UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-K

Commission file number 1-13692

AMERIGAS PARTNERS, L.P.

Delaware (State or Other Jurisdiction of Incorporation or Organization)		23-2787918 (I.R.S. Employer Identification No.)

460 North Gulph Road, King of Prussia, PA 19406
(Address of Principal Executive Offices) (Zip Code)
(610) 337-7000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class		Name of each Exchange on Which Registered
Common Units representing limited partner interests		New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:		None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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 þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ                    Accelerated filer o                    Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes o No þ

The aggregate market value of AmeriGas Partners, L.P. Common Units held by non-affiliates of AmeriGas Partners, L.P. on March 31, 2007 was approximately $1,046,601,007. At November 23, 2007, there were outstanding 56,993,202 Common Units representing limited partner interests.

 

 

TABLE OF CONTENTS

				Page
PART I:					1
Item 1.		Business			1
Item 1A.		Risk Factors			9
Item 1B.		Unresolved Staff Comments			21
Item 2.		Properties			21
Item 3.		Legal Proceedings			22
Item 4.		Submission of Matters to a Vote of Security Holders			23
PART II:					23
Item 5.		Market for Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities			23
Item 6.		Selected Financial Data			24
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk			36
Item 8.		Financial Statements and Supplementary Data			36
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			36
Item 9A.		Controls and Procedures			36
Item 9B.		Other Information			37
PART III:					37
Item 10.		Directors, Executive Officers and Corporate Governance			37
Item 11.		Executive Compensation			44
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Security holder Matters			74
Item 13.		Certain Relationships and Related Transactions, and Director Independence			78
Item 14.		Principal Accountant Fees and Services			80
PART IV:					81
Item 15.		Exhibits and Financial Statement Schedules			81
		Signatures			88
Index to Financial Statements and Financial Statement Schedules					F-2
Exhibit 10.19
Exhibit 10.25
Exhibit 21
Exhibit 23
Exhibit 31.1
Exhibit 31.2
Exhibit 32
Exhibit 99

PART I:

ITEM 1. BUSINESS

General

AmeriGas Partners, L.P. is a publicly traded limited partnership formed under Delaware law on November 2, 1994. We are the largest retail propane distributor in the United States based on the volume of propane gallons distributed annually. As of September 30, 2007, we served approximately 1.3 million residential, commercial, industrial, agricultural and motor fuel customers from approximately 650 district locations in 46 states. The increase in district locations from approximately 600 district locations as of September 30, 2006 is primarily a result of acquisitions made during fiscal year 2007. In fiscal year 2008, we anticipate that many of the district locations added in fiscal year 2007 will be combined with other district locations that are situated in close geographic proximity.

We are a holding company and we conduct our business principally through our subsidiary, AmeriGas Propane, L.P. (“AmeriGas OLP”) and its subsidiary, AmeriGas Eagle Propane, L.P. (“Eagle OLP” and together with AmeriGas OLP, the “Operating Partnership”), both Delaware limited partnerships. Our common units (“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 “Partnership” and “AmeriGas Partners,” as well as the terms “our,” “we,” and “its,” are used sometimes as abbreviated references to AmeriGas Partners, L.P. itself or collectively, AmeriGas Partners, L.P. and its consolidated subsidiaries, including the Operating Partnership.

AmeriGas Propane, Inc. is our general partner (the “General Partner”) and is responsible for managing our operations. The General Partner is a wholly owned subsidiary of UGI Corporation (“UGI”), a publicly traded company listed on the New York Stock Exchange and the Philadelphia Stock Exchange. The General Partner has an approximate 44% effective ownership interest in the Partnership. See Notes 1 and 2 to the Partnership’s Consolidated Financial Statements.

Business Strategy

Our strategy is to grow through acquisitions and internal sales programs, leverage our national and local economies of scale and achieve operating efficiencies through productivity improvements. We regularly consider and evaluate opportunities for growth through the acquisition of local, regional and national propane distributors. Acquisitions are an important part of our strategy because only modest growth in total demand for propane in the United States is foreseen. We compete for acquisitions with others engaged in the propane distribution business. During fiscal year 2007, we completed a number of transactions in pursuit of this strategy, including the acquisition of a 13 million gallon propane distribution business in Michigan and a 32 million gallon propane distribution business serving Arkansas, Arizona, Colorado, Missouri and Wyoming. We expect that internal growth will be provided in part from expansion of our AmeriGas Cylinder Exchange (“ACE”) program through which consumers can exchange an empty propane grill cylinder for a filled one, and our Strategic Accounts program, through which the Partnership encourages large, multi-location propane users to enter into a supply agreement with us rather than with many small suppliers. In addition, we believe opportunities exist to grow our business internally through sales and marketing programs designed to attract and retain customers.

General Partner Information

The Partnership’s website can be found at www.amerigas.com. The Partnership makes available free of charge at this website (under the caption “Investor Relations & Corporate Governance — SEC Filings”) copies of its reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, including its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. The General Partner’s Principles of Corporate Governance, Code of Ethics for the Chief Executive Officer and Senior Financial Officers, Code of Business Conduct and Ethics for Directors, Officers and Employees, and charters of the Corporate Governance, Audit and Compensation/Pension Committees of the Board of Directors of the General Partner are also available on the Partnership’s website, under the caption “Investor Relations & Corporate Governance.” All of these documents are also available free of charge by writing to Robert W. Krick, Vice President and Treasurer, AmeriGas Propane, Inc., P.O. Box 965, Valley Forge, PA 19482.

Forward-Looking Statements

Some information contained in this Annual Report on Form 10-K may contain forward-looking statements. 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 actual results almost always vary from assumed facts or bases, and the differences between actual results and assumed facts or bases can be material, depending on the circumstances. When considering forward-looking statements, you should keep in mind the following important factors which could affect our future results and could cause those results to differ materially from those expressed in our forward-looking statements: (1) adverse weather conditions resulting in reduced demand; (2) cost volatility and availability of propane, and the capacity to transport propane to our market areas; (3) the availability of, and our ability to consummate, acquisition or combination opportunities; (4) successful integration and future performance of acquired assets or businesses; (5) changes in laws and regulations, including safety, tax and accounting matters; (6) competitive pressures from the same and alternative energy sources; (7) failure to acquire new customers thereby reducing or limiting any increase in revenues; (8) liability for environmental claims; (9) increased customer conservation measures due to high energy prices and improvements in energy efficiency and technology resulting in reduced demand; (10) adverse labor relations; (11) large customer, counterparty or supplier defaults; (12) liability in excess of insurance coverage for personal injury and property damage arising from explosions and other catastrophic events, including acts of terrorism, resulting from operating hazards and risks incidental to transporting, storing and distributing propane, butane and ammonia; (13) political, regulatory and economic conditions in the United States and foreign countries; (14) reduced access to capital markets and interest rate fluctuations; and (15) the impact of pending and future legal proceedings.

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results. We undertake no obligation to update publicly any forward-looking statement whether as a result of new information or future events except as required by the federal securities laws.

General Industry Information

Propane is separated from crude oil during the refining process and also extracted from natural gas or oil wellhead gas at processing plants. Propane is normally transported and stored in a liquid state under moderate pressure or refrigeration for economy and ease of handling in shipping and distribution. When the pressure is released or the temperature is increased, it is usable as a flammable gas. Propane is colorless and odorless; an odorant is added to allow its detection. Propane is clean burning, producing negligible amounts of pollutants when properly consumed.

The primary customers for propane are residential, commercial, industrial, motor fuel and agricultural users to whom natural gas is not readily available. Propane is typically more expensive than natural gas and fuel oil and, in most areas, cheaper than electricity on an equivalent energy basis.

Based on the most recent annual survey by the American Petroleum Institute, 2005 domestic retail propane sales (annual sales for other than chemical uses) totaled approximately 10.4 billion gallons and, based on LP-GAS magazine rankings, 2006 sales volume of the ten largest propane companies (including AmeriGas Partners) represented approximately 40% of domestic retail sales. Based upon 2005 sales data, management believes the Partnership’s 2007 retail volume represents approximately 9% of domestic retail sales.

Products, Services and Marketing

As of September 30, 2007, the Partnership served approximately 1.3 million customers from district locations in 46 states. In addition to distributing propane, the Partnership also sells, installs and services propane appliances, including heating systems. In certain markets, the Partnership also installs and services propane fuel systems for motor vehicles. Typically, district locations are found in suburban and rural areas where natural gas is not readily 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 its overall transportation and distribution infrastructure, the Partnership operates as an interstate carrier in 48 states throughout the continental United States. It is also licensed as a carrier in the Canadian Provinces of British Columbia and Quebec.

The Partnership sells propane primarily to five markets: residential, commercial/industrial, motor fuel, agricultural and wholesale. The Partnership distributed over one billion gallons of propane in fiscal year 2007. Approximately 90% of the Partnership’s fiscal year 2007 sales (based on gallons sold) were to retail accounts and approximately 10% were to wholesale customers. Sales to residential customers in fiscal year 2007 represented approximately 40% of retail gallons sold; commercial/industrial customers 36%; motor fuel customers 14%; and agricultural customers 5%. Transport gallons, which are large-scale deliveries to retail customers other than residential, accounted for 5% of 2007 retail gallons. No single customer represents, or is anticipated to represent, more than 5% of the Partnership’s consolidated revenues.

The Partnership continues to expand its ACE program. At September 30, 2007, ACE cylinders were available at approximately 23,600 retail locations throughout the United States. Sales of our ACE grill cylinders to retailers are included in the commercial/industrial market. The ACE program enables consumers to exchange their empty 20-pound propane grill cylinders for filled cylinders or to purchase filled cylinders at various retail locations such as home centers, gas stations, mass merchandisers and grocery and convenience stores. We also supply retailers with large propane tanks to enable retailers to fill customers’ 20-pound propane grill cylinders directly at the retailer’s location.

In the residential market, which includes both conventional and manufactured housing, 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. 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, chicken brooding and crop drying. In its wholesale operations, the Partnership principally sells propane to large industrial end-users and other propane distributors.

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. The Partnership owns most of these storage tanks and leases them to its customers. The capacity of these tanks ranges from approximately 120 gallons to approximately 1,200 gallons. The Partnership also delivers propane to retail customers in portable cylinders with capacities of 4 to 24 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.

Propane Supply and Storage

The Partnership has over 250 domestic and international sources of supply, including the spot market. Supplies of propane from the Partnership’s sources historically have been readily available. During the year ended September 30, 2007, over 90% of the Partnership’s propane supply was purchased under supply agreements with terms of 1 to 3 years. The availability of propane supply is dependent upon, among other things, the severity of winter weather, the price and availability of competing fuels such as natural gas and crude oil, and the amount and availability of imported supply. Although no assurance can be given that supplies of propane will be readily available in the future, management currently expects to be able to secure adequate supplies during fiscal year 2008. If supply from major sources were interrupted, however, the cost of procuring replacement supplies and transporting those supplies from alternative locations might be materially higher and, at least on a short-term basis, margins could be affected. Aside from BP Products North America Inc. and BP Canada Energy Marketing Corp. (collectively), Enterprise Products Operating LP and Targa Midstream Services LP, no single supplier provided more than 10% of the Partnership’s total propane supply in fiscal year 2007. In certain market areas, however, some suppliers provide more than 50% of the Partnership’s requirements. Disruptions in supply in these areas could also have an adverse impact on the Partnership’s margins.

The Partnership’s supply contracts typically provide for pricing based upon (i) index formulas using the current prices established at major storage points such as Mont Belvieu, Texas, or Conway, Kansas, or (ii) posted prices at the time of delivery. 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 the General Partner. The Partnership uses 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. The Partnership stores propane at large storage facilities in Arizona and Pennsylvania, as well as at smaller facilities in several other states.

Because the Partnership’s profitability is sensitive to changes in wholesale propane costs, the Partnership generally seeks to pass on increases in the cost of propane to customers. There is no assurance, however, that the Partnership will always be able to pass on product cost increases fully, particularly when product costs rise rapidly. Product cost increases can be triggered by periods of severe cold weather, supply interruptions, increases in the prices of base commodities such as crude oil and natural gas, or other unforeseen events. The General Partner has adopted supply acquisition and product cost risk management practices to reduce the effect of volatility on selling prices. These practices currently include the use of summer storage, forward purchases and derivative commodity instruments such as options and propane price swaps. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk Disclosures.”

The following graph shows the average prices of propane on the propane spot market during the last 5 fiscal years at Mont Belvieu, Texas, a major storage area.

Average Propane Spot Market Prices

Competition

Propane competes with other sources of energy, some of which are less costly for equivalent energy value. Propane distributors compete for customers with suppliers of electricity, fuel oil and natural gas, principally on the basis of price, service, availability and portability. Electricity is a major competitor of propane, but propane generally enjoys a competitive price advantage over electricity for space heating, water heating, and cooking. However, in some areas electricity may have a competitive price advantage or be relatively equivalent in price to propane due to government regulated rate caps on electricity. Additionally, high efficiency electric heat pumps have led to a decrease in the cost of electricity for heating. 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, and, therefore, a conversion from one fuel to the other requires the installation of new equipment. Propane serves as an alternative to natural gas in rural and suburban areas where natural gas is unavailable or portability of product is required. Natural gas is generally a less expensive source of energy than propane, although in areas where natural gas is available, propane is used for certain industrial and commercial applications and as a standby fuel during interruptions in natural gas service. The gradual expansion of the nation’s natural gas distribution systems has resulted in the availability of natural gas in some areas that previously depended upon propane. However, natural gas pipelines are not present in many regions of the country where propane is sold for heating and cooking purposes.

In the motor fuel market, propane competes with gasoline and diesel fuel as well as electric batteries and fuel cells. Wholesale propane distribution is a highly competitive, low margin business. Propane sales to other retail distributors and large-volume, direct-shipment industrial end-users are price sensitive and frequently involve a competitive bidding process.

The retail propane industry is mature, with only modest growth in total demand for the product foreseen. Therefore, the Partnership’s ability to grow within the industry is dependent on its ability to acquire other retail distributors and to achieve internal growth, which includes expansion of the ACE program and the Strategic Accounts program as well as the success of its sales and marketing programs designed to attract and retain customers. The failure of the Partnership to retain and grow its customer base would have an adverse effect on its results.

The domestic propane retail distribution business is highly competitive. The Partnership competes in this business with other large propane marketers, including other full-service marketers, and thousands of small independent operators. Some rural electric cooperatives and fuel oil distributors have expanded their businesses to include propane distribution and the Partnership competes with them as well. The ability to compete effectively depends on providing high quality customer service, maintaining competitive retail prices and controlling operating expenses.

Trade Names, Trade and Service Marks

The Partnership markets propane principally under the “AmeriGas®,” and “America’s Propane Company®” trade names and related service marks. UGI owns, directly or indirectly, all the right, title and interest in the “AmeriGas” name and related trade and service marks. The General Partner owns all right, title and interest in the “America’s Propane Company” trade name and related service marks. The Partnership has an exclusive (except for use by UGI, AmeriGas, Inc. and the General Partner), royalty-free license to use these trade names and related service marks. UGI and the General Partner each have the option to terminate its respective license agreement (on 12 months prior notice in the case of UGI), without penalty, if the General Partner is removed as general partner of the Partnership other than for cause. If the General Partner ceases to serve as the general partner of the Partnership for cause, the General Partner has the option to terminate its license agreement upon payment of a fee to UGI equal to the fair market value of the licensed trade names. UGI has a similar termination option; however, UGI must provide 12 months prior notice in addition to paying the fee to the General Partner.

