Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2010
OR
|
|
|
o |
|
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
AMERIGAS PARTNERS, L.P.
(Exact name of registrant as specified in its charters)
|
|
|
Delaware
|
|
23-2787918 |
(State or Other Jurisdiction of
|
|
(I.R.S. Employer |
Incorporation or Organization)
|
|
Identification No.) |
|
|
|
460 North Gulph Road, King of Prussia, PA 19406
(Address of Principal Executive Offices) (Zip Code) |
(610) 337-7000
(Registrants Telephone Number, Including Area ode)
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act:
|
|
|
|
|
|
|
Large accelerated filer þ
|
|
Accelerated filer o
|
|
Non-accelerated filer o
|
|
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No þ
At
January 31, 2011 there were 57,106,974 Common Units of AmeriGas Partners, L.P.
outstanding.
AMERIGAS PARTNERS, L.P.
TABLE OF CONTENTS
- i -
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2010 |
|
|
2009 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
9,534 |
|
|
$ |
7,726 |
|
|
$ |
10,486 |
|
Accounts receivable (less allowances for doubtful accounts of $14,609
$15,290 and $12,936, respectively) |
|
|
311,024 |
|
|
|
172,708 |
|
|
|
271,065 |
|
Accounts receivable related parties |
|
|
7,593 |
|
|
|
7,039 |
|
|
|
6,888 |
|
Inventories |
|
|
137,935 |
|
|
|
114,122 |
|
|
|
119,850 |
|
Derivative financial instruments |
|
|
15,172 |
|
|
|
7,478 |
|
|
|
43,757 |
|
Prepaid expenses and other current assets |
|
|
16,208 |
|
|
|
16,785 |
|
|
|
11,357 |
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
497,466 |
|
|
|
325,858 |
|
|
|
463,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment (less accumulated depreciation and
amortization of $885,334, $867,250 and
$821,470, respectively) |
|
|
650,822 |
|
|
|
642,778 |
|
|
|
637,325 |
|
Goodwill |
|
|
685,698 |
|
|
|
678,721 |
|
|
|
666,404 |
|
Intangible assets, net |
|
|
41,751 |
|
|
|
37,590 |
|
|
|
32,894 |
|
Other assets |
|
|
10,636 |
|
|
|
11,272 |
|
|
|
12,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,886,373 |
|
|
$ |
1,696,219 |
|
|
$ |
1,812,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS CAPITAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
$ |
5,588 |
|
|
$ |
20,123 |
|
|
$ |
82,705 |
|
Bank loans |
|
|
178,000 |
|
|
|
91,000 |
|
|
|
24,000 |
|
Accounts payable trade |
|
|
241,795 |
|
|
|
130,575 |
|
|
|
212,845 |
|
Accounts payable related parties |
|
|
4,548 |
|
|
|
2,352 |
|
|
|
4,393 |
|
Customer deposits and advances |
|
|
67,462 |
|
|
|
86,154 |
|
|
|
68,293 |
|
Derivative financial instruments |
|
|
|
|
|
|
|
|
|
|
15,633 |
|
Other current liabilities |
|
|
110,249 |
|
|
|
130,058 |
|
|
|
88,452 |
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
607,642 |
|
|
|
460,262 |
|
|
|
496,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
788,063 |
|
|
|
771,279 |
|
|
|
784,146 |
|
Other noncurrent liabilities |
|
|
55,279 |
|
|
|
71,792 |
|
|
|
74,224 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,450,984 |
|
|
|
1,303,333 |
|
|
|
1,354,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (note 5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners capital: |
|
|
|
|
|
|
|
|
|
|
|
|
AmeriGas Partners, L.P. partners capital: |
|
|
|
|
|
|
|
|
|
|
|
|
Common
unitholders (units issued - 57,091,659, 57,088,509 and 57,054,888, respectively) |
|
|
405,526 |
|
|
|
372,220 |
|
|
|
412,471 |
|
General partner |
|
|
4,086 |
|
|
|
3,751 |
|
|
|
4,149 |
|
Accumulated other comprehensive income |
|
|
13,452 |
|
|
|
4,877 |
|
|
|
28,799 |
|
|
|
|
|
|
|
|
|
|
|
Total AmeriGas Partners, L.P. partners capital |
|
|
423,064 |
|
|
|
380,848 |
|
|
|
445,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest |
|
|
12,325 |
|
|
|
12,038 |
|
|
|
12,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total partners capital |
|
|
435,389 |
|
|
|
392,886 |
|
|
|
457,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital |
|
$ |
1,886,373 |
|
|
$ |
1,696,219 |
|
|
$ |
1,812,644 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
- 1 -
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Thousands of dollars, except per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
Propane |
|
$ |
653,812 |
|
|
$ |
614,358 |
|
Other |
|
|
46,408 |
|
|
|
42,237 |
|
|
|
|
|
|
|
|
|
|
|
700,220 |
|
|
|
656,595 |
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Cost of sales propane (excluding depreciation shown
below) |
|
|
420,700 |
|
|
|
375,449 |
|
Cost of sales other (excluding depreciation shown below) |
|
|
14,605 |
|
|
|
14,120 |
|
Operating and administrative expenses |
|
|
156,428 |
|
|
|
146,814 |
|
Depreciation |
|
|
20,072 |
|
|
|
19,983 |
|
Amortization |
|
|
2,595 |
|
|
|
1,398 |
|
Other income, net |
|
|
(5,755 |
) |
|
|
(3,783 |
) |
|
|
|
|
|
|
|
|
|
|
608,645 |
|
|
|
553,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
91,575 |
|
|
|
102,614 |
|
Interest expense |
|
|
(15,375 |
) |
|
|
(16,493 |
) |
|
|
|
|
|
|
|
Income before income taxes |
|
|
76,200 |
|
|
|
86,121 |
|
Income taxes |
|
|
(419 |
) |
|
|
(1,167 |
) |
|
|
|
|
|
|
|
Net income |
|
|
75,781 |
|
|
|
84,954 |
|
Less: net income attributable to noncontrolling interest |
|
|
(913 |
) |
|
|
(995 |
) |
|
|
|
|
|
|
|
Net income attributable to AmeriGas Partners, L.P. |
|
$ |
74,868 |
|
|
$ |
83,959 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General partners interest in net income attributable
to AmeriGas Partners, L.P. |
|
$ |
1,701 |
|
|
$ |
1,407 |
|
|
|
|
|
|
|
|
Limited partners interest in net income attributable
to AmeriGas Partners, L.P. |
|
$ |
73,167 |
|
|
$ |
82,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per limited partner unit basic and diluted: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.07 |
|
|
$ |
1.15 |
|
|
|
|
|
|
|
|
Diluted |
|
$ |
1.06 |
|
|
$ |
1.15 |
|
|
|
|
|
|
|
|
Average limited partner units outstanding (thousands): |
|
|
|
|
|
|
|
|
Basic |
|
|
57,095 |
|
|
|
57,055 |
|
|
|
|
|
|
|
|
Diluted |
|
|
57,149 |
|
|
|
57,105 |
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
- 2 -
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
75,781 |
|
|
$ |
84,954 |
|
Adjustments to reconcile net income to net
cash from operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
22,667 |
|
|
|
21,381 |
|
Provision for uncollectible accounts |
|
|
3,187 |
|
|
|
3,236 |
|
Net change in realized gains and losses deferred
as cash flow hedges |
|
|
1,235 |
|
|
|
3,841 |
|
Other, net |
|
|
915 |
|
|
|
(143 |
) |
Net change in: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(141,140 |
) |
|
|
(138,657 |
) |
Inventories |
|
|
(23,191 |
) |
|
|
(31,725 |
) |
Accounts payable |
|
|
113,415 |
|
|
|
99,945 |
|
Other current assets |
|
|
582 |
|
|
|
1,050 |
|
Other current liabilities |
|
|
(55,494 |
) |
|
|
(47,302 |
) |
|
|
|
|
|
|
|
Net cash used by operating activities |
|
|
(2,043 |
) |
|
|
(3,420 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Expenditures for property, plant and equipment |
|
|
(21,306 |
) |
|
|
(26,726 |
) |
Proceeds from disposals of assets |
|
|
773 |
|
|
|
1,566 |
|
Acquisitions of businesses, net of cash acquired |
|
|
(18,083 |
) |
|
|
(4,386 |
) |
|
|
|
|
|
|
|
Net cash used by investing activities |
|
|
(38,616 |
) |
|
|
(29,546 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Distributions |
|
|
(41,618 |
) |
|
|
(39,186 |
) |
Noncontrolling interest activity |
|
|
(712 |
) |
|
|
(687 |
) |
Increase in bank loans |
|
|
87,000 |
|
|
|
24,000 |
|
Repayment of long-term debt |
|
|
(2,351 |
) |
|
|
(201 |
) |
Proceeds associated with equity based compensation plans, net of tax withheld |
|
|
146 |
|
|
|
310 |
|
Capital contributions from General Partner |
|
|
2 |
|
|
|
3 |
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities |
|
|
42,467 |
|
|
|
(15,761 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents increase (decrease) |
|
$ |
1,808 |
|
|
$ |
(48,727 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
|
End of period |
|
$ |
9,534 |
|
|
$ |
10,486 |
|
Beginning of period |
|
|
7,726 |
|
|
|
59,213 |
|
|
|
|
|
|
|
|
Increase (decrease) |
|
$ |
1,808 |
|
|
$ |
(48,727 |
) |
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
- 3 -
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL
(unaudited)
(Thousands of dollars, except unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other |
|
|
AmeriGas |
|
|
|
|
|
|
Total |
|
|
|
Number of |
|
|
Common |
|
|
General |
|
|
comprehensive |
|
|
Partners, L.P. |
|
|
Noncontrolling |
|
|
partners |
|
|
|
Common Units |
|
|
unitholders |
|
|
partner |
|
|
income (loss) |
|
|
partners capital |
|
|
interest |
|
|
capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended December 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2010 |
|
|
57,088,509 |
|
|
$ |
372,220 |
|
|
$ |
3,751 |
|
|
$ |
4,877 |
|
|
$ |
380,848 |
|
|
$ |
12,038 |
|
|
$ |
392,886 |
|
Net income |
|
|
|
|
|
|
73,167 |
|
|
|
1,701 |
|
|
|
|
|
|
|
74,868 |
|
|
|
913 |
|
|
|
75,781 |
|
Net gains on derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,832 |
|
|
|
12,832 |
|
|
|
131 |
|
|
|
12,963 |
|
Reclassification of net gains on
derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,257 |
) |
|
|
(4,257 |
) |
|
|
(45 |
) |
|
|
(4,302 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
73,167 |
|
|
|
1,701 |
|
|
|
8,575 |
|
|
|
83,443 |
|
|
|
999 |
|
|
|
84,442 |
|
Distributions |
|
|
|
|
|
|
(40,250 |
) |
|
|
(1,368 |
) |
|
|
|
|
|
|
(41,618 |
) |
|
|
(712 |
) |
|
|
(42,330 |
) |
Unit-based compensation expense |
|
|
|
|
|
|
243 |
|
|
|
|
|
|
|
|
|
|
|
243 |
|
|
|
|
|
|
|
243 |
|
Common Units issued in connection
with incentive compensation
plans, net of tax withheld |
|
|
3,150 |
|
|
|
146 |
|
|
|
2 |
|
|
|
|
|
|
|
148 |
|
|
|
|
|
|
|
148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2010 |
|
|
57,091,659 |
|
|
$ |
405,526 |
|
|
$ |
4,086 |
|
|
$ |
13,452 |
|
|
$ |
423,064 |
|
|
$ |
12,325 |
|
|
$ |
435,389 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other |
|
|
AmeriGas |
|
|
|
|
|
|
Total |
|
|
|
Number of |
|
|
Common |
|
|
General |
|
|
comprehensive |
|
|
Partners, L.P. |
|
|
Noncontrolling |
|
|
partners |
|
|
|
Common Units |
|
|
unitholders |
|
|
partner |
|
|
income (loss) |
|
|
partners capital |
|
|
interest |
|
|
capital |
|
For the three months ended December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2009 |
|
|
57,046,388 |
|
|
$ |
367,708 |
|
|
$ |
3,698 |
|
|
$ |
(6,947 |
) |
|
$ |
364,459 |
|
|
$ |
11,866 |
|
|
$ |
376,325 |
|
Net income |
|
|
|
|
|
|
82,552 |
|
|
|
1,407 |
|
|
|
|
|
|
|
83,959 |
|
|
|
995 |
|
|
|
84,954 |
|
Net gains on derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,188 |
|
|
|
44,188 |
|
|
|
448 |
|
|
|
44,636 |
|
Reclassification of net gains on
derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,442 |
) |
|
|
(8,442 |
) |
|
|
(88 |
) |
|
|
(8,530 |
) |
|
|
|
|
|
| |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
82,552 |
|
|
|
1,407 |
|
|
|
35,746 |
|
|
|
119,705 |
|
|
|
1,355 |
|
|
|
121,060 |
|
Distributions |
|
|
|
|
|
|
(38,227 |
) |
|
|
(959 |
) |
|
|
|
|
|
|
(39,186 |
) |
|
|
(687 |
) |
|
|
(39,873 |
) |
Unit-based compensation expense |
|
|
|
|
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
128 |
|
|
|
|
|
|
|
128 |
|
Common Units issued in connection
with incentive compensation
plans, net of tax withheld |
|
|
8,500 |
|
|
|
310 |
|
|
|
3 |
|
|
|
|
|
|
|
313 |
|
|
|
|
|
|
|
313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2009 |
|
|
57,054,888 |
|
|
$ |
412,471 |
|
|
$ |
4,149 |
|
|
$ |
28,799 |
|
|
$ |
445,419 |
|
|
$ |
12,534 |
|
|
$ |
457,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
- 4 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
AmeriGas Partners, L.P. (AmeriGas Partners) is a publicly traded limited partnership that
conducts a national propane distribution business through its principal operating subsidiary
AmeriGas Propane, L.P. (AmeriGas OLP) and prior to its merger with AmeriGas OLP on October
1, 2010 (the Merger), AmeriGas OLPs subsidiary, AmeriGas Eagle Propane, L.P. (Eagle
OLP). AmeriGas Partners and AmeriGas OLP are Delaware limited partnerships. AmeriGas OLP
subsequent to the Merger, and AmeriGas OLP and Eagle OLP collectively prior to the Merger,
are referred to herein as the Operating Partnership. AmeriGas Partners, the Operating
Partnership and all of their subsidiaries are collectively referred to herein as the
Partnership or we.
The Operating Partnership is engaged in the distribution of propane and related equipment and
supplies. The Operating Partnership comprises the largest retail propane distribution
business in the United States serving residential, commercial, industrial, motor fuel and
agricultural customers in all 50 states.
At December 31, 2010, AmeriGas Propane, Inc. (the General Partner), an indirect wholly
owned subsidiary of UGI Corporation (UGI), held a 1% general partner interest in AmeriGas
Partners and a 1.01% general partner interest in AmeriGas OLP. The General Partner and its
wholly owned subsidiary Petrolane Incorporated (Petrolane, a predecessor company of the
Partnership) also owned 24,691,209 AmeriGas Partners Common Units (Common Units). The
remaining 32,400,450 Common Units are publicly held. The Common Units represent limited
partner interests in AmeriGas Partners.
AmeriGas Partners holds a 99% limited partner interest in AmeriGas OLP. Through September 30,
2010, AmeriGas OLP, indirectly through subsidiaries, owned an effective 0.1% general partner
interest and a direct approximate 99.9% limited partner interest in Eagle OLP.
AmeriGas Partners and the Operating Partnership have no employees. Employees of the General
Partner conduct, direct and manage our operations. Prior to the Merger, the General Partner
provided management and administrative services to AmeriGas Eagle Holdings, Inc. (AEH), the
general partner of Eagle OLP, under a management services agreement. The General Partner is
reimbursed monthly for all direct and indirect expenses it incurs on our behalf (see Note 4).
2. |
|
Significant Accounting Policies |
The condensed consolidated financial statements include the accounts of AmeriGas Partners and
its majority-owned subsidiaries principally comprising AmeriGas OLP and Eagle OLP prior to
the Merger. We eliminate all significant intercompany accounts and transactions when we
consolidate. We account for the General Partners 1.01% interest in AmeriGas OLP as a
noncontrolling interest in the condensed consolidated financial statements.
AmeriGas Finance Corp., AmeriGas Eagle Finance Corp. and AP Eagle Finance Corp. are wholly
owned finance subsidiaries of AmeriGas Partners. Their sole purpose is to serve as
co-obligors for debt securities issued by AmeriGas Partners.
- 5 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
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. The September 30, 2010 condensed
consolidated balance sheet data were derived from audited financial statements but do not
include all disclosures required by accounting principles generally accepted in the United
States of America (GAAP). 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, 2010. Weather significantly impacts demand for propane and
profitability because many customers use propane for heating purposes. Due to the seasonal
nature of the Partnerships propane business, the results of operations for interim periods
are not necessarily indicative of the results to be expected for a full year.
Allocation of Net Income Attributable to AmeriGas Partners. Net income attributable to
AmeriGas Partners, L.P. for partners capital and statement of operations presentation
purposes is allocated to the General Partner and the limited partners in accordance with
their respective ownership percentages after giving effect to amounts distributed to the
General Partner in excess of its 1% general partner interest in AmeriGas Partners based on
its incentive distribution rights (IDRs) under the Fourth Amended and Restated Agreement of
Limited Partnership of AmeriGas Partners (Partnership Agreement).
Net Income Per Unit. Income per limited partner unit is computed in accordance with GAAP
regarding the application of the two-class method for determining income per unit for master
limited partnerships (MLPs) when IDRs are present. The two-class method requires that
income per limited partner unit be calculated as if all earnings for the period were
distributed and requires a separate calculation for each quarter and year-to-date period. In
periods when our net income attributable to AmeriGas Partners exceeds our Available Cash, as
defined in the Partnership Agreement, and is above certain levels, the calculation according
to the two-class method results in an increased allocation of undistributed earnings to the
General Partner. Generally, in periods when our Available Cash in respect of the quarter or
year-to-date periods exceeds our net income (loss) attributable to AmeriGas Partners, the
calculation according to the two-class method results in an allocation of earnings to the
General Partner greater than its relative ownership interest in the Partnership (or in the
case of a net loss attributable to AmeriGas Partners, an allocation of such net loss to the
Common Unitholders greater than their relative ownership interest in the Partnership).
