EX-99.1 7 exhibit991proformafinancia.htm PRO FORMA FINANCIAL STATEMENTS Exhibit 99.1 Pro Forma Financials regarding Tyler drop down


Exhibit 99.1
DELEK LOGISTICS PARTNERS, LP
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
Background
The following unaudited pro forma condensed combined consolidated financial information of Delek Logistics Partners, LP (the “Partnership”) reflects adjustments to the historical combined consolidated financial statements of the Partnership to give effect to: (i) the acquisition of a terminal, storage tanks and related assets at Delek US's Tyler, Texas refinery (the "Tyler Refinery") (collectively, the “Tyler Assets”) from Delek Refining , Ltd. ("Delek Refining"), a wholly owned subsidiary of Delek US and hereafter referred to as the “Acquisition”, including the expected impact of the long-term commercial Tyler Throughput and Tankage Agreement (the "Throughput and Tankage Agreement"), the Tyler Site Services Agreement ("Site Services Agreement") and amended and restated Omnibus Agreement ("Restated Omnibus Agreement") that we entered into in connection with the Acquisition and (ii) the payment of estimated fees and expenses in connection with the Acquisition. References to “we,” “us” and “our” mean Delek Logistics Partners, LP and its consolidated subsidiaries, unless the context otherwise requires. References to “Delek US” refer collectively to Delek US Holdings, Inc. and any of its subsidiaries other than Delek Logistics Partners, LP, its subsidiaries and Delek Logistics GP, LLC (“DLGP”), its general partner. The information presented in this Report on Form 8-K contains the unaudited condensed combined pro forma financial results of the Delek Refining Tyler Assets (the "Predecessor"), our predecessor for accounting purposes, as of and for the three months ended March 31, 2013 and for the year ended December 31, 2012.
The Acquisition will be recorded at historical cost as it is considered to be a transfer of a business between entities under common control. Our valuation of the Tyler Assets is primarily based on the revenues that will be generated under the commercial Throughput and Tankage Agreement with Delek US, as well as on our own independent estimates of expected future and general and administrative expenses based on the industry experience of our management team.
The unaudited pro forma condensed combined consolidated financial information has been prepared for illustrative purposes only and is not necessarily indicative of our financial position or results of operations had the Acquisition actually occurred on the dates assumed, nor is such unaudited pro forma condensed combined consolidated financial information necessarily indicative of the results to be expected for any future period.
The pro forma adjustments are based on preliminary estimates and currently available information and assumptions that management believes are reasonable. The unaudited notes to the unaudited pro forma condensed combined consolidated statements of operations provide a detailed discussion of how such adjustments were derived and presented in the unaudited pro forma financial information. The unaudited pro forma condensed combined consolidated financial information and related notes thereto should be read in conjunction with the historical combined consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012 and the historical condensed combined consolidated financial statements and related notes thereto included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 filed with the Securities and Exchange Commission.
Effective July 26, 2013, the Partnership acquired from Delek Refining the Tyler Assets. The cash paid for the assets acquired was $94.8 million, comprised of $77.0 million financed with borrowings under the Partnership's amended and restated senior secured revolving credit facility and $17.8 million in cash on hand.
The assets acquired in the Acquisition consist of:
The refined products terminal located at the Tyler Refinery (the "Tyler Terminal") which consists of a truck loading rack with nine loading bays supplied by pipeline from storage tanks located at the Tyler Refinery, along with certain ancillary assets. Total throughput capacity for the Tyler Terminal is approximately 72,000 barrels per day ("bpd"). For the year ended December 31, 2012, approximately 55,000 bpd of refined products were throughput at the Tyler Terminal.
Ninety-six storage tanks and certain ancillary assets (such as tank pumps and piping) located adjacent to the Tyler Refinery with an aggregate shell capacity of approximately 2.0 million barrels (the "Tyler Storage Tanks"). The Tyler Storage Tanks, together with the Tyler Terminal, are sometimes hereinafter referred to as the "Tyler Assets."
Delek Refining retained any current assets, current liabilities and environmental liabilities related to the Tyler Assets as of the date of the Acquisition. The only historical balance sheet items that transferred to the Partnership in the Acquisition were property, plant and equipment assets and asset retirement obligations which will be recorded by us at historical cost.

