INERGY L P - 10-Q Quarterly Report

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 March 31, 2004

¨	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 May 1, 2004:


Common Units		14,669,822
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

	Item 1 – Financial Statements of Inergy, L.P.:

	Consolidated Balance Sheets as of March 31, 2004 (unaudited) and September 30, 2003	3

	Unaudited Consolidated Statements of Income for the Three and Six Months Ended March 31, 2004 and 2003	5

	Unaudited Consolidated Statement of Partners’ Capital for the Six Months Ended March 31, 2004	6

	Unaudited Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2004 and 2003	7

	Unaudited Notes to Consolidated Financial Statements	9

	Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operation	22

	Item 3 – Quantitative and Qualitative Disclosures About Market Risk	31

	Item 4 – Controls and Procedures	33

Part II – Other Information

	Item 1 – Legal Proceedings	34

	Item 2 – Changes in Securities and Use of Proceeds	34

	Item 3 – Defaults Upon Senior Securities	34

	Item 4 – Submission of Matters to a Vote of Security Holders	34

	Item 5 – Other Information	34

	Item 6 – Exhibits and Reports on Form 8-K	34

	Signatures	36

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INERGY, L.P. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS


	March 31, 2004 *(Unaudited)*			September 30, 2003
	March 31, 2004 *(Unaudited)*			September 30, 2003
	*(In Thousands)*
Assets

Current assets:
Cash	$	9,657		$	3,528
Accounts receivable, less allowance for doubtful accounts of $1,348,000 and $997,000 at March 31, 2004 and September 30, 2003, respectively		60,241			21,841
Inventories		12,836			35,722
Prepaid expenses and other current assets		5,395			3,957
Assets from price risk management activities		8,189			8,905

Total current assets		96,318			73,953

Property, plant and equipment, at cost:
Land and buildings		14,954			14,265
Office furniture and equipment		9,408			8,614
Vehicles		26,596			21,986
Tanks and plant equipment		156,278			135,040

		207,236			179,905
Less accumulated depreciation		(29,313	)		(22,704	)

Property, plant and equipment, net		177,923			157,201

Intangible assets:
Covenants not to compete		10,285			8,752
Deferred financing costs		4,438			8,843
Customer accounts		63,303			59,951
Goodwill		66,864			64,546

		144,890			142,092
Less accumulated amortization		(13,467	)		(12,383	)

Intangible assets, net		131,423			129,709

Other		265			1,530

Total assets	$	405,929		$	362,393

INERGY, L.P. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (continued)


	March 31, 2004 *(Unaudited)*			September 30, 2003
	March 31, 2004 *(Unaudited)*			September 30, 2003
	*(In Thousands)*
Liabilities and partners’ capital
Current liabilities:
Accounts payable	$	46,140		$	22,733
Accrued expenses		10,550			11,919
Customer deposits		2,258			11,830
Liabilities from price risk management activities		4,624			5,801
Current portion of long-term debt		1,216			12,449

Total current liabilities		64,788			64,732

Long-term debt, less current portion		79,473			118,678

Partners’ capital:
Common unitholders (14,669,822 and 11,044,822 units issued and outstanding as of March 31, 2004 and September 2003, respectively)		211,306			129,168
Senior subordinated unitholders (7,135,252 units issued and outstanding)		46,238			46,842
Junior subordinated unitholders (1,145,084 units issued and outstanding)		(238	)		(141	)
Non-managing general partner (2% interest)		4,362			3,114

Total partners’ capital		261,668			178,983

Total liabilities and partners’ capital	$	405,929		$	362,393

See accompanying notes.

INERGY, L.P. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Unit Data)

(unaudited)


	Three Months Ended March 31,						Six Months Ended March 31,
	2004			2003			2004			2003
Revenue:
Propane	$	167,422		$	153,450		$	288,247		$	257,492
Other		10,646			5,200			22,403			10,847

		178,068			158,650			310,650			268,339
Cost of product sold		127,748			118,113			223,213			199,664

Gross profit		50,320			40,537			87,437			68,675
Expenses:
Operating and administrative		20,188			17,073			40,487			31,384
Depreciation and amortization		4,958			3,374			9,676			6,735

Operating income		25,174			20,090			37,274			30,556

Other income (expense):
Interest expense, net		(1,471	)		(2,496	)		(4,367	)		(5,136	)
Write-off of deferred financing costs (Note 3)		(1,216	)		—			(1,216	)		—
Make whole premium charge (Note 3)		(17,949	)		—			(17,949	)		—
Swap value received (Note 3)		949			—			949			—
Gain (loss) on sale of property, plant and equipment		(325	)		116			(279	)		10
Finance charges		238			73			353			89
Other		42			22			78			52

Income before income taxes		5,442			17,805			14,843			25,571

Provision for income taxes		20			20			51			70

Net income	$	5,422		$	17,785		$	14,792		$	25,501


Partners’ interest information for the three and six months ended March 31, 2004 and 2003:
Non-managing general partners’ interest in net income	$	109		$	356		$	296		$	510


Limited partners’ interest in net income:
Common unit interest	$	3,492		$	8,788		$	8,740		$	12,500
Senior subordinated unit interest		1,569			7,368			4,960			10,651
Junior subordinated unit interest		252			1,273			796			1,840

Total limited partners’ interest in net income	$	5,313		$	17,429		$	14,496		$	24,991


Net income per limited partner unit:
Basic	$	0.24		$	1.11		$	0.70		$	1.61
Diluted	$	0.23		$	1.10		$	0.68		$	1.59

Weighted average limited partners’ units outstanding:
Basic		22,401			15,675			20,855	</

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents