þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 23-2787918 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification No.) |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
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Exhibit 10.1 | ||||||||
Exhibit 10.2 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
-i-
June 30, | September 30, | June 30, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 6,219 | $ | 7,726 | $ | 9,628 | ||||||
Accounts receivable (less allowances for doubtful accounts of $17,056
$15,290 and $15,326, respectively) |
229,377 | 172,708 | 182,607 | |||||||||
Accounts receivable related parties |
1,206 | 7,039 | 7,232 | |||||||||
Inventories |
111,334 | 114,122 | 95,885 | |||||||||
Derivative financial instruments |
5,569 | 7,478 | 175 | |||||||||
Prepaid expenses and other current assets |
13,403 | 16,785 | 12,768 | |||||||||
Total current assets |
367,108 | 325,858 | 308,295 | |||||||||
Property, plant and equipment (less accumulated depreciation and
amortization of $923,467, $867,250 and
$855,423, respectively) |
649,209 | 642,778 | 634,882 | |||||||||
Goodwill |
691,355 | 678,721 | 670,438 | |||||||||
Intangible assets, net |
42,324 | 37,590 | 34,248 | |||||||||
Other assets |
19,681 | 11,272 | 11,483 | |||||||||
Total assets |
$ | 1,769,677 | $ | 1,696,219 | $ | 1,659,346 | ||||||
LIABILITIES AND PARTNERS CAPITAL |
||||||||||||
Current liabilities: |
||||||||||||
Current maturities of long-term debt |
$ | 5,201 | $ | 20,123 | $ | 98,401 | ||||||
Bank loans |
176,000 | 91,000 | 15,000 | |||||||||
Accounts payable trade |
129,548 | 130,575 | 100,725 | |||||||||
Accounts payable related parties |
9 | 2,352 | 984 | |||||||||
Customer deposits and advances |
38,984 | 86,154 | 43,121 | |||||||||
Derivative financial instruments |
2,400 | | 17,975 | |||||||||
Other current liabilities |
83,374 | 130,058 | 95,193 | |||||||||
Total current liabilities |
435,516 | 460,262 | 371,399 | |||||||||
Long-term debt |
828,912 | 771,279 | 770,703 | |||||||||
Other noncurrent liabilities |
56,954 | 71,792 | 66,893 | |||||||||
Total liabilities |
1,321,382 | 1,303,333 | 1,208,995 | |||||||||
Commitments and contingencies (note 7) |
||||||||||||
Partners capital: |
||||||||||||
AmeriGas Partners, L.P. partners capital: |
||||||||||||
Common unitholders (units issued 57,124,296, 57,088,509 and
57,088,509, respectively) |
428,574 | 372,220 | 453,634 | |||||||||
General partner |
4,331 | 3,751 | 4,576 | |||||||||
Accumulated other comprehensive income (loss) |
2,592 | 4,877 | (20,334 | ) | ||||||||
Total AmeriGas Partners, L.P. partners capital |
435,497 | 380,848 | 437,876 | |||||||||
Noncontrolling interest |
12,798 | 12,038 | 12,475 | |||||||||
Total partners capital |
448,295 | 392,886 | 450,351 | |||||||||
Total liabilities and partners capital |
$ | 1,769,677 | $ | 1,696,219 | $ | 1,659,346 | ||||||
- 1 -
Three Months Ended | Nine Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues: |
||||||||||||||||
Propane |
$ | 428,286 | $ | 356,835 | $ | 1,941,693 | $ | 1,816,236 | ||||||||
Other |
42,544 | 39,778 | 136,133 | 123,073 | ||||||||||||
470,830 | 396,613 | 2,077,826 | 1,939,309 | |||||||||||||
Costs and expenses: |
||||||||||||||||
Cost of sales propane (excluding depreciation
shown below) |
284,629 | 220,545 | 1,257,038 | 1,125,387 | ||||||||||||
Cost of sales other (excluding depreciation
shown below) |
16,212 | 15,305 | 43,902 | 39,769 | ||||||||||||
Operating and administrative expenses |
147,139 | 138,704 | 474,039 | 451,614 | ||||||||||||
