Company Quick10K Filing
Quick10K
Amerigas Partners
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$35.15 93 $3,270
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-Q 2018-12-31 Quarter: 2018-12-31
10-K 2018-09-30 Annual: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-Q 2017-12-31 Quarter: 2017-12-31
10-K 2017-09-30 Annual: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-31 Quarter: 2016-12-31
10-K 2016-09-30 Annual: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-Q 2015-12-31 Quarter: 2015-12-31
10-K 2015-09-30 Annual: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-Q 2014-12-31 Quarter: 2014-12-31
10-K 2014-09-30 Annual: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-Q 2013-12-31 Quarter: 2013-12-31
8-K 2019-08-05 Earnings, Regulation FD, Exhibits
8-K 2019-06-05 Officers
8-K 2019-05-06 Earnings, Regulation FD, Exhibits
8-K 2019-04-01 Enter Agreement, Regulation FD, Exhibits
8-K 2019-03-13 Officers
8-K 2019-02-05 Earnings, Regulation FD, Exhibits
8-K 2019-01-17 Officers, Exhibits
8-K 2018-12-04 Regulation FD
8-K 2018-11-12 Earnings, Regulation FD, Exhibits
8-K 2018-09-24 Officers, Exhibits
8-K 2018-09-14 Officers, Exhibits
8-K 2018-08-01 Earnings, Regulation FD, Exhibits
8-K 2018-06-15 Officers, Exhibits
8-K 2018-05-02 Earnings, Regulation FD, Exhibits
8-K 2018-01-31 Earnings, Regulation FD, Exhibits
PSX Phillips 66 38,890
FSLR First Solar 6,210
AEGN Aegion 501
INTT inTEST 70
FMHI Fah Mai Holdings 52
XPL Solitario Zinc 20
FBR Fibria Celulose 0
VIDE Video Display 0
SPA Sparton 0
CVRR CVR Refining 0
APU 2019-06-30
Part I Financial Information
Item 1. Financial Statements
Note 1 - Nature of Operations
Note 2 - Summary of Significant Accounting Policies
Note 3 - Accounting Changes
Note 4 - Revenue From Contracts with Customers
Note 5 - Goodwill and Intangible Assets
Note 6 - Commitments and Contingencies
Note 7 - Fair Value Measurements
Note 8 - Derivative Instruments and Hedging Activities
Note 9 - Related Party Transactions
Note 10 - Proposed Merger
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 apuq363019ex311.htm
EX-31.2 apuq363019ex312.htm
EX-32 apuq363019ex32.htm

Amerigas Partners Earnings 2019-06-30

APU 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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Table of Contents

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
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 Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
460 North Gulph Road, King of Prussia, PA 19406
(Address of Principal Executive Offices) (Zip Code)
(610) 337-7000
(Registrant’s Telephone Number, Including Area Code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading Symbol(s):
Name of each exchange on which registered:
Common Units representing limited partner interests
APU
New York Stock Exchange
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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
  
Accelerated filer
 
Non-accelerated filer
Smaller reporting company
  
Emerging growth company
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
At July 31, 2019, there were 92,999,704 Common Units of AmeriGas Partners, L.P. outstanding.
 
 
 
 
 


Table of Contents



TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


- i -

Table of Contents



GLOSSARY OF TERMS AND ABBREVIATIONS

Terms and abbreviations used in this Form 10-Q are defined below:

AmeriGas Partners, L.P. and Related Entities

AmeriGas OLP - AmeriGas Propane, L.P., the principal operating subsidiary of AmeriGas Partners
AmeriGas Partners - AmeriGas Partners, L.P., the publicly-traded master limited partnership
AmeriGas Propane Holdings, Inc. - A Delaware corporation and an indirect wholly-owned subsidiary of UGI

AmeriGas Propane Holdings, LLC - A Delaware limited liability company and an indirect wholly owned subsidiary of UGI

Energy Services - UGI Energy Services, LLC, a wholly owned subsidiary of UGI

General Partner - AmeriGas Propane, Inc., the general partner of AmeriGas Partners and AmeriGas OLP
GP Audit Committee - The audit committee of the GP Board
GP Board - The board of directors of the General Partner
Merger Sub - AmeriGas Propane Holdings, LLC, an indirect wholly owned subsidiary of UGI
Partnership - AmeriGas Partners, AmeriGas OLP and all of their subsidiaries collectively
UGI - UGI Corporation
Other Terms and Abbreviations
2018 Annual Report - AmeriGas Partners Annual Report on Form 10-K for the fiscal year ended September 30, 2018
2018 nine-month period - Nine-month period ended June 30, 2018
2018 three-month period - Three-month period ended June 30, 2018
2019 nine-month period - Nine-month period ended June 30, 2019
2019 three-month period - Three-month period ended June 30, 2019
Adjusted EBITDA - A non-GAAP financial measure comprising the Partnership’s EBITDA as adjusted for the effects of gains and losses on commodity derivative instruments not associated with current-period transactions and other gains and losses that competitors do not necessarily have
ASC - Accounting Standards Codification
ASC 605 - ASC 605, “Revenue Recognition”
ASC 606 - ASC 606, “Revenue from Contracts with Customers”
ASU - Accounting Standards Update
Common Units - Limited partnership ownership interests in AmeriGas Partners
Credit Agreement - Revolving Credit Agreement issued by AmeriGas OLP expiring in December 2022
EBITDA - A non-GAAP financial measure comprising the Partnership’s earnings before interest expense, income taxes, depreciation and amortization
Exchange Act - Securities Exchange Act of 1934, as amended
FASB - Financial Accounting Standards Board

1

Table of Contents



FDIC - Federal Deposit Insurance Corporation
GAAP - U.S. generally accepted accounting principles
IDR - Incentive distribution right
Merger Agreement - Agreement and Plan of Merger, dated as of April 1, 2019, among UGI, AmeriGas Propane Holdings, Inc., AmeriGas Propane Holdings, LLC, AmeriGas Partners and AmeriGas Propane

MGP - Manufactured gas plant

MLP - Master limited partnership
NOAA - National Oceanic and Atmospheric Administration
NPNS - Normal purchase and normal sale
NYDEC - New York State Department of Environmental Conservation
Partnership Agreement - Fourth Amended and Restated Agreement of Limited Partnership of AmeriGas Partners dated as of July 27, 2009, as amended
Proposed Merger - The transaction contemplated by the Merger Agreement pursuant to which AmeriGas Propane Holdings, LLC will merge with and into the Partnership, with the Partnership surviving as an indirect wholly owned subsidiary of UGI

PRP - Potentially responsible party

ROD - Record of Decision
SEC - U.S. Securities and Exchange Commission
Special Meeting - Special meeting of holders of Common Units to be held on August 21, 2019 to approve (i) the Merger Agreement and the transactions contemplated thereby, including the Proposed Merger, (ii) the adjournment of the Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the Merger Agreement and the transactions contemplated thereby, including the Proposed Merger, at the time of the Special Meeting and (iii) a non-binding advisory vote regarding certain compensation arrangements that may be payable to AmeriGas Partners’ named executive officers in connection with the completion of the Proposed Merger

Support Agreement - Agreement between the Partnership and the General Partner, dated as of April 1, 2019, pursuant to which the General Partner has agreed to vote all Common Units that it or its affiliates beneficially own as of the record date of the Special Meeting in favor of the Merger Agreement and the transactions contemplated thereby, including the Proposed Merger, at the Special Meeting

TCJA - Tax Cuts and Jobs Act

TPH - Tudor, Pickering Holt & Co. Advisors LP

Western Missouri District Court - The United States District Court for the Western District of Missouri

2

Table of Contents

AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
 
 
June 30,
2019
 
September 30,
2018
 
June 30,
2018
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
2,049

 
$
6,878

 
$
5,082

Accounts receivable (less allowances for doubtful accounts of $14,857, $12,825 and $15,127, respectively)
 
