UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 17, 2006
ENERGY TRANSFER EQUITY, L.P.
(Exact name of registrant as specified in its charter)
| Delaware | 001-32740 | 30-0108820 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS. Employer Identification No.) |
2828 Woodside Street
Dallas, Texas 75204
(Address of principal executive offices, including zip code)
214-981-0700
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On July 17, 2006, Energy Transfer Equity, L.P. issued a press release announcing its financial results for the quarter ended May 31, 2006. A copy of this press release is being furnished as Exhibit 99.1 to this report and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
| (d) | The following exhibits are being furnished herewith: |
| Exhibit No. | Description | |
| 99.1 | Press release dated July 17, 2006, announcing financial results for the quarter ended May 31, 2006. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ENERGY TRANSFER EQUITY, L.P. | ||
| By: LE GP, LLC, its general partner | ||
| By: |
/s/ John W. McReynolds | |
| John W. McReynolds, | ||
| President and Chief Financial Officer | ||
Dated: July 17, 2006
Exhibit 99.1
PRESS RELEASE
ENERGY TRANSFER EQUITY, L.P.
REPORTS THIRD QUARTER AND YEAR-TO-DATE RESULTS
Dallas, Texas – July 17, 2006 – Energy Transfer Equity, L.P. (NYSE:ETE) Reports Third Quarter and Year-to-Date Income Boosted by Record Income from Energy Transfer Partners.
Energy Transfer Equity, L.P. (“ETE” or “the Partnership”) reported a 77% increase in third quarter income from continuing operations. “We are very pleased with the financial results this quarter as we showed impressive growth in both our income from continuing operations and distributions to our Unitholders,” said John McReynolds, President and Chief Financial Officer. “We look forward to having a very successful first year as a public company.”
The Partnership’s financial statements reflect its ownership interests relating to Energy Transfer Partners, L.P. (NYSE:ETP). Consequently, both the three and nine-month periods benefited from the results of operations of the Houston Pipeline transportation and storage assets which were purchased in January, 2005 by ETP. There were also increased volumes and synergies realized by ETP from operating the pipeline assets as an integrated system.
ETE reported net income for the third quarter ended May 31, 2006 of $43.3 million, as compared to income from continuing operations of $24.4 million for the third quarter ended May 31, 2005, an increase of $18.9 million, or 77%.
For the nine months ended May 31, 2006, net income was $107.3 million as compared to income from continuing operations of $76.0 million for the nine months ended May 31, 2005, an increase of $31.3 million, or 41%.
For the three months ended May 31, 2006, the Partnership had Distributable Cash (a “non-GAAP measure,” as defined below) of $33.9 million and has declared a total distribution to its general and limited partners of $32.6 million, which will be paid on July 19, 2006. The current distribution of $0.2375 per unit (an annualized rate of $0.95 per unit) represents a 19% increase in the annualized unit distribution rate.
Net income was $79.8 million and $133.0 million for the three and nine months ended May 31, 2005, respectively, which includes income from discontinued operations of $55.4 million and $57.0 million, respectively (net of income taxes and minority interests).
Net income for the three and nine month periods ended May 31, 2006 was affected by a $33.4 million and $199.5 million increase, respectively, in minority interest expense. The minority interest expense primarily represents partnership interests in Energy Transfer Partners, L.P. that ETE does not own. An increase in the net income of ETP results in a greater amount of income attributable to the partnership interests not owned by ETE, thereby increasing the minority interest expense on ETE’s books. Net income for the nine months ended May 31, 2006 was also affected by a non-cash expense of $52.9 million related to the issuance of the Partnership’s Class B Units at the time of the Partnership’s initial public offering in February 2006.
Net cash provided by operating activities for the ETE parent company on a stand-alone basis for the three months ended May 31, 2006 was $36.3 million. The Partnership’s principal sources of cash flow are distributions it receives from its investments in the limited and general partner interests in ETP. ETE currently has no other operating activities apart from those conducted by the operating subsidiaries within ETP.
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. 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 non-GAAP financial measures should not be considered as an alternative to GAAP measures such as net income, cash flow from operating activities or any other GAAP measure of liquidity or financial performance.
Distributable Cash. The Partnerships defines Distributable Cash as cash distributions expected to be received from ETP in connection with the Partnership’s investments in limited and general partner interests of ETP, net of the Partnership’s expenditures for general and administrative costs and debt service. Distributable Cash 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 to the distributions the Partnership expects to pay its unitholders. Using this measure, the Partnership’s management can quickly compute the coverage ratio of estimated cash flows to planned cash distributions.
Distributable Cash is an important non-GAAP financial measure for our limited partners since it indicates to investors whether or not 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 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 is cash flow from operating activities for ETE on a stand-alone basis (“Parent Company”).
