Energy Transfer 2010 Annual Report Download - page 71

net business insurance reserves and claims. These decreases were partially offset by an increase in our vehicle
fuel expenses due to the increase in fuel costs between periods and a slight increase in other general operating
expenses.
Depreciation and Amortization Expense. The decrease in depreciation and amortization expense was primarily
due to a net decrease in amortization expense of $1.9 million as a result of certain intangible assets becoming
fully amortized during the periods and was partially offset by an increase in depreciation expense related to
assets placed in service and acquisitions.
Selling, General and Administrative Expenses. The increase in selling, general and administrative expenses was
primarily due to increased administrative expense allocations of $2.5 million and increases in non-cash deferred
compensation expense of $1.1 million.
Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008 (tabular dollar amounts
are expressed in thousands)
Due to the high level of market volatility experienced in 2008, as well as other business considerations, we
ceased our trading of financial derivative instruments that are not offset by physical positions in July 2008. As a
result, we no longer have any material exposure to market risk from these activities. Trading activities resulted
in net losses of approximately $26.2 million for the year ended December 31, 2008.
Consolidated Results
Years Ended December 31,
2009 2008 Change
Revenues $ 5,417,295 $ 9,293,868 $ (3,876,573)
Cost of products sold 3,122,056 6,938,080 (3,816,024)
Gross margin 2,295,239 2,355,788 (60,549)
Operating expenses 680,893 781,831 (100,938)
Depreciation and amortization 312,803 262,151 50,652
Selling, general and administrative 173,936 194,227 (20,291)
Operating income 1,127,607 1,117,579 10,028
Interest expense, net of interest capitalized (394,274) (265,701) (128,573)
Equity in earnings (losses) of affiliates 20,597 (165) 20,762
Losses on disposal of assets (1,564) (1,303) (261)
Gains (losses) on non-hedged interest rate derivatives 39,239 (50,989) 90,228
Allowance for equity funds used during construction 10,557 63,976 (53,419)
Other, net 2,157 9,306 (7,149)
Income tax expense (12,777) (6,680) (6,097)
Net income $ 791,542 $ 866,023 $ (74,481)
See the detailed discussion of operating income by operating segment below.
Interest Expense. Interest expense increased principally due to higher levels of borrowings, which were used to
finance growth capital expenditures primarily in our intrastate transportation and storage and interstate
transportation segments, including capital contributions to our joint ventures.
Equity in Earnings (Losses) of Affiliates. The increase in equity in earnings of affiliates between the periods was
primarily attributable to earnings from the Midcontinent Express pipeline, which was placed in service in 2009.
We recorded equity in earnings of MEP of $14.0 million during 2009.
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