- 6 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
The following table sets forth the numerators and denominators of the basic and diluted
income per limited partner unit computations:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
Common Unitholders interest in net income attributable to
AmeriGas Partners under the two-class method for MLPs |
|
$ |
60,831 |
|
|
$ |
65,408 |
|
|
|
|
|
|
|
|
|
|
Weighted average Common Units outstanding basic (thousands) |
|
|
57,095 |
|
|
|
57,055 |
|
Potentially dilutive Common Units (thousands) |
|
|
54 |
|
|
|
50 |
|
|
|
|
|
|
|
|
Weighted average Common Units outstanding diluted
(thousands) |
|
|
57,149 |
|
|
|
57,105 |
|
|
|
|
|
|
|
|
Theoretical distributions of net income attributable to AmeriGas Partners, L.P. in
accordance with the two-class method for the three months ended December 31, 2010 and 2009
resulted in an increased allocation of net income attributable to AmeriGas Partners, L.P. to
the General Partner in the computation of income per limited partner unit which had the
effect of decreasing earnings per limited partner unit by $0.22 and $0.30, respectively.
Potentially dilutive Common Units included in the diluted limited partner units outstanding
computation reflect the effects of restricted Common Unit awards granted under the General
Partners incentive compensation plans.
Comprehensive Income. Comprehensive income comprises net income and other comprehensive
income (loss). Other comprehensive income (loss) results from gains and losses on derivative
instruments qualifying as cash flow hedges, net of reclassifications of net gains and losses
to net income.
Use of Estimates. The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, expenses and costs. These estimates are based on managements
knowledge of current events, historical experience and various other assumptions that are
believed to be reasonable under the circumstances. Accordingly, actual results may be
different from these estimates and assumptions.
- 7 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
The Partnerships goodwill and intangible assets comprise the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
|
2010 |
|
|
2010 |
|
|
2009 |
|
Subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships and
noncompete
agreements |
|
$ |
71,138 |
|
|
$ |
65,203 |
|
|
$ |
58,257 |
|
Accumulated amortization |
|
|
(29,387 |
) |
|
|
(27,613 |
) |
|
|
(25,363 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
41,751 |
|
|
$ |
37,590 |
|
|
$ |
32,894 |
|
|
|
|
|
|
|
|
|
|
|
Not subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
685,698 |
|
|
$ |
678,721 |
|
|
$ |
666,404 |
|
The increase in goodwill and other intangible assets during the three months ended
December 31, 2010 principally reflects the effects of acquisitions. Amortization expense of
intangible assets was $1,771 and $1,393 for the three months ended December 31, 2010 and
2009, respectively. No amortization is included in cost of sales in the Condensed
Consolidated Statements of Operations. Our expected aggregate amortization expense of
intangible assets for the next five fiscal years is as follows: Fiscal 2011 $7,650; Fiscal
2012 $7,764; Fiscal 2013 $7,180; Fiscal 2014 $6,185; Fiscal 2015 $4,768.
4. |
|
Related Party Transactions |
Pursuant to the Partnership Agreement and a Management Services Agreement between AmeriGas
Eagle Holdings, Inc., the general partner of Eagle OLP prior to the Merger, and the General
Partner, the General Partner is entitled to reimbursement for all direct and indirect
expenses incurred or payments it makes on behalf of the Partnership. These costs, which
totaled $93,708 and $90,495 for the three months ended December 31, 2010 and 2009,
respectively, include employee compensation and benefit expenses of employees of the General
Partner and general and administrative expenses.
UGI provides certain financial and administrative services to the General Partner. UGI bills
the General Partner monthly for all direct and indirect corporate expenses incurred in
connection with providing these services and the General Partner is reimbursed by the
Partnership for these expenses. The allocation of indirect UGI corporate expenses to the
Partnership utilizes a weighted, three-component formula based on the relative percentage of
the Partnerships revenues, operating expenses and net assets employed to the total of such
items for all UGI operating subsidiaries for which general and administrative services are
provided. The General Partner believes that this allocation method is reasonable and
equitable to the Partnership. Such corporate expenses totaled $2,618 and $1,203 for the three
months ended December 31, 2010 and 2009, respectively. In addition, UGI and certain of its
subsidiaries provide office space, stop loss medical coverage and automobile liability
insurance to the Partnership. The costs related to these items totaled $786 and $809 for the
three months ended December 31, 2010 and 2009, respectively.
- 8 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
AmeriGas OLP purchases propane from Atlantic Energy, Inc. (Atlantic Energy) a former
subsidiary of UGI Energy Services, Inc. (Energy Services) and a second-tier subsidiary of
UGI, pursuant to a propane sales agreement (Product Sales Agreement) expiring on April
2015, whereby Atlantic Energy has agreed to sell and AmeriGas OLP has agreed to purchase a
specified amount of propane annually at a terminal located in Chesapeake, Virginia. The price
to be paid for product purchased under the agreement is determined annually using a
contractual formula that takes into account published index prices and the locational value
of deliveries at the terminal. On July 30, 2010, Energy Services sold its interest in
Atlantic Energy. In addition, from time to time, AmeriGas OLP purchases propane on an as
needed basis from Energy Services. The prices of the purchases are generally based on market
price at the time of purchase. Purchases of propane by AmeriGas OLP from Energy Services and
Atlantic Energy (through the date of its sale) totaled $1,440 and $9,784 during the three
months ended December 31, 2010 and 2009, respectively. The sale of the terminal did not
affect the terms of the Product Sales Agreement.
The Partnership also sells propane to other affiliates of UGI. Such amounts were not material
during the three months ended December 31, 2010 and 2009.
5. |
|
Commitments and Contingencies |
Environmental Matters
By letter dated March 6, 2008, the New York State Department of Environmental Conservation
(DEC) notified AmeriGas OLP that DEC had placed property owned by the Partnership in
Saranac Lake, New York on its Registry of Inactive Hazardous Waste Disposal Sites. A site
characterization study performed by DEC disclosed contamination related to former
manufactured gas plant (MGP) operations on the site. DEC has classified the site as a
significant threat to public health or environment with further action required. The
Partnership has researched the history of the site and its ownership interest in the site.
The Partnership has reviewed the preliminary site characterization study prepared by the DEC,
the extent of the contamination, and the possible existence of other potentially responsible
parties. The Partnership has communicated the results of its research to DEC and is awaiting
a response before doing any additional investigation. Because of the preliminary nature of
available environmental information, the ultimate amount of expected clean up costs cannot be
reasonably estimated.
Other Matters
On May 27, 2009, the General Partner was named as a defendant in a purported class action
lawsuit in the Superior Court of the State of California in which plaintiffs are challenging
AmeriGas OLPs weight disclosure with regard to its portable propane grill cylinders. The
complaint purports to be brought on behalf of a class of all consumers in the state of
California during the four years prior to the date of the California complaint, who exchanged
an empty cylinder and were provided with what is alleged to be only a partially filled
cylinder. The plaintiffs seek restitution, injunctive relief, interest, costs, attorneys
fees and other appropriate relief.
- 9 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
Since that initial suit, various AmeriGas entities have been named in more than a dozen
similar suits that have been filed in various courts throughout the United States. These
complaints purport to be brought on behalf of nationwide classes, which are loosely defined
as including all purchasers of liquefied propane gas cylinders marketed or sold by AmeriGas
OLP and another unaffiliated entity nationwide. The complaints claim that defendants conduct
constituted unfair and deceptive practices that injured consumers and violated the consumer
protection statutes of at least thirty-seven states and the District of Columbia, thereby
entitling the class to damages, restitution, disgorgement, injunctive relief, costs and
attorneys fees. Some of the complaints also allege violation of state slack filling laws.
Additionally the complaints allege that defendants were unjustly enriched by their conduct
and they seek restitution of any unjust benefits received, punitive or treble damages, and
pre-judgment and post-judgment interest. A motion to consolidate the purported class action
lawsuits was heard by the Multidistrict Litigation Panel (MDL Panel) on September 24, 2009
in the United States District Court for the District of Kansas. By Order, dated October 6,
2009, the MDL Panel transferred the pending cases to the United States District Court for the
Western District of Missouri. The AmeriGas entities named in the consolidated class action
lawsuits have entered into a settlement agreement with the class. On May 19, 2010, the
United States District Court for the District of Kansas granted the classs motion seeking
preliminary approval of the settlement. On October 4, 2010, after the expiration of the time
in which claims were, or could have been, made by the class members, the District Court ruled
that the settlement was fair, reasonable and adequate to the class and granted final approval
of the settlement. Two parties have appealed that final order and the matter is now awaiting
review by the 8th Circuit Court of Appeals.
On or about October 21, 2009, the General Partner received a notice that the Offices of the
District Attorneys of Santa Clara, Sonoma, Ventura, San Joaquin and Fresno Counties and the
City Attorney of San Diego have commenced an investigation into AmeriGas OLPs cylinder
labeling and filling practices in California and issued an administrative subpoena seeking
documents and information relating to those practices. We have
responded to the administrative subpoena, but have had no further
requests from the District
Attorneys since that initial inquiry.
