<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
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: 0-4408
ATLAS PIPELINE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 23-3011077
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
311 Rouser Road, Moon Township, Pennsylvania 15108
(Address of principal executive offices)
(Zip code)
(412) 262-2830
(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 [X] No [ ]
As of May 9, 2000, there were outstanding 1,500,000 Common Units
and 1,641,026 Subordinated Units
<PAGE>
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated and Combined Balance Sheets as of March 31, 2000 (Unaudited)
and December 31, 1999 (Predecessor)................................................................. 3
Consolidated and Combined Statements of Income for the period from January 28, 2000
(Commencement of Operations) to March 31, 2000 (Partnership) and for the periods
January 1, 2000 to January 27, 2000, January 1, 1999 to March 31, 1999 (Predecessor)
(Unaudited)......................................................................................... 4
Consolidated and Combined Statements of Cash Flow for the period from January 28, 2000
(Commencement of Operations) to March 31, 2000 (Partnership) and for the periods
January 1, 2000 to January 27, 2000, January 1, 1999 to March 31, 1999 (Predecessor)
(Unaudited)......................................................................................... 5
Consolidated Statement of Partners' Capital (Deficit) for the period from January 28, 2000
(Commencement of Operations) to March 31, 2000 (Unaudited).......................................... 6
Notes to Consolidated and Combined Financial Statements (Unaudited)................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................................... 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................................ 13
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds............................................................. 14
Item 6. Exhibits.............................................................................................. 14
SIGNATURES ...................................................................................................... 15
</TABLE>
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
Partnership Predecessor
------------- ------------
March 31, December 31,
2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................................................... $ 120,100 $ 3,500
Accounts receivable - affiliates............................................... 914,200 373,800
Prepaid expenses............................................................... 64,700 -
------------- -------------
Total current assets......................................................... 1,099,000 377,300
Property and Equipment:
Gas gathering and transmission facilities...................................... 17,925,900 16,744,100
Less - accumulated depreciation................................................ (2,110,600) (1,858,200)
------------- -------------
Net property and equipment................................................... 15,815,300 14,885,900
Goodwill (net of accumulated amortization of $132,000 and $110,000)................. 2,458,000 2,480,000
------------- -------------
$ 19,372,300 $ 17,743,200
============= =============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current Liabilities:
Accounts payable and accrued liabilities......................................... $ 1,100 $ 33,100
Advances from parent............................................................. - 12,969,700
Distribution payable............................................................. 946,800 -
------------- -------------
Total current liabilities.................................................... 947,900 13,002,800
Combined equity..................................................................... - 4,740,400
Partners' Capital (Deficit):
Common unitholders 1,500,000 units outstanding................................... $ 17,699,200 $ -
Subordinated unitholders 1,641,026 units outstanding............................. 743,900 -
General partner.................................................................. (18,700) -
------------- -------------
Total partners' capital...................................................... 18,424,400 -
------------- -------------
$ 19,372,300 $ 17,743,200
============= =============
</TABLE>
See accompanying notes to consolidated and combined financial statements
3
<PAGE>
ATLAS PIPELINE PARTNERS, L.P.
