EX-99.1 2 d548568dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL INFORMATION

These following unaudited pro forma condensed combined consolidated financial statements of Inergy Midstream, L.P. (the “pro forma financial statements”) have been prepared for illustrative purposes only and are not necessarily indicative of what the combined partnership’s condensed consolidated financial position or results of operations actually would have been had the merger (the “merger”) between Inergy Midstream, L.P. (“Inergy Midstream”), Intrepid Merger Sub, LLC and Crestwood Midstream Partners LP (“Crestwood”) been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined consolidated financial information does not purport to project the future financial position or operating results of the combined partnership. Future results may vary significantly from the results reflected because of various factors.

The following unaudited pro forma financial statements give effect to the merger as if the merger was already consummated. The historical financial statements have been adjusted in the pro forma financial statements to give effects to events that are (1) directly attributable to the merger, (2) factually supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined partnership. The unaudited pro forma condensed combined consolidated statements of operations does not reflect any non-recurring charges directly related to the merger that the combined partnership may incur upon completion of the merger.

The pro forma financial statements were derived from and should be read in conjunction with the historical financial statements of Inergy Midstream and Crestwood filed with the Securities and Exchange Commission.

The unaudited pro forma condensed combined consolidated balance sheet as of March 31, 2013 reflects the merger as if it occurred on March 31, 2013 and the unaudited pro forma condensed combined consolidated statements of operations for the year ended December 31, 2012 and the three months ended March 31, 2013 reflect the merger as if it occurred on January 1, 2012. The pro forma financial statements reflect the following:

 

   

The conversion of each Crestwood common unit issued and outstanding as of the effective time (i) owned by Crestwood unitholders other than Crestwood Holdings LLC (“Crestwood Holdings”), Crestwood Gas Services GP LLC and Crestwood Gas Services Holdings LLC (collectively, the “Crestwood Affiliated Entities”) into the right to receive $1.03 in cash and 1.0700 Inergy Midstream common units and (ii) owned by the Crestwood Affiliated Entities into the right to receive only 1.0700 Inergy Midstream common units;

 

   

Inergy Midstream pays all cash consideration with respect to the merger consideration payable at the effective time other than approximately $10.4 million, which amount is to be funded by Crestwood Holdings;

 

   

Payment of certain estimated non-recurring fees associated with known contractual severance payments for certain identified employees that will be involuntarily terminated at the effective time;

 

   

Payment of certain estimated non-recurring contractual financing and professional fees; and

 

   

Payment of non-recurring fees associated with entering into a new revolving credit facility. The facility is expected to have an aggregate borrowing capacity of $1 billion.

The pro forma financial statements do not include any amounts for non-contractual costs expected to be incurred related to legal, accounting and other fees related to the merger which are currently estimated to range from $6 million to $9 million.

Descriptions of the foregoing adjustments are presented in the notes to the pro forma financial statements provided below. The fiscal year end for the pro forma financial statements is December 31, based upon the expectation that Inergy Midstream will file a Form 8-K within four days of the effective time of the merger declaring its intent to change its fiscal year from September 30 to December 31.

 

1


The merger will be accounted for as a reverse acquisition of Inergy Midstream under the purchase method of accounting in accordance with FASB Accounting Standard Codification Subtopic 805—Business Combinations. The accounting for a reverse merger results in the legal acquiree (Crestwood) being the acquiror for accounting purposes. Therefore, Inergy Midstream will account for the merger as if Crestwood acquired Inergy Midstream. The assets and liabilities of Inergy Midstream will be reflected at fair value on the balance sheet of the combined partnership. A final determination of the purchase accounting adjustments, including the allocation of fair value to the Inergy Midstream assets and liabilities, has not been made. Accordingly, the purchase accounting adjustments made in connection with the development of the pro forma financial statements are preliminary and have been made solely for purposes of developing such pro forma financial statements. The pro forma financial statements do not purport to present Inergy Midstream’s financial position or the results of operations had the merger transactions actually been completed as of the dates indicated. Further, these pro forma financial statements do not reflect the effects of any cost savings or other synergies that may be achieved as a result of the merger, are based on assumptions that Inergy Midstream believes are reasonable under the circumstances, and are intended for informational purposes only. Moreover, the statements do not project Inergy Midstream’s financial position or results of operations for any future date or period.

