<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 March 31, 1996
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 1-13692
AMERIGAS PARTNERS, L.P.
AMERIGAS FINANCE CORP.
(Exact name of registrants as specified in their charters)
<TABLE>
<S> <C>
Delaware 23-2787918
Delaware 23-2800532
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
460 North Gulph Road, King of Prussia, PA
(Address of principal executive offices)
19406
(Zip Code)
(610) 337-7000
(Registrants' 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 30, 1996, the registrants had units and shares of common
stock outstanding as follows:
AmeriGas Partners, L.P. - 21,949,272 Common Units
19,782,146 Subordinated Units
AmeriGas Finance Corp. - 100 shares
<PAGE> 2
AMERIGAS PARTNERS, L.P.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
AmeriGas Partners, L.P.
-----------------------
Condensed Consolidated Balance Sheets as of March 31, 1996 and
September 30, 1995 2
Condensed Consolidated Statements of Operations for the three and six
months ended March 31, 1996 and pro forma three and six months ended March
23, 1995 3
Condensed Consolidated Statement of Cash Flows for the six months
ended March 31, 1996 4
Condensed Consolidated Statement of Partners' Capital for the
six months ended March 31, 1996 5
Notes to Condensed Consolidated Financial Statements 6 - 9
AmeriGas Finance Corp.
----------------------
Balance Sheets as of March 31, 1996 and September 30, 1995 11
Note to Balance Sheets 12
AmeriGas Propane, Inc./AmeriGas Propane-2, Inc. (Predecessor)
-----------------------------------------------
Condensed Combined Statements of Income for the three and six
months ended March 23, 1995 14
Condensed Combined Statement of Cash Flows for the six months
ended March 23, 1995 15
Notes to Condensed Combined Financial Statements 16 - 17
Petrolane Incorporated and Subsidiaries (Predecessor)
---------------------------------------
Condensed Consolidated Statements of Operations for the three and six
months ended March 23, 1995 19
Condensed Consolidated Statement of Cash Flows for the six months
ended March 23, 1995 20
Notes to Condensed Consolidated Financial Statements 21 - 22
</TABLE>
-i-
<PAGE> 3
AMERIGAS PARTNERS, L.P.
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 23 - 29
PART II OTHER INFORMATION
Item 5. Other 30
Item 6. Exhibits and Reports on Form 8-K 30
Signatures 31
</TABLE>
-ii-
<PAGE> 4
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
for the three and six months ended
March 31, 1996
-1-
<PAGE> 5
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
--------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 30,436 $ 39,567
Short-term investments -- 9,000
Accounts receivable (less allowances for
doubtful accounts of $7,554 and $4,647,
respectively) 136,504 62,206
Inventories 62,590 78,996
Prepayments and other current assets 6,508 10,323
---------- ----------
Total current assets 236,038 200,092
Property, plant and equipment (less accumulated
depreciation and amortization of $122,800 and
$105,051, respectively) 455,425 453,100
Intangible assets (less accumulated amortization of
$86,723 and $74,230, respectively) 693,623 740,683
Other assets 40,189 41,434
---------- ----------
Total assets $1,425,275 $1,435,309
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current maturities of long-term debt $ 5,080 $ 4,675
Accounts payable - trade 44,716 35,965
Accounts payable - related parties 1,101 5,165
Other current liabilities 76,540 85,794
---------- ----------
Total current liabilities 127,437 131,599
Long-term debt 665,644 653,051
Other noncurrent liabilities 78,538 82,996
Minority interest 6,565 6,704
Partners' capital 547,091 560,959
---------- ----------
Total liabilities and partners' capital $1,425,275 $1,435,309
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 6
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Thousands of dollars, except per unit)
<TABLE>
<CAPTION>
Pro Pro
Forma Forma
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
March 31, March 23, March 31, March 23,
1996 1995 1996 1995
------------ ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Propane $ 352,398 $ 275,358 $ 609,047 $ 488,671
Other 22,370 24,369 51,517 57,955
------------ ----------- --------- ---------
374,768 299,727 660,564 546,626
------------ ----------- --------- ---------
Costs and expenses:
Cost of sales-propane 198,254 143,230 346,314 252,882
Cost of sales-other 11,067 13,157 25,727 32,625
Operating and administrative
expenses 84,495 78,698 161,415 154,293
Depreciation and amortization 15,453 15,589 30,925 30,669
Miscellaneous (income), net (1,645) (1,970) (4,489) (3,796)
------------ ----------- --------- ---------
307,624 248,704 559,892 466,673
------------ ----------- --------- ---------
Operating income 67,144 51,023 100,672 79,953
Interest expense (15,635) (15,214) (31,198) (30,439)
------------ ----------- --------- ---------
Income before income taxes 51,509 35,809 69,474 49,514
Income tax benefit 339 -- 5 --
Minority interest (550) (387) (754) (551)
------------ ----------- --------- ---------
Net income $ 51,298 $ 35,422 $ 68,725 $ 48,963
============ =========== ========= =========
General partner's interest in net
income $ 513 $ 354 $ 687 $ 490
============ =========== ========= =========
Limited partners' interest in net
income $ 50,785 $ 35,068 $ 68,038 $ 48,473
============ =========== ========= =========
Income per limited partner unit $ 1.22 $ .84 $ 1.63 $ 1.16
============ =========== ========= =========
Average limited partner units
outstanding (thousands) 41,731 41,714 41,727 41,714
============ =========== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 7
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
Six Months
Ended
March 31,
1996
----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 68,725
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 30,925
Amortization of debt premium (1,234)
Other, net 767
---------
99,183
Net change in:
Accounts receivable (76,569)
Inventories 16,903
Accounts payable 9,082
Other current assets and liabilities (6,137)
---------
Net cash provided by operating activities 42,462
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (14,495)
Proceeds from disposals of property, plant
and equipment 2,668
Decrease in short-term investments 9,000
Acquisitions of businesses, net of cash acquired (1,542)
---------
Net cash used by investing activities (4,369)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (46,359)
Minority interest activity (473)
Issuance of long-term debt 14,008
Repayment of long-term debt (9,650)
Capital contribution from General Partner 8
---------
Net cash used by financing activities (42,466)
---------
PARTNERSHIP FORMATION TRANSACTIONS:
Fees and expenses (4,758)
---------
Cash and cash equivalents decrease $ (9,131)
=========
CASH AND CASH EQUIVALENTS:
End of period $ 30,436
Beginning of period 39,567
---------
Decrease $ (9,131)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 8
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(unaudited)
(Thousands, except unit data)
<TABLE>
<CAPTION>
Number of units Total
------------------------- General partners'
Common Subordinated Common Subordinated partner capital
----------- ------------ ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SEPTEMBER 30, 1995 21,932,146 19,782,146 $ 291,988 $ 263,362 $ 5,609 $ 560,959
Issuance of Common Units in
connection with acquisition 17,126 413 4 417
Adjustments to net assets
contributed (19,084) (17,200) (367) (36,651)
Net income 35,786 32,252 687 68,725
Distributions (24,134) (21,752) (473) (46,359)
---------- ---------- --------- ----------- ------- ---------
BALANCE MARCH 31, 1996 21,949,272 19,782,146 $ 284,969 $ 256,662 $ 5,460 $ 547,091
========== ========== ========= =========== ======= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 9
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Thousands of dollars, except per unit)
1. PARTNERSHIP ORGANIZATION AND FORMATION
AmeriGas Partners, L.P. (AmeriGas Partners) was formed on November 2,
1994 as a Delaware limited partnership. AmeriGas Partners and its
subsidiary AmeriGas Propane, L.P., a Delaware limited partnership (the
"Operating Partnership"), were formed to acquire and operate the
propane businesses and assets of AmeriGas Propane, Inc. a Delaware
corporation, and AmeriGas Propane-2, Inc. (collectively, "AmeriGas
Propane"), wholly owned subsidiaries of AmeriGas, Inc. (AmeriGas), and
Petrolane Incorporated (Petrolane). AmeriGas Partners and the
Operating Partnership commenced operations effective April 19, 1995.
