0000821483-19-000006.txt : 20190211 0000821483-19-000006.hdr.sgml : 20190211 20190208180547 ACCESSION NUMBER: 0000821483-19-000006 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20190109 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190211 DATE AS OF CHANGE: 20190208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAR PACIFIC HOLDINGS, INC. CENTRAL INDEX KEY: 0000821483 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 841060803 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-36550 FILM NUMBER: 19581324 BUSINESS ADDRESS: STREET 1: 825 TOWN & COUNTRY LANE STREET 2: SUITE 1500 CITY: HOUSTON STATE: TX ZIP: 77024 BUSINESS PHONE: (281) 899-4800 MAIL ADDRESS: STREET 1: 825 TOWN & COUNTRY LANE STREET 2: SUITE 1500 CITY: HOUSTON STATE: TX ZIP: 77024 FORMER COMPANY: FORMER CONFORMED NAME: PAR PETROLEUM CORP/CO DATE OF NAME CHANGE: 20120907 FORMER COMPANY: FORMER CONFORMED NAME: DELTA PETROLEUM CORP/CO DATE OF NAME CHANGE: 19920703 8-K/A 1 a201809308-kawashingtonref.htm 8-K/A Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
  

Form 8-K/A
(Amendment No. 1)
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 8, 2019 (January 9, 2019)
 
Par Pacific Holdings, Inc.
(Exact name of registrant as specified in its charter)
 
  
 
 
 
 
 
Delaware
 
1-36550
 
84-1060803
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)

 
 
 
825 Town and Country Lane, Suite 1500
Houston, Texas
 
77024
(Address of principal executive offices)
 
(Zip Code)
(281) 899-4800
(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

7084391v2


EXPLANATORY NOTE
As previously disclosed in the Current Report on Form 8-K of Par Pacific Holdings, Inc., a Delaware corporation (the “Company”) filed with the U.S. Securities and Exchange Commission on January 14, 2019 (the “Prior 8-K”), Par Petroleum, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (“Par Petroleum”), completed its previously announced acquisition of all of the limited liability company interests of TrailStone NA Asset Finance I, LLC, a Delaware limited liability company that was subsequently renamed Par Tacoma, LLC (“Trailstone”), pursuant to that certain Purchase and Sale Agreement dated as of November 26, 2018 (as amended, the “Purchase Agreement”), among Par Petroleum, TrailStone NA Oil & Refining Holdings, LLC, a Delaware limited liability company, and, solely for certain purposes specified in the Purchase Agreement, the Company.
This Current Report on Form 8-K/A (this “Amendment”) amends and supplements the Prior 8-K for the sole purpose of providing the historical financial statements of Trailstone and the pro forma financial information of the Company required by Item 9.01 of Form 8-K. As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the Company has set forth the complete text of Item 9.01, as amended. This Amendment speaks as of the filing date of the Prior 8-K, does not update information in the Prior 8-K to reflect events that have occurred subsequent to the filing date of the Prior 8-K, and does not modify or update in any way disclosures made in the Prior 8-K. Except as described above, no other modification to the Prior 8-K is being made by this Amendment. Accordingly, this Amendment should be read in connection with the Prior 8-K, which provides a more complete description of the acquisition of Trailstone.
Item 9.01 Financial Statements and Exhibits.
(a)
Financial Statements of Businesses Acquired.
 
The audited consolidated financial statements of TrailStone NA Asset Finance I, LLC as of and for the years ended December 31, 2017 and 2016 are attached hereto as Exhibit 99.2 to this Current Report on Form 8-K and incorporated by reference herein.
 
The unaudited consolidated financial statements of TrailStone NA Asset Finance I, LLC as of September 30, 2018 and for the nine months ended September 30, 2018 and 2017 are attached hereto as Exhibit 99.3 to this Current Report on Form 8-K and incorporated by reference herein.
(b)
Pro Forma Financial Information.
 
The unaudited pro forma condensed consolidated combined financial information of the Company and its subsidiaries as of and for the nine months ended September 30, 2018 and for the year ended December 31, 2017 is attached hereto as Exhibit 99.4 to this Current Report on Form 8-K and incorporated by reference herein.
(c)
Shell Company Transactions.
 
