ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS Information contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements. Such statements use forward-looking words such as "believe," "plan," "anticipate," "continue," "estimate," "expect," "may," "will," or other similar words. These statements discuss plans, strategies, events or developments that we expect or anticipate will or may occur in the future.
A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, we caution you that actual results almost always vary from assumed facts or bases, and the differences between actual results and assumed facts or bases can be material, depending on the circumstances. When considering forward-looking statements, you should keep in mind the following important factors which could affect our future results and could cause those results to differ materially from those expressed in our forward-looking statements: (1) adverse weather conditions resulting in reduced demand; (2) cost volatility and availability of propane, and the capacity to transport propane to our market areas; (3) the availability of, and our ability to consummate, acquisition or combination opportunities; (4) successful integration and future performance of acquired assets or businesses; (5) changes in laws and regulations, including safety, tax and accounting matters; (6) competitive pressures from the same and alternative energy sources; (7) failure to acquire new customers thereby reducing or limiting any increase in revenues; (8) liability for environmental claims;
(9) increased customer conservation measures due to high energy prices and improvements in energy efficiency and technology resulting in reduced demand;
(10) adverse labor relations; (11) large customer, counter-party or supplier defaults; (12) liability in excess of insurance coverage for personal injury and property damage arising from explosions and other catastrophic events, including acts of terrorism, resulting from operating hazards and risks incidental to transporting, storing and distributing propane, butane and ammonia;
(13) political, regulatory and economic conditions in the United States and foreign countries; (14) capital market conditions, including, reduced access to capital markets and interest rate fluctuations; (15) changes in commodity market prices resulting in significantly higher cash collateral requirements; and
(16) the impact of pending and future legal proceedings. These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results. We undertake no obligation to update publicly any forward-looking statement whether as a result of new information or future events except as required by the federal securities laws.

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AMERIGAS PARTNERS, L.P. ANALYSIS OF RESULTS OF OPERATIONS The following analyses compare the Partnership's results of operations for
(1) the three months ended March 31, 2009 ("2009 three-month period") with the three months ended March 31, 2008 ("2008 three-month period") and (2) the six months ended March 31, 2009 ("2009 six-month period") with the six months ended March 31, 2008 ("2008 six-month period"). Executive Overview
Our net income for the 2009 three-month period increased to $147.8 million from $133.0 million in the prior-year three-month period primarily from higher average retail propane unit margins. Temperatures based upon heating degree days were approximately 2.3% warmer than normal compared with temperatures that were 1.0% warmer than normal in the prior-year period. Wholesale propane commodity prices generally stabilized during the three-months ended March 31, 2009 following a more than 50% decline in propane commodity prices during the first quarter of Fiscal 2009. As a result of this decline, average wholesale propane product costs in the three-months ended March 31, 2009 were more than 50% lower than such costs a year ago. Retail volumes sold in the 2009 three-month period were lower than in the prior-year three-month period reflecting the effects of the significant deterioration in general economic activity, customer conservation and the effects of the warmer weather. Notwithstanding the lower retail sales, total margin was higher as a result of greater average unit margins resulting from the significantly lower and less volatile propane product costs. We expect unit margins to return to more normal levels over the remainder of Fiscal 2009.
Our net income for the 2009 six-month period increased to $271.8 million from $187.3 million in the prior-year six-month period. The 2009 six-month period net income includes a $39.5 million gain on the sale of our California storage facility in November 2008. As previously mentioned, wholesale propane commodity prices declined more than 50% during the first half of the 2009 six-month period and generally remained at these lower levels during the second half of the period. Average wholesale propane prices in the six-months ended March 31, 2009 were approximately 50% lower than such prices during the prior-year six-month period. Notwithstanding the benefits from the acquisition of the assets of Penn Fuel Propane, LLC (Penn Fuel Acquisition") and 2009 six-month period temperatures that were slightly colder than last year, our retail volumes were lower reflecting the effects of the significant deterioration in general economic activity and customer conservation. Operating expenses were slightly higher than the prior year generally reflecting greater provisions for bad debts, incremental expenses from the Penn Fuel Acquisition, and higher payroll and benefits expense.

