Energy Transfer 2010 Annual Report Download - page 78

to joint ventures, as well as for general partnership purposes. As of December 31, 2010, in addition to
approximately $49.5 million of cash on hand, we had available capacity under our revolving credit facility (the
“ETP Credit Facility”) of approximately $1.57 billion. Based on our current estimates, we expect to utilize these
resources, along with cash from operations, to fund our announced growth capital expenditures and working
capital needs through the end of 2011; however, we may issue debt or equity securities prior to that time as we
deem prudent to provide liquidity for new capital projects or other partnership purposes.
The assets used in our natural gas operations, including pipelines, gathering systems and related facilities, are
generally long-lived assets and do not require significant maintenance capital expenditures. The assets utilized in
our propane operations do not typically require lengthy manufacturing process time or complicated, high
technology components. Accordingly, we do not have any significant financial commitments for maintenance
capital expenditures in our businesses. From time to time we experience increases in pipe costs due to a number
of reasons, including but not limited to, replacing pipe caused by delays from mills, limited selection of mills
capable of producing large diameter pipe timely, higher steel prices and other factors beyond our control.
However, we include these factors into our anticipated growth capital expenditures for each year.
Cash Flows
Our internally generated cash flows may change in the future due to a number of factors, some of which we
cannot control. These include regulatory changes, the price for our products and services, the demand for such
products and services, margin requirements resulting from significant changes in commodity prices, operational
risks, the successful integration of our acquisitions, and other factors.
Operating Activities
Changes in cash flows from operating activities between periods primarily result from changes in earnings (as
discussed in “Results of Operations” above), excluding the impacts of non-cash items and changes in operating
assets and liabilities. Non-cash items include recurring non-cash expenses, such as depreciation and amortization
expense and non-cash compensation expense. The increase in depreciation and amortization expense during the
periods presented primarily resulted from construction and acquisitions of assets, while changes in non-cash unit-
based compensation expense result from changes in the number of units granted and changes in the grant date
fair value estimated for such grants. Cash flows from operating activities also differ from earnings as a result of
non-cash charges that may not be recurring such as impairment charges and allowance for equity funds used
during construction. The allowance for equity funds used during construction increases in periods when we have
a significant amount of interstate pipeline construction in progress. Changes in operating assets and liabilities
between periods result from factors such as the changes in the value of price risk management assets and
liabilities, timing of accounts receivable collection, payments on accounts payable, the timing of purchase and
sales of propane and natural gas inventories, and the timing of advances and deposits received from customers.
Following is a summary of operating activities by period:
Year Ended December 31, 2010
Cash provided by operating activities during 2010 was $1.20 billion and net income was $617.2 million. The
difference between net income and cash provided by operating activities during 2010 consisted of non-cash items
totaling $416.9 million, changes in operating assets and liabilities of $125.2 million, interest rate swap
termination proceeds of $26.5 million and distributions received from our affiliates that exceeded our equity in
earnings by $20.9 million. The non-cash activity in 2010 consisted primarily of depreciation and amortization of
$343.0 million, non-cash compensation expense of $28.4 million, and a non-cash impairment of $52.6 million on
our investment in MEP. This impairment was incurred prior to our transfer of substantially all of our investment
in MEP to ETE on May 26, 2010. These amounts are partially offset by the allowance for equity funds used
during construction of $28.9 million.
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