Exhibit 99.2
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Introduction
On October 31, 2019, NGL Energy Partners LP (“we,” “us,” “our” or “the Partnership”) closed its transaction to acquire all of the equity interests of Hillstone Environmental Partners, LLC (“Hillstone”) for approximately $624.4 million, subject to certain adjustments. To fund a portion of this acquisition, the Partnership issued 200,000 Class D Preferred Units and 8.5 million warrants to purchase common units for estimated net proceeds of $194.6 million. The remaining amount of the purchase price was paid using funds available under our revolving credit facility.
On September 30, 2019, the Partnership sold TransMontaigne Product Services, LLC (“TPSL”) and associated assets to Trajectory Acquisition Company LLC (“Trajectory”) for total consideration of $275.5 million less estimated expenses of approximately $5.0 million. TPSL comprised a portion of the Partnership’s Refined Products and Renewables segment.
The unaudited pro forma condensed combined financial statements are presented for the Partnership and give effect to the sale of TPSL and the acquisition of Hillstone (as described above) and are based on the audited and unaudited financial statements of the Partnership and the audited and unaudited financial statements of Hillstone. These unaudited pro forma financial statements include all adjustments necessary to fairly present results for the periods and as of the dates presented. The following unaudited pro forma condensed consolidated balance sheet as of June 30, 2019 and the unaudited pro forma condensed consolidated statements of operations for the three months ended June 30, 2019 and the years ended March 31, 2019, 2018 and 2017 should be read in conjunction with the Partnership’s Current Reports on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on October 4, 2019 and November 1, 2019, the Partnership’s quarterly report on Form 10-Q for the three months ended June 30, 2019, filed with the SEC on August 9, 2019, the Partnership’s Annual Report on Form 10-K for the year ended March 31, 2019, filed with the SEC on May 30, 2019, and with Hillstone’s audited consolidated financial statements for the year ended June 30, 2019, including the related notes, included within Exhibit 99.1 of this Current Report on Form 8-K.
The following unaudited pro forma condensed combined balance sheet as of June 30, 2019 is presented to illustrate the estimated effects of the sale of TPSL on September 30, 2019 and the acquisition of Hillstone, as if these transactions had occurred on June 30, 2019. The unaudited pro forma condensed combined balance sheet combines the Partnership’s unaudited consolidated balance sheet as of June 30, 2019 and Hillstone’s audited consolidated balance sheet as of June 30, 2019.
The following unaudited pro forma condensed combined statements of operations for the three months ended June 30, 2019 and for the years ended March 31, 2019, 2018 and 2017 are presented to illustrate the estimated effects of the sale of TPSL as if it had occurred on April 1, 2016 and the acquisition of Hillstone as if this transaction had occurred on April 1, 2018. The unaudited pro forma condensed combined statements of operations for the three months ended June 30, 2019 combined the Partnership’s unaudited consolidated statement of operations for the three months ended June 30, 2019 and Hillstone’s unaudited consolidated statement of operations for the three months ended June 30, 2019. The unaudited pro forma condensed combined statements of operations for the year ended March 31, 2019 combined the Partnership’s audited consolidated statement of operations for the year ended March 31, 2019 and Hillstone’s audited consolidated statement of operations for the year ended June 30, 2019. The unaudited pro forma condensed combined statements of operations for the three months ended June 30, 2019 and for the year ended March 31, 2019 both contain the results recorded within Hillstone’s unaudited statement of operations for the three months ended June 30, 2019.
