<PAGE>   1
                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 December 31, 1996

                                       OR

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

                         Commission File Number 1-12499

                       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, California                           95076
-------------------------------                           -----
(Address of principal executive offices)               (Zip Code)

        Registrant's telephone number, including area code (408) 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   No   X
                                         --     --
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of December 31, 1996:

         Cornerstone Propane Partners, L.P. 9,821,000  Common Units
                                            6,597,619  Subordinated Units

<PAGE>   2
                       CORNERSTONE PROPANE PARTNERS, L.P.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                  PAGES
                                                                                  -----
                          Part I. Financial Information

<S>      <C>                                                                      <C>
Item 1.  Financial Statements

         Cornerstone Propane Partners, L.P.

                  Consolidated Balance Sheet as of December 31, 1996                 1

                  Consolidated Statement of Operations from Commencement
                    of Operations (on December 17, 1996) to December 31, 1996        2

                  Consolidated Statement of Cash Flows from Commencement
                    of Operations (on December 17, 1996) to December 31, 1996     3 - 4

                  Consolidated Statement of Partners' Capital from Commencement
                    of Operations (on December 17, 1996) to December 31, 1996        5

                  Notes to Consolidated Financial Statements                      6 - 15

         Cornerstone Propane Partners, L.P. (Pro Forma)

                  Consolidated Statements of Operations for the periods             16
                    July 1, 1996 to December 31, 1996,
                    July 1, 1995 to December 31, 1995,
                    October 1, 1996 to December 31, 1996 and
                    October 1, 1995 to December 31, 1995

                  Notes to Pro Forma Consolidated Financial Information           17 - 18

         SYN Inc. (Predecessor)

                  Consolidated Balance Sheet as of June 30, 1996                  19 - 20

                  Consolidated Statements of Operations for the
                    periods July 1, 1996 to December 16, 1996, August 15, 1995
                    to December 31, 1995, July 1, 1995 to August 14, 1995,
                    October 1, 1996 to December 16, 1996 and October 1, 1995
                    to December 31, 1995                                             21
</TABLE>



                                        i
<PAGE>   3
                       CORNERSTONE PROPANE PARTNERS, L.P.

                          TABLE OF CONTENTS (Continued)

<TABLE>
<CAPTION>
                                                                                  PAGES
                                                                                  -----
<S>      <C>                                                                      <C>
                    Part I. Financial Information (Continued)

         SYN Inc. (Predecessor) (Continued)

                  Consolidated Statements of Cash Flows for the                   22 - 23
                    the periods July 1, 1996 to December 16, 1996,
                    August 15, 1995 to December 31, 1995, and
                    July 1, 1995 to August 14, 1995

                  Notes to Consolidated Financial Statements                      24 - 25

         Empire Energy Corporation (Predecessor)

                  Consolidated Balance Sheet as of June 30, 1996                  26 - 27

                  Consolidated Statements of Operations for the                      28
                    periods July 1, 1996 to December 16, 1996, July 1, 1995
                    to December 31, 1995, October 1, 1996 to December 16, 1996,
                    and October 1, 1995 to December 31, 1995

                  Consolidated Statements of Cash Flows for the                   29 - 30
                    periods July 1, 1996 to December 16, 1996 and July 1, 1995
                    to December 31, 1995

                  Notes to Consolidated Financial Statements                      31 - 34

         CGI Holdings, Inc. (Predecessor)

                  Consolidated Balance Sheet as of July 31, 1996                  35 - 36

                  Consolidated Statements of Operations for the                      37
                    periods August 1, 1996 to December 16, 1996, August 1,
                    1995 to December 31, 1995, November 1, 1996 to December
                    16, 1996 and November 1, 1995 to December 31, 1995

                  Consolidated Statements of Cash Flows for the                   38 - 39
                    periods August 1, 1996 to December 16, 1996 and
                    August 1, 1995 to December 31, 1995
</TABLE>



                                       ii



<PAGE>   4

                       CORNERSTONE PROPANE PARTNERS, L.P.

                          TABLE OF CONTENTS (Continued)

<TABLE>
<CAPTION>
                                                                                  PAGES
                                                                                  -----

<S>       <C>                                                                     <C>
                  Notes to Consolidated Financial Statements                      40 - 41

Item 2.  Management's Discussion and Analysis of Financial Condition              42 - 67
           and Results of Operations of Cornerstone Propane Partners, L.P.,
           SYN Inc., Empire Energy Corporation, and CGI Holdings, Inc.

                           Part II. Other Information

Item 6.    Exhibits and Reports on Form 8-K                                          68

Signature                                                                            69
</TABLE>


<PAGE>   5
                       CORNERSTONE PROPANE PARTNERS, L.P.

                           CONSOLIDATED BALANCE SHEET
                             (Dollars in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                                       1996
                                                                                     --------
<S>                                                                                  <C>     
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                                          $ 24,050
  Trade receivables                                                                    76,204
  Inventories                                                                          31,328
  Prepayments and other current assets                                                  2,942
                                                                                     --------
     Total current assets                                                             134,524
                                                                                     --------

Property, plant and equipment, net of accumulated depreciation of $350                243,004
Excess of cost over fair value, net                                                   193,802
Other assets, net                                                                       5,810
Deferred costs                                                                          5,446
                                                                                     --------

     Total assets                                                                    $582,586
                                                                                     ========

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Current portion of long-term debt                                                  $    674
  Trade accounts payable                                                               82,856
  Accrued liabilities                                                                  10,084
                                                                                     --------
     Total current liabilities                                                         93,614
                                                                                     --------

Notes payable                                                                         220,000
Long-term debt                                                                         10,445
Notes payable related party                                                             2,074
Other non-current liabilities                                                          22,590
                                                                                     --------
     Total liabilities                                                                348,723
                                                                                     --------

COMMITMENTS AND CONTINGENCIES (Note 6)

PARTNERS' CAPITAL
  Common unitholders                                                                  137,090
  Subordinated unitholders                                                             92,096
  General partners                                                                      4,677
                                                                                     --------
     Total partners' capital                                                          233,863

     Total liabilities and partners' capital                                         $582,586
                                                                                     ========
</TABLE>




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



                                       1
<PAGE>   6

                       CORNERSTONE PROPANE PARTNERS, L.P.


                      CONSOLIDATED STATEMENT OF OPERATIONS
                  (Dollars in thousands, except per Unit data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                            From Commencement
                                              of Operations
                                          (on December 17, 1996)
                                           to December 31, 1996
                                           --------------------
<S>                                               <C>     
REVENUE                                           $ 40,370
COST OF SALES                                       31,341
                                                  --------

GROSS PROFIT                                         9,029
                                                  --------
EXPENSES
  Operating                                          3,798
  General and administrative                           580
  Depreciation and amortization                        575
                                                  --------
                                                     4,953
                                                  --------

OPERATING INCOME                                     4,076
INTEREST EXPENSE                                      (778)
                                                  --------
INCOME BEFORE INCOME TAXES                           3,298
INCOME TAXES                                             5
                                                  --------
NET INCOME                                        $  3,293
                                                  ========

General partners' interest in net income          $     66
                                                  --------
Limited partner's interest in net income          $  3,227
                                                  --------
Net income per Unit                               $   0.20
                                                  --------
Weighted average number of Units outstanding        16,513
                                                  ========
</TABLE>





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



                                       2
<PAGE>   7



                       CORNERSTONE PROPANE PARTNERS, L.P.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                             (Dollars in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                From Commencement
                                                                  of Operations
                                                              (on December 17, 1996)
                                                               to December 31, 1996
                                                               --------------------
<S>                                                                <C> 
CASH FLOWS FROM (USED FOR) OPERATING ACTIVITIES:
  Net income                                                       $   3,293
  Adjustments to reconcile net income to net cash
    provided by (used for) operating activities:
      Depreciation and amortization                                      575
      Changes in assets and liabilities, net
      of acquisitions:
        Trade receivables                                              2,275
        Inventories                                                   (5,035)
        Prepayments and other current assets                            (202)
      Deferred costs and other assets                                     20
      Trade accounts payable                                           3,710
        Accrued liabilities                                             (197)
        Other non-current liabilities                                     50
                                                                   ---------
      Net cash provided by operating activities                        4,489
                                                                   ---------

CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES:
  Expenditures for property, plant and equipment                        (504)
                                                                   ---------
    Net cash used for investing activities                              (504)
                                                                   ---------
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
    Net repayments on Working Capital Facility                        (2,355)
                                                                   ---------
    Net cash used for financing activities                            (2,355)
                                                                   ---------
PARTNERSHIP FORMATION TRANSACTIONS:
  Net proceeds from issuance of Common and Subordinated Units        191,804
  Borrowings on Working Capital Facility                              12,800
  Issuance of long-term debt                                         220,000
  Cash transfers from Predecessor Companies                           22,418
  Repayment of long-term debt and related interest                  (337,631)
  Distribution to Special General Partner for the redemption
    of preferred stock                                               (61,196)
  Distribution to Special General Partner                            (15,500)
  Other fees and expenses                                            (10,277)
                                                                   ---------
    Net cash provided by partnership formation transactions           22,418
                                                                   ---------

Cash and cash equivalents increase                                 $  24,048
                                                                   =========
</TABLE>


                                       3


<PAGE>   8
<TABLE>
<S>                                                                <C>
CASH AND CASH EQUIVALENTS:
  End of period                                                    $  24,050
  Beginning of period                                                      2
                                                                   ---------
    Increase                                                       $  24,048
                                                                   =========
</TABLE>

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




                                       4
<PAGE>   9
                       CORNERSTONE PROPANE PARTNERS, L.P.

                   CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
                    (Dollars in thousands, except Unit data)
                                   (unaudited)


<TABLE>
<CAPTION>
                                         Number of limited    
                                            partner Units                                                    Total
                                       ------------------------                               General      partners'
                                        Common     Subordinated    Common     Subordinated    partners      capital
                                       ---------  -------------    -------    ------------    --------    ----------
<S>                                    <C>         <C>             <C>           <C>           <C>        <C>      
Balance at Commencement of              
  Operations (on December 17, 1996)       -           -             $     -       $      -      $    -     $     -

  Contributions of net assets of       
     predecessor companies and
     issuance of Common Units          9,821,000   6,597,619        135,160         90,799                   225,959
                                                                  
  Issuance of 2% interest for
    general partners contribution                                                                   4,611       4,611

  Net income                                                          1,930          1,297             66       3,293
                                       ---------   ---------      ---------      ---------      ---------   ---------

Balance December 31, 1996              9,821,000   6,597,619      $ 137,090      $  92,096      $   4,677   $ 233,863
                                       =========   =========      =========      =========      =========   =========
</TABLE>






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




                                       5
<PAGE>   10
                       CORNERSTONE PROPANE PARTNERS, L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                    (Dollars in thousands, except Unit data)
                                   (unaudited)


 1.   Partnership Organization and Formation

     Cornerstone Propane Partners, L.P. ("Cornerstone Partners") was formed on
     October 7, 1996 as a Delaware limited partnership. Cornerstone Partners and
     its subsidiary Cornerstone Propane, L.P., a Delaware limited partnership
     (the "Operating Partnership"), were formed to acquire, own and operate
     substantially all of the propane businesses and assets of SYN Inc. and its
     subsidiaries ("Synergy"), Empire Energy Corporation and its subsidiaries
     ("Empire"), Myers Propane Gas Company ("Myers") and CGI Holdings, Inc. and
     its subsidiaries ("Coast"). The principal predecessor entities, Synergy,
     Empire and Coast are collectively referred to herein as the "Predecessor
     Companies." The consolidated financial statements include the accounts of
     Cornerstone Partners, the Operating Partnership and its corporate
     subsidiary Cornerstone Sales & Service Corporation, a Delaware corporation,
     collectively referred to herein as the Partnership. The Operating
     Partnership is, and the Predecessor Companies were, principally engaged in
     (i) the retail marketing and distribution of propane for residential,
     commercial, industrial, agricultural and other retail uses, (ii) the
     wholesale marketing and distribution of propane and natural gas liquids to
     the retail propane industry, the chemical and petrochemical industries and
     other commercial and agricultural markets, (iii) the repair and maintenance
     of propane heating systems and appliances and (iv) the sale of
     propane-related supplies, appliances and other equipment. Pursuant to a
     Contribution, Conveyance and Assumption Agreement dated as of December 17,
     1996, substantially all of the assets and liabilities of the Predecessor
     Companies were contributed to the Operating Partnership (the "Conveyance").
     As a result of the Conveyance, Cornerstone Propane GP, Inc., a Delaware
     corporation and the managing general partner of Cornerstone Partners (the
     "Managing General Partner") and SYN Inc., a Delaware corporation and the
     special general partner (the "Special General Partner") received all of the
     interests in the Operating Partnership, and the Operating Partnership
     received substantially all of the assets and assumed substantially all of
     the liabilities of the Predecessor Companies. Immediately after the
     Conveyance, and in accordance with the Amended and Restated Agreement of
     Limited Partnership of Cornerstone Partners (the "Partnership Agreement"),
     the Managing General Partner and the Special General Partner conveyed their
     limited partner interests in the Operating Partnership to Cornerstone
     Partners in exchange for a 2% interest of Cornerstone Partners.

     Following these transactions, on December 17, 1996, Cornerstone Partners
     completed its initial public offering through underwriters of 9,821,000
     Common Units (the "IPO") at a price to the public of $21.00 a unit. The net
     proceeds of approximately $191,804 from the IPO, the proceeds from the
     issuance of $220,000 aggregate principal amount of the Operating
     Partnership's 7.53% first mortgage notes, and $12,800 borrowings under the
     Working Capital Facility (as described in Note 3) were used to repay
     $414,327 in liabilities assumed by the Operating Partnership (including
     $141,799 paid to affiliates of the Managing General Partner) that were in
     large part incurred in connection with the transactions entered into prior
     to the offering. A portion of the funds were distributed to the Special




                                       6
<PAGE>   11
                       CORNERSTONE PROPANE PARTNERS, L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                    (Dollars in thousands, except Unit data)
                                   (unaudited)

     General Partner to redeem its preferred stock ($61,196) and to provide net
     worth to the Special General Partner ($15,500). The balance ($10,277) was 
     used to pay expenses.

     Partners' capital of limited partners consists of 9,821,000 Common Units
     and 6,597,619 Subordinated Units, representing an aggregate 58.6% and 39.4%
     limited partner interest in Cornerstone Partners, respectively. Partners'
     capital of general partners consists of a 2% interest in the Partnership.

     During the Subordination Period (see Note 5), the Partnership may issue up
     to 4,270,000 additional Parity Units (generally defined as Common Units and
     all other Units having rights to distribution or in liquidation ranking on
     a parity with the Common Units), excluding Common Units issued in
     connection with (i) employee benefit plans and (ii) the conversion of
     Subordinated Units into Common Units, without the approval of a majority of
     the Unitholders (see Note 5). The Partnership may issue an unlimited number
     of additional Parity Units without Unitholder approval if such issuance
     occurs in connection with acquisitions, including, in certain
     circumstances, the repayment of debt incurred in connection with an
     acquisition. In addition, under certain conditions the Partnership may
     issue without Unitholder approval an unlimited number of parity securities
     for the repayment of up to $75,000 of long-term indebtedness of the
     Partnership. After the Subordination Period, the Managing General Partner
     may cause the Partnership to issue an unlimited number of additional
     limited partner interests and other equity securities of the Partnership
     for such consideration and on such terms and conditions as shall be
     established by the General Partner in its sole discretion.

     Cornerstone Partners and the Operating Partnership have no employees. The
     Managing General Partner conducts, directs and manages all activities of
     Cornerstone Partners and the Operating Partnership and is reimbursed on a
     monthly basis for all direct and indirect expenses it incurs on their 
     behalf.


 2.  Basis of Presentation and Summary of Significant Accounting Policies

     Nature of Operations. The Partnership is the fifth largest retail marketer
     of propane in the United States in terms of volume, serving more than
     360,000 residential, commercial, industrial and agricultural customers from
     312 customer service centers in 26 states. The Partnership was recently
     formed to own and operate the propane business and assets of Synergy,
     Empire, Myers and Coast. The Partnership's operations are concentrated in
     the east coast, south-central and west coast regions of the United States.




                                       7
<PAGE>   12
                       CORNERSTONE PROPANE PARTNERS, L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                    (Dollars in thousands, except Unit data)
                                   (unaudited)

     Basis of Presentation. The consolidated financial statements include the
     accounts of the Predecessor Companies and Myers. Historical financial
     statements of Myers have not been separately presented based on the
     Partnership's belief that the separate inclusion of Myers does not have a
     material effect on the consolidated financial statements of the
     Partnership. The acquisitions of the Predecessor Companies are accounted
     for as purchase business combinations based on management's best estimate.
     All purchase price allocations for the acquisition of the Predecessor
     Companies are preliminary in nature and are subject to change within the
     twelve months following the acquisitions based on refinements as actual
     data becomes available. All significant inter-company transactions and
     accounts have been eliminated. The accompanying consolidated financial
     statements are unaudited and have been prepared in accordance with the
     rules and regulations of the Securities and Exchange Commission. They
     include all adjustments which the Partnership considers necessary for a
     fair statement of the results for the interim periods presented. Such
     adjustments consisted only of normal recurring items unless otherwise
     disclosed. Due to the seasonal nature of the Partnership's propane
     business, the results of operations for interim periods are not necessarily
     indicative of the results to be expected for a full year.

