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CONFORMED COPY
________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
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., 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
April 30, 1998.
________________________________________________________________________________
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NATIONAL PROPANE PARTNERS, L.P.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Part I -- Financial Information
Item 1 -- Financial Statements -- National Propane Partners, L.P.:
Condensed Consolidated Balance Sheets -- December 31, 1997 and March 31, 1998.................... 3
Condensed Consolidated Statements of Operations -- Three months ended March 31, 1997 and 1998.... 4
Condensed Consolidated Statements of Cash Flows -- Three months ended March 31, 1997 and 1998.... 5
Notes to Condensed Consolidated Financial Statements............................................. 6
Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations....... 8
Part II -- Other Information
Item 6 -- Exhibits and Reports on Form 8-K............................................................ 12
Signatures............................................................................................ 13
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997(A) 1998
------------ ---------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 4,616 $ 845
Receivables, net.................................................................. 13,955 13,565
Finished goods inventories........................................................ 9,599 7,366
Interest receivable from Triarc Companies, Inc.................................... -- 1,355
Other current assets.............................................................. 1,990 2,103
------------ ---------
Total current assets......................................................... 30,160 25,234
Note receivable from Triarc Companies, Inc............................................. 40,700 40,700
Properties, net........................................................................ 80,346 79,386
Unamortized costs in excess of net assets of acquired companies........................ 17,616 17,492
Other assets........................................................................... 8,415 8,048
------------ ---------
$177,237 $ 170,860
------------ ---------
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LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of long-term debt................................................. $ 9,235 $ 3,620
Accounts payable.................................................................. 5,877 4,122
Accrued expenses.................................................................. 7,866 10,208
------------ ---------
Total current liabilities.................................................... 22,978 17,950
Long-term debt......................................................................... 138,131 137,404
Customer deposits and other long-term liabilities...................................... 2,674 2,559
Partners' capital:
Common partners' capital.......................................................... 10,362 10,072
General partners' capital, including subordinated units........................... 3,092 2,875
------------ ---------
Total partners' capital...................................................... 13,454 12,947
------------ ---------
$177,237 $ 170,860
------------ ---------
------------ ---------
</TABLE>
- ------------
(A) Derived from the audited consolidated financial statements as of December
31, 1997.
See accompanying notes to condensed consolidated financial statements
3
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NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1998
------- -------
(IN THOUSANDS,
EXCEPT PER UNIT
DATA)
(UNAUDITED)
<S> <C> <C>
Revenues.................................................................................... $59,184 $46,130
------- -------
Cost of sales:
Cost of product-propane and appliances................................................. 32,870 21,243
Other operating expenses applicable to revenues........................................ 11,464 11,479
------- -------
44,334 32,722
------- -------
Gross profit...................................................................... 14,850 13,408
Selling, general and administrative expenses................................................ 6,379 6,487
------- -------
Operating income.................................................................. 8,471 6,921
Interest expense............................................................................ (2,951) (3,275)
Interest income from Triarc Companies, Inc.................................................. 1,340 1,355
Other income, net........................................................................... 318 583
------- -------
Income before income taxes........................................................ 7,178 5,584
Provision for income taxes.................................................................. -- (50)
------- -------
Net income........................................................................ $ 7,178 $ 5,534
------- -------
------- -------
General partners' interest in net income.................................................... $ 287 $ 221
------- -------
------- -------
Unitholders' interest (common and subordinated) in net income............................... $ 6,891 $ 5,313
------- -------
------- -------
Net income per unit -- basic and diluted.................................................... $ .61 $ .47
------- -------
------- -------
Weighted average number of units outstanding................................................ 11,235 11,235
------- -------
------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
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NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1998
--------- ---------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income......................................................................... $ 7,178 $ 5,534
