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Inergy Reports Fiscal 2012 Results

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, and our ability to service debt obligations. We believe that EBITDA provides additional information for evaluating our ability to make the quarterly distribution and is presented solely as a supplemental measure. We believe that Adjusted EBITDA provides additional information for evaluating our financial performance without regard to our financing methods, capital structure, and historical cost basis. Further, EBITDA and Adjusted EBITDA, as we define 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. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s view only as of the date made. We undertake no obligation to update any forward-looking statement, except as otherwise required by law.

 

Inergy, L.P. and Subsidiaries

Consolidated Statements of Operations
For the Three Months and Years Ended September 30, 2012 and 2011
(in millions, except unit and per unit data)
                       
Three Months Ended Year Ended
September 30, September 30,
2012 2011 2012 2011
(Unaudited) (Unaudited)
Revenues:
Propane $ 156.7 $ 274.0 $ 1,289.0 $ 1,461.9
Other   147.5     174.6     717.8     691.9  
304.2 448.6 2,006.8 2,153.8
 
Cost of product sold (excluding depreciation and amortization as shown below):
Propane 123.3 224.9 974.5 1,044.0
Other   81.0     110.6     421.7     432.0  
204.3 335.5 1,396.2 1,476.0
 
Expenses:
Operating and administrative 53.7 79.7 300.8 323.3
Depreciation and amortization 33.0 50.0 169.6 191.8
(Gain) loss on disposal of assets   (0.1 )   5.1     5.7     8.2  
Operating income (loss) 13.3 (21.7 ) 134.5 154.5
 
Other income (expense):
Interest expense, net (10.4 ) (26.0 ) (83.6 ) (113.5 )
Gain on disposal of retail propane operations

589.5

-

589.5

-

Loss on Suburban Propane Partners, L.P. units

(47.6

)

-

(47.6

)

-

Early extinguishment of debt - (2.5 ) (26.6 ) (52.1 )
Other income   -     -     1.5     1.2  
Income (loss) before income taxes 544.8 (50.2 ) 567.7 (9.9 )
Provision for income taxes   1.6     -     1.8     0.7  
Net income (loss) 543.2 (50.2 ) 565.9 (10.6 )
Net (income) loss attributable to non-controlling partners  

(3.2

)

 

-

   

(11.0

)

 

28.2

 
Net income (loss) attributable to partners $

540.0

  $ (50.2 ) $ 554.9   $ 17.6  
 
Total limited partners’ interest in net income (loss)

$

540.0

 

$

(50.2

)

$

554.9

 

$

17.6

 
 
Net income (loss) per limited partner unit:
Basic $ 4.18   $ (0.42 ) $ 4.39   $ 0.17  
Diluted $ 4.10   $ (0.42 ) $ 4.22   $ 0.15  
 
Weighted-average limited partners’ units outstanding (in thousands):
Basic   125,805     119,134     124,976     105,732  
Diluted   131,700     119,134     131,589     117,684  
 
 
           
Three Months Ended Year Ended
September 30, September 30,
2012       2011 2012       2011
(Unaudited) (Unaudited)

Supplemental Information:

Retail gallons sold 11.5 43.1 233.5 325.6
 
Cash and cash equivalents $ - $ 11.5
 
Outstanding debt:
Inergy credit agreement:
Revolving loan facility $ 311.7 $

81.2

Term loan facility - 300.0
Inergy senior unsecured notes 11.5 1,445.1
Inergy fair value hedge adjustment on senior unsecured notes - 0.5
Inergy net bond/swap premium (discount) (e) (f) - 8.5
Inergy other debt 3.5 1.3
NRGM credit facility (h)   416.5     -  
Total debt $ 743.2   $ 1,836.6  
 
Total partners’ capital $ 1,184.8   $ 1,146.0  
 
Limited partner units outstanding (in thousands):
Common units 125,796 119,148
Class B units (g)   5,882     12,165  
Total Common and Class B limited partner units   131,678     131,313  
 
EBITDA:
Net income (loss) $ 543.2 $ (50.2 ) $ 565.9 $ (10.6 )
Interest expense, net 10.4 26.0 83.6 113.5
Early extinguishment of debt - 2.5 26.6 52.1
Provision for income taxes 1.6 - 1.8 0.7
Depreciation and amortization   33.0     50.0     169.6     191.8  
EBITDA (a) $ 588.2 $ 28.3 $ 847.5 $ 347.5
Non-cash (gain) loss on derivative contracts (8.5 ) 1.4 (8.6 ) 1.2
Long-term incentive and equity compensation expense 8.1 1.4 17.9 5.8
(Gain) loss on disposal of assets (0.1 ) 5.1 5.7 8.2
Gain on disposal of retail propane operations (589.5 ) - (589.5 ) -
Loss on Suburban Propane Partners, L.P. units 47.6 - 47.6 -
Transaction costs   (3.4 )   0.5     0.9     9.5  
Adjusted EBITDA (a) $ 42.4   $ 36.7   $ 321.5   $ 372.2  
 
