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 June 30, 2001
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 July 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
2
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 June 30, 2001,
September 30, 2000 and June 30, 2000 1
Condensed Consolidated Statements of Operations for the three, nine
and twelve months ended June 30, 2001 and 2000 2
Condensed Consolidated Statements of Cash Flows for the nine
and twelve months ended June 30, 2001 and 2000 3
Condensed Consolidated Statement of Partners' Capital for the
nine months ended June 30, 2001 4
Notes to Condensed Consolidated Financial Statements 5 - 10
AmeriGas Finance Corp.
----------------------
Balance Sheets as of June 30, 2001 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 - 21
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21 - 22
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
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AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
June 30, September 30, June 30,
2001 2000 2000
------------- ------------- -------------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 18,722 $ 10,795 $ 17,330
Accounts receivable (less allowances for doubtful accounts
of $10,524, $6,529 and $7,195, respectively) 99,220 97,376 87,154
Inventories 54,751 65,489 60,236
Prepaid expenses and other current assets 16,055 15,185 13,349
------------- ------------- -------------
Total current assets 188,748 188,845 178,069
Property, plant and equipment (less accumulated depreciation and
amortization of $335,772, $277,790 and $267,104, respectively) 446,603 436,119 442,777
Intangible assets (less accumulated amortization of $207,871,
$188,655 and $183,742, respectively) 603,279 621,920 626,485
Other assets 14,267 11,336 11,944
------------- ------------- -------------
Total assets $ 1,252,897 $ 1,258,220 $ 1,259,275
============= ============= =============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Current liabilities:
Current maturities of long-term debt $ 66,639 $ 64,512 $ 64,552
Bank loans 9,000 30,000 25,000
Accounts payable - trade 40,675 73,786 54,054
Accounts payable - related parties 1,619 3,001 2,402
Other current liabilities 95,130 95,714 68,038
------------- ------------- -------------
Total current liabilities 213,063 267,013 214,046
Long-term debt 787,315 792,722 793,876
Other noncurrent liabilities 37,236 39,927 37,127
Commitments and contingencies (note 4)
Minority interest 3,780 2,587 3,174
Partners' capital 211,503 155,971 211,052
------------- ------------- -------------
Total liabilities and partners' capital $ 1,252,897 $ 1,258,220 $ 1,259,275
============= ============= =============
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 Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
---------------------- ----------------------- -----------------------
2001 2000 2001 2000 2001 2000
---------- ----------- ------------ ---------- ----------- -----------
Revenues:
Propane $ 197,524 $ 189,774 $1,137,527 $ 825,817 $1,334,677 $ 972,046
Other 21,640 19,896 71,557 73,777 94,869 95,430
---------- ----------- ------------ ---------- ----------- -----------
219,164 209,670 1,209,084 899,594 1,429,546 1,067,476
---------- ----------- ------------ ---------- ----------- -----------
Costs and expenses:
Cost of sales - propane 112,267 111,109 700,562 461,759 825,708 538,952
Cost of sales - other 8,237 8,267 28,142 31,671 37,847 40,990
Operating and administrative expenses 86,845 77,866 282,820 259,402 366,138 338,401
Depreciation and amortization 18,529 16,808 55,235 49,554 73,062 66,080
Other income, net (1,007) (1,375) (3,489) (4,752) (7,270) (6,767)
---------- ----------- ------------ ---------- ----------- -----------
224,871 212,675 1,063,270 797,634 1,295,485 977,656
---------- ----------- ------------ ---------- ----------- -----------
Operating income (loss) (5,707) (3,005) 145,814 101,960 134,061 89,820
Interest expense (19,319) (18,749) (59,163) (54,764) (79,163) (71,658)
---------- ----------- ------------ ---------- ----------- -----------
Income (loss) before income taxes (25,026) (21,754) 86,651 47,196 54,898 18,162
Income tax benefit 474 318 879 323 571 155
Minority interest 206 190 (979) (559) (682) (291)
---------- ----------- ------------ ---------- ----------- -----------
Income (loss) before accounting changes (24,346) (21,246) 86,551 46,960 54,787 18,026
Cumulative effect of accounting changes - - 12,494 - 12,494 -
---------- ----------- ------------ ---------- ----------- -----------
Net income (loss) $ (24,346) $ (21,246) $ 99,045 $ 46,960 $ 67,281 $ 18,026
========== =========== ============ ========== =========== ===========
General partner's interest in net income (loss) $ (244) $ (212) $ 990 $ 470 $ 672 $ 180
