<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 FEBRUARY 29, 2000
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)
<TABLE>
<S> <C>
DELAWARE 73-1493906
(state or other jurisdiction or (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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 April 4, 2000, the registrant had units outstanding as follows:
Heritage Propane Partners, L.P. 7,214,204 Common Units
2,777,207 Subordinated Units
<PAGE> 2
FORM 10-Q
HERITAGE PROPANE PARTNERS, L.P.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages
-----
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HERITAGE PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets as of February 29, 2000 and August 31, 1999 1
Consolidated Statements of Operations for the three months and six months
ended February 29, 2000 and February 28, 1999 2
Consolidated Statement of Partners' Capital for the six months ended
February 29, 2000 3
Consolidated Statements of Cash Flows for the six months ended
February 29, 2000 and February 28, 1999 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 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURE
</TABLE>
i
<PAGE> 3
PART I - FINANCIAL INFORMATION
HERITAGE PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
February 29, August 31,
2000 1999
------------ ------------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 3,992 $ 1,679
Accounts receivable 33,235 11,635
Inventories 11,517 14,784
Marketable securities 2,845 --
Prepaid expenses 1,044 1,169
-------- --------
Total current assets 52,633 29,267
PROPERTY, PLANT AND EQUIPMENT, net 189,075 155,219
INVESTMENT IN AFFILIATE 5,845 5,202
INTANGIBLES AND OTHER ASSETS, net 89,310 73,270
-------- --------
Total assets $336,863 $262,958
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Working capital facility $ 23,800 $ 19,900
Accounts payable 26,971 17,268
Accrued and other current liabilities 10,600 8,490
Current maturities of long-term debt 2,400 2,022
-------- --------
Total current liabilities 63,771 47,680
LONG-TERM DEBT, less current maturities 221,066 196,216
-------- --------
COMMITMENTS AND CONTINGENCIES
Total liabilities 284,837 243,896
-------- --------
PARTNERS' CAPITAL:
Common unitholders (7,155,886 and 5,825,674 units issued and outstanding at
February 29, 2000 and August 31, 1999, respectively) 48,355 17,077
Subordinated unitholders (2,777,207 units issued and outstanding at
February 29, 2000 and August 31, 1999, respectively) 3,190 1,809
General partner 481 176
-------- --------
Total partners' capital 52,026 19,062
-------- --------
Total liabilities and partners' capital $336,863 $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 Six Months Ended
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Retail fuel $ 83,001 $ 54,902 $ 119,519 $ 84,243
Wholesale fuel 11,911 7,767 19,728 13,522
Other 7,248 5,829 14,803 12,291
----------- ----------- ----------- -----------
Total revenues 102,160 68,498 154,050 110,056
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of products sold 57,260 31,738 86,681 51,669
Operating expenses 16,994 13,358 30,597 25,536
Depreciation and amortization 4,714 3,647 8,736 7,192
Selling, general and administrative 1,939 1,685 3,353 3,026
----------- ----------- ----------- -----------
Total costs and expenses 80,907 50,428 129,367 87,423
----------- ----------- ----------- -----------
OPERATING INCOME 21,253 18,070 24,683 22,633
OTHER INCOME (EXPENSE):
Interest expense (4,825) (3,963) (9,223) (7,859)
Equity in earnings of affiliates 597 643 643 821
Gain on disposal of assets 90 13 375 515
Other 222 (70) 152 (101)
----------- ----------- ----------- -----------
INCOME BEFORE MINORITY INTEREST 17,337 14,693 16,630 16,009
Minority interest (366) (289) (467) (390)
----------- ----------- ----------- -----------
NET INCOME 16,971 14,404 16,163 15,619
GENERAL PARTNER'S INTEREST IN
NET INCOME 169 144 161 156
----------- ----------- ----------- -----------
LIMITED PARTNERS' INTEREST IN
NET INCOME $ 16,802 $ 14,260 $ 16,002 $ 15,463
=========== =========== =========== ===========
BASIC NET INCOME PER LIMITED
PARTNER UNIT $ 1.70 $ 1.66 $ 1.69 $ 1.80
