Energy Transfer Equity, L.P. (NYSE:ETE)
today reported Distributable Cash Flow and net income attributable
to partners for the quarter ended June 30, 2011, both of which were
impacted by acquisition-related costs incurred by ETE in connection
with its proposed merger with Southern Union Company (NYSE:SUG).
Distributable Cash Flow before acquisition-related expenses was
$124.6 million for the three months ended June 30, 2011, as
compared to $126.2 million for the three months ended June 30,
2010. ETE’s net income attributable to partners was $66.3 million
for the three months ended June 30, 2011 as compared to $19.3
million for the three months ended June 30, 2010.
In June 2011, ETE entered into a plan of merger, whereby
Southern Union Company would become a wholly owned subsidiary of
ETE, and, in July 2011, ETE entered into an amended and restated
plan of merger which modified many of the terms of the original
agreement. ETE incurred $9.0 million of general and administrative
costs for the three months ended June 30, 2011 associated with this
transaction. For the three months ended June 30, 2010, ETE incurred
$12.8 million of general and administrative costs associated with
its acquisition of a controlling interest in Regency Energy
Partners LP (Nasdaq:RGNC).
For the quarter ended June 30, 2011, ETE significantly raised
its cash distribution on its outstanding limited partner interests
to $0.625 per limited partner unit ($2.50 annualized), an increase
of approximately 11.6%. The cash distribution for the quarter ended
June 30, 2011 will be paid on August 19, 2011 to Unitholders of
record as of the close of business on August 5, 2011.
Distributable Cash Flow before acquisition-related expenses for
the six months ended June 30, 2011 was $249.7 million, as compared
to $254.5 million for the six months ended June 30, 2010. ETE’s net
income attributable to partners was $154.9 million for the six
months ended June 30, 2011, an increase of $22.9 million over the
six months ended June 30, 2010.
The Partnership’s principal sources of cash flow are
distributions it receives from its investments in the limited and
general partner interests in Energy Transfer Partners, L.P. (“ETP”)
and Regency Energy Partners LP (“Regency”), including 100% of ETP’s
and Regency’s incentive distribution rights, approximately 50.2
million of ETP’s common units and approximately 26.3 million of
Regency’s common units. ETE currently has no operating activities
apart from those conducted by ETP and Regency and their operating
subsidiaries. ETE’s principal uses of cash are for general and
administrative expenses, debt service requirements, distributions
to its general partners, limited partners and holders of the Series
A Convertible Preferred Units, and capital contributions to ETP and
Regency in respect of ETE’s general partner interests in ETP and
Regency at ETE’s election.
The Partnership has scheduled a conference call for 8:30 a.m.
Central Time, Thursday, August 4, 2011 to discuss its second
quarter 2011 results. The conference call will be broadcast live
via an internet web cast, which can be accessed through
www.energytransfer.com and will also be available for replay on the
Partnership’s website for a limited time.
Use of Non-GAAP Financial
Measures
This press release and accompanying schedules include the
non-generally accepted accounting principle (“non-GAAP”) financial
measure of Distributable Cash Flow. The accompanying schedules
provide a reconciliation of this non-GAAP financial measure to its
most directly comparable financial measure calculated and presented
in accordance with GAAP. The Partnership’s Distributable Cash Flow
should not be considered as an alternative to GAAP financial
measures such as net income, cash flow from operating activities or
any other GAAP measure of liquidity or financial performance.
Distributable Cash Flow. The
Partnership defines Distributable Cash Flow for a period as cash
distributions expected to be received from ETP and Regency in
respect of such period in connection with the Partnership’s
investments in limited and general partner interests of ETP and
Regency, net of the Partnership’s cash expenditures for general and
administrative costs and interest expense. Distributable Cash Flow
is a significant liquidity measure used by the Partnership’s senior
management to compare net cash flows generated by the Partnership’s
equity investments in ETP and Regency to the distributions the
Partnership expects to pay its unitholders. Using this measure, the
Partnership’s management can compute the coverage ratio of
estimated cash flows for a period to planned cash distributions for
such period.
Distributable Cash Flow is also an important non-GAAP financial
measure for our limited partners since it indicates to investors
whether the Partnership’s investments are generating cash flows at
a level that can sustain or support an increase in quarterly cash
distribution levels. Financial measures such as Distributable Cash
Flow are quantitative standards used by the investment community
with respect to publicly traded partnerships because the value of a
partnership unit is in part measured by its yield (which in turn is
based on the amount of cash distributions a partnership can pay to
a unitholder). The GAAP measure most directly comparable to
Distributable Cash Flow is net income for ETE on a stand-alone
basis (“Parent Company”). The accompanying analysis of
Distributable Cash Flow is presented for the three and six months
ended June 30, 2011 and 2010 for comparative purposes.
