Inergy, L.P. (NASDAQ: NRGY) and Inergy Holdings, L.P. (NASDAQ:
NRGP) today each reported record results of operations for the
fiscal fourth quarter and year ended September 30, 2009.
Inergy, L.P.
Inergy, L.P. (“Inergy”) reported Adjusted EBITDA of $296.8
million for the year ended September 30, 2009, an increase of $57.8
million, or approximately 24.2%, from $239.0 million for the year
ended September 30, 2008. Net income, excluding certain items as
discussed below, was $108.0 million for the year ended September
30, 2009, or $1.12 per diluted limited partner unit, an improvement
of approximately 40.8% from $76.7 million or $0.81 per diluted
limited partner unit in fiscal 2008. A table reconciling Adjusted
EBITDA to Net Income for the three and twelve months ended
September 30, 2009 appears below.
Distributable cash flow was $221.7 million for the year ended
September 30, 2009, compared to $174.3 million in fiscal 2008, an
increase of $47.4 million, or approximately 27.2%. Distributable
cash flow per unit on a fully distributed basis increased to $2.92
per diluted limited partner unit in fiscal 2009 from $2.60 per
diluted limited partner unit in fiscal 2008.
“I would like to thank all of our employees for making 2009 an
outstanding year,” said John Sherman, President and CEO of Inergy.
“Thanks to their efforts we added to our track record of delivering
consistent results and achieving our operational and financial
performance objectives. In a challenging economic environment, we
focused on things we could control, grew our distributable cash
flow by 27%, and raised our distribution in every quarter.
Additionally, we raised over $400 million of long term capital,
kept our existing expansion projects on track, and upgraded our
future growth outlook. The combination of these accomplishments
with last week’s renewal and upsizing of our bank credit facility,
positions Inergy very well to take advantage of pending
opportunities and to execute our growth strategy on behalf of our
unitholders.”
Recent Events
As previously announced, Inergy is pleased to report the
following recent events related to the partnership:
- the Board of Directors of
Inergy’s managing general partner increased Inergy’s quarterly cash
distribution to $0.675 per limited partner unit ($2.70 annually)
for the quarter ended September 30, 2009. This represents an
approximate 6% increase over the distribution for the same quarter
of the prior year. The distribution was paid on November 13,
2009;
- the Thomas Corners natural gas
storage facility expansion has been placed in service, both under
budget and ahead of its previously scheduled April 2010 start up
date; and
- on November 24, 2009, Inergy
entered into a new $525 million four-year senior secured revolving
credit facility. The new credit facility replaces Inergy’s former
facility that was due to mature in November 2010. The credit
facility consists of a $75 million revolving working capital line
of credit and a $450 million revolving general partnership line of
credit and includes an expansion option of up to $100 million.
Fiscal Year-End Results
For the year ended September 30, 2009, there were 310.0 million
retail propane gallons sold compared to 331.9 million gallons sold
in fiscal 2008. Retail propane gross profit, excluding certain
non-cash items as discussed below, was $364.5 million for the year
ended September 30, 2009, compared to $312.9 million for the year
ended September 30, 2008. Gross profit from other propane
operations, including wholesale, appliances, service,
transportation, distillates, and other, was $108.3 million in the
year ended September 30, 2009, compared to $97.4 million in fiscal
2008.
Gross profit from midstream operations increased to $102.3
million for the year ended September 30, 2009, from $92.0 million
in fiscal 2008.
For the year ended September 30, 2009, operating and
administrative expenses increased to $279.6 million compared to
$265.6 million in fiscal 2008.
Exclusions from net income discussed above included a loss of
$5.2 million and $11.5 million on the disposal of excess property,
plant, and equipment during the years ended September 30, 2009 and
2008, respectively. Also excluded from net income and gross profit
discussed above was a non-cash charge of $1.4 million and $0.1
million during the years ended September 30, 2009 and 2008,
respectively, resulting from the derivative contracts associated
with retail propane fixed price sales.
