-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SFwprHED47xjr6jb3DetSC3zfNRT0rky8ZXf3DAPRIN4yu91xRjUbuN04nseNOB7 FHbWf04XuZYMfef7BkIcQw== 0000893220-99-000165.txt : 19990217 0000893220-99-000165.hdr.sgml : 19990217 ACCESSION NUMBER: 0000893220-99-000165 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIGAS PARTNERS LP CENTRAL INDEX KEY: 0000932628 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 232787918 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13692 FILM NUMBER: 99539069 BUSINESS ADDRESS: STREET 1: 460 NORTH GULPH RD STREET 2: BOX 965 CITY: VALLEY FORGE STATE: PA ZIP: 19482 BUSINESS PHONE: 6103377000 MAIL ADDRESS: STREET 1: 460 NORTH GULPH ROAD CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIGAS FINANCE CORP CENTRAL INDEX KEY: 0000945792 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RETAIL STORES, NEC [5990] IRS NUMBER: 232800532 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-92734-01 FILM NUMBER: 99539070 BUSINESS ADDRESS: STREET 1: 460 N GULPH RD CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 BUSINESS PHONE: 6103371000 MAIL ADDRESS: STREET 1: 460 NORTH GULPH ROAD CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 10-Q 1 AMERIGAS PARTNERS, L.P. FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission file number 1-13692 Commission file number 33-92734-01 AMERIGAS PARTNERS, L.P. AMERIGAS FINANCE CORP. (Exact name of registrants as specified in their charters) Delaware 23-2787918 Delaware 23-2800532 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 460 North Gulph Road, King of Prussia, PA (Address of principal executive offices) 19406 (Zip Code) (610) 337-7000 (Registrants' telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- At January 31, 1999, the registrants had units and shares of common stock outstanding as follows: AmeriGas Partners, L.P. - 22,105,993 Common Units 19,782,146 Subordinated Units AmeriGas Finance Corp. - 100 shares 2 AMERIGAS PARTNERS, L.P. TABLE OF CONTENTS
PAGES PART I FINANCIAL INFORMATION Item 1. Financial Statements AmeriGas Partners, L.P. Condensed Consolidated Balance Sheets as of December 31, 1998, September 30, 1998 and December 31, 1997 1 Condensed Consolidated Statements of Operations for the three and twelve months ended December 31, 1998 and 1997 2 Condensed Consolidated Statements of Cash Flows for the three and twelve months ended December 31, 1998 and 1997 3 Condensed Consolidated Statement of Partners' Capital for the three months ended December 31, 1998 4 Notes to Condensed Consolidated Financial Statements 5 - 7 AmeriGas Finance Corp. Balance Sheets as of December 31, 1998 and September 30, 1998 8 Note to Balance Sheets 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 - 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 - 17 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18
-i- 3 AMERIGAS PARTNERS, L.P. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Thousands of dollars)
December 31, September 30, December 31, 1998 1998 1997 ---------------- --------------- ---------------- ASSETS Current assets: Cash and cash equivalents $ 14,070 $ 8,873 $ 24,375 Accounts receivable (less allowances for doubtful accounts of $6,599, $6,432, and $8,072, respectively) 86,857 58,778 118,331 Inventories 43,250 49,394 78,746 Prepaid expenses and other current assets 15,032 16,301 11,721 ---------------- --------------- ---------------- Total current assets 159,209 133,346 233,173 Property, plant and equipment (less accumulated depreciation and amortization of $214,526, $205,083, and $175,832, respectively) 440,391 442,042 444,727 Intangible assets (less accumulated amortization of $147,450, $141,382, and $122,831, respectively) 625,180 629,355 672,123 Other assets 13,048 12,473 13,740 ---------------- --------------- ---------------- Total assets $ 1,237,828 $ 1,217,216 $ 1,363,763 ================ =============== ================ LIABILITIES AND PARTNERS' CAPITAL Current liabilities: Current maturities of long-term debt $ 6,194 $ 6,068 $ 6,544 Bank loans 62,000 10,000 75,000 Accounts payable - trade 44,018 34,075 53,544 Accounts payable - related parties 2,206 6,799 3,396 Other current liabilities 82,514 103,355 70,177 ---------------- --------------- ---------------- Total current liabilities 196,932 160,297 208,661 Long-term debt 693,634 702,926 696,263 Other noncurrent liabilities 48,985 50,069 51,784 Commitments and contingencies Minority interest 4,019 4,049 5,115 Partners' capital 294,258 299,875 401,940 ---------------- --------------- ---------------- Total liabilities and partners' capital $ 1,237,828 $ 1,217,216 $ 1,363,763 ================ =============== ================
The accompanying notes are an integral part of these financial statements. - 1 - 4 AMERIGAS PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (Thousands of dollars, except per unit)
