<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 1-13692
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
incorporation or organization) Identification No.)
460 North Gulph Road, King of Prussia, PA
(Address of principal executive offices)
19406
(Zip Code)
(610) 337-7000
(Registrants' telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
At April 30, 1998, the registrants had units and shares of common
stock outstanding as follows:
AmeriGas Partners, L.P. - 22,105,993 Common Units
19,782,146 Subordinated Units
AmeriGas Finance Corp. - 100 shares
<PAGE> 2
AMERIGAS PARTNERS, L.P.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGES
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
AmeriGas Partners, L.P.
-----------------------
Condensed Consolidated Balance Sheets as of March 31, 1998,
September 30, 1997 and March 31, 1997 1
Condensed Consolidated Statements of Operations for the three,
six and twelve months ended March 31, 1998 and 1997 2
Condensed Consolidated Statements of Cash Flows for the six
and twelve months ended March 31, 1998 and 1997 3
Condensed Consolidated Statement of Partners' Capital for the
six months ended March 31, 1998 4
Notes to Condensed Consolidated Financial Statements 5 - 7
AmeriGas Finance Corp.
----------------------
Balance Sheets as of March 31, 1998 and September 30, 1997 8
Note to Balance Sheets 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10 - 17
PART II OTHER INFORMATION
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
</TABLE>
<PAGE> 3
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
March 31, September 30, March 31,
1998 1997 1997
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 16,019 $ 4,069 $ 38,967
Accounts receivable (less allowances for doubtful accounts
of $9,619, $7,875, and $9,286, respectively) 100,466 78,341 130,111
Inventories 53,005 64,933 47,829
Prepaid expenses and other current assets 11,698 35,748 12,685
-------------- -------------- --------------
Total current assets 181,188 183,091 229,592
Property, plant and equipment (less accumulated depreciation and
amortization of $184,349, $167,385, and $155,172, respectively) 445,853 444,677 448,934
Intangible assets (less accumulated amortization of $129,143,
$116,557, and $104,458, respectively) 667,746 677,116 681,741
Other assets 13,356 13,777 13,646
-------------- -------------- --------------
Total assets $ 1,308,143 $ 1,318,661 $ 1,373,913
============== ============== ==============
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Current liabilities:
Current maturities of long-term debt $ 6,470 $ 6,420 $ 9,372
Bank loans - 28,000 -
Accounts payable - trade 39,939 50,055 44,571
Accounts payable - related parties 6,875 4,533 2,650
Other current liabilities 82,992 91,861 83,870
-------------- -------------- --------------
Total current liabilities 136,276 180,869 140,463
Long-term debt 695,195 684,308 687,708
Other noncurrent liabilities 50,444 50,904 51,263
Commitments and contingencies
Minority interest 5,283 5,043 5,970
Partners' capital 420,945 397,537 488,509
-------------- -------------- --------------
Total liabilities and partners' capital $ 1,308,143 $ 1,318,661 $ 1,373,913
============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 4
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Thousands of dollars, except per unit)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
------------------------------ ---------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
------------- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Propane $ 287,654 $ 352,602 $ 565,177 $ 684,496 $ 874,881 $ 1,000,259
Other 18,528 18,547 43,928 46,769 80,784 83,667
------------- -------------- ------------- ------------- ------------- -------------
306,182 371,149 609,105 731,265 955,665 1,083,926
------------- -------------- ------------- ------------- ------------- -------------
Costs and expenses:
Cost of sales - propane 138,337 207,809 289,970 399,734 454,195 579,675
Cost of sales - other 8,461 8,004 19,988 20,787 35,614 38,532
Operating and administrative
expenses 85,573 81,082 166,440 164,689 318,143 320,670
Depreciation and amortization 15,669 15,514 31,251 31,014 62,241 61,720
Miscellaneous income, net (1,243) (7,054) (1,966) (8,452) (4,830) (12,358)
------------- -------------- ------------- ------------- ------------- -------------
246,797 305,355 505,683 607,772 865,363 988,239
------------- -------------- ------------- ------------- ------------- -------------
Operating income 59,385 65,794 103,422 123,493 90,302 95,687
Interest expense (16,864) (16,901) (33,814) (33,607) (65,865) (65,191)
------------- -------------- ------------- ------------- ------------- -------------
Income before income taxes 42,521 48,893 69,608 89,886 24,437 30,496
Income tax (expense) benefit 213 137 (127) (471) 164 (111)
