1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-13692
AMERIGAS PARTNERS, L.P.
AMERIGAS FINANCE CORP.
(Exact name of registrants as specified in their charters)
Delaware 23-2787918
Delaware 23-2800532
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
460 North Gulph Road, King of Prussia, PA
(Address of principal executive offices)
19406
(Zip Code)
(610) 337-7000
(Registrants' 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 ___
At July 31, 1996, the registrants had units and shares of common stock
outstanding as follows:
AmeriGas Partners, L.P. - 21,949,272 Common Units
19,782,146 Subordinated Units
AmeriGas Finance Corp. - 100 shares
2
AMERIGAS PARTNERS, L.P.
TABLE OF CONTENTS
PAGES
-----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
AmeriGas Partners, L.P.
Condensed Consolidated Balance Sheets as of June 30, 1996,
September 30, 1995 and June 30, 1995 2
Condensed Consolidated Statements of Operations for the three and nine
months ended June 30, 1996 and the period April 19, 1995 to
June 30, 1995 3
Condensed Consolidated Statement of Cash Flows for the nine months
ended June 30, 1996 and the period April 19, 1995 to June 30, 1995 4
Condensed Consolidated Statement of Partners' Capital for the
nine months ended June 30, 1996 5
Notes to Condensed Consolidated Financial Statements 6 - 11
AmeriGas Finance Corp.
Balance Sheets as of June 30, 1996 and September 30, 1995 13
Note to Balance Sheets 14
AmeriGas Propane, Inc./AmeriGas Propane-2, Inc. (Predecessor)
Condensed Combined Statements of Income for the periods March 24, 1995
to April 19, 1995 and September 24, 1994 to April 19, 1995 16
Condensed Combined Statement of Cash Flows for the period
September 24, 1994 to April 19, 1995 17
Notes to Condensed Combined Financial Statements 18 - 19
Petrolane Incorporated and Subsidiaries (Predecessor)
Condensed Consolidated Statements of Operations for the periods
March 24, 1995 to April 19, 1995 and September 24, 1994 to
April 19, 1995 21
Condensed Consolidated Statement of Cash Flows for the period
September 24, 1994 to April 19, 1995 22
Notes to Condensed Consolidated Financial Statements 23 - 24
-i-
3
AMERIGAS PARTNERS, L.P.
TABLE OF CONTENTS (CONTINUED)
PAGES
-----
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 25 - 31
PART II OTHER INFORMATION
Item 1. Legal Proceedings 32
Item 5. Other Information 32
Item 6. Exhibits and Reports on Form 8-K 32
Signatures 34
-ii-
4
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
for the three and nine months ended
June 30, 1996 and the period
April 19, 1995 to June 30, 1995
-1-
5
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
June 30, September 30, June 30,
1996 1995 1995
--------- --------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 24,370 $ 39,567 $ 61,157
Short-term investments - 9,000 31,000
Accounts receivable (less allowances for doubtful accounts
of $7,000, $4,647 and $6,351, respectively) 78,097 62,206 55,449
Inventories 65,257 78,996 57,684
Prepayments and other current assets 5,374 10,323 6,354
---------- ---------- -----------
Total current assets 173,098 200,092 211,644
Property, plant and equipment (less accumulated depreciation and
amortization of $130,706, $105,051 and $96,410, respectively) 449,487 453,100 459,815
Intangible assets (less accumulated amortization of $92,737,
$74,230 and $68,035, respectively) 687,603 740,683 758,171
Other assets 42,827 41,434 38,692
---------- ---------- -----------
Total assets $1,353,015 $1,435,309 $ 1,468,322
========== ========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current maturities of long-term debt $ 5,260 $ 4,675 $ 5,772
Accounts payable - trade 27,204 35,965 28,744
Accounts payable - related parties 9,123 5,165 12,223
Other current liabilities 57,761 85,794 93,542
---------- ---------- -----------
Total current liabilities 99,348 131,599 140,281
Long-term debt 664,038 653,051 652,576
Other noncurrent liabilities 81,740 82,996 63,687
Minority interest 6,129 6,704 7,175
Partners' capital 501,760 560,959 604,603
---------- ---------- -----------
Total liabilities and partners' capital $1,353,015 $1,435,309 $ 1,468,322
========== ========== ===========
The accompanying notes are an integral part of these financial statements.
-2-
6
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Thousands of dollars, except per unit)
Three Months Nine Months April 19,
Ended Ended 1995 to
June 30, June 30, June 30,
1996 1996 1995
------------ ----------- ----------
Revenues:
Propane $158,268 $ 767,315 $ 99,740
Other 17,284 68,801 13,849
-------- --------- --------
175,552 836,116 113,589
-------- --------- --------
Costs and expenses:
Cost of sales-propane 88,267 434,581 51,238
Cost of sales-other 7,948 33,675 7,568
Operating and administrative
expenses 73,794 235,209 52,993
Depreciation and amortization 15,210 46,135 11,426
Miscellaneous (income), net (2,738) (7,227) (1,185)
-------- --------- --------
182,481 742,373 122,040
-------- --------- --------
Operating income (loss) (6,929) 93,743 (8,451)
Interest expense (15,743) (46,941) (12,060)
-------- --------- --------
Income (loss) before income taxes (22,672) 46,802 (20,511)
Income tax (expense) benefit 327 332 (296)
Minority interest 199 (555) 190
-------- --------- --------
Net income (loss) $(22,146) $ 46,579 $(20,617)
======== ========= ========
General partner's interest in net
income (loss) $ (221) $ 466 $ (206)
======== ========= ========
Limited partners' interest in net
income (loss) $(21,925) $ 46,113 $(20,411)
======== ========= ========
Income (loss) per limited partner
unit $ (.53) $ 1.11 $ (.49)
======== ========= ========
Average limited partner units
outstanding (thousands) 41,731 41,729 41,714
======== ========= ========
The accompanying notes are an integral part of these financial statements.
-3-
7
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(Thousands of dollars)
Nine Months April 19,
Ended 1995 to
June 30, June 30,
1996 1995
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 46,579 $ (20,617)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 46,135 11,426
Amortization of debt premium (1,869) (390)
Other, net 2,151 75
--------- --------
92,996 (9,506)
Net change in:
Accounts receivable (19,023) 20,666
Inventories 14,239 (2,828)
Accounts payable (408) (2,326)
Other current assets and liabilities (24,199) 9,549
--------- --------
Net cash provided by operating activities 63,605 15,555
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (18,050) (3,422)
Proceeds from disposals of property, plant and equipment 3,941 251
(Increase) decrease in short-term investments 9,000 (31,000)
Acquisitions of businesses, net of cash acquired (2,153) (2,332)
--------- --------
Net cash used by investing activities (7,262) (36,503)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (69,544) -
Minority interest activity (762) -
Issuance of long-term debt 14,008 -
Repayment of long-term debt (10,492) (468)
Capital contribution from General Partner 8 -
--------- --------
Net cash used by financing activities (66,782) (468)
--------- --------
PARTNERSHIP FORMATION TRANSACTIONS:
Net proceeds from issuance of common units - 349,751
Capital contribution from General Partner - 872
Issuance of long-term debt - 208,454
Payment to General Partner for purchase of Petrolane
Class B shares - (109,609)
Cash transfers from predecessor companies - 56,414
Repayment of long-term debt and related interest - (417,057)
Fees and expenses (4,758) (6,252)
--------- --------
Net cash provided (used) by partnership
formation transactions (4,758) 82,573
--------- --------
Cash and cash equivalents increase (decrease) $ (15,197) $ 61,157
========= ========
CASH AND CASH EQUIVALENTS:
End of period $ 24,370 $ 61,157
Beginning of period 39,567 -
--------- --------
Increase (decrease) $ (15,197) $ 61,157
========= ========
The accompanying notes are an integral part of these financial statements.