AmeriGas Propane and Petrolane are collectively referred to herein as
the Predecessor Companies. The Operating Partnership is, and the
Predecessor Companies were, engaged in the distribution of propane and
related equipment and supplies. AmeriGas Propane, Inc. (the "General
Partner"), a Pennsylvania corporation, serves as the general partner
of AmeriGas Partners and the Operating Partnership. The General
Partner holds a 1% general partner interest in AmeriGas Partners and a
1.0101% general partner interest in the Operating Partnership. In
addition, the General Partner and its wholly owned subsidiaries own an
effective 56.7% limited partner interest in the Operating Partnership.
This limited partner interest is evidenced by common units (Common
Units) and subordinated units (Subordinated Units) representing
limited partner interests in AmeriGas Partners. AmeriGas Partners and
the Operating Partnership have no employees. The General Partner
conducts, directs and manages all activities of AmeriGas Partners and
the Operating Partnership and is reimbursed on a monthly basis for all
direct and indirect expenses it incurs on their behalf.
The consolidated financial statements include the accounts of AmeriGas
Partners, the Operating Partnership and its corporate subsidiaries,
collectively referred to herein as the Partnership. The General
Partner's 1.0101% interest in the Operating Partnership is accounted
for in the condensed consolidated financial statements as a minority
interest. The accompanying condensed consolidated financial
statements are unaudited and have been prepared in accordance with the
rules and regulations of the Securities and Exchange Commission. They
include all adjustments which the Partnership considers necessary for
a fair statement of the results for the interim periods presented.
Such adjustments consisted only of normal recurring items unless
otherwise disclosed. These financial statements should be read in
conjunction with the financial statements and notes thereto included
in the Partnership's Report on Form 10-K for the year ended September
30, 1995. Due to the seasonal nature of the Partnership's propane
business, the results of operations for interim periods are not
necessarily indicative of the results to be expected for a full year.
The Partnership's fiscal periods end on the last day of the month.
Accordingly, the accompanying condensed consolidated results of
operations of the Partnership are for the periods January 1, 1996 to
March 31, 1996 and October 1, 1995 to March 31, 1996. Previously, the
Predecessor Companies' fiscal periods ended on the 23rd of the month.
Unaudited pro forma results of operations for the periods December 24,
1994 to March 23, 1995 and September 24, 1994 to March 23, 1995 have
been provided for comparative purposes and were derived from
-6-
<PAGE> 10
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the historical results of operations of AmeriGas Propane and Petrolane
for these periods. The pro forma statements of operations were
prepared to reflect the effects of the formation of the Partnership as
if the formation and the related transactions had been completed as of
the beginning of the periods presented. The pro forma statements of
operations do not purport to present the results of operations of the
Partnership had the formation and related transactions actually been
completed as of the beginning of the periods presented. In addition,
the pro forma statements of operations are not necessarily indicative
of results to be expected in the future.
2. DISTRIBUTIONS OF AVAILABLE CASH
The Partnership makes distributions to its partners with respect to
each fiscal quarter of the Partnership approximately 45 days after the
end of each fiscal quarter in an aggregate amount equal to its
Available Cash for such quarter. Available Cash generally means, with
respect to any fiscal quarter of the Partnership, all cash on hand at
the end of such quarter plus all additional cash on hand as of the
date of determination resulting from borrowings subsequent to the end
of such quarter less the amount of any cash reserves established by
the General Partner in its reasonable discretion for future cash
requirements. These reserves may be retained for the proper conduct
of the Partnership's business, the payment of debt principal and
interest and for distributions during the next four quarters. A
distribution of 55 cents per unit (the "Minimum Quarterly
Distribution") for the quarters ended December 31, 1995 and September
30, 1995 was made on February 18, 1996 and November 18, 1995 to
holders of record on February 8, 1996 and November 10, 1995,
respectively, of all Common and Subordinated units. The Minimum
Quarterly Distribution for the quarter ended March 31, 1996 will be
made on May 18, 1996 to holders of record on May 10, 1996 of all Common
and Subordinated units.
3. UNUSUAL ITEMS
During the three months ended March 31, 1996, the Partnership
completed the arrangements for a refund of general liability insurance
premium deposits which were previously paid by Petrolane prior to the
Partnership Formation. The anticipated refund, which has been
reflected as a reduction to operating expenses in the accompanying
condensed consolidated statements of operations, increased net income
for the three and six months ended March 31, 1996 by $4,356 or $.10
per limited partner unit.
During the three months ended March 31, 1996, the Partnership
completed a reassessment of its potential liability for environmental
matters principally relating to the clean up of underground storage
tanks (USTs). The reassessment indicated a reduction in estimated
future costs and the resulting adjustment has been reflected as a
reduction to operating expenses in the accompanying condensed
consolidated statements of operations. The adjustment increased net
income for the three and six months ended March 31, 1996 by $3,312 or
$.08 per limited partner unit.
Also during the three months ended March 31, 1996, the General Partner
completed AmeriGas Partners' and the Operating Partnership's federal
income tax returns for the Partnership's initial period of operation.
As a part of this process, a final determination was made as to how to
allocate the tax basis of certain of the assets contributed to the
Partnership by the Predecessor Companies. The completion of the
allocation process resulted in reductions in the deferred
- 7 -
<PAGE> 11
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
income tax liabilities of the General Partner and Petrolane existing
at April 19, 1995 which had been recorded in connection with
AmeriGas's acquisition by merger of the approximately 65% of Petrolane
common shares outstanding not already owned by AmeriGas or its parent
company, UGI Corporation (UGI), and the formation of the Partnership.
It also resulted in a reduction to the net assets contributed by the
General Partner and Petrolane to the Operating Partnership in
conjunction with the Partnership Formation which adjustment was
recorded by the Partnership during the three months ended March 31,
1996 as a $37,025 reduction in goodwill, a $36,651 reduction in
partners' capital, and a $374 reduction in minority interest.
4. RELATED PARTY TRANSACTIONS
Pursuant to the Partnership Agreement, the General Partner is entitled
to reimbursement for all direct and indirect expenses incurred or
payments it makes on behalf of the Partnership, and all other
necessary or appropriate expenses allocable to the Partnership or
otherwise reasonably incurred by the General Partner in connection
with the Partnership's business. These costs, which totaled $50,733
and $98,294 during the three and six months ended March 31, 1996,
respectively, include compensation and benefit expenses of employees
of the General Partner and general and administrative expenses. In
addition, UGI provides certain financial, accounting, human resources,
risk management, insurance, legal, corporate communications, investor
relations, treasury and corporate development services to the General
Partner. UGI bills the General Partner for these direct and indirect
corporate expenses and the General Partner is reimbursed by the
Partnership for these expenses. During the three and six months ended
March 31, 1996, such corporate expenses totaled $2,357 and $4,431,
respectively.
