<PAGE>
<PAGE>
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 SEPTEMBER 30, 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)
<TABLE>
<S> <C>
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)
</TABLE>
(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 October 31, 1997.
________________________________________________________________________________
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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 September 30, 1997................ 3
Condensed Consolidated Statements of Operations -- Three months ended September 30, 1996 and 1997
and nine months ended September 30, 1996 and 1997................................................ 4
Condensed Consolidated Statements of Cash Flows -- Nine months ended September 30, 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............................................................ 14
Signatures............................................................................................ 16
</TABLE>
2
<PAGE>
<PAGE>
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
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996(A) 1997
------------ -------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 11,187 $ 2,082
Receivables, net.............................................................. 24,217 7,529
Finished goods inventories.................................................... 14,130 13,452
Interest receivable from Triarc Companies, Inc................................ -- 1,370
Prepaid expenses and other current assets..................................... 2,268 1,725
------------ -------------
Total current assets..................................................... 51,802 26,158
Due from Triarc Companies, Inc..................................................... 40,700 40,700
Properties, net.................................................................... 80,634 80,435
Unamortized costs in excess of net assets of acquired companies.................... 14,601 17,476
Deferred costs and other assets.................................................... 8,671 8,428
------------ -------------
$196,408 $ 173,197
------------ -------------
------------ -------------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of long-term debt............................................. $ 6,312 $ 719
Accounts payable.............................................................. 15,859 4,159
Accrued expenses.............................................................. 10,103 10,458
------------ -------------
Total current liabilities................................................ 32,274 15,336
Long-term debt..................................................................... 128,044 138,150
Customer deposits.................................................................. 2,027 1,939
Partners' capital:
Common partners' capital...................................................... 22,165 12,835
General partners' capital, including subordinated units....................... 11,898 4,937
------------ -------------
Total partners' capital.................................................. 34,063 17,772
------------ -------------
$196,408 $ 173,197
------------ -------------
------------ -------------
</TABLE>
- ------------
(A) Derived from the audited consolidated financial statements as of December
31, 1996.
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION
AND SUBSIDIARIES)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ --------------------
1996 1997 1996 1997
------- ------- -------- --------
(IN THOUSANDS, EXCEPT UNIT AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues........................................................... $27,720 $29,300 $116,018 $117,987
------- ------- -------- --------
Cost of sales:
Cost of product-propane and appliances........................ 13,253 13,588 55,066 59,817
Other operating expenses applicable to revenues............... 11,578 11,403 34,031 33,982
------- ------- -------- --------
24,831 24,991 89,097 93,799
------- ------- -------- --------
Gross profit............................................. 2,889 4,309 26,921 24,188
Selling, general and administrative expenses....................... 4,756 5,971 17,009 17,568
Management fees.................................................... -- -- 1,500 --
------- ------- -------- --------
Operating income (loss).................................. (1,867) (1,662) 8,412 6,620
Interest expense................................................... (2,825) (3,234) (9,067) (9,306)
Interest income from Triarc Companies, Inc......................... 1,370 1,370 1,370 4,079
Other income, net.................................................. 152 174 662 910
------- ------- -------- --------
Income (loss) before income taxes and extraordinary
charge................................................. (3,170) (3,352) 1,377 2,303
Provision for income taxes......................................... -- (48) (1,922) (165)
------- ------- -------- --------
Income (loss) before extraordinary charge................ (3,170) (3,400) (545) 2,138
Extraordinary charge............................................... (2,631) -- (2,631) --
------- ------- -------- --------
Net income (loss)........................................ $(5,801) $(3,400) $ (3,176) $ 2,138
------- ------- -------- --------
------- ------- -------- --------
General partners' interest in:
Income (loss) before extraordinary charge................ $ (127) $ (136) $ 86
Extraordinary charge..................................... (2,631) -- --
------- ------- --------
Net income (loss)................................... $(2,758) $ (136) $ 86
------- ------- --------
------- ------- --------
Unitholders' interest (common and subordinated) in net income
(loss)........................................................... $(3,043) $(3,264) $ 2,052
------- ------- --------
------- ------- --------
