<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 December 31, 1997
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 January 31, 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 December 31, 1997,
September 30, 1997 and December 31, 1996 1
Condensed Consolidated Statements of Operations for the three
and twelve months ended December 31, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows for the three and
twelve months ended December 31, 1997 and 1996 3
Condensed Consolidated Statement of Partners' Capital for the
three months ended December 31, 1997 4
Notes to Condensed Consolidated Financial Statements 5 - 7
AmeriGas Finance Corp.
Balance Sheets as of December 31, 1997 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 - 15
PART II OTHER INFORMATION
Item 2. Changes in Securities 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
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<PAGE> 3
AMERIGAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1997 1997 1996
------------ ------------- ------------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 24,375 $ 4,069 $ 23,689
Accounts receivable (less allowances for doubtful accounts
of $8,072, $7,875, and $7,265, respectively) 118,331 78,341 152,313
Inventories 78,746 64,933 93,767
Prepaid expenses and other current assets 11,721 35,748 23,585
---------- ---------- ----------
Total current assets 233,173 183,091 293,354
Property, plant and equipment (less accumulated depreciation and
amortization of $175,832, $167,385, and $147,455, respectively) 444,727 444,677 451,343
Intangible assets (less accumulated amortization of $122,831,
$116,557, and $98,343, respectively) 672,123 677,116 685,959
Other assets 13,740 13,777 14,578
---------- ---------- ----------
Total assets $1,363,763 $1,318,661 $1,445,234
========== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Current liabilities:
Current maturities of long-term debt $ 6,544 $ 6,420 $ 7,098
Bank loans 75,000 28,000 70,000
Accounts payable - trade 53,544 50,055 79,590
Accounts payable - related parties 3,396 4,533 3,200
Other current liabilities 70,177 91,861 81,527
---------- ---------- ----------
Total current liabilities 208,661 180,869 241,415
Long-term debt 696,263 684,308 691,074
Other noncurrent liabilities 51,784 50,904 48,048
Commitments and contingencies
Minority interest 5,115 5,043 5,694
Partners' capital 401,940 397,537 459,003
---------- ---------- ----------
Total liabilities and partners' capital $1,363,763 $1,318,661 $1,445,234
========== ========== ==========
</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 Twelve Months Ended
December 31, December 31,
---------------------------- ----------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Propane $ 277,523 $ 331,894 $ 939,829 $ 1,000,055
Other 25,400 28,222 80,803 87,490
----------- ----------- ----------- -----------
302,923 360,116 1,020,632 1,087,545
----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales - propane 151,633 191,925 523,667 570,120
Cost of sales - other 11,527 12,783 35,157 41,595
Operating and administrative expenses 80,867 83,607 313,652 324,083
Depreciation and amortization 15,582 15,500 62,086 61,659
Miscellaneous income, net (723) (1,398) (10,641) (6,949)
----------- ----------- ----------- -----------
258,886 302,417 923,921 990,508
----------- ----------- ----------- -----------
Operating income 44,037 57,699 96,711 97,037
Interest expense (16,950) (16,706) (65,902) (63,925)
----------- ----------- ----------- -----------
Income before income taxes 27,087 40,993 30,809 33,112
Income tax (expense) benefit (340) (608) 88 91
Minority interest (296) (434) (417) (441)
----------- ----------- ----------- -----------
Net income $ 26,451 $ 39,951 $ 30,480 $ 32,762
=========== =========== =========== ===========
General partner's interest in net income $ 265 $ 400 $ 305 $ 328
=========== =========== =========== ===========
Limited partners' interest in net income $ 26,186 $ 39,551 $ 30,175 $ 32,434
=========== =========== =========== ===========
Income per limited partner unit $ 0.63 $ 0.95 $ 0.72 $ 0.78
=========== =========== =========== ===========
Average limited partner units outstanding (thousands) 41,881 41,731 41,836 41,728
=========== =========== =========== ===========
</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>
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------------- --------------------------
1997 1996 1997 1996
--------- -------------- --------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 26,451 $ 39,951 $ 30,480 $ 32,762
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 15,582 15,500 62,086 61,659
