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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 March 31, 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
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(Address of Principal Executive Offices and Zip Code)
(417) 532-3103
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(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 May 20, 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>
March 31, 2000 June 30, 1999
(Unaudited) Restated
-------------- -------------
Assets
Current Assets
<S> <C> <C>
Cash $ 1,185 $ 1,323
Trade Receivables, Less Allowance for Doubtful
Accounts; 2000 - $542,
1999 - $526 10,095 4,262
Inventories 4,942 4,854
Prepaid Expense 1,401 974
Refundable Income Taxes -- 749
Deferred Income Taxes 300 300
-------- --------
Total Current Assets 17,923 12,462
-------- --------
Property and Equipment 96,287 120,802
Less Accumulated Depreciation 36,553 43,378
-------- --------
Total Property and Equipment 59,734 77,424
-------- --------
Other Assets
Debt Acquisition Costs - Net 2,186 3,718
Excess of Cost Over Fair Value of Net Assets
Acquired - Net 7,805
11,261
Deferred Income Taxes 2,405 --
Other 1,543 2,110
-------- --------
Total Other Assets 13,939 17,089
-------- --------
Total Assets $ 91,596 $106,975
======== ========
</TABLE>
2
<PAGE>
ALL STAR GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
March 31, 2000 June 30, 1999
(Unaudited) Restated
-------------- -------------
<S> <C> <C>
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Checks in Process of Collection $ -- $ 1,884
Current Maturities of Long-Term Debt 3,700 2,252
Accounts Payable 4,506 2,415
Accrued Salaries 1,182 1,560
Accrued Interest 3,722 4,171
Customer Prepayments 3,831 9,027
Accrued Expenses 2,166 2,403
--------- ---------
Total Current Liabilities 19,107 23,712
Long-Term Debt 136,310 145,458
Deferred Income Taxes -- 794
Accrued Self-Insurance Liability 1,320 320
--------- ---------
Total Liabilities 156,737 170,284
--------- ---------
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 27,119 27,119
Retained Earnings (Deficit) (5,587) (3,755)
--------- ---------
22,773 24,605
Treasury Stock at Cost - 12,704,105 shares (87,914) (87,914)
--------- ---------
Total Stockholders' Equity (Deficit) (65,141) (63,309)
--------- ---------
Total Liabilities and Stockholders' Equity
(Deficit) $ 91,596 $ 106,975
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
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ALL STAR GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
----------------------------------- ----------------------------------
1999
2000 1999 2000 Restated
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Operating Revenue $31,523 $28,629 $71,054 $68,997
Cost of Product Sold 19,462 12,503 39,852 31,611
---------------- --------------- ---------------- ---------------
Gross Profit 12,061 16,126 31,202 37,386
---------------- --------------- ---------------- ---------------
Operating Costs and Expenses
General and Administrative 9,962 7,424 25,999 23,854
Depreciation and Amortization 2,066 2,341 6,999 7,191
Gain on Sale of Assets (12,875) (133) (13,181) (484)
---------------- --------------- ---------------- ---------------
(847) 9,632 19,817 30,561
---------------- --------------- ---------------- ---------------
Operating Income 12,908 6,494 11,385 6,825
---------------- --------------- ---------------- ---------------
Other Expense
Interest Expense, Net (4,779) (3,049) (13,962) (9,001)
Amortization of Debt Discount and
Expense (1,110) (1,966) (1,814) (5,664)
---------------- --------------- ---------------- ---------------
(5,889) (5,015) (15,776) (14,665)
---------------- --------------- ---------------- ---------------
Income (Loss) Before Income Taxes 7,019 1,479 (4,391) (7,840)
Provision (Credit) for Income Taxes 1,308 540 (2,559) (2,745)
---------------- --------------- ---------------- ---------------
Net Income (Loss) $5,711 $939 $(1,832) $(5,095)
================ =============== ================ ===============
Basic and Diluted Income (Loss) Per
Common Share $ 3.60 $0.59 $ (1.15) $ (3.21)
================ =============== ================ ===============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
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ALL STAR GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
1999
2000 Restated
-------- --------
Cash Flows From Operating Activities
<S> <C> <C>
Net Loss $ (1,832) $ (5,095)
Items not requiring (providing) cash
Depreciation 5,360 5,631
Amortization 3,453 7,224
Gain on sale of assets (13,181) (484)
Deferred income taxes (3,199) (1,925)
Changes In:
Trade receivables (5,342) (2,549)
Inventories (1,314) 2,095
Prepaid expense and other 2,064 104
Accounts payable and accrued expenses (2,877) (5,335)
-------- --------
Net cash used in operating activities (16,868) (334)
-------- --------
Cash Flows From Investing Activities
Purchase of property and equipment (3,860) (2,916)
Acquisition of retail service centers (5) (601)
