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Energy Transfer Equity Reports Results for the Quarter Ended March 31st

Posted on: Monday, 12 May 2008, 18:00 CDT

Energy Transfer Equity, L.P. (NYSE:ETE) today reported net income of $126.7 million and Distributable Cash of $99.3 million for the three months ended March 31, 2008. Distributable Cash is a "non-GAAP measure," as explained below.

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

ETE's net income decreased $20.7 million for the three months ended March 31, 2008 to $126.7 million as compared to $147.4 million for the three months ended February 28, 2007. The decrease is due primarily to the net unrealized losses on non-hedged interest rate derivatives of approximately $31.3 million held by ETE. The loss is attributable to the mark-to-market accounting of ETE's interest rate swaps and is principally a non-cash charge.

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 March 31, 2008 and February 28, 2007 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

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except unit data)

March 31,

December 31,

2008

2007

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

130,667

$

56,557

Marketable securities

13,651

3,002

Accounts receivable, net of allowance for doubtful accounts

1,062,620

822,027

Accounts receivable from related companies

30,287

18,070

Inventories

116,160

361,954

Deposits paid to vendors

60,475

42,273

Prepaid expenses and other current assets

108,358

99,913

Total current assets

1,522,218

1,403,796

PROPERTY, PLANT AND EQUIPMENT, net

7,312,912

6,852,458

ADVANCES TO AND INVESTMENTS IN AFFILIATES

1,253

86,167

GOODWILL

772,972

757,698

INTANGIBLES AND OTHER LONG-TERM ASSETS, net

377,025

361,975

Total Assets

$

9,986,380

$

9,462,094

LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

CURRENT LIABILITIES:

Accounts payable

$

786,132

$

673,116

Accounts payable to related companies

25,705

48,012

Exchanges payable

43,533

40,382

Customer advances and deposits

41,056

75,831

Accrued and other current liabilities

191,949

190,469

Accrued capital expenditures

152,954

87,622

Interest payable

56,584

78,933

Current maturities of long-term debt

47,245

47,068

Total current liabilities

1,345,158

1,241,433

LONG-TERM DEBT, less current maturities

6,211,980

5,870,106

LONG-TERM PRICE RISK MANAGEMENT LIABILITIES

78,117

46,479

DEFERRED INCOME TAXES

203,284

199,934

OTHER NON-CURRENT LIABILITIES

14,654

12,986

MINORITY INTERESTS

2,176,908

2,106,819

COMMITMENTS AND CONTINGENCIES

Total liabilities

10,030,101

9,477,757

PARTNERS' CAPITAL (DEFICIT):

General Partner

224

192

Limited Partners--Common Unitholders (222,829,956 units authorized, issued and outstanding at March 31, 2008 and December 31, 2007)

5,568

(4,628

)

5,792

(4,436

)

Accumulated other comprehensive loss

(49,513

)

(11,227

)

Total partners' deficit

(43,721

)

(15,663

)

Total liabilities and partners' capital (deficit)

$

9,986,380

$

9,462,094

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit and unit data)

Three Months Ended

March 31,

February 28,

2008

2007

REVENUES:

Natural gas operations

$

2,007,847

$

1,492,838

Retail propane

598,138

499,252

Other

33,260

70,390

Total revenues

2,639,245

2,062,480

COSTS AND EXPENSES:

Cost of products sold, natural gas operations

1,577,268

1,138,709

Cost of products sold, retail propane

392,555

304,634

Cost of products sold, other

9,895

42,473

Operating expenses

178,970

133,809

Depreciation and amortization

61,883

48,415

Selling, general and administrative

50,745

42,589

Total costs and expenses

2,271,316

1,710,629

OPERATING INCOME

367,929

351,851

OTHER INCOME (EXPENSE):

Interest expense, net of interest capitalized

(80,454

)

(65,077

)

Equity in earnings (losses) of affiliates

74

(514

)

Loss on disposal of assets

(1,451

)

(3,229

)

Gains (losses) on non-hedged interest rate derivatives (Note 14)

(31,636

)

-

Other income (expense), net

17,840

1,652

INCOME BEFORE INCOME TAX EXPENSE AND MINORITY INTERESTS

272,302

284,683

Income tax expense

5,144

2,576

INCOME BEFORE MINORITY INTERESTS

267,158

282,107

Minority interests

(140,453

)

