1
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 December 31, 2000
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
AMERIGAS PARTNERS, L.P.
AMERIGAS FINANCE CORP.
(Exact name of registrants as specified in their charters)
Delaware 23-2787918
Delaware 23-2800532
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
460 North Gulph Road, King of Prussia, PA
(Address of principal executive offices)
19406
(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 January 31, 2001, the registrants had units and shares of common
stock outstanding as follows:
AmeriGas Partners, L.P. - 34,404,286 Common Units
9,891,072 Subordinated Units
AmeriGas Finance Corp. - 100 shares
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AMERIGAS PARTNERS, L.P.
TABLE OF CONTENTS
PAGES
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
AmeriGas Partners, L.P.
Condensed Consolidated Balance Sheets as of December 31, 2000,
September 30, 2000 and December 31, 1999 1
Condensed Consolidated Statements of Operations for the three
and twelve months ended December 31, 2000 and 1999 2
Condensed Consolidated Statements of Cash Flows for the three
and twelve months ended December 31, 2000 and 1999 3
Condensed Consolidated Statement of Partners' Capital for the
three months ended December 31, 2000 4
Notes to Condensed Consolidated Financial Statements 5 - 10
AmeriGas Finance Corp.
Balance Sheets as of December 31, 2000 and September 30, 2000 11
Note to Balance Sheets 12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13 - 19
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19 - 20
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
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AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
December 31, September 30, December 31,
2000 2000 1999
---- ---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 20,517 $ 10,795 $ 17,639
Accounts receivable (less allowances for doubtful accounts
of $7,563, $6,529 and $6,280, respectively) 214,604 97,376 119,506
Inventories 77,072 65,489 58,048
Prepaid expenses and other current assets 34,680 15,185 24,279
---------- ---------- ----------
Total current assets 346,873 188,845 219,472
Property, plant and equipment (less accumulated depreciation and
amortization of $312,150, $277,790 and $247,715, respectively) 451,608 436,119 428,971
Intangible assets (less accumulated amortization of $195,056,
$188,655 and $171,759, respectively) 616,043 621,920 605,088
Other assets 10,858 11,336 11,043
---------- ---------- ----------
Total assets $1,425,382 $1,258,220 $1,264,574
========== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current maturities of long-term debt $ 64,423 $ 64,512 $ 24,936
Bank loans 37,000 30,000 50,000
Accounts payable - trade 155,739 73,786 69,087
Accounts payable - related parties 1,637 3,001 2,313
Other current liabilities 88,093 95,714 77,695
---------- ---------- ----------
Total current liabilities 346,892 267,013 224,031
Long-term debt 791,322 792,722 764,549
Other noncurrent liabilities 41,806 39,927 42,705
Commitments and contingencies (note 4)
Minority interest 3,490 2,587 3,365
Partners' capital 241,872 155,971 229,924
---------- ---------- ----------
Total liabilities and partners' capital $1,425,382 $1,258,220 $1,264,574
========== ========== ==========
See accompanying notes to consolidated financial statements.
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AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Thousands of dollars, except per unit)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- ----------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Propane $405,360 $269,818 $1,158,509 $ 842,813
Other 27,108 31,230 92,967 92,986
--------- --------- ----------- ----------
432,468 301,048 1,251,476 935,799
--------- --------- ----------- ----------
Costs and expenses:
Cost of sales - propane 253,552 144,693 695,764 405,322
Cost of sales - other 11,223 14,001 38,598 39,612
Operating and administrative
expenses 93,772 89,504 346,988 335,549
Depreciation and amortization 18,303 16,271 69,413 65,571
Other income, net (1,223) (1,141) (8,615) (5,829)
--------- --------- ----------- ----------
375,627 263,328 1,142,148 840,225
--------- --------- ----------- ----------
Operating income 56,841 37,720 109,328 95,574
Interest expense (19,989) (17,980) (76,773) (67,901)
--------- --------- ----------- ----------
Income before income taxes 36,852 19,740 32,555 27,673
Income tax (expense) benefit (55) (318) 278 (110)
Minority interest (397) (223) (436) (384)
--------- --------- ----------- ----------
Income before accounting changes 36,400 19,199 32,397 27,179
Cumulative effect of accounting changes 12,494 - 12,494 -
--------- --------- ----------- ----------
Net income $ 48,894 $ 19,199 $ 44,891 $ 27,179
========= ========= =========== ==========
General partner's interest in net income $ 489 $ 192 $ 449 $ 272
========= ========= =========== ==========
Limited partners' interest in
net income $ 48,405 $ 19,007 $ 44,442 $ 26,907
========= ========= =========== ==========
Income per limited partner unit - basic and diluted:
Income before accounting changes $ 0.82 $ 0.45 $ 0.76 $ 0.64
Cumulative effect of accounting changes 0.28 - 0.29 -
--------- --------- ----------- ----------
Net income $ 1.10 $ 0.45 $ 1.05 $ 0.64
========= ========= =========== ==========
Average limited partner units
outstanding - basic and diluted (thousands) 43,862 41,969 42,446 41,938
========= ========= =========== ==========
See accompanying notes to consolidated financial statements.
