Filed by Bowne Pure Compliance
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2008
Commission file number 1-13692
AMERIGAS PARTNERS, L.P.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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23-2787918 |
(State or Other Jurisdiction of
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(I.R.S. Employer Identification No.) |
Incorporation or Organization) |
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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)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of each Exchange on Which Registered |
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Common Units representing limited partner interests
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New York Stock Exchange, Inc. |
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Securities registered pursuant
to Section 12(g) of the Act: None
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act.
Yes o No þ
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. 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 the 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
Securities Exchange Act of 1934). Yes o No þ
The aggregate market value of AmeriGas Partners, L.P. Common Units held by non-affiliates of
AmeriGas Partners, L.P. on March 31, 2008 was approximately $974,410,071. At November 21, 2008,
there were outstanding 57,013,951 Common Units representing limited partner interests.
PART I:
ITEM 1. BUSINESS
General
AmeriGas Partners, L.P. is a publicly traded limited partnership formed under Delaware law on
November 2, 1994. We are the largest retail propane distributor in the United States based on the
volume of propane gallons distributed annually. As of September 30, 2008, we served approximately
1.3 million residential, commercial, industrial, agricultural and motor fuel customers from
approximately 600 district locations in 46 states.
We are a holding company and we conduct our business principally through our subsidiary,
AmeriGas Propane, L.P. (AmeriGas OLP) and its subsidiary, AmeriGas Eagle Propane, L.P. (Eagle
OLP and together with AmeriGas OLP, the Operating Partnership), both Delaware limited
partnerships. Our common units (Common Units), which represent limited partner interests, are
traded on the New York Stock Exchange under the symbol APU. Our executive offices are located at
460 North Gulph Road, King of Prussia, Pennsylvania 19406, and our telephone number is (610)
337-7000. In this report, the terms Partnership and AmeriGas Partners, as well as the terms
our, we, and its, are used sometimes as abbreviated references to AmeriGas Partners, L.P.
itself or collectively, AmeriGas Partners, L.P. and its consolidated subsidiaries, including the
Operating Partnership. The terms Fiscal 2008 and Fiscal 2007 refer to the fiscal years ended
September 30, 2008 and September 30, 2007, respectively.
AmeriGas Propane, Inc. is our general partner (the General Partner) and is responsible for
managing our operations. The General Partner is a wholly owned subsidiary of UGI Corporation
(UGI), a publicly traded company listed on the New York Stock Exchange. The General Partner has
an approximate 44% effective ownership interest in the Partnership. See Notes 1 and 2 to the
Partnerships Consolidated Financial Statements.
Business Strategy
Our strategy is to grow by (i) acquisitions and internal sales and marketing programs, (ii)
leveraging our scale and driving productivity and (iii) achieving world class safety performance.
We regularly consider and evaluate opportunities for growth through the acquisition of local,
regional and national propane distributors. We compete for acquisitions with others engaged in the
propane distribution business. During Fiscal 2008, we completed the acquisition of four propane
distribution companies. We expect that internal growth will be provided in part from expansion of
our AmeriGas Cylinder Exchange (ACE) program through which consumers can purchase pre-filled
propane grill cylinders or exchange an empty propane grill cylinder for a filled one, and our
Strategic Accounts program, through which the Partnership encourages large, multi-location propane
users to enter into a supply agreement with us rather than with many small suppliers. In addition,
we believe opportunities exist to grow our business internally through other sales and marketing
programs designed to attract and retain customers.
Global Climate Change
There is a growing concern about climate change and the contribution of greenhouse gas
emissions, most notably carbon dioxide, to global warming. While some states have adopted laws
regulating the emission of greenhouse gases for some industry sectors, there is currently no
federal regulation of greenhouse gas emissions in the United States. It is anticipated that
federal legislation, likely consisting of a cap and trade system, governing the emission of
greenhouse gases will be enacted in the United States in the near future. Since propane is
considered a clean alternative fuel under the federal Clean Air Act Amendments of 1990, we
anticipate that this will provide us with a competitive advantage over other sources of energy,
such as fuel oil and coal, when new climate change regulations become effective. In addition, we
are developing a strategy to identify both our greenhouse gas emissions and our energy consumption
in order to be in a position to comply with new regulations and to take advantage of any
opportunities that may arise from the regulation of such emissions.
General Partner Information
The Partnerships website can be found at www.amerigas.com. The Partnership makes available
free of charge at this website (under the caption Investor Relations & Corporate Governance SEC
Filings) copies of its reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, including its Annual Reports on Form 10-K, its Quarterly Reports
on Form 10-Q and its Current Reports on Form 8-K. The General Partners Principles of Corporate
Governance, Code of Ethics for the Chief Executive Officer and Senior Financial Officers, Code of
Business Conduct and Ethics for Directors, Officers and Employees,
and charters of the Corporate Governance, Audit and Compensation/Pension Committees of the
Board of Directors of the General Partner are also available on the Partnerships website, under
the caption Investor Relations & Corporate Governance. All of these documents are also available
free of charge by writing to Robert W. Krick, Vice President and Treasurer, AmeriGas Propane, Inc.,
P.O. Box 965, Valley Forge, PA 19482.
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General Industry Information
Propane is separated from crude oil during the refining process and also extracted from
natural gas or oil wellhead gas at processing plants. Propane is normally transported and stored in
a liquid state under moderate pressure or refrigeration for economy and ease of handling in
shipping and distribution. When the pressure is released or the temperature is increased, it is
usable as a flammable gas. Propane is colorless and odorless; an odorant is added to allow its
detection. Propane is clean burning, producing negligible amounts of pollutants when properly
consumed.
The primary customers for propane are residential, commercial, industrial, motor fuel and
agricultural users to whom natural gas is not readily available. Propane is typically more
expensive than natural gas and fuel oil and, in most areas, cheaper than electricity on an
equivalent energy basis.
In Fiscal 2008, the Partnerships retail propane sales totaled approximately 993 million
gallons. Based on the most recent annual survey by the American Petroleum Institute, total 2006
domestic retail propane sales (annual sales for other than chemical uses) in the United States
totaled approximately 9.5 billion gallons. Based on LP-GAS magazine rankings, 2007 sales volume of
the ten largest propane companies (including AmeriGas Partners) represented approximately 43% of
domestic retail sales.
Products, Services and Marketing
As of September 30, 2008, the Partnership served approximately 1.3 million customers from
district locations in 46 states. In addition to distributing propane, the Partnership also sells,
installs and services propane appliances, including heating systems. In certain markets, the
Partnership also installs and services propane fuel systems for motor vehicles. Typically, district
locations are found in suburban and rural areas where natural gas is not readily available.
Districts generally consist of an office, appliance showroom, warehouse, and service facilities,
with one or more 18,000 to 30,000 gallon storage tanks on the premises. As part of its
overall transportation and distribution infrastructure, the Partnership operates as an
interstate carrier in 48 states throughout the continental United States. It is also licensed as a
carrier in the Canadian Provinces of British Columbia and Quebec.
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The Partnership sells propane primarily to five markets: residential, commercial/industrial,
motor fuel, agricultural and wholesale. The Partnership distributed over one billion gallons of
propane in Fiscal 2008. Approximately 90% of the Partnerships Fiscal 2008 sales (based on gallons
sold) were to retail accounts and approximately 10% were to wholesale customers. Sales to
residential customers in Fiscal 2008 represented approximately 40% of retail gallons sold;
commercial/industrial customers 36%; motor fuel customers 14%; and agricultural customers 5%.
Transport gallons, which are large-scale deliveries to retail customers other than residential,
accounted for 5% of Fiscal 2008 retail gallons. No single customer represents, or is anticipated to
represent, more than 5% of the Partnerships consolidated revenues.
The Partnership continues to expand its ACE program. At September 30, 2008, ACE cylinders were
available at approximately 25,000 retail locations throughout the United States. Sales of our ACE
grill cylinders to retailers are included in the commercial/industrial market. The ACE program
enables consumers to exchange their empty propane grill cylinders for filled cylinders or to
purchase filled cylinders at various retail locations such as home centers, gas stations, mass
merchandisers and grocery and convenience stores. We also supply retailers with large propane tanks
to enable retailers to fill customers propane grill cylinders directly at the retailers location.
In the residential market, which includes both conventional and manufactured housing, propane
is used primarily for home heating, water heating and cooking purposes. Commercial users, which
include motels, hotels, restaurants and retail stores, generally use propane for the same purposes
as residential customers. Industrial customers use propane to fire furnaces, as a cutting gas and
in other process applications. Other industrial customers are large-scale heating accounts and
local gas utility customers who use propane as a supplemental fuel to meet peak load deliverability
requirements. As a motor fuel, propane is burned in internal combustion engines that power
over-the-road vehicles, forklifts and stationary engines. Agricultural uses include tobacco curing,
chicken brooding and crop drying. In its wholesale operations, the Partnership principally sells
propane to large industrial end-users and other propane distributors.
Retail deliveries of propane are usually made to customers by means of bobtail and rack
trucks. Propane is pumped from the bobtail truck, which generally holds 2,400 to 3,000 gallons of
propane, into a stationary storage tank on the customers premises. The Partnership owns most of
these storage tanks and leases them to its customers. The capacity of these tanks ranges from
approximately 120 gallons to approximately 1,200 gallons. The Partnership also delivers propane to
retail customers in portable cylinders (including ACE propane grill cylinders) which are filled
with 3.5 to 24 gallons of propane. Some of these deliveries are made to the customers location,
where empty cylinders are either picked up for replenishment or filled in place.
Propane Supply and Storage
The Partnership has over 250 domestic and international sources of supply, including the spot
market. Supplies of propane from the Partnerships sources historically have been readily
available. During the year ended September 30, 2008, over 90% of the Partnerships propane supply
was purchased under supply agreements with terms of 1 to 3 years. The availability of propane
supply is dependent upon, among other things, the severity of winter weather, the price and
availability of competing fuels such as natural gas and crude oil, and the amount and availability
of imported supply. Although no assurance can be given that supplies of propane will be readily
available in the future, management currently expects to be able to secure adequate supplies during
fiscal year 2009. If supply from major sources were interrupted, however, the cost of procuring
replacement supplies and transporting those supplies from alternative locations might be materially
higher and, at least on a short-term basis, margins could be affected. BP Products North America
Inc. and BP Canada Energy Marketing Corp. (collectively), Enterprise Products Operating LP and
Targa Midstream Services LP, supplied approximately 48% of the Partnerships Fiscal 2008 propane
supply. No other single supplier provided more than 10% of the Partnerships total propane supply
in Fiscal 2008. In certain market areas, however, some suppliers provide more than 50% of the
Partnerships requirements. Disruptions in supply in these areas could also have an adverse impact
on the Partnerships margins.
The Partnerships supply contracts typically provide for pricing based upon (i) index formulas
using the current prices established at a major storage point such as Mont Belvieu, Texas, or
Conway, Kansas, or (ii) posted prices at the time of delivery. In addition, some agreements provide
maximum and minimum seasonal purchase volume guidelines. The percentage of contract purchases, and
the amount of supply contracted for at fixed prices, will vary from year to year as determined by
the General Partner. The Partnership uses a number of interstate pipelines, as well as railroad
tank cars, delivery trucks and barges, to transport propane from suppliers to storage and
distribution facilities. The Partnership stores propane at large storage facilities in Arizona and
Pennsylvania, as well as at smaller facilities in several other states.
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Because the Partnerships profitability is sensitive to changes in wholesale propane costs,
the Partnership generally seeks to pass on increases in the cost of propane to customers. There is
no assurance, however, that the Partnership will always be able to pass on product cost increases
fully, particularly when product costs rise rapidly. Product cost increases can be triggered by
periods of severe cold weather, supply interruptions, increases in the prices of base commodities
such as crude oil and natural gas, or other unforeseen events. In Fiscal 2008, the Partnership
experienced significant product cost increases over Fiscal 2007 due to crude oil price increases.
The General Partner has adopted supply acquisition and product cost risk management practices to
reduce the effect of volatility on selling prices. These practices currently include the use of
summer storage, forward purchases and derivative commodity instruments, such as options and propane
price swaps. See Managements Discussion and Analysis of Financial Condition and Results of
Operations Market Risk Disclosures.
The following graph shows the average prices of propane on the propane spot market during the
last 5 fiscal years at Mont Belvieu, Texas, a major storage area.
Average Propane Spot Market Prices
Competition
Propane competes with other sources of energy, some of which are less costly for equivalent
energy value. Propane distributors compete for customers with suppliers of electricity, fuel oil
and natural gas, principally on the basis of price, service, availability and portability.
Electricity is a major competitor of propane, but propane generally enjoys a competitive price
advantage over electricity for space heating, water heating, and cooking. In some areas electricity
may have a competitive price advantage or be relatively equivalent in price to propane due to
government regulated rate caps on electricity. Additionally, high efficiency electric heat pumps
have led to a decrease in the cost of electricity for heating. Fuel oil is also a major competitor
of propane and is generally less expensive than propane. Furnaces and appliances that burn propane
will not operate on fuel oil, and vice versa, and, therefore, a conversion from one fuel to the
other requires the installation of new equipment. Propane serves as an alternative to natural gas
in rural and suburban areas where natural gas is unavailable or portability of product is required.
Natural gas is generally a less expensive source of energy than propane, although in areas where
natural gas is available, propane is used for certain industrial and commercial applications and as
a standby fuel during interruptions in natural gas service. The gradual expansion of the nations
natural gas distribution systems has resulted in the availability of natural gas in some areas that
previously depended upon propane. However, natural gas pipelines are not present in many regions of
the country where propane is sold for heating and cooking purposes.
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In the motor fuel market, propane competes with gasoline and diesel fuel as well as electric
batteries and fuel cells. Wholesale propane distribution is a highly competitive, low margin
business. Propane sales to other retail distributors and
large-volume, direct-shipment industrial
end-users are price sensitive and frequently involve a competitive bidding process.
The retail propane industry is mature, with only modest growth in total demand for the product
foreseen. Therefore, the Partnerships ability to grow within the industry is dependent on its
ability to acquire other retail distributors and to achieve internal growth, which includes
expansion of the ACE program and the Strategic Accounts program as well as the success of its sales
and marketing programs designed to attract and retain customers. The failure of the Partnership to
retain and grow its customer base would have an adverse effect on its long-term results.
The domestic propane retail distribution business is highly competitive. The Partnership
competes in this business with other large propane marketers, including other full-service
marketers, and thousands of small independent operators. Some rural electric cooperatives and fuel
oil distributors have expanded their businesses to include propane distribution and the Partnership
competes with them as well. The ability to compete effectively depends on providing high quality
customer service, maintaining competitive retail prices and controlling operating expenses.
Trade Names, Trade and Service Marks
The Partnership markets propane principally under the AmeriGas® and Americas Propane
Company® trade names and related service marks. UGI owns, directly or indirectly, all the right,
title and interest in the AmeriGas name and related trade and service marks. The General Partner
owns all right, title and interest in the Americas Propane Company trade name and related
service marks. The Partnership has an exclusive (except for use by UGI, AmeriGas, Inc. and the
General Partner), royalty-free license to use these trade names and related service marks. UGI and
the General Partner each have the option to terminate its respective license agreement (on 12
months prior notice in the case of UGI), without penalty, if the General Partner is removed as
general partner of the Partnership other than for cause. If the General Partner ceases to serve as
the general partner of the Partnership for cause, the General Partner has the option to terminate
its license agreement upon payment of a fee to UGI equal to the fair market value of the licensed
trade names. UGI has a similar termination option; however, UGI must provide 12 months prior notice
in addition to paying the fee to the General Partner.
Seasonality
Because many customers use propane for heating purposes, the Partnerships retail sales volume
is seasonal. Approximately 55% to 60% of the Partnerships retail sales volume occurs, and
substantially all of the Partnerships operating income is earned, during the five-month peak heating season
from November through March. As a result of this seasonality, sales are higher in the Partnerships
first and second fiscal quarters (October 1 through March 31). Cash receipts are generally greatest
during the second and third fiscal quarters when customers pay for propane purchased during the
winter heating season.
Sales volume for the Partnership traditionally fluctuates from year-to-year in response to
variations in weather, prices, competition, customer mix and other factors, such as conservation
efforts and general economic conditions. For historical information on national weather statistics,
see Managements Discussion and Analysis of Financial Condition and Results of Operations.
Government Regulation
The Partnership is subject to various federal, state and local environmental, safety and
transportation laws and regulations governing the storage, distribution and transportation of
propane and the operation of bulk storage LPG terminals. These laws include, among others, the
Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), the Clean Air Act, the Occupational Safety and
Health Act, the Homeland Security Act of 2002, the Emergency Planning and Community Right to Know
Act, the Clean Water Act and comparable state statutes. CERCLA imposes joint and several liability
on certain classes of persons considered to have contributed to the release or threatened release
of a hazardous substance into the environment without regard to fault or the legality of the
original conduct. Propane is not a hazardous substance within the meaning of federal and most state
environmental laws.
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All states in which the Partnership operates have adopted fire safety codes that regulate the
storage and distribution of propane. In some states these laws are administered by state agencies,
and in others they are administered on a municipal level. The Partnership conducts training
programs to help ensure that its operations are in compliance with applicable governmental
regulations. With respect to general operations, National Fire Protection Association (NFPA)
Pamphlets No. 54 and No. 58, which establish a set of rules and procedures governing the safe
handling of propane, or comparable regulations, have been adopted by all states in which the
Partnership operates. The most recent editions of NFPA Pamphlet No. 58, adopted by a majority of
states, requires certain stationary cylinders that are filled in place to be re-qualified
periodically, depending on the date of manufacture and previous schedule of re-qualification of the cylinders.
Management believes that the policies and procedures currently in effect at all of its facilities
for the handling, storage and distribution of propane are consistent with industry standards and
are in compliance in all material respects with applicable environmental, health and safety laws.
With respect to the transportation of propane by truck, the Partnership is subject to
regulations promulgated under federal legislation, including the Federal Motor Carrier Safety Act
and the Homeland Security Act of 2002. Regulations under these statutes cover the security and
transportation of hazardous materials and are administered by the United States Department of
Transportation (DOT). The Natural Gas Safety Act of 1968 required the DOT to develop and enforce
minimum safety regulations for the transportation of gases by pipeline. The DOTs pipeline safety
regulations apply to, among other things, a propane gas system which supplies 10 or more
residential customers or 2 or more commercial customers from a single source and a propane gas
system any portion of which is located in a public place. The code requires operators of all gas
systems to provide training and written instructions for employees, establish written procedures to
minimize the hazards resulting from gas pipeline emergencies, and to conduct and keep records of
inspections and testing. Operators are subject to the Pipeline Safety Improvement Act of 2002,
which, among other things, protects from adverse employment actions employees who provide
information to their employers or to the federal government as to pipeline safety.
Employees
The Partnership does not directly employ any persons responsible for managing or operating the
Partnership. The General Partner provides these services and is reimbursed for its direct and
indirect costs and expenses, including all compensation and benefit costs. At September 30, 2008,
the General Partner had approximately 5,900 employees, including approximately 380 part-time,
seasonal and temporary employees, working on behalf of the Partnership. UGI also performs certain
financial and administrative services for the General Partner on behalf of the Partnership and is
reimbursed by the Partnership.
ITEM 1A. RISK FACTORS
There are many factors that may affect our business and results of operations. Additional
discussion regarding factors that may affect our businesses and operating results is included
elsewhere in this Report.
Risks Related to Our Business
Decreases in the demand for propane because of warmer-than-normal heating season weather or
unfavorable weather may adversely affect our results of operations.
Because many of our customers rely on propane as a heating fuel, our results of operations are
adversely affected by warmer-than-normal heating season weather. Weather conditions have a
significant impact on the demand for propane for both heating and agricultural purposes.
Accordingly, the volume of propane sold is at its highest during the five-month peak heating season
of November through March and is directly affected by the severity of the winter weather. For
example, historically approximately 55% to 60% of our annual retail propane volumes are sold during
these months. There can be no assurance that normal winter weather in our service territories will
occur in the future.
The agricultural demand for propane is also affected by weather, as dry or warm weather during
the harvest season may reduce the demand for propane. Our ACE operations experience higher volumes
in the spring and summer, mainly due to the grilling season. Sustained periods of unfavorable
weather conditions can negatively affect our ACE revenues. Unfavorable weather conditions may also
cause a reduction in the purchase and use of grills and other propane-filled appliances which could
reduce the demand for our portable propane tank exchange services.
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Our profitability is subject to propane pricing and inventory risk.
The retail propane business is a margin-based business in which gross profits are dependent
upon the excess of the sales price over the propane supply costs. Propane is a commodity, and, as
such, its unit price is subject to volatile fluctuations in response to changes in supply or other
market conditions. We have no control over these market conditions. Consequently, the unit price of
the propane that we and other marketers purchase can change rapidly over a short period of time.
Most of our propane product supply contracts permit suppliers to charge posted prices at the time
of delivery or the current prices established at major storage points such as Mont Belvieu, Texas
or Conway, Kansas. Because our profitability is sensitive to changes in wholesale propane supply
costs, it will be adversely affected if we cannot pass on increases in the cost of propane to our
customers. Due to competitive pricing in the industry, we may not be able to pass on product cost
increases to our customers when product costs rise rapidly, or when our competitors do not raise
their product prices. Finally, market volatility may cause us to sell inventory at less than the
price we purchased it, which would adversely affect our operating results.
High propane prices can lead to customer conservation, resulting in reduced demand for our product.
Prices for propane are subject to volatile fluctuations in response to changes in supply and
other market conditions. During periods of high propane costs such as those experienced in fiscal
years 2008, 2007 and 2006, our prices generally increase. High prices can lead to customer
conservation, resulting in reduced demand for our product.
Volatility in credit and capital markets may restrict our ability to grow, increase the likelihood
of defaults by our customers and counterparties and adversely affect our operating results.
The recent volatility in credit and capital markets may create additional risks to our
business in the future. We are exposed to financial market risk resulting from, among things,
changes in interest rates and conditions in the credit and capital markets. Recent developments in
the credit markets increase our possible exposure to the liquidity, default and credit risks of our
suppliers, counterparties associated with derivative financial instruments and our customers.
Although we believe that recent financial market conditions, if they were to continue for the
foreseeable future, will not have a significant impact on our ability to fund our existing
operations, such market conditions could restrict our ability to grow through acquisitions, limit
the scope of major capital projects if access to credit and capital markets is limited or could
adversely affect our operating results.
Supplier defaults may have a negative effect on our operating results.
When we enter into fixed-price sales contracts with customers, we typically enter into
fixed-price purchase contracts with suppliers. Depending on changes in the market prices of
products compared to the prices secured in our contracts with suppliers of propane, a default of
one or more of our suppliers under such contracts could cause us to purchase propane at higher
prices which would have a negative impact on our operating results.
Changes in commodity market prices may have a negative effect on our liquidity.
Depending on the terms of our contracts with suppliers as well as our use of financial
instruments to reduce volatility in the cost of propane, changes in the market price of propane can
create margin payment obligations for us and expose us to an increased liquidity risk.
Our operations may be adversely affected by competition from other energy sources.
Propane competes with other sources of energy, some of which are less costly on an equivalent
energy basis. In addition, we cannot predict the effect that the development of alternative energy
sources might have on our operations. We compete for customers against suppliers of electricity,
fuel oil and natural gas.
Electricity is a major competitor of propane, but propane generally enjoys a competitive price
advantage over electricity for space heating, water heating and cooking. Fuel oil is also a major
competitor of propane and is generally less expensive than propane. Furnaces and appliances that
burn propane will not operate on fuel oil and vice versa, and, therefore, a conversion from one
fuel to the other requires the installation of new equipment. Our customers generally have an
incentive to switch to fuel oil only if fuel oil becomes significantly less expensive than propane.
Except for certain industrial and commercial applications, propane is generally not competitive
with natural gas in areas where natural gas pipelines already exist because natural gas is
generally a less expensive source
of energy than propane. As long as natural gas remains a less expensive energy source than propane, our business
will lose customers in each region into which natural gas distribution systems are expanded. The gradual expansion of the nations natural gas distribution systems
has resulted, and may continue to result, in the availability of natural gas in some areas that
previously depended upon propane.
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Our ability to increase revenues is adversely affected by the maturity of the retail propane
industry.
The retail propane industry is mature, with only modest growth in total demand for the product
foreseen. Given this limited growth, we expect that year-to-year industry volumes will be
principally affected by weather patterns. Therefore, our ability to grow within the industry is
dependent on our ability to acquire other retail distributors and to achieve internal growth, which
includes expansion of our ACE and Strategic Accounts programs, as well as the success of our
marketing programs designed to attract and retain customers. Any failure to retain and grow our
customer base would have an adverse effect on our results.
Our ability to grow will be adversely affected if we are not successful in making acquisitions or
integrating the acquisitions we have made.
We have historically expanded our propane business through acquisitions. We regularly consider
and evaluate opportunities for growth through the acquisition of local, regional and national
propane distributors. We may choose to finance future acquisitions with debt, equity, cash or a
combination of the three. We can give no assurances that we will find attractive acquisition
candidates in the future, that we will be able to acquire such candidates on economically
acceptable terms, that we will be able to finance acquisitions on economically acceptable terms,
that any acquisitions will not be dilutive to earnings and distributions or that any additional
debt incurred to finance an acquisition will not affect our ability to make distributions.
To the extent we are successful in making acquisitions, such acquisitions involve a number of
risks, including, but not limited to, the assumption of material liabilities, the diversion of
managements attention from the management of daily operations to the integration of operations,
difficulties in the assimilation and retention of employees and difficulties in the assimilation of
different cultures and practices, as well as in the assimilation of broad and geographically
dispersed personnel and operations. The failure to successfully integrate acquisitions could have
an adverse affect on our business, financial condition and results of operations.
We are subject to operating and litigation risks that may not be covered by insurance.
Our operations are subject to all of the operating hazards and risks normally incidental to
handling, storing, transporting and otherwise providing combustible liquids such as propane for use
by consumers. As a result, we are sometimes a defendant in legal proceedings and litigation arising
in the ordinary course of business. We believe that we are adequately insured for claims in excess
of our self-insurance; however, certain types of damages, such as punitive damages and penalties,
if any, may not be covered by insurance. There can be no assurance that our insurance will be
adequate to protect us from all material expenses related to pending and future claims or that such
levels of insurance will be available in the future at economical prices.
We may be unable to respond effectively to competition, which may adversely affect our operating
results.
We may be unable to timely respond to changes within the propane sector that may result from
regulatory initiatives to further increase competition within our industry. Such regulatory
initiatives may create opportunities for additional competitors to enter our markets, and, as a
result, we may be unable to maintain our revenues or continue to pursue our current business
strategy.
Our net income will decrease if we are required to incur additional costs to comply with new
governmental safety, health, transportation and environmental regulations.
We are subject to various federal, state and local safety, health, transportation and
environmental laws and regulations governing the storage, distribution and transportation of
propane. We have implemented safety and environmental programs and policies designed to avoid
potential liability and costs under applicable laws. It is possible; however, that we will incur
increased costs as a result of complying with new safety, health, transportation and environmental
regulations and such costs will reduce our net income. It is also possible that material
environmental liabilities will be incurred, including those relating to claims for damages to
property and persons.
10
Our operations, capital expenditures and financial results may be affected by regulatory changes
and/or market responses to global climate change.
There is a growing concern about climate change and the contribution of greenhouse gas
emissions, most notably carbon dioxide, to global warming. In response to this concern, there have
been numerous federal legislative proposals in the United States, as well as the enactment or
consideration of various state and local laws, aimed at reducing greenhouse gas emissions.
Increased regulation of greenhouse gas emissions, especially in the transportation sector,
could impose significant costs on us. While there is currently no federal regulation in the United
States that mandates the reduction of greenhouse gas emissions, it is likely that legislation
governing such emissions will be enacted in fiscal year 2009 or
fiscal year 2010. Until legislation is
passed in the United States, it will remain unclear as to (i) what industry sectors would be
impacted, (ii) when compliance would be required, (iii) the magnitude of the greenhouse gas
emissions reductions that would be required and (iv) the costs and opportunities associated with
compliance. At this time, we are uncertain as to the effect climate change regulation may have on
our operations, capital expenditures and financial results in the future.
Risks Inherent in an Investment in Our Common Units
Cash distributions are not guaranteed and may fluctuate with our performance.
Although we distribute all of our available cash each quarter, the amount of cash that we
generate each quarter fluctuates. As a result, we cannot guarantee that we will pay the current
regular quarterly distribution each quarter. Available cash generally means, with respect to any
fiscal quarter, all cash on hand at the end of each quarter, plus all additional cash on hand as of
the date of the determination of available cash resulting from borrowings after the end of the
quarter, less the amount of reserves established to provide for the proper conduct of our business,
to comply with applicable law or agreements, or to provide funds for future distributions to
partners. The actual amount of cash that is available to be distributed each quarter will depend
upon numerous factors, including:
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our cash flow generated by operations; |
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the weather in our areas of operation; |
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our borrowing capacity under our bank credit facilities; |
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required principal and interest payments on our debt; |
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fluctuations in our working capital; |
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our cost of acquisitions (including related debt service payments); |
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restrictions contained in our debt instruments; |
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our capital expenditures; |
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our issuances of debt and equity securities; |
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reserves made by our General Partner in its discretion; |
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prevailing economic and industry conditions; and |
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financial, business and other factors, a number of which are beyond our control. |
11
Our General Partner has broad discretion to determine the amount of available cash for
distribution to holders of our equity securities through the establishment and maintenance of cash
reserves, thereby potentially lessening and limiting the amount of available cash eligible for
distribution.
Our General Partner determines the timing and amount of our distributions and has broad
discretion in determining the amount of funds that will be recognized as available cash. Part of
this discretion comes from the ability of our General Partner to establish reserves. Decisions as
to amounts to be reserved have a direct impact on the amount of available cash for distributions
because reserves are taken into account in computing available cash. Each fiscal quarter, our
General Partner may, in its reasonable discretion, determine that amounts to be reserved, subject
to restrictions on the purposes of the reserves. Reserves may be made, increased or decreased for
any proper purpose, including, but not limited to, reserves:
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to comply with terms of any of our agreements or obligations, including the establishment
of reserves to fund the future payment of interest and principal on our debt securities; |
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to provide for level distributions of cash notwithstanding the seasonality of our
business; and |
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to provide for future capital expenditures and other payments deemed by our General
Partner to be necessary or advisable. |
The decision by our General Partner to establish reserves may limit the amount of cash available
for distribution to holders of our equity securities. Holders of our equity securities will not
receive payments unless we are able to first satisfy our own obligations and the establishment of
any reserves.
Holders of Common Units may experience dilution of their interests.
We may issue an unlimited number of additional limited partner interests and other equity
securities, including senior equity securities, for such consideration and on such terms and
conditions as shall be established by our General Partner in its sole discretion, without the
approval of any unitholders. We also may issue an unlimited number of partnership interests junior
to the Common Units without a unitholder vote. When we issue additional equity securities, a
unitholders proportionate partnership interest will decrease and the amount of cash distributed on
each unit and the market price of the Common Units could decrease. Issuance of additional Common
Units will also diminish the relative limited voting power of each previously outstanding unit.
Please read Holders of Common Units have limited voting rights, management and control of us
below. The ultimate effect of any such issuance may be to dilute the interests of holders of units
in AmeriGas Partners and to make it more difficult for a person or group to remove our General
Partner or otherwise change our management.
The market price of the Common Units may be adversely affected by various change of management
provisions.
Our Partnership Agreement contains certain provisions that are intended to discourage a person
or group from attempting to remove our General Partner as general partner or otherwise change the
management of AmeriGas Partners. If any person or group other than the General Partner or its
affiliates acquires beneficial ownership of 20% or more of the Common Units, such person or group
will lose its voting rights with respect to all of its Common Units. The effect of these provisions
and the change of control provisions in our debt instruments may be to diminish the price at which
the Common Units will trade under certain circumstances.
Restrictive covenants in the agreements governing our indebtedness and other financial obligations
may reduce our operating flexibility.
The various agreements governing our and the Operating Partnerships indebtedness and other
financing transactions restrict quarterly distributions. These agreements contain various negative
and affirmative covenants applicable to us and the Operating Partnership and some of these
agreements require us and the Operating Partnership to maintain specified financial ratios. If we
or the Operating Partnership violate any of these covenants or requirements, a default may result
and distributions would be limited. These covenants limit our and the Operating Partnerships
ability to, among other things:
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incur additional indebtedness; |
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engage in transactions with affiliates; |
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create or incur liens; |
12
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sell assets; |
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make restricted payments, loans and investments; |
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enter into business combinations and asset sale transactions; and |
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engage in other lines of business. |
Holders of Common Units have limited voting rights, management and control of us.
Our General Partner manages and operates AmeriGas Partners. Unlike the holders of common stock
in a corporation, holders of outstanding Common Units have only limited voting rights on matters
affecting our business. Holders of Common Units have no right to elect the general partner or its
directors, and our General Partner generally may not be removed except pursuant to the vote of the
holders of not less than two-thirds of the outstanding units. In addition, removal of the general
partner may result in a default under our debt instruments and loan agreements. As a result,
holders of Common Units have limited say in matters affecting our operations and others may find it
difficult to attempt to gain control or influence our activities.
Holders of Common Units may be required to sell their Common Units against their will.
If at any time our General Partner and its affiliates hold 80% or more of the issued and
outstanding Common Units, our General Partner will have the right (but not the obligation) to
purchase all, but not less than all, of the remaining Common Units held by nonaffiliates at certain
specified prices pursuant to the Partnership Agreement. Accordingly, under certain circumstances
holders of Common Units may be required to sell their Common Units against their will and the price
that they receive for those securities may be less than they would like to receive. They may also
incur a tax liability upon a sale of their Common Units.
Holders of Common Units may not have limited liability in certain circumstances and may be liable
for the return of distributions that cause our liabilities to exceed our assets.
The limitations on the liability of holders of Common Units for the obligations of a limited
partnership have not been clearly established in some states. If it were determined that AmeriGas
Partners had been conducting business in any state without compliance with the applicable limited
partnership statute, or that the right or the exercise of the right by the holders of Common Units
as a group to remove or replace our General Partner, to make certain amendments to our Partnership
Agreement or to take other action pursuant to that Partnership Agreement constituted participation
in the control of the business of AmeriGas Partners, then a holder of Common Units could be held
liable under certain circumstances for our obligations to the same extent as our General Partner.
We are not obligated to inform holders of Common Units about whether we are in compliance with the
limited partnership statutes of any states.
Holders of Common Units may also have to repay AmeriGas Partners amounts wrongfully returned
or distributed to them. Under Delaware law, we may not make a distribution to holders of Common
Units if the distribution causes our liabilities to exceed the fair value of our assets.
Liabilities to partners on account of their partnership interests and nonrecourse liabilities are
not counted for purposes of determining whether a distribution is permitted. Delaware law provides
that a limited partner who receives such a distribution and knew at the time of the distribution
that the distribution violated Delaware law will be liable to the limited partnership for the
distribution amount for three years from the distribution date.
Our General Partner has conflicts of interest and limited fiduciary responsibilities, which may
permit our General Partner to favor its own interest to the detriment of holders of Common Units.
Conflicts of interest can arise as a result of the relationships between AmeriGas Partners, on
the one hand, and the General Partner and its affiliates, on the other. The directors and officers
of the General Partner have fiduciary duties to manage the General Partner in a manner beneficial
to the General Partners sole shareholder, AmeriGas, Inc., a wholly owned subsidiary of UGI
Corporation. At the same time, the General Partner has fiduciary duties to manage AmeriGas Partners
in a manner beneficial to both it and the unitholders. The duties of our General Partner to
AmeriGas Partners and the unitholders, therefore, may come into conflict with the duties of the
directors and officers of our General Partner to its sole shareholder, AmeriGas, Inc.
13
Such conflicts of interest might arise in the following situations, among others:
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Decisions of our General Partner with respect to the amount and timing of cash
expenditures, borrowings, issuances of additional units and reserves in any quarter affect
whether and the extent to which there is sufficient available cash from operating surplus to
make quarterly distributions in a given quarter. In addition, actions by our General Partner
may have the effect of enabling the General Partner to receive distributions that exceed 2%
of total distributions. |
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AmeriGas Partners does not have any employees and relies solely on employees of the
General Partner and its affiliates. |
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Under the terms of the Partnership Agreement, we reimburse our General Partner and its
affiliates for costs incurred in managing and operating AmeriGas Partners, including costs
incurred in rendering corporate staff and support services to us. |
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Any agreements between us and our General Partner and its affiliates do not grant to the
holders of Common Units, separate and apart from AmeriGas Partners, the right to enforce the
obligations of our General Partner and such affiliates in our favor. Therefore, the General
Partner, in its capacity as the general partner of AmeriGas Partners, is primarily
responsible for enforcing such obligations. |
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Under the terms of the Partnership Agreement, our General Partner is not restricted from
causing us to pay the General Partner or its affiliates for any services rendered on terms
that are fair and reasonable to us or entering into additional contractual arrangements with
any of such entities on behalf of AmeriGas Partners. Neither the Partnership Agreement nor
any of the other agreements, contracts and arrangements between us, on the one hand, and the
General Partner and its affiliates, on the other, are or will be the result of arms-length
negotiations. |
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Our General Partner may exercise its right to call for and purchase units as provided in
the Partnership Agreement or assign such right to one of its affiliates or to us. |
Our Partnership Agreement expressly permits our General Partner to resolve conflicts of
interest between itself or its affiliates, on the one hand, and us or the unitholders, on the
other, and to consider, in resolving such conflicts of interest, the interests of other parties in
addition to the interests of the unitholders. In addition, the Partnership Agreement provides that
a purchaser of Common Units is deemed to have consented to certain conflicts of interest and
actions of our General Partner and its affiliates that might otherwise be prohibited and to have
agreed that such conflicts of interest and actions do not constitute a breach by the General
Partner of any duty stated or implied by law or equity. The General Partner is not in breach of its
obligations under the Partnership Agreement or its duties to us or the unitholders if the
resolution of such conflict is fair and reasonable to us. The latitude given in the Partnership
Agreement to the General Partner in resolving conflicts of interest may significantly limit the
ability of a unitholder to challenge what might otherwise be a breach of fiduciary duty.
Our Partnership Agreement expressly limits the liability of our General Partner by providing
that the General Partner, its affiliates and its officers and directors are not liable for monetary
damages to us, the limited partners or assignees for errors of judgment or for any actual omissions
if the General Partner and other persons acted in good faith. In addition, we are required to
indemnify our General Partner, its affiliates and their respective officers, directors, employees
and agents to the fullest extent permitted by law, against liabilities, costs and expenses incurred
by our General Partner or such other persons, if the General Partner or such persons acted in good
faith and in a manner they reasonably believed to be in, or not opposed to, our best interests and,
with respect to any criminal proceedings, had no reasonable cause to believe the conduct was
unlawful.
Our General Partner may voluntarily withdraw or sell its general partner interest.
Our General Partner may withdraw as the general partner of AmeriGas Partners and the Operating
Partnership without the approval of our unitholders. Our General Partner may also sell its general
partner interest in AmeriGas Partners and the Operating Partnership without the approval of our
unitholders. Any such withdrawal or sale could have a material adverse effect on us and could
substantially change the management and resolutions of conflicts of interest, as described above.
14
Tax Risks
The IRS could treat us as a corporation for tax purposes or changes in federal or state laws could
subject us to entity-level taxation, which would substantially reduce the cash available for
distribution to holders of Common Units.
The availability to a common unitholder of the federal income tax benefits of an investment in
the Common Units depends, in large part, on our classification as a partnership for federal income
tax purposes. No ruling from the IRS as to this status has been or is expected to be requested.
If we were classified as a corporation for federal income tax purposes, we would be required
to pay tax on our income at corporate tax rates (currently a 35% federal rate), and distributions
received by the common unitholders would generally be taxed a second time as corporate
distributions. Because a tax would be imposed upon us as an entity, the cash available for
distribution to the common unitholders would be substantially reduced. Treatment of us as a
corporation would cause a material reduction in the anticipated cash flow and after-tax return to
the common unitholders, likely causing a substantial reduction in the value of the Common Units.
The law could be changed so as to cause us to be treated as a corporation for federal income
tax purposes or otherwise to be subject to entity-level taxation. If we become subject to
widespread entity-level taxation for state tax purposes, it could substantially reduce
distributions to our unitholders. Our Partnership Agreement provides that if a law is enacted or
existing law is modified or interpreted in a manner that subjects us to taxation as a corporation
or otherwise subjects us to entity-level taxation for federal, state or local income tax purposes,
certain provisions of our Partnership Agreement will be subject to change. These changes would
include a decrease in the current regular quarterly distribution and the target distribution levels
to reflect the impact of this law on us. Any such reductions could increase our General Partners
percentage of cash distributions and decrease our limited partners percentage of cash
distributions.
States may subject partnerships to entity-level taxation in the future; thereby decreasing the
amount of cash available to us for distributions and potentially causing a decrease in our
distribution levels.
