APU 2013 Q3 6.30.2013 10Q
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number 1-13692
 
AMERIGAS PARTNERS, L.P.
(Exact name of registrant as specified in its charters)
 
Delaware
 
23-2787918
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
460 North Gulph Road, King of Prussia, PA 19406
(Address of Principal Executive Offices) (Zip Code)
(610) 337-7000
(Registrant’s Telephone Number, Including Area Code) 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
ý
  
Accelerated filer
¨
 
 
 
 
 
Non-accelerated filer
¨
  
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
At July 31, 2013, there were 92,824,539 Common Units of AmeriGas Partners, L.P. outstanding.

Table of Contents
AMERIGAS PARTNERS, L.P.


TABLE OF CONTENTS
 

 
  
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Table of Contents

AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
 
 
 
June 30,
2013
 
September 30,
2012
 
June 30,
2012
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
16,533

 
$
60,102

 
$
122,843

Accounts receivable (less allowances for doubtful accounts of $23,510, $17,217 and $22,961, respectively)
 
298,558

 
266,677

 
230,237

Accounts receivable - related parties
 
1,234

 
970

 
1,390

Inventories
 
142,406

 
163,746

 
162,286

Derivative financial instruments
 
424

 
1,478

 
9,933

Prepaid expenses and other current assets
 
10,045

 
30,395

 
23,093

Total current assets
 
469,200

 
523,368

 
549,782

Property, plant and equipment (less accumulated depreciation and amortization of $1,194,133, $1,075,528 and $1,037,327, respectively)
 
1,456,055

 
1,499,225

 
1,508,136

Goodwill
 
1,924,820

 
1,914,808

 
1,862,259

Intangible assets, net
 
497,648

 
535,996

 
594,883

Other assets
 
40,487

 
43,934

 
44,891

Total assets
 
$
4,388,210

 
$
4,517,331

 
$
4,559,951

LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Current maturities of long-term debt
 
$
10,006

 
$
30,706

 
$
43,410

Bank loans
 
80,000

 
49,900

 
68,800

Accounts payable - trade
 
127,497

 
170,424

 
132,823

Accounts payable - related parties
 
1,518

 
2,012

 
820

Customer deposits and advances
 
80,194

 
167,614

 
81,916

Derivative financial instruments
 
13,573

 
42,347

 
75,686

Other current liabilities
 
164,020

 
207,842

 
176,698

Total current liabilities
 
476,808

 
670,845

 
580,153

Long-term debt
 
2,293,199

 
2,297,363

 
2,301,720

Other noncurrent liabilities
 
87,331

 
80,563

 
82,714

Total liabilities
 
2,857,338

 
3,048,771

 
2,964,587

Commitments and contingencies (note 7)
 

 

 

Partners’ capital:
 
 
 
 
 
 
AmeriGas Partners, L.P. partners’ capital:
 
 
 
 
 
 
Common unitholders (units issued - 92,821,523, 92,801,347 and 92,784,524, respectively)
 
1,490,680

 
1,455,702

 
1,608,145

General partner
 
17,310

 
16,975

 
18,504

Accumulated other comprehensive loss
 
(16,959
)
 
(43,569
)
 
(71,117
)
Total AmeriGas Partners, L.P. partners’ capital
 
1,491,031

 
1,429,108

 
1,555,532

Noncontrolling interest
 
39,841

 
39,452

 
39,832

Total partners’ capital
 
1,530,872

 
1,468,560

 
1,595,364

Total liabilities and partners’ capital
 
$
4,388,210

 
$
4,517,331

 
$
4,559,951


See accompanying notes to condensed consolidated financial statements.

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Table of Contents

AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Thousands of dollars, except per unit amounts)
 
 
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
 
2013
 
2012
 
2013
 
2012
Revenues:
 
 
 
 
 
 
 
 
Propane
 
$
518,361

 
$
507,529

 
$
2,413,802

 
$
2,227,576

Other
 
63,358

 
64,416

 
220,771

 
183,755

 
 
581,719

 
571,945

 
2,634,573

 
2,411,331

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of sales - propane (excluding depreciation shown below)
 
283,037

 
312,487

 
1,306,728

 
1,394,860

Cost of sales - other (excluding depreciation shown below)
 
22,657

 
21,516

 
63,460

 
52,962

Operating and administrative expenses
 
224,452

 
242,905

 
733,267

 
655,090

Depreciation
 
41,738

 
38,311

 
117,668

 
94,593

Amortization
 
10,775

 
11,204

 
32,825

 
23,902

Other income, net
 
(7,579
)
 
(6,190
)
 
(23,385
)
 
(16,931
)
 
 
575,080

 
620,233

 
2,230,563

 
2,204,476

Operating income (loss)
 
6,639

 
(48,288
)
 
404,010

 
206,855

Gain (loss) on extinguishments of debt
 
—

 
30

 
—

 
(13,349
)
Interest expense
 
(41,247
)
 
(41,853
)
 
(124,219
)
 
(103,431
)
(Loss) income before income taxes
 
(34,608
)
 
(90,111
)
 
279,791

 
90,075

Income tax benefit (expense)
 
59

 
208

 
(516
)
 
(1,006
)
Net (loss) income
 
(34,549
)
 
(89,903
)
 
279,275

 
89,069

Add net loss (deduct net income) attributable to noncontrolling interest
 
(46
)
 
521

 
(3,997
)
 
(2,041
)
Net (loss) income attributable to AmeriGas Partners, L.P.
 
$
(34,595
)
 
$
(89,382
)
 
$
275,278

 
$
87,028

 
 
 
 
 
 
 
 
 
General partner’s interest in net (loss) income attributable to AmeriGas Partners, L.P.
 
$
5,045

 
$
3,355

 
$
16,648

 
$
9,628

Limited partners’ interest in net (loss) income attributable to AmeriGas Partners, L.P.
 
$
(39,640
)
 
$
(92,737
)
 
$
258,630

 
$
77,400

(Loss) income per limited partner unit - basic and diluted:
 
 
 
 
 
 
 
 
Basic
 
$
(0.43
)
 
$
(1.00
)
 
$
2.70

 
$
0.91

Diluted
 
$
(0.43
)
 
$
(1.00
)
 
$
2.70

 
$
0.91

Average limited partner units outstanding (thousands):
 
 
 
 
 
 
 
 
Basic
 
92,838

 
92,783

 
92,830

 
77,615

Diluted
 
92,838

 
92,783

 
92,904

 
77,668

See accompanying notes to condensed consolidated financial statements.


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AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(Thousands of dollars)
 
 
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
 
2013
 
2012
 
2013
 
2012
Net (loss) income
 
$
(34,549
)
 
$
(89,903
)
 
$
279,275

 
$
89,069

Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Net losses on derivative instruments
 
(19,434
)
 
(65,853
)
 
(24,348
)
 
(100,616
)
Reclassifications of net losses on derivative instruments
 
8,479

 
14,625

 
51,229

 
33,791

  Other comprehensive (loss) income
 
(10,955
)
 
(51,228
)
 
26,881

 
(66,825
)
Total comprehensive (loss) income
 
(45,504
)
 
(141,131
)
 
306,156

 
22,244

Add comprehensive loss (deduct comprehensive income) attributable to noncontrolling interest
 
65

 
1,034

 
(4,268
)
 
(1,373
)
Comprehensive (loss) income attributable to AmeriGas Partners, L.P.
 
$
(45,439
)
 
$
(140,097
)
 
$
301,888

 
$
20,871

See accompanying notes to condensed consolidated financial statements.


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AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Thousands of dollars)
 
 
 
Nine Months Ended
June 30,
 
 
2013
 
2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income
 
$
279,275

 
$
89,069

Adjustments to reconcile net income to net cash from operating activities
 
 
 
 
Depreciation and amortization
 
150,493

 
118,495

Provision for uncollectible accounts
 
12,045

 
14,128

Net change in realized gains and losses deferred as cash flow hedges
 
1,171

 
(7,350
)
Loss on extinguishments of debt
 
—

 
13,349

Other, net
 
1,867

 
9,274

Net change in:
 
 
 
 
Accounts receivable
 
(46,531
)
 
110,093

Inventories
 
21,358

 
55,235

Accounts payable
 
(43,423
)
 
(73,904
)
Other current assets
 
9,472

 
8,287

Other current liabilities
 
(113,348
)
 
(83,178
)
Net cash provided by operating activities
 
272,379

 
253,498

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Expenditures for property, plant and equipment
 
(80,736
)
 
(70,264
)
Proceeds from disposals of assets
 
5,891

 
5,030

Acquisitions of businesses, net of cash acquired
 
(1,045
)
 
(1,418,202
)
Net cash used by investing activities
 
(75,890
)
 
(1,483,436
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Distributions
 
(242,795
)
 
(192,561
)
Proceeds from issuance of Common Units
 
—

 
276,562

Noncontrolling interest activity
 
(3,879
)
 
(2,720
)
Increase (decrease) in bank loans
 
30,100

 
(26,700
)
Issuances of long-term debt
 
—

 
1,524,192

Repayments of long-term debt
 
(24,806
)
 
(237,578
)
Proceeds associated with equity-based compensation plans, net of tax withheld
 
1,312

 
153

Capital contributions from General Partner
 
10

 
2,801

Net cash (used) provided by financing activities
 
(240,058
)
 
1,344,149

Cash and cash equivalents (decrease) increase
 
$
(43,569
)
 
$
114,211

CASH AND CASH EQUIVALENTS:
 
 
 
 
End of period
 
$
16,533

 
$
122,843

Beginning of period
 
60,102

 
8,632

(Decrease) increase
 
$
(43,569
)
 
$
114,211

See accompanying notes to condensed consolidated financial statements.


