Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Northern Tier Energy LP (1533454) 10-Q published on Nov 02, 2016 at 8:07 pm
Reporting Period: Sep 29, 2016
We have organized our operations into three segments, refining, WNRL and retail, based on manufacturing and marketing processes, the nature of our products and services and each segment's respective customer base. Prior to the Merger on June 23, 2016, we also reported NTI as a separate reportable segment. Following the completion of the Merger, NTI became a wholly-owned subsidiary of Western and, as a result, we have moved its assets and operations into our other reportable segments. Beginning on July 1, 2016, our management team, led by our chief operating decision maker, began monitoring our business and allocating resources based on these three reportable segments. The St. Paul Park refinery and related operations are now included in the refining segment and the SuperAmerica retail and bakery assets and operations are now included in the retail segment. We have retrospectively adjusted the historical segment financial data for the periods presented to reflect our revised segment presentation. See Note 3, Segment Information, in the Notes to Condensed Consolidated Financial Statements for further discussion of our business segments.
General Instruction H(2)(a) of Form 10-Q allows for the omission of Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations from the presentation of NTI's financial position and operating results, provided that NTI includes within this Form 10-Q its management's narrative analysis of the results of operations explaining the reasons for material changes in revenue and expenses for the year-to-date periods presented. Set forth below are the operating results of NTI, as presented in NTI's standalone financial statements in its Condensed Consolidated Statements of Operations for the nine months ended September 30, 2016 and 2015. These operating results do not reflect Western's accounting adjustments to consolidate NTI into Western's operating segments. The following results are intended to be considered separately from Western's consolidated segment presentation, which incorporates NTI's operations, as adjusted in consolidation, into Western's reportable segments.
On September 15, 2016, Western executed the Contribution Agreement by and among Western, SPPR, WNRL and Western Refining Logistics GP, LLC, the general partner of WNRL. Pursuant to the terms of the Contribution Agreement, SPPR has agreed to sell to WNRL approximately four million barrels of refined product and crude oil storage tanks, a light products terminal, a heavy products loading rack, certain rail and barge facilities, certain other related logistics assets, and two crude oil pipeline segments and one pipeline segment not currently in service, each of which is approximately 2.5 miles and extends from SPPR’s refinery in St. Paul Park, Minnesota to SPPR’s tank farm in Cottage Grove, Minnesota, in exchange for $195 million in cash and 628,224 of common units representing limited partner interests in WNRL. The Company's book value on the date of sale of the property, plant and equipment, certain assets under construction and additive inventory used in the terminal operations amounted to $48.9 million. The proceeds from this transaction, reduced by the book value of the assets sold was $146.1 million. The Company treated the transaction as a transfer of assets between entities under common control and, as such, accounted for the transfer at the historical book value of the assets as required by GAAP. We recognized the difference between the proceeds and the book value of the assets as an increase in equity.
In connection with the closing of the Contribution Agreement, SPPR entered into a terminalling, transportation and storage services agreement (the “Terminalling Agreement”) with Western Refining Terminals, LLC (“WRT”), an indirect, wholly-owned subsidiary of WNRL. Pursuant to the Terminalling Agreement, WRT has agreed to provide product storage services, product throughput services and product additive and blending services at the terminal facilities located at or near SPPR’s refinery in St. Paul Park, Minnesota. In exchange for such services, SPPR has agreed to certain minimum volume commitments and to pay certain fees. The Terminalling Agreement will have an initial term of ten years, which may be extended for up to two renewal terms of five years each upon the mutual agreement of the parties.
The Company incurred professional service fees in connection with the Merger transaction. Additionally, the Company incurred costs associated with initiating a plan of reorganization for various positions in the third quarter of 2016. In relation to this reorganization plan, it was determined that certain employees would be terminated during 2016 and 2017. The Company recognized $1.5 million and $2.6 million of expense during the three and nine months ended September 30, 2016, respectively, which included compensation related to the severance of employment and retention bonuses for selected employees. These costs are recognized in the merger-related expenses line within the consolidated statements of operations and comprehensive income. All reorganization and related costs are recognized in the Other segment. The Company recognizes these costs ratably from September 1, 2016, the effective date of the agreements, through the remaining service period, which varies for each employee, but in no case is later than September 1, 2017. As of September 30, 2016, the Company anticipates that these costs will continue to be recognized through the third quarter of 2017 and for the expenses to be completely paid out by December 31, 2017.