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Partnership Predecessor
------------------ --------------------------------------
For the
Period from
January 28, 2000 For the For the
(Commencement Period from Period from
of Operations) January 1, 2000 January 1, 1999
to to to
March 31, 2000 January 27, 2000 March 31, 1999
--------------- ---------------- ---------------
<S> <C> <C> <C>
Revenues:
Transportation and compression revenue....................... $ 1,140,200 $ 330,000 $ 712,200
Other income................................................. 9,700 - -
-------------- ------------ ------------
Total revenues............................................. 1,149,900 330,000 712,200
Costs and expenses:
Transportation and compression............................... 126,300 44,700 133,300
General and administrative................................... 67,900 40,600 91,300
Property tax................................................. 1,100 800 -
Interest expense............................................. - 36,200 76,300
Depreciation and amortization................................ 189,000 86,900 139,100
-------------- ------------ ------------
Total costs and expenses................................... 384,300 209,200 440,000
Income from operations.......................................... 765,600 120,800 272,200
Provision for income taxes...................................... - 48,300 108,800
-------------- ------------ ------------
Net income...................................................... $ 765,600 $ 72,500 $ 163,400
============== ============ ============
Net income - limited partners................................... $ 750,300
==============
Net income - general partner.................................... $ 15,300
==============
Basic and diluted net income per limited partner unit........... $ .24
==============
Weighted average units outstanding.............................. 3,141,026
==============
</TABLE>
See accompanying notes to consolidated and combined financial statements
4
<PAGE>
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Partnership Predecessor
---------------- --------------------------------------
For the
Period from
January 28, 2000 For the For the
(Commencement Period from Period from
of Operations) January 1, 2000 January 1, 1999
to to to
March 31, 2000 January 27, 2000 March 31, 1999
---------------- ---------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................................... $ 765,600 $ 72,500 $ 163,400
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization................................ 189,000 86,900 139,100
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable-affiliates and
prepaid expenses........................................... (978,900) 1,600 21,700
Increase (decrease) in accounts payable and
accrued liabilities........................................ 1,100 (33,100) (12,400)
-------------- ------------ -------------
Net cash provided by (used in) operating activities.......... (23,200) 127,900 311,800
CASH FLOWS FROM INVESTING ACTIVITIES
Payment of debt................................................. (12,810,900) - -
Acquisition of gathering systems................................ (3,824,200) - -
Capital expenditures............................................ (606,600) (164,200) (227,900)
-------------- ------------ -------------
Cash used in investing activities............................ (17,241,700) (164,200) (227,900)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from initial public offering....................... 18,135,000 - -
Payment of formation costs...................................... (750,000) - -
Advances from (to) parent....................................... - 38,100 (87,500)
-------------- ------------ -------------
Cash provided by (used in) financing activities.............. 17,385,000 38,100 (87,500)
Increase (decrease) in cash and cash equivalents................ 120,100 1,800 (3,600)
Cash and cash equivalents, beginning of period.................. - 3,500 9,000
-------------- ------------ -------------
Cash and cash equivalents, end of period........................ $ 120,100 $ 5,300 $ 5,400
============== ============ =============
</TABLE>
See accompanying notes to consolidated and combined financial statements
5
<PAGE>
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
FOR THE PERIOD FROM JANUARY 28, 2000 (COMMENCEMENT OF OPERATIONS)
TO MARCH 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Number of Limited Total
Partner Units Partners'
------------------------- General Capital
Common Subordinated Common Subordinated Partner (Deficit)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at commencement of operations
January 28, 2000....................... - - $ - $ - $ - $ -
Issuance of units to public............... 1,500,000 - 18,135,000 - - 18,135,000
Contribution of net assets of Predecessor. - 1,641,026 - 21,333,300 - 21,333,300
Distribution at time of formation......... - - - (20,112,700) - (20,112,700)
Payment of offering expenses.............. - - (352,500) (382,400) (15,100) (750,000)
Distribution payable...................... - - (443,100) (484,800) (18,900) (946,800)
Net income................................ - - 359,800 390,500 15,300 765,600
--------- --------- ------------- ------------- ---------- --------------
Balance at March 31, 2000................. 1,500,000 1,641,026 $ 17,699,200 $ 743,900 $ (18,700) $ 18,424,400
========= ========= ============= ============= ========== ==============
</TABLE>
See accompanying notes to consolidated and combined financial statements
6
<PAGE>
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS
The Partnership
Atlas Pipeline Partners, L.P. ("the Partnership") is a Delaware limited
partnership formed in May 1999 to acquire, own and operate natural gas gathering
systems theretofore owned by Atlas America, Inc. ("Atlas"), Viking Resources
Corporation ("VRC") and Resource Energy, Inc. ("REI") ("the Predecessor"), all
of which are wholly-owned subsidiaries of Resource America, Inc. ("RAI" or
"Parent").
The accompanying financial statements and related notes present the
Partnership's consolidated financial position as of March 31, 2000 and the
results of its operations, cash flows and changes in partners' capital for the
period from commencement of operations on January 28, 2000 to March 31, 2000.
All material intercompany transactions and accounts have been eliminated. The
combined financial statements of the Predecessor are for the periods indicated
and are presented for comparative purposes.
These consolidated and combined financial statements and notes thereto
for interim periods are unaudited except for the Predecessor combined balance
sheet as of December 31, 1999. However, in the opinion of management, these
financial statements reflect all adjustments necessary for a fair presentation
of the results for the periods presented. Results for interim periods are not
indicative of results for a full year.
