CONFORMED COPY
________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
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: 1-11867
NATIONAL PROPANE PARTNERS, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 42-1453040
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
200 FIRST STREET S.E., IES TOWER, SUITE 1700, 52401-1409
CEDAR RAPIDS, IA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(319) 365-1550
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
------------------------
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 last 90 days. Yes __X__ No _______
There were 6,701,550 Common Units and 4,533,638 Subordinated Units
outstanding as of April 30, 1997.
________________________________________________________________________________
NATIONAL PROPANE PARTNERS, L.P.
INDEX TO FORM 10-Q
PAGE
----
Part I -- Financial Information
Item 1 -- Financial Statements -- National Propane Partners, L.P. (Successor to National Propane
Corporation and Subsidiaries):
Condensed Consolidated Balance Sheets -- December 31, 1996 and March 31, 1997.................... 3
Condensed Consolidated Statements of Operations -- Three months ended March 31, 1996 and 1997.... 4
Condensed Consolidated Statements of Cash Flows -- Three months ended March 31, 1996 and 1997.... 5
Notes to Condensed Consolidated Financial Statements............................................. 6
Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations....... 10
Part II -- Other Information
Item 6 -- Exhibits and Reports on Form 8-K............................................................ 13
Signatures............................................................................................ 14
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION
AND SUBSIDIARIES)
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, MARCH 31,
1996(A) 1997
------------ ---------
(IN THOUSANDS)
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 11,187 $ 6,954
Receivables, net.................................................................. 24,217 20,717
Finished goods inventories........................................................ 14,130 10,833
Interest receivable from Triarc Companies, Inc.................................... -- 1,340
Prepaid expenses and other current assets......................................... 2,268 2,003
------------ ---------
Total current assets......................................................... 51,802 41,847
Due from Triarc Companies, Inc......................................................... 40,700 40,700
Properties, net........................................................................ 80,634 79,686
Unamortized costs in excess of net assets of acquired companies........................ 14,601 14,667
Deferred costs and other assets........................................................ 8,671 8,575
------------ ---------
$196,408 $ 185,475
------------ ---------
------------ ---------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of long-term debt................................................. $ 6,312 $ 378
Accounts payable.................................................................. 15,859 5,934
Accrued expenses.................................................................. 10,103 11,387
------------ ---------
Total current liabilities.................................................... 32,274 17,699
Long-term debt......................................................................... 128,044 130,661
Customer deposits...................................................................... 2,027 2,017
Partners' capital:
Common partners' capital.......................................................... 22,165 22,757
General partners' capital, including subordinated units........................... 11,898 12,341
------------ ---------
Total partners' capital...................................................... 34,063 35,098
------------ ---------
$196,408 $ 185,475
------------ ---------
------------ ---------
- ------------
(A) Derived from the audited consolidated financial statements as of December
31, 1996.
See accompanying notes to condensed consolidated financial statements
3
NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION
AND SUBSIDIARIES)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1997
--------- ---------
(IN THOUSANDS, EXCEPT
UNIT AMOUNTS)
(UNAUDITED)
Revenues................................................................................. $59,981 $59,184
--------- ---------
Cost of sales:
Cost of product - propane and appliances............................................ 29,437 32,870
Other operating expenses applicable to revenues..................................... 11,717 11,464
--------- ---------
41,154 44,334
--------- ---------
Gross profit................................................................... 18,827 14,850
Selling, general and administrative expenses............................................. 5,853 6,379
Management fees.......................................................................... 750 --
--------- ---------
Operating income............................................................... 12,224 8,471
Interest expense......................................................................... (3,138) (2,951)
Interest income from Triarc Companies, Inc............................................... -- 1,340
Other income, net........................................................................ 278 318
--------- ---------
Income before income taxes..................................................... 9,364 7,178
Provision for income taxes............................................................... 3,847 --
--------- ---------
Net income..................................................................... $ 5,517 $ 7,178
--------- ---------
--------- ---------
General partners' interest in net income................................................. $ 287
---------
---------
Unitholders' interest (common and subordinated) in net income............................ $ 6,891
---------
---------
