Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2011
OR
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o |
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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)
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Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
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23-2787918
(I.R.S. Employer
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 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 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:
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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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 April 30, 2011 there were 57,124,296 Common Units of AmeriGas Partners, L.P. outstanding.
AMERIGAS PARTNERS, L.P.
TABLE OF CONTENTS
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
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March 31, |
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September 30, |
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March 31, |
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2011 |
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2010 |
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2010 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
35,396 |
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$ |
7,726 |
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$ |
9,852 |
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Accounts receivable (less allowances for doubtful accounts of $17,713
$15,290 and $17,053, respectively) |
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326,858 |
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|
172,708 |
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|
302,516 |
|
Accounts receivable related parties |
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|
2,881 |
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|
7,039 |
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|
6,833 |
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Inventories |
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122,651 |
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114,122 |
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115,806 |
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Derivative financial
instruments |
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11,278 |
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7,478 |
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7,932 |
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Prepaid expenses and
other current assets |
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|
13,756 |
|
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|
16,785 |
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14,053 |
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|
|
|
|
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Total current assets |
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512,820 |
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325,858 |
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456,992 |
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Property, plant and equipment (less accumulated depreciation and
amortization of $904,158, $867,250 and $839,475, respectively) |
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651,283 |
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642,778 |
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636,949 |
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Goodwill |
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689,523 |
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678,721 |
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666,510 |
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Intangible assets, net |
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42,827 |
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|
37,590 |
|
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|
32,913 |
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Other assets |
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16,257 |
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11,272 |
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11,943 |
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Total assets |
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$ |
1,912,710 |
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$ |
1,696,219 |
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$ |
1,805,307 |
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LIABILITIES AND PARTNERS CAPITAL |
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Current liabilities: |
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Current maturities of long-term debt |
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$ |
5,473 |
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$ |
20,123 |
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$ |
82,787 |
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Bank loans |
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194,000 |
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91,000 |
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23,000 |
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Accounts payable trade |
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183,726 |
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130,575 |
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152,285 |
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Accounts payable related parties |
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17 |
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2,352 |
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3,210 |
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Customer deposits and advances |
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34,833 |
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86,154 |
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38,401 |
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Derivative financial instruments |
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16,977 |
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Other current
liabilities |
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98,568 |
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130,058 |
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104,813 |
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|
|
|
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|
|
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Total current liabilities |
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516,617 |
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460,262 |
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421,473 |
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Long-term debt |
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829,386 |
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771,279 |
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784,369 |
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Other noncurrent liabilities |
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56,289 |
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71,792 |
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69,713 |
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Total liabilities |
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1,402,292 |
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1,303,333 |
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1,275,555 |
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Commitments and contingencies (note 6) |
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Partners capital: |
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AmeriGas Partners, L.P. partners capital: |
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Common unitholders (units issued - 57,124,296, 57,088,509 and 57,088,509, respectively) |
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481,270 |
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372,220 |
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507,077 |
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General partner |
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4,866 |
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3,751 |
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5,116 |
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Accumulated other comprehensive income |
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10,767 |
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4,877 |
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4,169 |
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Total AmeriGas Partners, L.P. partners capital |
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496,903 |
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|
380,848 |
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|
516,362 |
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Noncontrolling interest |
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13,515 |
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|
12,038 |
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13,390 |
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Total partners capital |
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510,418 |
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392,886 |
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529,752 |
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Total liabilities and partners capital |
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$ |
1,912,710 |
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$ |
1,696,219 |
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$ |
1,805,307 |
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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)
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Three Months Ended |
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Six Months Ended |
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March 31, |
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March 31, |
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2011 |
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2010 |
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2011 |
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2010 |
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Revenues: |
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Propane |
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$ |
859,595 |
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$ |
845,043 |
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$ |
1,513,407 |
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$ |
1,459,401 |
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Other |
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|
47,181 |
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|
41,058 |
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|
|
93,589 |
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|
83,295 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
906,776 |
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|
|
886,101 |
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1,606,996 |
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1,542,696 |
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Costs and expenses: |
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Cost of sales propane (excluding depreciation
shown below) |
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|
551,709 |
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|
529,393 |
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|
972,409 |
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|
904,842 |
|
Cost of sales other (excluding depreciation
shown below) |
|
|
13,085 |
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|
|
10,344 |
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|
|
27,690 |
|
|
|
24,464 |
|
Operating and administrative expenses |
|
|
170,472 |
|
|
|
166,096 |
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|
|
326,900 |
|
|
|
312,910 |
|
Depreciation |
|
|
20,346 |
|
|
|
19,931 |
|
|
|
40,418 |
|
|
|
39,914 |
|
Amortization |
|
|
2,858 |
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|
|
1,907 |
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|
|
5,453 |
|
|
|
3,305 |
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Other expense (income), net |
|
|
(6,320 |
) |
|
|
5,182 |
|
|
|
(12,075 |
) |
|
|
1,399 |
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|
|
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|
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|
|
|
|
|
|
|
|
|
752,150 |
|
|
|
732,853 |
|
|
|
1,360,795 |
|
|
|
1,286,834 |
|
|
|
|
|
|
|
|
|
|
|
|
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Operating income |
|
|
154,626 |
|
|
|
153,248 |
|
|
|
246,201 |
|
|
|
255,862 |
|
Loss on extinguishment of debt |
|
|
(18,801 |
) |
|
|
|
|
|
|
(18,801 |
) |
|
|
|
|
Interest expense |
|
|
(16,347 |
) |
|
|
(16,710 |
) |
|
|
(31,722 |
) |
|
|
(33,203 |
) |
|
|
|
|
|
|
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|
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|
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|
Income before income taxes |
|
|
119,478 |
|
|
|
136,538 |
|
|
|
195,678 |
|
|
|
222,659 |
|
Income tax benefit (expense) |
|
|
71 |
|
|
|
(549 |
) |
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|
(348 |
) |
|
|
(1,716 |
) |
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|
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Net income |
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|
119,549 |
|
|
|
135,989 |
|
|
|
195,330 |
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|
220,943 |
|
Less: net income attributable to noncontrolling interest |
|
|
(1,547 |
) |
|
|
(1,506 |
) |
|
|
(2,460 |
) |
|
|
(2,501 |
) |
|
|
|
|
|
|
|
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|
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Net income attributable to AmeriGas Partners, L.P. |
|
$ |
118,002 |
|
|
$ |
134,483 |
|
|
$ |
192,870 |
|
|
$ |
218,442 |
|
|
|
|
|
|
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|
|
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|
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General partners interest in net income attributable
to AmeriGas Partners, L.P. |
|
$ |
2,133 |
|
|
$ |
1,913 |
|
|
$ |
3,834 |
|
|
$ |
3,319 |
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|
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Limited partners interest in net income attributable
to AmeriGas Partners, L.P. |
|
$ |
115,869 |
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|
$ |
132,570 |
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|
$ |
189,036 |
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|
$ |
215,123 |
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Income per limited partner unit basic and diluted (note 2) |
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Basic |
|
$ |
1.45 |
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$ |
1.59 |
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$ |
2.51 |
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$ |
2.74 |
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Diluted |
|
$ |
1.45 |
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|
$ |
1.59 |
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$ |
2.51 |
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|
$ |
2.74 |
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Average limited partner units outstanding (thousands): |
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Basic |
|
|
57,128 |
|
|
|
57,077 |
|
|
|
57,109 |
|
|
|
57,066 |
|
|
|
|
|
|
|
|
|
|
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|
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|
Diluted |
|
|
57,175 |
|
|
|
57,124 |
|
|
|
57,159 |
|
|
|
57,114 |
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|
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|
See accompanying notes to condensed consolidated financial statements.
