UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2003
OR
| ¨ | 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: 0-32453
Inergy, L.P.
(Exact name of registrant as specified in its charter)
| Delaware | 43-1918951 | |
| (State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| Two Brush Creek Blvd., Suite 200 Kansas City, Missouri |
64112 | |
| (Address of principal executive offices) | (Zip code) |
(816) 842-8181
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the 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 last 90 days.
Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No ¨
The following units were outstanding at February 2, 2004:
| Common Units |
14,544,822 | |
| Senior Subordinated Units |
7,135,252 | |
| Junior Subordinated Units |
1,145,084 |
INERGY, L.P.
INDEX TO FORM 10-Q
| Page | ||
| Part I – Financial Information |
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| Item 1 – Financial Statements of Inergy, L.P.: |
||
| Consolidated Balance Sheets as of December 31, 2003 (unaudited) and September 30, 2003 |
3 | |
| Unaudited Consolidated Statements of Income for the Three Months Ended December 31, 2003 and 2002 |
5 | |
| Unaudited Consolidated Statement of Partners’ Capital for the Three Months Ended December 31, 2003 |
6 | |
| 7 | ||
| 9 | ||
| Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operation |
21 | |
| Item 3 – Quantitative and Qualitative Disclosures About Market Risk |
27 | |
| Item 4 – Controls and Procedures |
29 | |
| Part II – Other Information |
||
| Item 1 – Legal Proceedings |
30 | |
| 30 | ||
| Item 3 – Defaults Upon Senior Securities |
30 | |
| Item 4 – Submission of Matters to a Vote of Security Holders |
30 | |
| Item 5 – Other Information |
30 | |
| Item 6 – Exhibits and Reports on Form 8-K |
30 | |
| 32 | ||
2
| Item 1. | Financial Statements |
INERGY, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
| December 31, 2003 |
September 30, 2003 |
|||||||
| (Unaudited) | ||||||||
| (In Thousands) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash |
$ | 6,567 | $ | 3,528 | ||||
| Accounts receivable, less allowance for doubtful accounts of $1,047,000 and $997,000 at December 31, 2003 and September 30, 2003, respectively |
62,776 | 21,841 | ||||||
| Inventories |
42,093 | 35,722 | ||||||
| Prepaid expenses and other current assets |
6,050 | 3,957 | ||||||
| Assets from price risk management activities |
15,002 | 8,905 | ||||||
| Total current assets |
132,488 | 73,953 | ||||||
| Property, plant and equipment, at cost: |
||||||||
| Land and buildings |
14,898 | 14,265 | ||||||
| Office furniture and equipment |
8,945 | 8,614 | ||||||
| Vehicles |
25,514 | 21,986 | ||||||
| Tanks and plant equipment |
149,679 | 135,040 | ||||||
| 199,036 | 179,905 | |||||||
| Less accumulated depreciation |
(25,955 | ) | (22,704 | ) | ||||
| Property, plant and equipment, net |
173,081 | 157,201 | ||||||
| Intangible assets: |
||||||||
| Covenants not to compete |
9,186 | 8,752 | ||||||
| Deferred financing costs |
7,995 | 7,994 | ||||||
| Deferred acquisition costs |
72 | 849 | ||||||
| Customer accounts |
60,625 | 59,951 | ||||||
| Goodwill |
65,174 | 64,546 | ||||||
| 143,052 | 142,092 | |||||||
| Less accumulated amortization |
(14,228 | ) | (12,383 | ) | ||||
| Intangible assets, net |
128,824 | 129,709 | ||||||
| Other |
977 | 1,530 | ||||||
| Total assets |
$ | 435,370 | $ | 362,393 | ||||
| 3 |
INERGY, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (continued)
| December 31, 2003 |
September 30, 2003 |
|||||||
| (Unaudited) | ||||||||
| (In Thousands) | ||||||||
| Liabilities and partners’ capital |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 51,806 | $ | 22,733 | ||||
| Accrued expenses |
14,791 | 11,919 | ||||||
| Customer deposits |
8,695 | 11,830 | ||||||
| Liabilities from price risk management activities |
15,356 | 5,801 | ||||||
| Current portion of long-term debt |
30,359 | 12,449 | ||||||
| Total current liabilities |
121,007 | 64,732 | ||||||
| Long-term debt, less current portion |
133,759 | 118,678 | ||||||
| Partners’ capital: |
||||||||
| Common unitholders (11,044,822 units issued and outstanding) |
130,186 | 129,168 | ||||||
| Senior subordinated unitholders (7,135,252 units issued and outstanding) |
47,500 | 46,842 | ||||||
| Junior subordinated unitholders (1,145,084 units issued and outstanding) |
(36 | ) | (141 | ) | ||||
| Non-managing general partner (2% interest) |
2,954 | 3,114 | ||||||
| Total partners’ capital |
180,604 | 178,983 | ||||||
| Total liabilities and partners’ capital |
$ | 435,370 | $ | 362,393 | ||||
See accompanying notes.
