the number of APL common units underlying such APL phantom unit award. The acquired business contributed revenues of $1,459.3 million and a net loss of $30.1 million to us for the period from February 27, 2015 to December 31, 2015, and is reported in our Gathering and Processing segment. Cumulative acquisition-related costs totaled $18.7 million. These expenses are included in other expense in our Consolidated Statements of Operations. Pro Forma Impact of Atlas Mergers on Consolidated Statement of Operations The following summarized unaudited pro forma Consolidated Statement of Operations information for the year ended December 31, 2015 assumes that our acquisition of APL and Targa’s acquisition of ATLS had occurred as of January 1, 2014. We prepared the following summarized unaudited pro forma financial results for comparative purposes only. The summarized unaudited pro forma financial results may not be indicative of the results that would have occurred if we had completed the APL merger as of January 1, 2014, or that the results that will be attained in the future. Amounts presented below are in millions:
December 31, 2015
Pro Forma
Revenues
$
6,947.3
Net income
(62.2
) The pro forma consolidated results of operations amounts have been calculated after applying our accounting policies, and making adjustments to:
•
Reflect the change in amortization expense resulting from the difference between the historical balances of APL’s intangible assets, net, and the fair value of intangible assets acquired.
•
Reflect the change in depreciation expense resulting from the difference between the historical balances of APL’s property, plant and equipment, net, and the fair value of property, plant and equipment acquired.
•
Reflect the change in interest expense resulting from our financing activities directly related to the Atlas mergers as compared to APL’s historical interest expense.
•
Reflect the changes in stock-based compensation expense related to the fair value of the unvested portion of replacement Partnership Long Term Incentive Plan (“LTIP”) awards that were issued in connection with the acquisition to APL phantom unitholders who continue to provide service as Targa employees following the completion of the APL merger.
•
Remove the results of operations attributable to the February 2015 transfer to Atlas Resource Partners, L.P. of 100% of APL’s interest in gas gathering assets located in the Appalachian Basin of Tennessee.
•
Exclude $18.7 million of acquisition-related costs incurred as of December 31, 2015 from pro forma net income for the year ended December 31, 2015.
•
Reflect the change in APL’s revenues and product purchases to report plant sales of Y-grade at contractual net values to conform to our accounting policy. The following table summarizes the consideration transferred to acquire ATLS and APL, which are viewed together as a single integrated transaction for GAAP reporting purposes:
Fair
Cash paid, net of cash acquired (1):
$
745.7
Common shares of TRC
1,008.5
Replacement restricted stock units awarded (3)
5.2
Less: value of APL common units owned by ATLS
(147.4
)
Total
$
1,612.0
Fair Value of Consideration Transferred by Targa for APL:
Cash paid, net of cash acquired (2)
$
828.7
Common units of TRP
2,568.5
Replacement phantom units awarded (3)
15.0
Total
$
3,412.2
Total fair value of consideration transferred
$
5,024.2
________________
(1)
Targa acquired $5.5 million of cash.
(2)
We acquired $35.3 million of cash.
(3)
The fair value of consideration transferred in the form of replacement restricted stock unit awards and replacement phantom unit awards represent the allocation of the fair value of the awards to the pre-combination service period. The fair value of the awards associated with the post-combination service period will be recognized over the remaining service period of the award. Our final fair value determination related to the Atlas mergers was as follows:
Fair value determination:
February
Trade and other current receivables, net
$
181.1
Other current assets
24.4
Assets from risk management activities
102.1
Property, plant and equipment
4,616.9
Investments in unconsolidated affiliates
214.5
Intangible assets
1,354.9
Other long-term assets
5.5
Current liabilities
(258.8
)
Long-term debt
(1,573.3
)
Deferred income tax liabilities, net
(13.6
)
Other long-term liabilities
(119.1
)
Total identifiable net assets
4,534.6
Noncontrolling interest in subsidiaries
(216.9
)
Current liabilities retained by Targa
(0.5
)
Goodwill
707.0
Total fair value of consideration transferred
$
5,024.2
The valuation of the acquired assets and liabilities was prepared using fair value methods and assumptions including projections of future production volumes and cash flows, benchmark analysis of comparable public companies, expectations regarding customer contracts and relationships, and other management estimates. The fair value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and therefore represent Level 3 inputs, as defined in Note 14 – Fair Value Measurements. These inputs require significant judgments and estimates at the time of valuation. The excess of the fair value of the consideration transferred over the fair value of net assets acquired was approximately $707.0 million which was recorded as goodwill. The determination of goodwill is attributable to the workforce of the acquired business and the expected synergies with us and Targa. Goodwill was attributed to the WestTX, SouthTX and SouthOK reporting units in our Gathering and Processing segment. The goodwill is amortizable over 15 years for tax purposes. See Note 7 – Goodwill. The fair value of assets acquired included trade receivables of $178.1 million. The gross amount due under contracts was $178.1 million, all of which was expected to be collectible. The fair value of assets acquired included other receivables of $3.0 million reported in current receivables and $4.5 million reported in other long-term assets related to a contractual settlement with a counterparty. Mandatorily Redeemable Preferred Interests Other long-term liabilities acquired included $109.3 million related to mandatorily redeemable preferred interests held by our partner in two joint ventures. See Note 11 – Other Long-Term Liabilities. Contingent Consideration A liability arising from the contingent consideration for APL’s previous acquisition of a gas gathering system and related assets has been recognized at fair value. APL agreed to pay up to an additional $6.0 million if certain volumes are achieved on the acquired gathering system within a specified time period. The acquisition date fair value of the remaining contingent payment of $4.2 million was recorded within other long term liabilities on our Consolidated Balance Sheets. Subsequent changes in the fair value of this liability are included in earnings. Replacement Phantom Units In connection with the Atlas mergers, we awarded replacement phantom units in accordance with and as required by the Atlas Merger Agreements to those APL employees who became Targa employees after the acquisition. The vesting dates and terms remained unchanged from the existing APL awards, and vest over the remaining terms of the awards, which are either 25% per year over the original four year term or 33% per year over the original three year term. Each replacement phantom unit will entitle the grantee a common unit of TRP on the vesting date and is an equity-settled award. The replacement phantom units include distribution equivalent rights. When we declare and pay cash distributions, the holders of replacement phantom units are entitled within 60 days to receive cash payment of distribution equivalent rights in an amount equal to the cash distributions the holders would have received if they were the holders of record on the record date of the number of our common units related to the replacement phantom units. The fair value of the replacement phantom units was based on the closing price of our units at the close of trading on February 27, 2015. The fair value was allocated between the pre-acquisition and post-acquisition periods to determine the amount to be treated as purchase consideration and compensation expense, respectively. Compensation cost will be recognized in general and administrative expense over the remaining service period of each award. See Note 22 – Compensation Plans for discussion of the impact of the TRC/TRP Merger on the replacement phantom units. 2017 Divestiture Sale of Venice Gathering System, L.L.C. Through our 76.8% ownership interest in Ve |