-4-
8
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(unaudited)
(Thousands, except unit data)
Number of units Total
------------------------ General partners'
Common Subordinated Common Subordinated partner capital
------- ------------ ------ ------------ ------- -------
BALANCE SEPTEMBER 30, 1995 21,932,146 19,782,146 $291,988 $263,362 $5,609 $560,959
Issuance of Common Units in
connection with acquisition 17,126 413 4 417
Adjustments to net assets
contributed (19,084) (17,200) (367) (36,651)
Net income 24,254 21,859 466 46,579
Distributions (36,212) (32,637) (695) (69,544)
---------- ---------- -------- -------- ------ --------
BALANCE JUNE 30, 1996 21,949,272 19,782,146 $261,359 $235,384 $5,017 $501,760
========== ========== ======== ======== ====== ========
The accompanying notes are an integral part of these financial statements.
-5-
9
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Thousands of dollars, except per unit)
1. PARTNERSHIP ORGANIZATION AND FORMATION
AmeriGas Partners, L.P. (AmeriGas Partners) was formed on November 2,
1994 as a Delaware limited partnership. AmeriGas Partners and its
subsidiary AmeriGas Propane, L.P., a Delaware limited partnership (the
"Operating Partnership"), were formed to acquire and operate the
propane businesses and assets of AmeriGas Propane, Inc., a Delaware
corporation, and AmeriGas Propane-2, Inc. (collectively, "AmeriGas
Propane"), wholly owned subsidiaries of AmeriGas, Inc. (AmeriGas), and
Petrolane Incorporated (Petrolane). AmeriGas Partners and the
Operating Partnership commenced operations effective April 19, 1995.
AmeriGas Propane and Petrolane are collectively referred to herein as
the Predecessor Companies. The Operating Partnership is, and the
Predecessor Companies were, engaged in the distribution of propane and
related equipment and supplies. AmeriGas Propane, Inc. (the "General
Partner"), a Pennsylvania corporation, serves as the general partner
of AmeriGas Partners and the Operating Partnership. The General
Partner holds a 1% general partner interest in AmeriGas Partners and a
1.0101% general partner interest in the Operating Partnership. In
addition, the General Partner and its wholly owned subsidiaries own an
effective 56.7% limited partner interest in the Operating Partnership.
This limited partner interest is evidenced by common units (Common
Units) and subordinated units (Subordinated Units) representing
limited partner interests in AmeriGas Partners. AmeriGas Partners and
the Operating Partnership have no employees. The General Partner
conducts, directs and manages all activities of AmeriGas Partners and
the Operating Partnership and is reimbursed on a monthly basis for all
direct and indirect expenses it incurs on their behalf.
The consolidated financial statements include the accounts of AmeriGas
Partners, the Operating Partnership and its corporate subsidiaries,
collectively referred to herein as the Partnership. The General
Partner's 1.0101% interest in the Operating Partnership is accounted
for in the condensed consolidated financial statements as a minority
interest. The accompanying condensed consolidated financial
statements are unaudited and have been prepared in accordance with the
rules and regulations of the U.S. Securities and Exchange Commission.
They include all adjustments which the Partnership considers necessary
for a fair statement of the results for the interim periods presented.
Such adjustments consisted only of normal recurring items unless
otherwise disclosed. These financial statements should be read in
conjunction with the financial statements and notes thereto included
in the Partnership's Report on Form 10-K for the year ended September
30, 1995. Due to the seasonal nature of the Partnership's propane
business, the results of operations for interim periods are not
necessarily indicative of the results to be expected for a full year.
The Partnership's fiscal periods end on the last day of the month.
Accordingly, the accompanying condensed consolidated results of
operations of the Partnership are for the periods April 1, 1996 to
June 30, 1996, October 1, 1995 to June 30, 1996, and April 19, 1995
(date of inception) to June 30, 1995. Previously, the Predecessor
Companies' fiscal periods ended on the 23rd of the month. For
comparative purposes, Note 6 includes unaudited pro forma results of
operations for the periods March 24, 1995 to June 30, 1995 and
September 24, 1994 to June 30, 1995.
-6-
10
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. DISTRIBUTIONS OF AVAILABLE CASH
The Partnership makes distributions to its partners with respect to
each fiscal quarter of the Partnership approximately 45 days after the
end of each fiscal quarter in an aggregate amount equal to its
Available Cash for such quarter. Available Cash generally means, with
respect to any fiscal quarter of the Partnership, all cash on hand at
the end of such quarter plus all additional cash on hand as of the
date of determination resulting from borrowings subsequent to the end
of such quarter less the amount of any cash reserves established by
the General Partner in its reasonable discretion for future cash
requirements. These reserves may be retained for the proper conduct
of the Partnership's business and for distributions during the next
four quarters. In addition, reserves for the payment of debt
principal and interest are required under the provisions of certain of
the Partnership's debt instruments. A distribution of 55 cents per
unit (the "Minimum Quarterly Distribution") for the quarters ended
March 31, 1996, December 31, 1995 and September 30, 1995 were made
approximately 45 days after the end of each quarter. The Minimum
Quarterly Distribution for the quarter ended June 30, 1996 will be
made on August 16, 1996 to holders of record on August 9, 1996 of all
Common and Subordinated units.
3. UNUSUAL ITEMS
In March 1996 the Partnership completed the arrangements for a refund
of general liability insurance premium deposits which were previously
paid by Petrolane prior to the Partnership Formation. The anticipated
refund, which has been reflected as a reduction to operating expenses
in the accompanying condensed consolidated statements of operations,
increased net income for the nine months ended June 30, 1996 by $4,356
or $.10 per limited partner unit.
In March 1996 the Partnership completed a reassessment of its
potential liability for environmental matters principally relating to
the clean up of underground storage tanks (USTs). The reassessment
indicated a reduction in estimated future costs and the resulting
adjustment has been reflected as a reduction to operating expenses in
the accompanying condensed consolidated statements of operations for
the nine months ended June 30, 1996. The adjustment increased net
income for the nine months ended June 30, 1996 by $3,312 or $.08 per
limited partner unit.
In February 1996 the General Partner completed AmeriGas Partners' and
the Operating Partnership's federal income tax returns for the
Partnership's initial period of operation. As a part of this process,
a final determination was made as to how to allocate the tax basis of
certain of the assets contributed to the Partnership by the
Predecessor Companies. The completion of the allocation process
resulted in reductions in the deferred income tax liabilities of the
General Partner and Petrolane existing at April 19, 1995 which had
been recorded in connection with AmeriGas's acquisition by merger of
the approximately 65% of Petrolane common shares outstanding not
already owned by AmeriGas or its parent company, UGI Corporation
(UGI), and the formation of the Partnership. It also resulted in a
reduction to the net assets contributed by the General Partner and
Petrolane to the Operating Partnership in conjunction with the
Partnership Formation which adjustment was recorded by the Partnership
as a $37,025 reduction in goodwill, a $36,651 reduction in partners'
capital, and a $374 reduction in minority interest.
