-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, USMJeRAhYaSWVnHYW6cEJDF/hxhb9Vm0xmYIWNc7MA51gIlHgETcxK3q8hFOiHZH Wo/L5te1CkhmAOPZIKUAXA== 0000909518-96-000134.txt : 19960629 0000909518-96-000134.hdr.sgml : 19960629 ACCESSION NUMBER: 0000909518-96-000134 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUBURBAN PROPANE PARTNERS LP CENTRAL INDEX KEY: 0001005210 STANDARD INDUSTRIAL CLASSIFICATION: 5900 IRS NUMBER: 223410353 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14222 FILM NUMBER: 96563382 BUSINESS ADDRESS: STREET 1: ONE SUBURBAN PLAZA STREET 2: 240 ROUTE 10 WEST CITY: WIPPANY STATE: NJ ZIP: 07981 BUSINESS PHONE: 2018875300 MAIL ADDRESS: STREET 1: ONE SUBURBAN PLZ STREET 2: 240 RTE 10 WEST CITY: WHIPPANY STATE: NJ ZIP: 07981 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 30, 1996 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 16 OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ______ to ______ Commission File Number: 1-14222 SUBURBAN PROPANE PARTNERS, L.P. ------------------------------- (Exact name of registrant as specified in its charter) Delaware 22-3410353 - - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 240 Route 10 West, Whippany, NJ 07981 - - -------------------------------------------------------------------------------- (Address of principal executive office) (Zip Code) (201) 887-5300 - - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for each shorter period that the Registrant was required to file such reports), and (2) had been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of March 30, 1996: Suburban Propane Partners, L.P. - 21,562,500 Common Units - 7,163,750 Subordinated Units SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES INDEX TO FORM 10-Q Part 1 Financial Information Page ---- Item 1 - Financial Statements Suburban Propane Partners, L.P. and Subsidiaries ------------------------------------------------ Condensed Consolidated Balance Sheet as of March 30, 1996 3 Condensed Consolidated Statement of Operations from March 5, 1996 through March 30, 1996 4-5 Condensed Consolidated Statement of Cash Flows from March 5, 1996 through March 30, 1996 6-7 Condensed Consolidated Statement of Partners' Capital from March 5, 1996 through March 30, 1996 8 Notes to Condensed Consolidated Financial Statements 9-16 Suburban Propane division of Quantum Chemical Corporation --------------------------------------------------------- (Predecessor) ------------- Condensed Consolidated Balance Sheet as of 3 September 30, 1995 Condensed Consolidated Statement of Operations from October 1, 1995 through March 4, 1996 and October 1, 1994 through April 1, 1995. 4-5 Condensed Consolidated Statement of Cash Flows from October 1, 1995 through March 4, 1996 and October 1, 1994 through April 1, 1995. 6-7 Notes to Condensed Consolidated Financial Statements 9-16 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 17-20 Part 2 Other Information Item 5 - Other 21 Item 6 - Exhibits and Reports on Form 8-K 21 Signatures 22 SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) SEPTEMBER 30, MARCH 30, 1995 1996 (PREDECESSOR) --------------- ---------------- ASSETS Current assets: Cash and cash equivalents $ 90,594 $ 136 Accounts receivable, less allowance for doubtful accounts of $122 and $3,162, respectively 60,836 41,045 Inventories 27,122 36,663 Prepaid expenses and other current assets 6,118 1,002 ------------ ------------- Total current assets 184,670 78,846 Property, plant and equipment, net 366,242 363,805 Net prepaid pension cost 46,049 44,713 Goodwill and other intangible assets 252,325 239,909 Other assets 9,281 9,186 ------------ ------------- Total assets $ 858,567 $ 736,459 ============ ============= LIABILITIES AND PARTNERS' CAPITAL/ PREDECESSOR EQUITY Current liabilities: Accounts payable $ 32,280 $ 22,298 Due to affiliate, net 36,175 - Accrued employment and benefit costs 22,774 19,975 Accrued insurance 4,460 4,470 Customer deposits and advances 3,832 8,501 Other current liabilities 11,809 9,097 ------------ ------------ Total current liabilities 111,330 64,341 Long-term debt 425,000 - Postretirement benefits obligation 82,639 83,098 Accrued insurance 16,183 18,569 Other liabilities 12,017 12,216 ------------ -------------- Total liabilities 647,169 178,224 Predecessor equity - 558,235 Partners' capital: General partner 4,228 - Limited partners' 207,170 - ------------ ------------- Total partners' capital/predecessor equity 211,398 558,235 ------------ ------------- Total liabilities and partners' capital/ predecessor equity $ 858,567 $ 736,459 ============= =============
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per unit amounts) (unaudited) December 30, 1995 December 30, 1995 December 30, 1994 through March 5, 1996 through through March 4, 1996 through March 30, 1996 April 1, 1995 (Predecessor) March 30, 1996 (Combined) (Predecessor) ------------- --------------- ---------- ------------- Revenues Propane $181,924 $ 61,929 $ 243,853 $ 202,655 Other 11,396 4,743 16,139 15,044 -------- -------- --------- --------- 193,320 66,672 259,992 217,699 Costs and expenses Cost of sales 107,196 36,142 143,338 110,006 Operating 38,358 17,183 55,541 52,853 Depreciation and amortization 6,100 2,843 8,943 8,437 Selling, general and administrative expenses 5,751 1,567 7,318 5,506 Management fee 515 - 515 775 --------- -------- --------- --------- 157,920 57,735 215,655 177,577 Income before interest expense and income taxes 35,400 8,937 44,337 40,122 Interest expense - 1,985 1,985 - --------- -------- --------- --------- Income before provision for income taxes 35,400 6,952 42,352 40,122 Provision for income taxes 16,124 21 16,145 18,276 --------- -------- --------- --------- Net income $ 19,276 $ 6,931 $ 26,207 $ 21,846 ========= ======== ========= ========= General partner's interest in net income $ 139 --------- Limited partners' interest in net income $ 6,792 ========= Net income per Unit $ 0.24 ========= Weighted average number of Units outstanding 28,726 ---------