- 2 -
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Thousands of dollars)
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|
|
|
|
|
|
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|
Six Months Ended |
|
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
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|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
195,330 |
|
|
$ |
220,943 |
|
Adjustments to reconcile net income to net
cash from operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
45,871 |
|
|
|
43,219 |
|
Provision for uncollectible accounts |
|
|
6,821 |
|
|
|
7,503 |
|
Loss on interest rate hedges |
|
|
|
|
|
|
12,193 |
|
Net change in realized gains and losses deferred as cash flow hedges |
|
|
2,565 |
|
|
|
4,020 |
|
Loss on extinguishment of debt |
|
|
18,801 |
|
|
|
|
|
Other, net |
|
|
152 |
|
|
|
161 |
|
Net change in: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(155,823 |
) |
|
|
(173,986 |
) |
Inventories |
|
|
(7,742 |
) |
|
|
(27,480 |
) |
Accounts payable |
|
|
50,815 |
|
|
|
38,201 |
|
Other current assets |
|
|
3,031 |
|
|
|
(1,645 |
) |
Other current liabilities |
|
|
(98,742 |
) |
|
|
(65,368 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
61,079 |
|
|
|
57,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Expenditures for property, plant and equipment |
|
|
(40,614 |
) |
|
|
(45,384 |
) |
Proceeds from disposals of assets |
|
|
1,695 |
|
|
|
2,554 |
|
Acquisitions of businesses, net of cash acquired |
|
|
(25,419 |
) |
|
|
(7,259 |
) |
|
|
|
|
|
|
|
Net cash used by investing activities |
|
|
(64,338 |
) |
|
|
(50,089 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Distributions |
|
|
(83,259 |
) |
|
|
(78,395 |
) |
Noncontrolling interest activity |
|
|
(1,040 |
) |
|
|
(1,087 |
) |
Increase in bank loans |
|
|
103,000 |
|
|
|
23,000 |
|
Issuance of long-term debt |
|
|
461,980 |
|
|
|
|
|
Repayment of long-term debt |
|
|
(450,386 |
) |
|
|
(1,134 |
) |
Proceeds associated with equity-based compensation plans, net of tax withheld |
|
|
616 |
|
|
|
566 |
|
Capital contributions from General Partner |
|
|
18 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) by financing activities |
|
|
30,929 |
|
|
|
(57,033 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents increase (decrease) |
|
$ |
27,670 |
|
|
$ |
(49,361 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
|
End of period |
|
$ |
35,396 |
|
|
$ |
9,852 |
|
Beginning of period |
|
|
7,726 |
|
|
|
59,213 |
|
|
|
|
|
|
|
|
Increase (decrease) |
|
$ |
27,670 |
|
|
$ |
(49,361 |
) |
|
|
|
|
|
|
|
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 six months ended March 31, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2010 |
|
|
57,088,509 |
|
|
$ |
372,220 |
|
|
$ |
3,751 |
|
|
$ |
4,877 |
|
|
$ |
380,848 |
|
|
$ |
12,038 |
|
|
$ |
392,886 |
|
Net income |
|
|
|
|
|
|
189,036 |
|
|
|
3,834 |
|
|
|
|
|
|
|
192,870 |
|
|
|
2,460 |
|
|
|
195,330 |
|
Net gains on derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,022 |
|
|
|
25,022 |
|
|
|
255 |
|
|
|
25,277 |
|
Reclassification of net gains on
derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,132 |
) |
|
|
(19,132 |
) |
|
|
(198 |
) |
|
|
(19,330 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
189,036 |
|
|
|
3,834 |
|
|
|
5,890 |
|
|
|
198,760 |
|
|
|
2,517 |
|
|
|
201,277 |
|
Distributions |
|
|
|
|
|
|
(80,522 |
) |
|
|
(2,737 |
) |
|
|
|
|
|
|
(83,259 |
) |
|
|
(1,137 |
) |
|
|
(84,396 |
) |
Unit-based compensation expense |
|
|
|
|
|
|
1,108 |
|
|
|
|
|
|
|
|
|
|
|
1,108 |
|
|
|
|
|
|
|
1,108 |
|
Common Units issued in connection
with incentive compensation
plans, net of tax withheld |
|
|
35,787 |
|
|
|
(572 |
) |
|
|
18 |
|
|
|
|
|
|
|
(554 |
) |
|
|
|
|
|
|
(554 |
) |
General Partner contribution to AmeriGas Propane, L.P. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97 |
|
|
|
97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2011 |
|
|
57,124,296 |
|
|
$ |
481,270 |
|
|
$ |
4,866 |
|
|
$ |
10,767 |
|
|
$ |
496,903 |
|
|
$ |
13,515 |
|
|
$ |
510,418 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 six months ended March 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2009 |
|
|
57,046,388 |
|
|
$ |
367,708 |
|
|
$ |
3,698 |
|
|
$ |
(6,947 |
) |
|
$ |
364,459 |
|
|
$ |
11,866 |
|
|
$ |
376,325 |
|
Net income |
|
|
|
|
|
|
215,123 |
|
|
|
3,319 |
|
|
|
|
|
|
|
218,442 |
|
|
|
2,501 |
|
|
|
220,943 |
|
Net gains on derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,393 |
|
|
|
32,393 |
|
|
|
330 |
|
|
|
32,723 |
|
Reclassification of net gains on
derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,277 |
) |
|
|
(21,277 |
) |
|
|
(220 |
) |
|
|
(21,497 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
215,123 |
|
|
|
3,319 |
|
|
|
11,116 |
|
|
|
229,558 |
|
|
|
2,611 |
|
|
|
232,169 |
|
Distributions |
|
|
|
|
|
|
(76,476 |
) |
|
|
(1,918 |
) |
|
|
|
|
|
|
(78,394 |
) |
|
|
(1,087 |
) |
|
|
(79,481 |
) |
Unit-based compensation expense |
