<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 27, 1998
CORNERSTONE PROPANE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 1-12499 77-0439862
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
432 WESTRIDGE DRIVE
WATSONVILLE, CALIFORNIA 95076
(Address of principal executive offices)
(831) 724-1921
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Cornerstone Propane Partners, L.P. (the "Partnership") is filing
this Amendment No. 1 to Form 8-K in order to amend Items 5 and 7(b) of its
Form 8-K filed with the Securities and Exchange Commission (the "Commission")
on December 2, 1998. Items 5 and 7(b) are hereby amended to read in their
entirety as follows:
ITEM 5. OTHER EVENTS
On October 27, 1998, Cornerstone Propane Partners, L.P. (the
"Partnership"), Cornerstone Holding Corp. ("CHC"), Propane Continental, Inc.
("PCI") and certain PCI selling shareholders and warrant holders, entered
into a definitive agreement (the "Stock Purchase Agreement") by which the
Partnership and CHC would acquire all of PCI's outstanding common and
preferred stock and warrants to purchase common stock. PCI, based in Overland
Park, Kansas, is a distributor of propane gas to retail and wholesale
customers. PCI is the nation's 19th largest retail propane distributor in
terms of volume, serving approximately 60,000 residential, commercial,
industrial and agricultural customers from 34 customer service centers in
eleven states. For its fiscal year ended June 30, 1998, PCI had retail
propane sales of approximately 28.5 million gallons. Of the eleven states in
which PCI has customer service centers, five are states in which the
Partnership currently does not have its own customer service centers
(Colorado, Massachusetts, Michigan, Pennsylvania and Wisconsin).
Under the Stock Purchase Agreement, the Partnership will acquire PCI
for an estimated total purchase price of approximately $120 million. The
consideration that the Partnership will pay will consist of approximately
$109 million in cash, $7 million of the Partnership's Common Units and the
assumption of $4 million in PCI installment payment obligations to previous
owners of propane businesses which PCI acquired. In order to finance the cash
portion of the purchase price, the Partnership is offering additional Common
Units in a public offering and is expected to issue $85 million of senior notes
in a separate private placement transaction, the proceeds of which will be
used to fund the remaining cash portion of the acquisition of PCI and to
repay Partnership acquisition debt under its acquisition credit facility.
The transaction is subject to, among other things, regulatory approvals
and other customary conditions. The transaction is expected to close by December
31, 1998. Until the closing of the transaction, PCI may not solicit alternative
acquisition proposals.
Reference is made to the Stock Purchase and Contribution Agreement
between the Partnership, CHC, PCI and selling shareholders and warrant
holders, dated October 27, 1998 attached as exhibit 2.1 to this Form 8-K
Current Report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
2
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(b) Pro Forma Financial Information
The following pro forma financial statements appear below:
- Report of Independent Public Accountants
- Pro Forma Financial Information for the Partnership and
PCI for the fiscal year ended June 30, 1998 and for the
quarter ended September 30, 1998.
- Notes to Pro Forma Financial Information
(c) Exhibits
2.1 Stock Purchase and Contribution Agreement dated October 27,
1998, by and among Cornerstone Propane Partners, L.P.,
Cornerstone Holding Corp., Propane Continental, Inc. and
selling shareholders and warrant holders.*
23.1 Consent of Ernst & Young LLP*
23.2 Consent of Arthur Andersen LLP
99.1 Press Release dated October 27, 1998*
99.2 Press Release dated December 2, 1998*
* - Previously filed as an exhibit to the Partnership's Form 8-K
filed with the Commission on December 2, 1998.
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(b) PRO FORMA FINANCIAL INFORMATION.
Report of Independent Public Accountants
To Cornerstone Propane Partners, L.P.:
We have examined the pro forma adjustments reflecting the transactions
described in the headnote and the notes to the pro forma financial
information and the application of those adjustments to the historical
amounts in the accompanying pro forma condensed balance sheet data of
Cornerstone Propane Partners, L.P. and Subsidiary as of June 30, 1998, and
the pro forma condensed statement of operations data for the year then ended.
