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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
Commission file number 1-13692
AMERIGAS PARTNERS, L.P.
AMERIGAS FINANCE CORP.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
Delaware 23-2787918
Delaware 23-2800532
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
460 North Gulph Road, King of Prussia, PA 19406
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)
(610) 337-7000
(REGISTRANTS' TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF CLASS ON WHICH REGISTERED
Common Units representing New York Stock Exchange, Inc.
limited partner interests
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
INDICATE BY CHECK MARK WHETHER EACH 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 .
---- ----
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]
The aggregate market value of AmeriGas Partners, L.P. Common Units held by
nonaffiliates of AmeriGas Partners, L.P. on December 1, 1996 was approximately
$408,923,325. At December 1, 1996 there were outstanding 21,949,272 Common Units
and 19,782,146 Subordinated Units, each representing limited partner interests.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the AmeriGas Partners, L.P.
Annual Report for the year ended September 30, 1996 are incorporated by
reference in Part II of this Form 10-K.
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TABLE OF CONTENTS
<TABLE>
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PART I BUSINESS PAGE
<S> <C> <C>
Items 1 and 2 Business and Properties................................................. 1
Item 3 Legal Proceedings.......................................................11
Item 4 Submission of Matters to a Vote of
Security Holders........................................................13
PART II SECURITIES AND FINANCIAL INFORMATION
Item 5 Market for Registrant's Common Equity
and Related Security Holder Matters.....................................13
Item 6 Selected Financial Data.................................................15
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................................18
Item 8 Financial Statements and Supplementary
Data....................................................................32
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..................................32
PART III MANAGEMENT AND SECURITY HOLDERS
Item 10 Directors and Executive Officers of the
General Partner.........................................................32
Item 11 Executive Compensation..................................................37
Item 12 Security Ownership of Certain Beneficial
Owners and Management...................................................47
Item 13 Certain Relationships and Related
Transactions............................................................49
PART IV ADDITIONAL EXHIBITS, SCHEDULES AND REPORTS
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K.................................................51
Signatures..............................................................57
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PART I: BUSINESS
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
AmeriGas Partners, L.P. ("AmeriGas Partners") is a publicly traded
Delaware limited partnership formed on November 2, 1994. AmeriGas Partners
conducts its business principally through its subsidiary, AmeriGas Propane, L.P.
(the "Operating Partnership"), a Delaware limited partnership. AmeriGas Partners
and the Operating Partnership are referred to collectively as the "Partnership."
On April 19, 1995, the Operating Partnership acquired the propane distribution
business and assets of AmeriGas Propane, Inc., a Delaware corporation, AmeriGas
Propane-2, Inc. (collectively, "AGP" or "AmeriGas Propane") and Petrolane
Incorporated, a California corporation ("Petrolane," and together with AGP, the
"Predecessors") (the "Partnership Formation") in connection with a concurrent
initial public offering of common units by AmeriGas Partners. Unless the context
otherwise requires, references to "AmeriGas Partners" and the "Partnership"
include the Operating Partnership, its Predecessors and its subsidiaries.
The Partnership is the largest retail propane distributor in the United
States, serving approximately 968,000 residential, commercial, industrial,
agricultural and motor fuel customers from over 600 district locations in 44
states, as of September 30, 1996. The Partnership's operations are located
primarily in the Northeast, Southeast, Great Lakes and West Coast regions of the
United States and are conducted principally under the trade name AmeriGas. The
retail propane sales volume of the Partnership was approximately 855 million
gallons during the twelve months ended September 30, 1996. Based on the most
recent information supplied by the American Petroleum Institute, management
believes that the Partnership's sales volume in fiscal 1996 constituted
approximately 9% of the domestic retail market for propane (sales for other than
chemical uses). The Partnership's executive offices are located at 460 North
Gulph Road, King of Prussia, Pennsylvania 19406, and its telephone number is
(610) 337-7000.
AmeriGas Propane, Inc. (the "General Partner"), a Pennsylvania
corporation and an indirect, wholly owned subsidiary of UGI Corporation ("UGI"),
serves as the sole general partner of AmeriGas Partners and the Operating
Partnership. In addition to its aggregate 2% general partner interest in the
Partnership, the General Partner and its affiliates own an aggregate 56.7%
limited partner interest in the Partnership. The General Partner is responsible
for managing and operating the Partnership.
AmeriGas Finance Corp. ("AmeriGas Finance"), a Delaware corporation,
was formed on March 13, 1995, and is a wholly owned subsidiary of AmeriGas
Partners. AmeriGas Finance serves as co-obligor for certain debt securities of
the Partnership. It has nominal assets and does not conduct any operations.
Accordingly, a discussion of the results of operations, liquidity and capital
resources of AmeriGas Finance is not presented. Its executive offices are
located at 460 North Gulph Road, King of Prussia, Pennsylvania, and its
telephone number is (610) 337-7000.
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HISTORY OF THE PARTNERSHIP'S OPERATIONS
AmeriGas, Inc. ("AmeriGas"), the parent of AGP and a wholly owned
subsidiary of UGI, began propane distribution operations in 1959. In the ten
fiscal years preceding the Partnership's formation, AGP experienced significant
growth through the acquisition of over 30 propane companies, including Cal Gas
Corporation ("Cal Gas"), which was a major national propane distributor. In
July, 1993, AmeriGas purchased a significant equity interest in Petrolane. At
the time they were acquired, Cal Gas and Petrolane had annual revenues from
propane sales that were approximately three times and one and one-half times,
respectively, those of AGP.
BUSINESS STRATEGY
The Partnership's strategy is to continue to expand its operations and
increase its market share both through the acquisition of local and regional
propane distributors and through internal growth, including the opening of new
district locations. These new district locations are known as "scratch-starts."
Although less costly than acquisitions of existing businesses, scratch-starts
typically do not reach target sales and profitability levels for a number of
years. Acquisitions will be a principal element of growth for the Partnership,
as the demand for propane is expected to remain relatively constant for the
foreseeable future, with year-to-year industry volumes being affected primarily
by weather patterns. According to the American Petroleum Institute, the domestic
retail market for propane (annual sales for other than chemical uses) in 1995
was approximately 9.3 billion gallons. Based on this market estimate, and
information published by LP-Gas Magazine, the General Partner believes there are
numerous potential acquisition candidates because the propane industry is highly
fragmented, with the ten largest retailers comprising approximately 33% of
domestic sales.
In fiscal year 1996, the Partnership acquired a total of nine propane
operations with aggregate annual retail sales of approximately 22.6 million
gallons. It also opened 20 scratch-starts. The increase in the number of
publicly traded master limited partnerships engaged in the propane distribution
business has intensified acquisition and expansion activity in the industry.
There can be no assurance that the Partnership will find attractive acquisition
candidates in the future, or that the Partnership will be able to acquire such
candidates on economically acceptable terms. In addition, future acquisitions
may be dilutive to earnings and distributions, and additional debt incurred to
finance acquisitions may adversely affect the ability of the Partnership to make
distributions.
Management of the General Partner believes there are also opportunities
for limited growth in the Partnership's existing district locations arising
from, among other things, marketing programs designed to increase propane
consumption by existing customers, new construction and commercial growth in the
territories served by the Partnership and conversions to propane by potential
customers currently using electricity or fuel oil.
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GENERAL INDUSTRY INFORMATION
Propane is separated from crude oil during the refining process and
also extracted from natural gas or oil wellhead gas at processing plants.
Propane is normally transported and stored in a liquid state under moderate
pressure or refrigeration for economy and ease of handling in shipping and
distribution. When the pressure is released or the temperature is increased, it
is usable as a flammable gas. Propane is colorless and odorless; an odorant is
added to allow its detection. Propane is clean burning, producing negligible
amounts of pollutants when properly consumed.
The primary customers for propane are residential, commercial,
agricultural, motor fuel and industrial users to whom natural gas is not readily
available. Customers use propane primarily for home heating, water heating,
cooking, motor fuel and process applications. Propane is typically more
expensive than natural gas, competitive with fuel oil when operating
efficiencies are taken into account and, in most areas, cheaper than electricity
on an equivalent energy basis. Several states have adopted or are considering
proposals that would substantially deregulate the electric utility industry and
thereby permit retail electric customers to choose their electric supplier.
Proponents of electric utility deregulation believe that competition will
ultimately reduce the cost of electricity. The General Partner is unable to
predict the impact that electric utility deregulation may have on propane's
competitive price advantage over electricity.
PRODUCTS, SERVICES AND MARKETING
As of September 30, 1996, the Partnership distributed propane to
approximately 955,000 customers from over 600 district locations in 44 states.
The Partnership's operations are located primarily in the Northeast, Southeast,
Great Lakes and West Coast regions of the United States. From many of its
district locations, the Partnership also sells, installs and services equipment
related to its propane distribution business, including heating and cooking
appliances and, at some locations, propane fuel systems for motor vehicles.
Typically, district locations are found in suburban and rural areas where
natural gas is not available. Districts generally consist of an office,
appliance showroom, warehouse and service facilities, with one or more 18,000 to
30,000 gallon storage tanks on the premises. The Partnership also engages in the
business of delivering liquified petroleum gases by truck as a common carrier.
The Partnership operates as an interstate carrier in 49 states throughout the
United States, and as an intrastate carrier in 46 states. It is also licensed as
a carrier in Canada; a license is pending in Mexico. The Partnership's trucking
capacity is part of its overall transportation and distribution infrastructure
which is utilized in the conduct of its business.
The Partnership sells propane primarily to five markets: residential,
commercial/industrial, motor fuel, agricultural and wholesale. Approximately 73%
of the Partnership's 1996 fiscal year sales (based on gallons sold) were to
retail accounts (31% to residential customers, 27% to industrial/commercial
customers, 9% to motor fuel customers and 6% to agricultural customers),
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and approximately 27% were to wholesale customers. Sales to residential
customers in fiscal 1996 represented approximately 42% of retail gallons sold
and 54% of the Partnership's total margin. No single customer accounts for 10%
or more of the Partnership's consolidated revenues.
In the residential market, which includes both conventional and mobile
homes, propane is used primarily for home heating, water heating and cooking
purposes. Commercial users, which include motels, hotels, restaurants and retail
stores, generally use propane for the same purposes as residential customers. As
a motor fuel, propane is burned in internal combustion motors that power
over-the-road vehicles, forklifts and stationary motors. Industrial customers
use propane to fire furnaces, as a cutting gas and in other process
applications. Other industrial customers are large-scale heating accounts and
local gas utility customers who use propane as a supplemental fuel to meet peak
load deliverability requirements. Agricultural uses include tobacco curing, crop
drying and poultry brooding.
Retail deliveries of propane are usually made to customers by means of
bobtail and rack trucks. Propane is pumped from the bobtail truck, which
generally holds 2,200 gallons of propane, into a stationary storage tank on the
customer's premises. The Partnership owns most of these storage tanks and leases
them to its customers. The capacity of these tanks ranges from approximately 100
gallons to approximately 1,200 gallons, with a typical tank having a capacity of
300 to 400 gallons. The Partnership also delivers propane to retail customers in
portable cylinders, which typically have a capacity of 5 to 25 gallons. When
these cylinders are delivered to customers, empty cylinders are picked up for
replenishment at district locations or are filled in place. In its wholesale
operations, the Partnership principally sells propane to large industrial
end-users and other propane distributors.
PROPANE SUPPLY AND STORAGE
Supplies of propane from the Partnership's sources historically have
been readily available. In the year ended September 30, 1996, the Amoco
companies (Amoco Canada and Amoco USA) and Warren Petroleum Company ("Warren"),
a division of Chevron U.S.A., provided approximately 14% and 12%, respectively,
of the Partnership's total propane supply. Management believes that if supplies
from either source were interrupted, it would be able to secure adequate propane
supplies from other sources without a material disruption of its operations;
however, the cost of procuring replacement supplies might be materially higher,
and at least on a short-term basis, margins could be affected. Aside from Amoco
and Warren, no single supplier provided more than 10% of the Partnership's total
domestic propane supply in the fiscal year ended September 30, 1996. On a
regional basis, however, certain suppliers provide 70 to 80% of the
Partnership's requirements. Disruptions in supply in these areas could also have
an adverse impact on the Partnership's margins.
The Partnership's propane supply is purchased from over 175 oil
companies and natural gas processors in the United States and Canada, and the
Partnership also makes purchases on the
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spot market. The Partnership purchases approximately 80% of its propane supplies
from domestic suppliers. Approximately 70% of propane purchases by the
Partnership in the 1996 fiscal year were on a contractual basis under one-year
agreements subject to annual renewal, but the percentage of contract purchases
will vary from year-to-year as determined by the General Partner. The General
Partner believes that, as the largest retail propane distributor in the United
States, the Partnership generally will be able to obtain propane supplies at
competitive prices. Most supply contracts provide for pricing based upon posted
prices at the time of delivery or the current prices established at major
storage points such as Mont Belvieu, Texas, or Conway, Kansas. In addition, some
agreements provide maximum and minimum seasonal purchase guidelines. The
Partnership uses a number of interstate pipelines, as well as railroad tank
cars, delivery trucks and barges to transport propane from suppliers to storage
and distribution facilities. The Partnership stores propane at facilities in
Arizona, Rhode Island and several other locations.
Because the Partnership's profitability is sensitive to changes in
wholesale propane costs, management generally seeks to pass on increases in the
cost of propane to customers. There is no assurance, however, that the
Partnership will be able to pass on product cost increases fully, particularly
when product costs rise rapidly, as they did in 1996. For example, the average
Mont Belvieu price per gallon of propane more than doubled between April 1, 1996
($.34625) and December 3, 1996 ($.70375) as a result of several unrelated
events. Propane inventory levels remained below historic levels during the
second half of fiscal year 1996, following an unusually cold winter in the
eastern United States. Other factors contributing to the reduced industry
inventory levels include a normal 1995-96 winter in Europe, which reduced the
amount of propane available for import, and a midsummer explosion affecting gas
processing plants in Mexico.
Despite increased product cost, the Partnership expects to be able to
secure adequate supplies for its customers during fiscal year 1997, however,
periods of severe cold weather, supply interruptions, or other unforeseen
events, could result in further increases in product cost. The General Partner
is gradually expanding its product price risk management activities to reduce
the effect of price volatility on its product costs. Current strategies include
the use of contracts to purchase product at fixed prices in the future and, to
some extent, options and propane price swaps.
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The following table shows the average quarterly prices of propane on
the propane spot market during the last five fiscal years at Mont Belvieu,
Texas and Conway, Kansas, two major storage areas.
QUARTERLY PRICE AVERAGES
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Oct-91 39.588 33.283 Sep 30, 96 50.925 51.588
Jan-92 28.386 23.963 Oct 07,96 49.550 49.488
Apr-92 31.296 25.939 Oct 14, 96 49.925 49.250
Jul-92 35.508 27.181 Oct 21, 96 53.450 52.963
Oct-92 33.095 33.31 Oct 28, 96 54.266 54.875
1st QRT-93 33.812 37.957 Oct 31, 96 53.215 55.5
2nd QRT-93 33.384 33.102
3rd QRT-93 30.811 33.566
Oct-93 27.352 30.651
1st QRT-94 28.143 26.769
2nd QRT-94 29.076 28.488
3rd QRT-94 29.806 29.092
Oct-94 33.545 30.128
1st QRT-95 32.513 29.496
2nd QRT-95 32.303 30.922
3rd QRT-95 31.172 32.344
Oct-95 32.407 34.564
1st QRT-96 38.028 36.674
2nd QRT-96 35.141 34.979
3rd QRT-96 40.363 40.01
Sep 30-96 49.5 48.675
</TABLE>
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COMPETITION
Propane is sold in competition with other sources of energy, some of
which are less costly for equivalent energy value. Propane distributors compete
for customers against suppliers of electricity, fuel oil and natural gas,
principally on the basis of price, availability and portability. Electricity is
a major competitor of propane, but propane generally enjoys a competitive price
advantage over electricity for space heating, water heating and cooking. As
previously stated, the General Partner is unable to predict the impact that
electric utility deregulation may have on propane's current competitive price
advantage. In the last two decades, many new homes were built to use electrical
heating systems and appliances. Fuel oil is also a major competitor of propane
and is generally less expensive than propane. Operating efficiencies and other
factors such as air quality and environmental advantages, however, generally
make propane competitive with fuel oil as a heating source. Furnaces and
appliances that burn propane will not operate on fuel oil, and vice versa, and,
therefore, a conversion from one fuel to the other requires the installation of
new equipment. Propane serves as an alternative to natural gas in rural and
suburban areas where natural gas is unavailable or portability of product is
required. Natural gas is generally a less expensive source of energy than
propane, although in areas where natural gas is available, propane is used for
certain industrial and commercial applications and as a standby fuel during
interruptions in natural gas service. The gradual expansion of the nation's
natural gas distribution systems has resulted in the availability of natural gas
in some areas that previously depended upon propane. However, natural gas
pipelines are not present in many regions of the country where propane is sold
for heating and cooking purposes.
The domestic propane retail distribution business is highly
competitive. The Partnership competes in this business with other large propane
marketers, including other full-service marketers, and thousands of small
independent operators. Based on the most recent information supplied by the
American Petroleum Institute, the 1995 domestic retail market for propane
(annual sales for other than chemical uses) was approximately 9.3 billion
gallons and, according to LP-GAS magazine, the ten largest propane companies
(including AmeriGas Partners) comprise approximately 33% of domestic sales. The
Partnership's retail volume of approximately 855 million gallons in fiscal year
1996 represented 9% of 1995 total domestic retail sales. The ability to compete
effectively depends on reliability of service, responsiveness to customers and
maintaining competitive retail prices.
Competition can intensify in response to a variety of factors,
including significantly warmer-than-normal weather, higher prices resulting from
extraordinary increases in the cost of propane, and recessionary economic
factors. In the past, AmeriGas Propane has experienced greater than normal
customer losses in certain years when competitive conditions reflected these
factors.
In the motor fuel market, propane competes with gasoline and diesel
fuel. When gasoline prices are high relative to propane, propane competes
effectively. The wholesale propane business is highly competitive. Propane sales
to other retail distributors and large-volume, direct-
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shipment industrial end-users are price sensitive and frequently involve a
competitive bidding process.
PROPERTIES
As of September 30, 1996, the Partnership owned approximately 60% of
its district locations. In addition, the Partnership subleases three one-million
barrel underground storage caverns in Arizona to store propane and butane for
itself and third parties. The Partnership also leases a 600,000 barrel
refrigerated, above-ground storage facility in California, which could be used
in connection with waterborne imports or exports of propane. The California
facility, which the Partnership operates, is currently subleased to several
refiners for the storage of butane. Petrolane, now a wholly owned subsidiary of
the General Partner, owns a 50% interest in a joint venture which owns a 480,000
barrel storage facility in Virginia. This facility is currently used by third
parties. The Partnership leases a 420,000 barrel storage facility in Rhode
Island, which is owned by a third party. Both the Virginia and Rhode Island
facilities may be used in connection with waterborne imports of propane and the
Virginia facility may be used in connection with exports.
The transportation of propane requires specialized equipment. The
trucks and railroad tank cars utilized for this purpose carry specialized steel
tanks that maintain the propane in a liquefied state. The Partnership has a
fleet of approximately 421 transport trucks, of which 206 are owned by the
Partnership, as well as 586 railroad tank cars, of which 21 are owned by the
Partnership. In addition, the Partnership utilizes approximately 2,300 bobtail
and rack trucks, of which approximately 53% are owned, and approximately 1,980
other delivery and service vehicles, of which approximately 61% are owned. As of
September 30, 1996, the Partnership owned more than 800,000 stationary storage
tanks with typical capacities of 350 to 500 gallons and approximately 900,000
portable propane cylinders with typical capacities of 5 to 25 gallons. The
obligations of the Partnership under its borrowings are secured by liens and
mortgages on the Partnership's real and personal property.
TRADE NAMES; TRADE AND SERVICE MARKS
The Partnership markets propane principally under the "AmeriGas" and
"America's Propane Company" trade name and related service marks. UGI owns,
directly or indirectly, all the right, title and interest in the "AmeriGas" and
"Petrolane" trade names and related trade and service marks. The Partnership has
an exclusive (except for use by AmeriGas and the General Partner), royalty-free
license to use these names and trade and service marks. The General Partner has
discontinued widespread use of the "Petrolane" trade name and conducts
Partnership operations almost exclusively under the "AmeriGas" and "America's
Propane Company" trade names.
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UGI, Petrolane and the General Partner each have the option to
terminate their respective license agreements on 12 months' prior notice, or
immediately in the case of the General Partner, without penalty if the General
Partner is removed as general partner of the Partnership other than for cause.
If the General Partner ceases to serve as the general partner of the Partnership
for cause, UGI, Petrolane and the General Partner will each have the option to
terminate the license agreements immediately upon payment of a fee equal to the
fair market value of the licensed trade names.
SEASONALITY
The Partnership's retail sales volume is seasonal, with approximately
59% of the Partnership's fiscal year 1996 retail sales volume and approximately
90% of its earnings occurring during the five-month peak heating season from
November through March, because many customers use propane for heating purposes.
As a result of this seasonality, sales are concentrated in the Partnership's
first and second fiscal quarters (October 1 through March 31), and cash receipts
are greatest during the second and third fiscal quarters when customers pay for
propane purchased during the winter heating season.
Sales volume for the Partnership traditionally fluctuates from
year-to-year in response to variations in weather, prices, competition, customer
mix and other factors, such as general economic conditions. Long-term, historic
weather data from the National Weather Service Climate Analysis Center indicate
that average annual temperatures have remained relatively constant over the last
30 years with fluctuations occurring on a year-to-year basis only. Actual
weather conditions in the Partnership's various service territories, however,
can vary substantially from historical averages. For information concerning
average annual variations in weather across the Partnership's service
territories, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
GOVERNMENT REGULATION
The Partnership is subject to various federal, state and local
environmental, safety and transportation laws and regulations governing the
storage, distribution and transportation of propane. These laws include, among
others, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), the Clean Air
Act, the Occupational Safety and Health Act, the Emergency Planning and
Community Right to Know Act, the Clean Water Act and comparable state statutes.
CERCLA, also known as the "Superfund" law, imposes joint and several liability
without regard to fault or the legality of the original conduct on certain
classes of persons considered to have contributed to the release or threatened
release of a "hazardous substance" into the environment. Propane is not a
hazardous substance within the meaning of federal and state environmental laws.
However, the Partnership
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owns and operates real property where such hazardous substances may exist. See
Note 9 to the Partnership's Consolidated Financial Statements.
All states in which the Partnership operates have adopted fire safety
codes that regulate the storage and distribution of propane. In some states
these laws are administered by state agencies, and in others they are
administered on a municipal level. The Partnership conducts training programs to
help ensure that its operations are in compliance with applicable governmental
regulations. The Partnership maintains various permits under environmental laws
that are necessary to operate some of its facilities, some of which may be
material to the operations of the Partnership. Management believes that the
procedures currently in effect at all of its facilities for the handling,
storage and distribution of propane are consistent with industry standards and
are in compliance in all material respects with applicable environmental, health
and safety laws.
With respect to the transportation of propane by truck, the Partnership
is subject to regulations promulgated under the Federal Motor Carrier Safety
Act. These regulations cover the transportation of hazardous materials and are
administered by the United States Department of Transportation. With respect to
general operations, National Fire Protection Association Pamphlets No. 54 and
No. 58, which establish a set of rules and procedures governing the safe
handling of propane, or comparable regulations, have been adopted as the
industry standard in a majority of the states in which the Partnership operates.
The Natural Gas Safety Act of 1968 required the U.S. Department of
Transportation ("DOT") to develop and enforce minimum safety regulations for the
transportation of gases by pipeline. The DOT's pipeline safety code applies to,
among other things, a propane gas system which supplies 10 or more customers
from a single source, and a propane system, any portion of which is located in a
public place. The code requires operators of all gas systems to provide training
and written instructions for employees, establish written procedures to minimize
the hazards resulting from gas pipeline emergencies, and keep records of
inspections and testing. Significant expense could be incurred if additional
safety requirements are imposed that exceed the current DOT standards.
Future developments, such as stricter safety or environmental laws,
regulations and enforcement policies thereunder, could affect the handling,
transportation, manufacture, use, emission or disposal of propane or solid or
hazardous waste. It is not anticipated that the Partnership's compliance with,
or liabilities, if any, under safety and environmental laws and regulations,
including CERCLA, will have a material adverse effect on the Partnership. To the
extent that there are any environmental liabilities unknown to the Partnership
or safety or environmental laws or regulations are made more stringent, there
can be no assurance that the Partnership's results of operations will not be
materially and adversely affected.
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EMPLOYEES
The Partnership does not directly employ any persons responsible for
managing or operating the Partnership. The General Partner provides these
services and is reimbursed for its direct and indirect costs and expenses,
including all compensation and benefit costs. At September 30, 1996, the General
Partner had 5,071 employees, including 241 temporary and part-time employees.
Approximately two percent of the General Partner's employees are
represented by eleven local labor unions which are affiliated with the
International Brotherhood of Teamsters (9), the United Steelworkers of America
(1) and the Warehouse, Processing and Distribution Workers Union of the
International Longshoremen's and Warehousemen's Union, AFL-CIO (1).
ITEM 3. LEGAL PROCEEDINGS
With the exception of the matters set forth below, no material legal
proceedings are pending involving the Partnership, any of its subsidiaries or
any of their properties, and no such proceedings are known to be contemplated by
governmental authorities.
MATEEL ENVIRONMENTAL JUSTICE FOUNDATION V. AMERIGAS PROPANE, L.P. ET AL. On July
29, 1996, Mateel Environmental Justice Foundation ("Mateel") filed a complaint
in the Superior Court of the State of California, County of San Francisco,
alleging that the Operating Partnership, and several other major propane gas
distributors, are in violation of Proposition 65, "The Safe Drinking Water and
Toxic Enforcement Act of 1986" (commonly referred to as "Prop 65"). The
Operating Partnership is a 98.99% owned subsidiary of the Partnership. The
Complaint alleges that the Operating Partnership and its co-defendants are
required to provide warnings that the use of liquid propane would result in
exposure to chemicals known to cause cancer and birth defects, and that the
burning of liquid propane in heaters and other appliances causes exposure to
carbon monoxide, benzene, formaldehyde and acetaldehyde. The maximum penalty
under Prop 65 is $2,500 per day, per person exposed. In addition to the maximum
penalty, Mateel is seeking attorney's fees and costs, together with an Order
mandating compliance with Prop 65. Management believes that the Operating
Partnership has substantial defenses to this claim. The Operating Partnership
has entered into settlement negotiations with Mateel and the California Attorney
General's office. The proposed amount of the settlement is immaterial to the
Partnership.
COMMERCIAL ROW CASES, JUDICIAL COUNCIL OF CALIFORNIA, COORDINATION PROCEEDING
NO. 3096. Beginning in June 1994, twenty-one complaints were filed against
AmeriGas Propane (a predecessor of the Operating Partnership) in the Superior
Court of California, arising from an explosion which occurred in Truckee,
California on November 30, 1993. The explosion is alleged to have occurred as
the result of propane gas which escaped from a fractured fitting in an
underground supply line. The complaints sought relief for alleged personal
injuries and/or
11
<PAGE> 14
property damage, and named as defendants the manufacturer and distributor of the
fitting, in addition to AmeriGas Propane. The cases have been consolidated by
the Judicial Council of California as the Commercial Row Cases, Judicial Council
Coordination Proceeding No. 3096. All of the complaints requested damages in
unspecified amounts; some of the complaints sought punitive damages as well as
compensatory damages. A number of complaints were settled during 1996. During
pretrial discovery, the remaining claimants have asserted demands which in the
aggregate now exceed $18 million. The claims asserted in the complaints are
fully insured, subject to a $500,000 self-insured retention, except for awards
of punitive damages or that portion of a settlement attributable to punitive
damages, which may not be covered by insurance. Trial currently is scheduled to
begin on February 24, 1997.
12
<PAGE> 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the last
fiscal quarter of the 1996 fiscal year.
PART II: SECURITIES AND FINANCIAL INFORMATION
ITEM 5. MARKET FOR REGISTRANT'S COMMON UNITS
AND RELATED SECURITY HOLDER MATTERS
The common units representing limited partner interests ("Common
Units") are listed on the New York Stock Exchange, which is the principal
trading market for such securities, under the symbol "APU". The following table
sets forth, for the periods indicated, the high and low sale prices per Common
Unit, as reported on the New York Stock Exchange Composite Transactions tape,
and the amount of cash distributions paid per Common Unit.
<TABLE>
<CAPTION>
PRICE RANGE CASH
1996 FISCAL YEAR HIGH LOW DISTRIBUTION
<S> <C> <C> <C>
Fourth Quarter $24.875 $22.75 $0.55
Third Quarter 24.625 22.375 0.55
Second Quarter 25.25 22.0 0.55
First Quarter 24.625 22.0 0.55
1995 FISCAL YEAR
Fourth Quarter 24.250 22.875 0.55
Third Quarter beginning April 12, 1995 23.375 21.250 0.446*
</TABLE>
- --------------------------------------------------------------------------------
* Prorated for the period between the closing of the Partnership's initial
public offering ("IPO") and June 30, 1995, based on a Minimum Quarterly
Distribution of $0.55 per Unit.
As of December 1, 1996, there were 982 record holders of the
Partnership's Common Units. There is no established public trading market for
the Partnership's subordinated units, representing limited partner interests
("Subordinated Units"). The Partnership makes quarterly distributions to its
partners in an aggregate amount equal to its Available Cash (as defined) 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
13
<PAGE> 16
amount of cash reserves established by the General Partner in its reasonable
discretion for future cash requirements. Certain reserves are maintained to
provide for the payment of principal and interest under the terms of the
Partnership's debt agreements and other reserves may be maintained to provide
for the proper conduct of the Partnership's business, and to provide funds for
distribution during the next four fiscal quarters. The full definition of
Available Cash is set forth in the Amended and Restated Agreement of Limited
Partnership of AmeriGas Partners, L.P., which is filed as an exhibit to this
Report. The information concerning restrictions on distributions required by
Item 5 is incorporated herein by reference to Note 4 to the Partnership's
Consolidated Financial Statements which is incorporated herein by reference.
Distributions of Available Cash to the Subordinated Unitholders are subject to
the prior rights of the Common Unitholders to receive the Minimum Quarterly
Distribution ("MQD") for each quarter during the subordination period, and to
receive any arrearages in the distribution of the MQD on the Common Units for
prior quarters during the subordination period. The subordination period will
not end earlier than April 1, 2000. See "Management's Discussion and Analysis of
Results of Operations."
14
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA
The following tables provide selected financial data for AmeriGas Partners
and the Predecessors.
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
(Thousands of dollars, except per unit)
<TABLE>
<CAPTION>
Year April 19
Ended to
September 30, September 30,
1996 1995
------------- -------------
<S> <C> <C>
FOR THE PERIOD:
Income statement data:
Revenues $1,013,225 $ 269,500
Operating income (loss) 72,866 (20,088)
Income (loss) before income taxes 10,084 (47,400)
Net income (loss) 10,238 (47,107)
Limited partners' interest in net income (loss) 10,136 (46,636)
Income (loss) per limited partner unit .24 (1.12)
Cash distributions declared 2.20 .446
AT PERIOD END:
Balance sheet data:
Current assets $ 200,380 $ 200,092
Total assets 1,372,223 1,435,309
Current liabilities (excluding debt) 158,110 126,924
Total debt 707,453 657,726
Minority interest 5,497 6,704
Partners' capital 442,236 560,959
OTHER DATA:
EBITDA (a) $ 134,497 $ 6,497
Capital expenditures $ 21,908 $ 11,282
Retail propane gallons sold (millions) 855.4 243.6
</TABLE>
(a) EBITDA (earnings before interest expense, income taxes, depreciation and
amortization) should not be considered as an alternative to net income
(loss) (as an indicator of operating performance) or as an alternative to
cash flow (as a measure of liquidity or ability to service debt
obligations).
