Note 4—Acquisitions

Year Ending March 31, 2016

Water Solutions Facilities

As described below, we are party to certain development agreements that provide us a right to purchase water solutions facilities developed by the other party to the agreements. During the three months ended June 30, 2015, we purchased six water treatment and disposal facilities under these development agreements. On a combined basis, we paid $59.3 million of cash and issued 386,383 common units, valued at $11.4 million, in exchange for these facilities.

We are in the process of identifying and determining the fair values of the assets acquired and liabilities assumed in these business combinations, and as a result, the estimates of fair value at June 30, 2015 are subject to change. We expect to complete this process prior to finalizing our financial statements for the year ending March 31, 2016. We have preliminarily estimated the fair values of the assets acquired (and useful lives) and liabilities assumed as follows (in thousands):

Property, plant and equipment:
Water treatment facilities and equipment (3–30 years)	$	24,511
Buildings and leasehold improvements (7–30 years)	5,050
Land	547
Other (5 years)	30
Goodwill	45,809
Accrued expenses and other payables	(5,102		)
Other noncurrent liabilities	(174		)

Fair value of net assets acquired	$	70,671

Goodwill represents the excess of the consideration paid for the acquired business over the fair value of the individual assets acquired, net of liabilities assumed. Goodwill primarily represents the value of synergies between the acquired business and the Partnership and the opportunity to use the acquired business as a platform for growth. We estimate that all of the goodwill will be deductible for federal income tax purposes.

The operations of these water treatment and disposal facilities have been included in our condensed consolidated statement of operations since their acquisition dates. Our condensed consolidated statement of operations for the three months ended June 30, 2015 includes revenues of $1.0 million and an operating loss of $0.5 million that were generated by the operations of these facilities after we acquired them.

Retail Propane Acquisition

During the three months ended June 30, 2015, we completed an acquisition of a retail propane business that operates in the northeastern United States and paid $4.6 million of cash to acquire these assets and operations. The agreement for this acquisition contemplates post-closing payments for certain working capital items. We are in the process of identifying and determining the fair values of the assets acquired and liabilities assumed in this business combination, and as a result, the estimates of fair value at June 30, 2015 are subject to change. We expect to complete this process prior to finalizing our financial statements for the three months ended December 31, 2015. The operations of this retail propane business have been included in our condensed consolidated statement of operations since its acquisition date. Our condensed consolidated statement of operations for the three months ended June 30, 2015 includes revenues of $0.3 million and operating income of $0.1 million that were generated by the operations of this business after we acquired them.

Year Ended March 31, 2015

As described in Note 2, pursuant to GAAP, an entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair values of the assets acquired and liabilities assumed in a business combination. Certain of our acquisitions during the year ended March 31, 2015 are still within this measurement period, and as a result, the acquisition date fair values we have recorded for the assets acquired and liabilities assumed are subject to change. These business combinations are described below.

Natural Gas Liquids Storage Acquisition

In February 2015, we acquired Sawtooth NGL Caverns, LLC (“Sawtooth”), which owns a natural gas liquids salt dome storage facility in Utah with rail and truck access to western United States markets and entered into a construction agreement to expand the storage capacity of the facility. We paid $97.6 million of cash, net of cash acquired, and issued 7,396,973 common units, valued at $218.5 million, in exchange for these assets and operations. The agreement for this acquisition contemplates post-closing payments for certain working capital items. We are in the process of identifying and determining the fair values of the assets acquired and liabilities assumed in this business combination, and as a result, the estimates of fair value at June 30, 2015 are subject to change. We expect to complete this process prior to finalizing our financial statements for the three months ended December 31, 2015. We have preliminarily estimated the fair values of the assets acquired (and useful lives) and liabilities assumed as follows:

