XTXI Crosstex Energy, Inc. (MM)

The Crosstex Energy companies, Crosstex Energy, L.P. (NASDAQ: XTEX) (the Partnership) and Crosstex Energy, Inc. (NASDAQ: XTXI) (the Corporation) today reported earnings for the fourth-quarter and full-year 2007. Fourth-Quarter 2007 � Crosstex Energy, L.P. Financial Results The Partnership realized record distributable cash flow of $41.1 million in the fourth quarter of 2007, or 5.64 times the amount required to cover its minimum quarterly distribution of $0.25 per unit and 1.61 times the amount required to cover its current distribution of $0.61 per unit. Distributable cash flow was $22.0 million in the fourth quarter of 2006. Distributable cash flow is a non-GAAP financial measure and is explained in greater detail under �Non-GAAP Financial Information.� There is a reconciliation of this non-GAAP measure to net income in the tables at the end of this news release. The Partnership�s gross margin for the fourth quarter of 2007 increased 66 percent to $121.4 million, compared with $73.3 million in the corresponding 2006 period. Gross margin from the Midstream business segment rose $48.8 million, or 84 percent, to $106.6 million. The improvement was primarily due to increased throughput on all the Company�s pipeline systems, as well as improved operations at our Louisiana processing plants, and improved processing margins during the fourth quarter of 2007. Gross margin from the Treating segment was $14.8 million, compared with $15.5 million in the fourth quarter of 2006. The Partnership reported net income of $14.1 million in the fourth quarter of 2007, compared with a net loss of $4.9 million in the fourth quarter of 2006. Net income per limited partner unit in the fourth quarter of 2007 was $0.31 per unit versus a net loss of $0.34 per unit in the fourth quarter of 2006. The income per limited partner unit was impacted by the preferential allocation of net income to the general partner of $5.8 million in the fourth quarter of 2007, which represented the general partner�s incentive distribution rights less certain stock-based compensation costs. This allocation reduced the limited partners� share of net income to $8.3 million in the quarter. �In early 2007, we said the year would be a building one for Crosstex,� said Barry E. Davis, Crosstex President and Chief Executive Officer. �Our dedicated employees did an outstanding job to execute our growth plan during the year. North Texas gathering volumes rose 240 percent, the result of our work to develop our gathering footprint in the Barnett Shale gas play. We also increased the capacity of the North Texas Pipeline that delivers gas to eastern markets from the Barnett Shale by 50 percent. In northern Louisiana, we built a major system expansion that is flowing at near capacity. We are continuing to find new synergies between Crosstex LIG and our southern Louisiana plants, as well as improving the efficiencies of those plants and finding new gas supplies for them. �Overall, 2007 was a year of great achievement. Results exceeded our expectations, and we are well positioned to continue our strong track record in 2008,� Davis continued. �Our asset teams have identified key projects related to our existing infrastructures in North Texas, East Texas and Louisiana that will drive our growth in 2008 and beyond.� During the fourth quarter 2007, the Partnership recorded a $9.9 million increase in operating expenses and a $6.6 million increase in general and administrative expenses. The increases were primarily associated with the build-out of the North Texas gathering systems and the northern Louisiana expansion. Interest expense rose to $21.6 million in the fourth quarter of 2007 from $15.6 million in the fourth quarter of 2006 due to greater debt from development activities. Depreciation and amortization expense increased $5.8 million in the fourth quarter of 2007 compared with the fourth quarter of 2006 due to the northern Louisiana expansion start-up in the second quarter of 2007 and the North Texas growth projects that were not in service in the fourth quarter of 2006. Full-Year 2007 � Crosstex Energy, L.P. Financial Results The Partnership�s distributable cash flow in 2007 was $116.0 million, an increase of 42 percent from distributable cash flow of $81.9 million in 2006. This is 4.17 times the amount required to cover the minimum quarterly distribution and 1.28 times the amount required