What caused the significant drop in net income for the first half of 2002 compared to 2001?

The primary driver for the substantial decrease in net income was a significant negative impact from commodity hedging activities. The company reported a loss of $50.9 million from commodity hedging in the first six months of 2002, compared to income of $70.3 million in the same period of 2001. Additionally, lower overall revenues due to declining commodity prices contributed to the reduced profitability.

How has the company's debt level changed, and why?

Long-term debt increased significantly from $855.3 million at December 31, 2001, to $1.22 billion at June 30, 2002. This increase was primarily to fund the substantial acquisitions of the Diamond-Koch propylene fractionation and storage businesses completed in early 2002. Further debt was taken on post-quarter end to finance the announced acquisitions of Mid-America and Seminole Pipelines.

What are the key strategic moves the company made during this period?

EPD made significant strategic moves through acquisitions. In early 2002, they acquired the Diamond-Koch propylene fractionation and storage businesses, enhancing their position in Mont Belvieu. They also initiated the purchase of additional interests in existing joint ventures and subsequently announced the major acquisition of Mid-America and Seminole Pipelines, significantly expanding their pipeline network.

How did the company's inventory levels change?

Inventories increased significantly, from $69.4 million at December 31, 2001, to $153.3 million at June 30, 2002. This increase is reflected in the 'Inventories' line item on the balance sheet and is also a contributing factor to the lower cash flow from operations, as more cash was tied up in inventory.

EPD/EPDU 10-Q Quarterly Report Q2 FY2002 — Revenue, Net Income, EPS

Summary

Enterprise Products Partners L.P. (EPD) reported its financial results for the quarter and six months ended June 30, 2002. The company experienced a significant decrease in net income compared to the prior year, largely attributable to a substantial negative impact from commodity hedging activities and lower product prices, partially offset by strategic acquisitions. Total revenues declined year-over-year, reflecting softer commodity prices. However, the company expanded its operational footprint through significant acquisitions, including the Diamond-Koch propylene fractionation and storage businesses, and initiated the acquisition of interests in Mid-America and Seminole Pipelines. Debt levels increased to finance these growth initiatives and ongoing operations, while cash flow from operations was lower than the previous year, impacted by inventory build-up and hedging losses. Despite these challenges, EPD continues to focus on strategic growth and integration of acquired assets.

Key Highlights

1Net income for the six months ended June 30, 2002, significantly decreased to $5.1 million from $145.3 million in the prior year, primarily due to commodity hedging losses and lower revenues.
2Total revenues for the six months ended June 30, 2002, decreased to $1.46 billion from $1.81 billion in the same period of 2001, reflecting lower commodity prices.
3The company completed significant acquisitions in early 2002, including the Diamond-Koch propylene fractionation ($239M) and storage ($129.6M) businesses, and initiated further acquisitions in mid-2002.
4Long-term debt increased substantially to $1.22 billion at June 30, 2002, from $855 million at December 31, 2001, primarily to fund acquisitions.
5Cash flow from operations for the six months ended June 30, 2002, was $45.2 million, a decrease from $90.6 million in the prior year, impacted by inventory changes and hedging activities.
6The company declared a quarterly distribution of $0.335 per Common Unit for the second quarter of 2002, a slight increase from the previous quarter's distribution.
7Subsequent to the quarter end, EPD announced the acquisition of interests in Mid-America Pipeline Company and Seminole Pipeline Company for approximately $1.2 billion, funded by new debt.

ENTERPRISE PRODUCTS PARTNERS L.P. Quarterly Report for Q2 Ended Jun 30, 2002

Summary

Key Highlights

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