Acquisitions

The following summarizes our business combinations made during the year ended March 31, 2017:

Water Solutions Facilities

During the year ended March 31, 2017, we acquired three water solutions facilities and paid $26.9 million of cash. In addition, we have recorded contingent consideration liabilities within accrued expenses and other payables and other noncurrent liabilities in our consolidated balance sheet related to future royalty payments due to the sellers of one of these facilities. We estimated the contingent consideration based on the contracted royalty rate, which is a flat rate per disposal barrel and percentage of oil revenues, multiplied by the expected disposal volumes and oil revenue for the expected useful life of the facility and disposal well. This amount was then discounted to present value using our weighted average cost of capital plus a premium representative of the uncertainty associated with the expected disposal volumes and oil revenue. As of the acquisition date, we recorded a contingent liability of $2.6 million.

We assumed a land lease with a royalty component as part of the acquisition of one of the facilities. The acquisition method of accounting requires that executory contracts with unfavorable terms relative to market conditions at the acquisition date be recorded as liabilities in the acquisition accounting. We recorded a liability to other noncurrent liabilities of $2.8 million related to this lease due to the royalty terms being deemed unfavorable. We will amortize this liability based on the volumes processed by the facility.

During the year ended March 31, 2017, we completed the acquisition accounting for one of these water solutions facilities. The following table summarizes the final calculation of the fair values of the assets acquired and liabilities assumed (in thousands):



Property, plant and equipment	$	4,436
Goodwill	8,188
Current liabilities	(280		)
Other noncurrent liabilities	(2,344		)
Fair value of net assets acquired	$	10,000

We are in the process of identifying and determining the fair values of the assets acquired and liabilities assumed for the other two water solutions facilities, and as a result, the estimates of fair value at March 31, 2017 are subject to change. The following table summarizes the preliminary estimates of the fair values of the assets acquired and liabilities assumed (in thousands):



Property, plant and equipment	$	14,315
Goodwill	1,615
Intangible assets	3,878
Current liabilities	(34		)
Other noncurrent liabilities	(2,878		)
Fair value of net assets acquired	$	16,896

Goodwill represents the excess of the consideration paid for the acquired businesses over the fair value of the individual assets acquired, net of liabilities assumed. Goodwill represents a premium paid to expand the number of our disposal sites in an oilfield production basin currently serviced by us, thereby enhancing our competitive position as a provider of disposal services in this oilfield production basin. We expect that all of the goodwill will be deductible for federal income tax purposes.

The operations of these water solutions facilities have been included in our consolidated statement of operations since their acquisition date. Our consolidated statement of operations for the year ended March 31, 2017 includes revenues of $6.2 million and operating income of $2.7 million that were generated by the operations of these water solutions facilities.

Acquisition of Remaining Interest in Water Solutions Facilities

On September 15, 2016, we acquired the remaining 25% ownership interest in three water solutions facilities and paid $10.0 million of cash. The acquisition of the remaining interest was accounted for as an equity transaction, no gain or loss was recorded and the carrying value of the noncontrolling interest was adjusted to reflect the change in ownership interest of the subsidiary. As of the date of the transaction, the 25% interest had a carrying value of $7.4 million.

Water Pipeline Company

As discussed below, on January 7, 2016, we acquired a 57.125% interest in an existing produced water pipeline company operating in the Delaware Basin portion of West Texas. On June 3, 2016, we acquired an additional 24.5% interest in this water pipeline company as part of the purchase and sale agreement discussed in Note 16. As we control this entity (and continue to retain our controlling financial interest), the acquisition of the additional interest was accounted for as an equity transaction, no gain or loss was recorded and the carrying value of the noncontrolling interest was adjusted to reflect the change in ownership interest of the subsidiary. As of the date of the transaction, the 24.5% interest had a carrying value of $5.2 million.

Grassland

On June 3, 2016, we acquired the remaining 65% ownership interest in Grassland (see Note 2). In exchange for this additional interest, we paid $1.0 million of cash and assumed an outstanding note payable, which relates to money Grassland previously borrowed from us. Prior to the completion of this transaction, we accounted for our previously held 35% ownership interest in Grassland using the equity method of accounting (see Note 2). As we owned a controlling interest in Grassland, we revalued our previously held 35% ownership interest to fair value of $0.8 million and recorded a loss of $14.9 million, which is recorded within revaluation of investments in our consolidated statement of operations. As the amount paid (cash plus the fair value of our previously held ownership interest) was less than the fair value of the assets acquired and liabilities assumed, we recorded a bargain purchase gain of $0.6 million within revaluation of investments in our consolidated statement of operations.

The following table summarizes the fair values of the assets acquired and liabilities assumed (in thousands):



Current assets	$	1,713
Property, plant and equipment	8,874
Intangible assets	14,472
Current liabilities	(2,765		)
Notes payable-affiliate	(19,900		)
Fair value of net assets acquired	$	2,394

On November 29, 2016, we sold Grassland. We received proceeds of $22.0 million and recorded a loss on the sale of $2.3 million within (gain) loss on disposal or impairment of assets, net in our consolidated statement of operations during the year ended March 31, 2017. The operations of Grassland have been included in our consolidated statement of operations for the period from June 3, 2016 to November 29, 2016. Our consolidated statement of operations for the year ended March 31, 2017 includes revenues of $6.1 million and operating income of $5.1 million that were generated by the operations of Grassland.

Retail Propane Businesses

During the year ended March 31, 2017, we acquired four retail propane businesses and paid $80.6 million of cash and issued 218,617 common units, valued at $3.9 million. The agreements for these acquisitions contemplate post-closing payments for certain working capital items.