The Partnership will manage the operation of all of the assets and receive fees for services commencing upon completion of the Acquisition.






DELEK LOGISTICS PARTNERS, LP
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET
March 31, 2013
 
Delek Logistics
Partners, LP
 
Tyler Terminal
and Tank Assets
  
Pro Forma
Adjustments
 
 
Delek Logistics
Partners, LP Pro Forma
(Dollars in thousands)
ASSETS
Current assets:
 
 
 
  
 
 
 
 
Cash and cash equivalents
$
18,980

 
$

  
$
77,000

(a) 
 
$
830

 
 
 
 
  
(94,800
)
(b) 
 
 
 
 
 
 
  
(350
)
(c) 
 
 
     Accounts receivable
37,886

 

  

 
 
37,886

     Inventory
24,499

 

  

 
 
24,499

     Deferred tax assets
14

 

  

  
 
14

     Other current assets
362

 

  

 
 
362

Total current assets
81,741

 

  
(18,150
)
  
 
63,591

 
 
 
 
  
 
 
 
 
Property, plant and equipment:
 
 
 
 
 
 
 
 
     Property, plant and equipment
173,576

 
42,029

  

(b) 
 
215,605

     Less: accumulated depreciation
(20,841
)
 
(6,235
)
  

(b) 
 
(27,076
)
Property, plant and equipment, net
152,735

 
35,794

  

 
 
188,529

 
 
 
 
  
 
 
 
 
Goodwill
10,454

 

  

  
 
10,454

Intangible assets, net
12,178

 

  

  
 
12,178

Other non-current assets
3,698

 

  

 
 
3,698

Total assets
$
260,806

 
$
35,794

  
$
(18,150
)
  
 
$
278,450

 
 
 
 
  
 
 
 
 



(Continued on next page)







DELEK LOGISTICS PARTNERS, LP
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET
March 31, 2013
 
Delek Logistics
Partners, LP
 
Tyler Terminal
and Tank Assets
  
Pro Forma
Adjustments
 
 
Delek Logistics
Partners, LP Pro Forma
(Dollars in thousands)
LIABILITIES AND EQUITY
Current liabilities:
 
 
 
  
 
 
 
 
     Accounts payable
$
33,377

 
$

  
$

 
 
$
33,377

     Accounts payable to related parties
2,148

 

  

 
 
2,148

     Fuel and other taxes payable
5,577

 

  

  
 
5,577

     Accrued expenses and other current liabilities
7,865

 
31

  
(31
)
(d) 
 
7,865

                Total current liabilities
48,967

 
31

  
(31
)
 
 
48,967

 
 
 
 
  
 
 
 
 
Non-current liabilities:
 
 
 
  
 
 
 
 
     Revolving credit facility
$
90,000

 
$

  
$
77,000

(a) 
 
$
167,000

     Asset retirement obligations
1,475

 
1,761

  

(b) 
 
3,236

     Deferred tax liability
13

 

  

  
 
13

     Other non-current liabilities
9,208

 
185

  
(185
)
(d) 
 
9,208

                Total non-current liabilities
100,696

 
1,946

  
76,815

 
 
179,457

 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
 
 
Equity of Predecessors

 
33,817

 
(33,817
)
(e) 
 

Common unitholders
54,892

 

  
(46,452
)
(b) 
 
24,946

 
 
 
 
  
(171
)
(c) 
 
 
 
 
 
 
  
106

(d) 
 
 
 
 
 
 
  
16,571

(e) 
 
 
Subordinated unitholders
56,165

 

