ETE-9.30.2012-Q3
Table of Contents

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2012
or
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-32740
ENERGY TRANSFER EQUITY, L.P.
(Exact name of registrant as specified in its charter)
 
Delaware
 
30-0108820
(state or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
3738 Oak Lawn Avenue, Dallas, Texas 75219
(Address of principal executive offices) (zip code)
(214) 981-0700
(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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
ý
  
Accelerated filer
¨
 
 
 
 
Non-accelerated filer
£  (Do not check if a smaller reporting company)
  
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
At November 1, 2012, the registrant had units outstanding as follows:
Energy Transfer Equity, L.P. 279,955,608 Common Units


Table of Contents

FORM 10-Q
ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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Table of Contents

Forward-Looking Statements
Certain matters discussed in this report, excluding historical information, as well as some statements by Energy Transfer Equity, L.P. (“Energy Transfer Equity,” the “Partnership” or “ETE”) in periodic press releases and some oral statements of Energy Transfer Equity officials during presentations about the Partnership, include forward-looking statements. These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Statements using words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “estimate,” “intend,” “continue,” “believe,” “may,” “will” or similar expressions help identify forward-looking statements. Although the Partnership and its General Partner believe such forward-looking statements are based on reasonable assumptions and current expectations and projections about future events, no assurance can be given that such assumptions, expectations or projections will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, the Partnership’s actual results may vary materially from those anticipated, estimated or expressed, forecasted, projected or expected in forward-looking statements since many of the factors that determine these results are subject to uncertainties and risks that are difficult to predict and beyond management’s control. For additional discussion of risks, uncertainties and assumptions, see “Part II — Other Information – Item 1A. Risk Factors” for the quarters ended March 31, 2012 and June 30, 2012 and included in this Quarterly Report on Form 10-Q, as well as “Part I — Item 1A. Risk Factors” in the Partnership’s Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission on February 22, 2012.
Definitions
The following is a list of certain acronyms and terms generally used in the energy industry and throughout this document:
/d
  
per day
 
 
AmeriGas
 
AmeriGas Partners, L.P.
 
 
 
AOCI
 
accumulated other comprehensive income
 
 
 
AROs
 
asset retirement obligations
 
 
 
Bbls
  
barrels
 
 
Btu
  
British thermal unit, an energy measurement used by gas companies to convert the volume of gas used to its heat equivalent, and thus calculate the actual energy content
 
 
 
CAA
 
Federal Clean Air Act
 
 
Canyon
 
ETC Canyon Pipeline, LLC
 
 
 
Capacity
  
capacity of a pipeline, processing plant or storage facility refers to the maximum capacity under normal operating conditions and, with respect to pipeline transportation capacity, is subject to multiple factors (including natural gas injections and withdrawals at various delivery points along the pipeline and the utilization of compression) which may reduce the throughput capacity from specified capacity levels
 
 
 
Citi
 
Citigroup Global Markets Inc.
 
 
 
Citrus
 
Citrus Corp., which owns 100% of FGT
 
 
 
Citrus Merger
 
ETP's acquisition of Citrus Corp. on March 26, 2012
 
 
 
CrossCountry
 
CrossCountry Energy LLC
 
 
 
CFTC
 
Commodities Futures Trading Commission
 
 
CRSA
 
Contingent Residual Support Agreement
 
 
 
DER
 
Distribution equivalent rights
 
 
 
DRIP
 
Distribution Reinvestment Plan
 
 
 
DOT
 
U.S. Department of Transportation
 
 
 
Enterprise
 
Enterprise Products Partners L.P., together with its subsidiaries
 
 
 
ETP
 
Energy Transfer Partners, L.P.
 
 
 
ETP Class F Units
 
Class F Units issued by ETP in Holdco Transaction
 
 
 
ETP Credit Facility
 
ETP's revolving credit facility
 
 
 

ii

Table of Contents

ETP GP
 
Energy Transfer Partners GP, L.P., the general partner of ETP
 
 
 
ETP LLC
 
Energy Transfer Partners, L.L.C., the general partner of ETP GP
 
 
 
EPA
 
U.S. Environmental Protection Agency
 
 
 
Exchange Act
 
Securities Exchange Act of 1934
 
 
 
FDOT/FTE
 
Florida Department of Transportation, Florida's Turnpike Enterprise
 
 
 
FEP
 
Fayetteville Express Pipeline LLC
 
 
 
FERC
 
Federal Energy Regulatory Commission
 
 
 
FGT
 
Florida Gas Transmission Company, LLC, which owns a natural gas pipeline system that originates in Texas and delivers natural gas to the Florida peninsula
 
 
 
Finance Company
 
AmeriGas Finance LLC
 
 
 
GAAP
 
accounting principles generally accepted in the United States of America
 
 
 
HPC
 
RIGS Haynesville Partnership Co.
 
 
 
Holdco
 
ETP Holdco Corporation
 
 
 
Holdco Transaction
 
October 5, 2012 transaction including contributions from ETP and ETE to Holdco
 
 
 
HOLP
 
Heritage Operating, L.P.
 
 
 
IDRs
 
incentive distribution rights
 
 
 
LDH
 
LDH Energy Asset Holdings LLC
 
 
 
LIBOR
 
London Interbank Offered Rate
 
 
 
LNG
 
Liquefied natural gas
 
 
 
LNG Holdings
 
Trunkline LNG Holdings, LLC
 
 
 
Lone Star
 
Lone Star NGL LLC
 
 
 
MDPU
 
Massachusetts Department of Public Utilities
 
 
 
MEP
 
Midcontinent Express Pipeline LLC
 
 
 
MGP
 
manufactured gas plant
 
 
 
MMBtu
  
million British thermal units
 
 
 
NGL
  
natural gas liquid, such as propane, butane and natural gasoline
 
 
NMED
 
New Mexico Environmental Department
 
 
 
NYMEX
  
New York Mercantile Exchange
 
 
OTC
 
over-the-counter
 
 
Other Post-retirement Plans
 
postretirement health care and life insurance plans
 
 
 
Panhandle
 
Panhandle Eastern Pipe Line Company, LP and its subsidiaries
 
 
 
PCB
 
polychlorinated biphenyl
 
 
Pension Plans
 
funded non-contributory defined benefit pension plans
 
 
 
PEPL
 
Panhandle Eastern Pipe Line Company, LP
 
 
 
PHMSA
 
Pipeline Hazardous Materials Safety Administration
 
 
RIGS
 
Regency Intrastate Gas System
 
 
 
Preferred Units
 
ETE's Series A Convertible Preferred Units

iii

Table of Contents

 
 
 
Propane Business
 
Heritage Operating, L.P. and Titan Energy Partners, L.P.
 
 
 
Propane Contribution
 
ETP's contribution of its Propane Business to AmeriGas
 
 
 
Regency
 
Regency Energy Partners LP
 
 
 
Regency GP
 
Regency Energy Partners GP LP, the general partner of Regency
 
 
 
Regency LLC
 
Regency Energy Partners GP LLC, the general partner of Regency GP
 
 
 
Regency Preferred Units
 
Regency's Series A Convertible Preferred Units, the Preferred Units of a Subsidiary
 
 
Sea Robin Pipeline
 
Sea Robin Pipeline Company LLC
 
 
 
SEC
 
Securities and Exchange Commission
 
 
 
Southern Union
 
Southern Union Company, a subsidiary of ETE
 
 
 
Southern Union Credit Facility
 
Southern Union's revolving credit facility
 
 
 
Southern Union Merger
 
ETE's acquisition of Southern Union on March 26, 2012
 
 
 
SUGS
 
Southern Union Gas Services
 
 
 
Sunoco
 
Sunoco, Inc.
 
 
 
Sunoco Logistics
 
Sunoco Logistics Partners L.P.
 
 
 
Sunoco Merger
 
ETP's acquisition of Sunoco on October 5, 2012
 
 
 
TCEQ
 
Texas Commission on Environmental Quality
 
 
 
Transwestern
 
Transwestern Pipeline Company, LLC
 
 
 
Trunkline LNG
 
Trunkline LNG Company, LLC
 
 
 
WTI
  
West Texas Intermediate Crude

Adjusted EBITDA is a term used throughout this document, which we define as earnings before interest, taxes, depreciation, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, non-cash impairment charges, loss on extinguishment of debt, gain on deconsolidation of ETP's Propane Business and other non-operating income or expense items. Unrealized gains and losses on commodity risk management activities includes unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments). Adjusted EBITDA reflects amounts for less than wholly owned subsidiaries and unconsolidated affiliates based on proportionate ownership.