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AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Thousands of dollars)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 48,894 $ 19,199 $ 44,891 $ 27,179
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of accounting changes (12,494) - (12,494) -
Depreciation and amortization 18,303 16,271 69,413 65,571
Other, net 4,380 1,359 1,164 535
--------- --------- --------- ---------
59,083 36,829 102,974 93,285
Net change in:
Accounts receivable (119,629) (53,701) (99,767) (36,138)
Inventories and prepaid propane purchases (12,184) (8,157) (11,734) (20,220)
Accounts payable 80,589 20,519 85,976 25,176
Other current assets and liabilities (12,640) (22,121) 5,911 (13,725)
--------- --------- --------- ---------
Net cash provided (used) by operating activities (4,781) (26,631) 83,360 48,378
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (8,937) (5,162) (34,202) (28,987)
Proceeds from disposals of assets 1,546 1,771 7,179 6,541
Acquisitions of businesses, net of cash acquired (147) (2,393) (53,394) (3,924)
--------- --------- --------- ---------
Net cash used by investing activities (7,538) (5,784) (80,417) (26,370)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (24,609) (23,316) (94,559) (93,174)
Minority interest activity 164 (238) (653) (1,037)
Increase (decrease) in bank loans 7,000 28,000 (13,000) (12,000)
Issuance of long-term debt - 46,000 150,000 142,007
Repayment of long-term debt (757) (782) (82,096) (54,251)
Proceeds from Common Unit offering 39,836 - 39,836 -
Capital contributions from General Partner 407 - 407 16
--------- --------- --------- ---------
Net cash provided (used) by financing activities 22,041 49,664 (65) (18,439)
--------- --------- --------- ---------
Cash and cash equivalents increase $ 9,722 $ 17,249 $ 2,878 $ 3,569
========= ========= ========= =========
CASH AND CASH EQUIVALENTS:
End of period $ 20,517 $ 17,639 $ 20,517 $ 17,639
Beginning of period 10,795 390 17,639 14,070
--------- --------- --------- ---------
Increase $ 9,722 $ 17,249 $ 2,878 $ 3,569
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
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AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(unaudited)
(Thousands, except unit data)
Accumulated
other Total
Number of units General comprehensive partners'
Common Subordinated Common Subordinated partner income capital
------ ------------ ------ ------------ ------- ------ -------
BALANCE SEPTEMBER 30, 2000 32,078,293 9,891,072 $ 118,872 $ 35,542 $ 1,557 $ - $155,971
Net income 37,459 10,946 489 48,894
Cumulative effect of change in
accounting principle -
SFAS No. 133 8,921 8,921
Net gain on derivative
instruments 22,833 22,833
Reclassification adjustments (10,839) (10,839)
--------- ----------
Comprehensive income 20,915 69,809
Distributions (18,923) (5,440) (246) (24,609)
Common Units issued in
connection
with public offering 2,300,000 39,836 402 40,238
Common Units issued in
connection
with acquisition 25,993 458 5 463
---------- --------- ---------- --------- ------- --------- ----------
BALANCE DECEMBER 31, 2000 34,404,286 9,891,072 $ 177,702 $ 41,048 $ 2,207 $ 20,915 $ 241,872
========== ========= ========== ========= ======= ========= ==========
See accompanying notes to consolidated financial statements.
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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 subsidiary AmeriGas
Propane, L.P. (the "Operating Partnership"), and their corporate
subsidiaries, together referred to in this report 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 the Operating
Partnership as a minority interest 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, 2000 ("2000 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.