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per unit amounts) (unaudited) October 1, 1995 October 1, 1995 October 1, 1994 through March 5, 1996 through through March 4, 1996 through March 30, 1996 April 1, 1995 (Predecessor) March 30, 1996 (Combined) (Predecessor) -------------- -------------- ----------- ------------- Revenues Propane $ 352,621 $ 61,929 $ 414,550 $ 367,555 Other 31,378 4,743 36,121 35,307 ----------- ----------- ----------- ----------- 383,999 66,672 450,671 402,862 Costs and expenses Cost of sales 204,491 36,142 240,633 204,152 Operating 88,990 17,183 106,173 103,054 Depreciation and amortization 14,816 2,843 17,659 16,954 Selling, general and administrative expenses 12,616 1,567 14,183 11,406 Management fee 1,290 - 1,290 1,550 ----------- ----------- ----------- ----------- 322,203 57,735 379,938 337,116 Income before interest expense and income taxes 61,796 8,937 70,733 65,746 Interest expense, net - 1,985 1,985 - ----------- ----------- ----------- ----------- Income before provision for income taxes 61,796 6,952 68,748 65,746 Provision for income taxes 28,147 21 28,168 29,947 ----------- ----------- ----------- ----------- Net income $ 33,649 $ 6,931 $ 40,580 $ 35,799 =========== =========== ============ =========== General partner's interest in net income $ 139 ----------- Limited partners' interest in net income $ 6,792 =========== Net income per Unit $ 0.24 =========== Weighted average number of Units outstanding 28,726 -----------
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) December 30, 1995 December 30, 1995 December 30, 1994 through March 5, 1996 through through March 4, 1996 through March 30, 1996 April 1, 1995 (Predecessor) March 30, 1996 (Combined) (Predecessor) ------------- -------------- ---------- ------------- Cash flows from operating activities: Net Income $ 19,276 $ 6,931 $ 26,207 $ 21,846 Adjustments to reconcile net income to net cash provided by operations: Depreciation 4,947 2,239 7,186 6,849 Amortization 1,153 604 1,757 1,588 (Gain) loss on disposal of property, plant and equipment (62) (9) (71) 16 Changes in operating assets and liabilities, net of acquistions and dispositions: (Increase) decrease in accounts receivable (21,177) 36,852 15,675 3,782 Decrease in inventories 7,833 6,712 14,545 13,947 (Increase) decrease in prepaid expenses and other current assets (653) (3,242) (3,895) 933 Increase (decrease) in accounts payable 337 647 984 (10,009) Increase in due to affiliate -- 41,735 41,735 -- Increase in accrued employment and benefit costs 4,643 496 5,139 1,025 Increase (decrease) in other accrued liabilities 201 1,563 1,764 (2,638) Other noncurrent assets (1,199) (228) (1,427) 26 Deferred credits and other noncurrent liabilities (1,562) 318 (1,244) (2,199) --------- --------- --------- --------- Net cash provided by operating activities 13,737 94,618 108,355 35,166 --------- --------- --------- --------- Cash flows from investing activities: Capital expenditures (3,388) (2,428) (5,816) (6,626) Acquistions (9,628) (1,947) (11,575) (736) Proceeds from sale of property, plant and equipment, net 443 146 589 1,333 --------- --------- --------- --------- Net cash used for investing activities (12,573) (4,229) (16,802) (6,029) --------- --------- --------- --------- Cash flows from financing activities: Cash activity with parent, net (1,078) -- (1,078) (28,943) Proceeds from debt placement -- 425,000 425,000 -- Proceeds from offering-net -- 413,569 413,569 -- Debt placement and credit agreement expenses -- (6,224) (6,224) -- Cash distribution to general partner -- (832,345) (832,345) -- --------- --------- --------- --------- Net cash used for financing activities (1,078) -- (1,078) (28,943) --------- --------- --------- --------- Net increase in cash 86 90,389 90,475 194 Cash and cash equivalents at beginning of period 119 205 119 78 --------- --------- --------- --------- Cash and cash equivalents at end of period $ 205 $ 90,594 $ 90,594 $ 272 ========= ========= ========= =========
The accompanying notes are an intergral part of these condensed consolidated financial statements. 6 SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) October 1, 1995 October 1, 1995 October 1, 1994 through March 5, 1996 through through March 4, 1996 through March 30, 1996 April 1, 1995 (Predecessor) March 30, 1996 (Combined) (Predecessor) ------------- -------------- ---------- ------------- Cash flows from operating activities: Net Income $ 33,649 $ 6,931 $ 40,580 $ 35,799 Adjustments to reconcile net income to net cash provided by operations: Depreciation 12,033 2,239 14,272 13,787 Amortization 2,783 604 3,387 3,167 Gain on disposal of property, plant and equipment (85) (9) (94) (61) Changes in operating assets and liabilities, net of acquistions and dispositions: (Increase) decrease in accounts receivable (56,643) 36,852 (19,791) (19,367) Decrease in inventories 2,829 6,712 9,541 12,674 (Increase) decrease in prepaid expenses and other current assets (1,874) (3,242) (5,116) 