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AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(unaudited)
(Thousands of dollars, except unit data) 
 
 
Number of
Common Units
 
Common
unitholders
 
General
partner
 
Accumulated
other
comprehensive
income (loss)
 
Total
AmeriGas
Partners, L.P.
partners’ capital
 
Noncontrolling
interest
 
Total
partners’
capital
For the nine months ended June 30, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance September 30, 2012
 
92,801,347

 
$
1,455,702

 
$
16,975

 
$
(43,569
)
 
$
1,429,108

 
$
39,452

 
$
1,468,560

Net income
 
 
 
258,630

 
16,648

 
 
 
275,278

 
3,997

 
279,275

Net losses on derivative instruments
 
 
 
 
 
 
 
(24,102
)
 
(24,102
)
 
(246
)
 
(24,348
)
Reclassification of net losses on derivative instruments
 
 
 
 
 
 
 
50,712

 
50,712

 
517

 
51,229

Distributions
 
 
 
(226,472
)
 
(16,323
)
 
 
 
(242,795
)
 
(3,879
)
 
(246,674
)
Unit-based compensation expense
 
 
 
2,996

 
 
 
 
 
2,996

 
 
 
2,996

Common Units issued in connection with incentive compensation plans, net of tax withheld
 
20,176

 
(176
)
 
10

 
 
 
(166
)
 
 
 
(166
)
Balance June 30, 2013
 
92,821,523

 
$
1,490,680

 
$
17,310

 
$
(16,959
)
 
$
1,491,031

 
$
39,841

 
$
1,530,872

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of
Common Units
 
Common
unitholders
 
General
partner
 
Accumulated
other
comprehensive
income (loss)
 
Total
AmeriGas
Partners, L.P.
partners’ capital
 
Noncontrolling
interest
 
Total
partners’
capital
For the nine months ended June 30, 2012:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance September 30, 2011
 
57,124,296

 
$
340,180

 
$
3,436

 
$
(4,960
)
 
$
338,656

 
$
12,823

 
$
351,479

Net income
 
 
 
77,400

 
9,628

 
 
 
87,028

 
2,041

 
89,069

Net losses on derivative instruments
 
 
 
 
 
 
 
(99,607
)
 
(99,607
)
 
(1,009
)
 
(100,616
)
Reclassification of net losses on derivative instruments
 
 
 
 
 
 
 
33,450

 
33,450

 
341

 
33,791

Distributions
 
 
 
(181,877
)
 
(10,684
)
 
 
 
(192,561
)
 
(3,040
)
 
(195,601
)
Unit-based compensation expense
 
 
 
5,089

 
 
 
 
 
5,089

 
 
 
5,089

Common Units issued in connection with the Heritage Acquisition
 
29,567,362

 
1,132,628

 
 
 
 
 
1,132,628

 
 
 
1,132,628

General Partner contribution to AmeriGas OLP in connection with the Heritage Acquisition
 
(635,667
)
 
(28,357
)
 
 
 
 
 
(28,357
)
 
28,357

 
—

General Partner contribution to AmeriGas Partners, L.P. in connection with the Heritage Acquisition
 
(298,660
)
 
(13,323
)
 
13,323

 
 
 
—

 
 
 
—

Common Units issued in connection with public offering
 
7,000,000

 
276,562

 
2,800

 
 
 
279,362

 
 
 
279,362

Common Units issued in connection with incentive compensation plans, net of tax withheld
 
27,193

 
(157
)
 
1

 
 
 
(156
)
 
 
 
(156
)
General Partner contribution to AmeriGas OLP
 
 
 
 
 
 
 
 
 
 
 
319

 
319

Balance June 30, 2012
 
92,784,524

 
$
1,608,145

 
$
18,504

 
$
(71,117
)
 
$
1,555,532

 
$
39,832

 
$
1,595,364

See accompanying notes to condensed consolidated financial statements.

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Table of Contents
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)


1.
Nature of Operations

AmeriGas Partners, L.P. (“AmeriGas Partners”) is a publicly traded limited partnership that conducts a national propane distribution business through its principal operating subsidiary AmeriGas Propane, L.P. (“AmeriGas OLP”) and prior to its merger with AmeriGas OLP on July 1, 2013 (the “Merger”), AmeriGas OLP’s principal operating subsidiary Heritage Operating, L.P. (“HOLP”). AmeriGas OLP and prior to the Merger, HOLP, are referred to herein as the “Operating Partnership.” AmeriGas Partners and AmeriGas OLP are Delaware limited partnerships. AmeriGas Partners, the Operating Partnership and its subsidiaries are collectively referred to herein as the “Partnership” or “we.” The Operating Partnership is engaged in the distribution of propane and related equipment and supplies. The Operating Partnership comprises the largest retail propane distribution business in the United States serving residential, commercial, industrial, motor fuel and agricultural customers in all 50 states.
At June 30, 2013, 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 23,756,882 AmeriGas Partners Common Units (“Common Units”). The remaining Common Units outstanding comprise 39,497,279 publicly held Common Units and 29,567,362 Common Units held by a subsidiary of Energy Transfer Partners, L.P. (“ETP”) as a result of the January 12, 2012, acquisition of substantially all of ETP’s propane operations (“Heritage Propane”) (see Note 4). The Common Units represent limited partner interests in AmeriGas Partners. AmeriGas Partners holds a 98.99% limited partner interest in AmeriGas OLP. In July 2013, ETP sold 7,500,000 of the Common Units it held in an underwritten public offering. AmeriGas Partners did not receive any proceeds from the sale of the Common Units by ETP.
AmeriGas Partners and the Operating Partnership have no employees. Employees of the General Partner conduct, direct and manage our operations. Prior to the Merger, the General Partner provided management and administrative services to Heritage Operating GP, LLC (“HOLP GP”), the general partner of HOLP, under a management services agreement. The General Partner is reimbursed monthly for all direct and indirect expenses it incurs on our behalf (see Note 6).

2.
Significant Accounting Policies

The condensed consolidated financial statements include the accounts of AmeriGas Partners and its majority-owned subsidiaries principally comprising AmeriGas OLP and, prior to the Merger, HOLP. We eliminate all significant intercompany accounts and transactions when we consolidate. We account for the General Partner’s 1.01% interest in AmeriGas OLP as noncontrolling interest in the condensed consolidated financial statements.
AmeriGas Finance Corp., AP Eagle Finance Corp. and AmeriGas Finance LLC are 100%-owned finance subsidiaries of AmeriGas Partners. Their sole purpose is to serve as issuers or co-obligors for debt securities issued or guaranteed by AmeriGas Partners. The 6.75% and 7.00% Senior Notes are fully and unconditionally guaranteed on a senior secured basis by AmeriGas Partners.
 
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). They include all adjustments which we consider necessary for a fair statement of the results for the interim periods presented. Such adjustments consisted only of normal recurring items unless otherwise disclosed. The September 30, 2012, condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).

These financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the year ended September 30, 2012 (“Partnership’s 2012 Annual Financial Statements and Notes”). Weather significantly impacts demand for propane and profitability because many customers use propane for heating purposes. Due to the seasonal nature of the Partnership’s propane business, the results of operations for interim periods are not necessarily indicative of the results to be expected for a full year.
Allocation of Net Income Attributable to AmeriGas Partners. Net income attributable to AmeriGas Partners, L.P. for partners’ capital and statement of operations presentation purposes is allocated to the General Partner and the limited partners

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Table of Contents
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)

in accordance with their respective ownership percentages after giving effect to amounts distributed to the General Partner in excess of its 1% general partner interest in AmeriGas Partners based on its incentive distribution rights (“IDRs”) under the Fourth Amended and Restated Agreement of Limited Partnership of AmeriGas Partners, as amended (“Partnership Agreement”).
Net Income Per Unit. Income per limited partner unit is computed in accordance with GAAP regarding the application of the two-class method for determining income per unit for master limited partnerships (“MLPs”) when IDRs are present. The two-class method requires that income per limited partner unit be calculated as if all earnings for the period were distributed and requires a separate calculation for each quarter and year-to-date period. In periods when our net income attributable to AmeriGas Partners exceeds our Available Cash, as defined in the Partnership Agreement, and is above certain levels, the calculation according to the two-class method results in an increased allocation of undistributed earnings to the General Partner. Generally, in periods when our Available Cash in respect of the quarter or year-to-date periods exceeds our net income (loss) attributable to AmeriGas Partners, the calculation according to the two-class method results in an allocation of earnings to the General Partner greater than its relative ownership interest in the Partnership (or in the case of a net loss attributable to AmeriGas Partners, an allocation of such net loss to the Common Unitholders greater than their relative ownership interest in the Partnership).
 
