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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission File Number 1-6537-3
ALL STAR GAS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
MISSOURI 43-1494323
------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P.O. Box 303, 119 West Commercial Street, Lebanon, Missouri 65536
(Address of Principal Executive Offices and Zip Code)
(417) 532-3103
(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 _____
Number of Shares of outstanding common stock (one class only) as of October 31,
2000 was 1,586,915.
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<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
ALL STAR GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
September 30, 2000
(Unaudited) June 30, 2000
------------------ -------------
Assets
Current Assets
<S> <C> <C>
Cash $ 1,601 $ 432
Trade receivables - net 4,329 2,226
Current maturities of note receivable 46 45
Inventories 5,510 4,121
Forward purchase contracts 3,732 --
Prepaid expenses 354 91
Deferred income taxes 150 150
------- -------
Total Current Assets 15,722 7,065
------- -------
Property, plant and equipment 55,366 58,095
Less accumulated depreciation 24,175 24,777
------- -------
Fixed Assets - Net 31,191 33,318
------- -------
Other Assets
Debt acquisition costs - net 890 823
Excess of cost over fair value of assets
acquired - net 5,698 6,176
Note receivable 915 927
Other 578 1,186
------- -------
Total Other Assets 8,081 9,112
------- -------
Total Assets $54,994 $49,495
======= =======
</TABLE>
2
<PAGE>
ALL STAR GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
September 30, 2000
(Unaudited) June 30, 2000
--------- -------------
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
<S> <C> <C>
Current maturities of long-term debt $ 57,963 $ 57,897
Notes payable - bank 1,990 --
Accrued interest 9,825 8,034
Customer prepayments 7,980 5,008
Income taxes payable 9,183 9,948
Accounts payable and accrued expenses 6,261 6,691
Forward sales and futures contracts 3,437 --
--------- ---------
Total Current Liabilities 96,639 87,578
Long-term debt 2,369 3,177
Deferred income taxes 2,445 2,788
Accrued self-insurance liability 1,308 1,871
--------- ---------
Total Liabilities 102,761 95,414
--------- ---------
Stockholders' Equity (Deficit)
Common; $.001 par value; authorized 20,000,000
shares, issued - 14,291,020 shares 14 14
Common stock purchase warrants 1,227 1,227
Additional paid-in capital 28,574 28,574
Retained earnings 10,332 12,180
--------- ---------
40,147 41,995
Treasury stock, at cost
September 30, 2000 and June 30, 2000 -
12,704,105 shares (87,914) (87,914)
--------- ---------
Total Stockholders' Equity (Deficit) (47,767) (45,919)
--------- ---------
Total Liabilities and Stockholders' Equity
(Deficit) $ 54,994 $ 49,495
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
ALL STAR GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Operating Revenue $ 7,682 $ 13,244
Cost of Product Sold 4,548 6,451
-------- --------
Gross Profit 3,134 6,793
-------- --------
Operating Costs and Expenses
General and administrative 3,508 7,824
Depreciation and amortization 1,034 2,675
(Gain) loss on sale of assets 204 (347)
Loss on forward and futures contracts 462 --
-------- --------
5,208 10,152
-------- --------
Operating Loss (2,074) (3,359)
-------- --------
Other Expense
Interest expense (1,821) (4,372)
Amortization of debt discount and expense (134) (352)
-------- --------
(1,955) (4,724)
-------- --------
Loss Before Income Taxes (4,029) (8,083)
Credit for Income Taxes (1,241) (2,700)
-------- --------
Loss Before Cumulative Effect of Change in Accounting
Principle (2,788) (5,383)
Cumulative Effect of Change in Accounting Principle,
Net of Income Taxes of $546,000 940 --
-------- --------
Net Loss $ (1,848) $ (5,383)
======== ========
Basic and Diluted Loss Per Common Share Before
Cumulative Effect of Change in Accounting Principle $ (1.75) $ (3.39)
Basic and Diluted Income Per Common Share on Cumulative Effect of
Change in Accounting Principle .59 --
-------- --------
Basic and Diluted Loss Per Common Share $ (1.16) $ (3.39)
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
ALL STAR GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(Dollars in Thousands)
2000 1999
------- -------
Cash Flows From Operating Activities
Net Loss $(1,848) $(5,383)
Items not requiring (providing) cash
Depreciation 793 1,892
Amortization 375 1,135
(Gain) loss on sale of assets 204 (347)
Cumulative effect of change in accounting
principle (940) --
Loss on forward and futures contracts 462 --
Deferred income taxes (733) (18)