-7-
11
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. RELATED PARTY TRANSACTIONS
Pursuant to the Partnership Agreement, the General Partner is entitled
to reimbursement for all direct and indirect expenses incurred or
payments it makes on behalf of the Partnership, and all other
necessary or appropriate expenses allocable to the Partnership or
otherwise reasonably incurred by the General Partner in connection
with the Partnership's business. These costs, which totaled $43,342
and $141,636 during the three and nine months ended June 30, 1996,
respectively, and $30,644 for the period April 19, 1995 to June 30,
1995, include compensation and benefit expenses of employees of the
General Partner and general and administrative expenses. In addition,
UGI provides certain financial, accounting, human resources, risk
management, insurance, legal, corporate communications, investor
relations, treasury and corporate development services to the General
Partner. UGI bills the General Partner for these direct and indirect
corporate expenses and the General Partner is reimbursed by the
Partnership for these expenses. During the three and nine months
ended June 30, 1996, and the period April 19, 1995 to June 30, 1995,
such corporate expenses totaled $2,072, $6,503 and $1,854,
respectively.
On November 16, 1995, a wholly owned subsidiary of the General
Partner, Diamond Acquisition, Inc. (Diamond), contributed to the
Partnership the net assets (including acquisition debt payable to UGI
relating thereto) of Oahu Gas Service, Inc. (Oahu), a Hawaii
corporation acquired by Diamond on October 31, 1995. In consideration
of the retention of certain income tax liabilities relating to Oahu,
AmeriGas Partners issued 17,126 Common Units to Diamond having a fair
value of $413.
5. COMMITMENTS AND CONTINGENCIES
The Partnership has succeeded to the lease guarantee obligations of
Petrolane relating to Petrolane's divestiture of nonpropane operations
prior to its 1989 acquisition by QFB Partners which are currently
estimated to aggregate approximately $100,000 (subject to reduction in
certain circumstances). The leases expire through 2007 and some of
them are currently in default. Under certain circumstances such lease
obligations may be reduced by the earnings of such divested
operations. The Partnership has succeeded to the indemnity agreement
of Petrolane by which Texas Eastern Corporation (Texas Eastern), a
prior owner of Petrolane, agreed to indemnify Petrolane against any
liabilities arising out of the conduct of businesses that do not
relate to, and are not a part of, the propane business, including
lease guarantees. To date, Texas Eastern has directly satisfied its
obligations without the Partnership's having to honor its guarantee.
In addition, the Partnership has succeeded to Petrolane's agreement to
indemnify Shell Petroleum N.V. (Shell) for various scheduled claims
that were pending against Tropigas de Puerto Rico (Tropigas). This
indemnification agreement had been entered into by Petrolane in
conjunction with Petrolane's sale of the international operations of
Tropigas to Shell in 1989. The Partnership also succeeded to
Petrolane's right to seek indemnity on these claims first from
International Controls Corp., which sold Tropigas to Petrolane, and
then from Texas Eastern. To date, neither the Partnership nor
Petrolane has paid any sums under this indemnity, but several claims
by Shell, including claims related to certain antitrust actions
aggregating at least $68,000, remain pending.
-8-
12
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Partnership has identified environmental contamination at several
of its properties. The Partnership's policy is to accrue
environmental investigation and cleanup costs when it is probable that
a liability exists and the amount or range of amounts is reasonably
estimable. However, in many circumstances future expenditures cannot
be reasonably quantified because of a number of factors, including
various costs associated with potential remedial alternatives, the
unknown number of other potentially responsible parties involved and
their ability to contribute to the costs of investigation and
remediation, and changing environmental laws and regulations. The
Partnership intends to pursue recovery of any incurred costs through
all appropriate means, although such recovery cannot be assured.
In addition to these environmental matters, there are various other
pending claims and legal actions arising out of the normal conduct of
the Partnership's business. The final results of environmental and
other matters cannot be predicted with certainty. However, it is
reasonably possible that some of them could be resolved unfavorably to
the Partnership. Management believes, after consultation with
counsel, that damages or settlements, if any, recovered by the
plaintiffs in such claims or actions will not have a material adverse
effect on the Partnership's financial position but could be material
to operating results and cash flows in future periods depending on the
nature and timing of future developments with respect to these matters
and the amounts of future operating results and cash flows.
6. UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated statement of operations
for the period March 24, 1995 to June 30, 1995 and the period
September 24, 1994 to June 30, 1995 have been derived from the
historical results of operations of AmeriGas Propane and Petrolane
prior to the formation of the Partnership and the historical results
of operations of the Partnership subsequent to the formation. The pro
forma statements of operations were prepared to reflect the effects of
the formation of the Partnership as if the formation and the related
transactions had been completed as of the beginning of the periods
presented. The pro forma statements of operations do not purport to
present the results of operations of the Partnership had the formation
and related transactions actually been completed as of the beginning
of the periods presented. In addition, the pro forma statements of
operations are not necessarily indicative of results to be expected in
the future.
-9-
13
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Pro Forma Pro Forma
March 24, September 24,
1995 to 1994 to
June 30, June 30,
1995 1995
---- ----
Revenues:
Propane $156,626 $645,297
Other 19,425 77,380
-------- --------
176,051 722,677
-------- --------
Costs and expenses:
Cost of sales - propane 80,642 333,524
Cost of sales - other 9,914 42,539
Operating and administrative expenses 75,797 230,090
Depreciation and amortization 16,431 47,100
Miscellaneous (income), net (2,154) (5,950)
-------- --------
180,630 647,303
-------- --------
Operating income (loss) (4,579) 75,374
Interest expense (17,132) (47,571)
Income taxes (296) (296)
Minority interest 193 (358)
-------- --------
Net income (loss) $(21,814) $ 27,149
======== ========
Income (loss) per limited partner unit $ (.52) $ .64
======== ========
7. ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" (SFAS 121) effective for fiscal years beginning after December 15,
1995. In the case of the Partnership, SFAS 121 must be adopted no later
than fiscal 1997. SFAS 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived
assets and certain identifiable intangibles to be disposed of. The
Partnership's policy is to evaluate the impairment of long-lived assets,
including associated intangibles, whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. The test for impairment is performed by comparing estimated
net future cash flows expected to result from the use of such assets and
their eventual disposition to their carrying amount aggregated on an
acquisition-level basis. On this basis, no impairment has been recognized
because the estimated future net cash flows of each such asset group has
exceeded the associated carrying amount. Under the provisions of SFAS
121, the aggregation of cash flows and the related test for impairment
would be performed at a lower level within the Partnership. As a result,
long-lived assets and associated intangibles, which are not deemed to be
impaired under the Partnership's current impairment policy, could be
deemed to be impaired under the provisions of SFAS 121 resulting in a
noncash charge to operating income from recording such impaired assets at
fair value.
-10-
14
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Partnership's management is in the process of evaluating the
recoverability of its long-lived assets under the provisions of SFAS 121
and expects to complete its evaluation in the fourth quarter of fiscal
1996.
-11-
15
AMERIGAS FINANCE CORP.
BALANCE SHEETS
as of June 30, 1996 and
September 30, 1995
-12-
16
AMERIGAS FINANCE CORP.
