<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, 2000
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, 2000, 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
-----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
AmeriGas Partners, L.P.
Condensed Consolidated Balance Sheets as of March 31, 2000,
September 30, 1999 and March 31, 1999 1
Condensed Consolidated Statements of Operations for the three,
six and twelve months ended March 31, 2000 and 1999 2
Condensed Consolidated Statements of Cash Flows for the six
and twelve months ended March 31, 2000 and 1999 3
Condensed Consolidated Statement of Partners' Capital for the
six months ended March 31, 2000 4
Notes to Condensed Consolidated Financial Statements 5 - 7
AmeriGas Finance Corp.
Balance Sheets as of March 31, 2000 and September 30, 1999 8
Note to Balance Sheets 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10 - 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
</TABLE>
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<PAGE> 3
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
March 31, September 30, March 31,
2000 1999 1999
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,285 $ 390 $ 16,453
Accounts receivable (less allowances for doubtful accounts
of $7,243, $5,998, and $8,115, respectively) 123,380 66,937 93,963
Inventories 50,855 53,455 37,042
Prepaid expenses and other current assets 15,279 19,787 17,139
---------- ---------- ----------
Total current assets 193,799 140,569 164,597
Property, plant and equipment (less accumulated depreciation and
amortization of $257,524, $236,628, and $223,846, respectively) 430,845 435,545 438,241
Intangible assets (less accumulated amortization of $177,308,
$165,676, and $153,535, respectively) 607,936 608,878 619,752
Other assets 11,791 11,469 11,712
---------- ---------- ----------
Total assets $1,244,371 $1,196,461 $1,234,302
========== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current maturities of long-term debt $ 16,821 $ 17,394 $ 5,190
Bank loans 5,000 22,000 5,000
Accounts payable - trade 61,698 48,730 39,680
Accounts payable - related parties 3,603 2,151 2,283
Other current liabilities 74,293 97,632 90,766
---------- ---------- ----------
Total current liabilities 161,415 187,907 142,919
Long-term debt 784,021 727,331 714,742
Other noncurrent liabilities 39,719 43,802 45,941
Commitments and contingencies
Minority interest 3,602 3,380 4,321
Partners' capital 255,614 234,041 326,379
---------- ---------- ----------
Total liabilities and partners' capital $1,244,371 $1,196,461 $1,234,302
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
<PAGE> 4
AMERIGAS PARTNERS, L.P.
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,
--------------------------- --------------------------- ---------------------------
2000 1999 2000 1999 2000 1999
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Propane $ 366,225 $ 284,276 $ 636,043 $ 496,421 $ 924,762 $ 765,871
Other 22,651 20,649 53,881 46,288 94,988 82,111
----------- ----------- ----------- ----------- ----------- -----------
388,876 304,925 689,924 542,709 1,019,750 847,982
----------- ----------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales - propane 205,957 120,450 350,650 213,884 490,829 334,627
Cost of sales - other 9,403 8,345 23,404 19,439 40,670 32,498
Operating and administrative
expenses 92,032 88,740 181,536 172,330 338,841 326,110
Depreciation and amortization 16,475 16,444 32,746 32,022 65,602 63,996
Other income, net (2,236) (1,300) (3,377) (2,004) (6,765) (783)
----------- ----------- ----------- ----------- ----------- -----------
321,631 232,679 584,959 435,671 929,177 756,448
----------- ----------- ----------- ----------- ----------- -----------
Operating income 67,245 72,246 104,965 107,038 90,573 91,534
Interest expense (18,035) (16,409) (36,015) (33,073) (69,527) (65,448)
----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes 49,210 55,837 68,950 73,965 21,046 26,086
Income tax (expense) benefit 323 145 5 (121) 68 3
Minority interest (526) (591) (749) (798) (319) (368)
----------- ----------- ----------- ----------- ----------- -----------
Net income $ 49,007 $ 55,391 $ 68,206 $ 73,046 $ 20,795 $ 25,721
