<PAGE>
Filed pursuant to rule 424(b)(3)
Registration No. 333-45902
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this preliminary prospectus is not complete and may be +
+ changed. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 5, 2000
PROSPECTUS SUPPLEMENT
(To Prospectus Dated October 5, 2000)
2,000,000 Common Units
AmeriGas Partners, L.P.
Representing Limited Partner Interests
$ per unit
---------
We are selling 2,000,000 common units with this prospectus supplement and the
accompanying prospectus. The underwriters named in this prospectus supplement
may purchase up to 300,000 additional common units from us under certain
circumstances.
The common units are listed for trading on the New York Stock Exchange under
the symbol "APU." The last reported sale price of the common units on the New
York Stock Exchange on October 5, 2000, was $19 3/16 per common unit.
---------
Investing in the common units involves certain risks. Limited partner
interests are inherently different from the capital stock of a corporation. See
"Risk Factors" beginning on page 5 of the accompanying prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
---------
<TABLE>
<CAPTION>
Per Unit Total
-------- -----
<S> <C> <C>
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to AmeriGas Partners, L.P. (before expenses) $ $
</TABLE>
The underwriters are offering the common units subject to various conditions.
The underwriters expect to deliver the common units to purchasers on or about
October , 2000.
---------
Salomon Smith Barney
Banc of America Securities LLC
Donaldson, Lufkin & Jenrette
PaineWebber Incorporated
October , 2000
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement Prospectus
<TABLE>
<S> <C>
Prospectus Supplement Summary....... S-1
Use of Proceeds..................... S-6
Capitalization...................... S-7
Price Range of our Common Units and
Cash Distributions................. S-8
Summary Historical Consolidated
Financial Data..................... S-9
Business and Properties............. S-10
Management.......................... S-13
Underwriting........................ S-16
Legal Matters....................... S-17
</TABLE>
<TABLE>
<S> <C>
Who We Are.......................... 1
About this Prospectus............... 2
Where You Can Find More
Information........................ 2
Incorporation of Documents by
Reference.......................... 2
Forward-Looking Statements.......... 3
Risk Factors........................ 5
Risks Inherent in Our Business..... 5
Risks Inherent in an Investment in
AmeriGas Partners................. 7
Tax Risks.......................... 11
Use of Proceeds..................... 14
Description of Common Units......... 14
Tax Considerations.................. 18
Plan of Distribution................ 28
Legal Opinions...................... 29
Experts............................. 29
</TABLE>
------------
You should rely only on the information contained in this prospectus
supplement, the accompanying prospectus and the documents we have incorporated
by reference. We have not authorized anyone to provide you with different
information. We are not making an offer of these securities in any state where
the offer or sale is not permitted. You should not assume that the information
provided by this prospectus supplement or the accompanying prospectus, as well
as the information we previously filed with the Securities and Exchange
Commission that is incorporated by reference herein, is accurate as of any date
other than its respective date.
<PAGE>
AmeriGas Partners, L.P.
{MAP APPEARS HERE]
Map shows our district locations in 46 states
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights some basic information in this prospectus supplement
and the accompanying prospectus to help you understand the common units. It may
not contain all of the information that is important to you. You should
carefully read the entire prospectus supplement, the accompanying prospectus
and the other documents incorporated by reference to understand fully the terms
of the common units, as well as the tax and other considerations that are
important to you in making your investment decision. You should pay special
attention to the "Risk Factors" section beginning on page 5 of the accompanying
prospectus to determine whether an investment in the common units is
appropriate for you. For purposes of this prospectus supplement and the
accompanying prospectus, unless the context otherwise indicates, the terms
"AmeriGas Partners," "us," "we," "our," or "ours" are sometimes used as
abbreviated references to AmeriGas Partners, L.P. itself or AmeriGas Partners,
L.P. and its consolidated subsidiaries, which includes our operating
partnership, AmeriGas Propane, L.P.
AMERIGAS PARTNERS, L.P.
Who We Are
We are the second largest propane distributor in the United States, serving
approximately 969,000 customers from approximately 600 district locations in 46
states. Our competitive strengths are our experienced and dedicated work force,
our national distribution infrastructure and our intense focus on customer
satisfaction. Our operations are located primarily in the Northeast, Southeast,
Great Lakes and West Coast regions of the United States. Approximately 80% of
our 1999 fiscal year propane gallons sold were to retail customers, while the
remaining 20% were to wholesale customers. In our 1999 fiscal year, residential
customers accounted for 33% of total propane gallons sold;
industrial/commercial customers, 29%; motor fuel customers, 11%; and
agricultural customers, 7%. Although sales to residential customers represented
only 33% of total propane gallons sold, they accounted for 50% of our total
propane margin, reflecting the higher margins for this segment of the market.
Since our initial public offering in 1995, we have made 46 acquisitions of
propane operations for an aggregate purchase price of approximately $112
million in cash and 63,000 common units. We have an annual target to acquire
propane operations with aggregate annual sales of approximately 10 to 15
million gallons of propane. In fiscal year 2000, we acquired propane operations
with aggregate annual sales of approximately 24 million gallons of propane. In
March 2000, AmeriGas acquired Mitchell Butane of Texas, a leader in the rapidly
growing customer exchange program for grill cylinders, which had annual sales
of over 5.5 million gallons of propane from two locations in Texas. Also, in
May 2000, we acquired the West Coast propane operations of All Star Gas
Corporation, which had annual sales of over 17 million gallons of propane from
26 locations in California, Idaho, Nevada, Oregon and Washington.
Temperatures based upon heating degree days were 13.8% warmer than normal in
the twelve-month period ended June 30, 2000 and 2.6% warmer than in the prior
twelve-month period, using historical national weather statistics. Retail
propane gallons sold were 8.0 million gallons lower as reductions in heating-
related sales were partially offset by higher motor fuel and grill cylinder
exchange sales. In addition, the average cost of propane increased in the
twelve-month period ended June 30, 2000 by more than 50%. Total margin
increased $4.1 million in the twelve-month period ended June 30, 2000 due to
higher total margin from our expanding grill cylinder exchange business,
customer fees, tank rent and ancillary sales and services.
Business Strategy
Our business strategy is to increase market share through acquisitions and
internal growth, leverage our national and local economies of scale and achieve
operating efficiencies through business process improvements.
Acquisitions. The propane industry is highly fragmented, with over 3,500 retail
propane distribution companies. Although we are the second largest propane
distributor in the U.S., we only serve approximately 8% of the retail propane
market. Our management believes there are numerous opportunities for us
S-1
<PAGE>
to grow through acquisitions. We have successfully integrated many large and
small businesses. We achieve efficiencies by reducing operating costs,
introducing more effective pricing and operational systems and improving
marketing and management programs.
We regularly consider and evaluate opportunities for growth through the
acquisition of local, regional and national propane distributors. We may choose
to finance future acquisitions with debt, equity, cash or a combination of the
three. The competition for acquisitions among publicly traded master limited
partnerships engaged in the propane distribution business has intensified in
recent years. Although we believe there are numerous potential acquisition
candidates in the industry, some of which represent material acquisition
opportunities, there can be no assurance that we will find attractive
candidates in the future, or that we will be able to acquire such candidates on
economically acceptable terms.
Leveraging our National Presence. Our national presence is playing an important
role in differentiating us from our competition and growing our business. With
our national infrastructure, we can offer full service to large, national
companies that want to consolidate vendors and reduce operating costs. Two
areas of focus for us are our national accounts program and our grill cylinder
exchange program. National account status affords our customers more efficient
centralized account management and consistently high-quality service at every
location.
. PPX Program. Our PPX Prefilled Propane Xchange(R) program enables consumers
to exchange their empty 20-pound propane grill cylinders for filled
cylinders at various retail locations such as home center and convenience
stores. We inspect, maintain, refill and transport the cylinders and supply
one invoice to our PPX retailers. This provides convenience to consumers and
profitability to the retailers. The PPX program is also attractive to us
because it generates revenues outside of the propane heating season. PPX is
currently available at approximately 10,000 retail locations throughout the
country, which has increased from 6,000 locations last year. Our customers
include many of the nation's leading retailers and grocery chains, including
Home Depot, Albertson's, Wal-Mart and Circle K.
. National Accounts Program. Through our national accounts program, we
encourage large, multi-location propane users to enter into a supply
agreement with us rather than with many small suppliers. We have a dedicated
sales force to service our national account customers. As a result, our
national accounts program has increased its market share with home
improvement centers, national merchandisers, and distribution companies. Our
national account gallons increased by more than 10% in our 2000 fiscal year.
Our national account customers include large forklift users such as
Consolidated Freightways and United Parcel Service, along with companies
that refill grill cylinders like U-Haul.
Operational Initiatives. We are committed to developing new ways to offer
better service to our customers and to improve our productivity. We are
implementing a management structure and business process changes which are
designed to improve the efficiency of field operations such as dispatching
delivery trucks, responding to customer calls and handling vital administrative
functions. We are shifting to a more functional structure with managers
specializing in one activity rather than performing several. We expect these
efforts to result in higher customer and employee satisfaction and lower costs
as this new structure is fully implemented over the next few years.
In addition, we are employing a company-wide customer profitability system
which allows us to track profit contribution and return on investment by
customer. The system enables us to service our customers more profitably
primarily by determining the most appropriate tank size for customers,
improving delivery schedules and rationalizing customer pricing. Using this
system, we are also targeting our marketing efforts to grow the most profitable
customer segments.
S-2
<PAGE>
OUR STRUCTURE
AmeriGas Propane, Inc., our sole general partner and a wholly owned indirect
subsidiary of UGI Corporation (NYSE:UGI), manages our activities and conducts
our business. Through our general partner, we utilize the employees of, and
management services provided by, UGI Corporation and its affiliates. The
following chart depicts our organization and ownership structure after giving
effect to the issuance of the common units offered in this prospectus
supplement (assuming the underwriters' over-allotment option is not exercised).
The percentages reflected in the following chart represent the approximate
ownership interest in each of the Partnership and the Operating Partnership,
individually, and not on an aggregate basis. Aggregate ownership of the
Operating Partnership is shown in the box entitled "Effective Ownership of the
Operating Partnership" in the organizational chart.
[ORGANIZATIONAL CHART APPEARS HERE]
S-3
<PAGE>
THE OFFERING
<TABLE>
<S> <C> <C> <C>
Securities offered...... 2,000,000 common units
2,300,000 common units if the underwriters exercise in full
their over-allotment option
<CAPTION>
Percent
of Total
Limited
Number of Partner
Units Interests
---------- ---------
<S> <C> <C> <C>
Units to be outstanding
after the offering..... Common Units............................... 34,078,293 77.5%
Subordinated Units......................... 9,891,072 22.5%
---------- -----
43,969,365 100.0%
If the underwriters exercise in full their over-allotment
option, we will issue an additional 300,000 common units, which
will result in 34,378,293 common units outstanding representing
a 77.7% interest and 9,891,072 subordinated units outstanding
representing a 22.3% interest.
Use of proceeds......... We estimate that we will receive approximately $36.0 million
from the sale of the common units, or $41.5 million if the
underwriters' over-allotment option is exercised in full, in
each case, after deducting underwriting discounts and
commissions and offering expenses. We plan to use the net
proceeds from this offering, including any from the exercise of
the underwriters' over-allotment option, to reduce indebtedness
under our revolving credit and acquisition facilities and for
working capital.
New York Stock Exchange
symbol................. APU
</TABLE>
TAX CONSIDERATIONS
The tax consequences to you of an investment in common units will depend in
part on your own tax circumstances. For a discussion of the principal federal
income tax considerations associated with our operations and the purchase,
ownership and disposition of units, see "Tax Considerations" beginning on page
18 of the accompanying prospectus. You should consult your own tax advisor
about the federal, state and local tax consequences peculiar to your
circumstances.
We estimate that if you purchase a common unit in this offering and hold the
unit through the record date for the distribution with respect to the quarter
ending September 30, 2003 (assuming quarterly distributions on the common units
with respect to that period are equal to the current minimum quarterly
distribution rate of $0.55 per common unit), you will be allocated an amount of
federal taxable income for that period that is less than or equal to
approximately 20% of the amount of cash distributed to you with respect to that
period. This estimate is based upon many assumptions regarding our business and
operations, including assumptions as to weather conditions in our area of
operations, capital expenditures, cash flows and anticipated cash
distributions. This estimate and our assumptions are subject to, among other
things, numerous business, economic, regulatory and competitive uncertainties
beyond our control. Further, the estimate is based on current tax law and
S-4
<PAGE>
certain tax reporting positions with which the Internal Revenue Service could
disagree. Accordingly, we cannot assure you that the estimate will be correct.
The actual percentage of distributions that will constitute taxable income
could be higher or lower, and any differences could materially affect the value
of the common units.
Ownership of common units by tax-exempt entities, regulated investment
companies and foreign investors raises issues unique to such persons. See "Tax
Considerations--Tax-Exempt Organizations and Certain Other Investors" in the
accompanying prospectus.
FORWARD-LOOKING STATEMENTS
Some information in this prospectus supplement, the accompanying prospectus
and the documents that we have incorporated by reference may contain forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. Such statements
use forward-looking words such as "believe," "plan," "anticipate," "continue,"
"estimate," "expect," "may," "will," or other similar words. These statements
discuss plans, strategies, events or developments that we expect or anticipate
will or may occur in the future.
A forward-looking statement may include a statement of the assumptions or
bases underlying the forward-looking statement. We believe that we have chosen
these assumptions or bases in good faith and that they are reasonable. However,
we caution you that assumed facts or bases almost always vary from actual
results, and the differences between assumed facts or bases and actual results
can be material, depending on the circumstances. When considering forward-
looking statements, you should keep in mind the risk factors and other
cautionary statements in this prospectus supplement, the accompanying
prospectus and the documents that we have incorporated by reference. We will
not update these statements unless the securities laws require us to do so.
SUMMARY OF RISK FACTORS
You should carefully consider the discussion of risks beginning on page 5 of
the accompanying prospectus and the other information included in this
prospectus supplement, the accompanying prospectus and the other documents
incorporated by reference prior to investing in our common units. Some of the
risks discussed include:
. Weather conditions have a significant impact on the demand for propane.
. The retail propane industry is mature, with only limited foreseeable
growth in total demand for the product.
. The retail propane business experiences competition from other energy
sources.
. Our profitability is sensitive to prices and the availability of
supplies.
. We are dependent on our principal suppliers, which increases the risk of
an interruption in our supply of propane.
. We are subject to operating and litigation risks which may not be covered
by insurance.
. We may not be successful in expanding our propane business through
acquisitions.
. Energy efficiency and technology trends may affect the demand for
propane.
. Results of our operations and financial condition may be adversely
affected by governmental regulation and associated environmental and
regulatory costs.
. Cash distributions are not guaranteed and may fluctuate with our
performance.
S-5
<PAGE>
. Our indebtedness may limit our ability to make distributions and may
affect our operations.
. Our ability to issue additional common units may dilute the interests of
holders of common units.
. Holders of common units have limited voting rights, and therefore have a
limited say in the management and control of AmeriGas Partners.
. Our general partner has a limited call right and can protect itself
against dilution.
. Our partnership agreement may discourage an attempt to change our
management.
. Unitholders may not have limited liability in certain circumstances and
may be liable for the return of certain distributions.
. Conflicts of interest may arise as a result of the relationships between
AmeriGas Partners, on the one hand, and the general partner and its
affiliates, on the other.
. Our tax treatment is dependent on our partnership status.
. We have not requested an IRS ruling regarding our classification as a
partnership.
. A unitholder's tax liability could exceed the cash distributions on its
units.
. The ownership of common units may have adverse tax consequences for tax-
exempt organizations and certain other investors.
. There are limits on the deductibility of losses.
. Our registration as a tax shelter could increase the risk of a potential
audit by the IRS.
. Your tax gain or loss on your disposition of common units could be
different than expected.
. The reporting of partnership tax information is complicated and subject
to audits.
. There is a possibility of loss of tax benefits relating to nonconformity
of common units and nonconforming depreciation conventions.
. There are state, local and other tax considerations.
. Unitholders may have negative consequences if we default on our debt or
sell assets.
USE OF PROCEEDS
We expect that we will receive approximately $36.0 million from the sale of
our common units, or $41.5 million if the underwriters' over-allotment option
is exercised in full, in each case, after deducting underwriting discounts and
commissions and offering expenses. We plan to use the net proceeds from this
offering, including any from the exercise of the underwriters' over-allotment
option, to reduce indebtedness under our revolving credit and acquisition
facilities and for working capital.
