EXHIBIT 99.1
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2000, 1999 and 1998
1
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements for the years ended
December 31, 2000, 1999 and 1998
TABLE OF CONTENTS
PAGE(S)
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Report of Independent Public Accountants 3
Consolidated Balance Sheets as of December 31, 2000 and 1999 4
Consolidated Statements of Operations for the years ended
December 31, 2000, 1999 and 1998 5
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 6
Consolidated Statements of Stockholder's Equity for the years
ended December 31, 2000, 1999 and 1998 7
Notes to Consolidated Financial Statements 8 - 20
2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AmeriGas Propane, Inc.:
We have audited the accompanying consolidated balance sheets of Columbia Propane
Corporation and subsidiaries (a Delaware corporation and wholly owned subsidiary
of Columbia Energy Group) as of December 31, 2000 and 1999, and the related
consolidated statements of operations, cash flows and stockholder's equity for
each of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Columbia Propane Corporation and subsidiaries as of December 31, 2000 and 1999,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Philadelphia, Pennsylvania
November 2, 2001
3
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
DECEMBER 31,
-------------------------
2000 1999
--------- -----------
ASSETS
Cash and cash equivalents $ 2,394 $ 4,818
Accounts receivable (less allowances for doubtful accounts
of $1,355 and $1,228, respectively) 55,758 36,261
Accounts receivable - affiliates 10,977 11,013
Inventories 15,861 13,785
Income taxes recoverable from Parent Company 15,918 5,425
Prepaid expenses and other current assets 3,571 3,359
Deferred income taxes 2,035 2,088
Net current assets of discontinued operations -- 23,975
--------- ---------
Total current assets 106,514 100,724
--------- ---------
Property, plant and equipment (less accumulated depreciation
of $55,126 and $42,354, respectively) 193,704 186,563
Intangible assets (less accumulated amortization
of $14,142 and $6,118, respectively) 124,014 121,374
Net noncurrent assets of discontinued operations -- 50,804
Other assets 3,569 2,855
--------- ---------
Total assets $ 427,801 $ 462,320
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current portion of long-term debt $ 2,053 $ 931
Notes payable - Parent Company -- 1,904
Advances from Parent Company 16,302 13,159
Accounts payable 26,234 20,328
Accounts payable - affiliates 15,457 13,427
Employee compensation and benefits accrued 7,469 5,461
Other current liabilities 1,635 4,001
--------- ---------
Total current liabilities 69,150 59,211
--------- ---------
Long-term debt 2,018 2,890
Notes payable - Parent Company 111,168 149,758
Deferred income taxes 16,986 10,553
Other noncurrent liabilities 27,022 22,198
Commitments and contingencies (Note 9)
Minority interest 500 627
Common stockholder's equity:
Common stock, $25 par value (authorized - 3,000 shares; issued
and outstanding - 1,377 shares) 34 34
Additional paid in capital 213,930 213,930
Retained earnings (accumulated deficit) (13,007) 3,119
--------- ---------
Total stockholder's equity 200,957 217,083
--------- ---------
Total liabilities and stockholder's equity $ 427,801 $ 462,320
========= =========
See accompanying notes to consolidated financial statements.
4
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS)
YEAR ENDED DECEMBER 31,
---------------------------------------
2000 1999 1998
--------- --------- ---------
Revenues:
Propane $ 330,987 $ 150,818 $ 62,750
Other 25,859 21,188 7,734
--------- --------- ---------
356,846 172,006 70,484
--------- --------- ---------
Costs and expenses:
Cost of sales - propane 205,954 79,464 27,488
Cost of sales - other 9,933 11,389 7,081
Operating and administrative expenses 118,088 66,553 24,253
Parent Company charges 15,418 3,579 1,915
Depreciation and amortization 22,244 15,241 6,156
--------- --------- ---------
371,637 176,226 66,893
--------- --------- ---------
Operating (loss) income (14,791) (4,220) 3,591
Nonoperating income (expense), net 3,719 3,966 (420)
--------- --------- ---------
(Loss) income before interest expense, minority
interest and income taxes (11,072) (254) 3,171
Interest expense (11,670) (8,829) (1,666)
--------- --------- ---------
(Loss) income before income taxes and minority interest (22,742) (9,083) 1,505
Income tax benefit (expense) 7,333 3,738 (648)
Minority interest 128 73 --
--------- --------- ---------
(Loss) income from continuing operations (15,281) (5,272) 857
Loss from discontinued operations, net of income tax benefit (845) (1,448) --
--------- --------- ---------
Net (loss) income $ (16,126) $ (6,720) $ 857
========= ========= =========
See accompanying notes to consolidated financial statements.