Net income (loss) per unit......................................... $ (0.28) $ (.29) $ 0.18
------- ------- --------
------- ------- --------
Weighted average number of units outstanding....................... 10,810 11,235 11,235
------- ------- --------
------- ------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION
AND SUBSIDIARIES)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------------
1996 1997
----------------- -----------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................................... $ (3,176) $ 2,138
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization of properties..................................... 7,489 8,049
Amortization of costs in excess of net assets of acquired companies............. 540 630
Amortization of deferred financing costs........................................ 710 608
Other amortization.............................................................. 270 505
Write-off of deferred financing costs........................................... 4,126 --
Provision for doubtful accounts................................................. 947 782
Deferred income tax benefit..................................................... (2,520) --
Gain on sale of assets, net..................................................... (39) (191)
Other, net...................................................................... 73 (72)
Changes in operating assets and liabilities:
Decrease in receivables, net............................................... 5,187 16,210
Increase in due from Triarc Companies, Inc................................. -- (1,370)
(Increase) decrease in inventories......................................... (3,636) 800
Decrease in prepaid expenses and other current assets...................... 104 532
Increase (decrease) in accounts payable and accrued expenses............... 3,154 (11,356)
----------------- -----------------
Net cash provided by operating activities....................................... 13,229 17,265
----------------- -----------------
Cash flows from investing activities:
Business acquisitions................................................................ (1,030) (7,568)
Capital expenditures................................................................. (4,997) (4,894)
Proceeds from sale of assets......................................................... 237 737
----------------- -----------------
Net cash used in investing activities........................................... (5,790) (11,725)
----------------- -----------------
Cash flows from financing activities:
Proceeds from First Mortgage Notes................................................... 125,000 --
Proceeds from other long-term debt................................................... 3,800 10,112
Repayments of long-term debt......................................................... (137,302) (6,328)
Payment of dividend to Triarc Companies, Inc......................................... (59,300) --
Net proceeds of initial public offering.............................................. 117,933 --
(Increase) decrease in due to/from Triarc Companies, Inc. and another affiliate...... (50,611) --
Distributions........................................................................ -- (18,429)
Deferred financing costs............................................................. (5,087) --
Other................................................................................ (26) --
----------------- -----------------
Net cash used in financing activities........................................... (5,593) (14,645)
----------------- -----------------
Net increase (decrease) in cash........................................................... 1,846 (9,105)
Cash and cash equivalents at beginning of period.......................................... 2,825 11,187
----------------- -----------------
Cash and cash equivalents at end of period................................................ $ 4,671 $ 2,082
----------------- -----------------
----------------- -----------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
<PAGE>
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 (see 'Partnership Conveyance' below) 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'. In July, 1996, the Partnership Entities consummated 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 Partners' 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 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.
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
6
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION
AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
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 September 30, 1997, its results of operations for
the three-month and nine-month periods ended September 30, 1996 and 1997 and its
cash flows for the nine-month periods ended September 30, 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:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Properties, at cost............................................ $170,724 $ 167,182
Less accumulated depreciation.................................. 90,090 86,747
------------ -------------
$ 80,634 $ 80,435
------------ -------------
------------ -------------
</TABLE>
NOTE 4 -- INCOME TAXES
National's provision for income taxes for the nine months ended September
30, 1996 includes income taxes related to National Propane through June 30,
1996. For periods subsequent to June 30, 1996 which are subsequent to the
Partnership Conveyance, income taxes have been provided only on the pre-tax
income of NSSI, which is subject to federal and state income taxes. 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, no income taxes have been provided thereon.
NOTE 5 -- ACQUISITIONS
During the first nine months of 1997 National acquired the assets of five
propane distributors for aggregate cash consideration of $7,568,000, a note
payable of $407,000 subject to downward adjustment and other consideration of
$325,000.
