================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q/A
AMENDMENT 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
Commission File Number 1-6537-3
ALL STAR GAS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
MISSOURI 43-1494323
------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P.O. Box 303, 119 West Commercial Street, Lebanon, Missouri 65536
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
(417) 532-3103
----------------------------------------------------
(Registrant's 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 _____
Number of Shares of outstanding common stock (one class only) as of May 14, 2002
was 1,586,891.
================================================================================
The Condensed Consolidated Statement of Operations included in Item 1 of Part 1
of Form 10-Q contained misstatements in the recording of the sale of three
retail service centers. In December 2001, the Company entered into a financing
transaction whereby the assets of these retail service centers in Missouri were
transferred to a related party for approximately $1 million. The nature of the
transaction was such that it was not a sale (as originally recorded at a gain on
sale of assets) but as a financing liability to the related party. During June
2002, the assets of the service centers were transferred back to the Company,
subject to a security interest in favor of a third-party lending institution.
The misstatement in the gain on sale of assets recognized resulted in an
understatement of the Company's net loss and basic and diluted loss per common
share for the three and nine months ended March 31, 2002. This also resulted in
an error in the balances of property, plant and equipment, notes receivable,
income taxes payable, long-term debt and retained earnings on the Condensed
Consolidated Balance Sheet at March 31, 2002 included in Item 1 of Part 1 of
Form 10-Q. The misstatement also resulted in errors relating to these items in
the Condensed Consolidated Statement of Cash Flows for the nine months ended
March 31, 2002 included in Item 1 of Part 1 of Form 10-Q. The Condensed
Consolidated Financial Statements as of and for the three and nine months ended
March 31, 2002 in Item 1 of Part 1 have been restated to correct the
misstatement.
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Item 2 of Part 1 has been restated to correct the Company's
working capital (deficit).
Items 1 and 2 of Part 1 of the registrant's Form 10-Q are hereby amended in
their entirety as follows:
2
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
- ------------------------------
ALL STAR GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
March 31, 2002
(Unaudited) June 30, 2001
----------- -------------
Assets
- ------
Current Assets
Cash $ 576 $ 509
Trade receivables - net 3,374 2,549
Current maturities of notes receivable 108 --
Inventories 1,782 2,783
Forward purchase contracts -- 115
Prepaid expense 617 198
Deferred income taxes 200 200
------- -------
Total Current Assets 6,658 6,354
------- -------
Property, plant and equipment 51,639 56,593
Less accumulated depreciation 24,796 25,742
------- -------
Fixed Assets - Net 26,843 30,851
------- -------
Other Assets
Debt acquisition costs - net 1,298 1,174
Excess of cost over fair value of net assets
acquired - net 4,311 5,016
Notes receivable 4,055 942
Other 1,025 1,628
------- -------
Total Other Assets 10,689 8,760
------- -------
Total Assets $44,190 $45,965
======= =======
3
ALL STAR GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
March 31, 2002
(Unaudited) June 30, 2001
---------- -------------
Liabilities and Stockholders' Equity (Deficit)
- ----------------------------------------------
Current Liabilities
Checks in process of collection $ 3,619 $ 1,243
Current maturities of long-term debt 69,747 14,493
Notes payable - banks 5,084 3,979
Accrued interest 1,997 1,339
Customer prepayments 2,392 10,208
Income taxes payable 1,703 3,705
Accounts payable and accrued expenses 3,986 3,489
Forward sales and futures contracts -- 200
------- --------
Total Current Liabilities 88,528 38,656
Long-term debt 5,156 56,726
Deferred income taxes 5,922 5,738
Accrued self-insurance liability 280 529
------- --------
Total Liabilities 99,886 101,649
------- --------
Stockholders' Equity (Deficit)
Common; $.001 par value; authorized 20,000,000
shares, issued - 14,291,020 shares
14 14
Common stock purchase warrants 1,227 1,227
Additional paid-in capital 28,574 28,574
Retained earnings 2,403 2,415
------- --------
32,218 32,230
Treasury Stock at Cost - 12,704,129 shares (87,914) (87,914)
------- --------
Total Stockholders' Equity (Deficit) (55,696) (55,684)
