Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS.
EN TERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
September 30,
2020
December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents
$
1,032.2
$
334.7
Restricted cash
98.9
75.3
Accounts receivable – trade, net of allowance for doubtful accounts
of $ 13.8 at September 30, 2020 and $ 12.4 at December 31, 2019
3,776.2
4,873.6
Accounts receivable – related parties
4.1
2.5
Inventories
3,192.6
2,091.4
Derivative assets
132.9
127.2
Prepaid and other current assets
556.4
358.2
Total current assets
8,793.3
7,862.9
Property, plant and equipment, net
42,360.1
41,603.4
Investments in unconsolidated affiliates
2,485.4
2,600.2
Intangible assets, net of accumulated amortization of $ 1,796.8 at
September 30, 2020 and $ 1,687.5 at December 31, 2019 (see Note 6)
3,348.6
3,449.0
Goodwill (see Note 6)
5,745.2
5,745.2
Other assets
1,003.6
472.5
Total assets
$
63,736.2
$
61,733.2
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt (see Note 7)
$
1,325.0
$
1,981.9
Accounts payable – trade
896.0
1,004.5
Accounts payable – related parties
121.3
162.3
Accrued product payables
4,317.1
4,915.7
Accrued interest
235.1
431.7
Derivative liabilities
329.7
122.4
Other current liabilities
622.7
511.2
Total current liabilities
7,846.9
9,129.7
Long-term debt (see Note 7)
28,537.0
25,643.2
Deferred tax liabilities (see Note 11)
463.3
100.4
Other long-term liabilities
735.2
1,032.4
Commitments and contingent liabilities (see Note 16)
Redeemable preferred limited partner interests: (see Note 8)
Series A cumulative convertible preferred units (“preferred units”)
( 50,000 units outstanding at September 30, 2020)
49.1
Equity: (see Note 8)
Partners’ equity:
Common limited partner interests ( 2,182,880,979 units issued and outstanding at September 30, 2020, 2,189,226,130 units issued and outstanding at December 31, 2019)
26,381.9
24,692.6
Treasury units, at cost
( 1,297.3
)
–
Accumulated other comprehensive income (loss)
( 49.3
)
71.4
Total partners’ equity
25,035.3
24,764.0
Noncontrolling interests in consolidated subsidiaries
1,069.4
1,063.5
Total equity
26,104.7
25,827.5
Total liabilities, preferred units, and equity
$
63,736.2
$
61,733.2
See Notes to Unaudited Condensed Consolidated Financial Statements.
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ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(Dollars in millions, except per unit amounts)
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Revenues:
Third parties
$
6,914.5
$
7,948.5
$
20,126.3
$
24,730.2
Related parties
7.5
15.6
29.2
53.7
Total revenues (see Note 9)
6,922.0
7,964.1
20,155.5
24,783.9
Costs and expenses:
Operating costs and expenses:
Third parties
5,288.2
6,217.6
15,087.4
19,342.4
Related parties
283.0
356.1
914.5
1,051.9
Total operating costs and expenses
5,571.2
6,573.7
16,001.9
20,394.3
General and administrative costs:
Third parties
16.3
19.1
63.1
60.9
Related parties
34.0
36.4
99.7
99.3
Total general and administrative costs
50.3
55.5
162.8
160.2
Total costs and expenses (see Note 10)
5,621.5
6,629.2
16,164.7
20,554.5
Equity in income of unconsolidated affiliates
82.0
139.3
336.1
431.3
Operating income
1,382.5
1,474.2
4,326.9
4,660.7
Other income (expense):
Interest expense
( 320.5
)
( 382.9
)
( 958.2
)
( 950.2
)
Change in fair market value of Liquidity Option (see Note 8)
–
( 38.7
)
( 2.3
)
( 123.1
)
Interest income
2.2
6.9
12.3
8.9
Other, net
0.7
0.7
2.5
2.8
Total other expense, net
( 317.6
)
( 414.0
)
( 945.7
)
( 1,061.6
)
Income before income taxes
1,064.9
1,060.2
3,381.2
3,599.1
Benefit from (provision for) income taxes (see Note 11)
19.1
( 15.4
)
138.6
( 37.4
)
Net income
1,084.0
1,044.8
3,519.8
3,561.7
Net income attributable to noncontrolling interests
( 31.4
)
( 25.6
)
( 82.4
)
( 67.3
)
Net income attributable to preferred units (see Note 8)
-
*
–
-
*
–
Net income attributable to common unitholders
$
1,052.6
$
1,019.2
$
3,437.4
$
3,494.4
* Amount is negligible
Earnings per unit: (see Note 12)
Basic earnings per common unit
$
0.48
$
0.46
$
1.56
$
1.59
Diluted earnings per common unit
$
0.48
$
0.46
$
1.56
$
1.59
See Notes to Unaudited Condensed Consolidated Financial Statements.
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ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED
COMPREHENSIVE INCOME
(Dollars in millions)
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Net income
$
1,084.0
$
1,044.8
$
3,519.8
$
3,561.7
Other comprehensive income (loss):
Cash flow hedges: (see Note 14)
Commodity hedging derivative instruments:
Changes in fair value of cash flow hedges
( 4.2
)
72.3
392.7
58.6
Reclassificatio n of losses ( gains) to ne t income
29.5
( 91.5
)
( 334.8
)
( 152.0
)
Interest rate hedging derivative instruments:
Changes in fair value of cash flow hedges
62.6
( 18.6
)
( 207.7
)
( 23.8
)
Reclassification of losses to net income
9.9
9.4
29.2
27.8
Total cash flow hedges
97.8
( 28.4
)
( 120.6
)
( 89.4
)
Other
–
–
( 0.1
)
( 0.6
)
Total other comprehens ive income (loss)
97.8
( 28.4
)
( 120.7
)
( 90.0
)
Comprehensive income
1,181.8
1,016.4
3,399.1
3,471.7
Comprehensive income attributable to noncontrolling interests
( 31.4
)
( 25.6
)
( 82.4
)
( 67.3
)
Comprehensive income attributable to preferred units (see Note 8)
-
*
–
-
*
–
Comprehensive income attributable to common unitholders
$
1,150.4
$
990.8
$
3,316.7
$
3,404.4
* Amount is negligible
See Notes to Unaudited Condensed Consolidated Financial Statements.
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ENTERPRISE PRODUCT S PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in millions)
For the Nine Months
Ended September 30,
2020
2019
Operating activities:
Net income
$
3,519.8
$
3,561.7
Reconciliation of net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion
1,545.1
1,456.7
Asset impairment and related charges
90.4
51.3
Equity in income of unconsolidated affiliates
( 336.1
)
( 431.3
)
Distributions received from unconsolidated affiliates attributable to earnings
337.4
431.2
Net gains attributable to asset sales
( 2.1
)
( 2.6
)
Deferred income tax expense (benefit)
( 149.0
)
10.9
Change in fair market value of derivative instruments
( 53.7
)
2.0
Change in fair market value of Liquidity Option
2.3
123.1
Non-cash expense related to long-term operating leases (see Note 16)
29.6
32.4
Net effect of changes in operating accounts (see Note 17)
( 692.0
)
( 409.0
)
Other operating activities
( 0.1
)
( 0.2
)
Net cash flows provided by operating activities
4,291.6
4,826.2
Investing activities:
Capital expenditures
( 2,671.6
)
( 3,302.1
)
Investments in unconsolidated affiliates
( 9.9
)
( 100.1
)
Distributions received from unconsolidated affiliates attributable to the return of capital
124.9
53.9
Proceeds from asset sales
8.4
16.8
Other investing activities
( 16.0
)
( 41.3
)
Cash used in investing activities
( 2,564.2
)
( 3,372.8
)
Financing activities:
Borrowings under debt agreements
6,672.1
44,629.6
Repayments of debt
( 4,406.6
)
( 42,855.3
)
Debt issuance costs
( 46.3
)
( 26.3
)
Monetization of interest rate derivative instruments
( 33.3
)
–
Cash distributions paid to common unitholders (see Note 8)
( 2,919.6
)
( 2,871.1
)
Cash payments made in connection with distribution equivalent rights
( 20.0
)
( 16.4
)
Cash distributions paid to noncontrolling interests
( 97.8
)
( 69.7
)
Cash contributions from noncontrolling interests
21.2
590.8
Net cash proceeds from the issuance of common units
–
82.2
Repurchase of common units under 2019 Buyback Program (see Note 8)
( 173.8
)
( 81.1
)
Net cash proceeds from the issuance of preferred units (see Note 8)
32.5
–
Other financing activities
( 34.7
)
( 38.4
)
Cas h used in financing ac tivities
( 1,006.3
)
( 655.7
)
Net change in cash and cash equivalents, including restricted cash
721.1
797.7
Cash and cash equivalents, including restricted cash, at beginning of period
410.0
410.1
Cash and cash equivalents, including restricted cash, at end of period
$
1,131.1
$
1,207.8
See Notes to Unaudited Condensed Consolidated Financial Statements.
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ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020
(Dollars in millions)
Partners’ Equity
Common
Limited
Partner
Interests
Treasury
Units
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Consolidated
Subsidiaries
Total
For the Three Months Ended September 30, 2020:
Balance, June 30, 2020
$
26,321.1
$
( 1,297.3
)
$
( 147.1
)
$
1,064.7
$
25,941.4
Net income
1,052.6
–
–
31.4
1,084.0
Cash distributions paid to common unitholders
( 972.7
)
–
–
–
( 972.7
)
Cash payments made in connection with
distribution equivalent rights
( 7.1
)
–
–
–
( 7.1
)
Cash distributions paid to noncontrolling interests
–
–
–
( 36.0
)
( 36.0
)
Cash contributions from noncontrolling interests
–
–
–
1.5
1.5
Amortization of fair value of equity-based awards
39.5
–
–
–
39.5
Repurchase and cancellation of common units under
2019 Buyback Program (see Note 8)
( 33.7
)
–
–
–
( 33.7
)
Common units exchanged for preferred units, with common
units received being immediately cancelled (see Note 8)
( 17.5
)
–
–
–
( 17.5
)
Cash flow hedges
–
–
97.8
–
97.8
Other, net
( 0.3
)
–
–
7.8
7.5
Balance, September 30, 2020
$
26,381.9
$
( 1,297.3
)
$
( 49.3
)
$
1,069.4
$
26,104.7
Partners’ Equity
Common
Limited
Partner
Interests
Treasury
Units
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Consolidated
Subsidiaries
Total
For the Nine Months Ended September 30, 2020:
Balance, December 31, 2019
$
24,692.6
$
–
$
71.4
$
1,063.5
$
25,827.5
Net income
3,437.4
–
–
82.4
3,519.8
Cash distributions paid to common unitholders
( 2,919.6
)
–
–
–
( 2,919.6
)
Cash payments made in connection with
distribution equivalent rights
( 20.0
)
–
–
–
( 20.0
)
Cash distributions paid to noncontrolling interests
–
–
–
( 97.8
)
( 97.8
)
Cash contributions from noncontrolling interests
–
–
–
21.2
21.2
Amortization of fair value of equity-based awards
120.1
–
–
–
120.1
Repurchase and cancellation of common units under
2019 Buyback Program (see Note 8)
( 173.8
)
–
–
–
( 173.8
)
Common units issued to Skyline North Americas, Inc. in
connection with settlement of Liquidity Option (see Note 8)
1,297.3
–
–
–
1,297.3
Treasury units acquired in connection with settlement
of Liquidity Option, at cost (see Note 8)
–
( 1,297.3
)
–
–
( 1,297.3
)
Common units exchanged for preferred units, with common
units received being immediately cancelled (see Note 8)
( 17.5
)
–
–
–
( 17.5
)
Cash flow hedges
–
–
( 120.6
)
–
( 120.6
)
Other, net
( 34.6
)
–
( 0.1
)
0.1
( 34.6
)
Balance, September 30, 2020
$
26,381.9
$
( 1,297.3
)
$
( 49.3
)
$
1,069.4
$
26,104.7
See Notes to Unaudited Condensed Consolidated Financial Statements. For information regarding Unit History and
Accumulated Other Comprehensive Income (Loss), see Note 8.
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ENTERPRISE PRODUCTS PARTNERS L.P.
UNAUDITED CONDENSED STATEMENTS OF CONSOLIDATED EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019
(Dollars in millions)
Partners’ Equity
Common
Limited
Partner
Interests
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Consolidated
Subsidiaries
Total
For the Three Months Ended September 30, 2019:
Balance, June 30, 2019
$
24,450.5
$
( 10.7
)
$
535.6
$
24,975.4
Net income
1,019.2
–
25.6
1,044.8
Cash distributions paid to common unitholders
( 963.2
)
–
–
( 963.2
)
Cash payments made in connection with distribution equivalent rights
( 5.9
)
–
–
( 5.9
)
Cash distributions paid to noncontrolling interests
–
–
( 22.8
)
( 22.8
)
Cash contributions from noncontrolling interests
–
–
491.2
491.2
Amortization of fair value of equity-based awards
36.7
–
–
36.7
Cash flow hedges
–
( 28.4
)
–
( 28.4
)
Other, net
( 2.2
)
–
( 0.1
)
( 2.3
)
Balance, September 30, 2019
$
24,535.1
$
( 39.1
)
$
1,029.5
$
25,525.5
Partners’ Equity
Common
Limited
Partner
Interests
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests in
Consolidated
Subsidiaries
Total
For the Nine Months Ended September 30, 2019:
Balance, December 31, 2018
$
23,802.6
$
50.9
$
438.7
$
24,292.2
Net income
3,494.4
–
67.3
3,561.7
Cash distributions paid to common unitholders
( 2,871.1
)
–
–
( 2,871.1
)
Cash payments made in connection with distribution equivalent rights
( 16.4
)
–
–
( 16.4
)
Cash distributions paid to noncontrolling interests
–
–
( 69.7
)
( 69.7
)
Cash contributions from noncontrolling interests
–
–
590.8
590.8
Net cash proceeds from the issuance of common units
82.2
–
–
82.2
Common units issued in connection with employee compensation
45.6
–
–
45.6
Repurchase and cancellation of common units under
2019 Buyback Program (see Note 8)
( 81.1
)
–
–
( 81.1
)
Amortization of fair value of equity-based awards
107.2
–
–
107.2
Cash flow hedges
–
( 89.4
)
–
( 89.4
)
Other, net
( 28.3
)
( 0.6
)
2.4
( 26.5
)
Balance, September 30, 2019
$
24,535.1
$
( 39.1
)
$
1,029.5
$
25,525.5
See Notes to Unaudited Condensed Consolidated Financial Statements. For information regarding Unit History and
Accumulated Other Comprehensive Income (Loss), see Note 8.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
With the exception of per unit amounts, or as noted within the context of each disclosure,
the dollar amounts presented in the tabular data within these disclosures are
stated in millions of dollars.
KEY REFERENCES USED IN THESE
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unless the context requires otherwise, references to “we,” “us,” “our” or “Enterprise” are intended to mean the business and operations of Enterprise Products Partners L.P. and its consolidated subsidiaries. References to “EPD” or the “Partnership” mean Enterprise Products Partners L.P. on a standalone basis. References to “EPO” mean Enterprise Products Operating LLC, which is an indirect wholly owned subsidiary of EPD, and its consolidated subsidiaries, through which EPD conducts its business. Enterprise is managed by its general partner, Enterprise Products Holdings LLC (“Enterprise GP”), which is a wholly owned subsidiary of Dan Duncan LLC, a privately held Texas limited liability company.
The membership interests of Dan Duncan LLC are owned by a voting trust, the current trustees (“DD LLC Trustees”) of which are: (i) Randa Duncan Williams, who is also a director and Chairman of the Board of Directors (the “Board”) of Enterprise GP; (ii) Richard H. Bachmann, who is also a director and Vice Chairman of the Board of Enterprise GP; and (iii) Dr. Ralph S. Cunningham, who is also an advisory director of Enterprise GP. Ms. Duncan Williams and Mr. Bachmann also currently serve as managers of Dan Duncan LLC along with W. Randall Fowler, who is also a director and the Co-Chief Executive Officer and Chief Financial Officer of Enterprise GP.
References to “EPCO” mean Enterprise Products Company, a privately held Texas corporation, and its privately held affiliates. A majority of the outstanding voting capital stock of EPCO is owned by a voting trust, the current trustees (“EPCO Trustees”) of which are: (i) Ms. Duncan Williams, who serves as Chairman of EPCO; (ii) Dr. Cunningham, who serves as Vice Chairman of EPCO; and (iii) Mr. Bachmann, who serves as the President and Chief Executive Officer of EPCO. Ms. Duncan Williams and Mr. Bachmann also currently serve as directors of EPCO along with Mr. Fowler, who is also the Executive Vice President and Chief Financial Officer of EPCO. EPCO, together with its privately held affiliates, owned approximately 32.2 % of EPD’s common units outstanding and 30 % of its preferred units outstanding at September 30, 2020. See Note 8 for information regarding our issuance of preferred units on September 30, 2020.