 

2


INERGY MIDSTREAM, L.P.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2013

(in millions)

 

     Historical      Pro Forma
Adjustments
           Inergy
Midstream Pro
Forma
 
     Crestwood      Inergy
Midstream
         

Assets

             

Current assets:

             

Cash and cash equivalents

   $ —         $ 0.3       $ (69.8     (b)       $ —     
           (4.6     (c)      
           74.1        (d)      

Accounts receivable

     24.3         25.5         —             49.8   

Accounts receivable—related party

     23.6         —           —             23.6   

Insurance receivable

     3.0         —           —             3.0   

Inventories

     —           5.7         —             5.7   

Prepaid expenses and other current assets

     1.3         9.4         —             10.7   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total current assets

     52.2         40.9         (0.3        92.8   

Property, plant and equipment, net

     950.9         979.9         —             1,930.8   

Intangible assets, net

     495.9         187.4         8.1        (a)         691.4   

Goodwill

     95.0         259.4         3,087.0        (a)         3,441.4   

Other assets

     22.8         2.9         —             25.7   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total assets

   $ 1,616.8       $ 1,470.5       $ 3,094.8         $ 6,182.1   
  

 

 

    

 

 

    

 

 

      

 

 

 

Liabilities and partners’ capital

             

Current liabilities:

             

Accounts payable, accrued expenses and other liabilities

   $ 37.8       $ 17.9       $ —           $ 55.7   

Accounts payable—related party

     3.6         —           —             3.6   

Accrued additions to property, plant and equipment

     7.6         8.5         —             16.1   

Capital leases

     3.8         —           —             3.8   

Deferred revenue

     2.4         —           —             2.4   

Current portion of long-term debt

     —           0.9         —             0.9   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total current liabilities

     55.2         27.3         —             82.5   

Long-term debt, less current portion

     727.6         711.0         22.5        (a)         1,535.2   
           74.1        (d)      

Long-term capital leases

     2.3         —           —             2.3   

Asset retirement obligations

     14.2         —           —             14.2   

Other long-term liabilities

     —           0.8         —             0.8   

Partners’ capital

     817.5         731.4         3,072.6        (a)         4,547.1   
           (69.8     (b)      
           (4.6     (c)      
  

 

 

    

 

 

    

 

 

      

 

 

 

Total partners’ capital

     817.5         731.4         2,998.2           4,547.1   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total liabilities and partners’ capital

   $ 1,616.8       $ 1,470.5       $ 3,094.8         $ 6,182.1   
  

 

 

    

 

 

    

 

 

      

 

 

 

The accompanying notes are an integral part of these unaudited pro forma condensed combined consolidated financial statements.

 

3


INERGY MIDSTREAM, L.P.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2012

(in millions, except unit and per unit data)

 

    Historical     Rangeland
Acquisition
(e)
    Inergy
Midstream
Pro Forma (1)
    Pro Forma
Adjustments
          Inergy
Midstream,
As Further
Adjusted
 
    Crestwood     Inergy
Midstream (1)
           

Operating revenues

  $ 239.5      $ 189.8      $ 3.4      $ 193.2      $ —          $ 432.7   

Depreciation, amortization, and accretion expense

    51.9        50.5        35.3        85.8        (4.8     (f)        132.9   

Other operating expenses

    111.7        71.8        5.1        76.9        —            188.6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Operating income (loss)

    75.9        67.5        (37.0     30.5        4.8          111.2   

Interest and debt expense

    35.8        1.8        24.6        26.4        4.0        (g)        66.2   

Other income

    —          —          0.1        0.1        —            0.1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) before income taxes

    40.1        65.7        (61.5     4.2        0.8          45.1   

Provision for income taxes

    1.2        —          —          —          —            1.2   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss)

    38.9        65.7        (61.5     4.2        0.8          43.9   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Less: net income prior to initial public offering of Inergy Midstream, L.P.

    —          12.9        —          12.9        —            12.9   

Less: net income earned by US Salt, LLC prior to acquisition

    —          7.8        —          7.8        —            7.8   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss) available to partners

  $ 38.9      $ 45.0      $ (61.5   $ (16.5   $ 0.8        $ 23.2   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Partners’ interest information:

             

General partner interest in net income

  $ 22.2      $ 1.9      $ —        $ 1.9      $ —          $ 24.1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total limited partners’ interest in net income (loss)

  $ 16.7      $ 43.1      $ (61.5   $ (18.4   $ 0.8        $ (0.9
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss) per limited partner unit:

             

Basic

  $ 0.37      $ 0.58        $ (0.21       $ (0.01
 

 

 

   

 

 

     

 

 

       

 

 

 

Diluted

  $ 0.37      $ 0.58        $ (0.21       $ (0.01
 

 

 

   

 

 

     

 

 

       

 

 

 

Weighted average limited partners’ units outstanding (in thousands):

             

Basic

    45,223        74,768        10,714        85,482        64,596        (h)        150,078   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Diluted

    45,420        74,768        10,714        85,482        64,596        (h)        150,078   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Distributions declared per limited partner unit

  $ 2.02      $ 1.18              $ 1.22   (j) 
 

 

 

   

 

 

           

 

 

 

 

(1) Inergy Midstream financial information is for the year ended September 30, 2012.

