-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DaV0OFVvtimUgYPjsVg//BTQ55E/CJfCfAHDsoV1uC6iCeR1ncW2SJqbpX96JGtI WXySyopXQ4fO607msZFSXA== 0000950116-02-002320.txt : 20021015 0000950116-02-002320.hdr.sgml : 20021014 20021015112405 ACCESSION NUMBER: 0000950116-02-002320 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20021015 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALL STAR GAS CORP CENTRAL INDEX KEY: 0000922404 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS RETAIL [5900] IRS NUMBER: 431494323 STATE OF INCORPORATION: MO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 033-53343 FILM NUMBER: 02788573 BUSINESS ADDRESS: STREET 1: 119 WEST COMMERCIAL ST STREET 2: P O BOX 303 CITY: LEBANON STATE: MO ZIP: 65536 BUSINESS PHONE: 4175323103 MAIL ADDRESS: STREET 1: 119 WEST COMMERCIAL STREET STREET 2: P O BOX 303 CITY: LEBANON STATE: MO ZIP: 65536 FORMER COMPANY: FORMER CONFORMED NAME: EMPIRE GAS CORP/NEW DATE OF NAME CHANGE: 19940428 10-Q/A 1 tenq-a.txt 10-Q/A ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q/A AMENDMENT 1 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 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 May 14, 2002 was 1,586,891. ================================================================================ The Condensed Consolidated Statement of Operations included in Item 1 of Part 1 of Form 10-Q contained misstatements in the recording of the sale of three retail service centers. In December 2001, the Company entered into a financing transaction whereby the assets of these retail service centers in Missouri were transferred to a related party for approximately $1 million. The nature of the transaction was such that it was not a sale (as originally recorded at a gain on sale of assets) but as a financing liability to the related party. During June 2002, the assets of the service centers were transferred back to the Company, subject to a security interest in favor of a third-party lending institution. The misstatement in the gain on sale of assets recognized resulted in an understatement of the Company's net loss and basic and diluted loss per common share for the three and nine months ended March 31, 2002. This also resulted in an error in the balances of property, plant and equipment, notes receivable, income taxes payable, long-term debt and retained earnings on the Condensed Consolidated Balance Sheet at March 31, 2002 included in Item 1 of Part 1 of Form 10-Q. The misstatement also resulted in errors relating to these items in the Condensed Consolidated Statement of Cash Flows for the nine months ended March 31, 2002 included in Item 1 of Part 1 of Form 10-Q. The Condensed Consolidated Financial Statements as of and for the three and nine months ended March 31, 2002 in Item 1 of Part 1 have been restated to correct the misstatement. Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of Part 1 has been restated to correct the Company's working capital (deficit). Items 1 and 2 of Part 1 of the registrant's Form 10-Q are hereby amended in their entirety as follows: 2 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) March 31, 2002 (Unaudited) June 30, 2001 ----------- ------------- Assets - ------ Current Assets Cash $ 576 $ 509 Trade receivables - net 3,374 2,549 Current maturities of notes receivable 108 -- Inventories 1,782 2,783 Forward purchase contracts -- 115 Prepaid expense 617 198 Deferred income taxes 200 200 ------- ------- Total Current Assets 6,658 6,354 ------- ------- Property, plant and equipment 51,639 56,593 Less accumulated depreciation 24,796 25,742 ------- ------- Fixed Assets - Net 26,843 30,851 ------- ------- Other Assets Debt acquisition costs - net 1,298 1,174 Excess of cost over fair value of net assets acquired - net 4,311 5,016 Notes receivable 4,055 942 Other 1,025 1,628 ------- ------- Total Other Assets 10,689 8,760 ------- ------- Total Assets $44,190 $45,965 ======= =======
3
ALL STAR GAS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands, Except Per Share Amounts) March 31, 2002 (Unaudited) June 30, 2001 ---------- ------------- Liabilities and Stockholders' Equity (Deficit) - ---------------------------------------------- Current Liabilities Checks in process of collection $ 3,619 $ 1,243 Current maturities of long-term debt 69,747 14,493 Notes payable - banks 5,084 3,979 Accrued interest 1,997 1,339 Customer prepayments 2,392 10,208 Income taxes payable 1,703 3,705 Accounts payable and accrued expenses 3,986 3,489 Forward sales and futures contracts -- 200 ------- -------- Total Current Liabilities 88,528 38,656 Long-term debt 5,156 56,726 Deferred income taxes 5,922 5,738 Accrued self-insurance liability 280 529 ------- -------- Total Liabilities 99,886 101,649 ------- -------- 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 2,403 2,415 ------- -------- 32,218 32,230 Treasury Stock at Cost - 12,704,129 shares (87,914) (87,914) ------- -------- Total Stockholders' Equity (Deficit) (55,696) (55,684) ------- -------- Total Liabilities and Stockholders' Equity (Deficit) $44,190 $ 45,965 ======= ========