197,572

 
206,576

 
215,424

Accounts receivable — related parties
 
3,663

 
3,248

 
4,036

Inventories
 
99,672

 
130,527

 
116,133

Derivative instruments
 
29

 
38,661

 
26,821

Prepaid expenses and other current assets
 
50,152

 
66,001

 
59,725

Total current assets
 
353,137

 
451,891

 
427,221

Property, plant and equipment (less accumulated depreciation of $1,217,159, $1,151,726 and $1,162,119, respectively)
 
1,114,152

 
1,148,383

 
1,158,045

Goodwill
 
2,003,671

 
2,003,671

 
2,006,139

Intangible assets, net
 
249,523

 
279,608

 
290,023

Derivative instruments
 
4,902

 
6,347

 
2,845

Other assets
 
65,954

 
35,918

 
42,068

Total assets
 
$
3,791,339

 
$
3,925,818

 
$
3,926,341

LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Current maturities of long-term debt
 
$
7,863

 
$
8,626

 
$
9,176

Short-term borrowings
 
248,500

 
232,000

 
177,000

Accounts payable — trade
 
90,119

 
137,050

 
101,182

Accounts payable — related parties
 
1,551

 
1,482

 
241

Customer deposits and advances
 
50,310

 
91,829

 
52,191

Derivative instruments
 
15,054

 

 

Other current liabilities
 
190,974

 
207,041

 
189,782

Total current liabilities
 
604,371

 
678,028

 
529,572

Long-term debt
 
2,561,033

 
2,561,007

 
2,565,181

Other noncurrent liabilities
 
143,876

 
117,115

 
128,943

Total liabilities
 
3,309,280

 
3,356,150

 
3,223,696

Commitments and contingencies (Note 6)
 

 

 

Partners’ capital:
 
 
 
 
 
 
AmeriGas Partners, L.P. partners’ capital:
 
 
 
 
 
 
Common unitholders (units issued — 92,999,704, 92,977,072 and 92,977,072, respectively)
 
437,880

 
523,925

 
654,418

General partner
 
12,152

 
12,682

 
14,001

Total AmeriGas Partners, L.P. partners’ capital
 
450,032

 
536,607

 
668,419

Noncontrolling interest
 
32,027

 
33,061

 
34,226

Total partners’ capital
 
482,059

 
569,668

 
702,645

Total liabilities and partners’ capital
 
$
3,791,339

 
$
3,925,818

 
$
3,926,341

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Thousands of dollars, except per unit amounts)
 
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
 
Propane
 
$
414,602

 
$
461,875

 
$
2,057,395

 
$
2,141,128

Other
 
64,132

 
66,528

 
213,143

 
214,903

 
 
478,734

 
528,403

 
2,270,538

 
2,356,031

Costs and expenses:
 
 
 
 
 
 
 
 
Cost of sales — propane (excluding depreciation and amortization shown below)
 
192,160

 
199,652

 
1,027,432

 
1,039,647

Cost of sales — other (excluding depreciation and amortization shown below)
 
21,604

 
24,492

 
61,419

 
64,770

Operating and administrative expenses
 
234,429

 
222,358

 
719,497

 
704,146

Impairment of tradenames and trademarks
 

 
75,000

 

 
75,000

Depreciation and amortization
 
43,989

 
46,393

 
133,967

 
138,968

Other operating income, net
 
(6,690
)
 
(5,793
)
 
(17,767
)
 
(17,443
)
 
 
485,492

 
562,102

 
1,924,548

 
2,005,088

Operating (loss) income
 
(6,758
)
 
(33,699
)
 
345,990

 
350,943

Interest expense
 
(41,640
)
 
(40,449
)
 
(126,208
)
 
(122,021
)
(Loss) income before income taxes
 
(48,398
)
 
(74,148
)
 
219,782

 
228,922

Income tax expense
 
(673
)
 
(624
)
 
(1,779
)
 
(3,658
)
Net (loss) income including noncontrolling interest
 
(49,071
)
 
(74,772
)
 
218,003

 
225,264

Add net loss (deduct net income) attributable to noncontrolling interest
 
114

 
376

 
(3,340
)
 
(3,415
)
Net (loss) income attributable to AmeriGas Partners, L.P.
 
$
(48,957
)
 
$
(74,396
)
 
$
214,663

 
$
221,849

 
 
 
 
 
 
 
 
 
General partner’s interest in net (loss) income attributable to AmeriGas Partners, L.P.
 
$
10,959

 
$
10,587

 
$
36,488

 
$
36,208

Limited partners’ interest in net (loss) income attributable to AmeriGas Partners, L.P.
 
$
(59,916
)
 
$
(84,983
)
 
$
178,175

 
$
185,641

(Loss) income per limited partner unit (see Note 2):
 
 
 
 
 
 
 
 
Basic
 
$
(0.64
)
 
$
(0.91
)
 
$
1.92

 
$
2.00

Diluted
 
$
(0.64
)
 
$
(0.91
)
 
$
1.92

 
$
1.99

Weighted-average limited partner units outstanding (thousands):
 
 
 
 
 
 
 
 
Basic
 
93,098

 
93,042

 
93,077

 
93,031

Diluted
 
93,098

 
93,042

 
93,121

 
93,082

See accompanying notes to condensed consolidated financial statements.


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Table of Contents

AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Thousands of dollars)
 
Nine Months Ended
June 30,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income including noncontrolling interest
$
218,003

 
$
225,264

Adjustments to reconcile net income including noncontrolling interest to net cash provided by operating activities:
 
 
 
Depreciation and amortization
133,967

 
138,968

Provision for uncollectible accounts
11,211

 
11,769

Change in unrealized gains and losses on derivatives instruments
64,845

 
10,138

Impairment of tradenames and trademarks

 
75,000

Other, net
5,008

 
6,145

Net change in:
 
 
 
Accounts receivable
(2,622
)
 
(28,987
)
Inventories
30,855

 
598

Accounts payable
(46,862
)
 
(18,538
)
Derivative instruments collateral deposits paid
(9,590
)
 
(7,991
)
Other current assets
3,120

 
3,361

Other current liabilities
(50,246
)
 
(71,400
)
Net cash provided by operating activities
357,689

 
344,327

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Expenditures for property, plant and equipment
(77,804
)
 
(72,893
)
Proceeds from disposals of assets
9,241

 
10,260

Acquisitions of businesses, net of cash acquired

 
(9,382
)
Net cash used by investing activities
(68,563
)
 
(72,015
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Distributions
(302,048
)
 
(301,980
)
Noncontrolling interest activity
(4,374
)
 
(4,361
)
Increase in short-term borrowings
16,500

 
37,000

Repayment of long-term debt
(3,681
)
 
(3,174
)
Capital contributions from General Partner

 
8

Other
(352
)
 
(2,039
)
Net cash used by financing activities
(293,955
)
 
(274,546
)
Cash and cash equivalents decrease
$
(4,829
)
 
$
(2,234
)
CASH AND CASH EQUIVALENTS
 
 
 
Cash and cash equivalents at end of period
$
2,049

 
$
5,082

Cash and cash equivalents at beginning of period
6,878

 
7,316

Cash and cash equivalents decrease
$
(4,829
)
 
$
(2,234
)
See accompanying notes to condensed consolidated financial statements.


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Table of Contents

AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(unaudited)
(Thousands of dollars, except unit amounts) 

For the three months ended June 30, 2019:
 
Number of
Common Units
 
Common
unitholders
 
General
partner
 
Total
AmeriGas
Partners, L.P.
partners’ capital
 
Noncontrolling
interest
 
Total
partners’
capital
Balance March 31, 2019
 
92,998,220

 
$
585,897

 
$
13,533

 
$
599,430

 
$
33,714

 
$
633,144

Net (loss) income including noncontrolling interest
 
 
 
(59,916
)
 
10,959

 
(48,957
)
 
(114
)
 
(49,071
)
Distributions
 
 
 
(88,349
)
 
(12,340
)
 
(100,689
)
 
(1,573
)
 
(102,262
)
Unit-based compensation expense
 
 
 
273

 
 
 
273

 
 
 
273

Common Units issued in connection with employee and director plans, net of tax withheld
 
1,484

 
(25
)
 

 
(25
)
 
 
 
(25
)
Balance June 30, 2019
 
92,999,704

 
$
437,880

 
$
12,152

 
$
450,032

 
$
32,027

 
$
482,059

 
 
 
 
 
 
 
 
 
 
 
 
 
For the three months ended June 30, 2018:
 
Number of
Common Units
 
Common
unitholders
 
General
partner
 
Total
AmeriGas
Partners, L.P.
partners’ capital
 
Noncontrolling
interest
 
Total
partners’
capital
Balance March 31, 2018
 
92,976,504

 
$
827,473

 
$
15,751

 
$
843,224

 
$
36,172

 
$
879,396

Net (loss) income including noncontrolling interest
 
 
 
(84,983
)
 
10,587

 
(74,396
)
 
(376
)
 
(74,772
)
Distributions
 
 
 
(88,328
)
 
(12,337
)
 
(100,665
)
 
(1,570
)
 
(102,235
)
Unit-based compensation expense
 
 
 
213

 
 
 
213

 
 
 
213

Common Units issued in connection with employee and director plans, net of tax withheld
 
568

 
43

 

 
43

 
 
 
43

Balance June 30, 2018
 
92,977,072

 
$
654,418

 
$
14,001

 
$
668,419

 
$
34,226

 
$
702,645


For the nine months ended June 30, 2019:
 
Number of
Common Units
 
Common
unitholders
 
General
partner
 
Total
AmeriGas
Partners, L.P.
partners’ capital
 
Noncontrolling
interest
 
Total
partners’
capital
Balance September 30, 2018
 
92,977,072

 
$
523,925

 
$
12,682

 
$
536,607

 
$
33,061

 
$
569,668

Net income including noncontrolling interest
 
 
 
178,175

 
36,488

 
214,663

 
3,340

 
218,003

Distributions
 
 
 
(265,030
)
 
(37,018
)
 
(302,048
)
 
(4,374
)
 
(306,422
)
Unit-based compensation expense
 
 
 
1,162

 
 
 
1,162

 
 
 
1,162

Common Units issued in connection with employee and director plans, net of tax withheld
 
22,632

 
(352
)
 

 
(352
)
 
 
 
(352
)
Balance June 30, 2019
 
92,999,704

 
$
437,880

 
$
12,152

 
$
450,032

 
$
32,027

 
$
482,059

 
 
 
 
 
 
 
 
 
 
 
 
 
For the nine months ended June 30, 2018:
 
Number of
Common Units
 
Common
unitholders
 
General
partner
 
Total
AmeriGas
Partners, L.P.
partners’ capital
 
Noncontrolling
interest
 
Total
partners’
capital
Balance September 30, 2017
 
92,958,586

 
$
733,104

 
$
14,795

 
$
747,899

 
$
35,172

 
$
783,071

Net income including noncontrolling interest
 
 
 
185,641

 
36,208

 
221,849

 
3,415

 
225,264

Distributions
 
 
 
(264,970
)
 
(37,010
)
 
(301,980
)
 
(4,361
)
 
(306,341
)
Unit-based compensation expense
 
 
 
983

 
 
 
983

 
 
 
983

Common Units issued in connection with employee and director plans, net of tax withheld
 
18,486

 
(340
)
 
8

 
(332
)
 
 
 
(332
)
Balance June 30, 2018
 
92,977,072

 
$
654,418

 
$
14,001

 
$
668,419

 
$
34,226

 
$
702,645

See accompanying notes to condensed consolidated financial statements.

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Table of Contents
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit amounts and where indicated otherwise)


Note 1 — Nature of Operations

AmeriGas Partners is a publicly traded limited partnership that conducts a national propane distribution business through its principal operating subsidiary, AmeriGas OLP. AmeriGas Partners and AmeriGas OLP are Delaware limited partnerships. AmeriGas Partners, AmeriGas OLP and all of their subsidiaries are collectively referred to herein as the Partnership.

AmeriGas OLP is engaged in the distribution of propane and related equipment and supplies. AmeriGas OLP 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, 2019, the General Partner, an indirect wholly owned subsidiary of UGI, held a 1% general partner interest in AmeriGas Partners and a 1.01% general partner interest in AmeriGas OLP. The General Partner also owns AmeriGas Partners Common Units. The remaining Common Units outstanding represents publicly held Common Units. AmeriGas Partners holds a 98.99% limited partner interest in AmeriGas OLP.

AmeriGas Partners and AmeriGas OLP have no employees. Employees of the General Partner conduct, direct and manage our operations. The General Partner is reimbursed monthly for all direct and indirect expenses it incurs on our behalf (see Note 9).

On April 1, 2019, we entered into the Merger Agreement, pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership surviving as an indirect, wholly owned subsidiary of UGI. If the Merger Agreement is consummated, UGI will obtain full ownership of AmeriGas Partners by acquiring all of the outstanding Common Units not already held by the General Partner. Consummation of the Merger Agreement is subject to customary conditions as well as the approval of a majority of the outstanding Common Units including the Common Units held by the General Partner.

Upon completion of the Proposed Merger, Common Units will no longer be publicly traded. Subject to the satisfaction or waiver of certain conditions, including the approval of the Merger Agreement by AmeriGas Partners’ unitholders at the Special Meeting to be held on August 21, 2019, the Proposed Merger is expected to close in the fourth quarter of Fiscal 2019. See Note 10 for further information on the Proposed Merger.

Note 2 — Summary of Significant Accounting Policies
 
The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with the rules and regulations of the SEC. They include all adjustments which we consider necessary for a fair statement of the results for the interim periods presented. Such adjustments consist only of normal recurring items unless otherwise disclosed. The September 30, 2018, Condensed Consolidated Balance Sheet was derived from audited financial statements but does not include all footnote disclosures from the annual financial statements.

These financial statements should be read in conjunction with the Partnership’s 2018 Annual Report. 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.

Principles of Consolidation. The consolidated financial statements include the accounts of AmeriGas Partners, its majority-owned subsidiary AmeriGas OLP, and its 100%-owned finance subsidiaries AmeriGas Finance Corp., AmeriGas Eagle Finance Corp., AP Eagle Finance Corp., and AmeriGas Finance LLC. AmeriGas Partners and AmeriGas OLP are under the common control of the General Partner. The General Partner of AmeriGas OLP, which is also the General Partner of AmeriGas Partners, makes all decisions for AmeriGas OLP; limited partners of AmeriGas OLP do not have the ability to remove the General Partner or participate in the decision-making for AmeriGas OLP. The accounts of AmeriGas OLP are included based upon the determination that AmeriGas Partners has a controlling financial interest in and is the primary beneficiary of AmeriGas OLP. We eliminate intercompany accounts and transactions when we consolidate.

Revenue Recognition. Effective October 1, 2018, the Partnership adopted ASU No. 2014-09, “Revenue from Contracts with Customers,” which, as amended, is included in ASC 606. This new accounting guidance supersedes previous revenue recognition requirements in ASC 605. ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services

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AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit amounts and where indicated otherwise)

to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Partnership adopted this new accounting guidance using the modified retrospective transition method to those contracts which were not completed as of October 1, 2018. Periods prior to October 1, 2018, have not been restated and continue to be reported in accordance with ASC 605. Upon adoption, there were no cumulative effect adjustments made to the October 1, 2018, partners’ capital balances. The adoption of ASC 606 did not, and is not expected to, have a material impact on the amount or timing of our revenue recognition and on our consolidated net income, cash flows or financial position.

Certain revenues are not within the scope of ASC 606 such as revenue from leases, financial instruments, other revenues that are not from contracts with customers, and other contractual rights or obligations and we account for such revenues in accordance with other GAAP. Revenue-related taxes collected on behalf of customers and remitted to taxing authorities, principally sales and use taxes, are not included in revenues. The Partnership has elected to use the practical expedient to expense the costs to obtain contracts when incurred as such amounts are generally not material.

