peplform8k.htm  

 


 
 
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): May 8, 2012


PANHANDLE EASTERN PIPE LINE COMPANY, LP
(Exact name of registrant as specified in its charter)



Delaware
1-2921
44-0382470
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)

5051 Westheimer Road
Houston, Texas
(Address of principal executive offices)
77056-5306
(Zip Code)

Registrant's telephone number, including area code: (713) 989-7000


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 7.01. Regulation FD Disclosure.
 
On May 8, 2012, Energy Transfer Equity, L.P. (“ETE”), the ultimate parent company of Panhandle Eastern Pipe Line Company, LP (the “Company”), issued a press release announcing its financial and operating results, including certain financial results of the Company, for the quarter ended March 31, 2012.  A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information set forth in the attached Exhibit 99.1 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.


Item 9.01
Financial Statements and Exhibits.

(d) Exhibits.  In accordance with General Instruction B.2 of Form 8-K, the information set forth in the attached Exhibit 99.1 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.

Exhibit No.                             Exhibit
 
99.1         
 
Energy Transfer Equity, L.P. Press Release dated May 8, 2012
 






 
 

 



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 thereunto duly authorized.

     
 
PANHANDLE EASTERN PIPE LINE COMPANY, LP
 
(Registrant)
 
Date: May 9, 2012
 
     By:
 
/s/ Robert M. Kerrigan, III
 
Robert M. Kerrigan, III
 
Vice President and Secretary



 
 

 


EXHIBIT INDEX

  Exhibit No.                             Exhibit
 
99.1          
 
Energy Transfer Equity, L.P. Press Release dated May 8, 2012
 


 

 
 

 

exhibit991.htm  

Exhibit 99.1

[ETE Logo]

 
 
ENERGY TRANSFER EQUITY
REPORTS FIRST QUARTER RESULTS

Dallas - May 8, 2012 - Energy Transfer Equity, L.P. (NYSE:ETE) today reported financial results for the quarter ended March 31, 2012.
 
Distributable Cash Flow, as adjusted, was $130.7 million for the three months ended March 31, 2012 as compared to $125.8 million for the three months ended March 31, 2011.  ETE's net income attributable to partners was $166.4 million for the three months ended March 31, 2012, an increase of $77.8 million over the three months ended March 31, 2011.
 
As of and during the quarter ended March 31, 2012, ETE's financial position and operating results were impacted by the following transactions:
 
 
•  
Southern Union Acquisition.  On March 26, 2012, ETE completed the acquisition of Southern Union Company (“Southern Union”) for $5.4 billion of cash and ETE Common Units.  As such, Southern Union was consolidated in ETE's financial statements as of March 31, 2012 and its cash flows were included in ETE's Distributable Cash Flow from March 26, 2012 to March 31, 2012.  The cash portion of the Southern Union acquisition purchase price was $3.0 billion, which was funded with proceeds from a $2.0 billion senior secured term loan and with proceeds from the dropdown transaction discussed below.
 
Merger and Finance-related Expenses. In connection with the Southern Union acquisition the following expenses were incurred by ETE during the three months ended March 31, 2012:
 
•  
$62.2 million in fees related to a bridge loan facility that ETE entered into to initially fund the cash consideration of the Southern Union merger.  The bridge loan facility was not utilized and was terminated on March 26, 2012;
 
•  
$29.9 million in merger-related costs that were accounted for in selling, general and administrative expenses; and,
 
•  
$53.1 million of net merger-related expenses incurred directly by Southern Union that were consolidated in to ETE's operating results.
 
•  
Citrus Dropdown.  Concurrent with the Southern Union acquisition, ETE completed the dropdown of Southern Union's 50% interest in Citrus Corp. (“Citrus”) to Energy Transfer Partners, L.P. (“ETP”) in exchange for approximately $1.9 billion in cash and $105 million of ETP common units.  The cash proceeds from ETP were used in part to fund a portion of the Southern Union acquisition and to repay existing indebtedness at Southern Union.  Citrus was reflected as an equity method investment on ETE's consolidated financial statements from the date of acquisition.  In connection with this transaction, ETE also relinquished its rights to $220 million of the incentive distributions from ETP that it would otherwise be entitled to receive over 16 consecutive quarters.
 