Quarterly Results
Inergy reported Adjusted EBITDA of $23.4 million for the quarter
ended September 30, 2009, an increase of $0.7 million, or
approximately 3.1%, from $22.7 million for the quarter ended
September 30, 2008. Net loss, excluding certain items as discussed
below, was $(31.8) million for the quarter ended September 30,
2009, or $(0.77) per diluted limited partner unit, a change of
$10.4 million, or approximately 48.6%, from $(21.4) million or
$(0.62) per diluted limited partner unit in the same quarter of
last year. Due to the seasonal nature of the propane industry,
Inergy typically reports a quarterly loss in its fourth fiscal
quarter.
In the quarter ended September 30, 2009, retail propane gallon
sales were 39.0 million gallons compared to 42.2 million gallons
sold in the same quarter of the prior year. Retail propane gross
profit, excluding certain non-cash items as discussed below, was
$41.4 million for the quarter ended September 30, 2009, compared to
$39.2 million for the quarter ended September 30, 2008. Gross
profit from other propane operations, including wholesale,
appliances, service, transportation, distillates, and other, was
$19.0 million in the quarter ended September 30, 2009, compared to
$22.4 million for the same quarter in the prior year.
Gross profit from midstream operations increased to $29.5
million for the quarter ended September 30, 2009, from $25.5
million for the same quarter in the prior year.
For the quarters ended September 30, 2009 and 2008, operating
and administrative expenses were $67.0 million.
Exclusions from net loss discussed above included a loss of $1.1
million and $12.3 million on the disposal of excess property,
plant, and equipment during the three months ended September 30,
2009 and 2008, respectively. Also excluded from net loss and gross
profit discussed above was a non-cash gain of $0.1 million and $0.6
million during the three months ended September 30, 2009 and 2008,
respectively, resulting from the derivative contracts associated
with retail propane fixed price sales.
Fiscal 2010 Guidance
Inergy also announces its Adjusted EBITDA guidance range for the
full fiscal year ended September 30, 2010, of $313 million to $332
million. Inergy also expects capital expenditures associated with
its previously disclosed midstream expansion projects to
approximate $100 million in 2010. A table reconciling Adjusted
EBITDA to Net Income for the forecasted period appears below.
Inergy Holdings,
L.P.
As discussed above, the $0.675 per limited partner unit
distribution by Inergy, L.P. resulted in Inergy Holdings, L.P.
receiving a total distribution of $18.0 million with respect to the
fourth fiscal quarter of 2009. As a result of this Inergy, L.P.
distribution, Inergy Holdings, L.P. declared a quarterly
distribution of $0.85 per limited partner unit, or $3.40 on an
annualized basis. This represents an approximate 31% increase over
the $0.65 per limited partner unit paid for the same quarter of the
prior year. The distribution was paid on November 13, 2009.
Inergy, L.P. and Inergy Holdings, L.P. will conduct a live
conference call and internet webcast today, November 30, 2009, to
discuss results of operations for the fourth quarter and fiscal
year end and its business outlook. The call will begin at 10:00
a.m. CT. The call-in number for the earnings call is
1-877-405-3427, and the conference name is Inergy. The live
internet webcast and the replay can be accessed on Inergy’s
website, www.inergypropane.com. A digital recording of the call
will be available for one week following the call by dialing
1-800-642-1687 and entering the pass code 37936734.
Inergy, L.P., with headquarters in Kansas City, MO, is among the
fastest growing master limited partnerships in the country.
Inergy’s operations include the retail marketing, sale, and
distribution of propane to residential, commercial, industrial and
agricultural customers. Today, Inergy serves approximately 700,000
retail customers from over 300 customer service centers throughout
the eastern half of the United States. Inergy also operates a
natural gas storage business; a supply logistics, transportation,
and wholesale marketing business that serves independent dealers
and multi-state marketers in the United States and Canada; and a
solution-mining and salt production company.
