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
November 7, 2012
Date of Report (Date of earliest event reported)
ENERGY TRANSFER EQUITY, L.P.
(Exact name of Registrant as specified in its charter)
Delaware | 1-32740 | 30-0108820 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification Number) | ||
3738 Oak Lawn Avenue
Dallas, TX 75219
(Address of principal executive offices)
(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 November 7, 2012, Energy Transfer Equity, L.P. (the “Partnership”) issued a press release announcing its financial and operating results for the third quarter ended September 30, 2012. A copy of this 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 this Item 2.02 and in the attached exhibit shall be deemed to be “furnished” and not be deemed to be “filed” for purposes of the Securities Exchange Act of 1934, as amended (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 Number | Description of the Exhibit | |
Exhibit 99.1 | Energy Transfer Equity, L.P. Press Release dated November 7, 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 hereunto duly authorized.
Energy Transfer Equity, L.P. | |
By:LE GP, LLC, its general partner | |
Date: November 7, 2012 | /s/ John W. McReynolds John W. McReynolds President and Chief Financial Officer |
Exhibit Index
Exhibit Number | Description of the Exhibit | |
Exhibit 99.1 | Energy Transfer Equity, L.P. Press Release dated November 7, 2012 | |
ENERGY TRANSFER EQUITY
REPORTS THIRD QUARTER RESULTS
Dallas - November 7, 2012 - Energy Transfer Equity, L.P. (NYSE:ETE) today reported financial results for the quarter ended September 30, 2012.
Distributable Cash Flow, as adjusted, for Energy Transfer Equity, L.P. ("ETE" or the "Partnership") was $189.2 million for the three months ended September 30, 2012, an increase of $62.9 million over the three months ended September 30, 2011. ETE's net income attributable to partners was $35.2 million for the three months ended September 30, 2012 as compared to $69.1 million for the three months ended September 30, 2011.
Distributable Cash Flow, as adjusted, for ETE was $476.1 million for the nine months ended September 30, 2012, an increase of $100.0 million over the nine months ended September 30, 2011. ETE's net income attributable to partners was $255.1 million for the nine months ended September 30, 2012 as compared to $224.0 million for the nine months ended September 30, 2011.
As of and during the three and nine months ended September 30, 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 26, 2012 and its cash flows were included in ETE's Distributable Cash Flow from March 26, 2012 to September 30, 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 and nine months ended September 30, 2012: |
• | $62.2 million in fees recognized during the first quarter of 2012 related to a bridge loan facility that ETE entered into to initially fund the cash consideration of the Southern Union merger; |
• | $38.2 million in merger-related costs that were accounted for in selling, general and administrative expenses during the nine months ended September 30, 2012, respectively; and, |
• | $56.8 million of net merger-related expenses incurred directly by Southern Union that were consolidated in to ETE's operating results during the nine months ended September 30, 2012. |
• | 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 nine months ended September 30, 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 million was recorded during the nine months ended September 30, 2012 and recognized in ETE's consolidated statement of operations. |
The Partnership has scheduled a conference call for 8:30 a.m. Central Time, Thursday, November 8, 2012 to discuss its third 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 Partnership’s principal sources of cash flow historically have derived from (i) 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 50.2 million of ETP's common units and approximately 26.3 million of Regency's common units and (ii) cash flow generated from its wholly owned subsidiary, Southern Union, which was acquired on March 26, 2012. Subsequent to October 5, 2012, the Partnership's cash flows will derive from its investment in ETP and Regency and its 60% interest in Holdco. The Partnership's primary cash requirements are for general and administrative expenses, debt service requirements and distributions to its partners and holders of its 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 to the distributions the Partnership expects to pay its unitholders. Using this measure, the Partnership's management can compute the coverage ratio of estimated cash flows for a period to planned cash distributions for such period.
Distributable Cash Flow is also an important non-GAAP financial measure for our limited partners since it indicates to investors whether the Partnership's investments are generating cash flows at a level that can sustain or support an increase in quarterly cash distribution levels. Financial measures such as Distributable Cash Flow are quantitative standards used by the investment community with respect to publicly traded partnerships because the value of a partnership unit is in part measured by its yield (which in turn is based on the amount of cash distributions a partnership can pay to a unitholder). The GAAP measure most directly comparable to Distributable Cash Flow is net income for ETE on a stand-alone basis (“Parent Company”). The accompanying analysis of Distributable Cash Flow is presented for the three and nine months ended September 30, 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 the cash expenses that were incurred during the three and nine months ended September 30, 2012 in connection with the Partnership's merger and acquisition activities, Distributable Cash Flow, as adjusted, for the three and nine months ended September 30, 2012 and 2011 is a significant liquidity measure used by the Partnership's senior management to compare net cash flows generated by the Partnership 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 and nine months ended September 30, 2012 and 2011 for comparative purposes.