Note 1. Partnership Organization and Basis of Presentation
The Partnership is a publicly traded Delaware limited partnership, the common units of which are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “EPD.” The Partnership’s preferred units are not publicly traded. We were formed in April 1998 to own and operate certain natural gas liquids (“NGLs”) related businesses of EPCO and are a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, petrochemicals and refined products.
The Partnership is owned by its limited partners (preferred and common unitholders) from an economic perspective. Enterprise GP, which owns a non-economic general partner interest in the Partnership, manages our operations. The Partnership conducts substantially all of its business through EPO. We, Enterprise GP, EPCO and Dan Duncan LLC are affiliates under the collective common control of the DD LLC Trustees and the EPCO Trustees. Like many publicly traded partnerships, we have no employees. All of our management, administrative and operating functions are performed by employees of EPCO pursuant to an administrative services agreement (the “ASA”) or by other service providers. See Note 15 for information regarding related party matters.
Our results of operations for the nine months ended September 30, 2020 are not necessarily indicative of results expected for the full year of 2020. In our opinion, the accompanying Unaudited Condensed Consolidated Financial Statements include all adjustments consisting of normal recurring accruals necessary for fair presentation. Although we believe the disclosures in these financial statements are adequate and make the information presented not misleading, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
These Unaudited Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto included in our annual report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”) filed with the SEC on February 28, 2020.
Note 2. Summary of Significant Accounting Policies
Apart from those matters noted below, there have been no changes in our significant accounting policies since those reported under Note 2 of the 2019 Form 10-K.
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash and cash equivalents, and restricted cash reported within the Unaudited Condensed Consolidated Balance Sheets that sum to the total of the amounts shown in the Unaudited Condensed Statements of Consolidated Cash Flows.
September 30,
2020
December 31,
2019
Cash and cash equivalents
$
1,032.2
$
334.7
Restricted cash
98.9
75.3
Total cash, cash equivalents and restricted cash shown in the
Unaudited Condensed Statements of Consolidated Cash Flows
$
1,131.1
$
410.0
Restricted cash primarily represents amounts held in segregated bank accounts by our clearing brokers as margin in support of our commodity derivative instruments portfolio and related physical purchases and sales of natural gas, NGLs, crude oil, refined products and power. Additional cash may be restricted to maintain our commodity derivative instruments portfolio as prices fluctuate or margin requirements change. See Note 14 for information regarding our derivative instruments and hedging activities.
Recent Accounting Developments
Credit Losses
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . The new guidance, referred to as the current expected credit loss model, requires the measurement of expected credit losses for financial assets (e.g., accounts receivable) held at the reporting date based on historical experience, current economic conditions, and reasonable and supportable forecasts. These result in the more timely recognition of losses. The adoption of this new guidance on January 1, 2020 did not have a material impact on our consolidated financial statements.
Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which amended the disclosure requirements related to fair value measurements in an effort to enhance the overall usefulness of the disclosures and reduce costs by eliminating certain disclosures that were not considered to be decision-useful for users of the financial statements. The ASU will now require incremental disclosures regarding changes in unrealized gains and losses, significant unobservable inputs used to develop Level 3 fair value measurements and measurement uncertainty. Additionally, the ASU eliminated certain policy and process disclosures and reporting requirements.
The adoption of this new guidance on January 1, 2020 did not have a material impact on our consolidated financial statements. See Note 14 for information regarding our fair value measurements.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Goodwill
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We adopted this guidance on January 1, 2020 for future goodwill impairment testing.
Note 3. Inventories
Our inventory amounts by product type were as follows at the dates indicated:
September 30,
2020
December 31,
2019
NGLs
$
1,678.1
$
1,094.9
Petrochemicals and refined products
800.8
311.5
Crude oil
696.1
674.2
Natural gas
17.6
10.8
Total
$
3,192.6
$
2,091.4
Inventories of NGLs, refined products and crude oil increased since December 31, 2019 primarily due to the use of working capital in connection with our marketing activities.
Due to fluctuating commodity prices, we recognize lower of cost or net realizable value adjustments when the carrying value of our available-for-sale inventories exceeds their net realizable value. The following table presents our total cost of sales amounts and lower of cost or net realizable value adjustments for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Cost of sales (1)
$
4,313.7
$
5,276.5
$
12,331.9
$
16,721.5
Lower of cost or net realizable value adjustments
recognized in cost of sales
4.4
6.8
55.6
17.1
(1)
Cost of sales is a component of “Operating costs and expenses” as presented on our Unaudited Condensed Statements of Consolidated Operations. Fluctuations in these amounts are primarily due to changes in energy commodity prices and sales volumes associated with our marketing activities.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Property, Plant and Equipment
The historical costs of our property, plant and equipment and related accumulated depreciation balances were as follows at the dates indicated:
Estimated
Useful Life
in Years
September 30,
2020
December 31,
2019
Plants, pipelines and facilities (1)
3 - 45
(5)
$
49,050.9
$
47,201.2
Underground and other storage facilities (2)
5 - 40
(6)
4,133.7
3,965.5
Transportation equipment (3)
3 - 10
204.1
198.9
Marine vessels (4)
15 - 30
928.9
905.9
Land
376.7
372.3
Construction in progress
2,468.9
2,641.2
Total
57,163.2
55,285.0
Less accumulated depreciation
14,803.1
13,681.6
Property, plant and equipment, net
$
42,360.1
$
41,603.4
(1)
Plants, pipelines and facilities include processing plants; NGL, natural gas, crude oil and petrochemical and refined products pipelines; terminal loading and unloading facilities; buildings; office furniture and equipment; laboratory and shop equipment and related assets.
(2)
Underground and other storage facilities include underground product storage caverns; above ground storage tanks; water wells and related assets.
(3)
Transportation equipment includes tractor-trailer tank trucks and other vehicles and similar assets used in our operations.
(4)
Marine vessels include tow boats, barges and related equipment used in our marine transportation business.
(5)
In general, the estimated useful lives of major assets within this category are: processing plants, 20 - 35 years; pipelines and related equipment, 5 - 45 years; terminal facilities, 10 - 35 years; buildings, 20 - 40 years; office furniture and equipment, 3 - 20 years; and laboratory and shop equipment, 5 - 35 years.
(6)
In general, the estimated useful lives of assets within this category are: underground storage facilities, 5 - 35 years; storage tanks, 10 - 40 years; and water wells, 5 - 35 years.
The following table summarizes our depreciation expense and capitalized interest amounts for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Depreciation expense (1)
$
420.7
$
394.7
$
1,251.6
$
1,164.6
Capitalized interest (2)
34.5
33.9
96.9
102.9
(1)
Depreciation expense is a component of “Costs and expenses” as presented on our Unaudited Condensed Statements of Consolidated Operations.
(2)
We capitalize interest costs incurred on funds used to construct property, plant and equipment while the asset is in its construction phase. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset’s estimated useful life as a component of depreciation expense. When capitalized interest is recorded, it reduces interest expense from what it would be otherwise.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Asset impairment charges and related matters
We recognized non-cash asset impairment charges of $ 77.0 million and $ 90.4 million during the three and nine months ended September 30, 2020, respectively, primarily due to the complete write-off of assets that would no longer be used or constructed. These charges include the $ 42.0 million of expense we recognized in September 2020 in connection with our cancellation of the Midland-to-ECHO 4 pipeline construction project. We recognized impairment charges of $ 39.4 million and $ 51.2 million during the three and nine months ended September 30, 2019, respectively, primarily due to the complete write-off of assets that would no longer be used. These impairment charges are a component of “Operating costs and expenses” on our Unaudited Condensed Statements of Consolidated Operations. We recognized $ 0.1 million of impairment charges in the three and nine months ended September 30, 2019 that are a component of general and administrative costs.
We are closely monitoring the recoverability of our long-lived assets in light of the adverse economic effects of the coronavirus disease 2019 (“COVID-19”) pandemic. If the adverse economic impacts of the pandemic persist for longer periods than currently expected, these developments could result in the recognition of additional non-cash impairment charges in the future.
In connection with our cancellation of the Midland-to-ECHO 4 pipeline project, we reclassified $ 311.7 million of pipe and related items that were purchased for the project from construction in progress to long-term spare parts, where they will be held for future use. Long-term spare parts is a component of “Other assets” as presented on our Unaudited Condensed Consolidated Balance Sheet.
Asset Retirement Obligations
Property, plant and equipment at September 30, 2020 and December 31, 2019 includes $ 70.2 million and $ 69.6 million, respectively, of asset retirement costs capitalized as an increase in the associated long-lived asset. The following table presents information regarding our asset retirement obligations, or AROs, since December 31, 2019:
ARO liability balance, December 31, 2019
$
132.1
Liabilities incurred
3.5
Liabilities settled
( 0.6
)
Revisions in estimated cash flows
2.9
Accretion expense
6.1
ARO liability balance, September 30, 2020
$
144.0
Note 5. Investments in Unconsolidated Affiliates
The following table presents our investments in unconsolidated affiliates by business segment at the dates indicated. We account for these investments using the equity method.
September 30,
2020
December 31,
2019
NGL Pipelines & Services
$
676.4
$
703.8
Crude Oil Pipelines & Services
1,774.8
1,866.5
Natural Gas Pipelines & Services
29.9
27.3
Petrochemical & Refined Products Services
4.3
2.6
Total
$
2,485.4
$
2,600.2
The following table presents our equity in income (loss) of unconsolidated affiliates by business segment for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
NGL Pipelines & Services
$
29.3
$
25.9
$
90.8
$
82.7
Crude Oil Pipelines & Services
51.8
113.2
243.2
348.8
Natural Gas Pipelines & Services
1.4
1.6
4.3
4.9
Petrochemical & Refined Products Services
( 0.5
)
( 1.4
)
( 2.2
)
( 5.1
)
Total
$
82.0
$
139.3
$
336.1
$
431.3
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Intangible Assets and Goodwill
Identifiable Intangible Assets
The following table summarizes our intangible assets by business segment at the dates indicated:
September 30, 2020
December 31, 2019
Gross
Value
Accumulated
Amortization
Carrying
Value
Gross
Value
Accumulated
Amortization
Carrying
Value
NGL Pipelines & Services:
Customer relationship intangibles
$
447.8
$
( 217.0
)
$
230.8
$
447.8
$
( 206.3
)
$
241.5
Contract-based intangibles
162.6
( 52.2
)
110.4
162.6
( 43.9
)
118.7
Segment total
610.4
( 269.2
)
341.2
610.4
( 250.2
)
360.2
Crude Oil Pipelines & Services:
Customer relationship intangibles
2,203.5
( 287.5
)
1,916.0
2,203.5
( 243.5
)
1,960.0
Contract-based intangibles
283.1
( 246.7
)
36.4
276.9
( 235.0
)
41.9
Segment total
2,486.6
( 534.2
)
1,952.4
2,480.4
( 478.5
)
2,001.9
Natural Gas Pipelines & Services:
Customer relationship intangibles
1,350.3
( 504.2
)
846.1
1,350.3
( 481.6
)
868.7
Contract-based intangibles
470.7
( 401.7
)
69.0
468.0
( 395.5
)
72.5
Segment total
1,821.0
( 905.9
)
915.1
1,818.3
( 877.1
)
941.2
Petrochemical & Refined Products Services:
Customer relationship intangibles
181.4
( 62.2
)
119.2
181.4
( 57.5
)
123.9
Contract-based intangibles
46.0
( 25.3
)
20.7
46.0
( 24.2
)
21.8
Segment total
227.4
( 87.5
)
139.9
227.4
( 81.7
)
145.7
Total intangible assets
$
5,145.4
$
( 1,796.8
)
$
3,348.6
$
5,136.5
$
( 1,687.5
)
$
3,449.0
The following table presents the amortization expense of our intangible assets by business segment for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
NGL Pipelines & Services
$
6.2
$
7.3
$
19.0
$
25.4
Crude Oil Pipelines & Services
16.0
25.1
55.7
71.2
Natural Gas Pipelines & Services
9.0
10.3
28.8
31.2
Petrochemical & Refined Products Services
1.9
2.1
5.8
6.5
Total
$
33.1
$
44.8
$
109.3
$
134.3
The following table presents our forecast of amortization expense associated with existing intangible assets for the periods indicated:
Remainder
of 2020
2021
2022
2023
2024
$
45.1
$
145.5
$
162.3
$
169.9
$
165.7
Goodwill
Goodwill represents the excess of the purchase price of an acquired business over the amounts assigned to assets acquired and liabilities assumed in the transaction. There has been no change in our goodwill amounts since those reported in our 2019 Form 10-K.
We are closely monitoring the recoverability of our long-lived assets, which include goodwill, in light of the COVID-19 pandemic (see Note 4).
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 7. Debt Obligations
The following table presents our consolidated debt obligations (arranged by company and maturity date) at the dates indicated:
September 30,
2020
December 31,
2019
EPO senior debt obligations:
Commercial Paper Notes, variable-rates
$
–
$
482.0
Senior Notes Q, 5.25 % fixed-rate, due January 2020
–
500.0
Senior Notes Y, 5.20 % fixed-rate, due September 2020
–
1,000.0
Senior Notes TT, 2.80 % fixed-rate, due February 2021
750.0
750.0
Senior Notes RR, 2.85 % fixed-rate, due April 2021
575.0
575.0
September 2020 364-Day Revolving Credit Agreement, variable-rate, due September 2021
–
–
Senior Notes VV, 3.50 % fixed-rate, due February 2022
750.0
750.0
Senior Notes CC, 4.05 % fixed-rate, due February 2022
650.0
650.0
Senior Notes HH, 3.35 % fixed-rate, due March 2023
1,250.0
1,250.0
Senior Notes JJ, 3.90 % fixed-rate, due February 2024
850.0
850.0
Multi-Year Revolving Credit Agreement, variable-rate, due September 2024
–
–
Senior Notes MM, 3.75 % fixed-rate, due February 2025
1,150.0
1,150.0
Senior Notes PP, 3.70 % fixed-rate, due February 2026
875.0
875.0
Senior Notes SS, 3.95 % fixed-rate, due February 2027
575.0
575.0
Senior Notes WW, 4.15 % fixed-rate, due October 2028
1,000.0
1,000.0
Senior Notes YY, 3.125 % fixed-rate, due July 2029
1,250.0
1,250.0
Senior Notes AAA, 2.80 % fixed-rate, due January 2030
1,250.0
–
Senior Notes D, 6.875 % fixed-rate, due March 2033
500.0
500.0
Senior Notes H, 6.65 % fixed-rate, due October 2034
350.0
350.0
Senior Notes J, 5.75 % fixed-rate, due March 2035
250.0
250.0
Senior Notes W, 7.55 % fixed-rate, due April 2038
399.6
399.6
Senior Notes R, 6.125 % fixed-rate, due October 2039
600.0
600.0
Senior Notes Z, 6.45 % fixed-rate, due September 2040
600.0
600.0
Senior Notes BB, 5.95 % fixed-rate, due February 2041
750.0
750.0
Senior Notes DD, 5.70 % fixed-rate, due February 2042
600.0
600.0
Senior Notes EE, 4.85 % fixed-rate, due August 2042
750.0
750.0
Senior Notes GG, 4.45 % fixed-rate, due February 2043
1,100.0
1,100.0
Senior Notes II, 4.85 % fixed-rate, due March 2044
1,400.0
1,400.0
Senior Notes KK, 5.10 % fixed-rate, due February 2045
1,150.0
1,150.0
Senior Notes QQ, 4.90 % fixed-rate, due May 2046
975.0
975.0
Senior Notes UU, 4.25 % fixed-rate, due February 2048
1,250.0
1,250.0
Senior Notes XX, 4.80 % fixed-rate, due February 2049
1,250.0
1,250.0
Senior Notes ZZ, 4.20 % fixed-rate, due January 2050
1,250.0
1,250.0
Senior Notes BBB, 3.70 % fixed-rate, due January 2051
1,000.0
–
Senior Notes DDD, 3.20 % fixed-rate, due February 2052
1,000.0
–
Senior Notes NN, 4.95 % fixed-rate, due October 2054
400.0
400.0
Senior Notes CCC, 3.95 % fixed rate, due January 2060
1,000.0
–
TEPPCO senior debt obligations:
TEPPCO Senior Notes, 7.55 % fixed-rate, due April 2038
0.4
0.4
Total principal amount of senior debt obligations
27,500.0
25,232.0
EPO Junior Subordinated Notes C, variable-rate, due June 2067 (1)
232.2
232.2
EPO Junior Subordinated Notes D, fixed/variable-rate, due August 2077 (2)
700.0
700.0
EPO Junior Subordinated Notes E, fixed/variable-rate, due August 2077 (3)
1,000.0
1,000.0
EPO Junior Subordinated Notes F, fixed/variable-rate, due February 2078 (4)
700.0
700.0
TEPPCO Junior Subordinated Notes, variable-rate, due June 2067 (1)
14.2
14.2
Total principal amount of senior and junior debt obligations
30,146.4
27,878.4
Other, non-principal amounts
( 284.4
)
( 253.3
)
Less current maturities of debt
( 1,325.0
)
( 1,981.9
)
Total long-term debt
$
28,537.0
$
25,643.2
(1)
Variable rate is reset quarterly and based on 3-month London Interbank Offered Rate ("LIBOR") , plus 2.778 %.
