Crosstex Reports Fourth Quarter and Full Year 2004 Results Seven
Straight Quarters of Increases in Distributable Cash Flow Since IPO
of Partnership DALLAS, March 8 /PRNewswire-FirstCall/ -- Crosstex
Energy, L.P. (NASDAQ:XTEX) (the Partnership) today reported fourth
quarter and full year earnings. Crosstex Energy, Inc. (NASDAQ:XTXI)
(the Corporation) will report its results later this week. Both
companies continued their track record of solid growth in the
fourth quarter and full year 2004, which supported increases in
distributions and dividends from both companies. "With the LIG
acquisition and the continued growth of our treating business, our
employees continue to drive our results higher," said Barry E.
Davis, President and Chief Executive Officer of the Crosstex Energy
companies. "We have been able to continue this growth while
maintaining our emphasis on return on total invested capital. Our
emphasis on return, as opposed to accretion alone, will compel us
to focus more resources on organic growth projects as the driver of
our next growth steps in preference to acquisitions, given the
current market environment." The Partnership reported net income of
$6.1 million, or $0.22 per limited partner unit, in the quarter
ended December 31, 2004, compared to net income in the fourth
quarter of 2003 of $5.5 million, or $0.26 per unit. Full year 2004
results for the Partnership were net income of $23.7 million, or
$0.95 per unit, compared to net income of $15.2 million or $0.88
per unit in 2003. The Partnership's Distributable Cash Flow for the
quarter was $11.9 million, or 2.58 times the amount required to
cover its Minimum Quarterly Distribution of $0.25 per unit, and
1.17 times the amount required to cover its recently increased
distribution of $0.45 per unit. This is an increase of $3.2
million, or 37 percent, over Distributable Cash Flow of $8.7
million in the 2003 fourth quarter. For the full year of 2004,
Distributable Cash Flow was $42.2 million, or 2.29 times the amount
required to cover the Minimum Quarterly Distribution and 1.14 times
the amount required to cover its actual distributions of $37.0
million. Distributable Cash Flow for the year increased more than
40 percent from the 2003 figure of $29.5 million. Distributable
Cash Flow is a non-GAAP financial measure and is explained in
greater detail under "Non-GAAP Financial Information." Also, in the
tables at the end of this release is a reconciliation of this
measure to net income. The increase in Distributable Cash Flow was
due to growth in the Partnership's gross margin, to $33.2 million
compared to $18.5 million in the corresponding 2003 period, an
increase of 80 percent. Gross margin from the Midstream business
segment increased by $13.0 million, or 98 percent, to $26.3
million, due to growth in on-system gathering and transmission
volumes of 104 percent, and to growth in processed volumes of 182
percent. The acquisition of Louisiana Intrastate Gas (LIG) Pipeline
Company and its subsidiaries on April 1, 2004 was the main driver
of growth in Midstream gross margins. LIG contributed $10.8 million
to gross margin in the quarter. Gross margin for the quarter from
the Treating segment increased by $1.7 million, or 33 percent, to
$7.0 million. Improvements in margins of the Seminole plant
provided $266 thousand of the increase. Growth in the number of
treating plants in service from 52 at the end of the fourth quarter
of 2003 to 74 at the end of the fourth quarter of 2004 created the
remaining increase in Treating margins. For similar reasons, gross
margin for the year increased from $59.7 million to $112.3 million,
or 88 percent. Of the $52.6 million gross margin increase for the
year, $43.5 million was contributed from the midstream segment. In
addition to improvements from the LIG acquisition ($27.7 million
for the nine months it was owned in 2004), midstream margins
increased $7.9 million due to the DEFS assets acquired mid-year
2003. Treating margins improved $9.1 million year over year, $4.5
million of which is due to ownership of the Seminole plant for only
six months in 2003, and $4.1 million due to the net growth in
treating plants in service. These improvements were offset by
increases in operating expenses of $5.9 million and $20.4 million
for the quarter and year respectively, primarily associated with
the new assets in service. General and administrative expenses
increased by $5.1 million and $13.2 million for the quarter and
year, respectively. The Partnership's general and administrative
costs were capped in 2003. Without such a cap, annual general and
administrative expenses would have been $10.2 million in 2003
compared to $20.1 million in 2004, an increase of $9.9 million.
This increase is related to the staffing increases around the LIG
acquisition and the significant infrastructure improvements being
made at the company to support future growth. Also included in
general and administrative costs are $2.7 million associated with
the implementation of new computer systems, outside consultants and
audit work related to compliance with Sarbanes Oxley and corporate
development costs. Interest expense increased $1.8 million and $5.8
million for the quarter and year, respectively, as the Partnership
has financed its growth in 2004 with debt. The Partnership's
capital structure is still very conservative. Crosstex Energy, Inc.