As of June 30, 2000, we had $25.0 million outstanding under our revolving
credit facility bearing interest at a rate of 8.28% with a final maturity of
September 15, 2002. As of June 30, 2000, we had $70.0 million outstanding under
our acquisition facility bearing interest at a rate of 7.46% with a final
maturity of September 15, 2002. Over the past twelve months, we used borrowings
from our revolving credit facility and our acquisition facility for working
capital, acquisitions and capital expenditures.
S-6
<PAGE>
CAPITALIZATION
The following table sets forth our unaudited consolidated capitalization on
a historical basis as of June 30, 2000, and our unaudited consolidated
capitalization as adjusted to reflect (1) the sale of the common units offered
by this prospectus supplement and the accompanying prospectus and the
application of the net proceeds (assuming the underwriters' over-allotment
option is not exercised) to repay our indebtedness under our revolving credit
facility and reduce the amount outstanding under our acquisition facility and
(2) the capital contribution by our general partner in order to maintain its
aggregate 2% general partner interest in us and the operating partnership as a
result of issuing additional common units. See "Use of Proceeds" above. This
table should be read in conjunction with our consolidated financial statements
and the notes to those financial statements that are incorporated by reference
in this prospectus supplement and the accompanying prospectus.
<TABLE>
<CAPTION>
As of June 30, 2000
----------------------
Actual As Adjusted
---------- -----------
(in thousands)
<S> <C> <C>
Short-term debt, including current portion of long-term
debt:
Revolving credit facility............................ $ 25,000 $ --
Current portion of long-term debt.................... 64,552 64,552
---------- ----------
Total short-term debt.............................. 89,552 64,552
---------- ----------
Long-term debt:
10.125% Senior Notes................................. 100,000 100,000
First Mortgage Notes................................. 616,576 616,576
Acquisition Facility................................. 70,000 58,996
Other................................................ 7,300 7,300
---------- ----------
Total long-term debt............................... 793,876 782,872
---------- ----------
Minority interest...................................... 3,174 3,538
Partners' capital...................................... 211,052 247,056
---------- ----------
Total capitalization................................. $1,097,654 $1,098,018
========== ==========
</TABLE>
S-7
<PAGE>
PRICE RANGE OF OUR COMMON UNITS AND CASH DISTRIBUTIONS
The common units are listed for trading on the New York Stock Exchange under
the symbol "APU." The table below shows, for the quarters indicated, the high
and low sales prices for our common units, as reported on the New York Stock
Exchange Composite Tape, and the amount of cash distributions paid per common
unit.
<TABLE>
<CAPTION>
Price Range Cash
-------------------- Distributions
Fiscal Year High Low Per Common Unit
----------- --------- ---------- ---------------
<S> <C> <C> <C>
1998
First Quarter....................... $ 27 1/4 $ 23 3/8 $ .55
Second Quarter...................... 27 24 3/8 .55
Third Quarter....................... 26 7/16 22 3/4 .55
Fourth Quarter...................... 25 1/16 21 .55
1999
First Quarter....................... $ 26 $ 21 1/2 $ .55
Second Quarter...................... 25 1/8 17 .55
Third Quarter....................... 22 1/8 18 7/8 .55
Fourth Quarter...................... 20 9/16 18 5/16 .55
2000
First Quarter....................... $ 19 7/8 $ 12 3/4 $ .55
Second Quarter...................... 18 1/2 14 3/8 .55
Third Quarter....................... 17 7/16 14 15/16 .55
Fourth Quarter...................... 19 3/8 16 7/8 .55
2001
First Quarter (through October 5)... $ 19 1/4 $ 19 --
</TABLE>
S-8
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
(Thousands of dollars, except per unit)
The following summary consolidated financial data should be read in
conjunction with our consolidated financial statements and the related notes
and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated by reference into this prospectus
supplement. The income statement data for the three years ended September 30,
1999 and the balance sheet data as of September 30, 1999 and 1998 are derived
from our audited consolidated financial statements that are incorporated by
reference into this prospectus supplement. The balance sheet data as of
September 30, 1997 are derived from our audited consolidated financial
statements, which are not included in or incorporated by reference into this
prospectus supplement. The income statement data for the nine-month and twelve-
month periods ended June 30, 2000 and 1999 and the balance sheet data as of
June 30, 2000 and 1999 are derived from our unaudited interim consolidated
financial statements for the nine months ended June 30, 2000, which are
incorporated by reference into this prospectus supplement. We believe that our
unaudited interim results reflect all adjustments, consisting only of normal
recurring adjustments necessary for the fair presentation of our interim
results. Results of operations for the interim periods are not necessarily
indicative of the results of operations for the entire year due to the seasonal
nature of our business.
<TABLE>
<CAPTION>
Nine Month
Twelve Month Period Ended Year Ended
Period Ended June 30, June 30, September 30,
---------------------- ---------------------- ----------------------------------
2000 1999(a) 2000 1999 1999 1998(a) 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD:
Income statement data:
Revenues............... $1,067,476 $ 851,720 $ 899,594 $ 704,653 $ 872,535 $ 914,378 $1,077,825
Operating income....... 89,820 89,934 101,960 104,786 92,646 87,918 110,373
Income before income
taxes................. 18,162 24,102 47,196 55,095 26,061 21,729 44,715
Net income............. 18,026 23,789 46,960 54,569 25,635 21,402 43,980
Limited partner
interest in net
income................ 17,846 23,551 46,490 54,023 25,379 21,188 43,540
Income per limited
partner unit--basic
and diluted........... 0.43 0.56 1.11 1.29 0.61 0.51 1.04
AT PERIOD END:
Balance sheet data:
Current assets......... $ 178,069 $ 113,884 $ 178,069 $ 113,884 $ 140,569 $ 133,346 $ 183,091
Total assets........... 1,259,275 1,178,204 1,259,275 1,178,204 1,196,461 1,217,216 1,318,661
Current liabilities
(excluding debt)...... 124,494 99,319 124,494 99,319 148,513 144,229 146,449
Total debt............. 883,428 741,990 883,428 741,990 766,725 718,994 718,728
Minority interest...... 3,174 3,939 3,174 3,939 3,380 4,049 5,043
Partners' capital...... 211,052 286,291 211,052 286,291 234,041 299,875 397,537
OTHER DATA:
EBITDA(b).............. $ 155,900 $ 154,430 $ 151,514 $ 153,138 $ 157,524 $ 151,143 $ 172,377
Capital expenditures
(including capital
leases)............... $ 27,698 $ 35,355 $ 22,449 $ 25,804 $ 34,577 $ 31,577 $ 24,470
Total propane
margin(c)............. $ 433,094 $ 433,399 $ 364,058 $ 362,041 $ 431,077 $ 423,914 $ 430,241
Total margin(c)........ $ 487,534 $ 483,371 $ 406,164 $ 400,397 $ 481,767 $ 470,618 $ 477,453
Retail propane gallons
sold (millions)....... 773.1 781.1 635.9 646.0 783.2 785.3 807.4
Degree days--% (warmer)
than normal(d)........ (13.8) (11.2) (14.1) (9.6) (9.9) (8.7) (1.2)
</TABLE>
--------
(a) Includes loss from interest rate protection agreements which decreased
EBITDA, operating income, and income before income taxes by $4,000, and
decreased net income by $3,960 or $0.09 per limited partner unit.
(b) EBITDA (earnings before interest expense, income taxes, depreciation and
amortization) should not be considered as an alternative to net income (as
an indicator of operating performance) or as an alternative to cash flow
(as a measure of liquidity or ability to service debt obligations) and is
not a measure of performance or financial condition under generally
accepted accounting principles.
(c) Revenues less related cost of sales.
(d) Deviation from average heating degree days during the 30-year period from
1961 to 1990, based upon national weather statistics provided by the
National Oceanic and Atmospheric Administration for 335 airports in the
continental U.S.
S-9
<PAGE>
BUSINESS AND PROPERTIES
Products, Services and Marketing
We are the second largest propane distributor in the United States, serving
approximately 969,000 customers from approximately 600 district locations in 46
states. Our operations are located primarily in the Northeast, Southeast, Great
Lakes and West Coast regions of the United States. We also sell, install and
service propane appliances, including heating systems. In certain markets, we
also install and service propane fuel systems for motor vehicles. Typically,
district locations are found in suburban and rural areas where natural gas is
not available. Districts generally consist of an office, appliance showroom,
warehouse and service facilities, with one or more 18,000 to 30,000 gallon
storage tanks on the premises. As part of our overall transportation and
distribution infrastructure, we operate as an interstate carrier in 48 states
throughout the United States and are also licensed as a carrier in Canada.
We sell propane primarily to five markets: residential,
commercial/industrial, motor fuel, agricultural and wholesale. Approximately
80% of our fiscal year 1999 propane gallons sold were to retail customers (33%
to residential customers, 29% to industrial/commercial customers, 11% to motor
fuel customers and 7% to agricultural customers), and approximately 20% were to
wholesale customers. Sales to residential customers in fiscal 1999 represented
approximately 41% of retail gallons sold and 50% of our total propane margin.
No single customer accounted for 1% or more of our consolidated revenues for
1999.
In the residential market, which includes both conventional and mobile
homes, propane is used primarily for home heating, water heating and cooking
purposes. Commercial users, which include motels, hotels, restaurants and
retail stores, generally use propane for the same purposes as residential
customers. Our PPX Prefilled Propane Xchange program enables customers to
exchange their empty 20-pound propane grill cylinders at various retail
locations such as home centers and convenience stores. Sales of PPX cylinders
to retailers are included in the commercial/industrial market. Industrial
customers use propane to fire furnaces, as a cutting gas and in other process
applications. Other industrial customers are large-scale heating accounts and
local gas utility customers who use propane as a supplemental fuel to meet peak
load deliverability requirements. As a motor fuel, propane is burned in
internal combustion engines that power over-the-road vehicles, forklifts and
stationary engines. Agricultural uses include tobacco curing and crop drying.
Retail deliveries of propane are usually made to customers by means of
bobtail and rack trucks. Propane is pumped from the bobtail truck, which
generally holds 2,400 to 3,000 gallons of propane, into a stationary storage
tank on the customer's premises. We own most of these storage tanks and lease
them to our customers. The capacity of these tanks ranges from approximately
100 gallons to approximately 1,200 gallons.
We also deliver propane to retail customers in portable cylinders with
capacities of 4 to 30 gallons. Some of these deliveries are made to the
customer's location, where empty cylinders are either picked up for
replenishment or filled in place. We continue to expand our PPX Prefilled
Propane Xchange program. This program is available at approximately 10,000
retail locations throughout the country. In our wholesale operations, we
principally sell propane to large industrial end-users and other propane
distributors.
Propane Supply and Storage
Supplies of propane from our sources historically have been readily
available. During the year ended September 30, 1999, we purchased over 65% of
our propane from 10 suppliers, including the Shell Oil companies (approximately
16%), Dynegy (approximately 15%), and the Amoco companies (approximately 14%).
Management believes that if supplies from these sources were interrupted, we
would be able to secure adequate propane supplies from other sources without a
material disruption of our operations; however, the cost of procuring
replacement supplies might be materially higher and, at least on a short-term
basis, margins could be affected. Aside from Shell, Dynegy and Amoco, no single
supplier provided more than 10% of our total propane supply in fiscal year
1999. In certain market areas, however, some suppliers provide 70% to 80% of
our requirements. Disruptions in supply in these areas could also have an
adverse impact on our margins.
S-10
<PAGE>
We have over 200 sources of supply and we also make purchases on the spot
market. We purchase our propane supplies from domestic and international
suppliers. Over 80% of our propane purchases in fiscal year 1999 were on a
contractual basis under one- or two-year agreements subject to annual review.
More than 70% of the supply contracts provide for pricing based upon posted
prices at the time of delivery or the current prices established at major
storage points such as Mont Belvieu, Texas or Conway, Kansas. In addition, some
agreements provide maximum and minimum seasonal purchase volume guidelines. The
percentage of contract purchases, and the amount of supply contracted for at
fixed prices, will vary from year to year as determined by our general partner.
We use a number of interstate pipelines, as well as railroad tank cars,
delivery trucks and barges to transport propane from suppliers to storage and
distribution facilities. We store propane at facilities in Arizona, Rhode
Island, Utah and several other locations.
Because our profitability is sensitive to changes in wholesale propane
costs, we generally seek to pass on increases in the cost of propane to
customers. There is no assurance, however, that we will always be able to pass
on product cost increases fully, particularly when product costs rise rapidly.
In fiscal year 1997, when the Mont Belvieu price per gallon of propane more
than doubled between April 1, 1996 ($.34625) and December 16, 1996 ($.75), we
were able to maintain our profitability through the use of risk management
techniques designed to control product costs and by passing product cost
increases through to end users.
We expect to be able to secure adequate product supply for our customers
during fiscal year 2001. Periods of severe cold weather, supply interruptions
or other unforeseen events, however, could result in rapid increases in product
cost. Our general partner has adopted supply acquisition and product price risk
management practices to reduce the effect of price volatility on product costs.
These practices currently include the use of summer storage, prepaid contracts
for future product delivery and derivative commodity instruments such as
options and propane price swaps.
The following graph shows the average prices of propane on the propane spot
market during the last five fiscal years through September 30, 2000 at Mont
Belvieu, Texas and Conway, Kansas, two major storage areas.
[GRAPH APPEARS HERE]
Oct-95 30.946 32.7784
Nov-95 30.9531 32.7406
Dec-95 35.3219 38.1719
Jan-96 36 36.2415
Feb-96 40.8563 37.7688
Mar-96 37.2292 36.0119
Apr-96 35.5744 34.1071
May-96 34.9233 34.4773
Jun-96 34.925 36.3531
Jul-96 35.6339 37.2679
Aug-96 38.4403 37.9773
Sep-96 47.0156 44.7844
Oct-96 51.5734 51.5272
Nov-96 58.0493 63.4112
Dec-96 61.0446 84.2917
Jan-97 47.4545 63.392
Feb-97 38.7105 39.0197
Mar-97 38.5 37.2563
Apr-97 34.875 35.2614
May-97 35.3095 36.4762
Jun-97 34.4286 35.8631
Jul-97 34.9063 34.6278
Aug-97 37.0268 36.5268
Sep-97 38.6786 37.9524
Oct-97 39.8261 37.3207
Nov-97 35.9479 35.0035
Dec-97 33.571 31.3636
Jan-98 30.0656 28.2063
Feb-98 29.7862 28.3237
Mar-98 27.3892 27.8381
Apr-98 29.0565 29.4702
May-98 27.4188 27.8231
Jun-98 24.4205 24.8409
Jul-98 24.5398 24.5483
Aug-98 24.1161 23.8661
Sep-98 24.8304 24.0417
Oct-98 25.7188 24.5682
Nov-98 24.7862 23.2007
Dec-98 20.8949 18.7188
Jan-99 21.7467 19.6086
Feb-99 22.4342 20.5822
Mar-99 24.1005 23.4022
Apr-99 28.2619 27.5774
May-99 28.3063 26.8813
Jun-99 30.9517 28.679
Jul-99 37.2619 34.622
Aug-99 40.5085 37.5597
Sep-99 43.1786 42.4048
Oct-99 45.4554 43.3899
Nov-99 43.4406 38.7781
Dec-99 42.8304 35.1012
Jan-00 56.1086 42.3191
Feb-00 59.7219 47.2625
Mar-00 51.1277 47.6495
Apr-00 46.875 43.6414
May-00 51.3068 50.8068
Jun-00 55.4716 56.2244
Jul-00 54.875 56.2862
Aug-00 58.5408 63.5245
Sep-00 64.20945 70.9466
S-11
<PAGE>
Properties
As of September 30, 1999, we owned approximately 81% of our district
locations. In addition, we sublease three one-million barrel underground
storage caverns in Arizona to store propane and butane for ourself and third
parties. We also lease a 600,000 barrel refrigerated, above-ground storage
facility in California, which could be used in connection with waterborne
imports or exports of propane or butane. The California facility, which we
operate, is currently subleased to several refiners for the storage of butane.
In Rhode Island, we lease storage with a 400,000 barrel capacity.
The transportation of propane requires specialized equipment. The trucks and
railroad tank cars utilized for this purpose carry specialized steel tanks that
maintain the propane in a liquefied state. As of September 30, 1999, we
operated a fleet of approximately 150 transport trucks, 40% of which are
leased. We owned approximately 315 transport trailers and leased over 400
railroad tank cars. In addition, our fleet included over 2,400 bobtail and rack
trucks and approximately 1,800 other delivery and service vehicles.
