EX-99.1 2 rrd89121_7320.htm PRESS RELEASE NRGY Exhibit 99

Exhibit 99.1

 

For more information:
Mike Campbell, 816-842-8181
investorrelations@inergyservices.com

 

Inergy, L.P. and Inergy Holdings, L.P. Report Third Quarter 2005 Earnings

***********

Management Conference Call Scheduled for 3:30 CDT Today

Kansas City, MO (August 9, 2005) -- Inergy, L.P. (NASDAQ:NRGY) and Inergy Holdings, L.P. (NASDAQ:NRGP) today each reported results of operations for the quarter ended June 30, 2005, the third quarter of fiscal 2005.

Inergy, L.P.

For the three months ended June 30, 2005, Inergy, L.P. (Inergy) reported EBITDA (income (loss) before interest, taxes, depreciation and amortization) as a loss of $1.1 million, an improvement of $1.6 million over the $2.7 million loss reported in the third quarter of last year. Due to the seasonal nature of the propane industry, Inergy typically reports a quarterly loss in its third fiscal quarter. For the nine-month period, EBITDA increased 142% to $107.3 million from $44.4 million last year. The seasonal net loss for the quarter ended June 30, 2005, was $24.1 million or $0.72 per diluted limited partner unit as compared to a net loss of $9.8 million, or $0.42 per diluted limited partner unit for the same period in the prior year. For the nine-month period ended June 30, 2005, net income, before a $7.0 million net charge to earnings associated with the early retirement of debt recorded in December 2004, was $48.8 million, or $1.58 per diluted limited partner unit. Net income in the comparable prior year nine-month period, before an $18.2 million net charge to earnings associated with the early retirement of debt recorded in January 2004, was $23.2 million, or $1.05 per diluted limited partner unit.

As previously announced, the Board of Directors of the Partnership's general partner increased Inergy's quarterly cash distribution to $0.51 per unit ($2.04 annually) for the quarter ended June 30, 2005. This represents a 23% increase over the distribution for the same quarter of the prior year. The distribution will be paid on August 12, 2005, to unitholders of record as of August 5, 2005.

"Once again, we are having an outstanding year thanks to the consistent execution of our growth strategy by our employees," said John Sherman, President and CEO of Inergy. "Inergy's successful integration of the Star Gas Propane acquisition along with today's acquisition of the Stagecoach natural gas storage facility have transformed the company. We are very well-positioned to continue to grow cash earnings on behalf of our unitholders."

The improved EBITDA results for the three and nine-month periods ended June 30, 2005, are primarily attributable to our retail propane acquisitions with improvement in the three-month period also partially attributable to our wholesale and West Coast operations. The increase in the seasonal net loss in the quarter ended June 30, 2005, is attributable to higher interest expense and higher depreciation and amortization expense as a result of acquisitions. The improvement in net income for the nine months ended June 30, 2005, is also primarily attributable to the increased EBITDA associated with our retail propane acquisitions partially offset by higher interest expense and higher depreciation and amortization expense associated with these acquisitions.

Retail gallon sales increased 167% to 48.6 million in the third quarter of fiscal 2005 from 18.2 million gallons sold in the same quarter last year. For the nine-month period, retail gallon sales increased 130% to 269.7 million gallons in 2005 compared to 117.4 million gallons sold in the same period of the prior year. Retail propane gross profit increased to $39.5 million in the quarter ended June 30, 2005, from $11.2 million in the same quarter of the prior year due to the increased sales volume from acquisitions and higher gross profit per gallon. Retail propane gross profit in the nine months ended June 30, 2005, was $200.8 million as compared to $78.8 million in the same period of 2004.

Gross profit from wholesale operations was $5.0 million in the third quarter of fiscal 2005 compared to $2.3 million in the same period of 2004. In the nine months ended June 30, 2005, gross profit from wholesale operations was $15.1 million as compared to $13.8 million in the same period of 2004.

Operating and administrative expenses were $52.1 million in the three months ended June 30, 2005, compared to $20.0 million in the same period of 2004. For the nine months ended June 30, 2005, operating and administrative expenses were $146.1 million compared to $60.5 million in the same period of 2004. The increase in operating expenses is the result of growth related to acquisitions.

