<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, 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 January 31, 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
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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, 1999,
September 30, 1999 and December 31, 1998 1
Condensed Consolidated Statements of Operations for the three
and twelve months ended December 31, 1999 and 1998 2
Condensed Consolidated Statements of Cash Flows for the three
and twelve months ended December 31, 1999 and 1998 3
Condensed Consolidated Statement of Partners' Capital for the
three months ended December 31, 1999 4
Notes to Condensed Consolidated Financial Statements 5 - 7
AmeriGas Finance Corp.
Balance Sheets as of December 31, 1999 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 - 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
</TABLE>
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AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Thousands of dollars)
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1999 1999 1998
------------ ------------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,639 $ 390 $ 14,070
Accounts receivable (less allowances for doubtful accounts
of $6,280, $5,998, and $6,599, respectively) 119,506 66,937 86,857
Inventories 58,048 53,455 43,250
Prepaid expenses and other current assets 24,279 19,787 15,032
---------- ---------- ----------
Total current assets 219,472 140,569 159,209
Property, plant and equipment (less accumulated depreciation and
amortization of $247,715, $236,628, and $214,526, respectively) 428,971 435,545 440,391
Intangible assets (less accumulated amortization of $171,759,
$165,676, and $147,750, respectively) 605,088 608,878 625,180
Other assets 11,043 11,469 13,048
---------- ---------- ----------
Total assets $1,264,574 $1,196,461 $1,237,828
========== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current maturities of long-term debt $ 24,936 $ 17,394 $ 6,194
Bank loans 50,000 22,000 62,000
Accounts payable - trade 69,087 48,730 44,018
Accounts payable - related parties 2,313 2,151 2,206
Other current liabilities 77,695 97,632 82,514
---------- ---------- ----------
Total current liabilities 224,031 187,907 196,932
Long-term debt 764,549 727,331 693,634
Other noncurrent liabilities 42,705 43,802 48,985
Commitments and contingencies
Minority interest 3,365 3,380 4,019
Partners' capital 229,924 234,041 294,258
---------- ---------- ----------
Total liabilities and partners' capital $1,264,574 $1,196,461 $1,237,828
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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AMERIGAS PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(Thousands of dollars, except per unit)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------------ ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Propane $ 269,818 $ 212,145 $ 842,813 $ 769,249
Other 31,230 25,639 92,986 79,990
--------- --------- --------- ---------
301,048 237,784 935,799 849,239
--------- --------- --------- ---------
Costs and expenses:
Cost of sales - propane 144,693 93,434 405,322 352,514
Cost of sales - other 14,001 11,094 39,612 32,614
Operating and administrative
expenses 89,504 83,590 335,549 322,943
Depreciation and amortization 16,271 15,578 65,571 63,221
Other income, net (1,141) (704) (5,829) (726)
--------- --------- --------- ---------
263,328 202,992 840,225 770,566
--------- --------- --------- ---------
Operating income 37,720 34,792 95,574 78,673
Interest expense (17,980) (16,664) (67,901) (65,903)
--------- --------- --------- ---------
Income before income taxes 19,740 18,128 27,673 12,770
Income tax (expense) benefit (318) (266) (110) 71
Minority interest (223) (207) (384) (235)
--------- --------- --------- ---------
Net income $ 19,199 $ 17,655 $ 27,179 $ 12,606
========= ========= ========= =========
General partner's interest in
net income $ 192 $ 177 $ 272 $ 126
========= ========= ========= =========
Limited partners' interest in
net income $ 19,007 $ 17,478 $ 26,907 $ 12,480
========= ========= ========= =========
Income per limited
partner unit - basic and diluted $ 0.45 $ 0.42 $ 0.64 $ 0.30
========= ========= ========= =========
Average limited partner units
outstanding (thousands) 41,969 41,888 41,938 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>
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ------------------------