Net income per unit...................................................................... $ 0.61
---------
---------
Weighted average number of units outstanding............................................. 11,235
---------
---------
See accompanying notes to condensed consolidated financial statements
4
NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION
AND SUBSIDIARIES)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31,
----------------------------------------
1996 1997
------------------ ------------------
(IN THOUSANDS)
(UNAUDITED)
Cash flows from operating activities:
Net income.......................................................................... $5,517 $7,178
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of properties.................................... 2,417 2,564
Amortization of costs in excess of net assets of acquired
companies.................................................................... 159 184
Amortization of deferred financing costs....................................... 289 118
Other amortization............................................................. 25 152
Provision for doubtful accounts................................................ 346 350
Deferred income tax benefit.................................................... (146) --
Gain on sale of assets, net.................................................... (27) (27)
Other, net..................................................................... (434) 5
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable................................ (6,152) 3,231
Decrease in inventories................................................... 1,756 3,311
Decrease in prepaid expenses and other current assets..................... 135 298
Decrease in accounts payable and accrued expenses......................... (269) (8,642)
Decrease (increase) in due from parent.................................... 3,974 (1,368)
------- -------
Net cash provided by operating activities...................................... 7,590 7,354
------- -------
Cash flows from investing activities:
Capital expenditures................................................................ (1,216) (1,398)
Business acquisitions............................................................... -- (515)
Proceeds from sale of properties.................................................... 70 126
------- -------
Net cash provided by (used in) investing activities............................ (1,146) (1,787)
------- -------
Cash flows from financing activities:
Proceeds from long-term debt........................................................ -- 2,621
Repayments of long-term debt........................................................ (1,186) (6,278)
Distributions....................................................................... -- (6,143)
Deferred financing costs............................................................ (2) --
------- -------
Net cash used in financing activities.......................................... (1,188) (9,800)
------- -------
Net increase (decrease) in cash.......................................................... 5,256 (4,233)
Cash and cash equivalents at beginning of period......................................... 2,825 11,187
------- -------
Cash and cash equivalents at end of period............................................... $8,081 $6,954
------- -------
------- -------
See accompanying notes to condensed consolidated financial statements
5
NATIONAL PROPANE PARTNERS, L.P., AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION
AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- ORGANIZATION
National Propane Partners, L.P. (the 'Partnership') was formed on March 13,
1996 as a Delaware limited partnership. The Partnership and its subsidiary
partnership National Propane, L.P. (the 'Operating Partnership') were formed to
acquire, own and operate the propane business and substantially all the assets
and liabilities (principally all assets and liabilities other than amounts due
from a parent, deferred financing costs and income tax liabilities) of National
Propane Corporation and subsidiaries ('National Propane', and referred to
subsequent to the initial public offering (described below) as the 'Managing
General Partner'), a wholly-owned subsidiary of Triarc Companies, Inc.
('Triarc'). In addition, National Sales & Service, Inc. ('NSSI'), a subsidiary
of the Operating Partnership, was formed to acquire and operate the service work
and appliance and parts sales business of National Propane. The Partnership, the
Operating Partnership and NSSI are collectively referred to hereinafter as the
'Partnership Entities'. The Partnership Entities consummated in July, 1996, an
initial public offering (the 'Offering'), of 6,301,550 common units representing
limited partner interests in the Partnership (the 'Common Units') for an
offering price of $21.00 per Common Unit aggregating $132,333,000 before
$14,951,000 of underwriting discounts and commissions and other expenses related
to the Offering. On November 6, 1996 the Partnership sold an additional 400,000
Common Units through a private placement (the 'Equity Private Placement') at a
price of $21.00 per Common Unit aggregating $8,400,000 before $1,033,000 of fees
and expenses. On July 2, 1996 the Managing General Partner issued in a private
placement $125,000,000 of 8.54% First Mortgage Notes due June 30, 2010 (the
'First Mortgage Notes'). The Operating Partnership assumed the Managing General
Partner's obligation under the First Mortgage Notes in connection with the
conveyance on July 2, 1996 (the 'Partnership Conveyance') by the Managing
General Partner and National Propane SGP Inc., a subsidiary of the Managing
General Partner (the 'Special General Partner' and, together with the Managing
General Partner, referred to as the 'General Partners'), of substantially all of
their assets and liabilities (excluding an existing $81,392,000 intercompany
note from Triarc, $59,300,000 of the net proceeds from the issuance of the First
Mortgage Notes which was used to pay a dividend to Triarc and certain net
liabilities of the General Partners).