|
|
|
|
|
|
1,073 |
|
|
|
|
|
|
|
|
|
|
|
1,073 |
|
|
|
|
|
|
|
1,073 |
|
Common Units issued in connection
with incentive compensation
plans, net of tax withheld |
|
|
42,121 |
|
|
|
(351 |
) |
|
|
17 |
|
|
|
|
|
|
|
(334 |
) |
|
|
|
|
|
|
(334 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2010 |
|
|
57,088,509 |
|
|
$ |
507,077 |
|
|
$ |
5,116 |
|
|
$ |
4,169 |
|
|
$ |
516,362 |
|
|
$ |
13,390 |
|
|
$ |
529,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 March 31, 2011, 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 32,433,087 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, prior to the
Merger, Eagle OLP. 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 |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Common Unitholders interest in net income
attributable to AmeriGas Partners under the
two-class method for MLPs |
|
$ |
82,631 |
|
|
$ |
90,942 |
|
|
$ |
143,463 |
|
|
$ |
156,350 |
|
|
Weighted average Common Units
outstanding basic (thousands) |
|
|
57,128 |
|
|
|
57,077 |
|
|
|
57,109 |
|
|
|
57,066 |
|
Potentially dilutive Common Units (thousands) |
|
|
47 |
|
|
|
47 |
|
|
|
50 |
|
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average Common Units
outstanding diluted (thousands) |
|
|
57,175 |
|
|
|
57,124 |
|
|
|
57,159 |
|
|
|
57,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theoretical distributions of net income attributable to AmeriGas Partners, L.P. in
accordance with the two-class method for the three months ended March 31, 2011 and 2010
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 $0.58 and $0.73, respectively.
Theoretical distributions of net income attributable to AmeriGas Partners, L.P. in
accordance with the two-class method for the six months ended March 31, 2011 and 2010
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 $0.80 and $1.03, 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
September 30, |
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
2010 |
|
Subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships and
noncompete agreements |
|
$ |
74,199 |
|
|
$ |
65,203 |
|
|
$ |
59,768 |
|
Accumulated amortization |
|
|
(31,372 |
) |
|
|
(27,613 |
) |
|
|
(26,855 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
42,827 |
|
|
$ |
37,590 |
|
|
$ |
32,913 |
|
|
|
|
|
|
|
|
|
|
|
Not subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
689,523 |
|
|
$ |
678,721 |
|
|
$ |
666,510 |
|
|
|
|
|
|
|
|
|
|
|
The increase in goodwill and other intangible assets during the six months ended March
31, 2011 reflects the effects of acquisitions. Amortization expense of intangible assets was
$1,985 and $1,492 for the three months ended March 31, 2011 and 2010, respectively.
Amortization expense of intangible assets was $3,755 and $2,885 for the six months ended
March 31, 2011 and 2010, 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 $7,868;
Fiscal 2012 $8,210; Fiscal 2013 $7,626; Fiscal 2014 $6,631; Fiscal 2015 $4,829.
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 $102,485 and $196,193 for the three and six months ended March 31, 2011,
respectively, and $97,634 and $188,129 for the three and six months ended March 31, 2010,
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 $5,187 and $7,804 during
the three and six months ended March 31, 2011, respectively, and $4,668 and $5,872 during
the three and six months ended March 31, 2010, 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 $783 and $1,568 for
the three and six months ended March 31, 2011, respectively, and $627 and $1,436 for the
three and six months ended March 31, 2010, 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, LLC (Atlantic Energy), a former
subsidiary of UGI Energy Services, Inc. (Energy Services), a 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
$2,633 and $4,073 during the three and six months ended March 31, 2011, respectively, and
$23,973 and $33,756 during the three and six months ended March 31, 2010, 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 periods presented.
During the three
months ended March 31, 2011, AmeriGas Partners issued $470,000 principal
amount of 6.50% Senior Notes due 2021. The proceeds from the issuance of the 6.50% Senior
Notes were used to repay AmeriGas Partners $415,000 7.25% Senior Notes due May 15, 2015
pursuant to a January 5, 2011 tender offer and subsequent redemption. The 6.50% Senior Notes
due 2021 rank pari passu with AmeriGas Partners outstanding senior debt. In addition,
during the three months ended March 31, 2011, AmeriGas Partners redeemed the outstanding
$14,640 principal amount of its 8.875% Senior Notes due May 2011. The Partnership incurred a
loss of $18,801 on these early extinguishments of debt which amount is reflected on the
Condensed Consolidated Statements of Operations under the caption Loss on extinguishment of
debt. The loss reduced net income attributable to AmeriGas Partners, L.P. by $18,801 during
the three and six months ended March 31, 2011.