  
(46,452
)
(b) 
 
26,217

 
 
 
 
 
(172
)
(c) 
 
 
 
 
 
 
 
106

(d) 
 
 
 
 
 
 
 
16,570

(e) 
 
 
General partner - DLGP
86

 

  
(1,896
)
(b) 
 
(1,137
)
 
 
 
 
  
(7
)
(c) 
 
 
 
 
 
 
  
4

(d) 
 
 
 
 
 
 
  
676

(e) 
 
 
Total equity
111,143

 
33,817

  
(94,934
)
 
 
50,026

 
 
 
 
  
 
 
 
 
    Total liabilities and equity
$
260,806

 
$
35,794

  
$
(18,150
)
 
 
$
278,450


 
 
 
 
 
 
 
 
See accompanying notes to unaudited pro forma condensed combined consolidated financial statements







DELEK LOGISTICS PARTNERS, LP
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF COMBINED CONSOLIDATED INCOME AND COMPREHENSIVE INCOME
Year Ended December 31, 2012
 
 
 
 
 
 
 
 
 
 
Delek Logistics Partners, LP
 
Tyler Terminal and Tank Assets
 
Pro Forma Adjustments
 
 
Delek Logistics Partners, LP Pro Forma
(dollars in thousands, except unit data and per unit data)
Net sales
$
1,022,586

  
$

  
$
17,066

(f) 
 
$
1,039,652

Operating costs and expenses:
 
 
 
 
 
 
 
 
Cost of goods sold
959,434

  

  

 
 
959,434

Operating expenses
23,362

  
7,035

  
509

(g) 
 
29,506

 
 
 

 
200

(h) 
 
 
 
 
 

 
(1,600
)
(i) 
 
 
General and administrative expenses
8,389

  
761

  
(372
)
(j) 
 
8,778

Depreciation and amortization
8,675

  
1,255

  

 
 
9,930

Loss on sale of assets
9

  

  

  
 
9

Total operating costs and expenses
999,869

  
9,051

  
(1,263
)
 
 
1,007,657

           Operating income (loss)
22,717

  
(9,051
)
 
18,329

  
 
31,995

Interest expense, net
2,682

 

  
1,540

(k) 
 
4,222

Net income (loss) before income tax benefit
20,035

  
(9,051
)
 
16,789

 
 
27,773

Income tax benefit
(14,024
)
 

  

  
 
(14,024
)
Net income (loss)
34,059

 
(9,051
)
 
16,789

 
 
41,797

Comprehensive income (loss)
34,059

 
(9,051
)
 
16,789

 
 
41,797

Less: income attributable to Predecessors
25,649

  

  

 
 
25,649

Net income (loss) attributable to partners
8,410

  
(9,051
)
 
16,789

 
 
16,148

Less: General partner’s interest in net income
168

  
(181
)
 
336

 
 
323

Limited partners’ interest in net income (loss)
$
8,242

  
$
(8,870
)
 
$
16,453

 
 
$
15,825

Net income per limited partner unit:
 
 
 
 
 
 
 
 
Common units – (basic and diluted)
$
0.34

  
 
 
 
 
 
$
0.66

Subordinated units – Delek (basic and diluted)
$
0.34

  
 
 
 
 
 
$
0.66

Weighted average limited partner units outstanding:
 
 
 
 
 
 
 
 
Common units – (basic and diluted)
11,999,258

  
 
 
 
  
 
11,999,258

Subordinated units – Delek (basic and diluted)
11,999,258

  
 
 
 
  
 
11,999,258

 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited pro forma condensed combined consolidated financial statements.