In 1996, a fire occurred at the residence of Samuel and Brenda Swiger (the Swigers) when
propane that leaked from an underground line ignited. In July 1998, the Swigers filed a class
action lawsuit against AmeriGas Propane, L.P. (named incorrectly as UGI/AmeriGas, Inc.), in
the Circuit Court of Monongalia County, West Virginia, in which they sought to recover an
unspecified amount of compensatory and punitive damages and attorneys fees, for themselves
and on behalf of persons in West Virginia for whom the defendants had installed propane gas
lines, resulting from the defendants alleged failure to install underground propane lines at
depths required by applicable safety standards. On December 14, 2010, AmeriGas OLP and its
affiliates entered into a settlement agreement with the class, which was preliminarily
approved by the Circuit Court of Monongalia County on January 13, 2011.
- 10 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
In 2005, the Swigers also filed what purports to be a class action in the Circuit Court of
Harrison County, West Virginia against UGI, an insurance subsidiary of UGI, certain officers
of UGI and the General Partner, and their insurance carriers and insurance adjusters. In the
Harrison County lawsuit, the Swigers are seeking compensatory and punitive damages on behalf
of the putative class for alleged violations of the West Virginia Insurance Unfair Trade
Practice Act, negligence, intentional misconduct, and civil conspiracy. The Swigers have also
requested that the Court rule that insurance coverage exists under the policies issued by the
defendant insurance companies for damages sustained by the members of the class in the
Monongalia County lawsuit. The Circuit Court of Harrison County has not certified the class
in the Harrison County lawsuit at this time and, in October 2008, stayed that lawsuit pending
resolution of the class action lawsuit in Monongalia County. We believe we have good defenses
to the claims in this action.
We cannot predict with certainty the final results of any of the environmental or other
pending claims or legal actions described above. However, it is reasonably possible that some
of them could be resolved unfavorably to us and result in losses in excess of recorded
amounts. We are unable to estimate any possible losses in excess of recorded amounts.
Although we currently believe, 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, damages or settlements 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. In addition to the matters described above, there are other pending claims
and legal actions arising in the normal course of our businesses. While the results of these
other pending claims and legal actions cannot be predicted with certainty, we believe, after
consultation with counsel, the final outcome of such other matters will not have a
significant effect on our consolidated financial position, results of operations or cash
flows.
- 11 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
6. |
|
Fair Value Measurement |
Derivative Financial Instruments
The following table presents our financial assets and financial liabilities that are measured
at fair value on a recurring basis for each of the fair value hierarchy levels, including
both current and noncurrent portions, as of December 31, 2010, September 30, 2010 and
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset (Liability) |
|
|
|
Quoted Prices |
|
|
|
|
|
|
|
|
|
|
|
|
in Active |
|
|
Significant |
|
|
|
|
|
|
|
|
|
Markets for |
|
|
Other |
|
|
|
|
|
|
|
|
|
Identical Assets |
|
|
Observable |
|
|
Unobservable |
|
|
|
|
|
|
and Liabilities |
|
|
Inputs |
|
|
Inputs |
|
|
|
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
Total |
|
December 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
|
$ |
|
|
|
$ |
15,451 |
|
|
$ |
|
|
|
$ |
15,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
|
$ |
|
|
|
$ |
8,025 |
|
|
$ |
|
|
|
$ |
8,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
|
$ |
|
|
|
$ |
40,008 |
|
|
$ |
|
|
|
$ |
40,008 |
|
Interest rate contracts |
|
$ |
|
|
|
$ |
3,856 |
|
|
$ |
|
|
|
$ |
3,856 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial
instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
|
$ |
|
|
|
$ |
(1,584 |
) |
|
$ |
|
|
|
$ |
(1,584 |
) |
Interest rate contracts |
|
$ |
|
|
|
$ |
(14,049 |
) |
|
$ |
|
|
|
$ |
(14,049 |
) |
The fair values of our non-exchange traded commodity derivative contracts are based upon
indicative price quotations available through brokers, industry price publications or recent
market transactions and related market indicators. For commodity option contracts we use a
Black Scholes option pricing model that considers time value and volatility of the underlying
commodity. The fair values of interest rate contracts are based upon third-party quotes or
indicative values based on recent market transactions.
Other Financial Instruments
The carrying amounts of financial instruments included in current assets and current
liabilities (excluding unsettled derivative instruments and current maturities of long-term
debt) approximate their fair values because of their short-term nature. The carrying amount
and estimated fair value of our long-term debt at December 31, 2010 were $793,651 and
$817,351, respectively. The carrying amount and estimated fair value of our long-term debt at
December 31, 2009 were $866,851 and $867,392, respectively. We estimate the fair value of
long-term debt by using current market prices and by discounting future cash flows using
rates available for similar type debt.
- 12 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
We have financial instruments such as short-term investments and trade accounts
receivable which could expose us to concentrations of credit risk. We limit our credit risk
from short-term investments by investing only in investment-grade commercial paper and U.S.
Government securities. The credit risk from trade accounts receivable is limited because we
have a large customer base which extends across many different U.S. markets.
7. |
|
Disclosures About Derivative Instruments and Hedging Activities |
The Partnership is exposed to certain market risks related to its ongoing business
operations. Management uses derivative financial and commodity instruments, among other
things, to manage these risks. The primary risks managed by derivative instruments are
commodity price risk and interest rate risk. Although we use derivative financial and
commodity instruments to reduce market risk associated with forecasted transactions, we do
not use derivative financial and commodity instruments for speculative or trading purposes.
The use of derivative instruments is controlled by our risk management and credit policies
which govern, among other things, the derivative instruments the Partnership can use,
counterparty credit limits and contract authorization limits. Because our derivative
instruments generally qualify as hedges under GAAP, we expect that changes in the fair value
of derivative instruments used to manage commodity or interest rate market risk would be
substantially offset by gains or losses on the associated anticipated transactions.
Commodity Price Risk
In order to manage market risk associated with the Partnerships fixed-price programs which
permit customers to lock in the prices they pay for propane principally during the months of
October through March, the Partnership uses over-the-counter derivative commodity
instruments, principally price swap contracts. At December 31, 2010 and 2009 there were 122.7
million gallons and 93.8 million gallons, respectively, of propane hedged with
over-the-counter price swap and option contracts. At December 31, 2010, the maximum period
over which we are hedging propane market price risk is 21 months with a weighted average of 3
months. In addition, the Partnership from time to time enters into price swap agreements to
provide market price risk support to a limited number of its wholesale customers. These
agreements are not designated as hedges for accounting purposes. The volumes of propane
subject to these wholesale customer agreements were not material.
We account for substantially all of our commodity price risk contracts as cash flow hedges.
Changes in the fair values of contracts qualifying for cash flow hedge accounting are
recorded in AOCI and noncontrolling interests, to the extent effective in offsetting changes
in the underlying commodity price risk, until earnings are affected by the hedged item. At
December 31, 2010, the amount of net gains associated with commodity price risk hedges
expected to be reclassified into earnings during the next twelve months based upon current
fair values is $16,144.
- 13 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
Interest Rate Risk
Our long-term debt is typically issued at fixed rates of interest. As these long-term debt
issues mature, we typically refinance such debt with new debt having interest rates
reflecting then-current market conditions. In order to reduce market rate risk on the
underlying benchmark rate of interest associated with near- to medium-term forecasted
issuances of fixed-rate debt, from time to time we enter into interest rate protection
agreements (IRPAs). There are no unsettled IRPAs outstanding at December 31, 2010. At
December 31, 2009, the total notional amount of unsettled IRPAs was $150,000. At December 31,
2010, the amount of net losses associated with settled IRPAs expected to be reclassified into
earnings during the next twelve months is $538.
Derivative Financial Instruments Credit Risk
The Partnership is exposed to credit loss in the event of nonperformance by counterparties to
derivative financial and commodity instruments. Our counterparties principally consist of
major energy companies and major U.S. financial institutions. We maintain credit policies
with regard to our counterparties that we believe reduce overall credit risk. These policies
include evaluating and monitoring our counterparties financial condition, including their
credit ratings, and entering into agreements with counterparties that govern credit limits.
Certain of these agreements call for the posting of collateral by the counterparty or by the
Partnership in the forms of letters of credit, parental guarantees or cash. Although we have
concentrations of credit risk associated with derivative financial instruments held by
certain derivative financial instrument counterparties, the maximum amount of loss due to
credit risk that, based upon the gross fair values of the derivative financial instruments,
we would incur if these counterparties that make up the concentration failed to perform
according to the terms of their contracts was not material at December 31, 2010. We generally
do not have credit-risk-related contingent features in our derivative contracts.