•  
Propane Contribution.  On January 12, 2012, ETP completed the contribution of its retail propane operations to AmeriGas Partners, L.P. (“AmeriGas”) in exchange for approximately $2.7 billion, consisting of cash and AmeriGas common units, which resulted in the recognition of a $1.1 billion gain on deconsolidation in ETE's consolidated financial statements during the three months ended March 31, 2012, and ETE's consolidated financial statements now reflect ETP's equity method investment in AmeriGas.
 
•  
Tender Offer.  ETP used the cash proceeds from the propane contribution discussed above to repay borrowings under its existing revolving credit facility and to extinguish approximately $750 million in senior notes outstanding through a tender offer.  As a result of the tender offer, a loss on extinguishment of debt of $115.0 million was recorded during the three months ended March 31, 2012 and recognized in ETE's consolidated statement of operations.

 
 

 

 
The Partnership has scheduled a conference call for 8:30 a.m. Central Time, Wednesday, May 9, 2012 to discuss its first quarter 2012 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.
 
The Parent Company’s principal sources of cash flow are derived from distributions related to its direct and indirect investments in the limited and general partner interests in ETP and Regency Energy Partners LP (“Regency”), including 100% of ETP's and Regency's incentive distribution rights, approximately 52.5 million of ETP's common units and approximately 26.3 million of Regency's common units. Effective with its acquisition on March 26, 2012, the Parent Company also generates cash flow from its wholly owned subsidiary, Southern Union.  ETE’s primary cash requirements are for general and administrative expenses, debt service requirements and distributions to its partners and holders of the Preferred Units.
 
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.  Subsequent to the acquisition of Southern Union on March 26, 2012, the Partnership's definition of Distributable Cash Flow also includes distributable cash flow related to Southern Union.  The Partnership defines distributable cash flow for Southern Union as net income, adjusted for certain non-cash items, less maintenance capital expenditures.  Non-cash items include depreciation and amortization, deferred income taxes, non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, and non-cash impairment charges.

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 months ended March 31, 2012 and 2011 for comparative purposes.

Distributable Cash Flow, as adjusted.  The Partnership defines Distributable Cash Flow, as adjusted, 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 plus the distributable cash flow related to Southern Union (as described in the definition of Distributable Cash Flow above), net of the Partnership's cash expenditures for general and administrative costs and interest expense, excluding certain items, such as acquisition-related expenses.  Due to (i) the cash expenses that were incurred during the three months ended March 31, 2012 in connection with the Partnership's merger and acquisition activities, Distributable Cash Flow, as adjusted, for the three months ended March 31, 2012 and 2011 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, as adjusted, is net income (loss) for the Parent Company on a stand-alone basis.  The accompanying analysis of Distributable Cash Flow, as adjusted, is presented for the three months ended March 31, 2012 and 2011 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 52.5 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.  ETE is also the parent of Southern Union Company.  The ETE family of companies owns approximately 45,000 miles of natural gas and natural gas liquids pipelines.  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 has pipeline operations in Alabama, Arizona, Arkansas, Colorado, Florida, Louisiana, Mississippi, New Mexico, Utah and West Virginia and owns the largest intrastate pipeline system in Texas.  ETP currently has natural gas operations that include approximately 23,500 miles of gathering and transportation pipelines, treating and processing assets, and three storage facilities located in Texas.  ETP also holds a 70 percent interest in Lone Star NGL, a joint venture that owns and operates NGL storage, fractionation and transportation assets in Texas, Louisiana and Mississippi.  ETP’s general partner is owned by ETE.  For more information, visit the Energy Transfer Partners, L.P. web site at www.energytransfer.com.
 
Regency Energy Partners LP (NYSE: RGP) is a growth-oriented, midstream energy partnership engaged in the gathering and processing, contract compression, treating and transportation of natural gas and the transportation, fractionation, and storage of natural gas liquids.  Regency also holds a 30% interest in Lone Star NGL LLC, a joint venture that owns and operates natural gas liquids storage, fractation, and transporation assets in Texas, Louisiana and Missippi.  Regency's general partner is owned by ETE.  For more information, visit the Regency Energy Partners LP Web site at www.regencyenergy.com.
 