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) and approximately 50.2 million ETP limited partner units; and owns the general partner and 100% of the IDRs of Regency Energy Partners LP (NYSE:RGP) and approximately
26.3 million RGP limited partner units. ETE also owns a non-controlling interest in a corporation (ETP Holdco Corporation) that owns Southern Union Company and Sunoco, Inc. The ETE family of companies owns approximately 69,000 miles of natural gas, natural gas liquids, refined products, and crude 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 master limited partnership owning and operating one of the largest and most diversified portfolios of energy assets in the United States. ETP currently has natural gas operations that include approximately 24,000 miles of gathering and transportation pipelines, treating and processing assets, and storage facilities. ETP also owns general partner interests, 100% of the incentive distribution rights, and a 32.4% limited partnership interest 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 assets. ETP also holds a 70% interest in Lone Star NGL, a joint venture that owns and operates natural gas liquids storage, fractionation and transportation assets in Texas, Louisiana and Mississippi. In addition, ETP holds controlling interest in a corporation (ETP Holdco Corporation) that owns Southern Union Company and Sunoco, Inc. ETP’s general partner is owned by ETE. For more information, visit the Energy Transfer Partners, L.P. website 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. RGP also holds a 30% interest in Lone Star NGL LLC, a joint venture that owns and operates natural gas liquids storage, fractionation, and transportation assets in Texas, Louisiana and Mississippi. Regency’s general partner is owned by Energy Transfer Equity, L.P. (NYSE:ETE). For more information, visit the Regency Energy Partners LP website at www.regencyenergy.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 pipeline, terminalling and crude oil acquisition and marketing assets. The Crude Oil Pipelines segment consists of approximately 5,400 miles of crude oil pipelines, located principally in Oklahoma and Texas. The Crude Oil Acquisition and Marketing segment consists of acquisition and marketing of crude oil and is principally conducted in the midcontinent and consists of approximately 200 crude oil transport trucks and approximately 120 crude oil truck unloading facilities. The Terminal Facilities segment consists of approximately 42 million shell barrels of refined products and crude oil terminal capacity (including approximately 22 million shell barrels of capacity at the Nederland Terminal on the Gulf Coast of Texas and approximately 5 million shell barrels of capacity at the Eagle Point terminal on the banks of the Delaware River in New Jersey). The Refined Products Pipelines segment consists of approximately 2,500 miles of refined products pipelines located in the northeast, midwest and southwest United States, and equity interests in four refined products pipelines. Sunoco Logistics' general partner is owned by Energy Transfer Partners, L.P. For more information, visit the Sunoco Logistics Partners, L.P. web site at www.sunocologistics.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)
September 30, 2012 | December 31, 2011 | ||||||
ASSETS | |||||||
CURRENT ASSETS | $ | 1,737,422 | $ | 1,455,444 | |||
PROPERTY, PLANT AND EQUIPMENT, net | 22,237,050 | 14,558,562 | |||||
NON-CURRENT ASSETS HELD FOR SALE | 190,996 | — | |||||
ADVANCES TO AND INVESTMENTS IN AFFILIATES | 4,500,273 | 1,496,600 | |||||
NON-CURRENT PRICE RISK MANAGEMENT ASSETS | 43,566 | 26,011 | |||||
GOODWILL | 3,458,807 | 2,038,975 | |||||
INTANGIBLES ASSETS, net | 953,924 | 1,072,291 | |||||
OTHER NON-CURRENT ASSETS, net | 475,561 | 248,910 | |||||
Total assets | $ | 33,597,599 | $ | 20,896,793 | |||
LIABILITIES AND EQUITY | |||||||
CURRENT LIABILITIES | $ | 2,540,273 | $ | 1,841,313 | |||
LONG-TERM DEBT, less current maturities | 17,525,668 | 10,946,864 | |||||
SERIES A CONVERTIBLE PREFERRED UNITS | 327,960 | 322,910 | |||||
