<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1999

                                       OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                          Commission File Number 1-2499

                       CORNERSTONE PROPANE PARTNERS, L.P.
             (Exact name of registrant as specified in its charter)

             Delaware                                        77-0439862
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                        Identification Number)

432 Westridge Drive\Watsonville, California                    95076
(Address of principal executive offices)                     (Zip Code)

       Registrant's telephone number, including area code: (831) 724-1921

                                      NONE
              (Former name, former address and former fiscal year,
                         if changed since last report.)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes X   No____

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 12, 1999: 16,788,894 - Common Units


<PAGE>


                       CORNERSTONE PROPANE PARTNERS, L.P.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                  PAGES
                          Part I. Financial Information
<S>                                                                                <C>
Item 1. Financial Statements

         Cornerstone Propane Partners, L.P.

         Consolidated Balance Sheets as of September 30, 1999 and 1998,              1
             and June 30, 1999

         Consolidated Statements of Operations for the Three Months Ended            2
             September 30, 1999 and 1998

         Consolidated Statements of Cash Flows for the Three Months Ended
             September 30, 1999 and 1998                                             3

         Consolidated Statements of Comprehensive Net Income for the
             Three Months Ended September 30, 1999 and 1998                          4

         Notes to Consolidated Financial Statements                                  5

Item 2.      Management's Discussion and Analysis of Financial Condition and
             Results of Operations of Cornerstone Propane Partners, L.P.
             for the Three Months Ended September 30, 1999 compared to the
             Three Months Ended September 30, 1998                                   9

                           Part II. Other Information

Item 6.      Exhibits and Reports on Form 8-K                                       16

             Signature                                                              17
</TABLE>


                                       ii

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                    (Dollars in thousands, except unit data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                     ASSETS

                                                                     September 30,               June 30,
                                                               ---------------------------     ------------
                                                                  1999            1998            1999
                                                               ------------    -----------     ------------
<S>                                                            <C>             <C>             <C>
Current assets:
   Cash and cash equivalents                                     $  7,722        $  8,292        $  9,229
   Trade receivables, net                                          62,989          25,501          29,097
   Inventories                                                     57,779          11,552          42,629
   Prepaid expenses                                                 1,275           8,538           5,444
   Other current assets                                             5,826           1,013           4,690
                                                                 --------        --------        --------
         Total current assets                                     135,591          54,896          91,089

Property, plant and equipment, net                                341,412         278,479         336,820
Goodwill, net                                                     317,990         226,769         314,735
Other intangible assets, net                                       32,016          18,920          31,612
Due from related parties                                                -               -           3,020
Other assets                                                        4,428           1,847           3,968
                                                                 --------        --------        --------
         Total assets                                            $831,437        $580,911        $781,244
                                                                 ========        ========        ========

                        LIABILITIES AND PARTNERS' CAPITAL

Current liabilities:
   Current portion of long-term debt                             $ 11,256        $  2,822        $ 10,456
   Trade accounts payable                                          35,809          16,252          33,182
   Accrued expenses                                                64,183          33,166          27,425
                                                                 --------        --------        --------
         Total current liabilities                                111,248          52,240          71,063

Long-term debt, net of current portion                            417,252         260,321         388,484
Due to related parties                                              5,352           1,813               -
Other noncurrent liabilities                                        6,219           2,500           6,170
                                                                 --------        --------        --------
         Total liabilities                                        540,071         316,874         465,717
                                                                 --------        --------        --------

Partners' capital:
   Common Unitholders                                             200,534         173,573         220,077
   Subordinated Unitholders                                        84,850          85,101          88,965
   General Partners                                                 5,982           5,363           6,485
                                                                 --------        --------        --------
         Total Partners' capital                                  291,366         264,037         315,527
                                                                 --------        --------        --------

         Total liabilities and partners' capital                 $831,437        $580,911        $781,244
                                                                 ========        ========        ========
</TABLE>

             The accompanying notes are an integral part of these
                   consolidated financial statements.