The following unaudited pro forma condensed consolidated financial statements are based on certain assumptions and do not purport to be indicative of the results that actually would have been achieved if the transaction described above had occurred on the dates indicated. Moreover, the accompanying unaudited pro forma condensed consolidated financial statements do not project the Partnership’s results of operations for any future date or period.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2019
(U.S. Dollars in Thousands)
Historical NGL Energy Partners LP (As Reported) | Sale of TPSL | Pro Forma As Adjusted | Hillstone Environmental Partners, LLC | Pro Forma Adjustments | Pro Forma As Further Adjusted | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 27,501 | $ | 275,470 | (A) | $ | 27,501 | $ | 21,535 | $ | 429,800 | (E) | $ | 49,036 | ||||||||||
(5,000 | ) | (A) | 194,600 | (F) | ||||||||||||||||||||
(270,470 | ) | (B) | (624,400 | ) | (G) | |||||||||||||||||||
Accounts receivable-trade, net | 911,982 | (121,543 | ) | (C) | 790,439 | 14,697 | — | 805,136 | ||||||||||||||||
Accounts receivable-affiliates | 11,507 | — | 11,507 | 205 | (205 | ) | (H) | 11,507 | ||||||||||||||||
Inventories | 519,603 | (212,111 | ) | (C) | 307,492 | 349 | (349 | ) | (H) | 307,492 | ||||||||||||||
Prepaid expenses and other current assets | 178,695 | (15,704 | ) | (C) | 162,991 | 1,243 | (1,050 | ) | (H) | 163,184 | ||||||||||||||
Total current assets | 1,649,288 | (349,358 | ) | 1,299,930 | 38,029 | (1,604 | ) | 1,336,355 | ||||||||||||||||
PROPERTY, PLANT AND EQUIPMENT, net | 2,015,518 | (15,185 | ) | (C) | 2,000,333 | 151,460 | (2,061 | ) | (I) | 2,149,732 | ||||||||||||||
GOODWILL | 1,153,029 | (32,712 | ) | (C) | 1,120,317 | — | 62,530 | (H) | 1,182,847 | |||||||||||||||
INTANGIBLE ASSETS, net | 931,709 | (136,074 | ) | (C) | 795,635 | 946 | 401,231 | (H) | 1,197,812 | |||||||||||||||
INVESTMENTS IN UNCONSOLIDATED ENTITIES | 1,585 | — | 1,585 | 808 | — | 2,393 | ||||||||||||||||||
OPERATING LEASE RIGHT-OF-USE ASSETS | 518,035 | (308,117 | ) | (C) | 209,918 | — | 3,124 | (H) | 213,042 | |||||||||||||||
OTHER NONCURRENT ASSETS | 125,741 | (46,871 | ) | (C) | 78,870 | 795 | — | 79,665 | ||||||||||||||||
Total assets | $ | 6,394,905 | $ | (888,317 | ) | $ | 5,506,588 | $ | 192,038 | $ | 463,220 | $ | 6,161,846 | |||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||||||
Accounts payable-trade | $ | 814,141 | $ | (77,352 | ) | (C) | $ | 736,789 | $ | 14,066 | $ | — | $ | 750,855 | ||||||||||
Accounts payable-affiliates | 23,071 | — | 23,071 | — | — | 23,071 | ||||||||||||||||||
Accrued expenses and other payables | 214,243 | (51,041 | ) | (C) | 163,202 | 13,634 | (3,144 | ) | (H) | 173,692 | ||||||||||||||
Advance payments received from customers | 28,313 | (460 | ) | (C) | 27,853 | — | — | 27,853 | ||||||||||||||||
Current maturities of long-term debt | 649 | — | 649 | — | — | 649 | ||||||||||||||||||
Operating lease obligations | 77,021 | (7,526 | ) | (C) | 69,495 | — | 573 | (H) | 70,068 | |||||||||||||||
Total current liabilities | 1,157,438 | (136,379 | ) | 1,021,059 | 27,700 | (2,571 | ) | 1,046,188 | ||||||||||||||||
LONG-TERM DEBT, net of debt issuance costs and current maturities | 2,586,954 | (270,470 | ) | (B) | 2,316,484 | 118,470 | (118,470 | ) | (J) | 2,746,284 | ||||||||||||||
429,800 | (E) | |||||||||||||||||||||||