Distributable Cash Flow (before
acquisition-related expenses). The Partnership defines
Distributable Cash Flow (before acquisition-related expenses) for a
period as cash distributions expected to be received from ETP and
Regency in respect of such period in connection with the
Partnership's investments in limited and general partner interests
of ETP and Regency, net of the Partnership's cash expenditures for
general and administrative costs and interest expense and net of
realized losses on termination of interest rate swaps. Due to the
cash expenses that were incurred during the three months ended June
30, 2011 and 2010 in connection with the Partnership’s merger and
acquisition activities, Distributable Cash Flow (before
acquisition-related expenses) for the three months and six months
ended June 30, 2011 and 2010 is a significant liquidity measure
used by the Partnership's senior management to compare net cash
flows generated by the Partnership's equity investments in ETP and
Regency to the distributions the Partnership expects to pay its
unitholders. Using this measure, the Partnership's management can
compute the coverage ratio of estimated cash flows for a period to
planned cash distributions for such period. The GAAP measure most
directly comparable to Distributable Cash Flow (before
acquisition-related expenses) is net income (loss) for the Parent
Company on a stand-alone basis. The accompanying analysis of
Distributable Cash Flow (before acquisition-related expenses) is
presented for the three and six months ended June 30, 2011 and 2010
for comparative purposes.
Energy Transfer Equity, L.P. (NYSE:ETE) is a
publicly traded partnership, which owns the general partner and 100
percent of the incentive distribution rights (IDRs) of Energy
Transfer Partners and approximately 50.2 million ETP limited
partner units; and owns the general partner and 100 percent of the
IDRs of Regency Energy Partners and approximately 26.3 million
Regency limited partner units. For more information, visit the
Energy Transfer Equity, L.P. web site at www.energytransfer.com.
Energy Transfer Partners, L.P. (NYSE:ETP) is a
publicly traded partnership owning and operating a diversified
portfolio of energy assets. ETP currently has natural gas
operations that include more than 17,500 miles of gathering and
transportation pipelines, treating and processing assets, and three
storage facilities located in Texas. ETP also holds a 70% interest
in Lone Star NGL LLC (“Lone Star”), a joint venture that owns and
operates NGL storage, fractionation and transportation assets in
Texas, Louisiana and Mississippi. ETP is also one of the three
largest retail marketers of propane in the United States, serving
more than one million customers across the country. For more
information, visit the Energy Transfer Partners, L.P. web site at
www.energytransfer.com.
Regency Energy Partners LP (Nasdaq: RGNC) is a growth-oriented,
midstream energy partnership engaged in the gathering, contract
compression, processing, marketing and transporting of natural gas
and natural gas liquids. Regency also owns the remaining 30%
interest in Lone Star. Regency’s general partner is owned by ETE.
For more information, visit the Regency Energy Partners LP Web site
at www.regencyenergy.com.