(a wholly owned subsidiary of AmeriGas Partners, L.P.)
BALANCE SHEETS
(unaudited)
June 30, September 30,
1996 1995
-------- --------
ASSETS
Subscription receivable $ 1,000 $ 1,000
-------- --------
Total assets $ 1,000 $ 1,000
======== ========
STOCKHOLDER'S EQUITY
Common stock, $.01 par value; 100 shares authorized;
100 shares issued and outstanding $ 1 $ 1
Additional paid-in capital 999 999
-------- --------
Total stockholder's equity $ 1,000 $ 1,000
======== ========
The accompanying note is an integral part of these financial statements.
-13-
17
AMERIGAS FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.)
NOTE TO BALANCE SHEETS
AmeriGas Finance Corp. (AmeriGas Finance), a Delaware corporation, was formed
on March 13, 1995 and is a wholly owned subsidiary of AmeriGas Partners, L.P.
(AmeriGas Partners). AmeriGas Partners was formed on November 2, 1994 as a
Delaware limited partnership. AmeriGas Partners was formed to acquire and
operate the propane businesses and assets of AmeriGas Propane, Inc., a Delaware
corporation (AmeriGas Propane), AmeriGas Propane-2, Inc. (AGP-2) and Petrolane
Incorporated (Petrolane) through AmeriGas Propane, L.P. (the "Operating
Partnership"). AmeriGas Partners holds a 98.99% limited partner interest in
the Operating Partnership and AmeriGas Propane, Inc., a Pennsylvania
corporation and the general partner of AmeriGas Partners (the "General
Partner"), holds a 1.01% general partner interest. On April 19, 1995, (i)
pursuant to a Merger and Contribution Agreement dated as of April 19, 1995,
AmeriGas Propane and certain of its operating subsidiaries and AGP-2 merged
into the Operating Partnership (the "Formation Merger"), and (ii) pursuant to a
Conveyance and Contribution Agreement dated as of April 19, 1995, Petrolane
conveyed substantially all of its assets and liabilities to the Operating
Partnership (the "Petrolane Conveyance"). As a result of the Formation Merger
and the Petrolane Conveyance, the General Partner and Petrolane received
limited partner interests in the Operating Partnership and the Operating
Partnership owns substantially all of the assets and assumed substantially all
of the liabilities of AmeriGas Propane, AGP-2 and Petrolane. AmeriGas Propane
conveyed its limited partner interest in the Operating Partnership to AmeriGas
Partners in exchange for 2,922,235 Common Units and 13,350,146 Subordinated
Units of AmeriGas Partners and Petrolane conveyed its limited partner interest
in the Operating Partnership to AmeriGas Partners in exchange for 1,407,911
Common Units and 6,432,000 Subordinated Units of AmeriGas Partners. Both
Common and Subordinated units represent limited partner interests in AmeriGas
Partners.
On April 19, 1995, AmeriGas Partners issued $100,000,000 face value of 10.125%
Senior Notes due April 2007. AmeriGas Finance serves as a co-obligor of these
notes.
AmeriGas Partners subscribed to 100 shares of AmeriGas Finance common stock for
$1,000 on March 13, 1995. There have been no other transactions involving
AmeriGas Finance through June 30, 1996.
-14-
18
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
(PREDECESSOR)
CONDENSED COMBINED FINANCIAL INFORMATION
for the periods March 24, 1995 to April 19, 1995
and September 24, 1994 to April 19, 1995
-15-
19
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
CONDENSED COMBINED STATEMENTS OF INCOME
(unaudited)
(Thousands of dollars)
March 24, September 24,
1995 to 1994 to
April 19, April 19,
1995 1995
-------- ------------
Revenues:
Propane $ 23,105 $ 218,078
Other 2,627 24,107
-------- ---------
25,732 242,185
-------- ---------
Costs and expenses:
Cost of sales - propane 11,043 106,596
Cost of sales - other 1,146 12,693
Operating and administrative expenses 8,496 62,706
Operating and administrative expenses -
related parties 3,012 22,440
Depreciation and amortization 1,777 13,589
Miscellaneous (income) - related parties (872) (6,512)
Miscellaneous (income), net (275) (1,709)
-------- ---------
24,327 209,803
-------- ---------
Operating income 1,405 32,382
Interest expense 1,776 14,569
-------- ---------
Income (loss) before income taxes (371) 17,813
Income taxes 5,983 14,891
-------- ---------
Income (loss) before extraordinary loss and
accounting change (6,354) 2,922
Extraordinary loss - propane debt restructuring (11,892) (11,892)
Change in accounting for postemployment benefits - (1,650)
-------- ---------
Net loss $(18,246) $ (10,620)
======== =========
The accompanying notes are an integral part of these financial statements.
-16-
20
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
CONDENSED COMBINED STATEMENT OF CASH FLOWS
(unaudited)
(Thousands of dollars)
September 24,
1994 to
April 19,
1995
--------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (10,620)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 13,589
Deferred income taxes, net 6,188
Extraordinary loss 11,892
Other, net 1,717
---------
22,766
Net change in:
Accounts receivable (5,998)
Inventories 7,152
Accounts payable (3,903)
Receivable from/payable to related parties, net 4,641
Other current assets and liabilities 5,313
---------
Net cash provided by operating activities 29,971
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (5,605)
Proceeds from disposals of property, plant and equipment 1,098
Acquisitions of businesses, net of cash acquired (156)
---------
Net cash used by investing activities (4,663)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (5,286)
Repayment of long-term debt (852)
---------
Net cash used by financing activities (6,138)
---------
Cash and cash equivalents increase $ 19,170
=========
CASH AND CASH EQUIVALENTS:
End of period $ 37,743
Beginning of period 18,573
---------
Increase $ 19,170
=========
The accompanying notes are an integral part of these financial statements.
-17-
21
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(unaudited)
(Thousands of dollars)
1. ORGANIZATION AND BASIS OF PRESENTATION
Prior to April 19, 1995, AmeriGas Propane, Inc., a Delaware
corporation (AmeriGas Propane), and AmeriGas Propane-2, Inc., a
Pennsylvania corporation ("AGP-2", and together with AmeriGas Propane,
"the Company"), were wholly owned subsidiaries of AmeriGas, Inc.
(AmeriGas) engaged in the distribution of propane and related
equipment and supplies. On April 19, 1995, pursuant to a Merger and
Contribution Agreement, AmeriGas Propane and certain of its operating
subsidiaries, and AGP-2 were merged into AmeriGas Propane, L.P., (the
"Operating Partnership"), a Delaware limited partnership formed to
acquire and operate the propane businesses of the Company and
Petrolane Incorporated (Petrolane). The condensed combined financial
statements include the consolidated accounts of AmeriGas Propane and
its subsidiaries and the accounts of AGP-2 through April 19, 1995.
All significant intercompany accounts and transactions have been
eliminated.
The accompanying condensed combined financial statements are unaudited
and have been prepared in accordance with the rules and regulations of
the U.S. Securities and Exchange Commission. They include all
adjustments which the Company considers necessary for a fair statement
of the results for the interim periods presented. Such adjustments
consisted only of normal recurring items unless otherwise disclosed.
These financial statements should be read in conjunction with the
financial statements and the notes thereto included in AmeriGas
Partners' Report on Form 10-K for the year ended September 30, 1995.
