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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 September 30, 2012

 

OR

 

o                   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: 000-50067

 

CROSSTEX ENERGY, L.P.

(Exact name of registrant as specified in its charter)

 

 

(214) 953-9500

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether 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 past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

 

As of October 29, 2012, the Registrant had 66,727,369 common units outstanding.

 

 

Table of Contents

 

TABLE OF CONTENTS

 

Item		Description		Page
		PART I—FINANCIAL INFORMATION
1.		Financial Statements		3
2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
3.		Quantitative and Qualitative Disclosures About Market Risk		39
4.		Controls and Procedures		42
		PART II—OTHER INFORMATION
1.		Legal Proceedings		42
1A.		Risk Factors		42
6.		Exhibits		43

 

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CROSSTEX ENERGY, L.P.

 

Condensed Consolidated Balance Sheets

 

		September 30,			December 31,
		2012			2011
		(Unaudited)
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	2,518		$	24,143
Accounts receivable:
Trade, net of allowance for bad debt of $428 and $405, respectively		75,067			22,680
Accrued revenue and other		121,293			143,115
Fair value of derivative assets		4,336			2,867
Natural gas and natural gas liquids, prepaid expenses and other		15,096			9,951
Assets held for disposition		22,822			—
Total current assets		241,132			202,756
Property and equipment, net of accumulated depreciation of $472,877 and $406,273, respectively		1,394,881			1,241,901
Fair value of derivative assets		750			—
Intangible assets, net of accumulated amortization of $242,205 and $199,248, respectively		446,105			451,462
Goodwill		150,630			—
Investment in limited liability company		88,761			35,000
Other assets, net		27,168			24,212
Total assets		$	2,349,427		$	1,955,331
LIABILITIES AND PARTNERS’ EQUITY
Current liabilities:
Accounts payable, drafts payable and other		$	39,906		$	22,550
Accrued gas and crude oil purchases		99,527			106,232
Fair value of derivative liabilities		860			5,587
Other current liabilities		58,504			66,065
Accrued interest		15,326			24,918
Liabilities held for disposition		2,261			—
Total current liabilities		216,384			225,352
Long-term debt		970,331			798,409
Other long-term liabilities		31,922			23,919
Deferred tax liability		74,516			7,192
Fair value of derivative liabilities		12			—
Commitments and contingencies		—			—
Partners’ equity		1,056,262			900,459
Total liabilities and partners’ equity		$	2,349,427		$	1,955,331

 

See accompanying notes to condensed consolidated financial statements.

 

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CROSSTEX ENERGY, L.P.

 

Condensed Consolidated Statements of Operations

 

		Three Months Ended September 30,						Nine Months Ended September 30,
		2012			2011			2012			2011
		(Unaudited)
		(In thousands, except per unit amounts)
Revenues		$	406,968		$	517,498		$	1,129,871		$	1,533,003
Operating costs and expenses:
Purchased gas, NGLs and crude oil		307,223			426,539			840,070			1,255,650
Operating expenses		35,551			28,126			93,928			81,083
General and administrative		16,470			13,712			44,398			38,111
(Gain) loss on sale of property		109			397			(395		)	317
(Gain) loss on derivatives		759			563			(1,977		)	5,520
Depreciation and amortization		45,059			31,912			110,107			93,200
Total operating costs and expenses		405,171			501,249			1,086,131			1,473,881
Operating income		1,797			16,249			43,740			59,122
Other income (expense):
Interest expense, net of interest income		(23,229		)	(19,507		)	(63,932		)	(59,952		)
Equity in earnings of limited liability company		1,511			—			1,511			—
Other income		4,439			786			4,464			656
Total other expense		(17,279		)	(18,721		)	(57,957		)	(59,296		)
Loss before non-controlling interest and income taxes		(15,482		)	(2,472		)	(14,217		)	(174		)
Income tax provision		(672		)	(287		)	(1,507		)	(898		)
Net loss		(16,154		)	(2,759		)	(15,724		)	(1,072		)
Less: Net loss attributable to the non- controlling interest		(54		)	(23		)	(163		)	(130		)
Net loss attributable to Crosstex Energy, L.P.		$	(16,100	)	$	(2,736	)	$	(15,561	)	$	(942	)
Preferred interest in net loss attributable to Crosstex Energy, L.P.		$	5,640		$	4,558		$	15,346		$	13,382
General partner interest in net loss		$	(309	)	$	(76	)	$	(420	)	$	(709	)
Limited partners’ interest in net loss attributable to Crosstex Energy, L.P.		$	(21,431	)	$	(7,218	)	$	(30,487	)	$	(13,615	)
Net loss attributable to Crosstex Energy, L.P. per limited partners’ unit:
Basic and diluted per common unit		$	(0.34	)	$	(0.14	)	$	(0.53	)	$	(0.26	)

 

See accompanying notes to condensed consolidated financial statements.