=========== =========== =========== =========== =========== ===========
General partner's interest in
net income $ 490 $ 554 $ 682 $ 730 $ 208 $ 257
=========== =========== =========== =========== =========== ===========
Limited partners' interest in
net income $ 48,517 $ 54,837 $ 67,524 $ 72,316 $ 20,587 $ 25,464
=========== =========== =========== =========== =========== ===========
Income per limited
partner unit - basic and diluted $ 1.16 $ 1.31 $ 1.61 $ 1.73 $ 0.49 $ 0.61
=========== =========== =========== =========== =========== ===========
Average limited partner units
outstanding (thousands) 41,969 41,888 41,969 41,888 41,958 41,888
=========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 5
AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
Six Months Ended Twelve Months Ended
March 31, March 31,
----------------------- -----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 68,206 $ 73,046 $ 20,795 $ 25,721
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 32,746 32,022 65,602 63,996
Other, net 1,037 3,673 (3,577) (1,231)
--------- --------- --------- ---------
101,989 108,741 82,820 88,486
Net change in:
Accounts receivable (58,710) (37,433) (32,739) 3,363
Inventories and prepaid propane purchases 5,987 13,164 (12,020) 16,030
Accounts payable 14,420 1,171 23,435 (4,735)
Other current assets and liabilities (25,726) (20,017) (18,909) (572)
--------- --------- --------- ---------
Net cash provided by operating activities 37,960 65,626 42,587 102,572
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (12,858) (15,838) (28,073) (32,014)
Proceeds from disposals of assets 1,801 2,291 5,215 5,942
Acquisitions of businesses, net of cash acquired (14,833) (2,968) (15,763) (5,422)
--------- --------- --------- ---------
Net cash used by investing activities (25,890) (16,515) (38,621) (31,494)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (46,633) (46,542) (93,221) (93,085)
Minority interest activity (528) (528) (1,036) (1,039)
Increase (decrease) in bank loans (17,000) (5,000) -- 5,000
Issuance of long-term debt 126,000 73,007 149,000 83,007
Repayment of long-term debt (70,014) (62,468) (70,893) (64,539)
Capital contribution from General Partner -- -- 16 12
--------- --------- --------- ---------
Net cash used by financing activities (8,175) (41,531) (16,134) (70,644)
--------- --------- --------- ---------
Cash and cash equivalents increase (decrease) $ 3,895 $ 7,580 $ (12,168) $ 434
========= ========= ========= =========
CASH AND CASH EQUIVALENTS:
End of period $ 4,285 $ 16,453 $ 4,285 $ 16,453
Beginning of period 390 8,873 16,453 16,019
--------- --------- --------- ---------
Increase (decrease) $ 3,895 $ 7,580 $ (12,168) $ 434
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<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, 1999 32,078,293 9,891,072 $ 177,947 $ 53,756 $ 2,338 $234,041
Net income 51,610 15,914 682 68,206
Distributions (35,287) (10,880) (466) (46,633)
---------- --------- --------- -------- ------- --------
BALANCE MARCH 31, 2000 32,078,293 9,891,072 $ 194,270 $ 58,790 $ 2,554 $255,614
========== ========= ========= ======== ======= ========
</TABLE>
See accompanying notes to consolidated 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, 1999. 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 Partnership's comprehensive
income as determined under Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income," was the same as its
net income for all periods presented.
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 $52,677, $104,246 and $192,405 during the three, six and
twelve months ended March 31, 2000, respectively, and $52,337, $100,953
and $191,020 during the three, six and twelve months ended March 31, 1999,
respectively. In addition, UGI Corporation ("UGI") provides certain
financial and administrative services to the General Partner. UGI
-5-
<PAGE> 8
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
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 $1,474, $1,907 and $4,636
during the three, six and twelve months ended March 31, 2000,
respectively, and $1,419, $2,767 and $5,655 during the three, six and
twelve months ended March 31, 1999, respectively.