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of properties................................... 2,564 2,679
Amortization of costs in excess of net assets of acquired companies........... 184 249
Amortization of deferred financing costs...................................... 118 182
Other amortization............................................................ 152 276
Provision for doubtful accounts............................................... 350 279
Gain on sale of assets, net................................................... (27) (385)
Other, net.................................................................... (23) (69)
Changes in operating assets and liabilities:
Decrease in accounts receivable.......................................... 3,231 151
Increase in interest receivable from Triarc Companies, Inc............... (1,340) (1,355)
Decrease in inventories.................................................. 3,311 2,233
Decrease (increase) in prepaid expenses and other current assets......... 298 (113)
Increase (decrease) in accounts payable and accrued expenses............. (8,642) 587
--------- ---------
Net cash provided by operating activities..................................... 7,354 10,248
--------- ---------
Cash flows from investing activities:
Capital expenditures............................................................... (1,398) (1,906)
Business acquisitions.............................................................. (515) (315)
Proceeds from sale of properties................................................... 126 687
--------- ---------
Net cash used in investing activities......................................... (1,787) (1,534)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt....................................................... 2,621 --
Repayments of long-term debt....................................................... (6,278) (6,342)
Payments of distributions.......................................................... (6,143) (6,143)
--------- ---------
Net cash used in financing activities......................................... (9,800) (12,485)
--------- ---------
Net decrease in cash.................................................................... (4,233) (3,771)
Cash and cash equivalents at beginning of period........................................ 11,187 4,616
--------- ---------
Cash and cash equivalents at end of period.............................................. $ 6,954 $ 845
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
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NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- ORGANIZATION
National Propane Partners, L.P. (the 'Partnership') has 6,701,550 common
units (the 'Common Units') outstanding in the Partnership and its subsidiaries
National Propane, L.P. (the 'Operating Partnership') and National Sales &
Service, Inc. ('NSSI') and collectively with the Partnership and Operating
Partnership, (the 'Partnership Entities'). National Propane Corporation (the
'Managing General Partner'), a wholly-owned subsidiary of Triarc Companies, Inc.
('Triarc'), and its subsidiary, National Propane SGP Inc., own general partner
interests representing an aggregate 4% unsubordinated general partners' interest
(the 'General Partners' Interest') in the Partnership Entities. In addition, the
Managing General Partner owns 4,533,638 subordinated units (the 'Subordinated
Units') representing a 38.7% subordinated general partner interest in the
Partnership Entities.
NOTE 2 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements 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 condensed consolidated financial statements contain
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Partnership's financial position as of December 31, 1997 and
March 31, 1998 and its results of operations and cash flows for the three-month
periods ended March 31, 1997 and 1998. 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, 1997 (the 'Form 10-K').
NOTE 3 -- PROPERTIES
The following is a summary of the components of properties, net:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Properties, at cost................................................ $168,871 $ 170,110
Less accumulated depreciation...................................... 88,525 90,724
------------ ---------
$ 80,346 $ 79,386
------------ ---------
------------ ---------
</TABLE>
NOTE 4 -- INCOME TAXES
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 those of the Partnership, no income taxes have
been provided thereon.
NOTE 5 -- CONTINGENCIES
The Partnership continues to have an environmental contingency of the same
nature and general magnitude as described in Note 17 to the consolidated
financial statements in the Form 10-K. The costs of remediation and third party
claims, if any, associated with this environmental contingency may have a
material adverse effect on the Partnership's financial position, results of
operations or its ability to make distributions (the 'Distributions') to the
holders of its Common Units, the General Partners' Interest and the Subordinated
Units.
6
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NATIONAL PROPANE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
The Partnership continues to have a contingency with respect to the Final
Rule for Continued Operation of the Present Propane Trucks (the 'Final Rule')
published by the U.S. Department of Transportation and resulting litigation of
the same nature as described in Note 17 to the consolidated financial statements
in the Form 10-K. The Partnership continues to be unable to determine the likely
outcome of the litigation or what the ultimate long-term cost of compliance with
the Final Rule will be.
The Partnership 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. However, any one or
all of these matters taken together may adversely affect the Partnership's
results of operations or limit the Partnership's ability to make Distributions.
