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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, 1998
Commission file number 1-13692
Commission file number 33-92734-01
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. [X]
The aggregate market value of AmeriGas Partners, L.P. Common Units held by
nonaffiliates of AmeriGas Partners, L.P. on December 1, 1998 was approximately
$413,616,768. At December 1, 1998 there were outstanding 22,105,993 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, 1998 are incorporated by
reference in Part II of this Form 10-K.
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TABLE OF CONTENTS
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PART I BUSINESS PAGE
Items 1 and 2 Business and Properties................................................. 1
Item 3 Legal Proceedings.......................................................11
Item 4 Submission of Matters to a Vote of
Security Holders........................................................12
PART II SECURITIES AND FINANCIAL INFORMATION
Item 5 Market for Registrant's Common Equity
and Related Security Holder Matters.....................................12
Item 6 Selected Financial Data.................................................14
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................................17
Item 7A Quantitative and Qualitative Disclosures About
Market Risk.............................................................28
Item 8 Financial Statements and Supplementary
Data....................................................................28
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..................................28
PART III MANAGEMENT AND SECURITY HOLDERS
Item 10 Directors and Executive Officers of the
General Partner.........................................................28
Item 11 Executive Compensation..................................................33
Item 12 Security Ownership of Certain Beneficial
Owners and Management...................................................41
Item 13 Certain Relationships and Related
Transactions............................................................45
PART IV ADDITIONAL EXHIBITS, SCHEDULES AND REPORTS
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K.................................................46
Signatures..............................................................51
Index to Financial Statements
and Financial Statement Schedules......................................F-2
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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. We are the largest
retail propane distributor in the United States based on fiscal year 1998 retail
sales volume of 785 million gallons. We serve approximately 956,000 residential,
commercial, industrial, agricultural and motor fuel customers from approximately
600 district locations in 46 states. Our operations are located primarily in the
Northeast, Southeast, Great Lakes and West Coast regions of the United States.
We conduct our business principally through our subsidiary, AmeriGas
Propane, L.P. (the "Operating Partnership"), a Delaware limited partnership. On
April 19, 1995, the Operating Partnership acquired the propane distribution
businesses and assets of AmeriGas Propane, Inc., AmeriGas Propane-2, Inc.
(collectively, "AGP") and Petrolane Incorporated ("Petrolane") (collectively,
the "Predecessors"). These acquisitions took place concurrently with the initial
public offering of our common units. The common units, which represent limited
partner interests, are traded on the New York Stock Exchange under the symbol
"APU." Our executive offices are located at 460 North Gulph Road, King of
Prussia, Pennsylvania 19406, and our telephone number is (610) 337-7000. In this
report, the terms "Partnership" and AmeriGas Partners, as well as the terms
"our," "we," and "its," are used sometimes as abbreviated references to AmeriGas
Partners, L.P., itself or AmeriGas Partners, L.P. and its consolidated
subsidiaries, including the Operating Partnership.
AmeriGas Propane, Inc. is our general partner (the "General Partner").
The General Partner is a wholly owned subsidiary of UGI Corporation ("UGI"), a
public company listed on the New York and Philadelphia Stock Exchanges. Through
various subsidiaries, UGI has been in the propane distribution business for
nearly 40 years. The General Partner and its subsidiary Petrolane own an
aggregate 56.6% limited partner interest in the Partnership. In addition, the
General Partner owns an aggregate 2% general partner interest. The General
Partner is responsible for managing our operations.
Our subsidiary, AmeriGas Finance Corp. ("AmeriGas Finance"), a Delaware
corporation, was formed on March 13, 1995. It serves as co-obligor for certain
of our senior notes. AmeriGas Finance has nominal assets and does not conduct
any operations. This report contains no discussion of the results of operations,
liquidity or capital resources of AmeriGas Finance. Its executive offices are
located at 460 North Gulph Road, King of Prussia, Pennsylvania 19406, and its
telephone number is (610) 337-7000.
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BUSINESS STRATEGY
Our strategy is to expand operations and increase market share through
the acquisition of local and regional propane distributors and through internal
growth. Our principal focus will be on acquisitions, because 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.
Internal growth will include the opening of new district locations known as
"scratch-starts" and expansion of our PPX Prefilled Propane Xchange(TM)
program. Scratch starts are less costly than acquisitions of existing
businesses; however, they typically do not reach target sales and profitability
levels for a number of years. We believe opportunities also exist to grow our
business internally through marketing programs designed to increase consumption
among existing users and through expansion of our customer base as a result of
commercial growth, new construction and propane conversions from electricity or
fuel oil.
In fiscal year 1998, we acquired a total of ten propane operations with
aggregate annual retail sales of approximately 8.9 million gallons. We also
opened ten scratch-starts and added more than 4,000 PPX(TM) locations. 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. Although we believe there are numerous potential
acquisition candidates in the industry, there can be no assurance that we will
find attractive candidates in the future, or that we will be able to acquire
such candidates on economically acceptable terms.
HISTORY OF THE PARTNERSHIP'S OPERATIONS
AmeriGas, Inc. ("AmeriGas"), a wholly owned subsidiary of UGI, began
propane distribution operations in 1959. In the ten fiscal years preceding the
Partnership's formation, AGP, a subsidiary of AmeriGas, 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.
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.
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The primary customers for propane are residential, commercial,
agricultural, engine fuel and industrial users to whom natural gas is not
readily available. 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. While proponents of
electric utility deregulation believe that competition will ultimately reduce
the cost of electricity, we are unable to predict the extent to which the price
of electricity may drop. Therefore, we cannot predict the ultimate impact that
electric utility deregulation may have on propane's existing competitive price
advantage over electricity.
PRODUCTS, SERVICES AND MARKETING
As of September 30, 1998, the Partnership distributed propane to
approximately 956,000 customers from approximately 600 district locations in 46
states. The Partnership's operations are located primarily in the Northeast,
Southeast, Great Lakes and West Coast regions of the United States. The
Partnership also sells, installs and services propane appliances, including
heating systems. In certain markets, the Partnership also installs and services
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. As part of its overall transportation and distribution infrastructure,
the Partnership operates as an interstate carrier in 48 states throughout the
United States. It is also licensed as a carrier in Canada.
The Partnership sells propane primarily to five markets: residential,
commercial/industrial, motor fuel, agricultural and wholesale. Approximately 79%
of the Partnership's 1998 fiscal year sales (based on gallons sold) were to
retail accounts (32% to residential customers, 29% to industrial/commercial
customers, 11% to motor fuel customers and 7% to agricultural customers), and
approximately 21% were to wholesale customers. Sales to residential customers in
fiscal 1998 represented approximately 40% of retail gallons sold and 51% of the
Partnership's total propane margin. No single customer accounts for 1% 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 engines that power
over-the-road vehicles, forklifts and stationary engines. 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 and
crop drying.
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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 2,400 to 3,000 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.
The Partnership also delivers propane to retail customers in portable
cylinders with capacities of 5 to 30 gallons. Some of these deliveries are made
to the customer's location, where empty cylinders are either picked up for
replenishment or filled in place. During fiscal year 1998, the Partnership
expanded its prefilled cylinder exchange program, called PPX Prefilled Propane
Xchange(TM). The PPX(TM) program enables customers to exchange their empty
20-pound propane cylinders at various retail locations. PPX(TM) is available at
over 5,000 retail locations throughout the country. 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. During the year ended September 30, 1998, the
Partnership purchased over 70% of its propane from 10 suppliers, including the
Shell Oil companies (approximately 18%), Dynergy (approximately 17%), and the
Amoco companies (approximately 15%). Management believes that if supplies from
these sources were interrupted, the Partnership 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 Shell, Dynergy and Amoco, no single supplier provided more
than 10% of the Partnership's total propane supply in fiscal year 1998. In
certain market areas, however, some 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 has over 200 sources of supply, and it also makes
purchases on the spot market. The Partnership purchases its propane supplies
from domestic and international suppliers. Approximately 70% of propane
purchases by the Partnership in the 1998 fiscal year were on a contractual basis
under one-year agreements subject to annual renewal. More than half of the
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 volume guidelines. The percentage of contract
purchases, and the amount of supply contracted for at fixed prices, will vary
from year to year as determined by the General Partner. 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, Michigan,
Mississippi, Rhode Island, Utah and several other locations.
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Because the Partnership's profitability is sensitive to changes in
wholesale propane costs, the Partnership generally seeks to pass on increases in
the cost of propane to customers. There is no assurance, however, that the
Partnership will always be able to pass on product cost increases fully,
particularly when product costs rise rapidly. In fiscal year 1997, when the Mont
Belvieu price per gallon of propane more than doubled between April 1, 1996
($.34625) and December 16, 1996 ($.75), the Partnership was able to maintain its
profitability through the use of risk management techniques designed to control
product costs, and by passing product cost increases through to end users.
The Partnership expects to be able to secure adequate product supply
for its customers during fiscal year 1999. Periods of severe cold weather,
supply interruptions, or other unforeseen events, however, could result in rapid
increases in product cost. The General Partner has adopted supply acquisition
and product price risk management practices to reduce the effect of price
volatility on product costs. Current strategies include the use of summer
storage, prepaid contracts for future product delivery, and derivative commodity
instruments such as options and propane price swaps. See "Management's
Discussion and Analysis of Results of Operations-Market Risk Disclosures."
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The following graph shows the average 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.
AVERAGE PROPANE SPOT MARKET PRICES
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Mont Belvieu Conway
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1993 October Avg. Oct-93 29.566 33.821
1993 November Avg. Nov-93 27.763 32.138
1993 December Avg. Dec-93 24.726 25.994
1994 January Avg. Jan-94 26.613 25.708
1994 February Avg. Feb-94 29.349 27.724
1994 March Avg. Mar-94 28.467 26.875
1994 April Avg. Apr-94 28.819 28.788
1994 May Avg. May-94 29.619 28.732
1994 June Avg. Jun-94 28.790 27.943
1994 July Avg. Jul-94 29.244 27.981
1994 August Avg. Aug-94 30.060 29.462
1994 September Avg. Sep-94 30.113 29.833
1994 October Avg. Oct-94 32.595 29.530
1994 November Avg. Nov-94 34.606 30.694
1994 December Avg. Dec-94 33.435 30.161
1995 January Avg. Jan-95 32.834 29.551
1995 February Avg. Feb-95 31.869 28.925
1995 March Avg. Mar-95 32.837 30.011
1995 April Avg. Apr-95 32.313 30.041
1995 May Avg. May-95 32.753 31.229
1995 June Avg. Jun-95 31.842 31.496
1995 July Avg. Jul-95 30.811 31.383
1995 August Avg. Aug-95 31.343 33.172
1995 September Avg. Sep-95 31.361 32.477
1995 October Avg. Oct-95 30.946 32.778
1995 November Avg. Nov-95 30.953 32.741
1995 December Avg. Dec-95 35.322 38.172
1996 January Avg. Jan-96 36.000 36.242
1996 February Avg. Feb-96 40.856 37.769
1996 March Avg. Mar-96 37.229 36.012
1996 April Avg. Apr-96 35.574 34.107
1996 May Avg. May-96 34.923 34.477
1996 June Avg. Jun-96 34.925 36.353
1996 July Avg. Jul-96 35.634 37.268
1996 August Avg. Aug-96 38.440 37.977
1996 September Avg. Sep-96 47.016 44.784
1996 October Avg. Oct-96 51.573 51.527
1996 November Avg. Nov-96 58.049 63.411
1996 December Avg. Dec-96 61.045 84.292
1997 January Avg. Jan-97 47.455 63.392
1997 February Avg. Feb-97 38.711 39.020
1997 March Avg. Mar-97 38.500 37.256
1997 April Avg. Apr-97 34.875 35.261
1997 May Avg. May-97 35.310 36.476
1997 June Avg. Jun-97 34.429 35.863
1997 July Avg. Jul-97 34.906 34.628
1997 August Avg. Aug-97 37.027 36.527
1997 September Avg. Sep-97 38.679 37.952
1997 October Avg. Oct-97 39.826 37.321
1997 November Avg. Nov-97 35.948 35.004
1997 December Avg. Dec-97 33.571 31.364
1998 January Avg. Jan-98 30.066 28.206
1998 February Avg. Feb-98 29.786 28.324
1998 March Avg. Mar-98 27.389 27.838
1998 April Avg. Apr-98 29.057 29.470
1998 May Avg. May-98 27.419 27.823
1998 June Avg. Jun-98 24.421 24.841
1998 July Avg. Jul-98 24.540 24.548
1998 August Avg. Aug-98 24.116 23.866
1998 September Avg. Sep-98 24.830 24.042
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COMPETITION
Propane competes 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, service, 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, we are unable to predict the ultimate impact that electric
utility deregulation may have on propane's current competitive price advantage.
Since the 1970s, many new homes have been 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
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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. In recent years, some rural electric cooperatives and
fuel oil distributors have expanded their businesses to include propane
distribution and the Partnership competes with them as well. Based on the most
recent annual survey by the American Petroleum Institute, the 1996 domestic
retail market for propane (annual sales for other than chemical uses) was
approximately 10.4 billion gallons and, based on LP-GAS magazine rankings, 1997
sales volume of the ten largest propane companies (including AmeriGas Partners)
represented approximately 40% of domestic sales. The Partnership's retail volume
of 785 million gallons in fiscal 1998 represented approximately 8% of the 1996
domestic retail market. The ability to compete effectively depends on supplying
customer service, maintaining competitive retail prices and controlling
operating expenses.
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. The Partnership may experience greater than normal customer losses in
certain years when competitive conditions reflect any of 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. Wholesale propane distribution is a highly competitive, low margin
business. Propane sales to other retail distributors and large-volume,
direct-shipment industrial end users are price sensitive and frequently involve
a competitive bidding process.
PROPERTIES
As of September 30, 1998, the Partnership owned approximately 76% 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 or butane. The
California facility, which the Partnership operates, is currently subleased to
several refiners for the storage of butane. In Rhode Island, the Partnership
leases storage with a 400,000 barrel capacity.
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. As of September 30, 1998,
the Partnership owned a fleet of approximately 150 transport trucks; it leased
approximately 350 transport trailers and 500 railroad tank cars. In addition,
the Partnership fleet included over 2,400 bobtail and rack trucks, and over
1,900 other delivery and service vehicles. Approximately 46% of these vehicles
were owned. The Partnership owned more than 800,000 stationary storage tanks
with typical capacities of 100 to 1,000 gallons
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and over 1,000,000 portable propane cylinders with typical capacities of 5 to
100 gallons. The Partnership also owns more than 2,100 large volume tanks which
are used for its own storage requirements. Most of the Partnership's debt is
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,"
"America's Propane Company" and "PPX Prefilled Propane Xchange(TM)" trade names
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 General Partner owns all right, title and interest
in the "America's Propane Company" trade name and related service mark. The
Partnership has an exclusive (except for use by AmeriGas, Inc. and the General
Partner), royalty-free license to use these names and trade and service marks.
UGI, Petrolane Incorporated and the General Partner each has the option to
terminate its respective license agreement on 12 months prior notice
(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, Petrolane and the General Partner each has the option to
terminate its license agreement upon payment of a fee equal to the fair market
value of the licensed trade names. UGI has a similar termination option,
however, UGI must provide 12 months prior notice in addition to paying the fee.
The General Partner has discontinued widespread use of the "Petrolane"
trade name and conducts Partnership operations almost exclusively under the
"AmeriGas," "America's Propane Company" and "PPX Prefilled Propane Xchange(TM)"
trade names and related service marks. The General Partner has filed
applications with the United States Patent and Trademark Office to register the
mark "PPX Prefilled Propane Xchange(TM)" for use in connection with the
Partnership's cylinder exchange business.
SEASONALITY
Because many customers use propane for heating purposes, the
Partnership's retail sales volume is seasonal, with approximately 57% of the
Partnership's fiscal year 1998 retail sales volume and approximately 82% of its
earnings before interest expense, income taxes, depreciation and amortization
occurring during the five-month peak heating season from November through March.
As a result of this seasonality, sales are concentrated in the Partnership's
first and second fiscal quarters (October 1 through March 31). 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 conservation efforts and general economic
conditions. For historical information on national weather statistics, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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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
on certain classes of persons considered to have contributed to the release or
threatened release of a "hazardous substance" into the environment without
regard to fault or the legality of the original conduct. Propane is not a
hazardous substance within the meaning of federal and state environmental laws.
However, the Partnership owns and operates real property where such hazardous
substances may exist. See Note 2 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 certain 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 ("DOT"). 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 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
gas 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.
On December 13, 1996, the Research and Special Programs Administration
("RSPA"), a division of the DOT, issued an advisory notice that alerted persons
involved in the design,
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manufacture, assembly, maintenance or transportation of hazardous materials in
certain cargo tank motor vehicles, including the type of vehicles used by the
Partnership, of a problem with emergency discharge systems. On February 19,
1997, RSPA issued an emergency interim final rule indicating that the emergency
discharge control systems on the affected vehicles may not function as required
by federal regulations under all operating conditions. The interim final rule
specified the conditions under which the affected vehicles could continue to be
operated. On August 18, 1997, after conducting a series of public hearings and
workshops, RSPA issued an interim final rule which sets forth the requirements
that must be satisfied to continue operating such vehicles. The interim final
rule requires, among other things, that in the event of an unintentional release
of product, the person attending the unloading operation must be able to
promptly activate the internal self-closing stop valve on the motor vehicle and
shut down all power equipment. The interim final rule provides alternative ways
to comply with this requirement and permits the use of radio-controlled systems
that are capable of stopping the transfer of propane by use of a transmitter
carried by a qualified person who also satisfies the attendance requirements
contained in the regulations. The Partnership is in the process of installing a
radio-controlled emergency shut-down system on its bobtail vehicles.
As a result of a civil action filed by five major multi-state propane
marketers (not including the Partnership), the U.S. District Court for the
Western District of Missouri issued a preliminary injunction against the DOT,
staying and postponing certain provisions of the interim final rule. In
addition, a parallel civil action brought by the propane industry's trade
association, the National Propane Gas Association ("NPGA"), is pending in Texas.
In June 1998, RSPA responded to these actions by beginning a Negotiated
Rulemaking Proceeding under the Negotiated Rulemaking Act of 1990. In such a
negotiated rulemaking proceeding, representatives of interests that will be
affected by a regulation meet to discuss the safety issues and to identify
potential solutions. In this particular proceeding, the group must reach
unanimity on the proposed solution and prepare a notice of proposed rulemaking
for publication by the agency in early 1999.
The goal of the proceeding is to develop a regulatory framework
relating to the safe unloading of propane from cargo tank motor vehicles. The
General Partner is participating in the process and believes that the
radio-controlled shut-off systems which it is installing on its bobtail trucks
will be part of the final solution to the safety issues presented in the civil
actions and the Negotiated Rulemaking with respect to these delivery vehicles.
As to the Partnership's large vehicles known as transports, the General Partner
is waiting for DOT to approve a final rule relating to emergency shutdown
requirements. In the interim, the General Partner plans to investigate and test
several different transport systems.
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
-10-
<PAGE> 13
September 30, 1998, the General Partner had 5,107 employees, including 287
temporary and part-time employees. UGI also performs certain financial and
administrative services for the General Partner on behalf of the Partnership and
is reimbursed by the Partnership for its direct and indirect costs and expenses.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings 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 other than
claims arising in the ordinary course of the Partnership's business.
-11-
<PAGE> 14
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 1998 fiscal year.
PART II: SECURITIES AND FINANCIAL INFORMATION
ITEM 5. MARKET FOR REGISTRANT'S COMMON UNITS
AND RELATED SECURITY HOLDER MATTERS
Each common unit ("Common Unit") represents a limited partner interest.
The 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
1998 FISCAL YEAR HIGH LOW DISTRIBUTION
<S> <C> <C> <C>
Fourth Quarter $25.0625 $21.0000 $0.55
Third Quarter 26.4375 22.7500 0.55
Second Quarter 27.0000 24.3750 0.55
First Quarter 27.2500 23.3750 0.55
PRICE RANGE CASH
<CAPTION>
1997 FISCAL YEAR HIGH LOW DISTRIBUTION
Fourth Quarter $27.2500 $24.1250 $0.55
Third Quarter 24.8750 22.2500 0.55
Second Quarter 25.0000 22.2500 0.55
First Quarter 25.1250 20.7500 0.55
</TABLE>
- ------------------------------------------------------------------------------
As of December 1, 1998, there were 1,195 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 in the
Amended and Restated Agreement of Limited Partnership of AmeriGas Partners,
L.P., which is filed as an exhibit to this report. 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
-12-
<PAGE> 15
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. 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
information concerning restrictions on distributions required by Item 5 of this
report is incorporated herein by reference to Notes 3 and 4 to the Partnership's
Consolidated Financial Statements which are incorporated herein by reference.
Distributions of Available Cash to the holders of Subordinated Units are subject
to the prior rights of holders of the Common Units 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 Financial Condition and Results of Operations."
-13-
<PAGE> 16
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 Ended April 19
September 30, to
------------------------------------------------- September 30,
1998 1997 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FOR THE PERIOD:
Income statement data:
Revenues $ 914,378 $ 1,077,825 $ 1,013,225 $ 269,500
Operating income (loss) 87,918 110,373 72,866 (20,088)
Income (loss) before income taxes 21,729 44,715 10,084 (47,400)
Net income (loss) 21,402 43,980 10,238 (47,107)
Limited partners' interest
in net income (loss) 21,188 43,540 10,136 (46,636)
Income (loss) per limited partner unit .51 1.04 .24 (1.12)
Cash distributions declared 2.20 2.20 2.20 .446
AT PERIOD END:
Balance sheet data:
Current assets $ 133,346 $ 183,091 $ 199,452 $ 199,438
Total assets 1,217,216 1,318,661 1,360,292 1,423,615
Current liabilities (excluding debt) 144,229 146,449 157,182 126,270
Total debt 718,994 718,728 707,453 657,726
Minority interest 4,049 5,043 5,497 6,704
Partners' capital 299,875 397,537 442,236 560,959
OTHER DATA:
EBITDA (a) $ 151,143 $ 172,377 $ 134,497 $ 6,497
Capital expenditures $ 31,577 $ 24,470 $ 21,908 $ 11,282
Retail propane gallons sold (millions) 785.3 807.4 855.4 243.6
Degree days - % (warmer) colder
than normal (b) (8.7) (1.2) 1.7 N.M.
</TABLE>
N.M. - Not Meaningful.
(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) and is not a measure of performance or financial condition
under generally accepted accounting principles.
(b) Based upon national weather statistics provided by the National Oceanic
and Atmospheric Administration (NOAA) for 335 airports in the continental
U.S.
-14-
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
AMERIGAS PROPANE / AGP - 2 (PREDECESSOR)
(Thousands of dollars)
<TABLE>
<CAPTION>
September 24, Year
1994 to Ended
April 19, September 23,
1995 1994
--------- ---------
<S> <C> <C>
INCOME STATEMENT DATA (FOR THE PERIOD):
Revenues $ 242,185 $ 367,120
Operating income 32,382 46,433
Income before extraordinary loss and
accounting change 2,922 9,659
Net income (loss) (10,620) 9,659
BALANCE SHEET DATA (AT PERIOD END):
Current assets $ (x) $ 103,825
Total assets (x) 510,981
Current liabilities (excluding debt) (x) 63,292
Total debt (x) 210,272
Common stockholders' equity (x) 186,599
OTHER DATA:
EBITDA (a) $ 45,971 $ 69,521
Capital expenditures (b) $ 5,605 $ 8,948
Retail propane gallons sold (millions) 225.0 332.4
</TABLE>
----------------------------------------
(a) 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) and is
not a measure of performance or financial condition under generally
accepted accounting principles.
(b) Excludes capital lease obligations.
(x) Not applicable.
-15-
<PAGE> 18
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
PETROLANE (PREDECESSOR)
(Thousands of dollars, except per share)
<TABLE>
<CAPTION>
September 24, Year
1994 to Ended
April 19, September 23,
1995 1994
--------- ---------
<S> <C> <C>
INCOME STATEMENT DATA (FOR THE PERIOD):
Revenues $ 372,088 $ 589,709
Operating income 41,469 56,887
Income (loss) before extraordinary item and accounting change 1,390 (2,309)
Net income (loss) 485 (2,309)
Income (loss) per common share .05 (.22)
BALANCE SHEET DATA (AT PERIOD END):
Current assets $(x) $ 126,436
Total assets (x) 914,212
Current liabilities (excluding debt) (x) 114,518
Total debt (x) 625,883
Common stockholders' equity (x) 93,113
OTHER DATA:
EBITDA (a) $ 68,867 $ 102,922
Capital expenditures (b) $ 7,291 $ 22,077
Retail propane gallons sold (millions) 319.4 496.9
</TABLE>
---------------------------------------------------
(a) 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) and is
not a measure of performance or financial condition under generally
accepted accounting principles.
(b) Excludes capital lease obligations.
(x) Not applicable.
-16-
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ANALYSIS OF RESULTS OF OPERATIONS
The following analysis compares the Partnership's results of operations for (1)
the year ended September 30, 1998 ("Fiscal 1998") with the year ended September
30, 1997 ("Fiscal 1997") and (2) Fiscal 1997 with the year ended September 30,
1996 ("Fiscal 1996").
-17-
<PAGE> 20
The following table provides gallon, weather and certain financial information
for the Partnership:
AmeriGas Partners, L.P.
