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PEPL 2.19.14 8-K


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): February 19, 2014


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.)

3738 Oak Lawn Avenue
Dallas, Texas
(Address of principal executive offices)
75219
(Zip Code)

Registrant’s telephone number, including area code: (214) 981-0700


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 February 19, 2014, Energy Transfer Partners, L.P. (“ETP”), the entity which owns 100% of ETP Holdco Corporation, which indirectly owns 100% of the equity interests of Panhandle Eastern Pipe Line Company, LP (the “Company”), issued a press release after market close announcing its financial and operating results, including certain financial results of the Company, for the fiscal year and quarter ended December 31, 2013. A copy of ETP’s 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 Partners, L.P. Press Release dated February 19, 2014




SIGNATURE

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: February 19, 2014
By:
/s/ Martin Salinas, Jr.
 
Martin Salinas, Jr.
 
Chief Financial Officer (duly authorized to sign on behalf of the registrant)




EXHIBIT INDEX

Exhibit No.
Exhibit
99.1
Energy Transfer Partners, L.P. Press Release dated February 19, 2014



ETP-12.31.2013-Ex 99.1


ENERGY TRANSFER PARTNERS
REPORTS FOURTH QUARTER AND ANNUAL RESULTS
Dallas – February 19, 2014 – Energy Transfer Partners, L.P. (NYSE: ETP) today reported its financial results for the quarter and year ended December 31, 2013.
Adjusted EBITDA for Energy Transfer Partners, L.P. (“ETP”) for the three months ended December 31, 2013 totaled $986 million, an increase of $38 million over the same period last year. Distributable Cash Flow attributable to the partners of ETP for the three months ended December 31, 2013 totaled $530 million, an increase of $284 million over the same period last year. Loss from continuing operations for the three months ended December 31, 2013 was $462 million, a decrease of $796 million compared to the same period last year, including the impact of a non-cash goodwill impairment, as discussed below.
The increases in Adjusted EBITDA and Distributable Cash Flow were primarily due to recent strategic transactions and organic growth. ETP has placed more than $1.20 billion in growth projects into service over the last twelve months that are now generating strong and consistent earnings and cash flow.
The decrease in income from continuing operations between periods was primarily due to the recognition of a goodwill impairment of $689 million during the fourth quarter of 2013 related to Trunkline LNG Company, LLC (“Trunkline LNG”).
ETP’s key accomplishments during or subsequent to the quarter include the following:
•
In October, ETP and Energy Transfer Equity, L.P. (“ETE”) exchanged 50.2 million ETP Common Units, owned by ETE, for new Class H Units issued by ETP that track 50.05% of the underlying economics of the general partner interest and incentive distribution rights of Sunoco Logistics Partners L.P. (“Sunoco Logistics”).
•
In November, ETP and Regency Energy Partners LP (“Regency”) announced that Lone Star NGL LLC (“Lone Star”), a joint venture between ETP and Regency, has placed in service a second natural gas liquids fractionator at its facility in Mont Belvieu, Texas, bringing Lone Star’s total fractionation capacity at Mont Belvieu to 200,000 barrels per day.
•
In November, ETP amended its credit facility to extend the maturity until October 2017.
•
In December, Trunkline LNG Export, LLC, an entity owned jointly by ETP and ETE, filed Draft Resource Report No. 13 with the Federal Energy Regulatory Commission for the Lake Charles LNG export project. The report, which details engineering and design aspects of the LNG project, is a major milestone toward the formal application for authorization of the LNG project.
•
In January, ETP’s Board of Directors approved a second consecutive increase in its quarterly distribution to $0.92 per unit ($3.68 annualized) on ETP Common Units for the quarter ended December 31, 2013, representing an increase of $0.06 per Common Unit on an annualized basis compared to the quarter ended September 30, 2013 and an increase of $0.105 per Common Unit on an annualized basis compared to the quarter ended December 31, 2012.
In addition, earlier today, ETE and ETP completed the previously announced transfer to ETE of Trunkline LNG, the entity that owns a LNG regasification facility in Lake Charles, Louisiana, from ETP in exchange for the redemption by ETP of 18.71 million ETP Common Units held by ETE. This transaction was effective as of January 1, 2014.
An analysis of ETP’s segment results and other supplementary data is provided after the financial tables shown below. ETP has scheduled a conference call for 8:30 a.m. Central Time, Thursday, February 20, 2014 to discuss the fourth quarter 2013 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 ETP’s web site for a limited time.
Energy Transfer Partners, L.P. (NYSE: ETP) is a master limited partnership owning and operating one of the largest and most diversified portfolios of energy assets in the United States. ETP currently owns and operates approximately 35,000 miles of natural gas and natural gas liquids pipelines. ETP owns 100% of Panhandle Eastern Pipe Line Company, LP (the successor of Southern Union Company) and Sunoco, Inc., and a 70% interest in Lone Star NGL LLC, a joint venture that owns and operates natural gas liquids storage, fractionation and transportation assets. ETP also owns the general partner, 100% of the incentive distribution rights, and approximately 33.5 million common units in Sunoco Logistics Partners L.P. (NYSE: SXL), which operates a geographically diverse portfolio of crude oil and refined products pipelines, terminalling and crude oil acquisition and marketing