Initial Public Offering and Concurrent Transactions
On January 28, 2000, the Partnership completed its initial public
offering (the "IPO") of 1,500,000 common units ("Common Units") representing
limited partner interests in the Partnership at a price of $13.00 per unit. The
Partnership used the $18.1 million of gross proceeds, after underwriters'
commissions, from the IPO to acquire the gathering systems from the Predecessor
and to pay certain formation costs.
Consistent with guidance provided by the Emerging Issues Task Force in
Issue no. 87-21 "Change of Accounting Basis in Master Limited Partnership
Transactions", the Partnership maintained the historical gas gathering and
transmission facilities cost of $17.3 million, which was the carrying value of
those assets by the Predecessor.
Partnership Structure and Management
The Partnership's operations are conducted through subsidiary entities
whose equity interests are owned by an operating partnership ("the Operating
Partnership"). On a consolidated basis, the General Partner, Atlas Pipeline
Partners GP, Inc. (a wholly-owned subsidiary of RAI), owns a 2% general partner
interest in the consolidated Pipeline operations. The remaining 98% is owned by
limited partner interests of which 47% consists of Common Units and 51% consists
of Subordinated Units. Through the ownership of these interests, the General
Partner will effectively manage and control both the Partnership and the
Operating Partnership.
7
<PAGE>
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS - (Continued)
Analysis of Pro Forma Results of Operations
The pro forma information presented below for the three months ended
March 31, 2000 and 1999, was derived from the historical consolidated financial
statements of the Partnership from the commencement of operations on January 28,
2000 through March 31, 2000 and from the historical combined financial
statements of the Predecessor for the periods from January 1, 2000 through
January 27, 2000 and January 1, 1999 through March 31, 1999. The pro forma
information reflects the following pro forma adjustments to the historical
results of operations as if the Partnership had been formed on January 1, 1999:
(i) increasing revenues to the amount which would have been earned
under the master natural gas gathering agreement,
(ii) removing interest on debt of the Predecessor and
(iii) eliminating income tax expense as income taxes will be borne by
the partners and not the Partnership.
For the three months ended March 31, 2000 and 1999, the pro forma total
revenues would have been approximately $1,691,000 and $1,553,000, respectively.
For the three months ended March 31, 2000 and 1999, the pro forma net income
would have been approximately $1,143,000 and $1,013,000 and net income per
limited partner unit would have been $.36 and $.32, respectively.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial statements
follows.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Partnership and its wholly owned subsidiaries. All material intercompany
transactions have been eliminated.
Use of Estimates
Preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Property and Equipment
Depreciation and amortization are provided for in amounts sufficient to
relate the cost of depreciable assets to operations over their estimated service
lives. Gas gathering and transmission facilities are depreciated over 15 or 25
years using the double declining balance and straight-line methods. Other
equipment is depreciated over 5 to 10 years using the straight-line methods.
8
<PAGE>
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Impairment of Long-Lived Assets
The Partnership reviews its long-lived assets for impairment whenever
events or circumstances indicate that the carrying amount of an asset may not be
recoverable. If it is determined that an asset's estimated future cash flows
will not be sufficient to recover its carrying amount, an impairment charge will
be recorded to reduce the carrying amount for that asset to its estimated fair
value.
Goodwill
Goodwill is associated with the Partnership's purchase of the gas
gathering assets of Atlas and is being amortized over a period of 30 years,
using the straight-line method.
Federal Income Taxes
The Partnership is a limited partnership. As a result, the
Partnership's income for federal income tax purposes will be included in the tax
returns of the individual partners. Accordingly, no recognition has been given
to income taxes in the accompanying financial statements of the Partnership. The
Predecessor files a consolidated federal income tax return with its ultimate
parent, RAI. Federal and state taxes are reflected as if the Predecessor filed
on a separate company basis utilizing an effective federal tax rate of 34%.
Revenue Recognition
Revenues are recognized at the time the natural gas is transmitted
through the gathering systems.
Fair Value of Financial Instruments
For cash and cash equivalents, receivable and payables, the carrying
amounts approximate fair value because of the short maturity of these
instruments.
Net Income Per Unit
There is no difference between basic and diluted net income per limited
partner unit since there are no potential units outstanding. Net income per
limited partner unit is determined by dividing net income, after deducting the
General Partner's 2% interest, by the weighted average number of outstanding
common units and subordinated units (a total of 3,141,026 units as of March 31,
2000).