Due to the seasonal nature of the Company's propane business, the
results of operations for interim periods are not necessarily
indicative of the results to be expected for a full year.
2. RELATED PARTY FEES
AmeriGas Propane and Petrolane were parties to a customer services
agreement (Customer Services Agreement) pursuant to which AmeriGas
Propane served customers of closed Petrolane districts and Petrolane
served customers of closed AmeriGas Propane districts. These
districts were closed in order to achieve cost reductions and
operational efficiencies in overlapping geographical markets served by
AmeriGas Propane and Petrolane. Fees billed by Petrolane to AmeriGas
Propane under the Customer Services Agreement are included in
operating and administrative expenses - related parties. Such fees
totaled $809 and $6,879 in the period March 24, 1995 to April 19, 1995
(the 1995 one-month period) and the period September 24, 1994 to April
19, 1995 (the 1995 seven-month period), respectively. Fees billed to
Petrolane under the Customer Services Agreement are included in
miscellaneous income - related parties. Such fees totaled $669 and
$5,307 in the 1995 one-month period and the 1995 seven-month period,
respectively.
AmeriGas Management Company (AMC) and AmeriGas Transportation
Management Company (ATMC), former first-tier subsidiaries of
AmeriGas's parent company UGI Corporation (UGI), provided general
management, supervisory, administrative and transportation services to
AmeriGas Propane, AGP-2 and Petrolane effective with AmeriGas's
acquisition of a significant equity interest in Petrolane on July 15,
1993. As consideration for these services, AMC and
-18-
22
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED)
ATMC charged AmeriGas Propane and AGP-2 monthly fees which, together
with fees received from Petrolane, effectively reimbursed AMC and ATMC
for their costs to provide such services. Fees incurred pursuant to
the AMC and ATMC agreements are included in operating and
administrative expenses - related parties. The Company recorded
combined management fees of $1,554 and $10,368 in the 1995 one-month
period and the 1995 seven-month period, respectively.
UGI provided certain management services to the Company for a monthly
fee based upon a rate of 2.25 cents per retail gallon of propane sold
by the Company. During the 1995 one-month period and the 1995
seven-month period, the Company recorded management fees of $649 and
$5,193, respectively, which amounts are included in operating and
administrative expenses - related parties.
-19-
23
PETROLANE INCORPORATED AND SUBSIDIARIES
(PREDECESSOR)
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
for the periods March 24, 1995 to April 19, 1995
and September 24, 1994 to April 19, 1995
-20-
24
PETROLANE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Thousands of dollars, except per share)
March 24, September 24,
1995 to 1994 to
April 19, April 19,
1995 1995
------- --------
Revenues:
Propane $33,781 $327,479
Other 3,738 44,609
------- --------
37,519 372,088
------- --------
Costs and expenses:
Cost of sales-propane 18,361 175,690
Cost of sales-other 1,989 27,463
Selling, general and administrative expenses 9,121 79,838
Selling, general and administrative expenses -
related parties 2,799 20,469
Depreciation and amortization 3,987 27,398
Taxes - other than income taxes 1,330 8,491
Miscellaneous (income) - related parties (809) (6,879)
Miscellaneous (income), net (491) (1,851)
------- --------
36,287 330,619
------- --------
Operating income 1,232 41,469
Interest expense 3,873 29,966
------- --------
Income (loss) before income taxes (2,641) 11,503
Income tax expense (benefit) (222) 10,113
------- --------
Income (loss) before accounting change (2,419) 1,390
Change in accounting for postemployment benefits - (905)
------- --------
Net income (loss) $(2,419) $ 485
======= ========
Earnings (loss) per common share:
Income (loss) before accounting change $ (.23) $ .13
Change in accounting for postemployment
benefits - (.08)
------- --------
Net earnings (loss) $ (.23) $ .05
======= ========
Average shares outstanding (thousands) 10,501 10,501
======= ========
The accompanying notes are an integral part of these financial statements.
-21-
25
PETROLANE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(Thousands of dollars)
September 24,
1994 to
April 19,
1995
-----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 485
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 27,398
Deferred income taxes 7,097
Other, net (3,101)
-------
31,879
Net change in:
Accounts receivable 431
Inventories 6,851
Accounts payable (11,622)
Other current assets and liabilities (5,584)
-------
Net cash provided by operating activities 21,955
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (7,291)
Proceeds from disposals of property, plant and equipment 2,881
Acquisitions of businesses, net of cash acquired (2,840)
-------
Net cash used by investing activities (7,250)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (12,507)
Change in working capital loans 7,000
Other (1,304)
-------
Net cash used by financing activities (6,811)
-------
Cash and cash equivalents increase $ 7,894
=======
CASH AND CASH EQUIVALENTS:
End of period $18,671
Beginning of period 10,777
-------
Increase $ 7,894
=======
The accompanying notes are an integral part of these financial statements.
-22-
26
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Thousands of dollars, except per share amounts)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include
the accounts of Petrolane Incorporated and its majority-owned
subsidiaries (the "Company"). All significant intercompany accounts
and transactions have been eliminated in consolidation. Earnings
(loss) per common share for the periods presented are based on the
average number of shares of common stock outstanding during the
respective periods.
On April 19, 1995, pursuant to a Conveyance and Contribution
Agreement, the Company conveyed substantially all of its assets and
liabilities to AmeriGas Propane, L.P., a Delaware limited partnership
and subsidiary of AmeriGas Partners, L.P., a Delaware limited
partnership (AmeriGas Partners), formed to acquire and operate the
propane businesses of the Company and affiliates AmeriGas Propane,
Inc., a Delaware corporation (AmeriGas Propane) and AmeriGas
Propane-2, Inc. (AGP-2). AmeriGas Propane and AGP-2 are wholly owned
subsidiaries of AmeriGas, Inc. (AmeriGas).
The condensed consolidated financial statements include the results of
operations and cash flows of the Company prior to the Conveyance and
Contribution Agreement. The accompanying condensed consolidated
financial statements are unaudited and have been prepared in
accordance with the rules and regulations of the U.S. Securities and
Exchange Commission. They include all adjustments which the Company
considers necessary for a fair statement of the results for the
interim periods presented. Such adjustments consisted only of normal
recurring items unless otherwise disclosed. These financial
statements should be read in conjunction with the financial statements
and the notes thereto included in AmeriGas Partners' Report on Form
10-K for the year ended September 30, 1995. Due to the seasonal
nature of the Company's business, the results of operations for
interim periods are not necessarily indicative of the results to be
expected for a full year.
2. RELATED PARTY FEES
The Company and AmeriGas Propane were parties to a customer services
agreement (Customer Services Agreement) pursuant to which the Company
served customers of closed AmeriGas Propane districts and AmeriGas
Propane served customers of closed Company districts. Fees incurred
by the Company under the Customer Services Agreement are included in
selling, general and administrative expenses - related parties. Such
fees totaled $669 and $5,307 in the periods March 24, 1995 to April
19, 1995 (the 1995 one-month period) and September 24, 1994 to April
19, 1995 (the 1995 seven-month period), respectively. Fees billed to
AmeriGas Propane under the Customer Services Agreement are included in
miscellaneous income - related parties. Such fees totaled $809 and
$6,879 in the 1995 one-month period and the 1995 seven-month period,
respectively.