477 Increase (decrease) in accounts payable 9,335 647 9,982 (3,041) Increase in due to affiliate -- 41,735 41,735 -- Increase (decrease) in accrued employment and benefit costs 2,303 496 2,799 (5,219) (Decrease) increase in other accrued liabilities (3,530) 1,563 (1,967) (6,997) Other noncurrent assets (1,203) (228) (1,431) 230 Deferred credits and other noncurrent liabilities (3,362) 318 (3,044) (2,069) --------- --------- --------- --------- Net cash (used for) provided by operating activities (3,765) 94,618 90,853 29,380 --------- --------- --------- --------- Cash flows from investing activities: Capital expenditures (9,796) (2,428) (12,224) (12,406) Acquistions (13,172) (1,947) (15,119) (2,395) Proceeds from sale of property, plant and equipment, net 1,003 146 1,149 3,705 --------- --------- --------- --------- Net cash used for investing activities (21,965) (4,229) (26,194) (11,096) --------- --------- --------- --------- Cash flows from financing activities: Cash activity with parent, net 25,799 -- 25,799 (18,310) Proceeds from debt placement -- 425,000 425,000 -- Proceeds from offering-net -- 413,569 413,569 -- Debt placement and credit agreement expenses -- (6,224) (6,224) -- Cash distribution to general partner -- (832,345) (832,345) -- --------- --------- --------- --------- Net cash provided by (used for) financing activities 25,799 -- 25,799 (18,310) --------- --------- --------- --------- Net increase (decrease) in cash 69 90,389 90,458 (26) Cash and cash equivalents at beginning of period 136 205 136 298 --------- --------- --------- --------- Cash and cash equivalents at end of period $ 205 $ 90,594 $ 90,594 $ 272 ========= ========= ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 7 SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (IN THOUSANDS) (UNAUDITED) Total Number of Units General Partners' Common Subordinated Common Subordinated Partner Capital ---------------------------------------------------------------------------------------- Balance at March 4, 1996 -- -- -- -- -- -- Contribution in connection with formation of the Partnership and issuance of Common Units 21,562 7,164 $150,488 $ 49,890 $ 4,089 $204,467 Net income -- -- 5,101 1,691 139 6,931 --------------------------------------------------------------------------------------- Balance at March 30, 1996 21,562 7,164 $155,589 $ 51,581 $ 4,228 $211,398 =======================================================================================
The accompanying notes are an integral part of these condensed consolidated financial statements. 8 SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 30, 1996 (DOLLARS IN THOUSANDS) (UNAUDITED) 1. PARTNERSHIP ORGANIZATION AND FORMATION -------------------------------------- Suburban Propane Partners, L.P. (the "Partnership") was formed on December 19, 1995 as a Delaware limited partnership. The Partnership and its subsidiary, Suburban Propane, L.P. (the "Operating Partnership"), were formed to acquire and operate the propane business and assets of the Suburban Propane Division of Quantum Chemical Corporation (the "Predecessor Company"). In addition, Suburban Sales & Service, Inc. (The "Service Company"), a subsidiary of the Operating Partnership, was formed to acquire and operate the service work and appliance and parts sales businesses of the Predecessor Company. The Partnership, the Operating Partnership and the Service Company are collectively referred to hereinafter as the "Partnership Entities". The Partnership Entities commenced operations on March 5, 1996 (the "Closing Date"), upon consummation of an initial public offering of 18,750,000 Common Units representing limited partner interests in the Partnership (the "Common Units"), the private placement of $425,000 aggregate principal amount of Senior Notes due 2011 issued by the Operating Partnership (the "Senior Notes") and the transfer of all the propane assets (excluding the net accounts receivable balance - See Note 3) of the Predecessor Company to the Operating Partnership and the Service Company. On March 25, 1996, the underwriters of the Partnership's initial public offering exercised an overallotment option to purchase an additional 2,812,500 Common Units. The Operating Partnership and Service Company are, and the Predecessor Company was, engaged in the retail and wholesale marketing of propane and related appliances and services. Suburban Propane GP, Inc. (the "General Partner") is a wholly-owned subsidiary of Quantum Chemical Corporation ("Quantum") and serves as the general partner of the Partnership and the Operating Partnership. Both the General Partner and Quantum are indirect wholly-owned subsidiaries of Hanson PLC ("Hanson"). The General Partner holds a 1% general partner interest in the Partnership and a 1.0101% general partner interest in the Operating Partnership. In addition, the General Partner owns a 24.4% limited partner interest in the Partnership. This limited partner interest is evidenced by subordinated units representing limited partner interests in the Partnership. The General Partner has delegated to the Board of Supervisors all management powers over the business and affairs of the Partnership Entities that the General Partner possesses under applicable law. 