Approximately 41% of these vehicles were owned. Other assets owned as of
September 30, 1999 included more than one million stationary storage tanks with
typical capacities of 100 to 1,000 gallons and over 1.1 million portable
propane cylinders with typical capacities of 5 to 100 gallons. We also owned
more than 2,400 large volume tanks which are used for our own storage
requirements. Most of our debt is secured by liens and mortgages on our real
and personal property.
S-12
<PAGE>
MANAGEMENT
As is commonly the case with publicly-traded master limited partnerships, we
do not employ any of the persons responsible for managing or operating us, but
instead reimburse our general partner and its affiliates for their services.
The following table sets forth certain information as of September 5, 2000,
regarding the executive officers and directors of our general partner.
Directors are elected annually by our general partner's sole shareholder,
AmeriGas, Inc., a Pennsylvania corporation, and hold office until their
successors are duly elected and qualified. AmeriGas, Inc. is a wholly owned
subsidiary of UGI Corporation. Each executive officer named in the following
table has been elected to serve until his successor is duly appointed or
elected or until his earlier death, removal or resignation from office. There
are no family relationships between any of the directors or any of the
executive officers or between any of the executive officers and any of the
directors.
<TABLE>
<CAPTION>
Name Age Position With The General Partner
---- --- ----------------------------------------------------------------------
<S> <C> <C>
Lon R. Greenberg........ 50 Chairman of the Board of Directors
Eugene V. N. Bissell.... 47 President, Chief Executive Officer, and Director
Thomas F. Donovan....... 67 Director
Richard C. Gozon........ 61 Director
James W. Stratton....... 63 Director
Stephen A. Van Dyck..... 57 Director
Roger B. Vincent........ 55 Director
David I. J. Wang........ 68 Director
Martha B. Lindsay....... 48 Vice President--Finance and Chief Financial Officer
Brendan P. Bovaird...... 52 Vice President and General Counsel
Richard R. Eynon........ 53 Controller and Chief Accounting Officer
R. Paul Grady........... 47 Senior Vice President--Operations and Chief Operating Officer
William D. Katz......... 47 Vice President--Human Resources
Robert H. Knauss........ 46 Vice President--Law, Associate General Counsel and Corporate Secretary
David L. Lugar.......... 42 Vice President--Supply and Transportation
Carey M. Monaghan....... 49 Vice President--Business Transformation and Marketing
</TABLE>
Mr. Greenberg is a director (since 1994) and Chairman of the general
partner. He previously served as President and Chief Executive Officer of the
general partner from 1996 until July 2000. He is also a director (since 1994)
and Chairman (since 1996), Chief Executive Officer (since 1995), and President
(since 1994) of UGI, having previously been Senior Vice President--Legal and
Corporate Development of UGI (1989 to 1994). Mr. Greenberg previously served as
Vice President and General Counsel of AmeriGas, Inc. (1984 to 1994). He also
serves as a director of UGI Utilities, Inc. and Mellon PSFS Advisory Board.
Mr. Bissell is President, Chief Executive Officer and a director of the
general partner (since July 2000). He previously served as Senior Vice
President--Sales and Marketing of the general partner (October 1999 to July
2000), having served as Vice President--Sales and Operations (1995 to 1999).
Previously, he was Vice President--Distributors and Fabrication, BOC Gases
(1995), having been Vice President--National Sales (1993 to 1995) and Regional
Vice President (Southern Region) for Distributor and Cylinder Gases Division,
BOC Gases (1989 to 1993). He had previously worked at the general partner and
AmeriGas from 1981 to 1987. He currently serves as Vice President and is a
member of the Board of Directors of the National Propane Gas Association.
S-13
<PAGE>
Mr. Donovan was elected a director of the general partner on April 25, 1995.
He retired as Vice Chairman of Mellon Bank on January 31, 1997, a position he
had held since 1988. He continues to serve as an advisory board member to
Mellon Bank Corp. He also serves as a director of UGI Corporation, UGI
Utilities, Inc., Nuclear Electric Insurance Co. and Merrill Lynch International
Bank, Ltd.
Mr. Gozon was elected a director of the general partner on February 24,
1998. He is Executive Vice President of Weyerhaeuser Company (an integrated
forest products company), a position he has held since 1994. Mr. Gozon was
formerly a director (1984 to 1993), President and Chief Operating Officer of
Alco Standard Corporation (a provider of paper and office products) (1988 to
1993); Executive Vice President and Chief Operating Officer (1987); Vice
President (1982 to 1988); and President (1979 to 1987) of Paper Corporation of
America. He also serves as a director of UGI Corporation, UGI Utilities, Inc.,
AmeriSource Health Corporation, and Triumph Group, Inc.
Mr. Stratton was elected a director of the general partner on April 25,
1995. He has been the Chairman, Chief Executive Officer and a director of
Stratton Management Company (investment advisory and financial consulting firm)
since 1972. He has also been Chairman and a director of EFI (financial services
firm) since 1979. In addition, Mr. Stratton is a director of UGI Corporation,
UGI Utilities, Inc., Stratton Growth Fund, Inc., Stratton Monthly Dividend REIT
Shares, Inc., Stratton Small-Cap Value Fund, Teleflex, Inc. and BE&K, Inc.
Mr. Van Dyck was elected a director of the general partner on June 15, 1995.
He has been Chairman of the Board and Chief Executive Officer of Maritrans Inc.
since 1987, the nation's largest independent marine transporter of petroleum.
He also serves as Chairman of the Board of West of England Mutual Insurance
Association and as a director of Mellon PSFS Advisory Board.
Mr. Vincent was elected a director of the general partner on January 8,
1998. He has been President of Springwell Corporation, a corporate finance
advisory firm since 1989. Mr. Vincent served in various capacities at Bankers
Trust Company (1971 to 1989), including managing director (1984 to 1989). He is
also a director of Tatham Offshore, Inc.
Mr. Wang was elected a director of the general partner on April 25, 1995.
Mr. Wang is retired, having formerly served as Executive Vice President--Timber
and Specialty Products and a director of International Paper Company (1987 to
1991). He is also a director of UGI Corporation, UGI Utilities, Inc., BE&K
Inc., Emsource Inc., and Forest Resources LLC.
Ms. Lindsay was elected Vice President--Finance and Chief Financial Officer
of the general partner on January 5, 1998. She previously served as Vice
President and Treasurer (1994 to 1997) and as Treasurer (1994) of Tambrands
Inc., a manufacturer of personal products. Prior to 1994, Ms. Lindsay held the
positions of Director of Business Development (1987 to 1989) and Assistant
Treasurer (1990 to 1993) at Tambrands, Inc.
Mr. Bovaird is Vice President and General Counsel of the general partner
(since 1995). He is also Vice President and General Counsel of UGI Corporation,
UGI Utilities, Inc. and AmeriGas, Inc. (since 1995). Mr. Bovaird previously
served as Division Counsel and Member of the Executive and Operations
Committees of Wyeth-Ayerst International Inc. (1992 to 1995) and Senior Vice
President, General Counsel and Secretary of Orion Pictures Corporation (1990 to
1991).
Mr. Eynon was elected Controller and Chief Accounting officer of the general
partner on January 5, 1998. Prior to his election, Mr. Eynon was Controller of
the general partner (March 1997 to January 1998) and Assistant Controller of
UGI Corporation (1985 to 1997). Previously, he was a Senior Manager with Price
Waterhouse.
Mr. Grady is Senior Vice President--Operations of the general partner (since
October 1999) and Chief Operating Officer (since July 2000), having served as
Vice President--Sales and Operations (1995 to 1999). Previously, he was Vice
President--Corporate Development of UGI (1994 to 1995) and Director, Corporate
Development (1990 to 1994). Mr. Grady was previously Director, Corporate
Development Services of Campbell Soup Company (1985 to 1990).
S-14
<PAGE>
Mr. Katz is Vice President--Human Resources of the general partner (since
December 1999), having served as Vice President--Corporate Development (1996 to
1999). Previously, he was Vice President--Corporate Development of UGI (1995 to
1996). Prior to joining UGI, Mr. Katz was Director of Corporate Development
with Campbell Soup Company for over five years. He also practiced law for
approximately 10 years, first with the firm of Jones, Day, Reavis & Pogue, and
later in the Legal Department at Campbell Soup Company.
Mr. Knauss is Vice President--Law and Associate General Counsel of the
General Partner (since 1996), having served as Corporate Secretary (since 1994)
and Group Counsel--Propane (1989 to 1996) of UGI. He joined UGI as Associate
Counsel in 1985. Before joining UGI, Mr. Knauss was an associate at the firm of
Ballard, Spahr, Andrews & Ingersoll in Philadelphia, Pennsylvania.
Mr. Lugar is Vice President--Supply and Transportation (since September
2000). Previously, he served as Director--NGL Marketing for Conoco, Inc., where
he spent 20 years in increasingly responsible positions in propane marketing,
operations, and supply.
Mr. Monaghan is Vice President--Business Transformation and Marketing (since
May 2000). Prior to joining AmeriGas Partners, he was Vice President--General
Manager, Dry Soup for Campbell Soup Company (since 1997), where he also served
as a Business Director and General Manager of a number of Campbell Soup
Divisions for almost 10 years.
S-15
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement of
even date herewith, each underwriter named below has severally agreed to
purchase, and we have agreed to sell to such underwriter, the number of units
set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
Number of
Underwriters Common Units
------------ ------------
<S> <C>
Salomon Smith Barney Inc........................................
Banc of America Securities LLC..................................
Donaldson, Lufkin & Jenrette Securities Corporation.............
PaineWebber Incorporated........................................
----
Total.......................................................
====
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the units included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the units (other than those
covered by the over-allotment option described below) if they purchase any of
the units.
The underwriters, for whom Salomon Smith Barney Inc., Banc of America
Securities LLC, Donaldson, Lufkin & Jenrette Securities Corporation and
PaineWebber Incorporated are acting as representatives, propose to offer some
of the units directly to the public at the public offering price set forth on
the cover page of this prospectus supplement and some of the units to certain
dealers at the public offering price less a concession not in excess of $
per unit. The underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per unit on sales to certain other dealers. If
all of the units are not sold at the initial offering price, the
representatives may change the public offering price and the other selling
terms.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus supplement, to purchase up to 300,000 additional
common units at the public offering price less the underwriting discount. The
underwriters may exercise such option solely for the purpose of covering over-
allotments, if any, in connection with this offering. To the extent such option
is exercised, each underwriter will be obligated, subject to certain
conditions, to purchase a number of additional units approximately
proportionate to such underwriter's initial purchase commitment.
We, our general partner and some affiliates of our general partner have
agreed with the underwriters, for a period of 180 days from the date of this
prospectus supplement, not to, without the prior written consent of Salomon
Smith Barney Inc., offer, sell, contract to sell, dispose of or hedge any
common units of AmeriGas Partners or any securities convertible into or
exchangeable for common units. These agreements do not apply to the acquisition
of assets, businesses or the capital stock or other ownership interests of
businesses by us in exchange for units, if the recipient of units agrees not to
dispose of any units received in connection with the acquisition during that
period. These agreements also do not apply to any existing employee benefit
plans or unit option plans. Salomon Smith Barney Inc. in its sole discretion
may release any of the securities subject to these lock-up agreements at any
time without notice.
The following table shows the per unit and total underwriting discounts and
commissions to be paid to the underwriters by us in connection with this
offering. These amounts are shown assuming both no exercise and full exercise
of the underwriters' option to purchase additional common units.
<TABLE>
<CAPTION>
Paid by AmeriGas
Partners
-----------------
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per unit................................................... $ $
---- ----
Total...................................................... $ $
==== ====
</TABLE>
S-16
<PAGE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell common units in the open market. These
transactions may include short sales, syndicate covering transactions and
stabilizing transactions. Short sales involve syndicate sales of common units
in excess of the number of units to be purchased by the underwriters in the
offering, which creates a syndicate short position. "Covered" short sales are
sales of units made in an amount up to the number of units represented by the
underwriters' over-allotment option. In determining the source of units to
close out the covered syndicate short position, the underwriters will consider,
among other things, the price of units available for purchase in the open
market as compared to the price at which they may purchase through the over-
allotment option. Transactions to close out the covered syndicate short
position involve either purchases of the common units in the open market after
the distribution has been completed or the exercise of the over-allotment
option. The underwriters may also make "naked" short sales of units in excess
of the over-allotment option. The underwriters must close out any naked short
sale position by purchasing common units in the open market. A naked short sale
position is more likely to be created if the underwriters are concerned that
there may be downward pressure on the price of the units in the open market
after pricing that could adversely affect investors who purchase in the
offering. Stabilizing transactions consist of bids or purchases of units in the
open market while the offering is in progress.
The underwriters may also impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc. repurchases units originally sold by that syndicate
member in order to cover syndicate short positions or make stabilizing
purchases.
Any of these activities have the effect of preventing or retarding a decline
in the market price of common units. They may also cause the price of common
units to be higher than the price that would otherwise exist in the open market
in the absence of these transactions. The underwriters may conduct these
transactions on the New York Stock Exchange or in the over-the-counter market,
or otherwise. If the underwriters commence any of these transactions, they may
be discontinued at any time.
We estimate that our portion of the total expenses, excluding underwriting
discounts and commissions, of this offering will be approximately $500,000.
The underwriters have performed certain investment banking and advisory
services for us from time to time for which they have received customary fees
and expenses. The representatives may, from time to time, engage in
transactions with and perform services for us or our affiliates in the ordinary
course of business.
A prospectus in electronic form may be made available on the websites
maintained by one or more of the underwriters. The representatives may agree to
allocate a number of units to underwriters for sale to their online brokerage
account holders. The representatives will allocate units to underwriters that
may make Internet distributions on the same basis as other allocations. In
addition, units may be sold by the underwriters to securities dealers who
resell units to online brokerage account holders.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make because of any of those
liabilities.
LEGAL MATTERS
Certain legal and tax matters relating to the common units being offered
will be passed upon for us by Morgan, Lewis & Bockius LLP, Washington, D.C.,
and Baker Botts L.L.P., Houston, Texas. Certain legal matters relating to the
common units being offered will be passed upon for the underwriters by Vinson &
Elkins L.L.P., New York, New York.
S-17
<PAGE>
PROSPECTUS
9,000,000 Common Units
of
AmeriGas Partners, L.P.
------------
This prospectus provides you with a general description of the securities
that we may offer. Each time that we sell securities we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read this prospectus and
any supplement carefully before you invest.
The common units are traded on the New York Stock Exchange under the symbol
"APU." On October 5, 2000, the last reported sales price for the common units
as reported on the New York Stock Exchange was $19 3/16 per common unit.
We may sell these securities to underwriters or dealers, or we may sell them
directly to other purchasers. See "Plan of Distribution." The prospectus
supplement will list any underwriters and the compensation they will receive.
Each time that we sell common units under this prospectus we will provide a
prospectus supplement that will contain specific information about the terms of
that offering.
The common units are limited partner interests, which are inherently
different from the capital stock of a corporation. You should carefully
consider the risks relating to investing in common units and each of the risk
factors described under "Risk Factors" beginning on page 5 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this prospectus is October 5, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Who We Are.......................... 1
About This Prospectus............... 2
Where You Can Find More
Information........................ 2
Incorporation of Documents by
Reference.......................... 2
Forward-Looking Statements.......... 3
Risk Factors........................ 5
Risks Inherent in Our Business.... 5
Risks Inherent in an Investment in
AmeriGas Partners................ 7
Tax Risks......................... 11
</TABLE>
<TABLE>
<S> <C>
Use of Proceeds.............. 14
Description of Common Units.. 14
Tax Considerations........... 18
Plan of Distribution......... 28
Legal Opinions............... 29
Experts...................... 29
</TABLE>
------------
You should rely only on the information contained in or incorporated by
reference into this prospectus. We have not authorized anyone to provide you
with different information. We are not making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information provided by this prospectus is accurate as of any date other than
the date on the front of this prospectus.
<PAGE>
WHO WE ARE
AmeriGas Partners, L.P. is a publicly traded Delaware limited partnership
formed on November 2, 1994. We are the second largest retail propane
distributor in the United States based on fiscal year 1999 retail sales volume
of 783 million gallons. We serve approximately 969,000 residential, commercial,
industrial, agricultural and motor fuel customers from approximately 600
district locations in 46 states. Our operations are located primarily in the
Northeast, Southeast, Great Lakes and West Coast regions of the United States.
