Discontinued Operations and Assets Held for Sale

3 Months Ended

Mar. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations and Assets Held for Sale

Discontinued Operations and Assets Held for Sale

Asphalt Terminals Held for Sale

On February 12, 2018, Delek announced it had reached a definitive agreement to sell certain assets and operations of four asphalt terminals (included in Delek's corporate, other and eliminations segment), as well as an equity method investment in an additional asphalt terminal located in Femley, Nevada, to an affiliate of Andeavor. On May 21, 2018, Delek completed the transaction and received net proceeds of approximately $110.8 million, inclusive of the $75.0 million base proceeds as well as certain working capital adjustments. The assets associated with the owned terminals met the definition of held for sale pursuant to ASC 360 as of February 1, 2018, but did not meet the definition of discontinued operations pursuant to ASC 205-20, Presentation of Financial Statements - Discontinued Operations ("ASC 205-20"), as the sale of these asphalt assets did not represent a strategic shift that would have a major effect on the entity's operations and financial results. Accordingly, depreciation ceased as of February 1, 2018, and the assets to be sold were reclassified to assets held for sale as of that date and were written down to the estimated fair value less costs to sell, resulting in an impairment loss on assets held for sale of $27.5 million for the three months ended March 31, 2018. All goodwill associated with the asphalt operations sold was written off in connection with the impairment charge discussed above. In connection with the completion of the sale transaction in the second quarter of 2018, we recognized a gain of approximately $13.3 million, resulting primarily from the recognition of certain additional proceeds at closing associated with the asphalt terminals which were not previously determinable/probable and the recognition of the gain on the sale of the joint venture which was not previously recognized as held for sale (as it did not meet the criteria).

California Discontinued Entities

During the third quarter 2017, we committed to a plan to sell certain assets associated with our Paramount and Long Beach, California refineries and our California renewable fuels facility (as previously defined, the "California Discontinued Entities"). Such operations were designated and reported as discontinued operations. On March 16, 2018, Delek sold to World Energy, LLC (i) all of Delek’s membership interests in the California renewable fuels facility ("AltAir") (ii) certain refining assets and other related assets located in Paramount, California and (iii) certain associated tank farm and pipeline assets and other related assets located in California. Upon final settlement (excluding contingent components), Delek expects to receive net cash proceeds of approximately $85.2 million, which includes a post-closing working capital settlement, Delek’s portion of the expected biodiesel tax credit for 2017 and certain customary adjustments. The sale resulted in a loss on sale of discontinued operations totaling approximately $41.4 million of which $41.2 million was recorded during the three months ended March 31, 2018. Of the total expected proceeds, $54.6 million was received during the three months ended March 31, 2018 ($14.9 million of which were included in net cash flows from investing activities in discontinued operations). As of March 31, 2019, we have received a total of $70.4 million of the total expected proceeds. Additionally, Delek will be entitled to its pro rata portion of any tax credits relating to AltAir activities in 2018 earned through the sale date if the 2018 biodiesel tax credit is re-enacted. A receivable for such additional contingent proceeds will be recorded when the criteria for recognition are met, which is predicated upon reenactment of the tax credit and determination of the amounts earned by AltAir.

The transaction to dispose of certain assets and liabilities associated with our Long Beach, California refinery to Bridge Point Long Beach, LLC closed July 17, 2018 resulting in initial cash proceeds of approximately $14.5 million, net of expenses, and resulting in a gain on sale of discontinued operations of approximately $1.4 million during the third quarter of 2018.

The operating results, net of tax, from discontinued operations associated with the California Discontinued Entities are presented separately in Delek’s condensed consolidated statements of income and the notes to the condensed consolidated financial statements have been adjusted to exclude the discontinued operations. Components of amounts reflected in income from discontinued operations are as follows (in millions):

	Three Months Ended
		March 31, 2018
Net revenues		32.5
Cost of sales:
Cost of materials and other		3.8
Operating expenses (excluding depreciation and amortization)		(7.8		)
Total cost of sales		(4.0		)
General and administrative expenses		(1.1		)
Interest income		0.3
Other income, net		3.0
Loss on sale of California Discontinued Entities		(41.2		)
Loss from discontinued operations before taxes		(10.5		)
Income tax benefit		(2.3		)
Loss from discontinued operations, net of tax		$	(8.2	)

Included in loss from discontinued operations is net income attributable to non-controlling interest totaling $8.1 million related to AltAir for the three months ended March 31, 2018.