Minority interest (458) (522) (754) (956) (353) (413)
------------- -------------- ------------- ------------- ------------- -------------
Net income $ 42,276 $ 48,508 $ 68,727 $ 88,459 $ 24,248 $ 29,972
============= ============== ============= ============= ============= =============
General partner's interest in
net income $ 423 $ 485 $ 687 $ 885 $ 242 $ 300
============= ============== ============= ============= ============= =============
Limited partners' interest in
net income $ 41,853 $ 48,023 $ 68,040 $ 87,574 $ 24,006 $ 29,672
============= ============== ============= ============= ============= =============
Income per limited partner unit $ 1.00 $ 1.15 $ 1.62 $ 2.10 $ 0.57 $ 0.71
============= ============== ============= ============= ============= =============
Average limited partner units
outstanding (thousands) 41,888 41,780 41,884 41,755 41,863 41,743
============= ============== ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended
March 31, March 31,
------------------------------ -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 68,727 $ 88,459 $ 24,248 $ 29,972
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 31,251 31,014 62,241 61,720
Other, net 2,079 58 5,960 (2,913)
------------- ------------- ------------- ------------
102,057 119,531 92,449 88,779
Net change in:
Accounts receivable (24,892) (47,488) 24,107 1,279
Inventories and prepaid propane purchases 33,908 35,409 (4,611) 15,314
Accounts payable (8,281) (2,229) (951) 1,397
Other current assets and liabilities (6,820) (6,012) (4,067) (1,642)
------------- ------------- ------------- ------------
Net cash provided by operating activities 95,972 99,211 106,927 105,127
------------- ------------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (15,401) (11,728) (28,143) (19,141)
Proceeds from disposals of assets 1,502 8,370 3,745 11,125
Acquisition of businesses, net of cash acquired (5,622) (2,748) (14,501) (22,115)
------------- ------------- ------------- ------------
Net cash used by investing activities (19,521) (6,106) (38,899) (30,131)
------------- ------------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (46,517) (46,368) (93,010) (92,736)
Minority interest activity (528) (498) (1,054) (1,075)
Decrease in bank loans (28,000) (15,000) (7,000) -
Issuance of long-term debt 13,000 7,000 14,131 30,001
Repayment of long-term debt (2,456) (1,420) (4,043) (2,681)
Capital contribution from General Partner - 26 - 26
------------- ------------- ------------- ------------
Net cash used by financing activities (64,501) (56,260) (90,976) (66,465)
------------- ------------- ------------- ------------
Cash and cash equivalents increase (decrease) $ 11,950 $ 36,845 $ (22,948) $ 8,531
============= ============= ============= ============
CASH AND CASH EQUIVALENTS:
End of period $ 16,019 $ 38,967 $ 16,019 $ 38,967
Beginning of period 4,069 2,122 38,967 30,436
------------- ------------- ------------- ------------
Increase (decrease) $ 11,950 $ 36,845 $ (22,948) $ 8,531
============= ============= ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 6
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(unaudited)
(Thousands, except unit data)
<TABLE>
<CAPTION>
Number of units Total
------------------------------ General partners'
Common Subordinated Common Subordinated partner capital
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SEPTEMBER 30, 1997 22,060,407 19,782,146 $ 208,253 $ 185,310 $ 3,974 $ 397,537
Issuance of Common Units in
connection with acquisition 45,586 1,198 1,198
Net income 35,908 32,132 687 68,727
Distributions (24,303) (21,749) (465) (46,517)
------------- ------------- ------------- ------------- ------------- -------------
BALANCE MARCH 31, 1998 22,105,993 19,782,146 $ 221,056 $ 195,693 $ 4,196 $ 420,945
============= ============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 7
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Thousands of dollars, except per unit)
1. BASIS OF PRESENTATION
AmeriGas Partners, L.P. (AmeriGas Partners), through its subsidiary
AmeriGas Propane, L.P. (the "Operating Partnership"), is the largest
retail propane distributor in the United States. The Operating
Partnership serves residential, commercial, industrial, motor fuel and
agricultural customers from locations in 45 states, including Alaska
and Hawaii. AmeriGas Partners and the Operating Partnership are
Delaware limited partnerships. AmeriGas Propane, Inc. (the "General
Partner") serves as the general partner of AmeriGas Partners and the
Operating Partnership. The General Partner holds a 1% general partner
interest in AmeriGas Partners and a 1.01% general partner interest in
the Operating Partnership. In addition, the General Partner and its
wholly owned subsidiary Petrolane Incorporated (Petrolane) own an
effective 56.6% limited partner interest in the Operating Partnership.