None.
(d)
Exhibits:
2.1
2.2
4.1
4.2
10.1
10.2

7084391v2


10.3
10.4
10.5
10.6
10.7
23.1
99.1
99.2
99.3
99.4
*
Schedules and similar attachments to the referenced agreements have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish supplementally a copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.
#
Confidential treatment has been granted for portions of this exhibit. Omissions are designated with brackets containing asterisks. As part of our confidential treatment request, a complete version of this exhibit was filed separately with the Securities and Exchange Commission.

7084391v2


SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
Par Pacific Holdings, Inc.
 
 
 
 
 
Dated: February 8, 2019
 
 
 
/s/ J. Matthew Vaughn
 
 
 
 
 
J. Matthew Vaughn
Senior Vice President and General Counsel
 


7084391v2
 EX-23.1 2 ex23120180930cascadiaprofo.htm EXHIBIT 23.1 Exhibit


Consent of Independent Auditors

We consent to the incorporation by reference in the following Registration Statements:
(1)
Registration Statement Nos. 333-192519, 333-204597, 333-212107, 333-213472, 333-213471, 333-214593, 333-228933, 333-229278 and 333-229528 on Form S-3 of Par Pacific Holdings, Inc., and

(2)
Registration Statement Nos. 333-185612, 333-208575, 333-216518 and 333-225054 on Form S-8 of Par Pacific Holdings, Inc.
of our report dated December 5, 2018, with respect to the consolidated financial statements of TrailStone NA Asset Finance I, LLC as of and for the years ended December 31, 2017 and 2016, included in this Form 8-K/A.
/s/ Ernst & Young LLP


February 7, 2019
San Antonio, TX



 EX-99.4 3 a20180930cascadiaproformafs2.htm EXHIBIT 99.4 Exhibit


UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL INFORMATION

On November 26, 2018, Par Petroleum LLC ("Par Petroleum"), a subsidiary of Par Pacific Holdings, Inc. ("Par," the "Company," "we," "us," or "our"), entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with TrailStone NA Oil & Refining Holdings, LLC ("TrailStone"). Pursuant to the Purchase Agreement, TrailStone agreed to sell 100% of the issued and outstanding equity interests in TrailStone NA Asset Finance I, LLC ("TSNAFI"), to Par Petroleum in exchange for aggregate consideration of $358.0 million less net working capital and other customary adjustments (the “Acquisition”). On January 11, 2019 (the “Closing Date”), Par Petroleum completed the Acquisition for a total purchase price of $326.7 million, consisting of cash consideration of $289.7 million and 2,363,776 shares of Par’s common stock issued to TrailStone. The cash consideration was funded in part through proceeds from borrowings under the Term Loan Facility (as defined below) of $250.0 million and proceeds from borrowings under a term loan note from the Bank of Hawaii of $45 million.

The Pro Forma Condensed Consolidated Combined Financial Information (the "Pro Forma Financial Statements") gives effect to the Acquisition and the directly related debt and equity financings as described below: 

Senior Secured Term Loan Facility

In connection with the Purchase Agreement, on November 26, 2018, Par and certain of its subsidiaries entered into a commitment letter (the "Commitment Letter") with Goldman Sachs Bank USA ("GS") with respect to a $275.0 million senior secured term loan facility (the “Term Loan Facility”). Pursuant to the Commitment Letter, GS agreed to fund the entirety of the Term Loan Facility as a lender for the purpose of Financing the Acquisition. The funding of the Term Loan Facility provided for in the Commitment Letter was contingent on the satisfaction of customary conditions, including (i) the execution and delivery of definitive documentation with respect to the Term Loan Facility and (ii) the consummation of the Acquisition in accordance with the Purchase Agreement.

On the Closing Date, in connection with the consummation of the Acquisition, Par Petroleum and Par Petroleum Finance Corp. (collectively, the "Borrowers"), the Company, solely for the limited purposes set forth therein, and all of Par Petroleum’s existing wholly-owned subsidiaries (other than Par Petroleum Finance Corp., but including TSNAFI and its subsidiaries), as guarantors, entered into the Term Loan Facility with GS, as administrative agent, and the lenders party thereto from time to time (the “Lenders”). Pursuant to the Term Loan Facility, the Lenders made a term loan to the Borrowers in the amount of $250.0 million (the “Term Loan”) on the Closing Date. The net proceeds from the Term Loan totaled $228.9 million after deducting the original issue discount of $10 million, deferred financing costs of $4.9 million, and commitment and other fees of $6.2 million. The net proceeds of the Par Pacific Term Loan were used to pay a portion of the purchase price for the Acquisition.