1


assets. ETP’s general partner is owned by ETE. For more information, visit the Energy Transfer Partners, L.P. web site at www.energytransfer.com.
Energy Transfer Equity, L.P. (NYSE: ETE) is a master limited partnership which owns the general partner and 100% of the incentive distribution rights (IDRs) of Energy Transfer Partners, L.P. (NYSE: ETP), approximately 30.8 million ETP common units, and approximately 50.2 million ETP Class H Units, which track 50% of the underlying economics of the general partner interest and the IDRs of Sunoco Logistics Partners L.P. (NYSE: SXL). ETE also owns the general partner and 100% of the IDRs of Regency Energy Partners LP (NYSE: RGP) and approximately 26.3 million RGP common units. The Energy Transfer family of companies owns more than 56,000 miles of natural gas, natural gas liquids, refined products, and crude oil pipelines. For more information, visit the Energy Transfer Equity, L.P. web site at www.energytransfer.com.
Sunoco Logistics Partners L.P. (NYSE: SXL), headquartered in Philadelphia, is a master limited partnership that owns and operates a logistics business consisting of a geographically diverse portfolio of complementary crude oil and refined product pipeline, terminalling, and acquisition and marketing assets. SXL’s general partner is owned by Energy Transfer Partners, L.P. (NYSE: ETP). For more information, visit the Sunoco Logistics Partners, L.P. web site at www.sunocologistics.com.
Forward-Looking Statements
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 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 Partnerships’ Annual Reports on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission. The Partnerships undertake 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 our web site at www.energytransfer.com.
Contacts
Investor Relations:
Energy Transfer
Brent Ratliff
214-981-0700 (office)
Media Relations:
Vicki Granado
Granado Communications Group
214-599-8785 (office)
214-498-9272 (cell)

2


ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(unaudited)
 
December 31,
 
2013
 
2012
ASSETS
 
 
 
 
 
 
 
CURRENT ASSETS
$
6,239

 
$
5,404

 
 
 
 
PROPERTY, PLANT AND EQUIPMENT, net
25,947

 
25,773

 
 
 
 
NON-CURRENT ASSETS HELD FOR SALE
—

 
985

ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES
4,436

 
3,502

NON-CURRENT PRICE RISK MANAGEMENT ASSETS
17

 
42

GOODWILL
4,729

 
5,606

INTANGIBLE ASSETS, net
1,568

 
1,561

OTHER NON-CURRENT ASSETS, net
766

 
357

Total assets
$
43,702

 
$
43,230

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
CURRENT LIABILITIES
$
6,067

 
$
5,548

 
 
 
 
NON-CURRENT LIABILITIES HELD FOR SALE
—

 
142

LONG-TERM DEBT, less current maturities
16,451

 
15,442

LONG-TERM NOTES PAYABLE — RELATED PARTY
—

 
166

NON-CURRENT PRICE RISK MANAGEMENT LIABILITIES
54

 
129

DEFERRED INCOME TAXES
3,762

 
3,476

OTHER NON-CURRENT LIABILITIES
1,080

 
995

 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
EQUITY:
 
 
 
Total partners’ capital
11,540

 
9,201

Noncontrolling interest
4,748

 
8,131

Total equity
16,288

 
17,332

Total liabilities and equity
$
43,702

 
$
43,230


3


ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per unit data)
(unaudited)
 
Three Months Ended December 31,
 
Years Ended December 31,
 
2013
 
2012
 
2013
 
2012
REVENUES
$
12,032

 
$
10,981

 
$
46,339

 
$
15,702

COSTS AND EXPENSES:
 
 
 
 
 
 
 
Cost of products sold
10,727

 
9,660

 
41,204

 
12,266

Operating expenses
376

 
419

 
1,388

 
951

Depreciation and amortization
268

 
237

 
1,032

 
656

Selling, general and administrative
123

 
202

 
485

 
435

Goodwill impairment
689

 
—

 
689

 
—

Total costs and expenses
12,183

 
10,518

 
44,798

 
14,308

OPERATING INCOME (LOSS)
(151
)
 
463

 
1,541

 
1,394

OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
Interest expense, net of interest capitalized
(217
)
 
(186
)
 
(849
)
 
(665
)
Equity in earnings of unconsolidated affiliates
35

 
78

 
172

 
142

Gain on deconsolidation of Propane Business
—

 
—

 
—

 
1,057

Gain on sale of AmeriGas common units
—

 
—

 
87

 
—

Loss on extinguishment of debt
—

 
—

 
—

 
(115
)
Gains (losses) on interest rate derivatives
(2
)
 
5

 
44

 
(4
)
Non-operating environmental remediation
(168
)
 
—

 
(168
)
 
—

Other, net
(1
)
 
1

 
5

 
11

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE
(504
)
 
361

 
832

 
1,820

Income tax expense (benefit) from continuing operations
(42
)
 
27

 
97

 
63

INCOME (LOSS) FROM CONTINUING OPERATIONS
(462
)
 