Changes In:
Trade receivables (1,778) (714)
Inventories (1,491) (1,398)
Prepaid expense and other 989 (307)
Accounts payable and customer prepayments 3,827 2,968
Accrued expenses 822 572
Income taxes payable (765) (2,715)
------- -------
Net cash used in operating activities (83) (4,315)
------- -------
Cash Flows From Investing Activities
Purchase of property & equipment (620) (1,037)
Proceeds from sales of property and equipment 909 311
Disposal of retail service centers 929 999
Advances from related parties -- 1,930
------- -------
Net cash provided by investing activities 1,218 2,203
------- -------
Cash Flows From Financing Activities
Checks in process of collection (985) 284
Increase in working capital financing -- 1,906
Proceeds on notes payable - bank 1,990 --
Proceeds on long-term debt obligations -- 118
Principal payments on other long-term debt (971) (630)
------- -------
Net cash provided by financing activities 34 1,678
------- -------
INCREASE (DECREASE) IN CASH 1,169 (434)
CASH, BEGINNING OF PERIOD 432 1,323
------- -------
CASH, END OF PERIOD $ 1,601 $ 889
======= =======
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
ALL STAR GAS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(1) BASIS OF PRESENTATION
All Star Gas Corporation (the "Company") was founded in 1963 and
through its subsidiaries has been in operation for over 37 years. The
Company is engaged primarily in the retail marketing of propane and
propane related appliances, supplies and equipment to residential,
agricultural and commercial customers.
The accompanying unaudited condensed consolidated financial statements
contain, in the opinion of Management, all adjustments necessary to
present fairly the Company's consolidated financial position as of
September 30, 2000, and the consolidated results of its operations and
cash flows for the periods ended September 30, 2000 and 1999. All such
adjustments are of a normal recurring nature.
These financial statements should be read in conjunction with the
Company's audited consolidated financial statements as of June 30,
2000, and the notes thereto included in the Form 10-K as filed with the
United States Securities and Exchange Commission as disclosure which
would substantially duplicate the disclosure contained in that
registration has been omitted. The condensed consolidated balance sheet
of the Company as of June 30, 2000 has been derived from the audited
consolidated balance sheet of the Company as of that date.
Due to the seasonal nature of the Company's business, the results of
operations for the three months ended September 30, 2000 are not
necessarily indicative of the results to be expected for the full year.
The report of Baird, Kurtz & Dobson commenting upon their review
accompanies the condensed consolidated financial statements included in
Item 1 of Part I.
(2) MANAGEMENT'S CONSIDERATION OF GOING CONCERN MATTERS
The Company reported income from operations during the fiscal year
ended June 30, 2000, primarily due to the gains recognized on the sale
of certain retail service centers. The Company has otherwise suffered
recurring losses from operations and continues to have net working
capital and net stockholders' equity deficiencies. On July 31, 2000,
the Company went into default with respect to its outstanding Senior
Secured Notes due 2004 and, consequently, went into default with
respect to its 9% Subordinated Debentures due 2007.
Also, as a result of the Company's significant disposition of retail
service centers during fiscal 2000, the Company has incurred a $7.7
million federal tax liability that was due September 15, 2000. The
Company was unable to pay the obligation when due. The Internal Revenue
Service (the "IRS") may attempt collection by various means including
placing liens on Company assets and seizing bank accounts.
6
<PAGE>
The financial statements have been prepared assuming the Company will
continue as a going concern, realizing assets and liquidating
liabilities in the ordinary course of business. Management is
undertaking several strategies for mitigating these conditions during
the coming year. The Company is in negotiations with the holders of
both the Senior Secured Notes and the Subordinated Debentures seeking
to restructure these debts and replace the current indentures with new
indentures. It is also in negotiations with the IRS for a workout plan
to settle the current tax obligation. Although not currently planned,
realization of assets in other than the ordinary course of business to
meet liquidity needs could incur losses not reflected in these
financial statements.
