Exhibit 99.1
Regency Energy Partners Reports Fourth-Quarter and Full-Year 2010 Results
Full-Year 2010 Adjusted EBITDA Increased 55% Over 2009
DALLAS, February 16, 2011 – Regency Energy Partners LP (Nasdaq: RGNC), (“Regency” or the “Partnership”), announced today its financial results for the full year ended December 31, 2010.
Regency’s adjusted EBITDA increased 92% to $102 million in the fourth quarter 2010, compared to $53 million in the fourth quarter 2009. For the full year, adjusted EBITDA increased 55% to $327 million in 2010, compared to $211 million in 2009.
“Regency had a transformational year and continued to evolve into a full-service midstream provider in 2010,” said Mike Bradley, president and chief executive officer of Regency. “This past year, our key accomplishments included the completion of several major growth projects in north Louisiana, and the acquisitions of a natural gas treating business and interest in the Midcontinent Express Pipeline. These achievements diversified our service offerings, expanded our geographic footprint and contributed to our strong financial performance.”
“Our general partner, Energy Transfer Equity, L.P., is committed to our long-term strategy of growing distributions and achieving investment grade metrics,” continued Bradley. “With the expertise of a supportive general partner, a strong balance sheet and well-positioned assets, we enter 2011 with a solid foundation on which to grow.”
For the year ended December 31, 2010, the Partnership recorded a net loss of $11 million, compared to net income of $140 million in 2009. This variance was primarily attributable to the following items: a $134-million decrease in gain on asset sales, primarily due to the contribution of the Regency Intrastate Gas System to the Haynesville Joint Venture in 2009; and an $18-million loss on debt refinancing, net, primarily related to the redemption premium paid to redeem the senior notes due 2013.
REVIEW OF SEGMENT PERFORMANCE
Adjusted total segment margin increased 8% to $390 million for the full year 2010, compared to $361 million for the full year 2009.
Gathering and Processing – The Gathering and Processing segment includes Regency’s natural gas processing and treating plants, low-pressure gathering pipelines and NGL pipeline activities. In addition, Regency reports its producer services revenues in this segment.
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Adjusted segment margin for the Gathering and Processing segment, which excludes non-cash hedging gains and losses related to the Gathering and Processing segment, was $226 million for the full year 2010, compared to $207 million for the full year 2009. The 9% increase was primarily due to increased volumes in south Texas associated with the Eagle Ford shale development.
Total throughput volumes for the Gathering and Processing segment averaged 1 million MMbtu per day of natural gas, and processed NGLs averaged 26,000 barrels per day for 2010. For 2009, total throughput volumes averaged 1 million MMbtu per day of natural gas, and processed NGLs averaged 21,000 barrels per day.
Transportation – The Transportation segment consists of Regency’s 49.99% interest in the Haynesville Joint Venture and its 49.9% interest in the MEP Joint Venture. Since Regency uses the equity method of accounting for the Haynesville Joint Venture and the MEP Joint Venture, Regency does not record segment margin for the Transportation segment. Rather, the income attributable to both the Haynesville Joint Venture and the MEP Joint Venture is recorded as income from unconsolidated subsidiaries.
For 2010, Regency reported income from unconsolidated subsidiaries of $69 million, of which $48 million was related to the Haynesville Joint Venture, and $21 million was related to the MEP Joint Venture. For 2009, Regency reported income from unconsolidated subsidiaries of $8 million. The increase from 2009 to 2010 was primarily due to the completion of the Haynesville Expansion Project and Red River Lateral in January 2010, the acquisition of additional ownership interest in the Haynesville Joint Venture in April 2010, and the acquisition of a 49.9% interest in the MEP Joint Venture in May 2010.
For comparison purposes only, Regency is providing operating data and segment information assuming 100% ownership of both joint ventures.
The Haynesville Joint Venture, which consists solely of the Regency Intrastate Gas System (“RIGS”), was previously wholly owned by Regency and is currently operated by Regency. The Haynesville Joint Venture’s segment margin increased to $174 million for 2010, compared to $52 million for 2009. This increase was primarily driven by the completion of the Haynesville Expansion Project and Red River Lateral in January 2010.
Total combined throughput volumes for the Haynesville Joint Venture averaged 1.3 million MMbtu per day of natural gas for 2010, compared to an average of 739,000 MMbtu per day of natural gas for 2009.
The MEP Joint Venture consists solely of the Midcontinent Express Pipeline, which is operated by Kinder Morgan Energy Partners, L.P. The MEP Joint Venture’s segment margin increased to $212 million for 2010, compared to $89 million for 2009. This increase was primarily attributable to a full year of operations of Zone 1 and Zone 2, which were completed in May and August 2009, respectively. In addition there was an expansion project completed in June 2010, which increased total pipeline capacity from 1.5 Bcf/d to 1.8 Bcf/d.
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Total combined throughput volumes for the MEP Joint Venture averaged 1.4 million MMbtu per day of natural gas for 2010, compared to an average of 678,000 MMbtu per day of natural gas for 2009.