ENERGY TRANSFER EQUITY, L.P. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in thousands)
(unaudited)
June 30, December 31, 2011 2010
ASSETS
CURRENT ASSETS $ 1,398,971 $ 1,291,010 PROPERTY,
PLANT AND EQUIPMENT, net 13,774,472 11,852,732 ADVANCES TO
AND INVESTMENTS IN AFFILIATES 1,350,627 1,359,979 LONG-TERM PRICE
RISK MANAGEMENT ASSETS 7,468 13,971 GOODWILL 2,008,896 1,600,611
INTANGIBLES AND OTHER ASSETS, net 1,325,724
1,260,427 Total assets $ 19,866,158 $ 17,378,730
LIABILITIES AND
EQUITY
CURRENT LIABILITIES $ 1,259,420 $ 1,081,075 LONG-TERM
DEBT, less current maturities 11,123,820 9,346,067 SERIES A
CONVERTIBLE PREFERRED UNITS 334,170 317,600 LONG-TERM PRICE RISK
MANAGEMENT LIABILITIES 60,934 79,465 OTHER NON-CURRENT LIABILITIES
252,892 235,848 COMMITMENTS AND CONTINGENCIES
PREFERRED UNITS OF SUBSIDIARY 71,040 70,943 EQUITY: Total
partners’ capital (deficit) (23,541 ) 120,668 Noncontrolling
interest 6,787,423 6,127,064 Total equity
6,763,882 6,247,732 Total liabilities and
equity $ 19,866,158 $ 17,378,730
ENERGY TRANSFER
EQUITY, L.P. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit
data)
(unaudited)
Three Months Ended June 30, Six
Months Ended June 30, 2011 2010
2011 2010 REVENUES: Natural gas
operations $ 1,728,951 $ 1,140,768 $ 3,157,908 $ 2,447,477 Retail
propane 220,296 197,147 748,762 730,586 Other 25,659
24,613 57,356 56,446
Total revenues 1,974,906 1,362,528
3,964,026 3,234,509 COSTS AND
EXPENSES: Cost of products sold ─ natural gas operations 1,122,857
723,835 2,006,626 1,636,441 Cost of products sold ─ retail propane
134,728 110,282 445,592 415,263 Cost of products sold ─ other 6,567
6,336 13,360 13,614 Operating expenses 222,717 179,745 443,413
350,493 Depreciation and amortization 148,530 98,035 287,786
184,366 Selling, general and administrative 78,946
65,038 142,445 116,147
Total costs and expenses 1,714,345 1,183,271
3,339,222 2,716,324
OPERATING INCOME 260,561 179,257 624,804 518,185 OTHER
INCOME (EXPENSE): Interest expense, net of interest capitalized
(181,517 ) (129,036 ) (349,446 ) (250,707 ) Equity in earnings of
affiliates 28,819 12,193 54,260 18,374 (Losses) gains on disposal
of assets (681 ) 1,375 (2,435 ) (489 ) Gains (losses) on non-hedged
interest rate derivatives 1,883 (22,468 ) 3,403 (36,892 )
Impairment of investment in affiliate — (52,620 ) — (52,620 )
Other, net 2,811 (5,213 ) (9,715 )
(3,070 ) INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAX EXPENSE 111,876 (16,512 ) 320,871 192,781 Income
tax expense 5,224 4,053 15,127
9,264 INCOME (LOSS) FROM CONTINUING
OPERATIONS 106,652 (20,565 ) 305,744 183,517 Income from
discontinued operations — 86 —
86 NET INCOME (LOSS) 106,652 (20,479 )
305,744 183,603 LESS: NET INCOME (LOSS) ATTRIBUTABLE TO
NONCONTROLLING INTEREST 40,367 (39,747 )
150,819 51,558 NET INCOME
ATTRIBUTABLE TO PARTNERS 66,285 19,268 154,925 132,045
GENERAL PARTNER’S INTEREST IN NET INCOME 205
60 479 409 LIMITED
PARTNERS’ INTEREST IN NET INCOME $ 66,080 $ 19,208 $
154,446 $ 131,636 BASIC NET INCOME PER LIMITED
PARTNER UNIT $ 0.30 $ 0.09 $ 0.69 $ 0.59
BASIC AVERAGE NUMBER OF UNITS OUTSTANDING
222,972,708 222,941,172 222,963,741
222,941,140 DILUTED NET INCOME PER
LIMITED PARTNER UNIT $ 0.30 $ 0.09 $ 0.69 $
0.59 DILUTED AVERAGE NUMBER OF UNITS OUTSTANDING
222,972,708 222,941,172
222,963,741 222,941,140
ENERGY TRANSFER
EQUITY, L.P.
DISTRIBUTABLE
CASH FLOW
(Dollars in thousands)
(unaudited)
The following table presents the
calculation and reconciliation of Distributable Cash Flow of Energy
Transfer Equity, L.P.
