<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1999
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 1-11727
HERITAGE PROPANE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 73-1493906
(state or other jurisdiction or (I.R.S. Employer
incorporation or organization) Identification No.)
8801 SOUTH YALE AVENUE, SUITE 310
TULSA, OKLAHOMA 74137
(Address of principal
executive offices
and zip code)
(918) 492-7272
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
-----
At January 4, 2000, the registrant had units outstanding as follows:
Heritage Propane Partners, L.P. 7,106,326 Common Units
2,777,207 Subordinated Units
<PAGE> 2
FORM 10-Q
HERITAGE PROPANE PARTNERS, L.P.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages
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<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HERITAGE PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets as of November 30, 1999 and August 31, 1999 1
Consolidated Statements of Operations for the three months ended
November 30, 1999 and 1998 2
Consolidated Statement of Partners' Capital for the three months ended
November 30, 1999 3
Consolidated Statements of Cash Flows for the three months ended
November 30, 1999 and 1998 4
Notes to Unaudited Consolidated Financial Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 14
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURE
</TABLE>
i
<PAGE> 3
PART I - FINANCIAL INFORMATION
HERITAGE PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
November 30, August 31,
1999 1999
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 2,660 $ 1,679
Accounts receivable 19,797 11,635
Inventories 15,701 14,784
Prepaid expenses 1,788 1,169
------------ ------------
Total current assets 39,946 29,267
PROPERTY, PLANT AND EQUIPMENT, net 171,773 155,219
INVESTMENT IN AFFILIATE 5,248 5,202
INTANGIBLES AND OTHER ASSETS, net 76,424 73,270
------------ ------------
Total assets $ 293,391 $ 262,958
============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Working capital facility $ 31,400 $ 19,900
Accounts payable 20,913 17,268
Accrued and other current liabilities 10,833 8,490
Current maturities of long-term debt 2,294 2,022
------------ ------------
Total current liabilities 65,440 47,680
LONG-TERM DEBT, less current maturities 188,919 196,216
------------ ------------
COMMITMENTS AND CONTINGENCIES
Total liabilities 254,359 243,896
------------ ------------
PARTNERS' CAPITAL:
Common unitholders (7,086,752 and 5,825,674 units issued and outstanding at
November 30, 1999 and August 31, 1999, respectively) 38,641 17,077
Subordinated unitholders (2,777,207 units issued and outstanding at
November 30, 1999 and August 31, 1999, respectively) 27 1,809
General partner 364 176
------------ ------------
Total partners' capital 39,032 19,062
------------ ------------
Total liabilities and partners' capital $ 293,391 $ 262,958
============ ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
1
<PAGE> 4
HERITAGE PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit and unit data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
1999 1998
------------ ------------
<S> <C> <C>
REVENUES:
Retail fuel $ 36,518 $ 29,341
Wholesale fuel 7,817 5,755
Other 7,555 6,462
------------ ------------
Total revenues 51,890 41,558
------------ ------------
COSTS AND EXPENSES:
Cost of products sold 29,421 19,931
Operating expenses 13,603 12,178
Depreciation and amortization 4,022 3,545
Selling, general and administrative 1,414 1,341
------------ ------------
Total costs and expenses 48,460 36,995
------------ ------------
OPERATING INCOME 3,430 4,563
OTHER INCOME (EXPENSE):
Interest expense (4,398) (3,896)
Equity in earnings of affiliates 46 178
Gain on disposal of assets 285 502
Other (70) (31)
------------ ------------
INCOME (LOSS) BEFORE MINORITY INTEREST (707) 1,316
Minority interest (101) (101)
------------ ------------
NET INCOME (LOSS) (808) 1,215
GENERAL PARTNER'S INTEREST IN NET INCOME (LOSS) (8) 12
------------ ------------
LIMITED PARTNERS' INTEREST IN NET INCOME (LOSS) $ (800) $ 1,203
============ ============
BASIC NET INCOME (LOSS) PER LIMITED PARTNER UNIT $ (0.09) $ 0.14
============ ============
BASIC WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING 9,081,607 8,579,668
============ ============
DILUTED NET INCOME (LOSS) PER LIMITED PARTNER UNIT $ (0.09) $ 0.14
============ ============
DILUTED WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING 9,081,607 8,634,168
============ ============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
2
<PAGE> 5
HERITAGE PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(in thousands, except unit data)
(unaudited)
<TABLE>
<CAPTION>
NUMBER OF UNITS Common Subordinated General Total Partners'
Common Subordinated Unitholders Unitholders Partner Capital
---------- ------------ ----------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST 31, 1999 5,825,674 2,777,207 $ 17,077 $ 1,809 $ 176 $ 19,062
Unit Distribution -- -- (3,280) (1,562) (57) (4,899)
Issuance of restricted Common Units
in connection with certain
acquisitions 56,578 -- 1,262 -- -- 1,262
Issuance of Common Units to public
net of related expenses 1,200,000 -- 24,041 -- -- 24,041
Capital contribution from General
Partner in connection with
issuance of Common Units -- -- -- -- 253 253
Issuance of Common Units pursuant
to the vesting rights of the
Restricted Unit Plan 4,500 -- -- -- -- --
Other -- -- 116 5 -- 121
Net loss -- -- (575) (225) (8) (808)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE, NOVEMBER 30, 1999 7,086,752 2,777,207 $ 38,641 $ 27 $ 364 $ 39,032
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE> 6
HERITAGE PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (808) $ 1,215
Reconciliation of net income (loss) to net cash provided by (used in)
operating activities-
Depreciation and amortization 4,022 3,545
Provision for losses on accounts receivable 68 38
Gain on disposal of assets (285) (502)
Deferred compensation on restricted units 121 89
Undistributed earnings of affiliates (46) 174
Minority interest (63) (298)
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable (8,128) (5,408)
Inventories (789) (158)
Prepaid expenses (617) (478)
Intangibles and other assets 503 (17)
Accounts payable 3,646 3,083
Accrued and other current liabilities 1,946 1,509
---------- ----------
Net cash provided by (used in) operating activities (430) 2,792
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of cash acquired (15,271) (3,425)
Capital expenditures (5,045) (3,529)
Proceeds from asset sales 431 1,465