Several states have enacted or are evaluating ways to subject partnerships to entity-level
taxation through the imposition of state income, franchise or other forms of taxation. If
additional states were to impose a tax upon us as an entity, the cash available for distribution to
unitholders would be reduced.
Holders of Common Units will likely be subject to state, local and other taxes in states where
holders of Common Units live or as a result of an investment in the Common Units.
In addition to United States federal income taxes, unitholders will likely be subject to other
taxes, such as state and local taxes, unincorporated business taxes and estate, inheritance or
intangible taxes that are imposed by the various jurisdictions in which the unitholder resides or
in which we do business or own property. A unitholder will likely be required to file state and
local income tax returns and pay state and local income taxes in some or all of the various
jurisdictions in which we do business or own property and may be subject to penalties for failure
to comply with those requirements. It is the responsibility of each unitholder to file all
applicable United States federal, state and local tax returns.
A successful IRS contest of the federal income tax positions that we take may adversely affect the
market for Common Units and the costs of any contest will be borne directly or indirectly by the
unitholders and our General Partner.
We have not requested a ruling from the IRS with respect to our classification as a
partnership for federal income tax purposes, the classification of any of the revenue from our
propane operations as qualifying income under Section 7704 of the Internal Revenue Code, or any
other matter affecting us. Accordingly, the IRS may adopt positions that differ from the
conclusions expressed herein or the positions taken by us. It may be necessary to resort to
administrative or court proceedings in an effort to sustain some or all of such conclusions or the
positions taken by us. A court may not concur with some or all of our positions. Any contest with
the IRS may materially and adversely impact the market for the Common Units and the prices at which
they trade. In addition, the costs of any contest with the IRS will be borne directly or indirectly
by the unitholders and our General Partner.
Holders of Common Units may be required to pay taxes even if they do not receive any cash
distributions.
A unitholder will be required to pay federal income taxes and, in some cases, state and local
income taxes on the unitholders allocable share of our income, even if the unitholder receives no
cash distributions from us. We cannot guarantee that a unitholder will receive cash distributions
equal to the unitholders allocable share of our taxable income or even the tax liability to the
unitholder resulting from that income. Further, a unitholder may incur a tax liability, in excess
of the amount of cash received, upon the sale of the unitholders Common Units.
15
Ownership of Common Units may have adverse tax consequences for tax-exempt organizations and
certain other investors.
Investment in Common Units by certain tax-exempt entities, regulated investment companies and
foreign persons raises issues unique to them. For example, virtually all of our taxable income
allocated to organizations exempt from federal income tax, including individual retirement accounts
and other retirement plans, will be unrelated business taxable income and thus will be taxable to
the unitholder. Distributions to foreign persons will be reduced by withholding taxes.
There are limits on the deductibility of losses that may adversely affect holders of Common Units.
In the case of taxpayers subject to the passive loss rules (generally, individuals,
closely-held corporations and regulated investment companies), any losses generated by us will only
be available to offset our future income and cannot be used to offset income from other activities,
including other passive activities or investments. Unused losses may be deducted when the
unitholder disposes of the unitholders entire investment in us in a fully taxable transaction with
an unrelated party. A unitholders share of our net passive income may be offset by unused losses
from us carried over from prior years, but not by losses from other passive activities, including
losses from other publicly traded partnerships.
Our tax shelter registration could increase the risk of a potential audit by the IRS.
We are registered with the IRS as a tax shelter. The IRS has issued to us the following tax
shelter registration number: 95-192000149. Issuance of the registration number does not indicate
that an investment in us or the claimed tax benefits have been reviewed, examined or approved by
the IRS. We cannot guarantee that we will not be audited by the IRS or that tax adjustments will
not be made. The rights of a unitholder owning less than a 1% profits interest in us to participate
in the income tax audit process are very limited. Further, any adjustments in our tax returns will
lead to adjustments in the unitholders tax returns and may lead to audits of unitholders tax
returns and adjustments of items unrelated to us. Each unitholder would bear the cost of any
expenses incurred in connection with an examination of the unitholders personal tax return.
Tax gain or loss on disposition of Common Units could be different than expected.
A unitholder who sells Common Units will recognize the gain or loss equal to the difference
between the amount realized, including the unitholders share of our nonrecourse liabilities, and
the unitholders adjusted tax basis in the Common Units. Prior distributions in excess of
cumulative net taxable income allocated for a common unit which decreased a unitholders tax basis
in that common unit will, in effect, become taxable income if the common unit is sold at a price
greater than the unitholders tax basis in that common unit, even if the price is less than the
units original cost. A portion of the amount realized, whether or not representing gain, may be
ordinary income. Furthermore, should the IRS successfully contest some conventions used by us, a
unitholder could recognize more gain on the sale of Common Units than would be the case under those
conventions, without the benefit of decreased income in prior years.
The reporting of partnership tax information is complicated and subject to audits.
We will furnish each unitholder with a Schedule K-1 that sets forth the unitholders share of
our income, gains, losses and deductions. In preparing these schedules, we will use various
accounting and reporting conventions and adopt various depreciation and amortization methods. We
cannot guarantee that these schedules will yield a result that conforms to statutory or regulatory
requirements or to administrative pronouncements of the IRS. Further, our tax return may be
audited, which could result in an audit of a unitholders individual tax return and increased
liabilities for taxes because of adjustments resulting from the audit.
There is a possibility of loss of tax benefits relating to nonconformity of Common Units and
nonconforming depreciation conventions.
Because we cannot match transferors and transferees of Common Units, uniformity of the tax
characteristics of the Common Units to a purchaser of Common Units of the same class must be
maintained. To maintain uniformity and for other reasons, we have adopted certain depreciation and
amortization conventions which we believe conform to Treasury Regulations under Section 743(b) of
the Internal Revenue Code. A successful challenge to those conventions by the IRS could adversely
affect the amount of tax benefits available to a purchaser of Common Units and could have a
negative impact on the value of the Common Units.
16
Holders of Common Units may have negative tax consequences if we default on our debt or sell
assets.
If we default on any of our debt, the lenders will have the right to sue us for non-payment.
This could cause an investment loss and negative tax consequences for unitholders through the
realization of taxable income by unitholders without a corresponding cash distribution. Likewise,
if we were to dispose of assets and realize a taxable gain while there is substantial debt
outstanding and proceeds of the sale were applied to the debt, our unitholders could have increased
taxable income without a corresponding cash distribution.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
As of September 30, 2008, the Partnership owned approximately 82% of its district locations.
On November 13, 2008, the Partnership sold its 600,000 barrel refrigerated, above-ground storage
facility located on leased property in California for approximately
$43 million in cash. See Note 17 to the Partnerships Consolidated Financial Statements.
The transportation of propane requires specialized equipment. The trucks and railroad tank
cars utilized for this purpose carry specialized steel tanks that maintain the propane in a
liquefied state. As of September 30, 2008, the Partnership operated a transportation fleet with the
following assets:
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Approximate Quantity & Equipment Type |
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Owned |
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% Leased |
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540 |
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Trailers |
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89 |
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11 |
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290 |
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Tractors |
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29 |
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71 |
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180 |
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Railroad tank cars |
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0 |
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100 |
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2,640 |
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Bobtail trucks |
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13 |
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87 |
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350 |
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Rack trucks |
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9 |
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91 |
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2,200 |
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Service and delivery trucks |
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16 |
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84 |
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Other assets owned at September 30, 2008 included approximately 875,000 stationary storage tanks
with typical capacities ranging from 121 to 2,000 gallons and approximately 2.7 million portable
propane cylinders with typical capacities of 1 to 120 gallons. The Partnership also owned
approximately 5,600 large volume tanks with typical capacities of more than 2,000 gallons which are
used for its own storage requirements.
ITEM 3. LEGAL PROCEEDINGS
With the exception of the matters set forth in Note 11 to the Partnerships Consolidated
Financial Statements, no material legal proceedings are pending involving the Partnership, any of
its subsidiaries, or any of their properties, and no such proceedings are known to be contemplated
by governmental authorities other than claims arising in the ordinary course of the Partnerships
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the last fiscal quarter of Fiscal
2008.
17
PART II:
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ITEM 5. |
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MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SECURITY HOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES |
Each Common Unit represents a limited partner interest in the Partnership. Common Units are
listed on the New York Stock Exchange, which is the principal trading market for such securities,
under the symbol APU. The following table sets forth, for the periods indicated, the high and low
sale prices per Common Unit, as reported on the New York Stock Exchange (NYSE) Composite
Transactions tape, and the amount of cash distributions paid per Common Unit.
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Price Range |
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Cash |
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2008 Fiscal Year |
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High |
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Low |
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Distribution |
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Fourth Quarter |
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$ |
32.42 |
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$ |
28.84 |
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$ |
0.64 |
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Third Quarter |
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35.90 |
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30.25 |
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0.64 |
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Second Quarter |
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36.81 |
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29.46 |
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0.61 |
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First Quarter |
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37.90 |
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34.71 |
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0.61 |
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Price Range |
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Cash |
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2007 Fiscal Year |
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High |
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Low |
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Distribution |
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Fourth Quarter |
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$ |
38.00 |
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$ |
31.20 |
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$ |
0.86 |
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Third Quarter |
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38.89 |
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32.62 |
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0.61 |
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Second Quarter |
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34.00 |
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31.28 |
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0.58 |
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First Quarter |
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33.10 |
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30.35 |
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0.58 |
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As of November 3 , 2008, there were
1,263 record holders of the Partnerships Common Units.
The Partnership makes quarterly distributions to its partners in an aggregate amount equal to
its Available Cash, as defined in the Third Amended and Restated Agreement of Limited Partnership
of AmeriGas Partners, L.P., as amended by Amendment No. 1 (the Partnership Agreement). Available
Cash generally means, with respect to any fiscal quarter of the Partnership, all cash on hand at
the end of such quarter, plus all additional cash on hand as of the date of determination resulting
from borrowings subsequent to the end of such quarter, less the amount of cash reserves established
by the General Partner in its reasonable discretion for future cash requirements. Certain reserves
are maintained to provide for the payment of principal and interest under the terms of the
Partnerships debt agreements and other reserves may be maintained to provide for the proper
conduct of the Partnerships business, and to provide funds for distribution during the next four
fiscal quarters. The information concerning restrictions on distributions required by Item 5 of
this report is incorporated herein by reference to Notes 5 and 6 to the Partnerships Consolidated
Financial Statements which are incorporated herein by reference.
18
ITEM 6. SELECTED FINANCIAL DATA
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|
|
Year Ended September 30, |
|
(Thousands of dollars, except per share amounts) |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
FOR THE PERIOD: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income statement data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
2,815,189 |
|
|
$ |
2,277,375 |
|
|
$ |
2,119,266 |
|
|
$ |
1,963,256 |
|
|
$ |
1,775,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
158,019 |
|
|
$ |
190,784 |
|
|
$ |
91,158 |
|
|
$ |
60,845 |
|
|
$ |
91,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited partners interest in net income |
|
$ |
155,741 |
|
|
$ |
185,184 |
|
|
$ |
90,246 |
|
|
$ |
60,237 |
|
|
$ |
90,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per limited partner unit basic and
diluted (a) |
|
$ |
2.70 |
|
|
$ |
3.15 |
|
|
$ |
1.59 |
|
|
$ |
1.10 |
|
|
$ |
1.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash distributions declared per limited
partner unit |
|
$ |
2.50 |
|
|
$ |
2.63 |
|
|
$ |
2.28 |
|
|
$ |
2.22 |
|
|
$ |
2.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AT PERIOD END: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
425,096 |
|
|
$ |
375,020 |
|
|
$ |
368,209 |
|
|
$ |
417,740 |
|
|
$ |
298,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
1,725,073 |
|
|
|
1,696,784 |
|
|
|
1,611,767 |
|
|
|
1,663,075 |
|
|
|
1,550,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities (excluding debt) |
|
|
461,095 |
|
|
|
376,668 |
|
|
|
378,331 |
|
|
|
338,928 |
|
|
|
292,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
|
933,390 |
|
|
|
933,042 |
|
|
|
933,746 |
|
|
|
913,502 |
|
|
|
901,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests |
|
|
10,723 |
|
|
|
11,386 |
|
|
|
10,448 |
|
|
|
8,570 |
|
|
|
7,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners capital |
|
|
247,375 |
|
|
|
311,228 |
|
|
|
221,503 |
|
|
|
337,417 |
|
|
|
289,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures (including capital leases) |
|
$ |
62,756 |
|
|
$ |
73,764 |
|
|
$ |
70,915 |
|
|
$ |
63,584 |
|
|
$ |
62,303 |
|
Retail propane gallons sold (millions) |
|
|
993.2 |
|
|
|
1,006.7 |
|
|
|
975.2 |
|
|
|
1,034.9 |
|
|
|
1,059.1 |
|
Degree days % warmer than
normal (b) |
|
|
3.4 |
|
|
|
6.5 |
|
|
|
10.2 |
|
|
|
6.9 |
|
|
|
4.9 |
|
|
|
|
(a) |
|
Calculated in accordance with Emerging Issues Task Force Issue No. 03-6, Participating
Securities and the Two-Class Method under FASB Statement No. 128. |
|
(b) |
|
Deviation from average heating degree days for the 30-year period of 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. |
19
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A) relates to AmeriGas Partners and the Operating Partnership. Our MD&A should be read in
conjunction with our consolidated financial statements and related notes thereto incorporated by
reference in this Annual Report on Form 10-K.
EXECUTIVE OVERVIEW
AmeriGas Partners is the largest retail propane marketer in the United States, with sales to
retail customers of nearly a billion gallons during the year ended September 30, 2008 (Fiscal
2008). We deliver propane to approximately 1.3 million customers from our distribution locations
in 46 states. The propane industry is mature, with only modest growth in residential customer
demand. Our strategy is to grow through acquisitions and internal sales programs, leverage our
national and local economies of scale and achieve operating efficiencies through productivity
programs.
During the past three years our financial results reflect growth achieved through execution
of the strategy referred to above. Temperatures based upon heating degree days in Fiscal 2008
were colder than in the year ended September 30, 2007 (Fiscal 2007) although slightly warmer
than normal. Notwithstanding the slightly colder year-over-year weather and the full-year effects
of Fiscal 2007 acquisitions, retail volumes declined modestly in Fiscal 2008 reflecting the
effects of record high propane commodity prices on customer usage and a weak economy. In Fiscal
2008, net income was $158.0 million compared with net income of $190.8 million in Fiscal 2007
which included the effects of a $46.1 million pre-tax gain from the sale of our 3.5 million
barrel liquefied petroleum gas storage facility located in Arizona. Notwithstanding the lower
retail volumes sold in Fiscal 2008, total margin increased due principally to high average
propane margin per retail gallon sold. Colder temperatures during Fiscal 2007
compared with the year ended September 30, 2006 (Fiscal 2006) had a favorable impact on retail
volumes sold and total margin. Net income during Fiscal 2006 includes the impact of a
$17.1 million loss on early extinguishment of debt resulting from the refinancings of certain
AmeriGas Partners and AmeriGas OLP debt.
In Fiscal 2009 and beyond, we will continue to focus on growing through acquisitions and
internal sales programs, leveraging our national and local economies of scale and achieving
operating efficiencies through productivity programs. We expect to achieve base business growth
by providing best-in-class customer service and improving the effectiveness of our sales force,
while maintaining competitive prices.
20
Analysis of Results of Operations
The following analysis compares the Partnerships results of operations for (1) Fiscal 2008 with
Fiscal 2007 and (2) Fiscal 2007 with Fiscal 2006. The following table provides gallons sold,
weather and certain financial information for the Partnership and should be read in conjunction
with the sections Fiscal 2008 Compared to Fiscal 2007 and Fiscal 2007 Compared to Fiscal 2006
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
(Millions of dollars, except where noted) |
|
2008 |
|
|
2007 |
|
|
2006 |
|
Gallons sold (millions): |
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
993.2 |
|
|
|
1,006.7 |
|
|
|
975.2 |
|
Wholesale |
|
|
111.2 |
|
|
|
117.4 |
|
|
|
119.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,104.4 |
|
|
|
1,124.1 |
|
|
|
1,094.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Retail propane |
|
$ |
2,439.2 |
|
|
$ |
1,958.5 |
|
|
$ |
1,816.0 |
|
Wholesale propane |
|
|
185.4 |
|
|
|
137.6 |
|
|
|
137.7 |
|
Other |
|
|
190.6 |
|
|
|
181.3 |
|
|
|
165.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,815.2 |
|
|
$ |
2,277.4 |
|
|
$ |
2,119.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total margin (a) |
|
$ |
906.9 |
|
|
$ |
840.2 |
|
|
$ |
775.5 |
|
EBITDA (b) |
|
$ |
313.0 |
|
|
$ |
338.7 |
|
|
$ |
237.9 |
|
Operating income |
|
$ |
234.9 |
|
|
$ |
265.7 |
|
|
$ |
184.1 |
|
Net income |
|
$ |
158.0 |
|
|
$ |
190.8 |
|
|
$ |
91.2 |
|
Degree days % warmer than normal (c) |
|
|
3.4 |
% |
|
|
6.5 |
% |
|
|
10.2 |
% |
|
|
|
(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 (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 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 requirement in
Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information, to provide profitability information about its domestic
propane segment. |
The following table includes reconciliations of net income to EBITDA for the periods
presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Net income |
|
$ |
158.0 |
|
|
$ |
190.8 |
|
|
$ |
91.2 |
|
Income tax expense |
|
|
1.7 |
|
|
|
0.8 |
|
|
|
0.2 |
|
Interest expense |
|
|
72.9 |
|
|
|
71.5 |
|
|
|
74.1 |
|
Depreciation |
|
|
75.7 |
|
|
|
71.6 |
|
|
|
67.8 |
|
Amortization |
|
|
4.7 |
|
|
|
4.0 |
|
|
|
4.6 |
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
$ |
313.0 |
|
|
$ |
338.7 |
|
|
$ |
237.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
21
Fiscal 2008 Compared with Fiscal 2007
Based upon heating degree-day data, average temperatures in our service territories were 3.4%
warmer than normal in Fiscal 2008 compared with temperatures that were 6.5% warmer than normal in
Fiscal 2007. Notwithstanding the slightly colder Fiscal 2008 weather and the full-year benefits
of acquisitions made in Fiscal 2007, retail gallons sold were slightly lower reflecting, among
other things, customer conservation in response to increasing propane product costs and a weak
economy. The average wholesale propane cost at Mont Belvieu, Texas,
one of the major liquefied petroleum gas (LPG) supply
points in the U.S. increased nearly 50% during Fiscal 2008 over the average cost during Fiscal
2007.
Retail propane revenues increased $480.7 million in Fiscal 2008 reflecting a $507.0 million
increase due to the higher average selling prices partially offset by a $26.3 million decrease as
a result of the lower retail volumes sold. Wholesale propane revenues increased $47.8 million in
Fiscal 2008 reflecting a $55.1 million increase from higher average wholesale selling prices
partially offset by a $7.3 million decrease from lower wholesale volumes sold. Total cost of
sales increased $471.1 million to $1,908.3 million in Fiscal 2008 reflecting higher propane
product costs.
Total margin was $66.7 million greater in Fiscal 2008 principally reflecting higher average
propane margin per retail gallon sold and, to a much lesser extent, higher fee income.
EBITDA in Fiscal 2008 was $313.0 million compared to EBITDA of $338.7 million in Fiscal
2007. Fiscal 2007 EBITDA includes $46.1 million resulting from the sale of the Partnerships
Arizona storage facility. Excluding the effects of this gain in Fiscal 2007, EBITDA in Fiscal
2008 increased $20.4 million over Fiscal 2007 principally reflecting the previously mentioned
increase in total margin partially offset by a $47.9 million increase in operating and
administrative expenses. The increased operating expenses reflect expenses associated with
acquisitions, increased vehicle fuel and maintenance expenses, greater general insurance expense
and, to a lesser extent, higher uncollectible accounts expenses largely attributable to the
higher revenues.
The Partnerships operating income decreased $30.8 million in Fiscal 2008 reflecting the
lower EBITDA and higher depreciation and amortization expense resulting from the full-year
effects of Fiscal 2007 propane business acquisitions and plant and equipment expenditures.
Fiscal 2007 Compared with Fiscal 2006
Temperatures in the Partnerships service territories based upon heating degree days during
Fiscal 2007 were 6.5% warmer than normal compared with temperatures that were 10.2% warmer than
normal during Fiscal 2006. Retail propane volumes sold increased approximately 3.2% reflecting
greater demand attributable to the colder weather and the effects of higher sales in our AmeriGas
Cylinder Exchange program.
Retail propane revenues increased $142.5 million in Fiscal 2007 reflecting an $83.8 million
increase due to higher average selling prices and $58.7 million due to the higher volumes sold.
Wholesale propane revenues decreased slightly reflecting a $2.6 million decrease due to lower
volumes sold largely offset by a $2.5 million increase due to higher average selling prices. In
Fiscal 2007, our average retail propane product cost per retail gallon sold was approximately 4%
higher than in Fiscal 2006 resulting in higher year-over-year prices to our customers. Total cost
of sales increased to $1,437.2 million in Fiscal 2007 from $1,343.8 million in Fiscal 2006
primarily reflecting the increase in propane product costs and the increased volumes sold. Total
margin increased $64.7 million principally due to the higher average retail propane margins per
gallon, the higher volumes and higher fees in response to increases in operating and
administrative expenses.
22
EBITDA during Fiscal 2007 increased $100.8 million as a result of the previously mentioned
increase in total margin, a $46.1 million gain from the sale of the Partnerships storage
facility in Arizona, and the absence of a $17.1 million loss on early extinguishments of debt
recorded in Fiscal 2006 partially offset by a $27.2 million increase in operating and administrative expenses. The $17.1 million loss on
early extinguishments of debt in Fiscal 2006 was associated with refinancings of AmeriGas OLPs
Series A and Series C First Mortgage Notes totaling $228.8 million, and $59.6 million of AmeriGas
Partners 10% Senior Notes, with $350 million of 7.125% AmeriGas Partners Senior Notes due 2016.
The Partnership also used a portion of the proceeds from the issuance of the 7.125% Senior Notes
to repay AmeriGas OLPs $35 million term loan. The increase in Fiscal 2007 operating and
administrative expenses principally resulted from higher (1) employee compensation and benefits,
(2) vehicle costs and (3) maintenance and repairs expenses. Both Fiscal 2007 and 2006 benefited
from favorable expense reductions related to general insurance primarily reflecting improved
claims experience.
Operating income increased $81.6 million in Fiscal 2007 mainly reflecting the previously
mentioned increase in EBITDA but excluding the impact of the prior periods $17.1 million loss on
extinguishments of debt (which is included in EBITDA but not operating income) slightly offset by
greater depreciation expense. Net income in Fiscal 2007 increased $99.6 million reflecting the
increase in operating income, the absence of the Fiscal 2006 loss on extinguishments of debt and
a decrease in interest expense.
Financial Condition and Liquidity
Capitalization and Liquidity
The Partnerships debt outstanding at September 30, 2008 totaled $933.4 million (including current
maturities of long-term debt of $71.5 million). Total debt outstanding at September 30, 2008
includes long-term debt comprising $779.8 million of AmeriGas Partners Senior Notes, $150.2
million of AmeriGas OLP First Mortgage Notes and $3.4 million of other long-term debt. AmeriGas OLP
expects to refinance $70 million of long-term debt maturing in March 2009 with proceeds from the
issuance of a term loan.
AmeriGas OLPs Credit Agreement expires on October 15, 2011 and 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, subject to restrictions in the AmeriGas
OLP First Mortgage Notes. Issued and outstanding letters of credit under the Revolving
Credit Facility, which reduce the amount available for borrowings, totaled $42.9 million at
September 30, 2008 and $58.0 million at September 30, 2007. 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. The average daily and peak bank loan
borrowings outstanding under the Credit Agreement during Fiscal 2008 were $39.1 million and
$106.0 million, respectively. The average daily and peak bank loan borrowings outstanding under
the Credit Agreement during Fiscal 2007 were $1.6 million and $92.0 million, respectively. There
were no borrowings outstanding under the Credit Agreement at September 30, 2008 or 2007. At
September 30, 2008, the Partnerships available borrowing capacity under the Credit Agreement was
$157.1 million.
Although commodity propane prices increased through much of Fiscal 2008, a precipitous
decline in prices in late Fiscal 2008 which continued into Fiscal 2009 has resulted in greater
cash needed by the Partnership to fund counterparty collateral
requirements. These collateral requirements are associated with
derivative financial instruments used by the Partnership to manage market price risk associated
with fixed sales price commitments to customers principally during
the heating-season months of October through March. At September 30, 2008, the Partnership had
made collateral deposits of $17.8 million associated with these derivative financial instruments.
At November 20, 2008, such collateral deposits totaled $144.5 million. In order to reduce cash
collateral payment obligations and to provide the Partnership with greater borrowing flexibility and a
more cost effective use of its Credit Agreement, in
October 2008, UGI agreed to
provide guarantees of up to $50 million to AmeriGas OLPs propane suppliers through September
30, 2009. In addition, on November 14, 2008, AmeriGas OLP entered into a revolving credit
agreement with two major banks (Supplemental Credit
Agreement). The Supplemental Credit
Agreement expires on May 14, 2009, and permits AmeriGas OLP to borrow up to $50 million for
working capital and general purposes. Except for more restrictive
covenants regarding the incurrence of additional indebtedness by
AmeriGas OLP, the Supplemental Credit Agreement has restrictive
covenants substantially similar to the existing AmeriGas OLP Credit
Agreement. At November 20, 2008, the Partnership had $49.5 million of
available borrowing capacity under its revolving credit agreements and $25.0 million of unused
UGI guarantees.
23
At September 30, 2008, the amount of net assets of the Partnerships subsidiaries that was
restricted from transfer as a result of the amount of Available Cash, computed in accordance with
the Partnership Agreement, the applicable debt agreements and the partnership agreements of the
Partnerships subsidiaries, totaled approximately $900 million.
In order to borrow under the Credit Agreement and the Supplemental Credit Agreement,
AmeriGas OLP must satisfy certain financial covenants including, but not limited to, a minimum
interest coverage ratio, a maximum debt to EBITDA ratio and a minimum EBITDA, as defined.
AmeriGas OLPs financial covenants calculated as of September 30, 2008 permitted it to borrow up
to the maximum amount available under its Credit Agreement.
Based upon existing cash balances,
the availability of the UGI guarantees, cash expected to be
generated from operations and borrowings available under its Credit
Agreement and the Supplemental
Credit Agreement, the Partnerships management believes that the
Partnership will be able to meet its anticipated contractual commitments and projected cash needs
in Fiscal 2009. In addition, the Partnerships management
believes its liquidity will begin to improve in December 2008. For a more detailed discussion of the Partnerships credit facilities, see Note 6 to
Consolidated Financial Statements.
Partnership Distributions
The Partnership makes distributions to its partners approximately 45 days after the end of each
fiscal quarter in a total amount equal to its Available Cash as defined in the Third Amended and
Restated Agreement of Limited Partnership, as amended (the Partnership Agreement) for such
quarter. Available Cash generally means:
|
1. |
|
cash on hand at the end of such quarter, |
|
|
2. |
|
plus all additional cash on hand as of the date of determination resulting from
borrowings after the end of such quarter, |
|
|
3. |
|
less the amount of cash reserves established by the General Partner in its
reasonable discretion. |
The General Partner may establish reserves for the proper conduct of the Partnerships
business and for distributions during the next four quarters. In addition, certain of the
Partnerships debt agreements require reserves be established for the payment of debt principal
and interest.
Distributions of Available Cash are made 98% to limited partners and 2% to the General
Partner (giving effect to the 1.01% interest of the General Partner in distributions of Available
Cash from AmeriGas OLP to AmeriGas Partners) until Available Cash exceeds the Minimum Quarterly
Distribution of $0.55 and the First Target Distribution of $0.055 per Common Unit (or a total of
$0.605 per Common Unit). If Available Cash exceeds $0.605 per Common Unit in any quarter, the
General Partner will receive a greater percentage of the total Partnership distribution but only
with respect to the amount by which the distribution per Common Unit to limited partners exceeds
$0.605.
24
Quarterly distributions of Available Cash per limited partner unit paid during Fiscal 2008,
Fiscal 2007 and Fiscal 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
1st Quarter |
|
$ |
0.61 |
|
|
$ |
0.58 |
|
|
$ |
0.56 |
|
2nd Quarter |
|
|
0.61 |
|
|
|
0.58 |
|
|
|
0.56 |
|
3rd Quarter |
|
|
0.64 |
|
|
|
0.61 |
|
|
|
0.58 |
|
4th Quarter |
|
|
0.64 |
|
|
|
0.86 |
|
|
|
0.58 |
|
Because the Partnership made distributions to Common Unitholders in excess of $0.605 per
limited partner unit beginning in the third quarter of Fiscal 2007, the General Partner has
received a greater percentage of the total Partnership distribution than its aggregate 2% general
partner interest in AmeriGas Partners and AmeriGas OLP. The total amount of distributions
received by the General Partner with respect to its 1% general partner interest in AmeriGas
Partners during Fiscal 2008 and Fiscal 2007 totaled $2.1 million and $5.2 million which amounts
included incentive distributions of $0.7 million and $3.7 million, respectively.
On July 30, 2007, the General Partners Board of Directors approved a distribution of $0.86
per Common Unit payable on August 18, 2007 to unitholders of record on August 10, 2007. This
distribution included the regular quarterly distribution of $0.61 per Common Unit and $0.25 per
Common Unit reflecting a distribution of a portion of the proceeds from the Partnerships sale of
its Arizona storage facility in July 2007.
Contractual Cash Obligations and Commitments
The Partnership has certain contractual cash obligations that extend beyond Fiscal 2008 including
obligations associated with long-term debt, interest on long-term fixed-rate debt, lease
obligations, derivative instruments and propane supply contracts. The following
table presents significant contractual cash obligations as of September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2014 |
|
|
|
|
|
|
|
Fiscal |
|
|
Fiscal |
|
|
Fiscal |
|
|
and |
|
(Millions of dollars) |
|
Total |
|
|
2009 |
|
|
2010-2011 |
|
|
2012-2013 |
|
|
thereafter |
|
Long-term debt (a) |
|
$ |
933.0 |
|
|
$ |
71.2 |
|
|
$ |
95.9 |
|
|
$ |
0.9 |
|
|
$ |
765.0 |
|
Interest on long-term fixed-rate debt (b) |
|
|
432.2 |
|
|
|
67.7 |
|
|
|
119.4 |
|
|
|
110.1 |
|
|
|
135.0 |
|
Operating leases |
|
|
222.0 |
|
|
|
45.4 |
|
|
|
71.5 |
|
|
|
48.1 |
|
|
|
57.0 |
|
Derivative financial instruments (c) |
|
|
59.8 |
|
|
|
55.8 |
|
|
|
4.0 |
|
|
|
|
|
|
|
|
|
Propane supply contracts |
|
|
36.5 |
|
|
|
36.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,683.5 |
|
|
$ |
276.6 |
|
|
$ |
290.8 |
|
|
$ |
159.1 |
|
|
$ |
957.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Based upon stated maturity dates. |
|
(b) |
|
Based upon stated interest rates. |
|
(c) |
|
Represents the sum of
amounts due from us if derivative financial instrument liabilities were settled at the September 30, 2008 amounts reflected in the financial statements. |
The components of the other noncurrent liabilities included in our Consolidated Balance
Sheet at September 30, 2008 principally consist of property and casualty liabilities
and, to a much lesser extent, liabilities associated with executive compensation plans and
employee post-employment benefit programs. These liabilities are not included in the table of
Contractual Cash Obligations and Commitments because they are estimates of future payments and
not contractually fixed as to timing or amount. The table above
excludes the Penn Fuel Propane, LLC purchase obligation of
$33.6 million (see Subsequent EventsAcquisition of Penn
Fuel Propane, LLC and Partnership sale of Propane Storage
Facility below).
25
Effect of Recent Market Conditions
The recent unprecedented volatility in credit and capital markets may create additional risks to
the Partnership in the future. We are exposed to financial market risk resulting from, among other
things, changes in interest rates and conditions in the credit and capital markets. Recent
developments in the credit markets increase our possible
exposure to the liquidity and credit risks of our suppliers, counterparties associated with
derivative financial instruments and our customers.
We believe that we have sufficient liquidity in the form of revolving credit facilities,
letters of credit and guarantee arrangements to fund our operations including the collateral
requirements of our derivative financial instruments. Additionally, we do not have significant
amounts of long-term debt maturing or revolving credit agreements terminating in the next several
fiscal years. Accordingly, we do not believe that recent conditions in the credit and capital
markets will have a significant impact on our liquidity. Although we believe that recent financial
market conditions will not have a significant
impact on our ability to fund our existing operations, such market conditions could restrict our
ability to make a significant acquisition or limit the scope of major capital projects, if access to
credit and capital markets is limited, and could adversely affect our results of operations.
We are subject to credit risk relating to the ability of counterparties to meet their
contractual payment obligations or the potential non-performance of counterparties to deliver
contracted commodities or services at contract prices. We monitor our counterparty credit risk
exposure in order to minimize credit risk with any one supplier or financial instrument
counterparty. We have a diverse customer base that spans broad geographic, economic and demographic
constituencies. No single customer represents more than ten percent of our revenues or operating
income. Notwithstanding our diverse customer profile, current conditions in the credit markets
could affect the ability of some of our customers to pay timely or result in increased customer
bankruptcies which may lead to increased bad debts.
As previously mentioned, 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, the
Partnership has entered into derivative financial instruments that
have collateral provisions. These derivative instruments are used to
manage market price risk principally during the heating-season months
of October through March. If
market prices for propane were to continue to fall during the Fiscal
2009 heating season, we could be required to make significant additional cash
collateral payments or to provide guarantees. The Partnerships
management believes it has sufficient liquidity
to meet such obligations and its projected cash needs in Fiscal 2009.
In addition, the Partnerships management believes its liquidity
will begin to improve in December 2008.
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 Agreement and Supplemental Credit
Agreement to satisfy its seasonal operating cash flow needs. Cash flow from operating activities
was $180.2 million in Fiscal 2008, $204.5 million in Fiscal 2007 and $177.8 million in Fiscal
2006. Cash flow from operating activities before changes in operating working capital was $255.1
million in Fiscal 2008, $234.7 million in Fiscal 2007 and $185.3 million in Fiscal 2006. The
year-over-year increase in cash flow from operating activities before changes in working capital
in the three-year period ended September 30, 2008 principally reflects the improved
year-over-year operating results. Cash required to fund changes in operating working capital
totaled $74.9 million in Fiscal 2008, $30.2 million in Fiscal 2007 and $7.4 million in Fiscal
2006. The greater cash required to fund operating working capital in Fiscal 2008 compared to
Fiscal 2007 principally reflects the impact of the timing of purchases and increases in propane
prices on cash receipts from customers and net collateral deposit payments of $17.8 million in
Fiscal 2008 associated with unsettled commodity derivative instruments. As previously mentioned,
falling commodity propane prices late in fiscal 2008 resulted in greater cash needed to fund
counterparty collateral requirements under product cost management contracts. The increase in
cash flow required to fund working capital in Fiscal 2007 compared with Fiscal 2006 principally
reflects the impact of propane prices on purchases of inventories and the timing of customers
use of their deposits and prepayments.
26
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 $55.6 million in Fiscal 2008, $97.5 million in Fiscal 2007 and
$63.1 million in Fiscal 2006. We spent $62.8 million for property, plant and equipment
(comprising $29.1 million of maintenance capital expenditures and $33.7 million of growth capital
expenditures) in Fiscal 2008; $73.8 million for property, plant and equipment (comprising
$27.2 million of maintenance capital expenditures and $46.6 million of growth capital
expenditures) in Fiscal 2007; and $70.7 million for property, plant and equipment (comprising
$23.6 million of maintenance capital expenditures and $47.1 million of growth capital
expenditures) in Fiscal 2006. The lower growth capital expenditures in Fiscal 2008 reflect in
large part lower capital expenditures associated with the Partnerships grill cylinder exchange
business. In July 2007, the Partnership sold its 3.5 million barrel liquefied petroleum gas
storage terminal located near Phoenix, Arizona for net cash proceeds of $49.0 million. Also
during Fiscal 2007, the Partnership acquired several retail propane distribution businesses,
including the retail distribution businesses of All Star Gas Corporation and Shell Gas (LPG) USA,
and several cylinder refurbishing businesses for total net cash consideration of $78.8 million.
Financing activities. Changes in cash flow from financing activities are primarily due to issuances
and repayments of long-term debt, net Credit Agreement borrowings, distributions on AmeriGas
Partners Common Units and issuances of AmeriGas Partners Common Units. Cash flow used by financing
activities was $147.7 million in Fiscal 2008, $157.7 million in Fiscal 2007 and $129.1 million in
Fiscal 2006. Distributions in Fiscal 2007 include the effects of an additional $0.25 per Common
Unit distribution paid in August 2007 to distribute a portion of the proceeds from the
Partnerships July 2007 sale of its Arizona storage facility. Cash flows from financing activities
in Fiscal 2006 reflect cash transactions associated with refinancings of certain AmeriGas Partners
and AmeriGas OLP debt.
Capital Expenditures
In the following table, we present capital expenditures (which exclude acquisitions) for Fiscal
2008, Fiscal 2007 and Fiscal 2006. We also provide amounts we expect to spend in Fiscal 2009. We
expect to finance Fiscal 2009 capital expenditures principally from cash generated by operations
and borrowings under our credit agreements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
(Millions of dollars) |
|
(estimate) |
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment expenditures |
|
$ |
87.1 |
|
|
$ |
62.8 |
|
|
$ |
73.8 |
|
|
$ |
70.7 |
|
The increase in Fiscal 2009 estimated capital expenditures includes expenditures associated with a
Partnership system software replacement.
AmeriGas OLP Environmental Matter
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 operations
on the site. DEC has classified the site as a significant threat to public health or environment
with further action required. The Partnership is researching the history of the site and is
investigating DECs findings. The General Partner has reviewed the preliminary site
characterization study prepared by DEC and is in the early stages of investigating the extent of
contamination and the possible existence of other potentially responsible parties. Due to the early
stage of such investigation, the amount of expected clean up costs cannot be reasonably estimated.
When such expected clean up costs can be reasonably estimated, it is possible that the amount could
be material to the Partnerships results of operations.
27
Related Party Transactions
Pursuant to the Partnership Agreement and a Management Services Agreement among AmeriGas Eagle
Holdings, Inc., the general partner of Eagle OLP, 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 $345.5 million, $333.6 million and $313.6
million in Fiscal 2008, Fiscal 2007 and Fiscal 2006, respectively, include employee compensation
and benefit expenses of employees of the General Partner and general and administrative expenses.
UGI Corporation (UGI) provides certain financial and administrative services to the
General Partner. UGI bills the General Partner 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. Such corporate expenses totaled $11.2 million, $10.8 million and
$10.4 million in Fiscal 2008, Fiscal 2007 and Fiscal 2006, respectively. In addition, UGI and
certain of its subsidiaries provide office space and automobile liability insurance to the
Partnership. These costs totaled $2.3 million, $2.5 million and $2.7 million in Fiscal 2008,
Fiscal 2007 and Fiscal 2006, respectively.
AmeriGas OLP purchases propane from UGI Energy Services, Inc. and subsidiaries (Energy
Services), which is owned by an affiliate of UGI. Purchases of propane by AmeriGas OLP from
Energy Services totaled $47.3 million, $34.7 million and $37.7 million during Fiscal 2008, Fiscal
2007 and Fiscal 2006, respectively. Amounts due to Energy Services at September 30, 2008 and 2007
totaled $1.3 million and $3.5 million, respectively, which are included in accounts payable
related parties in our Consolidated Balance Sheets.
In September 2007, in conjunction with a propane business acquisition, the Partnership
issued 166,205 Common Units to the General Partner in consideration for the retention of certain
income tax liabilities having a fair value of $34.28 per Common Unit. See Notes 3 and 12 to Consolidated
Financial Statements for more information related to this transaction.
The Partnership sold propane to certain affiliates of UGI. Such amounts were not material
during Fiscal 2008, Fiscal 2007 or Fiscal 2006.
Off-Balance Sheet Arrangements
We do not have any offbalance sheet arrangements that are expected to have an effect on the
Partnerships financial condition, change in financial condition, revenues or expenses, results
of operations, liquidity, capital expenditures or capital resources.
Market Risk Disclosures
Our primary financial market risks include commodity prices for propane and interest rates on
borrowings.
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. As previously mentioned, precipitous declines in propane commodity prices late in
Fiscal 2008 which continued into Fiscal 2009 has resulted in greater collateral requirements by
our derivative instruments counterparties. In order to minimize our credit risk associated with
derivative commodity contracts, we monitor established credit limits with our contract
counterparties. 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.
28
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 its fair value. Conversely,
changes in interest rates impact the fair value of fixed-rate debt but do not impact its cash
flows.