On November 16, 1995, a wholly owned subsidiary of the General
Partner, Diamond Acquisition, Inc. (Diamond), contributed to the
Partnership the net assets (including acquisition debt payable to UGI
relating thereto) of Oahu Gas Service, Inc. (Oahu), a Hawaii
corporation acquired by Diamond on October 31, 1995. In consideration
of the retention of certain income tax liabilities relating to Oahu,
AmeriGas Partners issued 17,126 Common Units to Diamond having a fair
value of $413.
5. COMMITMENTS AND CONTINGENCIES
The Partnership has succeeded to the lease guarantee obligations of
Petrolane relating to Petrolane's divestiture of nonpropane operations
prior to its 1989 acquisition by QFB Partners which are currently
estimated to aggregate approximately $100,000 (subject to reduction in
certain circumstances). The leases expire through 2007 and some of
them are currently in default. Under certain circumstances such lease
obligations may be reduced by the earnings of such divested
operations. The Partnership has succeeded to the indemnity agreement
of Petrolane by which Texas Eastern Corporation (Texas Eastern), a
prior owner of Petrolane, agreed to indemnify Petrolane against any
liabilities arising out of the conduct of businesses that do not
relate to, and are not a part of, the propane business, including
lease guarantees. To date, Texas Eastern has directly satisfied its
obligations without the Partnership having to honor its guarantee.
In addition, the Partnership has succeeded to Petrolane's agreement to
indemnify Shell Petroleum N.V. (Shell) for various scheduled claims
that were pending against Tropigas de Puerto Rico
- 8 -
<PAGE> 12
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Tropigas). This indemnification agreement had been entered into by
Petrolane in conjunction with Petrolane's sale of the international
operations of Tropigas to Shell in 1989. The Partnership also
succeeded to Petrolane's right to seek indemnity on these claims first
from International Controls Corp., which sold Tropigas to Petrolane,
and then from Texas Eastern. To date, neither the Partnership nor
Petrolane has paid any sums under this indemnity, but several claims
by Shell, including claims related to certain antitrust actions
aggregating at least $68,000, remain pending.
The Partnership has identified environmental contamination at several
of its properties. The Partnership's policy is to accrue
environmental investigation and cleanup costs when it is probable that
a liability exists and the amount or range of amounts is reasonably
estimable. However, in many circumstances future expenditures cannot
be reasonably quantified because of a number of factors, including
various costs associated with potential remedial alternatives, the
unknown number of other potentially responsible parties involved and
their ability to contribute to the costs of investigation and
remediation, and changing environmental laws and regulations. The
Partnership intends to pursue recovery of any incurred costs through
all appropriate means, although such recovery cannot be assured.
In addition to these environmental matters, there are various other
pending claims and legal actions arising out of the normal conduct of
the Partnership's business. The final results of environmental and
other matters cannot be predicted with certainty. However, it is
reasonably possible that some of them could be resolved unfavorably to
the Partnership. Management believes, after consultation with
counsel, that damages or settlements, if any, recovered by the
plaintiffs in such claims or actions will not have a material adverse
effect on the Partnership's financial position but could be material
to operating results and cash flows in future periods depending on the
nature and timing of future developments with respect to these matters
and the amounts of future operating results and cash flows.
- 9 -
<PAGE> 13
AMERIGAS FINANCE CORP.
BALANCE SHEETS
AS OF MARCH 31, 1996 AND
SEPTEMBER 30, 1995
- 10 -
<PAGE> 14
AMERIGAS FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.)
BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
-------- ------------
<S> <C> <C>
ASSETS
Subscription receivable $ 1,000 $ 1,000
-------- -----------
Total assets $ 1,000 $ 1,000
======== ===========
STOCKHOLDER'S EQUITY
Common stock, $.01 par value; 100 shares
authorized; 100 shares
issued and outstanding $ 1 $ 1
Additional paid-in capital 999 999
-------- -----------
Total stockholder's equity $ 1,000 $ 1,000
======== ===========
</TABLE>
The accompanying note is an integral part of these financial statements.
- 11 -
<PAGE> 15
AMERIGAS FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.)
NOTE TO BALANCE SHEETS
AmeriGas Finance Corp. (AmeriGas Finance), a Delaware corporation, was formed
on March 13, 1995 and is a wholly owned subsidiary of AmeriGas Partners, L.P.
(AmeriGas Partners). AmeriGas Partners was formed on November 2, 1994 as a
Delaware limited partnership. AmeriGas Partners was formed to acquire and
operate the propane businesses and assets of AmeriGas Propane, Inc., a Delaware
corporation (AmeriGas Propane), AmeriGas Propane-2, Inc. (AGP-2) and Petrolane
Incorporated (Petrolane) through AmeriGas Propane, L.P. (the "Operating
Partnership"). AmeriGas Partners holds a 98.99% limited partner interest in
the Operating Partnership and AmeriGas Propane, Inc., a Pennsylvania
corporation and the general partner of AmeriGas Partners (the "General
Partner"), holds a 1.01% general partner interest. On April 19, 1995, (i)
pursuant to a Merger and Contribution Agreement dated as of April 19, 1995,
AmeriGas Propane and certain of its operating subsidiaries and AGP-2 merged
into the Operating Partnership (the "Formation Merger"), and (ii) pursuant to a
Conveyance and Contribution Agreement dated as of April 19, 1995, Petrolane
conveyed substantially all of its assets and liabilities to the Operating
Partnership (the "Petrolane Conveyance"). As a result of the Formation Merger
and the Petrolane Conveyance, the General Partner and Petrolane received
limited partner interests in the Operating Partnership and the Operating
Partnership owns substantially all of the assets and assumed substantially all
of the liabilities of AmeriGas Propane, AGP-2 and Petrolane. AmeriGas Propane
conveyed its limited partner interest in the Operating Partnership to AmeriGas
Partners in exchange for 2,922,235 Common Units and 13,350,146 Subordinated
Units of AmeriGas Partners and Petrolane conveyed its limited partner interest
in the Operating Partnership to AmeriGas Partners in exchange for 1,407,911
Common Units and 6,432,000 Subordinated Units of AmeriGas Partners. Both
Common and Subordinated units represent limited partner interests in AmeriGas
Partners.
On April 19, 1995, AmeriGas Partners issued $100,000,000 face value of 10.125%
Senior Notes due April 2007. AmeriGas Finance serves as a co-obligor of these
notes.
AmeriGas Partners subscribed to 100 shares of AmeriGas Finance common stock for
$1,000 on March 13, 1995. There have been no other transactions involving
AmeriGas Finance through March 31, 1996.
-12-
<PAGE> 16
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
(PREDECESSOR)
CONDENSED COMBINED FINANCIAL INFORMATION
for the six months ended
March 23, 1995
-13-
<PAGE> 17
AMERIGAS PROPANE, INC. / AMERIGAS PROPANE - 2, INC.