                                       -1-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Dollars in thousands, except per unit data)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                             September 30,
                                                  ----------------------------------
                                                      1999                1998
                                                  --------------  ------------------
<S>                                              <C>               <C>
Revenues                                            $ 556,527         $ 169,991

Cost of sales                                         521,435           143,292
                                                    ---------         ---------

    Gross profit                                       35,092            26,699
                                                    ---------         ---------

Expenses:
    Operating, general and administrative              33,382            25,681
    Depreciation and amortization                       8,169             5,122
                                                    ---------         ---------
          Total expenses                               41,551            30,803
                                                    ---------         ---------

    Operating loss                                     (6,459)           (4,104)
Interest expense                                        8,360             5,133
                                                    ---------         ---------
    Income before provision for income taxes          (14,819)           (9,237)
Provision for income taxes                                 48                29
                                                    ---------         ---------

     Net loss                                       $ (14,867)        $  (9,266)
                                                    =========         =========

General partner's interest in net loss              $    (297)        $    (185)
                                                    =========         =========

Limited partners' interest in net loss              $ (14,570)        $  (9,081)
                                                    =========         =========

Limited partners' net loss per unit                 $    (.62)        $    (.46)
                                                    =========         =========

Weighted average number of units outstanding           23,387            19,859
                                                    =========         =========
</TABLE>

          The accompanying notes are an integral part of these
                   consolidated financial statements.


                                       -2-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                          Three Months Ended
                                                                                              September 30,
                                                                                      ---------------------------
                                                                                         1999             1998
                                                                                      -----------     -----------
<S>                                                                                  <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                           $(14,867)        $ (9,266)
    Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization                                                       8,169            5,122
       Loss on sale of assets                                                               400              119
       Foreign currency translation                                                         (12)               -
      Changes in assets and liabilities, net of effect of acquisitions:
           Trade receivables                                                            (33,814)          (6,780)
           Inventories                                                                  (15,007)           6,782
           Prepaid expenses and other current assets                                      3,097           (2,397)
           Trade accounts payable and accrued expenses                                   39,177            1,575
                                                                                       --------         --------
                   Net cash used in operating activities                                (12,857)          (4,845)
                                                                                       --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Expenditures for property, plant and equipment                                       (4,346)          (2,800)
    Acquisitions, net of cash received                                                  (10,136)          (6,640)
    Other investments                                                                      (460)             (43)
                                                                                       --------         --------
                   Net cash used in investing activities                                (14,942)          (9,483)
                                                                                       --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Borrowings on Working Capital Facility                                               28,700           21,780
    Financing costs                                                                         (30)               -
    Advances from related parties                                                         8,372              129
    Payments on purchase obligations                                                     (1,498)          (1,372)
    General Partners' contribution                                                            -               20
    Partnership distributions                                                            (9,252)          (7,303)
                                                                                       --------         --------
                   Net cash provided by financing activities                             26,292           13,254
                                                                                       --------         --------

DECREASE IN CASH AND CASH EQUIVALENTS                                                    (1,507)          (1,074)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                            9,229            9,366
                                                                                       --------         --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                               $  7,722         $  8,292
                                                                                       ========         ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid for Interest                                                             $  6,566         $  8,270
                                                                                       ========         ========

NON-CASH INVESTING & FINANCING ACTIVITIES
    Assets acquired in exchange for Common Units                               $              -         $  1,006
                                                                                       ========         ========
    Assets acquired in exchange for debt                                               $  2,415         $  1,782
                                                                                       ========         ========
</TABLE>

            The accompanying notes are an integral part of these
                   consolidated financial statements.


                                       -3-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

               CONSOLIDATED STATEMENTS OF COMPREHENSIVE NET INCOME
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                         Three Months Ended
                                                                           September 30,
                                                                -----------------------------------
                                                                        1999               1998
                                                                        ----               ----
<S>                                                                 <C>               <C>
Net loss                                                               $(14,867)        $ (9,266)

Other comprehensive income:

     Foreign currency adjustments                                           (12)               -
                                                                        --------         --------

     Comprehensive net income                                          $(14,879)        $ (9,266)
                                                                        ========         ========


                                                                         Three Months Ended
Reconciliation of accumulated other comprehensive income:                  September 30,
                                                                -------------------------------------
                                                                        1999               1998
                                                                        ----               ----

Balance, beginning of period                                              $(229)        $    -

Current period change                                                       (12)             -
                                                                          -----         ------

Balance, end of period                                                    $(241)        $    -
                                                                          =====         ======
</TABLE>

           The accompanying notes are an integral part of these
                   consolidated financial statements.