Our
variable-rate debt includes borrowings under AmeriGas OLPs Credit Agreement. This
agreement has interest rates that are generally indexed to short-term market interest rates. At
September 30, 2008 and 2007, there were no borrowings outstanding under the Credit Agreement.
Based upon the average level of borrowings outstanding under the Credit Agreement in Fiscal 2008,
an increase in short-term interest rates of 100 basis points (1%) would have increased annual
interest expense by $0.4 million.
The remainder of our debt outstanding is subject to fixed rates of interest. A 100 basis
point increase in market interest rates would result in decreases in the fair value of this
fixed-rate debt of $38.9 million and $48.1 million at September 30, 2008 and 2007, respectively.
A 100 basis point decrease in market interest rates would result in increases in the fair market
value of this debt of $41.7 million and $52.0 million at September 30, 2008 and 2007,
respectively.
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.
The following table summarizes the fair values of unsettled market risk sensitive derivative
instruments held at September 30, 2008 and 2007. It also includes the changes in fair value that
would result if there were a ten percent adverse change in (1) the market price of propane and
(2) the three-month LIBOR:
|
|
|
|
|
|
|
|
|
|
|
Fair Value - |
|
|
|
|
|
|
Asset |
|
|
Change in |
|
(Millions of dollars) |
|
(Liability) |
|
|
Fair Value |
|
September 30, 2008: |
|
|
|
|
|
|
|
|
Propane swap and option contracts |
|
$ |
(54.0 |
) |
|
$ |
(29.1 |
) |
Interest rate protection agreements |
|
|
(5.8 |
) |
|
|
(4.0 |
) |
|
|
|
|
|
|
|
|
|
September 30, 2007: |
|
|
|
|
|
|
|
|
Propane swap and option contracts |
|
$ |
18.3 |
|
|
$ |
(18.4 |
) |
Interest rate protection agreements |
|
|
0.6 |
|
|
|
(4.4 |
) |
Because the Partnerships derivative instruments generally qualify as hedges under Statement
of Financial Accounting Standards (SFAS) No. 133, we expect that changes in the fair value of
derivative instruments used to manage propane price or interest rate risk would be substantially
offset by gains or losses on the associated anticipated transactions.
29
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in compliance with GAAP requires
the selection and application of appropriate accounting principles to the relevant facts and
circumstances of the Partnerships operations and the use of estimates made by management. The
Partnership has identified the following critical accounting policies that are most important to
the portrayal of the Partnerships financial condition and results
of operations. Changes in these policies could have a material effect on the financial
statements. The application of these accounting policies necessarily requires managements most
subjective or complex judgments regarding estimates and projected outcomes of future events which
could have a material impact on the financial statements. Management has reviewed these critical
accounting policies, and the estimates and assumptions associated with them, with its Audit
Committee. In addition, management has reviewed the following disclosures regarding the
application of these critical accounting policies with the Audit Committee.
Litigation accruals and environmental liabilities. The Partnership is involved in litigation
regarding pending claims and legal actions that arise in the normal course of its business and
may own sites at which hazardous substances may be present. In accordance with GAAP, the
Partnership establishes reserves for pending claims and legal actions or environmental
remediation liabilities when it is probable that a liability exists and the amount or range of
amounts can be reasonably estimated. Reasonable estimates involve management judgments based on a
broad range of information and prior experience. These judgments are reviewed quarterly as more
information is received and the amounts reserved are updated as necessary. Such estimated
reserves may differ materially from the actual liability and such reserves may change materially
as more information becomes available and estimated reserves are adjusted.
Depreciation and amortization of long-lived assets. We compute depreciation on property, plant
and equipment on a straight-line basis over estimated useful lives generally ranging from 2 to 40
years. We also use amortization methods and determine asset values of intangible assets other
than goodwill using reasonable assumptions and projections. Changes in the estimated useful lives
of property, plant and equipment and changes in intangible asset amortization methods or values
could have a material effect on our results of operations. As of September 30, 2008, our net
property, plant and equipment totaled $616.8 million. Depreciation expense of $75.7 million was
recorded during Fiscal 2008.
Purchase price allocation. From time to time, we enter into material business combinations. In
accordance with SFAS No. 141, Business Combinations, the purchase price is allocated to the
various assets and liabilities acquired at their estimated fair value. Fair values of assets
acquired and liabilities assumed are based upon available information and may involve us engaging
an independent third party to perform an appraisal. Estimating fair values can be complex and
subject to significant business judgment and most commonly impacts property, plant and equipment
and intangible assets, including those with indefinite lives. Generally, we have, if necessary,
up to one year from the acquisition date to finalize the purchase price allocation.
Subsequent Events Acquisition of Penn Fuel Propane, LLC and Partnership Sale of Propane Storage
Facility
On October 1, 2008, AmeriGas OLP acquired all of the assets of Penn Fuel Propane, LLC (now named
UGI Central Penn Propane, LLC, CPP) from CPP, a subsidiary of UGI Central Penn Gas, Inc, for
$32.0 million cash plus estimated working capital of $1.6 million. CPP sells propane to customers
primarily in eastern Pennsylvania. AmeriGas OLP funded the acquisition of the assets of CPP
principally from borrowings under its Credit Agreement.
On November 13, 2008, AmeriGas OLP sold its 600,000 barrel refrigerated, above-ground storage
facility located on leased property in California for approximately $43.0 million in cash. We
expect to record a pre-tax gain of approximately $40.0 million associated with this transaction during
our first quarter of Fiscal 2009.
30
Recently Issued Accounting Pronouncements Not Yet Adopted
Below is a listing of recently issued accounting pronouncement by the Financial Accounting
Standards Board (FASB). See Note 2 to the Consolidated Financial Statements for additional discussion of
these pronouncements.
|
|
|
|
|
|
|
|
|
Title of Pronouncement |
|
Month of Issue |
|
|
Effective Date |
|
FASB Staff Position No. SFAS 142-3,
Determination
of the Useful Life of Intangible Assets |
|
April 2008 |
|
Fiscal 2010 |
|
|
|
|
|
|
|
|
|
SFAS 161, Disclosures about Derivative
Instruments
and Hedging Activities |
|
March 2008 |
|
Fiscal 2009 (2nd Quarter) |
|
|
|
|
|
|
|
|
|
EITF 07-04 Application of the
Two-Class Method under
FAS 128 to Master Limited Partnerships |
|
March 2008 |
|
Fiscal 2010 |
|
|
|
|
|
|
|
|
|
SFAS 141R, Business Combinations |
|
December 2007 |
|
Fiscal 2010 |
|
|
|
|
|
|
|
|
|
SFAS 160, Noncontrolling Interests in
Consolidated
Financial Statements an amendment of
ARB No. 51 |
|
December 2007 |
|
Fiscal 2010 |
|
|
|
|
|
|
|
|
|
FASB Staff Position No. FIN 39-1,
Amendment of FASB
Interpretation No. 39 |
|
April 2007 |
|
Fiscal 2009 |
|
|
|
|
|
|
|
|
|
SFAS 159, The Fair Value Option for
Financial Assets
and Financial Liabilities |
|
February 2007 |
|
Fiscal 2009 |
|
|
|
|
|
|
|
|
|
SFAS 157, Fair Value Measurements |
|
September 2006 |
|
Fiscal 2009 |
Effective October 1, 2007, we adopted FASB Interpretation
No. 48, Accounting for Uncertainties in Income Taxes (FIN 48). FIN 48 provides a comprehensive
model for the recognition, measurement and disclosure in financial statements of uncertain income
tax positions that an entity has taken or expects to take on a tax return. The adoption of FIN 48
did not have a significant effect on the Partnership.
Forward-Looking
Statements
Some
information contained in this Annual Report on Form 10-K 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 market areas; (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, counter-party 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; and (16) the impact of pending and future
legal proceedings.
These
factors 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 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.
31
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market Risk are contained in Managements
Discussion and Analysis of Financial Condition and Results of Operations under the caption Market
Risk Disclosures and are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Managements Annual Report on Internal Control Over Financial Reporting and the financial
statements and financial statement schedules referred to in the Index contained on page F-2 of this
Report are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
|
(a) |
|
The General Partners management, with the participation of the 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
designed and functioning effectively 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 disclosure. |
|
|
(b) |
|
For Managements Annual Report on Internal Control Over Financial Reporting see Item 8 of
this Report (which information is incorporated herein by reference). |
|
|
(c) |
|
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 9B. OTHER INFORMATION
None.
PART III:
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
We do not directly employ any persons responsible for managing or operating the Partnership.
The General Partner and UGI provide such services and are reimbursed for direct and indirect costs
and expenses including all compensation and benefit costs. See Certain Relationships and Related
Transactions, and Director Independence Related Person Transactions and Note 12 to the
Partnerships Consolidated Financial Statements.
The Board of Directors of the General Partner has an Audit Committee, Compensation/Pension
Committee, Corporate Governance Committee and an Executive Committee. The functions of and other
information about these committees is summarized below.
The Audit Committee has the authority to (i) make determinations or review determinations made
by management in transactions that require special approval by the Committee under the terms of the
Partnership Agreement and (ii) at the request of the General Partner, review specific matters as to
which the General Partner believes there may be a conflict of interest, in order to determine if
the resolution of such conflict is fair and reasonable to the Partnership. In addition, the Audit
Committee acts on behalf of the Board of Directors in fulfilling its responsibility to:
|
|
|
oversee the accounting and financial reporting processes and audits of the financial
statements of the Partnership; |
|
|
|
|
monitor the independence of the Partnerships independent registered public accountants
and the performance of the independent registered public accountants and internal audit
staff; |
|
|
|
|
oversee the adequacy of the Partnerships controls relative to financial and business
risk; |
|
|
|
|
provide a means for open communication among the independent registered public
accountants, management, internal audit staff and the Board of Directors; and |
|
|
|
|
oversee compliance with applicable legal and regulatory requirements. |
32
The Audit Committee has sole authority to appoint, retain, fix the compensation of and oversee
the work of the independent registered public accountants. A copy of the current charter of the
Audit Committee is posted on the Partnerships website, www.amerigas.com; see Investor Relations -
Corporate Governance.
The Audit Committee members are Messrs. Pratt (Chairman), Marrazzo and Stoeckel. Each member
of the Audit Committee is independent as defined by the New York Stock Exchange listing
standards. In addition, the Board of Directors of the General Partner has determined that all
members of the Audit Committee qualify as audit committee financial experts within the meaning of
the Securities and Exchange Commission regulations.
The Compensation/Pension Committee members are Messrs. Gozon (Chairman) and Marrazzo and Dr.
Ban. The Committee establishes executive compensation policies and programs, recommends to the
Board of Directors base salary, annual target bonus levels and long-term compensation awards for
executives, approves corporate goals and objectives relating to the Chief Executive Officers
compensation and reviews the General Partners management development and succession planning
policies. Each member of the Compensation/Pension Committee is independent as defined by the New
York Stock Exchange listing standards.
The Corporate Governance Committee members are Messrs. Stratton (Chairman), Gozon and Pratt.
The Committee identifies nominees and reviews qualifications of persons eligible to stand for
election as Directors and makes recommendations to the Board on these matters, advises the Board
with respect to significant developments in corporate governance matters, reviews and assesses the
performance of the Board and each Committee, and reviews and recommends director compensation. Each
member of the Corporate Governance Committee is independent as defined by the New York Stock
Exchange listing standards.
The Executive Committee members are Messrs. Stratton (Chairman), Gozon and Greenberg. The
Committee has the full authority of the Board to act on matters between meetings of the Board, with
specified limitations relating to major transactions.
The General Partner has adopted a Code of Ethics for the Chief Executive Officer and Senior
Financial Officers that applies to the General Partners Chief Executive Officer, Chief Financial
Officer and Chief Accounting Officer. The Code of Ethics is included as an exhibit to this Report
and is posted on the Partnerships website, www.amerigas.com; see Investor Relations Corporate
Governance. Copies of all corporate governance documents posted on the Partnerships website are
available free of charge by writing to Robert W. Krick, Vice President and Treasurer, AmeriGas
Propane, Inc., P. O. Box 965, Valley Forge, PA 19482.
Directors and Executive Officers of the General Partner
The following table sets forth certain information with respect to the directors and executive
officers of the General Partner. AmeriGas, Inc., as the sole shareholder of the General Partner,
elects directors annually. AmeriGas, Inc. is a wholly owned subsidiary of UGI. Executive officers
are elected for one-year terms. There are no family relationships between any of the directors or
any of the executive officers or between any of the executive officers and any of the directors.
|
|
|
|
|
Name |
|
Age |
|
Position with the General Partner |
Lon R. Greenberg |
|
58 |
|
Chairman and Director |
Eugene V. N. Bissell |
|
55 |
|
President, Chief Executive Officer and Director |
John L. Walsh |
|
53 |
|
Vice Chairman and Director |
Stephen D. Ban |
|
68 |
|
Director |
Richard C. Gozon |
|
70 |
|
Director |
William J. Marrazzo |
|
59 |
|
Director |
Gregory A. Pratt |
|
60 |
|
Director |
Howard B. Stoeckel |
|
62 |
|
Director |
James W. Stratton |
|
71 |
|
Director |
William D. Katz |
|
55 |
|
Vice President Human Resources |
Robert H. Knauss |
|
55 |
|
Vice President, General Counsel and Corporate Secretary |
David L. Lugar |
|
51 |
|
Vice President Supply and Logistics |
Carey M. Monaghan |
|
57 |
|
Vice President Sales and Marketing |
Jerry E. Sheridan |
|
43 |
|
Vice President Finance and Chief Financial Officer |
William J. Stanczak |
|
53 |
|
Controller and Chief Accounting Officer |
33
Mr. Greenberg is a director (since 1994) and Chairman of the General Partner. He previously
served as President and Chief Executive Officer of the General Partner from 1996 until July 2000.
He is also a director (since 1994), Chairman (since 1996) and Chief Executive Officer (since 1995)
of UGI Corporation, having previously been Senior Vice President Legal and Corporate Development
of UGI (1989 to 1994). Mr. Greenberg previously served as Vice President and General Counsel of
AmeriGas, Inc. (1984 to 1994). He also serves as a director of UGI Utilities, Inc. and Aqua
America, Inc., and serves on the compensation committee of Aqua America, Inc.
Mr. Bissell is President, Chief Executive Officer and a director of the General Partner (since
July 2000). He previously served as Senior Vice President Sales and Marketing of the General
Partner (October 1999 to July 2000), having served as Vice President Sales and Operations (1995
to 1999). Previously, he was Vice President Distributors and Fabrication, BOC Gases (1995),
having been Vice President National Sales (1993 to 1995) and Regional Vice President (Southern
Region) for Distributor and Cylinder Gases Division, BOC Gases (1989 to 1993). From 1981 to 1987,
Mr. Bissell held various positions with UGI Corporation and its subsidiaries, including Director,
Corporate Development. He is a member of the Board of Directors of the National Propane Gas
Association and a member of the Kalamazoo College Board of Trustees.
Mr. Walsh is Vice Chairman and a director of the General Partner (since April 2005). He is
also President, Chief Operating Officer and a director of UGI Corporation and he serves as Vice
Chairman and a director of UGI Utilities, Inc. (since April 2005). He previously served as Chief
Executive of the Industrial and Special Products division and executive director of BOC Group PLC,
an industrial gases company (2001 to 2005). From 1986 to 2001, he held various senior management
positions with the BOC Group. Prior to joining BOC Group, Mr. Walsh was a Vice President of UGIs
industrial gas division prior to its sale to BOC Group in 1989. From 1981 until 1986, Mr. Walsh
held several management positions with affiliates of UGI.
Dr. Ban was elected a director of the General Partner on February 22, 2006. He is currently
serving as the Director of the Technology Transfer Division of the Argonne National Laboratory, a
science-based Department of Energy laboratory dedicated to advancing the frontiers of science in
energy, environment, biosciences and materials (March 2002 to present). He previously served as
President and Chief Executive Officer of the Gas Research Institute, a gas industry research and
development company funded by distributors, transporters, and producers of natural gas (1987
through 1999). He also served as Executive Vice President of GRI. Prior to joining GRI in 1981, he
was Vice President, Research and Development and Quality Control of Bituminous Materials, Inc. Dr.
Ban also serves as a director of UGI Utilities, Inc. and Energen Corporation.
Mr. Gozon was elected a director of the General Partner on February 24, 1998. He retired as
Executive Vice President of Weyerhaeuser Company in 2002, an integrated forest products company,
and Chairman of Norpac, a North Pacific Paper Company, a joint venture with Nippon Paper
Industries, positions he had held since 1994. Mr. Gozon was formerly a director (1984 to 1993),
President and Chief Operating Officer of Alco Standard Corporation, a provider of paper and office
products (1988 to 1993); Executive Vice President and Chief Operating Officer (1988), President
(1985 to 1987) of Paper Corporation of America. He also serves as a director of UGI Corporation,
UGI Utilities, Inc., AmerisourceBergen Corp., and Triumph
Group, Inc.
Mr. Marrazzo was elected a director of the General Partner on April 23, 2001. He is Chief
Executive Officer and President of WHYY, Inc., a public television and radio company in the
nations fourth largest market (since 1997). Previously, he was Chief Executive Officer and
President of Roy F. Weston, Inc. (1988 to 1997); Water Commissioner for the Philadelphia Water
Department (1971 to 1988) and Managing Director for the City of Philadelphia (1983 to 1984). He
also serves as a director of American Water Corporation and Woodard & Curran Engineers.
Mr. Pratt was elected a director of the General Partner on May 24, 2005. He is Vice Chairman
and a director of OAO Technology Solutions, Inc. (OAOT), an information technology professional
services company (2002 to present). He joined OAOT in 1998 as President and CEO after OAOT acquired
Enterprise Technology Group, Inc., a software engineering firm founded by Mr. Pratt. He served as
President and COO of Intelligent Electronics, Inc. from 1991 through 1996, and was co-founder, and
served as CFO of Atari Corp. and President of Atari (US) Corp. from 1984 through 1991. He serves as
Lead Director and is chair of the governance committee of Carpenter Technology Corporation.
34
Mr. Stoeckel was elected a director of the General Partner on September 30, 2006. Mr. Stoeckel
is currently President and Chief Executive Officer of Wawa, Inc. and also serves as Vice Chairman
of the Board of Directors of Wawa, Inc. Wawa, Inc. is a multi-state retailer of food products and
gasoline. He joined Wawa, Inc. in 1987 as Vice President Human Resources and was promoted to
various positions, including Chief Operating Officer, Executive Vice President, Chief Retail
Officer, and Vice President Marketing. He also serves as a director of Riddle Memorial Hospital,
a trustee for Rider University, and a member of the Main Line Health Board of Governors.
Mr. Stratton was elected a director of the General Partner on April 25, 1995. He is the Chief
Investment Officer and a Director of Stratton Management Company, an investment advisory and
financial consulting firm, which was acquired by Susquehanna Bancorp on April 30, 2008.
Previously, he was Chairman, Chief Executive Officer and a Director of Stratton Holding Company (an
investment advisory and consulting firm) since 1972. In addition, Mr. Stratton is a director of UGI
Corporation, UGI Utilities, Inc., Stratton Multi Cap Value Fund, Inc., Stratton Monthly Dividend
REIT Shares, Inc., and Stratton Small-Cap Value Fund.
Mr. Katz is Vice President Human Resources of the General Partner (since December 1999),
having served as Vice President Corporate Development (1996 to 1999). Previously, he was Vice
President Corporate Development of UGI Corporation (1995 to 1996). Prior to joining UGI
Corporation, Mr. Katz was Director of Corporate Development with Campbell Soup Company for over
five years. He also practiced law for approximately 10 years, first with the firm of Jones, Day,
Reavis & Pogue, and later in the Legal Department at Campbell Soup Company.
Mr. Knauss is Vice President and General Counsel of the General Partner (since October 2003)
and UGI Corporation (since September 2003). He is also Corporate Secretary of the General Partner
(since 1994). Prior to October 2003, Mr. Knauss served as Vice President Law and Associate
General Counsel of the General Partner (1996 to 2003). Previously he was Group Counsel Propane
(1989 to 1996) of UGI Corporation. He joined UGI Corporation as Associate Counsel in 1985. Before
joining UGI Corporation, Mr. Knauss was an associate at the firm of Ballard, Spahr, Andrews &
Ingersoll in Philadelphia, Pennsylvania.
Mr. Lugar is Vice President Supply and Logistics of the General Partner (since September
2000). Previously, he served as Director NGL Marketing for Conoco, Inc., where he spent 20 years
in increasingly responsible positions in propane marketing, operations, and supply.
Mr. Monaghan is Vice President Sales and Marketing of the General Partner (since May 2000).
Prior to joining the General Partner, he was Vice President-General Manager, Dry Soup for Campbell
Soup Company (since 1997), where he also served as a Business Director and General Manager of a
number of Campbell Soup Divisions for the 10 prior years.
Mr. Sheridan is Vice President Finance and Chief Financial Officer of the General Partner
(since August 2005). From 2003 to 2005, he served as President and Chief Executive Officer of
Potters Industries, Inc., a global manufacturer of engineered glass materials and a wholly-owned
subsidiary of PQ Corporation. In addition, Mr. Sheridan served as Executive Vice President (2003 to
2005) and as Vice President and Chief Financial Officer (1999 to 2003) of PQ Corporation, a global
producer of inorganic specialty chemicals.
Mr. Stanczak is Controller and Chief Accounting Officer of the General Partner (since
September 2004). Previously he held the position of Director Corporate Accounting and Reporting
of UGI Corporation (2003 to 2004). Mr. Stanczak also served as Controller of the Gas Utility
Division of UGI Utilities, Inc., a subsidiary of UGI Corporation, from 1991 to 2003.
Director Independence
The Board of Directors of the General Partner has determined that, other than Messrs. Bissell,
Greenberg and Walsh, no director has a material relationship with the Partnership and each is an
independent director as defined under the rules of the New York Stock Exchange. The Board of
Directors has established the following guidelines to assist it in determining director
independence:
|
(i) |
|
service by a director on the Board of Directors of UGI Corporation and its subsidiaries
in and of itself will not be considered to result in a material relationship between such
director and the Partnership; |
|
|
(ii) |
|
if a director serves as an officer, director or trustee of a non-profit organization,
charitable contributions to that organization by the Partnership and its affiliates in an
amount up to $250,000 per year will not be considered to result in a material relationship
between such director and the Partnership; |
35
|
(iii) |
|
service by a director or his immediate family member as a non-management director of a
company that does business with the Partnership or an affiliate of the Partnership will not
be considered to result in a material relationship between such director and the Partnership
where the business is done in the ordinary course of the Partnerships or affiliates
business and on substantially the same terms and conditions as would be available to
similarly situated customers; and |
|
(iv) |
|
service by a director or his immediate family member as an executive officer or employee
of a company that makes payments to, or receives payments from, the Partnership or its
affiliates for property or services in an amount which, in any of the last three fiscal
years, does not exceed the greater of $1 million or 2% of such other companys consolidated
gross revenues, will not be considered to result in a material relationship between such
director and the Partnership. |
In making its determination of independence, the Board of Directors considered charitable
contributions and underwriting support by the Partnership and its affiliates to WHYY, of which Mr.
Marrazzo is the Chief Executive Officer, as well as ordinary course business transactions between
the Partnership and its affiliates and companies for which Mr. Pratt serves on the Board of
Directors. All such transactions were in compliance with the categorical standards set by the Board
of Directors for determining director independence.
Non-management Directors
Non-management directors meet at regularly scheduled executive sessions without management
present. These sessions are led by Mr. Stratton, who currently holds the position of Presiding
Director.
Communications with the Board of Directors and Non-management Directors
Interested persons wishing to communicate directly with the Board of Directors or the
non-management directors as a group may do so by sending written communications addressed to them
c/o AmeriGas Propane, Inc., P.O. Box 965, Valley Forge, PA 19482. Any communications directed to
the Board of Directors or the non-management directors as a group from employees or others that
concern complaints regarding accounting, internal controls or auditing matters will be handled in
accordance with procedures adopted by the Audit Committee of the Board.
All other communications directed to the Board of Directors or the non-management directors as
a group are initially reviewed by the General Counsel. The Chairman of the Corporate Governance
Committee is advised promptly of any such communication that alleges misconduct on the part of
management or raises legal, ethical or compliance concerns about the policies or practices of the
General Partner.
On a periodic basis, the Chairman of the Corporate Governance Committee receives updates on
other communications that raise issues related to the affairs of the Partnership but do not fall
into the two prior categories. The Chairman of the Corporate Governance Committee determines which
of these communications he would like to review. The Corporate Secretary maintains a log of all
such communications that is available for review for one year upon request of any member of the
Board.
Typically, the General Partner does not forward to the Board of Directors communications from
Unitholders or other parties which are of a personal nature or are not related to the duties and
responsibilities of the Board, including customer complaints, job inquiries, surveys and polls and
business solicitations.
These procedures have been posted on the Partnerships website at www.amerigas.com (click the
Investor Relations and Corporate Governance caption, then click on Contact AmeriGas Propane,
Inc. Board of Directors).
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the directors and certain
officers of the General Partner and any 10% beneficial owners of the Partnership to send reports of
their beneficial ownership of Common Units and changes in beneficial ownership to the Securities
and Exchange Commission. Based on our records, we believe that during Fiscal 2008 all of such
reporting persons complied with all Section 16(a) filing requirements applicable to them.
36
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation/Pension Committee of the General Partner are Messrs. Gozon and
Marrazzo and Dr. Ban. None of the members is a former or current officer or employee of the General
Partner or any of its subsidiaries. None of the members has any relationship required to be
disclosed under this caption under the rules of the Securities and Exchange Commission.
COMPENSATION COMMITTEE REPORT
The Compensation/Pension Committee has reviewed and discussed the Compensation Discussion and
Analysis with management. Based on this review and discussion, the Committee recommended to the
General Partners Board of Directors, and the Board of Directors approved, the inclusion of the
Compensation Discussion and Analysis in the Partnerships Annual Report on Form 10-K for the year
ended September 30, 2008.
Compensation/Pension Committee
Richard C. Gozon, Chairperson
William J. Marrazzo
Stephen D. Ban
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
In this Compensation Discussion and Analysis, we address the compensation paid or awarded to
Messrs. Bissell, Sheridan, Greenberg, Walsh and Knauss. We refer to these executive officers as our
named executive officers.
Compensation decisions for Messrs. Bissell and Sheridan were made by the Board of Directors of the General Partner after receiving the
recommendation of its Compensation/Pension Committee. Compensation decisions for Messrs. Greenberg,
Walsh and Knauss were made by the Board of Directors of UGI, after receiving the recommendations of
its Compensation and Management Development Committee. For ease of understanding, we will use the
term we to refer to one or more of the entities involved in the relevant compensation decisions,
unless the context indicates otherwise.
Compensation Philosophy and Objectives
We believe that our compensation program for our named executive officers is designed to
provide a competitive level of total compensation necessary to attract and retain talented and
experienced executives. Additionally, our compensation program is intended to motivate our
executives to contribute to our success and reward our executives for their performance and
leadership excellence.
In Fiscal 2008, the components of our compensation program included salary, annual bonus
awards, long-term incentive compensation (performance unit awards and stock option grants),
perquisites, retirement benefits, and other benefits, all as described in greater detail in this
Compensation Discussion and Analysis. We believe that the elements of our compensation program are
essential components of a balanced and competitive compensation program.
Determination of Competitive Compensation
The Compensation/Pension Committee engages Towers Perrin as its compensation consultant.
Towers Perrin supports the Compensation/Pension Committee in performing its responsibilities with
respect to our executive compensation program. The primary duties of Towers Perrin are to:
|
|
|
provide the Compensation/Pension Committee with independent and objective market data; |
|
|
|
|
conduct compensation analysis; and |
|
|
|
|
review and advise on pay programs and salary, target bonus and long-term incentive levels
applicable to our executives. |
37
These duties are performed annually. In addition, Towers Perrin recommends plan design changes as
requested from time to time by the Compensation/Pension Committee.
Towers Perrin also performs other services for us and our affiliates under separate
agreements. These services include providing (i) actuarial services for UGIs pension plan, (ii)
consulting services with respect to benefits programs, and (iii) non-discrimination testing for
qualified benefit plans.
In assessing competitive compensation, we referenced market data provided to us in Fiscal 2007
by Towers Perrin. For Messrs. Bissell and Sheridan, Towers Perrin provided us with two reports: the
2007 Executive Cash Compensation Review and the Executive Compensation Analysis 2007 Long-Term
Incentive Review. Each of these reports includes an executive compensation analysis. We utilize
similar but separate Towers Perrin market data for UGI, including an executive compensation
analysis, in determining compensation for Messrs. Greenberg, Walsh and Knauss. While we do not
benchmark against specific companies in the Towers Perrin reports, our Compensation/Pension
Committee and the UGI Compensation and Management Development Committee do reference the data and
consider the reports when discussing our executives compensation. Our Compensation/Pension
Committee and the UGI Compensation and Management Development Committee exercise discretion and
also review other factors, such as internal equity and sustained individual and company
performance, when setting our executives compensation.
For Messrs. Bissell and Sheridan, the executive compensation analysis is based on general
industry data in Towers Perrins General Industry Executive Compensation Database, which includes
approximately 800 companies. For Messrs. Greenberg, Walsh and Knauss, the analysis was weighted 75
percent based on the General Industry Executive Compensation Database and 25 percent based on
Towers Perrins Energy Services Executive Compensation Database, which includes approximately 90
utility companies. This weighting is designed to approximate the relative sizes of UGIs
non-utility and utility businesses. Towers Perrins General Industry Executive Compensation
Database is comprised of companies from a broad range of industries, including oil and gas,
aerospace, automotive and transportation, chemicals, computer, consumer products, electronics, food
and beverages, metals and mining, pharmaceutical and telecommunications. The energy services and
financial services industries are excluded from this database because compensation in these
industries typically differs from general industry compensation practices.
For comparison purposes, due to the variance in size among the companies in the General
Industry Executive Compensation Database, regression analysis, which is an objective analytical
tool used to determine the relationship among data, was used to adjust the data for differences in
company revenues. We generally seek to position a named executive officers salary grade so that
the midpoint of the salary range in the salary grade approximates the 50th percentile of salaries
for comparable executives included in the executive compensation database material referenced by
Towers Perrin. We consider salaries that are within 15 percent of market median salary levels
developed by Towers Perrin to be competitive.
Elements of Compensation
Salary
Salary is designed to compensate executives for their level of responsibility and sustained
individual performance. We pay our executive officers a salary that is competitive with that of
other executive officers providing comparable services, taking into account the size and nature of
the business of AmeriGas Partners or UGI, as the case may be.
As noted above, we seek to position the midpoint of the applicable salary grade for our named
executive officers to approximate the 50th percentile of salaries for comparable executives as
determined in the applicable Towers Perrin executive compensation databases. For Fiscal 2008, all
named executive officers received a salary that was within 90 percent to 110 percent of the
midpoint for his salary range. Based on the data provided by Towers Perrin, we increased the range
of salary in each salary grade by 2.5 percent. We also adjusted individual salaries to reflect
merit increases. The merit increases were targeted at 3.5 percent, but individual increases varied
based on performance evaluations and the individuals position within the salary range. Criteria
reviewed in such performance evaluations included: overall leadership, accomplishment of annual
goals and objectives, development of an effective management team, and commitment to the job and
company.
38
The following table sets forth each named executive officers Fiscal 2008 salary and his
percentage increase over Fiscal 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage Increase |
|
|
|
|
|
|
|
over Fiscal 2007 |
|
Name |
|
Salary |
|
|
Salary |
|
Eugene V. N. Bissell |
|
$ |
442,624 |
|
|
|
3.8 |
% |
Jerry E. Sheridan |
|
$ |
281,112 |
|
|
|
4.5 |
% |
Lon R. Greenberg |
|
$ |
1,026,300 |
|
|
|
6.2 |
%(1) |
John L. Walsh |
|
$ |
617,500 |
|
|
|
5.0 |
% |
Robert H. Knauss |
|
$ |
315,068 |
|
|
|
8.0 |
% |
|
|
|
(1) |
|
Mr. Greenbergs salary increase includes a modest adjustment to compensate for the
discontinuance of certain perquisites as reported in Fiscal 2007. |
Annual Bonus Awards
Our General Partner and UGI annual bonus plans provide our named executive officers with the
opportunity to earn annual cash incentives provided that certain performance goals are satisfied.
Our annual cash incentives are intended to motivate our executives to focus on the achievement of
our annual business objectives by providing competitive incentive opportunities to those executives
who have the ability to significantly impact our financial performance. We believe that basing a
meaningful portion of an executives compensation on financial performance will result in the
enhancement of partnership unitholder or shareholder value.
In determining the target award levels under our annual bonus plan, we considered information
in the Towers Perrin executive compensation databases regarding the percentage of salary payable
upon achievement of target goals relative to other companies as described above. In establishing
the target award level, we position the amount within the 50th to 75th percentiles for comparable
executives. We determined that the 50th to 75th percentile range was appropriate because we believe
that the annual bonus opportunities should have a significant reward potential to recognize the
difficulty of achieving the annual goals and the significant corporate impact of such achievement.
For Fiscal 2008, each executives target award opportunity was established within the
50th to 75th percentile range provided in Towers Perrins executive compensation databases, with
Mr. Bissells opportunity set at the 67th percentile.
Messrs. Bissell and Sheridan participate in the AmeriGas Propane, Inc. Executive Annual Bonus
Plan. For Messrs. Bissell and Sheridan, the entire target award opportunity was based on earnings
per common unit (EPU) of AmeriGas Partners, although the bonus achieved based on EPU is subject
to adjustment based on customer growth, as described below. We believe that enhancing financial
performance is the most important goal of a principal executive, operating or financial officer,
and earnings per partnership unit provides a straightforward, bottom line measure of the
performance of an executive in a large, well-established business. In addition, we believe that
customer growth for AmeriGas Partners is an important corollary to EPU because we foresee only
modest growth in total demand for propane, and, therefore, is an important factor in our ability to
improve the Partnerships financial performance.
Messrs. Greenberg, Walsh and Knauss participate in the UGI Corporation Executive Annual Bonus
Plan. For reasons similar to those underlying our use of EPU as a goal for Messrs. Bissell and
Sheridan, the entire target award for Messrs. Greenberg, Walsh and Knauss was based on UGIs
earnings per share (EPS). We also believe that EPS is an appropriate measure for Messrs.
Greenberg, Walsh and Knauss, whose duties encompass UGI and its affiliated enterprises, including
the General Partner and the Partnership. The EPS measure is not subject to adjustment based on
customer growth or any other metric.
As noted above, each of Messrs. Bissells and Sheridans target award opportunity was based on
EPU of the Partnership, subject to modification based on customer growth. The EPU target amount was
derived based on a targeted EBITDA range for AmeriGas Partners of approximately $300 million to
$310 million for Fiscal 2008. Under the target bonus criteria applicable to Mr. Bissell, no awards
would be paid if the EPU amount was less than approximately 80 percent of the target award, while
200 percent of the target award might be payable if the EPU amount was approximately 120 percent or
more of the target award (the percentage of target bonus payable based on various levels of EPU is
referred to as the EPU Leverage Factor). The amount of the award determined by applying the EPU
Leverage Factor is then adjusted to reflect the degree of achievement of predetermined customer
growth objectives (Customer Growth Leverage Factor). For Fiscal 2008, the adjustment ranged from
70 percent if the minimum growth objective was not achieved, to 120 percent if the growth objective
exceeded 150 percent of the growth target. In Fiscal 2007, the adjustment based on achievement of
customer growth objectives ranged from 0 to 200 percent, in effect placing the entire annual bonus
opportunity at risk if customer growth targets were not met. The customer growth adjustment was
changed in Fiscal 2008 to avoid potentially inequitable variations in annual bonus amounts due to
over-weighting of customer growth objectives compared to financial performance goals.
39
Once the EPU Leverage Factor and Customer Growth Leverage Factor are determined as explained
above, the EPU Leverage Factor is multiplied by the Customer Growth Leverage Factor to obtain an
adjusted leverage factor. This adjusted leverage factor is then multiplied by the target award
opportunity to arrive at Messrs. Bissells and Sheridans actual bonus payment for the fiscal year.
Accordingly, each of Messrs. Bissell and Sheridan received a bonus payout for Fiscal 2008 equal to 76 percent of his target bonus.
The Compensation/Pension Committee and the UGI Compensation and Management Development
Committee each have discretion to adjust performance results for extraordinary items or other
events, as the Committee deems appropriate. When an executives entire target award opportunity is
based solely on the achievement of business financial performance goals, each Committee also has
discretion to increase or decrease the amount of the award otherwise determined by up to 50
percent, based on the Committees assessment of the executives contribution to the achievement of
the financial performance goal, overall leadership, accomplishment of annual goals and objectives,
development of an effective management team, commitment to the job and company, and other factors.
The bonus award opportunity for each of Messrs. Greenberg, Walsh and Knauss was structured so
that no amounts would be paid unless UGIs EPS was at least 80 percent of the target amount, with
the target bonus award being paid out if UGIs EPS was 100 percent of the targeted EPS. The maximum
award, equal to 200 percent of the target award, would be payable if the EPS exceeded 120 percent
of the EPS target. The targeted EPS for bonus purposes for Fiscal 2008 was established to be in the
range of $1.95 to $2.05 per share. Accordingly, for Fiscal 2008,
Messrs. Greenberg, Walsh and Knauss each received a bonus payout equal to
94 percent of his
target bonus.
Based on the achievement relating to the EPU and the EPS target, the following annual bonus payments were made for 2008:
|
|
|
|
|
|
|
|
|
|
|
Percent of |
|
|
|
|
|
|
Target |
|
|
Amount |
|
Name |
|
Bonus Paid |
|
|
of Bonus |
|
Eugene V. N. Bissell |
|
|
76 |
% |
|
$ |
252,960 |
|
Jerry E. Sheridan |
|
|
76 |
% |
|
$ |
96,393 |
|
Lon R. Greenberg |
|
|
94 |
% |
|
$ |
964,722 |
|
John L. Walsh |
|
|
94 |
% |
|
$ |
493,383 |
|
Robert H. Knauss |
|
|
94 |
% |
|
$ |
177,698 |
|
Long-Term Compensation Fiscal Year 2008 Equity Awards
Our long-term incentive compensation is intended to create a strong financial incentive for
achieving or exceeding long-term performance goals and to encourage a significant equity stake in
our company. Additionally, we believe our long-term incentives provide us the ability to attract
and retain talented executives in a competitive market.
We awarded our long-term compensation effective January 1, 2008 for Messrs. Bissell and
Sheridan, under the 2000 AmeriGas Propane, Inc. Long-Term Incentive Plan. Messrs. Greenberg, Walsh,
and Knauss were granted performance units under the Amended and Restated UGI Corporation 2004
Omnibus Equity Compensation Plan. Our long-term compensation included UGI stock option grants and
either AmeriGas performance unit awards tied to the three-year total return performance of AmeriGas
Partners common units relative to that of a peer group of publicly traded partnerships or UGI
performance unit awards tied to the three-year total return performance of UGI common stock
relative to that of the companies in the S&P Utilities Index. Each performance unit represents the
right of the recipient to receive a common unit (or a share of common stock in the case of Messrs.
Greenberg, Walsh and Knauss) if specified performance goals and other conditions are met.
As is the case with cash compensation and annual bonus awards, we referenced Towers Perrins
executive compensation databases in establishing equity compensation. In determining the total
dollar value of the long-term compensation opportunity to be provided in Fiscal 2008, we initially
referenced (i) market median salary information and (ii) the percentage of the market median base
salary for each position to be delivered as a long-term compensation opportunity, both as
calculated by Towers Perrin. The aforementioned percentage was developed using the applicable
executive compensation databases and was targeted to produce long-term compensation opportunity at
the 50th percentile level.
40
We initially applied approximately 50 percent of the amount of the long-term incentive
opportunity to stock options and approximately 50 percent to performance units. We have bifurcated
long-term compensation in this manner since 2000 and believe it provides a good balance between two
related, but discrete goals. Stock options are designed to align the executives interests with
shareholder interests, because the value of stock options is a function of the appreciation or
depreciation of UGIs stock price. As explained in more detail below, the performance units are
designed to encourage performance that compares favorably relative to a competitive peer group.
In providing award calculations, Towers Perrin valued UGI stock options by applying a binomial
model. The stock price used in the model for January 1, 2008 awards was $26.41 which was the three
month average UGI stock price from June 7, 2007 through September 6, 2007. The model also assumes a
5 percent turnover annually over the vesting period to account for options forfeited by terminating
participants. As a result of this analysis, Towers Perrin valued the stock options at $4.58 per
underlying share. Based on its valuation, Towers Perrin calculated the number of options to be
granted to the named executive officers covering a specified number of underlying shares.