We conduct our business principally through our subsidiary, AmeriGas
Propane, L.P., a Delaware limited partnership which is commonly referred to as
our operating partnership. On April 19, 1995, the operating partnership
acquired the propane distribution businesses and assets of AmeriGas Propane,
Inc., AmeriGas Propane-2, Inc. and Petrolane Incorporated. These acquisitions
took place concurrently with the initial public offering of our common units.
The common units, which represent limited partner interests, are traded on the
New York Stock Exchange under the symbol "APU." Our executive offices are
located at 460 North Gulph Road, King of Prussia, Pennsylvania 19406, and our
telephone number is (610) 337-7000. In this report, the terms "AmeriGas
Partners," "our," "us" and "we" are sometimes used as abbreviated references to
AmeriGas Partners, L.P. itself or AmeriGas Partners, L.P. and its consolidated
subsidiaries, which includes the operating partnership.
AmeriGas Propane, Inc., a Pennsylvania corporation, is our general partner.
Our general partner is a wholly owned indirect subsidiary of UGI Corporation, a
public company listed on the New York and Philadelphia stock exchanges. Through
various subsidiaries, UGI has been in the propane distribution business for
over 40 years. Our general partner and its subsidiary, Petrolane Incorporated,
own an aggregate 56.4% limited partner interest in AmeriGas Partners. In
addition, our general partner owns an aggregate 2% general partner interest.
Our general partner is responsible for managing our operations.
1
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the SEC using a "shelf" registration process. Under this shelf registration
process, we may sell the common units described in this prospectus in one or
more offerings. This prospectus provides you with a general description of us
and the common units, our registered securities. Each time we sell common units
under this prospectus we will provide a prospectus supplement that will contain
specific information about the terms of that offering. The prospectus
supplement may also add to, update or change information in this prospectus.
The information in this prospectus is accurate as of its date. You should
carefully read this prospectus, the prospectus supplement and the documents
that we have incorporated by reference below.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with the
SEC. You can inspect and/or copy these reports and other information at
locations maintained by the SEC, including:
. The principal offices of the SEC located at Judiciary Plaza, Public
Reference Room, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549;
. The regional offices of the SEC located at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661;
. The regional offices of the SEC located at 7 World Trade Center, Suite
1300, New York, New York 10048; and
. The SEC's website at http://www.sec.gov.
Copies of such materials can be obtained by mail at prescribed rates from
the Public Reference Room of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Please call 1-800 SEC-0330 for further information
about the operation of the Public Reference Room.
We also provide information to the New York Stock Exchange because the
common units are traded on the New York Stock Exchange. You may obtain reports
and other information at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the information that we file
with the SEC. This means that we can disclose to you important information
contained in other documents filed with the SEC by referring you to those
documents. The information incorporated by reference is an important part of
this prospectus. Information that we file later with the SEC will automatically
update and may supersede information in this prospectus or information
previously filed with the SEC. We incorporate by reference the documents listed
below:
1) our annual report on Form 10-K for the year ended September 30, 1999;
2) our quarterly reports on Form 10-Q for the quarters ended December 31,
1999, March 31, 2000, and June 30, 2000; and
3) the description of the common units in our registration statement filed
pursuant to the Securities Exchange Act of 1934 on Form 8-A (File No.
001-13692), dated March 28, 1995, as amended by Amendment No. 1 to Form
8-A, dated April 11, 1995, and by Amendment No. 2 to Form 8-A, dated
January 17, 1997, and any amendments or reports filed after the date
hereof to update the description.
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We also incorporate by reference all documents filed by us under Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 between the
date of this prospectus and our sale of all of the common units offered by this
prospectus.
If information in incorporated documents conflicts with information in this
prospectus you should rely on the most recent information. If information in an
incorporated document conflicts with information in another incorporated
document, you should rely on the most recent incorporated document.
You may request a copy of these filings at no cost by writing or telephoning
us at the following address or phone number:
AmeriGas Propane, Inc.
Attention: Robert W. Krick, Treasurer
P.O. Box 965
Valley Forge, Pennsylvania 19482
Telephone: (610) 337-7000
You should only rely on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. We are making
offers of the common units only in states where the offer is permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
FORWARD-LOOKING STATEMENTS
Some information in this prospectus, any prospectus supplement and the
documents that we have incorporated by reference may contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such statements use
forward-looking words such as "believe," "plan," "anticipate," "continue,"
"estimate," "expect," "may," "will," or other similar words. These statements
discuss plans, strategies, events or developments that we expect or anticipate
will or may occur in the future. Specific factors which could cause actual
results to differ from those in the forward-looking statements include:
. adverse weather conditions resulting in reduced demand;
. price volatility and availability of propane;
. the availability of capacity to transport propane to market areas;
. changes in laws and regulations, including safety, tax and accounting
matters;
. competitive pressures from the same and alternative energy sources;
. liability for environmental claims;
. improvements in energy efficiency and technology resulting in reduced
demand;
. labor relations;
. inability to make business acquisitions on economically acceptable
terms;
. operating hazards and risks incidental to transporting, storing and
distributing propane, butane and ammonia including the risk of
explosions and fires resulting in personal injury and property damage;
. regional economic conditions; and
. interest rate fluctuations and other capital market conditions.
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A forward-looking statement may include a statement of the assumptions or
bases underlying the forward-looking statement. We believe that we have chosen
these assumptions or bases in good faith and that they are reasonable. However,
we caution you that assumed facts or bases almost always vary from actual
results, and the differences between assumed facts or bases and actual results
can be material, depending on the circumstances. When considering forward-
looking statements, you should keep in mind the risk factors and other
cautionary statements in this prospectus, any prospectus supplement and the
documents that we have incorporated by reference. We will not update these
statements unless the securities laws require us to do so.
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RISK FACTORS
Common units are inherently different from capital stock of a corporation,
although many of the business risks to which we are subject are similar to
those that would be faced by a corporation engaged in the same business. You
should carefully consider the following risk factors, together with other
information contained in this prospectus, any prospectus supplement and the
information that we have incorporated by reference before investing in the
common units. If any of the following risks actually occurs, then our business,
financial condition or results of operations could be materially adversely
affected. In such event, we may be unable to make distributions to the holders
of our common units, the trading price of our common units could decline and
you may lose all or part of your investment.
Risks Inherent in the Business of AmeriGas Partners
Weather Conditions Affect the Demand for Propane
Weather conditions have a significant impact on the demand for propane for
both heating and agricultural purposes. Many customers of AmeriGas Partners
rely heavily on propane as a heating fuel. Accordingly, the volume of propane
sold is at its highest during the five-month peak heating season of November
through March and is directly affected by the severity of the winter weather.
Approximately 55% to 60% of our retail propane volumes are sold during these
months. In recent years, warmer-than-normal weather in our service territory
has reduced demand for propane and other energy sources for heating purposes
below normal levels, which has had an adverse effect on our operating results.
There can be no assurance that normal winter weather in our service territory
will occur in the future.
The Retail Propane Industry is Mature and Competitive
The retail propane industry is mature, with only limited growth in total
demand for the product foreseen. Our general partner expects the overall demand
for propane to remain relatively constant over the next several years, with
year-to-year industry volumes being impacted primarily by weather patterns.
Therefore, our ability to grow within the industry is dependent on our ability
to acquire other retail distributors and to achieve internal growth, including
expansion of our PPX Prefilled Propane Xchange program (through which consumers
can exchange an empty barbecue propane cylinder for a filled one) and National
Accounts program (through which we encourage large, multi-location propane
users to enter into a supply agreement with us rather than with many small
suppliers), and the success of our marketing programs designed to increase
targeted customer segments.
AmeriGas Partners competes with other distributors of propane, including
several major companies and several thousand small independent operators. In
recent years, some rural electric cooperatives and fuel oil distributors have
expanded their businesses to include propane distribution and we compete with
them as well. Generally, competition in the past few years has intensified,
partly as a result of warmer-than-normal weather and general economic
conditions. Our ability to compete effectively depends on the reliability of
our service, our responsiveness to customers and our ability to maintain
competitive retail prices.
The Retail Propane Business Experiences Competition From Other Energy Sources
Propane is sold in competition with other sources of energy, some of which
are less costly for equivalent energy value. AmeriGas Partners competes for
customers against suppliers of electricity, fuel oil and natural gas.
Electricity is a major competitor of propane, but propane generally enjoys a
substantial competitive price advantage over electricity. Several states have
adopted or are considering proposals that would substantially deregulate the
generation portion of the electric utility industry and thereby permit retail
electric customers to choose their electric supplier. Proponents of electric
utility deregulation believe that competition will ultimately reduce the cost
of electricity, and a drop in the price of electricity could adversely affect
propane's existing competitive price advantage over electricity.
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Fuel oil is also a major competitor of propane and is generally less
expensive than propane. Furnaces and appliances that burn propane will not
operate on fuel oil and vice versa, however, so a conversion from one fuel to
the other requires the installation of new equipment. Our customers generally
have an incentive to switch to fuel oil only if fuel oil becomes significantly
less expensive than propane. Except for certain industrial and commercial
applications, propane is generally not competitive with natural gas in areas
where natural gas pipelines already exist, because natural gas is a
significantly less expensive source of energy than propane. The gradual
expansion of the nation's natural gas distribution systems has resulted in the
availability of natural gas in many areas that previously depended upon
propane. In addition, our general partner cannot predict the effect that the
development of alternative energy sources might have on our operations.
AmeriGas Partners is Subject to Pricing and Inventory Risk
The retail propane business is a "margin-based" business in which gross
profits are dependent upon the excess of the sales price over the propane
supply costs. Propane is a commodity, and, as such, its unit price is subject
to volatile changes in response to changes in supply or other market
conditions. AmeriGas Partners has no control over these market conditions.
Consequently the unit price of the propane that we and other marketers purchase
can change rapidly over a short period. Most of our product supply contracts
permit suppliers to charge posted prices at the time of delivery or the current
prices established at major storage points such as Mont Belvieu, Texas or
Conway, Kansas. Because our profitability is sensitive to changes in wholesale
propane costs, we generally seek to pass on increases in the cost of propane to
our customers. There is no assurance, however, that we will always be able to
pass on product cost increases fully, particularly when product costs rise
rapidly.
We Are Dependent on Our Principal Suppliers Which Increases the Risk of an
Interruption in Supply
Supplies of propane from our sources historically have been readily
available. During the year ended September 30, 1999, we purchased over 65% of
our propane from 10 suppliers. Our general partner believes that if supplies
from these sources were interrupted, we would be able to secure adequate
propane supplies from other sources without a material disruption of our
operations; however, the cost of procuring replacement supplies might be
materially higher and, at least on a short-term basis, margins could be
affected. Additionally, in certain market areas some of our suppliers provide
70% to 80% of our propane requirements. Disruptions in supply in these areas
could also have an adverse impact on our margins.
AmeriGas Partners Is Subject to Operating and Litigation Risks Which May Not
Be Covered by Insurance
The operations of AmeriGas Partners are subject to all of the operating
hazards and risks normally incidental to handling, storing, transporting and
otherwise providing combustible liquids such as propane for use by consumers.
As a result, we are sometimes a defendant in various legal proceedings and
litigation arising in the ordinary course of business. We maintain insurance
policies with insurers in such amounts and with such coverages and deductibles
as our general partner believes are reasonable and prudent. There can be no
assurance, however, that such insurance will be adequate to protect us from all
material expenses related to potential future claims for personal and property
damage or that such levels of insurance will be available in the future at
economical prices.
AmeriGas Partners May Not Be Successful in Making Acquisitions
AmeriGas Partners has historically expanded its propane business through
acquisitions and internal growth. We regularly consider and evaluate
opportunities for growth through the acquisition of local, regional and
national propane distributors. We may choose to finance future acquisitions
with debt, equity, cash or a combination of the three. The competition for
acquisitions among publicly traded master limited partnerships engaged in the
propane distribution business has intensified in recent years. Although we
believe there are numerous potential acquisition candidates in the industry,
some of which represent material acquisition opportunities, there can be no
assurance that we will find attractive acquisition candidates in the future,
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that we will be able to acquire such candidates on economically acceptable
terms, that any acquisitions will not be dilutive to earnings and distributions
or that any additional debt incurred to finance an acquisition will not affect
our ability to make distributions.
Energy Efficiency and Technology Trends May Affect Demand for Propane
Retail customers primarily use propane as a heating fuel. The national trend
toward increased conservation and technological advances, including
installation of improved insulation and the development of more efficient
furnaces and other heating devices, has slowed the growth of demand for propane
by retail gas customers. Our general partner is not able to predict the effect
that future conservation measures or advances in heating, conservation or other
devices might have on the operations of AmeriGas Partners.
Results of Operations and Financial Condition of AmeriGas Partners May be
Adversely Affected by Governmental Regulation and Associated Environmental and
Regulatory Costs
The propane business is subject to a wide range of federal and state laws
and regulations related to environmental and other regulated matters. AmeriGas
Partners has implemented environmental programs and policies designed to avoid
potential liability and costs under applicable environmental laws. It is
possible, however, that we will have increased costs with operating or other
regulatory permits. New environmental regulations might adversely impact our
operations, storage and transportation of propane. It is possible that material
costs and liabilities will be incurred, including those relating to claims for
damages to property and persons.
Risks Inherent in an Investment in AmeriGas Partners
Cash Distributions Are Not Guaranteed and May Fluctuate with the Performance
of AmeriGas Partners
Although we distribute all of our "available cash" (as defined in
"Description of Common Units," below) each quarter, the amount of cash that we
generate each quarter fluctuates. As a result, we cannot guarantee that we will
pay the minimum quarterly distribution (as described more fully in "Description
of Common Units," below) each quarter. The actual amount of cash that is
available to be distributed each quarter will depend upon numerous factors,
including:
. cash flow generated by operations;
. weather in our areas of operation;
. borrowing capacity under our revolving credit facility;
. required principal and interest payments on our debt and reserves
therefor;
. fluctuations in working capital;
. cost of acquisitions (including related debt service payments);
. restrictions contained in our debt instruments;
. capital expenditures;
. issuances of debt and equity securities;
. reserves made by the general partner in its discretion;
. prevailing economic and industry conditions; and
. financial, business and other factors, a number of which are beyond our
control.
The amount of available cash needed annually to pay the minimum quarterly
distribution on all common units and the general partner interest is
approximately $72.5 million ($70.6 million on the common units and $1.9 million
on the general partner interest). An additional $21.8 million is needed
annually to pay the minimum quarterly distribution on the subordinated units. A
reasonable proxy for the amount of cash available for distribution and
generated from operations can be calculated by subtracting from our EBITDA
(earnings before interest expense, income taxes, depreciation and amortization)
(1) cash interest expense and (2) capital
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expenditures needed to maintain operating capacity. Although we believe that
distributable cash flow calculated in this manner is a reasonable estimate of
the amount of cash we generate from operations, it does not reflect changes in
working capital which can significantly affect actual cash available for
distribution and it is not a measure of performance or financial condition
under generally accepted accounting principles. Distributable cash flow
calculated in this manner for the twelve months ended June 30, 2000 was
approximately $71.9 million. During that period, we declared and paid the full
minimum quarterly distribution on all common and subordinated units and the
general partner interest, for a total of $94.3 million. A portion of the
minimum quarterly distributions paid during that period were funded with
revolving credit borrowings.
Our inability to generate sufficient cash from operations during the twelve
months ended June 30, 2000 to pay the full minimum quarterly distribution on
all units was due to significantly warmer-than-normal weather and the impact of
higher propane product costs on working capital. If weather during fiscal year
2001 is significantly warmer than normal, we may not generate sufficient cash
from operations to cover the full minimum quarterly distribution on the
subordinated units, in which event we may elect to borrow under our revolving
credit facility, as we have in the past, to fund this shortfall. Any borrowing
to pay distributions increases our leverage and interest expense and reduces
the borrowing capacity under our revolving credit facility until such
borrowings are repaid.
The Indebtedness of AmeriGas Partners May Limit Our Ability to Make
Distributions and May Affect Our Operations
Our debt outstanding as of June 30, 2000 totaled $883.4 million, consisting
of $858.4 million of long-term debt (including current maturities of $64.6
million) and $25.0 million under the revolving credit facility. Our ability to
make principal and interest payments depends on future performance, which
performance is subject to many factors, some of which will be outside of our
control. In addition, most of our indebtedness is secured by substantially all
of our assets and all of our indebtedness contains restrictive covenants that
limit our ability to distribute cash and to incur additional indebtedness. The
first mortgage notes and the bank credit facilities require our general partner
to serve as our sole general partner and sole general partner of the operating
partnership, to maintain with its affiliates an aggregate 30% partnership
interest in AmeriGas Partners and to be a direct or indirect wholly owned
subsidiary of UGI. Failure to maintain these ownership interests would
constitute an event of default under the first mortgage notes and the bank
credit facilities. Upon a change of control, we will be required to offer to
purchase the senior notes at 101% of the principal amount thereof, and the
operating partnership will be required to offer to purchase the first mortgage
notes at a purchase price specified in the first mortgage note agreements.