In December 2004, Inergy repaid in full its 364-day credit facility and prior credit agreement with proceeds from offerings of common units and senior unsecured notes and borrowings under its new bank credit facility. The early retirement of this debt resulted in a net charge to earnings in the first quarter of fiscal 2005 of approximately $7.0 million related to the write-off of deferred financing costs associated with the debt. In January 2004 Inergy repaid in full its senior secured notes with proceeds from a common unit offering and borrowings under its bank credit facility. The early retirement of this debt resulted in a net charge to earnings in the second quarter of fiscal 2004 of approximately $18.2 million comprised of a make-whole premium paid to the lenders ($17.9 million) and the write-off of deferred financing costs associated with the debt ($1.2 million) partially offset by a gain recognized on the termination of an interest rate swap agreement associated with the debt ($0.9 million). Although these are reflected as charges to earnings, these net charges do not affect Inergy's distributable cash flow.

 

Inergy Holdings, L.P.

Inergy Holdings, L.P. closed on its initial public offering of common units on June 24, 2005.

As discussed above, the $0.51 per limited partner unit distribution by Inergy, L.P. will result in Inergy Holdings, L.P. receiving a total distribution of $5.1 million with respect to the third fiscal quarter of 2005. As a result of this Inergy, L.P. distribution, Inergy Holdings, L.P. declared a distribution of $0.225 per limited partner unit. The distribution for the period from the closing of the initial public offering through June 30, 2005 is expected to be paid to Inergy Holdings, L.P. unitholders of record as of November 11, 2005 along with the 4th quarter distribution payment, once declared, on or about November 18, 2005.

Inergy, L.P. also announces guidance for the full fiscal year ended September 30, 2006, giving effect to the acquisitions closed to date including the acquisition of the Stagecoach natural gas storage facility which closed today. Inergy expects to generate EBITDA of $148 to $155 million during this period. In addition, Inergy expects to deliver approximately 355 to 370 million retail gallons of propane and generate $359 to $365 million of total gross profit. Below is a table reconciling this anticipated EBITDA to net income:

Forecast Range ($ in millions)

Fiscal Year Ended September 30, 2006

Net Income(a)

$ 25

$ 32

Interest Expense(a) (b)

54

54

Depreciation and Amortization(a)

68

68

Income Taxes(a)

1

1

EBITDA(a)

$148

$155
     

Maintenance Capital Expenditures

$ 8

$ 8

(a) Estimates exclude any one-time or non-recurring charges that may occur. Depreciation and amortization are based upon a preliminary purchase price allocation and may be subject to change.

(b) Estimate includes approximately $2 million of non-cash interest expense and is based upon our outstanding indebtedness immediately after the closing of the Stagecoach acquisition.

 

Inergy will conduct a live conference call and webcast for both companies today, August 9, 2005, to discuss results of operations for the third fiscal quarter and its business outlook. The call will be at 3:30 p.m. CDT. The call-in number for the earnings call is 1-877-405-3427, and the conference name is Inergy LP. The live internet web-cast and the replay can be accessed on Inergy's website, www.inergypropane.com. A digital recording of the call will be available for the two weeks following the call by dialing 1-800-642-1687 and entering the pass code 8213137.

Inergy, L.P., headquartered in Kansas City, Missouri, is among the fastest growing master limited partnerships in the country. The company's operations include the retail marketing, sale and distribution of propane to residential, commercial, industrial and agricultural customers. Today, the company serves over 600,000 retail customers from approximately 280 customer service centers throughout the eastern half of the United States. The company also operates a natural gas storage business and a supply logistics, transportation and wholesale marketing business that serves independent dealers and multi-state marketers in the United States and Canada.

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.

This press release contains forward-looking statements, which are statements that are not historical in nature such as our business outlook. 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, our ability to generate available cash for distribution to unitholders, the costs and effects of legal and administrative proceedings against us or which may be brought against us and our ability to sustain our historical levels of internal growth. These and other risks and assumptions are described in Inergy's annual report on Form 10-K and other reports that are available from the United States Securities and Exchange Commission.