(Millions, except per gallon and percentages)
<TABLE>
<CAPTION>
Year Ended September 30,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gallons sold:
Retail 785.3 807.4 855.4
Wholesale 205.1 218.6 309.7
---------- ---------- ----------
990.4 1,026.0 1,165.1
========== ========== ==========
Revenues:
Retail propane $ 746.1 $ 868.2 $ 786.9
Wholesale propane 88.5 126.0 137.9
Other 79.8 83.6 88.4
---------- ---------- ----------
$ 914.4 $ 1,077.8 $ 1,013.2
========== ========== ==========
Total propane margin (a) $ 423.9 $ 430.2 $ 398.6
Total margin (a) $ 470.6 $ 477.4 $ 443.5
EBITDA (b) $ 151.1 $ 172.4 $ 134.5
Operating income $ 87.9 $ 110.4 $ 72.9
Degree days - % (warmer) colder
than normal (c) (8.7)% (1.2)% 1.7%
</TABLE>
(a) Revenues less related cost of sales.
(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) and is
not a measure of performance or financial condition under generally
accepted accounting principles.
(c) Based upon national weather statistics provided by the National Oceanic and
Atmospheric Administration (NOAA) for 335 airports in the continental U.S.
-18-
<PAGE> 21
PARTNERSHIP RESULTS OF OPERATIONS
FISCAL 1998 COMPARED WITH FISCAL 1997
Retail and wholesale volumes sold in Fiscal 1998 were lower than in Fiscal 1997
due to warmer heating-season weather. Because many of our customers use propane
for heating purposes, our sales are affected by temperatures during the heating
season. Based upon degree day information obtained from the National Oceanic and
Atmospheric Administration (NOAA), weather in Fiscal 1998 was 8.7% warmer than
normal compared to weather that was 1.2% warmer than normal in Fiscal 1997. In
particular, the critical heating-season period of January and February was the
warmest in more than 100 years.
Total revenues from retail propane sales were $746.1 million in Fiscal 1998, a
decrease of $122.1 million from Fiscal 1997. The decrease includes $98.3 million
from a reduction in average selling prices and $23.8 million from the lower
retail volumes sold. Our wholesale propane revenues in Fiscal 1998 decreased
$37.5 million to $88.5 million due to lower Fiscal 1998 selling prices and lower
volumes. The lower average retail and wholesale selling prices were due to
significantly lower propane product costs. Other revenues were $79.8 million in
Fiscal 1998, a decrease of $3.8 million, due in large part to reduced terminal
and storage revenues and lower appliance sales revenues.
Total margin, representing total revenues less cost of sales, declined $6.8
million in Fiscal 1998 due to the lower retail volumes sold. The decline in
Fiscal 1998 total margin resulting from the lower sales was partially offset by
slightly higher average retail margin per gallon, or unit margin. The higher
average unit margin in Fiscal 1998 principally resulted from the lower propane
product costs.
The decrease in Fiscal 1998 operating income and EBITDA reflects (1) lower other
income, (2) a decrease in total propane margin, and (3) slightly higher
operating expenses. Other income, net, in Fiscal 1998 includes a $4.0 million
loss from two interest rate protection agreements. We entered into these
agreements to reduce interest rate exposure associated with an anticipated
refinancing of the Operating Partnership's Acquisition Facility in late Fiscal
1998. Like many companies planning debt refinancings, we postponed our
refinancing in response to volatility in the corporate debt markets during the
fourth quarter of fiscal 1998. The Partnership's strong cash flows in 1998, due
in large part to improved working capital management and lower propane product
costs, gave us the flexibility needed to delay the refinancing. When we
postponed the refinancing we recorded a loss on the interest rate protection
agreements because they no longer qualified for hedge accounting treatment. We
expect the corporate debt markets to stabilize which should result in lower
future interest expense when the refinancing occurs. Other income in Fiscal 1997
includes (1) $4.7 million from the sale of the Partnership's 50% interest in
Atlantic Energy, Inc. (Atlantic Energy), (2) higher customer finance charges,
and (3) higher interest income. We sold our interest in Atlantic Energy in
Fiscal 1997 after determining that its storage terminal facilities in
Chesapeake, Virginia were not strategic to our business. Operating expenses were
$320.2 million in Fiscal 1998 compared to $316.4 million in Fiscal 1997.
Operating expenses in Fiscal 1998 include the benefit of (1) $2.7 million from
lower required accruals for
-19-
<PAGE> 22
environmental matters and (2) $2.0 million from lower required accruals for
property taxes. Excluding these items, operating expenses in 1998 were $8.5
million higher, an increase of 2.7%, primarily due to incremental expenses
associated with (1) acquisitions and (2) new business activities including
start-up locations and our PPX Prefilled Propane Xchange(TM) program. Excluding
the impact of these new business activities, our base business total expenses
were essentially unchanged.
FISCAL 1997 COMPARED WITH FISCAL 1996
We sold fewer retail gallons of propane in Fiscal 1997 due in part to warmer
heating-season weather. Weather in the continental U.S. during Fiscal 1997 as
determined by NOAA averaged 1.2% warmer than normal compared to weather that was
1.7% colder than normal in Fiscal 1996. In addition, significantly higher and
more volatile propane market prices during the first half of the Fiscal 1997
heating season encouraged customers to conserve. Wholesale volumes of propane
sold decreased 91.1 million gallons to 218.6 million gallons in Fiscal 1997
principally due to reduced low-margin sales of storage inventories.
Total Fiscal 1997 revenues from our retail propane sales increased $81.3 million
to $868.2 million. The increase includes a $125.5 million increase from higher
average selling prices partially offset by a $44.2 million decrease from the
lower retail volumes sold. The higher average prices resulted from significantly
higher propane product costs early in Fiscal 1997. Our wholesale propane
revenues in Fiscal 1997 decreased $11.9 million to $126.0 million reflecting the
lower wholesale volumes sold partially offset by higher average wholesale
prices. Other revenues declined $4.8 million to $83.6 million due to lower
hauling, appliance and service revenues.
Total propane margin was greater in Fiscal 1997 because of higher average retail
unit margins. Although our propane product costs were significantly higher in
Fiscal 1997, we benefitted from favorable fixed-price supply arrangements and
derivative commodity contracts entered into as part of our Fiscal 1997 propane
supply strategy. The higher Fiscal 1997 average retail unit margin also reflects
the fact that our retail unit margins in the prior-year period were adversely
impacted by certain sales and marketing programs.
The increase in our Fiscal 1997 operating income and EBITDA is the result of (1)
the higher total margin, (2) greater other income, and (3) a decrease in
operating expenses. Total operating expenses were $316.4 million in Fiscal 1997
compared with $317.4 million in Fiscal 1996. The Fiscal 1996 operating expenses,
however, are net of (1) $4.4 million from a refund of insurance premium deposits
and (2) $3.3 million from a reduction in accrued environmental costs. Excluding
the impact of these items on Fiscal 1996 operating expenses, operating expenses
in Fiscal 1997 declined $8.7 million mainly reflecting (1) lower expenses
related to sales and marketing programs and (2) lower required accruals for
general and automobile liability and workers' compensation costs. Other income
increased $2.9 million in Fiscal 1997 reflecting a pre-tax gain of $4.7 million
from the sale of the Partnership's 50% interest in Atlantic Energy.
-20-
<PAGE> 23
FINANCIAL CONDITION AND LIQUIDITY
CAPITALIZATION AND LIQUIDITY
The Operating Partnership's primary cash sources have been (1) cash generated by
operations and (2) borrowings under its Bank Credit Agreement.
The Operating Partnership's Bank Credit Agreement consists of (1) a Revolving
Credit Facility and (2) an Acquisition Facility. The Operating Partnership may
borrow up to $100 million (including $35 million for letters of credit) under
the Revolving Credit Facility. The Revolving Credit Facility may be used for (1)
working capital, (2) capital expenditures, and (3) interest and distribution
payments. Revolving Credit Facility loans were $10 million at September 30, 1998
and $28 million at September 30, 1997. The Operating Partnership's borrowing
needs are typically greatest during the fall and early winter months due to the
need to fund working capital. The Operating Partnership may borrow up to $75
million under its Acquisition Facility to finance the purchase of propane
businesses or propane business assets. The Acquisition Facility operates like a
revolving facility until September 15, 2000. At that time, the total amount
outstanding converts to a quarterly amortizing four-year term loan. Acquisition
Facility loans were $60 million at September 30, 1998 and $37 million at
September 30, 1997.
The Partnership must maintain certain financial ratios in order to borrow under
the Bank Credit Agreement. These include a minimum interest coverage ratio and a
maximum debt to EBITDA ratio, each as defined in the Bank Credit Agreement. The
Partnership's ratios calculated as of September 30, 1998 permit it to borrow up
to the maximum amount available.
The Operating Partnership also has a credit agreement with the General Partner.
The Operating Partnership may borrow up to $20 million from the General Partner
to fund (1) working capital, (2) capital expenditures, and (3) interest and
distribution payments. The terms of this facility are generally comparable to
those of the Revolving Credit Facility. The major difference, however, is that
borrowings from the General Partner are unsecured and subordinated to all senior
debt of the Operating Partnership. UGI has agreed to contribute up to $20
million to the General Partner to fund such borrowings. The Operating
Partnership did not borrow under this facility in Fiscal 1998.
The Partnership's management believes that, given near normal weather, its cash
flow from operations and its credit facility borrowings will satisfy its
liquidity needs, including paying the minimum quarterly distribution of $.55
(MQD) to all unitholders, for the foreseeable future.
In June 1998, we revised our estimate of the tax basis of certain assets
contributed to the Partnership in conjunction with the Partnership's formation.
The change in estimate resulted in the following adjustments to the Consolidated
Balance Sheet: (1) a $27.2 million decrease in partners' capital; (2) a $.3
million decrease in minority interest; (3) a $17.9 million decrease in goodwill;
and (4) a $9.6 million decrease in excess reorganization value.
-21-
<PAGE> 24
PARTNERSHIP DISTRIBUTIONS
Since our formation in 1995, we have paid the MQD on all limited partner units
outstanding. The amount of Available Cash needed in Fiscal 1998 to pay the MQD
on all units as well as the 2% general partner interest was approximately $94
million ($48.6 million for the Common Units; $43.5 million for the Subordinated
Units; and $1.9 million for the general partner interests). The amount of cash
available for distribution that is generated by the Partnership can be estimated
by subtracting (1) cash interest expense and (2) capital expenditures needed to
maintain operating capacity, from the Partnership's EBITDA. Distributable cash
as calculated for Fiscal 1998, Fiscal 1997 and Fiscal 1996 is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Year Ended September 30, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Millions of dollars)
EBITDA $ 151.1 $ 172.4 $ 134.5
Cash interest expense(a) (67.6) (66.8) (63.6)
Maintenance capital expenditures (10.3) (7.9) (7.2)
- ----------------------------------------------------------------------------------------------------------
Distributable cash flow $ 73.2 $ 97.7 $ 63.7
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Interest expense adjusted for noncash items.
Although distributable cash is a reasonable estimate of the amount of cash
generated by the Partnership, it does not reflect changes in working capital
which can significantly affect cash available for distribution. Distributable
cash is not a measure of performance or financial condition under generally
accepted accounting principles. Although the level of distributable cash in
Fiscal 1998 was less than the full MQD, the additional cash generated from
changes in the Partnership's working capital was more than sufficient to permit
the Partnership to pay the full MQD. The ability of the Partnership to pay the
MQD on all units depends upon a number of factors. These factors include (1) the
level of Partnership earnings, (2) the cash needs of the Partnership's
operations (including cash needed for maintaining and growing operating
capacity), (3) changes in operating working capital, and (4) the Partnership's
ability to borrow. Some of these factors are affected by conditions beyond our
control including weather, competition in markets we serve, and the cost of
propane.
CONVERSION OF SUBORDINATED UNITS
As more fully described in Note 3 to Consolidated Financial Statements, the
subordination period applicable to the Subordinated Units will extend until the
first day of any quarter beginning on or after April 1, 2000 in which certain
cash performance and distribution requirements are met. However, 4,945,537
Subordinated Units may convert into Common Units on the first day after the
record date for distributions based upon any quarter ending on or after March
31, 1998, and an additional 4,945,537 may convert on the first day after the
record date for distributions based upon any quarter ending on or after March
31, 1999, if certain cash performance and distribution
-22-
<PAGE> 25
requirements are met. The cash performance requirements for conversion have not
been met to date. They are dependent upon many factors including highly seasonal
operating results, changes in working capital, asset sales and debt
refinancings. Management believes, however, that it is reasonably possible that
9,891,074 Subordinated Units will convert into Common Units during fiscal 1999.
CASH FLOWS
OPERATING ACTIVITIES. Although the Partnership's operating results were lower in
Fiscal 1998, the Partnership's cash flow from operations increased $22.5
million. Included in the Fiscal 1998 amount is $51.1 million of cash generated
from changes in operating working capital (which consists of customer accounts
receivable, inventories, accounts payable and other current assets and
liabilities used in the operations of our business). Changes in operating
working capital in Fiscal 1997 contributed only $.2 million. The change in
working capital during Fiscal 1998 was primarily due to a $36.8 million decrease
in inventories and prepaid propane purchases and a $15.9 million decrease in
accounts receivable. These decreases were a result of improved working capital
management and lower propane product costs.
INVESTING ACTIVITIES. We spent $31.6 million for property, plant and equipment
in Fiscal 1998, (including maintenance capital expenditures of $10.3 million).
Included in this amount is $4.5 million relating to the design and installation
of a new integrated financial system. The first phase of the integrated
financial system installation is scheduled to be completed during the first half
of Fiscal 1999. Capital expenditures in Fiscal 1997 were $24.5 million
(including maintenance capital expenditures of $7.9 million). During Fiscal
1998, we paid $8.1 million for propane business acquisitions compared to $11.6
million in Fiscal 1997. Proceeds from disposals of assets totaled $5.2 million
in Fiscal 1998 compared with $10.6 million in Fiscal 1997. The Fiscal 1997
amount includes proceeds from the sale of Atlantic Energy.
FINANCING ACTIVITIES. We paid the MQD on all Common Units and Subordinated
Units, as well as the general partner interests, totaling $94.1 million in
Fiscal 1998. During Fiscal 1997 we paid $93.9 million in such distributions. Due
to our strong Fiscal 1998 cash flows, we were able to reduce the amount
outstanding under our revolving credit facility by $18 million. This compares
with net borrowings of $6 million in Fiscal 1997. During Fiscal 1998, the
Operating Partnership borrowed $23 million under its Acquisition Facility
compared to $7 million in Fiscal 1997.
YEAR 2000 MATTERS
The Year 2000 ("Y2K") issue is a result of computer programs being written using
two digits (rather than four) to identify and process a year in a date field.
Computer programs having date sensitive software may recognize date fields using
"00" as the year 1900 rather than the year 2000. If uncorrected, miscalculations
and possible computer-based system failures could result which might disrupt
business operations. We are designating the following information as our "Year
2000 Readiness Disclosure."
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<PAGE> 26
Recognizing the potential business consequences of the Y2K issue, we are using
internal and external resources to conduct a detailed assessment of critical,
date sensitive computer-based systems and to identify and modify systems which
are not Y2K compliant. The scope of such efforts includes (1) our information
technology ("IT") systems such as computer hardware and software we use in the
operation of our business; (2) non-IT systems that contain embedded computer
technology such as micro-controllers contained in various equipment, facilities
and vehicles; and (3) the readiness of third parties, including our suppliers
and key vendors, and certain of our customers. We have directed our Y2K
compliance efforts toward ensuring that we will be able to continue to perform
three critical operating functions: (1) obtain products to sell; (2) provide
service to our customers; and (3) bill customers and pay our vendors and
employees. We have completed the assessment of our IT and non-IT systems.
We have successfully modified all of our critical IT systems that are not in the
process of being replaced. The modified systems include our customer information
and data systems and our financial systems including payroll and the fuel
accounting supply and transportation system. We are in the process of installing
integrated financial system software that is already Y2K compliant. We
anticipate that the installation of this software, as well as any modification
of our critical non-IT systems, will be completed by March 31, 1999.
In addition to internal Y2K remediation activities, we are in the process of
assessing the readiness of our key suppliers and third-party providers. Although
none of our products or services are directly date sensitive, as a company with
operations throughout the United States we are dependent upon other companies
whose IT and non-IT systems may not be Y2K compliant. We rely on these companies
for the supply and transportation of propane. Additionally, we depend on other
companies to supply us with propane tanks and cylinders, fuel for our vehicles,
as well as other products and services we need to operate our businesses. If key
third parties cannot provide products or services because of their own Y2K
problems, it could have a material adverse impact on our operations. The extent
of such impact would depend upon the duration of disruption and our costs to
find alternative sources of products and services, among others. We expect to
complete our evaluation of key supplier and third-party provider Y2K readiness
by March 31, 1999.
We are in the process of developing contingency plans to address, to the extent
reasonably possible, disruptions arising from Y2K related failures of key
suppliers and third-party providers. We anticipate the major elements of these
contingency plans will be based upon the use of manual back-up systems,
alternative supply sources, higher critical inventory levels, and additional
staffing. These contingency plans attempt to mitigate the impact of third-party
Y2K noncompliance. However, they cannot assure that business disruptions caused
by key suppliers or third-party providers will not have a material adverse
impact on our operations. We anticipate the business contingency plans will be
completed by June 30, 1999. In addition to the business risks noted above, there
are other Y2K risks which are beyond our control, any of which could have a
material adverse impact on our operations. Such risks include the failure of
utility and telecommunications companies to provide service and the failure of
financial institutions to process transactions.
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<PAGE> 27
Incremental costs associated with our Y2K efforts have not had a material effect
on our results of operations. Estimated future costs to modify existing IT and
non-IT systems are expected to be less than $0.5 million and will be financed
through internally generated funds. We expense Y2K costs as incurred. Costs
associated with information system improvement initiatives are expensed or
capitalized in accordance with our accounting policy for software development
costs.
IMPACT OF INFLATION
Inflation affects the prices the Partnership pays for operating and
administrative services and, to some extent, propane gas. Competitive pressures
may limit the Partnership's 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.
MARKET RISK DISCLOSURES
Our primary market risk exposures are market prices for propane and changes in
long-term interest rates.
Price risk associated with fluctuations in the prices we pay for propane is
principally a result of market forces reflecting changes in supply and demand.
The Partnership's profitability is sensitive to changes in propane supply costs
and the Partnership generally seeks to pass on increases in such costs to
customers. There is no assurance, however, that the Partnership will be able to
do so. In order to manage propane market price risk, we use contracts for the
forward purchase of propane, propane fixed-price supply agreements, and
derivative commodity instruments such as price swap and option contracts.
Although we use derivative financial and commodity instruments to reduce market
price risk associated with forecasted transactions, we do not use derivative
financial and commodity instruments for trading purposes.
We use long-term debt as a primary source of capital. These debt instruments are
typically issued at fixed interest rates. When these debt instruments mature, we
refinance such debt at then-existing market interest rates which may be more or
less than the interest rates on the maturing debt. In addition, we may attempt
to reduce interest rate risk associated with a forecasted issuance of new debt.
In order to reduce interest rate risk associated with these transactions, we
occasionally enter into interest rate protection agreements.
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<PAGE> 28
The following table summarizes the fair value of our market risk sensitive
instruments by market risk at September 30, 1998. It also includes the change in
fair value that would result if (1) the market price of propane declined 5 cents
a gallon and (2) interest rates on ten-year U.S. treasury notes declined 50
basis points:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
September 30, 1998 Fair Value Change in Fair Value
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
(Millions of dollars)
Propane commodity price risk $ (.6) $ (3.8)
Interest rate risk $ (2.4) $ (2.0)
- -------------------------------------------------------------------------------------------------------
</TABLE>
We expect that any losses from market risk sensitive instruments used to manage
propane price or interest rate market risk would be substantially offset by
gains on the associated underlying transactions.
ACCOUNTING PRINCIPLES NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income" (SFAS 130), and SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 130 establishes standards
for reporting and displaying comprehensive income and its components in
financial statements. Comprehensive income includes net income and all other
nonowner changes in equity. SFAS 131 establishes standards for reporting
information about operating segments as well as related disclosures about
products and services, geographic areas, and major customers. We will adopt SFAS
130 and SFAS 131 in fiscal 1999. In addition, in March 1998 the American
Institute of Certified Public Accountants issued Statement of Position No. 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" (SOP 98-1). SOP 98-1 requires companies to capitalize the cost of
computer software developed or obtained for internal use once certain criteria
have been met. We will adopt SOP 98-1 in fiscal 2000. We do not expect the
adoptions of SFAS 130 and SOP 98-1 will have a material effect on our financial
position or results of operations. In addition, we do not expect the initial
application of SFAS 131 will affect the operating segments we disclose.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). SFAS 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivative instruments as either assets or
liabilities and measure them at fair value. The accounting for changes in fair
value depends upon the purpose of the derivative instrument and whether it is
designated and qualifies for hedge accounting. To the extent derivative
instruments qualify and are designated as hedges of forecasted transactions,
changes in fair value will generally be reported as a component of other
comprehensive income and be reclassified into net income when the forecasted
transaction affects earnings. To the extent such derivative instrument qualifies
as a hedge of a firm
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<PAGE> 29
commitment, any gain or loss would generally be recognized in earnings when the
firm commitment affects earnings. We will adopt SFAS 133 in fiscal 2000.
We are currently evaluating the potential impact of SFAS 133 on our future
financial condition and results of operations. The impact of SFAS 133 will
likely depend upon the extent to which we use derivative instruments and their
designation and effectiveness as hedges of market risk.
FORWARD-LOOKING STATEMENTS
Information contained above in this Management's Discussion and Analysis and
elsewhere in this Report on Form 10-K with respect to expected financial results
and future events is forward-looking, based on our estimates and assumptions and
subject to risk and uncertainties. For those statements, we claim the protection
of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
The following important factors could affect our future results and could cause
those results to differ materially from those expressed in our forward-looking
statements: (1) adverse weather conditions resulting in reduced demand; (2)
price volatility and availability of propane, and the capacity to transport to
market areas; (3) changes in laws and regulations, including safety, tax and
accounting matters; (4) competitive pressures from the same and alternative
energy sources; (5) liability for environmental claims; (6) improvements in
energy efficiency and technology resulting in reduced demand; (7) labor
relations; (8) inability to make business acquisitions on economically
acceptable terms; (9) operating hazards and risks incidental to transporting,
storing and distributing propane, butane and ammonia including the risk of
explosions and fires resulting in personal injury and property damage; (10)
regional economic conditions; (11) the success of the Partnership and its
suppliers in achieving Year 2000 compliance; and (12) interest rate fluctuations
and other capital market conditions.
These factors are not necessarily all of the important factors that could cause
actual results to differ materially from those expressed in any of our
forward-looking statements. Other unknown or unpredictable factors could also
have material adverse effects on future results. We undertake no obligation to
update publicly any forward-looking statement whether as a result of new
information or future events.
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<PAGE> 30
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Quantitative and Qualitative Disclosure about market risk is contained
in Management's Discussion and Analysis of Financial Condition and Results of
Operations under the caption "Market Risk Disclosures" and is incorporated here
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and financial statement schedules referred to
in the index contained on pages F-2 and 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
We do not directly employ any persons responsible for managing or
operating the Partnership. The General Partner and UGI provide such services and
are reimbursed for direct and indirect costs and expenses including all
compensation and benefit costs. See "Certain Relationships and Related
Transactions" and Note 10 to the Partnership's Consolidated Financial
Statements.
The Board of Directors of the General Partner established a committee
(the "Audit Committee") consisting of two individuals, currently, Messrs. Van
Dyck and Vincent, 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> 31
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. as the sole shareholder of the General Partner.
AmeriGas, Inc. is a wholly owned subsidiary of UGI. 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 48 Chairman, Director, President and
Chief Executive Officer
Thomas F. Donovan 65 Director
Richard C. Gozon 60 Director
James W. Stratton 62 Director
Stephen A. Van Dyck 55 Director
Roger B. Vincent 53 Director
David I. J. Wang 66 Director
Martha B. Lindsay 46 Vice President-Finance
and Chief Financial Officer
Brendan P. Bovaird 50 Vice President and General Counsel
Eugene V. N. Bissell 45 Vice President-Sales and Operations
Diane L. Carter 50 Vice President-Human Resources
Richard R. Eynon 51 Controller and Chief Accounting Officer
R. Paul Grady 45 Vice President-Sales and Operations
William D. Katz 45 Vice President-Corporate Development
Robert H. Knauss 45 Vice President-Law and
Associate General Counsel and
Corporate Secretary
</TABLE>
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<PAGE> 32
<TABLE>
<CAPTION>
<S> <C> <C>
Gordon E. Regan, Jr. 46 Vice President-Purchasing and
Transportation
</TABLE>
Mr. Greenberg is a Director (since 1994) and Chairman, President and
Chief Executive Officer (since 1996) of the General Partner. He is also a
Director (since 1994) and Chairman (since 1996), Chief Executive Officer (since
1995), and President (since 1994) of UGI, having been Senior Vice President -
Legal and Corporate Development of UGI (1989 to 1994). Mr. Greenberg previously
served as Vice President and General Counsel of AmeriGas, Inc. (1984 to 1994).
He also serves as a Director of UGI Utilities, Inc. and Mellon PSFS Advisory
Board.