Loans under the Term Loan, if a LIBOR Loan (as defined in the Term Loan Facility), will bear interest at a rate per annum equal to Adjusted LIBOR (as defined in the Term Loan Facility) plus an applicable margin of 6.75%, and if an ABR Loan (as defined in the Term Loan Facility), at a rate per annum equal to the ABR or Alternate Base Rate (as defined in the Term Loan Facility) plus an applicable margin of 5.75%. The Term Loan matures on January 11, 2026.

Par Pacific Term Loan

On January 9, 2018, in connection with the consummation of the Acquisition, the Company entered into a Loan Agreement (the “Par Pacific Term Loan Agreement”) with Bank of Hawaii (“BOH”). Pursuant to the Par Pacific Term Loan Agreement, BOH made a loan to the Company in the amount of $45.0 million (the “Par Pacific Term Loan”) pursuant to a note (the “Par Pacific Term Loan Note”) dated as of January 9, 2018. The net proceeds of the Par Pacific Term Loan were used to pay a portion of the purchase price for the Acquisition.

During the term of the Par Pacific Term Loan, the interest rate on the outstanding principal balance will be a floating rate equal to 3.50% above the applicable LIBOR rate (as defined in the Par Pacific Term Loan Note) for each interest period of one month, beginning on the first day of the calendar month and ending on the last day, subject to an increased default interest rate in the event of a default. Payments of accrued interest only will be made on the first day of each calendar month, beginning with the payment due on February 1, 2019 and ending with the payment due on July 1, 2019. The unpaid principal balance of the Par Pacific Term Loan will be due and payable in full on July 9, 2019.

Pro Forma Financial Statements

The following Pro Forma Financial Statements set forth selected historical consolidated financial statements of Par and gives effect to the Acquisition, including the directly related debt and equity financings described above. The historical data provided for the year ended December 31, 2017 is derived from our audited annual consolidated financial statements included in




our Annual Report on Form 10-K for the year ended December 31, 2017 and from the TSNAFI audited consolidated financial statements for the year ended December 31, 2017 attached as Exhibit 99.2. The historical data provided as of and for the nine months ended September 30, 2018 is derived from our unaudited interim condensed consolidated financial statements included in our Quarterly Report on Form 10-Q for the nine months ended September 30, 2018 and from the TSNAFI unaudited consolidated financial statements as of and for the nine months ended September 30, 2018 attached as Exhibit 99.3.

The unaudited pro forma condensed consolidated combined balance sheet as of September 30, 2018 gives effect to the Acquisition and the directly related debt and equity financings described above as if each had occurred on September 30, 2018. The unaudited pro forma condensed consolidated combined statements of operations for the nine months ended September 30, 2018 and the year ended December 31, 2017 both give effect to the Acquisition and the directly related debt and equity financings described above as if each had occurred on January 1, 2017. The Pro Forma Financial Statements are provided for informational and illustrative purposes only and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2017; our Quarterly Report on Form 10-Q for the nine months ended September 30, 2018; and the TSNAFI consolidated financial statements for the year ended December 31, 2017 and for the nine months ended September 30, 2018 attached as Exhibit 99.2 and Exhibit 99.3, respectively.
 
The pro forma adjustments, as described in the notes to the Pro Forma Financial Statements, are preliminary and based on currently available information. The pro forma adjustments included on the pro forma condensed consolidated combined statements of operations only include adjustments that have an ongoing impact. Management believes such adjustments are reasonable, factually supportable, and directly attributable to the events and transactions described below. The Pro Forma Financial Statements do not purport to represent what our actual consolidated results of operations or financial position would have been had the events and transactions occurred on the dates assumed, nor are they necessarily indicative of our future financial condition or consolidated results of operations.

Purchase Price Consideration

The total purchase price consideration for the Acquisition is as follows:
(in millions, except share and per share information)
 
 Shares
 
 Price
 
Purchase Consideration
Cash consideration
 
 
 
 
 
$
321,010

Net working capital adjustments
 
 
 
 
 
(31,300
)
Net cash consideration
 
 
 
 
 
289,710

Equity consideration
 
2,363,776

 
$
15.6485

 
36,990

Total purchase price
 
 
 
 
 