5
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
YEAR ENDED DECEMBER 31,
---------------------------------------
2000 1999 1998
--------- --------- ---------
Cash flows from operating activities:
Net (loss) income $ (16,126) $ (6,720) $ 857
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Depreciation and amortization 22,244 15,241 6,156
Provision for doubtful accounts 1,130 1,102 551
Deferred income taxes 7,193 1,242 2,235
Other, net (4,187) 5,656 (5,539)
--------- --------- ---------
10,254 16,521 4,260
--------- --------- ---------
Changes in operating assets and liabilities:
Increase in accounts receivable (20,591) (23,838) (4,460)
Decrease (increase) in inventories (1,979) (3,757) 1,934
Increase in income taxes recoverable from Parent Company (10,493) (3,297) --
Increase in accounts payable 7,936 2,496 8,403
Decrease (increase) in other current assets and liabilities (517) 2,761 (2,183)
--------- --------- ---------
Net cash (used in) provided by continuing operations (15,390) (9,114) 7,954
Net cash used in discontinued operations -- (373) --
--------- --------- ---------
Net cash (used in) provided by operating activities (15,390) (9,487) 7,954
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures (24,231) (9,857) (6,636)
Acquisitions of businesses, net of cash acquired (3,233) (155,162) (10,073)
Proceeds from sale of Columbia Petroleum 74,825 -- --
Proceeds from sales of assets 2,063 207 452
--------- --------- ---------
Net cash provided by (used in) investing activities 49,424 (164,812) (16,257)
--------- --------- ---------
Cash flows from financing activities:
Issuance of promissory notes to Parent Company 1,143 125,274 9,500
Repayments of promissory notes to Parent Company (40,494) -- --
Repayments of long-term debt - other (250) (141,645) (5,582)
Net advances from (repayments to) Parent Company 3,143 (4,268) 454
Capital contributions from Parent Company -- 197,226 4,500
--------- --------- ---------
Net cash (used in) provided by financing activities (36,458) 176,587 8,872
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents $ (2,424) $ 2,288 $ 569
Cash and cash equivalents at beginning of year 4,818 2,530 1,961
--------- --------- ---------
Cash and cash equivalents at end of year $ 2,394 $ 4,818 $ 2,530
========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 11,581 $ 7,140 $ 1,453
========= ========= =========
Income taxes (net of refunds) $ -- $ 1,400 $ 844
========= ========= =========
See accompanying notes to consolidated financial statements.
6
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(THOUSANDS OF DOLLARS)
Retained
Additional earnings Total
Common paid-in (accumulated stockholder's
stock capital deficit) equity
-----------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ 34 $ 12,204 $ 8,982 $ 21,220
Net income 857 857
Capital contribution from CEG 4,500 4,500
-----------------------------------------------------------------------------------------------
Balance at December 31, 1998 $ 34 $ 16,704 $ 9,839 $ 26,577
-----------------------------------------------------------------------------------------------
Net loss (6,720) (6,720)
Capital contributions from CEG 197,226 197,226
-----------------------------------------------------------------------------------------------
Balance at December 31, 1999 $ 34 $ 213,930 $ 3,119 $ 217,083
-----------------------------------------------------------------------------------------------
Net loss (16,126) (16,126)
-----------------------------------------------------------------------------------------------
Balance at December 31, 2000 $ 34 $ 213,930 $ (13,007) $ 200,957
===============================================================================================
See accompanying notes to consolidated financial statements.
7
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of dollars)
1. ORGANIZATION
Columbia Propane Corporation ("Columbia Propane") and its principal operating
subsidiary, Columbia Propane, L.P. ("Columbia OLP" or the "Operating
Partnership"), are engaged in the retail distribution of propane and related
equipment and supplies. Columbia Propane, Columbia OLP, and their subsidiaries
are collectively referred to herein as "the Company." The Company is the seventh
largest retail propane marketer in the United States. It serves residential,
commercial, industrial, motor fuel and agricultural customers from approximately
190 locations in 29 states. Columbia OLP is a Delaware limited partnership. CP
Holdings, Inc. ("CPH"), a wholly owned subsidiary of Columbia Propane, serves as
the general partner of the Operating Partnership. An affiliate of Triarc
Companies, Inc. ("Triarc") holds an approximate 1% limited partner interest in
Columbia OLP.
Columbia Propane is a wholly owned subsidiary of Columbia Energy Group ("CEG" or
the "Parent Company"), a leading energy services company engaged in the
transmission, storage and distribution of natural gas, energy marketing and
electric power generation. On August 21, 2001, CEG sold its interests in the
Company to AmeriGas Propane, L.P., a subsidiary of AmeriGas Partners, L.P. (see
Note 13).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION PRINCIPLES. The Company's consolidated financial statements
include the accounts of Columbia Propane and its majority-owned subsidiaries.
The Company eliminates all significant intercompany accounts and transactions
when it consolidates. The Company accounts for Triarc's limited partner interest
in Columbia OLP as minority interest in the consolidated financial statements.
The Company's 50% ownership interest in Atlantic Energy, Inc., a Delaware
corporation ("Atlantic Energy"), the owner of a propane storage terminal located
in Chesapeake, Virginia, is accounted for by the equity method. The investment
is included in other assets on the Consolidated Balance Sheets and the equity in
the earnings of the joint venture are included in nonoperating income (expense),
net, coming in the Consolidated Statements of Operations. The Company's share of
income (loss) of Atlantic Energy was $548, $435 and $(36) for the years ended
December 31, 2000, 1999 and 1998, respectively. The Company's investment in
Atlantic Energy approximates 50% of Atlantic Energy's net assets.
USE OF ESTIMATES. The Company makes estimates and assumptions when preparing its
financial statements in conformity with accounting principles generally accepted
in the United States. These estimates and assumptions affect the reported
amounts of assets and
8
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
liabilities, revenues and expenses, as well as the disclosure of contingent
assets and liabilities. Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS. For cash management purposes, CEG aggregates cash
receipts and makes cash disbursements on behalf of its subsidiaries, including
the Company. The Company's cash receipts in excess of cash disbursements, which
are managed by CEG, are included in cash and cash equivalents on the
Consolidated Balance Sheets. The Company's cash equivalents include highly
liquid investments with maturities of three months or less when purchased. Cash
equivalents are recorded at cost plus accrued interest, which approximates
market value.
REVENUE RECOGNITION. The Company recognizes revenues from the sale of propane
principally as product is shipped or delivered to customers. Revenue from the
sale of appliances and equipment is recognized at the time of sale or
installation. Revenue from repairs and maintenance is recognized upon completion
of the service.
INVENTORIES. Inventories are stated at the lower of cost or market. The Company
determines cost using an average cost method for propane and specific
identification for appliances.