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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)
 
 
September 30,
2012
 
December 31, 2011
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
172,076

 
$
126,342

Accounts receivable, net of allowance for doubtful accounts of $2,844 and $8,841 as of September 30, 2012 and December 31, 2011, respectively
822,109

 
680,491

Accounts receivable from related companies
38,956

 
100,406

Inventories
450,212

 
327,963

Exchanges receivable
44,030

 
21,307

Price risk management assets
31,615

 
15,802

Current assets held for sale
7,482

 

Other current assets
170,942

 
183,133

Total current assets
1,737,422

 
1,455,444

 
 
 
 
PROPERTY, PLANT AND EQUIPMENT
24,157,556

 
16,529,339

ACCUMULATED DEPRECIATION
(1,920,506
)
 
(1,970,777
)
 
22,237,050

 
14,558,562

 
 
 
 
NON-CURRENT ASSETS HELD FOR SALE
190,996

 

ADVANCES TO AND INVESTMENTS IN UNCONSOLIDATED AFFILIATES
4,500,273

 
1,496,600

NON-CURRENT PRICE RISK MANAGEMENT ASSETS
43,566

 
26,011

GOODWILL
3,458,807

 
2,038,975

INTANGIBLE ASSETS, net
953,924

 
1,072,291

OTHER NON-CURRENT ASSETS, net
475,561

 
248,910

Total assets
$
33,597,599

 
$
20,896,793

















The accompanying notes are an integral part of these consolidated financial statements.

1

Table of Contents


ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(unaudited)

 
September 30,
2012
 
December 31, 2011
LIABILITIES AND EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable
$
554,022

 
$
512,023

Accounts payable to related companies
3,740

 
33,208

Exchanges payable
112,645

 
17,957

Price risk management liabilities
119,481

 
90,053

Accrued and other current liabilities
1,130,528

 
763,912

Current maturities of long-term debt
614,418

 
424,160

Current liabilities held for sale
5,439

 

Total current liabilities
2,540,273

 
1,841,313

 
 
 
 
LONG-TERM DEBT, less current maturities
17,525,668

 
10,946,864

PREFERRED UNITS
327,960

 
322,910

DEFERRED INCOME TAXES
1,954,144

 
217,244

NON-CURRENT PRICE RISK MANAGEMENT LIABILITIES
173,838

 
81,415

OTHER NON-CURRENT LIABILITIES
311,713

 
26,958

 
 
 
 
COMMITMENTS AND CONTINGENCIES (Note 16)

 

 
 
 
 
PREFERRED UNITS OF SUBSIDIARY
72,549

 
71,144

 
 
 
 
EQUITY:
 
 
 
General Partner
(161
)
 
321

Limited Partners:
 
 
 
Common Unitholders
2,203,817

 
52,485

Accumulated other comprehensive income (loss)
(5,747
)
 
678

Total partners’ capital
2,197,909

 
53,484

Noncontrolling interest
8,493,545

 
7,335,461

Total equity
10,691,454

 
7,388,945

Total liabilities and equity
$
33,597,599

 
$
20,896,793












The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit data)
(unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
REVENUES:
 
 
 
 
 
 
 
Natural gas sales
$
789,634

 
$
796,323

 
$
1,928,913

 
$
2,320,208

NGL sales
584,475

 
507,616

 
1,704,860

 
1,187,616

Gathering, transportation and other fees
635,340

 
479,279

 
1,724,756

 
1,335,201

Retail propane sales

 
213,496

 
87,082

 
962,258

Other
161,513

 
87,300

 
364,910

 
219,600

Total revenues
2,170,962

 
2,084,014

 
5,810,521

 
6,024,883

COSTS AND EXPENSES:
 
 
 
 
 
 
 
Cost of products sold
1,244,418

 
1,347,587

 
3,250,485

 
3,807,320

Operating expenses
216,673

 
230,909

 
645,129

 
667,084

Depreciation and amortization
219,458

 
151,429

 
589,080

 
426,216

Selling, general and administrative
124,380

 
82,564

 
395,584

 
224,957

Total costs and expenses
1,804,929

 
1,812,489

 
4,880,278

 
5,125,577

OPERATING INCOME
366,033

 
271,525

 
930,243

 
899,306

OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
Interest expense, net of interest capitalized
(237,802
)
 
(193,772
)
 
(732,387
)
 
(543,218
)
Bridge loan related fees

 

 
(62,241
)
 

Equity in earnings of unconsolidated affiliates
19,924

 
28,374

 
117,619

 
82,634

Gain on deconsolidation of Propane Business

 

 
1,056,709

 

Losses on extinguishments of debt

 

 
(122,844
)
 

Losses on non-hedged interest rate derivatives
(6,118
)
 
(68,497
)
 
(23,296
)
 
(65,094
)
Other, net
(84
)
 
27,902

 
28,628

 
15,752

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE
141,953

 
65,532

 
1,192,431

 
389,380

Income tax expense
28,625

 
3,290

 
40,379

 
18,415

INCOME FROM CONTINUING OPERATIONS
113,328

 
62,242

 
1,152,052

 
370,965

Loss from discontinued operations
(147,162
)
 
(1,543
)
 
(150,062
)
 
(4,522
)
NET INCOME (LOSS)
(33,834
)
 
60,699

 
1,001,990

 
366,443

LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST
(69,004
)
 
(8,384
)
 
746,900

 
142,435

NET INCOME ATTRIBUTABLE TO PARTNERS
35,170

 
69,083

 
255,090

 
224,008

GENERAL PARTNER’S INTEREST IN NET INCOME
87

 
214

 
725

 
693

LIMITED PARTNERS’ INTEREST IN NET INCOME
$
35,083

 
$
68,869

 
$
254,365

 
$
223,315

INCOME FROM CONTINUING OPERATIONS PER LIMITED PARTNER UNIT:
 
 
 
 
 
 
 
Basic
$
0.65

 
$
0.32

 
$
1.54

 
$
1.02

Diluted
$
0.65

 
$
0.32

 
$
1.54

 
$
1.02

NET INCOME PER LIMITED PARTNER UNIT:
 
 
 
 
 
 
 
Basic
$
0.13

 
$
0.31

 
$
0.97

 
$
1.00

Diluted
$
0.13

 
$
0.31

 
$
0.97

 
$
1.00

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)
(unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Net income (loss)
$
(33,834
)
 
$
60,699

 
$
1,001,990

 
$
366,443

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Reclassification to earnings of gains and losses on derivative instruments accounted for as cash flow hedges
(7,119
)
 
288

 
(14,933
)
 
(13,129
)
Change in value of derivative instruments accounted for as cash flow hedges
(6,897
)
 
16,412

 
14,251

 
9,403

Change in value of available-for-sale securities

 
(900
)
 
(114
)
 
(935
)
Change in other comprehensive income from equity investments
8,437

 

 
(13,771
)
 

 
(5,579
)
 
15,800

 
(14,567
)
 
(4,661
)
Comprehensive income (loss)
(39,413
)
 
76,499

 
987,423

 
361,782

Less: Comprehensive income (loss) attributable to noncontrolling interest
(67,527
)
 
4,323

 
738,758

 
139,836

Comprehensive income attributable to partners
$
28,114

 
$
72,176

 
$
248,665

 
$
221,946
































The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
(Dollars in thousands)
(unaudited)
 
 
General
Partner    
 
Common
Unitholders    
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interest
 
Total    
Balance, December 31, 2011
$
321

 
$
52,485

 
$
678

 
$
7,335,461

 
$
7,388,945

Distributions to partners
(1,298
)
 
(489,303
)
 

 

 
(490,601
)
Distributions to noncontrolling interest

 

 

 
(687,917
)
 
(687,917
)
Units issued in Southern Union Merger (See Note 3)

 
2,354,490

 

 

 
2,354,490

Subsidiary units issued for cash
94

 
32,498

 

 
1,051,390

 
1,083,982

Subsidiary units issued in certain acquisitions

 

 

 
7,000

 
7,000

Non-cash compensation expense, net of units tendered by employees for tax withholdings

 
492

 

 
33,233

 
33,725

Capital contributions from noncontrolling interest

 

 

 
23,836

 
23,836

Other, net
(3
)
 
(1,210
)
 

 
(8,216
)
 
(9,429
)
Other comprehensive loss, net of tax

 

 
(6,425
)
 
(8,142
)
 
(14,567
)
Net income
725

 
254,365

 

 
746,900

 
1,001,990

Balance, September 30, 2012
$
(161
)
 
$
2,203,817

 
$
(5,747
)
 
$
8,493,545

 
$
10,691,454


























The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
Nine Months Ended September 30,
 
2012
 
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
1,001,990

 
$
366,443

Reconciliation of net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
589,080

 
426,216

Deferred income taxes
37,315

 
(479
)
Gain on curtailment of other postretirement benefit plans
(15,332
)
 

Amortization of finance costs charged to interest
6,248

 
14,581

Bridge loan related fees
62,241

 

Non-cash compensation expense
34,411

 
34,429

Gain on deconsolidation of Propane Business
(1,056,709
)
 

Losses on extinguishments of debt
122,844

 

Write-down of assets included in loss from discontinued operations (Note 3)
145,214