Mr. Donovan was elected a Director of the General Partner on April 25,
1995. He retired as Vice Chairman of Mellon Bank on December 31, 1996, a
position held since 1988. He continues to serve as an advisory board member to
Mellon Bank Corp. He also serves as a Director of UGI Corporation, UGI
Utilities, Inc., Nuclear Electric Insurance Co. and Merrill Lynch International
Bank, Ltd.
Mr. Gozon was elected a director of the General Partner on February 24,
1998. He is Executive Vice President of Weyerhaeuser Company (an integrated
forest products company), a position he has held since 1994. Mr. Gozon was
formerly Director (1984 to 1993), President and Chief Operating Officer of Alco
Standard Corporation (a provider of paper and office products) (1988 to 1993);
Executive Vice President and Chief Operating Officer (1987); Vice President
(1982 to 1988); and President (1979 to 1987) of Paper Corporation of America. He
also serves as a Director of UGI Corporation, UGI Utilities, Inc., AmeriSource
Health Corporation, and Triumph Group, Inc.
Mr. Stratton was elected a Director of the General Partner on April 25,
1995. He is President and Chief Executive Officer of Stratton Management Company
(investment advisory and financial consulting firm) since 1972, 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, Teleflex, Inc. and
Unisource Worldwide, 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. Vincent was elected a Director of the General Partner on January 8,
1998. He is President of Springwell Corporation, a corporate finance advisory
firm (since 1989). Mr. Vincent served in various capacities at Bankers Trust
Company (1971 to 1989), including managing director (1984 to 1989). He is also a
Director of Tatham Offshore, Inc.
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<PAGE> 33
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 also a Director of UGI Corporation and UGI Utilities, Inc.
Ms. Lindsay was elected Vice President - Finance and Chief Financial
Officer of the General Partner on January 5, 1998. She previously served as Vice
President and Treasurer (1994 to 1997) and as Treasurer (1994) of Tambrands
Inc., a manufacturer of personal products. Prior to 1994, Ms. Lindsay held the
positions of Director of Business Development (1987 to 1989) and Assistant
Treasurer (1990 to 1993) at Tambrands Inc.
Mr. Bovaird is Vice President and General Counsel of the General
Partner (since 1995). He is also Vice President and General Counsel of UGI
Corporation, UGI Utilities, Inc. and AmeriGas, Inc. (since 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.
Mr. Bissell is Vice President - Sales and Operations (since 1995) of
the General Partner. Previously, he was Vice President - Distributors and
Fabrication, BOC Gases (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).
Ms. Carter is Vice President - Human Resources of the General Partner
effective (since 1996). Previously she was Vice President - Human Resources of
Sisters of Mercy Health System, St. Louis, Missouri (1994 to 1996) and President
and founding principal of the Touchstone Partnership, Ltd., an organization and
management consulting firm based in Philadelphia (1991 to 1994).
Mr. Eynon was elected Controller and Chief Accounting Officer of the
General Partner on January 5, 1998. Prior to his election, Mr. Eynon was
Controller of the General Partner (March 1997 to January 1998) and Assistant
Controller of UGI Corporation (1985 to 1997). Previously, he was a Senior
Manager with Price Waterhouse & Co.
Mr. Grady is Vice President - Sales and Operations (since 1995) of the
General Partner. He was Vice President - Corporate Development of UGI (1994 to
1995), having been Director, Corporate Development (1990 to 1994). Previously,
Mr. Grady was Director, Corporate Development Services of Campbell Soup Company
(1985 to 1990).
Mr. Katz is Vice President - Corporate Development of the General
Partner (since 1996). He was previously 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. He also 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.
-31-
<PAGE> 34
Mr. Knauss is Vice President - Law and Associate General Counsel of the
General Partner (since 1996), having served as Corporate Secretary (since 1994)
and Group Counsel - Propane (1989 to 1996) of UGI. He joined UGI as Associate
Counsel in 1985. Before joining UGI, Mr. Knauss was an associate at the firm of
Ballard, Spahr, Andrews & Ingersoll in Philadelphia.
Mr. Regan is Vice President-Purchasing and Transportation of the
General Partner (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 approximately 20 years, most
recently as General Manager Business Support, Downstream-North America.
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<PAGE> 35
ITEM 11. EXECUTIVE COMPENSATION
The following table shows cash and other compensation paid or accrued
to the General Partner's Chief Executive Officer and each of its four other most
highly compensated executive officers, (collectively, the "Named Executives")
for the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------------ ------------ ----------
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING LONG-TERM ALL OTHER
PRINCIPAL BONUS COMPENSATION OPTIONS/SARS INCENTIVE COMPENSATION
POSITION YEAR SALARY (1) (2) GRANTED (#) PAYOUTS (3)
-------- ---- ------ --- --- --- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Lon R. Greenberg (4) 1998 $559,616 $225,000 $ 8,209 0 $0 $ 22,154
President, Chairman, 1997 $509,827 $425,000 $ 7,671 200,000 (5) $0 $ 14,233
and Chief Executive 1996 $465,000 $122,760 $ 7,359 0 $0 $ 10,462
Officer
Eugene V.N. Bissell (7) 1998 $179,728 $40,545 $ 2,069 0 $0 $ 19,175
Vice President-Sales 1997 $169,931 $74,812 $50,027 0 $0 $ 21,876
and Operations 1996 $123,750 $ 0 $ 0 5,000 (6) $0 $ 0
R. Paul Grady (7) 1998 $174,622 $43,750 $ 3,724 0 $0 $ 20,231
Vice President-Sales 1997 $166,603 $73,353 $ 3,281 0 $0 $ 23,544
and Operations 1996 $158,704 $ 0 $ 7,508 0 $0 $ 14,292
Brendan P. Bovaird (4) 1998 $176,677 $42,188 $ 4,075 0 $0 $ 5,425
Vice President and 1997 $164,653 $64,449 $ 3,769 30,000 (5) $0 $ 4,196
General Counsel 1996 $149,999 $21,853 $ 1,299 0 $0 $ 1,363
Robert H. Knauss
Vice President-Law,
Associate General 1998 $149,835 $50,405 $ 2,081 0 $0 $ 17,715
Counsel and 1997 $136,950 $48,820 $ 0 7,000 $0 $ 18,175
Corporate Secretary 1996 $132,550 $5,000 $ 0 0 $0 $ 3,375
</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 148% of base salary for Mr. Greenberg and 0% to
65% of base salary for Mr. Bovaird. For the other Named Executives, bonus
opportunities are limited only by the level of the Partnership's
profitability.
(2) Amounts represent tax payment reimbursements for certain benefits, except
for Mr. Bissell. In 1997, Mr. Bissell received a tax payment reimbursement
of $7,563, reimbursement of relocation expenses in the amount of $39,765,
and other perquisites available to executive officers generally.
(3) The amounts represent contributions by the General Partner or UGI in
accordance with the provisions of the AmeriGas Propane, Inc. Employee
Savings Plan (the "AmeriGas Employee Savings Plan"), the UGI Utilities,
Inc. Employee Savings Plan (the "UGI Employee Savings Plan"), allocations
under the UGI Corporation Senior Executive Retirement Plan (the "UGI
Executive Retirement Plan"), and/or allocations under the AmeriGas Propane,
Inc. Supplemental Executive Retirement Plan (the "AmeriGas Executive
Retirement
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<PAGE> 36
Plan"). During fiscal years 1998, 1997 and 1996, the following
contributions were made to the Named Executives: (i) under the AmeriGas
Employee Savings Plan: Mr. Bissell, $5,148, $4,902, $0; Mr. Grady, $6,394,
$7,048, and $458; and Mr. Knauss, $5,691, $7,098 and $0; (ii) under the UGI
Employee Savings Plan: Mr. Greenberg, $3,600, $3,375 and $3,375; and Mr.
Bovaird, $3,600, $3,375, and $1,363; (iii) under the UGI Executive
Retirement Plan: Mr. Greenberg, $18,554, $10,858, and $7,087; Mr. Grady,
$0, $0, and $2,427; and Mr. Bovaird, $1,852, $821 and $0; (iv) under the
AmeriGas Executive Retirement Plan: Mr. Bissell, $14,027, $16,974, and $0;
Mr. Grady, $13,837, $16,496, and $0; and Mr. Knauss, $12,024, $11,077 and
$3,375.
(4) Compensation reported for Messrs. Greenberg and Bovaird is attributable to
their respective positions of Chairman, President and Chief Executive
Officer, and Vice President and General Counsel of UGI Corporation.
Compensation for these individuals is also reported in the UGI Proxy
Statement for the 1999 Annual Meeting of Shareholders and is not additive.
The General Partner does not compensate Mr. Greenberg or Mr. Bovaird.
(5) Non-qualified stock options granted under the UGI Corporation 1997 Stock
Option and Dividend Equivalent Plan. The 1997 Plan provides 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 three-year
period beginning January 1, 1997 and ending December 31, 1999. Total return
encompasses both changes in the per share market price and dividends paid
on a share of UGI Common Stock.
(6) Non-qualified stock options granted under the UGI Corporation 1992
Non-Qualified Stock Option Plan.
(7) Effective October 1, 1996, the General Partner made grants to Messrs.
Bissell, Grady and Knauss under the AmeriGas Propane, Inc. Long-Term
Incentive Plan ("LTIP"). Each grant represents the right to receive a like
number of Common Units of the Partnership or their cash equivalent, in the
discretion of the Compensation/Pension Committee of the Board of Directors,
together with a cash payment equal to the distributions which would have
been paid on a Common Unit during the performance period if a performance
contingency is met. The performance contingency is Partnership financial
and operating performance over a minimum of twelve consecutive calendar
quarters ending no later than September 30, 2001, such that the
Partnership's Subordinated Units convert to Common Units in accordance with
the Partnership Agreement. See Note 3 to the Partnership's Consolidated
Financial Statements for a summary of the conditions necessary for
conversion of the Subordinated Units. No portion of any grant will be paid
if the performance contingency is not met by September 30, 2001. Depending
on the date of achievement of the contingency, payouts will range from 50%
to 150% of the size of the awards shown above. In the event of a change of
control, a portion of the grants may become payable pursuant to Agreements
between the General Partner and Messrs.
Bissell, Grady and Knauss.
As of September 30, 1998, the Long-Term Incentive Plan ("LTIP") grant for
each of Mr. Bissell and Mr. Grady represented 10,000 Common Units with a
market value of $238,750. Mr. Knauss's LTIP grant represented 7,000 Common
Units with a market value of $167,125. Market values are based on the
September 30, 1998 closing price for the Common Units on the New York Stock
Exchange.
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<PAGE> 37
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR END (#) AT FISCAL YEAR END
SHARES
ACQUIRED
ON VALUE
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lon R. Greenberg 50,000 $393,750 93,959 (1) 0 $281,877 (2) $ 0
200,000 (3) 0 $100,000 (4) $ 0
Eugene V.N. Bissell 0 $ 0 2,000 (5) 3,000 (5) $5,000 (6) $7,500 (6)
R. Paul Grady 17,000 (1) 0 $51,000 (2) $ 0
0 $ 0 2,000 (5) 0 $6,000 (7) $ 0
Brendan P. Bovaird 5,007 (1) $15,021 (2) $ 0
4,993 $ 37,448 30,000 (3) 0 $15,000 (4) $ 0
Robert H. Knauss 0 $ 0 1,000 (5) 0 $3,000 $ 0
</TABLE>
(1) Options granted under the 1992 Stock Option and Dividend Equivalent Plan.
(2) Value based on comparison of price per share at September 30, 1998 (fair
market value $23.125) to 1992 Stock Option and Dividend Equivalent Plan
option price ($20.125).
(3) Options granted under the 1997 Stock Option and Dividend Equivalent Plan.
(4) Value based on comparison of price per share at September 30, 1998 (fair
market value $23.125) to 1997 Stock Option and Dividend Equivalent Plan
option price ($22.625).
(5) Options granted under the 1992 Non-Qualified Stock Option Plan.
(6) Value based on comparison of price per share at September 30, 1998 (fair
market value $23.125) to option grant price at December 18, 1995 (fair
market value $20.625) under the terms of the 1992 Non-Qualified Stock
Option Plan.
(7) Value based on comparison of price per share at September 30, 1998 (fair
market value $23.125) to option grant price at January 2, 1992 (fair market
value $20.125) under the terms of the 1992 Non-Qualified Stock Option Plan.
-35-
<PAGE> 38
RETIREMENT BENEFITS
The following table shows the annual benefits payable upon retirement
to Messrs. Greenberg and Bovaird under the Retirement Income Plan for Employees
of UGI Utilities, Inc. and participating employers (the "UGI Retirement Plan")
and the UGI Supplemental Executive Retirement Plan. The amounts shown assume the
executive retires in 1998 at age 65, and that the aggregate benefits are not
subject to statutory maximums.
PENSION PLAN BENEFITS TABLE
<TABLE>
<CAPTION>
FINAL 5-YEAR ANNUAL BENEFIT FOR YEARS OF CREDITED SERVICE SHOWN (1)
AVERAGE ------------------------------------------------------------------------------
ANNUAL EARNINGS (2) 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$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)
$1,200,000 $342,000 $456,000 $570,000 $684,000 $798,000 $820,800(3)
$1,400,000 $399,000 $532,000 $665,000 $798,000 $931,000 $957,600(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. Messrs. Greenberg
and Bovaird had 18 and 3 years of estimated credited service,
respectively, at September 30, 1998. Mr. Grady previously accumulated
more than 4 years of credited service in the UGI Retirement Plan
before joining the General Partner in 1995. Mr. Knauss previously
accumulated more than 11 years of credited service in the UGI
Retirement Plan before joining the General Partner in 1996. Mr.
Bissell previously accumulated more than 5 years of credited service
with UGI and its subsidiaries before joining the General Partner in
1995.
(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 maximum benefit under the UGI Retirement Plan and the UGI
Supplemental Executive Retirement Plan is equal to 60% of a
participant's highest consecutive 12 months' earnings during the last
120 months.
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<PAGE> 39
SEVERANCE PAY PLAN FOR SENIOR EXECUTIVE EMPLOYEES
Named Executives Employed by UGI Corporation. The UGI Corporation
Senior Executive Employee Severance Pay Plan (the "UGI Severance Plan") assists
certain senior level employees of UGI, including Messrs. Greenberg and Bovaird,
in the event their employment is terminated without fault on their part.
Benefits are payable to a senior executive covered by the UGI 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.
The UGI Severance Plan provides for cash payments equal to a
participant's compensation for a period of time ranging from 3 months to 15
months (30 months in the case of Mr. Greenberg), depending on length of service.
In addition, a participant receives the cash equivalent of his or her target
bonus under the Annual Bonus Plan, pro-rated for the number of months served in
the fiscal year. However, if the termination occurs in the last two months of
the fiscal year, the Chief Executive Officer has the discretion to determine
whether the participant will receive a pro-rated target bonus, or the actual
annual bonus which would have been paid after the end of the fiscal year,
assuming that the participant's entire bonus was contingent on meeting the
applicable financial performance goal. The Plan also provides for separation pay
equal to one day's pay per month of service, not to exceed 12 months'
compensation. Certain employee benefits are continued under the Plan for a
period of up to 15 months (30 months in the case of Mr. Greenberg). UGI has the
option to pay a participant the cash equivalent of those employee benefits.
In order to receive benefits under the UGI Severance Plan, a senior
executive is required to execute a release which discharges UGI and its
subsidiaries from liability for any claims the senior executive may have against
any 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 its
subsidiaries. The senior executive is also required to cooperate in attending to
matters pending at the time of his or her termination of employment.
Named Executives Employed by AmeriGas Propane. The AmeriGas Propane,
Inc. Executive Employee Severance Pay Plan (the "AmeriGas Severance Plan")
assists certain senior level employees of the General Partner including Messrs.
Bissell, Grady and Knauss in the event their employment is terminated without
fault on their part. Specified benefits are payable to a senior executive
covered by the AmeriGas 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.
The AmeriGas Severance Plan provides for cash payments equal to a
participant's compensation for three months (6 months in the case of the Chief
Executive Officer). In addition, a participant receives the cash equivalent of
his or her target bonus under the Annual Bonus Plan, pro-rated for the number of
months served in the fiscal year. However, if the termination occurs in the last
two months of the fiscal year, the Chief Executive Officer has the discretion to
determine whether the participant will receive a pro-rated target bonus, or the
actual annual bonus which would have been paid after the end of the fiscal year,
assuming that the participant's entire
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<PAGE> 40
bonus was contingent on meeting the applicable financial performance goal. The
Plan also provides for separation pay equal to one day's pay per month of
service, not to exceed 12 months' compensation. Minimum separation pay ranges
from six to twelve months' base salary, depending on the executive's employment
grade. Certain employee benefits are continued under the Plan for a period not
exceeding 15 months (30 months in the case of the Chief Executive Officer). This
period is called the "Employee Benefit Period." The General Partner has the
option to pay a participant the cash equivalent of those employee benefits. The
AmeriGas Severance Plan also provides for payment in cash of an amount
approximately equal to all distribution equivalents credited (including those
that would be credited during the Employee Benefit Period) under the AmeriGas
Propane, Inc. 1997 Long-Term Incentive Plan and successor plans.
In order to receive benefits under the AmeriGas Severance Plan, a
senior executive is required to execute a release which discharges the General
Partner and its affiliates from liability for any claims the senior executive
may have against any 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 the General Partner or its affiliates. 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
Named Executives Employed By UGI Corporation. Messrs. Greenberg and
Bovaird each have an agreement with UGI Corporation (the "Agreement") which
provides certain benefits in the event of a change of control. The Agreements
operate independently of the UGI Severance Plan, continue through July 2002, 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,
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<PAGE> 41
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 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 or 1.5
(2.5 in the case of Mr. Greenberg) times his average total cash remuneration for
the preceding five calendar years. 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
Internal Revenue Code of 1986, as amended (the "Code"), the executive will also
receive an amount to satisfy the executive's additional tax burden.
Named Executives Employed by the General Partner. Messrs. Bissell,
Grady and Knauss each have an agreement with the General Partner (the
"Agreement") which provides certain benefits in the event of a change of
control. The Agreements operate independently of the AmeriGas Severance Plan,
continue through July 2002, and are automatically extended in one-year
increments thereafter unless, prior to a change of control, the General Partner
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 the General Partner or any of its subsidiaries.
A change of control is generally deemed to occur if : (i) a change of
control of UGI, as defined above, occurs, (ii) the General Partner, AmeriGas
Partners or the Operating Partnership is reorganized, merged or consolidated
with or into, or sells all or substantially all of its assets to, another
corporation or partnership in a transaction in which the former shareholders of
the General Partner, or former limited partners, as the case may be, do not own
more than 50% of the outstanding common stock and combined voting power, or the
outstanding common units of such partnership, after the transaction, unless the
Executive Committee of the Board of Directors of the General Partner determines
at the time of such transaction that the circumstances do not warrant the
implementation of the provisions of the Agreement, (iii) the General Partner,
AmeriGas Partners or the Operating Partnership is liquidated or dissolved, (iv)
UGI and its subsidiaries fail to own fifty-one percent (51%) of the general
partnership interests of AmeriGas Partners or the Operating Partnership, (unless
the Executive Committee determines otherwise), (v) UGI and its subsidiaries fail
to own fifty-one percent (51%) of the combined voting power of the General
Partner's then outstanding voting securities, (unless the Executive Committee
determines otherwise), (vi) AmeriGas Propane, Inc. is removed as the general
partner of
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<PAGE> 42
AmeriGas Partners by vote of the limited partners, or AmeriGas Propane, Inc. is
removed as the general partner of AmeriGas Partners or the Operating Partnership
as a result of judicial or administrative proceedings.
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 termination of officer
status; a significant adverse change in authority, duties, responsibilities or
compensation; the failure of the General Partner 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 times his
average total cash remuneration for the preceding five calendar years, and,
unless payment shall already have been made pursuant to the AmeriGas Propane,
Inc. 1997 Long-Term Incentive Plan ("LTIP"), an additional amount representing
up to 110% (based on length of service) of the fair market value of the Common
Units underlying grants made to the executive under the LTIP. 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, the executive will also receive an amount
to satisfy the executive's additional tax burden.
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 $22,000 to all other directors and an
attendance fee of $1,000 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 $1,000 for each Committee meeting attended. The General
Partner reimburses directors for expenses incurred by them (such as travel
expenses) in 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
Richard C. Gozon (Chairman), Thomas F. Donovan and David I. J. Wang.
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<PAGE> 43
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, 1998. AmeriGas Propane, Inc. is the sole general partner of
the Partnership.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS (1) BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- -------------- ------------------- --------- --------
<S> <C> <C> <C>
Common Units UGI Corporation 4,392,858 (2) 19.9%
AmeriGas, Inc. 4,392,858 (3) 19.9%
AmeriGas Propane, Inc. 4,392,858 (4) 19.9%
Petrolane Incorporated 1,407,911 (5) 6.4%
Subordinated Units UGI Corporation 19,782,146 (2) 100.0%
AmeriGas, Inc. 19,782,146 (3) 100.0%
AmeriGas Propane, Inc. 19,782,146 (6) 100.0%
Petrolane Incorporated 6,432,000 (7) 33.0%
</TABLE>
(1) The address of each of UGI, AmeriGas, Inc., AmeriGas Propane, Inc. and
Petrolane is 460 North Gulph Road, King of Prussia, PA 19406.
(2) Based on the number of units held by its indirect wholly owned
subsidiaries, Petrolane Incorporated ("Petrolane") and AmeriGas Propane,
Inc.
(3) Based on the number of units held by its direct and indirect wholly owned
subsidiaries, AmeriGas Propane, Inc. and Petrolane.
(4) Includes 2,984,947 Common Units for which AmeriGas Propane, Inc. has sole
voting and investment power, and 1,407,911 Common Units held by its
subsidiary, Petrolane.
(5) Petrolane has sole voting and investment power.
(6) Includes 13,350,146 Subordinated Units for which AmeriGas Propane, Inc.
has sole voting and investment power, and 6,432,000 Subordinated Units
held by its subsidiary, Petrolane.
(7) Petrolane has sole voting and investment power.
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<PAGE> 44
OWNERSHIP OF PARTNERSHIP COMMON UNITS BY THE DIRECTORS AND EXECUTIVE OFFICERS OF
THE GENERAL PARTNER
The table below sets forth as of October 31, 1998 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>
NAME OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)
---------------- -----------------------
<S> <C>
Lon R. Greenberg 4,500 (2)
Thomas F. Donovan 1,000
Richard C. Gozon 0
James W. Stratton 1,000
Stephen A. Van Dyck 1,000
Roger B. Vincent 1,000
David I. J. Wang 5,000
Eugene V.N. Bissell 1,500 (3)
Brendan P. Bovaird 400 (4)
R. Paul Grady 2,300
Robert H. Knauss 0
Directors and executive officers as a group (16
persons) 18,300
</TABLE>
(1) Sole voting and investment power unless otherwise specified.
(2) 3,000 Units are owned by Mr. Greenberg's adult children; 1,500 Units are
held by Mr. Greenberg as custodian for a dependent child.
(3) Mr. Bissell's Units are held jointly with his spouse.
(4) Mr. Bovaird's Units are held jointly with his spouse.
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<PAGE> 45
The General Partner is a wholly owned subsidiary of AmeriGas, Inc.
which is a wholly owned subsidiary of UGI. The table below sets forth, as of
October 31, 1998, the beneficial ownership of UGI Common Stock by each director
and each of the Named Executives, as well as by the directors and the executive
officers of the General Partner as a group. Including the number of shares of
stock underlying exercisable options, Mr. Greenberg is the beneficial owner of
approximately 1.2% of UGI's Common Stock. All other directors, Named Executives
and executive officers own less than 1% of UGI's outstanding shares. The total
number of shares beneficially owned by the directors and executive officers as a
group (including 385,466 shares subject to exercisable options), represents
approximately 1.8% of UGI's outstanding shares.
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND NATURE OF
BENEFICIAL OWNERSHIP
NAME OF EXCLUDING NUMBER OF
BENEFICIAL OWNER OPTIONS (1)(2) STOCK OPTIONS TOTAL
---------------- -------------- ------------- -----
<S> <C> <C> <C>
Lon R. Greenberg 90,360 (3) 293,959 384,319
Thomas F. Donovan 1,647 0 1,647
Richard C. Gozon 14,184 5,000 19,184
James W. Stratton 9,880 5,000 14,880
Stephen A. Van Dyck 0 0 0
Roger B. Vincent 1,000 0 1,000
David I. J. Wang 21,952 5,000 26,952
Eugene V.N. Bissell 5,815 (4) 2,000 7,815
Brendan P. Bovaird 13,498 (5)(6) 35,007 48,505
R. Paul Grady 8,893 19,000 27,893
Robert H. Knauss 4,504 1,000 5,504
Directors and executive officers as a
group (16 persons) 195,648 (6) 385,466 581,114
</TABLE>
(1) Sole voting and investment power unless otherwise specified.
(2) Included in the number of shares shown above are Deferred Units ("Units")
acquired through the UGI Corporation 1997 Directors' Equity Compensation
Plan. Units are neither actual shares nor other securities, but each Unit
will be converted to one share of UGI common stock and paid out to
directors upon their retirement or termination of service. The number of
Units included for the directors is as follows: Messrs. Donovan (630),
Gozon (7,639), Stratton (8,335) and Wang (7,407).