(2)
Fixed rate of 4.875 % through August 15, 2022; thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 2.986 %.
(3)
Fixed rate of 5.250 % through August 15, 2027; thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 3.033 %.
(4)
Fixed rate of 5.375 % through February 14, 2028; thereafter, a variable rate reset quarterly and based on 3-month LIBOR plus 2.57 %.
References to “TEPPCO” mean TEPPCO Partners, L.P. prior to its merger with one of our wholly owned subsidiaries in October 2009.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the range of interest rates and weighted-average interest rates paid on our consolidated variable-rate debt during the nine months ended September 30, 2020:
Range of Interest
Rates Paid
Weighted-Average
Interest Rate Paid
Commercial Paper Notes
1.78 % to 2.08 %
1.86 %
EPO Junior Subordinated Notes C and TEPPCO Junior Subordinated Notes
3.02 % to 4.68 %
3.87 %
Amounts borrowed under EPO’s 364-Day and Multi-Year Revolving Credit Agreements bear interest, at its election, equal to: (i) LIBOR, plus an additional variable spread; or (ii) an alternate base rate, which is the greater of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 0.5%, or (c) the LIBO Market Index Rate in effect on such day plus 1% and a variable spread. The applicable spreads are determined based on EPO's debt ratings.
The following table presents the scheduled maturities of principal amounts of EPO’s consolidated debt obligations at September 30, 2020 for the next five years and in total thereafter:
Scheduled Maturities of Debt
Total
Remainder
of 2020
2021
2022
2023
2024
Thereafter
Principal amount of senior and junior debt obligations
$
30,146.4
$
–
$
1,325.0
$
1,400.0
$
1,250.0
$
850.0
$
25,321.4
September 2020 364-Day Revolving Credit Agreement
In September 2020, EPO entered into a new 364-Day Revolving Credit Agreement that replaced its September 2019 364-Day Revolving Credit Agreement. The new 364-Day Revolving Credit Agreement matures in September 2021. There was no principal amount outstanding under the September 2019 364-Day Revolving Credit Agreement when it expired and was replaced by the September 2020 364-Day Revolving Credit Agreement.
Under the terms of the September 2020 364-Day Revolving Credit Agreement, EPO may borrow up to $ 1.5 billion (which may be increased by up to $ 200 million to $ 1.7 billion at EPO’s election, provided certain conditions are met) at a variable interest rate for a term of up to 364 days, subject to the terms and conditions set forth therein. To the extent that principal amounts are outstanding at the maturity date, EPO may elect to have the entire principal balance then outstanding continued as non-revolving term loans for a period of one additional year, payable in September 2022. Borrowings under the September 2020 364-Day Revolving Credit Agreement may be used for working capital, capital expenditures, acquisitions and general company purposes.
The September 2020 364-Day Revolving Credit Agreement contains customary representations, warranties, covenants (affirmative and negative) and events of default, the occurrence of which would permit the lenders to accelerate the maturity date of any amounts borrowed under this credit agreement. The September 2020 364-Day Revolving Credit Agreement also restricts EPO’s ability to pay cash distributions to its parent, Enterprise Products Partners L.P., if an event of default (as defined in the credit agreement) has occurred and is continuing at the time such distribution is scheduled to be paid or would result therefrom.
EPO’s obligations under the September 2020 364-Day Revolving Credit Agreement are not secured by any collateral; however, they are guaranteed by Enterprise Products Partners L.P.
15
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
August 2020 Senior Notes Offering
In August 2020, EPO issued $ 1.0 billion in principal amount of 3.20 % senior notes due February 2052 (“Senior Notes DDD”) and $ 250.0 million in principal amount of 2.80 % reopened Senior Notes AAA (as defined below). The reopened Senior Notes AAA and the Senior Notes DDD were issued at 107.211 % and 99.233 % of their principal amounts, respectively.
We received aggregate net proceeds of $ 1.25 billion from the sale of the notes after deducting underwriting discounts and other estimated offering expenses payable by us. Net proceeds from the issuance of these senior notes will be used for general company purposes, including for growth capital investments, and to repay all or part of $ 750.0 million in principal amount of Senior Notes TT, which mature in February 2021.
The reopened Senior Notes AAA represent a re-opening of an outstanding series of EPO’s senior notes. EPO originally issued $ 1.0 billion principal amount of Senior Notes AAA on January 15, 2020. The reopened Senior Notes AAA form a single series with the original notes of that series, trade under the same CUSIP number, and have the same terms as to status, redemption or otherwise as the original notes of that series.
EPO’s fixed-rate senior notes are unsecured obligations of EPO that rank equal with its existing and future unsecured and unsubordinated indebtedness. They are senior to any existing and future subordinated indebtedness of EPO. EPO’s senior notes are subject to make-whole redemption rights and were issued under indentures containing certain covenants, which generally restrict its ability (with certain exceptions) to incur debt secured by liens and engage in sale and leaseback transactions.
April 2020 364-Day Revolving Credit Agreement
In April 2020, EPO entered into an additional 364-day revolving credit agreement (the “April 2020 364-Day Revolving Credit Agreement ”). The new agreement provided EPO with an incremental $ 1.0 billion of borrowing capacity at a variable interest rate for a term of 364 days, subject to the terms and conditions set forth therein.
Following execution of the September 2020 364-Day Revolving Credit Agreement, EPO terminated the April 2020 364-Day Revolving Credit Agreement on September 11, 2020.
January 2020 Senior Notes Offering
In January 2020, EPO issued $ 3.0 billion aggregate principal amount of senior notes comprised of (i) $ 1.0 billion principal amount of senior notes due January 2030 (“Senior Notes AAA”), (ii) $ 1.0 billion principal amount of senior notes due January 2051 (“Senior Notes BBB”) and (iii) $ 1.0 billion principal amount of senior notes due January 2060 (“Senior Notes CCC”). Net proceeds from this offering were used by EPO for the repayment of $ 500 million principal amount of its Senior Notes Q that matured in January 2020, temporary repayment of amounts outstanding under its commercial paper program and for general company purposes. In addition, net proceeds from this offering were used by EPO for the repayment of $ 1.0 billion principal amount of its Senior Notes Y that matured in September 2020.
Senior Notes AAA were issued at 99.921 % of their principal amount and have a fixed-rate interest rate of 2.80 % per year. Senior Notes BBB were issued at 99.413 % of their principal amount and have a fixed-rate interest rate of 3.70 % per year. Senior Notes CCC were issued at 99.360 % of their principal amount and have a fixed-rate interest rate of 3.95 % per year. EPD guaranteed these senior notes through an unconditional guarantee on an unsecured and unsubordinated basis.
Lender Financial Covenants
We were in compliance with the financial covenants of our consolidated debt agreements at September 30, 2020.
Letters of Credit
At September 30, 2020, EPO had $ 200.7 million of letters of credit outstanding primarily related to our commodity hedging activities.
16
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Parent-Subsidiary Guarantor Relationships
EPD acts as guarantor of the consolidated debt obligations of EPO, with the exception of the remaining debt obligations of TEPPCO. If EPO were to default on any of its guaranteed debt, EPD would be responsible for full and unconditional repayment of that obligation.
Note 8. Capital Accounts
Common Limited Partner Interests
The following table summarizes changes in the number of our common units outstanding since December 31, 2019:
Common units outstanding at December 31, 2019
2,189,226,130
Common units issued to Skyline North Americas, Inc. in connection with
settlement of Liquidity Option in March 2020
54,807,352
Treasury units acquired in connection with settlement of Liquidity Option in March 2020
( 54,807,352
)
Common unit repurchases under 2019 Buyback Program
( 6,357,739
)
Common units issued in connection with the vesting of phantom unit awards, net
2,912,214
Other
19,638
Common units outstanding at March 31, 2020
2,185,800,243
Common units issued in connection with the vesting of phantom unit awards, net
96,190
Common units outstanding at June 30, 2020
2,185,896,433
Common units exchanged for preferred units in September 2020,
with the common units received being immediately cancelled
( 1,120,588
)
Common unit repurchases under 2019 Buyback Program
( 1,984,507
)
Common units issued in connection with the vesting of phantom unit awards, net
89,641
Units outstanding at September 30, 2020
2,182,880,979
Registration Statements
We have a universal shelf registration statement (the “2019 Shelf”) on file with the SEC which allows the Partnership and EPO to issue an unlimited amount of equity and debt securities, respectively. EPO issued $ 4.25 billion of senior notes during 2020 using the 2019 Shelf (see Note 7).
In addition, EPD has a registration statement on file with the SEC covering the issuance of up to $ 2.54 billion of its common units in amounts, at prices and on terms to be determined by market conditions and other factors at the time of such offerings in connection with its at-the-market (“ATM”) program. During the nine months ended September 30, 2020 and 2019 , EPD did not issue any common units under its ATM program. After taking into account the aggregate sales price of common units sold under the ATM program through September 30, 2020, EPD has the capacity to issue additional common units under its ATM program up to an aggregate sales price of $ 2.54 billion. The existing ATM registration statement expires in November 2020, at which time we expect to file a replacement ATM registration statement with the SEC in order to maintain our financial flexibility.
We may issue additional equity and debt securities to assist us in meeting our future liquidity requirements, including those related to capital investments.
March 2020 Issuance of Common Units to Skyline North Americas, Inc. and related acquisition of Treasury Units
In February 2020, the Partnership received notice from Marquard & Bahls AG (“M&B”) of M&B’s election to exercise its rights (the “Liquidity Option”) under the Liquidity Option Agreement among the Partnership, OTA Holdings, Inc., a Delaware corporation previously named Oiltanking Holding Americas, Inc. (“OTA”), and M&B dated October 1, 2014 (the “Liquidity Option Agreement”). On March 5, 2020, the Partnership settled its obligations under the Liquidity Option Agreement by issuing 54,807,352 new common units to Skyline North Americas, Inc. (“Skyline,” an affiliate of M&B) in exchange for the capital stock of OTA. As a result of the settlement, OTA became a consolidated subsidiary of ours and we indirectly acquired the 54,807,352 Partnership common units owned by OTA (which were issued by the Partnership to OTA in October 2014) and assumed all future income tax obligations of OTA, including its deferred tax liability. At March 5, 2020, OTA’s assets and liabilities consisted primarily of the Partnership common units it owned and the related deferred tax liability, respectively.
17
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At March 5, 2020, the Partnership’s accrual for the Liquidity Option liability was $ 511.9 million. The Liquidity Option liability, at any measurement date, represented the fair value of estimated federal and state income taxes that we believe a market participant would assume due to ownership of OTA, including its deferred income tax liabilities. OTA’s deferred tax liability at March 5, 2020 was $ 439.7 million. The market value of the common units issued by the Partnership to Skyline was $ 1.30 billion based on a closing price of $ 23.67 per unit on March 5, 2020.
The common units issued to Skyline upon settlement of the Liquidity Option constitute “restricted securities” in the meaning of Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”) and may not be resold except pursuant to an effective registration statement or an available exemption under the Securities Act. In connection with the settlement of the Liquidity Option, the Partnership entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with Skyline. Pursuant to the Registration Rights Agreement, Skyline has the right to request that the Partnership prepare and file a registration statement to permit and otherwise facilitate the public resale of all or a portion of the Partnership’s common units owned by Skyline and its affiliates. The Partnership’s obligation to Skyline to effect such transactions is limited to five registration statements and underwritten offerings. In May 2020, the Partnership filed a registration statement on behalf of Skyline for the resale of up to 54,807,352 common units. This registration statement is effective and, in June 2020, the Partnership filed a prospectus supplement to this registration statement that allows Skyline to sell up to $ 500 million of the Partnership’s common units it owns in connection with an “at-the-market” program that it administers. We do not receive any proceeds from such offerings.
As a result of the Liquidity Option settlement, the partners’ equity balance for common units (as presented on our Unaudited Condensed Consolidated Balance Sheet) increased by $ 1.30 billion, representing the market value of the Partnership’s common units issued to Skyline.
Since OTA does not meet the definition of a business as described in Accounting Standards Codification (“ASC”) 805, Business Combinations , t he OTA transaction was accounted for as the reacquisition of limited partner units and the assumption of OTA’s related deferred tax liability by the Partnership. In consolidation, we present the limited partner units owned by OTA as treasury units, with their historical cost equal to the $ 1.30 billion market value of the Partnership common units issued to Skyline. On September 30, 2020, OTA exchanged the common units it holds for preferred units issued by the Partnership. For information regarding the preferred units and exchange transaction, see “Redeemable Preferred Limited Partner Interests” within this Note 8.
Upon settlement of the Liquidity Option, the Liquidity Option liability was effectively replaced by the deferred tax liability of OTA as calculated in accordance with ASC 740, Income Taxes . See Note 11 for additional information regarding OTA’s deferred tax liability.
Prior to March 5, 2020, changes in the estimated fair value of the Liquidity Option liability were recognized in earnings as a component of other income (expense) on our Unaudited Condensed Statements of Consolidated Operations. We recognized $ 2.3 million of expense for the period January 1, 2020 to March 5, 2020 attributable to changes in the estimated fair value of the Liquidity Option. We recognized $ 38.7 million and $ 123.1 million of such expense for the three and nine months ended September 30, 2019, respectively.
Common Unit Repurchases Under 2019 Buyback Program
In January 2019, we announced that the Board had approved a $ 2.0 billion multi-year unit buyback program (the “2019 Buyback Program”), which provides the Partnership with an additional method to return capital to investors. The 2019 Buyback Program authorizes the Partnership to repurchase its common units from time to time, including through open market purchases and negotiated transactions. The timing and pace of buy backs under the program will be determined by a number of factors including (i) our financial performance and flexibility, (ii) organic growth and acquisition opportunities with higher potential returns on investment, (iii) the Partnership’s unit market price and implied cash flow yield and (iv) maintaining targeted financial leverage with a debt-to-normalized adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of approximately 3.5 times. No time limit has been set for completion of the program, and it may be suspended or discontinued at any time.
18
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Partnership repurchased an aggregate 8,342,246 common units under the 2019 Buyback Program through open market and private purchases during the nine months ended September 30, 2020 . The total purchase price of these repurchases was $ 173.8 million including commissions and fees . During the nine months ended September 30, 2019 , the Partnership repurchased 2,909,128 common units under the 2019 Buyback Program for a total purchase price of $ 81.1 million including commissions and fees. Units repurchased under the 2019 Buyback Program are immediately cancelled upon acquisition.
At September 30, 2020, the remaining available capacity under the 2019 Buyback Program was $ 1.75 billion.
Common Units Issued in Connection With the Vesting of Phantom Unit Awards
During the nine months ended September 30, 2020 , after taking into account tax withholding requirements, the Partnership issued a net 3,098,045 new common units to employees in connection with the vesting of phantom unit awards. See Note 13 for information regarding our phantom unit awards.
Common Units Delivered Under DRIP and EUPP
The Partnership has registration statements on file with the SEC in connection with its distribution reinvestment plan (“DRIP”) and employee unit purchase plan (“EUPP”). In July 2019, the Partnership announced that, beginning with the quarterly distribution payment paid in August 2019, it would use common units purchased on the open market, rather than issuing new common units, to satisfy its delivery obligations under the DRIP and EUPP. This election is subject to change in future quarters depending on the Partnership’s need for equity capital. During the nine months ended September 30, 2020, a total of 5,148,468 common units were purchased on the open market and delivered to participants in connection with the DRIP and EUPP. Apart from $ 1.8 million attributable to the plan discount available to all participants in the EUPP, the funds used to effect these purchases were sourced from the DRIP and EUPP participants. No other Partnership funds were used to satisfy these obligations. We plan to use open market purchases to satisfy DRIP and EUPP reinvestments in connection with the distribution expected to be paid on November 12, 2020.
Redeemable Preferred Limited Partner Interests
On September 30, 2020, the Partnership issued and sold an aggregate of 50,000 Series A Cumulative Convertible Preferred Units in a private placement transaction. The stated value of each preferred unit is $ 1,000 per unit. The total offering price for the preferred units was $ 50.0 million, of which $ 32.5 million was received in cash with the remaining $ 17.5 million funded through the exchange of 1,120,588 of the Partnership’s common units owned by the purchasers. Cash proceeds from the preferred unit offering include $ 15.0 million received from a privately held affiliate of EPCO for the purchase of 15,000 preferred units.
Concurrently, the Partnership exchanged all of the 54,807,352 Partnership common units owned directly by OTA for 855,915 of the Partnership’s new preferred units having an equivalent value. The preferred units held by OTA, like the common units OTA held prior to the exchange, are accounted for as treasury units by the Partnership in consolidation. The historical cost of the treasury units did not change as a result of the exchange and remains at the $ 1.3 0 billion recognized in March 2020 in connection with settlement of the Liquidity Option.
