FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
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 1-13692
Commission file number 33-92734-01
Commission file number 333-72986-02
Commission file number 333-72986-01
AMERIGAS PARTNERS, L.P.
AMERIGAS FINANCE CORP.
AMERIGAS EAGLE FINANCE CORP.
AP EAGLE FINANCE CORP.
(Exact name of registrants as specified in their charters)
Delaware 23-2787918
Delaware 23-2800532
Delaware 23-3074434
Delaware 23-3077318
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
460 North Gulph Road, King of Prussia, PA 19406
(Address of principal executive offices) (Zip Code)
(610) 337-7000
(Registrants' telephone number, including area code)
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 past 90 days. Yes X No
--- ---
At April 30, 2002, the registrants had units and shares of common
stock outstanding as follows:
AmeriGas Partners, L.P. - 39,539,286 Common Units
9,891,072 Subordinated Units
AmeriGas Finance Corp. - 100 shares
AmeriGas Eagle Finance Corp. - 100 shares
AP Eagle Finance Corp. - 100 shares
AMERIGAS PARTNERS, L.P.
TABLE OF CONTENTS
PAGES
-----
PART I FINANCIAL INFORMATION
Item 1.Financial Statements
AmeriGas Partners, L.P.
-----------------------
Condensed Consolidated Balance Sheets as of March 31, 2002,
September 30, 2001 and March 31, 2001 1
Condensed Consolidated Statements of Operations for the three, six
and twelve months ended March 31, 2002 and 2001 2
Condensed Consolidated Statements of Cash Flows for the six
and twelve months ended March 31, 2002 and 2001 3
Condensed Consolidated Statement of Partners' Capital for the
six months ended March 31, 2002 4
Notes to Condensed Consolidated Financial Statements 5 - 11
AmeriGas Finance Corp.
----------------------
Balance Sheets as of March 31, 2002 and September 30, 2001 12
Note to Balance Sheets 13
AmeriGas Eagle Finance Corp.
----------------------------
Balance Sheets as of March 31, 2002 and September 30, 2001 14
Note to Balance Sheets 15
AP Eagle Finance Corp.
----------------------
Balance Sheets as of March 31, 2002 and September 30, 2001 16
Note to Balance Sheets 17
-i-
AMERIGAS PARTNERS, L.P.
TABLE OF CONTENTS (CONTINUED)
PAGES
-----
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 18 - 25
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25 - 26
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 28 - 29
-ii-
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
March 31, September 30, March 31,
2002 2001 2001
------------- ------------- -------------
ASSETS
------
Current assets:
Cash and cash equivalents $ 66,211 $ 32,489 $ 13,909
Accounts receivable (less allowances for doubtful accounts
of $13,071, $10,792 and $11,240, respectively) 149,322 102,392 193,824
Accounts receivable - related parties 1,624 3,352 316
Inventories 54,650 73,072 67,534
Prepaid expenses and other current assets 19,940 18,955 15,477
------------- ------------- -------------
Total current assets 291,747 230,260 291,060
Property, plant and equipment (less accumulated depreciation and
amortization of $377,680, $347,898 and $323,855, respectively) 619,976 627,640 449,205
Goodwill and excess reorganization value 589,924 589,878 602,864
Intangible assets (less accumulated amortization of $7,185,
$5,364 and $4,317, respectively) 25,085 26,870 6,813
Other assets 21,621 21,774 11,073
------------- ------------- -------------
Total assets $ 1,548,353 $ 1,496,422 $ 1,361,015
============= ============= =============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Current liabilities:
Current maturities of long-term debt $ 64,455 $ 87,178 $ 65,781
Bank loans - - 17,000
Accounts payable - trade 93,658 73,692 92,679
Accounts payable - related parties 1,155 3,623 2,926
Customer deposits and advances 22,571 48,540 14,413
Other current liabilities 89,305 112,657 68,607
------------- ------------- -------------
Total current liabilities 271,144 325,690 261,406
Long-term debt 901,265 918,726 788,376
Other noncurrent liabilities 41,621 42,860 38,311
Commitments and contingencies (note 7)
Minority interests 6,867 5,641 3,744
Partners' capital 327,456 203,505 269,178
------------- ------------- -------------
Total liabilities and partners' capital $ 1,548,353 $ 1,496,422 $ 1,361,015
============= ============= =============
See accompanying notes to consolidated financial statements.
-1-
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Thousands of dollars, except per unit)
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
--------------------- --------------------- ------------------------
2002 2001 2002 2001 2002 2001
---------- ---------- ---------- ---------- ------------ -----------
Revenues:
Propane $432,986 $534,643 $772,134 $940,003 $1,155,065 $1,326,927
Other 27,136 22,809 59,373 49,917 104,886 93,125
---------- ---------- ---------- ---------- ------------ -----------
460,122 557,452 831,507 989,920 1,259,951 1,420,052
---------- ---------- ---------- ---------- ------------ -----------
Costs and expenses:
Cost of sales - propane 211,231 334,743 394,118 588,295 603,989 824,550
Cost of sales - other 10,122 8,682 23,670 19,905 41,574 37,877
Operating and administrative expenses 119,629 102,203 235,497 195,975 419,515 357,159
Depreciation and amortization 16,488 18,403 32,674 36,706 70,728 71,341
Other (income), net (1,992) (1,259) (1,076) (2,482) (4,748) (7,638)
---------- ---------- ---------- ---------- ------------ -----------
355,478 462,772 684,883 838,399 1,131,058 1,283,289
---------- ---------- ---------- ---------- ------------ -----------
Operating income 104,644 94,680 146,624 151,521 128,893 136,763
Interest expense (22,011) (19,855) (44,757) (39,844) (85,309) (78,593)
---------- ---------- ---------- ---------- ------------ -----------
Income before income taxes 82,633 74,825 101,867 111,677 43,584 58,170
Income tax (expense) benefit 322 460 (216) 405 (294) 415
Minority interests (966) (788) (1,265) (1,185) (786) (698)
---------- ---------- ---------- ---------- ------------ -----------
Income before accounting changes 81,989 74,497 100,386 110,897 42,504 57,887
Cumulative effect of accounting changes - - - 12,494 - 12,494
---------- ---------- ---------- ---------- ------------ -----------
Net income $ 81,989 $ 74,497 $100,386 $123,391 $ 42,504 $ 70,381
========== ========== ========== ========== ============ ===========
General partner's interest in net income $ 820 $ 745 $ 1,004 $ 1,234 $ 425 $ 704
========== ========== ========== ========== ============ ===========
Limited partners' interest in net income $ 81,169 $ 73,752 $ 99,382 $122,157 $ 42,079 $ 69,677
========== ========== ========== ========== ============ ===========
Income per limited partner unit - basic and diluted:
Income before accounting changes $ 1.64 $ 1.67 $ 2.05 $ 2.49 $ 0.90 $ 1.33
Cumulative effect of accounting changes - - - 0.28 - 0.29
---------- ---------- ---------- ---------- ------------ -----------
Net income $ 1.64 $ 1.67 $ 2.05 $ 2.77 $ 0.90 $ 1.62
========== ========== ========== ========== ============ ===========
Average limited partner units outstanding:
Basic 49,385 44,295 48,385 44,076 46,600 43,020
========== ========== ========== ========== ============ ===========
Diluted 49,493 44,295 48,476 44,076 46,645 43,020
========== ========== ========== ========== ============ ===========
See accompanying notes to consolidated financial statements.