See Note 4 for additional disclosures regarding the Partnership’s revenue from contracts with customers.

Allocation of Net Income (Loss). Net income (loss) attributable to AmeriGas Partners, L.P. for partners’ capital and statement of operations presentation purposes is allocated to the General Partner and the limited partners in accordance with their respective ownership percentages after giving effect to amounts distributed to the General Partner in excess of its 1% general partner interest in AmeriGas Partners based on its IDRs under the Partnership Agreement.

Income (Loss) Per Unit. Income (loss) per limited partner unit is computed in accordance with GAAP regarding the application of the two-class method for determining income (loss) per unit for 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 reconciliations of 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,
 
 
2019
 
2018
 
2019
 
2018
Net (loss) income attributable to AmeriGas Partners, L.P.
 
$
(48,957
)
 
$
(74,396
)
 
$
214,663

 
$
221,849

Adjust for general partner share and theoretical distributions of net (loss) income attributable to AmeriGas Partners, L.P. to the general partner in accordance with the two-class method for MLPs
 
(10,844
)
 
(10,587
)
 
(36,170
)
 
(36,215
)
Common Unitholders’ interest in net (loss) income attributable to AmeriGas Partners, L.P. under the two-class method for MLPs
 
$
(59,801
)
 
$
(84,983
)
 
$
178,493

 
$
185,634

 
 
 
 
 
 
 
 
 
Weighted average Common Units outstanding — basic (thousands)
 
93,098

 
93,042

 
93,077

 
93,031

Potentially dilutive Common Units (thousands)
 

 

 
44

 
51

Weighted average Common Units outstanding — diluted (thousands)
 
93,098

 
93,042

 
93,121

 
93,082



There was no dilutive effect based upon the computation of income (loss) per limited partner unit in accordance with the two-class method for the three and nine months ended June 30, 2019 and 2018.

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.

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AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit amounts and where indicated otherwise)


Derivative Instruments. Derivative instruments are reported on the Condensed Consolidated Balance Sheets at their fair values, unless the NPNS exception is elected. The accounting for changes in fair value depends upon the purpose of the derivative instrument and whether it qualifies and is designated as a hedge for accounting purposes. We do not currently have derivative instruments that are designated and qualify as cash flow hedges. Changes in the fair values of our commodity derivative instruments are reflected in “Cost of sales — propane” on the Condensed Consolidated Statements of Operations. Cash flows from commodity derivative instruments are included in cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.

For a more detailed description of the derivative instruments we use, our accounting for derivatives, our objectives for using them and other information, see Note 8.

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.

Correction of Prior Period Errors. During the three and nine months ended June 30, 2019, the Partnership determined that it had not properly recorded expenses associated with certain vehicle lease arrangements.  The Partnership evaluated the impact of the error on prior periods and determined that the effect was not material to the financial statements for the three and nine months ended June 30, 2019, or any prior period financial statements, and recorded the cumulative effect of the error in accounting for certain vehicle lease arrangements as of April 1, 2019. The correction of the error increased “Operating and administrative expenses” for the three months ended June 30, 2019, by $5,025 substantially all of which relates to periods prior to Fiscal 2019.

Reclassifications. Certain prior-period amounts have been reclassified to conform to the current-period presentation.

Note 3 — Accounting Changes
New Accounting Standards Adopted Effective October 1, 2018

Revenue Recognition. Effective October 1, 2018, the Partnership adopted new accounting guidance regarding revenue recognition. See Notes 2 and 4 for a detailed description of the impact of the new guidance and related disclosures.

Cloud Computing Implementation Costs. In August 2018, the FASB issued ASU No. 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The new guidance requires a customer in a cloud computing arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project. These deferred implementation costs are expensed over the fixed, noncancelable term of the service arrangement plus any reasonably certain renewal periods. The new guidance also requires the entity to present the expense related to the capitalized implementation costs in the same income statement line as the hosting service fees; to classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments for hosting service fees; and to present the capitalized implementation costs in the balance sheet in the same line item in which prepaid hosting service fees are presented. The new guidance can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We adopted this ASU effective October 1, 2018, and applied the guidance prospectively to all implementation costs associated with cloud computing arrangements that are service contracts incurred beginning October 1, 2018. The adoption of the new guidance did not have a material impact on our results of operations for the three and nine months ended June 30, 2019.

Accounting Standards Not Yet Adopted

Fair Value Measurements Disclosures. In August 2018, the FASB issued ASU No. 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The amendments in this ASU are effective for annual periods beginning October 1, 2020 (Fiscal 2021). The guidance regarding removing and modifying disclosures will be adopted on a retrospective basis and the guidance regarding new disclosures will be adopted on a prospective basis. Early adoption is permitted. The Partnership

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Table of Contents
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit amounts and where indicated otherwise)

expects to adopt the new guidance in the fourth quarter of Fiscal 2019. The adoption of the new guidance is not expected to have a material impact on the Partnership’s financial statements.

Derivatives and Hedging. In August 2017, the FASB issued ASU No. 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” This ASU amends and simplifies existing guidance to allow companies to more accurately present the economic effects of risk management activities in the financial statements. The amendments in this ASU are effective for the Partnership for interim and annual periods beginning October 1, 2019 (Fiscal 2020). Early adoption is permitted. For cash flow and net investment hedges as of the adoption date, the guidance requires a modified retrospective approach. The amended presentation and disclosure guidance is required prospectively. The Partnership expects to adopt the new guidance in the first quarter of Fiscal 2020. The adoption of the new guidance is not expected to have a material impact on the Partnership’s financial statements.

Credit Losses. In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments. This ASU requires entities to estimate lifetime expected credit losses for financial instruments not measured at fair value through net income, including trade and other receivables, net investments in leases, financial receivables, debt securities, and other financial instruments, which may result in earlier recognition of credit losses. Further, the new current expected credit loss model may affect how entities estimate their allowance for loss for receivables that are current with respect to their payment terms. ASU 2016-13 is effective for the Partnership for interim and annual periods beginning October 1, 2020 (Fiscal 2021). Early adoption is permitted. The Partnership is in the process of assessing the impact on its financial statements from the adoption of the new guidance and determining the period in which the new guidance will be adopted.

Leases. In February 2016, the FASB issued ASU No. 2016-02, "Leases." This ASU, as subsequently updated, amends existing guidance to require entities that lease assets to recognize the assets and liabilities for the rights and obligations created by those leases on the balance sheet. The new guidance also requires additional disclosures about the amount, timing and uncertainty of cash flows from leases. The amendments in this ASU are effective for the Partnership for interim and annual periods beginning October 1, 2019 (Fiscal 2020). Early adoption is permitted. Lessees must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements unless an entity chooses the transition option in ASU 2018-11, “Leases: Targeted Improvements” which, among other things, provides entities with a transition option to recognize the cumulative-effect adjustment from the modified retrospective application to the opening balance of retained earnings in the period of adoption. We will adopt ASU No. 2016-02, as updated, effective October 1, 2019 and expect to elect the transition option which would allow the Partnership to maintain historical presentation for periods before October 1, 2019. The Partnership has completed a preliminary assessment for evaluating the impact of the guidance and anticipates that its adoption will result in a significant amount of right-of-use assets and lease liabilities for leases in effect at the adoption date. The Partnership has begun implementation activities including accumulating contracts and lease data in formats compatible with a new lease management system that will assist with the initial adoption and future reporting required by the standard.