DEFERRED INCOME TAXES | 1,954,144 | 217,244 | |||||
NON-CURRENT PRICE RISK MANAGEMENT LIABILITIES | 173,838 | 81,415 | |||||
OTHER NON-CURRENT LIABILITIES | 311,713 | 26,958 | |||||
COMMITMENTS AND CONTINGENCIES | |||||||
PREFERRED UNITS OF SUBSIDIARY | 72,549 | 71,144 | |||||
EQUITY: | |||||||
Total partners' capital | 2,197,909 | 53,484 | |||||
Noncontrolling interest | 8,493,545 | 7,335,461 | |||||
Total equity | 10,691,454 | 7,388,945 | |||||
Total liabilities and equity | $ | 33,597,599 | $ | 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 September 30, | Nine Months Ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
REVENUES: | |||||||||||||||
Natural gas sales | $ | 789,634 | $ | 796,323 | $ | 1,928,913 | $ | 2,320,208 | |||||||
NGL sales | 584,475 | 507,616 | 1,704,860 | 1,187,616 | |||||||||||
Gathering, transportation and other fees | 635,340 | 479,279 | 1,724,756 | 1,335,201 | |||||||||||
Retail propane sales | — | 213,496 | 87,082 | 962,258 | |||||||||||
Other | 161,513 | 87,300 | 364,910 | 219,600 | |||||||||||
Total revenues | 2,170,962 | 2,084,014 | 5,810,521 | 6,024,883 | |||||||||||
COSTS AND EXPENSES: | |||||||||||||||
Cost of products sold | 1,244,418 | 1,347,587 | 3,250,485 | 3,807,320 | |||||||||||
Operating expenses | 216,673 | 230,909 | 645,129 | 667,084 | |||||||||||
Depreciation and amortization | 219,458 | 151,429 | 589,080 | 426,216 | |||||||||||
Selling, general and administrative | 124,380 | 82,564 | 395,584 | 224,957 | |||||||||||
Total costs and expenses | 1,804,929 | 1,812,489 | 4,880,278 | 5,125,577 | |||||||||||
OPERATING INCOME | 366,033 | 271,525 | 930,243 | 899,306 | |||||||||||
OTHER INCOME (EXPENSE): | |||||||||||||||
Interest expense, net of interest capitalized | (237,802 | ) | (193,772 | ) | (732,387 | ) | (543,218 | ) | |||||||
Bridge loan related fees | — | — | (62,241 | ) | — | ||||||||||
Equity in earnings of unconsolidated affiliates | 19,924 | 28,374 | 117,619 | 82,634 | |||||||||||
Gain on deconsolidation of Propane Business | — | — | 1,056,709 | — | |||||||||||
Losses on extinguishments of debt | — | — | (122,844 | ) | — | ||||||||||
Losses on non-hedged interest rate derivatives | (6,118 | ) | (68,497 | ) | (23,296 | ) | (65,094 | ) | |||||||
Other, net | (84 | ) | 27,902 | 28,628 | 15,752 | ||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE | 141,953 | 65,532 | 1,192,431 | 389,380 | |||||||||||
Income tax expense | 28,625 | 3,290 | 40,379 | 18,415 | |||||||||||
INCOME FROM CONTINUING OPERATIONS | 113,328 | 62,242 | 1,152,052 | 370,965 | |||||||||||
Loss from discontinued operations | (147,162 | ) | (1,543 | ) | (150,062 | ) | (4,522 | ) | |||||||
NET INCOME (LOSS) | (33,834 | ) | 60,699 | 1,001,990 | 366,443 | ||||||||||
LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST | (69,004 | ) | (8,384 | ) | 746,900 | 142,435 | |||||||||
NET INCOME ATTRIBUTABLE TO PARTNERS | 35,170 | 69,083 | 255,090 | 224,008 | |||||||||||
GENERAL PARTNER’S INTEREST IN NET INCOME | 87 | 214 | 725 | 693 | |||||||||||
LIMITED PARTNERS’ INTEREST IN NET INCOME | $ | 35,083 | $ | 68,869 | $ | 254,365 | $ | 223,315 | |||||||
INCOME FROM CONTINUING OPERATIONS PER LIMITED PARTNER UNIT: | |||||||||||||||
Basic | $ | 0.65 | $ | 0.32 | $ | 1.54 | $ | 1.02 | |||||||
Diluted | $ | 0.65 | $ | 0.32 | $ | 1.54 | $ | 1.02 | |||||||
NET INCOME PER LIMITED PARTNER UNIT: | |||||||||||||||
Basic | $ | 0.13 | $ | 0.31 | $ | 0.97 | $ | 1.00 | |||||||
Diluted | $ | 0.13 | $ | 0.31 | $ | 0.97 | $ | 1.00 | |||||||
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 September 30, | Nine Months Ended September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Cash distributions from ETP associated with: (1) | |||||||||||||||
General partner interest | $ | 4,935 | $ | 4,898 | $ | 14,768 | $ | 14,690 | |||||||
Incentive distribution rights | 147,310 | 103,714 | 381,487 | 310,254 | |||||||||||
Limited partner interest | 44,890 | 44,890 | 134,671 | 134,670 | |||||||||||
Total | 197,135 | 153,502 | 530,926 | 459,614 | |||||||||||
IDR relinquishment related to Citrus Dropdown and Sunoco Merger | (31,250 | ) | — | (58,750 | ) | — | |||||||||
