Exhibit 99.1
Crosstex Reports Fourth Quarter and Full Year 2003 Results;
Crosstex Energy, L.P. Announces Two-For-One Split of Common Units
DALLAS--(BUSINESS WIRE)--Feb. 26, 2004--The Crosstex Energy
companies, Crosstex Energy, L.P. (NasdaqNM:XTEX) (the Partnership) and
Crosstex Energy, Inc. (NasdaqNM:XTXI) (the Corporation), today
reported fourth quarter and full year 2003 operating results. Crosstex
Energy, L.P. also announced a two-for-one split on its outstanding
limited partnership units. The unit split will entitle unitholders of
record at the close of business on March 16, 2004 to receive one
additional limited partnership unit for every unit held.
"We believe that the split will provide a more flexible trading
environment, which will create greater liquidity for our unitholders,"
stated Barry E. Davis, President and Chief Executive Officer. "We also
believe that the increase in the number of units outstanding could
attract a broader range of investors who share our long-term vision
and see our potential for growth."
Upon completion of the unit split, the total number of limited
partnership units outstanding will be approximately 18.1 million,
based on the number of units expected to be outstanding as of February
26, 2004. The additional units will be issued and mailed on or about
March 29, 2004 by the Partnership's transfer agent.
Crosstex Energy, L.P. Financial Results (all per unit amounts are
pre-split):
The Partnership reported net income of $5.5 million for the fourth
quarter of 2003, or $0.53 per limited partner unit, compared to net
income in the fourth quarter of 2002 of $0.5 million. (Limited partner
units were outstanding for only a portion of the 2002 period, as the
Partnership completed its initial public offering in December 2002.
Income attributable to the limited partner units for the period from
December 17, 2002 through December 31, 2002 was $0.04 per limited
partner unit.) Full year 2003 results for the Partnership were net
income of $15.2 million, or $1.75 per unit, compared to net income of
$2.0 million in 2002.
The Partnership's Distributable Cash Flow for the quarter was $8.7
million, or 1.9 times the amount required to cover its Minimum
Quarterly Distribution of $0.50 per unit, and 1.2 times the amount
required to cover its actual distributions of $0.75 per unit.
Distributable Cash Flow was $3.6 million in the 2002 fourth quarter.
For the full year of 2003, Distributable Cash Flow was $29.5 million,
or 1.8 times the amount required to cover the Minimum Quarterly
Distribution and 1.3 times the amount required to cover its actual
distributions of $2.50 per unit. Distributable Cash Flow is a non-GAAP
financial measure and is explained in greater detail under "Non-GAAP
Financial Information." Also, in the tables at the end of this release
is a reconciliation of this measure to net income.
The Partnership's gross margin in the fourth quarter was $18.5
million, compared to $8.7 million in the corresponding 2002 period, an
increase of 113 percent. Midstream gross margin increased by $8.7
million, or 139 percent, to $15.0 million, while Treating gross margin
increased by $1.1 million, or 46 percent, to $3.5 million. Annual 2003
gross margin was $59.7 million, compared to $32.7 million in 2002, an
increase of $27.0 million, or 82 percent. The increase in 2003 over
2002 is attributable primarily to the asset acquisition from Duke
Energy Field Services in June 2003 ($9.4 million), the acquisition of
the Vanderbilt system at the end of 2002 ($4.4 million), the
commencement of service on the Hallmark lateral at the end of 2002
($3.4 million), and growth in treating plants in service, from 35 at
the end of 2002 to 52 at the end of 2003 ($2.9 million).
For largely the same reasons, fourth quarter pipeline throughput
increased approximately 62 percent over the fourth quarter of 2002,
from 391,000 MMBtu/d to 633,000 MMBtu/d. Natural gas processed
increased approximately 87 percent, from 82,000 MMBtu/d to 153,000
MMBtu/d for the same period in 2002 due to the Gregory Plant expansion
and the acquisition of the Conroe Plant.
General and administrative expenses charged to the Partnership
were limited to $1.5 million in the fourth quarter of 2003, plus costs
associated with acquisition activities of $232 thousand incurred in
the quarter, for a total of $1.7 million for the quarter. Had the cap
not been in place, general and administrative expenses would have been
$3.0 million, reducing reported earnings and Distributable Cash Flow
by approximately $1.3 million in the fourth quarter. For the full
year, general and administrative expenses were $6.8 million in the
Partnership, $3.5 million below what they would have been if the $6.0
million annual cap had not been in place. Expenses above the cap were
paid by Crosstex Energy, Inc. The cap expired at the end of 2003.