6. |
|
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.
- 9 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
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 challenged
AmeriGas OLPs weight disclosure with regard to its portable propane grill cylinders. After
that initial suit, various AmeriGas entities were named in more than a dozen similar suits
that were filed in various courts throughout the United States. All of those cases were
consolidated and transferred to the United States District Court for the Western District of
Missouri. On May 19, 2010, the Court granted the class motion seeking preliminary
approval of the parties settlement. On October 4, 2010, the Court ruled that the
settlement was fair, reasonable and adequate to the class and granted final approval of the
settlement.
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
the 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.
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.
- 10 -
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)
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)
7. |
|
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 March 31, 2011, September 30, 2010 and
March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
March 31, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
|
$ |
|
|
|
$ |
11,407 |
|
|
$ |
|
|
|
$ |
11,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
|
$ |
|
|
|
$ |
8,025 |
|
|
$ |
|
|
|
$ |
8,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
|
$ |
|
|
|
$ |
5,122 |
|
|
$ |
|
|
|
$ |
5,122 |
|
Interest rate contracts |
|
$ |
|
|
|
$ |
2,834 |
|
|
$ |
|
|
|
$ |
2,834 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Interest rate contracts |
|
$ |
|
|
|
$ |
(16,977 |
) |
|
$ |
|
|
|
$ |
(16,977 |
) |
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 March 31, 2011 were $834,859 and $861,209,
respectively. The carrying amount and estimated fair value of our long-term debt at March
31, 2010 were $867,156 and $874,106, 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.
8. |
|
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 March 31, 2011 and 2010 there were 46.5
million gallons and 71.2 million gallons, respectively, of propane hedged with
over-the-counter price swap and option contracts. At March 31, 2011, the maximum period over
which we are hedging propane market price risk is 18 months with a weighted average of 3
months. In addition, the Partnership from time to time enters into price swap agreements to
reduce short-term commodity price volatility and to provide market price risk support to a
limited number of its wholesale customers. These agreements are not designated as hedges for
accounting purposes and the volumes of propane subject to these 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 accumulated other comprehensive income ("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
March 31, 2011, 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 $13,522.
- 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). We
account for IRPAs as cash flow hedges. Changes in the fair values of IRPAs are recorded in
AOCI to the extent effective in offsetting
changes in the underlying interest rate risk, until earnings are affected by the hedged
interest expense. There are no unsettled IRPAs outstanding at March 31, 2011. The amount of
net losses associated with IRPAs expected to be reclassified into earnings during the next
twelve months is $538.
As previously disclosed, during the three months ended March 31, 2010, the Partnerships
management determined that it was likely that it would not issue $150,000 of long-term debt
during the summer of 2010. As a result, the Partnership discontinued cash flow hedge
accounting treatment for interest rate protection agreements associated with this previously
anticipated long-term debt issuance and recorded a $12,193 loss during the three months
ended March 31, 2010 which is reflected in other expense (income), net on the Condensed
Consolidated Statements of Operations.
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 March 31, 2011. 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 March 31, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets |
|
|
Derivative (Liabilities) |
|
|
|
Balance Sheet |
|
Fair |
|
|
Balance Sheet |
|
Fair |
|
As of March 31, 2011 |
|
Location |
|
Value |
|
|
Location |
|
Value |
|
Derivatives Designated as
Hedging Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
Derivative financial instruments and Other assets |
|
$ |
11,407 |
|
|
Derivative financial instruments and Other noncurrent liabilities |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as
Hedging Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
Derivative financial instruments |
|
|
|
|
|
Derivative financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Derivatives |
|
|
|
$ |
11,407 |
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets |
|
|
Derivative (Liabilities) |
|
|
|
Balance Sheet |
|
Fair |
|
|
Balance Sheet |
|
Fair |
|
As of March 31, 2010 |
|
Location |
|
Value |
|
|
Location |
|
Value |
|
Derivatives Designated as
Hedging Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
Derivative financial instruments
and Other assets |
|
$ |
5,120 |
|
|
Derivative financial instruments and Other noncurrent liabilities |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as
Hedging Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
Derivative financial instruments |
|
$ |
2 |
|
|
Derivative financial instruments |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts (a) |
|
Derivative financial instruments |
|
|
2,835 |
|
|
Derivative financial instruments |
|
|
(16,977 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Derivatives Not Designated
as Hedging Instruments |
|
|
|
$ |
2,837 |
|
|
|
|
$ |
(16,977 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Derivatives |
|
|
|
$ |
7,957 |
|
|
|
|
$ |
(16,977 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Amounts represent fair value of IRPAs for which cash flow hedge accounting was discontinued
in March 2010. |
- 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 and six months ended March 31, 2011:
Three Months Ended March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of |
|
|
Gain |
|
|
Gain (Loss) |
|
|
Gain (Loss) |
|
|
Recognized in |
|
|
Reclassified from |
|
|
Reclassified from |
|
|
AOCI and Noncontrolling |
|
|
AOCI and Noncontrolling |
|
|
AOCI and Noncontrolling |
|
|
Interest |
|
|
Interest into Income |
|
|
Interest into Income |
|
|
|
|
|
|
|
|
|
|
|
Cash Flow |
|
|
|
|
|
|
|
|
|
|
Hedges: |
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
$ |
12,315 |
|
|
$ |
15,163 |
|
|
Cost of sales |