AmeriGas Management Company (AMC) and AmeriGas Transportation
Management Company (ATMC), former first-tier subsidiaries of AmeriGas's
parent company UGI Corporation (UGI), provided
-23-
27
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
general management, supervisory, administrative and transportation
services to the Company and AmeriGas's wholly owned propane
subsidiaries. As consideration for these services, AMC and ATMC
charged the Company fees which together with fees received from
AmeriGas's wholly owned propane subsidiaries effectively reimbursed
AMC and ATMC for their costs to provide such services. Fees incurred
by the Company under the AMC and ATMC agreements are included in
selling, general and administrative expenses - related parties. Such
fees totaled $1,248 and $8,338 in the 1995 one-month period and the
1995 seven-month period, respectively.
Pursuant to its management agreement with the Company (UGI Management
Agreement), UGI provided to the Company certain financial, accounting,
human resources, risk management, insurance, legal, corporate
communication, investor relations, treasury and corporate development
services. For such services, UGI received a quarterly fee from the
Company. Fees incurred by the Company under the UGI Management
Agreement are included in selling, general and administrative expenses
- related parties. Such fees totaled $882 and $6,824 in the 1995
one-month period and the 1995 seven-month period, respectively.
-24-
28
AMERIGAS PARTNERS, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ANALYSIS OF RESULTS OF OPERATIONS
The following analyses compare AmeriGas Partners' results of operations for the
periods April 1, 1996 to June 30, 1996 (the "1996 Three Month Period") and
October 1, 1995 to June 30, 1996 (the "1996 Nine Month Period") with pro forma
results of operations for the periods March 24, 1995 to June 30, 1995 (the "Pro
Forma 1995 Three Month Period") and September 24, 1994 to June 30, 1995 (the
"Pro Forma 1995 Nine Month Period"), respectively. Due to the seasonal nature
of AmeriGas Partners' propane business, the results of operations for interim
periods are not necessarily indicative of results to be expected for a full
year.
The pro forma consolidated results of operations were derived from the
historical results of operations of AmeriGas Propane and Petrolane prior to the
Partnership Formation and the historical results of operations of AmeriGas
Partners subsequent to the Partnership Formation. The pro forma results of
operations were prepared to reflect the effects of the Partnership Formation as
if the formation had been completed in its entirety as of the beginning of the
periods presented. As a result of the difference in the fiscal month end of
AmeriGas Partners and the Predecessor Companies, the Pro Forma 1995 Three Month
Period and the Pro Forma 1995 Nine Month Period each contain one additional
week of operating results when compared to the corresponding 1996 Three Month
Period and the 1996 Nine Month Period.
Other than formation transactions recorded on March 13, 1995, there have been
no other transactions involving AmeriGas Finance Corp. through June 30, 1996.
Accordingly, the following analyses of results of operations exclude AmeriGas
Finance Corp.
-25-
29
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
THE 1996 THREE MONTH PERIOD COMPARED WITH THE PRO FORMA 1995 THREE MONTH PERIOD
Pro Forma
April 1, March 24,
1996 to 1995 to
June 30, June 30, Increase
1996 1995(a) (Decrease)
-------- -------- ----------
(Millions, except per gallon and percentages)
Gallons sold:
Retail 146.5 159.0 (12.5) (7.9)%
Wholesale 45.7 39.6 6.1 15.4
------ ------ ------
192.2 198.6 (6.4) (3.2)
====== ====== ======
Revenues:
Retail propane $137.9 $139.4 $ (1.5) (1.1)%
Wholesale propane 20.4 17.2 3.2 18.6
Other 17.3 19.5 (2.2) (11.3)
------ ------ ------
$175.6 $176.1 $ (.5) (.3)
====== ====== ======
Total margin (b) $ 79.3 $ 85.5 $ (6.2) (7.3)%
EBITDA (c) $ 8.3 $ 11.9 $ (3.6) (30.3)
Operating loss $ (6.9) $ (4.6) $ 2.3 50.0
Degree days - % colder (warmer)
than normal (d) 2.4% (.7)% N.M. N.M.
N.M. - Not Meaningful.
(a) Reflects unaudited pro forma information for the Partnership as if the
formation of the Partnership had occurred as of March 24, 1995.
(b) Total revenues less total cost of sales.
(c) EBITDA (earnings before interest, income taxes, depreciation and
amortization) should not be considered as an alternative to net income
(as an indicator of operating performance) or as an alternative to
cash flow (as a measure of liquidity or ability to service debt
obligations).
(d) Based on the weighted average deviation from average degree days
during the 30-year period 1961-1990, as contained in the National
Weather Service Climate Analysis Center database, for geographic areas
in which AmeriGas Partners operates.
The comparison of propane volumes, revenues, total margin, operating loss and
EBITDA included in the table above are affected by the additional week of
operations in the Pro Forma 1995 Three Month Period resulting from the
difference in the fiscal month end of the Partnership and the Predecessor
Companies. In order to provide a more meaningful comparison, the following
analysis reflects adjustments to the prior-year period's results to eliminate
the estimated impact of the additional week.
-26-
30
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Retail volumes of propane sold increased approximately 4.7 million gallons
reflecting the benefit of colder late heating-season weather and the effects of
acquisitions. Wholesale volumes of propane sold were higher in the 1996 Three
Month Period as a result of increased sales of low margin storage inventories.
Revenues from the sale of propane in the 1996 Three Month Period increased
approximately $17.2 million reflecting higher average retail propane selling
prices and higher retail and wholesale volumes sold. Other revenues from the
sale of appliances, parts, and other products and services were slightly lower
in the 1996 Three Month Period due in large part to lower revenues from hauling
activities. Propane cost of sales increased approximately $15.1 million in the
1996 Three Month Period as a result of higher average propane product costs and
higher propane volumes.
Total margin from the sale of propane increased an estimated $2.0 million in
the 1996 Three Month Period compared with the adjusted Pro Forma 1995 Three
Month Period reflecting the impact of the higher retail volumes sold. Average
retail unit margin in the 1996 Three Month Period was essentially equal to
average retail unit margin in the adjusted Pro Forma 1995 Three Month Period.
Total margin from other propane related sales and services increased $.8
million.
Operating loss in the 1996 Three Month Period was $1.5 million higher than the
adjusted Pro Forma 1995 Three Month Period. A $2.8 million increase in total
margin was more than offset by higher operating and administrative expenses and
slightly higher charges for depreciation and amortization. The increased
operating and administrative expenses include higher payroll and employee
compensation expenses associated with the Partnership's management
reorganization activities. EBITDA for the 1996 Three Month Period was
approximately $1.0 million lower than in the adjusted Pro Forma 1995 Three
Month Period reflecting the higher operating loss in the current-year period.
Interest expense was $15.7 million in the 1996 Three Month Period compared with
$15.9 million in the adjusted 1995 Pro Forma Three Month Period.
