Inergy Midstream, L.P. | Investor Relations

KANSAS CITY, Mo.--(BUSINESS WIRE)--Aug. 2, 2012-- Inergy Midstream, L.P. (NYSE:NRGM) (“Inergy Midstream”) today reported results of operations for the quarter ended June 30, 2012, the third quarter of fiscal 2012. Effective May 2012, Inergy Midstream acquired US Salt, LLC (“US Salt”) from Inergy, L.P. (“Inergy”). This acquisition is reflected in Inergy Midstream’s consolidated financial statements, and periods prior to the acquisition have been recast to include the historical results of operations of US Salt. This accounting treatment is required as the transaction is amongst entities under common control.

Inergy Midstream reported Adjusted EBITDA of $33.4 million for the quarter ended June 30, 2012, an increase of $7.0 million, or approximately 27%, from $26.4 million for the quarter ended June 30, 2011. Included in Adjusted EBITDA is a one-time business interruption insurance recovery amount of approximately $3.6 million received this quarter from an occurrence in December 2010. Net income was $18.0 million for the quarter ended June 30, 2012, and $15.5 million in the same quarter of last year.

For the nine-month period ended June 30, 2012, Adjusted EBITDA increased approximately 29% to $93.9 million from $72.8 million for the same prior-year period. Net income was $52.0 million for the nine months ended June 30, 2012, and $39.7 million in the same prior-year period.

“We continue to perform consistently across the board while executing our growth strategy,” said John Sherman, President and CEO of Inergy Midstream. “Our expansion projects are moving forward, and we are experiencing solid fundamentals supportive of our natural gas and natural gas liquids platform. The recent acquisition of US Salt adds to our potential, and we remain focused on delivering cash earnings growth to our investors.”

As previously announced, the Board of Directors of Inergy Midstream’s general partner declared a cash distribution of $0.38 per limited partner unit ($1.52 annually) for the quarter ended June 30, 2012, representing an approximate 2.7% increase over the distribution paid for the previous quarter. The distribution will be paid on August 14, 2012.

Quarterly Results

In the quarter ended June 30, 2012, revenues from firm storage increased to $24.1 million compared to $22.5 million during the same three-month period in 2011. Revenues from transportation increased to $7.1 million for the three months ended June 30, 2012, compared to $3.9 million during the same three-month period in 2011. Revenues from hub services increased to $4.4 million for the three months ended June 30, 2012, compared to $2.5 million during the same three-month period in 2011. Revenues from salt decreased to $13.0 million for the three months ended June 30, 2012, compared to $13.1 million during the same three-month period in 2011.

In the quarter ended June 30, 2012, storage-related costs decreased to $0.4 million compared to $2.2 million during the same three-month period in 2011. Transportation-related costs were $1.0 million and $2.1 million for the three months ended June 30, 2012 and 2011, respectively. Salt-related costs decreased to $7.6 million compared to $7.8 million during the same three-month period in 2011.

For the quarter ended June 30, 2012, operating and administrative expenses were $8.1 million compared to $3.7 million in the same period of fiscal 2011.

Year-to-Date Results

During the nine-month period ended June 30, 2012, revenues from firm storage increased to $70.5 million compared to $66.2 million during the same nine-month period in 2011. Revenues from transportation increased to $21.2 million for the nine months ended June 30, 2012, compared to $9.5 million during the same nine-month period in 2011. Revenues from hub services increased to $11.1 million for the nine months ended June 30, 2012, compared to $4.6 million during the same nine-month period in 2011. Revenues from salt increased to $39.5 million for the nine months ended June 30, 2012, compared to $39.2 million during the same nine-month period in 2011.

During the nine-month period ended June 30, 2012, storage-related costs decreased to $3.9 million compared to $6.8 million during the same nine-month period in 2011. Transportation-related costs were $4.1 million and $5.1 million for the nine months ended June 30, 2012 and 2011, respectively. Salt-related costs decreased to $23.1 million compared to $23.2 million during the same nine-month period in 2011.

For the nine-month period ended June 30, 2012, operating and administrative expenses were $21.0 million compared to $12.7 million in the same period of fiscal 2011.