The condensed consolidated financial statements include the accounts
of AmeriGas Partners, the Operating Partnership and their
subsidiaries, collectively referred to herein as the Partnership. The
General Partner's 1.01% interest in the Operating Partnership is
accounted for in the condensed consolidated financial statements as a
minority interest. Certain prior-period balances have been
reclassified to conform with the current period presentation.
The accompanying condensed consolidated financial statements are
unaudited and have been prepared in accordance with the rules and
regulations of the U.S. Securities and Exchange Commission. They
include all adjustments which the Partnership considers necessary for
a fair statement of the results for the interim periods presented.
Such adjustments consisted only of normal recurring items unless
otherwise disclosed. These financial statements should be read in
conjunction with the financial statements and notes thereto included
in the Partnership's Report on Form 10-K for the year ended September
30, 1997. Weather significantly impacts demand for propane and
profitability because many customers use propane for heating purposes.
Due to the seasonal nature of the Partnership's propane business, the
results of operations for interim periods are not necessarily
indicative of the results to be expected for a full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements, and revenues and expenses during
the reporting period. Actual results could differ from these
estimates.
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<PAGE> 8
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
2. DISTRIBUTIONS OF AVAILABLE CASH
Distributions of 55 cents per limited partner unit (the "Minimum
Quarterly Distribution" or "MQD") for the quarters ended September 30,
1997 and December 31, 1997 were paid on November 18, 1997 and February
18, 1998, respectively, on all Common and Subordinated units. On April
27, 1998, the Partnership declared the MQD on all Common and
Subordinated units for the quarter ended March 31, 1998, payable May
18, 1998 to holders of record on May 8, 1998.
3. RELATED PARTY TRANSACTIONS
In accordance with the Amended and Restated Agreement of Limited
Partnership of AmeriGas Partners, the General Partner is entitled to
reimbursement of all direct and indirect expenses incurred or payments
it makes on behalf of the Partnership, and all other necessary or
appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by the General Partner in connection with the
Partnership's business. These costs totaled $48,037, $97,897 and
$181,220 during the three, six and twelve months ended March 31, 1998,
respectively, and $46,586, $93,887 and $172,018 during the three, six
and twelve months ended March 31, 1997, respectively. In addition, UGI
Corporation (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 $1,595, $3,047 and $6,329 during the three, six and
twelve months ended March 31, 1998, respectively, and $1,794, $3,275
and $6,630 during the three, six and twelve months ended March 31,
1997, respectively.
4. UNUSUAL ITEMS
In March 1997, the Partnership sold its 50% equity interest in
Atlantic Energy, Inc. (Atlantic Energy), a refrigerated liquefied
petroleum gas storage terminal in Chesapeake, Virginia. The resulting
gain of $4,700 increased net income for the three, six and twelve
months ended March 31, 1997 by $4,652 or $.11 per limited partner
unit.
5. COMMITMENTS AND CONTINGENCIES
The Partnership has succeeded to the lease guarantee obligations of
Petrolane, a predecessor company of the Partnership, relating to
Petrolane's divestiture of nonpropane operations prior to its 1989
acquisition by QFB Partners. These leases are currently estimated to
aggregate approximately $60,000. 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
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<PAGE> 9
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
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 having to honor
its guarantee. The Partnership believes the probability that it 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). This
indemnification agreement had been entered into by Petrolane in
conjunction with Petrolane's sale of the international operations of
Tropigas to Shell in 1989. The Partnership also succeeded to
Petrolane's right to seek indemnity on these claims first from
International Controls Corp., which sold Tropigas to Petrolane, and
then from Texas Eastern. To date, neither the Partnership nor
Petrolane has paid any sums under this indemnity, but several claims
by Shell, including claims related to certain antitrust actions
aggregating at least $68,000, remain pending.
The Partnership has identified environmental contamination at several
of its properties. The Partnership's policy is to accrue environmental
investigation and cleanup costs when it is probable that a liability
exists and the amount or range of amounts can be reasonably estimated.
However, in many circumstances future expenditures cannot be
reasonably quantified because of a number of factors, including
various costs associated with potential remedial alternatives, the
unknown number of other potentially responsible parties involved and
their ability to contribute to the costs of investigation and
remediation, and changing environmental laws and regulations. The
Partnership intends to pursue recovery of any incurred costs through
all appropriate means, although such recovery cannot be assured.
In addition to these environmental matters, there are various other
pending claims and legal actions arising out of the normal conduct of
the Partnership's business. The final results of environmental and
other matters cannot be predicted with certainty. However, it is
reasonably possible that some of them could be resolved unfavorably to
the Partnership. Management believes, after consultation with
counsel, that damages or settlements, if any, recovered by the
plaintiffs in such claims or actions will not have a material adverse
effect on the Partnership's financial position but could be material
to operating results and cash flows in future periods depending on the
nature and timing of future developments with respect to these matters
and the amounts of future operating results and cash flows.