The following table sets forth the numerators and denominators of the basic and diluted income per limited partner unit computations:
 
 
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
 
2013
 
2012
 
2013
 
2012
Common Unitholders’ interest in net income (loss) attributable to AmeriGas Partners under the two-class method for MLPs
 
$
(39,640
)
 
$
(92,737
)
 
$
251,083

 
$
70,342

Weighted average Common Units outstanding—basic (thousands)
 
92,838

 
92,783

 
92,830

 
77,615

Potentially dilutive Common Units (thousands)
 
—

 
—

 
74

 
53

Weighted average Common Units outstanding—diluted (thousands)
 
92,838

 
92,783

 
92,904

 
77,668

Theoretical distributions of net income attributable to AmeriGas Partners, L.P. in accordance with the two-class method for the nine months ended June 30, 2013 and 2012, resulted in an increased allocation of net income attributable to AmeriGas Partners, L.P. to the General Partner in the computation of income per limited partner unit which had the effect of decreasing earnings per limited partner unit by $0.08 and $0.09, respectively. There was no dilutive effect based on the computation of income (loss) per limited partner unit in accordance with the two-class method for the three months ended June 30, 2013 and 2012.
Potentially dilutive Common Units included in the diluted limited partner units outstanding computation reflect the effects of restricted Common Unit awards granted under the General Partner’s incentive compensation plans.
Comprehensive Income. Comprehensive income (loss) comprises net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) principally results from gains and losses on derivative instruments qualifying as cash flow hedges, net of reclassifications to net income.
Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and costs. These estimates are based on management’s knowledge of current events, historical experience and various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may be different from these estimates and assumptions.


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Table of Contents
AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)


3.     Accounting Changes
New Accounting Standards Not Yet Adopted
Disclosures about Reclassifications Out of Accumulated Other Comprehensive Income. In February 2013, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance regarding disclosures for items reclassified out of accumulated other comprehensive income (“AOCI”). The new disclosure guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2012. The new disclosures are to be applied prospectively, and early adoption is permitted. We expect to adopt the new guidance in Fiscal 2014. As this guidance provides only disclosure requirements, the adoption of this standard will not impact our results of operations, cash flows or financial position.
Disclosures about Offsetting Assets and Liabilities. In December 2011 (and amended in January 2013), the FASB issued new accounting guidance requiring entities to disclose both gross and net information about recognized derivative instruments that are offset on the balance sheet or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the balance sheet. The new guidance is effective for annual reporting periods beginning on or after January 1, 2013 (Fiscal 2014) and interim periods within those annual periods, and is required to be applied retrospectively. As this guidance provides only disclosure requirements, the adoption of this standard will not impact our results of operations, cash flows or financial position.

4.
Acquisition of Heritage Propane
On January 12, 2012, AmeriGas Partners completed the acquisition of Heritage Propane from ETP for total consideration of $2,604,827, comprising $1,472,199 in cash and 29,567,362 AmeriGas Partners Common Units with a fair value of $1,132,628 (the “Heritage Acquisition”). The Heritage Acquisition was consummated pursuant to a Contribution and Redemption Agreement dated October 15, 2011, as amended (the “Contribution Agreement”), by and among AmeriGas Partners, ETP, Energy Transfer Partners GP, L.P., the general partner of ETP, and Heritage ETC, L.P. For additional information on the Heritage Acquisition, see Note 4 to the Partnership’s 2012 Annual Financial Statements and Notes.
 
The following presents unaudited pro forma income statement and income per unit data as if the Heritage Acquisition had occurred on October 1, 2011:
 
 
 
Nine Months Ended
June 30,
 
 
2013 (As Reported)
 
2012 Pro Forma
Revenues
 
$
2,634,573

 
$
2,903,046

Net income attributable to AmeriGas Partners, L.P.
 
$
275,278

 
$
106,980

Income per limited partner unit:
 
 
 
 
Basic
 
$
2.70

 
$
1.07

Diluted
 
$
2.70

 
$
1.07

The unaudited pro forma results of operations reflect Heritage Propane’s historical operating results after giving effect to adjustments directly attributable to the transaction that are expected to have a continuing effect. The unaudited pro forma consolidated results of operations are not necessarily indicative of the results that would have occurred had the Heritage Acquisition occurred on the date indicated nor are they necessarily indicative of future operating results.
 

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AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)

5.
Goodwill and Intangible Assets

The Partnership’s goodwill and intangible assets comprise the following:
 
 
 
June 30,
2013
 
September 30,
2012
 
June 30,
2012
Goodwill (not subject to amortization)
 
$
1,924,820

 
$
1,914,808

 
$
1,862,259

Intangible assets:
 
 
 
 
 
 
Customer relationships and noncompete agreements
 
$
505,580

 
$
505,367

 
$
507,089

Trademarks and tradenames (not subject to amortization)
 
81,800

 
91,100

 
144,200

Gross carrying amount
 
587,380

 
596,467

 
651,289

Accumulated amortization
 
(89,732
)
 
(60,471
)
 
(56,406
)
Intangible assets, net
 
$
497,648

 
$
535,996

 
$
594,883

The decrease in trademarks and tradenames and the increase in goodwill during the nine months ended June 30, 2013 reflects a correcting adjustment associated with the Heritage Acquisition. Amortization expense of intangible assets was $9,585 and $29,261 for the three and nine months ended June 30, 2013, respectively, and $10,099 and $20,735 for the three and nine months ended June 30, 2012, respectively. No amortization is included in cost of sales in the Condensed Consolidated Statements of Operations. As of June 30, 2013, our expected aggregate amortization expense of intangible assets for the remainder of Fiscal 2013 and the next four fiscal years is as follows: remainder of Fiscal 2013 — $9,594; Fiscal 2014 — $37,554; Fiscal 2015 — $35,362; Fiscal 2016 — $34,190; Fiscal 2017 — $32,111.

6.
Related Party Transactions
Pursuant to the Partnership Agreement and, prior to the Merger, a management services agreement among HOLP GP, HOLP and the General Partner, the General Partner is entitled to reimbursement for all direct and indirect expenses incurred or payments it makes on our behalf. These costs, which totaled $130,079 and $89,619 for the three months ended June 30, 2013 and 2012, respectively, and $420,581 and $280,175 for the nine months ended June 30, 2013 and 2012, respectively, include employee compensation and benefit expenses of employees of the General Partner and general and administrative expenses.
UGI provides certain financial and administrative services to the General Partner. UGI bills the General Partner monthly for all direct and indirect corporate expenses incurred in connection with providing these services and the General Partner is reimbursed by the Partnership for these expenses. The allocation of indirect UGI corporate expenses to the Partnership utilizes a weighted, three-component formula based on the relative percentage of the Partnership’s revenues, operating expenses and net assets employed to the total of such items for all UGI operating subsidiaries for which general and administrative services are provided. The General Partner believes that this allocation method is reasonable and equitable to the Partnership. Such corporate expenses totaled $4,218 and $2,287 during the three months ended June 30, 2013 and 2012, respectively, and $14,974 and $7,664, during the nine months ended June 30, 2013 and 2012, respectively. In addition, UGI and certain of its subsidiaries provide office space, stop loss medical coverage and automobile liability insurance to the Partnership. The costs related to these items totaled $872 and $1,223 for the three months ended June 30, 2013 and 2012, respectively, and $3,498 and $2,969 for the nine months ended June 30, 2013 and 2012, respectively.
From time to time, AmeriGas OLP purchases propane on an as needed basis from UGI Energy Services, Inc. (“Energy Services”). The prices for any such propane purchased are generally based on market price at the time of purchase. AmeriGas OLP purchased propane from Energy Services totaling $405 and $1,980 during the three and nine months ended June 30, 2013, respectively. AmeriGas OLP purchased propane from Energy Services totaling $42 during the three and nine months ended June 30, 2012.
In addition, the Partnership sells propane to affiliates of UGI. Such amounts were not material during the periods presented.

7.
Commitments and Contingencies
Environmental Matters
Saranac Lake. 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

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AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)

of Inactive Hazardous Waste Disposal Sites. A site characterization study performed by DEC disclosed contamination related to former manufactured gas plant (“MGP”) operations on the site. DEC has classified the site as a significant threat to public health or environment with further action required. The Partnership has researched the history of the site and its ownership interest in the site. The Partnership has reviewed the preliminary site characterization study prepared by the DEC, the extent of the contamination, and the possible existence of other potentially responsible parties. The Partnership communicated the results of its research to DEC in January 2009. There have been no recent developments in this matter. Because of the preliminary nature of available environmental information, the ultimate amount of expected clean up costs cannot be reasonably estimated.
Claremont, New Hampshire and Chestertown, Maryland. In connection with the Heritage Acquisition on January 12, 2012, a predecessor of Titan Propane, LLC (“Titan LLC”), a former subsidiary acquired in the Heritage Acquisition, is purportedly the beneficial holder of title with respect to two former MGPs discussed below. The Contribution Agreement provides for indemnification from ETP for certain expenses associated with remediation of these sites. By letter dated September 30, 2010, the EPA notified Titan LLC that it may be a potentially responsible party (“PRP”) for cleanup costs associated with contamination at a former MGP in Claremont, New Hampshire. In June 2010, the Maryland Attorney General (“MAG”) identified Titan LLC as a PRP in connection with contamination at a former MGP in Chestertown, Maryland and requested that Titan LLC participate in characterization and remediation activities. Titan LLC has supplied the EPA and MAG with corporate and bankruptcy information for its predecessors to support its claim that it is not liable for any remediation costs at the sites. Because of the preliminary nature of available environmental information, the ultimate amount of expected clean up costs cannot be reasonably estimated.
Other Matters
Cylinder Investigation. On or about October 21, 2009, the General Partner received a notice that the Offices of the District Attorneys of Santa Clara, Sonoma, Ventura, San Joaquin and Fresno Counties and the City Attorney of San Diego (the “District Attorneys”) have commenced an investigation into AmeriGas OLP’s cylinder labeling and filling practices in California as a result of the Partnership's decision in 2008 to reduce the volume of propane in cylinders it sells to consumers from 17 pounds to 15 pounds. At that time, the District Attorneys issued an administrative subpoena seeking documents and information relating to those practices. We have responded to the administrative subpoena. On or about July 20, 2011, the General Partner received a second subpoena from the District Attorneys. The subpoena sought additional information and documents regarding AmeriGas OLP’s cylinder exchange program and we responded to that subpoena. In connection with this matter, the District Attorneys have alleged potential violations of California’s antitrust laws, California’s slack-fill law, and California's principal false advertising statute. We believe we have strong defenses to these allegations.
Federal Trade Commission Investigation of Propane Grill Cylinder Filling Practices. On or about November 4, 2011, the General Partner received notice that the Federal Trade Commission (“FTC”) is conducting an antitrust and consumer protection investigation into certain practices of the Partnership which relate to the filling of portable propane cylinders. On February 2, 2012, the Partnership received a Civil Investigative Demand from the FTC that requests documents and information concerning, among other things, (i) the Partnership’s decision, in 2008, to reduce the volume of propane in cylinders it sells to consumers from 17 pound to 15 pounds and (ii) cross-filling, related service arrangements and communications regarding the foregoing with competitors. The Partnership believes that it will have good defenses to any claims that may result from this investigation. We are not able to assess the financial impact this investigation or any related claims may have on the Partnership.
Purported Class Action Lawsuit. In 2005, Samuel and Brenda Swiger (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 this lawsuit, the Swigers are seeking compensatory and punitive damages on behalf of the putative class for alleged violations of the West Virginia Insurance Unfair Trade Practice Act, negligence, intentional misconduct, and civil conspiracy. The Court has not certified the class and, in October 2008, stayed the lawsuit pending resolution of a separate, but related class action lawsuit filed against AmeriGas OLP in Monongalia County, which was settled in Fiscal 2011. We believe we have good defenses to the claims in this action.
BP America Production Company v. Amerigas Propane, L.P. On July 15, 2011, BP America Production Company (“BP”) filed a complaint against AmeriGas OLP in the District Court of Denver County, Colorado, alleging, among other things, breach of contract and breach of the covenant of good faith and fair dealing relating to amounts billed for certain goods and services provided to BP since 2005 (the “Services”). The Services relate to the installation of propane-fueled equipment

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AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)

and appliances, and the supply of propane, to approximately 400 residential customers at the request of and for the account of BP. Effective June 20, 2013, we entered into a settlement agreement with BP and the lawsuit has been dismissed. The effect of the settlement agreement will not have a material impact on our results of operations or financial condition.
We cannot predict the final results of any of the environmental or other pending claims or legal actions described above. However, it is reasonably possible that some of them could be resolved unfavorably to us and result in losses in excess of recorded amounts. We are unable to estimate any possible losses in excess of recorded amounts. Although we currently believe, after consultation with counsel, that damages or settlements, if any, recovered by the plaintiffs in such claims or actions will not have a material adverse effect on our financial position, damages or settlements could be material to our operating results or cash flows in future periods depending on the nature and timing of future developments with respect to these matters and the amounts of future operating results and cash flows. In addition to the matters described above, there are other pending claims and legal actions arising in the normal course of our businesses. We believe, after consultation with counsel, the final outcome of such other matters will not have a material effect on our consolidated financial position, results of operations or cash flows.
 
8.
Fair Value Measurements

Derivative Financial Instruments
The following table presents our financial assets and financial liabilities that are measured at fair value on a recurring basis for each of the fair value hierarchy levels, including both current and noncurrent portions, as of June 30, 2013, September 30, 2012 and June 30, 2012:
 

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AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)

 
 
Asset (Liability)
 
 
Quoted Prices
in Active
Markets for
Identical
Assets and
Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Total
June 30, 2013:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Derivative financial instruments:
 
 
 
 
 
 
 
 
Commodity contracts
 
$
—

 
$
424

 
$
—

 
$
424

Liabilities:
 
 
 
 
 
 
 
 
Derivative financial instruments:
 
 
 
 
 
 
 
 
Commodity contracts
 
$
—

 
$
(15,224
)
 
$
—

 
$
(15,224
)
September 30, 2012:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Derivative financial instruments:
 
 
 
 
 
 
 
 
Commodity contracts
 
$
—

 
$
2,089

 
$
—

 
$
2,089

Liabilities:
 
 
 
 
 
 
 
 
Derivative financial instruments:
 
 
 
 
 
 
 
 
Commodity contracts
 
$
—

 
$
(42,598
)
 
$
—

 
$
(42,598
)
June 30, 2012:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Derivative financial instruments:
 
 
 
 
 
 
 
 
Commodity contracts
 
$
—

 
$
10,337

 
$
—

 
$
10,337

Liabilities:
 
 
 
 
 
 
 
 
Derivative financial instruments:
 
 
 
 
 
 
 
 
Commodity contracts
 
$
—

 
$
(79,139
)
 
$
—

 
$
(79,139
)
 
The fair values of our non-exchange traded commodity derivative contracts included in Level 2 are based upon indicative price quotations available through brokers, industry price publications or recent market transactions and related market indicators. For commodity option contracts not traded on an exchange, we use a Black Scholes option pricing model that considers time value and volatility of the underlying commodity.
Other Financial Instruments
The carrying amounts of other financial instruments included in current assets and current liabilities (except for current maturities of long-term debt) approximate their fair values because of their short-term nature. At June 30, 2013, the carrying amount and estimated fair value of our long-term debt (including current maturities) were $2,303,205 and $2,366,116, respectively. At June 30, 2012, the carrying amount and estimated fair value of our long-term debt (including current maturities) were $2,345,130 and $2,404,863, respectively. We estimate the fair value of long-term debt by using current market prices and by discounting future cash flows using rates available for similar type debt (Level 2).
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.


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AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)

9.
Disclosures About Derivative Instruments and Hedging Activities

The Partnership is exposed to certain market risks related to its ongoing business operations. Management uses derivative financial and commodity instruments, among other things, to manage these risks. The primary risks managed by derivative instruments are commodity price risk and interest rate risk. Although we use derivative financial and commodity instruments to reduce market risk associated with forecasted transactions, we do not use derivative financial and commodity instruments for speculative or trading purposes. The use of derivative instruments is controlled by our risk management and credit policies which govern, among other things, the derivative instruments the Partnership can use, counterparty credit limits and contract authorization limits. Because most of our derivative instruments generally qualify as hedges under GAAP, we expect that changes in the fair value of derivative instruments used to manage commodity or interest rate market risk would be substantially offset by gains or losses on the associated anticipated transactions.
Commodity Price Risk
In order to manage market risk associated with the Partnership’s fixed-price programs which permit customers to lock in the prices they pay for propane principally during the months of October through March, the Partnership uses over-the-counter derivative commodity instruments, principally price swap contracts. At June 30, 2013 and 2012, there were 177.8 million gallons and 223.0 million gallons, respectively, of propane hedged with over-the-counter price swap and option contracts that qualify for hedge accounting treatment. At June 30, 2013, the maximum period over which we are hedging propane market price risk is 19 months with a weighted average of 7 months. In addition, the Partnership from time to time enters into price swap and option agreements to reduce short-term commodity price volatility and to provide market price risk support to a limited number of its wholesale customers which are generally not designated as hedges for accounting purposes.
We account for a significant portion of our commodity price risk contracts as cash flow hedges. Changes in the fair values of contracts qualifying for cash flow hedge accounting are recorded in accumulated other comprehensive income (“AOCI”) and noncontrolling interest, to the extent effective in offsetting changes in the underlying commodity price risk, until earnings are affected by the hedged item. At June 30, 2013, the amount of net losses associated with commodity price risk hedges expected to be reclassified into earnings during the next twelve months based upon current fair values is $14,924.
Interest Rate Risk
Our long-term debt is typically issued at fixed rates of interest. As these long-term debt issues mature, we typically refinance such debt with new debt having interest rates reflecting then-current market conditions. In order to reduce market rate risk on the underlying benchmark rate of interest associated with near- to medium-term forecasted issuances of fixed-rate debt, from time to time we enter into interest rate protection agreements (“IRPAs”). We account for IRPAs as cash flow hedges. Changes in the fair values of IRPAs are recorded in AOCI, to the extent effective in offsetting changes in the underlying interest rate risk, until earnings are affected by the hedged interest expense. There are no settled or unsettled amounts relating to IRPAs at June 30, 2013.
Derivative Financial Instruments Credit Risk
The Partnership is exposed to credit loss in the event of nonperformance by counterparties to derivative financial and commodity instruments. Our counterparties principally consist of major energy companies and major U.S. financial institutions. We maintain credit policies with regard to our counterparties that we believe reduce overall credit risk. These policies include evaluating and monitoring our counterparties’ financial condition, including their credit ratings, and entering into agreements with counterparties that govern credit limits. Certain of these agreements call for the posting of collateral by the counterparty or by the Partnership in the forms of letters of credit, parental guarantees or cash. Although we have concentrations of credit risk associated with derivative financial instruments held by certain derivative financial instrument counterparties, the maximum amount of loss due to credit risk that, based upon the gross fair values of the derivative financial instruments, we would incur if these counterparties that make up the concentration failed to perform according to the terms of their contracts was not material at June 30, 2013. Certain of our derivative contracts have credit-risk-related contingent features that may require the posting of additional collateral in the event of a downgrade in the Partnership’s debt rating. At June 30, 2013, if the credit-risk-related contingent features were triggered, the amount of collateral required to be posted would not be material.