Note 4 — Revenue from Contracts with Customers

We recognize revenue when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. The Partnership generally has the right to consideration from a customer in an amount that corresponds directly with the value to the customer for our performance completed to date. As such, we elected to recognize revenue in the amount to which we have a right to invoice.
We do not have a significant financing component in our contracts because we receive payment shortly before, at, or shortly after the transfer of control of the good or service. Because the period between the time the performance obligation is satisfied and payment received is one year or less, the Partnership has elected to apply the significant financing component practical expedient and no amount of consideration has been allocated as a financing component.
The Partnership records revenue principally from the sale of propane to retail and wholesale customers. The primary performance obligation associated with the sale of propane is the delivery of propane to (1) the customer’s point of delivery for retail customers and (2) the customer’s specified location where propane is picked up by wholesale customers, at which point control of the propane is transferred to the customer, the performance obligation is satisfied, and the associated revenue is recognized. For contracts with retail customers that consume propane from a metered tank, the Partnership recognizes revenue as the propane is consumed, at which point we have the right to invoice, and generally invoice monthly based on consumption.

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Table of Contents
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit amounts and where indicated otherwise)

Contracts with customers comprise different types of contracts with varying length terms, fixed or variable prices, and fixed or variable quantities. Contracts with our residential customers, which comprise a substantial number of our customer contracts, are generally one year or less. Customer contracts for the sale of propane include fixed-price, fixed-quantity contracts under which propane is provided to a customer at a fixed price and a fixed volume, and contracts that provide for the sale of propane at market prices at date of delivery with no fixed volumes. The Partnership offers contracts that permit customers to lock in a fixed price for their volumes for a fee and also provide customers with the option to pre-buy a fixed amount of propane at a fixed price. Amounts received under pre-buy arrangements are recorded as a contract liability when received and recorded as revenue when propane is delivered and control is transferred to the customer. Fees associated with fixed-price contracts are recorded as contract liabilities and recorded ratably over the contract period.
The Partnership also distributes propane to customers in portable cylinders. Under certain contracts, filled cylinders are delivered, and control is transferred, to a reseller. In such instances, the reseller is our customer and we record revenue upon delivery to the reseller. Under other contracts, filled cylinders are delivered to a reseller, but the Partnership retains control of the cylinders. In such instances, we record revenue at the time the reseller transfers control of the cylinder to the customer.
Certain retail propane customers receive credits which we account for as variable consideration. We estimate these credits based upon past practices and historical customer experience and we reduce our revenues recognized for these credits.
Other revenues from contracts with customers are generated primarily from certain fees the Partnership charges associated with the delivery of propane including hazmat safety compliance, inspection, metering, installation, fuel recovery and certain other services. Revenues from fees are typically recorded when the propane is delivered to the customer or the associated service is completed. Other revenues from contracts with customers are also generated from the Partnership’s parts and service business. The performance obligations of this business include installation and repair services. The performance obligations under these contracts are satisfied, and revenue is recognized, as control of the product is transferred or the services are rendered.
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers or cash receipts. Contract assets represent the Partnership’s right to consideration after the performance obligations have been satisfied when such right is conditioned on something other than the passage of time. Contract assets were not material at June 30, 2019. Substantially all of the Partnership’s receivables are unconditional rights to consideration and are included in “Accounts receivable” on the Condensed Consolidated Balance Sheets. Amounts billed are generally due within the following month.
Contract liabilities arise when payment from a customer is received before the performance obligations have been satisfied and represent the Partnership’s obligations to transfer goods or services to a customer for which the Partnership has received consideration from the customer. The balances of contract liabilities were $54,836 and $93,393 at June 30, 2019 and October 1, 2018, respectively, and are included in “Customer deposits and advances” and “Other current liabilities” on the Condensed Consolidated Balance Sheets. Revenue recognized for the nine months ended June 30, 2019, from the amount included in contract liabilities at October 1, 2018 was $74,154.


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AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit amounts and where indicated otherwise)

Revenue Disaggregation

The following table presents our disaggregated revenues for the three and nine months ended June 30, 2019:
 
 
Three Months Ended June 30, 2019
 
Nine Months Ended June 30, 2019
Revenues from contracts with customers:
 
 
 
 
Propane:
 
 
 
 
Retail
 
$
405,817

 
$
2,002,361

Wholesale
 
8,785

 
55,034

Other
 
48,235

 
165,945

Total revenues from contracts with customers
 
462,837

 
2,223,340

Other revenues (a)
 
15,897

 
47,198

Total revenues
 
$
478,734

 
$
2,270,538


(a)
Primarily represents revenues from tank rentals that are not within the scope of ASC 606 and accounted for in accordance with other GAAP.

Remaining Performance Obligations
The Partnership has elected to use practical expedients as allowed in ASC 606 to exclude disclosures related to the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied as of the end of the reporting period because these contracts have an initial expected term of one year or less or we have a right to bill the customer in an amount that corresponds directly with the value of services provided to the customer to date.
Note 5 — Goodwill and Intangible Assets

The Partnership’s goodwill and intangible assets comprise the following:
 
 
June 30,
2019
 
September 30,
2018
 
June 30,
2018
Goodwill (not subject to amortization)
 
$
2,003,671

 
$
2,003,671

 
$
2,006,139

Intangible assets, net (definite-lived):
 
 
 
 
 
 
Customer relationships and noncompete agreements
 
$
496,901

 
$
497,373

 
$
499,579

Trademarks and tradenames
 
7,944

 
7,944

 
7,944

Accumulated amortization
 
(255,322
)
 
(225,709
)
 
(217,500
)
Intangible assets, net (definite-lived)
 
$
249,523


$
279,608


$
290,023



Amortization expense of intangible assets was $9,840 and $10,388 for the three months ended June 30, 2019 and 2018, respectively. Amortization expense of intangible assets was $30,085 and $29,568 for the nine months ended June 30, 2019 and 2018, respectively. No amortization expense is included in cost of sales on the Condensed Consolidated Statements of Operations. The estimated aggregate amortization expense of intangible assets for the remainder of Fiscal 2019 and the next four fiscal years is as follows: remainder of Fiscal 2019$10,059; Fiscal 2020$39,152; Fiscal 2021$35,914; Fiscal 2022$32,963; Fiscal 2023$31,627.

In April 2018, a plan to discontinue the use of indefinite-lived tradenames and trademarks, primarily those associated with the Partnership’s January 2012 acquisition of Heritage Propane, was presented to the Partnership’s senior management. After considering the merits of the plan, the Partnership’s senior management approved a plan to discontinue the use of these tradenames and trademarks over a period of approximately three years. As a result, during the three months ended June 30, 2018, the Partnership determined that these tradenames and trademarks no longer had indefinite lives and, in accordance with GAAP associated with intangible assets, adjusted the carrying amounts of these tradenames and trademarks to their estimated fair values of approximately

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AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit amounts and where indicated otherwise)

$7,944. During the three months ended June 30, 2018, the Partnership recorded a non-cash impairment charge of $75,000, which amount is reflected in “Impairment of tradenames and trademarks” on the Condensed Consolidated Statements of Operations, and is amortizing the remaining fair value of these tradenames and trademarks of $7,944 over their estimated period of benefit of three years.

Note 6 — Commitments and Contingencies

Contingencies

Saranac Lake Environmental Matter. In 2008, the NYDEC notified AmeriGas OLP that the NYDEC had placed property purportedly owned by AmeriGas OLP in Saranac Lake, New York on the New York State Registry of Inactive Hazardous Waste Disposal Sites. A site characterization study performed by the NYDEC disclosed contamination related to a former MGP. AmeriGas OLP responded to the NYDEC in 2009 to dispute the contention it was a PRP as it did not operate the MGP and appeared to only own a portion of the site. In 2017, the NYDEC communicated to AmeriGas OLP that the NYDEC had previously issued three RODs related to remediation of the site totaling approximately $27,700 and requested additional information regarding AmeriGas OLP’s purported ownership. AmeriGas renewed its challenge to designation as a PRP and identified potential defenses. The NYDEC subsequently identified a third party PRP with respect to the site.

The NYDEC commenced implementation of the remediation plan in the spring of 2018. Based on our evaluation of the available information, the Partnership accrued an undiscounted environmental remediation liability of $7,545 related to the site during the third quarter of Fiscal 2017. Our share of the actual remediation costs could be significantly more or less than the accrued amount.

Purported Class Action Lawsuits. Between May and October of 2014, purported class action lawsuits were filed in multiple jurisdictions against the Partnership/UGI and a competitor by certain of their direct and indirect customers.  The class action lawsuits allege, among other things, that the Partnership and its competitor colluded, beginning in 2008, to reduce the fill level of portable propane cylinders from 17 pounds to 15 pounds and combined to persuade their common customer, Walmart Stores, Inc., to accept that fill reduction, resulting in increased cylinder costs to retailers and end-user customers in violation of federal and certain state antitrust laws.  The claims seek treble damages, injunctive relief, attorneys’ fees and costs on behalf of the putative classes. 

On October 16, 2014, the United States Judicial Panel on Multidistrict Litigation transferred all of these purported class action cases to the Western Missouri District Court.  As the result of rulings on a series of procedural filings, including petitions filed with the Eighth Circuit and the U.S. Supreme Court, both the federal and state law claims of the direct customer plaintiffs and the state law claims of the indirect customer plaintiffs were remanded to the Western Missouri District Court. The decision of the Western Missouri District Court to dismiss the federal antitrust claims of the indirect customer plaintiffs was upheld by the Eighth Circuit. On April 15, 2019, the Western Missouri District Court ruled that it has jurisdiction over the indirect purchasers’ state law claims and that the indirect customer plaintiffs have standing to pursue those claims.
  
Although we cannot predict the final results of these pending claims and legal actions, we believe, after consultation with counsel, that the final outcome of these matters will not have a material effect on our financial statements.

Proposed Merger Lawsuits. In connection with the Proposed Merger (see Note 10), on June 5, 2019, a single AmeriGas Partners unitholder filed a class action complaint in the United States District Court for the District of Delaware. On July 9, 2019, a second AmeriGas Partners unitholder filed a complaint in the United States District Court for the Eastern District of Pennsylvania. The complaints generally allege that the May 6, 2019 registration statement filed with the SEC in connection with the Proposed Merger included materially incomplete and/or misleading information in violation of the federal securities laws. The complaints request, among other things, that the respective courts enjoin the parties from proceeding with the Proposed Merger or rescind the Proposed Merger if it does close. Both plaintiffs seek an award of attorneys’ fees and costs. AmeriGas Partners has not yet answered or responded to the complaints.

Although we cannot predict the final results of these pending claims and legal actions, we believe, after consultation with counsel, that the final outcome of these matters will not have a material effect on our financial statements.


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AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit amounts and where indicated otherwise)

In addition to the matters described above, there are other pending claims and legal actions arising in the normal course of our businesses. Although we cannot predict the final results of these pending claims and legal actions, we believe, after consultation with counsel, that the final outcome of these matters will not have a material effect on our financial statements.

Note 7 — Fair Value Measurements

Recurring Fair Value Measurements - Derivative Instruments

The following table presents, on a gross basis, our derivative assets and liabilities, including both current and noncurrent portions, that are measured at fair value on a recurring basis within the fair value hierarchy: 
 
 
Asset (Liability)
 
 
Level 1
 
Level 2
 
Level 3
 
Total
June 30, 2019:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Commodity contracts
 
$

 
$
7,428

 
$

 
$
7,428

Liabilities:
 
 
 
 
 
 
 
 
Commodity contracts
 
$

 
$
(19,995
)
 
$

 
$
(19,995
)
September 30, 2018:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Commodity contracts
 
$

 
$
52,529

 
$

 
$
52,529

Liabilities:
 
 
 
 
 
 
 
 
Commodity contracts
 
$

 
$
(251
)
 
$

 
$
(251
)
June 30, 2018:
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Commodity contracts
 
$

 
$
30,086

 
$

 
$
30,086

Liabilities:
 
 
 
 
 
 
 
 
Commodity contracts
 
$

 
$
(420
)
 
$

 
$
(420
)

 
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.

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. We estimate the fair value of long-term debt by using current market rates and by discounting future cash flows using rates available for similar type debt (Level 2). The carrying amount and estimated fair value of our long-term debt (including current maturities but excluding unamortized debt issuance costs) at June 30, 2019, September 30, 2018 and June 30, 2018 were as follows:

 
June 30, 2019
 
September 30, 2018
 
June 30, 2018
Carrying amount
$
2,593,504

 
$
2,597,131

 
$
2,602,827

Estimated fair value
$
2,724,645

 
$
2,562,206

 
$
2,519,411



Financial instruments other than derivative instruments, such as short-term investments and trade accounts receivable, could expose us to concentrations of credit risk. We limit credit risk from short-term investments by investing only in investment-grade commercial paper, money market mutual funds, securities guaranteed by the U.S. Government or its agencies and FDIC insured bank deposits. The credit risk arising from concentrations of trade accounts receivable is limited because we have a large customer base that extends across many different U.S. markets.


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AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit amounts and where indicated otherwise)

Note 8 — Derivative Instruments and Hedging Activities

The Partnership is exposed to certain market risks associated with its ongoing business operations. Management uses derivative financial and commodity instruments, among other things, to manage these risks. The primary risk managed by derivative instruments is commodity price 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. Although our commodity derivative instruments extend over a number of years, a significant portion of our commodity derivative instruments economically hedge commodity price risk during the next twelve months.

Commodity Price Risk

In order to manage market risk associated with the Partnership’s fixed-price programs, the Partnership uses over-the-counter derivative commodity instruments, principally price swap contracts, to reduce propane price volatility associated with a portion of forecasted propane purchases. In addition, the Partnership from time to time enters into price swap agreements to reduce the effects of short term commodity price volatility. At June 30, 2019, September 30, 2018 and June 30, 2018, total volumes associated with propane commodity derivatives totaled 399.5 million gallons, 244.8 million gallons and 226.6 million gallons, respectively. At June 30, 2019, the maximum period over which we are economically hedging propane market price risk is 27 months.

Derivative 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 comprise 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 instruments held by certain derivative instrument counterparties, the maximum amount of loss due to credit risk that, based upon the gross fair values of the derivative 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, 2019. 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, 2019, if the credit-risk-related contingent features were triggered, the amount of collateral required to be posted would not be material.

Offsetting Derivative Assets and Liabilities
Derivative assets and liabilities are presented net by counterparty on the Consolidated Balance Sheets if the right of offset exists. Our derivative instruments comprise over-the-counter transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a third party. Certain over-the-counter contracts contain contractual rights of offset through master netting arrangements and contract default provisions. In addition, the contracts are subject to conditional rights of offset through counterparty nonperformance, insolvency, or other conditions.
In general, most of our over-the-counter transactions are subject to collateral requirements. Types of collateral generally include cash or letters of credit. Cash collateral paid by us to our over-the-counter derivative counterparties, if any, is reflected in the table below to offset derivative liabilities. Cash collateral received by us from our over-the-counter derivative counterparties, if any, is reflected in the table below to offset derivative assets. Certain other accounts receivable and accounts payable balances recognized on the Consolidated Balance Sheets with our derivative counterparties are not included in the table below but could reduce our net exposure to such counterparties because such balances are subject to master netting or similar arrangements.


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AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit amounts and where indicated otherwise)

Fair Value of Derivative Instruments

The following table presents our derivative assets and liabilities by type, as well as the effects of offsetting:

 
 
June 30,
2019
 
September 30,
2018
 
June 30,
2018
Derivative assets not designated as hedging instruments:
 
 
 
 
 
 
Commodity contracts
 
$
7,428

 
$
52,529

 
$
30,086

Total derivative assets — gross
 
7,428

 
52,529

 
30,086

Gross amounts offset in the balance sheet
 
(2,497
)
 
(251
)
 
(420
)
Cash collateral received
 

 
(7,270
)
 

Total derivative assets — net
 
$
4,931

 
$
45,008

 
$
29,666

 
 
 
 
 
 
 
Derivative liabilities not designated as hedging instruments:
 
 
 
 
 
 
Commodity contracts
 
$
(19,995
)
 
$
(251
)
 
$
(420
)
Total derivative liabilities — gross
 
(19,995
)
 
(251
)
 
(420
)
Gross amounts offset in the balance sheet
 
2,497

 
251

 
420

Cash collateral pledged
 
2,320

 

 

Total derivative liabilities — net (a)
 
$
(15,178
)
 
$

 
$


(a)
Derivative liabilities with maturities greater than one year are recorded in “Other noncurrent liabilities” on the Condensed Consolidated Balance Sheets.

