SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q/A
Amendment No. 1
ý | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2004 |
OR | |
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to |
Commission file number: 000-50067 | |
CROSSTEX ENERGY, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State of organization) | 52-2235832 (I.R.S. Employer Identification No.) |
2501 CEDAR SPRINGS, SUITE 600
DALLAS, TEXAS 75201
(Address of principal executive offices)
(Zip Code)
(214) 953-9500
(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o No ý
As of April 28, 2004, the Registrant had 12,092,368 shares of common stock outstanding.
CROSSTEX ENERGY, INC.
FORM 10-Q/A
INTRODUCTORY NOTE
This Amendment No. 1 to quarterly report on Form 10-Q/A ("Form 10-Q/A") is being filed to amend our quarterly report on Form 10-Q for the quarterly period ended March 31, 2004, which was originally filed on May 7, 2004 ("Original Form 10-Q"). Accordingly, pursuant to rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Form 10-Q/A contains the complete text of items 1 and 4 of Part I and item 6 of Part II, as amended, as well as certain currently dated certifications. Unaffected items have not been repeated in this Amendment No. 1.
In July 2004, we determined that, due to clerical errors, certain reconciling items between the detail accounts receivable and accounts payable subledgers and the general ledger relating to 2002 had not been properly cleared. As a result of correcting these errors, we have restated our consolidated balance sheets as of December 31, 2003 and March 31, 2004 and our consolidated statements of changes in stockholders' equity as of March 31, 2004 and December 31, 2003. We have also restated our notes to consolidated financial statements as necessary to reflect the adjustments. The net effect of the adjustments resulted in a reduction in stockholders' equity and working capital as of December 31, 2003 and March 31, 2004 by $0.4 million. In addition, we have restated our fully diluted weighted average shares outstanding from 11,672 to 12,759 and our fully diluted earnings per share from $0.19 to $0.17 for the three months ended March 31, 2004 due to a mathematical error in the calculation of fully diluted weighted average shares outstanding related to the conversion of preferred stock to common stock in connection with our initial public offering. Please read note 2 to the accompanying consolidated financial statements for a discussion of the adjustments.
This amendment does not reflect events occurring after the filing of the Original Form 10-Q, and does not modify or update the disclosures therein in any way other than as required to reflect the adjustments described above. Such events include, among others, the events described in our current reports on Form 8-K filed after the filing of the Original Form 10-Q.
| Item | | Page | ||
|---|---|---|---|---|
| | DESCRIPTION | | ||
| PART I—FINANCIAL INFORMATION | ||||
1. | FINANCIAL STATEMENTS | 3 | ||
| 4. | CONTROLS AND PROCEDURES | 19 | ||
PART II—OTHER INFORMATION | ||||
6. | EXHIBITS AND REPORTS ON FORM 8-K | 20 | ||
2
CROSSTEX ENERGY, INC.
Consolidated Balance Sheets
(In thousands)
| | March 31, 2004 (Restated) | December 31, 2003 (Restated) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | (Unaudited) | | ||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 14,344 | $ | 1,479 | ||||||
| Accounts receivable: | ||||||||||
| Trade | 12,937 | 10,238 | ||||||||
| Accrued revenues | 125,504 | 124,517 | ||||||||
| Imbalances | 378 | 447 | ||||||||
| Related party | 120 | 617 | ||||||||
| Note receivable | 747 | 535 | ||||||||
| Other | 2,850 | 2,628 | ||||||||
| Fair value of derivative assets | 6,118 | 4,080 | ||||||||
| Prepaid expenses and other | 1,909 | 2,013 | ||||||||
| Total current assets | 164,907 | 146,554 | ||||||||
| Property and equipment: | ||||||||||
| Transmission assets | 109,952 | 99,650 | ||||||||
| Gathering systems | 27,825 | 27,990 | ||||||||
| Gas plants | 92,130 | 88,395 | ||||||||
| Other property and equipment | 3,842 | 3,743 | ||||||||
| Construction in process | 7,927 | 9,863 | ||||||||
| Total property and equipment | 241,676 | 229,641 | ||||||||
| Accumulated depreciation | (28,771 | ) | (24,751 | ) | ||||||
| Total property and equipment, net | 212,905 | 204,890 | ||||||||
| Account receivable from Enron (net allowance of $6,931) | 1,312 | 1,312 | ||||||||
| Intangible assets, net | 5,126 | 5,366 | ||||||||
| Goodwill, net | 6,164 | 6,164 | ||||||||
| Investment in limited partnerships | 430 | 2,560 | ||||||||
| Other assets, net | 2,829 | 3,639 | ||||||||
| Total assets | $ | 393,673 | $ | 370,485 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Current liabilities: | ||||||||||
| Drafts payable | $ | 17,914 | $ | 10,446 | ||||||
| Accounts payable | 10,074 | 6,325 | ||||||||
| Accrued gas purchases | 119,684 | 119,900 | ||||||||
| Accounts payable—related party | — | 448 | ||||||||
| Preferred dividends payable | — | 3,471 | ||||||||
| Accrued imbalances payable | 212 | 212 | ||||||||
| Fair value of derivative liabilities | 3,406 | 2,487 | ||||||||
| Current portion of long-term debt | 50 | 50 | ||||||||
| Other current liabilities | 7,585 | 10,920 | ||||||||
| Total current liabilities | 158,925 | 154,259 | ||||||||
| Deferred tax liability | 20,541 | 19,103 | ||||||||
| Long-term debt | 62,700 | 60,700 | ||||||||
| Interest of non-controlling partners in the Partnership | 69,485 | 67,157 | ||||||||
| Stockholders' equity | 82,022 | 69,266 | ||||||||
| Total liabilities and stockholders' equity | $ | 393,673 | $ | 370,485 | ||||||
See accompanying notes to consolidated financial statements.
