Sunoco 2011 Annual Report Download - page 108

In the third quarter of 2010, the Partnership exercised its rights to acquire additional ownership interests in
Mid-Valley and WTG, increasing its ownership interests to 91 and 60 percent, respectively. Since the Partnership
obtained a controlling financial interest in both Mid-Valley and WTG, the joint ventures were both reflected as
consolidated subsidiaries of Sunoco from the dates of their respective acquisitions. The Partnership recorded an
$80 million increase in noncontrolling interests upon consolidation of the joint ventures (Note 2).
In May 2011, the Partnership obtained a controlling financial interest in Inland through a series of
transactions involving Sunoco and a third party. As a result, Inland was reflected as a consolidated subsidiary of
Sunoco and, in connection therewith, Sunoco recorded a $20 million increase in noncontrolling interests upon
consolidation of the entity (Note 2).
In July 2011, the Partnership issued 3.94 million deferred distribution units valued at $98 million and paid
$2 million in cash to Sunoco in exchange for the tank farm and related assets located at the Eagle Point refinery.
These units will not participate in Partnership distributions until they convert into common units on the one-year
anniversary of their issuance. The exchange was accounted for as an equity transaction since the Partnership
continues to be a consolidated subsidiary of Sunoco. The transaction resulted in a $12 million decrease in
noncontrolling interests and a $7 million increase in capital in excess of par value, net of income taxes. Upon
completion of this transaction, Sunoco’s interest in the Partnership’s limited partner units increased to the current
32 percent.
The Partnership distributes to its general and limited partners all available cash (generally cash on hand at
the end of each quarter less the amount of cash the general partner determines in its reasonable discretion is
necessary or appropriate to provide for the proper conduct of the Partnership’s business). During the 2009-2011
period, the Partnership increased its quarterly distribution per unit from $.33 to $.42.
The following table describes the Partnership’s target distribution levels and distribution allocations
between the general partner and the holders of the Partnership’s limited partner units under the current incentive
distribution right structure:
Total Quarterly
Distribution Target Amount
Marginal
Percentage Interest
in Distributions
General
Partner Unitholders
Minimum Quarterly Distribution ........... $0.1500 2% 98%
First Target Distribution .................. upto$0.1667 2% 98%
Second Target Distribution ................ above $ 0.1667 up to $ 0.1917 15%* 85%
Third Target Distribution ................. above $ 0.1917 up to $ 0.5275 37%* 63%
Thereafter ............................. above $ 0.5275 50%* 50%
*Includes Sunoco’s 2 percent general partner interest.
During 2011, 2010 and 2009, Sunoco received $98, $91 and $98 million, respectively, from the Partnership
representing 47, 48 and 57 percent, respectively, of the Partnership’s total cash distributions. These amounts
include $50, $46 and $48 million, respectively, in 2011, 2010 and 2009 attributable to Sunoco’s general partner
interest and incentive distribution rights. Sunoco’s share of Partnership distributions is expected to be 47 percent
at the Partnership’s current quarterly cash distribution rate but is expected to increase to approximately 49
percent, assuming the Partnership’s current quarterly cash distribution rate and no additional unit issuances, when
the deferred distribution units convert to common units in the third quarter of 2012.
Sunoco has agreements with the Partnership which establish fees for administrative services provided by
Sunoco and provide indemnifications by Sunoco for certain environmental, toxic tort and other liabilities related
to operation of the Partnership’s assets prior to its initial public offering in February 2002. The Partnership also
participates in Sunoco’s centralized cash management program under which all of the Partnership’s cash receipts
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