<PAGE>
<PAGE>
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 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: 1-11867
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, Cedar Rapids, IA
--------------------------------------------------------------
(Address of principal executive offices)
52401-1409
----------
(Zip Code)
(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 [ ] No [X]
There were 6,301,550 Common Units and 4,533,638 Subordinated Units
outstanding as of July 31, 1996.
<PAGE>
<PAGE>
National Propane Partners, L.P.
Index to Form 10-Q
Part I Financial Information
Item 1--Financial Statements
<TABLE>
<S> <C>
National Propane Partners, L.P.:
Condensed Consolidated Balance Sheet--June 30, 1996
Condensed Consolidated Statement of Operations--March 13, 1996 (date of inception)
through June 30, 1996
Condensed Consolidated Statement of Cash Flows--March 13, 1996 (date of inception)
through June 30, 1996
Notes to Condensed Consolidated Financial Statements
National Propane Corporation (Predecessor):
Condensed Consolidated Balance Sheets--December 31, 1995 and June 30, 1996
Condensed Consolidated Statements of Operations--Three months and six months
ended June 30, 1995 and 1996
Condensed Consolidated Statements of Cash Flows--Six months ended
June 30, 1995 and 1996
Notes to Condensed Consolidated Financial Statements
Item II--Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II Other Information
Item 5--Other Information
Item 6--Exhibits and Reports on Form 8-K
Signature
</TABLE>
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30,
1996
-----
<S> <C>
Assets
Cash $2,023
------
Total Assets $2,023
------
------
Liabilities and General Partners' Capital
Due to National Propane Corporation $1,000
General Partners' Capital 1,023
------
Total Liabilities and General Partners' Capital $2,023
------
------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
March 13, 1996
(date of inception)
through
June 30, 1996
-------------
<S> <C>
General and Administrative Expenses $ 977
----
Net loss $(977)
----
----
General Partners' interest in net loss $(977)
----
----
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
March 13, 1996
(date of inception)
through
June 30, 1996
-------------------
<S> <C>
Cash flows from operating activities:
Net loss $(977)
-----
Net cash used in operating activities (977)
-----
Cash flows from financing activities:
Increase in Due to National Propane Corporation 1,000
Capital contribution 2,000
-----
Net cash provided by financing activities 3,000
-----
Net increase in cash 2,023
Cash at beginning of period --
------
Cash at end of period $2,023
------
------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
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 other than amounts due from a parent, deferred
financing costs and income tax liabilities) of National Propane Corporation
(the "Predecessor Company", 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
and 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 the Predecessor Company. The Partnership, the Operating Partnership
and NSSI are collectively referred to hereinafter as the "Partnership Entities".
The Partnership Entities consummated on July 2, 1996 (the "Closing Date"), an
initial public offering of 6,190,476 Common Units representing limited partner
interests in the Partnership (the "Common Units") for an offering price of
$21.00 per Common Unit aggregating $130 million before underwriting discounts
and commissions and other expenses related to the offering. On such date the
Managing General Partner issued in a private placement $125 million 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 (the "Partnership
Conveyance") by the Managing General Partner and National Propane SGP, Inc. (the
"Special General Partner" and, together with the Managing General Partner
referred to as the "General Partners"), of substantially all of their assets
(which assets did not include the existing intercompany note from Triarc,
approximately $59.3 million of the net proceeds from the issuance of the First
Mortgage Notes and certain other assets of the General Partners). On July 22,
1996, the underwriters of the Partnership's initial public offering exercised
an overallotment option to purchase an additional 111,074 Common Units for
an offering price of $21.00 per Common Unit aggregating $2.3 million before
underwriting discounts and commissions and other expenses.
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 40.2% subordinated general partner interest in the Partnership
Entities.
Note 2 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of the Partnership 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 the
Partnership, however, the accompanying financial statements contain all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Partnership's financial position, results of operations and
cash flows.
Note 3 - Long Term Debt
First Mortgage Notes - Concurrent with the initial public offering the
Managing General Partner issued $125 million of First Mortgage Notes in a
private placement, which have been assumed by the Operating Partnership in
connection with the Partnership Conveyance. The First Mortgage Notes bear
interest at a fixed annual rate of 8.54% payable semi-annually in arrears.
The agreement pursuant to which the First Mortgage Notes were issued
contains certain restrictive covenants limiting, among other items, (i) the
incurrence of certain other additional indebtedness, (ii) certain investments,
asset dispositions and transactions with affiliates other than in the normal
course of business and (iii) restricts the payment of dividends.
<PAGE>
<PAGE>
The First Mortgage Notes mature on June 30, 2010 and require eight
equal annual prepayments of $15,625,000 of principal beginning June 30, 2003.
Bank Credit Facility -- Concurrent with the initial public offering,
the Operating Partnership entered into a $55 million bank credit facility (the
"Bank Credit Facility") with a group of banks. The Bank Credit Facility includes
a $15 million working capital facility (the "Working Capital Facility") and a
$40 million acquisition facility (the "Acquisition Facility"), the use of which
is restricted to business acquisitions and capital expenditures for growth. The
Bank Credit Facility bears interest, at the Operating Partnership's option, at
either (i) the 30, 60, 90 or 180-day London Interbank Offered Rate plus a margin
generally ranging from 1% to 1.75% or (ii) the higher of (a) the prime rate and
(b) the Federal funds rate plus 0.5%, in either case, plus a margin of up to
0.25%. The Working Capital Facility matures in full in July 1999. However, the
Operating Partnership must reduce the borrowings under the Working Capital
Facility to zero for a period of at least 30 consecutive days in each year
between March 1 and August 31. The Acquisition Facility converts to a term loan
in July 1998 and amortizes thereafter in equal quarterly installments through
July 2001. The Bank Credit Facility agreement contains various covenants which
(i) require meeting certain financial amount and ratio tests (ii) limit, among
other items, the incurrence of indebtedness, investments, asset dispositions and
affiliate transactions other than in the normal course of business and (iii)
restricts the payment of dividends.
