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Southcross Energy Partners, L.P. Reports Fourth Quarter And Full Year 2012 Financial And Operating Results And Provides Updated 2013 Guidance

Use of Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles generally accepted in the United States, or GAAP. We also present the non-GAAP financial measures of Adjusted EBITDA, gross operating margin and distributable cash flow. We define Adjusted EBITDA as net income, plus interest expense, income tax expense, depreciation and amortization expense, certain non-cash charges such as non-cash equity compensation, unrealized losses on commodity derivative contracts and selected charges and transaction costs that are unusual or non-recurring, less interest income, income tax benefit, unrealized gains on commodity derivative contracts and selected gains that are unusual or non-recurring. We define gross operating margin as the sum of all revenues less the cost of natural gas and NGLs sold. We define distributable cash flow as Adjusted EBITDA plus interest income, less cash paid for interest expense, taxes and maintenance capital expenditures.

We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our results of operations. Reconciliations of Adjusted EBITDA, gross operating margin and distributable cash flow to their most directly comparable GAAP measure are included in this press release. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool because it excludes some but not all items that affect the most directly comparable GAAP financial measure. You should not consider any of Adjusted EBITDA, gross operating margin, or distributable cash flow in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA, gross operating margin and distributable cash flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

 
 
SOUTHCROSS ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for unit and per unit data)
(Unaudited)
                   
Three months ended Year ended
December 31, December 31,
2012 2011 2012 2011
 
Revenues $ 151,660 $ 139,699 $ 496,129 $ 523,149
 
Expenses:
Cost of natural gas and liquids sold 135,212 120,966 424,489 460,580
Operations and maintenance 11,063 7,943 35,532 24,707
Depreciation and amortization 6,117 3,723 18,977 12,345
General and administrative   4,855     2,404     13,842     9,129  
Total expenses   157,247     135,036     492,840     506,761  
 
(Loss) income from operations (5,587 ) 4,663 3,289 16,388
Loss on extinguishment of debt (1,764 ) - (1,764 ) (3,240 )
Interest expense   (1,274 )   (1,295 )   (5,767 )   (5,348 )
(Loss) income before income tax expense (8,625 ) 3,368 (4,242 ) 7,800
Income tax benefit/(expense)   3     (62 )   (246 )   (261 )
 
Net (loss) income $ (8,622 ) $ 3,306   $ (4,488 ) $ 7,539  
 
Less:
Net loss through November 6, 2012   (4,394 )   (260 )
Net loss attributable to partners $ (4,228 ) $ (4,228 )
 

General partner's interest

  (85 )   (85 )
Limited partners' interest $ (4,143 ) $ (4,143 )
 
 
Net loss through November 6, 2012 $ (4,394 ) $ (260 )
Less deemed dividend on:
Redeemable preferred units (354 ) (718 ) (2,693 ) (1,553 )
Series B redeemable preferred units (874 ) - (4,696 ) -
Series C redeemable preferred units (589 ) - (2,012 ) -
Preferred units   (1,684 )   (3,694 )   (13,249 )   (14,131 )
Net loss attributable to Southcross Energy LLC common unitholders $ (7,895 ) $ (1,106 ) $ (22,910 ) $ (8,145 )
 
Basic and diluted earnings per unit

Net loss allocated to limited partner common units(from November 7, 2012 through December 31, 2012)

$ (2,072 ) $ (2,072 )

Weighted average number of limited partner common units outstanding

12,213,713

12,213,713
Loss per common unit $ (0.17 ) $ (0.17 )
 
Net loss allocated to limited partner subordinated units $ (2,072 ) $ (2,072 )

Weighted average number of limited partner subordinated units outstanding

12,213,713

12,213,713
Loss per subordinated unit $ (0.17 ) $ (0.17 )
 
Net loss allocated to Southcross Energy LLC common units $ (7,895 ) $ (1,106 ) $ (22,910 ) $ (8,145 )

Weighted average number of Southcross Energy LLC common units outstanding

1,198,865

1,198,246 1,198,429 1,197,876
Loss per Southcross Energy LLC common unit $ (6.59 ) $ (0.92 ) $ (19.12 ) $ (6.79 )
             
 
SOUTHCROSS ENERGY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for unit data)
(Unaudited)
 