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -------------------------------------------------------------------- Basis of Presentation. The condensed consolidated financial statements include the accounts of the Partnership Entities. All significant inter-company transactions and accounts have been eliminated . The accompanying condensed 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 9 results for the interim period presented. Such adjustments consisted only of normal recurring items unless otherwise disclosed. These financial statements should be read in conjunction with the Predecessor Company financial statements contained in Amendment No. 4 to the Partnership's Form S-1 Registration Statement (Registration No. 33-80605) filed with the Commission on February 28, 1996. 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 Period. The Partnership's fiscal periods end on the last Saturday of the quarter. Accordingly, the accompanying condensed consolidated results of operations for the Partnership are for the period March 5, 1996 (date at which Partnership operations commenced) to March 30, 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. Cash Equivalents. The Partnership considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Revenue Recognition. Sales of propane are recognized at the time product is shipped or delivered to the customer. Revenue from the sale of propane appliances and equipment is recognized at the time of sale or installation. Revenue from repairs and maintenance is recognized upon completion of the service. Inventories. Inventories are stated at the lower of cost or market. Cost is determined using a weighted average method for propane and a specific identification basis for appliances. Property, Plant and Equipment. Property, plant and equipment are stated at cost. When plant and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any gains or losses are reflected in operations. Depreciation of property, plant and equipment is computed using the straight-line method over the estimated service lives which range from three to forty years. Accumulated depreciation at March 30, 1996 and September 30, 1995 was $71,340 and $57,067, respectively. Intangible assets. Intangible assets are comprised of the following at March 30, 1996: Goodwill $259,618 Debt origination costs 6,224 Other, principally noncompete agreements 2,499 ----------- 268,341 Less: Accumulated amortization 16,016 ----------- $252,325 =========== 10 Goodwill represents the excess of the purchase price over the fair market value of net assets acquired and is being amortized on a straight-line basis over forty years from the date of acquisition. Debt origination costs represent the costs incurred in connection with the placement of the $425,000 of Senior Notes (see Note 6) which is being amortized on a straight-line basis over 15 years. Income Taxes. As discussed in Note 1, the Partnership Entities consist of two limited partnerships, the Partnership and the Operating Partnership, and one corporate entity, the Service Company. For federal and state income tax purposes, the earnings attributed to the Partnership and Operating Partnership are included in the tax returns of the 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 the Partnership and Operating Partnership. The earnings attributed to the Service Company are subject to federal and state income taxes. Accordingly, the Partnership's consolidated financial statements reflect income tax expense related to the Service Company's earnings. Net Income Per Unit. Net income per unit is computed by dividing net income, after deducting the General Partner's 2% interest by the weighted average number of outstanding Common Units and Subordinated Units. Reclassifications: Certain prior period balances have been reclassified to conform with the current period presentation. 3. DISTRIBUTIONS OF AVAILABLE CASH ------------------------------- The Partnership will make distributions to its partners 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 all cash on hand at the end of the fiscal quarter plus all additional cash on hand as a result of borrowings and purchases of additional limited partner units (APUs) subsequent to the end of such quarter less cash reserves established by the Board of Supervisors in its reasonable discretion for future cash requirements. The Partnership has not made a distribution to Unitholders for the partial fiscal quarter ended March 30, 1996. The Partnership expects to make a distribution with respect to the fiscal quarter ending June 29, 1996 to holders of record as of July 26, 1996. The minimum Quarterly Distribution and Target Distribution levels for said fiscal quarter will be increased proportionately to reflect the fact that a distribution was not made for the partial fiscal quarter ended March 30, 1996. 4. RELATED PARTY TRANSACTIONS -------------------------- Pursuant to the Contribution, Conveyance and Assumption Agreement dated as of March 4, 1996, between Quantum and the Partnership (the "Contribution Agreement") Quantum retained ownership of the Predecessor Company's accounts receivable, net of allowance for doubtful accounts, as of the Closing Date. The Partnership retained from the net proceeds of the Common Unit offering cash in an amount equal to the net book value of such accounts receivable. In accordance with the Contribution Agreement, the Partnership has agreed to collect such accounts receivable on behalf of Quantum which amounted to $97,700 as of the Closing Date. As of March 30, 1996, the Operating Partnership had collected $78,000 in accounts receivable and remitted $29,400 to Quantum, resulting in a liability to Quantum of $48,600 as of March 30, 1996. 