UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): November 1, 2007

 

ENTERPRISE GP HOLDINGS L.P.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

 

 

 

 

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Item 2.02. Results of Operations and Financial Condition.

 

On November 1, 2007, Enterprise GP Holdings L.P. issued a press release regarding its consolidated and parent-only financial results for the three and nine months ended September 30, 2007. A copy of the earnings press release is filed as Exhibit 99.1 to this Current Report on Form 8-K, which is incorporated by reference into this Item 2.02.

 

Significant Relationships

 

Enterprise GP Holdings L.P. is a publicly traded Delaware limited partnership, the registered limited partnership interests of which (“the Units”) are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “EPE.” The current business of Enterprise GP Holdings L.P. is to own general and limited partner interests of publicly traded partnerships engaged in the midstream energy industry and related businesses. Unless the context requires otherwise, references to “we,” “us,” “our,” or “the Company” are intended to mean the business and operations of Enterprise GP Holdings L.P. and its consolidated subsidiaries.

 

References to “the parent company” mean Enterprise GP Holdings L.P., individually as the parent company, and not on a consolidated basis. The parent company was formed in April 2005 and completed its initial public offering in August 2005. The parent company is owned 99.99% by its limited partners and 0.01% by its general partner, EPE Holdings, LLC (“EPE Holdings”). EPE Holdings is a wholly owned subsidiary of Dan Duncan LLC, the membership interests of which are owned by Dan L. Duncan.

 

References to “Enterprise Products Partners” mean the business and operations of Enterprise Products Partners L.P. and its consolidated subsidiaries, including Duncan Energy Partners L.P. Enterprise Products Partners is a publicly traded Delaware limited partnership, the registered limited partnership interests of which are listed on the NYSE under the ticker symbol “EPD.” References to “EPGP” mean Enterprise Products GP, LLC, which is the general partner of Enterprise Products Partners.

 

References to “TEPPCO” mean the business and operations of TEPPCO Partners, L.P. and its consolidated subsidiaries. TEPPCO is a publicly traded Delaware limited partnership, the registered limited partnership interests of which are listed on the NYSE under the ticker symbol “TPP.” References to “TEPPCO GP” mean Texas Eastern Products Pipeline Company, LLC, which is the general partner of TEPPCO.

 

References to “Energy Transfer Equity” mean the business and operations of Energy Transfer Equity, L.P. and its consolidated subsidiaries, which include Energy Transfer Partners, L.P. (“ETP”). Energy Transfer Equity is a publicly traded Delaware limited partnership, the registered limited partnership interests of which are listed on the NYSE under the ticker symbol “ETE.” The general partner of Energy Transfer Equity is LE GP, LLC (“ETEGP”).

 

References to “EPCO” mean EPCO, Inc., which is a related party affiliate to all of the foregoing named entities. Mr. Duncan is the Chairman and controlling shareholder of EPCO.

 

The parent company, Enterprise Products Partners, EPGP, TEPPCO, TEPPCO GP and EPCO are affiliates under common control of Mr. Duncan. Enterprise Products Partners and TEPPCO and their respective general partners have been under Mr. Duncan’s indirect control for all periods presented in the press release and this Current Report on Form 8-K. We account for our investments in Energy Transfer Equity and ETEGP using the equity method of accounting since we do not control such entities.

 

Basis of Financial Statement Presentation

 

Effective with the second quarter of 2007, our consolidated and parent-only financial statements and related information were restated to reflect the acquisition of ownership interests in TEPPCO and TEPPCO GP (including associated TEPPCO incentive distribution rights (“IDRs”)) in May 2007 and the reorganization of our business segments. TEPPCO and TEPPCO GP have been under common control with the parent company since February 2005. For additional information regarding the restatement of our financial statements for common control considerations, please refer to our Current Report on Form 8-K dated September 21, 2007.

