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 22, 2004
ENTERPRISE PRODUCTS PARTNERS L.P.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 1-14323 76-0568219
(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
2727 NORTH LOOP WEST, HOUSTON, TEXAS 77008-1044
(Address of Principal Executive Offices) (Zip Code)
(713) 880-6500
(Registrant's Telephone Number, including Area Code)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99.1 Enterprise Products Partners L.P. press release dated April 22,
2004.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On April 22, 2004, Enterprise Products Partners L.P. issued a press
release regarding its financial results for the three month periods ended March
31, 2004 and 2003 and held a webcast conference call discussing those results. A
copy of this earnings press release is filed as Exhibit 99.1 to this report,
which is hereby incorporated by reference into this Item 12. 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.
Use of Non-GAAP financial measures
Our earnings press release includes 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 and amortization 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) selling, 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 arise, we may increase our ownership interest in equity
investments which could result in subsequent consolidation of operations.
Distributable cash flow. We define distributable cash flow as net
income or loss plus: (1) depreciation and amortization 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; (7)
the addition of decreases or the subtraction of increases in the value of our
financial instrument portfolios; and (8) 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 senior
management to compare basic cash flows generated by the partnership to the cash
distributions we expect to pay our partners. Using this metric, management can
quickly 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 the partnership's
success in providing a cash return on investment. Specifically, this financial
measure indicates to investors whether or not the partnership is generating cash
flows at a level that can sustain or support an increase in our quarterly cash
distribution rates. Distributable cash flow is also a quantitative standard used
throughout the investment community with respect to publicly-traded partnerships
because the value of a partnership unit is generally determined by its yield
(which in turn is based on the amount of cash distributions a partnership can
pay to a unitholder). The GAAP measure most directly comparable to distributable
cash flow is cash flow from operating activities.
EBITDA. We define EBITDA as net income or loss plus interest expense,
provision for income taxes and depreciation and amortization expense. EBITDA is
used as a supplemental financial measure by management and by external users of
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 sector, 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
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.
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.
ENTERPRISE PRODUCTS PARTNERS L.P.
By: Enterprise Products GP, LLC,
as general partner
Date: April 22, 2004 By: /s/ Michael J. Knesek
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Michael J. Knesek
Vice President, Principal Accounting Officer
and Controller of Enterprise Products GP, LLC