Contract Compression – The Contract Compression segment provides turnkey natural gas compression services.
Segment margin for the Contract Compression segment was $154 million for 2010, compared to $141 million for 2009. This increase was primarily attributable to increased revenue generating horsepower and additional contract compression services provided to the Gathering and Processing segment. The inter-segment revenues are eliminated upon consolidation.
Regency’s revenue generating horsepower increased to 844,800 for the fourth quarter 2010, compared to 753,328 of revenue generating horsepower for the fourth quarter 2009.
Contract Treating – The Contract Treating segment owns and operates a fleet of equipment used to provide treating services, such as carbon dioxide and hydrogen sulfide removal, natural gas cooling, dehydration and BTU management to natural gas producers and midstream pipeline companies.
Segment margin for the Contract Treating segment, which was acquired in September 2010, was $11 million for the period since acquisition. For the fourth quarter 2010, which was the first full quarter contribution from the Contract Treating segment, segment margin was $9 million.
Corporate and Others – The Corporate and Others segment is primarily comprised of revenues from the operations of a small interstate pipeline, as well as partial reimbursements of general and administrative costs from the Haynesville Joint Venture. Segment margin in the Corporate and Others segment increased to $21 million for 2010, compared to $6 million for 2009, primarily due to an increase in the reimbursement from the Haynesville Joint Venture for general and administrative expenses.
ORGANIC GROWTH
In 2010, Regency invested $193 million for growth capital projects – exclusive of growth capital related to its joint venture interests – of which approximately $121 million was related to organic growth projects in the Gathering and Processing segment; $67 million was related to the fabrication of new compressor packages for the Contract Compression segment; and $5 was million related to the Corporate and Others segment.
In 2010, Regency invested $20 million and $86 million to fund its proportionate share of growth capital associated with the Haynesville Joint Venture and MEP Joint Venture, respectively.
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CASH DISTRIBUTIONS
On January 27, 2011, Regency announced a cash distribution of 44.5 cents per outstanding common unit and Series A Preferred Unit for the fourth quarter ended December 31, 2010. This distribution is equivalent to $1.78 per outstanding common unit and Series A Preferred Unit on an annual basis and was paid on February 14, 2011, to unitholders of record at the close of business on February 7, 2011.
In the fourth quarter of 2010, Regency generated $69 million in cash available for distribution, representing coverage of 1.08 times the amount required to cover its announced distribution to unitholders.
Regency makes distribution determinations based on its cash available for distribution and the perceived sustainability of distribution levels over an extended period. In addition to considering the cash available for distribution generated during the quarter, Regency takes into account cash reserves established with respect to prior distributions, seasonality of results, and its internal forecasts of adjusted EBITDA and cash available for distribution over an extended period. Distributions are set by the Board of Directors and are driven by the long-term sustainability of the business.
TELECONFERENCE
Regency Energy Partners will hold a quarterly conference call to discuss full-year 2010 results on Thursday, February 17, 2011, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time).
The dial-in number for the call is 1-866-831-6234 in the United States, or +1-617-213-8854 outside the United States, pass code 42367669. A live webcast of the call can be accessed on the investor information page of Regency Energy Partners’ Web site atwww.regencyenergy.com. The call will be available for replay for seven days by dialing 1-888-286-8010 (from outside the U.S., +1-617-801-6888) pass code 62859233.
NON-GAAP FINANCIAL INFORMATION
This press release and the accompanying financial schedules include the non-GAAP financial measures of:
| | • | | cash available for distribution; |
| | • | | adjusted segment margin; and |
| | • | | adjusted total segment margin. |
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These financial metrics are key measures of the Partnership’s financial performance. The accompanying schedules provide reconciliations of these non-GAAP financial measures to their most directly-comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Our non-GAAP financial measures should not be considered an alternative to, or more meaningful than, net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as a measure of operating performance, liquidity or ability to service debt obligations.
We define EBITDA as net income (loss) plus interest expense, provision for income taxes and depreciation and amortization expense.
We define adjusted EBITDA as EBITDA plus (minus) non-cash loss (gain) from commodity and embedded derivatives, non-cash unit-based compensation, loss (gain) on asset sales, net, loss on debt refinancing, other (income) expense, net, and the Partnership’s interest in adjusted EBITDA from unconsolidated subsidiaries less income from unconsolidated subsidiaries.
Adjusted EBITDA is used as a supplemental performance measure by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others, to assess:
| | • | | financial performance of our assets without regard to financing methods, capital structure or historical cost basis; |
| | • | | the ability of our assets to generate cash sufficient to pay interest costs, support our indebtedness and make cash distributions to our unitholders and general partner; |
| | • | | our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing methods or capital structure; and |
| | • | | the viability of acquisitions and capital expenditure projects and the overall rates of return on alternative investment opportunities. |
Our EBITDA and adjusted EBITDA may not be comparable to a similarly titled measure of another company because other entities may not calculate EBITDA or adjusted EBITDA in the same manner.