-2-
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Thousands of dollars)
Six Months Ended Twelve Months Ended
March 31, March 31,
----------------------- ------------------------
2002 2001 2002 2001
---------- ----------- ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 100,386 $ 123,391 $ 42,504 $ 70,381
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of accounting changes - (12,494) - (12,494)
Depreciation and amortization 32,674 36,706 70,728 71,341
Other, net 4,675 2,665 4,930 (229)
Net change in:
Accounts receivable (48,402) (102,237) 58,728 (77,366)
Inventories 18,422 (2,023) 24,083 (15,717)
Accounts payable 17,498 18,687 (6,700) 30,173
Other current assets and liabilities (33,693) (21,134) 6,737 1,022
---------- ----------- ---------- -----------
Net cash provided by operating activities 91,560 43,561 201,010 67,111
---------- ----------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (26,787) (18,761) (45,916) (36,330)
Proceeds from disposals of assets 4,137 1,927 7,557 7,530
Acquisitions of businesses, net of cash acquired - (147) (205,424) (40,954)
---------- ----------- ---------- -----------
Net cash used by investing activities (22,650) (16,981) (243,783) (69,754)
---------- ----------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (53,574) (49,218) (102,791) (95,851)
Minority interest activity (245) (139) 2,268 (666)
Increase (decrease) in bank loans - (13,000) (17,000) 12,000
Issuance of long-term debt - - 252,833 70,000
Repayment of long-term debt (38,496) (1,352) (147,911) (13,459)
Proceeds from issuance of Common Units 56,556 39,836 56,556 39,836
Proceeds from sale of AmeriGas OLP interest - - 50,000 -
Capital contributions from General Partner 571 407 1,120 407
---------- ----------- ---------- -----------
Net cash (used) provided by financing activities (35,188) (23,466) 95,075 12,267
---------- ----------- ---------- -----------
Cash and cash equivalents increase $ 33,722 $ 3,114 $ 52,302 $ 9,624
========== =========== ========== ===========
CASH AND CASH EQUIVALENTS:
End of period $ 66,211 $ 13,909 $ 66,211 $ 13,909
Beginning of period 32,489 10,795 13,909 4,285
---------- ----------- ---------- -----------
Increase (decrease) $ 33,722 $ 3,114 $ 52,302 $ 9,624
========== =========== ========== ===========
See accompanying notes to consolidated financial statements.
-3-
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(unaudited)
(Thousands, except unit data)
Accumulated
Number of units other Total
--------------------------- General comprehensive partners'
Common Subordinated Common Subordinated partner income (loss) capital
------------- ------------ -------- ------------ -------- ------------- ------------
BALANCE SEPTEMBER 30, 2001 36,761,239 9,891,072 $ 187,001 $ 28,513 $ 2,174 $ (14,183) $ 203,505
Net income 79,371 20,011 1,004 100,386
Net loss on derivative instruments (11,680) (11,680)
Reclassification adjustment for net
losses on derivative instruments
included in net income 31,692 31,692
------------- ------------
Comprehensive income 20,012 120,398
Distributions (42,158) (10,880) (536) (53,574)
Common Units issued in connection
with public offering 2,428,047 49,623 501 50,124
Common Units sold to General Partner 350,000 6,933 70 7,003
------------- ---------- ----------- ----------- -------- ------------- ------------
BALANCE MARCH 31, 2002 39,539,286 9,891,072 $ 280,770 $ 37,644 $ 3,213 $ 5,829 $ 327,456
============= ========== =========== =========== ======== ============= ============
See accompanying notes to consolidated financial statements.
-4-
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Thousands of dollars, except per unit)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts
of AmeriGas Partners, L.P. ("AmeriGas Partners"), its principal
operating subsidiaries AmeriGas Propane, L.P. ("AmeriGas OLP") and
AmeriGas OLP's subsidiary, AmeriGas Eagle Propane, L.P. ("Eagle OLP"),
and their subsidiaries. AmeriGas OLP and Eagle OLP are collectively
referred to herein as "the Operating Partnerships." AmeriGas Partners,
the Operating Partnerships and 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
Partner's") 1.01% interest in AmeriGas OLP and an unrelated third
party's 0.1% limited partner interest in Eagle OLP as minority
interests in the condensed consolidated financial statements.
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. 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, 2001 ("2001
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 Partnership's propane business, the
results of operations for interim periods are not necessarily
indicative of the results to be expected for a full year.
Potentially dilutive units included in diluted average limited partner
units outstanding comprise restricted Common Units issuable under
incentive award plans.
The following table presents the components of comprehensive income
for the three and six months ended March 31, 2002 and 2001:
Three Months Ended Six Months Ended
March 31, March 31,
2002 2001 2002 2001
----------------------------------------------------------------------------------------
Net income $ 81,989 $ 74,497 $ 100,386 $ 123,391
Other comprehensive income (loss) 25,755 (22,582) 20,012 (1,667)
----------------------------------------------------------------------------------------
Comprehensive income $ 107,744 $ 51,915 $ 120,398 $ 121,724
----------------------------------------------------------------------------------------
Other comprehensive income (loss) is principally the result of changes
in the fair value of propane commodity derivative instruments and
interest rate protection agreements, net of reclassification
adjustments for net gains and losses included in net income.
-5-
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
2. ACQUISITION OF COLUMBIA PROPANE
On August 21, 2001, AmeriGas Partners, through AmeriGas OLP, acquired
the propane distribution businesses of Columbia Energy Group
("Columbia Propane Businesses") in a series of equity and asset
purchases pursuant to the terms of the Purchase Agreement dated
January 30, 2001 and Amended and Restated August 7, 2001 ("Columbia
Purchase Agreement") by and among Columbia Energy Group ("CEG"),
Columbia Propane Corporation ("Columbia Propane"), Columbia Propane,
L.P. ("CPLP"), CP Holdings, Inc. ("CPH"), AmeriGas Partners, AmeriGas
OLP, and the General Partner. The acquired businesses comprised the
seventh largest retail marketer of propane in the United States with
annual sales of over 300 million gallons from locations in 29 states.
The acquired businesses were principally conducted through Columbia
Propane and its approximate 99% owned subsidiary, CPLP (referred to
after the acquisition as "Eagle OLP"). AmeriGas OLP acquired
substantially all of the assets of Columbia Propane, including an
indirect 1% general partner interest and an approximate 99% limited
partnership interest in Eagle OLP.