	Estimated At
	June 30,			March 31,
	2015			2015			Change
	(in thousands)
Accounts receivable—trade	$	42		$	42		$	—
Prepaid expenses and other current assets	883			600			283
Property, plant and equipment:
Natural gas liquids terminal and storage assets (2–30 years)	62,205			62,205			—
Vehicles and railcars (3–25 years)	75			75			—
Land	68			68			—
Other	32			32			—
Construction in progress	19,525			19,525			—
Goodwill	151,570			151,853			(283		)
Intangible assets:
Customer relationships (15 years)	85,000			85,000			—
Non-compete agreements (10 years)	12,000			12,000			—
Accounts payable—trade	(931		)	(931		)	—
Accrued expenses and other payables	(6,511		)	(6,511		)	—
Advance payments received from customers	(1,015		)	(1,015		)	—
Other noncurrent liabilities	(6,817		)	(6,817		)	—

Fair value of net assets acquired	$	316,126		$	316,126		$	—

Goodwill represents the excess of the consideration paid for the acquired business over the fair value of the individual assets acquired, net of liabilities assumed. Goodwill primarily represents the value of synergies between the acquired business and the Partnership, the opportunity to use the acquired business as a platform for growth, and the acquired assembled workforce. We estimate that all of the goodwill will be deductible for federal income tax purposes.

We estimated the value of the customer relationship intangible asset using the income approach, which uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts.

The acquisition method of accounting requires that executory contracts with unfavorable terms relative to current market conditions at the acquisition date be recorded as assets or liabilities in the acquisition accounting. Since certain natural gas liquids storage lease commitments were at unfavorable terms relative to acquisition-date market conditions, we recorded a liability of $12.8 million related to these lease commitments in the acquisition accounting, and we amortized $1.5 million of this balance as an increase to revenues during the three months ended June 30, 2015. We will amortize the remainder of this liability over the term of the leases. The future amortization of this liability is shown below (in thousands):

Year Ending March 31,
2016 (nine months)	$	4,355
2017	4,905
2018	1,306
2019	88

Bakken Water Solutions Facilities

On November 21, 2014, we completed the acquisition of two saltwater disposal facilities in the Bakken shale play in North Dakota for $34.6 million of cash. We are in the process of identifying and determining the fair values of the assets acquired and liabilities assumed in this business combination, and as a result, the estimates of fair value at June 30, 2015 are subject to change. We expect to complete this process prior to finalizing our financial statements for the three months ending September 30, 2015. We have preliminarily estimated the fair values of the assets acquired (and useful lives) and liabilities assumed as follows:

	Estimated At
	June 30,			March 31,
	2015			2015			Change
	(in thousands)
Property, plant and equipment:
Vehicles (10 years)	$	63		$	63		$	—
Water treatment facilities and equipment (3–30 years)	5,815			5,815			—
Buildings and leasehold improvements (7–30 years)	130			130			—
Land	100			100			—
Goodwill	6,721			6,560			161
Intangible asset:
Customer relationships (6 years)	22,000			22,000			—
Other noncurrent assets	75			—			75
Other noncurrent liabilities	(304		)	(68		)	(236		)

Fair value of net assets acquired	$	34,600		$	34,600		$	—

TransMontaigne Inc.

On July 1, 2014, we acquired TransMontaigne for $200.3 million of cash, net of cash acquired (including $174.1 million paid at closing and $26.2 million paid upon completion of the working capital settlement). As part of this transaction, we also purchased $380.4 million of inventory from the previous owner of TransMontaigne (including $346.9 million paid at closing and $33.5 million subsequently paid as the working capital settlement process progressed). The operations of TransMontaigne include the marketing of refined products. As part of this transaction, we acquired the 2.0% general partner interest, the incentive distribution rights, a 19.7% limited partner interest in TLP, and assumed certain terminaling service agreements with TLP from an affiliate of the previous owner of TransMontaigne.