                                       -4-

<PAGE>

                            CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Dollars in thousands, except unit data)
                                               (Unaudited)

1.       BASIS OF PRESENTATION

    The consolidated financial statements include the accounts of Cornerstone
Propane Partners, L.P. ("Cornerstone Partners") and its subsidiary,
Cornerstone Propane L.P. (the "Operating Partnership") and the Operating
Partnership's corporate subsidiaries, Cornerstone Sales and Service
Corporation ("CSSC"), Cornerstone Holding Corporation ("CHC"), Propane
Continental, Inc. ("PCI") and Flame, Inc., after elimination of all material
intercompany balances and transactions. Cornerstone Partners, the Operating
Partnership, CSSC, CHC, PCI and Flame, Inc. are collectively referred to as
the "Partnership."

    The accompanying interim consolidated financial statements of the
Partnership are unaudited; however, in the opinion of management, all
adjustments necessary for a fair presentation of such consolidated financial
statements have been reflected in the interim periods presented. Such
adjustments consisted only of normal recurring items. The Partnership's
business is seasonal and, accordingly, interim results are not indicative of
results for a full year. The significant accounting policies and certain
financial information which are normally included in financial statements
prepared in accordance with generally accepted accounting principles, but
which are not required for interim reporting purposes, have been condensed or
omitted. The accompanying consolidated financial statements of the
Partnership should be read in conjunction with the consolidated financial
statements and related notes included in the Partnership's Annual Report on
Form 10-K for the fiscal year ended June 30, 1999.

    The Partnership's Coast Energy Group ("CEG") operation engages in the
marketing and distribution of propane to independent dealers, major
interstate marketers and the chemical and petrochemical industries in
addition to procurement and distribution of propane for the retail segment.
Through CEG, the Partnership also participates in the marketing of other
natural gas liquids, the processing and marketing of natural gas and the
marketing of crude oil. The Partnership either owns or has contractual rights
to use transshipment terminals, rail cars, long-haul tanker trucks, pipelines
and storage capacity.


                                       -5-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (Dollars in thousands, except unit data)
                                   (Unaudited)

    In December 1998 the Partnership acquired all of the outstanding stock of
PCI in a purchase transaction. The following unaudited pro forma financial
data presents the effect of the acquisition of PCI as if it had occurred on
July 1, 1998. The pro forma financial data is provided for informational
purposes only and does not purport to be indicative of the results which
would have been obtained if the acquisition had been effective on the first
day of the period presented. The unaudited pro forma financial information
reflects the amortization of the excess purchase price over the fair value of
net assets acquired and the income tax effect thereof (in thousands, except
per unit data):

<TABLE>
<CAPTION>
                                                     Pro Forma
                                                  Three Months Ended
                                      September 1999            September 1998
                                      --------------            --------------
<S>                                    <C>                      <C>
Revenue                                    $ 556,527                  $ 196,107
Net Loss                                     (14,867)                   (11,351)
Limited partners' net loss per unit             (.62)                      (.66)
</TABLE>

2.   DISTRIBUTIONS OF AVAILABLE CASH

    The Partnership will make distributions to its partners with respect to
each fiscal quarter of the Partnership within 45 days after the end of each
fiscal quarter in an aggregate amount equal to its Available Cash for such
quarter. The Partnership will distribute 100% of its Available Cash (98% to
Unitholders and 2% to the General Partners) until the Minimum Quarterly
Distribution ("MQD") ($.54 per unit) for such quarter has been met. The MQD
will be subject to the payment of incentive distributions in the event
Available Cash exceeds the MQD of $.54 on all units. During the Subordination
Period, to the extent there is sufficient Available Cash, the holders of
Common Units have the right to receive the MQD, plus any arrearages, prior to
the distribution of Available Cash to holders of Subordinated Units.
Subordinated Units do not accrue arrearages with respect to distributions for
any quarter.