Three Months Ended Twelve Months Ended December 31, December 31, -------------------------------- -------------------------------- 1998 1997 1998 1997 ---------------- ------------ ------------- --------------- Revenues: Propane $ 212,145 $ 277,523 $ 769,249 $ 939,829 Other 25,639 25,400 79,990 80,803 ---------------- ------------ ------------- --------------- 237,784 302,923 849,239 1,020,632 ---------------- ------------ ------------- --------------- Costs and expenses: Cost of sales - propane 93,434 151,633 352,514 523,667 Cost of sales - other 11,094 11,527 32,614 35,157 Operating and administrative expenses 83,590 80,867 322,943 313,652 Depreciation and amortization 15,578 15,582 63,221 62,086 Other income, net (704) (723) (726) (10,641) ---------------- ------------ ------------- --------------- 202,992 258,886 770,566 923,921 ---------------- ------------ ------------- --------------- Operating income 34,792 44,037 78,673 96,711 Interest expense (16,664) (16,950) (65,903) (65,902) ---------------- ------------ ------------- --------------- Income before income taxes 18,128 27,087 12,770 30,809 Income tax (expense) benefit (266) (340) 71 88 Minority interest (207) (296) (235) (417) ---------------- ------------ ------------- --------------- Net income $ 17,655 $ 26,451 $ 12,606 $ 30,480 ================ ============ ============= =============== General partner's interest in net income $ 177 $ 265 $ 126 $ 305 ================ ============ ============= =============== Limited partners' interest in net income $ 17,478 $ 26,186 $ 12,480 $ 30,175 ================ ============ ============= =============== Income per limited partner unit $ 0.42 $ 0.63 $ 0.30 $ 0.72 ================ ============ ============= =============== Average limited partner units outstanding (thousands) 41,888 41,881 41,888 41,836 ================ ============ ============= ===============
The accompanying notes are an integral part of these financial statements. - 2 - 5 AMERIGAS PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Thousands of dollars)
Three Months Ended Twelve Months Ended December 31, December 31, -------------------------------- ------------------------------- 1998 1997 1998 1997 ------------- ------------- ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 17,655 $ 26,451 $ 12,606 $ 30,480 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 15,578 15,582 63,221 62,086 Other, net (117) 1,687 (4,629) 4,056 ------------- ------------- ------------ ------------- 33,116 43,720 71,198 96,622 Net change in: Accounts receivable (29,025) (41,131) 28,010 28,123 Inventories and prepaid propane purchases 7,220 8,064 35,930 15,547 Accounts payable 5,529 1,846 (10,504) (26,398) Other current assets and liabilities (21,596) (19,349) 10,378 (1,012) ------------- ------------- ------------ ------------- Net cash provided (used) by operating activities (4,756) (6,850) 135,012 112,882 ------------- ------------- ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property, plant and equipment (7,228) (6,987) (31,818) (24,904) Proceeds from disposals of assets 935 667 5,421 10,537 Acquisitions of businesses, net of cash acquired (2,367) (1,388) (9,055) (12,096) ------------- ------------- ------------ ------------- Net cash used by investing activities (8,660) (7,708) (35,452) (26,463) ------------- ------------- ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions (23,272) (23,246) (93,085) (92,923) Minority interest activity (237) (237) (1,040) (1,024) Increase (decrease) in bank loans 52,000 47,000 (13,000) (2,000) Issuance of long-term debt - 13,000 10,000 14,131 Repayment of long-term debt (9,878) (1,653) (12,752) (3,943) Capital contribution from General Partner - - 12 26 ------------- ------------- ------------ ------------- Net cash provided (used) by financing activities 18,613 34,864 (109,865) (85,733) ------------- ------------- ------------ ------------- Cash and cash equivalents increase (decrease) $ 5,197 $ 20,306 $ (10,305) $ 686 ============= ============= ============ ============= CASH AND CASH EQUIVALENTS: End of period $ 14,070 $ 24,375 $ 14,070 $ 24,375 Beginning of period 8,873 4,069 24,375 23,689 ------------- ------------- ------------ ------------- Increase (decrease) $ 5,197 $ 20,306 $ (10,305) $ 686 ============= ============= ============ =============
The accompanying notes are an integral part of these financial statements. -3- 6 AMERIGAS PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (unaudited) (Thousands, except unit data)
Number of units Total ---------------------------------- General partners' Common Subordinated Common Subordinated partner capital --------------- --------------- ----------- --------------- ------------ ------------ BALANCE SEPTEMBER 30, 1998 22,105,993 19,782,146 $ 157,866 $ 139,012 $ 2,997 $ 299,875 Net income 9,224 8,254 177 17,655 Distributions (12,159) (10,880) (233) (23,272) --------------- --------------- ----------- --------------- ------------ ------------ BALANCE DECEMBER 31, 1998 22,105,993 19,782,146 $ 154,931 $ 136,386 $ 2,941 $ 294,258 =============== =============== =========== =============== ============ ============
