-----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, Sm3Yn8NNAZGfR+ARZB8gKxTbZxrI+Q9d7ZKevIakWmqohIphRI3s+U3L2y2f4gvy 5QFNkb8/2ySn6Hi9xESLaA== 0001005210-96-000011.txt : 19960812 0001005210-96-000011.hdr.sgml : 19960812 ACCESSION NUMBER: 0001005210-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19960809 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUBURBAN PROPANE PARTNERS LP CENTRAL INDEX KEY: 0001005210 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS RETAIL [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: 96607113 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 10-Q FOR SUBURBAN PROPANE PARTNERS, L.P. 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 June 29, 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 June 29, 1996: Suburban Propane Partners, L.P. - 21,562,500 Common Units - 7,163,750 Subordinated Units This Report contains a total of 22 pages. 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 June 29, 1996 3 Condensed Consolidated Statement of Operations from April 1, 1996 through June 29, 1996 and March 5, 1996 through June 29, 1996 4-5 Condensed Consolidated Statement of Cash Flows from April 1, 1996 through June 29, 1996 and March 5, 1996 through June 29, 1996 6-7 Condensed Consolidated Statement of Partners' Capital from March 4, 1996 through June 29, 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 April 1, 1995 through July 1, 1995 and October 1, 1995 through March 4, 1996 and October 1, 1994 through July 1, 1995. 4-5 Condensed Consolidated Statement of Cash Flows from April 1, 1995 through July 1, 1995 and October 1, 1995 through March 4, 1996 and October 1, 1994 through July 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, JUNE 29, 1995 1996 (PREDECESSOR) ----------- ----------- ASSETS Current assets: Cash and cash equivalents ..................... $ 62,251 $ 136 Accounts receivable, less allowance for doubtful accounts of $3,162 ................ 48,883 41,045 Inventories ................................... 23,288 36,663 Prepaid expenses and other current assets ..... 7,449 1,002 ----------- ----------- Total current assets ..................... 141,871 78,846 Property, plant and equipment, net ................. 364,775 363,805 Net prepaid pension cost ........................... 46,809 44,713 Goodwill and other intangible assets, net .......... 251,697 239,909 Other assets ....................................... 9,271 9,186 ----------- ----------- Total assets ............................. 814,423 736,459 =========== =========== LIABILITIES AND PARTNERS' CAPITAL/ PREDECESSOR EQUITY Current liabilities: Accounts payable .............................. $ 24,881 $ $22,298 Accrued employment and benefit costs .......... 22,784 19,975 Accrued insurance ............................. 4,460 4,470 Customer deposits and advances ................ 3,662 8,501 Accrued interest .............................. 10,487 0 Other current liabilities ..................... 10,210 9,097 ----------- ----------- Total current liabilities ................ 76,484 64,341 Long-term debt ..................................... 425,000 0 Postretirement benefits obligation ................. 82,322 83,098 Accrued insurance .................................. 18,248 18,569 Other liabilities .................................. 11,547 12,216 ----------- ----------- Total liabilities ........................ 613,601 178,224 Predecessor equity ................................. 0 558,235 Partners' capital: General Partner ............................... 4,016 0 Limited Partners .............................. 196,806 0 ----------- ----------- Total partners' capital/predecessor equity 200,822 558,235 ----------- ----------- Total liabilities and partners' capital/ predecessor equity ..................... $ 814,423 $ 736,459 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ( in thousands, except per unit amounts) (unaudited) THREE MONTHS ENDED JUNE 29, 1996 JULY 1, 1995 (PREDECESSOR) ------------- ------------ Revenues Propane .................................... $ 116,120 $ 108,356 Other ...................................... 14,470 13,919 ----------- ----------- 130,590 122,275 Costs and expenses Cost of sales .............................. 68,012 59,634 Operating .................................. 49,561 48,859 Depreciation and amortization .............. 8,983 8,402 Selling, general and administrative expenses 7,296 6,782 Management fee ............................. 0 775 ----------- ----------- 133,852 124,452 Loss before interest expense and income taxes ... (3,262) (2,177) Interest expense, net ........................... 7,251 0 ----------- ----------- Loss before provision for income taxes .......... (10,513) (2,177) Provision (benefit) for income taxes ............ 63 (993) ----------- ----------- Net loss ................................... $ (10,576) $ (1,184) =========== =========== General Partner's interest in net loss .......... $ (212) ----------- Limited Partners' interest in net loss .......... $ (10,364) =========== Net loss per Unit ............................... $ (0.36) =========== Weighted average number of Units outstanding .... 28,726 -----------