========== =========== ============ ========== =========== ===========
Limited partners' interest in
net income (loss) $ (24,102) $ (21,034) $ 98,055 $ 46,490 $ 66,609 $ 17,846
========== =========== ============ ========== =========== ===========
Income (loss) per limited
partner unit - basic and diluted:
Income (loss) before accounting changes $ (0.54) $ (0.50) $ 1.94 $ 1.11 $ 1.24 $ 0.43
Cumulative effect of accounting changes - - 0.28 - 0.29 -
---------- ----------- ------------ ---------- ----------- -----------
Net income (loss) $ (0.54) $ (0.50) $ 2.22 $ 1.11 $ 1.53 $ 0.43
========== =========== ============ ========== =========== ===========
Average limited partner units
outstanding - basic and diluted (thousands) 44,295 41,969 44,149 41,969 43,600 41,969
========== =========== ============ ========== =========== ===========
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)
Nine Months Ended Twelve Months Ended
June 30, June 30,
------------------------ ------------------------
2001 2000 2001 2000
----------- ---------- ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 99,045 $ 46,960 $ 67,281 $ 18,026
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of accounting changes (12,494) - (12,494) -
Depreciation and amortization 55,235 49,554 73,062 66,080
Other, net 987 (52) (818) (3,637)
----------- ---------- ---------- -----------
142,773 96,462 127,031 80,469
Net change in:
Accounts receivable (8,408) (22,606) (19,641) (31,432)
Inventories and prepaid propane purchases 10,760 (2,339) 5,324 (23,567)
Accounts payable (34,494) 5,575 (14,163) 25,099
Other current assets and liabilities (21,523) (31,453) 6,428 (7,733)
----------- ---------- ---------- -----------
Net cash provided by operating activities 89,108 45,639 104,979 42,836
----------- ---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (28,624) (22,449) (36,602) (27,698)
Proceeds from disposals of assets 2,660 2,801 7,263 5,511
Acquisitions of businesses, net of cash acquired (147) (55,914) 127 (56,570)
----------- ---------- ---------- -----------
Net cash used by investing activities (26,111) (75,562) (29,212) (78,757)
----------- ---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (73,827) (69,949) (97,144) (93,265)
Minority interest activity 199 (765) (91) (1,055)
Increase (decrease) in bank loans (21,000) 3,000 (16,000) 5,000
Issuance of long-term debt 59,705 196,000 59,705 216,237
Repayment of long-term debt (60,390) (81,423) (61,088) (81,744)
Proceeds from Common Unit offering 39,836 - 39,836 -
Capital contributions from General Partner 407 - 407 -
----------- ---------- ---------- -----------
Net cash provided (used) by financing activities (55,070) 46,863 (74,375) 45,173
----------- ---------- ---------- -----------
Cash and cash equivalents increase $ 7,927 $ 16,940 $ 1,392 $ 9,252
=========== ========== ========== ===========
CASH AND CASH EQUIVALENTS:
End of period $ 18,722 $ 17,330 $ 18,722 $ 17,330
Beginning of period 10,795 390 17,330 8,078
----------- ---------- ---------- -----------
Increase $ 7,927 $ 16,940 $ 1,392 $ 9,252
=========== ========== ========== ===========
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
Number of units other Total
------------------------- General comprehensive partners'
Common Subordinated Common Subordinated partner income (loss) capital
----------- ------------ ---------- ------------ --------- ------------ -----------
BALANCE SEPTEMBER 30, 2000 32,078,293 9,891,072 $ 118,872 $ 35,542 $ 1,557 $ - $ 155,971
Net income 76,022 22,033 990 99,045
Cumulative effect of change in
accounting principle - SFAS No. 133 8,921 8,921
Net gain on derivative
instruments 5,245 5,245
Reclassification adjustments (24,553) (24,553)
------------ -----------
Comprehensive income (10,387) 88,658
Distributions (56,769) (16,320) (738) (73,827)
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 JUNE 30, 2001 34,404,286 9,891,072 $ 178,419 $ 41,255 $ 2,216 $ (10,387) $ 211,503
=========== ========== ========== ========== ======== ============ ===========
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 (loss), which comprises net income (loss) and other
comprehensive income (loss), for the three and nine months ended June
30, 2001 was $(33,066) and $88,658, respectively. Other comprehensive
loss of $(8,720) in the three months ended June 30, 2001 is principally
a result of a decline in the fair value of propane derivative hedge
instruments. Other comprehensive loss of $(10,387) in the nine months
ended June 30, 2001 is primarily due to the reclassification of
derivative hedge gains to net income. The Partnership's comprehensive
income (loss) in the three and nine months ended June 30, 2000 was the
same as its net income (loss).