We define cash available for distribution as:
| | • | | minus interest expense, excluding capitalized interest; |
| | • | | minus maintenance capital expenditures; |
| | • | | plus cash proceeds from asset sales, if any. |
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Cash available for distribution is used as a supplemental liquidity measure by our management and by external users of our financial statements such as investors, commercial banks, research analysts and others, to approximate the amount of operating surplus generated by us during a specific period and to assess our ability to make cash distributions to our unitholders and our general partner. Cash available for distribution is not the same measure as operating surplus or available cash, both of which are defined in our partnership agreement.
We define segment margin, generally, as revenues minus cost of sales. We calculate our Gathering and Processing segment margin and Corporate and Others segment margin as our revenue generated from operations minus the cost of natural gas and NGLs purchased and other cost of sales, including third-party transportation and processing fees.
Prior to our contribution of RIGS to the Haynesville Joint Venture, we calculated our Transportation segment margin as revenues generated by fee income as well as, in those instances in which we purchased and sold gas for our account, gas sales revenue minus the cost of natural gas that we purchased and transported. After our contribution of RIGS to the Haynesville Joint Venture, we do not record segment margin for the Transportation segment, which also includes our investment in the MEP Joint Venture, because we record our ownership percentage of the net income in the Haynesville Joint Venture and the MEP Joint Venture as income from an unconsolidated subsidiaries.
We calculate our Contract Services segment margin as our revenue generated from our contract services operations minus the direct costs, primarily compressor unit repairs, associated with that revenue.
We calculate our Contract Treating segment margin as revenues generated from our contract treating operations minus direct costs associated with those revenues.
We calculate total segment margin as the total of segment margin of our five segments, less intersegment eliminations.
We define adjusted segment margin as segment margin adjusted for non-cash gains (losses) from commodity derivatives. We define adjusted total segment margin as total segment margin adjusted for non-cash gains (losses) from commodity derivatives. Our adjusted total segment margin equals the sum of our operating segments’ adjusted segment margins or segment margins, including intersegment eliminations. Adjusted segment margin and adjusted total segment margin are included as supplemental disclosures because they are primary performance measures used by management as they represent the results of product purchases and sales, a key component of our operations.
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Our total segment margin and adjusted total segment margin may not be comparable to a similarly titled measure of another company because other entities may not calculate these amounts in the same manner.
For quarterly comparison purposes only we have also used the following non-GAAP financial measures related to the Haynesville Joint Venture and the MEP Joint Venture:
| | • | | Haynesville Joint Venture segment margin; |
| | • | | MEP Joint Venture segment margin. |
We define the Haynesville Joint Venture’s segment margin as the Haynesville Joint Venture’s revenue minus cost of sales.
We define the MEP Joint Venture’s segment margin as the MEP Joint Venture’s revenue minus cost of sales.
FORWARD-LOOKING INFORMATION
This release contains “forward-looking” statements, which are any statements that do not relate strictly to historical facts. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “plan,” “project,” “will” or similar expressions help identify forward-looking statements. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions, which include, but are not limited to, the risks, uncertainties and assumptions enumerated in our Forms 10-Q and 10-K as filed with the Securities and Exchange Commission. Although we believe our forward-looking statements are based on reasonable assumptions, current expectations and projections about future events, we cannot give assurances that such assumptions, expectations and projections will prove to be correct. Therefore, actual results and outcomes may differ materially from those expressed in such forward-looking statements. We undertake no obligation to update publicly or to revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Regency Energy Partners LP (Nasdaq: RGNC) is a growth-oriented, midstream energy partnership engaged in the gathering and processing, contract compression, treating, marketing and transporting of natural gas and natural gas liquids. Regency’s general partner is owned by Energy Transfer Equity, L.P. (NYSE: ETE). For more information, visit the Regency Energy Partners LP Web site atwww.regencyenergy.com.