Seasonality

Because many customers use propane for heating purposes, the Partnership’s retail sales volume is seasonal. Approximately 55% to 60% of the Partnership’s retail sales volume occurs, and substantially all of the Partnership’s income is earned, during the five-month peak heating season from November through March. As a result of this seasonality, sales are higher in the Partnership’s first and second fiscal quarters (October 1 through March 31). Cash receipts are generally greatest during the second and third fiscal quarters when customers pay for propane purchased during the winter heating season.

Sales volume for the Partnership traditionally fluctuates from year-to-year in response to variations in weather, prices, competition, customer mix and other factors, such as conservation efforts and general economic conditions. For historical information on national weather statistics, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Government Regulation

The Partnership is subject to various federal, state and local environmental, safety and transportation laws and regulations governing the storage, distribution and transportation of propane and the operation of bulk storage LPG terminals. These laws include, among others, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or, the “Superfund Law”), the Clean Air Act, the Occupational Safety and Health Act, the Homeland Security Act of 2002, the Emergency Planning and Community Right to Know Act, the Clean Water Act and comparable state statutes. CERCLA imposes joint and several liability on certain classes of persons considered to have contributed to the release or threatened release of a “hazardous substance” into the environment without regard to fault or the legality of the original conduct. Propane is not a hazardous substance within the meaning of federal and most state environmental laws. See Notes 2 and 11 to the Company’s Consolidated Financial Statements.

All states in which the Partnership operates have adopted fire safety codes that regulate the storage and distribution of propane. In some states these laws are administered by state agencies, and in others they are administered on a municipal level. The Partnership conducts training programs to help ensure that its operations are in compliance with applicable governmental regulations. With respect to general operations, National Fire Protection Association (“NFPA”) Pamphlets No. 54 and No. 58, which establish a set of rules and procedures governing the safe handling of propane, or comparable regulations, have been adopted by all states in which the Partnership operates. The most recent editions of NFPA Pamphlet No. 58, adopted by a majority of states, requires certain stationary cylinders that are filled in place to be re-qualified periodically, depending on the date of manufacture and previous schedule of re-qualification. Management believes that the policies and procedures currently in effect at all of its facilities for the handling, storage and distribution of propane are consistent with industry standards and are in compliance in all material respects with applicable environmental, health and safety laws.

With respect to the transportation of propane by truck, the Partnership is subject to regulations promulgated under federal legislation, including the Federal Motor Carrier Safety Act and the Homeland Security Act of 2002. Regulations under these statutes cover the security and transportation of hazardous materials and are administered by the United States Department of Transportation (“DOT”). The Natural Gas Safety Act of 1968 required the DOT to develop and enforce minimum safety regulations for the transportation of gases by pipeline. The DOT’s pipeline safety regulations apply to, among other things, a propane gas system which supplies 10 or more residential customers or 2 or more commercial customers from a single source and a propane gas system any portion of which is located in a public place. The code requires operators of all gas systems to provide training and written instructions for employees, establish written procedures to minimize the hazards resulting from gas pipeline emergencies, and to conduct and keep records of inspections and testing. Operators are subject to the Pipeline Safety Improvement Act of 2002, which, among other things, protects from adverse employment actions employees who provide information to their employers or to the federal government as to pipeline safety.

Employees

The Partnership does not directly employ any persons responsible for managing or operating the Partnership. The General Partner provides these services and is reimbursed for its direct and indirect costs and expenses, including all compensation and benefit costs. At September 30, 2007, the General Partner had approximately 6,200 employees, including approximately 430 part-time, seasonal and temporary employees, working on behalf of the Partnership. UGI also performs certain financial and administrative services for the General Partner on behalf of the Partnership and is reimbursed by the Partnership.

ITEM 1A. RISK FACTORS

There are many factors that may affect our business and results of operations. Additional discussion regarding factors that may affect our businesses and operating results is included elsewhere in this Report.

Risks Related to Our Business

Decreases in the demand for propane because of warmer-than-normal heating season weather or unfavorable weather may adversely affect our results of operations.

Because many of our customers rely on propane as a heating fuel, our results of operations are adversely affected by warmer-than-normal heating season weather. Weather conditions have a significant impact on the demand for propane for both heating and agricultural purposes. 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. For example, historically approximately 55% to 60% of our annual retail propane volumes are sold during these months. There can be no assurance that normal winter weather in our service territories will occur in the future.

The agricultural demand for propane is also affected by weather, as dry or warm weather during the harvest season may reduce the demand for propane. Our ACE operations experience higher volumes in the spring and summer, mainly due to the grilling season. Sustained periods of unfavorable weather conditions can negatively affect our ACE revenues. Unfavorable weather conditions may also cause a reduction in the purchase and use of grills and other propane-filled appliances which could reduce the demand for our portable propane tank exchange services.

Our profitability is subject to propane 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 fluctuations in response to changes in supply or other market conditions. We have 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 of time. Most of our propane 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 supply costs, it will be adversely affected if we cannot pass on increases in the cost of propane to our customers. Due to competitive pricing in the industry, we may not be able to pass on product cost increases to our customers when product costs rise rapidly, or when our competitors do not raise their product prices. Finally, market volatility may cause us to sell inventory at less than the price we purchased it, which would adversely affect our operating results.

High propane prices can lead to customer conservation, resulting in reduced demand for our product.

Prices for propane are subject to volatile fluctuations in response to changes in supply and other market conditions. During periods of high propane costs such as those experienced in fiscal years 2007 and 2006, our prices generally increase. High prices can lead to customer conservation, resulting in reduced demand for our product.

Supplier defaults may have a negative effect on our operating results.

When we enter into fixed-price sales contracts with customers, we also enter into fixed-price purchase contracts with suppliers. Depending on changes in the market prices of products compared to the prices secured in our contracts with suppliers of propane, a default of one or more of our suppliers under such contracts could cause us to purchase propane at higher prices which would have a negative impact on our operating results.

Changes in commodity market prices may have a negative effect on our liquidity.

Depending on the terms of our contracts with suppliers, a change in the market price of propane could create a margin payment obligation for us and expose us to an increased liquidity risk.

Our operations may be adversely affected by competition from other energy sources.

Propane competes with other sources of energy, some of which are less costly on an equivalent energy basis. In addition, we cannot predict the effect that the development of alternative energy sources might have on our operations. We compete for customers against suppliers of electricity, fuel oil and natural gas.

Electricity is a major competitor of propane, but propane generally enjoys a competitive price advantage over electricity for space heating, water heating and cooking. 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, and, therefore, 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 generally a less expensive source of energy than propane. The gradual expansion of the nation’s natural gas distribution systems has resulted, and may continue to result, in the availability of natural gas in some areas that previously depended upon propane.

Our ability to increase revenues is adversely affected by the maturity of the retail propane industry.

The retail propane industry is mature, with only modest growth in total demand for the product foreseen. Given this limited growth, we expect that year-to-year industry volumes will be principally affected 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, which includes expansion of our ACE and Strategic Accounts programs, as well as the success of our marketing programs designed to attract and retain customers. Any failure to retain and grow our customer base would have an adverse effect on our results.

Our ability to grow will be adversely affected if we are not successful in making acquisitions or integrating the acquisitions we have made.

We have historically expanded our propane business through acquisitions. 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. We can give no assurances that we will find attractive acquisition candidates in the future, 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.

To the extent we are successful in making acquisitions, such acquisitions involve a number of risks, including, but not limited to, the assumption of material liabilities, the diversion of management’s attention from the management of daily operations to the integration of operations, difficulties in the assimilation and retention of employees and difficulties in the assimilation of different cultures and practices, as well as in the assimilation of broad and geographically dispersed personnel and operations. The failure to successfully integrate acquisitions could have an adverse affect on our business, financial condition and results of operations.

We are subject to operating and litigation risks that may not be covered by insurance.

Our operations 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 legal proceedings and litigation arising in the ordinary course of business. We believe that we are adequately insured for claims in excess of our self-insurance; however, certain types of damages, such as punitive damages and penalties, if any, may not be covered by insurance. There can be no assurance that our insurance will be adequate to protect us from all material expenses related to pending and future claims or that such levels of insurance will be available in the future at economical prices.

We may be unable to respond effectively to competition, which may adversely affect our operating results.

We may be unable to timely respond to changes within the propane sector that may result from regulatory initiatives to further increase competition within our industry. Such regulatory initiatives may create opportunities for additional competitors to enter our markets, and, as a result, we may be unable to maintain our revenues or continue to pursue our current business strategy.

Our net income will decrease if we are required to incur additional costs to comply with new governmental safety, health, transportation and environmental regulations.

We are subject to various federal, state and local safety, health, transportation and environmental laws and regulations governing the storage, distribution and transportation of propane. We have implemented safety and environmental programs and policies designed to avoid potential liability and costs under applicable laws. It is possible, however, that we will incur increased costs as a result of complying with new safety, health, transportation and environmental regulations and that such costs will reduce our net income. It is also possible that material environmental liabilities will be incurred, including those relating to claims for damages to property and persons.

Risks Inherent in an Investment in Our Common Units

Cash distributions are not guaranteed and may fluctuate with our performance.

Although we distribute all of our available cash each quarter, the amount of cash that we generate each quarter fluctuates. As a result, we cannot guarantee that we will pay the current regular quarterly distribution each 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 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. The actual amount of cash that is available to be distributed each quarter will depend upon numerous factors, including:

	•		our cash flow generated by operations;
	•		the weather in our areas of operation;
	•		our borrowing capacity under our bank credit facilities;
	•		required principal and interest payments on our debt;
	•		fluctuations in our working capital;
	•		our cost of acquisitions (including related debt service payments);
	•		restrictions contained in our debt instruments;
	•		our capital expenditures;

	•		our issuances of debt and equity securities;
	•		reserves made by our General Partner in its discretion;
	•		prevailing economic and industry conditions; and
	•		financial, business and other factors, a number of which are beyond our control.

Our General Partner has broad discretion to determine the amount of “available cash” for distribution to holders of our equity securities through the establishment and maintenance of cash reserves, thereby potentially lessening and limiting the amount of “available cash” eligible for distribution.

Our General Partner determines the timing and amount of our distributions and has broad discretion in determining the amount of funds that will be recognized as “available cash.” Part of this discretion comes from the ability of our General Partner to establish reserves. Decisions as to amounts to be reserved have a direct impact on the amount of available cash for distributions because reserves are taken into account in computing available cash. Each fiscal quarter, our General Partner may, in its reasonable discretion, determine that amounts to be reserved, subject to restrictions on the purposes of the reserves. Reserves may be made, increased or decreased for any proper purpose, including, but not limited to, reserves:

	•		to comply with terms of any of our agreements or obligations, including the establishment of reserves to fund the payment of interest and principal in the future of debt securities;
	•		to provide for level distributions of cash notwithstanding the seasonality of our business; and
	•		to provide for future capital expenditures and other payments deemed by our General Partner to be necessary or advisable.

The decision by our General Partner to establish reserves may limit the amount of cash available for distribution to holders of our equity securities. Holders of our equity securities will not receive payments unless we are able to first satisfy our own obligations and the establishment of any reserves.

Holders of Common Units may experience dilution of their interests.

We may issue an unlimited number of additional limited partner interests and other equity securities, 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. We also may issue an unlimited number of partnership interests junior to the Common Units without a unitholder vote. When we issue additional equity securities, a unitholder’s 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 power of each previously outstanding unit. Please read “Holders of Common Units have limited voting rights, management and control of us” 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.

 The market price of the Common Units may be adversely affected by various change of management provisions.  

Our 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 the 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 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.

The various agreements governing our and the Operating Partnership’s indebtedness and other financing transactions restrict quarterly distributions. These agreements contain various negative and affirmative covenants applicable to us and the Operating Partnership and some of these agreements require us and the Operating Partnership to maintain specified financial ratios. If we or the Operating Partnership violate any of these covenants or requirements, a default may result and distributions would be limited. These covenants limit our and the Operating Partnership’s ability to, among other things:

	•		incur additional indebtedness;
	•		engage in transactions with affiliates;
	•		create or incur liens;

	•		sell assets;
	•		make restricted payments, loans and investments;
	•		enter into business combinations and asset sale transactions; and
	•		engage in other lines of business.

Holders of Common Units have limited voting rights, management and control of us.

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 or its directors, and our General Partner generally may not be removed except pursuant to the vote of the holders of not less than two-thirds of the outstanding units. In addition, removal of the general partner may result in a default under our debt instruments and loan agreements. 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.

Holders of Common Units may be required to sell their Common Units against their will.

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 (but not the obligation) to purchase all, but not less than all, of the remaining Common Units held by nonaffiliates at certain specified prices pursuant to the Partnership Agreement. Accordingly, under certain circumstances holders of Common Units may be required to sell their Common Units against their will and the price that they receive for those securities may be less than they would like to receive. They may also incur a tax liability upon a sale of their Common Units.

Holders of Common Units may not have limited liability in certain circumstances and may be liable for the return of distributions that cause our liabilities to exceed our assets.

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 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. We are not obligated to inform holders of Common Units about whether we are in compliance with the limited partnership statutes of any states.

Holders of Common Units may also have to repay AmeriGas Partners amounts wrongfully returned or distributed to them. Under Delaware law, we may not make a distribution to holders of Common Units if the distribution causes our liabilities to exceed the fair value of our assets. Liabilities to partners on account of their partnership interests and nonrecourse 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.

Our General Partner has conflicts of interest and limited fiduciary responsibilities, which may permit our General Partner to favor its own interest to the detriment of holders of Common Units.

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:

	•		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 affect whether and the extent to which there is sufficient available cash from operating surplus to make quarterly distributions in a given quarter. In addition, actions by our General Partner may have the effect of enabling the General Partner to receive distributions that exceed 2% of total distributions.
	•		AmeriGas Partners does not have any employees and relies solely on employees of the General Partner and its affiliates.
	•		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.
	•		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.

	•		Under the terms of the Partnership Agreement, our 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.
	•		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.

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 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.

 Our General Partner may voluntarily withdraw or sell its general partner interest.

Our General Partner may withdraw as the general partner of AmeriGas Partners and the Operating Partnership without the approval of our unitholders. Our General Partner may also sell its general partner interest in AmeriGas Partners and the Operating Partnership without the approval of our unitholders. Any such withdrawal or sale could have a material adverse effect on us and could substantially change the management and resolutions of conflicts of interest, as described above.

Tax Risks

The IRS could treat us as a corporation for tax purposes or changes in federal or state laws could subject us to entity-level taxation, which would substantially reduce the cash available for distribution to holders of Common Units.

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. No ruling from the IRS as to this status has been or is expected to be requested.

If 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), and distributions received by the common unitholders would generally be taxed a second time as corporate distributions. 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.

The law could 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. If we become subject to widespread entity-level taxation for state tax purposes, it could substantially reduce distributions to our unitholders. 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 current regular quarterly distribution and the target distribution levels to reflect the impact of this law on us. Any such reductions could increase our General Partner’s percentage of cash distributions and decrease our limited partners’ percentage of cash distributions.

States may subject partnerships to entity-level taxation in the future; thereby decreasing the amount of cash available to us for distributions and potentially causing a decrease in our distribution levels.

Several states have enacted or are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise or other forms of taxation. If additional states were to impose a tax upon us as an entity, the cash available for distribution to unitholders would be reduced.

Holders of Common Units will likely be subject to state, local and other taxes in states where holders of Common Units live or as a result of an investment in the Common Units.

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.  

A successful IRS contest of the federal income tax positions that we take may adversely affect the market for Common Units and the costs of any contest will be borne directly or indirectly by the unitholders and our General Partner.

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 expressed herein 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 such conclusions or the positions taken by us. A court may not concur with some or all of our positions. 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.

Holders of Common Units may be required to pay taxes even if they do not receive any cash distributions.

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. Distributions to foreign persons will be reduced by withholding taxes.

There are limits on the deductibility of losses that may adversely affect holders of Common Units.

In the case of taxpayers subject to the passive loss rules (generally, individuals, closely-held corporations and regulated investment companies), 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 carried over from prior years, but not by losses from other passive activities, including losses from other publicly traded partnerships.

Our tax shelter registration could increase the risk of a 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 the gain or loss equal to the difference between the amount realized, including the unitholder’s share of our nonrecourse 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.  

The 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 share of our 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.

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.  

Holders of Common Units 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.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

As of September 30, 2007, the Partnership owned approximately 83% of its district locations. The Partnership owns a 600,000 barrel refrigerated, above-ground storage facility located on leased property in California. The California facility, which the Partnership operates, is currently leased to an LPG marketer for the storage of LPG.

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, 2007, the Partnership operated a transportation fleet with the following assets:

Approximate Quantity & Equipment Type						% Owned				% Leased
	530			Trailers			92				8
	300			Tractors			27				73
	180			Railroad tank cars			0				100
	2,600			Bobtail trucks			13				87
	330			Rack trucks			9				91
	2,200			Service and delivery trucks			16				84

Other assets owned at September 30, 2007 included approximately 900,000 stationary storage tanks with typical capacities ranging from 121 to 2,000 gallons and approximately 2.7 million portable propane cylinders with typical capacities of 1 to 120 gallons. The Partnership also owned approximately 5,400 large volume tanks with typical capacities of more than 2,000 gallons which are used for its own storage requirements.

ITEM 3. LEGAL PROCEEDINGS

With the exception of the matter set forth below, no material legal proceedings are pending involving the Partnership, any of its subsidiaries, or any of their properties, and no such proceedings are known to be contemplated by governmental authorities other than claims arising in the ordinary course of the Partnership’s business.

Swiger, et al. v. UGI/AmeriGas, Inc. et al. Plaintiffs Samuel and Brenda Swiger and their son (the “Swigers”) sustained personal injuries and property damage as a result of a fire that occurred when propane that leaked from an underground line ignited. In July 1998, the Swigers filed a class action lawsuit against AmeriGas OLP (named incorrectly as “UGI/AmeriGas, Inc.”), in the Circuit Court of Monongalia County, West Virginia (Civil Action No. 98-C-298), in which they sought to recover an unspecified amount of compensatory and punitive damages and attorney’s fees, for themselves and on behalf of persons in West Virginia for whom the defendants had installed propane gas lines, allegedly resulting from the defendants’ failure to install underground propane lines at depths required by applicable safety standards. In 2003, we settled the individual personal injury and property damage claims of the Swigers. In 2004, the court granted the plaintiffs’ motion to include customers acquired from Columbia Propane in August 2001 as additional potential class members, and the plaintiffs amended their complaint to name additional parties pursuant to such ruling. Subsequently, in March 2005, we filed a cross-claim against Columbia Energy Group, former owner of Columbia Propane, seeking indemnification for conduct undertaken by Columbia Propane prior to AmeriGas OLP’s acquisition. Class counsel has indicated that the class is seeking compensatory damages in excess of $12 million plus punitive damages, civil penalties and attorneys’ fees. The defendants believe they have good defenses to the claims of the class members and intend to vigorously defend against the remaining claims in this lawsuit.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders during the last fiscal quarter of the 2007 fiscal year.

PART II:

ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SECURITY HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Each Common Unit represents a limited partner interest in the Partnership. Common Units are listed on the New York Stock Exchange, which is the principal trading market for such securities, under the symbol “APU.” The following table sets forth, for the periods indicated, the high and low sale prices per Common Unit, as reported on the New York Stock Exchange (“NYSE”) Composite Transactions tape, and the amount of cash distributions paid per Common Unit.

		Price Range								Cash
2007 Fiscal Year		High				Low				Distribution
Fourth Quarter		$	38.00			$	31.20			$	0.86
Third Quarter			38.89				32.62				0.61
Second Quarter			34.00				31.28				0.58
First Quarter			33.10				30.35				0.58

		Price Range								Cash
2006 Fiscal Year		High				Low				Distribution
Fourth Quarter		$	31.27			$	29.40			$	0.58
Third Quarter			31.35				28.27				0.58
Second Quarter			31.83				28.22				0.56
First Quarter			32.54				27.10				0.56

As of November 23, 2007, there were 1,319 record holders of the Partnership’s Common Units.

The Partnership makes quarterly distributions to its partners in an aggregate amount equal to its Available Cash, as defined in the Third Amended and Restated Agreement of Limited Partnership of AmeriGas Partners, L.P., as amended by Amendment No. 1 (the “Partnership Agreement”). Available Cash generally means, with respect to any fiscal quarter of the Partnership, all cash on hand at the end of such quarter, plus all additional cash on hand as of the date of determination resulting from borrowings subsequent to the end of such quarter, less the amount of cash reserves established by the General Partner in its reasonable discretion for future cash requirements. Certain reserves are maintained to provide for the payment of principal and interest under the terms of the Partnership’s debt agreements and other reserves may be maintained to provide for the proper conduct of the Partnership’s business, and to provide funds for distribution during the next four fiscal quarters. The information concerning restrictions on distributions required by Item 5 of this report is incorporated herein by reference to Notes 5 and 6 to the Partnership’s Consolidated Financial Statements which are incorporated herein by reference.

During fiscal year 2007, the Partnership issued 166,205 Common Units to the General Partner. The Partnership relied on the exemption from the provisions of Section 5 of the Securities Act of 1933, as amended (the “Act”), contained in Section 4(2) of the Act for transactions not involving a public offering. For additional information, see “Related Person Transactions” under Item 13.

ITEM 6. SELECTED FINANCIAL DATA

		Year Ended
		September 30,
		2007				2006				2005				2004				2003
		(Thousands of dollars, except per unit)
FOR THE PERIOD:
Income statement data:
Revenues		$	2,277,375			$	2,119,266			$	1,963,256			$	1,775,900			$	1,628,424
Net income		$	190,784			$	91,158			$	60,845			$	91,854			$	71,958
Limited partners’ interest in net income		$	185,184			$	90,246			$	60,237			$	90,935			$	71,238
Income per limited partner unit — basic and diluted (a)		$	3.15			$	1.59			$	1.10			$	1.71			$	1.42
Cash distributions declared per limited partner unit		$	2.63			$	2.28			$	2.22			$	2.20			$	2.20
AT PERIOD END:
Balance sheet data:
Current assets		$	375,020			$	368,209			$	417,740			$	298,116			$	250,244
Total assets			1,696,784				1,611,767				1,663,075				1,550,227				1,496,088
Current liabilities (excluding debt)			376,668				378,331				338,928				292,402				253,255
Total debt			933,042				933,746				913,502				901,351				927,286
Minority interests			11,386				10,448				8,570				7,749				7,005
Partners’ capital			311,228				221,503				337,417				289,038				253,683
OTHER DATA:
Capital expenditures (including capital leases)		$	73,764			$	70,915			$	63,584			$	62,303			$	53,429
Retail propane gallons sold (millions)			1,006.7				975.2				1,034.9				1,059.1				1,074.9
Degree days — % (warmer) colder than normal (b)			(6.5	)			(10.2	)			(6.9	)			(4.9	)			0.2

ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

AmeriGas Partners is the largest retail propane marketer in the United States, with sales to retail customers of more than a billion gallons during the year ended September 30, 2007 (“Fiscal 2007”). We deliver propane to more than a million customers from our distribution locations in 46 states. The propane industry is mature, with only modest growth in residential customer demand. Accordingly, our growth strategy focuses on acquisition of other propane marketers and internal growth to be achieved by leveraging our geographic coverage to secure regional and national accounts, serving the growing grill cylinder program and offering superior customer service.

During the past three years our financial results reflect growth achieved through (1) acquisitions of retail propane distribution and cylinder refurbishment businesses, (2) additions of multi-location regional and national accounts and new distribution points for our cylinder exchange operation, and (3) growth in our traditional residential and commercial customer base. During Fiscal 2007, we achieved record net income of $190.8 million which includes, among other things, the effects of a $46.1 million gain from the sale of our 3.5 million barrel liquefied petroleum gas storage facility located in Arizona. Net income during the year ended September 30, 2006 (“Fiscal 2006”) includes the impact of a $17.1 million loss on early extinguishment of debt related to debt refinancings. Colder temperatures during Fiscal 2007 had a favorable impact on our retail volumes sold and total margin compared to the prior year. Our AmeriGas Cylinder Exchange program also experienced higher volumes sold primarily reflecting customer growth.

In Fiscal 2008 and beyond, we will continue to focus on growing our traditional customer base, as well as growing through acquisitions and our strategic account and grill cylinder program. We expect to achieve base business growth by providing best-in-class customer service and improving the effectiveness of our sales force, while maintaining competitive prices. In addition, we plan to manage the growth rate of operating and administrative expenses by executing a series of initiatives to enhance safety and productivity.

Analysis of Results of Operations

The following analysis compares the Partnership’s results of operations for (1) Fiscal 2007 with Fiscal 2006 and (2) Fiscal 2006 with the year ended September 30, 2005 (“Fiscal 2005”).

The following table provides gallon, weather and certain financial information for the Partnership and should be read in conjunction with “Fiscal 2007 Compared to Fiscal 2006” and “Fiscal 2006 Compared to Fiscal 2005” sections below.

(Millions of dollars, except where noted)

		Year Ended September 30,
		2007				2006				2005
Gallons sold (millions):
Retail			1,006.7				975.2				1,034.9
Wholesale			117.4				119.7				148.7
			1,124.1				1,094.9				1,183.6
Revenues:
Retail propane		$	1,958.5			$	1,816.0			$	1,679.2
Wholesale propane			137.6				137.7				140.5
Other			181.3				165.6				143.6
		$	2,277.4			$	2,119.3			$	1,963.3
Total margin (a)		$	840.2			$	775.5			$	743.3
EBITDA (b)		$	338.7			$	237.9			$	215.9
Operating income		$	265.7			$	184.1			$	177.3
Net income		$	190.8			$	91.2			$	60.8
Degree days — % warmer than normal (c)			6.5	%			10.2	%			6.9	%

		Year Ended September 30,
		2007				2006				2005
Net income		$	190.8			$	91.2			$	60.8
Income tax expense			0.8				0.2				1.5
Interest expense			71.5				74.1				79.9
Depreciation			71.6				67.8				68.2
Amortization			4.0				4.6				5.5
EBITDA		$	338.7			$	237.9			$	215.9

Fiscal 2007 Compared with Fiscal 2006

Temperatures in the Partnership’s service territories based upon heating degree days during Fiscal 2007 were 6.5% warmer than normal compared with temperatures that were 10.2% warmer than normal during Fiscal 2006. Retail propane volumes sold increased approximately 3.2% reflecting greater demand attributable to the colder weather and the effects of higher sales in our AmeriGas Cylinder Exchange program.

Retail propane revenues increased $142.5 million reflecting an $83.8 million increase due to higher average selling prices and $58.7 million due to the higher volumes sold. Wholesale propane revenues decreased slightly reflecting a $2.6 million decrease due to lower volumes sold largely offset by a $2.5 million increase due to higher average selling prices. In Fiscal 2007, our average retail propane product cost per retail gallon sold was approximately 4% higher than in Fiscal 2006 resulting in higher year-over-year prices to our customers. Total cost of sales increased to $1,437.2 million in Fiscal 2007 from $1,343.8 million in Fiscal 2006 primarily reflecting the increase in propane product costs and the increased volumes sold. Total margin increased $64.7 million principally due to the higher average retail propane margins per gallon, the higher volumes and higher fees in response to increases in operating and administrative expenses.

EBITDA during Fiscal 2007 increased $100.8 million as a result of the previously mentioned increase in total margin, a $46.1 gain from the sale of the Partnership’s storage facility in Arizona, and the absence of a $17.1 million loss on early extinguishments of debt recorded in Fiscal 2006 partially offset by a $27.2 million increase in operating and administrative expenses. The $17.1 million loss on early extinguishments of debt incurred during Fiscal 2006 was associated with the refinancings of AmeriGas OLP’s Series A and Series C First Mortgage Notes totaling $228.8 million, and $59.6 million of AmeriGas Partners’ 10% Senior Notes, with $350 million of 7.125% AmeriGas Partners’ Senior Notes due 2016. The Partnership also used a portion of the proceeds from the issuance of the 7.125% Senior Notes to repay AmeriGas OLP’s $35 million term loan. The increase in Fiscal 2007 operating and administrative expenses principally resulted from higher (1) employee compensation and benefits, (2) vehicle costs and (3) maintenance and repairs expenses. Both Fiscal 2007 and 2006 benefited from favorable expense reductions related to general insurance primarily reflecting improved claims experience.

Operating income increased $81.6 million mainly reflecting the previously mentioned increase in EBITDA but excluding the impact of the prior period’s $17.1 million loss on extinguishment of debt (which is included in EBITDA but not operating income) slightly offset by greater depreciation expense. Net income in Fiscal 2007 increased $99.6 million reflecting the increase in operating income, the absence of the Fiscal 2006 loss on extinguishment of debt and a decrease in interest expense.

Fiscal 2006 Compared with Fiscal 2005

Temperatures in our service territories based upon heating degree days during Fiscal 2006 were 10.2% warmer than normal compared with temperatures that were 6.9% warmer than normal during Fiscal 2005. Retail propane volumes sold decreased approximately 5.8% principally due to the warmer winter weather and the negative effects of customer conservation driven by continued high propane selling prices.

Retail propane revenues increased $136.8 million reflecting a $233.8 million increase due to higher average selling prices partially offset by a $97.0 million decrease due to the lower retail volumes sold. Wholesale propane revenues decreased $2.8 million reflecting a $27.4 million decrease due to lower volumes sold partially offset by a $24.6 million increase due to higher average selling prices. In Fiscal 2006, our average retail propane product cost per retail gallon sold was approximately 18% higher than in Fiscal 2005 resulting in higher year-over-year prices to our customers. Total cost of sales was $1,343.8 million in Fiscal 2006 compared to $1,220.0 million in Fiscal 2005, primarily reflecting the increase in propane product costs partially offset by the decreased volumes sold. Total margin increased $32.2 million principally due to higher average propane margins per gallon and higher fees in response to increases in operating and administrative expenses.

EBITDA during Fiscal 2006 increased $22.0 million compared to Fiscal 2005 as a result of the previously mentioned increase in total margin and a $16.5 million decrease in losses on early extinguishments of debt ($17.1 million of such losses in Fiscal 2006 compared to $33.6 million in Fiscal 2005). These favorable year-over-year changes were partially offset by a $17.2 million increase in operating and administrative expenses and a $9.5 million decrease in other income. Other income in Fiscal 2005 benefited from a $9.1 million pre-tax gain on the sale of AmeriGas Propane’s 50% ownership interest in Atlantic Energy to Energy Services, Inc. (“Energy Services”), which is owned by an affiliate of UGI. The increase in operating and administrative expenses principally resulted from higher (1) vehicle fuel and lease costs, (2) employee compensation and benefits costs, and (3) repairs and maintenance expenses. These increases were partially offset by a $7.2 million favorable net expense reduction related to general insurance and litigation, primarily reflecting improved claims history. During Fiscal 2006, the Partnership recovered significant increases in certain costs, such as vehicle fuel, through delivery surcharges.

Operating income increased $6.8 million reflecting the previously mentioned increase in total margin and a $1.2 million decrease in depreciation and amortization expense, largely offset by the aforementioned $17.2 million increase in operating and administrative expenses and decrease in other income. Net income in Fiscal 2006 increased $30.3 million principally reflecting the previously mentioned increase in EBITDA and a $5.8 million decrease in interest expense resulting from the previously mentioned debt refinancings and reduced use of our revolving credit facility.