The accompanying notes are an integral part of these condensed consolidated financial statements. 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 June 29, 1996 July 1, 1995 (Predecessor) June 29, 1996 (Combined) (Predecessor) ------------- ------------- ------------- ------------- Revenues Propane .................................... $ 352,621 $ 178,049 $ 530,670 $ 475,911 Other ...................................... 31,378 19,213 50,591 49,226 ------------- ------------- ------------- ------------- 383,999 197,262 581,261 525,137 Costs and expenses Cost of sales .............................. 204,491 104,154 308,645 263,786 Operating .................................. 88,990 66,744 155,734 151,913 Depreciation and amortization .............. 14,816 11,826 26,642 25,356 Selling, general and administrative expenses 12,616 8,863 21,479 18,188 Management fee ............................. 1,290 0 1,290 2,325 ------------- ------------- ------------- ------------- 322,203 191,587 513,790 461,568 Income before interest expense and income taxes . 61,796 5,675 67,471 63,569 Interest expense, net ........................... 0 9,236 9,236 0 ------------- ------------- ------------- ------------- Income (loss) before provision for income taxes . 61,796 (3,561) 58,235 63,569 Provision for income taxes ...................... 28,147 84 28,231 28,954 ------------- ------------- ------------- ------------- Net income (loss) .......................... $ 33,649 $ (3,645) $ 30,004 $ 34,615 ============= ============= ============= ============= General Partner's interest in net loss .......... $ (73) ------------- Limited Partners' interest in net loss .......... $ (3,572) ============= Net loss per Unit ............................... $ (0.12) ============= Weighted average number of Units outstanding .... 28,726 -------------
The accompanying notes are an integral part of these condensed consolidated financial statements. SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) THREE MONTHS ENDED THREE MONTHS ENDED JUNE 29, JULY 1, 1996 1995 (PREDECESSOR) ------------ ------------ Cash flows from operating activities: Net loss ..................................................... $ (10,576) $ (1,184) Adjustments to reconcile net loss to net cash provided by (used in) operations: Depreciation ............................................ 7,296 6,833 Amortization ............................................ 1,687 1,569 Gain on disposal of property, plant and equipment ............................................. (26) (46) Changes in operating assets and liabilities, net of acquisitions and dispositions: Decrease in accounts receivable ........................ 11,953 26,591 Decrease in inventories ................................ 3,834 2,915 Increase in prepaid expenses and other current assets ................................... (1,331) (300) Decrease in accounts payable ............................ (7,399) (1,438) Decrease due to affiliate ............................... (41,735) 0 Increase (decrease) in accrued employment and benefit costs ...................................... 10 (2,172) Increase in accrued interest ............................ 8,173 0 Increase in other accrued liabilities .................. 545 1,169 Other noncurrent assets ...................................... (750) 64 Deferred credits and other noncurrent liabilities ............ 4,778 (2,693) ------------- ------------- Net cash provided by (used in) operating activities (23,541) 31,308 ------------- ------------- Cash flows from investing activities: Capital expenditures ........................................ (6,351) (4,847) Acquisitions ................................................ (4,168) (2,213) Proceeds from sale of property, plant and equipment, net .... 157 1,531 ------------- ------------- Net cash used in investing activities .............. (10,362) (5,529) ------------- ------------- Cash flows from financing activities: Cash activity with parent, net .............................. 0 (25,852) Proceeds from post-closing adjustment with former parent .... 5,560 0 ------------- ------------- Net cash provided by (used in) financing activities 5,560 (25,852) ------------- ------------- Net decrease in cash and cash equivalents ........................ (28,343) (73) Cash and cash equivalents at beginning of period .................. 90,594 272 ------------- ------------- Cash and cash equivalents at end of period ........................ $ 62,251 $ 199 ============= =============
The accompanying notes are an integral part of these condensed consolidated financial statements. SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (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 June 29, 1996 July 1, 1995 (Predecessor) June 29, 1996 (Combined) (Predecessor) ------------ ------------ ------------ ------------ Cash flows from operating activities: Net income (loss) ........................................... $ 33,649 $ (3,645) $ 30,004 $ 34,615 Adjustments to reconcile net income (loss) to net cash provided by (used in) operations: Depreciation ........................................... 12,033 9,535 21,568 20,620 Amortization ........................................... 2,783 2,291 5,074 4,736 Gain on disposal of property, plant and equipment ............................................ (85) (35) (120) (106) Changes in operating assets and liabilities, net of acquisitions and dispositions: Decrease (increase) in accounts receivable ............. (56,643) 48,805 (7,838) 7,224 Decrease in inventories ............................... 