Total cash distributions from ETP | 165,885 | 153,502 | 472,176 | 459,614 | |||||||||||
Cash distributions from Regency associated with: (2) | |||||||||||||||
General partner interest | 1,322 | 1,305 | 3,968 | 3,861 | |||||||||||
Incentive distribution rights | 2,083 | 1,681 | 6,231 | 4,133 | |||||||||||
Limited partner interest | 12,083 | 11,951 | 36,248 | 35,460 | |||||||||||
Total cash distributions from Regency | 15,488 | 14,937 | 46,447 | 43,454 | |||||||||||
Total cash distributions from ETP and Regency | 181,373 | 168,439 | 518,623 | 503,068 | |||||||||||
Distributable cash flow attributable to Southern Union (including acquisition-related expenses) (3) | 76,523 | — | 82,079 | — | |||||||||||
Deduct expenses of the Parent Company on a stand-alone basis: | |||||||||||||||
Selling, general and administrative expenses, excluding non-cash compensation expense (4) | (6,305 | ) | (11,559 | ) | (47,571 | ) | (25,264 | ) | |||||||
Interest expense, net of amortization of financing costs, interest income, and realized gains and losses on interest rate swaps (4) | (63,874 | ) | (40,002 | ) | (171,945 | ) | (120,240 | ) | |||||||
Bridge financing costs | — | — | (62,241 | ) | — | ||||||||||
Distributable Cash Flow (5) | 187,717 | 116,878 | 318,945 | 357,564 | |||||||||||
Acquisition-related expenses (4) | 1,435 | 9,503 | 157,174 | 18,542 | |||||||||||
Distributable Cash Flow, as adjusted (5) | $ | 189,152 | $ | 126,381 | $ | 476,119 | $ | 376,106 | |||||||
Cash distributions to be paid to the partners of ETE: (6) | |||||||||||||||
Distributions to be paid to limited partners | $ | 174,972 | $ | 139,358 | $ | 524,916 | $ | 403,564 | |||||||
Distributions to be paid to general partner | 433 | 433 | 1,298 | 1,254 | |||||||||||
Total cash distributions to be paid to the partners of ETE (5) | $ | 175,405 | $ | 139,791 | $ | 526,214 | $ | 404,818 | |||||||
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 | $ | 35,170 | $ | 69,083 | $ | 255,090 | $ | 224,008 | |||||||
Equity in income related to investments in ETP and Regency | (101,227 | ) | (102,565 | ) | (562,066 | ) | (369,833 | ) | |||||||
Total cash distributions from ETP and Regency | 181,373 | 168,439 | 518,623 | 503,068 | |||||||||||
Amortization included in interest expense (excluding ETP and Regency) | 4,606 | 814 | 9,983 | 2,094 | |||||||||||
Fair value adjustment of ETE Preferred Units | 8,100 | (19,190 | ) | 5,050 | (2,620 | ) | |||||||||
Other non-cash (excluding ETP and Regency) | 59,695 | 297 | 92,265 | 847 | |||||||||||
Distributable Cash Flow | 187,717 | 116,878 | 318,945 | 357,564 | |||||||||||
Acquisition-related expenses (4) | 1,435 | 9,503 | 157,174 | 18,542 | |||||||||||
Distributable Cash Flow, as adjusted | $ | 189,152 | $ | 126,381 | $ | 476,119 | $ | 376,106 | |||||||
(1) | For the three months ended September 30, 2012, cash distributions expected to be received from ETP consist of cash distributions in respect of the quarter ended September 30, 2012 payable on November 14, 2012 to holders of record on November 6, 2012 and also take into consideration a reduction in incentive distributions of $31.3 million related to recent transactions. For the three months ended September 30, 2011, cash distributions received from ETP consist of cash distributions paid on November 14, 2011 in respect of the quarter ended September 30, 2011. |
For the nine months ended September 30, 2012, cash distributions received or expected to be received from 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, and cash distributions in respect of the three months ended September 30, 2012 payable on November 14, 2012 to holders of record on November 6, 2012 and also take into consideration a reduction in incentive distributions of $58.8 million related to recent transactions. For the nine months ended September 30, 2011, cash distributions received from ETP consist of cash distributions paid on May 16, 2011 in respect of the quarter ended March 31, 2011, cash distributions paid on August 15, 2011 in respect of the quarter ended June 30, 2011, and cash distributions paid on November 14, 2011 in respect of the quarter ended September 30, 2011.