11 At March 30, 1996, the Partnership's consolidated balance sheet reflects a $36,200 payable due to Quantum (classified as "Due to affiliate, net") representing the $48,600 of the Predecessor Company accounts receivable balances collected but not yet remitted to Quantum as described above offset by $12,400 of amounts due from Quantum principally related to expenditures made by the Partnership on behalf of Quantum related to the Partnership formation and a closing price adjustment in accordance with the Contribution Agreement. Pursuant to a Computer Services Agreement dated as of the Closing Date between Quantum and the Partnership, Quantum permits the Partnership to utilize Quantum's mainframe computer for the generation of customer bills, reports and information regarding the Partnership's retail sales. For the partial fiscal quarter ended March 30, 1996, the Partnership incurred expenses of $31 under the Services Agreement. Subsequent Event. During April 1996 and through May 6, 1996, the Operating Partnership remitted $49,000 to Quantum relating to accounts receivable of the Predecessor Company collected by the Partnership on behalf of Quantum . 5. COMMITMENTS AND CONTINGENCIES ----------------------------- The Partnership leases certain property, plant and equipment for various periods under noncancelable leases. Rental expense under operating leases was $6,679 for the six months ended March 30, 1996. The Partnership is involved in various legal actions which have arisen in the normal course of business including those relating to commercial transactions and product liability. It is the opinion of management, based on the advice of legal counsel, that the ultimate resolution of these matters will not have a material adverse effect on the Partnership's financial position or future results of operations. 6. LONG-TERM DEBT -------------- On the Closing Date, the Operating Partnership issued $425,000 of Senior Notes with an annual interest rate of 7.54%. The Operating Partnership's obligations under the Senior Note Agreement are unsecured and will rank on an equal and ratable basis with the Operating Partnership's obligations under the Bank Credit Facilities discussed in Note 7 below. The Senior Notes will mature June 30, 2011, and require semiannual interest payments commencing June 30, 1996. The Note Agreement requires that the principal be paid in equal annual payments of $42,500 starting June 30, 2002. The Senior Note Agreement contains various restrictive and affirmative covenants applicable to the Operating Partnership, including (i) maintenance of certain financial tests, (ii) restrictions on the incurrence of additional indebtedness, and (iii) restrictions on certain liens, investments, guarantees, loans, advances, payments, mergers, consolidations, distributions, sales of assets and other transactions. 12 7. BANK CREDIT FACILITIES ---------------------- The Bank Credit Facilities consist of a $100,000 acquisition facility ("Acquisition Facility") and a $75,000 working capital facility ("The Working Capital Facility"). The Operating Partnership's obligations under the Bank Credit Facilities are unsecured on an equal and ratable basis with the Operating Partnership's obligations under the Senior Notes. The Bank Credit Facilities will bear interest at a rate based upon either LIBOR, Chemical Bank's prime rate or the Federal Funds effective rate plus 1/2 of 1% and in each case, plus a margin. In addition, an annual fee (whether or not borrowings occur), is payable quarterly ranging from 0.125% to 0.375% based upon certain financial tests. The Credit Agreement governing the Acquisition Facility and Working Capital Facility contains covenants generally similar to those contained in the Senior Note Agreement. The Working Capital Facility will expire on March 1, 1999. The Acquisition Facility will expire on March 1, 2003. Any loans outstanding under the Acquisition Facility after March 1, 1999 will require equal quarterly principal payments over a four year period. 8. UNAUDITED PRO FORMA FINANCIAL INFORMATION ----------------------------------------- The accompanying unaudited pro forma condensed consolidated statements of operations for the three and six months ended March 30, 1996 and April 1, 1995 were derived from the historical statements of operations of the Predecessor Company for the periods October 1, 1994 through April 1, 1995 and October 1, 1995 through March 4, 1996 and the condensed consolidated statement of operations of the Partnership from March 5, 1996 through March 30, 1996. The pro forma condensed consolidated statements of operations were prepared to reflect the effects of Partnership formation 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 partnership formation actually been completed as of the beginning of the periods presented. In addition, the pro forma condensed consolidated statements of operations are not necessarily indicative of the results of future operations of the Partnership and should be read in conjunction with the historical condensed consolidated financial statements of the Predecessor Company and the Partnership appearing elsewhere in this Quarterly Report on Form 10-Q. 13 SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March 30 April 1 ------------------------------ 1996 1995 ---- ---- Revenues Propane $ 243,853 $ 202,655 Other 16,139 15,044 --------- --------- 259,992 217,699 Costs and Expenses Cost of sales 143,338 110,006 Operating 55,541 52,853 Depreciation and amortization 8,943 8,437 