DELEK LOGISTICS PARTNERS, LP
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF COMBINED CONSOLIDATED INCOME AND COMPREHENSIVE INCOME
Three Months Ended March 31, 2013
 
 
 
 
 
 
 
 
 
 
Delek Logistics Partners, LP
 
Tyler Terminal and Tank Assets
 
Pro Forma Adjustments
 
 
Delek Logistics Partners, LP Pro Forma
(dollars in thousands, except unit data and per unit data)
Net sales
$
210,894

 
$

 
$
4,255

(f) 
 
$
215,149

Operating costs and expenses:
 
 
 
 
 
 
 
 
Cost of goods sold
187,860

 

 

 
 
187,860

Operating expenses
5,862

 
1,650

 
501

(g) 
 
7,663

 
 
 

 
50

(h) 
 
 
 
 
 

 
(400
)
(i) 
 
 
General and administrative expenses
1,677

 
293

 
(196
)
(j) 
 
1,774

Depreciation and amortization
2,352

 
844

 

 
 
3,196

Total operating costs and expenses
197,751

 
2,787

 
(45
)
 
 
200,493

           Operating income (loss)
13,143

 
(2,787
)
 
4,300

  
 
14,656

Interest expense, net
817

 

 
385

(k) 
 
1,202

Net income (loss) before income tax expense
12,326

 
(2,787
)
 
3,915

 
 
13,454

Income tax expense
122

 

 

  
 
122

Net income (loss)
12,204

 
(2,787
)
 
3,915

 
 
13,332

Comprehensive income (loss)
12,204

 
(2,787
)
 
3,915

 
 
13,332

Less: General partner’s interest in net income
244

 
(56
)
 
78

 
 
266

Limited partners’ interest in net income (loss)
$
11,960

 
$
(2,731
)
 
$
3,837

 
 
$
13,066

Net income per limited partner unit:
 
 
 
 
 
 
 
 
Common units – (basic and diluted)
$
0.50

 
 
 
 
 
 
$
0.54

Subordinated units – Delek (basic and diluted)
$
0.50

 
 
 
 
 
 
$
0.54

Weighted average limited partner units outstanding:
 
 
 
 
 
 
 
 
Common units – (basic)
11,999,258

 
 
 
 
 
 
11,999,258

Common units – (diluted)
12,092,922

 
 
 
 
 
 
12,092,922

Subordinated units – Delek (basic and diluted)
11,999,258

 
 
 
 
 
 
11,999,258

 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited pro forma condensed combined consolidated financial statements.


 






DELEK LOGISTICS PARTNERS, LP
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 1. Basis of Presentation
The unaudited pro forma combined consolidated financial information presents the application of pro forma adjustments to our historical financial statements to reflect (i) the Acquisition, including the expected impact of the long-term commercial Throughput and Tankage Agreement and the Amended and Restated Omnibus Agreement ("Restated Omnibus Agreement") that we entered into in connection with the Acquisition and (ii) the payment of estimated fees and expenses in connection with the Acquisition. The pro forma adjustments have been prepared as if the Acquisition had taken place as of March 31, 2013, in the case of the unaudited pro forma balance sheet, and as of January 1, 2012, in the case of the unaudited pro forma statements of income and comprehensive income. The unaudited pro forma condensed combined consolidated financial statements give pro forma effect to:

