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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): April 25, 2006
ENTERPRISE PRODUCTS PARTNERS L.P.
(Exact name of registrant as specified in its charter)
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Delaware
(State or Other Jurisdiction of
Incorporation or Organization) |
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1-14323
(Commission File Number) |
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76-0568219
(I.R.S. Employer
Identification No.) |
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2727 North Loop West, Houston, Texas
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77008-1044 |
(Address of Principal Executive Offices)
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(Zip Code) |
Registrants Telephone Number, including Area Code: (713) 880-6500
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):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
Item 2.02. Results of Operations and Financial Condition.
On April 25, 2006, Enterprise Products Partners L.P. issued a press release announcing its
financial results for the three month periods ended March 31, 2006 and 2005, and held a webcast
conference call discussing those results. A copy of the earnings press release is filed as Exhibit
99.1 to this report, which is hereby incorporated by reference into this Item 2.02. The webcast
conference call will be available for replay on Enterprise Products Partners L.P.s website at
www.epplp.com. The conference call will be archived on our website for 90 days.
Unless the context requires otherwise, references to we, us, our, or Enterprise within
the context of this Current Report on Form 8-K refer to the consolidated business and operations of
Enterprise Products Partners L.P. References to El Paso refer to El Paso Corporation and its
affiliates. References to EPCO refer to EPCO, Inc., an affiliate of Enterprise and our ultimate
parent company. In addition, as generally used in the energy industry and in this press release
and accompanying exhibits, the identified terms have the following meanings:
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/d |
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= per day |
TBtu |
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= trillion British Thermal units |
BBtu |
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= billion British Thermal units |
MMBtu |
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= million British Thermal units |
MBPD |
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= thousand barrels per day |
Mcf |
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= thousand cubic feet |
MMcf |
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= million cubic feet |
Use of Non-GAAP financial measures
Our press release and/or the conference call discussions include the non-generally accepted
accounting principle (non-GAAP) financial measures of gross operating margin, distributable cash
flow, and EBITDA. The press release provides reconciliations of these non-GAAP financial measures
to their most directly comparable financial measure calculated and presented in accordance with
accounting principles generally accepted in the United States of America (GAAP). Our non-GAAP
financial measures should not be considered as alternatives to GAAP measures such as net income,
operating income, cash flow from operating activities or any other GAAP measure of liquidity or
financial performance.
Gross operating margin. We evaluate segment performance based on the non-GAAP
financial measure of gross operating margin. Gross operating margin (either in total or by
individual segment) is an important performance measure of the core profitability of our
operations. This measure forms the basis of our internal financial reporting and is used by senior
management in deciding how to allocate capital resources among business segments. We believe that
investors benefit from having access to the same financial measures that our management uses in
evaluating segment results. The GAAP measure most directly comparable to total segment gross
operating margin is operating income.
We define total segment gross operating margin as operating income before: (1) depreciation,
amortization and accretion expense; (2) operating lease expenses for which we do not have the
payment obligation; (3) gains and losses on the sale of assets; and (4) general and administrative
expenses. Gross operating margin is exclusive of other income and expense transactions, provision
for income taxes, minority interest, cumulative effect of changes in accounting principles and
extraordinary charges. Gross operating margin by segment is calculated by subtracting segment
operating costs and expenses (net of the adjustments noted above) from segment revenues, with both
segment totals before the elimination of intercompany transactions. In accordance with GAAP,
intercompany accounts and transactions are eliminated in consolidation. Our non-GAAP financial
measure of total segment gross operating margin should not be considered as an alternative to GAAP
operating income.
We include earnings from equity method unconsolidated affiliates in our measurement of segment
gross operating margin. Our equity investments with industry partners are a vital component of our
business strategy. They are a means by which we conduct our operations to align our interests with
those of our customers, which may be a supplier of raw materials or a consumer of finished
products. This method of operation also enables us to achieve favorable economies of scale
relative to the level of investment and business risk assumed versus what we could accomplish on a
stand-alone basis. Many of these businesses perform supporting or complementary roles to our
other business operations. As circumstances dictate, we may increase our ownership interest in
equity investments, which could result in their subsequent consolidation into our operations.
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Distributable cash flow. We define distributable cash flow as net income or loss
plus: (1) depreciation, amortization and accretion expense; (2) operating lease expenses for which
we do not have the payment obligation; (3) cash distributions received from unconsolidated
affiliates less equity in the earnings of such unconsolidated affiliates; (4) the subtraction of
sustaining capital expenditures; (5) the addition of losses or subtraction of gains relating to the
sale of assets; (6) cash proceeds from the sale of assets or return of investment from
unconsolidated affiliates; (7) gains or losses on monetization of financial instruments recorded
in accumulated other comprehensive income less related amortization of such amount to earnings; (8)
transition support payments received from El Paso related to the GulfTerra merger and (9) the
addition of losses or subtraction of gains relating to other miscellaneous non-cash amounts
affecting net income for the period. Sustaining capital expenditures are capital expenditures (as
defined by GAAP) resulting from improvements to and major renewals of existing assets.
Distributable cash flow is a significant liquidity metric used by our senior management to compare
basic cash flows generated by us to the cash distributions we expect to pay our partners. Using
this metric, our management can compute the coverage ratio of estimated cash flows to planned cash
distributions.
Distributable cash flow is also an important non-GAAP financial measure for our limited
partners since it serves as an indicator of our success in providing a cash return on investment.
Specifically, this financial measure indicates to investors whether or not we are generating cash
flows at a level that can sustain or support an increase in our quarterly cash distribution.
Distributable cash flow is also a quantitative standard 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). The GAAP measure most directly comparable to distributable cash flow is cash flows
from operating activities.
EBITDA. We define EBITDA as net income or loss plus interest expense, provision for
income taxes and depreciation, accretion and amortization expense. EBITDA is commonly used as a
supplemental financial measure by management and by external users of our financial statements,
such as investors, commercial banks, research analysts and rating agencies, to assess: (1) the
financial performance of our assets without regard to financing methods, capital structures or
historical cost basis; (2) the ability of our assets to generate cash sufficient to pay interest
cost and support our indebtedness; (3) our operating performance and return on capital as compared
to those of other companies in the midstream energy industry, without regard to financing and
capital structure; and (4) the viability of projects and the overall rates of return on alternative
investment opportunities. Because EBITDA excludes some, but not all, items that affect net income
or loss and because these measures may vary among other companies, the EBITDA data presented in the
press release may not be comparable to similarly titled measures of other companies. The GAAP
measure most directly comparable to EBITDA is cash flow from operating activities.
Item 9.01. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
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Exhibit No. |
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Description |
99.1
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Enterprise Products Partners L.P. press release dated April 25, 2006. |
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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.
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ENTERPRISE PRODUCTS PARTNERS L.P.
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By: |
Enterprise Products GP, LLC, |
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its General Partner |
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Date: April 25, 2006 |
By: |
/s/ Michael J. Knesek |
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Name: |
Michael J. Knesek |
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Title: |
Senior Vice President, Controller and Principal
Accounting Officer of Enterprise Products GP, LLC |
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Exhibit Index
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Exhibit No. |
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Description |
99.1 |
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Enterprise Products Partners L.P. press release dated April 25, 2006. |
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