Three Months Ended Six Months
Ended June 30, June 30, 2011 2010
2011 2010
Distributable Cash Flow: Cash distributions from Energy
Transfer Partners, L.P. (“ETP”) associated with: (1) General
partner interest: Standard distribution rights $ 4,896 $ 4,874 $
9,792 $ 9,754 Incentive distribution rights 103,358 89,834 206,540
184,751 Limited partner interest 44,890 44,890
89,780 100,750 Total cash
distributions from ETP 153,144 139,598 306,112 295,255 Cash
distributions from Regency Energy Partners LP (“Regency”)
associated with: (2) General partner interest: Standard
distribution rights 1,287 1,105 2,556 1,105 Incentive distribution
rights 1,338 915 2,452 915 Limited partner interest 11,820
11,689 23,509 11,689
Total cash distributions from Regency 14,445
13,709 28,517 13,709
Total cash distributions from Subsidiaries 167,589 153,307
334,629 308,964 Net pro rata cash settlement related to
Regency Transactions (3) — 3,015
— 3,015 Total cash distributions
expected from ETP and Regency including net pro rata settlement
167,589 156,322 334,629 311,979 Deduct expenses of the
Parent Company on a stand-alone basis: Selling, general and
administrative expenses, excluding non-cash compensation expense
(11,950 ) (14,917 ) (13,705 ) (17,161 ) Interest expense, net of
amortization of financing costs, interest income, and realized
gains and losses on interest rate swaps (4) (40,119 )
(28,007 ) (80,238 ) (53,160 ) Distributable Cash Flow
115,520 113,398 240,686 241,658 Acquisition-related expenses
included in selling, general and administrative expenses
9,039 12,830 9,039 12,830
Distributable Cash Flow, before acquisition-related expenses
$ 124,559 $ 126,228 $ 249,725 $ 254,488
Cash distributions to be paid to the partners of ETE: (5)
Distributions to be paid to limited partners $ 139,358 $ 120,388 $
264,206 $ 240,776 Distributions to be paid to general partner
433 374 821 748
Total cash distributions to be paid to the partners of ETE $
139,791 $ 120,762 $ 265,027 $ 241,524
Reconciliation of Non-GAAP “Distributable Cash Flow” and
“Distributable Cash Flow, before acquisition-related expenses” to
GAAP “Net income” for the Parent Company on a stand-alone basis:
Net income for the Parent Company on a stand-alone basis $ 66,285 $
19,268 $ 154,925 $ 132,045 Adjustments to derive Distributable Cash
Flow: Equity in income of unconsolidated affiliates (120,626 )
(75,362 ) (267,268 ) (221,740 ) Cash distributions from
Subsidiaries 167,589 153,307 334,629 308,964 Net pro rata cash
settlement related to Regency Transactions (3) — 3,015 — 3,015
Amortization included in interest expense 466 1,455 1,280 2,153
Fair value adjustment of ETE Preferred Units 1,530 — 16,570 — Other
non-cash 276 228 550 457 Unrealized losses on non-hedged interest
rate swaps — 11,487 —
16,764 Distributable Cash Flow 115,520 113,398
240,686 241,658 Acquisition-related expenses included in selling,
general and administrative expenses 9,039
12,830 9,039 12,830
Distributable Cash Flow, before acquisition-related expenses $
124,559 $ 126,228 $ 249,725 $ 254,488
(1) For the three months ended June 30, 2011, cash distributions
expected to be received from ETP consist of cash distributions in
respect of the quarter ended June 30, 2011 payable on August 15,
2011 to holders of record on the close of business August 5, 2011.
For the three months ended June 30, 2010, cash distributions
received from ETP consist of cash distributions paid on August 16,
2010 in respect of the quarter ended June 30, 2010.
For the six months ended June 30, 2011, cash distributions
received or expected to be received from ETP consist of cash
distributions paid on May 16, 2011 in respect of the quarter ended
March 31, 2011 and cash distributions in respect of the three
months ended June 30, 2011 payable on August 15, 2011 to holders of
record on August 5, 2011. For the six months ended June 30, 2010,
cash distributions received from ETP consist of cash distributions
paid on May 17, 2010 in respect of the quarter ended March 31, 2010
and cash distributions paid on August 16, 2010 in respect of the
quarter ended June 30, 2010.
(2) On May 26, 2010, ETE contributed a 49.9% interest in MEP to
Regency in exchange for 26,266,791 Regency common units. Total cash
distributions expected from Regency for the three months ended June
30, 2010 reflect full-quarter distributions from the Regency common
units and general partner interests held by ETE as of the end of
the period.
For the three months ended June 30, 2011, cash distributions
expected to be received from Regency consist of cash distributions
in respect of the quarter ended June 30, 2011 payable on August 12,
2011 to holders of record on the close of business August 5, 2011.
For the three months ended June 30, 2010, cash distributions
received from Regency consist of cash distributions paid on August
13, 2010 in respect of the quarter ended June 30, 2010.
For the six months ended June 30, 2011, cash distributions
received or expected to be received from Regency consist of cash
distributions paid on May 13, 2011 in respect of the quarter ended
March 31, 2011 and cash distributions in respect of the three
months ended June 30, 2011 payable on August 12, 2011 to holders of
record on August 5, 2011. For the six months ended June 30, 2010,
cash distributions received from Regency consist of cash
distributions paid on August 13, 2010 in respect of the quarter
ended June 30, 2010.