2. CHANGES IN ACCOUNTING
Effective October 1, 2000, we (1) adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities ("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 and
to manage market risk associated with propane storage inventories. These
derivative instruments generally qualify and are designated as cash flow
or fair value hedges. The fair values of these derivative instruments
are affected by changes in propane product prices. In addition to these
derivative instruments, we may also enter into 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.
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 a cumulative effect increase to accumulated other
comprehensive income of $8,921. The increase in accumulated other
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AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
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
June 30, 2001 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 loss included in accumulated other comprehensive loss at June
30, 2001 hedges future purchases of propane expected to occur in the
next twelve months. The actual amount of derivative gains or losses 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 other current liabilities in the
June 30, 2001 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, revenues 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. The change in
accounting method for nonrefundable tank fees did not have a material
impact on reported revenues in fiscal 2001 and would not have materially
impacted revenues in periods prior to the change. At June 30, 2001, the
deferred revenue balance relating to nonrefundable tank fees was $5,669.
(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.
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AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
The effect on net income (loss) from the change in accounting for tank
installation costs during the three and nine months ended June 30, 2001
was not material.
CUMULATIVE EFFECT OF ACCOUNTING CHANGES AND PRO FORMA DISCLOSURE
The cumulative effect impact reflected on the Consolidated Statements of
Operations 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 (loss) and net income
(loss) per limited partner unit after applying retroactively the changes
in accounting for tank installation costs and nonrefundable tank fees:
------------------------------------------------------------------------------------------------------------
As As
Reported Adjusted
------------------------------------------------------------------------------------------------------------
TWELVE MONTHS ENDED JUNE 30, 2001:
Net income $ 54,787 $ 54,123
Income per limited partner unit - basic and diluted $ 1.24 $ 1.23
THREE MONTHS ENDED JUNE 30, 2000:
Net loss $(21,246) $(21,293)
Loss per limited partner unit - basic and diluted $ (0.50) $ (0.50)
NINE MONTHS ENDED JUNE 30, 2000:
Net income $ 46,960 $ 47,418
Income per limited partner unit - basic and diluted $ 1.11 $ 1.12
TWELVE MONTHS ENDED JUNE 30, 2000:
Net income $ 18,026 $ 18,100
Income per limited partner unit - basic and diluted $ 0.43 $ 0.43
------------------------------------------------------------------------------------------------------------
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 $47,179, $159,764
and $205,348 during the three, nine and twelve months ended June 30,
2001, respectively, and $43,080, $147,326 and $191,764 during the three,
nine and twelve months ended June 30, 2000, 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 $1,388, $3,866 and $5,020 during the three, nine and
twelve months ended June 30, 2001, respectively, and $924, $2,831 and
$4,189 during the three, nine and twelve months ended June 30, 2000,
respectively.
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AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
4. COMMITMENTS AND CONTINGENCIES
There have been no significant developments relating to the commitments
and contingencies reported in the Partnership's 2000 Annual Report.
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 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 on September 22, 2000.