Financial Condition and Liquidity

Capitalization and Liquidity

The Partnership’s debt outstanding at September 30, 2007 totaled $933.0 million. There were no amounts outstanding under AmeriGas OLP’s Credit Agreement at September 30, 2007.

AmeriGas OLP’s Credit Agreement expires on October 15, 2011 and consists of (1) a $125 million Revolving Credit Facility and (2) a $75 million Acquisition Facility. The Revolving Credit Facility may be used for working capital and general purposes of AmeriGas OLP. The Acquisition Facility provides AmeriGas OLP with the ability to borrow up to $75 million to finance the purchase of propane businesses or propane business assets or, to the extent it is not so used, for working capital and general purposes, subject to restrictions in the AmeriGas Partners Senior Notes indentures. Issued and outstanding letters of credit under the Revolving Credit Facility, which reduce the amount available for borrowings, totaled $58.0 million at September 30, 2007 and $58.9 million at September 30, 2006. Approximately the same amounts were outstanding all year in each of the respective fiscal years. AmeriGas OLP’s short-term borrowing needs are seasonal and are typically greatest during the fall and winter heating-season months due to the need to fund higher levels of working capital. The average daily and peak bank loan borrowings outstanding under the Credit Agreement during Fiscal 2007 were $1.6 million and $92.0 million, respectively. There were no significant borrowings under the Credit Agreement during Fiscal 2006.

AmeriGas Partners periodically issues equity securities in public offerings and may continue to do so. Proceeds from the Partnership’s equity offerings have generally been used by the Partnership to reduce indebtedness and for general Partnership purposes, including funding acquisitions. The Partnership has an effective unallocated debt and equity shelf registration statement with the U.S. Securities and Exchange Commission (“SEC”) under which it may issue Common Units or Senior Notes due 2016 in underwritten public offerings.

In order to borrow under its Credit Agreement, AmeriGas OLP must satisfy certain financial covenants including, but not limited to, a minimum interest coverage ratio, a maximum debt to EBITDA ratio and a minimum EBITDA, as defined. AmeriGas OLP’s financial covenants calculated as of September 30, 2007 permitted it to borrow up to the maximum amount available under its Credit Agreement. For a more detailed discussion of the Partnership’s credit facilities, see Note 6 to Consolidated Financial Statements. Based upon existing cash balances, cash expected to be generated from operations and borrowings available under its Credit Agreement, the Partnership’s management believes that the Partnership will be able to meet its anticipated contractual commitments and projected cash needs in Fiscal 2008.

Partnership Distributions

The Partnership makes distributions to its partners approximately 45 days after the end of each fiscal quarter in a total amount equal to its Available Cash as defined in the Third Amended and Restated Agreement of Limited Partnership, as amended (the “Partnership Agreement”) for such quarter. Available Cash generally means:

1.

all cash on hand at the end of such quarter,

	2.		plus all additional cash on hand as of the date of determination resulting from borrowings after the end of such quarter,
	3.		less the amount of cash reserves established by the General Partner in its reasonable discretion.

The General Partner may establish reserves for the proper conduct of the Partnership’s business and for distributions during the next four quarters. In addition, certain of the Partnership’s debt agreements require reserves be established for the payment of debt principal and interest. Distributions of Available Cash are made 98% to limited partners and 2% to the General Partner (giving effect to the 1.01% interest of the General Partner in distributions of Available Cash from AmeriGas OLP to AmeriGas Partners) until Available Cash exceeds the Minimum Quarterly Distribution of $0.55 and the First Target Distribution of $0.055 per Common Unit (or a total of $0.605 per Common Unit). If Available Cash exceeds $0.605 per Common Unit in any quarter, the General Partner will receive a greater percentage of the total Partnership distribution than its 1% general partner interest in AmeriGas Partners (the “incentive distribution”) but only with respect to the amount by which the distribution per Common Unit to limited partners exceeds $0.605. Accordingly, because the Partnership made distributions to Common Unitholders of $0.61 per limited partner unit on May 18, 2007 and $0.86 per limited partner unit on August 18, 2007 (which amount included a one-time $0.25 per limited partner unit increase in the regular quarterly distribution reflecting a distribution of a portion of the proceeds from the sale of the Partnership’s Arizona storage facility), the General Partner received a greater percentage of the total Partnership distributions than its aggregate 2% general partner interest in AmeriGas Partners and AmeriGas OLP. The total amount of distributions received by the General Partner with respect to its 1% general partner interest in AmeriGas Partners during Fiscal 2007 totaled $5.2 million which includes approximately $3.7 million of incentive distributions.

As previously mentioned, on July 30, 2007, the General Partner’s Board of Directors approved a distribution of $0.86 per Common Unit payable on August 18, 2007 to unitholders of record on August 10, 2007. This distribution included the regular quarterly distribution of $0.61 per Common Unit and $0.25 per Common Unit reflecting a distribution of a portion of the proceeds from the Partnership’s sale of its Arizona storage facility in July 2007.

A reasonable proxy for the amount of cash available for distribution that is generated by the Partnership can be calculated by subtracting from the Partnership’s EBITDA interest expense and capital expenditures needed to maintain operating capacity and adding back losses on extinguishments of debt associated with refinancings.

Partnership distributable cash as calculated under this method for Fiscal 2007, 2006 and 2005 is as follows:

Year Ended September 30,
(Millions of dollars)		2007				2006				2005
Net income		$	190.8			$	91.2			$	60.8
Income tax expense			0.8				0.2				1.5
Interest expense			71.5				74.1				79.9
Depreciation			71.6				67.8				68.2
Amortization			4.0				4.6				5.5
EBITDA			338.7				237.9				215.9
Interest expense			(71.5	)			(74.1	)			(79.9	)
Maintenance capital expenditures			(27.2	)			(23.6	)			(19.3	)
Loss on extinguishment of debt			—				17.1				33.6
Distributable cash		$	240.0			$	157.3			$	150.3

Although distributable cash is a reasonable estimate of the amount of cash available for distribution by the Partnership, it does not reflect, among other things, the impact of changes in working capital and the amount of distributable cash used to finance growth capital expenditures, which can significantly affect cash available for distribution. Distributable cash 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 GAAP. Management believes distributable cash is a meaningful non-GAAP measure for evaluating the Partnership’s ability to declare and pay distributions pursuant to the terms of the Partnership Agreement. The Partnership’s definition of distributable cash may be different from that used by other companies. The ability of the Partnership to pay distributions 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 increasing operating capacity); (3) changes in operating working capital; and (4) the Partnership’s ability to borrow under its Credit Agreement, to refinance maturing debt and to increase its long-term debt. Some of these factors are affected by conditions beyond our control including weather, competition in markets we serve, the cost of propane and changes in capital market conditions.

Contractual Cash Obligations and Commitments

The Partnership has certain contractual cash obligations that extend beyond Fiscal 2007 including obligations associated with long-term debt, interest on long-term fixed-rate debt, lease obligations and propane supply contracts. The following table presents significant contractual cash obligations as of September 30, 2007:

		Payments Due by Period
						Fiscal				Fiscal				Fiscal				Fiscal 2013
(Millions of dollars)		Total				2008				2009-2010				2011-2012				and thereafter
Long-term debt		$	932.2			$	1.5			$	150.9			$	14.8			$	765.0
Interest on long-term fixed-rate debt			499.4				68.1				129.9				111.4				190.0
Operating leases			224.2				47.3				74.1				51.1				51.7
Propane supply contracts			25.8				25.8				—				—				—
Total		$	1,681.6			$	142.7			$	354.9			$	177.3			$	1,006.7

Cash Flows

Operating activities. Due to the seasonal nature of the Partnership’s business, cash flows from operating activities are generally strongest during the second and third fiscal quarters when customers pay for propane consumed during the heating season months. Conversely, operating cash flows are generally at their lowest levels during the first and fourth fiscal quarters when the Partnership’s investment in working capital, principally accounts receivable and inventories, is generally greatest. The Partnership may use its Credit Agreement to satisfy its seasonal operating cash flow needs. Cash flow from operating activities was $204.5 million in Fiscal 2007, $177.8 million in Fiscal 2006 and $183.6 million in Fiscal 2005. Cash flow from operating activities before changes in operating working capital was $234.7 million in Fiscal 2007, $185.3 million in Fiscal 2006 and $166.9 million in Fiscal 2005. Cash required to fund changes in operating working capital totaled $30.2 million in Fiscal 2007 and $7.4 million in Fiscal 2006 compared to cash provided from changes in operating working capital of $16.7 million in Fiscal 2005. The increase in cash flow from operations in Fiscal 2007 primarily reflects the improved earnings partially offset by greater cash used to fund working capital.

Investing activities. Cash flow used in investing activities was $97.5 million in Fiscal 2007, $63.1 million in Fiscal 2006 and $55.4 million in Fiscal 2005. We spent $73.8 million for property, plant and equipment (comprising $27.2 million of maintenance capital expenditures and $46.6 million of growth capital expenditures) in Fiscal 2007 compared to expenditures of $70.7 million for property, plant and equipment (comprising $23.6 million of maintenance capital expenditures and $47.1 million of growth capital expenditures) in Fiscal 2006. In July 2007, the Partnership completed the sale of its 3.5 million barrel liquefied petroleum gas storage terminal located near Phoenix, Arizona for net cash proceeds of $49.0 million. Also during Fiscal 2007, the Partnership acquired several retail propane distribution businesses, including the retail distribution businesses of All Star Gas Corporation and Shell Gas (LPG) USA, and several cylinder refurbishing businesses for total net cash consideration of $78.8 million.

Financing activities. Cash flow used by financing activities was $157.7 million in Fiscal 2007, $129.1 million in Fiscal 2006 and $69.5 million in Fiscal 2005. The Partnership’s financing activities are typically the result of repayments and issuances of long-term debt, borrowings under our Credit Agreement, issuances of Common Units and distributions on partnership interests.

Related Party Transactions

In September 2007, in conjunction with a propane business acquisition, the Partnership issued 166,205 Common Units to the General Partner in consideration for the retention of certain income tax liabilities at a price of $34.28 per Common Unit. See Notes 3 and 12 to Consolidated Financial Statements for more information related to this transaction.

Pursuant to the Partnership Agreement and a Management Services Agreement among AmeriGas Eagle Holdings, Inc., the general partner of Eagle OLP, and the General Partner, the General Partner is entitled to reimbursement for all direct and indirect expenses incurred or payments it makes on behalf of the Partnership. These costs, which totaled $333.6 million, $313.6 million and $303.6 million in Fiscal 2007, 2006 and 2005, respectively, include employee compensation and benefit expenses of employees of the General Partner and general and administrative expenses.

UGI Corporation (“UGI”) provides certain financial and administrative services to the General Partner. UGI bills the General Partner for all direct and indirect corporate expenses incurred in connection with providing these services and the General Partner is reimbursed by the Partnership for these expenses. Such corporate expenses totaled $10.8 million, $10.4 million and $13.1 million in Fiscal 2007, 2006 and 2005, respectively. In addition, UGI and certain of its subsidiaries provide office space and automobile liability insurance to the Partnership. These costs totaled $2.5 million, $2.7 million and $3.1 million in Fiscal 2007, 2006 and 2005, respectively.

AmeriGas OLP purchases propane from UGI Energy Services, Inc. and subsidiaries (“Energy Services”), which is owned by an affiliate of UGI. Purchases of propane by AmeriGas OLP from Energy Services totaled $34.7 million, $37.7 million and $28.5 million during Fiscal 2007, 2006 and 2005, respectively. Amounts due to Energy Services at September 30, 2007 and 2006 totaled $3.5 million and $3.1 million, respectively, which are included in accounts payable – related parties in our Consolidated Balance Sheets.

The Partnership sold propane to certain affiliates of UGI. Such amounts were not material during Fiscal 2007, 2006 or 2005.

Off-Balance Sheet Arrangements

We do not have any off–balance sheet arrangements that are expected to have an effect on the Partnership’s financial condition, change in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Market Risk Disclosures

Our primary financial market risks include commodity prices for propane and interest rates on borrowings.

The risk associated with fluctuations in the prices the Partnership pays for propane is principally a result of market forces reflecting changes in supply and demand for propane and other energy commodities. The Partnership’s profitability is sensitive to changes in propane supply costs and the Partnership generally passes on increases in such costs to customers. The Partnership may not, however, always be able to pass through product cost increases fully, particularly when product costs rise rapidly. In order to reduce the volatility of the Partnership’s propane market price risk, we use contracts for the forward purchase or sale of propane,

propane fixed-price supply agreements, and over-the-counter derivative commodity instruments including price swap and option contracts. Over-the-counter derivative commodity instruments utilized by the Partnership to hedge forecasted purchases of propane are generally settled at expiration of the contract. In order to minimize credit risk associated with derivative commodity contracts, we monitor established credit limits with the contract counterparties. 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 speculative or trading purposes.

The Partnership has both fixed-rate and variable-rate debt. Changes in interest rates impact the cash flows of variable-rate debt but generally do not impact its fair value. Conversely, changes in interest rates impact the fair value of fixed-rate debt but do not impact their cash flows.

Our variable rate debt includes borrowings under AmeriGas OLP’s Credit Agreement. This agreement has interest rates that are generally indexed to short-term market interest rates. The Partnership generally did not need to use its Revolving Credit Facility during Fiscal 2007 to fund its operations. At September 30, 2007 and 2006, there were no borrowings outstanding under the Credit Agreement.

The remainder of our debt outstanding is subject to fixed rates of interest. A 100 basis point increase in market interest rates would result in decreases in the fair value of this fixed-rate debt of $48.1 million and $53.7 million at September 30, 2007 and 2006, respectively. A 100 basis point decrease in market interest rates would result in increases in the fair market value of this debt of $52.0 million and $58.4 million at September 30, 2007 and 2006, respectively.

Our long-term debt is typically issued at fixed rates of interest based upon market rates for debt having similar terms and credit ratings. As these long-term debt issues mature, we may refinance such debt with new debt having interest rates reflecting then-current market conditions. This debt may have an interest rate that is more or less than the refinanced debt. In order to reduce interest rate risk associated with forecasted issuances of fixed-rate debt, from time to time we enter into interest rate protection agreements.

The following table summarizes the fair values of unsettled market risk sensitive derivative instruments held at September 30, 2007 and 2006. It also includes the changes in fair value that would result if there were a ten percent adverse change in (1) the market price of propane and (2) the three-month LIBOR:

						Change in Fair
		Fair Value				Value
		(Millions of dollars)
September 30, 2007
Propane swap contracts		$	18.3			$	(18.4	)
Interest rate protection agreements			0.6				(4.4	)
September 30, 2006
Propane swap and option contracts		$	(26.2	)		$	(21.1	)
Interest rate protection agreements			(0.3	)			(4.3	)

Because the Partnership’s derivative instruments generally qualify as hedges under Statement of Financial Accounting Standards (“SFAS”) No. 133, we expect that changes in the fair value of derivative instruments used to manage propane price or interest rate risk would be substantially offset by gains or losses on the associated anticipated transactions.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in compliance with GAAP requires the selection and application of appropriate accounting principles to the relevant facts and circumstances of the Partnership’s operations and the use of estimates made by management. The Partnership has identified the following critical accounting policies that are most important to the portrayal of the Partnership’s financial condition and results of operations. Changes in these policies could have a material effect on the financial statements. The application of these accounting policies necessarily requires management’s most subjective or complex judgments regarding estimates and projected outcomes of future events which could have a material impact on the financial statements. Management has reviewed these critical accounting policies, and the estimates and assumptions associated with them, with its Audit Committee. In addition, management has reviewed the following disclosures regarding the application of these critical accounting policies with the Audit Committee.