Distributable cash flow:
Adjusted EBITDA (a) $ 42.4 $ 36.7 $ 321.5 $ 372.2
Cash interest expense (b) (9.3 ) (24.4 ) (77.5 ) (107.1 )
Maintenance capital expenditures (c) (3.1 ) (4.2 ) (12.4 ) (14.0 )
Income tax expense (1.6 ) - (1.8 ) (0.7 )
Inergy Midstream distributions declared and paid for minority unitholders (i)  

(7.2

)

 

-

   

(21.9

)

 

-

 
Distributable cash flow (d) $ 21.2   $ 8.1   $ 207.9   $ 250.4  
 
EBITDA:
Net cash provided by (used in) operating activities $ (14.2 ) $ (17.7 ) $ 239.0 $ 114.4
Net changes in working capital balances 53.7 28.0 (9.4 ) 104.1
Non-cash early extinguishment of debt - (1.5 ) (10.0 ) (12.7 )
Provision for doubtful accounts (0.3 ) (1.1 ) (2.1 ) (3.7 )
Amortization of deferred financing costs, swap premium and net bond discount

(1.0

)

(1.7

)

(4.9

)

(7.4

)

Unit-based compensation charges (3.1 ) (1.4 ) (12.9 ) (5.8 )
Gain (loss) on disposal of assets 0.1 (5.1 ) (5.7 ) (8.2 )
Gain on disposal of retail propane operations 589.5 - 589.5 -
Loss on Suburban Propane Partners, L.P. units (47.6 ) - (47.6 ) -
Deferred income tax (0.9 ) 0.3 (0.4 ) 0.5
Interest expense, net 10.4 26.0 83.6 113.5
Early extinguishment of debt - 2.5 26.6 52.1
Provision for income taxes   1.6     -     1.8     0.7  
EBITDA $ 588.2 $ 28.3 $ 847.5 $ 347.5
Non-cash (gain) loss on derivative contracts (8.5 ) 1.4 (8.6 ) 1.2
Long-term incentive and equity compensation expense 8.1 1.4 17.9 5.8
(Gain) loss on disposal of assets (0.1 ) 5.1 5.7 8.2
Gain on disposal of retail propane operations (589.5 ) - (589.5 ) -
Loss on Suburban Propane Partners, L.P. units 47.6 - 47.6 -
Transaction costs   (3.4 )   0.5     0.9     9.5  
Adjusted EBITDA $ 42.4   $ 36.7   $ 321.5   $ 372.2  
 
(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, long-term incentive and equity compensation expenses, the gain or loss on the disposal of assets, the gain on disposal of retail propane operations, the loss on Suburban Propane Partners, L.P. units, and transaction costs. Transaction costs are third-party professional fees and other costs that are incurred in conjunction with closing a transaction. 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, and our ability to service debt obligations. We believe that EBITDA provides additional information for evaluating our ability to make the quarterly distribution and is presented solely as a supplemental measure. We believe that Adjusted EBITDA provides additional information for evaluating our financial performance without regard to our financing methods, capital structure, and historical cost basis. Further, EBITDA and Adjusted EBITDA, as we define 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, income taxes, and Inergy Midstream distributions declared and paid for minority unitholders. 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. We believe that distributable cash flow provides additional information for evaluating our ability to declare and pay distributions to unitholders. 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.
 
(e) In April 2008, the Company 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 was amortized on a non-cash basis over the term of the senior notes.
 
(f) In February 2009, the Company closed on a $225 million offering of senior notes under Rule 144A to eligible purchasers. The 8¾% notes were issued at 90.191%, which resulted in a discount of $22.1 million. The discount was amortized on a non-cash basis over the term of the senior notes.
 
(g) The Class B units have similar rights and obligations of Inergy, L.P. common units except that the units pay distributions in kind rather than in cash for a certain period of time. On November 14, 2011, approximately 6.6 million Class B units converted into common units of Inergy, L.P. and are entitled to receive cash distributions. Immediately after the payment of the Inergy, L.P. common unit distribution on November 14, 2012, the remaining approximately 5.9 million outstanding Class B units converted into common units of Inergy, L.P. and are entitled to receive cash distributions. For a complete description of the Class B units, please see the Third Amended and Restated Agreement of Limited Partnership of Inergy, filed on Form 8-K on November 5, 2010.
 
(h) Inergy and each of its wholly owned subsidiaries do not provide credit support nor do they guarantee any amounts outstanding under the NRGM Credit Facility.
 
(i) The amount of distributions for the three months and year ended September 30, 2012, includes amounts that are to be received by Inergy Midstream’s minority unitholders based on the $0.385 distribution per limited partner unit declared on October 26, 2012. The amount of distributions for the year ended September 30, 2012, also includes the $0.04, $0.37 and $0.38 distributions per limited partner unit paid to Inergy Midstream’s minority unitholders on February 14, 2012, May 15, 2012 and August 14, 2012, respectively.




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