15
<PAGE> 18
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
AMERIGAS PROPANE / AGP - 2 (PREDECESSOR)
(Thousands of dollars)
<TABLE>
<CAPTION>
Twelve Nine
September 24, Year Months Months Year
1994 to Ended Ended Ended Ended
April 19, September 23, September 23, September 23, December 23,
1995 1994 1993 1993(a) 1992
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (FOR THE PERIOD):
Revenues $ 242,185 $367,120 $376,380 $ 258,271 $358,277
Operating income 32,382 46,433 42,729 24,323 40,259
Income (loss) before extraordinary loss and
accounting change 2,922 9,659 5,864 (48) 6,826
Net income (loss) (10,620) 9,659 5,864 (48) 6,826
BALANCE SHEET DATA (AT PERIOD END):
Current assets $ (x) $103,825 $108,826 $ 108,826 $ 84,987
Total assets (x) 510,981 526,717 526,717 513,165
Current liabilities (excluding debt) (x) 63,292 69,696 69,696 45,966
Total debt (x) 210,272 210,177 210,177 210,741
Common stockholders' equity (x) 186,599 195,543 195,543 206,418
OTHER DATA:
EBITDA (b) $ 45,971 $ 69,521 $ 63,977 $ 39,884 $ 62,765
Capital expenditures (c) $ 5,605 $ 8,948 $ 6,420 $ 5,052 $ 6,388
Retail propane gallons sold (millions) 225.0 332.4 332.1 231.3 322.5
</TABLE>
-----------------------------------------------------------------
(a) On April 27, 1993, AmeriGas Propane changed its fiscal year end to
September 23. Previously, AmeriGas Propane's fiscal year ended December 23.
As a result of the change in fiscal year, the Selected Financial Data
include data as of and for the nine-month transition period ended September
23, 1993.
(b) EBITDA (earnings before interest expense, income 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).
(c) Excludes capital lease obligations.
(x) Not applicable.
16
<PAGE> 19
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
PETROLANE (PREDECESSOR)
(Thousands of dollars, except per share)
<TABLE>
<CAPTION>
September 24, Year
1994 to Ended July 16 to
April 19, September 23, September 23,
1995 1994 1993(a)
------------- ------------- -------------
<S> <C> <C> <C>
INCOME STATEMENT DATA (FOR THE PERIOD):
Revenues $372,088 $ 589,709 $ 88,094
Operating income (loss) 41,469 56,887 (4,694)
Income (loss) before extraordinary item and accounting change 1,390 (2,309) (10,334)
Net income (loss) 485 (2,309) (10,334)
Income (loss) per common share (c) .05 (.22) (.98)
BALANCE SHEET DATA (AT PERIOD END):
Current assets $ (x) $ 126,436 $ 132,948
Total assets (x) 914,212 947,669
Current liabilities (excluding debt) (x) 114,518 96,699
Total debt (x) 625,883 663,464
Common stockholders' equity (x) 93,113 95,422
Partners' deficiency (x) (x) (x)
OTHER DATA:
EBITDA (d) $ 68,867 $ 102,922 $ 3,479
Capital expenditures (f) $ 7,291 $ 22,077 $ 1,719
Retail propane gallons sold (millions) 319.4 496.9 72.2
</TABLE>
<TABLE>
<CAPTION>
QFB Partners (b)
----------------------------
January 1
to Year Ended
July 15, December 31,
1993 1992
--------- ------------
<S> <C> <C>
INCOME STATEMENT DATA (FOR THE PERIOD):
Revenues $ 354,116 $ 631,867
Operating income (loss) (22,009) 26,531
Income (loss) before extraordinary item and accounting change (59,172) (111,308)
Net income (loss) 328,042 (111,308)
Income (loss) per common share (c)
BALANCE SHEET DATA (AT PERIOD END):
Current assets $ 108,791 $ 173,058
Total assets 929,667 914,268
Current liabilities (excluding debt) 86,904 250,295
Total debt 640,798 987,431
Common stockholders' equity 105,756 (x)
Partners' deficiency (x) (328,042)
OTHER DATA:
EBITDA (d) $ 11,639(e) $ 89,573
Capital expenditures (f) $ 3,480 $ 11,945
Retail propane gallons sold (millions) 274.6 514.2
</TABLE>
-----------------------------------------------------
(a) On July 26, 1993, Petrolane changed its fiscal year end to September 23.
Previously, Petrolane's fiscal year ended December 31. As a result of the
change in fiscal year and the adoption of "Fresh Start Accounting", the
Selected Financial Data include data for the periods January 1 to July 15,
1993 and July 16 to September 23, 1993.
(b) Represents data of QFB Partners prior to its reorganization on July 15,
1993. Due to the application of "Fresh Start Accounting" effective on July
15, 1993, the consolidated financial data of Petrolane are generally not
comparable to those of QFB Partners and are separated by a vertical black
line.
(c) Per share results for periods prior to July 16, 1993 are not presented
because there were no publicly held shares of stock outstanding.
(d) EBITDA (earnings before interest expense, income 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).
(e) Includes a charge of $16,600,000 related to environmental matters and a
$5,600,000 charge related to an adjustment of taxes other than income taxes
associated with prior years.
(f) Excludes capital lease obligations.
(x) Not applicable.
17
<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ANALYSIS OF RESULTS OF OPERATIONS
The Partnership's accounting periods end on the 30th of the month. The
Predecessors' accounting periods ended on the 23rd of the month. The following
analysis compares AmeriGas Partners' results of operations for the 52 weeks
ended September 30, 1996 ("Fiscal 1996") with pro forma results of operations
for the 53 weeks ended September 30, 1995 ("Pro Forma Fiscal 1995") which
includes an additional week of results (i.e. the period September 24 to
September 30, 1994) due to the difference in the Partnership's and the
Predecessors' year ends. The following analysis also compares the Partnership's
results for the period April 19, 1995 to September 30, 1995 ("1995 Five-Month
Period") with pro forma results for the period April 24, 1994 to September 23,
1994 ("Pro Forma 1994 Five-Month Period"), and each of AmeriGas Propane's and
Petrolane's results of operations for the period September 24, 1994 to April 19,
1995 (each the "1995 Seven-Month Period") with AmeriGas Propane's and
Petrolane's results of operations for the period September 24, 1993 to April 23,
1994 (each the "1994 Seven-Month Period"). Due to the seasonality of AmeriGas
Partners', AmeriGas Propane's and Petrolane's businesses, the results of
operations for periods of less than twelve months are not necessarily indicative
of the results to be expected for a full year.
The pro forma consolidated statements of operations data of the
Partnership, which include periods prior to the Partnership Formation, were
derived from the historical statements of operations of the Predecessors for the
period September 24, 1994 to April 19, 1995. The pro forma statements of
operations were prepared to reflect the effects of the Partnership Formation as
if the formation had been completed in its entirety as of the beginning of the
periods presented.
The pro forma consolidated statements of operations data do not purport
to present the results of operations of the Partnership had the Partnership
Formation actually been completed as of the beginning of the periods presented.
In addition, the pro forma consolidated statements of operations data are not
necessarily indicative of the results of future operations of the Partnership
and should be read in conjunction with the consolidated financial statements of
the Partnership, the consolidated financial statements of Petrolane, and the
combined financial statements of AmeriGas Propane, and the related notes
thereto, appearing elsewhere in this Annual Report on Form 10-K. Significant pro
forma adjustments reflected in the data include (a) the elimination of income
taxes as a result of operating in a partnership structure; (b) an adjustment to
interest expense resulting from the retirement of approximately $377 million of
Petrolane term loans, the restructuring of Petrolane and AmeriGas Propane senior
debt, and the issuance of an aggregate $210 million face value of notes of
AmeriGas Partners and the Operating Partnership; (c) the elimination of
management fees previously charged to Petrolane by UGI; (d) a net reduction in
amortization expense resulting from the longer-term (40-year) amortization of
the excess
18
<PAGE> 21
purchase price over fair value of 65% of the net identifiable assets of
Petrolane, compared with the amortization of 65% of Petrolane's excess
reorganization value over 20 years; and (e) the elimination of intercompany
revenues and expenses.
19
<PAGE> 22
The following tables provide gallon, weather and certain profitability
information for the Partnership, AmeriGas Propane and Petrolane.
AMERIGAS PARTNERS, L.P.
(Millions, except per gallon and percentages)
<TABLE>
<CAPTION>
Pro Pro
Forma Forma
Year 53 Weeks April 19, April 24,
Ended Ended 1995 to 1994 to
Sept. 30, Sept. 30, Sept. 30, Sept. 23,
1996 1995 (a) 1995 1994 (a)
---- -------- ---- --------
<S> <C> <C> <C> <C>
Gallons sold:
Retail 855.4 788.0 243.6 230.1
Wholesale 309.7 198.0 65.6 73.6
-------- ------ ------ ------
1,165.1 986.0 309.2 303.7
======== ====== ====== ======
Revenues:
Retail propane $ 786.9 $692.7 $205.7 $199.2
Wholesale propane 137.9 86.5 27.9 29.3
Other 88.4 99.4 35.9 38.3
-------- ------ ------ ------
$1,013.2 $878.6 $269.5 $266.8
======== ====== ====== ======
Average selling price per gallon:
Retail $ .92 $ .88 $ .84 $ .87
Wholesale $ .45 $ .44 $ .43 $ .40
Total propane margin (b) $ 398.6 $373.5 $110.2 $109.6
Total margin (b) $ 443.5 $419.6 $127.8 $126.1
EBITDA (c) $ 134.5 $126.0 $ 6.5 $ 23.2
Operating income (loss) $ 72.9 $ 63.7 $(20.1) $ (1.7)
Degree days - % (warmer) colder
than normal (d) 1.4 % (12.1)% N.M. N.M.
</TABLE>
(a) Reflects unaudited pro forma information for the Partnership as if the
Partnership Formation had occurred as of the beginning of the periods
presented.
(b) Revenues less related cost of sales.
(c) EBITDA (earnings before interest, income 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. Due to the seasonality of the propane business favoring
the winter heating season, degree days for the period April 19 to September
30, 1995, and the period April 24 to September 23, 1994, are not meaningful
(N.M.).
20
<PAGE> 23
AMERIGAS PROPANE
(Millions, except per gallon and percentages)
<TABLE>
<CAPTION>
Twelve
Sept. 24, Sept. 24, Year Nine Months Months Year
1994 to 1993 to Ended Ended Ended Ended
April 19, April 23, Sept. 23, Sept. 23, Sept. 23, Dec. 23,
1995 1994 1994 1993 (a) 1993 (a) 1992
---- ---- ---- -------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Gallons sold:
Retail 225.0 242.4 332.4 231.3 332.1 322.5
Wholesale 32.5 53.3 74.3 43.6 82.3 80.1
------ ------ ------ ------ ------ ------
257.5 295.7 406.7 274.9 414.4 402.6
====== ====== ====== ====== ====== ======
Revenues:
Retail propane $203.3 $222.9 $302.4 $217.7 $310.3 $293.6
Wholesale propane 14.8 20.1 28.1 18.8 33.9 31.6
Other 24.1 23.4 36.6 21.8 32.2 33.1
------ ------ ------ ------ ------ ------
$242.2 $266.4 $367.1 $258.3 $376.4 $358.3
====== ====== ====== ====== ====== ======
Average selling price per gallon:
Retail $ .90 $ .92 $ .91 $ .94 $ .93 $ .91
Wholesale $ .46 $ .38 $ .38 $ .43 $ .41 $ .39
Total propane margin (b) $111.5 $126.5 $171.7 $118.5 $169.5 $170.8
Total margin (b) $122.9 $138.3 $190.3 $130.7 $187.3 $189.1
EBITDA (c) $ 46.0 $ 61.6 $ 69.5 $ 39.9 $ 63.9 $ 62.8
Operating income $ 32.4 $ 48.2 $ 46.4 $ 24.3 $ 42.7 $ 40.3
Degree days - % (warmer)
colder than normal (d) (12.9)% (2.9)% (3.5)% (6.9)% (5.3)% (10.5)%
</TABLE>
(a) On April 27, 1993, AmeriGas Propane changed its fiscal year end to
September 23. Previously, AmeriGas Propane's fiscal year ended on December
23. As a result of the change in fiscal year, the amounts above include
data as of and for the nine month transition period ended September 23,
1993.
(b) Revenues less related cost of sales.
(c) EBITDA (earnings before interest, income 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 1951-1980 for the twelve month period ended December 23,
1992 and the twelve and nine month periods ended September 23, 1993, and
the 30-year period 1961-1990 for the twelve month period ended September
23, 1994, the period September 24, 1993 to April 23, 1994 and the period
September 24, 1994 to April 19, 1995, as contained in the National Weather
Service Climate Analysis Center database, for geographic areas in which
AmeriGas Propane operates.
21
<PAGE> 24
PETROLANE
(Millions, except per gallon and percentages)
<TABLE>
<CAPTION>
Nine Months Year
Sept. 24, Sept. 24, Year Ended Ended Year
1994 to 1993 to Ended Sept. 23, Sept. 23, Ended
April 19, April 23, Sept. 23, 1993 1993 Dec. 31,
1995 1994 1994 (38 weeks)(a) (51 weeks)(b) 1992
---- ---- ---- ------------- ------------- ----
<S> <C> <C> <C> <C> <C> <C>
Gallons sold:
Retail 319.4 356.9 496.9 346.7 506.9 514.2
Wholesale 99.9 132.8 185.5 151.5 228.5 237.0
------ ------ ------ ------ ------ ------
419.3 489.7 682.4 498.2 735.4 751.2
====== ====== ====== ====== ====== ======
Revenues:
Retail propane $283.7 $317.2 $437.0 $314.1 $453.9 $448.9
Wholesale propane 43.8 53.9 75.1 66.5 99.4 94.8
Other 44.6 49.8 77.6 61.6 89.4 88.2
------ ------ ------ ------ ------ ------
$372.1 $420.9 $589.7 $442.2 $642.7 $631.9
====== ====== ====== ====== ====== ======
Average selling price per gallon:
Retail $ .89 $ .89 $ .88 $ .91 $ .90 $ .87
Wholesale $ .44 $ .41 $ .40 $ .44 $ .44 $ .40
Total propane margin (c) $151.8 $178.7 $243.1 $164.3 $237.0 $246.0
Total margin (c) $168.9 $196.6 $270.7 $183.3 $266.3 $280.0
EBITDA (d) $ 68.9 $ 89.3 $102.9 $ 15.1(e) $ 49.9(e) $ 89.6
Operating income $ 41.5 $ 62.5 $ 56.9 $(26.7)(e,)(f) $ (7.5)(e,f) $ 26.5
Degree days - % (warmer)
colder than normal (g) (12.6)% (4.2)% (3.2)% (3.8)% (2.9)% (5.6)%
</TABLE>
(a) On July 26, 1993, Petrolane changed its fiscal year end to September 23.
Previously, Petrolane's fiscal year ended December 31. As a result of the
change in fiscal year, the amounts above include combined amounts for the
pre-reorganization accounting period January 1 to July 15, 1993 and the
post-reorganization accounting period July 16 to September 23, 1993.
(b) On July 26, 1993, Petrolane changed its fiscal year end to September 23.
Previously, Petrolane's fiscal year ended December 31. As a result of the
change in fiscal year, the amounts above include combined amounts for the
pre-reorganization accounting period October 1, 1992 to July 15, 1993, and
the post-reorganization accounting period July 16, 1993 to September 23,
1993.
(c) Revenues less related cost of sales.
(d) EBITDA (earnings before interest, income 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).
(e) Includes a charge of $16.6 million related to environmental matters and a
charge of $5.6 million related to an adjustment of taxes other than income
taxes.
(f) Due to the effects of "Fresh Start Accounting," these amounts are not
meaningful for comparative purposes.
(g) Based on the weighted average deviation from average degree days during the
30-year period 1951-1980 for the twelve month period ended December 31,
1992 and the 51 and 38 week periods ended September 23, 1993, and the
30-year period 1961-1990, for the twelve month period ended September 23,
1994, the period September 24, 1993 to April 23, 1994 and the period
September 24, 1994 to April 19, 1995, as contained in the National Weather
Service Climate Analysis Center database, for geographic areas in which
Petrolane operates.
22
<PAGE> 25
PARTNERSHIP RESULTS OF OPERATIONS
FISCAL 1996 COMPARED WITH PRO FORMA FISCAL 1995
Retail volumes of propane sold increased 67.4 million gallons in Fiscal
1996 reflecting the effects of colder weather, acquisitions and volume growth.
Regional temperature differences in Fiscal 1996 were significant with the
western U.S. experiencing substantially warmer than normal temperatures and
lower retail sales, and the eastern and midwestern U.S. experiencing colder than
normal temperatures and higher retail sales. Wholesale volumes of propane sold
were significantly higher reflecting an increase in sales of low-margin excess
storage inventories.
Total revenues increased during Fiscal 1996 reflecting the increase in
propane sales as well as higher average retail propane selling prices. Total
cost of sales increased $110.7 million as a result of the higher volumes of
propane sold and higher average propane product costs. The Partnership's propane
product cost averaged approximately five cents a gallon higher in Fiscal 1996
than in Pro Forma Fiscal 1995. The spot price of propane at Mont Belvieu, Texas,
a major storage and distribution hub, increased dramatically in August and
September 1996, rising to 50.5 cents per gallon on September 30, 1996 compared
to 31.63 cents per gallon a year earlier. The general trend of propane product
cost increases has continued through November 1996.
Total propane margin was higher in Fiscal 1996 as a result of the
greater volumes of propane sold. Average retail unit margins in Fiscal 1996 were
slightly lower than in Pro Forma Fiscal 1995, notwithstanding an increase in
average retail selling price, reflecting the impact of higher average propane
product costs which were not completely passed through to customers.
The increases in Fiscal 1996 operating income and earnings before
interest, income taxes, depreciation and amortization ("EBITDA") reflect
principally the increase in total propane margin partially offset by higher
operating and administrative expenses. Operating expenses in Fiscal 1996 are net
of $4.4 million from a refund of insurance premium deposits made in prior years
and $3.3 million from reductions to reserves for environmental matters recorded
in the quarter ended March 31. Operating expenses in Pro Forma Fiscal 1995
include $4.3 million in accruals for management reorganization activities.
Operating expenses, exclusive of these items, increased $27.8 million reflecting
higher payroll and employee compensation expenses associated with the
Partnership's new management structure; higher vehicle and distribution expenses
due in part to the higher retail volumes and severe eastern U.S. winter weather;
higher expenses associated with sales and marketing programs; increased customer
equipment repairs and maintenance expenses; and incremental costs associated
with acquisitions and new district locations. The Partnership instituted cost
reduction programs in mid-1996, which are continuing, in order to reduce the
level of operating and administrative costs.
23
<PAGE> 26
1995 FIVE-MONTH PERIOD COMPARED WITH PRO FORMA 1994 FIVE-MONTH PERIOD
Retail volumes of propane sold increased 13.5 million gallons in the
1995 Five-Month Period. Approximately 11.7 million retail gallons are
attributable to five additional workdays included in the 1995 Five-Month Period
resulting from the Partnership having a different fiscal year end than the
Predecessor Companies. The remainder of the increase in retail gallons is
principally attributable to aggressive sales and marketing programs implemented
by the Partnership to improve customer retention and to attract new customers,
and an increase in gallons due to acquisitions. The sales and marketing programs
were in many cases accompanied by lower prices in market segments in which
strong competitive conditions exist. This was especially the case in the
Partnership's Northern and Pacific regions where average residential prices
declined significantly. Principally as a result of the increase in retail
gallons sold and notwithstanding a decrease in average retail selling prices,
revenues from sales of propane increased $5.1 million.
Total propane margin increased $.6 million reflecting the impact of the
increase in retail gallons sold. Absent the effect of additional workdays in the
1995 Five-Month Period, total propane margin decreased $4.3 million as the
impact of slightly higher retail sales was more than offset by the effect of
lower retail unit margins principally caused by lower average retail prices.
EBITDA was $6.5 million in the 1995 Five-Month Period compared with pro
forma EBITDA of $23.2 million in the Pro Forma 1994 Five-Month Period. The
decrease in EBITDA, despite the higher total margin, reflects the impact of
higher operating expenses resulting from the additional workdays included in the
1995 Five-Month Period and higher expenses including higher employee
compensation expenses resulting in part from newly implemented marketing and
sales programs. In September 1995, the General Partner announced management
organizational changes in response to competitive conditions in markets served
by the Partnership. During the 1995 Five-Month Period, the Partnership accrued
$4.3 million of costs related to these organizational changes.
Interest expense was $27.3 million in the 1995 Five-Month Period
compared with $25.3 million in the Pro Forma 1994 Five-Month Period. The higher
interest expense principally reflects the additional week in the 1995 Five-Month
Period resulting from the different fiscal year end of the Partnership.
PREDECESSOR COMPANIES' RESULTS OF OPERATIONS
1995 SEVEN-MONTH PERIOD COMPARED WITH 1994 SEVEN-MONTH PERIOD
AMERIGAS PROPANE
The average temperature across AmeriGas Propane's nationwide service
territory during the 1995 Seven-Month Period was 12.9% warmer than normal and
10.3% warmer than the prior-
24
<PAGE> 27
year period. Retail volumes of propane sold declined 7.2% due in large part to
the warmer weather's effect on sales of propane used for heating. The lower
sales volume was the primary reason for a $24.9 million decrease in propane
revenues. The lower 1995 Seven-Month Period retail volumes sold, along with
lower average unit margins resulting from lower average retail prices and
slightly higher unit product costs, resulted in a $15.0 million decrease in
total propane margin. The effects of the lower heating sales were most evident
in AmeriGas Propane's residential market segment which typically has higher
average unit margins than in the commercial/industrial heating markets. This was
particularly the case in AmeriGas Propane's Northern and Southern regions where
significantly warmer-than-normal 1995 winter weather reduced propane demand.
The lower demand heightened competitive pressures to reduce prices
which, together with the slightly higher product costs, resulted in lower 1995
Seven-Month Period average unit margins. These competitive pressures also
resulted in a modest loss of customers. Average unit margins in AmeriGas
Propane's commercial/industrial and agricultural markets were also slightly
lower than during the 1994 Seven-Month Period due in large part to price
reductions resulting from competitive pressures and the introduction of
aggressive marketing programs late in the 1995 Seven-Month Period. Operating
expenses, net of fee income from the Customer Services Agreement with Petrolane,
were virtually unchanged in the 1995 Seven-Month Period.
Interest expense decreased $.5 million in the 1995 Seven-Month period
reflecting lower average levels of debt outstanding. Income tax expense in the
1995 Seven-Month Period includes the write-off of $5.9 million of deferred tax
benefits no longer realizable as a result of the merger of AmeriGas Propane into
the Operating Partnership.
PETROLANE
Temperatures across Petrolane's service territory during the 1995
Seven-Month Period averaged 12.6% warmer than normal and 8.8% warmer than during
the 1994 Seven-Month Period. The combination of warmer-than-normal weather and
to a much lesser extent, modest customer losses, resulted in a 37.5 million
gallon (10.5%) decrease in retail volumes of propane sold. Total revenues
decreased $48.8 million to $372.1 million during the 1995 Seven-Month Period.
Decreases in sales to residential customers accounted for approximately
two-thirds of the overall decrease in retail volumes sold. The warmer weather
also contributed to lower commercial and industrial sales. Agricultural gallons
sold decreased due in part to a poor grain drying season in the Midwest and
reduced usage for poultry brooding. Wholesale sales, on which unit margins are
significantly lower than on retail sales, decreased 32.9 million gallons. These
sales were also affected by the warmer-than-normal weather.
Average unit margins were slightly lower in the 1995 Seven-Month Period
compared with the 1994 Seven-Month Period primarily as a result of higher
average propane product costs in the 1995 Seven-Month Period and the
introduction of aggressive sales and marketing programs late in the period to
retain customers and to increase market share. As a result of the lower average
25
<PAGE> 28
unit margins and the decreased sales volumes, total propane margin decreased
$26.9 million in the 1995 Seven-Month Period. Partially offsetting the decrease
in total margin was a $7.5 million decrease in net operating expenses. The lower
operating expenses reflect, in part, lower payroll expense because of lower
overtime pay, lower fees for professional services and lower computer expense.
Interest expense increased $3.0 million to $30.0 million reflecting
higher 1995 Seven-Month Period interest rates on Petrolane's variable rate debt.
The effective income tax rate was 87.9% for the 1995 Seven-Month Period compared
with a rate of 92.4% in the prior year. Both rates reflect the impact of
nondeductible amortization of excess reorganization value.
26
<PAGE> 29
FINANCIAL CONDITION AND LIQUIDITY
CAPITALIZATION AND LIQUIDITY
AmeriGas Partners' debt outstanding at September 30, 1996 totaled
$707.5 million compared to $657.7 million at September 30, 1995. The increase is
principally a result of $52 million in combined borrowings under the Operating
Partnership's Bank Credit Facilities. The Bank Credit Facilities consist of a
Revolving Credit Facility, an Acquisition Facility and a Special Purpose
Facility, each governed by the Bank Credit Agreement. The Operating
Partnership's obligations under these facilities are collateralized by
substantially all of its assets.
The Operating Partnership's revolving credit facilities which include
the Revolving Credit Facility, the General Partner Credit Facility, and a
portion of the Special Purpose Facility as described below, provide for
borrowings of up to $105 million to fund working capital, capital expenditures,
and interest and distribution payments. The Revolving Credit Facility provides
for borrowings of up to $70 million including a $35 million sublimit for letters
of credit. Borrowings under this facility totaled $15 million at September 30,
1996. The Revolving Credit Facility expires April 12, 1998, but may be extended,
upon timely notice, for additional one-year periods with the consent of the
participating banks representing at least 80% of the commitments thereunder.
The General Partner Credit Facility, which became effective October 28,
1996, provides for borrowings of up to $20 million. This agreement is
coterminous with the Operating Partnership's Revolving Credit Facility.
Borrowings under the General Partner Credit Facility will be unsecured and
subordinated in right of payment to all of the Partnership's existing senior
debt. UGI has agreed to contribute on an as needed basis through its
subsidiaries up to $20 million to the General Partner to fund such borrowings.
The Special Purpose Facility is a $30 million nonrevolving line of
credit which can be used for the payment of certain liabilities of Petrolane
assumed by the Operating Partnership that relate to potential liabilities for
tax, insurance and environmental matters. The Special Purpose Facility expires
April 12, 2000 at which time all amounts then outstanding will become
immediately due and payable. Effective October 28, 1996, the Bank Credit
Agreement was amended to include a revolving $15 million sublimit under the
Special Purpose Facility which can be used to fund working capital, capital
expenditures, and interest and distribution payments. This sublimit is scheduled
to expire April 12, 1998. As of September 30, 1996, there were $7 million in
special purpose borrowings outstanding under the Special Purpose Facility.
The Acquisition Facility provides the Operating Partnership with the
ability to borrow up to $75 million to finance propane business acquisitions.
The Acquisition Facility operates as a revolving facility through October 12,
1997 at which time any amounts then outstanding will convert to a quarterly
amortizing 4 1/2-year term loan. The Partnership expects to refinance such
27
<PAGE> 30
loans on a long-term basis. As of September 30, 1996, there were $30 million in
loans outstanding under the Acquisition Facility.
The ability of the Partnership to issue debt under the above facilities
is subject to provisions in the Partnership's loan agreements which require,
among other things, minimum debt-to-capital and interest coverage ratios. Based
upon such ratios calculated as of September 30, 1996, the Operating Partnership
could borrow the maximum amount available under its Revolving Credit, Special
Purpose and General Partner revolving credit facilities.
The Partnership has succeeded to certain lease guarantees and scheduled
claim obligations relating to certain of Petrolane's former businesses and has
also succeeded to Petrolane's agreements with third parties for payment
indemnification relating to such obligations. At September 30, 1996, the lease
guarantee obligations totaled approximately $91 million and scheduled claims of
at least $68 million were pending. To date, the Partnership has not paid any
amounts under these lease guarantee and scheduled claim obligations (see Note 9
to Consolidated Financial Statements).
DISTRIBUTIONS
The Partnership makes distributions to its partners approximately 45
days after the end of each fiscal quarter in an aggregate amount equal to its
Available Cash for such quarter, subject to limitations under its loan
agreements (see Note 4 to Consolidated Financial Statements). 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 cash reserves established by the General Partner in
its reasonable discretion for future cash requirements. These reserves are
retained to provide for the proper conduct of the Partnership's business, the
payment of debt principal and interest and to provide funds for distribution
during the next four quarters.
Distributions by the Partnership in an amount equal to 100% of its
Available Cash will generally be made 98% to the Common and Subordinated
unitholders and 2% to the General Partner, subject to the payment of incentive
distributions in the event Available Cash exceeds the MQD of $.55 on all units.
To the extent there is sufficient Available Cash, the holders of Common Units
have the right to receive the MQD, plus any arrearages, prior to the
distribution of Available Cash to holders of Subordinated Units. Common Units
will not accrue arrearages for any quarter after the Subordination Period (as
defined below) and Subordinated Units will not accrue any arrearage with respect
to distributions for any quarter.
The Subordination Period will generally extend until the first day of
any quarter beginning on or after April 1, 2000 by which (a) distributions of
Available Cash from Operating Surplus (generally defined as $40 million plus
$42.9 million of cash on hand as of April 19, 1995 plus all operating cash
receipts less all operating cash expenditures and cash reserves) equal or exceed
the MQD on each of the outstanding Common and Subordinated units for each of the
four
28
<PAGE> 31
consecutive four-quarter periods immediately preceding such date; (b) the
Adjusted Operating Surplus (generally defined as Operating Surplus adjusted to
exclude working capital borrowings, reductions in cash reserves and $40 million
plus $42.9 million of cash on hand as of April 19, 1995 and to include increases
in reserves to provide for distributions resulting from Operating Surplus
generated during such period) generated during both (i) each of the two
immediately preceding four-quarter periods and (ii) the immediately preceding
sixteen-quarter period, equals or exceeds the MQD on each of the Common and
Subordinated units outstanding during those periods; and (c) there are no
arrearages on the Common Units.
Prior to the end of the Subordination Period but not prior to March 31,
1998, 4,945,537 Subordinated Units will convert into Common Units for any
quarter ending on or after March 31, 1998, and an additional 4,945,537
Subordinated Units will convert into Common Units for any quarter ending on or
after March 31, 1999, if (a) distributions of Available Cash from Operating
Surplus on each of the outstanding Common and Subordinated units equal or exceed
the MQD for each of the three consecutive four-quarter periods immediately
preceding such date; (b) the Adjusted Operating Surplus generated during the
immediately preceding twelve-quarter period equals or exceeds the MQD on all of
the Common and Subordinated units outstanding during that period; (c) the
General Partner makes a good faith determination that the Partnership will, with
respect to the four-quarter period commencing with such date, generate Adjusted
Operating Surplus in an amount equal to or exceeding the MQD on all of the
outstanding Common and Subordinated units; and (d) there are no arrearages on
the Common Units.
During Fiscal 1996, the Partnership paid the full MQD on all limited
partner units outstanding. The amount of Available Cash needed to distribute the
MQD on all such units as well as the 2% general partner interest during 1996 was
approximately $93.7 million ($48.3 million for the Common Units; $43.5 million
for the Subordinated Units; and $1.9 million for the general partner interests).
A reasonable proxy for the amount of distributable cash actually generated by
the Partnership during 1996, determined by subtracting maintenance capital
expenditures of $9.3 million from the Partnership's earnings before depreciation
and amortization, was approximately $63 million. Although distributions in 1996
were in excess of cash generated by the Partnership, the Partnership had cash
and short-term investment balances of $48.6 million at the beginning of the
year. Due to the seasonality of its operating cash flows and working capital
needs, during Fiscal 1996 the Partnership was required on a short-term basis to
use the Revolving Credit Facility to fund a portion of such distribution
payments.
Although the level of distributable cash generated in Fiscal 1996 is
more than sufficient to pay the full MQD on all Common Units, the ability of the
Partnership to continue to pay the full MQD on its Subordinated Units will
depend upon a number of factors including a significant improvement in the level
of Partnership earnings, the cash needs of the Partnership's operations
(including cash needed for maintenance and growth capital), and the
Partnership's ability to finance externally such cash needs. The Partnership's
management expects the Partnership's earnings to improve as a result of a number
of factors including a continued focus on reducing operating expenses, volume
increases through acquisitions and internal growth, increased
29
<PAGE> 32
monitoring of pricing, improved propane product cost management, and improved
customer retention as a result of an emphasis on customer service. Such earnings
improvement, however, is subject to a number of factors beyond the control of
the Partnership including weather, competitive conditions in the markets served
by the Partnership, and the cost of propane, among others.