PROPERTY, PLANT AND EQUIPMENT AND RELATED DEPRECIATION. The Company records
property, plant and equipment at cost. The amounts the Company assigns to
property, plant and equipment of businesses acquired are based upon estimated
fair value at the date of acquisition. When the Company retires or disposes of
plant and equipment, the cost and related accumulated depreciation are removed
from the accounts and any gains or losses are included in income.
The Company computes depreciation of property, plant and equipment using the
straight-line method over estimated service lives generally ranging from 15 to
40 years for buildings and improvements; 7 to 20 years for storage and customer
tanks and cylinders; and 5 to 10 years for vehicles, equipment and office
furniture and fixtures. Depreciation expense was $13,231 in 2000, $10,958 in
1999, and $5,083 in 1998.
INTANGIBLE ASSETS. Intangible assets comprise the following at December 31, 2000
and 1999:
2000 1999
-------- --------
Goodwill (less accumulated amortization of
$2,858 and $1,010, respectively) $ 70,979 $ 63,490
Customer lists (less accumulated amortization
of $8,983 and $3,922, respectively) 48,610 52,339
Non-compete agreements (less accumulated
amortization of $2,301 and $1,186,
respectively) 4,425 5,545
-------- --------
Total intangible assets $124,014 $121,374
======== ========
9
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
The Company amortizes goodwill resulting from business combinations accounted
for as purchases on a straight-line basis over 40 years. Customer lists are
amortized over ten years. Non-compete agreements are amortized over the term of
the agreements which range from five to ten years. Amortization expense of
intangible assets was $9,013, $4,283 and $1,073 for the years ended December 31,
2000, 1999 and 1998, respectively.
The Company evaluates the impairment of long-lived assets, including
intangibles, whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. The Company evaluates
recoverability based upon undiscounted future cash flows expected to be
generated by such assets.
ENVIRONMENTAL LIABILITIES. The Company accrues environmental investigation and
cleanup costs when it is probable that a liability exists and the amount or
range of amounts can be reasonably estimated. Our estimated liability for
environmental contamination is reduced to reflect anticipated participation of
other responsible parties but is not reduced for possible recovery from
insurance carriers. The Company does not discount to present value the costs of
future expenditures for environmental liabilities.
INCOME TAXES. The Company joins with CEG and its subsidiaries in filing a
consolidated federal income tax return. The Company is allocated tax assets,
liabilities, expense, benefits and credits resulting from the effects of its
transactions in the consolidated federal income tax provision including giving
effects to intercompany transactions. The result of this allocation is not
materially different from income taxes calculated on a separate return basis.
The income taxes due from Parent Company represent the amount of federal income
tax benefits utilized by the Parent Company resulting from the Company's net
losses. Such amounts are to be repaid in future periods by CEG.
The Operating Partnership is not directly subject to federal income taxes.
Instead, its taxable income or loss is allocated to the individual partners,
including Columbia Propane, pursuant to its partnership agreement. Accordingly,
income taxes of Columbia Propane include income taxes resulting from its
ownership interests in the Operating Partnership.
RISK MANAGEMENT ACTIVITIES. On occasion, the Company uses forward purchase and
propane futures contracts to hedge exposure to price risk associated with a
portion of its anticipated propane purchases. Gains or losses resulting from
these contracts are recognized in cost of sales when the forecasted transaction
affects earnings. If it is probable that the forecasted purchase of propane will
not occur, any gain or loss is immediately recognized in earnings. If the
contract is terminated early for other economic reasons, any gain or loss is
deferred as of the termination date until such time as the forecasted purchase
of propane occurs.
10
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
COMPREHENSIVE INCOME. Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income" ("SFAS 130"), establishes standards for
reporting and displaying comprehensive income, comprising net income and other
nonowner changes in equity, in the financial statements. For all periods
presented, comprehensive income (loss) was the same as net income (loss).
SEGMENT INFORMATION. SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information" ("SFAS 131"), defines operating segments as components
of an enterprise for which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Based upon the way we organize
our business for making operating decisions and assessing performance, we have
determined that we have a single reportable operating segment which engages in
the distribution of propane and related equipment and supplies. No single
customer represents ten percent or more of consolidated revenues. In addition,
virtually all of the Company's revenues are derived from sources within the
United States and virtually all of its long-lived assets are located in the
United States.
ACCOUNTING PRINCIPLES NOT YET ADOPTED.
SFAS 133. In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). SFAS 133, as amended, establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that an entity recognize all derivative instruments as either assets or
liabilities and measure them 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 in cash
flows associated with forecasted transactions, the effective portion of the gain
or loss on such derivative instruments will generally be reported in other
comprehensive income and the ineffective portion, if any, will be reported in
net income. Such amounts recorded in accumulated other comprehensive income will
be reclassified into earnings when the forecasted transaction affects 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 will be recognized currently in
earnings along with changes in the fair value of the hedged asset, liability or
firm commitment attributable to the hedged risk.
The Company adopted the provisions of SFAS 133 effective January 1, 2001.
Because the Company elected not to formally document the effectiveness of its
hedges to determine if they met the requirements for hedge accounting under SFAS
133, all derivative instruments are marked to fair value through earnings. The
adoption of SFAS 133 resulted in after-tax cumulative effect income of $2,058
representing the fair value of
11
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
derivative instruments outstanding on January 1, 2001. The impact of SFAS 133 on
the Company's future results of operations will depend upon whether or not its
derivative instruments are designated and qualify for hedge accounting. As a
result, future earnings could reflect greater volatility.