3
CROSSTEX ENERGY, INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
| | Three months ended March 31, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| | 2004 | 2003 | |||||||
| Revenues: | |||||||||
| Midstream | $ | 318,214 | $ | 245,315 | |||||
| Treating | 7,144 | 5,255 | |||||||
| Total revenues | 325,358 | 250,570 | |||||||
| Operating costs and expenses: | |||||||||
| Midstream purchased gas | 302,876 | 237,408 | |||||||
| Treating purchased gas | 1,376 | 2,416 | |||||||
| Operating expenses | 6,225 | 3,234 | |||||||
| General and administrative | 3,865 | 2,000 | |||||||
| Stock based compensation | 209 | 2,504 | |||||||
| (Profit) loss on energy trading activities | (421 | ) | (107 | ) | |||||
| Loss on sale of property | 296 | — | |||||||
| Depreciation and amortization | 4,418 | 2,510 | |||||||
| Total operating costs and expenses | 318,844 | 249,965 | |||||||
| Operating income | 6,514 | 605 | |||||||
| Other income (expense): | |||||||||
| Interest expense, net | (1,117 | ) | (338 | ) | |||||
| Other income | 92 | 38 | |||||||
| Total other income (expense) | (1,025 | ) | (300 | ) | |||||
| Income before income taxes and non-controlling partners in the Partnership's net income | 5,489 | 305 | |||||||
| Income tax expense | (1,182 | ) | (17 | ) | |||||
| Interest of non-controlling partners in the Partnership's net income | (2,110 | ) | (257 | ) | |||||
| Net income | $ | 2,197 | $ | 31 | |||||
| Preferred dividends | $ | 132 | $ | 917 | |||||
| Net income (loss) available to common shareholders | $ | 2,065 | $ | (886 | ) | ||||
| Basic earnings (loss) per common share | $ | 0.19 | $ | (0.25 | ) | ||||
| Diluted earnings (loss) per common share (2004-Restated) | $ | 0.17 | $ | (0.25 | ) | ||||
| Weighted average shares outstanding: | |||||||||
| Basic | 10,946 | 3,486 | |||||||
| Diluted (2004-Restated) | 12,759 | 3,486 | |||||||
See accompanying notes to consolidated financial statements.
4
CROSSTEX ENERGY, INC.
Consolidated Statements of Changes in Stockholders' Equity
Three Months ended March 31, 2004
(In thousands)
(Unaudited)
| | | | | | | | | Accumulated other Compre- hensive Income | | | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Preferred Stock | Common Stock | | | | | Total Stock- holders' Equity | |||||||||||||||||||||||
| | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Notes Receivable | ||||||||||||||||||||||||||
| | Shares | Amt | Shares | Amt | ||||||||||||||||||||||||||
| Balance, December 31, 2003 (as previously reported) | 4,123,642 | $ | 42 | 1,743,032 | $ | 19 | $ | 68,934 | $ | (2,500 | ) | $ | 7,902 | $ | 506 | $ | (5,284 | ) | $ | 69,619 | ||||||||||
| Restatement adjustments | — | — | — | — | — | — | (353 | ) | — | — | (353 | ) | ||||||||||||||||||
| Balance, December 31, 2003 (restated) | 4,123,642 | $ | 42 | 1,743,032 | $ | 19 | $ | 68,934 | $ | (2,500 | ) | $ | 7,549 | $ | 506 | $ | (5,284 | ) | $ | 69,266 | ||||||||||
| Conversion of preferred to common | (4,123,642 | ) | (42 | ) | 4,123,642 | 40 | 2 | — | — | — | — | — | ||||||||||||||||||
| Cancellation of Treasury stock | — | — | — | — | (2,500 | ) | 2,500 | — | — | — | — | |||||||||||||||||||
| Two-for-one common stock split | — | — | 5,866,674 | 59 | (59 | ) | — | — | — | — | — | |||||||||||||||||||
| Issuance of common stock in public equity offering, net of offering costs | — | — | 345,900 | 3 | 5,204 | — | — | — | — | 5,207 | ||||||||||||||||||||
| Preferred dividends | — | — | — | — | — | — | (132 | ) | — | — | (132 | ) | ||||||||||||||||||
| Repayment of notes receivable | — | — | — | — | — | — | — | — | 4,910 | 4,910 | ||||||||||||||||||||
| Stock based compensation | — | — | — | — | 99 | — | — | — | — | 99 | ||||||||||||||||||||
| Net income | — | — | — | — | — | — | 2,197 | — | — | 2,197 | ||||||||||||||||||||
| Hedging gains or losses reclassified to earnings | — | — | — | — | — | — | — | (271 | ) | — | (271 | ) | ||||||||||||||||||
| Adjustment in fair value of derivatives | — | — | — | — | — | — | — | 746 | — | 746 | ||||||||||||||||||||
| Balance, March 31, 2004 (restated) | — | $ | — | 12,079,248 | $ | 121 | $ | 71,680 | $ | — | $ | 9,614 | $ | 981 | $ | (374 | ) | $ | 82,022 | |||||||||||
See accompanying notes to consolidated financial statements.
5
CROSSTEX ENERGY, INC.
Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)
| | Three months ended March 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| | 2004 | 2003 | ||||||
| Net income | $ | 2,197 | $ | 31 | ||||
| Hedging gains or losses reclassified to earnings | (271 | ) | (173 | ) | ||||
| Adjustment in fair value of derivatives | 746 | (523 | ) | |||||
| Comprehensive income (loss) | $ | 2,672 | $ | (665 | ) | |||
See accompanying notes to consolidated financial statements.