The purchase price of the Columbia Propane Businesses consisted of
$201,750 in cash. In addition, AmeriGas OLP agreed to pay CEG for the
amount of working capital, as defined, in excess of $23,000. The
Columbia Purchase Agreement also provided for the purchase by CEG of
limited partnership interests in AmeriGas OLP valued at $50,000 for
$50,000 in cash, which interests were exchanged for 2,356,953 Common
Units of AmeriGas Partners having an estimated fair value of $54,422.
Concurrently with the acquisition, AmeriGas Partners issued $200,000
of 8.875% Senior Notes due 2011, the net proceeds of which were
contributed to AmeriGas OLP to finance the acquisition of the Columbia
Propane Businesses, to fund related fees and expenses, and to repay
debt outstanding under AmeriGas OLP's Bank Credit Agreement.
The following table identifies the components of the purchase price:
--------------------------------------------------------------------------------
Cash paid $ 201,750
Cash received from sale of AmeriGas OLP limited partner interests (50,000)
Fair value of AmeriGas Partners' Common Units issued in exchange
for the AmeriGas OLP limited partner interests 54,422
Transaction costs and expenses 6,968
Involuntary employee termination benefits and relocation costs 5,363
Other liabilities and obligations assumed 6,107
--------------------------------------------------------------------------------
$ 224,610
--------------------------------------------------------------------------------
-6-
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
The purchase price of the Columbia Propane Businesses has been
preliminarily allocated to the assets acquired and liabilities assumed
as follows:
----------------------------------------------------------------------------------
Working capital $ 23,230
Property, plant and equipment 181,386
Customer relationships and noncompete agreement (estimated useful life
of 15 and 5 years, respectively) 20,986
Other assets and liabilities (992)
----------------------------------------------------------------------------------
Total $ 224,610
----------------------------------------------------------------------------------
In April 2002, subsequent to the end of the quarter, the Partnership's
management and Columbia Energy Group agreed upon the amount of working
capital acquired by AmeriGas OLP and AmeriGas OLP made an additional
payment for working capital of $1,326. The Partnership is currently in
the process of completing the review and determination of the fair value
of the Columbia Propane Businesses' assets acquired and liabilities
assumed, principally the fair values of property, plant and equipment
and identifiable intangible assets. The final allocation of the purchase
price is not expected to differ materially from the preliminary
allocation. The operating results of the Columbia Propane Businesses are
included in our consolidated results from August 21, 2001.
The following table presents unaudited pro forma income statement and
per unit data for the six months ended March 31, 2001 as if the
acquisition of the Columbia Propane Businesses had occurred as of
October 1, 2000:
Six Months Ended
March 31, 2001
--------------------------------------------------------------------------------
Revenues $ 1,279,699
Income before accounting changes $ 140,662
Net income $ 153,156
Income per limited partner unit - basic and diluted:
Income before accounting changes $ 3.00
Net income $ 3.27
--------------------------------------------------------------------------------
The pro forma results of operations reflect the Columbia Propane
Businesses' historical operating results after giving effect to
adjustments directly attributable to the transaction that are expected
to have a continuing impact. They are not adjusted for, among other
things, the impact of normal weather conditions, operating synergies and
anticipated cost savings. In our opinion, the unaudited pro forma
results are not necessarily indicative of the actual results that would
have occurred had the acquisition of the Columbia Propane Businesses
occurred as of the beginning of the period presented or of future
operating results under our management.
-7-
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
3. ADOPTION OF SFAS NO. 142
Effective October 1, 2001, we adopted the provisions of SFAS No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142
addresses the financial accounting and reporting for acquired goodwill
and other intangible assets and supersedes Accounting Principles Board
("APB") Opinion No. 17, "Intangible Assets." SFAS 142 addresses the
financial accounting and reporting for intangible assets acquired
individually or with a group of other assets (excluding those acquired
in a business combination) at acquisition and also addresses the
financial accounting and reporting for goodwill and other intangible
assets subsequent to their acquisition. Under SFAS 142, an intangible
asset is amortized over its useful life unless that life is determined
to be indefinite. Goodwill, including excess reorganization value, and
other intangible assets with indefinite lives are not amortized but
are subject to tests for impairment at least annually. In accordance
with the provisions of SFAS 142, the Partnership ceased the
amortization of goodwill and excess reorganization value effective
October 1, 2001.
The Partnership's intangible assets comprise the following:
-----------------------------------------------------------------------------------------------
March 31, 2002 September 30, 2001
--------------------------- ---------------------------------
Gross Carrying Accumulated Gross Carrying Accumulated
Amount Amortization Amount Amortization
-----------------------------------------------------------------------------------------------
Subject to amortization:
Customer relationships and
noncompete agreements $ 32,270 $ (7,185) $ 32,234 $ (5,364)
Not subject to amortization:
Goodwill $ 496,604 $ 496,558
Excess reorganization value 93,320 93,320
-----------------------------------------------------------------------------------------------
$ 589,924 $ 589,878
-----------------------------------------------------------------------------------------------
Amortization expense of intangible assets for the three and six months
ended March 31, 2002 was $910 and $1,821, respectively. Amortization
expense of intangible assets for the three and six months ended March
31, 2001, including amortization of goodwill and excess reorganization
value prior to the adoption of SFAS 142, was $6,416 and $12,817,
respectively. Our expected aggregate amortization expense of
intangible assets for the next five fiscal years is as follows: Fiscal
2002 - $3,367; Fiscal 2003 - $2,969; Fiscal 2004 - $2,857; Fiscal 2005
- $2,624; Fiscal 2006 - $2,138.
-8-
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
The following table reflects adjusted net income and net income per
limited partner unit as if SFAS 142 had been effective as of October
1, 2000:
----------------------------------------------------------------------------------------------
Three Months Six Months
Ended March 31, Ended March 31,
----------------------------------------------------------------------------------------------
2002 2001 2002 2001
----------------------------------------------------------------------------------------------
NET INCOME:
Reported income before accounting changes $ 81,989 $ 74,497 $ 100,386 $ 110,897
Add back goodwill and excess reorganization value
amortization, net of adjustment to minority
interest - 5,896 - 11,784
----------------------------------------------------------------------------------------------
Adjusted income before accounting changes 81,989 80,393 100,386 122,681
Cumulative effect of accounting changes - - - 12,494
----------------------------------------------------------------------------------------------
Adjusted net income $ 81,989 $ 80,393 $ 100,386 $ 135,175
----------------------------------------------------------------------------------------------
INCOME PER LIMITED PARTNER UNIT - BASIC AND DILUTED:
Reported income before accounting changes $ 1.64 $ 1.67 $ 2.05 $ 2.49
Add back goodwill and excess reorganization value
amortization, net of adjustment to minority
interest - 0.13 - 0.27
----------------------------------------------------------------------------------------------
Adjusted income before accounting changes 1.64 1.80 2.05 2.76
Cumulative effect of accounting changes - - - 0.28
----------------------------------------------------------------------------------------------
Adjusted net income $ 1.64 $ 1.80 $ 2.05 $ 3.04
----------------------------------------------------------------------------------------------
In accordance with the provisions of SFAS 142, we are required to
perform a transitional goodwill impairment test within six months of
the date of adoption. Thereafter, we will perform the impairment test
annually and whenever events or circumstances indicate that the value
of goodwill might be impaired. In connection with these goodwill
impairment tests, SFAS 142 prescribes a two-step method for
determining goodwill impairment. In the first step, we determine the
fair value of the Partnership. To the extent the net book value of the
Partnership exceeds its fair value, we would then perform the second
step of the transitional impairment test which requires allocation of
the Partnership's fair value to all of its assets and liabilities in a
manner similar to a purchase price allocation, with any residual fair
value being allocated to goodwill.