CASH FLOWS
OPERATING ACTIVITIES. Cash flow from operating activities was $48.4 million in
Fiscal 1996. Cash flow from operating activities before changes in operating
working capital was $68.4 million. Changes in operating working capital used
$20.1 million of operating cash flow in Fiscal 1996 due principally to increases
in accounts receivable due to the higher heating-season sales and an increase in
propane inventories due to higher late Fiscal 1996 propane product costs and
greater propane inventory volumes partially offset by the impact of an increase
in accounts payable.
INVESTING ACTIVITIES. Expenditures for property, plant and equipment totaled
$21.9 million in Fiscal 1996. The Partnership expects capital expenditures of
approximately $25.1 million in Fiscal 1997 and expects to fund these capital
expenditures through internally generated cash as well as through external
financing sources. During Fiscal 1996, the Partnership made several business
acquisitions for $20.9 million in cash.
FINANCING ACTIVITIES. During Fiscal 1996 the Partnership paid the MQD on all
limited partner (and general partner) interests totaling $93.7 million. The
Partnership had borrowings of $15 million under its Revolving Credit Facility
and, during the year, borrowed $30 million under its Acquisition Facility and $7
million under the Partnership's Special Purpose Facility. The Partnership also
made long-term debt repayments of $10.9 million in Fiscal 1996 including $8.4
million of debt repayments associated with UGI's contribution of the net assets
of Oahu Gas Service, Inc.
PARTNERSHIP FORMATION TRANSACTIONS. Cash paid for Partnership formation
transactions during Fiscal 1996 represents the reimbursement by the Partnership
of fees and expenses previously paid by AmeriGas relating to the formation of
the Partnership.
PROPANE PROCUREMENT
The Partnership, from time to time, holds propane option contracts to
manage propane price risk associated with a portion of its anticipated propane
procurement during the heating season. The unrealized gain on such contracts at
September 30, 1996 and 1995 was not material. In addition to these option
contracts, the Partnership fixes costs on a portion of its propane supply
requirements by entering into firm commitments with suppliers to provide propane
at future dates at fixed prices.
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<PAGE> 33
IMPACT OF INFLATION
Inflation affects the prices the Partnership pays for operating and
administrative services and, to some extent, propane gas. Competitive pressures
in recent years have limited the Partnership's and the Predecessor Companies'
ability to recover fully propane product cost increases. The Partnership
attempts to limit the effects of inflation on its results of operations through
cost control efforts and productivity improvements.
FORWARD-LOOKING STATEMENTS
Except for the historical information contained herein, certain of the
matters discussed in this Annual Report on Form 10-K are forward-looking
statements that are subject to risks and uncertainties. The factors that could
cause actual results to differ materially include those discussed herein as well
as those listed in Exhibit 99 to this Report. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date of this Annual Report on Form 10-K. The General Partner undertakes no
obligation to publicly release any revision to these forward-looking statements
to reflect events or circumstances after the date of this Annual Report on Form
10-K.
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<PAGE> 34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and financial statement schedules referred to
in the index contained on pages F-2 through F-3 of this Report are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III: MANAGEMENT AND SECURITY HOLDERS
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER
The Partnership does not directly employ any persons responsible for
managing or operating the Partnership. The General Partner provides such
services and is reimbursed for its direct and indirect costs and expenses
including all compensation and benefit costs.
The Board of Directors of the General Partner established a committee
(the "Audit Committee") consisting of two individuals, currently, Messrs.
Donovan and Van Dyck, who are neither officers nor employees of the General
Partner or any affiliate of the General Partner. The Audit Committee has the
authority to review, at the request of the General Partner, specific matters as
to which the General Partner believes there may be a conflict of interest, in
order to determine if the resolution of such conflict is fair and reasonable to
the Partnership. In addition, the Audit Committee has the authority and
responsibility for selecting the Partnership's independent public accountants,
reviewing the Partnership's annual audit, and resolving accounting policy
questions.
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<PAGE> 35
DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER
The following table sets forth certain information with respect to the
directors and executive officers of the General Partner. Directors are elected
annually by AmeriGas, Inc., a wholly owned subsidiary of UGI, as the sole
shareholder of the General Partner. Executive officers are elected for one-year
terms. There are no family relationships between any of the directors or any of
the executive officers or between any of the executive officers and any of the
directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE GENERAL PARTNER
<S> <C> <C>
Lon R. Greenberg 46 Chairman, Director, President and
Chief Executive Officer
Thomas F. Donovan 63 Director
Robert C. Forney 69 Director
James W. Stratton 60 Director
Stephen A. Van Dyck 53 Director
David I. J. Wang 64 Director
Brendan P. Bovaird 48 Vice President and General Counsel
Eugene V. N. Bissell 42 Vice President-Sales and Operations
Diane L. Carter 48 Vice President-Human Resources
R. Paul Grady 43 Vice President-Sales and Operations
William D. Katz 43 Vice President-Corporate Development
Robert H. Knauss 42 Vice President-Law and
Associate General Counsel and
Corporate Secretary
Gordon E. Regan, Jr. 44 Vice President-Purchasing and
Transportation
David C. Riggan 42 Vice President-Finance and Accounting
</TABLE>
33
<PAGE> 36
Mr. Greenberg is a Director (since October 1994) and Chairman (since
August 1996), and President and Chief Executive Officer (since July 1996) of the
General Partner. Mr. Greenberg is also Director (since 1994), Chairman (since
August 1996), Chief Executive Officer (since August 1995) and President (since
July 1994) of UGI, having been Senior Vice President-Legal and Corporate
Development of UGI (since July 1989). He also serves as a Director of AmeriGas
(since 1993) and Mellon PSFS Advisory Board. Mr. Greenberg previously served as
Vice President and General Counsel of AmeriGas (1984 to 1994).
Mr. Donovan was elected a Director of the General Partner on April 25,
1995. He retired from his position as Vice Chairman of Mellon Bank Corporation
on December 31, 1995. He continues to serve as a consultant and an advisory
board member to Mellon. He also serves as a Director of Private Export Funding,
Nuclear Mutual Insurance Co., Nuclear Electric Insurance Co. and Merrill Lynch
International Bank, Inc.
Dr. Forney was elected a Director of the General Partner on April 25,
1995. Dr. Forney is retired, having formerly served as Executive Vice President
(1981 to 1989) and Director (1979 to 1989) of E. I. duPont de Nemours & Co.,
Inc. (chemicals and petroleum products). He is a Director of UGI Corporation,
UGI Utilities, Inc., Wilmington Trust Corporation, Wilmington Trust Company and
Wilmington Trust of Pennsylvania.
Mr. Stratton was elected a Director of the General Partner on April 25,
1995. He is President and Director of Stratton Management Company (investment
advisory and financial consulting firm), and Chairman and Chief Executive
Officer of FinDaTex (financial services firm). Mr. Stratton is a Director of UGI
Corporation, UGI Utilities, Inc., Stratton Growth Fund, Stratton Monthly
Dividend Shares, Inc., Stratton Small-Cap Yield Fund, Alco Standard Corporation,
and Teleflex, Inc.
Mr. Van Dyck was elected a Director of the General Partner on June 15,
1995. He is Chairman of the Board and Chief Executive Officer of Maritrans Inc.
(since 1987), the nations largest independent marine transporter of petroleum.
He also serves as Chairman of the Board of West of England Mutual Insurance
Association, and as a Director of Mellon PSFS Advisory Board.
Mr. Wang was elected a Director of the General Partner on April 25,
1995. Mr. Wang is retired, having formerly served as Executive Vice
President-Timber and Specialty Products and a Director of International Paper
Company (1987 to 1991). He is a Director of UGI Corporation, UGI Utilities,
Inc., and Weirton Steel Corp.
Mr. Bissell is Vice President-Sales and Operations (since December
1995) of the General Partner. Previously, Mr. Bissell was Vice
President-Distributors and Fabrication, BOC Gases (August to December 1995),
having been Vice President-National Sales (1993 to 1995) and Regional Vice
President Southern Region for Distributor and Cylinder Gases Division, BOC Gases
(1989 to 1993).
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<PAGE> 37
Mr. Bovaird is Vice President and General Counsel of the General
Partner (since April 1995). He is also Vice President and General Counsel of UGI
Corporation, UGI Utilities, Inc. and AmeriGas, Inc. (since April 1995). Mr.
Bovaird previously served as Division Counsel and Member of the Executive and
Operations Committees of Wyeth-Ayerst International Inc. (1992 to 1995) and
Senior Vice President, General Counsel and Secretary of Orion Pictures
Corporation (1990 to 1991). Mr. Bovaird also engaged in private practice from
1991 to 1992.
Ms. Carter was elected Vice President-Human Resources effective January
15, 1996. Prior to her election, Ms. Carter was Vice President-Human Resources
of Sisters of Mercy Health System, St. Louis, Missouri (1994 to 1996).
Previously, she was President and founding principal of the Touchstone
Partnership, Ltd., an organization and management consulting firm based in
Philadelphia (1991 to 1994).
Mr. Grady is Vice President-Sales and Operations (since August 1995) of
the General Partner. Mr. Grady was Vice President-Corporate Development of UGI
(March 1994 to August 1995), having been Director, Corporate Development
(September 1990 to March 1994). Previously, he was Director, Corporate
Development Services of Campbell Soup Company (1985 to August 1990).
Mr. Katz was elected Vice President-Corporate Development effective
October 1, 1996. Previously, he served as Vice President-Corporate Development
of UGI (1995 to 1996). Prior to joining UGI, Mr. Katz was Director of Corporate
Development with Campbell Soup Company for over five years. Previously, he
practiced law for approximately 10 years, first with the firm of Jones, Day
Reavis & Pogue, and later in the Legal Department at Campbell Soup Company.
Mr. Knauss was elected to the additional position of Vice President-Law
and Associate General Counsel effective October 1, 1996, having served as
Corporate Secretary since 1994. Previously, he served as Group Counsel-Propane
(1989 to 1996) of UGI, having joined UGI as Associate Counsel in 1985. Before
joining UGI, he was an associate at the firm of Ballard, Spahr, Andrews &
Ingersoll in Philadelphia.
Mr. Regan is Vice President-Purchasing and Transportation (since May
1996). Prior to joining the General Partner, Mr. Regan was President of the
Chemical Division of DSI Transports, Inc. (1995 to 1996). Previously, he served
Conoco, Inc. for over 20 years, most recently as General Manager Business
Support, Downstream-North America.
Mr. Riggan is Vice President-Finance and Accounting of the General
Partner (since February 1995). Prior to joining AmeriGas, Mr. Riggan was Vice
President and Controller of The American Tobacco Company (1994 to February
1995), having previously served as its Controller (1991 to 1994) and Deputy
Controller (1986 to 1991).
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<PAGE> 38
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
UGI Corporation and AmeriGas, Inc. are each beneficial owners of more
than 10% of the Common Units, based solely on the number of Common Units held by
their respective direct and indirect subsidiaries. The General Partner is also
the beneficial owner of more than 10% of the Common Units. During fiscal year
1996, each of those companies made one late filing of a Form 4 with respect to
the issuance of 17,126 Common Units to Diamond Acquisition, Inc., in connection
with the acquisition of a propane business by the Partnership.
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<PAGE> 39
ITEM 11. EXECUTIVE COMPENSATION
The following table shows information concerning the annual and
long-term compensation of the General Partner's Chief Executive Officers,
including Mr. Mauch who retired effective September 1, 1996, and each of its
five other most highly compensated executive officers, including Mr. Zink, who
resigned as Vice President-Marketing on July 1, 1996 (collectively, the "Named
Executives").
<TABLE>
<CAPTION>
===================================================================================================================
SUMMARY COMPENSATION TABLE
===================================================================================================================
Long-Term Compensation
------------------------------
Annual Compensation
Awards Payouts
- -------------------------------------------------------------------------------------------------------------------
Securities
Other Underlying Long-Term All
Annual Options/SARs Incentive Other Compensation
Name and Year Salary Bonus Compensation Granted Payouts ($) (4)
Principal Position ($) ($) (1) ($) (2) (#) (3) ($)
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Lon R. Greenberg (5)
President, 1996 $465,000 $122,760 $ 7,359 0 $0 $ 10,462
Chairman, and Chief 1995 $381,923 $ 0 $ 7,365 14,167 $0 $ 11,439
Executive Officer 1994 $255,402 $126,463 $ 1,281 42,292 $0 $ 2,891
- -------------------------------------------------------------------------------------------------------------------
Robert C. Mauch
President and 1996 $346,481 $163,350 $62,133 0 $0 $876,131
Chief Executive 1995 $323,462 $ 32,076 $ 8,707 0 $0 $ 56,203
Officer (Retired) 1994 $307,992 $191,608 $ 2,426 0 $0 $ 23,780
- -------------------------------------------------------------------------------------------------------------------
R. Paul Grady
Vice President- 1996 $158,704 $ 0 $ 7,508 0 $0 $ 14,292
Sales and 1995 $139,174 $ 15,566 $ 5,126 0 $0 $ 5,298
Operations
- -------------------------------------------------------------------------------------------------------------------
Eugene V.N. Bissell
(6) 1996 $123,750 $ 0 $ 0 5,000 $0 $ 0
Vice President-
Sales and
Operations
- -------------------------------------------------------------------------------------------------------------------
Brendan P. Bovaird
(7) 1996 $149,999 $ 10,927 $ 1,299 0 $0 $ 1,363
Vice President 1995 $ 66,346 $ 8,663 $ 0 10,000 $0 $ 0
and General
Counsel
- -------------------------------------------------------------------------------------------------------------------
David C. Riggan
Vice President- 1996 $147,220 $ 0 $ 0 0 $0 $ 5,398
Finance 1995 $ 86,442 $ 11,479 $ 0 5,000 $0 $ 0
- -------------------------------------------------------------------------------------------------------------------
Timothy R. Zink (8)
Vice President- 1996 $132,300 $ 0 $ 0 0 $0 $ 11,090
Marketing 1995 $130,000 $ 9,750 $ 0 5,000 $0 $ 500
===================================================================================================================
</TABLE>
(1) Messrs. Greenberg and Bovaird participate in the UGI Annual Bonus Plan. All
other Named Executives participate in the AmeriGas Partners Annual Bonus Plan.
Awards under both Plans are for the year reported, regardless of the year paid.
Awards under both Plans are based on the achievement of pre-determined business
and/or financial performance objectives which support business plans and goals.
Bonus opportunities vary by position and currently range from 0% to 119% of base
salary for Mr. Greenberg, 0% to 68% of base salary for Mr. Bovaird, and for the
other Named Executives, from 0 to an amount limited only by the Partnership's
profitability.
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<PAGE> 40
(2) Amounts represent tax payment reimbursements for certain benefits, except
for Mr. Mauch in 1996. In addition to a tax payment reimbursement of $9,561, in
1996 Mr. Mauch received other perquisites available to executive officers
generally, and $38,631 for certain accrued vacation and personal days.
(3) For Messrs. Greenberg and Bovaird, non-qualified stock options granted under
the UGI Corporation 1992 Stock Option and Dividend Equivalent Plan. The 1992
Plan consists of non-qualified stock option grants and the opportunity for
participants to earn an amount equivalent to the dividends paid on shares
covered by options, subject to a comparison of the total return realizable on a
share of UGI Common Stock ( the "UGI Return") with the total return achieved by
each member of a group of comparable peer companies ( the "SODEP Peer Group")
over a five-year period beginning January 1, 1992 and ending December 31, 1996.
Total return encompasses both changes in the per share market price and
dividends paid on a share of UGI Common Stock. No credited dividend equivalents
will be paid when the performance period ends on December 31, 1996. For Messrs.
Bissell, Riggan and Zink, amounts represent non-qualified stock options granted
under the UGI Corporation 1992 Non-Qualified Stock Option Plan.
(4) Except for Mr. Mauch in 1996, the amounts represent contributions by the
General Partner or UGI in accordance with the provisions of the AmeriGas
Propane, Inc. Pension Plan ("APIPP"), the AmeriGas Propane, Inc. Employee
Savings Plan (the "AmeriGas Employee Savings Plan"), the UGI Utilities, Inc.
Employee Savings Plan (the "UGI Employee Savings Plan"), and/or allocations
under the UGI Corporation Senior Executive Retirement Plan (the "Executive
Retirement Plan"). Effective January 1, 1994, all plans adopted a plan year
ending September 30 to correspond to the fiscal year. As a result, contributions
and allocations for 1994 are based on a nine-month plan year. During 1996, 1995
and 1994, the following contributions were made to the Named Executives: (i)
under the AmeriGas Employee Savings Plan: Mr. Mauch, $0, $2,250 and $1,688; and
Mr. Grady, $0, $458 and $0 and (ii) under the UGI Employee Savings Plan: Mr.
Greenberg, $,3,375, $3,375 and $1,688; Mr. Grady, $0 and $2,962 (for 1996 and
1995, respectively); and Mr. Bovaird, $1,363 and $0 (for 1996 and 1995,
respectively); (iii) under the APIPP: Mr. Mauch, $11,865, $11,970 and $8,978;
Mr. Grady, $11,875 and $1,526 (for 1996 and 1995, respectively); Mr. Riggan,
$5,398 and $0 (for 1996 and 1995, respectively); and Mr. Zink, $11,090 and $500
(for 1996 and 1995, respectively); and (iv) under the Executive Retirement Plan:
Mr. Greenberg, $7,087, $8,064, and $1,203; Mr. Mauch, $0, $41,983 and $13,114;
and Mr. Grady, $2,427 and $352 (for 1996 and 1995, respectively).
Mr. Mauch retired from AmeriGas Propane on September 1, 1996. In
addition to the benefits detailed above, the amount shown for Mr. Mauch includes
payments under an agreement which recognized Mr. Mauch's substantial
contributions to the Partnership. The agreement provided for payments of earned
and accrued vacation and personal holidays, including the amount of $57,772
which is included in this column, and a supplemental payment of $806,494.
38
<PAGE> 41
(5) Compensation reported for Mr. Greenberg is attributable to his employment as
Chairman, President and Chief Executive Officer of UGI Corporation. Mr.
Greenberg's compensation is also reported in the Proxy Statement for UGI's 1997
Annual Meeting of Shareholders and is not additive. Mr. Greenberg receives no
compensation from the General Partner.
(6) Mr. Bissell was elected to the position of Vice President-Sales and
Operations of the General Partner effective December 18, 1995.
(7) Compensation reported for Mr. Bovaird is attributable to his employment as
Vice President and General Counsel of UGI Corporation and is not additive. Mr.
Bovaird receives no compensation from the General Partner.
(8) Mr. Zink resigned from his position as Vice President-Marketing of the
General Partner effective July 1, 1996.
<TABLE>
<CAPTION>
=====================================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------------------------
Grant Date
Individual Grants Value
- ---------------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or Grant Date
Options Granted Employees in Base Price Expiration Date Present Value
Name (#) Fiscal Year (2) ($/Share) ($)
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
Lon R. Greenberg 0 0 - - -
- ---------------------------------------------------------------------------------------------------------------------
Robert C. Mauch 0 0 - - -
- ---------------------------------------------------------------------------------------------------------------------
R. Paul Grady 0 0 - - -
- ---------------------------------------------------------------------------------------------------------------------
Eugene V.N. Bissell 5,000 (1) 33 1/3% $20.625 12/18/05 $11,107 (3)
- ---------------------------------------------------------------------------------------------------------------------
Brendan P. Bovaird 0 0 - - -
- ---------------------------------------------------------------------------------------------------------------------
David C. Riggan 0 0 - - -
- ---------------------------------------------------------------------------------------------------------------------
Timothy R. Zink 0 0 - - -
=====================================================================================================================
</TABLE>
39
<PAGE> 42
(1) Non-qualified stock options granted during fiscal year 1996 under the UGI
Corporation 1992 Non-Qualified Stock Option Plan. The option exercise
price is the Fair Market Value of UGI's Common Stock determined on the
date of the grant. According to Plan provisions, these options vest at 20%
per year beginning on the first anniversary of the grant date. Options
granted under the Plan are nontransferable and are generally exercisable
only while the optionee is employed by the Company or a subsidiary. The
vesting schedule can be accelerated subject to action by the Compensation
and Management Development Committee, in the event of mergers or certain
other corporate transactions. Options are also subject to adjustment in
the event of recapitalization, stock splits, mergers, and other similar
corporate transactions affecting UGI's Common Stock.
(2) A total of 15,000 stock options were granted to employees and executive
officers of the General Partner during fiscal year 1996 under the 1992
Non-Qualified Stock Option Plan.
(3) Based on the Black-Scholes option pricing model. Three years of closing
monthly stock price observations were used to calculate the stock
volatility and dividend yield assumptions. The other principal assumptions
used in calculating the grant date present value are as follows:
- Stock volatility - .1920
- Stock's dividend yield - 6.31%
- Length of option term (in years) - 10
- Annualized risk-free interest rate - 5.71%
- Discount for risk of forfeiture - 3% per year over 5 year vesting
schedule.
All options were granted at fair market value. The actual value, if any,
the executive may realize will depend on the excess of the stock price on
the date the option is exercised over the exercise price. There is no
assurance that the value realized by the executive will be at or near the
value estimated by the Black-Scholes model.
40
<PAGE> 43
<TABLE>
<CAPTION>
=========================================================================================================================
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
- -------------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-The-Money Options at Fiscal
Acquired on Options at Fiscal Year End Year End ($)
(#)
Value -----------------------------------------------------------------
Exercise (#) Realized ($)
Name Exercisable Unexercisable Exercisable Unexercisable
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Lon R. Greenberg 0 $0 105,278 (1) 38,681 (1) $355,313 (3) $130,548 (3)
- -------------------------------------------------------------------------------------------------------------------------
Robert C. Mauch 0 $0 70,000 (1) 17,500 (1) $236,250 (3) $ 59,063 (3)
- -------------------------------------------------------------------------------------------------------------------------
11,333 (1) 5,667 (1) $ 38,249 (3) $ 19,126 (3)
R. Paul Grady 0 $0 2,000 (2) 0 $ 6,750 (4) $ 0
- -------------------------------------------------------------------------------------------------------------------------
Eugene V.N. Bissell 0 $0 0 5,000 (2) $ 0 $ 14,375 (5)
- -------------------------------------------------------------------------------------------------------------------------
Brendan P. Bovaird 0 $0 5,000 (1) 5,000 (1) $ 16,875 (3) $ 16,875 (3)
- -------------------------------------------------------------------------------------------------------------------------
David C. Riggan 0 $0 1,000 (2) 4,000 (2) $ 2,375 (6) $ 9,500 (6)
- -------------------------------------------------------------------------------------------------------------------------
Timothy R. Zink 0 $0 2,000 (2) 3,000 (2) $ 9,000 (7) $ 13,500 (7)
=========================================================================================================================
</TABLE>
(1) Options granted under the 1992 Stock Option and Dividend Equivalent Plan.
(2) Options granted under the 1992 Non-Qualified Stock Option Plan.
(3) Value based on comparison of price per share at September 30, 1996 (fair
market value $23.50) to 1992 Stock Option and Dividend Equivalent Plan
option price ($20.125).
(4) Value based on comparison of price per share at September 30, 1996 (fair
market value $23.50) to option grant price at January 2, 1992 (fair market
value $20.125) under the terms of the 1992 Non-Qualified Stock Option
Plan.
(5) Value based on comparison of price per share at September 30, 1996 (fair
market value $23.50) to option grant price at December 18, 1995 (fair
market value $20.625) under the terms of the 1992 Non-Qualified Stock
Option Plan.
(6) Value based on comparison of price per share at September 30, 1996 (fair
market value $23.50) to option grant price at February 21, 1995 (fair
market value $21.125) under the terms of the 1992 Non-Qualified Stock
Option Plan.
41
<PAGE> 44
(7) Value based on comparison of price per share at September 30, 1996 (fair
market value $23.50) to option grant price at September 27, 1994 (fair
market value $19.00) under the terms of the 1992 Non-Qualified Stock
Option Plan.
RETIREMENT BENEFITS
The following table shows the annual benefits upon retirement at age 65
in 1996 without regard to statutory maximums, for various combinations of final
average earnings and lengths of service which may be payable to certain of the
Named Executives under the UGI Qualified Retirement Plan (the "UGI Retirement
Plan") and the UGI Non-Qualified Senior Executive Retirement Plan.
<TABLE>
<CAPTION>
========================================================================================================================
PENSION PLAN BENEFITS
- ------------------------------------------------------------------------------------------------------------------------
Final 5-Year
Average Annual Benefit for Years of Credited Service Shown (1)
Annual ---------------------------------------------------------------------------------------------------
Earnings (2)
15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 $28,500 $38,000 $47,500 $57,000 $66,500 $68,400(3)
- ------------------------------------------------------------------------------------------------------------------------
$200,000 $57,000 $76,000 $95,000 $114,000 $133,000 $136,800(3)
- ------------------------------------------------------------------------------------------------------------------------
$300,000 $85,500 $114,000 $142,500 $171,000 $199,500 $205,200(3)
- ------------------------------------------------------------------------------------------------------------------------
$400,000 $114,000 $152,000 $190,000 $228,000 $266,000 $273,600(3)
- ------------------------------------------------------------------------------------------------------------------------
$500,000 $142,500 $190,000 $237,500 $285,000 $332,500 $342,000(3)
- ------------------------------------------------------------------------------------------------------------------------
$600,000 $171,000 $228,000 $285,000 $342,000 $399,000 $410,400(3)
- ------------------------------------------------------------------------------------------------------------------------
$700,000 $199,500 $266,000 $332,500 $399,000 $465,500 $478,800(3)
- ------------------------------------------------------------------------------------------------------------------------
$800,000 $228,000 $304,000 $380,000 $456,000 $532,000 $547,200(3)
- ------------------------------------------------------------------------------------------------------------------------
$900,000 $256,500 $342,000 $427,500 $513,000 $598,500 $615,600(3)
- ------------------------------------------------------------------------------------------------------------------------
$1,000,000 $285,000 $380,000 $475,000 $570,000 $665,000 $684,000(3)
========================================================================================================================
</TABLE>
(1) Annual benefits are computed on the basis of straight life annuity
amounts. These amounts include pension benefits, if any, to which a
participant may be entitled as a result of participation in a pension plan
of a UGI subsidiary during previous periods of employment. The amounts
shown do not take into account exclusion of up to 35% of the estimated
primary Social Security benefit. The UGI Retirement Plan provides a
minimum benefit equal to 25% of a participant's final 12 months' earnings,
reduced proportionately for less than 15 years of credited service at
retirement. The minimum UGI Retirement Plan Benefit is not subject to
Social Security offset. Mr. Greenberg and Mr. Bovaird had 16
42
<PAGE> 45
years and 1 year of estimated credited service, respectively, at September
30, 1996. Mr. Mauch participated in the UGI Retirement Plan through
December 31, 1992, and had 15 years of estimated credited service as of
that date. Mr. Grady previously accumulated more than 4 years of estimated
credited service in the UGI Retirement Plan before joining AmeriGas
Propane, Inc. in 1995. None of the other Named Executives are covered by
the UGI Retirement Plan. Existing funds in the AmeriGas Propane, Inc.
Pension Plan, a defined contribution benefit plan ("APIPP"), were merged
into the AmeriGas Propane, Inc. Employee Savings Plan effective October 1,
1996. No contributions in respect of service on and after October 1, 1996
will be accepted in the APIPP.
(2) Consists of (i) base salary, commissions and cash payments under the UGI
Annual Bonus Plan, and (ii) deferrals thereof permitted under the Internal
Revenue Code.
(3) The UGI Retirement Plan formula maximum benefit equal to 60% of a
participant's highest consecutive 12 months' earnings during the last 120
months.
SEVERANCE PAY PLAN FOR SENIOR EXECUTIVE EMPLOYEES
The UGI Corporation Severance Pay Plan for Senior Executive Employees
(the "Severance Plan") assists certain senior level employees of the General
Partner in the event their employment is terminated without fault on their part.
Specified benefits are payable to a senior executive covered by the Severance
Plan if the senior executive's employment is involuntarily terminated for any
reason other than for cause or as a result of the senior executive's death or
disability.
Benefits payable include a lump sum cash payment in an amount
approximately equal to the sum of (i) three months of compensation (18 months in
the case of Mr. Greenberg), (ii) a pro rata portion of the senior executive's
annual target bonus under the Annual Bonus Plan for the current year, and (iii)
separation pay determined in a manner consistent with that payable to employees
generally, not exceeding 15 months of compensation (30 months in the case of Mr.
Greenberg). Employee benefits, including a vacation allowance, are continued for
a specified period (the "Employee Benefit Period") not exceeding 15 months (30
months in the case of Mr. Greenberg) after termination, or the senior executive
may be paid a lump sum equal to the present value of such benefits. The
Severance Plan also provides for payment in cash to a senior executive of an
amount approximately equal to all dividend equivalents credited (including those
that would be credited during the Employee Benefit Period) to the senior
executive's account under the 1992 Stock Option and Dividend Equivalent Plan and
successor plans. Payment of dividend equivalents which would be credited during
the period in which employee benefits are to be continued for such senior
executive will also be made. Senior executives may designate a beneficiary for
these payments.
43
<PAGE> 46
In order to receive benefits under the Severance Plan, a senior
executive is required to execute a release which discharges UGI and the General
Partner from liability for any claims the senior executive may have against
either of them, other than claims for amounts or benefits due to the executive
under any plan, program or contract provided by or entered into with UGI or the
General Partner. The senior executive is also required to cooperate in attending
to matters pending at the time of his or her termination of employment.
CHANGE OF CONTROL ARRANGEMENTS
On April 30, 1996, the Board of Directors of UGI ("Board") approved
Change of Control Agreements (individually, an "Agreement"), for senior
executive officers of UGI and certain of its subsidiaries, including Messrs.
Bissell, Bovaird, Grady and Greenberg. The Agreements operate independently of
the Severance Plan, continue through June 2001, and are automatically extended
in one-year increments thereafter unless, prior to a change of control, UGI
terminates an Agreement. In the absence of a change of control, each Agreement
will terminate when, for any reason, the executive terminates his employment
with UGI or its subsidiaries.
A change of control is generally deemed to occur if: (i) any person
(other than the executive, his affiliates and associates, UGI or any of its
subsidiaries, any employee benefit plan of UGI or any of its subsidiaries, or
any person or entity organized, appointed, or established by UGI or its
subsidiaries for or pursuant to the terms of any such employee benefit plan),
together with all affiliates and associates of such person, acquires securities
representing 20% or more of either (x) the then outstanding shares of common
stock of UGI or (y) the combined voting power of UGI's then outstanding voting
securities, in either case unless the members of the Executive Committee of the
Board of Directors in office immediately prior to such acquisition (the
"Executive Committee") determine that the circumstances do not warrant the
implementation of the provisions of the Agreement; (ii) individuals who at the
beginning of any 24-month period constitute the Board of Directors (the
"Incumbent Board") and any new director whose election by the Board, or
nomination for election by UGI's shareholders, was approved by a vote of at
least a majority of the Incumbent Board, cease for any reason to constitute a
majority thereof; (iii) UGI is reorganized, merged or consolidated with or into,
or sells all or substantially all of its assets to, another corporation in a
transaction in which former shareholders of UGI do not own more than 50% of the
outstanding common stock and the combined voting power, respectively, of the
then outstanding voting securities of the surviving or acquiring corporation
after the transaction, in any such case, unless the Executive Committee
determines at the time of such transaction that the circumstances do not warrant
the implementation of the provisions of the Agreement; or (iv) UGI is liquidated
or dissolved.
Severance benefits are payable under the Agreements if there is a
termination of the executive's employment without cause at any time within three
years after a change of control. In addition, following a change of control, the
executive may elect to terminate his or her employment without loss of severance
benefits in certain specified contingencies, including
44
<PAGE> 47
termination of officer status; a significant adverse change in authority,
duties, responsibilities or compensation; the failure of UGI to comply with and
satisfy any of the terms of the Agreement; or a substantial relocation or
excessive travel requirements.