Comprehensive income for the three months ended December 31, 2000 was
$69,809. Other comprehensive income of $20,915 in the three months
ended December 31, 2000 consisted primarily of transition adjustments
relating to the adoption of Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), totaling $8,921, and income associated with
changes in the fair value of derivative instruments, net of
reclassification adjustments, of $11,994. The Partnership's
comprehensive income in the three months ended December 31, 1999 was
the same as its net income.
2. CHANGES IN ACCOUNTING
Effective October 1, 2000, we (1) adopted SFAS 133; (2) applied the
provisions of SEC Staff Accounting Bulletin No. 101 entitled "Revenue
Recognition" ("SAB 101") with respect to our nonrefundable tank fees;
and (3) changed our method of accounting for costs to install
Partnership-owned tanks at customer locations. These accounting changes
are further described below.
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AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
(1) ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (SFAS
133)
SFAS 133, as amended by SFAS Nos. 137 and 138, establishes accounting
and reporting standards for derivative instruments and for hedging
activities. It requires that all derivative instruments be recognized
as either assets or liabilities and measured at fair value. The
accounting for changes in fair value depends upon the purpose of the
derivative instrument and whether it is designated and qualifies for
hedge accounting. To the extent derivative instruments qualify and are
designated as hedges of the variability of cash flows associated with
forecasted transactions, the effective portion of the gain or loss on
such derivative instruments is generally reported in other
comprehensive income and the ineffective portion, if any, is reported
in net income. Such amounts reported in other comprehensive income are
reclassified into net income when the forecasted transaction affects
earnings. If a cash flow hedge is discontinued because it is probable
that the forecasted transaction will not occur, the net gain or loss is
immediately reclassified into earnings. To the extent derivative
instruments qualify and are designated as hedges of changes in the fair
value of an existing asset, liability or firm commitment, the gain or
loss on the hedging instrument is recognized in earnings along with the
changes in fair value of the hedged asset, liability or firm commitment
attributable to the hedged risk.
In accordance with our propane price risk management policy, we use
derivative instruments, including price swap and option contracts, to
manage the cost of a portion of our forecasted purchases of propane.
These derivative instruments generally qualify and are designated as
cash flow hedges. The fair values of these derivative instruments are
affected by changes in propane product prices. We may also enter into
derivative contracts to manage market price risk associated with
propane storage inventories whose value is subject to market price
fluctuations. These contracts are designated as fair value hedges. In
order to provide protection from the impact of significant declines in
propane product prices, from time to time we purchase propane put
option contracts. These derivative instruments generally do not qualify
for hedge accounting treatment and, as a result, gains or losses, if
any, are reflected in other income as they occur.
In addition to these derivative instruments, we also use contracts for
the forward purchase of propane as well as fixed price supply
agreements to manage propane market price risk. These contracts qualify
for the normal purchases and normal sales exception of SFAS 133 and
therefore are not adjusted to fair value.
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AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
We use fixed-rate long-term debt as a source of capital. As these
long-term debt issues mature, we often refinance such debt with
fixed-rate debt bearing then-existing market interest rates. On
occasion, we enter into interest rate protection agreements ("IRPAs")
to reduce market interest rate risk associated with these forecasted
debt issuances. We designate these IRPAs as cash flow hedges. Gains or
losses on IRPAs are included in other comprehensive income and
reclassified into interest expense when interest expense on the
associated debt issue affects earnings.
The adoption of SFAS 133 resulted in a cumulative effect charge to net
income of $736 and an increase to other comprehensive income of $8,921.
The increase in other comprehensive income is attributable to net gains
on derivative instruments designated and qualifying as cash flow hedges
on October 1, 2000.
Gains and losses included in accumulated other comprehensive income at
December 31, 2000 relating to cash flow hedges will be reclassified
into net income when (1) the forecasted purchase of propane subject to
the hedges impacts net income and (2) interest on anticipated issuances
of fixed-rate long-term debt is reflected in net income. Virtually all
of the net gains included in accumulated other comprehensive income at
December 31, 2000 are related to forecasted transactions that are
expected to occur in the next twelve months. The actual amount of such
gains, if any, that will ultimately be reclassified into net income
will depend upon the value of such derivative contracts when settled.
The fair value of derivative instruments is included in prepaid
expenses and other current assets in the December 31, 2000 Condensed
Consolidated Balance Sheet.
(2) REVENUE RECOGNITION
In order to comply with the provisions of SAB 101, effective October 1,
2000 we changed our method of accounting for annually billed
nonrefundable tank fees. Historically, nonrefundable tank fees for
installed Partnership-owned tanks were recorded as revenue when billed.