Depreciation |
21,435 | 19,739 | 61,853 | 59,653 | ||||||||||||
Amortization |
3,063 | 2,148 | 8,516 | 5,453 | ||||||||||||
Other income, net |
(8,329 | ) | (5,148 | ) | (20,404 | ) | (3,749 | ) | ||||||||
464,149 | 391,293 | 1,824,944 | 1,678,127 | |||||||||||||
Operating income |
6,681 | 5,320 | 252,882 | 261,182 | ||||||||||||
Loss on extinguishment of debt |
| | (18,801 | ) | | |||||||||||
Interest expense |
(15,643 | ) | (16,981 | ) | (47,365 | ) | (50,184 | ) | ||||||||
(Loss) income before income taxes |
(8,962 | ) | (11,661 | ) | 186,716 | 210,998 | ||||||||||
Income tax expense |
(139 | ) | (662 | ) | (487 | ) | (2,378 | ) | ||||||||
Net (loss) income |
(9,101 | ) | (12,323 | ) | 186,229 | 208,620 | ||||||||||
Less: net income attributable to noncontrolling interest |
(51 | ) | (49 | ) | (2,511 | ) | (2,550 | ) | ||||||||
Net (loss) income attributable to AmeriGas Partners, L.P. |
$ | (9,152 | ) | $ | (12,372 | ) | $ | 183,718 | $ | 206,070 | ||||||
General partners interest in net (loss) income attributable
to AmeriGas Partners, L.P. |
$ | 1,474 | $ | 828 | $ | 5,308 | $ | 4,148 | ||||||||
Limited partners interest in net (loss) income attributable
to AmeriGas Partners, L.P. |
$ | (10,626 | ) | $ | (13,200 | ) | $ | 178,410 | $ | 201,922 | ||||||
(Loss) income per limited partner unit basic and diluted (note 2) |
||||||||||||||||
Basic |
$ | (0.19 | ) | $ | (0.23 | ) | $ | 2.83 | $ | 3.03 | ||||||
Diluted |
$ | (0.19 | ) | $ | (0.23 | ) | $ | 2.83 | $ | 3.03 | ||||||
Average limited partner units outstanding (thousands): |
||||||||||||||||
Basic |
57,129 | 57,089 | 57,115 | 57,073 | ||||||||||||
Diluted |
57,129 | 57,089 | 57,165 | 57,119 | ||||||||||||
- 2 -
Nine Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 186,229 | $ | 208,620 | ||||
Adjustments to reconcile net income to net
cash from operating activities: |
||||||||
Depreciation and amortization |
70,369 | 65,106 | ||||||
Provision for uncollectible accounts |
9,454 | 9,593 | ||||||
Net change in realized gains and losses deferred
as cash flow hedges |
2,900 | 206 | ||||||
Loss on extinguishment of debt |
18,801 | | ||||||
Other, net |
(3,784 | ) | 3,040 | |||||
Net change in: |
||||||||
Accounts receivable |
(58,547 | ) | (56,135 | ) | ||||
Inventories |
3,851 | (7,062 | ) | |||||
Accounts payable |
(3,371 | ) | (15,585 | ) | ||||
Other current assets |
3,385 | (360 | ) | |||||
Other current liabilities |
(109,335 | ) | (73,566 | ) | ||||
Net cash provided by operating activities |
119,952 | 133,857 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Expenditures for property, plant and equipment |
(59,201 | ) | (59,796 | ) | ||||
Proceeds from disposals of assets |
2,678 | 1,944 | ||||||
Acquisitions of businesses, net of cash acquired |
(31,194 | ) | (17,296 | ) | ||||
Net cash used by investing activities |
(87,717 | ) | (75,148 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Distributions |
(127,540 | ) | (120,010 | ) | ||||
Noncontrolling interest activity |
(1,723 | ) | (1,800 | ) | ||||
Increase in bank loans |
85,000 | 15,000 | ||||||
Issuance of long-term debt |
462,122 | | ||||||
Repayment of long-term debt |
(452,235 | ) | (2,067 | ) | ||||
Proceeds associated with equity-based compensation plans, net of tax withheld |
616 | 566 | ||||||
Capital contributions from General Partner |
18 | 17 | ||||||
Net cash used by financing activities |
(33,742 | ) | (108,294 | ) | ||||
Cash and cash equivalents decrease |
$ | (1,507 | ) | $ | (49,585 | ) | ||
CASH AND CASH EQUIVALENTS: |
||||||||
End of period |