(3) SELF-INSURANCE AND CONTINGENCIES
Under the Company's current insurance program, the Company purchases
comprehensive general, auto and employers liability coverage and an
excess liability policy provides for losses of up to $75 million. The
general liability coverage has a $250,000 self-insured retention with a
$1 million cap on total claims. The Company's combined auto and
workers' compensation coverage is insured through participation in a
captive insurance program. The Company obtains excess coverage on
occurrence basis policies. Provisions for self-insured losses are
recorded based upon the Company's estimates of the aggregate
self-insured liability for claims incurred, resulting in a retention
for a portion of these expected losses.
The Company and its subsidiaries are defendants in other various
lawsuits related to the self-insurance program, which are not expected
to have a material adverse effect on the Company's financial position
or results of operations.
The Company and its subsidiaries are presently involved in other
various federal and state tax audits, which are not expected to have a
material adverse effect on the Company's financial position or results
of operations.
(4) FUTURES AND FORWARD CONTRACTS AND CHANGE IN ACCOUNTING PRINCIPLE
The Company routinely makes purchase and sale commitments under supply
contracts and similar agreements with other parties that typically have
a term of less than one year. As of September 30, 2000, the Company had
outstanding commitments to purchase approximately 21.5 million gallons
of LP gas for approximately $9.2 million. The Company also had
outstanding commitments to sell approximately 33.2 million gallons of
LP gas at September 30, 2000.
The Company also uses commodity futures contracts to reduce the risk of
price fluctuations for liquefied propane (LP) gas purchase and sale
commitments. As of September 30, 2000 and July 1, 2000, the Company's
open positions on commodity futures contracts consisted of 5.5 million
gallons and 210,000 gallons, respectively, and had a fair value of
approximately $326,000 and $13,000, respectively. Net unrealized losses
on open positions in commodity futures contracts as of September 30,
2000 aggregated approximately $129,000 and were immaterial at July 1,
2000.
7
<PAGE>
On July 1, 2000, the Company adopted the provisions of Financial
Accounting Standards Board Statements (SFAS) Nos. 133 and 138, which
establish accounting and reporting standards for derivative financial
instruments. SFAS 133 and 138 require most derivative instruments to be
reflected as assets or liabilities in the balance sheet at their fair
values with changes in fair values reflected in net income (or
accumulated other comprehensive income if the criteria for cash flow
hedge accounting are met.) An exception to application of the
requirements is provided for derivative instruments that meet the
criteria of normal purchases/normal sales set forth in the new
standards and are, therefore, not recognized.
Derivative financial instruments held by the Company consist of the
forward purchase and sales contracts and the commodity futures
contracts discussed above. Certain of the forward purchase and sales
contracts meet the normal purchases/normal sales criteria and are not
recognized in the financial statements. The remainder of the forward
purchase and sales contracts and all of the commodity futures contracts
are recognized in the financial statements as the Company has elected
not apply the hedge accounting provisions of the new standards to those
instruments.
At July 1, 2000, initial adoption of the new standards resulted in
recognition of derivative financial instruments as assets and
liabilities in the amounts of $3.1 million and $1.6 million,
respectively, and a cumulative effect adjustment of $940,000, net of
applicable income taxes. No disclosure of the pro forma effects as if
the new standards had been applied retroactively to prior periods is
made as such effects are immaterial. Application of the new standards
resulted in recognition of a loss on forward and futures contracts of
$462,000 during the quarter ended September 30, 2000.
(5) LOSS PER COMMON SHARE
Loss per common share is computed by dividing the net loss for the
three month periods by the average number of common shares and, except
where anti-dilutive, common share equivalents outstanding, if any.
Common share equivalents outstanding as of September 30, 2000 and 1999
consisted of stock options and common stock purchase warrants which are
anti-dilutive at those dates. The weighted average number of common
shares outstanding used in the computation of loss per common share was
1,586,915 as of September 30, 2000 and 1999.
(6) DISPOSITIONS OF RETAIL SERVICE CENTERS
During the three months ended September 30, 2000, the Company sold for
cash 3 retail service centers. At June 30, 2000, the carrying value of
the retail service centers sold was approximately 4% of total assets.