19
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The preferred units represent a new class of limited partner interests authorized under the Partnership’s Seventh Amended and Restated Agreement of Limited Partnership dated September 30, 2020 (the “Amended Partnership Agreement”). As described in the Amended Partnership Agreement, key terms of the preferred units include the following:
•
With respect to distribution and liquidation rights, the preferred units rank senior to the Partnership’s common units. Preferred units held by persons other than the Partnership, its subsidiaries and its affiliates generally will vote on an as-converted basis with the Partnership’s common units and have certain class voting rights with respect to certain protective matters.
•
Holders of the preferred units are entitled to receive cumulative quarterly distributions at a rate of 7.25 % per annum. The Partnership is prohibited from paying distributions on its common units unless full cumulative distributions on the preferred units are paid or set aside for payment. The Partnership may satisfy its obligation to pay distributions to the preferred unitholders through the issuance, in whole or in part, of additional preferred units (referred to as paid-in kind or “PIK” distributions), with the remainder in cash, subject to certain rights of a holder to elect all cash and other conditions as described in the Amended Partnership Agreement. The exchange by OTA of its common units for PIK-eligible preferred units enables the Partnership to more effectively manage its consolidated cash balances.
•
Subject to certain limitations, each preferred unitholder may elect to convert its preferred units on or after September 30, 2025 into a number of the Partnership’s common units equal to (a) the number of preferred units to be converted multiplied by (b) the quotient of (i) $ 1,000 plus any accrued and unpaid distributions per preferred unit, divided by (ii) 92.5 % of the volume-weighted average price of the Partnership’s common units at the time of conversion (as defined in the underlying agreements). In addition, each preferred unitholder may convert its preferred units into common units if EPO’s senior notes cease to have an investment grade rating or a Change of Control (as defined in the Amended Partnership Agreement) occurs, in each case based on the conversion ratio specified in the Amended Partnership Agreement.
•
The Partnership may elect to redeem the preferred units for cash, in whole or in part, based on a redemption price outlined in the following schedule, plus any accrued and unpaid distributions at the redemption date:
•
$ 1,100 per preferred unit from September 30, 2020 through September 29, 2022;
•
$ 1,070 per preferred unit from September 30, 2022 through September 29, 2024;
•
$ 1,030 per preferred unit from September 30, 2024 through September 29, 2025;
•
$ 1,010 per preferred unit from September 30, 2025 through September 29, 2026; and
•
$ 1,000 per preferred unit on or after September 30, 2026; however,
•
if a Change of Control event occurs prior to September 30, 2026, the redemption price is $ 1,010 per preferred unit.
In connection with a redemption at the Partnership’s election, the Partnership may convert up to 50 % of the preferred units being redeemed into common units (and to pay cash with respect to the remainder), with each such preferred unit being converted on the applicable redemption date into a number of common units equal to (i) the then-applicable preferred unit redemption price divided by (ii) 92.5 % of the volume-weighted average price of the Partnership’s common units at the time of conversion (as defined in the underlying agreements).
The Partnership has agreed to prepare and file a registration statement that would permit or otherwise facilitate the public resale of any common units resulting from the conversion of the preferred units to common units.
Our Unaudited Condensed Consolidated Balance Sheet at September 30, 2020 presents the capital accounts of the third-party and related party purchasers of the preferred units as mezzanine equity since the terms of the preferred units allow for cash redemption by the holders in a Change of Control event, without regard to the likelihood of such an event. The preferred units held by OTA are presented as treasury units in consolidation since their ultimate disposition remains under the control of the Partnership.
20
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Accumulated Other Comprehensive Income (Loss)
The following tables present the components of accumulated other comprehensive income (loss) as reported on our Unaudited Condensed Consolidated Balance Sheets at the dates indicated:
Cash Flow Hedges
Commodity
Derivative
Instruments
Interest Rate
Derivative
Instruments
Other
Total
Accumulated Other Comprehensive Income, December 31, 2019
$
55.1
$
13.9
$
2.4
$
71.4
Other comprehensive income (loss) for period, before reclassifications
392.7
( 207.7
)
( 0.1
)
184.9
Reclassification of losses (gains) to net income during period
( 334.8
)
29.2
–
( 305.6
)
Total other comprehensive income (loss) for period
57.9
( 178.5
)
( 0.1
)
( 120.7
)
Accumulated Other Comprehensive Income (Loss), September 30, 2020
$
113.0
$
( 164.6
)
$
2.3
$
( 49.3
)
Cash Flow Hedges
Commodity
Derivative
Instruments
Interest Rate
Derivative
Instruments
Other
Total
Accumulated Other Comprehensive Income (Loss), December 31, 2018
$
152.7
$
( 104.8
)
$
3.0
$
50.9
Other comprehensive income (loss) for period, before reclassifications
58.6
( 23.8
)
( 0.6
)
34.2
Reclassification of losses (gains) to net income during period
( 152.0
)
27.8
–
( 124.2
)
Total other comprehensive income (loss) for period
( 93.4
)
4.0
( 0.6
)
( 90.0
)
Accumulated Other Comprehensive Income (Loss), September 30, 2019
$
59.3
$
( 100.8
)
$
2.4
$
( 39.1
)
The following table presents reclassifications of (income) loss out of accumulated other comprehensive income into net income during the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
Losses (gains) on cash flow hedges:
Location
2020
2019
2020
2019
Interest rate derivatives
Interest expense
$
9.9
$
9.4
$
29.2
$
27.8
Commodity derivatives
Revenue
19.5
( 93.6
)
( 344.7
)
( 161.4
)
Commodity derivatives
Operating costs and expenses
10.0
2.1
9.9
9.4
Total
$
39.4
$
( 82.1
)
$
( 305.6
)
$
( 124.2
)
For information regarding our interest rate and commodity derivative instruments, see Note 14.
Cash Distributions
On October 7, 2020, we announced that the Board declared a quarterly cash distribution of $ 0.4450 per common unit, or $ 1.78 per unit on an annualized basis, to be paid to the Partnership’s common unitholders with respect to the third quarter of 2020. The quarterly distribution is payable on November 12, 2020 to unitholders of record as of the close of business on October 30, 2020. In light of current economic conditions, management will evaluate any future increases in cash distributions on a quarterly basis. The payment of any quarterly cash distribution is subject to management’s evaluation of our financial condition, results of operations and cash flows in connection with such payments and Board approval.
21
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Revenues
We classify our revenues into sales of products and midstream services. Product sales relate primarily to our various marketing activities whereas midstream services represent our other integrated businesses (i.e., gathering, processing, transportation, fractionation, storage and terminaling). The following table presents our revenues by business segment, and further by revenue type, for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
NGL Pipelines & Services:
Sales of NGLs and related products
$
2,048.4
$
2,624.9
$
6,401.7
$
7,955.5
Segment midstream services:
Natural gas processing and fractionation
205.4
279.6
575.8
837.3
Transportation
254.7
248.2
769.6
767.4
Storage and terminals
105.5
99.4
311.3
291.0
Total segment midstream services
565.6
627.2
1,656.7
1,895.7
Total NGL Pipelines & Services
2,614.0
3,252.1
8,058.4
9,851.2
Crude Oil Pipelines & Services:
Sales of crude oil
1,216.1
2,130.0
4,059.7
6,990.1
Segment midstream services:
Transportation
189.3
209.1
603.5
598.1
Storage and terminals
116.2
139.2
360.5
364.0
Total segment midstream services
305.5
348.3
964.0
962.1
Total Crude Oil Pipelines & Services
1,521.6
2,478.3
5,023.7
7,952.2
Natural Gas Pipelines & Services:
Sales of natural gas
350.7
440.0
1,097.6
1,627.1
Segment midstream services:
Transportation
256.2
275.5
765.1
835.2
Total segment midstream services
256.2
275.5
765.1
835.2
Total Natural Gas Pipelines & Services
606.9
715.5
1,862.7
2,462.3
Petrochemical & Refined Products Services:
Sales of petrochemicals and refined products
1,966.2
1,299.0
4,593.7
3,867.3
Segment midstream services:
Fractionation and isomerization
54.6
43.2
129.0
125.5
Transportation, including marine logistics
115.2
134.4
365.5
393.2
Storage and terminals
43.5
41.6
122.5
132.2
Total segment midstream services
213.3
219.2
617.0
650.9
Total Petrochemical & Refined Products Services
2,179.5
1,518.2
5,210.7
4,518.2
Total consolidated revenues
$
6,922.0
$
7,964.1
$
20,155.5
$
24,783.9
Substantially all of our revenues are derived from contracts with customers as defined within ASC 606, Revenue from Contracts with Customers .
Unbilled Revenue and Deferred Revenue
The following table provides information regarding our contract assets and contract liabilities at September 30, 2020:
Contract Asset
Location
Balance
Unbilled revenue (current amount)
Prepaid and other current assets
$
173.1
Total
$
173.1
Contract Liability
Location
Balance
Deferred revenue (current amount)
Other current liabilities
$
162.0
Deferred revenue (noncurrent)
Other long-term liabilities
206.4
Total
$
368.4
22
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents significant changes in our unbilled revenue and deferred revenue balances for the nine months ended September 30, 2020:
Unbilled
Revenue
Deferred
Revenue
Balance at December 31, 2019
$
17.6
$
314.9
Amount included in opening balance transferred to other accounts during period (1)
( 17.6
)
( 101.7
)
Amount recorded during period (2)
253.0
486.7
Amounts recorded during period transferred to other accounts (1)
( 79.9
)
( 325.5
)
Other changes
–
( 6.0
)
Balance at September 30, 2020
$
173.1
$
368.4
(1)
Unbilled revenues are transferred to accounts receivable once we have an unconditional right to consideration from the customer. Deferred revenues are recognized as revenue upon satisfaction of our performance obligation to the customer.
(2)
Unbilled revenue represents revenue that has been recognized upon satisfaction of a performance obligation, but cannot be contractually invoiced (or billed) to the customer at the balance sheet date until a future period. Deferred revenue is recorded when payment is received from a customer prior to our satisfaction of the associated performance obligation.
The increase in unbilled revenue since December 31, 2019 is primarily due to the recognition of deficiency fee revenues on our EFS Midstream System that are not billable to the customer until the end of 2020.
Remaining Performance Obligations
The following table presents estimated fixed future consideration from revenue contracts that contain minimum volume commitments, deficiency and similar fees and the term of the contracts exceeds one year. These amounts represent the revenues we expect to recognize in future periods from these contracts as of September 30, 2020.
Period
Fixed
Consideration
Three Months Ended December 31, 2020
$
988.5
One Year Ended December 31, 2021
3,804.7
One Year Ended December 31, 2022
3,375.9
One Year Ended December 31, 2023
3,016.8
One Year Ended December 31, 2024
2,848.3
Thereafter
15,315.9
Total
$
29,350.1
23
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10. Business Segments and Related Information
Our operations are reported under four business segments: (i) NGL Pipelines & Services, (ii) Crude Oil Pipelines & Services, (iii) Natural Gas Pipelines & Services and (iv) Petrochemical & Refined Products Services.
Segment Gross Operating Margin
We evaluate segment performance based on our financial measure of gross operating margin. Gross operating margin is an important performance measure of the core profitability of our operations and forms the basis of our internal financial reporting. We believe that investors benefit from having access to the same financial measures that our management uses in evaluating segment results. Gross operating margin is exclusive of other income and expense transactions, income taxes, the cumulative effect of changes in accounting principles and extraordinary charges. Gross operating margin is presented on a 100% basis before any allocation of earnings to noncontrolling interests. Our calculation of gross operating margin may or may not be comparable to similarly titled measures used by other companies.
The following table presents our measurement of total segment gross operating margin for the periods presented. The GAAP financial measure most directly comparable to total segment gross operating margin is operating income.
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Operating income
$
1,382.5
$
1,474.2
$
4,326.9
$
4,660.7
Adjustments to reconcile operating income to total segment gross operating margin
(addition or subtraction indicated by sign):
Depreciation, amortization and accretion expense in operating costs and expenses
484.2
467.1
1,461.3
1,380.8
Asset impairment and related charges in operating costs and expenses
77.0
39.4
90.4
51.2
Net gains attributable to asset sales in operating costs and expenses
( 0.6
)
( 0.1
)
( 2.1
)
( 2.6
)
General and administrative costs
50.3
55.5
162.8
160.2
N on-refundable payments received from shippers attributable to make-up rights (1)
49.3
20.8
79.1
34.3
Subsequent recognition of revenues attributable to make-up rights (2)
( 9.4
)
( 5.5
)
( 25.0
)
( 18.6
)
Total segment gross operating margin
$
2,033.3
$
2,051.4
$
6,093.4
$
6,266.0
(1)
Since make-up rights entail a future performance obligation by the pipeline to the shipper, these receipts are recorded as deferred revenue for GAAP purposes; however, these receipts are included in gross operating margin in the period of receipt since they are nonrefundable to the shipper.
(2)
As deferred revenues attributable to make-up rights are subsequently recognized as revenue under GAAP, gross operating margin must be adjusted to remove such amounts to prevent duplication since the associated non-refundable payments were previously included in gross operating margin.
Gross operating margin by segment is calculated by subtracting segment operating costs and expenses from segment revenues, with both segment totals reflecting the adjustments noted in the preceding table, as applicable, and before the elimination of intercompany transactions. The following table presents gross operating margin by segment for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Gross operating margin by segment:
NGL Pipelines & Services
$
1,028.1
$
1,008.3
$
3,038.2
$
2,933.8
Crude Oil Pipelines & Services
481.8
496.2
1,569.1
1,671.7
Natural Gas Pipelines & Services
208.4
258.5
701.1
824.6
Petrochemical & Refined Products Services
315.0
288.4
785.0
835.9
Total segment gross operating margin
$
2,033.3
$
2,051.4
$
6,093.4
$
6,266.0
24
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the non-cash mark-to-market gains (losses) for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Mark-to-market gains (losses) in gross operating margin:
NGL Pipelines & Services
$
( 12.0
)
$
( 0.7
)
$
11.4
$
( 0.1
)
Crude Oil Pipelines & Services
10.1
9.8
28.9
95.0
Natural Gas Pipelines & Services
( 14.8
)
1.3
10.0
1.3
Petrochemical & Refined Products Services
( 21.0
)
( 1.3
)
3.4
( 3.3
)
Total mark-to-market impact on gross operating margin
( 37.7
)
9.1
53.7
92.9
Mark-to-market loss in interest expense
–
( 94.9
)
–
( 94.9
)
Total
$
( 37.7
)
$
( 85.8
)
$
53.7
$
( 2.0
)
For information regarding our hedging activities, see Note 14.