The historical amounts in the condensed financial information were derived
from the historical financial statements of Cornerstone Propane Partners,
L.P. and Subsidiary, which were audited by us and included in the
Partnership's 1998 Form 10-K, and of Propane Continental, Inc., which were
audited by other accountants and appear elsewhere herein. Such pro forma
adjustments are based upon management's assumptions described in the headnote
and the notes to the pro forma financial information. Our examination was
made in accordance with standards established by the American Institute of
Certified Public Accountants, and accordingly, included such procedures as we
considered necessary in the circumstances.
In addition, we have reviewed the related pro forma adjustments and the
application of those adjustments to the historical amounts in the
accompanying pro forma condensed balance sheet data of Cornerstone Propane
Partners, L.P. and Subsidiary as of September 30, 1998, and the pro forma
condensed statement of operations data for the three months then ended. The
historical amounts in the condensed financial information were derived from
the historical unaudited financial statements of Cornerstone Propane
Partners, L.P. and Subsidiary, which were reviewed by us and included in the
Partnership's September 30, 1998 10-Q, and of Propane Continental, Inc.,
which were reviewed by other accountants and appear elsewhere herein. Such
pro forma adjustments are based on management's assumptions as described in
the headnote and the notes to the pro forma financial information. Our review
was conducted in accordance with standards established by the American
Institute of Certified Public Accountants.
The objective of this pro forma financial information is to show what the
significant effects on the historical financial information might have been
had the transaction occurred at an earlier date. However, the pro forma
condensed financial information is not necessarily indicative of the results
of operations or related effects on financial position that would have been
attained had the above-mentioned transactions actually occurred earlier.
In our opinion, management's assumptions provide a reasonable basis for
presenting the significant effects directly attributable to the above
mentioned transactions as described in the headnote and the notes to the pro
forma financial information, the related pro forma adjustments give
appropriate effect to those assumptions and the "Partnership Pro Forma"
column and the "Adjusted Partnership Pro Forma" column reflect the proper
application of those adjustments to the historical financial statement
amounts in the pro forma condensed balance sheet data as of June 30, 1998,
and the pro forma condensed statement of operations data for the year then
ended.
A review is substantially less in scope than an examination, the objective of
which is the expression
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of an opinion on management's assumptions, the pro forma adjustments and the
application of those adjustments to historical financial information.
Accordingly, we do not express such an opinion on the pro forma adjustments
or the application of such adjustments to the pro forma condensed balance
sheet data as of September 30, 1998 and the pro forma condensed statement of
operations data for the three months then ended. Based on our review,
however, nothing came to our attention that caused us to believe that
management's assumptions do not provide a reasonable basis for presenting the
significant effects directly attributable to the above mentioned transactions
as described in the headnote and the notes to the pro forma financial
information, that the related pro forma adjustments do not give appropriate
effect to those assumptions, or that the "Partnership Pro Forma" column and
the "Adjusted Partnership Pro Forma" column do not reflect the proper
application of those adjustments to the historical financial statement
amounts in the pro forma condensed balance sheet data as of September 30,
1998 and the pro forma condensed statement of operations data for the three
months then ended.
/s/ Arthur Andersen LLP
Minneapolis, Minnesota
December 8, 1998
<PAGE>
The following table presents selected historical, pro forma and adjusted pro
forma financial and other data of the Partnership and PCI as of June 30, 1998
and the year then ended. The Partnership adjustments give effect to the
Partnership acquisitions consummated in fiscal 1998 that do not include a
full year's activities and results of operations for businesses acquired by
the Partnership subsequent to June 30, 1998, as though all such acquisitions
had been consummated on July 1, 1997. The PCI consolidation adjustments give
effect to cost and income tax savings expected to result from the acquisition
of PCI by the Partnership. The PCI annualization adjustments give effect to
PCI acquisitions consummated in fiscal 1998 that do not include a full year's
activities and results of operations for businesses acquired by PCI