An executive who is terminated with rights to severance compensation
under an Agreement will be entitled to receive an amount equal to 1.0 (2.5 in
the case of Mr. Greenberg) times his average total cash remuneration for the
preceding five calendar years. The net amount payable under the Agreement,
taking into account payments due under other plans, as appropriate, may not
exceed 2.99 times the executive's "base amount" (as defined in Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code")) which, generally, is
the average of the executive's taxable annual income received from UGI and its
subsidiaries during the five-year period preceding the change of control, to
avoid the special federal tax rules applicable to "excess parachute payments."
To protect both parties to the Agreements, if the severance
compensation payable under the Agreement, either alone or together with other
payments to an executive, would constitute "excess parachute payments," as
defined in Section 280G of the Code, such severance compensation payment would
be reduced to the largest amount which would result in no portion of such
payments being disallowed as deductions to UGI and its subsidiaries under
Section 280G of the Code, and no portion of such payments being subject to the
excise tax imposed on the recipient by Section 4999 of the Code. The
determination of such reductions will be made, in good faith, by UGI's
independent accountants and will be conclusively binding.
AGREEMENT WITH ROBERT C. MAUCH
At the time of Mr. Mauch's retirement, the General Partner entered into
an agreement which recognized his substantial contributions to the General
Partner. As set forth in the Summary Compensation Table, in addition to his
retirement benefits, the agreement provided for payment of his earned and
accrued vacation and personal holidays, a pro-rated 1996 annual bonus, a
supplemental payment of $806,494, continuation of medical, dental, long-term
disability and certain other insurance benefits through September 30, 1997, and
certain professional services not to exceed $75,000 in value.
BOARD OF DIRECTORS
Officers of the General Partner receive no additional compensation for
service on the Board of Directors or on any Committee of the Board. The General
Partner pays an annual retainer of $20,000 to all other directors and an
attendance fee of $850 for each Board Meeting. For service on Committees, the
General Partner pays an annual retainer of $2,000 to each Committee Chairman and
an attendance fee of $700 for each Committee meeting attended. The General
Partner reimburses directors for expenses incurred by them (such as travel
expenses) in
45
<PAGE> 48
serving on the Board and Committees. The General Partner determines all expenses
allocable to the Partnership, including expenses allocable to the services of
directors.
COMPENSATION/PENSION COMMITTEE
The members of the General Partner's Compensation/Pension Committee are
Robert C. Forney (Chairman), Thomas F. Donovan and David I. J. Wang.
46
<PAGE> 49
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF LIMITED PARTNERSHIP UNITS BY CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding each
person known by the Partnership to have been the beneficial owner of more than
5% of the Partnership's voting securities representing limited partner interests
as of December 1, 1996. AmeriGas Propane, Inc. is the sole general partner of
the Partnership.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS (5) BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- -------------- -------------------- ---------- --------
<S> <C> <C> <C>
Common Units UGI Corporation 4,347,272 (1) 19.8%
AmeriGas, Inc. 4,347,272 (2) 19.8%
AmeriGas Propane, Inc. 4,347,272 (3) 19.8%
Petrolane Incorporated 1,425,037 (4) 6.5%
Subordinated Units UGI Corporation 19,782,146 (1) 100.0%
AmeriGas, Inc. 19,782,146 (2) 100.0%
AmeriGas Propane, Inc. 19,782,146 (6) 100.0%
Petrolane Incorporated 6,532,000 (7) 33.0%
</TABLE>
- ----------------------
(1) Based on the number of units held by its indirect wholly owned
subsidiaries, Petrolane Incorporated ("Petrolane"), AmeriGas Propane, Inc.
and Diamond Acquisition, Inc. ("Diamond").
(2) Based on the number of units held by its direct and indirect wholly owned
subsidiaries mentioned in footnote (1).
(3) Includes 2,922,235 Common Units for which AmeriGas Propane, Inc. has sole
voting and investment power, and 1,425,037 Common Units held by its
subsidiaries, Petrolane and Diamond.
(4) Includes 1,407,911 Common Units for which Petrolane has sole voting and
investment power, and 17,126 Common Units held by its subsidiary Diamond.
(5) The address of each of UGI, AmeriGas, Inc., AmeriGas Propane, Inc.,
Petrolane and Diamond Acquisition, Inc., is 460 North Gulph Road, King of
Prussia, PA 19406.
(6) Includes 13,250,146 Subordinated Units for which AmeriGas Propane, Inc.
has sole voting and investment power, and 6,532,000 Subordinated Units
held by its subsidiaries, Petrolane and Diamond.
(7) Includes 6,432,000 Subordinated Units for which Petrolane has sole voting
and investment power, and 100,000 Subordinated Units held by its
subsidiary, Diamond.
47
<PAGE> 50
OWNERSHIP OF PARTNERSHIP COMMON UNITS BY THE DIRECTORS AND EXECUTIVE OFFICERS OF
THE GENERAL PARTNER
The table below sets forth as of November 4, 1996 the beneficial
ownership of Partnership Common Units by each director and each of the Named
Executives currently serving the General Partner, as well as by the directors
and all of the executive officers of the General Partner as a group. No
director, Named Executive or executive officer beneficially owns (i) any
Subordinated Units, or (ii) more than 1% of the Partnership's Common Units. The
total number of Common Units beneficially owned by the directors and executive
officers of the General Partner as a group represents less than 1% of the
Partnership's outstanding Common Units.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)
- ------------------------ -----------------------
<S> <C>
Lon R. Greenberg 1,500 (2)
Thomas F. Donovan 1,000
Robert C. Forney 1,600
James W. Stratton 1,000
Stephen A. Van Dyck 1,000
David I. J. Wang 5,000
Eugene V.N. Bissell 0
Brendan P. Bovaird 0
R. Paul Grady 2,300
David C. Riggan 500
Directors and executive officers as a group (14 persons) 13,900
</TABLE>
- ----------
(1) Sole voting and investment power unless otherwise specified.
(2) Units are held by Mr. Greenberg as custodian for dependent children.
48
<PAGE> 51
The General Partner is a wholly owned subsidiary of AmeriGas, which is
a wholly owned subsidiary of UGI. The table below sets forth, as of November 4,
1996, the beneficial ownership of UGI Common Stock by each director and each of
the Named Executives currently serving the General Partner, as well as by the
directors and the executive officers of the General Partner as a group. No
director, Named Executive or executive officer beneficially owns more than 1% of
UGI's outstanding shares. The total shares beneficially owned by the directors
and executive officers as a group (including 163,111 shares subject to options
exercisable within the 60 days following November 4, 1996), represents less than
1% of UGI's outstanding shares.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP
EXCLUDING STOCK
NAME OF BENEFICIAL OWNER OPTIONS (1) OPTIONS TOTAL
- ------------------------ ----------- ------- -----
<S> <C> <C> <C>
Lon R. Greenberg 24,899 122,778 147,677
Thomas F. Donovan 0 0 0
Robert C. Forney 4,675 4,000 8,675
James W. Stratton 1,275 5,000 6,275
Stephen A. Van Dyck 0 0 0
David I. J. Wang 14,275 5,000 19,275
Eugene V.N. Bissell 0 1,000 1,000
Brendan P. Bovaird 52 5,000 5,052
R. Paul Grady 903 13,333 14,236
David C. Riggan 25 1,000 1,025
Directors and executive officers
as a group (14 persons) 46,147 163,111 209,258
</TABLE>
- ----------
(1) Sole voting and dispositive power, except as otherwise specified.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner employs persons responsible for managing and
operating the Partnership. The Partnership reimburses the General Partner for
the direct and indirect costs of providing these services, including all
compensation and benefit costs. In October 1996, the General Partner provided
the Partnership with a revolving line of credit up to a maximum of $20 million.
Any loans under this agreement will be unsecured and subordinated to all senior
debt of the Partnership. The rates of interest and fees for this line of credit
will be determined based on the terms of the Partnership's Revolving Credit
Facility, and it will be available until April 12,
49
<PAGE> 52
1998, the termination date of the Revolving Credit Facility. See Note 4 to the
Partnership's Consolidated Financial Statements, filed as an exhibit to this
Report.
The Partnership and the General Partner also have extensive ongoing
relationships with UGI and its affiliates. UGI performs certain financial and
administrative services for the General Partner on behalf of the Partnership.
UGI does not receive a fee for such services, but is reimbursed for all direct
and indirect expenses incurred in connection therewith, including all
compensation and benefit costs. A wholly owned subsidiary of UGI provides the
Partnership with general liability, automobile and workers' compensation
insurance for up to $500,000 over the Partnership's self-insured retention.
Another wholly owned subsidiary of UGI leases office space to the General
Partner for its headquarters staff. In addition, a UGI master policy provides
accidental death and business travel and accident insurance coverage for
employees of the General Partner. The General Partner is billed directly by the
insurer for this coverage. As discussed under "Business--Trade Names; Trade and
Service Marks," UGI, Petrolane and the General Partner have licensed the trade
names "AmeriGas," "America's Propane Company" and "Petrolane" and the related
service marks and trademark to the Partnership on a royalty-free basis. Finally,
the Partnership obtains management information services from the General
Partner, and reimburses the General Partner for its direct and indirect expenses
related to those services.
50
<PAGE> 53
PART IV: ADDITIONAL EXHIBITS, SCHEDULES AND REPORTS
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
(1) and (2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The financial statements and financial statement schedules incorporated
by reference or included in this Report are listed in the accompanying Index to
Financial Statements and Financial Statement Schedules set forth on pages F-2
through F-4 of this Report, which is incorporated herein by reference.
(3) LIST OF EXHIBITS:
The exhibits filed as part of this Report are as follows (exhibits
incorporated by reference are set forth with the name of the
registrant, the type of report and registration number or last date of
the period for which it was filed, and the exhibit number in such
filing):
<TABLE>
<CAPTION>
================================================================================================================================
INCORPORATION BY REFERENCE
================================================================================================================================
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
================================================================================================================================
<C> <S> <C> <C> <C>
2.1 Merger and Contribution Agreement among AmeriGas AmeriGas Registration 10.21
Partners, L.P., AmeriGas Propane, L.P., New Partners, L.P. Statement on Form S-4
AmeriGas Propane, Inc., AmeriGas Propane, Inc., (No. 33-92734)
AmeriGas Propane-2, Inc., Cal Gas Corporation of
America, Propane Transport, Inc. and NORCO
Transportation Company
2.2 Conveyance and Contribution Agreement among AmeriGas Partners, Registration 10.22
AmeriGas Partners, L.P., AmeriGas Propane, L.P. L.P. Statement on Form S-4
and Petrolane Incorporated (No. 33-92734)
- --------------------------------------------------------------------------------------------------------------------------------
3.1 Amended and Restated Agreement of Limited AmeriGas Partners, Form 10-K 3.1
Partnership of AmeriGas Partners, L.P. dated as L.P. (9/30/95)
of September 18, 1995
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE> 54
<TABLE>
<CAPTION>
================================================================================================================================
INCORPORATION BY REFERENCE
================================================================================================================================
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
================================================================================================================================
<C> <S> <C> <C> <C>
3.2 Certificate of Incorporation of AmeriGas Partners, Registration 3.3
AmeriGas Finance Corp. L.P. Statement on Form S-4
(No. 33-92734)
3.3 Bylaws of AmeriGas Finance Corp. AmeriGas Partners, Registration 3.4
L.P. Statement on Form S-4
(No. 33-92734)
- --------------------------------------------------------------------------------------------------------------------------------
4.1 Indenture dated as of April 19, 1995 among AmeriGas Partners, Form 10-Q (3/31/95) 4.1
AmeriGas Partners, L.P., AmeriGas Finance Corp., L.P.
and First Union National Bank (formerly, First
Fidelity Bank, National Association) as Trustee
4.2 Specimen Certificate of Notes AmeriGas Partners, Form 10-Q (3/31/95) 4.2
L.P.
4.3 Registration Rights Agreement dated as of April AmeriGas Partners, Form 10-Q (3/31/95) 4.3
19, 1995 among Donaldson, Lufkin & Jenrette L.P.
Securities Corporation, Smith Barney, Inc.,
AmeriGas Partners, L.P. and AmeriGas Finance
Corp.
4.4 First Mortgage Notes Agreement dated as of April AmeriGas Partners, Form 10-Q (3/31/95) 10.8
12, 1995 among The Prudential Insurance Company L.P.
of America, Metropolitan Life Insurance Company,
and certain other institutional investors and
AmeriGas Propane, L.P., New AmeriGas Propane,
Inc. and Petrolane Incorporated
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 55
<TABLE>
<CAPTION>
================================================================================================================================
INCORPORATION BY REFERENCE
================================================================================================================================
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
================================================================================================================================
<C> <S> <C> <C> <C>
10.1 Credit Agreement dated as of April 12, 1995 AmeriGas Partners, Registration 10.1
among AmeriGas Propane, L.P., AmeriGas Propane, L.P. Statement on Form S-4
Inc., Petrolane Incorporated, Bank of America (No. 33-92734)
National Trust and Savings Association, as Agent
and certain banks
*10.2 First Amendment dated as of July 31, 1995 to
Credit Agreement
*10.3 Second Amendment dated as of October 28, 1996
to Credit Agreement
10.4 Intercreditor and Agency Agreement dated as of AmeriGas Partners, Form 10-Q (3/31/95) 10.2
April 19, 1995 among AmeriGas Propane, Inc., L.P.
Petrolane Incorporated, AmeriGas Propane, L.P.,
Bank of America National Trust and Savings
Association ("Bank of America") as Agent,
Mellon Bank, N.A. as Cash Collateral Sub-Agent,
Bank of America as Collateral Agent and certain
creditors of AmeriGas Propane, L.P.
10.5 General Security Agreement dated as of April 19, AmeriGas Partners Form 10-Q (3/31/95) 10.3
1995 among AmeriGas Propane, L.P., Bank of L.P.
America National Trust and Savings Association
and Mellon Bank, N.A.
10.6 Subsidiary Security Agreement dated as of April AmeriGas Partners, Form 10-Q (3/31/95) 10.4
19, 1995 among AmeriGas Propane, L.P., Bank of L.P.
America National Trust and Savings Association
as Collateral Agent and Mellon Bank, N.A. as
Cash Collateral Agent
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 56
<TABLE>
<CAPTION>
================================================================================================================================
INCORPORATION BY REFERENCE
================================================================================================================================
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
================================================================================================================================
<C> <S> <C> <C> <C>
10.7 Restricted Subsidiary Guarantee dated as of AmeriGas Partners, Form 10-Q (3/31/95) 10.5
April 19, 1995 by AmeriGas Propane, L.P. for the L.P.
benefit of Bank of America National Trust and
Savings Association, as Collateral Agent
10.8 Trademark License Agreement dated April 19, 1995 AmeriGas Partners, Form 10-Q (3/31/95) 10.6
among UGI Corporation, AmeriGas, Inc., AmeriGas L.P.
Propane, Inc., AmeriGas Partners, L.P. and
AmeriGas Propane, L.P.
10.9 Trademark License Agreement dated April 19, 1995 AmeriGas Partners, Form 10-Q (3/31/95) 10.7
among AmeriGas Propane, Inc., AmeriGas Partners, L.P.
L.P. and AmeriGas Propane, L.P.
10.11** UGI Corporation 1992 Stock Option and Dividend UGI Corporation Form 10-Q (6/30/92) 10(ee.)
Equivalent Plan, as amended May 19, 1992.
10.12** UGI Corporation Annual Bonus Plan dated March 8, UGI Corporation Form 10-Q (6/30/96) 10.4
1996.
10.13** AmeriGas Partners, L.P. Annual Bonus Plan dated AmeriGas Partners, Form 10-Q (6/30/96) 10.1
March 8, 1996. L.P.
10.14** Amended and Restated Senior Executive Retirement UGI Corporation Form 10-K (9/30/94) 10.43
Plan for Certain Employees of UGI Corporation
and its Subsidiaries and Affiliates, effective
October 27, 1992.
10.15** UGI Corporation Senior Executive Severance Pay UGI Corporation Form 10-K (9/30/94) 10.44
Plan dated April 30, 1993.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE> 57
<TABLE>
<CAPTION>
================================================================================================================================
INCORPORATION BY REFERENCE
================================================================================================================================
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
================================================================================================================================
<C> <S> <C> <C> <C>
10.16 Stock Purchase Agreement, dated May 27, 1989 as Petrolane Registration on Form 10.16(a)
amended and restated July 31, 1989, between Incorporated/ S-1
Texas Eastern Corporation and QFB Partners AmeriGas, Inc. (No. 33-69450)
10.17 Amended and Restated Sublease Agreement dated UGI Corporation Form 10-K (9/30/94) 10.35
April 1, 1988, between Southwest Salt Co. and AP
Propane, Inc. (the "Southwest Salt Co.
Agreement")
10.18 Letter dated September 26, 1994 pursuant to UGI Corporation Form 10-K (9/30/94) 10.36
Article 1, Section 1.2 of the Southwest Salt Co.
Agreement re option to renew for period of June
1, 1995 to May 31, 2000.
*10.19 Credit Agreement dated October 28, 1996 between
AmeriGas Propane, Inc. and AmeriGas Partners,
L.P.
10.20 Agreement by Petrolane Incorporated and certain Petrolane Form 10-K (9/23/94) 10.13
of its subsidiaries parties thereto Incorporated
("Subsidiaries") for the Sale of the
Subsidiaries' Inventory and Assets to the Goodyear
Tire & Rubber Company and D.C.H., Inc., as
Purchaser, dated as of December 18, 1985.
10.21** UGI Corporation 1992 Non-Qualified Stock Option AmeriGas Partners, Form 10-K (9/30/95) 10.19
Plan L.P.
*10.22** Agreement with Robert C. Mauch dated July 25,
1996.
10.23** Change of Control Agreement between UGI UGI Corporation Form 10-Q (6/30/96) 10.1
Corporation and Lon R. Greenberg
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
55
<PAGE> 58
<TABLE>
<CAPTION>
================================================================================================================================
INCORPORATION BY REFERENCE
================================================================================================================================
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
================================================================================================================================
<C> <S> <C> <C> <C>
10.25** Form of Change of Control Agreement between UGI UGI Corporation Form 10-Q (6/30/96) 10.3
Corporation and Messrs. Bissell, Bovaird, Grady
and Katz.
- --------------------------------------------------------------------------------------------------------------------------------
*13 Pages 10 through 23 of AmeriGas Partners, L.P.
Annual Report for the year ended September 30,
1996
*21 Subsidiaries of AmeriGas Partners, L.P.
*27 Financial Data Schedule
*99 Cautionary Statements Affecting Forward-looking
Information
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Filed herewith.
** As required by Item 14(a)(3), this exhibit is identified as a compensatory
plan or arrangement.
(b) Reports on Form 8-K.
During the last quarter of the 1996 fiscal year, the Partnership filed
no Current Reports on Form 8-K.
56
<PAGE> 59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERIGAS PARTNERS, L.P.
Date: December 9, 1996 By: AmeriGas Propane, Inc.
its General Partner
By: David C. Riggan
----------------------------
David C. Riggan
Vice President -
Finance and Accounting
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below on December 9, 1996 by the following persons
on behalf of the Registrant and in the capacities with AmeriGas Propane, Inc.,
General Partner, indicated.
SIGNATURE TITLE
Lon R. Greenberg
- -------------------------- President, Chairman and Chief
Lon R. Greenberg Executive Officer
(Principal Executive
Officer) and Director
David C. Riggan
- -------------------------- Vice President -
David C. Riggan Finance and Accounting
(Principal Financial Officer
and Principal Accounting Officer)
57
<PAGE> 60
SIGNATURE TITLE
Thomas F. Donovan Director
- ----------------------
Thomas F. Donovan
Stephen A. Van Dyck Director
- ----------------------
Stephen A. Van Dyck
Robert C. Forney Director
- ----------------------
Robert C. Forney
James W. Stratton Director
- ----------------------
James W. Stratton
David I. J. Wang Director
- ----------------------
David I. J. Wang
58
<PAGE> 61
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERIGAS FINANCE CORP.
Date: December 9, 1996 By: David C. Riggan
---------------
David C. Riggan
Vice President -
Finance and Accounting
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below on December 9, 1996 by the following persons
on behalf of the Registrant and in the capacities indicated.
Signature Title
Lon R. Greenberg President and Chief
- ---------------------- Executive Officer
Lon R. Greenberg (Principal Executive
Officer) and Director
David C. Riggan Vice President -
- ---------------------- Finance and Accounting
David C. Riggan (Principal Financial
Officer and Principal
Accounting Officer) and
Director
Brendan P. Bovaird Director
- ----------------------
Brendan P. Bovaird
59
<PAGE> 62
AMERIGAS PARTNERS, L.P.
AMERIGAS FINANCE CORP.
FINANCIAL INFORMATION
FOR INCLUSION IN ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1996
F-1
<PAGE> 63
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The consolidated financial statements of AmeriGas Partners, L.P. and
subsidiaries, together with the report thereon of Arthur Andersen dated November
22, 1996, listed in the following index, are included in AmeriGas Partners' 1996
Annual Report to Unitholders and are incorporated herein by reference. With the
exception of the pages listed in this index and information incorporated in
Items 5 and 8, the 1996 Annual Report to Unitholders is not to be deemed filed
as part of this Report.
<TABLE>
<CAPTION>
Annual Report
Form 10-K to Unitholders
(page) (page)
------ ------
AmeriGas Partners, L.P. and Subsidiaries
<S> <C> <C>
Financial Statements:
Report of Independent Public Accountants Exhibit 13 23
Consolidated Balance Sheets as of September 30,
1996 and 1995 Exhibit 13 10
Consolidated Statements of Operations for the year ended
September 30, 1996 and the period April 19, 1995 to
September 30, 1995 Exhibit 13 11
Consolidated Statements of Cash Flows for the year ended
September 30, 1996 and the period April 19, 1995 to
September 30, 1995 Exhibit 13 12
Consolidated Statements of Partners' Capital for the year ended
September 30, 1996 and the period April 19, 1995 to
September 30, 1995 Exhibit 13 13
Notes to Consolidated Financial Statements Exhibit 13 14-22
Financial Statement Schedules:
I - Condensed Financial Information of Registrant
(Parent Company) S-1 to S-3
II - Valuation and Qualifying Accounts S-4
Report of Independent Public Accountants
on Financial Statement Schedules S-5
</TABLE>
F-2
<PAGE> 64
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (continued)
<TABLE>
<CAPTION>
Form 10-K
(page)
AmeriGas Finance Corp.
<S> <C>
Financial Statements:
Report of Independent Public Accountants F-6
Balance Sheets as of September 30, 1996 and 1995 F-7
Statements of Stockholder's Equity for the year ended
September 30, 1996 and the period March 13, 1995 to
September 30, 1995 F-8
Note to Financial Statements F-9
AmeriGas Propane, Inc./AmeriGas Propane-2, Inc. (Predecessor
of AmeriGas Partners, L.P.)
Financial Statements:
Reports of Independent Public Accountants F-11 to F-12
Combined Statements of Income for the period September 24,
1994 to April 19, 1995 and the year ended September 23,
1994 F-13
Combined Statements of Cash Flows for the period September 24,
1994 to April 19, 1995 and the year ended September
23, 1994 F-14
Combined Statements of Stockholder's Equity for the period September 24,
1994 to April 19, 1995 and the year ended
September 23, 1994 F-15
Notes to Combined Financial Statements F-16 to F-27
</TABLE>
F-3
<PAGE> 65
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (continued)
<TABLE>
<CAPTION>
Form 10-K
(page)
------
<S> <C> <C>
Petrolane Incorporated and Subsidiaries (Predecessor of
AmeriGas Partners, L.P.)
Financial Statements:
Report of Independent Public Accountants F-29
Consolidated Statements of Operations for the period
September 24, 1994 to April 19, 1995 and the year
ended September 23, 1994 F-30
Consolidated Statements of Cash Flows for the period
September 24, 1994 to April 19, 1995 and the year
ended September 23, 1994 F-31
Consolidated Statements of Stockholders' Equity for the
period September 24, 1994 to April 19, 1995 and the
year ended September 23, 1994 F-32
Notes to Consolidated Financial Statements F-33 to F-44
</TABLE>
All other financial statement schedules are omitted because the required
information is not present or not present in amounts sufficient to require
submission of the schedule or because the information required is included
elsewhere in the respective financial statements or notes thereto contained
herein.
F-4
<PAGE> 66
AMERIGAS FINANCE CORP.
FINANCIAL STATEMENTS
for the year ended September 30, 1996 and the period
March 13, 1995 (date of incorporation)
to September 30, 1995
F-5
<PAGE> 67
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AmeriGas Finance Corp.:
We have audited the accompanying balance sheets of AmeriGas Finance Corp. (a
Delaware corporation and a wholly owned subsidiary of AmeriGas Partners, L.P.)
as of September 30, 1996 and 1995, and the related statements of stockholder's
equity for the year ended September 30, 1996 and the period March 13, 1995 to
September 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the balance sheets and statements of stockholder's equity
referred to above present fairly, in all material respects, the financial
position of AmeriGas Finance Corp. as of September 30, 1996 and 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 22, 1996
F-6
<PAGE> 68
AMERIGAS FINANCE CORP.
(a wholly owned subsidiary of AmeriGas Partners, L.P.)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
ASSETS 1996 1995
- ------ ---- ----
<S> <C> <C>
Cash $ 1,000 $ --
Subscription receivable -- 1,000
------- -------
Total assets $ 1,000 $ 1,000
======= =======
STOCKHOLDER'S EQUITY
- --------------------
Common stock, $.01 par value; 100 shares authorized; $ 1 $ 1
100 shares issued and outstanding
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.
F-7
<PAGE> 69
AMERIGAS FINANCE CORP.
(a wholly owned subsidiary of AmeriGas Partners, L.P.)
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock
----- ------- -------- -----
<S> <C> <C> <C> <C>
Balance March 13, 1995 $-- $ -- $-- $--
Subscription for AmeriGas Finance
Corp. Common Stock 1 999
--- ---- --- ---
Balance September 30, 1995 1 999 -- --
--- ---- --- ---
Balance September 30, 1996 $ 1 $999 $-- $--
=== ==== === ===
</TABLE>
The accompanying note is an integral part of these financial statements.
F-8
<PAGE> 70
AMERIGAS FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.)
NOTE TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
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 owns all 100 shares of AmeriGas Finance common stock
outstanding.
F-9
<PAGE> 71
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
(Predecessor of AmeriGas Partners, L.P.)
COMBINED FINANCIAL STATEMENTS
for the period September 24, 1994,
to April 19, 1995 and the
year ended September 23, 1994
F-10
<PAGE> 72
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of AmeriGas Partners, L.P.
and The Board of Directors of AmeriGas Propane, Inc. :
We have audited the accompanying consolidated statements of income,
stockholder's equity and cash flows of AmeriGas Propane, Inc. and subsidiaries
and AmeriGas Propane-2, Inc. (Predecessor) (collectively, the "Company") for the
period September 24, 1994 to April 19, 1995. These financial statements and the
schedule referred to below are the responsibility of the management of AmeriGas
Propane, Inc. Our responsibility is to express an opinion on these combined
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
AmeriGas Propane, Inc. and subsidiaries and AmeriGas Propane-2, Inc.
(Predecessor) for the period September 24, 1994 to April 19, 1995, in conformity
with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule for the period September 24, 1994 to
April 19, 1995, listed in the Index to Financial Statements and Financial
Statement Schedules, is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
As discussed in Note 5 to the combined financial statements, effective September
24, 1994, the Company changed its method of accounting for postemployment
benefits. As discussed in Note 3 to the combined financial statements, the
Company has given retroactive effect to the change in its method of accounting
for propane inventories.
ARTHUR ANDERSEN LLP
Chicago, Illinois
December 4, 1995
F-11
<PAGE> 73
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder
AmeriGas Propane, Inc. and AmeriGas Propane-2, Inc.
Valley Forge, Pennsylvania
We have audited the combined statements of income, common stockholder's equity
and cash flows of AmeriGas Propane, Inc. and subsidiaries and AmeriGas
Propane-2, Inc. (collectively, "the Company") for the year ended September 23,
1994. We have also audited the related financial statement schedule for the year
ended September 23, 1994. These financial statements and related financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined results of operations and cash flows of
AmeriGas Propane, Inc. and subsidiaries and AmeriGas Propane-2, Inc. for the
year ended September 23, 1994 in conformity with generally accepted accounting
principles. Also, in our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information required to be
included therein.
As discussed in Note 3 to the combined financial statements, the Company changed
its method of accounting for propane inventories in March 1995 and restated
prior period financial statements to reflect the change.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, PA
December 12, 1994, except for Note 3,
as to which the date is March 23, 1995
F-12
<PAGE> 74
AMERIGAS PROPANE, INC. / AMERIGAS PROPANE - 2, INC.
COMBINED STATEMENTS OF INCOME
(Thousands of dollars)
<TABLE>
<CAPTION>
Year
September 24, Ended
1994 to September 23,
April 19, 1995 1994 (a)
-------------- --------
<S> <C> <C>
Revenues (note 1):
Propane $218,078 $330,518
Other 24,107 36,602
-------- --------
242,185 367,120
-------- --------
Costs and expenses:
Cost of sales - propane 106,596 158,799
Cost of sales - other 12,693 17,972
Operating and administrative expenses 62,706 100,919
Operating and administrative expenses - related parties (note 7) 22,440 33,913
Depreciation and amortization (note 1) 13,589 23,088
Miscellaneous (income) - related parties (note 7) (6,512) (9,767)
Miscellaneous (income), net (note 8) (1,709) (4,237)
-------- --------
209,803 320,687
-------- --------
Operating income 32,382 46,433
Interest expense 14,569 25,868
-------- --------
Income before income taxes 17,813 20,565
Income taxes (notes 1 and 4) 14,891 10,906
-------- --------
Income before extraordinary loss and accounting change 2,922 9,659
Extraordinary loss - debt restructuring (note 2) (11,892) --
Change in accounting for postemployment benefits (note 5) (1,650) --
-------- --------
Net income (loss) $ 10,620) $ 9,659
======== ========
</TABLE>
(a) Restated to reflect a change in accounting for propane inventories (see note
3).
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE> 75
AMERIGAS PROPANE, INC. / AMERIGAS PROPANE - 2, INC.
COMBINED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
<TABLE>
<CAPTION>
Year
September 24, Ended
1994 to September 23,
April 19, 1995 1994 (a)
-------------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(10,620) $ 9,659
Adjustments to reconcile net income (loss) to net
cash provided by continuing operating activities:
Depreciation and amortization 13,589 23,088
Deferred income taxes, net 5,538 (1,742)
Provision for uncollectible accounts 1,202 1,785
Extraordinary loss - debt restructuring 11,892 --
Change in accounting for postemployment benefits 1,650 --
Gain on sale of property, plant and equipment (363) (1,742)
Other, net (772) (37)
-------- --------
22,116 31,011
Net change in:
Accounts receivable (5,998) (3,717)
Inventories 7,152 (2,675)
Accounts payable (3,903) (12,663)
Receivable from / payable to related parties, net 4,641 (7,800)
Other current assets and liabilities 5,963 5,417
-------- --------
Net cash provided by operating activities 29,971 9,573
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (5,605) (8,948)
Proceeds from disposals of property, plant and equipment 1,098 4,201
Acquisitions of businesses, net of cash acquired (156) (4,608)
-------- --------
Net cash used by investing activities (4,663) (9,355)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (5,286) (23,604)
Repayment of long-term debt (852) (1,513)
Capital contributions from AmeriGas -- 5,001
-------- --------
Net cash used by financing activities (6,138) (20,116)
-------- --------
Cash and cash equivalents increase (decrease) 19,170 (19,898)
======== ========
CASH AND CASH EQUIVALENTS:
End of period 37,743 18,573
Beginning of period 18,573 38,471
-------- --------
Increase (decrease) $ 19,170 $(19,898)
======== ========
</TABLE>
(a) Restated to reflect a change in accounting for propane inventories (see note
3).
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE> 76
AMERIGAS PROPANE, INC. / AMERIGAS PROPANE - 2, INC.