Under the new accounting method, revenue from such fees are being
recorded on a straight-line basis over one year. Accordingly, on
October 1, 2000, we recorded a charge of $5,984 representing the
cumulative effect of the change in accounting method on prior years.
This change in accounting method resulted in a reduction in revenues of
approximately $964 in the three months ended December 31, 2000 and
would have reduced revenues for the twelve months ended December 31,
2000, and the three and twelve months ended December 31, 1999, by
approximately $699, $1,224 and $870, respectively. At December 31,
2000, the deferred revenue balance relating to nonrefundable tank fees
was $7,008.
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AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
(3) 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
billings, are capitalized and amortized using an accelerated method
that reflects the attrition of the Partnership's customers. 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, we recorded income of $19,214 representing the
cumulative effect of the change in accounting method on prior years.
The effect of the change in accounting for tank installation costs in
the three months ended December 31, 2000 was to increase net income by
$997.
CUMULATIVE EFFECT OF ACCOUNTING CHANGES AND PRO FORMA DISCLOSURE
The cumulative effect impact reflected on the Consolidated Statements
of Operations for the three months ended December 31, 2000 and related
per unit (basic and diluted) amounts resulting from the above changes
in accounting principles comprise the following:
CUMULATIVE CUMULATIVE EFFECT PER
EFFECT LIMITED PARTNER UNIT
----------------------------------------------------------------------------------------------
SFAS No. 133 $ (736) $(0.02)
Revenue recognition (5,984) (0.14)
Tank installation costs 19,214 0.44
----------------------------------------------------------------------------------------------
Total $12,494 $ 0.28
==============================================================================================
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AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
The following table reflects pro forma net income and net income per
limited partner unit after applying retroactively the changes in
accounting for tank installation costs and nonrefundable tank fees:
AS AS
REPORTED ADJUSTED
---------------------------------------------------------------------------------------------
THREE MONTHS ENDED DECEMBER 31, 1999:
Net income $19,199 $19,110
Income per limited partner unit - basic and diluted $ 0.45 $ 0.45
TWELVE MONTHS ENDED DECEMBER 31, 2000:
Net income $32,397 $32,278
Income per limited partner unit - basic and diluted $ 0.76 $ 0.75
TWELVE MONTHS ENDED DECEMBER 31, 1999:
Net income $27,179 $27,484
Income per limited partner unit - basic and diluted $ 0.64 $ 0.65
---------------------------------------------------------------------------------------------
3. RELATED PARTY TRANSACTIONS
In accordance with the Amended and Restated Agreement of Limited
Partnership of AmeriGas Propane, L.P. and the Second Amended and
Restated Agreement of Limited Partnership of AmeriGas Partners, the
General Partner is entitled to reimbursement of all direct and indirect
expenses incurred or payments it makes on behalf of the Partnership,
and all other necessary or appropriate expenses allocable to the
Partnership or otherwise reasonably incurred by the General Partner in
connection with the Partnership's business. These costs totaled $55,377
and $196,718 during the three and twelve months ended December 31,
2000, respectively, and $51,569 and $192,065 during the three and
twelve months ended December 31, 1999, 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 $1,137 and $4,689 during the three and twelve months
ended December 31, 2000, respectively, and $433 and $4,581 during the
three and twelve months ended December 31, 1999, respectively.
4. COMMITMENTS AND CONTINGENCIES
There have been no significant developments relating to the commitments
and contingencies reported in the Partnership's 2000 Annual Report.
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AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
5. ISSUANCE OF COMMON UNITS
In October 2000, we issued 2,300,000 Common Units in a public offering.
The net proceeds from the Common Unit offering and related capital
contributions from the General Partner of approximately $40,600 were
used to reduce Bank Credit Agreement indebtedness and for working
capital. The Common Units were issued under a shelf registration
statement covering 9,000,000 Common Units filed with the SEC which was
declared effective on September 22, 2000.
6. SUBSEQUENT EVENT
On January 30, 2001, we signed a definitive agreement to purchase the
retail propane distribution businesses of Columbia Energy Group
("Columbia") for approximately $208,000. The Columbia propane
businesses currently comprise the fifth largest retail marketer of
propane in the U.S. with total sales of over 300 million gallons from
186 locations in 29 states. At closing the seller will receive
approximately $155,000 cash and approximately $53,000 of AmeriGas
Partners Common Units. The cash portion of the purchase price and
transaction fees will be funded with approximately $55,000 of long-term
debt issued by AmeriGas Partners and approximately $108,000 of first
mortgage notes issued by the Operating Partnership. The transaction is
subject to customary conditions, including regulatory approval, and is
expected to close in March 2001.