(3) Upon closing the transactions to transfer a 49.9% interest
in MEP from ETP to Regency, the purchase price of each transaction
included an adjustment relating to the pro ration of the
distributions for the period from April 1, 2010 to May 26, 2010.
The transfer of the MEP interest, along with ETE’s acquisition of a
controlling interest in Regency on May 26, 2010, are collectively
referred to as the Regency Transactions.
(4) Interest expense included distributions on ETE's Series A
Convertible preferred units of $6.0 million and $12.0 million for
the three and six months ended June 30, 2011, respectively.
Interest expense included distributions on ETE’s convertible
preferred units of $2.4 million for the three and six months ended
June 30, 2010 which reflected a pro rata amount for the period
subsequent to our acquisition of a controlling interest in Regency
on May 26, 2010.
(5) For the three months ended June 30, 2011, cash distributions
expected to be paid by ETE consist of cash distributions in respect
of the quarter ended June 30, 2011 payable on August 19, 2011 to
holders of record on August 5, 2011. For the three months ended
June 30, 2010, cash distributions paid by ETE consist of cash
distributions paid on August 19, 2010 in respect of the quarter
ended June 30, 2010.
For the six months ended June 30, 2011, cash distributions paid
or expected to be paid by ETE consist of cash distributions paid on
May 19, 2011 in respect of the quarter ended March 31, 2011 and
cash distributions in respect of the three months ended June 30,
2011 payable on August 19, 2011 to holders of record on August 5,
2011. For the six months ended June 30, 2010, cash distributions
paid by ETE consist of cash distributions paid on May 19, 2010 in
respect of the quarter ended March 31, 2010 and cash distributions
paid on August 19, 2010 in respect of the quarter ended June 30,
2010.
ENERGY TRANSFER
EQUITY, L.P.SUPPLEMENTAL INFORMATION(Dollars in
thousands)(unaudited)
The following summarizes the key components of the stand-alone
results of operations of the Parent Company for the periods
indicated:
Three Months Ended June 30, Six Months
Ended June 30, 2011 2010
2011 2010 Selling, general and
administrative expenses $ (12,037 ) $ (15,079 ) $ (13,879 ) $
(17,415 ) Interest expense (40,587 ) (20,210 ) (81,526 ) (36,916 )
Equity in earnings of affiliates 120,626 75,362 267,268 221,740
Losses on non-hedged interest rate derivatives — (20,753 ) —
(35,177 ) Other, net (1,653 ) (88 ) (16,812 ) (212 )
Selling, general and administrative. For the three and six
months ended June 30, 2011 compared to the same period in the prior
year, selling, general and administrative expense decreased
primarily due to a decrease in acquisition-related costs. The three
and six months ended June 30, 2011 reflect approximately $9.0
million in expenses incurred in connection with our pending
acquisition of Southern Union Company, while the three and six
months ended June 30, 2010 reflect approximately $12.8 million in
expenses incurred related to our acquisition of a controlling
interest in Regency in May 2010.
Interest Expense. For the three and six months ended June 30,
2011 compared to the same period in the prior year, interest
expense increased primarily due to the issuance of $1.8 billion
aggregate principal amount of 7.5% senior notes in September 2010
the proceeds from which were used to repay all of the outstanding
indebtedness under our then existing revolving credit facility and
term loan facility, to fund the cost to terminate interest rate
swaps, and for general partnership purposes. In addition, interest
expense for the periods presented reflects distributions on the ETE
Preferred Units issued by ETE in connection with the acquisition of
a controlling interest in Regency in May 2010.
Equity in Earnings of Affiliates. Equity in earnings of
affiliates represents earnings of the Parent Company related to its
investment in ETP and Regency. The increases between the three and
six months period were primarily related to the Parent Company’s
equity in earnings of ETP.
Losses on Non-Hedged Interest Rate Derivatives. The Parent
Company terminated its interest rate swaps that were not accounted
for as hedges in September 2010 in connection with the issuance of
$1.8 billion of senior notes. Prior to that settlement, changes in
the fair value of and cash payments related to these swaps were
recorded directly in earnings. For the three and six months ended
June 30, 2011, we recorded unrealized losses on our interest rate
swaps as a result of decreases in the relevant floating index rates
during the period.
Other, net. Other expenses increased between periods primarily
due to non-cash charges recorded to increase the carrying value of
the preferred units that were issued by the Parent Company in
connection with the acquisition of a controlling interest in
Regency in May 2010.
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