Selling, general and administrative expenses 7,833 6,281 --------- --------- 215,655 177,577 Income before interest expenses and income taxes 44,337 40,122 Interest expense, net 7,781 8,175 Income before provision for income taxes 36,556 31,947 Provision for income taxes 63 63 --------- -------- Net income $ 36,493 $ 31,884 ========= ======== General partner's interest in net income $730 $638 ---- ---- Limited partners' interest in net income $35,763 $31,246 ======= ======= Net income per Unit $1.24 $1.09 ===== ===== Weighted average number of Units outstanding 28,726 28,726 ====== ====== 14 SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Six Months Ended March 30 April 1 --------------------------- 1996 1995 ---- ---- Revenues Propane $ 414,550 $ 367,555 Other 36,121 35,307 --------- --------- 450,671 402,862 Costs and Expenses Cost of sales 240,633 204,152 Operating 106,173 103,054 Depreciation and amortization 17,659 16,954 Selling, general and administrative expenses 15,473 12,956 --------- --------- 379,938 337,116 Income before interest expenses and income taxes 70,733 65,746 Interest expense, net 16,011 16,350 Income before provision for income taxes 54,722 49,396 Provision for income taxes 126 126 -------- --------- Net income $ 54,596 $ 49,270 ======== ========= General partner's interest in net income $1,092 $985 ------ ---- Limited partners' interest in net income $53,504 $48,285 ======= ======= Net income per Unit $1.86 $1.68 ===== ===== Weighted average number of Units outstanding 28,726 28,726 ====== ====== 15 9. UNAUDITED PRO FORMA FINANCIAL INFORMATION - CONTINUED ----------------------------------------------------- Significant pro forma adjustments reflected in the above data include the following: 1. For the three and six month periods ended March 30, 1996 and April 1, 1995, the elimination of management fees paid by the Predecessor Company to HM Holdings, Inc. 2. For the three and six month periods ended March 30, 1996 and April 1, 1995, the addition of the estimated incremental general and administrative costs associated with the partnership operating as a publicly traded partnership. 3. For the three and six month periods ended March 30, 1996 and April 1, 1995, an adjustment to interest expense to reflect the interest expense associated with the Senior Notes and Bank Credit facilities. 4. For the three and six month periods ended March 30, 1996, and April 1, 1995, the elimination of the provision for income taxes, as income taxes will be borne by the Partners and not the Partnership, except for corporate income taxes related to the Service Company. 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 30, 1996 - - --------------------------------- COMPARED TO THREE MONTHS ENDED APRIL 1, 1995 - - -------------------------------------------- REVENUES Revenues increased 19.4% or $42.3 million to $260.0 million for the three months ended March 30, 1996 as compared to $217.7 million for the three months ended April 1, 1995. The overall increase is primarily attributable to higher retail volumes as gallons increased 11.7% to 205.0 million gallons as compared to 183.5 million gallons for the three months ended April 1, 1995. Propane sold to residential and commercial customers increased 11.4% or 14.6 million gallons due to colder than normal temperatures in all sections of the country, except for the West. Wholesale gallons increased 17.8% or 10.6 million gallons to 70.2 million gallons compared to 59.6 million in the prior period due to the colder temperatures and higher demand resulting from low industry-wide inventory levels. Revenues also increased due to higher retail and wholesale selling prices necessitated by increased product costs. GROSS PROFIT Gross profit increased 8.3% or $9.0 million to $116.7 million for the three months ended March 30, 1996 compared to $107.7 million in the prior period. The increase in gross profit primarily resulted from higher retail propane volumes partially offset by lower retail margins due to product cost increases which were not fully passed on to retail customers. OPERATING EXPENSES Operating expenses increased 5.1% or $2.7 million to $55.6 million for the three months ended March 30, 1996 as compared to $52.9 million for the three months ended April 1, 1995. The increase in operating expenses is principally due to higher retail and wholesale volumes and the severe weather conditions on the East Coast, which resulted in higher delivery costs including payroll and vehicle operating expenses coupled with higher equipment maintenance and fuel costs. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, General and Administrative expenses increased 33% or $1.8 million to $7.3 million for the three months ended March 30, 1996 compared to $5.5 million for the three months ended April 1, 1995. Expenses increased due to higher employee incentive costs, expenditures for employee training and new customer satisfaction programs coupled with higher general and administrative costs associated with operating as a publicly traded Partnership. OPERATING INCOME AND EBITDA Operating income increased 10.5% or $4.2 million to $44.3 million in the three months ended March 30, 1996 compared to $40.1 million in the prior period. EBITDA increased 9.7% or $4.7 million 17 to $53.3 million. This increase is primarily attributable to the higher volume of retail gallons sold partially offset by lower retail margins and an increase in operating and administrative expenses. 