We have completed the transitional impairment test and have determined
that based upon the fair value of the Partnership, goodwill and excess
reorganization value was not impaired as of October 1, 2001.
4. CHANGES IN ACCOUNTING
Tank Fee Revenue Recognition. In order to comply with the provisions
of SEC Staff Accounting Bulletin No. 101 entitled "Revenue
Recognition," effective October 1, 2000, we changed our method of
accounting for annually billed nonrefundable tank fees. Prior
-9-
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
to the change, nonrefundable tank fees for installed Partnership-owned
tanks were recorded as revenue when billed. Under the new accounting
method, revenues from such fees are recorded on a straight-line basis
over one year. As a result of the new accounting method, on October 1,
2000, we recorded a charge of $5,984 representing the cumulative
effect of the change in accounting method on prior years. The change
in accounting method for nonrefundable tank fees did not have a
material impact on reported revenues for the periods presented.
Accounting for Tank Installation Costs. Effective October 1, 2000, we
changed our method of accounting for tank installation costs which are
not billed to customers. Prior to the change in accounting method, all
such costs to install Partnership-owned tanks at a customer location
were expensed as incurred. Under the new accounting method, all such
costs, net of amounts billed to customers, are capitalized and
amortized over the estimated period of benefit not exceeding ten
years. We believe that the new accounting method better matches the
costs of installing Partnership-owned tanks with the periods
benefited. As a result of this change in accounting, on October 1,
2000, we recorded increases of $19,214 in property, plant and
equipment and net income representing the cumulative effect of the
change in accounting method on prior years.
Cumulative Effect of Accounting Changes and Pro Forma Disclosure. The
cumulative effect impact of these accounting changes reflected on the
Condensed Consolidated Statement of Operations for the six months
ended March 31, 2001 and related per limited partner unit amounts, as
well as the cumulative effect from the adoption of SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities,"
comprise the following:
-----------------------------------------------------------
Cumulative Per Limited
Effect Partner Unit
-----------------------------------------------------------
Tank fees $ (5,984) $ (0.13)
Tank installation costs 19,214 0.43
SFAS 133 (736) (0.02)
-----------------------------------------------------------
Total $ 12,494 $ 0.28
-----------------------------------------------------------
Pro forma net income and net income per unit for the twelve months
ended March 31, 2001 adjusted to reflect the full-year impact of the
change in accounting for tank installation costs and tank fees are not
materially different than reported amounts
5. RELATED PARTY TRANSACTIONS
Pursuant to the Agreement of Limited Partnership of AmeriGas Partners
and a Management Services Agreement between 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
-10-
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
of the Partnership. These costs totaled $68,863, $137,688 and $250,235
during the three, six and twelve months ended March 31, 2002,
respectively, and $57,208, $112,585 and $201,249 during the three, six
and twelve months ended March 31, 2001, respectively. In addition, UGI
Corporation ("UGI") provides certain financial and administrative
services to the General Partner. UGI bills the General Partner for
these direct and indirect corporate expenses and the General Partner
is reimbursed by the Partnership for these expenses. Such corporate
expenses totaled $1,939, $3,139, and $5,937 during the three, six and
twelve months ended March 31, 2002, respectively, and $1,341, $2,478
and $4,556 during the three, six and twelve months ended March 31,
2001, respectively. In addition, the Partnership advances funds to
Atlantic Energy, Inc. for the purchase of propane. Such advances
totaled $717 at March 31, 2002 and are included in accounts receivable
- related parties.
6. ISSUANCE OF COMMON UNITS
On October 5, 2001, AmeriGas Partners sold 350,000 Common Units to the
General Partner at a market price of $19.81 per unit. The proceeds of
this sale and related capital contributions from the General Partner
totaling $7,075 were contributed to AmeriGas OLP and used to reduce
Bank Credit Agreement borrowings and for working capital.
On December 11, 2001, AmeriGas Partners sold 1,843,047 Common Units in
an underwritten public offering at a public offering price of $21.50
per unit. On January 8, 2002, the underwriters partially exercised
their overallotment option in the amount of 585,000 Common Units. The
remainder of the overallotment option has expired. The net proceeds of
the public offering and related capital contributions from the General
Partner totaling $50,635 were contributed to AmeriGas OLP and used for
working capital.
7. COMMITMENTS AND CONTINGENCIES
There have been no significant developments relating to the
commitments and contingencies reported in the Partnership's 2001
Annual Report.
-11-
AMERIGAS FINANCE CORP.
(a wholly owned subsidiary of AmeriGas Partners, L.P.)
BALANCE SHEETS
(unaudited)
March 31, September 30,
2002 2001
--------------- ---------------
ASSETS
------
Cash $ 1,000 $ 1,000
--------------- ---------------
Total assets $ 1,000 $ 1,000
=============== ===============
STOCKHOLDER'S EQUITY
--------------------
Common stock, $.01 par value; 100 shares authorized,
issued and outstanding $ 1 $ 1
Additional paid-in capital 999 999
--------------- ---------------
Total stockholder's equity $ 1,000 $ 1,000
=============== ===============
See accompanying note to balance sheets.
-12-
AMERIGAS FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.)
NOTE TO BALANCE SHEETS
AmeriGas Finance Corp. (AmeriGas Finance), a Delaware corporation, was formed on
March 13, 1995 and is a wholly owned subsidiary of AmeriGas Partners, L.P.
(AmeriGas Partners).
On April 19, 1995, AmeriGas Partners issued $100,000,000 face value of 10.125%
Senior Notes due April 2007. AmeriGas Finance serves as a co-obligor of these
notes.
AmeriGas Partners owns all 100 shares of AmeriGas Finance common stock
outstanding.
-13-
AMERIGAS EAGLE FINANCE CORP.
(a wholly owned subsidiary of AmeriGas Partners, L.P.)