CONTACT:
Investor Relations:
Lyndsay Hannah
Regency Energy Partners
Manager, Communications & Public Relations
214-840-5477
ir@regencygas.com
Media Relations:
Elizabeth Cornelius
HCK2 Partners
972-716-0500 x26
elizabeth.cornelius@hck2.com
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Consolidated Income Statements
Regency Energy Partners LP
Consolidated Statements of Operations
($ in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Year Ended | |
| | | December 31,
2010 | | | December 31,
2009 (1) | | | December 31,
2010 | | | December 31,
2009 (1) | |
REVENUES | | | | | | | | | | | | | | | | |
Gas sales, including related party amounts | | $ | 111,876 | | | $ | 127,840 | | | $ | 519,344 | | | $ | 476,077 | |
NGL sales, including related party amounts | | | 120,547 | | | | 81,201 | | | | 390,879 | | | | 239,255 | |
Gathering, transportation and other fees, including related party amounts | | | 84,014 | | | | 64,538 | | | | 293,295 | | | | 270,071 | |
Net realized and unrealized gain from derivatives | | | (1,518 | ) | | | 1,736 | | | | (8,582 | ) | | | 37,712 | |
Other, including related party amounts | | | 7,826 | | | | 7,035 | | | | 26,727 | | | | 20,162 | |
| | | | | | | | | | | | | | | | |
Total revenues | | | 322,745 | | | | 282,350 | | | | 1,221,663 | | | | 1,043,277 | |
| | | | |
OPERATING COSTS AND EXPENSES | | | | | | | | | | | | | | | | |
Cost of sales, including related party amounts | | | 221,121 | | | | 196,852 | | | | 862,105 | | | | 674,944 | |
Operation and maintenance | | | 33,100 | | | | 26,809 | | | | 125,650 | | | | 117,080 | |
General and administrative, including related party amounts | | | 18,563 | | | | 14,532 | | | | 80,951 | | | | 57,863 | |
Loss (gain) on asset sales, net | | | 3 | | | | 106 | | | | 516 | | | | (133,282 | ) |
Depreciation and amortization | | | 33,217 | | | | 26,174 | | | | 117,751 | | | | 100,098 | |
| | | | | | | | | | | | | | | | |
Total operating costs and expenses | | | 306,004 | | | | 264,473 | | | | 1,186,973 | | | | 816,703 | |
| | | | |
OPERATING INCOME | | | 16,741 | | | | 17,877 | | | | 34,690 | | | | 226,574 | |
| | | | |
Income from unconsolidated subsidiaries | | | 23,618 | | | | 2,431 | | | | 69,365 | | | | 7,886 | |
Interest expense, net | | | (19,791 | ) | | | (21,945 | ) | | | (82,792 | ) | | | (77,665 | ) |
Loss on debt refinancing, net | | | (15,748 | ) | | | — | | | | (17,528 | ) | | | — | |
Other income and deductions, net | | | (12,232 | ) | | | (1,459 | ) | | | (12,126 | ) | | | (15,132 | ) |
| | | | | | | | | | | | | | | | |
(LOSS) INCOME BEFORE INCOME TAXES | | | (7,412 | ) | | | (3,096 | ) | | | (8,391 | ) | | | 141,663 | |
Income tax (benefit) expense | | | (143 | ) | | | (484 | ) | | | 956 | | | | (1,095 | ) |
| | | | | | | | | | | | | | | | |
(LOSS) INCOME FROM CONTINUING OPERATIONS | | | (7,269 | ) | | | (2,612 | ) | | | (9,347 | ) | | | 142,758 | |
DISCONTINUED OPERATIONS | | | | | | | | | | | | | | | | |
Net loss from operations of east Texas assets | | | (1,654 | ) | | | (735 | ) | | | (1,571 | ) | | | (2,269 | ) |
| | | | | | | | | | | | | | | | |
NET (LOSS) INCOME | | $ | (8,923 | ) | | $ | (3,347 | ) | | $ | (10,918 | ) | | $ | 140,489 | |
Net income attributable to noncontrolling interest | | | (69 | ) | | | (30 | ) | | | (562 | ) | | | (91 | ) |
| | | | | | | | | | | | | | | | |
NET (LOSS) INCOME ATTRIBUTABLE TO REGENCY ENERGY PARTNERS LP | | $ | (8,992 | ) | | $ | (3,377 | ) | | $ | (11,480 | ) | | $ | 140,398 | |
| | | | | | | | | | | | | | | | |
| (1) | Amounts differ from previously disclosed amounts due to the presentation as discontinued operations for the disposition of east Texas assets. |
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Segment Financial and Operating Data
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Year Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | ($ in thousands) | |
Gathering and Processing Segment | | | | | | | | | | | | | | | | |
Financial data: | | | | | | | | | | | | | | | | |
Segment margin (1) | | $ | 52,915 | | | $ | 50,982 | | | $ | 196,008 | | | $ | 213,920 | |
Adjusted segment margin (1) | | | 59,731 | | | | 52,139 | | | | 226,191 | | | | 206,769 | |
Operating data: | | | | | | | | | | | | | | | | |
Throughput (MMbtu/d) | | | 1,029,597 | | | | 1,000,748 | | | | 996,800 | | | | 975,963 | |
NGL gross production (Bbls/d) | | | 29,327 | | | | 22,725 | | | | 26,155 | | | | 21,104 | |