---------- ----------
Net cash used in investing activities (19,885) (5,489)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 36,400 18,650
Principal payments on debt (34,499) (11,034)
Unit distribution (4,899) (4,332)
Net proceeds from issuance of common units 24,041 --
Capital contribution from General Partner 253 --
---------- ----------
Net cash provided by financing activities 21,296 3,284
---------- ----------
INCREASE IN CASH 981 587
CASH, beginning of period 1,679 1,837
---------- ----------
CASH, end of period $ 2,660 $ 2,424
========== ==========
NONCASH FINANCING ACTIVITIES:
Notes payable incurred on noncompete agreements $ 2,335 $ 851
Issuance of restricted common units in connection with certain
acquisitions $ 1,262 $ --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 2,768 $ 2,240
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE> 7
HERITAGE PROPANE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except unit data)
1. GENERAL:
Heritage Propane Partners, L.P. (the Partnership) was formed April 24, 1996, as
a Delaware limited partnership. The Partnership was formed to acquire, own and
operate the propane business and substantially all of the assets of Heritage
Holdings, Inc. (the Predecessor, Company or General Partner). In order to
simplify the Partnership's obligation under the laws of several jurisdictions in
which the Partnership conducts business, the Partnership's activities are
conducted through a subsidiary operating partnership, Heritage Operating, L.P.
(the Operating Partnership). The Partnership holds a 98.9899 percent limited
partner interest and the General Partner holds a 1.0101 percent general partner
interest in the Operating Partnership.
The Operating Partnership sells propane and propane-related products to a
current customer base of approximately 277,000 retail customers in 26 states
throughout the United States. The Partnership is also a wholesale propane
supplier in the southwestern United States and in Canada, the latter through
participation in M-P Energy Partnership. M-P Energy Partnership is a Canadian
partnership primarily engaged in lower-margin wholesale distribution in which
the Partnership owns a 60 percent interest. The Partnership grants credit to its
customers for the purchase of propane and propane-related products.
The consolidated financial statements include the accounts of the Partnership,
its subsidiaries, including Heritage Operating Partnership and M-P Energy
Partnership. The Partnership accounts for its 50 percent partnership interest in
Bi-State Partnership, another propane retailer, under the equity method. All
significant intercompany transactions and accounts have been eliminated in
consolidation. The General Partner's 1.0101 percent interest in the Operating
Partnership is accounted for in the consolidated financial statements as a
minority interest. The accompanying financial statements should be read in
conjunction with the Partnership's consolidated financial statements as of
August 31, 1999, and the notes thereto included in the Partnership's
consolidated financial statements included in Form 10-K as filed with the
Securities and Exchange Commission on November 29, 1999. The accompanying
financial statements include only normal recurring accruals and all adjustments
that the Partnership considers necessary for a fair presentation. Due to the
seasonal nature of the Partnership's business, the results of operations for
interim periods are not necessarily indicative of the results to be expected for
a full year.
2. INVENTORIES:
Inventories are valued at the lower of cost or market. The cost of fuel
inventories is determined using average cost while the cost of appliances, parts
and fittings is determined by the first-in, first-out method. Inventories
consist of the following:
<TABLE>
<CAPTION>
November 30, August 31,
1999 1999
------------ ----------
<S> <C> <C>
Fuel $ 10,421 $ 9,341
Appliances, parts and fittings 5,280 5,443
-------- --------
$ 15,701 $ 14,784
======== ========
</TABLE>
3. INCOME (LOSS) PER LIMITED PARTNER UNIT:
Basic net income (loss) per limited partner unit is computed by dividing net
income (loss), after considering the General Partner's one percent interest, by
the weighted average number of Common and Subordinated Units outstanding.
Diluted net income (loss) per limited partner unit is computed by dividing net
income (loss), after considering the General Partner's one percent interest, by
the weighted average number of Common and Subordinated Units outstanding and the
weighted average number of Restricted Units ("Phantom Units") granted under the
Restricted Unit Plan. For the three months ended November 30, 1999, 75,091
Phantom Units were excluded from the calculation of diluted net loss as such
units were anti-dilutive due to the net loss for the period. A reconciliation of
net income (loss) and weighted average units used in computing basic and diluted
earnings (loss) per unit is as follows:
5
<PAGE> 8
<TABLE>
<CAPTION>
Three Months Ended November 30,
1999 1998
-------------- --------------
<S> <C> <C>
BASIC NET INCOME (LOSS) PER LIMITED PARTNER UNIT:
Limited Partners' interest in net income (loss) $ (800) $ 1,203
============== ==============
Weighted average limited partner units 9,081,607 8,579,668
============== ==============
Basic net income (loss) per limited partner unit $ (.09) $ 0.14
============== ==============
DILUTED NET INCOME (LOSS) PER LIMITED PARTNER UNIT:
Limited partners' interest in net income (loss) $ (800) $ 1,203
============== ==============
Weighted average limited partner units 9,081,607 8,579,668
Dilutive effect of Phantom Units -- 54,500
-------------- --------------
Weighted average limited partner units, assuming dilutive
effect of Phantom Units 9,081,607 8,634,168
============== ==============
Diluted net income (loss) per limited partner unit $ (.09) $ 0.14
============== ==============
</TABLE>
CASH DISTRIBUTIONS
On October 14, 1999, a quarterly distribution of $4,842, or $.5625 per Common
and Subordinated Unit, was paid to Unitholders of record at the close of
business on October 1, 1999 and $57 and $58 was distributed to the General
Partner for its General Partner interest in the Operating Partnership and its
Minority Interest, respectively and its Incentive Distribution Rights. On
December 22, 1999, the Partnership declared a cash distribution for the first
quarter ended November 30, 1999 of $.5625 per unit payable on January 14, 2000
to Unitholders of record at the close of business on January 4, 2000.