$ | 6,219 | $ | 9,628 | ||||
Beginning of period |
7,726 | 59,213 | ||||||
Decrease |
$ | (1,507 | ) | $ | (49,585 | ) | ||
- 3 -
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 nine months ended June 30, 2011: |
||||||||||||||||||||||||||||
Balance September 30, 2010 |
57,088,509 | $ | 372,220 | $ | 3,751 | $ | 4,877 | $ | 380,848 | $ | 12,038 | $ | 392,886 | |||||||||||||||
Net income |
178,410 | 5,308 | 183,718 | 2,511 | 186,229 | |||||||||||||||||||||||
Net gains on derivative instruments |
26,258 | 26,258 | 267 | 26,525 | ||||||||||||||||||||||||
Reclassification of net gains on
derivative instruments |
(28,543 | ) | (28,543 | ) | (295 | ) | (28,838 | ) | ||||||||||||||||||||
Comprehensive income |
178,410 | 5,308 | (2,285 | ) | 181,433 | 2,483 | 183,916 | |||||||||||||||||||||
Distributions |
(122,794 | ) | (4,746 | ) | (127,540 | ) | (1,820 | ) | (129,360 | ) | ||||||||||||||||||
Unit-based compensation expense |
1,310 | | 1,310 | | 1,310 | |||||||||||||||||||||||
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 June 30, 2011 |
57,124,296 | $ | 428,574 | $ | 4,331 | $ | 2,592 | $ | 435,497 | $ | 12,798 | $ | 448,295 | |||||||||||||||
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 nine months ended June 30, 2010: |
||||||||||||||||||||||||||||
Balance September 30, 2009 |
57,046,388 | $ | 367,708 | $ | 3,698 | $ | (6,947 | ) | $ | 364,459 | $ | 11,866 | $ | 376,325 | ||||||||||||||
Net income |
201,922 | 4,148 | 206,070 | 2,550 | 208,620 | |||||||||||||||||||||||
Net gains on derivative instruments |
12,318 | 12,318 | 125 | 12,443 | ||||||||||||||||||||||||
Reclassification of net gains on
derivative instruments |
(25,705 | ) | (25,705 | ) | (266 | ) | (25,971 | ) | ||||||||||||||||||||
Comprehensive income |
201,922 | 4,148 | (13,387 | ) | 192,683 | 2,409 | 195,092 | |||||||||||||||||||||
Distributions |
(116,723 | ) | (3,287 | ) | (120,010 | ) | (1,800 | ) | (121,810 | ) | ||||||||||||||||||
Unit-based compensation expense |
1,078 | | 1,078 | | 1,078 | |||||||||||||||||||||||
Common Units issued in connection
with incentive compensation
plans, net of tax withheld |
42,121 | (351 | ) | 17 | (334 | ) | (334 | ) | ||||||||||||||||||||
Balance June 30, 2010 |
57,088,509 | $ | 453,634 | $ | 4,576 | $ | (20,334 | ) | $ | 437,876 | $ | 12,475 | $ | 450,351 | ||||||||||||||
- 4 -
1. | Nature of Operations |
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 June 30, 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
5). |
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 -
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 -
The following table sets forth the numerators and denominators of the basic and diluted
income per limited partner unit computations: |
Three Months Ended | Nine Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Common Unitholders interest in net income
attributable to AmeriGas Partners under the
two-class method for MLPs |
$ | (10,626 | ) | $ | (13,200 | ) | $ | 161,868 | $ | 173,115 | ||||||
Weighted average Common Units
outstanding basic (thousands) |
57,129 | 57,089 | 57,115 | 57,073 | ||||||||||||
Potentially dilutive Common Units (thousands) |
0 | 0 | 50 | 46 | ||||||||||||
Weighted average Common Units
outstanding diluted (thousands) |
57,129 | 57,089 | 57,165 | 57,119 | ||||||||||||
Theoretical distributions of net income attributable to AmeriGas Partners, L.P. in
accordance with the two-class method for the nine months ended June 30, 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 $0.29 and $0.50, respectively.