December 31, December 31,
2012 2011
ASSETS
Current assets:
Cash and cash equivalents $ 7,490 $ 1,412
Trade accounts receivable 50,994 41,234
Prepaid expenses 1,762 950
Other current assets   1,001     561  
Total current assets 61,247 44,157
 
Property, plant and equipment, net 550,603 369,861
Intangible assets, net 1,624 1,681
Other assets   5,131     4,686  
Total assets $ 618,605   $ 420,385  
 
LIABILITIES, PREFERRED UNITS, PARTNERS' CAPITAL AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 96,801 $ 50,439
Current maturities of long-term debt - 17,490
Other current liabilities   3,586     5,007  
Total current liabilities 100,387 72,936
 
Long-term debt 191,000 190,790
Other non-current liabilities   751     21  
Total liabilities   292,138     263,747  
 
Commitments and contingencies
 
Preferred units of Southcross Energy LLC:
Redeemable preferred units - 16,554
Series B redeemable preferred units - -
Series C redeemable preferred units - -
Preferred units - 150,249
 
Partners' capital and members' equity:
Partners' capital:
Common units - (12,213,713 units issued and outstanding as of December 31, 2012) 194,365 -
Subordinated units - (12,213,713 units issued and outstanding as of December 31, 2012) 125,951 -
General Partner interest 6,628 -
Accumulated other comprehensive loss (477 ) -
 
Members' equity of Southcross Energy LLC:
Common equity—Class A (1,415,729 units issued and outstanding as of December 31, 2011) - 1,416
Common equity—Class B (57,279 units issued and outstanding as of December 31, 2011) - 57
Accumulated deficit   -     (11,638 )
Total partners' capital and members' equity   326,467     (10,165 )
Total liabilities, preferred units, partners' capital and members' equity $ 618,605   $ 420,385  
 
 
SOUTHCROSS ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
        Year ended
December 31,
2012       2011
Cash flows from operating activities:
Net (loss) income $ (4,488 ) $ 7,539

Adjustments to reconcile net (loss) income to net cash provided by

 operating activities:

Depreciation and amortization 18,977 12,345
Unit-based compensation 630 -
Loss on extinguishment of debt 1,764 3,240
Deferred financing costs amortization 1,183 882
Gain on sale of property, plant and equipment - (522 )
Unrealized derivatives loss 141 21
Changes in operating assets and liabilities:
Trade accounts receivable (9,760 ) (2,806 )
Prepaid expenses and other (1,246 ) (497 )
Other non-current assets 1,786 (2,155 )
Accounts payable and accrued expenses 16,517 2,759
Other liabilities   (1,181 )   (799 )
Net cash provided by operating activities   24,323     20,007  
Cash flows from investing activities:
Capital expenditures (169,816 ) (123,347 )
Acquisition of Enterprise Alabama Intrastate, LLC - (21,777 )
Proceeds from sale of property, plant and equipment   -     522  
Net cash used in investing activities   (169,816 )   (144,602 )
Cash flows from financing activities:
Proceeds from issuance of common units, net 187,764 -
Borrowings under our credit agreements 297,500 229,400
Repayments of our credit agreements (314,780 ) (136,119 )
Financing costs (5,178 ) (2,710 )
Repayment of equity note - 113
Repurchase and retirement of Southcross Energy LLC common units (15,300 ) -
Proceeds from issuance of redeemable preferred units - 15,000
Proceeds from issuance of Series B redeemable preferred units 42,800 -
Proceeds from issuance of Series C redeemable preferred units 30,000 -
Distribution to Southcross Energy LLC (46,030 ) -
Purchase and retirement of Partnership common units   (25,205 )   -  
Net cash provided by financing activities   151,571     105,684  
 
Net increase (decrease) in cash and cash equivalents 6,078 (18,911 )
Cash and cash equivalents —Beginning of period   1,412     20,323  
Cash and cash equivalents—End of period $ 7,490   $ 1,412  
 
 
SOUTHCROSS ENERGY PARTNERS, L.P.
SELECTED FINANCIAL AND OPERATIONAL DATA
(In thousands, except for operational data)
(Unaudited)
                   
Three months ended Year ended
December 31, December 31,
2012 2011 2012 2011
Financial data:
Adjusted EBITDA $ 1,331 $ 8,379 $ 24,019 $ 28,957
Gross operating margin 16,448 18,733 71,640 62,569
 