The Operating Partnership's obligations under both the First Mortgage
Notes and the Bank Credit Facility are collateralized on an equal and ratable
basis by a security interest in substantially all of the assets of, and the
Partnership's limited partner interest in, the Operating Partnership and are
guaranteed by the Managing General Partner.
Note 4 - Acquisitions
Subsequent to the Closing Date the Operating Partnership acquired the
assets of two unaffiliated propane distributors for cash consideration of
$975,000.
Note 5 - Contingencies
In May 1994 the Predecessor Company was informed of coal tar
contamination which was discovered at one of its properties in Wisconsin. The
Predecessor Company purchased the property from a company which had purchased
the assets of a utility which had previously owned the property. The Predecessor
Company believes that the contamination occurred during the use of the property
as a coal gasification plant by such utility. In order to assess the extent of
the problem the Predecessor Company engaged environmental consultants who began
work in August 1994. In February 1996, the Predecessor Company's environmental
consultants provided a report which presented the two most likely remediation
methods and estimates of the costs of such methods. The range of estimated costs
for the first method, which involves treatment of groundwater and excavation,
treatment and disposal of contaminated soil, is from $1,600,000 to $3,300,000.
The range for the second method, which involves only treatment of groundwater
and the building of a soil containment wall, is from $432,000 to $750,000. Based
on discussion with the Predecessor Company's environmental consultants both
methods are acceptable remediation plans. The Predecessor Company, however, will
have to agree on a final plan with the State of Wisconsin. Since receiving
notice of the contamination, the Predecessor Company has engaged in discussions
of a general nature concerning remediation with the State of Wisconsin. The
discussions are ongoing and there is no indication as yet of the time frame for
a decision by the State of Wisconsin on the method of remediation. Accordingly,
it is unknown which remediation method will be used. Since no amount within the
ranges can be determined to be a better estimate, the Predecessor Company has
accrued $432,000 at December 31, 1995 and June 30, 1996 in order to provide for
the minimum costs estimated for the second remediation method and legal fees and
other professional costs. The Predecessor Company is also engaged in ongoing
discussions of a general nature with a successor to the utility that operated a
coal gasification plant on the property. There is as yet no indication that a
successor owner will share the costs of remediation. The Predecessor Company, if
found liable for any such costs, would attempt to recover such costs from the
successor owner. Pursuant to a lease with the Predecessor Company relating to
this facility, the Operating Partnership has agreed to be liable for any costs
of remediation in excess of amounts recovered from such successor or from
insurance. The ultimate outcome of this matter cannot presently be determined
and, depending on the cost of remediation required, may have a material adverse
effect on the Partnership's consolidated financial position or results of
operations.
The Partnership is involved in ordinary claims, litigation and
administrative proceedings and investigations of various types in several
jurisdictions incidental to its business. In the opinion of management of the
Partnership, the outcome of any such matter, or all of them combined, will not
have a material adverse effect on the Partnership's consolidated financial
condition or results of operations.
<PAGE>
<PAGE>
Note 6 - Unaudited Pro Forma Condensed Consolidated Financial Statements
The following pro forma condensed consolidated balance sheet of the
Partnership has been prepared by adjusting the assets and liabilities of the
Partnership resulting from the Partnership Conveyance by the General Partners to
give effect to the offering, a $40.7 million loan to Triarc (the "Partnership
Loan") and the use of proceeds of the offering as if they had occurred on June
30, 1996. The following pro forma condensed consolidated statement of operations
of the Partnership has been prepared by adjusting the consolidated statement of
operations of the Predecessor Company for the six months ended June 30, 1996
(see Predecessor Company condensed consolidated financial statements included
elsewhere herein) to give effect to the above transactions as if they had
occurred on January 1, 1996. The pro forma adjustments are described in the
accompanying notes to the pro forma condensed consolidated financial statements
which should be read in conjunction with such pro forma condensed consolidated
financial statements. Such pro forma condensed consolidated financial statements
should also be read in conjunction with the Predecessor Company's condensed
consolidated financial statements and notes thereto included elsewhere herein.
The following pro forma condensed consolidated financial statements do not
purport to be indicative of the actual financial position or the results of
operations that would have resulted had the above transactions actually been
consummated on the dates indicated or of the future financial position or the
results of operations of the Partnership which will result from the consummation
of such transactions.
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30,1996
<TABLE>
<CAPTION>
National National
Propane Propane
Partners, L.P. Pro Forma Partners, L.P.
Conveyance Adjustments Pro Forma
---------------- ----------- ----------------
ASSETS (In thousands)
<S> <C> <C> <C>
Current assets:
Cash $64,831 $118,933 (a) $2,025
(67,092)(b)
(40,700)(c)
(12,227)(d)
(61,720)(e)
Receivables, net 13,304 -- 13,304
Finished goods inventories 9,441 -- 9,441
Other current assets 2,486 -- 2,486
-------- --------- --------
Total current assets 90,062 (62,806) 27,256
Due from Triarc -- 40,700 (c) 40,700
Properties, net 80,886 -- 80,886
Unamortized costs in excess of net assets of
acquired companies 14,819 -- 14,819
Other assets 8,434 -- 8,434
-------- --------- --------
$194,201 ($22,106) $172,095
-------- --------- --------
-------- --------- --------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of long-term debt $3,784 $ (3,469)(e) $315
Accounts payable 4,033 -- 4,033
Due to Triarc and an affiliate 12,227 (12,227)(d) --
Accrued expenses 8,460 (180)(b) 8,117
(163)(e)
-------- --------- --------
Total current liabilities 28,504 (16,039) 12,465
Long-term debt 251,181 (66,912)(b) 126,181
(58,088)(e)
Other liabilities 2,051 -- 2,051
Commitments and contingencies
Partners' capital
Limited partners' capital -- 118,933 (a) 17,526
101,407 (f)
General partners' capital (87,535) (101,407)(f) 13,872
-------- --------- --------
Total partners' capital (87,535) 118,933 31,398
-------- --------- --------
$194,201 $(22,106) $172,095
-------- --------- --------
-------- --------- --------
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
(In thousands, except Unit amounts)
(a) To reflect the net proceeds to the Partnership of $118,933 from the
issuance of 6,301,550 Common Units at an offering price of $21.00 per
Common Unit net of $13,400 for underwriting discounts and commissions
and other expenses relating to the initial public offering.