CONDENSED COMBINED STATEMENTS OF INCOME
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
March 23, March 23,
1995 1995
----------- -----------
<S> <C> <C>
Revenues:
Propane $ 111,340 $ 194,973
Other 9,749 21,480
----------- ----------
121,089 216,453
----------- ----------
Costs and expenses:
Cost of sales - propane 55,161 95,553
Cost of sales - other 5,323 11,547
Operating and administrative expenses 27,552 54,210
Operating and administrative expenses -
related parties 10,288 19,428
Depreciation and amortization 6,029 11,812
Miscellaneous (income) - related parties (2,879) (5,640)
Miscellaneous (income), net (717) (1,434)
----------- ----------
100,757 185,476
----------- ----------
Operating income 20,332 30,977
Interest expense 6,323 12,793
----------- ----------
Income before income taxes 14,009 18,184
Income taxes 6,865 8,908
----------- ----------
Income before accounting change 7,144 9,276
Change in accounting for postemployment benefits - (1,650)
----------- ----------
Net income $ 7,144 $ 7,626
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-14-
<PAGE> 18
AMERIGAS PROPANE, INC. / AMERIGAS PROPANE - 2, INC.
CONDENSED COMBINED STATEMENT OF CASH FLOWS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
Six Months
Ended
March 23,
1995
------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,626
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 11,812
Deferred income taxes, net 338
Change in accounting for postemployment benefits 1,650
Other, net 140
-----------
21,566
Net change in:
Accounts receivable (10,804)
Inventories 7,250
Accounts payable 262
Receivable from/payable to related parties, net 4,709
Other current assets and liabilities 6,151
-----------
Net cash provided by operating activities 29,134
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (4,960)
Proceeds from disposals of property, plant and equipment 1,025
Acquisitions of businesses, net of cash acquired (833)
-----------
Net cash used by investing activities (4,768)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (5,286)
Repayment of long-term debt (91)
-----------
Net cash used by financing activities (5,377)
-----------
Cash and cash equivalents increase $ 18,989
===========
CASH AND CASH EQUIVALENTS:
End of period $ 37,562
Beginning of period 18,573
===========
Increase $ 18,989
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-15-
<PAGE> 19
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(unaudited)
(Thousands of dollars)
1. ORGANIZATION AND BASIS OF PRESENTATION
Prior to April 19, 1995, AmeriGas Propane, Inc., a Delaware
corporation (AmeriGas Propane), and AmeriGas Propane-2, Inc., a
Pennsylvania corporation ("AGP-2", and together with AmeriGas Propane,
"the Company"), were wholly owned subsidiaries of AmeriGas, Inc.
(AmeriGas) engaged in the distribution of propane and related
equipment and supplies. On April 19, 1995, pursuant to a Merger and
Contribution Agreement, AmeriGas Propane and certain of its operating
subsidiaries, and AGP-2 were merged into AmeriGas Propane, L.P., (the
"Operating Partnership"), a Delaware limited partnership formed to
acquire and operate the propane businesses of the Company and
Petrolane Incorporated (Petrolane). The condensed combined financial
statements include the consolidated accounts of AmeriGas Propane and
its subsidiaries and the accounts of AGP-2. All significant
intercompany accounts and transactions have been eliminated.
The accompanying condensed combined financial statements are unaudited
and have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission (the "Commission"). They
include all adjustments which the Company considers necessary for a
fair statement of the results for the interim periods presented. Such
adjustments consisted only of normal recurring items unless otherwise
disclosed. These financial statements should be read in conjunction
with the financial statements and the notes thereto included in
AmeriGas Partners' Report on Form 10-K for the year ended September
30, 1995. Due to the seasonal nature of the Company's propane
business, the results of operations for interim periods are not
necessarily indicative of the results to be expected for a full year.
2. RELATED PARTY FEES
AmeriGas Propane and Petrolane were parties to a customer services
agreement (Customer Services Agreement) pursuant to which AmeriGas
Propane served customers of closed Petrolane districts and Petrolane
served customers of closed AmeriGas Propane districts. These
districts were closed in order to achieve cost reductions and
operational efficiencies in overlapping geographical markets served by
AmeriGas Propane and Petrolane. Fees billed by Petrolane to AmeriGas
Propane under the Customer Services Agreement are included in
operating and administrative expenses - related parties. Such fees
totaled $3,061 and $6,070 in the three and six months ended March 23,
1995, respectively. Fees billed to Petrolane under the Customer
Services Agreement are included in miscellaneous income - related
parties. Such fees totaled $2,394 and $4,638 in the three and six
months ended March 23, 1995, respectively.
AmeriGas Management Company (AMC) and AmeriGas Transportation
Management Company (ATMC), former first-tier subsidiaries of
AmeriGas's parent company UGI Corporation (UGI), provided general
management, supervisory, administrative and transportation services to
AmeriGas Propane, AGP-2 and Petrolane effective with AmeriGas's
acquisition of a significant equity interest in Petrolane on July 15,
1993. As consideration for these services, AMC and ATMC charged
AmeriGas Propane and AGP-2 monthly fees which, together with fees
received
-16-
<PAGE> 20
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (Continued)
from Petrolane, effectively reimbursed AMC and ATMC for their costs to
provide such services. Fees incurred pursuant to the AMC and ATMC
agreements are included in operating and administrative expenses -
related parties. The Company recorded combined management fees of
$4,380 and $8,814 in the three and six months ended March 23, 1995,
respectively.
UGI provided certain management services to the Company for a monthly
fee based upon a rate of 2.25 cents per retail gallon of propane sold
by the Company. During the three and six months ended March 23, 1995,
the Company recorded management fees of $2,847 and $4,544,
respectively, which amounts are included in operating and
administrative expenses - related parties.
-17-
<PAGE> 21
PETROLANE INCORPORATED AND SUBSIDIARIES
(PREDECESSOR)
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
for the six months ended
March 23, 1995
-18-
<PAGE> 22
PETROLANE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Thousands of dollars, except per share)
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
March 23, March 23,
1995 1995
----------- ----------
<S> <C> <C>
Revenues:
Propane $ 164,018 $293,698
Other 16,963 40,871
----------- --------
180,981 334,569
----------- --------
Costs and expenses:
Cost of sales-propane 88,069 157,329
Cost of sales-other 10,177 25,474
Selling, general and administrative expenses 36,379 70,717
Selling, general and administrative expenses -
related parties 8,886 17,670
Depreciation and amortization 11,824 23,411
Taxes - other than income taxes 3,727 7,161
Miscellaneous (income) - related parties (3,061) (6,070)
Miscellaneous (income), net (767) (1,360)
----------- --------
155,234 294,332
----------- --------
Operating income 25,747 40,237
Interest expense 13,356 26,093
----------- --------
Income before income taxes 12,391 14,144
Income taxes 7,852 10,335
----------- --------
Income before accounting change 4,539 3,809
Change in accounting for postemployment benefits -- (905)
----------- --------
Net income $ 4,539 $ 2,904
=========== ========
Earnings (loss) per common share:
Income before accounting change $ .43 $ .36
Change in accounting for postemployment benefits - (.08)
----------- --------
Net earnings $ .43 $ .28
=========== ========
Average shares outstanding (thousands) 10,501 10,501
=========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-19-
<PAGE> 23
PETROLANE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
Six Months
Ended
March 23,
1995
----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,904
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 23,411
Deferred income taxes 5,666
Amortization of debt and
interest rate swap premiums (2,668)
Other, net 1,794
----------
31,107
Net change in:
Accounts receivable (9,673)
Inventories 3,948
Accounts payable (9,427)
Other current assets and liabilities (1,091)
----------
Net cash provided by operating activities 14,864
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (6,461)
Proceeds from disposals of property, plant and equipment 2,449
Acquisitions of businesses, net of cash acquired (2,386)
----------
Net cash used by investing activities (6,398)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (11,378)
Change in working capital loans 12,000
Other (1,133)
----------
Net cash used by financing activities (511)
----------
Cash and cash equivalents increase $ 7,955
==========
CASH AND CASH EQUIVALENTS:
End of period $ 18,732
Beginning of period 10,777
----------
Increase $ 7,955
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-20-
<PAGE> 24
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Thousands of dollars, except per share amounts)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include
the accounts of Petrolane Incorporated and its majority-owned
subsidiaries (the "Company"). All significant intercompany accounts
and transactions have been eliminated in consolidation. Earnings
(loss) per common share for the periods presented are based on the
average number of shares of common stock outstanding during the
respective periods.