3. COMMITMENTS AND CONTINGENCIES
The Partnership has succeeded to certain lease guarantee obligations of
Petrolane Incorporated ("Petrolane"), a predecessor company of the
Partnership, relating to Petrolane's divestiture of nonpropane operations
before its 1989 acquisition by QFB Partners. Future lease payments under
these leases total approximately $37,000 at March 31, 2000. The leases
expire through 2010, and some of them are currently in default. The
Partnership has succeeded to the indemnity agreement of Petrolane by which
Texas Eastern Corporation ("Texas Eastern"), a prior owner of Petrolane,
agreed to indemnify Petrolane against any liabilities arising out of the
conduct of businesses that do not relate to, and are not a part of, the
propane business, including lease guarantees. To date, Texas Eastern has
directly satisfied defaulted lease obligations without the Partnership's
having to honor its guarantee.
In addition, the Partnership has succeeded to Petrolane's agreement to
indemnify Shell Petroleum N.V. ("Shell") for various scheduled claims,
including claims related to antitrust actions, 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. In 1999, a case brought
by an unsuccessful entrant into the Puerto Rican propane market was
dismissed by the Supreme Court of Puerto Rico for lack of subject matter
jurisdiction, with the Court concluding that the Public Service Commission
of Puerto Rico has exclusive jurisdiction over the matter. In the only
pending litigation, the Supreme Court of Puerto Rico denied the motion of
the defendants to dismiss, remanding the matter to the trial court for
proceedings consistent with its ruling. In this case the plaintiff seeks
treble damages in excess of $11,700.
We believe the probability that we will be required to directly satisfy
the above-described lease obligations and the remaining claim subject to
the indemnification agreements is remote.
-6-
<PAGE> 9
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
In addition to these matters, there are other pending claims and legal
actions arising in the normal course of our business. We cannot predict
with certainty the final results of these matters. However, it is
reasonably possible that some of them could be resolved unfavorably to us.
Management believes, after consultation with counsel, that damages or
settlements, if any, recovered by the plaintiffs in such claims or actions
will not have a material adverse effect on our financial position.
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.
-7-
<PAGE> 10
AMERIGAS FINANCE CORP.
(a wholly owned subsidiary of AmeriGas Partners, L.P.)
BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
------ ------
<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>
See accompanying notes to consolidated 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").
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 (1)
the three months ended March 31, 2000 ("2000 three-month period") with the three
months ended March 31, 1999 ("1999 three-month period"); (2) the six months
ended March 31, 2000 ("2000 six-month period") with the six months ended March
31, 1999 ("1999 six-month period"); and (3) the twelve months ended March 31,
2000 ("2000 twelve-month period") with the twelve months ended March 31, 1999
("1999 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.
2000 THREE-MONTH PERIOD COMPARED WITH 1999 THREE-MONTH PERIOD
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Increase
Three Months Ended March 31 2000 1999 (Decrease)
- -----------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 266.8 284.8 (18.0) (6.3)%
Wholesale 86.6 66.8 19.8 29.6%
------ ------ ------
353.4 351.6 1.8 0.5%
====== ====== ======
Revenues:
Retail propane $313.5 $259.5 $ 54.0 20.8%
Wholesale propane 52.7 24.8 27.9 112.5%
Other 22.7 20.6 2.1 10.2%
------ ------ ------
$388.9 $304.9 $ 84.0 27.6%
====== ====== ======
Total margin $173.5 $176.1 $ (2.6) (1.5)%
EBITDA (a) $ 83.7 $ 88.7 $ (5.0) (5.6)%
Operating income $ 67.2 $ 72.2 $ (5.0) (6.9)%
Heating degree days - % warmer
than normal (b) 15.4 11.0 -- --
- -----------------------------------------------------------------------------------------------
</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.
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<PAGE> 13
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
(b) Based upon national weather statistics provided by the National Oceanic
and Atmospheric Administration ("NOAA") for 335 airports in the
continental U.S.