NOTE 6 -- QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH
On February 13, 1998, the Partnership paid a quarterly distribution for the
quarter ended December 31, 1997 of $0.525 per Common and Subordinated Unit to
Unitholders of record on February 5, 1998, with a proportionate amount for the
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 General
Partners' Interest. The Managing General Partner has agreed to forego any
additional distributions on the Subordinated Units in order to facilitate the
Partnership's compliance with a debt covenant restriction. Such distributions on
the Subordinated Units will be resumed when their payment will not impact
compliance with such covenant. Accordingly, the Partnership does not expect to
pay any additional distributions on the Subordinated Units for the remainder of
1998. On April 28, 1998 the Partnership declared a quarterly distribution for
the quarter ended March 31, 1998 of $0.525 per Common Unit to Common Unitholders
of record on May 8, 1998 payable May 15, 1998 with a proportionate amount for
the General Partners' Interest, or an aggregate of $3,664,000, including
$146,000 to the General Partners related to the General Partners' Interest. No
distribution was declared with respect to the Subordinated Units.
NOTE 7 -- RELATED PARTY TRANSACTIONS
The Partnership continues to have related party transactions of the same
nature and general magnitude as those described in Note 19 to the consolidated
financial statements contained in the Form 10-K.
NOTE 8 -- 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, 1997........................................... $10,362 $ 3,092 $13,454
Net income............................................................. 3,170 2,364 5,534
Cash distributions paid................................................ (3,518) (2,625) (6,143)
Amortization of unearned compensation on below market unit options..... 58 44 102
--------- --------- ---------
Balance at March 31, 1998.............................................. $10,072 $ 2,875 $12,947
--------- --------- ---------
--------- --------- ---------
</TABLE>
7
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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
The Partnership 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. The Partnership believes it
is the sixth largest retail marketer of propane in terms of retail volume in the
United States, supplying retail and wholesale customers in 24 states through its
159 full service centers. The Partnership's operations are concentrated in the
Midwest, Northeast, Southeast and West regions of the United States.
The Partnership'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 dependent on weather conditions. The
Partnership sells approximately 65% 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. The Partnership 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 similar sales volumes.
The Partnership 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, the Partnership's first fiscal quarter, and the beginning
of the second heating season, the Partnership'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. The Partnership does not believe it is overly dependent on
any one supplier. The Partnership primarily buys propane on both one year
contracts and the spot market and generally does not enter into any fixed price
take-or-pay contracts. Furthermore, the Partnership purchases propane from a
wide variety of sources. In 1997 and through the first quarter of 1998, no
provider supplied over 20% of the Partnership'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 the Partnership's ability
to raise customer prices, margins will be negatively affected.
The propane industry is very competitive. The Partnership competes against
other major propane companies as well as local marketers in most of its markets,
with the highest concentration of competitors 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 for the three
months ended March 31, 1998 with the three months ended March 31, 1997.
8
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RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1997
Revenues decreased $13.1 million, or 22.1%, to $46.1 million in the three
months ended March 31, 1998 as compared to $59.2 million for the three months
ended March 31, 1997 with propane revenues decreasing $13.0 million, or 22.8%,
to $44.0 million for the three months ended March 31, 1998 compared with $57.0
million in 1997 and revenues from appliance and other product lines decreasing
$0.1 million. The $13.0 million decrease in propane revenues is a result of
decreased average selling prices ($9.8 million) due to lower product costs along
with decreased volumes ($3.2 million) as a result of warmer weather. Propane
retail gallons sold decreased 2.8 million gallons, or 5.5%, to 48.4 million
gallons in 1998, compared to 51.2 million gallons in 1997. This decrease in
gallons sold is primarily attributable to a decrease in residential customers
sales due to the fact that the three months ended March 31, 1998 were 10.6%
warmer than the same period in 1997 according to Degree Day data published by
the National Climatic Data Center as applied to the geographic regions of the
Partnership's operations.
Gross profit decreased $1.5 million, or 10.1%, to $13.4 million in the
three months ended March 31, 1998 as compared to $14.9 million in the comparable
three months of 1997 of which $1.3 million is attributable to propane and $0.1
million is attributable to appliances and other revenue lines. Lower propane
sales volumes accounted for substantially all of the $1.3 million propane gross
profit decrease. The increase in gross profit as a percentage of sales, from
25.1% to 29.1%, 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 decreased $0.20 per gallon, or 18.1%, due to lower product
costs.