subsequent to June 30, 1998, as though all such acquisitions had been
consummated on July 1, 1997. The offering and financing adjustments give
effect to estimated proceeds from the issuance of Common Units in the
Partnership's $57.0 million Common Unit offering at the offering price of
$19.00, estimated proceeds from the private placement of $85.0 million
aggregate principal amount of Senior Secured Notes (which will be used to pay
a portion of the PCI acquisition purchase price and to repay Partnership debt
under its acquisition and working capital credit facility) and repayment and
assumption of PCI bank notes and other obligations.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1998
----------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
CORNERSTONE PROPANE CONTINENTAL
------------------ ----------------------------------
PCI PCI OFFERING
PARTNER- CONSOLI- ANNUAL- AND ADJUSTED
PARTNER- SHIP DATION IZATION FINANCING PARTNER- PARTNER-
SHIP ADJUST- PCI ADJUST- ADJUST- ADJUST- SHIP SHIP
HISTORICAL MENTS HISTORICAL MENTS MENTS MENTS PRO FORMA PRO FORMA
--------- ------- --------- ---------- --------- --------- ------------- ----------
(Col. 1) (Col. 2) (Col. 3) (Col. 4) (Col. 5) (Col. 6) Cols. 1,3,4,6 Cols. 1-6
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS
DATA:
Revenues $768,129 $14,299 $142,379 $ - $28,073 $ - $910,508 $952,880
Cost of sales 623,924 6,363 122,102 - 19,348 - 746,026 771,737
--------- ------- --------- ---------- --------- --------- ---------- ----------
Gross profit 144,205 7,936 20,277 - 8,725 - 164,482 181,143
Operating,
general and
administrative
expenses 97,184 3,725 11,665 (1,587)(2) 3,407 - 107,262 114,394
Depreciation and
amortization 18,246 812 3,411 - 3,832 1,187(3) 22,844 27,488
--------- ------- --------- ---------- --------- --------- ---------- ----------
Operating income
(loss) 28,775 3,399 5,201 1,587 1,486 (1,187) 34,376 39,261
Interest expense 19,222 2,040 2,362 - 2,138 136(4) 21,720 25,898
--------- ------- --------- ---------- --------- --------- ---------- ----------
Income (loss)
before provision
for income taxes 9,553 1,359 2,839 1,587 (652) (1,323) 12,656 13,363
Provision (benefit)
for income taxes 127 13 1,271 (1,021)(5) (240) - 377 150
--------- ------- --------- ---------- --------- --------- ---------- ----------
Net income (loss) $9,426 $1,346 $1,568 $2,608 $(412) $(1,323) 12,279 13,213
========= ======= ========= ========== ========= =========
General partners'
interest in net
income 246 264
---------- ----------
Limited partners'
interest in net
income $12,033 $12,949
========== ==========
Net income per
Unit $.52 $.56
========== ==========
Number of Units
outstanding 23,268 23,268
========== ==========
OTHER DATA:
Capital
expenditures:
Maintenance $2,750 $100 $750 $ - $150 $ - $3,500 $3,750
Acquisitions and
internal growth 27,346 11,420 14,059 - 24,633 - 41,405 77,458
EBITDA (1) 47,021 4,211 8,612 1,587 5,318 - 57,220 66,749
Retail propane
gallons sold 235,030 13,538 28,453 - 15,845 - 263,483 292,866
BALANCE SHEET DATA
(AT PERIOD END):
Current assets $53,221 $458 $15,991 $ - $3,800 $ - $69,212 $73,470
Total assets 572,511 11,420 66,569 - 28,433 44,587(6) 683,667 723,520
Current
liabilities
(excluding
current
maturities) 47,795 - 14,185 - - - 61,980 61,980
Long-term debt
(including
current
maturities) 240,938 10,396 31,008 - 28,433 485(7) 272,431 311,260
Total partners'
capital(8) 279,594 1,024 17,353 - - 44,102(9) 341,049 342,073
</TABLE>
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The following table presents selected historical, pro forma and adjusted pro
forma financial and other data of the Partnership and PCI as of September 30,
1998 and the quarter then ended. The Partnership adjustments give effect to
Partnership acquisitions consummated in the period between July 1, 1998 and
September 30, 1998 that do not include a full quarter's activities and
results of operations for businesses acquired by the Partnership subsequent
to September 30, 1998, as though all such acquisitions had been consummated
on July 1, 1998. The PCI consolidation adjustments give effect to cost and
income tax savings expected to result from the acquisition of PCI by the
Partnership. The PCI annualization adjustments give effect to PCI
acquisitions consummated during the quarter ended September 30, 1998 that do
not include a full quarter's activities and results of operations for
businesses acquired by PCI subsequent to September 30, 1998, as though all
such acquisitions had been consummated on July 1, 1998. The offering and
financing adjustments give effect to estimated proceeds from the issuance of
Common Units in the Partnership's $57.0 million Common Unit offering at the
offering price of $19.00, estimated proceeds from the private placement of
$85.0 million aggregate principal amount of Senior Secured Notes (which will
be used to pay a portion of the PCI acquisition purchase price and to repay
Partnership debt under its acquisition and working capital credit facility)
and repayment and assumption of PCI bank notes and other obligations.