OPERATING LEASE OBLIGATIONS | 439,083 | (300,591 | ) | (C) | 138,492 | — | 2,551 | (H) | 141,043 | |||||||||||||||
OTHER NONCURRENT LIABILITIES | 61,165 | — | 61,165 | 739 | 446 | (H) | 62,350 | |||||||||||||||||
COMMITMENTS AND CONTINGENCIES | . | |||||||||||||||||||||||
CLASS D PREFERRED UNITS | — | — | — | 175,881 | (F) | 175,881 | ||||||||||||||||||
EQUITY: | ||||||||||||||||||||||||
General partner, representing a 0.1% interest | (50,773 | ) | (181 | ) | (D) | (50,954 | ) | — | (50,954 | ) | ||||||||||||||
Limited partners, representing a 99.9% interest | 1,897,407 | (180,696 | ) | (D) | 1,716,711 | — | 18,719 | (F) | 1,735,430 | |||||||||||||||
Members’ Equity - Hillstone Environmental Partners, LLC | 43,136 | (43,136 | ) | (K) | — | |||||||||||||||||||
Class B preferred limited partners | 202,731 | 202,731 | — | 202,731 | ||||||||||||||||||||
Class C preferred limited partners | 42,638 | 42,638 | 42,638 | |||||||||||||||||||||
Accumulated other comprehensive loss | (218 | ) | (218 | ) | — | (218 | ) | |||||||||||||||||
Noncontrolling interests | 58,480 | 58,480 | 1,993 | — | 60,473 | |||||||||||||||||||
Total equity | 2,150,265 | (180,877 | ) | 1,969,388 | 45,129 | (24,417 | ) | 1,990,100 | ||||||||||||||||
Total liabilities and equity | $ | 6,394,905 | $ | (888,317 | ) | $ | 5,506,588 | $ | 192,038 | $ | 463,220 | $ | 6,161,846 |
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the three months ended June 30, 2019
(U.S. dollars in thousands, except unit and per unit amounts)
Historical NGL Energy Partners LP (As Reported) | Sale of TPSL | Pro Forma As Adjusted | Hillstone Environmental Partners, LLC (L) | Pro Forma Adjustments | Pro Forma As Adjusted | |||||||||||||||||||
REVENUES | $ | 6,637,891 | $ | (1,471,466 | ) | (N) | $ | 5,166,425 | $ | 19,345 | $ | — | $ | 5,185,770 | ||||||||||
COST OF SALES | 6,453,467 | (1,458,501 | ) | (N) | 4,994,966 | — | — | 4,994,966 | ||||||||||||||||
OPERATING COSTS AND EXPENSES: | ||||||||||||||||||||||||
Operating | 64,267 | (2,171 | ) | (N) | 62,096 | 8,807 | — | 70,903 | ||||||||||||||||
General and administrative | 20,363 | (21 | ) | (N) | 20,342 | 6,421 | (2,912 | ) | (Q) | 23,851 | ||||||||||||||
Depreciation and amortization | 54,208 | (454 | ) | (N) | 53,754 | 2,724 | 4,923 | (R) | 61,401 | |||||||||||||||
Gain on disposal or impairment of assets, net | (967 | ) | (967 | ) | (85 | ) | — | (1,052 | ) | |||||||||||||||
Revaluation of liabilities | — | — | — | 65 | — | 65 | ||||||||||||||||||
Operating Income | 46,553 | (10,319 | ) | 36,234 | 1,413 | (2,011 | ) | 35,636 | ||||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||||||
Equity in earnings of unconsolidated entities | 8 | — | 8 | (65 | ) | — | (57 | ) | ||||||||||||||||
Interest expense | (39,908 | ) | 14 | (N) | (37,007 | ) | (2,756 | ) | 2,756 | (S) | (41,595 | ) | ||||||||||||
2,887 | (O) | (4,588 | ) | (S) | ||||||||||||||||||||
Other income, net | 1,075 | (66 | ) | (N) | 1,009 | — | — | 1,009 | ||||||||||||||||
Income From Continuing Operations Before Income Taxes | 7,728 | (7,484 | ) | 244 | (1,408 | ) | (3,843 | ) | (5,007 | ) | ||||||||||||||
INCOME TAX BENEFIT | 311 | 10 | (N) | 321 | — | — | 321 | |||||||||||||||||
Income From Continuing Operations | 8,039 | (7,474 | ) | 565 | (1,408 | ) | (3,843 | ) | (4,686 | ) | ||||||||||||||
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS | 268 | — | 268 | 11 | — | 279 | ||||||||||||||||||
NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO NGL ENERGY PARTNERS LP | 8,307 | (7,474 | ) | 833 | (1,397 | ) | (3,843 | ) | (4,407 | ) | ||||||||||||||
LESS: DISTRIBUTIONS TO PREFERRED UNITHOLDERS | (129,460 | ) | — | (129,460 | ) | — | (4,500 | ) | (T) | (133,960 | ) | |||||||||||||
LESS: CONTINUING OPERATIONS NET LOSS ALLOCATED TO GENERAL PARTNER | 85 | 8 | (P) | 93 | — | 10 | (U) | 103 | ||||||||||||||||
NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS | $ | (121,068 | ) | $ | (7,466 | ) | $ | (128,534 | ) | $ | (1,397 | ) | $ | (8,333 | ) | $ | (138,264 | ) | ||||||
BASIC AND DILUTED LOSS PER COMMON UNIT | $ | (0.96 | ) | $ | (1.02 | ) | $ | (1.10 | ) | |||||||||||||||
BASIC AND DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING | 125,886,738 | 125,886,738 | 125,886,738 |
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended March 31, 2019
(U.S. dollars in thousands, except unit and per unit amounts)
Historical NGL Energy Partners LP (As Reported) | Sale of TPSL | Pro Forma As Adjusted | Hillstone Environmental Partners, LLC (M) | Pro Forma Adjustments | Pro Forma As Adjusted | |||||||||||||||||||
REVENUES | $ | 24,016,907 | $ | (6,196,287 | ) | (N) | $ | 17,820,620 | $ | 74,437 | $ | — | $ | 17,895,057 | ||||||||||
COST OF SALES | 23,284,917 | (6,122,642 | ) | (N) | 17,162,275 | — | — | 17,162,275 | ||||||||||||||||
OPERATING COSTS AND EXPENSES: | ||||||||||||||||||||||||
Operating | 240,684 | (7,371 | ) | (N) | 233,313 | 42,357 | — | 275,670 | ||||||||||||||||
General and administrative | 107,534 | (127 | ) | (N) | 107,407 | 18,537 | (2,912 | ) | (Q) | 123,032 | ||||||||||||||
Depreciation and amortization | 212,860 | (887 | ) | (N) | 211,973 | 7,590 | 22,998 | (R) | 242,561 | |||||||||||||||
Loss on disposal or impairment of assets, net | 34,296 | — | 34,296 | 11,137 | — | 45,433 | ||||||||||||||||||
Revaluation of liabilities | (5,373 | ) | — | (5,373 | ) | — | — | (5,373 | ) | |||||||||||||||
Operating Income | 141,989 | (65,260 | ) | 76,729 | (5,184 | ) | (20,086 | ) | 51,459 | |||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||||||
Equity in earnings of unconsolidated entities | 2,533 | — | 2,533 | 37 | — | 2,570 | ||||||||||||||||||
Interest expense | (164,726 | ) | 1 | (N) | (153,176 | ) | (9,741 | ) | 9,741 | (S) | (171,528 | ) | ||||||||||||
11,549 | (O) | (18,352 | ) | (S) | ||||||||||||||||||||
Loss on early extinguishment of liabilities, net | (12,340 | ) | — | (12,340 | ) | — | — | (12,340 | ) | |||||||||||||||
Other expense, net | (29,946 | ) | (468 | ) | (N) | (30,414 | ) | — | — | (30,414 | ) | |||||||||||||
Loss From Continuing Operations Before Income Taxes | (62,490 | ) | (54,178 | ) | (116,668 | ) | (14,888 | ) | (28,697 | ) | (160,253 | ) | ||||||||||||
INCOME TAX EXPENSE | (1,234 | ) | 1 | (N) | (1,233 | ) | — | — | (1,233 | ) | ||||||||||||||
Net Loss From Continuing Operations | (63,724 | ) | (54,177 | ) | (117,901 | ) | (14,888 | ) | (28,697 | ) | (161,486 | ) | ||||||||||||
LESS: CONTINUING OPERATIONS NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS | 20,206 | — | 20,206 | 32 | — | 20,238 | ||||||||||||||||||
NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO NGL ENERGY PARTNERS LP | (43,518 | ) | (54,177 | ) | (97,695 | ) | (14,856 | ) | (28,697 | ) | (141,248 | ) | ||||||||||||
LESS: DISTRIBUTIONS TO PREFERRED UNITHOLDERS | (111,936 | ) | — | (111,936 | ) | — | (18,000 | ) | (T) | (129,936 | ) | |||||||||||||