6. AGREEMENT TO PURCHASE COLUMBIA PROPANE
On August 7, 2001, Columbia Energy Group, Columbia Propane Corporation,
Columbia Propane, L.P., AmeriGas Propane, L.P., AmeriGas Partners, L.P.
and AmeriGas Propane, Inc. signed an Amended and Restated Purchase
Agreement relating to the purchase of the retail propane distribution
businesses of Columbia Energy Group for approximately $202,000, subject
to a working capital adjustment. The execution of the original purchase
agreement with Columbia was announced January 31, 2001. The Columbia
propane businesses currently comprise the seventh 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 $152,000 in cash and $50,000 of AmeriGas Partners
Common Units. The cash portion of the purchase price and related
transaction fees and expenses will be funded with approximately $161,000
of long-term debt to be issued by AmeriGas Partners. The closing under
the Amended and Restated Purchase Agreement is expected to occur by
August 31, 2001.
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AMERIGAS FINANCE CORP.
(a wholly owned subsidiary of AmeriGas Partners, L.P.)
BALANCE SHEETS
(unaudited)
June 30, September 30,
2001 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 balance sheets.
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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.
-12-
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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 June 30, 2001 ("2001 three-month period") with the three
months ended June 30, 2000 ("2000 three-month period"); (2) the nine months
ended June 30, 2001 ("2001 nine-month period") with the nine months ended June
30, 2000 ("2000 nine-month period"); and (3) the twelve months ended June 30,
2001 ("2001 twelve-month period") with the twelve months ended June 30, 2000
("2000 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.
2001 THREE-MONTH PERIOD COMPARED WITH 2000 THREE-MONTH PERIOD
- ------------------------------------------------------------------------------------------------------------------------
Increase
Three Months Ended June 30, 2001 2000 (Decrease)
- ------------------------------------------------------------------------------------------------------------------------
(Millions of dollars)
Gallons sold (millions):
Retail 133.2 135.4 (2.2) (1.6)%
Wholesale 36.5 58.5 (22.0) (37.6)%
------ ------ -----
169.7 193.9 (24.2) (12.5)%
====== ====== =====
Revenues:
Retail propane $174.1 $156.9 $17.2 11.0 %
Wholesale propane 23.4 32.9 (9.5) (28.9)%
Other 21.7 19.9 1.8 9.0 %
------ ------ -----
$219.2 $209.7 $ 9.5 4.5 %
====== ====== =====
Total margin $ 98.7 $ 90.3 $ 8.4 9.3 %
EBITDA (a) $ 12.8 $ 13.8 $(1.0) (7.2)%
Operating loss $ (5.7) $ (3.0) $ 2.7 90.0 %
Heating degree days - % warmer
than normal (b) (12.7) (9.0) - -
- ------------------------------------------------------------------------------------------------------------------------
(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
accounting principles generally accepted in the U.S.
(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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16
AMERIGAS PARTNERS, L.P.
Temperatures based upon national heating degree days were 12.7% warmer than
normal in the 2001 three-month period compared to weather that was 9.0% warmer
than normal in the 2000 three-month period. Retail gallons sold decreased 2.2
million gallons (1.6%) primarily due to warmer early spring weather and
price-induced customer conservation. Additionally, the weaker U.S. economy in
the 2001 three-month period resulted in lower sales to certain industrial,
commercial and motor fuel customers. Wholesale volumes sold decreased 22.0
million gallons (37.6%) due to greater sales in the prior-year period associated
with product cost management activities.
Retail propane revenues increased $17.2 million to $174.1 million reflecting (1)
a $19.7 million increase as a result of higher average selling prices partially
offset by (2) a $2.5 million decrease due to the lower retail volumes sold.
Wholesale propane revenues decreased $9.5 million reflecting (1) a $12.3 million
decrease as a result of lower wholesale volumes sold was slightly offset by (2)
a $2.8 million increase resulting from higher average selling prices. Other
revenues increased $1.8 million primarily due to higher customer charges and
service income. Cost of sales increased $1.1 million reflecting higher average
propane gas costs offset by the lower retail and wholesale volumes sold.
Notwithstanding the lower retail and wholesale volumes sold, total margin
increased $8.4 million primarily reflecting the impact of higher average retail
propane unit margins.