The remaining 50 percent of the long-term compensation opportunity is applied to performance
units. In calculating the number of AmeriGas Partners performance units to be awarded to each of
Messrs. Bissell and Sheridan, Towers Perrin placed a value of $26.88 per unit underlying an
AmeriGas Partners performance unit. The unit price used in the model for January 1, 2008 awards was
$35.78 which was the three-month average AmeriGas Partners common unit price from June 7, 2007
through September 6, 2007, subject to the same 5 percent turnover assumption used in valuing stock
options. The number of UGI performance units awarded was computed in a similar fashion, subject to
the same 5 percent turnover assumption. In calculating the number of UGI performance units to be
awarded to Messrs. Greenberg, Walsh and Knauss, Towers Perrin placed a value of $19.84 per share
underlying a UGI performance unit, based on the average price of UGI common stock over the three
month period from June 7, 2007 through September 6, 2007.
While management used the Towers Perrin calculations as a starting point, in accordance with
past practice, management recommended adjustments to the aggregate number of UGI stock options and
AmeriGas Partners and UGI performance units calculated by Towers Perrin. The adjustments were
designed to address historic grant practices, internal pay equity and the policy of UGIs
Compensation and Management Development Committee that the three year average of the annual number
of UGI equity awards, expressed as a percentage of UGI common shares outstanding at fiscal
year-end, made under the Amended and Restated UGI Corporation 2004 Omnibus Equity Compensation Plan
for the fiscal years 2008 through 2010 will not exceed 2 percent. For purposes of calculating the
annual number of equity awards: (i) each stock option granted is deemed to equal one share and (ii)
each performance unit earned and paid in shares of stock and each stock unit granted and expected
to be paid in shares of stock is deemed to equal four shares.
As a result of the General Partners Compensation/Pension Committees and UGIs Compensation
and Management Development Committees acceptance of managements recommendations, the named
executives received between approximately 88 percent and 115 percent of the total dollar value of
long-term compensation opportunity recommended by Towers Perrin. The actual grant amounts are set
forth below:
|
|
|
|
|
|
|
|
|
|
|
Shares Underlying |
|
|
|
|
|
|
Stock Options |
|
|
Performance Units |
|
Name |
|
# Granted |
|
|
# Granted |
|
Eugene V. N. Bissell |
|
|
65,000 |
|
|
|
12,000 |
|
Jerry E. Sheridan |
|
|
17,000 |
|
|
|
2,500 |
|
Lon R. Greenberg |
|
|
300,000 |
|
|
|
70,000 |
(1) |
John L. Walsh |
|
|
120,000 |
|
|
|
27,000 |
(1) |
Robert H. Knauss |
|
|
55,000 |
|
|
|
9,000 |
(1) |
|
|
|
(1) |
|
Constitutes UGI performance units. |
41
While the number of performance units awarded to the named executive officers was determined
as described above, the actual number of shares or partnership common units underlying performance
units that are paid out at the expiration of the three-year performance period will be based upon
comparative AmeriGas Partners total unitholder return (TUR) or UGI total shareholder return
(TSR) over the period from January 1, 2008 to December 31, 2010. In computing TUR, we use the
average of the daily closing prices for our common units and those of each entity in the peer group
below for the ninety calendar days prior to January 1 of the beginning and end of a given
three-year performance period. In addition, TUR gives effect to all distributions throughout the
three-year performance period as if they had been reinvested. For the AmeriGas Partners performance
units awarded to Messrs. Bissell and Sheridan, we compare the TUR of AmeriGas Partners common
units to the TUR performance of each member of a peer group comprised of the following limited
partnerships engaged in the propane, pipeline and coal industries:
|
|
|
|
|
Alliance Resource Partners, L.P.
|
|
Kinder Morgan Energy Partners,L.P.
|
|
Plains All American Pipeline, L.P. |
Buckeye Partners, L.P.
|
|
Magellan Midstream Partners, L.P.
|
|
Star Gas Partners, L.P. |
Enbridge Energy Partners, L.P.
|
|
Natural Resources Partners, L.P.
|
|
Suburban Propane Partners, L.P. |
Energy Transfer Partners, L.P.
|
|
NuStar Energy, L.P.
|
|
Sunoco Logistics Partners, L.P. |
Enterprise Products Partners, L.P.
|
|
ONEOK Partners, L.P.
|
|
TC Pipelines, L.P. |
Ferrellgas Partners, L.P.
|
|
Penn Virginia Resource Partners, L.P.
|
|
TEPPCO Partners, L.P. |
Inergy, L.P. |
|
|
|
|
In determining the number of UGI performance units to be paid out, UGI will compare the TSR of
UGI common stock relative to the TSR performance of those companies comprising the Standard and
Poors 500 Utilities Index (S&P Utilities Index) as of the beginning of a performance period. In
computing TSR, UGI uses the average of the daily closing prices for its common stock and the common
stock of each company in the S&P Utilities Index for the ninety calendar days prior to January 1 of
the beginning and end of a given three-year performance period. In addition, TSR gives effect to
all dividends throughout the three-year performance period as if they had been reinvested. If a
company is added to the S&P Utilities Index during a three-year performance period, UGI does not
include that company in its TSR analysis. UGI will only remove a company from its TSR analysis that
was included in the S&P Utilities Index at the beginning of a performance period if such company
ceases to exist during the applicable performance period. Those companies in the S&P Utilities
Index as of December 31, 2007 were as follows:
|
|
|
|
|
Allegheny Energy, Inc.
|
|
Edison International
|
|
PPL Corporation |
Ameren Corporation
|
|
Entergy Corporation
|
|
Progress Energy, Inc. |
American Electric Power Company, Inc.
|
|
Exelon Corporation
|
|
Public Service Enterprise Group Inc. |
Centerpoint Energy, Inc.
|
|
FirstEnergy Corp.
|
|
Questar Corporation |
CMS Energy Corporation
|
|
FPL Group, Inc.
|
|
Sempra Energy |
Consolidated Edison, Inc.
|
|
Integrys Energy Group, Inc.
|
|
TECO Energy, Inc. |
Constellation Energy Group, Inc.
|
|
Nicor Inc.
|
|
The AES Corporation |
Dominion Resources, Inc.
|
|
NiSource Inc.
|
|
The Southern Company |
DTE Energy Company
|
|
PG&E Corporation
|
|
Xcel Energy Inc. |
Duke Energy Corporation
|
|
Pepco Holdings, Inc.
|
|
|
Dynegy Inc.
|
|
Pinnacle West Capital Corp. |
|
|
Each award payable to the named executive officers provides a number of AmeriGas Partners
common units or UGI shares equal to the number of performance units earned. Management of the
General Partner or UGI, as the case may be, has the authority to provide for a cash payment in lieu
of up to 35 percent of the common units or shares payable, except for UGI awards earned in excess
of the target award, which are paid entirely in cash. The cash payment is based on the value of the
securities at the payment date and is designed to meet minimum statutory tax withholding
requirements. The minimum award, equivalent to 50 percent of the number of performance units, will
be payable if the TUR or TSR rank is at the 40th percentile of the peer group or S&P Utilities
Index companies, as applicable. The target award, equivalent to 100 percent of the number of
performance units, will be payable if the TUR or TSR rank is at the 50th percentile. The maximum
award, equivalent to 200 percent of the number of performance units, will be payable if the TUR or
TSR rank is the highest of all peer group or S&P Utilities Index companies, as applicable.
All performance units have distribution or dividend equivalent rights, as applicable. A
distribution equivalent is an amount determined by multiplying the number of performance units
credited to a recipients account by the per-unit cash distribution, or the per-unit fair market
value of any non-cash distribution, paid by AmeriGas Partners on its common units on a distribution
payment date. Accrued distribution and dividend (in the case of UGI performance units) equivalents
are payable on the number of common units or common shares payable, if any, at the end of the
performance period and are paid in cash.
The number of shares underlying options that were awarded to the named executive officers are
set forth below in the Grants of Plan Based Awards Table under the column heading, All Other
Option Awards: Number of Securities Underlying Options. The options generally vest in annual
increments over a three-year period. We believe that these vesting terms provide to our executives
(other than those executives who are retirement eligible) a meaningful incentive for continued
employment.
42
Long-Term Compensation Payout of Performance Units for 2005-2007 Period
During Fiscal 2008, we paid out awards to those executives who received performance units for
the period from January 1, 2005 to December 31, 2007. The award criteria for AmeriGas Partners
common units and UGI common stock during that period was the same as those for the performance
units granted for 2008-2010, described above. For the 2005-2007 period, the General Partners TUR
ranked 9th relative to its peer group of 19 other partnerships, placing the General Partner at the
57.9th percentile ranking, resulting in a 119.7 percent payout of the target award. UGIs TSR
ranked 19th relative to the 29 other companies in the S&P 500 Utilities Index, placing UGI just
below the 40th percentile ranking necessary for any payout. As a result of the foregoing, the
payouts on performance unit awards were as follows:
|
|
|
|
|
|
|
|
|
|
|
Performance Unit Payout |
|
|
|
|
|
|
(Number of |
|
|
Performance Unit Payout |
|
Name |
|
Units or Shares) |
|
|
Value(1) ($) |
|
Eugene V. N. Bissell |
|
|
11,970 |
|
|
|
432,237 |
|
Jerry E. Sheridan |
|
|
1,995 |
|
|
|
72,054 |
|
Lon R. Greenberg |
|
|
0 |
|
|
|
0 |
|
John L. Walsh |
|
|
0 |
|
|
|
0 |
|
Robert H. Knauss |
|
|
0 |
|
|
|
0 |
|
|
|
|
(1) |
|
Includes distribution equivalent or dividend equivalent payout. |
Perquisites
We provide limited perquisite opportunities to our executive officers. We provide
reimbursement for tax preparation services, certain health maintenance services and limited spousal
travel. The aggregate cost of perquisites for all named executive officers in Fiscal 2008 was less
than $50,000.
Other Benefits
Our named executive officers participate in various retirement, deferred compensation and
severance plans which are described in greater detail in the Ongoing Plans and Post-Employment
Agreements section of this Compensation Discussion and Analysis. We also provide employees,
including the named executive officers, with a variety of other benefits, including medical and
dental benefits, disability benefits, life insurance, and paid holidays and vacations. These
benefits generally are available to all of our full-time employees.
Ongoing Plans and Post-Employment Agreements
We have several plans and agreements (described below) that enable our named executive
officers to accrue retirement benefits as the executives continue to work for us, provide severance
benefits upon certain types of termination of employment events or provide other forms of deferred
compensation.
AmeriGas Propane, Inc. Savings Plan (the AmeriGas Propane Savings Plan)
This plan is a tax-qualified defined contribution plan for General Partner employees. Under
the plan, an employee may contribute, subject to Code limitations
(which, among other things, limited annual contributions in 2008 to $15,500), up to 50 percent of
his or her compensation on a pre-tax basis, and the General Partner provides a matching
contribution equal to 100 percent of the first 5 percent of compensation contributed in any pay
period. Amounts credited to an employees account in the plan may be invested among a number of
funds, including a UGI stock fund. Messrs. Bissell and Sheridan are eligible to participate in the
AmeriGas Propane Savings Plan.
UGI Utilities Inc. Savings Plan (the UGI Savings Plan)
This plan is a tax-qualified defined contribution plan available to, among others, employees
of UGI. Under the plan, an employee may contribute, subject to Code limitations (which, among other
things, limited annual contributions in 2008 to $15,500), up to a maximum of 50 percent of his or
her eligible compensation on a pre-tax basis and up to 6 percent of his or her eligible
compensation on an after-tax basis. UGI provides matching contributions targeted at 50 percent of
the first 3 percent of eligible compensation contributed by the employee in any pay period, and 25
percent of the next three percent. Like the AmeriGas Propane Savings Plan, participants in the UGI
Savings Plan may invest amounts credited to their account among a number of funds, including a UGI
stock fund. Messrs. Greenberg, Walsh and Knauss are eligible to participate in the UGI Savings
Plan.
43
Retirement Income Plan for Employees of UGI Utilities, Inc. (the UGI Pension Plan)
This plan is a tax-qualified defined benefit plan available to, among others, employees of UGI
and certain of its subsidiaries, but not including the General Partner. The UGI Pension Plan
provides an annual retirement benefit based on an employees earnings and years of service, subject
to maximum benefit limitations. Messrs. Greenberg, Walsh and Knauss are eligible to participate in
the UGI Pension Plan. See the Pension Benefits table and accompanying narrative for additional
information.
UGI Corporation Supplemental Executive Retirement Plan
This plan is a nonqualified defined benefit plan that provides retirement benefits that would
otherwise be provided under the UGI Pension Plan, but are prohibited from being paid from the UGI
Pension Plan by Code limits. The benefit paid by the plan is approximately equal to the difference
between the benefits provided under the UGI Pension Plan and benefits that would have been provided
by the UGI Pension Plan if not for the limitations of the Employee Retirement Security Act of 1974,
as amended, and the Code. Benefits vest after the participant completes five years of vesting
service. The plan also provides additional benefits in the event of certain terminations of
employment covered by a change in control agreement. Messrs. Greenberg, Walsh and Knauss
participate in the UGI Corporation Supplemental Executive Retirement Plan. See the Pension
Benefits table and accompanying narrative for additional information.
AmeriGas Propane, Inc. Supplemental Executive Retirement Plan
The General Partner maintains a supplemental executive retirement plan, which is a
nonqualified deferred compensation plan for highly compensated employees of the General Partner.
Under the plan, AmeriGas credits to each participants account 5 percent of the compensation below
the Code compensation limits and 10 percent of excess compensation. In addition, if any portion of
the General Partners matching contribution under the AmeriGas Propane, Inc. Savings Plan is
forfeited due to nondiscrimination requirements under the Code, the forfeited amount, adjusted for
earnings and losses on the amount, will be credited to a participants account. Through Fiscal
2007, participants accounts were credited with interest generally equal to the actual return on
the trust portfolio of the UGI Pension Plan subject to certain limitations as set forth in the
AmeriGas Propane, Inc. Supplemental Executive Retirement Plan. Beginning in Fiscal 2008,
participants direct the investment of deferred amounts to be invested among a number of mutual
funds. Messrs. Bissell and Sheridan participate in the AmeriGas Propane, Inc. Supplemental
Executive Retirement Plan. See the Nonqualified Deferred Compensation table and accompanying narrative for
additional information.
UGI Corporation Supplemental Savings Plan
This plan is a nonqualified deferred compensation plan that provides benefits that would be
provided under the qualified UGI Savings Plan in the absence of Code limitations. The Supplemental
Savings Plan is intended to pay an amount substantially equal to the difference between the UGI
matching contribution that would have been made under the qualified UGI Savings Plan if the Code
limitations were not in effect. At the end of each plan year, a participants account is credited
with earnings equal to the weighted average return based 60 percent on the total return of the
Standard & Poors 500 Index and 40 percent on the Lehman Brothers Aggregate Bond Index. The plan
also provides additional benefits in the event of certain terminations of employment covered by a
change in control agreement. Messrs. Greenberg, Walsh and Knauss are each eligible to participate
in the UGI Corporation Supplemental Savings Plan.
AmeriGas Propane, Inc. Nonqualified Deferred Compensation Plan
The General Partner maintains a nonqualified deferred compensation plan under which
participants may defer certain amounts of their compensation. Deferral elections are made annually
by eligible participants in respect of compensation to be earned for the following year.
Participants may direct the investment of deferred amounts into a number of mutual funds. Payment
of amounts accrued for the account of a participant generally is made following the participants
termination of employment. Messrs. Bissell and Sheridan are eligible to participate in the AmeriGas
Propane, Inc. Nonqualified Deferred Compensation Plan. See the
Nonqualified Deferred Compensation table and
accompanying narrative for additional information.
Severance Pay Plans for Senior Executive Employees
The General Partner and UGI each maintain a severance pay plan that provides severance
compensation to certain senior level employees. The plans are designed to alleviate the financial
hardships that may be experienced by executive employee participants whose employment is terminated
without just cause, other than in the event of death or disability. The General Partner plan covers
Messrs. Bissell and Sheridan and the UGI plan covers Messrs. Greenberg, Walsh and Knauss. See
Potential Payments Upon Termination or Change in Control below for further information regarding
the severance plans.
44
Change in Control Agreements
The General Partner has change in control agreements with Messrs. Bissell and Sheridan, and
UGI has change in control agreements with Messrs. Greenberg, Walsh and Knauss. The change in
control agreements are designed to reinforce and encourage the continued attention and dedication
of the executives without distraction in the face of potentially disturbing circumstances arising
from the possibility of a change in control and to serve as an incentive to their continued
employment with us. The agreements provide for payments and other benefits if we terminate an
executives employment without cause or if the executive terminates employment for good reason
within two years following a change in control of UGI (and, in the case of Messrs. Bissell and
Sheridan, the General Partner or AmeriGas Partners). The agreements also provide that if change in
control payments exceed certain threshold amounts, we or UGI, as the case may be, will make
additional payments to reimburse the executives for excise and related taxes imposed under the
Code. See Potential Payments Upon Termination or Change in Control for further information
regarding the change in control agreements. See Tax Considerations below for further information
regarding the excise tax reimbursement.
Equity Ownership Guidelines
We seek to underscore stakeholder incentives through our equity ownership guidelines. We
believe that by encouraging our executives to maintain a meaningful equity interest in AmeriGas
Partners or, if applicable, UGI, we will enhance the link between our executives and unitholders or
shareholders. Under our guidelines, an executive must meet 10 percent of the ownership requirement
within one year from the date of employment and must use 10 percent of his annual bonus award to
purchase Partnership common units or UGI stock (or, in the case of Messrs. Greenberg, Walsh and
Knauss, UGI stock) until his equity ownership requirement is met. In addition, the guidelines
require that 50 percent of the net proceeds from a cashless exercise of UGI stock options be used
to purchase equity until the ownership requirement is met. Up to 20 percent of the ownership
requirement may be satisfied through holdings of UGI common stock for the executives account in
the relevant savings plan. The following table provides information regarding our equity ownership
guidelines for, and the number of shares held at September 30, 2008, by our named executive
officers:
|
|
|
|
|
|
|
|
|
|
|
Required Ownership of |
|
|
Number of Shares of |
|
Name |
|
UGI Common Stock |
|
|
UGI Stock Held at 9/30/2008 |
|
Eugene V. N. Bissell |
|
|
60,000 |
(1) |
|
See footnote 1 |
|
Jerry E. Sheridan |
|
|
8,000 |
(2) |
|
See footnote 2 |
|
Lon R. Greenberg |
|
|
200,000 |
|
|
|
503,006 |
|
John L. Walsh |
|
|
100,000 |
|
|
|
70,030 |
|
Robert H. Knauss |
|
|
20,000 |
|
|
|
26,412 |
|
|
|
|
(1) |
|
In lieu of UGI common stock, Mr. Bissell may satisfy the stock ownership guidelines if he
holds 40,000 AmeriGas Partners common units or a combination of UGI Corporation common stock
and AmeriGas Partners common units deemed equivalent to 60,000 shares of UGI common stock; for
this purpose, each AmeriGas Partners common unit equals 1.5 shares of UGI Corporation common
stock. Mr. Bissell owned 66,380 shares of UGI common stock and 37,246 AmeriGas Partners common
units, thereby meeting his equity ownership requirement. |
|
(2) |
|
In lieu of UGI common stock, Mr. Sheridan may satisfy the stock ownership guidelines if he
holds 5,333 AmeriGas Partners common units or a combination of UGI common stock and AmeriGas
Partners common units deemed equivalent to 8,000 shares of UGI Corporation common stock; for
this purpose, each AmeriGas Partners common unit equals 1.5 shares of UGI common stock. Mr.
Sheridan owned 678 shares of UGI common stock and 11,437 AmeriGas Partners common units,
thereby meeting his equity ownership requirement. |
Stock Option Grant Practices
The UGI Compensation and Management Development Committee and the General Partners
Compensation/Pension Committee approve annual stock option grants to executive officers in the last
calendar quarter of each year, effective the following January 1. The exercise price per share of
the options is equal to the closing share price of UGI common stock on the last trading day of
December. A grant to a new employee is generally effective on the later of the date the employee
commences employment with us or the date the Committee authorizes the grant. In either case the
exercise price is equal to the closing price per share of UGI common stock on the effective date of
grant. From time to time, management recommends stock option grants for non-executive employees,
and the grants, if approved by the Committee, are effective on the date of Committee action and
have an exercise price equal to the
closing price per share of UGI common stock on the date of grant. We believe that our stock
option grant practices are appropriate and effectively eliminate any question regarding timing of
grants in anticipation of material events.
45
Role of Executive Officers in Determining Executive Compensation
In connection with Fiscal 2008 compensation, Messrs. Bissell, Greenberg and Walsh, aided by
our human resources personnel, provided statistical data and recommendations to the
Compensation/Pension Committee (and Mr. Greenberg to UGIs Compensation and Management Development
Committee) to assist it in determining compensation levels. Messrs. Bissell, Greenberg and Walsh
did not make recommendations as to their own respective compensation and each was excused from the
Committee meeting when his compensation was discussed by the Committee. While the Committees
utilized this information, and valued the observations of Messrs. Bissell, Greenberg and Walsh with
regard to other executive officers, the ultimate decisions regarding executive compensation were
made by the appropriate board of directors following Committee recommendations.
Tax Considerations
In the event of a change in control, payments to an executive may be subject to an excise tax,
and may not be deductible by us, under Sections 280G and 4999 of the Code. If change in control
payments exceed certain threshold amounts, the change in control agreements require that we may
make additional payments to the executives to reimburse them for excise tax imposed by Section 4999
of the Code, as well as other taxes in respect of the additional payments. We believe that the
purposes of the change in control agreements, as described above, would be diminished by the
possible imposition of significant excise taxes on the executives, and we did not wish to have the
provisions of the executives agreements serve as a disincentive to their pursuit of a change in
control that might otherwise be in the best interests of AmeriGas Partners and its unitholders or
UGI and its stockholders. Accordingly, we determined to provide a payment under certain
circumstances to reimburse the executives for excise taxes payable in connection with change in
control payments, as well as any taxes that accrue as a result of our reimbursement.
Summary Compensation Table
The following tables, narrative and footnotes provide information regarding the compensation
of our Chief Executive Officer, Chief Financial Officer, and our 3 other most highly
compensated executive officers in Fiscal 2008 and Fiscal 2007.
Summary Compensation Table
|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Pension |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
Value and |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
Plan |
|
|
Compensation |
|
|
All Other |
|
|
|
|
Name and |
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Earnings |
|
|
Compensation |
|
|
Total |
|
Principal |
|
Fiscal |
|
|
Salary |
|
|
Bonus |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
Position |
|
Year |
|
|
($) |
|
|
($) |
|
|
(1) |
|
|
(1) |
|
|
(2) |
|
|
(3) |
|
|
(4) |
|
|
(5) |
|
(a) |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
|
(f) |
|
|
(g) |
|
|
(h) |
|
|
(i) |
|
|
(j) |
|
Eugene V.N. Bissell
President and Chief |
|
|
2008 |
|
|
|
442,000 |
|
|
|
0 |
|
|
|
669,566 |
|
|
|
625,745 |
|
|
|
252,960 |
|
|
|
376 |
|
|
|
70,200 |
|
|
|
2,060,847 |
|
Executive Officer |
|
|
2007 |
|
|
|
425,770 |
|
|
|
0 |
|
|
|
409,923 |
|
|
|
395,188 |
|
|
|
415,740 |
|
|
|
16,856 |
|
|
|
84,401 |
|
|
|
1,747,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry E. Sheridan
Vice President
Finance and Chief |
|
|
2008 |
|
|
|
280,646 |
|
|
|
0 |
|
|
|
104,427 |
|
|
|
95,108 |
|
|
|
96,393 |
|
|
|
0 |
|
|
|
40,396 |
|
|
|
616,970 |
|
Financial Officer |
|
|
2007 |
|
|
|
268,660 |
|
|
|
0 |
|
|
|
73,592 |
|
|
|
68,230 |
|
|
|
157,365 |
|
|
|
862 |
|
|
|
44,531 |
|
|
|
613,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lon R. Greenberg |
|
|
2008 |
|
|
|
1,026,300 |
|
|
|
0 |
|
|
|
617,329 |
|
|
|
1,524,000 |
|
|
|
964,722 |
|
|
|
945,498 |
|
|
|
81,405 |
|
|
|
5,159,254 |
|
Chairman |
|
|
2007 |
|
|
|
966,885 |
|
|
|
0 |
|
|
|
870,627 |
|
|
|
1,601,600 |
|
|
|
944,748 |
|
|
|
1,988,689 |
|
|
|
95,560 |
|
|
|
6,468,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Walsh |
|
|
2008 |
|
|
|
616,933 |
|
|
|
0 |
|
|
|
188,035 |
|
|
|
656,050 |
|
|
|
493,383 |
|
|
|
147,550 |
|
|
|
24,494 |
|
|
|
2,126,445 |
|
Vice Chairman |
|
|
2007 |
|
|
|
588,016 |
|
|
|
0 |
|
|
|
857,590 |
|
|
|
588,650 |
|
|
|
488,818 |
|
|
|
159,195 |
|
|
|
19,625 |
|
|
|
2,701,894 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Knauss
Vice President and |
|
|
2008 |
|
|
|
314,619 |
|
|
|
0 |
|
|
|
82,493 |
|
|
|
439,746 |
|
|
|
177,698 |
|
|
|
262,102 |
|
|
|
10,521 |
|
|
|
1,287,179 |
|
General Counsel |
|
|
2007 |
|
|
|
291,720 |
|
|
|
0 |
|
|
|
132,331 |
|
|
|
205,080 |
|
|
|
171,181 |
|
|
|
242,625 |
|
|
|
10,922 |
|
|
|
1,053,859 |
|
|
|
|
(1) |
|
The amounts shown in these columns represent the dollar amount recognized for financial
statement reporting purposes by the Partnership or, with respect to Messrs. Greenberg, Walsh
and Knauss, UGI, in accordance with Statement of Financial Accounting Standards No. 123
(revised 2004) (SFAS 123R), of the fair value of awards of performance units, stock units
and stock options,
as the case may be, under the UGI Corporation 2004 Omnibus Equity Compensation Plan, and with
respect to Messrs. Bissell and Sheridan only, the 2000 AmeriGas Propane, Inc. Long-term Incentive
Plan. Accordingly, these figures include amounts from awards granted in and prior to the fiscal
year indicated. The Fiscal 2008 stock award amounts shown for Messrs. Greenberg, Walsh and Knauss
in column (e) were reduced by the previously accrued value of performance unit awards which
expired without payment. The assumptions used in the calculation of the amounts shown, are
included in Note 2 and Note 10 to our audited consolidated financial statements for Fiscal 2008
and Exhibit No. 99 to this Report. It is difficult to make comparisons among named executive
officers because retirement eligibility influences accounting expense. See the Grants of
Plan-Based Awards table for information on awards of performance units and UGI stock options made
in Fiscal 2008. |
46
|
|
|
(2) |
|
The amounts shown in this column represent payments made under the applicable
performance-based annual bonus plan. |
|
(3) |
|
The amounts shown in column (h) of the Summary Compensation Table reflect (i) for Messrs. Greenberg, Walsh and Knauss, the
change from September 30, 2007 to September 30, 2008 in the actuarial present value of the
named executive officers accumulated benefit under UGIs defined benefit and actuarial
pension plans, including the UGI Corporation Supplemental Executive Retirement Plan and (ii)
the above-market portion of earnings, if any, on nonqualified deferred compensation accounts.
The change in pension value from year to year as reported in this column is subject to market
volatility and may not represent the value that a named executive officer will actually accrue
under the UGI pension plans during any given year. Mr. Bissell has a vested annual benefit of
approximately $3,300 under UGIs defined benefit pension plan, based on prior credited
service. Mr. Bissell is not a current participant in that plan. Mr. Sheridan is not eligible
to participate in the UGI pension plan. Earnings on deferred compensation are considered above-market to the extent that the rate of interest exceeds 120 percent of the applicable
federal long-term rate. The material terms of the pension plans
and deferred compensation plans are described in the Pension Benefits Table and the
Nonqualified Deferred Compensation Table, and the related narratives to each. For purposes of this table, the market
rate on deferred compensation for Fiscal 2008 was 5.54 percent, which is 120 percent of the
federal long-term rate for Fiscal 2008. The amounts included in column (h) of the Summary Compensation Table are itemized below. |
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
Above-Market |
|
|
|
Pension |
|
|
Earnings on |
|
Name |
|
Value |
|
|
Deferred Compensation |
|
E.V.N. Bissell |
|
$ |
376 |
|
|
$ |
0 |
|
J.E. Sheridan |
|
$ |
N/A |
|
|
$ |
0 |
|
L.R. Greenberg |
|
$ |
942,642 |
|
|
$ |
2,856 |
|
J.L. Walsh |
|
$ |
147,371 |
|
|
$ |
179 |
|
R.H. Knauss |
|
$ |
262,020 |
|
|
$ |
82 |
|
|
|
|
(4) |
|
The table below shows the components of the amounts included for each named executive officer
under the All Other Compensation column in the Summary Compensation Table. Other than as set
forth below, the named executive officers did not receive perquisites with an aggregate value
of $10,000 or more. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to AmeriGas |
|
|
|
|
|
|
|
|
|
|
|
|
Employer |
|
|
Supplemental |
|
|
|
|
|
|
|
|
|
|
|
|
Contribution to |
|
|
Executive |
|
|
|
|
|
|
|
|
|
|
|
|
401(k) |
|
|
Retirement Plan/UGI |
|
|
|
|
|
|
|
|
|
|
|
|
Savings |
|
|
Supplemental Savings |
|
|
Tax |
|
|
|
|
|
|
|
Name |
|
Plan |
|
|
Plan |
|
|
Reimbursement |
|
|
Perquisites |
|
|
Total |
|
E.V.N. Bissell |
|
$ |
9,704 |
|
|
$ |
58,246 |
|
|
$ |
2,250 |
|
|
$ |
|
|
|
$ |
70,200 |
|
J.E. Sheridan |
|
$ |
11,692 |
|
|
$ |
26,454 |
|
|
$ |
2,250 |
|
|
$ |
|
|
|
$ |
40,396 |
|
L.R. Greenberg (a) |
|
$ |
5,175 |
|
|
$ |
38,269 |
|
|
$ |
15,808 |
|
|
$ |
22,153 |
|
|
$ |
81,405 |
|
J.L. Walsh |
|
$ |
5,175 |
|
|
$ |
19,319 |
|
|
$ |
0 |
|
|
$ |
|
|
|
$ |
24,494 |
|
R.H. Knauss |
|
$ |
5,047 |
|
|
$ |
5,474 |
|
|
$ |
0 |
|
|
$ |
|
|
|
$ |
10,521 |
|
|
|
|
(a) |
|
The perquisites shown for Mr. Greenberg include spousal travel expenses when attending
industry-related events where it is customary that officers attend with their spouses, tax
preparation fees and occasional use of UGIs tickets for sporting events
for personal rather than business purposes. The incremental cost to UGI for these benefits are
based on the actual costs or charges incurred by UGI for the benefits and are included in the
totals above. |
|
(5) |
|
The compensation reported for Messrs. Greenberg, Walsh and Knauss is paid by UGI. For Fiscal
2008, UGI charged the Partnership 40 percent of the compensation expenses, other than the
change in pension value, for Messrs. Greenberg, Walsh and Knauss. |
47
Grants of Plan-Based Awards In Fiscal Year 2008
The following table and footnotes provide information regarding equity and non-equity awards
granted to the named executive officers in Fiscal 2008.
Grants of Plan-Based Awards Table Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All |
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
Option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Awards: |
|
|
Exercise |
|
|
Grant Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
|
Number of |
|
|
or Base |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under |
|
|
Estimated Future Payouts Under |
|
|
Number of |
|
|
Securities |
|
|
Price of |
|
|
of |
|
|
|
|
|
|
|
Board |
|
|
Non-Equity Incentive Plan Awards (1) |
|
|
Equity Incentive Plan Awards (2) |
|
|
Shares of |
|
|
Underlying |
|
|
Option |
|
|
Stock and |
|
|
|
Grant |
|
|
Action |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Thres- |
|
|
Target |
|
|
Maximum |
|
|
Stock or |
|
|
Options (#) |
|
|
Awards |
|
|
Option |
|
Name |
|
Date |
|
|
Date |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
hold (#) |
|
|
(#) |
|
|
(#) |
|
|
Units (#) |
|
|
(3) |
|
|
($/Sh) |
|
|
Awards |
|
(a) |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
|
(f) |
|
|
(g) |
|
|
(h) |
|
|
(i) |
|
|
(j) |
|
|
(k) |
|
|
(l) |
|
|
(m) |
|
Eugene V.N. Bissell |
|
|
10/1/07 |
|
|
|
11/26/07 |
|
|
|
139,427 |
|
|
|
331,968 |
|
|
|
663,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/08 |
|
|
|
11/26/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000 |
|
|
|
27.25 |
|
|
|
330,200 |
|
|
|
|
1/1/08 |
|
|
|
11/26/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000 |
|
|
|
12,000 |
|
|
|
24,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
467,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry E. Sheridan |
|
|
10/1/07 |
|
|
|
11/26/07 |
|
|
|
55,138 |
|
|
|
126,500 |
|
|
|
253,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/08 |
|
|
|
11/26/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,000 |
|
|
|
27.25 |
|
|
|
86,360 |
|
|
|
|
1/1/08 |
|
|
|
11/26/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,250 |
|
|
|
2,500 |
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lon R. Greenberg |
|
|
10/1/07 |
|
|
|
11/27/07 |
|
|
|
615,780 |
|
|
|
1,026,300 |
|
|
|
2,052,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/08 |
|
|
|
11/27/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
|
|
|
27.25 |
|
|
|
1,524,000 |
|
|
|
|
1/1/08 |
|
|
|
11/27/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000 |
|
|
|
70,000 |
|
|
|
140,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,123,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Walsh |
|
|
10/1/07 |
|
|
|
11/27/07 |
|
|
|
314,925 |
|
|
|
524,875 |
|
|
|
1,049,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/08 |
|
|
|
11/27/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000 |
|
|
|
27.25 |
|
|
|
609,600 |
|
|
|
|
1/1/08 |
|
|
|
11/27/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,500 |
|
|
|
27,000 |
|
|
|
54,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
819,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Knauss |
|
|
10/1/07 |
|
|
|
11/27/07 |
|
|
|
113,424 |
|
|
|
189,041 |
|
|
|
378,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/1/08 |
|
|
|
11/27/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000 |
|
|
|
27.25 |
|
|
|
228,600 |
|
|
|
|
1/1/08 |
|
|
|
11/27/07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,500 |
|
|
|
9,000 |
|
|
|
18,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
273,060 |
|
|
|
|
(1) |
|
The amounts shown under this heading relate to bonus opportunities under the relevant
companys annual bonus plan for Fiscal 2008. See Compensation Discussion and Analysis for a
description of the annual bonus plans. Payments for these awards have already been determined
and are included in the Non-Equity Incentive Plan Compensation column (column (g)) of the
Summary Compensation Table. The threshold amount shown for Messrs. Bissell and Sheridan is
based on achievement of 81 percent of the financial goal and the minimum customer growth goal.
The threshold amount shown for Messrs. Greenberg, Walsh and Knauss is based on achievement of
80 percent of the UGI financial goal. |
|
(2) |
|
The awards shown for Messrs. Bissell and Sheridan are performance units under the 2000
AmeriGas Long-Term Incentive Plan, as described in Compensation Discussion and Analysis.
Performance units are forfeitable until the end of the performance period in the event of
termination of employment, with pro-rated forfeitures in the case of termination of employment
due to retirement, death or disability. In the case of a change in control, outstanding
performance units and distribution equivalents will be paid in cash in an amount equal to the
greater of (i) the target award, or (ii) the award amount that would be paid as if the
performance period ended on the date of the change in control, based on the Partnerships
achievement of the performance goal as of the date of the change in control, as determined by
the Compensation/Pension Committee. |
48
|
|
|
|
|
The awards shown for Messrs. Greenberg, Walsh and Knauss are performance units under the UGI
Corporation 2004 Plan, as described in Compensation Discussion and Analysis. Terms of these
awards with respect to forfeitures and change in control, as defined in the UGI Corporation 2004
Plan, are fashioned in a similar manner to the terms of the performance units granted under the
2000 AmeriGas Long-Term Incentive Plan. |
|
(3) |
|
Options are granted under the UGI Corporation 2004 Plan. Under this Plan, the option exercise
price is not less than 100 percent of the fair market value of UGIs Common Stock on the
effective date of the grant, which is either the date of the grant or a specified future date.
The term of each option is generally 10 years, which is the maximum allowable term. The
options become exercisable in three equal annual installments beginning on the first
anniversary of the grant date. All options are nontransferable and generally exercisable only
while the optionee is employed by the General Partner, UGI or an affiliate, with exceptions
for exercise following termination without cause, retirement, disability and death. In the
case of termination without cause, the option will be exercisable only to the extent that it
has vested as of the date of termination of employment and the option will terminate upon the
earlier of the expiration date of the option or the expiration of the 13-month period
commencing on the date of termination of employment. If termination of employment occurs due
to retirement or disability, the option term is shortened to the earlier of the third
anniversary of the date of such termination of employment, or the original expiration date,
and vesting continues in accordance with the original vesting schedule. In the event of death
of the optionee while an employee, the option will become fully vested and the option term
will be shortened to the earlier of the expiration of the 12-month period following the
optionees death, or the original expiration date. Options are subject to adjustment in the
event of recapitalizations, stock splits, mergers, and other similar corporate transactions
affecting UGIs common stock. |
Outstanding Equity Awards at Year-End
The table below shows the outstanding equity awards as of September 30, 2008 for each of the
named executive officers:
Outstanding Equity Awards at Year-End Table Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
Equity |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of |
|
|
Incentive |
|
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Shares or |
|
|
Plan Awards: |
|
|
Plan Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares or |
|
|
Units of |
|
|
Number of |
|
|
Market |
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units of |
|
|
Stock/Part- |
|
|
Unearned |
|
|
or Payout Value |
|
|
|
Securities |
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Stock/Part- |
|
|
nership |
|
|
Shares, Units |
|
|
of Unearned |
|
|
|
Underlying |
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
nership |
|
|
Units |
|
|
or Other |
|
|
Shares, Units or |
|
|
|
Unexercised |
|
|
Underlying |
|
|
Option |
|
|
|
|
|
|
Units that |
|
|
That Have |
|
|
Rights That |
|
|
Other Rights |
|
|
|
Options |
|
|
Options |
|
|
Exercise |
|
|
Option |
|
|
Have Not |
|
|
Not |
|
|
Have Not |
|
|
That Have Not |
|
|
|
(#) |
|
|
(#) |
|
|
Price |
|
|
Expiration |
|
|
Vested |
|
|
Vested |
|
|
Vested |
|
|
Vested |
|
Name |
|
Exercisable |
|
|
Unexercisable |
|
|
($) |
|
|
Date |
|
|
(#) |
|
|
($) |
|
|
(#) |
|
|
($) |
|
(a) |
|
(b) |
|
|
(c) |
|
|
(e) |
|
|
(f) |
|
|
(g) |
|
|
(h) |
|
|
(i) |
|
|
(j) |
|
Eugene V.N. Bissell |
|
|
|
|
|
|
21,667 |
(4) |
|
|
20.48 |
|
|
|
12/31/2015 |
|
|
|
0 |
|
|
|
0 |
|
|
|
12,000 |
(11) |
|
|
365,160 |
|
|
|
|
23,333 |
(5) |
|
|
46,667 |
(5) |
|
|
27.28 |
|
|
|
12/31/2016 |
|
|
|
|
|
|
|
|
|
|
|
14,000 |
(12) |
|
|
426,020 |
|
|
|
|
|
|
|
|
65,000 |
(6) |
|
|
27.25 |
|
|
|
12/31/2017 |
|
|
|
|
|
|
|
|
|
|
|
12,000 |
(13) |
|
|
365,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry E. Sheridan |
|
|
15,000 |
(14) |
|
|
|
|
|
|
27.57 |
|
|
|
8/14/2015 |
|
|
|
0 |
|
|
|
0 |
|
|
|
2,500 |
(11) |
|
|
76,075 |
|
|
|
|
12,000 |
(4) |
|
|
6,000 |
(4) |
|
|
20.48 |
|
|
|
12/31/2015 |
|
|
|
|
|
|
|
|
|
|
|
2,700 |
(12) |
|
|
82,161 |
|
|
|
|
6,000 |
(5) |
|
|
12,000 |
(5) |
|
|
27.28 |
|
|
|
12/31/2016 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
(13) |
|
|
76,075 |
|
|
|
|
|
|
|
|
17,000 |
(6) |
|
|
27.25 |
|
|
|
12/31/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lon R. Greenberg |
|
|
125,000 |
(1) |
|
|
|
|
|
|
12.57 |
|
|
|
12/31/2012 |
|
|
|
0 |
|
|
|
0 |
|
|
|
50,000 |
(8) |
|
|
1,289,000 |
|
|
|
|
360,000 |
(2) |
|
|
|
|
|
|
16.99 |
|
|
|
12/31/2013 |
|
|
|
|
|
|
|
|
|
|
|
60,000 |
(9) |
|
|
1,546,800 |
|
|
|
|
350,000 |
(3) |
|
|
|
|
|
|
20.47 |
|
|
|
12/31/2014 |
|
|
|
|
|
|
|
|
|
|
|
70,000 |
(10) |
|
|
1,804,600 |
|
|
|
|
166,666 |
(4) |
|
|
83,334 |
(4) |
|
|
20.48 |
|
|
|
12/31/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,333 |
(5) |
|
|
186,667 |
(5) |
|
|
27.28 |
|
|
|
12/31/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000 |
(6) |
|
|
27.25 |
|
|
|
12/31/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Walsh |
|
|
270,000 |
(7) |
|
|
|
|
|
|
22.92 |
|
|
|
3/31/2015 |
|
|
|
0 |
|
|
|
0 |
|
|
|
25,000 |
(8) |
|
|
644,500 |
|
|
|
|
30,000 |
(4) |
|
|
35,000 |
(4) |
|
|
20.48 |
|
|
|
12/31/2015 |
|
|
|
|
|
|
|
|
|
|
|
26,000 |
(9) |
|
|
670,280 |
|
|
|
|
40,000 |
(5) |
|
|
80,000 |
(5) |
|
|
27.28 |
|
|
|
12/31/2016 |
|
|
|
|
|
|
|
|
|
|
|
27,000 |
(10) |
|
|
696,060 |
|
|
|
|
|
|
|
|
120,000 |
(6) |
|
|
27.25 |
|
|
|
12/31/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Knauss |
|
|
40,000 |
(3) |
|
|
|
|
|
|
20.47 |
|
|
|
12/31/2014 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,500 |
(8) |
|
|
193,350 |
|
|
|
|
26,666 |
(4) |
|
|
13,334 |
(4) |
|
|
20.48 |
|
|
|
12/31/2015 |
|
|
|
|
|
|
|
|
|
|
|
9,000 |
(9) |
|
|
232,020 |
|
|
|
|
15,000 |
(5) |
|
|
30,000 |
(5) |
|
|
27.28 |
|
|
|
12/31/2016 |
|
|
|
|
|
|
|
|
|
|
|
9,000 |
(10) |
|
|
232,020 |
|
|
|
|
|
|
|
|
45,000 |
(6) |
|
|
27.25 |
|
|
|
12/31/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Column (d) was intentionally omitted. |
|
(1) |
|
These options were granted on January 1, 2003 and were fully vested on January 1, 2006. |
|
(2) |
|
These options were granted on January 1, 2004 and were fully vested on January 1, 2007. |
49
|
|
|
(3) |
|
These options were granted on January 1, 2005 and were fully vested on January 1, 2008. |
|
(4) |
|
These options were granted on January 1, 2006. These options vest
331/3 percent on each anniversary of the grant date and will be fully
vested on January 1, 2009. |
|
(5) |
|
These options were granted on January 1, 2007. These options vest
331/3 percent on each anniversary of the grant date and will be fully
vested on January 1, 2010. |
|
(6) |
|
These options were granted on January 1, 2008. These options vest 331/3
percent on each anniversary of the grant date and will be fully vested on January 1,
2011. |
|
(7) |
|
These options were granted on April 1, 2005 and were fully vested on April 1, 2008. |
|
(8) |
|
These performance units were awarded on January 1, 2006. The measurement period
for the performance goal is the period beginning January 1, 2006 and ending December 31, 2008. The target award level of
performance units and dividend equivalents will be payable on January 1, 2009 if the Companys TSR equals the median
TSR of a peer group for the measurement period. The peer group is
the group of companies that comprises the S&P
Utilities Index on January 1, 2006. The actual number of performance units earned may be higher or lower than the
target award, or even zero, based on the Companys TSR
percentile rank relative to the companies in the S&P Utilities Index. See "Compensation Discussion and Analysis Long-Term Compensation Fiscal 2008 Equity Awards for more information on TSR performance measurements. |
|
(9) |
|
These performance units were awarded on January 1, 2007. The measurement period
for the performance goal is the period beginning January 1, 2007 and ending December 31, 2009. The performance goal is
the same as described in footnote (8) above, but it is measured for a different three-year period.