------- --------
Total Liabilities and Stockholders' Equity
(Deficit) $44,190 $ 45,965
======= ========
See Notes to Condensed Consolidated Financial Statements
4
ALL STAR GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2002 AND 2001
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
Three Months Ended Nine Months Ended
March 31 March 31
2002 2001 2002 2001
---- ---- ---- ----
Operating Revenue $19,093 $23,055 $41,294 $ 50,276
Cost of Product Sold 10,149 17,405 23,132 35,720
------- ------- ------- --------
Gross Profit 8,944 5,650 18,162 14,556
------- ------- ------- --------
Operating Costs and Expenses
General and administrative 4,892 4,395 13,173 11,835
Depreciation and amortization 828 1,033 2,662 3,096
Gain on sale of assets (1,894) (760) (1,969) (617)
(Gain) loss on forward and futures
contracts 2 (1,495) (42) 266
------- ------- ------- --------
3,828 3,173 13,824 14,580
------- ------- ------- --------
Operating Income (Loss) 5,116 2,477 4,338 (24)
------- ------- ------- --------
Other Expense
Interest expense (714) (1,237) (1,581) (5,001)
Amortization of debt discount (938) (373) (2,776) (641)
------- ------- ------- --------
(1,652) (1,610) (4,357) (5,642)
------- ------- ------- --------
Income (Loss) Before Income Taxes 3,464 867 (19) (5,666)
Provision (Credit) for Income Taxes 1,271 374 (7) (2,082)
------- ------- ------- --------
Income (Loss) Before Cumulative Effect of Change in
Accounting Principle 2,193 493 (12) (3,584)
Cumulative Effect of Change in Accounting
Principle, Net of Income Taxes of $546 -- -- -- 940
------- ------- ------- --------
Net Income (Loss) $ 2,193 $ 493 $ (12) $ (2,644)
======= ======= ======= ========
Basic and Diluted Income (Loss) Per Common
Share Before Cumulative Effect of Change
in Accounting Principle $ 1.38 $ .31 $ (.01) $ (2.26)
Basic and Diluted Income Per Common Share
on Cumulative Effect of Change in
Accounting Principle -- -- -- .59
------- ------- ------- --------
Basic and Diluted Income (Loss) Per Common
Share $1.38 $.31 $ (.01) $ (1.67)
======= ======= ======= ========
See Notes to Condensed Consolidated Financial Statements.
5
ALL STAR GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 2002 AND 2001
(Unaudited)
(Dollars in Thousands)
2002 2001
---- ----
Cash Flows From Operating Activities
Net income (loss) $ (12) $(2,644)
Items not requiring (providing) cash
Depreciation 2,077 2,370
Amortization 3,361 1,367
Gain on sale of assets (1,969) (617)
Cumulative effect of change in accounting
principle -- (940)
(Gain) loss on forward and futures contracts (42) 266
Deferred income taxes 184 (555)
Changes In:
Trade receivables (1,359) (4,260)
Inventories 867 1,262
Prepaid expense and other 323 740
Accounts payable and customer prepayments (6,055) (3,391)
Accrued expenses and self-insurance (2,023) (1,459)
------- -------
Net cash used in operating activities (4,648) (7,861)
------- -------
Cash Flows From Investing Activities
Purchase of property and equipment (2,810) (1,557)
Acquisition of retail service centers (123) (110)
Proceeds from sales of property and equipment 237 1,957
Disposal of retail service centers 3,179 929
Purchase of interest in limited liability company -- (261)
------- -------
Net cash provided by investing activities 483 958
------- -------
Cash Flows From Financing Activities
Increase in checks in process of collection 2,376 2,439
Advances from related parties 516 1,051
Proceeds on notes payable - banks 3,444 4,972
Principal payments on notes payable to banks (2,339) --
Proceeds on long-term debt obligations 3,242 250
Principal payments on other long-term debt (3,007) (1,327)
------- -------
Net cash provided by financing activities 4,232 7,385
------- -------
INCREASE IN CASH 67 482
CASH, BEGINNING OF PERIOD 509 432
------- -------
CASH, END OF PERIOD $ 576 $ 914
======= =======
See Notes to Condensed Consolidated Financial Statements
6
ALL STAR GAS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 2002 AND 2001
(Unaudited)
(1) BASIS OF PRESENTATION
All Star Gas Corporation (the Company) was founded in 1963 and through
its subsidiaries has been in operation for over 38 years. The Company
is engaged primarily in the retail marketing of propane and propane
related appliances, supplies and equipment to residential, agricultural
and commercial customers.
The accompanying unaudited condensed consolidated financial statements
contain, in the opinion of management, all adjustments necessary to
present fairly the Company's consolidated financial position as of
March 31, 2002, and the consolidated results of its operations and cash
flows for the periods ended March 31, 2002 and 2001. All such
adjustments are of a normal recurring nature.