Comprehensive Income
The Partnership is subject to the provisions of Statement of Financial
Accounting Standards No. 130 (SFAS 130). SFAS 130, "Reporting Comprehensive
Income," which requires disclosure of comprehensive income and its components.
Comprehensive income includes net income and all other changes in equity of a
business during a period from non-owner sources. These changes, other than net
income, are referred to as "other comprehensive income". The Partnership has no
material elements of comprehensive income, other than net income, to report.
9
<PAGE>
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Cash Flow Statements
For purposes of the statement of cash flows, all highly liquid debt
instruments purchased with a maturity of three months or less are considered to
be cash equivalents.
Supplemental Disclosure of Cash Flow Information
Information for the three months ended March 31, 2000 and 1999 is as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
2000 1999
------------- -----------
<S> <C> <C>
Cash paid for:
Interest............................................................................... $ 36,200 $ 76,300
============== ===========
Income taxes........................................................................... $ 38,200 $ 82,700
============== ===========
Non-cash activities:
Issuance of subordinated units in exchange for gas gathering and
transmission facilities.............................................................. $ 21,333,300 $ -
============== ===========
</TABLE>
NOTE 3 - RELATED PARTY TRANSACTIONS
Accounts Receivable - Affiliates
The Partnership is affiliated with Atlas, VRC and REI ("Affiliates")
which are subsidiaries of RAI and limited partnerships controlled by RAI. The
Partnership is dependent upon the resources and services provided by RAI and
these Affiliates. Accounts receivable-affiliates represents the net balance due
from these affiliates for gas transported through the gathering systems, net of
reimbursements of Partnership costs and expenses paid by these Affiliates.
The Partnership does not directly employ any persons to manage or
operate its business. These functions are provided by employees of RAI and the
General Partner does not receive a management fee or other compensation in
connection with its management of the Partnership. The Partnership reimburses
the General Partner for all direct and indirect costs of services provided,
including the cost of employees, officer and managing board member compensation
and benefits properly allocable to the Partnership, and all other expenses
necessary or appropriate to the conduct of the business of, and allocable to,
the Partnership. The partnership agreement provides that the General Partner
will determine the expenses that are allocable to the Partnership in any
reasonable manner determined by the General Partner in its sole discretion.
Total costs reimbursed to the General Partner by the Partnership were
approximately $55,000 for the period from January 28, 2000 to March 31, 2000.
Such costs include allocated personnel costs (such as salaries and employee
benefits) of the personnel providing such services and out-of-pocket expenses
related to the provision of such services.
10
<PAGE>
ATLAS PIPELINE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS - (Continued)
Credit Facility
Atlas has agreed to provide the Partnership with financing for the cost
of constructing new gathering system expansions for a period of five years, on a
stand-by basis. If the Partnership chooses to use this stand-by commitment, the
financing will be provided through the issuance of common units to Atlas. The
number of units issued will be based upon the construction costs advanced and
the fair value of the units at the time of such advances. The commitment is for
a maximum of $1.5 million in any contract year.
NOTE 4 - DISTRIBUTION DECLARED
On March 21, 2000, the Partnership declared a cash distribution of
$0.2954 per unit on its outstanding common and subordinated units. The
distribution represents the minimum quarterly distribution for the 64-day period
from January 28, 2000 (commencement of operations) through March 31, 2000. The
$946,800 distribution is payable on May 10, 2000 to unit holders of record on
March 31, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Forward-Looking Statements
WHEN USED IN THIS FORM 10-Q, THE WORDS "BELIEVES," "ANTICIPATES,"
"EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD LOOKING
STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY. READERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS WHICH SPEAK ONLY AS OF
THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE
RESULTS OF ANY REVISIONS TO FORWARD LOOKING STATEMENTS WHICH MAY BE MADE TO
REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS.
