May 12, 2006 Via EDGAR and Federal Express Securities and Exchange Commission Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 Attn: Mr. George F. Ohsiek, Jr., Branch Chief Re: Suburban Propane Partners, L.P. Form 10-K for Fiscal Year Ended September 24, 2005 Filed December 5, 2005 Form 10-Q for Fiscal Quarter Ended December 24, 2005 File No. 1-14222 Ladies and Gentlemen: This memorandum responds to the comments of the staff of the Securities and Exchange Commission (the "Staff") contained in a letter to Suburban Propane Partners, L.P. (the "Partnership"), dated April 28, 2006, relating to the Form 10-K for the fiscal year ended September 24, 2005, filed on December 5, 2005, and the Form 10-Q for the fiscal quarter ended December 24, 2005. Set forth below in bold are each of the comments in the Staff's letter. Immediately following each of the Staff's comments is the Partnership's response to that comment, including where applicable, example language that we propose to incorporate into prospective filings with the Commission in response to the Staff's comment. For your convenience, each of the numbered paragraphs below corresponds to the numbered comment in the Staff's comment letter and includes the caption used in the comment letter. FORM 10-K FOR FISCAL YEAR ENDED SEPTEMBER 24, 2005 -------------------------------------------------- SELECTED FINANCIAL DATA, PAGE 12 -------------------------------- 1. BASED ON YOUR DISCLOSURES HERE AND ELSEWHERE THROUGHOUT THE DOCUMENT, WE NOTE THAT YOU ARE PRESENTING EBITDA AS A MEASURE OF YOUR LIQUIDITY. IN FUTURE FILINGS PLEASE REVISE YOUR DISCLOSURES HERE AND EACH PLACE WHERE EBITDA IS PRESENTED TO COMPLY WITH ITEM 10(e) OF REGULATION S-K AS FOLLOWS: a. BECAUSE THE MEASURE YOU PRESENT IS CALCULATED DIFFERENTLY THAN EBITDA AS DEFINED IN SEC RELEASE NO. 33-8176, PLEASE RE-CHARACTERIZE THE MEASURE AS ADJUSTED EBITDA, OR USE AN OTHERWISE APPROPRIATE LABEL. IN THIS REGARD, YOU HAVE ADJUSTED GAAP NET INCOME TO EXCLUDE NOT ONLY INTEREST, TAXES, DEPRECIATION AND AMORTIZATION, BUT ALSO LOSS ON DEBT EXTINGUISHMENT. REFER TO QUESTION 14 OF OUR FREQUENTLY ASKED QUESTIONS REGARDING THE USE OF NON-GAAP FINANCIAL MEASURES AVAILABLE ON OUR WEBSITE AT WWW.SEC.GOV (THE NON-GAAP FAQ). b. DISCLOSE THE ADDITIONAL PURPOSES, IF ANY, FOR WHICH YOU USE THE NON-GAAP FINANCIAL MEASURE. REFER TO ITEM 10(e)(1)(i)(D) OF REGULATION S-K. In future filings in which we deviate from the definition of EBITDA as set forth in SEC Release No. 33-8176, we will utilize the term Adjusted EBITDA and provide more detailed disclosure under "Selected Financial Data," and in each other place we use Adjusted EBITDA, in order to clearly describe the basis for our use of the term Adjusted EBITDA. Specifically, in our Form 10-Q for the upcoming fiscal quarter ending June 24, 2006 and for all future filings in which we present EBITDA exclusive of the loss on debt extinguishment, we will use the term Adjusted EBITDA and provide more detailed disclosure in addition to the disclosure regarding EBITDA that is already included in previous filings. An example of our future disclosure for EBITDA, and the additional disclosure for Adjusted EBITDA (underlined for your convenience), is as follows: EBITDA represents net income before deducting interest expense, loss on debt extinguishment, income taxes, depreciation and amortization. Our management uses EBITDA as a measure of liquidity and we are including it because we believe that it provides our investors and industry analysts with additional information to evaluate our ability to meet our debt service obligations and to pay our quarterly distributions to holders of our Common Units. Moreover, our revolving credit agreement requires us to use EBITDA as a component in calculating our leverage and interest coverage ratios. EBITDA is not a recognized term under generally accepted accounting principles ("GAAP") and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with GAAP. Because EBITDA as determined by us excludes some, but not all, items that affect net income, it may not be comparable to EBITDA or similarly titled measures used by other companies. We use the term Adjusted EBITDA to reflect the presentation of -------------------------------------------------------------- EBITDA for the fiscal year ended September 24, 2005 exclusive of ---------------------------------------------------------------- the impact of the non-cash charge for loss on debt extinguishment ----------------------------------------------------------------- in the amount of $36.2 million. We use this non-GAAP financial -------------------------------------------------------------- measure in order to assist industry analysts and investors in ------------------------------------------------------------- assessing our liquidity on a year-over-year basis. -------------------------------------------------- The following table sets forth (i) our calculation of EBITDA and (ii) a reconciliation of EBITDA, as so calculated, to our net cash provided by operating activities: (Dollars in thousands) FISCAL FISCAL FISCAL 2005 2004 2003 ------------- -------------- -------------- Net (loss) income $ (8,076) $ 54,304 $ 48,669 Add: Provision for income taxes 803 3 202 Interest expense, net 40,374 40,832 33,629 Depreciation and amortization 37,762 36,743 27,520 ------------- -------------- -------------- EBITDA 70,863 131,882 110,020 Loss on debt extinguishment 36,242 - - ------------- -------------- -------------- Adjusted EBITDA 107,105 131,882 110,020 Add (subtract): Provision for income taxes (803) (3) (202) Loss on debt extinguishment (36,242) - - Interest expense, net (40,374) (40,832) (33,629) Gain on disposal of property, plant and equipment, net (2,043) (715) (636) Gain on sale of customer service centers (976) (26,332) (2,483) Changes in working capital and other assets and liabilities 12,338 29,065 (15,770) ------------- -------------- -------------- Net cash provided by (used in) Operating activities $ 39,005 $ 93,065 $ 57,300 ============= ============== ============== Investing activities $ (24,631) $(196,557) $ (4,859) ============= ============== ============== Financing activities $ (53,444) $ 141,208 $ (77,631) ============= ============== ============== MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS...., ---------------------------------------------------------------------------- PAGE 15 ------- CONTRACTUAL OBLIGATIONS, PAGE 33 -------------------------------- 2. PLEASE REVISE YOUR CONTRACTUAL OBLIGATIONS TABLE IN FUTURE FILINGS TO INCLUDE ESTIMATED INTEREST PAYMENTS ON YOUR DEBT. BECAUSE THE TABLE IS AIMED AT INCREASING TRANSPARENCY OF CASH FLOW, WE BELIEVE INTEREST PAYMENTS SHOULD BE INCLUDED IN THE TABLE. IF YOU CHOOSE NOT TO INCLUDE THESE PAYMENTS, A FOOTNOTE TO THE TABLE SHOULD CLEARLY IDENTIFY THE EXCLUDED ITEM AND PROVIDE ANY ADDITIONAL INFORMATION THAT IS MATERIAL TO AN UNDERSTANDING OF YOUR CASH REQUIREMENTS. SEE SECTION IV.A AND FOOTNOTE 46 TO THE COMMISSION'S MD&A GUIDANCE ISSUED DECEMBER 19, 2003 AVAILABLE AT WWW.SEC.GOV. We have complied with this comment in our most recent quarterly report on Form 10-Q for the fiscal quarter ended March 25, 2006, filed with the Commission on May 4, 2006, by adding an estimate of future interest payments to the table within the "Debt Obligations and Other Commitments" section of the MD&A. Please refer to page 34 of such filing, an excerpt of which is provided as follows for your convenience: Debt Obligations and Other Commitments The following table presents short-term and long-term debt obligations, cash interest and future minimum rental commitments due under noncancelable operating lease agreements as of March 25, 2006. For purposes of determining cash interest due under the Term Loan, a variable interest debt instrument, we have used the interest rate in effect as of March 25, 2006, taking into consideration the impact of the interest rate swap described above. PAYMENTS DUE BY PERIOD -------------------------------------------------------------------- (Dollars in thousands) REMAINDER FISCAL OF FISCAL FISCAL FISCAL FISCAL 2010 AND 2006 2007 2008 2009 THEREAFTER TOTAL ------------- ----------- ----------- ---------- ------------- -------------- Short-term and long-term debt $ 22,225 $ - $ - $ - $ 548,187 $ 570,412 Future interest payments 21,065 35,603 37,731 37,731 108,650 240,780 Operating leases 12,196 17,403 13,208 8,071 10,120 60,998 -------- -------- -------- ------- --------- --------- Total debt obligations, cash interest and lease commitments $ 55,486 $ 53,006 $ 50,939 $45,802 $ 666,957 $ 872,190 ======== ======== ======== ======= ========= ========= FINANCIAL STATEMENTS, PAGE F-1 ------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, PAGE F-8 ---------------------------------------------------- NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, PAGE F-9 ------------------------------------------------------------- DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, PAGE F-9 ------------------------------------------------------- 3. PLEASE TELL US HOW YOU JUSTIFY CLASSIFYING UNREALIZED GAINS AND LOSSES ON DERIVATIVE INSTRUMENTS THAT ARE NOT DESIGNATED AS HEDGES AS OPERATING EXPENSES AND LATER RECLASSIFYING REALIZED GAINS AND LOSSES TO COST OF PRODUCTS SOLD. PLEASE TELL US THE DOLLAR IMPACT ON OPERATING EXPENSES AND COST OF PRODUCTS SOLD FOR ALL PERIODS PRESENTED. WE DO NOT BELIEVE THAT THE PRESENTATION OF UNREALIZED GAINS AND LOSSES IN ONE INCOME STATEMENT LINE ITEM WITH RECLASSIFICATION OF REALIZED GAINS AND LOSSES TO ANOTHER INCOME STATEMENT LINE ITEM IS APPROPRIATE. REFER TO PARAGRAPHS 238 AND 349-350 IN THE BASIS FOR CONCLUSIONS TO SFAS 133. As a retail distributor of commodities such as propane and fuel oil, our average selling prices are largely dependent on the volatility in the commodity markets and represent a mark-up from the unit cost of these commodities. As more fully disclosed in Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements and in Item 7A of our Annual Report on Form 10-K, we enter into derivative instruments in order to manage and hedge exposure to fluctuating prices of propane and fuel oil, as well as to help ensure the availability of product during periods of high demand. With