Other, net 1,687 1,570 4,056 (2,714)
--------- --------- --------- ---------
43,720 57,021 96,622 91,707
Net change in:
Accounts receivable (41,131) (67,743) 28,123 (32,942)
Inventories and prepaid propane purchases 8,064 (10,593) 15,547 (26,858)
Accounts payable 1,846 33,345 (26,398) 30,355
Other current assets and liabilities (19,349) (21,597) (1,012) 23
--------- --------- --------- ---------
Net cash provided (used) by operating activities (6,850) (9,567) 112,882 62,285
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (6,987) (6,553) (24,904) (21,260)
Proceeds from disposals of assets 667 743 10,537 4,949
Acquisition of businesses, net of cash acquired (1,388) (918) (12,096) (21,304)
--------- --------- --------- ---------
Net cash used by investing activities (7,708) (6,728) (26,463) (37,615)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (23,246) (23,184) (92,923) (92,736)
Minority interest activity (237) (237) (1,024) (1,051)
Increase (decrease) in bank loans 47,000 55,000 (2,000) 52,000
Issuance of long-term debt 13,000 7,000 14,131 44,001
Repayment of long-term debt (1,653) (717) (3,943) (10,778)
Capital contribution from General Partner - - 26 -
--------- --------- --------- ---------
Net cash provided (used) by financing activities 34,864 37,862 (85,733) (8,564)
--------- --------- --------- ---------
Cash and cash equivalents increase $ 20,306 $ 21,567 $ 686 $ 16,106
========= ========= ========= =========
CASH AND CASH EQUIVALENTS:
End of period $ 24,375 $ 23,689 $ 24,375 $ 23,689
Beginning of period 4,069 2,122 23,689 7,583
--------- --------- --------- ---------
Increase $ 20,306 $ 21,567 $ 686 $ 16,106
========= ========= ========= =========
</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 13,813 12,373 265 26,451
Distributions (12,134) (10,880) (232) (23,246)
----------- ----------- ----------- --------- --------- --------
BALANCE DECEMBER 31, 1997 22,105,993 19,782,146 $211,130 $ 186,803 $ 4,007 $401,940
=========== =========== =========== ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<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
A distribution of 55 cents per limited partner unit (the "Minimum
Quarterly Distribution" or "MQD") for the quarter ended September 30, 1997
was paid on November 18, 1997 on all Common and Subordinated units. On
January 26, 1998, the Partnership declared the MQD on all Common and
Subordinated units for the quarter ended December 31, 1997, payable
February 18, 1998 to holders of record on February 10, 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 or otherwise reasonably incurred by the
General Partner in connection with the Partnership's business. These costs
totaled $49,860 and $47,301 during the three months ended December 31,
1997 and 1996, respectively. During the twelve months ended December 31,
1997 and 1996, such expenses totaled $179,769 and $176,165, respectively.
In addition, UGI provides certain financial and administrative services to
the General Partner. UGI bills the General Partner for these direct and
indirect corporate expenses and the General Partner is reimbursed by the
Partnership for these expenses. During the three months ended December 31,
1997 and 1996, such corporate expenses totaled $1,452 and $1,481,
respectively. During the twelve months ended December 31, 1997 and 1996,
such corporate expenses totaled $6,528 and $7,193, respectively.
On October 14, 1997, the General Partner transferred to the Partnership
certain net assets of a corporation which had been acquired by merger by
AmeriGas, Inc. on the same date. As consideration for such assets and the
retention by the General Partner of certain associated income tax
liabilities, AmeriGas Partners issued 45,586 Common Units to the General
Partner having a fair value of $1,211.
4. 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 $64,000. 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
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<PAGE> 9
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
obligations without the Partnership's 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>
December 31, September 30,
1997 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.
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<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 December 31, 1997 (1997 three-month period) with the three
months ended December 31, 1996 (1996 three-month period) and the twelve months
ended December 31, 1997 (1997 twelve-month period) with the twelve months ended
December 31, 1996 (1996 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
is not presented.