The General Partners own general partner interests representing an
aggregate 4% unsubordinated general partner interest in the Partnership and the
Operating Partnership on a combined basis. In addition, the Managing General
Partner owns 4,533,638 subordinated units (the 'Subordinated Units')
representing a 38.7% subordinated general partner interest in the Partnership
Entities.
NOTE 2 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
presented herein reflect the effects of the Partnership Conveyance, in which the
Partnership Entities became the successor to the businesses of National Propane.
As such, the condensed consolidated financial statements represent National
Propane prior to the Partnership Conveyance and the Partnership Entities
subsequent to the Partnership Conveyance. Because the Partnership Conveyance was
a transfer of assets and liabilities in exchange for partnership interests among
a controlled group of companies, it has been accounted for in a manner similar
to a pooling of interests, resulting in the presentation of the Partnership
Entities as the successor to the continuing businesses of National Propane. The
entity representative of both the operations of (i) National Propane prior to
the Partnership Conveyance, and (ii) the Partnership Entities subsequent to the
Partnership Conveyance, is referred to herein as 'National'. Those assets and
liabilities not conveyed to the Partnership were retained by the Managing
General Partner. All significant intercompany balances and transactions have
been eliminated in consolidation.
6
NATIONAL PROPANE PARTNERS, L.P., AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION
AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
The accompanying unaudited condensed consolidated financial statements of
National have been prepared in accordance with Rule 10-01 of Regulation S-X
promulgated by the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. In the opinion of National, however,
the accompanying condensed consolidated financial statements contain all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly National's financial position as of December 31, 1996 and March
31, 1997 and its results of operations and cash flows for the three-month
periods ended March 31, 1996 and 1997. This information should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1996 (the 'Form 10-K').
NOTE 3 -- PROPERTIES
The following is a summary of the components of properties, net:
DECEMBER 31, MARCH 31,
1996 1997
------------ ---------
(IN THOUSANDS)
Properties, at cost................................................ $170,724 $ 161,094
Less accumulated depreciation...................................... 90,090 81,408
------------ ---------
$ 80,634 $ 79,686
------------ ---------
------------ ---------
NOTE 4 -- INCOME TAXES
National's provision for income taxes for the three-month period ended
March 31, 1996 relates to National Propane. For the three-month period ended
March 31, 1997, which is subsequent to the Partnership Conveyance, no income
taxes have been provided since the earnings attributed to the Partnership and
the Operating Partnership are included in the tax returns of the individual
partners and not the Partnership's. NSSI, which is subject to federal and state
income taxes, did not have pre-tax income.
NOTE 5 -- ACQUISITIONS
During the first quarter of 1997 National acquired the assets of a propane
distributor for aggregate cash consideration of approximately $515,000 and an
obligation of $340,000 subject to downward adjustment.
In April, 1997, National acquired the assets of two propane distributors
for aggregate cash consideration of $3,909,000 and other consideration of
$300,000.
NOTE 6 -- CONTINGENCIES
National continues to have an environmental contingency of the same nature
and general magnitude as described in Note 19 to the consolidated financial
statements in the Form 10-K which may have a material adverse effect on the
Partnership's financial position, results of operations and its ability to make
distributions to the holders of its Common Units, the 4% unsubordinated General
Partner interest and the Subordinated Units. National does not believe that
contingencies for ordinary routine claims, litigation and administrative
proceedings and investigations incidental to its business, will have a material
adverse effect on the Partnership's consolidated financial condition or results
of operations.