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AMERIGAS PARTNERS, L.P. 2009 three-month period compared with 2008 three-month period Increase Three Months Ended March 31, 2009 2008 (Decrease) (millions of dollars) Gallons sold (millions): Retail 342.9 368.5 (25.6 ) (6.9 )% Wholesale 40.8 40.1 0.7 1.7 % 383.7 408.6 (24.9 ) (6.1 )% Revenues: Retail propane $ 740.6 $ 895.5 $ (154.9 ) (17.3 )% Wholesale propane 39.5 64.8 (25.3 ) (39.0 )% Other 43.3 46.4 (3.1 ) (6.7 )% $ 823.4 $ 1,006.7 $ (183.3 ) (18.2 )% Total margin (a) $ 349.5 $ 330.7 $ 18.8 5.7 % EBITDA (b) $ 187.3 $ 171.8 $ 15.5 9.0 % Operating income $ 168.1 $ 153.3 $ 14.8 9.7 % Net income $ 147.8 $ 133.0 $ 14.8 11.1 % Heating degree days - % warmer than normal (c) 2.3 % 1.0 % - -

(a) Total margin represents total revenues less cost of sales - propane and cost of sales
- other.

(b) Earnings before interest expense, income taxes, depreciation and amortization
("EBITDA") should not be considered as an alternative to net income (as an indicator of operating performance) and is not a measure of performance or financial condition under accounting principles generally accepted in the United States of America ("GAAP"). Management believes EBITDA is a meaningful non-GAAP financial measure used by investors to (1) compare the Partnership's operating performance with other companies within the propane industry and
(2) assess its ability to meet loan covenants. The Partnership's definition of EBITDA may be different from that used by other companies. Management uses EBITDA to compare year-over-year profitability of the business without regard to capital structure as well as to compare the relative performance of the Partnership to that of other master limited partnerships without regard to their financing methods, capital structure, income taxes or historical cost basis. In view of the omission of interest, income taxes, depreciation and amortization from EBITDA, management also assesses the profitability of the business by comparing net income for the relevant years. Management also uses EBITDA to assess the Partnership's profitability because its parent, UGI Corporation, uses the Partnership's
EBITDA to assess the profitability of the Partnership.
UGI
Corporation
discloses the
Partnership's
EBITDA as the
profitability
measure to
comply with
the
requirement in
Statement of
Financial
Accounting
Standards
No. 131,
"Disclosures
about Segments
of an
Enterprise and
Related
Information,"
to provide
profitability
information
about its
domestic
propane
segment.

The following table includes reconciliations of net income to EBITDA for the periods presented:

Three Months Ended March 31, 2009 2008 Net income $ 147.8 $ 133.0 Income tax expense 0.8 0.1 Interest expense 17.8 18.7 Depreciation 19.6 18.8 Amortization 1.3 1.2 EBITDA $ 187.3 $ 171.8

(c) Deviation from average heating degree days for the 30-year period 1971-2000 based upon national weather statistics provided by the National Oceanic and Atmospheric Administration ("NOAA") for 335 airports in the United States, excluding Alaska.