$
326,700



Allocation of Purchase Price Consideration to Asset Acquired and Liabilities Assumed
The Pro Forma Financial Statements have been prepared using the acquisition method of accounting in accordance with accounting principles generally accepted in the U.S. ("GAAP"). Under the acquisition method of accounting per GAAP, any excess consideration transferred or paid beyond the fair value of the assets acquired and liabilities assumed should be attributed to goodwill. The purchase price allocation applied in the Pro Forma Financial Statements is preliminary and does not reflect final values that will be determined after the closing of the Acquisition. Such valuation assessments of specifically identifiable tangible and intangible assets, including any assessment of economic useful lives, have not been completed and such valuation exercises are not expected to be completed when final records and assumptions can be closed and fully analyzed as of the transaction date. Additionally, due to normal pre-closing commercial restrictions to books and records of TSNAFI, not all valuation assumptions can be fully confirmed as of the date of this filing, resulting in such assumptions employed in these pro forma adjustments as preliminary, tentative, and subject to change. In addition, the adjustments related to the Acquisition do not reflect any of the synergies and cost reductions that may result from the Acquisition.





The preliminary allocation of the purchase price consideration is as follows:
 
Estimated Fair Value
Total current assets
$
233,176

Property and equipment, net
238,103

Goodwill
167,228

Other noncurrent assets
13,947

Total assets acquired
652,454

 
 
Total current liabilities
46,567

Other liabilities
279,187

Total liabilities assumed
325,754

 
 
Net assets acquired
$
326,700





PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED COMBINED BALANCE SHEET
(Unaudited)
(in thousands)
 
As of September 30, 2018
 
Historical
 
Pro Forma
 
 
 
Par (a)
 
TSNAFI (b)
 
Adjustments
 
Par as Adjusted
ASSETS
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
87,734

 
$
64,201

 
$
(83,401
)
 (k)
$
68,534

Restricted cash
743

 
1,704

 
—


2,447

Trade accounts receivable
133,026

 
71,288

 
(1,321
)
 (n)
202,993

Inventories
358,581

 
157,782

 
(5,715
)
 (l)
510,648

Prepaid and other current assets
10,239

 
9,438

 
—


19,677

Total current assets
590,323


304,413


(90,437
)

804,299

Property and equipment, net
482,767


238,103


—

 (m)
720,870

Long-term assets
 
 
 
 
 
 
 
Investment in Laramie Energy, LLC
131,466

 
—

 
—


131,466

Intangible assets, net
24,611

 
1,368

 
—

 (m)
25,979

Goodwill
153,397

 
45,833

 
121,395

 (m)
320,625

Other long-term assets
23,919

 
12,579

 
—


36,498

Total assets
$
1,406,483


$
602,296


$
30,958


$
2,039,737

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
Obligations under inventory financing agreements
$
351,188

 
$
—

 
$
—


$
351,188

Accounts payable
68,592

 
74,096

 
(48,580
)
 (n)
94,108

Deferred revenue
8,493

 
1,678

 
—


10,171

Accrued taxes
14,409

 
10,461

 
—


24,870

Other accrued liabilities
45,905

 
90,369

 
—


136,274

Notes payable
—

 
195,634

 
(44,471
)
 (o)
151,163

Total current liabilities
488,587


372,238


(93,051
)

767,774

Long-term liabilities
 
 
 
 
 
 
 
Long-term debt, net of current maturities
389,598

 
54,500

 
225,600

 (p)
669,698

Common stock warrants
7,204

 
—

 
—


7,204

Long-term capital lease obligations
5,682

 
—

 
—


5,682

Other liabilities
38,006

 
46,567

 
(46,567
)
 (q)
38,006

Total liabilities
929,077


473,305


85,982


1,488,364


 
 
 
 
 
 
 
Stockholders' equity
 
 
 
 
 
 
 
Total stockholders' equity
477,406

 
128,991

 
(55,024
)
 (r)
551,373

Total liabilities and stockholders' equity
$
1,406,483


$
602,296


$
30,958


$
2,039,737


The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.





PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED COMBINED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)

 
For The Nine Months Ended September 30, 2018
 
Historical
 

 
Pro Forma
 
 
 
Par (a)
 
TSNAFI (b)
 
Reclassification (c)
 
Adjustments
 
Par as Adjusted
Revenues
$
2,531,616

 
$
988,109

 
$
—

 
$
(4,189
)
 (d)
$
3,515,536

 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
Cost of revenues (excluding depreciation)
2,232,608

 
847,307

 
16,928

 
(1,229
)
 (e)
3,095,614

Operating expense (excluding depreciation)
158,975

 
10,986

 
27,644

 
—


197,605

Depreciation, depletion, and amortization
39,004

 
26,767

 
—

 
—


65,771

General and administrative expense (excluding depreciation)
35,981

 
54,230

 
(26,943
)
 
(750
)
 (f)
62,518

Acquisition and integration expense
3,515

 
—

 
—

 
(457
)
 (g)
3,058

Other operating income
—

 
17,629

 
(17,629
)
 
—


—

Total operating expenses
2,470,083

 
956,919

 
—

 
(2,436
)

3,424,566

 
 
 
 
 
 
 
 
 
 
Operating income (loss)
61,533

 
31,190

 
—

 
(1,753
)

90,970

 
 
 
 
 
 
 
 
 


Other income (expense)
 
 
 
 
 
 
 
 
 
Interest expense and financing costs, net
(29,346
)
 
(10,382
)
 
—

 
(15,512
)
 (h)
(55,240
)
Other income, net
861

 
—

 
—

 
—


861

Change in value of common stock warrants
(396
)
 
—

 
—

 
—


(396
)
Change in value of contingent consideration
(10,500
)
 
—

 
—

 
—


(10,500
)
Equity earnings from Laramie Energy, LLC
4,274

 
—

 
—

 
—


4,274

Total other income (expense), net
(35,107
)
 
(10,382
)
 
—

 
(15,512
)

(61,001
)
 
 
 
 
 
 
 
 
 


Income (loss) before income taxes
26,426

 
20,808

 
—

 
(17,265
)

29,969

Income tax expense
(885
)
 
(4,558
)
 
—

 
4,558

 (i)
(885
)
Net income (loss)
$
25,541

 
$
16,250

 
$
—

 
$
(12,707
)

$
29,084

 
 
 
 
 
 
 
 
 
 
Income per share
 
 
 
 
 
 
 
 
 
Basic
$
0.55

 


 


 



$
0.60

Diluted
$
0.55

 


 


 



$
0.60

Weighted-average number of shares outstanding
 
 
 
 
 
 
 
 
 
Basic
45,676

 


 


 
2,364

 (j)
48,040

Diluted
45,721

 


 


 
2,364

 (j)
48,085


The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.








PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED COMBINED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)

 
For The Year Ended December 31, 2017
 
Historical
 

 
Pro Forma
 
 
 
Par (a)
 
TSNAFI (b)
 
Reclassification (c)
 
Adjustments
 
Par as Adjusted
Revenues
$
2,443,066

 
$
1,065,668

 
$
(189
)
 
$
(4,048
)
 (d)
$
3,504,497

 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
Cost of revenues (excluding depreciation)
2,054,627

 
959,373

 
5,346

 
(15,000
)
 (e)
3,004,346

Operating expense (excluding depreciation)
202,019

 
13,507

 
32,975

 
—


248,501

Depreciation, depletion and amortization
45,989

 
42,147

 
—

 
—


88,136

General and administrative expense (excluding depreciation)
46,078

 
61,247

 
(32,721
)
 
(1,000
)
 (f)
73,604

Acquisition and integration expense
395

 
—

 
—

 
—


395

Other operating income
—

 
6,089

 
(6,089
)
 
—


—

Total operating expenses
2,349,108

 
1,082,363

 
(489
)
 
(16,000
)

3,414,982

 
 
 
 
 
 
 
 
 
 
Operating income (loss)
93,958

 
(16,695
)
 
300

 
11,952


89,515

 
 
 
 
 
 
 
 
 
 
Other income (expense)
 
 
 
 
 
 
 
 
 
Interest expense and financing costs, net
(31,632
)
 
(13,715
)
 
—

 
(20,314
)
 (h)
(65,661
)
Loss on termination of financing agreements
(8,633
)
 
—

 
—

 
—


(8,633
)
Other income (expense), net
914

 
—

 
(300
)
 
—


614

Change in value of common stock warrants
(1,674
)
 
—

 
—

 
—


(1,674
)
Equity earnings from Laramie Energy, LLC
18,369

 
—

 
—

 
—


18,369

Total other income (expense), net
(22,656
)
 
(13,715
)
 
(300
)
 
(20,314
)

(56,985
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
71,302

 
(30,410
)
 
—

 
(8,362
)

32,530

Income tax benefit
1,319

 
37,205

 
—

 
(37,205
)
 (i)
1,319

Net income (loss)
$
72,621

 
$
6,795

 
$
—

 
$
(45,567
)

$
33,849

 
 
 
 
 
 
 
 
 
 
Income (loss) per share
 
 
 
 
 
 
 
 
 
Basic
$
1.58

 


 


 



$
0.71

Diluted
$
1.57

 


 


 



$
0.71

Weighted-average number of shares outstanding
 
 
 
 
 
 
 
 
 
Basic
45,543

 


 


 
2,364

 (j)
47,907

Diluted
45,583

 


 


 
2,364

 (j)
47,947


The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.






PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Unaudited Pro Forma Condensed Consolidated Combined Financial Statements

Unless stated otherwise in the body of these notes, all dollar value references in the tables of these notes are stated in thousands of dollars.

Note 1. TSNAFI Acquisition Pro Forma Adjustments

(a)
Represents Par's historical unaudited condensed consolidated and audited consolidated financial statements derived from its quarterly report on Form 10-Q as of and for the nine months ended September 30, 2018 and its annual report on Form 10-K for the year ended December 31, 2017, respectively.

(b)
Represents TSNAFI’s historical unaudited consolidated and audited consolidated financial statements as of and for the nine months ended September 30, 2018 and for the year ended December 31, 2017 included as Exhibit 99.3 and Exhibit 99.2 to this Form 8-K, respectively. Refer to Note 2 for reclassifications which conform TSNAFI's financial statement presentation to Par’s financial statement presentation.

(c)
Represents reclassification entries to conform where financial statement line items in TSNAFI’s statements of operations are classified differently than in Par’s statements of operations as outlined in the table below:

 
Nine Months Ended September 30, 2018
Financial Statement Line Item
Debit
 
Credit
Operating expense (excluding depreciation)
$
26,943

 
$
—

General and administrative expense (excluding depreciation)
—

 
26,943

Other operating income
—

 
17,629

Cost of revenues (excluding depreciation)
17,649

 
—

Operating expense (excluding depreciation)
—

 
20

Cost of revenues (excluding depreciation)
—

 
721

Operating expense (excluding depreciation)
721

 
—


 
Year Ended December 31, 2017
Financial Statement Line Item
Debit
 
Credit
Operating expense (excluding depreciation)
$
32,721

 
$
—

General and administrative expense (excluding depreciation)
—

 
32,721

Other operating income
—

 
6,089

Revenues
189

 
—

Cost of revenues (excluding depreciation)
4,476

 
—

Operating expense (excluding depreciation)
1,124

 
—

Other income (expense), net
300

 
—

Cost of revenues (excluding depreciation)
870

 
—

Operating expense (excluding depreciation)
—

 
870


Condensed Consolidated Statements of Operations

(d)
The adjustment to Revenues is to conform accounting policies for taxes assessed by a governmental authority that are both imposed on and concurrent with a revenue-producing transaction and collected from our customers by presenting these taxes on a net basis.

(e)
The adjustments to Cost of revenues (excluding depreciation) are (i) to conform accounting policies for taxes assessed by a governmental authority that are both imposed on and concurrent with a revenue-producing transaction and collected from our customers by presenting these taxes on a net basis; (ii) to conform accounting policies for valuing inventory in which TSNAFI uses the last-in, first -out ("LIFO") accounting method and Par uses the first-in, first-out ("FIFO")



PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Combined Pro Forma Financial Information



accounting method for commodity inventories; and (iii) to conform accounting policies for the recognition of losses (gains) on derivatives. TSNAFI records the realized losses (gains) for derivatives into the cost of inventory which is eventually recognized through the statement of operations whereas Par immediately recognizes realized losses (gains) for derivatives on the statement of operations. Refer to the following table for the adjustments:

 
Nine Months Ended September 30, 2018
 
Year Ended December 31, 2017
Conform tax accounting policies
$
(4,189
)
 
$
(4,048
)
Conform LIFO to FIFO accounting policies
5,148

 
(11,759
)
Conform derivative (gains)/losses accounting policies
(2,188
)
 
807

Net pro forma adjustment
$
(1,229
)
 
$
(15,000
)

(f)
Reflects the elimination of the management fee of $0.8 million and $1.0 million charged by TrailStone to TSNAFI for the nine months ended September 30, 2018 and year ended December 31, 2017, respectively. The services arrangement between TrailStone and TSNAFI was terminated in connection with the Acquisition.

(g)
Reflects the removal of $0.5 million of acquisition costs that are directly attributable to the Acquisition for the nine months ended September 30, 2018.