Payment of principal and interest on such indebtedness, as well as compliance
with the requirements and covenants of such indebtedness, limits our ability to
make distributions to unitholders. Our leverage may also adversely affect our
ability to finance future operations and capital needs, limit our ability to
pursue other business opportunities and make results of operations more
susceptible to adverse business conditions.
Holders of Common Units May Experience Dilution of Their Interests
The partnership agreement of AmeriGas Partners generally allows us to issue
additional limited partner interests and other equity securities without the
approval of the unitholders, as well as an unlimited number of partnership
interests junior to the common units without a unitholder vote. During the
subordination period, as defined in "Description of Common Units," below, the
number of common units that we may issue is subject to certain limitations.
These limitations do not apply to issuances in connection with acquisitions or
capital improvements that are accretive, the repayment of certain indebtedness
or certain employee benefit plans. When we issue additional equity securities,
your proportionate partnership interest will decrease and the amount of cash
distributed on each unit and the market price of the common units could
decrease. Issuance of additional common units will also diminish the relative
limited voting strength of each previously outstanding unit. See "Holders of
Common Units Have Limited Voting Rights," below. The ultimate effect of any
such issuance may be to dilute the interests of holders of units in AmeriGas
Partners and to make it more difficult for a person or group to remove our
general partner or otherwise change our management.
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After the subordination period, we may issue an unlimited number of
additional general and limited partner interests and other equity securities
of AmeriGas Partners, including senior equity securities, for such
consideration and on such terms and conditions as shall be established by our
general partner in its sole discretion, without the approval of any
unitholders.
Holders of Common Units Have Limited Voting Rights; Management and Control of
AmeriGas Partners
Our general partner manages and operates AmeriGas Partners. Unlike the
holders of common stock in a corporation, holders of outstanding common units
have only limited voting rights on matters affecting our business. Holders of
common units have no right to elect the general partner on an annual or other
continuing basis, and our general partner generally may not be removed except
pursuant to the vote of the holders of not less than 66 2/3% of the
outstanding units. As a result, holders of common units have limited say in
matters affecting our operations and others may find it difficult to attempt
to gain control or influence our activities.
The General Partner Has a Limited Call Right with Respect to the Common Units
If at any time our general partner and its affiliates hold 80% or more of
the issued and outstanding common units, our general partner will have the
right to purchase all, but not less than all, of the remaining common units
held by nonaffiliates at specified prices. Accordingly, under certain
circumstances you may be required to sell your common units against your will
and the price you receive for those securities may be less than you would like
to receive.
Change of Management Provisions
The partnership agreement contains certain provisions that are intended to
discourage a person or group from attempting to remove our general partner as
general partner or otherwise change management of AmeriGas Partners. If any
person or group other than the general partner or its affiliates acquires
beneficial ownership of 20% or more of the common units, such person or group
will lose its voting rights with respect to all of its common units. The
partnership agreement also provides that if our general partner is removed
other than for cause, the subordination period will end, all arrearages on the
common units will terminate and all outstanding subordinated units (if any)
will convert into common units. The effect of these provisions and the change
of control provisions in our debt instruments may be to diminish the price at
which the common units will trade under certain circumstances.
A "subordinated unit" (described more fully in "Description of Common
Units," below) is a unit that receives distributions only once the holders of
common units have received all required minimum quarterly distributions.
The General Partner Can Protect Itself Against Dilution
Whenever we issue equity securities to any person other than our general
partner and its affiliates, our general partner has the right to purchase
additional limited partnership interests on the same terms to maintain its
percentage interest in AmeriGas Partners. No other unitholder has a similar
right. Therefore, only our general partner may protect itself against dilution
caused by the issuance of additional equity securities.
Unitholders May Not Have Limited Liability in Certain Circumstances and May
be Liable for the Return of Certain Distributions
The limitations on the liability of holders of common units for the
obligations of a limited partnership have not been clearly established in some
states. If it were determined that AmeriGas Partners had been conducting
business in any state without compliance with the applicable limited
partnership statute, or that the right or the exercise of the right by the
holders of common units as a group to remove or replace our general partner,
to make certain amendments to our partnership agreement or to take other
action pursuant to that
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partnership agreement constituted participation in the "control" of the
business of AmeriGas Partners, then a holder of common units could be held
liable under certain circumstances for our obligations to the same extent as
our general partner.
Unitholders may also have to repay AmeriGas Partners amounts wrongfully
returned or distributed to them. Under Delaware law, we may not make a
distribution to you if the distribution causes our liabilities to exceed the
fair market value of our assets. Liabilities to partners on account of their
partnership interests and non-recourse liabilities are not counted for purposes
of determining whether a distribution is permitted. Delaware law provides that
a limited partner who receives such a distribution and knew at the time of the
distribution that the distribution violated Delaware law will be liable to the
limited partnership for the distribution amount for three years from the
distribution date.
Additionally, under Delaware law an assignee who becomes a substituted
limited partner of a limited partnership is liable for the obligations of the
assignor to make contributions to the partnership. However, such an assignee is
not obligated for liabilities unknown to him or her at the time he or she
became a limited partner if the liabilities could not be determined from the
partnership agreement.
Conflicts of Interest and Fiduciary Responsibility
Conflicts of interest can arise as a result of the relationships between
AmeriGas Partners, on the one hand, and the general partner and its affiliates,
on the other. The directors and officers of the general partner have fiduciary
duties to manage the general partner in a manner beneficial to the general
partner's sole shareholder, AmeriGas, Inc., a wholly-owned subsidiary of UGI
Corporation. At the same time, the general partner has fiduciary duties to
manage AmeriGas Partners in a manner beneficial to both it and the unitholders.
The duties of our general partner to AmeriGas Partners and the unitholders,
therefore, may come into conflict with the duties of the directors and officers
of our general partner to its sole shareholder, AmeriGas, Inc.
Such conflicts of interest might arise in the following situations, among
others:
(i) Decisions of our general partner with respect to the amount and timing
of cash expenditures, borrowings, issuances of additional units and
reserves in any quarter affects whether or the extent to which there
is sufficient available cash from operating surplus to meet the
minimum quarterly distribution and target distributions (as defined in
"Description of Common Units," below) on all units in a given quarter.
In addition, actions by our general partner (including those taken in
projecting future operating results and adjusted operating surplus)
may have the effect of enabling the general partner to receive
incentive distributions or hastening the expiration of the
subordination period or the conversion of subordinated units into
common units.
(ii) AmeriGas Partners does not have any employees and relies solely on
employees of the general partner and its affiliates.
(iii) Under the terms of the partnership agreement, we reimburse our
general partner and its affiliates for costs incurred in managing
and operating AmeriGas Partners, including costs incurred in
rendering corporate staff and support services to us.
(iv) Whenever possible, the general partner limits our liability under
contractual arrangements to all or particular assets of AmeriGas
Partners, with the other party thereto to have no recourse against
our general partner or its assets.
(v) Any agreements between us and our general partner and its affiliates
do not grant to the holders of common units, separate and apart from
AmeriGas Partners, the right to enforce the obligations of our general
partner and such affiliates in our favor. Therefore, the general
partner, in its capacity as the general partner of AmeriGas Partners,
is primarily responsible for enforcing such obligations.
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(vi) Under the terms of the partnership agreement, the general partner is
not restricted from causing us to pay the general partner or its
affiliates for any services rendered on terms that are fair and
reasonable to us or entering into additional contractual arrangements
with any of such entities on behalf of AmeriGas Partners. Neither the
partnership agreement nor any of the other agreements, contracts and
arrangements between us, on the one hand, and the general partner and
its affiliates, on the other, are or will be the result of arm's-
length negotiations.
(vii) Our general partner may exercise its right to call for and purchase
units as provided in the partnership agreement or assign such right
to one of its affiliates or to us.
(viii) Under the terms of the partnership agreement, it does not
constitute a breach of our general partner's fiduciary duties to
AmeriGas Partners or the unitholders for the general partner or its
affiliates to engage in certain activities of the type conducted by
us, even if in direct competition with us, and the general partner
and such affiliates have no obligation to present business
opportunities to us.
Unless provided for otherwise in the partnership agreement, Delaware law
generally requires a general partner of a Delaware limited partnership to
adhere to fiduciary duty standards under which it owes its limited partners the
highest duties of good faith, fairness and loyalty and which generally prohibit
such general partner from taking any action or engaging in any transaction as
to which it has a conflict of interest. Our partnership agreement expressly
permits our general partner to resolve conflicts of interest between itself or
its affiliates, on the one hand, and us or the unitholders, on the other, and
to consider, in resolving such conflicts of interest, the interests of other
parties in addition to the interests of the unitholders. In addition, the
partnership agreement provides that a purchaser of common units is deemed to
have consented to certain conflicts of interest and actions of our general
partner and its affiliates that might otherwise be prohibited and to have
agreed that such conflicts of interest and actions do not constitute a breach
by the general partner of any duty stated or implied by law or equity. The
general partner is not in breach of its obligations under the partnership
agreement or its duties to us or the unitholders if the resolution of such
conflict is fair and reasonable to us. The latitude given in the partnership
agreement to the general partner in resolving conflicts of interest may
significantly limit the ability of a unitholder to challenge what might
otherwise be a breach of fiduciary duty. Our general partner believes, however,
that such latitude is necessary and appropriate to enable it to serve as the
general partner of AmeriGas Partners without undue risk of liability.
Our partnership agreement expressly limits the liability of our general
partner by providing that the general partner, its affiliates and its officers
and directors are not liable for monetary damages to us, the limited partners
or assignees for errors of judgment or for any actual omissions if the general
partner and other persons acted in good faith. In addition, we are required to
indemnify our general partner, its affiliates and their respective officers,
directors, employees and agents to the fullest extent permitted by law, against
liabilities, costs and expenses incurred by our general partner or such other
persons, if the general partner or such persons acted in good faith and in a
manner they reasonably believed to be in, or not opposed to, our best interests
and, with respect to any criminal proceedings, had no reasonable cause to
believe the conduct was unlawful.
Tax Risks
Tax Treatment is Dependent on Partnership Status
The availability to a common unitholder of the federal income tax benefits
of an investment in the common units depends, in large part, on our
classification as a partnership for federal income tax purposes. We have been
and believe that we will continue to be classified as a partnership for federal
income tax purposes. However, no ruling from the IRS as to this status has been
or is expected to be requested. We are instead relying on the opinion of Baker
Botts L.L.P., our tax counsel, which is not binding on the IRS.
If, contrary to the opinion of our tax counsel, we were classified as a
corporation for federal income tax purposes, we would be required to pay tax on
our income at corporate tax rates (currently a 35% federal rate),
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distributions to the common unitholders would generally be taxed a second time
as corporate distributions and no income, gains, losses or deductions would
flow through to the unitholders. Because a tax would be imposed upon us as an
entity, the cash available for distribution to the common unitholders would be
substantially reduced. Treatment of us as a corporation would cause a material
reduction in the anticipated cash flow and after-tax return to the common
unitholders, likely causing a substantial reduction in the value of the common
units.
We cannot guarantee that the law will not be changed so as to cause us to be
treated as a corporation for federal income tax purposes or otherwise to be
subject to entity-level taxation. Our partnership agreement provides that if a
law is enacted or existing law is modified or interpreted in a manner that
subjects us to taxation as a corporation or otherwise subjects us to entity-
level taxation for federal, state or local income tax purposes, certain
provisions of our partnership agreement will be subject to change. These
changes would include a decrease in the minimum quarterly distribution and the
target distribution levels to reflect the impact of this law on us.
We Have Not Requested an IRS Ruling Regarding our Classification as a
Partnership
We have not requested a ruling from the IRS with respect to our
classification as a partnership for federal income tax purposes, the
classification of any of the revenue from our propane operations as "qualifying
income" under Section 7704 of the Internal Revenue Code or any other matter
affecting us. Accordingly, the IRS may adopt positions that differ from the
conclusions of our tax counsel expressed in this prospectus or the positions
taken by us. It may be necessary to resort to administrative or court
proceedings in an effort to sustain some or all of our tax counsel's
conclusions or the positions taken by us. A court may not concur with some or
all of our conclusions. Any contest with the IRS may materially and adversely
impact the market for the common units and the prices at which they trade. In
addition, the costs of any contest with the IRS will be borne directly or
indirectly by the unitholders and our general partner.
A Unitholder's Tax Liability Could Exceed Cash Distributions on its Units
A unitholder will be required to pay federal income taxes and, in some
cases, state and local income taxes on the unitholder's allocable share of our
income, even if the unitholder receives no cash distributions from us. We
cannot guarantee that a unitholder will receive cash distributions equal to the
unitholder's allocable share of our taxable income or even the tax liability to
the unitholder resulting from that income. Further, a unitholder may incur a
tax liability, in excess of the amount of cash received, upon the sale of the
unitholder's common units.
Ownership of Common Units May Have Adverse Tax Consequences for Tax-Exempt
Organizations and Certain Other Investors
Investment in common units by certain tax-exempt entities, regulated
investment companies and foreign persons raises issues unique to them. For
example, virtually all of our taxable income allocated to organizations exempt
from federal income tax, including individual retirement accounts and other
retirement plans, will be unrelated business taxable income and thus will be
taxable to the unitholder. Very little of our income will be qualifying income
to a regulated investment company. Distributions to foreign persons will be
reduced by withholding taxes.
There are Limits on the Deductibility of Losses
In the case of taxpayers subject to the passive loss rules (generally,
individuals and closely held corporations), any losses generated by us will
only be available to offset our future income and cannot be used to offset
income from other activities, including other passive activities or
investments. Unused losses may be deducted when the unitholder disposes of the
unitholder's entire investment in us in a fully taxable transaction with an
unrelated party. A unitholder's share of our net passive income may be offset
by unused losses from us
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carried over from prior years, but not by losses from other passive activities,
including losses from other publicly traded partnerships.
Tax Shelter Registration Could Increase Risk of Potential Audit by the IRS
We are registered with the IRS as a "tax shelter." The IRS has issued to us
the following tax shelter registration number: 95-192000149. Issuance of the
registration number does not indicate that an investment in us or the claimed
tax benefits have been reviewed, examined or approved by the IRS. We cannot
guarantee that we will not be audited by the IRS or that tax adjustments will
not be made. The rights of a unitholder owning less than a 1% profits interest
in us to participate in the income tax audit process are very limited. Further,
any adjustments in our tax returns will lead to adjustments in the unitholders'
tax returns and may lead to audits of unitholders' tax returns and adjustments
of items unrelated to us. Each unitholder would bear the cost of any expenses
incurred in connection with an examination of the unitholder's personal tax
return.
Tax Gain or Loss on Disposition of Common Units Could Be Different Than
Expected
A unitholder who sells common units will recognize gain or loss equal to the
difference between the amount realized, including the unitholder's share of our
non-recourse liabilities, and the unitholder's adjusted tax basis in the common
units. Prior distributions in excess of cumulative net taxable income allocated
for a common unit which decreased a unitholder's tax basis in that common unit
will, in effect, become taxable income if the common unit is sold at a price
greater than the unitholder's tax basis in that common unit, even if the price
is less than the unit's original cost. A portion of the amount realized,
whether or not representing gain, may be ordinary income. Furthermore, should
the IRS successfully contest some conventions used by us, a unitholder could
recognize more gain on the sale of common units than would be the case under
those conventions, without the benefit of decreased income in prior years.
Reporting of Partnership Tax Information is Complicated and Subject to Audits
We will furnish each unitholder with a Schedule K-1 that sets forth the
unitholder's allocable share of income, gains, losses and deductions. In
preparing these schedules, we will use various accounting and reporting
conventions and adopt various depreciation and amortization methods. We cannot
guarantee that these schedules will yield a result that conforms to statutory
or regulatory requirements or to administrative pronouncements of the IRS.
Further, our tax return may be audited, which could result in an audit of a
unitholder's individual tax return and increased liabilities for taxes because
of adjustments resulting from the audit.