 

Equity in earnings of unconsolidated affiliates
(117,619
)
 
(82,634
)
Distributions from unconsolidated affiliates
153,119

 
89,196

Other non-cash
54,187

 
21,032

Changes in operating assets and liabilities, net of effects of acquisitions and deconsolidation
(119,773
)
 
234,176

Net cash provided by operating activities
897,216

 
1,102,960

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Cash paid for Southern Union Merger, net of cash received (Note 3)
(2,971,588
)
 

Cash paid for acquisitions, net of cash received
(10,317
)
 
(1,971,438
)
Capital expenditures (excluding allowance for equity funds used during construction)
(2,238,730
)
 
(1,232,059
)
Contributions in aid of construction costs
28,022

 
18,435

Contributions to unconsolidated affiliates
(34,693
)
 
(221,365
)
Distributions from unconsolidated affiliates in excess of cumulative earnings
139,118

 
54,859

Proceeds from the sale of assets
35,475

 
15,570

Cash proceeds from contribution of propane operations
1,442,536

 

Other
(2,872
)


Net cash used in investing activities
(3,613,049
)
 
(3,335,998
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from borrowings
9,081,100

 
6,429,107

Repayments of long-term debt
(6,144,208
)
 
(4,130,493
)
Subsidiary equity offering, net of issue costs
1,083,982

 
1,003,209

Distributions to partners
(490,601
)
 
(385,806
)
Debt issuance costs
(98,789
)
 
(22,217
)
Distributions to noncontrolling interest
(687,917
)
 
(574,285
)
Capital contributions received from noncontrolling interest
23,836

 

Other, net
(5,836
)
 
(5,026
)
Net cash provided by financing activities
2,761,567

 
2,314,489

INCREASE IN CASH AND CASH EQUIVALENTS
45,734

 
81,451

CASH AND CASH EQUIVALENTS, beginning of period
126,342

 
86,264

CASH AND CASH EQUIVALENTS, end of period
$
172,076

 
$
167,715

The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

ENERGY TRANSFER EQUITY, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollar amounts, except per unit data, are in thousands)
(unaudited)
1.
OPERATIONS AND ORGANIZATION:
Business Operations
Unless the context requires otherwise, references to “we,” “us,” “our,” the “Partnership” and “ETE” mean Energy Transfer Equity, L.P. and its consolidated subsidiaries, which include ETP, ETP GP, ETP LLC, Regency, Regency GP, Regency LLC, and Southern Union. References to the “Parent Company” mean Energy Transfer Equity, L.P. on a stand-alone basis.
At September 30, 2012, our equity interests in ETP and Regency consisted of:
 
General Partner
Interest
(as a % of total
partnership  interest)
 
IDRs
 
Common
Units
 
Limited Partner Ownership
(as a % and net of any treasury units)
ETP
1.4
%
 
100
%
 
52,476,059

 
21
%
Regency
1.6
%
 
100
%
 
26,266,791

 
15
%
On March 26, 2012, we acquired all of the outstanding shares of Southern Union for approximately $3.01 billion in cash and approximately 57.0 million ETE Common Units. On October 5, 2012, ETP completed the Sunoco Merger and Holdco Transaction. See Note 3 for more information regarding the Southern Union Merger, Sunoco Merger and Holdco Transaction.
The unaudited consolidated financial statements of ETE presented herein for the three and nine month periods ended September 30, 2012 and 2011 include the results of operations of:
the Parent Company;
our controlled subsidiaries, ETP and Regency (see description of their respective operations below under “Business Operations”);
our wholly-owned subsidiary, Southern Union (see description of its operations below under “Business Operations”); and
ETP’s, Regency’s and Southern Union’s wholly-owned subsidiaries and our wholly-owned subsidiaries that own the general partner and IDR interests in ETP and Regency.
Our unaudited consolidated financial statements include the results of operations of Southern Union from March 26, 2012, the date we acquired Southern Union, through September 30, 2012.
Business Operations
The Parent Company’s principal sources of cash flow have historically derived from its direct and indirect investments in the limited partner and general partner interests in ETP and Regency. Effective with the acquisition of Southern Union, the Parent Company also generated cash flows through its wholly-owned subsidiary, Southern Union. The Parent Company’s primary cash requirements are for general and administrative expenses, debt service requirements and distributions to its partners and holders of the Preferred Units. Parent Company-only assets are not available to satisfy the debts and other obligations of ETE’s subsidiaries. In order to understand the financial condition of the Parent Company on a stand-alone basis, see Note 21 for stand-alone financial information apart from that of the consolidated partnership information included herein.
The following is a brief description of our operating entities prior to the completion of the Sunoco Merger and Holdco Transaction on October 5, 2012:
ETP is a publicly traded partnership owning and operating a diversified portfolio of energy assets. ETP has pipeline operations in Alabama, Arizona, Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Utah and West Virginia and owns the largest intrastate pipeline system in Texas. ETP currently has natural gas operations that include gathering and transportation pipelines, treating and processing assets, and storage facilities located in Texas. ETP also holds a 70% interest in Lone Star, a joint venture that owns and operates NGL storage, fractionation and transportation assets in Texas,

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Louisiana and Mississippi. Concurrent with the Parent Company's acquisition of Southern Union, ETP acquired a 50% interest in Citrus, which owns FGT (see Note 3).
Regency is a publicly traded partnership engaged in the gathering and processing, contract compression, treating and transportation of natural gas and the transportation, fractionation and storage of NGLs. Regency focuses on providing midstream services in some of the most prolific natural gas producing regions in the United States, including the Haynesville, Eagle Ford, Barnett, Fayetteville, Bone Spring, Avalon and Marcellus shales, as well as the Permian Delaware basin and the mid-continent region. Its assets are located in Texas, Louisiana, Arkansas, Pennsylvania, California, Mississippi, Alabama, West Virginia and the mid-continent region of the United States, which includes Kansas, Colorado and Oklahoma. Regency also holds a 30% interest in Lone Star.
Southern Union is engaged primarily in the transportation, storage, gathering, processing and distribution of natural gas. Southern Union owns and operates interstate pipeline that transports natural gas from the Gulf of Mexico, South Texas and the Panhandle regions of Texas and Oklahoma to major U.S. markets in the Midwest and Great Lakes regions. It owns and operates a LNG import terminal located on Louisiana's Gulf Coast. Through SUGS, it owns natural gas and NGL pipelines, cryogenic plants, treating plants and is engaged in connecting producing wells of exploration and production companies to its gathering system, treating natural gas to remove impurities to meet pipeline quality specifications, processing natural gas for the removal of NGLs and redelivering natural gas and NGLs to a variety of markets in West Texas and New Mexico. Southern Union also has regulated utility operations in Missouri and Massachusetts.
See Note 20 for discussion regarding our reportable segments.
Preparation of Interim Financial Statements
The accompanying consolidated balance sheet as of December 31, 2011, which has been derived from audited financial statements, and the unaudited interim consolidated financial statements and notes thereto of the Partnership as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011, have been prepared in accordance with GAAP for interim consolidated financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. However, management believes that the disclosures made are adequate to make the information not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year due to the seasonal nature of the Partnership’s operations, maintenance activities of the Partnership’s subsidiaries and the impact of forward natural gas prices and differentials on certain derivative financial instruments that are accounted for using mark-to-market accounting. Management has evaluated subsequent events through the date the financial statements were issued.
In the opinion of management, all adjustments (all of which are normal and recurring) have been made that are necessary to fairly state the consolidated financial position of the Partnership as of September 30, 2012, and the Partnership’s results of operations and cash flows for the three and nine months ended September 30, 2012 and 2011. The unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto presented in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the SEC on February 22, 2012.
Certain prior period amounts have been reclassified to conform to the 2012 presentation. These reclassifications had no impact on net income or total equity.

2.
ESTIMATES AND SIGNIFICANT ACCOUNTING POLICIES:
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the accrual for and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The natural gas industry conducts its business by processing actual transactions at the end of the month following the month of delivery. Consequently, the most current month’s financial results for natural gas and NGL related operations are estimated using volume estimates and market prices. Any differences between estimated results and actual results are recognized in the following month’s financial statements. Management believes that the estimated operating results represent the actual results in all material respects.
Some of the other significant estimates made by management include, but are not limited to, the timing of certain forecasted transactions that are hedged, the fair value of derivative instruments, useful lives for depreciation and amortization, purchase accounting allocations and subsequent realizability of intangible assets, fair value measurements used in the goodwill

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impairment test, market value of inventory, assets and liabilities resulting from the regulated ratemaking process, contingency reserves and environmental reserves. Actual values and results could differ from those estimates.
Significant Accounting Policies
As a result of the Southern Union Merger on March 26, 2012, the following significant accounting policies have been added to our significant accounting policies described in our Form 10-K for the year ended December 31, 2011.
Pensions and Other Postretirement Benefit Plans
Employers are required to recognize in their balance sheets the overfunded or underfunded status of defined benefit pension and other postretirement plans, measured as the difference between the fair value of the plan assets and the benefit obligation (the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for other postretirement plans). Each overfunded plan is recognized as an asset and each underfunded plan is recognized as a liability. Employers must recognize the change in the funded status of the plan in the year in which the change occurs through Accumulated other comprehensive income in equity. See Note 14 for further information regarding pensions and other postretirement benefit plans.
Revenue Recognition for Southern Union's Natural Gas Distribution Operations
In Southern Union's natural gas distribution operations, natural gas utility customers are billed on a monthly-cycle basis. The related cost of natural gas and revenue taxes are matched with cycle-billed revenues through utilization of purchased natural gas adjustment provisions in tariffs approved by the regulatory agencies having jurisdiction. Revenues from natural gas delivered but not yet billed are accrued, along with the related natural gas purchase costs and revenue-related taxes.