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AMERIGAS FINANCE CORP.
(a wholly owned subsidiary of AmeriGas Partners, L.P.)
BALANCE SHEETS
(unaudited)
December 31, September 30,
2000 2000
---- ----
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 consolidated financial statements.
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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.
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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 December 31, 2000 ("2000 three-month period") with the
three months ended December 31, 1999 ("1999 three-month period") and (2) the
twelve months ended December 31, 2000 ("2000 twelve-month period") with the
twelve months ended December 31, 1999 ("1999 twelve-month period"). AmeriGas
Finance Corp. has nominal assets and does not conduct any operations.
Accordingly, a discussion of the results of operations and financial condition
and liquidity of AmeriGas Finance Corp. is not presented.
2000 THREE-MONTH PERIOD COMPARED WITH 1999 THREE-MONTH PERIOD
Increase
Three Months Ended December 31, 2000 1999 (Decrease)
- -------------------------------------------------------------------------------------------
(Millions of dollars)
Gallons sold (millions):
Retail 257.0 233.7 23.3 10.0%
Wholesale 89.0 56.7 32.3 57.0%
------ ------ ------
346.0 290.4 55.6 19.1%
====== ====== ======
Revenues:
Retail propane $337.7 $240.4 $ 97.3 40.5%
Wholesale propane 67.7 29.4 38.3 130.3%
Other 27.1 31.2 (4.1) (13.1)%
------ ------ ------
$432.5 $301.0 $131.5 43.7%
====== ====== ======
Total margin $167.7 $142.4 $ 25.3 17.8%
EBITDA (a) $ 75.1 $ 54.0 $ 21.1 39.1%
Operating income $ 56.8 $ 37.7 $ 19.1 50.7%
Heating degree days - % colder
(warmer) than normal (b) 13.4 (14.1) -- --
- -------------------------------------------------------------------------------------------
(a) 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 generally accepted accounting principles.
(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 U.S
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AMERIGAS PARTNERS, L.P.
Based upon national heating degree day data, temperatures in the 2000
three-month period were 13.4% colder than normal compared with weather that was
14.1% warmer than normal in the prior year. Retail volumes of propane sold
increased 23.3 million gallons (10.0%) primarily as a result of the colder
weather. Retail volumes sold in the prior-year period were impacted by the
acceleration of purchases by some customers resulting from the anticipation of
Year 2000 ("Y2K") disruptions. The Partnership estimates that approximately 5
million to 10 million gallons sold during the 1999 three-month period may have
been a result of Y2K.
Total revenues from retail propane sales increased $97.3 million reflecting a
$73.3 million increase as a result of higher selling prices and a $24.0 million
increase as a result of higher retail volumes sold. Wholesale propane revenues
increased $38.3 million reflecting a $21.5 million increase due to higher
selling prices and a $16.8 million increase as a result of higher wholesale
volumes. The higher retail and wholesale selling prices resulted from
significantly higher propane supply prices. Other revenues decreased $4.1
million primarily reflecting lower revenues from appliance sales and service and
the impact of the change in accounting for tank installation costs on tank
installation revenue. Cost of sales in the 2000 three-month period increased
$106.1 million as a result of higher propane supply prices and greater retail
and wholesale volumes.
Total margin increased $25.3 million in the 2000 three-month period reflecting
the impact of the higher retail volumes and higher average retail unit margins.
Increasing selling prices during the 2000 three-month period, along with
derivative hedging gains and favorably priced supply arrangements, enabled the
Partnership to record higher average unit margins while maintaining
competitive prices.
The increase in EBITDA and operating income during the 2000 three-month period
principally reflects the higher total margin. Operating expenses of the
Partnership were $93.8 million in the 2000 three-month period compared with
$89.5 million in the prior year which includes $3.1 million of expenses
associated with the installation of Partnership-owned tanks at customer
locations. In the 2000 three-month period, such costs were capitalized in
accordance with the Partnership's change in accounting principle. Adjusting for
these expenses in the prior-year period, operating expenses increased $7.4
million reflecting higher volume-driven distribution expenses, including vehicle
fuel and repair expenses and greater compensation costs, and growth expenses
associated with our PPX(R) grill cylinder exchange business and businesses
acquired in fiscal 2000. Depreciation and amortization expense increased $2.0
million reflecting approximately $1.1 million of depreciation associated with
tank installation costs and greater acquisition-related depreciation and
amortization.