Inergy Midstream and Inergy will host a joint conference call and internet webcast today August 2, 2012, at 10 a.m. Central Time to discuss the results of operations for the quarter ended June 30, 2012, and its business outlook. The call-in number for the earnings call is 1-877-405-3427, and the conference name is Inergy. The live internet webcast and the replay can be accessed on Inergy Midstream’s website, www.inergylp.com. A digital recording of the call will be available for one week following the call by dialing 1-855-859-2056 and entering the pass code 15034986.

Recent Events

Inergy Midstream’s initial public offering (“IPO”) of its common units representing limited partner interests closed on December 21, 2011. Inergy Midstream offered 16,000,000 common units; and the underwriters exercised their option to purchase an additional 2,400,000 common units. Prior to this offering, there had been no public market for Inergy Midstream’s common units. Inergy Midstream’s common units began trading on the New York Stock Exchange on December 16, 2011, under the symbol “NRGM.”

On December 21, 2011, Inergy Midstream entered into a new $500 million revolving credit facility (“Credit Facility”) with a December 2016 maturity date. The Credit Facility is available to fund acquisitions, working capital, and internal growth projects and for general partnership purposes. Inergy Midstream’s Credit Facility has an accordion feature that allows Inergy Midstream to increase loan commitments by up to $250 million, subject to the lenders’ agreement and the satisfaction of certain conditions.

On April 16, 2012, Inergy Midstream exercised a portion of its accordion feature under the Credit Facility and increased the loan commitments thereunder by $100 million. The aggregate amount of revolving loan commitments under the Credit Facility now equals $600 million. Inergy Midstream may continue to increase the loan commitments by up to $150 million, subject to the lenders’ agreement and the satisfaction of certain conditions.

On May 14, 2012, Inergy Midstream acquired 100% of the membership interests in US Salt from Inergy (“US Salt Acquisition”) in exchange for $182.5 million in cash and 473,707 Inergy Midstream common units. Additionally, all intercompany balances between US Salt and Inergy were extinguished in conjunction with the US Salt Acquisition.

Subsequent to Inergy Midstream’s IPO and the US Salt Acquisition, Inergy owned 75.0% of the outstanding limited partnership units, the incentive distribution rights, and the managing general partner of Inergy Midstream.

About Inergy Midstream, L.P.

Inergy Midstream, L.P., headquartered in Kansas City, Missouri, is a master limited partnership engaged in the development and operation of natural gas and NGL storage and transportation assets, and the production and sale of salt. Its assets are located in the Northeast region of the United States.

About Inergy, L.P.

Inergy, L.P. (NYSE:NRGY), headquartered in Kansas City, Missouri, is a publicly traded master limited partnership. Inergy’s operations include a natural gas storage business in Texas and an NGL supply logistics, transportation, and wholesale marketing business that serves customers in the United States and Canada. Through its general partner interest and majority equity ownership interest in Inergy Midstream, L.P., Inergy is also engaged in the development and operation of natural gas and NGL storage and transportation business, and the production and sale of salt products in the Northeast region of the United States.

Corporate news, unit prices, and additional information about Inergy Midstream, including reports from the United States Securities and Exchange Commission, are available on the company’s website, www.inergylp.com. For more information, contact Mike Campbell in Inergy Midstream’s Investor Relations Department at 816-842-8181 or via e-mail at investorrelations@inergyservices.com.

We define EBITDA as income before income taxes plus net interest expense and depreciation and amortization expense. We define Adjusted EBITDA as EBITDA excluding the gain or loss on the disposal of assets, long-term incentive and equity compensation expense, and transaction costs. Transaction costs are third-party professional fees and other costs that are incurred in conjunction with closing a transaction.

Adjusted EBITDA is a non-GAAP supplemental financial measure that management and external users of our financial statements, such as industry analysts, investors, lenders, and rating agencies, may use to assess:

our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or financing methods;
the ability of our assets to generate sufficient cash flow to make distributions to our common unitholders;
our ability to incur and service debt and fund capital expenditures; and
the viability of acquisitions and other capital expenditure projects and the returns on investment in various opportunities.

