þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) |
23-2787918 (I.R.S. Employer Identification No.) |
December 31, | September 30, | December 31, | ||||||||||
2006 | 2006 | 2005 | ||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 27,166 | $ | 84,775 | $ | 33,070 | ||||||
Accounts receivable (less allowances for doubtful accounts
of $15,169, $14,460 and $14,658,
respectively) |
237,486 | 171,091 | 278,920 | |||||||||
Accounts receivable related parties |
4,107 | 3,104 | 2,943 | |||||||||
Inventories |
111,994 | 99,836 | 112,907 | |||||||||
Derivative financial instruments |
5 | 12 | 15,543 | |||||||||
Prepaid expenses and other current assets |
9,530 | 9,391 | 13,403 | |||||||||
Total current assets |
390,288 | 368,209 | 456,786 | |||||||||
Property, plant and equipment (less accumulated depreciation and
amortization of $637,920, $622,684 and $584,516, respectively) |
582,670 | 580,592 | 584,810 | |||||||||
Goodwill |
619,938 | 619,938 | 619,052 | |||||||||
Intangible assets (less accumulated amortization of $26,172,
$25,216 and $21,871, respectively) |
24,728 | 25,608 | 28,332 | |||||||||
Other assets |
16,872 | 17,420 | 13,819 | |||||||||
Total assets |
$ | 1,634,496 | $ | 1,611,767 | $ | 1,702,799 | ||||||
LIABILITIES AND PARTNERS CAPITAL |
||||||||||||
Current liabilities: |
||||||||||||
Current maturities of long-term debt |
$ | 1,635 | $ | 1,825 | $ | 152,838 | ||||||
Accounts payable trade |
192,544 | 143,528 | 221,321 | |||||||||
Accounts payable related parties |
4,193 | 3,530 | 7,822 | |||||||||
Customer deposits and advances |
77,039 | 103,329 | 72,067 | |||||||||
Employee compensation and benefits accrued |
17,657 | 28,279 | 22,153 | |||||||||
Interest accrued |
12,233 | 23,373 | 15,922 | |||||||||
Derivative financial instruments |
25,086 | 25,778 | 7,974 | |||||||||
Other current liabilities |
49,100 | 50,514 | 47,873 | |||||||||
Total current liabilities |
379,487 | 380,156 | 547,970 | |||||||||
Long-term debt |
931,644 | 931,921 | 759,791 | |||||||||
Other noncurrent liabilities |
69,908 | 67,739 | 63,717 | |||||||||
Commitments and contingencies (note 3)
Minority interests |
10,545 | 10,448 | 8,404 | |||||||||
Partners capital |
242,912 | 221,503 | 322,917 | |||||||||
Total liabilities and partners capital |
$ | 1,634,496 | $ | 1,611,767 | $ | 1,702,799 | ||||||
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Three Months Ended | ||||||||
December 31, | ||||||||
2006 | 2005 | |||||||
Revenues: |
||||||||
Propane |
$ | 569,924 | $ | 588,357 | ||||
Other |
46,667 | 41,867 | ||||||
616,591 | 630,224 | |||||||
Costs and expenses: |
||||||||
Cost of sales propane |
370,995 | 391,974 | ||||||
Cost of sales other |
17,711 | 15,815 | ||||||
Operating and administrative expenses |
138,450 | 133,438 | ||||||
Depreciation and amortization |
18,567 | 18,253 | ||||||
Other income, net |
(4,392 | ) | (3,921 | ) | ||||
541,331 | 555,559 | |||||||
Operating income |
75,260 | 74,665 | ||||||
Interest expense |
(17,973 | ) | (18,919 | ) | ||||
Income before income taxes and minority interests |
57,287 | 55,746 | ||||||
Income tax expense |
(911 | ) | (51 | ) | ||||
Minority interests |
(736 | ) | (682 | ) | ||||
Net income |
$ | 55,640 | $ | 55,013 | ||||
General partners interest in net income |
$ | 5,842 | $ | 5,536 | ||||
