Mail Stop 0308
March 4, 2005
VIA U.S. MAIL AND FACSIMILE
Mr. John J. Sherman
President, Chief Executive Officer
Inergy Holdings, LLC
Two Brush Creek Boulevard, Suite 200
Kansas City, MO 64112
Re: Inergy Holdings, LLC
Registration Statement on Form S-1
File No. 333-122466
Filed February 2, 2005
Dear Mr. Sherman:
We have reviewed your filing and have the following comments.
Where indicated, we think you should revise your document in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
* * * * * * * * * * *
Form S-1
General
1. We note that a key feature of this offering is your intention
to
pay distributions based upon cash you receive, subject to
adjustments, from Inergy. In particular, you will disclose your
expected per share initial quarterly distribution rate, although
the
actual amount currently is blank. In addition to the existing
cash
distribution policy section, please revise to add a section
discussing cash available for distribution. This section should
convey your pro forma available cash from operating surplus for
the
most recent fiscal year and interim periods, including all
relevant
adjustments. This section also should convey your estimated
available cash from operating surplus for the next four quarters,
including all material assumptions. Further, as an appendix to
the
registration statement, please add a table specifically setting
forth
your pro forma available cash from operating surplus for the most
recent fiscal year and interim periods. Please be aware that we
likely will have comments based upon your revised disclosure.
2. We note a number of blank spaces throughout your registration
statement for information that you are not entitled to omit under
Rule 430A, such as the anticipated price range. Please note that
we
may have additional comments once you have provided this
disclosure.
Therefore, please allow us sufficient time to review your complete
disclosure prior to any distribution of preliminary prospectuses.
3. Please file all required exhibits, such as the underwriting
agreement and the legal opinion, in a timely manner so that we may
have time to review them before you request that your registration
statement become effective.
Prospectus Cover Page
4. Please delete the phrase "rapidly growing" from here and the
proposed artwork. Those adjectives are not appropriate for cover
page disclosure. We note in this regard that your growth appears
to
be primarily the result of acquisitions.
Forward-Looking Statements, page iv
5. Please move this section to another part of the prospectus.
The
forepart of the prospectus should be limited to the cover page,
summary, and the risk factor sections.
Prospectus Summary
6. We remind you that the summary should provide a brief overview
of
the key aspects of you and the offering. As currently drafted,
your
fourteen page base summary is too long. Please revise accordingly
to
eliminate redundancies and matters that are not so material as to
merit summary disclosure. For example, consider deleting the
"Recent
Developments of the MLP" subsection. As another example, please
delete the "Cash Distributions" and "Issuance of additional
unites"
discussions on page 12, which repeat previous summary disclosure.
These are only examples.
7. Please revise throughout the prospectus forepart to eliminate
the
defined terms MLP and MQD. With particular regard to MLP, to
avoid
confusion, please use a more intuitive shorthand reference when
referring to the public operating company. We suggest you refer
to
it as Inergy while referring to yourself as "our," "we," and "us"
or,
when necessary, as Inergy Holdings or simply Holdings.
Limited Partnership Structure and Management, page 5
8. State, if true, that your general partner and its affiliates
will
receive substantial fees and profits in connection with the
offering.
Inergy, L.P., page 7
9. Please provide a tabular summary, if applicable, itemized by
category and specifying dollar amounts where possible, of all
compensation, fees, profits, and other benefits, including
reimbursement of out-of-pocket expenses, which your general
partner
and its affiliates may earn or receive in connection with the
offering or operation of the limited partnership.
Risk Factors, page 17
10. The amount of cash distribution from the MLP...page 18. Is it
Inergy GP, LLC that has the right to maintain a 1.4% interest in
Inergy, L.P. or Inergy Partners, LLC? Your chart on page 6 and
your
disclosure in your business section on page 59 suggest that Inergy
Partners, LLC has the right to maintain the 1.4% interest.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 42
11. Please note that Item 303(a) (3) (ii) of Regulation S-K
requires,
as applicable, a discussion of any known trends, or uncertainties
that are reasonably likely to have a material effect on the
company`s
net sales or revenues, income from continuing operations,
profitability, liquidity or capital resources, or that would
otherwise cause reported financial information not necessarily to
be
indicative of future operating results or financial condition.
For
example, are there any trends that you anticipate will impact your
revenues and do you expect your revenues to increase, decrease or
stay the same? In this regard, it would be appropriate to include
a
discussion of the prospects of Star Gas and its impact on you.
Please revise to discuss any known trends or uncertainties. For
additional guidance, please refer to SEC Releases 33-6835, 33-
8056,
and 33-8350.