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
(Thousands of dollars)
<TABLE>
<CAPTION>
Additional
Common Paid-in Accumulated
Stock Capital Deficit
----- ------- -------
<S> <C> <C> <C>
Balance September 23, 1993 $- $198,074 $ (2,531)
Net income 9,659
Dividends - cash (10,281) (13,323)
Capital contribution from AmeriGas (note 7) 5,001
-- -------- --------
Balance September 23, 1994 - 192,794 (6,195)
Net loss (10,620)
Dividends - cash (5,286)
-- -------- --------
Balance April 19, 1995 $-- $187,508 $(16,815)
== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE> 77
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(Thousands of dollars)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
AmeriGas Propane, Inc., a Delaware corporation (AmeriGas Propane),
and AmeriGas Propane-2, Inc., a Pennsylvania corporation
incorporated on January 5, 1994 ("AGP-2", and together with AmeriGas
Propane, "the Company"), are 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 business and assets of the
Company and Petrolane Incorporated (Petrolane) (see Note 2).
COMBINATION AND CONSOLIDATION PRINCIPLES
The 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 combined financial statements include the results of
operations and cash flows of the Company through April 19, 1995, the
date of the Merger and Contribution Agreement.
COMBINED STATEMENTS OF CASH FLOWS
Cash equivalents include all highly liquid investments with
maturities of three months or less when purchased and are recorded
at cost plus accrued interest which approximates market value.
Interest paid during the period September 24, 1994 to April 19, 1995
(the 1995 seven-month period) and the year ended September 23, 1994
was $14,525 and $25,406, respectively. Income taxes paid during the
1995 seven-month period and the year ended September 23, 1994 were
$5,341 and $9,773, respectively.
The Company incurred capital lease obligations during the year ended
September 23, 1994 of $1,559. There were no additions to capital
leases during the 1995 seven-month period.
REVENUE RECOGNITION
Revenues from the sale of propane are recognized principally as
product is shipped or delivered to customers.
F-16
<PAGE> 78
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined using an average cost method for propane inventories,
specific identification for appliances, and the first-in, first-out
(FIFO) method for all other inventories.
PROPERTY, PLANT AND EQUIPMENT AND RELATED DEPRECIATION
Property, plant and equipment is stated at cost. Amounts assigned to
property, plant and equipment of acquired businesses are based upon
estimated fair value at date of acquisition. When plant and
equipment are retired or otherwise disposed of, any gains or losses
are recorded in operations.
Depreciation of property, plant and equipment is computed using the
straight-line method over estimated service lives ranging from two
to 40 years.
GOODWILL AND OTHER INTANGIBLES
Goodwill recognized as a result of business combinations accounted
for as purchases is amortized on a straight-line basis over 40
years. Other intangibles consisting principally of covenants not to
compete, are amortized over the estimated periods of benefit which
do not exceed seven years. Amortization expense during the 1995
seven-month period and the year ended September 23, 1994 was $5,262
and $8,305, respectively.
It is the Company's policy to review goodwill and other intangible
assets for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may
not be recoverable. If such a review should indicate that the
carrying amount of goodwill and other intangible assets is not
recoverable, it is the Company's policy to reduce the carrying
amount of such assets to fair value.
INCOME TAXES
Income taxes are provided based upon the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes" (SFAS 109), which requires recognition of deferred
income tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income tax
liabilities and assets are determined based on the differences
between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse.
F-17
<PAGE> 79
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
The Company joined with AmeriGas and its parent, UGI Corporation
(UGI) in filing a consolidated federal income tax return. The
Company was allocated tax assets, liabilities, expense, benefits and
credits resulting from the effect of its transactions in the
consolidated income tax provision determined in accordance with SFAS
109, including giving effect to all intercompany transactions. The
result of this allocation was not materially different from income
taxes calculated on a separate return basis.
2. MERGER WITH AMERIGAS PROPANE, L.P.
On April 19, 1995, a subsidiary of AmeriGas acquired by merger (the
"Petrolane Merger") the approximately 65% of Petrolane common shares
outstanding not already owned by UGI or AmeriGas. Immediately after
the Petrolane Merger, AmeriGas Propane and certain of its operating
subsidiaries, and AGP-2 merged into the Operating Partnership (the
"Formation Merger"), a subsidiary of AmeriGas Partners, a Delaware
limited partnership formed to acquire and operate these businesses
(collectively, "the Partnership"). Also on April 19, 1995, Petrolane
conveyed substantially all of its assets and liabilities to the
Operating Partnership. In addition, certain senior indebtedness of
AmeriGas Propane assumed by the Operating Partnership with a face
value of $208,000 was exchanged for First Mortgage Notes of the
Operating Partnership and certain senior indebtedness of Petrolane
with a face value of $200,000 was also exchanged for such First
Mortgage Notes. Following these transactions, on April 19, 1995,
AmeriGas Partners completed its initial public offering of
15,452,000 Common Units.
As a result of the exchange of certain of the Company's indebtedness
for First Mortgage Notes of the Operating Partnership, the Company
recorded an extraordinary loss of $19,673 pre-tax ($11,892
after-tax). In addition, the Company expensed $5,916 of deferred tax
benefits representing the Company's deferred tax benefits no longer
realizable as a result of the Formation Merger.
3. CHANGE IN ACCOUNTING FOR PROPANE INVENTORIES
During the three months ended March 23, 1995, the Company changed
its method of determining the cost of its propane inventories from
the last-in, first-out (LIFO) method to the average cost method. Due
to the seasonality of the Company's business and the fluctuating
level of inventories during the year, the Company believes that the
average cost method will result in a better matching of current
revenues and costs on an interim basis.
F-18
<PAGE> 80
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
Also, the average cost method provides a more meaningful
presentation of the financial position of the Company by including
more recent costs in inventory.
The change in accounting has been applied retroactively to prior
periods by restating the financial statements as required by
generally accepted accounting principles. The restatement decreased
previously reported net income for the year ended September 23, 1994
by $298.
F-19
<PAGE> 81
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
4. INCOME TAXES
The provisions for income taxes consist of the following:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
September 24, 1994 Year Ended
to April 19, September 23,
1995 1994
------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 8,155 $10,535
State 1,198 2,113
-------------------------------------------------------------------------------
9,353 12,648
Deferred 5,538 (1,742)
-------------------------------------------------------------------------------
Total income taxes $14,891 $10,906
-------------------------------------------------------------------------------
</TABLE>
A reconciliation from the statutory federal tax rate to the
effective tax rate is as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
September 24, 1994 Year Ended
to April 19, September 23,
1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C>
Statutory federal tax rate 35.0% 35.0%
Difference in tax rate due
to:
State income taxes, net of federal
income tax benefit 5.8 5.3
Nondeductible amortization of
goodwill 9.6 12.2
Adjustment to deferred taxes as a
result of the Formation Merger 33.2 -
Other, net - .5
--------------------------------------------------------------------------------------------
Effective tax rate 83.6% 53.0%
--------------------------------------------------------------------------------------------
</TABLE>
5. PENSION PLAN AND OTHER POSTEMPLOYMENT BENEFITS
Employees of the Company participated in the AmeriGas Propane, Inc.
Pension Plan (AmeriGas Propane Plan), a noncontributory defined
contribution pension plan. Company
F-20
<PAGE> 82
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
contributions to the AmeriGas Propane Plan represented a percentage
of each covered employee's salary. AmeriGas Propane also sponsored a
401(k) savings plan, the AmeriGas Propane, Inc. Savings Plan
(Savings Plan), for its employees. Generally, participants could
contribute up to 6% of their compensation on a before-tax basis. The
Company could, at its discretion, match a portion of employees'
contributions to the Savings Plan. The cost of benefits under the
AmeriGas Propane Plan and the Savings Plan for the 1995 seven-month
period and the year ended September 23, 1994 totaled $1,105 and
$1,366, respectively.
The Company provided health care benefits to certain retirees and a
limited number of active employees meeting certain age and service
requirements as of January 1, 1989. The Company also provided
limited life insurance benefits to substantially all active and
retired employees.
The components of net periodic postretirement benefit cost are as
follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
September 24, 1994 Year Ended
to April 19, September 23,
1995 1994
----------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during
the period $ 6 $ 14
Interest cost on accumulated
postretirement benefit
obligation 153 278
Amortization of transition
obligation 118 235
----------------------------------------------------------------------------------
Net periodic postretirement benefit
cost $277 $527
----------------------------------------------------------------------------------
</TABLE>
F-21
<PAGE> 83
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
The major actuarial assumptions used in determining the net periodic
postretirement benefit cost for the periods covered by the financial
statements are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
September 24, 1994 Year Ended
to April 19, September 23,
1995 1994
-------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 8.7% 7.0%
Health care cost trend rate 10.0-5.5 12.0-5.5
-------------------------------------------------------------------------
</TABLE>
Increasing the health care cost trend rate one percent increases the
net periodic postretirement benefit cost for the 1995 seven-month
period and the year ended September 23, 1994 by approximately $11
and $45, respectively.
Effective September 24, 1994, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" (SFAS 112). SFAS 112
requires, among other things, the accrual of benefits provided to
former or inactive employees (who are not retirees) and to their
beneficiaries and covered dependents. Prior to the adoption of SFAS
112, the Company accounted for these postemployment benefits on a
pay-as-you-go basis. The cumulative effect of SFAS 112 on the
Company's results of operations for periods prior to September 24,
1994 of $2,730 pre-tax ($1,650 after-tax) has been reflected in the
Combined Statement of Income for the 1995 seven-month period as
"Change in accounting for postemployment benefits". The effect of
the change in accounting for postemployment benefits on results of
operations for the 1995 seven-month period was not material.
6. COMMITMENTS AND CONTINGENCIES
The Company leased various buildings and transportation, data
processing and office equipment under operating leases. Certain of
the leases contained renewal and purchase options and also contained
escalation clauses. The aggregate rental expense for such leases was
approximately $7,310 and $12,841 for the 1995 seven-month period and
the year ended September 23, 1994, respectively.
Prior to April 19, 1995, the Company was defending various claims
and legal actions arising out of the ordinary course of business the
final results of which could not be predicted with certainty.
However, it is reasonably possible that some of them could be
resolved unfavorably to the Company. Management believes, after
consultation with counsel, that damages or settlements, if any,
recovered by the plaintiffs in such claims or
F-22
<PAGE> 84
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
actions will not have a material adverse effect on the Company's
financial position but could be material to operating results in
future periods depending on the nature and timing of future
developments with respect to these matters and the amounts of future
operating results. As a result of the merger of the Company with the
Operating Partnership on April 19, 1995 pursuant to the Merger and
Contribution Agreement, these contingent liabilities were assumed by
the Operating Partnership.
7. RELATED PARTY TRANSACTIONS
During the period July 16, 1993 through April 19, 1995, AmeriGas
Management Company (AMC) and AmeriGas Transportation Management
Company (ATMC), first-tier subsidiaries of UGI, provided general
management, supervisory, administrative and transportation services
to the Company and Petrolane pursuant to management services
agreements. As consideration for the services provided to the
Company under the AMC Management Services Agreement (AMC Agreement)
and the ATMC Management Services Agreement (ATMC Agreement), the
Company was charged a monthly fee determined by multiplying the
overhead expenses of AMC and ATMC by a percentage which represented
the Company's share of AMC's and ATMC's total overhead expenses. The
percentage was 55% during the 1995 seven-month period and the year
ended September 23, 1994. For the 1995 seven-month period and the
year ended September 23, 1994, the Company recorded combined
management fee expense of $10,368 and $17,313 pursuant to the AMC
and ATMC Agreements which amounts are included in operating and
administrative expenses - related parties.
Pursuant to the AMC Agreement, AMC arranged for AmeriGas Propane to
purchase substantially all of Petrolane's propane supply needs for
which Petrolane was charged AmeriGas Propane's costs. Such costs
totaled $171,609 and $292,565 during the 1995 seven-month period and
the year ended September 23, 1994, respectively.
Effective July 1993 through April 19, 1995, the Company leased and
subleased certain furniture and equipment to AMC. Income resulting
from these leases and subleases totaled $1,205 and $2,065 for the
1995 seven-month period and the year ended September 23, 1994,
respectively, and is classified as miscellaneous income - related
parties.
In order to achieve cost reductions and operational efficiencies in
overlapping geographical markets, during the year ended September
23, 1994 AmeriGas Propane and Petrolane closed certain district
locations and entered into a customer services agreement (Customer
Services Agreement). Pursuant to the Customer Services Agreement,
AmeriGas Propane served customers of closed Petrolane districts, and
Petrolane served customers of closed AmeriGas Propane districts.
Fees under the Customer Services
F-23
<PAGE> 85
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
Agreement generally represented a percentage, based upon retail
gallon sales, of district operating expenses. Fees billed by
Petrolane to AmeriGas Propane under the Customer Services Agreement
totaled $6,879 and $9,130 for the 1995 seven-month period and the
year ended September 23, 1994, respectively, and are reflected in
operating and administrative expenses - related parties. Fees billed
to Petrolane under the Customer Services Agreement totaled $5,307
and $7,702 for the 1995 seven-month period and the year ended
September 23, 1994, respectively, and are reflected in miscellaneous
income - related parties.
Prior to April 19, 1995, UGI provided certain management services to
the Company for a fee under a management services agreement. The fee
was based upon a specified rate per retail gallon of propane sold.
Under this agreement, management fee expense was $5,193 and $7,470
for the 1995 seven-month period and the year ended September 23,
1994, respectively, and is included in operating and administrative
expenses - related parties. The Company also reimbursed AmeriGas and
UGI for certain costs incurred on its behalf for third party
services, primarily legal and insurance.
During the year ended September 23, 1994, AGP-2 received a cash
capital contribution from AmeriGas of $5,001. The contribution was
used for the acquisition of propane businesses and for related
working capital needs. During the period September 24, 1994 to April
19, 1995, no capital contributions were made to the Company.
F-24
<PAGE> 86
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
8. MISCELLANEOUS INCOME
Miscellaneous income comprises the following:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
September 24, 1994 Year Ended
to April 19, September 23,
1995 1994
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 509 $1,077
Gain on sale of fixed assets 363 1,742
Finance charges 564 852
Rental income 97 168
Other miscellaneous 176 398
-------------------------------------------------------------------------------
$1,709 $4,237
-------------------------------------------------------------------------------
</TABLE>
F-25
<PAGE> 87
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
9. SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED)
In order to provide comparative financial information, the following
table includes unaudited results of operations and cash flows for
the period September 24, 1993 to April 23, 1994:
<TABLE>
<CAPTION>
September 24, 1993
to
April 23, 1994
------------------
(Unaudited)
<S> <C>
STATEMENT OF INCOME
Revenues: $ 242,973
Propane 23,443
---------
Other 266,416
---------
Costs and expenses:
Cost of sales-propane 116,491
Cost of sales-other 11,639
Operating and administrative expenses 83,992
Depreciation and amortization 13,491
Miscellaneous (income) (7,348)
---------
218,265
---------
Operating income 48,151
Interest expense 15,067
Income taxes 16,363
---------
Net income $ 16,721
=========
</TABLE>
F-26
<PAGE> 88
AMERIGAS PROPANE, INC./AMERIGAS PROPANE-2, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(Thousands of dollars)
<TABLE>
<CAPTION>
September 24, 1993
to
April 23, 1994
------------------
(Unaudited)
STATEMENT OF CASH FLOWS
<S> <C>
Cash Flows From Operating Activities:
Net income $ 16,721
Adjustments to reconcile to cash provided by operating
activities:
Depreciation and amortization 13,491
Deferred income taxes (2,216)
Other 313
Change in operating working capital 2,006
--------
Net cash provided by operating activities 30,315
--------
Cash Flows From Investing Activities:
Expenditures for property, plant and equipment (4,336)
Acquisitions of businesses (4,300)
Other 1,214
--------
Net cash used by investing activities (7,422)
--------
Cash Flows From Financing Activities:
Payment of dividends (12,987)
Repayment of long-term debt (574)
Capital contribution from AmeriGas 5,001
--------
Net cash used by financing activities (8,560)
--------
Cash and cash equivalents increase $ 14,333
========
</TABLE>
F-27
<PAGE> 89
PETROLANE INCORPORATED AND SUBSIDIARIES
(Predecessor of AmeriGas Partners, L.P.)
CONSOLIDATED FINANCIAL STATEMENTS
for the period September 24, 1994
to April 19, 1995 and the
year ended September 23, 1994
F-28
<PAGE> 90
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of AmeriGas Partners, L.P.
and The Board of Directors of AmeriGas Propane, Inc. :
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Petrolane Incorporated (Predecessor) and
subsidiaries for the year ended September 23, 1994 and for the period September
24, 1994 to April 19, 1995. These financial statements and the schedule referred
to below are the responsibility of the management of AmeriGas Propane, Inc. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Petrolane Incorporated (Predecessor) and subsidiaries for the year ended
September 23, 1994 and for the period September 24, 1994 to April 19, 1995, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule for the year ended September
23, 1994 and for the period September 24, 1994 to April 19, 1995, listed in the
Index to Financial Statements and Financial Statement Schedules, is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
As discussed in Note 4 to the consolidated financial statements, effective
September 24, 1994, the Company changed its method of accounting for
postemployment benefits.
ARTHUR ANDERSEN LLP
Chicago, Illinois
December 4, 1995
F-29
<PAGE> 91
PETROLANE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of dollars, except per share)
<TABLE>
<CAPTION>
September 24, Year Ended
1994 to September 23,
April 19, 1995 1994
--------- ---------
<S> <C> <C>
Revenues (note 2):
Propane $ 327,479 $ 512,069
Other 44,609 77,640
--------- ---------
372,088 589,709
--------- ---------
Costs and expenses:
Cost of sales-propane (note 6) 175,690 268,983
Cost of sales-other 27,463 50,010
Selling, general and administrative expenses 79,838 134,005
Selling, general and administrative
expenses - related parties (note 6) 20,469 33,316
Depreciation and amortization (note 2) 27,398 46,035
Taxes - other than income taxes 8,491 13,069
Miscellaneous (income) - related parties (note 6) (6,879) (9,130)
Miscellaneous (income) expense, net (1,851) (3,466)
--------- ---------
330,619 532,822
--------- ---------
Operating income 41,469 56,887
Interest expense 29,966 45,826
--------- ---------
Income before income taxes and change in accounting 11,503 11,061
Income tax expense (note 3) 10,113 13,370
--------- ---------
Income (loss) before change in accounting 1,390 (2,309)
Change in accounting for postemployment benefits (note 4) (905) --
--------- ---------
Net income (loss) $ 485 $ (2,309)
========= =========
Earnings (loss) per common share (note 2):
Earnings (loss) before accounting change $ .13 $ (.22)
Change in accounting for postemployment benefits (.08) --
--------- ---------
Net income (loss) per share $ .05 $ (.22)
========= =========
Average shares outstanding (thousands) 10,501 10,501
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE> 92
PETROLANE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
<TABLE>
<CAPTION>
Year
September 24, Ended
1994 to September 23,
April 19, 1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 485 $ (2,309)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 27,398 46,035
Deferred income taxes 6,610 10,860
Amortization of debt premium and interest
rate swap premiums (3,035) (6,565)
Provision for uncollectible accounts 1,876 1,565
Other, net (1,942) (2,413)
-------- --------
31,392 47,173
Net change in:
Accounts receivable 431 5,423
Inventories 6,851 (3,578)
Prepayments and other current assets 2,878 9,242
Accounts payable and other current liabilities (19,597) 244
-------- --------
Net cash provided by operating activities 21,955 58,504
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (7,291) (22,077)
Proceeds from disposals of property, plant and equipment 2,881 3,493
Acquisitions of businesses, net of cash acquired (2,840) --
Other, net -- 312
-------- --------
Net cash used by investing activities (7,250) (18,272)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (12,507) (21,146)
Increase (decrease) in working capital loans 7,000 (19,000)
Other (1,304) --
-------- --------
Net cash used by financing activities (6,811) (40,146)
-------- --------
Cash and cash equivalents increase $ 7,894 $ 86
======== ========
CASH AND CASH EQUIVALENTS:
End of period $ 18,671 $ 10,777
Beginning of period 10,777 10,691
-------- --------
Increase $ 7,894 $ 86
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE> 93
PETROLANE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Thousands of dollars)
<TABLE>
<CAPTION>
Common Stock
--------------------------------------
Class A Class B Additional
----------------- ---------------- paid-in Accumulated
Shares Amount Shares Amount capital deficit
--------- ------ --------- ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance - September 23, 1993 1,050,000 $ 11 9,450,000 $ 95 $ 105,650 $ (10,334)
Net loss (2,309)
Conversion of Class B Common
Stock pursuant to the plan of
reorganization (note 1) 2,099,438 21 (2,099,438) (21)
Issuance of Class A Common
Stock pursuant to the plan of
reorganization (note 1) 802
--------- ------ --------- ------ --------- -----------
Balance - September 23, 1994 3,150,240 32 7,350,562 74 105,650 (12,643)
Net income 485
--------- ------ --------- ------ --------- -----------
Balance - April 19, 1995 3,150,240 $ 32 7,350,562 $ 74 $ 105,650 $ (12,158)
========= ====== ========= ====== ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE> 94
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
REORGANIZATION AND EMERGENCE FROM CHAPTER 11 BANKRUPTCY
On May 21, 1993 (Petition Date), QFB Partners (QFB), Petrolane Gas
Service Limited Partnership (Pet Gas), Petrolane Incorporated
(Petrolane), Petrolane Finance Corp. (Pet Finance) and certain
affiliated and related entities (collectively, the "Debtors") commenced
cases seeking reorganization under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court"). On the Petition Date,
the Debtors also filed a joint plan of reorganization (Plan) for which
the Debtors had solicited and received prepetition acceptances. The
Plan was confirmed by the Bankruptcy Court on June 25, 1993 and
substantially completed (the "Closing") on July 15, 1993 (Closing
Date). Prior to the substantial completion of the Plan, QFB was owned
by QJV Corp. (QJV) and FB Pet, L.P. (FB Pet), affiliates of Quantum
Chemical Corporation (Quantum) and The First Boston Corporation,
respectively.
Pursuant to the Plan, on the Closing Date, AmeriGas, Inc. (AmeriGas), a
Pennsylvania corporation and a wholly owned subsidiary of UGI
Corporation (UGI), received 1,050,000 shares of Petrolane Class A
Common Stock (Class A Stock) representing 10% of the outstanding common
stock of Petrolane and $19.4 million in cash. The holders of Pet Gas's
$375 million principal amount of 13-1/4 Senior Subordinated Debentures
due 2001 (Old Subordinated Debentures) received, through a series of
transactions, 9,450,000 shares of Petrolane Class B Common Stock (Class
B Stock), representing 90% of the common stock of Petrolane, and
1,250,000 warrants to purchase, in certain circumstances from June 30,
1996 to March 31, 1998, UGI Common Stock at an exercise price of $24
per share (UGI Warrants), subject to adjustment. On the Closing Date,
all of the Old Subordinated Debentures were cancelled. As of December
23, 1993, AmeriGas had acquired 2,023,530 shares of Class B Stock at a
price of $24.45 per share pursuant to the exercise of Put Rights issued
under the Put Rights Agreement (Put Rights Agreement) entered into by
AmeriGas, Petrolane and Continental Bank (as Put Rights Agent) pursuant
to the Plan. As provided in Petrolane's Amended and Restated Articles
of Incorporation, the shares of Class B Stock so acquired by AmeriGas
were automatically converted into 2,023,530 shares of Class A Stock. In
addition, pursuant to the exercise of Put Rights, on December 27, 1993,
AmeriGas acquired an additional 75,908 shares of Class B Stock at a
price of $24.45 per share (which shares were automatically converted
into a like number of shares of Class A Stock). Because 562 of the
2,100,000 Put Rights issued under the Put Rights Agreement were not
exercised, on January 24, 1994, Petrolane's Board of Directors, acting
in accordance with the Plan, authorized the issuance and sale of 802
shares of Class A Stock to AmeriGas.
F-33
<PAGE> 95
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Holders of Class B Stock were given the right, from January 1, 1997 (or
earlier in certain circumstances) to December 31, 2001, to exchange all
or a portion of their Class B Stock for AmeriGas Common Stock
constituting up to an aggregate of 26% of the shares of AmeriGas Common
Stock outstanding on the Closing Date, and AmeriGas was given the
right, from January 1, 1998 to December 31, 2002, to require such
exchange. Prior to the time the holders of Class B Stock could exchange
their Class B Stock for AmeriGas Common Stock, they were entitled to
receive certain payments equal to the difference between (i) the result
obtained by dividing (x) the amount of the dividend paid by AmeriGas on
18,690,000 shares of AmeriGas Common Stock (the number of shares
presently owned by UGI Corporation) by (y) .89, and (ii) the amount of
the dividends paid by AmeriGas on 18,690,000 shares of AmeriGas Common
Stock. AmeriGas agreed to finance these payments through subordinated
loans to Petrolane or, in certain circumstances, to make such payments
directly.
Also pursuant to the Plan, the senior secured debt of the Debtors was
restructured which, among other things, resulted in amendments to the
amortization schedules and covenants contained in the agreements
governing such senior debt, and a new revolving credit facility
(Revolving Credit Agreement) in an initial amount of $73 million was
made available to Petrolane by certain of its senior secured lenders.
AmeriGas guaranteed up to $45 million of such senior debt which
guarantee was, subject to certain conditions, to decrease to $20
million over time. In addition, on the Closing Date affiliates of
AmeriGas began providing Petrolane with management and administrative
services. Petrolane entered into management services agreements with
UGI and its subsidiaries AmeriGas Management Company (AMC) and AmeriGas
Transportation Management Company (ATMC).
ACQUISITION OF 100% OF PETROLANE BY AMERIGAS AND TRANSFER OF ASSETS TO
MASTER LIMITED PARTNERSHIP
On April 19, 1995, a subsidiary of AmeriGas acquired by merger (the
"Petrolane Merger") the approximately 65% of Petrolane common shares
outstanding not already owned by UGI or AmeriGas and combined the
propane business and assets of Petrolane, AmeriGas Propane, Inc., a
Delaware Corporation (AmeriGas Propane), and AmeriGas Propane-2, Inc.
(the "Partnership Formation"). Under the terms of the Petrolane Merger
approved by the Company's Class B shareholders (other than UGI) on
April 12, 1995, 6,850,562 shares of the Company's Class B Common Stock
not held by UGI were converted into the right to receive $16.00 per
share in cash and all other rights associated with such shares expired.
The Petrolane Merger consideration of approximately $109,600 was
financed with the proceeds of a private placement of $110,000 of First
Mortgage Notes of the Operating Partnership. Immediately after the
Petrolane Merger, Petrolane, pursuant to a Conveyance and Contribution
Agreement, conveyed (the "Petrolane Conveyance") substantially all of
its assets and liabilities to AmeriGas Propane, L.P. (the "Operating
Partnership"), a Delaware limited partnership and subsidiary of
AmeriGas Partners, L.P. (AmeriGas Partners), a Delaware limited
partnership and AmeriGas Propane and
F-34
<PAGE> 96
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AmeriGas Propane-2, Inc. (AGP-2) merged into the Operating Partnership
(the "Formation Merger"). As a result of the Formation Merger and the
Petrolane Conveyance, AmeriGas Propane, Inc., a Pennsylvania
corporation and the general partner of AmeriGas Partners (the "General
Partner"), and Petrolane each received a limited partner interest in
the Operating Partnership, and the Operating Partnership received
substantially all of the assets and assumed substantially all of the
liabilities of AmeriGas Propane, AmeriGas Propane-2, Inc., Petrolane
and their respective operating subsidiaries. The net book value of the
assets contributed by Petrolane to the Operating Partnership exceeded
the liabilities assumed by $77,375. Immediately after the Petrolane
Conveyance, 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION PRINCIPLES
The accompanying consolidated financial statements include the results
of operations and cash flows of the Company for periods prior to the
Petrolane Conveyance. The consolidated financial statements include
results of operations and cash flows for the periods September 24, 1994
to April 19, 1995 (the 1995 seven-month period) and the year ended
September 23, 1994. All significant intercompany accounts and
transactions have been eliminated in consolidation.
FRESH START ACCOUNTING
Effective with the Closing on July 15, 1993, the Company adopted the
provisions of the American Institute of Certified Public Accountants'
Statement of Position 90-7 "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" (Fresh Start Accounting).
Pursuant to such principles, the Company's assets were stated at
reorganization value which is generally described as the value of the
Company before considering liabilities on a going-concern basis
following the completion of the Plan. The reorganization value of the
Company was determined by reference to the remaining liabilities plus
the value of the common shareholders' equity indicated by the
consideration paid by AmeriGas for 30% of the outstanding shares of the
Company's common stock. The reorganization value was allocated to the
assets of the Company in conformity with the procedures specified by
Accounting Principles Board Opinion No. 16, "Business Combinations",
for transactions reported on the basis of the purchase method of
accounting. In this allocation, identifiable assets were valued at
estimated fair value and the reorganization value in excess of
identifiable assets was recorded as "reorganization value in excess of
amounts allocable to identifiable assets" (excess reorganization
value). Deferred taxes were provided as of the Closing Date in
accordance with Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes" (SFAS
F-35
<PAGE> 97
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
109). The effects of the adjustments to the historical amounts of
individual assets and liabilities resulting from the adoption of Fresh
Start Accounting and the effects of the extinguishment of debt
resulting from the substantial completion of the Plan are reflected in
the Predecessor's final statement of operations for the period ended
July 15, 1993.
Fresh Start Accounting is applicable because pre-reorganization
shareholders received less than 50% of the Company's common stock and
the reorganization value of the Company was less than the total
postpetition liabilities and allowed claims.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash equivalents include all highly liquid investments with maturities
of three months or less when purchased and are recorded at cost plus
accrued interest which approximates market value.
Interest paid for the 1995 seven-month period and the year ended
September 23, 1994 was $33.9 million and $51.0 million, respectively.
Income taxes paid for the 1995 seven-month period and the year ended
September 23, 1994 were $3.6 million and $1.8 million, respectively.
REVENUE RECOGNITION
Revenues from the sale of propane are recognized principally when
product is shipped or delivered to customers.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined using an average cost method for propane, specific cost for
appliances and the first-in, first-out (FIFO) method for parts and
fittings.
PROPERTY, PLANT AND EQUIPMENT AND RELATED DEPRECIATION
Property, plant and equipment is stated at cost. When plant and
equipment are retired or otherwise disposed of, any gains or losses are
reflected in operations.
Depreciation of property, plant and equipment acquired by the Company
subsequent to the Closing is computed using the straight-line method
over estimated service lives ranging from two to 40 years.
F-36
<PAGE> 98
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE
ASSETS
Reorganization value in excess of amounts allocable to identifiable
assets resulting from the application of Fresh Start Accounting is
amortized on a straight-line basis over 20 years. Amortization expense
during the 1995 seven-month period and the year ended September 23,
1994 was $14.2 million and $24.7 million, respectively.
It is the Company's policy to review intangible assets, including
excess reorganization value, for impairment whenever events or changes
in circumstances indicate that the carrying amount of such assets may
not be recoverable. If such a review should indicate that the carrying
amount of intangible assets, including excess reorganization value, is
not recoverable, it is the Company's policy to reduce the carrying
amount of such assets to fair value.
INCOME TAXES
Income taxes for the 1995 seven-month period and the year ended
September 23, 1994, were provided based upon the provisions of SFAS
109. SFAS 109 requires recognition of deferred income tax liabilities
and assets for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Under this
method, deferred income tax liabilities and assets are determined based
on the differences between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.
NET EARNINGS (LOSS) PER SHARE
Net earnings (loss) per share for the 1995 seven-month period and the
year ended September 23, 1994 is based on the weighted average number
of shares of Class A and Class B common stock outstanding during those
periods.