(3) Mr. Greenberg's beneficial ownership includes 88,220 shares that he holds
jointly with his spouse.
(4) Mr. Bissell's beneficial ownership includes 5,353 shares that he holds
jointly with his spouse.
(5) Mr. Bovaird's beneficial ownership includes 12,993 shares that he holds
jointly with his spouse.
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<PAGE> 46
(6) Includes the number of shares represented by units held in the UGI Stock
Fund of the UGI Utilities, Inc. and AmeriGas Propane, Inc. 401(k) Employee
Savings Plans based on September 30, 1998 Savings Plan statements.
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<PAGE> 47
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.
The Operating Partnership has a revolving line of credit up to a
maximum of $20 million from the General Partner available until September 15,
2002, the termination date of the Revolving Credit Facility. Any loans under
this agreement will be unsecured and subordinated to all senior debt of the
Operating Partnership. The commitment fees for this line of credit are computed
on the same basis as the facility fees under the Revolving Credit Facility, and
totaled $70,973 in fiscal year 1998. Interest rates are based on one-month
offshore interbank borrowing rates. The interest rate for a recent Credit
Facility borrowing from October 3, 1998 to November 23, 1998 was 5.875%,
representing a 5.25% one-month Offshore Rate, plus an Applicable Margin of
.625%. See Note 4 to the Partnership's Consolidated Financial Statements, which
are 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. The rental payments and insurance premiums
charged to the Partnership by UGI and its affiliates are comparable to amounts
charged by unaffiliated parties. In fiscal year 1998, the Partnership paid UGI
and its affiliates $10,573,459 for the services and expense reimbursements
referred to in this paragraph.
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<PAGE> 48
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 and F-3 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):
INCORPORATION BY REFERENCE
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
2.1 Merger and Contribution Agreement among AmeriGas Registration 10.21
AmeriGas Partners, L.P., AmeriGas Partners, L.P. Statement on
Propane, L.P., New AmeriGas Propane, Form S-4 (No.
Inc., AmeriGas Propane, Inc., AmeriGas 33-92734)
Propane-2, Inc., Cal Gas Corporation of
America, Propane Transport, Inc. and
NORCO Transportation Company
2.2 Conveyance and Contribution Agreement AmeriGas Registration 10.22
among AmeriGas Partners, L.P., AmeriGas Partners, L.P. Statement on
Propane, L.P. and Petrolane Incorporated Form S-4 (No.
33-92734)
3.1 Amended and Restated Agreement of Limited AmeriGas Form 10-K 3.1
Partnership of AmeriGas Partners, L.P. Partners, L.P. (9/30/95)
dated as of September 18, 1995
3.2 Certificate of Incorporation of AmeriGas AmeriGas Registration 3.3
Finance Corp. Partners, L.P. Statement on
Form S-4
(No. 33-92734)
</TABLE>
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<PAGE> 49
INCORPORATION BY REFERENCE
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
3.3 Bylaws of AmeriGas Finance Corp. AmeriGas Registration 3.4
Partners, L.P. Statement on
Form S-4
(No. 33-92734)
4.1 Indenture dated as of April 19, 1995 among AmeriGas Form 10-Q 4.1
AmeriGas Partners, L.P., AmeriGas Finance Partners, L.P. 3/31/95
Corp., and first Union National Bank
(formerly, First Fidelity Bank, National
Association) as Trustee
4.2 Specimen Certificate of Notes AmeriGas Form 10-Q 4.2
Partners, L.P. (3/31/95)
4.3 Registration Rights Agreement dated as of AmeriGas Form 10-Q 4.3
April 19, 1995 among Donaldson, Lufkin & Partners, L.P. (3/31/95)
Jenrette Securities Corporation, Smith
Barney, Inc., AmeriGas Partners, L.P. and
AmeriGas Finance Corp.
4.4 Note Agreement dated as of April 12, 1995 AmeriGas Form 10-Q 10.8
among The Prudential Insurance Company of Partners, L.P. (3/31/95)
America, Metropolitan Life Insurance
Company, and certain other institutional
investors and AmeriGas Propane, L.P., New
AmeriGas Propane, Inc. and Petrolane
Incorporated
4.5 First Amendment dated as of September 12, AmeriGas Form 10-Q 4.5
1997 to Note Agreement dated as of April Partners, L.P. (9/30/97)
12, 1995
*4.6 Second Amendment dated as of September 15,
1998 to Note Agreement dated as of April
12, 1995
10.1 Amended and Restated Credit Agreement dated AmeriGas Form 10-K 10.1
as of September 15, 1997 among AmeriGas Partners, L.P. (9/30/97)
Propane, L.P., AmeriGas Propane, Inc.,
Petrolane Incorporated, Bank of America
National Trust and Savings Association, as
Agent, First Union National Bank, as
Syndication Agent and certain banks
</TABLE>
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<PAGE> 50
INCORPORATION BY REFERENCE
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
*10.2 First Amendment dated as of September 15,
1998 to Amended and Restated Credit Agreement
10.3 Agreement dated as of May 1, 1996 between TE AmeriGas Form 10-K 10.2
Products Pipeline Company, L.P., and Partners, L.P. (9/30/97)
AmeriGas Propane, L.P., effective until
April 1, 2001
10.4 Intercreditor and Agency Agreement dated as AmeriGas Form 10-Q 10.2
of April 19, 1995 among AmeriGas Propane, Partners, L.P. (3/31/95)
Inc., 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 AmeriGas Form 10-Q 10.3
19, 1995 among AmeriGas Propane, L.P., Bank Partners, L.P. (3/31/95)
of America National Trust and Savings
Association and Mellon Bank, N.A.
10.6 Subsidiary Security Agreement dated as of AmeriGas Form 10-Q 10.4
April 19, 1995 among AmeriGas Propane, L.P., Partners, L.P. (3/31/95)
Bank of America National Trust and Savings
Association as Collateral Agent and Mellon
Bank, N.A. as Cash Collateral Agent
10.7 Restricted Subsidiary Guarantee dated as of AmeriGas Form 10-Q 10.5
April 19, 1995 by AmeriGas Propane, L.P. for Partners, L.P. (3/31/95)
the benefit of Bank of America National
Trust and Savings Association, as Collateral
Agent
10.8 Trademark License Agreement dated April 19, AmeriGas Form 10-Q 10.6
1995 among UGI Corporation, AmeriGas, Inc., Partners, L.P. (3/31/95)
AmeriGas Propane, Inc., AmeriGas Partners,
L.P. and AmeriGas Propane, L.P.
10.9 Trademark License Agreement dated April 19, AmeriGas Form 10-Q 10.7
1995 among AmeriGas Propane, Inc., AmeriGas Partners, L.P. (3/31/95)
Partners, L.P. and AmeriGas Propane, L.P.
10.10 Stock Purchase Agreement dated May 27, 1989, Petrolane Registration 10.16(a)
as amended and restated July 31, 1989, Incorporated/ on Form S-1
between Texas Eastern Corporation and QFB AmeriGas, Inc. (No. 33-69450)
Partners
</TABLE>
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<PAGE> 51
INCORPORATION BY REFERENCE
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
10.11 Amended and Restated Sublease Agreement UGI Corporation Form 10-K 10.35
dated April 1, 1988, between Southwest Salt (9/30/94)
Co. and AP Propane, Inc. (the "Southwest
Salt Co. Agreement")
10.12 Letter dated September 26, 1994 pursuant to UGI Corporation Form 10-K 10.36
Article 1, Section 1.2 of the Southwest Salt (9/30/94)
Co. Agreement re option to renew for period
of June 1, 1995 to May 31, 2000
10.13 Financing Agreement dated as of November 5, AmeriGas Form 10-K 10.12
1997 between AmeriGas Propane, Inc. and Partners, L.P. (9/30/97)
AmeriGas Propane, L.P.
10.14 Agreement by Petrolane Incorporated and Petrolane Form 10-K 10.13
certain of its subsidiaries parties thereto Incorporated (9/23/94)
("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
10.15** UGI Corporation 1992 Stock Option and UGI Corporation Form 10-Q 10(ee.)
Dividend Equivalent Plan, as amended May 19, (6/30/92)
1992
10.16** UGI Corporation Annual Bonus Plan dated UGI Corporation Form 10-Q 10.4
March 8, 1996 (6/30/96)
10.17** AmeriGas Partners, L.P. Annual Bonus Plan AmeriGas Form 10-Q 10.1
dated March 8, 1996 Partners, L.P. (6/30/96)
10.18** 1997 Stock Purchase Loan Plan UGI Corporation Form 10-K 10.16
(9/30/97)
10.19** UGI Corporation Senior Executive Employee UGI Corporation Form 10-K 10.12
Severance Pay Plan effective January 1, 1997 (9/30/97)
10.20** AmeriGas Propane, Inc. Executive Employee AmeriGas Form 10-Q 10.1
Severance Pay Plan effective January 1, 1997 Partners, L.P. (12/31/96)
10.21** Amendment No. 1 to AmeriGas Propane, Inc. AmeriGas Form 10-Q 10
Executive Employee Severance Pay Plan Partners, L.P. (6/30/98)
10.22** UGI Corporation 1992 Non-Qualified Stock AmeriGas Form 10-K 10.19
Option Plan Partners, L.P. (9/30/95)
10.23** Amendment No. 1 to the UGI Corporation 1992 UGI Utilities, Form 10-Q 10
Non-Qualified Stock Option Plan Inc. (6/30/97)
</TABLE>
-49-
<PAGE> 52
INCORPORATION BY REFERENCE
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT REGISTRANT FILING EXHIBIT
----------- ------- ---------- ------ -------
<S> <C> <C> <C> <C>
10.24** Form of Change of Control Agreement between UGI Corporation Form 10-K 10.13
UGI Corporation and Lon R. Greenberg (9/30/97)
10.25** Form of Change of Control Agreement between UGI Corporation Form 10-K 10.15
UGI Corporation and Brendan P. Bovaird (9/30/97)
10.26** Form of Change of Control Agreement between AmeriGas Form 10-K 10.25
AmeriGas Propane, Inc. and Messrs. Bissell, Partners, L.P. (9/30/97)
Grady and Knauss
10.27** AmeriGas Propane, Inc. 1997 Long-Term AmeriGas Form 10-K 10.26
Incentive Plan effective October 1, 1996 Partners, L.P. (9/30/97)
10.28** AmeriGas Propane, Inc. Supplemental AmeriGas Form 10-K 10.27
Executive Retirement Plan effective October Partners, L.P. (9/30/97)
1, 1996
10.29** UGI Corporation 1997 Stock Option and UGI Corporation Form 10-Q 10.2
Dividend Equivalent Plan (3/31/97)
10.30** UGI Corporation Supplemental Executive UGI Corporation Form 10-Q 10
Retirement Plan Amended and Restated (6/30/98)
effective October 1, 1996
*13 Pages 2 through 15 of the AmeriGas
Partners, L.P. Annual Report for the year
ended September 30, 1998
*21 Subsidiaries of AmeriGas Partners, L.P.
*27.1 Financial Data Schedule of AmeriGas
Partners, L.P.
*27.2 Financial Data Schedule of AmeriGas Finance
Corp.
</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 1998 fiscal year, neither the
Partnership nor AmeriGas Finance Corp. filed any Current Reports on Form 8-K.
-50-
<PAGE> 53
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 14, 1998 By: AmeriGas Propane, Inc.
its General Partner
By: Martha B. Lindsay
----------------------------------
Martha B. Lindsay
Vice President - Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below on December 14, 1998 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
- ----------------------------- Executive Officer
Lon R. Greenberg (Principal Executive Officer)
and Director
Martha B. Lindsay Vice President - Finance
- ----------------------------- and Chief Financial Officer
Martha B. Lindsay (Principal Financial Officer)
Richard R. Eynon Controller and
- ----------------------------- Chief Accounting Officer
Richard R. Eynon (Principal Accounting Officer)
-51-
<PAGE> 54
SIGNATURE TITLE
--------- -----
Thomas F. Donovan Director
- -----------------------------
Thomas F. Donovan
Richard C. Gozon Director
- -----------------------------
Richard C. Gozon
James W. Stratton Director
- -----------------------------
James W. Stratton
Stephen A. Van Dyck Director
- -----------------------------
Stephen A. Van Dyck
Roger B. Vincent Director
- -----------------------------
Roger B. Vincent
David I. J. Wang Director
- -----------------------------
David I. J. Wang
-52-
<PAGE> 55
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 14, 1998 By: Martha B. Lindsay
----------------------------------
Martha B. Lindsay
Vice President - Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below on December 14, 1998 by the following persons
on behalf of the Registrant and in the capacities indicated.
SIGNATURE TITLE
Lon R. Greenberg President (Principal Executive
- ----------------------------- Officer) and Director
Lon R. Greenberg
Martha B. Lindsay Vice President - Finance
- ----------------------------- and Chief Financial Officer
Martha B. Lindsay (Principal Financial Officer)
and Director
Richard R. Eynon Controller
- ----------------------------- (Principal Accounting Officer)
Richard R. Eynon
Eugene V. N. Bissell Director
- -----------------------------
Eugene V. N. Bissell
Brendan P. Bovaird Director
- -----------------------------
Brendan P. Bovaird
-53-
<PAGE> 56
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, 1998
F-1
<PAGE> 57
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 LLP dated
November 13, 1998, listed in the following index, are included in AmeriGas
Partners' 1998 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 1998 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)
------ ------
<S> <C> <C>
AmeriGas Partners, L.P. and Subsidiaries
Financial Statements:
Report of Independent Public Accountants Exhibit 13 15
Consolidated Balance Sheets as of September 30,
1998 and 1997 Exhibit 13 2
Consolidated Statements of Operations for the years ended September 30,
1998, 1997 and 1996 Exhibit 13 3
Consolidated Statements of Cash Flows for the years ended September 30,
1998, 1997 and 1996 Exhibit 13 4
Consolidated Statements of Partners' Capital for the years ended September
30, 1998, 1997 and 1996 Exhibit 13 5
Notes to Consolidated Financial Statements Exhibit 13 6-13
Financial Statement Schedules:
I - Condensed Financial Information of Registrant
(Parent Company) S-1 to S-3
II - Valuation and Qualifying Accounts S-4 to S-5
Report of Independent Public Accountants
on Financial Statement Schedules S-6
</TABLE>
F-2
<PAGE> 58
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (continued)
<TABLE>
<CAPTION>
Form 10-K
(page)
------
<S> <C>
AmeriGas Finance Corp.
Financial Statements:
Report of Independent Public Accountants F-5
Balance Sheets as of September 30, 1998 and 1997 F-6
Statements of Stockholder's Equity for the years ended September 30,
1998, 1997 and 1996 F-7
Note to Financial Statements F-8
</TABLE>
We have omitted all other financial statement schedules because the required
information is either (1) not present; (2) not present in amounts sufficient to
require submission of the schedule; or (3) the information required is included
elsewhere in the financial statements or related notes.
F-3
<PAGE> 59
AMERIGAS FINANCE CORP.
FINANCIAL STATEMENTS
for the years ended September 30, 1998, 1997 and 1996
F-4
<PAGE> 60
[ARTHUR ANDERSEN LLP]
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, 1998 and 1997, and the related statements of stockholder's
equity for each of the three years in the period ended September 30, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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, 1998 and 1997, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 13, 1998
F-5
<PAGE> 61
AMERIGAS FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
----------------
ASSETS 1998 1997
---- ----
<S> <C> <C>
Cash $1,000 $1,000
------ ------
Total assets $1,000 $1,000
====== ======
STOCKHOLDER'S EQUITY
Common stock, $.01 par value; 100 shares authorized;
100 shares issued and outstanding $ 1 $ 1
Additional paid-in capital 999 999
------ ------
Total stockholder's equity $1,000 $1,000
====== ======
</TABLE>
The accompanying note is an integral part of these financial statements.
F-6
<PAGE> 62
AMERIGAS FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.)
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings
----- ------- --------
<S> <C> <C> <C>
BALANCE SEPTEMBER 30, 1996 $ 1 $999 $--
---- ---- ---
BALANCE SEPTEMBER 30, 1997 1 999 --
---- ---- ---
BALANCE SEPTEMBER 30, 1998 $ 1 $999 $--
==== ==== ===
</TABLE>
The accompanying note is an integral part of these financial statements.
F-7
<PAGE> 63
AMERIGAS FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.)
NOTE TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
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-8
<PAGE> 64
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
BALANCE SHEETS
(Thousands of dollars)
<TABLE>
<CAPTION>
September 30,
--------------------
1998 1997
---- ----
<S> <C> <C>
ASSETS
Accounts receivable $ 5,093 $ 5,063
Investment in AmeriGas Propane, L.P. 396,844 494,233
Deferred charges 2,609 2,911
-------- --------
Total assets $404,546 $502,207
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 30 $ 29
Accrued interest 4,641 4,641
-------- --------
Total current liabilities 4,671 4,670
Long-term debt 100,000 100,000
Partners' capital:
Common unitholders 157,866 208,253
Subordinated unitholders 139,012 185,310
General partner 2,997 3,974
-------- --------
Total partners' capital 299,875 397,537
-------- --------
Total liabilities and partners' capital $404,546 $502,207
======== ========
</TABLE>
S-1
<PAGE> 65
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
STATEMENTS OF OPERATIONS
(Thousands of dollars)
<TABLE>
<CAPTION>
Year
Ended
September 30,
---------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Operating income (expenses) $ 30 $ (29) $ (36)
Equity in income of AmeriGas Propane, L.P. 31,802 54,439 20,676
Interest expense (10,430) (10,430) (10,402)
-------- -------- --------
Net income $ 21,402 $ 43,980 $ 10,238
======== ======== ========
</TABLE>
S-2
<PAGE> 66
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
Ended
September 30,
----------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,402 $ 43,980 $ 10,238
Reconciliation of net income to net cash from
operating activities:
Equity in income of AmeriGas Propane, L.P. (31,802) (54,438) (20,676)
Increase in accounts receivable (30) -- (113)
Increase (decrease) in accounts payable 1 (37) 35
Increase in accrued interest -- -- 85
Amortization of deferred debt issuance costs 305 306 305
--------- --------- ---------
Net cash used by operating activities (10,124) (10,189) (10,126)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Contribution to AmeriGas Propane, L.P. (12) (26) --
Distributions from AmeriGas Propane, L.P. 103,184 103,050 102,853
--------- --------- ---------
Net cash provided by investing activities 103,172 103,024 102,853
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (93,060) (92,861) (92,727)
Capital contribution from General Partner 12 26 --
--------- --------- ---------
Net cash used by financing activities (93,048) (92,835) (92,727)
--------- --------- ---------
Change in cash and cash equivalents $ -- $ -- $ --
========= ========= =========
CASH AND CASH EQUIVALENTS:
End of period $ -- $ -- $ --
Beginning of period -- -- --
--------- --------- ---------
Change $ -- $ -- $ --
========= ========= =========
</TABLE>
S-3
<PAGE> 67
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 year expenses Other year
------- -------- ----- ----
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1998
Reserves deducted from assets in the consolidated
balance sheet:
Allowance for doubtful accounts $ 7,875 $ 4,287 $ (5,730)(1) $ 6,432
======== ========
Allowance for amortization of other
deferred costs $ 414 $ 170 $ -- $ 584
======== ========
Allowance for amortization of deferred
financing costs $ 3,791 $ 1,616 $ -- $ 5,407
======== ========
Other reserves:
Self-insured property and casualty liability $ 41,856 $ 10,606 $(10,620)(2) $ 41,842
======== ========
Insured property and casualty liability $ 1,801 $ 2,851 $ (352)(2) $ 4,300
======== ========
Environmental and other $ 19,133 $ (4,046) $ (1,920)(2) $ 13,167
======== ========
YEAR ENDED SEPTEMBER 30, 1997
Reserves deducted from assets in the consolidated
balance sheet:
Allowance for doubtful accounts $ 6,579 $ 6,986 $ (5,690)(1) $ 7,875
======== ========
Allowance for amortization of other
deferred costs $ 244 $ 170 $ -- $ 414
======== ========
Allowance for amortization of deferred
financing costs $ 2,238 $ 1,553 $ -- $ 3,791
======== ========
Other reserves:
Self-insured property and casualty liability $ 42,332 $ 9,421 $ (9,897)(2) $ 41,856
======== ========
Insured property and casualty liability $ 19,024 $ 3,345 $(20,568)(2) $ 1,801
======== ========
Environmental and other $ 15,629 $ 4,565 $ (1,126)(2) $ 19,133
======== ========
65 (3)
</TABLE>
S-4
<PAGE> 68
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (CONTINUED)
(Thousands of dollars)
<TABLE>
<CAPTION>
Charged
Balance at (credited) Balance at
beginning to costs and end of
of year expenses Other year
------- -------- ----- ----
<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 and other $ 25,591 $ (7,127) $ (2,645)(2) $ 15,629
======== ========
(190)(3)
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
(2) Payments.
(3) Other adjustments.
S-5
<PAGE> 69
[ARTHUR ANDERSEN LLP]
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, in accordance with generally accepted auditing standards, the
consolidated financial statements included in the AmeriGas Partners, L.P. annual
report to unitholders for the year ended September 30, 1998, incorporated by
reference in this Form 10-K, and have issued our report thereon dated November
13, 1998. Our audits were made for the purpose of forming an opinion on those
consolidated financial statements taken as a whole. The schedules listed in the
index on page F-2 are the responsibility of the management of AmeriGas Propane,
Inc. and 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
audits 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 13, 1998
S-6
<PAGE> 70
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
4.6 Second Amendment dated as of September 15, 1998 to
Note Agreement dated as of April 12, 1995
10.2 First Amendment dated as of September 15, 1998 to
Amended and Restated Credit Agreement dated as of
September 15, 1997
13 Pages 2 to 15 of the AmeriGas Partners, L.P. 1998
Annual Report
21 Subsidiaries of AmeriGas Partners, L.P.
27.1 Financial Data Schedule of AmeriGas Partners, L.P.
27.2 Financial Data Schedule of AmeriGas Finance Corp.
<PAGE> 1
EXHIBIT 4.6
SECOND AMENDMENT dated as of September 15, 1998 (the "Second
Amendment") to the NOTE AGREEMENT dated as of April 12, 1995, as amended by the
First Amendment dated as of September 12, 1997 (as amended, the "Agreement") by
and among AMERIGAS PROPANE, L.P., a Delaware limited partnership (the
"Company"), AMERIGAS PROPANE, INC., a Pennsylvania corporation formerly known as
New AmeriGas Propane, Inc. (the "General Partner"), PETROLANE INCORPORATED, a
Pennsylvania corporation and successor by merger to Petrolane Incorporated, a
California corporation ("Petrolane"; the Company, the General Partner and
Petrolane being hereinafter collectively referred to as the "Obligors"), and
each of the noteholders listed in Schedule I to the Agreement as amended hereby
(the "Holders").
WHEREAS, the parties hereto desire to amend the Agreement as set forth
below;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows.
1. Amendments to the Agreement. Effective as of the
Effective Date (as hereinafter defined), the Agreement is hereby amended as
follows:
1.1 Amendments to Section 10.1.
(a) Section 10.1(f) of the Agreement is hereby
amended to read in its entirety as follows:
"(f) the Company may become and remain
liable with respect to Indebtedness, in addition to
that otherwise permitted by the foregoing
subdivisions of this Section 10.1, if on the date the
Company becomes liable with respect to any such
additional Indebtedness and immediately after giving
effect thereto and to the substantially concurrent
repayment of any other Indebtedness (i) the ratio of
Consolidated Cash Flow to Consolidated Pro Forma Debt
Service is equal to or greater than 2.50 to 1.0, and
(ii) the ratio of Consolidated Cash Flow to Average
Consolidated Pro Forma Debt Service is equal to or
greater than 1.25 to 1.0."
1.2 Amendments to Section 10.2.
(a) Section 10.2(m) of the Agreement is hereby
amended to read in its entirety as follows:
"(m) Liens (other than the Liens referred to
in clauses (j), (k) or (l) above) securing
Indebtedness represented by the 1998 Notes or other
Indebtedness incurred in accordance with Section
10.1(b) or 10.1(e) or, to the extent incurred (i) to
repay Indebtedness or letter of credit obligations
incurred and outstanding under the Acquisition
Facility or the Revolving Credit Facility (or any
extension, renewal, refunding, replacement or
refinancing of any such Indebtedness); (ii) to
finance the making of expenditures for the
improvement or repair (to the extent such
improvements and repairs may be capitalized on the
books of the Company and the Restricted Subsidiaries
in accordance with
<PAGE> 2
GAAP) of or additions (including additions by way of
acquisitions or capital contributions of businesses
and related assets) to the General Collateral, or
(iii) by assumption in connection with additions
(including additions by way of acquisitions or
capital contributions of businesses and related
assets) to the General Collateral, Section 10.1(f),
provided that (1) such Liens are effected through an
amendment to the Security Documents to the extent
necessary to provide the holders of such Indebtedness
equal and ratable security in the property and assets
subject to the Security Documents with the holders of
the Notes and the other Indebtedness secured under
the Security Documents, (2) in the case of
Indebtedness incurred in accordance with Section
10.1(b) or 10.1(f) to finance the making of additions
to the General Collateral, the Company has delivered
to the Collateral Agent an Officers' Certificate
demonstrating that the principal amount of such
Indebtedness (net of transaction costs funded by the
proceeds of such Indebtedness) does not exceed the
lesser of the cost to the Company and the Restricted
Subsidiaries of such additional property or assets
and the fair market value of such additional property
or assets at the time of the acquisition thereof (as
determined in good faith by the General Partner), and
(3) the Company has delivered to the Collateral Agent
an opinion of counsel reasonably satisfactory to the
Collateral Agent with regard to the attachment and
perfection of the Lien of the Security Documents with
respect to such additional property and assets;"
1.3 Amendment to Section 13.
(a) Section 13.1 is hereby amended by adding the
following definition:
"1998 Notes: the Notes issued in an aggregate
principal amount not exceeding $100,000,000 pursuant to the
Note Agreements, each dated as of October __, 1998, among the
Company, the General Partner and the purchasers named in
Schedule I thereto (but not any extension, refunding or
refinancing thereof)."