    The MQD for the three-month period from April 1, 1999 to June 30, 1999 of
$.54 per common unit totaling $9,252 was paid on August 13, 1999. On October
27, 1999, the MQD for the period July 1, 1999 to September 30, 1999 was
declared in the amount of $9,252 representing, in the aggregate,
distributions to the Common Unit Holders and General Partner at $.54 per
common unit. This distribution will be paid on November 15, 1999. The MQD for
the three-month period from April 1, 1998 to June 30, 1998 of $.54 per common
unit totaling $7,303 was paid on August 14, 1998. The MQD for the three-month
period from July 1, 1998 to September 30, 1998 of $.54 per common unit
totaling $7,337 was paid November 13, 1998.


                                       -6-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (Dollars in thousands, except unit data)
                                   (Unaudited)

3.   ACQUISITIONS

    The Partnership consummated six acquisitions during the three months
ended September 30, 1999 for total consideration of approximately $10.3
million in cash and $2.4 million in liabilities assumed.

    The Partnership consummated five acquisitions during the three months
ended September 30, 1998 for total consideration of approximately $8.8
million of which approximately $.4 million was in the form of Cornerstone
Common Units, $6.6 million was paid in cash and $1.8 million was for
liabilities assumed. In addition, contingent consideration paid during the
quarter related to prior acquisitions was approximately $.6 million and was
in the form of Cornerstone Common Units.

    All acquisitions have been accounted for using the purchase method of
accounting.

4.   LIMITED PARTNERS' NET LOSS PER UNIT

    Limited Partners' net loss per unit is computed by dividing net loss,
after considering the General Partners' 2% interest, by the weighted average
number of Common and Subordinated Units outstanding during the quarter.

5.   RECENTLY ISSUED ACCOUNTING STANDARDS

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
was issued in June 1998. SFAS No. 133 provides a comprehensive standard for
the recognition and measurement of derivatives and hedging activities. The
standard requires all derivatives to be recorded on the balance sheet at fair
value and establishes special accounting for three types of hedges. The
accounting treatment for each of these three types of hedges is unique but
results in including the offsetting changes in fair values of cash flows of
both the hedge and hedged item in results of operations in the same period.
Changes in fair value of derivatives that do not meet the criteria of one of
the aforementioned categories of hedges are included in the results of
operations. The Partnership must adopt the provisions of SFAS No. 133, as
amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities Deferral of the Effective Date of FASB Statement No. 133 - an
amendment of FASB Statement No. 133" for the Partnership's fiscal year
beginning July 1, 2000. Management is currently evaluating the impact that
SFAS 133 may have on the Partnership's financial statements.


                                       -7-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (Dollars in thousands, except unit data)
                                   (Unaudited)

6.   SUBSEQUENT EVENT

On November 4, 1999, the Partnership issued $60 million in additional Senior
Notes. These notes will bear interest at an average rate of 8.175%, with
maturity dates ranging from July 31, 2005 to July 31, 2009, and require
semi-annual interest payments each January 31 and July 31. These notes will
rank on an equal and ratable basis with the Operating Partnership's other
Senior Secured Note obligations. The proceeds from the issuance of these
notes were used to pay down borrowings on the Refunding Credit Agreement
which were incurred in conjunction with acquisitions.


                                       -8-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the historical financial condition and results of
operations for the Partnership should be read in conjunction with the
historical financial statements and notes thereto included elsewhere in this
Quarterly Report on Form 10-Q.

GENERAL

The Partnership is a Delaware limited partnership initially formed to own and
operate the propane business and assets of SYN Inc., Empire Energy
Corporation and CGI Holdings, Inc. The Partnership's management believes that
it is the fourth largest retail marketer of propane in the United States,
serving more than 460,000 residential, commercial, industrial and
agricultural customers from 297 customer service centers in 34 states.

Because a substantial portion of the Partnership's propane is used in the
weather-sensitive residential markets, the temperatures in the Partnership's
area of operations, particularly during the six-month peak heating season,
have a significant effect on the financial performance of the Partnership. In
any given area, warmer-than-normal temperatures will tend to result in
reduced propane use, while sustained colder-than-normal temperatures will
tend to result in greater propane use. Therefore, information on normal
temperatures is used by the Partnership in understanding how historical
results of operations are affected by temperatures that are colder or warmer
than normal and in preparing forecasts of future operations, which are based
on the assumption that normal weather will prevail in each of the
Partnership's regions.

Gross profit margins are not only affected by weather patterns but also by
changes in customer mix. For example, sales to residential customers
ordinarily generate higher margins than sales to other customer groups, such
as commercial or agricultural customers. In addition, gross profit margins
vary by geographic region. Accordingly, profit margins could vary
significantly from year to year in a period of identical sales volumes.