There was no dilutive effect in accordance with the two-class method for the three months
ended June 30, 2011 or 2010. |
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 -
3. | Accounting Changes |
New Accounting Standards Not Yet Adopted |
Fair Value Measurements. In May 2011, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update (ASU) 2011-04 Amendments to Achieve Common Fair Value
Measurements and Disclosure Requirements in GAAP and IFRS. The amendments in
ASU 2011-04 result in common fair value measurement and disclosure requirements in U.S. GAAP
and International Financial Reporting Standards (IFRS). The new guidance applies to all
reporting entities that are required or permitted to measure or disclose the fair value of
an asset, liability or an instrument classified in shareholders equity. Among other things,
the new guidance requires quantitative information about unobservable inputs, valuation
processes and sensitivity analysis associated with fair value measurements categorized
within Level 3 of the fair value hierarchy. The new guidance is effective for our interim
period ending March 31, 2012 and is required to be applied prospectively. We do not expect
it will have a material impact on our results of operations or financial condition. |
Presentation of Comprehensive Income. In June 2011, the FASB issued ASU 2011-05,
Presentation of Comprehensive Income, which revises the manner in which entities present
comprehensive income in their financial statements. The new guidance removes the
presentation options in Accounting Standards Codification (ASC) Topic 220 and requires
entities to report components of comprehensive income in either (1) a continuous statement
of comprehensive income or (2) two separate but consecutive statements. ASU 2011-05 does not
change the items that must be reported in other comprehensive income. The change in
presentation is effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2011 and the guidance is required to be applied
retrospectively. Early adoption is permitted. |
4. | Intangible Assets |
The Partnerships goodwill and intangible assets comprise the following: |
June 30, | September 30, | June 30, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Subject to amortization: |
||||||||||||
Customer relationships and
noncompete agreements |
$ | 75,814 | $ | 65,203 | $ | 62,608 | ||||||
Accumulated amortization |
(33,490 | ) | (27,613 | ) | (28,360 | ) | ||||||
$ | 42,324 | $ | 37,590 | $ | 34,248 | |||||||
Not subject to amortization: |
||||||||||||
Goodwill |
$ | 691,355 | $ | 678,721 | $ | 670,438 | ||||||
The increase in goodwill and other intangible assets during the nine months ended June
30, 2011 reflects the effects of acquisitions. Amortization expense of intangible assets was
$2,118 and $1,505 for the three months ended June 30, 2011 and 2010, respectively.
Amortization expense of intangible assets was $5,874 and $4,390 for the nine months ended
June 30, 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 remainder of Fiscal 2011 and the next four fiscal years is as
follows: remainder of Fiscal 2011 $2,100; Fiscal 2012 $8,624; Fiscal 2013 $8,040;
Fiscal 2014 $7,061; Fiscal 2015 $5,057. |
- 8 -
5. | Related Party Transactions |
Pursuant to the Partnership Agreement, the General Partner is entitled to reimbursement for
all direct and indirect expenses incurred or payments it makes on behalf of the Partnership.
Prior to the Merger and pursuant to 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 was also entitled to reimbursement for all direct and indirect
expenses it made on Eagle OLPs behalf. These costs, which totaled $84,544 and $280,737 for
the three and nine months ended June 30, 2011, respectively, and $78,895 and $267,024 for
the three and nine months ended June 30, 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 $1,660 and $9,465 during the
three and nine months ended June 30, 2011, respectively, and $2,095 and $7,966 during the
three and nine months ended June 30, 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 $782 and $2,350 for
the three and nine months ended June 30, 2011, respectively, and $401 and $1,837 for the
three and nine months ended June 30, 2010, respectively. |
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 $4,073 during the nine months ended June 30,
2011 and $4,653 and $38,409 during the three and nine months ended June 30, 2010,
respectively. AmeriGas OLP did not purchase any propane from Energy Services during the
three months ended June 30, 2011. 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. |
- 9 -
6. | Debt |
On January 20, 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 in
February 2011 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, in
February 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 6.50% Senior Notes of
AmeriGas Partners restrict the ability of the Partnership and AmeriGas OLP to, among other
things, incur additional indebtedness, make investments, incur liens, issue preferred
interests, prepay subordinated indebtedness, and effect mergers, consolidations and sales of
assets. |