The performance units will be payable, if at all, on January 1, 2010. |
|
(10) |
|
These performance units were awarded on January 1, 2008. The measurement period
for the performance goal is the period beginning January 1, 2008 and ending December 31, 2010. The performance goal is
the same as described in footnote (8) above, but it is measured for a different three-year period.
The performance units will be payable, if at all, on January 1, 2011. |
|
(11) |
|
These performance units were awarded on January 1, 2006. The measurement period for the
performance goal is the period beginning January 1, 2006 and ending December 31, 2008. The
performance units will be payable on January 1, 2009 if the AmeriGas Partners TUR equals the
median TUR of a comparison group for the performance period. The comparison group is a group
of publicly traded master limited partnerships in the propane, pipeline and coal industries.
The actual amount of the award of performance units may be higher or lower than the target
award, or even zero, based on the AmeriGas Partners TUR percentile rank relative to the
companies in the comparison group. See Compensation Discussion and Analysis Long-Term
Compensation Fiscal 2008 Equity Awards for more information on TUR performance
measurements. |
|
(12) |
|
These performance units were awarded on January 1, 2007. The measurement period for the
performance goal is the period beginning on January 1, 2006 and ending December 31, 2008. The
performance goal is the same as described in footnote (11) above, but it is measured for a
different three-year period. The performance units will be payable, if at all, on January 1,
2010. |
|
(13) |
|
These performance units were awarded on January 1, 2008. The measurement period for the
performance goal is the period beginning on January 1, 2008 and ending December 31, 2010. The
performance goal is the same as described in footnote (11) above, but it is measured for a
different three-year period. The performance units will be payable, if at all, on January 1,
2011. |
|
(14) |
|
These options were granted on August 15, 2005 and were fully vested on August 15, 2008. |
50
Option Exercises and Stock Vested Table Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock/Unit Awards |
|
|
|
Number of Shares |
|
|
|
|
|
|
Number of Shares/Units |
|
|
|
|
|
|
Acquired on |
|
|
Value Realized |
|
|
Acquired on |
|
|
Value Realized |
|
|
|
Exercise |
|
|
on Exercise |
|
|
Vesting |
|
|
on Vesting |
|
Name |
|
(#) |
|
|
($) |
|
|
(#) |
|
|
($) |
|
(a) |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
Eugene V.N. Bissell |
|
|
174,000 |
|
|
|
1,405,876 |
|
|
|
11,970 |
|
|
|
432,237 |
|
Jerry E. Sheridan |
|
|
0 |
|
|
|
0 |
|
|
|
1,995 |
|
|
|
72,054 |
|
Lon R. Greenberg |
|
|
270,000 |
|
|
|
3,775,049 |
|
|
|
0 |
|
|
|
0 |
|
John L. Walsh |
|
|
40,000 |
|
|
|
273,240 |
|
|
|
0 |
|
|
|
0 |
|
Robert H. Knauss |
|
|
62,000 |
|
|
|
683,444 |
|
|
|
0 |
|
|
|
0 |
|
The table above sets forth (1) the number of shares of UGI common stock acquired by the named
executive officers in Fiscal 2008 from the exercise of stock options, (2) the value realized by
those officers upon the exercise of those stock options based on the difference between the market
price for UGIs common stock on the date of exercise and the exercise price for the options, (3)
for Messrs. Greenberg, Walsh and Knauss, the number of UGI performance units and stock units
previously granted to those officers that vested in Fiscal 2008, (4) for Messrs. Bissell and
Sheridan, the number of performance units previously granted to them that vested in Fiscal 2008,
and (5) the value realized by those officers upon the vesting of such units based on the closing
market price for AmeriGas Partners common units on the vesting date.
Retirement Benefits
The following table shows the number of years of credited service for the named executive
officers under the UGI Utilities, Inc. Retirement Income Plan (which we refer to below as the UGI
Utilities Retirement Plan) and the UGI Corporation Supplemental Executive Retirement Plan (which we refer to
below as the UGI SERP) and the actuarial present value of accumulated benefits under those plans
as of September 30, 2008 and any payments made to the named executive officers in Fiscal 2008 under
those plans.
Pension Benefits Table Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Payments |
|
|
|
|
|
Years Credited |
|
|
Present Value of |
|
|
During Last |
|
|
|
|
|
Service |
|
|
Accumulated Benefit |
|
|
Fiscal Year |
|
Name (1) |
|
Plan Name |
|
(#) |
|
|
($) |
|
|
($) |
|
(a) |
|
(b) |
|
(c) |
|
|
(d) |
|
|
(e) |
|
Eugene V.N. Bissell (2) |
|
UGI Utilities Retirement Plan |
|
|
6 |
|
|
|
23,114 |
|
|
|
0 |
|
Lon R. Greenberg |
|
UGI SERP |
|
|
28 |
|
|
|
10,380,944 |
|
|
|
0 |
|
|
|
UGI Utilities Retirement Plan |
|
|
28 |
|
|
|
889,742 |
|
|
|
0 |
|
John L. Walsh |
|
UGI SERP |
|
|
3 |
|
|
|
428,993 |
|
|
|
0 |
|
|
|
UGI Utilities Retirement Plan |
|
|
3 |
|
|
|
77,741 |
|
|
|
0 |
|
Robert H. Knauss |
|
UGI SERP |
|
|
21 |
|
|
|
661,677 |
|
|
|
0 |
|
|
|
UGI Utilities Retirement Plan |
|
|
21 |
|
|
|
433,113 |
|
|
|
0 |
|
|
|
|
(1) |
|
Mr. Sheridan does not participate in any defined benefit pension plan. |
|
(2) |
|
Mr. Bissell has a vested annual benefit under the UGI Utilities Retirement Plan based on
prior service. He is not a current participant in that Plan. |
UGI participates in the UGI Utilities Retirement Plan, a qualified defined benefit retirement
plan (Pension Plan) to provide retirement income to its employees. The Pension
Plan pays benefits based upon final average earnings, consisting of base salary or wages and annual
bonuses, and years of credited service. Benefits vest after the participant completes 5 years of
vesting service.
51
The Pension Plan provides normal annual retirement benefits at age 65, unreduced early
retirement benefits at age 62 with 10 years of service, and reduced, but subsidized, early
retirement benefits at age 55 with 10 years of service. Employees terminating employment prior to early
retirement eligibility are eligible to receive a benefit under the plan formula commencing at age
65 or an unsubsidized benefit as
early as age 55, provided they had 10 years of service at termination. Employees who have
attained age 50 with 15 years of service and are involuntarily terminated by UGI prior to age 55
are also eligible for subsidized early retirement benefits, beginning at age 55.
The Pension Plans normal retirement benefit formula is (A) (B) and is shown below:
(A) = The minimum of (1) and (2), where
(1) = 1.9% of final five-year average earnings (as defined in the Pension Plan)
multiplied by years of service;
(2) = 60% of the highest year of earnings; and
(B) =1% of the estimated primary Social Security benefit multiplied by years of
service.
The amount of the benefit produced by the formula will be reduced by an early retirement
factor based on the employees actual age in years and months as of his early retirement date. The
reduction factors range from 65 percent at age 55 to 100 percent (no reduction) at age 62.
The normal form of benefit under the Pension Plan for a married employee is a 50 percent joint
and survivor lifetime annuity. Regardless of marital status, a participant may choose from a number
of lifetime annuity payments. Lump sum payments are not permitted unless the present value of the
lump sum benefit is $5,000 or less.
The Pension Plan is subject to qualified-plan Code limits on the amount of annual benefit that may be paid, and on the amount of
compensation that may be taken into account in calculating retirement benefits under the plan. For
2008, the limit on the compensation that may be used is $230,000 and the limit on annual benefits
payable for an employee retiring at age 65 in 2008 is $185,000. Benefits in excess of those
permitted under the statutory limits are paid from the UGI Corporation Supplemental Executive
Retirement Plan, described below.
Messrs. Greenberg and Knauss are currently eligible for early retirement benefits under the
Pension Plan.
UGI Corporation Supplemental Executive Retirement Plan
The UGI Corporation Supplemental Executive Retirement Plan (UGI SERP) is a non-qualified defined
benefit plan that provides retirement benefits that would otherwise be provided under the Pension
Plan, but are prohibited from being paid from the Pension Plan by Code limits. The
benefit paid by the UGI SERP is approximately equal to the difference between the benefits provided
under the Pension Plan and benefits that would have been provided by the Pension Plan if not for
the limitations of the Employee Retirement Income Security Act of 1974, as amended, and the Code.
Benefits vest after the participant completes 5 years of vesting service. The benefits earned under
the UGI SERP are payable in the form of a lump sum payment. Payment is due within 60 days after
termination of employment, except as required by Section 409A of the Code. If payment is required
to be delayed by Section 409A of the Code, payment is made within 15 days after expiration of a
six-month postponement period following separation from service as defined in the Code.
Actuarial Assumptions Used to Determine Values in the Pension Benefits Table
The amounts shown in the Pension Benefits table are actuarial present values of the
benefits accumulated through September 30, 2008. An actuarial present value is calculated by
estimating expected future payments starting at an assumed retirement age, weighting the estimated
payments by the estimated probability of surviving to each post-retirement age, and discounting the
weighted payments at an assumed discount rate to reflect the time value of money. The actuarial
present value represents an estimate of the amount which, if invested today at the discount rate,
would be sufficient on an average basis to provide estimated future payments based on the current
accumulated benefit. The assumed retirement age for each named executive officer is age 62, which
is the earliest age at which the executive could retire without any benefit reduction due to age.
Actual benefit present values will vary from these estimates depending on many factors, including
an executives actual retirement age. The key assumptions included in the calculations are as
follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008 |
|
|
September 30, 2007 |
|
Discount rate for Pension Plan for all
purposes and for SERP, for
pre-commencement calculations |
|
|
6.80% |
|
|
|
6.40% |
|
SERP lump sum rate |
|
|
4.23% |
|
|
|
4.07% |
|
Retirement age: |
|
|
62 |
|
|
|
62 |
|
Post-retirement mortality for Pension Plan |
|
|
RP-2000, combined, healthy table projected to 2015 using Scale AA without collar adjustments |
|
|
RP-2000, combined, healthy table projected to 2010 using Scale AA without collar adjustments |
|
Post-retirement mortality for SERP |
|
1994 GAR unisex |
|
1994 GAR unisex |
Pre-retirement mortality |
|
None |
|
None |
Termination and disability rates |
|
None |
|
None |
Form of payment for Pension Plan |
|
Single life annuity |
|
Single life annuity |
Form of payment for SERP |
|
Lump sum |
|
Lump sum |
52
Nonqualified Deferred Compensation
The following table shows the contributions, earnings, withdrawals and
account balances for each of the named executive officers in the AmeriGas Propane, Inc. Supplemental
Executive Retirement Plan (AmeriGas SERP), Nonqualified Deferred Compensation Plan and the UGI
Corporation Supplemental Savings Plan.
Nonqualified Deferred Compensation Table Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive |
|
|
Contributions |
|
|
Aggregate |
|
|
Aggregate |
|
|
Aggregate |
|
|
|
|
|
Contributions |
|
|
in Last Fiscal |
|
|
Earnings in Last |
|
|
Withdrawals/ |
|
|
Balance at Last |
|
|
|
|
|
in Last Fiscal Year |
|
|
Year |
|
|
Fiscal Year |
|
|
Distributions |
|
|
Fiscal Year |
|
Name |
|
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($)(2) |
|
(a) |
|
Plan Name |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
|
(f) |
|
Eugene V.N. Bissell |
|
AmeriGas SERP |
|
|
0 |
|
|
|
58,246 |
(1) |
|
|
0 |
|
|
|
0 |
|
|
|
588,805 |
|
|
|
AmeriGas Non-Qualified |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Compensation Plan |
|
|
16,259 |
(3) |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
19,545 |
|
Jerry E. Sheridan |
|
AmeriGas SERP |
|
|
26,454 |
|
|
|
26,454 |
(1) |
|
|
0 |
|
|
|
0 |
|
|
|
75,141 |
|
Lon R. Greenberg |
|
UGI Supplemental Savings Plan |
|
|
0 |
|
|
|
38,269 |
(4) |
|
|
32,032 |
|
|
|
0 |
|
|
|
597,149 |
|
John L. Walsh |
|
UGI Supplemental Savings Plan |
|
|
0 |
|
|
|
19,319 |
(4) |
|
|
2,003 |
|
|
|
0 |
|
|
|
54,263 |
|
Robert H. Knauss (5) |
|
UGI Supplemental Savings Plan |
|
|
0 |
|
|
|
5,474 |
(4) |
|
|
924 |
|
|
|
0 |
|
|
|
21,594 |
|
|
|
AmeriGas SERP |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
141,816 |
|
|
|
|
(1) |
|
This amount represents the General Partner contribution to the named executive officer under
the AmeriGas SERP, which is also reported in the Summary Compensation Table in the All Other
Compensation column. |
|
(2) |
|
The aggregate balances include the following aggregate amounts previously reported in the
Summary Compensation Table as compensation in prior years: Mr. Bissell, $472,434; Mr. Sheridan, $57,938; Mr.
Greenberg, $430,260; Mr. Walsh, $31,662; and Mr. Knauss, $137,110. |
|
(3) |
|
This amount is included in the amount reported in the Summary Compensation Table in the
Salary column. |
|
(4) |
|
This amount represents the employer match under the UGI Corporation Supplemental Savings
Plan, which is also reported in the Summary Compensation Table in the All Other Compensation
column. |
|
(5) |
|
Mr. Knauss participated in the AmeriGas SERP prior to transferring to UGI in 2003. |
The AmeriGas Propane, Inc. Supplemental Executive Retirement Plan is a nonqualified deferred
compensation plan that is intended to provide retirement benefits to certain AmeriGas executive
officers. Under the plan, AmeriGas credits to each participants account annually an amount equal
to 5 percent of the participants compensation (salary and annual bonus) up to the Code
compensation limits and 10 percent of compensation in excess of such limit. In addition, if any
portion of the General Partners matching contribution under the AmeriGas Propane, Inc. qualified
401(k) Savings Plan is forfeited due to nondiscrimination requirements under the Code, the
forfeited amount, adjusted for earnings and losses on the amount, will be credited to a
participants account. Benefits vest on the fifth anniversary of a participants employment
commencement date. Through Fiscal 2007, participants accounts were credited annually with interest
generally equal to the actual return on the trust portfolio of the UGI Utilities, Inc. Retirement
Income Plan, subject to certain limitations as set forth in the AmeriGas Propane, Inc. Supplemental
Executive Retirement Plan. Beginning in Fiscal 2008, in lieu of receiving interest on account
balances, participants direct the investment of their account balances among a number of mutual
funds, which are generally the same funds available to participants in the AmeriGas 401(k) Savings
Plan, other than the UGI stock fund. Account balances are payable in a lump sum within 60 days
after termination of employment, except as required by Section 409A of the Code. If payment is
required to be delayed by Section 409A of the Code, payment is made within 15 days after expiration
of a six-month postponement period following separation from service as defined in the Code.
53
The AmeriGas Propane, Inc. Nonqualified Deferred Compensation Plan is a nonqualified deferred
compensation plan that provides benefits to certain named executive officers that would otherwise
be provided under the AmeriGas 401(k) Savings Plan. The plan is intended to permit participants to
defer up to $10,000 of annual compensation that would generally not be eligible for contribution to
the AmeriGas 401(k) Savings Plan due to Code limitations and nondiscrimination requirements.
Participants may direct the investment of deferred amounts into a number of funds. The funds
available are the same funds available under the AmeriGas 401(k) Savings Plan, other than the UGI
stock fund. Account balances are payable in a lump sum within 60 days after termination of
employment, except as required by Section 409A of the Code. If payment is required to be delayed by
Section 409A of the Code, payment is made within 15 days after expiration of a six-month
postponement period following separation from service as defined in the Code.
The UGI Corporation Supplemental Savings Plan (SSP) is a nonqualified deferred compensation
plan that provides benefits to certain named executive officers that would otherwise be provided
under UGIs qualified 401(k) Savings Plan. Benefits vest after the participant completes 5 years of
service. The SSP is intended to pay an amount substantially equal to the difference between the UGI
matching contribution that would have been made under the 401(k) Savings Plan if the Code
limitations were not in effect, and the UGI match actually made under the 401(k) Savings Plan. The
Code compensation limit for 2007 was $225,000 and the limit for 2008 is $230,000. The Code
contribution limit for 2007 was $45,000 and the limit for 2008 is $46,000. Under the SSP, the
participant is credited with a UGI match on compensation in excess of Code limits using the same
formula applicable to contributions to the UGI Corporation 401(k) Savings Plan, which is a match of
50 percent of the first 3 percent of eligible compensation, and a match of 25 percent on the next 3
percent, assuming that the employee contributed to the 401(k) Savings Plan the lesser of 6 percent
of eligible compensation or the maximum amount permissible under the Code. Amounts credited to the
participants account are credited with interest. The rate of interest currently in effect is the
rate produced by blending the annual return on the S&P 500 Index (60 percent weighting) and the
annual return on the Lehman Brothers Bond Index (40 percent weighting). Account balances are
payable in a lump sum within 60 days after termination of employment, except as required by Section
409A of the Code. If payment is required to be delayed by Section 409A of the Code, payment is made
within 15 days after expiration of a six-month postponement period following separation from
service as defined in the Code.
Potential Payments Upon Termination of Employment or Change in Control
Severance Pay Plan for Senior Executive Employees
Named Executive Officers Employed by the General Partner. The AmeriGas Propane, Inc. Executive
Employee Severance Plan (the AmeriGas Severance Plan) provides for payment to certain senior
level employees of the General Partner, including Messrs. Bissell and Sheridan, in the event their
employment is terminated without fault on their part. Specified benefits are payable to a senior
executive covered by the AmeriGas Severance Plan if the senior executives employment is
involuntarily terminated for any reason other than for just cause or as a result of the senior
executives death or disability. Under the AmeriGas Severance Plan, just cause generally means
(i) dismissal of an executive due to misappropriation of funds, (ii) substance abuse or habitual
insobriety that adversely affects the executives ability to perform his or her job, (iii)
conviction of a crime involving moral turpitude, or (iv) gross negligence in the performance of
duties.
The AmeriGas Severance Plan provides for cash payments equal to a participants compensation
for a period of time ranging from 6 months to 18 months, depending on length of service (the Continuation Period). In the
case of Mr. Bissell, the Continuation Period ranges from 12 months to 24 months, depending on length of service. In
addition, a participant receives the cash equivalent of his or her target bonus under the Annual
Bonus Plan, pro-rated for the number of months served in the fiscal year. However, if the
termination occurs in the last 2 months of the fiscal year, we have discretion to determine
whether the participant will receive a pro-rated target bonus, or the actual annual bonus which
would have been paid after the end of the fiscal year, provided that the weighting to be applied to
the participants business/financial goals under the Annual Bonus Plan will be deemed to
be 100 percent. The levels of severance payment were established based on competitive practice and
are reviewed by management and the Compensation/Pension Committee from time to time.
Under the AmeriGas Severance Plan, the participant also
receives a payment equal to the cost he or she would have incurred to continue medical and dental coverage under the General
Partners plans for the Continuation Period (less the amount he would be required to contribute for such coverage if he were an active employee). This amount includes a tax gross-up payment equal to 75 percent of the cost
of medical and dental coverage. The AmeriGas Severance Plan also
provides for outplacement services for a period of 12 months following a participants termination
of employment. Participants are entitled to receive reimbursement for tax preparation services for
the final year of employment. Provided that the participant is
eligible to retire, all payments under the AmeriGas Severance Plan may be reduced by an amount
equal to the fair market value of certain equity-based awards, other than stock options, payable to
the participant after the termination of employment.
In order to receive benefits under the AmeriGas Severance Plan, a participant is required to
execute a release which discharges the General Partner and its affiliates from liability for any
claims the senior executive may have against any of them, other than claims for amounts or benefits
due to the executive under any plan, program or contract provided by or entered into with the
General Partner or its affiliates. Each senior executive is also required to ratify a
post-employment activities agreement (which restricts the senior
executive from competing with the Partnership and its affiliates following termination of his or her
employment) and to cooperate in attending to matters pending at the time of his or her termination
of employment.
54
Named Executive Officers Employed by UGI Corporation. The UGI Corporation Senior Executive
Employee Severance Plan (the UGI Severance Plan) provides for payment to certain senior level
employees of UGI, including Messrs. Greenberg, Walsh and Knauss, in the event their employment is
terminated without fault on their part. Benefits are payable to a senior executive covered by the
UGI Severance Plan if the senior executives employment is involuntarily terminated for any reason
other than for just cause or as a result of the senior executives death or disability. Under the
UGI Severance Plan, just cause generally means (i) dismissal of an executive due to
misappropriation of funds, (ii) substance abuse or habitual insobriety that adversely affects the
executives ability to perform his or her job, (iii) conviction of a crime involving moral
turpitude, or (iv) gross negligence in the performance of duties.
The UGI Severance Plan provides for cash payments equal to a participants compensation for a
period of time ranging from 6 months to 18 months, depending on length of service (the Continuation Period). In the case of
Mr. Greenberg, the Continuation Period is 30 months; for Mr. Walsh, the Continuation Period ranges from 12 months
to 24 months, depending on the length of service. In addition, a participant receives the cash
equivalent of his or her target bonus under the Annual Bonus Plan, pro-rated for the number of
months served in the fiscal year prior to termination. However, if the termination occurs in the
last 2 months of the fiscal year, UGI has the discretion to determine whether the participant
will receive a pro-rated target bonus, or the actual annual bonus which would have been paid after
the end of the fiscal year, assuming that the participants entire bonus was contingent on meeting
the applicable financial performance goal. The levels of severance payment were established based
on competitive practice and are reviewed by management and the Compensation and Management
Development Committee from time to time.
Under the UGI Severance Plan, the participant
also receives a payment equal to the cost he or she would have incurred to continue medical and dental coverage
under UGIs plans for the Continuation Period (less the amount he would be required to contribute for such coverage if he were an active employee). This amount includes a tax gross-up payment equal to 75 percent
of the cost of medical and dental coverage. The
UGI Severance Plan also provides for outplacement services for a period of 12 months following a
participants termination of employment. Participants are entitled to receive reimbursement for tax
preparation services for their final year of employment under the UGI Severance Plan. Provided that
the participant is eligible to retire, all payments under the Severance Plan may be reduced by an
amount equal to the fair market value of certain equity-based awards, other than stock options,
payable to the participant after the termination of employment.
In order to receive benefits under the UGI Severance Plan, a participant is required to
execute a release which discharges UGI and its subsidiaries from liability for any claims the
senior executive may have against any of them, other than claims for amounts or benefits due to the
executive under any plan, program or contract provided by or entered into with UGI or its
subsidiaries. Each senior executive is also required to ratify a post-employment activities
agreement (which restricts the senior executive from competing with UGI and its affiliates
following termination of his or her employment) and to cooperate in attending to matters pending at
the time of his or her termination of employment.
Change in Control Arrangements
Named Executive Officers Employed by the General Partner. Messrs. Bissell and Sheridan each
have an agreement with the General Partner that provides benefits in the event of a change in
control. The agreements have a term of 3 years with automatic one-year extensions beginning
May 2011 unless in each case, prior to a change in control, the General Partner terminates an
agreement. In the absence of a change in control or termination by the General Partner, each
agreement will terminate when, for any reason, the executive terminates his or her employment with
the General Partner. A change in control is generally deemed to occur in the following instances:
|
|
|
any person (other than certain persons or entities affiliated with UGI), together with
all affiliates and associates of such person, acquires securities representing 20 percent or more
of either (i) the then outstanding shares of common stock, or (ii) the combined voting power
of UGIs then outstanding voting securities; |
|
|
|
individuals, who at the beginning of any 24-month period constitute the UGI Board of
Directors (the Incumbent Board) and any new Director whose election by the Board of
Directors, or nomination for election by UGIs shareholders, was approved by a vote of at
least a majority of the Incumbent Board, cease for any reason to constitute a majority; |
|
|
|
UGI is reorganized, merged or consolidated with or into, or sells all or substantially
all of its assets to, another corporation in a transaction in which former shareholders of
UGI do not own more than 50 percent of, respectively, the outstanding common stock and the
combined voting power of the then outstanding voting securities of the surviving or
acquiring corporation; |
55
|
|
|
the General Partner, Partnership or Operating Partnership is reorganized, merged or
consolidated with or into, or sells all or substantially all of its assets to, another
entity in a transaction with respect to which all of the individuals and entities who
were owners of the General Partners voting securities or of the outstanding units of the
Partnership immediately prior to such transaction do not, following such transaction, own
more than 50 percent of, respectively, the outstanding common stock and the combined voting
power of the then outstanding voting securities of the surviving or acquiring corporation,
or if the resulting entity is a partnership, the former unitholders do not own more than 50
percent of the outstanding common units in substantially the same proportion as their
ownership immediately prior to the transaction; |
|
|
|
UGI, the General Partner, the Partnership or the Operating Partnership is liquidated or
dissolved; |
|
|
|
UGI fails to own more than 50 percent of the general partnership interests of the
Partnership or the Operating Partnership; |
|
|
|
UGI fails to own more than 50 percent of the outstanding shares of common stock of the
General Partner; or |
|
|
|
AmeriGas Propane, Inc. is removed as the general partner of the Partnership or the
Operating Partnership. |
The General Partner will provide Messrs. Bissell and Sheridan with cash benefits (Benefits)
if we terminate the executives employment without cause or if the executive terminates
employment for good reason at any time within 2 years following a change in control of the
General Partner, AmeriGas Partners or UGI. Cause generally includes (i) misappropriation of
funds, (ii) habitual insobriety or substance abuse, (iii) conviction of a crime involving moral
turpitude, or (iv) gross negligence in the performance of duties, which gross negligence has had a
material adverse effect on the business, operations, assets, properties or financial condition of
the General Partner. Good reason generally includes a material diminution in authority, duties,
responsibilities or base compensation; a material breach by the General Partner of the terms of the
agreement; and substantial relocation requirements. If the events trigger a payment following a
change in control, the benefits payable to Messrs. Bissell and Sheridan will be as specified under
his change in control agreement unless payments under the AmeriGas Severance Plan described above
would be greater, in which case Benefits would be provided under the AmeriGas Severance Plan.
Following a change in control, each of Messrs. Bissell and Sheridan may elect to terminate his
employment without loss of Benefits in certain situations, including a material diminution in
authority, duties, responsibilities or base compensation; or excessive relocation requirements.
Benefits under this arrangement would be equal to 3 times Mr. Bissells base salary and annual
bonus and 2 times Mr. Sheridans base salary and annual bonus. Each named executive officer would
also receive the cash equivalent of his target bonus, prorated for the number of months served in
the fiscal year. In addition, Messrs. Bissell and Sheridan are each entitled to receive a payment
equal to the cost he would incur if he enrolled in the General Partners medical and dental plans
for 3 years in the case of Mr. Bissell and 2 years in the case of Mr. Sheridan (in each case less the
amount he would be required to contribute for such coverage if he were an active employee). This
payment would include a tax gross-up payment equal to 75 percent of the total amount payable. Messrs.
Bissell and Sheridan would also receive their benefits under the AmeriGas Supplemental Executive
Retirement Plan calculated as if he had continued in employment for 3 years or 2 years,
respectively. In addition, outstanding performance units and distribution equivalents will be paid in cash based
on the fair market value of AmeriGas Partners common units in an amount equal to the greater of (i)
the target award or (ii) the award amount that would have been paid if the measurement period ended
on the date of the change in control, as determined by the Compensation/Pension Committee. For
treatment of stock options, see Grants of Plan-Based Awards table.
The Benefits are subject to a conditional gross up for excise and related taxes in the event
they would constitute excess parachute payments, as defined in Section 280G of the Code. The General Partner will provide the tax gross-up if
the aggregate parachute value of Benefits is greater than 110 percent of the maximum amount that
may be paid under Section 280G of the Code without imposition of an excise tax. If the parachute
value does not exceed the 110 percent threshold, the Benefits for each of Messrs. Bissell and
Sheridan will be reduced to the extent necessary to avoid imposition of the excise tax on excise
parachute payments.
In order to receive benefits under his change in control agreement, each named executive is
required to execute a release which discharges the General Partner and its affiliates from
liability for any claims he may have against any of them, other than claims for amounts or benefits
due to the executive under any plan, program or contract provided by or entered into with the
General Partner or its affiliates.
56
Named Executive Officers Employed By UGI Corporation. Messrs. Greenberg, Walsh and Knauss each
have an agreement with UGI which provides benefits in the event of a change in control. The agreements have a term of 3 years with automatic one-year extensions beginning May 2011, unless in each case, prior to a change in control, UGI
terminates an agreement. In the absence of a change in control or termination by UGI, each
agreement will terminate when, for any reason, the executive terminates his or her employment with
UGI. A change in control is generally deemed to occur in the following instances:
|
|
|
any person (other than certain persons or entities affiliated with UGI),
together with all affiliates and associates of such person, acquires securities representing
20 percent or more of either (i) the then outstanding shares of common stock, or (ii) the
combined voting power of UGIs then outstanding voting securities; |
|
|
|
individuals, who at the beginning of any 24-month period constitute the UGI Board of
Directors (the Incumbent Board) and any new Director whose election by the Board of
Directors, or nomination for election by UGIs shareholders, was approved by a
vote of at least a majority of the Incumbent Board, cease for any reason to constitute a
majority; |
|
|
|
UGI is reorganized, merged or consolidated with or into, or sells all or
substantially all of its assets to, another corporation in a transaction in which former
shareholders of UGI do not own more than 50 percent of, respectively, the
outstanding common stock and the combined voting power of the then outstanding voting
securities of the surviving or acquiring corporation; or |
|
|
|
UGI Corporation is liquidated or dissolved. |
UGI will provide Messrs. Greenberg, Walsh and Knauss with cash benefits (Benefits) if UGI
terminates the executives employment without cause or if the executive terminates employment for
good reason at any time within 2 years following a change in control of UGI. Cause generally
includes (i) misappropriation of funds, (ii) habitual insobriety or substance abuse, (iii)
conviction of a crime involving moral turpitude, or (iv) gross negligence in the performance of
duties, which gross negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of UGI. Good reason generally includes material
diminution in authority, duties, responsibilities or base compensation; a material breach by UGI of
the terms of the agreement; and substantial relocation requirements. If the events trigger a
payment following a change in control, the Benefits payable to each of Messrs. Greenberg, Walsh and
Knauss will be as specified under his change in control agreement unless payments under the UGI
Severance Plan described above would be greater, in which case Benefits would be provided under the
UGI Severance Plan.
Following a change in control, each of Messrs. Greenberg, Walsh and Knauss may elect to
terminate his employment without loss of Benefits in certain situations, including a material
diminution in authority, duties, responsibilities or base compensation; or excessive relocation
requirements. Benefits under this arrangement would be equal to 3 times the executive officers
base salary and annual bonus. Each named executive officer would also receive the cash equivalent
of his target bonus, prorated for the number of months served in the fiscal year. In addition,
Messrs. Greenberg, Walsh and Knauss are each entitled to receive a payment equal to the cost he would
incur if he enrolled in UGIs medical and dental plans for 3 years (less the amount he would be
required to contribute for such coverage if he were an active employee). This payment would
include a tax gross-up payment equal to 75 percent of the total amount payable. Messrs. Greenberg, Walsh
and Knauss would also have benefits under UGIs Supplemental Executive Retirement
Plan calculated as if he had continued in employment for 3 years. In addition, outstanding performance units, stock units and dividend
equivalents will be paid in cash based on the fair market value of UGIs common stock in an amount
equal to the greater of (i) the target award or (ii) the award amount that would have been paid if
the performance unit measurement period ended on the date of the change in control, as determined by UGIs
Compensation and Management Development Committee. For treatment of stock options, see Grants of
Plan-Based Awards table.
The Benefits are subject to a conditional gross up for excise and related taxes in the event
they would constitute excess parachute payments, as defined in Section 280G of Code. UGI will provide the tax gross-up if the aggregate
parachute value of Benefits is greater than 110 percent of the maximum amount that may be paid
under Section 280G of the Code without imposition of an excise tax. If the parachute value does not
exceed the 110 percent threshold, the Benefits for each of Messrs. Greenberg, Walsh and Knauss will
be reduced to the extent necessary to avoid imposition of the excise tax on excise parachute
payments.
In order to receive benefits under his change in control agreement, each named executive
officer is required to execute a release which discharges UGI and its subsidiaries from liability
for any claims the senior executive may have against any of them, other than
claims for amounts or benefits due to the executive under any plan, program or contract
provided by or entered into with UGI or its subsidiaries.
57
Potential Payments Upon Termination or Change-in-Control Table
The amounts shown in the table below assume that each named executive officers termination
was effective as of September 30, 2008 and are merely estimates of the incremental amounts that
would be paid out to the named executive officers upon their termination. The actual amounts to be
paid out can only be determined at the time of such named executive officers termination of
employment. The amounts set forth in the table below do not include compensation to which each
named executive officer would be entitled without regard to his termination of employment,
including (i) base salary and short-term incentives that have been earned but not yet paid or (ii)
amounts that have been earned, but not yet paid, under the terms of the plans listed under the
Pension Benefits and Nonqualified Deferred Compensation tables. There are no incremental
payments in the event of voluntary resignation, termination for cause, disability or upon
retirement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with |
|
|
Nonqualified |
|
|
Welfare & |
|
|
|
|
|
|
Severance |
|
|
Accelerated |
|
|
Retirement |
|
|
Other |
|
|
|
|
Name & Triggering Event |
|
Pay |
|
|
Vesting(3) |
|
|
Benefits(4) |
|
|
Benefits(5) |
|
|
Total |
|
Eugene V.N. Bissell
Death |
|
$ |
0 |
|
|
$ |
1,382,466 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
1,382,466 |
|
Involuntary Termination Without Cause |
|
$ |
1,562,378 |
(1) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
69,430 |
|
|
$ |
1,631,808 |
|
Termination Following Change in Control |
|
$ |
2,445,997 |
(2) |
|
$ |
2,032,349 |
|
|
$ |
197,877 |
|
|
$ |
80,799 |
|
|
$ |
4,757,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jerry E. Sheridan
Death |
|
$ |
0 |
|
|
$ |
288,244 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
288,244 |
|
Involuntary Termination Without Cause |
|
$ |
389,881 |
(1) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
57,822 |
|
|
$ |
447,703 |
|
Termination Following Change in Control |
|
$ |
941,725 |
(2) |
|
$ |
419,813 |
|
|
$ |
58,523 |
|
|
$ |
579,175 |
|
|
$ |
1,999,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lon R. Greenberg
Death |
|
$ |
0 |
|
|
$ |
4,509,751 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
4,509,751 |
|
Involuntary Termination Without Cause |
|
$ |
6,157,800 |
(1) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
52,167 |
|
|
$ |
6,209,967 |
|
Termination Following Change in Control |
|
$ |
7,681,182 |
(2) |
|
$ |
7,316,677 |
|
|
$ |
5,183,798 |
|
|
$ |
45,638 |
|
|
$ |
20,227,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Walsh
Death |
|
$ |
0 |
|
|
$ |
2,006,427 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
2,006,427 |
|
Involuntary Termination Without Cause |
|
$ |
1,851,788 |
(1) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
56,326 |
|
|
$ |
1,908,114 |
|
Termination Following Change in Control |
|
$ |
4,063,375 |
(2) |
|
$ |
3,122,048 |
|
|
$ |
1,331,036 |
|
|
$ |
3,310,802 |
|
|
$ |
11,827,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert H. Knauss
Death |
|
$ |
0 |
|
|
$ |
658,219 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
658,219 |
|
Involuntary Termination Without Cause |
|
$ |
945,204 |
(1) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
40,500 |
|
|
$ |
985,704 |
|
Termination Following Change in Control |
|
$ |
1,759,121 |
(2) |
|
$ |
1,033,937 |
|
|
$ |
744,980 |
|
|
$ |
1,454,804 |
|
|
$ |
4,992,842 |
|
|
|
|
(1) |
|
Amounts shown under Severance Pay in the case of involuntary termination without cause are
calculated under the terms of the UGI Severance Plan for Messrs. Greenberg, Walsh and Knauss,
and the AmeriGas Severance Plan for Messrs. Bissell and Sheridan. We assumed that 100 percent
of target annual bonus was paid. |
|
(2) |
|
Amounts listed under Severance Pay in the case of termination following a change in control
are calculated under the officers change in control agreement. |
|
(3) |
|
In calculating the amounts shown above, we assumed (i) the continuation of AmeriGas
Partners distribution (and UGIs dividend, as applicable) at the rate in effect on September
30, 2008; and (ii) performance at target levels with respect to performance shares. |
|
(4) |
|
Amounts shown are in addition to amounts shown in the Pension Benefits and Non-Qualified
Deferred Compensation tables. |
|
(5) |
|
Amounts shown under Welfare and Other Benefits include estimated payments for (i) medical
and dental and life insurance premiums, (ii) outplacement services, (iii) tax preparation
services, and (iv) an estimated Code Section 280G tax gross up payment of $1,417,190 for Mr.