SFAS 141 AND SFAS 142. In July 2001, the FASB issued SFAS No. 141, "Business
Combinations" ("SFAS 141"), and SFAS No. 142, "Goodwill and Other Intangible
Assets" ("SFAS 142"). Under the provisions of SFAS 141, all business
combinations initiated after June 30, 2001 are required to be accounted for
under the purchase method of accounting. Under the provisions of SFAS 142,
goodwill will no longer be amortized but will be subject to a transitional
impairment review and to annual impairment reviews. SFAS 142 is effective for
fiscal years beginning after December 15, 2001, but early adoption is permitted
for companies with a fiscal year beginning after March 15, 2001. The Company
will adopt the provisions of SFAS 142 effective January 1, 2002. The Company is
currently in the process of evaluating the impact SFAS 142 will have on the
consolidated financial position and consolidated results of operations of the
Company.
SFAS 144. In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" and the accounting and reporting provisions
of APB No. 30, "Reporting the Results of Operations -- Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" as it relates to the disposal of a segment of
a business. This statement is effective for the Company January 1, 2002. The
Company does not believe that the adoption of SFAS 144 will have a material
impact on its financial position or results of operations.
3. ACQUISITIONS
In July 1999, Columbia Propane, through Columbia OLP, completed its acquisition
of National Propane Partners, L.P. and its subsidiaries ("National Propane") for
total cash consideration of $67,211 plus transaction fees and expenses and the
assumption of $144,245 of debt. The total purchase price was $214,793. Pursuant
to the acquisition, Columbia OLP (1) acquired all of the remaining 6,701,550
outstanding common units of National Propane for $12 per common unit ($2.40 of
which was funded by Triarc); (2) acquired the general partnership and
subordinated unit interests of National Propane from Triarc for $17,916
consisting of $2,100 in cash and $15,816 in the form of the forgiveness of a
note owed by Triarc to National Propane; and (3) merged National Propane into
Columbia OLP. Additionally, concurrently with the acquisition, Triarc prepaid
$14,884 of a note owed to National Propane; and the Company repaid $140,997 of
National Propane debt plus accrued interest assumed in the acquisition. Triarc
retained
12
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
an approximate 1% limited partnership interest in Columbia OLP subsequent to the
acquisition.
The following table details the purchase price allocation for the National
Propane acquisition:
Current assets $ 15,392
Property, plant and equipment 127,264
Other assets 1,414
Goodwill 59,030
Customer lists 42,481
Accounts payable and accrued liabilities (30,788)
---------
$ 214,793
=========
The following unaudited pro forma financial information sets forth the operating
results of Columbia Propane for the year ended December 31, 1999, as if the
acquisition of National Propane had occurred on January 1, 1999, and reflects
the related impacts of adjustments to interest expense, depreciation and
amortization, interest income and income taxes:
Revenues $ 247,167
Loss from continuing operations (8,271)
Net loss (9,719)
The unaudited pro forma financial information does not purport to be indicative
of the actual results of operations that would have resulted had the Company
acquired National Propane on January 1, 1999, or of the future results of
operations of the Company.
In May 1999, Columbia Propane, through its subsidiary Columbia Petroleum
Corporation ("Columbia Petroleum"), acquired certain fuel oil and propane
operations from Carlos R. Leffler, Inc. ("Leffler") and certain other associated
entities for total cash consideration of $70,665. The fuel oil portion of the
Leffler business, along with other related petroleum assets, were sold to CEG
effective January 1, 2000 and have been classified as discontinued operations
(see Note 12). The Leffler propane operations included in continuing operations
are not material to the Company's results of operations.
In addition to the acquisitions of National Propane and Leffler, during 1999 and
1998, the Company acquired several retail propane and related businesses for
total cash consideration of $14,798 and $10,073, respectively. In addition,
during 2000 the Company acquired one retail propane business for $3,233 in cash
and the issuance of a $1,000 note. These business acquisitions have been
accounted for using the purchase
13
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
method of accounting. Their results of operations are included in the
consolidated results of operations from their respective dates of acquisition.
The pro forma effect of these acquisitions was not material to the Company's
results of operations.
During 1999 and 1998, CEG made cash capital contributions to the Company
primarily to finance acquisitions.
4. DEBT
Long-term debt comprises the following at December 31:
2000 1999
--------- ---------
Promissory Notes - CEG, 6.28% - 8.12%, due
November 2002 through March 2014 $ 111,168 $ 151,662
Other 4,071 3,821
--------- ---------
Total long-term debt 115,239 155,483
Less current maturities (2,053) (2,835)
--------- ---------
$ 113,186 $ 152,648
========= =========
Scheduled repayments of long-term debt for each of the next five fiscal years
ending December 31 are as follows: 2001 - $2,053; 2002 - $2,201; 2003 - $529;
2004 - $529; 2005 - $2,164.
For cash management purposes, CEG aggregates cash receipts and also makes
operating cash disbursements on behalf of each of its subsidiaries, including
the Company. Cash disbursements made on behalf of the Company in excess of cash
received is classified in the Consolidated Balance Sheets as advances from
Parent Company. Columbia Propane's borrowings under this arrangement with the
Parent Company bear interest at short-term market rates and cannot exceed
$25,000 at any one time. The Company from time to time converts all or a portion
of such borrowings into long-term promissory notes issued to CEG.
5. EMPLOYEE RETIREMENT PLANS
Employees of the Company participate in CEG's noncontributory qualified defined
benefit pension plan. Benefits are based upon years of credited service and the
employee's highest average annual compensation during the last five years of
service. Effective January 1, 2000, CEG adopted a cash balance feature to the
pension plan that provides benefits based on a percentage of current eligible
compensation and current interest credits. Certain of the Company's employees
also participate in CEG's nonqualified plan which provides supplemental retiree
income benefits in excess of the qualified plan's statutory limits. CEG
allocates a portion of the cost of these plans to the
14
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
Company. Pension expense (income) recorded by the Company was $845, $(109) and
$(266) in 2000, 1999 and 1998, respectively. The Company also provides, through
CEG, retiree medical and life insurance benefits to those employees meeting
certain age and service requirements. The cost of such benefits allocated to the
Company was $1,896 in 2000 and $717 in 1999. Such benefit cost in 1998 was not
material.