(b) To reflect the repayment of $67,092 of existing indebtedness
consisting of principal ($66,912) and accrued interest and commitment
fees ($180) utilizing a portion of the proceeds from the sale of Common
Units.
(c) To reflect the $40,700 Partnership Loan to Triarc.
(d) To record the payment of liabilities due to Triarc and another
affiliate primarily representing accrued management fees and tax
sharing payments.
(e) To reflect the repayment of $61,720 of existing indebtedness
consisting of principal ($61,557) and accrued interest ($163) utilizing
a portion of the proceeds from the issuance of the First Mortgage
Notes.
(f) To record the allocation of partners' capital resulting from the
completion of the initial public offering described in (a) above.
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except Unit amounts)
<TABLE>
<CAPTION>
Six months ended June 30. 1996
-----------------------------------------------------
National National
Propane Propane
Corporation Pro Forma Partnership, L.P.
& Subsidiaries Adjustments Pro Forma
-------------- ----------- -----------------
<S> <C> <C> <C>
Revenues $88,298 $ -- $88,298
------- ---- ----------
Operating costs and expenses:
Cost of sales 64,863 -- 64,863
Selling, general and administrative
expenses 11,656 750 (a) 12,406
Management fees charged by parent 1,500 (1,500)(b) --
------- ------ ----------
78,019 (750) 77,269
------- ------ ----------
Operating income 10,279 750 11,029
------- ------ ----------
Other income (expense):
Interest expense (6,242) 582 (c) (5,660)
Interest income from parent -- 2,750 (d) 2,750
Other income, net 510 -- 510
------- ------ ----------
(5,732) 3,332 (2,400)
------- ------ ----------
Income before income taxes 4,547 4,082 8,629
Provision for (benefit from) income taxes 1,922 (1,822)(e) 100
----- ------ ----------
Net income $2,625 $5,904 $8,529
----- ------ ----------
----- ------ ----------
General Partners' interest in net income (f) $341
----------
----------
Unitholders' interest in net income (f) $8,188
----------
----------
Net income per Unit (f) $0.76
----------
----------
Weighted average number of Units outstanding (f) 10,835,188
----------
----------
See notes to unaudited pro forma condensed consolidated statement of
operations.
</TABLE>
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
(Dollars in thousands)
(a) To reflect the estimated stand-alone general and administrative costs
associated with the Partnership. The following are primarily based on
actual quotes for third party services and salary levels commensurate with
the market:
<TABLE>
<S> <C>
Cost of tax return preparation and recordkeeping $125
Investor relations 100
Insurance 100
Audit and legal services 125
Registrar and stock exchange fees 62
Direct charges from Triarc 88
Other 150
----
$750
----
----
</TABLE>
(b) To reflect the elimination of the management services fee charged by Triarc
which will not be charged to the Partnership Entities.
(c) Represents adjustments to interest expense as follows:
<TABLE>
<S> <C>
Interest expense on the existing credit facility $5,318
Interest expense on other existing indebteness 276
Amortization of deferred financing costs associated with
the existing credit facility 597
Interest expense on the First Mortgage Notes (interest
rate of 8.54%) (5,338)
Amortization of deferred financing costs associated with
the First Mortgage Notes (271)
------
$582
------
------
</TABLE>
(d) To reflect interest income at 13.5% on the $40,700 Partnership Loan to
Triarc.
(e) To reflect the reduction of the provision for income taxes as income taxes
will be borne by the partners and not the Partnership, except for corporate
income taxes relative to the Partnership's wholly owned subsidiary which
will conduct certain of the Partnership's operations.
(f) The General Partners' allocation of net income is based on their combined
4% unsubordinated general partner interest in the Partnership (excluding
the Subordinated Units). The General Partners' 4% allocation of net income
has been deducted before calculating the net income per unit. The
allocation of net income for Common Units and Subordinated Units is based
on the terms of the partnership agreement and that 6,301,550 Common Units
and 4,533,638 Subordinated Units were outstanding at all times during the
period.