| (1) | Segment margin and adjusted segment margin vary from previously disclosed amounts due to the presentation of discontinued operations for the disposition of east Texas assets, as well as a functional reorganization of our operating segments. |
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Year Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | ($ in thousands) | |
Contract Compression Segment (1) | | | | | | | | | | | | | | | | |
Financial data: | | | | | | | | | | | | | | | | |
Segment margin | | $ | 40,855 | | | $ | 34,163 | | | $ | 154,209 | | | $ | 141,028 | |
Operating data: | | | | | | | | | | | | | | | | |
Revenue generating horsepower | | | 844,800 | | | | 753,328 | | | | 844,800 | | | | 753,328 | |
Average horsepower per revenue generating compression unit | | | 832 | | | | 849 | | | | 832 | | | | 849 | |
| (1) | Segment margin varies from previously disclosed amounts due to a functional reorganization of our operating segments. |
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Year Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | ($ in thousands) | |
Contract Treating Segment | | | | | | | | | | | | | | | | |
Financial data: | | | | | | | | | | | | | | | | |
Segment margin | | $ | 8,725 | | | $ | — | | | $ | 11,454 | | | $ | — | |
Operating data: | | | | | | | | | | | | | | | | |
Revenue generating gallons per minute | | | 3,431 | | | | — | | | | 3,431 | | | | — | |
| | |
| | | Three Months Ended
December 31, | | | Year Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | ($ in thousands) | |
Corporate & Others | | | | | | | | | | | | | | | | |
Financial data: | | | | | | | | | | | | | | | | |
Segment margin (1) | | $ | 5,341 | | | $ | 1,964 | | | $ | 21,092 | | | $ | 6,275 | |
| (1) | Segment margin varies from previously disclosed amounts due to a functional reorganization of our operating segments. |
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The following provides key performance measures for 100% of the Haynesville Joint Venture and the MEP Joint Venture
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Year Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | ($ in thousands) | |
Transportation Segment - Haynesville Joint Venture | | | | | | | | | | | | | | | | |
Financial data: | | | | | | | | | | | | | | | | |
Segment margin | | $ | 47,450 | | | $ | 12,157 | | | $ | 174,347 | | | $ | 52,051 | |
Operating data: | | | | | | | | | | | | | | | | |
Throughput (MMbtu/d) | | | 1,543,570 | | | | 640,166 | | | | 1,277,881 | | | | 738,654 | |
| | |
| | | Three Months Ended
December 31, | | | Year Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | ($ in thousands) | |
Transportation Segment - MEP Joint Venture | | | | | | | | | | | | | | | | |
Financial data: | | | | | | | | | | | | | | | | |
Segment margin | | $ | 57,799 | | | $ | 46,199 | | | $ | 212,345 | | | $ | 89,454 | |
Operating data: | | | | | | | | | | | | | | | | |
Throughput (MMbtu/d) | | | 1,541,533 | | | | 1,236,620 | | | | 1,408,778 | | | | 678,104 | |
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Reconciliation of Non-GAAP Measures to GAAP Measures
| | | | | | | | | | | | |
| | | Three Months Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | ($ in thousands) | |
Net (loss) income | | $ | (8,923 | ) | | $ | (3,347 | ) | | $ | 31,936 | |
Add (deduct): | | | | | | | | | | | | |
Interest expense, net | | | 19,791 | | | | 22,028 | | | | 14,982 | |
Depreciation and amortization | | | 33,217 | | | | 28,759 | | | | 27,928 | |
Income tax benefit | | | (143 | ) | | | (484 | ) | | | (408 | ) |
| | | | | | | | | | | | |
EBITDA (1) (2) | | $ | 43,942 | | | $ | 46,956 | | | $ | 74,438 | |
Add (deduct): | | | | | | | | | | | | |
Non-cash loss (gain) from derivatives | | | 18,922 | | | | 2,124 | | | | (13,691 | ) |
Non-cash unit based compensation (3) | | | 1,386 | | | | 1,613 | | | | 1,220 | |
Loss on asset sales, net | | | 78 | | | | 106 | | | | 38 | |
Income from unconsolidated subsidiaries | | | (23,618 | ) | | | (2,431 | ) | | | — | |
Partnership’s ownership interest in Haynesville Joint Venture’s adjusted EBITDA (4) | | | 20,374 | | | | 3,621 | | | | — | |
Partnership’s ownership interest in MEP Joint Venture’s adjusted EBITDA (5) | | | 24,095 | | | | — | | | | — | |
Loss on debt refinancing, net | | | 15,748 | | | | — | | | | — | |
Other expense, net | | | 831 | | | | 698 | | | | 104 | |
| | | | | | | | | | | | |
Adjusted EBITDA (6) | | $ | 101,758 | | | $ | 52,687 | | | $ | 62,109 | |
| | | | | | | | | | | | |