1997 THREE-MONTH PERIOD COMPARED WITH 1996 THREE-MONTH PERIOD
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Increase
Three Months Ended December 31, 1997 1996 (Decrease)
- ------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 248.6 251.7 (3.1) (1.2)%
Wholesale 82.7 68.6 14.1 20.6%
------ ----- ------
331.3 320.3 11.0 3.4%
------ ----- ------
Degree days - % colder (warmer)
than normal (a) 4.3% (1.6)% - -
Revenues:
Retail propane $240.2 $285.9 $(45.7) (16.0)%
Wholesale propane 37.3 46.0 (8.7) (18.9)%
Other 25.4 28.2 (2.8) (9.9)%
------ ------ ------
$302.9 $360.1 $(57.2) (15.9)%
------ ------ ------
Total margin $139.8 $155.4 $(15.6) (10.0)%
EBITDA (b) $ 59.6 $ 73.2 $(13.6) (18.6)%
Operating income $ 44.0 $ 57.7 $(13.7) (23.7)%
- ---------------------------------------------------------------------------------
</TABLE>
(a) Based on the weighted average deviation from average degree days during
the 30-year period 1961-1990, as contained in the National Weather Service
Climate Analysis Center database, for geographic areas in which AmeriGas
Partners operates.
(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
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<PAGE> 13
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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 1997 three-month period were slightly
lower than in the prior-year period. Wholesale volumes of propane sold were
higher in the 1997 three-month period due to increased sales of low margin
storage inventories.
Total revenues from retail propane sales decreased $45.7 million during the 1997
three-month period reflecting a $42.2 million decrease as a result of lower
average retail propane selling prices and a $3.5 million decrease resulting from
the lower volumes sold. Unlike the prior-year period when the Partnership's
higher propane prices reflected significantly higher propane product costs,
selling prices in the 1997 three-month period reflected significantly lower
propane product costs. The spot price of propane at Mont Belvieu, Texas, a major
U.S. storage and distribution hub, increased dramatically during the three
months ended December 31, 1996, rising to a quarterly high of 75 cents per
gallon on December 16, 1996. In contrast to spot market conditions existing
during the 1996 three-month period, spot prices at Mont Belvieu during the 1997
three-month period declined closing at a price of 32.5 cents a gallon on
December 31, 1997 compared with 40 cents a gallon on September 30, 1997.
Notwithstanding the higher 1997 three-month period wholesale volumes, wholesale
propane revenues decreased $8.7 million reflecting lower average wholesale
propane selling prices. Other revenues decreased $2.8 million in the 1997
three-month period due in part to lower appliance sales revenues.
Total margin decreased $15.6 million in the 1997 three-month period principally
reflecting the impact of lower average retail unit margins and, to a much lesser
extent, the reduced retail volumes of propane sold. Unit margins were lower in
the 1997 three-month period than in the prior-year period which benefitted from
fuel supply and pricing strategies that were especially effective as a result of
the unique market conditions existing at the time. Although the Partnership's
propane product costs were significantly higher in the 1996 three-month period,
the Partnership benefitted from favorable fixed-price supply arrangements and,
to a lesser extent, derivative commodity instruments.
The decrease in operating income and EBITDA during the 1997 three-month period
principally reflects the impact of the lower total margin and a decrease in
miscellaneous income partially offset by lower operating expenses. Total
operating expenses were $80.9 million in the 1997 three-month period compared
with the $83.6 million in the 1996 three-month period. The decrease in operating
expenses is primarily a result of a reduction in workers' compensation expense
reflecting the benefit of safety improvement programs initiated in 1996.
Miscellaneous income in the three months ended December 31, 1997 was $.7 million
less than in the prior-year period due principally to lower interest income.
Interest expense was $17.0 million in the 1997 three-month period compared with
$16.7 million in the prior-year period reflecting increased interest expense on
the Partnership's Revolving Credit
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<PAGE> 14
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
and Acquisition facilities principally as a result of higher amounts of debt
outstanding.
