ETP » Topics » Titan Acquisition

This excerpt taken from the ETP 8-K filed Jan 8, 2007.

Titan Acquisition

On April 19, 2006, ETP signed a definitive agreement with Titan Energy Partners, L.P. under which ETP acquired, on June 1, 2006, all of the propane operations of Titan Energy Partners, L.P. and Titan Energy GP, LLC for approximately $548 million, net of cash acquired of $24.5 million at June 1, 2006. ETP financed the acquisition initially with advances under its revolving credit facility. ETP subsequently repaid the revolving credit advances with proceeds received through a combination of the sale of a new public debt offering and a private placement of its Class G limited partner units, as discussed below under “Financing Transactions.”

The Titan acquisition is accounted for as a business combination using the purchase method of accounting in accordance with the provisions of Statement of Financial Accounting Standards No. 141. The total cost of the Titan acquisition was as follows (in thousands):

 

Base purchase price as per the merger agreement

   $ 549,700

Plus estimated termination and relocation costs

     4,000

Plus accrued compensation obligation as of June 1, 2006

     23,247

Plus other assumed Titan obligations as of June 1, 2006

     42,341
      

Total acquisition cost allocated to assets acquired

   $ 619,288
      

 

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For purposes of this pro forma analysis, the purchase price of the Titan transaction has been allocated using the independent valuation obtained subsequent to August 31, 2006. For purposes of the historical consolidated balance sheet of ETP as of August 31, 2006, the purchase price was assigned primarily to depreciable fixed assets, amortizable and non-amortizable intangible assets, and non-amortizable goodwill. Management of ETP engaged an appraisal firm to perform the asset appraisal in order to develop a definitive allocation of the purchase price. As a result, the purchase price allocation reflected herein differs from the preliminary allocation. The adjusted pro forma purchase price allocation is as follows (in thousands):

 

Current assets

   $ 58,234

Property, plant and equipment, including construction in progress

     205,423

Intangible assets

     74,532

Goodwill

     275,324

Other assets

     5,775
      

Total assets

   $ 619,288
      
This excerpt taken from the ETP 10-K filed Nov 13, 2006.

Titan Acquisition

On June 1, 2006, we completed the Titan acquisition. In recording the Titan acquisition, we followed our normal accounting procedures and internal controls. Our management also reviewed the operations of Titan from the date of the acquisition that are included in our earnings for the fiscal year ended August 31, 2006. In addition, we obtained disclosure information from former Titan (now Titan Energy Partners, L.P.) employees and reviewed the Titan historical audited and subsequent unaudited interim financial statements and notes accompanying the financial statements. We are continuing to integrate our internal controls into these operations, and it is expected that this effort will continue into future fiscal quarters of 2007. As a result, Titan’s business has been excluded from our fiscal 2006 internal control assessment.

We have excluded Titan’s business from our internal control assessment for the following reasons:

 

    Given the time required to test the operating effectiveness of Titan’s controls and the due date for our attestation required by Section 404 of the Sarbanes Oxley Act of 2002, it was not practical from a timing or resource standpoint for us to conduct a thorough assessment prior to our 2006 fiscal year end ;

 

    Titan’s district locations utilize an accounting computer system and other industry-specific computer applications that are different from those we used through August 31, 2006. For various business reasons, Titan’s business remained on these systems. As a result, we believe that reporting on the controls of the current computer system used by Titan will not be useful to our investors since the use of these systems may be discontinued after August 31, 2006.

 

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Index to Financial Statements
    We continue to evaluate Titan’s business and are making various changes to its operating and organizational structure based on our business plan. We are in the process of implementing our internal control structure over the operations of Titan. We expect that this effort will continue into future fiscal quarters of 2007 due to the magnitude of the business. The assessment and documentation of internal controls requires a complete implementation of controls operating in a stable and effective environment.

EXCERPTS ON THIS PAGE:

8-K
Jan 8, 2007
10-K
Nov 13, 2006

"Titan Acquisition" elsewhere:

Energy Transfer Equity (ETE)
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