6
CROSSTEX ENERGY, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| | Three months ended March 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2004 | 2003 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 2,197 | $ | 31 | |||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | 4,418 | 2,510 | |||||||||
| Income (loss) on investment in affiliated partnerships | (88 | ) | 4 | ||||||||
| Interest of non-controlling partners in the Partnership's net income | 2,110 | 257 | |||||||||
| Deferred tax expense | 1,182 | 17 | |||||||||
| Loss on sale of property | 296 | — | |||||||||
| Non-cash stock based compensation | 160 | 2,504 | |||||||||
| Changes in assets and liabilities, net of acquisition effects: | |||||||||||
| Accounts receivable and accrued revenue | (3,162 | ) | (86,934 | ) | |||||||
| Prepaid expenses | 104 | (1,470 | ) | ||||||||
| Accounts payable, accrued gas purchases, and other accrued liabilities | (292 | ) | 101,751 | ||||||||
| Fair value of derivatives | 181 | 36 | |||||||||
| Other | 133 | (328 | ) | ||||||||
| Net cash provided by operating activities | 7,239 | 18,378 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Additions to property and equipment | (8,051 | ) | (4,614 | ) | |||||||
| Proceeds from sale of property | 100 | — | |||||||||
| Distributions from (investments in) affiliated partnerships | (154 | ) | (100 | ) | |||||||
| Net cash used in investing activities | (8,105 | ) | (4,714 | ) | |||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from borrowings | 25,500 | 44,100 | |||||||||
| Payments on borrowings | (23,500 | ) | (45,850 | ) | |||||||
| Increase in drafts payable | 7,468 | (13,058 | ) | ||||||||
| Net proceeds from public equity offering | 5,673 | — | |||||||||
| Preferred dividends paid | (3,603 | ) | — | ||||||||
| Repayment of shareholder notes | 4,910 | — | |||||||||
| Proceeds from issuance of units of the Partnership | 313 | — | |||||||||
| Treasury stock purchased | — | (2,500 | ) | ||||||||
| Distribution to non-controlling partners in the Partnership | (3,030 | ) | — | ||||||||
| Net cash provided by (used in) financing activities | 13,731 | (17,308 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents | 12,865 | (3,644 | ) | ||||||||
| Cash and cash equivalents, beginning of period | 1,479 | 3,808 | |||||||||
| Cash and cash equivalents, end of period | $ | 14,344 | $ | 164 | |||||||
| Cash paid for interest | $ | 899 | $ | 374 | |||||||
See accompanying notes to consolidated financial statements.
7
CROSSTEX ENERGY, INC.
Notes to Consolidated Financial Statements
March 31, 2004
(Unaudited)
(1) General
Unless the context requires otherwise, references to "we","us","our" "CEI" or the "Company" mean Crosstex Energy, Inc. and its consolidated subsidiaries.
CEI, a Delaware corporation formed on April 28, 2000, is engaged, through its subsidiaries, in the gathering, transmission, treating, processing and marketing of natural gas. The Company connects the wells of natural gas producers to its gathering systems in the geographic areas of its gathering systems in order to purchase the gas production, treats natural gas to remove impurities to ensure that it meets pipeline quality specifications, processes natural gas for the removal of natural gas liquids or NGLs, transports natural gas and ultimately provides an aggregated supply of natural gas to a variety of markets. In addition, the Company purchases natural gas from producers not connected to its gathering systems for resale and sells natural gas on behalf of producers for a fee.
The accompanying consolidated financial statements include the assets, liabilities and results of operations of the Company and its majority owned subsidiaries, including Crosstex Energy, L.P. (herein referred to as "the Partnership" or "CELP"), a publicly traded master limited partnership.
The accompanying consolidated financial statements are prepared in accordance with the instructions to Form 10-Q, are unaudited and do not include all the information and disclosures required by generally accepted accounting principles for complete financial statements. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. All significant intercompany balances and transactions have been eliminated in consolidation. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2003.
(a) Initial Public Offering
On January 12, 2004 the Company completed an initial public offering of its common stock. In conjunction with the public offering, the Company converted all of its preferred stock to common stock, cancelled its treasury stock and made a two-for-one stock split, affected in the form of a stock dividend. The Company's existing shareholders sold 2,306,000 common shares (on a post-split basis) and the Company issued 345,900 common shares (on a post-split basis) at a public offering price of $19.50 per common share. The Company received net proceeds of approximately $5.2 million from the common stock issuance. The Company's existing stockholders also repaid approximately $4.9 million in stockholder notes receivable in connection with the public offering.
(b) Long-Term Incentive Plans
The Company applies the provisions of Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees (APB No. 25), and the related interpretations in accounting for the long-term incentive plans. In accordance with APB No. 25 for fixed stock and unit options, compensation is recorded to the extent the fair value of the stock or unit exceeds the exercise price of the option at the measurement date. Compensation costs for fixed awards with pro rata vesting are recognized on a straight-line basis over the vesting period. In addition, compensation expense is recorded for variable options based on the difference between fair value of the stock or unit and exercise price of the
8
options at period end. Compensation expense of $209,000 and $2,504,000 was recognized during the three months ended March 31, 2004 and 2003, respectively.
Had compensation cost for the Company been determined based on the fair value at the grant date for awards in accordance with SFAS No. 123,Accounting for Stock Based Compensation, the Company's net income would have been as follows (in thousands, except per unit amounts):
| | Three months ended March 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| | 2004 | 2003 | ||||||
| Net income, as reported | $ | 2,197 | $ | 31 | ||||
| Add: Stock-based employee compensation expense included in reported net income | 76 | 1,115 | ||||||
| Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards | (99 | ) | (1,166 | ) | ||||
| Pro forma net income | $ | 2,174 | $ | (20 | ) | |||
Net income per common share, as reported: | ||||||||
| Basic | $ | 0.19 | $ | (0.25 | ) | |||
| Diluted (2004-Restated) | $ | 0.17 | $ | (0.25 | ) | |||
| Pro forma net income per common share: | ||||||||
| Basic | $ | 0.19 | $ | (0.27 | ) | |||
| Diluted (2004-Restated) | $ | 0.17 | $ | (0.27 | ) | |||
The fair value of each option is estimated on the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions used for CELP unit and Company common stock grants in 2004:
| | Crosstex Energy, Inc. | Crosstex Energy, L.P. | |||||
|---|---|---|---|---|---|---|---|
| Options granted | 33,636 | 346,779 | |||||
| Weighted average dividend yield | 5.8 | % | 6.5 | % | |||
| Weighted average expected volatility | 28 | % | 24 | % | |||
| Weighted average risk free interest rate | 3.14 | % | 3.14 | % | |||
| Weighted average expected life | 5 | 5 | |||||
| Contractual life | 10 | 10 | |||||
| Weighted average of fair value of unit options granted | $ | 3.77 | $ | 3.09 | |||
The Company granted options to its directors in 2004 in connection with its initial public offering.