334

 
735

 
1,757

Income (loss) from discontinued operations
(11
)
 
27

 
33

 
(109
)
NET INCOME (LOSS)
(473
)
 
361

 
768

 
1,648

LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST
68

 
54

 
312

 
79

NET INCOME (LOSS) ATTRIBUTABLE TO PARTNERS
(541
)
 
307

 
456

 
1,569

GENERAL PARTNER’S INTEREST IN NET INCOME
77

 
119

 
506

 
461

CLASS H UNITHOLDER’S INTEREST IN NET INCOME
48

 
—

 
48

 
—

LIMITED PARTNERS’ INTEREST IN NET INCOME (LOSS)
$
(666
)
 
$
188

 
$
(98
)
 
$
1,108

INCOME (LOSS) FROM CONTINUING OPERATIONS PER LIMITED PARTNER UNIT:
 
 
 
 
 
 
 
Basic
$
(1.87
)
 
$
0.56

 
$
(0.23
)
 
$
4.93

Diluted
$
(1.87
)
 
$
0.56

 
$
(0.23
)
 
$
4.91

NET INCOME (LOSS) PER LIMITED PARTNER UNIT:
 
 
 
 
 
 
 
Basic
$
(1.90
)
 
$
0.62

 
$
(0.18
)
 
$
4.43

Diluted
$
(1.90
)
 
$
0.62

 
$
(0.18
)
 
$
4.42

WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING:
 
 
 
 
 
 
 
Basic
345.1

 
296.3

 
343.4

 
248.3

Diluted
345.1

 
297.0

 
343.4

 
249.0


4


SUPPLEMENTAL INFORMATION
(Tabular dollar amounts in millions)
(unaudited)
 
Three Months Ended December 31,
 
Years Ended December 31,
 
2013
 
2012
 
2013
 
2012
Reconciliation of net income (loss) to Adjusted EBITDA and Distributable Cash Flow (a):
 
 
 
 
 
 
 
Net income (loss)
$
(473
)
 
$
361

 
$
768

 
$
1,648

Interest expense, net of interest capitalized
217

 
186

 
849

 
665

Gain on deconsolidation of Propane Business
—

 
—

 
—

 
(1,057
)
Gain on sale of AmeriGas common units
—

 
—

 
(87
)
 
—

Goodwill impairment
689

 
—

 
689

 
—

Income tax expense (benefit) from continuing operations
(42
)
 
27

 
97

 
63

Depreciation and amortization
268

 
237

 
1,032

 
656

Non-cash compensation expense
11

 
11

 
47

 
42

(Gains) losses on interest rate derivatives
2

 
(5
)
 
(44
)
 
4

Unrealized (gains) losses on commodity risk management activities
(6
)
 
(51
)
 
(51
)
 
9

Write-down of assets included in income (loss) from discontinued operations
—

 
(13
)
 
—

 
132

LIFO valuation adjustment
19

 
75

 
(3
)
 
75

Loss on extinguishment of debt
—

 
—

 
—

 
115

Non-operating environmental remediation
168

 
—

 
168

 
—

Equity in earnings of unconsolidated affiliates
(35
)
 
(78
)
 
(172
)
 
(142
)
Adjusted EBITDA related to unconsolidated affiliates
155

 
178

 
629

 
480

Other, net
13

 
20

 
31

 
54

Adjusted EBITDA (consolidated)
986

 
948

 
3,953

 
2,744

Adjusted EBITDA related to unconsolidated affiliates
(155
)
 
(178
)
 
(629
)
 
(480
)
Distributions from unconsolidated affiliates
123

 
72

 
464

 
262

Interest expense, net of interest capitalized
(217
)
 
(186
)
 
(849
)
 
(665
)
Amortization included in interest expense
(17
)
 
(26
)
 
(80
)
 
(35
)
Income tax (expense) benefit from continuing operations
42

 
(27
)
 
(97
)
 
(63
)
Maintenance capital expenditures
(109
)
 
(143
)
 
(343
)
 
(313
)
Other, net
—

 
2

 
4

 
3

Distributable Cash Flow (consolidated)
653

 
462

 
2,423

 
1,453

Distributable Cash Flow attributable to Sunoco Logistics (100%)
(155
)
 
(165
)
 
(655
)
 
(165
)
Distributions from Sunoco Logistics to ETP (b)
57

 
41

 
204

 
41

Distributions to ETE in respect of Holdco (c)
—

 
(75
)
 
(50
)
 
(75
)
Distributions to Regency in respect of Lone Star (d)
(25
)
 
(17
)
 
(87
)
 
(63
)
Distributable Cash Flow attributable to the partners of ETP
$
530

 
$
246

 
$
1,835

 
$
1,191

 
 
 
 
 
 
 
 
Distributions to the partners of ETP (e):
 
 
 
 
 
 
 
Limited Partners:
 
 
 
 
 
 
 
Common units held by public
$
265

 
$
224

 
$
1,005

 
$
783

Common units held by ETE
45

 
45

 
268

 
180

Class H Units held by ETE Holdings
54

 
—

 
105

 
—

General Partner interests held by ETE
5

 
5

 
20

 
20

Incentive Distribution Rights (“IDR”) held by ETE
173

 
148

 
701

 
529

IDR relinquishments related to previous transactions
(57
)
 