(h)
Represents (i) the elimination of historical interest expense related to TSNAFI’s note payable which was fully settled in connection with the Acquisition, (ii) the additional interest expense for the Term Loan Facility and Par Pacific Term Loan, and (iii) the additional deferred financing costs related to these term loans.
 
Nine Months Ended September 30, 2018
 
Year Ended December 31, 2017
Elimination of TSNAFI's historical interest expense related to notes payable*
$
(6,116
)
 
$
(8,525
)
Addition of interest of 9.6% (base rate plus LIBOR as of filing) related to the Term Loan Facility
17,906

 
23,875

Addition of interest of 6.3% (base rate plus LIBOR as of filing) related to the Par Pacific Term Loan
2,126

 
2,835

Addition of estimated amortization of deferred financing costs associated with Term Loan Facility and Par Pacific Term Loan
1,596

 
2,129

Net pro forma adjustment
$
15,512

 
$
20,314

*No adjustments have been made to the TSNAFI's historical interest related to to the intermediation agreement as this agreement was amended and remained in place in connection with the Acquisition .

(i)
The adjustment for the nine months ended September 30, 2018 reflects a removal of the historical income tax expense of TSNAFI due to Par’s existing net operating loss tax carryforwards that would be released through a deferred tax valuation allowance to offset future tax from TSNAFI. Therefore, no tax expense will be recognized from the Acquisition. The adjustment for the year ended December 31, 2017 reflects a removal of the historical income tax benefit of TSNAFI due to the current deferred tax position of Par in which it records a valuation allowance against its existing deferred tax assets. The deferred tax assets are comprised primarily of net operating loss carryforwards, and Par maintains that it is not likely it will be able to realize its deferred tax assets in the future. Therefore, Par will not be able to realize the income tax benefit associated with the pro forma net loss from TSNAFI.

(j)
The pro forma weighted average shares are calculated as follows:



PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Combined Pro Forma Financial Information



 
Nine Months Ended September 30, 2018
 
Year Ended December 31, 2017
Basic:
 
 
 
Par historical weighted average shares
45,676

 
45,543

Par incremental shares issued for the Acquisition
2,364

 
2,364

Pro forma weighted average shares
48,040

 
47,907

 
 
 
 
Diluted:
 
 
 
Par historical weighted average shares
45,721

 
45,583

Par incremental shares issued for the Acquisition
2,364

 
2,364

Pro forma weighted average shares
48,085

 
47,947



Condensed Consolidated Balance Sheet

(k)
The adjustment to cash and cash equivalents represents net cash proceeds and consideration associated with the Acquisition and is comprised of the following:
Proceeds of $45 million related to the Par Pacific Term Loan
$
45,000

Proceeds from issuance of shares of common stock to TrailStone
36,990

Proceeds of $250.0 million related to the Term Loan Facility
250,000

Deferred financing costs and original issue discount associated with Term Loan Facility and Par Pacific Term Loan
(14,900
)
Reduction in TSNAFI cash due to distribution
(64,201
)
Total purchase price
(326,700
)
Payment of commitment and other fees
(6,200
)
Payment of non-refundable backstop fee*
(3,390
)
 Total pro forma adjustment
$
(83,401
)
*Under the Purchase Agreement, Par Petroleum had the right to decrease the cash purchase price by an amount not to exceed approximately $113 million and to correspondingly increase the number of shares of common stock to be issued to TrailStone (the “Backstop Option”). On November 26, 2018, Par Petroleum paid TrailStone a fee of $3.4 million in connection with the Backstop Option.

(l)
Reflects an adjustment (i) to conform accounting policies for valuing inventory in which TSNAFI uses the LIFO accounting method and Par uses the FIFO accounting method for commodity inventories and (ii) to conform accounting policies for the recognition of losses (gains) on derivatives. TSNAFI records the realized losses (gains) for derivatives into inventory which is eventually recognized through the statement of operations whereas Par immediately recognizes realized losses (gains) for derivatives on the statement of operations. Refer to the following table for the adjustments:
 
September 30, 2018
Conform LIFO to FIFO accounting policies
(5,225
)
Conform derivative (gains)/losses accounting policies
(490
)
Net pro forma adjustment
$
(5,715
)