-27-
31
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
THE 1996 NINE MONTH PERIOD COMPARED WITH THE PRO FORMA 1995 NINE MONTH PERIOD
Pro Forma
October 1, 1995 September 24,
to 1994 to
June 30, June 30, Increase
1996 1995(a) (Decrease)
-------------- ------------ ------------
(Millions, except per gallon and percentages)
Gallons sold:
Retail 706.1 645.1 61.0 9.5%
Wholesale 260.9 159.2 101.7 63.9
------ ------ ------
967.0 804.3 162.7 20.2
====== ====== ======
Revenues:
Retail propane $653.0 $575.1 $ 77.9 13.5%
Wholesale propane 114.3 70.2 44.1 62.8
Other 68.8 77.4 (8.6) (11.1)
------ ------ ------
$836.1 $722.7 $113.4 15.7
====== ====== ======
Total margin (b) $367.9 $346.6 $ 21.3 6.1%
EBITDA (c) $139.9 $122.5 $ 17.4 14.2
Operating income $ 93.7 $ 75.4 $ 18.3 24.3
Degree days - % colder (warmer)
than normal (d) 1.3% (17.0)% N.M. N.M.
N.M. - Not Meaningful.
(a) Reflects unaudited pro forma information for the Partnership as if the
formation of the Partnership had occurred as of September 24, 1994.
(b) Total revenues less total cost of sales.
(c) EBITDA (earnings before interest, income taxes, depreciation and
amortization) should not be considered as an alternative to net income
(as an indicator of operating performance) or as an alternative to
cash flow (as a measure of liquidity or ability to service debt
obligations).
(d) Based on the weighted average deviation from average degree days
during the 30-year period 1961-1990, as contained in the National
Weather Service Climate Analysis Center database, for geographic areas
in which AmeriGas Partners operates.
__________
Although the comparison of the Partnership's results for the nine month periods
is impacted by an additional week of operations in the prior-year period, the
impact of the additional week is not material to an understanding of the
overall results of operations and, therefore, is not included as part of the
following analysis.
-28-
32
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Retail volumes of propane sold increased 61.0 million gallons in the 1996 Nine
Month Period reflecting the effects of significantly colder weather,
acquisitions, and other non weather-related volume growth. Weather across the
U.S. markets served by the Partnership was, on average, 1.3% colder than normal
in the 1996 Nine Month Period compared with weather that was, on average, 17.0%
warmer than normal in the 1995 Pro Forma Nine Month Period. Regional
temperature variations in the 1996 Nine Month Period were significantly
different with the western U.S. experiencing substantially warmer than normal
temperatures and the eastern and midwestern U.S. experiencing colder than
normal temperatures. Wholesale volumes of propane sold were significantly
higher reflecting the effects of the colder weather and an increase in sales of
low margin excess storage inventories.
Revenues from propane sales increased during the 1996 Nine Month Period
reflecting the increased sales as well as higher average retail selling prices.
Other revenues in the 1996 Nine Month Period decreased $8.6 million as a result
of higher Pro Forma 1995 Nine Month Period sales of low margin diesel and other
fuels. Total cost of sales increased $92.2 million as a result of the higher
volumes of propane sold and higher average propane product costs.
Total margin from the sale of propane was $21.0 million higher in the 1996 Nine
Month Period as a result of the greater volumes of propane sold partially
offset by lower average retail unit margins. Average retail unit margins in
the 1996 Nine Month Period were slightly lower than in the Pro Forma 1995 Nine
Month Period, despite increased average retail selling prices, reflecting the
impact of higher average propane product costs. Total margin from other sales
and services during the 1996 Nine Month Period was virtually unchanged from the
prior-year period.
Operating income in the 1996 Nine Month Period increased $18.3 million
reflecting the increase in total margin partially offset by higher operating
expenses. The 1996 Nine Month Period operating expenses are net of $4.4
million from an expected refund of insurance premium deposits made in prior
years and $3.3 million from reductions to reserves for potential liabilities
for environmental matters. Operating expenses, exclusive of these items,
increased $12.8 million reflecting higher payroll and employee compensation
expenses, higher vehicle expenses and higher expenses associated with sales and
marketing programs. EBITDA for the 1996 Nine Month Period increased $17.4
million reflecting the higher operating income.
Interest expense was $46.9 million in the 1996 Nine Month Period compared with
$47.6 million in the Pro Forma 1995 Nine Month Period. Interest expense in the
current-year period includes interest on borrowings under the Partnership's
revolving credit and special purpose facilities along with interest on
acquisition-related debt, including borrowings under the Partnership's
acquisition facility. Interest expense in the prior-year period includes
interest attributable to the additional week.
-29-
33
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION
The Partnership makes distributions of its Available Cash approximately 45 days
after the end of each fiscal quarter ending December, March, June and September
to holders of record on the applicable record date. The Minimum Quarterly
Distribution of 55 cents per Common and Subordinated unit for each of the
quarters ended March 31, 1996, December 31, 1995, and September 30, 1995 was
made approximately 45 days after the end of each quarter. The Minimum
Quarterly Distribution for the quarter ended June 30, 1996 will be made on
August 16, 1996 to holders of record on August 9, 1996 of all Common and
Subordinated units.
During the three months ended March 31, 1996, the General Partner completed
AmeriGas Partners' and the Operating Partnership's federal income tax returns
for the Partnership's initial period of operation. As a part of this process,
a final determination was made as to how to allocate the tax basis of certain
of the assets contributed to the Partnership by the Predecessor Companies. The
completion of the allocation process resulted in reductions in the deferred
income tax liabilities of the General Partner and Petrolane existing at April
19, 1995 which had been recorded in connection with AmeriGas's acquisition by
merger of the approximately 65% of Petrolane common shares outstanding not
already owned by AmeriGas or its parent company, UGI Corporation, and the
formation of the Partnership. It also resulted in a reduction to the net
assets contributed by the General Partner and Petrolane to the Operating
Partnership in conjunction with the formation of the Partnership which
adjustment was recorded during the three months ended March 31, 1996 as a $37.0
million reduction in goodwill, a $36.6 million reduction in partners' capital,
and a $.4 million reduction in minority interest.
The Partnership's consolidated debt-to-total-capitalization ratio at June 30,
1996 was 56.9% compared to 53.7% at September 30, 1995. The higher ratio is
principally a result of $14 million in combined borrowings under the
Partnership's acquisition and special purpose facilities, a decrease in
partners' capital resulting from Partnership distributions in excess of net
income, and the effect of the adjustment to the net assets contributed to the
Operating Partnership. Had the adjustment been recorded at September 30, 1995,
the ratio as of that date would have been 55.7%. During the nine months ended
June 30, 1996, the Partnership made several small propane business acquisitions
for cash. In addition, on November 16, 1995, Diamond, a wholly owned
subsidiary of the General Partner, contributed to the Partnership the net
assets (including acquisition debt payable to UGI relating thereto) of Oahu, a
Hawaii corporation acquired by Diamond on October 31, 1995. In consideration
of the retention of certain income tax liabilities relating to Oahu, AmeriGas
Partners issued 17,126 Common Units to Diamond having a fair value of $.4
million.
The Partnership is required to adopt the provisions of SFAS 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of" no later than fiscal 1997. The Partnership's management is in the process
of evaluating the recoverability of its long-lived assets under the provisions
of SFAS 121 and expects to complete its evaluation in the fourth quarter of
fiscal 1996 (see Note 7 to Condensed Consolidated Financial Statements).
-30-
34
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CASH FLOWS
Cash and cash equivalents totaled $24.4 million at June 30, 1996 compared with
$39.6 million at September 30, 1995. Due to the seasonal nature of the propane
business, cash flows from operating activities are generally strongest during
the second and third fiscal quarters of the Partnership when customers pay for
propane purchased during the heating season. Conversely, cash flows from
operations during the first and fourth fiscal quarters are typically at their
lowest levels as the Partnership purchases propane inventories and finances
increases in other working capital in advance of the heating season.