Net income for the Partnership was negatively impacted in the
three-month and full year periods in 2003 by charges of $0.7 million
and $5.3 million, respectively, in stock-based compensation. The
charges primarily resulted from a modification in stock options held
in Crosstex Energy, Inc., which resulted in variable accounting on the
modified options. The charges, as previously discussed, had no impact
on distributable cash or outstanding units of the Partnership.
Crosstex Energy, Inc. Financial Results:
The Corporation reported net income of $1.0 million for the fourth
quarter and $13.4 million for the year in 2003, compared to $4.6
million and $5.6 million for the respective periods in 2002. The
Corporation's annual income before gains on issuance of units, income
taxes, and interest of non-controlling partners in the Partnership's
net income was $10.4 million in 2003 and $2.1 million in 2002.
The Corporation's share of distributions, including distributions
to its five million limited partner units, its two percent general
partner interest, and the incentive distribution rights, was $4.4
million for the fourth quarter (paid in February 2004) and $13.9
million for the year in 2003 (including the fourth quarter 2003
distributions paid in February 2004). Each $0.05 increase in the
Partnership's quarterly distribution in excess of $0.75 per unit will
now represent an increase in distributions to the Corporation of $701
thousand each quarter.
The Corporation paid $1.4 million for options which were cancelled
and redeemed in accordance with the above described modification to
its option plan. The remainder of the charge ($3.9 million for the
year) to the Corporation for this item is a non-cash charge. The
modification to the plan expired at the end of 2003, so the variable
accounting on the options will expire with the charge made in the
fourth quarter.
2004 Outlook (all per unit amounts are pre-split):
The Partnership has forecasted net income and Distributable Cash
Flow (before the LIG acquisition) for 2004 in the attached table. The
Partnership anticipates it will generate net income in 2004 of between
$22.0 million and $23.0 million, and its estimate of Distributable
Cash Flow for the year is in the range of $31.2 million to $33.7
million. At this level, the Partnership will cover the $0.75 quarterly
distribution by between 1.05 and 1.13 times. (The Partnership will
update its forecasts after the LIG acquisition closes. The Partnership
has previously estimated that LIG would be between $0.30 to $0.40 per
unit accretive to Distributable Cash Flow, depending on financing, in
the first full year of operations.)
Assuming the $0.75 quarterly distribution rate per unit is
maintained for the entire year, the Corporation will receive cash
distributions from the Partnership of $17.7 million in 2004. It
anticipates direct cash expenses associated with its operations
outside of the Partnership of approximately $1 million. The
Corporation expects that it will incur no current year income tax
expense due to tax loss carryforwards and other tax benefits it
expects to use in 2004. Assuming the $1.20 per share annual dividend
rate is maintained for the entire year (pro rated from the closing of
the Corporation's IPO on January 16, 2004), and no additional
issuances of shares, the total dividends for the year will be $13.9
million. In such a case, cash inflows are expected to exceed expenses
and the dividend by approximately $2.8 million.
Earnings Call:
Crosstex will hold its quarterly conference call to discuss third
quarter results tomorrow, February 27, at 10:00 am Central Time (11:00
am Eastern Time). The dial-in number for the call is 800-901-5213,
passcode Crosstex. A live Webcast of the call can be accessed on the
investor information page of Crosstex Energy's Web site at
www.crosstexenergy.com. The call will be available for replay for 30
days by dialing 888-286-8010, passcode 82907813. A replay of the
broadcast will also be available on the company's Web site.
About Crosstex:
Crosstex Energy, L.P., a mid-stream natural gas company
headquartered in Dallas, operates over 2,500 miles of pipeline, three
processing plants, and over 50 natural gas amine treating plants.
Crosstex currently provides services for more than one BCF/day of
natural gas. Additional information about Crosstex can be found at
www.crosstexenergy.com.
Crosstex Energy, Inc. owns five million limited partner units in
the Partnership, the two percent general partner interest in the
Partnership, and the Partnership's incentive distribution rights.
Non-GAAP Financial Information:
This press release contains non-generally accepted accounting
principle financial measures of earnings before non-cash charges and
less maintenance capital expenditures, which we refer to as
Distributable Cash Flow. The amounts included in the calculation of
these measures are computed in accordance with generally accepted
accounting principles (GAAP), with the exception of maintenance
capital expenditures. Maintenance capital expenditures are capital
expenditures made to replace partially or fully depreciated assets in
order to maintain the existing operating capacity of our assets and to
extend their useful lives. We believe this measure is useful to
investors because it may provide users of this financial information
with meaningful comparisons between current results and prior reported
results and a meaningful measure of the Partnership's cash flow after
it has satisfied the capital and related requirements of its
operations. Distributable Cash Flow is not a measure of financial
performance or liquidity under GAAP. It should not be considered in
isolation or as an indicator of the Partnership's performance.