2. Conditions to Effectiveness of this Second Amendment. This
Second Amendment shall become effective only upon the satisfaction in full (or
waiver by the Required Holders) of the following conditions precedent (the first
date upon which each such condition shall have been so satisfied or waived being
herein referred to as the "Effective Date"):
(a) No Defaults. On the Effective Date (after giving
effect to this Second Amendment), no Default or Event of Default shall have
occurred and be continuing.
(b) Section 8 of the Credit Agreement shall have been
amended to provide for substantially the same covenants set forth in Section 10
of the Agreement after giving effect to this Second Amendment. The covenants and
events of default set forth in the Credit Agreement shall not have been
otherwise amended in any material respect.
(c) Second Amendment. Each of the Obligors and the
Required Holders shall have executed this Second Amendment, and counterparts
hereof bearing the signatures of the Obligors shall have been delivered to the
holders together with a notice from the Company to each holder as to the
satisfaction of this condition.
-2-
<PAGE> 3
3. Agreement; Terms. Except as expressly amended hereby, the
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof, and this Second Amendment shall not be
deemed to waive or amend any provision of the Agreement except as expressly set
forth herein. As used in the Agreement, the terms "this Agreement," "herein,"
"hereinafter," "hereunder," "hereto" and words of similar import shall mean and
refer to, from and after the Effective Date, unless the context otherwise
specifically requires, the Agreement as amended by this Second Amendment.
Capitalized terms used and not defined herein shall have the meanings assigned
to such terms in the Agreement.
4. Headings. Section headings in this Second Amendment are
included herein for convenience of reference only and shall not define, limit or
otherwise affect any of the terms or provisions hereof.
5. Counterparts. This Second Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument, and all signatures need not appear on
any one counterpart.
6. Expenses. The Company agrees to pay all reasonable
out-of-pocket expenses incurred by the Holders in connection with the
preparation of this Second Amendment, including, but not limited to, the
reasonable fees, charges and disbursements of one outside special counsel for
the Holders as provided for in Section 16.1 of the Agreement.
7. Governing Law. This Second Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York (other than
any conflicts of law rule which might result in the application of the laws of
any other jurisdiction).
8. Ratification and Confirmation of Security Documents. The
Company hereby ratifies and confirms the provisions of the Security Documents
for the benefit from time to time of the holders of the Notes.
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<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed as of the date first above written.
AMERIGAS PROPANE, L.P.
By: AmeriGas Propane, Inc.,
its general partner
By: Martha B. Lindsay
---------------------------------------
Martha B. Lindsay
Vice President - Finance and Chief
Financial Officer
AMERIGAS PROPANE, INC.
By: Martha B. Lindsay
---------------------------------------
Martha B. Lindsay
Vice President - Finance and Chief
Financial Officer
PETROLANE INCORPORATED
By: Martha B. Lindsay
---------------------------------------
Martha B. Lindsay
Vice President - Finance and Chief
Financial Officer
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(registered holder of Notes #RA-1, RA-2,
RA-4 and RA-5)
By: Robert G. Gwin
---------------------------------------
Robert G. Gwin
Vice President
PRUCO LIFE INSURANCE COMPANY (registered
holder of Note #RA-3)
By: Randall M. Kob
---------------------------------------
Randall M. Kob
Vice President
METROPOLITAN LIFE INSURANCE COMPANY
(registered holder of Note #RB-1)
By: James A. Wiviott
---------------------------------------
James A. Wiviott
Director
[SIGNATURE PAGE TO SECOND AMENDMENT TO NOTE AGREEMENT]
<PAGE> 5
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES (registered holder of Note
#RC-1)
By:
---------------------------------------
Name:
Title:
CIG & CO. (registered holder of Notes #RC-2,
RC-3, RC-4, RC-6 and RC-14)
By: James G. Schelling
---------------------------------------
James G. Schelling
Partner
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA (registered holder of Note
#RC-10)
By:
---------------------------------------
Thomas E. Solano
Director Private Placements
TRAL & CO ((registered holder of Note #RC-11
(beneficially owned by The Travelers
Insurance Company)
By: Frank G. Pattison
---------------------------------------
Frank G. Pattison
Attorney-in-fact
LINCOLN NATIONAL LIFE INSURANCE COMPANY
(registered holder of Note #RC-15)
By: J. Steven Staggs
---------------------------------------
J. Steven Staggs
Vice President
[SIGNATURE PAGE TO SECOND AMENDMENT TO NOTE AGREEMENT]
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT
This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment"), dated as of September 15, 1998, 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 Pennsylvania corporation ("Petrolane"; the Company, the General
Partner and Petrolane are, collectively, the "Borrowers"), each of the financial
institutions that is a signatory to this Amendment (collectively, the "Banks"),
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for the Banks
(in such capacity, the "Agent"), and amends that certain Amended and Restated
Credit Agreement, dated as of September 15, 1997 (as the same is in effect
immediately prior to the effectiveness of this Amendment, the "Existing Credit
Agreement" and as the same may be amended, supplemented or modified and in
effect from time to time, the "Credit Agreement"), by and among the Company, the
General Partner, Petrolane, the Agent, First Union National Bank, as Syndication
Agent and the Banks from time to time party to the Credit Agreement. Capitalized
terms used and not otherwise defined in this Amendment shall have the same
meanings in this Amendment as set forth in the Credit Agreement, and the rules
of interpretation set forth in Section 1.2 of the Credit Agreement shall be
applicable to this Amendment.
RECITAL
The Company has requested that the Banks amend the definition of
"Indebtedness", permit the Borrowers to borrow Offshore Rate Loans with Interest
Periods of two weeks and amend Sections 1.1, 8.1(b), 8.1(f) and 8.3(m) under the
Existing Credit Agreement, and the Agent and the Banks are willing to agree to
so amend the Existing Credit Agreement on the terms and subject to the
conditions set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements set forth below and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
SECTION 1. Amendment. On the terms of this Amendment and subject to
the satisfaction of the conditions precedent set forth below in Section 3:
(a) The definition of "Indebtedness" contained in Section 1.1 of the
Existing Credit Agreement is hereby amended to read in full as set forth below:
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the
<PAGE> 2
deferred purchase price of property or services (other than trade payables and
accrued expenses arising in the ordinary course of business on ordinary terms);
(c) all non-contingent reimbursement or payment obligations with respect to
Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to property
acquired by the Person (even though the rights and remedies of the seller or
bank under such agreement in the event of default are limited to repossession or
sale of such property); (f) all Capitalized Lease Liabilities; (g) all
indebtedness referred to in clauses (a) through (f) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including accounts
and contracts rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness; (h) all
Redeemable Capital Stock of such Person valued at the greater of its voluntary
or involuntary maximum fixed repurchase price plus accrued dividends; (i) any
Preferred Stock of any Subsidiary of such Person valued at the sum of the
liquidation preference thereof or any mandatory redemption payment obligations
in respect thereof plus, in either case, accrued dividends thereon and (j) all
Guaranty Obligations in respect of indebtedness or obligations of others of the
kinds referred to in clauses (a) through (i) above.
(b) The definition of "Interest Period" contained in Section 1.1 of
the Existing Credit Agreement is hereby amended by adding the words "two weeks
or" before the words "one, two, three or six months" in the fourth line of such
definition.
(c) The definition of "Loan Documents" contained in Section 1.1 of
the Existing Credit Agreement is hereby amended by adding the words "the First
Amendment to Amended and Restated Credit Agreement, dated as of September 15,
1998, among the Borrowers, the Banks and the Agent," after the words "this
Agreement".
SECTION 2. Amendment. On the terms of this Amendment and subject to
the satisfaction of the conditions precedent set forth below in Section 4:
(a) The following definition is hereby added to Section 1.1 of the
Credit Agreement in its appropriate alphabetical order:
"1998 Mortgage Notes" means the First Mortgage Notes, in aggregate
principal amount not exceeding $100,000,000, issued pursuant to the Note
Agreements, each dated as of October __, 1998, among the Company, the General
Partner and the purchasers named in Schedule I thereto (but not any extension,
refunding or refinancing thereof)."
(b) Section 8.1(b) of the Existing Credit Agreement is hereby
amended to read in its entirety as follows:
"(b) the Company may become and remain liable with respect to
Indebtedness incurred by the Company (i) to finance the making of expenditures
for the improvement or repair (to the extent such improvements and repairs may
be capitalized on the
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<PAGE> 3
books of the Company in accordance with GAAP) of or additions (including
additions by way of acquisitions or capital contributions of businesses and
related assets) to the General Collateral or (ii) by assumption in connection
with additions (including additions by way of acquisitions or capital
contributions of businesses and related assets) to the General Collateral,
including borrowings under the Acquisition Commitment, or to extend, renew,
refund or refinance any such Indebtedness;"
(c) Section 8.1(f) of the Existing Credit Agreement is hereby
amended to read in its entirety as follows:
"(f) the Company may become and remain liable with respect to
Indebtedness, in addition to that otherwise permitted by the foregoing
subdivisions of this Section 8.1, if on the date the Company becomes liable with
respect to any such additional Indebtedness and immediately after giving effect
thereto and to the substantially concurrent repayment of any other Indebtedness
(i) the ratio of Consolidated Cash Flow to Consolidated Pro Forma Debt Service
is equal to or greater than 2.50 to 1.0 and (ii) the ratio of Consolidated Cash
Flow to Average Consolidated Pro Forma Debt Service is equal to or greater than
1.25 to 1.0;"
(d) Section 8.3(m) of the Existing Credit Agreement is hereby
amended to read in its entirety as follows:
"(m) Liens (other than the Liens referred to in clauses (j),
(k) and (l) above) securing Indebtedness represented by the 1998 Mortgage Notes
or other Indebtedness incurred in accordance with Section 8.1(b) or 8.1(e) or,
to the extent incurred (i) to repay Indebtedness or letter of credit obligations
incurred and outstanding under the Acquisition Commitment or the Revolving
Commitment (or any extension, renewal, refunding, replacement or refinancing of
any such Indebtedness), (ii) to finance the making of expenditures for the
improvement or repair (to the extent such improvements and repairs may be
capitalized on the books of the Company and the Restricted Subsidiaries in
accordance with GAAP) of or additions (including additions by way of
acquisitions or capital contributions of businesses and related assets) to the
General Collateral, or (iii) by assumption in connection with additions
(including additions by way of acquisitions or capital contributions of
businesses and related assets) to the General Collateral, in accordance with
Section 8.1(f), provided that (1) such Liens are effected through an amendment
to the Security Documents to the extent necessary to provide the holders of such
Indebtedness equal and ratable security in the property and assets subject to
the Security Documents with the Banks and holders of the other Indebtedness
secured under the Security Documents, (2) in the case of Indebtedness incurred
in accordance with Section 8.1(b) or Section 8.1(f) to finance the making of
additions to the General Collateral, the Company has delivered to the Collateral
Agent an Officers' Certificate demonstrating that the principal amount of such
Indebtedness (net of transaction costs funded by proceeds of such Indebtedness)
does not exceed the lesser of the cost to the Company and the Restricted
Subsidiaries of such additional property or assets and the fair market value of
such additional property or assets at the time of the acquisition thereof (as
determined in good faith by the General Partner) and (3) the Company has
delivered to the Collateral Agent an opinion of counsel reasonably satisfactory
to the Collateral Agent to the effect that the Lien of the Security Documents
has attached and is perfected (or will
-3-
<PAGE> 4
attach and be perfected upon the taking of one or more actions) with respect to
such additional property and assets;"
SECTION 3. Conditions to Effectiveness of Section 1 Amendments. The
amendments set forth in Section 1 of this Amendment shall become effective only
upon the satisfaction of all of the following conditions precedent (the date of
satisfaction of all such conditions being referred to as the "Amendment
Effective Date"):
(a) On or before the Amendment Effective Date, the Agent shall
have received, on behalf of the Banks, this Amendment, duly executed and
delivered by the Company, the General Partner, Petrolane, each Restricted
Subsidiary, the Required Banks and the Agent.
(b) The Agent shall have received a certificate from a
Responsible Officer of the Company certifying that (1) all governmental actions
or filings necessary for the execution, delivery and performance of this
Amendment shall have been made, taken or obtained, and no order, statutory rule,
regulation, executive order, decree, judgment or injunction shall have been
enacted, entered, issued, promulgated or enforced by any court or other
governmental entity which prohibits or restricts the transactions contemplated
by this Amendment nor shall any action have been commenced or threatened seeking
any injunction or any restraining or other order to prohibit, restrain,
invalidate or set aside the transactions contemplated by this Amendment and (2)
each of the representations and warranties set forth in this Amendment is true
and correct as of the Amendment Effective Date.
(c) The Agent shall have received evidence, dated on or about
July, 1998, from independent insurance brokers or consultants demonstrating that
insurance complying with the provisions of the Collateral Agency Agreement shall
be in full force and effect.
SECTION 4. Conditions to Effectiveness of Section 2 Amendments. The
amendments set forth in Section 2 of this Amendment shall become effective only
upon the satisfaction of all of the conditions precedent set forth in Section 3
and the following additional conditions precedent (the date of satisfaction of
all such conditions being referred to as the "Second Amendment Effective Date"):
(a) On or before the Second Amendment Effective Date, either (i) the
Agent shall have received, on behalf of the Banks, a First Amendment to
Intercreditor and Agency Agreement, in substantially the form of Exhibit A
hereto, duly executed and delivered by the General Obligors, the Requisite
Banks, the Requisite Note Holders, the Agent, the Collateral Agent and the Cash
Collateral Sub-Agent (in each case as defined in the Collateral Agency
Agreement) or, in the alternative (ii) the Company shall be bound by the terms
set forth in Sections 6 and 7 below.
(b) On or before the Second Amendment Effective Date, the Agent
shall have received, on behalf of the Banks, evidence that each of the Borrowers
and the Required Holders (as defined in the Note Agreements) has consented to
the amendment of Sections 10.1(f) and
-4-
<PAGE> 5
10.2(m) of the Note Agreements in form and substance substantially similar to
the amendments of Sections 8.1(f) and 8.3(m) contained in this Amendment.
SECTION 5. The Borrowers' Representations and Warranties. In order
to induce the Banks to enter into this Amendment and to amend the Existing
Credit Agreement in the manner provided in this Amendment, the Company, the
General Partner and Petrolane represent and warrant to each Bank as of the
Amendment Effective Date as follows:
(a) Power and Authority. The Company has all requisite
partnership power and authority to enter into this Amendment and to carry out
the transactions contemplated by, and perform its obligations under, the
Existing Credit Agreement as amended by this Amendment (hereafter referred to as
the "Amended Credit Agreement"). The General Partner has all requisite corporate
power and authority to enter into this Amendment in its individual capacity and
in its capacity as the sole general partner of the Company and to carry out the
transactions contemplated by, and perform its obligations under, the Amended
Credit Agreement. Petrolane has all requisite corporate power and authority to
enter into this Amendment and to carry out the transactions contemplated by, and
perform its obligations under, the Amended Credit Agreement. Each Restricted
Subsidiary has all requisite corporate power and authority to enter into this
Amendment and to carry out the transactions contemplated by, and perform its
obligations under, the Security Documents.
(b) Authorization of Agreements. The execution and delivery of
this Amendment by the Company, the General Partner, Petrolane and each
Restricted Subsidiary and the performance of the Amended Credit Agreement by the
Company, the General Partner and Petrolane have been duly authorized by all
necessary action, and this Amendment has been duly executed and delivered by the
Company, the General Partner, Petrolane and each Restricted Subsidiary.
(c) Enforceability. The Amended Credit Agreement constitutes
the legal, valid and binding obligation of the Company, the General Partner and
Petrolane enforceable against the Company, the General Partner and Petrolane in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights
generally.
(d) No Conflict. The execution, delivery and performance by
each of the Company, the General Partner, Petrolane and the Restricted
Subsidiaries of this Amendment, and the performance by each of the Company, the
General Partner, Petrolane and the Restricted Subsidiaries of the Amended Credit
Agreement do not and will not (i) violate (x) any provision of the Partnership
Agreement or the certificate or articles of incorporation or other Organization
Documents of the Company, the General Partner, Petrolane or any of their
respective Subsidiaries, (y) any applicable law, ordinance, rule or regulation
of any Governmental Authority or any applicable order, judgment or decree of any
court, arbitrator or Governmental Authority, or (z) any provision of any
agreement or instrument to which the Company, the General Partner, Petrolane or
any of their respective Subsidiaries is a party or by which any of its
properties is bound, except (in the case of clauses (y) and (z) above) for such
violations which would not,
-5-
<PAGE> 6
individually or in the aggregate, present a reasonable likelihood of having a
Material Adverse Effect, or (ii) result in the creation of (or impose any
express obligation on the part of the Borrowers to create) any Lien not
permitted by Section 8.3.
(e) Governmental Consents. Except for Routine Permits, (i) no
consent, approval or authorization of, or declaration or filing with, any
Governmental Authority is required for the valid execution, delivery and
performance of this Amendment by the Company, the General Partner, Petrolane and
the Restricted Subsidiaries.
(f) Representations and Warranties in the Credit Agreement.
The Company, the General Partner and Petrolane confirm that, as of the Amendment
Effective Date, (i) the representations and warranties contained in Article VI
of the Credit Agreement are (before and after giving effect to this Amendment)
true and correct in all material respects (except to the extent such
representations and warranties expressly relate to an earlier time or date, in
which case they shall have been true and correct in all material respects as of
such earlier time or date) with the same effect as if made on and as of the
Amendment Effective Date and (ii) that no Default or Event of Default has
occurred and is continuing.
(g) Liens. As of the Amendment Effective Date, there are no
Liens on the General Collateral other than Liens permitted under Section 8.3 of
the Credit Agreement.
(h) Subsidiaries. As of the Amendment Effective Date, the
Company has no Restricted Subsidiaries other than AmeriGas Propane Parts &
Service, Inc.
SECTION 6. Affirmative Covenant. In the event that the Agent shall
not have received a duly executed First Amendment to Intercreditor and Agency
Agreement in substantially the form of Exhibit A hereto on or before the date of
issuance of the 1998 Mortgage Notes, the Company hereby agrees to obtain and
deliver to the Agent, as promptly as practicable, but in any event within 30
days after the date of issuance of the 1998 Mortgage Notes, title endorsements
or their equivalents, in form and substance reasonably satisfactory to the
Collateral Agent, with respect to the title insurance policies listed on
Schedule I hereto.
SECTION 7. Further Agreements. The parties hereby acknowledge and agree
that:
(a) Except as set forth in Section 7(b) below, in the event of
any future issuance of Parity Debt the Company shall deliver to the Agent, as
promptly as practicable, but in any event within 10 Business Days after the date
of issuance of such Parity Debt, title endorsements or their equivalents, in
form and substance reasonably satisfactory to the Collateral Agent, with respect
to the title insurance policies issued in connection with the Mortgages listed
on Schedule I hereto and any title insurance policies obtained by the Company
pursuant to Section 7.10 of the Credit Agreement.
(b) In the event that, at any time after the date hereof, the
Company shall have delivered to the Agent a duly executed First Amendment to
Intercreditor and Agency Agreement in substantially the form of Exhibit A
hereto, the Company shall have no obligation,
-6-
<PAGE> 7
and shall not be required, to obtain or deliver title endorsements or their
equivalents for any Mortgaged Property in connection with any issuance of Parity
Debt.
SECTION 8. Miscellaneous.
(a) Reference to and Effect on the Existing Credit Agreement
and the Other Loan Documents.
(i) Except as specifically amended by this Amendment and
the documents executed and delivered in connection herewith, the Existing
Credit Agreement and the other Loan Documents shall remain in full force
and effect and are hereby ratified and confirmed. This Amendment shall be
a "Loan Document" under the Credit Agreement.
(ii) The execution and delivery of this Amendment and
performance of the Amended Credit Agreement shall not, except as expressly
provided herein, constitute a waiver of any provision of, or operate as a
waiver of any right, power or remedy of the Banks under, the Existing
Credit Agreement or any other Loan Document.
(iii) Upon the conditions precedent set forth herein
being satisfied, this Amendment shall be construed as one with the
Existing Credit Agreement, and the Existing Credit Agreement shall, where
the context requires, be read and construed throughout so as to
incorporate this Amendment.
(b) Fees and Expenses. The Company, the General Partner and
Petrolane acknowledge that all reasonable costs, fees and expenses incurred in
connection with this Amendment will be paid in accordance with Section 11.4 of
the Existing Credit Agreement.
(c) Headings. Section and subsection headings in this
Amendment are included for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
(d) Counterparts. This Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(e) Governing Law. This Amendment shall be governed by and
construed according to the laws of the State of New York.
(f) Resolutions. Concurrently with the issuance by the Company
of the 1998 Mortgage Notes, the Company will deliver to the Agent copies of
partnership authorizations for the Company and resolutions of the board of
directors of each of the General Partner, Petrolane and the Restricted
Subsidiaries authorizing and ratifying the transactions contemplated
-7-
<PAGE> 8
hereby and by the First Amendment to Intercreditor and Agency Agreement,
certified by the Secretary or an Assistant Secretary of such Person.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
AMERIGAS PROPANE, L.P., a Delaware
limited partnership
By: AMERIGAS PROPANE, INC.
Its: General Partner
By:____________________________________
Name:__________________________________
Title:_________________________________
AMERIGAS PROPANE, INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
PETROLANE INCORPORATED
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-8-
<PAGE> 9
AGENT
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-9-
<PAGE> 10
BANKS
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank and an
Issuing Bank
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-10-
<PAGE> 11
FIRST UNION NATIONAL BANK, as a Bank and
as Syndication Agent
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-11-
<PAGE> 12
THE BANK OF NEW YORK
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-12-
<PAGE> 13
CORESTATES BANK, N.A.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-13-
<PAGE> 14
MELLON BANK, N.A.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-14-
<PAGE> 15
THE FIRST NATIONAL BANK OF MARYLAND
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-15-
<PAGE> 16
THE BANK OF TOKYO - MITSUBISHI LTD.,
NEW YORK BRANCH
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-16-
<PAGE> 17
PNC BANK, NATIONAL ASSOCIATION
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-17-
<PAGE> 18
UNION BANK OF CALIFORNIA, N.A.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-18-
<PAGE> 19
The undersigned hereby acknowledges and consents to the foregoing First
Amendment to Amended and Restated Credit Agreement, reaffirms the terms of its
Restricted Subsidiary Guarantee in favor of Bank of America National Trust and
Savings Association, as Collateral Agent and acknowledges that such Restricted
Subsidiary Guarantee remains in full force and effect in accordance with its
terms.
Dated:________________ AMERIGAS PROPANE PARTS & SERVICE,
INC., as Guarantor
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-19-
<PAGE> 20
EXHIBIT A
See attached.
<PAGE> 21
FIRST AMENDMENT
TO INTERCREDITOR AND AGENCY AGREEMENT
This FIRST AMENDMENT TO INTERCREDITOR AND AGENCY AGREEMENT (this
"Amendment"), dated as of September 15, 1998, 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 Pennsylvania corporation ("Petrolane"; the Company, the General
Partner and Petrolane are, collectively, the "General Obligors"), the original
purchasers of the Notes as set forth in Schedule I to the Existing Intercreditor
Agreement (as defined below) and any successors of assigns thereof (the "Note
Holders"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national
banking association, in its capacity as Agent under the Intercreditor Agreement
and any successors or assigns thereof (in such capacity, the "Agent"), BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association,
in its capacity as Collateral Agent for the Secured Creditors (the "Collateral
Agent") and MELLON BANK, N.A., a national banking association, in its capacity
as Cash Collateral Sub-Agent for the Secured Creditors (the "Cash Collateral
Sub-Agent"), and amends that certain Intercreditor and Agency Agreement, dated
as of April 19, 1995 (as the same is in effect immediately prior to the
effectiveness of this Amendment, the "Existing Intercreditor Agreement" and as
the same may be amended, supplemented or modified and in effect from time to
time, the "Intercreditor Agreement"), by and among the General Obligors, the
Note Holders, the Agent, the Collateral Agent and the Cash Collateral Sub-Agent.
Capitalized terms used and not otherwise defined in this Amendment shall have
the same meanings in this Amendment as set forth in the Intercreditor Agreement.
RECITAL
The Company has requested that the Banks amend Appendix A to, and
Sections 4 and 6(a) of, the Existing Intercreditor Agreement, and the Agent and
the Banks are willing to agree to so amend the Existing Intercreditor Agreement
on the terms and subject to the conditions set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements set forth below and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
SECTION 1. Amendment. On the terms of this Amendment and subject to
the satisfaction of the conditions precedent set forth below in Section 2:
(a) The following definitions are hereby added to Appendix A to the
Existing Intercreditor Agreement:
<PAGE> 22
"Affected Parity Debt" shall mean, collectively, the Parity
Debt held by the Affected Parity Lenders.
