Partners' Equity:

Special L.P. Interests In accordance with the Partnership Agreement, certain partners were allocated $5.3 million of 1987 and 1988 taxable income (without any related cash distributions) for which they received Special L.P. Interests. The Special L.P. Interests do not participate in cash distributions and have no voting rights. However, the holders of Special L.P. Interests will receive in the aggregate $5.3 million upon liquidation of the Partnership.

Equity-Based Incentive Plans In August 2000, the Partnership's unitholders approved the establishment of an Equity Incentive Plan allowing the award of up to 4.8 million unit options and other forms of equity as determined by the Compensation Committee of the Board of Directors as an element of compensation to senior management and other key employees. Grants were made by the Compensation Committee through December 31, 2008. Following the adoption of the 2008 Omnibus Incentive Plan (Omnibus Plan), the Board of Directors prohibited any further grants under the Equity Incentive Plan. The Omnibus Plan was approved by the Partnership's unitholders in May of 2008 and superseded and replaced the following incentive compensation plans: our Amended and Restated Senior Management Long-Term Incentive Compensation Plan, our Amended and Restated 2000 Equity Incentive Plan, and our Amended and Restated 2000 Senior Executive Management Incentive Plan. The Omnibus Plan provides an opportunity for officers, directors, and eligible persons to acquire an interest in the growth and performance of our units and provides employees annual and long-term incentive awards as determined by the Board of Directors. Under the Omnibus Plan, the Compensation Committee of the Board of Directors may grant unit options, unit appreciation rights, restricted units, performance awards, other unit awards, cash incentive awards and long-term incentive awards.

Phantom Units

During 2012, 15,000 “phantom units” were awarded at an average grant price of $27.91. These awards generally vest over an approximately four-year period and can be paid with cash, limited partnership units, or a combination of both. The effect for outstanding “phantom units” has been included in the diluted earnings per unit calculation, as a portion of the awards are expected to be settled in limited partnership units. Approximately $3.4 million, $5.4 million and $3.5 million in compensation expense related to “phantom units” was recognized in 2012, 2011 and 2010, respectively. These amounts are included in “Selling, General and Administrative Expense” in the accompanying consolidated statements of operations and comprehensive income.

At year-end, the Partnership had 225,459 “phantom units” outstanding, 147,017 of which were vested, at the December 31, 2012 closing price of $33.45 per unit. The aggregate market value of the “phantom units” vested at year-end has been reflected on the balance sheet with the current portion recorded in "Accrued salaries and wages" and the long-term portion recorded in “Other Liabilities.” At December 31, 2012, the current and long-term portions were $0.5 million and $4.4 million, respectively. At December 31, 2011, the current and long-term portions were $9.7 million and $1.6 million, respectively. At December 31, 2012, unamortized compensation related to unvested phantom unit awards totaled approximately $2.6 million, which is expected to be amortized over a weighted average period of 1.9 years.

Performance Units

During 2012, 46,759 “performance units” were awarded at a grant price of $29.53 per unit. The number of “performance units” issuable is contingently based upon certain performance targets over a three-year period. The current awards vest ratably over the term of the grant. A prior award of performance units vested 50% in March 2012 and will vest 50% in March 2013. Assuming targets are achieved, the "performance units" can be paid with cash, limited partnership units, or a combination of both. The effect for outstanding “performance units” in which the performance conditions have not been met are appropriately excluded from the diluted earnings per unit calculation. Performance units in which the performance conditions have been met are included in diluted earnings per unit. Approximately $3.4 million, $2.6 million and $0.9 million in 2012, 2011 and 2010, respectively, was recorded in compensation expense related to “performance units” and is included in “Selling, General and Administrative Expense” in the accompanying consolidated statements of operations and comprehensive income.

At year-end, the Partnership had 161,619 “performance units” outstanding at the December 31, 2012 closing price of $33.45 per unit. The estimated aggregate market value of the “performance units” contingently issuable at year-end has been reflected on the balance sheet, with the current portion being recorded in "Accrued salaries and wages" and the long-term portion in “Other Liabilities.” At December 31, 2012 the current and long-term portions were $3.8 million and $0.5 million, respectively. At December 31, 2011, the market value of both the current and long-term portions were $2.1 million. At December 31, 2012, unamortized compensation related to unvested “performance unit” awards totaled approximately $1.1 million, which is expected to be amortized over a weighted average period of 2.0 years.