During the year ended March 31, 2017, we completed the acquisition accounting for one of these retail propane businesses. The following table summarizes the final calculation of the fair values of the assets acquired and liabilities assumed (in thousands):



Current assets	$	153
Property, plant and equipment	933
Goodwill	159
Intangible assets	500
Current liabilities	(59		)
Other noncurrent liabilities	(62		)
Fair value of net assets acquired	$	1,624

We are in the process of identifying and determining the fair values of the assets acquired and liabilities assumed for the other three retail propane businesses, and as a result, the estimates of fair value at March 31, 2017 are subject to change. The following table summarizes the preliminary estimates of the fair values of the assets acquired and liabilities assumed (in thousands):



Current assets	$	2,825
Property, plant and equipment	38,047
Goodwill	2,896
Intangible assets	46,830
Current liabilities	(5,621		)
Other noncurrent liabilities	(2,145		)
Fair value of net assets acquired	$	82,832

Goodwill represents the excess of the consideration paid for the acquired businesses over the fair value of the individual assets acquired, net of liabilities assumed. Goodwill represents a premium paid to acquire the skilled workforce of each of the businesses acquired and the ability to expand into new markets. We expect that all of the goodwill will be deductible for federal income tax purposes.

The operations of these retail propane businesses have been included in our consolidated statement of operations since their acquisition date. Our consolidated statement of operations for the year ended March 31, 2017 includes revenues of $33.9 million and operating income of $4.8 million that were generated by the operations of three of these retail propane businesses. The revenues and operating income of the fourth retail propane business acquisition are not considered material and have been included with existing businesses.

The following summarizes our significant asset acquisitions made during the year ended March 31, 2017:

Natural Gas Liquids Facilities

On January 9, 2017, we acquired a natural gas liquids terminal that supports refined products blending in Port Hudson, Louisiana, and a natural gas liquids and condensate facility in Kingfisher, Oklahoma and paid $50.6 million of cash.

We are in the process of identifying and determining the fair values of the assets acquired and liabilities assumed in this acquisition, and as a result, the estimates of fair value at March 31, 2017 are subject to change. The following table summarizes the preliminary estimates of the fair values of the assets acquired and liabilities assumed (in thousands):



Property, plant and equipment	$	27,725
Land	637
Intangible assets	22,245
Fair value of net assets acquired	$	50,607

The following summarizes certain adjustments made during the year ended March 31, 2017 to the preliminary purchase price allocation of acquisitions made prior to April 1, 2016:

Water Pipeline Company

During the year ended March 31, 2017, we finalized the purchase price accounting for the 57.125% interest acquired in a water pipeline company on January 7, 2016. The following table summarizes adjustments made to the preliminary estimates as well as the final amounts of the fair values of the assets acquired and liabilities assumed (in thousands):



	Final At March 31, 2017			Estimated At March 31, 2016			Change
Property, plant and equipment (1)	$	11,066		$	12,208		$	(1,142	)
Goodwill (2)	$	5,866		$	5,561		$	305
Intangible assets (1)	$	7,492		$	6,350		$	1,142
Current liabilities (3)	$	(1,152	)	$	(1,000	)	$	(152	)
Other noncurrent liabilities (2)(3)	$	(2,753	)	$	(2,600	)	$	(153	)


(1)	During the year ended March 31, 2017, we recorded an adjustment to reclassify property, plant and equipment to intangible assets, in order to present the fair value of the acquired rights-of-way as a finite-lived asset, which is consistent with our historical accounting policies.


(2)	During the year ended March 31, 2017, we recorded an adjustment to other noncurrent liabilities and goodwill to recognize an asset retirement obligation.


(3)	During the year ended March 31, 2017, we recorded an adjustment to reclassify other noncurrent liabilities to current liabilities for the current portion of a contingent consideration liability.

In addition, we paid $1.0 million in cash to the seller during the year ended March 31, 2017 for consideration that was held back at the acquisition date, which we recorded as a liability within accrued expenses and other payables in our consolidated balance sheet. There were no other adjustments to the fair value of assets acquired and liabilities assumed during the year ended March 31, 2017.

Delaware Basin Water Solutions Facilities

During the year ended March 31, 2017, we finalized the purchase price accounting for the four saltwater disposal facilities and a 50% interest in an additional saltwater disposal facility in the Delaware Basin of the Permian Basin in Texas we acquired on August 24, 2015. There were no adjustments to the fair value of assets acquired and liabilities assumed during the year ended March 31, 2017.

Water Solutions Facilities

During the year ended March 31, 2017, we finalized the purchase price accounting for ten water facilities acquired under the development agreement during the year ended March 31, 2016. During the year ended March 31, 2017, we received additional information and recorded an adjustment of $1.4 million to property, plant and equipment and goodwill to recognize the fair value of additional assets that we acquired. In addition, we paid $1.0 million in cash to the seller during the year ended March 31, 2017 for consideration that was held back at the acquisition date, which we recorded as a liability within accrued expenses and other payables in our consolidated balance sheet. There were no other adjustments to the fair value of assets acquired and liabilities assumed during the year ended March 31, 2017.

Retail Propane Businesses

During the year ended March 31, 2017, we finalized the purchase price accounting for six retail propane businesses we acquired during the year ended March 31, 2016. During the year ended March 31, 2017, we received additional information and recorded an adjustment of $0.1 million to working capital, property, plant and equipment and goodwill to recognize the fair value of additional assets that we acquired. In addition, we paid $1.1 million in cash to the sellers during the year ended March 31, 2017 for consideration that was held back at the acquisition date, which we recorded as a liability within accrued expenses and other payables in our consolidated balance sheet.