BALANCE SHEETS
(unaudited)
March 31, September 30,
2002 2001
-------------- --------------
ASSETS
------
$ 1,000 $ 1,000
-------------- --------------
Cash $ 1,000 $ 1,000
============== ==============
Total assets
STOCKHOLDER'S EQUITY
--------------------
Common stock, without par value; 100 shares authorized,
issued and outstanding $ - $ -
Additional paid-in capital 1,000 1,000
-------------- --------------
Total stockholder's equity $ 1,000 $ 1,000
============== ==============
See accompanying note to balance sheets.
-14-
AMERIGAS EAGLE FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.)
NOTE TO BALANCE SHEETS
AmeriGas Eagle Finance Corp. (Eagle Finance), a Delaware corporation, was formed
on February 22, 2001 and is a wholly owned subsidiary of AmeriGas Partners, L.P.
(AmeriGas Partners).
On April 4, 2001, AmeriGas Partners issued $60,000,000 face value of 10% Senior
Notes due April 2006. Eagle Finance serves as a co-obligor of these notes.
AmeriGas Partners owns all 100 shares of Eagle Finance common stock outstanding.
-15-
AP EAGLE FINANCE CORP.
(a wholly owned subsidiary of AmeriGas Partners, L.P.)
BALANCE SHEETS
(unaudited)
March 31, September 30,
2002 2001
-------------- --------------
ASSETS
------
$ 1,000 $ 1,000
-------------- --------------
Cash $ 1,000 $ 1,000
============== ==============
Total assets
STOCKHOLDER'S EQUITY
--------------------
Common stock, without par value; 100 shares authorized,
issued and outstanding $ - $ -
Additional paid-in capital 1,000 1,000
-------------- --------------
Total stockholder's equity $ 1,000 $ 1,000
============== ==============
See accompanying note to balance sheets.
-16-
AP EAGLE FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.)
NOTE TO BALANCE SHEETS
AP Eagle Finance Corp. (AP Eagle Finance), a Delaware corporation, was formed on
April 12, 2001 and is a wholly owned subsidiary of AmeriGas Partners, L.P.
(AmeriGas Partners).
On August 21, 2001, AmeriGas Partners issued $200,000,000 face value of 8.875%
Senior Notes due May 2011. On May 3, 2002, AmeriGas Partners issued an
additional $40,000,000 face value of 8.875% Senior Notes due May 2011. AP Eagle
Finance serves as a co-obligor of these notes.
AmeriGas Partners owns all 100 shares of AP Eagle Finance common stock
outstanding.
-17-
AMERIGAS PARTNERS, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following analyses compare the Partnership's results of operations for (1)
the three months ended March 31, 2002 ("2002 three-month period") with the three
months ended March 31, 2001 ("2001 three-month period"); (2) the six months
ended March 31, 2002 ("2002 six-month period") with the six months ended March
31, 2001 ("2001 six-month period"); and (3) the twelve months ended March 31,
2002 ("2002 twelve-month period") with the twelve months ended March 31, 2001
("2001 twelve-month period"). AmeriGas Finance Corp., AmeriGas Eagle Finance
Corp., and AP Eagle Finance Corp. have nominal assets and do not conduct any
operations. Accordingly, discussions of the results of operations and financial
condition and liquidity of these entities are not presented.
2002 THREE-MONTH PERIOD COMPARED WITH 2001 THREE-MONTH PERIOD
-----------------------------------------------------------------------------------------------------------------------------------
Increase
Three Months Ended March 31, 2002 2001 (Decrease)
-----------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars)
Gallons sold (millions):
Retail 346.2 287.9 58.3 20.3 %
Wholesale 86.1 132.4 (46.3) (35.0)%
---------------- ---------------- -----------------
432.3 420.3 12.0 2.9 %
================ ================ =================
Revenues:
Retail propane $ 392.9 430.6 $ (37.7) (8.8)%
Wholesale propane 40.1 104.0 (63.9) (61.4)%
Other 27.1 22.9 4.2 18.3 %
---------------- ---------------- -----------------
$ 460.1 557.5 $ (97.4) (17.5)%
================ ================ =================
Total margin $ 238.8 $ 214.0 $ 24.8 11.6 %
EBITDA (a) $ 121.1 $ 113.1 $ 8.0 7.1 %
Operating income $ 104.6 $ 94.7 $ 9.9 10.5 %
Heating degree days - % (warmer)
than normal (b) (8.5) (0.8) - -
-----------------------------------------------------------------------------------------------------------------------------------
(a) EBITDA (earnings before interest expense, income taxes, depreciation and
amortization, minority interests and the cumulative effect of accounting
changes) 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. EBITDA is included
to provide additional information for evaluating the Partnership's
ability to declare and pay the Minimum Quarterly Distribution. The
Partnership's definition of EBITDA may be different from that used by
other companies.
(b) 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 continental United
States.
-18-
AMERIGAS PARTNERS, L.P.
Based upon national heating degree day data, temperatures in the 2002
three-month period were 8.5% warmer than normal compared to weather that was
0.8% warmer than normal in the 2001 three-month period. Although the
significantly warmer weather adversely affected our heating-related sales
volumes, retail gallons sold increased 58.3 million gallons (20.3%) principally
as a result of the August 21, 2001 acquisition of Columbia Propane.
Additionally, sales to commercial, industrial and motor fuel customers were
negatively impacted by the weaker U.S. economy in the 2002 three-month period.
Retail propane revenues decreased $37.7 million to $392.9 million reflecting a
$125.0 million decrease as a result of lower average selling prices partially
offset by an $87.3 million increase due to the higher retail volumes sold.
Wholesale propane revenues decreased $63.9 million reflecting (1) a $27.6
million decrease resulting from lower average selling prices and (2) a $36.3
million decrease as a result of lower wholesale volumes sold. The lower retail
and wholesale selling prices reflect significantly lower propane product costs
in the 2002 three-month period. The average wholesale price of propane at Mont
Belvieu, Texas, a major U.S. supply point, was approximately 33 cents per gallon
in the 2002 three-month period compared to 64 cents per gallon in the prior-year
period. Other revenues increased $4.3 million primarily due to the impact of the
Columbia Propane acquisition. Cost of sales decreased $122.1 million reflecting
the previously mentioned lower average propane product costs.
Total margin increased $24.8 million reflecting the impact of the higher retail
propane gallons sold, including greater sales and unit margins from our PPX(R)
cylinder exchange business, and greater margin from ancillary sales and service
income. Average propane unit margins in the 2002 three-month period were lower
than average margins in the prior-year period which benefited from gains on
derivative hedge instruments and favorably priced supply arrangements during a
period of rapidly escalating product costs and market volatility.