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<PAGE> 10
AMERIGAS FINANCE CORP.
(a wholly owned subsidiary of AmeriGas Partners, L.P.)
BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
----------- -------------
<S> <C> <C>
ASSETS
- ------
Cash $ 1,000 $ 1,000
----------- ----------
Total assets $ 1,000 $ 1,000
=========== ==========
STOCKHOLDER'S EQUITY
- --------------------
Common stock, $.01 par value; 100 shares authorized,
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.
-8-
<PAGE> 11
AMERIGAS FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.)
NOTE TO BALANCE SHEETS
AmeriGas Finance Corp. (AmeriGas Finance), a Delaware corporation, was formed
on March 13, 1995 and is a wholly owned subsidiary of AmeriGas Partners, L.P.
(AmeriGas Partners). AmeriGas Partners was formed on November 2, 1994 as a
Delaware limited partnership. AmeriGas Partners was formed to acquire and
operate the propane businesses and assets of AmeriGas Propane, Inc., a Delaware
corporation (AmeriGas Propane), AmeriGas Propane-2, Inc. (AGP-2) and Petrolane
Incorporated (Petrolane) through AmeriGas Propane, L.P. (the "Operating
Partnership"). AmeriGas Partners holds a 98.99% limited partner interest in the
Operating Partnership and AmeriGas Propane, Inc., a Pennsylvania corporation
and the general partner of AmeriGas Partners (the "General Partner"), holds a
1.01% general partner interest. On April 19, 1995, (i) pursuant to a Merger and
Contribution Agreement dated as of April 19, 1995, AmeriGas Propane and certain
of its operating subsidiaries and AGP-2 merged into the Operating Partnership
(the "Formation Merger"), and (ii) pursuant to a Conveyance and Contribution
Agreement dated as of April 19, 1995, Petrolane conveyed substantially all of
its assets and liabilities to the Operating Partnership (the "Petrolane
Conveyance"). As a result of the Formation Merger and the Petrolane Conveyance,
the General Partner and Petrolane received limited partner interests in the
Operating Partnership and the Operating Partnership owns substantially all of
the assets and assumed substantially all of the liabilities of AmeriGas
Propane, AGP-2 and Petrolane. AmeriGas Propane conveyed its limited partner
interest in the Operating Partnership to AmeriGas Partners in exchange for
2,922,235 Common Units and 13,350,146 Subordinated Units of AmeriGas Partners
and Petrolane conveyed its limited partner interest in the Operating
Partnership to AmeriGas Partners in exchange for 1,407,911 Common Units and
6,432,000 Subordinated Units of AmeriGas Partners. Both Common and Subordinated
units represent limited partner interests in AmeriGas Partners.
On April 19, 1995, AmeriGas Partners issued $100,000,000 face value of 10.125%
Senior Notes due April 2007. AmeriGas Finance serves as a co-obligor of these
notes.
AmeriGas Partners owns all 100 shares of AmeriGas Finance Common Stock
outstanding.
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<PAGE> 12
AMERIGAS PARTNERS, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ANALYSIS OF RESULTS OF OPERATIONS
The following analyses compare the Partnership's results of operations for the
three months ended March 31, 1998 (1998 three-month period) with the three
months ended March 31, 1997 (1997 three-month period); the six months ended
March 31, 1998 (1998 six-month period) with the six months ended March 31, 1997
(1997 six-month period); and the twelve months ended March 31, 1998 (1998
twelve-month period) with the twelve months ended March 31, 1997 (1997
twelve-month period). AmeriGas Finance Corp. has nominal assets and does not
conduct any operations. Accordingly, a discussion of the results of operations
and financial condition and liquidity of AmeriGas Finance Corp. is not
presented.
1998 THREE-MONTH PERIOD COMPARED WITH 1997 THREE-MONTH PERIOD
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Increase
Three Months Ended March 31, 1998 1997 (Decrease)
- -----------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 265.7 267.6 (1.9) (.7)%
Wholesale 60.8 73.5 (12.7) (17.3)%
-------- ------- ------
326.5 341.1 (14.6) (4.3)%
======== ======= ======
Revenues:
Retail propane $ 260.3 $ 308.5 $(48.2) (15.6)%
Wholesale propane 27.3 44.1 (16.8) (38.1)%
Other 18.6 18.5 .1 .5%
-------- ------- ------
$ 306.2 $ 371.1 $(64.9) (17.5)%
======== ======= ======
Total margin $ 159.4 $ 155.3 $ 4.1 2.6%
EBITDA (a) $ 75.1 $ 81.3 $ (6.2) (7.6)%
Operating income $ 59.4 $ 65.8 $ (6.4) (9.7)%
- -----------------------------------------------------------------------------------------------------------
</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.