(2) | For the three months ended September 30, 2012, cash distributions expected to be received from Regency consist of cash distributions in respect of the quarter ended September 30, 2012 payable on November 14, 2012 to holders of record on November 6, 2012. For the three months ended September 30, 2011 cash distributions received from Regency consist of cash distributions paid on November 14, 2011 in respect of the quarter ended September 30, 2011. |
For the nine months ended September 30, 2012, cash distributions received or expected to be received from Regency consist of cash distributions paid on May 14, 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, and cash distributions in respect of the three months ended September 30, 2012 payable on November 14, 2012 to holders of record on November 6, 2012. For the nine months ended September 30, 2011, cash distributions received from Regency consist of cash distributions paid on May 13, 2011 in respect of the quarter ended March 31, 2011, cash distributions paid on August 12, 2011 in respect of the quarter ended June 30, 2011, and cash distributions paid November 14, 2011 in respect of the quarter ended September 30, 2011.
(3) | Distributable cash flow attributable to Southern Union was calculated as follows: |
Three Months Ended September 30, 2012 | Period from Acquisition (March 26, 2012) to September 30, 2012 | ||||||
Net income | $ | 16,986 | $ | (9,796 | ) | ||
Amortization of finance costs charged to interest | (12,394 | ) | (20,938 | ) | |||
Depreciation and amortization | 75,710 | 154,909 | |||||
Deferred income taxes | 27,106 | 25,548 | |||||
Non-cash equity-based compensation, accretion expense and amortization of regulatory assets | 144 | 5,004 | |||||
Other non-cash gains/revenues or losses/expenses | 7,798 | 12,525 | |||||
Losses from unconsolidated investments | 1,065 | 381 | |||||
Distributions received from unconsolidated investments | 2,010 | 4,368 | |||||
Other, net | 69 | (122 | ) | ||||
Maintenance capital expenditures | (41,971 | ) | (89,800 | ) | |||
Distributable cash flow attributable to Southern Union | 76,523 | 82,079 | |||||
Acquisition-related expenses recognized by Southern Union | 1,435 | 56,815 | |||||
Distributable cash flow, as adjusted, attributable to Southern Union | $ | 77,958 | $ | 138,894 | |||
Distributable cash flow attributable to Southern Union for the period from our acquisition to September 30, 2012 reflected above included change in control payments and legal and other outside service costs totaling $72.1 million offset by benefit plan curtailment gains of $15.3 million. The net amount of $56.8 million was included in merger-related expenses that were added back to calculate ETE's Distributable Cash Flow, as adjusted.