Summarized Segment Financial Information
Information by business segment, together with reconciliations to amounts presented on our Unaudited Condensed Statements of Consolidated Operations, is presented in the following table:
Reportable Business Segments
NGL
Pipelines
& Services
Crude Oil
Pipelines
& Services
Natural Gas
Pipelines
& Services
Petrochemical
& Refined Products Services
Adjustments
and
Eliminations
Consolidated
Total
Revenues from third parties:
Three months ended September 30, 2020
$
2,612.4
$
1,518.0
$
604.6
$
2,179.5
$
–
$
6,914.5
Three months ended September 30, 2019
3,250.1
2,467.9
712.3
1,518.2
–
7,948.5
Nine months ended September 30, 2020
8,053.4
5,007.0
1,855.2
5,210.7
–
20,126.3
Nine months ended September 30, 2019
9,843.9
7,916.5
2,451.6
4,518.2
–
24,730.2
Revenues from related parties:
Three months ended September 30, 2020
1.6
3.6
2.3
–
–
7.5
Three months ended September 30, 2019
2.0
10.4
3.2
–
–
15.6
Nine months ended September 30, 2020
5.0
16.7
7.5
–
–
29.2
Nine months ended September 30, 2019
7.3
35.7
10.7
–
–
53.7
Intersegment and intrasegment revenues:
Three months ended September 30, 2020
7,098.2
6,422.5
117.0
1,297.8
( 14,935.5
)
–
Three months ended September 30, 2019
4,729.3
9,479.7
141.7
558.1
( 14,908.8
)
–
Nine months ended September 30, 2020
18,826.6
18,302.7
325.0
2,815.6
( 40,269.9
)
–
Nine months ended September 30, 2019
14,715.5
26,818.0
500.2
1,890.4
( 43,924.1
)
–
Total revenues:
Three months ended September 30, 2020
9,712.2
7,944.1
723.9
3,477.3
( 14,935.5
)
6,922.0
Three months ended September 30, 2019
7,981.4
11,958.0
857.2
2,076.3
( 14,908.8
)
7,964.1
Nine months ended September 30, 2020
26,885.0
23,326.4
2,187.7
8,026.3
( 40,269.9
)
20,155.5
Nine months ended September 30, 2019
24,566.7
34,770.2
2,962.5
6,408.6
( 43,924.1
)
24,783.9
Equity in income (loss) of unconsolidated affiliates:
Three months ended September 30, 2020
29.3
51.8
1.4
( 0.5
)
–
82.0
Three months ended September 30, 2019
25.9
113.2
1.6
( 1.4
)
–
139.3
Nine months ended September 30, 2020
90.8
243.2
4.3
( 2.2
)
–
336.1
Nine months ended September 30, 2019
82.7
348.8
4.9
( 5.1
)
–
431.3
Segment revenues include intersegment and intrasegment transactions, which are generally based on transactions made at market-based rates. Our consolidated revenues reflect the elimination of intercompany transactions. Substantially all of our consolidated revenues are earned in the U.S. and derived from a wide customer base.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Information by business segment, together with reconciliations to our Unaudited Condensed Consolidated Balance Sheet totals, is presented in the following table:
Reportable Business Segments
NGL
Pipelines
& Services
Crude Oil
Pipelines
& Services
Natural Gas
Pipelines
& Services
Petrochemical
& Refined
Products
Services
Adjustments
and
Eliminations
Consolidated
Total
Property, plant and equipment, net:
(see Note 4)
At September 30, 2020
$
17,309.6
$
6,503.6
$
8,383.0
$
7,695.0
$
2,468.9
$
42,360.1
At December 31, 2019
16,652.1
6,324.4
8,432.5
7,553.2
2,641.2
41,603.4
Investments in unconsolidated affiliates:
(see Note 5)
At September 30, 2020
676.4
1,774.8
29.9
4.3
–
2,485.4
At December 31, 2019
703.8
1,866.5
27.3
2.6
–
2,600.2
Intangible assets, net: (see Note 6)
At September 30, 2020
341.2
1,952.4
915.1
139.9
–
3,348.6
At December 31, 2019
360.2
2,001.9
941.2
145.7
–
3,449.0
Goodwill: (see Note 6)
At September 30, 2020
2,651.7
1,841.0
296.3
956.2
–
5,745.2
At December 31, 2019
2,651.7
1,841.0
296.3
956.2
–
5,745.2
Segment assets:
At September 30, 2020
20,978.9
12,071.8
9,624.3
8,795.4
2,468.9
53,939.3
At December 31, 2019
20,367.8
12,033.8
9,697.3
8,657.7
2,641.2
53,397.8
Supplemental Revenue and Expense Information
The following table presents additional information regarding our consolidated revenues and costs and expenses for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Consolidated revenues:
NGL Pipelines & Services
$
2,614.0
$
3,252.1
$
8,058.4
$
9,851.2
Crude Oil Pipelines & Services
1,521.6
2,478.3
5,023.7
7,952.2
Natural Gas Pipelines & Services
606.9
715.5
1,862.7
2,462.3
Petrochemical & Refined Products Services
2,179.5
1,518.2
5,210.7
4,518.2
Total consolidated revenues
$
6,922.0
$
7,964.1
$
20,155.5
$
24,783.9
Consolidated costs and expenses
Operating costs and expenses:
Cost of sales
$
4,313.7
$
5,276.5
$
12,331.9
$
16,721.5
Other operating costs and expenses (1)
696.9
790.8
2,120.4
2,243.4
Depreciation, amortization and accretion
484.2
467.1
1,461.3
1,380.8
Asset impairment and related charges
77.0
39.4
90.4
51.2
Ne t gains attributable to asset sales
( 0.6
)
( 0.1
)
( 2.1
)
( 2.6
)
General and administrative costs
50.3
55.5
162.8
160.2
Total consolidated costs and expenses
$
5,621.5
$
6,629.2
$
16,164.7
$
20,554.5
(1)
Represents the cost of operating our plants, pipelines and other fixed assets excluding: depreciation, amortization and accretion charges; asset impairment and related charges; and net losses (or gains) attributable to asset sales.
Fluctuations in our product sales revenues and related cost of sales amounts are explained in part by changes in energy commodity prices. In general, lower energy commodity prices result in a decrease in our revenues attributable to product sales; however, these lower commodity prices also decrease the associated cost of sales as purchase costs are lower. The same type of correlation would be true in the case of higher energy commodity sales prices and purchase costs.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Income Taxes
The following table presents the components of our consolidated benefit from (provision for) income taxes for the periods indicated (dollars in millions):
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Deferred tax benefit (expense) attributable to OTA
$
21.3
$
158.0
Texas Margin Tax
( 7.2
)
$
( 15.5
)
( 21.9
)
$
( 36.5
)
Other
5.0
0.1
2.5
( 0.9
)
Benefit from (provision for) income taxes
$
19.1
$
( 15.4
)
$
138.6
$
( 37.4
)
Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We did not rely on any uncertain tax positions in recording our income tax-related amounts during the nine months ended September 30, 2020 and 2019.
OTA Deferred Tax Liability
On March 5, 2020, the Partnership settled its obligations under the Liquidity Option Agreement (see Note 8) and indirectly assumed OTA’s deferred tax liability, which reflects OTA’s outside basis difference in the limited partner interests it received from the Partnership in October 2014. Upon settlement of the Liquidity Option, the Liquidity Option liability was effectively replaced by the deferred tax liability of OTA calculated in accordance with ASC 740, Income Taxes .
At March 5, 2020, the Liquidity Option liability amount was $ 511.9 million. Since the book value of the Liquidity Option liability exceeded OTA’s estimated deferred tax liability of $ 439.7 million on that date, we recognized a non-cash benefit in earnings of $ 72.2 million, which is reflected in the “Benefit from (provision for) income tax” line on our Unaudited Condensed Statement of Consolidated Operations for the nine months ended September 30, 2020 . Subsequent to March 5, 2020 and through September 30, 2020, OTA recognized an additional net, non-cash deferred income tax benefit of $ 85.8 million due to a decrease in the outside basis difference of its investment in the Partnership, which in turn was driven by a decline in the market price of Partnership common units since March 5, 2020. In total, earnings for the three and nine months ended September 30, 2020 reflect $ 21.3 million and $ 158.0 million, respectively, of net deferred income tax benefit attributable to OTA.
On September 30, 2020, OTA exchanged the Partnership common units it owned for non-publicly traded preferred units having a stated value of $ 1,000 per unit (see Note 8). As a result and beginning September 30, 2020, OTA’s deferred tax liability no longer fluctuates due to market price changes in the Partnership’s common units. Our subsidiary OTA is a corporation for U.S. federal income tax purposes, and the exchange of common units for preferred units did not constitute a taxable transaction for OTA.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Tabular Disclosures Regarding Income Taxes
Our federal, state and foreign income tax benefit (provision) is summarized below:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Current portion of income tax benefit (provision):
Federal
$
5.3
$
0.4
$
3.0
$
( 0.1
)
State
( 4.7
)
( 9.1
)
( 13.4
)
( 25.6
)
Foreign
0.2
–
–
( 0.8
)
Total current portion
0.8
( 8.7
)
( 10.4
)
( 26.5
)
Deferred portion of income tax benefit (provision):
Federal
18.7
( 0.3
)
145.1
( 0.2
)
State
( 0.4
)
( 6.4
)
3.9
( 10.9
)
Foreign
–
–
–
0.2
Total deferred portion
18.3
( 6.7
)
149.0
( 10.9
)
Total benefit from (provision for) income taxes
$
19.1
$
( 15.4
)
$
138.6
$
( 37.4
)
A reconciliation of the benefit from (provision for) income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Pre-Tax Net Book Income (“NBI”)
$
1,064.9
$
1,060.2
$
3,381.2
$
3,599.1
Texas Margin Tax (1)
( 7.2
)
( 15.5
)
( 21.9
)
( 36.5
)
State income tax benefit (provision), net of federal benefit (2)
1.6
–
9.7
( 0.3
)
Federal income tax benefit (provision) computed by applying
the federal statutory rate to NBI of corporate entities
25.1
0.1
83.4
( 0.6
)
Federal benefit attributable to settlement of
Liquidity Option (2)
–
–
67.8
–
Other differences
( 0.4
)
–
( 0.4
)
–
Benefit from (provision for) income taxes
$
19.1
$
( 15.4
)
$
138.6
$
( 37.4
)
Effective income tax rate
1.8
%
( 1.5
)%
4.1
%
( 1.0
)%
(1)
Although the Texas Margin Tax is not considered a state income tax, it has the characteristics of an income tax since it is determined by applying a tax rate to a base that considers our Texas-sourced revenues and expenses.
(2)
The total benefit recognized in income tax expense on March 5, 2020 from settlement of the Liquidity Option was $ 72.2 million, which is comprised of $ 4.4 million of state income tax benefit and $ 67.8 million of federal income tax benefit.
Deferred income taxes are determined based on the temporary differences between the financial statement and income tax bases of assets and liabilities as measured by the enacted tax rates, which will be in effect when these differences reverse.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the significant components of deferred tax assets and deferred tax liabilities at the dates indicated:
September 30,
December 31,
2020
2019
Deferred tax liabilities:
Attributable to investment in OTA
$
353.9
Attributable to property, plant and equipment
107.9
$
100.2
Attributable to investments in other entities
4.2
3.3
Total deferred tax liabilities
466.0
103.5
Less deferred tax assets:
Net operating loss carryovers (1)
0.1
0.1
Temporary differences related to Texas Margin Tax
2.6
3.0
Total deferred tax assets
2.7
3.1
Total net deferred tax liabilities
$
463.3
$
100.4
(1)
These losses expire in various years between 2020 and 2037 and are subject to limitations on their utilization.
Note 12. Earnings Per Unit
The following table presents our calculation of basic and diluted earnings per unit for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
BASIC EARNINGS PER COMMON UNIT
Net income attributable to common unitholders
$
1,052.6
$
1,019.2
$
3,437.4
$
3,494.4
Earnings allocated to phantom unit awards (1)
( 7.5
)
( 6.1
)
( 24.9
)
( 21.3
)
Net income allocated to common unitholders
$
1,045.1
$
1,013.1
$
3,412.5
$
3,473.1
Basic weighted-average number of common units outstanding
2,185.5
2,189.1
2,186.7
2,188.4
Basic earnings per common unit
$
0.48
$
0.46
$
1.56
$
1.59
DILUTED EARNINGS PER COMMON UNIT
Net income attributable to common unitholders
$
1,052.6
$
1,019.2
$
3,437.4
$
3,494.4
Diluted weighted-average number of units outstanding:
Common units
2,185.5
2,189.1
2,186.7
2,188.4
Phantom units (2)
15.9
13.2
15.7
13.1
Preferred units (2)
-
*
–
-
*
–
Total
2,201.4
2,202.3
2,202.4
2,201.5
Diluted earnings per common unit
$
0.48
$
0.46
$
1.56
$
1.59
* Amount is negligible
(1)
Phantom units are considered participating securities for purposes of computing basic earnings per unit. See Note 13 for information regarding the phantom units.
(2)
We use the “if-converted method” to determine the potential dilutive effect of the vesting of phantom units and the conversion of preferred units outstanding. See Note 8 for information regarding the preferred units issued on September 30, 2020. Since the preferred units were issued on the last day of the third quarter of 2020, their weighted-average dilutive impact on earnings per unit for the three and nine months ended September 30, 2020 was negligible.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 13. Equity-Based Awards
An allocated portion of the fair value of EPCO’s equity-based awards is charged to us under the ASA. The following table summarizes compensation expense we recognized in connection with equity-based awards for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Equity-classified awards:
Phantom unit awards
$
37.3
$
34.7
$
113.1
$
99.6
Profits interest awards
2.2
2.5
7.2
8.1
Liability-classified awards
–
0.1
–
0.1
Total
$
39.5
$
37.3
$
120.3
$
107.8
The fair value of equity-classified awards is amortized to earnings over the requisite service or vesting period. Equity-classified awards are expected to result in the issuance of common units upon vesting. Compensation expense for liability-classified awards is recognized over the requisite service or vesting period based on the fair value of the award remeasured at each reporting date. Liability-classified awards are settled in cash upon vesting.
Phantom Unit Awards
Subject to customary forfeiture provisions, phantom unit awards allow recipients to acquire EPD common units once a defined vesting period expires (at no cost to the recipient apart from fulfilling required service and other conditions). The following table presents phantom unit award activity for the period indicated:
Number of
Units
Weighted-
Average Grant
Date Fair Value
per Unit (1)
Phantom unit awards at December 31, 2019
12,974,684
$
27.21
Granted (2)
7,403,345
$
25.71
Vested
( 4,447,460
)
$
26.35
Forfeited
( 130,774
)
$
26.74
Phantom unit awards at September 30, 2020
15,799,795
$
26.75
(1)
Determined by dividing the aggregate grant date fair value of awards (before an allowance for forfeitures) by the number of awards issued.
(2)
The aggregate grant date fair value of phantom unit awards issued during 2020 was $ 190.4 million based on a grant date market price of EPD common units ranging from $ 17.24 to $ 25.76 per unit. An estimated annual forfeiture rate of 2.4 % was applied to these awards.
Each phantom unit award includes a distribution equivalent right (“ DER”), which entitles the participant to nonforfeitable cash payments equal to the product of the number of phantom unit awards outstanding for the participant and the cash distribution per common unit paid by EPD to its common unitholders. Cash payments made in connection with DERs are charged to partners’ equity when the phantom unit award is expected to result in the issuance of common units; otherwise, such amounts are expensed.
The following table presents supplemental information regarding phantom unit awards for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Cash payments made in connection with DERs
$
7.1
$
5.9
$
20.0
$
16.4
Total intrinsic value of phantom unit awards that vested during period
2.0
7.2
113.4
108.9
For the EPCO group of companies, the unrecognized compensation cost associated with phantom unit awards was $ 196.6 million at September 30, 2020, of which our share of such cost is currently estimated to be $ 165.5 million. Due to the graded vesting provisions of these awards, we expect to recognize our share of the unrecognized compensation cost for these awards over a weighted-average period of 2.1 years.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Profits Interest Awards
EPCO currently serves as the general partner for each of four limited partnerships (referred to as the “Employee Partnerships”) that serve as long-term incentive arrangements for key employees of EPCO by providing such employees a profits interest in one or more of the Employee Partnerships.
On September 30, 2020, the partners of two such Employee Partnerships, namely EPD PubCo Unit II L.P. (“PubCo II”) and EPD PrivCo Unit I L.P. (“PrivCo I”), amended their respective limited partnership agreements to provide for the vesting of their Class B limited partner interests on the earlier of (i) February 22, 2023, (ii) the first date on or after September 30, 2020 on which the closing market price of the Partnership’s common units is equal to or greater than $ 25.41 per unit, (iii) a change of control event, or (iv) dissolution of the applicable Employee Partnership. As a result of these modifications, PubCo II and PrivCo I will recognize incremental compensation cost of $ 1.2 million and $ 0.5 million, respectively, through February 22, 2023.
The profits interest in EPD PubCo Unit I L.P. vested in February 2020 and was liquidated. At September 30, 2020 , our share of the total unrecognized compensation cost related to the four remaining Employee Partnerships was $ 18.0 million, which we expect to recognize over a weighted-average period of 3.1 years.
Note 14. Derivative Instruments, Hedging Activities and Fair Value Measurements
In the normal course of our business operations, we are exposed to certain risks, including changes in interest rates and commodity prices. In order to manage risks associated with assets, liabilities and certain anticipated future transactions, we use derivative instruments such as futures, forward contracts, swaps, options and other instruments with similar characteristics. Substantially all of our derivatives are used for non-trading activities.
Interest Rate Hedging Activities
We may utilize interest rate swaps, forward-starting swaps, options to enter into forward-starting swaps (“swaptions”), and similar derivative instruments to manage our exposure to changes in interest rates charged on borrowings under certain consolidated debt agreements. This strategy may be used in controlling our overall cost of capital associated with such borrowings.
Forward-Starting Swaps
The following table summarizes our portfolio of 30-year forward-starting swaps at September 30, 2020, all of which are associated with the expected future issuance of senior notes.
Hedged Transaction
Number and Type
of Derivatives
Outstanding
Notional
Amount
Expected
Settlement
Date
Weighted-Average
Fixed Rate
Locked
Accounting
Treatment
Future long-term debt offering
1 forward-starting swap
$ 75.0
4/2021
2.41 %
Cash flow hedge
Future long-term debt offering
5 forward-starting swaps
$ 500.0
4/2021
2.13 %
Cash flow hedge
Future long-term debt offering
2 forward-starting swaps (1)
$ 150.0
2/2022
1.72 %
Cash flow hedge
Future long-term debt offering
1 forward starting swap (1)
$ 100.0
4/2021
1.46 %
Cash flow hedge
Future long-term debt offering
2 forward starting swaps (1)
$ 150.0
2/2022
1.48 %
Cash flow hedge
Future long-term debt offering
2 forward starting swaps (1)
$ 100.0
2/2022
0.95 %
Cash flow hedge
(1)
These swaps were entered into during the first quarter of 2020.
In total, the notional amount of forward-starting swaps outstanding at September 30, 2020 was $ 1.08 billion. The weighted-average fixed interest rate of these derivative instruments is 1.83 %.
In January 2020, we terminated an aggregate $ 575 million notional amount of forward-starting swaps, which resulted in net cash payments of $ 33.3 million. These swaps were unwound in connection with our issuance of Senior Notes BBB due January 2051.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Commodity Hedging Activities
The prices of natural gas, NGLs, crude oil, petrochemicals and refined products are subject to fluctuations in response to changes in supply and demand, market conditions and a variety of additional factors that are beyond our control. In order to manage such price risks, we enter into commodity derivative instruments such as physical forward contracts, futures contracts, fixed-for-float swaps and basis swaps.