EBITDA decreased $1.0 million (7.2%) in the 2001 three-month period as the
increase in total margin was more than offset by a $9.0 million increase in
Partnership operating and administrative expenses. Operating expenses in the
2000 three-month period are net of $3.3 million of income from reductions to
employee incentive compensation and benefit accruals recorded earlier in the
fiscal 2000 year. Adjusting for this income in the prior year, operating and
administrative costs of the Partnership increased $5.7 million principally due
to higher vehicle expenses, greater expenses associated with growth initiatives
including our PPX(R) grill cylinder exchange program, and acquisitions made in
Fiscal 2000. Operating loss increased $2.7 million reflecting the decrease in
EBITDA and higher depreciation and amortization expense including $1.1 million
of additional depreciation associated with tank installation costs.
The Partnership's interest expense for the 2001 three-month period increased
$0.6 million due primarily to higher average Acquisition Facility borrowings.
-14-
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AMERIGAS PARTNERS, L.P.
2001 NINE-MONTH PERIOD COMPARED WITH 2000 NINE-MONTH PERIOD
- ---------------------------------------------------------------------------------------------------------------------
Increase
Nine Months Ended June 30, 2001 2000 (Decrease)
- ---------------------------------------------------------------------------------------------------------------------
(Millions of dollars)
Gallons sold (millions):
Retail 678.1 635.9 42.2 6.6 %
Wholesale 257.9 201.8 56.1 27.8 %
----- ------ ------
936.0 837.7 98.3 11.7 %
===== ====== ======
Revenues:
Retail propane $ 942.4 $710.8 $231.6 32.6 %
Wholesale propane 195.1 115.0 80.1 69.7 %
Other 71.6 73.8 (2.2) (3.0)%
--------- ------ ------
$ 1,209.1 $899.6 $309.5 34.4 %
========= ====== ======
Total margin $ 480.4 $406.2 $ 74.2 18.3 %
EBITDA $ 201.0 $151.5 $ 49.5 32.7 %
Operating income $ 145.8 $102.0 $ 43.8 42.9 %
Heating degree days - % colder
(warmer) than normal 3.0 (14.1) - -
- ---------------------------------------------------------------------------------------------------------------------
Temperatures during the 2001 nine-month period were 3.0% colder than normal
compared to weather that was 14.1% warmer than normal in the prior-year
nine-month period. Retail propane gallons sold increased 42.2 million gallons
(6.6%) mainly due to the colder weather, the impact of acquisitions completed in
Fiscal 2000 and higher PPX(R) grill cylinder exchange sales. Partially
offsetting the impact of these factors were customer conservation efforts in
response to higher selling prices and the effects of a slowing economy.
Wholesale gallons sold increased 56.1 million gallons primarily due to sales
associated with product cost management activities and generally greater
wholesale activity.
Total revenues from retail propane sales increased $231.6 million (32.6%)
reflecting (1) a $184.4 million increase as a result of higher average selling
prices and (2) a $47.2 million increase as a result of higher retail volumes
sold. Wholesale propane revenues increased $80.1 million reflecting (1) a $48.1
million increase as a result of higher average selling prices and (2) a $32.0
million increase as a result of the higher wholesale volumes sold. The increases
in retail and wholesale selling prices are a result of higher propane supply
costs. Other revenues decreased $2.2 million due to decreased appliance sales
and service revenue and the impact of the change in accounting for tank
installation costs on tank installation revenue partially offset by higher
customer charges and greater rental income. Cost of sales increased $235.3
million as a result of higher propane product costs and the greater retail and
wholesale volumes sold.
-15-
18
AMERIGAS PARTNERS, L.P.
Total margin increased $74.2 million in the 2001 nine-month period due to the
impact of higher-than-normal average retail unit margins and, to a lesser
extent, the greater retail propane volumes sold. Unit margins in the 2001
nine-month period benefited from gains on derivative hedge instruments and
favorably priced supply arrangements.
The $49.5 million increase in EBITDA reflects the increase in margin partially
offset by a $23.4 million increase in Partnership operating and administrative
expenses. Prior-year operating and administrative expenses include $5.7 million
of costs associated with the installation of Partnership-owned tanks. In the
2001 nine-month period, such costs were capitalized in accordance with the
Partnership's change in accounting principle. Adjusting for these costs in the
prior-year period, operating and administrative expenses increased $29.1 million
primarily as a result of (1) higher employee-related costs including greater
overtime and incentive compensation costs; (2) higher distribution expenses
including vehicle costs; (3) higher required reserves for uncollectible
accounts; and (4) growth-related expenses associated with our PPX(R) grill
cylinder exchange business and businesses acquired in Fiscal 2000. Depreciation
and amortization expense increased $5.7 million due to $3.3 million of
depreciation associated with tank installation costs and depreciation and
amortization resulting from Fiscal 2000 acquisitions.