=========== =========== =========== ===========
BASIC WEIGHTED AVERAGE NUMBER OF
UNITS OUTSTANDING 9,883,217 8,579,668 9,482,412 8,579,668
=========== =========== =========== ===========
DILUTED NET INCOME PER LIMITED
PARTNER UNIT $ 1.69 $ 1.65 $ 1.67 $ 1.79
=========== =========== =========== ===========
DILUTED WEIGHTED AVERAGE NUMBER OF
UNITS OUTSTANDING 9,957,517 8,634,168 9,557,108 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 -- -- (7,277) (3,124) (123) (10,524)
Issuance of restricted Common Units
in connection with certain
acquisitions 125,712 -- 2,789 -- -- 2,789
Issuance of Common Units to public
net of related expenses 1,200,000 -- 24,054 -- -- 24,054
Capital contribution from General
Partner in connection with
issuance of Common Units -- -- -- -- 265 265
Issuance of Common Units pursuant
to the vesting rights of the
Restricted Unit Plan 4,500 -- 29 (28) (1) --
Other -- -- 155 59 3 217
Net income -- -- 11,528 4,474 161 16,163
--------- --------- --------- --------- --------- ---------
BALANCE, FEBRUARY 29, 2000 7,155,886 2,777,207 $ 48,355 $ 3,190 $ 481 $ 52,026
========= ========= ========= ========= ========= =========
</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>
Six Months Ended
February 29, February 28,
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,163 $ 15,619
Reconciliation of net income to net cash provided by
operating activities-
Depreciation and amortization 8,736 7,192
Provision for losses on accounts receivable 122 92
Gain on disposal of assets (375) (515)
Deferred compensation on restricted units 217 178
Undistributed earnings of affiliates (643) (553)
Minority interest 250 (52)
Unrealized gain on trading securities (300) --
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable (21,595) (9,641)
Marketable securities (2,545) --
Inventories 3,825 3,975
Prepaid expenses 159 (129)
Intangibles and other assets (188) 690
Accounts payable 9,532 846
Accrued and other current liabilities 793 (1,621)
-------- --------
Net cash provided by operating activities 14,151 16,081
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of cash acquired (43,602) (5,914)
Capital expenditures (8,761) (6,894)
Proceeds from asset sales 587 1,521
-------- --------
Net cash used in investing activities (51,776) (11,287)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 87,350 35,449
Principal payments on debt (61,207) (30,684)
Unit distribution (10,524) (8,774)
Net proceeds from issuance of common units 24,054 --
Capital contribution from General Partner 265 --
-------- --------
Net cash provided by (used in ) financing activities 39,938 (4,009)
-------- --------
INCREASE IN CASH 2,313 785
CASH, beginning of period 1,679 1,837
-------- --------
CASH, end of period $ 3,992 $ 2,622
======== ========
NONCASH FINANCING ACTIVITIES:
Notes payable incurred on noncompete agreements $ 2,985 $ 1,799
Issuance of restricted common units in connection with certain
acquisitions $ 2,789 $ --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 8,231 $ 7,838
</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 286,000 retail customers in 27 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>
February 29, August 31,
2000 1999
------------ ----------
<S> <C> <C>
Fuel $ 5,998 $ 9,341
Appliances, parts and fittings 5,519 5,443
------- -------
$11,517 $14,784
======= =======
</TABLE>
3. INCOME PER LIMITED PARTNER UNIT:
Basic net income per limited partner unit is computed by dividing net income,
after considering the General Partner's one percent interest, by the weighted
average number of Common and Subordinated Units outstanding. Diluted net income
per limited partner unit is computed by dividing net income, 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. A
reconciliation of net income and weighted average units used in computing basic
and diluted earnings per unit is as follows:
5
<PAGE> 8
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
--------------------------- ---------------------------
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BASIC NET INCOME PER LIMITED PARTNER UNIT:
Limited Partners' interest in net income $ 16,802 $ 14,260 $ 16,002 $ 15,463
========== ========== ========== ==========