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES (PREDECESSOR)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except for share data)
(Unaudited)
<TABLE>
<CAPTION>
Dec 31, June 30,
1995(A) 1996
------- --------
ASSETS
<S> <C> <C>
Current assets:
Cash $2,825 $4,561
Receivables, net 16,391 13,304
Finished goods inventories 10,543 9,441
Other current assets 4,340 4,679
-------- --------
Total current assets 34,099 31,985
Properties, net 83,214 80,959
Unamortized costs in excess of net assets of acquired companies 15,161 14,819
Other assets 6,638 7,114
-------- --------
$139,112 $134,877
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $11,278 $3,784
Accounts payable 7,836 4,033
Due to a parent and another affiliate 9,972 12,788
Accrued expenses 9,370 9,061
-------- --------
Total current liabilities 38,456 29,666
Long-term debt 124,266 126,181
Deferred income taxes 22,878 22,954
Customer deposits 2,112 2,051
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, 221,900 shares authorized and no shares issued
or outstanding -- --
Common stock, $1 par value; 3,000 shares authorized,
1,360 shares issued and outstanding 1 1
Additional paid in capital 36,270 36,270
Accumulated deficit (3,479) (854)
Due from Triarc (81,392) (81,392)
-------- --------
Total stockholders' deficit ($48,600) ($45,975)
-------- --------
$139,112 $134,877
-------- --------
-------- --------
</TABLE>
(A) Derived from the audited consolidated financial statements as of
December 31, 1995
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES (PREDECESSOR)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1995 1996 1995 1996
------- ------- ------- ------
<S> <C> <C> <C> <C>
Revenues $26,418 $28,317 $76,725 $88,298
------- ------- ------- -------
Operating costs and expenses:
Cost of sales 21,979 23,709 55,840 64,863
Selling, general and administrative expenses 5,026 5,803 10,201 11,656
Management fees charged by parents 750 750 1,500 1,500
------- ------- ------- -------
27,755 30,262 67,541 78,019
------- ------- ------- -------
Operating income (loss) (1,337) (1,945) 9,184 10,279
------- ------- ------- -------
Other income (expense):
Interest expense (2,961) (3,104) (5,825) (6,242)
Other income, net 190 233 489 510
------- ------- ------- -------
(2,771) (2,871) (5,336) (5,732)
------- ------- ------- -------
Income (loss) before income taxes (4,108) (4,816) 3,848 4,547
Provision for (benefit from) income taxes (1,580) (1,927) 1,575 1,922
------- ------- ------- -------
Net income (loss) $(2,528) $(2,889) $ 2,273 $ 2,625
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES (PREDECESSOR)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------------------
1995 1996
------- ------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 2,273 $ 2,625
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization of properties 4,352 5,015
Amortization of costs in excess of net assets of acquired properties 245 359
Amortization of deferred financing costs 672 597
Other amortization 202 110
Provision for doubtful accounts 431 734
Deferred income tax benefit (294) (800)
Gain on sales of properties (93) (52)
Other, net (203) (87)
Changes in operating assets and liabilities
Decrease in:
Receivables 5,950 2,354
Inventories 2,401 1,102
Prepaid expenses and other current assets 79 538
Decrease in accounts payable and accrued expenses (6,079) (4,112)
-------- --------
Net cash provided by operating activities 9,936 8,383
-------- --------
Cash flows from investing activities:
Capital expenditures (3,289) (2,691)
Business acquisitions (78) (37)
Proceeds from sales of properties 333 227
Decrease (increase) in due from parents (3,288) 2,877
-------- --------
Net cash (used in) provided by investing activities (6,322) 376
-------- --------
Cash flows from financing activities:
Repayments of long-term debt (12,882) (8,820)
Proceeds from long-term debt 8,000 3,000
Expenses of the offering and private placement 0 (1,201)
Other (812) (2)
-------- --------
Net cash used in financing activities (5,694) (7,023)
-------- --------
Net increase (decrease) in cash (2,080) 1,736
Cash at beginning of period 3,983 2,825
-------- --------
Cash at end of period $ 1,903 $ 4,561
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
(Dollars in thousands)
1. Basis of Presentation
National Propane Corporation and subsidiaries (the "Company") is a
wholly-owned subsidiary of Triarc Companies, Inc. ("Triarc"). The three
and six months ended June 30, 1995 and 1996 reflect the effects of the
June 1995 merger (the "Merger") of Public Gas Company with and into the
Company. Because the Merger was a transfer of assets and liabilities in
exchange for shares among a controlled group of companies, it has been
accounted for in a manner similar to a pooling of interests and,
accordingly, the 1995 periods have been restated to reflect the Merger.
The accompanying unaudited condensed consolidated financial statements
of the Company 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 the Company, however, the accompanying
financial statements contain all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the Company's
financial position, results of operations and cash flows. 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. Properties
The following is a summary of the components of properties, net:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
---- ----
<S> <C> <C>
Properties, at cost $165,216 $167,813
Less accumulated depreciation 82,002 86,854
-------- --------
$83,214 $80,959
-------- --------
-------- --------
</TABLE>
3. Income Taxes
The Company's provision for (benefit from) income taxes for each of the
periods presented varies from the Federal statutory income tax rate of
35% principally due to state income taxes and the effect of goodwill
amortization.
4. Contingencies
In May 1994 the Company was informed of coal tar contamination which
was discovered at one of its properties in Wisconsin. The Company
purchased the property from a company which had purchased the assets of
a utility which had previously owned the property. The Company believes
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<PAGE>
that the contamination occurred during the use of the property as a
coal gasification plant by such utility. In order to assess the extent
of the problem the Company engaged environmental consultants who began
work in August 1994. In February 1996, the Company's environmental
consultants provided a report which presented the two most likely
remediation methods and estimates of the costs of such methods. The
range of estimated costs for the first method, which involves treatment
of groundwater and excavation, treatment and disposal of contaminated
soil, is from $1,600 to $3,300. The range for the second method, which
involves only treatment of groundwater and the building of a soil
containment wall, is from $432 to $750. Based on discussion with the
Company's environmental consultants both methods are acceptable
remediation plans. The Company, however, will have to agree on a final
plan with the State of Wisconsin. Since receiving notice of the
contamination, the Company has engaged in discussions of a general
nature concerning remediation with the State of Wisconsin. The
discussions are ongoing and there is no indication as yet of the time
frame for a decision by the State of Wisconsin on the method of
remediation. Accordingly, it is unknown which remediation method will
be used. Since no amount within the ranges can be determined to be a
better estimate, the Company has accrued $432 at December 31, 1995 and
June 30, 1996 in order to provide for the minimum costs estimated for
the second remediation method and legal fees and other professional
costs. The Company is also engaged in ongoing discussions of a general
nature with a successor to the utility that operated a coal
gasification plant on the property. There is as yet no indication that
a successor owner will share the costs of remediation. The Company, if
found liable for any such costs, would attempt to recover such costs
from the successor owner. Pursuant to a lease between the Company the
Operating Partnership relating to this facility, the Operating
Partnership has agreed to be liable for any costs of remediation in
excess of amounts recovered from such successors or from insurance. The
ultimate outcome of this matter cannot presently be determined and,
depending on the cost of remediation required, may have a material
adverse effect on the Partnership's consolidated financial position or
results of operations.