Litigation accruals. The Partnership is involved in litigation regarding pending claims and legal actions that arise in the normal course of its business. In accordance with GAAP, the Partnership establishes reserves for pending claims and legal actions when it is probable that a liability exists and the amount or range of amounts can be reasonably estimated. Reasonable estimates involve management judgments based on a broad range of information and prior experience. These judgments are reviewed quarterly as more information is received and the amounts reserved are updated as necessary. Such estimated reserves may differ materially from the actual liability and such reserves may change materially as more information becomes available and estimated reserves are adjusted.

Depreciation and amortization of long-lived assets. We compute depreciation on property, plant and equipment on a straight-line basis over estimated useful lives generally ranging from 2 to 40 years. We also use amortization methods and determine asset values of intangible assets other than goodwill using reasonable assumptions and projections. Changes in the estimated useful lives of property, plant and equipment and changes in intangible asset amortization methods or values could have a material effect on our results of operations. As of September 30, 2007, our net property, plant and equipment totaled $634.0 million. Depreciation expense of $71.6 million was recorded during Fiscal 2007.

Purchase Price Allocation. From time to time, we enter into material business combinations. In accordance with SFAS No. 141, “Business Combinations,” the purchase price is allocated to the various assets and liabilities acquired at their estimated fair value. Fair values of assets acquired and liabilities assumed are based upon available information and may involve us engaging an independent third party to perform an appraisal. Estimating fair values can be a complex and judgmental area and most commonly impacts property, plant and equipment and intangible assets, including those with indefinite lives. Generally, we have, if necessary, up to one year from the acquisition date to finalize the purchase price allocation.

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115” in February 2007 and SFAS No. 157 “Fair Value Measures” in September 2006. See Note 2 to the Consolidated Financial Statements for additional discussion of such pronouncements.

ITEM 7A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

“Quantitative and Qualitative Disclosures About Market Risk” are contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption “Market Risk Disclosures” and are incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management’s Annual Report on Internal Control Over Financial Reporting and the financial statements and financial statement schedules referred to in the Index contained on page F-2 of this Report are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a)

The General Partner’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Partnership’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Partnership’s disclosure controls and procedures as of the end of the period covered by this report were designed and functioning effectively to provide reasonable assurance that the information required to be disclosed by the Partnership in reports filed under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to management including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.

(b)		For “Management’s Annual Report on Internal Control Over Financial Reporting” see Item 8 of this Report (which information is incorporated herein by reference).
(c)		No change in the Partnership’s internal control over financial reporting occurred during the Partnership’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III:

ITEM 10.		DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We do not directly employ any persons responsible for managing or operating the Partnership. The General Partner and UGI provide such services and are reimbursed for direct and indirect costs and expenses including all compensation and benefit costs. See “Certain Relationships and Related Transactions, and Director Independence — Related Person Transactions” and Note 12 to the Partnership’s Consolidated Financial Statements.

The Board of Directors of the General Partner has an Audit Committee, Compensation/Pension Committee, Corporate Governance Committee and an Executive Committee. The functions of and other information about these committees is summarized below.

The Audit Committee has the authority to (i) make determinations or review determinations made by management in transactions that require special approval by the Committee under the terms of the Partnership Agreement and (ii) at the request of the General Partner, review specific matters as to which the General Partner believes there may be a conflict of interest, in order to determine if the resolution of such conflict is fair and reasonable to the Partnership. In addition, the Audit Committee acts on behalf of the Board of Directors in fulfilling its responsibility to:

	•		oversee the accounting and financial reporting processes and audits of the financial statements of the Partnership;
	•		monitor the independence of the Partnership’s independent registered public accountants and the performance of the independent registered public accountants and internal audit staff;

	•		oversee the adequacy of the Partnership’s controls relative to financial and business risk;
	•		provide a means for open communication among the independent registered public accountants, management, internal audit staff and the Board of Directors; and
	•		oversee compliance with applicable legal and regulatory requirements.

The Audit Committee has sole authority to appoint, retain, fix the compensation of and oversee the work of the independent registered public accountants. A copy of the current charter of the Audit Committee is posted on the Partnership’s website, www.amerigas.com; see “Investor Relations – Corporate Governance.”

The Audit Committee members are Messrs. Pratt (Chairman), Marrazzo and Stoeckel. Each member of the Audit Committee is “independent” as defined by the New York Stock Exchange listing standards. In addition, the Board of Directors of the General Partner has determined that all members of the Audit Committee qualify as “audit committee financial experts” within the meaning of the Securities and Exchange Commission regulations.

The Compensation/Pension Committee members are Messrs. Gozon (Chairman) and Marrazzo and Dr. Ban. The Committee establishes executive compensation policies and programs, recommends to the Board of Directors base salary, annual target bonus levels and long-term compensation awards for executives, approves corporate goals and objectives relating to the Chief Executive Officer’s compensation and reviews the General Partner’s management development and succession planning policies. Each member of the Compensation/Pension Committee is independent as defined by the New York Stock Exchange listing standards.

The Corporate Governance Committee members are Messrs. Stratton (Chairman), Gozon and Pratt. The Committee identifies nominees and reviews qualifications of persons eligible to stand for election as Directors and makes recommendations to the Board on these matters, advises the Board with respect to significant developments in corporate governance matters, reviews and assesses the performance of the Board and each Committee, and reviews and recommends director compensation. Each member of the Corporate Governance Committee is independent as defined by the New York Stock Exchange listing standards.

The Executive Committee members are Messrs. Stratton (Chairman), Gozon and Greenberg. The Committee has the full authority of the Board to act on matters between meetings of the Board, with specified limitations relating to major transactions.

The General Partner has adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers that applies to the General Partner’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer. The Code of Ethics is included as an exhibit to this Report and is posted on the Partnership’s website, www.amerigas.com; see “Investor Relations – Corporate Governance.” Copies of all corporate governance documents posted on the Partnership’s website are available free of charge by writing to Robert W. Krick, Vice President and Treasurer, AmeriGas Propane, Inc., P. O. Box 965, Valley Forge, PA 19482.

Directors and Executive Officers of the General Partner

The following table sets forth certain information with respect to the directors and executive officers of the General Partner. AmeriGas, Inc., as the sole shareholder of the General Partner, elects directors annually. AmeriGas, Inc. is a wholly owned subsidiary of UGI. Executive officers are elected for one-year terms. 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.

Name		Age				Position with the General Partner
Lon R. Greenberg			57			Chairman and Director
Eugene V. N. Bissell			54			President, Chief Executive Officer and Director
John L. Walsh			52			Vice Chairman and Director
Stephen D. Ban			67			Director
Richard C. Gozon			69			Director
William J. Marrazzo			58			Director
Gregory A. Pratt			59			Director
Howard B. Stoeckel			61			Director
James W. Stratton			71			Director
William D. Katz			54			Vice President – Human Resources
Robert H. Knauss			54			Vice President, General Counsel and Corporate Secretary
David L. Lugar			50			Vice President – Supply and Logistics
Carey M. Monaghan			56			Vice President – Sales and Marketing
Jerry E. Sheridan			42			Vice President – Finance and Chief Financial Officer
William J. Stanczak			52			Controller and Chief Accounting Officer

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), Chairman (since 1996) and Chief Executive Officer (since 1995) of UGI Corporation, 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 Aqua America, Inc.

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). From 1981 to 1987, Mr. Bissell held various positions with UGI Corporation and its subsidiaries, including Director, Corporate Development. He is a member of the Board of Directors of the National Propane Gas Association and a member of the Kalamazoo College Board of Trustees.

Mr. Walsh is Vice Chairman and a director of the General Partner (since April 2005). He is also President, Chief Operating Officer and a director of UGI Corporation and he serves as Vice Chairman and a director of UGI Utilities, Inc. (since April 2005). He previously served as Chief Executive of the Industrial and Special Products division and executive director of BOC Group PLC, an industrial gases company (2001 to 2005). From 1986 to 2001, he held various senior management positions with the BOC Group. Prior to joining BOC Group, Mr. Walsh was a Vice President of UGI’s industrial gas division prior to its sale to BOC Group in 1989. From 1981 until 1986, Mr. Walsh held several management positions with affiliates of UGI.

Dr. Ban was elected a director of the General Partner on February 22, 2006. He is currently serving as the Director of the Technology Transfer Division of the Argonne National Laboratory, a science-based Department of Energy laboratory dedicated to advancing the frontiers of science in energy, environment, biosciences and materials (March 2002 to present). He previously served as President and Chief Executive Officer of the Gas Research Institute, a gas industry research and development company funded by distributors, transporters, and producers of natural gas (1987 through 1999). He also served as Executive Vice President of GRI. Prior to joining GRI in 1981, he was Vice President, Research and Development and Quality Control of Bituminous Materials, Inc. Dr. Ban also serves as a director of UGI Utilities, Inc. and Energen Corporation.

Mr. Gozon was elected a director of the General Partner on February 24, 1998. He retired as Executive Vice President of Weyerhaeuser Company in 2002, an integrated forest products company, and Chairman of Norpac, a North Pacific Paper Company, a joint venture with Nippon Paper Industries, positions he had 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 (1988), President (1985 to 1987) of Paper Corporation of America. He also serves as a director of UGI Corporation, UGI Utilities, Inc., AmeriSource Bergen Corp., and Triumph Group, Inc.

Mr. Marrazzo was elected a director of the General Partner on April 23, 2001. He is Chief Executive Officer and President of WHYY, Inc., a public television and radio company in the nation’s fourth largest market (since 1997). Previously, he was Chief Executive Officer and President of Roy F. Weston, Inc. (1988 to 1997); Water Commissioner for the Philadelphia Water Department (1971 to 1988) and Managing Director for the City of Philadelphia (1983 to 1984). He also serves as a director of American Water Corporation and Woodard & Curran Engineers.

Mr. Pratt was elected a director of the General Partner on May 24, 2005. He is Vice Chairman and a director of OAO Technology Solutions, Inc. (OAOT), an information technology professional services company (2002 to present). He joined OAOT in 1998 as President and CEO after OAOT acquired Enterprise Technology Group, Inc., a software engineering firm founded by Mr. Pratt. He served as President and COO of Intelligent Electronics, Inc. from 1991 through 1996, and was co-founder, and served as CFO of Atari Corp. and President of Atari (US) Corp. from 1984 through 1991. He serves as a director and is chair of the governance committee of Carpenter Technology Corporation and as a director of Ceridian Corporation.

Mr. Stoeckel was elected a director of the General Partner on September 30, 2006. Mr. Stoeckel is currently President and Chief Executive Officer of Wawa, Inc. and also serves as Vice Chairman of the Board of Directors of Wawa, Inc. Wawa, Inc. is a multi-state retailer of food products and gasoline. He joined Wawa, Inc. in 1987 as Vice President – Human Resources and was promoted to various positions, including Chief Operating Officer, Executive Vice President, Chief Retail Officer, and Vice President – Marketing. He also serves as a director of Riddle Memorial Hospital, a trustee for Rider University, and a member of the Main Line Health Board of Governors.

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 Holding Company, an investment advisory and financial consulting firm, since 1972. In addition, Mr. Stratton is a director of UGI Corporation, UGI Utilities, Inc., Stratton Multi Cap Value Fund, Inc., Stratton Monthly Dividend REIT Shares, Inc., and Stratton Small-Cap Value Fund.

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 Corporation (1995 to 1996). Prior to joining UGI Corporation, 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 and General Counsel of the General Partner (since October 2003) and UGI Corporation (since September 2003). He is also Corporate Secretary of the General Partner (since 1994). Prior to October 2003, Mr. Knauss served as Vice President – Law and Associate General Counsel of the General Partner (1996 to 2003). Previously he was Group Counsel – Propane (1989 to 1996) of UGI Corporation. He joined UGI Corporation as Associate Counsel in 1985. Before joining UGI Corporation, Mr. Knauss was an associate at the firm of Ballard, Spahr, Andrews & Ingersoll in Philadelphia, Pennsylvania.

Mr. Lugar is Vice President – Supply and Logistics of the General Partner (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 – Sales and Marketing of the General Partner (since May 2000). Prior to joining the General Partner, 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 the 10 prior years.

Mr. Sheridan is Vice President – Finance and Chief Financial Officer of the General Partner (since August 2005). From 2003 to 2005, he served as President and Chief Executive Officer of Potters Industries, Inc., a global manufacturer of engineered glass materials and a wholly-owned subsidiary of PQ Corporation. In addition, Mr. Sheridan served as Executive Vice President (2003 to 2005) and as Vice President and Chief Financial Officer (1999 to 2003) of PQ Corporation, a global producer of inorganic specialty chemicals.

Mr. Stanczak is Controller and Chief Accounting Officer of the General Partner (since September 2004). Previously he held the position of Director – Corporate Accounting and Reporting of UGI Corporation (2003 to 2004). Mr. Stanczak also served as Controller of the Gas Utility Division of UGI Utilities, Inc., a subsidiary of UGI Corporation, from 1991 to 2003.

Director Independence

The Board of Directors of the General Partner has determined that, other than Messrs. Bissell, Greenberg and Walsh, no director has a material relationship with the Partnership and each is an “independent director” as defined under the rules of the New York Stock Exchange. The Board of Directors has established the following guidelines to assist it in determining director independence:

	(i)		service by a director on the Board of Directors of UGI Corporation and its subsidiaries in and of itself will not be considered to result in a material relationship between such director and the Partnership;
	(ii)		if a director serves as an officer, director or trustee of a non-profit organization, charitable contributions to that organization by the Partnership and its affiliates in an amount up to $250,000 per year will not be considered to result in a material relationship between such director and the Partnership;
	(iii)		service by a director or his immediate family member as a non-management director of a company that does business with the Partnership or an affiliate of the Partnership will not be considered to result in a material relationship between such director and the Partnership where the business is done in the ordinary course of the Partnership’s or affiliate’s business and on substantially the same terms and conditions as would be available to similarly situated customers; and
	(iv)		service by a director or his immediate family member as an executive officer or employee of a company that makes payments to, or receives payments from, the Partnership or its affiliates for property or services in an amount which, in any of the last three fiscal years, does not exceed the greater of $1 million or 2% of such other company’s consolidated gross revenues, will not be considered to result in a material relationship between such director and the Partnership.

In making its determination of independence, the Board of Directors considered charitable contributions and underwriting support by the Partnership and its affiliates to WHYY, of which Mr. Marrazzo is the Chief Executive Officer, as well as ordinary course business transactions between the Partnership and its affiliates and companies for which Mr. Pratt serves on the Board of Directors. All such transactions were in compliance with the categorical standards set by the Board of Directors for determining director independence.

Non-management Directors

Non-management directors meet at regularly scheduled executive sessions without management present. These sessions are led by Mr. Stratton, who currently holds the position of Presiding Director.

Communications with the Board of Directors and Non-management Directors

Interested persons wishing to communicate directly with the Board of Directors or the non-management directors as a group may do so by sending written communications addressed to them c/o AmeriGas Propane, Inc., P.O. Box 965, Valley Forge, PA 19482. Any communications directed to the Board of Directors or the non-management directors as a group from employees or others that concern complaints regarding accounting, internal controls or auditing matters will be handled in accordance with procedures adopted by the Audit Committee of the Board.

All other communications directed to the Board of Directors or the non-management directors as a group are initially reviewed by the General Counsel. The Chairman of the Corporate Governance Committee is advised promptly of any such communication that alleges misconduct on the part of management or raises legal, ethical or compliance concerns about the policies or practices of the General Partner.

