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Energy Transfer Equity Reports First Fiscal Quarter 2008 Results

Posted on: Wednesday, 9 January 2008, 18:00 CST

Energy Transfer Equity, L.P. (NYSE:ETE) today reported net income of $51.5 million and Distributable Cash of $84 million for the three months ended November 30, 2007. Distributable Cash is a "non-GAAP measure," as explained below. With the previously announced change in year-end reporting to December 31, ETE will have a financial reporting transition period consisting of the four months ended December 2007. In order to transition to cash distribution payments that coincide with calendar quarters, ETE's next distribution payment will cover the four-month transition period rather than a normal three-month period.

Based on this change in timing, in December 2007 ETE's management recommended a four-month distribution of $0.55 per unit for the period ended December 31, 2007, which would be payable on February 19, 2008 to holders of record on February 1, 2007, representing a distribution of $0.41 per unit for the three-month period ($1.64 per unit on an annualized basis) and $0.14 per unit for the additional month.

The Partnership's principal sources of cash flow are distributions it receives from its investments in the limited and general partner interests in Energy Transfer Partners, L.P. ("ETP"). ETE currently has no other operating activities apart from those conducted by the operating subsidiaries within ETP. ETE's principal uses of cash are for expenses, debt service and distributions to its general and limited partners.

ETE's net income increased $20.5 million for the three months ended November 30, 2007 to $51.5 million as compared to $31.0 million for the three months ended November 30, 2006. The increase is due to the increased earnings of ETP offset by the increase in minority interest expense and unrealized losses in interest rate instruments held by ETE. The minority interest expense primarily represents partnership interests in ETP that ETE does not own.

Use of Non-GAAP Financial Measures

This press release and accompanying schedules include the non-generally accepted accounting principle ("non-GAAP") financial measure of Distributable Cash. The accompanying schedules provide a reconciliation of this non-GAAP financial measure to its most directly comparable financial measure calculated and presented in accordance with GAAP. The Partnership's Distributable Cash should not be considered as an alternative to GAAP financial measures such as net income, cash flow from operating activities or any other GAAP measure of liquidity or financial performance.

Distributable Cash. The Partnership defines Distributable Cash as cash distributions expected to be received from ETP in connection with the Partnership's investments in limited and general partner interests of ETP, net of the Partnership's expenditures for general and administrative costs and debt service. Distributable Cash is a significant liquidity measure used by the Partnership's senior management to compare net cash flows generated by the Partnership's equity investments in ETP to the distributions the Partnership expects to pay its unitholders. Using this measure, the Partnership's management can compute the coverage ratio of estimated cash flows to planned cash distributions.

Distributable Cash is an important non-GAAP financial measure for our limited partners since it indicates to investors whether or not the Partnership's investments are generating cash flows at a level that can sustain or support an increase in quarterly cash distribution levels. Financial measures such as Distributable Cash are quantitative standards used by the investment community with respect to publicly-traded partnerships because the value of a partnership unit is in part measured by its yield (which in turn is based on the amount of cash distributions a partnership can pay to a unitholder). The GAAP measures most directly comparable to Distributable Cash are net income and cash flow from operating activities for ETE on a stand-alone basis ("Parent Company"). The accompanying analysis of Distributable Cash is presented for the three-month periods ended November 30, 2007 and 2006 for comparative purposes.

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

Energy Transfer Partners, L.P. (NYSE:ETP) is a publicly traded partnership owning and operating a diversified portfolio of energy assets. ETP has pipeline operations in Arizona, Colorado, Louisiana, New Mexico and Utah, and owns the largest intrastate pipeline system in Texas. ETP's natural gas operations include intrastate natural gas gathering and transportation pipelines, natural gas treating and processing assets and three natural gas storage facilities located in Texas. These assets include approximately 14,000 miles of intrastate pipeline in service, with approximately 500 miles of intrastate pipeline under construction, and 2,400 miles of interstate pipeline. ETP is also one of the three largest retail marketers of propane in the United States, serving more than one million customers across the country.