Inergy Holdings, L.P.’s assets consist of its ownership interest
in Inergy, L.P., including limited partnership interests, ownership
of the general partners, and the incentive distribution rights.
EBITDA is a non-GAAP financial measure and is defined as income
before income taxes, plus net interest expense and depreciation and
amortization expense. Adjusted EBITDA represents EBITDA excluding
the gain or loss on derivative contracts associated with retail
propane fixed price sales contracts, the gain or loss on the
disposal of fixed assets, and non-cash compensation expenses. Item
6 to the Partnership’s Annual Report on Form 10-K provides a
historical reconciliation of net income to EBITDA and Adjusted
EBITDA.
EBITDA and Adjusted EBITDA should not be considered an
alternative to net income, income before income taxes, cash flows
from operating activities, or any other measure of financial
performance calculated in accordance with generally accepted
accounting principles as those items are used to measure operating
performance, liquidity, or ability to service debt obligations.
Inergy believes that EBITDA and Adjusted EBITDA provide additional
information for evaluating financial performance without regard to
their financing methods, capital structure, and historical cost
basis. Further, Inergy believes that EBITDA and Adjusted EBITDA
provide additional information for evaluating their ability to make
the minimum quarterly distribution and are presented solely as a
supplemental measure. EBITDA and Adjusted EBITDA, as Inergy defines
them, may not be comparable to EBITDA and Adjusted EBITDA or
similarly titled measures used by other corporations or
partnerships.
This press release contains forward-looking statements, which
are statements that are not historical in nature. Forward-looking
statements are subject to certain risks, uncertainties, and
assumptions. Should one or more of these risks or uncertainties
materialize or any underlying assumption proves incorrect, actual
results may vary materially from those anticipated, estimated, or
projected. Among the key factors that could cause actual results to
differ materially from those referred to in the forward-looking
statements are: weather conditions that vary significantly from
historically normal conditions; the general level of petroleum
product demand and the availability of propane supplies; the price
of propane to the consumer compared to the price of alternative and
competing fuels; the demand for high deliverability natural gas
storage capacity in the Northeast; our ability to successfully
implement our business plan; the outcome of rate decisions levied
by the Federal Energy Regulatory Commission; our ability to
generate available cash for distribution to unitholders; and the
costs and effects of legal, regulatory, and administrative
proceedings against us or which may be brought against us. These
and other risks and assumptions are described in Inergy’s annual
reports on Form 10-K and other reports that are available from the
United States Securities and Exchange Commission.
Inergy, L.P. and
Subsidiaries
Consolidated Statements of Operations For the Three
Months and Years Ended September 30, 2009 and 2008 (in
millions, except per unit data)
Three Months Ended Year Ended September 30,
September 30, 2009 2008 2009
2008 (Unaudited) (Unaudited) Revenues: Propane $ 135.8 $
237.2 $ 1,124.4 $ 1,386.8 Other 95.7 103.7