The Company modified certain outstanding options attributable to its shares of common stock in the first quarter of 2003, which allowed the option holders to elect to be paid in cash for the modified options based on the fair value of the options. The total number of CEI options which were modified was approximately 364,000. These modified options have been accounted for using variable accounting as of the option modification date. The Company accounted for the modified options as variable
9
options until the holders elect to cash out the options or the election to cash out the options lapsed. The Company is responsible for paying the intrinsic value of the options for the holders who elect to cash out their options. December 31, 2003 was the last valuation date that a holder of modified options could elect the cash-out alternative. Accordingly, effective January 1, 2004, the remaining modified options are accounted for as fixed options. Beginning in the first quarter of 2003, the Company recognized stock compensation expense based on the estimated fair value at period end of the options modified. The Company recognized stock-based compensation expense of approximately $2.5 million related to the variable options for the quarter ended March 31, 2003.
In February 2004, 75,000 restricted shares in the Company were issued to senior management under its long-term incentive plan with an intrinsic value of $2,183,000. In February 2004, 1,406 restricted units with an intrinsic value of $29,000 were issued to a director, at his election, for his 2004 annual director fee as a director for the Partnership. These restricted units vest over a five-year period and the intrinsic value of the units is amortized into stock based compensation expense over the vesting period.
(c) Earnings per Share and Anti-Dilutive Computations
Basic earnings per share was computed by dividing net income by the weighted average number of common shares outstanding for the three months ended March 31, 2004 and 2003. The computation of diluted earnings per share further assumes the dilutive effect of common share options.
In conjunction with the Company's initial public offering, the Company affected a two-for-one split. All share amounts for prior periods presented herein have been restated to reflect this stock split.
The following are the common share amounts used to compute the basic and diluted earnings per common share for the three months ended March 31, 2004 and 2003 (in thousands):
| | Three months ended March 31, | ||||
|---|---|---|---|---|---|
| | 2004 | 2003 | |||
| Basic earnings per unit: | |||||
| Weighted average limited partner units outstanding | 10,946 | 3,486 | |||
| Diluted earnings per unit (2004-Restated): | |||||
| Weighted average limited partner units outstanding | 10,946 | 3,486 | |||
| Dilutive effect of exercise of options outstanding | 726 | — | |||
| Dilutive effect of preferred stock conversion to common shares | 1,087 | — | |||
| Diluted units | 12,759 | 3,486 | |||
All outstanding common shares were included in the computation of diluted earnings per common share.
(d) New Accounting Pronouncement
In January 2003, the FASB issued FASB Interpretation No. 46,Consolidation of Variable Interest Entities, and an interpretation of ARB No. 51. In December 2003, the FASB issued FIN No. 46R which
10
clarified certain issues identified in FIN 46. FIN No. 46R requires an entity to consolidate a variable interest entity if it is designated as the primary beneficiary of that entity even if the entity does not have a majority of voting interests. A variable interest entity is generally defined as an entity where its equity is unable to finance its activities or where the owners of the entity lack the risk and rewards of ownership. The provisions of this statement apply at inception for any entity created after January 31, 2003. For an entity created before February 1, 2003, the provisions of this Interpretation must be applied at the beginning of the first interim or annual period ending after March 15, 2004. In January 2004, the Company adopted FIN No. 46R and began consolidating its joint venture interest in the Crosstex DC Gathering, J.V. (CDC), previously accounted for using the equity method of accounting. The consolidated carrying amount for the joint venture is based on the historical costs of the assets, liabilities and non-controlling interests of the joint venture since its formation in January 2003, which approximates the carrying amount of the assets, liabilities and non-controlling interests in the consolidated financial statements as if FIN No. 46R had been effective upon inception of the joint venture.
(2) Restatement of Previously Issued Financial Statements
In July 2004, we determined that certain clerical errors had occurred in 2002 accounting that resulted in certain reconciling items not being properly cleared from the Partnership's accounts payable, accounts receivable and accrued gas purchases resulting in a decrease in the Partnership's net income of $1.7 million for the year ended December 31, 2002. Taking into effect the impact of this change on the Company's income taxes, and gain on issuance of units of the Partnership, this resulted in a decrease in net income of $0.4 million for the Company in 2002. As a result of correcting these errors, we have restated our consolidated balance sheets as of March 31, 2004 and December 31, 2003 and our consolidated statements of changes in stockholders' equity as of March 31, 2004 and December 31, 2003.
The effects of the revisions on our consolidated balance sheets as of March 31, 2004 and December 31, 2003 are summarized in the following table (dollars in thousands):
| | Previously Reported | As Restated | ||||||
|---|---|---|---|---|---|---|---|---|
| | March 31, 2004 | December 31, 2003 | March 31, 2004 | December 31, 2003 | ||||
| Accounts receivable—Trade | 12,190 | 9,491 | 12,937 | 10,238 | ||||
| Total current assets | 164,160 | 145,807 | 164,907 | 146,554 | ||||
| Total property and equipment, net | 212,905 | 204,890 | 212,905 | 204,890 | ||||
| Total assets | 392,926 | 369,738 | 393,673 | 370,485 | ||||
| Accounts payable | 7,813 | 4,064 | 10,074 | 6,325 | ||||
| Accrued gas purchases | 119,540 | 119,756 | 119,684 | 119,900 | ||||
| Total current liabilities | 156,520 | 151,854 | 158,925 | 154,259 | ||||
| Deferred tax liability | 21,121 | 19,683 | 20,541 | 19,103 | ||||
| Interest in non-controlling partners in Partnership | 70,210 | 67,882 | 69,485 | 67,157 | ||||
| Stockholders' equity | 82,375 | 69,619 | 82,022 | 69,266 | ||||
| Total liabilities and stockholders' equity | 392,926 | 369,738 | 393,673 | 370,485 | ||||
11
The effect of the revisions on our consolidated statement of changes in stockholders' equity is a decrease in equity of $0.4 million in retained earnings.