Contacts
Investor Relations:                                                                Media Relations:
Energy Transfer                                                      Vicki Granado
Brent Ratliff                                                      Granado Communications Group
214-981-0700 (office)                                                                214-599-8785 (office)
214-498-9272 (cell)

-more-


 
 

 

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)



   
March 31, 2012
   
December 31, 2011
ASSETS
         
           
CURRENT ASSETS
  $ 1,873,770     $ 1,455,444    
                   
PROPERTY, PLANT AND EQUIPMENT, net
    21,403,821       14,558,562    
                   
ADVANCES TO AND INVESTMENTS IN AFFILIATES
    4,667,594       1,496,600    
LONG-TERM PRICE RISK MANAGEMENT ASSETS
    25,345       26,011    
GOODWILL
    3,400,542       2,038,975    
INTANGIBLES ASSETS, net
    960,725       1,072,291    
OTHER NON-CURRENT ASSETS, net
    490,304       248,910    
Total assets
  $ 32,822,101     $ 20,896,793    
                   
                   
LIABILITIES AND EQUITY
                 
                   
CURRENT LIABILITIES
  $ 1,775,552     $ 1,841,313    
                   
LONG-TERM DEBT, less current maturities
    17,391,195       10,946,864    
SERIES A CONVERTIBLE PREFERRED UNITS
    326,950       322,910    
ACCUMULATED DEFERRED INCOME TAXES
    2,010,667       217,244    
LONG-TERM PRICE RISK MANAGEMENT LIABILITIES
    180,924       81,415    
OTHER NON-CURRENT LIABILITIES
    300,178       26,958    
                   
COMMITMENTS AND CONTINGENCIES
                 
                   
PREFERRED UNITS OF SUBSIDIARY
    72,196       71,144    
                   
EQUITY:
                 
Total partners' capital
    2,425,468       53,484    
Noncontrolling interest
    8,338,971       7,335,461    
Total equity
    10,764,439       7,388,945    
Total liabilities and equity
  $ 32,822,101     $ 20,896,793    





 
 

 

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit data)
(unaudited)

 
Three Months Ended March 31,
 
2012
 
2011
REVENUES:
     
Natural gas sales
$
504,610
   
$
709,324
 
NGL sales
532,299
   
275,152
 
Gathering, transportation and other fees
500,962
   
412,256
 
Retail propane sales
75,445
   
528,466
 
Other
75,815
   
63,922
 
Total revenues
1,689,131
   
1,989,120
 
COSTS AND EXPENSES:
     
Cost of products sold
1,022,200
   
1,201,426
 
Operating expenses
174,905
   
220,696
 
Depreciation and amortization
161,201
   
139,256
 
Selling, general and administrative
148,262
   
63,499
 
Total costs and expenses
1,506,568
   
1,624,877
 
OPERATING INCOME
182,563
   
364,243
 
OTHER INCOME (EXPENSE):
     
Interest expense, net of interest capitalized
(213,330
)
 
(167,929
)
Bridge loan related fees
(62,241
)
 
 
Equity in earnings of affiliates
75,232
   
25,441
 
Gain on deconsolidation of Propane Business
1,055,944
   
 
Losses on disposal of assets
(1,060
)
 
(1,754
)
Loss on extinguishment of debt
(115,023
)
 
 
Gains on non-hedged interest rate derivatives
27,490
   
1,520
 
Other, net
13,306
   
(12,526
)
INCOME BEFORE INCOME TAX EXPENSE
962,881
   
208,995
 
Income tax expense
1,579
   
9,903
 
NET INCOME
961,302
   
199,092
 
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST
794,880
   
110,452
 
NET INCOME ATTRIBUTABLE TO PARTNERS
166,422
   
88,640
 
GENERAL PARTNER’S INTEREST IN NET INCOME
506
   
274
 
LIMITED PARTNERS’ INTEREST IN NET INCOME
$
165,916
   
$
88,366
 
BASIC NET INCOME PER LIMITED PARTNER UNIT
$
0.73
   
$
0.40
 
BASIC AVERAGE NUMBER OF UNITS OUTSTANDING
226,730,477
   
222,954,674
 
DILUTED NET INCOME PER LIMITED PARTNER UNIT
$
0.73
   
$
0.40
 
DILUTED AVERAGE NUMBER OF UNITS OUTSTANDING
226,730,477
   
222,954,674
 





 
 

 

ENERGY TRANSFER EQUITY, L.P.
DISTRIBUTABLE CASH FLOW
(Tabular amounts in thousands)
(unaudited)
The following table presents the calculation and reconciliation of Distributable Cash Flow and Distributable Cash Flow, as adjusted, of Energy Transfer Equity, L.P.