Proceeds from sales of property and equipment 441 277
Disposal of retail service centers 30,126 2,365
Advances from (Payments to) related parties (1,380) 704
-------- --------
Net cash provided by (used in) investing activities 25,322 (171)
-------- --------
Cash Flows From Financing Activities
Checks in process of collection (1,884) 1,903
Increase (Decrease) in working capital financing (4,756) 5,323
Payments for loan fees -- (1,252)
Proceeds on long-term debt obligations 118 1,984
Principal payments on other long-term debt (2,070) (4,504)
--------
Net cash provided by (used in) financing activities (8,592) 3,454
-------- --------
INCREASE (DECREASE) IN CASH (138) 2,949
CASH, BEGINNING OF PERIOD 1,323 929
-------- --------
CASH, END OF PERIOD $ 1,185 $ 3,878
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
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ALL STAR GAS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 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 36 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. As of the last fiscal year, the Company
provided service to approximately 112,000 customers in 19 states
through 122 retail service centers.
The accompanying unaudited condensed consolidated financial statements
contain, in the opinion of Management, all adjustments necessary to
present fairly the Company's condensed consolidated financial position
as of March 31, 2000, and the condensed consolidated results of its
operations and cash flows for the periods ended March 31, 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,
1999, 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 condensed or omitted. The condensed consolidated
balance sheet of the Company as of June 30, 1999 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 and nine months ended March 31, 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 has suffered recurring losses from operations, has net
working capital and stockholders' equity deficiencies and the annual
cash interest requirement on its $127,200,000 Senior Secured Notes
increased from 7% to 12 7/8% on July 16, 1999. 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. These include the ongoing plan of
strategic geographic consolidation of service centers and disposing of
nonstrategic or marginal locations and merging small acquisitions into
existing markets (See Notes 8 and 9). The Company is also exploring
several financing and recapitalization alternatives in conjunction with
a downsizing of the Company's overall structure. Sale of assets in
other than the ordinary course of business to meet liquidity needs
could incur losses not reflected in these financial statements, or
result in not obtaining the highest value for the sale of properties.
6
<PAGE>
(3) BUSINESS ACQUISITION AND DISPOSITION
Effective July 2, 1999, the Company acquired Tres Hombres, Inc., a
restaurant chain controlled by the Company's principal shareholder, in
a transaction was accounted for in a manner similar to a pooling of
interests. The Company issued 22,865 shares of stock previously held in
Treasury in exchange for all of the outstanding common stock of Tres
Hombres, Inc. The consolidated balance sheets as of June 30, 1999 and
the consolidated statements of operations and cash flows for the three
and nine months ended March 31, 1999 have been retroactively restated
to reflect the operations of Tres Hombres, Inc., which resulted in an
increase in net loss for the three and nine months for 1999 of $401,592
and $659,847, respectively.
Due to covenant requirements established by its working capital lender,
the Company sold Tres Hombres, Inc. in December 1999, recognizing a
loss of approximately $363,000. The sale was consummated through
receipt of a promissory note and assumption of certain liabilities by
the buyer. At June 30, 1999, the carrying value of Tres Hombres, Inc.
was approximately 2.1% of total assets.
(4) SELF-INSURANCE AND CONTINGENCIES
Under the Company's current insurance program, the Company's
comprehensive general, auto and excess liability policy provides for
losses of up to $101.0 million with a $250,000 self-insured retention
for general and excess liability losses with a $1 million aggregate
cap. The Company's combined auto and workers' compensation coverage is
fully insured with no self-insured retention. 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 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 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.
(5) ACCOUNTING FOR DERIVATIVES
There has been no change since June 30, 1999 in the Company's treatment
of commodity futures contracts. As of March 31, 2000, the Company had
no open positions on futures contracts.
(6) RELATED PARTY TRANSACTIONS
During the three months ending March 31, 2000, the Company received
advances bearing interest at a rate 12% from its principal shareholder
totaling approximately $1,702,000. At March 31, 2000, the balances of
these obligations and other prior loan agreements was $50,000.