Knauss, $528,832 for Mr. Sheridan, and $3,244,363 for Mr. Walsh in the event of a change in
control. |
58
Compensation of Directors
The table below shows the components of director compensation for Fiscal 2008. A Director who
is an officer or employee of the General Partner or its subsidiaries is not compensated for service
on the Board of Directors or on any Committee of the Board.
Director Compensation
|
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|
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|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Pension Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
and |
|
|
|
|
|
|
|
|
|
Fees Earned |
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
Nonqualified |
|
|
All |
|
|
|
|
|
|
or Paid |
|
|
Stock |
|
|
Option |
|
|
Plan |
|
|
Deferred |
|
|
Other |
|
|
|
|
|
|
in Cash |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Compensation |
|
|
Compensation |
|
|
Total |
|
Name |
|
($)(2) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
Earnings |
|
|
($) |
|
|
($) |
|
(a) |
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
(e) |
|
|
(f) |
|
|
(g) |
|
|
(h) |
|
Stephen D. Ban |
|
$ |
65,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
65,000 |
|
Richard C. Gozon |
|
$ |
65,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
65,000 |
|
William J. Marrazzo (1) |
|
$ |
75,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
75,000 |
|
Gregory A. Pratt (1) |
|
$ |
80,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
80,000 |
|
Howard B. Stoeckel (1) |
|
$ |
75,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
75,000 |
|
James W. Stratton |
|
$ |
65,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
$ |
65,000 |
|
(1) |
|
The Partnership pays an additional annual retainer of $10,000 to members of the Audit
Committee, other than the chairperson. The chairperson of the Audit Committee is paid an
additional annual retainer of $15,000. |
|
(2) |
|
The Partnership pays no meeting attendance fees to its Directors. |
|
|
|
ITEM 12. |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SECURITY
HOLDER MATTERS |
Ownership of Limited Partnership Units by Certain Beneficial Owners
The following table sets forth certain information regarding each person known by the General
Partner to have been the beneficial owner of more than 5 percent of the Partnerships voting
securities representing limited partner interests as of November 1, 2008. AmeriGas Propane, Inc. is
the sole general partner of the Partnership.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount and |
|
|
|
|
|
|
|
|
|
|
Nature of |
|
|
|
|
|
|
|
|
|
|
Beneficial |
|
|
|
|
|
|
Name and Address (1) |
|
|
Ownership of |
|
|
Percent |
|
Title of Class |
|
of Beneficial Owner |
|
|
Partnership Units |
|
|
of Class |
|
Common Units |
|
UGI Corporation |
|
|
24,691,209 |
(2) |
|
|
43 |
% |
|
|
AmeriGas, Inc. |
|
|
24,691,209 |
(3) |
|
|
43 |
% |
|
|
AmeriGas Propane, Inc. |
|
|
24,691,209 |
(4) |
|
|
43 |
% |
|
|
Petrolane Incorporated |
|
|
7,839,911 |
(4) |
|
|
14 |
% |
|
|
|
(1) |
|
The address of each of UGI and the General Partner is 460 North Gulph Road, King of
Prussia, PA 19406. The address of each of AmeriGas, Inc. and Petrolane Incorporated is 100
Kachel Boulevard, Green Hills Corporate Center, Reading, PA 19607. |
|
(2) |
|
Based on the number of units held by its indirect, wholly-owned subsidiaries, Petrolane
Incorporated (Petrolane) and AmeriGas Propane, Inc. |
|
(3) |
|
Based on the number of units held by its direct and indirect, wholly-owned subsidiaries,
AmeriGas Propane, Inc. and Petrolane. |
|
(4) |
|
AmeriGas Propane, Inc.s beneficial ownership includes 7,839,911 Common Units held by its
subsidiary, Petrolane. Beneficial ownership of those Common Units is shared with UGI and
AmeriGas, Inc. |
59
Ownership of Partnership Common Units by the Directors and Named Executive Officers of the General
Partner
The table below sets forth as of October 1, 2008 the beneficial ownership of Partnership
Common Units by each director and each of the Named Executives, as well as by the directors and all
of the executive officers of the General Partner as a group. No director, Named Executive or
executive officer beneficially owns 1 percent or more of the Partnerships Common Units. The total
number of Common Units beneficially owned by the directors and executive officers of the General
Partner as a group represents less than 1 percent of the Partnerships outstanding Common Units.
|
|
|
|
|
|
|
Amount and Nature of |
|
Name of |
|
Beneficial Ownership of |
|
Beneficial Owner |
|
Partnership Common Units (1) |
|
Lon R. Greenberg |
|
|
7,000 |
|
John L. Walsh |
|
|
3,000 |
(2) |
Stephen D. Ban |
|
|
0 |
|
Richard C. Gozon |
|
|
5,000 |
|
James W. Stratton |
|
|
1,000 |
(3) |
Gregory A. Pratt |
|
|
0 |
|
William J. Marrazzo |
|
|
500 |
(4) |
Eugene V. N. Bissell |
|
|
37,246 |
(5) |
Robert H. Knauss |
|
|
13,108 |
|
Jerry E. Sheridan |
|
|
11,437 |
(6) |
Howard B. Stoeckel |
|
|
0 |
|
Directors and executive officers as a group (15 persons) |
|
|
103,861 |
|
|
|
|
(1) |
|
Sole voting and investment power unless otherwise specified. |
|
(2) |
|
Mr. Walshs Units are held jointly with his spouse. |
|
(3) |
|
Mr. Strattons Units are held jointly with his spouse. |
|
(4) |
|
Mr. Marrazzos Units are held jointly with his spouse. |
|
(5) |
|
Mr. Bissells Units are held jointly with his spouse. |
|
(6) |
|
Mr. Sheridans Units are held jointly with his spouse. |
The General Partner is a wholly owned subsidiary of AmeriGas, Inc. which is a wholly owned
subsidiary of UGI. The table below sets forth, as of October 1, 2008, the beneficial ownership of
UGI Common Stock by each director and each of the Named Executives, as well as by the directors and
the executive officers of the General Partner as a group. Including the number of shares of stock
underlying exercisable options, Mr. Greenberg is the beneficial owner of approximately 1.5 percent
of UGIs Common Stock. All other directors and executive officers own less than 1 percent of UGIs
outstanding shares. The total number of shares beneficially owned by the directors and executive
officers as a group (including 1,972,398 shares subject to exercisable options and stock units held
by directors under the 2004 plan), represents approximately 3 percent of UGIs outstanding shares.
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of UGI Shares |
|
|
|
|
|
|
|
|
|
and Stock Units and Nature |
|
|
|
|
|
|
|
|
|
of Beneficial Ownership |
|
|
Number of |
|
|
|
|
Name of |
|
Excluding |
|
|
Exercisable UGI |
|
|
|
|
Beneficial Owner |
|
UGI Stock Options (1)(4) |
|
|
Stock Options |
|
|
Total |
|
Lon R. Greenberg |
|
|
503,006 |
(2) |
|
|
1,095,000 |
|
|
|
1,598,006 |
|
John L. Walsh |
|
|
70,030 |
(3) |
|
|
340,000 |
|
|
|
410,030 |
|
Stephen D. Ban |
|
|
67,130 |
|
|
|
66,500 |
|
|
|
133,630 |
|
Richard C. Gozon |
|
|
116,567 |
|
|
|
92,900 |
|
|
|
209,467 |
|
James W. Stratton |
|
|
85,510 |
(5) |
|
|
92,900 |
|
|
|
178,410 |
|
Howard B. Stoeckel |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Gregory A. Pratt |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
William J. Marrazzo |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
Eugene V. N. Bissell |
|
|
66,380 |
(6) |
|
|
23,333 |
|
|
|
89,713 |
|
Robert H. Knauss |
|
|
26,412 |
|
|
|
81,666 |
|
|
|
108,078 |
|
Jerry E. Sheridan |
|
|
678 |
(7) |
|
|
33,000 |
|
|
|
33,678 |
|
Directors and executive officers as a group (15 persons) |
|
|
983,499 |
|
|
|
1,972,398 |
|
|
|
2,955,897 |
|
|
|
|
(1) |
|
Sole voting and investment power unless otherwise specified. |
|
(2) |
|
Mr. Greenberg holds 345,808 shares jointly with his spouse. |
|
(3) |
|
Mr. Walsh holds these shares jointly with his spouse. |
|
(4) |
|
Included in the number of shares shown are Stock Units (Units) under the 2004 Omnibus
Equity Compensation Plan. Each Unit will be paid out to the director upon retirement or
termination of service in the form of shares of UGI Common Stock (65 percent) and cash (35 percent). The
number of Units included for the directors is as follows: Dr. Ban 50,634, Mr. Gozon 83,959 and
Mr. Stratton 63,902. |
|
(5) |
|
Mr. Stratton holds 21,608 shares jointly with his spouse. |
|
(6) |
|
Mr. Bissell holds these shares jointly with his spouse. |
|
(7) |
|
Mr. Sheridan holds these shares in his 401(k) Savings Plan. |
Equity Compensation Plan Information
The following table sets forth information as of the end of Fiscal 2008 with respect to compensation plans under which equity securities of the Partnership are authorized
for issuance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
|
|
|
|
|
|
|
|
|
|
|
Number of securities |
|
|
|
|
|
|
|
|
|
|
|
remaining available |
|
|
|
(a) |
|
|
(b) |
|
|
for future issuance |
|
|
|
Number of securities to |
|
|
Weighted average |
|
|
under equity |
|
|
|
be issued upon exercise |
|
|
exercise price of |
|
|
compensation plans |
|
|
|
of outstanding options, |
|
|
outstanding options, |
|
|
(excluding securities |
|
Plan category |
|
warrants and rights |
|
|
warrants and rights |
|
|
reflected in column (a)) |
|
Equity compensation plans approved by security holders (1) |
|
|
126,100 |
|
|
|
0 |
|
|
|
420,386 |
|
Equity compensation plans not approved by security holders |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
126,100 |
|
|
|
0 |
|
|
|
420,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The AmeriGas Propane, Inc. 2000 Long-Term Incentive Plan and the AmeriGas Propane, Inc.
Discretionary Long-Term Incentive Plan for Non-Executive Key Employees were approved pursuant
to Section 6.4 of the Partnership Agreement. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
We do not have any employees. We are managed by our General Partner. Pursuant to the
Partnership Agreement and a Management Services Agreement among AmeriGas Eagle Holdings, Inc. 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. For information regarding our
related person transactions in general, please read Note 12 of the Notes to Consolidated Financial
Statements included under Item 8 of this Report. The information summarizes our business
relationships and related transactions with our General Partner and its affiliates, including UGI,
during Fiscal 2008.
61
Interests of the General Partner in the Partnership
We make quarterly cash distributions of all of our Available Cash, generally defined as all
cash on hand at the end of such quarter, plus all additional cash on hand as of the date of
determination resulting from borrowings subsequent to the end of such quarter, less the amount of
cash reserves established by the General Partner in its reasonable discretion for future cash
requirements. According to the Partnership Agreement, the General Partner receives cash
distributions as follows:
Distributions of Available Cash are made 98% to limited partners and 2% to the General Partner
(giving effect to the 1.01% interest of the General Partner in distributions of Available Cash from
AmeriGas OLP to the Partnership) until Available Cash exceeds the Minimum Quarterly Distribution of
$0.55 and the First Target Distribution of $0.055 per Common Unit (or a total of $0.605 per Common
Unit). If Available Cash exceeds $0.605 per Common Unit in any quarter, the General Partner will
receive a greater percentage of the total Partnership distribution but only with respect to the
amount by which the distribution per Common Unit to limited partners exceeds $0.605.
Related Person Transactions
The General Partner employs persons responsible for managing and operating the Partnership.
The Partnership reimburses the General Partner for the direct and indirect costs of providing these
services, including all compensation and benefit costs. For Fiscal 2008, these costs totaled
approximately $345.5 million.
The Partnership and the General Partner also have extensive, ongoing relationships with UGI
and its affiliates. UGI performs certain financial and administrative services for the General
Partner on behalf of the Partnership. UGI does not receive a fee for such services, but is
reimbursed for all direct and indirect expenses incurred in connection with providing these
services, including all compensation and benefit costs in accordance with a formula that has been
in effect since commencement of the Partnership. A wholly owned subsidiary of UGI provides the
Partnership with automobile liability insurance with limits of $500,000 per occurrence and, in the
aggregate, $500,000 in excess of the deductible, and stop loss medical coverage. Another wholly
owned subsidiary of UGI leases office space to the General Partner for its headquarters staff. In
addition, a UGI master policy provides accidental death and business travel and accident insurance
coverage for employees of the General Partner. The General Partner is billed directly by the
insurer for this coverage. As discussed under Business-Trade Names; Trade and Service Marks, UGI
and the General Partner have licensed the trade names AmeriGas and Americas Propane Company
and the related service marks and trademark to the Partnership on a royalty-free basis. The
Partnership obtains management information services from the General Partner, and reimburses the
General Partner for its direct and indirect expenses related to those services. The rental payments
and insurance premiums charged to the Partnership by UGI and its affiliates are comparable to
amounts charged by unaffiliated parties. For Fiscal 2008, the Partnership paid UGI and its
affiliates, including the General Partner, approximately $13.5 million for the services and expense
reimbursements referred to in this paragraph.
AmeriGas OLP purchases propane from UGI Energy Services, Inc. and subsidiaries (Energy
Services), which is an affiliate of UGI. Purchases of propane by AmeriGas OLP from Energy Services
totaled $47.3 million during Fiscal 2008. Of this amount, $46.5 million was pursuant to a Product
Sales Agreement between Energy Services and AmeriGas OLP which was approved by the Audit Committee
of the General Partners Board of Directors in 2004. In accordance with the Product Sales
Agreement, Energy Services has agreed to sell and AmeriGas OLP has agreed to purchase propane
annually at the Atlantic Energy, Inc. terminal in Chesapeake, Virginia. The Product Sales Agreement
took effect on April 1, 2005 and will continue for an initial term of 5 years with an option to
extend the agreement for up to an additional 5 years. Amounts due to Energy Services at
September 30, 2008 totaled $1.3 million.
During Fiscal 2007, the General Partner contributed to the Partnership the net assets and
liabilities of All Star Gas Corporation, a Missouri corporation, which was acquired by the General
Partner in August 2007. In consideration for the retention of certain income tax liabilities
related to the acquisition of All Star Gas Corporation, the Partnership issued 166,205 Common Units
to the General Partner having a fair value of approximately $5.7 million ($34.28 per Common Unit).
The
Partnership sold propane to certain affiliates of UGI which totaled $2.4 million in Fiscal 2008. The
highest amount due from affiliates of the Partnership during Fiscal 2008 and at November 1, 2008
was $5.2 million and $4.5 million, respectively.
62
Policies Regarding Transactions with Related Persons
The Partnership Agreement, the Audit Committee Charter and the Codes of Conduct set forth
policies and procedures for the review and approval of certain transactions with persons affiliated
with the Partnership.
Pursuant to the Audit Committee Charter, the Audit Committee has responsibility to review, and
if acceptable, approve any transactions involving the Partnership or the General Partner in which a
director or executive officer has a material interest. The Audit Committee also has authority to
review and approve any transaction involving a potential conflict of interest between the General
Partner and any of its affiliates, on the one hand, or the Partnership or any partner or assignee,
on the other hand, based on the provisions of the Partnership Agreement for determining that a
transaction is fair and reasonable to the Partnership. Such determinations are made at the request
of the General Partner. In addition, the Audit Committee conducts an annual review of all related
person transactions, as defined by applicable rules of the SEC.
Director Independence
For
a discussion of director independence, see Item 10
Directors, Executive Officers and Corporate
Governance Director Independence.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The aggregate fees billed by PricewaterhouseCoopers LLP, the Partnerships independent
registered public accountants, in Fiscal 2008 and Fiscal 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Audit Fees(1) |
|
$ |
830,193 |
|
|
$ |
844,143 |
|
Audit-Related Fees |
|
|
- 0 - |
|
|
|
- 0 - |
|
Tax Fees(2) |
|
|
682,850 |
|
|
|
640,771 |
|
All Other Fees(3) |
|
|
-0- |
|
|
|
12,800 |
|
|
|
|
|
|
|
|
Total Fees for Services Provided |
|
$ |
1,513,043 |
|
|
$ |
1,497,714 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit Fees were for audit services, including (i) the annual audit of the consolidated
financial statements and internal control over financial reporting of the Partnership, (ii)
subsidiary audits, (iii) review of the interim financial statements included in the Quarterly
Reports on Form 10-Q of the Partnership, and (iv) services that only the independent
registered public accounting firm can reasonably be expected to provide, such as services
associated with SEC registration statements, and documents issued in connection with
securities offerings. |
|
(2) |
|
Tax Fees were for (i) the preparation of Substitute Schedule K-1 forms for unitholders of the
Partnership, and (ii) tax planning and advice. |
|
(3) |
|
All Other Fees were for a software license. |
In the course of its meetings, the Audit Committee considered whether the provision by
PricewaterhouseCoopers LLP of the professional services described under Tax Fees is compatible
with PricewaterhouseCoopers LLPs independence. The Committee concluded that the independent
auditor is independent from the Partnership and its management.
Consistent with SEC policies regarding auditor independence, the Audit Committee has
responsibility for appointing, setting compensation and overseeing the work of the Partnerships
independent accountants. In recognition of this responsibility, the Audit Committee has a policy of
pre-approving all audit and permissible non-audit services provided by the independent accountants.
Prior to engagement of the Partnerships independent accountants for the next years audit,
management submits to the Audit Committee for approval a list of services expected to be rendered
during that year and fees related thereto for approval.
63
PART IV:
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this report:
(1) Financial Statements:
Included under Item 8 are the following financial statements and supplementary data:
Managements Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of September 30, 2008 and 2007
Consolidated Statements of Operations for the years ended September 30, 2008, 2007 and
2006
Consolidated Statements of Cash Flows for the years ended September 30, 2008, 2007 and
2006
Consolidated Statements of Partners Capital for the years ended September 30, 2008,
2007 and 2006
Notes to Consolidated Financial Statements
Quarterly Data for the years ended September 30, 2008 and 2007
(2) Financial Statement Schedules:
I Condensed Financial Information of Registrant (Parent Company)
II Valuation and Qualifying Accounts for the years ended September 30, 2008,
2007 and 2006
We have omitted all other financial statement schedules because the required information
is (1) not present; (2) not present in amounts sufficient to require submission of the
schedule; or (3) included elsewhere in the financial statements or notes thereto
contained in this report.
(3) List of Exhibits:
The exhibits filed as part of this report are as follows (exhibits incorporated by reference are
set forth with the name of the registrant, the type of report and registration number or last
date of the period for which it was filed, and the exhibit number in such filing):
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporation by Reference |
Exhibit No. |
|
Exhibit |
|
Registrant |
|
Filing |
|
Exhibit |
|
|
2.1 |
|
|
Merger and Contribution Agreement among
AmeriGas Partners, L.P., AmeriGas Propane,
L.P., New AmeriGas Propane, Inc., AmeriGas
Propane, Inc., AmeriGas Propane-2, Inc., Cal
Gas Corporation of America, Propane Transport,
Inc. and NORCO Transportation Company
|
|
AmeriGas
Partners, L.P.
|
|
Registration
Statement on
Form S-4
(No. 33-92734)
|
|
|
10.21 |
|
|
|
2.2 |
|
|
Conveyance and Contribution Agreement among
AmeriGas Partners, L.P., AmeriGas Propane, L.P.
and Petrolane Incorporated
|
|
AmeriGas
Partners, L.P.
|
|
Registration
Statement on
Form S-4
(No. 33-92734)
|
|
|
10.22 |
|
|
*3.1 |
|
|
Third Amended and Restated Agreement of Limited
Partnership of AmeriGas Partners, L.P. dated as
of December 1, 2004, and Amendment No. 1
effective October 15, 2007 thereto |
|
|
|
|
|
|
|
|
|
|
3.1 |
(a) |
|
Second Amended and Restated Agreement of
Limited Partnership of AmeriGas Propane, L.P.
dated as of December 1, 2004
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/04)
|
|
|
3.1 |
(a) |
|
|
3.2 |
|
|
Amended and Restated Agreement of Limited
Partnership of AmeriGas Eagle Propane, L.P.
dated July 19, 1999
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/01)
|
|
|
3.8 |
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporation by Reference |
Exhibit No. |
|
Exhibit |
|
Registrant |
|
Filing |
|
Exhibit |
|
|
4 |
|
|
Instruments defining the rights of security
holders, including indentures. (The Partnership
agrees to furnish to the Commission upon
request a copy of any instrument defining the
rights of holders of long-term debt not
required to be filed pursuant to Item 601(b)(4)
of Regulation S-K) |
|
|
|
|
|
|
|
|
|
|
4.1 |
|
|
Third Amended and Restated Agreement of Limited
Partnership of AmeriGas Partners, L.P. dated as
of December 1, 2004 referred to in 3.1 above |
|
|
|
|
|
|
|
|
|
|
4.2 |
|
|
Indenture, dated May 3, 2005, by and among
AmeriGas Partners, L.P., a Delaware limited
partnership, AmeriGas Finance Corp., a Delaware
corporation, and Wachovia Bank, National
Association, as trustee
|
|
AmeriGas
Partners, L.P.
|
|
Form 8-K
(5/3/05)
|
|
|
4.1 |
|
|
|
4.3 |
|
|
Indenture, dated January 26, 2006, by and among
AmeriGas Partners, L.P., a Delaware limited
partnership, AP Eagle Finance Corp., a Delaware
corporation, and U.S. Bank National
Association, as trustee
|
|
AmeriGas
Partners, L.P.
|
|
Form 8-K
(1/26/06)
|
|
|
4.1 |
|
|
|
4.4 |
|
|
Second Amended and Restated Agreement of
Limited Partnership of AmeriGas Propane, L.P.
dated as of December 1, 2004
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/04)
|
|
|
3.1 |
(a) |
|
|
4.5 |
|
|
Amended and Restated Agreement of Limited
Partnership of AmeriGas Eagle Propane, L.P.
dated as of July 19, 1999
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/01)
|
|
|
3.8 |
|
|
|
10.1 |
|
|
Credit Agreement dated as of November 6, 2006
among AmeriGas Propane, L.P., as Borrower,
AmeriGas Propane, Inc., as Guarantor, Petrolane
Incorporated, as Guarantor, Citigroup Global
Markets Inc., as Syndication Agent, J.P. Morgan
Securities, Inc. and Credit Suisse First
Securities (USA) LLC, as Co-Documentation
Agents, Wachovia Bank, National Association, as
Agent, Issuing Bank and Swing Line Bank, and
the other financial institutions party thereto
|
|
AmeriGas
Partners, L.P.
|
|
Form 8-K
(11/6/06)
|
|
|
10.1 |
|
|
|
10.2 |
|
|
Restricted Subsidiary Guarantee by the
Restricted Subsidiaries of AmeriGas Propane,
L.P., as Guarantors, for the benefit of
Wachovia Bank, National Association and the
Banks dated as of November 6, 2006
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/06)
|
|
|
10.2 |
|
|
|
10.3 |
|
|
Release of Liens and Termination of Security
Documents dated November 6, 2006 by and among
AmeriGas Propane, Inc., Petrolane Incorporated,
AmeriGas Propane, L.P., AmeriGas Propane Parts
& Service, Inc. and Wachovia Bank, National
Association, as Collateral Agent for the
Secured Creditors, pursuant to the
Intercreditor and Agency Agreement dated as of
April 19, 1995
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/06)
|
|
|
10.3 |
|
|
|
*10.4 |
** |
|
AmeriGas Propane, Inc. Executive Employee
Severance Plan, in effect January 1, 2008 |
|
|
|
|
|
|
|
|
|
|
10.5 |
|
|
Credit Agreement
dated as of November 14, 2008 among AmeriGas Propane, L.P., as Borrower, AmeriGas Propane, Inc., as Guarantor,
Petrolane Incorporated, as Guarantor, Citizens Bank of Pennsylvania, as Syndication Agent, and Wachovia Bank,
National Association, as Administrative Agent.
|
|
AmeriGas
Partners, L.P.
|
|
Form 8-K
(11/14/08)
|
|
|
10.1 |
|
|
|
*10.6 |
** |
|
AmeriGas Propane, Inc. Discretionary Long-Term
Incentive Plan for Non-Executive Key Employees
effective July 1, 2000 and Amended as of
January 1, 2005 |
|
|
|
|
|
|
|
|
|
|
*10.7 |
** |
|
AmeriGas Propane, Inc. 2000 Long-Term Incentive
Plan on Behalf of AmeriGas Partners, L.P., as
amended and restated effective January 1, 2005
(AmeriGas 2000 Plan) |
|
|
|
|
|
|
|
|
|
|
10.8 |
** |
|
UGI Corporation 1997 Stock Option and Dividend
Equivalent Plan Amended and Restated as of May
24, 2005
|
|
UGI
Corporation
|
|
Form 10-K
(9/30/06)
|
|
|
10.10 |
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporation by Reference |
Exhibit No. |
|
Exhibit |
|
Registrant |
|
Filing |
|
Exhibit |
|
|
10.9 |
|
|
Trademark License Agreement dated April 19,
1995 among UGI Corporation, AmeriGas, Inc.,
AmeriGas Propane, Inc., AmeriGas Partners, L.P.
and AmeriGas Propane, L.P.
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-Q
(3/31/95)
|
|
|
10.6 |
|
|
|
10.10 |
|
|
Trademark License Agreement dated April 19,
1995 among AmeriGas Propane, Inc., AmeriGas
Partners, L.P. and AmeriGas Propane, L.P.
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-Q
(3/31/95)
|
|
|
10.7 |
|
|
|
10.11 |
|
|
Stock Purchase Agreement dated May 27, 1989, as
amended and restated July 31, 1989, between
Texas Eastern Corporation and QFB Partners
|
|
Petrolane
Incorporated
/AmeriGas, Inc.
|
|
Registration on
Form S-1
(No. 33-69450)
|
|
|
10.16 |
(a) |
|
|
10.12 |
** |
|
UGI Corporation 2004 Omnibus Equity
Compensation Plan Amended and Restated as of
December 5, 2006
|
|
UGI
Corporation
|
|
Form 8-K
(3/27/07)
|
|
|
10.1 |
|
|
|
10.13 |
** |
|
UGI Corporation 2004 Omnibus Equity
Compensation Plan, as amended on December 7,
2004 Terms and Conditions as amended December
6, 2005
|
|
UGI
Corporation
|
|
Form 8-K
(12/6/05)
|
|
|
10.10 |
|
|
|
10.14 |
** |
|
UGI Corporation 2000 Stock Incentive Plan
Amended and Restated as of May 24, 2005
|
|
UGI
Corporation
|
|
Form 10-K
(9/30/06)
|
|
|
10.14 |
|
|
|
10.15 |
** |
|
UGI Corporation 2004 Omnibus Equity
Compensation Plan AmeriGas Employees Stock
Option Grant Letter dated as of January 1, 2006
|
|
UGI
Corporation
|
|
Form 8-K
(12/6/05)
|
|
|
10.6 |
|
|
|
10.16 |
** |
|
UGI Corporation 2004 Omnibus Equity
Compensation Plan UGI Employees Nonqualified
Stock Option Grant Letter dated as of January
1, 2006
|
|
UGI
Corporation
|
|
Form 8-K
(12/6/05)
|
|
|
10.4 |
|
|
|
10.17 |
** |
|
UGI Corporation 2004 Omnibus Equity
Compensation Plan UGI Employees Performance
Unit Grant Letter dated as of January 1, 2006
|
|
UGI
Corporation
|
|
Form 10-K
(9/30/06)
|
|
|
10.7 |
|
|
|
10.18 |
** |
|
UGI Corporation Executive Annual Bonus Plan
effective as of October 1, 2006
|
|
UGI
Corporation
|
|
Form 10-K
(9/30/07)
|
|
|
10.8 |
|
|
|
10.19 |
** |
|
AmeriGas Propane, Inc. Executive Annual Bonus
Plan, effective as of October 1, 2006
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/07)
|
|
|
10.19 |
|
|
|
10.20 |
** |
|
AmeriGas 2000 Plan Restricted Unit Grant Letter
dated as of January 1, 2006
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/06)
|
|
|
10.20 |
|
|
|
10.21 |
** |
|
UGI Corporation Senior Executive Employee
Severance Plan, in effect as of January 1, 2008
|
|
UGI
Corporation
|
|
Form 10-Q
(3/31/08)
|
|
|
10.1 |
|
|
|
10.22 |
** |
|
UGI Corporation 2004 Omnibus Equity
Compensation Plan UGI Employees Stock Unit
Grant Letter dated as of January 1, 2008
|
|
UGI
Corporation
|
|
Form 10-K
(9/30/08)
|
|
|
10.5 |
|
|
|
10.23 |
** |
|
UGI Corporation 2002 Non-Qualified Stock Option
Plan Amended and Restated as of May 24, 2005
|
|
UGI
Corporation
|
|
Form 10-K
(9/30/06)
|
|
|
10.38 |
|
|
|
10.24 |
** |
|
UGI Corporation 1992 Non-Qualified Stock Option
Plan, Amended and Restated as of May 24, 2005
|
|
UGI
Corporation
|
|
Form 10-K
(9/30/06)
|
|
|
10.39 |
|
|
|
10.25 |
** |
|
AmeriGas Propane, Inc. Supplemental Executive
Retirement Plan, As Amended July 30, 2007
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/07)
|
|
|
10.25 |
|
|
|
10.26 |
** |
|
Form of Change in Control Agreement Amended and
Restated as of May 12, 2008 for Mr. Bissell
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-Q
(6/30/08)
|
|
|
10.1 |
|
|
|
10.27 |
** |
|
Form of Change in Control Agreement Amended and
Restated as of May 12, 2008 for Mr. Sheridan
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-Q
(6/30/08)
|
|
|
10.2 |
|
|
|
10.28 |
** |
|
UGI Corporation Supplemental Executive
Retirement Plan and Supplemental Savings Plan,
As Amended and Restated on July 31, 2007
|
|
UGI
Corporation
|
|
Form 10-K
(9/30/07)
|
|
|
10.16 |
|
|
|
10.29 |
** |
|
Description of oral compensation arrangements
for Messrs. Greenberg and Walsh
|
|
UGI
Corporation
|
|
Form 10-K
(9/30/08)
|
|
|
10.30 |
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporation by Reference |
Exhibit No. |
|
Exhibit |
|
Registrant |
|
Filing |
|
Exhibit |
|
|
10.30 |
** |
|
Description of oral employment at-will
arrangements for Messrs. Bissell, Knauss and
Sheridan
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/05)
|
|
|
10.30 |
|
|
|
10.31 |
** |
|
Form of Confidentiality and Post-Employment
Activities Agreement with AmeriGas Propane,
Inc., in its own right and as general partner
of AmeriGas Partners, L.P., for Messrs.
Bissell and Knauss
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-Q
(3/31/05)
|
|
|
10.3 |
|
|
|
10.32 |
** |
|
Confidentiality and Post-Employment Activities
Agreement between AmeriGas Propane, Inc., in
its own right and as general partner of
AmeriGas Partners, L.P., and Mr. Sheridan
|
|
AmeriGas
Partners, L.P.
|
|
Form 8-K
(8/15/05)
|
|
|
10.1 |
|
|
|
10.33 |
** |
|
Form of Change in Control Agreement Amended and
Restated as of May 12, 2008 for Messrs.
Greenberg and Walsh
|
|
UGI
Corporation
|
|
Form 10-Q
(6/30/08)
|
|
|
10.3 |
|
|
|
10.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.35 |
|
|
Purchase Agreement by and among Columbia Energy
Group, Columbia Propane Corporation, CP
Holdings, Inc., Columbia Propane, L.P.,
AmeriGas Propane, L.P., AmeriGas Partners, L.P.
and AmeriGas Propane, Inc. dated as of January
30, 2001 and amended and restated August 7,
2001
|
|
AmeriGas
Partners, L.P.
|
|
Form 8-K
(8/8/01)
|
|
|
10.1 |
|
|
|
10.36 |
|
|
Purchase Agreement by and among Columbia
Propane, L.P., CP Holdings, Inc., Columbia
Propane Corporation, National Propane Partners,
L.P., National Propane Corporation, National
Propane SPG, Inc., and Triarc Companies, Inc.
dated as of April 5, 1999
|
|
National
Propane
Partners, L.P.
|
|
Form 8-K
(4/19/99)
|
|
|
10.5 |
|
|
|
10.37 |
|
|
Capital Contribution Agreement dated as of
August 21, 2001 by and between Columbia
Propane, L.P. and AmeriGas Propane, L.P.
acknowledged and agreed to by CP Holdings, Inc.
|
|
AmeriGas
Partners, L.P.
|
|
Form 8-K
(8/21/01)
|
|
|
10.2 |
|
|
|
10.38 |
|
|
Promissory Note by National Propane L.P., a
Delaware limited partnership in favor of
Columbia Propane Corporation dated July 19,
1999
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/01)
|
|
|
10.39 |
|
|
|
10.39 |
|
|
Loan Agreement dated July 19, 1999, between
National Propane, L.P. and Columbia Propane
Corporation
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/01)
|
|
|
10.40 |
|
|
|
10.40 |
|
|
First Amendment dated August 21, 2001 to Loan
Agreement dated July 19, 1999 between National
Propane, L.P. and Columbia Propane Corporation
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/01)
|
|
|
10.41 |
|
|
|
10.41 |
|
|
Columbia Energy Group Payment Guaranty dated April 5, 1999
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/01)
|
|
|
10.42 |
|
|
|
10.42 |
|
|
Keep Well Agreement by and between AmeriGas Propane, L.P. and Columbia Propane
Corporation dated August 21, 2001
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/01)
|
|
|
10.46 |
|
|
|
10.43 |
** |
|
Summary of Director Compensation
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/06)
|
|
|
10.43 |
|
|
|
*10.44 |
** |
|
AmeriGas Propane, Inc. Non-Qualified Deferred Compensation Plan, as amended
and restated effective January 1, 2009
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
Code of Ethics for principal executive, financial and accounting officers
|
|
AmeriGas
Partners, L.P.
|
|
Form 10-K
(9/30/03)
|
|
|
14 |
|
|
|
* 21 |
|
|
Subsidiaries of AmeriGas Partners, L.P.
|
|
|
|
|
|
|
|
|
|
|
* 23 |
|
|
Consent of PricewaterhouseCoopers LLP |
|
|
|
|
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporation by Reference |
Exhibit No. |
|
Exhibit |
|
Registrant |
|
Filing |
|
Exhibit |
|
|
* 31.1 |
|
|
Certification by the Chief Executive Officer relating to the Registrants
Report on Form 10-K for the year ended September 30, 2008, 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-K for the year ended September 30, 2008, 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-K for the fiscal year ended
September 30, 2008, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
|
* 99 |
|
|
UGI Corporation Incentive Stock Award Information |
|
|
|
|
|
|
|
|
|
|
|
* |
|
Filed herewith. |
|
** |
|
As required by Item 14(a)(3), this exhibit is identified as a compensatory plan or
arrangement. |
68
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
|
|
|
|
AMERIGAS PARTNERS, L.P. |
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
AmeriGas Propane, Inc., |
|
|
|
|
|
|
Its General Partner |
|
|
|
|
|
|
|
|
|
Date: November 20, 2008
|
|
By:
|
|
/s/ Jerry E. Sheridan
Jerry E. Sheridan
|
|
|
|
|
|
|
Vice President Finance and Chief Financial Officer |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been
signed below on November 20, 2008, by the following persons on behalf of the Registrant in the
capacities indicated.
|
|
|
Signature |
|
Title |
|
|
|
/s/ Eugene V. N. Bissell
Eugene V. N. Bissell
|
|
President and
Chief Executive Officer
(Principal Executive Officer) and Director |
|
|
|
/s/ Lon R. Greenberg
Lon R. Greenberg
|
|
Chairman and Director |
|
|
|
/s/ John L. Walsh
John L. Walsh
|
|
Vice Chairman and Director |
|
|
|
/s/ Jerry E. Sheridan
Jerry E. Sheridan
|
|
Vice President Finance and
Chief Financial Officer
(Principal Financial Officer) |
|
|
|
/s/ William J. Stanczak
William J. Stanczak
|
|
Controller and Chief Accounting Officer (Principal
Accounting Officer) |
69
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been
signed below on November 20, 2008, by the following persons on behalf of the Registrant in the
capacities indicated.
|
|
|
Signature |
|
Title |
|
/s/ Stephen D. Ban
Stephen D. Ban
|
|
Director |
|
|
|
/s/ Richard C. Gozon
Richard C. Gozon
|
|
Director |
|
|
|
/s/ William J. Marrazzo
William J. Marrazzo
|
|
Director |
|
|
|
/s/ Gregory A. Pratt
Gregory A. Pratt
|
|
Director |
|
|
|
/s/ Howard B. Stoeckel
Howard B. Stoeckel
|
|
Director |
|
|
|
|
|
Director |
70
AMERIGAS PARTNERS, L.P.
FINANCIAL INFORMATION
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
YEAR ENDED SEPTEMBER 30, 2008
F-1
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The consolidated financial statements of AmeriGas Partners, L.P. and subsidiaries, together with
the report thereon of PricewaterhouseCoopers LLP dated November 21, 2008 and Managements Report on
Internal Control over Financial Reporting listed in the following index and are included in this
report on Form-10-K.
|
|
|
|
|
AmeriGas Partners, L.P. and Subsidiaries |
|
Form 10-K page |
|
|
|
|
|
|
|
|
|
F-27 |
|
|
|
|
|
|
Financial Statements: |
|
|
|
|
|
|
|
|
|
|
|
|
F-26 |
|
|
|
|
|
|
|
|
|
F-3 |
|
|
|
|
|
|
|
|
|
F-4 |
|
|
|
|
|
|
|
|
|
F-5 |
|
|
|
|
|
|
|
|
|
F-6 |
|
|
|
|
|
|
|
|
F-7 to F-25 |
|
|
|
|
|
|
Supplementary Data (unaudited): |
|
|
|
|
|
|
|
|
|
|
|
|
F-25 |
|
|
|
|
|
|
Financial Statements Schedules: |
|
|
|
|
|
|
|
|
|
|
|
S-1 to S-3 |
|
|
|
|
|
|
|
|
S-4 to S-5 |
|
|
|
|
|
|
We have omitted all other financial statement schedules because the required information is either
(1) not present; (2) not present in amounts sufficient to require submission of the schedule; or
(3) the information required is included elsewhere in the financial statements or related notes.