- 14 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
The following table provides information regarding the fair values and balance sheet
locations of our derivative assets and liabilities existing as of December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets |
|
|
Derivative (Liabilities) |
|
|
|
Balance Sheet |
|
Fair |
|
|
Balance Sheet |
|
Fair |
|
As of December 31, 2010 |
|
Location |
|
Value |
|
|
Location |
|
Value |
|
Derivatives Designated as
Hedging Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
Derivative financial instruments and Other assets |
|
$ |
15,451 |
|
|
Derivative financial instruments |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not
Designated as
Hedging Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
Derivative financial instruments |
|
|
|
|
|
Derivative financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Derivatives |
|
|
|
$ |
15,451 |
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets |
|
|
Derivative (Liabilities) |
|
|
|
Balance Sheet |
|
Fair |
|
|
Balance Sheet |
|
Fair |
|
As of December 31, 2009 |
|
Location |
|
Value |
|
|
Location |
|
Value |
|
Derivatives Designated as
Hedging Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
Derivative financial instruments and Other assets |
|
$ |
38,366 |
|
|
Derivative financial instruments |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
Derivative financial instruments |
|
|
3,856 |
|
|
Derivative financial instruments |
|
|
(14,049 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Derivatives Designated
as Hedging Instruments |
|
|
|
$ |
42,222 |
|
|
|
|
$ |
(14,049 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated
as Hedging Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
Derivative financial instruments |
|
$ |
1,642 |
|
|
Derivative financial instruments |
|
$ |
(1,584 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Derivatives |
|
|
|
$ |
43,864 |
|
|
|
|
$ |
(15,633 |
) |
|
|
|
|
|
|
|
|
|
|
|
- 15 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
The following table provides information on the effects of derivative instruments on the
Condensed Consolidated Statements of Operations and changes in AOCI and noncontrolling
interest for the three months ended December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of |
|
|
Gain |
|
|
Gain (Loss) |
|
|
Gain (Loss) |
|
|
Recognized in |
|
|
Reclassified from |
|
|
Reclassified from |
|
|
AOCI and Noncontrolling |
|
|
AOCI and Noncontrolling |
|
|
AOCI and Noncontrolling |
Three Months Ended December 31, 2010 |
|
Interest |
|
|
Interest into Income |
|
Interests into Income |
|
|
|
|
|
|
|
|
|
|
|
Cash Flow
Hedges: |
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
$ |
12,963 |
|
|
$ |
4,437 |
|
|
Cost of sales |
Interest rate contracts |
|
|
|
|
|
|
(135 |
) |
|
Interest expense |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
12,963 |
|
|
$ |
4,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of |
|
|
Gain |
|
|
Gain (Loss) |
|
|
Gain (Loss) |
|
|
Recognized in |
|
|
Reclassified from |
|
|
Reclassified from |
|
|
AOCI and Noncontrolling |
|
|
AOCI and Noncontrolling |
|
|
AOCI and Noncontrolling |
Three
Months Ended December 31, 2009 |
|
Interest |
|
|
Interest into Income |
|
Interests into Income |
|
|
|
|
|
|
|
|
|
|
|
Cash Flow
Hedges: |
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
$ |
38,947 |
|
|
$ |
8,664 |
|
|
Cost of sales |
Interest rate contracts |
|
|
5,689 |
|
|
|
(135 |
) |
|
Interest expense |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
44,636 |
|
|
$ |
8,529 |
|
|
|
|
|
|
|
|
|
|
|
|
The amounts of derivative gains or losses representing ineffectiveness, and the amounts
of gains or losses recognized in income as a result of excluding from ineffectiveness
testing, were not material for the three months ended December 31, 2010 and 2009. The amount
of net gains or losses associated with propane contracts that are not designated as hedging
instruments was not material during the three months ended December 31, 2010 or 2009.
We are also a party to a number of contracts that have elements of a derivative instrument.
These contracts include, among others, binding purchase orders, contracts which provide for
the purchase and delivery of propane and service contracts that require the counterparty to
provide commodity storage or transportation service to meet our normal sales commitments.
Although many of these contracts have the requisite elements of a derivative instrument,
these contracts qualify for normal purchase and normal sales exception accounting under GAAP
because they provide for the delivery of products or services in quantities that are expected
to be used in the normal course of operating our business and the price in the contract is
based on an underlying that is directly associated with the price of the product or service
being purchased or sold.
- 16 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
8. |
|
Subsequent Event Debt Refinancing |
On January 20, 2011, AmeriGas Partners announced that holders of approximately $327,900 in
aggregate principal amount of its 7.25% Senior Notes due May 2015, representing approximately
79% of the total $415,000 principal amount outstanding, had validly tendered their notes in
connection with the Partnerships January 5, 2011 tender offer. The tendered notes were
redeemed on January 20, 2011 at an effective price of 100.95%, plus a consent fee. On January
21, 2011, the Partnership issued a notice of full optional redemption at a price of 103.625%
for the remaining outstanding $87,100 aggregate principal amount of 7.25% Senior Notes and a
notice of full optional redemption at par for the $14,640 outstanding balance of its 8.875%
Senior Notes due May 2011. The redemption of these notes is scheduled to occur on February
22, 2011. The tendered 7.25% Senior Notes were, and the called notes will be, redeemed with
proceeds from the January 20, 2011 issuance of $470,000 aggregate principal amount of
AmeriGas Partners 6.50% Senior Notes due 2021. The 6.50% Senior Notes due 2021 rank pari
passu with AmeriGas Partners outstanding senior debt. The Partnership expects to record a
loss of approximately $19,000 associated with these transactions during the second quarter of
Fiscal 2011. Because the 8.875% Senior Notes will be refinanced with proceeds from the
previously mentioned issuance of AmeriGas Partners 6.50% Senior Notes due 2021, the
outstanding principal amount of the 8.875% Senior Notes due
May 2011 has been classified as
long-term debt on the December 31, 2010 Condensed Consolidated Balance Sheet.
- 17 -
AMERIGAS PARTNERS, L.P.
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS |
FORWARD-LOOKING STATEMENTS
Information contained in this Quarterly Report on Form 10-Q may contain forward-looking statements.
Such statements use forward-looking words such as believe, plan, anticipate,
continue, estimate, expect, may, will, or other similar words. These statements discuss
plans, strategies, events or developments that we expect or anticipate will or may occur in the
future.
A forward-looking statement may include a statement of the assumptions or bases underlying the
forward-looking statement. We believe that we have chosen these assumptions or bases in good faith
and that they are reasonable. However, we caution you that actual results almost always vary from
assumed facts or bases, and the differences between actual results and assumed facts or bases can
be material, depending on the circumstances. When considering forward-looking statements, you
should keep in mind the following important factors which could affect our future results and could
cause those results to differ materially from those expressed in our forward-looking statements:
(1) adverse weather conditions resulting in reduced demand; (2) cost volatility and availability of
propane, and the capacity to transport propane to our customers; (3) the availability of, and our
ability to consummate, acquisition or combination opportunities; (4) successful integration and
future performance of acquired assets or businesses; (5) changes in laws and regulations, including
safety, tax and accounting matters; (6) competitive pressures from the same and alternative energy
sources; (7) failure to acquire new customers thereby reducing or limiting any increase in
revenues; (8) liability for environmental claims; (9) increased customer conservation measures due
to high energy prices and improvements in energy efficiency and technology resulting in reduced
demand; (10) adverse labor relations; (11) large customer, counterparty or supplier defaults; (12)
liability in excess of insurance coverage for personal injury and property damage arising from
explosions and other catastrophic events, including acts of terrorism, resulting from operating
hazards and risks incidental to transporting, storing and distributing propane, butane and ammonia;
(13) political, regulatory and economic conditions in the United States and foreign countries; (14)
capital market conditions, including reduced access to capital markets and interest rate
fluctuations; (15) changes in commodity market prices resulting in significantly higher cash
collateral requirements; (16) the impact of pending and future legal proceedings; and (17) the
timing and success of our acquisitions and investments to grow our business.
These factors, and those factors set forth in Item 1A. Risk Factors in our Annual Report on Form
10-K for the fiscal year ended September 30, 2010, are not necessarily all of the important factors
that could cause actual results to differ materially from those expressed in any of our
forward-looking statements. Other unknown or unpredictable factors could also have material adverse
effects on our business, financial condition or future results. We undertake no obligation to
update publicly any forward-looking statement whether as a result of new information or future
events except as required by the federal securities laws.
- 18 -
AMERIGAS PARTNERS, L.P.
ANALYSIS OF RESULTS OF OPERATIONS
The following analyses compare the Partnerships results of operations for the three months ended
December 31, 2010 (2010 three-month period) with the three months ended December 31, 2009 (2009
three-month period).
Executive Overview
Net income attributable to AmeriGas Partners for the 2010 three-month period was $74.9 million
compared with net income attributable to AmeriGas Partners for the 2009 three-month period of $84.0
million. Temperatures in our service territory during the 2010 three-month period averaged slightly
warmer than normal and warmer than the prior year. Our heating season got off to a slow start as
temperatures in early fall were significantly warmer than normal. The warmer early fall weather,
customer conservation and the impact on the prior-years volumes of a strong 2009 crop-drying
season resulted in lower year-over-year retail volume sales. Total margin decreased as a result of
the lower volumes sold partially offset by slightly higher average retail unit margins. Operating
results for the 2010 three-month period also reflect higher operating and administrative expenses.
We believe that the Partnership has sufficient liquidity in the form of revolving credit
agreements. Additionally, AmeriGas OLP expects to renew its credit agreements, which are scheduled
to expire in July 2011 and October 2011, during the second half of Fiscal 2011.