At September 30, 2020, our predominant commodity hedging strategies consisted of (i) hedging anticipated future purchases and sales of commodity products associated with transportation, storage and blending activities, (ii) hedging the fair value of commodity products held in inventory and (iii) hedging natural gas processing margins.
The following table summarizes our portfolio of commodity derivative instruments outstanding at September 30, 2020 (volume measures as noted):
Volume (1)
Accounting
Derivative Purpose
Current (2)
Long-Term (2)
Treatment
Derivatives designated as hedging instruments:
Natural gas processing:
Forecasted natural gas purchases for plant thermal reduction (billion cubic feet (“Bcf”))
7.4
n/a
Cash flow hedge
Forecasted sales of NGLs (million barrels (“MMBbls”)) (3)
1.1
n/a
Cash flow hedge
Octane enhancement:
Forecasted purchase of NGLs (MMBbls)
0.3
n/a
Cash flow hedge
Forecasted sales of octane enhancement products (MMBbls)
1.2
n/a
Cash flow hedge
Natural gas marketing:
Natural gas storage inventory management activities (Bcf)
5.2
n/a
Fair value hedge
NGL marketing:
Forecasted purchases of NGLs and related hydrocarbon products (MMBbls)
143.3
5.6
Cash flow hedge
Forecasted sales of NGLs and related hydrocarbon products (MMBbls)
179.7
16.6
Cash flow hedge
NGLs inventory management activities (MMBbls)
0.8
0.7
Fair value hedge
Refined products marketing:
Forecasted purchases of refined products (MMBbls)
46.8
8.1
Cash flow hedge
Forecasted sales of refined products (MMBbls)
54.0
11.5
Cash flow hedge
Refined products inventory management activities (MMBbls)
0.1
n/a
Fair value hedge
Crude oil marketing:
Forecasted purchases of crude oil (MMBbls)
51.0
n/a
Cash flow hedge
Forecasted sales of crude oil (MMBbls)
65.2
n/a
Cash flow hedge
Petrochemical marketing:
Forecasted sales of petrochemical products (MMBbls)
0.3
n/a
Cash flow hedge
Derivatives not designated as hedging instruments:
Natural gas risk management activities (Bcf) (4)
37.9
0.7
Mark-to-market
NGL risk management activities (MMBbls) (4)
26.4
10.8
Mark-to-market
Refined products risk management activities (MMBbls) (4)
4.0
n/a
Mark-to-market
Crude oil risk management activities (MMBbls) (4)
19.5
5.9
Mark-to-market
(1)
Volume for derivatives designated as hedging instruments reflects the total amount of volumes hedged whereas volume for derivatives not designated as hedging instruments reflects the absolute value of derivative notional volumes.
(2)
The maximum term for derivatives designated as cash flow hedges, derivatives designated as fair value hedges and derivatives not designated as hedging instruments is December 2022, December 2021 and December 2022, respectively.
(3)
Forecasted NGL sales volumes under natural gas processing exclude 0.3 MMBbls of additional hedges executed under contracts that have been designated as normal sales agreements.
(4)
Reflects the use of derivative instruments to manage risks associated with our transportation, processing and storage assets.
The carrying amount of our inventories subject to fair value hedges was $ 72.4 million and $ 31.7 million at September 30, 2020 and December 31, 2019, respectively.
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Tabular Presentation of Fair Value Amounts, and Gains and Losses on
Derivative Instruments and Related Hedged Items
The following table provides a balance sheet overview of our derivative assets and liabilities at the dates indicated:
Asset Derivatives
Liability Derivatives
September 30, 2020
December 31, 2019
September 30, 2020
December 31, 2019
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Balance
Sheet
Location
Fair
Value
Derivatives designated as hedging instruments
Interest rate derivatives
Current assets
$
–
Current assets
$
–
Current
liabilities
$
160.7
Current
liabilities
$
6.7
Interest rate derivatives
Other assets
5.7
Other assets
–
Other liabilities
32.9
Other liabilities
6.8
Total interest rate derivatives
5.7
–
193.6
13.5
Commodity derivatives
Current assets
109.3
Current assets
116.5
Current
liabilities
159.4
Current
liabilities
107.1
Commodity derivatives
Other assets
4.3
Other assets
–
Other liabilities
20.2
Other liabilities
–
Total commodity derivatives
113.6
116.5
179.6
107.1
Total derivatives designated as hedging instruments
$
119.3
$
116.5
$
373.2
$
120.6
Derivatives not designated as hedging instruments
Commodity derivatives
Current assets
$
23.6
Current assets
$
10.7
Current
liabilities
$
9.6
Current
liabilities
$
8.6
Commodity derivatives
Other assets
2.2
Other assets
0.6
Other liabilities
1.0
Other liabilities
0.5
Total commodity derivatives
25.8
11.3
10.6
9.1
Total derivatives not designated as hedging instruments
$
25.8
$
11.3
$
10.6
$
9.1
Certain of our commodity derivative instruments are subject to master netting arrangements or similar agreements. The following tables present our derivative instruments subject to such arrangements at the dates indicated:
Offsetting of Financial Assets and Derivative Assets
Gross
Amounts of
Recognized
Assets
Gross
Amounts
Offset in the
Balance Sheet
Amounts
of Assets
Presented
in the
Balance Sheet
Gross Amounts Not Offset
in the Balance Sheet
Amounts That
Would Have
Been Presented
On Net Basis
Financial
Instruments
Cash
Collateral
Received
Cash
Collateral
Paid
(i)
(ii)
(iii) = (i) – (ii)
(iv)
(v) = (iii) + (iv)
As of September 30, 2020:
Interest rate derivatives
$
5.7
$
–
$
5.7
$
–
$
–
$
–
$
5.7
Commodity derivatives
$
139.4
$
–
$
139.4
$
( 139.4
)
$
–
$
50.4
$
50.4
As of December 31, 2019:
Commodity derivatives
$
127.8
$
–
$
127.8
$
( 115.3
)
$
–
$
( 11.0
)
$
1.5
Offsetting of Financial Liabilities and Derivative Liabilities
Gross
Amounts of
Recognized
Liabilities
Gross
Amounts
Offset in the
Balance Sheet
Amounts
of Liabilities
Presented
in the
Balance Sheet
Gross Amounts Not Offset
in the Balance Sheet
Amounts That
Would Have
Been Presented
On Net Basis
Financial
Instruments
Cash
Collateral
Received
Cash
Collateral
Paid
(i)
(ii)
(iii) = (i) – (ii)
(iv)
(v) = (iii) + (iv)
As of September 30, 2020:
Interest rate derivatives
$
193.6
$
–
$
193.6
$
–
$
–
$
–
$
193.6
Commodity derivatives
190.2
–
190.2
( 139.4
)
–
–
50.8
As of December 31, 2019:
Interest rate derivatives
$
13.5
$
–
$
13.5
$
–
$
–
$
–
$
13.5
Commodity derivatives
116.2
–
116.2
( 115.3
)
–
–
0.9
33
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Derivative assets and liabilities recorded on our Unaudited Condensed Consolidated Balance Sheets are presented on a gross-basis and determined at the individual transaction level. The tabular presentation above provides a means for comparing the gross amount of derivative assets and liabilities, excluding associated accounts payable and receivable, to the net amount that would likely be receivable or payable under a default scenario based on the existence of rights of offset in the respective derivative agreements. Any cash collateral paid or received is reflected in these tables, but only to the extent that it represents variation margins. Any amounts associated with derivative prepayments or initial margins that are not influenced by the derivative asset or liability amounts or those that are determined solely on their volumetric notional amounts are excluded from these tables.
The following tables present the effect of our derivative instruments designated as fair value hedges on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:
Derivatives in Fair Value
Hedging Relationships
Location
Gain (Loss) Recognized in
Income on Derivative
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Commodity derivatives
Revenue
$
( 19.8
)
$
( 0.4
)
$
( 69.1
)
$
( 2.0
)
Total
$
( 19.8
)
$
( 0.4
)
$
( 69.1
)
$
( 2.0
)
Derivatives in Fair Value
Hedging Relationships
Location
Gain (Loss) Recognized in
Income on Hedged Item
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Commodity derivatives
Revenue
$
22.4
$
2.4
142.6
$
8.7
Total
$
22.4
$
2.4
$
142.6
$
8.7
The gain (loss) corresponding to the hedge ineffectiveness on the fair value hedges was negligible for all periods presented. The remaining gain (loss) for each period presented is primarily attributable to prompt-to-forward month price differentials that were excluded from the assessment of hedge effectiveness.
The following tables present the effect of our derivative instruments designated as cash flow hedges on our Unaudited Condensed Statements of Consolidated Operations and Unaudited Condensed Statements of Consolidated Comprehensive Income for the periods indicated:
Derivatives in Cash Flow
Hedging Relationships
Change in Value Recognized in
Other Comprehensive Income (Loss) on Derivative
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Interest rate derivatives
$
62.6
$
( 18.6
)
$
( 207.7
)
$
( 23.8
)
Commodity derivatives – Revenue (1)
2.6
73.5
404.5
71.1
Commodity derivatives – Operating costs and expenses (1)
( 6.8
)
( 1.2
)
( 11.8
)
( 12.5
)
Total
$
58.4
$
53.7
$
185.0
$
34.8
(1)
The fair value of these derivative instruments will be reclassified to their respective locations on the Unaudited Condensed Statement of Consolidated Operations upon settlement of the underlying derivative transactions, as appropriate.
Derivatives in Cash Flow
Hedging Relationships
Location
Gain (Loss) Reclassified from
Accumulated Other Comprehensive Income (Loss) to Income
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Interest rate derivatives
Interest expense
$
( 9.9
)
$
( 9.4
)
$
( 29.2
)
$
( 27.8
)
Commodity derivatives
Revenue
( 19.5
)
93.6
344.7
161.4
Commodity derivatives
Operating costs and expenses
( 10.0
)
( 2.1
)
( 9.9
)
( 9.4
)
Total
$
( 39.4
)
$
82.1
$
305.6
$
124.2
34
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Over the next twelve months, we expect to reclassify $ 40.8 million of losses attributable to interest rate derivative instruments from accumulated other comprehensive loss to earnings as an increase in interest expense. Likewise, we expect to reclassify $ 174.3 million of gains attributable to commodity derivative instruments from accumulated other comprehensive income to earnings, $ 175.5 million as an increase in revenue and $ 1.2 million as an increase in operating costs and expenses.
The following table presents the effect of our derivative instruments not designated as hedging instruments on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:
Derivatives Not Designated
as Hedging Instruments
Location
Gain (Loss) Recognized in
Income on Derivative
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Interest rate derivatives
Interest expense
$
–
$
( 94.9
)
$
–
$
( 94.9
)
Commodity derivatives
Revenue
14.7
21.8
113.4
96.7
Commodity derivatives
Operating costs and expenses
0.1
( 1.6
)
0.9
( 6.3
)
Total
$
14.8
$
( 74.7
)
$
114.3
$
( 4.5
)
The $ 114.3 million gain recognized for the nine months ended September 30, 2020 (as noted in the preceding table) from derivatives not designated as hedging instruments consists of $ 59.6 million of realized gains and $ 54.7 million of net unrealized mark-to-market gains attributable to commodity derivatives.
Fair Value Measurements
The following tables set forth, by level within the Level 1, 2 and 3 fair value hierarchy, the carrying values of our financial assets and liabilities at the dates indicated. These assets and liabilities are measured on a recurring basis and are classified based on the lowest level of input used to estimate their fair value. Our assessment of the relative significance of such inputs requires judgment.
The values for commodity derivatives are presented before and after the application of Chicago Mercantile Exchange (“CME”) Rule 814, which deems that financial instruments cleared by the CME are settled daily in connection with variation margin payments. As a result of this exchange rule, CME-related derivatives are considered to have no fair value at the balance sheet date for financial reporting purposes; however, the derivatives remain outstanding and subject to future commodity price fluctuations until they are settled in accordance with their contractual terms. Derivative transactions cleared on exchanges other than the CME (e.g., the Intercontinental Exchange or ICE) continue to be reported on a gross basis.
35
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 2020
Fair Value Measurements Using
Quoted Prices
in Active
Markets for
Identical Assets
and Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Financial assets:
Interest rate derivatives
$
–
$
5.7
$
–
$
5.7
Commodity derivatives:
Value before application of CME Rule 814
442.4
454.1
52.7
949.2
Impact of CME Rule 814
( 417.8
)
( 352.3
)
( 39.7
)
( 809.8
)
Total commodity derivatives
24.6
101.8
13.0
139.4
Total
$
24.6
$
107.5
$
13.0
$
145.1
Financial liabilities:
Interest rate derivatives
$
–
$
193.6
$
–
$
193.6
Commodity derivatives:
Value before application of CME Rule 814
637.9
567.9
100.2
1,306.0
Impact of CME Rule 814
( 613.6
)
( 433.5
)
( 68.7
)
( 1,115.8
)
Total commodity derivatives
24.3
134.4
31.5
190.2
Total
$
24.3
$
328.0
$
31.5
$
383.8
At December 31, 2019
Fair Value Measurements Using
Quoted Prices
in Active
Markets for
Identical Assets
and Liabilities
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Financial assets:
Commodity derivatives:
Value before application of CME Rule 814
$
53.4
$
343.7
$
0.1
$
397.2
Impact of CME Rule 814
( 47.0
)
( 222.4
)
–
( 269.4
)
Total commodity derivatives
6.4
121.3
0.1
127.8
Total
$
6.4
$
121.3
$
0.1
$
127.8
Financial liabilities:
Liquidity Option (see Note 8)
$
–
$
–
$
509.6
$
509.6
Interest rate derivatives
–
13.5
–
13.5
Commodity derivatives:
Value before application of CME Rule 814
88.1
273.6
0.3
362.0
Impact of CME Rule 814
( 81.9
)
( 163.9
)
–
( 245.8
)
Total commodity derivatives
6.2
109.7
0.3
116.2
Total
$
6.2
$
123.2
$
509.9
$
639.3
In the aggregate, the fair value of our commodity hedging portfolios at September 30, 2020 was a net derivative liability of $ 356.8 million prior to the impact of CME Rule 814.
Financial assets and liabilities recorded on the balance sheet at September 30, 2020 using significant unobservable inputs (Level 3) are not material to the Unaudited Condensed Consolidated Financial Statements. Refer to Note 8 for discussion of the settlement of the Liquidity Option in March 2020 and Note 11 for the income tax impact related to this transaction.
36
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nonrecurring Fair Value Measurements
We did not have any significant nonrecurring fair value measurements at September 30, 2020 or 2019.
See Note 4 for information regarding other non-cash asset impairment charges.
Other Fair Value Information
The carrying amounts of cash and cash equivalents (including restricted cash balances), accounts receivable, commercial paper notes and accounts payable approximate their fair values based on their short-term nature. The estimated total fair value of our fixed-rate debt obligations was $ 32.80 billion and $ 30.37 billion at September 30, 2020 and December 31, 2019, respectively. The aggregate carrying value of these debt obligations was $ 29.90 billion and $ 27.15 billion at September 30, 2020 and December 31, 2019, respectively. These values are primarily based on quoted market prices for such debt or debt of similar terms and maturities (Level 2) and our credit standing. Changes in market rates of interest affect the fair value of our fixed-rate debt. The carrying values of our variable-rate long-term debt obligations approximate their fair values since the associated interest rates are market-based. We do not have any long-term investments in debt or equity securities recorded at fair value.
Note 15. Related Party Transactions
The following table summarizes our related party transactions for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Revenues – related parties:
Unconsolidated affiliates
$
7.5
$
15.6
$
29.2
$
53.7
Costs and expenses – related parties:
EPCO and its privately held affiliates
$
283.9
$
297.8
$
847.0
$
837.9
Unconsolidated affiliates
33.1
94.7
167.2
313.3
Total
$
317.0
$
392.5
$
1,014.2
$
1,151.2
The following table summarizes our related party accounts receivable and accounts payable balances at the dates indicated:
September 30,
2020
December 31,
2019
Accounts receivable - related parties:
EPCO and its privately held affiliates
$
2.2
$
–
Unconsolidated affiliates
1.9
2.5
Total
$
4.1
$
2.5
Accounts payable - related parties:
EPCO and its privately held affiliates
$
113.8
$
143.7
Unconsolidated affiliates
7.5
18.6
Total
$
121.3
$
162.3
We believe that the terms and provisions of our related party agreements are fair to us; however, such agreements and transactions may not be as favorable to us as we could have obtained from unaffiliated third parties.
37
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Relationship with EPCO and Affiliates
We have an extensive and ongoing relationship with EPCO and its privately held affiliates (including Enterprise GP, our general partner), which are not a part of our consolidated group of companies.