(31
)
 
(199
)
 
(90
)
Total distributions to be paid to the partners of ETP
485

 
391

 
1,900

 
1,422

Distributions credited to Holdco transactions (f)
—

 
—

 
(68
)
 
—

Net distributions to the partners of ETP
$
485

 
$
391

 
$
1,832

 
$
1,422

Distribution coverage ratio (g)
1.09x

 
0.63x

 
1.00x

 
0.84x


5


(a)
Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures used by industry analysts, investors, lenders, and rating agencies to assess the financial performance and the operating results of ETP’s fundamental business activities and should not be considered in isolation or as a substitute for net income, income from operations, cash flows from operating activities, or other GAAP measures.
There are material limitations to using measures such as Adjusted EBITDA and Distributable Cash Flow, including the difficulty associated with using either as the sole measure to compare the results of one company to another, and the inability to analyze certain significant items that directly affect a company’s net income or loss or cash flows. In addition, our calculations of Adjusted EBITDA and Distributable Cash Flow may not be consistent with similarly titled measures of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP, such as gross margin, operating income, net income, and cash flow from operating activities.
Definition of Adjusted EBITDA
ETP defines Adjusted EBITDA as total partnership earnings before interest, taxes, depreciation, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, non-cash impairment charges, loss on extinguishment of debt, gain on deconsolidation of our Propane Business and other non-operating income or expense items. Unrealized gains and losses on commodity risk management activities include unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Adjusted EBITDA reflects amounts for less than wholly-owned subsidiaries based on 100% of the subsidiaries’ results of operations and for unconsolidated affiliates based on ETP’s proportionate ownership.
Adjusted EBITDA is used by management to determine our operating performance and, along with other financial and volumetric data, as internal measures for setting annual operating budgets, assessing financial performance of our numerous business locations, as a measure for evaluating targeted businesses for acquisition and as a measurement component of incentive compensation.
Definition of Distributable Cash Flow
ETP defines Distributable Cash Flow as net income, adjusted for certain non-cash items, less maintenance capital expenditures. Non-cash items include depreciation and amortization, non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, non-cash impairment charges, loss on extinguishment of debt and gain on deconsolidation of our Propane Business. Unrealized gains and losses on commodity risk management activities includes unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Distributable Cash Flow reflects earnings from unconsolidated affiliates on a cash basis.
Distributable Cash Flow is used by management to evaluate our overall performance. Our partnership agreement requires us to distribute all available cash, and Distributable Cash Flow is calculated to evaluate our ability to fund distributions through cash generated by our operations.
On a consolidated basis, Distributable Cash Flow includes 100% of the Distributable Cash Flow of ETP’s consolidated subsidiaries. However, to the extent that noncontrolling interests exist among ETP’s subsidiaries, the Distributable Cash Flow generated by ETP’s subsidiaries may not be available to be distributed to the partners of ETP. In order to reflect the cash flows available for distributions to the partners of ETP, ETP has reported Distributable Cash Flow attributable to the partners of ETP, which is calculated by adjusting Distributable Cash Flow (consolidated), as follows:
•
For subsidiaries with publicly traded equity interests, Distributable Cash Flow (consolidated) includes 100% of Distributable Cash Flow attributable to such subsidiary, and Distributable Cash Flow attributable to the partners of ETP includes distributions to be received by the parent company with respect to the periods presented. Currently, Sunoco Logistics is the only such subsidiary.
•
For consolidated joint ventures or similar entities, where the noncontrolling interest is not publicly traded, Distributable Cash Flow (consolidated) includes 100% of Distributable Cash Flow attributable to such subsidiary, but Distributable Cash Flow attributable to the partners of ETP is net of distributions to be paid by the subsidiary to the noncontrolling interests. Currently, Lone Star is such a subsidiary, as it is 30% owned by Regency, which is an unconsolidated affiliate. Prior to April 30, 2013, Holdco was also such a subsidiary, as ETE held a noncontrolling interest in Holdco.
The Partnership has presented Distributable Cash Flow in previous communications; however, the Partnership changed its calculation of this non-GAAP measure in the quarter ended December 31, 2013. Previously, the Partnership’s calculation of Distributable Cash Flow reflected the impact of amortization included in interest expense. Such amortization includes