<TABLE FOLLOWS>

 

 

Inergy, L.P. and Subsidiaries

Consolidated Statements of Operations

For the Three Months and Nine Months Ended June 30, 2005 and 2004

(in thousands, except per unit data)
       
 

(Unaudited)

  

(Unaudited)
 

Three Months Ended June 30,

  

Nine Months Ended June 30,
 

2005

2004

  

2005

2004

Revenue:

 		         

Propane

$127,493

$ 57,540

  

$708,201

$345,787

Other

46,109

12,175

  

137,294

34,578
 

173,602

69,715

  

845,495

380,365
           

Cost of product sold (excluding depreciation and

amortization as shown below)

          

Propane

86,064

45,788

  

502,109

262,163

Other

36,934

6,940

  

91,581

13,778

Cost of product sold

122,998

52,728

  

593,690

275,941
           

Gross profit

50,604

16,987

  

251,805

104,424
           

Operating and administrative expenses

52,078

20,027

  

146,055

60,514

Depreciation and amortization

13,865

5,591

  

35,094

15,267
           

Operating income

(15,339)

(8,631)

  

70,656

28,643
           

Other income (expense):

 		         

Interest expense, net

(9,144)

(1,443)

  

(23,018)

(5,810)

Write-off of deferred financing costs (a)

-

-

  

(6,990)

(1,216)

Make whole premium charge (b)

-

-

  

-

(17,949)

Swap value received (c)

-

-

  

-

949

Gain/(loss) on sale of property, plant and equipment

(270)

143

  

(170)

(136)

Finance charges

576

238

  

1,488

591

Other

82

6

234

84
           

Income (loss) before income taxes

(24,095)

(9,687)

  

42,200

5,156
           

Provision for income taxes

24

113

  

358

164
           

Net income (loss)

$ (24,119)

$ (9,800)

  

$ 41,842

$ 4,992
           

Net income allocable to:

 		         

Non-Managing General Partner Interest

$ (339)

$ (196)

  

$ 5,390

$ 100

Limited Partner Interest

(23,780)

(9,604)

  

36,452

4,892
 

$ (24,119)

$ (9,800)

  

$41,842

$ 4,992

           

Net Income Per Limited Partner Unit:
Basic
Diluted

$ (0.72)

$ (0.72)

$(0.42)

$(0.42)

  

$ 1.20

$ 1.18

$0.23

$0.22

 

  1. Deferred financing costs that were being amortized were written off as a result of the early retirement of the debt with which they were associated.
  2. Represents contractual premium paid to lenders upon early retirement of the senior secured notes in January 2004.
  3. Gain upon termination of interest rate swap agreement associated with the senior secured notes that were retired in January 2004.

 

(Unaudited)

  

(Unaudited)
 

Three Months Ended June 30,

  

Nine Months Ended June 30,
 

2005

2004

  

2005

2004

Supplemental Information:

          
           

Retail gallons sold

48,620

18,243

  

269,683

117,412
           

Outstanding Debt:

          

Working Capital Facility

      

$ 8,500

$ 129

Acquisition Facility

      

92,300

107,604

Senior Unsecured Notes

      

425,801

-

Other Debt

      

9,913

5,275

Total Debt

      

$ 536,514

$ 113,008
           

Total Partners' Capital

      

$ 477,127

$ 241,766
           

EBITDA:

          

Net Income (loss)

$ (24,119)

$ (9,800)

  

$ 41,842

$ 4,992

Interest expense, net

9,144

1,443

  

23,018

5,810

Write-off of deferred financing costs (b)

-

-

  

6,990

1,216

Make whole premium charge

-

-

  

-

17,949

Swap value received

-

-

  

-

(949)

Provision for income taxes

24

113

  

358

164

Depreciation and amortization

13,865

5,591

  

35,094

15,267

EBITDA (a)

$ (1,086)

$ (2,653)

  

$ 107,302

$ 44,449
           

Distributable Cash Flow:

          

EBITDA (a)

$(1,086)

$ (2,653)

  

$ 107,302

$ 44,449

Cash interest expense (b)

(8,648)

(1,059)

  

(21,690)

(4,613)

Maintenance capital expenditures (c)

(843)

(420)

  

(2,597)

(882)

Provision for income taxes

(24)

(113)

  

(358)

(164)

Distributable cash flow (d)

$ (10,601)

$ (4,245)

  

$82,657

$ 38,790
           

Weighted Average Limited Partner Units Outstanding:

          

Basic

32,878

22,950

  