Because our taxable year ends on September 30, a calendar-year unitholder
who sells units during the period from October 1 to December 31 may have to
include more than twelve months of income on a single tax return. The Schedule
K-1 with respect to the income allocated to the period from October 1 to the
date of sale will not be available for up to fifteen months after the end of
the calendar year even though such income is includable on the unitholder's tax
return for the calendar year in which the sale is made.
There is a Possibility of Loss of Tax Benefits Relating to Nonconformity of
Common Units and Nonconforming Depreciation Conventions
Because we cannot match transferors and transferees of common units,
uniformity of the tax characteristics of the common units to a purchaser of
common units of the same class must be maintained. To maintain uniformity and
for other reasons, we have adopted certain depreciation and amortization
conventions which we believe conform to Treasury Regulations under Section
743(b) of the Internal Revenue Code. A successful challenge to those
conventions by the IRS could adversely affect the amount of tax benefits
available to a purchaser of common units and could have a negative impact on
the value of the common units.
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There are State, Local and Other Tax Considerations
In addition to United States federal income taxes, unitholders will likely
be subject to other taxes, such as state and local taxes, unincorporated
business taxes and estate, inheritance or intangible taxes that are imposed by
the various jurisdictions in which the unitholder resides or in which we do
business or own property. A unitholder will likely be required to file state
and local income tax returns and pay state and local income taxes in some or
all of the various jurisdictions in which we do business or own property and
may be subject to penalties for failure to comply with those requirements. It
is the responsibility of each unitholder to file all applicable United States
federal, state and local tax returns. Our tax counsel has not rendered an
opinion on the tax consequences of an investment in us other than with regard
to the United States federal income tax consequences.
Unitholders May Have Negative Tax Consequences if we Default on our Debt or
Sell Assets
If we default on any of our debt, the lenders will have the right to sue us
for non-payment. This could cause an investment loss and negative tax
consequences for unitholders through the realization of taxable income by
unitholders without a corresponding cash distribution. Likewise, if we were to
dispose of assets and realize a taxable gain while there is substantial debt
outstanding and proceeds of the sale were applied to the debt, our unitholders
could have increased taxable income without a corresponding cash distribution.
USE OF PROCEEDS
We will use the net proceeds from the sale of the common units for general
business purposes, including debt repayment, future acquisitions, capital
expenditures and working capital. We may change the potential uses of the net
proceeds in a prospectus supplement.
DESCRIPTION OF COMMON UNITS
General
The common units represent limited partner interests that entitle the
holders to participate in AmeriGas Partners' distributions and exercise the
rights and privileges available to limited partners under our partnership
agreement.
Number of Units
As of July 31, 2000, we had 32,078,293 common units outstanding,
representing an approximate 74.9% limited partner interest in AmeriGas
Partners, and 9,891,072 subordinated units outstanding, representing an
approximate 23.1% limited partner interest in AmeriGas Partners. Our general
partner and its subsidiary own all of the subordinated units and 14,283,932
common units. In addition, our general partner owns a 1.0% general partner
interest in us and a 1.0101% general partner interest in our operating
partnership.
Under our partnership agreement we generally may issue, without further
unitholder action, an unlimited number of additional limited partner interests
and other equity securities with such rights, preferences and privileges as
shall be established by our general partner in its sole discretion, including
securities that may have special rights to which holders of common units are
not entitled. During the subordination period, however, there are restrictions
on the number and type of common units we may issue without the prior approval
of at least a majority of the outstanding common units. This limitation does
not apply to the issuance of common units or parity securities in connection
with certain accretive acquisitions or the repayment of certain indebtedness.
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Listing
Our common units are listed on the New York Stock Exchange under the symbol
"APU." Any additional common units we issue will also be listed on the New York
Stock Exchange.
Voting
Each record holder has a vote according to his percentage interest in
AmeriGas Partners. Our partnership agreement provides, however, that any person
or group (other than our general partner and its affiliates) that owns
beneficially 20% or more of all outstanding common units cannot vote on any
matter and those common units will not be considered to be outstanding when we
send notices of a meeting of unitholders, calculate required votes, determine
the presence of a quorum or take other similar actions under our partnership
agreement, unless otherwise required by law. Except as otherwise provided by
law or our partnership agreement, the holders of common units and subordinated
units vote as one class.
Cash Distributions
In General
Our partnership agreement requires us to distribute all of our available
cash to our unitholders and our general partner within 45 days following the
end of each fiscal quarter. "Available cash" generally means, with respect to
any fiscal quarter, all cash on hand at the end of each quarter, plus all
additional cash on hand as of the date of the determination of available cash
resulting from borrowings after the end of the quarter, less the amount of
reserves established by our general partner in its reasonable discretion to
provide for the proper conduct of our business, to comply with applicable law
or agreements, or to provide funds for future distributions to partners.
Cash distributions will be made either from "operating surplus" or from
"capital surplus." Available cash from operating surplus is distributed
differently from available cash from capital surplus.
"Operating surplus," with respect to any period, generally means:
. our cash balance on the closing date of our initial public offering plus
$40 million, plus all of our cash receipts since the closing of our
initial public offering, excluding cash receipts from interim capital
transactions (as defined below), plus working capital borrowings after
the end of such period, less
. all of our operating expenses, the payment of some of our indebtedness,
maintenance capital expenditures and reserves established for future
operations, in each case since the closing of our initial public
offering.
Interim capital transactions generally include borrowings (other than for
working capital purposes), sales of debt and equity securities and sales or
other dispositions of assets for cash, other than sales of inventory in the
ordinary course of business, sales of other current assets and sales of assets
as part of normal retirements or replacements.
All available cash distributed is treated as distributed from operating
surplus until the sum of all available cash distributed since our initial
public offering equals the operating surplus as of the end of the quarter
before that distribution. Any available cash distributed in excess of operating
surplus will be treated as capital surplus.
If capital surplus is distributed on a common unit issued in the initial
public offering in an aggregate amount equal to the initial public offering
price of the common units of $21.25 per common unit, plus any arrearages in the
payment of the minimum quarterly distribution on the common units, then the
distinction between operating surplus and capital surplus will cease and all
subsequent distributions of available cash will be made from operating surplus.
Historically, we have not made any distributions of available cash from capital
surplus and we do not expect to do so in the foreseeable future.
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Subordination Period
Currently, the common units have the right to receive distributions of
available cash from operating surplus in an amount equal to the minimum
quarterly distribution of $0.55 per unit per quarter, plus any arrearages on
the common units, before any distributions of available cash from operating
surplus are made on the subordinated units. If distributions from available
cash from operating surplus on the common units for any quarter during the
subordination period are less than $0.55 per unit, holders of common units will
be entitled to arrearages. Common unit arrearages will accrue and be paid in a
future quarter if there is available cash from operating surplus remaining
after the minimum quarterly distribution on the common units is paid for that
quarter from available cash from operating surplus. Common units will not
accrue arrearages for any quarter after the subordination period, and
subordinated units will not accrue any arrearages at any time.
The subordination period will extend until the first day of any quarter that
each of the following tests are met:
. distributions of available cash from operating surplus on each of the
outstanding common units and subordinated units equaled or exceeded the
minimum quarterly distribution for each of the four consecutive non-
overlapping four-quarter periods immediately preceding that date;
. the "adjusted operating surplus" generated during each of the two
immediately preceding, non-overlapping four-quarter periods and during
the immediately preceding sixteen-quarter period equaled or exceeded the
minimum quarterly distribution on each of the outstanding common units
and subordinated units during those periods; and
. there are no arrearages in payment of the minimum quarterly distribution
on the common units.
"Adjusted operating surplus" for any period generally means:
. operating surplus generated during that period; less
. any net increase in working capital borrowings during that period; less
. any net reduction in cash reserves during that period; plus
. any net increases in reserves to provide funds for distributions
resulting from operating surplus generated during the period.
Generally speaking, adjusted operating surplus is intended to reflect the
cash generated from operations during a particular period and therefore
excludes net increases in borrowings and net drawdowns of reserves of cash
generated in prior periods.
Upon the expiration of the subordination period, all remaining subordinated
units will convert into common units and will thereafter participate pro rata
with the other common units in distributions of available cash. In addition, if
our general partner is removed other than for cause, the subordination period
will end, any then-existing arrearages on the common units will terminate and
the subordinated units will immediately convert into common units.
Pursuant to the partnership agreement, a total of 9,891,074 subordinated
units held by the general partner and a subsidiary were converted to common
units on May 18, 1999. Our ability to attain the cash-based performance and
distribution requirements necessary to terminate the subordination period and
convert the remaining 9,891,072 subordinated units depends upon a number of
factors, including highly seasonal operating 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, we did not achieve the cash-based performance requirements in respect
of the quarters ended March 31, 2000 and June 30, 2000. Due to the historical
"look-back" provisions of the conversion test, the possibility is remote that
we will satisfy the cash-based performance requirements for conversion any
earlier than in respect of the quarter ending March 31, 2002.
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Distributions of Available Cash from Operating Surplus
During the subordination period, we will distribute available cash from
operating surplus for each quarter as follows:
. first, 98% to the holders of common units, pro rata, and 2% to the
general partner, until the holders of common units have received the
minimum quarterly distribution of $0.55 per common unit for the quarter;
. second, 98% to the holders of common units, pro rata, and 2% to the
general partner, until the holders of common units have received an
amount equal to any arrearages in payment of the minimum quarterly
distribution on the common units for any prior quarters during the
subordination period;
. third, 98% to the holders of subordinated units, pro rata, and 2% to the
general partner, until the holders of subordinated units have received
the minimum quarterly distribution of $0.55 per subordinated unit for
the quarter;
. fourth, 98% to all unitholders, pro rata, and 2% to the general partner,
until all unitholders have received a total of $.605 per unit for that
quarter;
. fifth, 85% to all unitholders, pro rata, and 15% to the general partner,
until all unitholders have received a total of $.696 per unit for that
quarter;
. sixth, 75% to all unitholders, pro rata, and 25% to the general partner,
until all unitholders have received a total of $.904 per unit for that
quarter; and
. thereafter, 50% to all unitholders, pro rata, and 50% to the general
partner.
Following the end of the subordination period, we will distribute available
cash from operating surplus as follows:
. first, 98% to all unitholders, pro rata, and 2% to the general partner,
until the unitholders have received $0.605 per unit for the quarter;
. second, 85% to all unitholders, pro rata, and 15% to the general
partner, until all unitholders have received a total of $.696 per unit
for that quarter;
. third, 75% to all unitholders, pro rata, and 25% to the general partner,
until all unitholders have received a total of $.904 per unit for that
quarter;
. thereafter, 50% to all unitholders, pro rata, and 50% to the general
partner.
Transfer Restrictions
Common units are securities and are transferable according to the laws
governing transfer of securities. Until a common unit has been transferred on
our books, we will treat the record holder as the absolute owner for all
purposes. Transfers of common units will not be recorded by the transfer agent
or recognized by us until the transferee executes and delivers a transfer
application. A purchaser or transferee of common units who does not execute and
deliver a transfer application will not receive cash distributions, unless the
common units are held in nominee or "street" name and the nominee or broker has
executed and delivered a transfer application with respect to the common units,
and may not receive federal income tax information and reports furnished to
record holders of common units. We have discretion to withhold consent to
transfer.
Transfer Agent and Registrar
Our transfer agent and registrar for the common units is ChaseMellon
Shareholder Services, L.L.C. Their address is Overpeck Centre, 85 Challenger
Road, Ridgefield Park, New Jersey 07660.
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TAX CONSIDERATIONS
This section is a summary of material tax considerations that may be
relevant to prospective unitholders. The following portion of this section and
the opinions of Baker Botts L.L.P., our tax counsel, that are set out herein
are based upon the Internal Revenue Code of 1986, as amended, regulations
thereunder and current administrative rulings and court decisions, all of which
are subject to change. Subsequent changes in such authorities may cause the tax
consequences to vary substantially from the consequences described below.
No attempt has been made in the following discussion to comment on all
federal income tax matters affecting us or the unitholders. Moreover, the
discussion focuses on unitholders who are individuals and who are citizens or
residents of the United States and has only limited application to
corporations, estates, trusts, non-resident aliens or other unitholders subject
to specialized tax treatment, such as tax-exempt institutions, foreign persons,
individual retirement accounts, REITs or mutual funds. Accordingly, each
prospective unitholder should consult, and should depend on, his own tax
advisor in analyzing the federal, state, local and foreign tax consequences
applicable to him of the ownership or disposition of common units.
Legal Opinions and Advice
Our tax counsel is of the opinion subject to the qualifications set forth in
the discussion that follows that for federal income tax purposes (i) AmeriGas
Partners and the operating partnership will be treated as a partnership and
(ii) owners of common units, with certain exceptions, as described in "Partner
Status" below, will be treated as partners of AmeriGas Partners but not as
partners of our operating partnership. In addition, all statements as to
matters of law contained in this section are the opinion of Baker Botts unless
such statements are made by us or others.
An opinion of counsel represents only that particular counsel's best legal
judgment and does not bind the IRS or the courts. No assurance can be provided
that the opinions and statements set forth herein would be sustained by a court
if contested by the IRS. Any such contest with the IRS may materially and
adversely impact the market for the common units and the prices at which common
units trade even if we prevail. In addition, the costs of any contest with the
IRS will be borne directly or indirectly by the unitholders and our general
partner. Furthermore, no assurance is given that the federal income tax
consequences of an investment in us will not be significantly modified by
future legislative or administrative changes or court decisions. Any such
modification may even have retroactive effect.
We have not requested, and do not expect to request, a ruling from the IRS
with respect to our classification as a partnership for federal income tax
purposes or with respect to any other matter affecting us or holders of our
common units.
Partnership Status
A partnership is not a taxable entity and incurs no federal income tax
liability. Instead, each partner is required to take into account his share of
the items of income, gain, loss and deduction of the partnership in computing
his federal income tax liability, regardless of whether distributions are made.
Distributions of cash by a partnership to a partner are generally not taxable
unless the amount of cash distributed to a partner is in excess of the
partner's adjusted basis in his partnership interest.
We have received the opinion of Baker Botts that, based upon the authorities
that are identified above, we and the operating partnership have been and will
each be classified as a partnership for federal income tax purposes. The
opinion of Baker Botts assumes the accuracy of the following:
(a) Neither we nor the operating partnership has elected nor will elect to
be treated as a corporation.
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(b) We and the operating partnership have been and will be operated in
accordance with (i) all applicable partnership statutes and (ii) the
partnership agreement or operating partnership agreement (whichever is
applicable).
(c) For each of our taxable years from and after our formation, more than
90% of our gross income (i) has been and will be derived from the
exploration, development, production, processing, refining,
transportation or marketing of any mineral or natural resource,
including oil, gas or products thereof or (ii) has been and will be
other items of "qualifying income" within the meaning of Section
7704(d) of the Internal Revenue Code.
AmeriGas Partners believes that such assumptions have been true in the past and
expects that such assumptions will be true in the future.
Section 7704 of the Internal Revenue Code provides that publicly traded
partnerships will, as a general rule, be taxed as corporations. However, an
exception exists with respect to publicly traded partnerships of which 90% or
more of the gross income for every taxable year consists of "qualifying
income," as described in clause (c) above. If we fail to meet this qualifying
income exception in any taxable year, other than a failure which is determined
by the IRS to be inadvertent and which is cured within a reasonable time after
discovery, we will be treated as if we transferred all of our assets (subject
to liabilities) to a newly formed corporation, on the first day of such taxable
year in return for stock in that corporation, and as though we then distributed
that stock to our partners in liquidation of their interests in us. This
contribution and liquidation should be tax-free to our partners and to us, so
long as we do not have liabilities at that time in excess of the tax basis of
our assets. Thereafter, we would be treated as a corporation for federal income
tax purposes.
If we or the operating partnership were treated as a corporation in any
taxable year, either as a result of a failure to meet the qualifying income
exception or otherwise, our items of income, gain, loss and deduction would be
reflected only on our tax return rather than being passed through to the
unitholders, and our net income would be taxed at corporate rates. In addition,
any distribution we made to a unitholder would be treated as taxable dividend
income to the extent of our current or accumulated earnings and profits, would
be treated in the absence of earnings and profits as a nontaxable return of
capital, to the extent of the unitholder's tax basis in his common units, and
would be treated as taxable capital gain after the unitholder's tax basis in
the common units is reduced to zero. Accordingly, treatment of either us or the
operating partnership as a corporation would result in a material reduction in
a unitholder's cash flow and after-tax return and thus would likely result in a
substantial reduction of the value of the common units.
The discussion below is based on the assumption that we and the operating
partnership will be classified as a partnership for federal income tax
purposes.
