<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 June 30, 1999
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 July 31, 1999, the registrants had units and shares of common stock
outstanding as follows:
AmeriGas Partners, L.P. - 32,078,293 Common Units
9,891,072 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 June 30, 1999,
September 30, 1998 and June 30, 1998 1
Condensed Consolidated Statements of Operations for the
three, nine and twelve months ended June 30, 1999 and
1998 2
Condensed Consolidated Statements of Cash Flows for the
nine and twelve months ended June 30, 1999 and 1998 3
Condensed Consolidated Statement of Partners' Capital for
the nine months ended June 30, 1999 4
Notes to Condensed Consolidated Financial Statements 5 - 8
AmeriGas Finance Corp.
Balance Sheets as of June 30, 1999 and September 30, 1998 9
Note to Balance Sheets 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11 - 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
</TABLE>
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AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
June 30, September 30, June 30,
1999 1998 1998
---------- ------------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,078 $ 8,873 $ 7,462
Accounts receivable (less allowances for doubtful accounts
of $7,048, $6,432, and $8,774, respectively) 58,187 58,778 59,327
Inventories 33,904 49,394 55,305
Prepaid expenses and other current assets 13,715 16,301 11,222
---------- ---------- ----------
Total current assets 113,884 133,346 133,316
Property, plant and equipment (less accumulated depreciation and
amortization of $227,313, $205,083, and $192,913, respectively) 438,493 442,042 442,751
Intangible assets (less accumulated amortization of $159,597,
$141,382, and $135,335, respectively) 613,925 629,355 634,991
Other assets 11,902 12,473 13,096
---------- ---------- ----------
Total assets $1,178,204 $1,217,216 $1,224,154
========== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current maturities of long-term debt $ 15,748 $ 6,068 $ 6,160
Bank loans 20,000 10,000 11,000
Accounts payable - trade 29,320 34,075 30,453
Accounts payable - related parties 2,037 6,799 3,939
Other current liabilities 67,962 103,355 70,523
---------- ---------- ----------
Total current liabilities 135,067 160,297 122,075
Long-term debt 706,242 702,926 693,896
Other noncurrent liabilities 46,665 50,069 49,631
Commitments and contingencies
Minority interest 3,939 4,049 4,638
Partners' capital 286,291 299,875 353,914
---------- ---------- ----------
Total liabilities and partners' capital $1,178,204 $1,217,216 $1,224,154
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 4
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Thousands of dollars, except per unit)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
---------------------- ---------------------- ----------------------
1999 1998 1999 1998 1999 1998
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Propane $ 142,490 $ 140,363 $ 638,911 $ 705,540 $ 767,998 $ 855,448
Other 19,454 17,843 65,742 61,771 83,722 80,757
--------- --------- --------- --------- --------- ---------
161,944 158,206 704,653 767,311 851,720 936,205
--------- --------- --------- --------- --------- ---------
Costs and expenses:
Cost of sales - propane 62,986 63,014 276,870 352,984 334,599 434,863
Cost of sales - other 7,947 6,695 27,386 26,683 33,750 35,247
Operating and administrative
expenses 78,306 74,829 250,636 241,269 329,587 319,005
Depreciation and amortization 16,330 15,830 48,352 47,081 64,496 62,720
Other income, net (1,373) (1,510) (3,377) (3,476) (646) (4,687)
--------- --------- --------- --------- --------- ---------
164,196 158,858 599,867 664,541 761,786 847,148
--------- --------- --------- --------- --------- ---------
Operating income (loss) (2,252) (652) 104,786 102,770 89,934 89,057
Interest expense (16,618) (16,234) (49,691) (50,048) (65,832) (66,104)
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes (18,870) (16,886) 55,095 52,722 24,102 22,953
Income tax (expense) benefit 231 199 110 72 35 241
Minority interest 162 142 (636) (612) (348) (339)
--------- --------- --------- --------- --------- ---------
Net income (loss) $ (18,477) $ (16,545) $ 54,569 $ 52,182 $ 23,789 $ 22,855
========= ========= ========= ========= ========= =========
General partner's interest in
net income (loss) $ (185) $ (165) $ 546 $ 522 $ 238 $ 229
========= ========= ========= ========= ========= =========
Limited partners' interest in
net income (loss) $ (18,292) $ (16,380) $ 54,023 $ 51,660 $ 23,551 $ 22,626
========= ========= ========= ========= ========= =========
Income (loss) per limited
partner unit $ (0.44) $ (0.39) $ 1.29 $ 1.23 $ 0.56 $ 0.54