2010 three-month period compared with 2009 three-month period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
Three Months Ended December 31, |
|
2010 |
|
|
2009 |
|
|
(Decrease) |
|
(millions of dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gallons sold (millions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
256.4 |
|
|
|
267.4 |
|
|
|
(11.0 |
) |
|
|
(4.1 |
)% |
Wholesale |
|
|
35.9 |
|
|
|
44.6 |
|
|
|
(8.7 |
) |
|
|
(19.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
292.3 |
|
|
|
312.0 |
|
|
|
(19.7 |
) |
|
|
(6.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail propane |
|
$ |
603.8 |
|
|
$ |
560.9 |
|
|
$ |
42.9 |
|
|
|
7.6 |
% |
Wholesale propane |
|
|
50.0 |
|
|
|
53.5 |
|
|
|
(3.5 |
) |
|
|
(6.5 |
)% |
Other |
|
|
46.4 |
|
|
|
42.2 |
|
|
|
4.2 |
|
|
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
700.2 |
|
|
$ |
656.6 |
|
|
$ |
43.6 |
|
|
|
6.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total margin (a) |
|
$ |
264.9 |
|
|
$ |
267.0 |
|
|
$ |
(2.1 |
) |
|
|
(0.8 |
)% |
EBITDA (b) |
|
$ |
113.3 |
|
|
$ |
123.0 |
|
|
$ |
(9.7 |
) |
|
|
(7.9 |
)% |
Operating income |
|
$ |
91.6 |
|
|
$ |
102.6 |
|
|
$ |
(11.0 |
) |
|
|
(10.7 |
)% |
Net income attributable to AmeriGas Partners |
|
$ |
74.9 |
|
|
$ |
84.0 |
|
|
$ |
(9.1 |
) |
|
|
(10.8 |
)% |
Heating degree days % (warmer) colder than normal (c) |
|
|
(2.2 |
)% |
|
|
1.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Total margin represents total revenues less cost of sales propane and cost of sales
other. |
- 19 -
AMERIGAS PARTNERS, L.P.
|
|
|
(b) |
|
Earnings before interest expense, income taxes, depreciation and amortization (EBITDA)
should not be considered as an alternative to net income attributable to AmeriGas Partners (as
an indicator of operating performance) and is not a measure of performance or financial
condition under accounting principles generally accepted in the United States of America
(GAAP). Management believes EBITDA is a meaningful non-GAAP financial measure used by
investors to (1) compare the Partnerships operating performance with other companies within
the propane industry and (2) assess its ability to meet loan covenants. The Partnerships
definition of EBITDA may be different from that used by other companies. Management uses
EBITDA to compare year-over-year profitability of the business without regard to capital
structure as well as to compare the relative performance of the Partnership to that of other
master limited partnerships without regard to their financing methods, capital structure,
income taxes or historical cost basis. In view of the omission of interest, income taxes,
depreciation and amortization from EBITDA, management also assesses the profitability of the
business by comparing net income attributable to AmeriGas Partners for the relevant years.
Management also uses EBITDA to assess the Partnerships profitability because its parent, UGI
Corporation, uses the Partnerships EBITDA to assess the profitability of the Partnership. UGI
Corporation discloses the Partnerships EBITDA as the profitability measure to comply with the
GAAP requirement to provide profitability information about its domestic propane segment. |
|
|
|
The following table includes reconciliations of net income attributable to AmeriGas Partners to
EBITDA for the periods presented: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Net income attributable to AmeriGas Partners |
|
$ |
74.9 |
|
|
$ |
84.0 |
|
Income tax expense |
|
|
0.4 |
|
|
|
1.1 |
|
Interest expense |
|
|
15.4 |
|
|
|
16.5 |
|
Depreciation |
|
|
20.0 |
|
|
|
20.0 |
|
Amortization |
|
|
2.6 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
113.3 |
|
|
$ |
123.0 |
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
|
Deviation from average heating degree days for the 30-year period 1971-2000 based upon
national weather statistics provided by the National Oceanic and Atmospheric Administration
(NOAA) for 335 airports in the United States, excluding Alaska. Prior year data has been
adjusted to correct a NOAA error. |
Based upon heating degree-day data, average temperatures in the Partnerships service
territories were 2.2% warmer than normal during the 2010 three-month period compared with
temperatures that were 1.2% colder than normal in the prior-year period. Early fall heating-season
temperatures were substantially warmer than normal and warmer than the prior year. Retail propane
gallons sold declined principally due to the warmer weather, customer conservation and higher
agricultural sales in the prior year due to an exceptionally strong 2009 crop-drying season
partially offset by volumes acquired through acquisitions.
Retail propane revenues increased $42.9 million during the 2010 three-month period reflecting
higher average retail sales prices ($66.0 million) partially offset by lower retail volumes sold
($23.1 million). Wholesale propane revenues decreased $3.5 million principally reflecting lower
wholesale volumes sold ($10.4 million) partially offset by higher wholesale selling prices ($6.9
million). Average wholesale propane prices at Mont Belvieu, Texas, a major supply location in the
U.S., were approximately 15% higher during the 2010 three-month period compared with average
wholesale propane prices during the 2009 three-month period. Other revenues from ancillary sales
and services increased $4.2 million in the 2010 three-month period. Total cost of sales increased
$45.7 million, to $435.3 million, principally reflecting the previously mentioned higher 2010
wholesale propane product costs.
- 20 -
AMERIGAS PARTNERS, L.P.
Total margin was $2.1 million lower in the 2010 three-month period primarily due to lower total
retail margin ($4.6 million) and, to a much lesser extent, lower wholesale margin partially offset
by an increase in margin from fee income and ancillary sales and services ($3.8 million). The lower
total retail margin reflects the effects of the lower retail volumes sold ($9.7 million) partially
offset by the effects of slightly higher average retail unit margins ($5.1 million).
The $9.7 million decrease in Partnership EBITDA during the 2010 three-month period primarily
reflects (1) the previously mentioned decrease in 2010 three-month total margin ($2.1 million) and
(2) higher operating and administrative expenses ($9.6 million). The increase in operating and
administrative expenses reflects a number of items including higher payroll and benefits and higher
vehicle fuel expenses.
Operating income in the 2010 three-month period decreased $11.0 million reflecting the previously
mentioned decrease in EBITDA ($9.7 million) and slightly higher depreciation and amortization
expense associated with fixed assets acquired or placed in service during the past year ($1.3
million). Partnership interest expense was $1.1 million lower in the 2010 three-month period
principally reflecting lower interest expense on lower long-term debt outstanding principally
resulting from the July 2010 repayment of $80 million of AmeriGas OLP Series E First Mortgage
Notes.
FINANCIAL CONDITION AND LIQUIDITY
Financial Condition
The Partnerships debt outstanding at December 31, 2010 totaled $971.7 million (including current
maturities of long-term debt of $5.6 million and bank loans of $178 million). The Partnerships
debt outstanding at September 30, 2010 totaled $882.4 million (including current maturities of
long-term debt of $20.1 million and bank loans of $91 million). Total debt outstanding at December
31, 2010 includes long-term debt comprising $779.7 million of AmeriGas Partners Senior Notes and
$14.0 million of other long-term debt. See Subsequent Event Partnership Debt Refinancing
below.
AmeriGas OLPs short-term borrowing needs are seasonal and are typically greatest during the fall
and winter heating-season months due to the need to fund higher levels of working capital. In order
to meet its short-term cash needs, AmeriGas OLP has a $200 million unsecured credit agreement
(Credit Agreement) which expires on October 15, 2011. AmeriGas OLP also has a $75 million
unsecured revolving credit facility (2009 Supplemental Credit Agreement) which expires on June
30, 2011. AmeriGas OLP expects to renew these credit agreements prior to their expiration. AmeriGas
OLPs Credit Agreement consists of (1) a $125 million Revolving Credit Facility and (2) a $75
million Acquisition Facility. The Revolving Credit Facility may be used for working capital and
general purposes of AmeriGas OLP. The Acquisition Facility provides AmeriGas OLP with the ability
to borrow up to $75 million to finance the purchase of propane businesses or propane business
assets or, to the extent it is not so used, for working capital and general purposes. The 2009
Supplemental Credit Agreement permits AmeriGas OLP to borrow up to $75 million for working capital
and general purposes.
- 21 -
AMERIGAS PARTNERS, L.P.
At December 31, 2010, there were $135 million of borrowings outstanding under the Credit Agreement
and $43 million of borrowings outstanding under the 2009 Supplemental Credit Agreement. Borrowings
under our credit agreements are classified as bank loans on the Consolidated Balance Sheets. Issued
and outstanding letters of credit under the Revolving Credit Facility, which reduce the amount
available for borrowings, totaled $35.7 million at December 31, 2010 and $36.1 million at December
31, 2009. The average daily and peak bank loan borrowings outstanding under the credit agreements
during the 2010 three-month period were $135.1 million and $201 million, respectively. The average
daily and peak bank loan borrowings outstanding under the credit agreements during the 2009
three-month period were $13.2 million and $48 million, respectively. At December 31, 2010, the
Partnerships available borrowing capacity under the credit agreements was $61.3 million.
Based on existing cash balances, cash expected to be generated from operations, and borrowings
available under the credit agreements the Partnerships management believes that the Partnership
will be able to meet its anticipated contractual commitments and projected cash needs during Fiscal
2011
During the three months ended December 31, 2010, the Partnership declared and paid quarterly
distributions on all limited partner units at a rate of $0.705 per Common Unit for the quarter
ended September 30, 2010. The quarterly distribution of $0.705 per limited partner unit for the
quarter ended December 31, 2010 will be paid on February 18, 2011 to holders of record on February
10, 2011. The ability of the Partnership to declare and pay the quarterly distribution on its
Common Units in the future depends upon a number of factors. These factors include (1) the level
of Partnership earnings; (2) the cash needs of the Partnerships operations (including cash needed
for maintaining and increasing operating capacity); (3) changes in operating working capital; and
(4) the Partnerships ability to borrow under its credit agreements, refinance maturing debt, and
increase its long-term debt. Some of these factors are affected by conditions beyond the
Partnerships control including weather, competition in markets we serve, the cost of propane and
changes in capital market conditions.