For the third consecutive year, results for the three-month period ended March
31 were significantly impacted by warmer than normal weather. Based upon
national heating degree day data, temperatures in the 2000 three-month period
were 15.4% warmer than normal and 4.6% warmer than in the prior-year period.
Retail volumes of propane sold decreased 18.0 million gallons (6.3%) principally
reflecting the impact of the warmer winter weather on sales to our residential
heating customers and the Year 2000 ("Y2K") issue which resulted in some of our
customers accelerating propane deliveries in November and December 1999.
Wholesale volumes of propane sold increased 19.8 million gallons in the 2000
three-month period reflecting higher sales associated with product cost
management activities.
Total revenues from retail propane sales increased $54.0 million during the 2000
three-month period reflecting a $70.4 million increase as a result of higher
average selling prices partially offset by a $16.4 million decrease as a result
of the lower retail volumes sold. Wholesale propane revenues increased $27.9
million due primarily to higher selling prices and, to a lesser extent, higher
volumes sold. The higher retail and wholesale selling prices resulted from
higher propane product costs. Other revenues increased $2.1 million reflecting,
in part, higher customer fees and higher hauling revenues. Cost of sales in the
2000 three-month period increased $86.6 million as a result of the higher
propane product costs and the increase in wholesale volumes sold.
Total margin decreased $2.6 million in the 2000 three-month period principally
as a result of lower volumes sold to residential customers partially offset by
greater total margin from PPX Prefilled Propane Xchange(R) ("PPX(R)") and
higher customer fees.
EBITDA and operating income were lower in the 2000 three-month period
principally as a result of the lower total margin and an increase in operating
expenses. The increase in operating and administrative expenses includes (1)
increased vehicle fuel costs and vehicle repair and maintenance expenses and (2)
higher expenses associated with new business initiatives.
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<PAGE> 14
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
2000 SIX-MONTH PERIOD COMPARED WITH 1999 SIX-MONTH PERIOD
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Increase
Six Months Ended March 31, 2000 1999 (Decrease)
- ------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 500.5 505.5 (5.0) (1.0)%
Wholesale 143.2 114.9 28.3 24.6%
------ ------ ------
643.7 620.4 23.3 3.8%
====== ====== ======
Revenues:
Retail propane $553.9 $453.2 $100.7 22.2%
Wholesale propane 82.1 43.2 38.9 90.0%
Other 53.9 46.3 7.6 16.4%
------ ------ ------
$689.9 $542.7 $147.2 21.6%
====== ====== ======
Total margin $315.9 $309.4 $ 6.5 2.1%
EBITDA $137.7 $139.1 $ (1.4) (1.0)%
Operating income $105.0 $107.0 $ (2.0) (1.9)%
Heating degree days - % warmer
than normal 14.8 11.0 -- --
- ------------------------------------------------------------------------------------------------
</TABLE>
Temperatures based upon heating degree days were 14.8% warmer than normal in the
2000 six-month period and 4.1% warmer than the prior-year period. Retail propane
volumes sold decreased 5.0 million gallons as a result of the warmer weather's
effect on heating-related sales partially offset by increased non-heating
related PPX(R) and motor fuel sales. Wholesale volumes increased 28.3 million
gallons (24.6%) as a result of higher wholesale sales associated with product
cost management activities.
Total retail propane revenues increased $100.7 million due almost entirely to
higher average selling prices resulting from significantly higher propane
product costs. Wholesale propane revenues increased $38.9 million reflecting a
$28.3 million increase from higher average selling prices and a $10.6 million
increase as a result of the higher wholesale volumes sold. Other revenues
increased $7.6 million reflecting, in part, higher customer fees and hauling,
service and PPX(R) cylinder sales revenue. Cost of sales in the 2000 six-month
period increased $140.7 million as a result of the higher propane product costs
and higher wholesale volumes sold.
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<PAGE> 15
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Notwithstanding the overall lower retail volumes in the 2000 six-month period,
total margin increased $6.5 million principally as a result of (1) greater
volumes sold to higher margin PPX(R) customers and (2) an increase in other
margin from customer fees and hauling and service related revenues.