30,321

21,551

Diluted

32,878

22,950

30,930

22,011

  1. EBITDA is defined as income (loss) before taxes, plus net interest expense (inclusive of write-off of deferred financing costs, make whole premium charge, less gain from termination of interest rate swap agreement) and depreciation and amortization expense. 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. EBITDA is presented because such information is relevant and is used by management, industry analysts, investors, lenders and rating agencies to assess the financial performance and operating results of our fundamental business activities. We believe that the presentation of EBITDA is useful to lenders and investors because of its use in the propane industry and for master limited partnerships as an indicator of the strength and performance of the ongoing business operations, including the ability to fund capital expenditures, service debt and pay distributions. Additionally, we believe that EBITDA provides useful information to our investors for trending, analyzing and benchmarking our operating results as compared to other companies that may have different financing and capital structures. The presentation of EBITDA allows investors to view our performance in a manner similar to the methods used by management and provides additional insight to our operating results.
  2. Cash interest expense is net of amortization charges associated with deferred financing costs. Write-off of deferred financing costs for the nine months ended June 30, 2005 includes $1.5 million from the early retirement of a bank credit facility and $5.5 million associated with the incurrence and write-off in December 2004 of commitment and funding fees associated with the bridge financing facility utilized in the Star Gas Propane, L.P. acquisition.
  3. Maintenance capital expenditures are defined as those capital expenditures which do not increase operating capacity or revenues from existing levels.
  4. Distributable cash flow is defined as EBITDA, less cash interest expense, maintenance capital expenditures and income taxes. We believe that distributable cash flow provides additional information for evaluating the Partnership's ability to declare and pay distributions to unitholders. Distributable cash flow should not be considered an alternative to cash flow from operating activities or any other measure of financial performance in accordance with accounting principles generally accepted in the United States. Distributable cash flow, as we define it, may not be comparable to distributable cash flow or similarly titled measures used by other corporations and partnerships.

 

 

Inergy Holdings, L.P. and Subsidiaries

Consolidated Statements of Operations

For the Three Months and Nine Months Ended June 30, 2005 and 2004

(in thousands, except per unit data)
       
 

(Unaudited)

  

(Unaudited)
 

Three Months Ended June 30,

  

Nine Months Ended June 30,
 

2005

2004

  

2005

2004

Revenue:

 		         

Propane

$127,493

$ 57,540

  

$708,201

$345,787

Other

46,109

12,175

  

137,294

34,578
 

173,602

69,715

  

845,495

380,365
           

Cost of product sold (excluding depreciation and

amortization as shown below)

          

Propane

86,064

45,788

  

502,109

262,163

Other

36,934

6,940

  

91,581

13,778

Cost of product sold

122,998

52,728

  

593,690

275,941
           

Gross profit

50,604

16,987

  

251,805

104,424
           

Operating and administrative expenses

52,111

20,036

  

146,454

60,547

Depreciation and amortization

13,904

5,591

  

35,138

15,267
           

Operating income (loss)

(15,411)

(8,640)

  

70,213

28,610
           

Other income (expense):

 		         

Interest expense, net

(10,058)

(1,444)

  

(24,671)

(5,813)

Write-off of deferred financing costs

(598)

-

  

(7,588)

(1,216)

Make whole premium charge

-

-

  

-

(17,949)

Swap value received

-

-

  

-

949

Gain/(loss) on sale of property, plant and equipment

(270)

143

  

(170)

(136)

Finance charges

576

238

  

1,488

591

Other

90

7

246

100

Income (loss) before gain on issuance of units in Inergy, L.P., income taxes, and interest of non-controlling partners in Inergy, L.P.'s net income (loss)

(25,671)

 

(9,696)

 

  

39,518

 

5,136

 
           

Gain on issuance of units in Inergy, L.P.

(5)

-

  

16,025

7,807

Provision for income taxes

210

289

  

(2,081)

(1,153)

Interest of non-controlling partners in Inergy, L.P.'s net income (loss)

20,636

8,210

  

(31,812)

(3,378)
           

Net income (loss)

$ (4,830)

$ (1,197)

  

$ 21,650

$ 8,412
           

Total limited partners' interest in net income

$ (4,830)

$ (1,197)

  

$ 21,650

$ 8,412
           

Net Income Per Limited Partner Unit:
Basic

$ (0.24)

$(0.09)

  

$ 1.00

$0.67

Diluted

$ (0.24)

$(0.09)

  

$ 1.00

$0.52

Weighted average limited partners' units outstanding:

 		         

Basic

20,000

12,675

  

21,668

12,550

Diluted

20,000

16,090

  

21,680

16,090