On April 19, 1995, pursuant to a Conveyance and Contribution
Agreement, the Company conveyed substantially all of its assets and
liabilities to AmeriGas Propane, L.P., a Delaware limited partnership
(the "Operating Partnership") and subsidiary of AmeriGas Partners,
L.P., a Delaware limited partnership (AmeriGas Partners), formed to
acquire and operate the propane businesses of the Company and
affiliates AmeriGas Propane, Inc., a Delaware corporation (AmeriGas
Propane) and AmeriGas Propane-2, Inc. (AGP-2). AmeriGas Propane and
AGP-2 are wholly owned subsidiaries of AmeriGas, Inc. (AmeriGas).
The condensed consolidated financial statements include the results of
operations and cash flows of the Company prior to the Conveyance and
Contribution Agreement. The accompanying condensed consolidated
financial statements are unaudited and have been prepared in
accordance with the rules and regulations of the Securities and
Exchange Commission. They include all adjustments which the Company
considers necessary for a fair statement of the results for the
interim periods presented. Such adjustments consisted only of normal
recurring items unless otherwise disclosed. These financial
statements should be read in conjunction with the financial statements
and the notes thereto included in AmeriGas Partners' Report on Form
10-K for the year ended September 30, 1995. Due to the seasonal
nature of the Company's business, the results of operations for
interim periods are not necessarily indicative of the results to be
expected for a full year.
2. RELATED PARTY FEES
The Company and AmeriGas Propane were parties to a customer services
agreement (Customer Services Agreement) pursuant to which the Company
served customers of closed AmeriGas Propane districts and AmeriGas
Propane served customers of closed Company districts. Fees incurred
by the Company under the Customer Services Agreement are included in
selling, general and administrative expenses - related parties. Such
fees totaled $2,394 and $4,638 in the three and six months ended March
23, 1995, respectively. Fees billed to AmeriGas Propane under the
Customer Services Agreement are included in miscellaneous
income - related parties. Such fees totaled $3,061 and $6,070 in the
three and six months ended March 23, 1995, respectively.
AmeriGas Management Company (AMC) and AmeriGas Transportation
Management Company (ATMC), first-tier subsidiaries of AmeriGas's
parent company UGI Corporation (UGI), provided general management,
supervisory, administrative and transportation services to the Company
and AmeriGas's wholly owned propane subsidiaries. As consideration
for these services, AMC and
-21-
<PAGE> 25
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ATMC charged the Company fees which together with fees received from
AmeriGas's wholly owned propane subsidiaries effectively reimbursed
AMC and ATMC for their costs to provide such services. Fees incurred
by the Company under the AMC and ATMC agreements are included in
selling, general and administrative expenses - related parties. Such
fees totaled $3,521 and $7,090 in the three and six months ended March
23, 1995, respectively.
Pursuant to its management agreement with the Company (UGI Management
Agreement), UGI provided to the Company certain financial, accounting,
human resources, risk management, insurance, legal, corporate
communication, investor relations, treasury and corporate development
services. For such services, UGI received a quarterly fee from the
Company. Fees incurred by the Company under the UGI Management
Agreement are included in selling, general and administrative expenses
- related parties. Such fees totaled $2,971 and $5,942 in the three
and six months ended March 23, 1995, respectively.
3. INCOME TAXES
The Company's effective income tax rate for the six months ended March
23, 1995 was 73.1% compared with an effective rate of 141.6% for the
three months ended December 23, 1994. A combination of lower than
expected estimated annual pre-tax earnings (due in part from
warmer-than-normal weather) and relatively high amounts of
nondeductible excess reorganization costs caused considerable
volatility in Petrolane's 1995 estimated annual effective income tax
rate. Because of the resulting uncertainty of the 1995 estimated
rate, the Company's income tax calculation for the 1995 six-month
period was based upon year-to-date pre-tax income as adjusted for
year-to-date nondeductible expenses. The effective income tax rate
for the three months ended December 23, 1994 was based upon an
estimated annual effective income tax rate. The application of the
lower tax rate to year-to-date pre-tax earnings at March 23, 1995
resulted in the reversal of approximately $1,200 of income taxes
recorded in the three months ended December 23, 1994. This income tax
reversal reduced income tax expense for the three months ended March
23, 1995.
-22-
<PAGE> 26
AMERIGAS PARTNERS, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ANALYSIS OF RESULTS OF OPERATIONS
The following analyses compare AmeriGas Partners' results of operations for the
periods January 1, 1996 to March 31, 1996 (the "1996 Three Month Period") and
October 1, 1995 to March 31, 1996 (the "1996 Six Month Period") with pro forma
results of operations for the periods December 24, 1994 to March 23, 1995 (the
"Pro Forma 1995 Three Month Period") and September 24, 1994 to March 23, 1995
(the "Pro Forma 1995 Six Month Period"). The pro forma consolidated results of
operations were derived from the historical statements of operations of
AmeriGas Propane and Petrolane for the respective pro forma periods. The pro
forma statements of operations were prepared to reflect the effects of the
formation of AmeriGas Partners as if the formation had been completed in its
entirety as of the beginning of the periods presented. Due to the seasonality
of AmeriGas Partners' propane business, the results of operations for interim
periods are not necessarily indicative of the results to be expected for a full
year.
Other than formation transactions recorded on March 13, 1995, there have been
no other transactions involving AmeriGas Finance Corp. through March 31, 1996.
Accordingly, the following analyses of results of operations exclude AmeriGas
Finance Corp.
-23-
<PAGE> 27
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
THE 1996 THREE MONTH PERIOD COMPARED WITH THE PRO FORMA 1995 THREE MONTH PERIOD
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
Pro Forma
January 1, December 24,
1996 to 1994 to
March 31, March 23, Increase
1996 1995(a) (Decrease)
- - -----------------------------------------------------------------------------------------------------------------
(Millions, except per gallon and percentages)
<S> <C> <C> <C> <C>
Gallons sold:
Retail 315.3 270.7 44.6 16.5%
Wholesale 95.9 63.9 32.0 50.1
------ ------ ------
411.2 334.6 76.6 22.9
====== ====== ======
Revenues:
Retail propane $305.2 $247.3 $ 57.9 23.4%
Wholesale propane 47.2 28.0 19.2 68.6
Other 22.4 24.4 (2.0) (8.2)
------ ------ ------
$374.8 $299.7 $ 75.1 25.1
====== ====== ======
Total margin (b) $165.4 $143.3 $ 22.1 15.4%
EBITDA (c) $ 82.6 $ 66.6 $ 16.0 24.0
Operating income $ 67.1 $ 51.0 $ 16.1 31.6
Degree days - % colder (warmer)
than normal (d) 0.8% (16.5)% N.M. N.M.
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
N.M. - Not Meaningful.
(a) Reflects unaudited pro forma information for the Partnership as if the
formation of the Partnership had occurred as of December 24, 1994.
