ENERGY TRANSFER PARTNERS, L.P.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information of Energy Transfer Partners, L.P. (“ETP”) reflects the pro forma impacts of (i) ETP's contribution of its propane operations to AmeriGas Partners, L.P. (“AmeriGas”) in exchange for approximately $1.46 billion in cash and approximately 29.6 million common units representing limited partner interests in AmeriGas (the “Propane Transaction”) and (ii) ETP's Citrus Transaction (as defined below).
The unaudited pro forma condensed consolidated balance sheet gives effect to the Propane Transaction and the Citrus Transaction as if both had occurred on December 31, 2011; the unaudited pro forma condensed consolidated statement of operations assumes that both transactions were consummated on January 1, 2011. The unaudited pro forma condensed balance sheet and condensed consolidated statements of operations should be read in conjunction with ETP's Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2012.
The unaudited pro forma condensed consolidated financial statements are for illustrative purposes only and are not necessarily indicative of the financial results that would have occurred if the Propane Transaction and/or Citrus Transaction had been consummated on the dates indicated, nor are they necessarily indicative of the results of operations in the future. The pro forma adjustments, as described in the accompanying notes, are based upon available information and certain assumptions that are believed to be reasonable as of the date of this document.
Propane Transaction
On January 12, 2012, ETP contributed its propane operations, consisting of Heritage Operating, L.P. ("HOLP") and Titan Energy Partners, L.P. ("Titan") (collectively, the “Propane Business”) to AmeriGas. ETP received approximately $1.46 billion in cash and approximately 29.6 million AmeriGas Common Units valued at $1.12 billion at the time of the contribution. AmeriGas also assumed approximately $71.0 million of existing HOLP debt. The cash proceeds were used to complete the redemption of $750 million of aggregate principal amount of ETP senior notes and to repay borrowings on ETP's revolving credit facility.
Citrus Transaction
On March 26, 2012, Energy Transfer Equity, L.P. ("ETE") consummated the acquisition of Southern Union Company ("Southern Union") and, concurrently with the closing of the Southern Union acquisition, CrossCountry Energy, LLC ("CrossCountry"), a subsidiary of Southern Union that indirectly owns a 50% interest in Citrus Corp., merged with a subsidiary of ETP and, in connection therewith, ETP paid $1.895 billion in cash and issued $105 million of ETP Common Units (the “Citrus Transaction”). ETP used cash proceeds from its completed public offering of $2 billion of aggregate principal amount of senior notes to fund the cash portion of the purchase price of the Citrus Transaction. As a result of the consummation of the Citrus Transaction, ETP owns CrossCountry which in turn owns a 50% interest in Citrus Corp. The other 50% interest in Citrus Corp. is owned by El Paso Corporation. In conjunction with the Citrus Transaction, ETE agreed to relinquish its rights to approximately $220 million of the incentive distributions from ETP that ETE would otherwise be entitled to receive over 16 consecutive quarters.
Pending Sunoco Merger
On April 30, 2012, ETP announced its entry into a definitive merger agreement whereby ETP will acquire Sunoco, Inc. ("Sunoco") in a common unit and cash transaction valued at $5.3 billion based on the closing price of ETP's common units on April 27, 2012. This transaction is expected to close in the third or fourth quarter of 2012, subject to approval by Sunoco's shareholders and customary regulatory approvals. The following unaudited pro forma condensed consolidated financial information of ETP does not reflect this pending merger, which was announced subsequent to the consummation of the Citrus Transaction.