this hedging strategy, we enter into futures, forward and option contracts, the majority of which qualify and are accounted for as cash flow hedges of our future purchases of inventory. A portion of our contracts do not qualify under SFAS 133 for classification as cash flow hedges and, as such, unrealized gains and losses are recognized in earnings for each reporting period. The realized gains and losses attributable to all derivative instruments, whether qualifying as cash flow hedges or not, become part of our weighted average cost of products sold, whereas unrealized gains or losses do not affect the value of inventory (i.e., the hedged item) until realized. We present the unrealized gains and losses within operating expenses in order to provide our investors and industry analysts with the actual weighted average cost of products sold as the item being hedged affects earnings. Additionally, we do not make a distinction of gross profit on our consolidated statement of operations. In Note 2, "Summary of Significant Accounting Principles," and Note 13, "Financial Instruments," to the consolidated financial statements and in Item 7A of our Annual Report on Form 10-K for the fiscal year ended September 24, 2005, we provide the financial statement reader with the line item on the consolidated statement of operations in which such unrealized amounts are reported and also disclose the dollar amount recognized for each period presented. In addition, in Note 2, "Summary of Significant Accounting Policies," we provide disclosure regarding the costs and expenses that are included within each of cost of products sold, operating expenses and general and administrative expenses within the consolidated statement of operations. Respectfully, we believe these disclosures provide the necessary transparency of our accounting policies for derivative instruments and the impact of such policies on the financial statements. Supplementally, the following is a summary of the dollar impact of realized and unrealized gains or losses reported for all periods presented: FISCAL YEAR ENDED FISCAL QUARTER ENDED ------------------------------------------- ----------------------------- (Dollars in thousands) SEPT. 24, SEPT. 25, SEPT. 27, DEC. 24, DEC. 25, 2005 2004 2003 2005 2004 ------------- ------------- ------------- -------------- ------------ Realized gains/(losses) reported in cost of products sold $ (5,549) $ (1,655) $ (80) $ (354) $ 5,890 Unrealized gains/(losses) reported in operating expenses $ (2,497) $ (4,523) $ (1,500) $ 7,042 $ 2,523 LONG-LIVED ASSETS, PAGE F-10 ---------------------------- 4. TANKS AND CYLINDERS CONSTITUTE THE MAJORITY OF YOUR EQUIPMENT BALANCE. YOU DISCLOSE THAT EQUIPMENT IS BEING DEPRECIATED OVER PERIODS RANGING FROM 3 TO 40 YEARS. PLEASE DISCLOSE IN GREATER DETAIL THE PERIODS OVER WHICH EACH OF YOUR PRIMARY CATEGORIES OF TANKS AND CYLINDERS ARE BEING DEPRECIATED CONSISTENT WITH YOUR RESPONSE TO COMMENT 44 IN YOUR LETTER TO US DATED MAY 20, 2003. SHOW US HOW YOUR REVISED DISCLOSURES WILL READ IN FUTURE FILINGS. In future filings of our Annual Report on Form 10-K, we will provide more detailed disclosure of the primary categories of fixed assets within the "Selected Balance Sheet Information" note to the consolidated financial statements by segregating the value of office equipment from tanks and cylinders. As of September 24, 2005, the Partnership disclosed these categories on a combined basis as "equipment, primarily tanks and cylinders" with a total gross value of $436,918. Of this combined gross value, $19,083 represented office equipment and the remaining $417,835 represented tanks and cylinders. In addition, within the "Summary of Significant Accounting Policies" note to the consolidated financial statements, we will provide the range of estimated useful lives for each of these fixed asset categories as follows: Office equipment 3 to 7 Years Tanks and cylinders 13 to 40 Years We will also add the following disclosure to the "Summary of Significant Accounting Policies" note in order to provide additional information regarding the average useful life of the tanks and cylinders category: "The weighted average estimated useful life of the Partnership's tanks and cylinders is approximately 25 years." In connection with responding to the Staff's comments, the Partnership hereby acknowledges that Suburban is responsible for the adequacy and accuracy of the disclosure in its Form 10-K for the fiscal year ended September 24, 2005 and its Form 10-Q for the fiscal quarter ended December 24, 2005; that Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filings; and that the Partnership may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. We appreciate the Staff's feedback. If you have any further questions or comments, please do not hesitate to contact me at (973) 887-5300. Very truly yours, /s/ MICHAEL A. STIVALA --------------------------------------- Michael A. Stivala Controller and Chief Accounting Officer Cc: Ta Tanisha Henderson, Staff Accountant, Division of Corporation Finance, Mail Stop 3561 Ellen Odoner, Weil, Gotshal & Manges LLP