Tax Treatment of Unitholders
Partner Status
Unitholders who have become our limited partners will be treated as our
partners for federal income tax purposes. Assignees who have executed and
delivered transfer applications, and are awaiting admission as limited partners
and unitholders whose common units are held in street name or by a nominee and
who have the right to direct the nominee in the exercise of the rights
attendant to the ownership of their common units will be treated as our
partners for federal income tax purposes. Because there is no direct authority
addressing assignees of common units who are entitled to execute and deliver
transfer applications but who fail to do so, such assignees may not be treated
as our partners for federal income tax purposes. No part of our income, gain,
deductions or losses is reportable by a unitholder who is not a partner for
federal income tax purposes, and any distributions received by such a
unitholder should therefore be fully taxable as ordinary income. These holders
should consult their own tax advisors with respect to their status as our
partners for federal income tax purposes.
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An owner of common units whose common units have been transferred to a short
seller to complete a short sale would appear to lose his status as a partner
with respect to such common units for federal income tax purposes. If such a
unitholder is not a partner, no part of our income, gain, deduction or loss
with respect to those common units would be reportable by the unitholder, any
payments received by the unitholder in lieu of cash distributions with respect
to those common units would be fully taxable and all of such payments would
appear to be treated as ordinary income. Unitholders desiring to assure their
status as partners should modify any applicable brokerage account agreements to
prohibit their brokers from borrowing their common units.
In the following portion of this section, the word "unitholder" refers to a
holder of our common units who is one of our partners.
Allocation of Partnership Income, Gain, Loss and Deduction
In general, if we have a net profit, our items of income, gain, loss and
deduction will be allocated among the general partner and the unitholders in
accordance with their respective percentage interests in us. At any time that
distributions are made with respect to the common units and not to the
subordinated units, or that incentive distributions are made to the general
partner, gross income will be allocated to the holders of common units to the
extent of the distributions that were not made to the holders of subordinated
units and to the general partner to the extent of the incentive distributions.
If we have a net loss, our items of income, gain, loss and deduction will
generally be allocated to the general partner and the unitholders in accordance
with their respective percentage interests.
Certain items of our income, deduction, gain and loss will be allocated as
required or permitted by Section 704(c) of the Internal Revenue Code to account
for the difference between the tax basis and fair market value of property
heretofore contributed to us. Allocations may also be made to account for the
difference between the fair market value of our assets and their tax basis at
the time of any offering made pursuant to this prospectus.
In addition, certain items of recapture income which we recognize on the
sale of any of our assets will be allocated to the extent provided in
regulations which generally require such depreciation recapture to be allocated
to the partner who (or whose predecessor in interest) was allocated the
deduction giving rise to the treatment of such gain as recapture income.
Alternative Minimum Tax
Each unitholder will be required to take into account his share of our items
of income, gain, deduction or loss for purposes of the alternative minimum tax.
A portion of our depreciation deductions may be treated as an item of tax
preference for this purpose. A unitholder's alternative minimum taxable income
derived from us may be higher than his share of our net income because we may
use accelerated methods of depreciation for federal income tax purposes.
Prospective unitholders should consult with their tax advisors as to the impact
of an investment in common units on their liability for the alternative minimum
tax.
Treatment of Distributions by AmeriGas Partners
Our distributions to a unitholder generally will not be taxable to him for
federal income tax purposes to the extent of the tax basis he has in his common
units immediately before the distribution. Our distributions in excess of a
unitholder's tax basis generally will be gain from the sale or exchange of the
common units, taxable in accordance with the rules described under "Disposition
of Common Units," below. Any reduction in a unitholder's share of our
liabilities for which no partner, including the general partner, bears the
economic risk of loss ("nonrecourse liabilities") will be treated as a
distribution of cash to that unitholder. In particular, our issuance of
additional common units will decrease each unitholder's share of our
nonrecourse liabilities.
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To the extent that our distributions cause the "at risk" amount of a
unitholder who is subject to the "at risk" rules to be less than zero at the
end of any taxable year, such unitholder must recapture losses deducted in
previous years that are equal to the amount of such shortfall.
A non-pro rata distribution of money or property may result in ordinary
income to a unitholder if such distribution reduces the unitholder's share of
our "unrealized receivables," including depreciation recapture or substantially
appreciated "inventory items," both as defined in Section 751 of the Internal
Revenue Code (collectively, "Section 751 assets"). In that event, the
unitholder will be treated as having received as a distribution the portion of
the Section 751 assets that used to be allocated to such partner and as having
exchanged such portion of our assets with us in return for the non-pro rata
portion of the actual distribution made to him. This latter deemed exchange
will generally result in the unitholder's realization of ordinary income the
amount of which is the excess of (1) the non-pro rata portion of such
distribution over (2) the unitholder's tax basis for the share of such Section
751 assets deemed relinquished in the exchange.
Basis of Common Units
A unitholder will have an initial tax basis for his common units equal to
the amount he paid for the common units plus his share of our nonrecourse
liabilities. His basis will be increased by his share of our income and by any
increase in his share of our nonrecourse liabilities. His basis will be
decreased, but not below zero, by his share of our distributions, by his share
of our losses, by any decrease in his share of our nonrecourse liabilities and
by his share of our expenditures that are not deductible in computing our
taxable income and are not required to be capitalized.
Limitations on Deductibility of AmeriGas Partners' Losses
The deduction by a unitholder of that unitholder's share of our losses will
be limited to that unitholder's tax basis in the common units and, in the case
of an individual unitholder or a corporate unitholder who is subject to the "at
risk" rules, to the amount for which the unitholder is considered to be "at
risk" with respect to our activities, if that is less than the unitholder's tax
basis. A unitholder must recapture losses deducted in previous years to the
extent that our distributions cause the unitholder's at risk amount to be less
than zero at the end of any taxable year. Losses disallowed to a unitholder or
recaptured as a result of these limitations will carry forward and will be
allowable to the extent that the unitholder's tax basis or at risk amount,
whichever is the limiting factor, subsequently increases. Upon the taxable
disposition of a common unit, any gain recognized by a unitholder can be offset
by losses that were previously suspended by the at risk limitation but may not
be offset by losses suspended by the basis limitation.
In general, a unitholder will be at risk to the extent of the unitholder's
tax basis in the unitholder's common units, excluding any portion of that basis
attributable to the unitholder's share of our nonrecourse liabilities, reduced
by any amount of money the unitholder borrows to acquire or hold the
unitholder's common units if the lender of such borrowed funds owns an interest
in us, is related to such a person or can look only to common units for
repayment. A unitholder's at risk amount will increase or decrease as the tax
basis of the unitholder's common units increases or decreases, other than tax
basis increases or decreases attributable to increases or decreases in the
unitholder's share of our nonrecourse liabilities.
The passive loss limitations generally provide that individuals, estates,
trusts, certain closely-held corporations and personal service corporations can
deduct losses from passive activities, which include any trade or business
activity in which the taxpayer does not materially participate, only to the
extent of the taxpayer's income from those passive activities. Moreover, the
passive loss limitations are applied separately with respect to each publicly
traded partnership. Consequently, any passive losses generated by us will only
be available to our partners who are subject to the passive loss rules to
offset future passive income generated by us and, in particular, will not be
available to offset income from other passive activities, investments, or
salary. Passive losses that are not deductible because they exceed a
unitholder's share of our income may be deducted
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in full when the unitholder disposes of the unitholder's entire investment in
us in a fully taxable transaction to an unrelated party. The passive activity
loss rules are applied after other applicable limitations on deductions such as
the at risk rules and the basis limitation.
Limitations on Interest Deductions
The deductibility of a non-corporate taxpayer's "investment interest
expense" is generally limited to the amount of such taxpayer's "net investment
income." The IRS has announced that Treasury Regulations will be issued which
characterize net passive income from a publicly traded partnership as
investment income for purposes of the limitations on the deductibility of
investment interest. In addition, the unitholder's share of our portfolio
income will be treated as investment income. Investment interest expense
includes (i) interest on indebtedness properly allocable to property held for
investment, (ii) our interest expense attributed to portfolio income, and (iii)
the portion of interest expense incurred to purchase or carry an interest in a
passive activity to the extent attributable to portfolio income. The
computation of a unitholder's investment interest expense will take into
account interest on any margin account borrowing or other loan incurred to
purchase or carry a common unit. Net investment income includes gross income
from property held for investment and amounts treated as portfolio income
pursuant to the passive loss rules less deductible expenses, other than
interest, directly connected with the production of investment income and
certain gains attributable to the disposition of property held for investment.
Tax Treatment of Operations
Accounting Method and Taxable Year
We currently use the year ending September 30 as our taxable year and we
have adopted the accrual method of accounting for federal income tax purposes.
Each unitholder will be required to include in income for each of the
unitholder's taxable years the unitholder's share of our income, gain, loss and
deduction for each of our taxable years that ends within or with each taxable
year. In addition, a unitholder who disposes of all of the unitholder's common
units following the close of our taxable year but before the close of the
unitholder's taxable year must include the unitholder's share of our income,
gain, loss and deduction in income for the unitholder's taxable year with the
result that the unitholder will be required to report in income for the
unitholder's taxable year the unitholder's share for more than one year of our
income, gain, loss and deduction.
Initial Tax Basis, Depreciation, Amortization and Certain Nondeductible Items
We use the adjusted tax basis of our various assets for purposes of
computing depreciation and cost recovery deductions and gain or loss on any
disposition of such assets. If we dispose of depreciable property, all or a
portion of any gain may be subject to the recapture rules and taxed as ordinary
income rather than capital gain.
The costs incurred in promoting the issuance of common units (i.e.,
syndication expenses) must be capitalized and cannot be deducted by us
currently, ratably or upon our termination. Uncertainties exist regarding the
classification of costs as organization expenses, which may be amortized, and
as syndication expenses, which may not be amortized, but underwriting discounts
and commissions are treated as a syndication cost.
Section 754 Election
We have made the election permitted by Section 754 of the Internal Revenue
Code, which permits us to adjust the tax basis of our assets as to each
purchaser of our common units pursuant to Section 743(b) of the Internal
Revenue Code to reflect the purchaser's purchase price. The Section 743(b)
adjustment is intended to provide a purchaser with the equivalent of an
adjusted tax basis in the purchaser's share of our assets equal to the value of
such share that is indicated by the amount that the purchaser paid for the
common units.
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A Section 754 election is advantageous if the transferee's tax basis in the
transferee's common units is higher than such common units' share of the
aggregate tax basis of our assets immediately prior to the transfer because the
transferee would have, as a result of the election, a higher tax basis in the
transferee's share of our assets. Conversely, a Section 754 election is
disadvantageous if the transferee's tax basis in the transferee's common units
is lower than such common units' share of the aggregate tax basis of our assets
immediately prior to the transfer. The Section 754 election is irrevocable
without the consent of the IRS.
We intend to compute the effect of the Section 743(b) adjustment so as to
preserve the tax uniformity of the common units, that is, to preserve our
ability to determine the tax attributes of a common unit from its date of
purchase and the amount paid therefor. In that regard, we have adopted
depreciation and amortization conventions that we believe conform to Treasury
regulations under Section 743(b) of the Internal Revenue Code.
The calculations involved in the Section 754 election are complex and are
made by us on the basis of certain assumptions as to the value of our assets
and other matters. There is no assurance that the determinations made by us
will prevail if challenged by the IRS and that the deductions resulting from
them will not be reduced or disallowed altogether.
Valuation of AmeriGas Partners' Property and Basis of Properties
The federal income tax consequences of the ownership and disposition of
common units will depend in part on our estimates of the fair market values and
our determinations of the adjusted tax bases of our assets. Although we may
from time to time consult with professional appraisers with respect to
valuation matters, we will make many of the fair market value estimates
ourselves. These estimates and determinations are subject to challenge and will
not be binding on the IRS or the courts. If such estimates or determinations of
basis are subsequently found to be incorrect, the character and amount of items
of income, gain, loss or deductions previously reported by unitholders might
change, and unitholders might be required to adjust their tax liability for
prior years.
Entity-Level Collections
If we are required or elect under applicable law to pay any federal, state
or local income tax on behalf of any partner, we are authorized to pay those
taxes from our funds. Such payment, if made, will be treated as a distribution
of cash to the partner on whose behalf the payment was made. If the payment is
made on behalf of a person whose identity cannot be determined, we are
authorized to treat the payment as a distribution to a current unitholder.
Disposition of Common Units
Recognition of Gain or Loss
A unitholder will recognize gain or loss on a sale of common units equal to
the difference between the amount realized and the unitholder's tax basis in
the common units sold. A unitholder's amount realized is measured by the sum of
the cash and the fair market value of other property received plus his share of
our nonrecourse liabilities. Because the amount realized includes a
unitholder's share of our nonrecourse liabilities, the gain recognized on the
sale of common units could result in a tax liability in excess of any cash
received from such sale.
Gain or loss recognized by a unitholder, other than a "dealer" in common
units, on the sale or exchange of a common unit will generally be a capital
gain or loss. Capital gain recognized on the sale of common units held for more
than one year will generally be taxed at a maximum rate of 20%. A portion of
this gain or loss (which could be substantial), however, will be separately
computed and will be classified as ordinary income or loss under Section 751 of
the Internal Revenue Code to the extent attributable to assets giving rise to
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depreciation recapture or other unrealized receivables or to inventory items
owned by us. Ordinary income attributable to unrealized receivables, inventory
items and depreciation recapture may exceed net taxable gain realized upon the
sale of the common units and will be recognized even if there is a net taxable
loss realized on the sale of the common units. Thus, a unitholder may recognize
both ordinary income and a capital loss upon a disposition of common units. Net
capital loss may offset no more than $3,000 of ordinary income in the case of
individuals and may only be used to offset capital gain in the case of
corporations.
The IRS has ruled that a partner who acquires interests in a partnership in
separate transactions must combine those interests and maintain a single
adjusted tax basis. Upon a sale or other disposition of less than all of such
interests, a portion of that tax basis must be allocated to the interests sold
using an "equitable apportionment" method. If this ruling is applicable to the
holders of common units, a unitholder will be unable to select high or low
basis common units to sell as would be the case with corporate stock. Our tax
counsel does not opine as to the effect such ruling will have on the
unitholders. The ruling is unclear as to how the holding period of these
interests is determined once they are combined.
Certain provisions of the Internal Revenue Code treat a taxpayer as having
sold an "appreciated" partnership interest, one in which gain would be
recognized if it were sold or assigned at its fair market value, if the
taxpayer or a related person enters into (i) a short sale, (ii) an offsetting
notional principal contract or (iii) a futures or forward contract with respect
to the partnership interest or substantially identical property. Moreover, if a
taxpayer has previously entered into a short sale, an offsetting notional
principal contract or a futures or forward contract with respect to a
partnership interest, the taxpayer will be treated as having sold such position
if the taxpayer or a related person acquires the partnership interest or
substantially similar property.
Allocations Between Transferors and Transferees
In general, we will prorate our annual taxable income and losses on a
monthly basis and such income as so prorated will be subsequently apportioned
among the unitholders in proportion to the number of common units owned by each
of them as of the opening of the principal national securities exchange on
which the common units are then traded on the first business day of the month.
However, gain or loss realized on a sale or other disposition of our assets
other than in the ordinary course of business will be allocated among the
unitholders on the date in the month in which that gain or loss is recognized.
As a result, a unitholder transferring common units in the open market may be
allocated income, gain, loss and deduction accrued after the date of transfer.
If this method is not allowed under the Treasury Regulations, or only
applies to transfers of less than all of the unitholder's interest, our taxable
income or losses might be reallocated among the unitholders. We are authorized
to revise our method of allocation between transferors and transferees, as well
as among partners whose interests otherwise vary during a taxable period, to
conform to a method permitted under future Treasury Regulations.
Notification Requirements
A unitholder who sells or exchanges common units is required to notify us in
writing of that sale or exchange within 30 days after the sale or exchange and
in any event by no later than January 15 of the year following the calendar
year in which the sale or exchange occurred. We are required to notify the IRS
of that transaction and to furnish certain information to the transferor and
transferee. However, these reporting requirements do not apply with respect to
a sale by an individual who is a citizen of the United States and who effects
the sale or exchange through a broker. Additionally, a transferee of a common
unit will be required to furnish a statement to the IRS, filed with the
transferee's income tax return for the taxable year in which the sale or
exchange occurred, that sets forth the amount of the consideration paid for the
common unit. Failure to satisfy these reporting obligations may lead to the
imposition of substantial penalties.