(m)
The adjustment to Goodwill of $121.4 million represents the excess of the purchase price paid over the preliminary estimated fair value of the identifiable assets acquired and liabilities assumed. We have not yet completed our analysis of the fair value of Property and equipment, net and Intangible assets, net related to the Acquisition. The final determination of the purchase price allocation is anticipated to be completed as soon as practicable after the closing of the Acquisition, but no later than one year from the closing date. The final amounts allocated to Property and equipment, net, Intangible assets, net and other acquired assets and liabilities related to the Acquisition could differ materially from the amounts presented in these unaudited pro forma consolidated financial statements. A summary of the preliminary



PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Combined Pro Forma Financial Information



estimated fair value of the assets acquired and liabilities assumed as if the Acquisition had been completed as of September 30, 2018 is as follows:

 
Estimated Fair Value
Total current assets
$
233,176

Property and equipment , net
238,103

Goodwill
167,228

Other noncurrent assets
13,947

Total assets acquired
652,454

 
 
Total current liabilities
46,567

Other liabilities
279,187

Total liabilities assumed
325,754

 
 
Net assets acquired
$
326,700


(n)
Reflects the elimination of accounts receivable and payable between affiliates of TSNAFI that were settled by TrailStone in connection with the Acquisition.

(o)
Reflects the removal of the notes payable including deferred financing costs that were settled by TrailStone in connection with the Acquisition.

(p)
Reflects the following changes to long-term debt:

Removal of TSNAFI's long-term note payable settled by TrailStone in connection with the Acquisition
$
(54,500
)
Par Pacific Term Loan
45,000

Term Loan Facility
250,000

Less estimated deferred financing costs and original issue discount
(14,900
)
Net pro forma adjustment
$
225,600


(q)
Reflects the removal of the historical TSNAFI deferred tax liability.

(r)
The following adjustments were made to Par’s equity accounts based on the Acquisition:

Remove TSNAFI historical balance
$
(128,991
)
Add: Par shares issued
36,990

Add: deferred tax valuation allowance release at Par, which is recorded as a non-recurring increase to income
46,567

Subtract: commitment and other fees
(6,200
)
Subtract: BackStop Option fee
(3,390
)
Pro forma adjustment
$
(55,024
)

Note 2. Reclassification of TSNAFI Historical Financial Statements

The historical financial statement information of TSNAFI was derived from the audited consolidated financial statements for the year ended December 31, 2017 and the unaudited consolidated financial statements for the nine months ended September



PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Combined Pro Forma Financial Information



30, 2018. The TSNAFI historical financial information as presented includes the following reclassifications to conform to Par’s financial statement presentation.

Consolidated Statement of Operations for the Nine Months Ended September 30, 2018
(in thousands)
 
 TSNAFI
 
 TSNAFI
 
 Historical
 
 Historical
 Financial Statement Line Item
 as filed
 
 as presented
 Salaries and benefits
$
26,835

 
$
—

 Operating expense (excluding depreciation)
—

 
10,986

 General and administrative expense (excluding depreciation)
 
 
15,849

 Service fees - affiliates
750

 
—

 General and administrative expense (excluding depreciation)
—

 
750



 Consolidated Statement of Operations for the Year Ended December 31, 2017
 (in thousands)
 
 TSNAFI
 
 TSNAFI
 
 Historical
 
 Historical
 Financial Statement Line Item
 as filed
 
 as presented
 Salaries and benefits
$
32,533

 
$
—

 Operating expense (excluding depreciation)
—

 
13,507

 General and administrative expense (excluding depreciation)
—

 
19,026

 Service fees - affiliates
1,000

 
—

 General and administrative expense (excluding depreciation)
—

 
1,000





PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Combined Pro Forma Financial Information



 Consolidated Balance Sheet as of September 30, 2018
 (in thousands)
 
 TSNAFI
 
 TSNAFI
 
 Historical
 
 Historical
 Financial Statement Line Item
 as filed
 
 as presented
 Receivables, affiliates
$
1,321

 
$
—

 Trade accounts receivable
—

 
1,321

 Derivative assets, net of margin held
4,733

 
—

 Prepaid and other current assets
—

 
4,733

 Deferred turnaround costs
12,579

 
—

 Other long-term assets
—

 
12,579

 Account payable, affiliates
48,580

 
—

 Accounts payable
—

 
48,580

 Derivative liabilities, net of margin held
9,515

 
—

 Other accrued liabilities
—

 
9,515

 Accounts payable
1,678

 
—

 Deferred revenue
—

 
1,678

 Deferred tax liability
46,567

 
—

 Other liabilities
—

 
46,567