The accompanying analysis of Distributable Cash is presented only for the three month period ended May 31, 2006. Prior period information is not comparable or meaningful due to ETE’s initial public offering in February 2006.
Energy Transfer Equity, L.P. owns the general partner interests, 50% of the incentive distribution rights and approximately 33% of the outstanding limited partner interests of Energy Transfer Partners, L.P. (NYSE:ETP). Energy Transfer Partners, L.P. owns a diversified portfolio of energy assets, including natural gas operations consisting of approximately 11,700 miles of natural gas gathering and transportation pipelines, natural gas treating and processing assets located in Texas and Louisiana, and three natural gas storage facilities located in Texas. Energy Transfer Partners, L.P. is also one of the three largest retail marketers of propane in the United States, serving more than one million customers from approximately 440 customer service locations in 40 states, extending from coast to coast and Alaska.
This press release may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal law. Such forward-looking statements include the annualized cash distribution rate and are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management’s control. An extensive list of factors that can affect future results are discussed in the Partnership’s prospectus dated February 3, 2006, and other documents filed from time to time with the Securities and Exchange Commission. The Partnership undertakes no obligation to update or revise any forward-looking statement to reflect new information or events.
The information contained in this press release is available on the Partnership’s website at www.energytransfer.com.
Energy Transfer Equity, L.P.
John W. McReynolds,
214-981-0700
www.energytransfer.com
ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
| May 31, 2006 |
August 31, 2005 |
||||||
| ASSETS |
|||||||
| CURRENT ASSETS: |
|||||||
| Cash and cash equivalents |
$ | 26,805 | $ | 33,459 | |||
| Marketable securities |
4,510 | 3,452 | |||||
| Accounts receivable, net of allowance for doubtful accounts |
494,459 | 847,028 | |||||
| Accounts receivable from related parties |
2,284 | 2,295 | |||||
| Deposits paid to vendors |
85,177 | 65,034 | |||||
| Inventories |
456,518 | 302,893 | |||||
| Price risk management assets |
80,238 | 138,961 | |||||
| Prepaid expenses and other assets |
56,626 | 72,056 | |||||
| Total current assets |
1,206,617 | 1,465,178 | |||||
| PROPERTY, PLANT AND EQUIPMENT, net |
3,341,855 | 2,887,750 | |||||
| LONG-TERM PRICE RISK MANAGEMENT ASSETS |
5,143 | 41,687 | |||||
| INVESTMENT IN AFFILIATES |
36,985 | 37,353 | |||||
| GOODWILL |
355,003 | 353,608 | |||||
| INTANGIBLES AND OTHER ASSETS, net |
124,564 | 131,544 | |||||
| Total assets |
$ | 5,070,167 | $ | 4,917,120 | |||
| LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT) |
|||||||
| CURRENT LIABILITIES: |
|||||||
| Working capital facility |
$ | — | $ | 17,026 | |||
| Accounts payable |
513,189 | 818,810 | |||||
| Accounts payable to related parties |
97 | 410 | |||||
| Customer deposits |
13,374 | 88,038 | |||||
| Price risk management liabilities |
33,388 | 104,772 | |||||
| Accrued and other current liabilities |
181,919 | 170,157 | |||||
| Accrued distribution payable |
32,589 | — | |||||
| Accrued distribution payable of subsidiary |
61,382 | — | |||||
| Accrued interest |
29,040 | 15,581 | |||||
| Income taxes payable |
1,221 | 2,063 | |||||
| Deferred income taxes |
4,061 | — | |||||
| Current maturities of long-term debt |
39,737 | 39,376 | |||||
| Total current liabilities |
909,997 | 1,256,233 | |||||
| LONG-TERM DEBT, less current maturities |
2,173,666 | 2,275,965 | |||||
| LONG-TERM PRICE RISK MANAGEMENT LIABILITIES |
363 | 30,517 | |||||
| LONG-TERM AFFILIATED PAYABLE |
— | 2,005 | |||||
| NONCURRENT DEFERRED INCOME TAXES |
210,501 | 215,118 | |||||
| OTHER NONCURRENT LIABILITIES |
9,740 | 13,284 | |||||