The accompanying notes are an integral part of these unaudited pro forma condensed combined consolidated financial statements.

 

4


INERGY MIDSTREAM, L.P.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2013

(in millions, except unit and per unit data)

 

     Historical                   
     Crestwood      Inergy
Midstream
    Pro Forma
Adjustments
         Inergy Midstream
Pro Forma
 

Operating revenues

   $ 72.4       $ 63.8      $ —           $ 136.2   

Depreciation, amortization, and accretion expense

     17.4         25.9        (2.7   (f)      40.6   

Other operating expenses

     34.3         26.1        —             60.4   
  

 

 

    

 

 

   

 

 

      

 

 

 

Operating income

     20.7         11.8        2.7           35.2   

Interest and debt expense

     11.4         8.6        1.1      (g)      21.1   
  

 

 

    

 

 

   

 

 

      

 

 

 

Income before income taxes

     9.3         3.2        1.6           14.1   

Provision for income taxes

     0.3         —          —             0.3   
  

 

 

    

 

 

   

 

 

      

 

 

 

Net income

   $ 9.0       $ 3.2      $ 1.6         $ 13.8   
  

 

 

    

 

 

   

 

 

      

 

 

 

Partners’ interest information:

            

General partner interest in net income

   $ 5.2       $ 2.2      $ —           $ 7.4   
  

 

 

    

 

 

   

 

 

      

 

 

 

Total limited partners’ interest in net income

   $ 3.8       $ 1.0      $ 1.6         $ 6.4   
  

 

 

    

 

 

   

 

 

      

 

 

 

Net income per limited partner unit:

            

Basic

   $ 0.07       $ 0.01           $ 0.04   
  

 

 

    

 

 

        

 

 

 

Diluted

   $ 0.07       $ 0.01           $ 0.04   
  

 

 

    

 

 

        

 

 

 

Weighted average limited partners’ units outstanding (in thousands):

            

Basic

     54,766         85,887        64,596      (h)      150,483   
  

 

 

    

 

 

   

 

 

      

 

 

 

Diluted

     55,042         85,887        64,596      (h)      150,483   
  

 

 

    

 

 

   

 

 

      

 

 

 

Distributions declared per limited partner unit

   $ 0.51       $ 0.40   (i)         $ 0.43   (j) 
  

 

 

    

 

 

        

 

 

 

The accompanying notes are an integral part of these unaudited pro forma condensed combined consolidated financial statements.

 

5


Notes to the Unaudited Pro Forma Condensed Combined Consolidated Financial Statements

 

(a) Represents pro forma adjustments to reflect the merger under the purchase method of accounting. Under the purchase method of accounting, tangible and identifiable intangible assets acquired and liabilities assumed are recorded at their estimated fair values. The merger is accounted for as a reverse merger and the value of the acquired net assets are based on the enterprise value of the accounting acquiree/legal acquiror (Inergy Midstream). The excess of the enterprise value of Inergy Midstream over the preliminary estimated fair value of net assets acquired is classified as goodwill on the accompanying unaudited pro forma condensed combined consolidated balance sheet. The preliminary estimates used to prepare the pro forma information presented will be updated after the closing of the merger based upon the final analysis prepared with the assistance of third party valuation advisors.

The following is a preliminary estimate of the enterprise value of Inergy Midstream (in millions, excluding unit and per unit information):

 

Inergy Midstream common units outstanding

     85,943,064   

Per unit value

   $ 23.40 (1) 

Total value of Inergy Midstream common units outstanding

   $ 2,011.1   

Value of Inergy Midstream incentive distribution rights

     1,060.6 (2) 

Fair value of outstanding debt

     734.4   

Dilutive effect of Inergy Midstream outstanding restricted units

     (2.1
  

 

 

 

Total enterprise value of Inergy Midstream

   $ 3,804.0   
  

 

 

 

 

(1) Inergy Midstream common unit price as of May 24, 2013. This amount will be updated following the effective time. At a unit price of $23.40 per unit, a 10% change in the unit price would result in a change in the total enterprise value of approximately $201.1 million.
(2) Based on certain assumptions management of Inergy Midstream believes are reasonable. This amount will be updated after the effective time with the assistance of third party valuation advisors. A 10% change in the valuation of the incentive distribution rights would result in a change in the total enterprise value of approximately $106.1 million.

The preliminary allocation of the aggregate merger consideration is as follows (in millions):

 

     Historical Net Book
Value
    Adjustment     Preliminary Fair
Value
 

Current assets

   $ 40.9      $ —        $ 40.9   

Property, plant and equipment, net

     979.9        —          979.9   

Intangible assets, net

     187.4        8.1        195.5   

Goodwill

     259.4        3,087.0        3,346.4   

Other assets

     2.9        —          2.9   

Current liabilities

     (27.3     —          (27.3

Long-term debt

     (711.0     (22.5     (733.5

Other long-term liabilities

     (0.8     —          (0.8
  

 

 

   

 

 

   

 

 

 

Total assumed purchase price

   $ 731.4      $ 3,072.6      $ 3,804.0   
  

 

 

   

 

 

   

 

 

 

 

(b) Reflects a one-time payment of $25 million to Crestwood unitholders other than the Crestwood Affiliated Entities and $44.8 million of costs directly related to the merger.