The accompanying notes are an integral part of these financial statements. -4- 7 AMERIGAS PARTNERS, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Thousands of dollars, except per unit) 1. BASIS OF PRESENTATION The condensed consolidated financial statements include the accounts of AmeriGas Partners, L.P. (AmeriGas Partners), its subsidiary AmeriGas Propane, L.P. (the "Operating Partnership"), and their corporate subsidiaries, together referred to in this report as "the Partnership" or "we." We eliminate all significant intercompany accounts and transactions when we consolidate. We account for AmeriGas Propane, Inc.'s (the "General Partner's") 1.01% interest in the Operating Partnership as a minority interest in the condensed consolidated financial statements. Certain prior-period balances have been reclassified to conform with the current period presentation. The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission. They include all adjustments which we consider necessary for a fair statement of the results for the interim periods presented. Such adjustments consisted only of normal recurring items unless otherwise disclosed. These financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the year ended September 30, 1998. Weather significantly impacts demand for propane and profitability because many customers use propane for heating purposes. Due to the seasonal nature of the Partnership's propane business, the results of operations for interim periods are not necessarily indicative of the results to be expected for a full year. Management makes estimates and assumptions when preparing financial statements in conformity with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities. Actual results could differ from these estimates. During the quarter ended December 31, 1998, we adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 establishes standards for reporting and displaying comprehensive income and its components in financial statements. Comprehensive income includes net income and all other nonowner changes in equity. The Partnership's comprehensive income was the same as its net income for all periods presented. -5- 8 AMERIGAS PARTNERS, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited) (Thousands of dollars, except per unit) During the quarter ended December 31, 1998, we adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131). SFAS 131 establishes standards for reporting information about operating segments as well as related disclosures about products and services, geographic areas, and major customers. In determining our reportable segments under the provisions of SFAS 131, we examined the way we organize our business internally for making operating decisions and assessing business performance. Based on this examination, we have determined that we have a single reportable operating segment which engages in the distribution of propane and related equipment and supplies. No single customer represents 1% or more of consolidated revenues. In addition, virtually all of the Partnership's revenues are derived from sources within the U.S., and virtually all of its long-lived assets are located in the U.S. 2. RELATED PARTY TRANSACTIONS In accordance with the Amended and Restated Agreement of Limited Partnership of AmeriGas Partners, the General Partner is entitled to reimbursement of all direct and indirect expenses incurred or payments it makes on behalf of the Partnership, and all other necessary or appropriate expenses allocable to the Partnership or otherwise reasonably incurred by the General Partner in connection with the Partnership's business. These costs totaled $49,761 and $48,408 during the three months ended December 31, 1998 and 1997, respectively. During the twelve months ended December 31, 1998 and 1997, such expenses totaled $186,270 and $179,798, respectively. In addition, UGI Corporation (UGI) provides certain financial and administrative services to the General Partner. UGI bills the General Partner for these direct and indirect corporate expenses, and the General Partner is reimbursed by the Partnership for these expenses. During the three months ended December 31, 1998 and 1997, such corporate expenses totaled $1,348 and $1,452, respectively. During the twelve months ended December 31, 1998 and 1997, such corporate expenses totaled $5,831 and $6,528, respectively. 3. COMMITMENTS AND CONTINGENCIES The Partnership has succeeded to certain lease guarantee obligations of Petrolane Incorporated (Petrolane), a predecessor company of the Partnership, relating to Petrolane's divestiture of nonpropane operations before its 1989 acquisition by QFB Partners. Lease payments under these leases total approximately $51,000 at December 31, 1998. The leases expire through 2010, and some of them are currently in default. The Partnership has succeeded to the indemnity agreement of Petrolane by which Texas Eastern Corporation (Texas Eastern), a prior owner of Petrolane, agreed to indemnify -6- 9 AMERIGAS PARTNERS, L.P. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited) (Thousands of dollars, except per unit) Petrolane against any liabilities arising out of the conduct of businesses that do not relate to, and are not a part of, the propane business, including lease guarantees. To date, Texas Eastern has directly satisfied defaulted lease obligations without the Partnership having to honor its guarantee. The Partnership believes the probability that it will be required to directly satisfy such lease obligations is remote. In addition, the Partnership has succeeded to Petrolane's agreement to indemnify Shell Petroleum N.V. (Shell) for various scheduled claims that were pending against Tropigas de Puerto Rico (Tropigas). Petrolane had entered into this indemnification agreement in conjunction with its sale of the international operations of Tropigas to Shell in 1989. The Partnership also succeeded to Petrolane's right to seek indemnity on these claims first from International Controls Corp., which sold Tropigas to Petrolane, and then from Texas Eastern. To date, neither the Partnership nor Petrolane has paid any sums under this indemnity, but several claims by Shell, including claims related to certain antitrust actions aggregating at least $68,000, remain pending. In addition to these matters, there are other pending claims and legal actions arising in the normal course of our business. We cannot predict with certainty the final results of these matters. However, it is reasonably possible that some of them could be resolved unfavorably to us. Management believes, after consultation with counsel, that damages or settlements, if any, recovered by the plaintiffs in such claims or actions will not have a material adverse effect on our financial position but could be material to our operating results or cash flows in future periods depending on the nature and timing of future developments with respect to these matters and the amounts of future operating results and cash flows. -7- 10 AMERIGAS FINANCE CORP. (a wholly owned subsidiary of AmeriGas Partners, L.P.) BALANCE SHEETS (unaudited)
December 31, September 30, 1998 1998 ------------ ------------- ASSETS Cash $ 1,000 $ 1,000 ------------ ------------- Total assets $ 1,000 $ 1,000 ============ ============= STOCKHOLDER'S EQUITY Common stock, $.01 par value; 100 shares authorized, issued and outstanding $ 1 $ 1 Additional paid-in capital 999 999 ------------ ------------- Total stockholder's equity $ 1,000 $ 1,000 ============ =============
The accompanying note is an integral part of these financial statements. - 8 - 11 AMERIGAS FINANCE CORP. (A WHOLLY OWNED SUBSIDIARY OF AMERIGAS PARTNERS, L.P.) NOTE TO BALANCE SHEETS AmeriGas Finance Corp. (AmeriGas Finance), a Delaware corporation, was formed on March 13, 1995 and is a wholly owned subsidiary of AmeriGas Partners, L.P. (AmeriGas Partners). On April 19, 1995, AmeriGas Partners issued $100,000,000 face value of 10.125% Senior Notes due April 2007. AmeriGas Finance serves as a co-obligor of these notes. AmeriGas Partners owns all 100 shares of AmeriGas Finance Common Stock outstanding. -9- 12 AMERIGAS PARTNERS, L.P. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ANALYSIS OF RESULTS OF OPERATIONS The following analyses compare the Partnership's results of operations for (1) the three months ended December 31, 1998 (1998 three-month period) with the three months ended December 31, 1997 (1997 three-month period) and (2) the twelve months ended December 31, 1998 (1998 twelve-month period) with the twelve months ended December 31, 1997 (1997 twelve-month period). AmeriGas Finance Corp. has nominal assets and does not conduct any operations. Accordingly, a discussion of the results of operations and financial condition and liquidity of AmeriGas Finance Corp. is not presented. 1998 THREE-MONTH PERIOD COMPARED WITH 1997 THREE-MONTH PERIOD
- ----------------------------------------------------------------------------------------------------------------- Increase Three Months Ended December 31, 1998 1997 (Decrease) - ----------------------------------------------------------------------------------------------------------------- (Millions of dollars) Gallons sold (millions): Retail 220.7 248.6 (27.9) (11.2)% Wholesale 48.1 82.7 (34.6) (41.8)% ------ ------ ----- 268.8 331.3 (62.5) (18.9)% ====== ====== ===== Revenues: Retail propane $193.7 $240.2 $(46.5) (19.4)% Wholesale propane 18.4 37.3 (18.9) (50.7)% Other 25.7 25.4 .3 1.2% ------ ------ ------ $237.8 $302.9 $(65.1) (21.5)% ====== ====== ====== Total margin $133.3 $139.8 $ (6.5) (4.6)% EBITDA (a) $ 50.4 $ 59.6 $ (9.2) (15.4)% Operating income $ 34.8 $ 44.0 $ (9.2) (20.9)% - -----------------------------------------------------------------------------------------------------------------