Selling, general and administrative expenses were relatively unchanged at
$6.5 million in the three months ended March 31, 1998 compared to $6.4 million
in 1997.
Interest expense increased $0.3 million to $3.3 million in the three months
ended March 31, 1998 due to higher average outstanding borrowings.
Interest income from Triarc was relatively unchanged at $1.4 million in the
three months ended March 31, 1998.
Other income, net increased $0.3 million to $0.6 million due to an increase
in gains on asset sales.
The provision for income taxes relates only to the pre-tax income of NSSI
which did not have any pre-tax income in the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's cash and cash equivalents (collectively 'cash') decreased
$3.8 million during the three-month period ended March 31, 1998. This decrease
reflected cash provided by operating activities of $10.2 million more than
offset by cash used in investing activities of $1.5 million and cash used in
financing activities of $12.5 million.
Cash flows provided by operating activities of $10.2 million in the 1998
period consisted of net income of $5.5 million, non-cash charges of $3.2
million, principally depreciation and amortization, and $1.5 million from
working capital sources. The change in working capital is primarily made up of
seasonal decreases in inventories of $2.2 million along with an increase of $0.6
million in accounts payable and accrued expenses, partially offset by an
increase of $1.4 million of interest due from Triarc on the Partnership Loan as
amounts are paid semi-annually. Accounts payable decreased $1.7 million due
primarily to the seasonal nature of the propane industry while accrued expenses
increased $2.3 million due primarily to the timing of the semi-annual interest
payments on the First Mortgage Notes ($2.7 million).
Cash used in investing activities during the three-month period ended March
31, 1998 reflects capital expenditures of $1.9 million and business acquisitions
of $0.3 million. Of the capital expenditure amount for 1998, $0.7 million was to
support growth of operations and $1.2 million was for maintenance capital
expenditures. The Partnership has budgeted capital expenditures of $2.6 million
for the remainder of 1998 comprised of $1.8 million for growth capital
expenditures and $0.8 for maintenance
9
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<PAGE>
capital expenditures. The Partnership has outstanding commitments amounting to
$1.1 million for such capital expenditures as of March 31, 1998, which consists
of $0.6 million for growth capital expenditures and $0.5 million for maintenance
capital expenditures. During the first three months of 1998 the Partnership
acquired the assets of two retail propane marketers for aggregate cash
consideration of $0.3 million.
Cash used in financing activities during the three-month period ended March
31, 1998 reflects net repayments of $5.7 million on the Working Capital Facility
(see below), other debt repayments of $0.6 million and the February 13, 1998
distribution to Unitholders of $6.1 million.
The Partnership maintains a bank facility (the 'Bank Facility') with a
group of banks which, as amended, provides for a $15.0 million working capital
facility (the 'Working Capital Facility') to be used for working capital and
other general partnership purposes and a $20.0 million acquisition facility (the
'Acquisition Facility'), the use of which is restricted to business acquisitions
and capital expenditures for growth. At March 31, 1998, $2.8 million and $12.0
million were borrowed under the Working Capital Facility and the Acquisition
Facility, respectively. The 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 'Principal Paydown'). The
Acquisition Facility and the $125 million of 8.54% First Mortgage Notes due June
30, 2010 do not require any principal payments in 1998.
Based on the Partnership's current cash on hand, available borrowings under
the Bank Facility and cash flows from operations, the Partnership expects to be
able to meet all of its cash requirements for the remainder of 1998 which,
exclusive of distributions discussed in the following paragraph, are primarily
the aforementioned capital expenditures and Principal Paydown and additional
business acquisitions, if any.