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

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except unit data)

November 30,

August 31,

2007

2007

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

53,527

$

77,350

Marketable securities

2,826

3,099

Accounts receivable, net of allowance for doubtful accounts

651,769

637,676

Accounts receivable from related companies

13,646

5,979

Inventories

367,297

192,276

Deposits paid to vendors

69,813

45,490

Prepaid expenses and other current assets

102,145

88,708

Total current assets

1,261,023

1,050,578

PROPERTY, PLANT AND EQUIPMENT, net

6,737,060

5,971,127

ADVANCES TO AND INVESTMENTS IN AFFILIATES

72,829

56,564

GOODWILL

757,082

748,018

INTANGIBLES AND OTHER LONG-TERM ASSETS, net

363,941

356,802

Total assets

$

9,191,935

$

8,183,089

LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

CURRENT LIABILITIES:

Short-term debt

$

310,000

$

-

Accounts payable

557,232

487,834

Accounts payable to related companies

36,312

19,136

Exchanges payable

48,711

34,252

Customer advances and deposits

96,663

81,919

Accrued and other current liabilities

348,895

262,611

Current maturities of long-term debt

47,067

47,063

Total current liabilities

1,444,880

932,815

LONG-TERM DEBT, less current maturities

5,687,969

5,198,676

DEFERRED INCOME TAXES

198,748

198,947

OTHER NON-CURRENT LIABILITIES

13,305

13,666

LONG-TERM PRICE RISK MANAGEMENT LIABILITIES

47,105

3,685

MINORITY INTERESTS

1,896,741

1,882,432

COMMITMENTS AND CONTINGENCIES

Total liabilities

9,288,748

8,230,221

PARTNERS' CAPITAL (DEFICIT):

General Partner

(87

)

24

Limited Partners - Common Unitholders (222,829,956 and 222,828,332 units authorized, issued and outstanding at November 30, 2007 and August 31, 2007, respectively)

(94,499

)

(58,918

)

(94,586

)

(58,894

)

Accumulated other comprehensive income (loss), per accompanying statements

(2,227

)

11,762

Total partners' deficit

(96,813

)

(47,132

)

Total liabilities and partners' capital (deficit)

$

9,191,935

$

8,183,089

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit and unit data)

Three Months Ended November 30,

2007

2006

REVENUES:

Natural gas operations

$

1,304,965

$

1,062,444

Retail propane

288,966

266,090

Other

34,141

59,911

Total revenues

1,628,072

1,388,445

COSTS AND EXPENSES:

Cost of products sold, natural gas operations

944,739

883,983

Cost of products sold, retail propane

192,065

167,619

Cost of products sold, other

11,035

35,741

Operating expenses

161,955

132,381

Depreciation and amortization

55,783

36,864

Selling, general and administrative

45,170

28,769

Total costs and expenses

1,410,747

1,285,357

OPERATING INCOME

217,325

103,088

OTHER INCOME (EXPENSE):

Interest expense, net of interest capitalized

(77,857

)

(68,547

)

Equity in earnings (losses) of affiliates

(241

)

4,887

Gain on disposal of assets

13,124

1,944

Other income (expense), net

(37,019

)

1,517

INCOME BEFORE INCOME TAX EXPENSE AND

MINORITY INTERESTS

115,332

42,889

Income tax expense

4,925

2,873

INCOME BEFORE MINORITY INTERESTS

110,407

40,016

Minority interests

(58,943

)

(8,975

)

NET INCOME

51,464

31,041

GENERAL PARTNER'S INTEREST IN NET INCOME

159

145

LIMITED PARTNERS' INTEREST IN NET INCOME

$

51,305

$

30,896

BASIC NET INCOME PER LIMITED PARTNER UNIT

$

0.23

$

0.20

BASIC AVERAGE NUMBER OF UNITS OUTSTANDING

222,829,902

154,636,195

DILUTED NET INCOME PER LIMITED PARTNER UNIT

$

0.23

$

0.20

DILUTED AVERAGE NUMBER OF UNITS OUTSTANDING

222,829,902

154,636,195

Three Months Ended

VOLUMES SOLD THROUGHENERGY TRANSFER PARTNERS, L.P.:

