Energy Transfer Equity, L.P. ( NYSE:ETE ) today reported financial results for the quarter ended June 30, 2012.
Distributable Cash Flow, as adjusted, was $158.2 million for the three months ended June 30, 2012, an increase of $33.7 million over the three months ended June 30, 2011. ETE's net income attributable to partners was $53.5 million for the three months ended June 30, 2012 as compared to $66.3 million for the three months ended June 30, 2011.
Distributable Cash Flow, as adjusted, was $286.9 million for the six months ended June 30, 2012, an increase of $37.2 million over the six months ended June 30, 2011. ETE's net income attributable to partners was $219.9 million for the six months ended June 30, 2012 as compared to $154.9 million for the six months ended June 30, 2011.
As of and during the three and six months ended June 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 June 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 six months ended June 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;
- $8.3 million and $38.2 million in merger-related costs that were accounted for in selling, general and administrative expenses during the three and six months ended June 30, 2012, respectively; and,
- $53.1 million of net merger-related expenses incurred directly by Southern Union that were consolidated in to ETE's operating results during the first quarter of 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 $105.0 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 $220.0 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 six months ended June 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 $750.0 million in senior notes outstanding through a tender offer. As a result of the tender offer, a loss on extinguishment of debt of $115.0 million was recorded during the six months ended June 30, 2012 and recognized in ETE's consolidated statement of operations.
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