There was no impact on cash flows due to the restatement.
The segment information in note 9 has been restated to reflect the impact of the correction of the clerical errors.
In addition, the Company restated its fully diluted weighted average shares outstanding from 11,672 to 12,759 and it's fully diluted earnings per share from $0.19 to $0.17 for the three months ended March 31, 2004 due to a mathematical error in the calculation of fully diluted weighted average shares outstanding related to the conversion of the preferred stock to common stock in connection with the Company's initial public offering.
(3) Significant Asset Purchases and Acquisitions
On June 30, 2003, the Partnership completed the acquisition of certain assets from Duke Energy Field Services, L.P. (DEFS) for $68.1 million, including the effect of certain purchase price adjustments. The assets acquired included: the Mississippi pipeline system, a 12.4% interest in the Seminole gas processing plant, the Conroe gas plant and gathering system and the Alabama pipeline system. The Partnership has accounted for this acquisition as a business combination in accordance with SFAS No. 141, Business Combinations. We have utilized the purchase method of accounting for this acquisition with an acquisition date of June 30, 2003.
Operating results for the DEFS assets are included in the Statements of Operations since June 30, 2003. Unaudited pro forma results of operations as if the acquisition from DEFS had been acquired on January 1, 2003 are as follows (in thousands, except per unit amounts):
| | Three months ended March 31, 2003 | ||||
|---|---|---|---|---|---|
| Revenue | $ | 308,019 | |||
| Net income | $ | 16 | |||
| Net income per common share: | |||||
| Basic | $ | (0.26 | ) | ||
| Diluted | $ | (0.26 | ) | ||
(4) Investment in Limited Partnerships and Note Receivable
The Partnership owns a 7.86% weighted average interest as the general partner in the five gathering systems of Crosstex Pipeline Partners, L.P. (CPP), a 20.31% interest as a limited partner in CPP, 50% interest in the J.O.B. J.V. and a 50% interest in CDC. In January 2004, the Company began consolidating its investment in CDC. The Company accounts for its investments in J.O.B.J.V. and CPP under the equity method, as it exercises significant influence in operating decisions as a general partner in CPP and as a 50% owner in the joint venture. Under this method, the Company carries its investments at cost and records its equity in net earnings of the affiliated partnerships as income in
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other income (expense) in the consolidated statement of operations, and distributions received from them are recorded as a reduction in the Company's investment in the affiliated partnership.
In connection with the formation of CDC, the Partnership agreed to loan the CDC Partner up to $1.5 million for their initial capital contribution. The loan bears interest at an annual rate of prime plus 2%. CDC makes payments directly to the Partnership attributable to CDC Partner's 50% share of distributable cash flow to repay the loan. Any balance remaining on the note is due in August 2007. The current portion of loan receivable of $747,000 from the CDC Partner is included in current notes receivable as of March 31, 2004. The remaining balance of $838,000 is included in other non-current assets as of March 31, 2004.
(5) Long-Term Debt
As of March 31, 2004 and December 31, 2003, long-term debt consisted of the following (in thousands):
| | March 31, 2004 | December 31, 2003 | ||||||
|---|---|---|---|---|---|---|---|---|
| Acquisition credit facility, interest based on Prime and/or LIBOR plus an applicable margin, interest rates (per the facility) at March 31, 2004 and December 31, 2003 were 3.00% and 2.92%, respectively | $ | 22,000 | $ | 20,000 | ||||
| Senior secured notes, weighted average interest rate of 6.93% | 40,000 | 40,000 | ||||||
| Note payable to Florida Gas Transmission Company | 750 | 750 | ||||||
| 62,750 | 60,750 | |||||||
| Less current portion | (50 | ) | (50 | ) | ||||
| Debt classified as long-term | $ | 62,700 | $ | 60,700 | ||||
In conjunction with the April 2004 acquisition of the LIG Pipeline Company and its subsidiaries discussed in Note (9), the Partnership amended its bank credit facility to increase the borrowing base under its senior secured revolving acquisition facility from $70 million to $100 million and to increase the borrowing base under its senior secured revolving credit working capital and letter of credit facility from $50 million to $100 million.
In October 2002, the Partnership entered into an interest rate swap covering a principal amount of $20 million for a period of two years. The Partnership is subject to interest rate risk on its acquisition credit facility. The interest rate swap reduces this risk by fixing the LIBOR rate, prior to credit margin, at 2.29%, on $20 million of related debt outstanding over the term of the swap agreement which expires on November 1, 2004. The Partnership has accounted for this swap as a cash flow hedge of the variable interest payments related to the $20 million of the acquisition credit facility outstanding. Accordingly, unrealized gains or losses relating to the swap which are recorded in other comprehensive income will be reclassified from other comprehensive income to interest expense over the period
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hedged. The fair value of the interest rate swap at March 31, 2004 was an $181,000 liability and is included in fair value of derivative liabilities.
(6) Derivatives
The Company manages its exposure to fluctuations in commodity prices by hedging the impact of market fluctuations. Swaps are used to manage and hedge prices and location risk related to these market exposures. Swaps are also used to manage margins on offsetting fixed-price purchase or sale commitments for physical quantities of natural gas and NGLs.
The fair value of derivative assets and liabilities, excluding the interest rate swap, are as follows (in thousands):
| | March 31, 2004 | December 31, 2003 | |||||
|---|---|---|---|---|---|---|---|
| Fair value of derivative assets—current | $ | 6,118 | $ | 4,080 | |||
| Fair value of derivative assets—long term | — | — | |||||
| Fair value of derivative liabilities—current | (3,225 | ) | (2,278 | ) | |||
| Fair value of derivative liabilities—long term | — | — | |||||
| Net fair value of derivatives | $ | 2,893 | $ | 1,802 | |||
Set forth below is the summarized notional amount and terms of all instruments held for price risk management purposes at March 31, 2004 (all quantities are expressed in British Thermal Units). The remaining term of the contracts extend no later than March 2005, with no single contract longer than 6 months. The Company's counterparties to hedging contracts include Williams Energy Services Company, Sempra Energy Trading Corp., Morgan Stanley Capital Group, BP Corporation, and Duke Energy Trading and Marketing. Changes in the fair value of the Company's derivatives related to Producer Services gas marketing activities are recorded in earnings. The effective portion of changes in the fair value of cash flow hedges is recorded in accumulated other comprehensive income until the related anticipated future cash flow is recognized in earnings.