========= ========= ========= ========= ========= =========
Average limited partner units
outstanding (thousands) 41,927 41,888 41,901 41,885 41,898 41,875
========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
Nine Months Ended Twelve Months Ended
June 30, June 30,
---------------------- ---------------------
1999 1998 1999 1998
---------- --------- -------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 54,569 $ 52,182 $ 23,789 $ 22,855
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 48,352 47,081 64,496 62,720
Other, net 2,644 (960) 779 1,852
--------- --------- -------- ---------
105,565 98,303 89,064 87,427
Net change in:
Accounts receivable (2,636) 14,997 (1,729) 17,547
Inventories and prepaid propane purchases 16,385 31,625 21,534 6,297
Accounts payable (9,338) (20,669) (2,856) (4,753)
Other current assets and liabilities (36,920) (16,813) (7,482) 89
--------- --------- -------- ---------
Net cash provided by operating activities 73,056 107,443 98,531 106,607
--------- --------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (25,804) (22,026) (35,355) (29,788)
Proceeds from disposals of assets 2,995 3,261 4,887 4,657
Acquisitions of businesses, net of cash acquired (3,242) (6,871) (4,447) (13,955)
--------- --------- -------- ---------
Net cash used by investing activities (26,051) (25,636) (34,915) (39,086)
--------- --------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (69,814) (69,788) (93,086) (93,035)
Minority interest activity (746) (751) (1,034) (1,039)
Increase (decrease) in bank loans 10,000 (17,000) 9,000 4,000
Issuance of long-term debt 75,770 13,000 85,770 13,000
Repayment of long-term debt (63,026) (3,887) (63,666) (4,203)
Capital contribution from General Partner 16 12 16 12
--------- --------- -------- ---------
Net cash used by financing activities (47,800) (78,414) (63,000) (81,265)
--------- --------- -------- ---------
Cash and cash equivalents increase (decrease) $ (795) $ 3,393 $ 616 $ (13,744)
========= ========= ======== =========
CASH AND CASH EQUIVALENTS:
End of period $ 8,078 $ 7,462 $ 8,078 $ 7,462
Beginning of period 8,873 4,069 7,462 21,206
--------- --------- -------- ---------
Increase (decrease) $ (795) $ 3,393 $ 616 $ (13,744)
========= ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 6
AMERIGAS PARTNERS, L.P.
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, 1998 22,105,993 19,782,146 $157,866 $139,012 $2,997 $299,875
Net income 26,266 27,757 546 54,569
Distributions (36,475) (32,641) (698) (69,814)
Issuance of common units in
connection with employee
incentive plans 81,226 1,645 16 1,661
Conversion of subordinated
units to common units 9,891,074 (9,891,074) 68,182 (68,182)
---------- ---------- -------- -------- ------ -------
Balance June 30, 1999 32,078,293 9,891,072 $217,484 $ 65,946 $2,861 $286,291
========== ========== ======== ======== ====== ========
</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
The condensed consolidated financial statements include the accounts of
AmeriGas Partners, L.P. (AmeriGas Partners), its subsidiary AmeriGas
Propane, L.P. (the "Operating Partnership"), and their corporate
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 AmeriGas Propane, Inc.'s (the "General
Partner's") 1.01% interest in the Operating Partnership as a minority
interest in the condensed consolidated financial statements. 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 we consider 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 related
notes included in our Annual Report on Form 10-K for the year ended
September 30, 1998. 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.
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.
On October 1, 1998, we adopted Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income" (SFAS 130). 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. The Partnership's
comprehensive income was the same as its net income for all periods
presented.
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<PAGE> 8
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
On October 1, 1998, we adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information" (SFAS 131). SFAS 131 establishes
standards for reporting information about operating segments as well as
related disclosures about products and services, geographic areas, and
major customers. In determining our reportable segments under the
provisions of SFAS 131, we examined the way we organize our business
internally for making operating decisions and assessing business
performance. Based on this examination, we have determined that we have a
single reportable operating segment which engages in the distribution of
propane and related equipment and supplies.