(a) EBITDA (earnings before interest expense, income taxes, depreciation and amortization) should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations) and is not a measure of performance or financial condition under generally accepted accounting principles. Retail volumes sold during the 1998 three-month period were lower than the prior-year period due primarily to significantly warmer weather. Based upon degree day information obtained from -10- 13 AMERIGAS PARTNERS, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) the National Oceanic and Atmospheric Administration (NOAA) for 335 airports in the continental U.S., weather during the three months ended December 31, 1998 was 11.0% warmer than normal and 12.2% warmer than the same period last year. Although weather-sensitive heating volumes declined the most, agricultural volumes were also down as a result of the warmer than normal weather and a dry autumn which reduced demand for crop drying. Wholesale volumes of propane sold were lower in the 1998 three-month period due to reduced low margin sales of storage inventories and, to a lesser extent, the effects of the warmer weather. Total revenues from retail propane sales decreased $46.5 million during the 1998 three-month period reflecting (1) a $27.0 million decrease as a result of the lower volumes sold and (2) a $19.5 million decrease from a reduction in average selling prices. Wholesale revenues declined $18.9 million during the 1998 three-month period due to (1) a $15.6 million reduction from the lower volumes sold and (2) a $3.3 million decrease from lower average selling prices. The lower average retail and wholesale selling prices were due to significantly lower propane product costs. Total margin decreased $6.5 million in the 1998 three-month period as a result of the lower retail volumes sold. The decline in total margin resulting from the lower sales was partially offset by higher average retail unit margins. The higher average retail unit margins reflect lower propane product costs during the three months ended December 31, 1998. The decrease in EBITDA and operating income in the 1998 three-month period primarily reflects (1) the decline in total margin and (2) modestly higher operating expenses. Operating expenses were $83.6 million during the three months ended December 31, 1998 compared with $80.9 million in the same period last year. The increase in operating expenses principally resulted from (1) higher compensation and benefit expenses and (2) higher vehicle repair and lease expense. -11- 14 AMERIGAS PARTNERS, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 1998 TWELVE-MONTH PERIOD COMPARED WITH 1997 TWELVE-MONTH PERIOD
- ----------------------------------------------------------------------------------------------------------------- Increase Twelve Months Ended December 31, 1998 1997 (Decrease) - ----------------------------------------------------------------------------------------------------------------- (Millions of dollars) Gallons sold (millions): Retail 757.4 804.3 (46.9) (5.8)% Wholesale 170.5 232.7 (62.2) (26.7)% ------- -------- ------- 927.9 1,037.0 (109.1) (10.5)% ======= ======== ======= Revenues: Retail propane $ 699.6 $ 822.5 $(122.9) (14.9)% Wholesale propane 69.6 117.3 (47.7) (40.7)% Other 80.0 80.8 (.8) (1.0)% ------- --------- ------- $ 849.2 $ 1,020.6 $(171.4) (16.8)% ======= ========= ======= Total margin $ 464.1 $ 461.8 $ 2.3 .5% EBITDA $ 141.9 $ 158.8 $ (16.9) (10.6)% Operating income $ 78.7 $ 96.7 $ (18.0) (18.6)% - -----------------------------------------------------------------------------------------------------------------
We sold fewer retail gallons of propane in the 1998 twelve-month period due to significantly warmer temperatures during the peak heating-season months (comprising January through March and November through December). Based upon degree day information provided by NOAA for 335 airports in the continental U.S., temperatures during these peak heating-season months in the 1998 twelve-month period were 13.1% warmer than normal and 9.4% warmer than the same period last year. Wholesale volumes of propane sold were lower in the 1998 twelve-month period due to reduced sales of storage inventories. Total revenues from retail propane sales declined $122.9 million in the twelve months ended December 31, 1998. The decrease reflects (1) a $74.9 million decrease as a result of lower average retail propane selling prices and (2) a $48.0 million reduction as a result of the lower volumes sold. Wholesale revenues were $47.7 million lower than those in the prior-year period due to (1) a $31.4 million decrease resulting from the lower volumes sold and (2) a $16.3 million decline from lower average selling prices. The lower average retail and wholesale selling prices reflect significantly lower propane product costs. Total margin increased $2.3 million in the 1998 twelve-month period, notwithstanding the decline in retail volumes, primarily due to higher average retail unit margins. Average retail unit margins -12- 15 AMERIGAS PARTNERS, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) were greater during the 1998 twelve-month period principally as a result of the lower propane product costs. Although total margin during the 1998 twelve-month period was greater than the prior-year period, EBITDA and operating income declined primarily due to (1) lower other income and (2) higher operating and administrative expenses. Other income in the 1998 twelve-month period includes a $4.0 million loss from two interest rate protection agreements. We entered into these agreements to reduce interest rate exposure associated