In addition, on June 21, 2011, AmeriGas OLP entered into an unsecured revolving credit
agreement (the 2011 Credit Agreement) with a group of banks providing for borrowings up to
$325,000 (including a $100,000 sublimit for letters of credit). Concurrently with entering
into the 2011 Credit Agreement, AmeriGas OLP terminated its then-existing $200,000 revolving
credit agreement dated as of November 6, 2006 and its $75,000 credit agreement dated as of
April 17, 2009. The 2011 Credit Agreement permits AmeriGas OLP to borrow at prevailing
interest rates, including the base rate, defined as the higher of the Federal Funds rate
plus 0.50% or the agent banks prime rate, or at a two-week, one-, two-, three-, or
six-month Eurodollar Rate, as defined in the 2011 Credit Agreement, plus a margin. The
margin on base rate borrowings (which ranges from 0.75% to 1.75%), Eurodollar Rate
borrowings (which ranges from 1.75% to 2.75%), and the 2011 Credit Agreement facility fee
rate (which ranges from 0.30% to 0.50%) are dependent upon AmeriGas Partners ratio of debt
to earnings before interest expense, income taxes, depreciation and amortization (EBITDA),
each as defined in the 2011 Credit Agreement. The 2011 Credit Agreement restricts the
incurrence of additional indebtedness and also restricts certain liens, guarantees,
investments, loans and advances, payments, mergers, consolidations, asset transfers,
transactions with affiliates, sales of assets, acquisitions and other transactions. The 2011
Credit Agreement requires that AmeriGas OLP and AmeriGas Partners not exceed ratios of total
indebtedness to EBITDA, as defined for each of those entities, and that AmeriGas Partners
maintains a minimum ratio of EBITDA to interest expense, as defined. |
7. | 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. |
- 10 -
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 (the District Attorneys) 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. On or about July 20, 2011, the General
Partner received a second subpoena from the District Attorneys. The subpoena seeks
information and documents regarding AmeriGas OLPs cylinder exchange program and alleges
potential violations of Californias Unfair Competition Law. We are reviewing the subpoena
and will continue to cooperate with the District Attorneys. |
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. |
- 11 -
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. |
On July 15, 2011, BP America
Production Company (“BP”) filed a complaint against AmeriGas
Propane, L.P. in the District Court of Denver County, Colorado, alleging, among
other things, breach of contract and breach of the covenant of good faith and
fair dealing relating to amounts billed for certain goods and services provided
to BP since 2005 (the “Services”). The Services relate to the
installation of propane-fueled equipment and appliances, and the supply of
propane, to approximately 400 residential customers at the request of
and for the account of BP. The complaint seeks an unspecified amount
of direct, indirect, consequential, special and compensatory damages, including
attorneys’ fees, costs and interest and other appropriate relief. It also
seeks an accounting to determine the amount of the alleged overcharges related
to the Services. We recently commenced an investigation into these
allegations. Because of the preliminary nature of this investigation,
which is ongoing, the amount of loss, if any,
cannot be reasonably estimated. |
We cannot predict 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. We believe, after consultation with counsel, the final outcome of such other matters will not
have a material effect on our consolidated financial position, results of operations or
cash flows. |
- 12 -
8. | 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 June 30, 2011, September 30, 2010 and
June 30, 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 | |||||||||||||
June 30, 2011: |
||||||||||||||||
Assets: |
||||||||||||||||
Derivative financial
instruments: |
||||||||||||||||
Commodity contracts |
$ | | $ | 5,569 | $ | | $ | 5,569 | ||||||||
Liabilities: |
||||||||||||||||
Derivative financial
instruments: |
||||||||||||||||
Commodity contracts |
$ | | $ | (2,757 | ) | $ | | $ | (2,757 | ) | ||||||
September 30, 2010: |
||||||||||||||||
Assets: |
||||||||||||||||
Derivative financial
instruments: |
||||||||||||||||
Commodity contracts |
$ | | $ | 8,025 | $ | | $ | 8,025 | ||||||||
June 30, 2010: |
||||||||||||||||
Assets: |
||||||||||||||||
Derivative financial
instruments: |
||||||||||||||||
Commodity contracts |
$ | | $ | 244 | $ | | $ | 244 | ||||||||
Liabilities: |
||||||||||||||||
Derivative financial
instruments: |
||||||||||||||||
Commodity contracts |
$ | | $ | (18,012 | ) | $ | | $ | (18,012 | ) |
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 June 30, 2011 were $834,113 and $850,188,
respectively. The carrying
amount and estimated fair value of our long-term debt at June 30, 2010 were $869,104 and
$866,974, 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. |
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. |
- 13 -