12. We note you issued $15 million of promissory notes in
November
2004 to your current owners. Please explain the need for this
additional funding, what the funds were used for, whether the
terms
of the repayment of the notes are tied to this offering, and
whether
you considered alternative sources of funding. Also, please file
copies of the promissory notes as exhibits.
Results of Operations, page 44
13. Where you describe two or more business reasons that
contributed
to a material change in a financial statement line item between
periods, please quantify the extent to which each change
contributed
to the overall change in that line item, if practical. For
example,
where you describe the various factors that contributed to the
overall increase in revenues from retail sales in fiscal 2004
compared to fiscal 2003, quantification of individual impacts such
as
the impact of acquisitions and changes in selling prices should be
provided, to the extent practical. See Item 303(a) of Regulation
S-K
and Financial Reporting Codification 501.04.
14. Where you identify intermediate causes of changes in your
operating results, please also describe the reasons underlying the
intermediate causes. For example, you indicate that your retail
gross profit increased in fiscal 2004 compared to fiscal 2003 due,
in
part, to an increase in margin per gallon but you do not discuss
why
there was an increase in margin per gallon. See SEC Release No.
33-
8350.
15. Please disclose the likelihood of future issuances of units in
Inergy. Refer to Question 6 of SAB Topic 5H.
16. You state that you recorded an expense of $10.0 million in
2003
and an expense of $9.6 million in 2002 associated with the
interests
of non-controlling partners. Per the financial statements the
2002
expense was $5.936 million. Please revise or advise.
Liquidity and Sources of Capital, page 48
17. Please tell us supplementally, and revise your filing to
indicate, the company`s level of compliance with its material
financial covenants.
18. Please revise your contractual obligations table to include
estimated interest payments on your debt. Because the table is
aimed
at increasing transparency of cash flow, we believe interest
payments
should be included in the table. If you choose not to include
these
payments, a footnote to the table should clearly identify the
excluded item and provide any additional information that is
material
to an understanding of your cash requirements. See Section IV.A
and
footnote 46 to the Commission`s MD&A Guidance issued December 19,
2003 available at www.sec.gov.
Summary Compensation Table, page 80
19. We note that you have provided detailed disclosure of the
compensation for the officers of Inergy, L.P. However, you have
not
consistently provided similar disclosures for your officers or for
the officers of Inergy G.P., LLC. Please disclose whether the
officers of your limited partnership and those of Inergy G.P., LLC
will receive compensation beyond the compensation they will
receive
from Inergy, L.P. In this regard, as Laura L. Ozenberger`s
compensation is not addressed in you disclosure concerning the
officers of Inergy, L.P., please include her in your disclosure of
officers` compensation.
Restrictions on the Ability of our Existing Officers to Transfer
Their Interest in Us, page 92
20. Please disclose at what price you must repurchase the equity
interest of the named officers. Are there agreements concerning
this
arrangement? If so, please file them as exhibits.
Underwriting, page 144
21. We note that you will have a directed unit program for
officers,
directors, employees and certain others associated with you.
Please
supplementally tell us the mechanics of how and when these shares
will be offered and sold to persons in the directed unit program.
For example, please explain for us how you will determine the
prospective recipients of reserved units, especially those you
describe as "certain others" associated with you. Tell us when
and
how they will indicate their interest in purchasing units. Also,
please tell us how and when you and underwriters will contact the
directed unit investors, including the types of communications
used.
When will the units and money be exchanged? When do purchasers
become committed to purchase their units? How and when will the
number of units offered be determined? Will the procedures for
the
directed units program differ from the procedures for the general
offering to the public?
22. We note your disclosure concerning electronic distribution.
Please identify any members of the underwriting syndicate that
will
engage in any electronic offer, sale or distribution of the units
and
describe its procedures to us supplementally. If you become aware
of
any additional members of the underwriting syndicate that may
engage
in electronic offers, sales or distributions after you respond to
this comment, promptly supplement your response to identify those
members and provide us with a description of their procedures.
In your discussion of the procedures, tell us how they ensure that
the distribution complies with Section 5 of the Securities Act.
In
particular, address:
the communication used;
the availability of the preliminary prospectus;
the manner of conducting the distribution and sale, such as the
use
of indications of interest or conditional offers; and
the funding of an account and payment of the purchase price.
In addition, please tell us whether you or the underwriters have
any
arrangements with a third party to host or access your preliminary
prospectus on the Internet. If so, identify the party and the
website, describe the material terms of your agreement, and
provide
us with a copy of any written agreement. Also, provide us with
all
information concerning your company or any prospectus that has
appeared on its website. Again, if you subsequently enter into
such
arrangements, promptly supplement your response.