(134,751

)

NET INCOME

126,705

147,356

GENERAL PARTNER'S INTEREST IN NET INCOME

392

467

LIMITED PARTNERS' INTEREST IN NET INCOME

$

126,313

$

146,889

BASIC NET INCOME PER LIMITED PARTNER UNIT

$

0.57

$

0.67

BASIC AVERAGE NUMBER OF UNITS OUTSTANDING

222,829,956

217,821,530

DILUTED NET INCOME PER LIMITED PARTNER UNIT

$

0.57

$

0.67

DILUTED AVERAGE NUMBER OF UNITS OUTSTANDING

222,829,956

217,821,530

The Partnership previously announced a change in its year-end from August 31 to December 31. The unaudited consolidated financial statements contained in this press release cover the three-month period ended March 31, 2008 and the three-month period ended February 28, 2007 (the three-month period of the previous fiscal year most nearly comparable to the three-month period ended March 31, 2008). The Partnership did not recast the financial data for the prior fiscal period because the financial reporting processes in place at that time included certain procedures that were completed only on a fiscal quarterly basis. The Partnership believes the information, data and indicated trends for the three-month period ended February 28, 2007 is comparable to what would have been reported for the three-month period ended March 31, 2007 if they had recast the prior period information. Such comparability is impacted primarily by weather, fluctuations in commodity prices, volumes of natural gas sold and transported, our hedging strategies and the use of financial instruments, trading activities, basis differences between market hubs and interest rates.

Three Months Ended

VOLUMES SOLD THROUGH

March 31,

February 28,

ENERGY TRANSFER PARTNERS, L.P.:

2008

2007

Midstream

Natural gas MMBtu/d -- sold

1,236,396

819,611

NGLs Bbls/d -- sold

27,794

15,901

Transportation and storage

Natural gas MMBtu/d -- transported

9,521,181

5,030,631

Natural gas MMBtu/d -- sold

1,696,912

1,655,278

Interstate transportation

Natural gas MMBtu/d -- transported

1,619,358

1,728,056

Retail propane gallons (in thousands)

234,414

253,715

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 following periods:

Three Months Ended

Three Months Ended

March 31,

February 28,

2008

2007

Distributable Cash:

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

General partner interest:

Standard distribution rights

$

3,979

$

3,374

Incentive distribution rights

67,797

54,345

Limited partner interest:

62,500,797 common units

54,298

49,220

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

126,074

106,939

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

General and administrative expenses

(2,849

)

(3,464

)

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

(23,902

)

(23,211

)

Distributable Cash

$

99,323

$

80,264

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

$

0.4400

$

0.3560

Distributions to be paid to public unitholders

41,765

33,791

Distributions to be paid to affiliates

56,280

45,536

Distributions to be paid to general partner

305

246

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

$

98,350

$

79,573

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

$

126,705

$

147,356

Adjustments to derive Distributable Cash:

Equity in income of unconsolidated affiliates

(185,472

)

(174,790

)

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

126,074

106,939

Amortization of financing costs

752

751

Other non-cash

13

8

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

31,251

-

Distributable Cash

99,323

80,264

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

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

(126,074

)

(106,939

)

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

150,384

99,927

Net changes in other operating assets and liabilities

8,768

1,843

Net cash provided by (used in) operating activities for Parent Company on stand-alone basis

$

132,401

$

75,095

(1) For the three months ended March 31, 2008, cash distributions expected to be received from Energy Transfer Partners, L.P. consists of cash distributions in respect of the three months ended March 31, 2008 payable on May 15, 2008 to holders of record on the close of business on May 5, 2008. For the three months ended February 28, 2007, cash distributions expected to be received from Energy Transfer Partners, L.P. consists of cash distributions paid on April 13, 2007 for the three months ended February 28, 2007.

(2) For the three months ended March 31, 2008, cash distributions expected to be paid from Energy Transfer Equity, L.P. consists of cash distributions in respect of the three months ended March 31, 2008 payable on May 19, 2008 to holders of record on May 5, 2008. For the three months ended February 28, 2007, cash distributions expected to be paid from Energy Transfer Equity, L.P. consists of cash distributions paid on April 16, 2007 for the three months ended February 28, 2007.

Source: Business Wire

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