Discontinued Operations and Assets Held for Sale

Retail Entities

In August 2016, Delek entered into a Purchase Agreement to sell the Retail Entities to COPEC. As a result of the Purchase Agreement, we met the requirements of ASC 205-20 and ASC 360 to report the results of the Retail Entities as discontinued operations and to classify the Retail Entities as a group of assets held for sale. The fair value assessment of the Retail Entities as of August 27, 2016 did not result in an impairment. We ceased depreciation of these assets as of August 27, 2016. The Retail Transaction closed in November 2016, and we received net cash consideration of $378.9 million, net of debt repayments and transaction costs, and retained approximately $62.8 million of net liabilities from the Retail Entities. The Retail Transaction resulted in a gain on sale of the Retail Entities, before income tax, of $134.1 million in 2016.

Under the terms of the Purchase Agreement, Lion Oil and MAPCO Express entered into a supply agreement at the closing of the Retail Transaction pursuant to which Lion Oil will supply fuel to retail locations owned by MAPCO Express for a period of 18 months following the closing of the Retail Transaction (the "Fuel Supply Agreement"). We recorded net revenues of $410.5 million and $54.3 million and net cash inflows of $411.5 million and $43.5 million for the years ended December 31, 2017 and 2016, respectively, associated with the Fuel Supply Agreement.

Once the Retail Entities were identified as assets held for sale, the operations associated with these properties qualified for reporting as discontinued operations. Accordingly, the operating results, net of tax, from discontinued operations are presented separately in Delek’s consolidated statements of income and the notes to the 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):



	Year Ended
		December 31, 2016			December 31, 2015
Net sales		$	1,216.3		$	1,495.1
Cost of goods sold		(1,041.2		)	(1,293.8		)
Operating expenses		(116.4		)	(136.3		)
General and administrative expenses		(21.8		)	(25.5		)
Depreciation and amortization		(20.4		)	(28.0		)
Other operating income, net		—			0.4
Interest expense		(6.4		)	(6.2		)
Gain on sale of Retail Entities		134.1			—
Income from discontinued operations before taxes		144.2			5.7
Income tax expense		57.9			(0.9		)
Income from discontinued operations, net of tax		$	86.3		$	6.6

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 (AltAir Paramount, LLC), which were acquired as part of the Delek/Alon Merger. As a result of this decision and commitment to a plan, and because it was made within three months of the Delek/Alon Merger, we met the requirements under ASC 205-20 and ASC 360 to report the results of the California Discontinued Entities as discontinued operations and to classify the California Discontinued Entities as a group of assets held for sale as of July 1, 2017. The sale of the California Discontinued Entities is currently anticipated to occur within the next 6-9 months. The property, plant and equipment of the California Discontinued Entities were recorded at fair value as part of the Delek/Alon Merger, and we did not record any depreciation of these assets since the Delek/Alon Merger.

The carrying amount of the major classes of assets and liabilities of the California Discontinued Entities included in assets held for sale and liabilities associated with assets held for sale are as follows (in millions):



	December 31, 2017
Assets held for sale:
Cash and cash equivalents	$	10.1
Accounts receivable	7.9
Inventory	1.9
Other current assets	1.3
Property, plant & equipment, net	130.0
Other intangibles, net	6.6
Other non-current assets	2.2
Assets held for sale	$	160.0
Liabilities associated with assets held for sale:
Accounts payable	$	—
Accrued expenses and other current liabilities	9.5
Deferred tax liabilities	63.9
Other non-current liabilities	32.5
Liabilities associated with assets held for sale	$	105.9

Once the operating assets of the California Discontinued Entities met the criteria to be classified as assets held for sale, the operations associated with these properties qualified for reporting as discontinued operations. Accordingly, the operating results, net of tax, from discontinued operations 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. Classification as discontinued operations requires retrospective reclassification of the associated assets, liabilities and results of operations for all periods presented, beginning (in this case) as of the date of acquisition, which was July 1, 2017. Components of amounts reflected in income from discontinued operations are as follows (in millions):



	Year Ended
	December 31, 2017
Net sales	$	82.4
Cost of goods sold	(68.7		)
Operating expenses	(14.4		)
General and administrative expenses	(6.0		)
Other operating expense, net	(0.2		)
Interest expense	(1.7		)
Interest income	—
Other expense, net	—
Loss from discontinued operations before taxes	(8.6		)
Income tax benefit	(2.7		)
Loss from discontinued operations, net of tax	$	(5.9	)

The net assets of the California Discontinued Entities include a non-controlling interest totaling $10.5 million as of December 31, 2017, and the net loss attributable to the California Discontinued Entities includes a net loss attributable to the non-controlling interest totaling $0.6 million for the for the period July 1, 2017 through December 31, 2017.