4. WORKING CAPITAL FACILITIES AND LONG-TERM DEBT:
As of June 25, 1996, the Partnership entered into a credit agreement with
various financial institutions. Effective July 2, 1999, the Partnership entered
into the First Amended and Restated Credit Agreement (the "Agreement"). The
Agreement replaced one of the financial institutions from the previous amended
credit agreement and extended the maturities, leaving all the terms essentially
unchanged. On October 15, 1999, the Partnership entered into the First Amendment
to the First Amended and Restated Credit Agreement the terms of which are as
follows:
A $35,000 Senior Revolving Working Capital Facility, expiring June 30,
2002, with $31,400 outstanding at November 30, 1999. The interest rate
and interest payment dates vary depending on the terms the Partnership
agrees to when the money is borrowed. The weighted average interest
rates were 6.688 percent and 6.925 percent for amounts outstanding at
August 31, 1999 and 1998, respectively. The Partnership must be free of
all working capital borrowings for 30 consecutive days each fiscal
year. The maximum commitment fee payable on the unused portion of the
facility is .375 percent.
A $50,000 Senior Revolving Acquisition Facility is available through
December 31, 2001, with $9,200 outstanding at November 30, 1999, at
which time the outstanding amount must be paid in ten equal quarterly
installments, beginning March 31, 2002. The interest rate and interest
payment dates vary depending on the terms the Partnership agrees to
when the money is borrowed. The average interest rates were 7.0 percent
and 7.0 percent for amounts outstanding at August 31, 1999 and 1998,
respectively. The maximum commitment fee payable on the unused portion
of the facility is .375 percent.
5. REPORTABLE SEGMENTS:
The Partnership applies SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, which requires the reporting of certain
financial information by business segment. The Partnership financial
6
<PAGE> 9
statements reflect three reportable segments: the domestic retail operations of
Heritage Propane Partners, the domestic wholesale operations of Heritage Propane
Partners, and the foreign wholesale operations of M-P Energy Partnership, a
majority owned partnership. The Partnership's reportable segments are strategic
business units that sell products and services to different types of users;
retail and wholesale customers. M-P Energy Partnership is a 60 percent owned
Canadian wholesale supplier that the Partnership consolidates. Intersegment
sales by the foreign wholesale segment to the domestic segment are priced in
accordance with the partnership agreement. The Partnership manages these
segments separately as each segment involves different distribution, sale and
marketing strategies. The Partnership evaluates the performance of its operating
segments based on operating income. The operating income below does not reflect
selling, general, and administrative expenses of $1,414 and $1,341 for the three
months ended November 30, 1999 and 1998 respectively.
The following table presents financial information by segment for the three
months ended November 30,
<TABLE>
<CAPTION>
1999 1998
------------ ----------
<S> <C> <C>
Gallons:
Domestic retail 38,875 35,668
Domestic wholesale 1,727 1,652
Foreign wholesale
Affiliated 14,506 13,092
Unaffiliated 19,426 18,613
Elimination (14,506) (13,092)
------------ ----------
Total 60,028 55,933
============ ==========
Revenues:
Domestic retail fuel $ 36,518 $ 29,341
Domestic wholesale fuel 946 665
Foreign wholesale
Affiliated 5,538 3,706
Unaffiliated 6,864 5,090
Elimination (5,538) (3,706)
Other domestic revenues 7,562 6,462
------------ ----------
Total $ 51,890 $ 41,558
============ ==========
Operating Income:
Domestic retail $ 4,429 $ 5,676
Domestic wholesale fuel -- 20
Foreign wholesale
Affiliated 145 126
Unaffiliated 414 208
Elimination (145) (126)
------------ ----------
Total $ 4,844 $ 5,904
============ ==========
Depreciation and amortization:
Domestic retail $ 4,010 $ 3,532
Domestic wholesale 10 13
Foreign wholesale 2 --
------------ ----------
Total $ 4,022 $ 3,545
============ ==========
</TABLE>
<TABLE>
<CAPTION>
As of As of
November 30, August 31,
1999 1999
------------ ----------
<S> <C> <C>
Total Assets:
Domestic retail $ 265,024 $ 236,215
Domestic wholesale 3,907 2,803
Foreign wholesale 4,924 4,566
Corporate 19,536 19,374
------------ ----------
Total $ 293,391 $ 262,958
============ ==========
</TABLE>
7
<PAGE> 10
6. SIGNIFICANT INVESTEE:
The Partnership holds a 50 percent interest in Bi-State Partnership. The
Partnership accounts for its 50 percent interest in Bi-State Partnership under
the equity method. The Partnership's investment in Bi-State Partnership totaled
$5,248 and $5,202 at November 30, 1999 and August 31, 1999, respectively. The
Partnership received distributions from Bi-State Partnership in the amount of
$470 for the year ended August 31, 1999.