On a periodic basis, the Chairman of the Corporate Governance Committee receives updates on other communications that raise issues related to the affairs of the Partnership but do not fall into the two prior categories. The Chairman of the Corporate Governance Committee determines which of these communications he would like to review. The Corporate Secretary maintains a log of all such communications that is available for review for one year upon request of any member of the Board.

Typically, the General Partner does not forward to the Board of Directors communications from Unitholders or other parties which are of a personal nature or are not related to the duties and responsibilities of the Board, including customer complaints, job inquiries, surveys and polls, business solicitations and junk mail.

These procedures have been posted on the Partnership’s website at www.amerigas.com (click the “Investor Relations and Corporate Governance” caption, then click on “Contact AmeriGas Propane, Inc. Board of Directors”).

Section 16(a) – Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the directors and certain officers of the General Partner and any 10% beneficial owners of the Partnership to send reports of their beneficial ownership of Common Units and changes in beneficial ownership to the Securities and Exchange Commission. Based on our records, we believe that during fiscal year 2007 all of such reporting persons complied with all Section 16(a) filing requirements applicable to them, except (i) Mr. Stanczak did not timely report on a Form 4 the award of 750 restricted Common Units to his wife under the AmeriGas Propane, Inc. Discretionary Long-Term Incentive Plan for Non-Executive Key Employees in October of 2006 and the October 2006 sale of 250 Common Units by his wife. These failures were inadvertent and the transactions were reported on a Form 4 four days late. AmeriGas Propane, Inc. did not timely report on a Form 4 the acquisition of 166,205 Common Units received in connection with a contribution of assets to AmeriGas Propane, L.P. See Note 12 to the Partnership’s Consolidated Financial Statements. This failure was inadvertent and the transaction was reported on a Form 4 eleven days late.

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation/Pension Committee of the General Partner are Messrs. Gozon and Marrazzo and Dr. Ban. None of the members is a former or current officer or employee of the General Partner or any of its subsidiaries. None of the members has any relationship required to be disclosed under this caption under the rules of the Securities and Exchange Commission.

COMPENSATION COMMITTEE REPORT

The Compensation/Pension Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussion, the Committee recommended to the General Partner’s Board of Directors and the Board of Directors approved the inclusion of the Compensation Discussion and Analysis in the Partnership’s Annual Report on Form 10-K for the year ended September 30, 2007.

Compensation/Pension Committee

Richard C. Gozon, Chairperson
William J. Marrazzo
Stephen D. Ban

COMPENSATION DISCUSSION AND ANALYSIS

Introduction

In this Compensation Discussion and Analysis, we address the compensation paid or awarded to Messrs. Bissell, Sheridan, Greenberg, Walsh and Knauss. We refer to these executive officers as our “named executive officers.”

Compensation decisions for Messrs. Bissell and Sheridan were made by the Board of Directors of AmeriGas Propane, Inc., the General Partner of AmeriGas Partners, L.P., after receiving the recommendation of its Compensation/Pension Committee. Compensation decisions for Messrs. Greenberg, Walsh and Knauss were made by the Board of Directors of UGI, after receiving the recommendations of its Compensation and Management Development Committee. For ease of understanding, we will use the term “we” to refer to one or more of the entities involved in the relevant compensation decisions, unless the context indicates otherwise.

Compensation Philosophy and Objectives

We believe that our compensation program for our named executive officers is designed to provide a competitive level of total compensation necessary to attract and retain talented and experienced executives. Additionally, our compensation program is intended to motivate our executives to contribute to our success and reward our executives for their performance and leadership excellence.

In fiscal year 2007, the components of our compensation program included salary, annual bonus awards, long-term incentive compensation (performance unit awards and stock option grants), perquisites, retirement benefits, and other benefits, all as described in greater detail in this Compensation Discussion and Analysis. We believe that the elements of our compensation program are essential components of a balanced and competitive compensation program.

Determination of Competitive Compensation

The Compensation/Pension Committee engages Towers Perrin as its compensation consultant. Towers Perrin supports the Compensation/Pension Committee in performing its responsibilities with respect to our executive compensation program. The primary duties of Towers Perrin are to:

	•		provide the Compensation/Pension Committee with independent and objective market data;
	•		conduct compensation analysis; and
	•		review and advise on pay programs and salary, target bonus and long-term incentive levels applicable to our executives.

These duties are performed annually. In addition, Towers Perrin recommends plan design changes as requested from time to time by the Compensation/Pension Committee.

Towers Perrin also performs other services for us and our affiliates under separate agreements. These services include providing (i) actuarial services for UGI’s pension plan, (ii) consulting services with respect to benefits programs, and (iii) non-discrimination testing for qualified benefit plans.

In assessing competitive compensation, we relied on data provided to us in fiscal year 2006 by Towers Perrin and applied this data as described herein. For Messrs. Bissell and Sheridan, Towers Perrin provided us with two reports: the “2006 Executive Cash Compensation Review” and the “Executive Compensation Analysis 2006 Long-Term Incentive Review.” Each of these reports includes an executive compensation analysis. We utilize similar but separate Towers Perrin data for UGI, including an executive compensation analysis, in determining compensation for Messrs. Greenberg, Walsh and Knauss.

For Messrs. Bissell and Sheridan, the executive compensation analysis is based on general industry data in Towers Perrin’s General Industry Executive Compensation Database, which includes approximately 800 companies. For Messrs. Greenberg, Walsh and Knauss, the analysis was weighted 75 percent based on the General Industry Executive Compensation Database and 25 percent based on Towers Perrin’s Energy Services Executive Compensation Database, which includes approximately 90 utility companies. This weighting is designed to approximate the relative sizes of UGI’s non-utility and utility businesses. Towers Perrin’s General Industry Executive Compensation Database is comprised of companies from a broad range of industries, including oil and gas, aerospace, automotive and transportation, chemicals, computer, consumer products, electronics, food and beverages, metals and mining, pharmaceutical and telecommunications.  The energy services and financial services industries are excluded from this database because compensation in these industries typically differs from general industry compensation practices. 

For comparison purposes, due to the variance in size among the companies in the General Industry Executive Compensation Database, regression analysis, which is an objective analytical tool used to determine the relationship among data, was used to adjust the data for differences in company revenues. We generally seek to position a named executive officer’s salary grade so that the midpoint of the salary range in the salary grade approximates the 50^th percentile of salaries for comparable executives included in the executive compensation database material referenced by Towers Perrin.

Elements of Compensation

Salary

Salary is designed to compensate executives for their level of responsibility and sustained individual performance. We pay our executive officers a salary that is competitive with that of other executive officers providing comparable services, taking into account the size and nature of the business of AmeriGas Partners or UGI, as the case may be.

As noted above, we seek to position the midpoint of the applicable salary grade for our named executive officers to approximate the 50^th percentile of salaries for comparable executives as determined in the applicable Towers Perrin executive compensation databases. Based on the data provided by Towers Perrin, we increased the range of salary in each salary grade by 2.5 percent. We also adjusted individual salaries to reflect merit increases. The merit increases were targeted at 3.5 percent, but individual increases varied based on performance evaluations and the individual’s position within the salary range. Criteria reviewed in such performance evaluations included: overall leadership, accomplishment of annual goals and objectives, development of an effective management team, and commitment to the job and company.

The following table sets forth each named executive officer’s fiscal year 2007 salary and his percentage increase over fiscal year 2006.

						Percentage Increase
						over Fiscal 2006
Name		Salary				Salary
Eugene V. N. Bissell		$	426,400				4.0%
Jerry E. Sheridan		$	269,000				3.5%
Lon R. Greenberg		$	966,000				5.0%
John L. Walsh		$	588,016				5.0%
Robert H. Knauss		$	291,720				6.0%

Annual Bonus Awards

Our General Partner and UGI annual bonus plans provide our named executive officers with the opportunity to earn annual cash incentives provided that certain performance goals are satisfied. Our annual cash incentives are intended to motivate our executives to focus on the achievement of our annual business objectives by providing competitive incentive opportunities to those executives who have the ability to significantly impact our financial performance. We believe that basing a meaningful portion of an executive’s compensation on financial performance will result in the enhancement of partnership unitholder or shareholder value.

In determining the target award levels under our annual bonus plan, we reviewed information in the Towers Perrin executive compensation databases regarding the percentage of salary payable upon achievement of target goals relative to other companies as described above. In establishing the target award level, we position the amount within the 50^th to 75^th percentiles for comparable executives. We determined that the 50^th to 75^th percentile range was appropriate because we believe that the annual bonus opportunities should have a significant reward potential to recognize the difficulty of achieving the annual goals and the significant corporate impact of such achievement. For fiscal year 2007, each executive’s target award opportunity set forth in the table below falls within the 50^th to 75^th percentile ranges provided in Towers Perrin’s executive compensation databases.

		Target Award								Approximate Location of
		Opportunity as a				Target Award				Target Award in 50th to
Name		Percentage of Salary				Opportunity				75th Percentile Range
Eugene V. N. Bissell			75%			$	319,800			67th Percentile
Jerry E. Sheridan			45%			$	121,050			63rd Percentile
Lon R. Greenberg			100%			$	966,000			50th Percentile
John L. Walsh			85%			$	499,814			56th Percentile
Robert H. Knauss			60%			$	175,032			50th Percentile

Messrs. Bissell and Sheridan participate in the AmeriGas Propane, Inc. Executive Annual Bonus Plan. For Messrs. Bissell and Sheridan, the entire target award opportunity was based on earnings per common unit (“EPU”) of AmeriGas Partners, although the bonus achieved based on EPU is subject to adjustment based on customer growth, as described below. We believe that enhancing financial performance is the most important goal of a principal executive, operating or financial officer, and earnings per partnership unit

provides a straightforward, “bottom line” measure of the performance of an executive in a large, well-established business. In addition, we believe that customer growth is an important corollary to EPU. Because we foresee only modest growth in total demand for propane, customer growth is an important factor in our ability to improve the Partnership’s financial performance.

Messrs. Greenberg, Walsh and Knauss participate in the UGI Corporation Executive Annual Bonus Plan. For reasons similar to those underlying our use of EPU as a goal for Messrs. Bissell and Sheridan, the entire target award for Messrs. Greenberg, Walsh and Knauss was based on UGI’s earnings per share (“EPS”). We also believe that EPS is an appropriate measure for Mr. Knauss, our General Counsel, whose duties encompass UGI and its affiliated enterprises, including the General Partner and the Partnership. The EPS measure is not subject to adjustment based on customer growth or any other metric.

As noted above, each of Messrs. Bissell’s and Sheridan’s target award opportunity was based on EPU of the Partnership, subject to modification based on customer growth. The EPU target amount was derived based on a targeted EBITDA range for AmeriGas Partners of approximately $265 million to $275 million for fiscal year 2007. Under the target bonus criteria applicable to Messrs. Bissell and Sheridan, no awards would be paid if the EPU amount was less than 82 percent of the target award, while 200 percent of the target award might be payable if the EPU amount was at least 133 percent of the target award (the percentage of target bonus payable based on various levels of EPU is referred to as the “EPU Leverage Factor”). Additionally, no awards would be paid to Messrs. Bissell and Sheridan if customer growth achieved in fiscal year 2007 was less than 1 percent, while 200 percent of the target award might be payable if customer growth achieved was 3 percent or more (the percentage of target bonus payable based on various levels of customer growth is referred to as the “Customer Growth Leverage Factor”). EPU may be adjusted in the discretion of the AmeriGas Compensation/Pension Committee to take into consideration unusual circumstances that occurred during the fiscal year. Based on our past practice of eliminating the effect of unusual gains and losses, the Compensation/Pension Committee decided to exclude from the calculation of the EPU Leverage Factor the gain associated with the divestiture of our 3.5 million barrel liquefied petroleum gas storage facility in Arizona. This exclusion resulted in a 70 percentage point reduction to the EPU Leverage Factor.

Once the EPU Leverage Factor and Customer Growth Leverage Factor are determined as explained above, the EPU Leverage Factor is multiplied by the Customer Growth Leverage Factor to obtain an adjusted leverage factor. This adjusted leverage factor is then multiplied by the target award opportunity to arrive at Messrs. Bissell and Sheridan’s actual bonus payment for the fiscal year. For fiscal year 2007, the Compensation/Pension Committee adjusted the resulting bonus for Messrs. Bissell and Sheridan downward approximately 5 percent to reflect the partial achievement of strategic initiatives relating to the introduction of new technologies and operating model efficiencies. Accordingly, each of Messrs. Bissell and Sheridan received a bonus payout for fiscal year 2007 equal to 130 percent of his target bonus.

The bonus award opportunity for each of Messrs. Greenberg, Walsh and Knauss was structured so that no amounts would be paid unless UGI’s EPS was at least 80 percent of the target amount, with the target bonus award being paid out if UGI’s EPS was 100 percent of the targeted EPS. The maximum award, equal to 200 percent of the target award, would be payable if the EPS exceeded 120 percent of the EPS target (the percentage of target bonus payable based on various levels of EPS is referred to as the “EPS Leverage Factor”). The targeted EPS for bonus purposes for fiscal year 2007 was set at a level between $1.75 and $1.85 per share. EPS may be adjusted in the discretion of the UGI Compensation and Management Development Committee to take into consideration unusual circumstances that occurred during the fiscal year. For fiscal year 2007, UGI’s Compensation and Management Development Committee excluded from the calculation of the EPS Leverage Factor 75 percent of the gain associated with the divestiture of the Partnership’s 3.5 million barrel liquefied petroleum gas storage facility in Arizona due to its unusual nature. This exclusion resulted in a 5 percentage point reduction to the EPS Leverage Factor. Accordingly, for fiscal year 2007, Messrs. Greenberg, Walsh and Knauss each received a bonus payout equal to 97.8 percent of his target bonus.

Based on the achievement relating to the modified EPU and the modified EPS target, as well as the discretionary adjustments set forth above, the following annual bonus payments were made for 2007:

		Percent of
		Target				Amount
Name		Bonus Paid				of Bonus
Eugene V. N. Bissell			130.0	%		$	415,740
Jerry E. Sheridan			130.0	%		$	157,365
Lon R. Greenberg			97.8	%		$	944,748
John L. Walsh			97.8	%		$	488,818
Robert H. Knauss			97.8	%		$	171,181

Long-Term Compensation — 2007 Awards

Our long-term incentive compensation is intended to create a strong financial incentive for achieving or exceeding long-term performance goals and to encourage a significant equity stake in our company. Additionally, we believe our long-term incentives provide us the ability to attract and retain talented executives in a competitive market.

We awarded our long-term compensation effective January 1, 2007 for Messrs. Bissell and Sheridan, under the 2000 AmeriGas Propane, Inc. Long-Term Incentive Plan. Messrs. Greenberg, Walsh, and Knauss were granted performance units under the Amended and Restated UGI Corporation 2004 Omnibus Equity Compensation Plan. Our long-term compensation included UGI stock option grants and either AmeriGas performance unit awards tied to the three-year performance of AmeriGas Partners common units representing limited partnership interests or UGI performance unit awards tied to the three-year performance of UGI common stock. Each performance unit represents the right of the recipient to receive a common unit (or a share of common stock in the case of Messrs. Greenberg, Walsh and Knauss) if specified performance goals and other conditions are met.

As is the case with cash compensation and annual bonus awards, we relied on Towers Perrin’s executive compensation databases as the basis for establishing equity compensation. In determining the total dollar value of the long-term compensation opportunity to be provided in fiscal year 2007, we initially referenced information provided by Towers Perrin regarding the percentage of the market median base salary for each position to be delivered as a long-term compensation opportunity. This percentage was developed using the applicable executive compensation databases and was targeted to produce long-term compensation opportunity at the 50^th percentile level. The following table shows the base salary market medians we referenced for each of our named executive officers.