The Company also sponsors a 401(k) savings plan for employees. The Company
matches employee contributions dollar-for-dollar up to 6% of eligible
compensation. The cost of benefits under this plan was $758 in 2000, $278 in
1999, and $225 in 1998.
6. INCOME TAXES
Income taxes consist of the following:
Year Ended
December 31,
----------------------------------
2000 1999 1998
-------- -------- --------
Current income tax benefit:
Federal $ 13,688 $ 4,121 $ 1,313
State 838 859 274
-------- -------- --------
14,526 4,980 1,587
Deferred income tax expense (7,193) (1,242) (2,235)
-------- -------- --------
Total income tax (expense) benefit $ 7,333 $ 3,738 $ (648)
======== ======== ========
A reconciliation from the statutory federal tax rate to our effective tax rate
is as follows:
Year Ended
December 31,
--------------------------
2000 1999 1998
------ ------ ------
Statutory federal tax rate 35.0% 35.0% 35.0%
Difference in tax rate due to:
State income taxes, net of federal (2.2) 6.8 7.0
Other, net (0.6) (0.6) 1.1
----- ----- -----
Effective tax rate 32.2% 41.2% 43.1%
===== ===== =====
During 2000, the Company recorded additional state tax expense of approximately
$2,000 for probable tax assessments.
15
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
Deferred tax liabilities (assets) comprise the following at December 31:
2000 1999
-------- --------
Excess book basis over tax basis of property,
plant and equipment $ 12,862 $ 10,533
Equity in partnership income 7,436 1,580
Other 63 1,585
-------- --------
Gross deferred tax liabilities 20,361 13,698
-------- --------
Employee-related benefits (2,986) (3,351)
Equity losses (793) (684)
Other (1,631) (1,198)
-------- --------
Gross deferred tax assets (5,410) (5,233)
-------- --------
Net deferred tax liabilities $ 14,951 $ 8,465
======== ========
7. INVENTORIES
Inventories comprise the following at December 31:
2000 1999
-------- --------
Propane gas $ 12,467 $ 10,536
Appliances for sale 3,086 2,930
Other 308 319
-------- --------
$ 15,861 $ 13,785
======== ========
In addition to inventories on hand, we also enter into contracts to purchase
propane to meet a portion of our supply requirements. Generally, such contracts
have terms of less than one year and call for payment based on either fixed
prices or market prices at date of delivery.
16
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprises the following at December 31:
2000 1999
-------- --------
Land $ 12,050 $ 11,768
Buildings and improvements 18,229 17,702
Transportation equipment 15,239 14,628
Equipment, primarily cylinders and tanks 196,532 177,721
Other 6,780 7,098
-------- --------
Gross property, plant and equipment 248,830 228,917
Less: Accumulated depreciation and amortization (55,126) (42,354)
-------- --------
Net property, plant and equipment $193,704 $186,563
======== ========
9. COMMITMENTS AND CONTINGENCIES
The Company leases various buildings and transportation, data processing, and
office equipment under operating leases. Certain of the leases contain renewal
and purchase options and also contain escalation clauses. The aggregate rental
expense for such leases was $8,932 in 2000, $4,468 in 1999, and $774 in 1998.
Minimum future payments under noncancelable operating leases are as follows:
Year ending December 31,
2001 $ 9,547
2002 8,913
2003 7,596
2004 6,012
2005 4,523
Thereafter 3,627
-------
Total minimum lease obligations $40,218
=======
The Company's primary exposure to environmental liability relates to former
manufactured gas plant ("MGP") sites acquired with the acquisition of National
Propane. These sites relate to properties purchased by National Propane from
utility companies which formerly operated MGPs on these sites. Some constituents
of coal tars and other residues of the manufactured gas process are today
considered hazardous substances under the federal "Comprehensive Environmental
Response, Compensation and Liability Act" or "Superfund Law" and may be present
at these sites. Investigations are currently underway at one MGP site, and it is
possible that former MGPs exist at several other
17
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
National Propane properties. At December 31, 2000, included in other noncurrent
liabilities is $5,571 relating to environmental sites which the Company believes
is adequate. The Company intends to pursue recovery of any incurred costs of
investigation and remediation from insurance companies and former owners of such
sites, however such recovery cannot be assured. Management believes that
expenditures or settlements relating to these sites will not have a material
adverse effect on the Company's financial position or results of operations.
In connection with the purchase of National Propane, Columbia Propane has
provided an indemnity to reimburse the former Managing Partner for income taxes
that would be due if certain actions by Columbia Propane result in the
recognition of certain types of income or gain by National Propane's former
Managing General Partner.
In addition to these matters, there are other pending claims and legal actions
arising in the normal course of business. We cannot predict with certainty the
final results of these matters. However, it is reasonably possible that some of
them could be resolved unfavorably to us. Management believes, after
consultation with counsel, that damages or settlements, if any, recovered by the
plaintiffs in such claims or actions will not have a material adverse effect on
our financial position but could be material to our operating results or cash
flows in future periods depending on the nature and timing of future
developments with respect to these matters and the amounts of future operating
results and cash flows.
Approximately $10 million of self insurance retention and legal reserves are
included in other noncurrent liabilities as of December 31, 2000 and 1999.