The Predecessor's operations consist of gathering systems owned by RAI
through its subsidiary, REI and beginning with their acquisitions on September
28, 1998 and August 31, 1999, gathering systems owned through Atlas and VRC,
respectively. The gathering systems gather natural gas from wells in Eastern
Ohio, Western New York, and Western Pennsylvania and transport the natural gas
primarily to public utility pipelines. To a lesser extent, the gathering systems
transport natural gas to end-users. The historical results of operations
discussed below are derived from the historical financial statements of the
Predecessor. The Predecessor's operations were acquired by the Partnership at
the close of the initial public offering. Since historical results of operations
of the Predecessor include VRC only from its date of purchase, and revenues were
based on lower rates than those earned under the master natural gas gathering
agreement, results of operations for the three months ended March 31, 2000 are
not comparable to the similar prior year period.
11
<PAGE>
RESULTS OF OPERATIONS
In comparing the three months ended March 31, 2000 to the three months
ended March 31, 1999, the Partnership and Predecessor periods for the current
fiscal quarter have been combined.
Three Months Ended March 31, 2000 as Compared to Three Months Ended March 31,
1999
Revenues. Transportation revenues were $1,470,200 in the three months
ended March 31, 2000, an increase of $758,000 (106%) from $712,200 in the three
months ended March 31, 1999 due to an 18% increase in volumes transported and a
75% increase in the average transportation rate. Transportation volumes were
favorably impacted by the acquisition of VRC in August 1999. Without the
addition of VRC, transportation revenues would have been $1,146,300 in the three
months ended March 31, 2000, resulting in an overall increase of $434,100 (61%)
compared to the three months ended March 31, 1999. Average daily volumes
transported would have been 31,060 mcf for the three months ended March 31,
2000, a 12% decrease compared to the three months ended March 31, 1999. Gross
margin (revenues less direct expenses of transportation, operation and
maintenance) was $1,299,200 for the three months ended March 31, 2000, an
increase of $720,300 from the $578,900 reported for the same period in 1999. The
gross margin percentage was 88% for the three months ended March 31, 2000 as
compared to 81% for the three months ended March 31, 1999. This increase is the
result of the higher transportation rates earned by the Partnership under the
master natural gas gathering agreement.
Other income of $9,700 consists of interest earned on funds temporarily
invested.
Expenses. Transportation and compression expense was $171,000 in the
three months ended March 31, 2000, an increase of $37,700 (28%) from $133,300 in
the three months ended March 31, 1999, due to an increase in compressor repairs.
General and administrative expense increased to $108,500 in the three
months ended March 31, 2000 from $91,300 in the three months ended March 31,
1999, an increase of $17,200 (19%), a result of expenses related to the
operations of the Partnership as a public entity.
Interest expense decreased to $36,200 in the three months ended March
31, 2000, a decrease of $40,100 (53%) from $76,300 in the three months ended
March 31, 1999, a result of the payoff of the advance from parent upon
completion of the IPO.
Depreciation and amortization expense increased to $275,900 in the
three months ended March 31, 2000, an increase of $136,800 (98%) from $139,100
in the three months ended March 31, 1999 as a result of additional depreciation
on gathering system extensions.
Liquidity and Capital Resources
The Partnership is required to distribute, within 45 days of the end of
each quarter, all of its available cash for that quarter. For each quarter
during the subordination period, to extent there is sufficient cash available,
the Common Unit holders have the right to receive a minimum quarterly
distribution ("MQD") of $.42 per unit.
12
<PAGE>
Quarterly distributions will be made from operating surplus or capital
surplus. Operating surplus equals cash and cash equivalents on hand at the date
the Partnership began operations, plus cash received, less operating expenses,
debt payments, capital expenditures and reserves. Upon twelve consecutive
quarters in which operating surplus equals or exceeds the MQD, the Subordinated
Units will be converted to Common Units. The operating surplus for the period
January 28, 2000 (commencement of operations) to March 31, 2000 is as follows:
Cash and cash equivalents, January 28, 2000..................... $ 750,000
Cash receipts................................................ 9,700
Operating expenses (cash basis).............................. (193,000)
Capital expenditures (cash basis)............................ (446,600)
-----------
Cash and cash equivalents, March 31, 2000....................... $ 120,100
Reserves..................................................... (120,100)
-----------
Operating surplus............................................... $ 0
===========
As of March 31, 2000, the Partnership had not received any cash for the
natural gas volumes transported because of an average lag time of 2.5 months
between the transportation of volumes and the cash receipt for those volumes. In
future quarters, the Partnership will receive three months of transportation
revenues and anticipates that the Partnership will generate sufficient operating
surplus, on a quarterly basis, to achieve the MQD and the conversion of the
Subordinated Units to Common Units.