 

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In most circumstances, generally accepted accounting principles in the United States of America (“GAAP”) requires a general partner to consolidate the financial statements of its respective underlying limited partnership due to the general partner’s ability to control the actions of such limited partnership. As a result, our general purpose financial statements reflect the consolidated results of (i) EPGP with those of Enterprise Products Partners and (ii) TEPPCO GP with those of TEPPCO. We control both EPGP and TEPPCO GP through our ownership of 100% of the membership interests in each of EPGP and TEPPCO GP. The acquisitions of ownership interests in TEPPCO and TEPPCO GP were accounted for at historical costs as a reorganization of entities under common control in a manner similar to a pooling of interests.

 

Basis of Financial Information pertaining to EPGP and Enterprise Products Partners. The parent company acquired its investments in Enterprise Products Partners and EPGP in August 2005 from private company affiliates of EPCO under the common control of Mr. Duncan. The parent company owns 13,454,498 common units of Enterprise Products Partners and 100% of the membership interests of EPGP, which is entitled to 2% of the cash distributions paid by Enterprise Products Partners as well as the associated IDRs of Enterprise Products Partners.

 

Basis of Financial Information pertaining to TEPPCO GP and TEPPCO. The parent company acquired 4,400,000 common units of TEPPCO and 100% of the membership interests of TEPPCO GP (including associated TEPPCO IDRs) in May 2007 from private company affiliates of EPCO under the common control of Mr. Duncan. TEPPCO GP is entitled to 2% of the cash distributions paid by TEPPCO as well as the associated IDRs of TEPPCO. Our restated consolidated and parent-only financial statements reflect ownership of 100% of the membership interests in TEPPCO GP and associated TEPPCO IDRs (equivalent to the current IDR structure) for all periods presented.

 

All earnings derived from TEPPCO IDRs and TEPPCO common units in excess of those allocated to the parent company are presented as a component of minority interest in our consolidated financial statements. In addition, the former owners of the TEPPCO and TEPPCO GP interests and rights were allocated all cash receipts from these investments during the periods they owned such interests prior to May 7, 2007.

 

Basis of Financial Information pertaining to Energy Transfer Equity and ETEGP. The parent company acquired 38,976,090 common units of Energy Transfer Equity and approximately 34.9% of the membership interests in ETEGP for $1.65 billion in cash in May 2007. The parent company initially financed these purchases through borrowings under an interim credit facility. We subsequently issued Units in the third quarter to repay a portion of these borrowings. Energy Transfer Equity owns limited partner interests and the general partner interest in Energy Transfer Partners, L.P., a publicly traded partnership, the common units of which are listed on the NYSE under ticker symbol “ETP.” We account for our investments in Energy Transfer Equity and ETEGP using the equity method of accounting.

 

Revised Business Segments. Effective with the second quarter of 2007, we revised our business segment disclosures to reflect the parent company’s new equity investments and sources of cash flows. Our reorganized business segments reflect the manner in which these investments are managed and reviewed by the chief executive officer of our general partner, who is our chief operating decision maker. The new reportable segments are (i) Investment in Enterprise Products Partners, (ii) Investment in TEPPCO and (iii) Investment in Energy Transfer Equity.

 

Our Investment in Enterprise Products Partners segment reflects the consolidated operations of Enterprise Products Partners and its general partner, EPGP. Our Investment in TEPPCO segment reflects the consolidated operations of TEPPCO and its general partner, TEPPCO GP. As discussed previously, the Investment in TEPPCO segment represents the historical operations of TEPPCO and TEPPCO GP that were under common control with us prior to our acquisition of such interests in May 2007. TEPPCO and Enterprise Products Partners are joint venture partners in Jonah Gas Gathering Company (“Jonah”), which owns a natural gas gathering pipeline located in southwest Wyoming (the “Jonah system”). Within their respective financial statements, Enterprise Products Partners and TEPPCO account for their individual ownership interests in Jonah using the equity method of accounting. As a result of common control at the parent company-level, we classify the assets and results of operations from Jonah within our Investment in TEPPCO segment. The Investment in Energy Transfer Equity segment reflects our equity method investment in Energy Transfer Equity and ETEGP.

 

 

 

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Use of Non-GAAP Financial Measures

 

The press release and accompanying schedules include the non-generally accepted accounting principle (“non-GAAP”) financial measure of distributable cash flow. Exhibit C provides a reconciliation of this non-GAAP financial measure to its most directly comparable financial measure calculated in accordance with GAAP. Distributable cash flow should not be considered an alternative to GAAP measures such as net income, net cash flow provided by operating activities or any other GAAP measure of liquidity or financial performance.