See Notes to Condensed Consolidated Financial Statements 4
ALL STAR GAS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2002 AND 2001 (Unaudited) (Dollars in Thousands, Except Per Share Amounts) Three Months Ended Nine Months Ended March 31 March 31 2002 2001 2002 2001 ---- ---- ---- ---- Operating Revenue $19,093 $23,055 $41,294 $ 50,276 Cost of Product Sold 10,149 17,405 23,132 35,720 ------- ------- ------- -------- Gross Profit 8,944 5,650 18,162 14,556 ------- ------- ------- -------- Operating Costs and Expenses General and administrative 4,892 4,395 13,173 11,835 Depreciation and amortization 828 1,033 2,662 3,096 Gain on sale of assets (1,894) (760) (1,969) (617) (Gain) loss on forward and futures contracts 2 (1,495) (42) 266 ------- ------- ------- -------- 3,828 3,173 13,824 14,580 ------- ------- ------- -------- Operating Income (Loss) 5,116 2,477 4,338 (24) ------- ------- ------- -------- Other Expense Interest expense (714) (1,237) (1,581) (5,001) Amortization of debt discount (938) (373) (2,776) (641) ------- ------- ------- -------- (1,652) (1,610) (4,357) (5,642) ------- ------- ------- -------- Income (Loss) Before Income Taxes 3,464 867 (19) (5,666) Provision (Credit) for Income Taxes 1,271 374 (7) (2,082) ------- ------- ------- -------- Income (Loss) Before Cumulative Effect of Change in Accounting Principle 2,193 493 (12) (3,584) Cumulative Effect of Change in Accounting Principle, Net of Income Taxes of $546 -- -- -- 940 ------- ------- ------- -------- Net Income (Loss) $ 2,193 $ 493 $ (12) $ (2,644) ======= ======= ======= ======== Basic and Diluted Income (Loss) Per Common Share Before Cumulative Effect of Change in Accounting Principle $ 1.38 $ .31 $ (.01) $ (2.26) Basic and Diluted Income Per Common Share on Cumulative Effect of Change in Accounting Principle -- -- -- .59 ------- ------- ------- -------- Basic and Diluted Income (Loss) Per Common Share $1.38 $.31 $ (.01) $ (1.67) ======= ======= ======= ========
See Notes to Condensed Consolidated Financial Statements. 5
ALL STAR GAS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED MARCH 31, 2002 AND 2001 (Unaudited) (Dollars in Thousands) 2002 2001 ---- ---- Cash Flows From Operating Activities Net income (loss) $ (12) $(2,644) Items not requiring (providing) cash Depreciation 2,077 2,370 Amortization 3,361 1,367 Gain on sale of assets (1,969) (617) Cumulative effect of change in accounting principle -- (940) (Gain) loss on forward and futures contracts (42) 266 Deferred income taxes 184 (555) Changes In: Trade receivables (1,359) (4,260) Inventories 867 1,262 Prepaid expense and other 323 740 Accounts payable and customer prepayments (6,055) (3,391) Accrued expenses and self-insurance (2,023) (1,459) ------- ------- Net cash used in operating activities (4,648) (7,861) ------- ------- Cash Flows From Investing Activities Purchase of property and equipment (2,810) (1,557) Acquisition of retail service centers (123) (110) Proceeds from sales of property and equipment 237 1,957 Disposal of retail service centers 3,179 929 Purchase of interest in limited liability company -- (261) ------- ------- Net cash provided by investing activities 483 958 ------- ------- Cash Flows From Financing Activities Increase in checks in process of collection 2,376 2,439 Advances from related parties 516 1,051 Proceeds on notes payable - banks 3,444 4,972 Principal payments on notes payable to banks (2,339) -- Proceeds on long-term debt obligations 3,242 250 Principal payments on other long-term debt (3,007) (1,327) ------- ------- Net cash provided by financing activities 4,232 7,385 ------- ------- INCREASE IN CASH 67 482 CASH, BEGINNING OF PERIOD 509 432 ------- ------- CASH, END OF PERIOD $ 576 $ 914 ======= =======
See Notes to Condensed Consolidated Financial Statements 6 ALL STAR GAS CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED MARCH 31, 2002 AND 2001 (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 38 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 March 31, 2002, and the consolidated results of its operations and cash flows for the periods ended March 31, 2002 and 2001. 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, 2001, 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 document has been omitted. The condensed consolidated balance sheet of the Company as of June 30, 2001 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, 2002 are not necessarily indicative of the results to be expected for the full year. The report of BKD, LLP 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, which have existed since June 30, 1994, and is in default with respect to its outstanding Senior Secured Notes due 2003 and its 9% Subordinated Debentures due 2007. The Company has recently been required to make additional cash deposits with various major propane suppliers to maintain current terms. Also, as a result of the Company's significant disposition of retail service centers during fiscal 2000, the Company 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") has placed liens on Company assets. The Company has entered into a workout plan with the IRS for payment of the tax obligation. The remaining balance of this liability as of March 31, 2002 is approximately $1.2 million. Subsequent to June 30, 2002, the Company breached the workout plan due to scheduled payments not being made, and the IRS has issued a notice of default. The total balance of income taxes payable as of March 31, 2002 including amounts relating to fiscal year 2002 taxable income is approximately $1.7 million. 