Weighted average limited partner units 9,883,217 8,579,668 9,482,412 8,579,668
========== ========== ========== ==========
Basic net income per limited partner unit $ 1.70 $ 1.66 $ 1.69 $ 1.80
========== ========== ========== ==========
DILUTED NET INCOME PER LIMITED PARTNER UNIT:
Limited partners' interest in net income $ 16,802 $ 14,260 $ 16,002 $ 15,463
========== ========== ========== ==========
Weighted average limited partner units 9,883,217 8,579,668 9,482,412 8,579,668
Dilutive effect of Phantom Units 74,300 54,500 74,696 54,500
---------- ---------- ---------- ----------
Weighted average limited partner units, assuming dilutive
effect of Phantom Units 9,957,517 8,634,168 9,557,108 8,634,168
========== ========== ========== ==========
Diluted net income per limited partner unit $ 1.69 $ 1.65 $ 1.67 $ 1.79
========== ========== ========== ==========
</TABLE>
CASH DISTRIBUTIONS
On October 15, 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
January 14, 2000 a quarterly distribution of $5,559, or $.5625 per Common and
Subordinated Unit was paid to Unitholders of record at the close of business
January 4, 2000 and $66 and $67 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 March 20, 2000, the
Partnership declared a cash distribution for the second quarter ended February
29, 2000 of $.5625 per unit payable on April 14, 2000 to Unitholders of record
at the close of business on April 3, 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 $23,800 outstanding at February 29, 2000. 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
rate was 7.55 percent for the amount outstanding at February 29, 2000.
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 $41,250 outstanding at February 29, 2000, 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 rate was 7.55 percent
for the amount outstanding at February 29, 2000. The maximum commitment
fee payable on the unused portion of the facility is .375 percent.
6
<PAGE> 9
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 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 60
percent owned Canadian wholesale supplier that the Partnership consolidates. The
Partnership's reportable segments are strategic business units that sell
products and services to different types of users; retail and wholesale
customers. 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
$1,939 and $1,685 for the three months and $3,353 and $3,026 for the six months
ended February 29, 2000 and February 28, 1999, respectively.
The following table presents financial information by segment:
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
2000 1999 2000 1999
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Gallons:
Domestic retail 77,352 62,734 116,227 98,402
Domestic wholesale 2,746 3,304 4,473 4,956
Foreign wholesale
Affiliated 25,964 22,718 40,470 35,810
Unaffiliated 25,069 22,045 44,495 40,658
Elimination (25,964) (22,718) (40,470) (35,810)
--------- --------- --------- ---------
Total 105,169 88,083 165,195 144,016
========= ========= ========= =========
Revenues:
Domestic retail fuel $ 83,001 $ 54,902 $ 119,519 $ 84,243
Domestic wholesale fuel 1,667 1,506 2,613 2,171
Foreign wholesale fuel
Affiliated 11,261 4,631 16,799 8,337
Unaffiliated 10,244 6,261 17,115 11,351
Elimination (11,261) (4,631) (16,799) (8,337)
Other revenues 7,248 5,829 14,803 12,291
--------- --------- --------- ---------
Total $ 102,160 $ 68,498 $ 154,050 $ 110,056
========= ========= ========= =========
Operating Income:
Domestic retail $ 22,300 $ 19,034 $ 26,729 $ 24,710
Domestic wholesale fuel 226 89 226 109
Foreign wholesale
Affiliated 220 190 365 316
Unaffiliated 666 633 1,081 841
Elimination (220) (190) (365) (316)
--------- --------- --------- ---------
Total $ 23,192 $ 19,756 $ 28,036 $ 25,659
========= ========= ========= =========
Depreciation and amortization:
Domestic retail $ 4,704 $ 3,628 $ 8,714 $ 7,160
Domestic wholesale 8 13 18 26
Foreign wholesale 2 6 4 6
--------- --------- --------- ---------
Total $ 4,714 $ 3,647 $ 8,736 $ 7,192
========= ========= ========= =========
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
As of As of
Feb. 29, 2000 Aug. 31, 1999