3.
ACQUISITIONS AND DIVESTITURES:
Southern Union Merger
On March 26, 2012, Sigma Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of ETE, completed its acquisition of Southern Union. Southern Union is the surviving entity in the merger and operates as a wholly-owned subsidiary of ETE. The assets acquired as a result of this merger significantly expand our existing geographic footprint of natural gas pipeline and natural gas transportation capacity and into natural gas utilities distribution, and are complementary to the assets owned and operated by our other entities.
Under the terms of the merger agreement, Southern Union stockholders received a total of 56,982,160 ETE Common Units and a total of approximately $3.01 billion in cash. Effective with the closing of the transaction, Southern Union's common stock is no longer publicly traded.
Citrus Merger
In connection with the Southern Union Merger on March 26, 2012, ETP completed its acquisition of CrossCountry, a subsidiary of Southern Union which owned an indirect 50% interest in Citrus, the owner of FGT. The total merger consideration was approximately $2.0 billion, consisting of approximately $1.9 billion in cash and approximately 2.25 million ETP Common Units. See Note 4 for more information regarding ETP's equity method investment in Citrus.
In connection with the Citrus Merger, we relinquished our rights to an aggregate $220 million of incentive distributions from ETP that we would otherwise be entitled to receive over 16 consecutive quarters following the closing of the merger.
Pursuant to the merger agreement, we also granted ETP a right of first offer with respect to any disposition by us or SUGS, a subsidiary of Southern Union that owns and operates a natural gas gathering and processing system serving the Permian Basin in West Texas and New Mexico.
Summary of Assets Acquired and Liabilities Assumed
We accounted for the Southern Union Merger using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition date. Our consolidated balance sheet presented as of September 30, 2012 reflects the preliminary purchase price allocations based on available information. Certain amounts included in the preliminary purchase price allocation as of September 30, 2012 have been changed from amounts reflected as of March 31, 2012 based on management's review of the valuation. Management is continuing to validate certain assumptions made in connection with the purchase price allocation.

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The following table summarizes the preliminary assets acquired and liabilities assumed recognized as of the merger date:
Total current assets
$
561,038

Property, plant and equipment (useful lives of 25 - 30 years)
6,958,768

Goodwill
2,030,271

Intangible assets (weighted average useful life of 17.5 years)
55,000

Investments in unconsolidated affiliates
2,022,784

Other assets
162,576

 
11,790,437

 
 
Long-term debt obligations, including current portion
3,778,706

Deferred income taxes
1,698,352

Other liabilities
950,513

 
6,427,571

Total consideration
5,362,866

Cash received
36,792

Total consideration, net of cash received
$
5,326,074

Goodwill was allocated by reportable business segment as $1.17 billion to the Southern Union Transportation and Storage segment; $598.3 million to the Southern Union Gathering and Processing segment; $251.8 million to the Southern Union Distribution segment; and $10.8 million to Corporate and other.
Other liabilities assumed included approximately $46.0 million of AROs, which are primarily related to owned natural gas storage wells and offshore lines and platforms. At the end of the useful life of these underlying assets, Southern Union is legally or contractually required to abandon in place or remove the asset. An ARO is required to be recorded when a legal obligation to retire an asset exists and such obligation can be reasonably estimated. Although a number of other onshore assets in Southern Union's system are subject to agreements that give rise to an ARO upon the discontinued use of the assets, AROs were not recorded because these assets have an indeterminate removal or abandonment date given the expected continued use of the assets with proper maintenance or replacement. As of September 30, 2012 AROs assumed as a result of the Southern Union Merger were approximately $46.4 million.
Pro Forma Results of Operations
The following unaudited pro forma consolidated results of operations for the three and nine months ended September 30, 2012 and 2011 are presented as if the Southern Union Merger had been completed on January 1, 2011. Actual results for the three months ended September 30, 2012 include Southern Union for the entire period.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Revenues
$
2,170,962

 
$
2,701,225

 
$
6,444,170

 
$
8,020,523

Net income
(33,834
)
 
78,831

 
1,139,241

 
431,326

Net income attributable to partners
35,170

 
80,430

 
390,147

 
268,536

Basic net income per Limited Partner unit
$
0.13

 
$
0.29

 
$
1.35

 
$
0.96

Diluted net income per Limited Partner unit
$
0.13

 
$
0.29

 
$
1.34

 
$
0.95

The pro forma consolidated results of operations include adjustments to:
include the results of Southern Union for all periods presented;
include the incremental expenses associated with the fair value adjustments recorded as a result of applying the acquisition method of accounting;
include incremental interest expense related to financing the transactions;
adjust for one-time expenses; and
adjust for relative changes in ownership resulting from the transactions.

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The pro forma information is not necessarily indicative of the results of operations that would have occurred had the Southern Union Merger been completed at the beginning of the periods presented or the future results of the combined operations.
Southern Union's revenue included in our consolidated statement of operations was approximately $477.9 million and $990.1 million for the three months ended September 30, 2012 and since the acquisition date to September 30, 2012, respectively. Southern Union's net income included in our consolidated statement of operations was approximately $17.0 million for the three months ended September 30, 2012 and a net loss of $9.8 million since the acquisition date to September 30, 2012, respectively.
Expenses Related to the Southern Union Merger
As a result of the acquisition, we recognized $38.2 million of merger-related costs during the nine months ended September 30, 2012.
Sunoco Merger
On October 5, 2012, Sam Acquisition Corporation, a Pennsylvania corporation and wholly-owned subsidiary of ETP, completed its merger with Sunoco. Under the terms of the merger agreement, Sunoco shareholders received a total of approximately 54,971,724 ETP Common Units and a total of approximately $2.6 billion in cash.
Sunoco generates cash flow from a portfolio of retail outlets for the sale of gasoline and middle distillates in the east coast, midwest and southeast areas of the United States. Prior to October 5, 2012, Sunoco also owned a 2% general partner interest, 100% of the IDRs, and 32.4% of the outstanding common units of Sunoco Logistics. As discussed below, on October 5, 2012, Sunoco's interest in Sunoco Logistics were transferred to ETP. In addition, in September 2012, Sunoco completed its exit from the refining business as a result of the contribution of its Philadelphia refinery to a joint venture and the related sale of its crude oil and refined product inventory to this joint venture. In connection with this transaction, Sunoco received a 33% non-operating minority interest in this joint venture.
Sunoco Logistics is a publicly traded limited partnership that owns and operates a logistics business consisting of a geographically diverse portfolio of complementary pipeline, terminalling and crude oil acquisition and marketing assets. The refined products pipelines business consists of refined products pipelines located in the northeast, midwest and southwest United States, and equity interests in refined products pipelines. The crude oil pipeline business consists of crude oil pipelines, located principally in Oklahoma and Texas. The terminal facilities business consists of refined products and crude oil terminal capacity at the Nederland Terminal on the Gulf Coast of Texas and capacity at the Eagle Point terminal on the banks of the Delaware River in New Jersey. The crude oil acquisition and marketing business, principally conducted in Oklahoma and Texas, involves the acquisition and marketing of crude oil and consists of crude oil transport trucks and crude oil truck unloading facilities.
ETP incurred merger related costs related to the Sunoco Merger of $5.7 million and $12.0 million for the three and nine months ended September 30, 2012, respectively.
Holdco Transaction
Immediately following the closing of the Sunoco Merger, ETE contributed its interest in Southern Union into Holdco, an ETP-controlled entity, in exchange for a 60% equity interest in Holdco. In conjunction with ETE's contribution, ETP contributed its interest in Sunoco to Holdco and retained a 40% equity interest in Holdco. Prior to the contribution of Sunoco to Holdco, Sunoco contributed $2.0 billion of cash and its interests in Sunoco Logistics to ETP in exchange for 90,706,000 ETP Class F Units representing limited partner interests in ETP Class F Units. The ETP Class F Units are entitled to 35% of the quarterly cash distribution generated by ETP and its subsidiaries other than Holdco, subject to a maximum cash distribution of $3.75 per ETP Class F Unit per year, which is ETP's current distribution level. Pursuant to a stockholders agreement between ETE and ETP, ETP will control Holdco. Consequently, ETP will consolidate Holdco (including Sunoco and Southern Union) in its financial statements subsequent to consummation of the Holdco Transaction.
Under the terms of the Holdco Transaction agreement, we relinquished an aggregate of $210 million of incentive distributions over 12 consecutive quarters following the closing of the Holdco Transaction. The relinquishment applies to the distribution to be paid with respect to the quarter ended September 30, 2012.
Discontinued Operations
In October 2012, ETP sold Canyon for approximately $207 million. The results of continuing operations of Canyon have been reclassified to loss from discontinued operations and the prior year amounts have been restated to present Canyon's operations as discontinued operations in our consolidated statements of operations for all periods presented herein. Canyon's