The Company is involved in ordinary claims, litigation and
administrative proceedings and investigations of various types in
several jurisdictions incidental to its business. In the opinion of
management of the Company, the outcome of any such matter, or all of
them combined, will not have a material adverse effect on the Company's
consolidated financial condition or results of operations. Any
liabilities that may result in the future from such matters, will also
be assumed by the Partnership in connection with the Partnership
Conveyance.
5. Partnership Transactions
In July 1996 the Partnership, a newly formed limited partnership
organized to acquire, own and operate the propane business of the
Company, consummated an initial public offering (the "Initial Public
Offering") of an aggregate 6,301,550 of its limited partner interest
common units (the "Common Units"), representing an approximate 55.8%
interest in the Partnership, for an offering price of $21.00 per Common
Unit aggregating $132,333 before underwriting discounts and commissions
and other expenses relating to the offering. In connection therewith,
the Partnership concurrently issued to the Company 4,533,638
subordinated units (the "Subordinated Units" and, collectively with the
Common Units, the "Units"), representing an approximate 40.2%
subordinated general partner interest in the Partnership, as well as a
combined aggregate 4.0% unsubordinated general partner interest in the
Partnership and a subpartnership, National Propane, L.P. (the
"Operating Partnership"). In connection therewith, the Company conveyed
(the "Partnership Conveyance") substantially all of its propane-related
assets and liabilities (principally other than a receivable from
Triarc, deferred financing costs and net income tax liabilities) to the
Operating Partnership. Further, on July 2, 1996 the Company issued
$125,000 of 8.54% first mortgage notes due June 30, 2010 (the "First
Mortgage Notes") to institutional investors; the First Mortgage Notes
were assumed by the Operating Partnership. From the proceeds of the
Initial Public Offering and the issuance of the First Mortgage Notes,
$128,469 of the Company's long-term debt (including $123,188 of
outstanding borrowings under the Company's existing bank facility) were
repaid. The Company has classified $5,684 of current debt as long-term
debt at June 30, 1996 in the accompanying condensed consolidated
balance sheet as a result of the long-term financing. The early
extinguishment of National Propane's long-term debt on July 2, 1996
will result in an extraordinary charge for the write-off of unamortized
deferred financing costs and prepayment penalties, net of income tax
benefit, in the third quarter of 1996, of $2,616 net of tax of $1,711.
6. Unit Option Plan
Effective on July 2, 1996, the Managing General Partner adopted the
National Propane Corporation 1996 Unit Option Plan (the "Option Plan"),
which permits the grant of options to purchase Common Units and
Subordinated Units and the grant of Unit appreciation rights ("UARs")
covering up to an aggregate of 1,250,000 Common Units and Subordinated
Units (subject to adjustment in certain circumstances) plus an
additional number of Units equal to 1% of the number of Units
outstanding as of each December 31 following the Option Plan's
effective date which will be added to the total number of Units that
may be issued thereafter. No options or UARs have been granted under
the Option Plan as of July 31, 1996.
7. Pro Forma Condensed Consolidated Balance Sheet
The following unaudited pro forma condensed balance sheet of National
Propane Corporation, the Managing General Partner of the Partnership,
has been prepared by adjusting the consolidated balance sheet of the
Company as of June 30, 1996, to give effect to the issuance of the
First Mortgage Notes, the Partnership Conveyance and certain other
related transactions as if they had occurred on June 30, 1996. The pro
forma condensed consolidated balance sheet does not purport to be
indicative of the actual financial position that would have resulted
had the transactions noted above actually been consummated on June 30,
1996 or of the future financial position of the Company which will
result from the consummation of such transactions.
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NATIONAL PROPANE CORPORATION AND SUBSIDIARIES, MANAGING GENERAL PARTNER
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30,1996
<TABLE>
<CAPTION>
National National National Propane
Propane Propane Corporation
Corporation Pro Forma Partners, L.P. & Subsidiaries
& Subsidiaries Adjustments Conveyance(f) Pro Forma
--------------- ----------- ----------------- ----------------
ASSETS (In thousands)
<S> <C> <C> <C> <C>
Current assets:
Cash $4,561 $125,015 (a) $(64,831) $ 23
(64,722)(b)
Receivables, net 13,304 -- (13,304) --
Finished goods inventories 9,441 -- (9,441) --
Other current assets 4,679 1,711 (c) (2,486) 3,904
----- ----- ------ ------
Total current assets 31,985 62,004 (90,062) 3,927
Due from Triarc -- 30,000 (d) -- 30,000
Properties, net 80,959 -- (80,886) 73
Unamortized costs in excess of
net assets of acquired companies 14,819 -- (14,819) --
Other assets 7,114 (4,102)(c) (8,434) --
5,422 (b)
Investment in National Propane
Partners, L.P -- -- 13,872 13,872
-------- ------- -------- -------
$134,877 $93,324 $(180,329) $47,872
-------- ------- -------- -------
-------- ------- -------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt $3,784 $ -- $(3,784) $ --
Accounts payable 4,033 -- (4,033) --
Due to Triarc and an affiliate 12,788 -- (12,227) 561
Accrued expenses 9,061 15 (a) (8,460) 841
225 (c)
------- ------- ------- ------
Total current liabilities 29,666 240 (28,504) 1,402
Long-term debt 126,181 125,000 (a) (251,181) --
Deferred income taxes 22,954 (2,500)(e) -- 20,454
Customer deposits 2,051 -- (2,051) --
Commitments and contingencies
Stockholders' equity (deficit)
Common stock 1 -- -- 1
Additional paid-in capital 36,270 2,500 (e) -- 38,770
Retained earnings (accumulated deficit) (854) (2,616)(c) 101,407 (12,755)
(51,392)(d)
(59,300)(b)
Due from Triarc (81,392) 81,392 (d) -- --
------- ------- -------- -------
Total stockholders' equity (deficit) (45,975) (29,416) 101,407 26,016
-------- ------- --------- -------
$134,877 $93,324 $(180,329) $47,872
-------- ------- --------- -------
-------- ------- --------- -------
</TABLE>
See notes to unaudited pro forma condensed balance sheet.