7 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 involving additional debt and equity restructurings for mitigating these conditions during the coming year. 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 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 with other unrelated parties. The Company obtains excess coverage through 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 but could change materially in the near term. 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. (4) FUTURES AND FORWARD CONTRACTS 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 March 31, 2002, the Company had outstanding commitments to purchase approximately 1.2 million gallons of LP gas for approximately $556,000. 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 March 31, 2002 the Company had no open positions on commodity futures contracts. As of March 31, 2001 the Company's open positions on futures contracts consisted of 252,000 gallons and had a fair value of approximately $24,000. (5) INCOME (LOSS) PER COMMON SHARE Income (loss) per common share is computed by dividing the net income (loss) for the three and nine 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 March 31, 2002 and 2001 consisted of stock options and common stock purchase warrants which are anti-dilutive at those dates and were excluded from the computation of earnings per share. The weighted average number of common shares outstanding used in the computation of income (loss) per common share was 1,586,891 and 1,586,915 as of March 31, 2002 and 2001, respectively. 8 (6) DISPOSITIONS OF RETAIL SERVICE CENTERS In February 2002, the Company entered into two sale-leaseback transactions whereby the Company sold and leased back the land and buildings at 26 retail service centers and recognized a gain of approximately $2 million using the full accrual method. At June 30, 2001, the carrying value of the assets sold was approximately 4% of total assets. The resulting leases are for a term of 15 years and are being accounted for as operating leases with combined monthly payments of approximately $38,000. 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 nature of the transaction. (7) RELATED PARTY TRANSACTIONS In December 2001, the Company entered into a financing transaction whereby the assets of 3 retail service centers in Missouri were transferred to a related party for approximately $1 million. The nature of the transaction was such that it was not recorded as a sale but as a financing liability to the related party. During June 2002, the assets of the service centers were transferred back to the Company, subject to a security interest in favor of a third party lending institution. At March 31, 2002, the amount due to the related party is approximately $1 million with interest at 8.64% payable monthly and due on demand. (8) ADDITIONAL CASH FLOW INFORMATION (In Thousands)
Additional Cash Payment Information 2002 2001 ----------------------------------- ---- ---- Interest Paid $2,072 $370 Income Taxes Paid $2,112 $1,894 Noncash Investing and Financing Activities Mortgage obligations incurred on the acquisition of retail service centers $1,792 $591 Long-term obligation incurred for investment in Missouri Investment Partner I, LLC, a purchaser of Missouri low-income housing tax credits -- $870 Notes receivable from sale of retail service centers $3,931 $ -- Capital lease obligations incurred for equipment $364 $326
9 (9) SENIOR SECURED NOTES AND SUBORDINATED DEBENTURES On October 30, 2001, due to the nonpayment of interest, the Company defaulted with respect to the $53,063,600 principal balance of the 11% Senior Secured Notes due 2003 (the "Senior Notes"). The Company also has not made the interest payments due December 31, 2001 and March 31, 2002 on the Senior Notes. Due to the nonpayment of interest, the Company is in default with respect to the $9,729,000 principal balance of the 9% Subordinated Debentures due 2007 (the "Subordinated Debentures"). The Company is prohibited under the terms of the Subordinated Debentures from making any interest payments if such payment shall create a default in the payment of amounts due on any Senior indebtedness. 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 March 31, 2002. 10 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).