(b) Total revenues less total cost of sales.
(c) EBITDA (earnings before interest, taxes, depreciation and
amortization) 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).
(d) Based on the weighted average deviation from average degree days
during the 30-year period 1961-1990, as contained in the National
Weather Service Climate Analysis Center database, for geographic
areas in which AmeriGas Partners operates.
- - ----------
Retail volumes of propane sold increased 44.6 million gallons (16.5%) in the
1996 Three Month Period reflecting the effects of colder weather on
heating-related sales, the effects of acquisitions, and other
nonweather-related volume growth. Weather across the U.S. markets served by
the Partnership was, on average, slightly colder than normal in the 1996 Three
Month Period compared with weather that was, on average, 16.5% warmer than
normal in the Pro Forma 1995 Three Month Period. Although the
-24-
<PAGE> 28
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
weather averaged only slightly colder than normal, temperatures were
significantly different across U.S. regions with the Partnership's eastern and
midwestern U.S. markets experiencing colder than normal weather and the
Partnership's western U.S. markets experiencing significantly warmer than
normal weather. Wholesale volumes of propane increased 32.0 million gallons
(50.1%) reflecting the effects of the colder 1996 weather and sales of low
margin excess storage inventories.
Revenues from the sale of propane increased $77.1 million (28.0%) reflecting
the increased retail and wholesale volumes sold as well as higher average
retail and wholesale prices. Other revenues, principally from sales of
appliances, parts and other products and services, decreased $2.0 million
(8.2%) in the 1996 Three Month Period as a result of higher Pro Forma 1995
Three Month Period sales of low margin diesel and other fuels. Total cost of
sales increased $52.9 million (33.8%) as a result of the increased volumes of
propane sold and, to a lesser extent, significantly higher average propane
product costs.
Total margin from the sale of propane increased $22.0 million (16.7%) in the
1996 Three Month Period reflecting the effects of the higher retail volumes of
propane sold. Although the sale of low margin excess storage inventories had a
significant effect on propane revenues, such sales had very little effect on
total propane margin. Average retail unit margins in the 1996 Three Month
Period were approximately equal to unit margins in the Pro Forma 1995 Three
Month Period. Higher average retail selling prices offset the impact of
significantly higher average propane product costs. Total margin from other
propane-related sales and services in the 1996 Three Month Period was virtually
unchanged from the prior-year period.
Earnings before interest expense, income taxes, depreciation and amortization
(EBITDA) was $82.6 million in the 1996 Three Month Period compared to $66.6
million in the Pro Forma 1995 Three Month Period. The increased EBITDA
reflects the impact of the higher total margin partially offset by higher
operating expenses. Total operating expenses were $84.5 million in the 1996
Three Month Period compared to $78.7 million in the Pro Forma 1995 Three Month
Period. The 1996 operating expenses are net of $4.4 million from an expected
refund of insurance premium deposits made in prior years and $3.3 million from
reductions to accruals for potential liabilities for environmental matters.
Operating expenses, exclusive of these items, increased $13.5 million (17.1%)
principally as a result of higher payroll and employee compensation expenses
(including amounts associated with overtime caused by severe winter weather in
eastern U.S. markets), higher vehicle repairs and maintenance expenses, and
increased expenses associated with the Partnership's sales and marketing
programs.
Interest expense was $15.6 million in the 1996 Three Month Period compared with
$15.2 million in the Pro Forma 1995 Three Month Period. The higher interest
expense reflects interest expense on 1996 Three Month Period borrowings under
the Partnership's revolving credit and special purpose facilities along with
interest expense on acquisition-related debt, including borrowings under the
Partnership's acquisition facility.
-25-
<PAGE> 29
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
THE 1996 SIX MONTH PERIOD COMPARED WITH THE PRO FORMA 1995 SIX MONTH PERIOD
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
Pro Forma
October 1, September 24,
1995 to 1994 to
March 31, March 23, Increase
1996 1995(a) (Decrease)
- - -----------------------------------------------------------------------------------------------------------------
(Millions, except per gallon and percentages)
<S> <C> <C> <C> <C>
Gallons sold:
Retail 559.6 486.2 73.4 15.1%
Wholesale 215.2 119.5 95.7 80.1
------ ------ -------
774.8 605.7 169.1 27.9
====== ====== ======
Revenues:
Retail propane $515.1 $436.1 $ 79.0 18.1%
Wholesale propane 94.0 52.6 41.4 78.7
Other 51.5 57.9 (6.4) (11.1)
------ ------ ------
$660.6 $546.6 $114.0 20.9
====== ====== ======
Total margin (b) $288.5 $261.1 $ 27.4 10.5%
EBITDA (c) $131.6 $110.6 $ 21.0 19.0
Operating income $100.7 $ 80.0 $ 20.7 25.9
Degree days - % colder (warmer)
than normal (d) 1.1% (18.8)% N.M. N.M.
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
N.M. - Not Meaningful.
(a) Reflects unaudited pro forma information for the Partnership as if the
formation of the Partnership had occurred as of September 24, 1994.
(b) Total revenues less total cost of sales.
(c) EBITDA (earnings before interest, taxes, depreciation and
amortization) 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).
(d) Based on the weighted average deviation from average degree days
during the 30-year period 1961-1990, as contained in the National
Weather Service Climate Analysis Center database, for geographic areas
in which AmeriGas Partners operates.
__________
Retail volumes of propane sold increased 73.4 million gallons (15.1%) in the
1996 Six Month Period reflecting the effects of colder heating-season weather
on heating-related sales, the effects of acquisitions, and other
nonweather-related volume growth. Weather across the Partnership's markets
averaged 1.1% colder than normal in the 1996 Six Month Period compared to
weather that averaged 18.8% warmer than
-26-
<PAGE> 30
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
normal in the 1995 Six Month Period. Regional temperature variations were
significantly different with the western U.S. experiencing substantially
warmer than normal temperatures and the eastern and midwestern U.S.
experiencing colder than normal temperatures. Wholesale volumes of propane
increased 95.7 million gallons (80.1%) reflecting the effects of the colder
weather and an increase in sales of low margin excess storage inventories.
Revenues from the sale of propane increased $120.4 million (24.6%) reflecting
the higher retail and wholesale volumes sold and higher average retail prices.
Average wholesale prices were slightly lower in the 1996 Six Month Period due
principally to a high percentage of very low margin wholesale sales. Other
revenues in the 1996 Six Month Period decreased $6.4 million (11.1%)
principally as a result of higher Pro Forma 1995 Six Month Period sales of low
margin diesel and other fuels. Total cost of sales increased $86.5 million
(30.3%) as a result of the higher volumes of propane sold and, to a lesser
extent, higher average propane product costs.
Total margin from the sale of propane increased $26.9 million (11.4%) in the
1996 Six Month Period principally as a result of the greater retail volumes of
propane sold partially offset by the effects of lower average retail unit
margins. Average retail unit margins in the 1996 Six Month Period were lower
than in the Pro Forma 1995 Six Month Period, despite increased average retail
selling prices, reflecting the impact of higher average propane product costs.
Total margin from other sales and services during the 1996 Six Month Period was
virtually unchanged from the prior-year period.