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES, MANAGING GENERAL PARTNER
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
(Dollars in thousands)
(a) To reflect the issuance of the First Mortgage Notes ($125,000) and
accrued interest ($15).
(b) To reflect the use of proceeds from the issuance of the First
Mortgage Notes for the payment of estimated deferred financing costs
associated with the issuance of the First Mortgage Notes of $5,422 and
payment of a $59,300 cash dividend to Triarc.
(c) To reflect the write-off of deferred financing costs of $4,102 and
prepayment penalties of $225, net of a related tax benefit of $1,711,
on the early extinguishment of the existing indebtedness.
(d) To reflect a dividend to Triarc of $51,392 of National Propane's
$81,392 receivable from Triarc and the reclassification of the
remainder of the receivable of $30,000 as an asset due to Triarc's
improved liquidity position as a result of the Initial Public Offering
and related transactions.
(e) To reflect the transfer to Triarc of certain income tax
liabilities.
(f) To reflect the Partnership Conveyance in exchange for an aggregate
4% combined general partner interest in the Partnership and the
Operating Partnership.
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
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 Propane Corporation and subsidiaries (the "Company" or
"National Propane") is primarily engaged in (i) the retail marketing of propane
to residential customers, commercial and industrial customers, agricultural
customers and to dealers (located primarily in the Northeast) 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 Propane believes it is the fifth largest retail marketer of
propane in terms of retail volume in the United States, supplying approximately
250,000 active retail and wholesale customers in 24 states through its 165
service centers. National Propane's operations are concentrated in the Midwest,
Northeast, Southeast and Southwest regions of the United States.
National Propane'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. Agriculture 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 Propane sells approximately 66% 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 Propane 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 a period of identical sales volumes.
National Propane 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 Propane's first fiscal quarter, and the
beginning of the second heating season, National Propane'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 Propane does not believe it is overly
dependent on any one supplier. National Propane primarily buys propane on both
one year contracts and the spot market and does not enter into any fixed
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price take-or-pay contracts. Furthermore, National Propane purchases propane
from a wide variety of sources. In 1995 and in the first half of 1996, no
provider supplied over 15% of National Propane'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 Propane's ability
to raise customer prices, margins will be negatively affected.
The propane industry is very competitive. National Propane competes
against other major propane companies as well as local marketers 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 six months ended June 30, 1996
with the six months ended June 30, 1995, and the three months ended June 30,
1996 with the three months ended June 30, 1995. All of such periods relate to
the predecessor company (National Propane Corporation) and do not reflect the
July 2, 1996 initial public offering of partnership units in National Propane
Partners, L.P. described in Note 5 to the accompanying condensed consolidated
financial statements of National Propane. The 1995 periods reflect the effects
of the June 1995 merger (the "Merger") of Public Gas Company with and into
National Propane. Because the Merger was a transfer of assets and liabilities in
exchange for shares among a controlled group of companies, it has been accounted
for in a manner similar to a pooling of interests and, accordingly, the 1995
periods have been restated to reflect the Merger.
Results of Operations
Six Months Ended June 30, 1996 Compared with Six Months Ended June 30, 1995
Revenues increased $11.6 million, or 15.1%, to $88.3 million in the six
months ended June 30, 1996 as compared to $76.7 million for the six months ended
June 30, 1995 with propane revenues increasing $11.8 million, or 16.7% to $82.7
in 1996 compared with $70.9 million in 1995. The increase is principally due to
increased propane sales volume as retail gallons sold for 1996 increased 7.7
million, or 10.1%, to 83.8 million in 1996 compared to 76.1 million in 1995.
Based on Degree Days data (the "Degree Days Data"), published by the National
Climatic Data Center, as applied to the geographical regions of National
Propane's operations, the six months ended June 30, 1996 was 9.8% colder than
the six months ended June 30, 1995. The $11.8 million increased propane revenue
is due to volume increases as a result of colder weather ($5.8 million) and
acquisitions ($1.4 million) and increased selling price due to increased costs
($4.6 million). National Propane's other lines of revenue, primarily appliance
sales and tank and equipment rental income, did not change significantly from
year to year.
Gross profit increased $2.5 million , or 12.2%, to $23.4 million in
1996 compared with $20.9 million in 1995 due principally to higher propane
volumes in 1996 compared with 1995 slightly offset by increased product costs
which could not be fully passed on to customers in the form of higher selling
prices and a shift in the customer mix toward lower-margin commercial accounts.
Selling, general and administrative expenses increased $1.5 million, or
14.7%, to $11.7 million in 1996 compared to $10.2 million in 1995. This increase
reflects higher costs for (i.) utility expenses due to colder weather, (ii.)
business taxes due to higher volumes, and (iii.) increased amortization of costs
in excess of net assets of acquired companies ("Goodwill") and other intangibles
which reflects the effect of acquisitions in 1995.
<PAGE>
<PAGE>
Interest expense increased $0.4 million, or 6.9%, to $6.2 million in
1996 compared to $5.8 million in 1995. This increase was due to higher average
borrowings under National Propane's revolving credit and term loan agreement.
Other income was essentially unchanged in 1996 from 1995.
The provision for income taxes in 1996 and 1995 varies from the Federal
statutory income tax rate of 35% principally due to state income taxes and the
effect of goodwill amortization.
Three Months Ended June 30, 1996 Compared with Three Months Ended June 30, 1995
Revenues increased $1.9 million, or 7.2%, to $28.3 million in the three
months ended June 30, 1996 as compared to $26.4 million for the three months
ended June 30, 1995 with propane revenues increasing $1.7 million, or 7.3% to
$25.5 for the three months ended June 30, 1996 compared with $23.8 million in
1995. Propane retail gallons sold increased 0.6 million, or 2.6%, to 25.4
million gallons in 1996, compared to 24.7 million gallons in 1995. The $1.7
million increased propane revenue is due to increased selling price resulting
from higher propane costs ($1.1 million), acquisitions ($0.4 million) and other
volume increases ($0.2 million).