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AMERIGAS PARTNERS, L.P. Based upon heating degree-day data, average temperatures in our service territories were 2.3% warmer than normal during the 2009 three-month period compared with temperatures in the prior-year period that were 1.0% warmer than normal. Notwithstanding the benefit of the October 1, 2008 Penn Fuel Acquisition, retail gallons sold were less than the prior-year period reflecting, among other things, the adverse effects of the significant deterioration in general economic activity which has occurred over the last year, continued customer conservation and the slightly warmer weather. Retail propane revenues declined $154.9 million during the 2009 three-month period reflecting a $92.7 million decrease due to lower average selling prices and a $62.2 million decrease as a result of the lower retail volumes sold. Wholesale propane revenues declined $25.3 million reflecting the decrease in year-over-year wholesale selling prices. Wholesale propane commodity prices at Mont Belvieu, Texas, one of the major supply points in the U.S., generally stabilized during the three months ended March 31, 2009 following a more than 50% decline in prices during the first quarter of Fiscal 2009. Wholesale propane commodity prices at Mont Belvieu during the three months ended March 31, 2009 were more than 50% lower than such prices a year ago. Total cost of sales decreased $202.1 million to $473.9 million principally reflecting the effects of the lower propane product costs.
Total margin was $18.8 million greater in the 2009 three-month period reflecting the beneficial impact of higher than normal retail unit margins resulting from the previously mentioned significantly lower and less volatile propane product costs. We expect unit margins to return to more normal levels over the remainder of Fiscal 2009.
EBITDA during the 2009 three-month period was $187.3 million compared with EBITDA of $171.8 million in the 2008 three-month period. The greater 2009 three-month period EBITDA reflects the previously mentioned $18.8 million increase in total margin partially offset by lower other income and slightly higher operating and administrative expenses. The higher operating and administrative expenses reflect greater compensation and benefits expenses, including incremental expenses resulting from the Penn Fuel Acquisition, offset in large part by lower vehicle fuel expense.
Operating income increased $14.8 million reflecting the $15.5 million increase in EBITDA and slightly higher depreciation and amortization expense associated with acquisitions and plant and equipment expenditures made since the prior year. Net income increased $14.8 million during the 2009 three-month period largely reflecting the increase in operating income.

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AMERIGAS PARTNERS, L.P. 2009 six-month period compared with 2008 six-month period Increase Six Months Ended March 31, 2009 2008 (Decrease) (millions of dollars) Gallons sold (millions): Retail 621.1 647.6 (26.5 ) (4.1 )% Wholesale 82.2 72.4 9.8 13.5 % 703.3 720.0 (16.7 ) (2.3 )% Revenues: Retail propane $ 1,375.6 $ 1,543.2 $ (167.6 ) (10.9 )% Wholesale propane 83.2 116.8 (33.6 ) (28.8 )% Other 91.7 94.8 (3.1 ) (3.3 )% $ 1,550.5 $ 1,754.8 $ (204.3 ) (11.6 )% Total margin (a) $ 631.0 $ 572.5 $ 58.5 10.2 % EBITDA (b) $ 351.4 $ 264.8 $ 86.6 32.7 % Operating income $ 312.9 $ 227.2 $ 85.7 37.7 % Net income $ 271.8 $ 187.3 $ 84.5 45.1 % Heating degree days - % warmer than normal (c) 1.7 % 3.7 % - -

(a) Total margin represents total revenues less cost of sales - propane and cost of sales
- other.

(b) Earnings before interest expense, income taxes, depreciation and amortization
("EBITDA") should not be considered as an alternative to net income (as an indicator of operating performance) and is not a measure of performance or financial condition under accounting principles generally accepted in the United States of America ("GAAP"). Management believes EBITDA is a meaningful non-GAAP financial measure used by investors to (1) compare the Partnership's operating performance with other companies within the propane industry and
(2) assess its ability to meet loan covenants. The Partnership's definition of EBITDA may be different from that used by other companies. Management uses EBITDA to compare year-over-year profitability of the business without regard to capital structure as well as to compare the relative performance of the Partnership to that of other master limited partnerships without regard to their financing methods, capital structure, income taxes or historical cost basis. In view of the omission of interest, income taxes, depreciation and amortization from EBITDA, management also assesses the profitability of the business by comparing net income for the relevant years. Management also uses EBITDA to assess the Partnership's profitability because its parent, UGI Corporation, uses the Partnership's
EBITDA to assess the profitability of the Partnership.
UGI
Corporation
discloses the
Partnership's
EBITDA as the
profitability
measure to
comply with
the
requirement in
Statement of
Financial
Accounting
Standards
No. 131,
"Disclosures
about Segments
of an
Enterprise and
Related
Information,"
to provide
profitability
information
about its
domestic
propane
segment.