Accordingly, cash flows from operations during the nine months ended June 30,
1996 are not necessarily indicative of cash flows to be expected for a full
year.
OPERATING ACTIVITIES. Cash flows from operating activities during the nine
months ended June 30, 1996 totaled $63.6 million. However, cash flows from
operating activities before changes in operating working capital totaled $93.0
million. Changes in the Partnership's operating working capital during the
nine months ended June 30, 1996 reflect a net use of cash of $29.4 million
principally due to seasonal changes in customer accounts receivable and
inventories as well as the payment of interest accrued as of September 30,
1995.
INVESTING ACTIVITIES. Cash expenditures for property, plant and equipment
totaled $18.1 million during the nine months ended June 30, 1996. Maturing
short-term investments which existed at September 30, 1995 increased cash flows
from investing activities by $9.0 million during the nine months ended June 30,
1996. In addition, net proceeds from disposals of property, plant and
equipment totaled $3.9 million.
FINANCING ACTIVITIES. During the nine months ended June 30, 1996, the
Partnership made total distributions of $69.5 million to its unitholders and
the General Partner representing the Minimum Quarterly Distribution for the
quarters ended March 31, 1996, December 31, 1995 and September 30, 1995. In
addition, the Operating Partnership distributed $.8 million to the General
Partner in respect of the General Partner's 1.0101% interest in the Operating
Partnership.
During the nine months ended June 30, 1996, the Partnership borrowed $5 million
under its Special Purpose facility to fund certain liabilities of Petrolane
assumed by the Operating Partnership that relate to liabilities for tax,
insurance and environmental matters. In addition, the Partnership borrowed $9
million under its Acquisition Facility the proceeds of which were used
principally for the repayment of acquisition debt assumed by the Partnership in
conjunction with the General Partner's November 16, 1995 contribution of the
assets of Oahu to the Operating Partnership.
PARTNERSHIP FORMATION TRANSACTIONS. Cash paid for Partnership formation
transactions during the nine months ended June 30, 1996 represents the
reimbursement by the Partnership of fees and expenses previously paid by
AmeriGas relating to the formation of the Partnership.
-31-
35
AMERIGAS PARTNERS, L.P.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Mateel Environmental Justice Foundation v. AmeriGas Propane, L.P. et al. On
July 29, 1996, Mateel Environmental Justice Foundation ("Mateel") filed a
complaint in the Superior Court of the State of California, County of San
Francisco, alleging that AmeriGas Propane, L.P. ("APLP"), and several other
major propane gas distributors, are in violation of Proposition 65, "The Safe
Drinking Water and Toxic Enforcement Act of 1986" (commonly referred to as
"Prop 65"). APLP is a wholly owned subsidiary of the Partnership. The
Complaint alleges that APLP and its co-defendants are required to provide
warnings that the use of liquid propane would result in exposure to chemicals
known to cause cancer and birth defects, and that the burning of liquid propane
in heaters and other appliances causes exposure to carbon monoxide, benzene,
formaldehyde and acetaldehyde. The maximum penalty under Prop 65 is $2,500 per
day, per person exposed. In addition to the maximum penalty, Mateel is seeking
attorney's fees and costs, together with an Order mandating compliance with
Prop 65. Management believes that APLP has substantial defenses to this claim.
Commercial Row Cases, Judicial Council of California, Coordination Proceeding
No. 3096. Beginning in June 1994, twenty-one complaints were filed against
AmeriGas Propane, Inc, a Delaware corporation ("API"), a predecessor of
AmeriGas Propane, L.P., in the Superior Court of California, arising from an
explosion which occurred in Truckee, California on November 30, 1993. The
explosion occurred apparently as the result of propane gas which escaped from a
fractured fitting in an underground supply line. The complaints sought relief
for alleged personal injuries and/or property damage, and named as defendants
the manufacturer and distributor of the fitting, in addition to API. The cases
have been consolidated by the Judicial Council of California as the Commercial
Row Cases, Judicial Council Coordination Proceeding No. 3096. All of the
complaints requested damages in unspecified amounts; some of the complaints
sought punitive damages as well as compensatory damages. During pretrial
discovery, the claimants have asserted demands which in the aggregate now
exceed $25 million. With the exception of claims for punitive damages, the
claims asserted in the complaints are fully insured, subject to a $500,000
self-insured retention. Trial currently is scheduled to begin on September 30,
1996.
ITEM 5. OTHER INFORMATION
Effective July 29, 1996, Lon R. Greenberg was elected Chairman of the
Board, President and Chief Executive Officer of AmeriGas Propane, Inc.,
("AmeriGas"), the General Partner of AmeriGas Partners, L.P. Previously, Mr.
Greenberg served as Vice Chairman of the Board of AmeriGas. Robert C. Mauch,
who previously served as President, Chief Executive Officer and Director of
AmeriGas, will retire effective September 1, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
10.1 AmeriGas Partners, L.P. Annual Bonus Plan dated March 8, 1996.
-32-
36
AMERIGAS PARTNERS, L.P.
PART II OTHER INFORMATION (CONTINUED)
10.2 Change of Control Agreement between UGI Corporation and Lon R.
Greenberg, incorporated by reference to Exhibit 10.1 to the
June 30, 1996 quarterly report on Form 10-Q of UGI
Corporation.
10.3 Form of Change of Control Agreement between UGI Corporation
and R. C. Mauch incorporated by reference to Exhibit 10.2 to
the June 30, 1996 quarterly report on Form 10-Q of UGI
Corporation.
10.4 Form of Change of Control Agreement between UGI Corporation
and E.V.N. Bissell, B. P. Bovaird, and R. P. Grady,
incorporated by reference to Exhibit 10.3 to the June 30, 1996
quarterly report on Form 10-Q of UGI Corporation.
27. Financial Data Schedule
(b) AmeriGas Partners, L.P. did not file any Reports on Form 8-K during
the fiscal quarter ended June 30, 1996.
-33-
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by
the undersigned thereunto duly authorized.
AmeriGas Partners, L.P.
------------------------
(Registrant)
By: AmeriGas Propane, Inc.,
as General Partner
Date: August 13, 1996 By: D. C. Riggan
----------------------------
D.C. Riggan
Vice President - Finance &
Accounting
AmeriGas Finance Corp.
-------------------------
(Registrant)
Date: August 13, 1996 By: D. C. Riggan
--------------------------
D. C. Riggan
Vice President - Finance &
Accounting
-34-
38
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.1 AmeriGas Partners, L.P. Annual Bonus Plan dated March 8, 1996.
10.2 Change of Control Agreement between UGI Corporation and Lon R. Greenberg,
incorporated by reference to Exhibit 10.1 to the June 30, 1996 quarterly
report on Form 10-Q of UGI Corporation.
10.3 Form of Change of Control Agreement between UGI Corporation and R. C. Mauch
incorporated by reference to Exhibit 10.2 to the June 30, 1996 quarterly
report on Form 10-Q of UGI Corporation.
10.4 Form of Change of Control Agreement between UGI Corporation and E.V.N.
Bissell, B. P. Bovaird, and R. P. Grady, incorporated by reference to
Exhibit 10.3 to the June 30, 1996 quarterly report on Form 10-Q of
UGI Corporation.
27. Financial Data Schedule