10. RELATED PARTY TRANSACTIONS
CEG performs certain general and administrative services on behalf of the
Company including insurance, legal, information system, audit, payroll and
employee-related services. CEG is reimbursed for all direct expenses it incurs
on behalf of the Company. Such expenses are included in operating and
administrative expenses. In addition, CEG allocates and bills monthly a portion
of its corporate overhead to its subsidiaries, including the Company. This
allocation is based upon a five-factor formula which includes headcount, fixed
assets, operating expenses, depreciable property and vehicles. These allocated
charges are reflected on the Consolidated Statements of Operations as "Parent
Company charges." Amounts due from CEG at December 31, 2000 and 1999 were $3,412
and $89, respectively. Amounts due to CEG at December 31, 2000 and 1999 were
$6,907 and $3,132, respectively. These amounts are included in accounts
receivable and accounts payable - affiliates in the Consolidated Balance Sheets.
18
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
The Company performs certain administrative and operating services for Atlantic
Energy including providing various accounting, administrative and insurance
services for which it is reimbursed. Such charges totaled $64, $42 and $36 in
2000, 1999 and 1998, respectively. In addition, certain of the Company's
employees perform full-time operating and administrative functions for Atlantic
Energy. The Company is reimbursed for the employee costs which totaled $657,
$710 and $856 in 2000, 1999 and 1998, respectively. The Company also sells
propane to Atlantic Energy at cost and provides trade credit and product cost
management services on behalf of Atlantic Energy. Sales of propane to Atlantic
Energy were not material in 2000, 1999 and 1998. Net amounts due from Atlantic
Energy at December 31, 2000 and 1999 were $7,537 and $9,102, respectively.
Amounts due to Atlantic Energy at December 31, 2000 and 1999 were $5,627 and
$7,244, respectively. These amounts are included in accounts receivable and
accounts payable - affiliates in the Consolidated Balance Sheets.
11. FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments included in current assets and
current liabilities approximate their fair values because of their short-term
nature. The estimated fair values of long-term debt are $112,304 at December 31,
2000 and $144,158 at December 31, 1999. These fair values have been determined
by discounting future cash flows using rates available for similar types of
debt.
The Company has financial instruments such as trade receivables which expose it
to concentrations of credit risk. The credit risk from trade accounts receivable
is limited because the Company has a large customer base which extends across
many U.S. markets.
The Company enters into forward propane purchase and futures contracts to manage
market risk associated with anticipated propane purchases under its supply
contracts and on the spot market. At December 31, 2000, the fair value of
unsettled forward purchase contracts was approximately $3,400.
19
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
12. DISCONTINUED OPERATIONS
Effective January 1, 2000, Columbia Propane sold its wholly owned subsidiary,
Columbia Petroleum, to CEG for total cash consideration of $33,400. The loss on
disposal of Columbia Petroleum of $845 is reflected as discontinued operations
in the 2000 Consolidated Statement of Operations. Concurrent with the sale, CEG
repaid $41,425 of loans due to Columbia Propane by Columbia Petroleum. The
results of Columbia Petroleum are reported as discontinued operations in the
1999 Consolidated Financial Statements. Revenues and net loss from discontinued
operations in 1999 were $128,352 and $1,448, respectively. The net assets of the
discontinued operations as of December 31, 1999 comprise the following:
Current assets $ 36,595
Property, plant and equipment, net 21,763
Other assets 29,227
Current liabilities (12,620)
Long-term liabilities (186)
--------
Net assets of discontinued operations $ 74,779
========
13. SUBSEQUENT EVENT
On August 21, 2001, Columbia Propane and CEG sold substantially all the assets
and the stock of Columbia Propane to AmeriGas Propane, L.P. ("AmeriGas OLP")
pursuant to the terms of a purchase agreement dated January 30, 2001 and amended
and restated on August 7, 2001 ("Columbia Purchase Agreement") by and among CEG,
CP Holdings, Inc., Columbia Propane, Columbia OLP, AmeriGas OLP, AmeriGas
Partners, L.P. ("AmeriGas Partners"), and AmeriGas Propane, Inc. The assets sold
included an indirect 1% general partner interest and a direct, approximate 99%
limited partnership interest in Columbia OLP. In addition, AmeriGas OLP (1)
became the payee under the $138,000 intercompany note of Columbia OLP due in
July 2009 and (2) made a capital contribution to Columbia OLP of operating
assets with a net agreed value of approximately $280,000 in exchange for a
limited partnership interest in Columbia OLP of equal value.
Columbia Propane and CEG received an aggregate $201,750 in cash. The Columbia
Purchase Agreement also provided for the purchase by CEG of limited partnership
interests in AmeriGas OLP valued at $50,000 for $50,000 in cash, which interests
were exchanged for 2,356,953 Common Units of AmeriGas Partners having an
estimated fair value of $54,422. In accordance with the Columbia Purchase
Agreement, AmeriGas OLP agreed to pay CEG for the amount of working capital, as
defined, in excess of $23,000.