"Affected Parity Lenders" shall mean, collectively, those
Parity Lenders, if any, whose Parity Debt Obligations are secured by Group B
Property.
"Application Date" shall mean each date on which the
Collateral Agent applies the proceeds, and makes payment of such amounts to the
Banks, the Note Holders and the Non-Affected Lenders, of (a) any casualty,
damage, destruction, taking by eminent domain of any Group B Property received
by it in accordance with Section 4(a)(ii) of this Agreement or (b) any sale or
collection or any other monies received by it in accordance with Section 4(e) of
this Agreement.
"Group A Proceeds" shall mean, collectively, the proceeds of
any sale or collection or any other monies received by the Collateral Agent in
respect of any Group A Property (including without limitation by reason of any
taking of possession, entry, removal or holding, operation or management of the
Security or any part thereof) under the Mortgages, the General Security
Agreement, the Subsidiary Security Agreement, the Subsidiary Guarantee or any
other Security Document (including without limitation all proceeds received by
the Collateral Agent under title insurance policies).
"Group A Property" shall mean, collectively, all Collateral
and Mortgaged Properties other than the Group B Properties.
"Group B Proceeds" shall mean, collectively, the proceeds of
any sale or collection or any other monies received by the Collateral Agent in
respect of any Group B Property (including without limitation by reason of any
taking of possession, entry, removal or holding, operation or management of the
Security or any part thereof) under the Mortgage or Mortgages, if any,
applicable to such Group B Property (including without limitation all proceeds
received by the Collateral Agent under title insurance policies).
"Group B Property" shall mean, in respect of each issuance of
Parity Debt, any Mortgaged Property, if any, on which a valid and perfected lien
or encumbrance (other than the liens and encumbrances permitted under the Credit
Agreement and the Note Agreements) has attached during the period from and after
the last date on which the Collateral Agent has received a title insurance
policy or an endorsement to a title insurance policy on such Mortgaged Property
through and including the date on which the holders of such Parity Debt extend
the full principal amount available in respect of such Parity Debt.
"Non-Affected Lenders" shall mean, collectively, those Secured
Creditors other than the Affected Parity Lenders.
"Non-Affected Parity Debt" shall mean, collectively, the
Parity Debt held by the Non-Affected Lenders.
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<PAGE> 23
"Non-Affected Parity Debt Obligations" shall mean,
collectively, all Obligations arising under or in connection with the
Non-Affected Parity Debt.
"Percentage" shall mean, as of any date of determination with
respect to any Non-Affected Lender, the ratio of (a) the Obligations owing to
such Non-Affected Lender in respect of its Notes, Bank Notes or Parity Debt, as
applicable, on such date (before giving effect to any new loans or extensions of
credit made by such Non-Affected Lender to any General Obligor on such date) to
(b) the Total Non-Affected Obligations on such date.
"Total Non-Affected Obligations" shall mean, as of any date of
determination, the aggregate amount of all Obligations in respect of the Notes,
the Bank Notes and the Non-Affected Parity Debt outstanding on such date (before
giving effect to any new loans or extensions of credit made by the Secured
Creditors to the General Obligors on such date).
(b) Section 4 of the Existing Intercreditor Agreement is hereby
amended to read in its entirety as set forth below:
Section 4. Application of Moneys by Collateral Agent. All moneys
received by the Collateral Agent in respect of the Security, including all
moneys received by the Collateral Agent under the Mortgages, the General
Security Agreement, the Subsidiary Security Agreement, the Subsidiary Guarantee
or any other Security Document, shall, promptly upon receipt, be deposited in an
account into which the Collateral Agent shall deposit all amounts received by it
in its capacity as Collateral Agent and be applied as follows:
(a) Upon a casualty, damage, destruction or a taking by eminent
domain of all or any portion of the properties or assets of the Company or
the Restricted Subsidiaries, the Company shall elect, as evidenced by an
Officers' Certificate (which should also contain a calculation of Excess
Taking Proceeds) within ninety (90) days of such event, whether or not to
restore such properties or assets, or portion thereof. In the event the
Company shall elect not to restore, or shall fail to make any election
within said ninety (90) day period:
(i) All proceeds from any casualty, damage, destruction or
taking by eminent domain of any Group A Property constituting Excess
Taking Proceeds shall be paid to the Collateral Agent and shall be equally
and ratably applied to the prepayment of (x) the Notes as provided in
Section 9.3(b) of the Note Agreements, (y) the Bank Notes as provided in
Section 2.7(c) of the Credit Agreement and (z) the Parity Debt in
accordance with the terms of the Taking Proceeds Sharing Provisions of the
Parity Debt Agreements, provided that, if a General Event of Default shall
have occurred and be continuing, such amounts shall be applied in
accordance with the priorities set forth in subsection (d) below. The
aggregate amount of Excess Taking Proceeds to be applied to the prepayment
of the Notes, the Bank Notes and the Parity Debt shall be an amount
determined by multiplying the amount of Excess Taking Proceeds by a
fraction, the numerator of which, in the case of the Notes, is the
aggregate principal amount of the
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<PAGE> 24
Notes, in the case of the Bank Notes, is the aggregate of all Commitments
and in the case of (I) revolving Parity Debt, is the aggregate commitment
amount in respect of such Parity Debt (the "Parity Debt Revolving
Commitment") and (II) other Parity Debt, is the aggregate principal amount
of such Parity Debt, and the denominator of which is the sum of the
aggregate principal amount of the Notes, the Commitments, the Parity Debt
Revolving Commitment and the aggregate principal amount of Parity Debt
(other than revolving Parity Debt) at the time outstanding.
(ii) All proceeds from any casualty, damage, destruction or
taking by eminent domain with respect to any Group B Property constituting
Excess Taking Proceeds shall be paid to the Collateral Agent and shall be
equally and ratably applied to the prepayment of (x) the Notes as provided
in Section 9.3(b) of the Note Agreements, (y) the Bank Notes as provided
in Section 2.7(c) of the Credit Agreement and (z) the Non-Affected Parity
Debt in accordance with the terms of the Taking Proceeds Sharing
Provisions of the applicable Parity Debt Agreements, provided that, if a
General Event of Default shall have occurred and be continuing, such
amounts shall be applied in accordance with the priorities set forth in
subsection (e) below. The aggregate amount of Excess Taking Proceeds to be
applied to the prepayment of the Notes, the Bank Notes and the
Non-Affected Parity Debt shall be an amount determined by multiplying the
amount of Excess Taking Proceeds by a fraction, the numerator of which, in
the case of the Notes, is the aggregate principal amount of the Notes, in
the case of the Bank Notes, is the aggregate of all Commitments, and in
the case of (I) revolving Non-Affected Parity Debt is the aggregate
commitment amount in respect of such Non-Affected Parity Debt (the
"Non-Affected Parity Debt Revolving Commitment") and (II) other
Non-Affected Parity Debt, is the aggregate principal amount of such
Non-Affected Parity Debt and the denominator of which is the sum of the
aggregate principal amount of the Notes, the Commitments at the time
outstanding, the Non-Affected Parity Debt Revolving Commitment at the time
outstanding and, without duplication, the aggregate principal amount of
all Non-Affected Parity Debt (other than revolving Non-Affected Parity
Debt).
(b) All proceeds of business interruption insurance maintained by
the Company and the Restricted Subsidiaries, if any, received by the
Collateral Agent shall be applied as follows:
(i) such proceeds shall, unless a General Default or General
Event of Default exists, be paid over or assigned to the Company or
as it may direct; and
(ii) if a General Default or General Event of Default exists,
such proceeds shall be held by the Collateral Agent as part of the
Security and shall be applied in accordance with the priorities set
forth in subsection (d) below.
(c) All proceeds received from the Company by the Collateral Agent
on account of voluntary sale, lease, abandonment or other disposition of
any of the assets of the Company or any Restricted Subsidiary constituting
Excess Sale Proceeds in
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<PAGE> 25
accordance with Section 10.7(c) of the Note Agreements, Section 8.8(c) of
the Credit Agreement and the Sale Proceeds Sharing Provisions of the
Parity Debt Agreements shall be applied as follows:
(i) such Excess Sale Proceeds shall, unless such Excess Sale
Proceeds are required to be used to prepay the Notes in accordance
with Section 9.3(a) of the Note Agreements, the Bank Notes in
accordance with Section 2.7(a) of the Credit Agreement and the
Parity Debt in accordance with the Sale Proceeds Sharing Provisions
of the Parity Debt Agreements or a General Default or General Event
of Default exists, be paid over to the Company or as it may direct
from time to time for the acquisition of replacement assets or other
productive assets in accordance with Section 10.7(c)(ii)(B) of the
Note Agreements, Section 8.8(c)(ii)(B) of the Credit Agreement and
the Sale Proceeds Sharing Provisions of the Parity Debt Agreements,
but only upon delivery by the Company of duly executed amendments
and/or supplements (including additional mortgages or deeds or
trust) to the Security Documents to cause such property or assets to
become part of the General Collateral and to be subject to the Lien
of the Security Documents, if required under Section 10.14 or 10.15
of the Note Agreements, or Section 7.9 or 7.10 of the Credit
Agreement, or the Security Documents together with a title policy in
form reasonably satisfactory to the Requisite Percentage if such
property or asset (x) is to be secured by a Mortgage and (y) has a
fair market value (determined in good faith by the General Partner)
or acquisition cost in excess of $500,000;
(ii) if such Excess Sale Proceeds are required to be used to
prepay the Notes, the Bank Notes and the Parity Debt in accordance
with Section 9.3(a) of the Note Agreements, Section 2.7(a) of the
Credit Agreement and the Sale Proceeds Sharing Provisions of the
Parity Debt Agreements, respectively, such Excess Sale Proceeds
shall be applied pro rata in the manner calculated in clause (a)
above to prepay the Notes, the Bank Notes and the Parity Debt as
provided in Section 9.3(a) of the Note Agreements, Section 2.7(a) of
the Credit Agreement and the Sale Proceeds Sharing Provisions of the
Parity Debt Agreements, respectively;
(iii) if any Excess Sale Proceeds remain after the application
of such Excess Sale Proceeds to the prepayment of the Notes, the
Bank Notes and the Parity Debt pursuant to subparagraph (ii) above,
and no General Default or General Event of Default exists, the
Collateral Agent shall deliver such remaining Excess Sale Proceeds
to the Company; and
(iv) if a General Default or General Event of Default exists,
such Excess Sale Proceeds shall be held by the Collateral Agent as
part of the Security and shall be applied in accordance with the
priorities set forth in subsection (d) or subsection (e) below, as
applicable.
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<PAGE> 26
(d) All Group A Proceeds as to which specific provision for the
application of such monies has not heretofore been made in this Section 4
shall be applied to pay:
First: all reasonable fees, costs and expenses of the
Collateral Agent and of the Cash Collateral Sub-Agent hereunder and
all fees, costs and expenses, including but not limited to those of
the Collateral Agent (including without limitation attorneys' fees
and expenses) of (1) entering upon, taking possession of, holding,
operating and managing the Security, or any part thereof, and any
Impositions prior to the Liens of the Security Documents and (2) the
sale of the Security or the General Collateral or any part thereof;
Second: all amounts of principal, interest and premium
(including without limitation prepayment or "breakage" fees or costs
and, in the case of the Notes, any Make Whole Amounts) at the time
due and payable on the Notes, the Bank Notes and the Parity Debt at
the time outstanding (whether at stated maturity or as an
installment or by prepayment, acceleration, declaration or
otherwise), including interest (to the extent permitted under
applicable law) on any overdue principal, interest and premium
(including without limitation prepayment or "breakage" fees or costs
and, in the case of the Notes, Make Whole Amounts) on the Notes, the
Bank Notes or any Parity Debt at the rate provided therefor in the
Note Agreements, the Credit Agreement or the Parity Debt Agreements,
as the case may be; and in case such monies shall be insufficient to
pay in full the amounts so due and unpaid on all the Notes, the Bank
Notes and the Parity Debt, then first, all amounts of interest at
the time due and payable on the Notes, the Bank Notes and the Parity
Debt, second, all amounts constituting premium (including without
limitation prepayment or "breakage" fees or costs and, in the case
of the Notes, Make Whole Amounts) at the time due and payable on the
Notes, the Bank Notes and the Parity Debt, and third, all amounts of
principal at the time due and payable on the Notes, the Outstanding
Bank Obligations and the Parity Debt; and all such payments shall be
made ratably and equally to the Note Holders, the Banks and the
Parity Lenders entitled thereto, with each Note Holder, Bank or
Parity Lender receiving that fraction of the total of all such
amounts paid to the Note Holders, the Banks and the Parity Lenders
as the aggregate amount of the type of obligation (e.g., principal,
interest or premium) owed to each such Note Holder, Bank or Parity
Lender bears to the sum of the aggregate amounts of said type of
obligation owed to all the Note Holders, Banks and Parity Lenders;
Third: any Obligations secured by any Security Document and at
the time due and owing, including without limitation any Note
Obligations, Credit Obligations or Parity Debt Obligations other
than amounts referred to in subdivisions First and Second above and
in case such monies should be insufficient to pay in full the
amounts so due and unpaid, all such payments shall be made ratably
and equally to the Persons entitled thereto, each Person receiving
that
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<PAGE> 27
fraction of the total of all such amounts paid to all such Persons
as the amount due to such Person bears to the sum of the amounts due
to all such Persons; and
Fourth: the balance, if any, to the General Obligors or as
they may direct if all conditions to the termination of this
Agreement specified in Section 17 shall have been fulfilled, but if
any such condition shall not have been fulfilled, to be held by the
Collateral Agent and thereafter applied to any other payments
required to be made in accordance with subdivisions First to Third,
inclusive, above.
(e) All Group B Proceeds as to which specific provision for the
application of such monies has not heretofore been made in this Section 4
shall be applied to pay:
First: all reasonable fees, costs and expenses of the
Collateral Agent and of the Cash Collateral Sub-Agent hereunder and
all fees, costs and expenses, including but not limited to those of
the Collateral Agent (including without limitation attorneys' fees
and expenses) of (1) entering upon, taking possession of, holding,
operating and managing the Security, or any part thereof, and any
Impositions prior to the Liens on the Group B Property and (2) the
sale of the Security or the General Collateral or any part thereof;
Second: all amounts of principal, interest and premium
(including without limitation prepayment or "breakage" fees or costs
and, in the case of the Notes, any Make Whole Amounts) at the time
due and payable on the Notes, the Bank Notes and the Non-Affected
Parity Debt at the time outstanding (whether at stated maturity or
as an installment or by prepayment, acceleration, declaration or
otherwise), including interest (to the extent permitted under
applicable law) on any overdue principal, interest and premium
(including without limitation prepayment or "breakage" fees or costs
and, in the case of the Notes, Make Whole Amounts) on the Notes, the
Bank Notes or the Non-Affected Parity Debt at the rate provided
therefor in the Note Agreements, the Credit Agreement or the
applicable Parity Debt Agreements, as the case may be; and in case
such monies shall be insufficient to pay in full the amounts so due
and unpaid on all the Notes, the Bank Notes or the Non-Affected
Parity Debt, then first, all amounts of interest at the time due and
payable on the Notes, the Bank Notes and the Non-Affected Parity
Debt, second, all amounts constituting premium (including without
limitation prepayment or "breakage" fees or costs and, in the case
of the Notes, Make Whole Amounts) at the time due and payable on the
Notes, the Bank Notes and the Non-Affected Parity Debt, and third,
all amounts of principal at the time due and payable on the Notes,
the Outstanding Bank Obligations and the Non-Affected Parity Debt
Obligations; and all such payments shall be made ratably and equally
to the Non-Affected Lenders entitled thereto, with each Non-Affected
Lender receiving that fraction of the total of all such amounts paid
to the Non-Affected Lenders as the aggregate amount of the type of
obligation (e.g., principal, interest or premium)
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<PAGE> 28
owed to each such Non-Affected Lender bears to the sum of the
aggregate amounts of said type of obligation owed to all the
Non-Affected Lenders;
Third: any Obligations secured by any Security Document (other
than the Obligations in respect of Affected Parity Debt) and at the
time due and owing, including without limitation any Note
Obligations, Credit Obligations or Non-Affected Parity Debt
Obligations other than amounts referred to in subdivisions First and
Second above and in case such monies should be insufficient to pay
in full the amounts so due and unpaid, all such payments shall be
made ratably and equally to the Persons entitled thereto, each
Person receiving that fraction of the total of all such amounts paid
to all such Persons as the amount due to such Person bears to the
sum of the amounts due to all such Persons; and
Fourth: the balance, if any, to the General Obligors or as
they may direct if all conditions to the termination of this
Agreement specified in Section 17 shall have been fulfilled, but if
any such condition shall not have been fulfilled, to be held by the
Collateral Agent and thereafter applied to any other payments
required to be made in accordance with subdivisions First to Third,
inclusive, above.
(f) Pending application in accordance with subsections (a) through
(e) of this Section 4, all monies received by the Cash Collateral
Sub-Agent hereunder shall be invested at the written direction of the
Company in (collectively, the "Permitted Investments"):
(i) marketable obligations issued or unconditionally
guaranteed by the United States of America, or issued by any agency
thereof and backed by the full faith and credit of the United States
of America, in each case maturing one year or less from the date of
acquisition thereof,
(ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year
from the date of acquisition thereof and having as at such date the
highest rating obtainable from either S&P or Moody's,
(iii) commercial paper maturing no more than 270 days from the
date of creation thereof and having as at the date of acquisition
thereof one of the two highest ratings obtainable from either S&P or
Moody's,
(iv) certificates of deposit maturing one year or less from
the date of acquisition thereof issued by Permitted Banks,
(v) Eurodollar time deposits having a maturity of less than
270 days from the date of acquisition thereof purchased directly
from any Permitted Bank,
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<PAGE> 29
(vi) bankers' acceptances eligible for rediscount under
requirements of The Board of Governors of the Federal Reserve System
and accepted by Permitted Banks, and
(vii) obligations of the type described in clause (i), (ii),
(iii), (iv) or (v) above purchased from a securities dealer
designated as a "primary dealer" by the Federal Reserve Bank of New
York or from a Permitted Bank as counterparty to a written
repurchase agreement obligating such counterparty to repurchase such
obligations not later than 14 days after the purchase thereof and
which provides that the obligations which are the subject thereof
are held for the benefit of the Company or a Restricted Subsidiary
subject to the rights of the Cash Collateral Sub-Agent, the
Collateral Agent and the Secured Creditors under the Financing
Agreements by a custodian which is a Permitted Bank and which is not
a counterparty to the repurchase agreement in question.
(g) On each Application Date, each Affected Parity Lender shall, and
each Affected Parity Lender hereby agrees to, irrevocably sell a participation
interest in, without recourse or warranty of any kind whatsoever (except that
each such Affected Parity Lender shall warrant that it is the legal and
beneficial owner of the Affected Parity Debt participated by it under this
Section 4(g) and that such Affected Parity Debt is held by such Affected Parity
Lender free and clear of adverse claims), to each Non-Affected Lender, and each
Non-Affected Lender shall, and each Non-Affected Lender hereby agrees to,
irrevocably acquire from each Affected Parity Lender, a participation interest
in the principal amount of the Affected Parity Debt of such Affected Parity
Lender (each, an "Acquired Portion") outstanding on the Application Date in an
amount equal to (1) such Non-Affected Lender's Percentage on such Application
Date multiplied by (2) such Affected Parity Lender's pro rata portion of the
amount of Group B Proceeds that would have been received by all Affected Parity
Lenders had such Group B Proceeds been applied as Group A Proceeds in accordance
with the terms of Section 4(a)(i) or Section 4(d), as the case may be. The
Collateral Agent shall notify each Secured Creditor of the amount required to be
paid by or to each Secured Creditor at or before 9:00 a.m. San Francisco time on
the Application Date. Such participation and acquisition shall be effective on
the Application Date automatically and without any action required on the part
of any party other than the payment by the Non-Affected Lenders to the
Collateral Agent for the account of the Affected Parity Lenders of an aggregate
amount equal to the Acquired Portion, which amount shall be allocated and paid
by the Collateral Agent at or before 12:00 p.m. San Francisco time on the
Application Date to each Affected Parity Lender pro rata based upon the
respective reductions in the principal amount of the Affected Parity Debt held
by such Affected Parity Lender on the Application Date. Each of the Collateral
Agent and the Secured Creditors shall adjust its records accordingly to reflect
the payment of the Acquired Portion. The application of proceeds on each
Application Date and the payment thereof to each Non-Affected Lender shall be
made by the Collateral Agent at or before 10:00 a.m. San Francisco time on such
date in Dollars and immediately available funds and payment to be made in
respect of the Acquired Portion shall
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<PAGE> 30
be made by the Non-Affected Lenders to the Collateral Agent in Dollars in
immediately available funds at or before 11:00 a.m. San Francisco time on the
Application Date."
(h) Section 6(a) of the Existing Intercreditor Agreement is hereby
amended by deleting the word "and" at the end of clause (iii), replacing the "."
at the end of clause (iv) with "; and" and adding the following as clause (v) of
Section 6(a):
"(v) the Company shall have delivered to the Collateral Agent
an Officers' Certificate in which the Company represents and warrants to the
Cash Collateral Sub-Agent, the Collateral Agent, the Agent, the Banks, the
Parity Lenders, if any, the Parity Agent, if any, and each Note Holder that, as
of the date of the incurrence of such Indebtedness, there are no Liens on the
General Collateral other than Liens permitted under Section 8.3 of the Credit
Agreement, Section 10.2 of the Note Agreements and any applicable provision of
any Parity Debt Agreement."
SECTION 2. Conditions to Effectiveness. The amendments set forth in
Section 1 of this Amendment shall become effective only upon the satisfaction of
the following condition precedent (the date of satisfaction of such condition
being referred to as the "Amendment Effective Date"):
On or before the Amendment Effective Date, the Collateral Agent
shall have received, on behalf of the Secured Creditors, this Amendment, duly
executed and delivered by each of the General Obligors, the Requisite Note
Holders, the Requisite Banks, the Agent, the Collateral Agent and the Cash
Collateral Sub-Agent.
SECTION 3. The General Obligors' Representations and Warranties. In
order to induce the Collateral Agent, the Agent, the Banks, the Note Holders and
the Cash Collateral Sub-Agent to enter into this Amendment and to amend the
Existing Intercreditor Agreement in the manner provided in this Amendment, each
General Obligor represents and warrants to each of the Collateral Agent, the
Agent, the Banks, the Note Holders and the Cash Collateral Sub-Agent as of the
Amendment Effective Date as follows:
(a) Power and Authority. The Company has all requisite
partnership power and authority to enter into this Amendment and to carry out
the transactions contemplated by, and perform its obligations under, the
Existing Intercreditor Agreement as amended by this Amendment (hereafter
referred to as the "Amended Intercreditor Agreement"). The General Partner has
all requisite corporate power and authority to enter into this Amendment in its
individual capacity and in its capacity as the sole general partner of the
Company and to carry out the transactions contemplated by, and perform its
obligations under, the Amended Intercreditor Agreement. Petrolane has all
requisite corporate power and authority to enter into this Amendment and to
carry out the transactions contemplated by, and perform its obligations under,
the Amended Intercreditor Agreement. Each Restricted Subsidiary has all
requisite corporate power and authority to enter into this Amendment and to
carry out the transactions contemplated by, and perform its obligations under,
the Amended Intercreditor Agreement.
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<PAGE> 31
(b) Authorization of Agreements. The execution and delivery of
this Amendment by the Company, the General Partner, Petrolane and each
Restricted Subsidiary and the performance of the Amended Intercreditor Agreement
by the Company, the General Partner, Petrolane and each Restricted Subsidiary
have been duly authorized by all necessary action, and this Amendment has been
duly executed and delivered by the Company, the General Partner, Petrolane and
each Restricted Subsidiary.
(c) Enforceability. The Amended Intercreditor Agreement
constitutes the legal, valid and binding obligation of the Company, the General
Partner, Petrolane and each Restricted Subsidiary enforceable against the
Company, the General Partner, Petrolane and each Restricted Subsidiary in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights
generally.
(d) No Conflict. The execution, delivery and performance by
each of the Company, the General Partner, Petrolane and the Restricted
Subsidiaries of this Amendment, and the performance by each of the Company, the
General Partner, Petrolane and the Restricted Subsidiaries of the Amended
Intercreditor Agreement do not and will not (i) violate (x) any provision of the
Partnership Agreement or the certificate or articles of incorporation or other
Organization Documents of the Company, the General Partner, Petrolane or any of
their respective Subsidiaries, (y) any applicable law, ordinance, rule or
regulation of any Governmental Authority or any applicable order, judgment or
decree of any court, arbitrator or Governmental Authority, or (z) any provision
of any agreement or instrument to which the Company, the General Partner,
Petrolane or any of their respective Subsidiaries is a party or by which any of
its properties is bound, except (in the case of clauses (y) and (z) above) for
such violations which would not, individually or in the aggregate, present a
reasonable likelihood of having a Material Adverse Effect, or (ii) result in the
creation of (or impose any express obligation on the part of the General
Obligors to create) any Lien not permitted by Section 8.3 of the Credit
Agreement and Section 10.2 of the Note Agreements.