Pro forma results of these operations as if the transactions had been
completed at the beginning of the period would not be materially
different from actual results due to the timing of the transaction and
the seasonal nature of the business.
During the year ended June 30, 2000, the Company sold 66 retail service
centers. The Company received $91.1 million in cash from these sales.
Unaudited pro forma consolidated operations, assuming the dispositions
had been completed at the beginning of the previous period, are shown
below for the periods ending September 30:
8
<PAGE>
Three Three
Months Months
Ended Ended
9/30/00 9/30/99
------- -------
(In Millions)
Operating revenue $11.5 $6.6
Net loss $(3.5) $(4.6)
The pro forma results are not necessarily indicative of what would have
occurred had the retail service center dispositions been on those
dates, nor are they necessarily indicative of future operations.
(7) BUSINESS ACQUISITION AND DISPOSITION
On July 2, 1999, the Company acquired Tres Hombres, Inc., a restaurant
chain, in which the transaction was accounted for in a manner similar
to a pooling of interests. Due to the covenant requirements established
by its then existing working capital lender, the Company sold Tres
Hombres, Inc. in December 1999. Unaudited pro forma consolidated
operations, assuming the disposition had been completed at the
beginning of the previous period, are shown below for the periods
ending September 30:
Three Three
Months Months
Ended Ended
9/30/00 9/30/99
------- -------
(In Millions)
Operating revenue $11.5 $12.1
Net loss $(3.5) $(5.1)
The pro forma results are not necessarily indicative of what would have
occurred had the business disposition been on those dates, nor are they
necessarily indicative of future operations.
9
<PAGE>
(8) ADDITIONAL CASH FLOW INFORMATION (In Thousands)
<TABLE>
<CAPTION>
Additional Cash Payment Information 2000 1999
----------------------------------- ---- ----
<S> <C> <C>
Interest Paid $27 $4,800
Income Taxes Paid (net of refunds) $262 $14
Noncash Investing and Financing Activities
Mortgage obligations incurred on the purchase of
property and equipment $85 $389
</TABLE>
(9) SENIOR SECURED NOTES AND SUBORDINATED DEBENTURES
On July 31, 2000, the Company defaulted with respect to the remaining
$50,880,000 principal balance of the 12 7/8% Senior Secured Notes due
2004 (the "Senior Notes") which, consequently, also caused the Company
to be in default with respect to the $9,729,000 principal balance of
the 9% Subordinated Debentures due 2007 (the "Subordinated
Debentures"). The Company was unable to enter into a definitive
agreement for the sale of certain of its retail service centers to
provide the funds necessary to redeem the remaining principal balance
of the Senior Notes. The Company is negotiating to restructure both the
Senior Notes and the Subordinated Debentures. The Company has made
exchange offers for both the Senior Notes and the Subordinated
Debentures of like principal amount. As a result of the defaults, the
holders of the Senior Notes and the Subordinated Debentures have the
right to accelerate the balance due and require immediate payment in
full. Accordingly, the entire balance of the obligations are included
in current liabilities at September 30, 2000. The holders of the Senior
Notes and the Subordinated Debentures have not accelerated the balance
due as of November 20, 2000.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition, Liquidity and Capital Resources
The following table is presented as a measure of the Company's liquidity and
financial condition (in thousands).
<TABLE>
<CAPTION>
September 30 June 30
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total long-term debt (including current
maturities) $62,322 $149,585 $61,074 $147,710
Working Capital (deficit) $(80,917) $(12,279) $(80,513) $(11,250)
Current Ratio .16 .58 .08 .53
</TABLE>
During the three months ended September 30, 2000, the Company incurred $2
million of additional bank debt for working capital purposes. This increase in
long-term debt was offset by mortgage obligation principal payments.
The changes in working capital and the resulting effects on the current ratio
are due to several factors, including:
o the balance of the Senior Notes and the Subordinated Debentures and their
classification as current at September 30, 2000 and June 30, 2000;
o the use of funds generated from the Company's prepaid product program; and
o the tax related impact of operations affecting deferred tax assets and
liabilities.
The Company's prepaid product program allows customers to prebuy product at an
established price, reducing their risk of winter price fluctuations brought
about by changes in demand and allowing the Company to improve its seasonal cash
flow and further enhance its hedging of product purchases and marketing programs
to its customers. Customer prepayments related to the program decreased $3.2
million for the three months ended September 30, 2000 compared to the same
period in 1999 primarily due to the divestiture of 66 retail service centers in
fiscal year 2000.
The Company is seeking to mitigate the effects of its current cash flow problems
through a restructuring of both the Senior Notes and the Subordinated
Debentures. On June 30, 2000, the Company offered, to the holders of the
Subordinated Debentures, to exchange an aggregate principal amount of up to
$9,729,000 of its new 9% Accruing Subordinated Debentures due 2007 (the
"Accruing Subordinated Debentures") for a like principal amount of its issued
and outstanding 9% Subordinated Debentures. The Accruing Subordinated Debentures
will be unsecured obligations of the Company, maturing on December 31, 2007, and
will bear interest accruing semiannually from January 1, 2000 at the rate of 9%
per year, payable on maturity. The payment of the principal of, premium, if any,
and interest on the Accruing Subordinated Debentures will be subordinated in
right of payment to the prior payment in full of all existing and future senior
indebtedness of the Company.
By exchanging a bi-annual cash interest payment obligation under the
Subordinated Debentures for the accruing and compounding interest obligation
under the Accruing Subordinated Debentures, although beneficial from a cash flow
perspective in the short term, the Company will significantly increase its
aggregate interest obligations upon maturity of the Accruing Subordinated
Debentures. Furthermore, if the exchange offer for the Accruing Subordinated
Debentures is not accepted by all of the holders of Subordinated Debentures, the
Company will be required to continue to pay interest to such non-tendering
holders semiannually in addition to being required to pay all accrued interest
payable as of July 31, 2000 to such non-tendering holders. The exchange offer
has an expiration date of November 30, 2000.
11
<PAGE>
In the event that the Company fails to make any interest payment otherwise
payable pursuant to the Subordinated Debentures or the Accruing Subordinated
Debentures, the trustee and the holders of such indebtedness may choose to
pursue any and all remedies contained in the indenture or at law relating to
such indebtedness.
On November 2, 2000, the Company offered to exchange an aggregate principal
amount of $50,880,000 of its 11% Senior Secured Notes due 2003 (the "New Senior
Notes") for a like principal amount of its issued and outstanding Senior Notes
from the registered holders thereof. The New Senior Notes will evidence the same
class of debt as the Senior Notes and will be issued pursuant to, and entitled
to the benefits of, an indenture, which the Company and State Street Bank and
Trust Company, as trustee, intend to execute on or before the issuance of the
New Senior Notes.
The Company's obligation to accept for exchange Senior Notes validly tendered
pursuant to the exchange offer is subject to certain conditions, including,
without limitation, the tender of 100% of the aggregate principal amount of the
Senior Notes outstanding and not owned by the Company and its affiliates.
The New Senior Notes will bear interest at the rate of 11% per annum payable
semiannually on each June 30 and December 30 from August 1, 2000. Holders
exchanging Senior Notes for New Senior Notes will not receive a cash interest
payment for the interest accrued through July 31, 2000 in respect of the Senior
Notes exchanged. Except for certain purchase money secured equipment financing
and lease obligations of the Company incurred in the ordinary course of its
business, the New Senior Notes will be secured obligations of the Company, and
rank pari passu with all existing and future secured and senior indebtedness of
the Company. The New Senior Notes will be secured by a pledge of certain
outstanding shares of stock of the Company and all of the outstanding shares of
stock of certain subsidiaries of the Company. The New Senior Notes will also be
secured by a lien on certain tangible and intangible assets of All Star Gas Inc.
of Colorado and the right to obtain a lien on certain of the remaining current
and future assets of the Company and its subsidiaries. The Company may, at its
option, redeem the New Senior Notes at any time, in whole or from time to time
in part, until maturity, upon not less than 30 nor more than 60 days' notice, at
a redemption price equal to a percentage of the principal amount of the New
Senior Notes being redeemed plus accrued and unpaid interest thereon to the
redemption date.