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. SIX MONTHS ENDED MARCH 30, 1996 - - ------------------------------- COMPARED TO SIX MONTHS ENDED APRIL 1, 1995 - - ------------------------------------------ REVENUES Revenues increased 11.9% or $47.8 million to $450.7 million for the six months ended March 30, 1996 as compared to $402.9 million for the six months ended April 1, 1995. The overall increase is primarily attributable to higher retail volumes as gallons increased 8.5% or 28.3 million gallons to 362.6 million gallons as compared to 334.3 million gallons for the six months ended April 1, 1995. Propane sold to residential and commercial customers increased 10.0% or 22.5 million gallons due to colder than normal temperatures in all sections of the country, except for the West. Wholesale gallons increased 3.6% or 4.2 million gallons to 120.6 million gallons compared to 116.4 million gallons in the prior period due to the colder temperatures and higher demand resulting from low industry-wide inventory levels. Revenues also increased due to higher retail and wholesale selling prices necessitated by increased product costs. GROSS PROFIT Gross profit increased 5.7% or $11.3 million to $210.0 million for the six months ended March 30, 1996 compared to $198.7 million in the prior period. The increase in gross profit principally resulted from higher retail propane volumes partially offset by lower retail margins resulting from increased product costs which were not fully passed on to customers. OPERATING EXPENSES Operating expenses increased 3.0% or $3.1 million to $106.2 million for the six months ended March 30, 1996 as compared to $103.1 million for the six months ended April 1, 1995. Operating expenses increased due to higher delivery costs associated with the higher volumes, higher maintenance and fuel costs and a $0.5 million non-recurring expense related to a fire at an underground storage facility in November 1995. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, General and Administrative expenses increased 24% or $2.8 million to $14.2 million for the six months ended March 30, 1996 compared to $11.4 million for the six months ended April 1, 1995. Expenses increased due to higher employee incentive costs, expenditures for employee training, new customer satisfaction programs and higher general and administrative costs associated with operating as a publicly traded Partnership. 18 OPERATING INCOME AND EBITDA Operating income increased 7.6% or $5.0 million to $70.7 million in the six months ended March 30, 1996 compared to $65.7 million in the prior period. EBITDA increased 6.9% or $5.7 million to $88.4 million. This increase is primarily attributable to the higher volume of retail gallons sold partially offset by lower retail margins and an increase in operating and general and administrative expenses. 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 Due to the seasonal nature of the propane business, cash flows from operating activities are greater during the winter and spring seasons as customers pay for propane purchased during the heating season. For the three months ended March 30, 1996, net cash provided by operating activities increased $73.2 million to $108.4 million compared to $35.2 million in the three months ended April 1, 1995. The increase was primarily attributable to an additional $60.5 million of net cash provided from accounts receivable activity including the Predecessor Company accounts receivable and subsequent collections by the Partnership of said retained receivables in excess of cash remitted to Quantum. In addition, accounts payable increased by $11.0 million reflecting an increase in the cost and volume of gallons sold. Net cash used in investing activities was $16.8 million for the three months ended March 30, 1996 consisting of capital expenditures of $5.8 million and acquisition payments of $11.6 million, offset by proceeds from the sale of property, plant and equipment of $ .6 million. Net cash used in investing activities was $6.0 million for the three months ended April 1, 1995 consisting of capital expenditures of $6.6 million and acquisition payments of $0.7 million, offset by proceeds from the sale of property, plant and equipment of $1.3 million. The increase in cash used for acquisition activities of $10.9 million primarily results from the Partnership's business strategy to expand its operations and increase its retail market share through selective acquisitions of other propane distributors as well as through internal growth. For the six months ended March 30, 1996, net cash provided by operating activities increased $61.5 million to $90.9 million compared to $29.4 million for six months ended April 1, 1995. The increase is primarily attributable to an increase in "Due to affiliate, net" of $41.7 million principally reflecting the collection of Predecessor Company accounts receivable on behalf of Quantum discussed above and an increase in accounts payable of $13.0 million due to an increase in the cost and volume of propane sold. Net cash used in investing activities was $26.2 million for the six months ended March 30, 1996, reflecting $12.2 million in capital expenditures and $15.1 million of payments for acquisitions offset by net proceeds of $1.1 million from the sale of property, plant and equipment. Net cash used in investing activities was $11.0 million for the six months ended April 1, 1995, consisting of capital expenditures of $12.4 million and acquisition payments of $2.4 million, offset by proceeds from the sale of property and equipment of $3.7 million. 