20
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended June 30, 2001 and 2000
1
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
(UNAUDITED)
JUNE 30, DECEMBER 31,
2001 2000
--------- -----------
ASSETS
Cash and cash equivalents $ 4,505 $ 2,394
Accounts receivable (less allowances for doubtful
accounts of $2,459 and $1,355, respectively) 24,947 55,758
Accounts receivable - affiliates 3,524 10,977
Inventories 15,768 15,861
Income taxes recoverable from Parent Company 15,918 15,918
Prepaid expenses and other current assets 1,964 5,606
--------- ---------
Total current assets 66,626 106,514
--------- ---------
Property, plant and equipment (less accumulated
depreciation of $62,324 and $55,126, respectively) 195,352 193,704
Intangible assets (less accumulated amortization
of $18,443 and $14,142, respectively) 120,204 124,014
Other assets 4,405 3,569
--------- ---------
Total assets $ 386,587 $ 427,801
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current portion of long-term debt $ 162 $ 2,053
Notes payable - Parent Company -- --
Advances from Parent Company 1,797 16,302
Accounts payable 2,737 30,914
Accounts payable - affiliates 12,847 10,777
Employee compensation and benefits accrued 10,836 7,469
Other current liabilities 2,142 1,635
--------- ---------
Total current liabilities 30,521 69,150
--------- ---------
Long-term debt 2,108 2,018
Notes payable - Parent Company 111,168 111,168
Deferred income taxes 14,754 16,986
Other noncurrent liabilities 26,831 27,022
Commitments and contingencies (Note 3)
Minority interest 440 500
Common stockholder's equity:
Common stock, $25 par value (authorized -
3,000 shares; issued and outstanding -
1,377 shares) 34 34
Additional paid in capital 213,930 213,930
Accumulated deficit (13,199) (13,007)
--------- ---------
Total stockholder's equity 200,765 200,957
--------- ---------
Total liabilities and stockholder's equity $ 386,587 $ 427,801
========= =========
See accompanying notes to condensed consolidated financial statements.
2
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
------------------------
2001 2000
--------- ---------
Revenues:
Propane $ 208,820 $ 162,863
Other 10,306 11,463
--------- ---------
219,126 174,326
--------- ---------
Costs and expenses:
Cost of sales - propane 133,080 96,137
Cost of sales - other 3,928 4,350
Operating and administrative expenses 69,087 63,952
Parent Company charges 3,733 3,571
Depreciation and amortization 11,755 12,152
--------- ---------
221,583 180,162
--------- ---------
Operating loss (2,457) (5,836)
Nonoperating income, net 3,118 3,414
--------- ---------
Income (loss) before interest expense, minority
interest and income taxes 661 (2,422)
Interest expense (4,555) (6,106)
--------- ---------
Loss before income taxes and minority interest (3,894) (8,528)
Income tax benefit 1,584 3,522
Minority interest 60 80
--------- ---------
Loss before accounting change, net (2,250) (4,926)
Cumulative effect of accounting change - SFAS No. 133 2,058 --
--------- ---------
Loss from continuing operations (192) (4,926)
Loss on sale of discontinued operations -- (845)
--------- ---------
Net loss $ (192) $ (5,771)
========= =========
See accompanying notes to condensed consolidated financial statements.
3
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
SIX MONTHS
ENDED JUNE 30,
----------------------
2001 2000
-------- --------
Cash flows from operating activities:
Net loss $ (192) $ (5,771)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 11,755 12,152
Cumulative effect of accounting change (2,058) --
Other, net (1,866) (1,122)
-------- --------
7,639 5,259
-------- --------
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 36,387 (871)
Decrease in inventories 93 633
Decrease in accounts payable (26,107) (11,012)
Decrease (increase) in other current assets and
liabilities 7,516 1,484
-------- --------
Net cash provided by (used in) operating activities 25,528 (4,507)
-------- --------
Cash flows from investing activities:
Capital expenditures (7,392) (12,987)
Acquisitions of businesses, net of cash acquired -- (3,233)
Proceeds from sale of Columbia Petroleum -- 74,825
Proceeds from sales of assets 280 242
-------- --------
Net cash (used in) provided by investing activities (7,112) 58,847
-------- --------
Cash flows from financing activities:
Repayments of promissory notes to Parent Company -- (38,590)
Repayments of long-term debt - other (1,800) (1,861)
Net advances from (repayments to) Parent Company (14,505) (9,617)
-------- --------
Net cash used in financing activities (16,305) (50,068)
-------- --------
Net increase in cash and cash equivalents $ 2,111 $ 4,272
Cash and cash equivalents at beginning of period 2,394 4,818
-------- --------
Cash and cash equivalents at end of period $ 4,505 $ 9,090
======== ========
See accompanying notes to condensed consolidated financial statements.
4
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Thousands of dollars)
1. BASIS OF PRESENTATION
Columbia Propane Corporation ("Columbia Propane") and its principal
operating subsidiary, Columbia Propane, L.P. ("Columbia OLP" or the
"Operating Partnership"), are engaged in the retail distribution of
propane and related equipment and supplies. Columbia Propane, Columbia
OLP, and their subsidiaries are collectively referred to herein as "the
Company." The Company is the seventh largest retail propane marketer in
the United States. It serves residential, commercial, industrial, motor
fuel and agricultural customers from approximately 190 locations in 29
states. Columbia OLP is a Delaware limited partnership. CP Holdings, Inc.
("CPH"), a wholly owned subsidiary of Columbia Propane, serves as the
general partner of the Operating Partnership. An affiliate of Triarc
Companies, Inc. ("Triarc") holds an approximate 1% limited partner
interest in Columbia OLP.
Columbia Propane is a wholly owned subsidiary of Columbia Energy Group
("CEG" or the "Parent Company"), a leading energy services company engaged
in the transmission, storage and distribution of natural gas, energy
marketing and electric power generation. On August 21, 2001, CEG sold its
interests in the Company to AmeriGas Propane, L.P. (see Note 4).
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 for the years ended December 31, 2000, 1999, and 1998,
included elsewhere in this Report on Form 8-K/A. Weather significantly
impacts demand for propane and profitability because many customers use
propane for heating purposes. Due to the seasonal nature of the Company's
propane distribution business, the results of operations for interim
periods are not necessarily indicative of the results to be expected for a
full year. The Company's comprehensive income as determined under
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," was the same as its net income for all periods
presented.