Pro Forma Financial Statements
Pro Forma Condensed Combined Balance Sheet, page F-3
23. Please supplementally provide a reconciliation of total debt
per
the pro forma balance sheet columns labeled "Inergy Holdings, LLC
Pro
Forma" and "Inergy Holdings, L.P. As Further Adjusted" to the
total
debt per the capitalization table columns labeled "As Adjusted"
and
"As Further Adjusted" included on page 35.
24. Pro forma adjustment (c) reflects the net proceeds of $230.5
million from the issuance of common units of the MLP. Please
reconcile the $230.5 million of proceeds to Note 13, subsequent
events, of the Inergy Holdings, LLC and Subsidiaries audited
financial statements, which appears to indicate proceeds totaling
approximately $211 million through two separate issuances.
Inergy Holdings, LLC and Subsidiaries Consolidated Financial
Statements
Consolidated Statements of Income, page F-9
25. When revenue is presented with two or more line items the
related
costs of products sold should be disaggregated in a similar
manner.
Refer to Rule 5-03 of Regulation S-X. Please revise or advise.
26. Please tell us why you do not disclose earnings per unit, or
revise your filing accordingly. This comment is also directed
towards the Star Gas Propane L.P. financial statements. Refer to
SAB
Topic 4F and SFAS 128 for guidance.
Note 1. Accounting Policies, page F-13
27. Please disclose the types of expenses that you include in the
cost of products sold line item and the types of expenses that you
include within operating and administrative expenses. In doing
so,
please disclose specifically whether you include all costs of your
distribution network in cost of sales. If you currently exclude a
significant portion of distribution costs from cost of products
sold,
please provide cautionary disclosure in MD&A that your gross
margins
may not be comparable to others, since some entities include all
of
the costs related to their distribution network in cost of
products
sold and others exclude a portion of them from gross margin,
including them instead in operating expense line items. To the
extent the excluded costs are material to your operating results,
quantify these amounts in MD&A. If you determine that these
amounts
are immaterial for disclosure, please supplementally provide us
with
your qualitative and quantitative assessment of materiality for
all
periods presented.
Note 9. Long-Term Incentive Plan, page F-27
28. Please revise the Company sponsored employee option plan
disclosure to provide the disclosures required by paragraphs 46-48
of
SFAS 123 or tell us why no such disclosure is necessary. If you
have
omitted certain stock compensation disclosures due to the exchange
transaction disclosed in Note 13, please advise. Also, please help
us
understand why you applied the minimum value method for the
employee
option plan. Refer to paragraph 19 of SFAS 123 for guidance.
Note 12. Segments, page F-30
29. Based on your disclosure, we understand that you sell several
types of products and services. Please revise and provide the
revenue disclosures by product and service group required by
paragraph 37 of SFAS 131. In particular, it appears that revenue
disclosures for each period presented for the following products
and
services may be applicable:
o Propane sales
o Sale of propane-related appliances
o Service work for propane-related equipment
o Price risk management services
If you believe that other product categories are more
appropriate, please advise.
Star Gas Propane, L.P. and Subsidiary Financial Statements
Independent Auditors` Report, page F-37
30. Please have your auditors revise the audit report to reflect
that
the audit was conducted in accordance with the standards of the
PCAOB. See SEC Release 34-49707 issued May 14, 2004 and PCAOB
Auditing Standard No. 1.
Item17. Undertakings, II-4
31. The following additional undertakings should be included:
"The registrant undertakes to send to each limited partner at
least
on an annual basis a detailed statement of any transactions with
the
General Partner or its affiliates, and of fees, commissions,
compensation and other benefits paid, or accrued to the General
Partner or its affiliates for the fiscal year completed, showing
the
amount paid or accrued to each recipient and the services
performed."
"The registrant undertakes to provide to the limited partners the
financial statements required by Form 10-K for the first full
fiscal
year of operations of the partnership."
Signatures, II-5
32. The registration statement is required to be signed by a
majority
of your directors. Please ensure that a majority of the directors
or
equivalent of your general partner sign your next amendment.
* * * * * * * * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Adam Phippen, Accountant at (202) 824-5549 or
in
his absence, George Ohsiek, Accounting Branch Chief at (202) 942-
2905
if you have questions regarding comments on the financial
statements
and related matters. Please contact Scott Anderegg, Attorney at
(202) 942-2868, David Mittelman, Legal Branch Chief at (202) 942-
1921
or me at (202) 942-1900 with any other questions.
Sincerely,
H. Christopher Owings
Assistant Director
cc: David P. Oelman
Vinson & Elkins, LLP
VIA FAX
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Mr. John J. Sherman
Inergy Holdings, LLC
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