     Fiscal Year. The Partnership's fiscal year is July 1 to June 30.
     Previously, Coast's fiscal year began on August 1 and ended on July 31,
     while Empire's, Synergy's and Myers' fiscal years began on July 1 and ended
     on June 30. Because the Partnership commenced operations upon completion of
     the IPO, the accompanying consolidated statements of operations, cash flows
     and partners' capital are for the period from commencement of operations on
     December 17, 1996 to December 31, 1996.

     Use of Estimates. The preparation of financial statements in conformity
     with generally accepted accounting principles requires management to make
     estimates and assumptions that affect the reported amounts of assets and
     liabilities and disclosure of contingent assets and liabilities at the date
     of the financial statements and the reported amounts of revenues and
     expenses during the reporting period. Actual results could differ from
     those estimates.

     Futures contracts. The Partnership routinely uses commodity futures
     contracts to reduce the risk of future price fluctuations for natural gas
     and LPG inventories and contracts. Gains and losses on futures contracts
     purchased as hedges are deferred and recognized in cost of sales as a
     component of the product cost for the related hedged transaction. In the
     statement of cash flows, cash flows from qualifying hedges are classified
     in the same category as the cash flows from the items being hedged.
     Contracts which do not qualify as hedges are marked to market, with the
     resulting gains and losses charged to current operations. Net realized
     gains and losses for the current fiscal year and unrealized gains, losses
     on outstanding positions and open positions as of December 31, 1996 are not
     material.



                                       8
<PAGE>   13
                       CORNERSTONE PROPANE PARTNERS, L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                    (Dollars in thousands, except Unit data)
                                   (unaudited)


     Accounts Receivable. The outstanding balance is stated net of allowance of
     doubtful accounts of $4,586 at December 31, 1996.

     Revenue Recognition. Sales of natural gas, crude oil, natural gas liquids
     and LPG and the related cost of product are recognized upon delivery of the
     product.

     Inventories. Inventories are stated at the lower of cost or market. The
     cost of natural gas, crude oil, natural gas liquids and LPG is determined
     using the first-in, first-out (FIFO) method. The cost of gas distribution
     parts, appliances and equipment is determined using the weighted average
     method. The major components of inventory consist of the following:

<TABLE>
<CAPTION>
                                     December 31, 1996
                                         (unaudited)
                                            -------
               <S>                          <C>    
               LPG and Other                $22,553
               Parts and Fittings             8,775
                                            -------
                                            $31,328
                                            =======
</TABLE>
                                  
     Property, Plant and Equipment. Property, plant and equipment are stated at
     cost. Depreciation is computed using the straight-line method over the
     estimated useful lives of the assets as follows: buildings and
     improvements, 25 to 33 years; LPG storage and rental tanks, 40 to 50 years;
     and office furniture, equipment and tank installation costs, 5 to 10 years.
     Leasehold improvements are amortized over the shorter of the estimated
     useful life or the lease term. When property, plant or equipment is retired
     or otherwise disposed, the cost and related accumulated depreciation is
     removed from the accounts, and the resulting gain or loss is credited or
     charged to operations. Maintenance and repairs are charged to earnings,
     while replacements and betterments that extend estimated useful lives are
     capitalized.

     Excess of Cost Over Fair Value of Net Assets Acquired. The excess of
     acquisition cost over the estimated fair market value of identifiable net
     assets of acquired businesses is amortized on a straight-line basis over
     forty years. The related costs and accumulated amortization were $193,977
     and $175 respectively, at December 31, 1996.

     It is the Partnership's policy to review intangible assets for impairment
     whenever events or changes in circumstances indicate that the carrying
     amount of such assets may not be recoverable. If such a review should
     indicate that the carrying amount of intangible assets is not recoverable,
     it is the Partnership's policy to reduce the carrying amount of such assets
     to fair value.

     Income Taxes. Neither Cornerstone Partners nor the Operating Partnership
     are directly subject to federal and state income taxes. Instead, taxable
     income or loss is allocated to the 



                                       9
<PAGE>   14
                       CORNERSTONE PROPANE PARTNERS, L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                    (Dollars in thousands, except Unit data)
                                   (unaudited)



     individual partners. As a result, no recognition of income tax expense has
     been reflected in the Partnership's consolidated financial statements
     relating to the earnings of Cornerstone Partners or the Operating
     Partnership. The Partnership has one subsidiary which operates in corporate
     form and is subject to federal and state income taxes. Accordingly, the
     Partnership's consolidated financial statements reflect income tax expense
     related to the subsidiary's earnings.

     Net Income per Unit. Net income per Unit is computed by dividing net
     income, after deducting the General Partners' 2% interest, by the weighted
     average number of outstanding Common and Subordinated Units.

     Unit-Based Compensation. The Partnership accounts for unit-based
     compensation as (a) deferred compensation for time-vesting units and (b)
     contingent consideration for performance-vesting units. Compensation
     expense for the time-vesting units is recognized over the vesting period.
     Compensation expense for the performance-vesting units is recognized when
     the units become issuable. Time vesting units are considered Common Unit
     equivalents for the purpose of computing primary earnings per unit.
     Performance-vesting units are considered for the purpose of computing fully
     diluted earnings per unit.


 3.  Credit Facilities

     Concurrently with the IPO, the Operating Partnership entered into a credit
     agreement (the "Bank Credit Agreement") which consists of a Working Capital
     Facility and an Acquisition Facility.

     The Working Capital Facility provides for borrowings up to $50,000
     (including a $30,000 sublimit for letters of credit through March 31, 1997
     and $20,000 thereafter), and matures on December 31, 1999. The Bank Credit
     Agreement provides that there must be no amount outstanding under the
     Working Capital Facility (excluding letters of credit) in excess of $10,000
     for at least 30 consecutive days during each fiscal year. Borrowings under
     the Working Capital Facility totaled $10,445 at December 31, 1996. Issued
     outstanding letters of credit totaled $18,425 at December 31, 1996.

     The Acquisition Facility provides the Operating Partnership with the
     ability to borrow up to $75,000 to finance propane business acquisitions.
     The Acquisition Facility operates as a revolving facility through December
     31, 1999, at which time any loans then outstanding may be converted to term
     loans and be amortized quarterly for a period of four years thereafter. No
     amounts were outstanding at December 31, 1996.




                                       10
<PAGE>   15
                       CORNERSTONE PROPANE PARTNERS, L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                    (Dollars in thousands, except Unit data)
                                   (unaudited)


     The Operating Partnership's obligations under the Bank Credit Agreement are
     secured, on an equal and ratable basis, with its obligations under the Note
     Agreement (see Note 4), by a first priority security interest in the
     Operating Partnership's inventory, accounts receivable and certain customer
     storage tanks. Loans under the Bank Credit Agreement bear interest at a per
     annum rate equal to either (at the Operating Partnership's option): (a) the
     sum (the "Base Rate") of the applicable margin, and the higher of (i) the
     agent bank's prime rate and (ii) the federal funds rate plus 1/2 of 1%,
     and (b) the sum (the "Eurodollar Rate") of the applicable margin and the
     rate offered by the agent bank to major banks in the offshore dollar market
     (as adjusted for applicable reserve requirements, if any). The applicable
     margin for Base Rate loans varies between 0% and .12%, and the applicable
     margin for Eurodollar Rate loans varies between .25% and .80%, in each case
     depending upon the Operating Partnership's ratio of consolidated "Debt" to
     "Consolidated Cash Flow" (as such terms are defined in the Bank Credit
     Agreement). At December 31, 1996, the applicable Base and Eurodollar Rates
     were 8.275% and 6.2375%, respectively. In addition, an annual fee is
     payable quarterly by the Operating Partnership (whether or not borrowings
     occur) ranging from .125% to .325% depending upon the ratio referenced
     above.

     The Bank Credit Agreement contains customary representations, warranties,
     events of defaults and covenants including limitations, among others, on
     the ability of the Operating Partnership and its "Restricted Subsidiaries"
     (as defined therein) to incur or maintain certain indebtedness or liens,
     make investments and loans, enter into mergers, consolidations or sales of
     all or substantially all of its assets and make assets sales. Generally, so
     long as no default exists or would result, the Operating Partnership is
     permitted to make any Restricted Payment (as defined in the Bank Credit
     Agreement and including distributions to the Partnership) during each
     fiscal quarter in amount not to exceed Available Cash with respect to the
     immediately preceding quarter.

     In addition, the Bank Credit Agreement provides that: (1) the Operating
     Partnership not permit the ratio of its consolidated Debt (as defined in
     the Bank Credit Agreement) less cash on hand (in excess of $1,000 up to
     $10,000) to Consolidated Cash Flow (as defined in the Bank Credit
     Agreement) to exceed 4.75:1.00 at any time on or before December 31, 1997,
     4.50:1.00 at any time on or before December 31, 1998 and 4.25:1.00 at any
     time thereafter; and (2) the Operating Partnership not permit the ratio of
     its Consolidated Cash Flow to consolidated "Interest Expense" (as defined
     therein) to be less than 2.00:1.00 prior to December 31, 1997, 2.25:1.00
     any time thereafter on or before December 31, 1998 and 2.50:1.00 at any
     time thereafter.



                                       11
<PAGE>   16
                       CORNERSTONE PROPANE PARTNERS, L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                    (Dollars in thousands, except Unit data)
                                   (unaudited)



 4.  Long-Term Debt

     On the IPO date, the Operating Partnership issued $220,000 of Senior Notes
     with an annual interest rate of 7.53% pursuant to note purchase agreements
     with various investors (collectively, the "Note Agreement"). The Senior
     Notes mature on December 30, 2010, and require semi-annual interest
     payments commencing December 30, 1996. The Note Agreement requires that the
     principal be paid in equal annual payments of $27,500 starting December 30,
     2003.

     The Operating Partnership's obligations under the Note Agreement are
     secured, on an equal and ratable basis with its obligations under the Bank
     Credit Agreement, by a first priority security interest in the Operating
     Partnership's inventory, accounts receivable and certain customer storage
     tanks. The Note Agreement contains customary representations, warranties,
     events of defaults and covenants applicable to the Operating Partnership
     and its "Restricted Subsidiaries" (as defined therein), including
     limitations, among others, on the ability of the Operating Partnership and
     its Restricted Subsidiaries to incur additional indebtedness, create liens,
     make investments and loans, enter into mergers, consolidations or sales of
     all or substantially all assets and make asset sales. Generally, so long as
     no default exists or would result, the Operating Partnership is permitted
     to make any Restricted Payment (as defined in the Note Agreement and
     including distributions to the Partnership) during each fiscal quarter in
     amount not in excess of Available Cash (see Note 5) with respect to the
     immediately preceding quarter.


 5.  Quarterly Distributions of Available Cash

     The Partnership will make distributions to its partners with respect to
     each fiscal quarter of the Partnership approximately 45 days after the end
     of each fiscal quarter in an aggregate amount equal to its Available Cash
     for such quarter. Available Cash generally means, with respect to any
     fiscal quarter of the Partnership, all cash on hand at the end of such
     quarter less the amount of cash reserves established by the Managing
     General Partner in its reasonable discretion for future cash requirements.
     These reserves are retained to provide for the proper conduct of the
     Partnership's business, the payment of debt principal and interest and to
     provide funds for distribution during the next four quarters. The
     Partnership has not made a distribution to holders of the Common Units and
     Subordinated Units ("Unitholders") for the partial fiscal quarter ended
     December 31, 1996. The Partnership expects to make a distribution with
     respect to the fiscal quarter ending March 31, 1997 to holders of record on
     the applicable record date. The Minimum Quarterly Distribution ($0.54 per
     Unit) for said fiscal quarter is expected to be increased proportionately
     to reflect the fact that a distribution was not made for the partial fiscal
     quarter ended December 31, 1996.



                                       12
<PAGE>   17
                       CORNERSTONE PROPANE PARTNERS, L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                    (Dollars in thousands, except Unit data)
                                   (unaudited)



     Distributions by the Partnership in an amount equal to 100% of its
     Available Cash will generally be made 98% to all Unitholders and 2% to the
     General Partners until there has been distributed in respect of each Unit
     an amount equal to the Minimum Quarterly Distribution for such quarter.
     With respect to each quarter during the Subordination Period (defined
     below), to the extent there is sufficient Available Cash, the holders of
     Common Units have the right to receive the Minimum Quarterly Distribution,
     plus any arrearages on the Minimum Quarterly Distribution ("Common Unit
     Arrearages"), prior to the distribution of Available Cash to holders of
     Subordinated Units. Common Units will not accrue arrearages with respect to
     distributions for any quarter after the Subordination Period and
     Subordinated Units will not accrue any arrearages with respect to
     distributions for any quarter.

     The Subordination Period will generally extend to the first day of any
     quarter beginning after December 31, 2001 in respect of which (i)
     distributions of Available Cash from Operating Surplus (generally defined
     as $25,000 plus $22,420 cash on hand as of December 17, 1996 plus all
     operating cash receipts less operating cash expenditures, debt service
     payments, maintenance capital expenditures and cash reserves) on the Common
     Units and the Subordinated Units with respect to each of the three
     consecutive four-quarter periods immediately preceding such date equaled or
     exceeded the sum of the Minimum Quarterly Distribution on all of the
     outstanding Common Units and Subordinated Units during such periods, (ii)
     the Adjusted Operating Surplus (generally defined as Operating Surplus
     generated during such period (a) less (i) any net increase in working
     capital borrowings during such period and (ii) any net reduction in cash
     reserves for operating expenditures during such period not relating to an
     operating expenditure made during such period, and (b) plus (i) any net
     decrease in working capital borrowings during such period and (ii) any net
     increase in cash reserves for operating expenditures during such period
     required by any debt instrument for the repayment of principal, interest or
     premium. Adjusted Operating Surplus does not include that portion of
     Operating Surplus included in clause (a)(i) of the definition of Operating
     Surplus) generated during each of the three consecutive four-quarter
     periods immediately preceding such date equaled or exceeded the sum of the
     Minimum Quarterly Distribution on all of the outstanding Common Units and
     Subordinated Units and the related distribution on the general partner
     interests in the Partnership during such periods, and (iii) there are no
     outstanding Common Unit Arrearages.


 6.  Commitments and Contingencies

     The Partnership has succeeded to obligations of the self insurance
     programs maintained by Empire and Synergy for any incidents occurring prior
     to December 17, 1996. The companies' insurance programs provided coverage
     for comprehensive general liability and vehicle liability for catastrophic
     exposures as well as those risks required to be insured by law or contract.
     The companies retained a significant portion of certain expected losses
     related primarily to 



                                       13
<PAGE>   18
                       CORNERSTONE PROPANE PARTNERS, L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                    (Dollars in thousands, except Unit data)
                                   (unaudited)


     comprehensive general liability and vehicle liability. Provisions for
     self-insured losses were recorded based upon the companies' estimates of
     the aggregate self-insured liability for claims incurred, and totaled
     $3,018 on December 31, 1996.

     The Partnership leases certain property, plant and equipment for various
     periods under noncancelable leases, including an office space agreement
     with the previous owner of Empire for $175 each year over a period of ten
     years. The annual rental payments may increase to $250, depending on
     certain circumstances occurring after two years.

     A number of personal injury, property damage and products liability suits
     are pending or threatened against the Partnership. In general, these
     lawsuits have arisen in the ordinary course of the Partnership's business
     and involve claims for actual damages and in some cases, punitive damages,
     arising from the alleged negligence of the Partnership or as a result of
     product defects or similar matters. Of the pending or threatened matters, a
     number involve property damage, and several involve serious personal
     injuries and the claims made are for relatively large amounts. Although any
     litigation is inherently uncertain, based on past experience, the
     information currently available to it and the availability of insurance
     coverage, the Partnership does not believe that these pending or threatened
     litigation matters will have a material adverse effect on its results of
     operations or its financial condition.


 7.  Restricted Unit Plan

     The Partnership adopted the 1996 Restricted Unit Award Plan (the
     "Restricted Unit Plan") which authorizes the issuance of Common Units with
     an aggregate value of $12,500 (595,238 Common Units valued at the initial
     public offering price of $21.00 per Unit) to executives, managers and
     elected supervisors of the Partnership. Units issued under the Restricted
     Unit Plan are subject to a bifurcated vesting procedure such that (a) 25%
     of the issued Units will vest over time with one-third of such units
     vesting at the end of each of the third, fifth and seventh anniversaries of
     the issuance date, and (b) the remaining 75% of the Units will vest
     automatically upon, and in the same proportions as, the conversion of
     Subordinated Units to Common Units. Restricted Unit Plan participants are
     not eligible to receive quarterly distributions or vote their respective
     Units until vested. Restrictions generally limit the sale or transfer of
     the Units during the restricted periods. The value of the restricted Unit
     is established by the market price of the Common Unit at the date of grant.

