Energy Transfer 2010 Annual Report Download - page 66

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Our reportable segments are discussed below. “All other” includes our compression and wholesale propane
businesses. Operating income related to “All other” increased by $32.5 million as compared to the prior year.
The increase was primarily the result of a $35.1 million increase in our operating income from our natural gas
compression equipment business. We acquired our natural gas compression equipment business in November
2009, and the increase in operating income resulted from a full twelve months of activity in 2010 compared to
two months of activity in 2009.
Selling, General and Administrative Expenses Not Allocated to Segments. Selling, general and administrative
expenses are allocated monthly to the Operating Companies using the Modified Massachusetts Formula
Calculation (“MMFC”). The expenses subject to allocation are based on estimated amounts and take into
consideration our actual expenses from previous months and known trends. The difference between the allocation
and actual costs is adjusted in the following month which results in over or under allocation of these costs due to
timing differences.
Intrastate Transportation and Storage
Years Ended December 31,
2010 2009 Change
Natural gas MMBtu/d — transported 12,251,457 12,254,168 (2,711)
Revenues $ 3,290,905 $ 2,391,544 $ 899,361
Cost of products sold 2,381,397 1,393,295 988,102
Gross margin 909,508 998,249 (88,741)
Operating expenses 194,955 199,806 (4,851)
Depreciation and amortization 116,992 107,605 9,387
Selling, general and administrative 75,049 64,059 10,990
Segment operating income $ 522,512 $ 626,779 $ (104,267)
Volumes. We experienced a decrease in incremental business due to less favorable basis differentials primarily
between the West and East Texas market hubs during 2010 which was offset by an increase in volumes
transported under long-term contracts.
Gross Margin. The components of our intrastate transportation and storage segment gross margin were as
follows:
Years Ended December 31,
2010 2009 Change
Transportation fees $ 594,405 $ 639,034 $ (44,629)
Natural gas sales and other 110,002 91,879 18,123
Retained fuel revenues 143,606 137,840 5,766
Storage margin, including fees 61,495 129,496 (68,001)
Total gross margin $ 909,508 $ 998,249 $ (88,741)
Our 2010 margin decreased as compared to 2009 due to the net impact of the following factors:
• The average transportation rate decreased approximately $0.01/MMBtu for the year ended
December 31, 2010 as compared to the year ended December 31, 2009, which resulted in a decrease in
transportation fees of $44.6 million. The lower rate was primarily caused by a decrease of
$0.15/MMBtu in the average spot price differential between West and East Texas market hubs from
$0.28/MMBtu for the year ended December 31, 2009 compared to $0.13/MMBtu for the year ended
December 31, 2010.
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