1999 1998 1999 1998
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 19,199 $ 17,655 $ 27,179 $ 12,606
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 16,271 15,578 65,571 63,221
Other, net 1,359 (117) 535 (4,629)
-------- -------- --------- ---------
36,829 33,116 93,285 71,198
Net change in:
Accounts receivable (53,701) (29,025) (36,138) 28,010
Inventories and prepaid propane purchases (8,157) 7,220 (20,220) 35,930
Accounts payable 20,519 5,529 25,176 (10,504)
Other current assets and liabilities (22,121) (21,596) (13,725) 10,378
-------- -------- --------- ---------
Net cash provided (used) by operating activities (26,631) (4,756) 48,378 135,012
-------- -------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (5,162) (7,228) (28,987) (31,818)
Proceeds from disposals of assets 1,771 935 6,541 5,421
Acquisitions of businesses, net of cash acquired (2,393) (2,367) (3,924) (9,055)
-------- -------- --------- ---------
Net cash used by investing activities (5,784) (8,660) (26,370) (35,452)
-------- -------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (23,316) (23,272) (93,174) (93,085)
Minority interest activity (238) (237) (1,037) (1,040)
Increase (decrease) in bank loans 28,000 52,000 (12,000) (13,000)
Issuance of long-term debt 46,000 -- 142,007 10,000
Repayment of long-term debt (782) (9,878) (54,251) (12,752)
Capital contribution from General Partner -- -- 16 12
-------- -------- --------- ---------
Net cash provided (used) used by financing activities 49,664 18,613 (18,439) (109,865)
-------- -------- --------- ---------
Cash and cash equivalents increase (decrease) $ 17,249 $ 5,197 $ 3,569 $ (10,305)
======== ======== ========= =========
CASH AND CASH EQUIVALENTS:
End of period $ 17,639 $ 14,070 $ 17,639 $ 14,070
Beginning of period 390 8,873 14,070 24,375
-------- -------- --------- ---------
Increase (decrease) $ 17,249 $ 5,197 $ 3,569 $ (10,305)
======== ======== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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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 14,528 4,479 192 19,199
Distributions (17,643) (5,440) (233) (23,316)
----------- ---------- --------- -------- ------ --------
BALANCE DECEMBER 31, 1999 32,078,293 9,891,072 $ 174,832 $ 52,795 $2,297 $229,924
=========== ========== ========= ======== ====== ========
</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.
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.
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
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<PAGE> 8
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
(Thousands of dollars, except per unit)
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 $51,569 and $192,065
during the three and twelve months ended December 31, 1999,
respectively, and $48,616 and $185,125 during the three and twelve
months ended December 31, 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 $433 and $4,581 during the three and twelve months
ended December 31, 1999, respectively, and $1,348 and $5,831 during the
three and twelve months ended December 31, 1998, 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. Lease payments
under these leases total approximately $40,000 at December 31, 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, aggregate at least $68,000. One of the
Antitrust cases which is the subject of the indemnity, Pressure Vessels
of Puerto Rico, et al. v. Empire Gas, et al., has been dismissed by the
trial court. The grounds for the dismissal are that the Public Service
Commission of Puerto Rico has exclusive jurisdiction over the claims
asserted against the defendants which are public service companies
under the laws of Puerto Rico. Our inquiries have failed to uncover any
information that an appeal has been filed or that any
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<PAGE> 9
AMERIGAS PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(Thousands of dollars, except per unit)
complaint has been filed with the Public Service Commission. The
remaining Antitrust suit, Puerto Rico Fuels, is pending before the
Puerto Rico Supreme Court.
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.
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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,
1999 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>
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").