7
NATIONAL PROPANE PARTNERS, L.P., AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION
AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
NOTE 7 -- UNAUDITED PRO FORMA SUMMARIZED OPERATING RESULTS
The following unaudited supplemental pro forma information of National for
the three months ended March 31, 1996 has been adjusted as if the Partnership
had been formed and the Partnership Conveyance, the Offering, the Equity Private
Placement and related transactions had been completed as of January 1, 1996 to
give effect to (i) the elimination of management fees paid to Triarc, (ii) the
addition of the estimated stand-alone general and administrative costs
associated with National's operations as a partnership, (iii) a net decrease in
interest expense to reflect the interest expense associated with the First
Mortgage Notes and to eliminate interest expense on the $128,469,000 of
refinanced debt, (iv) interest income on the $40,700,000 loan to Triarc made
concurrent with the Offering and (v) the elimination of the provision for income
taxes, as income taxes are now being borne by the partners and not the
Partnership or the Operating Partnership, except for corporate income taxes
relative to NSSI. Such following pro forma supplemental financial information
does not purport to be indicative of the actual results of operations of
National that would have resulted had the Partnership been formed and had the
Partnership Conveyance, the Offering, the Equity Private Placement and related
transactions been completed as of January 1, 1996 or of the future results of
operations of National.
THREE MONTHS ENDED
MARCH 31, 1996
--------------------------------------
(IN THOUSANDS, EXCEPT PER UNIT AMOUNT)
Revenues................................................ $ 59,981
Operating income........................................ 12,599
Income before income taxes.............................. 11,313
Net income.............................................. 11,263
General partners' unsubordinated interest in net
income................................................ 451
Unitholders' interest (common and subordinated) in net
income................................................ 10,812
Unitholders' net income per unit........................ .96
NOTE 8 -- QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH
On February 14, 1997 National paid a quarterly distribution for the quarter
ended December 31, 1996 to Unitholders of record on February 5, 1997 and on
April 28, 1997 National declared a quarterly distribution for the quarter ended
March 31, 1997 to Unitholders of record on May 8, 1997 payable May 15, 1997 each
consisting of $0.525 per Common and Subordinated Unit with a proportionate
amount for the 4% unsubordinated General Partner interest, or an aggregate of
$6,143,000 each including $2,625,000 to the General Partner related to the
Subordinated Units and the unsubordinated General Partner interest.
NOTE 9 -- RELATED PARTY TRANSACTIONS
National continues to have related party transactions of the same nature
and general magnitude as those described in Note 21 to the consolidated
financial statements contained in the Form 10-K.
8
NATIONAL PROPANE PARTNERS, L.P., AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION
AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
NOTE 10 -- STATEMENT OF PARTNERS' CAPITAL
GENERAL COMMON TOTAL
PARTNERS' PARTNERS' PARTNERS'
CAPITAL CAPITAL CAPITAL
--------- --------- ---------
(IN THOUSANDS)
Balance at December 31, 1996..................................................... $ 11,898 $ 22,165 $ 34,063
Net Income....................................................................... 3,068 4,110 7,178
Cash distributions paid.......................................................... (2,625) (3,518) (6,143)
--------- --------- ---------
Balance at March 31, 1997........................................................ $ 12,341 $ 22,757 $ 35,098
--------- --------- ---------
--------- --------- ---------
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements under this caption may constitute 'forward-looking
statements' under the Private Securities Litigation Reform Act of 1995. See
'Part II. Other Information.'
INTRODUCTION
National is primarily engaged in (i) the retail marketing of propane to
residential customers, commercial and industrial customers, agricultural
customers and to dealers that resell propane to residential and commercial
customers, and (ii) the retail marketing of propane-related supplies and
equipment, including home and commercial appliances. National believes it is the
sixth largest retail marketer of propane in terms of retail volume in the United
States, supplying approximately 250,000 retail and wholesale customers in 25
states through its 168 service centers.
National's residential and commercial customers use propane primarily for
space heating, water heating, clothes drying and cooking. In the industrial
market propane is used as a motor fuel for over-the-road vehicles, forklifts and
stationary engines, to fire furnaces, as a cutting gas and in other process
applications. Agricultural customers use propane for tobacco curing, crop
drying, poultry brooding and weed control. Dealers re-market propane in small
quantities, primarily in cylinders, for residential and commercial uses.