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AMERIGAS PARTNERS, L.P. The following table includes reconciliations of net income to EBITDA for the periods presented: Six Months Ended March 31, 2009 2008 Net income $ 271.8 $ 187.3 Income tax expense 1.4 0.8 Interest expense 36.5 36.9 Depreciation 39.0 37.5 Amortization 2.7 2.3 EBITDA $ 351.4 $ 264.8

(c) Deviation from average heating degree days for the 30-year period 1971-2000 based upon national weather statistics provided by the National Oceanic and Atmospheric Administration ("NOAA") for 335 airports in the United States, excluding Alaska.

Based upon heating degree-day data, average temperatures in our service territories were 1.7% warmer than normal during the 2009 six-month period compared with temperatures in the prior-year period that were 3.7% warmer than normal. Notwithstanding the colder 2009 six-month period weather and the benefit of the Penn Fuel Acquisition on October 1, 2008, retail gallons sold were lower than the prior-year period reflecting, among other things, the adverse effects of the significant deterioration in general economic activity which has occurred over the last year and continued customer conservation.
Retail propane revenues declined $167.6 million during the 2009 six-month period reflecting a $104.5 million decrease due to lower average selling prices and a $63.1 million decrease as a result of the lower retail volumes sold. Wholesale propane revenues declined $33.6 million reflecting a $49.6 million decrease from lower wholesale selling prices partially offset by a $16.0 million increase from higher wholesale volumes sold. From the beginning to the end of the first quarter of Fiscal 2009, wholesale propane commodity prices at Mont Belvieu, Texas declined more than 50% and generally remained at these lower price levels during the second half of the 2009 six-month period. Average wholesale propane prices in the 2009 six-month period were approximately 50% below average prices in the previous-year period. Total cost of sales decreased $262.8 million to $919.5 million principally reflecting the effects of the lower propane product costs.
Total margin was $58.5 million greater in the 2009 six-month period reflecting the beneficial impact of higher than normal retail unit margins resulting from a rapid and sharp decline in propane product costs during the first half of the 2009 six-month period. We expect unit margins to return to more normal levels over the remainder of Fiscal 2009.
EBITDA during the 2009 six-month period was $351.4 million compared with EBITDA of $264.8 million in the 2008 six-month period. The 2009 six-month period EBITDA includes a $39.9 million pre-tax gain from the sale of the Partnership's California LPG storage facility. In addition to the gain from the sale of the California LPG storage facility, the 2009 six-month period EBITDA reflects the previously mentioned $58.5 million increase in total margin partially offset by slightly higher operating and administrative expenses and lower other income. The slightly higher operating and administrative expenses reflect in large part higher provisions for bad debts, greater general insurance expenses and incremental expenses from the Penn Fuel Acquisition partially offset by, among other things, lower vehicle fuel expenses.
Operating income increased $85.7 million reflecting the $86.6 million increase in EBITDA and slightly higher depreciation and amortization expense associated with acquisitions and plant and equipment expenditures made since the prior year. Net income increased $84.5 million during the 2009 six-month period reflecting the increase in operating income.