| MINORITY INTERESTS |
1,466,998 | 1,212,135 | |||||
| 4,771,265 | 5,005,257 | ||||||
| COMMITMENTS AND CONTINGENCIES |
|||||||
| PARTNERS’ CAPITAL (DEFICIT): |
|||||||
| General partner capital |
152 | 772 | |||||
| Common Unitholders (134,003,277 and 0 units authorized, issued and outstanding at May 31, 2006 and August 31, 2005, respectively) |
225,953 | — | |||||
| Class B Unitholders (2,521,570 and 0 units authorized, issued and outstanding at May 31, 2006 and August 31, 2005, respectively) |
53,133 | — | |||||
| Limited partners’ deficit (0 and 116,503,277 limited partner units issued and outstanding at May 31, 2006 and August 31, 2005, respectively) |
— | (62,216 | ) | ||||
| Accumulated other comprehensive income (loss) |
19,664 | (26,693 | ) | ||||
| Total partners’ capital (deficit) |
298,902 | (88,137 | ) | ||||
| Total liabilities and partners’ capital (deficit) |
$ | 5,070,167 | $ | 4,917,120 | |||
ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit and unit data)
(unaudited)
| Three Months Ended May 31, | Nine Months Ended May 31, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
| REVENUES: |
||||||||||||||||
| Midstream and transportation and storage |
$ | 1,211,549 | $ | 1,849,518 | $ | 5,503,385 | $ | 3,673,730 | ||||||||
| Propane and other |
208,786 | 182,231 | 783,386 | 662,061 | ||||||||||||
| Total revenues |
1,420,335 | 2,031,749 | 6,286,771 | 4,335,791 | ||||||||||||
| COSTS AND EXPENSES: |
||||||||||||||||
| Cost of products sold, midstream and transportation and storage |
1,020,692 | 1,708,917 | 4,765,113 | 3,359,391 | ||||||||||||
| Cost of products sold, propane and other |
126,675 | 108,081 | 481,712 | 396,687 | ||||||||||||
| Operating expenses |
102,969 | 90,372 | 305,336 | 224,122 | ||||||||||||
| Depreciation and amortization |
31,205 | 28,429 | 93,242 | 76,874 | ||||||||||||
| Selling, general and administrative |
23,417 | 20,524 | 134,412 | 43,813 | ||||||||||||
| Total costs and expenses |
1,304,958 | 1,956,323 | 5,779,815 | 4,100,887 | ||||||||||||
| OPERATING INCOME |
115,377 | 75,426 | 506,956 | 234,904 | ||||||||||||
| OTHER INCOME (EXPENSE): |
||||||||||||||||
| Interest expense |
(11,786 | ) | (26,229 | ) | (90,025 | ) | (66,350 | ) | ||||||||
| Equity in losses of affiliates |
(150 | ) | (307 | ) | (318 | ) | (161 | ) | ||||||||
| Gain (loss) on disposal of assets |
22 | (138 | ) | 556 | (665 | ) | ||||||||||
| Gain (loss) on extinguishment of debt |
— | 1,446 | (5,060 | ) | (6,550 | ) | ||||||||||
| Interest income and other, net |
8,911 | 11,090 | 12,407 | 11,474 | ||||||||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE AND MINORITY INTERESTS |
112,374 | 61,288 | 424,516 | 172,652 | ||||||||||||
| Income tax expense |
1,264 | 2,458 | 26,240 | 5,168 | ||||||||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS |
111,110 | 58,830 | 398,276 | 167,484 | ||||||||||||
| Minority interests |
(67,839 | ) | (34,386 | ) | (290,969 | ) | (91,439 | ) | ||||||||
| INCOME FROM CONTINUING OPERATIONS |
43,271 | 24,444 | 107,307 | 76,045 | ||||||||||||
| DISCONTINUED OPERATIONS: |
||||||||||||||||
| Income from discontinued operations |
— | 930 | — | 5,498 | ||||||||||||
| Gain on the sale of discontinued operations, net of tax expense |
— | 104,562 | — | 104,562 | ||||||||||||
| Minority interest in income from discontinued operations |
— | (50,118 | ) | — | (53,060 | ) | ||||||||||
| Total income from discontinued operations |
— | 55,374 | — | 57,000 | ||||||||||||
| NET INCOME |
43,271 | 79,818 | 107,307 | 133,045 | ||||||||||||
| GENERAL PARTNER’S INTEREST IN NET INCOME |
219 | 781 | 611 | 1,121 | ||||||||||||
| LIMITED PARTNERS’ INTEREST IN NET INCOME |
$ | 43,052 | $ | 79,037 | $ | 106,696 | $ | 131,924 | ||||||||
| BASIC NET INCOME PER LIMITED PARTNER UNIT |
||||||||||||||||
| Limited Partners’ income from continuing operations |
$ | 0.32 | $ | 0.23 | $ | 0.86 | $ | 0.71 | ||||||||
| Limited Partners’ income from discontinued operations |
— | 0.52 | — | 0.54 | ||||||||||||