LESS: CONTINUING OPERATIONS NET LOSS ALLOCATED TO GENERAL PARTNER | 17 | 54 | (P) | 71 | — | 61 | (U) | 132 | ||||||||||||||||
NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS | $ | (155,437 | ) | $ | (54,123 | ) | $ | (209,560 | ) | $ | (14,856 | ) | $ | (46,636 | ) | $ | (271,052 | ) | ||||||
BASIC AND DILUTED LOSS FROM CONTINUING OPERATIONS PER COMMON UNIT | $ | (1.26 | ) | $ | (1.70 | ) | $ | (2.20 | ) | |||||||||||||||
BASIC AND DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING | 123,017,064 | 123,017,064 | 123,017,064 |
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended March 31, 2018
(U.S. dollars in thousands, except unit and per unit amounts)
Historical NGL Energy Partners LP (As Reported) | Sale of TPSL | Pro Forma As Adjusted | |||||||||
REVENUES | $ | 16,907,296 | $ | (6,536,524 | ) | (N) | $ | 10,370,772 | |||
COST OF SALES | 16,412,641 | (6,709,772 | ) | (N) | 9,702,869 | ||||||
OPERATING COSTS AND EXPENSES: | |||||||||||
Operating | 201,068 | (6,972 | ) | (N) | 194,096 | ||||||
General and administrative | 98,129 | (150 | ) | (N) | 97,979 | ||||||
Depreciation and amortization | 209,020 | (622 | ) | (N) | 208,398 | ||||||
(Gain) loss on disposal or impairment of assets, net | (17,104 | ) | (14 | ) | (N) | (17,118 | ) | ||||
Revaluation of liabilities | 20,716 | — | 20,716 | ||||||||
Operating (Loss) Income | (17,174 | ) | 181,006 | 163,832 | |||||||
OTHER INCOME (EXPENSE): | |||||||||||
Equity in earnings of unconsolidated entities | 7,539 | — | 7,539 | ||||||||
Interest expense | (199,148 | ) | (2 | ) | (N) | (199,150 | ) | ||||
Loss on early extinguishment of liabilities, net | (23,201 | ) | — | (23,201 | ) | ||||||
Other income, net | 6,953 | (601 | ) | (N) | 6,352 | ||||||
Loss From Continuing Operations Before Income Taxes | (225,031 | ) | 180,403 | (44,628 | ) | ||||||
INCOME TAX EXPENSE | (1,354 | ) | 1 | (N) | (1,353 | ) | |||||
Net Loss From Continuing Operations | (226,385 | ) | 180,404 | (45,981 | ) | ||||||
LESS: CONTINUING OPERATIONS NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (240 | ) | — | (240 | ) | ||||||
NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO NGL ENERGY PARTNERS LP | (226,625 | ) | 180,404 | (46,221 | ) | ||||||
LESS: DISTRIBUTIONS TO PREFERRED UNITHOLDERS | (59,697 | ) | — | (59,697 | ) | ||||||
LESS: CONTINUING OPERATIONS NET LOSS (INCOME) ALLOCATED TO GENERAL PARTNER | 150 | (180 | ) | (P) | (30 | ) | |||||
LESS: REPURCHASE OF WARRANTS | (349 | ) | — | (349 | ) | ||||||
NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS | $ | (286,521 | ) | $ | 180,224 | $ | (106,297 | ) | |||
BASIC AND DILUTED LOSS FROM CONTINUING OPERATIONS PER COMMON UNIT | $ | (2.37 | ) | $ | (0.88 | ) | |||||
BASIC AND DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING | 120,991,340 | 120,991,340 |
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended March 31, 2017
(U.S. dollars in thousands, except unit and per unit amounts)
Historical NGL Energy Partners LP (As Reported) | Sale of TPSL | Pro Forma As Adjusted | |||||||||
REVENUES | $ | 12,707,203 | $ | (5,229,681 | ) | (N) | $ | 7,477,522 | |||
COST OF SALES | 12,228,404 | (5,231,227 | ) | (N) | 6,997,177 | ||||||
OPERATING COSTS AND EXPENSES: | |||||||||||
Operating | 189,003 | (15,380 | ) | (N) | 173,623 | ||||||
General and administrative | 105,805 | (4,966 | ) | (N) | 100,839 | ||||||
