XTXI Crosstex Energy, Inc. (MM)

DALLAS, March 10 /PRNewswire-FirstCall/ -- The Crosstex Energy companies, Crosstex Energy, L.P. (NASDAQ:XTEX) (the Partnership) and Crosstex Energy, Inc. (NASDAQ:XTXI) (the Corporation) today reported solid growth in results for the fourth quarter and the full year 2005. This growth allows the companies to continue their track record of increases in both distributions and dividends. "We had a great fourth quarter and an outstanding year in 2005. The quarter and the year were distinguished by continued emphasis on maximizing profitable growth, including constructing a new pipeline in North Texas, the significant expansion in our treating business, and the strategic acquisition of the South Louisiana processing business," said Barry E. Davis, President and Chief Executive Officer. Crosstex Energy, L.P. Financial Results The Partnership reported net income of $10.5 million, or $0.33 per limited partner unit, in the quarter ended December 31, 2005, compared to net income in the fourth quarter of 2004 of $6.1 million, or $0.23 per unit. Net income in the fourth quarter of 2005 was impacted by a $2.3 million gain during the quarter from the mark-to-market valuation of the derivative financial instruments (puts) purchased to protect against liquid prices fluctuations in conjunction with the South Louisiana processing business. Full year 2005 results for the Partnership were net income of $19.2 million, or $0.56 per unit, compared to net income of $23.7 million or $0.98 per unit in 2004. The year's net income was reduced by the impact of the fair value loss of $9.2 million from the puts previously described. Neither the gains associated with the puts in the fourth quarter nor the fair value loss for the year had any impact on distributable cash flow. The Partnership's Distributable Cash Flow for the fourth quarter of 2005 was $22.2 million, or 3.48 times the amount required to cover its Minimum Quarterly Distribution of $0.25 per unit, and 1.31 times the amount required to cover its recently increased distribution of $0.51 per unit. This is an increase of $10.3 million, or 87 percent, over Distributable Cash Flow of $11.9 million in the 2004 fourth quarter. Fourth quarter 2005 Distributable Cash Flow was $3.6 million in excess of the amount needed to provide 1.1 times coverage of the fourth quarter distribution of $0.51. For the full year of 2005, Distributable Cash Flow was $64.6 million, or 2.53 times the amount required to cover the Minimum Quarterly Distribution and 1.29 times the amount required to cover its actual distributions of $50.1 million. Distributable Cash Flow for 2005 increased more than 53 percent from the 2004 figure of $42.2 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 in the fourth quarter 2005 was due to growth in the Partnership's gross margin to $56.4 million compared to $33.9 million in the corresponding 2004 period, an increase of 66 percent. Gross margin from the Midstream business segment increased by $18.9 million, or 72 percent, to $45.1 million driven in large part by South Louisiana processing margins of $14.1 million and market volatility. The quarter was negatively impacted by reduced throughput volumes on the new South Louisiana processing assets as a result of damage by Hurricanes Katrina and Rita to production and pipeline facilities owned by others in the Gulf of Mexico. The Partnership took advantage of arbitrage opportunities resulting from market volatility in the aftermath of the hurricanes which more than offset the negative impact of the reduced volumes. Additionally, the Partnership had negotiated a purchase price reduction on these assets due to the negative impacts on volumes foreseen prior to their acquisition. Volumes should begin to increase in these assets over the first two quarters of 2006 as natural gas producers and pipelines complete repairs to their infrastructure and resume full production, although it may be the third quarter before volumes are back to levels consistent with original acquisition expectations. The excess cash flow generated in the fourth quarter of 2005 and the purchase price reduction obtained on the South Louisiana processing assets will be considered in setting the distribution in the first quarter of 2006. Gross margin for the quarter from the Treating segment increased by $3.9 million, or 55 percent, to $10.8 million due to the increase in the number of plants in service. The number of treating plants in service increased from 74 at the end of the fourth quarter of 2004 to 112 at the end of the fourth quarter of 2005. For similar reasons, overall gross margin for the year increased from $114.5 million to $162.5 million, an increase of 42 percent. Of the $48.0 million gross margin increase for the year, $35 million was