|ENTERPRISE PRODUCTS PARTNERS L P filed this Form 10-K on 02/28/2018|
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Completion of Oiltanking Acquisition. In accordance with the merger agreement and Oiltanking’s partnership agreement, the merger was submitted to a vote of Oiltanking’s common unitholders, with the required majority of unitholders (including our ownership interests) voting to approve the merger on February 13, 2015. Upon approval of the merger, a total of 36,827,517 of our common units were issued to Oiltanking’s former public unitholders.
Step 2 of the acquisition was accounted for in accordance with ASC Topic 810, Consolidations – Overall – Changes in Parent’s Ownership Interest in a Subsidiary. Since we had a controlling financial interest in Oiltanking before and after completion of Step 2, the increase in our ownership interest in Oiltanking was accounted for as an equity transaction with no gain or loss recognized. Step 2 represented our acquisition of the noncontrolling interests in Oiltanking; therefore, approximately $1.4 billion of noncontrolling interests attributable to Oiltanking was reclassified to limited partners’ equity to reflect the February 2015 issuance of 36,827,517 new common units.
Registration Rights Agreement. In order to fund the equity consideration paid in Step 1 of the Oiltanking acquisition (see Note 12), we issued 54,807,352 common units to OTA on October 1, 2014 in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, and we granted OTA registration rights with respect to these common units under a Registration Rights Agreement between us and OTA (the “Registration Rights Agreement”). The Registration Rights Agreement provides that, subject to the terms and conditions set forth therein, at any time after the earlier of (i) 90 days after October 1, 2014 and (ii) the execution of definitive agreements to acquire (through merger or otherwise) all or substantially all of the Oiltanking common units not owned by Enterprise or its affiliates, OTA may request that we prepare and file a registration statement to permit and otherwise facilitate the public resale of all or a portion of the 54,807,352 Enterprise common units that OTA owns. Our obligation to OTA to effect such transactions is limited to five registration statements and underwritten offerings.
Common units issued in connection with employee compensation. In February 2017, the dollar value of discretionary employee bonus payments with respect to the year ended December 31, 2016 (less any retirement plan deductions and withholding taxes) was remitted through the issuance of an equivalent value of newly issued Enterprise common units under EPCO’s 2008 Enterprise Products Long-Term Incentive Plan (Third Amendment and Restatement) (“2008 Plan”). We issued 1,176,103 common units, which had a value of $33.7 million, in connection with the employee bonus payments. The compensation expense associated with this issuance of common units was recognized during the year ended December 31, 2016. See Note 13 for additional information regarding the 2008 Plan.
Treasury Units. In December 1998, we announced a common unit repurchase program whereby we, together with certain affiliates, intended to repurchase up to 4,000,000 of our common units. A total of 2,763,200 common units were repurchased under this program; however, no repurchases have been made since 2002. As of December 31, 2017, we and our affiliates could repurchase up to 1,236,800 additional common units under this program.
A total of 681,044 restricted common unit awards granted to employees of EPCO vested and converted to common units during the year ended December 31, 2017. Of this amount, 229,910 were sold back to us by employees to cover related withholding tax requirements. In addition, 797,888 units were sold back to us by employees to cover withholding tax requirements related to the vesting of phantom unit awards. The total cost of these treasury unit purchases was approximately $29.5 million. We cancelled such treasury units immediately upon acquisition. See Note 13 for additional information regarding our equity-based awards.