(1) Earnings before interest, taxes, depreciation and amortization. | | | | | | | | | | | | |
(2) EBITDA varies from previously disclosed amounts as a result of new accounting pronouncement that requires disclosing non-controlling interest in income separately on the face of the income statement. | | | | | | | | | | | | |
(3) The Partnership added non-cash unit based compensation as a reconciling item from EBITDA to adjusted EBITDA. Previous comparative periods have been restated. | | | | | | | | | | | | |
(4) 100% of Haynesville Joint Venture’s Adjusted EBITDA is calculated as follows: | | | | | | | | | | | | |
Net income Haynesville Joint Venture | | $ | 32,097 | | | $ | 5,655 | | | $ | — | |
Add: | | | | | | | | | | | | |
Depreciation and amortization | | | 8,474 | | | | 2,669 | | | | — | |
Interest expense | | | 171 | | | | 93 | | | | — | |
Gain on insurance settlement | | | 7 | | | | — | | | | — | |
Loss on sale of asset, net | | | (1 | ) | | | — | | | | — | |
Other expense, net | | | 9 | | | | 5 | | | | — | |
| | | | | | | | | | | | |
Haynesville Joint Venture’s Adjusted EBITDA | | $ | 40,757 | | | $ | 8,422 | | | $ | — | |
| | | | | | | | | | | | |
(5) 100% of MEP Joint Venture’s Adjusted EBITDA is calculated as follows and represents the three months ended September 30, 2010, as the Partnership acquired its 49.9 percent ownership interest on May 26, 2010: | | | | | | | | | | | | |
Net income MEP Joint Venture | | $ | 18,110 | | | $ | — | | | $ | — | |
Add: | | | | | | | | | | | | |
Depreciation and amortization | | | 17,402 | | | | — | | | | — | |
Total other income (expense) | | | 12,774 | | | | — | | | | — | |
| | | | | | | | | | | | |
MEP Joint Venture’s Adjusted EBITDA | | $ | 48,286 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | |
(6) Adjusted EBITDA and Combined Adjusted EBITDA differs from previously disclosed amounts as a result of the inclusion of income from unconsolidated subsidiary to account for Regency’s income from the Haynesville Joint Venture and the inclusion of non-cash unit based compensation as a reconciling item to Adjusted EBITDA. | | | | | | | | | | | | |
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Reconciliation of Non-GAAP Measures to GAAP Measures
| | | | | | | | | | | | |
| | | Year Ended
December 31, | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | ($ in thousands) | |
Net (loss) income | | $ | (10,918 | ) | | $ | 140,489 | | | $ | 101,328 | |
Add (deduct): | | | | | | | | | | | | |
Interest expense, net | | | 82,971 | | | | 77,996 | | | | 63,243 | |
Depreciation and amortization | | | 122,725 | | | | 109,893 | | | | 102,566 | |
Income tax expense (benefit) | | | 956 | | | | (1,095 | ) | | | (266 | ) |
| | | | | | | | | | | | |
EBITDA (1) (2) | | $ | 195,734 | | | $ | 327,283 | | | $ | 266,871 | |
Add (deduct): | | | | | | | | | | | | |
Non-cash loss (gain) from derivatives | | | 42,613 | | | | 5,163 | | | | (14,708 | ) |
Non-cash unit based compensation (3) | | | 13,727 | | | | 5,834 | | | | 4,318 | |
Loss (gain) on asset sales, net | | | 591 | | | | (133,284 | ) | | | 472 | |
Income from unconsolidated subsidiaries | | | (69,365 | ) | | | (7,886 | ) | | | — | |
Partnership’s ownership interest in Haynesville Joint Venture’s adjusted EBITDA (4) | | | 67,014 | | | | 11,398 | | | | — | |
Partnership’s ownership interest in MEP Joint Venture’s adjusted EBITDA (5) | | | 55,682 | | | | — | | | | — | |
Loss on debt refinancing, net | | | 17,528 | | | | — | | | | — | |
Other expense, net | | | 3,432 | | | | 2,486 | | | | 2,374 | |
| | | | | | | | | | | | |
Adjusted EBITDA (6) | | $ | 326,956 | | | $ | 210,994 | | | $ | 259,327 | |
| | | | | | | | | | | | |
(1) Earnings before interest, taxes, depreciation and amortization. | | | | | | | | | | | | |
(2) EBITDA varies from previously disclosed amounts as a result of new accounting pronouncement that requires disclosing non-controlling interest in income separately on the face of the income statement. | | | | | | | | | | | | |
(3) The Partnership added non-cash unit based compensation as a reconciling item from EBITDA to adjusted EBITDA. Previous comparative periods have been restated. | | | | | | | | | | | | |
(4) 100% of Haynesville Joint Venture’s Adjusted EBITDA is calculated as follows: | | | | | | | | | | | | |
Net income Haynesville Joint Venture | | $ | 106,737 | | | $ | 19,734 | | | $ | — | |
Add: | | | | | | | | | | | | |
Depreciation and amortization | | | 31,797 | | | | 8,514 | | | | — | |
Interest expense | | | 526 | | | | 158 | | | | — | |