Retail volumes of propane sold during the 1998 three-month period decreased
slightly from volumes sold during the prior-year period. Based upon degree day
information provided by the National Oceanic and Atmospheric Administration
(NOAA) for 335 airports in the continental U.S., weather during the 1998
three-month period was 14% warmer than normal and 8% warmer
-10-
<PAGE> 13
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
than last year. Wholesale volumes of propane sold were lower in the 1998
three-month period due in part to the warmer weather.
Total revenues from retail propane sales decreased $48.2 million during the
1998 three-month period reflecting a $46.0 million decrease as a result of
lower average retail propane selling prices and a $2.2 million decrease as a
result of lower volumes sold. The lower average retail propane selling prices
reflect lower 1998 three-month period propane product costs. Wholesale propane
revenues decreased $16.8 million due to lower average wholesale propane selling
prices and the previously mentioned lower wholesale volumes sold.
Total margin increased $4.1 million in the 1998 three-month period as declining
propane product costs resulted in slightly higher retail unit margins. Although
wholesale volumes were lower in the 1998 three-month period, such decrease did
not have a material impact on the change in total margin because wholesale unit
margins are typically very small.
The decrease in EBITDA and operating income during the 1998 three-month period
reflects a $5.8 million decrease in miscellaneous income and slightly higher
operating expenses partially offset by higher total margin. Miscellaneous
income in the 1997 three-month period includes $4.7 million of income from the
sale of the Partnership's 50% interest in Atlantic Energy which owns and
operates a liquefied petroleum gas storage terminal in Virginia, higher finance
charge income and higher income from sales of fixed assets. Operating expenses
increased $4.5 million reflecting, among other things, higher employee
compensation and benefit expenses and increased equipment refurbishment and
maintenance expenses due in large part to acquisitions and new business
development activities.
Interest expense was $16.9 million in both the 1998 three-month period and the
1997 three-month period. An increase in interest expense on higher amounts
outstanding under the Partnership's Acquisition Facility was offset by a
decrease in Revolving Credit Facility interest as a result of lower required
borrowings to finance working capital. Working capital borrowings were higher
in the prior-year period due to an increase in inventory and receivable
balances attributable to higher propane product costs.
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<PAGE> 14
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
1998 SIX-MONTH PERIOD COMPARED WITH 1997 SIX-MONTH PERIOD
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Increase
Six Months Ended March 31, 1998 1997 (Decrease)
- --------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 514.3 519.3 (5.0) (1.0)%
Wholesale 143.5 142.1 1.4 1.0%
-------- -------- --------
657.8 661.4 (3.6) (.5)%
======== ======== ========
Revenues:
Retail propane $ 500.6 $ 594.4 $ (93.8) (15.8)%
Wholesale propane 64.6 90.1 (25.5) (28.3)%
Other 43.9 46.8 (2.9) (6.2)%
-------- -------- --------
$ 609.1 $ 731.3 $ (122.2) (16.7)%
======== ======== ========
Total margin $ 299.1 $ 310.7 $ (11.6) (3.7)%
EBITDA (a) $ 134.7 $ 154.5 $ (19.8) (12.8)%
Operating income $ 103.4 $ 123.5 $ (20.1) (16.3)%
- --------------------------------------------------------------------------------------------------------
</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.
Retail volumes of propane sold were slightly lower during the 1998 six-month
period. Based upon degree day information provided by NOAA for 335 airports in
the continental U.S., weather during the peak heating-season months November
1997 through March 1998 was 9% warmer than normal and 5% warmer than the prior
year. In particular, the period comprising January and February 1998 was the
warmest in the last 104 years.
Total revenues from retail propane sales decreased $93.8 million during the
1998 six-month period reflecting an $88.1 million decrease as a result of lower
average retail propane selling prices and a $5.7 million decrease as a result
of the lower retail volumes sold. The decrease in wholesale propane revenues
is due to lower 1998 six-month period selling prices. The lower average retail
and wholesale selling prices resulted from significantly lower propane product
costs. The decline in other revenues reflects in large part lower terminal and
storage revenues and lower appliance sales revenues.