 

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CROSSTEX ENERGY, L.P.

 

Consolidated Statements of Comprehensive Loss

 

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2012			2011			2012			2011
		(Unaudited)
		(In thousands)
Net loss		$	(16,154	)	$	(2,759	)	$	(15,724	)	$	(1,072	)
Hedging (gains) losses reclassified to earnings		(593		)	421			(168		)	1,510
Adjustment in fair value of derivatives		(179		)	335			1,578			(1,200		)
Comprehensive loss		(16,926		)	(2,003		)	(14,314		)	(762		)
Comprehensive loss attributable to non-controlling interest		54			23			163			130
Comprehensive loss attributable to Crosstex Energy, L.P.		$	(16,872	)	$	(1,980	)	$	(14,151	)	$	(632	)

 

See accompanying notes to condensed consolidated financial statements.

 

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CROSSTEX ENERGY, L.P.

 

Consolidated Statements of Changes in Partners’ Equity

Nine Months Ended September 30, 2012

 

																	Accumulated
												General Partner					Other
		Common Units					Preferred Units					Interest					Comprehensive			Non-Controlling
		$			Units		$			Units		$			Units		Income (loss)			Interest			Total
		(Unaudited)
		(In thousands)
Balance, December 31, 2011		$	730,010		50,677		$	147,770		14,706		$	20,322		1,334		$	(503	)	$	2,860		$	900,459
Issuance of common units		232,791			15,780		—			—		3,362			207		—			—			236,153
Proceeds from exercise of unit options		347			70		—			—		—			—		—			—			347
Conversion of restricted units for common units, net of units withheld for taxes		(1,030		)	188		—			—		—			—		—			—			(1,030		)
Capital contributions		—			—		—			—		98			5		—			—			98
Stock-based compensation		3,973			—		—			—		3,523			—		—			—			7,496
Distributions		(54,155		)	—		(14,412		)	—		(4,324		)	—		—			(56		)	(72,947		)
Net income (loss)		(30,487		)	—		15,346			—		(420		)	—		—			(163		)	(15,724		)
Hedging gains or losses reclassified to earnings		—			—		—			—		—			—		(168		)	—			(168		)
Adjustment in fair value of derivatives		—			—		—			—		—			—		1,578			—			1,578
Balance, September 30, 2012		$	881,449		66,715		$	148,704		14,706		$	22,561		1,546		$	907		$	2,641		$	1,056,262

 

See accompanying notes to condensed consolidated financial statements.

 

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CROSSTEX ENERGY, L.P.

 

Consolidated Statements of Cash Flows

 