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. Although the ultimate outcome of this contingency
cannot be determined, the cost of remediation and third party claims 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
<PAGE>
<PAGE>
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 pro forma summarized operating results of National
for the nine-month period ended September 30, 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
$128,469,000 of refinanced debt, (iv) interest income on a $40,700,000 loan to
Triarc made concurrently 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.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1996
--------------------------------------
(IN THOUSANDS, EXCEPT PER UNIT AMOUNT)
<S> <C>
Revenues................................................ $116,018
Operating income........................................ 9,162
Income before income taxes and extraordinary charge..... 5,367
Income before extraordinary charge...................... 5,217
General partners' interest in income before
extraordinary charge.................................. 209
Unitholders' interest (common and subordinated) in
income before extraordinary charge.................... 5,008
Limited partners' income before extraordinary charge per
unit.................................................. 0.45
</TABLE>
NOTE 8 -- QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH
On February 14, 1997, May 15, 1997 and August 14, 1997 National paid
quarterly distributions for the quarters ended December 31, 1996, March 31, 1997
and June 30, 1997 to Unitholders of record on February 5, 1997, May 8, 1997 and
August 7, 1997, respectively, each consisting of $0.525 per Common and
Subordinated Unit with a proportionate amount for the 4% unsubordinated General
Partners' interest, or an aggregate of $6,143,000 each including $2,625,000 to
the General Partners related to the Subordinated Units and the unsubordinated
General Partners' interest. On October 27, 1997 National declared a quarterly
distribution for the quarter ended September 30, 1997 to Unitholders of record
on November 6, 1997 payable November 14, 1997 consisting of $0.525 per Common
and Subordinated Unit with a proportionate amount for the 4% unsubordinated
General Partners' interest, or an aggregate of $6,143,000 including $2,625,000
to the General Partners related to the Subordinated Units and the unsubordinated
General Partners' interest with respect to each distribution.
8
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION
AND SUBSIDIARIES)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
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.
NOTE 10 -- UNIT OPTIONS
Prior to the Offering and effective 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 Common Unit appreciation rights ('UAR's').
Any expenses recognized resulting from the Option Plan will be allocated to the
Partnership in accordance with an agreement between the Managing General Partner
and the Partnership. Prior to September 17, 1997 there were an aggregate of
1,317,015 Common Units and Subordinated Units available for grant and no options
or UAR's had been granted.
On September 17, 1997, the Managing General Partner granted 315,000 options
to purchase Common Units of the Partnership at $17.30 per unit to certain
officers and key employees of the Managing General Partner at which date the
fair market value of the Common Units was $21.625 per unit. The unit options
have a maximum term of ten years with 60% of the options vesting one-third per
year over the three-year period commencing September 18, 1999 and 40% of the
options vesting upon, and in the same proportion as, the conversion of the
outstanding Subordinated Units of the Partnership into Common Units in
accordance with the terms of the Partnership Agreement but, in any event, no
later than March 2007 (for further description of the timing of the conversion
of the Subordinated Units, see Note 5 to the consolidated financial statements
in the Form 10-K).
The fair market value of the Partnership's Common Units at the date of
grant of $21.625 per unit resulted in an aggregate excess of $1,362,000 over the
exercise price of $17.30 of the 315,000 unit options granted. At September 30,
1997, the aggregate difference of $1,362,000 is recorded as unearned
compensation as a component of 'Partners Capital' with an equal amount recorded
as contributed capital. Such unearned compensation will be amortized ratably as
compensation expense over the applicable service period of three to five years.