Net cash provided by operating activities decreased $207,100 in the
three months ended March 31, 2000 as compared to the three months ended March
31, 1999 due to the lag in cash receipts discussed above partially offset by an
increase in net income before depreciation. Net cash used in investing
activities increased $17.2 million in the three months ended March 31, 2000 as
compared to March 31, 1999, a result of the payment of debt associated with the
acquisition of the gathering system and an increase in capital expenditures
associated with gathering system extensions. Net cash provided by financing
activities increased $17.5 million in the three months ended March 31, 2000 as
compared to March 31, 1999, a result of net proceeds received in the IPO.
Inflation and Changes in Prices
Inflation affects the operating expenses of the gathering systems.
Increases in those expenses are not necessarily offset by increases in
transportation rates that the Partnership is able to charge. The value of the
gathering systems has been and will continue to be affected by changes in
natural gas prices. Natural gas prices are subject to fluctuations, which we are
unable to control or accurately predict.
Environmental Regulation
A continued trend to greater environmental and safety awareness and
increasing environmental regulation has resulted in higher operating costs for
the oil and gas industry and our gathering operations. The Predecessor has
monitored the compliance of our gathering systems with environmental and safety
laws and believe they are in compliance with such laws. To date, compliance with
environmental laws has not had a material impact on the capital expenditures,
earnings or competitive position of the gathering systems. We believe, however,
that environmental and safety costs will increase in the future. There can be no
assurance that compliance with such laws will not have material impact upon the
Partnership the future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
All of the Predecessor's transactions were, and all of the
Partnership's transactions are, denominated in U.S. dollars, and as a result,
does not have material exposure to currency exchange-rate risks.
The Predecessor did not, and the Partnership does not, engage in any
interest rate, foreign currency exchange rate or commodity price-hedging
transactions.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
On January 28, 2000, the Partnership completed its initial public
offering, which was underwritten by Friedman, Billing, Ramsey and McDonald
Investments, Inc. The Partnership sold 1,500,000 common units in the IPO. The
public offering price was $13.00 per common unit, and the underwriting discount
was $.91 per common unit. The proceeds from the offering to the Partnership,
after deducting the underwriting discount but before deducting expenses
associated with the offering, were approximately $18.1 million. Concurrently
with the closing of the IPO, the Partnership issued 1,641,026 subordinated units
to the General Partner.
The Partnership used the $18.1 million from the IPO to (i) pay
approximately $750,000 in fees and expenses incurred in connection with the IPO,
(ii) payoff $12.8 million of debt associated with the gathering systems, and
(iii) pay the General Partner $3.8 million for the purchase of the remaining gas
gathering assets. The Partnership retained approximately $750,000 for working
capital and other general corporate purposes.
ITEM 6. Exhibits And Reports On Form 8-K
(a) Exhibits:
27 Financial Data Schedule.
(b) Reports on Form 8-K: None
14
<PAGE>
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.
ATLAS PIPELINE PARTNERS, L.P.
(Registrant)
Date: May 10, 2000 By: /s/ Tony C. Banks
--------------------------------------
TONY C. BANKS
President
Date: May 10, 2000 By: /s/ Michael L. Staines
--------------------------------------
MICHAEL L. STAINES
Chief Operations Officer and Secretary
Date: May 10, 2000 By: /s/ William Seiler
--------------------------------------
WILLIAM SEILER
Vice President and Controller
Date: May 10, 2000 By: /s/ Nancy J. McGurk
--------------------------------------
NANCY J. McGURK
Chief Accounting Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> $
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-28-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 120,100
<SECURITIES> 0
<RECEIVABLES> 914,200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,099,000
<PP&E> 17,925,900
<DEPRECIATION> (2,110,600)
<TOTAL-ASSETS> 19,372,300
<CURRENT-LIABILITIES> 947,900
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 18,424,400
<TOTAL-LIABILITY-AND-EQUITY> 19,372,300
<SALES> 1,140,200
<TOTAL-REVENUES> 1,149,900
<CGS> 126,300
<TOTAL-COSTS> 384,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 765,600
<INCOME-TAX> 0
<INCOME-CONTINUING> 765,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 765,600
<EPS-BASIC> 0.24
<EPS-DILUTED> 0.24
</TABLE>