		Nine Months Ended September 30,
		2012			2011
		(Unaudited)
		(In thousands)
Cash flows from operating activities:
Net loss		$	(15,724	)	$	(1,072	)
Adjustments to reconcile net loss to net cash provided by operating activities, net of assets acquired or liabilities assumed:
Depreciation and amortization		110,107			93,200
(Gain) loss on sale of property and other assets		(3,381		)	317
Deferred tax benefit		(375		)	(375		)
Non-cash stock-based compensation		7,496			5,504
Non-cash portion of derivatives (gain) loss		(5,523		)	165
Amortization of debt issue costs		3,940			5,278
Amortization of discount on notes		1,423			1,423
Equity in earnings of limited liability company		(1,511		)	—
Changes in assets and liabilities:
Accounts receivable, accrued revenue and other		(18,431		)	30,115
Natural gas and natural gas liquids, prepaid expenses and other		(7,144		)	(3,493		)
Accounts payable, accrued gas and crude oil purchases and other accrued liabilities		(26,296		)	(47,181		)
Net cash provided by operating activities		44,581			83,881
Cash flows from investing activities:
Additions to property and equipment		(141,319		)	(62,829		)
Acquisition of business		(212,521		)	—
Proceeds from sale of property		11,677			425
Investment in limited liability company		(52,250		)	(35,000		)
Net cash used in investing activities		(394,413		)	(97,404		)
Cash flows from financing activities:
Proceeds from borrowings		696,500			390,250
Payments on borrowings		(526,000		)	(322,308		)
Payments on capital lease obligations		(2,337		)	(2,254		)
Increase (decrease) in drafts payable		4,319			(103		)
Debt refinancing costs		(6,896		)	(3,936		)
Conversion of restricted units, net of units withheld for taxes		(1,030		)	(1,798		)
Issuance of common units		232,791			—
Distribution to partners		(72,947		)	(59,135		)
Proceeds from exercise of unit options		347			513
Contributions from general partner		3,460			159
Net cash provided by financing activities		328,207			1,388
Net decrease in cash and cash equivalents		(21,625		)	(12,135		)
Cash and cash equivalents, beginning of period		24,143			17,697
Cash and cash equivalents, end of period		$	2,518		$	5,562
Cash paid for interest		$	70,460		$	70,074
Cash paid for income taxes		$	953		$	905

 

See accompanying notes to condensed consolidated financial statements.

 

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CROSSTEX ENERGY, L.P.

 

Notes to Condensed Consolidated Financial Statements

 

September 30, 2012

(Unaudited)

(1) General

 

Unless the context requires otherwise, references to “we,” “us,” “our” or the “Partnership” mean Crosstex Energy, L.P. and its consolidated subsidiaries.

 

Crosstex Energy, L.P., a Delaware limited partnership formed on July 12, 2002, is engaged in the gathering, transmission, processing and marketing of natural gas, natural gas liquids, or NGLs, and crude oil. The Partnership connects the wells of natural gas producers in the geographic areas of its gathering systems in order to gather for a fee or purchase the gas production, processes natural gas for the removal of NGLs, transports natural gas and NGLs and ultimately provides natural gas and NGLs to a variety of markets. The Partnership operates processing plants that process gas transported to the plants by major interstate pipelines or from our own gathering systems under a variety of fee arrangements.  In addition, the Partnership purchases natural gas and NGLs from producers not connected to its gathering systems for resale and markets natural gas and NGLs on behalf of producers for a fee.  The Partnership provides a variety of crude services throughout the Ohio River Valley (ORV) which include crude oil gathering via pipelines and trucks and oilfield brine disposal.  The Partnership recently added crude oil terminal facilities in south Louisiana to provide access for crude oil producers to the premium markets in this area.

 

Crosstex Energy GP, LLC (the “General Partner”) is the general partner of the Partnership. Crosstex Energy GP, LLC is a direct, wholly-owned subsidiary of Crosstex Energy, Inc. (“CEI”).

 

(a) Basis of Presentation

 

The accompanying condensed consolidated financial statements are prepared in accordance with the instructions to Form 10-Q, are unaudited and do not include all the information and disclosures required by generally accepted accounting principles for complete financial statements. All adjustments that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to the consolidated financial statements for the prior year to conform to the current presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership’s annual report on Form 10-K for the year ended December 31, 2011.

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management of the Partnership to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from these estimates.

 

(b) Investment in Limited Liability Company

 

On June 22, 2011, the Partnership entered into a limited liability agreement with Howard Energy Partners (“HEP”) for an initial capital contribution of $35.0 million in exchange for an individual ownership interest in HEP. In 2012, the Partnership made an additional capital contribution of $52.3 million to HEP related to HEP’s acquisition of substantially all of Meritage Midstream Services’ natural gas gathering assets in south Texas. HEP owns midstream assets and provides midstream and construction services to Eagle Ford Shale producers.  The Partnership owns 30.6 percent of HEP and accounts for this investment under the equity method of accounting. This investment is reflected on the balance sheet as “Investment in limited liability company.”  The Partnership’s proportional share of earnings is recorded as an increase to this investment account and recorded as equity in earnings of limited liability company.