7
<PAGE>
(7) 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. The
weighted average number of common shares outstanding used in the
computation of loss per common share was 1,586,915 as of March 31, 2000
and 1999 (restated).
(8) DISPOSITION OF RETAIL SERVICE CENTERS
During the three months ended March 31, 2000, the Company sold 17
retail service centers at a gain. The Company received approximately
$24.8 million in cash for the service center dispositions. 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.
(9) SUBSEQUENT EVENTS - DISPOSITIONS OF RETAIL SERVICE CENTERS
In April 2000, the Company sold for cash 9 retail service centers in
North Carolina at a gain. The retail service centers disposed of
accounted for approximately 13%, 12% and 11% of sales volume for the
quarters ended March 31, 2000 and 1999 and for the year ended June 30,
1999, respectively. At June 30, 1999, the carrying value of the retail
centers disposed of was approximately 12% of total assets. The Company
entered into an agreement to provide management services to the buyer
with respect to these retail service centers.
In May 2000, the Company sold for cash 26 retail service centers
located in various states on the west coast of the United States at a
gain. The retail service centers disposed of accounted for
approximately 25%, 23% and 25% of sales volume for the quarters ended
March 31, 2000 and 1999 and for the year ended June 30, 1999,
respectively. At June 30, 1999, the carrying value of the retail
centers disposed of was approximately 14% of total assets.
(10) ADDITIONAL CASH FLOW INFORMATION (In Thousands)
<TABLE>
<CAPTION>
1999
Additional Cash Payment Information 2000 Restated
---- --------
<S> <C> <C>
Interest Paid $14,411 $11,010
Income Taxes Paid $ 51 $ 59
Noncash Investing and Financing Activities
Mortgage obligations incurred on the
acquisition of service centers $ 389 $ 75
Receivables from sale of retail service centers
and Tres Hombres, Inc. $ 850 $ 207
Capital lease obligations incurred for equipment $ 278 $ 232
</TABLE>
8
<PAGE>
(11) SENIOR SECURED NOTES
Under the terms of the Company's 12 7/8% Senior Secured Notes, due
2004, the cash interest rate increased from 7% to 12 7/8% effective
July 16, 1999 resulting in a significantly higher semiannual interest
payment to be paid January 15, 2000 and subsequently.
In March 2000, the Company extended an offer to purchase all $127.2
million of its Senior Secured Notes, due 2004 and the consent
solicitation to the amendment of the indenture governing the notes. The
offered aggregate consideration for the purchase was $100 million, or
$786 per $1,000 principal amount of the notes, without any further
accrual of interest. In May 2000, the Company amended and extended its
offer to May 26, 2000. The amendment includes the purchase, on a pro
rata basis, of 60% of all notes outstanding. The offered aggregate
consideration for the purchase and consent is $60 million, or $786 per
$1,000 principal amount of the notes, without any accrual of interest.
Under terms of the offer, the Company will be permitted to redeem the
remaining principal amount of the notes outstanding at $786 per $1,000
principal without any accrual of interest by July 31, 2000. The Company
is considering alternatives to the form of consideration payable by the
Company for the notes. Consummation of the offer is subject to several
conditions including the amendment of the indenture governing the
notes. The proposed transaction has not consummated as of the date of
this filing.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition and Liquidity
The following table is presented as a measure of the Company's liquidity and
financial condition (in thousands).
<TABLE>
<CAPTION>
March 31 June 30
-------------------- -------------------------
1999 1999 1998
2000 Restated Restated Restated
---- -------- -------- --------
<S> <C> <C> <C> <C>
Total long-term debt (including current
maturities) $ 140,010 $150,830 $ 147,710 $ 143,709
Working Capital (deficit) $ (1,184) $41 $ (11,250) $ (14,802)
Current Ratio .94 1.00 .53 .50
</TABLE>
During the nine months ended March 31, 2000, the decrease in long-term debt is
related to the payment in full on the revolving credit facility that had a
balance of $4.6 million at June 30, 1999. Also, mortgage principal payments
amounted to $2.1 million during the nine months ended March 31, 2000 and $1
million of mortgages payable were eliminated due to the sale of Tres Hombres,
Inc. (See Note 3).
The significant change in working capital and the resulting effect on the
current ratio is due to several factors, including:
o the balance of the revolving credit facility and its classification as
long-term beginning March 31, 1999;
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.
Customer prepayments primarily related to the Company's prepaid product program,
decreased to $3.8 million as of March 31, 2000 compared to $4.4 million as of
March 31, 1999. The 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.