Limited partners interest in net income |
$ | 49,798 | $ | 49,477 | ||||
Net income per limited partner unit basic and diluted |
$ | 0.88 | $ | 0.87 | ||||
Average limited partner units outstanding (thousands): |
||||||||
Basic |
56,806 | 56,797 | ||||||
Diluted |
56,846 | 56,840 | ||||||
-2-
Three Months Ended | ||||||||
December 31, | ||||||||
2006 | 2005 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 55,640 | $ | 55,013 | ||||
Adjustments to reconcile net income to net
cash (used) provided by operating activities: |
||||||||
Depreciation and amortization |
18,567 | 18,253 | ||||||
Other, net |
1,634 | 2,536 | ||||||
Net change in: |
||||||||
Accounts receivable |
(69,444 | ) | (121,381 | ) | ||||
Inventories |
(12,149 | ) | (22,159 | ) | ||||
Accounts payable |
48,675 | 89,723 | ||||||
Other current assets and liabilities |
(47,071 | ) | (38,605 | ) | ||||
Net cash used by operating activities |
(4,148 | ) | (16,620 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Expenditures for property, plant and equipment |
(21,536 | ) | (18,084 | ) | ||||
Proceeds from disposals of assets |
2,208 | 2,217 | ||||||
Acquisitions of businesses, net of cash acquired |
(146 | ) | (551 | ) | ||||
Net cash used by investing activities |
(19,474 | ) | (16,418 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Distributions |
(33,280 | ) | (32,128 | ) | ||||
Minority interest activity |
(624 | ) | (502 | ) | ||||
Issuance of long-term debt |
70 | | ||||||
Repayment of long-term debt |
(417 | ) | (571 | ) | ||||
Proceeds from issuance of Common Units |
261 | 146 | ||||||
Capital contribution from the General Partner |
3 | 1 | ||||||
Net cash used by financing activities |
(33,987 | ) | (33,054 | ) | ||||
Cash and cash equivalents decrease |
$ | (57,609 | ) | $ | (66,092 | ) | ||
CASH AND CASH EQUIVALENTS: |
||||||||
End of period |
$ | 27,166 | $ | 33,070 | ||||
Beginning of period |
84,775 | 99,162 | ||||||
Decrease |
$ | (57,609 | ) | $ | (66,092 | ) | ||
-3-
Accumulated | ||||||||||||||||||||
Number of | other | Total | ||||||||||||||||||
Common | General | comprehensive | partners | |||||||||||||||||
Units | Common | partner | loss | capital | ||||||||||||||||
Balance September 30, 2006 |
56,797,105 | $ | 250,493 | $ | 2,525 | $ | (31,515 | ) | $ | 221,503 | ||||||||||
Net income |
49,798 | 5,842 | 55,640 | |||||||||||||||||
Net losses on derivative instruments |
(12,125 | ) | (12,125 | ) | ||||||||||||||||
Reclassification of net losses
on derivative instruments |
10,851 | 10,851 | ||||||||||||||||||
Comprehensive income |
49,798 | 5,842 | (1,274 | ) | 54,366 | |||||||||||||||
Distributions |
(32,947 | ) | (333 | ) | (33,280 | ) | ||||||||||||||
Unit based compensation expense |
59 | | 59 | |||||||||||||||||
Common Units issued in
connection with incentive
compensation plan |
8,500 | 261 | 3 | 264 | ||||||||||||||||
Balance December 31, 2006 |
56,805,605 | $ | 267,664 | $ | 8,037 | $ | (32,789 | ) | $ | 242,912 | ||||||||||
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1. | Basis of Presentation |
|
The condensed consolidated financial statements include the accounts of AmeriGas Partners,
L.P. (AmeriGas Partners) and its principal operating subsidiaries AmeriGas Propane, L.P.
(AmeriGas OLP) and AmeriGas OLPs subsidiary, AmeriGas Eagle Propane, L.P. (Eagle OLP).