 

(c) Potential Change in use of Sabine Plant during 2012

 

Currently, the Partnership’s Sabine plant has a contract with a third-party to fractionate the raw-make NGLs produced by the Sabine plant.  The primary term of the contract expired in March 2012 and is currently renewed on a month-to-month basis.  The Partnership anticipates that operations will cease in early 2013 because it is likely that this third-party fractionation agreement will be terminated.  During the three months ended September 30, 2012, the Partnership revised the useful life of these assets and began accelerating depreciation and amortization for the estimated non-recoverable costs associated with the plant totaling $26.4 million.  Depreciation and amortization expense for the three months ended September 30, 2012 includes $8.8 million associated with such non-recoverable costs, and the Partnership will recognize additional depreciation and amortization expense of $8.8 million in the fourth quarter of 2012 and the first quarter of 2013.  The net book value for the plant, excluding these non-recoverable costs, is $19.0 million as of September 30, 2012.   Although the Partnership does not have specific plans at this time to relocate the Sabine plant if it is idled, the Partnership may utilize it elsewhere in its operations.

 

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CROSSTEX ENERGY, L.P.

 

Notes to Condensed Consolidated Financial Statements

 

(2) Acquisition

 

On July 2, 2012, the Partnership, through a wholly-owned subsidiary, completed its previously announced acquisition of all of the issued and outstanding common stock of Clearfield Energy, Inc. and Clearfield Energy’s wholly-owned subsidiaries (collectively, “Clearfield”). Clearfield is a well-established crude oil, condensate and water services company with operations in Ohio, Kentucky and West Virginia. Clearfield’s business includes crude oil pipelines, a barge loading terminal on the Ohio River, a rail loading terminal on the Ohio Central Railroad network, a trucking fleet, and brine water disposal wells.  All of these assets are included in the Partnership’s ORV segment.

 

The Partnership paid approximately $212.5 million in cash (before working capital and certain purchase price adjustments) for the acquisition and the purchase was funded with proceeds from the senior notes offering in May 2012.

 

Included in the Clearfield acquisition were three local distributions companies, or LDCs, which the Partnership marketed for sale and were classified as held for disposition on the balance sheet as of September 30, 2012.  The Partnership chose not to apply discontinued operations presentation on the income statement as the related amounts are immaterial.  On October 15, 2012, the Partnership entered into an agreement to sell the LDCs for an amount of $19.5 million.  The assets held for disposition are recorded at the sales price of $19.5 million.

 

The goodwill recognized from the Clearfield acquisition results primarily from the value of opportunity created from the strategic asset positioning in the Utica and Marcellus shale plays which provides the Partnership with a substantial growth platform in a new geographic area.

 

The Partnership recognized intangible assets related to customer relationships.  The acquired intangible assets will be amortized on a straight-line basis over the estimated customer contract life of approximately 20 years.

 

The Partnership assumed a long-term liability related to additional benefit obligations.  Also, the Partnership assumed a long-term liability related to inactive easement commitments for a period of 10 years.

 

The Partnership formed a wholly-owned corporate entity to acquire the common stock of Clearfield and assumed the carryover basis of the Clearfield assets.  The difference between our purchase price for the Clearfield assets and the carryover tax basis for such assets resulted in the recognition of a deferred tax liability of $67.7 million.  This deferred liability is expected to become payable no later than 2027.

 

Purchase Price Allocation in Clearfield Acquisition

 

Based on currently available information, the following table is a summary of the consideration paid for the Clearfield acquisition and the preliminary purchase price allocation for the fair value of the assets acquired and liabilities assumed at the acquisition date:

 

Purchase Price Allocation (in thousands):
Purchase Price to Clearfield Energy, Inc.		$	212,521
Total purchase price		$	212,521
Assets acquired:
Current assets		$	15,466
Assets held for disposition		19,500
Property, plant, and equipment		93,671
Goodwill		150,630
Intangibles		37,600
Liabilities assumed:
Current liabilities		(23,575		)
Liabilities held for disposition		(2,642		)
Deferred taxes		(67,700		)
Long term liabilities		(10,429		)
Total purchase price		$	212,521

 

For the period from July 2, 2012 to September 30, 2012, the Partnership recognized $52.9 million of crude oil buy/sell, crude oil transportation and brine disposal sales related to properties acquired in the Clearfield acquisition. For the period from July 2, 2012 to September 30, 2012, the Partnership recognized $46.1 million net operating expense related to properties acquired in the Clearfield acquisition.