EBITDA increased $8.0 million (7.1%) in the 2002 three-month period as the
increase in total margin was offset principally by a $17.4 million increase in
Partnership operating and administrative expenses. The increase in operating
expenses in the current year includes incremental expenses associated with
Columbia Propane's operations partially offset by lower volume-driven costs
including (1) distribution costs; (2) employee-related costs including lower
overtime and incentive compensation costs; and (3) uncollectible accounts
expense. Operating income increased more than the increase in EBITDA principally
due to the elimination of goodwill and excess reorganization value amortization
resulting from the adoption of SFAS 142 on October 1, 2001, partially offset by
higher depreciation and amortization resulting from the Columbia Propane
acquisition. The prior-year three-month period includes $6.0 million of goodwill
and excess reorganization value amortization.
The Partnership's interest expense for the 2002 three-month period increased
$2.2 million primarily due to higher levels of AmeriGas Partners' long-term debt
outstanding primarily related to the Columbia Propane acquisition offset by
lower AmeriGas OLP Bank Credit Agreement borrowings and lower short-term
interest rates.
-19-
AMERIGAS PARTNERS, L.P.
2002 SIX-MONTH PERIOD COMPARED WITH 2001 SIX-MONTH PERIOD
-----------------------------------------------------------------------------------------------------------------------------------
Increase
Six Months Ended March 31, 2002 2001 (Decrease)
-----------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars)
Gallons sold (millions):
Retail 611.8 544.9 66.9 12.3 %
Wholesale 169.3 221.4 (52.1) (23.5)%
---------------- ---------------- -----------------
781.1 766.3 14.8 1.9 %
================ ================ =================
Revenues:
Retail propane $ 691.6 $ 768.3 $ (76.7) (10.0)%
Wholesale propane 80.5 171.7 (91.2) (53.1)%
Other 59.4 49.9 9.5 19.0 %
---------------- ---------------- -----------------
$ 831.5 $ 989.9 $ (158.4) (16.0)%
================ ================ =================
Total margin $ 413.7 $ 381.7 $ 32.0 8.4 %
EBITDA $ 179.3 $ 188.2 $ (8.9) (4.7)%
Operating income $ 146.6 $ 151.5 $ (4.9) (3.2)%
Heating degree days - % (warmer) colder
than normal (11.4) 5.2 - -
-----------------------------------------------------------------------------------------------------------------------------------
Temperatures based upon national heating degree days were 11.4% warmer than
normal in the 2002 six-month period compared to weather that was 5.2% colder
than normal in the 2001 six-month period. According to the National Climatic
Data Center, U.S. weather in the November 2001 to January 2002 period was the
warmest on record. Although the significantly warmer weather and a weak U.S.
economy adversely affected our sales volumes, retail gallons sold increased 66.9
million gallons (12.3%) as a result of the August 21, 2001 acquisition of
Columbia Propane.
Retail propane revenues decreased $76.7 million to $691.6 million reflecting a
$171.0 million decrease as a result of lower average selling prices partially
offset by a $94.3 million increase due to the higher retail volumes sold.
Wholesale propane revenues decreased $91.2 million reflecting (1) a $50.9
million decrease resulting from lower average selling prices and (2) a $40.3
million decrease as a result of lower wholesale volumes sold. The lower retail
and wholesale selling prices reflect significantly lower propane product costs
in the 2002 six-month period. Other revenues increased $9.5 million primarily
due to the impact of the Columbia Propane acquisition. Cost of sales decreased
$190.4 million reflecting the lower average propane product costs.
Total margin increased $32.0 million reflecting the impact of the higher retail
propane gallons sold, including greater sales and margin contribution from
PPX(R), and greater margin from ancillary sales and service income principally
as a result of the Columbia Propane acquisition. Retail propane unit margins
were slightly below last year's unit margins which benefited from derivative
hedge gains and favorably priced supply arrangements during a period of rapidly
escalating product costs and market volatility.
EBITDA decreased $8.9 million (4.7%) in the 2002 six-month period as the
increase in total margin was more than offset by (1) a $39.5 million increase in
Partnership operating and
-20-
AMERIGAS PARTNERS, L.P.
administrative expenses and (2) a $1.4 million decrease in other income. The
increase in operating expenses in the current year includes expenses of Columbia
Propane's operations partially offset by lower volume-driven distribution,
compensation and uncollectible accounts expense. Operating income decreased less
than the decrease in EBITDA principally due to the elimination of goodwill
amortization resulting from the adoption of SFAS 142 on October 1, 2001,
partially offset by higher depreciation and amortization resulting from the
Columbia Propane acquisition. The prior-year six-month period includes $11.9
million of goodwill and excess reorganization value amortization. Other income
decreased $1.4 million including a loss of $0.8 million from the early
redemption of $15 million of AmeriGas Partners Senior Notes.
The Partnership's interest expense for the 2002 six-month period increased $4.9
million primarily due to higher levels of AmeriGas Partners' long-term debt
outstanding primarily related to the Columbia propane acquisition offset by
lower AmeriGas OLP Bank Credit Agreement borrowings and lower short-term
interest rates.
2002 TWELVE-MONTH PERIOD COMPARED WITH 2001 TWELVE-MONTH PERIOD
---------------------------------------------------------------------------------------------------------------------------------
Increase
Twelve Months Ended March 31, 2002 2001 (Decrease)
---------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars)
Gallons sold (millions):
Retail 887.7 815.6 72.1 8.8 %
Wholesale 240.8 336.2 (95.4) (28.4)%
--------------- --------------- ----------------
1,128.5 1,151.8 (23.3) (2.0)%
=============== =============== ================
Revenues:
Retail propane $ 1,031.7 $ 1,084.7 $ (53.0) (4.9)%
Wholesale propane 123.3 242.3 (119.0) (49.1)%
Other 105.0 93.1 11.9 12.8 %
--------------- --------------- ----------------
$ 1,260.0 $ 1,420.1 $ (160.1) (11.3)%
=============== =============== ================
Total margin $ 614.4 $ 557.6 $ 56.8 10.2 %
EBITDA $ 199.6 $ 208.1 $ (8.5) (4.1)%
Operating income $ 128.9 $ 136.8 $ (7.9) (5.8)%
Heating degree days - % (warmer) colder
than normal (11.6) 3.5 - -
---------------------------------------------------------------------------------------------------------------------------------
Temperatures based upon heating degree days were 11.6% warmer than normal during
the 2002 twelve-month period compared to weather that was 3.5% colder than
normal in the 2001 twelve-month period. Retail propane gallons sold increased
72.1 million gallons (8.8%) due to the Columbia Propane acquisition partially
offset by the impact of the warmer 2002 twelve-month period weather and the
slowing U.S. economy.
Total retail propane revenues decreased $53.0 million reflecting a $148.9
million decrease as a result of lower average selling prices partially offset by
a $95.9 million increase as a result of the higher retail volumes sold. The
$119.0 million decrease in wholesale revenues reflects (1) a $68.8 million
decrease as a result of lower volumes sold and (2) a $50.2 million decrease as a
result of lower average wholesale selling prices. Nonpropane revenues increased
$11.9 million to $105.0 million principally as a result of the Columbia Propane
acquisition. Cost of sales
-21-
AMERIGAS PARTNERS, L.P.
decreased $216.9 million as a result of significantly lower average propane
product costs partially offset by the greater retail volumes sold.