F-2
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2008 |
|
|
2007 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
10,909 |
|
|
$ |
34,034 |
|
Accounts receivable (less allowances for doubtful accounts
of $20,215 and $15,150, respectively) |
|
|
218,411 |
|
|
|
184,038 |
|
Accounts receivable related parties |
|
|
5,130 |
|
|
|
3,684 |
|
Inventories |
|
|
144,206 |
|
|
|
124,840 |
|
Derivative financial instruments |
|
|
13 |
|
|
|
18,300 |
|
Collateral deposits |
|
|
17,830 |
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
28,597 |
|
|
|
10,124 |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
425,096 |
|
|
|
375,020 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment (less accumulated depreciation and
amortization of $743,097 and $679,081,
respectively) |
|
|
616,834 |
|
|
|
633,978 |
|
Goodwill |
|
|
640,843 |
|
|
|
640,664 |
|
Intangible assets (less accumulated amortization
of $20,033 and $29,253, respectively) |
|
|
27,579 |
|
|
|
29,809 |
|
|
Other assets |
|
|
14,721 |
|
|
|
17,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,725,073 |
|
|
$ |
1,696,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS CAPITAL |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
|
$ |
71,466 |
|
|
$ |
1,925 |
|
Accounts payable trade |
|
|
172,800 |
|
|
|
163,092 |
|
Accounts payable related parties |
|
|
2,017 |
|
|
|
3,588 |
|
Employee compensation and benefits accrued |
|
|
31,408 |
|
|
|
31,330 |
|
Interest accrued |
|
|
23,490 |
|
|
|
23,364 |
|
Customer deposits and advances |
|
|
106,946 |
|
|
|
99,137 |
|
Derivative financial instruments |
|
|
55,792 |
|
|
|
|
|
Other current liabilities |
|
|
68,642 |
|
|
|
56,157 |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
532,561 |
|
|
|
378,593 |
|
|
Long-term debt |
|
|
861,924 |
|
|
|
931,117 |
|
Other noncurrent liabilities |
|
|
72,490 |
|
|
|
64,460 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,466,975 |
|
|
|
1,374,170 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (note 11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interests |
|
|
10,723 |
|
|
|
11,386 |
|
|
Partners capital: |
|
|
|
|
|
|
|
|
Common unitholders (units issued 57,009,951 and 56,988,702, respectively) |
|
|
308,186 |
|
|
|
293,245 |
|
General partner |
|
|
3,094 |
|
|
|
2,952 |
|
Accumulated other comprehensive (loss) income |
|
|
(63,905 |
) |
|
|
15,031 |
|
|
|
|
|
|
|
|
|
Total partners capital |
|
|
247,375 |
|
|
|
311,228 |
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital |
|
$ |
1,725,073 |
|
|
$ |
1,696,784 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-3
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of dollars, except per unit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
September 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Propane |
|
$ |
2,624,672 |
|
|
$ |
2,096,080 |
|
|
$ |
1,953,714 |
|
Other |
|
|
190,517 |
|
|
|
181,295 |
|
|
|
165,552 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,815,189 |
|
|
|
2,277,375 |
|
|
|
2,119,266 |
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales propane (excluding depreciation shown
below) |
|
|
1,836,917 |
|
|
|
1,365,071 |
|
|
|
1,277,306 |
|
Cost of sales other (excluding depreciation shown below) |
|
|
71,396 |
|
|
|
72,125 |
|
|
|
66,463 |
|
Operating and administrative expenses |
|
|
610,465 |
|
|
|
562,524 |
|
|
|
535,288 |
|
Depreciation and amortization |
|
|
80,402 |
|
|
|
75,614 |
|
|
|
72,452 |
|
Gain on sale of Arizona storage facility |
|
|
|
|
|
|
(46,117 |
) |
|
|
|
|
Other (income), net |
|
|
(18,855 |
) |
|
|
(17,572 |
) |
|
|
(16,299 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,580,325 |
|
|
|
2,011,645 |
|
|
|
1,935,210 |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
234,864 |
|
|
|
265,730 |
|
|
|
184,056 |
|
Loss on extinguishments of debt |
|
|
|
|
|
|
|
|
|
|
(17,079 |
) |
Interest expense |
|
|
(72,886 |
) |
|
|
(71,487 |
) |
|
|
(74,094 |
) |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
161,978 |
|
|
|
194,243 |
|
|
|
92,883 |
|
Income tax expense |
|
|
(1,672 |
) |
|
|
(846 |
) |
|
|
(185 |
) |
Minority interests |
|
|
(2,287 |
) |
|
|
(2,613 |
) |
|
|
(1,540 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
158,019 |
|
|
$ |
190,784 |
|
|
$ |
91,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General partners interest in net income |
|
$ |
2,278 |
|
|
$ |
5,600 |
|
|
$ |
912 |
|
|
|
|
|
|
|
|
|
|
|
|
Limited partners interest in net income |
|
$ |
155,741 |
|
|
$ |
185,184 |
|
|
$ |
90,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per limited partner unit basic and diluted (note 2) |
|
$ |
2.70 |
|
|
$ |
3.15 |
|
|
$ |
1.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average limited partner units outstanding (thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
57,005 |
|
|
|
56,826 |
|
|
|
56,797 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
57,044 |
|
|
|
56,862 |
|
|
|
56,835 |
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-4
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
September 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
158,019 |
|
|
$ |
190,784 |
|
|
$ |
91,158 |
|
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
80,402 |
|
|
|
75,614 |
|
|
|
72,452 |
|
Gain on sale of Arizona storage facility |
|
|
|
|
|
|
(46,117 |
) |
|
|
|
|
Loss on extinguishments of debt |
|
|
|
|
|
|
|
|
|
|
17,079 |
|
Provision for uncollectible accounts |
|
|
15,852 |
|
|
|
9,544 |
|
|
|
10,768 |
|
Other, net |
|
|
839 |
|
|
|
4,856 |
|
|
|
(6,182 |
) |
Net change in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(51,270 |
) |
|
|
(17,142 |
) |
|
|
(21,027 |
) |
Inventories |
|
|
(19,032 |
) |
|
|
(18,829 |
) |
|
|
(9,039 |
) |
Accounts payable |
|
|
8,136 |
|
|
|
17,819 |
|
|
|
7,557 |
|
Other current assets |
|
|
(23,178 |
) |
|
|
310 |
|
|
|
3,845 |
|
Other current liabilities |
|
|
10,446 |
|
|
|
(12,340 |
) |
|
|
11,216 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
180,214 |
|
|
|
204,499 |
|
|
|
177,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures for property, plant and equipment |
|
|
(62,756 |
) |
|
|
(73,764 |
) |
|
|
(70,710 |
) |
Proceeds from disposals of assets |
|
|
8,442 |
|
|
|
5,954 |
|
|
|
10,448 |
|
Net proceeds from sale of Arizona storage facility |
|
|
|
|
|
|
49,031 |
|
|
|
|
|
Acquisitions of businesses, net of cash acquired |
|
|
(1,322 |
) |
|
|
(78,763 |
) |
|
|
(2,846 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities |
|
|
(55,636 |
) |
|
|
(97,542 |
) |
|
|
(63,108 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
|
(144,659 |
) |
|
|
(154,672 |
) |
|
|
(130,805 |
) |
Minority interest activity |
|
|
(2,138 |
) |
|
|
(2,144 |
) |
|
|
1,130 |
|
Issuance of long-term debt |
|
|
|
|
|
|
|
|
|
|
343,875 |
|
Repayment of long-term debt |
|
|
(1,680 |
) |
|
|
(1,762 |
) |
|
|
(343,453 |
) |
Proceeds from issuance of Common Units |
|
|
766 |
|
|
|
814 |
|
|
|
146 |
|
Capital contributions from General Partner |
|
|
8 |
|
|
|
66 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by financing activities |
|
|
(147,703 |
) |
|
|
(157,698 |
) |
|
|
(129,106 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents decrease |
|
$ |
(23,125 |
) |
|
$ |
(50,741 |
) |
|
$ |
(14,387 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
|
|
|
|
|
End of year |
|
$ |
10,909 |
|
|
$ |
34,034 |
|
|
$ |
84,775 |
|
Beginning of year |
|
|
34,034 |
|
|
|
84,775 |
|
|
|
99,162 |
|
|
|
|
|
|
|
|
|
|
|
|
Decrease |
|
$ |
(23,125 |
) |
|
$ |
(50,741 |
) |
|
$ |
(14,387 |
) |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL
(Thousands of dollars, except unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other |
|
|
Total |
|
|
|
Number of |
|
|
|
|
|
|
General |
|
|
comprehensive |
|
|
partners |
|
|
|
Common Units |
|
|
Common |
|
|
partner |
|
|
income (loss) |
|
|
capital |
|
Balance September 30, 2005 |
|
|
56,792,605 |
|
|
$ |
289,396 |
|
|
$ |
2,920 |
|
|
$ |
45,101 |
|
|
$ |
337,417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
90,246 |
|
|
|
912 |
|
|
|
|
|
|
|
91,158 |
|
Net losses on derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56,552 |
) |
|
|
(56,552 |
) |
Reclassification of net gains on
derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,064 |
) |
|
|
(20,064 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
90,246 |
|
|
|
912 |
|
|
|
(76,616 |
) |
|
|
14,542 |
|
Distributions |
|
|
|
|
|
|
(129,497 |
) |
|
|
(1,308 |
) |
|
|
|
|
|
|
(130,805 |
) |
Unit-based compensation expense |
|
|
|
|
|
|
202 |
|
|
|
|
|
|
|
|
|
|
|
202 |
|
Common Units issued in connection
with incentive compensation plans |
|
|
4,500 |
|
|
|
146 |
|
|
|
1 |
|
|
|
|
|
|
|
147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2006 |
|
|
56,797,105 |
|
|
|
250,493 |
|
|
|
2,525 |
|
|
|
(31,515 |
) |
|
|
221,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
185,184 |
|
|
|
5,600 |
|
|
|
|
|
|
|
190,784 |
|
Net gains on derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,270 |
|
|
|
25,270 |
|
Reclassification of net losses on
derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,276 |
|
|
|
21,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
185,184 |
|
|
|
5,600 |
|
|
|
46,546 |
|
|
|
237,330 |
|
Distributions |
|
|
|
|
|
|
(149,433 |
) |
|
|
(5,239 |
) |
|
|
|
|
|
|
(154,672 |
) |
Unit-based compensation expense |
|
|
|
|
|
|
489 |
|
|
|
|
|
|
|
|
|
|
|
489 |
|
Common Units issued in connection
with incentive compensation plans |
|
|
25,392 |
|
|
|
814 |
|
|
|
8 |
|
|
|
|
|
|
|
822 |
|
Common Units issued in connection
with acquisition |
|
|
166,205 |
|
|
|
5,698 |
|
|
|
58 |
|
|
|
|
|
|
|
5,756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2007 |
|
|
56,988,702 |
|
|
|
293,245 |
|
|
|
2,952 |
|
|
|
15,031 |
|
|
|
311,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
155,741 |
|
|
|
2,278 |
|
|
|
|
|
|
|
158,019 |
|
Net losses on derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25,925 |
) |
|
|
(25,925 |
) |
Reclassification of net gains on
derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,011 |
) |
|
|
(53,011 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
155,741 |
|
|
|
2,278 |
|
|
|
(78,936 |
) |
|
|
79,083 |
|
Distributions |
|
|
|
|
|
|
(142,515 |
) |
|
|
(2,144 |
) |
|
|
|
|
|
|
(144,659 |
) |
Unit-based compensation expense |
|
|
|
|
|
|
949 |
|
|
|
|
|
|
|
|
|
|
|
949 |
|
Common Units issued in connection
with incentive compensation plans |
|
|
21,249 |
|
|
|
766 |
|
|
|
8 |
|
|
|
|
|
|
|
774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2008 |
|
|
57,009,951 |
|
|
$ |
308,186 |
|
|
$ |
3,094 |
|
|
$ |
(63,905 |
) |
|
$ |
247,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-6
Note 1 Partnership Organization
AmeriGas Partners, L.P. (AmeriGas Partners) is a publicly traded limited partnership that
conducts a national propane distribution business through its principal operating subsidiaries
AmeriGas Propane, L.P. (AmeriGas OLP) and AmeriGas OLPs subsidiary, AmeriGas Eagle Propane, L.P.
(Eagle OLP). AmeriGas Partners, AmeriGas OLP and Eagle OLP are Delaware limited partnerships.
AmeriGas OLP and Eagle OLP are collectively referred to herein as the Operating Partnerships, and
AmeriGas Partners, the Operating Partnerships and all of their subsidiaries are collectively
referred to herein as the Partnership or we.
The Operating Partnerships are engaged in the distribution of propane and related equipment
and supplies. The Operating Partnerships comprise the largest retail propane distribution business
in the United States serving residential, commercial, industrial, motor fuel and agricultural
customers from locations in 46 states, including Alaska and Hawaii.
At September 30, 2008, 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 Common Units of AmeriGas Partners. The remaining 32,318,742 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. AmeriGas OLP,
indirectly through subsidiaries, owns an effective 0.1% general partner interest and a direct
approximate 99.8% limited partner interest in Eagle OLP. An unrelated third party (minority
partner) holds an approximate 0.1% limited partner interest in Eagle OLP.
AmeriGas Partners and the Operating Partnerships have no employees. Employees of the General
Partner conduct, direct and manage our operations. The General Partner provides 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 12).
Note 2 Summary of Significant Accounting Policies
Accounting and Consolidation Principles. Our financial statements are prepared in conformity with
U.S. generally accepted accounting principles (GAAP). The consolidated financial statements
include the accounts of AmeriGas Partners and its majority-owned subsidiaries. We eliminate all
significant intercompany accounts and transactions when we consolidate. We account for the General
Partners 1.01% interest in AmeriGas OLP and the minority partners 0.1% limited partner interest
in Eagle OLP as minority interests in the consolidated financial statements.
Finance Corps. 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.
Reclassifications. We have reclassified certain prior-year balances to conform to the current-year
presentation.
Use of Estimates. We make estimates and assumptions when preparing financial statements in
conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and
liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities.
Actual results could differ from these estimates.
F-7
Revenue Recognition. We recognize revenue from the sale of propane principally as product is
delivered to customers. Revenue from the sale of appliances and equipment is recognized at the time
of sale or installation. Revenue from repairs and maintenance is recognized upon completion of the
service. Revenues from annually billed nonrefundable tank fees are recorded on a straight-line
basis over one year. We present revenue-related taxes collected from customers and remitted to
taxing authorities, principally sales and use taxes, on a net basis.
Delivery Expenses. Expenses associated with the delivery of propane to customers (including
expenses of delivery personnel, vehicle repair and maintenance and general liability expenses) are
classified as operating and administrative expenses on the Consolidated Statements of Operations.
Depreciation expense associated with delivery vehicles is classified in depreciation and
amortization on the Consolidated Statements of Operations.
Inventories. Our inventories are stated at the lower of cost or market. We determine cost using an
average cost method for propane, specific identification for appliances and the first-in, first-out
(FIFO) method for all other inventories.
Property, Plant and Equipment and Related Depreciation. We record property, plant and equipment at
cost. The amounts we assign to property, plant and equipment of acquired businesses are based upon
estimated fair value at date of acquisition. When plant and equipment are retired or otherwise
disposed of, we eliminate the associated cost and accumulated depreciation from the appropriate
accounts and recognize any resulting gain or loss in Other income, net in the Consolidated
Statements of Operations (see Notes 4 and 15).
We include in property, plant and equipment costs associated with computer software we develop
or obtain for use in our business. We amortize computer software costs on a straight-line basis
over expected periods of benefit not exceeding seven years once the installed software is ready for
its intended use.
We compute depreciation expense on plant and equipment using the straight-line method over
estimated service lives generally ranging from 15 to 40 years for buildings and improvements; 7 to
30 years for storage and customer tanks and cylinders; and 2 to 10 years for vehicles, equipment
and office furniture and fixtures. Costs to install Partnership-owned tanks at customer locations,
net of amounts billed to customers, are capitalized and depreciated over the estimated period of
benefit not exceeding ten years. Depreciation expense was $75,679 in Fiscal 2008, $71,555 in Fiscal
2007 and $67,793 in Fiscal 2006. No depreciation expense is included in cost of sales in the
Consolidated Statements of Operations.
We evaluate the impairment of long-lived assets whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable. We evaluate recoverability
based upon undiscounted future cash flows expected to be generated by such assets. No provisions
for impairments were recorded during Fiscal 2008, Fiscal 2007 or Fiscal 2006.
Intangible Assets. The Partnerships intangible assets comprise the following at September 30:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Subject to amortization: |
|
|
|
|
|
|
|
|
Customer relationships and noncompete agreements |
|
$ |
47,612 |
|
|
$ |
59,062 |
|
Accumulated amortization |
|
|
(20,033 |
) |
|
|
(29,253 |
) |
|
|
|
|
|
|
|
|
|
|
27,579 |
|
|
|
29,809 |
|
|
|
|
|
|
|
|
Not subject to amortization: |
|
|
|
|
|
|
|
|
Goodwill |
|
$ |
640,843 |
|
|
$ |
640,664 |
|
|
|
|
|
|
|
|
F-8
The increase in intangible assets and goodwill during Fiscal 2008 is a result of business
acquisitions (see Note 3). We amortize customer relationship and noncompete agreement intangibles
over their estimated periods of benefit, which do not exceed 15 years. Amortization expense of
intangible assets was $4,712 in Fiscal 2008, $4,037 in Fiscal 2007 and $4,460 in Fiscal 2006. No
amortization expense is included in cost of sales in the Consolidated Statements of Operations.
Estimated amortization expense of intangible assets during the next five fiscal years is as
follows: Fiscal 2009 $4,625; Fiscal 2010 $4,205; Fiscal 2011 $4,121; Fiscal 2012 $4,050;
Fiscal 2013 $3,403.
Goodwill is tested for impairment annually or more frequently if events or circumstances
indicate that the value of goodwill might be impaired. For purposes of the goodwill impairment
test, the Partnership has determined it has one reporting unit. Fair value of the reporting unit is
estimated using a market value approach taking into account the quoted market price of AmeriGas
Partners Common Units. Amortizable intangible assets are tested for impairment whenever events or
circumstances indicate that the carrying value of these assets might not be recoverable. No
provisions for impairments of goodwill or amortizable intangibles were recorded during Fiscal 2008,
Fiscal 2007 or Fiscal 2006.
Deferred Debt Issuance Costs. Included in other assets are net deferred debt issuance costs of
$8,845 and $10,721 at September 30, 2008 and 2007, respectively. We are amortizing these costs over
the terms of the related debt.
Customer Deposits. We offer certain of our customers prepayment programs which require customers to
pay a fixed periodic amount, or to otherwise prepay a portion of their anticipated propane
purchases. Customer prepayments, which exceed associated billings, are classified as customer
deposits and advances on the Consolidated Balance Sheets.
Environmental and Other Legal Matters. We accrue environmental investigation and clean-up costs
when it is probable that a liability exists and the amount or range of amounts can be reasonably
estimated. Amounts accrued generally reflect our best estimate of costs expected to be incurred or,
if no best estimate can be made, the minimum liability associated with a range of expected
environmental response costs. Our estimated liability for environmental contamination is reduced to
reflect anticipated participation of other responsible parties but is not reduced for possible
recovery from insurance carriers. We do not discount to present value the costs of future
expenditures for environmental liabilities. At September 30, 2008, the Partnerships accrued
liability for environmental investigation and cleanup costs was not material.
Similar to environmental issues, we accrue for other pending claims and legal actions
investigation and other legal costs for other matters when it is probable a liability exists and
the amount or range of amounts can be reasonably estimated.
Income Taxes. AmeriGas Partners and the Operating Partnerships are not directly subject to federal
income taxes. Instead, their taxable income or loss is allocated to their individual partners. The
Operating Partnerships have corporate subsidiaries which are directly subject to federal and state
income taxes. Accordingly, our consolidated financial statements reflect income taxes related to
these corporate subsidiaries. Legislation in certain states allows for taxation of partnerships
income and the accompanying financial statements reflect state income taxes resulting from such
legislation. Net income for financial statement purposes may differ significantly from taxable
income reportable to unitholders. This is a result of (1) differences between the tax basis and
financial reporting basis of assets and liabilities and (2) the taxable income allocation
requirements of the Third Amended and Restated Agreement of Limited Partnership of AmeriGas
Partners, L.P., as amended (Partnership Agreement) and the Internal Revenue Code. At
September 30, 2008, the financial reporting basis of the Partnerships assets and liabilities
exceeded the tax basis by approximately $246,000.
Effective October 1, 2007, we adopted Financial Accounting Standards Board (FASB)
Interpretation No. 48, Accounting for Uncertainties in Income Taxes (FIN 48). FIN 48 provides a
comprehensive model for the recognition, measurement and disclosure in financial statements of
uncertain income tax positions that an entity has taken or expects to take on a tax return. The
adoption of FIN 48 did not have a significant effect on the Partnership.
F-9
Equity-Based Compensation. The Partnership adopted Statement of Financial Accounting Standards
(SFAS) No. 123 (Revised 2004), Share-Based Payment (SFAS 123R), effective October 1, 2005.
Among other things, SFAS 123R requires expensing the fair value of stock options, a previously
optional accounting method. We chose the modified prospective approach which requires that the new
guidance be applied to the unvested portion of all outstanding option grants as of October 1, 2005
and to new grants after that date. We recognized total equity-based compensation expense of $3,162,
$2,421 and $787 in Fiscal 2008, Fiscal 2007 and Fiscal 2006, respectively.
The General Partner may grant Common Unit awards to key employees under its executive and
nonexecutive Common Unit plans, and certain key employees of the General Partner may be granted
stock options for UGI Common Stock under UGIs 2004 Omnibus Equity
Compensation Plan, as Amended and Restated on December 5, 2006 (the UGI OECP). In accordance with
SFAS 123R, all of our equity-based compensation, comprising Common Unit awards and UGI stock
options, is measured at fair value on the grant date, date of modification or at the end of the
reporting period and recognized in earnings over the requisite service period. Depending upon the
settlement terms of the awards, all or a portion of the fair value of the awards may be presented
as a liability or as equity in the Consolidated Balance Sheets. We use a Black-Scholes
option-pricing model to estimate the fair value of UGI stock options. We use a Monte Carlo
valuation approach to estimate the fair value of our Common Unit awards. Equity-based compensation
costs associated with the portion of Common Unit awards classified as equity are measured based
upon their fair value on the date of grant or modification. Equity-based compensation costs
associated with the portion of Common Unit awards classified as
liabilities are measured based upon their fair value at the grant date and remeasured as of
the end of each period.
During Fiscal 2006, the General Partner modified the settlement terms of Common Unit awards that were
granted to key employees on January 1, 2006. As a result of this modification, the fair value of a
portion of the modified awards was reclassified to partners capital. The Partnership did not incur
any incremental equity-based compensation cost as a result of the modification.
For a further description of our equity-based compensation plans and related disclosures, see Note
10.
Allocation of Net Income. Net income 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 (incentive distributions), if
any, in accordance with the Partnership Agreement (see Note 5).
Net Income Per Unit. Income per limited partner unit is computed in accordance with Emerging Issues
Task Force Issue No. 03-6, Participating Securities and the Two-Class Method under FASB Statement
No. 128 (EITF 03-6), by dividing the limited partners interest in net income by the weighted
average number of limited partner units outstanding. 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. Thus, in periods when our net
income exceeds our aggregate distributions paid and undistributed earnings are above certain
levels, the calculation according to the two-class method results in an increased allocation of
undistributed earnings to the General Partner. Due to the seasonality of the propane business, the
dilution effect of EITF 03-6 will typically impact net income per limited partner unit for periods
in our first three fiscal quarters. Theoretical distributions of net income in accordance with EITF
03-6 for Fiscal 2008 resulted in an increased allocation of net income 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 $0.03. Theoretical distributions of net income in accordance with EITF 03-6
for Fiscal 2007 resulted in an increased allocation of net income 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 $0.11. EITF 03-6 did not impact net income per limited partner unit for
Fiscal 2006.
F-10
Potentially dilutive Common Units included in the diluted limited partner units outstanding
computation of approximately 39,000 in Fiscal 2008, 35,000 in Fiscal 2007 and 37,000 in Fiscal 2006
reflect the effects of Common Unit awards issued under AmeriGas Propane, Inc. incentive
compensation plans.
Derivative Instruments. SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS 133), as amended, establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that all derivative instruments be recognized
as either assets or liabilities and measured at fair value. The accounting for changes in fair
value depends upon the purpose of the derivative instrument and whether it is designated and
qualifies for hedge accounting.
Substantially all of our derivative financial instruments qualify and are designated as cash
flow hedges. Our cash flow hedges relate principally to the variability in cash flows associated
with purchases of propane and variability of interest rates associated with anticipated issuances
of long-term debt. For cash flow hedges, changes in the fair value of the derivatives are recorded
in accumulated other comprehensive income, to the extent effective at offsetting changes in the
hedged item, until earnings are affected by the hedged item. For cash flow hedges, we discontinue
hedge accounting if the occurrence of the forecasted transaction is determined to be no longer
probable.
Gains and losses on derivative financial instruments qualifying as cash flow hedges of
variability in purchase prices of propane, when recognized, are recorded in cost of sales on the
Consolidated Statements of Operations. Gains and losses on derivative financial instruments
qualifying as cash flow hedges of variability in interest rates associated with anticipated
issuances of long-term debt, when recognized, are recorded in interest expense. The portion of any
gains or losses on cash flow hedges determined to be ineffective, or any portion of gains or losses
excluded from the measurement of the hedging relationships effectiveness, are recorded in other
income, net. Cash flows from derivative financial instruments are included in cash flows from operating activities.
For a more detailed description of the derivative instruments we use, our objectives for using
them and related supplemental information required by SFAS 133, see Note 14.
Consolidated Statements of Cash Flows. We define cash equivalents as all highly liquid investments
with maturities of three months or less when purchased. We record cash equivalents at cost plus
accrued interest, which approximates market value. We paid interest totaling $70,801 in Fiscal
2008, $69,451 in Fiscal 2007 and $77,802 in Fiscal 2006.
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.
Segment Information. We have determined that we have a single reportable operating segment that
engages in the distribution of propane and related equipment and supplies. No single customer
represents ten percent or more of consolidated revenues. In addition, substantially all of our
revenues are derived from sources within the United States and substantially all of our long-lived
assets are located in the United States.
Recently Issued Accounting Pronouncements Not Yet Adopted. In April 2008, the FASB issued FASB
Staff Position (FSP) No. SFAS 142-3, Determination of the Useful Life of Intangible Assets
(FSP SFAS 142-3). FSP SFAS 142-3 amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a recognized intangible asset
under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142). The intent of FSP SFAS
142-3 is to improve the consistency between the useful life of a recognized intangible asset under
SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under
SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R) and other applicable accounting
literature. FSP SFAS 142-3 is effective for financial statements issued for fiscal years beginning
after December 15, 2008 (Fiscal 2010) and must be applied prospectively to intangible assets
acquired after the effective date. We are currently evaluating the provisions of FSP SFAS 142-3.
F-11
In March 2008, the FASB ratified the consensus reached in EITF 07-4, Application of the
Two-Class Method under FAS 128 to Master Limited Partnerships (EITF 07-4). EITF 07-4 addresses
the application of the two-class method for master limited partnerships when incentive distribution
rights are present and entitle the holder of such rights to a portion of the distributions. EITF
07-4 states that when earnings exceed distributions, the computation of earnings per unit should be
based on the terms of the partnership agreement. Accordingly, any contractual limitations on the
distributions to incentive distribution rights holders would need to be determined for each
reporting period. If distributions are contractually limited to the holder of the incentive
distribution rights holders share of currently designated available cash as defined in the
partnership agreement, undistributed earnings in excess of available cash should not be allocated
with respect to the incentive distribution rights. EITF 07-4 is effective for fiscal periods that
begin after December 15, 2008 (Fiscal 2010), and would be accounted for as a change in accounting
principle and applied retrospectively. Early adoption of EITF 07-4 is not permitted. We are
currently evaluating the impact of EITF 07-4 on our income (loss) per limited partner unit
calculation.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities (SFAS 161). SFAS 161 requires enhanced disclosures in the following areas:
(1) qualitative disclosures about the overall objectives and strategies for using derivatives; (2)
quantitative disclosures on the fair value of the derivative instruments and related gains and
losses in a tabular format; and (3) credit-risk-related contingent features in derivative
instruments. SFAS 161 is effective for fiscal years and interim periods beginning after November
15, 2008 (second quarter of Fiscal 2009). We are currently evaluating the impact of the provisions
of SFAS 161 on our future disclosures.
In December 2007, the FASB issued SFAS 141R, Business Combinations. SFAS 141R applies to
all transactions or other events in which an entity obtains control of one or more businesses. SFAS
141R establishes, among other things, principles and requirements for how the acquirer (1)
recognizes and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree; (2) recognizes and measures
the goodwill acquired in a business combination or gain from a bargain purchase; and (3) determines
what information with respect to a business combination should be disclosed. SFAS 141R applies
prospectively to business combinations for which the acquisition date is on or after the first
annual reporting period beginning on or after December 15, 2008 (Fiscal 2010). Among the more
significant changes in accounting for acquisitions are (1) transaction costs will generally be
expensed (rather than being included as costs of the acquisition), (2) contingencies, including
contingent consideration, will generally be recorded at fair value with subsequent adjustments
recognized in operations (rather than as adjustments to the purchase price) and (3) decreases in
valuation allowances on acquired deferred tax assets will be recognized in operations (rather than
decreases in goodwill). Generally, the effects of SFAS 141R will depend on future acquisitions.
Also in December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements an amendment of ARB No. 51 (SFAS 160). SFAS 160 is effective for us on
October 1, 2009 (Fiscal 2010). This standard will change the accounting and reporting relating to
noncontrolling interests in a consolidated subsidiary. After adoption, noncontrolling interests
($10,723 and $11,386 at September 30, 2008 and 2007, respectively) will be classified as partners
capital, a change from its current classification between liabilities and partners capital.
Earnings attributable to minority interests ($2,287, $2,613 and $1,540 in Fiscal 2008, Fiscal 2007
and Fiscal 2006, respectively) will be included in net income, although such income will continue
to be deducted to measure income per limited partner unit. In addition, changes in a parents
ownership interest while retaining control will be accounted for as equity transactions and any
retained noncontrolling equity investments in a former subsidiary will be initially measured at
fair value.
F-12
In April 2007, the FASB issued FASB Staff Position No. FIN 39-1, Amendment of FASB
Interpretation No. 39 (FSP 39-1). FSP 39-1 permits companies to offset fair value amounts
recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash
collateral (a payable) against fair value amounts recognized for derivative instruments executed
with the same counterparty under a master netting agreement. In addition, upon the adoption,
companies are permitted to change their accounting policy to offset or not offset fair value
amounts recognized for derivative instruments under master netting arrangements. FSP 39-1 requires
retrospective application for all periods presented. FSP 39-1 was effective for us on October 1,
2008 (Fiscal 2009). FSP 39-1 did not have a material effect on our earnings or financial
position and will have no effect on our future cash flows.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities (SFAS 159). Under SFAS 159, we may elect to report individual
financial instruments and certain items at fair value with changes in fair value reported in
earnings. Once made, this election is irrevocable for those items. SFAS 159 was effective for us on
October 1, 2008 (Fiscal 2009). The adoption of SFAS 159 did not impact our financial statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS
157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements. In February
2008, the FASB issued two final staff positions (FSPs) amending SFAS 157. FSP SFAS 157-1 amends
SFAS 157 to exclude SFAS No. 13, Accounting for Leases, and its related interpretive accounting
pronouncements that address leasing transactions. FSP SFAS 157-2 delays the effective date of SFAS
157 until Fiscal years beginning after November 15, 2008 for non-financial assets and liabilities
that are recognized or disclosed at fair value in the financial statements on a non-recurring
basis. The standard, as amended, applies prospectively to new fair value measurements for the
Partnership as follows: on October 1, 2008 (Fiscal 2009) the standard applies to our measurements
of fair values of financial instruments and recurring fair value measurements of non-financial
assets and liabilities; on October 1, 2009 (Fiscal 2010) the standard will apply to all remaining
fair value measurements including nonrecurring measurements of non-financial assets and liabilities
such as measurement of potential impairments of goodwill, other intangible assets and other
long-lived assets. It will also apply to non-financial assets acquired and liabilities assumed that
are initially measured at fair value in a business combination but that are not subject to
remeasurement at fair value in subsequent periods. SFAS 157 is not expected to have a material
effect on our earnings or financial position and will have no effect on our future cash flows.
Note 3 Acquisitions
During Fiscal 2008, the Partnership acquired several retail propane distribution businesses for
total net cash consideration of $2,478. Also during Fiscal 2008, the Partnership received a working
capital payment refund of $1,157 associated with a Fiscal 2007 acquisition. During Fiscal 2007, the
Partnership acquired several retail propane distribution businesses, including the retail
distribution businesses of All Star Gas Corporation and Shell Gas (LPG) USA, and several cylinder
refurbishing businesses for total net cash consideration of $78,763. In addition, with respect to
the 2007 acquisition of All Star Gas Corporation, the Partnership also issued 166,205 Common Units
having a fair value of $5,698 to the General Partner (see Note 12). During Fiscal 2006, the
Partnership acquired several retail distribution businesses and a cylinder refurbishing business
for total cash consideration of $2,846. In conjunction with these acquisitions, liabilities of
$2,445 in Fiscal 2008, $1,516 in Fiscal 2007 and $464 in Fiscal 2006 were incurred. The operating
results of these businesses have been included in our operating results from their respective dates
of acquisition.
F-13
The total purchase price of these acquisitions has been allocated to the assets acquired and
liabilities assumed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Net current (liabilities) assets |
|
$ |
(1,010 |
) |
|
$ |
(2,208 |
) |
|
$ |
172 |
|
Property, plant and equipment |
|
|
2,731 |
|
|
|
59,439 |
|
|
|
1,626 |
|
Goodwill |
|
|
751 |
|
|
|
19,449 |
|
|
|
884 |
|
Customer relationships and noncompete agreements
(estimated useful life of 10 and 5 years, respectively) |
|
|
2,451 |
|
|
|
8,238 |
|
|
|
632 |
|
Other long-term assets and liabilities |
|
|
|
|
|
|
(98 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,923 |
|
|
$ |
84,820 |
|
|
$ |
3,310 |
|
|
|
|
|
|
|
|
|
|
|
The pro forma effect of these transactions is not material.
Note 4 Sales of Assets
In July 2007, AmeriGas OLP sold its 3.5 million barrel liquefied petroleum gas storage terminal
located near Phoenix, Arizona to Plains LPG Services, L.P. The Partnership recorded a pre-tax gain
of $46,117
which is included in Gain on sale of Arizona storage facility in our Fiscal 2007 Consolidated
Statement of Operations.
Note 5 Quarterly Distributions of Available Cash
The Partnership makes distributions to its partners approximately 45 days after the end of each
fiscal quarter in a total amount equal to its Available Cash (as defined in the Partnership
Agreement) for such quarter. Available Cash generally means:
|
1. |
|
all cash on hand at the end of such quarter, |
|
|
2. |
|
plus all additional cash on hand as of the date of determination resulting from
borrowing after the end of such quarter, |
|
|
3. |
|
less the amount of cash reserves established by the General Partner in its reasonable
discretion. |
The General Partner may establish reserves for the proper conduct of the Partnerships
business and for distributions during the next four quarters. In addition, certain of the
Partnerships debt agreements require reserves be established for the payment of debt principal and
interest.
Distributions of Available Cash are made 98% to limited partners and 2% to the General Partner
(giving effect to the 1.01% interest of the General Partner in distributions of Available Cash from
AmeriGas OLP to AmeriGas Partners) until Available Cash exceeds the Minimum Quarterly Distribution
of $0.55 and the First Target Distribution of $0.055 per Common Unit (or a total of $0.605 per
Common Unit). If Available Cash exceeds $0.605 per Common Unit in any quarter, the General Partner
will receive a greater percentage of the total Partnership distribution but only with respect to
the amount by which the distribution per Common Unit to limited partners exceeds $0.605.
Quarterly distributions of Available Cash per limited partner unit during Fiscal 2008, Fiscal
2007 and Fiscal 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
1st Quarter |
|
$ |
0.61 |
|
|
$ |
0.58 |
|
|
$ |
0.56 |
|
2nd Quarter |
|
|
0.61 |
|
|
|
0.58 |
|
|
|
0.56 |
|
3rd Quarter |
|
|
0.64 |
|
|
|
0.61 |
|
|
|
0.58 |
|
4th Quarter |
|
|
0.64 |
|
|
|
0.86 |
|
|
|
0.58 |
|
F-14
Because the Partnership made quarterly distributions to Common Unitholders in excess of $0.605 per
limited partner unit beginning in the third quarter of Fiscal 2007, the General Partner has
received a greater percentage of the total Partnership distribution than its aggregate 2% general
partner interest in AmeriGas Partners and AmeriGas OLP. The total amount of distributions received
by the General Partner with respect to its 1% general partner interest in AmeriGas Partners during
Fiscal 2008 and Fiscal 2007 totaled $2,144 and $5,239 which amounts included incentive
distributions of $698 and $3,692, respectively.
On July 30, 2007, the General Partners Board of Directors approved a distribution of $0.86
per Common Unit payable on August 18, 2007 to unitholders of record on August 10, 2007. This
distribution included the regular quarterly distribution of $0.61 per Common Unit and $0.25 per
Common Unit
reflecting a distribution of a portion of the proceeds from the Partnerships sale of its
Arizona storage facility in July 2007.
Note 6 Debt
Long-term debt comprises the following at September 30:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
AmeriGas Propane: |
|
|
|
|
|
|
|
|
AmeriGas Partners Senior Notes: |
|
|
|
|
|
|
|
|
8.875%, due May 2011 (including unamortized premium of $127 and $175,
respectively, effective rate 8.46%) |
|
$ |
14,767 |
|
|
$ |
14,815 |
|
7.25%, due May 2015 |
|
|
415,000 |
|
|
|
415,000 |
|
7.125%, due May 2016 |
|
|
350,000 |
|
|
|
350,000 |
|
AmeriGas OLP First Mortgage Notes: |
|
|
|
|
|
|
|
|
Series D, 7.11%, due March 2009 (including unamortized premium of $201 and
$584, respectively, effective rate 6.52%) |
|
|
70,201 |
|
|
|
70,584 |
|
Series E, 8.50%, due July 2010 (including unamortized premium of $42 and $66,
respectively, effective rate 8.47%) |
|
|
80,042 |
|
|
|
80,066 |
|
Other |
|
|
3,380 |
|
|
|
2,577 |
|
|
|
|
|
|
|
|
Total long-term debt |
|
|
933,390 |
|
|
|
933,042 |
|
Less current maturities (including net unamortized premium of $273 and $455,
respectively) |
|
|
(71,466 |
) |
|
|
(1,925 |
) |
|
|
|
|
|
|
|
Total long-term debt due after one year |
|
$ |
861,924 |
|
|
$ |
931,117 |
|
|
|
|
|
|
|
|
Scheduled principal repayments of long-term debt for each of the next five fiscal years ending
September 30 are as follows: Fiscal 2009 $71,193; Fiscal 2010 $80,749; Fiscal 2011 $15,174;
Fiscal 2012 $504; Fiscal 2013 $399.
AmeriGas Partners Senior Notes. The 8.875% Senior Notes may be redeemed at our option; a redemption
premium applies through May 19, 2009. The 7.25% and 7.125% Senior Notes generally cannot be
redeemed at our option prior to May 20, 2010 and 2011, respectively. In January 2006, AmeriGas
Partners refinanced AmeriGas OLPs Series A and Series C First Mortgage Notes totaling $228,800,
$59,550 of AmeriGas Partners 10% Senior Notes, and an AmeriGas OLP $35,000 term loan with proceeds
from the issuance of $350,000 of AmeriGas Partners 7.125% Senior Notes due 2016. AmeriGas Partners
recognized a loss of $17,079 associated with this refinancing which amount is reflected in Loss on
extinguishments of debt in the Fiscal 2006 Consolidated Statement of Operations. AmeriGas Partners
may, under certain circumstances involving excess sales proceeds from the disposition of assets not
reinvested in the business or a change of control, be required to offer to prepay the 7.25% and
7.125% Senior Notes.
AmeriGas OLP First Mortgage Notes. The General Partner is co-obligor of the Series D and E First
Mortgage Notes. AmeriGas OLP may prepay the First Mortgage Notes, in whole or in part. These
prepayments include a make whole premium. AmeriGas OLP may, under certain circumstances involving
excess sales proceeds from the disposition of assets not reinvested in the business or a change of
control, be required to offer to prepay the First Mortgage Notes, in whole or in part.
F-15
AmeriGas
OLP Credit Agreements. AmeriGas OLP has a credit agreement (Credit Agreement) consisting
of (1) a Revolving Credit Facility and (2) an Acquisition Facility. The General Partner and
Petrolane are guarantors of amounts outstanding under the Credit Agreement.
Under the Revolving Credit Facility, AmeriGas OLP may borrow up to $125,000 (including a
$100,000 sublimit for letters of credit) which is subject to
restrictions in the AmeriGas OLP First Mortgage Notes (see Restrictive Covenants below). The Revolving Credit Facility may be
used for working capital and general purposes of AmeriGas OLP. The Revolving Credit Facility
expires on October 15, 2011, but may be extended for additional one-year periods with the consent
of the participating banks representing at least 80% of the commitments thereunder. There were no
borrowings outstanding under AmeriGas OLPs Revolving Credit Facility at September 30, 2008 or
2007. Issued and outstanding letters of credit, which reduce available borrowings under the
Revolving Credit Facility, totaled $42,874 and $58,034 at September 30, 2008 and 2007,
respectively.
The Acquisition Facility provides AmeriGas OLP with the ability to borrow up to $75,000 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, subject to restrictions in the AmeriGas Partners
Senior Notes indentures. The Acquisition Facility operates as a revolving facility through
October 15, 2011, at which time amounts then outstanding will be immediately due and payable. There
were no amounts outstanding under the Acquisition Facility at September 30, 2008 and 2007.
The Revolving Credit Facility and the Acquisition Facility permit 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 (5.00% at September 30, 2008), or at a two-week, one-,
two-, three-, or six-month Eurodollar Rate, as defined in the Credit Agreement, plus a margin. The
margin on Eurodollar Rate borrowings (which ranges from 1.00% to 1.75%) and the Credit Agreement
facility fee rate (which ranges from 0.25% to 0.375%) are dependent upon AmeriGas OLPs ratio of
funded debt to earnings before interest expense, income taxes, depreciation and amortization
(EBITDA), each as defined in the Credit Agreement.
In
October 2008, UGI agreed to provide guarantees of up to $50,000 to
AmeriGas OLP for propane suppliers through September 30, 2009.