March 31 June 30 2002 2001 2001 2000 ---- ---- ---- ---- Total long-term debt (including current maturities) $ 79,987 $ 78,292 $ 75,198 $ 61,074 Working Capital (deficit) $(81,870) $(27,484) $(32,302) $(80,513) Current Ratio .08 .29 .16 .08
During the nine months ended March 31, 2002, Company debt increased due to the Company receiving $5.6 million of additional bank debt for working capital purposes, incurring $2.2 million in mortgage and lease obligations for the acquisition of retail service centers and equipment and $2.3 million of debt discount amortization. The increase in debt was partially offset by principal payments on the Company's bank debt, mortgage obligations and Senior Notes of $6.4 million. The changes in working capital and the resulting effects on the current ratio are due principally to the balance of the Senior Notes and the Subordinated Debentures and their classification as current at March 31, 2002. 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 product purchasing program and marketing programs to its customers. The balance of customer prepayments related to the program was $2.4 million as of March 31, 2002 compared to $1.9 million as of March 31, 2001. In February 2002, in order to fund working capital needs, the Company entered into two sale-leaseback transactions whereby the Company sold and leased back the land and buildings at 26 retail service centers. See the condensed consolidated financial statements for further discussion. On October 30, 2001, due to the nonpayment of interest, the Company defaulted with respect to the $53,063,600 principal balance of the 11% Senior Secured Notes due 2003 (the "Senior Notes"). The Company also has not made the interest payments due December 31, 2001 and March 31, 2002 on the Senior Notes. Due to the nonpayment of interest, the Company is in default with respect to the $9,729,000 principal balance of the 9% Subordinated Debentures due 2007 (the "Subordinated Debentures"). The Company is prohibited under the terms of the Subordinated Debentures from making any interest payments if such payment shall create a default in the payment of amounts due on any Senior indebtedness. 11 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 is included in current liabilities at March 31, 2002. The holders of the Senior Notes and the Subordinated Debentures have not accelerated the balance due as of May 13, 2002. In the event that the Company continues to fail to make any interest payment otherwise payable pursuant to the Senior Notes and the 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. If the holders of the Senior Notes or the 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. Also, as a result of the Company's significant disposition of retail service centers during fiscal 2000, the Company 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") has placed liens on Company assets. The Company has entered into a workout plan with the IRS for payment of the tax obligation. The remaining balance of this liability as of March 31, 2002 is approximately $1.2 million. The total balance of income taxes payable as of March 31, 2002 including amounts relating to fiscal year 2002 taxable income is approximately $1.7 million. Results of Operations Due to the seasonal nature of its business, the Company usually realizes an operating loss the first quarter and 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. The following table presents additional operating data for the periods ended March 31, 2002 and 2001 and the year ended June 30, 2001 (in thousands).