The Partnership's interest expense for the 2000 three-month period increased
$2.0 million primarily as a result of higher levels of long-term debt
outstanding and greater borrowings under the Partnership's Acquisition Facility.
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AMERIGAS PARTNERS, L.P.
2000 TWELVE-MONTH PERIOD COMPARED WITH 1999 TWELVE-MONTH PERIOD
Increase
Twelve Months Ended December 31, 2000 1999 (Decrease)
- -------------------------------------------------------------------------------------------------
(Millions of dollars)
Gallons sold (millions):
Retail 794.5 796.2 (1.7) (0.2)%
Wholesale 290.4 199.2 91.2 45.8 %
------- ----- ----
1,084.9 995.4 89.5 9.0 %
======= ===== ====
Revenues:
Retail propane $ 967.5 $756.5 $211.0 27.9%
Wholesale propane 191.0 86.3 104.7 121.3%
Other 93.0 93.0 -- -%
-------- ------ ------
$1,251.5 $935.8 $315.7 33.7%
======== ====== ======
Total margin $ 517.1 $490.9 $ 26.2 5.3%
EBITDA $ 178.7 $161.1 $ 17.6 10.9%
Operating income $ 109.3 $ 95.6 $ 13.7 14.3%
Heating degree days - % warmer
than normal 3.7 11.0 -- --
- -------------------------------------------------------------------------------------------------
Temperatures based upon heating degree days during the 2000 twelve-month period
were 3.7% warmer than normal but 8.6% colder than the prior-year period. Retail
propane gallons sold were 1.7 million gallons lower as a slight decline in
heating-related sales were virtually offset by higher motor fuel and PPX(R)
sales. We estimate that 5 million to 10 million gallons of retail propane sales
in the 1999 twelve-month period were a result of customers accelerating
deliveries in advance of Y2K. Wholesale volumes of propane sold were higher in
the 2000 twelve-month period due in large part to sales associated with propane
product cost management activities.
Total revenues from retail propane sales increased $211.0 million due to
significantly higher average propane selling prices. Wholesale propane revenues
increased $104.7 million reflecting (1) a $65.2 million increase as a result of
higher average wholesale prices and (2) a $39.5 million increase as a result of
higher wholesale volumes sold. Nonpropane revenues in the 2000 twelve-month
period were virtually unchanged as higher customer fees and PPX(R) cylinder
sales revenues were offset by lower appliance and service revenue. Cost of sales
increased $289.4 million reflecting the higher propane product costs and greater
wholesale volumes.
Total margin increased $26.2 million due to (1) higher average retail unit
margins and (2) greater volumes sold to higher margin PPX(R) customers. Unit
margins late in the 2000 twelve-month period benefited from derivative hedging
gains and favorably priced supply arrangements.
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AMERIGAS PARTNERS, L.P.
EBITDA increased $17.6 million in the 2000 twelve-month period as the increase
in total margin was partially offset by an $11.4 million increase in the
Partnership's operating expenses. The higher operating expenses reflect
incremental expenses from growth and operational initiatives, higher vehicle
fuel and lease expenses, and greater uncollectible account expenses. Growth and
operational initiatives include PPX(R), acquiring retail propane businesses, and
developing and implementing more efficient methods of operating our core propane
distribution business. Operating income increased $13.7 million reflecting the
higher total margin partially offset by the higher operating expenses and
greater depreciation and amortization expense principally associated with
acquisitions.
Interest expense of the Partnership increased $8.9 million in the 2000
twelve-month period as a result of greater levels of long-term debt outstanding
and higher interest expense on Bank Credit Agreement borrowings.
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION
The Partnership's debt outstanding at December 31, 2000 totaled $892.7 million
comprising $855.7 million of long-term debt (including current maturities of
$64.4 million) and $37 million under its Revolving Credit Facility. Included in
long-term debt outstanding at December 31, 2000 is $70 million of borrowings
under the Operating Partnership's Acquisition Facility. We expect to refinance
$58 million of maturing First Mortgage Notes in April 2001.
During the three months ended December 31, 2000, our working capital balances
for accounts receivable, inventories and accounts payable increased
significantly as a result of dramatic increases in the commodity price of
propane.