(4) | Transaction costs for the nine months ended September 30, 2012 related to ETE's acquisition of Southern Union consisted of $62.2 million bridge financing costs, $38.2 million of selling, general and administrative expenses incurred by ETE and $56.8 million of merger-related expenses that were incurred directly by Southern Union. |
(5) | For the nine months ended September 30, 2012, total cash distributions to be paid to the partners of ETE exceeded ETE's Distributable Cash Flow and Distributable Cash Flow, as adjusted, primarily due to the timing of the Southern Union acquisition. In connection with the Southern Union acquisition, ETE issued 56,982,160 million ETE Common Units on March 26, 2012, the unitholders of which received the first quarter 2012 distribution of $0.625 per unit and will receive the third quarter 2012 distribution of $0.625 per unit, as announced July 26, 2012. However, ETE's Distributable Cash Flow and Distributable Cash Flow, as adjusted, both reflect cash flows from Southern Union for the period from acquisition (March 26, 2012) through September 30, 2012 rather than the full nine months. |
(6) | For the three months ended September 30, 2012, cash distributions expected to be paid by ETE consist of cash distributions in respect of the quarter ended September 30, 2012 payable on November 16, 2012 to holders of record on November 6, 2012. For the three months ended September 30, 2011, cash distributions paid by ETE consist of cash distributions paid on November 18, 2011 in respect of the quarter ended September 30, 2011. |
For the nine months ended September 30, 2012, cash distributions paid or expected to be paid by ETE consist of cash distributions paid on May 18, 2012 in respect of the quarter ended March 31, 2012, cash distributions paid on August 17, 2012 in respect of the quarter ended June 30, 2012, and cash distributions in respect of the three months ended September 30, 2012 payable on November 16, 2012 to holders of record on November 6, 2012. For the nine months ended September 30, 2011, cash distributions paid or expected to be paid by ETE consist of cash distributions paid on May 19, 2011 in respect of the quarter ended March 31, 2011, cash distributions paid on August 19, 2011 in respect of the quarter ended June 30, 2011 and cash distributions paid on November 18, 2011 in respect of the quarter ended September 30, 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 and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 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. By the application of "push-down" accounting, the Company allocated the purchase price paid by ETE to its assets, liabilities and equity as of the acquisition date based on preliminary estimates. Accordingly, the successor financial statements reflect a new basis of accounting and predecessor and successor period financial results (separated by a heavy black line) are presented, but are not comparable. The step-up in basis primarily impacted the depreciation, amortization, and interest expense recognized by Southern Union in the post-acquisition periods, 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.
Successor | Predecessor | Successor | Predecessor | |||||||||||||||||||
Three months ended September 30, 2012 | Three months ended September 30, 2011 | Period from Acquisition (March 26, 2012) to September 30, 2012 | Period from January 1, 2012 to March 25, 2012 | Nine months ended September 30, 2011 | ||||||||||||||||||
Segment Adjusted EBITDA: | ||||||||||||||||||||||
Transportation and storage segment | $ | 122,486 | $ | 199,952 | $ | 205,130 | $ | 185,706 | $ | 570,072 | ||||||||||||
Gathering and processing segment | 25,296 | 34,234 | 36,155 | 25,338 | 94,440 | |||||||||||||||||
Distribution segment | 22,461 | 14,369 | 35,907 | 33,554 | 58,673 | |||||||||||||||||
Corporate and other activities | (1,065 | ) | (1,255 | ) | (2,471 | ) | (18,845 | ) | (70 | ) | ||||||||||||
Total Segment Adjusted EBITDA | 169,178 | 247,300 | 274,721 | 225,753 | 723,115 | |||||||||||||||||
Depreciation and amortization | (75,710 | ) | (59,327 | ) | (154,909 | ) | (56,544 | ) | (177,949 | ) | ||||||||||||
Unrealized gains (losses) on nonhedged derivative activities | — | 5,130 | — | — | (9,283 | ) | ||||||||||||||||
Interest expense | (34,639 | ) | (54,925 | ) | (96,323 | ) | (50,407 | ) | (165,429 | ) | ||||||||||||
Income tax expense | (28,959 | ) | (24,446 | ) | (27,883 | ) | (22,871 | ) | (68,676 | ) | ||||||||||||
Non-cash equity-based compensation, accretion expense and amortization of regulatory assets | (7,256 | ) | (2,926 | ) | (12,116 | ) | (1,350 | ) | (7,580 | ) | ||||||||||||
Net gain on curtailment of OPEB plans | — | — | 15,332 | — | — | |||||||||||||||||
Other, net | (755 | ) | 191 | (564 | ) | 284 | 557 | |||||||||||||||
Earnings (losses) from unconsolidated investments | (1,065 | ) | 26,686 | (381 | ) | 16,160 | 78,435 | |||||||||||||||
Adjusted EBITDA attributable to unconsolidated investments | (3,808 | ) | (79,651 | ) | (7,673 | ) | (61,108 | ) | (194,723 | ) | ||||||||||||
Net income (loss) | $ | 16,986 | $ | 58,032 | $ | (9,796 | ) | $ | 49,917 | $ | 178,467 | |||||||||||
Southern Union's Segment Adjusted EBITDA was impacted between the predecessor and successor periods due to its contribution of its investment in Citrus to ETP. For the three and nine months ended September 30, 2011, Southern Union's transportation and storage Segment Adjusted EBITDA included Adjusted EBITDA attributable to Citrus of $79.3 million and $193.3 million, respectively.