Cash Flows
Operating activities. Due to the seasonal nature of the Partnerships business, cash flows from
operating activities are generally strongest during the second and third fiscal quarters when
customers pay for propane consumed during the heating season months. Conversely, operating cash
flows are generally at their lowest levels during the first and fourth fiscal quarters when the
Partnerships investment in working capital, principally accounts receivable and inventories, is
generally greatest. The Partnership may use its credit agreements to satisfy its seasonal operating
cash flow needs.
Cash flow used by operating activities was $2.0 million in the 2010 three-month period compared to
$3.4 million in the 2009 three-month period. Cash flow from operating activities before changes in
operating working capital was $103.8 million in the 2010 three-month period compared with $113.3
million in the prior-year period principally reflecting the lower 2010 three-month period operating
results. Cash required to fund changes in operating working capital totaled $105.8 million in the
2010 three-month period compared with $116.7 million in the prior-year period. The decrease in cash
required to fund operating working capital in the current-year period principally reflects the
timing and amount of cash payments for purchases of propane.
- 22 -
AMERIGAS PARTNERS, L.P.
Investing activities. Investing activity cash flow is principally affected by investments in
property, plant and equipment, cash paid for acquisitions of businesses and proceeds from sales of
assets. Cash flow used in investing activities was $38.6 million in the 2010 three-month period
compared with $29.5 million in the prior-year period. We spent $21.3 million for property, plant
and equipment (comprising $10.4 million of maintenance capital expenditures and $10.9 million of
growth capital expenditures) in the 2010 three-month period compared with $26.7 million (comprising
$10.4 million of maintenance capital expenditures and $16.3 million of growth capital expenditures)
in the 2009 three-month period. The greater capital expenditures in the prior-year period reflected
accelerated opportunistic purchases of cylinders associated with our AmeriGas Cylinder Exchange
program.
Financing activities. The Partnerships financing activities cash flows are typically the result of
repayments and issuances of long-term debt, borrowings under AmeriGas OLPs credit agreements,
issuances of Common Units and distributions on partnership interests. Cash provided by financing
activities was $42.5 million in the 2010 three-month period compared with cash used by financing
activities of $15.8 million in the prior-year period. Distributions in the 2010 three-month period
totaled $41.6 million compared with $39.2 million in the prior-year period principally reflecting a
higher quarterly per-unit distribution rate. We borrowed $87 million under the credit agreements
during the 2010 three-month period compared to $24 million during the 2009 three-month period. The
lower credit agreement borrowings in the prior year reflect higher beginning-of-period cash
balances available to fund operating, investing and financing activities.
Subsequent Event Debt Refinancing
On January 20, 2011, AmeriGas Partners announced that holders of approximately $327.9 million in
aggregate principal amount of its 7.25% Senior Notes due May 2015, representing approximately 79%
of the total $415 million principal amount outstanding, had validly tendered their notes in
connection with the Partnerships January 5, 2011 tender offer. The tendered notes were redeemed on
January 20, 2011 at an effective price of 100.95%, plus a consent fee. On January 21, 2011, the
Partnership issued a notice of full optional redemption at a price of 103.625% for the remaining
outstanding $87.1 million aggregate principal amount of 7.25% Senior Notes and a notice of full
optional redemption at par for the $14.6 million outstanding balance of its 8.875% Senior Notes due
May 2011. The redemption of these notes is scheduled to occur on February 22, 2011. The tendered
7.25% Senior Notes were, and the called notes will be, redeemed with proceeds from the January 20,
2011 issuance of $470 million aggregate principal amount of AmeriGas Partners 6.50% Senior Notes
due 2021. The 6.50% Senior Notes due 2021 rank pari passu with AmeriGas Partners outstanding
senior debt. The Partnership expects to record a loss of approximately $19.0 million associated
with these transactions during the second quarter of Fiscal 2011.
- 23 -
AMERIGAS PARTNERS, L.P.
|
|
|
ITEM 3. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK |
Our primary financial market risks include commodity prices for propane and interest rates on
borrowings. Although we use derivative financial and commodity instruments to reduce market price
risk associated with forecasted transactions, we do not use derivative financial and commodity
instruments for speculative or trading purposes.
Commodity Price Risk
The risk associated with fluctuations in the prices the Partnership pays for propane is principally
a result of market forces reflecting changes in supply and demand for propane and other energy
commodities. The Partnerships profitability is sensitive to changes in propane supply costs and
the Partnership generally passes on increases in such costs to customers. The Partnership may not,
however, always be able to pass through product cost increases fully or on a timely basis,
particularly when product costs rise rapidly. In order to reduce the volatility of the
Partnerships propane market price risk, we use contracts for the forward purchase or sale of
propane, propane fixed-price supply agreements, and over-the-counter derivative commodity
instruments including price swap and option contracts. Over-the-counter derivative commodity
instruments utilized by the Partnership to hedge forecasted purchases of propane are generally
settled at expiration of the contract. These derivative financial instruments contain collateral
provisions. The fair value of unsettled commodity price risk
sensitive instruments at December 31, 2010 was a gain of $15.5 million. A hypothetical 10% adverse
change in the market price of propane would result in a decrease in fair value of $15.5 million.
Because the Partnerships propane derivative instruments generally qualify as hedges under GAAP, we
expect that changes in the fair value of derivative instruments used to manage propane market price
risk would be substantially offset by gains or losses on the associated anticipated transactions.
Interest Rate Risk
The Partnership has both fixed-rate and variable-rate debt. Changes in interest rates impact the
cash flows of variable-rate debt but generally do not impact their fair value. Conversely, changes
in interest rates impact the fair value of fixed-rate debt but do not impact their cash flows.
Our variable-rate debt includes borrowings under AmeriGas OLPs credit agreements. These agreements
have interest rates that are generally indexed to short-term market interest rates. The remainder
of our debt outstanding is subject to fixed rates of interest. Our long-term debt is typically
issued at fixed rates of interest based upon market rates for debt having similar terms and credit
ratings. As these long-term debt issues mature, we may refinance such debt with new debt having
interest rates reflecting then-current market conditions. This debt may have an interest rate that
is more or less than the refinanced debt. In order to reduce interest rate risk associated with
forecasted issuances of fixed-rate debt, from time to time we enter into interest rate protection
agreements. There were no unsettled interest rate protection agreements outstanding at December 31,
2010.
- 24 -
AMERIGAS PARTNERS, L.P.
Derivative Financial Instruments Credit Risk
The Partnership is exposed to credit loss in the event of nonperformance by counterparties to
derivative financial and commodity instruments. Our counterparties principally consist of major
energy companies and major U.S. financial institutions. We maintain credit policies with regard to
our counterparties that we believe reduce overall credit risk. These policies include evaluating
and monitoring our counterparties financial condition, including their credit ratings, and
entering into agreements with counterparties that govern credit limits. Certain of these agreements
call for the posting of collateral by the counterparty or by the Partnership in the form of letters
of credit, parental guarantees or cash.
- 25 -
AMERIGAS PARTNERS, L.P.
|
|
|
ITEM 4. |
|
CONTROLS AND PROCEDURES |
(a) |
|
Evaluation of Disclosure Controls and Procedures |
|
|
The Partnerships disclosure controls and procedures are designed to provide reasonable
assurance that the information required to be disclosed by the Partnership in reports filed
under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed,
summarized, and reported within the time periods specified in the SECs rules and forms, and
(ii) accumulated and communicated to our management, including the Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure. The General Partners management, with the participation of the General Partners
Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the
Partnerships disclosure controls and procedures as of the end of the period covered by this
Report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Partnerships disclosure controls and procedures, as of the end of the
period covered by this Report, were effective at the reasonable assurance level. |
(b) |
|
Change in Internal Control over Financial Reporting |
|
|
No change in the Partnerships internal control over financial reporting occurred during the
Partnerships most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Partnerships internal control over financial reporting. |
- 26 -
AMERIGAS PARTNERS, L.P.
PART II OTHER INFORMATION
|
|
|
ITEM 1. |
|
LEGAL PROCEEDINGS |
Swiger, et al. v. UGI/AmeriGas, Inc. et al. In 1996, a fire occurred at the residence of
Samuel and Brenda Swiger (the Swigers) when propane that leaked from an underground line ignited.
In July 1998, the Swigers filed a class action lawsuit against AmeriGas Propane, L.P. (named
incorrectly as UGI/AmeriGas, Inc.), in the Circuit Court of Monongalia County, West Virginia, in
which they sought to recover an unspecified amount of compensatory and punitive damages and
attorneys fees, for themselves and on behalf of persons in West Virginia for whom the defendants
had installed propane gas lines, resulting from the defendants alleged failure to install
underground propane lines at depths required by applicable safety standards. On December 14, 2010,
AmeriGas OLP and its affiliates entered into a settlement agreement with the class, which was
preliminarily approved by the Circuit Court of Monongalia County on January 13, 2011.