12
<PAGE>
There can be no assurances that the holders of the Senior Notes or the
Subordinated Debentures will approve any amendment or restructuring of the
Senior Notes or the Subordinated Debentures, respectively. If the holders of the
Senior Notes or Subordinated Debentures accelerate the Company's obligations
under such indebtedness, such events would have a material adverse effect on the
Company's liquidity and financial position. Under these circumstances, the
Company's financial position would necessitate the development of an alternative
financial structure. Considering the limited financial resources and the
existence of certain defaults, there can be no assurances that the Company would
succeed in formulating and consummating an acceptable alternative financial
structure. In addition, in light of the Company's current financial condition
and the existence of certain defaults, the Company may need to seek protection
under the federal bankruptcy laws.
As a result of the Company's significant disposition of retail service centers
during fiscal 2000, the Company has incurred a $7.7 million federal tax
liability that was due September 15, 2000. The Company was unable to pay the
obligation when due. The Internal Revenue Service (the "IRS") may attempt
collection by various means including placing liens on Company assets and
seizing bank accounts. The Company is in negotiations with the IRS for a workout
plan to settle the current tax obligation.
Results of Operations
Due to the seasonal nature of its business, the Company usually realizes a net
operating loss the first quarter. Operating revenues and results of forward and
futures contracts for a particular quarter are not necessarily indicative of a
full fiscal year's operations primarily because of the seasonal element. Other
expense items such as depreciation and general and administrative expenses,
however, generally continue on a more annualized basis. Interest expense also
continues on a more level basis although interest expense is generally higher
during the summer and fall months due to increased working capital borrowings
used to finance inventory purchases in preparation for the Company's principal
sales months.
The following table presents additional operating data for the three months
ended September 30, 2000 and 1999 and the year ended June 30, 2000 (in
thousands).
<TABLE>
<CAPTION>
Three Three
Months Months Year
Ended Ended Ended
9/30/00 9/30/99 6/30/00
------- ------- -------
<S> <C> <C> <C>
Retail Propane Gallons Sold
(Bulk and Bottle) 6,246 13,417 74,297
Revenues:
Propane $6,796 $ 10,222 $71,651
Gas systems, appliances and other
fuels 409 879 3,424
Other 477 2,143 5,542
Gross Profit:
Propane 2,501 4,732 28,580
Gas systems, appliances and other
fuels 156 282 677
Other 477 1,779 4,935
</TABLE>
13
<PAGE>
Volumes. Retail volumes of propane sold decreased 53% in the three months ended
September 30, 2000 compared to the same period ended September 30, 1999 mainly
due to sales of retail service centers during the previous fiscal year.
Comparing stores that were operated by the Company during both 2000 and 1999,
volumes decreased .97%. The decrease in retail gallons is also a result of the
warmer weather experienced. Heating degree days experienced by the Company
during the period ended September 30, 2000 decreased 21% from the same period in
1999.
During the three months ended September 30, 2000, the Company completed forward
purchase and sale contracts which resulted in buying and selling 8.2 million
gallons of propane to other suppliers during this three month period. There were
no such contracts for the three months ended September 30, 1999.
Revenues. Operating revenues decreased in the three months ended September 30,
2000 compared to the same period in 1999. Offsetting the decrease in retail
volumes discussed above, retail sales prices per gallon increased 41% in the
three months ended September 30, 2000 compared to 1999. Other sales, including
gas systems, appliances and other fuels, increased but had no significant impact
on the change in revenues as indicated in the table above.
Cost of product and gross profit. Cost of product sold decreased $1.9 million
due to the divestitures of retail service centers during the previous fiscal
year offset by the costs per gallon that increased 68% over the same period in
1999.
The Company's gross profit decreased 54% in the three months ended September 30,
2000 compared to the same period in 1999. This is primarily due to the decrease
in gallons sold due to divestitures of retail service centers during fiscal year
2000.