In October 2000, the Partnership issued 2,300,000 Common Units in a public
offering. The net proceeds from the Common Unit offering and related capital
contributions from the General Partner of $40.6 million were used to reduce Bank
Credit Agreement indebtedness and for working capital purposes. The Common Units
were issued under a shelf registration statement covering 9,000,000 Common Units
filed with the SEC which was declared effective September 22, 2000.
During the three months ended December 31, 2000, the Partnership declared and
paid the minimum quarterly distribution of $0.55 (the "MQD") for the quarter
ended September 30, 2000. The MQD for the quarter ended December 31, 2000 will
be paid on February 18, 2001 to holders of record on February 9, 2001. The
ability of the Partnership to declare and 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
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AMERIGAS PARTNERS, L.P.
are affected by conditions beyond our control including weather, competition in
markets we serve, and the cost of propane.
The Partnership's management believes that cash flow from operations, Bank
Credit Agreement borrowings, and long-term debt issued to refinance maturing
debt, will be sufficient to satisfy its liquidity needs, including the payment
of the MQD, in fiscal 2001.
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
of the Partnership 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
three months ended December 31, 2000 are not necessarily indicative of cash
flows to be expected for a full year.
OPERATING ACTIVITIES. Cash used by operating activities was $4.8 million during
the three months ended December 31, 2000 compared with $26.6 million during the
prior-year three-month period. Changes in operating working capital during the
2000 three-month period used $63.9 million of operating cash flow compared with
$63.5 million in the prior year. Both years reflect significant increases in
accounts receivable and to a lesser extent propane inventories (due to greater
propane sales and higher propane product costs) partially offset by increases in
accounts payable. Cash flow from operating activities before changes in
operating working capital was $59.1 million in the three months ended December
31, 2000 compared with $36.8 million in the prior-year period reflecting the
improved 2000 three-month period operating results.
INVESTING ACTIVITIES. We spent $8.9 million for property, plant and equipment
(including maintenance capital expenditures of $4.4 million) during the three
months ended December 31, 2000 compared with $5.2 million (including maintenance
capital expenditures of $2.0 million) in the three months ended December 31,
1999. Included in the 2000 three-month period capital expenditures are $2.1
million of costs resulting from the Partnership's change in accounting method
for customer tank installation costs (see Note 2 to Condensed Consolidated
Financial Statements).
FINANCING ACTIVITIES. During the three-month periods ended December 31, 2000 and
1999, we declared and paid the MQD on all Common and Subordinated units and the
general partner interests. Notwithstanding the cash needed to fund a significant
increase in working capital during the 2000 three-month period resulting from
higher propane supply prices and colder weather, bank loans increased only $7
million due in large part to the use of $40.6 million of proceeds from the
public offering of 2,300,000 Common Units and related General Partner
contributions to pay down borrowings under the Bank Credit Agreement. During the
1999 three-month period, the Partnership borrowed $46 million under the
Acquisition Facility relating to propane business and asset expenditures
incurred in prior years.
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20
AMERIGAS PARTNERS, L.P.
CHANGES IN ACCOUNTING
Effective October 1, 2000, we (1) adopted SFAS 133; (2) applied the guidance of
SAB No. 101 entitled "Revenue Recognition" with respect to our nonrefundable
tank fees; and (3) changed our method of accounting for costs to install
Partnership-owned tanks at customer locations. The net effect of these
accounting changes on prior periods resulted in a $12.5 million increase in net
income for the quarter ended December 31, 2000 which amount is reflected on the
Consolidated Statement of Operations as "cumulative effect of accounting
changes."
The adoption of SFAS 133 resulted in a cumulative effect charge to net income of
$0.7 million and a cumulative effect increase to accumulated other comprehensive
income of $8.9 million which amount represents the fair value of derivative
instruments qualifying and designated as cash flow hedges on October 1, 2000.
Because our derivative instruments historically have been highly effective in
hedging exposure to changes in cash flows associated with forecasted purchases
or sales of propane, changes in the fair value of propane inventories, and
changes in the risk-free rate of interest on forecasted issuances of debt, we do
not expect SFAS 133 will have a material impact on our future results of
operations. However, if such instruments are not deemed highly effective in the
future, or if we use derivative instruments that do not meet the stringent
requirements for hedge accounting under SFAS 133, future results could reflect
greater volatility.