9. | 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 June 30, 2011 and 2010 there were 145.0
million gallons and 148.4 million gallons, respectively, of propane hedged with
over-the-counter price swap and option contracts. At June 30, 2011, the maximum period over
which we are hedging propane market price risk is 15 months with a weighted average of 7
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 June 30, 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 $6,314. |
- 14 -
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 June 30, 2011. The amount of net losses
associated with IRPAs expected to be reclassified into earnings during the next twelve
months is $538 (which excludes the impact of the debt refinancing described in Note 10). |
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 income, net, on the Condensed Consolidated
Statements of Operations for the nine months ended June 30, 2010. |
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 June 30, 2011. We generally do
not have credit-risk-related contingent features in our derivative contracts. |
- 15 -
The following table provides information regarding the fair values and balance sheet
locations of our derivative assets and liabilities existing as of June 30, 2011 and 2010: |
Derivative Assets | Derivative (Liabilities) | |||||||||||||||||||
Fair Value | Fair Value | |||||||||||||||||||
Balance Sheet | June 30, | Balance Sheet | June 30, | |||||||||||||||||
Location | 2011 | 2010 | Location | 2011 | 2010 | |||||||||||||||
Derivatives Designated as
Hedging Instruments: |
||||||||||||||||||||
Propane contracts |
Derivative financial instruments |
$ | 5,569 | $ | 180 | Derivative financial instruments and Other noncurrent liabilities |
$ | (2,757 | ) | $ | (17,956 | ) | ||||||||
Derivatives Not Designated as
Hedging Instruments: |
||||||||||||||||||||
Propane contracts |
Derivative financial instruments and Other assets |
$ | | $ | 64 | Derivative financial instruments |
$ | | $ | (56 | ) | |||||||||
Total Derivatives |
$ | 5,569 | $ | 244 | $ | (2,757 | ) | $ | (18,012 | ) | ||||||||||
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 nine months ended June 30, 2011: |
Three Months Ended June 30, 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 |
$ | 1,248 | $ | 9,642 | Cost of sales | |||||
Interest rate contracts |
| (135 | ) | Interest expense | ||||||
Total |
$ | 1,248 | $ | 9,507 | ||||||
Nine Months Ended June 30, 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 |
$ | 26,525 | $ | 29,242 | Cost of sales | |||||
Interest rate contracts |
| (404 | ) | Interest expense | ||||||
Total |
$ | 26,525 | $ | 28,838 | ||||||
- 16 -
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 nine months ended June 30, 2010: |
Three Months Ended June 30, 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 |
$ | (20,280 | ) | $ | 4,609 | Cost of sales | ||||
Interest rate contracts |
| (135 | ) | Interest expense/other expense | ||||||
Total |
$ | (20,280 | ) | $ | 4,474 | |||||
Nine Months Ended June 30, 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 |
$ | 10,704 | $ | 38,568 | Cost of sales | |||||
Interest rate contracts |
1,739 | (12,597 | ) | Interest expense/other expense | ||||||
Total |
$ | 12,443 | $ | 25,971 | ||||||
The amounts of derivative gains or losses representing ineffectiveness 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 nine months ended
June 30, 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. |
10. | Subsequent Event Debt Refinancing |
On July 27, 2011, AmeriGas Partners announced an offer to purchase for cash any and all of
its $350,000 aggregate principal amount of outstanding 7 1/8% Senior Notes (the 2016
Notes) due May 2016 (the Tender Offer), subject to receipt of the proceeds of the
issuance of $450,000 of 6.25% Senior Notes due 2019 (the 6.25% Notes). The 6.25% Notes
are expected to be issued on August 10, 2011. The proceeds from the offering will be used
to finance the Tender Offer and
for general corporate purposes, including to repay borrowings outstanding under the 2011
Credit Agreement. The Partnership intends to redeem any 2016 Notes that are not tendered in
the Tender Offer. The Partnership expects to record a loss of approximately $20,000
associated with these transactions during the fourth quarter of Fiscal 2011. |
- 17 -
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
- 18 -
- 19 -
Three Months Ended June 30, | ||||||||||||||||
(millions of dollars) | 2011 | 2010 | Increase | |||||||||||||
Gallons sold (millions): |
||||||||||||||||
Retail |
155.1 | 150.1 | 5.0 | 3.3 | % | |||||||||||
Wholesale |
21.6 | 15.8 | 5.8 | 36.7 | % | |||||||||||
176.7 | 165.9 | 10.8 | 6.5 | % | ||||||||||||
Revenues: |
||||||||||||||||
Retail propane |
$ | 394.7 | $ | 337.4 | $ | 57.3 | 17.0 | % | ||||||||
Wholesale propane |
33.6 | 19.4 | 14.2 | 73.2 | % | |||||||||||
Other |
42.5 | 39.8 | 2.7 | 6.8 | % | |||||||||||
$ | 470.8 | $ | 396.6 | $ | 74.2 | 18.7 | % | |||||||||
Total margin (a) |
$ | 170.0 | $ | 160.8 | $ | 9.2 | 5.7 | % | ||||||||
EBITDA (b) |
$ | 31.1 | $ | 27.2 | $ | 3.9 | 14.3 | % | ||||||||
Operating income (b) |
$ | 6.7 | $ | 5.3 | $ | 1.4 | 26.4 | % | ||||||||