		Market Median
Name		Base Salary Amount
Eugene V. N. Bissell		$	484,000
Jerry E. Sheridan		$	247,000
Lon R. Greenberg		$	960,000
John L. Walsh		$	601,000
Robert H. Knauss		$	384,000

In accordance with our practice over the past several years, we applied approximately 50 percent of the amount of the long-term incentive opportunity to stock options and approximately 50 percent to performance units. We have bifurcated long-term compensation in this manner since 2000 and believe it provides a good balance between two related, but discrete goals. Stock options are designed to align the executive’s interests with shareholder interests, because the value of stock options is a function of the appreciation or depreciation of UGI’s stock price. As explained in more detail below, the performance units are designed to encourage performance that not only increases shareholder or partnership unitholder value, but increases it to an extent that compares favorably relative to a competitive peer group.

In providing award calculations, Towers Perrin valued UGI stock options by applying a binomial model. The stock price used in the model for January 1, 2007 awards was $24.46 which was the three month average UGI stock price from June 26, 2006 through September 26, 2006. The model also assumes a 5 percent turnover annually over the vesting period to account for options forfeited by terminating participants. As a result of this analysis, Towers Perrin valued the stock options at $4.07 per underlying share. Based on its valuation, Towers Perrin calculated the number of options to be granted to the named executive officers covering a specified number of underlying shares.

The remaining 50 percent of the long-term compensation opportunity is applied to performance units. In calculating the number of AmeriGas Partners performance units to be awarded to each of Messrs. Bissell and Sheridan, Towers Perrin placed a value of $22.80 per unit underlying an AmeriGas Partners performance unit. The unit price used in the model for January 1, 2007 awards was $29.91 which was the three-month average AmeriGas Partners common unit price from June 26, 2006 through September 26, 2006, subject to the same 5 percent turnover assumption used in valuing stock options. The number of UGI performance units awarded was computed in a similar fashion, subject to the same 5 percent turnover assumption. In calculating the number of UGI performance units to be awarded to Messrs. Greenberg, Walsh and Knauss, Towers Perrin placed a value of $18.64 per share underlying a UGI performance unit, based on the average price of UGI common stock over the three month period from June 26, 2006 through September 26, 2006.

Management recommended reductions to the aggregate number of UGI stock options and AmeriGas Partners and UGI performance units calculated by Towers Perrin. The reduced amounts were designed to address historic grant practices, internal pay equity and the policy of UGI’s Compensation and Management Development Committee that the three year average of the annual number of UGI equity awards, expressed as a percentage of UGI common shares outstanding at fiscal year-end, made under the Amended and Restated UGI Corporation 2004 Omnibus Equity Compensation Plan for the fiscal years 2007 through 2009 will not exceed 2 percent. For purposes of calculating the annual number of equity awards: (i) each stock option granted is deemed to equal one share and (ii) each performance unit earned and paid in shares of stock and each stock unit granted and expected to be paid in shares of stock is deemed to equal four shares. In the case of UGI stock options granted to Mr. Sheridan, however, management recommended a modest increase over Towers Perrin’s calculations to reflect internal equity considerations.

As a result of the General Partner’s Compensation/Pension Committee’s and UGI’s Compensation and Management Development Committee’s acceptance of management’s recommendations, the number of shares underlying stock options calculated by Towers Perrin was reduced by approximately 13 percent to 22 percent (other than for Mr. Sheridan) and the number of performance units calculated by Towers Perrin was reduced by approximately 7 percent to 20 percent. The actual grant amounts are set forth below:

		Shares Underlying
		Stock Options				Performance Units
Name		# Granted				# Granted
Eugene V. N. Bissell			70,000				14,000
Jerry E. Sheridan			18,000				2,700
Lon R. Greenberg			280,000				60,000	1
John L. Walsh			120,000				26,000	1
Robert H. Knauss			45,000				9,000	1

1		Constitutes UGI performance units.

While the number of performance units awarded to the named executive officers was determined as described above, the actual number of shares or partnership common units underlying performance units that are paid out at the expiration of the three-year performance period will be based upon comparative AmeriGas Partners total unitholder return (“TUR”) or UGI total shareholder return (“TSR”) over the period from January 1, 2007 to December 31, 2009. In computing TUR, we use the average of the daily closing prices for our common units and those of each entity in the peer group below for the ninety calendar days prior to January 1 of the beginning and end of a given three-year performance period. In addition, TUR gives effect to all distributions throughout the three-year performance period as if they had been reinvested. For the AmeriGas Partners performance units awarded to Messrs. Bissell and Sheridan, we compare the TUR of AmeriGas Partners’ common units to the TUR performance of each member of a peer group comprised of the following limited partnerships engaged in the propane, pipeline and coal industries:

Alliance Resource Partners, L.P.		Kinder Morgan Energy Partners, L.P.		Plains All American Pipeline, L.P.
Buckeye Partners, L.P.		Magellan Midstream Partners, L.P.		Star Gas Partners, L.P.
Enbridge Energy Partners, L.P.		Natural Resources Partners, L.P.		Suburban Propane Partners, L.P.
Enterprise Products Partners, L.P.		NuStar Energy, L.P.		Sunoco Logistics Partners, L.P.
Ferrellgas Partners, L.P.		ONEOK Partners, L.P.		TC Pipelines, L.P.
Energy Transfer Partners, L.P.		Penn Virginia Resource Partners, L.P.		TEPPCO Partners, L.P.
Inergy, L.P.

In determining the number of UGI performance units to be paid out, UGI will compare the TSR of UGI common stock relative to the TSR performance of those companies comprising the Standard and Poors 500 Utilities Index (S&P Utilities Index) as of the beginning of a performance period. In computing TSR, UGI uses the average of the daily closing prices for its common stock and the common stock of each company in the S&P Utilities Index for the ninety calendar days prior to January 1 of the beginning and end of a given three-year performance period. In addition, TSR gives effect to all dividends throughout the three-year performance period as if they had been reinvested. If a company is added to the S&P Utilities Index during a three-year performance period, UGI does not include that company in its TSR analysis. UGI will only remove a company from its TSR analysis that was included in the S&P Utilities Index at the beginning of a performance period if such company ceases to exist during the applicable performance period. Those companies in the S&P Utilities Index as of December 31, 2006 were as follows:

Allegheny Energy, Inc.		Edison International		PPL Corporation
Ameren Corporation		Entergy Corporation		Progress Energy, Inc.
American Electric Power Company, Inc.		Exelon Corporation		Public Service Enterprise Group Inc
Centerpoint Energy, Inc.		FirstEnergy Corp.		Questar Corporation
CMS Energy Corporation		FPL Group, Inc.		Sempra Energy
Consolidated Edison, Inc.		Keyspan Corporation		TECO Energy, Inc.
Constellation Energy Group, Inc.		Nicor Inc.		The AES Corporation
Dominion Resources, Inc.		NiSource Inc.		The Southern Company
DTE Energy Company		Peoples Energy Corporation		TXU Corp.
Duke Energy Corporation		PG&E Corporation		Xcel Energy Inc.
Dynegy Inc.		Pinnacle West Capital Corp

Each award payable to the named executive officers provides a number of AmeriGas Partners common units or UGI shares equal to the number of performance units earned. Management of the General Partner or UGI, as the case may be, has the authority to provide for a cash payment in lieu of up to 35 percent of the common units or shares payable, except for UGI awards earned in excess of the target award, which are paid entirely in cash. The cash payment is based on the value of the securities at the payment date and is designed to meet minimum statutory tax withholding requirements. The minimum award, equivalent to 50 percent of the number of performance units, will be payable if the TUR or TSR rank is at the 40^th percentile of the peer group or S&P Utilities Index companies, as applicable. The target award, equivalent to 100 percent of the number of performance units, will be payable if the TUR or TSR rank is at the 50^th percentile. The maximum award, equivalent to 200 percent of the number of performance units, will be payable if the TUR or TSR rank is the highest of all peer group or S&P Utilities Index companies, as applicable.

All performance units have distribution or dividend equivalent rights, as applicable. A distribution equivalent is an amount determined by multiplying the number of performance units credited to a recipient’s account by the per-unit cash distribution, or the per-unit fair market value of any non-cash distribution, paid by AmeriGas Partners on its common units on a distribution payment date. Accrued distribution and dividend (in the case of UGI performance units) equivalents are payable on the number of common units or common shares payable, if any, at the end of the performance period and are paid in cash.

The number of shares underlying options that were awarded to the named executive officers are set forth below in the Grants of Plan Based Awards Table under the column heading, “All Other Option Awards; Number of Securities Underlying Options.” The options generally vest in annual increments over a three-year period. We believe that these vesting terms provide to our executives (other than those executives who are retirement eligible) a meaningful incentive for continued employment.

Long-Term Compensation — Payout of Performance Units for 2004-2006 Period

During 2007, we paid out awards to those executives who received performance units for the period from January 1, 2004 to December 31, 2006. The award criteria for AmeriGas Partners common units and UGI common stock during that period was the same as those for the performance units granted for 2007-2009, described above. For the 2004-2006 period, the General Partner’s TUR ranked 11th relative to the peer group placing the General Partner in the 47th percentile ranking, resulting in an 87 percent payout of the target award. UGI’s TSR ranked 17th relative to the S&P 500 Utilities Index companies, placing UGI in the 54th percentile ranking, resulting in a 111 percent payout of the target award. As a result of the foregoing, the payouts on performance unit awards were as follows:

		Performance Unit Payout
		(Number of				Performance Unit Payout
Name		Units or Shares)				Value1 ($)
Eugene V. N. Bissell			13,035				513,709
Jerry E. Sheridan			869				30,884
Lon R. Greenberg			77,490				2,266,679
John Walsh			16,605				472,973
Robert H. Knauss			6,642				194,287

1		Includes distribution equivalent or dividend equivalent payout.

Long-Term Compensation — Lapse of Restriction Period on UGI Stock Units

In connection with the lapse of restrictions on 40,000 UGI stock units held by Mr. Walsh, UGI’s Compensation and Management Development Committee authorized the conversion and payout in cash of up to 35 percent of these shares. The cash payout in lieu of shares was designed to assist him with payment of his tax obligations and was made during fiscal year 2007.

Perquisites

We provide limited perquisite opportunities to our executive officers, and in several instances, our executives did not utilize the opportunities. Among the perquisites is a company car provided to Mr. Greenberg. In addition, we provide several executives with tax preparation services, club memberships, limited health maintenance reimbursement and limited spousal travel reimbursement. The aggregate cost of perquisites for all named executive officers in fiscal year 2007 was less than $50,000. Management discontinued offering company cars and reimbursement for club memberships, in lieu of which the executives who used these perquisites in prior years received a nominal salary adjustment effective for fiscal year 2008.

Other Benefits

Our named executive officers participate in various retirement, deferred compensation and severance plans which are described in greater detail in the “Ongoing Plans and Post-Employment Agreements” section of this Compensation Discussion and Analysis. We also provide employees, including the named executive officers, with a variety of other benefits, including medical and dental benefits, disability benefits, life insurance, and paid holidays and vacations. These benefits generally are available to all of our full-time employees.

Ongoing Plans and Post-Employment Agreements

We have several plans and agreements that enable our named executive officers to accrue retirement benefits as the executives continue to work for us, provide severance benefits upon certain types of termination of employment events or provide other forms of deferred compensation.

AmeriGas Propane, Inc. Savings Plan (the “AmeriGas Propane Savings Plan”)

This plan is a tax-qualified defined contribution plan for General Partner employees. Under the plan, an employee may contribute, subject to Internal Revenue Code limitations (which, among other things, limited annual contributions in 2007 to $15,500), up to 50 percent of his or her compensation on a pre-tax basis, and the General Partner provides a matching contribution equal to 100 percent of the first 5 percent of compensation contributed in any pay period. Amounts credited to an employee’s account in the plan may be invested among a number of funds, including a UGI stock fund. Messrs. Bissell and Sheridan are eligible to participate in the AmeriGas Propane Savings Plan.

UGI Utilities Inc. Savings Plan (the “UGI Savings Plan”)

This plan is a tax-qualified defined contribution plan available to, among others, employees of UGI. Under the plan, an employee may contribute, subject to Internal Revenue Code limitations (which, among other things, limited annual contributions in 2007 to $15,500), up to a maximum of 50 percent of his or her eligible compensation on a pre-tax basis and up to 6 percent of his or her eligible compensation on an after-tax basis. UGI provides matching contributions targeted at 50 percent of the first 3 percent of eligible compensation contributed by the employee in any pay period, and 25 percent of the next three percent. Like the AmeriGas Propane Savings Plan, participants in the UGI Savings Plan may invest amounts credited to their account among a number of funds, including a UGI stock fund. Messrs. Greenberg, Walsh and Knauss are eligible to participate in the UGI Savings Plan.

Retirement Income Plan for Employees of UGI Utilities, Inc. (the “UGI Pension Plan”)

This plan is a tax-qualified defined benefit plan available to, among others, employees of UGI and certain of its subsidiaries, but not including the General Partner. The UGI Pension Plan provides an annual retirement benefit based on an employee’s earnings and years of service, subject to maximum benefit limitations. Messrs. Greenberg, Walsh and Knauss are eligible to participate in the UGI Pension Plan. See the “Pension Benefits” table and accompanying narrative for additional information.

UGI Corporation Supplemental Executive Retirement Plan

This plan is a nonqualified deferred compensation plan that provides benefits for executives in excess of the maximum benefits that may be provided under the UGI Pension Plan as a result of limits imposed by the Internal Revenue Code on benefits payable under the plan and on the amount of compensation that may be subject to the plan. We refer to compensation that exceeds these limits as “excess compensation.” For 2007, compensation in excess of $225,000 constitutes excess compensation. Under the plan, each employee who satisfies vesting requirements will accrue a lump sum benefit that has the actuarial equivalent present value of (i) the benefit that would have been produced under the UGI Pension Plan absent Internal Revenue Code limits minus (ii) the benefit that the participant is entitled to receive under the UGI Pension Plan. The plan also provides additional benefits in the event of certain terminations of employment covered by a change in control agreement. Messrs. Greenberg, Walsh and Knauss participate in the UGI Corporation Supplemental Executive Retirement Plan. See the “Pension Benefits” table and accompanying narrative for additional information.

AmeriGas Propane, Inc. Supplemental Executive Retirement Plan

The General Partner maintains a supplemental executive retirement plan, which is a nonqualified deferred compensation plan for highly compensated employees of the General Partner. Under the plan, AmeriGas credits to each participant’s account 5 percent of the compensation below the Internal Revenue Code compensation limits and 10 percent of excess compensation. In addition, if any portion of the General Partner’s matching contribution under the AmeriGas Propane, Inc. Savings Plan is forfeited due to nondiscrimination requirements under the Internal Revenue Code, the forfeited amount, adjusted for earnings and losses on the amount, will be credited to a participant’s account. Through the 2007 Fiscal Year, participants’ accounts were credited with interest generally equal to the actual return on the trust portfolio of the UGI Pension Plan subject to certain limitations as set forth in the AmeriGas Propane, Inc. Supplemental Executive Retirement Plan. Beginning in Fiscal Year 2008, participants may direct the investment of deferred amounts to be invested among a number of funds. Messrs. Bissell and Sheridan participate in the AmeriGas Propane, Inc. Supplemental Executive Retirement Plan. See the “Deferred Compensation” table and accompanying narrative for additional information.