<TABLE>
<CAPTION>
QUARTER ENDED SEPTEMBER 30, 1998
--------------------------------------------------------------------------------------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER UNIT DATA)
CORNERSTONE PROPANE CONTINENTAL
------------------- --------------------------------
PCI PCI OFFERING
PARTNER- CONSOLI- ANNUAL- AND ADJUSTED
PARTNER- SHIP DATION IZATION FINANCING PARTNER- PARTNER-
SHIP ADJUST- PCI ADJUST- ADJUST- ADJUST- SHIP SHIP
HISTORICAL MENTS HISTORICAL MENT MENTS MENTS PRO FORMA PRO FORMA
---------- -------- --------- -------- --------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Col. 1) (Col. 2) (Col. 3) (Col. 4) (Col. 5) (Col. 6) Cols. 1,3,4,6 Cols. 1-6
STATEMENT OF
OPERATIONS
DATA:
Revenues $169,991 $377 $25,575 $ - $ 541 $ - $195,566 $196,484
Cost of sales 143,292 179 22,043 - 236 - 165,335 165,750
--------- -------- --------- -------- --------- --------- ---------- ----------
Gross profit 26,699 198 3,532 - 305 - 30,231 30,734
Operating,
general and
administrative
expenses 25,682 77 3,472 (397)(10) 224 - 28,757 29,058
Depreciation and
amortization 5,122 86 1,165 - 87 297(3) 6,584 6,757
--------- -------- --------- -------- --------- --------- ---------- ----------
Operating
income (loss) (4,105) 35 (1,105) 397 (6) (297) (5,110) (5,081)
Litigation
settlement - - 3,000(11) - - - 3,000(11) 3,000(11)
Interest expense 5,132 96 1,190 - 170 34(12) 6,356 6,622
--------- -------- --------- -------- --------- --------- ---------- ----------
Income (loss)
before
provision for
income taxes (9,237) (61) (5,295) 397 (176) (331) (14,466) (14,703)
Provision (benefit)
for income taxes 29 - (2,383) 2,474(5) (80) - 120 40
--------- -------- --------- -------- --------- --------- ---------- ----------
Net income (loss) $(9,266) $(61) $(2,912)(11) $(2,077) $(96) $(331) (14,586)(11) (14,743)(11)
========= ======== ========= ======== ========= =========
General partners'
interest in net
loss (292) (295)
---------- ----------
Limited partners'
interest in net
loss $(14,294) $(14,448)
========== ==========
Net income (loss)
per Unit $(.61) $(.62)
========== ==========
Number of Units
outstanding 23,268 23,268
========== ==========
OTHER DATA:
Capital
expenditures: $9,440 $1,445 $23,981 $ - $ 830 $ - $ 33,421 $35,696
EBITDA (1) 1,017 121 (2,940)(11) 397 81 - (1,526)(11) (1,324)(11)
Retail propane
gallons sold 39,378 349 5,743 - 761 - 45,121 46,231
BALANCE SHEET
DATA (AT
PERIOD END):
Current assets $54,896 $153 $24,420 $ - $ 100 $ - $ 79,316 $79,569
Total assets 580,911 2,657 98,331 - 830 47,499(6) 726,741 730,228
Current
liabilities
(excluding
current
maturities) 49,418 - 20,516 - - - 69,934 69,934
Long-term debt
(including
current
maturities) 263,143 2,029 61,817 - 830 485(7) 325,445 328,304
Total partners' 264,037 628 14,441 - - 47,014(9) 325,492 326,120
capital(8)
</TABLE>
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- --------------------
1 EBITDA consists of net income before depreciation, amortization, interest
and income taxes. EBITDA should not be considered as an alternative to net
income (as an indicator of operating performance) or as an alternative to
cash flow, and it is not a measure of performance or financial condition
under generally accepted accounting principles, but it provides additional
information for evaluating the Partnership's ability to distribute the
Minimum Quarterly Distribution and to service and incur indebtedness. Cash
flows in accordance with generally accepted accounting principles consist of
cash flows from operating, investing and financing activities; cash flows
from operating activities reflect net income (including charges for interest
and income taxes, which are not reflected in EBITDA), adjusted for noncash
charges or income (which are reflected in EBITDA) and changes in operating
assets and liabilities (which are not reflected in EBITDA). Further, cash
flows from investing and financing activities are not included in EBITDA.