The Partnership distributes to its partners, on a quarterly basis, all of
its Available Cash. Available Cash, which is defined in the Partnership
Agreement, generally means with respect to any quarter of the Partnership, all
cash on hand at the end of such quarter less the amount of cash reserves that is
necessary or appropriate in the discretion of the Managing General Partner to
(i) provide for the proper conduct of the Partnership's business, (ii) comply
with applicable law or any Partnership debt instrument or other agreement, or
(iii) provide funds for distributions to Unitholders and the General Partners in
respect to any one or more of the next four quarters (see Note 5 to the December
31, 1997 audited financial statements within the Form 10-K for a more detailed
discussion of 'Available Cash'). However, commencing with the quarterly
distribution for the quarter ended March 31, 1998, the Managing General Partner
has agreed to forego any distributions on the Subordinated Units in order to
facilitate the Partnership's compliance with a debt covenant restriction. Such
distributions on the Subordinated Units will be resumed when their payment will
not impact compliance with such covenant. Accordingly, the Partnership does not
expect to pay any additional distributions on the Subordinated Units for the
remainder of 1998. On April 28, 1998, the Partnership declared a quarterly
distribution for the quarter ended March 31, 1998 of $0.525 per Common Unit to
Common Unitholders of record on May 8, 1998 payable May 15, 1998 with a
proportionate amount for the General Partners' Interest, or an aggregate of $3.7
million, including $0.1 million to the General Partners related to the General
Partners' Interest. No distribution was declared with respect to the
Subordinated Units.
CONTINGENCIES
The Partnership continues to have an environmental contingency of the same
nature and general magnitude as described in Note 17 to the consolidated
financial statements in the Form 10-K. The costs of remediation and third party
claims, if any, associated with this environmental contingency may have a
material adverse effect on the Partnership's financial position, results of
operations or its ability to make Distributions to the holders of its Common
Units, the General Partners' Interest and the Subordinated Units.
The Partnership continues to have a contingency with respect to the Final
Rule for Continued Operation of the Present Propane Trucks published by the U.S.
Department of Transportation and resulting litigation of the same nature as
described in Note 17 to the consolidated financial statements in
10
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<PAGE>
the Form 10-K. The Partnership continues to be unable to determine the likely
outcome of the litigation or what the ultimate long-term cost of compliance with
the Final Rule will be.
The Partnership 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. However, any one or
all of these matters taken together may adversely affect the Partnership's
results of operations or limit the Partnership's ability to make Distributions.
YEAR 2000
The Partnership has undertaken a study of its functional application
systems to determine their compliance with year 2000 issues and, to the extent
of noncompliance, the required remediation. An assessment of the readiness of
third-party entities with which the Partnership has relationships, such as its
suppliers, customers, payroll processors and others, is ongoing. As a result of
such study, the Partnership believes the majority of its systems are year 2000
compliant. However, certain systems, which are significant to the Partnership,
require remediation. The Partnership currently estimates it will complete the
required remediation by the end of the first half of 1999. The current estimated
cost of such remediation is not expected to be material. Such costs, other than
software, will be expensed as incurred.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997 the Financial Accounting Standards Board (the 'FASB') issued
Statement of Financial Accounting Standards ('SFAS') No. 131 ('SFAS 131')
'Disclosures about Segments of an Enterprise and Related Information' which
supersedes SFAS No. 14 'Financial Reporting for Segments of a Business
Enterprise'. SFAS 131 requires disclosure in the Partnership's consolidated
financial statements (including quarterly condensed consolidated financial
statements) of financial and descriptive information by operating segment as
used internally for evaluating segment performance and deciding how to allocate
resources to segments. SFAS 131 is effective for the Partnership's fiscal year
beginning January 1, 1998 (exclusive of the quarterly segment data which is
effective the following fiscal year) and requires comparative information for
earlier periods presented. The application of the provisions of SFAS 131 may
result in new segment disclosures but will not have any effect on the
Partnership's reported consolidated financial position and results of
operations.