with an anticipated refinancing of the Operating Partnership's Acquisition Facility in late fiscal 1998. When we postponed the refinancing due to volatility in the corporate debt markets in the fourth quarter of fiscal 1998, we recorded a loss on the interest rate protection agreements because they no longer qualified for hedge accounting treatment. Other income in the 1997 twelve-month period includes (1) $4.7 million of income from the sale of the Partnership's 50% interest in Atlantic Energy, Inc., (2) higher customer finance charges and (3) higher interest income. Operating and administrative expenses were $322.9 million in the 1998 twelve-month period compared with $313.7 million in the same period last year. The increase in operating expenses is primarily due to (1) incremental expenses associated with acquisitions and new business activities (including start-up locations and our PPX Prefilled Propane Xchange(R) program) and (2) higher compensation and benefit expenses. FINANCIAL CONDITION AND LIQUIDITY FINANCIAL CONDITION The Partnership's debt outstanding at December 31, 1998 totaled $761.8 million compared with $719.0 million at September 30, 1998. The increase in debt principally reflects a $43 million seasonal increase in net borrowings under the Operating Partnership's Bank Credit Agreement. During the three months ended December 31, 1998, the Partnership declared and paid the minimum quarterly distribution of $.55 (the "MQD") on all units for the quarter ended September 30, 1998. The MQD for the quarter ended December 31, 1998 will be paid on February 18, 1999 to holders of record on February 10, 1999 of all Common and Subordinated units. The ability of the Partnership to pay the MQD on all units depends upon a number of factors. These factors include (1) the level of Partnership earnings, (2) the cash needs of the Partnership's operations (including cash needed for maintaining and growing operating capacity), (3) changes in operating working capital, and (4) the Partnership's ability to borrow. Some of these factors are affected by conditions beyond our control including weather, competition in markets we serve, and the cost of propane. -13- 16 AMERIGAS PARTNERS, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CONVERSION OF SUBORDINATED UNITS The subordination period applicable to the Subordinated Units will extend until the first day of any quarter beginning on or after April 1, 2000, provided that certain cash performance and distribution requirements are met. However, 4,945,537 Subordinated Units may convert into Common Units on the first day after the record date for distributions based upon any quarter ending on or after March 31, 1998, and an additional 4,945,537 may convert on the first day after the record date for distributions based upon any quarter ending on or after March 31, 1999, if certain cash performance and distribution requirements are met. The cash performance requirements for conversion have not been met to date. They are dependent upon many factors including highly seasonal operating results, changes in working capital, asset sales and debt refinancings. Management believes, however, that it is reasonably possible that 9,891,074 Subordinated Units will convert into Common Units during fiscal 1999. CASH FLOWS Cash and cash equivalents totaled $14.1 million at December 31, 1998 compared with $8.9 million at September 30, 1998. Due to the seasonal nature of the propane business, cash flows from operating activities are generally strongest during the second and third fiscal quarters of the Partnership when customers pay for propane purchased during the heating season and are typically at their lowest levels during the first and fourth fiscal quarters. Accordingly, cash flows from operations during the three months ended December 31, 1998 are not necessarily indicative of cash flows to be expected for a full year. OPERATING ACTIVITIES. Cash used by operating activities was $(4.8) million during the three months ended December 31, 1998 compared with $(6.9) million during the prior-year period. The decrease in cash used for operating activities reflects the warmer weather's impact on cash needed to fund operating working capital. Changes in operating working capital during the three months ended December 31, 1998 required $37.9 million of operating cash flow while changes in operating working capital during the three months ended December 31, 1997 required $50.6 million of operating cash flow. Cash flow from operating activities before changes in working capital was $33.1 million in the three months ended December 31, 1998 compared with $43.7 million during the three months ended December 31, 1997 reflecting the decrease in the Partnership's operating results. INVESTING ACTIVITIES. We spent $7.2 million for property, plant and equipment (including maintenance capital expenditures of $2.5 million) during the three months ended December 31, 1998 compared with $7.0 million (including maintenance capital expenditures of $2.4 million) in the prior-year period. During the three months ended