1997 TWELVE-MONTH PERIOD COMPARED WITH 1996 TWELVE-MONTH PERIOD
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Increase
Twelve Months Ended December 31, 1997 1996 (Decrease)
- -------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 804.3 862.8 (58.5) (6.8)%
Wholesale 232.7 259.1 (26.4) (10.2)%
-------- -------- ------
1,037.0 1,121.9 (84.9) (7.6)%
-------- -------- ------
Degree days - % colder (warmer)
than normal (a) (3.1)% 1.0% - -
Revenues:
Retail propane $ 822.5 $ 863.0 $(40.5) (4.7)%
Wholesale propane 117.3 137.0 (19.7) (14.4)%
Other 80.8 87.5 (6.7) (7.7)%
-------- -------- ------
$1,020.6 $1,087.5 $(66.9) (6.2)%
-------- -------- ------
Total margin $ 461.8 $ 475.8 $(14.0) (2.9)%
EBITDA (b) $ 158.8 $ 158.7 $ .1 .1%
Operating income $ 96.7 $ 97.0 $ (.3) (.3)%
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Based on the weighted average deviation from average degree days
during the 30-year period 1961-1990, as contained in the National
Weather Service Climate Analysis Center database, for geographic
areas in which AmeriGas Partners operates.
(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.
Retail volumes of propane sold decreased in the 1997 twelve-month period
principally reflecting the effects of warmer heating-season weather during the
period January to March 1997 and price-induced customer conservation efforts.
Wholesale volumes of propane sold were lower in the twelve months ended December
31, 1997 principally due to reduced low-margin sales of storage inventories.
-12-
<PAGE> 15
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Total revenues from retail propane sales decreased $40.5 million reflecting a
$58.5 million decrease as a result of the lower volumes sold partially offset by
an $18.0 million increase from higher average retail propane selling prices.
Wholesale propane revenues decreased $19.7 million in the 1997 twelve-month
period reflecting the lower wholesale volumes sold. Other revenues decreased
$6.7 million principally reflecting lower hauling and appliance sales revenues.
Total margin was lower in the 1997 twelve-month period principally reflecting
the impact of the reduced volumes of propane sold partially offset by higher
average retail unit margins. Average unit margins early in the 1996 twelve-month
period were lower reflecting, in part, the impact of certain sales and marketing
programs.
Although total propane margin was lower in the 1997 twelve-month period, EBITDA
and operating income were virtually unchanged from the prior year as a result of
lower operating expenses and higher miscellaneous income. Total operating
expenses were $313.7 million in the 1997 twelve-month period compared with
$324.1 million in the 1996 twelve-month period. The 1996 twelve-month period
operating expenses are net of $4.4 million from a refund of insurance premium
deposits and $3.3 million from a reduction in accrued environmental costs
recorded in the quarter ended March 31, 1996. The $18.1 million decrease in
operating expenses during the twelve months ended December 31, 1997, after
adjusting for these items, primarily reflects lower required accruals for
general and automobile liability and workers' compensation costs and lower
customer equipment repairs and maintenance expense as well as reduced sales and
marketing expenses and lower fees for professional services. Miscellaneous
income increased $3.7 million in the 1997 twelve-month period principally from
$4.7 million of income from the sale of the Partnership's 50% interest in
Atlantic Energy, Inc., which owns and operates a liquefied petroleum gas storage
terminal in Chesapeake, Virginia.
Interest expense was $65.9 million in the twelve months ended December 31, 1997
compared with $63.9 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.
-13-
<PAGE> 16
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION
The Partnership's debt outstanding at December 31, 1997 totaled $777.8 million
compared with $718.7 million at September 30, 1997. The increase is principally
a result of a $47.0 million seasonal increase in borrowings under the Operating
Partnership's Revolving Credit Facility and a $13.0 million increase in
borrowings under its Acquisition Facility.
During the three months ended December 31, 1997, the Partnership declared and
paid the MQD of 55 cents on all units for the quarter ended September 30, 1997.
The MQD for the quarter ended December 31, 1997 will be paid on February 18,
1998 to holders of record on February 10, 1998 of all Common and Subordinated
units.
CASH FLOWS
Cash and cash equivalents totaled $24.4 million at December 31, 1997 compared
with $4.1 million at September 30, 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 three months ended December 31, 1997 are not
necessarily indicative of cash flows to be expected for a full year.