Total margin increased $56.8 million due to greater retail volumes sold. Average
propane retail unit margins in the 2002 twelve-month period were slightly higher
than in the prior-year period reflecting, in part, higher PPX(R) volumes and
unit margins.
EBITDA decreased $8.5 million in the 2002 twelve-month period as the increase in
total margin was more than offset by a $62.4 million increase in the
Partnership's operating and administrative expenses and a $2.9 million decline
in other income. The increase in operating and administrative expenses is due in
large part to (1) the impact of acquisitions, principally Columbia Propane, and
growth-related expenses associated with PPX(R); (2) higher distribution expenses
including higher vehicle fuel and maintenance expense; and (3) higher overtime
and incentive compensation costs. Operating income decreased $7.9 million as the
decrease in EBITDA was reduced primarily by lower amortization expense resulting
from the adoption of SFAS 142 on October 1, 2001 partially offset by higher
depreciation expense resulting from the Columbia Propane acquisition. The
decline in other income includes, among others, lower interest and finance
charge income and a decline in the fair value of propane call option contracts.
The Partnership's interest expense for the 2002 twelve-month period increased
$6.7 million due to higher levels of AmeriGas Partners long-term debt
outstanding primarily related to the Columbia Propane acquisition offset by
lower average Bank Credit Agreement borrowings and lower short-term interest
rates.
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION
The Partnership's debt outstanding at March 31, 2002 totaled $965.7 million
(including current maturities of $64.5 million) compared to $1,005.9 million at
September 30, 2001. At March 31, 2002, there were no amounts outstanding under
AmeriGas OLP's Revolving Credit Facility and Acquisition Facility. The
Partnership had cash balances totaling $66.2 million at March 31, 2002 compared
to $32.5 million at September 30, 2001. AmeriGas OLP's Acquisition Facility and
Revolving Credit Facility expire September 15, 2002. The Partnership's
management expects to extend these facilities for an additional year, or amend
and reissue for a longer-term period. In November 2001, AmeriGas Partners
redeemed prior to maturity $15 million face value of its 10.125% Senior Notes at
a redemption price of 103.375%. In April 2002, we repaid $60 million of AmeriGas
OLP maturing First Mortgage Notes with a combination of existing cash balances
and borrowings under our Bank Credit Agreement. On May 3, 2002, AmeriGas
Partners issued $40 million of 8 7/8% Senior Notes at an effective interest rate
of 8.12% and contributed the proceeds to AmeriGas OLP to reduce indebtedness
under its Revolving Credit Facility and for working capital and general business
purposes of AmeriGas OLP.
On October 5, 2001, AmeriGas Partners sold 350,000 Common Units to the General
Partner at a market price of $19.81 per unit. The proceeds of this sale and
related capital contributions from the General Partner totaling $7.1 million
were contributed to AmeriGas OLP and used to reduce Bank
-22-
AMERIGAS PARTNERS, L.P.
Credit Agreement borrowings and for working capital. On December 11, 2001,
AmeriGas Partners sold 1,843,047 Common Units in an underwritten public offering
at a public offering price of $21.50 per unit. On January 8, 2002, the
underwriters partially exercised their overallotment option in the amount of
585,000 Common Units. The remainder of the overallotment option has expired. The
net proceeds of the public offering and related capital contributions from the
General Partner totaling $50.6 million were contributed to AmeriGas OLP and used
to reduce Bank Credit Agreement borrowings and for working capital.
During the six months ended March 31, 2002, the Partnership declared and paid
the minimum quarterly distribution of $0.55 (the "MQD") on all units for the
quarters ended September 30, 2001 and December 31, 2001. The MQD for the quarter
ended March 31, 2002 will be paid on May 18, 2002 to holders of record on May
10, 2002. The ability of the Partnership to pay the MQD on all units depends
upon a number of factors. These factors include (1) the level of Partnership
earnings; (2) the cash needs of the Partnership's operations (including cash
needed for maintaining and increasing operating capacity); (3) changes in
operating working capital; and (4) the Partnership's ability to borrow under its
Bank Credit Agreement, to refinance maturing debt, and to increase its long-term
debt. Some of these factors are affected by conditions beyond our control
including weather, competition in markets we serve, and the cost of propane.
The ability of the Partnership to attain the cash-based performance and
distribution requirements necessary to convert the 9,891,072 Subordinated Units
held by the General Partner depends upon a number of factors, including highly
seasonal operating results, changes in working capital, asset sales and debt
refinancings. Based upon current projections of operating results and changes in
working capital, it is possible that the Partnership could satisfy the
cash-based performance requirements for conversion in respect of the quarter
ending September 30, 2002.
CASH FLOWS
Due to the seasonal nature of the propane business, cash flows from operating
activities are generally strongest during the second and third fiscal quarters
when customers pay for propane purchased during the heating season and are
generally at their lowest levels during the first and fourth fiscal quarters.
Accordingly, cash flows from operating activities during the six months ended
March 31, 2002 are not necessarily indicative of cash flows to be expected for a
full year.
OPERATING ACTIVITIES. Cash provided by operating activities was $91.6 million
during the six months ended March 31, 2002 compared with $43.6 million during
the prior-year six-month period. Changes in operating working capital during the
2002 six-month period used $46.2 million of operating cash flow compared with
$106.7 million of cash used in the prior year six-month period. The significant
decline in cash used for changes in operating working capital reflects the
impact of substantially lower propane selling prices and product costs on
working capital, principally accounts receivable and inventories. Cash flow from
operating activities before changes in operating working capital was $137.7
million in the six months ended March 31, 2002 compared with $150.3 million in
the prior-year six-month period reflecting the decline in 2002 six-month period
operating results.
INVESTING ACTIVITIES. We spent $26.8 million for property, plant and equipment
(including maintenance capital expenditures of $11.9 million) during the six
months ended March 31, 2002
-23-
AMERIGAS PARTNERS, L.P.
compared with $18.8 million (including maintenance capital expenditures of $9.4
million) during the six months ended March 31, 2001. The increase in capital
expenditures reflects expenditures associated with the Columbia Propane
Businesses and higher expenditures for PPX(R) grill cylinder overfill protection
valves to comply with recently enacted governmental safety regulations. Proceeds
from asset sales were higher in the 2002 six-month period reflecting, in part,
disposals of Columbia Propane excess assets.
FINANCING ACTIVITIES. During each of the six-month periods ended March 31, 2002
and 2001, we declared and paid the MQD on all Common and Subordinated units and
the general partner interests. During the 2002 six-month period, we sold 350,000
Common Units to the General Partner, and 2,428,047 Common Units to the public in
conjunction with an underwritten public offering. The combined net proceeds of
these sales and related capital contributions from the General Partner of $57.7
million were contributed to AmeriGas OLP and used to reduce Bank Credit
Agreement borrowings and for working capital. Also during the 2002 six-month
period, AmeriGas Partners redeemed $15 million of its 10.125% Senior Notes and
AmeriGas OLP repaid $20 million of borrowings outstanding under its Acquisition
Facility.