No single customer represents 1% or more of consolidated revenues. In
addition, virtually all of the Partnership's revenues are derived from
sources within the U.S., and virtually all of its long-lived assets are
located in the U.S.
In June 1999, the Financial Accounting Standards Board deferred the
effective date of SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133) to fiscal years beginning after June 15,
2000. We expect to adopt SFAS 133 in fiscal 2001.
2. 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 $43,721, $144,674 and $188,787 during the three, nine and
twelve months ended June 30, 1999, respectively, and $45,954, $140,804 and
$185,686 during the three, nine and twelve months ended June 30, 1998,
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 $1,371, $4,138 and $5,797 during the
three, nine and twelve months ended June 30, 1999, respectively, and
$1,229, $4,276 and $6,215 during the three, nine and twelve months ended
June 30, 1998, respectively.
3. CONVERSION OF SUBORDINATED UNITS
The Amended and Restated Agreement of Limited Partnership of AmeriGas
Partners provides that a total of 4,945,537 Subordinated Units may convert
into Common Units on the first day after the distribution record date for
any quarter ending on or after March 31, 1998, and an
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<PAGE> 9
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
additional 4,945,537 Subordinated Units may convert on the first day after
the distribution record date for any quarter ending on or after March 31,
1999, if as of such quarterly dates certain historical and projected cash
generation based requirements are met. Because the required cash
generation based objectives were achieved at March 31, 1999, a total of
9,891,074 Subordinated Units held by the General Partner and its wholly
owned subsidiary, Petrolane Incorporated (Petrolane), were converted to
Common Units on May 18, 1999. The remaining outstanding 9,891,072
Subordinated Units which are held by the General Partner are eligible to
convert to Common Units on the first day after the record date for any
quarter ending on or after March 31, 2000 in respect of which certain
historical cash generation based requirements are met.
4. COMMITMENTS AND CONTINGENCIES
The Partnership has succeeded to certain lease guarantee obligations of
Petrolane, a predecessor company of the Partnership, relating to
Petrolane's divestiture of nonpropane operations before its 1989
acquisition by QFB Partners. Lease payments under these leases total
approximately $45,000 at June 30, 1999. 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 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). 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
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<PAGE> 10
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
material adverse effect on our financial position. However, such damages
or settlements 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.
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<PAGE> 11
AMERIGAS FINANCE CORP.
(a wholly owned subsidiary of AmeriGas Partners, L.P.)
BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
-------- -------------
<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> 12
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).
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> 13
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 (1)
the three months ended June 30, 1999 (1999 three-month period) with the three
months ended June 30, 1998 (1998 three-month period); (2) the nine months ended
June 30, 1999 (1999 nine-month period) with the nine months ended June 30, 1998
(1998 nine-month period); and (3) the twelve months ended June 30, 1999 (1999
twelve-month period) with the twelve months ended June 30, 1998 (1998
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.
1999 THREE-MONTH PERIOD COMPARED WITH 1998 THREE-MONTH PERIOD
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Increase
Three Months Ended June 30, 1999 1998 (Decrease)
- -------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 140.5 135.9 4.6 3.4%
Wholesale 32.2 29.2 3.0 10.3%
------ ------ ---
172.7 165.1 7.6 4.6%
====== ====== ===
Revenues:
Retail propane $129.8 $128.2 $ 1.6 1.2%
Wholesale propane 12.6 12.1 0.5 4.1%
Other 19.5 17.9 1.6 8.9%
------ ------ -----
$161.9 $158.2 $ 3.7 2.3%
====== ====== =====
Total margin $ 91.0 $ 88.5 $ 2.5 2.8%
EBITDA (a) $ 14.1 $ 15.2 $(1.1) (7.2)%
Operating loss $ (2.3) $ (0.7) $ 1.6 N.M.
Heating degree days - % warmer
than normal (3.8) (8.4) - -
- -------------------------------------------------------------------------------
N.M. - Not Meaningful.