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AMERIGAS PARTNERS, L.P. FINANCIAL CONDITION AND LIQUIDITY Financial Condition
The Partnership's debt outstanding at March 31, 2009 totaled $862.7 million (including current maturities of long-term debt of $1.1 million) compared with total debt outstanding of $933.4 million (including current maturities of long-term debt of $71.5 million) at September 30, 2008. Total debt outstanding at March 31, 2009 includes long-term debt comprising $779.8 million of AmeriGas Partners' Senior Notes, $80.0 million of AmeriGas OLP First Mortgage Notes and $2.9 million of other long-term debt. At March 31, 2009, there were no amounts borrowed under AmeriGas OLP's credit agreements (as further described below). In March 2009, AmeriGas OLP repaid $70 million of its First Mortgage Notes with cash generated from operations.
AmeriGas OLP's short-term borrowing needs are seasonal and are typically greatest during the fall and winter heating-season months due to the need to fund higher levels of working capital. In addition, a rapid and precipitous decline in commodity propane prices in late Fiscal 2008 which continued into Fiscal 2009 resulted in greater cash needed by the Partnership to fund counterparty collateral requirements during the six months ended March 31, 2009. These collateral requirements are associated with derivative financial instruments used by the Partnership to manage market price risk associated with fixed sales price commitments to customers principally during the heating-season months of October through March. At March 31, 2009, the Partnership had outstanding $11.9 million of collateral deposits associated with these derivative financial instruments.
In order to meet its short-term cash needs, AmeriGas OLP has a $200 million credit agreement ("Credit Agreement") which expires on October 15, 2011. In addition, on November 14, 2008, AmeriGas OLP entered into a $50 million revolving credit agreement with two major banks ("Supplemental Credit Agreement") which was terminated on April 17, 2009 in conjunction with the signing of a new $75 million revolving credit facility described below. AmeriGas OLP's Credit Agreement consists of (1) a $125 million Revolving Credit Facility and (2) a $75 million Acquisition Facility. The Revolving Credit Facility may be used for working capital and general purposes of AmeriGas OLP. The Acquisition Facility provides AmeriGas OLP with the ability to borrow up to $75 million to finance the purchase of propane businesses or propane business assets or, to the extent it is not so used, for working capital and general purposes, subject to restrictions in the AmeriGas OLP First Mortgage Notes. The Supplemental Credit Agreement permitted AmeriGas OLP to borrow up to $50 million for working capital and general purposes.

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AMERIGAS PARTNERS, L.P. On April 17, 2009, AmeriGas OLP voluntarily terminated its Supplemental Credit Agreement and entered into a new $75 million unsecured revolving credit facility ("2009 Supplemental Credit Agreement") with three major banks. The New Supplemental Credit Agreement expires on July 1, 2010 and permits AmeriGas OLP to borrow up to $75 million for working capital and general purposes. Except for more restrictive covenants regarding the incurrence of additional indebtedness by AmeriGas OLP, the 2009 Supplemental Credit Agreement has restrictive covenants substantially similar to AmeriGas OLP's Credit Agreement. There were no borrowings outstanding under the credit agreements at March 31, 2009. Issued and outstanding letters of credit under the Revolving Credit Facility, which reduce the amount available for borrowings, totaled $77.5 million at March 31, 2009. The average daily and peak bank loan borrowings outstanding under the credit agreements during the 2009 six-month period were $83.8 million and $184.5 million, respectively. The average daily and peak bank loan borrowings outstanding under the Credit Agreement during the 2008 six-month period were $50.1 million and $101 million, respectively. At March 31, 2009, the Partnership's available borrowing capacity under the credit agreements was $172.5 million.
In order to reduce cash collateral payment obligations and to provide the Partnership with greater borrowing flexibility and a more cost effective use of its credit agreements, UGI agreed to provide guarantees of up to $50 million to AmeriGas OLP's propane suppliers through September 30, 2009. At March 31, 2009, the Partnership had $25 million of unused UGI guarantees.
Based on existing cash balances, cash expected to be generated from operations, and borrowings available under AmeriGas OLP's Credit Agreement and the 2009 Supplemental Credit Agreement, the Partnership's management believes that the Partnership will be able to meet its anticipated contractual commitments and projected cash needs during Fiscal 2009.
On April 28, 2009, the General Partner's Board of Directors approved a quarterly distribution of $0.67 per Common Unit equal to an annual rate of $2.68 per Common Unit. The new quarterly rate is effective with the distribution payable on May 18, 2009 to unitholders of record on May 8, 2009. This distribution reflects an increase of approximately 5% from the previous quarter's regular quarterly distribution rate of $0.64 per Common Unit. During the six months ended March 31, 2009, the Partnership declared and paid quarterly distributions on all limited partner units at a rate of $0.64 per Common Unit for each of the quarters ended December 31, 2008 and September 30, 2008. The ability of the . . .