During the three months ended June 30, 2015, we completed the acquisition accounting for this business combination. The following table presents the final calculation of the fair values of the assets acquired (and useful lives) and liabilities assumed for this acquisition:

				Estimated
				at
				March 31,
	Final			2015			Change
	(in thousands)
Cash and cash equivalents	$	1,469		$	1,469		$	—
Accounts receivable—trade	199,366			197,829			1,537
Accounts receivable—affiliates	528			528			—
Inventories	373,870			373,870			—
Prepaid expenses and other current assets	15,110			15,001			109
Property, plant and equipment:
Refined products terminal assets and equipment (20 years)	415,317			399,323			15,994
Vehicles	1,696			1,698			(2		)
Crude oil tanks and related equipment (20 years)	1,085			1,058			27
Information technology equipment	7,253			7,253			—
Buildings and leasehold improvements (20 years)	15,323			14,770			553
Land	61,329			70,529			(9,200		)
Tank bottoms (indefinite life)	46,900			46,900			—
Other	15,536			15,534			2
Construction in progress	4,487			4,487			—
Goodwill	30,169			28,074			2,095
Intangible assets:
Customer relationships (15 years)	66,000			76,100			(10,100		)
Pipeline capacity rights (30 years)	87,618			87,618			—
Investments in unconsolidated entities	240,583			240,583			—
Other noncurrent assets	3,911			3,911			—
Accounts payable—trade	(113,103		)	(113,066		)	(37		)
Accounts payable—affiliates	(69		)	(69		)	—
Accrued expenses and other payables	(79,405		)	(78,427		)	(978		)
Advance payments received from customers	(1,919		)	(1,919		)	—
Long-term debt	(234,000		)	(234,000		)	—
Other noncurrent liabilities	(33,227		)	(33,227		)	—
Noncontrolling interests	(545,120		)	(545,120		)	—

Fair value of net assets acquired	$	580,707		$	580,707		$	—

Goodwill represents the excess of the consideration paid for the acquired business over the fair value of the individual assets acquired, net of liabilities assumed. Goodwill primarily represents the value of synergies between the acquired business and the Partnership, the opportunity to use the acquired business as a platform for growth, and the acquired assembled workforce. We estimate that all of the goodwill will be deductible for federal income tax purposes.

The intangible asset for pipeline capacity rights relates to capacity allocations on a third-party refined products pipeline. Demand for use of this pipeline exceeds the pipeline’s capacity, and the limited capacity is allocated based on a shipper’s historical shipment volumes.

The fair value of the noncontrolling interests was calculated by multiplying the closing price of TLP’s common units on the acquisition date by the number of TLP common units held by parties other than us, adjusted for a lack-of-control discount.

Water Solutions Facilities

As described above, we are party to certain development agreements that provide us a right to purchase water solutions facilities developed by the other party to the agreements. During the year ended March 31, 2015, we purchased 16 water treatment and disposal facilities under these development agreements over the course of the year. We also purchased a 75% interest in one additional water treatment and disposal facility in July 2014 from a different seller. On a combined basis, we paid $190.0 million of cash and issued 1,322,032 common units, valued at $37.8 million, in exchange for these 17 facilities.

During the three months ended June 30, 2015, we completed the acquisition accounting for 12 of these water treatment and disposal facilities. The following table presents the final calculation of the fair values of the assets acquired (and useful lives) and liabilities assumed for these water treatment and disposal facilities:

				Estimated
				at
				March 31,
	Final			2015			Change
	(in thousands)
Accounts receivable—trade	$	939		$	939		$	—
Inventories	253			253			—
Prepaid expenses and other current assets	62			62			—
Property, plant and equipment:
Water treatment facilities and equipment (3–30 years)	60,784			60,784			—
Buildings and leasehold improvements (7–30 years)	5,701			5,701			—
Land	2,122			2,122			—
Other (5 years)	101			101			—
Goodwill	93,358			93,358			—
Intangible asset:
Customer relationships (4 years)	10,000			10,000			—
Other noncurrent assets	50			50			—
Accounts payable—trade	(58		)	(58		)	—
Accrued expenses and other payables	(1,092		)	(1,092		)	—
Other noncurrent liabilities	(420		)	(420		)	—
Noncontrolling interest	(5,775		)	(5,775		)	—