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 December 31, 1999 ("1999 three-month period") with the
three months ended December 31, 1998 ("1998 three-month period") and (2) the
twelve months ended December 31, 1999 ("1999 twelve-month period") with the
twelve months ended December 31, 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>
- ---------------------------------------------------------------------------------------------------
Three Months Ended December 31, 1999 1998 Increase
- ---------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 233.7 220.7 13.0 5.9 %
Wholesale 56.7 48.1 8.6 17.9 %
-------- ------- --------
290.4 268.8 21.6 8.0 %
======== ======= ========
Revenues:
Retail propane $ 240.4 $ 193.7 $ 46.7 24.1 %
Wholesale propane 29.4 18.4 11.0 59.8 %
Other 31.2 25.7 5.5 21.4 %
-------- ------- --------
$ 301.0 $ 237.8 $ 63.2 26.6 %
======== ======= ========
Total margin $ 142.4 $ 133.3 $ 9.1 6.8 %
EBITDA (a) $ 54.0 $ 50.4 $ 3.6 7.1 %
Operating income $ 37.7 $ 34.8 $ 2.9 8.3 %
Heating degree days - % warmer
than normal (14.1) (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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AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the second consecutive year, results for the three-month period ended
December 31 were impacted significantly by warmer than normal weather. Based
upon national heating degree day data, temperatures in the 1999 three-month
period were 14.1% warmer than normal and 3.4% warmer than in the prior-year
period. Notwithstanding the warmer weather, retail volumes of propane sold
increased 13.0 million gallons (5.9%) reflecting higher sales in virtually all
of the Partnership's customer categories. The increase in retail volumes is
attributable in large part to the acceleration of purchases by some customers
resulting from the year 2000 ("Y2K") issue as well as an increase in the number
of customers and further expansion of our PPX Prefilled Propane Xchange(R)
program.
Total revenues from retail propane sales increased $46.7 million during the 1999
three-month period reflecting a $35.3 million increase as a result of higher
average selling prices and an $11.4 million increase as a result of the higher
retail volumes sold. Wholesale propane revenues increased $11.0 million due
primarily to higher selling prices and, to a lesser extent, higher volumes. The
higher retail and wholesale selling prices resulted from higher propane supply
costs. Other revenues increased $5.5 million reflecting, in part, higher
customer fee, hauling, appliance and service revenues. Cost of sales in the 1999
three-month period increased $54.2 million primarily as a result of the higher
propane product costs and the increase in retail volumes sold.
Total margin increased $9.1 million in the 1999 three-month period principally
as a result of (1) the impact of greater volumes sold to higher margin
residential and PPX(R) customers, (2) an increase in total margin from
customer fees, and (3) an increase in total margin from higher appliance sales
and hauling and terminal revenues.
EBITDA and operating income were higher in the 1999 three-month period as a
result of the higher total margin and a $0.4 million increase in other income.
These increases were partially offset by a $5.9 million increase in operating
and administrative expenses. The increase in operating and administrative
expenses includes (1) higher expenses associated with new business initiatives
and (2) increased vehicle fuel costs and vehicle and tank repair and maintenance
expenses. Partially offsetting these increases in operating expenses was $0.8
million of income from adjustments to incentive compensation accruals.
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AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
1999 TWELVE-MONTH PERIOD COMPARED WITH 1998 TWELVE-MONTH PERIOD
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Twelve Months Ended December 31, 1999 1998 Increase
- -------------------------------------------------------------------------------------------------
(Millions of dollars)
<S> <C> <C> <C> <C>
Gallons sold (millions):
Retail 796.2 757.4 38.8 5.1%
Wholesale 199.2 170.5 28.7 16.8%
--------- ----------- --------
995.4 927.9 67.5 7.3%
========= =========== ========
Revenues:
Retail propane $ 756.5 $ 699.6 $ 56.9 8.1%
Wholesale propane 86.3 69.6 16.7 24.0%
Other 93.0 80.0 13.0 16.3%
--------- ----------- --------
$ 935.8 $ 849.2 $ 86.6 10.2%
========= =========== ========
Total margin $ 490.9 $ 464.1 $ 26.8 5.8%
EBITDA $ 161.1 $ 141.9 $ 19.2 13.5%
Operating income $ 95.6 $ 78.7 $ 16.9 21.5%
Heating degree days - % warmer
than normal (11.0) (13.1) -- --
- -------------------------------------------------------------------------------------------------
</TABLE>
Temperatures based upon heating degree days were 11.0% warmer than normal in the
1999 twelve-month period but 2.5% colder than during the prior-year period.