 

We define distributable cash flow as cash distributions expected to be received from the parent company’s investments in limited partner and general partner interests (including related IDRs) less parent company cash expenses and general and administrative and similar costs of EPGP and TEPPCO GP on a standalone basis. Distributable cash flow is a significant liquidity metric used by senior management to compare net cash flow generated by the parent company’s investments to the cash distributions the parent company is expected to pay its partners. Using this metric, senior management can quickly compute the coverage ratio of estimated cash flow to planned cash distributions.

 

Distributable cash flow is an important non-GAAP financial measure for the parent company’s unitholders since it indicates to investors whether or not the parent company’s investments are generating cash flow at a level that can sustain or support an increase in quarterly cash distribution levels. Financial metrics such as distributable cash flow are quantitative standards used by the investment community with respect to publicly-traded partnerships because the value of a partnership unit is in part measured by its yield (which, in turn, is based on the amount of cash distributions a partnership pays to a unitholder).

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

ENTERPRISE GP HOLDINGS L.P.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Exhibit Index

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Exhibit 99.1

P.O. Box 4323

(713) 381-6812

 

Enterprise GP Holdings Reports Third Quarter 2007 Results

Houston, Texas (Thursday, November 1, 2007) – Enterprise GP Holdings L.P., (NYSE: “EPE”) today announced its consolidated and parent-only financial results for the three and nine month periods ended September 30, 2007. Enterprise GP Holdings, the parent company, reported record distributable cash flow of $48 million for the third quarter of 2007. This provides 1.0 times coverage of the $0.395 per unit distribution declared by the board of the general partner of Enterprise GP Holdings with respect to the third quarter of 2007 that will be paid November 9, 2007. The declared distribution rate of $0.395 per unit for the third quarter of 2007 represents an 18 percent increase from $0.335 per unit declared for the third quarter of 2006.

In third quarter of 2007, Enterprise GP Holdings received $70 million of cash distributions from its ownership of general and limited partner interests in Enterprise Products Partners, TEPPCO Partners and Energy Transfer Equity. These distributions were comprised of $39 million from Enterprise Products Partners, $16 million from TEPPCO and $15 million from Energy Transfer Equity. This is a 40 percent increase from the $50 million in distributions received in the third quarter of 2006 due to the acquisition of partnership interest in Energy Transfer Equity and increases in cash distributions from Enterprise Products Partners and TEPPCO. Distributable cash flow is a non-generally accepted accounting principle (or “non-GAAP”) financial measure that is defined and reconciled later in this press release to its most directly comparable GAAP measure, which is net cash flow provided by operating activities.

Enterprise GP Holdings reported consolidated net income for the third quarter of 2007 of $11 million, or $0.09 per unit on a fully diluted basis, compared to $37 million, or $0.36 per unit on a fully diluted basis, for the third quarter of 2006. The decrease in consolidated net income is largely attributable to an increase in interest expense from a higher average debt balance associated with the acquisition of partnership interests in Energy Transfer Equity and the amortization of associated debt issuance costs.

 

The earnings per unit calculation for the third quarter of 2007 is based on 119.7 million average units outstanding, which is comprised of 88.9 million units issued in August 2005, 14.2 million units (formerly Class B units) issued as part of the consideration for the acquisition of partner interests in TEPPCO and its general partner in May 2007, and a pro rata amount of the 20.1 million units issued in July 2007 in a private placement with institutions. The earnings per unit calculation for the third quarter of 2006 is based on 103.1 million units, which excludes the units issued in the private placement in July 2007.

 

On May 7, 2007, Enterprise GP Holdings acquired 100 percent of the general partner, incentive distribution rights and 4.4 million common units of TEPPCO Partners, L.P. (“TEPPCO,” NYSE: TPP) and approximately 35% of the general partner and 39 million common units of Energy Transfer Equity, L.P. (“Energy Transfer Equity” NYSE: ETE). These investments complement Enterprise GP Holdings’ existing ownership of 100% of the general partner and approximately 13.5 million common units of Enterprise Products Partners L.P. (NYSE: EPD).