     As of and for the fourteen-day period ended December 31, 1996, a total of
     376,190 restricted Common Units were awarded. For the fourteen-day period
     ended December 31, 1996, the Partnership recorded $20 of compensation
     expense.




                                       14
<PAGE>   19
                       CORNERSTONE PROPANE PARTNERS, L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                    (Dollars in thousands, except Unit data)
                                   (unaudited)


 8.  Partners' Capital

     A portion of the Subordinated Units will convert into Common Units on the
     first day after the record date established for the distribution in respect
     of any quarter ending on or after (a) December 31, 1999 (with respect to
     one-quarter of the Subordinated Units) and (b) December 31, 2000 (with
     respect to one-quarter of the Subordinated Units), in respect of which (i)
     distributions of Available Cash from Operating Surplus on the Common Units
     and the Subordinated Units with respect to each of the three consecutive
     four-quarter periods immediately preceding such date equaled or exceeded
     the sum of the Minimum Quarterly Distribution on all of the outstanding
     Common Units and Subordinated Units during such periods, (ii) the Adjusted
     Operating Surplus generated during each of the two consecutive four-quarter
     periods immediately preceding such date equaled or exceeded the sum of the
     Minimum Quarterly Distribution on all of the outstanding Common Units and
     Subordinated Units and the related distribution on the general partner
     interests in the Partnership during such periods, and (iii) there are no
     outstanding Common Unit Arrearages; provided, however that the early
     conversion of the second one-quarter of Subordinated Units may not occur
     until at least one year following the early conversion of the first
     one-quarter of Subordinated Units.

     Upon expiration of the Subordination Period, all remaining Subordinated
     Units will convert into Common Units on a one-for-one basis and will
     thereafter participate pro rata with the other Common Units in
     distributions of Available Cash.


 9.  Related Party Transactions

     The Managing General Partner and its affiliates performing services for the
     Partnership are entitled to reimbursement for all expenses incurred on
     behalf of the Partnership, including the cost of compensation properly
     allocable to the Partnership, and all other expenses necessary or
     appropriate to the conduct of the business of, and allocable to, the
     Partnership. These costs, which totaled $2,657 for the period December 17,
     1996 to December 31, 1996, include employee compensation and benefit
     expenses of employees of the Managing General Partner and its affiliates.




                                       15
<PAGE>   20
                       CORNERSTONE PROPANE PARTNERS, L.P.
                                    PRO FORMA
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Dollars in thousands, except per Unit data)
                                   (unaudited)


<TABLE>
<CAPTION>
                                       July 1, 1996     July 1, 1995    October 1, 1996  October 1, 1995
                                             to              to               to                to
                                        December 31,     December 31,     December 31,      December 31,
                                            1996            1995              1996             1995
                                       -------------    ------------    ---------------  ---------------
<S>                                       <C>              <C>              <C>              <C>     
REVENUE                                   $314,937         $253,787         $173,181         $137,470
COST OF SALES                              250,909          192,162          133,390           97,931
                                          --------         --------         --------         --------

GROSS PROFIT                                64,028           61,625           39,791           39,539
                                          --------         --------         --------         --------

EXPENSES
   Operating                                36,112           34,784           18,439           18,632
   General and administrative                6,507            6,268            3,322            3,357
   Depreciation and amortization             7,129            6,752            3,391            3,296
                                          --------         --------         --------         --------

OPERATING INCOME                            14,280           13,821           14,639           14,254
INTEREST EXPENSE, NET                       (9,049)          (8,909)          (4,582)          (4,487)
                                          --------         --------         --------         --------
INCOME BEFORE
   INCOME TAXES                              5,231            4,912           10,057            9,767
INCOME TAXES                                    50               50               25               25
                                          --------         --------         --------         --------
NET INCOME                                $  5,181         $  4,862         $ 10,032         $  9,742
                                          ========         ========         ========         ========

General partners' interest in net
  income                                  $    104         $     97         $    201         $    195
                                          --------         --------         --------         --------
Limited partner's interest in net
  income                                  $  5,077         $  4,765         $  9,831         $  9,547
                                          --------         --------         --------         --------
Net income per Unit                       $   0.31         $   0.29         $   0.60         $   0.58
                                          --------         --------         --------         --------
Weighted average number of
  Units outstanding                         16,513           16,513           16,513           16,513
                                          ========         ========         ========         ========
</TABLE>



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


                                       16
<PAGE>   21
                       CORNERSTONE PROPANE PARTNERS, L.P.

                         NOTES TO PRO FORMA CONSOLIDATED
                              FINANCIAL INFORMATION
                                DECEMBER 31, 1996
                             (Dollars in thousands)
                                   (unaudited)


 1.  Basis of Presentation

     The unaudited pro forma consolidated statements of operations for the three
     and six month periods ended December 31, 1996 and 1995 were derived from
     the historical statements of operations of Empire Energy Corporation for
     the periods October 1 through December 16, 1996, October 1 through December
     31, 1995, July 1 through December 16, 1996 and July 1 through December 31,
     1995, of SYN Inc. and Myers Propane Gas Company ("Myers") for the periods
     October 1, 1996 to December 16, 1996, October 1, 1995 to December 31, 1995,
     July 1, 1996 to December 16, 1996 and August 15, 1995 to December 31, 1995,
     of Synergy Group Incorporated for the period July 1, 1995 to August 14,
     1995, of CGI Holdings, Inc. for the periods November 1 through December 31,
     1995, November 1 through December 16, 1996, August 1 through December 31,
     1995 and August 1 through December 16, 1996, and the consolidated statement
     of operations of the Partnership from December 17, 1996 through December
     31, 1996. Historical financial statements of Myers have not been separately
     presented based on the Partnership's belief that the separate inclusion of
     Myers does not have a material effect on the pro forma consolidated
     financial statements of the Partnership. The pro forma consolidated
     statements of operations were prepared to reflect the effects of the IPO as
     if it had been completed in its entirety as of the beginning of the periods
     presented. However, these statements do not purport to present the results
     of operations of the Partnership had the IPO actually been completed as of
     the beginning of the periods presented. In addition, the pro forma
     consolidated statements of operations are not necessarily indicative of the
     results of future operations of the Partnership and should therefore be
     read in conjunction with the historical consolidated financial statements
     of the Predecessor Companies and the Partnership appearing elsewhere in
     this Quarterly Report on Form 10-Q.


 2.  Pro Forma Adjustments

     Significant pro forma adjustments reflected in the pro forma consolidated
     statements of operations include the following:

     Adjustments to reflect the full period effect of operating expense savings
     resulting from the consolidation of certain operations that occurred
     subsequent to July 1, 1995, as well as the elimination of certain operating
     and general administrative expenses associated with the operation of the
     Partnership. Operating expense adjustments for retail overlap
     consolidations were $360 and $185 for the six and three months ended
     December 31, 1995, respectively. General and administrative adjustments
     relating to corporate overhead consolidation, the elimination of bank and
     consulting fees and the estimated incremental general and 




                                       17
<PAGE>   22
                       CORNERSTONE PROPANE PARTNERS, L.P.

                         NOTES TO PRO FORMA CONSOLIDATED
                              FINANCIAL INFORMATION
                                DECEMBER 31, 1996
                             (Dollars in thousands)
                                   (unaudited)

     administrative cost associated with the Partnership were $838 for each of
     the six month periods ended December 31, 1996 and 1995, and $405 and $420
     for the three month periods ended December 31, 1996 and 1995, respectively.
     The pro forma adjustments do not include any amount for the incentive
     compensation that might be paid to key employees.

     Adjustments to reflect the additional depreciation and amortization expense
     due to the increase in property and intangibles that result from applying
     the purchase method of accounting to the Empire Energy and Coast
     acquisitions. Depreciation and amortization adjustments were $40 for each
     of the six month periods ended December 31, 1996 and 1995, and $20 for each
     of the three month periods ended December 31, 1996 and 1995.

     Adjustments to reflect interest expense applicable to the Partnership.
     Interest expense adjustments relating to expense for the $220,000 first
     mortgage notes at a rate of 7.53% per annum, expense attributable to the
     working capital facility based on an average outstanding principal balance
     of $2,000 at 6.5% per annum, expense attributable to debt assumed based on
     an average outstanding principal balance of $9,500 at 8.5% per annum and
     debt expense amortization based on $5,050 estimated debt issuance costs
     were $180 for each for the six month periods ended December 31, 1996 and
     1995 and $90 for each of the three month periods ended December 31, 1996
     and 1995.

     Adjustments to reflect the elimination of income tax related accounts
     because income taxes will not be borne by the Partnership, except for
     income taxes applicable to operations to be conducted by the Partnership's
     wholly owned corporate subsidiary.

     Net income per limited partner Unit is determined by dividing the net
     income that would be allocated to the Unitholders, which is 98% of net
     income, by the number of Units outstanding. The weighted average number of
     Units outstanding, 16,513 were assumed to have been outstanding the entire
     period.




                                       18
<PAGE>   23
                                    SYN Inc.
                           CONSOLIDATED BALANCE SHEET
                  (Dollars in thousands, except share amounts)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                    June 30, 1996
                                                                                    -------------
<S>                                                                                  <C>      
CURRENT ASSETS:
  Cash ........................................................................      $      14
  Trade receivables, less allowance for doubtful accounts of $1,505 ...........          9,195
  Inventories .................................................................          7,447
  Prepaid expenses and other ..................................................            678
  Deferred income tax benefit .................................................          3,727
  Due from Former Stockholders ................................................         37,966
                                                                                     ---------
    Total current assets ......................................................         59,027
                                                                                     ---------

PROPERTY AND EQUIPMENT:
  Land and buildings ..........................................................          6,420
  Storage and consumer service facilities .....................................         52,953
  Transportation, office and other equipment ..................................         11,910
  Less -- Accumulated depreciation ............................................         (2,592)
                                                                                     ---------
    Total property and equipment ..............................................         68,691
                                                                                     ---------

OTHER ASSETS:
  Investments and restricted cash deposits ....................................          3,025
  Deferred income tax benefit .................................................          4,849
  Intangible assets, primarily the excess of cost over fair value of net assets         30,943
    acquired, net of accumulated amortization .................................            227
                                                                                     ---------
  Other .......................................................................         39,044
                                                                                     ---------
    Total other assets ........................................................      $ 166,762
                                                                                     =========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current maturities of long-term debt ........................................      $   1,025
  Accounts payable ............................................................          1,604
  Accrued expenses ............................................................          2,915
  Acquisition related liabilities .............................................         29,306
                                                                                     ---------
    Total current liabilities .................................................         34,850
LONG-TERM DEBT ................................................................         25,687
NOTE PAYABLE -- RELATED PARTY .................................................         52,812
                                                                                     ---------
    Total liabilities .........................................................        113,349
                                                                                     ---------
</TABLE>



                                       19
<PAGE>   24


<TABLE>
<S>                                                                                  <C>      
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
  Cumulative preferred stock, $.01 par value; 70,500 shares authorized; 55,312
    shares, issued and outstanding, at stated value of $1,000 per share .......         55,312
  Common stock; $0.01 par value; 100,000 shares authorized, issued and
    outstanding ...............................................................              1
  Additional paid-in capital ..................................................             99
  Accumulated deficit .........................................................         (1,999)
                                                                                     ---------
    Total stockholders' equity ................................................         53,413
                                                                                     ---------
                                                                                     $ 166,762
                                                                                     =========
</TABLE>


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



                                       20
<PAGE>   25
                                    SYN Inc.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Dollars in thousands)
                                   (unaudited)

                                                                       
<TABLE>
<CAPTION>
                                                          For the       For the period          For the
                                          For the        period from      from July 1,        period from     For the period
                                        period from       August 15,     1995 to August        October 1,      from October
                                        July 1, 1996        1995 to         14, 1995            1996 to         1, 1995 to
                                             to          December 31,     (Predecessor        December 16,      December 31,
                                     December 16, 1996       1995             Basis)              1996              1995
                                     -----------------   ------------     ------------        ------------      ------------
<S>                                       <C>               <C>               <C>               <C>               <C>      
REVENUES                                    44,066            38,589             7,568            26,183            28,024

COST OF PRODUCT SOLD                        23,322            18,375             3,631            14,382            12,793
                                           -------           -------          --------          --------          --------
  Gross profit                              20,744            20,214             3,937            11,801            15,231

OPERATING EXPENSES:
  Salaries and commissions                   7,252             6,312               -               3,387             4,650
  General and administrative                 6,151             5,461             3,632             3,068             4,128
  Depreciation and amortization              1,904             1,728               472               904             1,217
  Related-party corporate
    administration and
    management fees                          1,668             1,406               -                 703               938
                                           -------           -------          --------          --------          --------
    Total operating expenses                16,975            14,907             4,104             8,062            10,933
                                           -------           -------          --------          --------          --------

    Operating income (loss)                  3,769             5,307              (167)            3,739             4,298

INTEREST EXPENSE, including
$2,214, $2,228, $0, $1,010, $1,639
to related party                             3,311             2,347               816             1,646             1,758
                                           -------           -------          --------          --------          --------

INCOME (LOSS) BEFORE
  INCOME TAXES                                 458             2,960              (983)            2,093             2,540

PROVISION (BENEFIT) FOR                        
  INCOME TAXES                                 298             1,350              (373)              842             1,262
                                           -------           -------          --------          --------          --------

    Net income (loss)                          160             1,610              (610)            1,245             1,278

DIVIDENDS ON
  CUMULATIVE
  PREFERRED STOCK                           (3,878)           (3,111)              -              (1,805)           (3,111)
                                           -------           -------          --------          --------          --------

  Net loss applicable to common
     stockholders                         $ (3,718)         $ (1,501)         $   (610)         $   (560)         $ (1,833)
                                          ========          ========          ========          ========          ========
</TABLE>


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



                                       21
<PAGE>   26
                                    SYN Inc.

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


<TABLE>
<CAPTION>
                                                                                                  For the period
                                                           For the period     For the period    from July 1, 1995
                                                          from July 1, 1996    from August 15,     to August 14,
                                                            to December 16,        1995 to       1995 (Predecessor
                                                                 1996         December 31, 1995        Basis)
                                                           ----------------   -----------------  ------------------
<S>                                                           <C>                <C>                     <C>  
OPERATING ACTIVITIES:
  Net income (loss)                                           $     160          $   1,610               (610)
  Items not requiring (providing) cash--
    Depreciation and amortization                                 1,904              1,728                472
    Gain on sale of assets                                          233                -                  -
    Deferred income taxes                                           298              3,734                -
  Changes in operating items--
    Trade receivables                                            (1,991)            (9,166)             4,897
    Inventories                                                  (1,873)              (226)             1,244
    Prepaid expenses and other                                     (569)              (863)               345
    Accounts payable                                              2,549             (1,655)            (1,864)
    Accrued expenses                                              3,602              3,121                -
                                                              ---------          ---------          ---------

      Net cash provided by (used in) operating
        activities                                                4,313             (1,717)             4,484
                                                              ---------          ---------          ---------

INVESTING ACTIVITIES:
  Acquisition of assets of Synergy Group
    Incorporated                                                    -             (150,922)               -
  Proceeds from the sale of certain Synergy
    Group Incorporated assets to Empire Energy                      -
    Corporation                                                     -               35,980
  Sale of assets                                                    129                -                1,880
  Disposals of Companies                                            829                -                  -
  Purchases of property and equipment                            (4,240)            (4,497)               -
  Acquisition of Companies                                         (469)               -                  -
  Change in investments and restricted cash
    deposits                                                        -                 (270)               -
                                                              ---------          ---------          ---------

      Net cash provided by (used in)
        investing activities                                     (3,751)          (119,709)             1,880
                                                              ---------          ---------          ---------

FINANCING ACTIVITIES:
  Increase in credit facility                                     3,835             21,342             (6,965)
</TABLE>




                                       22
<PAGE>   27

<TABLE>
<S>                                                           <C>                <C>                <C>      
  Proceeds from issuance of common stock                            -                  100                -
  Proceeds from issuance of preferred stock                         -               52,812                -
  Proceeds from issuance of note payable --
    related party                                                   -               52,812                -
  Borrowings from related party                                     -               36,458                -
  Repayments to related party                                       -              (36,458)               -
  Payment on long-term debt                                        (242)            (1,771)               -
  Preferred stock dividends paid                                 (3,878)            (3,111)               -
                                                              ---------          ---------          ---------
      Net cash provided by (used in)
        financing activities                                       (285)           122,184             (6,965)
                                                              ---------          ---------          ---------

      Increase (decrease) in cash                                   277                758               (601)

CASH:
  Beginning of period                                                14                -                5,323
                                                              ---------          ---------          ---------
  End of period                                               $     291          $     758          $   4,722
                                                              =========          =========          =========
</TABLE>


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



                                       23
<PAGE>   28
                            SYN INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                FIVE AND ONE-HALF MONTHS ENDED DECEMBER 16, 1996,
                FOUR AND ONE-HALF MONTHS ENDED DECEMBER 31, 1995,
          ONE AND ONE-HALF MONTHS ENDED AUGUST 14, 1995 (PREDECESSOR),
               TWO AND ONE-HALF MONTHS ENDED DECEMBER 16, 1996 AND
                    AND THREE MONTHS ENDED DECEMBER 31, 1995,
                             (Dollars in thousands)
                                   (unaudited)

 1.   Basis of Presentation

     In the opinion of Management, the accompanying unaudited consolidated
     financial statements contain all adjustments necessary to present fairly
     SYN Inc. and its subsidiaries ("Synergy") consolidated results of
     operations and cash flows for the periods ended December 16, 1996, and
     December 31, 1995. All such adjustments are of a normal recurring nature.