In addition, on November 14, 2008, AmeriGas OLP entered into a
revolving credit agreement with two major banks (Supplemental
Credit Agreement). The Supplemental Credit Agreement expires on
May 14, 2009, and permits AmeriGas OLP to borrow up to $50,000
for working capital and general purposes. Except for more
restrictive covenants regarding the incurrence of additional
indebtedness by AmeriGas OLP, the Supplemental Credit Agreement has
restrictive covenants substantially similar to the existing AmeriGas
Credit Agreement.
AmeriGas OLP Term Loan. In April 2005, AmeriGas OLP entered into a $35,000 variable-rate term loan
due October 1, 2006 (AmeriGas OLP Term Loan), which bore interest plus margin at the same rates
as the Credit Agreement. Proceeds from the AmeriGas OLP Term Loan were used to repay a portion of
the $53,750 maturing AmeriGas OLP First Mortgage Notes. As previously mentioned, the Partnership
used a portion of the proceeds from the issuance of the 7.125% Senior Notes due 2016 to repay the
AmeriGas OLP Term Loan in January 2006.
Restrictive Covenants. The 7.25% and 7.125% 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. Under the 7.25% and 7.125% Senior Notes indentures,
AmeriGas Partners is generally permitted to make cash distributions equal to available cash, as
defined, as of the end of the immediately preceding quarter, if certain conditions are met. These
conditions include:
|
1. |
|
no event of default exists or would exist upon making such distributions and |
|
|
2. |
|
the Partnerships consolidated fixed charge coverage ratio, as defined, is greater than
1.75-to-1. |
If the ratio in item 2 above is less than or equal to 1.75-to-1, the Partnership may make cash
distributions in a total amount not to exceed $24,000 less the total amount of distributions made
during the immediately preceding 16 Fiscal quarters. At September 30, 2008, The Partnership was not
restricted by the consolidated fixed charge coverage ratio from making cash distributions. See the
provisions of the Partnership Agreement relating to distributions of Available Cash in Note 5.
F-16
The
credit agreements and the First Mortgage Notes restrict the incurrence of additional
indebtedness and also restrict certain liens, guarantees, investments, loans and advances,
payments, mergers, consolidations, asset transfers, transactions with affiliates, sales of assets,
acquisitions and other transactions. The credit agreements and First Mortgage Notes require that
AmeriGas OLP maintain a maximum ratio of total indebtedness, as defined, to EBITDA, as defined
(calculated on a rolling four-quarter basis or eight- quarter basis divided by two), to be less
than or equal to 4.0-to-1 with respect to the Credit Agreement and 5.25-to-1 with respect to the
First Mortgage Notes. In addition, the credit agreements require that AmeriGas OLP maintain a ratio
of EBITDA to interest expense, as defined, of at least 3.0-to-1 on a rolling four-quarter basis,
and a minimum EBITDA. Generally, as long as no default exists or would result, AmeriGas OLP is
permitted to make cash distributions not more frequently than quarterly in an amount not to exceed
available cash, as defined, for the immediately preceding calendar quarter.
At September 30, 2008, the amount of net assets of the Partnerships subsidiaries that was
restricted from transfer as a result of the amount of Available Cash, computed in accordance with
the Partnership Agreement, the applicable debt agreements and the partnership agreements of the
Partnerships subsidiaries, totaled approximately $900,000.
Note 7 Employee Retirement Plans
The General Partner sponsors a 401(k) savings plan for eligible employees. Participants in the
savings plan may contribute a portion of their compensation on a before-tax basis. Generally,
employee contributions are matched on a dollar-for-dollar (100%) basis up to 5% of eligible
compensation. The cost of benefits under our savings plan was $7,089 in Fiscal 2008, $7,039 in
Fiscal 2007 and $5,813 in Fiscal 2006.
The General
Partner sponsors a supplemental executive retirement plan, which is a
non-qualified deferred compensation plan for executives. Under the
plan, the General Partner credits to each participants account
annually an amount equal to 5 percent of the participants
compensation below the Internal Revenue Code compensation limits and
10% of compensation in excess of such limit. Costs associated with
this plan were not material in Fiscal 2008, Fiscal 2007, and Fiscal
2006.
Note 8 Inventories
Inventories comprise the following at September 30:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Propane gas |
|
$ |
121,365 |
|
|
$ |
103,587 |
|
Materials, supplies and other |
|
|
19,296 |
|
|
|
16,186 |
|
Appliances for sale |
|
|
3,545 |
|
|
|
5,067 |
|
|
|
|
|
|
|
|
Total inventories |
|
$ |
144,206 |
|
|
$ |
124,840 |
|
|
|
|
|
|
|
|
In addition to inventories on hand, we also enter into contracts to purchase propane to meet a
portion of our supply requirements. Generally, these contracts are one- to three-year agreements
subject to annual review and call for payment based on either market prices at date of delivery or
fixed prices.
F-17
Note 9 Property, Plant and Equipment
Property, plant and equipment comprise the following at September 30:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Land |
|
$ |
66,153 |
|
|
$ |
66,391 |
|
Buildings and improvements |
|
|
91,760 |
|
|
|
89,878 |
|
Transportation equipment |
|
|
68,254 |
|
|
|
68,005 |
|
Storage facilities |
|
|
118,650 |
|
|
|
109,934 |
|
Equipment, primarily cylinders and tanks |
|
|
992,532 |
|
|
|
958,917 |
|
Other |
|
|
22,582 |
|
|
|
19,934 |
|
|
|
|
|
|
|
|
|
Gross property, plant and equipment |
|
|
1,359,931 |
|
|
|
1,313,059 |
|
Less accumulated depreciation and amortization |
|
|
(743,097 |
) |
|
|
(679,081 |
) |
|
|
|
|
|
|
|
Net property, plant and equipment |
|
$ |
616,834 |
|
|
$ |
633,978 |
|
|
|
|
|
|
|
|
Note 10 Partners Capital and Incentive Compensation Plans
In accordance with the Partnership Agreement, the General Partner may, in its sole discretion,
cause the Partnership to issue an unlimited number of additional Common Units and other equity
securities of the Partnership ranking on a parity with the Common Units. In September 2007, in
conjunction with a propane business acquisition, the Partnership issued 166,205 Common Units to the
General Partner having a fair value of $34.28 per Common Unit (see Note 12).
Under the AmeriGas Propane, Inc. 2000 Long-Term Incentive Plan (2000 Propane Plan), the
General Partner may award to key employees the right to receive a total of 500,000 AmeriGas
Partners Common Units (comprising AmeriGas Performance Units), or cash equivalent to the fair
market value of such Common Units. In addition, the 2000 Propane Plan authorizes the crediting of
Common Unit distribution equivalents to participants accounts. AmeriGas Performance Unit grant
recipients are awarded a target number of AmeriGas Performance Units. The number of AmeriGas
Performance Units ultimately paid at the end of the performance period (generally three years) may
be higher or lower than the target amount based upon AmeriGas Partners Total Unitholder Return
(TUR) percentile rank relative to entities in a peer group. Grantees of AmeriGas Performance
Units will not receive any award if AmeriGas Partners TUR is below the 40th percentile of the peer
group, at the 40th percentile, the employee will be paid an award equal to 50% of the target award;
and at the 100th percentile will receive 200% of the target award. The actual amount of the award
is interpolated between these percentile rankings. Any distribution equivalents earned are paid in
cash. Except in the event of retirement, death or disability, each grant, unless paid, will
terminate when the participant ceases to be employed by the General Partner. There are certain
change of control and retirement eligibility conditions that, if met, generally result in
accelerated vesting or elimination of further service requirements.
Under SFAS 123R, AmeriGas Performance Units are equity awards with a market-based condition,
which, if settled in Common Units, results in the recognition of compensation cost over the
requisite employee service period regardless of whether the market-based condition is satisfied.
The fair values of AmeriGas Performance Units awarded after Fiscal 2005 are estimated using a Monte
Carlo valuation model. The fair value associated with the target award and the award above the
target, if any, which will be paid in AmeriGas Units, is accounted for as equity and the fair value
of all distribution equivalents,
which will be paid in cash, is accounted for as a liability. The expected term of the AmeriGas
Performance Unit awards is three years based on the performance period. Expected volatility is
based upon the historical volatility of AmeriGas Partners Common Units over a three-year period.
The risk-free interest rate is based on rates on U.S Treasury bonds at the time of grant.
Volatility for all comparator entities in the peer group is based on historical volatility.
F-18
The following table summarizes the weighted-average assumptions used to determine the fair
value of AmeriGas Performance Unit awards and related compensation costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants Awarded in Fiscal Year |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Risk-free rate |
|
|
3.1 |
% |
|
|
4.7 |
% |
|
|
5.2 |
% |
Expected life |
|
3 years |
|
|
3 years |
|
|
3 years |
|
Expected volatility |
|
|
17.7 |
% |
|
|
17.6 |
% |
|
|
18.1 |
% |
Dividend yield |
|
|
6.8 |
% |
|
|
7.1 |
% |
|
|
7.7 |
% |
We also have a nonexecutive AmeriGas Partners Common Unit plan under which the General Partner
may grant awards of up to a total of 200,000 Common Units (comprising AmeriGas Units) to key
employees who do not participate in the 2000 Propane Plan. Generally, awards under the nonexecutive
plan vest at the end of a three-year period and are paid in Common Units and cash. The General
Partner granted awards under the 2000 Propane Plan and the nonexecutive plan representing 40,050,
49,650, and 38,350 Common Units in Fiscal 2008, Fiscal 2007 and Fiscal 2006, respectively, having
weighted-average grant date fair values per Common Unit of $37.91, $33.63, and $29.62,
respectively. At September 30, 2008 and 2007, awards representing 126,100 and 119,317 Common Units,
respectively, were outstanding. At September 30, 2008, 281,586 and 138,800 Common Units were
available for future grants under the 2000 Propane Plan and the nonexecutive plan, respectively.
The following table summarizes AmeriGas Unit and AmeriGas Performance Unit award activity for
Fiscal 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Vested |
|
|
Non-Vested |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
Number of |
|
|
Grant Date |
|
|
Number of |
|
|
Grant Date |
|
|
Number of |
|
|
Grant Date |
|
|
|
Common |
|
|
Fair Value |
|
|
Common |
|
|
Fair Value |
|
|
Common |
|
|
Fair Value |
|
|
|
Units |
|
|
(per Unit) |
|
|
Units |
|
|
(per Unit) |
|
|
Units |
|
|
(per Unit) |
|
September 30, 2007 |
|
|
119,317 |
|
|
$ |
30.63 |
|
|
|
12,583 |
|
|
$ |
29.87 |
|
|
|
106,734 |
|
|
$ |
30.72 |
|
Granted |
|
|
40,050 |
|
|
$ |
37.91 |
|
|
|
|
|
|
$ |
|
|
|
|
40,050 |
|
|
$ |
37.91 |
|
Forfeited |
|
|
(750 |
) |
|
$ |
32.54 |
|
|
|
|
|
|
$ |
|
|
|
|
(750 |
) |
|
$ |
32.54 |
|
Vested |
|
|
|
|
|
$ |
|
|
|
|
59,900 |
|
|
$ |
31.10 |
|
|
|
(59,900 |
) |
|
$ |
31.10 |
|
Units paid |
|
|
(32,517 |
) |
|
$ |
29.49 |
|
|
|
(32,517 |
) |
|
$ |
29.49 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2008 |
|
|
126,100 |
|
|
$ |
33.44 |
|
|
|
39,966 |
|
|
$ |
32.03 |
|
|
|
86,134 |
|
|
$ |
34.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During Fiscal 2008, the Partnership paid 32,517 AmeriGas Partners Common Units, comprising
Common Units and $809 in cash, associated with 39,767 awards granted in Fiscal 2005. During Fiscal
2007, the Partnership paid 38,736 AmeriGas Partners Common Units,
comprising Common Units and
$600 in cash, associated with 51,200 awards granted in Fiscal 2004. During Fiscal 2006, the
Partnership paid 6,750 AmeriGas Partners Common Units, comprising Common Units and $73 in cash,
associated with 43,500 awards granted in Fiscal 2003.
As of September 30, 2008, there was $751 of unrecognized equity-based compensation expense
related to non-vested UGI stock options that is expected to be recognized over a weighted average
period of 1.7 years. As of September 30, 2008, there was a total of approximately $1,704 of
unrecognized compensation cost associated with 126,100 Common Unit awards that is expected to be
recognized over a weighted average period of 1.7 years. The total fair value of Common Units that
vested during Fiscal 2008, Fiscal 2007, and Fiscal 2006 was $2,087, $1,213 and $646, respectively.
As of September 30, 2008 and 2007, total liabilities of $1,023 and $1,769 associated with Common
Unit awards are reflected in Other current liabilities
and Other noncurrent liabilities in the
Consolidated Balance Sheets. It is the Partnerships practice to issue new AmeriGas Partners Common
Units for the portion of any Common Unit awards paid out in AmeriGas Partners Common Units.
F-19
Note 11 Commitments and Contingencies
We lease various buildings and other facilities and transportation, computer and office equipment
under operating leases. Certain of the leases contain renewal and purchase options and also contain
step-rent provisions. Our aggregate rental expense for such leases was $55,825 in Fiscal 2008,
$56,342 in Fiscal 2007 and $53,085 in Fiscal 2006.
Minimum future payments under noncancelable operating leases are as follows:
|
|
|
|
|
Year Ending September 30, |
2009 |
|
$ |
45,417 |
|
2010 |
|
|
38,818 |
|
2011 |
|
|
32,691 |
|
2012 |
|
|
26,712 |
|
2013 |
|
|
21,373 |
|
Thereafter |
|
|
56,985 |
|
|
|
|
|
Total minimum operating lease payments |
|
$ |
221,996 |
|
|
|
|
|
The Partnership enters into fixed price contracts with suppliers to purchase a portion of its
propane supply requirements. These contracts generally have terms of less than one year. As of
September 30, 2008, contractual obligations under these contracts totaled $36,451.
The Partnership also enters into contracts to purchase propane to meet additional supply
requirements. Generally, these contracts are one- to three-year agreements subject to annual review
and call for payment based on either market prices at the date of delivery or fixed prices.
On August 21, 2001, AmeriGas Partners, through AmeriGas OLP, acquired the propane distribution
businesses of Columbia Energy Group (the 2001 Acquisition) pursuant to the terms of a purchase
agreement (the 2001 Acquisition Agreement) by and among Columbia Energy Group (CEG), Columbia
Propane Corporation (Columbia Propane), Columbia Propane, L.P. (CPLP), CP Holdings,
Inc. (CPH, and together with Columbia Propane and CPLP, the Company Parties), AmeriGas
Partners, AmeriGas OLP and the General Partner (together with AmeriGas Partners and AmeriGas OLP,
the Buyer Parties). As a result of the 2001 Acquisition, AmeriGas OLP acquired all of the stock
of Columbia Propane and CPH and substantially all of the partnership interests of CPLP. Under the
terms of an earlier acquisition agreement (the 1999 Acquisition Agreement), the Company Parties
agreed to indemnify the former general partners of National Propane Partners, L.P. (a predecessor
company of the Columbia Propane businesses) and an affiliate (collectively, National General
Partners) against certain income tax and other losses that they may sustain as a result of the
1999 acquisition by CPLP of National Propane Partners, L.P. (the 1999 Acquisition) or the
operation of the business after the 1999 Acquisition (National Claims). At September 30, 2008,
the potential amount payable under this indemnity by the Company Parties was approximately $58,000.
These indemnity obligations will expire on the date that CPH acquires the remaining outstanding
partnership interest of CPLP, which is expected to occur on or after July 19, 2009. Under the
terms of the 2001 Acquisition Agreement, CEG agreed to indemnify the Buyer Parties and the Company
Parties against any losses that they sustain under the 1999 Acquisition Agreement and related
agreements (Losses), including National Claims, to the extent such claims are based on acts or
omissions of CEG or the Company Parties prior to the 2001 Acquisition. The Buyer Parties agreed to
indemnify CEG against Losses, including National Claims, to the extent such claims are based on
acts or omissions of the Buyer Parties or the Company Parties after the 2001 Acquisition. CEG and
the Buyer Parties have agreed to apportion certain losses resulting from National Claims to the
extent such losses result from the 2001 Acquisition itself. We believe that liability under such
indemnity agreement is remote.
F-20
Samuel and Brenda Swiger and their son (the Swigers) sustained personal injuries and
property damage as a result of a fire that occurred 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. In 2003, we
settled the individual personal injury and property damage claims of the Swigers. In 2004, the
court granted the plaintiffs motion to include customers acquired from Columbia Propane in August
2001 as additional potential class members and the plaintiffs amended their complaint to name
additional parties pursuant to such ruling. Subsequently, in March 2005, we filed a cross-claim
against CEG, former owner of Columbia Propane, seeking indemnification for conduct undertaken by
Columbia Propane prior to our acquisition. Class counsel has indicated that the class is seeking
compensatory damages in excess of $12,000 plus punitive damages, civil penalties and attorneys
fees.
In 2005, the Swigers 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 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 both actions.
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
operations on the site. DEC has classified the site as a significant threat to public health or
environment with further action required. The General Partner is researching the history of the
site and is investigating DECs findings. The General Partner has reviewed the preliminary site
characterization study prepared by the DEC and is in the early stages of investigating the extent
of contamination and the possible existence of other potentially responsible parties. Due to the
early stage of such investigation, the amount of expected clean up costs cannot be reasonably
estimated. When such expected clean up costs can be reasonably estimated, it is possible that the
amount could be material to the Partnerships results of operations.
We also have other contingent liabilities, pending claims and legal actions arising in the
normal course of our business. We cannot predict with certainty the final results of these and the
aforementioned matters. 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
such possible excess losses. Although management currently believes, after consultation with
counsel, that damages or settlements, if any, recovered by the plaintiffs in such claims or actions
will not have a material adverse effect on our financial position, 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.
F-21
Note 12 Related Party Transactions
Pursuant to the Partnership Agreement and a Management Services Agreement among AEH, the
general partner of Eagle OLP, 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 $345,460 in Fiscal 2008, $333,565 in Fiscal 2007 and
$313,553 in Fiscal 2006 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 comprising revenues, operating expenses and net assets employed
and considers the Partnerships relative percentage of such items to the total of such items for
UGIs other operating subsidiaries for which general and administrative services are provided.
Management believes that this allocation method is reasonable and equitable to the Partnership.
Such corporate expenses totaled $11,197 in Fiscal 2008, $10,820 in Fiscal 2007 and $10,350 in
Fiscal 2006. In addition, UGI and certain of its subsidiaries provide office space and automobile
liability insurance to the Partnership. These expenses totaled $2,328 in Fiscal 2008, $2,532 in
Fiscal 2007 and $2,682 in Fiscal 2006.
AmeriGas OLP purchases propane from UGI Energy Services, Inc. and subsidiaries (Energy
Services), which is owned by an affiliate of UGI, pursuant to a Product Sales Agreement whereby
Energy Services 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 Product Sales Agreement took
effect on April 1, 2005 and will continue for an initial term of five years with an option to
extend the agreement for up to an additional five years. The price to be paid for product purchased
under the agreement will be determined annually using a contractual formula that takes into account
published index prices and the locational value of deliveries at the Atlantic Energy terminal.
Purchases of propane by AmeriGas OLP from Energy Services totaled $47,307, $34,654 and $37,720
during Fiscal 2008, Fiscal 2007 and Fiscal 2006, respectively. Amounts due to Energy Services at
September 30, 2008 and 2007 totaled $1,309 and $3,507, respectively, which are included in accounts
payable related parties in our Consolidated Balance Sheets.
During Fiscal 2007, the General Partner contributed to the Partnership the net assets of All
Star Gas Corporation, a Missouri corporation that was acquired by the General Partner in
August 2007. In consideration for the retention of certain income tax liabilities relating to All
Star Gas Corporation, the Partnership issued 166,205 Common Units to the General Partner having a
fair value of $5,698 ($34.28 per Common Unit).
The Partnership also sells propane to other affiliates of UGI. Such amounts were not material
in Fiscal 2008, Fiscal 2007 or Fiscal 2006.
F-22
Note 13 Other Current Liabilities
Other current liabilities comprise the following at September 30:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Property and casualty liability |
|
$ |
27,831 |
|
|
$ |
17,923 |
|
Taxes other than income taxes |
|
|
6,411 |
|
|
|
6,718 |
|
Propane exchange liability |
|
|
12,583 |
|
|
|
11,950 |
|
Deferred tank fee revenue |
|
|
12,470 |
|
|
|
11,753 |
|
Other |
|
|
9,347 |
|
|
|
7,813 |
|
|
|
|
|
|
|
|
Total other current liabilities |
|
$ |
68,642 |
|
|
$ |
56,157 |
|
|
|
|
|
|
|
|
Note 14 Financial Instruments
In accordance with its propane price risk management policy, the Partnership uses derivative
instruments, including price swap and option contracts and contracts for the forward sale of
propane, to manage the cost of a portion of its forecasted purchases of propane and to manage
market risk associated with propane storage inventories. These derivative instruments have been
designated by the Partnership as cash flow or fair value hedges under SFAS 133. The fair values of
these derivative instruments are affected by changes in propane product prices. In addition to
these derivative instruments, the Partnership may also enter into contracts for the forward
purchase of propane as well as fixed-price supply agreements to manage propane market price risk.
These contracts generally qualify for the normal purchases and normal sales exception of SFAS 133
and therefore are not adjusted to fair value.
On occasion, we enter into interest rate protection agreements (IRPAs) designed to manage
interest rate risk associated with planned issuances of fixed-rate long-term debt. We designate
these IRPAs as cash flow hedges. Gains or losses on IRPAs are included in accumulated other
comprehensive income and are reclassified to interest expense as the interest expense on the
associated debt issue affects earnings.
Certain of the Partnerships over-the-counter derivative financial instruments have bilateral
collateral provisions which require the transfer of cash collateral when the value of the derivative
instruments reach certain threshold amounts. Although commodity propane prices increased through much of Fiscal 2008, a precipitous decline in prices in late Fiscal 2008 which continued into Fiscal 2009 has resulted in greater
cash needed by the Partnership to fund counterparty collateral
requirements. These collateral requirements are associated with
derivative financial instruments used by the Partnership to manage market price risk
associated with fixed sales price commitments to customers
principally during the heating-season months of October to March. At September 30, 2008, the Partnership had made
collateral deposits of $17,830 with counterparties. At November 20, 2008, such collateral deposits totaled $144,493.
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 are not subject to the
accounting requirements of SFAS 133 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 or the
value of the contract is directly associated with the price or value of a service.
During Fiscal 2008 and Fiscal 2007, there were no net losses recognized in earnings
representing cash flow ineffectiveness. During Fiscal 2006, the net loss recognized in earnings
representing cash flow hedge ineffectiveness was $445. Gains and losses included in accumulated
other comprehensive income at September 30, 2008 relating to cash flow hedges will be reclassified
into (1) cost of sales when the forecasted purchase of propane subject to the hedges impacts net
income and (2) interest expense when interest on anticipated issuances of fixed-rate long-term debt
is reflected in net income. Included in accumulated other comprehensive income at September 30,
2008 are net losses of approximately $5,719 from IRPAs associated with forecasted issuances of debt
generally anticipated to occur during Fiscal 2009 and 2010. The amount of net loss that is expected
to be reclassified into net income during the next twelve months is not material. The remaining net
loss on derivative instruments included in accumulated other comprehensive income at September 30,
2008 of $53,486 is principally associated with future purchases of propane generally anticipated to
occur during the next twelve months. The actual amount of gains or losses on unsettled derivative
instruments that ultimately is reclassified into net income will depend upon the value of such
derivative contracts when settled. The fair value of derivative instruments is included in
Derivative financial instruments, Other assets and Other noncurrent liabilities in the
Consolidated Balance Sheets.
F-23
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 amounts and
estimated fair values of our remaining financial instrument assets and (liabilities) at September
30 (including unsettled derivative instruments) are as follows:
|
|
|
|
|
|
|
|
|
|
|
Asset (Liability) |
|
|
|
Carrying |
|
|
Estimated |
|
|
|
Amount |
|
|
Fair Value |
|
2008: |
|
|
|
|
|
|
|
|
Propane swap and option contracts |
|
$ |
(54,018 |
) |
|
$ |
(54,018 |
) |
Interest rate protection agreements |
|
|
(5,778 |
) |
|
|
(5,778 |
) |
Long-term debt |
|
|
(933,390 |
) |
|
|
(863,550 |
) |
|
|
|
|
|
|
|
|
|
2007: |
|
|
|
|
|
|
|
|
Propane swap and option contracts |
|
$ |
18,290 |
|
|
$ |
18,290 |
|
Interest rate protection agreements |
|
|
583 |
|
|
|
583 |
|
Long-term debt |
|
|
(933,042 |
) |
|
|
(923,505 |
) |
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. Fair values of derivative
instruments reflect the estimated amounts that we would receive or (pay) to terminate the contracts
at the reporting date based upon quoted market prices of comparable contracts.
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. We attempt to minimize our credit risk associated with our
derivative financial instruments through the application of credit policies.
Note 15 Other Income, Net
Other income, net, comprises the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Gain on sales of fixed assets |
|
$ |
1,698 |
|
|
$ |
862 |
|
|
$ |
2,801 |
|
Finance charges |
|
|
11,822 |
|
|
|
10,208 |
|
|
|
8,371 |
|
Other |
|
|
5,335 |
|
|
|
6,502 |
|
|
|
5,127 |
|
|
|
|
|
|
|
|
|
|
|
Total other income, net |
|
$ |
18,855 |
|
|
$ |
17,572 |
|
|
$ |
16,299 |
|
|
|
|
|
|
|
|
|
|
|
F-24
Note 16 Quarterly Data (Unaudited)
The following unaudited quarterly data includes all adjustments (consisting only of normal
recurring adjustments), which we consider necessary for a fair presentation. Our quarterly results
fluctuate because of the seasonal nature of our propane business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
March 31, |
|
|
June 30, |
|
|
September 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007(a) |
|
Revenues |
|
$ |
748,168 |
|
|
$ |
616,591 |
|
|
$ |
1,006,656 |
|
|
$ |
809,808 |
|
|
$ |
535,129 |
|
|
$ |
433,917 |
|
|
$ |
525,236 |
|
|
$ |
417,059 |
|
Operating income
(loss) |
|
$ |
73,958 |
|
|
$ |
75,260 |
|
|
$ |
153,287 |
|
|
$ |
139,260 |
|
|
$ |
9,585 |
|
|
$ |
12,035 |
|
|
$ |
(1,966 |
) |
|
$ |
39,175 |
|
Net income (loss) |
|
$ |
54,305 |
|
|
$ |
55,640 |
|
|
$ |
132,950 |
|
|
$ |
119,886 |
|
|
$ |
(8,788 |
) |
|
$ |
(5,712 |
) |
|
$ |
(20,448 |
) |
|
$ |
20,970 |
|
Income (loss) per
limited partner
unit -basic
and diluted (b) |
|
$ |
0.87 |
|
|
$ |
0.88 |
|
|
$ |
1.58 |
|
|
$ |
1.47 |
|
|
$ |
(0.16 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.36 |
) |
|
$ |
0.30 |
|
|
|
|
(a) |
|
Includes a gain on sale of the Partnerships 3.5 million barrel storage facility which
increased net income by $45,651 or $0.79 per limited partner unit. |
|
(b) |
|
Theoretical distributions of net income in accordance with EITF 03-6 resulted in an increased
allocation of net income to the General Partner in the computation of income per limited
partner unit which had the effect of decreasing quarterly earnings per limited partner unit
for the quarters ended December 31 and March 31 as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
March 31, |
|
Quarter ended: |
|
2007 |
|
|
2006 |
|
|
2008 |
|
|
2007 |
|
Decrease in income
per limited partner
unit |
|
$ |
(0.07 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.73 |
) |
|
$ |
(0.62 |
) |
Note 17 Subsequent Events
On October 1, 2008, AmeriGas OLP acquired all of the assets of Penn Fuel Propane, LLC (now named
UGI Central Penn Propane, LLC, CPP) from CPP, a subsidiary of UGI Central Penn Gas, Inc, for
$32,000 cash plus estimated working capital of $1,621. CPP sells propane to customers primarily in
eastern Pennsylvania. AmeriGas OLP funded the acquisition of the assets of CPP principally from
borrowings under its Credit Agreement.
On November 13, 2008, AmeriGas OLP sold its 600,000 barrel refrigerated, above-ground storage
facility located on leased property in California for approximately $43,000 in cash. We
expect to record a pre-tax gain of approximately $40,000 associated with this transaction during
our first quarter of Fiscal 2009.
F-25
Report of Independent Registered Public Accounting Firm
To the Partners of AmeriGas Partners, L.P. and the Board of Directors of AmeriGas Propane, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related consolidated
statements of operations, of partners capital and of cash flows present fairly, in all material
respects, the financial position of AmeriGas Partners, L.P. and its subsidiaries at September 30,
2008 and 2007, and the results of their operations and their cash flows for each of the three years
in the period ended September 30, 2008 in conformity with accounting principles generally accepted
in the United States of America. In addition, in our opinion, the
financial statement schedules listed in the index appearing
under Item 15(a)(2) present fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements. Also in our opinion, the Partnership maintained, in all material
respects, effective internal control over financial reporting as of September 30, 2008 based on
criteria established in Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Partnerships management is
responsible for these financial statements and financial statement
schedules, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting included in Managements Report on Internal Control over Financial Reporting. Our
responsibility is to express opinions on these financial statements,
on the financial statement schedules and the Partnerships internal
control over financial reporting based on our integrated audits. We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether effective internal
control over financial reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. Our
audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 21, 2008
F-26
General Partners Report
Financial Statements
The Partnerships consolidated financial statements and other financial information contained in
this Annual Report are prepared by the management of the General Partner, AmeriGas Propane, Inc.,
which is responsible for their fairness, integrity and objectivity. The consolidated financial
statements and related information were prepared in accordance with accounting principles generally
accepted in the United States of America and include amounts that are based on managements best
judgments and estimates.
The Audit Committee of the Board of Directors of the General Partner is composed of three
members, none of whom is an employee of the General Partner. This Committee is responsible for
overseeing the financial reporting process and the adequacy of controls, and for monitoring the
independence and performance of the Partnerships independent registered public accounting firm and
internal auditors. The Committee is also responsible for maintaining direct channels of
communication among the Board of Directors, management and both the independent registered public
accounting firm and internal auditors.
PricewaterhouseCoopers LLP, our independent registered public accounting firm, is engaged to
perform audits of our consolidated financial statements. These audits are performed in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Our
independent registered public accounting firm was given unrestricted access to all financial
records and related data, including minutes of all meetings of the Board of Directors and
committees of the Board. The Partnership believes that all representations made to the independent
registered public accounting firm during their audits were valid and appropriate.
Managements Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial
reporting for the Partnership. In order to evaluate the effectiveness of internal control over
financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, management has
conducted an assessment, including testing, of the Partnerships internal control over financial
reporting using the criteria in Internal Control Integrated Framework, issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO Framework).
Internal control over financial reporting refers to the process designed under the supervision
and participation of management including our Chief Executive Officer and Chief Financial Officer,
to provide reasonable, but not absolute, assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with accounting
principles generally accepted in the United States and includes policies and procedures that, among
other things, provide reasonable assurance that assets are safeguarded and that transactions are
executed in accordance with managements authorization and are properly recorded to permit the
preparation of reliable financial information. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate due to changing conditions, or the degree of compliance with the policies or procedures
may deteriorate.
Based on its assessment, management has concluded that the Partnership maintained effective
internal control over financial reporting as of September 30, 2008, based on the COSO Framework.
Eugene V. N. Bissell
Chief Executive Officer
Jerry E. Sheridan
Chief Financial Officer
William J. Stanczak
Chief Accounting Officer
F-27
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
BALANCE SHEETS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
959 |
|
|
$ |
180 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
959 |
|
|
|
180 |
|
|
|
|
|
|
|
|
|
|
Investment in AmeriGas Propane, L.P. |
|
|
1,043,285 |
|
|
|
1,107,649 |
|
Other assets |
|
|
8,207 |
|
|
|
9,474 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,052,451 |
|
|
$ |
1,117,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS CAPITAL |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
$ |
4,812 |
|
|
$ |
5,764 |
|
Accrued interest |
|
|
20,496 |
|
|
|
20,496 |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
25,308 |
|
|
|
26,260 |
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
779,768 |
|
|
|
779,815 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners capital: |
|
|
|
|
|
|
|
|
Common unitholders |
|
|
308,186 |
|
|
|
293,245 |
|
General partner |
|
|
3,094 |
|
|
|
2,952 |
|
Accumulated other comprehensive (loss) income |
|
|
(63,905 |
) |
|
|
15,031 |
|
|
|
|
|
|
|
|
Total partners capital |
|
|
247,375 |
|
|
|
311,228 |
|
|
|
|
|
|
|
|
|
Total liabilities and partners capital |
|
$ |
1,052,451 |
|
|
$ |
1,117,303 |
|
|
|
|
|
|
|
|
Commitments and Contingencies:
The only scheduled principal repayment of long-term debt during the next five fiscal years ending
September 30 is $14,640 due May 2011.
S-1
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
STATEMENTS OF OPERATIONS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
|
Ended |
|
|
|
September 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (income) expenses, net |
|
$ |
(49 |
) |
|
$ |
78 |
|
|
$ |
151 |
|
Loss on extinguishments of debt |
|
|
|
|
|
|
|
|
|
|
(2,702 |
) |
Interest expense |
|
|
(58,003 |
) |
|
|
(58,006 |
) |
|
|
(51,648 |
) |
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(58,052 |
) |
|
|
(57,928 |
) |
|
|
(54,199 |
) |
Income tax expense |
|
|
3 |
|
|
|
30 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss before equity in income of AmeriGas Propane, L.P. |
|
|
(58,055 |
) |
|
|
(57,958 |
) |
|
|
(54,239 |
) |
|
Equity in income of AmeriGas Propane, L.P. |
|
|
216,074 |
|
|
|
248,742 |
|
|
|
145,397 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
158,019 |
|
|
$ |
190,784 |
|
|
$ |
91,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General partners interest in net income |
|
$ |
2,278 |
|
|
$ |
5,600 |
|
|
$ |
912 |
|
|
|
|
|
|
|
|
|
|
|
|
Limited partners interest in net income |
|
$ |
155,741 |
|
|
$ |
185,184 |
|
|
$ |
90,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per limited partner unit basic and diluted: |
|
$ |
2.70 |
|
|
$ |
3.15 |
|
|
$ |
1.59 |
|
|
|
|
|
|
|
|
|
|
|
|
Average limited partner units outstanding basic (thousands) |
|
|
57,005 |
|
|
|
56,826 |
|
|
|
56,797 |
|
|
|
|
|
|
|
|
|
|
|
|
Average limited partner units outstanding diluted (thousands) |
|
|
57,044 |
|
|
|
56,862 |
|
|
|
56,835 |
|
|
|
|
|
|
|
|
|
|
|
S-2
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
STATEMENTS OF CASH FLOWS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
|
Ended |
|
|
|
September 30, |
|
|
|
2008 |
|
|
2007 (b) |
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES (a) |
|
$ |
144,664 |
|
|
$ |
152,752 |
|
|
$ |
121,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Contributions to AmeriGas Propane, L.P. |
|
|
|
|
|
|
(264 |
) |
|
|
(282,207 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities |
|
|
0 |
|
|
|
(264 |
) |
|
|
(282,207 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
Distributions |
|
|
(144,659 |
) |
|
|
(154,672 |
) |
|
|
(130,805 |
) |
Issuance of long-term debt |
|
|
|
|
|
|
|
|
|
|
343,875 |
|
Repayments of long-term debt |
|
|
|
|
|
|
|
|
|
|
(60,000 |
) |
Proceeds from issuance of Common Units |
|
|
766 |
|
|
|
814 |
|
|
|
146 |
|
Capital contribution from General Partner |
|
|
8 |
|
|
|
66 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used) provided by financing activities |
|
|
(143,885 |
) |
|
|
(153,792 |
) |
|
|
153,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents |
|
$ |
779 |
|
|
$ |
(1,304 |
) |
|
$ |
(7,322 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS: |
|
|
|
|
|
|
|
|
|
|
|
|
End of year |
|
$ |
959 |
|
|
$ |
180 |
|
|
$ |
1,484 |
|
Beginning of year |
|
|
180 |
|
|
|
1,484 |
|
|
|
8,806 |
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) |
|
$ |
779 |
|
|
$ |
(1,304 |
) |
|
$ |
(7,322 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes distributions received from AmeriGas Propane, L.P. of $200,983, $210,996 and $171,510
for the years ended September 30, 2008, 2007 and 2006, respectively. |
|
(b) |
|
During the year ended September 30, 2007, the Partnership issued Common Units to the
General Partner having a fair value of $34.28 per Common Unit in consideration for the retention of
certain income tax liabilities
relating to the acquisition of All Star Gas Corporation. |
S-3
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charged |
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
(credited) |
|
|
|
|
|
|
Balance at |
|
|
|
beginning |
|
|
to costs and |
|
|
|
|
|
|
end of |
|
|
|
of year |
|
|
expenses |
|
|
Other |
|
|
year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from assets in
the consolidated balance sheet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
15,149 |
|
|
$ |
15,852 |
|
|
$ |
(10,786 |
)(1) |
|
$ |
20,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other reserves: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and casualty
liability |
|
$ |
57,714 |
|
|
$ |
31,498 |
|
|
$ |
(18,040 |
)(2) |
|
$ |
71,172 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Environmental, litigation and other |
|
$ |
12,056 |
|
|
$ |
4,559 |
|
|
$ |
(2,280 |
)(2) |
|
$ |
14,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146 |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from assets in
the consolidated balance sheet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
14,460 |
|
|
$ |
9,544 |
|
|
$ |
(10,131 |
)(1) |
|
$ |
15,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,276 |
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other reserves: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and casualty
liability |
|
$ |
58,550 |
|
|
$ |
10,987 |
|
|
$ |
(11,823 |
)(2) |
|
$ |
57,714 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Environmental, litigation and other |
|
$ |
12,680 |
|
|
$ |
90 |
|
|
$ |
(685 |
)(2) |
|
$ |
12,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29 |
)(3) |
|
|
|
|
S-4
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (continued)
(Thousands of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charged |
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
(credited) |
|
|
|
|
|
|
Balance at |
|
|
|
beginning |
|
|
to costs and |
|
|
|
|
|
|
end of |
|
|
|
of year |
|
|
expenses |
|
|
Other |
|
|
year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from assets in
the consolidated balance sheet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
13,143 |
|
|
$ |
10,768 |
|
|
$ |
(9,451 |
)(1) |
|
$ |
14,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other reserves: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and casualty liability |
|
$ |
60,620 |
|
|
$ |
11,856 |
|
|
$ |
(13,926 |
)(2) |
|
$ |
58,550 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Environmental, litigation and other |
|
$ |
8,303 |
|
|
$ |
5,140 |
|
|
$ |
(528 |
)(2) |
|
$ |
12,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(235 |
)(3) |
|
|
|
|
|
|
|
(1) |
|
Uncollectible accounts written off, net of recoveries |
|
(2) |
|
Payments, net of any refunds |
|
(3) |
|
Other adjustments, primarily reclassifications |
|
(4) |
|
Acquisitions |
|
(5) |
|
At September 30, 2008, 2007 and 2006, the Partnership had insurance indemnification receivables associated with its property and casualty liabilities totaling $17,926, $0, and $246, respectively. |
S-5
EXHIBIT INDEX
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
3.1 |
|
|
Third Amended and Restated Agreement of Limited
Partnership of AmeriGas Partners, L.P. dated as
of December 1, 2004, and Amendment No. 1
effective October 15, 2007 thereto |
|
|
|
|
|
|
10.4 |
|
|
AmeriGas Propane, Inc. Executive Employee Severance Plan, in effect January 1, 2008 |
|
|
|
|
|
|
10.6 |
|
|
AmeriGas Propane, Inc. Discretionary Long-Term Incentive Plan for Non-Executive Key Employees
effective July 1, 2000 and Amended as of January 1, 2005 |
|
|
|
|
|
|
10.7 |
|
|
AmeriGas Propane, Inc. 2000 Long-Term Incentive Plan on Behalf of AmeriGas Partners, L.P., as
amended and restated effective January 1, 2005 |
|
|
|
|
|
|
10.44 |
|
|
AmeriGas Propane, Inc. Non-Qualified Deferred Compensation Plan, as amended and restated
effective January 1, 2009 |
|
|
|
|
|
|
21 |
|
|
Subsidiaries of the Registrant |
|
|
|
|
|
|
23 |
|
|
Consent of PricewaterhouseCoopers LLP |
|
|
|
|
|
|
31.1 |
|
|
Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act |
|
|
|
|
|
|
31.2 |
|
|
Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act |
|
|
|
|
|
|
32 |
|
|
Certification by the Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act |
|
|
|
|
|
|
99 |
|
|
UGI Corporation Incentive Stock Award Information |