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AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)

The following table provides information regarding the fair values and balance sheet locations of our derivative assets and liabilities existing as of June 30, 2013 and 2012:
 
 
 
Derivative Assets
 
Derivative (Liabilities)
 
 
Balance Sheet
Location
 
Fair Value

 
Balance Sheet
Location
 
Fair Value

 
 
 
2013
 
2012
 
 
2013
 
2012
Derivatives Designated as Hedging Instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Propane contracts
 
Derivative financial instruments and other assets
 
$
424

 
$
2,216

 
Derivative financial instruments and other noncurrent liabilities
 
$
(15,224
)
 
$
(68,078
)
Derivatives Not Designated as Hedging Instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Propane contracts
 
Derivative financial instruments 
 
—

 
8,121

 
Derivative financial instruments
 
—

 
(11,061
)
Total Derivatives
 
 
 
$
424

 
$
10,337

 

 
$
(15,224
)
 
$
(79,139
)

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AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)

The following table provides information on the effects of derivative instruments on the Condensed Consolidated Statements of Operations and changes in AOCI and noncontrolling interest for the three and nine months ended June 30, 2013 and 2012:
Three Months Ended June 30,
 
 
 
 
 
 
 
 
 
 
 
 
Gain (Loss) Recognized in
AOCI  and Noncontrolling
Interest
 
Gain (Loss) Reclassified  from
AOCI and Noncontrolling
Interest into Income
 
Location of Gain  (Loss)
Reclassified from
AOCI and Noncontrolling
Interest into Income
 
 
2013
 
2012
 
2013
 
2012
 
Cash Flow Hedges:
 
 
 
 
 
 
 
 
 
 
Propane contracts
 
$
(19,434
)
 
$
(65,853
)
 
$
(8,479
)
 
$
(14,625
)
 
Cost of sales
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain (Loss)
 
 
 
 
 
Location of Gain  (Loss)
Recognized in Income
 
 
Recognized in Income
 
 
 
 
 
Derivatives Not Designated as Hedging Instruments:
 
2013
 
2012
 
 
 
 
 
 
Propane contracts
 
$
—

 
$
(14,871
)
 
 
 
 
 
Cost of sales
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended June 30,
 
 
 
 
 
 
 
 
 
 
 
 
Gain (Loss) Recognized in
AOCI  and Noncontrolling
Interest
 
Gain (Loss) Reclassified  from
AOCI and Noncontrolling
Interest into Income
 
Location of Gain  (Loss)
Reclassified from
AOCI and Noncontrolling
Interest into Income
 
 
2013
 
2012
 
2013
 
2012
 
Cash Flow Hedges:
 
 
 
 
 
 
 
 
 
 
Propane contracts
 
$
(24,348
)
 
$
(100,616
)
 
$
(51,229
)
 
$
(33,791
)
 
Cost of sales
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain (Loss)
 
 
 
 
 
Location of Gain  (Loss)
Recognized in Income
 
 
Recognized in Income
 
 
 
 
 
Derivatives Not Designated as Hedging Instruments:
 
2013
 
2012
 
 
 
 
 
 
Propane contracts
 
$
—

 
$
(14,871
)
 
 
 
 
 
Cost of sales
The amounts of derivative gains or losses representing ineffectiveness were not material for the three or nine months ended June 30, 2013 and 2012. During the three months ended June 30, 2012, the Partnership entered into propane swap and put option contracts to reduce short-term volatility in propane prices associated with a portion of its forecasted propane purchases during the months of April 2012 to August 2012. We did not account for these contracts as cash flow hedges and the changes in fair value was recorded through cost of sales in the Condensed Consolidated Statements of Operations. Net realized and unrealized losses recognized in income totaling $14,871 related to these contracts are included in the table above under the caption “Derivatives Not Designated as Hedging Instruments.”
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 and contracts which provide for the purchase and delivery of propane and service contracts that require the counterparty to provide commodity storage or transportation service to meet our normal sales commitments. Although many of these contracts have the requisite elements of a derivative instrument, these contracts qualify for normal purchase and normal sales exception accounting under GAAP because they provide for the delivery of products or services in quantities that are expected to be used in the normal course of operating our business and the price in the contract is based on an underlying that is directly associated with the price of the product or service being purchased or sold. 


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AMERIGAS PARTNERS, L.P.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit)

10.
Error in Accounting For Certain Customer Credits

During the three months ended March 31, 2013, the Partnership identified an error in its accounting for certain customer credits. The Partnership determined that the recording of propane revenues did not appropriately consider the effects of certain customer credits which were recorded when issued in a subsequent period. As a result, beginning January 1, 2013, the Partnership changed its accounting for customer credits to record an estimate of such credits at the time propane revenues are recorded. Such estimate considers the Partnership’s history of providing credits, propane revenue activity and other factors. The Partnership has evaluated the impact of the error on prior periods and has determined that the effect is not material to any prior period financial statements. The Partnership has also evaluated and concluded that the impact of recording the effect of the correction of the error as of January 1, 2013, is not material to the financial statements for the three and six months ended March 31, 2013, nor is it expected to be material to the financial statements for Fiscal 2013. The correction of the error in accounting for customer credits had the effect of increasing propane revenues and accounts receivable by $3,600, and increasing net income attributable to AmeriGas Partners, L.P. by $3,564, for the three months ended June 30, 2013, and decreasing propane revenues and accounts receivable by $5,100, and decreasing net income attributable to AmeriGas Partners, L.P. by $5,048, for the nine months ended June 30, 2013. If the Partnership had corrected the error in its accounting for customer credits and recorded the estimate of credits as of September 30, 2012, the cumulative effect of the change as of that date would have decreased net income attributable to AmeriGas Partners, L.P. by approximately $4,200.


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AMERIGAS PARTNERS, L.P.


ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Information contained in this Quarterly Report on Form 10-Q may contain forward-looking statements. Such statements use forward-looking words such as “believe,” “plan,” “anticipate,” “continue,” “estimate,” “expect,” “may,” “will,” or other similar words. These statements discuss plans, strategies, events or developments that we expect or anticipate will or may occur in the future.
A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, we caution you that actual results almost always vary from assumed facts or bases, and the differences between actual results and assumed facts or bases can be material, depending on the circumstances. When considering forward-looking statements, you should keep in mind the following important factors which could affect our future results and could cause those results to differ materially from those expressed in our forward-looking statements: (1) adverse weather conditions resulting in reduced demand; (2) cost volatility and availability of propane, and the capacity to transport propane to our customers; (3) the availability of, and our ability to consummate, acquisition or combination opportunities; (4) successful integration and future performance of acquired assets or businesses, including Heritage Propane, and achievement of anticipated synergies; (5) changes in laws and regulations, including safety, tax, consumer protection and accounting matters; (6) competitive pressures from the same and alternative energy sources; (7) failure to acquire new customers and retain current 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; (16) the impact of pending and future legal proceedings; and (17) the timing and success of our acquisitions and investments to grow our business.
These factors, and those factors set forth in Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012, 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.

