FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| x | QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended May 31, 2004
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission file number 1-11727
ENERGY TRANSFER PARTNERS, L.P.
| Delaware | 73-1493906 | |
| (state or other jurisdiction or | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
2838 Woodside Street
Dallas, Texas 75204
(Address of principal
executive offices and
zip code)
(918) 492-7272
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No o
At July 12, 2004, the registrant had units outstanding as follows:
Energy Transfer Partners, L.P.
44,559,031
Common Units
FORM 10-Q
ENERGY TRANSFER PARTNERS, L.P.
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
The financial statements of Energy Transfer Partners, L.P. presented herein for the nine months ended May 31, 2004 include the results of operations for Energy Transfer Company for the entire period from September 1, 2003 through May 31, 2004, but include the results of operations for Heritage Propane Partners, L.P. (referenced herein as Predecessor Heritage) only for the period from January 20, 2004 to May 31, 2004. Thus, the results of operations do not represent the entire results of operations for Predecessor Heritage for the nine months ended May 31, 2004, as they do not include the results of operations of Predecessor Heritage for the period prior to the Energy Transfer Transactions on January 20, 2004. Please read notes 1 and 2 to the Consolidated Financial Statements for further explanation of the Energy Transfer Transactions.
1
ITEM 1. FINANCIAL STATEMENTS
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
| May 31, | August 31, | August 31, | ||||||||||
| 2004 |
2003 |
2003 |
||||||||||
| (Energy Transfer | (Predecessor | |||||||||||
| (see Note 2) | Company) | Heritage) | ||||||||||
ASSETS |
||||||||||||
CURRENT ASSETS: |
||||||||||||
Cash and cash equivalents |
$ | 63,245 | $ | 53,122 | $ | 7,117 | ||||||
Marketable securities |
2,658 | — | 3,044 | |||||||||
Accounts receivable, net of allowance for doubtful accounts |
234,072 | 105,987 | 35,879 | |||||||||
Accounts receivable from related companies |
662 | — | — | |||||||||
Inventories |
38,427 | 3,947 | 45,274 | |||||||||
Deposits paid to vendors |
1,547 | 19,053 | — | |||||||||
Exchanges receivable |
2,261 | 1,373 | — | |||||||||
Price risk management asset |
2,181 | 928 | — | |||||||||
Prepaid expenses and other |
5,705 | 770 | 2,824 | |||||||||
Total current assets |
350,758 | 185,180 | 94,138 | |||||||||
PROPERTY, PLANT AND EQUIPMENT, net |
957,878 | 391,264 | 426,588 | |||||||||
INVESTMENT IN AFFILIATES |
7,934 | 6,844 | 8,694 | |||||||||
GOODWILL |
290,624 | 13,409 | 156,595 | |||||||||
INTANGIBLES AND OTHER ASSETS, net |
95,886 | 5,406 | 52,824 | |||||||||
Total assets |
$ | 1,703,080 | $ | 602,103 | $ | 738,839 | ||||||
LIABILITIES AND PARTNERS’ CAPITAL |
||||||||||||
CURRENT LIABILITIES: |
||||||||||||
Working capital facility |
$ | 7,030 | $ | — | $ | 26,700 | ||||||
Accounts payable |
247,841 | 114,198 | 43,690 | |||||||||
Accounts payable to related companies |
13,025 | 820 | 6,255 | |||||||||
Exchanges payable |
1,088 | 1,410 | — | |||||||||
Accrued and other current liabilities |
47,415 | 19,655 | 35,573 | |||||||||
Price risk management liabilities |
574 | 823 | — | |||||||||
Income taxes payable |
2,390 | 2,567 | 500 | |||||||||