 

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CROSSTEX ENERGY, L.P.

 

Notes to Condensed Consolidated Financial Statements-(Continued)

 

Pro Forma Information

 

The following unaudited pro forma condensed financial data for the nine months ended September 30, 2012 and three and nine months ended September 30, 2011 gives effect to the Clearfield acquisition as if it had occurred on January 1, 2011. The unaudited pro forma condensed financial information has been included for comparative purposes only and is not necessarily indicative of the results that might have occurred had the transactions taken place on the dates indicated and is not intended to be a projection of future results.

 

		Three Months Ended			Nine Months Ended
		September 30, 2011			September 30, 2012			September 30, 2011
Pro forma total revenues		$	564,198		$	1,235,782		$	1,676,004
Pro forma net loss		$	(6,067	)	$	(18,005	)	$	(9,330	)
Pro forma net loss attributable to Crosstex Energy, L.P.		$	(6,043	)	$	(17,842	)	$	(9,200	)
Pro forma net loss per common unit:
Basic and Diluted		$	(0.12	)	$	(0.32	)	$	(0.18	)

 

(3) Long-Term Debt

 

As of September 30, 2012 and December 31, 2011, long-term debt consisted of the following (in thousands):

 

		September 30,			December 31,
		2012			2011
Bank credit facility (due 2016), interest based on Prime and/or LIBOR plus an applicable margin, interest rate at September 30, 2012 and December 31, 2011 was 4.75% and 2.9%, respectively		$	5,500		$	85,000
Senior unsecured notes (due 2018), net of discount of $10.2 million and $11.6 million, respectively, which bear interest at the rate of 8.875%		714,831			713,409
Senior unsecured notes (due 2022), which bear interest at the rate of 7.125%		250,000			—
Debt classified as long-term		$	970,331		$	798,409

 

Credit Facility.  As of September 30, 2012, there was $61.6 million in outstanding letters of credit and $5.5 million borrowed under the Partnership’s bank credit facility, leaving approximately $567.9 million available for future borrowing based on the borrowing capacity of $635.0 million.

 

In January 2012, the Partnership further amended its credit facility to increase the Partnership’s borrowing capacity from $485.0 million to $635.0 million and amend certain terms under the facility to provide additional financial flexibility during the remaining four-year term of the facility.

 

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CROSSTEX ENERGY, L.P.

 

Notes to Condensed Consolidated Financial Statements-(Continued)

 

The Partnership amended the credit facility again in May 2012.  This amendment, among other things, (i) increased the maximum permitted consolidated leverage ratio (as defined in the amended credit facility, being generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) during the Clearfield acquisition period (as defined in the amended credit facility, being generally the four quarterly measurement periods after closing the Clearfield acquisition) from 5.0 to 1.0 to 5.5 to 1.0, and (ii) increased the maximum permitted consolidated leverage ratio during any other acquisition period (as defined in the amended credit facility, being generally the three quarterly measurement periods after closing certain material acquisitions) from 5.0 to 1.0 to 5.5 to 1.0.

 

In August 2012, the Partnership amended the credit facility to include projected EBITDA from material projects (as defined in the amendment, but generally being the construction or expansion of any capital project by the Partnership or any of its subsidiaries that is expected to cost more than $20.0 million and the Partnership’s “Riverside Phase II” project) in its EBITDA for purposes of calculating compliance with the amended credit agreement’s minimum interest coverage ratio, maximum leverage ratio and maximum senior leverage ratio. The amount of projected EBITDA from material projects that is included in such financial covenant calculations is subject to the approval of Bank of America, N.A. (the “Administrative Agent”), and it will be based on contracts related to the material project, expected expenses, the completion percentage of the material project, the expected commercial operation date of the material project, and other factors deemed appropriate by the Administrative Agent.  The aggregate amount of all material project EBITDA adjustments during any period shall be limited to 15% of the total actual consolidated EBITDA for such period (which total actual consolidated EBITDA shall be determined without including any material project EBITDA adjustments).

 

The credit facility is guaranteed by substantially all of the Partnership’s subsidiaries and is secured by first priority liens on substantially all of the Partnership’s assets and those of the guarantors, including all material pipeline, gas gathering and processing assets, crude gathering and transportation assets, brine disposal assets, all material working capital assets and a pledge of all of the Partnership’s equity interests in substantially all of its subsidiaries and its interest in HEP. The Partnership may prepay all loans under the amended credit facility at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements.