     Synergy completed its acquisition of Synergy Group Incorporated ("SGI") on
     August 14, 1995. The unaudited consolidated statement of operations and of
     cash flows for the period ended August 14, 1995 are presented as a
     predecessor entity of Synergy and contain all adjustments necessary to
     present fairly SGI consolidated results of operations and cash flows for
     the period then ended.

     The accounting policies followed by Synergy are set forth in Note 1 to
     Synergy's audited consolidated financial statements as of June 30, 1996,
     which were included in the Form S-1 of Cornerstone Propane Partners, L.P
     (Registration No. 333-13879). Other disclosures required by generally
     accepted accounting principles are not included herein but are included in
     the notes to the June 30, 1996, audited statements previously mentioned.

     The results of operations for the two and one-half month and five and
     one-half month periods ended December 16, 1996, are not necessarily
     indicative of the results to be expected for the full year due to the
     seasonal nature of Synergy's business.


 2.  Commitments and Contingencies

     Synergy obtains insurance coverage for catastrophic exposures related to
     comprehensive general liability, vehicle liability and workers'
     compensation, as well as those risks required to be insured by law or
     contract. Synergy self-insures the first $250 of coverage per incident and
     obtains excess coverage from carriers for these programs.

     Provisions for self-insured losses are recorded based upon Synergy's
     estimates of the aggregate self-insured liability for claims incurred.



                                       24
<PAGE>   29
                            SYN INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                FIVE AND ONE-HALF MONTHS ENDED DECEMBER 16, 1996,
                FOUR AND ONE-HALF MONTHS ENDED DECEMBER 31, 1995,
          ONE AND ONE-HALF MONTHS ENDED AUGUST 14, 1995 (PREDECESSOR),
               TWO AND ONE-HALF MONTHS ENDED DECEMBER 16, 1996 AND
                    AND THREE MONTHS ENDED DECEMBER 31, 1995,
                             (Dollars in thousands)
                                   (unaudited)

     Synergy self-insures for health benefits provided to its employees.
     Provisions for losses expected under this program are recorded based upon
     Synergy's estimate of the aggregate liability for claims incurred.

     Synergy and the acquired operations of SGI are presently involved in
     various federal and state tax audits and are also defendants in other
     business-related lawsuits which are not expected to have a material adverse
     effect on Synergy's financial position or results of operations.

     In conjunction with the acquisition of SGI, the former stockholders of SGI
     are contractually liable for all insurance claims and tax liabilities that
     relate to periods prior to the acquisition date. Funds have been placed in
     escrow accounts to provide for payment of these liabilities. In the event
     that the escrow amount is insufficient to settle these liabilities, Synergy
     could be obligated to fund any additional amounts due and would have to
     seek reimbursement form the former stockholders for such amounts. Synergy
     has recorded its best estimates of the ultimate liabilities expected to
     arise from these matters and has made claims against the former
     stockholders for reimbursement.


 3.   Subsequent Events

     On December 17, 1996, substantially all of the assets and liabilities of
     Synergy were contributed to Cornerstone Propane, L.P., a Delaware limited
     partnership, a subsidiary of Cornerstone Propane Partners, L.P. Following
     this transaction, on December 17, 1996, Cornerstone Propane Partners L.P.
     completed its initial public offering (see Note 1 to the consolidated
     financial statements of Cornerstone Propane Partners, L.P., included
     herein).


                                       25
<PAGE>   30
                            EMPIRE ENERGY CORPORATION
                           CONSOLIDATED BALANCE SHEET
                             (Dollars in thousands)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                             June 30, 1996
                                                                             -------------
<S>                                                                            <C>      
CURRENT ASSETS:
  Cash ...................................................................     $   2,064
  Trade receivables, less allowance for doubtful accounts of $1,262 ......         5,724
  Inventories ............................................................         6,702
  Prepaid expenses .......................................................           103
  Refundable income taxes ................................................           457
  Deferred income taxes ..................................................           996
                                                                               ---------
   Current Assets ........................................................        16,046
                                                                               ---------
DUE FROM SYN INC .........................................................         7,978
                                                                               ---------

PROPERTY AND EQUIPMENT, at cost:
  Land and buildings .....................................................         8,903
  Storage and consumer service facilities ................................        80,615
  Transportation, office and other equipment .............................        18,702
                                                                               ---------
                                                                                 108,220
  Less -- Accumulated depreciation .......................................       (28,686)
                                                                               ---------
                                                                                  79,534
                                                                               ---------
OTHER ASSETS:
  Excess of cost over fair value of net assets acquired, at amortized cost         3,033
  Other ..................................................................           511
                                                                               ---------
                                                                                   3,544

                                                                               $ 107,102
                                                                               =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current maturities of long-term debt ...................................     $   6,019
  Accounts payable .......................................................         3,368
  Accrued salaries .......................................................         1,063
  Accrued expenses .......................................................         1,676
                                                                               ---------
      Total current liabilities ..........................................        12,126
                                                                               ---------
LONG-TERM DEBT ...........................................................        25,442
                                                                               ---------
DEFERRED INCOME TAXES ....................................................        16,877
                                                                               ---------
ACCRUED SELF-INSURANCE LIABILITY .........................................         2,424
                                                                               ---------
</TABLE>

                                       26
<PAGE>   31


<TABLE>
<S>                                                                            <C>      
STOCKHOLDERS' EQUITY:
  Common stock; $0.001 par value; authorized 17,500,000 shares, issued,
    12,004,430 shares ....................................................            12
  Additional paid-in capital .............................................        46,099
  Retained earnings ......................................................         4,143
                                                                               ---------
                                                                                  50,254
                                                                               ---------

  Treasury stock, at cost - 3,000 shares .................................           (21)
                                                                               ---------

                                                                                  50,233
                                                                               ---------

                                                                               $ 107,102
                                                                               =========
</TABLE>


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




                                       27
<PAGE>   32
                            EMPIRE ENERGY CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Dollars in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                       For the period    For the period  For the period   For the period
                                        from July 1,       from July 1,   from October 1,  from October 1,
                                           1996 to           1995 to         1996 to          1995 to
                                        December 16,      December 31,    December 16,     December 31,
                                           1996               1995            1996             1995
                                          --------          --------         --------         --------
<S>                                       <C>               <C>              <C>              <C>     
OPERATING REVENUE                         $ 43,201          $ 44,035         $ 28,166         $ 31,812
COST OF PRODUCT SOLD                        23,310            21,207           15,400           15,079
                                          --------          --------         --------         --------

GROSS PROFIT                                19,891            22,828           12,766           16,733

OPERATING COSTS AND
  EXPENSES:
  Provision for doubtful accounts              710               775              436              553
  General and administrative                12,685            13,769            5,950            7,920
  Depreciation and amortization              2,929             2,726            1,344            1,438
                                          --------          --------         --------         --------

OPERATING INCOME                             3,567             5,558            5,036            6,822

INTEREST EXPENSE (NET)                       3,621             1,112            1,917              736
                                          --------          --------         --------         --------

INCOME (LOSS) BEFORE INCOME
  TAXES                                        (54)            4,446            3,119            6,086

PROVISION FOR INCOME TAXES                      32             1,900            1,197            2,450
                                          --------          --------         --------         --------

NET INCOME (LOSS)                         $    (86)         $  2,546         $  1,922         $  3,636
                                          ========          ========         ========         ========
</TABLE>




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




                                       28
<PAGE>   33
                            EMPIRE ENERGY CORPORATION

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

<TABLE>
<CAPTION>
                                                   For the period from       For the period from
                                                     July 1, 1996 to           July 1, 1995 to
                                                    December 16, 1996         December 31, 1995
                                                   -------------------       -------------------
<S>                                                     <C>                     <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                     $    (86)               $  2,546
  Items not requiring (providing) cash--                                 
    Depreciation                                           2,671                   2,590
    Amortization                                             258                     136
    Gain on sale of assets                                     4                       7
    Deferred income taxes                                   (126)                   (218)
  Changes in --                                                          
    Trade receivables                                     (8,352)                 (9,243)
    Inventories                                           (4,383)                 (7,032)
    Accounts payable                                       1,616                   3,009
    Accrued expenses and self insurance                    3,273                   4,846
    Prepaid expenses and other                            (2,313)                   (941)
    Due from SYN Inc.                                     (1,863)                    -
    Income taxes payable (refundable)                        457                     619
                                                        --------                --------
                                                                         
      Net cash used in operating activities               (8,844)                 (3,681)
                                                        --------                --------
                                                                         
CASH FLOWS FROM INVESTING ACTIVITIES:                                    
  Proceeds from the sale of assets                            57                      27
  Purchases of property and equipment                     (2,823)                 (2,963)
  Purchase of assets from SYN Inc.                           -                   (35,980)
  Capitalized costs                                         (242)                    -
                                                        --------                --------
                                                                         
      Net cash used in investing activities               (3,008)                (38,916)
                                                        --------                --------
                                                                         
CASH FLOWS FROM FINANCING ACTIVITIES:                                    
  Increase in credit facilities                            9,606                   7,800
  Principal payments on purchase obligations                (114)                    (98)
  Proceeds from management buyout loan                    94,000                     -
  Purchase of company stock in                                           
    management buyout                                    (59,000)                    -
  Payment of debt acquisition costs                       (3,100)                    -
  Proceeds from (repayments of) acquisition                              
    credit facility                                      (31,100)                 35,000
                                                        --------                --------
                                                                         
      Net cash provided by financing activities           10,292                  42,702
                                                        --------                --------
</TABLE>



                                       29
<PAGE>   34

                                                                         
<TABLE>
<S>                                                       <C>                   <C>
      Increase (decrease) in cash                         (1,560)                    105
                                                                         
CASH:                                                                    
  Beginning of period                                      2,064                     -
                                                        --------                --------
  End of period                                         $    504                $    105
                                                        ========                ========
</TABLE>
                                                                   

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




                                       30
<PAGE>   35
                            EMPIRE ENERGY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                FIVE AND ONE-HALF MONTHS ENDED DECEMBER 16, 1996,
                       SIX MONTHS ENDED DECEMBER 31, 1995,
               TWO AND ONE-HALF MONTHS ENDED DECEMBER 16, 1996 AND
                     THREE MONTHS ENDED DECEMBER 31, 1995,
                             (Dollars in thousands)
                                   (unaudited)

 1.   Basis of Presentation

     In the opinion of Management, the accompanying unaudited consolidated
     financial statements contain all adjustments necessary to present fairly
     Empire Energy Corporation's ("Empire Energy") consolidated results of
     operations and cash flows for the periods ended December 16, 1996, and
     December 31, 1995. All such adjustments are of a normal recurring nature.

     The accounting policies followed by Empire Energy are set forth in Note 1
     to Empire Energy's audited consolidated financial statements as of June 30,
     1996, which were included in the Form S-1 of Cornerstone Propane Partners,
     L.P. (Registration No. 333-13879) Other disclosures required by generally
     accepted accounting principles are not included herein but are included in
     the notes to the June 30, 1996, audited statements previously mentioned.

     The results of operations for the two and one-half month and five and
     one-half month periods ended December 16, 1996, are not necessarily
     indicative of the results to be expected for the full year due to the
     seasonal nature of Empire Energy's business.


 2.  Company Formation

     On August 1, 1996, members of management of Empire Energy purchased the
     ownership (92.7% of the common stock) of Empire Energy from the principal
     shareholder and certain other shareholders. Because of the change in
     control of Empire Energy, the balance sheet accounts were adjusted at the
     acquisition date to reflect new bases using the principles of purchase
     accounting.

     In connection with this transaction, the principal shareholder of Empire
     Energy terminated employment as well as certain lease and use agreements.
     The new entity was principally owned (71.3% of the common stock) by the son
     of the former principal shareholder.

     On October 7, 1996, Northwestern Growth Corporation purchased 100% of the
     Empire Energy common stock. See Note 2 to Pro Forma Consolidated Financial
     Information for Cornerstone Propane Partners, L.P. included herein. This
     purchase also resulted in a change of control and purchase accounting
     adjustments were reflected in the balance sheet as of the acquisition date.




                                       31
<PAGE>   36
                            EMPIRE ENERGY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                FIVE AND ONE-HALF MONTHS ENDED DECEMBER 16, 1996,
                       SIX MONTHS ENDED DECEMBER 31, 1995,
               TWO AND ONE-HALF MONTHS ENDED DECEMBER 16, 1996 AND
                     THREE MONTHS ENDED DECEMBER 31, 1995,
                             (Dollars in thousands)
                                   (unaudited)


 3.  Commitments and Contingencies

     Empire Energy reports the following contingencies. Except as noted, there
     have been no significant changes in these items since reported in Empire
     Energy's audited consolidated balance sheet as of June 30, 1996.

     Under Empire Energy's current insurance program, coverage for comprehensive
     general liability and vehicle liability is obtained for catastrophic
     exposures as well as those risks required to be insured by law or contract.
     Empire Energy retains a significant portion of certain expected losses
     related primarily to comprehensive general liability and vehicle liability.
     Under these current insurance programs, Empire Energy self insures the
     first $1 million of coverage (per incident) on general liability and on
     vehicle liability. In addition, Empire Energy has a $100 deductible for
     each and every liability claim. Empire Energy obtains excess coverage from
     carriers for these programs on claims-made basis policies. The excess
     coverage for comprehensive general liability provides a loss limitation
     that limits Empire Energy's aggregate of self-insured losses to $1.5
     million per policy period. Provisions for self-insured losses are recorded
     based upon Empire Energy's estimates of the aggregate self-insured
     liability for claims incurred.

     Empire Energy self insures the first $250 of workers' compensation coverage
     (per incident). Empire Energy purchased excess coverage from carriers for
     workers' compensation claims in excess of the self-insured coverage.
     Provisions for losses expected under this program are recorded based upon
     Empire Energy's estimates of the aggregate liability for claims incurred.

     Empire Energy currently self insures health benefits provided to the
     employees of Empire Energy and its subsidiaries. Provisions for losses
     expected under this program are recorded based upon Empire Energy's
     estimate of the aggregate liability for claims incurred.

     In conjunction with the restructuring that occurred in June 1994 (the
     "Split Off Transaction") Empire Energy agreed to indemnify Empire Gas for
     47.7% of the self-insured liabilities of Empire Gas incurred prior to June
     30, 1994. Empire Energy has included in its self-insurance liability its
     best estimate of the amount it will owe Empire Gas under this
     indemnification agreement.




                                       32
<PAGE>   37
                            EMPIRE ENERGY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                FIVE AND ONE-HALF MONTHS ENDED DECEMBER 16, 1996,
                       SIX MONTHS ENDED DECEMBER 31, 1995,
               TWO AND ONE-HALF MONTHS ENDED DECEMBER 16, 1996 AND
                     THREE MONTHS ENDED DECEMBER 31, 1995,
                             (Dollars in thousands)
                                   (unaudited)


     Empire Energy are presently defendants in various lawsuits related to the
     self-insurance program and other business-related lawsuits which are not
     expected to have a material, adverse effect on Empire Energy's financial
     position or results of operations.

     The state of Missouri has assessed Empire Gas approximately $1,400 for
     additional state income tax for the years ended June 30, 1992 and 1993. An
     amount approximating one-half of the above assessment could be at issue for
     the year ended June 30, 1994. Empire Gas and Empire Energy have protested
     these assessments and are currently waiting for a response from the
     Missouri Department of Revenue. It is likely that this matter will have to
     be settled in litigation. Empire Gas and Empire Energy believe that they
     have a strong position on this matter and intend to vigorously contest the
     assessment. It is not possible at this time to conclude on the outcome of
     this matter.

     The Internal Revenue Service has begun a federal income tax audit of Empire
     Gas for the year ended June 30, 1994. While the audit is still in process,
     the audit has principally focused on the deductibility of certain
     professional fees and travel and entertainment expenses as well as on the
     tax-free treatment of the Split-Off Transaction.

     As a former member of the Empire Gas controlled group and in connection
     with a tax indemnity agreement with Empire Gas, Empire Energy agreed to
     indemnify 47.7% of the total liabilities related to these tax audits of the
     years ended June 30, 1994, and prior thereto.

     The Split-Off Transaction was structured with the intent of qualifying for
     tax-free treatment under Section 355 of the Internal Revenue Code and
     Empire Energy, and Empire Gas, obtained a private letter ruling (the
     "Letter Ruling") from the Internal Revenue Service confirming such
     treatment, subject to certain representations and conditions specified in
     the Letter Ruling. The Internal Revenue Service is currently conducting an
     audit of empire Gas for the year in which the Split-Off Transaction
     occurred. If the Internal Revenue Service were to reverse the position it
     took in the Letter Ruling and prevail on a challenge to the tax-free
     treatment of the Split-Off Transaction, Empire Energy would be liable for a
     portion of any taxes, interest and penalties due, both as a former member
     of the Empire Gas controlled group and under a tax indemnity agreement with
     Empire Gas that was executed in connection with the Split-Off Transaction.
     Empire Energy's liability in such circumstances could exceed the percentage
     under the tax indemnity agreement if Empire Gas were unable to fund its
     percentage share under that agreement. If Empire Energy were held liable
     for any taxes, interest or penalties in connection with the above Split-Off
     Transaction, the amount of this 




                                       33
<PAGE>   38
                            EMPIRE ENERGY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                FIVE AND ONE-HALF MONTHS ENDED DECEMBER 16, 1996,
                       SIX MONTHS ENDED DECEMBER 31, 1995,
               TWO AND ONE-HALF MONTHS ENDED DECEMBER 16, 1996 AND
                     THREE MONTHS ENDED DECEMBER 31, 1995,
                             (Dollars in thousands)
                                   (unaudited)

     liability could be substantial and could adversely affect Empire Energy's
     financial position and results of operations.

     Empire Energy are presently included in various state tax audits which are
     not expected to have a material, adverse effect on Empire Energy's
     financial position or results of operations.


 4.  Subsequent Events

     On December 17, 1996, substantially all of the assets and liabilities of
     Empire Energy were contributed to Cornerstone Propane, L.P., a Delaware
     limited partnership, a subsidiary of Cornerstone Propane Partners, L.P.
     Following this transaction, on December 17, 1996, Cornerstone Propane
     Partners, L.P. completed its initial public offering (see Note 1 to the
     consolidated financial statements of Cornerstone Propane Partners, L.P.,
     included herein).




                                       34
<PAGE>   39
                               CGI HOLDINGS, INC.

                           CONSOLIDATED BALANCE SHEET
                             (Dollars in thousands)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                               July 31, 1996
                                                                               -------------
<S>                                                                              <C>      
CURRENT ASSETS:
  Cash and cash equivalents ..................................................   $   1,519
  Accounts and notes receivable ..............................................      23,664
  Inventories ................................................................       7,316
  Prepaid expenses and deposits ..............................................       1,996
  Deferred income tax benefit ................................................         802
                                                                                 ---------
    Total current assets .....................................................      35,297
                                                                                 ---------

  Property and equipment, at cost less accumulated depreciation ..............      51,495
  Cost in excess of net assets acquired, net of amortization .................      11,844
  Notes receivable ...........................................................       1,357
  Deferred charges and other assets ..........................................       6,186
                                                                                 ---------
                                                                                 $ 106,179
                                                                                 =========


                 LIABILITIES, MANDATORILY REDEEMABLE SECURITIES
                            AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable ...........................................................      30,824
  Accrued liabilities ........................................................       3,101
  Current maturities of long-term debt and capital lease obligations .........       3,924
                                                                                 ---------
    Total current liabilities ................................................      37,849
                                                                                 ---------
Long-term debt and capital lease obligations .................................      41,801
Deferred income taxes ........................................................      10,777
Other liabilities ............................................................       1,095

Commitments and contingencies (Note 2)

MANDATORILY REDEEMABLE SECURITIES:
  Redeemable exchangeable preferred stock:
    10% cumulative, $0.01 par value, 62,500 shares authorized, issued
      and outstanding; at redemption value ...................................       8,559
</TABLE>




                                       35
<PAGE>   40

<TABLE>
<S>                                                                              <C>      
STOCKHOLDERS' EQUITY:
  Common stock, $0.01 par value, 6,515,000 shares authorized; 4,312,247 issued
    and outstanding: 
    Class A voting common stock, $0.01 par value, 3,000,000
    shares authorized; 2,789,784 issued and outstanding ......................          28
    Class B voting common stock, $0.01 par value, 200,000 shares
      authorized; 149,485 issued and outstanding .............................           1
    Class C voting common stock, $0.01 par value, 3,000,000 shares
      authorized; 1,343,831 issued and outstanding ...........................          13
    Class D non-voting common stock, $0.01 par value, 250,000
      shares authorized; 29,147 issued and outstanding .......................         -
    Warrants outstanding .....................................................       2,134
  Additional paid-in capital .................................................       8,945
  Accumulated deficit ........................................................      (5,023)
                                                                                 ---------
    Total stockholders' equity ...............................................       6,098
                                                                                 ---------
                                                                                 $ 106,179
                                                                                 =========
</TABLE>

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




                                       36
<PAGE>   41
                               CGI HOLDINGS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Dollars in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                          August 1,        August 1,       November 1,         November 1,
                                           1996 to           1995 to         1996 to             1995 to
                                      December 16, 1996   December 31,     December 16,       December 31,
                                                              1995             1996               1995
                                      -----------------   -----------      -----------        -----------
<S>                                      <C>               <C>               <C>               <C>      
Sales and other revenue                  $ 182,029         $ 159,104         $  73,854         $  75,034
Costs and expenses:
  Cost of sales, except for
    depreciation and amortization          168,105           146,480            67,839            68,643
  Operating expenses                         8,181             8,257             2,980             3,284
  Sale of partnership interest                 660               -                 -                 -
  General and administrative
    expenses                                 1,738             1,354               647               428
  Depreciation and amortization              1,604             1,672               537               689
  Interest expense                           2,002             2,364               708               979
                                         ---------         ---------         ---------         ---------

Income (loss) before income taxes             (261)           (1,023)            1,143             1,011
Income tax (provision) benefit                  25               529              (466)             (142)
                                         ---------         ---------         ---------         ---------

Net income (loss)                        $    (236)        $    (494)        $     677         $     869
                                         =========         =========         =========         =========
</TABLE>


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




                                       37
<PAGE>   42
                               CGI HOLDINGS, INC.

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


<TABLE>
<CAPTION>
                                                              August 1, 1996     August 1, 1995
                                                                   to                 to
                                                             December 16, 1996  December 31, 1995
                                                             -----------------  -----------------
<S>                                                               <C>              <C>      
CASH FLOWS FROM (USED FOR)
 OPERATING ACTIVITIES:
  Net loss                                                        $   (236)        $   (494)
  Adjustments to reconcile net loss to net cash used
     for operating activities
    Depreciation and amortization                                    1,604            1,672
    Deferred income taxes                                             (476)            (529)
    Sale of partnership interest                                       202              -
  Changes in assets and liabilities, net of acquisitions:
    Accounts and notes receivable                                   (6,922)         (17,167)
    Inventories                                                        449           (1,727)
    Prepaid expenses and deposits                                     (628)            (304)
    Other assets                                                      (663)              45
    Accounts payable                                                (2,265)          20,762
    Accrued liabilities                                              6,332             (477)
                                                                  --------         --------
                                                                    (2,603)           1,781
                                                                  --------         --------

CASH FLOWS FROM (USED FOR) INVESTING
  ACTIVITIES
  Payments for acquisitions of retail outlets                          -             (3,000)
  Proceeds from sale of property and equipment                          57              140
  Purchases of and investments in property and
    equipment                                                       (1,083)          (1,556)
                                                                  --------         --------
                                                                    (1,026)          (4,416)
                                                                  --------         --------

CASH FLOWS FROM (USED FOR) FINANCING
  ACTIVITIES:
  Repayments of long-term debt                                        (562)            (625)
  Borrowings on capital leases and other term loans                    -                997
  Repayment of other notes payable                                    (252)            (497)
  Principal payments under capital lease obligations                  (506)            (548)
  Borrowings (repayments) under acquisition line                     5,998            2,806
                                                                  --------         --------
                                                                     4,678            2,133
                                                                  --------         --------

</TABLE>



                                       38
<PAGE>   43

<TABLE>
<S>                                                               <C>              <C>     
  Net (decrease) increase in cash                                    1,049             (502)
  Cash and cash equivalents, beginning of period                     1,519            4,423
                                                                  --------         --------
  Cash and cash equivalents, end of period                        $  2,568         $  3,921
                                                                  ========         ========
</TABLE>



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



                                       39
<PAGE>   44
                               CGI HOLDINGS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of presentation

     The consolidated financial statements include the accounts of CGI Holdings,
     Inc. (the "Company") and its wholly-owned subsidiary, Coast Gas, Inc., and
     its wholly-owned subsidiary Coast Energy Group, Inc. ("CEG"). In 1989, the
     Company formed CEG, headquartered in Houston, Texas, to conduct its
     wholesale procurement and distribution operations. All significant
     intercompany transactions have been eliminated in consolidation.

     The accompanying consolidated financial statements are unaudited, except
     for the consolidated balance sheet at July 31, 1996, and have been prepared
     in accordance with the rules and regulations of the Securities and Exchange
     Commission. They include all adjustments which the Company considers
     necessary for a fair statement of the results for the interim periods
     presented.

     Such adjustments consisted only of normal recurring items unless otherwise
     disclosed. Certain notes and other information have been condensed or
     omitted from the interim financial statements presented in this Quarterly
     Report on Form 10-Q. These financial statements should be read in
     conjunction with the Company's financial statements contained in the
     Partnership's Form S-1 Registration Statement (Registration No. 333-13879).
     Due to the seasonal nature of the Company's propane business, the results
     of operations for interim periods are not necessarily indicative of the
     results to be expected for a full year.


 2.  COMMITMENTS AND CONTINGENCIES

     The Company has contracts with various suppliers to purchase a portion of
     its supply needs of LPG for future deliveries with terms ranging from one
     to twelve months. The contracted quantities are not significant with
     respect to the Company's anticipated total sales requirements and will
     generally be acquired at prevailing market prices at the time of shipment.
     Outstanding letters of credit issued in conjunction with product supply
     contracts are a normal business requirement. There were no outstanding
     letters of credit issued on behalf of the Company as of July 31, 1996 and
     December 16, 1996 other than the $11.3 million and $13.0 million,
     respectively, drawn against its credit guidance line.

     The Company is engaged in certain legal actions related to the normal
     conduct of business. In the opinion of management, any possible liability
     arising from such actions will be adequately covered by insurance or will
     not have a material adverse effect on the Company's financial position or
     results of operations.




                                       40
<PAGE>   45
                               CGI HOLDINGS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


 3.  BUSINESS ACQUISITIONS

     During the quarter ended October 31, 1995, Coast Gas, Inc. acquired one
     retail outlet in a transaction accounted for using the purchase method of
     accounting. The cost of the acquired company totaled $4.0 million,
     including $1.0 million of seller notes and other liabilities and $3.0
     million from the increase in the Company's Working Capital/Acquisition bank
     line. Goodwill resulting from the acquisition totaled $2.8 million.


 4.  SALE OF PARTNERSHIP INTEREST

     Effective October 1, 1996, the Company terminated its participation and
     interest in Coast Energy Investments, Inc., a limited partnership in which
     Coast Energy Group, Inc. was a 50% limited partner. The original
     partnership agreement provided for a minimum investment term through
     December 1997. The termination resulted in the sale of the Company's
     partnership interest to its 50% partner and an employee of the partnership.
     The Company recorded a net loss on the disposition of the partnership
     interest of $660,000. This amount consisted of a $202,000 loss on the
     partnership investment and $458,000 of termination costs consisting of
     salary, consulting, non-compete agreements and other related expenses.


 5.  SUBSEQUENT EVENTS

     On December 17, 1996, substantially all of the assets and liabilities of
     the Company were contributed to Cornerstone Propane, L.P., a Delaware
     limited partnership, a subsidiary of Cornerstone Propane Partners, L.P.
     Following this transaction, on December 17, 1996, Cornerstone Propane
     Partners, L.P. completed its initial public offering (see Note 1 to the
     consolidated financial statements of Cornerstone Propane Partners, L.P.,
     included herein).




                                       41
<PAGE>   46

                       CORNERSTONE PROPANE PARTNERS, L.P.

Item 2.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                            December 17, 1996
                                                           to December 31, 1996
                                                           --------------------
<S>                                                              <C>    
Statement of Operations Data:
  Revenues                                                       $40,370
  Gross profit (a)                                                 9,029
  Depreciation and amortization                                      575
  Operating income                                                 4,076
  Interest expense                                                   778
  Provision for income taxes                                           5
  Net income                                                       3,293

Operating Data:
  EBITDA (b)                                                      $4,651
  Capital expenditures (c)                                           504
  Retail propane gallons sold                                     15,417
</TABLE>

----------

(a)  Gross profit is computed by reducing total revenues by the direct cost of
     the products sold.

(b)  EBITDA is defined as operating income plus depreciation and amortization.
     EBITDA 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), but provides
     additional information for evaluating the Partnership's ability to make the
     Minimum Quarterly Distribution.

(c)  Capital expenditures fall generally into three categories: (i) growth
     capital expenditures, which include expenditures for the purchase of new
     propane tanks and other equipment to facilitate expansion of the retail
     customer base, (ii) maintenance capital expenditures, which includes
     expenditures for repair and replacement of property, plant and equipment,
     and (iii) acquisition capital expenditures.



                                       42
<PAGE>   47



                                    SYN Inc.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                      July 1, 1995
                                      to August 14,    August 15,                    October 1,      October 1,
                                           1995         1995 to      July 1, 1996      1995 to        1996 to
                                      (Predecessor    December 31,  to December 16,  December 31,   December 16,
                                         Basis)           1995           1996           1995            1996
                                      ------------    -----------    ------------   -----------     -----------
<S>                                    <C>             <C>              <C>            <C>            <C>    
Statement of Operations Data:
  Revenues                             $ 7,568         $38,589          $44,066        $28,024        $26,183
  Gross profit (a)                       3,937          20,214           20,744         15,231         11,801
  Depreciation and amortization            472           1,728            1,904          1,217            904
  Operating income (loss)                 (167)          5,307            3,769          4,298          3,739
  Interest expense                         816           2,347            3,311          1,758          1,646
  Provision for income taxes              (373)          1,350              298          1,262            848
  Net income (loss)                       (610)          1,610              160          1,278          1,245

Operating Data:
  EBITDA (b)                           $   305         $ 7,035          $ 5,673        $ 5,515        $ 4,643
  Capital expenditures (c)                 -             4,497            4,709            695          3,138
  Retail propane gallons sold            6,952          35,443           39,468         25,738         23,040
</TABLE>

----------

(a)  Gross profit is computed by reducing total revenues by the direct cost of
     the products sold.

(b)  EBITDA is defined as operating income plus depreciation and amortization.
     EBITDA 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), but provides
     additional information for evaluating the Partnership's ability to make the
     Minimum Quarterly Distribution.

(c)  Capital expenditures fall generally into three categories: (i) growth
     capital expenditures, which include expenditures for the purchase of new
     propane tanks and other equipment to facilitate expansion of the retail
     customer base, (ii) maintenance capital expenditures, which includes
     expenditures for repair and replacement of property, plant and equipment,
     and (iii) acquisition capital expenditures.



                                       43
<PAGE>   48
                                  EMPIRE ENERGY

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                        October 1,    
                                    July 1, 1995 to  July 1, 1996        1995 to       October 1, 1996 
                                     December 31,   to December 16,    December 31,   to December 16,  
                                         1995            1996              1995              1996      
                                    ---------------  ------------      -----------    ----------------
<S>                                    <C>             <C>              <C>             <C>     
Statement of Operations Data:
  Revenues                             $ 44,035        $ 43,201         $ 31,812        $ 28,166
  Gross profit (a)                       22,828          19,891           16,733          12,766
  Depreciation and amortization           2,726           2,929            1,438           1,344
  Operating income                        5,558           3,567            6,822           5,036
  Interest expense                        1,112           3,621              736           1,917
  Provision for income taxes              1,900              32            2,450           1,197
  Net income (loss)                       2,546             (86)           3,636           1,922

Operating Data:
  EBITDA (b)                           $  8,284        $  6,496         $  8,260        $  6,380
  Capital expenditures (c)             $  3,110        $  2,823         $  2,705        $  1,475
  Retail propane gallons sold            49,249          40,847           34,640          24,700
</TABLE>

----------

(a)  Gross profit is computed by reducing total revenues by the direct cost of
     the products sold.

(b)  EBITDA is defined as operating income plus depreciation and amortization.
     EBITDA 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), but provides
     additional information for evaluating the Partnership's ability to make the
     Minimum Quarterly Distribution.

(c)  Capital expenditures fall generally into three categories: (i) growth
     capital expenditures, which include expenditures for the purchase of new
     propane tanks and other equipment to facilitate expansion of the retail
     customer base, (ii) maintenance capital expenditures, which includes
     expenditures for repair and replacement of property, plant and equipment,
     and (iii) acquisition capital expenditures.