General and administrative expense. General and administrative expense for the
three months ended September 30, 2000 decreased $4.3 million over the same
period in 1999. In general, expenses decreased as a result of the divestiture of
66 retail service centers and Tres Hombres, Inc. during fiscal year 2000. The
effect from the sales of the retail service centers primarily affected salaries
and employee benefits which decreased $2.8 million and office expense and other
taxes which decreased $472,000. No other significant changes occurred in any
individual expense category other than those associated with the divestiture of
the retail service centers and Tres Hombres, Inc.
Depreciation and amortization. Depreciation and amortization expense decreased
$1.7 million for the three months ended September 30, 2000 as compared to the
same period in 1999 mainly due to the divestiture of 66 retail service centers
during fiscal year 2000.
Loss on forward and futures contracts. Loss on forward and futures contracts
increased $462,000 due to the Company's adoption of SFAS 133 during the three
months ended September 30, 2000. This loss is a result of the decrease in fair
value of the Company's derivative instruments during the quarter.
Interest expense. Interest expense decreased approximately $93,000 for the three
months ended September 30, 2000 compared to the same period in 1999 primarily
due to payment in full on the revolving credit facility in February 2000 and the
elimination of various mortgages related to the divestiture of 66 retail service
centers during fiscal year 2000.
14
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Impact of Recent Accounting Pronouncements
On July 1, 2000, the Company adopted the provisions of Financial Accounting
Standards Board Statements (SFAS) Nos. 133 and 138, which establish accounting
and reporting standards for derivative financial instruments. SFAS 133 and 138
require most derivative instruments to be reflected as assets or liabilities in
the balance sheet at their fair values with changes in fair values reflected in
net income (or accumulated other comprehensive income if the criteria for cash
flow hedge accounting are met.) An exception to application of the requirements
is provided for derivative instruments that meet the criteria of normal
purchases/normal sales set forth in the new standards and are, therefore, not
recognized.
Derivative financial instruments held by the Company consist of the forward
purchase and sales contracts and the commodity futures contracts discussed
above. Certain of the forward purchase and sales contracts meet the normal
purchases/normal sales criteria and are not recognized in the financial
statements. The remainder of the forward purchase and sales contracts and all of
the commodity futures contracts are recognized in the financial statements as
the Company has elected not apply the hedge accounting provisions of the new
standards to those instruments.
At July 1, 2000, initial adoption of the new standards resulted in recognition
of derivative financial instruments as assets and liabilities in the amounts of
$3.1 million and $1.6 million, respectively, and a cumulative effect adjustment
of $940,000, net of applicable income taxes. Application of the new standards
resulted in recognition of a loss on forward and futures contracts of $462,000
during the quarter ended September 30, 2000.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Note 3 of the Condensed Consolidated Financial Statements.
Items 2, 3, 4 and 5
No information is reportable under these sections
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
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Exhibit No. Description
----------- -----------
(27) Financial Data Schedule
(b) Reports on Form 8-K
July 31, 2000
August 31, 2000
September 29, 2000
October 30, 2000
November 2, 2000
Reviewed by Independent Certified Public Accountants
The September 30, 2000 financial statements included in this filing on Form 10-Q
have been reviewed by Baird, Kurtz & Dobson, Independent Certified Public
Accountants, in accordance with established professional standards and
procedures for such a review. The report of Baird, Kurtz & Dobson commenting
upon their review is appended hereto.
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SIGNATURE
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.
ALL STAR GAS CORPORATION
Registrant
----------------------------------
PAUL S. LINDSEY
PRESIDENT AND CEO
DATE: November 20, 2000
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Independent Accountants' Report
Board of Directors and Stockholders
All Star Gas Corporation
Lebanon, Missouri
We have reviewed the accompanying condensed consolidated balance sheet of
ALL STAR GAS CORPORATION as of September 30, 2000, and the related condensed
consolidated statements of operations and cash flows for the three-month periods
ended September 30, 2000 and 1999. These condensed consolidated financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of ALL STAR GAS CORPORATION as of June
30, 2000, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the year then ended (not presented herein);
and in our report dated August 25, 2000, on those consolidated financial
statements, we expressed an unqualified opinion that also contained an
explanatory paragraph regarding substantial doubt about the Company's ability to
continue as a going concern for a reasonable period of time. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of June 30, 2000, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
BAIRD, KURTZ & DOBSON
Springfield, Missouri
November 9, 2000
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