446.2 492.1 231.5 340.9 1,570.6
1,878.9
Cost of product sold (excluding
depreciationand amortization as shown below):
Propane 89.3 191.0 737.4 1,053.0 Other 52.2
62.2 259.5 323.7 141.5
253.2 996.9 1,376.7
Gross profit 90.0 87.7 573.7 502.2 Expenses:
Operating and administrative 67.0 67.0 279.6 265.6 Depreciation and
amortization 36.5 25.9 115.8 98.0 Loss on disposal of assets
1.1 12.3 5.2 11.5
Operating income (loss) (14.6 ) (17.5 ) 173.1 127.1 Other
income (expense): Interest expense, net (17.6 ) (15.9 ) (69.7 )
(60.9 ) Other income 0.1 0.9 0.1
1.0
Income (loss) before income taxes
andinterest of non-controlling partners in ASC
(32.1
)
(32.5
)
103.5
67.2
Provision for income taxes (0.3 ) (0.1 ) (0.7 ) (0.7 )
Interest of non-controlling
partners in ASC’sconsolidated net income
(0.4
)
(0.5
)
(1.4
)
(1.4
)
Net income (loss) $ (32.8 ) $ (33.1 ) $ 101.4 $ 65.1
Partners’ interest information:
Non-managing general partner
andaffiliates interest in net income
$ 12.5 $ 9.2
$
47.0
$
36.1
Distribution paid on restricted units 0.2 0.1
0.8 0.3
Total interest in net income not
attributableto limited partners’
$ 12.7 $ 9.3 $ 47.8 $ 36.4
Total limited partners’ interest
in netincome (loss)
$ (45.5 ) $ (42.4 ) $ 53.6 $ 28.7 Net income
(loss) per limited partner unit: Basic $ (0.79 ) $ (0.85 ) $ 1.00
$ 0.58 Diluted $ (0.79 ) $ (0.85 ) $ 1.00 $
0.57
Weighted average limited partners’
unitsoutstanding (in thousands):
Basic 57,511 50,044 53,709
49,777 Diluted 57,544
50,044 53,736 49,851
Three Months Ended Year Ended
September 30, September 30, 2009
2008 2009 2008 (Unaudited) (Unaudited)
Supplemental Information:
Retail gallons sold 39.0 42.2 310.0 331.9 Cash and cash
equivalents $ 11.6 $ 17.3 Outstanding debt: Working capital
facility $ 27.2 $ 65.0 Acquisition facility - 182.0 Senior
unsecured notes 1,050.0 825.0
Fair value hedge adjustment on
seniorunsecured notes
5.6
1.9
Bond premium (e) 3.3 3.8 Bond discount(g) (19.7 ) - ASC credit
agreement 8.3 10.9 Other debt 18.6 18.0
Total debt $ 1,093.3 $ 1,106.6 Total partners’
capital $ 799.4 $ 637.8 EBITDA: Net income
(loss) $ (32.8 ) $ (33.1 ) $ 101.4 $ 65.1
Interest of non-controlling
partners in ASC’sconsolidated ITDA (f)
(0.1
)
(0.1
)
(0.5
)
(0.8
)
Interest expense, net 17.6 15.9 69.7 60.9 Provision for income
taxes 0.3 0.1 0.7 0.7 Depreciation and amortization 36.5
25.9 115.8 98.0
EBITDA (a) $ 21.5 $ 8.7 $ 287.1 $ 223.9 Non-cash (gain) loss on
derivative contracts (0.1 ) (0.6 ) 1.4 0.1 Non-cash compensation
expense 0.9 2.3 3.1 3.5 Loss on disposal of assets 1.1
12.3 5.2 11.5
Adjusted EBITDA (a) $ 23.4 $ 22.7 $ 296.8 $
239.0 Distributable cash flow: Adjusted EBITDA $ 23.4
$ 22.7 $ 296.8 $ 239.0 Cash interest expense (b) (16.7 ) (15.4 )
(66.4 ) (58.6 ) Maintenance capital expenditures (c) (2.9 ) (1.8 )
(8.0 ) (5.4 ) Income tax expense (0.3 ) (0.1 )
(0.7 ) (0.7 ) Distributable cash flow (d) $ 3.5 $ 5.4
$ 221.7 $ 174.3 EBITDA: Net cash
provided by operating activities $ 30.2 $ 32.8 $ 239.4 $ 183.8 Net
changes in working capital balances (21.9 ) (23.7 ) (3.6 ) 3.7
Provision for doubtful accounts (0.5 ) (0.7 ) (3.7 ) (5.7 )
Amortization of deferred financing
costs andnet bond discount
(1.7
)
(0.5
)
(5.2
)
(2.3
)
Non-cash compensation expense (0.9 ) (2.3 ) (3.1 ) (3.5 ) Loss on
disposal of assets (1.1 ) (12.3 ) (5.2 ) (11.5 )
Interest of non-controlling
partners in ASC’sconsolidated EBITDA
(0.5
)
(0.6
)
(1.9
)
(2.2
)