Interest expense of the Partnership increased $4.4 million principally as a
result of higher levels of long-term debt outstanding and higher average
Acquisition Facility borrowings.
2001 TWELVE-MONTH PERIOD COMPARED WITH 2000 TWELVE-MONTH PERIOD
- ---------------------------------------------------------------------------------------------------------------------
Increase
Twelve Months Ended June 30, 2001 2000 (Decrease)
- ---------------------------------------------------------------------------------------------------------------------
(Millions of dollars)
Gallons sold (millions):
Retail 813.4 773.1 40.3 5.2 %
Wholesale 314.1 245.3 68.8 28.0 %
------- ------- -----
1,127.5 1,018.4 109.1 10.7 %
======= ======= =====
Revenues:
Retail propane $1,101.9 $ 837.6 $264.3 31.6 %
Wholesale propane 232.7 134.5 98.2 73.0 %
Other 94.9 95.4 (0.5) (0.5)%
-------- -------- ------
$1,429.5 $1,067.5 $362.0 33.9 %
======== ======== ======
Total margin $ 566.0 $ 487.5 $ 78.5 16.1 %
EBITDA $ 207.1 $ 155.9 $ 51.2 32.8 %
Operating income $ 134.1 $ 89.8 $ 44.3 49.3 %
Heating degree days - % colder
(warmer) than normal 2.9 (13.8) - -
- ---------------------------------------------------------------------------------------------------------------------
-16-
19
AMERIGAS PARTNERS, L.P.
Temperatures based upon heating degree days were 2.9% colder than normal during
the 2001 twelve-month period compared to weather that was 13.8% warmer than
normal in the 2000 twelve-month period. Retail propane gallons sold increased
40.3 million gallons (5.2%) due to higher residential heating, commercial and
industrial gallons sold resulting from the colder weather and the impact of
acquisitions partially offset by price-induced customer conservation and the
slowing economy. Wholesale propane volumes increased 28.0% to 314.1 million
gallons mainly due to product cost management activities and greater wholesale
activity.
Total retail propane revenues increased $264.3 million reflecting (1) a $220.6
million increase as a result of higher average selling prices and (2) a $43.7
million increase as a result of higher retail volumes sold. The $98.3 million
increase in wholesale revenues reflects (1) a $60.6 million increase as a result
of higher average wholesale selling prices and (2) a $37.7 million increase as a
result of higher volumes sold. Cost of sales increased as a result of the higher
propane costs and greater volumes sold.
Total margin increased $78.5 million due to higher-than-normal average retail
unit margins and greater volumes sold. Unit margins in the 2001 twelve-month
period benefited from gains on derivative hedge instruments and favorably priced
supply arrangements. EBITDA increased $51.2 million in the 2001 twelve-month
period primarily due to the increased margin partially offset by a $27.7 million
increase in the Partnership's operating and administrative expenses. Operating
and administrative expenses increased primarily due to (1) higher
employee-related costs including greater overtime and incentive compensation
costs; (2) higher distribution expenses including vehicle expenses; (3) higher
required reserves for uncollectible accounts; and (4) growth-related expenses
associated with our PPX(R) grill cylinder exchange business and businesses
acquired in Fiscal 2000. Operating income increased $44.3 million as the
increase in EBITDA was offset primarily by greater depreciation and amortization
expense associated with acquisitions and depreciation on tank installation
costs.
The Partnership's interest expense for the 2001 twelve-month period increased
$7.5 million due to higher levels of long-term debt outstanding and higher
average Acquisition Facility borrowings.
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION
The Partnership's debt outstanding at June 30, 2001 totaled $863.0 million
comprising $854.0 million of long-term debt (including current maturities of
$66.6 million) and $9 million under the Operating Partnership's Revolving Credit
Facility. Included in long-term debt outstanding at June 30, 2001 is $70 million
of Acquisition Facility borrowings.