Fair value of net assets acquired	$	166,025		$	166,025		$	—

We are in the process of identifying and determining the fair values of the assets acquired and liabilities assumed for the remaining five water treatment and disposal facilities, and as a result, the estimates of fair value at June 30, 2015 are subject to change. We expect to complete this process prior to finalizing our financial statements for the three months ending December 31, 2015. We have preliminarily estimated the fair values of the assets acquired (and useful lives) and liabilities assumed as follows:

	Estimated At
	June 30,			March 31,
	2015			2015			Change
	(in thousands)
Property, plant and equipment:
Water treatment facilities and equipment (3–30 years)	$	18,922		$	18,922		$	—
Buildings and leasehold improvements (7–30 years)	4,549			4,549			—
Land	987			987			—
Other (5 years)	28			28			—
Goodwill	39,412			39,412			—
Accrued expenses and other payables	(2,000		)	(2,000		)	—
Other noncurrent liabilities	(162		)	(162		)	—

Fair value of net assets acquired	$	61,736		$	61,736		$	—

Retail Propane Acquisitions

During the year ended March 31, 2015, we completed eight acquisitions of retail propane businesses that operate in the northeastern, Midwest, and southern United States. On a combined basis, we paid $39.0 million of cash and issued 132,100 common units, valued at $3.7 million, in exchange for these assets and operations. The agreements for these acquisitions contemplate post-closing payments for certain working capital items.

During the three months ended June 30, 2015, we completed the acquisition accounting for seven of these business combinations. The following table presents the final calculation of the fair values of the assets acquired (and useful lives) and liabilities assumed for these acquisitions:

				Estimated
				at
				March 31,
	Final			2015			Change
	(in thousands)
Accounts receivable—trade	$	1,913		$	1,913		$	—
Inventories	583			583			—
Prepaid expenses and other current assets	110			110			—
Property, plant and equipment:
Retail propane equipment (15–20 years)	10,821			10,821			—
Vehicles and railcars (5–7 years)	1,953			1,953			—
Buildings and leasehold improvements (30 years)	534			534			—
Land	455			455			—
Other (5–7 years)	90			90			—
Goodwill	8,097			8,097			—
Intangible assets:
Customer relationships (10–15 years)	16,763			16,763			—
Non-compete agreements (5–7 years)	400			400			—
Trade names (3–12 years)	950			950			—
Accounts payable—trade	(1,523		)	(1,523		)	—
Advance payments received from customers	(1,661		)	(1,661		)	—
Current maturities of long-term debt	(78		)	(78		)	—
Long-term debt, net of current maturities	(760		)	(760		)	—

Fair value of net assets acquired	$	38,647		$	38,647		$	—

We are in the process of identifying and determining the fair values of the assets acquired and liabilities assumed for the remaining one of these business combinations, and as a result, the estimates of fair value at June 30, 2015 are subject to change. We expect to complete this process prior to finalizing our financial statements for the three months ending September 30, 2015. We have preliminarily estimated the fair values of the assets acquired (and useful lives) and liabilities assumed as follows:

	Estimated At
	June 30,			March 31,
	2015			2015			Change
	(in thousands)
Accounts receivable—trade	$	324		$	324		$	—
Inventories	188			188			—
Property, plant and equipment:
Retail propane equipment (15–20 years)	2,356			2,356			—
Vehicles and railcars (5–7 years)	379			379			—
Buildings and leasehold improvements (30 years)	—			250			(250		)
Land	50			200			(150		)
Other (5–7 years)	26			26			—
Intangible assets:
Customer relationships (10–15 years)	800			800			—
Non-compete agreements (5–7 years)	100			100			—
Accounts payable—trade	—			(398		)	398
Advance payments received from customers	(87		)	(89		)	2

Fair value of net assets acquired	$	4,136		$	4,136		$	—