These financial statements should be read in conjunction with the
Company's audited consolidated financial statements as of June 30,
2001, and the notes thereto included in the Form 10-K as filed with the
United States Securities and Exchange Commission as disclosure which
would substantially duplicate the disclosure contained in that document
has been omitted. The condensed consolidated balance sheet of the
Company as of June 30, 2001 has been derived from the audited
consolidated balance sheet of the Company as of that date.
Due to the seasonal nature of the Company's business, the results of
operations for the three and nine months ended March 31, 2002 are not
necessarily indicative of the results to be expected for the full year.
The report of BKD, LLP commenting upon their review accompanies the
condensed consolidated financial statements included in Item 1 of
Part I.
(2) MANAGEMENT'S CONSIDERATION OF GOING CONCERN MATTERS
The Company reported income from operations during the fiscal year
ended June 30, 2000, primarily due to the gains recognized on the sale
of certain retail service centers. The Company has otherwise suffered
recurring losses from operations and continues to have net working
capital and net stockholders' equity deficiencies, which have existed
since June 30, 1994, and is in default with respect to its outstanding
Senior Secured Notes due 2003 and its 9% Subordinated Debentures due
2007. The Company has recently been required to make additional cash
deposits with various major propane suppliers to maintain current
terms.
Also, as a result of the Company's significant disposition of retail
service centers during fiscal 2000, the Company incurred a $7.7 million
federal tax liability that was due September 15, 2000. The Company was
unable to pay the obligation when due. The Internal Revenue Service
(the "IRS") has placed liens on Company assets. The Company has entered
into a workout plan with the IRS for payment of the tax obligation. The
remaining balance of this liability as of March 31, 2002 is
approximately $1.2 million. Subsequent to June 30, 2002, the Company
breached the workout plan due to scheduled payments not being made, and
the IRS has issued a notice of default. The total balance of income
taxes payable as of March 31, 2002 including amounts relating to fiscal
year 2002 taxable income is approximately $1.7 million.
7
The financial statements have been prepared assuming the Company will
continue as a going concern, realizing assets and liquidating
liabilities in the ordinary course of business. Management is
undertaking several strategies involving additional debt and equity
restructurings for mitigating these conditions during the coming year.
Although not currently planned, realization of assets in other than the
ordinary course of business to meet liquidity needs could incur losses
not reflected in these financial statements.
(3) SELF-INSURANCE AND CONTINGENCIES
Under the Company's current insurance program, the Company purchases
comprehensive general and employers liability coverage and an excess
liability policy provides for losses of up to $75 million. The general
liability coverage has a $250,000 self-insured retention with a $1
million cap on total claims. The Company's combined auto and workers'
compensation coverage is insured through participation in a captive
insurance program with other unrelated parties. The Company obtains
excess coverage through occurrence basis policies. Provisions for
self-insured losses are recorded based upon the Company's estimates of
the aggregate self-insured liability for claims incurred, resulting in
a retention for a portion of these expected losses.
The Company and its subsidiaries are defendants in other various
lawsuits related to the self-insurance program, which are not expected
to have a material adverse effect on the Company's financial position
or results of operations but could change materially in the near term.
The Company and its subsidiaries are presently involved in various
federal and state tax audits, which are not expected to have a material
adverse effect on the Company's financial position or results of
operations.
(4) FUTURES AND FORWARD CONTRACTS
The Company routinely makes purchase and sale commitments under supply
contracts and similar agreements with other parties that typically have
a term of less than one year. As of March 31, 2002, the Company had
outstanding commitments to purchase approximately 1.2 million gallons
of LP gas for approximately $556,000.
The Company also uses commodity futures contracts to reduce the risk of
price fluctuations for liquefied propane (LP) gas purchase and sale
commitments. As of March 31, 2002 the Company had no open positions on
commodity futures contracts. As of March 31, 2001 the Company's open
positions on futures contracts consisted of 252,000 gallons and had a
fair value of approximately $24,000.
(5) INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share is computed by dividing the net income
(loss) for the three and nine month periods by the average number of
common shares and, except where anti-dilutive, common share equivalents
outstanding, if any. Common share equivalents outstanding as of March
31, 2002 and 2001 consisted of stock options and common stock purchase
warrants which are anti-dilutive at those dates and were excluded from
the computation of earnings per share. The weighted average number of
common shares outstanding used in the computation of income (loss) per
common share was 1,586,891 and 1,586,915 as of March 31, 2002 and 2001,
respectively.