Interest rate contracts |
|
|
|
|
|
|
(135 |
) |
|
Interest expense |
|
|
|
|
|
|
|
|
Total |
|
$ |
12,315 |
|
|
$ |
15,028 |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended March 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of |
|
|
Gain |
|
|
Gain (Loss) |
|
|
Gain (Loss) |
|
|
Recognized in |
|
|
Reclassified from |
|
|
Reclassified from |
|
|
AOCI and Noncontrolling |
|
|
AOCI and Noncontrolling |
|
|
AOCI and Noncontrolling |
|
|
Interest |
|
|
Interest into Income |
|
|
Interest into Income |
|
|
|
|
|
|
|
|
|
|
|
Cash Flow |
|
|
|
|
|
|
|
|
|
|
Hedges: |
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
$ |
25,277 |
|
|
$ |
19,599 |
|
|
Cost of sales |
Interest rate contracts |
|
|
|
|
|
|
(269 |
) |
|
Interest expense |
|
|
|
|
|
|
|
|
Total |
|
$ |
25,277 |
|
|
$ |
19,330 |
|
|
|
|
|
|
|
|
|
|
|
- 16 -
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 and six months ended March 31, 2010:
Three Months Ended March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of |
|
|
Loss |
|
|
Gain (Loss) |
|
|
Gain (Loss) |
|
|
Recognized in |
|
|
Reclassified from |
|
|
Reclassified from |
|
|
AOCI and Noncontrolling |
|
|
AOCI and Noncontrolling |
|
|
AOCI and Noncontrolling |
|
|
Interest |
|
|
Interest into Income |
|
|
Interest into Income |
|
|
|
|
|
|
|
|
|
|
|
Cash Flow |
|
|
|
|
|
|
|
|
|
|
Hedges: |
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
$ |
(7,962 |
) |
|
$ |
25,295 |
|
|
Cost of sales |
Interest rate contracts |
|
|
(3,950 |
) |
|
|
(12,327 |
) |
|
Interest expense/other expense |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(11,912 |
) |
|
$ |
12,968 |
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of |
|
|
Gain |
|
|
Gain (Loss) |
|
|
Gain (Loss) |
|
|
Recognized in |
|
|
Reclassified from |
|
|
Reclassified from |
|
|
AOCI and Noncontrolling |
|
|
AOCI and Noncontrolling |
|
|
AOCI and Noncontrolling |
|
|
Interest |
|
|
Interest into Income |
|
|
Interest into Income |
|
|
|
|
|
|
|
|
|
|
|
Cash Flow |
|
|
|
|
|
|
|
|
|
|
Hedges: |
|
|
|
|
|
|
|
|
|
|
Propane contracts |
|
$ |
30,984 |
|
|
$ |
33,959 |
|
|
Cost of sales |
Interest rate contracts |
|
|
1,739 |
|
|
|
(12,462 |
) |
|
Interest expense/other expense |
|
|
|
|
|
|
|
|
Total |
|
$ |
32,723 |
|
|
$ |
21,497 |
|
|
|
|
|
|
|
|
|
|
|
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. The amount of net gains or losses associated with propane
contracts that are not designated as hedging instruments was not material during the three
and six months ended March 31, 2011 or 2010.
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.
- 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 (1) the three months
ended March 31, 2011 (2011 three-month period) with the three months ended March 31, 2010 (2010
three-month period) and the six months ended March 31, 2011 (2011 six-month period) with the six
months ended March 31, 2010 (2010 six-month period).
Executive Overview
Net income attributable to AmeriGas Partners for the 2011 three-month period was $118.0 million
compared with net income attributable to AmeriGas Partners for the 2010 three-month period of
$134.5 million. The 2011 three-month period results reflect an
$18.8 million loss on early extinguishment of Partnership Senior Notes.
Results in the 2010 three-month period include a $12.2 million loss associated with the
discontinuance of interest rate hedges. Temperatures in our service territory during the 2011
three-month period averaged slightly colder than normal and the prior year. Although weather nationally was colder
than normal and colder than in the prior-year period, weather in our southern operating regions in February
and March was significantly warmer than in the comparable prior-year period. The warmer southern weather and
customer conservation more than offset the beneficial impacts of colder weather in the northern and western U.S.
Operating results for the 2011 three-month period also reflect higher operating and administrative
expenses.
Net income attributable to AmeriGas Partners for the 2011 six-month period was $192.9 million
compared with net income attributable to AmeriGas Partners for the 2010 six-month period of $218.4
million. The 2011 six-month period EBITDA reflects the $18.8 million loss on early extinguishment
of debt whereas the 2010 six-month period EBITDA and operating income reflect the $12.2 million
loss associated with the discontinuance of interest rate hedges. Average temperatures in our
service territory during both the 2011 and 2010 six-month periods were near normal. However,
during the 2011 six-month period, early fall temperatures were significantly warmer than normal and we experienced an early end to
the heating season weather in our southern regions. The effects of these weather patterns,
customer conservation and the impact on the prior-years volumes of a strong 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 2011 six-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 refinance its credit agreements, which are
scheduled to expire in July 2011 and October 2011, during the third quarter of Fiscal 2011.
- 19 -
AMERIGAS PARTNERS, L.P.
2011 three-month period compared with 2010 three-month period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
Three Months Ended March 31, |
|
2011 |
|
|
2010 |
|
|
(Decrease) |
|
(millions of dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gallons sold (millions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
316.3 |
|
|
|
329.2 |
|
|
|
(12.9 |
) |
|
|
(3.9 |
)% |
Wholesale |
|
|
41.5 |
|
|
|
45.9 |
|
|
|
(4.4 |
) |
|
|
(9.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
357.8 |
|
|
|
375.1 |
|
|
|
(17.3 |
) |
|
|
(4.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail propane |
|
$ |
797.8 |
|
|
$ |
782.7 |
|
|
$ |
15.1 |
|
|
|
1.9 |
% |
Wholesale propane |
|
|
61.8 |
|
|
|
62.4 |
|
|
|
(0.6 |
) |
|
|
(1.0 |
)% |
Other |
|
|
47.2 |
|
|
|
41.0 |
|
|
|
6.2 |
|
|
|
15.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
906.8 |
|
|
$ |
886.1 |
|
|
$ |
20.7 |
|
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total margin (a) |
|
$ |
342.0 |
|
|
$ |
346.4 |
|
|
$ |
(4.4 |
) |
|
|
(1.3 |
)% |
EBITDA (b) |
|
$ |
157.5 |
|
|
$ |
173.6 |
|
|
$ |
(16.1 |
) |
|
|
(9.3 |
)% |
Operating income (b) |
|
$ |
154.6 |
|
|
$ |
153.2 |
|
|
$ |
1.4 |
|
|
|
0.9 |
% |
Net income attributable to AmeriGas Partners |
|
$ |
118.0 |
|
|
$ |
134.5 |
|
|
$ |
(16.5 |
) |
|
|
(12.3 |
)% |
Heating degree days % colder than normal (c) |
|
|
1.9 |
% |
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Total margin represents total revenues less cost of sales propane and cost of sales
other. |
|
(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.