Interest expense, net 17.6 15.9 69.7 60.9 Provision for income
taxes 0.3 0.1 0.7
0.7 EBITDA (a) $ 21.5 $ 8.7 $ 287.1 $ 223.9 Non-cash (gain)
loss on derivative contracts (0.1 ) (0.6 ) 1.4 0.1 Non-cash
compensation expense 0.9 2.3 3.1 3.5 Loss on disposal of assets
1.1 12.3 5.2 11.5
Adjusted EBITDA (a) $ 23.4 $ 22.7 $ 296.8
$ 239.0
(a) EBITDA is defined as income (loss) before taxes, plus net
interest expense and depreciation and amortization expense. As
indicated in the table, Adjusted EBITDA represents EBITDA excluding
the gain or loss on derivative contracts associated with retail
propane fixed price sales contracts, the gain or loss on the
disposal of assets and non-cash compensation expenses. EBITDA and
Adjusted EBITDA should not be considered an alternative to net
income, income before income taxes, cash flows from operating
activities, or any other measure of financial performance
calculated in accordance with generally accepted accounting
principles as those items are used to measure operating
performance, liquidity or the ability to service debt obligations.
Inergy believes that EBITDA and Adjusted EBITDA provide additional
information for evaluating financial performance without regard to
their financing methods, capital structure and historical cost
basis. Further, Inergy believes that EBITDA and Adjusted EBITDA
provide additional information for evaluating their ability to make
the minimum quarterly distribution and are presented solely as
supplemental measures. EBITDA and Adjusted EBITDA, as Inergy
defines them, may not be comparable to EBITDA and Adjusted EBITDA
or similarly titled measures used by other corporations or
partnerships.
(b) Cash interest expense is book interest expense less
amortization of deferred financing costs.
(c) Maintenance capital expenditures are defined as those
capital expenditures which do not increase operating capacity or
revenues from existing levels.
(d) Distributable cash flow is defined as Adjusted EBITDA, less
cash interest expense, maintenance capital expenditures and income
taxes. Distributable cash flow should not be considered an
alternative to cash flows from operating activities or any other
measure of financial performance calculated in accordance with
generally accepted accounting principles as those items are used to
measure operating performance, liquidity or the ability to service
debt obligations. Inergy believes that distributable cash flow
provides additional information for evaluating their ability to
declare and pay distributions to unitholders. Distributable cash
flow, as Inergy defines it, may not be comparable to distributable
cash flow or similarly titled measures used by other corporations
and partnerships.
(e) In April 2008, Inergy announced the placement of a $200
million add-on to its existing 8.25% senior unsecured notes under
Rule 144A to eligible purchasers. The proceeds from the bond
issuance were $204 million, representing a premium of $4 million to
par. The $4 million premium will be amortized on a non-cash basis
over the term of the senior notes.
(f) ITDA – Interest, taxes, depreciation and amortization.
(g) In February 2009, Inergy closed on a $225 million offering
of senior notes under Rule 144A to eligible purchasers. The 8 ¾%
notes were issued at 90.191%, which resulted in a discount of $22.1
million. The discount will be amortized on a non-cash basis over
the term of the senior notes.