At September 30, 2020, EPCO and its privately held affiliates (including Dan Duncan LLC and certain Duncan family trusts) beneficially owned the following limited partner interests in us:
Total Number of Limited Partner Interests Held
Percentage of
Limited Partner
Interests
Outstanding
701,981,017 common units
32.2 %
15,000 preferred units
30.0 %
Of the total number of units held by EPCO and its privately held affiliates, 97,322,618 have been pledged as security under the credit facilities of EPCO and its privately held affiliates at September 30, 2020. These credit facilities contain customary and other events of default, including defaults by us and other affiliates of EPCO. An event of default, followed by a foreclosure on the pledged collateral, could ultimately result in a change in ownership of these units and affect the market price of EPD’s common units.
The Partnership and Enterprise GP are both separate legal entities apart from each other and apart from EPCO and its other affiliates, with assets and liabilities that are also separate from those of EPCO and its other affiliates. EPCO and its privately held affiliates depend on the cash distributions they receive from us and other investments to fund their other activities and to meet their debt obligations. During the nine months ended September 30, 2020 and 2019, we paid EPCO and its privately held affiliates cash distributions totaling $ 908.2 million and $ 893.1 million, respectively.
We have no employees. All of our operating functions and general and administrative support services are provided by employees of EPCO pursuant to the ASA or by other service providers. The following table presents our related party costs and expenses attributable to the ASA with EPCO for the periods indicated:
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Operating costs and expenses
$
247.8
$
259.3
$
740.9
$
732.0
General and administrative expenses
32.1
34.2
94.6
92.9
Total costs and expenses
$
279.9
$
293.5
$
835.5
$
824.9
We lease office space from privately held affiliates of EPCO at rental rates that approximate market rates. In January 2020, we amended an office space lease with an affiliate of EPCO that extended the term through June 2037. For the three months ended September 30, 2020 and 2019, we recognized $ 3.3 million and $ 3.8 million, respectively, of related party operating lease expense in connection with these office space leases. For the nine months ended September 30, 2020 and 2019, we recognized $ 9.6 million and $ 11.1 million, respectively, of related party operating lease expense in connection with these office space leases.
Note 16. Commitments and Contingent Liabilities
Litigation
As part of our normal business activities, we may be named as defendants in legal proceedings, including those arising from regulatory and environmental matters. Although we are insured against various risks to the extent we believe it is prudent, there is no assurance that the nature and amount of such insurance will be adequate, in every case, to fully indemnify us against losses arising from future legal proceedings. We will vigorously defend the Partnership in litigation matters.
38
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Our accruals for litigation contingencies were $ 6.9 million and $ 0.2 million at September 30, 2020 and December 31, 2019, respectively, and recorded in our Unaudited Condensed Consolidated Balance Sheets as a component of “Other current liabilities.”
Energy Transfer Matter
As reported in our 2019 Form 10-K, we prevailed on our appeal on January 31, 2020 when the Supreme Court of Texas unanimously affirmed the opinion of the Dallas Court of Appeals. On March 6, 2020, the Supreme Court of Texas issued its mandate to the Dallas County Civil District Court, bringing this lawsuit and the resulting appeal to a close.
PDH Litigation
In July 2013, we executed a contract with Foster Wheeler USA Corporation (“Foster Wheeler”) pursuant to which Foster Wheeler was to serve as the general contractor responsible for the engineering, procurement, construction and installation of our initial propane dehydrogenation (“PDH 1”) facility. In November 2014, Foster Wheeler was acquired by an affiliate of AMEC plc to form Amec Foster Wheeler plc, and Foster Wheeler is now known as Amec Foster Wheeler USA Corporation (“AFW”). In December 2015, Enterprise and AFW entered into a transition services agreement under which AFW was partially terminated from the PDH 1 project. In December 2015, Enterprise engaged a second contractor, Optimized Process Designs LLC, to complete the construction and installation of PDH 1.
On September 2, 2016, we terminated AFW for cause and filed a lawsuit in the 151st Judicial Civil District Court of Harris County, Texas against AFW and its parent company, Amec Foster Wheeler plc, asserting claims for breach of contract, breach of warranty, fraudulent inducement, string-along fraud, gross negligence, professional negligence, negligent misrepresentation and attorneys’ fees. We intend to diligently prosecute these claims and seek all direct, consequential, and exemplary damages to which we may be entitled.
Contractual Obligations
Scheduled Maturities of Debt
We have long-term and short-term payment obligations under debt agreements. In total, the principal amount of our consolidated debt obligations were $ 30.15 billion and $ 27.88 billion at September 30, 2020 and December 31, 2019, respectively. See Note 7 for additional information regarding our scheduled future maturities of debt principal.
Lease Accounting Matters
The following table presents information regarding operating leases where we are the lessee at September 30, 2020:
Asset Category
ROU
Asset
Carrying
Value (1)
Lease
Liability
Carrying
Value (2)
Weighted-
Average
Remaining
Term
Weighted-
Average
Discount
Rate (3)
Storage and pipeline facilities
$
131.0
$
131.5
16 years
4.3 %
Transportation equipment
37.4
39.7
3 years
3.5 %
Office and warehouse space
172.7
183.0
16 years
3.2 %
Total
$
341.1
$
354.2
(1)
Right-of-use (“ROU”) asset amounts are a component of “Other assets” on our Unaudited Condensed Consolidated Balance Sheet.
(2)
At September 30, 2020 , lease liabilities of $ 28.6 million and $ 325.6 million were included within “Other current liabilities” and “Other liabilities,” respectively.
(3)
The discount rate for each category of assets represents the weighted average of either (i) the implicit rate applicable to the underlying leases (where determinable) or (ii) our incremental borrowing rate adjusted for collateralization (if the implicit rate is not determinable). In general, the discount rates are based on either (i) information available at the lease commencement date or (ii) January 1, 2019 for leases existing at the adoption date for ASC 842, Leases .
In total, our ROU asset and lease liability carrying values increased $ 130.9 million and $ 142.2 million, respectively, since December 31, 2019 primarily due to the modification of an office space lease with an affiliate of EPCO.
39
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table disaggregates our total operating lease expense for the periods indicated :
For the Three Months
Ended September 30,
For the Nine Months
Ended September 30,
2020
2019
2020
2019
Long-term operating leases:
Fixed lease expense:
Non-cash lease expense (amortization of ROU assets)
$
9.8
$
10.7
$
29.6
$
32.4
Related accretion expense on lease liability balances
3.1
2.1
9.8
6.9
Total fixed lease expense
12.9
12.8
39.4
39.3
Variable lease expense
0.1
1.6
0.4
4.5
Subtotal operating lease expense
13.0
14.4
39.8
43.8
Short-term operating leases
12.3
12.4
37.3
35.9
Total operating lease expense
$
25.3
$
26.8
$
77.1
$
79.7
Fixed lease expense is charged to earnings on a straight-line basis over the contractual term, with any variable lease payments expensed as incurred. Short-term operating lease expense is expensed as incurred. Cash paid for operating lease liabilities recorded on our balance sheet was $ 9.8 million and $ 13.0 million for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019 cash paid for operating lease liabilities was $ 28.1 million and $ 39.4 million, respectively.
We do not have any significant operating or direct financing leases where we are the lessor. Our operating lease income for the three months ended September 30, 2020 and 2019 was $ 2.3 million and $ 3.5 million, respectively. For the nine months ended September 30, 2020 and 2019 operating lease income was $ 8.4 million and $ 10.7 million, respectively. We do not have any sales-type leases.
Including the impact of the modification of the related party office space lease, our total operating lease commitments increased from $ 271.2 million at December 31, 2019 to approximately $ 469.2 million at September 30, 2020.
Purchase Obligations
We have contractual future product purchase commitments for natural gas, NGLs, crude oil, petrochemicals and refined products. These commitments represent enforceable and legally binding agreements as of the reporting date. Our product purchase commitments at September 30, 2020 declined by an estimated $ 6.3 billion when compared to those reported in our 2019 Form 10-K primarily due to lower NGL and crude oil prices in the nine months ended September 30, 2020. At September 30, 2020, our estimated long-term product purchase obligations totaled $ 14.27 billion after reflecting the decline in commodity prices, agreements added during the nine months ended September 30, 2020 and those commitments that expired during the year. At December 31, 2019, our estimated long-term product purchase obligations totaled $ 20.57 billion.
Settlement of Liquidity Option
See Note 8 for information regarding settlement of the Liquidity Option on March 5, 2020.
40
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 17. Supplemental Cash Flow Information
The following table presents the net effect of changes in our operating accounts for the periods indicated:
For the Nine Months
Ended September 30,
2020
2019
Decrease (increase) in:
Accounts receivable – trade
$
1,119.5
$
( 578.0
)
Accounts receivable – related parties
1.0
1.6
Inventories
( 1,063.2
)
( 44.2
)
Prepaid and other current assets
288.2
( 305.3
)
Other assets
( 27.7
)
( 18.3
)
Increase (decrease) in:
Accounts payable – trade
147.0
( 55.4
)
Accounts payable – related parties
( 41.0
)
31.0
Accrued product payables
( 621.9
)
666.6
Accrued interest
( 196.6
)
( 158.4
)
Other current liabilities
( 212.3
)
133.6
Other liabilities
( 85.0
)
( 82.2
)
Net effect of changes in operating accounts
$
( 692.0
)
$
( 409.0
)
Cash payments for interest, net of $ 96.9 and $ 102.9 capitalized during the
nine months ended September 30, 2020 and 2019, respectively
$
1,107.4
$
996.1
Cash payments for federal and state income taxes
$
24.9
$
24.7
We incurred liabilities for construction in progress that had not been paid at September 30, 2020 and December 31, 2019 of $ 272.1 million and $ 432.0 million, respectively. Such amounts are not included under the caption “Capital expenditures” on the Unaudited Condensed Statements of Consolidated Cash Flows.
41
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ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 18. Condensed Consolidating Financial Information
EPO conducts all of our business. Currently, we have no independent operations and no material assets outside those of EPO.
EPO has issued publicly traded debt securities. As the parent company of EPO, EPD guarantees substantially all of the debt obligations of EPO. If EPO were to default on any of its guaranteed debt, EPD would be responsible for full and unconditional repayment of that obligation. See Note 7 for additional information regarding our consolidated debt obligations.
EPO’s consolidated subsidiaries have no significant restrictions on their ability to pay distributions or make loans to EPD.
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Balance Sheet
September 30, 2020
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
ASSETS
Current assets:
Cash and cash equivalents and restricted cash
$
863.2
$
292.5
$
( 24.7
)
$
1,131.0
$
0.1
$
–
$
1,131.1
Accounts receivable – trade, net
1,155.1
2,621.9
( 0.8
)
3,776.2
–
–
3,776.2
Accounts receivable – related parties
145.8
782.0
( 915.0
)
12.8
–
( 8.7
)
4.1
Inventories
2,447.6
745.3
( 0.3
)
3,192.6
–
–
3,192.6
Derivative assets
101.6
31.3
–
132.9
–
–
132.9
Prepaid and other current assets
269.8
445.5
( 159.7
)
555.6
0.2
0.6
556.4
Total current assets
4,983.1
4,918.5
( 1,100.5
)
8,801.1
0.3
( 8.1
)
8,793.3
Property, plant and equipment, net
6,685.4
35,715.0
( 40.3
)
42,360.1
–
–
42,360.1
Investments in unconsolidated affiliates
46,284.9
4,840.8
( 48,640.3
)
2,485.4
25,092.9
( 25,092.9
)
2,485.4
Intangible assets, net
624.3
2,741.0
( 16.7
)
3,348.6
–
–
3,348.6
Goodwill
459.5
5,285.7
–
5,745.2
–
–
5,745.2
Other assets
907.0
335.0
( 239.4
)
1,002.6
1.0
–
1,003.6
Total assets
$
59,944.2
$
53,836.0
$
( 50,037.2
)
$
63,743.0
$
25,094.2
$
( 25,101.0
)
$
63,736.2
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt
$
1,325.0
$
–
$
–
$
1,325.0
$
–
$
–
$
1,325.0
Accounts payable – trade
288.3
631.4
( 24.7
)
895.0
1.0
–
896.0
Accounts payable – related parties
891.1
158.1
( 927.9
)
121.3
8.7
( 8.7
)
121.3
Accrued product payables
1,879.1
2,439.0
( 1.0
)
4,317.1
–
–
4,317.1
Accrued interest
235.0
3.2
( 3.1
)
235.1
–
–
235.1
Derivative liabilities
329.3
0.4
–
329.7
–
–
329.7
Other current liabilities
201.8
579.1
( 158.2
)
622.7
–
–
622.7
Total current liabilities
5,149.6
3,811.2
( 1,114.9
)
7,845.9
9.7
( 8.7
)
7,846.9
Long-term debt
28,522.4
14.6
–
28,537.0
–
–
28,537.0
Deferred tax liabilities
25.5
434.2
( 0.5
)
459.2
–
4.1
463.3
Other long-term liabilities
370.0
607.3
( 242.1
)
735.2
–
–
735.2
Commitments and contingent liabilities
Redeemable preferred limited partner interests
–
–
–
–
49.2
( 0.1
)
49.1
Equity:
Partners’ and other owners’ equity
25,876.7
48,905.3
( 49,724.5
)
25,057.5
25,035.3
( 25,057.5
)
25,035.3
Noncontrolling interests in consolidated subsidiairies
–
63.4
1,044.8
1,108.2
–
( 38.8
)
1,069.4
Total equity
25,876.7
48,968.7
( 48,679.7
)
26,165.7
25,035.3
( 25,096.3
)
26,104.7
Total liabilities, preferred units, and equity
$
59,944.2
$
53,836.0
$
( 50,037.2
)
$
63,743.0
$
25,094.2
$
( 25,101.0
)
$
63,736.2
42
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Balance Sheet
December 31, 2019
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
ASSETS
Current assets:
Cash and cash equivalents and restricted cash
$
109.2
$
315.8
$
( 15.1
)
$
409.9
$
0.1
$
–
$
410.0
Accounts receivable – trade, net
1,471.1
3,403.8
( 1.3
)
4,873.6
–
–
4,873.6
Accounts receivable – related parties