6


amortization of deferred financing costs, premiums or discounts on the issuance of long-term debt, and fair value adjustments on long-term debt assumed in acquisitions. Beginning with the quarter ended December 31, 2013, the Partnership’s calculation of Distributable Cash Flow excludes the impact of such amortization. Management believes that this revised calculation is more useful to and more accurately reflects the cash flows of the Partnership that are available for payment of distributions.
(b)
For the three months ended December 31, 2013, cash distributions paid from Sunoco Logistics to ETP consist of cash distributions paid on February 14, 2014 in respect of the quarter ended December 31, 2013. For the three months ended December 31, 2012, cash distributions paid from Sunoco Logistics to ETP consist of cash distributions paid on February 14, 2013 in respect of the quarter ended December 31, 2012.
For the year ended December 31, 2013, cash distributions paid from Sunoco Logistics to ETP consist of cash distributions paid on May 15, 2013 in respect of the quarter ended March 31, 2013, cash distributions paid on August 14, 2013 in respect of the quarter ended June 30, 2013, cash distributions paid on November 14, 2013 in respect to the quarter ended September 30, 2013, and cash distributions paid on February 14, 2014 in respect of the quarter ended December 31, 2013. For the year ended December 31, 2012, cash distributions paid from Sunoco Logistics to ETP consist of cash distributions paid on February 14, 2013 in respect of the quarter ended December 31, 2012.
(c)
For the year ended December 31, 2013, cash distributions to ETE in respect of Holdco consist of cash distributions paid in April 2013 in respect to the quarter ended March 31, 2013.
For the three months and year ended December 31, 2012, cash distributions to ETE in respect of Holdco consist of cash distributions paid on February 14, 2013 in respect of the quarter ended December 31, 2012.
(d)
Cash distributions to Regency in respect of Lone Star consist of cash distributions paid on a monthly basis, one month in arrears. These amounts are in respect of the periods then ended, including payments made in arrears subsequent to period end.
(e)
For the three months ended December 31, 2013, cash distributions paid to the partners of ETP consist of cash distributions paid on February 14, 2014 in respect of the quarter ended December 31, 2013. For the three months ended December 31, 2012, cash distributions paid to the partners of ETP consist of cash distributions paid on February 14, 2013 in respect of the quarter ended December 31, 2012.
For the year ended December 31, 2013, cash distributions paid to the partners of ETP consist of cash distributions paid on May 15, 2013 in respect of the quarter ended March 31, 2013, cash distributions paid on August 14, 2013 in respect of the quarter ended June 30, 2013, cash distributions paid on November 14, 2013 in respect of the quarter ended September 30, 2013, and cash distributions paid on February 14, 2014 in respect of the quarter ended December 31, 2013. For the year ended December 31, 2012, cash distributions paid to the partners of ETP consist of cash distributions paid on May 15, 2012 in respect of the quarter ended March 31, 2012, cash distributions paid on August 14, 2012 in respect of the quarter ended June 30, 2012, cash distributions paid on November 14, 2012 in respect of the quarter ended September 30, 2012, and cash distributions paid on February 14, 2013 in respect of the quarter ended December 31, 2012.
(f)
For the year ended December 31, 2013, net distributions to the partners of ETP excluded distributions paid in respect of the quarter ended March 31, 2013 on 49.5 million ETP Common Units issued to ETE as a portion of the consideration for ETP’s acquisition of ETE’s interest in Holdco on April 30, 2013. These newly issued ETP Common Units received cash distributions on May 15, 2013; however, such distributions were reduced from the total cash portion of the consideration paid to ETE in connection with the April 30, 2013 Holdco transaction.
(g)
Distribution coverage ratio is calculated as Distributable Cash Flow attributable to the partners of ETP divided by net distributions to the partners of ETP.

7


SUMMARY ANALYSIS OF QUARTERLY RESULTS BY SEGMENT
(Tabular dollar amounts in millions)
(unaudited)
Our segment results were presented based on the measure of Segment Adjusted EBITDA. The tables below identify the components of Segment Adjusted EBITDA, which was calculated as follows:
•
Gross margin, operating expenses, and selling, general and administrative. These amounts represent the amounts included in our consolidated financial statements that are attributable to each segment.
•
Unrealized gains or losses on commodity risk management activities. These are the unrealized amounts that are included in cost of products sold to calculate gross margin. These amounts are not included in Segment Adjusted EBITDA; therefore, the unrealized losses are added back and the unrealized gains are subtracted to calculate the segment measure.
•
Non-cash compensation expense. These amounts represent the total non-cash compensation recorded in operating expenses and selling, general and administrative. This expense is not included in Segment Adjusted EBITDA and therefore is added back to calculate the segment measure.
•
Adjusted EBITDA related to unconsolidated affiliates. These amounts represent our proportionate share of the Adjusted EBITDA of our unconsolidated affiliates. Amounts reflected are calculated consistently with our definition of Adjusted EBITDA above.
 
Three Months Ended December 31,
 
 
 
2013
 
2012
 
Change
Segment Adjusted EBITDA:
 
 
 
 
 
Midstream
$
129

 
$
109

 
$
20

NGL transportation and services
94

 
54

 
40

Interstate transportation and storage
301

 
312

 
(11
)
Intrastate transportation and storage
112

 
131

 
(19
)
Investment in Sunoco Logistics
210

 
219

 
(9
)
Retail marketing
91

 
109

 
(18
)
All other
49

 
14

 
35

 
$
986

 
$
948

 
$
38


8


Midstream
 
Three Months Ended December 31,
 
 
 
2013
 
2012
 
Change
Gathered volumes (MMBtu/d):
 
 
 
 
 
ETP legacy assets
2,493,038

 
2,473,878

 
19,160

Southern Union gathering and processing
—

 
533,548

 
(533,548
)
NGLs produced (Bbls/d):
 
