Business Acquisitions

3 Months Ended

Mar. 31, 2013

Business Acquisitions [Abstract]

Business Acquisitions

Note 4 –Business Acquisitions

 

On December 31, 2012, the Partnership completed the acquisition of Saddle Butte Pipeline, LLC's ownership of its Williston Basin crude oil pipeline and terminal system and its natural gas gathering and processing operations (collectively "Badlands").

Pursuant to the Membership Interest Purchase and Sale Agreement dated November 19, 2012 (the "MIPSA"), the acquisition is subject to a contingent payment of $50 million ("the contingent consideration") if aggregate crude oil gathering volumes exceed certain stipulated monthly thresholds during the period from January 2013 through June 2014. If the threshold is not attained during the contingency period, no payment is owed. Accounting standards require that the contingent consideration be recorded at fair value at the date of acquisition and revalued at subsequent reporting dates under the acquisition method of accounting and revalued during the contingency period. At December 31, 2012, the Partnership recorded a $15.3 million accrued liability representing the fair value of this contingent consideration, determined by a probability based model measuring the likelihood of meeting certain volumetric measures identified in the MIPSA.

Future changes in the fair value of this accrued liability are included in earnings and reported as Other income (expense) in the Consolidated Statement of Operations. At March 31, 2013, the Partnership re-estimated the contingent consideration to be $15.6 million, an increase of $0.3 million attributable to accretion of the discount factor due to the passage of time. The current assessment of other valuation variables and factors has not changed since the acquisition date.

Our Annual Report on Form 10-K included the pro-forma schedule information for the year ended 2012. The following table presents updated 2012 pro forma information to reflect the effects of our 2013 policy decisions regarding depreciation and amortization of acquired properties and intangible assets, as described below. The following table also presents quarterly unaudited pro forma information for the three months ended March 31, 2012 for comparative purposes in this quarterly report.

	Year Ended December 31, 2012				Three Months Ended
	As reported in 10-K		Pro forma		March 31, 2012
	( In millions except per share amounts)
Revenues	$	5,885.7	$	5,909.9	$	1,648.7
Net income		159.3		129.5		59.2
Less: Net income attributable to noncontrolling interests		121.2		83.5		47.3
Net income attributable to Targa Resources Corp.	$	38.1	$	46.0	$	11.9
Net income per common share - Basic	$	0.93	$	1.12	$	0.29
Net income per common share - Diluted	$	0.91	$	1.10	$	0.28

The Partnership applied the same assumptions used in preparing the year-end pro forma schedules reported in its Annual Report on Form 10-K except for the following adjustments to conform to its current accounting policies:

· depreciation expenses associated with the fair value adjustments to property, plant and equipment using straight-line method over a useful life of 15-20 years. The pro forma information included in our 2012 Form 10-K utilized a 30 year useful life;

· amortization expenses associated with the fair value adjustments to definite-lived intangibles in a manner that closely resembles the expected pattern in which we benefit from services provided to customers, over a useful life of 20 years. The pro forma information included in our 2012 10-K utilized a straight-line method over a 30 year life; and

· adjustment to pro forma revenues to report purchases, and sales on a net, rather than gross, basis for certain Badlands natural gas processing agreements in which we are in substance an agent rather than a principal.