Retail propane gallons sold increased 38.8 million gallons as a result of the
slightly colder weather, the impact of targeted customer growth in higher-margin
residential heating and PPX(R) cylinder exchange markets, and the
acceleration of purchases by some of our customers in anticipation of Y2K.
Wholesale volumes of propane sold increased 28.7 million gallons reflecting in
part the effects of the slightly colder weather.
Total retail propane revenues increased $56.9 million in the 1999 twelve-month
period reflecting (1) a $35.8 million increase as a result of the higher volumes
sold and (2) a $21.1 million increase as a result of higher average retail
propane selling prices. Wholesale propane revenues increased $16.7 million on
higher volumes sold and higher average selling prices. Propane selling prices in
the 1999 twelve-month period were generally lower during the first half of the
period and higher during the latter part of the year reflecting a significant
increase in propane supply costs. Other revenues increased $13.0 million in the
1999 twelve-month period reflecting higher appliance sales, increased terminal
and hauling revenues, and greater customer fee revenues. Cost of sales increased
$59.8 million primarily as a result of the higher propane volumes sold and
higher average product costs.
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<PAGE> 15
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Total margin increased $26.8 million in the 1999 twelve-month period due to (1)
the higher retail propane volumes sold and (2) an increase in total margin from
appliance sales, customer fees, and hauling and terminal revenue.
The increase in EBITDA and operating income reflects (1) the greater total
margin and (2) higher other income. The impact of these increases was partially
offset by higher operating and administrative expenses. Other income, net, in
the 1998 twelve-month period is net of a $4.0 million loss from two interest
rate protection agreements entered into to reduce interest rate exposure
associated with an anticipated debt refinancing. Operating expenses of the
Partnership were $335.5 million in the 1999 twelve-month period compared with
$322.9 million in the prior-year period. Operating expenses in the prior-year
period are net of (1) $2.7 million of income from lower required accruals for
environmental matters and (2) $2.0 million of income from lower required
accruals for property taxes. Excluding the impact of these items in the prior
year, operating expenses of the Partnership increased $7.9 million principally
due to expenses associated with new business initiatives and, to a lesser
extent, higher vehicle expenses.
FINANCIAL CONDITION AND LIQUIDITY
FINANCIAL CONDITION
The Partnership's debt outstanding at December 31, 1999 totaled $839.5 million
compared with $766.7 million at September 30, 1999. During the three months
ended December 31, 1999, the Operating Partnership borrowed $46.0 million under
its Acquisition Facility relating to propane business and asset expenditures
incurred in prior years. Borrowings under the Acquisition Facility at December
31, 1999 totaled $69 million.
During the three months ended December 31, 1999, the Partnership declared and
paid the minimum quarterly distribution of $0.55 (the "MQD") on all units for
the quarter ended September 30, 1999. The MQD for the quarter ended December 31,
1999 will be paid on February 18, 2000 to holders of record on February 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
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<PAGE> 16
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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 will depend upon a number
of factors including highly seasonal operating results, changes in working
capital, asset sales and debt refinancings. Due in large part to the impact of
higher propane product costs on working capital, it is possible but unlikely
that the cash generation based requirements for conversion will be attained
during fiscal 2000.
CASH FLOWS
Cash and cash equivalents totaled $17.6 million at December 31, 1999 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 three months ended December 31, 1999 are not necessarily
indicative of cash flows to be expected for a full year.
OPERATING ACTIVITIES. Cash used by operating activities was $(26.6) million
during the three months ended December 31, 1999 compared with $(4.8) million
during the prior-year period. Changes in operating working capital during the
three months ended December 31, 1999 used $63.5 million of operating cash flow
while changes in operating working capital during the three months ended
December 31, 1998 used $37.9 million of operating cash flow. The higher amount
in the 1999 period principally reflects the impact of higher propane product
costs on working capital. Cash flow from operating activities before changes in
working capital was $36.8 million in the three months ended December 31, 1999
compared with $33.1 million during the three months ended December 31, 1998
reflecting the improved 1999 three-month period operating results.