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 2011
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | ETP Historical | | Propane Transaction Pro Forma Adjustments | | ETP as Adjusted for Propane Transaction | | Citrus Transaction Pro Forma
Adjustments | | ETP Pro Forma |
| ASSETS | | | | | | | | | |
| CURRENT ASSETS: | | | | | | | | | |
| Cash and cash equivalents | $ | 106,816 |
| | $ | (52,799 | ) | a | $ | 313,517 |
| | $ | — |
| | $ | 313,517 |
|
| | | | 259,500 |
| b | | | | | |
| Marketable securities | 1,229 |
| | (1,218 | ) | a | 11 |
| | — |
| | 11 |
|
| Accounts receivable, net of allowance for doubtful accounts | 568,579 |
| | (126,935 | ) | a | 441,644 |
| | — |
| | 441,644 |
|
| Accounts receivable from related companies | 81,753 |
| | — |
| | 81,753 |
| | — |
| | 81,753 |
|
| Inventories | 306,740 |
| | (98,149 | ) | a | 208,591 |
| | — |
| | 208,591 |
|
| Exchanges receivable | 18,808 |
| | — |
| | 18,808 |
| | — |
| | 18,808 |
|
| Price risk management assets | 11,429 |
| | — |
| | 11,429 |
| | — |
| | 11,429 |
|
| Other current assets | 180,140 |
| | (21,938 | ) | a | 158,202 |
| | — |
| | 158,202 |
|
| Total current assets | 1,275,494 |
| | (41,539 | ) | | 1,233,955 |
| | — |
| | 1,233,955 |
|
| | | | | | | | | | |
| PROPERTY, PLANT AND EQUIPMENT, net | 12,306,366 |
| | (732,848 | ) | a | 11,573,518 |
| | — |
| | 11,573,518 |
|
| | | | | | | | | | |
| ADVANCES TO AND INVESTMENTS IN AFFILIATES | 200,612 |
| | 1,123,007 |
| b | 1,323,619 |
| | 2,000,000 |
| c | 3,323,619 |
|
| LONG-TERM PRICE RISK MANAGEMENT ASSETS | 25,537 |
| | — |
| | 25,537 |
| | — |
| | 25,537 |
|
| GOODWILL | 1,219,597 |
| | (615,826 | ) | a | 603,771 |
| | — |
| | 603,771 |
|
| INTANGIBLE ASSETS, net | 331,409 |
| | (147,118 | ) | a | 184,291 |
| | — |
| | 184,291 |
|
| OTHER NON-CURRENT ASSETS, net | 159,601 |
| | (7,723 | ) | a | 151,878 |
| | — |
| | 151,878 |
|
| Total assets | $ | 15,518,616 |
| | $ | (422,047 | ) | | $ | 15,096,569 |
| | $ | 2,000,000 |
| | $ | 17,096,569 |
|
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 2011
(in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| | ETP Historical | | Propane Transaction Pro Forma Adjustments | | ETP as Adjusted for Propane Transaction | | Citrus Transaction Pro Forma
Adjustments | | ETP Pro Forma |
| LIABILITIES | | | | | | | | | |
| CURRENT LIABILITIES: | | | | | | | | | |
| Accounts payable | $ | 401,053 |
| | $ | (45,172 | ) | a | $ | 355,881 |
| | $ | — |
| | $ | 355,881 |
|
| Accounts payable to related companies | 33,373 |
| | (27,770 | ) | a | 5,603 |
| | — |
| | 5,603 |
|
| Exchanges payable | 17,906 |
| | — |
| | 17,906 |
| | — |
| | 17,906 |
|
| Price risk management liabilities | 79,518 |
| | (4,061 | ) | a | 75,457 |
| | — |
| | 75,457 |
|
| Accrued and other current liabilities | 629,202 |
| | (143,639 | ) | a | 485,563 |
| | — |
| | 485,563 |
|
| Current maturities of long-term debt | 424,117 |
| | (24,117 | ) | a | 108,000 |
| | — |
| | 108,000 |
|
| | | | (292,000 | ) | b | | | | | |
| Total current liabilities | 1,585,169 |
| | (536,759 | ) | | 1,048,410 |
| | — |
| | 1,048,410 |
|
| | | | | | | | | | |
| LONG-TERM DEBT, less current maturities | 7,388,170 |
| | (56,927 | ) | a | 6,558,743 |
| | 1,895,000 |
| c | 8,453,743 |
|
| | | | (772,500 | ) | b | | | | | |
| LONG-TERM PRICE RISK MANAGEMENT LIABILITIES | 42,303 |
| | (61 | ) | a | 42,242 |
| | — |
| | 42,242 |
|
| OTHER NON-CURRENT LIABILITIES | 152,550 |
| | (3,484 | ) | a | 149,066 |
| | — |
| | 149,066 |
|
| | | | | | | | | | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | | | |
| | | | | | | | | | |
| PARTNERS’ CAPITAL: | | | | | | | | | |
| General Partner | 181,646 |
| | (22,937 | ) | a | 196,148 |
| | — |
| | 196,148 |
|
| | | | 37,439 |
| b | | | | | |
| Limited Partners: | | | | | | | | | |
| Common Unitholders | 5,533,492 |
| | (1,476,153 | ) | a | 6,466,907 |
| | 105,000 |
| c | 6,571,907 |
|
| | | | 2,409,568 |
| b | | | | | |
| Accumulated other comprehensive income | 6,569 |
| | (233 | ) | a | 6,336 |
| | — |
| | 6,336 |
|
| Total partners’ equity | 5,721,707 |
| | 947,684 |
| | 6,669,391 |
| | 105,000 |
| | 6,774,391 |
|
| Noncontrolling interest | 628,717 |
| | — |
| | 628,717 |
| | — |
| | 628,717 |
|
| Total equity | 6,350,424 |
| | 947,684 |
| | 7,298,108 |
| | 105,000 |
| | 7,403,108 |
|
| Total liabilities and equity | $ | 15,518,616 |
| | $ | (422,047 | ) | | $ | 15,096,569 |
| | $ | 2,000,000 |
| | $ | 17,096,569 |
|
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.