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 were used to reduce Bank Credit Agreement
indebtedness and for working capital purposes.
-17-
20
AMERIGAS PARTNERS, L.P.
On April 4, 2001, AmeriGas Partners issued $60 million face value of 10% Senior
Notes due April 2006. The proceeds of these notes were contributed to the
Operating Partnership and used to (1) repay revolving loans under the Operating
Partnership's bank credit facilities and (2) fund a portion of the scheduled
April 2001 $58 million principal repayment on the Operating Partnership's First
Mortgage Notes.
During the nine months ended June 30, 2001, the Partnership declared and paid
the minimum quarterly distribution of $0.55 (the "MQD") on all units for the
quarters ended September 30, 2000, December 31, 2000, and March 31, 2001. The
MQD for the quarter ended June 30, 2001 will be paid on August 18, 2001 to
holders of record on August 10, 2001 of all Common and Subordinated units. 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 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 for the foreseeable
future.
The Partnership's ability 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. Due to the historical "look-back" provisions of the conversion
test, the Partnership cannot satisfy the cash-based performance requirements for
conversion any earlier than 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 nine months ended
June 30, 2001 are not necessarily indicative of cash flows to be expected for a
full year.
OPERATING ACTIVITIES. Cash provided by operating activities was $89.1 million
during the nine months ended June 30, 2001 compared with $45.6 million during
the prior-year nine-month period. Changes in operating working capital during
the 2001 nine-month period used $53.7 million of operating cash flow compared
with $50.8 million in the prior year. Cash flow from operating activities before
changes in operating working capital was $142.8 million in the nine months ended
June 30, 2001 compared with $96.5 million in the prior-year period reflecting
the improved 2001 nine-month period operating results.
-18-
21
AMERIGAS PARTNERS, L.P.
INVESTING ACTIVITIES. We spent $28.6 million for property, plant and equipment
(including maintenance capital expenditures of $13.0 million) during the nine
months ended June 30, 2001 compared with $22.4 million (including maintenance
capital expenditures of $8.0 million) in the nine months ended June 30, 2000.
Included in the 2001 nine-month period capital expenditures are $4.0 million of
capitalized 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 nine-month periods ended June 30, 2001 and
2000, 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 2001 nine-month period resulting from
higher propane supply prices and colder weather, we were able to reduce our bank
loans $21 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
2001 nine-month period, AmeriGas Partners issued $60 million face value of
senior notes and the Operating Partnership repaid $58 million of maturing First
Mortgage Notes. During the 2000 nine-month period, the Operating Partnership
borrowed $116 million under the Acquisition Facility and made Acquisition
Facility repayments totaling $69 million, with the proceeds from an $80 million
issuance of First Mortgage Notes.
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 nine months ended June 30, 2001 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
-19-
22
AMERIGAS PARTNERS, L.P.
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.
ACCOUNTING PRINCIPLES NOT YET ADOPTED
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations" ("SFAS 141") and SFAS No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142").
SFAS 141 addresses financial accounting and reporting for business combinations
and supersedes Accounting Principles Board ("APB") Opinion No. 16, "Business
Combinations," and SFAS No. 38, "Accounting for Preacquisition Contingencies of
Purchased Enterprises." Under the provisions of SFAS 141, all business
combinations initiated after June 30, 2001 are required to be accounted for
using the purchase method of accounting. SFAS 141 also establishes specific
criteria for the recognition of intangible assets separate from goodwill
acquired in a purchase business combination, and requires unallocated negative
goodwill resulting from a purchase business combination to be written off
immediately as an extraordinary gain. Although SFAS 141 supersedes APB 16 and
SFAS 38, it does not change many of their provisions relating to the application
of the purchase method.