| NET INCOME PER LIMITED PARTNER UNIT |
$ | 0.32 | $ | 0.75 | $ | 0.86 | $ | 1.25 | ||||||||
| BASIC AVERAGE NUMBER OF LIMITED PARTNER UNITS OUTSTANDING |
136,524,847 | 105,640,451 | 124,790,594 | 105,640,451 | ||||||||||||
| DILUTED NET INCOME PER LIMITED PARTNER UNIT |
||||||||||||||||
| Limited Partners’ income from continuing operations |
$ | 0.31 | $ | 0.18 | $ | 0.84 | $ | 0.57 | ||||||||
| Limited Partners’ income from discontinued operations |
— | 0.42 | — | 0.43 | ||||||||||||
| NET INCOME PER LIMITED PARTNER UNIT |
$ | 0.31 | $ | 0.60 | $ | 0.84 | $ | 1.00 | ||||||||
| DILUTED AVERAGE NUMBER OF LIMITED PARTNER UNITS OUTSTANDING |
136,524,847 | 132,072,452 | 124,790,594 | 132,072,452 | ||||||||||||
| VOLUMES SOLD THROUGH ENERGY TRANSFER PARTNERS, L.P.: |
||||||||||||||||
| Midstream |
||||||||||||||||
| Natural gas MMBtu/d – sold |
1,216,424 | 1,499,978 | 1,423,410 | 1,376,179 | ||||||||||||
| NGLs Bbls/d – sold |
10,902 | 13,711 | 10,224 | 13,914 | ||||||||||||
| Transportation and storage |
||||||||||||||||
| Natural gas MMBtu/d – transported |
4,797,307 | 3,487,769 | 4,500,308 | 3,214,842 | ||||||||||||
| Natural gas MMBtu/d – sold |
1,303,033 | 1,546,728 | 1,572,223 | 1,660,567 | ||||||||||||
| Propane operations (in gallons) |
||||||||||||||||
| Retail propane |
91,514 | 94,025 | 346,010 | 346,156 | ||||||||||||
| Wholesale |
19,299 | 15,690 | 67,143 | 59,707 | ||||||||||||
ENERGY TRANSFER EQUITY, L.P. - PARENT COMPANY
DISTRIBUTABLE CASH
(in thousands)
(unaudited)
The following table presents the calculation and reconciliation of Distributable Cash of the Parent Company with respect to the third quarter of fiscal 2006:
| Three Months Ended May 31, 2006 |
||||
| Distributable Cash: |
||||
| Cash distributions from Energy Transfer Partners, L.P. associated with: |
||||
| General partner interest: |
||||
| Standard distribution rights |
$ | 2,076 | ||
| Incentive distribution rights |
14,009 | |||
| Limited partner interest: |
||||
| 33,843,690 common units |
21,575 | |||
| 2,570,150 class F units |
1,638 | |||
| Special distributions: |
||||
| 33,843,690 common units |
1,100 | |||
| 2,570,150 class F units |
84 | |||
| Total cash expected from Energy Transfer Partners, L.P. |
40,482 | |||
| Deduct expenses of the Parent Company on a stand-alone basis: |
||||
| General and administrative expenses, and other |
(460 | ) | ||
| Interest expense, net, and before the effects of unrealized gains on interest rate swaps |
(6,134 | ) | ||
| Distributable Cash |
$ | 33,888 | ||
| Cash distributions to be paid to the limited partners of Energy Transfer Equity, L.P.: |
||||
| Distribution per limited partner unit |
$ | 0.2375 | ||
| Distributions to be paid to public unitholders |
13,855 | |||
| Distributions to be paid to affiliates |
17,971 | |||
| Distributions to be paid to class B unitholders |
599 | |||
| Distributions to be paid to general partner of Energy Transfer Equity, L.P. |
164 | |||
| Total cash distributions to be paid by Energy Transfer Equity, L.P. to its partners |
$ | 32,589 | ||
| Reconciliation of Non-GAAP “Distributable Cash” to GAAP “Net Income” and GAAP “Net cash provided by operating activites” for the Parent Company on a stand-alone basis: |
||||
| Net Income |
$ | 43,271 | ||
| Adjustments to derive Distributable Cash: |
||||
| Equity in income of subsidiaries |
(41,828 | ) | ||
| Quarterly distribution expected from Energy Transfer Partners, L.P. |
40,482 | |||
| Unrealized gains on interest rate swaps |
(8,037 | ) | ||
| Distributable Cash |
33,888 | |||
| Adjustments to Distributable Cash to derive Net Cash Provided by Operating Activites |
||||
| Quarterly distribution expected from Energy Transfer Partners, L.P. |
(40,482 | ) | ||
| Cash distribution received from Energy Transfer Partners, L.P. in April 2006 |
42,646 | |||
| Net effect of changes in operating accounts |
215 | |||
| Net cash provided by operating activites for Parent Company on stand-alone basis |
$ | 36,267 | ||