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assets and liabilities have been reclassified and reported as assets and liabilities held for sale as of September 30, 2012. A $145 million non-cash write-down of the carrying amounts of the Canyon assets to net recoverable value was recorded during the three months ended September 30, 2012.
4.
INVESTMENTS IN UNCONSOLIDATED AFFILIATES:
Citrus Corp.
ETP acquired a 50% interest in Citrus, which owns 100% of FGT on March 26, 2012. A subsidiary of Kinder Morgan, Inc. owns the remaining 50% interest in Citrus. In exchange for the interest in Citrus, Southern Union received $1.9 billion in cash and $105.0 million of ETP Common Units. ETP initially recorded its investment in Citrus at $2.0 billion, which exceeded its proportionate share of Citrus' equity by $1.03 billion, all of which is treated as equity method goodwill due to the application of regulatory accounting.
AmeriGas Partners, L.P.
On January 12, 2012, ETP contributed its Propane Business to AmeriGas in exchange for 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. In addition, AmeriGas assumed approximately $71.0 million of existing debt of the Propane Business. ETP recognized a gain on deconsolidation of $1.06 billion as a result of this transaction. ETP recorded equity in losses of $32.0 million and $28.9 million related to AmeriGas for the three and nine months ended September 30, 2012, respectively.
ETP's investment in AmeriGas initially reflected $630.0 million in excess of the proportionate share of AmeriGas' limited partners' capital. Of this excess fair value, $288.6 million is being amortized over a weighted average period of 14 years and $341.4 million is being treated as equity method goodwill and non-amortizable intangible assets.
We have not reflected the Propane operations as discontinued operations as a result of ETP's investment in AmeriGas.
In June 2012, ETP sold the remainder of its retail propane operations, consisting of its cylinder exchange business, to a third party. In connection with the contribution agreement with AmeriGas, certain excess sales proceeds from the sale of the cylinder exchange business were remitted to AmeriGas, and ETP received net proceeds of approximately $43.0 million.
Midcontinent Express Pipeline LLC
Regency owns a 50% interest in MEP, which owns approximately 500 miles of natural gas pipelines that extend from Southeast Oklahoma, across Northeast Texas, Northern Louisiana and Central Mississippi to an interconnect with the Transcontinental natural gas pipeline system in Butler, Alabama.
RIGS Haynesville Partnership Co.
Regency owns a 49.99% interest in HPC, which, through its ownership of the RIGS, delivers natural gas from Northwest Louisiana to downstream pipelines and markets through a 450-mile intrastate pipeline system.
Fayetteville Express Pipeline LLC
ETP owns a 50% interest in the FEP, which owns an approximately 185-mile natural gas pipeline that originates in Conway County, Arkansas, continues eastward through White County, Arkansas and terminates at an interconnect with Trunkline Gas Company in Panola County, Mississippi.
Summarized Financial Information
The following table presents aggregated selected income statement data for our unconsolidated affiliates, including AmeriGas, Citrus, FEP, HPC and MEP (on a 100% basis for all periods presented).
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Revenue
$
869,162

 
$
803,085

 
$
3,280,285

 
$
2,767,669

Operating income
173,674

 
194,199

 
707,958

 
680,326

Net income
27,081

 
62,866

 
293,824

 
382,946


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In addition to the equity method investments described above, ETP, Regency and Southern Union each have other insignificant equity method investments.

5.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include all cash on hand, demand deposits, and investments with original maturities of three months or less. We consider cash equivalents to include short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.
We place our cash deposits and temporary cash investments with high credit quality financial institutions. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance Corporation insurance limit.
Non-cash investing and financing activities are as follows:
 
Nine Months Ended September 30,
 
2012
 
2011
NON-CASH INVESTING ACTIVITIES:
 
 
 
Accrued capital expenditures
$
432,330

 
$
154,378

Gain from subsidiary common unit transactions
$
32,592

 
$
93,941

AmeriGas limited partner interest received in Propane Contribution (see Note 4)
$
1,123,003

 
$

NON-CASH FINANCING ACTIVITIES:
 
 
 
Issuance of common units in connection with Southern Union Merger (see Note 3)
$
2,354,490

 
$

Subsidiary issuances of common units in connection with acquisitions
$
112,000

 
$
3,000

Long-term debt assumed and non-compete agreement notes payable issued in acquisitions
$

 
$
4,166


6.
INVENTORIES:
Inventories consisted of the following:
 
September 30,
2012
 
December 31,
2011
Natural gas and NGLs, excluding propane
$
309,659

 
$
146,132

Propane

 
86,958

Appliances, parts and fittings and other
140,553

 
94,873

Total inventories
$
450,212

 
$
327,963


ETP utilizes commodity derivatives to manage price volatility associated with its natural gas inventory and designates certain of these derivatives as fair value hedges for accounting purposes. Changes in fair value of the designated hedged inventory have been recorded in inventory on our consolidated balance sheets and in cost of products sold in our consolidated statements of operations.

7.
GOODWILL AND INTANGIBLE ASSETS:
A net increase in goodwill of $1.42 billion was recorded during the nine months ended September 30, 2012, which includes goodwill of $2.03 billion recorded as a result of the Southern Union Merger partially offset by a decrease of $605.6 million as a result of ETP's contribution of its Propane Business to AmeriGas.
The goodwill recorded as a result of the Southern Union Merger was primarily due to expected commercial and operational synergies and is subject to change based on final purchase price allocations. None of the goodwill recorded as a result of this transaction is deductible for tax purposes. See Note 3 for further discussion of Southern Union Merger.
We review amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If such a review should indicate that the carrying amount of amortizable intangible assets is not recoverable, we reduce the carrying amount of such assets to fair value. We review goodwill and non-amortizable intangible assets for impairment annually, or more frequently if circumstances dictate. Our annual impairment

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test is performed as of August 31 for reporting units within ETP’s intrastate transportation and storage and midstream operations, as of November 30 for the Southern Union reporting units and as of December 31 for all others, including all of Regency’s reporting units. We have not completed our annual impairment tests for 2012 and have not recorded any impairments related to amortizable intangible assets during the nine months ended September 30, 2012.
8.
FAIR VALUE MEASUREMENTS:
The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate their fair value. Price risk management assets and liabilities are recorded at fair value.
We have marketable securities, commodity derivatives, interest rate derivatives, the Preferred Units and embedded derivatives in the Regency Preferred Units that are accounted for as assets and liabilities at fair value in our consolidated balance sheets. We determine the fair value of our assets and liabilities subject to fair value measurement by using the highest possible “level” of inputs. Level 1 inputs are observable quotes in an active market for identical assets and liabilities. We consider the valuation of marketable securities and commodity derivatives transacted through a clearing broker with a published price from the appropriate exchange as a Level 1 valuation. Level 2 inputs are inputs observable for similar assets and liabilities. We consider OTC commodity derivatives entered into directly with third parties as a Level 2 valuation since the values of these derivatives are quoted on an exchange for similar transactions. Additionally, we consider our options transacted through our clearing broker as having Level 2 inputs due to the level of activity of these contracts on the exchange in which they trade. We consider the valuation of our interest rate derivatives as Level 2 as the primary input, the LIBOR curve, is based on quotes from an active exchange of Eurodollar futures for the same period as the future interest swap settlements, and we discount the future cash flows accordingly, including the effects of credit risk. Level 3 inputs are unobservable. Derivatives related to the Regency Preferred Units are valued using a binomial lattice model. The market inputs utilized in the model include credit spread, probabilities of the occurrence of certain events, common unit price, dividend yield, and expected value, and are considered Level 3. The fair value of the Preferred Units was based predominantly on an income approach model and is also considered Level 3.
Based on the estimated borrowing rates currently available to us and our subsidiaries for long-term loans with similar terms and average maturities, the aggregate fair value of our consolidated debt obligations as of September 30, 2012 and December 31, 2011 was $19.73 billion and $12.21 billion, respectively. As of September 30, 2012 and December 31, 2011, the aggregate carrying amount of our consolidated debt obligations was $18.14 billion and $11.37 billion, respectively. The fair value of our consolidated debt obligations is a Level 2 valuation based on the observable inputs used for similar liabilities.