 

All other material terms of the credit facility are described in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Indebtedness” in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2011. The Partnership expects to be in compliance with all credit facility covenants for at least the next twelve months.

 

2022 Notes.  On May 24, 2012, the Partnership issued $250.0 million in aggregate principal amount of 7.125% senior unsecured notes (the “2022 Notes”) due on June 1, 2022 at an issue price of 100% of the principal amount to yield 7.125% to maturity.  The interest payments are due semi-annually in arrears in June and December.  Net proceeds from the sale of the notes of $245.1 million (net of transaction costs) were used to fund the Clearfield acquisition and for general partnership purposes, including capital expenditures for the Cajun-Sibon natural gas liquids pipeline expansion.

 

The Partnership may redeem up to 35% of the 2022 Notes at any time prior to June 1, 2015 in an amount not greater than the cash proceeds from equity offerings at a redemption price of 107.125% of the principal amount of the 2022 Notes (plus accrued and unpaid interest to the redemption date).

 

Prior to June 1, 2017, the Partnership may redeem all or a part of the 2022 Notes at the redemption price equal to the sum of the principal amount thereof, plus a make-whole premium at the redemption date, plus accrued and unpaid interest to the redemption date.

 

On or after June 1, 2017, the Partnership may redeem all or a part of the 2022 Notes at redemption prices (expressed as percentages of principal amount) equal to 103.563% for the twelve-month period beginning on June 1, 2017, 102.375% for the twelve-month period beginning on June 1, 2018, 101.188% for the twelve-month period beginning on June 1, 2019 and 100.000% for the twelve-month period beginning on June 1, 2020 and at any time thereafter, plus accrued and unpaid interest, if any, to the applicable redemption date on the 2022 Notes.

 

Under the terms of the indenture governing the 2022 Notes agreement, repurchase offer obligations would be triggered by a change of control combined with a ratings decline on the notes.

 

Non-Guarantors.  All senior unsecured notes are jointly and severally guaranteed by each of the Partnership’s current material subsidiaries (the “Guarantors”), with the exception of its regulated Louisiana subsidiaries (which may only guarantee up to $500.0 million of the Partnership’s debt), CDC (the Partnership’s joint venture in Denton County, Texas which is not 100% owned by the

 

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CROSSTEX ENERGY, L.P.

 

Notes to Condensed Consolidated Financial Statements-(Continued)

 

Partnership) and Crosstex Energy Finance Corporation (a wholly owned Delaware corporation that was organized for the sole purpose of being a co-issuer of certain of the Partnership’s indebtedness, including the senior unsecured notes). Guarantors may not sell or otherwise dispose of all or substantially all of their properties or assets, or consolidate with or merge into another company if such a sale would cause a default under the terms of the senior unsecured notes. Since certain wholly owned subsidiaries do not guarantee the senior unsecured notes, the condensed consolidating financial statements of the guarantors and non-guarantors for the three and nine months ended September 30, 2012 and 2011 are disclosed below in accordance with Rule 3-10 of Regulation S-X. Comprehensive income (loss) is not included in the condensed consolidating statements of operations of the guarantors and non-guarantors for the nine months ended September 30, 2012 and 2011 as these amounts are not considered material.

 

Condensed Consolidating Balance Sheets

September 30, 2012

 

		Guarantors			Non-Guarantors			Elimination			Consolidated
		(In thousands)
ASSETS
Total current assets		$	227,012		$	14,120		$	—		$	241,132
Property, plant and equipment, net		1,189,183			205,698			—			1,394,881
Total other assets		713,414			—			—			713,414
Total assets		$	2,129,609		$	219,818		$	—		$	2,349,427
LIABILITIES & PARTNERS’ CAPITAL
Total current liabilities		$	209,899		$	6,485		$	—		$	216,384
Long-term debt		970,331			—			—			970,331
Other long-term liabilities		106,450			—			—			106,450
Partners’ capital		842,929			213,333			—			1,056,262
Total liabilities & partners’ capital		$	2,129,609		$	219,818		$	—		$	2,349,427

 

December 31, 2011

 