The Company decided to utilize its 30 day grace period for the payment of the
$8.2 million interest payment due on January 15, 2000 on its $127.2 million 12
7/8% Senior Secured Notes, due 2004. The Company continues to experience cash
shortages due to the unusually warm weather, and higher inventory costs
resulting from significantly higher wholesale product costs and the Company's
experiencing unusual difficulty in passing through increased product costs to
customers. The Company made the interest payment utilizing in part proceeds from
the Company's sale of various retail service centers as discussed in Note 8 to
the condensed consolidated financial statements.
10
<PAGE>
In March 2000, the Company extended an offer to purchase all $127.2 million of
its Senior Secured Notes, due 2004 and the consent solicitation to the amendment
of the indenture governing the notes. The offered aggregate consideration for
the purchase was $100 million, or $786 per $1,000 principal amount of the notes,
without any further accrual of interest. In May 2000, the Company amended and
extended its offer to May 26, 2000. The amendment includes the purchase, on a
pro rata basis, of 60% of all notes outstanding. The offered aggregate
consideration for the purchase and consent is $60 million, or $786 per $1,000
principal amount of the notes, without any accrual of interest. After
consummation of the offer, the Company will be permitted to redeem the remaining
principal amount of the notes outstanding at $786 per $1,000 principal without
any accrual of interest by July 31, 2000. The Company is considering
alternatives to the form of consideration payable by the Company for the notes.
Consummation of the offer is subject to several conditions including the
amendment of the indenture governing the notes. The proposed transaction has not
consummated as of the date of this filing.
The Company has net working capital and stockholders' equity deficiencies. The
Company is considering several alternatives for mitigating these conditions
during the coming year, which include exploring several financing and
recapitalization alternatives in conjunction with a downsizing of the Company's
overall structure. Capital and maintenance expenditures have been high over the
past three fiscal years as the Company has upgraded and improved its trucks and
equipment. During the past fiscal year, the Company has also incurred costs
related to the renovation of an existing building which was converted into the
corporate facilities for the Company allowing the Company to exit an expensive
lease agreement.
Impact of Year 2000
The Company believes successful remediation of mission-critical systems has been
completed in a timely manner. The Company has not experienced any significant
operational or financial problems related to the Year 2000 compliance.
Management presently believes that the Year 2000 Issue will not pose any future
operational problems.
THE ESTIMATES AND CONCLUSIONS HEREIN ARE FORWARD-LOOKING STATEMENTS AND ARE
BASED ON MANAGEMENT'S BEST ESTIMATES OF FUTURE EVENTS. RISKS OF COMPLETING THE
PLAN INCLUDE THE AVAILABILITY OF RESOURCES, THE ABILITY TO DISCOVER AND CORRECT
THE POTENTIAL YEAR 2000 SENSITIVE PROBLEMS WHICH COULD HAVE A SERIOUS IMPACT ON
CERTAIN OPERATIONS AND THE ABILITY OF THE COMPANY'S SERVICE PROVIDERS, CUSTOMERS
AND SUPPLIERS TO BRING THEIR SYSTEMS INTO YEAR 2000 COMPLIANCE.
Results of Operations
Due to the seasonal nature of its business, the Company usually realizes an
operating loss the first quarter and net operating income for the second and
third quarters. Operating revenues for a particular quarter are not necessarily
indicative of a full fiscal year's operations 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.
11
<PAGE>
The following table presents additional operating data for the periods ended
March 31, 2000 and 1999 (restated) and the year ended June 30, 1999 (restated in
thousands).
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Year Ended
3/31/99 3/31/99 6/30/99
3/31/00 Restated 3/31/00 Restated Restated
------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
Propane Gallons Sold 28,253 34,443 67,123 75,825 90,381
(Bulk and Bottle)
Revenues:
Propane $30,126 $27,183 $62,907 $60,882 $71,992
Gas systems, appliances and other
fuels 714 806 3,002 2,975 3,741
Other 683 640 5,145 5,140 7,967
Gross Profit:
Propane 11,126 15,221 25,666 31,932 37,925
Gas systems, appliances and other
fuels 252 265 998 986 1,225
Other 683 640 4,538 4,468 6,634
</TABLE>
Volumes. Retail volumes of propane sold decreased in the three and nine months
ended March 31, 2000 compared to the same periods ended March 31, 1999. Heating
degree-days experienced by the Company during the nine months ended March 31,
2000 were only 85% of those experienced in a normal winter. For the nine months
ended March 31, 2000 compared to the same period in 1999, volumes decreased by
approximately 8.7 million mainly due to the sale of retail service centers.