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The following tables summarize the fair value of our financial assets and liabilities measured and recorded at fair value on a recurring basis as of September 30, 2012 and December 31, 2011 based on inputs used to derive their fair values:
 
Fair Value Measurements  at
September 30, 2012
 
Fair Value
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Marketable securities (included in other current assets)
$
6

 
$
6

 
$

 
$

Interest rate derivatives
54,479

 

 
54,479

 

Commodity derivatives:
 
 
 
 
 
 
 
Condensate — Forward Swaps
2,510

 

 
2,510

 

Natural Gas:
 
 
 
 
 
 
 
Basis Swaps IFERC/NYMEX
30,102

 
30,102

 

 

Swing Swaps IFERC
14,260

 
172

 
14,088

 

Fixed Swaps/Futures
87,887

 
84,383

 
3,504

 

Options — Calls
1,790

 

 
1,790

 

Options — Puts
2,322

 

 
2,322

 

Forward Physical Contracts
2,223

 

 
2,223

 

NGLs:
 
 
 
 
 
 
 
Swaps
8,250

 

 
8,250

 

Options — Puts
1,030

 

 
1,030

 

Power:
 
 
 
 
 
 
 
Forwards
6,176

 

 
6,176

 

Futures
374

 
374

 

 

Options — Calls
2,495

 

 
2,495

 

Total commodity derivatives
159,419

 
115,031

 
44,388

 

Total Assets
$
213,904

 
$
115,037

 
$
98,867

 
$

Liabilities:
 
 
 
 
 
 
 
Interest rate derivatives
$
(243,860
)
 
$

 
$
(243,860
)
 
$

Preferred Units
(327,960
)
 

 

 
(327,960
)
Embedded derivatives in the Regency Preferred Units
(29,094
)
 

 

 
(29,094
)
Commodity derivatives:
 
 
 
 
 
 
 
Natural Gas:
 
 
 
 
 
 
 
Basis Swaps IFERC/NYMEX
(42,492
)
 
(42,492
)
 

 

Swing Swaps IFERC
(14,918
)
 
(648
)
 
(14,270
)
 

Fixed Swaps/Futures
(120,331
)
 
(104,316
)
 
(16,015
)
 

Options — Calls
(2,134
)
 

 
(2,134
)
 

Options — Puts
(672
)
 

 
(672
)
 

Forward Physical Contracts
(2,082
)
 

 
(2,082
)
 

NGLs — Swaps
(276
)
 

 
(276
)
 

Power:
 
 
 
 
 
 
 
Forwards
(5,865
)
 

 
(5,865
)
 

Futures
(605
)
 
(605
)
 

 

Options — Calls
(2,106
)
 


 
(2,106
)
 

Total commodity derivatives
(191,481
)
 
(148,061
)
 
(43,420
)


Total Liabilities
$
(792,395
)
 
$
(148,061
)
 
$
(287,280
)
 
$
(357,054
)

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Fair Value Measurements  at
December 31, 2011
 
Fair Value
Total
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Marketable securities (included in other current assets)
$
1,229

 
$
1,229

 
$

 
$

Interest rate derivatives
36,301

 

 
36,301

 

Commodity derivatives:
 
 
 
 
 
 
 
Condensate — Forward Swaps
538

 

 
538

 

Natural Gas:
 
 
 
 
 
 
 
Basis Swaps IFERC/NYMEX
62,924

 
62,924

 

 

Swing Swaps IFERC
15,002

 
1,687

 
13,315

 

Fixed Swaps/Futures
218,479

 
214,572

 
3,907

 

Options — Puts
6,435

 

 
6,435

 

Forward Physical Contracts
699

 

 
699

 

NGLs:
 
 
 
 
 
 
 
Swaps
94

 

 
94

 

Options — Puts
309

 

 
309

 

Propane — Forwards/Swaps
9

 

 
9

 

Total commodity derivatives
304,489

 
279,183

 
25,306

 

Total Assets
$
342,019

 
$
280,412

 
$
61,607

 
$

Liabilities:
 
 
 
 
 
 
 
Interest rate derivatives
$
(117,490
)
 
$

 
$
(117,490
)
 
$

Preferred Units
(322,910
)
 

 

 
(322,910
)
Embedded derivatives in the Regency Preferred Units
(39,049
)
 

 

 
(39,049
)
Commodity derivatives:
 
 
 
 
 
 
 
Condensate — Forward Swaps
(1,567
)
 

 
(1,567
)
 

Natural Gas:
 
 
 
 
 
 
 
Basis Swaps IFERC/NYMEX
(82,290
)
 
(82,290
)
 

 

Swing Swaps IFERC
(16,074
)
 
(3,061
)
 
(13,013
)
 

Fixed Swaps/Futures
(148,111
)
 
(148,111
)
 

 

Options — Calls
(12
)
 

 
(12
)
 

Forward Physical Contracts
(712
)
 

 
(712
)
 

NGLs — Swaps
(8,561
)
 

 
(8,561
)
 

Propane — Forwards/Swaps
(4,131
)
 

 
(4,131
)
 

Total commodity derivatives
(261,458
)
 
(233,462
)
 
(27,996
)
 

Total Liabilities
$
(740,907
)
 
$
(233,462
)
 
$
(145,486
)
 
$
(361,959
)
The following table presents the material unobservable inputs used to estimate the fair value of the Preferred Units and the embedded derivatives in Regency's Preferred Units:
 
Unobservable Input
 
September 30, 2012
Preferred Units
Assumed Yield
 
6.55
%
Embedded derivatives in the Regency Preferred Units
Credit Spread
 
6.31
%
 
Volatility
 
18.32
%

16

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Changes in the remaining term of the Preferred Units, U.S. Treasury yields and valuations in related instruments would cause a change in the yield to value the Preferred Units. Changes in Regency's cost of equity and U. S. Treasury yields would cause a change in the credit spread used to value the embedded derivatives in the Regency Preferred Units. Changes in Regency's historical unit price volatility would cause a change in the volatility used to value the embedded derivatives.
The following table presents a reconciliation of the beginning and ending balances for our Level 3 financial instruments measured at fair value on a recurring basis using significant unobservable inputs for the nine months ended September 30, 2012. There were no transfers between the fair value hierarchy levels during the nine months ended September 30, 2012 or 2011.
Balance, December 31, 2011
$
(361,959
)
Net unrealized gain included in other income (expense)
4,905

Balance, September 30, 2012
$
(357,054
)

  
9.
NET INCOME PER LIMITED PARTNER UNIT:
A reconciliation of net income from continuing operations and weighted average units used in computing basic and diluted income from continuing operations per unit is as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Income from continuing operations
$
113,328

 
$
62,242

 
$
1,152,052

 
$
370,965

Less: Income (loss) from continuing operations attributable noncontrolling interest
(69,004
)
 
(8,384
)
 
746,900

 
142,435

Income from continuing operations, net of noncontrolling interest
182,332

 
70,626

 
405,152

 
228,530

Less: General Partner’s interest in income from continuing operations
451

 
219

 
1,121

 
707

Income from continuing operations available to Limited Partners
$
181,881

 
$
70,407

 
$
404,031

 
$
227,823

Basic Income from Continuing Operations per Limited Partner Unit:
 
 
 
 
 
 
 
Weighted average Limited Partner units
279,955,608

 
222,972,708

 
262,278,639

 
222,966,763

Basic income from continuing operations per Limited Partner unit
$
0.65

 
$
0.32

 
$
1.54

 
$
1.02

Basic loss from discontinued operations per Limited Partner unit
$
(0.53
)
 
$
(0.01
)
 
$
(0.57
)
 
$
(0.02
)
Diluted Income from Continuing Operations per Limited Partner Unit:

 

 

 

Income from continuing operations available to Limited Partners
$
181,881

 
$
70,407

 
$
404,031

 
$
227,823

Dilutive effect of equity-based compensation of subsidiaries

 
(167
)
 
(1,235
)
 
(525
)
Diluted income from continuing operations available to Limited Partners
$
181,881

 
$
70,240

 
$
402,796

 
$
227,298

Weighted average Limited Partner units
279,955,608

 
222,972,708

 
262,278,639

 
222,966,763

Diluted income from continuing operations per Limited Partner unit
$
0.65

 
$
0.32

 
$
1.54

 
$
1.02

Diluted loss from discontinued operations per Limited Partner unit
$
(0.53
)
 
$
(0.01
)
 
$
(0.57
)
 
$
(0.02
)
The calculation above for the three and nine months ended September 30, 2012 for diluted net income per limited partner unit excludes the impact of any ETE Common Units that would be issued upon conversion of the Preferred Units, because