Gain on insurance settlement | | | (242 | ) | | | — | | | | — | |
Loss on sale of asset, net | | | 105 | | | | — | | | | — | |
Other expense, net | | | 14 | | | | 50 | | | | — | |
| | | | | | | | | | | | |
Haynesville Joint Venture’s Adjusted EBITDA | | $ | 138,937 | | | $ | 28,456 | | | $ | — | |
| | | | | | | | | | | | |
(5) 100% of MEP Joint Venture’s Adjusted EBITDA is calculated as follows and represents the period from May 26, 2010 to September 30, 2010, as the Partnership acquired its 49.9 percent ownership interest on May 26, 2010: | | | | | | | | | | | | |
Net income MEP Joint Venture | | $ | 42,529 | | | $ | — | | | $ | — | |
Add: | | | | | | | | | | | | |
Depreciation and amortization | | | 40,104 | | | | — | | | | — | |
Total other income (expense) | | | 28,954 | | | | — | | | | — | |
| | | | | | | | | | | | |
MEP Joint Venture’s Adjusted EBITDA | | $ | 111,587 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | |
(6) Adjusted EBITDA and Combined Adjusted EBITDA differs from previously disclosed amounts as a result of the inclusion of income from unconsolidated subsidiary to account for Regency’s income from the Haynesville Joint Venture and the inclusion of non-cash unit based compensation as a reconciling item to Adjusted EBITDA. | | | | | | | | | | | | |
12
Non-GAAP Adjusted Segment Margin to GAAP Net Income
| | | | | | | | | | | | |
| | | Three Months Ended December 31, | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | ($ in thousands) | |
Net (loss) income | | $ | (8,923 | ) | | $ | (3,347 | ) | | $ | 31,936 | |
Add (Deduct): | | | | | | | | | | | | |
Operation and maintenance | | | 33,100 | | | | 26,809 | | | | 34,240 | |
General and administrative | | | 18,563 | | | | 14,532 | | | | 12,539 | |
Loss on asset sales, net | | | 3 | | | | 106 | | | | 38 | |
Transaction expenses | | | — | | | | — | | | | 1,084 | |
Depreciation and amortization | | | 33,217 | | | | 26,174 | | | | 25,581 | |
Income from unconsolidated subsidiaries | | | (23,618 | ) | | | (2,431 | ) | | | — | |
Interest expense, net | | | 19,791 | | | | 21,945 | | | | 14,899 | |
Loss on debt refinancing, net | | | 15,748 | | | | — | | | | — | |
Other income and deductions, net | | | 12,232 | | | | 1,459 | | | | 118 | |
Income tax benefit | | | (143 | ) | | | (484 | ) | | | (408 | ) |
Discontinued operations | | | 1,654 | | | | 735 | | | | (1,597 | ) |
| | | | | | | | | | | | |
Total Segment Margin (1) | | | 101,624 | | | | 85,498 | | | | 118,430 | |
Non-cash loss (gain) from derivatives | | | 6,816 | | | | 1,157 | | | | (13,608 | ) |
| | | | | | | | | | | | |
Adjusted Total Segment Margin (1) | | | 108,440 | | | | 86,655 | | | | 104,822 | |
| | | |
Transportation Segment Margin (1) (2) | | | — | | | | — | | | | 15,984 | |
| | | |
Contract Compression Segment Margin (1) | | | 40,855 | | | | 34,163 | | | | 33,351 | |
| | | |
Contract Treating Segment Margin (1) | | | 8,725 | | | | — | | | | — | |
| | | |
Corporate & Others Segment Margin (1) | | | 5,341 | | | | 1,964 | | | | 217 | |
| | | |
Inter-segment Elimination | | | (6,212 | ) | | | (1,611 | ) | | | 2,258 | |
| | | | | | | | | | | | |
Adjusted Gathering and Processing Segment Margin (1) | | $ | 59,731 | | | $ | 52,139 | | | $ | 53,012 | |
| | | | | | | | | | | | |
| (1) | Segment margin and adjusted segment margin vary from previously disclosed amounts due to the presentation of discontinued operations for the disposition of east Texas assets, a functional reorganization of our operating segments, as well as inter-segment eliminations. |
| (2) | Transportation segment margin and adjusted transportation segment margin represent Regency’s 100% ownership in RIGS prior to contribution of RIGS to the Haynesville Joint Venture. |
13
Non-GAAP Adjusted Segment Margin to GAAP Net Income
| | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2010 | | | 2009 | | | 2008 | |
| | | ($ in thousands) | |
Net (loss) income | | $ | (10,918 | ) | | $ | 140,489 | | | $ | 101,328 | |
Add (Deduct): | | | | | | | | | | | | |
Operation and maintenance | | | 125,650 | | | | 117,080 | | | | 119,715 | |
General and administrative | | | 80,951 | | | | 57,863 | | | | 51,323 | |
Loss (gain) loss on asset sales, net | | | 516 | | | | (133,282 | ) | | | 457 | |
Management services termination fee | | | — | | | | — | | | | 3,888 | |
Transaction expenses | | | — | | | | — | | | | 1,620 | |
Depreciation and amortization | | | 117,751 | | | | 100,098 | | | | 93,393 | |