</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
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<PAGE> 14
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 and wholesale volumes of propane sold during the 1999 three-month period
increased primarily due to the effects of slightly cooler spring weather and
growth in our customer base. In addition, sales under our expanding PPX
Prefilled Propane Xchange(R) program were higher than in the prior year. Based
upon degree day information obtained from the National Oceanic and Atmospheric
Administration (NOAA) for 335 airports in the continental U.S., weather during
the three months ended June 30, 1999 was 3.8% warmer than normal but 5.1% colder
than the same period last year.
Total revenues from retail propane sales increased $1.6 million during the 1999
three-month period reflecting a $4.3 million increase as a result of higher
retail volumes sold partially offset by a $2.7 million decrease as a result of
lower average retail propane selling prices. Wholesale propane revenues
increased $0.5 million during the three months ended June 30, 1999 due to a 10%
increase in volumes sold. Other revenues increased $1.6 million principally due
to greater hauling revenue and revenue from appliance sales.
Total margin increased $2.5 million in the 1999 three-month period primarily
reflecting the effects of the cooler weather as well as an increase in total
margin from our prefilled cylinder exchange program. Average retail unit margins
were comparable with the 1998 three-month period.
The lower EBITDA and higher operating loss during the 1999 three-month period,
not-withstanding the previously noted increase in total margin, principally
reflect higher operating expenses. Operating expenses were $78.3 million during
the 1999 three-month period compared with $74.8 million in the same period last
year. However, operating expenses in the 1998 three-month period include the net
benefit of $2.2 million from adjustments to environmental, tax and benefit
accruals. The slight increase in operating expenses, excluding the impact of
these items in the prior year, primarily reflects higher payroll costs as well
as costs associated with new business initiatives.
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<PAGE> 15
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
1999 NINE-MONTH PERIOD COMPARED WITH 1998 NINE-MONTH PERIOD
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Increase
Nine Months Ended June 30, 1999 1998 (Decrease)
- -------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 646.0 650.2 (4.2) (0.6)%
Wholesale 147.1 172.7 (25.6) (14.8)%
------ ------ -----
793.1 822.9 (29.8) (3.6)%
====== ====== =====
Revenues:
Retail propane $583.0 $628.8 $(45.8) (7.3)%
Wholesale propane 56.0 76.8 (20.8) (27.1)%
Other 65.7 61.7 4.0 6.5%
------ ------ ------
$704.7 $767.3 $(62.6) (8.2)%
====== ====== ======
Total margin $400.4 $387.6 $ 12.8 3.3%
EBITDA $153.1 $149.9 $ 3.2 2.1%
Operating income $104.8 $102.8 $ 2.0 1.9%
Heating degree days - % warmer
than normal (9.6) (7.4) - -
- -------------------------------------------------------------------------------
</TABLE>
Weather during the nine months ended June 30, 1999 was 9.6% warmer than normal
and 2.3% warmer than the 1998 nine-month period. Retail volumes of propane sold
were slightly lower in the 1999 nine-month period reflecting a 7.0 million
gallon decrease (11.7%) in agricultural volumes due largely to a dry autumn
which reduced demand for crop drying. Partially offsetting this decrease were
higher gallons sold by our pre-filled cylinder exchange program, higher engine
fuel sales, and slightly higher sales to residential customers. Wholesale
volumes sold during the 1999 nine-month period decreased primarily as a result
of reduced sales of storage inventories.
Total revenues from retail propane sales declined $45.8 million in the 1999
nine-month period reflecting (1) a $41.7 million decrease as a result of lower
average retail propane selling prices and (2) a $4.1 million decrease as a
result of the lower retail volumes sold. Wholesale propane revenues declined
$20.8 million reflecting (1) an $11.4 million decrease as a result of lower
volumes sold and (2) a $9.4 million decrease as a result of lower average
wholesale selling prices. The decline in both retail and wholesale selling
prices resulted from lower 1999-period propane product costs. Other revenues
increased principally reflecting higher appliance sales, terminal operations
revenue and various customer fees.
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<PAGE> 16
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Total margin increased $12.8 million in the 1999 nine-month period principally
due to slightly higher average retail unit margin per gallon and a $3.3 million
increase in total margin from ancillary sales and services including appliance
sales, income from terminal operations and various customer fees. Average retail
propane unit margin was greater in the 1999 nine-month period due in large part
to lower propane product costs.