Current maturities of long-term debt |
30,785 | 30,000 | 38,309 | |||||||||
Total current liabilities |
350,148 | 169,473 | 151,027 | |||||||||
LONG-TERM DEBT, less current maturities |
697,931 | 196,000 | 360,762 | |||||||||
DEFERRED TAXES |
111,898 | 55,385 | — | |||||||||
OTHER NONCURRENT LIABILITIES |
3,676 | 157 | — | |||||||||
MINORITY INTERESTS |
1,129 | — | 4,002 | |||||||||
| 1,164,782 | 421,015 | 515,791 | ||||||||||
2
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
(unaudited)
| May 31, | August 31, | August 31, | ||||||||||
| 2004 |
2003 |
2003 |
||||||||||
| (Energy Transfer | (Predecessor | |||||||||||
| (see Note 2) | Company) | Heritage) | ||||||||||
COMMITMENTS AND CONTINGENCIES |
||||||||||||
PARTNERS’ CAPITAL: |
||||||||||||
Common Unitholders (27, 919,974 and 6,628,817 units authorized,
issued and outstanding at May 31, 2004 and August 31, 2003,
respectively) |
307,032 | 180,896 | 221,207 | |||||||||
Class C Unitholders (1,000,000 and 0 units authorized, issued
and outstanding at May 31, 2004 and August 31, 2003,
respectively) |
— | — | — | |||||||||
Class D Unitholders (7,721,542 and 0 authorized, issued and
outstanding at May 31, 2004 and August 31, 2003) |
210,825 | — | — | |||||||||
Class E Unitholders (4,426,916 and 0 authorized, issued and
outstanding at May 31, 2004 and August 31, 2003, respectively –
held by subsidiary and reported as treasury units) |
— | — | — | |||||||||
Special Units (3,742,515 and 0 authorized, issued and outstanding
at May 31, 2004 and August 31, 2003) |
— | — | — | |||||||||
General Partner |
18,466 | 192 | 2,190 | |||||||||
Accumulated other comprehensive income (loss) |
1,975 | — | (349 | ) | ||||||||
Total partners’ capital |
538,298 | 181,088 | 223,048 | |||||||||
Total liabilities and partners’ capital |
$ | 1,703,080 | $ | 602,103 | $ | 738,839 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit and unit data)
(unaudited)
| Three Months | Three Months | Three Months | Nine Months | Eight Months | Nine Months | |||||||||||||||||||
| Ended | Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||
| May 31, | May 31, | May 31, | May 31, | May 31, | May 31, | |||||||||||||||||||
| 2004 |
2003 |
2003 |
2004 |
2003 |
2003 |
|||||||||||||||||||
| (Energy | (Energy | |||||||||||||||||||||||
| Transfer | (Predecessor | Transfer | (Predecessor | |||||||||||||||||||||
| (see Note 2) | Company) | Heritage) | (see Note 2) | Company) | Heritage) | |||||||||||||||||||
REVENUES: |
||||||||||||||||||||||||
Midstream and transportation |
$ | 505,691 | $ | 372,535 | $ | — | $ | 1,408,968 | $ | 649,828 | $ | — | ||||||||||||
Affiliated - midstream |
— | 51 | — | — | 5,117 | — | ||||||||||||||||||
Propane |
122,850 | — | 113,039 | 255,303 | — | 441,358 | ||||||||||||||||||
Other |
13,634 | — | 12,700 | 22,177 | — | 47,649 | ||||||||||||||||||
Total revenues |
642,175 | 372,586 | 125,739 | 1,686,448 | 654,945 | 489,007 | ||||||||||||||||||
COSTS AND EXPENSES: |
||||||||||||||||||||||||
Cost of products sold |
530,130 | 329,650 | 66,781 | 1,442,586 | 570,170 | 252,221 | ||||||||||||||||||
Operating expenses |
52,695 | 9,900 | 39,460 | 90,211 | 18,753 | 118,090 | ||||||||||||||||||
Depreciation and amortization |
16,489 | 4,600 | 9,579 | 30,108 | 9,061 | 28,291 | ||||||||||||||||||
Selling, general and
administrative |
10,026 | 4,955 | 3,764 | 21,287 | 10,828 | 10,941 | ||||||||||||||||||
Realized and unrealized (gains)