Bi-State Partnership's financial position at November 30, 1999 and August 31,
1999 is summarized below:
<TABLE>
<CAPTION>
November 30, August 31,
1999 1999
------------ ------------
<S> <C> <C>
Current assets $ 1,591 $ 1,533
Noncurrent assets 14,399 14,281
------------ ------------
$ 15,990 $ 15,814
============ ============
Current liabilities $ 2,882 $ 2,333
Long-term debt 4,325 4,804
Partners' capital:
Heritage 5,248 5,202
Other partner 3,535 3,475
------------ ------------
$ 15,990 $ 15,814
============ ============
</TABLE>
Bi-State Partnership's results of operations for three months ended November 30,
1999 and 1998, respectively are summarized below:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Revenues $2,549 $2,748
Gross profit 1,377 1,684
Net income:
Heritage 46 178
Other partner 61 16
</TABLE>
7. FOOTNOTES INCORPORATED BY REFERENCE:
Certain footnotes are applicable to the consolidated financial statements but
would be substantially unchanged from those presented on Form 10-K filed with
the Securities and Exchange Commission on November 29, 1999. Accordingly,
reference should be made to the Company's Annual Report filed with the
Securities and Exchange Commission on Form 10-K for the following:
<TABLE>
<CAPTION>
NOTE DESCRIPTION
---- -----------
<S> <C>
1. OPERATIONS AND ORGANIZATION
2. SIGNIFICANT ACCOUNTING POLICIES AND BALANCE SHEET DETAIL
4. WORKING CAPITAL FACILITIES AND LONG-TERM DEBT
5. COMMITMENTS AND CONTINGENCIES
6. PARTNERS' CAPITAL
7. REGISTRATION STATEMENTS
8. PROFIT SHARING AND 401(k) SAVINGS PLAN
9. RELATED PARTY TRANSACTIONS
</TABLE>
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Since its formation in 1989, Heritage has grown primarily through
acquisitions of retail propane operations and, to a lesser extent, through
internal growth. Through November 30, 1999, Heritage and the Partnership
completed 64 acquisitions for an aggregate purchase price of approximately $261
million. The Partnership has completed 36 of these acquisitions since going
public on June 25, 1996. Subsequent to November 30, 1999, the Partnership
completed 2 additional acquisitions, adding 15 retail outlets, for an
approximate purchase price of $21 million. The Partnership engages in the sale,
distribution and marketing of propane and other related products. The
Partnership derives its revenue primarily from the retail propane marketing
business. The General Partner believes that the Partnership is one of the
largest retail marketers of propane in the United States, based on retail
gallons sold, currently serving more than 277,000 residential,
industrial/commercial and agricultural customers in 26 states through 162 retail
outlets.
The retail propane business of the Partnership consists principally of
transporting propane purchased in the contract and spot markets, primarily from
major oil companies, to its retail distribution outlets and then to tanks
located on the customers' premises, as well as to portable propane cylinders. In
the residential and commercial markets, propane is primarily used for space
heating, water heating and cooking. In the agricultural market, propane is
primarily used for crop drying, tobacco curing, poultry brooding and weed
control. In addition, propane is used for certain industrial applications,
including use as an engine fuel that burns in internal combustion engines that
power vehicles and forklifts and as a heating source in manufacturing and mining
processes.
The retail propane distribution business is largely seasonal due to
propane's use as a heating source in residential and commercial buildings.
Historically, approximately two-thirds of the Partnership's retail propane
volume and in excess of 80% of the Partnership's EBITDA is attributable to sales
during the six-month peak heating season of October through March. Consequently,
sales and operating profits are concentrated in the Partnership's first through
third fiscal quarters. Cash flow from operations, however, is greatest during
the second and third fiscal quarters when customers pay for propane purchased
during the six-month peak-heating season.
A substantial portion of the Partnership's propane is used in the
heating-sensitive residential and commercial markets causing the temperatures
realized in the Partnership's areas of operations, particularly during the
six-month peak heating season, to have a significant effect on the financial
performance of the Partnership. In any given area, sustained warmer-than-normal
temperatures will tend to result in reduced propane use, while sustained
colder-than-normal temperatures will tend to result in greater propane use. The
Partnership therefore uses information on normal temperatures in understanding
how temperatures that are colder or warmer than normal affect historical results
of operations and in preparing forecasts of future operations, which assumes
that normal weather will prevail in each of the Partnership's regions.
The retail propane business is a "margin-based" business in which gross
profits depend on the excess of sales price over propane supply costs. The
market price of propane is often subject to volatile changes as a result of
supply or other market conditions over which the Partnership will have no
control. Product supply contracts are one-year agreements subject to annual
renewal and generally permit suppliers to charge posted prices (plus
transportation costs) at the time of delivery or the current prices established
at major delivery points. Since rapid increases in the wholesale cost of propane
may not be immediately passed on to retail customers, such increases could
reduce the Partnership's gross profits. In the past, the Partnership generally
attempted to reduce price risk by purchasing propane on a short-term basis. The
Partnership has on occasion purchased significant volumes of propane during
periods of low demand, which generally occur during the summer months, at the
then current market price, for storage both at its service centers and in major
storage facilities for future resale.
Gross profit margins vary according to customer mix. For example, sales
to residential customers generate higher margins than sales to certain other
customer groups, such as agricultural customers. Wholesale margins are
substantially lower than retail margins. In addition, gross profit margins vary
by geographical region. Accordingly, a change in customer or geographic mix can
affect gross profit without necessarily affecting total revenues.
9
<PAGE> 12
ANALYSIS OF UNAUDITED HISTORICAL RESULTS OF OPERATIONS
The following discussion reflects for the periods indicated the results
of operations and operating data for the Partnership. Most of the increases in
the line items discussed below result from the acquisitions made by the
Partnership subsequent to the prior period discussed. The acquisition activity
affects the comparability of prior period financial matters, as the volumes are
not included in the prior period's results of operations. As the Partnership has
grown through acquisitions, fixed costs such as personnel costs, depreciation
and amortization and interest expense have increased. Amounts discussed below
reflect 100% of the results of M-P Energy Partnership, a general partnership in
which the Partnership owns a 60% interest. Because M-P Energy Partnership is
primarily engaged in lower-margin wholesale distribution, its contribution to
the Partnership's net income is not significant and the minority interest of
this partnership is excluded from the EBITDA calculation.