INVESTING ACTIVITIES. We spent $5.2 million for property, plant and equipment
(including maintenance capital expenditures of $1.8 million) during the three
months ended December 31, 1999 compared with $7.2 million (including maintenance
capital expenditures of $2.5 million) in the prior-year period. During each of
the three month periods ended December 31, 1999 and 1998, we acquired several
propane businesses for net cash payments of $2.4 million.
FINANCING ACTIVITIES. During the three-month periods ended December 31, 1999 and
1998, we declared and paid the MQD on all Common and Subordinated units and the
general partner interests. During the 1999 three-month period, the Operating
Partnership borrowed $46 million under its Acquisition Facility relating to
propane business and asset expenditures incurred in prior years. The Operating
Partnership had net borrowings of $28 million under its Revolving Credit
Facility during the 1999 three-month period compared with net borrowings of $52
million in the 1998 three-month period.
-14-
<PAGE> 17
AMERIGAS PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000 MATTERS
The Y2K issue is a result of computer programs being written using two digits
(rather than four) to identify and process a year in a date field. Computer
programs, 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 modified 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. 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. We also developed contingency plans to be used in the event of Y2K
disruption. The major elements of these plans were based upon the use of manual
back-up systems, alternative sources of supply, and additional staffing.
Since December 31, 1999, the Partnership has not experienced, and has not become
aware of, any Y2K-related problems associated with any of its mission critical
computer-based systems or its computer-controlled systems and equipment with
embedded software. Furthermore, the Partnership is not aware of or has not
experienced any Y2K-related problems with any of its key suppliers and
third-party providers including utility and telecommunication companies and
financial institutions with which the Partnership does business.
We believe that a significant portion of the 13.0 million increase in retail
gallons sold during the 1999 three-month period may have resulted from customers
accelerating purchases in advance of Y2K. Expenses associated with our Y2K
compliance efforts during the last three fiscal years totaled approximately $2.0
million. We do not expect additional Y2K-related expenditures of a material
amount in the future.
-15-
<PAGE> 18
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 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. 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 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. 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 December 31, 1999, the impact on the fair value of the Partnership's market
risk sensitive instruments resulting from (1) a 10 cent a gallon decline in the
market price of propane and (2) a 100 basis point decline in interest rates on
U.S. treasury notes, 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.
-16-
<PAGE> 19
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 December 31, 1999.
-17-
<PAGE> 20
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 11, 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: February 11, 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
-18-
<PAGE> 21
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 THREE MONTHS ENDED DECEMBER 31, 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
DECEMBER 31, 1999.
</LEGEND>
<CIK> 0000932628
<NAME> AMERIGAS PARTNERS, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 17,639
<SECURITIES> 0
<RECEIVABLES> 125,786
<ALLOWANCES> 6,280
<INVENTORY> 58,048
<CURRENT-ASSETS> 219,472
<PP&E> 676,686
<DEPRECIATION> 247,715
<TOTAL-ASSETS> 1,264,574
<CURRENT-LIABILITIES> 224,031
<BONDS> 764,549
0
0
<COMMON> 0
<OTHER-SE> 229,924
<TOTAL-LIABILITY-AND-EQUITY> 1,264,574
<SALES> 301,048
<TOTAL-REVENUES> 301,048
<CGS> 158,694
<TOTAL-COSTS> 158,694
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,275
<INTEREST-EXPENSE> 17,980
<INCOME-PRETAX> 19,740
<INCOME-TAX> 318
<INCOME-CONTINUING> 19,199
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,199
<EPS-BASIC> 0.45
<EPS-DILUTED> 0.45
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET OF AMERIGAS FINANCE CORP. AS OF DECEMBER 31, 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 DECEMBER 31, 1999.
</LEGEND>
<CIK> 0000945792
<NAME> AMERIGAS FINANCE CORP.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<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>