December 31, 1998, we acquired several propane businesses for an -14- 17 AMERIGAS PARTNERS, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) aggregate $2.4 million in cash. During the three months ended December 31, 1997, we made acquisition-related cash payments of $1.4 million. FINANCING ACTIVITIES. During the three-month periods ended December 31, 1998 and 1997, we declared and paid the MQD on all Common and Subordinated units and the general partner interests. During the three months ended December 31, 1998, we made $9.9 million of long-term debt repayments principally reflecting prepayments of the Operating Partnership's Acquisition Facility. The Operating Partnership borrowed $52 million under its Revolving Credit Facility during the 1998 three-month period principally to meet seasonal working capital needs and to fund the Partnership's distribution payments. During the 1997 three-month period, the Operating Partnership borrowed $47 million under the Revolving Credit Facility and $13 million under the Acquisition Facility. YEAR 2000 MATTERS The Year 2000 ("Y2K") issue is a result of computer programs being written using two digits (rather than four) to identify and process a year in a date field. Computer programs, computer-controlled systems and equipment with embedded software may recognize date fields using "00" as the year 1900 rather than the year 2000. If uncorrected, miscalculations and possible computer-based system failures could result which might disrupt business operations. We are designating the following information as our "Year 2000 Readiness Disclosure." Recognizing the potential business consequences of the Y2K issue, we are using internal and external resources to conduct a detailed assessment of critical, date sensitive computer-based systems and to identify and modify systems which are not Y2K compliant. The scope of such efforts includes (1) our information technology ("IT") systems such as computer hardware and software we use in the operation of our business; (2) non-IT systems that contain embedded computer technology such as micro-controllers contained in various equipment, facilities and vehicles; and (3) the readiness of third parties, including our suppliers and key vendors, and certain of our customers. We have directed our Y2K compliance efforts toward ensuring that we will be able to continue to perform three critical operating functions: (1) obtain products to sell; (2) provide service to our customers; and (3) bill customers and pay our vendors and employees. We have completed the assessment of our IT and non-IT systems. We have successfully modified or replaced all of our critical IT systems, including the installation of our integrated financial system software. These systems include our customer information and data systems and our financial systems including payroll and the fuel accounting supply and transportation system. We currently anticipate that any required modification to our critical non-IT systems will be completed by March 31, 1999. -15- 18 AMERIGAS PARTNERS, L.P. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) In addition to internal Y2K remediation activities, we are in the process of assessing the readiness of our key suppliers and third-party providers. Although none of our products or services are directly date sensitive, as a company with operations throughout the United States we are dependent upon other companies whose IT and non-IT systems may not be Y2K compliant. We rely on these companies for the supply and transportation of propane. Additionally, we depend on other companies to supply us with propane tanks and cylinders, fuel for our vehicles, as well as other products and services we need to operate our businesses. If key third parties cannot provide products or services because of their own Y2K problems, it could have a material adverse impact on our operations. The extent of such impact would depend upon the duration of disruption and our costs to find alternative sources of products and services, among others. We expect to complete our evaluation of key supplier and third-party provider Y2K readiness by March 31, 1999. We are in the process of developing contingency plans to address, to the extent reasonably possible, disruptions arising from Y2K related failures of key suppliers and third-party providers. We anticipate the major elements of these contingency plans will be based upon the use of manual back-up systems, alternative supply sources, higher critical inventory levels, and additional staffing. These contingency plans attempt to mitigate the impact of third-party Y2K noncompliance. However, they cannot assure that business disruptions caused by key suppliers or third-party providers will not have a material adverse impact on our operations. We anticipate the business contingency plans will be completed by June 30, 1999. In addition to the business risks noted above, there are other Y2K risks which are beyond our control, any of which could have a material adverse impact on our operations. Such risks include the failure of utility and telecommunications companies to provide service and the failure of financial institutions to process transactions. Incremental costs associated with our Y2K efforts have not had a material effect on our results of operations. Estimated future costs to modify existing IT and non-IT systems are expected to be less than $0.5 million and will be financed through internally generated funds. We expense Y2K costs as incurred. Costs associated with information system improvement initiatives are expensed or capitalized in accordance with our accounting policy for software development costs. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our primary market risk exposures are market prices for propane and changes in long-term interest rates. -16- 19 AMERIGAS PARTNERS, L.P. Price risk associated with fluctuations in the prices we pay for propane is principally a result of market forces reflecting changes in supply and demand. The Partnership's profitability is sensitive to changes in propane supply costs and the Partnership generally seeks to pass on increases in such costs to customers. There is no assurance, however, that the Partnership will be able to do so. In order to manage propane market price risk, we use contracts for the forward purchase of propane, propane fixed-price supply agreements, and derivative commodity instruments such as price swap and option contracts. Although we use derivative financial and commodity instruments to reduce market price risk associated with forecasted transactions, we do not use derivative financial and commodity instruments for trading purposes. We use long-term debt as a primary source of capital. These debt instruments are typically issued at fixed interest rates. When these debt instruments mature, we refinance such debt at then-existing market interest rates which may be more or less than the interest rates on the maturing debt. In addition, we may attempt to reduce interest rate risk associated with a forecasted issuance of new debt. In order to reduce interest rate risk associated with these transactions, we occasionally enter into interest rate protection agreements. At December 31, 1998, the impact on the fair value of the Partnership's market risk sensitive instruments resulting from (1) a 5 cent a gallon decline in the market price of propane and (2) a 50 basis point decline in interest rates on U.S. treasury notes, would not be materially different than that reported in the Partnership's 1998 Annual Report on Form 10-K. We expect that any losses from market risk sensitive instruments used to manage propane price or interest rate market risk would be substantially offset by gains on the associated underlying transactions. PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) List of Exhibits 27.1 Financial Data Schedule of AmeriGas Partners, L.P. 27.2 Financial Data Schedule of AmeriGas Finance Corp. (b) No Current Report on Form 8-K was filed by either AmeriGas Partners, L.P. or AmeriGas Finance Corp. during the fiscal quarter ended December 31, 1998. -17- 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. AmeriGas Partners, L.P. --------------------------------------- (Registrant) By: AmeriGas Propane, Inc., as General Partner Date: February 11, 1999 By: Martha B. Lindsay - ------------------------ --------------------------------------- Martha B. Lindsay Vice President - Finance and Chief Financial Officer By: Richard R. Eynon --------------------------------------- Richard R. Eynon Controller and Chief Accounting Officer AmeriGas Finance Corp. --------------------------------------- (Registrant) Date: February 11, 1999 By: Martha B. Lindsay - ------------------------ --------------------------------------- Martha B. Lindsay Vice President - Finance and Chief Financial Officer By: Richard R. Eynon --------------------------------------- Richard R. Eynon Controller and Chief Accounting Officer -18- 21 AMERIGAS PARTNERS, L.P. EXHIBIT INDEX 27.1 Financial Data Schedule of AmeriGas Partners, L.P. 27.2 Financial Data Schedule of AmeriGas Finance Corp. EX-27.1 2 FDS OF AMERIGAS PARTNERS, L.P.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS OF AMERIGAS PARTNERS, L.P. AS OF AND FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN AMERIGAS PARTNERS' QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1998. 0000932628 AMERIGAS PARTNERS, L.P. 1,000 3-MOS SEP-30-1998 OCT-01-1998 DEC-31-1998 14,070 0 93,456 6,599 43,250 159,209 654,917 214,526 1,237,828 196,932 693,634 0 0 0 294,258 1,237,828 237,784 237,784 104,528 104,528 0 1,147 16,664 18,128 266 17,655 0 0 0 17,655 $.42 $.42
EX-27.2 3 FDS OF AMERIGAS FINANCE CORP.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET OF AMERIGAS FINANCE CORP. AS OF DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH BALANCE SHEET INCLUDED IN AMERIGAS PARTNERS' QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1998. 0000945792 AMERIGAS FINANCE CORP. 3-MOS SEP-30-1998 OCT-01-1998 DEC-31-1998 1,000 0 0 0 0 1,000 0 0 1,000 0 0 0 0 1 999 1,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
-----END PRIVACY-ENHANCED MESSAGE-----