The adoption of SAB 101 resulted in a cumulative effect charge to net income of
$6.0 million representing the impact on prior periods resulting from the
application of SAB 101 as it relates to our method of recognizing revenue
associated with nonrefundable fees for installed Partnership-owned tanks. Prior
to October 1, 2000, such fees, which are generally received annually, were
recorded as revenue when billed. In accordance with SAB 101, we now record such
nonrefundable fees on a straight-line basis over one year. The adoption of this
revenue recognition method is not expected to materially impact the
Partnership's future financial condition or results of operations.
In order to more appropriately match the costs of installing Partnership-owned
tanks at customer locations with the associated periods of benefit, we changed
our method of accounting for tank installation costs. Previously, such costs
were expensed as incurred. Effective October 1, 2000, such costs, net of
billings, are capitalized and amortized using an accelerated method that
reflects the attrition of the Partnership's customers. The change in accounting
for tank installation costs resulted in a cumulative effect increase to net
income of $19.2 million representing the impact on prior periods resulting from
the accounting change. For a more detailed discussion of these accounting
changes, see Note 2 to Condensed Consolidated Financial Statements.
SUBSEQUENT EVENT
On January 30, 2001, we signed a definitive agreement to purchase the retail
propane distribution businesses of Columbia Energy Group ("Columbia") for
approximately $208 million.
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21
AMERIGAS PARTNERS, L.P.
The Columbia propane businesses currently comprise the fifth largest retail
marketer of propane in the U.S. with total sales of over 300 million gallons
from 186 locations in 29 states. At closing the seller will receive
approximately $155 million cash and approximately $53 million of AmeriGas
Partners Common Units. The cash portion of the purchase price and transaction
fees will be funded with approximately $55 million of long-term debt issued by
AmeriGas Partners and approximately $108 million of first mortgage notes issued
by the Operating Partnership. The transaction is subject to customary
conditions, including regulatory approval, and is expected to close in March
2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risk exposures are market prices for propane and changes in
interest rates.
Our profitability is sensitive to changes in propane supply costs, and we
generally attempt to pass on increases in such costs to customers. There is no
assurance, however, that we will be able to do so. In order to manage a portion
of our propane market price risk, we use contracts for the forward purchase of
propane, propane fixed-price supply agreements, and derivative commodity
instruments such as price swap and option contracts. Although we use derivative
commodity instruments to reduce market price risk associated with forecasted
transactions, we do not use derivative financial and commodity instruments for
trading purposes. We attempt to minimize our credit risk with our counterparties
through the application of credit policies.
We have market risk exposure from changes in interest rates on borrowings under
the Operating Partnership's Bank Credit Agreement. This agreement has interest
rates on borrowings that are indexed to short-term market interest rates. At
December 31, 2000, borrowings outstanding under this facility totaled $107
million. Based upon average borrowings under this agreement during Fiscal 2000,
an increase in interest rates of 100 basis points (1%) would have increased
interest expense on an annual basis by $0.9 million. We also use fixed-rate
long-term debt as a source of capital. As these fixed-rate long-term debt issues
mature, we intend to 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. On occasion, we enter into
interest rate protection agreements to reduce interest rate risk associated with
a forecasted issuance of debt.
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22
AMERIGAS PARTNERS, L.P.
The following table summarizes the fair value of our market risk sensitive
derivative instruments at December 31, 2000. It also includes the change in fair
value that would result if there were an adverse change in (1) the market price
of propane of 10 cents a 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)
December 31, 2000:
Propane commodity price risk $18.4 $(7.5)
Interest rate risk (0.5) (6.2)
- ---------------------------------------------------------------------------------
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23
AMERIGAS PARTNERS, L.P.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
18 Letter re: change in accounting principles
27.1 Financial Data Schedule of AmeriGas Partners, L.P.
27.2 Financial Data Schedule of AmeriGas Finance Corp.
(b) AmeriGas Partners, L.P. filed three Current Reports on Form
8-K during the fiscal quarter ended December 31, 2000. The
Reports were as follows:
Date Item Number(s) Content
---- -------------- -------
9-30-00 5, 7 Second Amended and Restated Agreement
of Limited Partnership of AmeriGas
Partners, L.P. dated as of September 30,
2000
10-11-00 5, 7 Underwriting Agreement dated October 11,
2000
11-10-00 5 Advance notice of webcast of regular
earnings conference call
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24
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: February 12, 2001 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: February 12, 2001 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
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25
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
18 Letter re: change in accounting principles
27.1 Financial Data Schedule of AmeriGas Partners, L.P.
27.2 Financial Data Schedule of AmeriGas Finance Corp.