AmeriGas Partners, AmeriGas OLP and Eagle OLP are Delaware limited partnerships. AmeriGas
OLP and Eagle OLP are collectively referred to herein as the Operating Partnerships, and
AmeriGas Partners, the Operating Partnerships and all of their subsidiaries are collectively
referred to herein as the Partnership or we. We eliminate all significant intercompany
accounts and transactions when we consolidate. We account for AmeriGas Propane, Inc.s (the
General Partners) 1.01% interest in AmeriGas OLP and an unrelated third partys
approximate 0.1% limited partner interest in Eagle OLP as minority interests in the
condensed consolidated financial statements. |
||
AmeriGas Finance Corp., AmeriGas Eagle Finance Corp. and AP Eagle Finance Corp. are
wholly-owned finance subsidiaries of AmeriGas Partners. Their sole purpose is to serve as
co-obligors for debt securities issued by AmeriGas Partners, L.P. |
||
The accompanying condensed consolidated financial statements are unaudited and have been
prepared in accordance with the rules and regulations of the U.S. Securities and Exchange
Commission (SEC). They include all adjustments which we consider necessary for a fair
statement of the results for the interim periods presented. Such adjustments consisted only
of normal recurring items unless otherwise disclosed. The September 30, 2006 condensed
consolidated balance sheet data was derived from audited financial statements, but does not
include all disclosures required by accounting principles generally accepted in the United
States of America. These financial statements should be read in conjunction with the
financial statements and related notes included in our Annual Report on Form 10-K for the
year ended September 30, 2006 (2006 Annual Report). Weather significantly impacts demand
for propane and profitability because many customers use propane for heating purposes. Due
to the seasonal nature of the Partnerships propane business, the results of operations for
interim periods are not necessarily indicative of the results to be expected for a full
year. |
||
Net Income Per Unit. Net income per unit is computed by dividing net income, after
deducting the General Partners interest in AmeriGas Partners, by the weighted average
number of limited partner units outstanding. This interest is calculated in accordance with
the provisions in the Partnership Agreement governing cash distributions. The percentage of
cash distributions to the General Partner increases after certain target distributions have
been made to the limited partners. |
||
The Partnership follows the provisions in Emerging Issues Task Force Issue No. 03-6,
Participating Securities and the Two-Class Method under FASB Statement No. 128 (EITF
03-6), which results in the calculation of net income per limited partner unit for each
period according to distributions declared and participation rights in undistributed
earnings, as if all of
the earnings
|
-5-
for the period had been distributed. In periods with undistributed earnings
above certain levels, the calculation according to the two-class method results in an
increased allocation of undistributed earnings to the General Partner and a dilution of the
earnings to the limited partners. Due to the seasonality of the propane business, the
dilutive effect of EITF 03-6 on net income per limited partner unit will typically, but not
necessarily, impact our first three fiscal quarters. The dilutive effect of EITF 03-6 on
net income per diluted limited partner unit was $(0.09) for both the three months ended
December 31, 2006 and 2005. Because EITF 03-6 can impact the calculation of net income per
limited partner unit on a quarterly basis but normally does not affect the calculation on an
annual basis, annual net income per limited partner unit will generally not equal the sum of
net income per limited partner unit for each of the Partnerships quarterly periods. |
||
Potentially dilutive Common Units included in the diluted limited partner units outstanding
computation reflect the effects of restricted Common Unit awards granted under the General
Partners incentive compensation plans. |
||
Comprehensive Income. The following table presents the components of comprehensive income
for the three months ended December 31, 2006 and 2005: |
Three Months Ended | ||||||||
December 31, | ||||||||
2006 | 2005 | |||||||
Net income |
$ | 55,640 | $ | 55,013 | ||||
Other comprehensive loss |
(1,274 | ) | (37,532 | ) | ||||
Comprehensive income |
$ | 54,366 | $ | 17,481 | ||||
Other comprehensive loss is principally the result of changes in the fair value of
propane commodity derivative instruments and interest rate protection agreements, net of
reclassifications of net gains and losses to net income. |
||
Reclassifications. We have reclassified certain prior-year balances to conform to the
current period presentation. |
||
Use of Estimates. We make estimates and assumptions when preparing financial statements in
conformity with accounting principles generally accepted in the United States of America.
These estimates and assumptions affect the reported amounts of assets and liabilities,
revenues and expenses, as well as the disclosure of contingent assets and liabilities.
Actual results could differ from these estimates. |
-6-
2. | Related Party Transactions |
|
Pursuant to the Partnership Agreement and a Management Services Agreement among AmeriGas
Eagle Holdings, Inc., the general partner of Eagle OLP, and the General Partner, the General
Partner is entitled to reimbursement for all direct and indirect expenses incurred or
payments it makes on behalf of the Partnership. These costs, which totaled $83,067 and
$78,652 during the three months ended December 31, 2006 and 2005, respectively, include
employee compensation and benefit expenses of employees of the General Partner and general
and administrative expenses. |
||
UGI provides certain financial and administrative services to the General Partner. UGI
bills the General Partner for all direct and indirect corporate expenses incurred in
connection with providing these services and the General Partner is reimbursed by the
Partnership for these expenses. Such corporate expenses totaled $2,322 and $787 during the
three months ended December 31, 2006 and 2005, respectively. In addition, UGI and certain
of its subsidiaries (excluding Atlantic Energy which is discussed separately) provide office
space and automobile liability insurance and sell propane to the Partnership. These costs
totaled $668 and $864 during the three months ended December 31, 2006 and 2005,
respectively. |
||
AmeriGas OLP purchases propane from Atlantic Energy, which is owned by an affiliate of UGI.