THREE MONTHS ENDED NOVEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED NOVEMBER
30, 1998.
Volume. The Partnership sold 38.9 million retail gallons in the three
months ended November 30, 1999, an increase of 3.2 million gallons or 9.0% over
the 35.7 million gallons sold in the three months ended November 30, 1998. This
increase was primarily attributable to acquisition-related volumes and to a
lesser extent internal growth, offset by warmer than normal weather.
The Partnership also sold approximately 21.1 million wholesale gallons
in this first quarter of fiscal 2000, an increase of .8 million gallons or 3.9%
from the 20.3 million wholesale gallons sold in the first quarter of fiscal
1999. U.S. wholesale volumes remained relatively constant at 1.7 million gallons
while the foreign volumes of MP Energy Partnership increased .8 million gallons
to 19.4 million gallons for the first quarter.
Revenues. Total revenues for the Partnership increased $10.4 million or
25.1% to $51.9 million for the three months ended November 30, 1999 as compared
to $41.5 million for the same three-month period last year. The current period's
domestic retail propane revenues increased $7.2 million or 24.6% to $36.5
million versus the prior year's comparable period results of $29.3 million due
to increased volumes and higher selling prices. The U.S. wholesale revenues
increased slightly to $.9 million as compared to $.7 million for the period
ended November 30, 1998, due to higher selling prices. Other domestic revenues
increased $1.2 million or 18.8% to $7.6 million as a result of acquisitions and
internal growth. Foreign revenues increased $1.8 million for the three months
ended November 30, 1999, to $6.9 million as compared to $5.1 million for the
three months ended November 30, 1998, primarily as a result of higher selling
prices and increased volume. Sales price per gallon increased during the three
months ended November 30, 1999 in relation to the significant increase in the
wholesale cost of propane as compared to the same period last year.
Cost of Sales. Total cost of sales increased $9.5 million or 47.7% to
$29.4 million for the three months ended November 30, 1999, as compared to $19.9
million for the three months ended November 30, 1998. This increase is the
result of a significant increase in the wholesale propane prices during the
three months ended November 30, 1999 as compared to the low wholesale costs
experienced in the same period last fiscal year. U.S. wholesale cost of sales
increased $.3 million in the first quarter comparisons for the same reasons.
Retail fuel cost of sales increased $7.0 million or 57.4% to $19.2 million in
the first quarter of fiscal 2000, compared to $12.2 million in the first quarter
of fiscal 1998 due to the impact of the increase in wholesale fuel cost and
retail volumes. Other cost of sales also increased $.6 million in the first
quarter comparison in correlation to the increase in other revenues.
Gross Profit. Total gross profit increased $.9 million or 4.2% to $22.5
million for the three months ended November 30, 1999, as compared to $21.6
million for the three months ended November 30, 1998 due to the aforementioned
increases in retail volumes and revenues, offset by the increase in product
costs. Last year's margins benefited as a result of the low propane cost
environment, which was not experienced this current quarter.
Operating Expenses. Operating expenses increased $1.4 million or 11.5%
to $13.6 million in the first quarter of fiscal 2000 as compared to $12.2
million in the first quarter of fiscal 1999 primarily due to acquisition related
operating expenses.
Selling, General and Administrative. Selling, general and
administrative expenses were $1.4 million for the three months ended November
30, 1999, an increase of $.1 million from the $1.3 million reported the same
three month period last year.
Depreciation and Amortization. Depreciation and amortization increased
$.5 million for the first quarter ended November 30, 1999 to $4.0 million as
compared to $3.5 million for the first quarter ended November 30, 1998. This
increase is primarily the result of additional depreciation and amortization
cost on the fixed assets and intangible assets recorded in connection with
acquisitions.
10
<PAGE> 13
Operating Income. Operating income for the three months ended November
30, 1999, decreased $1.2 million, or 26.1%, to $3.4 million as compared to $4.6
million for the same three-month period last fiscal year. This decrease is
primarily attributable to increased fuel costs, warmer than normal weather,
which hindered expected increases in volumes, and the acquisition related
increase in operating expenses.
Net Income. The first quarter of fiscal 2000 recorded a net loss of $.8
million, a $2.0 million decrease from the net income of $1.2 million for the
first quarter of fiscal 1999. This decrease is the result of the operating
income decrease described above and an increase in interest costs.
EBITDA. Earnings before interest, taxes, depreciation and amortization
decreased $.8 million to $7.7 million for the first quarter ended November 30,
1999, as compared to the revised first quarter 1999 EBITDA of $8.5 million. The
first quarter 1999 EBITDA was revised to account for the non-cash compensation
expense that was previously included. The Partnership's EBITDA includes the
EBITDA of investees, but does not include the EBITDA of the minority interest of
M-P Energy Partnership. EBITDA should not be considered as an alternative to net
income (as an indicator of operating performance) or as an alternative to cash
flow (as a measure of liquidity or ability to service debt obligations), but
provides additional information for evaluating the Partnership's ability to make
the Minimum Quarterly Distribution.