EBITDA for the three months ended March 31, 2011 includes a pre-tax loss of $18.8 million
associated with the early extinguishment of debt. EBITDA and operating income for the three
months ended March 31, 2010 includes a pre-tax loss of $12.2 million associated with the
discontinuance of interest rate hedges. |
- 20 -
AMERIGAS PARTNERS, L.P.
The following table includes reconciliations of net income attributable to AmeriGas Partners to
EBITDA for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Net income attributable to AmeriGas Partners |
|
$ |
118.0 |
|
|
$ |
134.5 |
|
Income tax expense |
|
|
|
|
|
|
0.6 |
|
Interest expense |
|
|
16.3 |
|
|
|
16.7 |
|
Depreciation |
|
|
20.3 |
|
|
|
19.9 |
|
Amortization |
|
|
2.9 |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
157.5 |
|
|
$ |
173.6 |
|
|
|
|
|
|
|
|
|
|
|
(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 1.9% colder than normal during the 2011 three-month period compared with
temperatures that were approximately normal in the prior-year period. Although average temperatures
were slightly colder than last year, the Partnership experienced significantly warmer weather in
its southern regions during February and March 2011. Retail propane gallons sold declined
principally due to the effects of the regional weather patterns and customer conservation partially
offset by volumes acquired through acquisitions.
Retail propane revenues increased $15.1 million during the 2011 three-month period reflecting
higher average retail sales prices ($45.8 million) partially offset by lower retail volumes sold
($30.7 million). Wholesale propane revenues were about equal to the prior-year period. Average
wholesale propane prices at Mont Belvieu, Texas, a major supply location in the U.S., were
approximately 12% higher during the 2011 three-month period compared with average wholesale propane
prices during the 2010 three-month period. Other revenues from fee income and ancillary sales and
services increased $6.2 million in the 2011 three-month period. Total cost of sales increased $25.1
million, to $564.8 million, reflecting higher 2011 wholesale propane product costs.
Total margin was $4.4 million lower in the 2011 three-month period primarily due to lower total
retail margin ($8.3 million) partially offset principally by an increase in margin from fee income.
The lower total retail margin reflects the effects of the lower retail volumes sold ($12.3 million)
partially offset by the effects of slightly higher average retail unit margins ($4.0 million).
The $16.1 million decrease in EBITDA during the 2011 three-month period primarily reflects (1) the
loss on early extinguishment of Partnership Senior Notes ($18.8 million); (2) slightly higher
operating and administrative expenses ($4.4 million) resulting primarily from higher employee
benefits costs and vehicle expenses; and (3) the previously mentioned decrease in 2011 three-month
total margin ($4.4 million). The effect of these items on the change in EBITDA was partially offset
by the absence of a $12.2 million loss recorded in the prior-year three-month period resulting from
the discontinuance of interest rate hedges.
- 21 -
AMERIGAS PARTNERS, L.P.
Operating income (which excludes the loss on early extinguishment of debt) increased $1.4 million
in the 2011 three-month period principally reflecting the absence of the loss on interest rate
hedges recorded in the prior year ($12.2 million) substantially offset by (1) the higher operating
and administrative and depreciation and amortization expenses ($5.7 million) and (2) the lower
total margin ($4.4 million). Interest expense was $0.4 million lower in the 2011 three-month
period. The $16.5 million decrease in net income attributable to AmeriGas Partners principally
reflects the previously mentioned $18.8 million loss on early extinguishment of debt.
2011 six-month period compared with 2010 six-month period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
Six Months Ended March 31, |
|
2011 |
|
|
2010 |
|
|
(Decrease) |
|
(millions of dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gallons sold (millions): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
572.7 |
|
|
|
596.6 |
|
|
|
(23.9 |
) |
|
|
(4.0 |
)% |
Wholesale |
|
|
77.4 |
|
|
|
90.5 |
|
|
|
(13.1 |
) |
|
|
(14.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
650.1 |
|
|
|
687.1 |
|
|
|
(37.0 |
) |
|
|
(5.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail propane |
|
$ |
1,401.6 |
|
|
$ |
1,343.6 |
|
|
$ |
58.0 |
|
|
|
4.3 |
% |
Wholesale propane |
|
|
111.8 |
|
|
|
115.8 |
|
|
|
(4.0 |
) |
|
|
(3.5 |
)% |
Other |
|
|
93.6 |
|
|
|
83.3 |
|
|
|
10.3 |
|
|
|
12.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,607.0 |
|
|
$ |
1,542.7 |
|
|
$ |
64.3 |
|
|
|
4.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total margin (a) |
|
$ |
606.9 |
|
|
$ |
613.4 |
|
|
$ |
(6.5 |
) |
|
|
(1.1 |
)% |
EBITDA (b) |
|
$ |
270.8 |
|
|
$ |
296.6 |
|
|
$ |
(25.8 |
) |
|
|
(8.7 |
)% |
Operating income (b) |
|
$ |
246.2 |
|
|
$ |
255.9 |
|
|
$ |
(9.7 |
) |
|
|
(3.8 |
)% |
Net income attributable to AmeriGas Partners |
|
$ |
192.9 |
|
|
$ |
218.4 |
|
|
$ |
(25.5 |
) |
|
|
(11.7 |
)% |
Heating degree days % colder than normal (c) |
|
|
0.1 |
% |
|
|
0.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Total margin represents total revenues less cost of sales propane and cost of sales
other. |
|
(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.