8
(6) DISPOSITIONS OF RETAIL SERVICE CENTERS
In February 2002, the Company entered into two sale-leaseback
transactions whereby the Company sold and leased back the land and
buildings at 26 retail service centers and recognized a gain of
approximately $2 million using the full accrual method. At June 30,
2001, the carrying value of the assets sold was approximately 4% of
total assets. The resulting leases are for a term of 15 years and are
being accounted for as operating leases with combined monthly payments
of approximately $38,000. Pro forma results of these operations as if
the transactions had been completed at the beginning of the period
would not be materially different from actual results due to the nature
of the transaction.
(7) RELATED PARTY TRANSACTIONS
In December 2001, the Company entered into a financing transaction
whereby the assets of 3 retail service centers in Missouri were
transferred to a related party for approximately $1 million. The nature
of the transaction was such that it was not recorded as a sale but as a
financing liability to the related party. During June 2002, the assets
of the service centers were transferred back to the Company, subject to
a security interest in favor of a third party lending institution. At
March 31, 2002, the amount due to the related party is approximately $1
million with interest at 8.64% payable monthly and due on demand.
(8) ADDITIONAL CASH FLOW INFORMATION (In Thousands)
Additional Cash Payment Information 2002 2001
----------------------------------- ---- ----
Interest Paid $2,072 $370
Income Taxes Paid $2,112 $1,894
Noncash Investing and Financing Activities
Mortgage obligations incurred on the acquisition of
retail service centers $1,792 $591
Long-term obligation incurred for investment in Missouri
Investment Partner I, LLC, a purchaser of Missouri
low-income housing tax credits -- $870
Notes receivable from sale of retail service
centers $3,931 $ --
Capital lease obligations incurred for equipment $364 $326
9
(9) SENIOR SECURED NOTES AND SUBORDINATED DEBENTURES
On October 30, 2001, due to the nonpayment of interest, the Company
defaulted with respect to the $53,063,600 principal balance of the 11%
Senior Secured Notes due 2003 (the "Senior Notes"). The Company also
has not made the interest payments due December 31, 2001 and March 31,
2002 on the Senior Notes.
Due to the nonpayment of interest, the Company is in default with
respect to the $9,729,000 principal balance of the 9% Subordinated
Debentures due 2007 (the "Subordinated Debentures"). The Company is
prohibited under the terms of the Subordinated Debentures from making
any interest payments if such payment shall create a default in the
payment of amounts due on any Senior indebtedness.
As a result of the defaults, the holders of the Senior Notes and the
Subordinated Debentures have the right to accelerate the balance due
and require immediate payment in full. Accordingly, the entire balance
of the obligations are included in current liabilities at March 31,
2002.
10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition and Liquidity
The following table is presented as a measure of the Company's liquidity and
financial condition (in thousands).
March 31 June 30
2002 2001 2001 2000
---- ---- ---- ----
Total long-term debt (including current
maturities) $ 79,987 $ 78,292 $ 75,198 $ 61,074
Working Capital (deficit) $(81,870) $(27,484) $(32,302) $(80,513)
Current Ratio .08 .29 .16 .08
During the nine months ended March 31, 2002, Company debt increased due to the
Company receiving $5.6 million of additional bank debt for working capital
purposes, incurring $2.2 million in mortgage and lease obligations for the
acquisition of retail service centers and equipment and $2.3 million of debt
discount amortization. The increase in debt was partially offset by principal
payments on the Company's bank debt, mortgage obligations and Senior Notes of
$6.4 million.
The changes in working capital and the resulting effects on the current ratio
are due principally to the balance of the Senior Notes and the Subordinated
Debentures and their classification as current at March 31, 2002.
The Company's prepaid product program allows customers to prebuy product at an
established price, reducing their risk of winter price fluctuations brought
about by changes in demand and allowing the Company to improve its seasonal cash
flow and further enhance its product purchasing program and marketing programs
to its customers. The balance of customer prepayments related to the program was
$2.4 million as of March 31, 2002 compared to $1.9 million as of March 31, 2001.
In February 2002, in order to fund working capital needs, the Company entered
into two sale-leaseback transactions whereby the Company sold and leased back
the land and buildings at 26 retail service centers. See the condensed
consolidated financial statements for further discussion.