losses on derivatives |
(3,352 | ) | (1,367 | ) | — | (13,554 | ) | 5,326 | — | |||||||||||||||
Total costs and expenses |
605,988 | 347,738 | 119,584 | 1,570,638 | 614,138 | 409,543 | ||||||||||||||||||
OPERATING INCOME |
36,187 | 24,848 | 6,155 | 115,810 | 40,807 | 79,464 | ||||||||||||||||||
OTHER INCOME (EXPENSE): |
||||||||||||||||||||||||
Interest, net |
(12,234 | ) | (4,498 | ) | (8,950 | ) | (24,881 | ) | (9,449 | ) | (27,563 | ) | ||||||||||||
Equity in earnings of affiliates |
179 | 48 | 504 | 506 | 1,491 | 1,687 | ||||||||||||||||||
Gain (loss) on disposal of assets |
(263 | ) | — | 517 | (235 | ) | — | 672 | ||||||||||||||||
Other |
(103 | ) | 11 | (103 | ) | 130 | 79 | (2,649 | ) | |||||||||||||||
INCOME (LOSS) BEFORE MINORITY
INTERESTS AND
INCOME TAXES |
23,766 | 20,409 | (1,877 | ) | 91,330 | 32,928 | 51,611 | |||||||||||||||||
Minority interests |
(67 | ) | — | (90 | ) | (242 | ) | — | (1,038 | ) | ||||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES |
23,699 | 20,409 | (1,967 | ) | 91,088 | 32,928 | 50,573 | |||||||||||||||||
Income taxes |
2,369 | 1,582 | 199 | 4,826 | 2,534 | 1,483 | ||||||||||||||||||
NET INCOME (LOSS) |
21,330 | 18,827 | (2,166 | ) | 86,262 | 30,394 | 49,090 | |||||||||||||||||
GENERAL PARTNER’S INTEREST IN NET
INCOME |
2,698 | 377 | 225 | 5,315 | 608 | 1,181 | ||||||||||||||||||
LIMITED PARTNERS’ INTEREST IN NET
INCOME (LOSS) |
$ | 18,632 | $ | 18,450 | $ | (2,391 | ) | $ | 80,947 | $ | 29,786 | $ | 47,909 | |||||||||||
BASIC NET INCOME (LOSS) PER LIMITED
PARTNER UNIT |
$ | 0.52 | $ | 2.79 | $ | (0.14 | ) | $ | 3.91 | $ | 4.50 | $ | 2.96 | |||||||||||
BASIC AVERAGE NUMBER OF UNITS
OUTSTANDING |
35,637,406 | 6,621,737 | 16,574,582 | 20,703,273 | 6,621,737 | 16,189,029 | ||||||||||||||||||
DILUTED NET INCOME (LOSS) PER
LIMITED PARTNER UNIT |
$ | 0.52 | $ | 2.79 | $ | (0.14 | ) | $ | 3.90 | $ | 4.50 | $ | 2.95 | |||||||||||
DILUTED AVERAGE NUMBER OF UNITS
OUTSTANDING |
35,665,702 | 6,621,737 | 16,574,582 | 20,729,837 | 6,621,737 | 16,227,061 | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, unaudited)
| Three Months | Three Months | Three Months | Nine Months | Eight Months | Nine Months | |||||||||||||||||||
| Ended | Ended | Ended | Ended | Ended | Ended | |||||||||||||||||||
| May 31, | May 31, | May 31, | May 31, | May 31, | May 31, | |||||||||||||||||||
| 2004 |
2003 |
2003 |
2004 |
2003 |
2003 |
|||||||||||||||||||
| (Energy | (Energy | |||||||||||||||||||||||
| Transfer | (Predecessor | Transfer | (Predecessor | |||||||||||||||||||||
| (see Note 2) | Company) | Heritage) | (see Note 2) | Company) | Heritage) | |||||||||||||||||||
Net income (loss) |
$ | 21,330 | $ | 18,827 | $ | (2,166 | ) | $ | 86,262 | $ | 30,394 | $ | 49,090 | |||||||||||
Other comprehensive income (loss) |
||||||||||||||||||||||||
Reclassification adjustment
for gains on derivative
instruments included in net
income |
2,766 | — | (125 | ) | (3,134 | ) | — | (552 | ) | |||||||||||||||
Reclassification adjustment
for losses on
available-for-sale securities
included in net income |
— | — | — | — | — | 2,376 | ||||||||||||||||||
Change in value of derivative
instruments |
(3,762 | ) | — | (406 | ) | 4,968 | — | 551 | ||||||||||||||||
Change in value of
available-for-sale securities |
520 | — | (253 | ) | 141 | — | (262 | ) | ||||||||||||||||
Comprehensive income (loss) |
$ | 20,854 | $ | 18,827 | $ | (2,950 | ) | $ | 88,237 | $ | 30,394 | $ | 51,203 | |||||||||||