The Corporation's share of Partnership distributions, including
distributions on its ten million limited partner units, its two
percent general partner interest, and the incentive distribution
rights, was $6.5 million in the fourth quarter, compared to $4.4
million in the fourth quarter of 2003, an increase of over 47
percent. The recently announced increase in the Partnership's
distribution increased the Corporation's share of the distribution
by $0.5 million, from $6.0 million in the third quarter of 2004 to
$6.5 million for the fourth quarter. "The accretive growth of the
Partnership and the growth of the Corporation's distributions
received from the Partnership have allowed it to increase its
dividend payable to its stockholders by 30 percent in the first
year of its existence as a public company," said Mr. Davis. "From
the first quarter to the fourth quarter of 2004, we increased
dividends from $0.30 per share to $0.39 per share." Earnings Call
Crosstex will hold its quarterly conference call to discuss fourth
quarter results today at 10:00 a.m. Central Time (11:00 a.m.
Eastern Time). The dial- in number for the call is 800-706-7741,
passcode Crosstex. A live Webcast of the call can be accessed on
the investor information page of Crosstex Energy's Web site at
http://www.crosstexenergy.com/ . The call will be available for
replay for 30 days by dialing 888-286-8010, passcode 76714886. A
replay of the broadcast will also be available on the Partnership's
Web site. About the Crosstex Energy Companies Crosstex Energy,
L.P., a mid-stream natural gas company headquartered in Dallas,
operates over 4,500 miles of pipeline, five processing plants, and
over 80 natural gas amine treating plants. Crosstex currently
provides services for over 1.9 BCF/day of natural gas. Crosstex
Energy, Inc. owns the general partner, a 54 percent limited partner
interest and the incentive distribution rights of Crosstex Energy,
L.P. Additional information about the Crosstex companies can be
found at http://www.crosstexenergy.com/ . Non-GAAP Financial
Information This press release contains non-generally accepted
accounting principle financial measures of earnings before non-cash
charges and less maintenance capital expenditures, which we refer
to as Distributable Cash Flow. The amounts included in the
calculation of these measures are computed in accordance with
generally accepted accounting principles (GAAP), with the exception
of maintenance capital expenditures. Maintenance capital
expenditures are capital expenditures made to replace partially or
fully depreciated assets in order to maintain the existing
operating capacity of our assets and to extend their useful lives.
We believe this measure is useful to investors because it may
provide users of this financial information with meaningful
comparisons between current results and prior reported results and
a meaningful measure of the Partnership's cash flow after it has
satisfied the capital and related requirements of its operations.
Distributable Cash Flow is not a measure of financial performance
or liquidity under GAAP. It should not be considered in isolation
or as an indicator of the Partnership's performance. Furthermore,
it should not be seen as a measure of liquidity or a substitute for
metrics prepared in accordance with GAAP. Our reconciliation of
this measure to net income is included in the following tables.
This press release contains forward-looking statements identified
by the use of words such as "forecast," "anticipate," "plan" and
"estimate." These statements are based on currently available
information and assumptions and expectations that the Partnership
and the Corporation believe are reasonable. However, the
assumptions and expectations are subject to a wide range of
business risks, so it can give no assurance that actual performance
will fall within the forecast ranges. Among the key risks that may
bear directly on the Partnership's and the Corporation's results of
operation and financial condition are: (1) the amount of natural
gas transported in the Partnership's gathering and transmission
lines may decline as a result of competition for supplies, reserve
declines and reduction in demand from key customers and markets;
(2) the level of the Partnership's processing and treating
operations may decline for similar reasons; (3) fluctuations in
natural gas and NGL prices may occur due to weather and other
natural and economic forces; (4) there may be a failure to
successfully integrate new acquisitions; (5) the Partnership's