EBITDA and operating income increased slightly during the nine months ended June
30, 1999 reflecting the increase in total margin offset by higher operating
expenses. Operating and administrative expenses were $250.6 million during the
1999 nine-month period compared with $241.3 million in the 1998 nine-month
period. Operating expenses in the 1998 nine-month period are net of (1) $2.7
million from lower required accruals for environmental matters and (2) $2.0
million from lower required accruals for property taxes. Excluding the impact of
these items in the prior-year period, operating expenses increased a modest $4.7
million (1.9%) principally due to (1) higher compensation and benefit costs; (2)
higher vehicle lease expense; and (3) expenses associated with new business
initiatives. These operating expense increases were partially offset by lower
general liability insurance expense.
1999 TWELVE-MONTH PERIOD COMPARED WITH 1998 TWELVE-MONTH PERIOD
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Increase
Twelve Months Ended June 30, 1999 1998 (Decrease)
- ------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 781.1 792.9 (11.8) (1.5)%
Wholesale 179.5 214.7 (35.2) (16.4)%
------- ------- ------
960.6 1,007.6 (47.0) (4.7)%
======= ======= ======
Revenues:
Retail propane $ 700.3 $ 759.3 $(59.0) (7.8)%
Wholesale propane 67.7 96.2 (28.5) (29.6)%
Other 83.7 80.7 3.0 3.7%
------- ------- ------
$ 851.7 $ 936.2 $(84.5) (9.0)%
======= ======= ======
Total margin $ 483.4 $ 466.1 $ 17.3 3.7%
EBITDA $ 154.4 $ 151.8 $ 2.6 1.7%
Operating income $ 89.9 $ 89.1 $ 0.8 0.9%
Heating degree days - % warmer
than normal (11.2) (7.9) - -
- ------------------------------------------------------------------------------
</TABLE>
- 14 -
<PAGE> 17
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Temperatures based upon heating degree days were 11.2% warmer than normal and
3.6% warmer than the 1998 twelve-month period. Retail gallons of propane sold
were slightly lower in the 1999 twelve-month period reflecting a 9.7 million
gallon decrease in agricultural gallons primarily related to lower crop drying
demand and the effects on heating-related volumes of the slightly warmer
temperatures. Wholesale gallons of propane sold were also lower primarily as a
result of lower sales of storage inventories.
Total retail propane revenues declined $59.0 million in the 1999 twelve-month
period. The decrease reflects (1) a $47.7 million decrease as a result of lower
average retail propane selling prices and (2) an $11.3 million reduction due to
the lower volumes sold. Wholesale propane revenues declined $28.5 million due to
(1) a $15.8 million reduction from the lower volumes sold and (2) a $12.7
million decrease as a result of lower average wholesale selling prices. The
lower average retail and wholesale selling prices reflect lower propane product
costs. Other revenues increased $3.0 million reflecting higher appliance sales
and hauling revenues.
Total margin increased $17.3 million in the 1999 twelve-month period due to (1)
higher average retail unit margin and (2) higher total margin from other sales
and services including appliance sales, terminal operations and various customer
fees. The higher average retail unit margin is principally a result of the lower
1999 twelve-month period propane product costs.
The slight increase in EBITDA and operating income for the 1999 twelve-month
period was the result of the higher total margin substantially offset by (1)
higher operating expenses and (2) a decrease in other income, net. Operating
expenses in the 1998 twelve-month period are net of $4.7 million from lower
required accruals for environmental and property tax matters. Excluding these
items, operating expenses increased $5.9 million reflecting (1) an increase in
compensation and benefit expenses, (2) higher expenses associated with
acquisitions and new business initiatives and (3) higher vehicle lease expenses.
These increases were partially offset by lower required accruals for
uncollectible accounts. Other income, net, in the 1999 twelve-month period
includes a $4.0 million loss from two interest rate protection agreements.
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION
The Partnership's debt outstanding at June 30, 1999 totaled $742.0 million
compared with $719.0 million at September 30, 1998. During the nine months ended
June 30, 1999, the Operating Partnership issued $70 million of ten-year Series D
First Mortgage Notes, the proceeds of which were used principally to repay
borrowings under the Acquisition Facility as well as to reduce borrowings under
the Revolving Credit Facility.