EBITDA and Adjusted EBITDA should not be considered an alternative to net income, income before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with GAAP, as those items are used to measure operating performance, liquidity, and our ability to service debt obligations. We believe that EBITDA provides additional information for evaluating our ability to make distributions to our common unitholders and is presented solely as a supplemental measure. We believe that Adjusted EBITDA provides additional information for evaluating our financial performance without regard to our financing methods, capital structure, and historical cost basis. One should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. EBITDA and Adjusted EBITDA, as we define them, may not be comparable to EBITDA and Adjusted EBITDA or similarly titled measures used by other corporations or partnerships in our industry, thereby diminishing such measures’ utility.

This press release contains forward-looking statements, which are statements that are not historical in nature. Forward-looking statements are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or any underlying assumption proves incorrect, actual results may vary materially from those anticipated, estimated, or projected. Among the key factors that could cause actual results to differ materially from those referred to in the forward-looking statements are: changes in general and local economic conditions; competitive conditions within our industry; our ability to complete internal growth projects on time and on budget; the price and availability of debt and equity financing; the effects of existing and future governmental legislation and regulations; and natural disasters, weather-related delays, casualty losses, and other matters beyond our control. These and other risks and assumptions are described in Inergy Midstream’s prospectus dated December 15, 2011, filed with the United States Securities and Exchange Commission in accordance with Rule 424(b) of the Securities Act on December 16, 2011. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s view only as of the date made. We undertake no obligation to update any forward-looking statement, except as otherwise required by law.


Inergy Midstream, L.P. (Formerly Inergy Midstream, LLC)
Consolidated Statements of Operations
For the Three Months and Nine Months Ended June 30, 2012 and 2011
(in millions, except unit and per unit data)

	Three Months Ended June 30,				Nine Months Ended June 30,

	(Unaudited)
	2012		2011^(a)		2012		2011^(a)

Revenue:
Firm storage	$	20.8	$	20.7	$	62.0	$	64.0
Transportation		7.1		3.9		21.2		9.5
Hub services		4.4		2.5		11.1		4.6
Related party firm storage		3.3		1.8		8.5		2.2
Salt		13.0		13.1		39.5		39.2
		48.6		42.0		142.3		119.5

Costs and expenses:
Storage related costs		0.4		2.2		3.9		6.8
Transportation related costs		1.0		2.1		4.1		5.1
Salt related costs		7.6		7.8		23.1		23.2
Operating and administrative		8.1		3.7		21.0		12.7
Depreciation and amortization		12.8		10.7		37.5		32.0
		29.9		26.5		89.6		79.8

Operating income		18.7		15.5		52.7		39.7

Interest expense, net		0.7		-		0.7		-

Net income	$	18.0	$	15.5	$	52.0	$	39.7

Less: Net income prior to initial public offering of Inergy Midstream, L.P.		-				12.9
Less: Net income earned by US Salt, LLC prior to acquisition		1.6				7.8

Net income available to partners	$	16.4			$	31.3


Partners’ interest information:
Non-managing general partner interest in net income	$	0.7			$	0.7
Total limited partners’ interest in net income	$	15.7			$	30.6


Net income per limited partner unit:
Basic	$	0.21			$	0.41
Diluted	$	0.21			$	0.41


Weighted-average limited partner units outstanding (in thousands):
Basic		74,834				74,571
Diluted		74,834				74,571


	Three Months Ended						Nine Months Ended
	June 30,						June 30,
		2012			2011^(a)			2012			2011^(a)
	(Unaudited)						(Unaudited)
Supplemental Information:

Cash and cash equivalents							$	-		$	-

Outstanding debt:
Credit facility ^(f)							$	324.2		$	-

Total partner’s capital							$	567.3		$	583.7

EBITDA:
Net income	$	18.0		$	15.5		$	52.0		$	39.7
Depreciation and amortization		12.8			10.7			37.5			32.0
Interest expense, net		0.7			-			0.7			-
EBITDA ^(b)	$	31.5		$	26.2		$	90.2		$	71.7
Long-term incentive and equity compensation expense		1.3			0.2			3.1			1.1
Transaction costs		0.6			-			0.6			-
Adjusted EBITDA ^(b)	$	33.4		$	26.4		$	93.9		$	72.8