NOTE 11 -- STATEMENT OF PARTNERS' CAPITAL
The following is a summary of the changes in partners' capital:
<TABLE>
<CAPTION>
COMMON GENERAL TOTAL
PARTNERS' PARTNERS' PARTNERS'
CAPITAL CAPITAL CAPITAL
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at December 31, 1996................................................... $ 22,165 $ 11,898 $ 34,063
Net income:
Allocable to General Partners............................................. -- 86 86
Allocable to Unitholders (common and subordinated)........................ 1,224 828 2,052
--------- --------- ---------
1,224 914 2,138
Unit Options:
Grant of 315,000 unit options............................................. 780 582 1,362
Unearned compensation..................................................... (780) (582) (1,362)
--------- --------- ---------
-- -- --
Cash distributions paid........................................................ (10,554) (7,875) (18,429)
--------- --------- ---------
Balance at September 30, 1997.................................................. $ 12,835 $ 4,937 $ 17,772
--------- --------- ---------
--------- --------- ---------
</TABLE>
9
<PAGE>
<PAGE>
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 operations are concentrated
in the Midwest, Northeast, Southeast and Southwest regions of the United States.
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 domestic wholesale propane prices, which
are increasingly influenced by global supply and demand factors for both natural
gas liquids and crude oil. National has diverse sources of propane supply from a
broad array of producers and, accordingly, does not believe it is overly
dependent on any one supplier. In 1996 and through the first three quarters of
1997, no propane supplier provided more than 20% of National's propane
purchases. National buys propane on evergreen, annual and spot contracts on a
fixed or floating price basis, but does not enter into take-or-pay contracts.
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 (i) the
Partnership for the nine months ended September 30, 1997 with the combined
results of National Propane for the six months ended June 30, 1996 and of the
Partnership for the three months ended September 30, 1996 and (ii) the
Partnership for the three months ended September 30, 1997 with the three months
ended September 30, 1996.
10
<PAGE>
<PAGE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1996
Revenues increased $2.0 million, or 1.7%, to $118.0 million in the nine
months ended September 30, 1997 as compared to $116.0 million for the nine
months ended September 30, 1996 with propane revenues increasing $3.1 million,
or 2.9%, to $110.9 million for the nine months ended September 30, 1997 compared
with $107.8 million in 1996 and revenues from appliance and other product lines
decreasing $1.1 million. The $3.1 million increase in propane revenues
principally resulted from increased selling prices due to passing on to
customers a portion of the record high product costs this past heating season
($6.6 million) partially offset by volume decreases ($3.5 million). Propane
retail gallons sold decreased 3.6 million gallons, or 3.3%, to 107.0 million
gallons in 1997, compared to 110.6 million gallons in 1996 reflecting a decrease
of 5.9 million gallons sold to existing customers, primarily residential, due to
the fact that the nine months ended September 30, 1997 were approximately 3.7%
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 a result of the higher
propane costs this past heating season. Partially offsetting this decrease were
increases of approximately 1.7 million gallons from the acquisitions of propane
distributorships and 0.6 million gallons from the opening of new service centers
by the Partnership. Revenues from appliance and other product lines decreased
$1.1 million, or 13.4%, to $7.1 million for the nine months ended September 30,
1997 as compared to $8.2 million in 1996. This decrease is a result of decreases
in (i) equipment rental charges in certain market areas due to competitive
conditions and (ii) terminal sublease income due to warmer weather conditions
this past heating season.
Gross profit (revenues less cost of sales) decreased $2.7 million, or
10.2%, to $24.2 million in the nine months ended September 30, 1997 as compared
to $26.9 million in 1996 of which $2.1 million is attributable to propane and
$0.6 million to appliances and other product lines. Lower propane sales volumes
caused $1.8 million of the $2.1 million propane gross profit decrease. The
average dollar margin (sales price less the cost of propane) declined $0.003, or
0.5%, per gallon sold in the nine months ended September 30, 1997 versus the
same period in 1996. The $0.003 lower average dollar margin was due to (i) a
shift in customer mix toward lower-priced non-residential customers and (ii) a
13.3% 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 the period of high propane costs this past heating
season. The decrease in gross profit as a percentage of sales, from 23.2% to
20.5%, is primarily the result of the average dollar margin per gallon remaining
relatively unchanged from period to period while the average sales price per
gallon increased 6.3% due to higher product costs.