Effects of Derivative Instruments

The following table provides information on the effects of derivative instruments on the Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2019 and 2018:
 
 
Gain (Loss)
Recognized in Income
 
Location of Gain (Loss)
Recognized in Income
Three Months Ended June 30,
 
2019
 
2018
 
Derivatives Not Designated as Hedging Instruments:
 
 
 
 
 
 
Commodity contracts
 
$
(13,466
)
 
$
28,545

 
Cost of sales  propane
 
 
 
 
 
 
 
 
 
Gain (Loss)
Recognized in Income
 
Location of Gain (Loss)
Recognized in Income
Nine Months Ended June 30,
 
2019
 
2018
 
Derivatives Not Designated as Hedging Instruments:
 
 
 
 
 
 
Commodity contracts
 
$
(91,971
)
 
$
30,544

 
Cost of sales  propane

We are also a party to a number of contracts that have elements of a derivative instrument. These contracts include, among others, binding purchase orders, contracts that 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 certain of these contracts have the requisite elements of a derivative instrument, these contracts qualify for NPNS 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. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit amounts and where indicated otherwise)

Note 9 — Related Party Transactions

Pursuant to the Partnership Agreement and a management services agreement, the General Partner is entitled to reimbursement for all direct and indirect expenses incurred or payments it makes on behalf of the Partnership. These costs, which totaled $137,069 and $134,986 for the three months ended June 30, 2019 and 2018, respectively, and $446,034 and $439,386 for the nine months ended June 30, 2019 and 2018, 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 $3,493 and $4,979 for the three months ended June 30, 2019 and 2018, respectively, and $12,473 and $12,997 for the nine months ended June 30, 2019 and 2018, 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 incurred related to these items during the three and nine months ended June 30, 2019 and 2018, were not material.

From time to time, AmeriGas OLP purchases propane on an as needed basis from Energy Services. The price of the purchases is generally based on market price at the time of purchase. Purchases of propane by AmeriGas OLP from Energy Services during the three and nine months ended June 30, 2019 and 2018 were not material.

In addition, the AmeriGas OLP sells propane to affiliates of UGI. Sales of propane to affiliates of UGI during three and nine months ended June 30, 2019 and 2018 were not material.
UGI Standby Commitment to Purchase AmeriGas Partners Class B Common Units
On November 7, 2017, AmeriGas Partners entered into a Standby Equity Commitment Agreement with the General Partner and UGI. Under the terms of the Standby Equity Commitment Agreement, upon the request of AmeriGas Partners from time to time, in each instance only with prior approval by the General Partner Audit Committee, which would be made in its sole and absolute discretion, UGI committed to make up to $225,000 of capital contributions to the Partnership through July 1, 2019. Under the terms of the Commitment Agreement, the last date on which AmeriGas Partners could have requested a capital contribution, without the consent of UGI, was May 17, 2019. AmeriGas Partners did not request, and UGI did not make, any capital contributions under the Commitment Agreement and the agreement has now terminated in accordance with its terms.

Note 10 — Proposed Merger

On April 1, 2019, we entered into the Merger Agreement, pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership surviving as an indirect, wholly owned subsidiary of UGI. Under the terms of the Merger Agreement, at the effective time of the Proposed Merger, each outstanding Common Unit other than Common Units owned by UGI and its subsidiaries, including the General Partner, will be converted into the right to receive, at the election of each holder of such Common Units, one of the following forms of merger consideration:

(i)0.6378 shares of UGI common stock;
(ii)$7.63 in cash, without interest, and 0.500 shares of UGI common stock; or
(iii)$35.325 in cash, without interest.

The merger consideration is subject to proration designed to ensure that the total number of shares of UGI common stock issuable as merger consideration will equal approximately 34.6 million shares, and the amount of cash consideration paid will equal approximately $530,000. Also, at the effective time of the Proposed Merger, the General Partner’s 1% economic general partner interest in AmeriGas Partners, which includes its incentive distribution rights, will convert into (i) 10,615,711 Common Units, which will remain outstanding as partnership interests in AmeriGas Partners, and (ii) a non-economic general partner interest in AmeriGas Partners. Pursuant to the Merger Agreement, until such time as the Proposed Merger becomes effective, the General Partner will continue to declare and cause to be paid regular quarterly cash distributions on outstanding Common Units in accordance

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AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
(Thousands of dollars, except per unit amounts and where indicated otherwise)

with the Partnership Agreement in an amount that will not be less than $0.95 per Common Unit. In addition, the Merger Agreement requires that the record date for the quarterly cash distribution related to the quarter immediately prior to the quarter in which the closing of the Proposed Merger occurs be designated so that such record date precedes the closing of the Proposed Merger so as to permit the payment of such quarterly distribution to the holders of the Common Units; provided that the AmeriGas Partners’ unitholders are not intended to receive, for any quarter, distributions both in respect of Common Units and also dividends in respect of shares of UGI common stock that they receive in exchange for such Common Units in the transaction.

Completion of the Proposed Merger is subject to certain customary conditions, including, among others: (i) approval of the Merger Agreement by holders of a majority of the outstanding Common Units; (ii) there being no law or injunction prohibiting consummation of the transactions contemplated under the Merger Agreement; (iii) the effectiveness of a registration statement on Form S-4 relating to the issuance of shares of UGI common stock pursuant to the Merger Agreement; (iv) approval for listing on the New York Stock Exchange of the shares of UGI common stock issuable pursuant to the Merger Agreement; (v) subject to specified materiality standards, the accuracy of certain representations and warranties of the other party; and (vi) compliance by the respective parties in all material respects with their respective covenants. UGI’s registration statement on Form S-4 relating to the Proposed Merger became effective July 12, 2019.

Pursuant to a Support Agreement, the General Partner has agreed to vote all Partnership Common Units that it or its affiliates beneficially own as of the record date of the Special Meeting in favor of the Merger Agreement and the Proposed Merger.

The Merger Agreement provides for certain termination rights for both UGI and the Partnership which, under certain circumstances, would require the Partnership to pay UGI a termination fee of $20,000 and/or reimburse UGI for expenses in an amount not to exceed $5,000 or require UGI to reimburse the Partnership for expenses not to exceed $5,000.

Upon completion of the Proposed Merger, Common Units will no longer be publicly traded. Subject to the satisfaction or waiver of certain conditions, including the approval of the Merger Agreement by AmeriGas Partners’ unitholders at the Special Meeting to be held on August 21, 2019, the Proposed Merger is expected to close in the fourth quarter of Fiscal 2019.

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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 within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Such statements use forward-looking words such as “believe,” “plan,” “anticipate,” “continue,” “estimate,” “expect,” “may,” 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 that 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 and achievement of anticipated synergies; (5) changes in laws and regulations, including safety, tax, consumer protection, environmental, 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) customer, counterparty, supplier, or vendor defaults; (12) liability for uninsured claims and for claims in excess of insurance coverage, including those for personal injury and property damage arising from explosions, terrorism, and other catastrophic events that may result 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, including, but not limited to, pending litigation relating to the Proposed Merger; (17) the availability, timing, and success of our acquisitions and investments to grow our business; (18) the interruption, disruption, failure, malfunction, or breach of our information technology systems, including due to cyber attack; (19) the failure to realize the anticipated benefits of the Proposed Merger; (20) the possible diversion of management time on issues related to the Proposed Merger; (21) the risk that the requisite approvals to complete the Proposed Merger are not obtained; and (22) the potential need to address any reviews, investigations or other proceedings by governmental authorities or shareholder actions.