 
 
 
 
ETP legacy assets
119,878

 
87,389

 
32,489

Southern Union gathering and processing
—

 
42,346

 
(42,346
)
Equity NGLs produced (Bbls/d):
 
 
 
 
 
ETP legacy assets
11,036

 
13,538

 
(2,502
)
Southern Union gathering and processing
—

 
6,724

 
(6,724
)
Revenues
$
563

 
$
543

 
$
20

Cost of products sold
400

 
367

 
33

Gross margin
163

 
176

 
(13
)
Unrealized gains on commodity risk management activities
(2
)
 
—

 
(2
)
Operating expenses, excluding non-cash compensation expense
(33
)
 
(49
)
 
16

Selling, general and administrative expenses, excluding non-cash compensation expense
(2
)
 
(12
)
 
10

Adjusted EBITDA related to unconsolidated affiliates
—

 
(6
)
 
6

Other
3

 
—

 
3

Segment Adjusted EBITDA
$
129

 
$
109

 
$
20

Excluding the $10 million negative impact related to the deconsolidation of Southern Union’s gathering and processing operations, midstream’s Segment Adjusted EBITDA increased $30 million as a result of increased cash flows from assets recently placed in service and an increase in production (primarily in the Eagle Ford Shale) due to continued favorable market conditions.
Segment Adjusted EBITDA for the midstream segment reflected a decrease in gross margin as follows:
 
Three Months Ended December 31,
 
 
 
2013
 
2012
 
Change
Gathering and processing fee-based revenues
$
122

 
$
101

 
$
21

Non fee-based contracts and processing
37

 
73

 
(36
)
Other
4

 
2

 
2

Total gross margin
$
163

 
$
176

 
$
(13
)
The assets recently placed in service and increased production, as discussed above, had a favorable impact of $29 million on fee-based revenues, which was offset by $8 million related to the deconsolidation of Southern Union’s gathering and processing operations on April 30, 2013. Non fee-based gross margin decreased primarily due to the deconsolidation of Southern Union’s gathering and processing operations.

9


NGL Transportation and Services
 
Three Months Ended December 31,
 
 
 
2013
 
2012
 
Change
NGL transportation volumes (Bbls/d)
360,480

 
187,821

 
172,659

NGL fractionation volumes (Bbls/d)
125,275

 
18,424

 
106,851

Revenues
$
776

 
$
154

 
$
622

Cost of products sold
643

 
76

 
567

Gross margin
133

 
78

 
55

Operating expenses, excluding non-cash compensation expense
(38
)
 
(18
)
 
(20
)
Selling, general and administrative expenses, excluding non-cash compensation expense
(2
)
 
(4
)
 
2

Adjusted EBITDA related to unconsolidated affiliates
1

 
(2
)
 
3

Segment Adjusted EBITDA
$
94

 
$
54

 
$
40

Segment Adjusted EBITDA for the NGL transportation and services segment increased primarily due to higher gross margin, as discussed below, partially offset by higher operating expenses primarily due to additional expenses from assets recently placed in service.
Segment Adjusted EBITDA for the NGL transportation and services segment reflected an increase in gross margin as follows:
 
Three Months Ended December 31,
 
 
 
2013
 
2012
 
Change
Transportation margin
$
52

 
$
28

 
$
24

Processing and fractionation margin
40

 
18

 
22

Storage margin
38

 
32

 
6

Other margin
3

 
—

 
3

Total gross margin
$
133

 
$
78

 
$
55

Transportation margin increased as a result of higher volumes transported primarily due to the completion of the Gateway pipeline resulting in increased margin of $18 million on our Lone Star pipeline system for the three months ended December 31, 2013. The completion of our Justice pipeline connection to Mont Belvieu, Texas and additional NGL production from our processing plants accounted for the remainder of the increase in transportation margin.
Processing and fractionation margin increased due to higher volumes from the startup of Lone Star’s fractionators in Mont Belvieu, Texas in December 2012 and October 2013, respectively.

10


Interstate Transportation and Storage
 
Three Months Ended December 31,
 
 
 
2013
 
2012
 
Change
Natural gas transported (MMBtu/d)
6,405,185

 
6,962,646

 
(557,461
)
Natural gas sold (MMBtu/d)
19,244

 
17,020

 
2,224

Revenues
$
317

 
$
334

 
$
(17
)
Operating expenses, excluding non-cash compensation, amortization and accretion expenses
(91
)
 
(77
)
 
(14
)
Selling, general and administrative expenses, excluding non-cash compensation, amortization and accretion expenses
(14
)
 
(30
)
 
16

Adjusted EBITDA related to unconsolidated affiliates
89

 
85

 
4

Segment Adjusted EBITDA
$
301

 
$
312

 
$
(11
)
 
 
 
 
 