2 Reflects $1.6 million in savings resulting from the consolidation of PCI,
primarily salary and benefits.
3 The offering and financing adjustment for depreciation and amortization
includes the additional amortization expense related to the PCI purchase
price in excess of net assets acquired (goodwill), amortized over a forty
year term.
4 Reflects a decrease of interest expense in the amount of $4.9 million on
$60.0 million of PCI debt obligations that are expected to be repaid upon
consummation of the PCI Acquisition, an increase of $6.2 million in interest
expense associated with the anticipated private placement of $85.0 million
aggregate principal amount of Senior Secured Notes, reduction of interest
expense for repayment of acquisition and working capital credit facility of
$1.6 million, and an increase of $0.4 million to adjust for seller notes in
place for less than a full year.
5 It is anticipated that income tax expenses for PCI will be reduced as a
result of the additional debt obligations and other effects associated with
the PCI Acquisition.
6 Reflects the capitalized cost of the PCI purchase in excess of net assets
acquired.
7 Reflects (a) estimated proceeds from the anticipated private placement of
$85.0 million aggregate principal amount of Senior Secured Notes, plus
offering fees and expenses, (b) the repayment and assumption of PCI bank
notes and other obligations and (c) the repayment of Partnership acquisition
and working capital credit facility debt.
8 With respect to PCI, includes total shareholders' equity plus the
mandatorily redeemable Series A and Series B preferred stock.
9 Reflects the adjustment necessary to eliminate the capital stock of PCI,
plus the additional Common Unit partner equity and general partner interest
in the amount of $58.3 million less anticipated underwriting discounts and
commissions and expenses of $3.8 million related to the Partnership's $57.0
million Common Unit offering, plus $7.0 million in Common Units to be issued
to the selling shareholders and warrantholders of PCI.
10 Reflects $0.4 million in savings resulting from the consolidation of PCI,
primarily salary and benefits.
11 Includes a $3.0 million charge for settlement of a claim not covered by
insurance.
12 Reflects a decrease of interest expense in the amount of $1.2 million on
$60.0 million of PCI debt obligations that are expected to be repaid upon
consummation of the PCI Acquisition, an increase of $1.6 million in interest
expense associated with the anticipated private placement of $85.0 million
aggregate principal amount of Senior Secured Notes, reduction of interest
expense for repayment of acquisition and working capital credit facility of
$0.4 million and an increase of $0.1 million to adjust for seller notes in
place for less than a full year.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 9, 1998
CORNERSTONE PROPANE PARTNERS, L.P.
By: CORNERSTONE PROPANE GP, INC.,
Managing General Partner
By: /s/ KEITH G. BAXTER
-------------------------------------
Keith G. Baxter
President and Chief Executive Officer
<PAGE>
INDEX TO EXHIBITS
2.1 Stock Purchase and Contribution Agreement dated October
27, 1998, by and among Cornerstone Propane Partners, L.P.,
Cornerstone Holding Corp., Propane Continental, Inc. and
selling shareholders and warrant holders.*
23.1 Consent of Ernst & Young LLP*
23.2 Consent of Arthur Andersen LLP
99.1 Press Release dated October 27, 1998*
99.2 Press Release dated December 2, 1998*
* - Previously filed as an exhibit to the Partnership's Form 8-K
filed with the Commission on December 2, 1998.
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EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated December 8, 1998 included in or made a part of this Amendment No. 1 to
Form 8-K and to the incorporation by reference of that report into
Registration Statement No. 333-60931.
/s/ Arthur Andersen
Minneapolis, Minnesota,
December 8, 1998