| 4 |
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Unit Data)
(unaudited)
| Three Months Ended December 31, |
||||||||
| 2003 |
2002 |
|||||||
| Revenue: |
||||||||
| Propane |
$ | 120,824 | $ | 104,042 | ||||
| Other |
11,757 | 5,648 | ||||||
| 132,581 | 109,690 | |||||||
| Cost of product sold |
95,464 | 81,551 | ||||||
| Gross profit |
37,117 | 28,139 | ||||||
| Expenses: |
||||||||
| Operating and administrative |
20,298 | 14,311 | ||||||
| Depreciation and amortization |
4,718 | 3,361 | ||||||
| Operating income |
12,101 | 10,467 | ||||||
| Other income (expense): |
||||||||
| Interest expense, net |
(2,896 | ) | (2,640 | ) | ||||
| Gain (loss) on sale of property, plant and equipment |
45 | (106 | ) | |||||
| Finance charges |
115 | 16 | ||||||
| Other |
36 | 29 | ||||||
| Income before income taxes |
9,401 | 7,766 | ||||||
| Provision for income taxes |
31 | 50 | ||||||
| Net income |
$ | 9,370 | $ | 7,716 | ||||
| Partners’ interest information for the three months ended December 31, 2003 and 2002: |
||||||||
| Non-managing general partners’ interest in net income |
$ | 187 | $ | 155 | ||||
| Limited partners’ interest in net income: |
||||||||
| Common unit interest |
$ | 5,248 | $ | 3,752 | ||||
| Senior subordinated unit interest |
3,391 | 3,248 | ||||||
| Junior subordinated unit interest |
544 | 561 | ||||||
| Total limited partners’ interest in net income |
$ | 9,183 | $ | 7,561 | ||||
| Net income per limited partner unit: |
||||||||
| Basic |
$ | 0.48 | $ | 0.49 | ||||
| Diluted |
$ | 0.46 | $ | 0.48 | ||||
| Weighted average limited partners’ units outstanding: |
||||||||
| Basic |
19,325 | 15,426 | ||||||
| Diluted |
19,779 | 15,610 | ||||||
See accompanying notes.
| 5 |
CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL
(In Thousands)
(unaudited)
| Common Unit Capital |
Senior Capital |
Junior Capital |
Non-Managing General Partner and Affiliate |
Total Capital |
||||||||||||||||
| Balance at September 30, 2003 |
$ | 129,168 | $ | 46,842 | $ | (141 | ) | $ | 3,114 | $ | 178,983 | |||||||||
| Distributions |
(4,252 | ) | (2,747 | ) | (441 | ) | (348 | ) | (7,788 | ) | ||||||||||
| Comprehensive income: |
||||||||||||||||||||
| Net income |
5,248 | 3,391 | 544 | 187 | 9,370 | |||||||||||||||
| Foreign currency translation |
22 | 14 | 2 | 1 | 39 | |||||||||||||||
| Comprehensive income |
9,409 | |||||||||||||||||||
| Balance at December 31, 2003 |
$ | 130,186 | $ | 47,500 | $ | (36 | ) | $ | 2,954 | $ | 180,604 | |||||||||
See accompanying notes.
6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(unaudited)
| Three Months Ended December 31, |
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| 2003 |
2002 |
|||||||
| Operating activities |
||||||||
| Net income |
$ | 9,370 | $ | 7,716 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
| Depreciation |
3,374 | 2,337 | ||||||
| Amortization |
1,344 | 1,024 | ||||||
| Amortization of deferred financing costs |
502 | 344 | ||||||
| Provision for doubtful accounts |
82 | 147 | ||||||
| (Gain) loss on disposal of property, plant and equipment |
(45 | ) | 106 | |||||
| Net asset (liabilities) from price risk management activities |
3,458 | (2,102 | ) | |||||
| Changes in operating assets and liabilities, net of effects from acquisitions: |
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