 

(c) Reflects estimated non-recurring fees associated with known contractual severance payments for certain identified employees that will be involuntarily terminated at the effective time. A plan to identify additional employees will likely be completed shortly before the effective time, and, accordingly, additional severance costs are likely; however, the amount of these costs is not known at this time.

 

6


(d) Reflects borrowings from Inergy Midstream’s revolving credit facility to fund the $25 million payable by Inergy Midstream to Crestwood unitholders other than the Crestwood Affiliated Entities, and to fund payments of fees and expenses directly related to the merger.

 

(e) Inergy Midstream acquired Rangeland Energy, LLC (“Rangeland”) on December 7, 2012. These amounts have been calculated after applying Inergy Midstream’s accounting policies and adjusting the results of Rangeland to reflect the depreciation and amortization that would have been charged assuming the preliminary fair value adjustments to property, plant and equipment and intangible assets had been made at the beginning of the current period. The purchase price allocation for this acquisition has been prepared on a preliminary basis pending final asset valuation and asset rationalization, and changes are expected when additional information becomes available. Accordingly, the purchase accounting adjustments made in connection with the development of the pro forma financial statements are preliminary and subject to change. The entities comprising Rangeland were development stage entities (as defined by ASC Topic 915, Development Stage Entities) until commencing principal commercial operations in June 2012.

 

(f) Reflects the pro forma adjustment of depreciation and amortization expense as follows (in millions):

 

     Year Ended
December 31, 2012
    Three Months
Ended
March 31, 2013
 

Eliminate historical depreciation, amortization and accretion expense

   $ (85.8   $ (25.9

Pro forma depreciation, amortization and accretion expense

     81.0        23.2   
  

 

 

   

 

 

 

Pro forma adjustment to depreciation, amortization and accretion expense

   $ (4.8   $ (2.7
  

 

 

   

 

 

 

The preliminary allocation of the purchase price of Rangeland includes certain customer account intangible assets, the preliminary amortization period of the customer account intangible assets is five years.

 

(g) Reflects the pro forma adjustment of interest and debt expense as follows (in millions):

 

     Year Ended
December 31, 2012
     Three Months
Ended
March 31, 2013
 

Amortization of fair value adjustment to Inergy Midstream’s outstanding senior notes

   $ 2.8       $ 0.7   

Interest on additional borrowings to fund merger consideration and related fees and expenses

     1.2         0.4   
  

 

 

    

 

 

 

Pro forma adjustment to interest and debt expense

   $ 4.0       $ 1.1   
  

 

 

    

 

 

 

The amortization period relative to the fair value adjustment to Inergy Midstream’s senior notes is approximately eight years. The interest rate assumed on the additional borrowings was approximately 2.0% for the twelve months ended December 31, 2012 and the three months ended March 31, 2013. A change of 20 basis points in the assumed rate does not result in a material change to interest and debt expense.

 

(h) Reflects the pro forma adjustment of basic and diluted earnings per limited partner unit as follows (in thousands):

 

     Year Ended
December 31, 2012
     Three Months
Ended
March 31, 2013
 

Basic and diluted weighted average number of Inergy Midstream common units outstanding—as reported

     85,482         85,887   

Inergy Midstream common units issued as merger consideration (1)

     64,596         64,596   
  

 

 

    

 

 

 

Pro forma basic and diluted weighted average number of Inergy Midstream common units outstanding

     150,078         150,483   
  

 

 

    

 

 

 

 

(1) Calculated based on 60,370,000 common units of Crestwood converted into Inergy Midstream common units at a rate of 1.0700.

 

7


(i) Amount of distribution per limited partner unit has been rounded. Inergy Midstream distributed $0.395 per limited partner unit for the three months ended March 31, 2013.

 

(j) Reflects pro forma distributions declared per Inergy Midstream limited partner unit:

 

     Year Ended
December 31, 2012
     Three Months
Ended
March 31, 2013
 

Distributions declared (in millions) (1)

   $ 182.9       $ 64.5   

Pro forma weighted average limited partner units outstanding (in thousands)

     150,078         150,483   
  

 

 

    

 

 

 

Pro forma distributions declared per limited partner unit

   $ 1.22       $ 0.43   
  

 

 

    

 

 

 

 

(1) Represents historical distributions of Crestwood and Inergy Midstream.

 

8