ADOPTION OF SFAS NO. 142
Effective October 1, 2001, we adopted the provisions of SFAS No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"). SFAS 142 addresses the financial
accounting and reporting for acquired goodwill and other intangible assets and
supersedes APB Opinion No. 17, "Intangible Assets." SFAS 142 addresses the
financial accounting and reporting for intangible assets acquired individually
or with a group of other assets (excluding those acquired in a business
combination) at acquisition and also addresses the financial accounting and
reporting for goodwill and other intangible assets subsequent to their
acquisition. Under SFAS 142, an intangible asset is amortized over its useful
life unless that life is determined to be indefinite. Goodwill, including excess
reorganization value, and other intangible assets with indefinite lives are not
amortized but are subject to tests for impairment at least annually. As a result
of the adoption of SFAS 142, the Partnership ceased the amortization of goodwill
and excess reorganization value effective October 1, 2001. For a more detailed
discussion of SFAS 142 and its impact on the Partnership, see Note 3 to
Condensed Consolidated Financial Statements.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") recently issued SFAS No. 143,
"Accounting for Asset Retirement Obligations" ("SFAS 143") and SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144").
SFAS 143 addresses financial accounting and reporting for legal obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred with a corresponding increase in the carrying value of the related
asset. Entities shall subsequently charge the retirement cost to expense using a
systematic and rational method over the related asset's useful life and adjust
the fair value of the liability resulting from the passage of time through
charges to interest expense. The Partnership is required to adopt SFAS 143
effective October 1, 2002. The Partnership is currently in the
-24-
AMERIGAS PARTNERS, L.P.
process of evaluating the impact SFAS 143 will have on its financial condition
and results of operations.
SFAS 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," as it relates to the disposal of a segment of a business. SFAS
144 establishes a single accounting model for long-lived assets to be disposed
of based upon the framework of SFAS 121, and resolves significant implementation
issues of SFAS 121. SFAS 144 is effective for the Partnership October 1, 2002.
The Partnership believes that the adoption of SFAS 144 will not have a material
impact on its financial position or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risks are commodity prices for propane and interest rates on
borrowings.
Price risk associated with fluctuations in the prices the Partnership pays for
propane are principally a result of market forces reflecting changes in supply
and demand. The Partnership's profitability is sensitive to changes in propane
supply costs, and the Partnership generally attempts to pass on increases in
such costs to customers. The Partnership may not, however, always be able to
pass through product cost increases fully, particularly when product costs rise
rapidly. In order to manage a portion of the Partnership's propane market price
risk, we use contracts for the forward purchase or sale of propane, propane
fixed-price supply agreements, and over-the-counter derivative commodity
instruments including price swap and option contracts. Although we use
derivative financial and commodity instruments to reduce market price risk
associated with forecasted transactions, we do not use derivative financial and
commodity instruments for speculative or trading purposes.
Over-the-counter derivative commodity instruments utilized by the Partnership to
hedge forecasted purchases of propane are generally settled at expiration of the
contract. In order to minimize credit risk associated with these contracts, we
carefully monitor established credit limits with the contract counterparties.
The Partnership has both fixed-rate and variable-rate debt. Changes in interest
rates impact the cash flows of variable-rate debt but generally do not impact
its fair value. Conversely, changes in interest rates impact the fair value of
fixed-rate debt but do not impact their cash flows.
Our variable rate debt comprises borrowings under AmeriGas OLP's Bank Credit
Agreement. These debt agreements have interest rates that are generally indexed
to short-term market interest rates. Our long-term debt is typically issued at
fixed rates of interest based upon market rates for debt having similar terms
and credit ratings. As these long-term debt issues mature, we may refinance such
debt with new debt having interest rates reflecting then-current market
conditions. This debt may have an interest rate that is more or less than the
refinanced debt. In order to reduce interest rate risk associated with
forecasted issuances of fixed-rate debt, we generally enter into interest rate
protection agreements.
-25-
AMERIGAS PARTNERS, L.P.
The following table summarizes the fair values of unsettled market risk
sensitive derivative instruments held at March 31, 2002. It also includes the
changes in fair value that would result if there were an adverse change in (1)
the market price of propane of 10 cents per gallon and (2) interest rates on
ten-year U.S. treasury notes of 100 basis points:
---------------------------------------------------------------------------------------------------------------
Fair Change in
Value Fair Value
---------------------------------------------------------------------------------------------------------------
(Millions of dollars)
March 31, 2002:
Propane commodity price risk $ 4.5 $ (5.5)
Interest rate risk 1.8 (6.2)
---------------------------------------------------------------------------------------------------------------
Because the Partnership's derivative instruments generally qualify as hedges
under SFAS 133, we expect that changes in the fair value of derivative
instruments used to manage propane price or interest rate risk would be
substantially offset by gains or losses on the associated underlying
transactions.
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AMERIGAS PARTNERS, L.P.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) The following Current Report on Form 8-K was filed during the
fiscal quarter ended March 31, 2002:
Date Item Number Content
---- ----------- -------
January 22, 2002 5 Notice of first quarter earnings
conference call webcast.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
AmeriGas Partners, L.P.
----------------------------------------
(Registrant)
By: AmeriGas Propane, Inc.,
as General Partner
Date: May 14, 2002 By: /s/ Martha B. Lindsay
------------------- -----------------------------------
Martha B. Lindsay
Vice President - Finance
and Chief Financial Officer
By: /s/ Richard R. Eynon
------------------------------------
Richard R. Eynon
Controller and Chief Accounting Officer
AmeriGas Finance Corp.
----------------------------------------
(Registrant)
Date: May 14, 2002 By: /s/ Martha B. Lindsay
------------------- -----------------------------------
Martha B. Lindsay
Vice President - Finance
and Chief Financial Officer
By: /s/ Richard R. Eynon
-----------------------------------
Richard R. Eynon
Controller and Chief Accounting Officer
-28-
AmeriGas Eagle Finance Corp.
----------------------------------------
(Registrant)
Date: May 14, 2002 By: /s/ Martha B. Lindsay
------------------- -----------------------------------
Martha B. Lindsay
Vice President - Finance
and Chief Financial Officer
By: /s/ Richard R. Eynon
------------------------------------
Richard R. Eynon
Controller and Chief Accounting Officer
AP Eagle Finance Corp.
----------------------------------------
(Registrant)
Date: May 14, 2002 By: /s/ Martha B. Lindsay
------------------- -----------------------------------
Martha B. Lindsay
Vice President - Finance
and Chief Financial Officer
By: /s/ Richard R. Eynon
-----------------------------------
Richard R. Eynon
Controller and Chief Accounting Officer
-29-