The retail propane sales volumes are very dependent on weather conditions.
National sells approximately 67% of its retail volume during the first and
fourth quarters, which are the winter heating season. As a result, cash flow is
greatest during the first and fourth quarters as customers pay for their
purchases. Propane sales are also dependent on climatic conditions which may
affect agricultural regions. National believes that its exposure to regional
weather patterns is lessened because of the geographic diversity of its areas of
operations and through sales to commercial and industrial markets, which are not
as sensitive to variations in weather conditions.
Gross profit margins are not only affected by weather patterns but also by
changes in customer mix. In addition, gross profit margins vary by geographical
region. Accordingly, profit margins could vary significantly from year to year
in periods with identical sales volumes.
National reports on a calendar year basis; accordingly its results are
affected by two different winter heating seasons: the end of the first year's
heating season, National's first fiscal quarter, and the beginning of the second
heating season, National's fourth fiscal quarter.
Profitability is also affected by the price and availability of propane.
Worldwide availability of both gas liquids and oil affects the supply of propane
in domestic markets. National does not believe it is overly dependent on any one
supplier. National buys propane on both one year contracts and the spot market
and does not enter into any fixed price take-or-pay contracts. Furthermore,
National purchases propane from a wide variety of sources. In 1996 and in the
first quarter of 1997, no provider supplied over 20% of National's propane
needs.
Based on demand and weather conditions the price of propane can change
quickly over a short period of time; in most cases the increased cost of propane
is passed on to the customer. However, in cases where increases cannot be passed
on or when the price of propane escalates faster than National's ability to
raise customer prices, margins will be negatively affected.
The propane industry is very competitive. National competes against other
major propane companies as well as local distributors in most of its markets,
with the most competition in the Midwest United States. Propane also competes
against other energy sources, primarily natural gas, oil and electricity.
The following discussion compares the results of operations of the
Partnership for the three months ended March 31, 1997 with the results of
National Propane for the three months ended March 31, 1996.
10
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1996
Revenues decreased $0.8 million, or 1.3%, to $59.2 million in the three
months ended March 31, 1997 as compared to $60.0 million for the three months
ended March 31, 1996 with propane revenues decreasing $0.2 million, or 0.3% to
$57.0 million for the three months ended March 31, 1997 compared with $57.2
million in 1996 and revenues from appliance and other product lines decreasing
$0.6 million. The $0.2 million decrease in propane revenue is due to volume
decreases ($7.0 million) as a result of warmer weather and customer energy
conservation resulting from the record high propane costs this heating season
offset by increased selling prices due to increased product costs ($6.8
million). Propane retail gallons sold decreased 7.2 million, or 12.3%, to 51.2
million gallons in 1997, compared to 58.4 million gallons in 1996. This decrease
in gallons sold is primarily attributable to a decrease in gallons sold to
residential customers due to the fact that the three months ended March 31, 1997
were 6.8% warmer than the same period in 1996 according to Degree Day data
published by the National Climatic Data Center as applied to the geographic
regions of National's operations and customer energy conservation as previously
discussed.
Gross profit (revenues less cost of sales) decreased $4.0 million, or 21.1%
to $14.8 million in the three month period ended March 31, 1997 versus the same
period in 1996, of which $3.8 million is attributable to propane and $0.2
million to appliance and other product lines. Lower propane sales volume caused
$3.5 million of the $3.8 million propane gross profit decrease. The average
dollar margin (sales price less the cost of propane) declined $0.006, or 1.2%,
per gallon sold in the 1997 first quarter versus the 1996 first quarter. The
$0.006 lower average dollar margin was due to (i) a shift in customer mix toward
lower-priced non-residential customers and (ii) a 28% increase in propane costs
which was not fully passed on to certain customers in the form of higher selling
prices in order to achieve maximum customer retention, during this period of
high propane costs. The decrease in gross profit as a percentage of sales, from
31.4% to 25.1%, is primarily the result of the gross profit per gallon remaining
relatively unchanged from period to period while the average sales price per
gallon increased 13.7% due to higher product costs.