233.1
799.9
( 1,023.6
)
9.4
–
( 6.9
)
2.5
Inventories
1,351.3
740.4
( 0.3
)
2,091.4
–
–
2,091.4
Derivative assets
115.2
12.0
–
127.2
–
–
127.2
Prepaid and other current assets
221.0
183.5
( 46.3
)
358.2
–
–
358.2
Total current assets
3,500.9
5,455.4
( 1,086.6
)
7,869.7
0.1
( 6.9
)
7,862.9
Property, plant and equipment, net
6,413.3
35,233.6
( 43.5
)
41,603.4
–
–
41,603.4
Investments in unconsolidated affiliates
45,514.0
4,165.7
( 47,079.5
)
2,600.2
25,279.3
( 25,279.3
)
2,600.2
Intangible assets, net
636.7
2,852.3
( 40.0
)
3,449.0
–
–
3,449.0
Goodwill
459.5
5,285.7
–
5,745.2
–
–
5,745.2
Other assets
404.9
288.5
( 221.9
)
471.5
1.0
–
472.5
Total assets
$
56,929.3
$
53,281.2
$
( 48,471.5
)
$
61,739.0
$
25,280.4
$
( 25,286.2
)
$
61,733.2
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of debt
$
1,981.9
$
–
$
–
$
1,981.9
$
–
$
–
$
1,981.9
Accounts payable – trade
301.4
717.7
( 14.6
)
1,004.5
–
–
1,004.5
Accounts payable – related parties
977.5
222.3
( 1,037.5
)
162.3
6.9
( 6.9
)
162.3
Accrued product payables
1,895.4
3,021.9
( 1.6
)
4,915.7
–
–
4,915.7
Accrued interest
431.6
0.9
( 0.8
)
431.7
–
–
431.7
Derivative liabilities
114.2
8.2
–
122.4
–
–
122.4
Other current liabilities
120.5
438.2
( 47.3
)
511.4
–
( 0.2
)
511.2
Total current liabilities
5,822.5
4,409.2
( 1,101.8
)
9,129.9
6.9
( 7.1
)
9,129.7
Long-term debt
25,628.6
14.6
–
25,643.2
–
–
25,643.2
Deferred tax liabilities
22.2
75.6
( 0.8
)
97.0
–
3.4
100.4
Other long-term liabilities
161.2
608.9
( 247.2
)
522.9
509.5
–
1,032.4
Commitments and contingent liabilities
Equity:
Partners’ and other owners’ equity
25,294.8
48,107.6
( 48,155.3
)
25,247.1
24,764.0
( 25,247.1
)
24,764.0
Noncontrolling interests in consolidated subsidiairies
–
65.3
1,033.6
1,098.9
–
( 35.4
)
1,063.5
Total equity
25,294.8
48,172.9
( 47,121.7
)
26,346.0
24,764.0
( 25,282.5
)
25,827.5
Total liabilities and equity
$
56,929.3
$
53,281.2
$
( 48,471.5
)
$
61,739.0
$
25,280.4
$
( 25,286.2
)
$
61,733.2
43
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Operations
For the Three Months Ended September 30, 2020
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Revenues
$
11,392.7
$
4,135.4
$
( 8,606.1
)
$
6,922.0
$
–
$
–
$
6,922.0
Costs and expenses:
Operating costs and expenses
11,053.8
3,124.1
( 8,606.7
)
5,571.2
–
–
5,571.2
General and administrative costs
8.1
41.2
0.7
50.0
0.3
–
50.3
Total costs and expenses
11,061.9
3,165.3
( 8,606.0
)
5,621.2
0.3
–
5,621.5
Equity in income of unconsolidated affiliates
923.7
114.3
( 956.0
)
82.0
1,053.0
( 1,053.0
)
82.0
Operating income
1,254.5
1,084.4
( 956.1
)
1,382.8
1,052.7
( 1,053.0
)
1,382.5
Other income (expense):
Interest expense
( 320.8
)
( 2.5
)
2.8
( 320.5
)
–
–
( 320.5
)
Other, net
4.4
( 114.1
)
112.6
2.9
–
–
2.9
Total other expense, net
( 316.4
)
( 116.6
)
115.4
( 317.6
)
–
–
( 317.6
)
Income before income taxes
938.1
967.8
( 840.7
)
1,065.2
1,052.7
( 1,053.0
)
1,064.9
Benefit from (provision for) income taxes
( 1.7
)
21.3
( 0.1
)
19.5
0.1
( 0.5
)
19.1
Net income
936.4
989.1
( 840.8
)
1,084.7
1,052.8
( 1,053.5
)
1,084.0
Net income attributable to noncontrolling interests
–
( 1.8
)
( 31.3
)
( 33.1
)
–
1.7
( 31.4
)
Net income attributable to preferred units
–
–
–
–
( 0.2
)
0.2
–
Net income attributable to entity
$
936.4
$
987.3
$
( 872.1
)
$
1,051.6
$
1,052.6
$
( 1,051.6
)
$
1,052.6
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Operations
For the Three Months Ended September 30, 2019
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Revenues
$
8,268.7
$
5,238.9
$
( 5,543.5
)
$
7,964.1
$
–
$
–
$
7,964.1
Costs and expenses:
Operating costs and expenses
7,950.9
4,166.6
( 5,543.8
)
6,573.7
–
–
6,573.7
General and administrative costs
9.4
45.4
0.4
55.2
0.3
–
55.5
Total costs and expenses
7,960.3
4,212.0
( 5,543.4
)
6,628.9
0.3
–
6,629.2
Equity in income of unconsolidated affiliates
1,131.9
167.1
( 1,159.7
)
139.3
1,058.2
( 1,058.2
)
139.3
Operating income
1,440.3
1,194.0
( 1,159.8
)
1,474.5
1,057.9
( 1,058.2
)
1,474.2
Other income (expense):
Interest expense
( 383.2
)
( 2.6
)
2.9
( 382.9
)
–
–
( 382.9
)
Other, net
8.7
1.8
( 2.9
)
7.6
( 38.7
)
–
( 31.1
)
Total other expense, net
( 374.5
)
( 0.8
)
–
( 375.3
)
( 38.7
)
–
( 414.0
)
Income before income taxes
1,065.8
1,193.2
( 1,159.8
)
1,099.2
1,019.2
( 1,058.2
)
1,060.2
Provision for income taxes
( 8.5
)
( 6.6
)
–
( 15.1
)
–
( 0.3
)
( 15.4
)
Net income
1,057.3
1,186.6
( 1,159.8
)
1,084.1
1,019.2
( 1,058.5
)
1,044.8
Net income attributable to noncontrolling interests
–
( 1.5
)
( 25.4
)
( 26.9
)
–
1.3
( 25.6
)
Net income attributable to entity
$
1,057.3
$
1,185.1
$
( 1,185.2
)
$
1,057.2
$
1,019.2
$
( 1,057.2
)
$
1,019.2
44
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Operations
For the Nine Months Ended September 30, 2020
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Revenues
$
29,836.7
$
12,609.5
$
( 22,290.7
)
$
20,155.5
$
–
$
–
$
20,155.5
Costs and expenses:
Operating costs and expenses
28,856.1
9,438.6
( 22,292.8
)
16,001.9
–
–
16,001.9
General and administrative costs
28.5
130.6
2.1
161.2
1.6
–
162.8
Total costs and expenses
28,884.6
9,569.2
( 22,290.7
)
16,163.1
1.6
–
16,164.7
Equity in income of unconsolidated affiliates
2,972.6
422.3
( 3,058.8
)
336.1
3,368.9
( 3,368.9
)
336.1
Operating income
3,924.7
3,462.6
( 3,058.8
)
4,328.5
3,367.3
( 3,368.9
)
4,326.9
Other income (expense):
Interest expense
( 959.0
)
( 7.6
)
8.4
( 958.2
)
–
–
( 958.2
)
Other, net
17.4
( 386.9
)
384.0
14.5
( 2.0
)
–
12.5
Total other expense, net
( 941.6
)
( 394.5
)
392.4
( 943.7
)
( 2.0
)
–
( 945.7
)
Income before income taxes
2,983.1
3,068.1
( 2,666.4
)
3,384.8
3,365.3
( 3,368.9
)
3,381.2
Benefit from (provision for) income taxes
( 10.5
)
78.3
( 0.4
)
67.4
72.3
( 1.1
)
138.6
Net income
2,972.6
3,146.4
( 2,666.8
)
3,452.2
3,437.6
( 3,370.0
)
3,519.8
Net income attributable to noncontrolling interests
–
( 4.6
)
( 82.5
)
( 87.1
)
–
4.7
( 82.4
)
Net income attributable to preferred units
–
–
–
–
( 0.2
)
0.2
–
Net income attributable to entity
$
2,972.6
$
3,141.8
$
( 2,749.3
)
$
3,365.1
$
3,437.4
$
( 3,365.1
)
$
3,437.4
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Operations
For the Nine Months Ended September 30, 2019
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Revenues
$
25,664.8
$
16,618.5
$
( 17,499.4
)
$
24,783.9
$
–
$
–
$
24,783.9
Costs and expenses:
Operating costs and expenses
24,670.6
13,216.2
( 17,492.5
)
20,394.3
–
–
20,394.3
General and administrative costs
22.6
133.4
2.3
158.3
1.9
–
160.2
Total costs and expenses
24,693.2
13,349.6
( 17,490.2
)
20,552.6
1.9
–
20,554.5
Equity in income of unconsolidated affiliates
3,606.9
496.8
( 3,672.4
)
431.3
3,619.4
( 3,619.4
)
431.3
Operating income
4,578.5
3,765.7
( 3,681.6
)
4,662.6
3,617.5
( 3,619.4
)
4,660.7
Other income (expense):
Interest expense
( 950.9
)
( 7.8
)
8.5
( 950.2
)
–
–
( 950.2
)
Other, net
16.0
4.2
( 8.5
)
11.7
( 123.1
)
–
( 111.4
)
Total other expense, net
( 934.9
)
( 3.6
)
–
( 938.5
)
( 123.1
)
–
( 1,061.6
)
Income before income taxes
3,643.6
3,762.1
( 3,681.6
)
3,724.1
3,494.4
( 3,619.4
)
3,599.1
Provision for income taxes
( 18.2
)
( 18.3
)
–
( 36.5
)
–
( 0.9
)
( 37.4
)
Net income
3,625.4
3,743.8
( 3,681.6
)
3,687.6
3,494.4
( 3,620.3
)
3,561.7
Net income attributable to noncontrolling interests
–
( 4.9
)
( 66.5
)
( 71.4
)
–
4.1
( 67.3
)
Net income attributable to entity
$
3,625.4
$
3,738.9
$
( 3,748.1
)
$
3,616.2
$
3,494.4
$
( 3,616.2
)
$
3,494.4
45
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Comprehensive Income
For the Three Months Ended September 30, 2020
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Comprehensive income
$
1,083.0
$
940.4
$
( 840.8
)
$
1,182.6
$
1,150.4
$
( 1,151.2
)
$
1,181.8
Comprehensive income attributable to noncontrolling interests
–
( 1.8
)
( 31.3
)
( 33.1
)
–
1.7
( 31.4
)
Comprehensive income attributable to preferred units
–
–
–
–
( 0.2
)
0.2
–
Comprehensive income attributable to entity
$
1,083.0
$
938.6
$
( 872.1
)
$
1,149.5
$
1,150.2
$
( 1,149.3
)
$
1,150.4
Unaudited Condensed Consolidating Statement of Comprehensive Income
For the Three Months Ended September 30, 2019
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Comprehensive income
$
1,038.7
$
1,176.8
$
( 1,159.8
)
$
1,055.7
$
990.8
$
( 1,030.1
)
$
1,016.4
Comprehensive income attributable to noncontrolling interests
–
( 1.5
)
( 25.4
)
( 26.9
)
–
1.3
( 25.6
)
Comprehensive income attributable to entity
$
1,038.7
$
1,175.3
$
( 1,185.2
)
$
1,028.8
$
990.8
$
( 1,028.8
)
$
990.8
Unaudited Condensed Consolidating Statement of Comprehensive Income
For the Nine Months Ended September 30, 2020
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Comprehensive income
$
2,767.1
$
3,231.4
$
( 2,666.8
)
$
3,331.7
$
3,316.7
$
( 3,249.3
)
$
3,399.1
Comp rehensive income attrib utable to noncontrolling interests
–
( 4.6
)
( 82.5
)
( 87.1
)
–
4.7
( 82.4
)
Comprehensive income attributable to preferred units
–
–
–
–
( 0.2
)
0.2
–
Comprehensive income attributable to entity
$
2,767.1
$
3,226.8
$
( 2,749.3
)
$
3,244.6
$
3,316.5
$
( 3,244.4
)
$
3,316.7
Unaudited Condensed Consolidating Statement of Comprehensive Income
For the Nine Months Ended September 30, 2019
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Comprehensive income
$
3,628.6
$
3,650.6
$
( 3,681.6
)
$
3,597.6
$
3,404.4
$
( 3,530.3
)
$
3,471.7
Comprehensive income attributable to noncontrolling interests
–
( 4.9
)
( 66.5
)
( 71.4
)
–
4.1
( 67.3
)
Comprehensive income attributable to entity
$
3,628.6
$
3,645.7
$
( 3,748.1
)
$
3,526.2
$
3,404.4
$
( 3,526.2
)
$
3,404.4
46
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2020
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Operating activities:
Net income
$
2,972.6
$
3,146.4
$
( 2,666.8
)
$
3,452.2
$
3,437.6
$
( 3,370.0
)
$
3,519.8
Reconciliation of net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion
260.8
1,286.9
( 2.6
)
1,545.1
–
–
1,545.1
Equity in income of unconsolidated affiliates
( 2,972.6
)
( 422.3
)
3,058.8
( 336.1
)
( 3,368.9
)
3,368.9
( 336.1
)
Distributions received from unconsolidated affiliates attributable to earnings
1,071.3
157.4
( 891.3
)
337.4
3,164.4
( 3,164.4
)
337.4
Net effect of changes in operating accounts and other operating activities
1,997.2
( 2,254.3
)
( 449.2
)
( 706.3
)
( 68.7
)
0.4
( 774.6
)
Net cash flows provided by operating activities
3,329.3
1,914.1
( 951.1
)
4,292.3
3,164.4
( 3,165.1
)
4,291.6
Investing activities:
Capital expenditures
( 533.9
)
( 2,139.1
)
1.4
( 2,671.6
)
–
–
( 2,671.6
)
Proceeds from asset sales
1.2
7.2
–
8.4
–
–
8.4
Other investing activities
( 1,106.8
)
30.4
1,175.4
99.0
–
–
99.0
Cash used in investing activities
( 1,639.5
)
( 2,101.5
)
1,176.8
( 2,564.2
)
–
–
( 2,564.2
)
Financing activities:
Borrowings under debt agreements
6,672.1
–
–
6,672.1
–
–
6,672.1
Repayments of debt
( 4,406.6
)
–
–
( 4,406.6
)
–
–
( 4,406.6
)
Cash distributions paid to owners
( 3,164.4
)
( 1,104.7
)
1,153.5
( 3,115.6
)
( 2,968.4
)
3,164.4
( 2,919.6
)
Cash payments made in connection with DERs
–
–
–
–
( 20.0
)
–
( 20.0
)
Cash distributions paid to noncontrolling interests
–
( 6.6
)
( 91.9
)
( 98.5
)
–
0.7
( 97.8
)
Cash contributions from noncontrolling interests
–
–
21.2
21.2
–
–
21.2
Repurchase of common units under 2019 Buyback Program
–
–
–
–
( 173.8
)
–
( 173.8
)
Net cash proceeds from the issuance of preferred unit
–
–
–
–
32.5
–
32.5
Cash contributions from owners
–
1,275.4
( 1,275.4
)
–
–
–
–
Other financing activities
( 36.9
)
–
( 42.7
)
( 79.6
)
( 34.7
)
–
( 114.3
)
Cash provided by (used in) financing activities
( 935.8
)
164.1
( 235.3
)
( 1,007.0
)
( 3,164.4
)
3,165.1
( 1,006.3
)
Net change in cash and cash equivalents,
including restricted cash
754.0
( 23.3
)
( 9.6
)
721.1
–
–
721.1
Cash and cash equivalents, including
restricted cash, at beginning of period
109.2
315.8
( 15.1
)
409.9
0.1
–
410.0
Cash and cash equivalents, including
restricted cash, at end of period
$
863.2
$
292.5
$
( 24.7
)
$
1,131.0
$
0.1
$
–
$
1,131.1
47
Table of Contents
ENTERPRISE PRODUCTS PARTNERS L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Enterprise Products Partners L.P.
Unaudited Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2019
EPO and Subsidiaries
Subsidiary
Issuer
(EPO)
Other
Subsidiaries
(Non-
guarantor)
EPO and
Subsidiaries
Eliminations
and
Adjustments
Consolidated
EPO and
Subsidiaries
EPD
(Guarantor)
Eliminations
and
Adjustments
Consolidated
Total
Operating activities:
Net income
$
3,625.4
$
3,743.8
$
( 3,681.6
)
$
3,687.6
$
3,494.4
$
( 3,620.3
)
$
3,561.7
Reconciliation of net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion
231.5
1,226.5
( 1.3
)
1,456.7
–
–
1,456.7
Equity in income of unconsolidated affiliates
( 3,606.9
)
( 496.8
)
3,672.4
( 431.3
)
( 3,619.4
)
3,619.4
( 431.3
)
Distributions received from unconsolidated affiliates attributable to earnings
1,170.9
243.0
( 982.7
)
431.2
3,028.9
( 3,028.9
)
431.2
Net effect of changes in operating accounts and other operating activities
2,203.8
( 2,549.8
)
19.1
( 326.9
)
134.6
0.2
( 192.1
)
Net cash flows provided by operating activities
3,624.7
2,166.7
( 974.1
)
4,817.3
3,038.5
( 3,029.6
)
4,826.2
Investing activities:
Capital expenditures
( 503.8
)
( 2,791.2
)
( 7.1
)
( 3,302.1
)
–
–
( 3,302.1
)
Proceeds from asset sales
0.9
15.9
–
16.8
–
–
16.8
Other investing activities
( 1,349.5
)
( 28.8
)
1,290.8
( 87.5
)
( 119.3
)
119.3
( 87.5
)
Cash used in investing activities
( 1,852.4
)
( 2,804.1
)
1,283.7
( 3,372.8
)
( 119.3
)
119.3
( 3,372.8
)
Financing activities:
Borrowings under debt agreements
44,629.6
–
–
44,629.6
–
–
44,629.6
Repayments of debt
( 42,855.2
)
( 0.1
)
–
( 42,855.3
)
–
–
( 42,855.3
)
Cash distributions paid to owners
( 3,028.9
)
( 1,484.8
)
1,484.8
( 3,028.9
)
( 2,871.1
)
3,028.9
( 2,871.1
)
Cash payments made in connection with DERs
–
–
–
–
( 16.4
)
–
( 16.4
)
Cash distributions paid to noncontrolling interests
–
( 7.0
)
( 63.4
)
( 70.4
)
–
0.7
( 69.7
)
Cash contributions from noncontrolling interests
–
–
590.8
590.8
–
–
590.8
Net cash proceeds from issuance of common units
–
–
–
–
82.2
–
82.2
Repurchase of common units under 2019 Buyback Program
–
–
–
–
( 81.1
)
–
( 81.1
)
Cash contributions from owners
119.3
2,320.3
( 2,320.3
)
119.3
–
( 119.3
)
–
Other financing activities
( 26.3
)
( 5.6
)
–
( 31.9
)
( 32.8
)
–
( 64.7
)
Cash provided by (used in) financing activities
( 1,161.5
)
822.8
( 308.1
)
( 646.8
)
( 2,919.2
)
2,910.3
( 655.7
)
Net change in cash and cash equivalents,
including restricted cash
610.8
185.4
1.5
797.7
–
–
797.7
Cash and cash equivalents, including
restricted cash, at beginning of period
393.4
50.3
( 33.6
)
410.1
–
–
410.1
Cash and cash equivalents, including
restricted cash, at end of period
$
1,004.2
$
235.7
$
( 32.1
)
$
1,207.8
$
–
$
–
$
1,207.8
48
Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.