		Guarantors			Non-Guarantors			Elimination			Consolidated
		(In thousands)
ASSETS
Total current assets		$	189,410		$	13,346		$	—		$	202,756
Property, plant and equipment, net		1,026,537			215,364			—			1,241,901
Total other assets		510,671			3			—			510,674
Total assets		$	1,726,618		$	228,713		$	—		$	1,955,331
LIABILITIES & PARTNERS’ CAPITAL
Total current liabilities		$	220,811		$	4,541		$	—		$	225,352
Long-term debt		798,409			—			—			798,409
Other long-term liabilities		31,111			—			—			31,111
Partners’ capital		676,287			224,172			—			900,459
Total liabilities & partners’ capital		$	1,726,618		$	228,713		$	—		$	1,955,331

 

Condensed Consolidating Statements of Operations

For the Three Months Ended September 30, 2012

 

		Guarantors			Non-Guarantors			Elimination			Consolidated
		(In thousands)
Total revenues		$	392,085		$	20,468		$	(5,585	)	$	406,968
Total operating costs and expenses		(400,897		)	(9,859		)	5,585			(405,171		)
Operating income (loss)		(8,812		)	10,609			—			1,797
Interest expense, net		(23,220		)	(9		)	—			(23,229		)
Other income		5,950			—			—			5,950
Income (loss) from continuing operations before non-controlling interest and income taxes		(26,082		)	10,600			—			(15,482		)
Income tax provision		(665		)	(7		)	—			(672		)
Net loss attributable to non-controlling interest		—			54			—			54
Net income (loss) attributable to Crosstex Energy, L.P.		$	(26,747	)	$	10,647		$	—		$	(16,100	)

 

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CROSSTEX ENERGY, L.P.

 

Notes to Condensed Consolidated Financial Statements-(Continued)

 

For the Three Months Ended September 30, 2011

 

		Guarantors			Non-Guarantors			Elimination			Consolidated
		(In thousands)
Total revenues		$	501,866		$	21,287		$	(5,655	)	$	517,498
Total operating costs and expenses		(497,149		)	(9,755		)	5,655			(501,249		)
Operating income		4,717			11,532			—			16,249
Interest expense, net		(19,507		)	—			—			(19,507		)
Other expense		786			—			—			786
Income (loss) from continuing operations before non-controlling interest and income taxes		(14,004		)	11,532			—			(2,472		)
Income tax provision		(283		)	(4		)	—			(287		)
Net income attributable to non-controlling interest		—			23			—			23
Net (loss) income attributable to Crosstex Energy, L.P.		$	(14,287	)	$	11,551		$	—		$	(2,736	)

 

For the Nine Months Ended September 30, 2012

 

		Guarantors			Non-Guarantors			Elimination			Consolidated
		(In thousands)
Total revenues		$	1,086,065		$	64,946		$	(21,140	)	$	1,129,871
Total operating costs and expenses		(1,078,556		)	(28,715		)	21,140			(1,086,131		)
Operating income		7,509			36,231			—			43,740
Interest expense, net		(63,867		)	(65		)	—			(63,932		)
Other income		5,975			—			—			5,975
Income (loss) from continuing operations before non-controlling interest and income taxes		(50,383		)	36,166			—			(14,217		)
Income tax provision		(1,493		)	(14		)	—			(1,507		)
Net loss attributable to non-controlling interest		—			163			—			163
Net income (loss) attributable to Crosstex Energy, L.P.		$	(51,876	)	$	36,315		$	—		$	(15,561	)

 

For the Nine Months Ended September 30, 2011

 

		Guarantors			Non-Guarantors			Elimination			Consolidated
		(in thousands)
Total revenues		$	1,487,910		$	65,148		$	(20,055	)	$	1,533,003
Total operating costs and expenses		(1,464,720		)	(29,216		)	20,055			(1,473,881		)
Operating income		23,190			35,932			—			59,122
Interest expense, net		(59,952		)	—			—			(59,952		)
Other expense		656			—			—			656
Income (loss) from continuing operations before non-controlling interest and income taxes		(36,106		)	35,932			—			(174		)
Income tax provision		(886		)	(12		)	—			(898		)
Net loss attributable to non-controlling interest		—			130			—			130
Net (loss) income attributable to Crosstex Energy, L.P.		$	(36,992	)	$	36,050		$	—		$	(942	)

 

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