On October 30, 2001, due to the nonpayment of interest, the Company defaulted
with respect to the $53,063,600 principal balance of the 11% Senior Secured
Notes due 2003 (the "Senior Notes"). The Company also has not made the interest
payments due December 31, 2001 and March 31, 2002 on the Senior Notes. Due to
the nonpayment of interest, the Company is in default with respect to the
$9,729,000 principal balance of the 9% Subordinated Debentures due 2007 (the
"Subordinated Debentures"). The Company is prohibited under the terms of the
Subordinated Debentures from making any interest payments if such payment shall
create a default in the payment of amounts due on any Senior indebtedness.
11
As a result of the defaults, the holders of the Senior Notes and the
Subordinated Debentures have the right to accelerate the balance due and require
immediate payment in full. Accordingly, the entire balance of the obligations is
included in current liabilities at March 31, 2002. The holders of the Senior
Notes and the Subordinated Debentures have not accelerated the balance due as of
May 13, 2002.
In the event that the Company continues to fail to make any interest payment
otherwise payable pursuant to the Senior Notes and the Subordinated Debentures,
the trustee and the holders of such indebtedness may choose to pursue any and
all remedies contained in the indenture or at law relating to such indebtedness.
If the holders of the Senior Notes or the Subordinated Debentures accelerate the
Company's obligations under such indebtedness, such events would have a material
adverse effect on the Company's liquidity and financial position. Under these
circumstances, the Company's financial position would necessitate the
development of an alternative financial structure. Considering the limited
financial resources and the existence of certain defaults, there can be no
assurances that the Company would succeed in formulating and consummating an
acceptable alternative financial structure.
Also, as a result of the Company's significant disposition of retail service
centers during fiscal 2000, the Company incurred a $7.7 million federal tax
liability that was due September 15, 2000. The Company was unable to pay the
obligation when due. The Internal Revenue Service (the "IRS") has placed liens
on Company assets. The Company has entered into a workout plan with the IRS for
payment of the tax obligation. The remaining balance of this liability as of
March 31, 2002 is approximately $1.2 million. The total balance of income taxes
payable as of March 31, 2002 including amounts relating to fiscal year 2002
taxable income is approximately $1.7 million.
Results of Operations
Due to the seasonal nature of its business, the Company usually realizes an
operating loss the first quarter and operating income for the second and third
quarters. Operating revenues for a particular quarter are not necessarily
indicative of a full fiscal year's operations because of the seasonal element.
Other expense items such as depreciation and general and administrative
expenses, however, generally continue on a more annualized basis.
The following table presents additional operating data for the periods ended
March 31, 2002 and 2001 and the year ended June 30, 2001 (in thousands).
Three Months Ended Nine Months Ended Year Ended
3/31/02 3/31/01 3/31/02 3/31/01 6/30/01
------- ------- ------- ------- -------
Revenues:
Propane $18,135 $22,317 $37,897 $46,933 $52,920
Gas systems, appliances
and other fuels 422 273 1,592 1,281 1,787
Other 536 465 1,805 2,062 2,345
Gross Profit:
Propane 8,285 5,123 15,910 12,074 13,941
Gas systems, appliances
and other fuels 144 86 558 454 632
Other 515 441 1,694 2,028 2,345
12
Volumes. Retail volumes of propane sold decreased 7% and 9% in the three and
nine months ended March 31, 2002, respectively, compared to the same periods
ended March 31, 2001 due to the warmer winter weather experienced and the sales
of retail service centers. Comparing stores that were operated by the Company
during both 2002 and 2001, volumes increased 8% in the three months ended March
31, 2002 compared to the same period in 2001 and decreased 1% in the nine months
ended March 31, 2002 compared to the same period in 2001.
During the nine months ended March 31, 2002 and 2001, the Company completed
forward purchase and sale contracts which resulted in buying and selling 3.2
million and 42.5 million gallons, respectively, of propane to other suppliers
during these nine month periods.
Revenues. Operating revenues decreased in the three and nine months ended March
31, 2002 compared to the same period in 2001. In addition to the decrease in
retail volumes discussed above, retail sales prices per gallon decreased 13%, in
the nine months ended March 31, 2002 compared to 2001. Other sales, including
gas systems, appliances and other fuels, have shown a slight increase as
indicated in the table above.
Cost of product and gross profit. Cost of product sold decreased in the three
and nine month periods compared to the same periods in 2001 due to the decrease
in volumes discussed above. There was also a 31% decrease in average costs per
gallon sold for the nine months ended March 31, 2002 compared to the same period
in 2001.
The Company's gross profit increased in the three and nine months ended March
31, 2002 compared to the same periods in 2001. This is primarily due to the
increase in margins per gallon experienced by the Company.
