Energy Transfer 2012 Annual Report Download - page 169

F - 24
If we designate a derivative financial instrument as a cash flow hedge and it qualifies for hedge accounting, the change in the
fair value is deferred in accumulated other comprehensive income (“AOCI”) until the underlying hedged transaction occurs.
Any ineffective portion of a cash flow hedge’s change in fair value is recognized each period in earnings. Gains and losses
deferred in AOCI related to cash flow hedges remain in AOCI until the underlying physical transaction occurs, unless it is
probable that the forecasted transaction will not occur by the end of the originally specified time period or within an additional
two-month period of time thereafter. For financial derivative instruments that do not qualify for hedge accounting, the change
in fair value is recorded in cost of products sold in the consolidated statements of operations.
We manage a portion of our interest rate exposures by utilizing interest rate swaps and similar instruments. Certain of our
interest rate derivatives are accounted for as either cash flow hedges or fair value hedges. For interest rate derivatives accounted
for as either cash flow or fair value hedges, we report realized gains and losses and ineffectiveness portions of those hedges
in interest expense. For interest rate derivatives not designated as hedges for accounting purposes, we report realized and
unrealized gains and losses on those derivatives in “Gains (losses) on non-hedged interest rate derivatives” in the consolidated
statements of operations. See Note 11 for additional information related to interest rate derivatives.
Pensions and Other Postretirement Benefit Plans
Employers are required to recognize in their balance sheets the overfunded or underfunded status of defined benefit pension
and other postretirement plans, measured as the difference between the fair value of the plan assets and the benefit obligation
(the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for other
postretirement plans). Each overfunded plan is recognized as an asset and each underfunded plan is recognized as a
liability. Employers must recognize the change in the funded status of the plan in the year in which the change occurs through
AOCI in equity.
See Note 12 for additional related information.
Allocation of Income
For purposes of maintaining partner capital accounts, the Partnership Agreement specifies that items of income and loss shall
generally be allocated among the partners in accordance with their percentage interests (see Note 6). Our net income for
partners’ capital and statement of operations presentation purposes is allocated to the General Partner and Limited Partners
in accordance with their respective partnership percentages, after giving effect to priority income allocations for incentive
distributions, if any, to our General Partner, the holder of the incentive distribution rights (“IDRs”) pursuant to our Partnership
Agreement, which are declared and paid following the close of each quarter. Earnings in excess of distributions are allocated
to the General Partner and Limited Partners based on their respective ownership interests.
3. ACQUISITIONS AND RELATED TRANSACTIONS:
2012 Transactions
Southern Union Merger
On March 26, 2012, ETE completed its acquisition of Southern Union. Southern Union is the surviving entity in the merger
and operates as a wholly-owned subsidiary of ETE. See below for discussion of Holdco Transaction and ETE's contribution
of Southern Union to Holdco.
Under the terms of the merger agreement, Southern Union stockholders received a total of 56,982,160 ETE Common Units
and a total of approximately $3.01 billion in cash. Effective with the closing of the transaction, Southern Union's common
stock was no longer publicly traded.
Citrus Acquisition
In connection with the Southern Union Merger on March 26, 2012, we completed our acquisition of CrossCountry, a subsidiary
of Southern Union which owned an indirect 50% interest in Citrus, the owner of FGT. The total merger consideration was
approximately $2.0 billion, consisting of approximately $1.9 billion in cash and approximately 2.25 million ETP Common
Units. See Note 4 for more information regarding our equity method investment in Citrus.
Sunoco Merger
On October 5, 2012, ETP completed its merger with Sunoco. Under the terms of the merger agreement, Sunoco shareholders
received 55 million ETP Common Units and a total of approximately $2.6 billion in cash.
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