                                       44
<PAGE>   49
                               CGI HOLDINGS, INC.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                 (in thousands)
                                   (unaudited)

           
<TABLE>
<CAPTION>
                                                                                 November 1,    
                                            August 1, 1995    August 1, 1996       1995 to     November 1, 1996 
                                           to December 31,    to December 16,    December 31,   to December 16,  
                                                1995               1996              1995             1996
                                           ----------------- ---------------- -------------- -------------------
<S>                                          <C>               <C>               <C>              <C>
Statement of Operations Data:
  Revenues                                   $ 159,104         $ 182,029         $  75,034        $  73,854
  Gross profit (a)                              12,624            13,924             6,391            6,015
  Depreciation and amortization                  1,672             1,604               689              537
  Operating income                               1,341             1,741             1,990            1,851
  Interest expense                               2,364             2,002               979              708
  Provision for income taxes (credit)             (529)              (25)              142              466
  Net income (loss)                               (494)             (236)              869              677

Operating Data:
  EBITDA (b)                                 $   3,013         $   3,345         $   2,679        $   2,388
  Capital expenditures (c)                   $   4,556         $   1,083         $   1,061        $     489
  Retail propane gallons sold                   13,508            13,380             7,088            6,367
</TABLE>

----------

(a)  Gross profit is computed by reducing total revenues by the direct cost of
     the products sold, except for depreciation and amortization.

(b)  EBITDA is defined as operating income plus depreciation and amortization.
     EBITDA 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), but provides
     additional information for evaluating the Partnership's ability to make the
     Minimum Quarterly Distribution.

(c)  Capital expenditures fall generally into three categories: (i) growth
     capital expenditures, which include expenditures for the purchase of new
     propane tanks and other equipment to facilitate expansion of the retail
     customer base, (ii) maintenance capital expenditures, which includes
     expenditures for repair and replacement of property, plant and equipment,
     and (iii) acquisition capital expenditures.




                                       45
<PAGE>   50
                       CORNERSTONE PROPANE PARTNERS, L.P.

                     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 and its principal predecessor entities, Synergy,
Empire Energy and Coast, should be read in conjunction with the Selected
Historical Financial and Operating Data and notes thereto and the historical and
pro forma financial statements and notes thereto included elsewhere in this Form
10-Q. No separate discussion of the historical financial condition and results
of operations of Myers has been included based on the Partnership's belief that
such information is not material to the Partnership.

GENERAL

The Partnership is a Delaware limited partnership recently formed to own and
operate the propane business and assets of Synergy, Empire Energy, Myers and
Coast. It is the fifth largest retail marketer of propane in the United States,
serving more than 360,000 residential, commercial, industrial and agricultural
customers from 312 customer service centers in 26 states.

Because a substantial portion of the Partnership's propane is used in the
weather-sensitive residential markets, the temperatures realized in the
Partnership's areas 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. 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.

In determining actual and normal weather for a given period of time, the
Partnership compares the actual number of Heating Degree Days for such period to
the average number of Heating Degree Days for a longer time period assumed to
more accurately reflect the average normal weather, in each case as such
information is published by the National Weather Service Climate Analysis
Center, for each measuring point in each of the Partnership's regions. Synergy
and Empire Energy have historically used the 30-year period from 1961-1990, and
Coast has historically used a 10-year rolling average. The Partnership then
calculates weighted averages, based on retail volumes attributable to each
measuring point, of actual and normal Heating Degree Days within each region.
Based on this information, the Partnership calculates a ratio of actual Heating
Degree Days to normal Heating Degree Days, first on a regional basis and then on
a Partnership-wide basis.

Although the Partnership believes that comparing temperature information for a
given period of time to "normal" temperatures is helpful for an understanding of
the Partnership's results of operations, when comparing variations in weather to
changes in total revenues or operating profit, attention is drawn to the fact
that a portion of the Partnership's total revenues is not weather-sensitive and
other factors such as price, competition, product supply costs and customer mix
also 



                                       46
<PAGE>   51
                       CORNERSTONE PROPANE PARTNERS, L.P.

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



affect the results of operations. Furthermore, actual weather conditions in
the Partnership's regions can vary substantially from historical experience.

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.

The Partnership intends to purchase a portion of its propane (approximately 50%
to 60% of a given typical year's projected propane needs) pursuant to agreements
with terms of less than one year at market prices. The balance of its propane
needs for the year will be satisfied in the spot market. The Partnership
generally does not enter into supply contracts containing "take or pay"
provisions.

The Partnership will engage in hedging of product cost and supply through common
hedging practices. These practices will be monitored and maintained by
management for the Partnership on a daily basis. Hedging of product cost and
supply does not always result increased margins and is not considered to be
material to operations or liquidity for the fourteen-day period ended December
31, 1996.

ANALYSIS OF HISTORICAL RESULTS OF OPERATIONS

During the fourteen-day period from commencement on December 17, 1996 to
December 31, 1996, the Partnership sold 15.4 million retail gallons and 18.6
million wholesale gallons. Retail operating revenues and wholesale revenues were
$17.8 million and $22.6 million, respectively, for the fourteen-day period.
Retail gross profit amounted to $8.0 million and gross profit per retail gallon
was approximately $0.52 per gallon for the fourteen-day period ended December
31, 1996. As a percentage of revenues, operating expenses were 9.4% and general
and administrative expenses were 1.4%. Total EBITDA was $4.7 million and
approximately $0.30 per retail gallon for the fourteen-day period. EBITDA 
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), but provides additional 
information for evaluating the Partnership's ability to distribute the Minimum
Quarterly Distribution.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS

Cash provided by operating activities during the fourteen-day period ended
December 31, 1996 was $4.5 million. Cash flow from operations included a net
income of $3.3 million and non-cash charges of $0.6 million for the period,
comprised principally of depreciation and amortization 




                                       47
<PAGE>   52
                       CORNERSTONE PROPANE PARTNERS, L.P.

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


expense. The impact of working capital changes increased cash flow by
approximately $0.6 million.

Cash used in investment activities for the fourteen-day period ended December
31, 1996 totaled $0.5 million, which was principally used for purchases of
property and equipment. Cash used in financing activities was $2.4 million for
the fourteen-day period ended December 17, 1996. This amount reflects net
repayments on the Working Capital Facility.

On December 17, 1996, Cornerstone Propane Partners, L.P. completed its initial
public offering, proceeds from which amounted to $191.8 million. Concurrently
with the IPO, Cornerstone Propane, L.P. (the "Operating Partnership") issued
$220.0 million of Senior Notes and borrowed $12.8 million on its Working Capital
Facility. Also on the IPO date, the Operating Partnership received cash of $22.4
million from the Predecessor Companies.

Proceeds from the IPO, Senior Notes and the Working Capital Facility were used
to repay liabilities assumed by the Operating Partnership ($337.6 million), to
make distributions to the Special General Partner to redeem its preferred stock
($61.2 million) and to provide net worth to the Special General Partner ($15.5
million). The balance ($10.3 million) was used to pay expenses of the
Partnership organization and formation.


FINANCING AND SOURCES OF LIQUIDITY

On December 17, 1996, the Operating Partnership issued $220.0 million of Senior
Notes with an annual interest rate of 7.53% pursuant to note purchase agreements
with various investors (collectively, the "Note Agreement"). The Senior Notes
mature on December 30, 2010, and require semi-annual interest payments
commencing December 30, 1996. The Note Agreement requires that the principal be
paid in equal annual payments of $27.5 million starting December 30, 2003.

The Operating Partnership's obligations under the Note Agreement are secured, on
an equal and ratable basis with its obligations under the Bank Credit Agreement,
by a first priority security interest in the Operating Partnership's inventory,
accounts receivable and certain customer storage tanks. The Note Agreement
contains customary representations, warranties, events of defaults and covenants
applicable to the Operating Partnership and its "Restricted Subsidiaries" (as
defined therein), including limitations, among others, on the ability of the
Operating Partnership and its Restricted Subsidiaries to incur additional
indebtedness, create liens, make investments and loans, enter into mergers,
consolidations or sales of all or substantially all assets and make asset sales.
Generally, so long as no default exists or would result, the Operating
Partnership is permitted to make any Restricted Payment (as defined in the Note
Agreement and including distributions to the Partnership) during each fiscal
quarter in amount not in excess of Available Cash with respect to the
immediately preceding quarter.




                                       48
<PAGE>   53
                       CORNERSTONE PROPANE PARTNERS, L.P.

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



Also on the same date, the Operating Partnership entered a bank credit agreement
consisting of a working capital facility (the "Working Capital Facility") and an
acquisition facility (the "Acquisition Facility"). The Working Capital Facility
provides for borrowings up to $50 million (including a $30 million sublimit for
letters of credit through March 31, 1997 and $20 million thereafter), and
matures on December 31, 1999. The Bank Credit Agreement provides that there must
be no amount outstanding under the Working Capital Facility (excluding letters
of credit) in excess of $10 million for at least 30 consecutive days during each
fiscal year. Borrowings under the Working Capital Facility totaled $10.4 million
at December 31, 1996. Issued outstanding letters of credit totaled $18.4 million
at December 31, 1996. The Acquisition Facility provides the Operating
Partnership with the ability to borrow up to $75 million to finance propane
business acquisitions. The Acquisition Facility operates as a revolving facility
through December 31, 1999, at which time any loans then outstanding may be
converted to term loans and will amortize quarterly for a period of four years
thereafter. No amounts were outstanding at December 31, 1996. The Operating
Partnership's obligations under the Bank Credit Agreement are secured by a
security interest in the Operating Partnership's inventory, accounts receivable
and certain customer storage tanks.

Loans under the Bank Credit Agreement bear interest as a per annum rate equal to
either (at the Operating Partnership's option): (a) the sum (the "Base Rate") of
the applicable margin, and the higher of (i) the agent bank's prime rate and
(ii) the federal funds rate plus one-half of 1%, and (b) the sum (the
"Eurodollar Rate") of the applicable margin and the rate offered by the agent
bank to major banks in the offshore dollar market (as adjusted for applicable
reserve requirements, if any). The applicable margin for Base Rate loans varies
between 0% and .12%, and the applicable margin for Eurodollar Rate loans varies
between .25% and .80%, in each case depending upon the Operating Partnership's
ratio of consolidated "Debt" to "Consolidated Cash Flow" (as such terms are
defined in the Bank Credit Agreement). At December 31, 1996, the applicable Base
and Eurodollar Rates were 8.275% and 6.2375%, respectively. In addition, an
annual fee is payable quarterly by the Operating Partnership (whether or not
borrowings occur) ranging from .125% to .325% depending upon the ratio
referenced above.

The Bank Credit Agreement contains customary representations, warranties, events
of defaults and covenants including limitations, among others, on the ability of
the Operating Partnership and its "Restricted Subsidiaries" (as defined therein)
to incur or maintain certain indebtedness or liens, make investments and loans,
enter into mergers, consolidations or sales of all or substantially all of its
assets and make assets sales. Generally, so long as no default exists or would
result, the Operating Partnership is permitted to make any Restricted Payment
(as defined in the Bank Credit Agreement and including distributions to the
Partnership) during each fiscal quarter in amount not to exceed Available Cash
with respect to the immediately preceding quarter.

In addition, the Bank Credit Agreement provides that: (1) the Operating
Partnership not permit the ratio of its consolidated Debt (as defined in the
Bank Credit Agreement) less cash on hand (in 




                                       49
<PAGE>   54
                       CORNERSTONE PROPANE PARTNERS, L.P.

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



excess of $1 million up to $10 million) to Consolidated Cash Flow (as defined in
the Bank Credit Agreement) to exceed 4.75:1.00 at any time on or before December
31, 1997, 4.50:1.00 at any time on or before December 31, 1998 and 4.25:1.00 at
any time thereafter; and (2) the Operating Partnership not permit the ratio of
its Consolidated Cash Flow to consolidated "Interest Expense" (as defined
therein) to be less than 2.00:1.00 prior to December 31, 1997, 2.25:1.00 any
time thereafter on or before December 31, 1998 and 2.50:1.00 at any time
thereafter.




                                       50
<PAGE>   55
                                  SYN Inc.

                     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 for
SYN Inc. ("Synergy") for the two and one-half month period ended December 16,
1996 to the three-month period ended December 31, 1995, and five and one-half
month period ended December 16, 1996 to the six-month period ended December 31,
1995.

Two and one-half months ended December 16, 1996 compared to three months ended
December 31, 1995

Volume. During the two and one-half months ended December 16, 1996, Synergy sold
23.0 million retail propane gallons, a decrease of 2.7 million gallons, or
10.5%, from the 25.7 million retail propane gallons sold during the three months
ended December 31, 1995. The decrease in retail volume was primarily
attributable to a reduction of 5.7 million gallons for the 14 days ended
December 31, 1996 offset by an increase of 3.0 million gallons due to
acquisitions and mergers since December 31, 1995. These acquisitions combined
with the completion by new management of new sales programs and activities
helped to increase volume despite slightly warmer weather in some regions served
by SYN Inc. in 1996 compared to 1995.

Revenues. Revenues decreased by $1.8 million, or 6.4%, to $26.2 million for the
two and one-half months ended December 16, 1996, as compared to $28.0 million
for the three months ended December 31, 1995. This decrease was primarily
attributable to a reduction in revenues of $7.1 million for the 14 days ended
December 31, 1996 offset by increased propane prices per gallon in the two and
one-half months ended December 16, 1996, resulting from increased costs during
that period as discussed below.

Cost of Product Sold. Cost of product sold increased by $1.6 million, or 12.5%,
to $14.4 million for the two and one-half months ended December 16, 1996, as
compared to $12.8 million for the three months ended December 31, 1995. The
increase in cost of product sold was primarily due to the increased sales volume
discussed above combined with an increase in the wholesale cost of propane,
which increased approximately 40% per gallon in the two and one-half months
ended December 16, 1996 compared to the same period of the prior year. This
increase was offset by a reduction of cost of product sold of $4.0 million for
the 14 days ended December 31, 1996. As a percentage of revenues, cost of
product sold increased to 55.0% for the two and one-half months ended December
16, 1996, as compared to 45.7% for the three months ended December 31, 1995.

Gross Profit. Gross profit decreased $3.4 million, or 22.4%, to $11.8 million
for the two and one-half months ended December 16, 1996, as compared to $15.2
million for the three months ended December 31, 1995. This decrease was
primarily due to a reduction of gross profit of $3.1 million for the 14 days
ended December 31, 1996.





                                       51
<PAGE>   56
                                  SYN Inc.

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



General and Administrative Expenses. General and administrative expenses (which
include salaries and commissions and related party corporate administration
fees) decreased by $2.5 million, or 25.8%, to $7.2 million for the two and
one-half months ended December 16, 1996, as compared to $9.7 million for the
three months ended December 31, 1995. The majority of this decrease was
attributable to a reduction of expenses of $2.0 million for the 14 days ended
December 31, 1996 and reduced insurance expense. As a percentage of revenues,
general and administrative expenses decreased to 27.3% for the two and one-half
months ended December 16, 1996, as compared to 34.7% for the three months ended
December 31, 1995.

Depreciation and Amortization. Depreciation and amortization decreased $0.3
million, or 25.0%, to $0.9 million for the two and one-half months ended
December 16, 1996, as compared to $1.2 million for the three months ended
December 31, 1995. This decrease was primarily attributable to a slight timing
difference in computing amortization and depreciation on the assets acquired at
August 14, 1995 with the formation of Synergy and a reduction in depreciation
expense of $0.1 million for the 14 days ended December 31, 1996.

Operating Income (Loss). Operating income decreased $0.6 million, or 14%, to
$3.7 million for the two and one-half months ended December 16, 1996, as
compared to $4.3 million in the three months ended December 31, 1995. This
decrease was primarily due to the reduction of $1.0 million of operating income
for the fourteen days ended December 31, 1996 offset by reduced insurance
expense.

Interest Expense. Interest expense decreased by $0.1 million, or 5.6%, to $1.7
million for the two and one-half months ended December 16, 1996, as compared to
$1.8 million for the three months ended December 31, 1995. This decrease was
primarily due to the retirement of the debt effective December 17, 1996 with the
consummation of the Cornerstone Propane Partners, L.P. IPO.

Net Income. Synergy had a net income of $1.2 million for the two and one-half
months ended December 16, 1996, as compared to a net income of $1.3 million for
the three months ended December 31, 1995. This decrease was primarily
attributable to the decreased operating income offset by a lower provision for
income taxes.

EBITDA. Total EBITDA decreased by $0.9 million, or 16.4%, to $4.6 million for
the two and one-half months ended December 16, 1996, as compared to $5.5 million
for the three months ended December 31, 1995. The decrease in total EBITDA
reflects a reduction in EBITDA of $1.1 million for the 14 days ended December
31, 1996 offset by the reduction in operating and general and administrative
expenses discussed above. As a percentage of revenues, total EBITDA decreased to
17.7% for the two and one-half months ended December 16, 1996, as compared to
19.7% for the three months ended December 31, 1995. EBITDA 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), but provides additional information for
evaluating the Partnership's ability to distribute the Minimum Quarterly
Distribution.




                                       52
<PAGE>   57
                                  SYN Inc.

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


Five and one-half Months ended December 16, 1996 compared to Six Months Ended
December 31, 1995

Volume. During the five and one-half months ended December 16, 1996, Synergy
sold 39.5 million retail propane gallons, a decrease of 2.9 million gallons, or
6.8%, compared to 42.4 million retail propane gallons sold during the six months
ended December 31, 1995. The decrease in retail volume was primarily
attributable to the longer sales period in fiscal 1995 offset by acquisitions
and mergers subsequent to December 31, 1995.