Comparing stores that were operated by the Company during both 2000 and 1999,
volumes decreased 1.8%.
Revenues. Operating revenues increased 10% and 3% in the three and nine months
ended March 31, 2000 compared to the same periods in 1999. Offsetting the
decrease in volumes discussed above, sales prices per gallon increased 17% in
the nine months ended March 31, 2000 compared to 1999.
Cost of product and gross profit. The Company's gross profit decreased 25% and
17% in the three and nine months ended March 31, 2000, respectively, compared to
the same periods in 1999, due to the decline in volumes noted above and a
decline in margins of approximately 4 cents per gallon. There were no
significant changes in the cost or related profit on other sales as indicated in
the table above.
General and administrative expense. General and administrative expense increased
$2.5 million for the three months ended March 31, 2000 and increased $2.1
million for the nine months ended March 31, 2000, compared to the same periods
in 1999. The increase is due to several reasons. Insurance and liability claims
increased $1.2 million and $1.3 million for the three and nine months ending
March 31, 2000 compared to the same periods in 1999, respectively, due to
increased costs on outstanding claims including a significant increase in the
Company's self-insurance reserve to cover anticipated losses on two specific
claims. Repairs and maintenance expenses increased $545,000 for the three and
nine months ending March 31, 2000 compared to the same periods in 1999,
respectively, mainly due to the increased costs of truck fuel and maintenance
and the increased costs of painting and maintenance of Company tanks. Costs
associated with repairs for the Company airplane increased $133,000 and $104,000
for the three and nine months ending March 31, 2000 compared to the same periods
in 1999, respectively. Professional fees and other fees increased $390,000 and
$476,000 for the three and nine months ending March 31, 2000 compared to the
same periods in 1999, respectively, due to costs associated with the sale of
retail service centers and the Company's downsizing program during the quarter.
12
<PAGE>
Depreciation and amortization. Depreciation and amortization expense decreased
$275,000 and $192,000 for the three and nine months ended March 31, 2000
compared to the same periods in 1999. The decrease in depreciation and
amortization on purchased goodwill and noncompete agreements is the result of
the disposition of retail service centers that were sold during the nine months
ended March 31, 2000.
Interest expense and amortization of debt discount. Interest expense increased
and amortization of debt discount decreased for the three and nine month periods
ended March 31, 2000 compared to the same periods in 1999 primarily due to the
effect of the interest rate increase under the terms of the Company's 12 7/8%
Senior Secured Notes, due 2004.
Potential Impact of Future Accounting Pronouncements
The Financial Accounting Standards Board (FASB) recently adopted Statement of
Financial Accounting Standards (SFAS 133), Accounting for Derivative Financial
Instruments and Hedging Activities. This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000,
may be adopted early for periods beginning after issuance of the Statement and
may not be applied retroactively. The effects of adoption of SFAS 133 on the
Company's financial statements are not determinable currently. The Company
expects to initially adopt SFAS 133 for the quarter ending September 30, 2000.
13
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Note 4 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
Exhibit No. Description
- ----------- -----------
(27) Financial Data Schedule
(b) Reports on Form 8-K
January 14, 2000
February 9, 2000
February 23, 2000
March 22, 2000
April 19, 2000
May 5, 2000
May 12, 2000
May 23, 2000
Reviewed by Independent Certified Public Accountants
The March 31, 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.
14
<PAGE>
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
/s/ Valeria Schall
-------------------------------
Valeria Schall
EXECUTIVE VICE PRESIDENT
DATE: May 23, 2000
15
<PAGE>
Independent Accountants' Report
Board of Directors and Stockholders
All Star Gas Corporation
Lebanon, Missouri
We have reviewed the condensed consolidated balance sheet of ALL STAR GAS
CORPORATION as of March 31, 2000, and the related condensed consolidated
statements of operations for the three-month and nine-month periods ended March
31, 2000 and 1999, and the condensed consolidated statement of cash flows for
the nine-month periods ended March 31, 2000 and 1999. These 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 condensed consolidated financial statements referred to
above 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, 1999, 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 13, 1999, 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, 1999, before restatement for the matter discussed in Note 3, 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
May 4, 2000, except for Note 9 as to
which the date is May 8, 2000
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