contributed from the midstream segment. Treating margins improved $13 million year-over-year. These improvements were offset by increases in operating expenses of $7.5 million and $18.4 million for the fourth quarter and full year, respectively, primarily associated with the new assets in service. General and administrative expenses increased by $3.3 million and $11.8 million for the fourth quarter and full year, respectively. This increase is related to the staffing increases from the South Louisiana processing acquisition, the North Texas Pipeline construction activity, the growth in treating plants and other growth. Interest expense increased $3.4 million and $6.5 million for the fourth quarter and full year, respectively, due to increased debt to support growth activities. The Partnership's capital structure is still very conservative, having recently raised $228 million of equity, representing approximately 47 percent of the purchase price of the South Louisiana processing assets. Crosstex Energy, Inc. Financial Results The Corporation reported net income of $45.1 million for the fourth quarter of 2005, compared to net income of $2.4 million for the fourth quarter of 2004. Net income for the fourth quarter included a non-cash gain on issuance of units of the Partnership of $65.1 million related to the Partnership's offering of 6.6 million units during the quarter. This gain was offset by non-cash income tax expense of $27.5 million for a net non-cash impact on fourth quarter earnings of $37.6 million. The Corporation's net income before income taxes and interest of non-controlling partners in the net income of the Partnership was $10.3 million in the fourth quarter of 2005 and $6.1 million in the fourth quarter of 2004. The Corporation's share of distributions, including distributions on its 10 million limited partner units, its two percent general partner interest and the incentive distribution rights was $9.4 million for the fourth quarter of 2005 compared to $6.5 million in the fourth quarter of 2004, an increase of over 44 percent. Much of the increase is the result of the increase in the number of limited partner units receiving distributions. Such units increased by 6.6 million to 24.8 million units due to equity issued to finance the South Louisiana processing assets. Since the Corporation's initial public offering in 2004, dividends have grown from $0.30 to $0.56 per share, an increase of 86 percent in seven quarters. Earnings Call Crosstex will hold its quarterly conference call to discuss fourth quarter and year-end results today, Friday, March 10, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time). The dial-in number for the call is 800-322-5044, passcode Crosstex. A live Webcast of the call can be accessed on the investor relations page of Crosstex Energy's Web site at http://www.crosstexenergy.com/. The call will also be available for replay for 30 days by dialing 888-286-8010, passcode 84615803, or by going to the investor relations events page of the Company's Web site. About the Crosstex Energy Companies Crosstex Energy, L.P., a mid-stream natural gas company headquartered in Dallas, operates over 5,000 miles of pipeline, nine processing plants, four fractionators, and approximately 150 natural gas amine treating plants and 22 dew point control plants. Crosstex currently provides services for over 3.0 Bcf/day of natural gas, or approximately 6.0 percent of marketed U.S. daily production based on August 2005 Department of Energy data. Crosstex Energy, Inc. owns the two percent general partner interest, a 38 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. Distributable Cash Flow includes earnings before non-cash charges, less maintenance capital expenditures, plus, in 2005, proceeds from the sale of idle equipment. 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 they 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; (6) natural disasters such as hurricanes may significantly disrupt operations; and (7) 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 follow) CROSSTEX ENERGY, L.P. Selected Financial and Operating Data (All amounts in thousands except per unit numbers) Three Months Ended Year Ended December 31, December 31, 2005 2004 2005 2004 Revenues Midstream $1,054,544 $620,840 $2,982,874 $1,948,021 Treating 14,542 8,163 48,606 30,755 Profit from Energy Trading Activities 411 623 1,568 2,228 1,069,497 629,626 3,033,048 1,981,004 Cost of Gas Midstream 1,009,405 594,580 2,860,823 1,861,204 Treating 3,710 1,182 9,706 5,274 1,013,115 595,762 2,870,529 1,866,478 Gross Margin 56,382 33,864 162,519 114,526 Operating Expenses 19,138 11,599 56,736 38,339 General and Administrative 10,360 7,063 32,697 20,867 (Gain) Loss on Derivatives (3,711) (92) 9,968 (279) Gain on Sale of Property (341) --- (8,138) (12) Depreciation and Amortization 13,890 6,535 36,024 23,034 Total 39,336 25,105 127,287 81,949 Operating Income 17,046 8,759 35,232 32,577 Interest Expense (6,444) (3,006) (15,767) (9,220) Other Income 12 544 392 798 Total Other Income (6,432) (2,462) (15,375) (8,422) Net Income Before Minority Interest and Taxes 10,614 6,297 19,857 24,155 Minority Interest in Subsidiary (110) (139) (441) (289) Income Tax Provision (40) (46) (216) (162) Net Income $10,464 $6,112 $19,200 $23,704 General Partner Share of Net Income $3,435 $1,908 $8,651 $5,913 Limited Partners Share of Net Income $7,029 $4,204 $10,549 $17,791 Net Income per Limited Partners' Unit: Basic $0.33 $0.23 $0.56 $0.98 Diluted $0.30 $0.22 $0.51 $0.95 Weighted Average Limited Partners' Units Outstanding: Basic 21,554 18,086 19,006 18,081 Diluted 23,809 18,713 20,527 18,633 Distributions per Limited Partner Unit $0.51 $0.45 $1.93 $1.70 CROSSTEX ENERGY, L.P. Reconciliation of Net Income to Distributable Cash Flow (All amounts in thousands except ratios) Three Months Ended Year Ended December 31, December 31, 2005 2004 2005 2004 Net Income $ 10,464 $ 6,112 $ 19,200 $ 23,704 Depreciation and Amortization (A) 13,820 6,478 35,751 22,852 Stock-Based Compensation 1,398 235 4,057 1,001 Gain on Sale of Property (342) --- (8,138) (12) Proceeds from Sale of Property --- --- 9,313 611 Puts Mark-to-Market (2,304) --- 9,243 --- Deferred Tax Benefit 501 (22) 216 (190) Cash Flow 23,537 12,803 69,642 47,966 Maintenance Capital Expenditures (1,319) (915) (5,046) (5,729) Distributable Cash Flow $22,218 $11,888 $64,596 $42,237 Minimum Quarterly Distribution (MQD) $6,379 $4,615 $25,515 $18,458 Distributable Cash Flow/MQD 3.48 2.58 2.53 2.29 Actual Distribution $16,913 $10,164 $50,050 $37,032 Distribution Coverage 1.31 1.17 1.29 1.14 (A) Excludes minority interest share of depreciation and amortization of $70,000 and $272,000 for the three months and year-end December 31, 2005, respectively, and $57,000 and $182,000 for the three months and year-ended December 31, 2004 respectively. CROSSTEX ENERGY, L.P. Operating Data Three Months Ended Year Ended December 31, December 31, 2005 2004 2005 2004 Pipeline Throughput (MMBtu/d) South Texas 524,000 548,000 517,000 555,000 LIG Pipeline & Marketing 604,000 619,000(A) 613,000 603,000(A) Other Midstream 204,000 125,000 172,000 131,000 Total Gathering and Transmission Volume 1,332,000 1,292,000 1,302,000 1,289,000 Natural Gas Processed MMBtu/d 1,730,000(B) 432,000(A) 1,825,000(B) 425,000(A) Commercial Services Volume 168,000 212,000 181,000 210,000 Treating Plants in Service (C) 112 74 112 74 (A) Includes LIG volumes after April 1, 2004 acquisition. (B) Includes South Louisiana Processing volumes after November 1, 2005. (C) Plants in service represents plants in service on the last day of the quarter. CROSSTEX ENERGY, INC. Selected Financial and Operating Data (All amounts in thousands except per unit numbers) Three Months Ended Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 Revenues Midstream $1,054,544 $620,840 $2,982,874 $1,948,021 Treating 14,542 8,163 48,606 30,755 Profit from Energy Trading Activities 411 623 1,568 2,228 1,069,497 629,626 3,033,048 1,981,004 Cost of Gas Midstream 1,009,405 594,580 2,860,823 1,861,204 Treating 3,710 1,182 9,706 5,274 1,013,115 595,762 2,870,529 1,866,478 Gross Margin 56,382 33,864 162,519 114,526 Operating Expenses 19,155 11,628 56,768 38,396 General and Administrative 10,850 7,317 34,145 22,005 (Gain) Loss on Derivatives (3,711) (92) 9,968 (279) Gain on Sale of Property (341) --- (8,138) (12) Impairments --- --- --- 981 Depreciation and Amortization 13,901 6,535 36,070 23,034 Total 39,854 25,388 128,813 84,125 Operating Income 16,528 8,476 33,706 30,401 Interest Expense (6,286) (2,949) (15,332) (9,115) Other Income 13 548 391 802 Total Other Income (6,273) (2,401) (14,941) (8,313) Income Before Income Taxes and Interest of Non-controlling Partners in the Partnership's Net Income 10,255 6,075 18,765 22,088 Income Tax Expense (27,519) (1,645) (30,047) (5,149) Gain on Issuance of Units of the Partnership 65,070 --- 65,070 --- Interest of Non-controlling Partners in the Partnership's Net (Income) Loss (2,743) (2,023) (4,652) (8,239) Net Income $45,063 $2,407 $49,136 $8,700 Preferred Stock Dividends $--- $--- $--- $132 Net Income Available to Common $45,063 $2,407 $49,136 $8,658 Net Income per Common Share: Basic Earnings per Common Share $3.53 $0.20 $3.88 $0.72 Diluted Earnings per Common Share $3.47 $0.19 $3.79 $0.67 Weighted Average Shares Outstanding: Basic 12,760 12,214 12,652 11,849 Diluted 12,982 12,932 12,957 12,899 Dividends per Common Share $0.56 $0.39 $1.86 $1.37 DATASOURCE: Crosstex Energy 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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