Selling, general and administrative expenses increased $0.5 million or 9.0%
to $6.4 million for the three months ended March 31, 1997 as compared to $5.9
million for the three months ended March 31, 1996 due to increases in
stand-alone costs associated with the Partnership partially offset by reduced
payroll and insurance costs.
Management fees formerly paid to Triarc have been eliminated effective with
the beginning of the operations of the Partnership.
Interest expense decreased $0.2 million, or 6.0% in the first quarter of
1997 compared to 1996. This decrease was due to lower average interest rates due
to the refinanced debt and lower amortization of deferred financing costs
partially offset by higher average borrowings.
Interest income from Triarc in the three months ended March 31, 1997 is due
to interest on the July 2, 1996 $40.7 million loan to Triarc.
Other income, net remained constant in 1997 and 1996.
The provision for income taxes in 1996 is related to National's operations
prior to the Partnership Conveyance. The Partnership and the Operating
Partnership are not tax paying entities except for NSSI which did not have any
pre-tax income in the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
National's cash balances decreased $4.2 million during the three month
period ended March 31, 1997. This decrease reflected cash provided by operating
activities of $8.7 million offset by cash used in investing activities of $3.2
million and cash used in financing activities of $9.8 million.
Cash flows from operating activities of $7.4 million in the 1997 period
consisted of net income of $7.2 million increased by non cash charges of $3.3
million, principally depreciation and amortization, and offset by a $3.2 million
increase in working capital. The change in working capital is primarily made
11
up of seasonal decreases in receivables ($3.2 million) and inventories ($3.3
million) more than offset by decreases in accounts payable and accrued expenses
($8.6 million) and an increase in due from parent ($1.4 million). The decrease
in accounts payable and accrued expenses is comprised of a decrease of
approximately $10.0 million in accounts payable offset by an increase in accrued
expenses of approximately $1.4 million. The decrease in accounts payable is also
due primarily to the seasonal nature of the propane industry as well as a 22%
decrease in the cost of propane purchased in March 1997 versus propane purchased
in December 1996. The $1.4 million increase in accrued expenses is due to the
timing of the interest payments on the First Mortgage Notes ($2.7 million)
offset primarily by a decrease in property and sales taxes ($0.6 million), a
decrease in accrued financing costs ($0.6 million) and a decrease in other
accrued expenses ($0.1 million).
Cash used in investing activities during the three month period ended March
31, 1997 included capital expenditures of $1.4 million and acquisitions of $0.5
million. Of the capital expenditure amount for 1997, $0.5 million was for
recurring maintenance and $0.9 million was to support growth of operations.
National has budgeted maintenance capital expenditures and growth capital
expenditures for the remainder of 1997 of approximately $3.0 million and $1.6
million, respectively, subject to the availability of cash and other financing
sources. National has outstanding commitments amounting to $0.9 million for such
capital expenditures as of March 31, 1997, which consists of $0.5 million for
growth capital expenditures and $0.4 million for maintenance capital
expenditures. During the first quarter of 1997 National acquired the assets of a
propane distributor for approximately $0.9 million for cash consideration of
$0.5 million and an obligation of $0.3 million subject to downward adjustment.
In April 1997, National acquired the assets of two additional propane
distributors for cash of $3.9 million and other consideration of $0.3 million.
Cash used in financing activities during the three month period ended March
31, 1997 reflects net repayments of $6.0 million on National's working capital
line-of-credit, borrowings of $2.6 million on the acquisition facility (see
below) other debt repayments of $0.3 million and the February 14, 1997
distributions to unitholders of $6.1 million.
National has a $55 million bank credit facility (the 'Bank Credit
Facility') which includes a $15 million working capital facility (the 'Working
Capital Facility') to be used for working capital and other general partnership
purposes and a $40 million acquisition facility (the 'Acquisition Facility'),
the use of which is restricted to business acquisitions and capital expenditures
for growth. At March 31, 1997 there were no outstanding borrowings under the
Working Capital Facility and $4.5 million borrowed under the Acquisition
Facility. The Acquisition Facility and the First Mortgage Notes do not require
any principal payments in 1997.
Based on National's current cash on hand, available borrowings under the
Bank Credit Facility and cash flows from operations, National expects to be able
to meet all of its cash requirements, principally the aforementioned capital
expenditures and business acquisitions, for the remainder of 1997.
To the extent National has net positive cash flows, it will make quarterly
distributions of its cash balances in excess of reserve requirements, as
defined, to holders of the Common Units, the 4% unsubordinated General Partner
interest and the Subordinated Units within 45 days after the end of each fiscal
quarter. On April 28, 1997, National announced it would pay on May 15, 1997 a
quarterly distribution of $0.525 per Common and Subordinated Unit to unitholders
of record on May 8, 1997 with a proportionate amount for the 4% unsubordinated
general partner interest, or an aggregate of $6.1 million, including $2.6
million payable to the General Partners related to the Subordinated Units and
the unsubordinated General Partner interest.
CONTINGENCIES
National continues to have an environmental contingency of the same nature
and general magnitude as described in Note 19 to the consolidated financial
statements in the form 10-K which may have a material adverse effect on the
Partnership's financial position, results of operations and its ability to make
distributions to the holders of its Common Units, the 4% unsubordinated General
Partner interest and the Subordinated Units. National does not believe that
contingencies for ordinary routine
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claims, litigation and administrative proceedings and investigations incidental
to its business, will have a material adverse effect on the Partnership's
consolidated financial condition or results of operations.
PART II. OTHER INFORMATION
The statements in this Quarterly Report on Form 10-Q that are not
historical facts constitute 'forward-looking statements' within the meaning of
the Private Securities Litigation Reform Act of 1995 that involve risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership and its related entities to be materially
different from any future results, performance or achievements express or
implied by such forward-looking statements. These forward looking statements are
identified by their use of forms of such terms and phrases as 'intends',
'goals', 'estimates', 'projects', 'plans', 'anticipates', 'should', 'future',
'believes', and 'scheduled'. The factors which may cause differences include,
but are not limited to, the following: general economic and business conditions;
competition; success of operating initiatives; operating costs; advertising and
promotional efforts; the existence or absence of adverse publicity; availability
and locations and terms of opportunities for business growth and development;
changes in business strategy or development plans; quality of management;
availability, terms and deployment of capital; business abilities and judgment
of personnel; availability of qualified personnel; labor and employee benefit
costs; availability and cost of raw materials and supplies; changes in, or
failure to comply with, government regulations; regional weather conditions; and
other risks and uncertainties detailed in the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1996 and in the Partnership's other
current and periodic filings with the Securities and Exchange Commission.
National will not undertake and specifically declines any obligation to release
publicly the result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Second Amendment dated as of April 22, 1997 to the Credit Agreement dated as of June 26, 1996 among
National Propane Partners, L.P., the First National Bank of Boston, as administrative agent and a lender,
Bank of America NT & SA, as a lender and BA Securities, Inc., as Syndication Agent incorporated herein by
reference to Exhibit 10.1 to the Partnership's report on Form 8-K Dated May 15, 1997.
27. Financial Data Schedule for the three month period ended March 31, 1997, submitted to the Securities and
Exchange Commission in electronic format.
(b) Reports on Form 8-K.
The Partnership filed a Form 8-K on May 15, 1997 pursuant to which the
Partnership filed an exhibit required to be filed in connection with its
quarterly report on Form 10-Q for the quarter ended March 31, 1997.
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NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
SIGNATURES
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.
NATIONAL PROPANE PARTNERS, L.P.
BY: NATIONAL PROPANE CORPORATION
as Managing General Partner
By /s/ RONALD R. ROMINIECKI
...................................
RONALD R. ROMINIECKI
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
By /s/ R. BROOKS SHERMAN
...................................
R. BROOKS SHERMAN
CONTROLLER AND
CHIEF ACCOUNTING OFFICER
(PRINCIPAL ACCOUNTING OFFICER)
Date: May 15, 1997
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