5
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars)
2. CHANGES IN ACCOUNTING
Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133,
as amended, establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity
recognize all derivative instruments as either assets or liabilities and
measure them 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 in
cash flows associated with forecasted transactions, the effective portion
of the gain or loss on such derivative instruments will generally be
reported in other comprehensive income and the ineffective portion, if
any, will be reported in net income. Such amounts recorded in accumulated
other comprehensive income will be reclassified into earnings when the
forecasted transaction affects 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 will be recognized currently in earnings along
with changes in the fair value of the hedged asset, liability or firm
commitment attributable to the hedged risk.
Because the Company elected not to formally document the effectiveness of
its hedges to determine if they met the requirements for hedge accounting
under SFAS 133, all derivative instruments are marked to fair value
through earnings. The adoption of SFAS 133 resulted in after-tax
cumulative effect income of $2,058 representing the fair value of
derivative instruments outstanding on January 1, 2001. At June 30, 2001,
the Company has recorded a liability for the fair value of its derivative
instruments of $1,380 which is included in other current liabilities. The
before-tax loss of $4,810 resulting from changes in the fair value of
derivative instruments during the six months ended June 30, 2001 is
reflected in operating and administrative expenses in the condensed
consolidated statement of operations. The impact of SFAS 133 on the
Company's future results of operations will depend upon whether or not its
derivative instruments are designated and qualify for hedge accounting. As
a result, future earnings could reflect greater volatility.
3. COMMITMENTS AND CONTINGENCIES
The Company's primary exposure to environmental liability relates to
former manufactured gas plant ("MGP") sites acquired with the acquisition
of National Propane. These sites relate to properties purchased by
National Propane from
6
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars)
utility companies which formerly operated MGPs on these sites. Some
constituents of coal tars and other residues of the manufactured gas
process are today considered hazardous substances under the federal
"Comprehensive Environmental Response, Compensation and Liability Act" or
"Superfund Law" and may be present at these sites. Investigations are
currently underway at one MGP site, and it is possible that former MGPs
exist at several other National Propane properties. At June 30, 2001,
included in other noncurrent liabilities is $5,571 relating to
environmental sites which the Company believes is adequate. The Company
intends to pursue recovery of any incurred costs of investigation and
remediation from insurance companies and former owners of such sites,
however such recovery cannot be assured. Management believes that
expenditures or settlements relating to these sites will not have a
material adverse effect on the Company's financial position or results of
operations.
In connection with the purchase of National Propane, Columbia Propane, CPH
and CPLP have provided an indemnity to reimburse the former Managing
Partner for income taxes that would be due if certain actions by Columbia
propane result in the recognition of certain types of income or gain by
its former Managing General Partner.
In addition to these matters, there are other pending claims and legal
actions arising in the normal course of business. We cannot predict with
certainty the final results of these matters. However, it is reasonably
possible that some of them could be resolved unfavorably to us. Management
believes, after consultation with counsel, that damages or settlements, if
any, recovered by the plaintiffs in such claims or actions will not have a
material adverse effect on our financial position but could be material to
our operating results or cash flows in future periods depending on the
nature and timing of future developments with respect to these matters and
the amounts of future operating results and cash flows.
4. SUBSEQUENT EVENT
On August 21, 2001, Columbia Propane and CEG sold substantially all the
assets and the stock of Columbia Propane to AmeriGas Propane, L.P.
("AmeriGas OLP") pursuant to the terms of a purchase agreement dated
January 30, 2001 and amended and restated on August 7, 2001 ("Columbia
Purchase Agreement") by and among CEG, CP Holdings, Inc., Columbia
Propane, Columbia OLP, AmeriGas OLP, AmeriGas Partners, L.P. ("AmeriGas
Partners"), and AmeriGas Propane, Inc. The assets sold included an
indirect 1% general partner interest and a direct, approximate 99% limited
partnership interest in Columbia OLP. In addition, AmeriGas OLP (1) became
the payee under the $138,000 intercompany note of Columbia OLP due in July
2009
7
COLUMBIA PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars)
and (2) made a capital contribution to Columbia OLP of operating assets
with a net agreed value of approximately $280,000 in exchange for a
limited partnership interest in Columbia OLP of equal value.
Columbia Propane and CEG received an aggregate $201,750 in cash. The
Columbia Purchase Agreement also provided for the purchase by CEG of
limited partnership interests in AmeriGas OLP valued at $50,000 for
$50,000 in cash, which interests were exchanged for 2,356,953 Common Units
of AmeriGas Partners having an estimated fair value of $54,422. In
accordance with the Columbia Purchase Agreement, AmeriGas OLP agreed to
pay CEG for the amount of working capital, as defined, in excess of
$23,000.
5. ACCOUNTING PRINCIPLES NOT YET ADOPTED
In July 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"). Under the provisions
of SFAS 141, all business combinations initiated after June 30, 2001 are
required to be accounted for under the purchase method of accounting.
Under the provisions of SFAS 142, goodwill will no longer be amortized but
will be subject to a transitional impairment review and to annual
impairment reviews. SFAS 142 is effective for fiscal years beginning after
December 15, 2001, but early adoption is permitted for companies with a
fiscal year beginning after March 15, 2001. The Company will adopt the
provisions of SFAS 142 effective January 1, 2002. The Company is currently
in the process of evaluating the impact SFAS 142 will have on the
consolidated financial position and consolidated results of operations of
the Company.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" and the accounting and
reporting provisions of APB No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
as it relates to the disposal of a segment of a business. This statement
is effective for the Company January 1, 2002. The Company does not believe
that the adoption of SFAS 144 will have a material impact on its financial
position or results of operations.
8