(e) Governmental Consents. Except for Routine Permits, (i) no
consent, approval or authorization of, or declaration or filing with, any
Governmental Authority is required for the valid execution, delivery and
performance of this Amendment by the Company, the General Partner, Petrolane and
the Restricted Subsidiaries.
(f) Representations and Warranties in the Intercreditor
Agreement. The Company, the General Partner and Petrolane confirm that, as of
the Amendment Effective Date, that no General Default or General Event of
Default has occurred and is continuing.
(g) Liens. As of the Amendment Effective Date, there are no
Liens on the General Collateral other than Liens permitted under Section 8.3 of
the Credit Agreement and Section 10.2 of the Note Agreements.
(h) Subsidiaries. As of the Amendment Effective Date, the
Company has no Restricted Subsidiaries other than AmeriGas Propane Parts &
Service, Inc.
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<PAGE> 32
SECTION 4. Acknowledgment. Each of the Banks and the Note Holders
acknowledges that (a) except as otherwise agreed by the Company, no amendments
to Mortgages or title insurance endorsements will be obtained in connection
with any issuance of Parity Debt and (b) endorsements with respect to title
insurance policies (and any amendments to Mortgages required in connection
therewith) were obtained as set forth on Schedule I hereto.
SECTION 5. Miscellaneous.
(a) Reference to and Effect on the Existing Intercreditor
Agreement and the Security Documents.
(i) Except as specifically amended by this Amendment
and the documents executed and delivered in connection herewith, the
Existing Intercreditor Agreement and the Security Documents shall remain
in full force and effect and are hereby ratified and confirmed.
(ii) The execution and delivery of this Amendment and
performance of the Amended Intercreditor Agreement shall not, except as
expressly provided herein, constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy of the Banks under, the
Existing Intercreditor Agreement or any Security Document.
(iii) Upon the conditions precedent set forth herein
being satisfied, this Amendment shall be construed as one with the
Existing Intercreditor Agreement, and the Existing Intercreditor Agreement
shall, where the context requires, be read and construed throughout so as
to incorporate this Amendment.
(b) Fees and Expenses. The Company, the General Partner and
Petrolane acknowledge that all reasonable costs, fees and expenses incurred in
connection with this Amendment will be paid in accordance with Section 11 of the
Intercreditor Agreement, Section 11.4 of the Credit Agreement and Section 16.1
of the Note Agreements.
(c) Headings. Section and subsection headings in this
Amendment are included for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
(d) Counterparts. This Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(e) Governing Law. This Amendment shall be governed by and
construed according to the laws of the State of New York.
-12-
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
AMERIGAS PROPANE, L.P., a Delaware
limited partnership
By: AMERIGAS PROPANE, INC.
Its: General Partner
By:____________________________________
Name:__________________________________
Title:_________________________________
AMERIGAS PROPANE, INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
PETROLANE INCORPORATED
By:_________________________________________
Name:_______________________________________
Title:______________________________________
AMERIGAS PROPANE PARTS & SERVICE,
INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-13-
<PAGE> 34
NOTE HOLDERS
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(registered holder of Notes #RA-1, RA-2,
RA-4 and RA-5)
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-14-
<PAGE> 35
PRUCO LIFE INSURANCE COMPANY
(registered holder of Note #RA-3)
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-15-
<PAGE> 36
METROPOLITAN LIFE INSURANCE
COMPANY (registered holder of Note #RB-1)
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-16-
<PAGE> 37
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES (registered holder of Note
#RC-1)
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-17-
<PAGE> 38
CIG & CO. (registered holder of Notes #RC-2,
RC-3, RC-4, RC-6 and RC-14 (beneficially
owned by Connecticut General Life
Insurance Company); registered holder of
Note #RA-7 (beneficially owned by Century
Indemnity Company); Note #RC-12
(beneficially owned by Insurance Company
of North America); and Note #RC-13
(beneficially owned by Life Insurance
Company of North America))
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-18-
<PAGE> 39
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA (registered
holder of Note #RC-10)
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-19-
<PAGE> 40
TRAL & CO (registered holder of Note #RC-11
(beneficially owned by Travelers Insurance
Company))
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-20-
<PAGE> 41
LINCOLN NATIONAL LIFE INSURANCE COMPANY
(registered holder of Note #RC-15)
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-21-
<PAGE> 42
AGENT
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-22-
<PAGE> 43
BANKS
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank and an
Issuing Bank
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-23-
<PAGE> 44
FIRST UNION NATIONAL BANK, as a Bank and
as Syndication Agent
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-24-
<PAGE> 45
THE BANK OF NEW YORK
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-25-
<PAGE> 46
CORESTATES BANK, N.A.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-26-
<PAGE> 47
MELLON BANK, N.A.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-27-
<PAGE> 48
THE FIRST NATIONAL BANK OF MARYLAND
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-28-
<PAGE> 49
THE BANK OF TOKYO - MITSUBISHI LTD.,
NEW YORK BRANCH
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-29-
<PAGE> 50
PNC BANK, NATIONAL ASSOCIATION
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-30-
<PAGE> 51
UNION BANK OF CALIFORNIA, N.A.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-31-
<PAGE> 52
COLLATERAL AGENT
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Collateral Agent
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-32-
<PAGE> 53
CASH COLLATERAL SUB-AGENT
MELLON BANK, N.A., as Cash Collateral Sub-
Agent
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-33-
<PAGE> 54
SCHEDULE I
<TABLE>
<CAPTION>
AMENDED TITLE POLICY
ADDRESS MORTGAGE ENDORSEMENT
- -------------------------------------------------------------------------------------
<S> <C> <C>
Osyart Road, Bumstead, Recorded 3/27/98 Policy #137-00-003-314
Maricopa County, AZ* Instrument #98-0241615 Dated 3/27/98
- -------------------------------------------------------------------------------------
2110 N. Gaffey Street, San Pedro, Policy #137-00-005-303
Los Angeles County, CA* N/A Dated 9/15/97
- -------------------------------------------------------------------------------------
2675 N. Temple Avenue, Signal Hill, Policy #135-00-538-760
Los Angeles County, CA N/A Dated 9/15/97
- -------------------------------------------------------------------------------------
16800 South Main Street, Carson, Policy #135-00-538-761
Los Angeles County, CA N/A Dated 9/15/97
- -------------------------------------------------------------------------------------
9608 Cherry Avenue, Fontana, Policy #82-03-134-439
San Bernardino County, CA N/A Dated 9/15/97
- -------------------------------------------------------------------------------------
295 E. Virginia Street, San Jose, Policy #135-00-525-911
Santa Clara County, CA N/A Dated 9/15/97
- -------------------------------------------------------------------------------------
232 Mt. Hermon Road, Scotts Valley, Policy #112-00-398-650
Santa Cruz County, CA N/A Dated 9/15/97
- -------------------------------------------------------------------------------------
52 Lower Bartlett Road, Waterford, Recorded 9/29/97 Policy #112-00-689253
New London County, CT Vol. 0473 Page 0132 Dated 9/29/97
- -------------------------------------------------------------------------------------
10052 N.W. 89th Avenue, Medley, Recorded 10/2/97 Policy #82-02-875613
Dade County, FL 17814 Page 0674 Dated 5/11/98
Instrument #97R448821
- -----------------------------------------------------------------------------------
1830 East 3rd Street, Panama City, Recorded 10/23/97 Policy #82-01-853324
Bay County, FL* Book 1744 Page 1774 Dated
File #97049929
- -------------------------------------------------------------------------------------
2715 Woodwin Road, Doraville, Recorded 9/29/97 Policy #112-00-273266
DeKalb County, GA Book 9634 Page 143 Dated 11/25/97
- -------------------------------------------------------------------------------------
Lot 2999, Honolulu, N/A Policy #T107-42270
Honolulu County, HI Dated 9/15/97
- -------------------------------------------------------------------------------------
Lot 53 of "THE MILLYARD N/A Policy #T107-42270
SUBDIVISION", Halieu (Maui), Dated 9/15/97
Maui County, HI
- -------------------------------------------------------------------------------------
2400 Terminal Drive, Arlington Hts., N/A Policy #112-00-3737437
Cook County, IL Dated 6/21/95
- -------------------------------------------------------------------------------------
3801 South Cicero Avenue, Cicero, N/A Policy #112-00-737438
Cook County, IL Dated 6/21/95
- -------------------------------------------------------------------------------------
2801 East 175th Street, Lansing, N/A Policy #112-00-73439
Cook County, IL Dated 6/21/95
- -------------------------------------------------------------------------------------
522 South Vermont Street, Palatine, N/A Policy #112-00-737440
Cook County, IL Dated 6/21/95
- -------------------------------------------------------------------------------------
6300 Cliffdale Road, Fayetteville, N/A Policy 112-00-838604
Cumberland County, NC Dated 9/25/97
- -------------------------------------------------------------------------------------
</TABLE>
*Leasehold mortgage
1
<PAGE> 55
SCHEDULE I
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------
Route 206, Bordentown, Recorded 10/1/97 Policy #112-02-239349
Burlington County, NJ MB6976 Page 273 Dated 10/1/97
- -------------------------------------------------------------------------------------
Route 24, Chester, Recorded 10/1/97 Policy #112-02-239350
Morris County, NJ MB7212 Page 47 Dated 5/5/98
- -------------------------------------------------------------------------------------
</TABLE>
*Leasehold mortgage
2
<PAGE> 1
EXHIBIT 13
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
=========================================================================================================
SEPTEMBER 30,
---------------------------
1998 1997
=========================================================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (note 2) $ 8,873 $ 4,069
Accounts receivable (less allowances for doubtful accounts
of $6,432 and $7,875, respectively) 58,778 78,341
Inventories (notes 2 and 6) 49,394 64,933
Prepaid propane purchases (note 2) 770 21,700
Prepaid expenses and other current assets 15,531 14,048
- ---------------------------------------------------------------------------------------------------------
Total current assets 133,346 183,091
Property, plant and equipment (less accumulated depreciation and
amortization of $205,083 and $167,385, respectively) (notes 2 and 7) 442,042 444,677
Intangible assets (less accumulated amortization of $141,382 and
$116,557, respectively) (notes 2 and 8) 629,355 677,116
Other assets (note 2) 12,473 13,777
- ---------------------------------------------------------------------------------------------------------
Total assets $1,217,216 $1,318,661
=========================================================================================================
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current maturities of long-term debt (note 4) $ 6,068 $ 6,420
Bank loans (note 4) 10,000 28,000
Accounts payable--trade 34,075 50,055
Accounts payable--related parties (note 10) 6,799 4,533
Employee compensation and benefits accrued 19,962 17,776
Interest accrued 28,053 27,700
Refunds and deposits 25,938 20,314
Other current liabilities (note 11) 29,402 26,071
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 160,297 180,869
Long-term debt (note 4) 702,926 684,308
Other noncurrent liabilities 50,069 50,904
Commitments and contingencies (note 9)
Minority interest (note 2) 4,049 5,043
Partners' capital (note 8):
Common Unitholders (units issued--22,105,993 and
22,060,407, respectively) 157,866 208,253
Subordinated Unitholders (units issued--19,782,146) 139,012 185,310
General Partner 2,997 3,974
- ---------------------------------------------------------------------------------------------------------
Total partners' capital 299,875 397,537
- ---------------------------------------------------------------------------------------------------------
Total liabilities and partners' capital $1,217,216 $1,318,661
=========================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
AmeriGas Partners, L.P. 1998 Annual Report
2
<PAGE> 2
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER UNIT)
<TABLE>
<CAPTION>
=============================================================================================================
YEAR ENDED SEPTEMBER 30,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996
=============================================================================================================
<S> <C> <C> <C>
Revenues (note 2):
Propane $ 834,627 $ 994,200 $ 924,810
Other 79,751 83,625 88,415
- -------------------------------------------------------------------------------------------------------------
914,378 1,077,825 1,013,225
- -------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales--propane 410,713 563,959 526,255
Cost of sales--other 33,047 36,413 43,472
Operating and administrative expenses (note 10) 320,220 316,392 317,396
Depreciation and amortization (note 2) 63,225 62,004 61,631
Other income, net (note 13) (745) (11,316) (8,395)
- -------------------------------------------------------------------------------------------------------------
826,460 967,452 940,359
- -------------------------------------------------------------------------------------------------------------
Operating income 87,918 110,373 72,866
Interest expense (66,189) (65,658) (62,782)
- -------------------------------------------------------------------------------------------------------------
Income before income taxes 21,729 44,715 10,084
Income tax (expense) benefit (note 2) (3) (180) 365
Minority interest (note 2) (324) (555) (211)
- -------------------------------------------------------------------------------------------------------------
Net income $ 21,402 $ 43,980 $ 10,238
=============================================================================================================
General partner's interest in net income $ 214 $ 440 $ 102
=============================================================================================================
Limited partners' interest in net income $ 21,188 $ 43,540 $ 10,136
=============================================================================================================
Income per limited partner unit $ .51 $ 1.04 $ .24
=============================================================================================================
Average limited partner units outstanding (thousands) 41,886 41,799 41,729
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
AmeriGas Partners, L.P. 1998 Annual Report
3
<PAGE> 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
============================================================================================================
YEAR ENDED SEPTEMBER 30,
- ------------------------------------------------------------------------------------------------------------
1998 1997 1996
============================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 21,402 $ 43,980 $ 10,238
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 63,225 62,004 61,631
Other, net (2,825) 3,939 (3,438)
- ------------------------------------------------------------------------------------------------------------
81,802 109,923 68,431
Net change in:
Accounts receivable 15,904 1,511 (27,802)
Inventories and prepaid propane purchases 36,774 (3,110) (3,192)
Accounts payable (14,187) 5,101 12,708
Other current assets and liabilities 12,625 (3,259) (1,767)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 132,918 110,166 48,378
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (31,577) (24,470) (21,908)
Proceeds from disposals of property, plant and equipment 5,153 10,613 5,423
Decrease in short-term investments -- -- 9,000
Acquisitions of businesses, net of cash acquired (8,076) (11,627) (20,909)
- ------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (34,500) (25,484) (28,394)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (93,060) (92,861) (92,727)
Minority interest activity (1,039) (1,024) (1,042)
Increase (decrease) in bank loans (18,000) 6,000 15,000
Issuance of long-term debt 23,000 8,131 37,009
Repayment of long-term debt (4,527) (3,007) (10,911)
Capital contribution from General Partner 12 26 --
Partnership Formation fees and expenses -- -- (4,758)
- ------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (93,614) (82,735) (57,429)
- ------------------------------------------------------------------------------------------------------------
Cash and cash equivalents increase (decrease) $ 4,804 $ 1,947 $(37,445)
============================================================================================================
CASH AND CASH EQUIVALENTS
End of period $ 8,873 $ 4,069 $ 2,122
Beginning of period 4,069 2,122 39,567
- ------------------------------------------------------------------------------------------------------------
Increase (decrease) $ 4,804 $ 1,947 $(37,445)
============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
AmeriGas Partners, L.P. 1998 Annual Report
4
<PAGE> 4
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(THOUSANDS OF DOLLARS, EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
==================================================================================================================================
NUMBER OF UNITS TOTAL
---------------------------- GENERAL PARTNERS'
COMMON SUBORDINATED COMMON SUBORDINATED PARTNER CAPITAL
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Balance September 30, 1995 21,932,146 19,782,146 $ 291,988 $ 263,362 $5,609 $560,959
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 8) (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
- ----------------------------------------------------------------------------------------------------------------------------------
Net income 22,857 20,683 440 43,980
Distributions (note 3) (48,411) (43,521) (929) (92,861)
Issuance of Common Units
in connection with
acquisition 111,135 2,645 27 2,672
Capital contribution from
General Partner 786 709 15 1,510
- ----------------------------------------------------------------------------------------------------------------------------------
Balance September 30, 1997 22,060,407 19,782,146 208,253 185,310 3,974 397,537
- ----------------------------------------------------------------------------------------------------------------------------------
Net income 11,182 10,006 214 21,402
Distributions (note 3) (48,608) (43,521) (931) (93,060)
Adjustments to net assets
contributed (note 8) (14,172) (12,783) (272) (27,227)
Issuance of Common Units
in connection with
acquisition (note 10) 45,586 1,211 12 1,223
- ----------------------------------------------------------------------------------------------------------------------------------
Balance September 30, 1998 22,105,993 19,782,146 $ 157,866 $ 139,012 $2,997 $299,875
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
AmeriGas Partners, L.P. 1998 Annual Report
5
<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. EMPLOYEE RETIREMENT PLANS
6. INVENTORIES
7. PROPERTY, PLANT AND EQUIPMENT
8. PARTNERS' CAPITAL AND INCENTIVE COMPENSATION PLAN
9. COMMITMENTS AND CONTINGENCIES
10. RELATED PARTY TRANSACTIONS
11. OTHER CURRENT LIABILITIES
12. FINANCIAL INSTRUMENTS
13. OTHER INCOME, NET
14. QUARTERLY DATA (UNAUDITED)
1. PARTNERSHIP ORGANIZATION AND FORMATION
AmeriGas Partners, L.P. (AmeriGas Partners) was formed on November 2, 1994
and is a publicly traded limited partnership. AmeriGas Partners owns a 98.99%
limited partner interest in AmeriGas Propane, L.P. (the "Operating
Partnership"). The Operating Partnership was formed to acquire the propane
businesses and assets of AmeriGas Propane, Inc., a Delaware corporation,
AmeriGas Propane-2, Inc., and Petrolane Incorporated (Petrolane). The Operating
Partnership acquired such assets on April 19, 1995 (the "Closing Date").
AmeriGas Partners and AmeriGas Propane, L.P. are Delaware limited
partnerships. The Operating Partnership is 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
46 states, including Alaska and Hawaii.
AmeriGas Propane, Inc. (the "General Partner"), a Pennsylvania corporation,
holds a 1% general partner interest in AmeriGas Partners and a 1.01% general
partner interest in the Operating Partnership. At September 30, 1998, the
General Partner and its wholly owned subsidiary Petrolane owned a combined
4,392,858 Common Units and 19,782,146 Subordinated Units of AmeriGas Partners.
These Common and Subordinated units represent limited partner interests in
AmeriGas Partners.
AmeriGas Partners and the Operating Partnership have no employees. The
General Partner conducts, directs and manages all activities of AmeriGas
Partners and the Operating Partnership and is reimbursed on a monthly basis for
all direct and indirect expenses it incurs on their behalf.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION PRINCIPLES. Our consolidated financial statements include the
accounts of AmeriGas Partners, the Operating Partnership and their subsidiaries,
together referred to in this report as "the Partnership" or "we." We eliminate
all significant intercompany accounts and transactions when we consolidate. We
account for the General Partner's 1.01% interest in the Operating Partnership as
a minority interest in the consolidated financial statements.
USE OF ESTIMATES. Management makes estimates and assumptions when preparing
financial statements in conformity with generally accepted accounting
principles. These estimates and assumptions affect the reported amounts of
assets and liabilities, revenues and expenses, as well as the disclosure of
contingent assets and liabilities. Actual results could differ from these
estimates.
REVENUE RECOGNITION. We recognize revenues from the sale of propane
principally as product is shipped or delivered to customers.
INVENTORIES AND PREPAID PROPANE PURCHASES. Our inventories are stated at the
lower of cost or market. We determine cost using an average cost method for
propane, specific identification for appliances, and the first-in, first-out
(FIFO) method for all other inventories. We also enter into contracts with
certain of our suppliers under which we prepay all or a portion of the purchase
price of a fixed volume of propane for future delivery. We report these
prepayments in the Consolidated Balance Sheets as "prepaid propane purchases."
PROPERTY, PLANT AND EQUIPMENT AND RELATED DEPRECIATION. We record property,
plant and equipment at cost. The amounts we assign to property, plant and
equipment of acquired businesses are based upon estimated fair value at date of
acquisition. When we retire or dispose of plant and equipment, we remove from
the accounts the cost and accumulated depreciation and include in income any
gains or losses.
We compute depreciation of property, plant and equipment using the
straight-line method over estimated service lives which range from two to 40
years. Depreciation expense was $38,133 in 1998, $37,366 in 1997, and $36,910 in
1996.
INTANGIBLE ASSETS. Intangible assets comprise the following at September 30:
<TABLE>
<CAPTION>
========================================================================================================
1998 1997
========================================================================================================
<S> <C> <C>
Goodwill (less accumulated amortization of $94,605 and $79,265, respectively).. $507,559 $537,396
Excess reorganization value (less accumulated amortization of $44,360 and
$35,939, respectively)....................................................... 117,147 135,128
Other (less accumulated amortization of $2,417 and $1,353, respectively)....... 4,649 4,592
- --------------------------------------------------------------------------------------------------------
Total intangible assets..........................................................$629,355 $677,116
========================================================================================================
</TABLE>
AmeriGas Partners, L.P. 1998 Annual Report
6
<PAGE> 6
We amortize goodwill recognized as a result of business combinations
accounted for as purchases on a straight-line basis over 40 years. We amortize
excess reorganization value (resulting from Petrolane's July 15, 1993
reorganization under Chapter 11 of the U.S. Bankruptcy Code) on a straight-line
basis over 20 years. We amortize other intangible assets over the estimated
periods of benefit which do not exceed ten years. Amortization expense of
intangible assets was $24,922 in 1998, $24,469 in 1997, and $24,551 in 1996.
We evaluate the impairment of long-lived assets, including intangibles,
whenever events or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable. We evaluate recoverability based upon
undiscounted future cash flows expected to be generated by such assets.
OTHER ASSETS. Included in other assets are net deferred debt issuance costs
of $10,876 at September 30, 1998 and $12,456 at September 30, 1997. We are
amortizing these costs over the term of the related debt.
ACCOUNTING FOR COMPUTER SOFTWARE COSTS. We include in property, plant and
equipment external and incremental internal costs associated with computer
software we develop for use in our business. We begin capitalizing these costs
when the preliminary stage of the project is completed. We amortize these costs
on a straight-line basis over a period of five to seven years once the installed
software is ready for its intended use.
ENVIRONMENTAL LIABILITIES. We have identified environmental contamination at
several of our properties. Our policy is to accrue environmental investigation
and cleanup costs when it is probable that a liability exists and the amount or
range of amounts can be reasonably estimated. We do not discount to present
value the costs of future expenditures for environmental liabilities. We intend
to pursue recovery of any incurred costs through all appropriate means.
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 corporate subsidiaries which are subject to
federal and state income taxes. Accordingly, our consolidated financial
statements reflect income taxes related to these corporate subsidiaries. Net
income for financial statement purposes may differ significantly from taxable
income reportable to unitholders. This is a result of (1) differences between
the tax basis and financial reporting basis of assets and liabilities and (2)
the taxable income allocation requirements of the Amended and Restated Agreement
of Limited Partnership (Partnership Agreement) and the Internal Revenue Code.
UNIT-BASED COMPENSATION. As permitted by Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation" (SFAS 123),
we apply the provisions of Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" in recording compensation expense for
grants of stock, stock options, and other equity instruments to employees. If
different, we disclose certain pro forma net income and earnings per share data
as if the fair value provisions of SFAS 123 had been applied.
NET INCOME PER UNIT. Net income per unit is computed by dividing net income,
after deducting the General Partner's 1% interest, by the weighted average
number of Common and Subordinated units outstanding. In 1998, we adopted SFAS
No. 128, "Earnings Per Share" (SFAS 128). SFAS 128 establishes standards for
computing and presenting earnings per share and supersedes the previous
standards. SFAS 128 requires restatement of all prior-period earnings per share
data presented. The adoption of SFAS 128 did not impact the calculation of 1998,
1997 or 1996 net income per unit.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS. We use derivative instruments,
including futures contracts, price swap agreements and option contracts, to
hedge exposure to market risk associated with a portion of our anticipated
propane purchases. Additionally, on occasion we enter into interest rate
protection agreements to reduce interest rate risk associated with anticipated
issuances of debt.
We recognize gains or losses on derivative instruments associated with these
forecasted transactions when such transactions affect earnings. If it is
probable that the original forecasted transaction will not occur, we immediately
recognize in earnings any gain or loss on the related derivative instrument. If
such derivative instrument is terminated early for other economic reasons, we
defer any gain or loss as of the termination date until such time as the
forecasted transaction affects earnings.
CONSOLIDATED STATEMENTS OF CASH FLOWS. We define cash equivalents as all
highly liquid investments with maturities of three months or less when
purchased. We record cash equivalents at cost plus accrued interest, which
approximates market value. We paid interest totaling $67,069 in 1998, $67,103 in
1997, and $62,846 in 1996.
ACCOUNTING PRINCIPLES NOT YET ADOPTED. In June 1997, the Financial Accounting
Standards Board (FASB) issued SFAS No. 130, "Reporting Comprehensive Income"
(SFAS 130), and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 130 establishes standards for reporting
and displaying comprehensive income and its components in financial statements.
Comprehensive income includes net income and all other nonowner changes in
equity. SFAS 131 establishes standards for reporting information about operating
segments as well as related disclosures about products and services, geographic
areas, and major customers. We will adopt SFAS 130 and SFAS 131 in fiscal 1999.
In addition, in March 1998 the American Institute of Certified Public
Accountants issued Statement of Position No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1
requires companies to capitalize the cost of computer software developed or
obtained for internal use once certain criteria have been met. We will adopt SOP
98-1 in fiscal 2000.