                                       -9-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



ANALYSIS OF HISTORICAL RESULTS OF OPERATIONS

The following discussion compares the results of operations and other data of
the Partnership for the three-month period ended September 30, 1999, to the
three-month period ended September 30, 1998.

VOLUME. During the three months ended September 30, 1999, the Partnership
sold 46.4 million retail propane gallons, an increase of 7.0 million gallons
or 17.8% from the 39.4 million retail propane gallons sold during the three
months ended September 30, 1998. Increased retail sales volumes reflect the
additions related to acquired operations, offset to some extent by reduced
crop drying sales that were adversely impacted by the fall hurricane season.
Heavy rains in many parts of the eastern United States caused extensive
damage and destruction to agricultural crops. Acquisitions of new propane
businesses since October 1, 1998 accounted for 7.9 million gallons sold
during the three months ended September 30, 1999.

REVENUES. Revenues increased by $386.5 million or 227.4% to $556.5 million
for the three months ended September 30, 1999, as compared to $170.0 million
for the three months ended September 30, 1998. This increase was attributable
to an increase in CEG revenues of $372.7 million or 284.9% to $503.5 million
for the three months ended September 30, 1999, as compared to $130.8 million
for the three months ended September 30, 1998. This increase was due
primarily to the increase in natural gas and crude oil sales from the Petro
Source and ERI acquisitions completed in January 1999. Revenues for the
retail business increased by $13.8 million or 35.3% to $53.0 million for the
three months ended September 30, 1999, as compared to $39.2 million for the
three months ended September 30, 1998. This increase reflected the increase
in retail volumes described above coupled with an increase in the average
retail sales price per gallon of propane. Retail propane selling prices have
been raised over last year in response to significant product cost increases.

COST OF PRODUCT SOLD. Cost of product sold increased by $378.1 million or
263.9% to $521.4 million for the three months ended September 30, 1999, as
compared to $143.3 million for the three months ended September 30, 1998. The
increase in cost of product sold was primarily due to the increased CEG
natural gas and crude oil sales described above and increased retail volumes
and product costs as noted above. As a percentage of revenues, cost of
product sold increased to 93.7% for the three months ended September 30,
1999, as compared to 84.3% for the three months ended September 30, 1998, due
to a change in the mix between the CEG and Retail segments.


                                       -10-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GROSS PROFIT. Gross profit increased $8.4 million or 31.4% to $35.1 million
for the three months ended September 30, 1999, compared to $26.7 million for
the three months ended September 30, 1998. Margins per Retail gallon for the
three months ended September 30, 1999 were 11% better than the prior year.
This was attributable to increased service and equipment rental charges,
partially offset by lower propane margins per gallon which have been
adversely impacted by significant product cost increases. As a percentage of
revenues, gross profit decreased to 6.3% for the three months ended September
30, 1999, as compared to 15.7% for the three months ended September 30, 1998
due to a higher CEG mix that has lower gross profit margins. Gross profit
from propane businesses acquired since October 1, 1998 was $5.1 million for
the three months ended September 30, 1999.

OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES. Operating, general and
administrative expenses increased by $7.7 million or 30.0% to $33.4 million
for the three months ended September 30, 1999, as compared to $25.7 million
for three months ended September 30, 1998. Approximately $5.2 million, or
67.5%, of this increase was attributable to increases in salaries and other
operating expenses resulting from the acquisitions of new businesses and the
correspondingly increased sales volumes discussed above. As a percentage of
revenues, operating, general and administrative expenses decreased to 6.0%
for the three months ended September 30, 1999, as compared to 15.1% for the
three months ended September 30, 1998.


                                       -11-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS



LIQUIDITY AND CAPITAL RESOURCES

OPERATING ACTIVITIES. Cash used for operating activities during the
three-month period ended September 30, 1999 was $12.9 million. Cash flow from
operations included a net loss of $14.9 million and non-cash charges of $8.5
million for the period, comprised of depreciation and amortization expense,
loss on asset sales, and foreign currency translation adjustments. The impact
of working capital changes decreased cash flow by approximately $6.5 million.