EBITDA declined $1.4 million, notwithstanding the slightly higher total margin,
reflecting higher operating and administrative expenses in the 2000 six-month
period. The increase in operating expenses includes (1) higher vehicle fuel and
repairs and maintenance expenses and (2) higher expenses associated with the
expansion of PPX(R) and other new business initiatives. Operating income
decreased $2.0 million in the 2000 six-month period reflecting the lower EBITDA
and slightly higher depreciation and amortization expense.
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<PAGE> 16
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
2000 TWELVE-MONTH PERIOD COMPARED WITH 1999 TWELVE-MONTH PERIOD
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Increase
Twelve Months Ended March 31, 2000 1999 (Decrease)
- ----------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 778.2 776.5 1.7 0.2%
Wholesale 218.9 176.5 42.4 24.0%
-------- -------- --------
997.1 953.0 44.1 4.6%
======== ======== ========
Revenues:
Retail propane $ 810.5 $ 698.7 $ 111.8 16.0%
Wholesale propane 114.2 67.2 47.0 69.9%
Other 95.1 82.1 13.0 15.8%
-------- -------- --------
$1,019.8 $ 848.0 $ 171.8 20.3%
======== ======== ========
Total margin $ 488.3 $ 480.9 $ 7.4 1.5%
EBITDA $ 156.2 $ 155.5 $ 0.7 0.5%
Operating income $ 90.6 $ 91.5 $ (0.9) (1.0)%
Heating degree days - % warmer
than normal 13.2 11.7 -- --
- ----------------------------------------------------------------------------------------------------
</TABLE>
Temperatures based upon heating degree days were 13.2% warmer than normal in the
2000 twelve-month period and slightly warmer than in the 1999 twelve-month
period. Notwithstanding the warmer weather, retail propane gallons sold were
virtually unchanged as weather-related reductions were offset by higher motor
fuel and PPX(R) sales. Wholesale volumes of propane sold increased 42.4 million
gallons to 218.9 million gallons reflecting an increase in sales associated with
propane product cost management activities.
Total retail propane revenues increased $111.8 million due almost entirely to
higher average retail propane selling prices. Wholesale propane revenues
increased $47.0 million reflecting (1) a $30.9 million increase from higher
average prices and (2) a $16.1 million increase as a result of the higher
wholesale volumes. The higher average propane selling prices during the 2000
twelve-month period were a result of significantly higher propane product costs.
Other revenues increased $13.0 million reflecting higher hauling revenues,
higher ancillary sales and service revenue, and greater customer fee revenues.
Cost of sales increased $164.4 million as a result of the higher propane product
costs.
-14-
<PAGE> 17
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Total margin increased $7.4 million in the 2000 twelve-month period due to (1)
an increase in margin from customer fees and ancillary sales and services and
(2) higher total margin from our expanding PPX(R) cylinder exchange business.
EBITDA and operating income were virtually unchanged from the prior year as the
increase in total margin and higher other income was offset by higher operating
and administrative expenses. Other income in the 1999 twelve-month period is net
of a $4.0 million loss from interest rate protection agreements. Operating
expenses of the Partnership were $338.8 million in the 2000 twelve-month period
compared with $326.1 million in the prior-year period. The increase in operating
and administrative expenses includes higher expenses associated with new
business activities and higher vehicle expenses.
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION
The Partnership's debt outstanding at March 31, 2000 totaled $805.8 million
comprising $800.8 million of long-term debt (including current maturities of
$16.8 million) and $5.0 million of bank loans. During the six months ended March
31, 2000, the Operating Partnership borrowed $46 million under its Acquisition
Facility and made Acquisition Facility repayments of $69.0 million. These
repayments were funded through the Operating Partnership's issuance of $80
million of ten-year, Series E First Mortgage Notes at an effective interest rate
of 8.47%. At March 31, 2000, there were no amounts outstanding under the
Acquisition Facility.