Restricted Units

During 2012, restricted unit grants of 93,517 and 97,394, were awarded at a restricted grant price $29.53 and $35.52, respectively. Restricted units vest ratably over a three-year period and the restrictions on these units lapse at the end of the three-year period. During the time of restriction, the units accumulate distribution-equivalents, which, when the units are fully vested, can be paid out in cash or units. Approximately $1.2 million was recorded in compensation expense related to restricted units and is included in "Selling, General, and Administrative Expense" in the accompanying consolidated statement of operations and comprehensive income. As of December 31, 2012, the amount of distribution equivalents accrued and recorded on the balance sheet in "Other liabilities" was approximately $0.2 million.

The intrinsic value of restricted units that vested in 2012 was approximately $0.1 million.

At December 31, 2012, unamortized compensation expense related to unvested restricted unit awards totaled approximately, $5.0 million, which is expected to be amortized over a weighted average period of 2.5 years.

Unit Options

Options are issued with an exercise price no less than the market price of the Partnership's units on the day before the date of grant. Variable-price options have an exercise price that declines by the value of cash distributions declared on the underlying limited partnership units. Options granted in 2012 vest ratably over a three-year period and have a maximum term of ten years. Options granted in prior years vest ratably over a five-year period, or when other conditions are met, and have a maximum term of ten years. As of December 31, 2012, the Partnership had 600 variable-price options and 293,422 fixed-price options outstanding under the Equity Incentive Plan. There were no unit options granted in 2011 and 2010.

During 2012, 280,672 unit options were granted at a fair value of $4.92. The significant assumptions used to determine the fair value of these options include the stock option exercise price equals the grant price, the options have a maximum term of ten years, the expected volatility is 37.2%, the assumed risk-free interest rate is 2.31% and the units receive an annual distribution of $1.60 per unit.

Non-cash compensation expense relating to unit options in 2012 totaled $0.3 million. No non-cash compensation expense relating to unit options was recognized in 2011 or 2010.

A summary of unit option activity in 2012 and 2011 is presented below:



	2012				2011
			Weighted Average				Weighted Average
	Unit Options		Exercise Price		Unit Options		Exercise Price
Outstanding, beginning of year	224,500		$	24.40	341,500		$	23.10
Granted	280,672		29.53		—		—
Exercised	(206,150	)	24.19		(6,300	)	20.29
Forfeited	(5,000	)	23.81		(110,700	)	20.60
Outstanding, end of year	294,022		$	29.45	224,500		$	24.40
Options exercisable, end of year	83,518		$	29.26	224,500		$	24.40

Cash received from unit option exercises totaled approximately $76,000 in 2012, $5,000 in 2011, and $7,000 in 2010.

The following table summarizes information about vested unit options outstanding at December 31, 2012:



Vested Options Outstanding

Type	Range of Exercise Prices					Unit Options		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
Variable	$	15.07	—	$	15.07	600		0.8 years	$	15.07
Fixed	$	28.45	—	$	29.53	82,918		8.9 years	$	29.36
Outstanding at year-end	$	15.07	—	$	29.53	83,518		8.9 years	$	29.26

Aggregate intrinsic value ($'s in thousands)						$	350

A summary of the status of the Partnership's nonvested unit options at December 31, 2012 is presented below:



	Unit Options		Weighted Average Grant-Date Fair Value
Nonvested, beginning of year	—		$	—
Granted	280,672		29.53
Vested	(70,168	)	29.53
Nonvested, end of year	210,504		$	29.53

The total intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010 was $0.4 million, $0.0 million, and $0.5 million, respectively.

The Partnership had 210,504 unvested unit options at December 31, 2012. In addition, the Partnership had $1.0 million of unamortized compensation expense related to unvested options which is expected to be amortized over a weighted average period of 2.3 years.

The Partnership has a policy of issuing limited partnership units from treasury to satisfy option exercises and expects its treasury unit balance to be sufficient for 2013, based on estimates of option exercises for that period.