UGI Corporation Supplemental Savings Plan

This plan is a nonqualified deferred compensation plan that provides benefits for executives in excess of the benefits that may be provided under the UGI Savings Plan as a result of limits imposed by the Internal Revenue Code. We refer to compensation in excess of these limits as “excess compensation.” Generally, under the Supplemental Savings Plan, if the participant contributed to the UGI Savings Plan the lesser of 6 percent of his or her eligible compensation or the maximum annual contribution permissible under the Internal Revenue Code, UGI will credit to the participant’s account an amount equal to the matching contribution that would have made for the participant under the UGI Savings Plan with respect to the participant’s excess compensation if the excess compensation had been taken into account under the UGI Savings Plan. At the end of each plan year, a participant’s account is credited with earnings equal to the weighted average return based 60 percent on the total return of the Standard & Poor’s 500 Index and 40 percent on the Lehman Brothers Aggregate Bond Index. The plan also provides additional benefits in the event of certain terminations of employment covered by a change in control agreement. Messrs. Greenberg, Walsh and Knauss are eligible to participate in the UGI Corporation Supplemental Savings Plan.

AmeriGas Propane, Inc. Nonqualified Deferred Compensation Plan

The General Partner maintains a nonqualified deferred compensation plan under which participants may defer certain amounts of their compensation. Deferral elections are made annually by eligible participants in respect of compensation to be earned for the following year. Participants may direct the investment of deferred amounts into a number of funds. The funds available are the same funds available under the AmeriGas Propane Savings Plan, other than the UGI stock fund. Payment of amounts accrued for the account of a participant generally is made following the participant’s termination of employment. Messrs. Bissell and Sheridan are eligible to participate in the AmeriGas Propane, Inc. Nonqualified Deferred Compensation Plan. See the “Deferred Compensation” table and accompanying narrative for additional information.

Severance Pay Plans for Senior Executive Employees

The General Partner and UGI each maintain a severance pay plan that provides severance compensation to certain senior level employees. The plans are designed to alleviate the financial hardships that may be experienced by executive employee participants whose employment is terminated without just cause, other than in the event of death or disability. The General Partner plan covers Messrs. Bissell and Sheridan and the UGI plan covers Messrs. Greenberg, Walsh and Knauss. See “Potential Payments Upon Termination or Change in Control” below for further information regarding the severance plans.

Change in Control Agreements

The General Partner has change in control agreements with Messrs. Bissell and Sheridan, and UGI has change in control agreements with Messrs. Greenberg, Walsh and Knauss. The change in control agreements are designed to reinforce and encourage the continued attention and dedication of the executives without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control and to serve as an incentive to their continued employment with us. The agreements provide for payments and other benefits if we terminate an executive’s employment without cause or if the executive terminates employment for “good reason” within two years following a change in control of UGI (and, in the case of Messrs. Bissell and Sheridan, the General Partner or AmeriGas Partners). The agreements also provide that if change in control payments exceed certain threshold amounts, we or UGI, as the case may be, will make additional payments to reimburse the executives for excise and related taxes imposed under the Internal Revenue Code. See “Potential Payments Upon Termination or Change in Control” for further information regarding the change in control agreements. See “Tax Considerations” below for further information regarding the excise tax reimbursement.

Equity Ownership Guidelines

We seek to underscore stakeholder incentives through our equity ownership guidelines. We believe that by encouraging our executives to maintain a meaningful equity interest in AmeriGas Partners or, if applicable, UGI, we will enhance the link between our executives and unitholders or shareholders. Under our guidelines, an executive must meet 10 percent of the ownership requirement within one year from the date of employment and must use 10 percent of his annual bonus award to purchase Partnership common units or UGI stock (or, in the case of Messrs. Greenberg, Walsh and Knauss, UGI stock) until his equity ownership requirement is met. In addition, the guidelines require that 50 percent of the net proceeds from a “cashless exercise” of UGI stock options be used

to purchase equity until the ownership requirement is met. Up to 20 percent of the ownership requirement may be satisfied through holdings of UGI common stock for the executive’s account in the relevant savings plan. The following table provides information regarding our equity ownership guidelines for, and the number of shares held at September 30, 2007, by our named executive officers:

		Required Ownership of
Name		UGI Common Stock				Number of Shares of UGI Stock Held at 9/30/2007
Eugene V. N. Bissell			90,000	1		See footnote 1
Jerry E. Sheridan			12,000	2		See footnote 2
Lon R. Greenberg			300,000				613,006
John L. Walsh			150,000				65,030
Robert H. Knauss			30,000				26,412

1		In lieu of UGI common stock, Mr. Bissell may satisfy the stock ownership guidelines if he holds 60,000 AmeriGas Partners common units or a combination of UGI Corporation common stock and AmeriGas Partners common units deemed equivalent to 90,000 shares of UGI common stock; for this purpose, each AmeriGas Partners common unit equals 1.5 shares of UGI Corporation common stock. Mr. Bissell owned 66,380 shares of UGI common stock and 30,746 AmeriGas Partners common units, thereby meeting his stock ownership requirement.
2		In lieu of UGI common stock, Mr. Sheridan may satisfy the stock ownership guidelines if he holds 8,000 AmeriGas Partners common units or a combination of UGI common stock and AmeriGas Partners common units deemed equivalent to 12,000 shares of UGI Corporation common stock; for this purpose, each AmeriGas Partners common unit equals 1.5 shares of UGI common stock. Mr. Sheridan owned 2,597 shares of UGI common stock and 3,953 AmeriGas Partners common units.

In November 2007, the Compensation/Pension Committee of the General Partner and the Compensation and Management Development Committee of UGI each reviewed the equity ownership requirements applicable to our executives, as each committee does from time to time. As a result of the review, each committee decided to decrease the executive equity ownership requirements by one-third. The reason for the reduction was to adjust the ownership requirements to reflect the appreciation of Partnership common units and UGI stock since 2004 when the stock ownership guidelines were last revised.

Stock Option Grant Practices

The UGI Compensation and Management Development Committee and the General Partner’s Compensation/Pension Committee approve annual stock option grants to executive officers in the last calendar quarter of each year, effective the following January 1. The exercise price per share of the options is equal to the closing share price of UGI common stock on the last trading day of December. A grant to a new employee is generally effective on the later of the date the employee commences employment with us or the date the committee authorizes the grant. In either case the exercise price is equal to the closing price per share of UGI common stock on the effective date of grant. From time to time, management recommends stock option grants for non-executive employees, and the grants, if approved by the committee, are effective on the date of committee action and have an exercise price equal to the closing price per share of UGI common stock on the date of grant. We believe that our stock option grant practices are appropriate and effectively eliminate any question regarding “timing” of grants in anticipation of material events.

Role of Executive Officers in Determining Executive Compensation

In connection with fiscal year 2007 compensation, Messrs.  Bissell, Greenberg and Walsh, aided by our human resources personnel, provided statistical data and recommendations to the Compensation/Pension Committee (and Mr. Greenberg to UGI’s Compensation and Management Development Committee) to assist it in determining compensation levels. Messrs. Bissell, Greenberg and Walsh did not make recommendations as to their own respective compensation and each was excused from the committee meeting when his compensation was discussed by the committee. While the committees utilized this information, and valued the observations of Messrs. Bissell, Greenberg and Walsh with regard to other executive officers, the ultimate decisions regarding executive compensation were made by the appropriate board of directors following committee recommendations.

Tax Considerations

In the event of a change in control, payments to an executive may be subject to an excise tax, and may not be deductible by us, under Sections 280G and 4999 of the Internal Revenue Code. If change in control payments exceed certain threshold amounts, the change in control agreements require that we may make additional payments to the executives to reimburse them for excise tax imposed by Section 4999 of the Internal Revenue Code, as well as other taxes in respect of the additional payments. We believe that the purposes of the change in control agreements, as described above, would be diminished by the possible imposition of significant excise taxes on the executives, and we did not wish to have the provisions of the executives’ agreements serve as a disincentive to their pursuit of a change in control that might otherwise be in the best interests of AmeriGas Partners and its unitholders or UGI and its stockholders. Accordingly, we determined to provide a payment under certain circumstances to reimburse the executives for excise taxes payable in connection with change in control payments, as well as any taxes that accrue as a result of our reimbursement.

Summary Compensation Table

The following tables, narrative and footnotes provide information regarding the compensation of our Chief Executive Officer, Chief Financial Officer, and our three other most highly compensated executive officers in fiscal year 2007.

Summary Compensation Table — Fiscal 2007

																										Change in Pension
																										Value and
																						Non-Equity				Nonqualified
														Stock				Option				Incentive				Deferred				All Other
														Awards				Awards				Plan				Compensation				Compensation				Total
Name and Principal		Fiscal				Salary				Bonus				($)				($)				Compensation				Earnings ($)				($)				($)
Position		Year				($)				($)				(1)				(1)				($) (2)				(3)				(4)				(5)
(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)
Eugene V.N. Bissell
President and Chief
Executive Officer			2007				425,770				0				409,923				395,188				415,740				16,856			$	84,401			$	1,747,878
Jerry E. Sheridan
Vice President –
Finance and Chief
Financial Officer			2007				268,660				0				73,592				68,230				157,365				862			$	44,531			$	613,240
Lon R. Greenberg
Chairman			2007				966,885				0				870,627				1,601,600				944,748				1,988,689				95,560			$	6,468,109
John L. Walsh
Vice Chairman			2007				588,016				0				857,590				588,650				488,818				159,195				19,625			$	2,701,894
Robert H. Knauss
Vice President and
General Counsel			2007				291,720				0				132,331				205,080				171,181				242,625				10,922			$	1,053,859

(1)		The amounts shown in these columns represent the dollar amount recognized for financial statement reporting purposes by the Partnership or, with respect to Messrs. Greenberg, Walsh and Knauss, UGI, in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004) (“SFAS 123R”), of the fair value of awards of performance units, stock units and stock options, as the case may be, under the UGI Corporation 2004 Omnibus Equity Compensation Plan, and with respect to Messrs. Bissell and Sheridan only, the 2000 AmeriGas Propane, Inc. Long-term Incentive Plan. Accordingly, these figures include amounts from awards granted in and prior to fiscal year 2007 and are affected if an executive is eligible for retirement. For assumptions used in the calculation of the amounts shown, see Note 2 and Note 10 to our audited consolidated financial statements for fiscal year 2007 and Exhibit No. 99 to this Report. See the Grants of Plan-Based Awards table for information on awards of performance units and UGI stock options made in fiscal 2007.
(2)		The amounts shown in this column represent payments determined under the applicable performance-based annual bonus plan.
(3)		The amounts shown in this column reflect (i) for Messrs. Greenberg, Walsh and Knauss, the change from September 30, 2006 to September 30, 2007 in the actuarial present value of the named executive officer’s accumulated benefit under UGI’s defined benefit and actuarial pension plans, including the UGI Corporation Supplemental Executive Retirement Plan and (ii) the above-market portion of earnings, if any, on nonqualified deferred compensation accounts. The change in pension value from year to year as reported in this column is subject to market volatility and may not represent the value that a named executive officer will actually accrue under the UGI pension plans during any given year. Mr. Bissell has a vested annual benefit of approximately $3,300 under UGI’s defined benefit pension plan, based on prior credited service. Mr. Bissell is not a current participant in that plan. Mr. Sheridan is not eligible to participate in the UGI pension plan. Earnings on deferred compensation are considered to be above-market to the extent that the rate of interest exceeds 120 percent of the applicable federal long-term rate. The material terms of UGI’s and the General Partner’s pension plans and deferred compensation plans are described in the Pension Benefits Table and the Nonqualified Deferred Compensation Table, respectively. For purposes of this table, the market rate on deferred compensation for fiscal year 2007 was 6.13 percent, which is 120 percent of the federal long-term rate for September, 2007. The amounts attributed to items described above in clauses (i) and (ii) are set forth below.

		Change in				Above-Market
		Pension				Earnings on
Name		Value				Deferred Compensation
E.V.N. Bissell		$	0			$	16,856
J.E. Sheridan		$	0			$	862
L.R. Greenberg		$	1,988,689			$	0
J.L. Walsh		$	159,195			$	0
R.H. Knauss		$	237,517			$	5,108

(4)		The table below shows the components of the amounts included for each named executive officer under the “All Other Compensation” column in the Summary Compensation Table.

						Employer
						Contribution
						to AmeriGas
		Employer				Supplemental
		Contribution to				Executive
		401(k)				Retirement Plan/UGI
		Savings				Supplemental Savings				Tax
Name		Plan				Plan				Reimbursement				Perquisites				Total
E.V.N. Bissell		$	11,250			$	73,151			$	0			$	0			$	84,401
J.E. Sheridan		$	12,928			$	31,603			$	0			$	0			$	44,531
L.R. Greenberg (a)		$	10,012			$	22,523			$	22,982			$	40,043			$	95,560
J.L. Walsh		$	10,021			$	9,604			$	0			$	0			$	19,625
R.H. Knauss		$	9,909			$	1,013			$	0			$	0			$	10,922

(a)

The perquisites shown for Mr. Greenberg include the use of a company vehicle, club membership dues, spousal travel expenses when attending industry-related events where it is customary that officers attend with their spouses, tax preparation fees and, on occasion, use of UGI’s tickets for sporting and entertainment events for personal rather than business purposes. The incremental cost to UGI for these benefits are based on the actual costs or charges incurred by UGI for the benefits and are included in the totals above.

(5)

The compensation reported for Messrs. Greenberg, Walsh and Knauss is paid by UGI. For fiscal year 2007, UGI charged the Partnership 42 percent of the compensation expenses, other than the change in pension value, for Messrs. Greenberg, Walsh and Knauss.

Grants of Plan-Based Awards In Fiscal Year 2007

The following table and footnotes provide information regarding equity and non-equity awards granted to the named executive officers in fiscal 2007.

Grants of Plan-Based Awards Table — Fiscal 2007

																																						All Other
																																		All				Option
																																		Other				Awards:				Exercise
																						Estimated Future Payouts												Stock Awards:				Number of				or Base				Grant Date
										Estimated Possible Payouts Under												Under Equity Incentive Plan												Number of				Securities				Price of				Fair Value of
						Board				Non-Equity Incentive Plan Awards (1)												Awards(2)												Shares of				Underlying				Option				Stock and
		Grant				Action				Threshold				Target				Maximum				Thres-				Target				Maximum				Stock or				Options (#)				Awards				Option
Name		Date				Date				($)				($)				($)				hold (#)				(#)				(#)				Units (#)				(3)				($/Sh)				Awards
(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)				(k)				(l)				(m)
Eugene V.N. Bissell			10/1/06				12/4/06			$	76,752			$	319,800			$	639,600
			1/1/07				12/5/06																																70,000			$	27.28			$	400,400
			1/1/07				12/5/06																7,000				14,000				28,000															$	227,710
Jerry E. Sheridan			10/1/06				12/4/06			$	29,052			$	121,050			$	242,100
			1/1/07				12/5/06																																18,000			$	27.28			$	102,960
			1/1/07				12/5/06																1,350				2,700				5,400															$	43,916
Lon R. Greenberg			10/1/06				12/5/06			$	579,600			$	966,000			$	1,932,000
			1/1/07				12/5/06																																280,000			$	27.28			$	1,601,600
			1/1/07				12/5/06																30,000				60,000				120,000															$	1,662,600
John L. Walsh			10/1/06				12/5/06			$	299,888			$	499,814			$	999,627
			1/1/07				12/5/06																																120,000			$	27.28			$	686,400
			1/1/07				12/5/06																13,000				26,000				52,000															$	720,460
Robert H. Knauss			10/1/06				12/5/06			$	105,019			$	175,032			$	350,064
			1/1/07				12/5/06																																45,000			$	27.28			$	257,400
			1/1/07				12/5/06																4,500				9,000				18,000															$	249,390