2,829 10,546 13,375 15,589 Decrease (increase) in prepaid expenses and other current assets .................................. (1,874) (4,573) (6,447) 177 Increase (decrease) in accounts payable ................ 9,335 (6,752) 2,583 (4,479) Increase (decrease) in accrued employment and benefit costs ..................................... 2,303 506 2,809 (7,391) Increase in accrued interest ........................... 0 10,487 10,487 0 Decrease in other accrued liabilities .................. (3,530) (206) (3,736) (5,828) Other noncurrent assets ..................................... (1,203) (978) (2,181) 294 Deferred credits and other noncurrent liabilities ........... (3,362) 5,096 1,734 (4,762) ------------ ------------ ------------ ------------ Net cash provided by (used in) operating activities (3,765) 71,077 67,312 60,689 ------------ ------------ ------------ ------------ Cash flows from investing activities: Capital expenditures ....................................... (9,796) (8,779) (18,575) (17,253) Acquisitions ............................................... (13,172) (6,115) (19,287) (4,608) Proceeds from sale of property, plant and equipment, net ... 1,003 303 1,306 5,235 ------------ ------------ ------------ ------------ Net cash used in investing activities ............. (21,965) (14,591) (36,556) (16,626) ------------ ------------ ------------ ------------ Cash flows from financing activities: Cash activity with parent, net ............................. 25,799 0 25,799 (44,162) Proceeds from post-closing adjustment with former parent ... 0 5,560 5,560 0 Proceeds from debt placement ............................... 0 425,000 425,000 0 Proceeds from offering ..................................... 0 413,569 413,569 0 Debt placement and credit agreement expenses ............... 0 (6,224) (6,224) 0 Cash distribution to general partner ....................... 0 (832,345) (832,345) 0 ------------ ------------ ------------ ------------ Net cash provided by (used in) financing activities 25,799 5,560 31,359 (44,162) ------------ ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents ............ 69 62,046 62,115 (99) Cash and cash equivalents at beginning of period ................. 136 205 136 298 ------------ ------------ ------------ ------------ Cash and cash equivalents at end of period ....................... $ 205 $ 62,251 $ 62,251 $ 199 ============ ============ ============ ============
The accompanying notes are an integral part of these condensed consolidated financial statements. 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 loss ................. -- -- (2,679) (893) (73) (3,645) --------------------------------------------------------------------------------------- Balance at June 29, 1996 ...... 21,562 7,164 $ 147,809 $ 48,997 $ 4,016 $ 200,822 =======================================================================================
The accompanying notes are an integral part of these condensed consolidated financial statements. SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 29, 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 4) 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 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 Saturday nearest the end 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 June 29, 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 June 29, 1996 and September 30, 1995 was $78,635 and $57,067, respectively. Goodwill and other intangible assets. Goodwill and other intangible assets are comprised of the following at June 29, 1996: Goodwill $260,843 Debt origination costs 6,224 Other, principally noncompete agreements 2,334 ----------- 269,401 Less: Accumulated amortization 17,704 ----------- $251,697 =========== 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 will make a distribution on August 13, 1996 for the fiscal quarter ended 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 had agreed to collect such accounts receivable on behalf of Quantum which amounted to $97,700 as of the Closing Date. As of June 29, 1996, the Operating Partnership had satisfied its obligation to Quantum under such arrangement. 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 four months ended June 29, 1996, the Partnership incurred expenses of $127 under the Services Agreement. 5. COMMITMENTS AND CONTINGENCIES ----------------------------- The Partnership leases certain property, plant and equipment for various periods under noncancelable leases. Rental expense under operating leases was $10,000 for the nine months ended June 29, 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. The Note Agreement requires that the principal be paid in equal annual installments 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. 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, Chase Manhattan's (formerly 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 nine months ended June 29, 1996 and July 1, 1995 were derived from the historical statements of operations of the Predecessor Company for the periods October 1, 1994 through July 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 June 29, 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. SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended June 29 July 1 1996 1995 ------------ ------------ Revenues Propane .................................... $ 116,120 $ 108,356 Other ...................................... 