Sunoco 2012 Annual Report Download - page 75

SUNOCO LOGISTICS PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
Sunoco Logistics Partners L.P. (the “Partnership” or “SXL”) is a publicly traded Delaware limited
partnership that owns and operates a logistics business, consisting of refined products and crude oil pipelines,
terminalling and storage assets, and refined products and crude oil acquisition and marketing assets. The
Partnership is principally engaged in these activities in approximately 30 states located throughout the United
States.
On October 5, 2012, Sunoco, Inc. (“Sunoco”) was acquired by Energy Transfer Partners, L.P. (“ETP”).
Prior to this transaction, Sunoco (through its wholly-owned subsidiary Sunoco Partners LLC) served as the
Partnership’s general partner and owned a two percent general partner interest, all of the Partnership’s incentive
distribution rights and a 32.4 percent limited partner interest in the Partnership. In connection with the
acquisition, Sunoco’s interests in the general partner and limited partnership were contributed to ETP, resulting
in a change of control of the Partnership’s general partner. As a result of these transactions, the Partnership
became a consolidated subsidiary of ETP and elected to apply “push-down” accounting which required its assets
and liabilities to be adjusted to fair value on the closing date, October 5, 2012. The effective date of the
acquisition for accounting and reporting purposes was deemed to be October 1, 2012. Due to the application of
push-down accounting, the Partnership’s consolidated financial statements and certain footnote disclosures are
presented in two distinct periods to indicate the application of two different bases of accounting between the
periods presented. The periods prior to the acquisition date, October 5, 2012, are identified as “Predecessor” and
the period from October 5, 2012 forward is identified as “Successor.” The Partnership performed an analysis and
determined that the activity from October 1, 2012 through October 4, 2012 was not material in relation to the
Partnership’s financial position, results of operations or cash flows. Therefore, operating results between
October 1, 2012 and October 4, 2012 have been included within the “Successor” period.
The Partnership, along with the assistance of a third-party valuation firm, developed models to estimate the
enterprise value of the Partnership on October 5, 2012. These models utilized a combination of observable
market inputs and management assumptions, including application of a discounted cash flow approach to
projected operating results, growth estimates and projected changes in market conditions. The estimated fair
value of the partners’ capital balances as of October 5, 2012 was as follows:
(in millions)
Fair value of Limited Partners’ interests ............... $5,118
Fair value of General Partner’s interest ................ 893
Fair value of Noncontrolling interests ................. 123
$6,134
The Partnership then determined the estimated fair value of its assets and liabilities. The fair values of the
Partnership’s current assets and current liabilities (with the exception of inventory) were assumed to approximate
their carrying values. The estimated fair values of the Partnership’s long-lived tangible assets and inventory were
determined utilizing observable market inputs where available or estimated replacement cost adjusted for a usage
or obsolescence factor. The Partnership’s identifiable intangible assets consist of customer relationships and
technology patents and were estimated by applying a discounted cash flow approach which was adjusted for
customer attrition assumptions and projected market conditions. The estimated fair values of the Partnership’s
long-term liabilities were determined utilizing observable market inputs where available or estimated based on
their current carrying values. The Partnership has recorded goodwill as the excess of the estimated enterprise
value over the sum of the fair value amounts allocated to the Partnership’s assets and liabilities. The following
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