19 Prior to March 5, 1996, the Predecessor Company's cash accounts had been managed on a centralized basis by HM Holdings, Inc. ("HM Holdings"), a wholly-owned affiliate of Hanson. Accordingly, cash receipts and disbursements relating to the operations of the Predecessor Company were received or funded by HM Holdings. Net cash used by financing activities which are reflected as a decrease in division invested capital, was $1.1 million during the three months ended March 30, 1996 compared to $28.9 million in the prior period. Net cash provided by financing activities, which are reflected as a increase in division invested capital, was $25.8 million for the six months ended March 30, 1996 compared to $18.3 million of net disbursements (reduction of division invested capital) in 1995. In March 1996, the Operating Partnership issued $425.0 million aggregate principal amount of Senior Notes with an interest rate of 7.54% for net cash proceeds of $418.8 million. Also, the Partnership, by means of an initial public offering and the exercise of an overallotment option by the underwriters, issued 21,562,500 Common Units for net cash proceeds of $413.6 million. The net proceeds of the Notes and Units issuance (which totals $832.4 million), less $5.6 million reflecting a closing price adjustment to adjust division invested capital to $623.2 million immediately prior to the Partnership formation and $97.7 million reflecting the retention of the Predecessor Company net accounts receivable by Quantum, was used to acquire the propane assets from Quantum, pay off the intercompany payables and make a special distribution to the General Partner. The Partnership will make distributions in an amount equal to all of its Available Cash approximately 45 days after the end of each fiscal quarter to holders of record on the applicable record dates. The first distribution is scheduled to occur on August 13, 1996 and reflect distributions for the period March 5, 1996 through June 29, 1996. 20 SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES PART II ITEM 5. OTHER INFORMATION - NONE. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (27) Financial Data Schedule (99) Press Release, dated March 28, 1996, regarding the appointment of Harold R. Logan, Jr. as an elected Supervisor of the Board of Supervisors. (B) Form 8-K On April 27, 1996, the Partnership filed a Form 8-K reporting on Other Events relating to the Partnership's initial public offering of the Common Units and the Operating Partnership's private placement of the Senior Notes and for the purpose of filing certain Exhibits relating to said transactions. 21 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1934, THE REGISTRANT HAS CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED: SUBURBAN PROPANE PARTNERS, L.P. DATE: MAY 13, 1996 BY /s/ CHARLES T. HOEPPER --------------------------------------- CHARLES T. HOEPPER VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND CHIEF ACCOUNTING OFFICER EXHIBIT INDEX Exhibit No. Description ----------- ----------- (27) Financial Data Schedule (99) Press Release, dated March 28, 1996, regarding the appointment of Harold R. Logan, Jr. as an elected Supervisor of the Board of Supervisors. 23 EX-27 2 FINANCIAL DATA SCHEDULE
5 This Schedule contains summary financial information extracted from the financial statements contained in the body of the accompanying Form 10-Q and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS SEP-30-1995 MAR-30-1996 90,594 0 60,958 122 27,122 184,670 437,582 71,340 858,567 111,330 425,000 0 0 0 211,398 858,567 450,671 450,671 240,633 346,806 0 122 1,985 68,748 28,168 40,580 0 0 0 40,580 0 0
EX-99 3 PRESS RELEASE SUBURBAN PROPANE One Suburban Plaza * 240 Route 10 West * P.O. Box 206 * Whippany, NJ 07981-0206 Office 201-887-5300 Contact: Mark Alexander Executive Vice Chairman Suburban Propane Partners, L.P. 201-887-5300 For Immediate Release --------------------- SUBURBAN PROPANE PARTNERS ELECTS HAROLD R. LOGAN, JR. TO -------------------------------------------------------- BOARD OF SUPERVISORS -------------------- Whippany, New Jersey - March 28, 1996 - Suburban Propane Partners, L.P., (NYSE:SPH) announced today that Harold R. Logan, Jr. has been elected to the Company's Board of Supervisors. Mr. Logan, 51, is Executive Vice President, Chief Financial Officer and a director of Denver-based TransMontaigne Oil Company. TransMontaigne is engaged in the marketing and distribution of gasoline, jet fuel and natural gas. Previously, Mr. Logan served as Senior Vice President of Finance and as a director of Associated Natural Gas Corporation, an independent gatherer and marketer of natural gas, natural gas liquids and crude oil, which was acquired by Panhandle Eastern Corporation in 1994. Mark A. Alexander, Suburban Propane's Executive Vice Chairman, in making the announcement said, "We are very pleased that Hal Logan has agreed to serve as an Elected Supervisor on our Board. We will benefit significantly from Hal's diverse and extensive hands-on management experience in the energy industry as we enter new markets." Suburban Propane Partners is one of the country's leading propane gas companies and is engaged in the retail and wholesale marketing of propane in the United States. The Company's Master Limited Partnership Units began trading on the New York Stock Exchange on February 29, 1996. # # # -----END PRIVACY-ENHANCED MESSAGE-----