Net loss attributable to AmeriGas Partners |
$ | (9.2 | ) | $ | (12.4 | ) | $ | 3.2 | (25.8 | )% | ||||||
Heating degree days % (warmer) than normal (c) |
(1.4 | )% | (17.0 | )% | | |
(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. |
|
The following table includes reconciliations of net income attributable to AmeriGas Partners to
EBITDA for the periods presented: |
Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Net loss attributable to AmeriGas Partners |
$ | (9.2 | ) | $ | (12.4 | ) | ||
Income tax expense |
0.1 | 0.7 | ||||||
Interest expense |
15.6 | 17.0 | ||||||
Depreciation |
21.5 | 19.7 | ||||||
Amortization |
3.1 | 2.2 | ||||||
EBITDA |
$ | 31.1 | $ | 27.2 | ||||
(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. |
- 20 -
- 21 -
Nine Months Ended June 30, | Increase | |||||||||||||||
(millions of dollars) | 2011 | 2010 | (Decrease) | |||||||||||||
Gallons sold (millions): |
||||||||||||||||
Retail |
727.8 | 746.7 | (18.9 | ) | (2.5 | )% | ||||||||||
Wholesale |
99.0 | 106.3 | (7.3 | ) | (6.9 | )% | ||||||||||
826.8 | 853.0 | (26.2 | ) | (3.1 | )% | |||||||||||
Revenues: |
||||||||||||||||
Retail propane |
$ | 1,796.3 | $ | 1,681.0 | $ | 115.3 | 6.9 | % | ||||||||
Wholesale propane |
145.4 | 135.2 | 10.2 | 7.5 | % | |||||||||||
Other |
136.1 | 123.1 | 13.0 | 10.6 | % | |||||||||||
$ | 2,077.8 | $ | 1,939.3 | $ | 138.5 | 7.1 | % | |||||||||
Total margin (a) |
$ | 776.9 | $ | 774.2 | $ | 2.7 | 0.3 | % | ||||||||
EBITDA (b) |
$ | 301.9 | $ | 323.7 | $ | (21.8 | ) | (6.7 | )% | |||||||
Operating income (b) |
$ | 252.9 | $ | 261.2 | $ | (8.3 | ) | (3.2 | )% | |||||||
Net income attributable to AmeriGas Partners |
$ | 183.7 | $ | 206.1 | $ | (22.4 | ) | (10.9 | )% | |||||||
Heating degree days % (warmer) than normal (c) |
(0.1 | )% | (1.6 | )% | | |
(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 nine months ended June 30, 2011 includes a pre-tax loss of $18.8 million
associated with the early extinguishment of debt. EBITDA and operating income for the nine
months ended June 30, 2010 includes a pre-tax loss of $12.2 million associated with the
discontinuance of interest rate hedges. |
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The following table includes reconciliations of net income attributable to AmeriGas Partners to
EBITDA for the periods presented: |
Nine Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
Net income attributable to AmeriGas Partners |
$ | 183.7 | $ | 206.1 | ||||
Income tax expense |
0.5 | 2.4 | ||||||
Interest expense |
47.3 | 50.2 | ||||||
Depreciation |
61.9 | 59.6 | ||||||
Amortization |
8.5 | 5.4 | ||||||
EBITDA |
$ | 301.9 | $ | 323.7 | ||||
(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. |
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ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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ITEM 4. | CONTROLS AND PROCEDURES |
(a) | Evaluation of Disclosure Controls and Procedures |
The Partnerships disclosure controls and procedures are designed to provide reasonable
assurance that the information required to be disclosed by the Partnership in reports filed
under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed,
summarized, and reported within the time periods specified in the SECs rules and forms, and
(ii) accumulated and communicated to our management, including the Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure. The General Partners management, with the participation of the General
Partners Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness
of the Partnerships disclosure controls and procedures as of the end of the period covered
by this Report. Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Partnerships disclosure controls and procedures, as of the end
of the period covered by this Report, were effective at the reasonable assurance level. |
(b) | Change in Internal Control over Financial Reporting |
No change in the Partnerships internal control over financial reporting occurred during the
Partnerships most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Partnerships internal control over financial reporting. |
ITEM 1. LEGAL PROCEEDINGS
BP America Production Company
v. Amerigas Propane, L.P.
On July 15, 2011, BP America
Production Company (“BP”) filed a complaint against AmeriGas
Propane, L.P. in the District Court of Denver County, Colorado, alleging, among
other things, breach of contract and breach of the covenant of good faith and
fair dealing relating to amounts billed for certain goods and services provided
to BP since 2005 (the “Services”). The Services relate to the
installation of propane-fueled equipment and appliances, and the supply of
propane, to approximately 400 residential customers at the request of
and for the account of BP. The complaint seeks an unspecified amount
of direct, indirect, consequential, special and compensatory damages, including
attorneys’ fees, costs and interest and other appropriate relief. It also
seeks an accounting to determine the amount of the alleged overcharges related
to the Services. We recently commenced an investigation into these
allegations.