LIQUIDITY AND CAPITAL RESOURCES
The ability of the partnership to satisfy its obligations will depend
on its future performance, which will be subject to prevailing economic,
financial, business and weather conditions and other factors, many of which are
beyond its control. Future capital needs of the Partnership are expected to be
provided by various sources as follows:
a) increases in working capital will be financed by the working
capital line of credit and repaid from subsequent seasonal
reductions in inventory and accounts receivable
b) payment of interest cost, and other debt services, will be provided
by the annual cash flow from operations
c) required maintenance capital, predominantly vehicle replacement,
will also be provided by the annual cash flow from operations
d) growth capital, mainly for customer tanks, expended will be
financed by the revolving acquisition bank line of credit
e) acquisition capital expenditures will be financed with additional
indebtedness on the revolving acquisition bank line of credit,
other lines of credit, issues of additional Common Units or a
combination thereof.
CASH FLOWS
Operating Activities. Cash used by operating activities during the
three months ended November 30, 1999, was $.4 million compared to cash provided
of $2.8 million in the three months ended November 30, 1998. The net cash used
from operations for the three months ended November 30, 1999 consisted of a net
loss of $.8 million and the impact of working capital used of $3.4 offset by
noncash charges of $3.8 million, principally depreciation and amortization. This
increase in cash used in operations is primarily due to the net effect of the
increase in propane costs on accounts receivable, inventory and accounts
payable.
Investing Activities. Cash used in investing activities during the
three months ended November 30, 1999 included capital expenditures for
acquisitions amounting to $15.3 million, net of cash received plus $5.0 million
spent for maintenance needed to sustain operations at current levels and
customer tanks to support growth of operations.
Financing Activities. Cash provided by financing activities during the
first quarter of fiscal 2000 of $21.3 million is primarily the result of net
proceeds received in an equity offering of 1,200,000 Common Units representing
limited partner interest in Heritage Propane Partners, L.P. utilizing the
Partnership's Registration Statement No. 333-86057 on Form S-3 dated September
13, 1999. The underwriters delivered the Common Units to purchasers on October
28, 1999, at a public offering price of $22.00 per Common Unit. The net proceeds
of
11
<PAGE> 14
approximately $24 million were used to repay a portion of the outstanding
indebtedness under the acquisition facility that was incurred to acquire propane
businesses. Other cash provided by financing activities of $1.9 was from a net
increase in the working capital facility of $11.5 million and a net decrease in
long-term debt of $9.6 million. These increases were offset by cash
distributions to unitholders of $4.9 million.
FINANCING AND SOURCES OF LIQUIDITY
The Partnership has a Bank Credit Facility, which includes a Working
Capital Facility, a revolving credit facility providing for up to $35.0 million
of borrowings to be used for working capital and other general partnership
purposes, and an Acquisition Facility, a revolving credit facility providing for
up to $50.0 million of borrowings to be used for acquisitions and improvements.
As of November 30, 1999, the Acquisition Facility had $40.8 million available to
fund future acquisitions and the Working Capital Facility had $3.6 million
available for borrowings.
The Partnership uses its cash provided by operating and financing
activities to provide distributions to unitholders and to fund acquisition,
maintenance and growth capital expenditures. Acquisition capital expenditures,
which include expenditures related to the acquisition of retail propane
operations and intangibles associated with such acquired businesses, were $15.3
million for the three months ended November 30, 1999, as compared to $3.4
million during the same period of fiscal 1998. In addition to the $15.3 million
of cash expended for acquisitions during the first quarter of fiscal 2000, $1.3
million of Common Units and $2.3 million for notes payable on non-compete
agreements were issued in connection with certain acquisitions.
Under the Partnership Agreement of Heritage, the Partnership will
distribute to its partners, 45 days after the end of each fiscal quarter, an
amount equal to all of its Available Cash for such quarter. Available cash
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 established by
the General Partner in its reasonable discretion that is necessary or
appropriate to provide for future cash requirements. The current distribution
level of $.5625 per unit ($2.25 annually) includes incentive distributions
payable to the General Partner to the extent the quarterly distribution exceeds
$.55 per unit ($2.20 annually).
The assets utilized in the propane business do not typically require
lengthy manufacturing process time nor complicated, high technology components.
Accordingly, the Partnership does not have any significant financial commitments
for capital expenditures. In addition, the Partnership has not experienced any
significant increases attributable to inflation in the cost of these assets or
in its operations.
YEAR 2000 MATTERS
The Year 2000 issue arose because many computer programs use only the
last two digits to indicate the year; hence, they may not correctly interpret
dates beyond the year 1999. The Partnership has recognized the potential impact
of this problem that could cause computer applications to fail or create
erroneous results disrupting business operations. The Partnership along with
outside consultants has conducted a detailed assessment of its Year 2000 (Y2K)
compliance and readiness issues. The Partnership has put a comprehensive program
in place to prepare for its Y2K readiness and designates the following
information as our "Year 2000 Readiness Disclosure".
The scope of the Partnership's program includes the review and
evaluation of (1) its information technology ("IT") such as hardware and
software utilized in the Partnership's operations; (2) non-IT systems or
embedded technology such as micro-controllers contained in various equipment,
facilities and vehicles; and (3) the readiness of third parties which includes
key fuel suppliers, vendors and banking facilities. A complete and detailed
inventory list of the Partnership's hardware and software systems has been
completed enabling us to evaluate the state of readiness of these systems.
The Partnership's district operations use a variety of external
software that has been evaluated for Year 2000 compliance. The upgrade to the
Y2K software at these district locations is complete. The hardware necessary to
accommodate the software upgrades was replaced as needed. The Partnership's
central accounting software, which encompasses general ledger, financial
reporting, and accounts payable, has been upgraded and successfully tested as
Y2K compliant. The Partnership's payroll, fixed asset and wholesale fuel supply
and distribution systems are completed. Miscellaneous applications have also
been evaluated and upgrades are completed. The non-IT systems such as
telephones, fax machines, and photocopiers were investigated for the date
critical Year 2000 and were replaced or updated as needed for operation.