Selling, general and administrative expenses amounted to $17.6 million in
the nine months ended September 30, 1997, an increase of $0.6 million over the
comparable 1996 period. The increase is due primarily to increases in
amortization ($0.4 million) and professional fees ($0.4 million), both partially
offset by decreased insurance costs ($0.2 million). The increase in amortization
is due primarily to increases in amortization of costs in excess of net assets
of acquired companies ('Goodwill') and non-compete contracts associated with the
acquisition of propane distributorships while professional fees have increased
due to the stand-alone status of the Partnership. Casualty insurance costs have
decreased as a result of lower premiums and losses due to improved loss
experience.
Management fees formerly paid to Triarc have been eliminated effective with
the beginning of the operations of the Partnership.
Interest expense increased $0.2 million, or 2.6%, to $9.3 million in the
first nine months of 1997 compared to 1996. This increase was due to higher
average borrowings, partially offset by lower average interest rates and lower
amortization of deferred financing costs, both due to a refinancing of debt in
July, 1996.
Interest income from Triarc increased $2.7 million to $4.1 million in the
nine months ended September 30, 1997 due to the full period effect in 1997 of
the $40.7 million loan to Triarc (the 'Partnership Loan') made on July 2, 1996.
11
<PAGE>
<PAGE>
Other income, net increased $0.2 million to $0.9 million in the nine months
ended September 30, 1997 as compared to $0.7 million during the same period in
1996 due primarily to increased gains on the sale of certain properties in 1997.
The provision for income taxes in 1996 is related entirely to National's
operations through June 30, 1996 prior to the Partnership Conveyance. The
Partnership and the Operating Partnership are not tax paying entities except for
NSSI, the wholly-owned corporate subsidiary. As such, the 1996 period does not
include a tax benefit for the third quarter pre-tax loss. For the nine months
ended September 30, 1997, income taxes of $0.2 million have been provided on the
pre-tax income of NSSI.
The extraordinary charge of $2.6 million in 1996 is a result of the early
extinguishment of $128.5 million of existing indebtedness and consists of the
write-off of deferred financing costs of $4.1 million and prepayment penalties
of $0.2 million, net of income tax benefit of $1.7 million.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1996
Revenues increased $1.6 million, or 5.7%, to $29.3 million in the three
months ended September 30, 1997 as compared to $27.7 million for the three
months ended September 30, 1996 with propane revenues increasing $1.4 million,
or 5.6%, to $26.5 million for the three months ended September 30, 1997 compared
with $25.1 million in 1996 and revenues from appliance and other product lines
increasing $0.2 million. The $1.4 million increase in propane revenues is a
result of volume increases ($1.9 million) partially offset by decreased average
selling prices ($0.5 million). Propane retail gallons sold increased 2.1 million
gallons, or 7.9%, to 28.9 million gallons in 1997, compared to 26.8 million
gallons in 1996. Increased sales at existing service centers contributed 1.0
million gallons, acquisitions of propane distributorships accounted for an
increase in gallons sold of 0.8 million gallons and the opening of new service
centers by National accounted for an increase of 0.3 million gallons. Revenues
from appliance and other product lines increased $0.2 million, or 6.4%, to $2.8
million for the three months ended September 30, 1997 as compared to $2.6
million in 1996 due to increases in equipment rental charges.
Gross profit increased $1.4 million, or 49.2%, to $4.3 million in the three
months ended September 30, 1997 as compared to $2.9 million in the comparable
three months of 1996 of which $1.0 million is attributable to propane, $0.2
million is attributable to appliances and other revenue lines and $0.2 million
is a result of lower operating expenses applicable to revenues. Higher propane
sales volumes accounted for substantially all of the $1.0 million propane gross
profit increase. Other gross profit increased $0.2 million as a result of
increased equipment rental charges. The increase in gross profit as a percentage
of sales, from 10.4% to 14.7%, is primarily the result of the average dollar
margin per gallon increasing $0.002 per gallon, or 0.4%, from period to period
while the average sales price per gallon decreased $0.02 per gallon, or 2.2%,
due to lower product costs.