credit risk management efforts may fail to adequately protect
against customer nonpayment; and (6) the Partnership may not
adequately address construction and operating risks. The
Partnership and the Corporation have no obligation to publicly
update or revise any forward-looking statement, whether as a result
of new information, future events, or otherwise. (tables to follow)
CROSSTEX ENERGY, L.P. Selected Financial and Operating Data (All
amounts in thousands except per unit numbers) Quarter Ended Twelve
Months Ended December 31, December 31, 2004 2003 2004 2003 Revenues
Midstream $620,840 $244,130 $1,948,021 $989,697 Treating 8,163
6,513 30,755 23,966 629,003 250,643 1,978,776 1,013,663 Cost of Gas
Midstream 594,580 230,898 1,861,204 946,412 Treating 1,182 1,257
5,274 7,568 595,762 232,155 1,866,478 953,980 Gross Margin 33,241
18,488 112,298 59,683 Operating Expenses 11,599 5,685 38,141 17,692
General & Administrative 6,828 1,732 20,064 6,844 Profit on
Energy Trading Activities (715) (414) (2,507) (1,905) Stock Based
Compensation 235 696 1,001 5,345 (Gain) Loss on Sale of Property
--- --- (12) --- Depreciation and Amortization 6,535 4,191 23,034
13,268 Total 24,482 11,890 79,721 41,244 Operating Income 8,759
6,598 32,577 18,439 Interest Expense (3,006) (1,196) (9,220)
(3,392) Other Income 544 129 798 179 Total Other Income (Expense)
(2,462) (1,067) (8,422) (3,213) Income Before Income Taxes and
Interest of Non-controlling Partners in the Partnership's Net
Income 6,297 5,531 24,155 15,226 Interest of Non- controlling
Partners in the Partnership's Net Income (139) --- (289) --- Income
Tax Provision (46) --- (162) --- Net Income $6,112 $5,531 $23,704
$15,226 General Partner Share of Net Income $1,908 $619 $5,913
$1,240 Limited Partners Share of Net Income $4,204 $4,912 $17,791
$13,986 Net Income per Limited Partners' Unit $0.22 $0.26 $0.95
$0.88 Weighted Average Limited Partners' Units Outstanding
(Diluted) 18,713 18,564 18,633 15,960 CROSSTEX ENERGY. L.P.
Reconciliation of Net Income to Distributable Cash Flow (All
amounts in thousands except ratios) Quarter Ended Twelve Months
Ended December 31, December 31, 2004 2003 2004 2003 Net Income
$6,112 $5,531 $23,704 $15,226 Depreciation and Amortization (A)
6,478 4,191 22,852 13,268 Stock Based Compensation 235 696 1,001
5,345 Loss (Gain) on Sale of Property --- --- (12) --- Proceeds
from Sale of Property --- --- 611 --- Deferred Tax Benefit (22) ---
(190) --- Cash Flow 12,803 10,418 47,966 33,839 Maintenance Capital
Expenditures (915) (1,738) (5,729) (4,310) Distributable Cash Flow
$11,888 $8,680 $42,237 $29,529 Minimum Quarterly Distribution (MQD)
$4,615 $4,605 $18,458 $16,658 Distributable Cash Flow/MQD 2.58 1.89
2.29 1.77 Actual Distribution $10,164 $7,436 $37,032 $22,149
Distribution Coverage 1.17 1.17 1.14 1.33 (A) Excludes minority
interest share of depreciation and amortization of $57,000 and
$182,000 for the three and twelve months ended December 31, 2004,
respectively. CROSSTEX ENERGY, L.P. Operating Data (All volumes in
MMBtu/d) Quarter Ended Twelve Months Ended December 31, December
31, Pipeline Throughput 2004 2003 2004 2003 Gulf Coast Transmission
56,000 97,000 72,000 85,000 Vanderbilt 89,000 61,000 68,000 49,000
CCNG Transmission 175,000 127,000 179,000 157,000 CCNG Transmission
- Hallmark 108,000 73,000 103,000 57,000 Gregory Gathering 120,000
151,000 133,000 151,000 Mississippi 78,000 74,000 78,000 79,000
Arkoma 17,000 15,000 19,000 13,000 LIG Pipeline & Marketing
619,000 N/A 603,000 (A) N/A Other Midstream 30,000 35,000 34,000
35,000 Total Gathering and Transmission Volume 1,292,000 633,000
1,289,000 626,000 Natural Gas Processed Gregory Processing 93,000
128,000 106,000 106,000 Conroe Processing 22,000 25,000 25,000
26,000 LIG Processing 317,000 N/A 294,000 (A) N/A Total Processed
Volume 432,000 153,000 425,000 132,000 Total On-System Volumes
1,724,000 786,000 1,714,000 758,000 Producer Services Volumes
212,000 246,000 210,000 259,000 Treating Plants in Service (B) 74
52 (A) Represents activity since April 1, 2004 acquisition. (B)
Plants in service represent plants in service on the last day of
the quarter. Contact: Barry E. Davis, President and Chief Executive
Officer William W. Davis, Executive V.P. and Chief Financial
Officer Phone: (214) 953-9500 DATASOURCE: Crosstex Energy, L.P.
CONTACT: Barry E. Davis, President and Chief Executive Officer, or
William W. Davis, Executive V.P. and Chief Financial Officer, both
of Crosstex Energy, +1-214-953-9500 Web site:
http://www.crosstexenergy.com/
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