F-37
<PAGE> 99
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INCOME TAXES
The Company's provisions for income taxes for the 1995 seven-month
period and the year ended September 23, 1994 consist of the following:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
September 24, 1994 Year Ended
to September 23,
April 19, 1995 1994
---------------------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C>
Current:
Federal $ 2,936 $ 2,406
State 567 104
---------------------------------------------------------------------------------------------------------
3,503 2,510
Deferred 6,610 10,860
---------------------------------------------------------------------------------------------------------
Total income tax expense $10,113 $13,370
---------------------------------------------------------------------------------------------------------
</TABLE>
A reconciliation from the statutory federal tax rate to the effective
tax rate is as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
September 24, 1994 Year Ended
to September 23,
April 19, 1995 1994
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Statutory federal tax rate 35.0% 35.0%
Difference in tax rate due to:
State income taxes, net
of federal income tax benefit
9.3 12.1
Nondeductible
amortization of excess
reorganization value 43.4 78.1
Other nondeductible
expenses .5 3.7
Adjustments related to
prior years - (3.4)
Adjustments of deferred
tax balances established at
Closing Date - (6.4)
Other (.3) 1.8
---------------------------------------------------------------------------------------------------------
Effective tax rate 87.9% 120.9%
---------------------------------------------------------------------------------------------------------
</TABLE>
F-38
<PAGE> 100
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. PENSION PLAN AND POSTEMPLOYMENT BENEFITS
Concurrent with the Partnership Formation, employees of the Company
became employees of the General Partner and the Partnership assumed the
Company's employee-related liabilities including liabilities related to
employee benefit plans. Prior to the Partnership Formation, employees
of the Company participated in the Petrolane Incorporated Pension Plan
(Pension Plan), a noncontributory defined contribution pension plan
established on the Closing Date. Company contributions to the Pension
Plan represented a percentage of each covered employee's salary. The
Company also sponsored a 401(k) savings plan, the Petrolane Savings and
Stock Ownership Plan (Savings Plan), for eligible employees. Under the
Savings Plan, participants could contribute a percentage of their
compensation on a before-tax basis. The Savings Plan also provided for
discretionary employer matching contributions. The combined cost of
benefits under the Pension Plan and the Savings Plan was $1.7 million
for the 1995 seven-month period and $2.8 million for the year ended
September 23, 1994.
Effective September 24, 1994, the Company adopted the provisions of
SFAS No. 112, "Employers' Accounting for Postemployment Benefits" (SFAS
112). SFAS 112 requires, among other things, the accrual of benefits
provided to former or inactive employees (who are not retirees) and to
their beneficiaries and covered dependents. Prior to the adoption of
SFAS 112, the Company accounted for these postemployment benefits on a
pay-as-you-go basis. The cumulative effect of SFAS 112 on the results
of operations for periods prior to September 24, 1994 of $1.5 million
pre-tax ($905,000 after-tax) has been reflected in the Consolidated
Statement of Operations for the 1995 seven-month period as "Change in
accounting for postemployment benefits." The effect of the change in
accounting for postemployment benefits on the results of operations for
the 1995 seven-month period was not material.
5. COMMITMENTS AND CONTINGENCIES
The Company utilized leased assets under both capital and operating
leases. The aggregate operating lease rental expense charged to
operations for the 1995 seven-month period and the year ended September
23, 1994 was $3.2 million and $8.8 million, respectively.
Petrolane, in connection with its divestiture of nonpropane operations
prior to its acquisition by QFB, guaranteed certain lease obligations
for retail and distribution facilities, which at April 19, 1995 were
estimated to aggregate approximately $109 million (subject to reduction
in certain circumstances). Under certain circumstances, such
obligations may be reduced by earnings of divested operations. In
addition, Petrolane has guaranteed other obligations. Petrolane has
been indemnified by Texas Eastern 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 these lease guarantees. In a June
15, 1993 Stipulation
F-39
<PAGE> 101
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and Order entered in Petrolane's bankruptcy, Texas Eastern confirmed
its obligation to indemnify and hold harmless Petrolane from and
against certain liabilities and losses of discontinued businesses
including lease obligations. To date, Texas Eastern has directly
satisfied its obligations without the Company's having to honor its
guarantee.
In addition, in connection with its sale of the international
operations of Tropigas de Puerto Rico (Tropigas) to Shell Petroleum
N.V. in 1989, Petrolane agreed to indemnify Shell for various scheduled
claims that were pending against Tropigas. In turn, Petrolane has a
right to seek indemnity on these claims first from International
Controls Corp. (ICC), which sold Tropigas to Petrolane, and then from
Texas Eastern. To date, Petrolane has not paid any sums under this
indemnity, but several claims by Shell, including claims related to
certain antitrust actions aggregating at least $68 million, remain
pending. In the above referenced Stipulation and Order, Texas Eastern
confirmed its obligation to indemnify and hold harmless Petrolane from
and against the liabilities discussed in this paragraph, but only to
the extent that Petrolane, despite the exercise of its best efforts, is
not indemnified by a third party, including ICC.
The Company has identified environmental contamination at several
properties it owned or operated. The Company's policy is to accrue
environmental investigation and cleanup costs when it is probable that
a liability exists and the amount 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 Company intends to pursue
recovery of any incurred costs through all appropriate means.
In addition to these environmental matters, there are various other
pending claims and legal actions arising out of the normal conduct of
the Company'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
Company. 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
Company's financial position but could be material to operating results
in future periods depending on the nature and timing of future
developments with respect to these matters and the amounts of future
operating results.
The commitments and contingencies discussed herein were transferred on
April 19, 1995, to AmeriGas Propane, L.P. pursuant to the Conveyance
and Contribution Agreement.
F-40
<PAGE> 102
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTY TRANSACTIONS
Pursuant to its management agreement with UGI (UGI Management
Agreement), UGI provided to the Company certain financial, accounting,
human resources, risk management, insurance, legal, corporate
communications, investor relations, treasury and corporate development
services. For such services, UGI received a quarterly fee from
Petrolane which was adjusted annually for inflation. The quarterly fee
under the UGI Management Agreement, which was $2.9 million through June
1994, increased to $3.0 million in July 1994. During the 1995
seven-month period and the year ended September 23, 1994, the Company
recorded management fee expense under the UGI Management Agreement of
$6.8 million and $11.7 million, respectively, which is included in
selling, general and administrative expenses - related parties.
The Company also entered into a management services agreement with AMC
(AMC Agreement) and a transportation services agreement with ATMC (ATMC
Agreement). AMC and ATMC provided general management, supervisory,
administrative and transportation services to Petrolane and AmeriGas's
wholly owned subsidiaries, AmeriGas Propane and AGP-2. In consideration
for such services provided to the Company, the Company paid AMC and
ATMC monthly fees based upon a percentage of AMC's and ATMC's monthly
overhead expenses. This percentage generally represented the proportion
of incremental costs incurred by AMC and ATMC to provide such services
to the Company and was subject to adjustment under certain
circumstances. For the 1995 seven-month period and the year ended
September 23, 1994, the Company recorded total management fee expense
under the AMC and ATMC agreements of $8.3 million and $13.9 million,
respectively, which is included in selling, general and administrative
expenses - related parties.
Pursuant to the AMC Agreement, AMC was required to arrange the supply
and delivery of the Company's propane requirements on terms that were
at least as favorable as the arrangements made for AmeriGas Propane in
the same geographical areas. Subsequent to the Closing, AMC arranged
for AmeriGas Propane to purchase substantially all of the Company's
propane requirements from various suppliers and AmeriGas Propane has
charged the Company for such propane at AmeriGas Propane's cost. Such
purchases from AmeriGas Propane totaled approximately $171.6 million
for the 1995 seven-month period and $293 million for the year ended
September 23, 1994.
In order to achieve cost reductions and operational efficiencies in
overlapping geographical markets served by the Company and AmeriGas
Propane, the Company and AmeriGas Propane closed certain district
locations and entered into a customer services agreement (Customer
Services Agreement). Pursuant to the Customer Services Agreement, 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 totaled
$5.3 million for the 1995
F-41
<PAGE> 103
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
seven-month period and $7.7 million for the year ended September 23,
1994, and are included in selling, general and administrative expenses
- related parties. Fees billed to AmeriGas Propane under the Customer
Services Agreement totaled $6.9 million for the 1995 seven-month period
and $9.1 million for the year ended September 23, 1994 and are included
in miscellaneous income - related parties.
Prior to the Closing Date, Quantum, AmeriGas and the Company entered
into a transition services agreement (Transition Agreement) pursuant to
which Quantum provided, prior to the Closing, certain services to
AmeriGas to facilitate the management of the Company after the Closing.
In addition, Quantum agreed to provide to AMC and the Company, for a
reasonable time after the Closing, any general and administrative
services which AmeriGas and Petrolane might reasonably request.
Expenses incurred by the Company under the Transition Agreement totaled
$1.1 million for the year ended September 23, 1994, which amount is
included in selling, general and administrative expenses. There were no
such expenses incurred by the Company for the 1995 seven-month period.
F-42
<PAGE> 104
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED)
In order to provide comparative financial information, the following
table includes unaudited results of operations and cash flows for the
period September 24, 1993 to April 23, 1994:
<TABLE>
<CAPTION>
September 24, 1993
to April 23,
1994
----
(Thousands)
<S> <C>
STATEMENT OF INCOME
Revenues: $371,133
Propane 49,816
------
Other 420,949
-------
Costs and expenses:
Cost of sales-propane 192,440
Cost of sales-other 31,862
Selling, general and administrative expenses 105,713
Depreciation and amortization 26,814
Taxes-other than income taxes 8,349
Miscellaneous (income) (6,683)
------
358,495
Operating income 62,454
Interest expense 26,918
Income tax expense 32,843
------
Net income $ 2,693
========
</TABLE>
F-43
<PAGE> 105
PETROLANE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
September 24, 1993
to April 23,
1994
----
(Thousands)
<S> <C>
STATEMENT OF CASH FLOWS
Cash Flows From Operating Activities:
Net income $ 2,693
Adjustments to reconcile to cash provided by
operating activities:
Depreciation and amortization 26,814
Deferred income taxes 26,222
Other (3,958)
Change in operating working capital 1,870
--------
Net cash provided by operating activities 53,641
--------
Cash Flows From Investing Activities:
Expenditures for property, plant and
equipment (6,887)
Other 439
--------
Net cash used by investing activities (6,448)
--------
Cash Flows From Financing Activities:
Repayment of long-term debt (7,355)
Change in working capital loans (35,000)
--------
Net cash used by financing activities (42,355)
--------
Cash and cash equivalents increase $ 4,838
========
</TABLE>
F-44
<PAGE> 106
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
BALANCE SHEETS
(Thousands of dollars)
<TABLE>
<CAPTION>
September 30,
-----------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Accounts receivable $ 5,063 $ 4,950
Investment in AmeriGas Propane, L.P. 538,664 657,075
Deferred charges 3,217 3,521
-------- --------
Total assets $546,944 $665,546
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 67 $ 32
Accrued interest 4,641 4,555
-------- --------
Total current liabilities 4,708 4,587
Long-term debt 100,000 100,000
Partners' capital:
Common unitholders 230,376 291,988
Subordinated unitholders 207,439 263,362
General partner 4,421 5,609
-------- --------
Total partners' capital 442,236 560,959
-------- --------
Total liabilities and partners' capital $546,944 $665,546
======== ========
</TABLE>
S-1
<PAGE> 107
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
STATEMENTS OF OPERATIONS
(Thousands of dollars)
<TABLE>
<CAPTION>
Year April 19
Ended to
September 30, September 30,
1996 1995
------------ ------------
<S> <C> <C>
Equity in income (loss) of AmeriGas Propane, L.P. $ 20,676 $(42,414)
Interest expense (10,438) (4,693)
------- -------
Net income (loss) $ 10,238 $(47,107)
======= =======
</TABLE>
S-2
<PAGE> 108
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
STATEMENTS OF CASH FLOWS
(Thousands of dollars)
<TABLE>
<CAPTION>
Year April 19
Ended to
September 30, September 30,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 10,238 $ (47,107)
Reconciliation of net income (loss) to net cash from operating activities:
Equity in (income) loss of AmeriGas Propane, L.P. (20,676) 42,414
Increase in accounts receivable (113) --
Increase in accounts payable 35 --
Increase in accrued interest 85 4,556
Amortization of deferred debt issuance costs 305 137
-------- ---------
Net cash used by operating activities (10,126) --
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Contribution to AmeriGas Propane, L.P. -- (447,433)
Distribution from AmeriGas Propane, L.P. 102,853 18,797
-------- ---------
Net cash provided (used) by investing activities 102,853 (428,636)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (92,727) (18,797)
-------- ---------
Net cash used by financing activities (92,727) (18,797)
-------- ---------
PARTNERSHIP FORMATION TRANSACTIONS:
Net proceeds from issuance of common units -- 349,751
Capital contribution from General Partner -- 432
Issuance of long-term debt -- 97,250
-------- ---------
Net cash provided by partnership formation transactions -- 447,433
-------- ---------
Cash and cash equivalents increase $ -- $ --
======== =========
CASH AND CASH EQUIVALENTS:
End of period $ -- $ --
Beginning of period -- --
-------- ---------
Increase $ -- $ --
======== =========
</TABLE>
Supplemental disclosure of non-cash investing activities:
Effective April 19, 1995, substantially all of the assets and liabilities
of AmeriGas Propane, Inc., AmeriGas Propane-2, Inc. and Petrolane
Incorporated and their respective operating subsidiaries were contributed
at historical cost to AmeriGas Propane, L.P., a subsidiary of AmeriGas
Partners, L.P. The net assets contributed of $286,956 are net of the
following liabilities: accounts payable - $40,304; long-term debt -
$929,828; other liabilities - $171,667.
S-3
<PAGE> 109
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Thousands of dollars)
<TABLE>
<CAPTION>
Charged
Balance at (credited) Balance at
beginning to costs and end of
of period expenses Other period
---------- ------------ ---------- ------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1996
Reserves deducted from assets in
the consolidated balance sheet:
Allowance for doubtful accounts $ 4,647 $ 5,568 $ (3,636)(1) $ 6,579
======= ======
Allowance for amortization of other
deferred costs $ 74 $ 170 $ -- $ 244
======= ======
Allowance for amortization of deferred
financing costs $ 690 $ 1,548 $ -- $ 2,238
======= ======
Other reserves:
Self-insured property and casualty liability $43,908 $12,401 $ (13,977)(2) $42,332
======= =======
Insured property and casualty liability $12,246 $ 6,778 $ -- $19,024
======= =======
Environmental $17,906 $(5,932) $ (580)(2) $11,394
======= =======
Other $ 7,685 $(1,195) $ (2,065)(2) $ 4,235
======= =======
(190)(4)
APRIL 19, 1995 TO SEPTEMBER 30, 1995
Reserves deducted from assets in
the consolidated balance sheet:
Allowance for doubtful accounts $ 7,257 $ 778 $ (3,388)(1) $ 4,647
======= =======
Allowance for amortization of other
deferred costs $ 417 $ 191 $ (534)(4) $ 74
======= =======
Allowance for amortization of deferred
financing costs $ -- $ 690 $ -- $ 690
======= =======
Other reserves:
Self-insured property and casualty liability $43,849 $ 5,901 $ (6,081)(2) $43,908
======= =======
239 (4)
Insured property and casualty liability $ 7,800 $ 6,546 $ (2,100)(2) $12,246
======= =======
Environmental $21,425 $ - $ (157)(2) $17,906
======= =======
(3,362)(4)
Other $10,857 $ 242 $ (490)(4) $ 7,685
======= =======
(2,924)(2)
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
(2) Payments.
(3) Represents amounts for Petrolane Incorporated (Petrolane) as a result of
the purchase on April 19, 1995 of the 65% of the common stock of Petrolane
not already owned by UGI or its subsidiary AmeriGas, Inc.
(4) Other adjustments.
S-4
<PAGE> 110
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of AmeriGas Partners, L.P. and
the Board of Directors of AmeriGas Propane, Inc.:
We have audited the accompanying consolidated balance sheets of AmeriGas
Partners, L.P. and subsidiaries as of September 30, 1996 and 1995, and the
related consolidated statements of operations, partners' capital and cash flows
for the year ended September 30, 1996 and for the period April 19, 1995 to
September 30, 1995. These financial statements and the schedules referred to
below are the responsibility of the management of AmeriGas Propane, Inc. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
AmeriGas Partners, L.P. and subsidiaries as of September 30, 1996 and 1995 and
the results of their operations and their cash flows for the year ended
September 30, 1996 and for the period April 19, 1995 to September 30, 1995, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules for the year ended September 30,
1996 and for the period April 19, 1995 to September 30, 1995, listed in the
Index to Financial Statements and Financial Statement Schedules, are presented
for purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 22, 1996
S-5
<PAGE> 111
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
10.2 First Amendment dated as of July 31, 1995 to Credit Agreement
10.3 Second Amendment dated as of October 28, 1996 to Credit Agreement.
10.19 Financing Agreement dated October 28, 1996 between AmeriGas Propane,
Inc. and AmeriGas Partners, L.P.
10.22 Agreement with Robert C. Mauch dated July 25, 1996.
13 Pages 10 through 23 of AmeriGas Partners, L.P. Annual Report for the
year ended September 30, 1996.
21 Subsidiaries of AmeriGas Partners, L.P.
27 Financial Data Schedule
99 Cautionary Statements Affecting Forward-looking Information
</TABLE>
<PAGE> 1
EXHIBIT 10.2
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.
-2-
<PAGE> 3
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
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
-3-
<PAGE> 4
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
------------------------------
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.
-4-
<PAGE> 5
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
-----------------------------
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
------------------------------
-5-
<PAGE> 6
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
------------------------------
-6-
<PAGE> 1
EXHIBIT 10.3
SECOND AMENDMENT TO CREDIT AGREEMENT
This Agreement, dated as of October 28, 1996 (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 Agent, the Issuing Bank and the Banks are parties
to a Credit Agreement dated as of April 12, 1995 as amended by an Amendment
dated as of July 31, 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 temporarily expand the uses of proceeds under the
Special Purpose Commitment to also include working capital purposes. The Banks
and the Issuing Bank have agreed to do so, 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. AMENDMENTS.
1. Amendment of Section 2.1(c).
Section 2.1(c) is hereby amended by deleting the last sentence
thereof and replacing with the following:
Within the limits of each Bank's Special Purpose
Commitment, and subject to the other terms and
conditions hereof, the Borrowers may borrow under
this Section 2.1(c), prepay under Section 2.6, and,
with respect to the Special
-1-
<PAGE> 2
Purpose Loans for working capital purposes only,
reborrow under this Section 2.1(c).
2. Amendment of Section 8.9(e).
Section 8.9(e) is hereby amended by adding the following after
the words "Schedule 8.9(e)":
"from October 28, 1996 to the Revolving Termination
Date, up to $15,000,000 of Special Purpose Loans may
also be used for working capital purposes of the
Company."
B. REPRESENTATIONS AND WARRANTIES.
Each Borrower hereby represents and warrants to the Agent, the Banks
and the Issuing Bank that:
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 making 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 making 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 execution by the Required Banks, provided that the Agent
shall have received in form and substance satisfactory to the Agent
and the Required Banks all of the following:
1. A copy of the resolution passed by the Board of Directors of
each Borrower, certified by the Secretary or an Assistant
Secretary of such Borrower as being in full force and effect
on the date hereof, authorizing the execution, delivery and
performance of the Credit Agreement as hereby amended.
-2-
<PAGE> 3
2. A certificate of incumbency certifying the names of the
officers of the Borrower authorized to sign this Amendment,
together with the true signatures of such officers.
3. Executed counterparts of this Amendment.
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
signatures 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
according to its terms and provisions, and all references
therein or in the Exhibits to the Credit Agreement shall
henceforth 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
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
AMERIGAS PROPANE, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
-3-
<PAGE> 4
PETROLANE INCORPORATED
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
BANK OF AMERICA ILLINOIS,
as a Bank and as Issuing Bank
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
THE BANK OF NEW YORK
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
THE BANK OF TOKYO - MITSUBISHI, LTD.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
CORESTATES BANK, N.A.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
THE FIRST NATIONAL BANK OF BOSTON
-4-
<PAGE> 5
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
THE FIRST NATIONAL BANK OF MARYLAND
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
FIRST UNION NATIONAL BANK
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
MELLON BANK, N.A.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
PNC BANK, NATIONAL ASSOCIATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
UNION BANK OF CALIFORNIA, N.A.
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
-5-
<PAGE> 6
UNION BANK OF SWITZERLAND,
New York Branch
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
ACKNOWLEDGED AND CONSENTED:
NORTHWEST LPG SUPPLY., LTD.,
as Guarantor
By
------------------------
Title:
---------------------
AMERIGAS PROPANE PARTS &
SERVICE, INC.,
as Guarantor
By
------------------------
Title:
---------------------
-6-
<PAGE> 1
EXHIBIT 10.19
FINANCING AGREEMENT
This FINANCING AGREEMENT, dated as of October 28, 1996 (the
"Agreement"), is between AmeriGas Propane, Inc., a Pennsylvania corporation
("AGP"), and AmeriGas Propane, L.P., a Delaware limited partnership ("APLP").
BACKGROUND
A. AGP is the sole general partner of APLP.
B. AGP has agreed to make available to APLP a revolving
credit facility, upon the terms and conditions set forth in this Agreement, to
finance APLP's working capital, capital expenditures and interest and
distribution expenses.
C. Capitalized terms used herein and not otherwise
defined shall have the respective meanings assigned to them in that certain
Credit Agreement dated as of April 12, 1995 among AGP, APLP, Petrolane
Incorporated, Bank of America National Trust and Savings Association, as Agent,
and the other financial institutions party thereto (the "Credit Agreement").
NOW, THEREFORE, in consideration of the premises and covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Credit Line Terms.
(a) Credit Limit. AGP agrees, on the terms and
conditions set forth herein, to make loans ("Loans") to APLP from time to time
on any Business Day during the period from the date hereof to the Revolving
Termination Date, in an aggregate principal amount not to exceed at anytime
outstanding of $20,000,000 (the "Commitment"). Subject to the other terms and
conditions hereof, APLP may borrow under this Section 1(a), prepay under
Section 1(d) and reborrow under this Section 1(a). The Commitment shall
automatically be terminated (i) upon the occurrence of an Event of Default (as
defined in Section 4 below) unless waived in writing by AGP or (ii) if AGP is
no longer the sole general partner of APLP. Upon the termination of the
Commitment, subject to the provisions of Section 15 below, APLP shall pay to
AGP all amounts owing or payable under this Agreement, without presentment,
demand, protest or any other notice of any kind, all of which are expressly
waived by APLP.
(b) Procedure for Borrowing. Each borrowing by APLP
pursuant to Section 1(a) shall be made upon APLP's written notice
<PAGE> 2
delivered to AGP one Business Day prior to the requested borrowing date
specifying the requested borrowing amount and date. All advances by AGP
hereunder shall be noted on the Master Promissory Note provided for in Section
3 hereof.
(c) Voluntary Termination or Reduction of Commitment.
APLP may, upon prior written notice to AGP, terminate the Commitment or
permanently reduce the Commitment by an aggregate minimum amount of $1,000,000
or any multiple of $1,000,000 in excess thereof. At no time shall the amount
of outstanding Loans exceed the amount of the Commitment.
(d) Optional Prepayment. APLP may at anytime, upon
prior notice to AGP, prepay Loans, together with all accrued and unpaid
interest thereon, in whole or in part.
(e) Repayment. APLP shall repay to AGP on the
Revolving Termination Date the aggregate principal amount of Loans outstanding
on such date, together with all accrued and unpaid interest thereon.
(f) Interest. Each Loan shall bear interest on the
outstanding principal amount thereof from the applicable borrowing date to the
one month anniversary of the borrowing date at a rate per annum equal to the
Offshore Rate, with an Interest Period of one month, on such borrowing date,
plus the Applicable Margin for Offshore Rate Loans - Revolving Loans (the
"Interest Rate"). On each one month anniversary of any Loan (the "Reset
Date"), such Loan shall bear interest on the outstanding principal amount
thereof until the next one month anniversary date at a rate per annum equal to
the Interest Rate on the Reset Date. The Interest Rate shall change during any
Interest Period as a result of changes in the Applicable Margin. Interest on
each Loan shall be paid in arrears on the last day of each month and on the
Revolving Termination Date.
(g) Default Interest. During the existence of any
Event of Default, interest shall be paid upon demand by AGP. The foregoing
notwithstanding, if any amount of principal of or interest on any Loan, or any
other amount payable hereunder, is not paid in full when due, APLP agrees to
pay interest on such unpaid amount, from the date such amount becomes due to
the date such amount is paid in full, and after as well as before any entry of
judgment thereon to the extent permitted by law, payable on demand (but not
more frequently than once per week), at a fluctuating rate per annum equal to
the Base Rate plus 2%.
(h) Facility Fees. APLP shall pay to AGP on the
last day of each calendar quarter a facility fee from the date hereof
2
<PAGE> 3
through the Revolving Termination Date, on the daily average amount of the
Commitment (whether or not used), at the rate per annum set forth below for
each pricing tier as such pricing tier is applicable.
<TABLE>
<CAPTION>
Pricing Tier Funded Debt/EBITDA Facility Fee Rate
- ------------ ------------------ -----------------
<S> <C> <C>
I Less than 1.75 x 0.1400%
II Greater than or equal to 1.75 x but 0.1600%
Less than 2.75 x
III Greater than or equal to 2.75 x but 0.2000%
Less than 3.25 x
IV Greater than or equal to 3.25 x but 0.2750%
Less than 3.75 x
V Greater than or equal to 3.75 x but 0.3500%
Less than 4.25 x
VI Greater than or equal to 4.25 0.3750%
</TABLE>
For the purpose of determining the applicable pricing tier, EBITDA shall be
determined as at the end of each fiscal quarter for the four fiscal quarters
then ending and Funded Debt shall be determined as at the end of each fiscal
quarter. Pricing changes shall be effective forty-five (45) days after the end
of each of the first three fiscal quarters of the fiscal year and ninety (90)
days after each fiscal year end.
(i) Payments by APLP. All payments by APLP shall be
made without set-off, recoupment or counterclaim. Any payment due on a day
other than a Business Day shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(j) Waivers of Notices, Etc. APLP hereby waives
presentment, demand, protest, notice of default, and any and all other notices
or demands in connection with the delivery, acceptance, performance or
enforcement of this Agreement.
(k) Computation of Fees and Interest. All
computations of fees and interest shall be made on the basis of a 360-day year
and actual days elapsed. Interest and fees shall accrue during each period
during which interest on such fees are computed from the first day thereof to
the last day thereof.
3
<PAGE> 4
2. Lending Authority. The President, any Vice
President, the Treasurer and any other officer of AGP shall have the authority
hereunder on behalf of AGP to receive requests for advances from, to lend funds
to, and to give notices to, APLP, and to take such other steps on behalf of AGP
as are reasonable and necessary to carry out the terms of this Agreement. The
President, any Vice President, the Treasurer and any other officer of AGP shall
have the authority hereunder on behalf of APLP to request advances and to
borrow funds from, and to give notices and confirmations to, AGP, to make
repayments of any amounts due hereunder, and to take such other steps on behalf
of APLP as are reasonable and necessary to carry out the terms of this
Agreement.
3. Master Promissory Note. Concurrent with the signing of
this Agreement, APLP shall deliver to AGP a properly completed and duly
executed Master Promissory Note, substantially in the form attached hereto as
Exhibit A; provided, however, that notwithstanding the face amount of the
Master Promissory Note, APLP's liability thereunder shall be limited at all
times to APLP's actual indebtedness (principal and interest) then outstanding
to AGP hereunder.
4. Events of Default. It shall be an "Event of Default"
under this Agreement if (a) APLP shall fail to pay to AGP any amount of
principal of any Loan or, within ten (10) days after the same becomes due, any
interest, fee or other amount payable to AGP hereunder, or (b) an Event of
Default as described in Section 9.1 of the Credit Agreement shall occur and be
continuing.
If an Event of Default occurs and is continuing, APLP may, subject to
the provisions of Section 15 hereof:
(a) declare all amounts owing or payable under this
Agreement due and payable, without presentment, demand, protest or other notice
of any kind, all of which are expressly waived by APLP; and/or
(b) exercise all rights and remedies available under
this Agreement or applicable law;
provided, however, that upon the occurrence of any event specified in
subsection (f) or (g) of Section 9.1 of the Credit Agreement (in the case of
clause (i) of subsection (g) upon the expiration of the sixty (60) day period
mentioned therein), the unpaid principal amount of all Loans and all interest
and other amounts shall automatically become due and payable without further
act of AGP.
4
<PAGE> 5
The rights provided in this Agreement are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or Agreement now existing or hereafter
arising.
5. Payment of Expenses. APLP shall bear all expenses
incurred by either party hereto in connection with the preparation of this
Agreement and the consummation of the transactions contemplated hereby.
6. Further Assurances. Each party shall from time to time at
the request of the other execute, acknowledge and deliver any and all such
further papers, documents, powers of attorney, notices or other instruments
that may reasonably be required to give full force and effect to the provisions
and intent of this Agreement.
7. Assignment. None of the rights or obligations of APLP
under this Agreement shall be assignable by APLP. AGP shall not sell, pledge,
assign or otherwise transfer any of its rights hereunder without giving APLP
written notice thereof.
8. Notices. Except where oral notice is specifically
permitted by this Agreement and other than as set forth below, any notice to
AGP or APLP hereunder shall be in writing and sent to the following addresses,
unless and until either party notifies the other in writing to the contrary:
If to AmeriGas Propane, Inc., to Box 965, Valley Forge, PA
19482, Attention: Treasurer.
If to AmeriGas Propane, L. P., to Box 965, Valley Forge, PA
19482, Attention: Treasurer.
9. Governing Law. This Agreement, and all documents issued
or delivered pursuant hereto, shall be deemed to have been signed, accepted,
completed and issued at the office of AGP at Valley Forge, Pennsylvania, and
shall be governed by, and construed and enforced in accordance with, the laws
of the Commonwealth of Pennsylvania.
10. Binding Effect. This Agreement shall inure to the
benefit of, and be binding upon and enforceable by, the parties hereto and
their respective successors and assigns.
11. Entire Agreement; Amendments. This Agreement, together
with the Exhibit referred to herein, sets forth the entire agreement of the
parties hereto with respect to the subject matter hereof. Any prior agreements
or understandings between the parties
5
<PAGE> 6
hereto regarding the subject matter hereof, whether written or oral, are
superseded by this Agreement. This Agreement may not be amended or modified
except by a written instrument duly executed by each of the parties hereto.
12. Waiver. Any term or provision of this Agreement may be
waived at any time by the party entitled to the benefit thereof by a written
instrument duly executed by such party, and such waiver shall not constitute a
waiver of any other provision of this Agreement or a further waiver of the
provision waived.
13. Section Headings; Gender; Number. All section headings,
and the use of a particular gender or number (plural or singular), are for
convenience only and shall in no way modify or restrict any of the terms or
provisions hereof.
14. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, and both of which
taken together shall constitute but one and the same instrument. This
Agreement shall become binding only when each party hereto has executed and
delivered to the other party one or more counterparts.
15. Subordination. (a) The indebtedness ("Subordinated
Debt") evidenced by this Agreement is subordinate and junior in right of
payment to all Senior Debt (as defined in subdivision (b) hereof) of APLP to
the extent provided herein.
(b) For all purposes of these subordination provisions the
term "Senior Debt" shall mean all principal of and Make Whole Amount, if any,
and interest on (i) APLP's First Mortgage Notes, Series A through C, originally
issued in the aggregate principal amount of $518,000,000, pursuant to separate
Note Agreements, dated as of April 12, 1995, between APLP, AmeriGas Propane,
Inc., a Pennsylvania corporation and Petrolane Incorporated, a California
corporation and the institutional investors listed on Schedule I thereto (and
any notes issued in substitution therefor), (ii) those obligations outstanding
under the Credit Agreement, and (iii) all other indebtedness of APLP for
borrowed money unless, under the instrument evidencing the same or under which
the same is outstanding, it is expressly provided that such other indebtedness
is junior and subordinate to other indebtedness and obligations of APLP. The
Senior Debt shall continue to be Senior Debt and entitled to the benefits of
these subordination provisions irrespective of any amendment, modification or
waiver of any term of or extension or renewal of the Senior Debt.
6
<PAGE> 7
(c) Upon the happening of an event of default with respect to
any Senior Debt, as defined therein or in the instrument under which the same
is outstanding, which occurs at the maturity thereof or which automatically
accelerates or permits the holders thereof to accelerate the maturity thereof,
then, unless and until such event of default shall have been remedied or waived
or shall have ceased to exist, no direct or indirect payment (in cash, property
or securities or by set-off or otherwise) other than Permitted Payments shall
be made on account of the principal of, or premium, if any, or interest on any
Subordinated Debt, or as a sinking fund for the Subordinated Debt, or in
respect of any redemption, retirement, purchase or other acquisition of any of
the Subordinated Debt. For purposes of these subordination provisions,
"Permitted Payments" shall mean (i) payments of in-kind interest and (ii)
payments of Permitted Securities (as defined below) pursuant to paragraph (d)
below.