------------- -------------
<S> <C> <C>
Total Assets:
Domestic retail $303,544 $236,215
Domestic wholesale 1,842 2,803
Foreign wholesale 8,662 4,566
Corporate 22,815 19,374
-------- --------
Total $336,863 $262,958
======== ========
</TABLE>
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
$5,845 and $5,202 at February 29, 2000 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 February 29, 2000 and August 31,
1999 is summarized below:
<TABLE>
<CAPTION>
February 29, August 31,
2000 1999
------------ ----------
<S> <C> <C>
Current assets $ 2,880 $ 1,533
Noncurrent assets 14,358 14,281
------- -------
$17,238 $15,814
======= =======
Current liabilities $ 2,874 $ 2,333
Long-term debt 4,325 4,804
Partners' capital:
Heritage 5,845 5,202
Other partner 4,194 3,475
------- -------
$17,238 $15,814
======= =======
</TABLE>
Bi-State Partnership's results of operations are summarized below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Feb. 29, Feb. 28, Feb. 29, Feb. 28
2000 1999 2000 1999
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Revenues $5,300 $4,819 $7,849 $7,567
Gross profit 2,553 2,716 3,930 4,400
Net income:
Heritage 597 643 643 821
Other partner 658 733 719 898
</TABLE>
7. MARKETABLE SECURITIES
The Partnership's marketable securities are classified as trading securities as
defined by SFAS No. 115 and are reflected as a current asset on the balance
sheet at their fair value. An unrealized gain of $300 was recorded as other
income based on the market value of the securities at the balance sheet date.
8. 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.
8
<PAGE> 11
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>
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 February 29, 2000, Heritage and the Partnership
completed 68 acquisitions for an aggregate purchase price of approximately $292
million. The Partnership has completed 40 of these acquisitions since going
public on June 25, 1996. 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 286,000 residential, industrial/commercial and agricultural customers
in 27 states through 168 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
9
<PAGE> 12
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.
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 FEBRUARY 29, 2000 COMPARED TO THE THREE MONTHS ENDED FEBRUARY
28, 1999.
Volume. The Partnership sold 77.4 million retail gallons in the three
months ended February 29, 2000, an increase of 14.7 million gallons or 23.4%
over the 62.7 million gallons sold in the three months ended February 28, 1999.
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 27.7 million wholesale gallons
in this second quarter of fiscal 2000, an increase of 2.3 million gallons or
9.1% from the 25.4 million wholesale gallons sold in the second quarter of
fiscal 1999. U.S. wholesale volumes decreased .6 million gallons to 2.7 million
gallons while the foreign volumes of MP Energy Partnership increased 2.9 million
gallons to 25.0 million gallons during the second quarter.
Revenues. Total revenues for the Partnership increased $33.7 million or
49.2% to $102.2 million for the three months ended February 29, 2000 as compared
to $68.5 million for the same three-month period last year. The current period's
domestic retail propane revenues increased $28.1 million or 51.2% to $83.0
million versus the prior year's comparable period results of $54.9 million due
to increased volumes and higher selling prices. The U.S. wholesale revenues
increased slightly to $1.7 million as compared to $1.5 million for the period
ended February 28, 1999, due to higher selling prices. Other revenues increased
$1.5 million or 25.9% to $7.3 million as a result of acquisitions and internal
growth. Foreign revenues increased $3.9 million for the three months ended
February 29, 2000, to $10.2 million as compared to $6.3 million for the three
months ended February 28, 1999, primarily as a result of higher selling prices
and increased volume. Sales price per gallon during the three months ended
February 29, 2000 continued to remain above last year's level due to the higher
cost of propane as compared to the same period last year.