Furthermore, it should not be seen as a measure of liquidity or a
substitute for metrics prepared in accordance with GAAP. Our
reconciliation of this measure to net income is included in the
following tables.
This press release contains forward-looking statements identified
by the use of words such as "forecast", "anticipate" and "estimate".
These statements are based on currently available information and
assumptions and expectations that Crosstex Energy believes are
reasonable. However, Crosstex Energy's assumptions and expectations
are subject to a wide range of business risks, so it can give no
assurance that actual performance will fall within the forecast
ranges. Among the key risks that may bear directly on the
Partnership's and the Corporation's results of operation and financial
condition are: (1) the amount of natural gas transported in the
Partnership's gathering and transmission lines may decline as a result
of competition for supplies, reserve declines and reduction in demand
from key customers and markets; (2) the level of the Partnership's
processing and treating operations may decline for similar reasons;
(3) fluctuations in natural gas and NGL prices may occur due to
weather and other natural and economic forces; (4) there may be a
failure to successfully integrate new acquisitions; (5) the
Partnership's credit risk management efforts may fail to adequately
protect against customer nonpayment; and (6) the Partnership may not
adequately address construction and operating risks. Crosstex Energy
has no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events, or
otherwise.
(tables to follow)
CROSSTEX ENERGY, L.P.
Selected Financial and Operating Data
(All amounts in thousands except per unit numbers)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- --------------------
2003 2002 2003 2002
--------- --------- ---------- ---------
Revenues
Midstream $245,870 $126,223 $993,140 $437,676
Treating 4,773 4,186 20,523 14,817
--------- --------- ---------- ---------
250,643 130,409 1,013,663 452,493
Cost of Gas
Midstream 230,898 119,957 946,412 413,982
Treating 1,257 1,771 7,568 5,767
--------- --------- ---------- ---------
232,155 121,728 953,980 419,749
Gross Margin 18,488 8,681 59,683 32,744
Operating Expenses 5,685 3,005 17,692 11,409
General & Administrative 1,732 1,938 6,844 7,513
Impairments - 1,025 - 4,175
(Profit) Loss on Energy
Trading Activities (414) 213 (1,905) (2,703)
Stock Based Compensation 696 8 5,345 41
Depreciation and Amortization 4,191 1,712 13,268 7,745
--------- --------- ---------- ---------
Total 11,890 7,901 41,244 28,180
Operating Income 6,598 780 18,439 4,564
Interest Expense (1,196) (318) (3,392) (2,717)
Other Income 129 83 179 155
--------- --------- ---------- ---------
Total Other Income
(Expense) (1,067) (235) (3,213) (2,562)
--------- --------- ---------- ---------
Net Income $5,531 $545 $15,226 $2,002
========= ========= ========== =========
General Partner Share of Net
Income $619 $1,240
========= =========
Limited Partners Share of Net
Income $4,912 $13,986
========= ==========
Net Income per Limited
Partners' Unit $0.53 $1.75
========= ==========
Weighted Average Limited
Partners' Units Outstanding
(Diluted) 9,282 7,980
========= ==========
CROSSTEX ENERGY, L.P.
Reconciliation of Net Income to Distributable Cash Flow
(All amounts in thousands except ratios)
Three Months Twelve Months
Ended Ended
December 31, December 31,
--------------- -----------------
2003 2002 2003 2002
------- ------- -------- --------
Net Income $5,531 $545 $15,226 $2,002
Depreciation and Amortization 4,191 1,712 13,268 7,745
Impairments - 1,025 - 4,175
(Profit) Loss on Energy Trading
Activities - 752 (1) - (922)(1)
Stock Based Compensation 696 8 5,345 41
Abandoned Merger Cost - 489
------- ------- -------- --------
Cash Flow 10,418 4,042 33,839 13,530
Maintenance Capital
Expenditures (1,738) (444) (4,310) (1,711)
------- ------- -------- --------
Distributable Cash Flow $8,680 $3,598 $29,529 $11,819
======= ======= ======== ========
Minimum Quarterly Distribution
(MQD) $4,605 $16,658
Distributable Cash Flow/MQD 1.89 1.77
Actual Distribution $7,436 $22,149
Distribution Coverage 1.17 1.33
(1) (Profit) loss on energy trading activities for the three and
twelve months ended December 31, 2002 includes one-time (gains)
and losses, primarily related to the Partnership's Enron position,
of $752 and ($922), respectively, which have been excluded from
the computation of Distributable Cash Flow.
CROSSTEX ENERGY, L.P.