Selling, general and administrative expenses increased $1.2 million to $6.0
million in the three months ended September 30, 1997 from $4.8 million in 1996.
The increase is attributable to increases in payroll expenses and amortization
of Goodwill and non-compete agreements due primarily to new service centers
opened by the Partnership and acquisitions of propane distributorships,
respectively. In addition, the Partnership experienced increases in bank fees,
receivable collection fees and office expenses.
Interest expense increased $0.4 million to $3.2 million due to higher
average outstanding borrowings.
Interest income from Triarc was unchanged at $1.4 million.
Other income, net was unchanged at $0.2 million.
The provision for income taxes is relatively unchanged for the three months
ended September 30, 1997 and relates only to the pre-tax income of NSSI.
The extraordinary charge of $2.6 million in the 1996 quarter is discussed
above.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's cash and cash equivalents (collectively 'cash') decreased
$9.1 million during the nine-month period ended September 30, 1997. This
decrease reflected cash provided by operating
12
<PAGE>
<PAGE>
activities of $17.4 million more than offset by cash used in investing
activities of $11.9 million and cash used in financing activities of $14.6
million.
Cash flows provided by operating activities of $17.4 million in the 1997
period consisted of net income of $2.1 million, non-cash charges of $10.4
million, principally depreciation and amortization, and $4.9 million from
working capital sources. The change in working capital is primarily made up of
seasonal decreases in receivables ($16.2 million) and inventories ($0.8 million)
and a decrease in prepaid expenses and other current assets of $0.5 million
partially offset by a decrease of $11.3 million in accounts payable and accrued
expenses and an increase of $1.3 million of interest due from Triarc on the
Partnership Loan. Accounts payable decreased $11.7 million due primarily to the
seasonal nature of the propane industry while accrued expenses increased $0.4
million.
Cash used in investing activities during the nine-month period ended
September 30, 1997 included business acquisitions of $7.6 million and capital
expenditures of $5.0 million. During the first nine months of 1997 the
Partnership acquired the assets of five propane distributors for an aggregate of
$8.3 million including $7.6 million of cash. In furtherance of its growth
strategy, the Partnership will consider selective future acquisitions as
appropriate to the extent it has available resources to do so (see 'Acquisition
Facility' below). Of the capital expenditure amount for 1997, $3.3 million was
to support growth of operations and $1.7 million was for recurring maintenance.
The Partnership has budgeted capital expenditures of $1.7 million for the fourth
quarter comprised of $0.9 million for growth capital expenditures and $0.8 for
maintenance capital expenditures. The Partnership has outstanding commitments
amounting to $1.3 million for such fourth quarter capital expenditures as of
September 30, 1997, which consists of $0.7 million for growth capital
expenditures and $0.6 million for maintenance capital expenditures. The
Partnership believes it has available sufficient cash and financing sources for
these budgeted expenses.
Cash used in financing activities during the nine-month period ended
September 30, 1997 reflects borrowings of $10.1 million under the Acquisition
Facility (see below), net repayments of $6.0 million on the Working Capital
Facility (see below) other debt repayments of $0.3 million and the three
distributions of $6.1 million each on February 14, 1997, May 15, 1997 and August
14, 1997.
The Partnership 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 September 30, 1997 there were no outstanding borrowings under the
Working Capital Facility and $12.0 million borrowed under the Acquisition
Facility. The Acquisition Facility and the First Mortgage Notes do not require
any principal payments in 1997.
Based on the Partnership's current cash on hand, available borrowings under
the Bank Credit Facility and cash flows from operations, the Partnership expects
to be able to meet all of its cash requirements for the remainder of 1997 which,
exclusive of distributions discussed in the following paragraph, are primarily
the aforementioned capital expenditures and business acquisitions.