Depreciation and amortization | 180,239 | (626 | ) | (N) | 179,613 | ||||||
(Gain) loss on disposal or impairment of assets, net | (208,890 | ) | (92 | ) | (N) | (208,982 | ) | ||||
Revaluation of liabilities | 6,717 | — | 6,717 | ||||||||
Operating Income | 205,925 | 22,610 | 228,535 | ||||||||
OTHER INCOME (EXPENSE): | |||||||||||
Equity in earnings of unconsolidated entities | 3,830 | — | 3,830 | ||||||||
Revaluation of investments | (14,365 | ) | — | (14,365 | ) | ||||||
Interest expense | (149,994 | ) | 393 | (N) | (149,601 | ) | |||||
Gain on early extinguishment of liabilities, net | 24,727 | — | 24,727 | ||||||||
Other income, net | 26,612 | (192 | ) | (N) | 26,420 | ||||||
Income From Continuing Operations Before Income Taxes | 96,735 | 22,811 | 119,546 | ||||||||
INCOME TAX EXPENSE | (1,933 | ) | — | (1,933 | ) | ||||||
Net Income From Continuing Operations | 94,802 | 22,811 | 117,613 | ||||||||
LESS: CONTINUING OPERATIONS NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (6,832 | ) | — | (6,832 | ) | ||||||
NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO NGL ENERGY PARTNERS LP | 87,970 | 22,811 | 110,781 | ||||||||
LESS: DISTRIBUTIONS TO PREFERRED UNITHOLDERS | (30,142 | ) | — | (30,142 | ) | ||||||
LESS: CONTINUING OPERATIONS NET INCOME ALLOCATED TO GENERAL PARTNER | (183 | ) | (22 | ) | (P) | (205 | ) | ||||
NET INCOME FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS | $ | 57,645 | $ | 22,789 | $ | 80,434 | |||||
BASIC INCOME FROM CONTINUING OPERATIONS PER COMMON UNIT | $ | 0.53 | $ | 0.74 | |||||||
DILUTED INCOME FROM CONTINUING OPERATIONS PER COMMON UNIT | $ | 0.52 | $ | 0.72 | |||||||
BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING | 108,091,486 | 108,091,486 | |||||||||
DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING | 111,850,621 | 111,850,621 |
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
NGL ENERGY PARTNERS LP AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 - Basis of Presentation
See “Introduction” for more information regarding the basis of presentation for these unaudited pro forma condensed consolidated financial statements.
Note 2 - Preliminary Purchase Price Allocation
The following presents the preliminary purchase price allocation for Hillstone based on a preliminary purchase price of $624.4 million in cash and preliminary estimates of fair value (in thousands):
Current assets | $ | 36,425 | ||
Property, plant and equipment | 149,399 | |||
Intangible assets | 402,177 | |||
Investments in unconsolidated entities | 808 | |||
Operating lease right-of-use assets | 3,124 | |||
Other noncurrent assets | 795 | |||
Goodwill | 62,530 | |||
Current liabilities | (24,556 | ) | ||
Operating lease obligations | (3,124 | ) | ||
Asset retirement obligations | (446 | ) | ||
Other long-term liabilities | (739 | ) | ||
Noncontrolling interests | (1,993 | ) | ||
$ | 624,400 |
The purchase price and the allocation of the purchase price are preliminary. Items pending completion include the determination of the final purchase price, including any final closing adjustments and completion of independent appraisals of property, plant and equipment, intangible assets, investments in unconsolidated entities and noncontrolling interests and the valuations of the operating lease liabilities and right-of-use assets and the asset retirement obligations.