We do not expect the adoptions of SFAS 130 and SOP 98-1 will have a material
effect on our financial position or results of operations. In addition, we do
not expect the initial application of SFAS 131 will affect the operating
segments we disclose.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). SFAS
AmeriGas Partners, L.P. 1998 Annual Report
7
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THOUSANDS OF DOLLARS, EXCEPT PER UNIT)
133 establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivative
instruments as either assets or liabilities and measure them at fair value. The
accounting for changes in fair value depends upon the purpose of the derivative
instrument and whether it is designated and qualifies for hedge accounting. To
the extent derivative instruments qualify and are designated as hedges of
forecasted transactions, changes in fair value will generally be reported as a
component of other comprehensive income and be reclassified into net income when
the forecasted transaction affects earnings. To the extent such derivative
instrument qualifies as a hedge of a firm commitment, any gain or loss would
generally be recognized in earnings when the firm commitment affects earnings.
We will adopt SFAS 133 in fiscal 2000. We are currently evaluating the potential
impact of SFAS 133 on our future financial condition and results of operations.
The impact of SFAS 133 will likely depend upon the extent to which we use
derivative instruments and their designation and effectiveness as hedges of
market risk.
3. QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH
The Partnership makes distributions to its partners approximately 45 days
after the end of each fiscal quarter in a total amount equal to its Available
Cash for such quarter. Available Cash generally means:
1. all cash on hand at the end of such quarter,
2. plus all additional cash on hand as of the date of determination resulting
from borrowings after the end of such quarter,
3. less the amount of cash reserves established by the General Partner in its
reasonable discretion.
The General Partner may establish reserves for the proper conduct of the
Partnership's business and for distributions during the next four quarters. In
addition, certain of the Partnership's debt agreements require reserves be
established for the payment of debt principal and interest.
Distributions of Available Cash will generally be made 98% to the Common and
Subordinated unitholders and 2% to the General Partner. The Partnership may pay
an incentive distribution if Available Cash exceeds the Minimum Quarterly
Distribution (MQD) of $.55 on all units. If there is sufficient Available Cash,
the holders of Common Units have the right to receive the MQD, plus any
arrearages, before 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
arrearages for any quarter.
The Subordination Period will generally extend until the first day of any
quarter beginning on or after April 1, 2000 where:
1. distributions of Available Cash from Operating Surplus (generally defined
as $40,000 plus $42,879 of cash on hand as of the Closing Date 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 non-overlapping
four-quarter periods immediately preceding such date;
2. the Adjusted Operating Surplus (generally defined as Operating Surplus
adjusted to exclude working capital borrowings, decreases in cash
reserves, and $40,000 plus $42,879 of cash on hand as of the Closing Date,
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 non-overlapping
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
3. there are no arrearages on the Common Units.
Prior to the end of the Subordination Period, 4,945,537 Subordinated Units
may convert into Common Units on the first day after the record date for
distributions based upon any quarter ending on or after March 31, 1998, and an
additional 4,945,537 Subordinated Units may convert into Common Units on the
first day after the record date for distributions based upon any quarter ending
on or after March 31, 1999, if:
1. 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;
2. 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;
3. the Audit Committee of the Board of Directors of the General Partner
approves management's 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
4. there are no arrearages on the Common Units.
The cash performance requirements for conversion have not been met to date.
They are dependent upon many factors including highly seasonal operating
results, changes in working capital, asset sales and debt refinancings.
Management believes, however, that it is reasonably possible that the 9,891,074
Subordinated Units eligible for early conversion will convert into Common Units
during fiscal 1999.
AmeriGas Partners, L.P. 1998 Annual Report
8
<PAGE> 8
4. DEBT
Long-term debt comprises the following at September 30:
<TABLE>
<CAPTION>
================================================================================================================
1998 1997
================================================================================================================
<S> <C> <C>
AmeriGas Partners Senior Notes, 10.125%, due April 2007 $ 100,000 $ 100,000
First Mortgage Notes:
Series A, 9.34%-11.71%, due April 2000 through April 2009 (including
unamortized premium of $13,511 and $14,785,
respectively, calculated at an 8.91% effective rate) 221,511 222,785
Series B, 10.07%, due April 2001 through April 2005
(including unamortized premium of $9,838 and $11,557,
respectively, calculated at an 8.74% effective rate) 209,838 211,557
Series C, 8.83%, due April 2003 through April 2010 110,000 110,000
Acquisition Facility 60,000 37,000
Other (including capital lease obligations of $980 and $2,145, respectively) 7,645 9,386
- ----------------------------------------------------------------------------------------------------------------
Total long-term debt 708,994 690,728
Less current maturities (6,068) (6,420)
- ----------------------------------------------------------------------------------------------------------------
Total long-term debt due after one year $ 702,926 $ 684,308
================================================================================================================
</TABLE>
Scheduled repayments of long-term debt for each of the next five fiscal years
ending September 30 are as follows: 1999 - $6,068; 2000 - $18,305; 2001 -
$77,258; 2002 - $78,455; 2003 - $74,395.
AMERIGAS PARTNERS SENIOR NOTES. The 10.125% Senior Notes of AmeriGas Partners
are not redeemable prior to April 15, 2000. Thereafter, AmeriGas Partners has
the option to redeem the Senior Notes, in whole or in part. A redemption premium
applies until April 15, 2004. In addition, AmeriGas Partners may, under certain
circumstances following the disposition of assets or a change of control, be
required to offer to prepay the Senior Notes.
FIRST MORTGAGE NOTES. The Operating Partnership's First Mortgage Notes are
collateralized by substantially all of its assets. The General Partner and
Petrolane are co-obligors of the First Mortgage Notes. The Operating Partnership
may prepay the First Mortgage Notes, in whole or in part. These prepayments
include a make whole premium. Following the disposition of assets or a change of
control, the Operating Partnership may be required to offer to prepay the First
Mortgage Notes, in whole or in part.
BANK CREDIT AGREEMENT. The Operating Partnership's bank credit agreement
(Bank Credit Agreement) consists of a Revolving Credit Facility and an
Acquisition Facility. The Operating Partnership's obligations under the Bank
Credit Agreement are collateralized by substantially all of its assets. The
General Partner and Petrolane are co-obligors of the bank credit facilities.
Under the Revolving Credit Facility, the Operating Partnership may borrow up
to $100,000 (including a $35,000 sublimit for letters of credit). The Revolving
Credit Facility expires September 15, 2002, but may be extended 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 various prevailing interest rates,
including the Base Rate, defined as the higher of the Federal Funds Rate plus
.50% or the agent bank's reference rate (8.50% at September 30, 1998), or at
two-week, one-, two-, three-, or six-month offshore interbank offering rates
(IBOR), plus a margin. The margin on IBOR borrowings (which ranges from .20% to
1.00%) and the Revolving Credit Facility commitment fee rate 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 had borrowings under the Revolving Credit Facility
totaling $10,000 at September 30, 1998 and $28,000 at September 30, 1997, which
we classify as bank loans. The weighted-average interest rates on the bank loans
outstanding were 6.22% as of September 30, 1998 and 6.44% as of September 30,
1997. Issued outstanding letters of credit under the Revolving Credit Facility
at September 30, 1998 totaled $500.
The Acquisition Facility provides the Operating Partnership with the ability
to borrow up to $75,000 to finance the purchase of propane businesses or propane
business assets. The Acquisition Facility operates as a revolving facility
through September 15, 2000, at which time it converts to a quarterly amortizing
four-year term loan. The Acquisition Facility permits the Operating Partnership
to borrow at the Base Rate or at two-week, one-, two-, three-, or six-month
IBOR, plus a margin. The margin on IBOR borrowings and the Acquisition Facility
commitment fee rate are dependent upon the Operating Partnership's ratio of
funded debt to EBITDA, as defined. The weighted-average interest rates on
Acquisition Facility loans outstanding were 6.18% as of September 30, 1998 and
6.32% as of September 30, 1997.
RESTRICTIVE COVENANTS. The 10.125% Senior Notes of AmeriGas Partners 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. Under the Senior Notes Indenture, AmeriGas
Partners is generally permitted to make cash distributions equal to available
cash, as defined, as of the end of the immediately preceding quarter, if certain
conditions are met. These conditions include:
1. no event of default exists or would exist upon making such distributions
and
2. the Partnership's consolidated fixed charge coverage ratio, as defined, is
greater than 1.75-to-1.
AmeriGas Partners, L.P. 1998 Annual Report
9
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THOUSANDS OF DOLLARS, EXCEPT PER UNIT)
If the ratio in item 2 above is less than or equal to 1.75-to-1, the
Partnership may make cash distributions in a total amount not to exceed $24,000
less the total amount of distributions made during the immediately preceding 16
fiscal quarters. At September 30, 1998, such ratio was 2.27-to-1.
The Bank Credit Agreement and the First Mortgage Notes restrict the
incurrence of additional indebtedness and also restrict certain liens,
guarantees, loans and advances, payments, mergers, consolidations, sales of
assets and other transactions. They also require the ratio of total
indebtedness, as defined, to EBITDA, as defined (calculated on a rolling
four-quarter basis or eight-quarter basis divided by two), to be less than or
equal to 5.25-to-1. In addition, the Bank Credit Agreement requires 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. 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.
GENERAL PARTNER FACILITY. 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, and generally
comparable to, the Operating Partnership's Revolving Credit Facility except that
borrowings under the General Partner Facility are unsecured and subordinated to
all senior debt of the Partnership. Interest rates on borrowings are based upon
one-month IBOR. Commitment fees are determined in the same manner as fees under
the Revolving Credit Facility. UGI Corporation 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. EMPLOYEE RETIREMENT PLANS
The General Partner sponsors a 401(k) savings plan for eligible employees.
Participants in the savings plan may contribute a portion of their compensation
on a before-tax basis. In 1998 and 1997, we matched employee contributions on a
dollar-for-dollar basis up to 5% of eligible compensation. In 1996, employee
contributions were not matched. In 1996, the General Partner also sponsored a
noncontributory defined contribution pension plan for eligible employees. Our
contributions to the pension plan represented a percentage of each covered
employee's salary. Effective October 1, 1996, we ceased contributing to the
pension plan and the assets were merged into the savings plan. The cost of
benefits under our pension and savings plans was $4,101 in 1998, $4,762 in 1997,
and $4,943 in 1996.
We provide postretirement health care benefits to a closed group of retired
employees, and we also provide limited life insurance benefits to nearly all
active employees and certain retired employees. The cost of postretirement
medical and life insurance benefits for 1998, 1997 and 1996, and the related
accumulated benefit obligations as of the end of such periods, were not
material.
6. INVENTORIES
Inventories comprise the following at September 30:
<TABLE>
<CAPTION>
=========================================================
1998 1997
=========================================================
<S> <C> <C>
Propane gas ................. $34,777 $47,641
Materials, supplies and
other ..................... 11,386 12,519
Appliances for sale ......... 3,231 4,773
- ---------------------------------------------------------
Total inventories ........... $49,394 $64,933
=========================================================
</TABLE>
In addition to inventories on hand, we also enter into contracts to purchase
propane to meet a portion of our supply requirements. Generally, such contracts
have terms of less than one year and call for payment based on either fixed
prices or market prices at date of delivery.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment comprise the following at September 30:
<TABLE>
<CAPTION>
===============================================================================
1998 1997
===============================================================================
<S> <C> <C>
Land ......................................... $ 52,924 $ 52,849
Buildings and improvements ................... 52,481 50,566
Transportation equipment ..................... 59,196 53,284
Storage facilities ........................... 63,852 58,200
Equipment, primarily cylinders and tanks ..... 408,471 387,554
Capital leases ............................... 5,204 5,211
Other ........................................ 4,997 4,398
- --------------------------------------------------------------------------------
Gross property, plant and equipment .......... 647,125 612,062
Less accumulated depreciation and
amortization ............................... (205,083) (167,385)
- --------------------------------------------------------------------------------
Net property, plant and equipment ............ $ 442,042 $ 444,677
===============================================================================
</TABLE>
AmeriGas Partners, L.P. 1998 Annual Report
10
<PAGE> 10
8. PARTNERS' CAPITAL AND INCENTIVE COMPENSATION PLAN
During the Subordination Period, we may issue up to 9,400,000 additional
Common Units (excluding Common Units issued in connection with (1) employee
benefit plans and (2) 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. We may issue an
unlimited number of additional Common Units or parity securities without Common
Unitholder approval if:
1. such issuance occurs in connection with acquisitions, including, in
certain circumstances, the repayment of debt incurred in connection with
an acquisition or
2. such issuance is for the repayment of up to $150,000 of long-term
indebtedness of the Partnership.
After the Subordination Period, the General Partner may, in its sole
discretion, cause the Partnership to issue an unlimited number of additional
limited partner interests and other equity securities of the Partnership.
In June 1998, the General Partner revised its estimate of the tax basis of
certain assets contributed to the Partnership in conjunction with the
Partnership's formation. The change in estimate resulted in the following
adjustments to the Consolidated Balance Sheet: (1) a $27,227 decrease in
partners' capital; (2) a $279 decrease in minority interest; (3) a $17,945
decrease in goodwill; and (4) a $9,561 decrease in excess reorganization value.
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 its predecessor companies. The completion of the allocation
process resulted in reductions to the deferred income tax liabilities of the
General Partner and Petrolane at the Closing Date, which had been recorded in
connection with the formation of the Partnership. It also resulted in a
reduction to the net assets contributed by the General Partner and Petrolane to
the Operating Partnership in conjunction with the formation of the Partnership.
This adjustment was recorded during 1996 as (1) a $36,651 reduction in partners'
capital; (2) a $374 reduction in minority interest; and (3) a $37,025 reduction
in goodwill.
On October 28, 1996, the General Partner adopted the AmeriGas Propane, Inc.
1997 Long-Term Incentive Plan (1997 Propane Plan), effective October 1, 1996.
Under the 1997 Propane Plan, the General Partner may grant to key employees the
right to receive a total of 500,000 AmeriGas Partners Common Units, or cash
generally equivalent to the fair market value of such Common Units, on the
payment date. In addition, the 1997 Propane Plan provides for the crediting of
Partnership distribution equivalents to participants' accounts. Distribution
equivalents will be paid in cash, and such payment may, at the participant's
request, be deferred. Generally, each grant, unless paid, will terminate when
the participant ceases to be employed by the General Partner.
The actual number of Common Units (or their cash equivalent) that may be
delivered under the 1997 Propane Plan, as well as the amount of the distribution
equivalent, are contingent upon the date on which the requirements for early
conversion of Subordinated Units are met. If the requirements for early
conversion are not met by September 30, 2001, the General Partner will not make
any payments under the 1997 Propane Plan. The number of Common Units made the
subject of grants under the 1997 Propane Plan was 88,200 at September 30, 1998
and 84,500 at September 30, 1997. At September 30, 1998, 411,800 Common Units
were available for future grants.
We recorded compensation expense for the 1997 Propane Plan of $164 in 1998
and $1,560 in 1997. Such compensation expense, if determined under the
provisions of SFAS 123, would have been the same.
9. COMMITMENTS AND CONTINGENCIES
We lease 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. Our aggregate rental
expense for such leases was $29,026 in 1998, $23,481 in 1997, and $23,090 in
1996.
Minimum future payments under noncancelable capital and operating leases are
as follows:
<TABLE>
<CAPTION>
================================================================================
CAPITAL LEASES OPERATING LEASES
================================================================================
<S> <C> <C>
Year ending September 30,
1999 .................................. $ 1,028 $ 26,456
2000 .................................. 7 21,225
2001 .................................. -- 18,060
2002 .................................. -- 13,868
2003 .................................. -- 10,578
Thereafter ............................ -- 23,788
- --------------------------------------------------------------------------------
Total minimum lease obligations .......... 1,035 $113,975
========
Less imputed interest .................... (55)
- ---------------------------------------------------------
Present value of capital lease
obligations ............................ $ 980
=========================================================
</TABLE>
AmeriGas Partners, L.P. 1998 Annual Report
11
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THOUSANDS OF DOLLARS, EXCEPT PER UNIT)
The Partnership has succeeded to certain lease guarantee obligations of
Petrolane relating to Petrolane's divestiture of nonpropane operations before
its 1989 acquisition by QFB Partners. Lease payments under these leases total
approximately $54,000. The leases expire through 2010, and some of them are
currently in default. The Partnership has succeeded to the indemnity agreement
of Petrolane by which Texas Eastern Corporation (Texas Eastern), a prior owner
of Petrolane, agreed to indemnify Petrolane against any liabilities arising out
of the conduct of businesses that do not relate to, and are not a part of, the
propane business, including lease guarantees. To date, Texas Eastern has
directly satisfied defaulted lease obligations without the Partnership's having
to honor its guarantee. We believe the probability that we will be required to
directly satisfy such lease obligations is remote.
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). Petrolane had entered into
this indemnification agreement in conjunction with its 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.
In addition to these matters, there are other pending claims and legal
actions arising in the normal course of our business. We cannot predict with
certainty the final results of these matters. However, it is reasonably possible
that some of them could be resolved unfavorably to us. 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 our financial position but could be material to our operating results
or 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
Under the Partnership Agreement, the General Partner is entitled to
reimbursement for all direct and indirect expenses incurred or payments it makes
on behalf of the Partnership. These costs, which totaled $184,917 in 1998,
$177,210 in 1997, and $176,425 in 1996, include employee compensation and
benefit expenses of employees of the General Partner and general and
administrative expenses. 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. Such corporate expenses totaled $5,935 in 1998,
$6,557 in 1997, and $7,786 in 1996. In addition, UGI and certain of its
subsidiaries provide office space and general liability, automobile and workers'
compensation insurance to the Partnership. These expenses totaled $2,501 in
1998, $3,009 in 1997, and $3,189 in 1996.
During 1998, the Partnership, in conjunction with a propane business
acquisition, issued 45,586 Common Units to the General Partner having a fair
value of $1,211. During 1996, a wholly owned subsidiary of the General Partner,
Diamond Acquisition, Inc. (Diamond), contributed to the Partnership the net
assets of a Hawaiian corporation. In consideration of the retention of certain
associated income tax liabilities, AmeriGas Partners issued 17,126 Common Units
to Diamond having a fair value of $413.
11. OTHER CURRENT LIABILITIES
Other current liabilities comprise the following at September 30:
<TABLE>
<CAPTION>
========================================================================
1998 1997
========================================================================
<S> <C> <C>
Self-insured property and casualty liability $11,265 $10,969
Insured property and casualty liability .... 3,800 1,801
Taxes other than income taxes .............. 5,471 9,981
Other ...................................... 8,866 3,320
- ------------------------------------------------------------------------
Total other current liabilities ............ $29,402 $26,071
========================================================================
</TABLE>
12. FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments included in current assets and
current liabilities (excluding current maturities of long-term debt) approximate
their fair values because of their short-term nature. We estimate the fair
values of our long-term debt to be $772,000 at September 30, 1998 and $737,000
at September 30, 1997. We make these estimates by using current market prices
and by discounting future cash flows using rates available for similar type
debt.
We have financial instruments such as trade accounts receivable which could
expose us to concentrations of credit risk. The credit risk from trade accounts
receivable is limited because we have a large customer base which extends across
many different U.S. markets. At September 30, 1998 and 1997, we had no
significant concentrations of credit risk.
In order to reduce interest rate risk associated with the anticipated
refinancing of existing long-term debt, during 1998 we entered into an interest
rate protection agreement covering $50,000 of long-term debt to be issued in
fiscal 2001. The counterparty to this agreement is a large financial
institution. To the extent this agreement continues to qualify as a hedge of the
forecasted
AmeriGas Partners, L.P. 1998 Annual Report
12
<PAGE> 12
transaction, any gains or losses on the agreement will be included in
the basis of the long-term debt issued which will adjust the effective interest
rate. The estimated fair value of this agreement was $(2,441) at September 30,
1998.
We are a party to propane price swap and option agreements with private
counterparties maturing through March 1999. We use these agreements to manage
price risk associated with a portion of our propane supply needs. At September
30, 1998, we were a party to price swap agreements with a total notional amount
of $11,700. In addition, the Partnership held zero-cost collars for propane
having a total notional ceiling amount of $11,800 and a total notional floor
amount of $9,300. The estimated fair value of these agreements was not material.
13. OTHER INCOME, NET
Other income, net, comprises the following:
<TABLE>
<CAPTION>
========================================================================================
1998 1997 1996
========================================================================================
<S> <C> <C> <C>
Interest income ........................... $ (22) $ (1,475) $(1,278)
Loss on interest rate protection agreements 4,000) - -
Gain on sale of Atlantic Energy, Inc. ..... - (4,700) -
Gain on sale of fixed assets .............. (1,411) (1,001) (1,855)
Other ..................................... (3,312) (4,140) (5,262)
- -----------------------------------------------------------------------------------------
Total other income, net ................... $ (745) $(11,316) $(8,395)
========================================================================================
</TABLE>
14. QUARTERLY DATA (UNAUDITED)
The following quarterly data includes all adjustments (consisting only of
normal recurring adjustments with the exception of those indicated below) which
we consider necessary for a fair presentation. Our quarterly results fluctuate
because of the seasonal nature of our propane business.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1997 1996 1998 1997(a) 1998 1997 1998(b) 1997
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues .............. $302,923 $360,116 $306,182 $371,149 $ 158,206 $ 177,666 $ 147,067 $ 168,894
Operating
income (loss) ...... 44,037 57,699 59,385 65,794 (652) 593 (14,852) (13,713)
Net income (loss) ..... 26,451 39,951 42,276 48,508 (16,545) (15,152) (30,780) (29,327)
Net income (loss) per
limited partner unit .63 .95 1.00 1.15 (.39) (.36) (.73) (.69)
=============================================================================================================================
</TABLE>
(a) Includes gain from the sale of the Partnership's 50% equity interest in
Atlantic Energy, Inc., which owns and operates a liquefied petroleum gas
storage terminal in Chesapeake, Virginia. The gain increased operating
income by $4,700 and net income by $4,652 or $.11 per limited partner
unit.
(b) Includes loss from interest rate protection agreements which increased
operating loss by $4,000 and net loss by $3,960 or $.09 per limited
partner unit. We entered into these agreements in 1998 to reduce interest
rate exposure associated with an anticipated debt refinancing. Due to
unusual conditions in the corporate debt markets, we postponed the
refinancing and recorded a loss on these agreements because they no longer
qualified for hedge accounting treatment.
AmeriGas Partners, L.P. 1998 Annual Report
13
<PAGE> 13
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/ Martha B. Lindsay /s/ Richard R. Eynon
- ----------------------- ---------------------- ------------------------
Lon R. Greenberg Martha B. Lindsay Richard R. Eynon
Chairman and Chief Financial Officer Chief Accounting Officer
Chief Executive Officer
AmeriGas Partners, L.P. 1998 Annual Report
14
<PAGE> 14
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, 1998 and 1997 and the
related consolidated statements of operations, partners' capital and cash flows
for each of the three years in the period ended September 30, 1998. These
financial statements are the responsibility of the management of AmeriGas
Propane, Inc. Our responsibility is to express an opinion on these 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, 1998 and 1997 and
the results of their operations and their cash flows for each of the three years
in the period ended September 30, 1998, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
- -----------------------
Chicago, Illinois
November 13, 1998
AmeriGas Partners, L.P., 1998 Annual Report
15
<PAGE> 1
EXHIBIT 21
AMERIGAS PARTNERS, L.P. SUBSIDIARIES
<TABLE>
<CAPTION>
STATE
OF
ORGANIZATION/
SUBSIDIARY INCORPORATION OWNERSHIP
- --------------------------------------------------------------------------------
<S> <C> <C>
AMERIGAS PARTNERS, L.P. DE
AmeriGas Finance Corp. DE 100%
AmeriGas Propane, L.P. DE *
AmeriGas Propane Parts & Service, Inc. PA 100%
Petrolane Offshore Limited Bermuda 100%
- --------------------------------------------------------------------------------
</TABLE>
* AmeriGas Partners, L.P. owns 98.9899% of 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, 1998 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 SEPTEMBER 30,
1998.
</LEGEND>
<CIK> 0000932628
<NAME> AMERIGAS PARTNERS, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<CASH> 8,873
<SECURITIES> 0
<RECEIVABLES> 65,210
<ALLOWANCES> 6,432
<INVENTORY> 49,394
<CURRENT-ASSETS> 133,346
<PP&E> 647,125
<DEPRECIATION> 205,083
<TOTAL-ASSETS> 1,217,216
<CURRENT-LIABILITIES> 160,297
<BONDS> 702,926
0
0
<COMMON> 0
<OTHER-SE> 299,875
<TOTAL-LIABILITY-AND-EQUITY> 1,217,216
<SALES> 914,378
<TOTAL-REVENUES> 914,378
<CGS> 443,760
<TOTAL-COSTS> 443,760
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,287
<INTEREST-EXPENSE> 66,189
<INCOME-PRETAX> 21,729
<INCOME-TAX> 3
<INCOME-CONTINUING> 21,402
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,402
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF AMERIGAS FINANCE CORP. AS OF SEPTEMBER 30, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT INCLUDED IN AMERIGAS
PARTNERS' ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1998.
</LEGEND>
<CIK> 0000945792
<NAME> AMERIGAS FINANCE CORP.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<CASH> 1,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 999
<TOTAL-LIABILITY-AND-EQUITY> 1,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