EBITDA for the six months ended March 31, 2011 includes a pre-tax loss of $18.8 million
associated with the early extinguishment of debt. EBITDA and operating income for the six
months ended March 31, 2010 includes a pre-tax loss of $12.2 million associated with the
discontinuance of interest rate hedges. |
- 22 -
AMERIGAS PARTNERS, L.P.
The following table includes reconciliations of net income attributable to AmeriGas Partners to
EBITDA for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
|
2011 |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
Net income attributable to AmeriGas Partners |
|
$ |
192.9 |
|
|
$ |
218.4 |
|
Income tax expense |
|
|
0.3 |
|
|
|
1.8 |
|
Interest expense |
|
|
31.7 |
|
|
|
33.2 |
|
Depreciation |
|
|
40.4 |
|
|
|
39.9 |
|
Amortization |
|
|
5.5 |
|
|
|
3.3 |
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
270.8 |
|
|
$ |
296.6 |
|
|
|
|
|
|
|
|
|
|
|
(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 near normal for each of the six month periods ended March 31, 2011 and 2010.
However, during the 2011 six-month period, early fall temperatures were significantly warmer than normal and we experienced an
early end to the heating season weather in our southern regions. Retail propane gallons sold
declined principally due to the effects of these weather patterns, customer conservation and the
impact on our prior-year volumes of a strong crop-drying season partially offset by volumes
acquired through acquisitions.
Retail propane revenues increased $58.0 million during the 2011 six-month period reflecting higher
average retail sales prices ($111.8 million) partially offset by lower retail volumes sold ($53.8
million). Wholesale propane revenues decreased $4.0 million principally reflecting lower wholesale
volumes sold ($16.8 million) partially offset by higher wholesale selling prices ($12.8 million).
Average wholesale propane prices at Mont Belvieu, Texas, a major supply location in the U.S., were
approximately 14% higher during the 2011 six-month period compared with average wholesale propane
prices during the 2010 six-month period. Other revenues from fee income and ancillary sales and
services increased $10.3 million in the 2011 six-month period. Total cost of sales increased $70.8
million, to $1,000.1 million, principally reflecting the higher 2011 wholesale propane product
costs.
Total margin was $6.5 million lower in the 2011 six-month period primarily due to lower total
retail margin ($12.9 million) partially offset principally by an increase in margin from fee
income. The lower total retail margin reflects the effects of the lower retail volumes sold ($22.1
million) partially offset by the effects of slightly higher average retail unit margins ($9.2
million).
The $25.8 million decrease in EBITDA during the 2011 six-month period primarily reflects (1) the
loss on the early extinguishment of Partnership Senior Notes ($18.8 million); (2) higher
operating and administrative expenses ($14.0 million); and (3) the previously mentioned decrease in
2011 six-month total margin ($6.5 million). The effects of these items on the change in EBITDA were
partially offset by the absence of a $12.2 million loss recorded in the prior-year six-month period
resulting from the discontinuance of interest rate hedges.
- 23 -
AMERIGAS PARTNERS, L.P.
Operating income (which excludes the loss on early extinguishment of debt) decreased $9.7 million
in the 2011 six-month period principally reflecting (1) higher operating and administrative and
depreciation and amortization expenses ($16.6 million) and (2) the lower total margin ($6.5
million). These decreases in operating income were partially offset by the absence of the loss on
interest rate hedges recorded in the prior year ($12.2 million). Interest expense was $1.5 million
lower in the 2011 six-month period principally reflecting lower interest expense on long-term debt
outstanding partially offset by higher interest expense on working capital borrowings. Net income
attributable to AmeriGas Partners in the 2011 six-month period was $25.5 million lower than the
2010 six-month period reflecting the $18.8 million loss on extinguishment of debt and the lower
operating income ($9.7 million).
FINANCIAL CONDITION AND LIQUIDITY
Financial Condition
The Partnerships debt outstanding at March 31, 2011 totaled $1,028.9 million (including current
maturities of long-term debt of $5.5 million and bank loans of $194 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 long-term debt outstanding at
March 31, 2011, including current maturities, comprises $820 million of AmeriGas Partners Senior
Notes and $14.9 million of other long-term debt. During the three months ended March 31, 2011,
AmeriGas Partners issued $470 million principal amount of 6.50% Senior Notes due 2021. The proceeds
from the issuance of the 6.50% Senior Notes were used to repay AmeriGas Partners $415 million
7.25% Senior Notes due May 15, 2015 pursuant to a January 5, 2011 tender offer and subsequent
redemption. The 6.50% Senior Notes due 2021 rank pari passu with AmeriGas Partners outstanding
senior debt. In addition, during the three months ended March 31, 2011, AmeriGas Partners redeemed
$14.6 million of its 8.875% Senior Notes due May 2011. The Partnership incurred a loss on
extinguishment of debt associated with these refinancings of $18.8 million.
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 refinance its credit agreements during the third quarter of Fiscal
2011. 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.
- 24 -
AMERIGAS PARTNERS, L.P.
At March 31, 2011, there were $140 million of borrowings outstanding under the Credit Agreement and
$54 million of borrowings outstanding under the 2009 Supplemental Credit Agreement. Borrowings
under our credit agreements are classified as bank loans on the Condensed 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 March 31, 2011 and $36.1 million at
March 31, 2010. The average daily and peak bank loan borrowings outstanding under the credit
agreements during the 2011 six-month period were $153.1 million and $235 million, respectively. The
average daily and peak bank loan borrowings outstanding under the credit agreements during the 2010
six-month period were $25.5 million and $75 million, respectively. At March 31, 2011, the
Partnerships available borrowing capacity under the credit agreements was $45.3 million.