INVESTING ACTIVITIES. Cash used for investing activities for the three-month
period ended September 30, 1999 totaled $14.9 million, which was principally
related to Partnership acquisitions and for purchases of plant and equipment.

FINANCING ACTIVITIES. Cash provided by financing activities was $26.3 million
for the three months ended September 30, 1999, which reflects the $28.7
million proceeds received from borrowings on the Working Capital Facility and
advances from related parties and other transactions of $8.4 million, offset
in part by repayments of purchase contract obligations of $1.5 million, and
cash distributions paid to Unitholders of $9.3 million.

FINANCING AND SOURCES OF LIQUIDITY

    The Partnership's obligations under the Note Agreements under which its
Senior Notes were issued and its Refunding Credit Agreement are secured by a
security interest in the Operating Partnership's inventory, accounts
receivable and certain customer storage tanks. The Note and Refunding Credit
Agreements contain various terms and covenants including financial ratio
covenants with respect to debt and interest coverage and limitations, among
others, on the ability of the Partnership to incur additional indebtedness,
create liens, make investments and loans, enter into mergers, consolidations
or sales of all or substantially all of its assets. Generally, so long as no
default exists or would result, the Partnership is permitted to make
distributions during each fiscal quarter in an amount not in excess of
Available Cash with respect to the immediately preceding quarter. The
Operating Partnership and Cornerstone Partners were in compliance with all
terms and covenants at September 30, 1999.


                                       -12-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

YEAR 2000 READINESS DISCLOSURE

    The Year 2000 issue is the result of computer programs using only the
last two digits to indicate the year. If uncorrected, such computer programs
will not be able to interpret dates correctly beyond the year 1999 and, in
some cases prior to that time (as some computer experts believe), which could
cause computer system failures or other computer errors disrupting business
operations. Recognizing the potentially severe consequences of the failure to
be Year 2000 compliant, the Partnership's management has developed and
implemented a company-wide program to identify and remedy the Year 2000
issues. A project team, consisting of the Partnership's Director of
Information Systems and the Partnership's key IS managers who supervise
operations at each of the Partnership's three main regional facilities in
California, Missouri and Texas, together with the Chief Information Officer
of Northwestern Corporation, the Partnership's parent corporation, was
created to manage the company's Year 2000 problems, enabling a smooth
transition into the Year 2000. The project team reports directly to executive
management who have assigned a high priority to such efforts within the
Partnership.

    The scope of the Partnership's Year 2000 readiness program includes the
review and evaluation of (i) the Partnership's information technology (IT)
such as hardware and software utilized in the operation of the Partnership's
business; (ii) the Partnership's non-IT systems or embedded technology such
as micro-controllers contained in various equipment and facilities; and (iii)
the readiness of third parties, including customers, suppliers and other key
vendors to the company, and the electronic data interchange (EDI) with those
key third parties. If needed modifications and conversions are not made on a
timely basis, the Year 2000 issue could have a material adverse effect on the
Partnership's operations.

    The Partnership is currently using internal and external resources to
identify, correct and test large quantities of lines of application software
code for systems that were developed internally. Remediation of these systems
is expected to be completed by November 1999 except for the Partnership's
Retail Information System, consisting principally of its billing and accounts
receivable systems, which is already Year 2000 compliant. Since January 1997,
the Partnership has been converting its old billing system installed at each
customer service center to the new Retail Information System. Currently,
approximately 99% of the Partnership's customer service centers are running
the new system, and the planned rollout to the balance of the service centers
will be completed by November 1999.


                                       -13-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


    Software developed externally has been evaluated for Year 2000 compliance
and has been upgraded or replaced. The Partnership's NT-platform-based year
2000 compliant financial system was installed in January 1999. The new
financial system encompasses general ledger, accounts payable and fixed
assets. Remediation efforts for sub-systems integrated with the financial
system are scheduled for completion in November 1999. The Partnership's oil
and gas systems were replaced with a year 2000 compliant third party solution
in October 1999. The Partnership is using this process as an opportunity to
upgrade and enhance its information systems.