Gross profit increased $0.2 million , or 3.6%, to $4.6 million for the
three months ended June 30, 1996 compared with $4.4 million in 1995 due
principally to gross profit from acquisitions, partially offset by increased
product costs which could not be fully passed on to certain customers and a
shift in the customer mix toward lower-margin commercial accounts.
Selling, general and administrative expenses increased $0.8 million, or
16.0%, to $5.8 million in 1996 compared to $5.0 million in 1995. This increase
reflects higher costs for (i.) utility expenses due to colder weather, (ii.)
increased business and property taxes and (iii.) increased amortization of
Goodwill and other intangibles which reflects the effect of acquisitions in
1995.
Interest expense increased $0.1 million, or 4.8%, to $3.1 million in
1996 compared to $3.0 million in 1995. This increase was due to higher average
borrowings under National Propane's revolving credit and term loan agreement.
<PAGE>
<PAGE>
Other income was essentially unchanged in 1996 from 1995.
The provision for income taxes in 1996 and 1995 varies from the Federal
statutory income tax rate of 35% principally due to state income taxes and the
effect of goodwill amortization.
Liquidity and Capital Resources
National Propane's cash balances increased $1.7 million during the six
month period ended June 30, 1996. This increase reflected cash provided by
operating activities of $8.4 million partially offset by cash used in financing
activities of $7.0 million.
The cash flows from operating activities of $8.4 million in the 1996
period consisted primarily of $2.6 million of net income plus noncash charges of
$6.5 million, principally depreciation and amortization. Net working capital
experienced a slight decrease of $0.1 million as the seasonal decreases in
accounts receivable ($2.4 million), inventories ($1.1 million) and prepaid and
other current assets ($0.5 million) were more than offset by decreases in
accounts payable and accrued expenses ($4.1 million).
Cash used in investing activities during the six month period ended
June 30, 1996 included capital expenditures and acquisitions, excluding capital
leases, amounting to $2.7 million. Of the amount for 1996, $0.9 million was for
recurring maintenance and $1.8 million was to support growth of operations. The
Partnership has budgeted maintenance capital expenditures for the remainder of
1996 of approximately $2.4 million, subject to the availability of cash and
other financing sources, and has outstanding commitments amounting to $0.9
million for such capital expenditures as of June 30, 1996.
Cash used in financing activities during the period ended June 30, 1996
of $7.0 million reflected an aggregate of $8.8 million repayments of long-term
debt and $1.2 million of deferred debt and equity offering expenses partially
offset by net borrowings of $3.0 million under the existing credit facility.
In July 1996, the Operating Partnership entered into a new $55 million
bank credit facility (the "Bank Credit Facility"), which includes a $15 million
Working Capital Facility to be used for working capital and other general
partnership purposes and a $40 million Acquisition Facility the use of which is
restricted to acquisitions and capital expenditures for growth.
In July 1996, National Propane issued through a private placement and
National Propane, L.P. assumed $125 million of 8.54% first mortgage notes due
June 30, 2010 (the "First Mortgage Notes"). The First Mortgage Notes provided
net cash of $119.6 million which was used primarily to repay $61.5 million of
indebtedness under National Propane Corporation's existing credit facility and
other existing indebtedness and to pay a $59.3 million dividend to Triarc.
Also, in July 1996, National Propane Partners, L.P. issued 6,301,550
Common Units at $21.00 per unit which provided net cash of $118.9 million after
deducting the underwriting discounts, commissions and other expenses. These
proceeds were primarily used (i) to repay $66.9 million under National Propane
Corporation's existing credit facility, (ii) to loan Triarc $40.7 million and
(iii) to pay $12.2 million of intercompany indebtedness consisting principally
of accrued management fees and tax sharing payments due to Triarc. The remaining
<PAGE>
<PAGE>
proceeds will be used for general purposes of the Partnership.
Based on the Partnership's current cash on hand, available borrowings
under the Bank Credit Facility and expected cash flows from operations, the
Partnership expects to be able to meet all of its cash requirements for the
remainder of 1996.
To the extent the Partnership 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 and the Subordinated Units within 45
days after the end of each fiscal quarter commencing with the fiscal quarter
ended September 30, 1996.
Contingencies
The Partnership is contingently liable in connection with an
environmental matter described in Note 5 to the accompanying condensed
consolidated financial statements of the Partnership. The ultimate outcome of
this matter cannot presently be determined and, depending on the cost of
remediation required, may have a material adverse effect on the Partnership's
consolidated financial position or results of operations. The Partnership is
also involved in ordinary claims, litigation and administrative proceedings and
investigations of various types in several jurisdictions incidental to its
business. In the opinion of management of the Partnership, the outcome of any
such matter, or all of them combined, will not have a material adverse effect on
the Partnership's consolidated financial position or results of operations.
Part II. OTHER INFORMATION
The statements in this Quarterly Report on Form 10-Q (this "Form 10-Q")
that are not historical facts constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"), 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. Such factors
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
Registration Statement on Form S-1 (No. 333-2768).
Item 1. Legal Proceedings
In May 1994 the Predecessor Company was informed of coal tar
contamination which was discovered at one of its properties in Wisconsin. The
Predecessor Company purchased the property from a company which had purchased
the assets of a utility which had previously owned the property. The Predecessor
Company believes that the contamination occurred during the use of the property
as a coal gasification plant by such utility. In order to assess the extent of
the problem the Predecessor Company engaged environmental consultants who began
work in August 1994. In February 1996, the Predecessor Company's environmental
consultants provided a report which presented the two most likely remediation
methods and estimates of the costs of such methods. The range of estimated costs
for the first method, which involves treatment of groundwater and excavation,
treatment and disposal of contaminated soil, is from $1,600,000 to $3,300,000.