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| March 31, 2004 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Transaction type | Total volume | Pricing terms | Remaining term of contracts | Fair value (in thousands) | |||||||
| Cash Flow Hedge: | |||||||||||
| Natural gas swaps Cash flow hedge | 4,529,500 | Fixed prices ranging from $4.64 to $5.90 settling against various Inside FERC Index prices | April 2004-March 2005 | $ | 4,744 | ||||||
| Natural gas swaps Cash flow hedge | (2,336,000 | ) | April 2004-March 2005 | (1,724 | ) | ||||||
| Total natural gas swaps Cash flow hedge | $ | 3,020 | |||||||||
| Liquids swaps Cash flow hedge | (5,411,342 | ) | Fixed prices ranging from $0.3775 to $0.7450 settling against Mt. Belvieu Average of daily postings (non-TET) | April 2004-December 2004 | $ | (155 | ) | ||||
| Total liquids swaps Cash flow hedge | $ | (155 | ) | ||||||||
| Producer Services: | |||||||||||
| Marketing trading financial swaps | 780,000 | Fixed prices ranging from $3.14 to $5.945 settling against various Inside FERC Index prices | April 2004-March 2005 | $ | 784 | ||||||
| Marketing trading financial swaps | (628,000 | ) | April 2004-March 2005 | (476 | ) | ||||||
| Total marketing trading financial swaps | $ | 308 | |||||||||
| Physical offset to marketing trading transactions | 628,000 | Fixed prices ranging from $3.59 to $5.855 settling against various Inside FERC Index prices | April 2004-March 2005 | $ | 496 | ||||||
| Physical offset to marketing trading transactions | (780,000 | ) | April 2004-March 2005 | (776 | ) | ||||||
| Total physical offset to marketing trading transactions swaps | $ | (280 | ) | ||||||||
On all transactions where the Company is exposed to counterparty risk, the Company analyzes the counterparty's financial condition prior to entering into an agreement, establishes limits, and monitors the appropriateness of these limits on an ongoing basis.
Assets and liabilities related to Producer Services that are accounted for as derivative contracts held for trading purposes are included in the fair value of derivative assets and liabilities and Producer Services operating results are recorded net as profit (loss) on energy trading activities in the consolidated statement of operations. The Company estimates the fair value of all of its energy trading
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contracts using prices actively quoted. The estimated fair value of energy trading contracts by maturity date was as follows (in thousands):
| | Maturity periods | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| | Less than one year | One to two years | Two to three years | Total fair value | |||||||
| March 31, 2004 | $ | 28 | — | — | $ | 28 | |||||
| December 31, 2003 | $ | (26 | ) | — | — | $ | (26 | ) | |||
(7) Transactions with Related Parties
Camden Resources, Inc.
The Partnership treats gas for, and purchases gas from, Camden Resources, Inc. (Camden). Camden is an affiliate of the Partnership by way of equity investments made by Yorktown Energy Partners IV, L.P. and Yorktown Energy Partners V, L.P., collectively the major shareholder in the Company, in Camden. During the three months ended March 31, 2004 and 2003, the Partnership purchased natural gas from Camden in the amount of approximately $8.2 million and $2.7 million, respectively, and received approximately $18,000 and $61,000 in treating fees from Camden.
Crosstex Pipeline Partners, L.P.
The Partnership had related-party transactions with Crosstex Pipeline Partners, L.P. (CPP), as summarized below:
(8) Commitments and Contingencies
(a) Employment Agreements
Each member of senior management of the Company is a party to an employment contract with the general partner. The employment agreements provide each member of senior management with severance payments in certain circumstances and prohibit each such person from competing with the general partner or its affiliates for a certain period of time following the termination of such person's employment.
(b) Environmental Issues
The Partnership acquired two assets from DEFS in June 2003 that have environmental contamination, including a gas plant in Montgomery County near Conroe, Texas and a compressor
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station near Cadeville, Louisiana. At both of these sites, contamination from historical operations has been identified at levels that exceed the applicable state action levels. Consequently, site investigation and/or remediation are underway to address those impacts. The estimated remediation cost for the Conroe plant site is currently estimated to be approximately $3.2 million, and the remediation cost for the Cadeville site is currently estimated to be approximately $1.2 million. Under the purchase agreement, DEFS has retained liability for cleanup of both the Conroe and Cadeville sites. Moreover, DEFS has entered into an agreement with a third-party Company pursuant to which the remediation costs associated with the Conroe site have been assumed by this third-party Company that specializes in remediation work. Therefore, the Partnership does not expect to incur any material environmental liability associated with the Conroe or Cadeville sites.
(c) Other
The Company is involved in various litigation and administrative proceedings arising in the normal course of business. In the opinion of management, any liabilities that may result from these claims would not individually or in the aggregate have a material adverse effect on its financial position or results of operations.
The Partnership receives notices from pipeline companies from time to time of gas volume allocation corrections related to gas deliveries on their pipeline systems. These allocation corrections normally have little impact on the Partnership's gross margin because the Partnership balances its purchases and sales in the pipelines and both the purchase and sale on the pipeline system require corrections. As of March 31, 2004 and December 31, 2003, a subsidiary of the Partnership was involved in a dispute related to one such allocation correction with a pipeline company and a customer on that pipeline. In reallocating previous settled deliveries, the pipeline company billed the Partnership's subsidiary for approximately $1.2 million of gas deliveries that occurred in the period from December, 2000 through February, 2001. The Partnership's subsidiary, in turn, billed its customer who was overpaid due to the allocation error. The customer is disputing its liability for such amount, asserting that the corrected billing was untimely. The allocation error occurred prior to the Partnership's acquisition of the subsidiary involved in the dispute. The Partnership has an indemnity from the seller of the subsidiary for liabilities arising prior to the acquisition date. As of March 31, 2004 and December 31, 2003, the Partnership has recorded a receivable of $1.2 million in other current receivables and a liability of $1.2 million in other current liabilities related to this allocation correction. The Partnership believes the customer's dispute of the receivable is without merit, and further believes that it is protected against loss by its right to indemnification.
