Sunoco 2013 Annual Report Download - page 67

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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 crude oil, refined products and natural gas liquids ("NGL") pipelines,
terminalling and storage assets, and crude oil, refined products and NGL acquisition and marketing assets. The Partnership
conducts its business activities in more than 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 general partner and limited partner interests
were contributed to ETP, resulting in a change in control of the Partnership's general partner. As a result, the Partnership
became a consolidated subsidiary of ETP and elected to apply "push-down" accounting, which required the Partnership's 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 during those periods. The periods prior to the acquisition date, October 5,
2012, are identified as "Predecessor" and the periods from October 5, 2012 forward are 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 were included within the "Successor" period in the Partnership's 2012
consolidated financial statements.
With the assistance of a third-party valuation firm, management developed models to determine the enterprise value of
the Partnership on October 5, 2012. These models utilized a combination of observable market inputs and management
assumptions, including the application of a discounted cash flow approach to projected operating results, growth estimates and
projected changes in market conditions. The 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 fair values 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 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, the fair values of which were determined by applying a
discounted cash flow approach, which was adjusted for customer attrition assumptions and projected market conditions. The
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 recorded goodwill as the excess of the enterprise value over
the sum of the fair values of the Partnership's assets and liabilities. The following table summarizes the final allocation of the
fair value of partners' capital balances to the assets and liabilities of the Partnership as of the acquisition date. Based on
management's review of the valuation, certain amounts included in the purchase price allocation have been adjusted during
2013 from those amounts reflected in the preliminary purchase price allocation as of October 5, 2012. These adjustments did
not have a material impact on the Partnership's financial position or results of operations.