-12-
<PAGE> 15
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Total margin declined $11.6 million in the 1998 six-month period reflecting the
impact of significantly lower average retail unit margins early in the 1998
six-month period partially offset by slightly higher unit margins during the
later half of the period. Unit margins in the first half of the prior-year
period benefitted from fuel supply and pricing strategies that were especially
effective during the unique market conditions (characterized by a rapid
increase in propane spot-market prices) that existed at the time. During the
second half of the 1998 six-month period, declining propane product costs
resulted in slightly higher retail unit margins.
The decrease in operating income and EBITDA during the 1998 six-month period
principally reflects the decrease in total propane margin, lower miscellaneous
income and slightly higher operating expenses. Miscellaneous income in the
prior-year six-month period includes $4.7 million from the sale of Atlantic
Energy as well as higher customer finance charges and income from sales of
fixed assets. Operating expenses increased $1.8 million reflecting higher
employee compensation and benefit expenses and an increase in equipment
refurbishment and maintenance expense due in large part to acquisitions and new
business development activities partially offset by reduced workers'
compensation expense reflecting the benefits of safety improvement programs
initiated in 1996.
Interest expense was $33.8 million during the 1998 six-month period compared
with $33.6 million in the prior-year period reflecting increased interest
expense on the Partnership's Acquisition Facility from higher amounts
outstanding.
-13-
<PAGE> 16
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
1998 TWELVE-MONTH PERIOD COMPARED WITH 1997 TWELVE-MONTH PERIOD
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Increase
Twelve Months Ended March 31, 1998 1997 (Decrease)
- --------------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 802.4 815.1 (12.7) (1.6)%
Wholesale 220.0 236.6 (16.6) (7.0)%
--------- ---------- --------
1,022.4 1,051.7 (29.3) (2.8)%
========= ========== ========
Revenues:
Retail propane $ 774.4 $ 866.2 $ (91.8) (10.6)%
Wholesale propane 100.5 134.0 (33.5) (25.0)%
Other 80.8 83.7 (2.9) (3.5)%
--------- ---------- --------
$ 955.7 $ 1,083.9 $ (128.2) (11.8)%
========= ========== ========
Total margin $ 465.9 $ 465.7 $ .2 -%
EBITDA (a) $ 152.5 $ 157.4 $ (4.9) (3.1)%
Operating income $ 90.3 $ 95.7 $ (5.4) (5.6)%
- --------------------------------------------------------------------------------------------------------
</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.
Retail and wholesale volumes of propane sold decreased in the 1998 twelve-month
period principally reflecting the effects of warmer temperatures. Based upon
degree day information provided by NOAA for 335 airports in the continental
U.S., weather during the peak heating season months of November 1997 through
March 1998 averaged 9% warmer than normal and 5% warmer than the prior year.
Total revenues from retail propane sales declined $91.8 million reflecting a
$78.3 million decrease as a result of lower average retail propane selling
prices and a $13.5 million decrease as a result of the lower retail volumes
sold. The decrease in wholesale propane revenues reflects a $24.1 million
decrease as a result of lower average selling prices and a $9.4 million
decrease as a result of the lower volumes. The higher selling prices in the
prior-year period were a result of significantly higher propane spot-market
prices particularly during the three months ended December 31, 1996.
Total margin in the 1998 twelve-month period was comparable with the prior-year
period,
-14-
<PAGE> 17
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
notwithstanding the lower retail and wholesale volumes sold, reflecting
slightly higher average retail unit margins. Total margin from other sales and
services during the 1998 twelve-month period were virtually unchanged from the
prior-year period.
Although total margin during the 1998 twelve-month period was comparable with
the prior-year period, EBITDA and operating income declined principally as a
result of lower miscellaneous income. Miscellaneous income in the 1997
twelve-month period includes $4.7 million of income from the sale of the
Partnership's 50% interest in Atlantic Energy. Miscellaneous income in the
prior-year period also includes higher interest income and income from sales of
fixed assets. Operating expenses were slightly lower during the 1998
twelve-month period principally as a result of lower required self-insurance
reserves associated with general and automobile liability and workers'
compensation costs.
Interest expense was $65.9 million in the twelve months ended March 31, 1998
compared with $65.2 million in the prior-year period. The increase reflects
higher interest expense on the Partnership's Revolving Credit and Acquisition
facilities principally due to higher amounts outstanding.
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION
The Partnership's debt outstanding at March 31, 1998 totaled $701.7 million
compared with $718.7 million at September 30, 1997. The decrease is principally
a result of $28 million in net repayments under the Revolving Credit Facility
partially offset by $13 million of borrowings under the Acquisition Facility.