November 30,

2007

2006

Midstream

Natural gas MMBtu/d -- sold

1,074,560

979,978

NGLs Bbls/d -- sold

24,956

11,569

Transportation and storage

Natural gas MMBtu/d -- transported

8,831,276

4,800,086

Natural gas MMBtu/d -- sold

1,220,692

1,310,077

Interstate transportation

Natural gas MMBtu/d -- transported

1,728,028

-

Retail propane gallons (in thousands)

130,425

140,631

ENERGY TRANSFER EQUITY, L.P. - PARENT COMPANY

DISTRIBUTABLE CASH

(Dollars in thousands, except per unit)

(unaudited)

The following table presents the calculation and reconciliation of Distributable Cash of the Parent Company with respect to the three months ended November 30, 2007 and 2006:

Three Months Ended

Three Months Ended

November 30,

November 30,

2007

2006

Distributable Cash:

Cash distributions expected from Energy Transfer Partners, L.P. associated with:

General partner interest:

Standard distribution rights

$

3,812

$

3,272

Incentive distribution rights

63,994

51,880

Limited partner interest:

62,500,797 common units

52,735

48,047

Total cash expected from Energy Transfer Partners, L.P.

120,541

103,199

Deduct expenses of the Parent Company on a stand-alone basis:

General and administrative expenses

(10,695

)

(1,974

)

Interest expense, net of amortization of financing costs, interest income, and realized gains on interest rate derivatives

(25,852

)

(18,515

)

Distributable Cash

$

83,994

$

82,710

Cash distributions to be paid to the partners of Energy Transfer Equity, L.P.:

Distribution per limited partner unit as of the end of the period

$

0.4100

$

0.3400

Distributions to be paid to public unitholders

38,917

19,205

Distributions to be paid to affiliates

52,443

54,855

Distributions to be paid to general partner

284

235

Total cash distributions to be paid by Energy Transfer Equity, L.P. to its limited and general partners for the three months

$

91,644

$

74,295

Reconciliation of Non-GAAP "Distributable Cash" to GAAP "Net Income" and GAAP "Net cash provided by operating activities" for the Parent Company on a stand-alone basis:

Net income

$

51,464

$

31,041

Adjustments to derive Distributable Cash:

Equity in income of unconsolidated affiliates

(118,972

)

(59,979

)

Quarterly distribution expected to be received from Energy Transfer Partners, L.P.

120,541

103,199

Amortization of financing costs

756

379

Other non-cash

18

-

Change in value of unrealized losses on interest rate derivatives that are not cash flow hedges

30,187

8,070

Distributable Cash

83,994

82,710

Adjustments to Distributable Cash to Derive Net Cash Provided by Operating Activities:

Quarterly distribution expected to be received from Energy Transfer Partners, L.P.

(120,541

)

(103,199

)

Cash distribution received from Energy Transfer Partners, L.P. during the period

110,850

49,906

Net changes in other operating assets and liabilities

11,956

(16,652

)

Net cash provided by operating activities for Parent Company on stand-alone basis

$

86,259

$

12,765

(1) For the three months ended November 30, 2007, cash distributions expected to be received from Energy Transfer Partners, L.P. consists of cash distributions allocated to the three months ended November 30, 2007 in respect of the distribution that management has recommended to the Board of Directors for the four-month period ended December 31, 2007 which would be payable on February 14, 2008 to holders of record on the close of business on February 1, 2008. For the three months ended November 30, 2006, cash distributions expected to be received from Energy Transfer Partners, L.P. consists of cash distributions paid on January 15, 2007.

(2) For the three months ended November 30, 2007, cash distributions expected to be paid from Energy Transfer Equity, L.P. consists of cash distributions allocated to the three months ended November 30, 2007 in respect of the distribution that management has recommended to the Board of Directors for the four-month period ended December 31, 2007 which would be payable on February 19, 2008 to holders of record on February 1, 2008. For the three months ended November 30, 2006, cash distributions expected to be paid from Energy Transfer Equity, L.P. consists of cash distributions paid on January 19, 2007.

Source: Business Wire

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