ITEM 1A. | RISK FACTORS |
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ITEM 6. | EXHIBITS |
Exhibit No. | Exhibit | Registrant | Filing | Exhibit | ||||||
10.1 | Form of Change in Control Agreement
dated as of May 9, 2011 for Mr.
Iannarelli |
|||||||||
10.2 | Credit Agreement dated as of June
21, 2011 by and among AmeriGas
Propane, L.P., as Borrower,
AmeriGas Propane, Inc., as a
Guarantor, Wells Fargo Bank,
National Association, as
Administrative Agent, Swingline
Lender and Issuing Lender
(Agent), Wells Fargo Securities,
LLC, as Sole Lead Arranger and Sole
Book Manager and Wells Fargo Bank,
National Association, Branch
Banking and Trust Company,
Citibank, N.A., JPMorgan Chase
Bank, N.A., PNC Bank, National
Association, Citizens Bank of
Pennsylvania, The Bank of New York
Mellon, Compass Bank, Manufacturers
and Traders Trust Company,
Sovereign Bank, TD Bank, N.A. and
the other financial institutions
from time to time party thereto |
|||||||||
31.1 | Certification by the Chief
Executive Officer relating to the
Registrants Report on Form 10-Q
for the quarter ended June 30,
2011, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 |
|||||||||
31.2 | Certification by the Chief
Financial Officer relating to the
Registrants Report on Form 10-Q
for the quarter ended June 30,
2011, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 |
|||||||||
32 | Certification by the Chief
Executive Officer and the Chief
Financial Officer relating to the
Registrants Report on Form 10-Q
for the quarter ended June 30,
2011, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 |
|||||||||
101.INS | * | XBRL Instance |
||||||||
101.SCH | * | XBRL Taxonomy Extension Schema |
||||||||
101.CAL | * | XBRL Taxonomy Extension Calculation |
||||||||
101.DEF | * | XBRL Taxonomy Extension Definition |
||||||||
101.LAB | * | XBRL Taxonomy Extension Labels |
||||||||
101.PRE | * | XBRL Taxonomy Extension Presentation |
* | XBRL information will be considered to be furnished, not filed, for the first two years of a
companys submission of XBRL information. |
- 29 -
AmeriGas Partners, L.P. (Registrant) |
||||
By: | AmeriGas Propane, Inc., | |||
as General Partner | ||||
Date: August 5, 2011 | By: | /s/ John S. Iannarelli | ||
John S. Iannarelli | ||||
Vice President Finance and Chief Financial Officer | ||||
Date: August 5, 2011 | By: | /s/ William J. Stanczak | ||
William J. Stanczak | ||||
Controller and Chief Accounting Officer |
- 30 -
10.1 | Form of Change in Control Agreement dated as of May 9, 2011 for Mr. Iannarelli |
|||
10.2 | Credit Agreement dated as of June 21, 2011 by and among AmeriGas Propane, L.P., as Borrower,
AmeriGas Propane, Inc., as a Guarantor, Wells Fargo Bank, National Association, as
Administrative Agent, Swingline Lender and Issuing Lender (Agent), Wells Fargo Securities,
LLC, as Sole Lead Arranger and Sole Book Manager and Wells Fargo Bank, National Association,
Branch Banking and Trust Company, Citibank, N.A., JPMorgan Chase Bank, N.A., PNC Bank,
National Association, Citizens Bank of Pennsylvania, The Bank of New York Mellon, Compass
Bank, Manufacturers and Traders Trust Company, Sovereign Bank, TD Bank, N.A. and the other
financial institutions from time to time party thereto |
|||
31.1 | Certification by the Chief Executive Officer relating to the Registrants Report on Form 10-Q
for the quarter ended June 30, 2011, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
|||
31.2 | Certification by the Chief Financial Officer relating to the Registrants Report on Form 10-Q
for the quarter ended June 30, 2011, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 |
|||
32 | Certification by the Chief Executive Officer and the Chief Financial Officer relating to the
Registrants Report on Form 10-Q for the quarter ended June 30, 2011, pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 |
|||
101.INS | * | XBRL.Instance |
||
101.SCH | * | XBRL Taxonomy Extension Schema |
||
101.CAL | * | XBRL Taxonomy Extension Calculation |
||
101.DEF | * | XBRL Taxonomy Extension Definition |
||
101.LAB | * | XBRL Taxonomy Extension Labels |
||
101.PRE | * | XBRL Taxonomy Extension Presentation |
* | XBRL information will be considered to be furnished, not filed, for the first two years of
a companys submission of XBRL information. |
-31-