 
ANALYSIS OF RESULTS OF OPERATIONS
The following analyses compare the Partnership’s results of operations for the three months ended June 30, 2013 (“2013 three-month period”) with the three months ended June 30, 2012 (“2012 three-month period”) and the nine months ended June 30, 2013 (“2013 nine-month period”) with the nine months ended June 30, 2012 (“2012 nine-month period”).
Executive Overview
Net loss attributable to AmeriGas Partners for the 2013 three-month period was $34.6 million compared with net loss attributable to AmeriGas Partners for the 2012 three-month period of $89.4 million. Average temperatures based upon heating degree days during the 2013 three-month period were approximately normal but significantly colder than the prior-year three-month period. The lower seasonal loss includes the colder weather's impact on retail propane volumes sold, higher average retail unit margins and lower operating and administrative expenses reflecting in large part the benefits from the integration of Heritage Propane. Results for the 2013 three-month period include $9.9 million of transition costs associated with Heritage Propane while results for the prior-year period include $15.0 million of transition and acquisition costs associated with Heritage Propane.
Net income attributable to AmeriGas Partners for the 2013 nine-month period was $275.3 million compared with net income attributable to AmeriGas Partners for the 2012 nine-month period of $87.0 million. Results in the 2013 nine-month period benefited from the full-period operations of Heritage Propane which was acquired by the Partnership on January 12, 2012. Notwithstanding average temperatures that were approximately 4.1% warmer than normal, net income attributable to AmeriGas Partners increased $188.3 million principally reflecting weather that was nearly 16.8% colder than the prior-year period and the full-period benefit of Heritage Propane. The return to more normal weather in the 2013 nine-month period from the record-setting warm weather experienced in the prior-year period resulted in greater retail volumes sold. Results for the 2013 nine-month period include $20.7 million of transition costs associated with Heritage Propane while the prior-year nine-month period includes $26.9 million of

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AMERIGAS PARTNERS, L.P.


transition and acquisition costs associated with Heritage Propane.The prior-year nine-month period results also include a $13.3 million loss on extinguishments of debt.
2013 three-month period compared with 2012 three-month period
 
Three Months Ended June 30,
 
2013
 
2012
 
Increase (Decrease)
(millions of dollars)
 
 
 
 
 
 
 
 
Gallons sold (millions):
 
 
 
 
 
 
 
 
Retail
 
224.7

 
204.0

 
20.7

 
10.1
 %
Wholesale
 
16.6

 
14.8

 
1.8

 
12.2
 %
 
 
241.3

 
218.8

 
22.5

 
10.3
 %
Revenues:
 
 
 
 
 
 
 
 
Retail propane
 
$
500.9

 
$
491.5

 
$
9.4

 
1.9
 %
Wholesale propane
 
17.5

 
16.0

 
1.5

 
9.4
 %
Other
 
63.3

 
64.4

 
(1.1
)
 
(1.7
)%
 
 
$
581.7

 
$
571.9

 
$
9.8

 
1.7
 %
Total margin (a)
 
$
276.0

 
$
237.9

 
$
38.1

 
16.0
 %
EBITDA (b)
 
$
59.1

 
$
1.8

 
$
57.3

 
N.M.

Operating income (loss) (b)
 
$
6.6

 
$
(48.3
)
 
$
54.9

 
N.M.

Net loss attributable to AmeriGas Partners
 
$
(34.6
)
 
$
(89.4
)
 
$
(54.8
)
 
(61.3
)%
Degree days — % colder (warmer) than normal (c)
 
0.5
%
 
(23.8
)%
 
—

 
—

 N.M. - Variance is not meaningful.

(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 (loss) attributable to AmeriGas Partners (as an indicator of operating performance) and is not a measure of performance or financial condition under accounting principles generally accepted in the United States of America (“GAAP”). Management believes EBITDA is a meaningful non-GAAP financial measure used by investors to (1) compare the Partnership’s operating performance with that of other companies within the propane industry and (2) assess the Partnership’s ability to meet loan covenants. The Partnership’s definition of EBITDA may be different from those used by other companies. Management uses EBITDA to compare year-over-year profitability of the business without regard to capital structure as well as to compare the relative performance of the Partnership to that of other master limited partnerships without regard to their financing methods, capital structure, income taxes or historical cost basis. In view of the omission of interest, income taxes, depreciation and amortization from EBITDA, management also assesses the profitability of the business by comparing net income attributable to AmeriGas Partners for the relevant years. Management also uses EBITDA to assess the Partnership’s profitability because its parent, UGI Corporation, uses the Partnership’s EBITDA to assess the profitability of the Partnership which is one of UGI Corporation’s reportable segments. UGI Corporation discloses the Partnership’s EBITDA in its disclosure about reportable segments as the profitability measure for its domestic propane segment. EBITDA for the three months ended June 30, 2013 and 2012, includes acquisition and transition expenses of $9.9 million and $15.0 million, respectively, associated with Heritage Propane.

The following table includes reconciliations of net loss attributable to AmeriGas Partners to EBITDA for the periods presented:
     
 
 
Three Months Ended
June 30,
(millions of dollars)
 
2013
 
2012
Net loss attributable to AmeriGas Partners
 
$
(34.6
)
 
$
(89.4
)
Income tax benefit
 
—

 
(0.2
)
Interest expense
 
41.2

 
41.9

Depreciation
 
41.7

 
38.3

Amortization
 
10.8

 
11.2

EBITDA
 
$
59.1

 
$
1.8


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AMERIGAS PARTNERS, L.P.


(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.

Retail gallons sold in the 2013 three-month period increased more than 10% from the 2012 three-month period reflecting average temperatures based upon heating degree days that were approximately normal but significantly colder than the prior-year three-month period. Based upon heating degree-day data, temperatures in the Partnership’s service territories during the 2013 three-month period averaged approximately 0.5% colder than normal while temperatures in the prior-year period averaged approximately 23.8% warmer than normal.
Retail propane revenues increased $9.4 million during the 2013 three-month period reflecting the higher retail volumes sold ($49.9 million) offset in large part by the effects of a decline in average retail selling prices ($40.5 million) which were the result of lower propane product costs. Wholesale propane revenues increased $1.5 million for the 2013 three-month period on slightly higher wholesale sales. Average daily wholesale propane commodity prices during the 2013 three-month period at Mont Belvieu, Texas, one of the major supply points in the U.S., were approximately 7% lower than such prices during the prior-year three-month period. Total revenues from fee income and other ancillary sales and services in the 2013 three-month period were slightly lower than in the 2012 three-month period. Total cost of sales decreased $28.3 million principally reflecting the effects on retail propane cost of sales of the lower average propane product costs ($60.1 million) partially offset by effects of the greater retail volumes sold ($30.0 million).
Total margin increased $38.1 million in the 2013 three-month period principally reflecting higher retail propane total margin ($39.4 million). The increase in retail propane total margin reflects the increase in retail volumes sold and modestly higher average retail propane unit margins.
EBITDA in the 2013 three-month period increased $57.3 million principally reflecting the higher total margin ($38.1 million) and lower operating and administrative expenses ($18.5 million) reflecting, among other things, synergies from the integration of Heritage Propane, lower self-insured liability and casualty expenses ($7.2 million), and lower Heritage Propane integration transition expenses. Operating and administrative expenses in the 2013 three-month period include $9.9 million of transition expenses associated with the integration of Heritage Propane while operating and administrative expenses in the prior-year period include Heritage Propane transition expenses of $15.0 million. Operating income increased $54.9 million in the 2013 three-month period principally reflecting the higher total margin ($38.1 million) and the lower operating and administrative expenses ($18.5 million) partially offset by increased depreciation and amortization expense ($3.0 million).


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AMERIGAS PARTNERS, L.P.


2013 nine-month period compared with 2012 nine-month period
 
Nine Months Ended June 30,
 
2013
 
2012
 
Increase (Decrease)
(millions of dollars)
 
 
 
 
 
 
 
 
Gallons sold (millions):
 
 
 
 
 
 
 
 
Retail
 
1,039.8

 
814.3

 
225.5

 
27.7
 %
Wholesale
 
81.9

 
83.4

 
(1.5
)
 
(1.8
)%
 
 
1,121.7

 
897.7

 
224.0

 
25.0
 %
Revenues:
 
 
 
 
 
 
 
 
Retail propane
 
$
2,327.4

 
$
2,106.7

 
$
220.7

 
10.5
 %
Wholesale propane
 
86.4

 
120.9

 
(34.5
)
 
(28.5
)%
Other
 
220.8

 
183.7

 
37.1

 
20.2
 %
 
 
$
2,634.6

 
$
2,411.3

 
$
223.3

 
9.3
 %
Total margin (a)
 
$
1,264.4

 
$
963.5

 
$
300.9

 
31.2
 %
EBITDA (b)
 
$
550.5

 
$
310.0

 
$
240.5

 
77.6
 %
Operating income (b)
 
$
404.0

 
$
206.9

 
$
197.1

 
95.3
 %
Net income attributable to AmeriGas Partners
 
$
275.3

 
$
87.0

 
$
188.3

 
216.4
 %
Degree days — % (warmer) than normal (c)
 
(4.1
)%
 
(18.3
)%
 
—

 
—

 
(a)
Total margin represents total revenues less cost of sales – propane and cost of sales – other.
(b)
Earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”) should not be considered as an alternative to net income attributable to AmeriGas Partners (as an indicator of operating performance) and is not a measure of performance or financial condition under accounting principles generally accepted in the United States of America (“GAAP”). Management believes EBITDA is a meaningful non-GAAP financial measure used by investors to (1) compare the Partnership’s operating performance with that of other companies within the propane industry and (2) assess the Partnership’s ability to meet loan covenants. The Partnership’s definition of EBITDA may be different from those used by other companies. Management uses EBITDA to compare year-over-year profitability of the business without regard to capital structure as well as to compare the relative performance of the Partnership to that of other master limited partnerships without regard to their financing methods, capital structure, income taxes or historical cost basis. In view of the omission of interest, income taxes, depreciation and amortization from EBITDA, management also assesses the profitability of the business by comparing net income attributable to AmeriGas Partners for the relevant years. Management also uses EBITDA to assess the Partnership’s profitability because its parent, UGI Corporation, uses the Partnership’s EBITDA to assess the profitability of the Partnership which is one of UGI Corporation’s reportable segments. UGI Corporation discloses the Partnership’s EBITDA in its disclosure about reportable segments as the profitability measure for its domestic propane segment. EBITDA for the nine months ended June 30, 2013 and 2012, includes acquisition and transition expenses of $20.7 million and $26.9 million, respectively, associated with Heritage Propane. EBITDA for the the nine months ended June 30, 2012 includes a pre-tax loss of $13.3 million associated with extinguishments of debt.