(9) Segment Information
Identification of operating segments is based principally upon differences in the types and distribution channel of products. The Company's reportable segments consist of Midstream and Treating. The Midstream division consists of the Partnership's natural gas gathering and transmission operations and includes the Mississippi System, the Conroe System, the Gulf Coast System, the Corpus Christi System, the Gregory Gathering System located around the Corpus Christi area, the Arkoma system in Oklahoma, the Vanderbilt System located in south Texas, and various other small systems. Also included in the Midstream division are the Partnership's Producer Services operations. The
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operations in the Midstream segment are similar in the nature of the products and services, the nature of the production processes, the type of customer, the methods used for distribution of products and services and the nature of the regulatory environment. The Treating division generates fees from its plants either through volume-based treating contracts or though fixed monthly payments. Included in the Treating division are four gathering systems that are connected to the treating plants and the Seminole plant located in Gaines County, Texas.
The Company evaluates the performance of its operating segments based on earnings before income taxes and accounting changes, and after an allocation of corporate expenses. Corporate expenses are allocated to the segments on a pro rata basis based on assets. Inter-segment sales are at cost.
Summarized financial information concerning the Company's reportable segments is shown in the following table. There are no other significant non-cash items.
| | Midstream | Treating | Totals | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | (in thousands) | |||||||||
| Three months ended March 31, 2004: | ||||||||||
| Sales to external customers | $ | 318,214 | $ | 7,144 | $ | 325,358 | ||||
| Inter-segment sales | 1,425 | (1,425 | ) | — | ||||||
| Interest expense | 1,093 | 24 | 1,117 | |||||||
| Stock-based compensation expense | 167 | 42 | 209 | |||||||
| Depreciation and amortization | 3,560 | 858 | 4,418 | |||||||
| Segment profit (loss) | 5,106 | 383 | 5,489 | |||||||
| Segment assets (restated) | 349,022 | 44,651 | 393,673 | |||||||
| Capital expenditures | 4,347 | 3,704 | 8,051 | |||||||
| Three months ended March 31, 2003: | ||||||||||
| Sales to external customers | $ | 245,315 | $ | 5,255 | $ | 250,570 | ||||
| Inter-segment sales | 1,504 | (1,504 | ) | — | ||||||
| Interest expense | 331 | 7 | 338 | |||||||
| Stock-based compensation expense | 2,003 | 501 | 2,504 | |||||||
| Depreciation and amortization | 1,895 | 615 | 2,510 | |||||||
| Segment profit (loss) | (4 | ) | 309 | 305 | ||||||
| Segment assets (restated) | 319,031 | 10,286 | 329,317 | |||||||
| Capital expenditures | 2,691 | 1,923 | 4,614 | |||||||
(10) Subsequent Event
On April 1, 2004, the Partnership acquired through its wholly-owned subsidiary Crosstex Louisiana Energy, L.P., the LIG Pipeline Company and its subsidiaries (LIG Inc., Louisiana Intrastate Gas Company, L.L.C., LIG Chemical Company, LIG Liquids Company, L.L.C. and Tuscaloosa Pipeline Company) (collectively, "LIG") from a subsidiary of American Electric Power in a negotiated transaction for $76.2 million. LIG consists of approximately 2,000 miles of gas gathering and transmission systems located in 32 parishes extending from northwest and north-central Louisiana through the center of the state to south and southeast Louisiana. The Partnership financed the acquisition through borrowings under its amended bank credit facility.
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Item 4.Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, to the extent and in the case described in the following paragraph, our disclosure controls and procedures were not effective as of March 31, 2004 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
In July 2004, we determined during the course of internal reviews that, due to clerical errors, certain reconciling items between the detail accounts receivable and accounts payable subledgers and the general ledger relating to 2002 had not been properly cleared. We identified these errors and promptly brought them to the attention of our audit committee and auditors. As a result of correcting these errors, in this quarterly report on Form 10-Q/A, we have restated our consolidated balance sheets as of December 31, 2003 and March 31, 2004 and our consolidated statements of changes in stockholders' equity as of March 31, 2004 and December 31, 2003. We have also restated our notes to consolidated financial statements as necessary to reflect the adjustments. These errors resulted from a deficiency in the procedures to reconcile the detail accounts receivable and accounts payable subledgers to the general ledger. Our independent auditors, KPMG LLP, have reviewed these matters and advised our Audit Committee that the deficiency constituted a material weakness as defined in Statements of Auditing Standards No. 60. In light of the discovery of these errors, we have implemented new procedures for reconciling subledgers to the general ledger and disposition and resolution of reconciling items on a timely basis. Management believes that controls are now in place to ensure that similar errors do not occur again.