Reconciliation of Accumulated
Other Comprehensive Income (Loss) |
||||||||||||||||||||||||
Balance, beginning of period |
$ | 2,451 | $ | — | $ | (755 | ) | $ | — | $ | — | $ | (3,652 | ) | ||||||||||
Current period reclassification
to earnings |
2,766 | — | (125 | ) | (3,134 | ) | — | 1,824 | ||||||||||||||||
Current period change |
(3,242 | ) | — | (659 | ) | 5,109 | — | 289 | ||||||||||||||||
Balance, end of period |
$ | 1,975 | $ | — | $ | (1,539 | ) | $ | 1,975 | $ | — | $ | (1,539 | ) | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF PARTNERS’ CAPITAL
(in thousands, except unit data)
(unaudited)
| Number of Units |
||||||||||||||||||||
| Common |
Class C |
Class D |
Class E |
Special |
||||||||||||||||
Balance, August 31, 2003 |
6,628,817 | — | — | — | ||||||||||||||||
Distribution to parent |
— | — | — | — | ||||||||||||||||
Unit distribution |
— | — | — | — | ||||||||||||||||
Merger with Predecessor
Heritage |
16,495,833 | 1,000,000 | 7,721,542 | 3,742,515 | ||||||||||||||||
Conversion of Class E units |
(4,426,916 | ) | — | — | 4,426,916 | — | ||||||||||||||
Class E Units held by
subsidiary and reported as
treasury units |
— | — | — | (4,426,916 | ) | — | ||||||||||||||
Issuance of Common Units |
9,200,000 | — | — | — | ||||||||||||||||
General Partner capital
contribution |
— | — | — | — | ||||||||||||||||
Issuance of Common Units
in connection with certain
acquisitions |
22,240 | — | — | — | – | |||||||||||||||
Net change in accumulated
other comprehensive income
per accompanying
statements |
— | — | — | — | ||||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||
Balance, May 31, 2004 |
27,919,974 | 1,000,000 | 7,721,542 | — | 3,742,515 | |||||||||||||||
[Continued from above table, first column(s) repeated]
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||
| General | Comprehensive | |||||||||||||||||||||||||||||||||||
| Common |
Class C |
Class D |
Class E |
Special |
Partner |
Income |
Total |
|||||||||||||||||||||||||||||
Balance, August 31, 2003 |
$ | 180,896 | $ | — | $ | — | $ | — | $ | — | $ | 192 | $ | — | $ | 181,088 | ||||||||||||||||||||
Distribution to parent |
(209,264 | ) | — | — | — | — | — | (209,264 | ) | |||||||||||||||||||||||||||
Unit distribution |
(19,544 | ) | — | (5,405 | ) | — | — | (1,919 | ) | — | (26,868 | ) | ||||||||||||||||||||||||
Merger with Predecessor
Heritage |
115,614 | — | 198,200 | — | — | (1,973 | ) | — | 311,841 | |||||||||||||||||||||||||||
Conversion of Class E units |
(157,340 | ) | — | — | 157,340 | — | — | — | — | |||||||||||||||||||||||||||
Class E Units held by
subsidiary and reported as
treasury units |
— | — | — | (157,340 | ) | — | — | — | (157,340 | ) | ||||||||||||||||||||||||||
Issuance of Common Units |
334,330 | — | — | — | — | — | — | 334,330 | ||||||||||||||||||||||||||||
General Partner capital
contribution |
(1,027 | ) | — | (284 | ) | — | — | 16,851 | — | 15,540 | ||||||||||||||||||||||||||
Issuance of Common Units
in connection with certain
acquisitions |
734 | — | — | — | — | — | — | 734 | ||||||||||||||||||||||||||||
Net change in accumulated
other comprehensive income
per accompanying statements |
— | — | — | — | — | — | 1,975 | 1,975 | ||||||||||||||||||||||||||||
Net income |
62,633 | — | 18,314 | — | — | 5,315 | — | 86,262 | ||||||||||||||||||||||||||||
Balance, May 31, 2004 |
$ | 307,032 | $ | — | $ | |||||||||||||||||||||||||||||||