During the six months ended March 31, 2000, the Partnership declared and paid
the minimum quarterly distribution of $0.55 (the "MQD") on all units for the
quarters ended September 30, 1999 and December 31, 1999. The MQD for the quarter
ended March 31, 2000 will be paid on May 18, 2000 to holders of record on May
10, 2000 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 and refinance debt. Some of these factors are affected by
conditions beyond our control including weather, competition in markets we
serve, and the cost of propane.
The 9,891,072 Subordinated Units of the Partnership 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-based performance and distribution requirements
are met. The ability of the Partnership to attain the cash-based performance and
distribution requirements depends upon a number of factors including highly
seasonal operating
-15-
<PAGE> 18
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
results, changes in working capital, asset sales and debt refinancings. Due to
significantly warmer than normal weather and the impact of higher propane
product costs on working capital, the Partnership did not achieve the cash-based
performance requirements in respect of the quarter ended March 31, 2000. Due to
the historical "look-back" provisions of the conversion test, the possibility is
remote that the Partnership will satisfy the cash-based performance requirements
for conversion any earlier than in respect of the quarter ending March 31, 2002.
CASH FLOWS
Cash and cash equivalents totaled $4.3 million at March 31, 2000 compared with
$0.4 million at September 30, 1999. 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 six months ended March 31, 2000 are not necessarily indicative of cash flows
to be expected for a full year.
OPERATING ACTIVITIES. Cash provided by operating activities was $38.0 million
during the six months ended March 31, 2000 compared with $65.6 million during
the prior-year six-month period. Changes in operating working capital used $64.0
million of cash in the 2000 six-month period compared to $43.1 million in the
1999 period reflecting the impact of higher propane product costs on accounts
receivable and inventories. Operating cash flow before changes in working
capital was $102.0 million in the 2000 six-month period compared to $108.7
million in the prior year principally reflecting the lower 2000 six-month period
operating results.
INVESTING ACTIVITIES. We spent $12.9 million for property, plant and equipment
(including maintenance capital expenditures of $3.8 million) during the 2000
six-month period compared with $15.8 million (including maintenance capital
expenditures of $6.3 million) in the prior-year period. Acquisitions of propane
businesses used $14.8 million of cash in the six months ended March 31, 2000
compared to $3.0 million in the prior-year period.
FINANCING ACTIVITIES. During each of the six-month periods ended March 31, 2000
and 1999, we declared and paid the MQD on all Common and Subordinated units and
the general partner interests. During the 2000 six-month period, the Operating
Partnership borrowed $46 million under the Acquisition Facility and subsequently
repaid all Acquisition Facility borrowings, totaling $69 million, with the
proceeds from the issuance of ten-year, Series E First Mortgage Notes. These
notes bear interest at an effective interest rate of 8.47%. During the 2000
six-month period, the Operating Partnership had net repayments of $17 million
under its Revolving Credit Facility compared with repayments of $5 million
during the prior-year six-month period.
-16-
<PAGE> 19
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. In order to manage a portion of our 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. On occasion, we also enter into wholesale product cost management
activities to reduce price risk associated with changes in the fair value of a
portion of our propane storage inventory.
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 most recent fiscal year ended September 30, 1999, an increase in
interest rates of 100 basis points (1.0%) would increase annual interest expense
by approximately $0.6 million. On occasion we enter into interest rate
protection agreements to reduce interest rate risk associated with forecasted
issuances of debt.
At March 31, 2000, the impact on the fair value of market risk sensitive
instruments resulting from an adverse change in (1) the market price of propane
of 10 cents a gallon and (2) interest rates on ten-year U.S. treasury notes of
100 basis points would not be materially different than that reported in the
Partnership's 1999 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.
-17-
<PAGE> 20
AMERIGAS PARTNERS, L.P.
PART II OTHER INFORMATION
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, 2000.
-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 12, 2000 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 12, 2000 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
-19-
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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