12
<PAGE> 15
The Partnership has identified major vendors and suppliers on whom it
depends upon for services and products to assess their Year 2000 readiness to
assure there are no interruptions in operations. A Year 2000 compliance letter
and questionnaire was sent to these third parties and our evaluation of these
key third parties is complete. While none of the Partnership's products are
directly date sensitive, interruption of the supply and delivery of gas products
or other services could have a material adverse effect on the operations of the
Partnership. By contacting these third parties to assess their state of
readiness and developing an appropriate contingency plan if necessary, the
Partnership is hoping to minimize these risks. The Partnership contacted their
bank facilities to ensure that the collection and transfer of funds will not be
interrupted and that extension of working capital will be available as needed.
The Partnership does not have any customers that accounted for 5% or more of the
Partnership's revenues during fiscal 1999 thus reducing the risk if some but not
all customers are not Y2K compliant.
Estimated costs to modify its computer-based systems to date have not
been specifically tracked but are estimated to be immaterial. A portion of these
costs was capitalized as they relate to adding new software and hardware to
enhance current operations. Other costs related directly to becoming Year 2000
compliant have been expensed as incurred.
A contingency plan has been developed to deal with system failures and
disruptions of service arising from third party Y2K failures. The contingency
plan for the Partnership's district operations is primarily focused on one
system that already has been successfully tested and is Y2K compliant. This
system affects two-thirds of our district operations and if other systems fail
during the testing, they will be upgraded to this compliant system. The success
the Partnership has with dealing with the issues of the Year 2000 and its vendor
and supplier's success in the matter will affect the Partnership's future
operations. Interruptions in the Partnership's operations or those of its major
suppliers and vendors due to Year 2000 failures could have a material adverse
affect on its operations and cash flows. In addition to the business risks noted
above there are other Y2K risks, which include but are not limited to utility
and telecommunication systems failure to provide service, which are beyond the
Partnership's control and could have adverse effects on our operations. As of
January 10, 2000, the Partnership has not experienced any significant problems
arising from Y2K system failures or disruptions of service arising from third
parties.
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this report, excluding historical
information, include certain forward-looking statements. Although Heritage
believes such forward-looking statements are based on reasonable assumptions, no
assurance can be given that every objective will be reached. Such statements are
made in reliance on the "safe harbor" protections provided under the Private
Securities Litigation Reform Act of 1995.
As required by that law, the Partnership hereby identifies the
following important factors that could cause actual results to differ materially
from any results projected, forecasted, estimated or budgeted by the Partnership
in forward-looking statements.
o Risks and uncertainties impacting the Partnership as a whole relate
to changes in general economic conditions in the United States; the
availability and cost of capital; changes in laws and regulations
to which the Partnership is subject, including tax, environmental
and employment laws and regulations; the cost and effects of legal
and administrative claims and proceedings against the Partnership
or which may be brought against the Partnership and changes in
general and economic conditions and currencies in foreign
countries.
o The uncertainty of the ability of the Partnership to sustain its
rate of internal sales growth and its ability to locate and acquire
other propane companies at prices that are accretive to the
Partnership.
o Risks and uncertainties related to energy prices and the ability of
the Partnership to develop expanded markets and products offerings
as well as their ability to maintain existing markets. In addition,
future sales will depend on the cost of propane compared to other
fuels, competition from other propane retailers and alternate
fuels, the general level of petroleum product demand, and weather
conditions, among other things.
o The Partnership's success in dealing with the Year 2000 issues and
those of its vendors, suppliers and other third parties, many of
which are beyond the Partnership's control.
13
<PAGE> 16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Partnership has very little cash flow exposure due to rate changes for
long-term debt obligations. The Partnership primarily enters debt obligations to
support general corporate purposes including capital expenditures and working
capital needs. The Partnership's long-term debt instruments are typically issued
at fixed interest rates. When these debt obligations mature, the Partnership may
refinance all or a portion of such debt at then-existing market interest rates
which may be more or less than the interest rates on the maturing debt.
Commodity price risk arises from the risk of price changes in the propane
inventory that the Partnership buys and sells. The market price of propane is
often subject to volatile changes as a result of supply or other market
conditions over which the Partnership will have no control. In the past, price
changes have generally been passed along to the Partnership's customers to
maintain gross margins, mitigating the commodity price risk. The Partnership in
the past has on occasion purchased significant volumes of propane during periods
of low demand, which generally occur during the summer months, at the then
current market price, for storage both at its service centers and in major
storage facilities.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) During the three months ended November 30, 1999, the Partnership issued
56,578 Common Units ("Units") to in exchange for certain assets in
connection with the acquisitions of certain propane businesses, for a
total value of $1.3 million. These Units were issued utilizing the
Partnership's Registration Statement No. 333-40407 on Form S-4. In
addition, the partnership issued 4,500 Common Units to certain
individuals pursuant to the vesting rights of the Restricted Unit Plan.
On October 25, 1999, the Partnership issued a prospectus supplement
offering 1,200,000 Common Units, representing limited partner interests
in Heritage Propane Partners, L.P. utilizing the Partnership's
Registration Statement No. 333-86057 on Form S-3 dated September 13,
1999. The underwriters delivered the Common Units to purchasers on
October 28, 1999, at a public offering price of $22.00 per Common Unit.
The net proceeds of approximately $24 million were used to repay a
portion of the outstanding indebtedness under the acquisition facility
that was incurred to acquire propane businesses
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits listed on the following Exhibit Index are filed as part of
this Report. Exhibits required by Item 601 of Regulation S-K, but which are
not listed below, are not applicable.
Exhibit
Number Description
------- -----------
(1) 3.1 Agreement of Limited Partnership of Heritage Propane
Partners, L.P.