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inclusion would have been antidilutive. The Preferred Units have a liquidation preference of $300 million and are subject to mandatory conversion as discussed in Note 11.
10.
DEBT OBLIGATIONS:
Our debt obligations consisted of the following:
 
September 30,
2012
 
December 31,
2011
Parent Company Indebtedness:
 
 
 
ETE Senior Notes, due October 15, 2020
$
1,800,000

 
$
1,800,000

ETE Senior Secured Term Loan, due March 26, 2017
2,000,000

 

ETE Senior Secured Revolving Credit Facility

 
71,500

Subsidiary Indebtedness:
 
 
 
ETP Senior Notes (aggregated)
7,691,951

 
6,550,000

Transwestern Senior Unsecured Notes (aggregated)
870,000

 
870,000

HOLP Senior Secured Notes (aggregated)

 
71,314

Regency Senior Notes (aggregated)
1,262,429

 
1,350,000

Southern Union Senior Notes:
 
 
 
7.6% Senior Notes due February 1, 2024
359,765

 

8.25% Senior Notes due November 14, 2029
300,000

 

7.24% to 9.44% First Mortgage Bonds due February 15, 2020 to December 15, 2027
19,500

 

7.2% Junior Subordinated Notes due November 1, 2066
600,000

 

Notes Payable
7,306

 

Panhandle:
 
 
 
6.05% Senior Notes due August 15, 2013
250,000

 

6.2% Senior Notes due November 1, 2017
300,000

 

7.0% Senior Notes due June 15, 2018
400,000

 

8.125% Senior Notes due June 1, 2019
150,000

 

7.0% Senior Notes due July 15, 2029
66,305

 

Term Loan due February 23, 2015
455,000

 

Revolving Credit Facilities:
 
 
 
ETP Revolving Credit Facility
491,914

 
314,438

Regency Revolving Credit Facility
695,000

 
332,000

Southern Union Revolving Credit Facility
251,000

 

Other Long-Term Debt
20,140

 
10,434

Unamortized discounts, net
(53,962
)
 
(10,309
)
Fair value adjustments related to interest rate swaps
203,738

 
11,647

 
18,140,086

 
11,371,024

Current maturities
(614,418
)
 
(424,160
)
 
$
17,525,668

 
$
10,946,864

The following table reflects future maturities of long-term debt for each of the next five years and thereafter. These amounts exclude $149.8 million in net unamortized discounts and fair value adjustments related to interest rate swaps:
2012 (remainder)
$
994

2013
604,154

2014
1,079,273

2015
1,209,557

2016
1,035,213

Thereafter
14,061,119

Total
$
17,990,310


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ETE Senior Secured Term Loan
We used the net proceeds from our Senior Secured Term Loan, along with proceeds received from ETP in the Citrus Merger, to fund the cash portion of the Southern Union Merger and pay related fees and expenses, including existing borrowings under our revolving credit facility and for general partnership purposes.
Borrowings bear interest at either the Eurodollar rate plus an applicable margin or the alternative base rate plus an applicable margin. The alternative base rate used to calculate interest on base rate loans will be calculated using the greater of a prime rate, a federal funds effective rate plus 0.50%, and an adjusted one-month LIBOR rate plus 1.00%. The applicable margins are 3.0% for Eurodollar loans and from 2.0% for base rate loans. The effective interest rate on the amount outstanding as of September 30, 2012 was 3.75%.
Southern Union Junior Subordinated Notes
Southern Union has interest rate swap agreements that effectively fix the interest rate applicable to the floating rate on $525 million of the $600 million Junior Subordinated Notes due 2066. The interest rate on the remaining notes is a variable rate based upon the three-month LIBOR rate plus 3.0175%. The balance of the variable rate portion of the Junior Subordinated Notes was $75 million at an effective interest rate of 3.46% at September 30, 2012.
Panhandle Term Loans
In February 2012, Southern Union refinanced LNG Holdings' $455 million term loan due March 2012 with an unsecured three-year term loan facility due February 2015, with LNG Holdings as borrower and PEPL and Trunkline LNG as guarantors and a floating interest rate tied to LIBOR plus a margin based on the rating of PEPL's senior unsecured debt. The effective interest rate of PEPL's term loan was 1.84% at September 30, 2012.
Bridge Term Loan Facility
Upon obtaining permanent financing for the Southern Union Merger in March 2012, we terminated the 364-day Bridge Term Loan Facility. For the nine months ended September 30, 2012, bridge loan related fees reflects the recognition of $62.2 million of commitment fees upon termination of the facility.
ETP Senior Notes
In January 2012 ETP completed a public offering of $1.00 billion aggregate principal amount of 5.20% Senior Notes due February 1, 2022 and $1.00 billion aggregate principal amount of 6.50% Senior Notes due February 1, 2042 and used the net proceeds of $1.98 billion from the offering to fund the cash portion of the purchase price of the Citrus Merger and for general partnership purposes. ETP may redeem some or all of the notes at any time and from time to time pursuant to the terms of the indenture subject to the payment of a “make-whole” premium. Interest is paid semi-annually.
In January 2012 ETP announced a tender offer for approximately $750 million aggregate principal amount of specified series of the ETP Senior Notes. The tender offer consisted of two separate offers: an Any and All Offer and a Maximum Tender Offer. The senior notes described below were repurchased under the offers for a total cost of $885.9 million and a loss on extinguishment of debt of $115.0 million was recorded during the nine months ended September 30, 2012.
In the Any and All Offer ETP offered to purchase any and all of its 5.65% Senior Notes due August 1, 2012, at a fixed price. Pursuant to the Any and All Offer, ETP purchased $292 million aggregate principal amount of its 5.65% Senior Notes due August 1, 2012.
In the Maximum Tender Offer ETP offered to purchase certain series of outstanding ETP Senior Notes at a fixed spread over the index rate. Pursuant to the Maximum Tender Offer, on February 7, 2012, ETP purchased $200 million aggregate principal amount of its 9.7% Senior Notes due March 15, 2019, $200 million aggregate principal amount of its 9.0% Senior Notes due April 15, 2019 and $58.1 million aggregate principal amount of its 8.5% Senior Notes due April 15, 2014.
ETP as Co-Obligor of Sunoco Debt
In connection with the Sunoco Merger and Holdco Transaction, which was completed on October 5, 2012, ETP became a co-obligor on approximately $965 million of aggregate principal amount of Sunoco's existing senior notes and debentures.

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Regency Senior Notes
In October 2012, Regency issued $700 million in senior notes that mature on April 15, 2023 (the “Regency Senior Notes Due 2023”). The Regency Senior Notes Due 2023 bear interest at 5.5% payable semi-annually in arrears on April 15 and October 15, commencing April 15, 2013. The proceeds were used to repay borrowings outstanding under the Regency Credit Facility.
In May 2012, Regency exercised its option to redeem 35%, or $87.5 million, of its outstanding senior notes due 2016 at a price of 109.375%.
Revolving Credit Facilities
Parent Company Credit Facility
As of September 30, 2012, we had no outstanding borrowings under the Parent Company Credit Facility and the amount available for future borrowings was $200 million.
ETP Credit Facility
As of September 30, 2012, ETP had a balance of $491.9 million outstanding under the ETP Credit Facility, and the amount available for future borrowings was $1.98 billion after taking into account letters of credit of $31.9 million. The weighted average interest rate on the total amount outstanding as of September 30, 2012 was 1.72%.
ETP used approximately $2.0 billion of Sunoco's cash on hand to partially fund the cash portion of the Sunoco Merger consideration. The remainder of the cash portion of the merger consideration, approximately $620 million, was funded with borrowings under the ETP Credit Facility.
Regency Credit Facility
In August 2012, Regency exercised the accordion feature of the Fifth Amended and Restated Credit Agreement (the "Credit Agreement") to increase its commitments under the Regency Credit Facility by $250 million to a total of $1.15 billion. The new commitments are available pursuant to the same terms and subject to the same interest rates and fees as the existing commitments under the Credit Agreement. As of September 30, 2012, there was a balance outstanding under the Regency Credit Facility of $695.0 million in revolving credit loans and approximately $8.6 million in letters of credit. The total amount available under the Regency Credit Facility, as of September 30, 2012, which was reduced by any letters of credit, was approximately $446.4 million, and the weighted average interest rate on the total amount outstanding as of September 30, 2012 was 2.72%.
Southern Union Credit Facilities
The Southern Union Credit Facility provides for a $700 million revolving credit facility which matures on May 20, 2016. Borrowings under the Southern Union Credit Facility are available for working capital, other general company purposes and letter of credit requirements. The interest rate and commitment fee under the Southern Union Credit Facility are calculated using a pricing grid, which is based on the credit ratings for Southern Union's senior unsecured notes. The weighted average interest rate on the total amount outstanding as of September 30, 2012 was 1.83% .
On August 10, 2012, Southern Union entered into a First Amendment of the Southern Union Credit Facility. The amendment provides for, among other things, (i) a revision to the change of control definition to permit equity ownership of Southern Union by ETP or any direct subsidiaries of ETP in addition to ETE or any direct or indirect subsidiary of ETE; and (ii) a waiver of any potential default that may result from the Holdco Transaction.
Covenants Related to Our Credit Agreements
Covenants Related to Southern Union
Southern Union is not party to any lending agreement that would accelerate the maturity date of any obligation due to a failure to maintain any specific credit rating, nor would a reduction in any credit rating, by itself, cause an event of default under any of Southern Union’s lending agreements. Covenants exist in certain of the Southern Union’s debt agreements that require Southern Union to maintain a certain level of net worth, to meet certain debt to total capitalization ratios and to meet certain ratios of earnings before depreciation, interest and taxes to cash interest expense. A failure by Southern Union to satisfy any such covenant would give rise to an event of default under the associated debt, which could become immediately due and payable if Southern Union did not cure such default within any permitted cure period or if Southern Union did not obtain amendments, consents or waivers from its lenders with respect to such covenants.