PART II. OTHER INFORMATION
The statements in this Quarterly Report on Form 10-Q that are not
historical facts, including most importantly, information concerning possible or
assumed future results of operations of the Partnership and statements preceded
by, followed by, or that include the words 'may', 'believes', 'expects',
'anticipates' or the negation thereof, or similar expressions, constitute
'forward-looking statements'. All statements which address operating
performance, events or developments that are expected or anticipated to occur in
the future, including statements relating to volume and revenue growth, or
statements expressing general optimism about future operating results, are
forward-looking statements. Such forward-looking statements involve risks,
uncertainties and other factors which may cause actual results, performance or
achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. For those statements, the Partnership claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. Such factors include, but are
not limited to, the following: changes in wholesale propane prices; regional
weather conditions; general economic conditions where the Partnership operates;
competition; success of operating initiatives; development and operating costs;
advertising and promotional efforts; the existence or absence of adverse
publicity; change 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; changes in, or failure to comply with, government
regulations; the costs, uncertainties and other effects of legal and
administrative
11
<PAGE>
<PAGE>
proceedings; and other risks and uncertainties detailed in the Partnership's
Securities and Exchange Commission filings. The Partnership will not undertake
and specifically declines any obligation to publicly release 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>
10.1 -- Third Amendment dated as of March 23, 1998 to the National Propane Credit Agreement among National Propane,
L.P., the Lenders (as defined therein), BankBoston, N.A., as Administrative Agent and a Lender, and
BancAmerica Robertson Stephens, as Syndication Agent incorporated herein by reference to the Partnership's
report on Form 8-K dated March 25, 1998.
10.2 -- Agreement dated as of March 23, 1998 among National Propane Corporation, National Propane Partners, L.P.,
Triarc Companies, Inc., the Lenders (as defined therein), BankBoston, N.A., as Administrative Agent and a
Lender, and BancAmerica Robertson Stephens, as Syndication Agent incorporated herein by reference to the
Partnership's report on Form 8-K dated March 25, 1998.
10.3 -- Amendment to Employment Agreement between National Propane Corporation and Ronald R. Rominiecki, dated as
of March 19, 1998 incorporated herein by reference to exhibit 10.26 to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1997.
10.4 -- Fourth Amendment dated as of March 30, 1998 to the National Propane Credit Agreement among National
Propane, L.P., the Lenders (as defined therein), BankBoston, N.A., as Administrative Agent and a Lender, and
BancAmerica Robertson Stephens, as Syndication Agent incorporated herein by reference to exhibit 10.27 to
the Partnership's Report on Form 10-K for the year ended December 31, 1997.
27.1 -- Financial Data Schedule for the three-month period ended March 31, 1998, submitted to the Securities and
Exchange Commission in electronic format.
</TABLE>
(b) Reports on Form 8-K.
The Partnership filed a Form 8-K on March 25, 1998 with respect to the
Third Amendment dated as of March 23, 1998 to the National Propane Credit
Agreement among National Propane, L.P., the Lenders (as defined therein),
BankBoston, N.A., as Administrative Agent and a Lender, and BancAmerica
Robertson Stephens, as Syndication Agent and the Agreement dated as of
March 23, 1998 among National Propane Corporation, National Propane
Partners, L.P., Triarc Companies, Inc., the Lenders (as defined therein),
BankBoston, N.A., as Administrative Agent and a Lender, and BancAmerica
Robertson Stephens, as Syndication Agent.
12
<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/ R. BROOKS SHERMAN, JR.
...................................
R. BROOKS SHERMAN, JR.
VICE-PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER)
By /s/ STEVEN T. SCHURING
...................................
STEVEN T. SCHURING
CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
Date: May 14, 1998
13
<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 March 31, 1998 and the condensed consolidated Statement of
Operations for the interim period January 1, 1998 through March 31, 1998
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 845
<SECURITIES> 0
<RECEIVABLES> 13,565
<ALLOWANCES> 0
<INVENTORY> 7,366
<CURRENT-ASSETS> 25,234
<PP&E> 170,110
<DEPRECIATION> 90,724
<TOTAL-ASSETS> 170,860
<CURRENT-LIABILITIES> 17,950
<BONDS> 137,404
<COMMON> 0
0
0
<OTHER-SE> 12,947
<TOTAL-LIABILITY-AND-EQUITY> 170,860
<SALES> 46,130
<TOTAL-REVENUES> 46,130
<CGS> 32,722
<TOTAL-COSTS> 32,722
<OTHER-EXPENSES> 6,487
<LOSS-PROVISION> 279
<INTEREST-EXPENSE> 3,275
<INCOME-PRETAX> 5,584
<INCOME-TAX> 50
<INCOME-CONTINUING> 5,534
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,534
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
<FN>
Allowances-Receivables are shown net of an allowance of $1,278. Total
receivable balance is $14,843.
</FN>
</TABLE>