(d) In the event of
(i) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment,
composition or other similar proceeding relating to
APLP, its creditors as such or its property,
(ii) any proceeding for the liquidation, dissolution or
other winding-up of APLP, voluntary or involuntary,
whether or not involving insolvency or bankruptcy
proceedings,
(iii) any assignment by APLP for the benefit of creditors,
or
(iv) any other marshalling of the assets of APLP,
all Senior Debt (including any interest thereon accruing at the legal rate
after the commencement of any such proceedings and any additional interest that
would have accrued thereon but for the commencement of such proceedings) shall
first be paid in full before any payment or distribution, whether in cash,
securities or other property (other than Permitted Payments), shall be made to
any holder of any Subordinated Debt on account of any Subordinated Debt. Any
payment or distribution, whether in cash, securities or other property (other
than securities ("Permitted Securities") of APLP or any other entity provided
for by a plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in these subordination provisions
with respect to Subordinated Debt, to the payment of all Senior Debt at the
time outstanding and to any securities issued in respect thereof under any such
plan of reorganization or readjustment), which would otherwise
7
<PAGE> 8
(but for these subordination provisions) be payable or deliverable in respect
of this Subordinated Debt shall be paid or delivered directly to the holders of
Senior Debt in accordance with the priorities then existing among such holders
until all Senior Debt (including any interest thereon accruing at the legal
rate after the commencement of any such proceedings and any additional interest
that would have accrued thereon but for the commencement of such proceedings)
shall have been paid in full.
(e) In the event that any holder of Subordinated Debt shall
have the right to declare any Subordinated Debt due and payable as a result of
the occurrence of any one or more defaults in respect thereof, under
circumstances when the terms of subdivision (d) above are not applicable, such
holder shall not declare such Subordinated Debt due and payable or otherwise to
be in default and, solely in its capacity as a holder of such Subordinated
Debt, shall take no action at law or in equity in respect of any such default
unless and until all Senior Debt shall have been paid in full.
(f) If any payment or distribution of any character or any
security, whether in cash, securities or other property (other than Permitted
Payments), shall be received by a holder of Subordinated Debt in contravention
of any of the terms hereof before all the Senior Debt shall have been paid in
full, such payment or distribution or security shall be received in trust for
the benefit of, and shall be paid over or delivered and transferred to, the
holders of the Senior Debt at the time outstanding in accordance with the
priorities then existing among such holders for application to the payment of
all Senior Debt remaining unpaid, to the extent necessary to pay all such
Senior Debt in full. In the event of the failure of any holder of any
Subordinated Debt to endorse or assign any such payment, distribution or
security, each holder of Senior Debt is hereby irrevocably authorized to
endorse or assign the same.
(g) No present or future holder of any Senior Debt shall be
prejudiced in the right to enforce subordination of Subordinated Debt by any
act or failure to act on the part of APLP. Nothing contained herein shall
impair, as between APLP and the holder of this Subordinated Debt, the
obligation of APLP to pay to the holder hereof the principal hereof and
interest hereon as and when the same shall become due and payable in accordance
with the terms hereof, or prevent the holder of any Subordinated Debt from
exercising all rights, powers and remedies otherwise permitted by applicable
law or hereunder upon a default or event of default hereunder, all subject to
the rights of the holders of the Senior Debt to receive cash, securities or
other property (other than Permitted Payments) otherwise payable or deliverable
to the holders of Subordinated Debt.
8
<PAGE> 9
(h) Upon the payment in full of all Senior Debt, the holders
of Subordinated Debt shall be subrogated to all rights of any holders of Senior
Debt to receive any further payments or distributions applicable to the Senior
Debt until the Subordinated Debt shall have been paid in full, and, for
purposes of such subrogation, no payment or distribution received by the
holders of Senior Debt of cash, securities or other property to which the
holders of the Subordinated Debt would have been entitled except for these
subordination provisions shall, as between APLP and its creditors other than
the holders of Subordinated Debt, on the one hand, and the holders of
Subordinated Debt, on the other, be deemed to be a payment or distribution by
APLP to or on account of Senior Debt.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
AMERIGAS PROPANE, INC.
By:
-----------------------
Name:
Title:
AMERIGAS PROPANE, L.P.
BY: AMERIGAS PROPANE, INC.
AS GENERAL PARTNER
By:
----------------------
Name:
Title:
9
<PAGE> 10
FORM OF
MASTER PROMISSORY NOTE
Maximum Principal Amount: $20,000,000 Date: October __, 1996
FOR VALUE RECEIVED, AmeriGas Propane, L.P., a Delaware limited
partnership (the "Borrower"), hereby promises to pay to AmeriGas Propane, Inc.,
a Pennsylvania corporation (the "Lender"), the principal amount of each advance
made to the Borrower under the Financing Agreement referred to below on such
dates as may be determined in accordance with such Agreement. The aggregate
principal amount of such advances outstanding at any one time shall not exceed
the amount set forth above.
This Master Promissory Note is issued under, and subject to the terms
and conditions of, the Financing Agreement, dated as of October __, 1996 (the
"Agreement"), between the Borrower and the Lender.
Interest on the outstanding principal amount of each advance evidenced
by this Master Promissory Note shall accrue and be payable in accordance with
the terms of the Agreement.
The Agreement provides for optional prepayment by the Borrower of the
advances evidenced by this Master Promissory Note. The Agreement also provides
that this Master Promissory Note is subject to subordination terms as provided
in paragraph 15 thereof.
This Master Promissory Note is being made and delivered in the
Commonwealth of Pennsylvania and shall be governed by, and construed and
enforced in accordance with, the laws of such Commonwealth.
IN WITNESS WHEREOF, the Borrower has caused this Master Promissory
Note to be duly executed and delivered as of the date first above written
AMERIGAS PROPANE, L.P.
BY: AMERIGAS PROPANE, INC.
AS GENERAL PARTNER
By:
----------------------
Name:
Title:
10
<PAGE> 11
Master Promissory Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Amount Amount of Unpaid
Quoted of Principal Principal Notation
Date Rate Loan Repaid Balance Made By
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
</TABLE>
11
<PAGE> 1
EXHIBIT 10.22
AGREEMENT AND GENERAL RELEASE
WHEREAS, Robert C. Mauch ("Employee") has been employed by
AmeriGas Propane, Inc. ("Company") as President and Chief Executive Officer;
and
WHEREAS, the Employee and the Company mutually desire to
terminate amicably the Employee's employment and/or affiliation with the
Company and to settle and terminate any and all disputes between them;
NOW, THEREFORE, IT IS HEREBY AGREED by and between the Employee and
the Company, as follows:
1. a. For and in consideration of the undertakings of the
Company set forth herein, and intending to be legally bound, the Employee does
hereby REMISE, RELEASE AND FOREVER DISCHARGE the Company and its parents,
subsidiaries and affiliates and its and their predecessors, successors and
assigns, and its and their directors, officers, employees, partners and agents,
(collectively referred to as the "Company and Affiliates") of and from any and
all manner of actions and causes of actions, suits, debts, claims and demands
whatsoever in law or in equity, which the Employee ever had, now has, or
hereafter may have, or which the heirs, executors or administrators of the
Employee hereafter may have, by reason of any matter, cause or thing
whatsoever, from the beginning of the
- 1 -
<PAGE> 2
Employee's employment with the Company to the date of this Agreement and
General Release, and particularly, but without limitation of the foregoing
general terms, any claims arising from or relating in any way to the Employee's
employment relationship and/or the termination of the Employee's employment
relationship and/or affiliation with the Company, including but not limited to,
any claims which have been asserted or could have been asserted or could be
asserted now or in the future under the Age Discrimination in Employment Act,
29 U.S.C. Section 621 et seq., the Americans With Disabilities Act, 42 U.S.C.
Section 12102 et seq., Title VII of the Civil Rights Act of 1964, 42 U.S.C.
Section 2000e et seq., and the Pennsylvania Human Relations Act, 43 P.C.S.A.
Section 951 et seq., and any and all other federal, state or local laws and
any common law claims now or hereafter recognized. Notwithstanding the
foregoing provision, the Employee does not hereby release (i) any claims
against employees, partners and agents of the Company that do not relate to or
arise from Employee's employment relationship and/or termination of the
Employee's employment relationship with the Company and (ii) the rights,
obligations and benefits referred to in paragraph 9 below.
b. For and in consideration of the undertakings of the
Employee set forth herein, and intending to be legally bound, the Company does
hereby REMISE, RELEASE AND FOREVER DISCHARGE the Employee, his heirs, executors
and administrators of and from any
- 2 -
<PAGE> 3
and all manner of actions and causes of actions, suits, debts, claims and
demands whatsoever in law or in equity, which the Company ever had, now has, or
hereafter may have, or which the Company hereafter may have, by reason of any
matter, cause or thing whatsoever, from the beginning of the Employee's
employment with the Company to the date of this Agreement and General Release,
and particularly, but without limitation of the foregoing general terms, any
claims arising from or relating in any way to the Employee's employment
relationship and/or the termination of the Employee's employment relationship
and/or affiliation with the Company, including but not limited to, any claims
which have been asserted or could have been asserted or could be asserted now
or in the future under any and all federal, state or local laws and any common
law claims now or hereafter recognized.
2. a. The Employee acknowledges that the Employee has read
the terms of this Agreement and General Release and that Employee understands
its terms and effects. Employee has been, and hereby is, advised to consult
with an attorney prior to executing this agreement. The Employee further
acknowledges executing this Agreement and General Release of Employee's own
volition, with full understanding of its terms and effects, and with the
intention of releasing all claims recited herein in exchange for the
consideration described herein, which the Employee acknowledges is adequate and
satisfactory.
- 3 -
<PAGE> 4
b. The Employee acknowledges that Employee has been
informed, and is informed herein by the Company that Employee has the right to
consider this Agreement and General Release for a period of at least twenty-one
(21) days from the date on which it is presented to Employee. Employee also
understands and is advised herein that Employee has the right to revoke this
Agreement and General Release at any time within seven (7) days after the
execution of the Agreement and General Release by delivering written notice to
UGI Corporation, Attention: Director-Executive Compensation & Benefits. If
Employee exercises his or her right to revoke this Agreement and General
Release on a timely basis, the Agreement shall be ineffective, and all
obligations hereunder, including but not limited to those obligations specified
in paragraphs 4 and 5 below, shall be void.
3. The Employee understands that various state and federal laws
prohibit employment discrimination based on age, sex, race, color, national
origin, religion, handicap or veteran status. These laws are enforced through
the Equal Employment Opportunity Commission (EEOC), Department of Labor and
State Human Rights Agencies. If Employee feels that his or her treatment by
the Company and Affiliates is or has been discriminatory, Employee may want to
consult with a lawyer before executing the Agreement and General Release.
- 4 -
<PAGE> 5
4. In full consideration of the Employee's submission of a
resignation effective September 1, 1996, execution of this Agreement and
General Release, and an agreement to be legally bound by its terms, the Company
will make payment as appropriate to the Employee (less, where applicable in
each case, all payroll deductions required by law or authorized by the
Employee) in the next regularly scheduled paycheck after Employee has signed
this Agreement and General Release and the expiration of the time periods
specified in paragraph 2 (b) above:
a. "paid notice period" pay in the amount of
$125,550.00;
b. separation pay in the amount of $419,144.00;
c. pay in lieu of all earned and accrued vacation
time and personal holidays in the amount of $131,345.00;
d. prorated 1996 annual bonus in the amount of
$163,350.00;
e. outplacement services to be provided by
Manchester Associates through its Leaders in Transition Program;
f. the sum of $687,827.00 representing all
Supplemental Executive Retirement Plan payments;
g. tax preparation services for 1996 and 1997 under
the terms of the Company's policy;
h. additional separation pay in the amount of
$250,000.00;
- 5 -
<PAGE> 6
i. continued use of the Company-owned vehicle, which
has been made available to the Employee, including payment by the Company of
related expenses in accordance with the Company's policy through September 1,
1996;
j. continued use of Company-issued credit cards in
accordance with the Company's policy through September 1, 1996;
k. use of two airline tickets purchased for a visit
to Oahu Gas;
l. continued use of Employee's club membership in
accordance with the Company's policy through September 1, 1996;
m. receipt of business publications (Wall Street
Journal, LP Gas Magazine, etc.) not needed by L. R. Greenberg until such
subscriptions expire;
n. eligibility for contributions to the AmeriGas
pension and savings plan for the period October 1, 1995 through August 31, 1996
in accordance with the terms of such plans;
o. title to the Company-owned vehicle that has been
made available to the Employee;
p. secretarial and office services not provided by
the outplacement firm through November 30, 1996; and
q. reimbursement for expense accounts to cover
business-related expenses through September 1, 1996 in accordance with the
Company's policy.
- 6 -
<PAGE> 7
5. In addition to the foregoing payments, the Company will
keep in effect the Employee's participation in the following company benefit
programs (contingent upon the Employee making the required participant
contributions) until the earlier of the date indicated opposite the applicable
benefit program or the date the Employee obtains other employment and becomes
eligible to participate in a similar type of benefit program, at which time the
Employee's participation in such benefit program shall terminate:
<TABLE>
<CAPTION>
Benefit Program Termination Date
- --------------- ----------------
<S> <C>
Basic Life Insurance September 30, 1997
Supplemental Life Insurance September 30, 1997
Medical September 30, 1997
Dental September 30, 1997
Accidental Death September 30, 1997
Long Term Disability September 30, 1997
</TABLE>
6. The Company will provide a reference to prospective
employers specifying only the Employee's position held, dates of employment,
rate of pay, and that the Employee voluntarily resigned, and containing further
statements substantially in the form set forth in Exhibit A.
7. The Employee further agrees and covenants that neither the
Employee, nor any person, organization or other entity on behalf of the
Employee, will file or permit to be filed any
- 7 -
<PAGE> 8
charge, claim or action for legal or equitable relief (including damages,
injunctive, declaratory, monetary or other relief) involving any matter
occurring at any time in the past up to the date of this Agreement and General
Release or involving any continuing effects or any acts or practices which may
have arisen or occurred prior to the date of this Agreement and General
Release.
8. It is also agreed and understood that the Employee
will make himself or herself available and cooperate in any reasonable manner
even after leaving employment in providing assistance to the Company and
Affiliates in concluding any matters which are presently pending. It is
agreed that the Employee shall not be required to provide such cooperation if
it would conflict or interfere with any subsequent employment obtained by the
Employee or business activity of the Employee.
9. The Employee hereby agrees and recognizes that the
Employee's employment relationship with the Company has been permanently and
irrevocably severed and that the Company and Affiliates do not have any
obligation, contractual or otherwise, to hire, rehire, or re-employ the
Employee in the future. It is expressly agreed and understood that the Company
and Affiliates do not have and will not have any obligation to provide the
Employee at any time in the future with any payments, benefits or
considerations other than those recited above, except for (i) the
- 8 -
<PAGE> 9
continuation of Employee's medical and dental benefits under COBRA at
Employee's own expense to the extent required by federal law; (ii) any interest
in or entitlement to benefits under the terms of any applicable qualified
retirement plan; (iii) any dividend equivalent payment due to the Employee
under the terms of the UGI Corporation 1992 Stock Option and Dividend
Equivalent Plan ("SODEP Plan"), assuming the Employee had continued to
participate in the SODEP Plan until the end of the Performance Period (as
defined in the Plan) ending December 31, 1996; and (iv) any Options (as defined
in the SODEP Plan) that are exercisable or become exercisable under the terms
of the SODEP Plan. It is further agreed that if the Employee becomes entitled
to a dividend equivalent payment under the terms of the SODEP Plan, the
additional separation pay of $250,000.00 set forth in paragraph 4 (h) of this
Agreement and General Release shall be credited toward such dividend equivalent
payment due under the terms of the SODEP Plan.
10. The Employee agrees and acknowledges that the agreement
by the Company described herein and the settlement and termination of any
claims against the Company and Affiliates as set forth herein are not and shall
not be construed to be an admission of any violation of any federal, state or
local statute or regulation, or of any duty owed by the Company and Affiliates
to the Employee and that the Employee's resignation and the execution
- 9 -
<PAGE> 10
of this Agreement and General Release are made voluntarily to provide an
amicable conclusion of the Employee's employment relationship with the Company.
11. a. The Employee acknowledges that the Employee has
received An Agreement and Understanding and that Employee has certain
continuing obligations under the policies contained therein, including without
limitation an obligation to return to the Company any Company records and to
refrain from using or disclosing confidential information about the Company and
Affiliates. The Employee represents that he will return to the Company all
Company records and confidential information.
b. The Employee acknowledges that the Employee
signed and has been given a copy of his or her Confidentiality and
Post-Employment Activities Agreement. The Company and Employee agree that this
Agreement and General Release is not consideration for, and has no effect on
the Confidentiality and Post Employment Activities Agreement.
12. Neither the Company and Affiliates nor their agents,
representatives, or attorneys have made any representations to the Employee
concerning the terms or effects of this Agreement and General Release other
than those contained herein. The Company shall be entitled to make a brief
announcement regarding the Employee's resignation. The Employee agrees,
covenants and promises not to communicate or disclose the terms of this
Agreement
- 10 -
<PAGE> 11
and General Release or the settlement of all potential claims against the
Company and Affiliates as described herein to any one other than the Employee's
attorney, accountant, or members of the Employee's immediate family. Except to
the extent required by law or stock exchange rules, the Company will keep
confidential the terms of this Agreement. It is expressly understood that any
violation of this confidentiality obligation shall constitute a material breach
of this Agreement and General Release.
13. The parties agree that any liability in an action or
other proceeding accruing from a breach of this Agreement and General Release
shall include not only the monetary amount of any judgment which may be
awarded, but also all other damages, costs and expenses sustained by the
prevailing party on account of such action, including reasonable attorneys'
fees and all other litigation costs and expenses incurred in preparing the
defense of and defending such action or proceeding, in establishing or
maintaining the applicability or validity of this Agreement and General Release
or provisions thereof, and in prosecuting any claim, counterclaim or
cross-claim therein.
14. This Agreement and General Release and the obligations
of the parties shall be construed, interpreted and enforced in accordance with
the laws of the Commonwealth of Pennsylvania, without regard to its choice of
law provisions.
- 11 -
<PAGE> 12
15. The Employee agrees to the exclusive jurisdiction of
the Court of Common Pleas of Pennsylvania and the United States District Court
for the Eastern District of Pennsylvania in all disputes which may arise
between the Employee and the Company and Affiliates.
16. Except for the agreements referred to in this Agreement
and General Release and the Employee's indemnification rights under the bylaws
of the Company and Affiliates (as such bylaws may be amended from time to
time), which are incorporated herein and made a part of this Agreement and
General Release, this Agreement is the only agreement, commitment or
understanding between the parties and takes the place of any and all prior
agreements, commitments or understandings between the parties regarding the
subjects covered in it. This Agreement may not be changed, except by means of
a written modification signed by both parties.
Intending to be legally bound hereby, the Employee and the Company
execute the foregoing Agreement and General Release this 25th day of July,
1996.
WITNESS AmeriGas Propane, Inc.
By:
--------------------- --------------------------
Brendan P. Bovaird
Vice President & General
Counsel
--------------------- --------------------------
Robert C. Mauch
- 12 -
<PAGE> 1
<TABLE>
<CAPTION>
Consolidated Balance Sheets (Thousands of dollars)
- ------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30,
1996 1995
========================================================================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (note 2) $ 2,122 $ 39,567
Short-term investments, at cost which approximates market value - 9,000
Accounts receivable (less allowances for doubtful accounts of $6,579
and $4,647, respectively) 85,926 62,206
Insurance indemnification receivable 19,024 -
Inventories (notes 2 and 6) 82,957 78,996
Prepaid expenses and other current assets 10,351 10,323
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 200,380 200,092
Property, plant and equipment (less accumulated depreciation and
amortization of $138,850 and $105,051, respectively) (notes 2 and 7) 454,112 453,100
Intangible assets (less accumulated amortization of $94,785 and
$74,230, respectively) (note 2) 691,688 740,683
Insurance indemnification receivable - 12,246
Other assets (note 2) 26,043 29,188
- ------------------------------------------------------------------------------------------------------------------------
Total assets $1,372,223 $1,435,309
========================================================================================================================
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current maturities of long-term debt (note 4) $ 5,150 $ 4,675
Bank loans (note 4) 15,000 -
Accounts payable--trade 46,891 35,965
Accounts payable--related parties (note 10) 2,552 5,165
Employee compensation and benefits accrued 22,983 20,797
Interest accrued 28,037 27,372
Refunds and deposits 13,545 11,254
Other current liabilities (note 11) 44,102 26,371
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 178,260 131,599
Long-term debt (note 4) 687,303 653,051
Other noncurrent liabilities 58,927 82,996
Commitments and contingencies (note 9)
Minority interest (note 2) 5,497 6,704
Partners' capital (note 8):
Common unitholders (units issued--21,949,272 and
21,932,146, respectively) 230,376 291,988
Subordinated unitholders (units issued--19,782,146) 207,439 263,362
General partner 4,421 5,609
- ------------------------------------------------------------------------------------------------------------------------
Total partners' capital 442,236 560,959
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and partners' capital $1,372,223 $1,435,309
========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
10 AmeriGas Partners, L.P. 1996 Annual Report
<PAGE> 2
<TABLE>
<CAPTION>
Consolidated Statements of Operations (Thousands of dollars, except per unit)
- ------------------------------------------------------------------------------------------------------------------------
YEAR ENDED APRIL 19 TO
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
========================================================================================================================
<S> <C> <C>
Revenues (note 2):
Propane $ 924,810 $ 233,610
Other 88,415 35,890
- ------------------------------------------------------------------------------------------------------------------------
1,013,225 269,500
- ------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales--propane 526,255 123,414
Cost of sales--other 43,472 18,319
Operating and administrative expenses (note 10) 317,396 124,473
Depreciation and amortization (note 2) 61,631 26,585
Miscellaneous income, net (note 14) (8,395) (3,203)
- ------------------------------------------------------------------------------------------------------------------------
940,359 289,588
- ------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 72,866 (20,088)
Interest expense (62,782) (27,312)
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 10,084 (47,400)
Income tax (expense) benefit (note 2) 365 (140)
Minority interest (note 2) (211) 433
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 10,238 $ (47,107)
========================================================================================================================
General partner's interest in net income (loss) $ 102 $ (471)
========================================================================================================================
Limited partners' interest in net income (loss) $ 10,136 $ (46,636)
========================================================================================================================
Income (loss) per limited partner unit $ .24 $ (1.12)
========================================================================================================================
Average limited partner units outstanding (thousands) 41,729 41,714
========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 3
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (Thousands of dollars)
========================================================================================================================
YEAR ENDED APRIL 19 TO
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
========================================================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 10,238 $ (47,107)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 61,631 26,585
Other, net (3,438) (938)
- ------------------------------------------------------------------------------------------------------------------------
68,431 (21,460)
Net change in:
Accounts receivable (27,802) 13,712
Inventories (3,192) (24,153)
Accounts payable 12,708 2,761
Other current assets and liabilities (1,767) 36,271
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 48,378 7,131
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (21,908) (11,282)
Proceeds from disposals of property, plant and equipment 5,423 1,210
(Increase) decrease in short-term investments 9,000 (9,000)
Acquisitions of businesses, net of cash acquired (20,909) (3,978)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (28,394) (23,050)
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (92,727) (18,797)
Minority interest activity (1,042) (242)
Increase in bank loans 15,000 -
Issuance of long-term debt 37,009 -
Repayment of long-term debt (10,911) (1,294)
- ------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (52,671) (20,333)
- ------------------------------------------------------------------------------------------------------------------------
PARTNERSHIP FORMATION TRANSACTIONS
Net proceeds from issuance of Common Units - 349,751
Capital contribution from General Partner - 872
Issuance of long-term debt - 208,454
Payment to General Partner for purchase of
Petrolane Class B shares - (109,609)
Cash transfers from predecessor companies - 56,414
Repayment of long-term debt and related interest - (417,057)
Other fees and expenses (4,758) (13,006)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by partnership formation transactions (4,758) 75,819
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents increase (decrease) $(37,445) $ 39,567
========================================================================================================================
CASH AND CASH EQUIVALENTS
End of period $ 2,122 $ 39,567
Beginning of period 39,567 -
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) $(37,445) $ 39,567
========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
12 AmeriGas Partners, L.P. 1996 Annual Report
<PAGE> 4
<TABLE>
<CAPTION>
Consolidated Statements of Partners' Capital (Thousands of dollars, except unit data)
===========================================================================================================================
NUMBER OF UNITS TOTAL
----------------------------- GENERAL PARTNERS'
COMMON SUBORDINATED COMMON SUBORDINATED PARTNER CAPITAL
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Balance April 19, 1995 - - $ - $ - $ - $ -
Contributions of
net assets of
predecessor companies
(notes 1 and 2) 4,330,146 19,782,146 147,857 133,361 2,840 284,058
Issuance of units
to public (note 1) 17,602,000 178,492 160,994 3,429 342,915
Cash contribution
by General Partner 449 405 9 863
Effect of contribution
of net proceeds of
Senior Notes to
AmeriGas Propane, L.P. (506) (457) (10) (973)
Net loss (24,520) (22,116) (471) (47,107)
Distributions (note 3) (9,784) (8,825) (188) (18,797)
- ---------------------------------------------------------------------------------------------------------------------------
Balance
September 30, 1995 21,932,146 19,782,146 291,988 263,362 5,609 560,959
- ---------------------------------------------------------------------------------------------------------------------------
Net income 5,332 4,804 102 10,238
Distributions (note 3) (48,279) (43,521) (927) (92,727)
Issuance of Common
Units in connection
with acquisition (note 10) 17,126 413 4 417
Adjustments to net assets
contributed (note 2) (19,078) (17,206) (367) (36,651)
- ---------------------------------------------------------------------------------------------------------------------------
Balance
September 30, 1996 21,949,272 19,782,146 $230,376 $207,439 $4,421 $442,236
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE> 5
Notes to Consolidated Financial Statements
(Thousands of dollars, except per unit)
1. PARTNERSHIP ORGANIZATION AND FORMATION
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3. QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH
4. DEBT
5. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS
6. INVENTORIES
7. PROPERTY, PLANT AND EQUIPMENT
8. PARTNERS' CAPITAL
9. COMMITMENTS AND CONTINGENCIES
10. RELATED PARTY TRANSACTIONS
11. OTHER CURRENT LIABILITIES
12. UNAUDITED PRO FORMA FINANCIAL INFORMATION
13. FINANCIAL INSTRUMENTS
14. MISCELLANEOUS INCOME
15. QUARTERLY DATA (UNAUDITED)
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
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. The
Operating Partnership is the largest retail propane distributor in the United
States serving residential, commercial, industrial, motor fuel and agricultural
customers from locations in 44 states, including Alaska and Hawaii.
On April 19, 1995 (a) pursuant to a Merger and Contribution Agreement
dated as of April 19, 1995, AmeriGas Propane and certain of its operating
subsidiaries merged into the Operating Partnership (the "Formation Merger"),
and (b) 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, AmeriGas Propane, Inc., a
Pennsylvania corporation and the general partner of AmeriGas Partners (the
"General Partner"), and Petrolane each received a limited partner interest in
the Operating Partnership, and the Operating Partnership received substantially
all of the assets and assumed substantially all of the liabilities of AmeriGas
Propane, Petrolane and their respective operating subsidiaries.
Immediately after the Formation Merger, and in accordance with the Amended
and Restated Agreement of Limited Partnership of AmeriGas Partners (the
"Partnership Agreement"), (a) the General Partner 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 (b) immediately after the Petrolane Conveyance, 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. The General Partner has a 1% general partner
interest in AmeriGas Partners and a 1.01% general partner interest in the
Operating Partnership, or an effective 2% general partner interest in the
Operating Partnership.
Following these transactions, on April 19, 1995, AmeriGas Partners
completed its initial public offering through underwriters of 15,452,000 Common
Units (the "IPO") at a price to the public of $21.25 a unit. The net proceeds
of approximately $307,000 from the IPO and the net proceeds from the issuance
of $100,000 face value of AmeriGas Partners' 10.125% Senior Notes, along with
existing cash balances of the Predecessor Companies, were used on April 19,
1995 to repay Petrolane's revolving credit loan, term loans and related accrued
interest and fees which were assumed by the Operating Partnership. In addition,
certain senior indebtedness of Petrolane and AmeriGas Propane with a combined
face value of $408,000 was assumed by the Operating Partnership and immediately
exchanged for First Mortgage Notes of the Operating Partnership. The Operating
Partnership also issued $110,000 face value of First Mortgage Notes, the
proceeds of which were used by an AmeriGas subsidiary to acquire all of the
outstanding common stock of Petrolane not already owned by AmeriGas's parent
company, UGI Corporation (UGI), or its subsidiaries. On May 11, 1995, the
underwriters exercised their overallotment option in the amount of 2,150,000
Common Units. These Common Units were issued on May 17, 1995 at a price of
$21.25 a unit.
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation Principles. The consolidated financial statements include
the accounts of AmeriGas Partners, the Operating Partnership and their
subsidiaries, collectively referred to herein as the Partnership. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The General Partner's 1.01% interest in the Operating
Partnership is accounted for in the consolidated financial statements as a
minority interest.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Fiscal Year. The Partnership's fiscal year ends on September 30.
Accordingly, the accompanying consolidated results of operations of the
Partnership are for the fiscal year ended September 30, 1996 and the period
April 19, 1995 (date of inception) to September 30, 1995. Previously, the
Predecessor Companies' fiscal periods ended on the 23rd of the month. For
comparative purposes, Note 12 to the Consolidated
14 AmeriGas Partners, L.P. 1996 Annual Report
<PAGE> 6
Financial Statements includes unaudited pro forma results of operations data for
the period September 24, 1994 to September 30, 1995 (53 weeks) and the period
April 24, 1994 to September 23, 1994, as well as a description of the
significant pro forma adjustments. Combined revenues of the Predecessor
Companies for the period September 24 to September 30, 1994 were approximately
$12,700.
Revenue Recognition. Revenues from the sale of propane are recognized
principally as product is shipped or delivered to customers.
Inventories. Inventories are stated at the lower of cost or market. Cost
is determined using an average cost method for propane, specific identification
for appliances, and the first-in, first-out (FIFO) method for all other
inventories.
Property, Plant and Equipment and Related Depreciation. Property, plant
and equipment is stated at cost. Amounts assigned to property, plant and
equipment of acquired businesses are based upon estimated fair value at date of
acquisition. When plant and equipment are retired or otherwise disposed of, any
gains or losses are reflected in results of operations.
Depreciation of property, plant and equipment is computed using the
straight-line method over estimated service lives ranging from two to 40 years.
Depreciation expense during the year ended September 30, 1996 and the period
April 19, 1995 to September 30, 1995 was $36,910 and $15,500, respectively.
Intangible Assets. Intangible assets comprise the following at September
30:
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
1996 1995
===============================================================================================================================
<S> <C> <C>
Goodwill (less accumulated amortization of $64,007 and $48,596, respectively). . . . . . . . . . . . . . . . $545,353 $586,201
Excess reorganization value (less accumulated amortization of $27,398 and $18,857, respectively) . . . . . . 143,426 151,967
Other, principally noncompete agreements (less accumulated amortization of $3,380 and $6,777, respectively). 2,909 2,515
- -------------------------------------------------------------------------------------------------------------------------------
Total intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $691,688 $740,683
===============================================================================================================================
</TABLE>
Goodwill recognized as a result of business combinations accounted for as
purchases (including goodwill resulting from an AmeriGas subsidiary's April 19,
1995 acquisition by merger of the 65% of Petrolane common shares not already
owned by UGI and its subsidiaries) is being amortized on a straight-line basis
over 40 years. Excess reorganization value (which represents reorganization
value in excess of amounts allocable to identifiable assets of Petrolane
resulting from Petrolane's July 15, 1993 reorganization under Chapter 11 of the
United States Bankruptcy Code) is being amortized on a straight-line basis over
the 20-year period commencing July 15, 1993. Other intangible assets,
consisting principally of covenants not to compete, are being amortized over
the estimated periods of benefit which do not exceed ten years. Amortization
expense of intangible assets during the year ended September 30, 1996 and the
period April 19, 1995 through September 30, 1995 was $24,551 and $10,492,
respectively.