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Table of Contents

Southern Union’s restrictive covenants include restrictions on debt levels, restrictions on liens securing debt and guarantees, restrictions on mergers and on the sales of assets, capitalization requirements, dividend restrictions, cross default and cross-acceleration and prepayment of debt provisions. A breach of any of these covenants could result in acceleration of Southern Union’s debt and other financial obligations and that of its subsidiaries. Under the current credit agreements, the significant debt covenants and cross defaults are as follows:
Under the Southern Union Credit Facility, the consolidated debt to total capitalization ratio, as defined therein, cannot exceed 65%;
Under the Southern Union Credit Facility, Southern Union must maintain an earnings before interest, tax, depreciation and amortization interest coverage ratio of at least 2.00 times;
Under Southern Union’s First Mortgage Bond indentures for the Fall River Gas division of New England Gas Company, Southern Union’s consolidated debt to total capitalization ratio, as defined therein, cannot exceed 70% at the end of any calendar quarter; and
All of Southern Union’s major borrowing agreements contain cross-defaults if Southern Union defaults on an agreement involving at least $10 million of principal.
In addition to the above restrictions and default provisions, Southern Union and/or its subsidiaries are subject to a number of additional restrictions and covenants. These restrictions and covenants include limitations on additional debt at some of its subsidiaries; limitations on the use of proceeds from borrowing at some of its subsidiaries; limitations, in some cases, on transactions with its affiliates; limitations on the incurrence of liens; potential limitations on the abilities of some of its subsidiaries to declare and pay dividends and potential limitations on some of its subsidiaries to participate in Southern Union’s cash management program; and limitations on Southern Union’s ability to prepay debt.
Compliance with Our Covenants
We were in compliance with all requirements, tests, limitations, and covenants related to our respective credit agreements as of September 30, 2012.
11.
REDEEMABLE PREFERRED UNITS:
ETE Preferred Units
The Parent Company has outstanding 3,000,000 Series A Convertible Preferred Units to an affiliate of GE Energy Financial Services, Inc. having an aggregate liquidation preference of $300 million. These units are reflected as a non-current liability in our consolidated balance sheets. The Preferred Units are measured at fair value on a recurring basis. Changes in the estimated fair value of the ETE Preferred Units are recorded in other income (expense) on our consolidated statements of operations.
Regency Preferred Units
Regency had 4,371,586 Regency Preferred Units outstanding at September 30, 2012, which were convertible into 4,651,884 Regency Common Units. If outstanding on September 2, 2029, the Regency Preferred Units are mandatorily redeemable for $80 million plus all accrued but unpaid distributions thereon. Holders of the Regency Preferred Units receive fixed quarterly cash distributions of $0.445 per unit. Holders can elect to convert Regency Preferred Units to Regency Common Units at any time in accordance with Regency’s Partnership Agreement.
12.
EQUITY:
ETE Common Units Issued
The change in ETE Common Units during the nine months ended September 30, 2012 was as follows:
 
Number of
Units
Outstanding at December 31, 2011
222,972,708

Issuance of restricted units under equity incentive plan
740

Issuance of common units in connection with Southern Union Merger (See Note 3)
56,982,160

Outstanding at September 30, 2012
279,955,608


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Table of Contents

Sales of Common Units by Subsidiaries
The Parent Company accounts for the difference between the carrying amount of its investments in ETP and Regency and the underlying book value arising from the issuance or redemption of units by ETP or Regency (excluding transactions with the Parent Company) as capital transactions.
As a result of ETP’s and Regency’s issuances of common units during the nine months ended September 30, 2012, we recognized increases in partners’ capital of $32.6 million.
Sales of Common Units by ETP
On July 3, 2012, ETP issued 15,525,000 ETP Common Units representing limited partner interests at $44.57 per ETP Common Unit in a public offering. Proceeds, net of commissions, of approximately $671.1 million from the offering were used to repay amounts outstanding under the ETP Credit Facility, to fund capital expenditures related to pipeline construction projects and for general partnership purposes.
During the nine months ended September 30, 2012, ETP received proceeds from units issued pursuant to an Equity Distribution Agreement with Credit Suisse Securities (USA) LLC of $76.7 million, net of commissions, which were used for general partnership purposes. No ETP Common Units remain available to be issued under the ETP Equity Distribution Agreement as of September 30, 2012.
For the nine months ended September 30, 2012, distributions of approximately $23.9 million were reinvested under ETP's DRIP resulting in the issuance of 548,708 ETP Common Units. As of September 30, 2012, a total of 4,847,613 ETP Common Units remain available to be issued under this registration statement.
ETP issued approximately 2.25 million ETP Common Units to Southern Union as a portion of consideration in the Citrus Merger. See Note 3 for additional discussion.
Sale of Common Units by Regency
In March 2012, Regency issued 12,650,000 Regency Common Units through a public offering. The net proceeds of approximately $296.8 million were used to repay borrowings outstanding under the Regency Credit Facility and to redeem 35% in aggregate principal amount of its outstanding Senior Notes due 2016 and pay related premium expenses and interest.
On June 19, 2012, Regency entered into an Equity Distribution Agreement with Citi under which Regency may offer and sell Regency Common Units, having an aggregate offering price of up to $200 million from time to time through Citi, as sales agent for Regency. Sales of these units, if any, made under the Regency Equity Distribution Agreement will be made by means of ordinary brokers’ transactions on the New York Stock Exchange at market prices, in block transactions, or as otherwise agreed upon by Regency and Citi. Under the terms of this agreement, Regency may also sell Regency Common Units to Citi as principal for its own account at a price agreed upon at the time of sale. Any sale of Regency Common Units to Citi as principal would be pursuant to the terms of a separate agreement between Regency and Citi. Regency intends to use the net proceeds from the sale of these units for general partnership purposes. During the nine months ended September 30, 2012, Regency issued 691,129 Regency Common Units pursuant to its Equity Distribution Agreement with Citi and received net proceeds of $15.4 million.
Parent Company Quarterly Distributions of Available Cash
Following are distributions declared and/or paid by us subsequent to December 31, 2011:
Quarter Ended
 
Record Date
 
Payment Date
 
Rate
December 31, 2011
 
February 7, 2012
 
February 17, 2012
 
$
0.625

March 31, 2012
 
May 4, 2012
 
May 18, 2012
 
0.625

June 30, 2012
 
August 6, 2012
 
August 17, 2012
 
0.625

September 30, 2012
 
November 6, 2012
 
November 16, 2012
 
0.625


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Table of Contents

ETP Quarterly Distributions of Available Cash
Following are distributions declared and/or paid by ETP subsequent to December 31, 2011:
Quarter Ended
 
Record Date
 
Payment Date
 
Rate
December 31, 2011
 
February 7, 2012
 
February 14, 2012
 
$
0.89375

March 31, 2012
 
May 4, 2012
 
May 15, 2012
 
0.89375

June 30, 2012
 
August 6, 2012
 
August 14, 2012
 
0.89375

September 30, 2012

November 6, 2012

November 14, 2012

0.89375


Regency Quarterly Distributions of Available Cash
Following are distributions declared and/or paid by Regency subsequent to December 31, 2011:
Quarter Ended
 
Record Date
 
Payment Date
 
Rate
December 31, 2011
 
February 6, 2012
 
February 13, 2012
 
$
0.46

March 31, 2012
 
May 7, 2012
 
May 14, 2012
 
0.46

June 30, 2012
 
August 6, 2012
 
August 14, 2012
 
0.46

September 30, 2012
 
November 6, 2012
 
November 14, 2012
 
0.46


Accumulated Other Comprehensive Income
The following table presents the components of AOCI, net of tax:
 
 
September 30,
2012
 
December 31, 2011
Net gains on commodity related hedges
$
1,014

 
$
1,696

Unrealized gains on available-for-sale securities