The Partnership's debt outstanding at March 31, 1997 totaled $697.1 million.
At March 31, 1998 and 1997 there were no amounts outstanding under the
Revolving Credit Facility.
During the six months ended March 31, 1998, the Partnership declared and paid
the MQD of 55 cents on all units for the quarters ended September 30, 1997 and
December 31, 1997. The MQD for the quarter ended March 31, 1998 will be paid
on May 18, 1998 to holders of record on May 8, 1998 of all Common and
Subordinated units.
The ability of the Partnership to continue to pay the full MQD on all of its
units will depend upon a number of factors including the level of Partnership
earnings, the cash needs of the Partnership's operations (including cash needed
for maintenance and growth capital), and the Partnership's ability to finance
externally such cash needs. The Partnership's EBITDA during the 1998 six-month
period was $19.8 million lower than during the 1997 six-month period. Given
the level of EBITDA to date, it is unlikely the Partnership will be able to
fund solely from cash generated from operations during fiscal 1998 payment of
the full distribution on its Subordinated Units for the remainder of calendar
year 1998. While the Partnership expects to have sufficient borrowing capacity
to fund all of its cash needs (including amounts for growth capital and the
full
-15-
<PAGE> 18
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
distribution on the Subordinated Units) during this period, no assurance can be
given that the General Partner will elect to utilize such borrowing capacity to
fund the full distribution on the Subordinated Units. The Partnership expects
to generate sufficient cash from operations during fiscal 1998 to continue to
fund the full distribution on the Common Units.
CASH FLOWS
Cash and cash equivalents totaled $16.0 million at March 31, 1998 compared with
$4.1 million at September 30, 1997 and $39.0 million at March 31, 1997. Due to
the seasonal nature of the propane business, cash flows from operating
activities are generally strongest during the second and third fiscal quarters
of the Partnership when customers pay for propane purchased during the heating
season and are typically at their lowest levels during the first and fourth
fiscal quarters. Accordingly, cash flows from operations during the six months
ended March 31, 1998 are not necessarily indicative of cash flows to be
expected for a full year.
OPERATING ACTIVITIES. Cash provided by operating activities was $96.0 million
during the six months ended March 31, 1998 compared with $99.2 million in the
comparable prior-year period. Cash flow from operations before changes in
working capital was $102.1 million in the six months ended March 31, 1998
compared with $119.5 million during the six months ended March 31, 1997
reflecting a decrease in the Partnership's operating results. Changes in
operating working capital during the six months ended March 31, 1998 required
$6.1 million of operating cash flow principally from a $24.9 million seasonal
increase in accounts receivable and a $16.8 million decrease in accounts
payable and customer deposits partially offset by a $33.9 million decrease in
inventories and prepaid propane purchases. During the six months ended March
31, 1997, changes in operating working capital required $20.3 million of
operating cash flow.
INVESTING ACTIVITIES. Cash expenditures for property, plant and equipment
totaled $15.4 million (including maintenance capital expenditures of $4.4
million) during the six months ended March 31, 1998 compared with $11.7 million
(including maintenance capital expenditures of $3.9 million) in the prior-year
period. Proceeds from disposals of assets totaled $1.5 million during the six
months ended March 31, 1998 compared with $8.4 million during the six months
ended March 31, 1997 which included proceeds from the sale of Atlantic Energy.
During the six months ended March 31, 1998, the Partnership acquired several
propane businesses for $5.6 million in cash. In conjunction with one
acquisition, the Partnership issued 45,586 Common Units to the General Partner
having a fair value of $1.2 million. During the six months ended March 31,
1997, the Partnership made acquisition-related cash payments of $2.7 million.
FINANCING ACTIVITIES. During each of the six-month periods ended March 31, 1998
and 1997, AmeriGas Partners declared and paid the MQD on all units and the
general partner interest for the quarters ended September 30, 1997 and December
31, 1997. In addition, during each of the six-month periods ended March 31,
1998 and 1997, the Operating Partnership distributed $.5 million to the General
Partner in respect of the General Partner's 1.0101% interest in the Operating
Partnership.
-16-
<PAGE> 19
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
During the six months ended March 31, 1998 and 1997, the Partnership had net
repayments under its working capital facilities of $28 million and $15 million,
respectively. The Partnership borrowed $13 million under its Acquisition
Facility during the six months ended March 31, 1998 relating to acquisitions
made prior to fiscal 1998. The Partnership borrowed $7 million under the
Acquisition Facility during the 1997 six-month period. During the six months
ended March 31, 1998, the Partnership made long-term debt repayments of $2.5
million (including the repayment of $1.2 million of debt assumed in conjunction
with an acquisition) compared with $1.4 million in the prior-year period.