The range for the second method, which involves only treatment of groundwater
and the building of a soil containment wall, is from $432,000 to $750,000. Based
on discussion with the Predecessor Company's environmental consultants both
methods are acceptable remediation plans. The Predecessor Company, however, will
have to agree on a final plan with the State of Wisconsin. Since receiving
notice of the contamination, the Predecessor Company has engaged on discussions
of a general nature concerning remediation with the State of Wisconsin. The
discussions are ongoing and there is no indication as yet of the time frame for
a decision by the State of Wisconsin on the method of remediation. Accordingly,
it is unknown which remediation method will be used. Since no amount within the
ranges can be determined to be a better estimate, the Predecessor Company has
accrued $432,000 at December 31, 1995 and June 30, 1996 in order to provide for
the minimum costs estimated for the second remediation method and legal fees and
other professional costs. The Predecessor Company is also engaged in ongoing
discussions of a general nature with a successor to the utility that operated a
coal gasification plant on the property. There is as yet no indication that a
successor owner will share the costs of remediation. The Predecessor Company, if
found liable for any such costs, would attempt to recover such costs from the
successor owner. Pursuant to a lease with the Predecessor Company relating to
this facility, the Operating Partnership has agreed to be liable for any costs
of remediation in excess of amounts recovered from such successors or from
insurance. The ultimate outcome of this matter cannot presently be determined
and, depending on the cost of remediation required, may have a material adverse
effect on the Partnership's consolidated financial position or results of
operations.
The Partnership is involved in ordinary claims, litigation and
administrative proceedings and investigations of various types in several
jurisdictions incidental to its business. In the opinion of management of the
Company, the outcome of any such matter, or all of them combined, will not have
a material adverse effect on the Partnership's consolidated financial condition
or results of operations.
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
1.1 Purchase Agreement, dated June 26, 1996, among National Propane
Partners, L.P. and the several Underwriters named therein incorporated
herein by reference to Exhibit 1.1 to the Partnership's Current Report
of Form 8-K dated August 16, 1996 (SEC file No. 1-11867)(the "Form
8-K").
3.1 Amended and Restated Agreement of Limited Partnership of National
Propane Partners, L.P. dated as of July 2, 1996 incorporated herein by
reference to Exhibit 3.1 to the Partnership's Form 8-K.
3.2 Amended and Restated Agreement of Limited Partnership of National
Propane, L.P. dated as of July 2, 1996 incorporated herein by reference
to Exhibit 3.2 to the Partnership's Form 8-K.
10.1 Credit Agreement, dated as of June 26, 1996, among National Propane,
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 Form 8-K.
10.2 Note Purchase Agreement, dated as of June 26, 1996, among National
Propane, L.P. and each of the Purchasers listed in Schedule A thereto
relating to $125 million aggregate principal amount of 8.54% First
Mortgage Notes due June 30, 2010 incorporated herein by reference to
Exhibit 10.2 to the Partnership's Form 8-K.
10.3 Conveyance, Contribution and Assumption Agreement, dated as of July 2,
1996, by and among National Propane, L.P., National Propane Partners,
L.P., National Propane Corporation and National Propane SGP, Inc.
incorporated herein by reference to Exhibit 10.3 to the Partnership's
Form 8-K.
10.4 Contribution and Assumption Agreement, dated as of July 2, 1996, by and
among National Propane, L.P., National Propane Corporation, National
Propane SGP, Inc. and National Sales & Service, Inc. incorporated herein
by reference to Exhibit 10.4 to the Partnership's Form 8-K.
10.5 Note, in the principal amount of $40.7 million, issued by Triarc
Companies, Inc. to National Propane, L.P. incorporated herein by
reference to Exhibit 10.5 to the Partnership's Form 8-K.
10.6 National Propane 1996 Unit Option Plan incorporated herein by reference
to Exhibit 10.6 to the Partnership's Form 8-K.
10.7 Amendment to Employment Agreement of Ronald D. Paliughi, dated as of
June 10, 1996 incorporated herein by reference to Exhibit 10.7 to the
Partnership's Form 8-K.
27. Financial Data Schedule for the six-month period ended June 30, 1996,
submitted to the Securities and Exchange Commission in electronic
format.
(b) Reports on Form 8-K.
The Partnership filed on Form 8-K on August 16, 1996 pursuant to which
the Partnership filed certain exhibits required to be filed in
connection with its quarterly report on Form 10-Q for the quarter ended
June 30, 1996.
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NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL PROPANE PARTNERS, L.P.
By NATIONAL PROPANE CORPORATION,
AS MANAGING GENERAL PARTNER
Date: August 19, 1996 By: Ronald R. Rominiecki
-------------------------
Ronald R. Rominiecki
Senior Vice President
Chief Financial Officer
(Principal Financial
and Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from National
Propane Corporation and subsidiaries (Predecessor) condensed consolidated
Balance Sheet as of June 30, 1996 and condensed consolidated Statement of
Operations for the interim period January 1, 1995 through June 30, 1996 and
is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,561
<SECURITIES> 0
<RECEIVABLES> 13,304
<ALLOWANCES> 0
<INVENTORY> 9,441
<CURRENT-ASSETS> 31,985
<PP&E> 167,813
<DEPRECIATION> 86,854
<TOTAL-ASSETS> 134,877
<CURRENT-LIABILITIES> 29,666
<BONDS> 126,181
<COMMON> 1
0
0
<OTHER-SE> (45,976)
<TOTAL-LIABILITY-AND-EQUITY> 134,877
<SALES> 88,298
<TOTAL-REVENUES> 88,298
<CGS> 64,863
<TOTAL-COSTS> 64,863
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,242
<INCOME-PRETAX> 4,547
<INCOME-TAX> 1,922
<INCOME-CONTINUING> 2,625
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,625
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
1. Allowances - Receivables are shown net of an allowance of $1,372.
Total receivable balance is $14,476.
</FN>
</TABLE>