Recoverability of Long-Lived Assets. The Partnership adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121) in
1996. SFAS 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of.
The Partnership evaluates the impairment of long-lived assets to be held
and used, including associated intangibles, whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. Under SFAS 121, such assets are grouped and evaluated for
impairment at the lowest level for which there are identifiable cash flows that
are largely independent of the cash flows of other groups of assets. Under the
Partnership's prior policy for determining the impairment of long-lived assets,
the aggregation of cash flows and the related test for impairment were
performed on an acquisition-level basis. If an asset is determined to be
impaired, the loss is measured as the amount by which the carrying amount of
the asset exceeds its fair value. The test for impairment is performed by
comparing estimated net future cash flows expected to result from the use of
such assets and their eventual disposition to their carrying amount. The
adoption of SFAS 121 did not impact the Partnership's 1996 results of
operations or financial condition.
Other Assets. Included in other assets at September 30, 1996 and 1995 are
net deferred financing costs of $13,698 and $15,246, respectively. These costs
are being amortized, using the interest method, over the term of the related
debt.
Income Taxes. AmeriGas Partners and the Operating Partnership are not
directly subject to federal and state income taxes. Instead, their taxable
income or loss is allocated to the individual partners. The Operating
Partnership does, however, have certain subsidiaries which operate in corporate
form and are subject to federal and state income taxes.
Net Income (Loss) per Unit. Net income (loss) per unit is computed by
dividing net income (loss), after deducting the General Partner's 1% interest,
by the weighted average number of outstanding Common and Subordinated units.
Common Units issued on May 17, 1995 pursuant to the exercise of the
underwriters' overallotment option are considered to have been issued, for
purposes of the calculation of net income (loss) per unit, as of April 19,
1995.
Consolidated Statements of Cash Flows. Cash equivalents include all highly
liquid investments with maturities of three months or less when purchased and
are recorded at cost plus accrued interest which approximates market value.
Interest paid during the year ended September 30, 1996 and the period April 19,
1995 to September 30, 1995 totaled $62,846 and $404, respectively.
Effective April 19, 1995, in conjunction with the Formation Merger and the
Petrolane Conveyance, substantially all of the assets and liabilities of the
Predecessor Companies and their operating subsidiaries were contributed at
historical cost to the Operating Partnership.
15
<PAGE> 7
Notes to Consolidated Financial Statements
(Thousands of dollars, except per unit)
The combined net assets contributed to the Operating Partnership, adjusted
for the effects of the tax basis reallocation described below, are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
APRIL 19, 1995
===============================================================================================================================
<S> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,414
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,493
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,761
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,237
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456,128
Goodwill and other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556,782
Excess reorganization value, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,687
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,228
- -------------------------------------------------------------------------------------------------------------------------------
Total assets contributed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,391,730
- -------------------------------------------------------------------------------------------------------------------------------
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,304
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,923
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929,828
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,744
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,141,799
- -------------------------------------------------------------------------------------------------------------------------------
Net assets contributed to the Operating Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 249,931
===============================================================================================================================
</TABLE>
In February 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 65% of Petrolane common shares outstanding not already owned by AmeriGas or
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 year ended September 30,
1996 as a $37,025 reduction in goodwill, a $36,651 reduction in partners'
capital, and a $374 reduction in minority interest.
3. QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH
The Partnership makes distributions to its partners with respect to each
fiscal quarter of the Partnership 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 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 and for distributions during the next four
quarters. In addition, reserves for the payment of debt principal and interest
are required under the provisions of certain of the Partnership's debt
agreements.
Distributions by the Partnership in an amount equal to 100% of its
Available Cash will generally be made 98% to the Common and Subordinated
unitholders and 2% to the General Partner, subject to the payment of incentive
distributions in the event Available Cash exceeds the Minimum Quarterly
Distribution (MQD) of $.55 on all units. To the extent there is sufficient
Available Cash, the holders of Common Units have the right to receive the MQD,
plus any arrearages, prior to the distribution of Available Cash to holders of
Subordinated Units. Common Units will not accrue arrearages for any quarter
after the Subordination Period (as defined below) and Subordinated Units will
not accrue any arrearages with respect to distributions for any quarter.
The Subordination Period will generally extend until the first day of any
quarter beginning on or after April 1, 2000 in respect of which (a)
distributions of Available Cash from Operating Surplus (generally defined as
$40,000 plus $42,879 of cash on hand as of April 19, 1995 plus all operating
cash receipts less all operating cash expenditures and cash reserves) equal or
exceed the MQD on each of the outstanding Common and Subordinated units for
each of the four consecutive four-quarter periods immediately preceding such
date; (b) the Adjusted Operating Surplus (generally defined as Operating
Surplus adjusted to exclude working capital borrowings, reductions in cash
reserves and $40,000 plus $42,879 of cash on hand as of April 19, 1995 and to
include increases in reserves to provide for distributions resulting from
Operating Surplus generated during such period) generated during both (i) each
of the two immediately preceding four-quarter periods and (ii) the immediately
preceding sixteen-quarter period, equals or exceeds the MQD on each of the
Common and Subordinated units outstanding during those periods; and (c) there
are no arrearages on the Common Units.
Prior to the end of the Subordination Period but not prior to March 31,
1998, 4,945,537 Subordinated Units will convert into Common Units for any
quarter ending on or after March 31, 1998, and an additional 4,945,537
Subordinated Units will convert into Common Units for any quarter ending on or
after March 31, 1999, if (a) distributions of Available Cash from Operating
Surplus on each of the outstanding Common and Subordinated units equal or
exceed the MQD for each of the three consecutive four-quarter periods
immediately preceding such date; (b) the Adjusted Operating Surplus generated
during the immediately preceding twelve-quarter period equals or exceeds the
MQD on all of the Common and Subordinated units outstanding during that period;
(c) the General Partner makes a good faith determination that the Partnership
will, with respect to the four-quarter period commencing with such date,
generate Adjusted Operating Surplus in an amount equal to or
16 AmeriGas Partners, L.P. 1996 Annual Report
<PAGE> 8
exceeding the MQD on all of the outstanding Common and Subordinated units; and
(d) there are no arrearages on the Common Units.
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 dates.
4. DEBT
<TABLE>
Long-term debt comprises the following at September 30:
===============================================================================================================================
1996 1995
===============================================================================================================================
<S> <C> <C>
First Mortgage Notes:
Series A, 9.34%-11.71%, due April 2000 through April 2009
(including unamortized premium of $15,952 and $17,025, respectively,
calculated at an 8.91% effective rate) . . . . . . . . . . . . . . . . . . . . . . . . . $223,952 $225,025
Series B, 10.07%, due April 2001 through April 2005
(including unamortized premium of $13,130 and $14,574, respectively,
calculated at an 8.74% effective rate) . . . . . . . . . . . . . . . . . . . . . . . . . 213,130 214,574
Series C, 8.83%, due April 2003 through April 2010 . . . . . . . . . . . . . . . . . . . . 110,000 110,000
AmeriGas Partners Senior Notes, 10.125%, due April 2007. . . . . . . . . . . . . . . . . . . . 100,000 100,000
Acquisition Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 -
Special Purpose Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 -
Other (including capital lease obligations of $2,349 and $4,067, respectively) . . . . . . . . 8,371 8,127
- -------------------------------------------------------------------------------------------------------------------------------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692,453 657,726
Less current maturities included in current liabilities . . . . . . . . . . . . . . . . . . . (5,150) (4,675)
- -------------------------------------------------------------------------------------------------------------------------------
Total long-term debt due after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . $687,303 $653,051
===============================================================================================================================
</TABLE>
Annual scheduled repayments of long-term debt for each of the next five
fiscal years ended September 30 are as follows: 1997 - $5,150; 1998 - $11,771;
1999 - $11,267; 2000 - $27,554; 2001 - $68,228.
The Operating Partnership's obligations under the First Mortgage Notes are
collateralized by substantially all of the assets of the Operating Partnership.
The General Partner and Petrolane are co-obligors of the First Mortgage Notes.
The Operating Partnership may, at its option, and under certain circumstances
following the disposition of assets be required to, offer to prepay the First
Mortgage Notes, in whole or in part. Certain of these prepayments will be at a
premium. The First Mortgage Note Agreement contains restrictive covenants
applicable to the Operating Partnership, including (a) restrictions on the
incurrence of additional indebtedness; (b) restrictions on the ratio of each of
the Operating Partnership's and the General Partner's total debt to
consolidated gross worth, as defined; and (c) restrictions on certain liens,
guarantees, loans and advances, payments, mergers, consolidations, sales of
assets and other transactions. Generally, as long as no default exists or would
result, the Operating Partnership is permitted to make cash distributions not
more frequently than quarterly in an amount not to exceed available cash, as
defined, for the immediately preceding calendar quarter.
The 10.125% Senior Notes of AmeriGas Partners contain covenants which
restrict the ability of the Partnership to, among other things, incur
additional indebtedness, incur liens, issue preferred interests, and effect
mergers, consolidations and sales of assets. The Senior Notes are not
redeemable prior to April 15, 2000. Thereafter, AmeriGas Partners has the
option to redeem the Senior Notes, in whole or in part, at a premium. In
addition, AmeriGas Partners may, under certain circumstances following the
disposition of assets, be required to prepay the Senior Notes. Pursuant to the
Indenture under which the Senior Notes were issued, AmeriGas Partners is
generally permitted to make cash distributions in an amount equal to available
cash, as defined, as of the end of the immediately preceding quarter, as long
as no event of default exists or would exist upon making such distributions and
if the Partnership's consolidated fixed charge coverage ratio, as defined, is
at least 1.75-to-1. If such ratio is not met, cash distributions may be made in
an aggregate amount not to exceed $24,000 less the aggregate of all
distributions made during the immediately preceding 16 fiscal quarters. At
September 30, 1996, such ratio was 2.19-to-1.
The Operating Partnership has Bank Credit Facilities with a group of
commercial banks. The Bank Credit Facilities consist of a Revolving Credit
Facility, an Acquisition Facility and a Special Purpose Facility, each governed
by the Bank Credit Agreement. The Operating Partnership's obligations under the
Bank Credit Facilities are collateralized by substantially all of its assets.
The General Partner and Petrolane are co-obligors of the Bank Credit
Facilities.
The Revolving Credit Facility provides for borrowings of up to $70,000
(including a $35,000 sublimit for letters of credit). The Revolving Credit
Facility expires April 12, 1998, but may be extended, upon timely notice, for
additional one-year periods with the consent of the participating banks
representing at least 80% of the commitments thereunder. The Revolving Credit
Facility permits the Operating Partnership to borrow at the Base Rate, defined
as the higher of the Federal Funds Rate plus .50% per annum or the agent bank's
reference rate (6.59% and 8.25%, respectively, at September 30, 1996), or at
prevailing one-, two-, three-, or six-month offshore interbank borrowing rates,
plus a margin (.525% per annum as of September 30, 1996). The applicable margin
on such offshore interbank borrowing rates, and the Revolving Credit Facility
commitment fee rate (.275% per annum as of September 30, 1996), are dependent
upon the Operating Partnership's ratio of funded debt to earnings before
interest, income taxes, depreciation and amortization (EBITDA), each as defined
in the Bank Credit Agreement. The Operating Partnership is also required to pay
letter of credit fees on the undrawn amount of outstanding letters of credit
equal to the applicable margin on offshore interbank borrowings under the
Revolving Credit Facility and on the face amount of outstanding letters of
credit equal to .2% per annum. At September 30, 1996, borrowings under the
Revolving Credit Facility totaled $15,000 and are classified as bank loans.
There were no borrowings under the Revolving Credit Facility at September 30,
1995. The weighted-average interest rate on the Operating
17
<PAGE> 9
Notes to Consolidated Financial Statements
(Thousands of dollars, except per unit)
Partnership's bank loans outstanding as of September 30, 1996 was 6.00%. Issued
outstanding letters of credit under the Revolving Credit Facility totaled $2,305
and $16,271 at September 30, 1996 and 1995, respectively.
The Acquisition Facility provides the Operating Partnership with the
ability to borrow up to $75,000 to finance propane business acquisitions. The
Acquisition Facility operates as a revolving facility through October 12, 1997
at which time any amount then outstanding will convert to a quarterly
amortizing 41/2-year term loan. The Special Purpose Facility is a $30,000
nonrevolving line of credit which can be used for the payment of certain
liabilities of Petrolane assumed by the Operating Partnership as a result of
the Partnership Formation that relate to potential liabilities for tax,
insurance and environmental matters. The Special Purpose Facility expires April
12, 2000 at which time all amounts then outstanding will become immediately due
and payable. Effective October 28, 1996, the Bank Credit Agreement was amended
to include a revolving $15,000 sublimit under the Special Purpose Facility
which can be used to fund working capital, capital expenditures, and interest
and distribution payments. This sublimit is scheduled to expire April 12, 1998.
The Acquisition Facility and the Special Purpose Facility permit the
Operating Partnership to borrow at the Base Rate or prevailing one-, two-,
three-, or six-month offshore interbank borrowing rates, plus a margin (.65% as
of September 30, 1996). The applicable margin on such offshore interbank
borrowing rates, and the Acquisition Facility and Special Purpose Facility
commitment fee rate (.35% per annum at September 30, 1996), are dependent upon
the Operating Partnership's ratio of funded debt to EBITDA, as defined. The
weighted-average interest rate on the Operating Partnership's Acquisition and
Special Purpose loans outstanding as of September 30, 1996 was 6.34%.
The Bank Credit Facilities contain restrictive covenants which include (a)
restrictions on the incurrence of additional indebtedness; (b) restrictions on
the ratio of each of the Operating Partnership's and the General Partner's
total debt to consolidated gross worth, as defined; and (c) restrictions on
certain liens, guarantees, loans and advances, payments, mergers,
consolidations, sales of assets and other transactions. They also require that
the Operating Partnership maintain a ratio of EBITDA to interest expense, as
defined, of at least 2.25-to-1 on a rolling four-quarter basis. At September
30, 1996, such ratio was 2.57-to-1. Generally, as long as no default exists or
would result, the Operating Partnership is permitted to make cash distributions
not more frequently than quarterly in an amount not to exceed available cash,
as defined, for the immediately preceding calendar quarter.
Effective October 28, 1996, the Operating Partnership also has a revolving
credit agreement with the General Partner under which it may borrow up to
$20,000 to fund working capital, capital expenditures, and interest and
distribution payments. This agreement is coterminous with the Operating
Partnership's Revolving Credit Facility. Borrowings under the General Partner
Facility will be unsecured and subordinated to all senior debt of the
Partnership. Interest rates on borrowings and facility fees will be determined
generally on the same basis as the Revolving Credit Facility's interest rates
and fees. UGI has agreed to contribute on an as needed basis through its
subsidiaries up to $20,000 to the General Partner to fund such borrowings.
5. PENSION PLANS AND OTHER POSTEMPLOYMENT BENEFITS
The Partnership has no employees and is managed and controlled by the
General Partner. The Partnership assumed substantially all of the liabilities
of Petrolane and AmeriGas Propane including employee and postemployment benefit
obligations for officers and employees of the General Partner.
During the year ended September 30, 1996 and the period April 19, 1995 to
September 30, 1995, substantially all eligible employees of the General Partner
were covered by noncontributory defined contribution pension plans and 401(k)
savings plans. Contributions to the pension plans made by the General Partner
represented a percentage of each covered employee's salary. Participants in the
savings plans could contribute up to 6% of their compensation on a before-tax
basis. The General Partner could, in its sole discretion, match a portion of
employees' contributions to these savings plans. The cost of benefits under the
pension plans and savings plans for the year ended September 30, 1996 and the
period April 19, 1995 to September 30, 1995 was $4,943 and $2,614,
respectively.
Effective October 1, 1996, the pension plan was frozen and the plan's
assets were merged into the savings plan. In addition, effective October 1,
1996, the provisions of the savings plan were changed to provide for, among
other things, a dollar-for-dollar match on participants' contributions up to 5%
of eligible compensation.
The General Partner provides postretirement health care benefits to a
closed group of retired employees of the Predecessor Companies and also
provides limited life insurance benefits to substantially all active employees
of the General Partner and certain retired employees of the General Partner and
the Predecessor Companies. The cost of postretirement medical and life
insurance benefits for the year ended September 30, 1996 and the period April
19, 1995 to September 30, 1995, and the accumulated benefit obligations as of
the end of such periods, were not material.
18 AmeriGas Partners, L.P. 1996 Annual Report
<PAGE> 10
6. INVENTORIES
<TABLE>
<CAPTION>
Inventories comprise the following at September 30:
===============================================================================================================================
1996 1995
===============================================================================================================================
<S> <C> <C>
Propane gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $61,130 $54,384
Materials, supplies and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,539 18,399
Appliances for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,288 6,213
- -------------------------------------------------------------------------------------------------------------------------------
$82,957 $78,996
===============================================================================================================================
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Property, plant and equipment comprise the following at September 30:
===============================================================================================================================
1996 1995
===============================================================================================================================
<S> <C> <C>
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 51,672 $ 49,301
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,079 49,302
Transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,612 48,603
Storage facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,432 52,548
Equipment, primarily cylinders and tanks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372,805 344,361
Capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,457 8,457
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,905 5,579
- -------------------------------------------------------------------------------------------------------------------------------
592,962 558,151
Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . (138,850) (105,051)
- -------------------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $454,112 $453,100
===============================================================================================================================
</TABLE>
8. PARTNERS' CAPITAL
Partners' capital consists of 21,949,272 Common Units representing a 52.1%
limited partner interest, 19,782,146 Subordinated Units representing a 46.9%
limited partner interest, and a 1% general partner interest.
During the Subordination Period, the Partnership may issue up to 9,400,000
additional Common Units (excluding Common Units issued in connection with (i)
employee benefit plans and (ii) the conversion of Subordinated Units into
Common Units) or an equivalent number of securities ranking on a parity with
the Common Units without the approval of a majority of the Common Unitholders.
The Partnership may issue an unlimited number of additional Common Units or
parity securities without Common Unitholder approval if such issuance occurs in
connection with acquisitions, including, in certain circumstances, the
repayment of debt incurred in connection with an acquisition. In addition,
under certain conditions the Partnership may issue without Common Unitholder
approval an unlimited number of Common Units or parity securities for the
repayment of up to $150,000 of long-term indebtedness of the Partnership. After
the Subordination Period, the General Partner may cause the Partnership to
issue an unlimited number of additional limited partner interests and other
equity securities of the Partnership for such consideration and on such terms
and conditions as shall be established by the General Partner in its sole
discretion.
9. COMMITMENTS AND CONTINGENCIES
The Partnership leases various buildings and transportation, data
processing and office equipment under operating leases. Certain of the leases
contain renewal and purchase options and also contain escalation clauses. The
aggregate rental expense for such leases for the year ended September 30, 1996
and the period April 19, 1995 through September 30, 1995 was $23,090 and
$8,866, respectively.
<TABLE>
<CAPTION>
Minimum future payments under noncancelable capital and operating leases are as follows:
===============================================================================================================================
CAPITAL OPERATING
LEASES LEASES
===============================================================================================================================
<S> <C> <C>
Year ending September 30,
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,171 $20,502
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 809 16,909
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702 14,125
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 10,840
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 8,244
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 17,128
- -------------------------------------------------------------------------------------------------------------------------------
2,682 $87,748
=======
Less imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (333)
- -------------------------------------------------------------------------------------------------------------------
Present value of capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,349
===================================================================================================================
</TABLE>
At September 30, 1996, the Partnership had entered into fixed price
propane supply contracts totaling approximately $26,000 which expire at various
dates through March 1997.
19
<PAGE> 11
Notes to Consolidated Financial Statements
(Thousands of dollars, except per unit)
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. These leases are currently estimated to
aggregate approximately $91,000 (subject to reduction in certain
circumstances). The leases expire through 2010 and some of them are currently
in default, as discussed below. 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. The Consolidated Balance Sheets at September 30,
1996 and 1995 include current and noncurrent liabilities of $928 and $11,003;
and $654 and $11,040, respectively, related to leases guaranteed by the
Partnership and currently in default and equal corresponding current and
noncurrent assets related to Texas Eastern's indemnification agreement with
respect thereto. To date, Texas Eastern has directly satisfied its obligations
without the Partnership's 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 (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.
10. RELATED PARTY TRANSACTIONS
Pursuant to the Partnership Agreement, the General Partner is entitled to
reimbursement of 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 $176,425 and $72,648 for the year ended September 30, 1996 and the
period April 19, 1995 to September 30, 1995, respectively, include employee
compensation and benefit expenses of employees of the General Partner and
general and administrative expenses. In addition, UGI provides certain
financial and administrative 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. For the
year ended September 30, 1996 and the period April 19, 1995 to September 30,
1995, such corporate expenses totaled $7,786 and $4,116, 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.
11. OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
Other current liabilities comprise the following at September 30:
===============================================================================================================================
1996 1995
===============================================================================================================================
<S> <C> <C>
Self-insured property and casualty liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,429 $ 9,593
Insured property and casualty liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,024 -
Taxes other than income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,764 7,144
Accrual for management organizational changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,195 4,339
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,690 5,295
- -------------------------------------------------------------------------------------------------------------------------------
$44,102 $26,371
===============================================================================================================================
</TABLE>
20 AmeriGas Partners, L.P. 1996 Annual Report
<PAGE> 12
12. UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated statement of operations for
the 53 weeks ended September 30, 1995 was derived from the historical
statements of operations of the Predecessor Companies for the period September
24, 1994 to April 19, 1995 and the statement of operations of the Partnership
from April 19, 1995 to September 30, 1995. The following pro forma statement of
operations for the period April 24, 1994 to September 23, 1994 was derived from
the historical statements of operations of the Predecessor Companies for the
period April 24, 1994 to September 23, 1994. The pro forma statements of
operations were prepared to reflect the effects of the Partnership Formation as
if the formation had been completed in its entirety as of the beginning of the
periods presented.
The pro forma consolidated statements of operations do not purport to
present the results of operations of the Partnership had the Partnership
Formation actually been completed as of the beginning of the periods presented.
In addition, the pro forma consolidated statements of operations are not
necessarily indicative of the results of future operations of the Partnership
and should be read in conjunction with the consolidated financial statements of
the Partnership and the Predecessor Companies appearing in the Partnership's
Annual Report on Form 10-K.
<TABLE>
<CAPTION>
===============================================================================================================================
53 WEEKS PERIOD
ENDED APRIL 24 TO
SEPTEMBER 30, SEPTEMBER 23,
1995 1994
===============================================================================================================================
(Unaudited)
<S> <C> <C>
Revenues:
Propane. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $779,167 $228,481
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,421 38,347
- -------------------------------------------------------------------------------------------------------------------------------
878,588 266,828
- -------------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458,990 140,696
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,259 24,884
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301,570 107,715
Miscellaneous income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,968) (4,758)
- -------------------------------------------------------------------------------------------------------------------------------
814,851 268,537
- -------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,737 (1,709)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (62,823) (25,276)
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (140) -
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (115) 230
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 659 $(26,755)
===============================================================================================================================
Net income (loss) per limited partner unit . . . . . . . . . . . . . . . . . . . . . . . . . $ .02 $ (.63)
===============================================================================================================================
</TABLE>
Significant pro forma adjustments reflected in the data above include (a)
the elimination of income taxes as a result of operating in a partnership
structure; (b) an adjustment to interest expense resulting from the retirement
of approximately $377,000 of Petrolane term loans, the restructuring of
Petrolane and AmeriGas Propane senior debt, and the issuance of an aggregate
$210,000 face value of notes of AmeriGas Partners and the Operating
Partnership; (c) the elimination of management fees previously charged to
Petrolane by UGI; (d) a net reduction in amortization expense resulting from
the longer-term (40-year) amortization of the excess purchase price over fair
value of 65% of the net identifiable assets of Petrolane, compared with the
amortization of 65% of Petrolane's excess reorganization value over 20 years;
and (e) the elimination of intercompany revenues and expenses.
13. FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, short-term investments, accounts receivable, accounts
payable and bank loans approximate fair value because of the immediate or
short-term maturity of these financial instruments. Based upon current market
prices and discounted present value methods calculated using borrowing rates
currently available for debt with similar credit ratings, terms and maturities,
the fair values of total long-term debt outstanding at September 30, 1996 and
1995 are estimated to be approximately $720,000 and $701,000, respectively.
Financial instruments which potentially subject the Partnership to
concentrations of credit risk consist principally of short-term investments and
trade accounts receivable. The Partnership invests available cash in
investment-grade commercial paper of industrial and other companies and in
obligations of the U.S. Government. The risk associated with trade accounts
receivable is limited due to the Partnership's large customer base and its
dispersion across many different U.S. markets. At September 30, 1996 and 1995,
the Partnership had no significant concentrations of credit risk.
The Partnership from time to time holds certain option contracts to manage
price risk associated with a portion of its anticipated propane procurement
during the heating season. The unrealized gains on such contracts at September
30, 1996 and 1995 were not material.
21
<PAGE> 13
Notes to Consolidated Financial Statements
(Thousands of dollars, except per unit)
14. MISCELLANEOUS INCOME
<TABLE>
<CAPTION>
Miscellaneous income comprises the following:
===============================================================================================================================
YEAR ENDED APRIL 19 TO
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
===============================================================================================================================
<S> <C> <C>
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,278 $1,795
Gain on sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,855 366
Finance charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,175 504
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487 176
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,600 362
- -------------------------------------------------------------------------------------------------------------------------------
$8,395 $3,203
===============================================================================================================================
</TABLE>
15. QUARTERLY DATA (UNAUDITED)
The following quarterly data includes all adjustments (consisting only of
normal recurring adjustments with the exception of those listed below) which
the Partnership considers necessary for a fair presentation of such
information. Quarterly results fluctuate because of the seasonal nature of the
Partnership's propane business.
<TABLE>
<CAPTION>
===============================================================================================================================
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
YEAR ENDED SEPTEMBER 30, 1996 1995 1996(a) 1996 1996
===============================================================================================================================
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $285,796 $374,768 $175,552 $177,109
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,528 67,144 (6,929) (20,877)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,427 51,298 (22,146) (36,341)
Net income (loss) per limited partner unit . . . . . . . . . . . . . . . . . . . .41 1.22 (.53) (.86)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
===============================================================================================================================
APRIL 19 TO
JUNE 30, JULY 1 TO
1995 SEPTEMBER 30,
APRIL 19, 1995 TO SEPTEMBER 30, 1995 (10 WEEKS) 1995(b)
===============================================================================================================================
<S> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $113,589 $155,911
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,451) (11,637)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,617) (26,490)
Net loss per limited partner unit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.49) (.63)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes reduction in operating expenses of $4,356 from the refund of
insurance premium deposits and $3,312 from a reduction in accrued
environmental costs which increased operating income by $7,668 and net
income by $7,590 or $.18 per limited partner unit.
(b) Reflects accrual for management organizational costs which increased
operating loss by $4,339 and net loss by $4,295 or $.10 per limited partner
unit.
22 AmeriGas Partners, L.P. 1996 Annual Report
<PAGE> 14
General Partner's Report
The Partnership's consolidated financial statements and other financial
information contained in this Annual Report are prepared by management of the
General Partner, AmeriGas Propane, Inc., which is responsible for their
fairness, integrity and objectivity. The consolidated financial statements and
related information were prepared in accordance with generally accepted
accounting principles and include amounts that are based on management's best
judgments and estimates.
The General Partner has established a system of internal controls.
Management of the General Partner believes the system provides reasonable
assurance that assets are safeguarded and that transactions are executed in
accordance with management's authorization and are properly recorded to permit
the preparation of reliable financial information. There are limits in all
systems of internal control, based on the recognition that the cost of the
system should not exceed the benefits to be derived. We believe that the
internal control system is cost effective and provides reasonable assurance
that material errors or irregularities will be prevented or detected within a
timely period. The internal control system and compliance therewith are
monitored by UGI Corporation's internal audit staff.
The Audit Committee of the Board of Directors of the General Partner is
composed of two members, neither of whom is an employee of the Company. This
Committee is responsible, among other things, for reviewing the adequacy of
corporate financial reporting and accounting systems and controls, for
overseeing the external and internal auditing functions and for recommending to
the Board of Directors the independent public accountants to conduct the annual
audit of the Partnership's consolidated financial statements. The Committee
maintains direct channels of communication between the Board of Directors and
both the independent public accountants and internal auditors.
The independent public accountants, who are appointed by the Board of
Directors of the General Partner, perform certain procedures, including an
evaluation of internal controls to the extent required by generally accepted
auditing standards, in order to express an opinion on the consolidated
financial statements and to obtain reasonable assurance that such financial
statements are free of material misstatement.
/s/ LON R. GREENBERG /s/ DAVID C. RIGGAN
Lon R. Greenberg David C. Riggan
Chairman and Chief Executive Officer Chief Financial Officer
Report of Independent Public Accountants
To the Partners of AmeriGas Partners, L.P. and
the Board of Directors of AmeriGas Propane, Inc.:
We have audited the accompanying consolidated balance sheets of AmeriGas
Partners, L.P. and subsidiaries as of September 30, 1996 and 1995 and the
related consolidated statements of operations, partners' capital and cash flows
for the year ended September 30, 1996 and for the period April 19, 1995 to
September 30, 1995. These financial statements are the responsibility of the
management of AmeriGas Propane, Inc. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of AmeriGas Partners, L.P. and subsidiaries as of September 30, 1996 and 1995
and the results of their operations and their cash flows for the year ended
September 30, 1996 and for the period April 19, 1995 to September 30, 1995, in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Chicago, Illinois
November 22, 1996
23
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AMERIGAS PARTNERS, L.P. SUBSIDIARIES
- -------------------------------------------------------------------------------------------------
STATE
OF
SUBSIDIARY ORGANIZATION/ OWNERSHIP
INCORPORATION
=================================================================================================
<S> <C> <C>
AMERIGAS PARTNERS, L.P. DE
AmeriGas Finance Corp. DE 100%
AmeriGas Propane, L.P. DE *
AmeriGas Propane Parts & PA 100%
Service, Inc.
Northwest LPG Supply Ltd. Canada 100%
Petrolane Offshore Limited Bermuda 100%
- -------------------------------------------------------------------------------------------------
</TABLE>
* AmeriGas Partners, L.P. owns 98.9899% of the limited partnership interest
in AmeriGas Propane, L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS OF AMERIGAS PARTNERS,
L.P. AND SUBSIDIARIES AS OF AND FOR THE YEAR ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN
AMERIGAS PARTNERS' ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED 9/30/96.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 2,122
<SECURITIES> 0
<RECEIVABLES> 92,505
<ALLOWANCES> 6,579
<INVENTORY> 82,957
<CURRENT-ASSETS> 200,380
<PP&E> 592,962
<DEPRECIATION> 138,850
<TOTAL-ASSETS> 1,372,223
<CURRENT-LIABILITIES> 178,260
<BONDS> 687,303
0
0
<COMMON> 0
<OTHER-SE> 442,236
<TOTAL-LIABILITY-AND-EQUITY> 1,372,223
<SALES> 1,013,225
<TOTAL-REVENUES> 1,013,225
<CGS> 569,727
<TOTAL-COSTS> 569,727
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,782
<INCOME-PRETAX> 10,084
<INCOME-TAX> (365)
<INCOME-CONTINUING> 10,238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,238
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
<PAGE> 1
EXHIBIT 99
Forward-Looking Statements
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, AmeriGas Partners, L.P. ("AmeriGas
Partners") is hereby filing cautionary statements identifying important factors
that could cause AmeriGas Partners' actual results to differ materially from
those projected in forward-looking statements of AmeriGas Partners made by or
on behalf of AmeriGas Partners.
Risk Factors
The financial and operating performance of AmeriGas Partners
is subject to risks and uncertainties, all of which are difficult to predict,
and many of which are beyond the control of management. Forward-looking
statements concerning AmeriGas Partners' performance may differ materially from
actual results because of these risks and uncertainties. They include, but are
not limited to:
1. Weather conditions;
2. price and availability of propane, and the capacity
to transport to market areas;
3. governmental legislation and regulations;
4. local economic conditions;
5. labor relations;
6. environmental claims;
7. competition from the same and alternative energy
sources;
8. operating hazards and other risks incidental to
transporting, storing, and distributing propane;
9. energy efficiency and technology trends;
10. interest rates; and
11. large customer defaults.