 
Three Months Ended March 31,
 
2012
 
2011
Cash distributions from ETP associated with: (1)
     
General partner interest
$
4,914
   
$
4,896
 
Incentive distribution rights
99,548
   
103,182
 
Limited partner interest
46,900
   
44,890
 
Total cash distributions from ETP
151,362
   
152,968
 
Cash distributions from Regency associated with: (2)
     
General partner interest
1,324
   
1,269
 
Incentive distribution rights
2,074
   
1,114
 
Limited partner interest
12,083
   
11,689
 
Total cash distributions from Regency
15,481
   
14,072
 
Total cash distributions from ETP and Regency
166,843
   
167,040
 
Distributable cash flow attributable to Southern Union (including acquisition-related expenses of $53.1 million) (3)
(45,718
)
 
 
Deduct expenses of the Parent Company on a stand-alone basis:
     
Selling, general and administrative expenses, excluding non-cash compensation expense (4)
(30,981
)
 
(1,755
)
Interest expense, net of amortization of financing costs, interest income, and realized gains and losses on interest rate swaps (4)
(42,416
)
 
(40,119
)
Bridge financing costs
(62,241
)
 
 
Distributable Cash Flow (5)
(14,513
)
 
125,166
 
Acquisition-related expenses (4)
145,199
   
617
 
Distributable Cash Flow, as adjusted (5)
$
130,686
   
$
125,783
 
       
Cash distributions to be paid to the partners of ETE: (6)
     
Distributions to be paid to limited partners
$
174,982
   
$
124,848
 
Distributions to be paid to General Partner
433
   
388
 
Total cash distributions to be paid to the partners of ETE (5)
$
175,415
   
$
125,236
 
       
Reconciliation of Non-GAAP “Distributable Cash Flow” and “Distributable Cash Flow, as adjusted” to GAAP “Net income attributable to partners":
     
Net income attributable to partners
$
166,422
   
$
88,640
 
Equity in income related to investments in ETP and Regency
(345,194
)
 
(146,642
)
Cash distributions from ETP and Regency
166,843
   
167,040
 
Amortization included in interest expense (excluding ETP and Regency)
826
   
814
 
Fair value adjustment of ETE Preferred Units
4,040
   
15,040
 
Other non-cash (excluding ETP and Regency)
(7,450
)
 
274
 
Distributable Cash Flow
(14,513
)
 
125,166
 
Acquisition-related expenses (4)
145,199
   
617
 
Distributable Cash Flow, as adjusted
$
130,686
   
$
125,783
 

(1)  
For the three months ended March 31, 2012, cash distributions expected to be received from ETP consist of cash distributions in respect of the quarter ended March 31, 2012 payable on May 15, 2012 to holders of record on  May 4, 2012 and also take into consideration a reduction in incentive distributions of $13.8 million related to the Citrus Dropdown.  For the three months ended March 31, 2011, cash distributions received from ETP consist of cash distributions paid on May 16, 2011 in respect of the quarter ended March 31, 2011.

 
 

 

(2)  
For the three months ended March 31, 2012, cash distributions expected to be received from Regency consist of cash distributions in respect of the quarter ended March 31, 2012 payable on May 14, 2012 to holders of record on May 7, 2012.  For the three months ended March 31, 2011, cash distributions received from Regency consist of cash distributions paid on May 13, 2011 in respect of the quarter ended March 31, 2011.

(3)  
Distributable cash flow attributable to Southern Union was calculated as follows:


 
Period from Acquisition (March 26, 2012) to March 31, 2012
Net loss
$
(38,507
)
Depreciation and amortization
4,723
 
Deferred income taxes
(11,934
)
Distributable cash flow attributable to Southern Union
(45,718
)
Acquisition-related expenses recognized by Southern Union
53,059
 
Distributable cash flow, as adjusted, attributable to Southern Union
$
7,341
 
 
Distributable cash flow attributable to Southern Union reflected above includes change in control payments of $68.4 million, offset by benefit plan curtailment gains of $15.3 million.  The net amount of $53.1 million was added back to calculate ETE's Distributable Cash Flow, as adjusted.
 
(4)
Transaction costs for the three months ended March 31, 2012 and 2011 related to ETE's acquisition of Southern Union  consisted of $62.2 million bridge finance costs, $29.9 million of selling, general and administrative expenses incurred by ETE and $53.1 million of merger-related expenses that were incurred directly by Southern Union.
 