- 15 -
<PAGE> 18
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
During the nine months ended June 30, 1999, the Partnership declared and paid
the minimum quarterly distribution of $.55 (the "MQD") on all units for the
quarters ended September 30, 1998, December 31, 1998 and March 31, 1999. The MQD
for the quarter ended June 30, 1999 will be paid on August 18, 1999 to holders
of record on August 10, 1999 of all Common and Subordinated units. 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
The Amended and Restated Agreement of Limited Partnership of AmeriGas Partners
provides that a total of 4,945,537 Subordinated Units may convert into Common
Units on first day after the distribution record date for any quarter ending on
or after March 31, 1998, and an additional 4,945,537 Subordinated Units may
convert on the first day after the distribution record date for any quarter
ending on or after March 31, 1999, if as of such quarterly dates certain
historical and projected cash generation based requirements are met. Because the
required cash generation based objectives were achieved as of March 31, 1999, a
total of 9,891,074 Subordinated Units held by the General Partner and its wholly
owned subsidiary, Petrolane, were converted into Common Units on May 18, 1999.
The remaining outstanding 9,891,072 Subordinated Units which are held by the
General Partner are eligible to convert to Common Units on the first day after
the record date for any quarter ending on or after March 31, 2000 in respect of
which certain historical cash generation based requirements are met.
CASH FLOWS
Cash and cash equivalents totaled $8.1 million at June 30, 1999 compared with
$8.9 million at September 30, 1998. Due to the seasonal nature of the propane
business, cash flows from operating activities are generally strongest during
the second and third fiscal quarters 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 nine months ended June 30, 1999 are not necessarily indicative of cash flows
to be expected for a full year.
OPERATING ACTIVITIES. Cash flows from operating activities were $73.1 million
during the nine months ended June 30, 1999 compared with $107.4 million during
the prior-year period. Changes in operating working capital during the nine
months ended June 30, 1999 used $32.5 million of operating cash flow while
changes in operating working capital during the nine months ended June 30, 1998
provided $9.1 million of operating cash flow. Cash flow from operating
activities before changes in working capital
- 16 -
<PAGE> 19
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
was $105.6 million in the nine months ended June 30, 1999 compared with $98.3
million during the nine months ended June 30, 1998 reflecting the improved 1999
operating results.
INVESTING ACTIVITIES. We spent $25.8 million for property, plant and equipment
(including maintenance capital expenditures of $8.9 million) during the nine
months ended June 30, 1999 compared with $22.0 million (including maintenance
capital expenditures of $7.0 million) in the prior-year period. During the nine
months ended June 30, 1999, we acquired several propane businesses for an
aggregate $3.2 million in cash. During the nine months ended June 30, 1998, we
made acquisition-related cash payments of $6.9 million.
FINANCING ACTIVITIES. During the nine-month periods ended June 30, 1999 and
1998, we declared and paid the MQD on all Common and Subordinated units and the
general partner interests. On March 31, 1999, the Operating Partnership issued
$70 million of ten-year Series D First Mortgage Notes. The proceeds were used
principally to repay borrowings under the Acquisition Facility and the Revolving
Credit Facility. During the 1998 nine-month period, the Operating Partnership
borrowed $13 million under its Acquisition Facility. During the nine months
ended June 30, 1999, we made $63.0 million of long-term debt repayments
including $60 million in repayments of the Operating Partnership's Acquisition
Facility. The Operating Partnership had net borrowings of $10 million under its
Revolving Credit Facility during the 1999 nine-month period compared with net
repayments of $17 million in the 1998 nine-month period.
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, computer-controlled systems and equipment with embedded
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."
Recognizing the potential business consequences of the Y2K issue, we conducted a
detailed assessment of our critical, date sensitive, computer-based systems to
identify those systems that were not Y2K compliant and developed a program to
modify those systems that were not otherwise scheduled for replacement prior to
the year 2000. Our Y2K compliance efforts focused on our ability 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.
Those systems that we assessed included (1) our information technology ("IT")
systems such as computer hardware and software we use in the operation of our
business and (2) our non-IT systems that contain embedded systems with
potentially date sensitive components such as micro-
- 17 -
<PAGE> 20
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
controllers contained in various equipment and facilities. Among these systems
are our customer information and data systems and our financial systems
including payroll and our propane fuel accounting, supply and transportation
system. In order to identify and modify those systems that we determined were
not Y2K compliant, we used internal resources as well as outside consultants and
vendor representatives. In addition to assessing, identifying and modifying our
own systems, we developed and implemented a program to attempt to determine the
Y2K compliance status of third parties, including our key suppliers and vendors,
and certain of our customers. As of June 30, 1999, we have successfully modified
or replaced all of our critical IT and non-IT systems that were not Y2K
compliant.