Income from unconsolidated subsidiaries | | | (69,365 | ) | | | (7,886 | ) | | | — | |
Interest expense, net | | | 82,792 | | | | 77,665 | | | | 62,940 | |
Loss on debt refinancing, net | | | 17,528 | | | | — | | | | — | |
Other income and deductions, net | | | 12,126 | | | | 15,132 | | | | (328 | ) |
Income tax expense (benefit) | | | 956 | | | | (1,095 | ) | | | (266 | ) |
Discontinued operations | | | 1,571 | | | | 2,269 | | | | (13,931 | ) |
| | | | | | | | | | | | |
Total Segment Margin (1) | | | 359,558 | | | | 368,333 | | | | 420,139 | |
Non-cash loss (gain) from derivatives | | | 30,183 | | | | (7,151 | ) | | | (17,996 | ) |
| | | | | | | | | | | | |
Adjusted Total Segment Margin (1) | | | 389,741 | | | | 361,182 | | | | 402,143 | |
| | | |
Transportation Segment Margin (1) (2) | | | — | | | | 11,714 | | | | 66,888 | |
| | | |
Contract Compression Segment Margin (1) | | | 154,209 | | | | 141,028 | | | | 125,503 | |
| | | |
Contract Treating Segment Margin (1) | | | 11,454 | | | | — | | | | — | |
| | | |
Corporate & Others Segment Margin (1) | | | 21,092 | | | | 6,275 | | | | 815 | |
| | | |
Inter-segment Elimination | | | (23,205 | ) | | | (4,604 | ) | | | (4,573 | ) |
| | | | | | | | | | | | |
Adjusted Gathering and Processing Segment Margin (1) | | $ | 226,191 | | | $ | 206,769 | | | $ | 213,510 | |
| | | | | | | | | | | | |
| (1) | Segment margin and adjusted segment margin vary from previously disclosed amounts due to the presentation of discontinued operations for the disposition of east Texas assets, a functional reorganization of our operating segments, as well as inter-segment eliminations. |
| (2) | Transportation segment margin and adjusted transportation segment margin represent Regency’s 100% ownership in RIGS prior to contribution of RIGS to the Haynesville Joint Venture. |
14
Reconciliation of “cash available for distribution” to net cash flows provided by operating activities and to net income
| | | | |
| | | Three Months Ended
December 31, 2010 | |
| | | ($ in thousands) | |
Net cash flows provided by operating activities | | $ | 41,304 | |
Add (deduct): | | | | |
Depreciation and amortization, including debt issuance cost amortization | | | (34,556 | ) |
Write-off of debt issuance costs | | | 1,422 | |
Amortization of excess fair value of unconsolidated subsidiaries | | | (3,410 | ) |
Income from unconsolidated subsidiaries | | | 27,028 | |
Derivative valuation change | | | (18,352 | ) |
Loss on asset sales, net | | | (78 | ) |
Unit based compensation expenses | | | (1,387 | ) |
Trade accounts receivables, accrued revenues, and related party receivables | | | 13,708 | |
Other current assets | | | 1,010 | |
Trade accounts payable, accrued cost of gas and liquids, related party payables and deferred revenues | | | (14,724 | ) |
Other current liabilities | | | 4,667 | |
Distributions received from unconsolidated subsidiaries | | | (27,028 | ) |
Other assets and liabilities | | | 1,473 | |
| | | | |
Net loss | | $ | (8,923 | ) |
| | | | |
Add: | | | | |
Interest expense, net | | | 19,791 | |
Depreciation and amortization | | | 33,217 | |
Income tax benefit | | | (143 | ) |
| | | | |
EBITDA | | $ | 43,942 | |
| | | | |
Add (deduct): | | | | |
Non-cash loss from derivatives | | | 18,922 | |
Non-cash unit based compensation | | | 1,386 | |
Loss on asset sales, net | | | 78 | |
Income from unconsolidated subsidiaries | | | (23,618 | ) |
Partnership’s ownership interest in Haynesville Joint Venture’s adjusted EBITDA | | | 20,374 | |
Partnership’s ownership interest in MEP Joint Venture’s adjusted EBITDA | | | 24,095 | |
Loss on debt refinancing, net | | | 15,748 | |
Other expense, net | | | 831 | |
| | | | |
Adjusted EBITDA | | $ | 101,758 | |
| | | | |
Add (deduct): | | | | |
Interest expense, excluding capitalized interest | | | (19,552 | ) |
Maintenance capital expenditures | | | (4,164 | ) |
Proceeds from asset disposal | | | 128 | |
Convertible preferred distribution | | | (1,945 | ) |
Joint venture adjustments (1) | | | (7,844 | ) |
Others | | | 304 | |
| | | | |
Cash available for distribution | | $ | 68,685 | |
| | | | |
| (1) | Adjustments for the Partnership’s share of the Haynesville Joint Venture’s and MEP Joint Venture’s adjustments between their respective adjusted EBITDA and cash available for distribution. Adjustments include interest expense, maintenance capital expenditures and the Haynesville Joint Venture’s non-cash portion of the general and administrative management fee. |
15