the Acquisition of the net assets and operations, recorded at historical cost of $34.0 million (net book value of property and equipment of $35.8 million less the asset retirement obligations assumed of $1.8 million), which excludes environmental liabilities which were retained by Delek US under the amended schedules to the Restated Omnibus Agreement;
the payment of $0.4 million of estimated fees and expenses related to the Acquisition;
the execution of the Throughput and Tankage Agreement, the Tyler Lease and Access Agreement, (the "Tyler Lease") and the Tyler Site Services Agreement (the "Site Services Agreement"), and the recognition of incremental revenues and expenses under each agreement; and
the amendment to the Omnibus Agreement, and the recognition of incremental expense under that agreement.
Note 2. Pro Forma Adjustments and Assumptions
a.
Reflects the drawdown of $77.0 million under our amended and restated senior secured revolving credit facility.
b.
Reflects the acquisition of the Tyler Assets, along with the related distributions to a subsidiary of Delek US. The property, plant and equipment and the asset retirement obligations will be recorded at historical cost as it is considered to be a transaction among entities under common control.
c.
Reflects approximately $0.4 million in costs associated with the Acquisition relating to legal and consulting services, audit expenses and other costs.
d.
Delek US retained the environmental liabilities of the Predecessor, as these balances represent liabilities related to the Predecessor's operations prior to the closing of the Acquisition.
e.
Represents the conversion of the adjusted equity of the Predecessor of $33.8 million from equity of predecessors to $16.6 million for the common unitholders, $16.6 million for the subordinated unitholders and $0.7 million for the general partner of the Partnership.
f.
Reflects recognition of affiliate revenues for services provided by the Partnership to manage and operate the Tyler Assets. Volumes used in the calculations are the Tyler Terminal historical refined products volumes transported across the rack. Fees were calculated using the contractual terms under the Throughput and Tankage Agreement that was entered into with Delek US at the closing of the Acquisition.
g.
Reflects the adjustment to back out non-recurring credits in operating expenses of (i) $0.5 million recorded in the twelve months ended December 31, 2012 and (ii) $0.5 million recorded in the three months ended March 31, 2013.
h.
Reflects the adjustment of operating expenses to the terms of the Site Services Agreement.
i.
Reflects the adjustment of operating expenses to the terms of the Restated Omnibus Agreement in regards to indemnification of API 653 tank repairs.





j.
Reflects the adjustment of general and administrative expenses to the terms of the Restated Omnibus Agreement.
k.
Reflects interest expense at 2.3% on the additional $77.0 million borrowing under our amended and restated senior secured revolving credit facility, partially offset by a reduction of $0.2 million in the commitment fee for the unutilized portion of the facility. A 1.0% change in the interest rate associated with this borrowing would result in a $0.8 million change in annual interest expense.
Note 3. Pro Forma Net Income Per Unit
We use the two-class method when calculating the net income per unit applicable to limited partners, because we have more than one participating security. Our participating securities consist of common units, subordinated units and general partner units. We base our calculation of net income per unit on the weighted-average number of common units outstanding during the period.
Net income attributable to the Partnership is allocated between the limited (both common and subordinated) and general partners in accordance with our partnership agreement. Net income per unit is only calculated for the Partnership after its initial public offering as no units were outstanding prior to November 7, 2012. Distributions less than (greater than) earnings are allocated to the general partner and limited partners based on their respective ownership interests. Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income per unit. The pro forma basic weighted-average number of units outstanding equals the historical weighted average number of units outstanding for each of the periods presented.
Diluted net income per unit includes the effects of potentially dilutive units on our common units, which consist of unvested phantom units. Basic and diluted net income per unit applicable to subordinated limited partners are the same as there are no potentially dilutive subordinated units outstanding.
  
Note 4. Commercial Agreements with Delek
In connection with the closing of this Acquisition, we entered into the Throughput and Tankage Agreement, the Tyler Lease, and the Site Services Agreement. These agreements contain terms under which DLGP and Delek Refining will provide the necessary personnel, equipment, other services and access for operation and maintenance of the Tyler Assets subsequent to the asset transfer date. The Throughput and Tankage Agreement is a long-term, fee-based commercial agreement with Delek Refining, under which we agree to provide services to manage and operate the assets and Delek Refining agrees to pay us fees based on minimum monthly throughput volumes in regards to the terminal and based on fixed amounts in regards to the storage tanks. The fees under these agreements will be indexed for inflation.
Additionally, these agreements include provisions that permit Delek Refining to suspend, reduce or terminate its obligations under the applicable agreements if certain events occur. These events include Delek US deciding to permanently or indefinitely suspend refining operations at the Tyler refinery as well as our being subject to certain force majeure events that would prevent us from performing required services under the applicable agreement.