EBITDA was $131.6 million in the 1996 Six Month Period compared to $110.6
million in the Pro Forma 1995 Six Month Period. The increased EBITDA
principally reflects the impact of the higher total margin partially offset by
higher operating expenses. The 1996 Six Month Period operating expenses are
net of $4.4 million from an expected refund of insurance premium deposits made
in prior years and $3.3 million from reductions to potential liabilities for
environmental matters. Operating expenses, exclusive of these items, increased
$14.8 million (9.6%) principally reflecting higher payroll and employee
compensation expenses, higher vehicle repairs and maintenance expenses, and
increased expenses associated with the Partnership's sales and marketing
programs.
Interest expense was $31.2 million in the 1996 Six Month Period compared with
$30.4 million in the Pro Forma 1995 Six Month Period. The higher interest
expense reflects interest expense on 1996 Six Month Period borrowings under the
Partnership's revolving credit and special purpose facilities along with
interest expense on acquisition-related debt, including borrowings under the
Partnership's acquisition facility.
-27-
<PAGE> 31
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION
During the three months ended March 31, 1996, the General Partner completed
AmeriGas Partners' and the Operating Partnership's federal income tax returns
for the Partnership's initial period of operation. As a part of this process,
a final determination was made as to how to allocate the tax basis of certain
of the assets contributed to the Partnership by the Predecessor Companies. The
completion of the allocation process resulted in reductions in the deferred
income tax liabilities of the General Partner and Petrolane existing at April
19, 1995 which had been recorded in connection with AmeriGas's acquisition by
merger of the approximately 65% of Petrolane common shares outstanding not
already owned by AmeriGas or its parent company, UGI Corporation, and the
formation of the Partnership. It also resulted in a reduction to the net
assets contributed by the General Partner and Petrolane to the Operating
Partnership in conjunction with the formation of the Partnership which
adjustment was recorded during the three months ended March 31, 1996 as a $37.0
million reduction in goodwill, a $36.7 million reduction in partners' capital,
and a $.4 million reduction in minority interest.
The Partnership's consolidated debt-to-total-capitalization ratio at March 31,
1996 was 54.8% compared to 53.7% at September 30, 1995. The slightly higher
ratio is principally a result of $9 million in borrowings under the
Partnership's acquisition facility and $5 million under the Partnership's
special purpose facility and the decrease in partners' capital resulting from
the adjustment to the net assets contributed to the Operating Partnership. Had
the adjustment been recorded at September 30, 1995, the ratio as of that date
would have been 55.7%. During the six months ended March 31, 1996, the
Partnership made several small propane business acquisitions for cash. In
addition, on November 16, 1995, a wholly owned subsidiary of the General
Partner, Diamond Acquisition, Inc. (Diamond), contributed to the Partnership
the net assets (including acquisition debt payable to UGI relating thereto) of
Oahu Gas Service, Inc. (Oahu), a Hawaii corporation acquired by Diamond on
October 31, 1995. In consideration of the retention of certain income tax
liabilities relating to Oahu, AmeriGas Partners issued 17,126 Common Units to
Diamond having a fair value of $.4 million.
The Partnership makes distributions of its Available Cash approximately 45 days
after the end of each fiscal quarter ending December, March, June and September
to holders of record on the applicable record date. The Minimum Quarterly
Distributions for the quarters ended September 30, 1995 and December 31, 1995
were made on November 18, 1995 and February 18, 1996 to holders of record on
November 10, 1995 and February 8, 1996, respectively, of all Common and
Subordinated units. The Minimum Quarterly Distribution for the quarter ended
March 31, 1996 will be made on May 18, 1996 to holders of record on May 10,
1996 of all Common and Subordinated units.
CASH FLOWS
Cash and cash equivalents totaled $30.4 million at March 31, 1996 compared with
$39.6 million at September 30, 1995. Due to the seasonal nature of the propane
business, cash flows from operating activities are generally strongest during
the second and third fiscal quarters of the Partnership when
-28-
<PAGE> 32
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
customers pay for propane purchased during the heating season. Conversely,
cash flows from operations during the first and fourth fiscal quarters are
typically at their lowest levels as the Partnership purchases propane
inventories and finances increases in other working capital in advance of the
heating season. Accordingly, cash flows from operations during the six months
ended March 31, 1996 are not necessarily indicative of cash flows to be
expected for a full year.
OPERATING ACTIVITIES. Cash flows from operating activities during the six
months ended March 31, 1996 totaled $42.5 million. However, cash flows from
operating activities before changes in operating working capital totaled $99.2
million. Changes in the Partnership's operating working capital during the six
months ended March 31, 1996 reflect a net use of cash of $56.7 million
principally due to a seasonal increase in customer accounts receivable.
INVESTING ACTIVITIES. Cash expenditures for property, plant and equipment
totaled $14.5 million during the six months ended March 31, 1996. Maturing
short-term investments which existed at September 30, 1995 increased cash flows
from investing activities by $9.0 million during the six months ended March 31,
1996. In addition, net proceeds from the disposal of property, plant and
equipment totaled $2.7 million.
FINANCING ACTIVITIES. During the six months ended March 31, 1996, the
Partnership made total distributions of $46.4 million to its unitholders and
the General Partner representing the Minimum Quarterly Distribution for the
quarters ended September 30, 1995 and December 31, 1995. In addition, the
Operating Partnership distributed $.5 million to the General Partner in respect
of the General Partner's 1.0101% interest in the Operating Partnership.
During the six months ended March 31, 1996, the Partnership borrowed $5 million
under its Special Purpose facility to fund certain liabilities of Petrolane
assumed by the Operating Partnership that relate to liabilities for tax,
insurance and environmental matters. In addition, the Partnership borrowed $9
million under its Acquisition Facility the proceeds of which were used
principally for the repayment of acquisition debt assumed by the Partnership in
conjunction with the General Partner's November 16, 1995 contribution of the
assets of Oahu to the Operating Partnership.
PARTNERSHIP FORMATION TRANSACTIONS. Cash paid for Partnership formation
transactions represents the reimbursement by the Partnership of fees and
expenses previously paid by AmeriGas relating to the formation of the
Partnership.
-29-
<PAGE> 33
AMERIGAS PARTNERS, L.P.
PART II OTHER INFORMATION
ITEM 5. OTHER
Effective May 1, 1996, Gordon E. Regan, Jr. was elected Vice President
- - - Purchasing & Transportation of AmeriGas Propane, Inc., the General Partner of
AmeriGas Partners, L.P.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
10. First Amendment dated as of July 31, 1995 to Credit Agreement
dated as of April 12, 1995 among AmeriGas Propane, L.P.,
AmeriGas Propane, Inc., Petrolane Incorporated, Bank of
America National Trust and Savings Association, as Agent, and
certain banks.
27. Financial Data Schedule
(b) AmeriGas Partners, L.P. did not file any Reports on Form 8-K during
the fiscal quarter ended March 31, 1996.
-30-
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by
the undersigned thereunto duly authorized.
AmeriGas Partners, L.P.
--------------------------------------
(Registrant)
By: AmeriGas Propane, Inc.,
as General Partner
Date: May 13, 1996 By: D. C. Riggan
- - ------------------- -----------------------------------
D. C. Riggan
Vice President - Finance & Accounting
AmeriGas Finance Corp.
-------------------------------------
(Registrant)
Date: May 13, 1996 By: D. C. Riggan
- - ------------------- --------------------------------------
D. C. Riggan
Vice President - Finance & Accounting
-31-
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- - ----------- -----------
<S> <C>
10 First Amendment dated as of July 31, 1995 to Credit Agreement dated as of April 12, 1995 among
AmeriGas Propane, L.P., AmeriGas Propane, Inc., Petrolane Incorporated, Bank of America National
Trust and Savings Association, as Agent, and certain banks.