 

“We were very pleased with the growth in cash distributions that we received from Enterprise Products, TEPPCO and Energy Transfer,” said Dr. Ralph S. Cunningham, president and chief executive officer of Enterprise GP Holdings. “Our general partner and limited partner interests in these partnerships have us well positioned to benefit from their growth through their distribution increases and equity raised to fund growth.”

 

Basis of Presentation of Financial Information 

 

In order for our unitholders and others to more fully understand Enterprise GP Holdings’ financial condition and results of operations on a standalone basis, this press release includes financial information of Enterprise GP Holdings as the parent company apart from that of our consolidated partnership. The parent-only income statements

 

 

 

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reflect equity earnings from its investees as a component of operating income. These investments are the primary source of earnings for Enterprise GP Holdings on a standalone basis. In accordance with accounting principles generally accepted in the United States of America (“GAAP”), equity earnings from Enterprise Products Partners and its general partner (“EPGP”) and TEPPCO and its general partner (“TEPPCO GP”) are eliminated in the preparation of our consolidated financial statements.

 

Effective with the second quarter of 2007, our consolidated and parent-only financial statements and related information were restated to reflect the acquisition of ownership interests in TEPPCO and TEPPCO GP (including associated TEPPCO incentive distribution rights (“IDRs”)) in May 2007 and the reorganization of our business segments. TEPPCO and TEPPCO GP have been under common control with the parent company since February 2005. For additional information regarding the recast of our financial statements to reflect common control considerations, please refer to our Current Report on Form 8-K dated September 21, 2007.

 

Our Investment in Enterprise Products Partners business segment reflects the consolidated operations of Enterprise Products Partners and its general partner. Our Investment in TEPPCO reflects the consolidated operations of TEPPCO and its general partner. The Investment in TEPPCO segment represents the historical operations of TEPPCO and its general partner that were under common control with the parent company prior to its acquisition of these interests on May 7, 2007. We control Enterprise Products Partners and TEPPCO through our ownership of their respective general partners. Our Investment in Energy Transfer Equity business segment reflects our non-controlling equity method interests in Energy Transfer Equity and its general partner. We evaluate segment performance based on operating income.

 

Today, Enterprise GP Holdings will host a conference call to discuss third quarter earnings. The call will be broadcast live over the internet at 5:00 p.m., Central Daylight Time and may be accessed by visiting the partnership’s website at www.enterprisegp.com.

 

Use of Non-GAAP Financial Measures

 

This press release and accompanying schedules include the non-generally accepted accounting principle (“non-GAAP”) financial measure of distributable cash flow. Exhibit C provides a reconciliation of this non-GAAP financial measure to its most directly comparable financial measure calculated in accordance with GAAP. Distributable cash flow should not be considered an alternative to GAAP measures such as net income, net cash flow provided by operating activities or any other GAAP measure of liquidity or financial performance.

 

We define distributable cash flow as cash distributions expected to be received from the parent company’s investments in limited partner and general partner interests (including related IDRs) less parent company cash expenses and general and administrative and similar costs of EPGP and TEPPCO GP on a standalone basis. Distributable cash flow is a significant liquidity metric used by senior management to compare net cash flow generated by the parent company’s investments to the cash distributions the parent company is expected to pay its partners. Using this metric, senior management can quickly compute the coverage ratio of estimated cash flow to planned cash distributions.

 

Distributable cash flow is an important non-GAAP financial measure for the parent company’s unitholders since it indicates to investors whether or not the parent company’s investments are generating cash flow at a level that can sustain or support an increase in quarterly cash distribution levels. Financial metrics such as distributable cash flow are quantitative standards used by the investment community with respect to publicly-traded partnerships because the value of a partnership unit is in part measured by its yield (which, in turn, is based on the amount of cash distributions a partnership pays to a unitholder).