There have been no changes in our internal controls over financial reporting that occurred during the three months ended March 31, 2004 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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Item 6.Exhibits and Reports on Form 8-K
The exhibits filed as part of this report are as follows (exhibits incorporated by reference are set forth with the name of the registrant, the type of report and registration number or last date of the period for which it was filed, and the exhibit number in such filing):
| Number | | Description | ||
|---|---|---|---|---|
| 3.1 | — | Restated Certificate of Incorporation of Crosstex Energy, Inc. (incorporated by reference from Exhibit 3.1 to Crosstex Energy, Inc.'s Annual Report on Form 10-K, file No. 000-50536, filed March 26, 2004) | ||
| 3.2 | — | Restated Bylaws of Crosstex Energy, Inc. (incorporated by reference from Exhibit 3.2 to Crosstex Energy, Inc.'s Annual Report on Form 10-K, file No. 000-50536, filed March 26, 2004) | ||
| 3.3 | — | Certificate of Limited Partnership of Crosstex Energy, L.P (incorporated by reference from Exhibit 3.1 to Crosstex Energy, L.P.'s Registration Statement on Form S-1, file No. 333-97779, filed August 7, 2002) | ||
| 3.5 | — | Second Amended and Restated Agreement of Limited Partnership of Crosstex Energy, L.P., dated as of March 29, 2004 (incorporated by reference from Exhibit 3.2 to Crosstex Energy, L.P.'s Quarterly Report on Form 10-Q, file No. 000-50067, filed on May 7, 2004) | ||
| 3.6 | — | Amendment No. 1 to Second Amended and Restated Agreement of Limited Partnership of Crosstex Energy, L.P., dated as of April 1, 2004 (incorporated by reference from Exhibit 3.3 to Crosstex Energy, L.P.'s Quarterly Report on Form 10-Q, file No. 000-50067, filed on May 7, 2004) | ||
| 3.5 | — | Certificate of Limited Partnership of Crosstex Energy Services, L.P. (incorporated by reference from Exhibit 3.3 to Amendment No. 2 to Crosstex Energy, L.P.'s Registration Statement on Form S-1, file No. 333-97779, filed November 4, 2002) | ||
| 3.5 | — | Second Amended and Restated Agreement of Limited Partnership of Crosstex Energy Services, L.P., dated as of April 1, 2004 (incorporated by reference from Exhibit 3.2 to Crosstex Energy, L.P.'s Quarterly Report on Form 10-Q, file No. 000-50067, filed on May 7, 2004) | ||
| 3.7 | — | Certificate of Limited Partnership of Crosstex Energy GP, L.P. (incorporated by reference from Exhibit 3.5 to Crosstex Energy, L.P.'s Registration Statement, file No. 333-97779, filed August 7, 2002) | ||
| 3.8 | — | Agreement of Limited Partnership of Crosstex Energy GP, L.P., dated as of July 12, 2002 (incorporated by reference from Exhibit 3.6 to Crosstex Energy L.P.'s Registration Statement on Form S-1, file No. 333-97779, filed August 7, 2002) | ||
| 3.9 | — | Certificate of Formation of Crosstex Energy GP, LLC (incorporated by reference from Exhibit 3.7 to Crosstex Energy, L.P.'s Registration Statement on Form S-1, file No. 333-97779, filed August 7, 2002) | ||
| 3.10 | — | Amended and Restated Limited Liability Company Agreement of Crosstex Energy GP, LLC, dated as of December 17, 2002 (incorporated by reference from Exhibit 3.8 from Crosstex Energy, L.P.'s Registration Statement on Form S-1, file No. 333-106927, filed July 10, 2003) | ||
| 3.11 | — | Amended and Restated Certificate of Formation of Crosstex Holdings GP, LLC (incorporated by reference from Exhibit 3.11 to Crosstex Energy, Inc.'s Registration Statement on Form S-1, file No. 333-110095, filed October 30, 2003) | ||
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| 3.12 | — | Limited Liability Company Agreement of Crosstex Holdings GP, LLC, dated as of October 27, 2003 (incorporated by reference from Exhibit 3.12 to Crosstex Energy, Inc.'s Registration Statement on Form S-1, file No. 333-110095, filed October 30, 2003) | ||
| 3.13 | — | Certificate of Formation of Crosstex Holdings LP, LLC (incorporated by reference from Exhibit 3.13 to Crosstex Energy, Inc.'s Registration Statement on Form S-1, file No. 333-110095, filed October 30, 2003) | ||
| 3.14 | — | Limited Liability Company Agreement of Crosstex Holdings LP, LLC, dated as of November 4, 2003 (incorporated by reference from Exhibit 3.14 to Crosstex Energy, Inc.'s Registration Statement on Form S-1, file No. 333-110095, filed October 30, 2003) | ||
| 3.15 | — | Amended and Restated Certificate of Limited Partnership of Crosstex Holdings, L.P. (incorporated by reference from Exhibit 3.15 to Crosstex Energy, Inc.'s Registration Statement on Form S-1, file No. 333-110095, filed October 30, 2003) | ||
| 3.16 | — | Agreement of Limited Partnership of Crosstex Holdings, L.P., dated as of November 4, 2003 (incorporated by reference from Exhibit 3.16 to Crosstex Energy, Inc.'s Registration Statement on Form S-1, file No. 333-110095, filed October 30, 2003) | ||
| 4.1 | — | Specimen Certificate representing shares of common stock (incorporated by reference from Exhibit 4.1 to Crosstex Energy, Inc.'s Registration Statement on Form S-1, file No. 333-110095, filed October 30, 2003) | ||
| 10.1 | — | Third Amendment to Second Amended and Restated Credit Agreement, dated as of April 1, 2004, by and among Crosstex Energy Services, L.P., Union Bank of California, N.A. and certain other parties (incorporated by reference from Exhibit 10.1 to Crosstex Energy, L.P.'s Quarterly Report on Form 10-Q, file No. 000-50067, filed on May 7, 2004) | ||
| 10.2 | — | Letter Amendment No. 1 to Master Shelf Agreement, dated as of April 1, 2004, among Crosstex Energy Services, L.P., Prudential Investment Management, Inc., The Prudential Insurance Company of America and Pruco Life Insurance Company (incorporated by reference from Exhibit 10.2 to Crosstex Energy, L.P.'s Quarterly Report on Form 10-Q, file No. 000-50067, filed on May 7, 2004) | ||
| 21.1 | * | — | List of Subsidiaries | |
| 31.1 | ** | — | Certification of the principal executive officer | |
| 31.2 | ** | — | Certification of the principal financial officer | |
| 32.1 | ** | — | Certification of the principal executive officer and the principal financial officer of the Company pursuant to 18 U.S.C. Section 1350 |
On February 27, 2004, Crosstex Energy, Inc. filed a Current Report, items 7 and 12, on Form 8-K, which included its press release as Exhibit 99.1 announcing its financial results for the three and twelve month periods ended December 31, 2003.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th day of August 2004.
| CROSSTEX ENERGY, INC. | |||
By: | /s/ WILLIAM W. DAVIS William W. Davis, Executive Vice President and Chief Financial Officer | ||
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