Operating Data
(All volumes in MMBtu/d)
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------- -----------------
Pipeline Throughput 2003 2002 2003 2002
-------- -------- -------- --------
Gulf Coast Transmission 97,000 94,000 85,000 103,000
Vanderbilt 61,000 - 49,000 -
CCNG Transmission 127,000 161,000 157,000 158,000
CCNG Transmission - Hallmark 73,000 - 57,000 -
Gregory Gathering 151,000 112,000 151,000 107,000
Mississippi 74,000 - 79,000 -
Arkoma 15,000 10,000 13,000 11,000
Other Midstream 35,000 14,000 35,000 14,000
-------- -------- -------- --------
Total On-System Volume 633,000 391,000 626,000 393,000
Natural Gas Processed
Gregory Processing 128,000 82,000 106,000 84,000
Conroe Processing 25,000 - 26,000 -
-------- -------- -------- --------
Total Processed Volume 153,000 82,000 132,000 84,000
Total On-System Volumes 786,000 473,000 758,000 477,000
Producer Services Volumes 246,000 235,000 259,000 230,000
Treating Volumes (1) 89,000 95,000 90,000 98,000
Treating Plants in Service (2) 52 35
(1) Represent volumes for treating plants operated by us whereby we
receive a fee based on the volumes treated.
(2) Plants in service represent plants in service on the last day of
the quarter.
CROSSTEX ENERGY, L.P.
Forecast for 2004 Net Income
Reconciliation to Distributable Cash Flow
(In millions)
Range
Low High
-------------- --------------
Net Income $22.0 $23.0
Depreciation and Amortization 19.0 19.0
Stock Based Compensation 0.2 0.2
-------------- --------------
Cash Flow 41.2 42.2
Maintenance Capital (10.0) (8.5)
-------------- --------------
Distributable Cash Flow $31.2 $33.7
============== ==============
These numbers do not include results from the pending LIG acquisition.
CROSSTEX ENERGY, INC.
Selected Financial and Operating Data
(All amounts in thousands except per unit numbers)
Three Months Twelve Months
Ended Ended
December 31, December 31,
------------------- --------------------
2003 2002 2003 2002
--------- --------- ---------- ---------
Revenues
Midstream $245,870 $126,223 $993,140 $437,676
Treating 4,773 4,186 20,523 14,817
--------- --------- ---------- ---------
250,643 130,409 1,013,663 452,493
Cost of Gas
Midstream 230,898 119,957 946,412 413,982
Treating 1,257 1,771 7,568 5,767
--------- --------- ---------- ---------
232,155 121,728 953,980 419,749
Gross Margin 18,488 8,681 59,683 32,744
Operating Expenses 5,853 3,016 18,914 11,420
General & Administrative 3,045 2,036 10,437 7,663
Impairments - 1,025 - 4,175
(Profit) Loss on Energy
Trading Activities (414) 213 (1,905) (2,703)
Stock Based Compensation 696 8 5,345 41
Depreciation and Amortization 4,241 1,712 13,542 7,745
--------- --------- ---------- ---------
Total 13,421 8,010 46,333 28,341
Operating Income 5,067 671 13,350 4,403
Interest Expense (1,124) (233) (3,103) (2,381)
Other Income 129 83 179 56
--------- --------- ---------- ---------
Total Other Income
(Expense) (995) (150) (2,924) (2,325)
--------- --------- ---------- ---------
Income before gain on
issuance of units by the
Partnership, income taxes
and interest of non-
controlling partners in the
Partnership's net income. 4,072 521 10,426 2,078
Gain on issuance of units of
the Partnership 280 11,054 18,360 11,054
Income tax provision (1,324) (6,891) (10,157) (7,451)
Interest of non-controlling
partners in the
Partnership's net income (2,077) (99) (5,181) (99)
--------- --------- ---------- ---------
Net Income $951 $4,585 $13,448 $5,582
========= ========= ========== =========
Preferred stock dividends $885 $865 $3,584 $3,021
========= ========= ========== =========
Net income available to
common $66 $3,720 $9,864 $2,561
========= ========= ========== =========
Basic earnings per common
share (a) $0.02 $0.99 $2.83 $0.68
========= ========= ========== =========
Diluted earnings per common
share (a) $0.02 $0.38 $1.10 $0.49
========= ========= ========== =========
Weighted average shares
outstanding:
Basic 3,486 3,766 3,486 3,765
Diluted 3,486 12,224 12,271 11,361
(a) Common share amounts have been adjusted for the January 2004
two-for-one stock-split made in conjunction with Crosstex Energy,
Inc.'s initial public offering.
CONTACT: Crosstex Energy, L.P.
Barry E. Davis or William W. Davis, 214-953-9500