In 2005, the Swigers also filed what purports to be a class action in the Circuit Court of Harrison
County, West Virginia against UGI, an insurance subsidiary of UGI, certain officers of UGI and the
General Partner, and their insurance carriers and insurance adjusters. In the Harrison County
lawsuit, the Swigers are seeking compensatory and punitive damages on behalf of the putative class
for alleged violations of the West Virginia Insurance Unfair Trade Practice Act, negligence,
intentional misconduct and civil conspiracy. The Swigers have also requested that the Court rule
that insurance coverage exists under the policies issued by the defendant insurance companies for
damages sustained by the members of the class in the Monongalia County lawsuit. The Circuit Court
of Harrison County has not certified the class in the Harrison County lawsuit at this time and, in
October 2008, stayed that lawsuit pending resolution of the class action lawsuit in Monongalia
County. We believe we have good defenses to the claims in this action.
Purported Class Action Lawsuits. On May 27, 2009, the General Partner was named as a
defendant in a purported class action lawsuit in the Superior Court of the State of California in
which plaintiffs are challenging AmeriGas OLPs weight disclosure with regard to its portable
propane grill cylinders. The complaint purports to be brought on behalf of a class of all
consumers in the state of California during the four years prior to the date of the California
complaint, who exchanged an empty cylinder and were provided with what is alleged to be only a
partially filled cylinder. The plaintiffs seek restitution, injunctive relief, interest, costs,
attorneys fees and other appropriate relief.
- 27 -
AMERIGAS PARTNERS, L.P.
Since that initial suit, various AmeriGas entities have been named in more than a dozen similar
suits that have been filed in various courts throughout the United States. These complaints
purport to be brought on behalf of nationwide classes, which are loosely defined as including all
purchasers of liquefied propane gas cylinders marketed or sold by AmeriGas OLP and another
unaffiliated entity nationwide. The complaints claim that defendants conduct constituted unfair
and deceptive practices that injured consumers and violated the consumer protection statutes of at
least thirty-seven states and the District of Columbia, thereby entitling the class to damages,
restitution, disgorgement, injunctive relief, costs and attorneys fees. Some of the complaints
also allege violation of state slack filling laws. Additionally the complaints allege that
defendants were unjustly enriched by their conduct and they seek restitution of any unjust benefits
received, punitive or treble damages, and pre-judgment and post-judgment interest. A motion to
consolidate the purported class action lawsuits was heard by the Multidistrict Litigation Panel
(MDL Panel) on September 24, 2009 in the United States District Court for the District of Kansas.
By Order, dated October 6, 2009, the MDL Panel transferred the pending cases to the United States
District Court for the Western District of Missouri. The AmeriGas entities named in the
consolidated class action lawsuits have entered into a settlement agreement with the class. On May
19, 2010, the United States District Court for the District of Kansas granted the classs motion
seeking preliminary approval of the settlement. On October 4, 2010, after the expiration of the
time in which claims were, or could have been, made by class members, the District Court ruled that
the settlement was fair, reasonable and adequate to the class and granted final approval of the
settlement. Two parties have appealed that final order and the matter is now awaiting review by
the 8th Circuit Court of Appeals.
Cylinder
Investigations. On or about October 21, 2009, the General Partner received a notice that the Offices of the
District Attorneys of Santa Clara, Sonoma, Ventura, San Joaquin and Fresno Counties and the City
Attorney of San Diego have commenced an investigation into AmeriGas OLPs cylinder labeling and
filling practices in California and issued an administrative subpoena seeking documents and
information relating to those practices. We have responded to the administrative subpoena, but have had no further
requests from the District Attorneys since that initial inquiry.
In addition to the other information presented in this report, you should carefully consider the
factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2010, which could materially affect our business, financial
condition or future results. The risks described in our Annual Report on Form 10-K are not the
only risks facing the Partnership. Other unknown or unpredictable factors could also have material
adverse effects on future results.
- 28 -
AMERIGAS PARTNERS, L.P.
The exhibits filed as part of this report are as follows (exhibits incorporated by reference are
set forth with the name of the registrant, the type of report and registration number or last date
of the period for which it was filed, and the exhibit number in such filing):
Incorporation by Reference
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit |
|
|
|
|
|
|
|
|
|
No. |
|
Exhibit |
|
Registrant |
|
Filing |
|
Exhibit |
|
4.1 |
|
|
Indenture, dated as
of January 20,
2011, by and among
AmeriGas Partners,
L.P., AmeriGas
Finance Corp., and
U.S. Bank National
Association, as
trustee. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.2 |
|
|
First Supplemental
Indenture, dated as
of January 20,
2011, to Indenture
dated as of January
20, 2011, among
AmeriGas Partners,
L.P., AmeriGas
Finance Corp. and
U.S. Bank National
Association, as
trustee.
|
|
AmeriGas Partners,
L.P.
|
|
8-K (1/19/2011)
|
|
|
4.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.3 |
|
|
First Supplemental
Indenture, dated
January 19, 2011,
to Indenture dated
May 3, 2005, by and
among AmeriGas
Partners, L.P.,
AmeriGas Finance
Corp. and U.S. Bank
National
Association, as
successor to
Wachovia Bank
National
Association, as
trustee.
|
|
AmeriGas Partners,
L.P.
|
|
8-K (1/19/2011)
|
|
|
4.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1 |
|
|
Trademark License
Agreement, dated
April 19, 1995
among AmeriGas
Propane, Inc.,
AmeriGas Partners,
L.P. and AmeriGas
Propane, L.P. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
|
Certification by
the Chief Executive
Officer relating to
the Registrants
Report on Form 10-Q
for the quarter
ended December 31,
2010, pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
|
Certification by
the Chief Financial
Officer relating to
the Registrants
Report on Form 10-Q
for the quarter
ended December 31,
2010, pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32 |
|
|
Certification by
the Chief Executive
Officer and the
Chief Financial
Officer relating to
the Registrants
Report on Form 10-Q
for the quarter
ended December 31,
2010, pursuant to
Section 906 of the
Sarbanes-Oxley Act
of 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101 |
|
|
The following
materials from
AmeriGas Partners,
L.P.s Quarterly
Report on Form 10-Q
for the quarter
ended December 31,
2010, formatted in
XBRL (Extensible
Business Reporting
Language): (i) the
Condensed
Consolidated
Balance Sheets;
(ii) the Condensed
Consolidated
Statements of
Operations; (iii)
the Condensed
Consolidated
Statements of Cash
Flows; (iv) the
Condensed
Consolidated
Statements of
Partners Capital;
and (v) Notes to
Condensed
Consolidated
Financial
Statements, tagged
as blocks of text.
This Exhibit 101 is
deemed not filed
for purposes of
Section 11 or 12 of
the Securities Act
of 1933 and Section
18 of the
Securities Exchange
Act of 1934, and
otherwise is not
subject to
liability under
these sections. |
|
|
|
|
|
|
|
|
- 29 -
AMERIGAS PARTNERS, L.P.
SIGNATURES
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.
|
|
|
|
|
|
AmeriGas Partners, L.P.
(Registrant)
|
|
|
By: |
AmeriGas Propane, Inc.,
|
|
|
|
as General Partner |
|
|
|
|
Date: February 4, 2011 |
By: |
/s/ Jerry E. Sheridan
|
|
|
|
Jerry E. Sheridan |
|
|
|
Vice President Finance
and Chief Financial Officer |
|
|
|
|
Date: February 4, 2011 |
By: |
/s/ William J. Stanczak
|
|
|
|
William J. Stanczak |
|
|
|
Controller and Chief Accounting Officer |
|
- 30 -
EXHIBIT INDEX
|
|
|
|
|
|
4.1 |
|
|
Indenture, dated as of January 20, 2011, by and among AmeriGas Partners, L.P.,
AmeriGas Finance Corp., and U.S. Bank National Association, as trustee. |
|
|
|
|
|
|
10.1 |
|
|
Trademark License Agreement, dated April 19, 1995, among AmeriGas Propane, Inc., AmeriGas
Partners, L.P., and AmeriGas Propane, L.P. |
|
|
|
|
|
|
31.1 |
|
|
Certification by the Chief Executive Officer relating to the Registrants Report on Form 10-Q
for the quarter ended December 31, 2010, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
|
|
|
|
|
|
31.2 |
|
|
Certification by the Chief Financial Officer relating to the Registrants Report on Form 10-Q
for the quarter ended December 31, 2010, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
|
|
|
|
|
|
32 |
|
|
Certification by the Chief Executive Officer and the Chief Financial Officer relating to the
Registrants Report on Form 10-Q for the quarter ended December 31, 2010, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
101 |
|
|
The following materials from AmeriGas Partners, L.P.s Quarterly Report on Form 10-Q for the
quarter ended December 31, 2010, formatted in XBRL (Extensible Business Reporting Language): |
|
|
|
|
(i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of
Operations; (iii) the Condensed Consolidated Statements of Cash Flows; (iv) the Condensed
Consolidated Statements of Partners Capital; and (v) Notes to Condensed Consolidated
Financial Statements, tagged as blocks of text. This Exhibit 101 is deemed not filed for
purposes of Section 11 or 12 of the Securities Act of 1933 and Section 18 of the Securities
Exchange Act of 1934, and otherwise is not subject to liability under these sections. |