 

Company Information and Forward-Looking Statements

 

Enterprise GP Holdings is one of the largest publicly traded GP partnerships with an enterprise value of more than $5 billion. It owns the general partner and limited partner interests in Enterprise Products Partners L.P., TEPPCO Partners, L.P. and Energy Transfer Equity, L.P. For more information on Enterprise GP Holdings L.P., visit its website at www.enterprisegp.com.

 

This press release contains various forward-looking statements and information that are based on Enterprise GP Holdings’ beliefs and those of its general partner, as well as assumptions made by and information currently

 

 

 

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available to Enterprise GP Holdings. When used in this press release, words such as “anticipate,” “project,” “expect,” “plan,” “goal,” “forecast,” “intend,” “could,” “believe,” “may,” and similar expressions and statements regarding the plans and objectives of Enterprise GP Holdings, Enterprise Products Partners, TEPPCO, Energy Transfer Equity or Energy Transfer Partners (the “Related Companies”) for future operations, are intended to identify forward-looking statements. Although Enterprise GP Holdings and its general partner believe that such expectations reflected in such forward-looking statements are reasonable, neither Enterprise GP Holdings nor its general partner can give assurances that such expectations will prove to be correct. Such 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, Enterprise GP Holdings’ actual results may vary materially from those it anticipated, estimated, projected or expected. Among the key risk factors that may have a direct bearing on the Related Companies, and in turn, Enterprise GP Holdings’ results of operations and financial condition are:

 

Enterprise GP Holdings has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 

Contacts: Randy Burkhalter, Investor Relations (713) 381-6812

Rick Rainey, Media Relations (713) 381-3635

 

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Exhibit A

Enterprise GP Holdings L.P. – Parent Company

Distributable Cash Flow, Summary Income Statements and Selected Balance Sheet Data– UNAUDITED

(Amounts in thousands)

 

The following table presents distributable cash flow, summarized income statement data and selected balance sheet information for the parent company with respect to the periods and at the dates indicated. Effective with the second quarter of 2007, our parent-only historical financial information was restated to reflect the acquisition of ownership interests in TEPPCO and TEPPCO GP (including associated TEPPCO IDRs) in May 2007. TEPPCO and TEPPCO GP have been under common control with the parent company since February 2005. The former owners of the TEPPCO and TEPPCO GP interests and rights were allocated all cash distributions received from these investments prior to May 7, 2007. We acquired our investments in Energy Transfer Equity in May 2007.

 

 

** Debt increased between periods in connection with financing our acquisition of equity interests in Energy Transfer Equity in May 2007.

 

 

 

 

 

 

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Exhibit B

Enterprise GP Holdings L.P.

Condensed Statements of Consolidated Operations – UNAUDITED

For the Three and Nine Months Ended September 30, 2007 and 2006

(Amounts in thousands, except per unit amounts)

 

Since the parent company owns the general partner of Enterprise Products Partners and TEPPCO, our general purpose condensed consolidated financial statements reflect the financial results of Enterprise Products Partners, EPGP, TEPPCO and TEPPCO GP. The earnings of Enterprise Products Partners, EPGP, TEPPCO and TEPPCO GP that are allocated to limited and general partner interests not owned by the parent company are reflected as minority interest expense in our condensed statement of consolidated operations. Effective with the second quarter of 2007, our historical consolidated financial information was restated to reflect the acquisition of ownership interests in TEPPCO and TEPPCO GP (including associated TEPPCO IDRs) in May 2007 and reorganization of our business segments. TEPPCO and TEPPCO GP have been under common control with the parent company since February 2005. We acquired our investments in Energy Transfer Equity in May 2007. The following table summarizes our financial information by business segment:

 

 

** The parent company’s 16,000,000 Class C units are non-participating securities; thus, they are excluded from our earnings per Unit computations.

 

 

 

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Exhibit C

 

Enterprise GP Holdings L.P. – Parent Company

Non-GAAP Reconciliations – UNAUDITED

(Amounts in thousands)

 

The following table presents the reconciliation of the parent company’s non-GAAP distributable cash flow to GAAP net cash flow provided by operating activities. This information has been restated to give effect to the common control of TEPPCO and TEPPCO GP by affiliates of EPCO since February 2005.

 

 

 

 

 

 

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