As previously mentioned, in addition to assuring our IT and non-IT systems are
Y2K compliant, we developed and implemented a program to assess the readiness of
our key suppliers and third-party providers. Although none of our products or
services are of themselves 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. We have completed
our program to contact and inquire of the readiness of these key suppliers and
vendors. We have evaluated the responses received from our critical vendors and
suppliers and to the extent we were not satisfied with the responses, or have
determined that the responses indicate a lack of Y2K readiness, we have
developed or are in the process of finalizing the development of contingency
plans. The major elements of these contingency plans are 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
potential impact of Y2K noncompliance by our key suppliers and vendors. However,
these plans cannot assure that business disruptions that may be caused by key
suppliers or third-party providers will not have a material adverse impact on
our operations. We have substantially completed our contingency plans and
anticipate that such contingency plans will be fully completed during the fourth
quarter of fiscal 1999.
In addition, 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, but are not limited to, the failure of utility and telecommunications
companies to provide service and the failure of financial institutions to
process transactions.
Incremental costs associated with our Y2K efforts have not had a material effect
on our results of operations. 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. Because
our Y2K compliance program is substantially complete, we do not expect future
costs will be significant.
- 18 -
<PAGE> 21
AMERIGAS PARTNERS, L.P.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risk exposures are market prices for propane and changes in
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.
The Partnership has interest rate exposure associated with borrowings under its
Bank Credit Agreement. The Bank Credit Agreement provides for interest rates on
borrowings which are indexed to the agent bank's reference rate or offshore
interbank borrowing rates. Based upon Bank Credit Agreement average borrowings
during the twelve months ended June 30, 1999, an increase in interest rates of
50 basis points (0.5%) would increase annual interest expense by less than $0.4
million. Additionally, the Partnership uses 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.
At June 30, 1999, the impact on the fair value of the Partnership's market risk
sensitive instruments resulting from (1) a 5 cent a gallon decline in the market
price of propane and (2) a 50 basis point decline in interest rates on U.S.
treasury notes, would not be materially different than that reported in the
Partnership's 1998 Annual Report on Form 10-K. 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.
- 19 -
<PAGE> 22
AMERIGAS PARTNERS, L.P.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
10 Summary of Terms of UGI Corporation 1999 Restricted Stock
Awards incorporated by reference to Exhibit 10 to the UGI
Corporation Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999.
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 June
30, 1999.
- 20 -
<PAGE> 23
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: August 13, 1999 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: August 13, 1999 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
- 21 -
<PAGE> 24
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. AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 1999 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
JUNE 30, 1999.
</LEGEND>
<CIK> 0000932628
<NAME> AMERIGAS PARTNERS, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 8,078
<SECURITIES> 0
<RECEIVABLES> 65,235
<ALLOWANCES> 7,048
<INVENTORY> 33,904
<CURRENT-ASSETS> 113,884
<PP&E> 665,806
<DEPRECIATION> 227,313
<TOTAL-ASSETS> 1,178,204
<CURRENT-LIABILITIES> 135,067
<BONDS> 706,242
0
0
<COMMON> 0
<OTHER-SE> 286,291
<TOTAL-LIABILITY-AND-EQUITY> 1,178,204
<SALES> 704,653
<TOTAL-REVENUES> 704,653
<CGS> 304,256
<TOTAL-COSTS> 304,256
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,383
<INTEREST-EXPENSE> 49,691
<INCOME-PRETAX> 55,095
<INCOME-TAX> (110)
<INCOME-CONTINUING> 54,569
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,569
<EPS-BASIC> 1.29
<EPS-DILUTED> 1.29
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET OF AMERIGAS FINANCE CORP AS OF JUNE 30, 1999 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 JUNE 30, 1999.
</LEGEND>
<CIK> 0000945792
<NAME> AMERIGAS FINANCE CORP.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<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-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