    In addition to internal Year 2000 remediation activities, the Partnership
has contacted key suppliers, vendors and customers to determine their
readiness for the Year 2000, surveying each of them about their compliance
and contingency plans to supply the Partnership upon the approach and arrival
of the Year 2000. While none of the Partnership's products are directly date
sensitive, the supply and transportation of propane gas products are
dependent upon companies whose own systems may need to be Year 2000
compliant. If third parties do not convert their systems in a timely manner
and in a way compatible with the Partnership's systems, the arrival of the
Year 2000 could have an adverse effect on Partnership operations. The
Partnership believes that its actions with key suppliers, vendors and
customers will minimize these risks. Furthermore, no single customer accounts
for more than 10% of the Partnership's consolidated gross profits, thus
mitigating the adverse risk to the Partnership's business if some but not all
customers are not Year 2000 compliant. Also, only a minimal number of
transactions are conducted through EDI, which reduces the risk.

    The Partnership's primary focus has been directed at resolving the Year
2000 problem. While the Partnership expects its internal IT and non-IT
systems to be Year 2000 compliant by the dates specified, the Partnership has
developed a contingency plan specifying what the Partnership will do if it or
important third parties are not Year 2000 compliant by the required dates. A
majority of such a contingency plan is based on manual back-up systems,
procedures and practices.

    Through September 1999, the Partnership estimates that incremental costs
of approximately $1.9 million have been incurred and expensed related to Year
2000 issues. Since many systems are being modified to provide significant
enhanced capabilities, the Year 2000 expenses have not been nor are planned
to be specifically tracked. The current estimated additional cost to complete
remediation is expected to be less than $0.1 million. The Partnership expects
that a portion of these costs will be capitalized, as they are principally
related to adding new software applications and functionality. Other costs
will continue to be expensed as incurred.


                                       -14-

<PAGE>

                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


    The Partnership's current estimates of the amount of time and costs
necessary to remediate and test its computer systems are based on the facts
and circumstances existing at this time. The estimates were made using
assumptions of future events including the continued availability of existing
resources, Year 2000 modification plans, implementation success by third
parties, and other factors. New developments may occur that could affect the
Partnership's estimates of the amount of time and costs necessary to modify
and test its IT and non-IT systems for Year 2000 compliance. These
developments include, but are not limited to: (i) the availability and cost
of personnel trained in this area, (ii) the ability to locate and correct all
relevant computer codes and equipment and (iii) the planning and Year 2000
compliance success that key suppliers, vendors and customers attain.

    In October 1998, President Clinton signed into law the Year 2000
Readiness Disclosure Act. The Partnership intends to obtain the benefits of
the Act's protections by implementing certain procedures described in that
Act.

FORWARD-LOOKING STATEMENTS

         The information presented herein may contain certain
"forward-looking statements" within the meaning of the federal securities
laws. The Partnership's actual future performance will be affected by a
number of factors, risks and uncertainties, including without limitation,
weather conditions, regulatory changes, competitive factors, the
Partnership's success in dealing with the Year 2000 issues and the operations
of vendors, suppliers and customers, many of which are beyond the
Partnership's control. Future events and results may vary substantially from
what the Partnership currently foresees, and there can be no assurance that
the Partnership's actual results will not differ materially from its
expectations. The Partnership undertakes no obligation to publicly release
any revision to these forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.


                                       -15-

<PAGE>



                CORNERSTONE PROPANE PARTNERS, L.P. AND SUBSIDIARY

                           PART II. OTHER INFORMATION

Item 6   Exhibits and Reports on Form 8-K

a)       Exhibits:
                           10.12*    Coast Energy Group Stock Appreciation
                                     Rights Agreement, dated March 23, 1999.

                           27        Financial Data Schedule

b)       Reports on Form 8-K:

              None


*  Management contract or compensatory plan or arrangement.


                                       -16-

<PAGE>



                                    SIGNATURE

    Pursuant to the requirements of Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                           Cornerstone Propane Partners, L.P.
                                           ----------------------------------
                                                  (Registrant)


                                     By:   Cornerstone Propane GP, Inc.
                                           as Managing General Partner


Date:  November 12, 1999             By:   /s/ Ronald J. Goedde
                                           --------------------------------
                                           Name:  Ronald J. Goedde
                                           Title: Executive Vice President
                                                  and Chief Financial Officer

                                     By:   /s/ Richard D. Nye
                                           --------------------------------
                                           Name:  Richard D. Nye
                                           Title:   Vice President Finance


                                       -17-