Revenues. Revenues decreased by $2.1 million, or 4.5%, to $44.1 million for the
five and one-half months ended December 16, 1996, as compared to $46.2 million
for the six months ended December 31, 1995. This decrease was primarily
attributable to the longer sales period in fiscal 1995 offset by increased
propane sales prices per gallon for the five and one-half months ended December
31, 1996.

Cost of Product Sold. Cost of product sold increased by $1.3 million, or 5.9%,
to $23.3 million for the five and one-half months ended December 16, 1996, as
compared to $22.0 million for the six months ended December 31, 1995. The
increase in cost of product sold was due to a higher wholesale cost of propane,
approximately 26% higher per gallon, partially offset by the exclusion of cost
of products sold during the fourteen-day period ended December 31, 1996.

Gross Profit. Gross profit decreased $3.4 million, or 14.0%, to $20.7 million
for the five and one-half months ended December 16, 1996, as compared to $24.1
million for the six months ended December 31, 1995. This decrease was primarily
due to the longer sales period in fiscal 1995.

General and Administrative Expenses. General and administrative expenses (which
include salaries and commissions and related party corporate administration
fees) decreased by $1.7 million, or 10.1%, to $15.1 million for the five and
one-half months ended December 16, 1996, as compared to $16.8 million for the
six months ended December 31, 1995. The majority of this decrease was
attributable to the longer sales period in fiscal 1995. As a percentage of
revenues, general and administrative expenses decreased to 34.2% for the five
and one-half months ended December 16, 1996, as compared to 36.4% for the six
months ended December 31, 1995.

Depreciation and Amortization. Depreciation and amortization decreased $0.3
million or 13.6% to $1.9 million for the five and one-half months ended December
16, 1996, as compared to $2.2 million for the six months ended December 31,
1995. This decrease was primarily attributable to the longer sales period in
fiscal 1995.

Operating Income. Operating income decreased $1.3 million, or 25.5%, to $3.8
million for the five and one-half months ended December 16, 1996, as compared to
$5.1 million in the four and 



                                       53
<PAGE>   58
                                  SYN Inc.

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



one-half months ended December 31, 1995. This decrease was primarily due to the
longer sales period in fiscal 1995.

Interest Expense. Interest expense increased by $0.1 million or 3.1% to $3.3
million for the five and one-half months ended December 16, 1996, as compared to
$3.2 million for the six months ended December 31, 1995. This increase was
primarily due to the longer sales period in fiscal 1995.

Net Income. Synergy had a net income of $0.2 million for the five and one-half
months ended December 16, 1996, as compared to a net income of $1.0 million for
the six months ended December 31, 1995. This decrease was primarily attributable
to the longer sales period in fiscal 1995.

EBITDA. Total EBITDA decreased by $1.6 million, or 21.9%, to $5.7 million for
the five and one-half months ended December 16, 1996, as compared to $7.3
million for the six months ended December 31, 1995. The decrease in total EBITDA
reflects the effect of having 14 days less EBITDA in December 1996, when the
Company is more profitable. As a percentage of revenues, total EBITDA decreased
to 12.9% for the five and one-half months ended December 16, 1996, as compared
to 15.9% for the six months ended December 31, 1995. EBITDA 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), but provides additional information for
evaluating the Partnership's ability to distribute the Minimum Quarterly
Distribution.


LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Cash provided by operating activities during the five and one-half months ended
December 16, 1996 was $4.3 million. Cash flow from operations included a net
income of $0.2 million. Net income was reduced by non-cash charges of $2.4
million for the period, comprised principally of depreciation and amortization
expense. The impact of working capital changes increased cash flow by
approximately $1.7 million.

Cash used in investment activities for the five and one-half months ended
December 16, 1996 totaled $3.8 million, which was principally used to purchase
property and equipment. Cash used in financing activities was $0.3 million for
the five and one-half months ended December 16, 1996. This amount reflects
borrowings under Synergy's revolving credit line of $3.8 million, partially
offset by principal payments on other notes payable in the amount of $0.2
million and the payment of preferred stock dividends of $3.9 million.

Financing and Sources of Liquidity




                                       54
<PAGE>   59
                                  SYN Inc.

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



On December 28, 1995, Synergy entered into a revolving credit agreement with
Bank of Boston, which was amended in August 1996. Synergy's revolving credit
facility consists of a revolving credit line of up to $30.0 million, including
up to $7.5 million for letters of credit. The revolving credit facility bears
interest at either the Eurodollar rate plus 2.0% or the prime rate plus .75%.
The obligations of Synergy under the revolving credit agreement are secured by
its accounts receivable, inventory, instruments and documents and a pledge of
the capital stock of its subsidiaries. The revolving credit agreement contains
customary operating and maintenance covenants. Synergy's obligations under the
revolving credit agreement have been jointly and severally guaranteed by each of
its subsidiaries. The revolving credit facility matures on December 31, 1997.

On July 31, 1996, Synergy entered into a term loan agreement with NPS in the
principal amount of approximately $52.8 million, secured by substantially all of
Synergy's personal property. The term loan bears interest at a rate of 9.12% per
annum. The debt and security interests under the term loan agreement are
subordinate to the debt owed to and security interests of Bank of Boston under
the revolving credit agreement. The term loan agreement contains customary
financial and performance covenants. No principal payments are due under the
term loan until it matures on August 1, 2005.

All of the above debt was repaid in full on December 17, 1996 with the proceeds
of the Cornerstone Propane Partners, L.P. public offering, the Cornerstone
Propane, L.P. Note Agreement and borrowings under the Cornerstone Propane, L.P.
Bank Credit Agreement.




                                       55
<PAGE>   60
                            EMPIRE ENERGY CORPORATION

                     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 for
Empire Energy Corporation ("Empire") for the two and one-half month period ended
December 16, 1996 to the three-month period ended December 31, 1995, and the
five and one-half month period ended December 16, 1996 to the six-month period
ended December 31, 1995.

Two and one-half months ended December 16, 1996 compared to three months ended
December 31, 1995

Volume. During the two and one-half months ended December 16, 1996, Empire sold
24.7 million retail propane gallons, a decrease of 9.9 million gallons, or
28.6%, from the 34.6 million retail propane gallons sold during the three months
ended December 31, 1995. The decrease in retail volume was attributable to a
reduction in gallons of 5.8 million for the fourteen days ended December 31,
1996 and a decrease of 4.1 million gallons primarily due to warmer weather in
the Company's market area.

Revenues. Total operating revenues decreased $3.6 million, or 11.3%, to $28.2
million for the two and one-half months ended December 16, 1996, as compared to
$31.8 million for the three months ended December 31, 1995. This decrease was
attributable to a reduction in operating revenues of $7.4 million for the
fourteen days ended December 31, 1996 offset by an increase in revenues due to
higher propane prices in the Company's core market area in fiscal 1996.

Cost of Product Sold. Total cost of product sold increased by $0.3 million, or
2.0%, to $15.4 million for the two and one-half months ended December 16, 1996,
as compared to $15.1 million for the three months ended December 31, 1995. The
increase was attributable to the higher propane prices in fiscal 1996 offset by
a reduction of cost of product sold of $3.8 million for the fourteen days ended
December 31, 1996.

Gross Profit. Gross profit decreased by $3.9 million, or 23.4%, to $12.8 million
for the two and one-half months ended December 16, 1996, as compared to $16.7
million for the three months ended December 31, 1995. This decrease was
primarily due to a reduction in gross profit of $3.6 million for the fourteen
days ended December 31, 1996.

General and Administrative Expenses. General and administrative expenses (which
include allowance for doubtful accounts) decreased by $2.1 million, or 24.7%, to
$6.4 million for the two and one-half months ended December 16, 1996, as
compared to $8.5 million for the three months ended December 31, 1995. The
decrease was due primarily to a reduction in expenses of $1.5 million for the
fourteen days ended December 31, 1996 and a decrease in insurance expense. As a
percentage of revenues, general and administrative expenses decreased to 22.7%
for the two and one-half months ended December 16, 1996, as compared to 26.7%
for the three months ended December 31, 1995.




                                       56
<PAGE>   61
                            EMPIRE ENERGY CORPORATION

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



Depreciation and Amortization. Depreciation and amortization decreased $0.1
million, or 7.1%, to $1.3 million for the two and one-half months ended December
16, 1996, as compared to $1.4 million for the three months ended December 31,
1995. This decrease was largely the result of a reduction of $0.3 million in
depreciation for the fourteen days ended December 31, 1996, offset by an
increase due to the revaluation of assets for purchase accounting adjustments in
August 1996.

Operating Income. Operating income decreased $1.8 million, or 26.5%, to $5.0
million for the two and one-half months ended December 16, 1996, as compared to
$6.8 million in the three months ended December 31, 1995. This increase was
primarily due to the longer sales period in fiscal 1995.

Interest Expense. Interest expense increased by $1.2 million to $1.9 million for
the two and one-half months ended December 16, 1996, as compared to $0.7 million
for the three months ended December 31, 1995. This increase was a result of debt
incurred in connection with the Management Buyout which occurred in August of
1996.

Net Income. The Company had a net income of $1.9 million for the two and
one-half months ended December 16, 1996, as compared to a net income of $3.6
million for the three months ended December 31, 1995. This decrease was
principally the result of a reduction in net income of $1.8 million for the
fourteen days ended December 31, 1996, and the increased interest expense,
offset by a lower provision for income taxes.

EBITDA. Total EBITDA decreased by $1.9 million, or 22.9%, to $6.4 million for
the two and one-half months ended December 16, 1996, as compared to $8.3 million
for the three months ended December 31, 1995. The decrease in total EBITDA
reflects the longer sales period in fiscal 1995. As a percentage of revenues,
total EBITDA decreased to 22.6% for the two and one-half months ended December
16, 1996, as compared to 26.0% for the three months ended December 31, 1995.
EBITDA 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), but provides additional
information for evaluating the Partnership's ability to distribute the Minimum
Quarterly Distribution.


Five and one-half Months ended December 16, 1996 compared to Six Months Ended
December 31, 1995

Volume. During the five and one-half months ended December 16, 1996, the Company
sold 40.8 million retail propane gallons, a decrease of 8.4 million gallons, or
17.1%, from the 49.2 million retail propane gallons sold during the six months
ended December 31, 1995. The decrease in retail volume was primarily
attributable to a reduction in gallons of 5.8 million for the fourteen days
ended December 31, 1996 and to warmer weather in the Company's market area.




                                       57
<PAGE>   62
                            EMPIRE ENERGY CORPORATION

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



Operating Revenues. Total operating revenues decreased $0.8 million, or 1.8%, to
$43.2 million for the five and one-half months ended December 16, 1996, as
compared to $44 million for the six months ended December 31, 1995. This
decrease was attributable to a reduction in operating revenues of $7.4 million
for the fourteen days ended December 31, 1996 offset by an increase in revenues
due to higher propane prices in the Company's core market area in fiscal 1996.

Cost of Product Sold. Total cost of product sold increased by $2.1 million, or
9.9%, to $23.3 million for the five and one-half months ended December 16, 1996,
as compared to $21.2 million for the six months ended December 31, 1995. The
increase was primarily attributable to the higher propane prices in fiscal 1996
offset by a reduction of cost of product sold of $3.8 million for the fourteen
days ended December 31, 1996. As a percentage of revenues, cost of product sold
increased to 53.9% for the five and one-half months ended December 16, 1996, as
compared to 48.2% for the six months ended December 31, 1995.

Gross Profit. Gross profit decreased $2.9 million, or 12.7%, to $19.9 million
for the five and one-half months ended December 16, 1996, as compared to $22.8
million for the six months ended December 31, 1995. This decrease was primarily
due to reduced sales volume offset by a higher gross profit per gallon.

General and Administrative Expenses. General and administrative expenses (which
include allowance for doubtful accounts) decreased by $1.2 million, or 8.2%, to
$13.4 million for the five and one-half months ended December 16, 1996, as
compared to $14.5 million for the six months ended December 31, 1995. The
decrease was due primarily to a reduction in expense of $1.5 million for the
fourteen days ended December 31, 1996. As a percentage of revenues, general and
administrative expenses decreased to 31.0% for the five and one-half months
ended December 16, 1996, as compared to 33.0% for the six months ended December
31, 1995.

Depreciation and Amortization. Depreciation and amortization increased $0.2
million, or 7.4%, to $2.9 million for the five and one-half months ended
December 16, 1996, as compared to $2.7 million for the six months ended December
31, 1995. This increase was largely the result of the revaluation of the assets
for purchase accounting adjustments in August of 1996, offset by a reduction of
$0.3 million in depreciation for the fourteen days ended December 31, 1996.

Operating Income. Operating income decreased $2.0 million, or 35.7%, to $3.6
million for the five and one-half months ended December 16, 1996, as compared to
$5.6 million in the six months ended December 31, 1995. This decrease was
primarily due to the longer sales period in 1995.

Interest Expense. Interest expense increased $2.5 million to $3.6 million for
the five and one-half months ended December 16, 1996, as compared to $1.1
million for the six months ended 




                                       58
<PAGE>   63
                            EMPIRE ENERGY CORPORATION

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



December 31, 1995. This increase was a result of new debt for the Management
Buyout which occurred in August of 1996.

Net Loss. The Company had a net loss of $0.1 million for the five and one-half
months ended December 16, 1996, as compared to a net income of $2.5 million for
the six months ended December 31, 1995. This decrease was primarily the result
of a reduction in net income of $1.8 million for the fourteen days ended
December 31, 1996, and the increase in interest expense, offset by a lower
provision for income taxes.

EBITDA. Total EBITDA decreased by $1.8 million, or 21.7%, to $6.5 million for
the five and one-half months ended December 16, 1996, as compared to $8.3
million for the six months ended December 31, 1995. The decrease in total EBITDA
reflects the longer sales period in 1995. As a percentage of revenues, total
EBITDA decreased to 15% for the five and one-half months ended December 16,
1996, as compared to 18.8% for the six months ended December 31, 1995. EBITDA
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), but provides additional
information for evaluating the Partnership's ability to distribute the Minimum
Quarterly Distribution.


LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Cash used in operating activities during the five and one-half months ended
December 16, 1996 was $8.8 million. Cash flow from operations included a net
loss of $0.1 million, largely offset by non-cash charges of $2.8 million for the
period, comprised principally of depreciation and amortization expense. The
impact of working capital changes decreased cash flow by approximately $11.5
million.

Cash used in investment activities for the five and one-half months ended
December 16, 1996 totaled $3.0 million, which was principally used for purchase
of property and equipment. Cash provided by financing activities was $10.3
million for the five and one-half months ended December 16, 1996. This amount
reflects borrowings under the Company's revolving credit line and funding from
the Management Buyout credit facilities of $10.4 million, partially offset by
principal payments on other notes payable in the amount of $0.1 million.

Financing and Sources of Liquidity

In connection with the Management Buyout on August 1, 1996, Empire Energy
obtained a new credit facility from Bank of Boston replacing its prior credit
facilities. The new credit facility 




                                       59
<PAGE>   64
                            EMPIRE ENERGY CORPORATION

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



provides for loans of $124.0 million, including (i) a $42.0 million term loan,
which matures on December 31, 2002, (ii) a $52.0 million second term loan, which
matures on December 31, 2006, (iii) a $20.0 million working capital facility
which matures on June 30, 2001, and (iv) a $10.0 million acquisition credit
facility, which matures on December 30, 2002. These loans bear interest at rates
ranging from the Bank of Boston prime rate up to 3.25% plus the Eurodollar rate,
depending on the type of loan and the amount of debt outstanding. The new credit
facility includes working capital, cash flow and net worth requirements as well
as dividend and capital expenditure restrictions and is secured by all goods,
machinery, equipment and other personal property of Empire Energy. In addition,
Empire Energy's obligations under the credit facility have been jointly and
severally guaranteed by each of its subsidiaries.

All of the above debt was repaid in full on December 17, 1996 with the proceeds
of the Cornerstone Propane Partners, L.P. public offering, the Cornerstone
Propane, L.P. Note Agreement and borrowings under the Cornerstone Propane, L.P.
Bank Credit Agreement.




                                       60
<PAGE>   65
                               CGI HOLDINGS, INC.

                     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 for
CGI Holdings, Inc. and its subsidiaries ("Coast") for the one and one-half month
period ended December 16, 1996 to the two-month period ended December 31, 1995,
and the four and one-half month period ended December 16, 1996 to the five-month
period ended December 31, 1995.

One and one-half months ended December 16, 1996 compared to two months ended
December 31, 1995

Volume. During the one and one-half months ended December 16, 1996, Coast sold
57.0 million wholesale propane gallons of natural gas liquids, a decrease of 9.4
million gallons, or 14.2%, from the 66.4 million gallons sold in the two months
ended December 31, 1995. The decrease in volume was primarily attributable to
the 1996 period having fourteen days less than the 1995, period offset by
increased demand due to cooler weather. In the fourteen-day period from December
17, 1996 to December 31, 1996, sales volume amounted to 18.6 million gallons.
During the one and one-half months ended December 16, 1996, Coast sold 6.4
million retail propane gallons, a decrease of 0.7 million gallons, or 10.2%,
from the 7.1 million retail propane gallons sold during the two months ended
December 31, 1995. The decrease in retail volume is primarily attributable to
the 1996 period having fourteen days less than the 1995 period offset by the
impact of cooler weather in some of the retail markets served by Coast in 1996.
Retail sales volume in the fourteen-day period from December 17, 1996 to
December 31, 1996 period amounted to 2.2 million gallons.