to cover the Partnership�s distributions of $90.8 million. The Partnership�s gross margin in 2007 rose 41 percent to $383.6 million from $272.5 million in 2006, primarily due to greater system throughput on the Partnership�s North Texas Pipeline and gathering systems, improved operations in our Louisiana processing business, the completion of the northern Louisiana expansion in April 2007, and a favorable pricing environment for natural gas liquids. The Midstream segment contributed $108.3 million to the increase, and the Treating segment provided $2.8 million. In 2007, the Partnership reported net income of $13.9 million, compared with a net loss of $4.2 million in 2006. Operating expenses increased to $127.8 million in 2007 from $101.0 million in 2006, primarily due to the growth projects completed during 2007. General and administrative expenses in 2007 increased to $61.5 million from $45.7 million in 2006. The higher amount was related to staffing increases from expanded operations in the North Texas region and in northern Louisiana. Interest expense rose to $77.8 million in 2007 from $51.2 million in 2006 primarily due to increased debt from prior acquisitions and growth projects undertaken in 2007. Depreciation and amortization expense increased $26.2 million, primarily the result of additional North Texas assets in service and the start-up of the northern Louisiana expansion. The net loss per limited partner unit in 2007 was $0.20 per unit versus a net loss of $1.09 per unit in 2006. The loss per limited partner unit was impacted by the preferential allocation of net income to the general partner of $19.3 million in 2007, which represented the general partner�s incentive distribution rights less certain stock-based compensation costs. This allocation reduced the limited partners� share of the net income to a loss of $5.4 million for the year. Fourth-Quarter 2007 � Crosstex Energy, Inc. Financial Results The Corporation reported net income of $7.7 million for the fourth quarter of 2007, compared with net income of $0.5 million for the comparable period in 2006. Net income in the fourth quarter of 2007 included a noncash net gain after income taxes of $2.6 million from the issuance of 1.8 million Partnership units in the fourth quarter 2007. The Corporation�s net income before gain on issuance of partnership units, income taxes and interest of noncontrolling partners in the net income of the Partnership was $13.8 million in the fourth quarter of 2007, compared with a net loss of $5.4 million in the fourth quarter of 2006. The Corporation�s share of Partnership distributions, including distributions on the Corporation�s 10 million participating limited partner units, its two percent general partner interest and the incentive distribution rights, was $13.9 million in the fourth quarter of 2007, compared with $11.5 million in the fourth quarter of 2006. The recently announced increase in the Partnership�s distribution of $0.02 per unit and the issuance of 1.8 million Partnership units that are subject to incentive distribution rights in the fourth quarter 2007 raised the Corporation�s share of distributions $1.3 million to $13.9 million from $12.6 million in the third quarter of 2007. Full-Year 2007 � Crosstex Energy, Inc. Financial Results The Corporation reported net income of $12.2 million for 2007, compared with net income of $16.5 million for the comparable period in 2006. The net income in 2007 includes a noncash net gain after income taxes of $2.6 million from the issuance of Partnership units in 2007 and $10.8 million in 2006. The Corporation�s net income before gain on issuance of partnership units, income taxes and interest of noncontrolling partners in the net income of the Partnership was $12.6 million in 2007, compared with a net loss of $4.6 million in 2006. The Corporation�s share of Partnership distributions, including distributions on the Corporation�s 10 million participating limited partner units, its two percent general partner interest and the incentive distribution rights, was $49.9 million in 2007 compared with $43.8 million in 2006. Crosstex Provides Preliminary 2008 Guidance The Partnership estimates 2008 net income of $47 million to $54 million and distributable cash flow of $159 million to $180 million. Total maintenance capital expenditures are expected to be $19 million to $23 million in 2008 or $8 million to $12 million higher than 2007. The increase in maintenance capital reflects the expansion of Crosstex�s asset base and scheduled periodic maintenance of some of the Partnership�s processing plants. The $9 million internal charge for the cost of natural gas liquids puts in 2007 was fully amortized and will not be charged to distributable cash flow in 2008 and beyond. �In 2007, Crosstex spent approximately $390 million on major organic growth projects. In 2008, we estimate that we will spend approximately $250 million to develop these projects and initiate new ones,� said Davis. Based upon our forecast for 2008, the Partnership currently expects to increase 2008 total distributions 10 percent to $2.56 per unit, with a coverage range of 1.0 to 1.1 times. The Corporation would expect to receive total distributions from the Partnership of $92 million based on this estimate. The 82 percent increase in the Corporation�s distributions will be impacted by the conversion of 12.8 million Series C Subordinated Units to common units in the first quarter of 2008. The Corporation will receive additional incentive distributions as the result of the conversion of these units, and limited partner distributions on the 6.4 million Series C Subordinated Units held by it that converted to common units. The Corporation anticipates direct cash expenses associated with its operations outside the Partnership of approximately $3 million. In addition, the Corporation anticipates that it will incur only nominal current-year income tax expense due to tax loss carryforwards and other tax benefits that it expects to use in 2008. The Corporation also will continue to build its cash balances during the year. Therefore, the Corporation expects to pay dividends of approximately $1.50 per share in 2008, a 58 percent increase over 2007. However, distributions for the Partnership and the Corporation are determined by their respective Boards based upon circumstances present at that time. Crosstex plans to disclose more detailed guidance in conjunction with its April 2, 2008 analyst conference in Dallas. CROSSTEX ENERGY, L.P. Forecast for 2008 Net income Reconciliation to Distributable Cash Flow (In millions) � Range Low � � � High � Net Income $ 47 $ 54 Depreciation and Amortization $ 126 $ 132 Stock-based Compensation $ 9 $ 13 Interest (1) $ 86 � $ 90 � Adjusted Cash Flow $ 268 $ 289 � Interest $ (86 ) $ (90 ) Maintenance Capital Expenditures $ (23 ) $ (19 ) Distributable Cash Flow $ 159 � $ 180 � � (1) Assumes no equity offerings during 2008. Crosstex to Hold Earnings Conference Call Today The Partnership and the Corporation will hold their quarterly conference call to discuss fourth-quarter and full-year 2007 results today, February 29, at 10:00 a.m. Central Time (11:00 p.m. Eastern Time). The dial-in number for the call is 1-888-713-4214, and the passcode is 83258826. Callers outside the United States should dial 1-617-213-4866, and the passcode is 83258826. Investors are advised to dial in to the call at least 10 minutes prior to the call time to register. Participants may preregister for the call at www.theconferencingservice.com/prereg/key.process?key=PUKNQQA34. Preregistrants will be issued a pin number to use when dialing in to the live call, which will provide quick access to the conference by bypassing the operator upon connection. Interested parties also can access a live Web cast of the call on the Investors page of Crosstex�s Web site at www.crosstexenergy.com. After the conference call, a replay can be accessed until March 29, 2008, by dialing 1-888-286-8010. International callers should dial 1-617-801-6888 for a replay. The passcode for all callers listening to the replay is 41235353. Interested parties also can visit the Investors page of Crosstex�s Web site to listen to a replay of the call. About the Crosstex Energy Companies Crosstex Energy, L.P., a midstream natural gas company headquartered in Dallas, operates over 5,000 miles of pipeline, 12 processing plants, four fractionators, and approximately 190 natural gas amine-treating plants and dew-point control plants. Crosstex currently provides services for over 3.5 billion cubic feet per day of natural gas, or approximately 7.0 percent of marketed U.S. daily production. 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 www.crosstexenergy.com. Non-GAAP Financial Information This press release contains a non-generally accepted accounting principle financial measure referred to as Distributable Cash Flow. Distributable Cash Flow includes earnings before non-cash charges, less maintenance capital expenditures and non-cash derivative activity. 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 and the amortization of put premiums. 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. The puts were acquired to hedge the future price of certain natural gas liquids. The net cost of the puts is being amortized against Distributable Cash Flow over their life. The company believes 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. The reconciliation of this measure to net income is included among the following tables. This press release contains forward-looking statements within the meaning of the federal securities laws. These statements are based on certain assumptions made by the Partnership and the Corporation based upon management�s experience and perception of historical trends, current conditions, expected future developments and other factors the Partnership and the Corporation believe are appropriate in the circumstances. These statements include, but are not limited to, statements with respect to future net income, future distributable cash flow, future capital expenditures, future cash expenses and future distributions. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Partnership and the Corporation, which may cause the Partnership�s and the Corporation�s actual results to differ materially from those implied or expressed by the forward-looking statements. These risks include the following: (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) the Partnership may not adequately address construction and operating risks; and (7) other factors discussed in the Partnership�s and the Corporation�s Form 10-K for the year ended December 31, 2007, and other filings with the Securities and Exchange Commission. 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 & Operating Data (All amounts in thousands except per unit numbers) � � � Three Months Ended Years Ended December 31, December 31, � 2007 � � 2006 � � 2007 � � 2006 � (Unaudited) Revenues Midstream $ 1,070,122 $ 706,575 $ 3,791,316 $ 3,075,481 Treating 16,462 17,590 65,025 63,813 Profit from Energy Trading Activities � 1,910 � � 580 � � 4,090 � � 2,510 � 1,088,494 724,745 3,860,431 3,141,804 � Cost of Gas Midstream 965,400 649,351 3,468,924 2,859,815 Treating � 1,684 � � 2,104 � � 7,892 � � 9,463 � 967,084 651,455 3,476,816 2,869,278 � Gross Margin 121,410 79,290 383,615 272,526 � Operating Expenses 38,043 28,117 127,759 100,991 General and Administrative 18,518 11,942 61,528 45,694 (Gain) Loss on Derivatives (1,697 ) 240 (5,666 ) (1,599 ) (Gain) Loss on Sale of Property 152 (2,131 ) (1,667 ) (2,108 ) Depreciation and Amortization � 30,355 � � 24,548 � � 108,880 � � 82,731 � Total 85,371 62,716 290,834 225,709 � Operating Income 36,039 10,574 92,781 46,817 � Interest Expense and Other � (21,608 ) � (15,575 ) � (77,768 ) � (51,244 ) Net Income (Loss) before Minority Interest and Taxes 14,431 (5,001 ) 15,013 (4,427 ) � Minority Interest in Subsidiary 26 (8 ) (160 ) (231 ) Income Tax Provision � (309 ) � 134 � � (964 ) � (222 ) Income (Loss) before Cumulative Effect of Accounting Change � 14,148 � � (4,875 ) � 13,889 � � (4,880 ) � Cumulative Effect of Accounting Change � - � � - � � - � � 689 � Net Income (Loss) $ 14,148 � $ (4,875 ) $ 13,889 � $ (4,191 ) General Partner Share of Net Income (Loss) $ 5,808 � $ 4,275 � $ 19,252 � $ 16,456 � Limited Partners' Share of Net Income (Loss) $ 8,339 � $ (9,150 ) $ (5,363 ) $ (20,647 ) � Net Income (Loss) per Limited Partners' Unit after Accounting Change: � � Basic Common Unit $ 0.31 � $ (0.34 ) $ (0.20 ) $ (1.09 ) Diluted Common Unit $ 0.19 � $ (0.34 ) $ (0.20 ) $ (1.09 ) Basic and Diluted Senior Subordinated A Unit $ - � $ - � $ - � $ 5.31 � � Weighted Average Limited Partners� Units Outstanding: � � Basic Common Units � 26,964 � � 26,614 � � 26,753 � � 26,337 � Diluted Common Units � 44,074 � � 26,614 � � 26,753 � � 26,337 � Basic and Diluted Senior Subordinated A Units � - � � - � � - � � 1,495 � CROSSTEX ENERGY, L.P. Reconciliation of Net Income to Distributable Cash Flow (All amounts in thousands except ratios and distributions per unit) � � � � Three Months Ended Years Ended December 31, December 31, � 2007 � � 2006 � � 2007 � � 2006 � (Unaudited) (Unaudited) Net Income (Loss) $ 14,148 $ (4,875 ) $ 13,889 $ (4,191 ) Depreciation and Amortization (1) 30,265 24,477 108,617 82,444 Stock-based Compensation 3,648 2,348 12,284 8,557 Financial Derivatives Mark-to-Market 455 1,319 894 3,255 Cumulative Effect of Accounting Change - - - (689 ) Other � 119 � � 1,475 � � 253 � � 3,027 � Cash Flow 48,635 24,744 135,937 92,403 � Amortization of Put Premiums (2,988 ) (1,450 ) (9,165 ) (4,442 ) Maintenance Capital Expenditures � (4,594 ) � (1,318 ) � (10,760 ) � (6,044 ) Distributable Cash Flow $ 41,053 � $ 21,976 � $ 116,012 � $ 81,917 � Minimum Quarterly Distribution (MQD) $ 7,278 $ 6,790 $ 27,791 $ 27,136 Distributable Cash Flow/MQD 5.64 3.24 4.17 3.02 Actual Distribution $ 25,465 $ 20,813 $ 90,783 $ 79,980 Distribution Coverage 1.61 1.06 1.28 1.02 � Distributions per Limited Partner Unit $ 0.61 � $ 0.56 � $ 2.33 � $ 2.18 � � (1) Excludes minority interest share of depreciation and amortization of $90,000 and $263,000 for the three months and year ended December 31, 2007, respectively, and $72,000 and $287,000 for the three months and year ended December 31, 2006, respectively. CROSSTEX ENERGY, L.P. Operating Data � � � � � Three Months Ended Years Ended December 31, December 31, 2007 2006 2007 2006 � Pipeline Throughput (MMBtu/d) LIG Pipeline and Marketing 966,000 756,000 932,000 701,000 South Texas 387,000 336,000 393,000 367,000 North Texas - Gathering 454,000 147,000 341,000 99,000 North Texas - Transmission 318,000 12,000 263,000 16,000 Other Midstream 197,000 174,000 189,000 173,000 Total Gathering and Transmission Volume 2,322,000 1,425,000 2,118,000 1,356,000 � Natural Gas Processed and Fractionated (MMBtu/d) South Louisiana 1,283,000 1,469,000 1,400,000 1,471,000 LIG System 320,000 308,000 317,000 328,000 South Texas 225,000 219,000 222,000 215,000 North Texas 165,000 20,000 118,000 18,000 Total Gas Volumes Processed and Fractionated 1,993,000 2,016,000 2,057,000 2,032,000 � Commercial Services Volume (MMBtu/d) 96,000 97,000 94,000 138,000 � North Texas Gathering (1) Wells Connected 51 32 208 78 � Treating Plants and Dew Point Control Plants in Service (2) 190 190 190 190 � (1) North Texas Gathering assets were acquired June 29, 2006. (2) Treating Plants and Dew Point Control Plants in Service represents plants in service on the last day of the period. CROSSTEX ENERGY, INC. Selected Financial & Operating Data (All amounts in thousands except per share numbers) � � � Three Months Ended Years Ended December 31, December 31, � 2007 � � 2006 � � 2007 � � 2006 � (Unaudited) Revenues Midstream $ 1,070,122 $ 706,575 $ 3,791,316 $ 3,075,481 Treating 16,462 17,590 65,025 63,813 Profit from Energy Trading Activities � 1,910 � � 580 � � 4,090 � � 2,510 � 1,088,494 724,745 3,860,431 3,141,804 � Cost of Gas Midstream 965,400 649,351 3,468,924 2,859,815 Treating � 1,684 � � 2,104 � � 7,892 � � 9,463 � 967,084 651,455 3,476,816 2,869,278 � Gross Margin 121,410 73,290 383,615 272,526 � Operating Expenses 38,045 28,129 127,794 101,036 General and Administrative 19,230 12,352 64,304 47,707 (Gain) Loss on Sale of Property 152 (2,131 ) (1,667 ) (2,108 ) (Gain) Loss on Derivatives (1,697 ) 240 (5,666 ) (1,599 ) Depreciation and Amortization � 30,366 � � 24,567 � � 108,926 � � 82,792 � Total 86,096 63,157 293,691 227,828 � Operating Income 35,314 10,133 89,924 44,698 � Interest Expense and Other � (21,532 ) � (15,496 ) � (77,358 ) � (49,277 ) Income (Loss) before Gain on Issuance of Partnership Units, Income Taxes and Interest of Noncontrolling Partners in the Partnership's Net Loss � � 13,782 (5,363 ) 12,566 (4,579 ) Gain on Issuance of Units of the Partnership 7,461 - 7,461 18,955 Income Tax Benefit (Provision) (8,335 ) 124 (11,049 ) (11,118 ) Interest of Noncontrolling Partners in the Partnership's Net Income (Loss) � (5,179 ) � 5,704 � � 3,198 � � 13,027 � Net Income before Cumulative Effect of Accounting Change � 7,729 � � 465 � � 12,176 � � 16,285 � Cumulative Effect of Accounting Change � - � � - � � - � � 170 � Net Income $ 7,729 � $ 465 � $ 12,176 � $ 16,455 � � Net Income per Common Share after Accounting Change: � � Basic Earnings per Common Share $ 0.17 � $ 0.01 � $ 0.26 � $ 0.39 � � Diluted Earnings per Common Share $ 0.17 � $ 0.01 � $ 0.26 � $ 0.39 � � Weighted Average Shares Outstanding: � Basic � 46,019 � � 45,941 � � 45,988 � � 42,168 � � Diluted � 46,713 � � 46,534 � � 46,607 � � 42,666 � � Dividends Declared per Common Share $ 0.26 � $ 0.22 � $ 0.95 � $ 0.84 