 
Distributions from unconsolidated affiliates
$
83

 
$
42

 
$
41

Segment Adjusted EBITDA for the interstate transportation and storage segment decreased primarily due to a $17 million decrease in revenues as a result of overall lower capacity sold and lower rates. Additionally, an increase of $14 million in operating expenses, due in part to the timing of maintenance activities, was offset by a $16 million decrease in selling, general and administrative expenses. Selling, general and administrative expenses were lower primarily due to the impact of certain cost reduction initiatives in 2013.
Intrastate Transportation and Storage
 
Three Months Ended December 31,
 
 
 
2013
 
2012
 
Change
Natural gas transported (MMBtu/d)
8,991,586

 
9,426,807

 
(435,221
)
Revenues
$
592

 
$
659

 
$
(67
)
Cost of products sold
415

 
445

 
(30
)
Gross margin
177

 
214

 
(37
)
Unrealized gains on commodity risk management activities
(9
)
 
(35
)
 
26

Operating expenses, excluding non-cash compensation expense
(51
)
 
(47
)
 
(4
)
Selling, general and administrative expenses, excluding non-cash compensation expense
(5
)
 
(4
)
 
(1
)
Adjusted EBITDA related to unconsolidated affiliates
—

 
3

 
(3
)
Segment Adjusted EBITDA
$
112

 
$
131

 
$
(19
)
Segment Adjusted EBITDA for the intrastate transportation and storage segment decreased primarily due to a decrease in transportation fees due to lower transportation volumes from the cessation of certain long-term contracts, and to a lesser extent, due to the renewal of long-term contracts at lower rates.

11


Investment in Sunoco Logistics
 
Three Months Ended December 31,
 
 
 
2013
 
2012
 
Change
Revenue
$
4,288

 
$
3,189

 
$
1,099

Cost of products sold
4,040

 
2,885

 
1,155

Gross margin
248

 
304

 
(56
)
Unrealized (gains) losses on commodity risk management activities
11

 
(15
)
 
26

Operating expenses, excluding non-cash compensation expense
(30
)
 
(48
)
 
18

Selling, general and administrative expenses, excluding non-cash compensation expense
(20
)
 
(32
)
 
12

Adjusted EBITDA related to unconsolidated affiliates
10

 
10

 
—

Other
(9
)
 
—

 
(9
)
Segment Adjusted EBITDA
$
210

 
$
219

 
$
(9
)
 
 
 
 
 
 
Distributions from unconsolidated affiliates
$
4

 
$
6

 
$
(2
)
Segment Adjusted EBITDA for the investment in Sunoco Logistics segment decreased due to lower crude oil margins in Sunoco Logistics’ crude oil acquisition and marketing operations of $56 million driven by contracted crude differentials compared to the prior year, partially offset by increased crude oil volumes of $8 million as a result of the expansion of Sunoco Logistics’ crude oil trucking fleet and higher market demand. This net decrease was partially offset by an increase in Sunoco Logistics’ crude oil pipeline operations of $30 million primarily due to higher throughput volumes largely attributable to expansion projects coming online in 2013 and strong demand for West Texas crude as well as an increase in Sunoco Logistics’ terminal facilities operations of $10 million primarily due to improved contributions from the Nederland and Eagle Point terminals.
Retail Marketing
 
Three Months Ended December 31,
 
 
 
2013
 
2012
 
Change
Total retail gasoline outlets, end of period
5,112

 
4,988

 
124

Total company-operated outlets, end of period
513

 
437

 
76

Gasoline and diesel throughput per company-operated site (gallons/month)
193,901

 
198,000

 
(4,099
)
Revenue
$
5,201

 
$
5,926

 
$
(725
)
Cost of products sold
4,961

 
5,757

 
(796
)
Gross margin
240

 
169

 
71

Unrealized gains on commodity risk management activities
(2
)
 
—

 
(2
)
Operating expenses, excluding non-cash compensation expense
(128
)
 
(119
)
 
(9
)
Selling, general and administrative expenses, excluding non-cash compensation expense
(38
)
 
(17
)
 
(21
)
LIFO valuation adjustments
19

 
75

 
(56
)
Adjusted EBITDA related to unconsolidated affiliates
—

 
1

 
(1
)
Segment Adjusted EBITDA
$
91

 
$
109

 
$
(18
)
Segment Adjusted EBITDA for the retail marketing segment decreased primarily due to lower retail gasoline margins, offset by a $10 million positive impact from the MACS acquisition in October 2013. In the prior period, retail gasoline margins were unusually high as the cost of wholesale gasoline declined sharply in line with the crude market decline.

12


All Other
 
Three Months Ended December 31,
 
 
 
2013
 
2012
 
Change
Revenue
$
725

 
$
485

 
$
240

Cost of products sold
692

 
481

 
211

Gross margin
33

 
4

 
29

Unrealized gains on commodity risk management activities
(4
)
 
(1
)
 
(3
)
Operating expenses, excluding non-cash compensation expense
(9
)
 
(15
)
 
6

Selling, general and administrative expenses, excluding non-cash compensation expense
(35
)
 
(91
)
 
56

Adjusted EBITDA related to discontinued operations
1

 
33

 
(32
)
Adjusted EBITDA related to unconsolidated affiliates
57

 
87

 
(30
)
Other
7

 
—

 
7

Elimination
(1
)
 
(3
)
 