Purchases of propane by AmeriGas OLP from Atlantic Energy during the three months ended
December 31, 2006 and 2005 totaled $8,587 and $12,256, respectively. Amounts due to Atlantic
Energy totaled $4,134, $3,115 and $7,822 at December 31, 2006, September 30, 2006 and
December 31, 2005, respectively, and are reflected in accounts payable related parties in
the Condensed Consolidated Balance Sheets. |
||
3. | Commitments and Contingencies |
|
On August 21, 2001, AmeriGas Partners, through AmeriGas OLP, acquired the propane
distribution businesses of Columbia Energy Group (the 2001 Acquisition) pursuant to the
terms of a purchase agreement (the 2001 Acquisition Agreement) by and among Columbia
Energy Group (CEG), Columbia Propane Corporation (Columbia Propane), Columbia Propane,
L.P. (CPLP), CP Holdings, Inc. (CPH, and together with Columbia Propane and CPLP, the
Company Parties), AmeriGas Partners, AmeriGas OLP and the General Partner (together with
AmeriGas Partners and AmeriGas OLP, the Buyer Parties). As a result of the 2001
Acquisition, AmeriGas OLP acquired all of the stock of Columbia Propane and CPH and
substantially all of the partnership interests of CPLP. Under the terms of an earlier
acquisition agreement (the 1999 Acquisition Agreement), the Company Parties agreed to
indemnify the former general partners of National Propane Partners, L.P. (a predecessor
company of the Columbia Propane businesses) and an affiliate (collectively, National
General Partners) against certain income tax and other losses that they may sustain as a
result of the 1999
acquisition by CPLP of National Propane Partners, L.P. (the 1999 Acquisition) or the operation of the business after the 1999 Acquisition (National Claims). At December 31,
2006, the potential amount payable under this indemnity by the Company Parties was
approximately $58,000. These indemnity obligations will expire on the date that CPH acquires
the remaining outstanding partnership interest of CPLP, which is expected to occur on or
after July 19, 2009. |
-7-
-8-
-9-
-10-
Increase | ||||||||||||||||
Three Months Ended December 31, | 2006 | 2005 | (Decrease) | |||||||||||||
(millions of dollars) | ||||||||||||||||
Gallons sold (millions): |
||||||||||||||||
Retail |
282.9 | 291.9 | (9.0 | ) | (3.1 | )% | ||||||||||
Wholesale |
34.6 | 38.2 | (3.6 | ) | (9.4 | )% | ||||||||||
317.5 | 330.1 | (12.6 | ) | (3.8 | )% | |||||||||||
Revenues: |
||||||||||||||||
Retail propane |
$ | 531.5 | $ | 543.2 | $ | (11.7 | ) | (2.2 | )% | |||||||
Wholesale propane |
38.5 | 45.2 | (6.7 | ) | (14.8 | )% | ||||||||||
Other |
46.6 | 41.8 | 4.8 | 11.5 | % | |||||||||||
$ | 616.6 | $ | 630.2 | $ | (13.6 | ) | (2.2 | )% | ||||||||
Total margin (a) |
$ | 227.9 | $ | 222.4 | $ | 5.5 | 2.5 | % | ||||||||
EBITDA (b) |
$ | 93.1 | $ | 92.2 | $ | 0.9 | 1.0 | % | ||||||||
Operating income |
$ | 75.3 | $ | 74.7 | $ | 0.6 | 0.8 | % | ||||||||
Net income |
$ | 55.6 | $ | 55.0 | $ | 0.6 | 1.1 | % | ||||||||
Heating degree days % warmer than normal (c) |
8.6 | 4.1 | | |
(a) | Total margin represents total revenues less cost of sales propane and cost of sales
other. |
|
(b) | EBITDA (earnings before interest expense, income taxes, depreciation and amortization) should
not be considered as an alternative to net income (as an indicator of operating performance)
or as an alternative to cash flow (as a measure of liquidity or ability to service debt
obligations) and is not a measure of performance or financial condition under accounting
principles generally accepted in the United States of America (GAAP). Management believes
EBITDA is a meaningful non-GAAP financial measure used by investors to compare the
Partnerships operating performance with that of other companies within the propane industry
and to evaluate the Partnerships ability to meet loan covenants. The Partnerships
definition of EBITDA may be different from that used by other companies. Weather
significantly impacts demand for propane and profitability because many customers use propane
for heating purposes. Due to the seasonal nature of the Partnerships propane business,
EBITDA for interim periods is not necessarily indicative of amounts to be expected for a full
year. |
|
The following table includes reconciliations of net income to EBITDA for the periods presented: |
Three Months Ended | ||||||||
December 31, | ||||||||
2006 | 2005 | |||||||
Net income |
$ | 55.6 | $ | 55.0 | ||||
Income tax expense |
0.9 | 0.1 | ||||||
Interest expense |
18.0 | 18.9 | ||||||
Depreciation |
17.6 | 16.9 | ||||||
Amortization |
1.0 | 1.3 | ||||||
EBITDA |
$ | 93.1 | $ | 92.2 | ||||
(c) | Deviation from average heating degree days based upon national weather statistics provided
by the National Oceanic and Atmospheric Administration (NOAA) for 335 airports in the United
States, excluding Alaska. |
-11-
-12-
-13-
-14-
Fair | Change in | |||||||
Value | Fair Value | |||||||
(Millions of dollars) | ||||||||
December 31, 2006: |
||||||||
Propane commodity price risk |
$ | (25.6 | ) | $ | (14.4 | ) | ||
Interest rate risk |
(0.6 | ) | (4.3 | ) |
(a) | Evaluation of Disclosure Controls and Procedures |
|
The Partnerships management, with the participation of the Partnerships Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of the Partnerships
disclosure controls and procedures as of the end of the period covered by this report.
Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Partnerships disclosure controls and procedures as of the end of the period
covered by this report were designed and functioning effectively to provide reasonable
assurance that the information required to be disclosed by the Partnership in reports filed
under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange
Commissions rules and forms, and
(ii) accumulated and communicated to our management, including the Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. |
||
(b) | Change in Internal Control over Financial Reporting |
|
No change in the Partnerships internal control over financial reporting occurred during the
Partnerships most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Partnerships internal control over financial reporting. |
-15-
Exhibit No. | Exhibit | Registrant | Filing | Exhibit | ||||||
10.1
|
Credit Agreement dated as of November 6, 2006 among AmeriGas Propane, L.P., as Borrower, AmeriGas Propane, Inc., as Guarantor, Petrolane Incorporated, as Guarantor, Citigroup Global Markets Inc., as Syndication Agent, J.P. Morgan Securities, Inc. and Credit Suisse First Securities (USA) LLC, as Co- Documentation Agents, Wachovia Bank, National Association, as Agent, Issuing Bank and Swing Line Bank, and the other financial institutions party thereto | AmeriGas Partners, L.P. | Form 8-K (11/6/06) |
10.1 | ||||||
10.2
|
Restricted Subsidiary Guarantee by the Restricted Subsidiaries of AmeriGas Propane, L.P., as Guarantors, for the benefit of Wachovia Bank, National Association and the Banks dated as of November 6, 2006 | AmeriGas Partners, L.P. | Form 10-K (9/30/06) |
10.2 |
-16-
Exhibit No. | Exhibit | Registrant | Filing | Exhibit | ||||||
10.3
|
Release of Liens and Termination of Security Documents dated November 6, 2006 by and among AmeriGas Propane, Inc., Petrolane Incorporated, AmeriGas Propane, L.P., AmeriGas Propane Parts & Service, Inc. and Wachovia Bank, National Association, as Collateral Agent for the Secured Creditors, pursuant to the Intercreditor and Agency Agreement dated as of April 19, 1995 | AmeriGas Partners, L.P. | Form 10-K (9/30/06) |
10.3 | ||||||
31.1
|
Certification by the Chief Executive Officer relating to the Registrants Report on Form 10-Q for the quarter ended December 31, 2006, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||||
31.2
|
Certification by the Chief Financial Officer relating to the Registrants Report on Form 10-Q for the quarter ended December 31, 2006, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||||
32
|
Certification by the Chief Executive Officer and the Chief Financial Officer relating to the Registrants Report on Form 10-Q for the quarter ended December 31, 2006, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
-17-
AmeriGas Partners, L.P. (Registrant) |
||||
By: | AmeriGas Propane, Inc., | |||
as General Partner |
Date: February 8, 2007 | By: | /s/ Jerry E. Sheridan | ||
Jerry E. Sheridan | ||||
Vice President Finance and Chief Financial Officer |
||||
Date: February 8, 2007 | By: | /s/ William J.Stanczak | ||
William J. Stanczak | ||||
Controller and Chief Accounting Officer | ||||
-18-
31.1 | Certification by the Chief Executive Officer relating to the Registrants Report on
Form 10-Q for the quarter ended December 31, 2006, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
31.2 | Certification by the Chief Financial Officer relating to the Registrants Report on
Form 10-Q for the quarter ended December 31, 2006, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
32 | Certification by the Chief Executive Officer and the Chief Financial Officer relating
to the Registrants Report on Form 10-Q for the quarter ended December 31, 2006, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. |