OPERATING ACTIVITIES. Cash used by operating activities was $(6.9) million
during the three months ended December 31, 1997 compared with $(9.6) million in
the comparable prior-year period. Cash flow from operations before changes in
working capital was $43.7 million in the three months ended December 31, 1997
compared with $57.0 million during the three months ended December 31, 1996
reflecting a decrease in the Partnership's net income. Changes in operating
working capital during the three months ended December 31, 1997 required $50.6
million of operating cash flow principally from a $41.1 million seasonal
increase in accounts receivable and a $17.2 million net use of cash from changes
in accrued interest and employee benefits partially offset by an $8.1 million
decrease in inventories and prepaid propane purchases. During the three months
ended December 31, 1996, changes in operating working capital required $66.6
million of operating cash flow.
INVESTING ACTIVITIES. Cash expenditures for property, plant and equipment
totaled $7.0 million (including maintenance capital expenditures of $3.6
million) during the three months ended December 31, 1997 compared with $6.6
million (including maintenance capital expenditures of $2.7 million) in the
prior-year period. Proceeds from disposals of assets totaled $.7 million during
both the three months ended December 31, 1997 and 1996. During the three months
ended December 31, 1997, the Partnership acquired several propane businesses for
$1.4 million in cash. In conjunction with one such
-14-
<PAGE> 17
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
acquisition, the Partnership issued 45,586 Common Units to the General Partner
having a fair value of $1.2 million. During the three months ended December 31,
1996, the Partnership made acquisition-related cash payments of $.9 million.
FINANCING ACTIVITIES. During each of the three-month periods ended December 31,
1997 and 1996, AmeriGas Partners declared and paid the MQD on all units and the
general partner interest for the quarters ended September 30, 1997 and 1996,
respectively. In addition, during each of the three-month periods ended December
31, 1997 and 1996, the Operating Partnership distributed $.2 million to the
General Partner in respect of the General Partner's 1.0101% interest in the
Operating Partnership. In order to meet seasonal working capital needs, during
the three months ended December 31, 1997 the Operating Partnership borrowed $47
million under its Revolving Credit Facility compared with $55 million during the
same period in the prior year. The Partnership also borrowed $13 million under
its Acquisition Facility during the three months ended December 31, 1997
relating to acquisitions made prior to fiscal 1998. There were borrowings of $7
million under the Acquisition Facility during the same period last year. During
the three months ended December 31, 1997, the Partnership made repayments of
long-term debt of $1.7 million (including the repayment of $1.2 million of debt
assumed in conjunction with an acquisition) compared with $.7 million in the
prior-year period.
-15-
<PAGE> 18
AMERIGAS PARTNERS, L.P.
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(c) As of October 14, 1997, AmeriGas Partners, L.P. ("APLP") exchanged
45,586 Common Units ("Common Units"), representing limited
partnership interests in APLP, for certain net assets ("Target
Assets") of a corporation ("Target") acquired by AmeriGas, Inc.
("AmeriGas"). The Target Assets, which were valued at
approximately $1.2 million, were contributed by AmeriGas to
AmeriGas Propane, Inc., the general partner of APLP. AmeriGas
Propane transferred the Target Assets to APLP in exchange for the
Common Units. APLP's issuance of the Common Units was made
pursuant to the exemption from registration provided under Section
4(2) of the Securities Act of 1933, as amended, based upon the
sale of the subject securities in a privately negotiated
transaction to an accredited investor which is an affiliate of
APLP and which purchased the Common Units for investment without a
view to further distribution.
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 December 31, 1997.
-16-
<PAGE> 19
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: February 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: February 13, 1998 By: Martha B. Lindsay
- ------------------------ ---------------------------------------
Martha B. Lindsay
Vice President - Finance
and Chief Financial Officer
By: Richard R. Eynon
---------------------------------------
Richard R. Eynon
Controller
-17-
<PAGE> 20
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.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS OF AMERIGAS
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QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN
AMERIGAS PARTNERS' QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED DECEMBER
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
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<NAME> AMERIGAS FINANCE CORP.
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<PERIOD-TYPE> 3-MOS
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