Cost of Sales. Total cost of sales increased $25.5 million or 80.2% to
$57.3 million for the three months ended February 29, 2000 as compared to $31.8
million for the three months ended February 28, 1999. This increase is the
result of a significant increase in the wholesale propane prices that started
during the first quarter as compared to the low wholesale costs experienced in
the same period last fiscal year and the increase in gallons sold for the
period. Retail fuel cost of sales increased $20.8 million or 90.4% to $43.8
million in the second quarter of fiscal 2000, compared to $23.0 million in the
second quarter of fiscal 1999 due to the impact of the increase in wholesale
fuel cost and retail volumes. Foreign cost of sales increased $4.0 million for
the same reasons. Other cost of sales also increased $.6 million in the second
quarter comparison in correlation to the increase in other revenues and total
domestic wholesale cost increased from $1.3 million to $1.4 million.
Gross Profit. Total gross profit increased $8.2 million or 22.3% to
$44.9 million for the three months ended February 29, 2000, as compared to $36.7
million for the three months ended February 28, 1999 due to the increases in
retail volumes and revenues discussed above, offset by the increase in product
costs.
10
<PAGE> 13
Operating Expenses. Operating expenses increased $3.7 million or 27.8%
to $17.0 million in the second quarter of fiscal 2000 as compared to $13.3
million in the second quarter of fiscal 1999 primarily due to acquisition
related operating expenses.
Selling, General and Administrative. Selling, general and
administrative expenses were $1.9 million for the three months ended February
29, 2000, an increase of $.2 million from the $1.7 million reported for the same
three month period last year.
Depreciation and Amortization. Depreciation and amortization increased
$1.0 million for the second quarter ended February 29, 2000 to $4.7 million as
compared to $3.7 million for the second quarter ended February 28, 1999. This
increase is primarily the result of additional depreciation and amortization
cost on the fixed assets and intangible assets recorded in connection with
acquisitions.
Operating Income. Operating income for the three months ended February
29, 2000, increased $3.3 million, or 18.3%, to $21.3 million as compared to
$18.0 million for the same three-month period last fiscal year. This increase is
primarily attributable to the increased gross profit offset by the acquisition
related increase in operating expenses.
Net Income. The second quarter of fiscal 2000 recorded net income of
$17.0 million, a $2.6 million, or 18.1% increase over the net income of $14.4
million for the second quarter of fiscal 2000. This increase is the result of
the increase in operating income described above and offset by an increase in
interest costs.
EBITDA. Earnings before interest, taxes, depreciation and amortization
increased $4.5 million to $27.0 million for the second quarter ended February
29, 2000, as compared to the revised second quarter 1999 EBITDA of $22.5
million. The second 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.
SIX MONTHS ENDED FEBRUARY 29, 2000 COMPARED TO THE SIX MONTHS ENDED FEBRUARY 28,
1999.
Volume. The Partnership sold 116.2 million retail gallons in the six
months ended February 29, 2000, an increase of 17.8 million gallons or 18.1%
over the 98.4 million gallons sold in the six months ended February 28, 1999.
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 49.0 million wholesale gallons
the first six months of fiscal 2000, an increase of 3.3 million gallons or 7.2%
from the 45.7 million wholesale gallons sold during the same period last year.
U.S. wholesale volumes decreased .5 million gallons to 4.5 million gallons while
the foreign volumes of MP Energy Partnership increased 3.8 million gallons to
44.5 million gallons during this time period.