(7) 10.1 First Amended and Restated Credit Agreement with
Banks Dated May 31, 1999
(8) 10.1.1 First Amendment to the First Amended and Restated
Credit Agreement dated as of October 15, 1999
(1) 10.2 Form of Note Purchase Agreement (June 25, 1996)
(3) 10.2.1 Amendment of Note Purchase Agreement (June 25, 1996)
dated as of July 25, 1996
(4) 10.2.2 Amendment of Note Purchase Agreement (June 25, 1996)
dated as of March 11, 1997
(6) 10.2.3 Amendment of Note Purchase Agreement (June 25, 1996)
dated as of October 15, 1998
(8) 10.2.4 Second Amendment Agreement dated September 1, 1999 to
June 25, 1996 Note Purchase Agreement
14
<PAGE> 17
Exhibit
Number Description
------- -----------
(1) 10.3 Form of Contribution, Conveyance and Assumption
Agreement among Heritage Holdings, Inc., Heritage
Propane Partners, L.P. and Heritage Operating, L.P.
(1) 10.6 Restricted Unit Plan
(4) 10.6.1 Amendment of Restricted Unit Plan dated as of October
17, 1996
(2) 10.7 Employment Agreement for James E. Bertelsmeyer
(1) 10.8 Employment Agreement for R. C. Mills
(1) 10.9 Employment Agreement for G.A. Darr
(1) 10.10 Employment Agreement for H. Michael Krimbill
(6) 10.11 Employment Agreement for Bradley K. Atkinson
(7) 10.12 First Amended and Restated Revolving Credit Agreement
between Heritage Service Corp. and Banks Dated May
31, 1999
(5) 10.16 Note Purchase Agreement dated as of November 19, 1997
(6) 10.16.1 Amendment dated October 15, 1998 to November 19, 1997
Note Purchase Agreement
(8) 10.16.2 Second Amendment Agreement dated September 1, 1999
to November 19, 1997 Note Purchase Agreement and June
25, 1996 Note Purchase Agreement
(8) 21.1 List of Subsidiaries
27.1 Financial Data Schedule - Filed with EDGAR version
only
(8) 99.1 Balance Sheet of Heritage Holdings, Inc. as of August
31, 1999
--------------------------------------------
(1) Incorporated by reference to the same numbered Exhibit to Registrant's
Registration Statement of Form S-1, File No. 333-04018, filed with the
Commission on June 21, 1996.
(2) Incorporated by reference to Exhibit 10.11 to Registrant's Registration
Statement on Form S-1, File No. 333-04018, filed with the Commission on
June 21, 1996.
(3) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-Q for the quarter ended November 30, 1996.
(4) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-Q for the quarter ended February 28, 1997.
(5) Incorporated by reference to the same numbered Exhibit to Registrant's
Form 10-Q for the quarter ended May 31, 1998.
(6) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-K for the year ended August 31, 1998.
(7) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-Q for the quarter ended May 31, 1999.
(8) Incorporated by reference to the same numbered Exhibit to the
Registrant's Form 10-K for the year ended August 31, 1999.
15
<PAGE> 18
(b) Reports on Form 8-K
The Partnership filed three reports on Form 8-K during the three months
ended November 30, 1999. Form 8-K dated October 19, 1999, was filed
reporting the announcement of the Partnership's financial results for the
fiscal year ended August 31, 1999 with the press release filed as an
exhibit. On October 21, 1999, a Form 8-K was filed to report the public
offering (the "Offering") of up to 1,380,000 Common Units under the
Partnership's shelf registration statement on Form S-3 (Registration No.
333-86057). The opinions of Andrews & Kurth L.L.P. attached to this Form
8-K related to the Offering, and the opinion as to certain tax matters,
replaced the opinion as to tax matters originally filed with the
Registration Statement. The opinions of Andrews & Kurth L.L.P. were filed
as exhibits to the Form 8-K in lieu of filing them as exhibits to the
Registration Statement by means of a post-effective amendment thereto. Form
8-K dated October 25, 1999, attached as an exhibit the Underwriting
Agreement dated October 25, 1999 among Heritage Propane Partners, L.P.
("the Partnership"), Heritage Holdings, Inc. and Heritage Operating, L.P.
and PaineWebber Incorporated, A.G. Edwards & Sons, Inc. and CIBC World
Markets Corp. relating to the offering of 1,200,000 Common Units
representing limited partner interests in the Partnership registered
pursuant to a Registration Statement on Form S-3 (Registration No.
333-86057), as supplemented by the Prospectus Supplement, dated October 25,
1999.
16
<PAGE> 19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HERITAGE PROPANE PARTNERS, L.P.
By: Heritage Holdings, Inc.,
General Partner
Date: January 12, 2000 By: /s/ H. Michael Krimbill
-------------------------------------
H. Michael Krimbill
(President and Chief Financial
Officer and officer duly authorized
to sign on behalf of the
registrant)
17
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- - ------- -----------
<S> <C>
27.1 Financial Data Schedule - Filed with EDGAR version only
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 2,660
<SECURITIES> 0
<RECEIVABLES> 20,097
<ALLOWANCES> 300
<INVENTORY> 15,701
<CURRENT-ASSETS> 39,946
<PP&E> 218,860
<DEPRECIATION> 47,087
<TOTAL-ASSETS> 293,391
<CURRENT-LIABILITIES> 65,440
<BONDS> 188,919
0
0
<COMMON> 0
<OTHER-SE> 39,032
<TOTAL-LIABILITY-AND-EQUITY> 293,391
<SALES> 51,890
<TOTAL-REVENUES> 51,890
<CGS> 29,421
<TOTAL-COSTS> 48,460
<OTHER-EXPENSES> (261)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,398
<INCOME-PRETAX> (808)
<INCOME-TAX> 0
<INCOME-CONTINUING> (808)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (800)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