27 Financial Data Schedule
</TABLE>
<PAGE> 1
Exhibit 10
FIRST AMENDMENT TO CREDIT AGREEMENT
This Agreement, dated as of July 31, 1995 (this "Amendment") is
entered into by and among AmeriGas Propane, L.P., a Delaware limited
partnership (the "Company"), AmeriGas Propane, Inc., a Pennsylvania corporation
(the "General Partner"), Petrolane Incorporated, a California corporation
("Petrolane"; the Company, the General Partner and Petrolane being hereinafter
referred to collectively as the "Borrowers" and sometimes individually as a
"Borrower"), the several financial institutions parties to this Amendment
(collectively, the "Banks"; individually, a "Bank"), and Bank of America
National Trust and Savings Association, as Agent.
RECITALS
The Borrowers, the Banks, the Issuing Bank and the Agent are parties
to a Credit Agreement dated as of April 12, 1995 (the "Credit Agreement").
Capitalized terms used and not otherwise defined or amended in this Amendment
shall have the meanings respectively assigned to them in the Credit Agreement.
The Borrowers have requested that the Banks and the Issuing Bank amend
the Credit Agreement to reduce the minimum face amount of Letters of Credit to
$500,000. The Banks and the Issuing Bank have agreed to so amend the Credit
Agreement, all upon the terms and provisions and subject to the conditions
hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreements hereinafter set forth, the parties hereto mutually agree as follows:
A. AMENDMENT
1. Amendment of Section 3.1 (The Letter of Credit Subfacility).
Section 3.1 of the Credit Agreement is hereby amended by deleting the amount
"$1,000,000" appearing in paragraph (b) (v) thereof and substituting therefor
the amount "$500,000".
B. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to the Banks and the
Issuing Bank that:
<PAGE> 2
1. No Event of Default specified in the Credit Agreement and no
Default has occurred and is continuing;
2. The representations and warranties of such Borrower pursuant
to the Credit Agreement are true on and as of the date hereof as if made on and
as of said date;
3. The execution, delivery and performance by such Borrower of
this Amendment have been duly authorized by all corporate or partnership
action; and
4. No consent, approval, authorization, permit or license from
any federal or state regulatory authority is required in connection with the
execution, delivery or performance of the Credit Agreement as amended hereby.
C. CONDITIONS PRECEDENT
This Amendment will become effective as of the date first written
above upon receipt by the Agent of counterparts hereof duly executed by each
Borrower, the Required Banks and the Issuing Bank, and duly acknowledged by the
Agent.
D. MISCELLANEOUS
1. This Amendment may be signed in any number of counterparts,
each of which shall be an original, with same effect as if the signature
thereto and hereto were upon the same instrument.
2. Except as herein specifically amended, all terms, covenants
and provisions of the Credit Agreement shall remain in full force and effect
and shall be performed by the parties thereto in accordance therewith. All
references to the Credit Agreement contained in the Credit Agreement or the
other Loan Documents shall henceforth be deemed to refer to the Credit
Agreement as amended by this Amendment.
3. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the date first written above.
AMERIGAS PROPANE, L.P.
By: AMERIGAS PROPANE, INC.,
as General Partner
-2-
<PAGE> 3
By: /s/M. J. Cuzzolina
----------------------------------
Name: M. J. Cuzzolina
--------------------------------
Title: Treasurer
-------------------------------
AMERIGAS PROPANE, INC.
By: /s/M. J. Cuzzolina
----------------------------------
Name: M. J. Cuzzolina
--------------------------------
Title: Treasurer
-------------------------------
PETROLANE INCORPORATED
By: /s/M. J. Cuzzolina
----------------------------------
Name: M. J. Cuzzolina
-------------------------------
Title: Treasurer
-------------------------------
BANK OF AMERICA ILLINOIS,
as a Bank and as Issuing Bank
By: /s/Steve A. Aronowitz
----------------------------
Name: Steve A. Aronowitz
--------------------------
Title: Vice President
-------------------------------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/Frank T. Smith
---------------------------------
Name: Frank T. Smith
-------------------------------
Title: Director
-------------------------------
THE BANK OF NEW YORK
By: /s/Peter H. Abdill
---------------------------------
Name: Peter H. Abdill
--------------------------------
-3-
<PAGE> 4
Title:
------------------------------
CORESTATES BANK, N.A.
By: /s/Anthony D. Braxton
---------------------------------
Name: Anthony D. Braxton
-------------------------------
Title: Vice President
------------------------------
FIRST FIDELITY BANK,
NATIONAL ASSOCIATION
By: /s/Wynelle Farlow
---------------------------------
Name: Wynelle Farlow
-------------------------------
Title: Vice President
------------------------------
THE FIRST NATIONAL BANK OF MARYLAND
By: /s/George A. Hennessy
---------------------------------
Name: George A. Hennessy
-------------------------------
Title: Assistant Vice President
------------------------------
MELLON BANK, N.A.
By: /s/Maria D. Kalilec
---------------------------------
Name: Maria D. Kalilec
-------------------------------
Title: Assistant Vice President
-------------------------------
THE MISUBISHI BANK, LIMITED,
New York Branch
By: /s/Frank H. Madden
---------------------------------
Name: Frank H. Madden
-------------------------------
Title: Joint General Manager
------------------------------
-4-
<PAGE> 5
PNC BANK, NATIONAL ASSOCIATION
By: /s/H. Todd Dissinger
---------------------------------
Name: H. Todd Dissinger
-------------------------------
Title: Vice President
------------------------------
UNION BANK
By: /s/Walter M. Roth
---------------------------------
Name: Walter M. Roth
-------------------------------
Title: Vice President
------------------------------
UNION BANK OF SWITZERLAND,
New York Branch
By: /s/Peter B. Yearly
---------------------------------
Name: Peter B. Yearly
-------------------------------
Title: Vice President
------------------------------
By: /s/James P. Kelleher
---------------------------------
Name: James P. Kelleher
-------------------------------
Title: Assistant Vice President
------------------------------
Acknowledged:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: /s/Doris V. G. Bergum
------------------------------
Name: Doris V. G. Bergum
----------------------------
Title: Vice President
---------------------------
-5-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS OF AMERIGAS
PARTNERS, L.P. AS OF AND FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN
AMERIGAS PARTNERS' QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH
31, 1996
</LEGEND>
<CIK> 0000932628
<NAME> AG PARTNERS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1996
<CASH> 30,436
<SECURITIES> 0
<RECEIVABLES> 144,058
<ALLOWANCES> 7,554
<INVENTORY> 62,590
<CURRENT-ASSETS> 236,038
<PP&E> 578,225
<DEPRECIATION> 122,800
<TOTAL-ASSETS> 1,425,275
<CURRENT-LIABILITIES> 127,437
<BONDS> 665,644
0
0
<COMMON> 0
<OTHER-SE> 547,091
<TOTAL-LIABILITY-AND-EQUITY> 1,425,275
<SALES> 660,564
<TOTAL-REVENUES> 660,564
<CGS> 372,041
<TOTAL-COSTS> 372,041
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,198
<INCOME-PRETAX> 69,474
<INCOME-TAX> (5)
<INCOME-CONTINUING> 68,725
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,725
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.63
</TABLE>