ENERGY TRANSFER PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2011
(dollars in thousands, except per unit data) |
| | | | | | | | | | | | | | | | | | | | |
| | ETP Historical | | Propane Transaction Pro Forma Adjustments | | ETP as Adjusted for Propane Transaction | | Citrus Transaction Pro Forma Adjustments | | ETP Pro Forma | |
| REVENUES: | | | | | | | | | | |
| Natural gas sales | $ | 2,536,257 |
| | $ | — |
| | $ | 2,536,257 |
| | $ | — |
| | $ | 2,536,257 |
| |
| NGL sales | 1,132,023 |
| | — |
| | 1,132,023 |
| | — |
| | 1,132,023 |
| |
| Gathering, transportation and other fees | 1,513,802 |
| | — |
| | 1,513,802 |
| | — |
| | 1,513,802 |
| |
| Retail propane sales | 1,360,653 |
| | (1,314,420 | ) | a | 46,233 |
| | — |
| | 46,233 |
| |
| Other | 307,705 |
| | (113,094 | ) | a | 194,611 |
| | — |
| | 194,611 |
| |
| Total revenues | 6,850,440 |
| | (1,427,514 | ) | | 5,422,926 |
| | — |
| | 5,422,926 |
| |
| COSTS AND EXPENSES: | | | | | | | | | | |
| Cost of products sold | 4,189,353 |
| | (845,369 | ) | a | 3,343,984 |
| | — |
| | 3,343,984 |
| |
| Operating expenses | 773,767 |
| | (328,137 | ) | a | 445,630 |
| | — |
| | 445,630 |
| |
| Depreciation and amortization | 430,904 |
| | (78,256 | ) | a | 352,648 |
| | — |
| | 352,648 |
| |
| Selling, general and administrative | 211,609 |
| | (46,776 | ) | a | 164,833 |
| | — |
| | 164,833 |
| |
| Total costs and expenses | 5,605,633 |
| | (1,298,538 | ) | | 4,307,095 |
| | — |
| | 4,307,095 |
| |
| OPERATING INCOME | 1,244,807 |
| | (128,976 | ) | | 1,115,831 |
| | — |
| | 1,115,831 |
| |
| OTHER INCOME (EXPENSE): | | | | | | | | | | |
| Interest expense, net of interest capitalized | (474,113 | ) | | 8,700 |
| a | (403,313 | ) | | (110,858 | ) | e | (514,171 | ) | |
| | | | 62,100 |
| b | | | | | | |
| Equity in earnings of affiliates | 25,836 |
| | 55,298 |
| b | 81,134 |
| | 92,690 |
| f | 173,824 |
| |
| Losses on disposal of assets | (3,188 | ) | | 2,837 |
| a | (351 | ) | | — |
| | (351 | ) | |
| Losses on non-hedged interest rate derivatives | (77,409 | ) | | — |
| | (77,409 | ) | | — |
| | (77,409 | ) | |
| Allowance for equity funds used during construction | 957 |
| | — |
| | 957 |
| | — |
| | 957 |
| |
| Impairment of investment in affiliates | (5,355 | ) | | — |
| | (5,355 | ) | | — |
| | (5,355 | ) | |
| Other, net | 4,442 |
| | (616 | ) | a | 3,826 |
| | — |
| | 3,826 |
| |
| INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) | 715,977 |
| | (657 | ) | | 715,320 |
| | (18,168 | ) | | 697,152 |
| |
| Income tax expense (benefit) | 18,815 |
| | (3,593 | ) | a | 15,222 |
| | — |
| | 15,222 |
| |
| NET INCOME | 697,162 |
| | 2,936 |
| | 700,098 |
| | (18,168 | ) | | 681,930 |
| |
| LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST | 28,188 |
| | — |
| | 28,188 |
| | — |
| | 28,188 |
| |
| NET INCOME ATTRIBUTABLE TO PARTNERS | 668,974 |
| | 2,936 |
| | 671,910 |
| | (18,168 | ) | | 653,742 |
| |
| GENERAL PARTNER'S INTEREST IN NET INCOME | 433,148 |
| | 48 |
| d | 433,196 |
| | (55,298 | ) | g | 377,898 |
| |
| LIMITED PARTNERS' INTEREST IN NET INCOME | $ | 235,826 |
| | $ | 2,888 |
| d | $ | 238,714 |
| | $ | 37,130 |
| g | $ | 275,844 |
| |
| BASIC NET INCOME PER LIMITED PARTNER UNIT | $ | 1.10 |
| | | | $ | 1.11 |
| | | | $ | 1.28 |