Based on existing cash balances, cash expected to be generated from operations, and borrowings
available under AmeriGas OLP revolving 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.
On April 27, 2011, the General Partners Board of Directors approved a quarterly distribution of
$0.74 per Common Unit equal to an annual rate of $2.96 per Common Unit. The new quarterly rate is
effective with the distribution payable on May 18, 2011 to unitholders of record on May 10, 2011.
This distribution reflects an increase of approximately 5% from the previous quarters regular
quarterly distribution rate of $0.705 per Common Unit. During the six months ended March 31, 2011,
the Partnership declared and paid quarterly distributions on all limited partner units at a rate of
$0.705 per Common Unit for the quarters ended December 31, 2010 and September 30, 2010. 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 provided by operating activities was $61.1 million in the 2011 six-month period
compared to $57.8 million in the 2010 six-month period. Cash flow from operating activities before
changes in operating working capital was $269.5 million in the 2011 six-month period compared with
$288.0 million in the prior-year period principally reflecting the lower 2011 six-month period
operating results. Cash required to fund changes in operating working capital totaled $208.5
million in the 2011 six-month period compared with $230.3 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.
- 25 -
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 $64.3 million in the 2011 six-month period
compared with $50.1 million in the prior-year period. We spent $40.6 million for property, plant
and equipment (comprising $19.7 million of maintenance capital expenditures and $20.9 million of
growth capital expenditures) in the 2011 six-month period compared with $45.4 million (comprising
$21.3 million of maintenance capital expenditures and $24.1 million of growth capital expenditures)
in the 2010 six-month period. Cash paid for acquisitions reflects 11 propane business acquisitions
completed during the 2011 six-month period compared to 6 propane business acquisitions in the 2010
six-month period.
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 $30.9 million in the 2011 six-month period compared with cash used by financing
activities of $57.0 million in the prior-year period. Distributions in the 2011 six-month period
totaled $83.3 million compared with $78.4 million in the prior-year period principally reflecting a
higher quarterly per-unit distribution rate. We borrowed $103 million under the credit agreements
during the 2011 six-month period compared to $23 million during the 2010 six-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. As previously mentioned,
the Partnership refinanced its $415 million 7.25% Senior Notes due 2015 through the issuance of
$470 million of 6.50% Senior Notes due 2021. In addition, it redeemed its $14.6 million 8.875%
Senior Notes due 2011. Repayments of long-term debt includes $16.8 million of transaction fees and
expenses associated with the early extinguishments of debt.
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ITEM 3. |
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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 March 31,
2011 was a gain of $11.4 million. A hypothetical 10% adverse change in the market price of propane
would result in a decrease in fair value of $6.3 million.
- 26 -
AMERIGAS PARTNERS, L.P.
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 March 31,
2011.
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.
- 27 -
AMERIGAS PARTNERS, L.P.
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ITEM 4. |
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CONTROLS AND PROCEDURES |
(a) |
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Evaluation of Disclosure Controls and Procedures |
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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) |
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Change in Internal Control over Financial Reporting |
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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. |
PART II OTHER INFORMATION
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
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Exhibit |
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No. |
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Exhibit |
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Registrant |
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Filing |
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Exhibit |
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10.1 |
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Amendment No. 2,
dated as of March
17, 2011, to the
Credit Agreement
dated as of April
17, 2009, among the
Partnership,
AmeriGas Propane,
Inc., Petrolane
Incorporated,
Citizens Bank of
Pennsylvania,
JPMorgan Chase Bank
N.A., and Wells
Fargo Bank, N.A.
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AmeriGas Partners,
L.P.
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Form 8-K
(3/17/2011)
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10.1 |
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10.2 |
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Amendment No. 1,
dated as of March
17, 2011, to the
Credit Agreement
dated as of
November 6, 2006,
among the
Partnership,
AmeriGas Propane,
Inc., Petrolane
Incorporated,
Citigroup Global
Markets Inc., J.P.
Morgan Securities
Inc. and Credit
Suisse Securities
(USA) LLC, and
Wells Fargo Bank,
N.A.
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AmeriGas Partners,
L.P.
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Form 8-K
(3/17/2011)
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10.2 |
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31.1 |
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Certification by
the Chief Executive
Officer relating to
the Registrants
Report on Form 10-Q
for the quarter
ended March 31,
2011, pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002 |
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31.2 |
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Certification by
the Chief Financial
Officer relating to
the Registrants
Report on Form 10-Q
for the quarter
ended March 31,
2011, pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002 |
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32 |
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Certification by
the Chief Executive
Officer and the
Chief Financial
Officer relating to
the Registrants
Report on Form 10-Q
for the quarter
ended March 31,
2011, pursuant to
Section 906 of the
Sarbanes-Oxley Act
of 2002 |
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101 |
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The following
materials from
AmeriGas Partners,
L.P.s Quarterly
Report on Form 10-Q
for the quarter
ended March 31,
2011, 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. |
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- 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.
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AmeriGas Partners, L.P.
(Registrant)
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By: |
AmeriGas Propane, Inc.,
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as General Partner |
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Date: May 6, 2011 |
By: |
/s/ Jerry E. Sheridan
Jerry E. Sheridan
Vice President Finance
and Chief Financial Officer |
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Date: May 6, 2011 |
By: |
/s/ William J. Stanczak
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William J. Stanczak |
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Controller and Chief Accounting Officer |
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- 30 -
AMERIGAS PARTNERS, L.P.
EXHIBIT INDEX
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31.1 |
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Certification by the Chief Executive Officer relating to the Registrants Report on Form 10-Q for the quarter ended March 31, 2011, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2 |
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Certification by the Chief Financial Officer relating to the Registrants Report on Form 10-Q for the quarter ended March 31, 2011, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32 |
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Certification by the Chief Executive Officer and the Chief Financial Officer relating to the Registrants Report on Form 10-Q for the quarter ended March 31, 2011, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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101 |
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The following materials from AmeriGas Partners, L.P.s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, 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. |