(5)
For the three months ended March 31, 2012, total cash distributions to be paid to the partners of ETE exceed ETE's Distributable Cash Flow and Distributable Cash Flow, as adjusted, primarily due to the timing of the timing of the Southern Union acquisition.   In connection with the Southern Union acquisition, ETE issued 56,981,860 million ETE Common Units on March 26, 2012, the unitholders of which will receive the first quarter 2012 distribution of $0.625 per unit, as announced on April 24, 2012.   However, ETE's Distributable Cash Flow and Distributable Cash Flow, as adjusted, both reflect only six days of cash flows from Southern Union for the period from acquisition (March 26, 2012) through March 31, 2012.  In future quarters, ETE's Distributable Cash Flow and Distributable Cash Flow, as adjusted, will include a full quarter of cash flows from Southern Union on a consolidated basis.
 
(6)
For the three months ended March 31, 2012, cash distributions expected to be paid by ETE consist of cash distributions in respect of the quarter ended March 31, 2012 payable on May 18, 2012 to holders of record on May 4, 2012.  For the three months ended March 31, 2011, cash distributions paid by ETE consist of cash distributions paid on May 19, 2011 in respect of the quarter ended March 31, 2011.

 
 

 

SUPPLEMENTAL INFORMATION
RESULTS OF OPERATIONS FOR SOUTHERN UNION COMPANY
(Tabular amounts in thousands)
(unaudited)
 
Supplemental Data
 
 
Following is a summary of Southern Union's results for the three months ended March 31, 2012 compared to the three months ended March 31, 2011.  The results of Southern Union shown below include periods prior and subsequent to ETE's consolidation of Southern Union, which began upon the acquisition on March 26, 2012.  Amount shown below for the three months ended March 31, 2012 include both the pre-acquisition and post-acquisition periods.  The results of Southern Union in the post-acquisition period were impacted slightly by the changes in the accounting basis of Southern Union's assets and liabilities to record such assets and liabilities at estimated fair value.  This step-up in basis primarily impacted the depreciation, amortization, and interest expense recognized by Southern Union during the last six days of the quarter, which amounts were accordingly reflected in ETE's consolidated financial statements, and will continue to be impacted by the step-up in basis going forward.
 
 
Southern Union defines Segment Adjusted EBITDA as earnings before interest, taxes, depreciation, amortization and other non-cash items, such as non-cash compensation expense, unrealized gains and losses on unhedged derivative activities, and other non-operating income or expense items.  Segment Adjusted EBITDA reflects amounts for less than wholly owned subsidiaries and unconsolidated affiliates based on Southern Union's proportionate ownership.
 
 
Segment Adjusted EBITDA may not be comparable to measures used by other companies and should be considered in conjunction with net earnings and other performance measures such as operating income or net cash flows provided by operating activities.
 
The following table presents Southern Union's Segment Adjusted EBITDA for each of the reportable segments reflected in Southern Union's consolidated financial statements, as well as a reconciliation of the total of Segment Adjusted EBITDA for all of Southern Union's segments to Southern Union's net earnings.
 
Three Months Ended March 31,
 
2012
 
2011
 
Combined
   
Segment Adjusted EBITDA:
     
Transportation and storage segment
$
152,430
   
$
166,752
 
Gathering and processing segment
13,835
   
20,733
 
Distribution segment
23,686
   
32,277
 
Corporate and other activities
(20,887
)
 
2,229
 
Total Segment Adjusted EBITDA
169,064
   
221,991
 
Depreciation and amortization
(61,267
)
 
(59,327
)
Unrealized losses on non-hedged derivative activities
   
(14,744
)
Net gain on curtailment of other postretirement benefit plans
15,332
   
 
Non-cash equity based compensation
(1,350
)
 
(1,954
)
Other, net
300
   
142
 
Proportionate share of unconsolidated investments' interest, depreciation and allowance for funds used during construction
(44,944
)
 
(11,233
)
Interest expense
(54,788
)
 
(55,571
)
Federal and state income tax expense
(10,937
)
 
(18,642
)
Net earnings
$
11,410
   
$
60,662
 

Southern Union's Segment Adjusted EBITDA decreased between periods primarily due to Southern Union's recognition of approximately $68 million of net merger-related costs incurred in connection with the acquisition by ETE.

Southern Union's income tax expense decreased between periods primarily due to lower pretax earnings recorded in the period subsequent to the change in control.