The following table includes reconciliations of net income attributable to AmeriGas Partners to EBITDA for the periods presented:
     
 
 
Nine Months Ended
June 30,
(millions of dollars)
 
2013
 
2012
Net income attributable to AmeriGas Partners
 
$
275.3

 
$
87.0

Income tax expense
 
0.5

 
1.0

Interest expense
 
124.2

 
103.4

Depreciation
 
117.7

 
94.6

Amortization
 
32.8

 
24.0

EBITDA
 
$
550.5

 
$
310.0

(c)
Deviation from average heating degree days for the 30-year period 1971-2000 based upon national weather statistics provided by NOAA for 335 airports in the United States, excluding Alaska.


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AMERIGAS PARTNERS, L.P.


Results for the 2013 nine-month period reflect the full-period operations of Heritage Propane acquired in January 2012. Based upon heating degree-day data, temperatures in the Partnership’s service territories during the 2013 nine-month period averaged approximately 4.1% warmer than normal but 16.8% colder than the 2012 nine-month period. Retail gallons sold were 225.5 million gallons (27.7%) greater than in the prior-year period principally reflecting the full-period impact of the Heritage Propane operations and the colder 2013 nine-month period weather.
Retail propane revenues increased $220.7 million during the 2013 nine-month period reflecting the higher retail volumes sold ($583.4 million) partially offset by a decline in average retail selling prices ($362.7 million) which were the result of lower propane product costs. Wholesale propane revenues declined $34.5 million principally reflecting lower average wholesale propane selling prices ($32.3 million) and lower wholesale volumes sold ($2.2 million). Average daily wholesale propane commodity prices during the 2013 nine-month period at Mont Belvieu, Texas, one of the major supply points in the U.S., were approximately 28% lower than such prices during the prior-year nine-month period. Total revenues from fee income and other ancillary sales and services in the 2013 nine-month period were $37.0 million higher than in the 2012 nine-month period principally reflecting the full-period effects of Heritage Propane. Total propane cost of sales decreased $88.1 million during the 2013 nine-month period principally reflecting the effects of the lower propane commodity prices on retail propane cost of sales ($403.8 million) and lower wholesale propane cost of sales ($37.2 million) substantially offset by the effects of the greater retail volumes sold ($352.9 million). Cost of sales associated with ancillary sales and services increased $10.5 million principally reflecting the full-period effects of Heritage Propane.
Total margin increased $300.9 million in the 2013 nine-month period principally reflecting higher total propane margin ($274.3 million) and greater total margin from ancillary sales and services ($26.6 million). These increases principally reflect the incremental full-period effects of Heritage Propane, the colder 2013 nine-month period weather and, with respect to total propane margin, slightly higher 2013 nine-month period average unit margins reflecting the lower propane product costs.
EBITDA in the 2013 nine-month period increased $240.5 million principally reflecting the higher total margin ($300.9 million) and the absence of the $13.3 million loss on extinguishments of debt recorded in the prior-year period partially offset by higher operating and administrative expenses ($78.2 million) primarily attributable to the full-period effects of Heritage Propane operations. Operating and administrative expenses in the 2013 nine-month period include $20.7 million of transition expenses associated with integration of Heritage Propane while operating and administrative expenses in the prior-year period include Heritage Propane acquisition and transition-related expenses of $26.9 million. Operating income increased $197.1 million in the 2013 nine-month period principally reflecting the higher total margin ($300.9 million) partially offset by the previously mentioned greater operating and administrative expenses ($78.2 million) and increased depreciation and amortization expense ($32.0 million) reflecting in large part the full-period effects of Heritage Propane.
FINANCIAL CONDITION AND LIQUIDITY
Financial Condition
The Partnership’s debt outstanding at June 30, 2013, totaled $2,383.2 million (including current maturities of long-term debt of $10.0 million and bank loans of $80.0 million). The Partnership’s debt outstanding at September 30, 2012, totaled $2,378.0 million (including current maturities of long-term debt of $30.7 million and bank loans of $49.9 million). Total long-term debt outstanding at June 30, 2013, including current maturities, comprises $2,250.8 million of AmeriGas Partners’ Senior Notes and $52.4 million of other long-term debt.
AmeriGas OLP’s 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. AmeriGas OLP has a $525 million unsecured credit agreement (“Credit Agreement”) which expires October 2016.
At June 30, 2013, there were $80.0 million of borrowings outstanding under the Credit Agreement which are classified as bank loans on the Condensed Consolidated Balance Sheets. Issued and outstanding letters of credit under the Credit Agreement, which reduce the amount available for borrowings, totaled $54.1 million at June 30, 2013. The average daily and peak bank loan borrowings outstanding under the Credit Agreement during the 2013 nine-month period were $106.6 million and $200.5 million, respectively. The average daily and peak bank loan borrowings outstanding under the Credit Agreement during the 2012 nine-month period were $111.5 million and $239.5 million, respectively. At June 30, 2013, the Partnership’s available borrowing capacity under the Credit Agreement was $390.9 million.
The Partnership’s management believes that the Partnership has sufficient liquidity in the forms of cash and cash equivalents on hand, cash expected to be generated from operations, and bank loan borrowings available under the AmeriGas Credit Agreement to meet its anticipated contractual and projected cash commitments.


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AMERIGAS PARTNERS, L.P.


On July 29, 2013, the General Partner’s Board of Directors approved a quarterly distribution of $0.84 per Common Unit payable on August 19, 2013, to unitholders of record on August 9, 2013. During the nine months ended June 30, 2013, the Partnership declared and paid quarterly distributions on all limited partner units at a rate of $0.84 per Common Unit for the quarter ended March 31, 2013 and $0.80 per Common Unit for the quarters ended December 31, 2012 and September 30, 2012.

The ability of the Partnership to declare and pay the quarterly distribution on its Common Units in the future depends upon a number of factors. These factors include (1) the level of Partnership earnings; (2) the cash needs of the Partnership's operations (including cash needed for maintaining and increasing operating capacity); (3) changes in operating working capital; and (4) the Partnership’s ability to borrow under its Credit Agreement, refinance maturing debt, and increase its long-term debt. Some of these factors are affected by conditions beyond the Partnership’s control including weather, competition in markets we serve, the cost of propane and changes in capital market conditions.
Cash Flows
Operating activities. Due to the seasonal nature of the Partnership’s 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 Partnership’s investment in working capital, principally accounts receivable and inventories, is generally greatest. The Partnership may use its Credit Agreement to satisfy its seasonal operating cash flow needs.
Cash flow provided by operating activities was $272.4 million in the 2013 nine-month period compared to $253.5 million in the 2012 nine-month period. Cash flow from operating activities before changes in operating working capital was $444.9 million in the 2013 nine-month period compared with $237.0 million in the prior-year period largely reflecting the full period effects of the operations of Heritage Propane in the current-year period and the beneficial impact of colder weather on our operating results. Cash used to fund changes in operating working capital was $172.5 million in the 2013 nine-month period compared to cash provided from changes in working capital of $16.5 million in the 2012 nine-month period. The increase in cash used to fund changes in working capital in the 2013 nine-month period reflects, among other things, greater cash needed to fund increased sales of propane and greater interest payments on long-term debt associated with the Heritage Propane acquisition. The prior-year nine-month period cash provided by operating working capital benefited from the timing of the acquisition of Heritage Propane on cash receipts from Heritage Propane customers.
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 $75.9 million in the 2013 nine-month period compared with $1,483.4 million in the prior-year period. The 2012 nine-month period cash used in investing activities largely reflects the cash portion of the Heritage Acquisition purchase price paid, net of cash acquired. The Partnership spent $80.7 million for property, plant and equipment (comprising $34.0 million of maintenance capital expenditures, $15.7 million of capital expenditures associated with Heritage Propane integration activities and $31.0 million of growth capital expenditures) in the 2013 nine-month period compared with $70.3 million (comprising $34.5 million of maintenance capital expenditures, $4.4 million of of capital expenditures associated with Heritage Propane integration activities and $31.4 million of growth capital expenditures) in the 2012 nine-month period. The increase in the 2013 nine-month period capital expenditures reflects in large part the full-period effects of the operations of Heritage Propane.
 
Financing activities. The Partnership’s financing activities cash flows are typically the result of repayments and issuances of long-term debt, borrowings under the Credit Agreement, issuances of Common Units and distributions on partnership interests. Cash used by financing activities was $240.1 million in the 2013 nine-month period compared with cash provided of $1,344.1 million in the prior-year period. Distributions in the 2013 nine-month period totaled $242.8 million compared with $192.6 million in the prior-year period principally reflecting the impact of a greater number of Common Units outstanding subsequent to the Heritage Acquisition and higher quarterly per-unit distribution rates.

In order to finance the cash portion of the acquisition of Heritage Propane, on January 12, 2012, AmeriGas Partners issued $550 million principal amount of the 6.75% Notes due 2020 and $1.0 billion principal amount of 7.00% Notes due 2022. During March 2012, AmeriGas Partners sold 7 million Common Units in an underwritten public offering and used a portion of the net proceeds to repay $200 million of outstanding 6.50% Senior Notes due 2021, to reduce bank loan borrowings and for general corporate purposes.


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AMERIGAS PARTNERS, L.P.


ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk exposures include commodity prices for propane and interest rates on borrowings. Although we use derivative financial and commodity instruments to reduce market price risk associated with forecasted transactions, we do not use derivative financial and commodity instruments for speculative or trading purposes.
Commodity Price Risk
The risk associated with fluctuations in the prices the Partnership pays for propane is principally a result of market forces reflecting changes in supply and demand for propane and other energy commodities. The Partnership’s 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 Partnership’s propane market price risk, we use contracts for the forward purchase or sale of propane, propane fixed-price supply agreements, and over-the-counter derivative commodity instruments including price swap and option contracts. Over-the-counter derivative commodity instruments utilized by the Partnership to hedge forecasted purchases of propane are generally settled at expiration of the contract. These derivative financial instruments contain collateral provisions. The fair value of unsettled commodity price risk sensitive instruments at June 30, 2013, was a loss of $14.8 million. A hypothetical 10% adverse change in the market price of propane would increase such loss by approximately $15.0 million.
Because the Partnership’s propane derivative instruments generally qualify as hedges under GAAP, we expect that changes in the fair value of derivative instruments used to manage propane market price risk would be substantially offset by gains or losses on the associated anticipated transactions.
Interest Rate Risk
The Partnership has both fixed-rate and variable-rate debt. Changes in interest rates impact the cash flows of variable-rate debt but generally do not impact their fair value. Conversely, changes in interest rates impact the fair value of fixed-rate debt but do not impact their cash flows.
 
Our variable-rate debt includes borrowings under the Credit Agreement. This agreement has interest rates that are generally indexed to short-term market interest rates. The remainder of our debt outstanding is subject to fixed rates of interest. Our long-term debt is typically issued at fixed rates of interest based upon market rates for debt having similar terms and credit ratings. As these long-term debt issues mature, we may refinance such debt with new debt having interest rates reflecting then-current market conditions. This debt may have an interest rate that is more or less than the refinanced debt. In order to reduce interest rate risk associated with forecasted issuances of fixed-rate debt, from time to time we enter into interest rate protection agreements. There were no settled or unsettled amounts relating to interest rate protection agreements at June 30, 2013.
Derivative Financial Instruments Credit Risk
The Partnership is exposed to credit loss in the event of nonperformance by counterparties to derivative financial and commodity instruments. Our counterparties principally consist of major energy companies and major U.S. financial institutions. We maintain credit policies with regard to our counterparties that we believe reduce overall credit risk. These policies include evaluating and monitoring our counterparties’ financial condition, including their credit ratings, and entering into agreements with counterparties that govern credit limits. Certain of these agreements call for the posting of collateral by the counterparty or by the Partnership in the form of letters of credit, parental guarantees or cash.
 

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AMERIGAS PARTNERS, L.P.


ITEM 4.
CONTROLS AND PROCEDURES

(a)Evaluation of Disclosure Controls and Procedures
The Partnership’s disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by the Partnership in reports filed under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. The General Partner’s management, with the participation of the General Partner’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Partnership’s 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 Partnership’s disclosure controls and procedures, as of the end of the period covered by this Report, were effective at the reasonable assurance level.
(b)Change in Internal Control over Financial Reporting
No change in the Partnership’s internal control over financial reporting occurred during the Partnership’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 


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AMERIGAS PARTNERS, L.P.


PART II OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS
BP America Production Company v. Amerigas Propane, L.P. On July 15, 2011, BP America Production Company (“BP”) filed a complaint against AmeriGas OLP in the District Court of Denver County, Colorado, alleging, among other things, breach of contract and breach of the covenant of good faith and fair dealing relating to amounts billed for certain goods and services provided to BP since 2005 (the “Services”). The Services relate to the installation of propane-fueled equipment and appliances, and the supply of propane, to approximately 400 residential customers at the request of and for the account of BP. Effective June 20, 2013, we entered into a settlement agreement with BP and the lawsuit has been dismissed.

ITEM 1A.
RISK FACTORS
In addition to the other information presented in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing the Partnership. Other unknown or unpredictable factors could also have material adverse effects on future results.
 
ITEM 6.
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):
 

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AMERIGAS PARTNERS, L.P.


Exhibit No.
  
Exhibit
  
Registrant
Filing
Exhibit
 
 
 
 
 
 
 
1.1
 
Underwriting Agreement, dated July 9, 2013, by and among the Partnership, AmeriGas Propane, Inc., AmeriGas Propane, L.P., the Selling Unitholder, Morgan Stanley & Co. LLC, Barclays Capital Inc., UBS Securities LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, and Wells Fargo Securities, LLC, as representatives of the several underwriters named therein.
 
AmeriGas Partners, L.P.
Form 8-K (7/9/2013)
1.1
 
 
 
 
 
 
 
10.1
 
AmeriGas Propane, Inc. Senior Executive Employee Severance Plan, as amended and restated as of November 15, 2012.
 
 
 
 
 
 
 
 
 
 
 
10.2
 
AmeriGas Propane, Inc. Executive Employee Severance Plan, as amended and restated as of November 15, 2012.
 
 
 
 
 
 
 
 
 
 
 
10.3
 
UGI Corporation Senior Executive Employee Severance Plan, as amended and restated as of November 16, 2012.
 
UGI
Form 10-Q (6/30/2013)
10.1
 
 
 
 
 
 
 
31.1
  
Certification by the Chief Executive Officer relating to the Registrant’s Report on Form 10-Q for the quarter ended June 30, 2013, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  
 
 
 
 
 
 
 
 
 
 
31.2
  
Certification by the Chief Financial Officer relating to the Registrant’s Report on Form 10-Q for the quarter ended June 30, 2013, 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 Registrant’s Report on Form 10-Q for the quarter ended June 30, 2013, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 
 
 
 
 
101.INS
  
XBRL.Instance
 
 
 
 
 
 
 
 
 
 
 
101.SCH
  
XBRL Taxonomy Extension Schema
 
 
 
 
 
 
 
 
 
 
 
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase
 
 
 
 
 
 
 
 
 
 
 
101.DEF
  
XBRL Taxonomy Extension Definition Linkbase
 
 
 
 
 
 
 
 
 
 
 
101.LAB
  
XBRL Taxonomy Extension Labels Linkbase
 
 
 
 
 
 
 
 
 
 
 
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase
 
 
 
 

 
 

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AMERIGAS PARTNERS, L.P.


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
AMERIGAS PARTNERS, L.P.
 
 
(Registrant)
 
 
 
 
 
 
By:
AmeriGas Propane, Inc.
 
 
 
as General Partner
 
 
 
 
Date:
August 2, 2013
By:
/s/ Hugh J. Gallagher
 
 
 
Hugh J. Gallagher
 
 
 
Vice President - Finance and Chief Financial Officer
 
 
 
 
 
 
 
 
Date:
August 2, 2013
By:
/s/ Robert J. Cane
 
 
 
Robert J. Cane
 
 
 
Controller and Chief Accounting Officer
 


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Table of Contents
AMERIGAS PARTNERS, L.P.


EXHIBIT INDEX
 
10.1
 
AmeriGas Propane, Inc. Senior Executive Employee Severance Plan, as amended and restated as of November 15, 2012.
 
 
 
10.2
 
AmeriGas Propane, Inc. Executive Employee Severance Plan, as amended and restated as of November 15, 2012.
 
 
 
31.1
  
Certification by the Chief Executive Officer relating to the Registrant’s Report on Form 10-Q for the quarter ended June 30, 2013, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
31.2
  
Certification by the Chief Financial Officer relating to the Registrant’s Report on Form 10-Q for the quarter ended June 30, 2013, 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 Registrant’s Report on Form 10-Q for the quarter ended June 30, 2013, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
 
101.INS
  
XBRL.Instance
 
 
 
101.SCH
  
XBRL Taxonomy Extension Schema
 
 
 
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase
 
 
 
101.DEF
  
XBRL Taxonomy Extension Definition Linkbase
 
 
 
101.LAB
  
XBRL Taxonomy Extension Labels Linkbase
 
 
 
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase