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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 8-K

 

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) : January 10, 2007

 

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ENERGY TRANSFER EQUITY, L.P.

(Exact name of registrant as specified in its charter)

 

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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) (Zip Code)

(214) 981-0700

(Registrant’s telephone number, including area code)

 

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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))

 

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Item 2.02. Results of Operations and Financial Condition.

On January 16, 2007, Energy Transfer Equity, L.P. (the “Partnership”) issued a press release announcing its financial results for the first quarter ended November 30, 2006. A copy of this press release is being furnished as Exhibit 99.1 to this report and is incorporated herein by reference.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On January 10, 2007, H. Michael Krimbill, a director of LE GP, LLC (“LE GP”), the general partner of the Partnership, resigned his position as a director. Mr. Krimbill’s resignation is in connection with his resignation as an executive officer and director of the general partner of Energy Transfer Partners, L.P., a subsidiary of the Partnership.

Mr. Krimbill’s departure is not related in any manner to any disagreement with LE GP’s board of directors or management that is known to any executive officer of LE GP or the Partnership on any matter relating to the Partnership’s operations, policies or practices.

Item 9.01. Financial Statement and Exhibits.

 

(d)

Exhibits.

 

Exhibit No.		Description
99.1		Press release dated January 16, 2007, announcing financial results for the quarter ended November 30, 2006.
99.2		Letter of Resignation of H. Michael Krimbill.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: January 17, 2007

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EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Press release dated January 16, 2007, announcing financial results for the quarter ended November 30, 2006.
99.2		Letter of Resignation of H. Michael Krimbill.

Exhibit 99.1

PRESS RELEASE

ENERGY TRANSFER EQUITY, L.P.

REPORTS FIRST QUARTER 2007 RESULTS

Dallas, Texas – January 16 2007 – Energy Transfer Equity, L.P. (NYSE:ETE) reported net income of $31.0 million and Distributable Cash of $74.6 million for the three months ended November 30, 2006. The Partnership raised its annual cash distribution $0.11 per unit paid on the Partnership’s outstanding limited partner units resulting in a quarterly distribution equal to $0.34 per limited partner unit ($1.36 annualized). Distributable Cash is a “non-GAAP measure”, as explained below.

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”). ETE currently has no other operating activities apart from those conducted by the operating subsidiaries within ETP. ETE’s principal uses of cash are for administrative expenses, debt service and distributions to its general and limited partners.

ETE’s net income for the first quarter ended November 30, 2006 of $31.0 million compares to $39.6 million for the first quarter ended November 30, 2005. The decrease in net income is due primarily to the decreased net income of ETP and increased ETE interest expense. The decrease was partially offset by a decrease in minority interest expense of $59.1 million. The minority interest expense primarily represents partnership interests in ETP that ETE does not own. The decrease in minority interest expense is due to the increase in ETE’s average ownership in ETP’s limited and general partners’ interests for the first quarter ended November 30, 2006 to 38.92% as compared to 30.66% for the first quarter ended November 30, 2005 and the increase in ETE’s income allocation from ETP due to ETE’s now owning 100% of the incentive distribution rights of 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 Distributable Cash 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.

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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 measures most directly comparable to Distributable Cash are net income and 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 November 30, 2006. Prior period information is not comparable or meaningful due to ETE’s initial public offering in February 2006.

Energy Transfer Equity, L.P. (NYSE:ETE) owns the general partner of Energy Transfer Partners and approximately 62.5 million ETP limited partner units. Together ETP and ETE have a combined enterprise value approaching $20 billion.

Energy Transfer Partners, L.P. (NYSE:ETP) is a publicly traded partnership owning and operating a diversified portfolio of energy assets. ETP’s natural gas and storage operations include intrastate 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. These assets include approximately 12,000 miles of intrastate pipeline in service, with an additional 600 miles of intrastate pipeline under construction, and 2,400 miles of interstate pipeline. ETP is one of the three largest retail marketers of propane in the United States, serving more than one million customers from over 400 customer service locations extending from coast to coast.

The information contained in this press release is available on our website at www.energytransfer.com.

 

Contacts:
Investor Relations:		Media Relations:
Renee Lorenz		Vicki Granado
Energy Transfer		Gittins & Granado
214-981-0700		214-361-0400

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ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except unit data)

(unaudited)

 

		November 30, 2006				August 31, 2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	248,674			$	26,204
Marketable securities			2,596				2,817
Accounts receivable, net of allowance for doubtful accounts			598,854				675,545
Accounts receivable from related parties			1,176				602
Inventories			499,648				387,140
Deposits paid to vendors			79,227				87,806
Exchanges receivable			28,045				23,221
Price risk management assets			30,200				56,851
Prepaid expenses and other assets			40,577				42,549
Total current assets			1,528,997				1,302,735
PROPERTY, PLANT AND EQUIPMENT, net			3,998,467				3,748,614
ADVANCES TO AND INVESTMENT IN AFFILIATES			999,056				41,344
GOODWILL			632,624				633,998
INTANGIBLES AND OTHER LONG-TERM ASSETS, net			206,250				197,450
Total assets		$	7,365,394			$	5,924,141
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
CURRENT LIABILITIES:
Accounts payable		$	580,176			$	603,527
Accounts payable to related parties			1,396				320
Exchanges payable			32,580				24,722
Customer advances and deposits			101,771				108,836
Accrued and other current liabilities			260,922				205,857
Price risk management liabilities			43,359				36,918
Current maturities of long-term debt			40,857				40,607
Total current liabilities			1,061,061				1,020,787
LONG-TERM DEBT, less current maturities			4,474,675				3,205,646
NONCURRENT DEFERRED INCOME TAXES			207,749				207,877
OTHER NONCURRENT LIABILITIES			14,160				4,953
MINORITY INTERESTS			1,853,596				1,439,127
COMMITMENTS AND CONTINGENCIES
			7,611,241				5,878,390
PARTNERS’ CAPITAL (DEFICIT):
General partner			(140	)			(69	)
Common Unitholders (132,149,653 and 124,360,520 units authorized, issued and outstanding at November 30, 2006 and August 31, 2006, respectively)			(259,625	)			(9,586	)
Class B Unitholders (2,521,570 units authorized, issued and outstanding at November 30, 2006 and August 31, 2006, respectively)			52,871				53,130
Class C Unitholders (83,418,900 and 0 units authorized, issued and outstanding at November 30, 2006 and August 31, 2006, respectively)			(62,150	)			—
Accumulated other comprehensive income (loss)			23,197				2,276
Total partners’ capital (deficit)			(245,847	)			45,751
Total liabilities and partners’ capital (deficit)		$	7,365,394			$	5,924,141

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ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit and unit data)

(unaudited)

 

		Three Months Ended November 30,
		2006				2005
REVENUES:
Midstream and transportation and storage		$	1,062,444			$	2,208,533
Propane and other			326,001				208,087
Total revenues			1,388,445				2,416,620
COSTS AND EXPENSES:
Cost of products sold – midstream and transportation and storage			883,983				1,959,368
Cost of products sold – propane and other			203,360				131,259
Operating expenses			132,381				102,671
Depreciation and amortization			36,864				29,969
Selling, general and administrative			28,769				25,487
Total costs and expenses			1,285,357				2,248,754
OPERATING INCOME			103,088				167,866
OTHER INCOME (EXPENSE):
Interest expense, net of interest capitalized			(68,547	)			(39,143	)
Equity in earnings (losses) of affiliates			4,887				(274	)
Gain (loss) on disposal of assets			1,944				(128	)
Interest and other income, net			1,517				1,064
INCOME BEFORE INCOME TAX EXPENSE AND MINORITY INTERESTS			42,889				129,385
Income tax expense			2,873				21,687
INCOME BEFORE MINORITY INTERESTS			40,016				107,698
Minority interests			(8,975	)			(68,097	)
NET INCOME			31,041				39,601
GENERAL PARTNER’S INTEREST IN NET INCOME			145				248
LIMITED PARTNERS’ INTEREST IN NET INCOME		$	30,896			$	39,353
BASIC NET INCOME PER LIMITED PARTNER UNIT		$	0.20			$	0.29
BASIC AVERAGE NUMBER OF LIMITED PARTNER UNITS OUTSTANDING			154,636,195				136,357,871
DILUTED NET INCOME PER LIMITED PARTNER UNIT		$	0.20			$	0.29
DILUTED AVERAGE NUMBER OF LIMITED PARTNER UNITS OUTSTANDING			154,636,195				136,357,871

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		Three Months Ended November 30,
		2006		2005
VOLUMES:
(unaudited)
Midstream
Natural gas MMBtu/d – sold		979,878		1,527,391
NGLs Bbls/d – sold		11,569		10,217
Transportation and storage
Natural gas MMBtu/d – transported		4,800,086		4,465,189
Natural gas MMBtu/d – sold		1,021,297		1,551,365
Propane gallons (in thousands)
Retail propane		140,631		88,738
Wholesale		23,283		19,601

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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 first quarter of fiscal 2007:

 

		Three Months Ended November 30, 2006
Distributable Cash:
Cash distributions expected from Energy Transfer Partners, L.P. associated with:
General partner interest:
Standard distribution rights		$	3,271
Incentive distribution rights			51,880
Limited partner interest:
36,413,840 common units			27,994
26,086,957 class G units			20,054
Total cash expected from Energy Transfer Partners, L.P.			103,199
Deduct expenses of the Parent Company on a stand-alone basis:
General and administrative expenses			(1,974	)
Interest expense, net of amortization of financing costs			(26,585	)
Distributable Cash		$	74,640
Cash distributions to be paid to the partners of Energy Transfer Equity, L.P.:
Distribution per limited partner unit		$	0.3400
Distributions to be paid to public unitholders		$	19,205
Distributions to be paid to affiliates			53,998
Distributions to be paid to Class B unitholder			857
Distributions to be paid to general partner			235
Total cash distributions to be paid by Energy Transfer Equity, L.P. to its limited and general partners		$	74,295
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		$	31,041
Adjustments to derive Distributable Cash:
Equity in income of unconsolidated affiliates			(59,979	)
Quarterly distribution expected to be received from Energy Transfer Partners, L.P.			103,199
Amortization of financing costs			379
Distributable Cash			74,640
Adjustments to Distributable Cash to derive Net Cash Provided by Operating Activites:
Quarterly distribution expected to be received from Energy Transfer Partners, L.P.			(103,199	)
Cash distribution received from Energy Transfer Partners, L.P. in October 2006			49,906
Net effect of changes in operating accounts			(8,582	)
Net cash provided by operating activites for Parent Company on stand-alone basis		$	12,765

Exhibit 99.2

H. Michael Krimbill

5620 E. 114^th Street,

Tulsa, Oklahoma 74137

(918) 629-0841

January 10, 2007

Via Email Delivery & Original via U.S. Mail

John W. McReynolds

2828 Woodside Street

Dallas, Texas 75204

 

RE:

Energy Transfer Equity, L.P. (the “Partnership”)

Dear John:

I regret to inform you that as of 5.00 p.m. today, January 10, 2007, I am resigning as a director of the general partner of the Partnership. We have accomplished a great deal in a relatively short period of time, including the initial public offering last February, the work relating to the credit rating of the Partnership, and the acquisition of the remaining IDRs. The subsequent financing of these transactions was both challenging and ultimately very successful. However, based upon my resignation earlier today as an executive officer and director of Energy Transfer Partners, L.P., I believe it is in the best interests of the Partnership, and my own, that I do not continue to serve as a director of the Partnership. It has been a pleasure not only working with you, but developing a friendship with you and Anne. I will miss the comraderie and teamwork.

 

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To: The Board of Directors

I hereby resign as a director of Energy Transfer Equity, L.P., effective as of 5.00 p.m. on Wednesday, January 10, 2007.