SFAS 142 addresses the financial accounting and reporting for acquired goodwill
and other intangible assets and supersedes APB Opinion No. 17, "Intangible
Assets" ("APB 17"). 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, a recognized
intangible asset will be amortized over its useful life unless that life is
determined to be indefinite. Goodwill, and intangible assets determined to have
an indefinite useful life, will no longer be amortized. Goodwill will be tested
for impairment at least annually using a two-step process that begins with an
estimation of the fair value of a reporting unit. Other intangible assets with
indefinite lives will also be tested for impairment at least annually by
comparing the fair values of those assets with their recorded amounts. The
provisions of SFAS 142 are required to be applied to all goodwill and other
intangible assets recognized in an entity's statement of financial position in
fiscal years beginning after December 15, 2001. Early application is permitted
for entities with fiscal years beginning
-20-
23
AMERIGAS PARTNERS, L.P.
after March 15, 2001. The provisions of SFAS 142 will be initially applied at
the beginning of a fiscal year. Retroactive application is not permitted,
however entities will be required to disclose the impact that SFAS 142 would
have had on periods presented that are prior to the date of adoption.
Notwithstanding the initial date of adoption, goodwill and other intangible
assets acquired in a business combination completed after June 30, 2001 will be
subject to the amortization and nonamortization provisions of SFAS 142 from the
date of acquisition.
The Partnership plans to adopt the provisions of SFAS 142 effective October 1,
2001. At June 30, 2001, the Partnership had approximately $502.0 million of
goodwill, resulting principally from propane purchase business combinations, and
$95.0 million of excess reorganization value resulting from a subsidiary's 1993
reorganization under Chapter 11 of the U.S. Bankruptcy Code. During the fiscal
year ended September 30, 2000, amortization expense associated with goodwill and
excess reorganization value totaled approximately $23.5 million. As a result of
the nonamortization provisions of SFAS 142, the Partnership expects reported net
income to increase significantly subsequent to the adoption of SFAS 142. In
addition, based upon the current fair value of AmeriGas Partners' publicly
traded Common Units, the Partnership's management does not believe that the
Partnership's goodwill and excess reorganization value are currently impaired.
AGREEMENT TO PURCHASE COLUMBIA PROPANE
On August 7, 2001, Columbia Energy Group, Columbia Propane Corporation, Columbia
Propane, L.P., AmeriGas Propane, L.P., AmeriGas Partners, L.P. and AmeriGas
Propane, Inc. signed an Amended and Restated Purchase Agreement relating to the
purchase of the retail propane distribution businesses of Columbia Energy Group
for approximately $202.0 million, subject to a working capital adjustment. The
execution of the original purchase agreement with Columbia was announced January
31, 2001. The Columbia propane businesses currently comprise the seventh 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 $152.0 million in cash and $50.0 million of AmeriGas Partners
Common Units. The cash portion of the purchase price and related transaction
fees and expenses will be funded with approximately $161.0 million of long-term
debt to be issued by AmeriGas Partners. The closing under the Amended and
Restated Purchase Agreement is expected to occur by August 31, 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary financial market risks include commodity prices for propane and
interest rates. In managing our exposure to these risks, we may use derivative
financial instruments in accordance with established policies and procedures. We
do not use derivative financial instruments for trading purposes.
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
-21-
24
AMERIGAS PARTNERS, L.P.
instruments such as price swap and option contracts. 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
June 30, 2001, borrowings outstanding under this facility totaled $79 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.
The following table summarizes the fair values of unsettled market risk
sensitive derivative instruments held at June 30, 2001. 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)
June 30, 2001:
Propane commodity price risk $ (11.0) $ (7.7)
Interest rate risk (0.1) (3.3)
- ---------------------------------------------------------------------------------
-22-
25
AMERIGAS PARTNERS, L.P.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
4 Indenture dated April 4, 2001 among AmeriGas Partners L.P.,
AmeriGas Eagle Finance Corp. and First Union National Bank,
as Trustee.
(b) AmeriGas Partners, L.P. filed two Current Reports on Form 8-K
during the fiscal quarter ended June 30, 2001. The Reports were as
follows:
Date Item Number Content
---- ----------- -------
4/10/01 5 Advance notice of webcast of quarterly
earnings conference call.
5/02/01 5 Advance notice of webcast of Chairman's
presentation to the American Gas
Association Financial Forum conference.
-23-
26
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: August 14, 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: August 14, 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
-24-
27
EXHIBIT INDEX
<Table>
Exhibit No. Description
- ----------- -----------
4 Indenture dated April 4, 2001 among AmeriGas
Partners L.P., AmeriGas Eagle Finance Corp.
and First Union National Bank, as Trustee.
</Table>