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Constructive Termination
AmeriGas Partners will be considered terminated if there is a sale or
exchange of 50% or more of the total interests in our capital and profits
within a 12-month period. Any such termination would result in the closing of
our taxable year for all unitholders. In the case of a unitholder reporting on
a taxable year that does not end with our taxable year, the closing of our
taxable year may result in more than 12 months of our taxable income or loss
being includible in that unitholder's taxable income for the year of
termination. New tax elections required to be made by us, including a new
election under Section 754 of the Internal Revenue Code, must be made
subsequent to a termination and a termination could result in a deferral of our
deductions for depreciation. A termination could also result in penalties if we
were unable to determine that the termination had occurred. Moreover, a
termination might either accelerate the application of, or subject us to, any
tax legislation enacted prior to the termination.
Tax-Exempt Organizations and Certain Other Investors
Ownership of common units by employee benefit plans, other tax-exempt
organizations, nonresident aliens, foreign corporations, other foreign persons
and regulated investment companies raises issues unique to such persons and, as
described below, may have substantially adverse tax consequences. Employee
benefit plans and most other organizations exempt from federal income tax,
including individual retirement accounts and other retirement plans, are
subject to federal income tax on unrelated business taxable income. Much of the
taxable income derived by such an organization from the ownership of a common
unit will be unrelated business taxable income and thus will be taxable to such
a unitholder.
A regulated investment company or "mutual fund" is required to derive 90% or
more of its gross income from interest, dividends, gains from the sale of
stocks or securities or foreign currency or certain related sources. It is not
anticipated that any significant amount of our gross income will include that
type of income.
Non-resident aliens and foreign corporations, trusts or estates which hold
common units will be considered to be engaged in business in the United States
on account of ownership of common units. As a consequence they will be required
to file federal tax returns in respect of their share of our income, gain, loss
or deduction and pay federal income tax at regular rates on any net income or
gain. Generally, a partnership is required to pay a withholding tax on the
portion of the partnership's income which is effectively connected with the
conduct of a United States trade or business and which is allocable to the
foreign partners, regardless of whether any actual distributions have been made
to such partners. However, under rules applicable to publicly traded
partnerships, we will withhold taxes at the rate of 39.6% on actual cash
distributions made quarterly to foreign unitholders. Each foreign unitholder
must obtain a taxpayer identification number from the IRS and submit that
number to our transfer agent, ChaseMellon Shareholder Services, L.L.C., on a
Form W-8 in order to obtain credit for the taxes withheld. A change in
applicable law may require us to change these procedures.
Because a foreign corporation which owns common units will be treated as
engaged in a United States trade or business, such a corporation will also be
subject to United States branch profits tax at a rate of 30% (or any applicable
lower treaty rate) of the portion of any reduction in the foreign corporation's
"U.S. net equity," which is the result of our activities. In addition, such a
unitholder is subject to special information reporting requirements under
Section 6038C of the Internal Revenue Code.
Under a ruling of the IRS, gain recognized by a foreign unitholder who sells
or otherwise disposes of a common unit will be subject to federal income tax as
effectively connected with a United States trade or business of the foreign
unitholder in whole or in part. Apart from the ruling, a foreign unitholder
will not be taxed upon the disposition of a common unit if that foreign
unitholder has held less than 5% in value of the common units during the 5-year
period ending on the date of the disposition and if the common units are
regularly traded on an established securities market at the time of the
disposition.
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Administrative Matters
Information Returns and Audit Procedures
We intend to furnish to each unitholder, within 75 days after the close of
each calendar year, certain tax information, including a Substitute Schedule K-
1, which sets forth such unitholder's share of our income, gain, loss and
deduction for our preceding taxable year. In preparing this information, which
will generally not be reviewed by counsel, we will use various accounting and
reporting conventions. We cannot assure prospective unitholders that the IRS
will not successfully contend in court that such accounting and reporting
conventions are impermissible. Any such challenge by the IRS could negatively
affect the value of the common units.
The IRS may audit our federal income tax information returns. Adjustments
resulting from any such audit may require each unitholder to adjust a prior
year's tax liability, and possibly may result in an audit of the unitholder's
own return. Any audit of a unitholder's return could result in adjustments not
related to our returns as well as those related to our returns. Partnerships
generally are treated as separate entities for purposes of federal tax audits,
judicial review of administrative adjustments by the IRS and tax settlement
proceedings. The tax treatment of partnership items of income, gain, loss and
deduction is determined in a partnership proceeding rather than in separate
proceedings with the partners. The Internal Revenue Code provides for one
partner to be designated as the "tax matters partner" for these purposes. Our
partnership agreement appoints our general partner as our tax matters partner.
The tax matters partner will make certain elections on our behalf and on
behalf of the unitholders and can extend the statute of limitations for
assessment of tax deficiencies against unitholders with respect to items in our
returns. The tax matters partner may bind a unitholder with less than a 1%
profits interest in us to a settlement with the IRS unless that unitholder
elects, by filing a statement with the IRS, not to give such authority to the
tax matters partner. The tax matters partner may seek judicial review, by which
all the unitholders are bound, of a final partnership administrative adjustment
and, if the tax matters partner fails to seek judicial review, such review may
be sought by any unitholder having at least a 1% interest in our profits and by
the unitholders having in the aggregate at least a 5% profits interest.
However, only one action for judicial review will go forward, and each
unitholder with an interest in the outcome may participate. However, if we
elect to be treated as a large partnership, which we do not intend to do, a
unitholder will not have a right to participate in settlement conferences with
the IRS or to seek a refund.
A unitholder must file a statement with the IRS identifying the treatment of
any item on his federal income tax return that is not consistent with the
treatment of the item on our return. Intentional or negligent disregard of the
consistency requirement may subject a unitholder to substantial penalties.
Nominee Reporting
Persons who hold an interest in us as a nominee for another person are
required to furnish to us the following information: (a) the name, address and
taxpayer identification number of the beneficial owner and the nominee; (b)
whether the beneficial owner is (i) a person that is not a United States
person, (ii) a foreign government, an international organization or any wholly-
owned agency or instrumentality of either of the foregoing, or (iii) a tax-
exempt entity; (c) the amount and description of common units held, acquired or
transferred for the beneficial owner; and (d) certain information including the
dates of acquisitions and transfers, means of acquisitions and transfers, and
acquisition cost for purchases, as well as the amount of net proceeds from
sales. Brokers and financial institutions are required to furnish additional
information, including whether they are United States persons and certain
information on common units they acquire, hold or transfer for their own
account. A penalty of $50 per failure, up to a maximum of $100,000 per calendar
year, is imposed by the Internal Revenue Code for failure to report such
information to us. The nominee is required to supply the beneficial owner of
the common units with the information furnished to us.
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Registration as a Tax Shelter
The Internal Revenue Code requires that "tax shelters" be registered with
the Secretary of the Treasury. Although we may not be subject to the
registration requirement on the basis that we do not constitute a tax shelter,
our general partner has registered us as a tax shelter with the Secretary of
the Treasury in the absence of assurance that we will not be subject to tax
shelter registration and in light of the substantial penalties which might be
imposed if registration is required and not undertaken. The IRS has issued to
us the following tax shelter registration number: 95-192000149. ISSUANCE OF THE
REGISTRATION NUMBER DOES NOT INDICATE THAT AN INVESTMENT IN US OR THE CLAIMED
TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED BY THE IRS. We must
furnish the registration number to the unitholders, and a unitholder who sells
or otherwise transfers a common unit in a subsequent transaction must furnish
the registration number to the transferee. The penalty for failure of the
transferor of a common unit to furnish the registration number to the
transferee is $100 for each such failure. The unitholders must disclose our tax
shelter registration number on Form 8271 to be attached to the tax return on
which any deduction, loss or other benefit generated by us is claimed or our
income is included. A unitholder who fails to disclose the tax shelter
registration number on the unitholder's return, without reasonable cause for
that failure, will be subject to a $250 penalty for each failure.
Accuracy-Related Penalties
An additional tax equal to 20% of the amount of any portion of an
underpayment of tax which is attributable to one or more specified causes,
including negligence or disregard of rules or regulations, substantial
understatements of income tax and substantial valuation misstatements, is
imposed by the Internal Revenue Code. No penalty will be imposed, however, with
respect to any portion of an underpayment if it is shown that there was a
reasonable cause for that portion and that the taxpayer acted in good faith
with respect to that portion.
A substantial understatement of income tax in any taxable year exists if the
amount of the understatement exceeds the greater of 10% of the tax required to
be shown on the return for the taxable year or $5,000 ($10,000 for most
corporations). The amount of any understatement subject to penalty generally is
reduced if any portion is attributable to a position adopted on the return (i)
with respect to which there is, or was, "substantial authority" or (ii) as to
which there is a reasonable basis and the pertinent facts of such position are
disclosed on the return. More stringent rules apply to "tax shelters," a term
that in this context does not appear to include us. If any item of our income,
gain, loss or deduction included in the distributive shares of unitholders
might result in such an "understatement" of income for which no "substantial
authority" exists, we must disclose the pertinent facts on our return. In
addition, we will make a reasonable effort to furnish sufficient information
for unitholders to make adequate disclosure on their returns to avoid liability
for this penalty.
A substantial valuation misstatement exists if the value of any property, or
the adjusted basis of any property, claimed on a tax return is 200% or more of
the amount determined to be the correct amount of such valuation or adjusted
basis. No penalty is imposed unless the portion of the underpayment
attributable to a substantial valuation misstatement exceeds $5,000 ($10,000
for most corporations). If the valuation claimed on a return is 400% or more
than the correct valuation, the penalty imposed increases to 40%.
State, Local and Other Tax Considerations
In addition to federal income taxes, a unitholder will be subject to other
taxes, such as state and local income taxes, unincorporated business taxes, and
estate, inheritance or intangible taxes that may be imposed by the various
jurisdictions in which he resides or in which we do business or own property.
Although an analysis of those various taxes is not presented here, each
prospective unitholder should consider their potential impact on such person's
investment in us. We currently conduct business in 46 states including
California, New York, Michigan, Florida, Pennsylvania and North Carolina. A
unitholder will be required to file state income tax
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returns and to pay state income taxes in some or all of the states in which we
do business or own property and may be subject to penalties for failure to
comply with those requirements. In certain states, tax losses may not produce a
tax benefit in the year incurred and also may not be available to offset income
in subsequent taxable years. Some of the states may require that we, or we may
elect to, withhold a percentage of income from amounts to be distributed to a
unitholder who is not a resident of the state. Withholding, the amount of which
may be greater or less than a particular unitholder's income tax liability to
the state, generally does not relieve the non-resident unitholder from the
obligation to file an income tax return. Amounts withheld may be treated as if
distributed to unitholders for purposes of determining the amounts distributed
by us. Based on current law and our estimate of future operations, we
anticipate that any amounts required to be withheld will not be material.
It is the responsibility of each unitholder to investigate the legal and tax
consequences, under the laws of pertinent states and localities, of his
investment in us. Accordingly, each prospective unitholder should consult, and
must depend upon, his own tax counsel or other advisor with regard to those
matters. Further, it is the responsibility of each unitholder to file all state
and local, as well as U.S. federal, tax returns that may be required of such
unitholder. Baker Botts has not rendered an opinion on the state or local tax
consequences of an investment in us.
PLAN OF DISTRIBUTION
We may sell the common units representing limited partner interests
described in this prospectus and any prospectus supplement to one or more
underwriters for public offering and sale, or we may sell the common units to
investors directly or through agents. Any underwriter or agent involved in the
offer and sale of these common units will be named in the applicable prospectus
supplement.
Underwriters may offer and sell these common units at fixed prices, which
may be changed, at prices related to the prevailing market prices at the time
of sale or at negotiated prices. We also may authorize underwriters acting as
our agents to offer and sell these common units upon the terms and conditions
as are set forth in the applicable prospectus supplement. In connection with
the sale of these common units, underwriters may be deemed to have received
compensation from us in the form of underwriting discounts or commissions and
may also receive commissions from purchasers of these common units for whom
they may act as agent. Underwriters may sell these common units to or through
dealers. Dealers may receive compensation in the form of discounts, concessions
or commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by us to underwriters or agents in
connection with the offering of these common units, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable prospectus supplement. Underwriters,
dealers and agents participating in the distribution of these common units may
be deemed to be underwriters, and any discounts and commissions received by
them and any profit realized by them on resale of these common units may be
deemed to be underwriting discounts and commissions under the Securities Act of
1933. Underwriters, dealers and agents may be entitled, under agreements
entered into with us, to indemnification against the contribution toward
certain civil liabilities, including liabilities under the Securities Act of
1933.
If a prospectus supplement so indicates, we will authorize agents,
underwriters or dealers to solicit offers by certain institutional investors to
purchase those common units to which such prospectus supplement relates,
providing for payment and delivery on a future date specified in such
prospectus supplement. There may be limitations on the minimum amount that may
be purchased by any institutional investor or on the number of common units
that may be sold pursuant to such arrangements. Institutional investors include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and such other institutions
as we may approve. The obligations of the purchasers pursuant to such delayed
delivery and payment arrangements will not be subject to any conditions except
that (i) the purchase by
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an institution of the common units shall not be prohibited under the applicable
laws of any jurisdiction in the United States and (ii) if common units are
being sold to underwriters, we shall have sold to such underwriters the total
number of such common units less the number thereof covered by such
arrangements. Underwriters will not have any responsibility in respect of the
validity of such arrangements or our performance or that of such institutional
investors thereunder.
If a prospectus supplement so indicates, the underwriters engaged in an
offering of these common units may make short sales of our common units in
connection with this offering, resulting in the sale by the underwriters of a
greater number of common units than they are required to purchase pursuant to
the underwriting agreement. The short position resulting from those short sales
will be deemed a "covered" short position to the extent that it does not exceed
the number of common units subject to the underwriters' over-allotment option
and will be deemed a "naked" short position to the extent that it exceeds that
number. A naked short position is more likely to be created if the underwriters
are concerned that there may be downward pressure on the trading price of the
common units in the open market that could adversely affect investors who
purchased common units in the offering. The underwriters may reduce or close
out their covered short positions either by exercising the over-allotment
option or by purchasing common units in the open market. In determining which
of these alternatives to pursue, the underwriters will consider the price at
which common units are available for purchase in the open market as compared to
the price at which they may purchase common units through the over-allotment
option. Any "naked" short position will be closed out by purchasing common
units in the open market. Similar to the other stabilizing transactions
described below, open market purchases made by the underwriters to cover all or
a portion of their short position may have the effect of preventing or
retarding a decline in the market price of our common units following this
offering. As a result, our common units may trade at a price that is higher
than the price that otherwise might prevail in the open market.
If a prospectus supplement so indicates, the underwriters may, pursuant to
Regulation M under the Securities Exchange Act of 1934, engage in transactions,
including stabilization bids or the imposition of penalty bids, that may have
the effect of stabilizing or maintaining the market price of the common units
at a level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of common units on behalf of the
underwriters for the purpose of fixing or maintaining the price of the common
units. A "penalty bid" is an arrangement permitting the representatives to
claim the selling concession otherwise accruing to an underwriter or syndicate
member in connection with the offering if the common units originally sold by
that underwriter or syndicate member are purchased by or on behalf of the
underwriters in the open market pursuant to a stabilizing bid or to cover all
or part of a syndicate short position. Any stabilizing bids or open market
purchases would be effected on the New York Stock Exchange or otherwise and, if
commenced, could be discontinued at any time.
Certain of the underwriters and their affiliates may be customers of, engage
in transactions with and perform services for us or our affiliates in the
ordinary course of business.
LEGAL OPINIONS
Certain legal and tax matters relating to the common units being offered
will be passed upon for us by Morgan, Lewis & Bockius LLP, Washington, D.C.,
and Baker Botts L.L.P., Houston, Texas. If certain legal matters in connection
with an offering of common units made by this prospectus and a related
prospectus supplement are passed on by counsel for the underwriters of such
offering, that counsel will be named in the applicable prospectus supplement
relating to that offering.
EXPERTS
The consolidated financial statements and schedules of AmeriGas Partners,
L.P. and subsidiaries incorporated by reference into this prospectus and
elsewhere in the registration statement to the extent and for the periods
indicated in their reports have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
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2,000,000 Common Units
AmeriGas Partners, L.P.
Representing Limited Partner Interests
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PROSPECTUS SUPPLEMENT
October , 2000
(Including Prospectus dated October 5, 2000)
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Salomon Smith Barney
Banc of America Securities LLC
Donaldson, Lufkin & Jenrette
PaineWebber Incorporated
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