Distributable cash flow:
Adjusted EBITDA ^(b)	$	33.4		$	26.4		$	93.9		$	72.8
Cash interest expense ^(c)		(0.2	)		-			(0.2	)		-
Maintenance capital expenditures ^(d)		(1.4	)		(1.7	)		(3.3	)		(3.9	)
Less: Pre-acquisition distributable cash flow of US Salt, LLC ^(g)		(2.0	)		(3.6	)		(9.8	)		(12.2	)
Distributable cash flow ^(e)	$	29.8		$	21.1		$	80.6		$	56.7

EBITDA:
Net cash provided by operating activities	$	35.7		$	36.5		$	103.9		$	89.1
Net changes in working capital balances		(3.4	)		(10.3	)		(10.8	)		(17.4	)
Amortization of deferred financing costs		(0.2	)		-			(0.5	)		-
Interest expense, net		0.7			-			0.7			-
Long-term incentive and equity compensation expense		(1.3	)		-			(3.1	)		-
EBITDA	$	31.5		$	26.2		$	90.2		$	71.7
Long-term incentive and equity compensation expense		1.3			0.2			3.1			1.1
Transaction costs		0.6			-			0.6			-
Adjusted EBITDA	$	33.4		$	26.4		$	93.9		$	72.8

(a)			On May 14, 2012, Inergy Midstream acquired 100% of the membership interests in US Salt from Inergy (“US Salt Acquisition”). The US Salt Acquisition is reflected in Inergy Midstream’s consolidated financial statements based on the historical values, and periods prior to the acquisition have been retrospectively adjusted to include the historical balances of US Salt. This accounting treatment is similar to the pooling of interests and is required as the transaction is amongst entities under common control.

(b)			EBITDA is defined as income (loss) before income taxes plus net interest expense and depreciation and amortization expense. As indicated in the table, Adjusted EBITDA represents EBITDA excluding the gain or loss on the disposal of assets, long-term incentive and equity compensation expenses and transaction costs. Transaction costs are third party professional fees and other costs that are incurred in conjunction with closing a transaction. EBITDA and Adjusted EBITDA should not be considered an alternative to net income, income before income taxes, cash flows from operating activities, or any other measure of financial performance calculated in accordance with generally accepted accounting principles as those items are used to measure operating performance, liquidity, and our ability to service debt obligations. We believe that EBITDA provides additional information for evaluating our ability to make distributions to our common unitholders and is presented solely as a supplemental measure. We believe that Adjusted EBITDA provides additional information for evaluating our financial performance without regard to our financing methods, capital structure, and historical cost basis. EBITDA and Adjusted EBITDA, as we define them, may not be comparable to EBITDA and Adjusted EBITDA or similarly titled measures used by other corporations or partnerships.

(c)			Cash interest expense is book interest expense less amortization of deferred financing costs.

(d)			Maintenance capital expenditures are defined as those capital expenditures which do not increase operating capacity or revenues from existing levels.

(e)			Distributable cash flow is defined as Adjusted EBITDA, less cash interest expense, maintenance capital expenditures, and income taxes. Distributable cash flow should not be considered an alternative to cash flows from operating activities or any other measure of financial performance calculated in accordance with generally accepted accounting principles as those items are used to measure operating performance, liquidity, or the ability to service debt obligations. We believe that distributable cash flow provides additional information for evaluating our ability to declare and pay distributions to unitholders. Distributable cash flow, as we define it, may not be comparable to distributable cash flow or similarly titled measures used by other corporations and partnerships.

(f)			On December 21, 2011, Inergy Midstream entered into a new $500 million revolving credit facility (“Credit Facility”) with a December 2016 maturity date. The Credit Facility is available to fund acquisitions, working capital, and internal growth projects and for general partnership purposes. On April 16, 2012, Inergy Midstream exercised a portion of its accordion feature under the Credit Facility and increased the loan commitments thereunder by $100 million. The aggregate amount of revolving loan commitments under the Credit Facility now equals $600 million. Inergy Midstream’s outstanding balance on the Credit Facility at June 30, 2012, amounted to $324.2 million.

(g)			The amounts represent US Salt’s distributable cash flow prior to the acquisition of US Salt by Inergy Midstream from Inergy on May 14, 2012, which have been retrospectively included in the historic results of operations of Inergy Midstream as discussed above.

Source: Inergy Midstream, L.P.

Inergy Midstream, L.P.
Mike Campbell, 816-842-8181
investorrelations@inergyservices.com

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