These factors, and those factors set forth in Item 1A. Risk Factors in this Form 10-Q and the Partnership’s 2018 Annual Report, 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

Fiscal 2019 and 2018 Quarterly Results

The following analyses compares the Partnership’s results of operations for the 2019 three-month period with the 2018 three-month period, and the 2019 nine-month period with the 2018 nine-month period.
Our results are significantly influenced by temperatures in our service territories particularly during the heating season months of October through March. As a result, our operating results, after adjusting for the effects of gains and losses on commodity derivative instruments not associated with current-period transactions as further discussed below, are significantly higher in our first and second fiscal quarters.

AmeriGas Partners does not designate its propane commodity derivative instruments as hedges under GAAP. As a result, volatility in net income attributable to AmeriGas Partners as determined in accordance with GAAP can occur as gains and losses on commodity derivative instruments not associated with current-period transactions, principally comprising non-cash changes in unrealized gains and losses, are reflected in cost of sales.


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AmeriGas Partners’ management presents the non-GAAP measures “Adjusted EBITDA,” “adjusted net income (loss) attributable to AmeriGas Partners,” “adjusted total margin,” and “adjusted operating income (loss)” (in addition to “net income (loss) attributable to AmeriGas Partners” determined in accordance with GAAP) in order to assist in the evaluation of the Partnership’s overall performance. Management believes that these non-GAAP measures provide meaningful information to investors about AmeriGas Partners’ performance because they eliminate the impact of (1) changes in unrealized gains and losses on commodity derivative instruments not associated with current-period transactions and (2) certain other gains and losses that competitors do not necessarily have, to provide additional insight into the comparison of year-over-year profitability to that of other master limited partnerships. For additional information on these non-GAAP measures as well as the non-GAAP measure, “EBITDA,” including reconciliations of these non-GAAP measures to the most closely associated GAAP measures, see “Non-GAAP Financial Measures” below.

Proposed Merger

On April 1, 2019, we entered into the Merger Agreement, pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership surviving as an indirect, wholly owned subsidiary of UGI. If the Merger Agreement is consummated, UGI will obtain full ownership of AmeriGas Partners by acquiring all of the outstanding Common Units not already held by the General Partner. Consummation of the Merger Agreement is subject to customary conditions as well as the approval of a majority of the outstanding Common Units including the Common Units held by the General Partner.

Upon completion of the Proposed Merger, Common Units will no longer be publicly traded. Subject to the satisfaction or waiver of certain conditions, including the approval of the Merger Agreement by AmeriGas Partners’ unitholders at the Special Meeting to be held on August 21, 2019, the Proposed Merger is expected to close in the fourth quarter of Fiscal 2019. See Note 10 to Condensed Consolidated Financial Statements for further information.

Executive Overview

Three Months Ended June 30, 2019

We recorded GAAP net loss attributable to AmeriGas Partners for the 2019 three-month period of $49.0 million compared to GAAP net loss attributable to AmeriGas Partners for the 2018 three-month period of $74.4 million. GAAP net loss in the 2019 three-month period and the 2018 three-month period reflects the effects of net unrealized (losses) gains of $(3.5) million and $20.3 million, respectively, on commodity derivative instruments not associated with current-period transactions. GAAP net loss in the 2019 three-month period also includes $1.8 million of expenses associated with the Proposed Merger while GAAP net loss in the prior-year period includes a $75 million impairment charge associated with Heritage tradenames and trademarks.

Adjusted net loss attributable to AmeriGas Partners for the 2019 three-month period was $43.8 million compared with adjusted net loss attributable to AmeriGas Partners for the 2018 three-month period of $20.2 million. The increase in adjusted net loss attributable to AmeriGas Partners principally reflects a $15.5 million decrease in adjusted total margin on lower retail volumes sold and slightly higher operating and administrative expenses. Average temperatures based upon heating degree days in our service territories averaged normal during the 2019 three-month period compared with average temperatures that were 9.6% colder than normal during the 2018 three-month period. In particular, temperatures in the month of April 2019, the primary heating month in the quarter, were 5.3% warmer than normal compared with temperatures in the month of April 2018 that were nearly 36% colder than normal.

Nine Months Ended June 30, 2019

We recorded GAAP net income attributable to AmeriGas Partners for the 2019 nine-month period of $214.7 million compared to GAAP net income attributable to AmeriGas Partners for the 2018 nine-month period of $221.8 million. GAAP net income in the 2019 and 2018 nine-month periods reflects the effects of net unrealized losses of $64.8 million and $10.1 million, respectively, on commodity derivative instruments not associated with current-period transactions. GAAP net income in the 2019 nine-month period also reflects $2.7 million of expenses associated with the Proposed Merger while GAAP net income in the prior-year nine-month period reflect a $75 million impairment charge related to Heritage tradenames and trademarks.

Adjusted net income attributable to AmeriGas Partners for the 2019 nine-month period was $281.5 million compared with adjusted net income attributable to AmeriGas Partners for the 2018 nine-month period of $306.1 million. The $24.6 million decrease in adjusted net income attributable to AmeriGas Partners reflects the effects of slightly higher operating and administrative expenses and slightly lower adjusted total margin partially offset by lower depreciation and amortization expense. Average temperatures based upon heating degree days in our service territories were 4.0% colder than normal during the 2019 nine-month period compared with average temperatures that were 0.4% colder than normal during the prior-year period. Although average temperatures during

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the 2019 nine-month period across our entire service territory were colder than normal, we experienced significantly warmer than normal weather in the southeastern U.S. during January and February.

Non-GAAP Financial Measures

The Partnership’s management uses certain non-GAAP financial measures, including adjusted total margin, EBITDA, Adjusted EBITDA, adjusted operating income, and adjusted net income attributable to AmeriGas Partners, when evaluating the Partnership’s overall performance. These financial measures are not in accordance with, or an alternative to, GAAP and should be considered in addition to, and not as a substitute for, the comparable GAAP measures.
Management believes EBITDA as adjusted for the effects of gains and losses on commodity derivative instruments not associated with current-period transactions and other gains and losses that competitors do not necessarily have (Adjusted 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 Adjusted EBITDA may be different from those used by other companies. Management uses Adjusted 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, the effects of gains and losses on commodity derivative instruments not associated with current-period transactions or historical cost basis. In view of the omission of interest, income taxes, depreciation and amortization, gains and losses on commodity derivative instruments not associated with current-period transactions and other gains and losses that competitors do not necessarily have from Adjusted EBITDA, management also assesses the profitability of the business by comparing net income attributable to AmeriGas Partners for the relevant periods. Management also uses Adjusted EBITDA to assess the Partnership’s profitability because its parent, UGI, uses the Partnership’s Adjusted EBITDA to assess the profitability of the Partnership which is one of UGI’s reportable segments. UGI discloses the Partnership’s Adjusted EBITDA in its disclosure about reportable segments as the profitability measure for its domestic propane segment.
Our other non-GAAP financial measures comprise adjusted total margin, adjusted operating income and adjusted net income attributable to AmeriGas Partners. Management believes the presentations of these non-GAAP financial measures provide useful information to investors to more effectively evaluate the period-over-period results of operations of the Partnership. Management uses these non-GAAP financial measures because they eliminate the impact of (1) gains and losses on commodity derivative instruments not associated with current-period transactions and (2) other gains and losses that competitors do not necessarily have to provide insight into the comparison of period-over-period profitability to that of other master limited partnerships.


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The following table includes reconciliations of adjusted total margin, adjusted operating income, adjusted net income (loss) attributable to AmeriGas Partners, EBITDA and Adjusted EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP for the periods presented:
(Dollars in millions)
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Adjusted total margin:
 
 
 
 
 
 
 
 
Total revenues
 
$
478.7

 
$
528.4

 
$
2,270.5

 
$
2,356.0

Cost of sales — propane
 
(192.2
)
 
(199.7
)
 
(1,027.4
)
 
(1,039.6
)
Cost of sales — other (a)
 
(21.5
)
 
(24.4
)
 
(61.4
)
 
(64.8
)
Total margin
 
265.0

 
304.3

 
1,181.7