To the extent the Partnership has 'Available Cash' as defined in the
Partnership Agreement, which generally means cash on hand and available to it
under its Working Capital Facility less reserve requirements, 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 (see Note 5 to the December 31, 1996 audited financial statements
within the Partnership's Annual Report on Form 10-K for the year ended December
31, 1996 for a more detailed discussion of 'Available Cash'). On October 27,
1997, National announced it would pay on November 14, 1997 a quarterly
distribution of $0.525 per Common and Subordinated Unit to unitholders of record
on November 6, 1997 with a proportionate amount for the 4% unsubordinated
General Partners' 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 Partners' interest.
The Partnership is subject to various federal, state and local laws and
regulations governing the transportation, storage and distribution of propane,
and the health and safety of workers, primarily regulations promulgated by the
Occupational Safety and Health Administration. On August 18, 1997,
13
<PAGE>
<PAGE>
the U.S. Department of Transportation (the 'DOT') published its Final Rule for
Continued Operation of the Present Propane Trucks (the 'Final Rule'). The Final
Rule is intended to address perceived risks during the transfer of propane. The
Final Rule required certain immediate changes in the Partnership's operating
procedures including retrofitting the Partnership's cargo tanks. The
Partnership, as well as the National Propane Gas Association and the propane
industry in general, believe that the Final Rule cannot practicably be complied
with in its current form. Accordingly, on October 15, 1997, the Partnership
joined four other multi-state propane marketers in filing an action against the
DOT in the United States District Court for the Western District of Missouri
seeking to enjoin enforcement of the Final Rule. At this time, the Partnership
cannot determine the likely outcome of the litigation or what the ultimate
long-term cost of compliance with the Final Rule will be.
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. Although the ultimate outcome of this contingency
cannot be determined, the cost of remediation and third party claims 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 Partners' 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.
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
<TABLE>
<C> <S>
27. Financial Data Schedule for the nine-month period ended September 30, 1997, submitted to the Securities and
Exchange Commission in electronic format.
</TABLE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the three-month period ended
September 30, 1997.
14
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
(SUCCESSOR TO NATIONAL PROPANE CORPORATION
AND SUBSIDIARIES)
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT -------------------------------------------------------------------------------------------------
NO. DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------------------------------- --------
<S> <C> <C>
(a) -- Exhibits......................................................................................
27 -- Financial Data Schedule for the nine-month period ended September 30, 1997, submitted to the
Securities and Exchange Commission in electronic format........................................
</TABLE>
15
<PAGE>
<PAGE>
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
PRESIDENT AND
CHIEF OPERATING OFFICER
By /s/ R. BROOKS SHERMAN
...................................
R. BROOKS SHERMAN
VICE-PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
Date: November 12, 1997
16
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
National Propane Partners, L.P. condensed consolidated Balance Sheet
as of September 30, 1997 and the condensed consolidated Statement of
Operations for the interim period January 1, 1997 through September 30, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,082
<SECURITIES> 0
<RECEIVABLES> 7,529
<ALLOWANCES> 0
<INVENTORY> 13,452
<CURRENT-ASSETS> 26,158
<PP&E> 167,182
<DEPRECIATION> 86,747
<TOTAL-ASSETS> 173,197
<CURRENT-LIABILITIES> 15,336
<BONDS> 138,150
<COMMON> 0
0
0
<OTHER-SE> 17,772
<TOTAL-LIABILITY-AND-EQUITY> 173,197
<SALES> 117,987
<TOTAL-REVENUES> 93,799
<CGS> 93,799
<TOTAL-COSTS> 17,568
<OTHER-EXPENSES> 782
<LOSS-PROVISION> 9,306
<INTEREST-EXPENSE> 2,303
<INCOME-PRETAX> 165
<INCOME-TAX> 2,138
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,138
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
<FN>
Allowances - Receivables are shown net of an allowance of $1,157.
Total receivable balance is $8,686.
</FN>
</TABLE>