2

Segment Adjusted EBITDA
$
49

 
$
14

 
$
35

 
 
 
 
 
 
Distributions from unconsolidated affiliates
$
34

 
$
24

 
$
10

Amounts reflected above primarily include:
•
our investment in AmeriGas;
•
our natural gas compression operations;
•
an approximate 33% non-operating interest in PES, a refining joint venture;
•
our investment in Regency related to the Regency common and Class F units received by Southern Union in exchange of its interest in Southern Union Gathering Company, LLC to Regency on April 30, 2013; and
•
our natural gas marketing operations.
Adjusted EBITDA related to discontinued operations reflected the results of Southern Union’s local distribution operations.
Adjusted EBITDA related to unconsolidated affiliates reflected the results from our investments in AmeriGas, PES and Regency. Additional information related to unconsolidated affiliates is provided below in “Supplemental Information on Unconsolidated Affiliates.”
Segment Adjusted EBITDA for all other increased primarily due to favorable results from our natural gas marketing operations and due to merger-related expenses incurred in 2012.
The increase in distributions from unconsolidated affiliates was primarily due to cash distributions from our ownership in Regency of $15 million during the fourth quarter of 2013 slightly offset by a decrease in cash distributions from our ownership in AmeriGas of $5 million as a result of selling a portion of these interests in July 2013.

13


SUPPLEMENTAL INFORMATION ON CAPITAL EXPENDITURES
(Tabular amounts in millions)
(unaudited)
The following is a summary of capital expenditures (net of contributions in aid of construction costs) during the year ended December 31, 2013:
 
Growth
 
Maintenance
 
Total
Midstream(1)
$
516

 
$
49

 
$
565

NGL transportation and services(2)
426

 
17

 
443

Interstate transportation and storage
55

 
97

 
152

Intrastate transportation and storage
18

 
29

 
47

Investment in Sunoco Logistics
965

 
53

 
1,018

Retail marketing
113

 
63

 
176

All other (including eliminations)
19

 
35

 
54

Total capital expenditures
$
2,112

 
$
343

 
$
2,455

(1)
Amounts reflected above for the midstream segment include growth and maintenance capital expenditures of $95 million and $10 million, respectively, incurred by Southern Union’s gathering and processing operations prior to deconsolidation on April 30, 2013.
(2)
We received $147 million in capital contributions from Regency related to their 30% share of Lone Star.
We currently expect capital expenditures for the full year 2014 to be within the following ranges:
 
Growth
 
Maintenance
 
Low
 
High
 
Low
 
High
Midstream
$
275

 
$
300

 
$
10

 
$
15

NGL transportation and services(1)
300

 
330

 
20

 
25

Interstate transportation and storage
20

 
30

 
115

 
135

Intrastate transportation and storage
30

 
40

 
25

 
30

Investment in Sunoco Logistics
1,250

 
1,350

 
65

 
75

Retail marketing
125

 
155

 
50

 
60

All other (including eliminations)
60

 
80

 
10

 
15

Total capital expenditures
$
2,060

 
$
2,285

 
$
295

 
$
355

(1) 
We expect to receive capital contributions from Regency related to their 30% share of Lone Star of between $75 million and $100 million.

14


SUPPLEMENTAL INFORMATION ON UNCONSOLIDATED AFFILIATES
(In millions)
(unaudited)
 
Three Months Ended December 31,
 
 
 
2013
 
2012
 
Change
Equity in earnings (losses) of unconsolidated affiliates:
 
 
 
 
 
AmeriGas
$
26

 
$
25

 
$
1

Citrus
21

 
16

 
5

FEP
14

 
14

 
—

Regency
(2
)
 
—

 
(2
)
Other
(24
)
 
23

 
(47
)
Total equity in earnings of unconsolidated affiliates
$
35

 
$
78

 
$
(43
)
Proportionate share of interest, depreciation, amortization, non-cash compensation expense, loss on debt extinguishment and taxes:
 
 
 
 
 
AmeriGas
$
27

 
$
35

 
$
(8
)
Citrus
49

 
50

 
(1
)
FEP
4

 
6

 
(2
)
Regency
26

 
—

 
26

Other
14

 
9

 
5

Total proportionate share of interest, depreciation, amortization, non-cash compensation expense, loss on debt extinguishment and taxes
$
120

 
$
100

 
$
20

Adjusted EBITDA related to unconsolidated affiliates:
 
 
 
 
 
AmeriGas
$
53

 
$
60

 
$
(7
)
Citrus
70

 
66

 
4

FEP
18

 
20

 
(2
)
Regency
24

 
—

 
24

Other
(10
)
 
32

 
(42
)
Total Adjusted EBITDA related to unconsolidated affiliates
$
155

 
$
178

 
$
(23
)
Distributions received from unconsolidated affiliates:
 
 
 
 
 
AmeriGas
$
19

 
$
24

 
$
(5
)
Citrus
65

 
25

 
40

FEP
18

 
17

 
1

Regency
15

 
—

 
15

Other
6

 
6

 
—

Total distributions received from unconsolidated affiliates
$
123

 
$
72

 
$
51


15