Energy Transfer 2010 Annual Report Download - page 70

Operating Expenses. Midstream operating expenses increased between the periods primarily due to an increase
in maintenance expense of $2.7 million, an increase in plant operating expenses of $2.0 million, and a net
increase in other operating expenses of $5.3 million resulting from increased volumes on our systems and
processing/treating facilities.
Depreciation and Amortization. Midstream depreciation and amortization expense increased between the periods
primarily due to incremental depreciation from the continued expansion of our systems.
Selling, General and Administrative Expenses. Midstream selling, general and administrative expenses
decreased between the periods primarily due to a decrease in professional fees of $18.5 million, of which $10.0
million related to a FERC settlement in 2009, and a net decrease of $5.3 million in other expenses primarily due
to lower employee-related costs (including allocated overhead expenses).
Retail Propane and Other Retail Propane Related
Years Ended December 31
2010 2009 Change
Retail propane gallons (in thousands) 554,865 568,315 (13,450)
Retail propane revenues $ 1,314,973 $ 1,190,523 $ 124,450
Other retail propane related revenues 104,673 102,060 2,613
Retail propane cost of products sold 752,926 574,854 178,072
Other retail propane related cost of
products sold 21,816 21,148 668
Gross margin 644,904 696,581 (51,677)
Operating expenses 337,180 341,935 (4,755)
Depreciation and amortization 81,947 83,476 (1,529)
Selling, general and administrative 45,936 41,941 3,995
Segment operating income $ 179,841 $ 229,229 $ (49,388)
Volumes. Sales volumes were negatively impacted by the timing and geographic distribution of temperature
patterns due to an abrupt end to the 2009-2010 heating season in the eastern United States and the continued
customer conservation resulting from the lingering effects of the economic recession, which slowed certain
normal seasonal deliveries. These negative impacts more than offset the favorable impact to sales volumes
resulting from the colder than normal weather in certain areas of our operations. For the year ended
December 31, 2010, the combined average temperatures in our operating areas were approximately 3.3% colder
than normal as compared to weather which was approximately 4.1% colder than normal during the same period
in 2009.
Gross Margin. Total gross margin decreased primarily due to a decrease of $48.7 million attributable to the
mark-to-market adjustment for our financial instruments used in our commodity price risk management activities
and also a decrease of approximately $13.5 million resulting from the decrease in volumes discussed above. The
decrease in gross margin was offset by an approximate $8.6 million favorable impact from increases in the
average margin per gallon sold in 2010 over 2009 and a $1.9 million increase in other gross profit. Prior to April
2009, our financial instruments used to hedge our customer prebuy programs were not designated as cash flow
hedges for accounting purposes, and changes in market value were recorded in cost of products sold in the
consolidated statements of operations. The propane margins in 2009 include unrealized gains of $45.6 million on
these contracts. In comparison, the remaining contracts under mark-to-market accounting resulted in unrealized
losses of $3.1 million for 2010.
Operating Expenses. Operating expenses decreased primarily due to decreases of $4.2 million in compensation
and benefits expense, $5.7 million in performance-based bonus accruals and $2.2 million due to a reduction in
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