YEAR 2000 MATTERS
The Partnership, in conjunction with outside consultants, has conducted a
detailed assessment of its critical computer-based systems in order to evaluate
its Year 2000 "Y2K" exposure. The 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,
resulting in miscalculations and possible computer system failures. The
Partnership has also identified and is contacting major vendors on which it
depends for products or services in order to assess their Y2K compliance
readiness and, if necessary, to develop appropriate contingency plans.
The Partnership has a number of information initiatives under way which include
the installation of integrated financial system software that is Y2K compliant.
In addition, the Partnership, in conjunction with consultants, has begun
modifying its computer-based systems that are not currently Y2K compliant. The
Partnership anticipates that its critical computer-based systems will be Y2K
compliant by March 31, 1999.
The Partnership does not expect the costs to modify its computer-based systems,
which will be expensed as incurred, will have a material effect on the
Partnership's results of operations or cash flows. However, in the event that
the Partnership or its major suppliers experience disruptions due to Y2K
issues, the Partnership's operations could be adversely affected.
-17-
<PAGE> 20
AMERIGAS PARTNERS, L.P.
PART II OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Martha B. Lindsay was elected Vice President-Finance and Chief
Financial Officer of AmeriGas Propane, Inc., the General Partner of AmeriGas
Partners, L.P., effective January 5, 1998. She was also elected Vice
President-Finance and Chief Financial Officer of AmeriGas Finance Corp.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
27.1 Financial Data Schedule of AmeriGas Partners, L.P.
27.2 Financial Data Schedule of AmeriGas Finance Corp.
(b) No Current Report on Form 8-K was filed by either AmeriGas
Partners, L.P. or AmeriGas Finance Corp. during the fiscal
quarter ended March 31, 1998.
-18-
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by
the undersigned thereunto duly authorized.
AmeriGas Partners, L.P.
---------------------------------------
(Registrant)
By: AmeriGas Propane, Inc.,
as General Partner
Date: May 13, 1998 By: Martha B. Lindsay
- ------------------- ---------------------------------------
Martha B. Lindsay
Vice President - Finance
and Chief Financial Officer
By: Richard R. Eynon
---------------------------------------
Richard R. Eynon
Controller and Chief Accounting Officer
AmeriGas Finance Corp.
---------------------------------------
(Registrant)
Date: May 13, 1998 By: Martha B. Lindsay
- ------------------- ---------------------------------------
Martha B. Lindsay
Vice President - Finance
and Chief Financial Officer
By: Richard R. Eynon
---------------------------------------
Richard R. Eynon
Controller
-19-
<PAGE> 22
AMERIGAS PARTNERS, L.P.
EXHIBIT INDEX
27.1 Financial Data Schedule of AmeriGas Partners, L.P.
27.2 Financial Data Schedule of AmeriGas Finance Corp.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet and Statement of Operations of AmeriGas
Partners, L.P., and subsidiaries as of and for the six months ended March 31,
1998 and is qualified in its entirety by reference to such financial statements
included in AmeriGas Partners' quarterly report on Form 10-Q for the quarter
ended March 31, 1998.
</LEGEND>
<CIK> 0000932628
<NAME> AMERIGAS PARTNERS, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 16,019
<SECURITIES> 0
<RECEIVABLES> 110,085
<ALLOWANCES> 9,619
<INVENTORY> 53,005
<CURRENT-ASSETS> 181,188
<PP&E> 630,202
<DEPRECIATION> 184,349
<TOTAL-ASSETS> 1,308,143
<CURRENT-LIABILITIES> 136,276
<BONDS> 695,195
0
0
<COMMON> 0
<OTHER-SE> 420,945
<TOTAL-LIABILITY-AND-EQUITY> 1,308,143
<SALES> 609,105
<TOTAL-REVENUES> 609,105
<CGS> 309,958
<TOTAL-COSTS> 309,958
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,814
<INCOME-PRETAX> 69,608
<INCOME-TAX> 127
<INCOME-CONTINUING> 68,727
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,727
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 1.62
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet of AmeriGas Finance Corp. as of March 31, 1998 and is qualified in its
entirety by reference to such Balance Sheet included in AmeriGas Partners'
quarterly report on Form 10-Q for the quarter ended March 31, 1998.
</LEGEND>
<CIK> 0000945792
<NAME> AMERIGAS FINANCE CORP.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<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>