Inergy Holdings, L.P. and
Subsidiaries
Consolidated Statements of
Operations
For the Three Months and Years Ended September 30, 2009 and
2008 (in millions, except per unit data)
Three Months Ended Year Ended September 30,
September 30, 2009 2008 2009
2008 (Unaudited) (Unaudited) Revenues: Propane $
135.8 $ 237.2 $ 1,124.4 $ 1,386.8 Other 95.7
103.7 446.2 492.1 231.5 340.9
1,570.6 1,878.9
Cost of product sold (excluding
depreciation andamortization as shown below):
Propane 89.3 191.0 737.4 1,053.0 Other 52.2
62.2 259.5 323.7 141.5
253.2 996.9 1,376.7
Gross profit 90.0 87.7 573.7 502.2 Expenses:
Operating and administrative 67.2 67.2 280.5 266.6 Depreciation and
amortization 36.5 25.9 115.8 98.0 Loss on disposal of assets
1.1 12.3 5.2 11.5
Operating income (loss) (14.8 ) (17.7 ) 172.2 126.1 Other
income (expense): Interest expense, net (17.7 ) (16.3 ) (70.5 )
(62.6 ) Other income 0.1 0.9 0.1
1.0
Income (loss) before gain on
issuance of units inInergy, L.P., income taxes and interest of
non-controlling partners in Inergy, L.P. and ASC
(32.4 )
(33.1
)
101.8
64.5
Gain on issuance of units in Inergy, L.P. 4.6 - 8.0 -
Provision for income taxes (0.4 ) (0.1 ) (1.7 ) (1.4 )
Interest of non-controlling
partners in Inergy, L.P.’snet (income) loss
41.1
38.4
(49.6 )
(26.2
)
Interest of non-controlling
partners in ASC’sconsolidated net income
(0.4 )
(0.5
)
(1.4 )
(1.4
)
Net income $ 12.5 $ 4.7 $ 57.1 $ 35.5
Partners’ interest information: Less distribution paid on
restricted units $ 0.1 $ 0.2 $ 0.6 $ 0.5
Net income applicable to limited partners’ units $ 12.4
$ 4.5 $ 56.5 $ 35.0 Net income
per limited partner unit: Basic $ 0.61 $ 0.23 $ 2.82
$ 1.75 Diluted $ 0.61 $ 0.23 $ 2.80
$ 1.73
Weighted average limited partners’
unitsoutstanding (in thousands):
Basic 20,047 20,018 20,032
20,011 Diluted 20,278
20,142 20,149 20,222
Inergy, L.P.
Reconciliation of Forecast Net Income to Adjusted EBITDA
Fiscal Year Ended September 30, 2010 (in millions)
Low High Net income (a) $ 113 $
117 Interest expense (a) (b) 83 89 Depreciation and amortization
(a)(c) 116 125 Income taxes (a) 1 1 Adjusted
EBITDA (a) $ 313 $ 332 Maintenance capital
expenditures $ 7 $ 8 Net Income Allocable to Limited
Partners (d) $ 55 $ 60 Limited Partner Units Outstanding 60
60
(a) Earnings guidance is based upon various forward-looking
assumptions made by the management of Inergy. While Inergy believes
that these assumptions are reasonable, it can give no assurance
that such results will materialize. Estimates exclude any one-time
or non-recurring charges that may occur. Adjusted EBITDA is defined
as income (loss) before taxes, plus net interest expense and
depreciation and amortization and excludes (i) non-cash gains or
losses on derivatives associated with fixed price sales to retail
propane customers, (ii) long-term incentive and equity compensation
charges, and (iii) gains or losses on disposals of assets as
disclosed in Inergy, L.P.’s SEC filings.
(b) Estimate includes approximately $4 million of non-cash
interest expense and is based upon our outstanding indebtedness
including the indebtedness from all acquisitions to date.
(c) Depreciation and amortization are based upon certain
preliminary purchase price allocations and may be subject to
change.
(d) Based upon current limited partnership units outstanding,
general partner ownership, and current distribution of $0.675 per
quarter.
Supplemental Information Table
Supplemental Guidance Information
Fiscal Year Ended September 30,
2010
Low High Retail Gallon Sales 309
325 Retail Propane Gross Profit $ 344 $ 362 Other Propane
Operations Gross Profit 105 111 Total Midstream Gross Profit
136 142 Total Gross Profit $ 585 $ 615
Operating Expenditures $ 272 $ 283 Adjusted EBITDA $ 313 $
332
Note: The above figures supplement Inergy’s annual guidance and
should only be used as guidelines in connection with the annual
guidance issued. While Inergy believes that these assumptions are
reasonable, it can give no assurance that such results will
materialize.
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