Note 3 - Pro Forma Adjustments
The unaudited pro forma condensed consolidated financial statements reflect the impact of the following pro forma adjustments:
A. | Represents the net cash proceeds received from Trajectory at closing from the sale of TPSL for total consideration of $275.5 million, less estimated expenses of approximately $5 million. |
B. | The Partnership’s use of net proceeds from the consideration received from Trajectory to repay a portion of the outstanding debt under the revolving credit facility as of June 30, 2019, which bears interest primarily based on a LIBOR rate plus the applicable margin. |
C. | Represents the removal of assets and liabilities of the discontinued operations from the balance sheet. |
D. | Represents the non-recurring pro forma loss on sale that would have been recorded if the Partnership had completed the sale of TPSL on June 30, 2019. |
E. | Represents the amount borrowed under our revolving credit facility and used to pay a portion of the consideration for the acquisition of Hillstone. |
F. | Represents the net cash proceeds from the issuance of $194.6 million Class D Preferred Units and warrants to purchase common units. The net proceeds were allocated between Class D Preferred Units and the warrants based on the preliminary fair value of the instruments. |
G. | Represents the payment of the preliminary purchase price for the purchase of Hillstone. |
H. | Represents the step up in basis for the assets acquired and liabilities assumed as a result of the difference in valuation between the purchase price allocated to the assets and liabilities and their book value on June 30, 2019 in accordance with the acquisition method of accounting. |
I. | Reflects the reclassification from property, plant and equipment to intangible assets the rights-of-way to conform to the Partnership’s presentation of these amounts. |
J. | Represents the repayment of Hillstone’s outstanding debt as of June 30, 2019. |
K. | Represents the reversal of Hillstone’s equity book value. |
L. | Amounts in this column represent Hillstone’s unaudited consolidated statement of operations for the three months ended June 30, 2019. |
M. | Amounts in this column represent Hillstone’s audited consolidated statement of operations for the year ended June 30, 2019. |
N. | Amounts reflect the pro forma effect of eliminating the results of operations of TPSL for the three months ended June 30, 2019 and the years ended March 31, 2019, 2018 and 2017 from the presentation of continuing operations in the unaudited pro forma condensed consolidated statements of operations. |
O. | The reduction of interest expense from the net repayment of outstanding borrowings under the revolving credit facility as a result of the sale of TPSL. As the pro forma statements of operations assume that the transaction closed on April 1, 2016, the Partnership calculated the reduction by using $270.5 million and an assumed interest rate of 4.27%, the interest rate on the Partnership's revolving credit facility as of June 30, 2019. A change of 0.125% in the assumed interest rate would result in an adjustment of interest expense, on an annual basis, of approximately $0.3 million. |
P. | Represents our general partner’s interest in the pro forma adjustments related to the sale of TPSL for the respective periods. |
Q. | Represents the reversal of transaction expenses incurred by Hillstone related to this transaction for the respective periods. |
R. | Represents the incremental increase in depreciation and amortization expense for the respective periods. |
S. | Represents the incremental increase in interest expense due to the repayment of Hillstone’s outstanding debt and the elimination of the amortization of the related debt issuance costs and the interest expense incurred related to the borrowings under the Partnership’s revolving credit facility. The additional interest expense was calculation by using $429.8 million and an assumed rate of 4.27%, the interest rate on the Partnership's revolving credit facility as of June 30, 2019. A change of 0.125% in the assumed interest rate would result in an adjustment of interest expense, on an annual basis, of approximately $0.5 million. |
T. | Represents the distributions paid on the Class D preferred units for the respective periods. |
U. | Represents our general partner’s interest in Hillstone’s operations and the pro forma adjustments for the respective periods. |
Note 4 - Earnings per Unit
Basic earnings per unit is computed by dividing the net income (loss) by the weighted average number of units outstanding during a period. To determine net income (loss) allocated to each class of ownership, the Partnership first allocates net income (loss) in accordance with the amount of distributions made for the quarter by each class of units, if any. The remaining net income is allocated to each class of units in proportion to the weighted average number of units of such class outstanding for a period, as compared to the weighted average number of units outstanding for all classes for the period, with the exception of net losses. Net losses are allocated only to the common units.
Note 5 - Intercompany Transactions
Intercompany transactions have been eliminated within the consolidation in accordance with generally accepted accounting principles. The following are the intercompany transactions that were eliminated from TPSL for the periods presented:
Three Months Ended June 30, | Years Ended March 31, | ||||||||||||||
2019 | 2019 | 2018 | 2017 | ||||||||||||
(in thousands) | |||||||||||||||
Intercompany Revenue | $ | 62,419 | $ | 277,356 | $ | 243,796 | $ | 146,143 | |||||||
Intercompany Cost of Sales | $ | 72,663 | $ | 318,549 | $ | 32,336 | $ | 38,838 |