| |
| BASIC AVERAGE NUMBER OF UNITS OUTSTANDING | 207,245,106 |
| | | | 207,245,106 |
| | | | 209,494,198 |
| h |
| DILUTED NET INCOME PER LIMITED PARTNER UNIT | $ | 1.10 |
| | | | $ | 1.11 |
| | | | $ | 1.27 |
| |
| DILUTED AVERAGE NUMBER OF UNITS OUTSTANDING | 208,154,303 |
| | | | 208,154,303 |
| | | | 210,403,395 |
| h |
The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.
ENERGY TRANSFER PARTNERS, L.P.
NOTES TO UNAUDITED PRO FORMA INFORMATION
| |
| (a) | To record the deconsolidation of ETP's propane operations in connection with the Propane Transaction with AmeriGas. |
| |
| (b) | To record the pro forma impacts from the consideration received in connection with the Propane Transaction, including (i) ETP's receipt of AmeriGas common units representing approximately 34% of the limited partner interests in AmeriGas, and (ii) ETP's use of cash proceeds from the transaction to redeem long-term debt. The unaudited pro forma condensed consolidated statements of operations include adjustments to reduce interest expense resulting from the repayment of (i) $402.3 million of outstanding borrowings on ETP's revolving credit facility based on the amount outstanding as of January 1, 2011 and (ii) the redemption of $750 million of aggregate principal amount of ETP's senior notes. |
The unaudited pro forma condensed consolidated statements of operations also include adjustments to equity in earnings of affiliates to reflect net impact of (i) ETP's proportionate share of limited partners' interest in net income attributable to AmeriGas and (ii) amortization of the pro forma excess fair value associated with ETP's interest in AmeriGas. ETP's equity in earnings of AmeriGas reflected in its unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2011 are based on the pro forma earnings of AmeriGas for the twelve month period ended December 31, 2011 including the earnings of the Propane Business.
| |
| (c) | To record the $2.0 billion contribution for ETP's 50% interest in Citrus Corp. consisting of $1.895 billion in issuance of debt and the issuance of $105 million of ETP common units. |
| |
| (d) | To reflect changes in amounts attributable to general and limited partners based on the impacts of pro forma adjustments (a) and (b) above. |
| |
| (e) | To record interest expense at ETP's actual weighted average rate of 5.85% from incremental debt of $1.895 billion in connection with the Citrus Transaction. |
| |
| (f) | To record ETP's 50% share in equity in earnings of Citrus Corp. |
| |
| (g) | To reflect changes in amounts attributable to general and limited partners based on (i) pro forma changes in earnings resulting from adjustments (e) and (f) above, (ii) the change in relative ownership percentage between the general partner and limited partners that would be presumed to occur upon issuance of $105 million of ETP Common Units in connection with the Citrus Transaction, and (iii) the impact for the period presented of ETE's relinquishment of $13.75 million per quarter of incentive distributions in connection with the Citrus Transaction. |
| |
| (h) | The pro forma average number of limited partner units outstanding reflects ETP's issuance of $105 million of ETP Common Units issued in connection with the Citrus Transaction. |