General and administrative expense. General and administrative expense for the
three and nine months ended March 31, 2002 increased $497,000 and $1.3 million,
respectively, over the same periods in 2001. Salaries and commissions increased
$189,000 and $494,000, respectively, for the three and nine months ended March
31, 2002 compared to the same periods in 2001 due to increased expenses at the
retail service centers. Insurance and liability expense increased $473,000 and
$809,000, respectively, for the three and nine months ended March 31, 2002
compared to the same periods in 2001 due to the settling of several claims,
reaching the stop-loss limit on one specific claim and the resulting reduction
in the liability for expected losses during the nine months ended March 31,
2001. There were no other significant changes occurring in any individual
expense category.
Depreciation and amortization. Depreciation and amortization expense for the
three and nine months ended March 31, 2002 decreased over the same periods in
2001 mainly due to the divestiture of retail service centers during fiscal year
2001 and the nine months ended March 31, 2002.
Gain/loss on forward and futures contracts. Gain on forward and futures
contracts for the three and nine months ended March 31, 2002 decreased $1.5
million and increased $408,000, respectively. Gains or losses are recognized as
a result of the increase or decrease in fair value of the Company's derivative
instruments during the three and nine months ended March 31, 2002.
Interest expense. Interest expense for the three and nine months ended March 31,
2002 decreased $523,000 and $3.4 million, respectively, primarily due to
interest on the Senior Notes being a direct principal reduction due to the
accounting treatment of the Senior Notes upon restructuring in February 2001.
13
Impact of Recent Accounting Pronouncements
The Financial Accounting Standard Board (FASB) recently issued Statement of
Financial Accounting Standards (SFAS) 141, Business Combinations. This Statement
addresses financial accounting and reporting for business combinations. It
eliminates the pooling-of-interests method and requires that all business
combinations be accounted for using the purchase method. The provisions of this
Statement apply to all business combinations initiated after June 30, 2001.
The FASB also recently issued SFAS 142, Goodwill and Other Intangible Assets.
This Statement establishes accounting and reporting standards for acquired
goodwill and other intangible assets. The Statement addresses how intangible
assets that are acquired individually or with a group of other assets (but not
those acquired in a business combination) should be accounted for in financial
statements upon their acquisition. It also addresses how goodwill and other
intangible assets should be accounted for after they have been initially
recognized in the financial statements. Under the new standard, amortization of
existing goodwill ceases upon adoption of SFAS 142 and is replaced by periodic
evaluation for impairment using specified methodology. SFAS 142 is effective for
fiscal years beginning after December 15, 2001. Early adoption is permitted for
entities with fiscal years beginning after March 15, 2001. The Company will
apply SFAS 142 beginning with the first quarter of its fiscal year ending June
30, 2003, on a prospective basis. Adoption of the new standard will have no
initial effect on the Company's financial statements.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Note 3 of the Condensed Consolidated Financial Statements.
Items 2, 3, 4 and 5
No information is reportable under these sections
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
None
Reviewed by Independent Certified Public Accountants
The March 31, 2002 financial statements included in this filing on Form 10-Q/A
have been reviewed by BKD, LLP, Independent Certified Public Accountants, in
accordance with established professional standards and procedures for such a
review. The report of BKD, LLP commenting upon their review is appended hereto.
The report of BKD, LLP dated April 26, 2002 included in the Company's filing on
Form 10-Q for the three and nine months ended March 31, 2002 has been withdrawn
and should no longer be relied upon.
14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
All Star Gas Corporation
Registrant
By: /s/ Paul S. Lindsey, Jr.
---------------------------
Paul S. Lindsey, Jr.
President and CEO
DATE: October 10, 2002
15
Independent Accountants' Report
Board of Directors and Stockholders
All Star Gas Corporation
Lebanon, Missouri
We have reviewed the accompanying condensed consolidated balance sheet of All
Star Gas Corporation as of March 31, 2002, and the related condensed
consolidated statements of operations for the three- and nine-month periods
ended March 31, 2002 and 2001, and cash flows for the nine-month periods ended
March 31, 2002 and 2001. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of All
Star Gas Corporation as of June 30, 2001, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
year then ended (not presented herein); and in our report dated August 10, 2001,
on those consolidated financial statements, we expressed an unqualified opinion
that also contained an explanatory paragraph regarding substantial doubt about
the Company's ability to continue as a going concern for a reasonable period of
time. In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of June 30, 2001, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ BKD, LLP
Springfield, Missouri
October 4, 2002
16