Revenues. Total revenues for the Partnership increased $44.0 million or
40.0% to $154.0 million for the six months ended February 29, 2000 as compared
to $110.0 million for the same six-month period last year. The current period's
domestic retail propane revenues increased $35.3 million or 41.9% to $119.5
million versus the prior year's comparable period results of $84.2 million due
to increased volumes and higher selling prices. The U.S. wholesale revenues
increased slightly to $2.6 million as compared to $2.2 million for the six month
period ended February 28, 1999, due to higher selling prices. Other revenues
increased $2.6 million or 21.3% to $14.8 million as a result of acquisitions and
internal growth. Foreign revenues increased $5.7 million for the six months
ended February 29, 2000, to $17.1 million as compared to $11.4 million for the
six months ended February 28, 1999, primarily as a result of higher selling
prices and increased volume. Sales price per gallon during the six months ended
February 29, 2000 continued to remain above last year's level due to the higher
cost of propane as compared to the same period last year.
Cost of Sales. Total cost of sales increased $34.9 million or 67.5% to
$86.6 million for the six months ended February 29, 2000 as compared to $51.7
million for the six months ended February 28, 1999. This increase is the result
of a significant increase in the wholesale propane prices that started during
the first quarter as compared to the low wholesale costs experienced in the same
period last fiscal year and the increase in gallons sold. Retail fuel cost of
sales increased $27.8 million or 79.0% to $63.0 million during the six months
ended February 29, 2000, compared to $35.2 million for the same time period of
fiscal 1999. Foreign wholesale cost of sales also reflected an
11
<PAGE> 14
increase, going from $10.5 million for the six months ended February 28, 1999 to
$16.0 million for the six months ended February 29, 2000. These increases were
due to the impact of the increase in the cost of propane and increased volumes
in these areas. U.S. wholesale cost of sales increased $.4 million as a result
of the higher cost of fuel. Other cost of sales also increased $1.2 million
during the six-month comparison in correlation to the increase in other
revenues.
Gross Profit. Total gross profit increased $9.1 million or 15.6% to
$67.4 million for the six months ended February 29, 2000, as compared to $58.3
million for the six months ended February 28, 1999 due to the increases in
volumes sold and revenues discussed above, offset by the increase in product
costs. The Partnership was able to recoup part of its margins during the latter
part of the second quarter, narrowing the gap as compared to last fiscal year's
margins.
Operating Expenses. Operating expenses increased $5.1 million or 20.0%
to $30.6 million in the six months ended February 29, 2000 as compared to $25.5
million in the six months ended February 28, 1999 primarily due to acquisition
related operating expenses.
Selling, General and Administrative. Selling, general and
administrative expenses were $3.3 million for the six months ended February 29,
2000, an increase of $.3 million from the $3.0 million reported for the six
months ended February 28, 1999.
Depreciation and Amortization. Depreciation and amortization increased
$1.5 million for the six months ended February 29, 2000 to $8.7 million as
compared to $7.2 million for the same period last year. This increase is
primarily the result of additional depreciation and amortization cost on the
fixed assets and intangible assets recorded in connection with acquisitions.
Operating Income. Operating income for the six months ended February
29, 2000, increased $2.1 million, or 9.3%, to $24.7 million as compared to $22.6
million for the same six-month period last fiscal year. This increase is
primarily attributable to the increased gross profit offset by the acquisition
related increase in operating expenses, depreciation and amortization.
Net Income. Net income for the six months ended February 29, 2000 was
$16.2 million as compared to the net income of $15.6 million for the same period
last year. The $.6 million increase is the result of the increase in operating
income described above and offset by an increase in interest costs.
EBITDA. Earnings before interest, taxes, depreciation and amortization
increased $3.7 million to $34.7 million for the six months ended February 29,
2000, as compared to the revised six month 1999 EBITDA of $31.0 million. The
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
12
<PAGE> 15
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 provided by operating activities during the
six months ended February 29, 2000, was $14.2 million compared to cash provided
of $16.1 million in the six months ended February 28, 1999. The net cash
provided from operations for the six months ended February 29, 2000 consisted of
net income of $16.2 million and the impact of working capital used of $10.0
offset by noncash charges of $8.0 million, principally depreciation and
amortization. Accounts receivable have increased significantly over last year as
a result of the net effect of the increase in propane costs which in part was
passed on to the customers and a larger customer base due to acquisitions.