Revenues. Revenues decreased by $1.2 million, or 1.6%, to $73.9 million for the
one and one-half months ended December 16, 1996, as compared to $75.0 million
for the two months ended December 31, 1995. The decrease was primarily
attributable to the 1996 period having fourteen days less than the 1995 period
offset by increases in propane and natural gas sales prices. Revenue in the
fourteen-day period from December 17, 1996 to December 31, 1996 amounted to
$25.6 million. Retail operating revenues increased by $0.3 million, or 3.2%, to
$8.1 million for the one and one-half months ended December 16, 1996, as
compared to $7.9 million for the two months ended December 31, 1995. The
increase resulted from the impact of colder weather in many retail markets
served by Coast. This increase is offset by the 1996 period having fourteen days
less than the 1995 period. Retail operating revenues relating to the
fourteen-day period ended December 31, 1996 amounted to $3.0 million.

Cost of Product Sold. Cost of product sold decreased by $0.8 million, or 1.2%,
to $67.8 million for the one and one-half months ended December 16, 1996, as
compared to $68.6 million for the two months ended December 31, 1995. The
decrease in cost of product sold was primarily due to the 1996 period having
fourteen days less than the 1995 period offset by higher propane costs per
gallon. The cost of product sold in the fourteen-day period ended December 31,
1996 amounted to $23.3 million. Cost of retail product sold, primarily the cost
of propane, increased by $0.8 




                                       61
<PAGE>   66
                               CGI HOLDINGS, INC.

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



million, or 21.1%, to $4.5 million for the one and one-half months ended
December 16, 1996, as compared to $3.7 million for the two months ended December
31, 1995. The cost per gallon of propane for the retail business increased from
$0.48 in the two months ended December 31, 1995 to $0.67 in the one and one-half
months ended December 16, 1996, reflecting heavier demand in 1996. As a
percentage of revenues, cost of product sold increased to 91.9% for the one and
one-half months ended December 16, 1996, as compared to 91.5% for the two months
ended December 31, 1995.

Gross Profit. Gross profit decreased $0.4 million, or 5.9%, to $6.0 million for
the one and one-half months ended December 16, 1996, as compared to $6.4 million
for the two months ended December 31, 1995. The decrease was primarily
attributable to the 1996 period having fourteen days less than the 1995 period
offset by increased margins due to inventory purchased at advantageous prices.
Retail gross profits decreased by $0.6 million, or 13.2%, to $3.6 million for
the one and one-half months ended December 16, 1996, as compared to $4.2 million
for the two months ended December 31, 1995. This decrease was primarily due to
the 1996 period having fourteen days less than the 1995 period offset by an 
increase in volumes. Gross profit per retail gallon decreased by $0.02, or 
3.4%, to $0.57 per gallon for the one and one-half months ended December 16, 
1996 from $0.59 per gallon for the two months ended December 31, 1995.

Operating Expenses. Operating expenses decreased $0.3 million, or 9.3%, to $3.0
million for the one and one-half months ended December 16, 1996, as compared to
$3.3 million for the two months ended December 31, 1995. The decrease was
primarily attributable to the 1996 period having fourteen days less than the
1995 period. Operating expenses for the fourteen-day period were $1.0 million.
Operating expenses for retail operations decreased by $0.4 million, or 18.5%, to
$1.8 million in the one and one-half months ended December 16, 1996, as compared
to $2.2 million in the two months ended December 31, 1995 due to the 1996 period
having fourteen days less than the 1995 period. As a percentage of revenues,
operating expenses decreased to 4.0% for the one and one-half months ended
December 16, 1996, as compared to 4.4% for the two months ended December 31,
1995.

General and Administrative Expenses. General and administrative expenses (which
include corporate administrative expenses) increased by $0.2 million, or 51.2%,
to $0.6 million for the one and one-half months ended December 16, 1996, as
compared to $0.4 million for the two months ended December 31, 1995. The
majority of this increase was attributable to an increase in salaries, travel
and relocation expenses in conjunction with acquisition matters offset by the
1996 period having fourteen days less than the 1995 period. General and
administrative expenses for the fourteen-day period amounted to $0.2 million. As
a percentage of revenues, general and administrative expenses increased to 0.9%
for the one and one-half months ended December 16, 1996, as compared to 0.6% for
the two months ended December 31, 1995.




                                       62
<PAGE>   67
                               CGI HOLDINGS, INC.

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



Depreciation and Amortization. Depreciation and amortization decreased $0.2
million, or 22.1%, to $0.5 million for the one and one-half months ended
December 16, 1996, as compared to $0.7 million for the two months ended December
31, 1995. This decrease was primarily attributable to the 1996 period having
fourteen days less than the 1995 period. Depreciation expense for the
fourteen-day period ended December 31, 1996 amounted to $0.2 million.

Operating Income. Operating income decreased $0.1 million, or 7.0%, to $1.9
million for the one and one-half months ended December 16, 1996, as compared to
$2.0 million in the two months ended December 31, 1995. This decrease was
primarily due the 1996 period having fourteen days less than the 1995 period.
Operating income for the fourteen-day period ended December 31, 1996 amounted to
$0.9 million.

Interest Expense. Interest expense decreased by $0.3 million, or 27.7%, to $0.7
million for the one and one-half months ended December 16, 1996, as compared to
$1.0 million for the two months ended December 31, 1995. This decrease was
primarily due to the retirement of debt effective December 17, 1996 with the
consummation of the Cornerstone Propane Partners, L.P. IPO. Interest expense for
the fourteen-day period ended December 31, 1996 was $0.1 million.

Net Income. Coast had a net income of $0.7 million for the one and one-half
months ended December 16, 1996, as compared to a net income of $0.9 million for
the two months ended December 31, 1995. This decrease was primarily attributable
to the 1996 period having fourteen days less than the 1995 period offset by both
higher wholesale and retail prices in 1996.

EBITDA. Total EBITDA decreased by $0.3 million, or 10.9%, to $2.4 million for
the one and one-half months ended December 16, 1996, as compared to $2.7 million
for the two months ended December 31, 1995. Coast's retail EBITDA decreased by
$0.2 million, or 7.6%, to $1.9 million for the one and one-half months ended
December 16, 1996, as compared to $2.0 million for two months ended December 31,
1995. The decrease in total EBITDA was due to the 1996 period having fourteen
days less than the 1995 period offset by both higher earnings from wholesale
operations and increased earnings from retail operations primarily due to
internal customer growth. As a percentage of revenues, total EBITDA decreased to
3.2% for the one and one-half months ended December 16, 1996, as compared to
3.6% for the two months ended December 31, 1995. EBITDA 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), but provides additional information for evaluating the
Partnership's ability to distribute the Minimum Quarterly Distribution.



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                               CGI HOLDINGS, INC.

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



Four and One-Half Months ended December 16, 1996 compared to Five Months Ended
December 31, 1995

Volume. During the four and one-half months ended December 16, 1996, Coast sold
166.1 million wholesale propane gallons of natural gas liquids, a decrease of
15.2 million gallons, or 8.4%, from the 181.3 million gallons sold in the five
months ended December 31, 1995. The decrease in volume was primarily
attributable to the 1996 period having fourteen days less than the 1995 period.
Sales volume for the fourteen-day period ended December 31, 1996 amounted to
18.6 million gallons. During the four and one-half months ended December 16,
1996, Coast sold 13.4 million retail propane gallons, a decrease of 0.1 million
gallons, or 0.9%, from the 13.5 million retail propane gallons sold during the
five months ended December 31, 1995. The decrease in retail volume was primarily
attributable to the 1996 period having fourteen days less than the 1995 period
offset by the impact of colder weather this year in some of the retail markets
served by Coast in the 1996 period.

Revenues. Revenues increased by $23.0 million, or 14.4%, to $182.0 million for
the four and one-half months ended December 16, 1996, as compared to $159.1
million for the five months ended December 31, 1995. This increase was primarily
attributable to an increase in wholesale natural gas and propane prices. Retail
operating revenues increased by $1.7 million, or 11.7%, to $16.5 million for the
four and one-half months ended December 16, 1996, as compared to $14.8 million
for the five months ended December 31, 1995. This increase was attributable to
increases in propane prices offset by the 1996 period having fourteen days less
than the 1995 period.

Cost of Product Sold. Cost of product sold increased by $21.6 million, or 14.8%,
to $168.1 million for the four and one-half months ended December 16, 1996, as
compared to $146.5 million for the five months ended December 31, 1995. The
increase in cost of product sold was primarily due to the increase in the
wholesale cost of natural gas and propane, which increased by approximately
21.4% and 43.5%, respectively, in the four and one-half months ended December
16, 1996, as compared to the five months ended December 31, 1995. Cost of retail
product sold, increased by $1.7 million, or 25.5%, to $8.6 million for the four
and one-half months ended December 16, 1996, as compared to $6.8 million for the
five months ended December 31, 1995, as a result of the increase in propane
prices offset by the 1996 period having fourteen days less than the 1995 period.
The cost per gallon of propane for the retail business increased from $0.46 in
the five months ended December 31, 1995 to $0.59 in the four and one-half months
ended December 16, 1996, reflecting the increase in propane prices. As a
percentage of revenues, cost of product sold increased to 92.4% for the four and
one-half months ended December 16, 1996, as compared to 92.1% for the five
months ended December 31, 1995.

Gross Profit. Gross profit increased $1.3 million, or 10.3%, to $13.9 million
for the four and one-half months ended December 16, 1996, as compared to $12.6
million for the five months ended December 31, 1995. The increase was primarily
attributable to increased margins in Coast's wholesale business due to inventory
purchased at advantageous prices, offset by the 1996 period 



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                               CGI HOLDINGS, INC.

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



having fourteen days less than 1995. Retail gross profits remained constant at
$7.9 million for the four and one-half months ended December 16, 1996, and the
five months ended December 31, 1995. The decrease in gross profit due to
fourteen less days in the 1996 period is offset by increased profits resulting
from higher volumes sold. Gross profit per retail gallon remained constant at
$0.59 per gallon for the four and one-half months ended December 16, 1996 and
the five months ended December 31, 1995.

Operating Expenses. Operating expenses decreased $0.1 million, or 0.9%, to $8.2
million for the four and one-half months ended December 16, 1996, as compared to
$8.3 million for the five months ended December 31, 1995, primarily due to
fourteen less days in the 1996 period. Operating expenses during the fourteen
days ended December 31, 1996 were $1.0 million. Operating expenses for the
retail business decreased by $0.2 million, or 3.4%, to $4.9 million in the four
and one-half months ended December 16, 1996, as compared to $5.1 million in the
five months ended December 31, 1995, due to the 1996 period having fourteen days
less than the 1995 period. As a percentage of revenues, operating expenses
decreased to 4.5% for the five months ended December 31, 1995, as compared to
5.2% for the four and one-half months ended December 16, 1996.

Sale of Partnership Interest. Effective October 1, 1996, Coast terminated its
participation and interest in Coast Energy Investments, Inc., a limited
partnership in which Coast Energy Group, Inc., a wholly owned subsidiary of
Coast, had been a 50% limited partner. The original partnership agreement
provided for a minimum investment term through December 1997. The termination
resulted in the sale of Coast's partnership interest to its 50% partner and an
employee of the partnership. Coast recorded a net loss on the disposition of the
partnership interest of $0.7 million. This amount consisted of a $0.2 million
loss on the partnership investment and $0.5 million of termination costs
consisting of salary, consulting, non-compete agreements and other related
expenses.

General and Administrative Expenses. General and administrative expenses (which
include corporate administrative expenses) increased by $0.4 million, or 28.4%,
to $1.7 million for the four and one-half months ended December 16, 1996, as
compared to $1.4 million for the five months ended December 31, 1995. The
majority of this increase was attributable to outside services and travel
expenses in conjunction with acquisition matters, offset by the 1996 period
having fourteen days less than 1995. General and administrative expenses for the
fourteen-day period ended December 31, 1996 amounted to $0.2 million. As a
percentage of revenues, general and administrative expenses increased to 1.0%
for the four and one-half months ended December 16, 1996, as compared to 0.9%
for the five months ended December 31, 1995.

Depreciation and Amortization. Depreciation and amortization decreased $0.1
million, or 4.1%, to $1.6 million for the four and one-half months ended
December 16, 1996, as compared to $1.7 million for the five months ended
December 31, 1995. This decrease was primarily attributable to 




                                       65
<PAGE>   70
                               CGI HOLDINGS, INC.

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



the 1996 period having fourteen days less than the 1995 period. Depreciation
expense for the fourteen-day period ended December 31, 1996 totaled $0.2
million.

Operating Income. Operating income increased $0.4 million, or 29.8%, to $1.7
million for the four and one-half months ended December 16, 1996, as compared to
$1.3 million in the five months ended December 31, 1995. This increase was
primarily due to both higher retail and wholesale prices in 1996 offset by the
1996 period having fourteen days less than 1995. Operating income for the
fourteen-day period ended December 31, 1996 amounted to $0.9 million.

Interest Expense. Interest expense decreased by $0.4 million, or 15.3%, to $2.0
million for the four and one-half months ended December 16, 1996, as compared to
$2.4 million for the five months ended December 31, 1995. This decrease was
primarily due to the 1996 period having fourteen days less than the 1995 period
and relatively lower interest rates in the four and one-half month period ended
December 16, 1996 than in the five month period ended December 31, 1995.
Interest expense incurred in the fourteen-day period ended December 31, 1996 was
$0.1 million.

Net Loss. Coast had a net loss of $0.2 million for the four and one-half months
ended December 16, 1996, as compared to a net loss of $0.5 million for the five
months ended December 31, 1995. The change was primarily attributable to an
increase in wholesale sales and profits in 1996, offset by the 1996 period
having fourteen days less than the 1995 period.

EBITDA. Total EBITDA increased by $0.3 million, or 11.0%, to $3.3 million for
the four and one-half months ended December 16, 1996, as compared to $3.0
million for the five months ended December 31, 1995. Coast's retail EBITDA
increased by $0.2 million, or 5.3%, to $3.0 million for the four and one-half
months ended December 16, 1996, as compared to $2.9 million for the five months
ended December 31, 1995. The increase in total EBITDA reflects the impact of
higher earnings from wholesale operations and increased earnings from retail
operations primarily due to internal customer growth, offset by the 1996 period
having fourteen days less than the 1995 period. As a percentage of revenues,
total EBITDA decreased to 1.8% for the four and one-half months ended December
16, 1996, as compared to 1.9% for the five months ended December 31, 1995.
EBITDA 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), but provides additional
information for evaluating the Partnership's ability to distribute the Minimum
Quarterly Distribution.





                                       66
<PAGE>   71
                               CGI HOLDINGS, INC.

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



LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Cash used in operating activities during the four and one-half months ended
December 16, 1996 was $2.6 million. Cash flow from operations included a net
loss of $0.2 million, largely offset by non-cash charges of $1.3 million for the
period, comprised principally of depreciation and amortization expense. The
impact of working capital changes decreased cash flow by approximately $3.7
million.

Cash used in investment activities for the four and one-half months ended
December 16, 1996 totaled $1.0 million, which was principally used in purchases
of property and equipment. Cash provided by financing activities was $4.7
million for the four and one-half months ended December 16, 1996. This amount
reflects borrowings under Coast's revolving credit line of $6.0 million,
partially offset by principal payments on existing bank notes, capital lease
obligations and other notes payable in the amount of $1.3 million.

Financing and Sources of Liquidity

As of December 16, 1996, the total outstanding indebtedness under Coast's credit
facility totaled $19.0 million. The outstanding balance under the credit
facility represents an increase of $5.9 million since July 31, 1996, primarily
due to purchases of customer tanks, capital expenditures, payments on term notes
and working capital charges.

The credit facility and subordinated notes were repaid in full on December 17,
1996, with the proceeds of Cornerstone Propane Partners, L.P. public offering,
the Cornerstone Propane, L.P. Note Agreement and borrowings under the
Cornerstone Propane, L.P. Bank Credit Agreement.




                                       67
<PAGE>   72
                       CORNERSTONE PROPANE PARTNERS, L.P.


PART II.      OTHER INFORMATION

Item 6        Exhibits and Reports on Form 8-K

               a)  Exhibits:

                   (27) Financial Data Schedule

               b)  Reports on Form 8-K:

                   None



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<PAGE>   73
                                    SIGNATURE


Pursuant to the requirements of the 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: February 14, 1997    By:   /s/  Ronald J. Goedde 
                                         -------------------------------------
                                             Name:  Ronald J. Goedde
                                             Title:  Executive Vice President
                                                     and Chief Financial Officer




                                       69