Note 4—Acquisitions

Mid Pac Acquisition

On April 1, 2015, we completed the acquisition of Par Hawaii Inc. ("PHI," formerly Koko’oha Investments, Inc.), a Hawaii corporation that owns 100% of the outstanding membership interests of Mid Pac Petroleum, LLC (“Mid Pac”). Net cash consideration was $74.4 million, including the working capital settlement of $1 million paid in September 2015. The cash consideration includes advance deposits of $15 million, of which $10 million was paid in 2014, prior to closing. In connection with the acquisition, Mid Pac's pre-existing debt was fully repaid on the closing date for $45.3 million. The acquisition and debt repayment were funded with cash on hand and $55 million of borrowings under the Credit Agreement with the Bank of Hawaii ("Mid Pac Credit Agreement"). Please read Note 11—Debt for further discussion.

We accounted for the acquisition of Mid Pac as a business combination whereby the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. Goodwill recognized in the transaction was attributable to opportunities expected to arise from combining our operations with Mid Pac's and utilization of our net operating loss carryforwards, as well as other intangible assets that do not qualify for separate recognition. In addition, we recorded certain other identifiable intangible assets including trade names and customer relationships. These intangible assets will be amortized over their estimated useful lives on a straight-line basis, which approximates their consumptive life. Please read Note 9—Goodwill and Intangible Assets for further discussion. None of the goodwill or intangible assets are expected to be deductible for income tax reporting purposes.

A summary of the preliminary estimated fair value of the assets acquired and liabilities assumed is as follows (in thousands):



Cash	$	10,007
Accounts receivable	9,905
Inventories	5,375
Prepaid and other current assets	1,444
Property, plant and equipment	40,997
Land	34,800
Goodwill ⁽¹⁾	27,531
Intangible assets	33,647
Other non-current assets	1,228
Accounts payable and other current liabilities	(11,331		)
Deferred tax liability	(16,759		)
Other non-current liabilities	(7,235		)
Total	$	129,609

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⁽¹⁾ We allocated $13.8 million, $2.8 million and $11.0 million of goodwill to our refining, retail and logistics reporting units, respectively.

We have recorded a preliminary estimate of the fair value of the assets acquired and liabilities assumed and expect to finalize the purchase price allocation during 2016. The primary areas of the purchase price allocation that are not yet finalized relate to income taxes and contingent liabilities. We incurred $0.8 million and $6.4 million of acquisition costs related to the Mid Pac acquisition for the years ended December 31, 2015 and 2014. These costs are included in acquisition and integration costs on our consolidated statement of operations.

The results of operations of Mid Pac were included in our refining, retail and logistics segments results beginning April 1, 2015. For the year ended December 31, 2015, our results of operations included Mid Pac's revenues of $147.6 million and net income of $10.6 million, respectively. The following unaudited pro forma financial information presents our consolidated revenues and net income (loss) as if the Mid Pac acquisition had been completed on January 1, 2014 (in thousands):



	Year Ended December 31,
		2015			2014
Revenues		$	2,093,587		$	3,361,739
Net loss		(54,941		)	(28,501		)

Par Hawaii Refining Acquisition

On September 25, 2013, we completed the acquisition of Tesoro Hawaii which owned and operated a petroleum refinery in Kapolei, Hawaii, certain pipeline assets, floating pipeline mooring equipment, refined products terminals and retail assets selling fuel products and merchandise on the islands of Oahu, Maui and Hawaii. Following the acquisition, Tesoro Hawaii was renamed Hawaii Independent Energy, LLC (“HIE”). Effective December 28, 2015, HIE was renamed Par Hawaii Refining, LLC ("PHR"). The purchase price was $75 million plus net working capital and inventories at closing plus certain contingent earnout payments of up to $40 million. As a part of the purchase price, we also funded approximately $24.3 million of start-up expenses and for a major overhaul of a co-generation turbine used at the refinery prior to closing. The purchase price was paid with a portion of the net proceeds from the private placement common stock sale (please read Note 15—Stockholders' Equity), amounts received pursuant to the Supply and Exchange Agreements (please read Note 10—Inventory Financing Agreements) and the ABL Facility (please read Note 11—Debt).

The contingent earnout payments, if any, are to be paid annually following each of the three calendar years beginning January 1, 2014 through the year ending December 31, 2016, in an amount equal to 20% of the consolidated annual gross margin of PHR in excess of $165 million during such calendar years, with an annual cap of $20 million. In the event that the refinery ceases operations or we dispose of any facility used in the acquired business, our obligation to make earnout payments could be modified and/or accelerated. As of December 31, 2015, no amounts have been paid related to the contingent earnout and our estimated contingent consideration liability was $27.6 million. In January 2016, we paid $1.0 million related the year ended December 31, 2014.

We accounted for the acquisition of PHR as a business combination whereby the purchase price was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. Goodwill recognized in the transaction was attributable to opportunities expected to arise from combining our operations with PHR’s and utilization of our net operating loss carryforwards, as well as other intangible assets that do not qualify for separate recognition. In addition, we recorded certain other identifiable intangible assets including trade names and trademarks. These intangible assets will be amortized over their estimated useful lives on a straight-line basis, which approximates their consumptive life.

During 2014, we finalized the acquisition purchase price allocation. The primary purchase price allocation adjustments related to the finalization of the post-retirement medical plan, working capital settlements and allocating value to underground storage tanks installed by Tesoro Corporation in conjunction with the Environmental Agreement. Please read Note 16—Benefit Plans and Note 14—Commitments and Contingencies for additional information. We believe these adjustments did not have a material impact on prior periods.

A summary of the final estimated fair value of the assets acquired and liabilities assumed is as follows (in thousands):



Inventory	$	418,750
Trade accounts receivable	59,553
Prepaid and other current assets	2,497
Property, plant and equipment	59,670
Land	39,800
Goodwill	13,796
Intangible assets	4,596
Accounts payable and other current liabilities	(18,542		)
Contingent consideration liability	(11,980		)
Other non-current liabilities	(7,561		)
Total	$	560,579

The acquisition was partially funded from proceeds totaling approximately $378.2 million from the Supply and Exchange Agreements. Please read Note 10—Inventory Financing Agreements for further information. None of the goodwill or intangible assets are expected to be deductible for income tax reporting purposes. Acquisition costs of approximately $7 million are included in Acquisition and integration expense on our consolidated statement of operations for the year ended December 31, 2013.

The unaudited pro forma financial information for the year ended December 31, 2013 presented below assumes that the acquisition occurred as of January 1, 2013 (in thousands):



Revenues	$	2,986,800
Net income	(122,000		)

Revenue and earnings for PHR subsequent to the acquisition are included in the refining, retail and logistics segments in Note 19—Segment Information.