Accounts payable has also increased significantly also due to the same related
reasons of increased cost of propane and acquisitions.
Investing Activities. The Partnership has had an active acquisition
season during the six months ended February 29, 2000 spending $43.6 million, net
of cash received, to purchase propane companies. This capital expenditure amount
is reflected in the cash used in investing activities of $51.8 million along
with $8.8 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
second quarter of fiscal 2000 of $39.9 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 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 $26.4 million was
mainly from a net increase in the working capital facility of $3.9 million and a
net increase in long-term debt of $22.2 million used to acquire other propane
businesses. These increases were offset by cash distributions to unitholders of
$10.5 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 February 29, 2000, the Acquisition Facility had $8.7 million available to
fund future acquisitions and the Working Capital Facility had $11.2 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 $43.6
million for the six months ended February 29, 2000, as compared to $5.9 million
during the same period of fiscal 1999. In addition to the $43.6 million of cash
expended for acquisitions during the first six months of fiscal 2000, $2.8
million of Common Units and $3.0 million for notes payable on non-compete
agreements were issued in connection with certain acquisitions and $1.0 million
of liabilities were assumed.
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 is $.5625 per unit ($2.25 annually). To the extent the quarterly
distribution exceeds $.55 per unit ($2.20 annually), incentive distributions are
payable to the General Partner.
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
13
<PAGE> 16
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 Partnership has not experienced any significant problems arising
from Year 2000 system failures or disruption of service from its information
technology ("IT") such as hardware and software and its non-IT systems, or
embedded technology. The Partnership also believes that no significant vendors
or suppliers and other third parties experienced any interruptions due to the
Year 2000 issues that would have any effect on the Partnership's operations.
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.
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.
14
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) During the three months ended February 29, 2000, the Partnership issued
19,574 Common Units ("Units") in exchange for certain assets in connection
with the acquisition of a propane business for a total value of $.4
million. These Units were issued utilizing the Partnership's Registration
Statement No. 333-40407 on Form S-4. In addition, the partnership issued
49,650 Common Units to Heritage Holdings Inc., the Partnership's General
Partner. Subsequent to February 29, 2000, the Partnership issued additional
58,318 Common Units to the General Partner. The Common Units issued to the
General Partner were issued in connection with the assumption of certain
liabilities by the General Partner from the Partnership's prior acquisition
of certain assets of other propane companies. The General Partner's Units
were not registered with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, by virtue of an exemption under Section
4(2) thereof. All of the above Common Units carry a restrictive legend with
regard to transfer of the Units.
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.
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<C> <C> <S>
(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, 2996) 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
(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
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<C> <C> <S>
(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
</TABLE>
- ----------
(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.
(b) Reports on Form 8-K
None.
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: April 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
Number Description
------ -----------
<C> <C> <S>
(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, 2996) 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
(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
</TABLE>
- ----------
(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.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 3,992
<SECURITIES> 2,845
<RECEIVABLES> 33,535
<ALLOWANCES> 300
<INVENTORY> 11,517
<CURRENT-ASSETS> 52,633
<PP&E> 238,369
<DEPRECIATION> 49,294
<TOTAL-ASSETS> 336,863
<CURRENT-LIABILITIES> 63,771
<BONDS> 221,066
0
0
<COMMON> 0
<OTHER-SE> 52,026
<TOTAL-LIABILITY-AND-EQUITY> 336,863
<SALES> 154,050
<TOTAL-REVENUES> 154,050
<CGS> 86,681
<TOTAL-COSTS> 117,278
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,223
<INCOME-PRETAX> 16,630
<INCOME-TAX> 0
<INCOME-CONTINUING> 16,163
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,163
<EPS-BASIC> 1.69
<EPS-DILUTED> 1.67
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> DEC-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 3,992
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