Maintenance capital expenditures 1,778 2,615 5,193 5,317
Expansion capital expenditures 55,589 42,083 164,623 150,669
 
Distributable cash flow (1,482 ) 4,576 13,996 18,913
Distributions declared (1) 5,982 - 5,982 -
 
Operating data:
Average throughput volumes of natural gas (MMBtu/d) 619,409 595,135 553,093 506,975
Average volume of processed gas (MMBtu/d) 215,083 213,243 206,045 155,475
Average volume of NGLs sold (Barrels per day) 11,057 6,497 9,385 5,131
 
Realized prices on natural gas volumes sold/Btu ($/MMBtu) $ 3.47 $ 3.49 $ 2.83 $ 4.05
Realized prices on NGL volumes sold/gal ($/gal) $ 0.70 $ 1.49 $ 0.87 $ 1.35
 

(1) A distribution of $0.24 attributable to fourth quarter 2012 is the first declared by the Partnership and corresponds to the minimum quarterly distribution of $0.40 per unit, or $1.60 on an annualized basis, pro-rated for the portion of the quarter following the closing of the Partnership's initial public offering on November 7, 2012.

                   
 
SOUTHCROSS ENERGY PARTNERS, L.P.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)
 
Three months ended Year ended
December 31, December 31,
2012 2011 2012 2011
Reconciliation of gross operating margin to net (loss) income:
Gross operating margin $ 16,448 $ 18,733 $ 71,640 $ 62,569
Add (deduct):
Income tax benefit/(expense) 3 (62 ) (246 ) (261 )
Interest expense (1,274 ) (1,295 ) (5,767 ) (5,348 )
Loss on extinguishment of debt (1,764 ) - (1,764 ) (3,240 )
General and administrative expense (4,855 ) (2,404 ) (13,842 ) (9,129 )
Depreciation and amortization expense (6,117 ) (3,723 ) (18,977 ) (12,345 )
Operations and maintenance expense   (11,063 )   (7,943 )   (35,532 )   (24,707 )
Net (loss) income $ (8,622 ) $ 3,306   $ (4,488 ) $ 7,539  
 
Three months ended Year ended
December 31, December 31,
2012 2011 2012 2011
Reconciliation of net (loss) income
to Adjusted EBITDA and distributable cash flow:
Net (loss) income $ (8,622 ) $ 3,306 $ (4,488 ) $ 7,539
Add (deduct):
Depreciation and amortization expense 6,117 3,723 18,977 12,345
Interest expense 1,274 1,295 5,767 5,348
Unrealized derivatives loss (gain) - (7 ) 141 21
Loss on extinguishment of debt 1,764 - 1,764 3,240
Unit-based compensation 337 - 630 -
Transaction costs - - - 203
Income tax (benefit)/expense (3 ) 62 246 261
Management fees 50 - 568 -
Expenses associated with significant items   414     -     414     -  
Adjusted EBITDA $ 1,331   $ 8,379   $ 24,019   $ 28,957  
Cash interest, net (1,038 ) (1,126 ) (4,584 ) (4,466 )
Income tax benefit/(expense) 3 (62 ) (246 ) (261 )
Maintenance capital expenditures   (1,778 )   (2,615 )   (5,193 )   (5,317 )
Distributable cash flow $ (1,482 ) $ 4,576   $ 13,996   $ 18,913  
 
                 
 
SOUTHCROSS ENERGY PARTNERS, L.P.
FOURTH QUARTER 2013 AND FULL YEAR 2013 ADJUSTED EBITDA GUIDANCE
RECONCILIATION TO NET INCOME
(In thousands)
(Unaudited)
 
Current Original
Full Year 2013: Low High Low High
 
Net Income $ 5,000 $ 18,000 $ 26,500 $ 33,500
Add:
Interest expense 8,500 8,500 7,000 7,000
Income tax expense 500 500 500 500
Depreciation and amortization expense   28,000   28,000   24,000   24,000
Adjusted EBITDA $ 42,000 $ 55,000 $ 58,000 $ 65,000
 
Current
Fourth Quarter 2013: Low High
 
Net Income $ 3,865 $ 6,865
Add:
Interest expense 2,500 2,500
Income tax expense 135 135
Depreciation and amortization expense   7,500   7,500
Adjusted EBITDA $ 14,000 $ 17,000
 




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