Three Months Ended Nine Months Ended Year Ended 3/31/02 3/31/01 3/31/02 3/31/01 6/30/01 ------- ------- ------- ------- ------- Revenues: Propane $18,135 $22,317 $37,897 $46,933 $52,920 Gas systems, appliances and other fuels 422 273 1,592 1,281 1,787 Other 536 465 1,805 2,062 2,345 Gross Profit: Propane 8,285 5,123 15,910 12,074 13,941 Gas systems, appliances and other fuels 144 86 558 454 632 Other 515 441 1,694 2,028 2,345
12 Volumes. Retail volumes of propane sold decreased 7% and 9% in the three and nine months ended March 31, 2002, respectively, compared to the same periods ended March 31, 2001 due to the warmer winter weather experienced and the sales of retail service centers. Comparing stores that were operated by the Company during both 2002 and 2001, volumes increased 8% in the three months ended March 31, 2002 compared to the same period in 2001 and decreased 1% in the nine months ended March 31, 2002 compared to the same period in 2001. During the nine months ended March 31, 2002 and 2001, the Company completed forward purchase and sale contracts which resulted in buying and selling 3.2 million and 42.5 million gallons, respectively, of propane to other suppliers during these nine month periods. Revenues. Operating revenues decreased in the three and nine months ended March 31, 2002 compared to the same period in 2001. In addition to the decrease in retail volumes discussed above, retail sales prices per gallon decreased 13%, in the nine months ended March 31, 2002 compared to 2001. Other sales, including gas systems, appliances and other fuels, have shown a slight increase as indicated in the table above. Cost of product and gross profit. Cost of product sold decreased in the three and nine month periods compared to the same periods in 2001 due to the decrease in volumes discussed above. There was also a 31% decrease in average costs per gallon sold for the nine months ended March 31, 2002 compared to the same period in 2001. The Company's gross profit increased in the three and nine months ended March 31, 2002 compared to the same periods in 2001. This is primarily due to the increase in margins per gallon experienced by the Company. General and administrative expense. General and administrative expense for the three and nine months ended March 31, 2002 increased $497,000 and $1.3 million, respectively, over the same periods in 2001. Salaries and commissions increased $189,000 and $494,000, respectively, for the three and nine months ended March 31, 2002 compared to the same periods in 2001 due to increased expenses at the retail service centers. Insurance and liability expense increased $473,000 and $809,000, respectively, for the three and nine months ended March 31, 2002 compared to the same periods in 2001 due to the settling of several claims, reaching the stop-loss limit on one specific claim and the resulting reduction in the liability for expected losses during the nine months ended March 31, 2001. There were no other significant changes occurring in any individual expense category. Depreciation and amortization. Depreciation and amortization expense for the three and nine months ended March 31, 2002 decreased over the same periods in 2001 mainly due to the divestiture of retail service centers during fiscal year 2001 and the nine months ended March 31, 2002. Gain/loss on forward and futures contracts. Gain on forward and futures contracts for the three and nine months ended March 31, 2002 decreased $1.5 million and increased $408,000, respectively. Gains or losses are recognized as a result of the increase or decrease in fair value of the Company's derivative instruments during the three and nine months ended March 31, 2002. Interest expense. Interest expense for the three and nine months ended March 31, 2002 decreased $523,000 and $3.4 million, respectively, primarily due to interest on the Senior Notes being a direct principal reduction due to the accounting treatment of the Senior Notes upon restructuring in February 2001. 13 Impact of Recent Accounting Pronouncements The Financial Accounting Standard Board (FASB) recently issued Statement of Financial Accounting Standards (SFAS) 141, Business Combinations. This Statement addresses financial accounting and reporting for business combinations. It eliminates the pooling-of-interests method and requires that all business combinations be accounted for using the purchase method. The provisions of this Statement apply to all business combinations initiated after June 30, 2001. The FASB also recently issued SFAS 142, Goodwill and Other Intangible Assets. This Statement establishes accounting and reporting standards for acquired goodwill and other intangible assets. The Statement addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. It also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Under the new standard, amortization of existing goodwill ceases upon adoption of SFAS 142 and is replaced by periodic evaluation for impairment using specified methodology. SFAS 142 is effective for fiscal years beginning after December 15, 2001. Early adoption is permitted for entities with fiscal years beginning after March 15, 2001. The Company will apply SFAS 142 beginning with the first quarter of its fiscal year ending June 30, 2003, on a prospective basis. Adoption of the new standard will have no initial effect on the Company's financial statements. 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 None (b) Reports on Form 8-K None Reviewed by Independent Certified Public Accountants The March 31, 2002 financial statements included in this filing on Form 10-Q/A have been reviewed by BKD, LLP, Independent Certified Public Accountants, in accordance with established professional standards and procedures for such a review. The report of BKD, LLP commenting upon their review is appended hereto. The report of BKD, LLP dated April 26, 2002 included in the Company's filing on Form 10-Q for the three and nine months ended March 31, 2002 has been withdrawn and should no longer be relied upon. 14 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 By: /s/ Paul S. Lindsey, Jr. --------------------------- Paul S. Lindsey, Jr. President and CEO DATE: October 10, 2002 15 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 March 31, 2002, and the related condensed consolidated statements of operations for the three- and nine-month periods ended March 31, 2002 and 2001, and cash flows for the nine-month periods ended March 31, 2002 and 2001. 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 accompanying condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of All Star Gas Corporation as of June 30, 2001, 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 10, 2001, 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, 2001, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ BKD, LLP Springfield, Missouri October 4, 2002 16 -----END PRIVACY-ENHANCED MESSAGE-----