14,470 13,919 ------------ ------------ 130,590 122,275 Costs and Expenses Cost of sales .............................. 68,012 59,634 Operating .................................. 49,561 48,859 Depreciation and amortization .............. 8,983 8,402 Selling, general and administrative expenses 7,296 7,557 ------------ ------------ 133,852 124,452 Loss before interest expenses and income taxes .. (3,262) (2,177) Interest expense, net ........................... 7,251 8,175 ------------ ------------ Loss before provision for income taxes .......... (10,513) (10,352) Provision for income taxes ...................... 63 63 ------------ ------------ Net loss ........................................ $ (10,576) $ (10,415) ============ ============ General Partner's interest in net loss .......... $ (212) $ (208) ------------ ------------ Limited Partners' interest in net loss .......... $ (10,364) $ (10,207) ============ ============ Net loss per Unit ............................... $ (0.36) $ (0.36) ============ ============ Weighted average number of Units outstanding .... 28,726 28,726 ============ ============
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Nine Months Ended June 29 July 1 1996 1995 ------------ ------------ Revenues Propane .................................... $ 530,670 $ 475,911 Other ...................................... 50,591 49,226 ------------ ------------ 581,261 525,137 Costs and Expenses Cost of sales .............................. 308,645 263,786 Operating .................................. 155,734 151,913 Depreciation and amortization .............. 26,642 25,356 Selling, general and administrative expenses 22,769 20,513 ------------ ------------ 513,790 461,568 Income before interest expenses and income taxes 67,471 63,569 Interest expense, net ........................... 23,262 24,525 ------------ ------------ Income before provision for income taxes ........ 44,209 39,044 Provision for income taxes ...................... 189 189 ------------ ------------ Net income ...................................... $ 44,020 $ 38,855 ============ ============ General Partner's interest in net income ........ $ 880 $ 777 ------------ ------------ Limited Partners' interest in net income ........ $ 43,140 $ 38,078 ============ ============ Net income per Unit ............................. $ 1.50 $ 1.33 ============ ============ Weighted average number of Units outstanding .... 28,726 28,726 ============ ============
9. UNAUDITED PRO FORMA FINANCIAL INFORMATION - CONTINUED ----------------------------------------------------- Significant pro forma adjustments reflected in the above data include the following: 1. For the three and nine month periods ended June 29, 1996 and July 1, 1995, the elimination of management fees paid by the Predecessor Company to HM Holdings, Inc. 2. For the three and nine month periods ended June 29, 1996 and July 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 nine month periods ended June 29, 1996 and July 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 nine month periods ended June 29, 1996, and July 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. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 29, 1996 - -------------------------------- COMPARED TO THREE MONTHS ENDED JULY 1, 1995 - ------------------------------------------- REVENUES Revenues increased 6.8% or $8.3 million to $130.6 million for the three months ended June 29, 1996 as compared to $122.3 million for the three months ended July 1, 1995. The overall increase is primarily attributable to higher retail and wholesale selling prices. Propane sold to retail customers increased 1.5% or 1.5 million gallons while wholesale gallons sold increased 4% or 1.4 million gallons. GROSS PROFIT Gross profit equaled the prior period's level of $62.6 million. The impact of the higher retail and wholesale volumes was offset by lower retail margins due to product cost increases. Product cost is expected to remain at higher than historical levels with an associated impact on retail margins through the end of the fiscal year. OPERATING EXPENSES Operating expenses increased 1.4% or $0.7 million to $49.6 million for the three months ended June 29, 1996 as compared to $48.9 million for the three months ended July 1, 1995. The increase in operating expenses is principally due to higher plant and equipment maintenance, advertising and insurance expenses. Operating expenses are expected to remain at higher than historical levels through the end of the fiscal year. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, General and Administrative expenses decreased 3.5% or $0.3 million to $7.3 million for the three months ended June 29, 1996 compared to $7.6 million for the three months ended July 1, 1995. Expenses declined due to lower headcount-related expenses and supplies, offset in part by expenditures for employee training and customer satisfaction programs. OPERATING INCOME AND EBITDA The operating loss increased $1.1 million to $3.3 million in the three months ended June 29, 1996 compared to $2.2 million in the prior period. EBITDA decreased 8.1% or $0.5 million to $5.7 million. This decrease is primarily attributable to higher operating expenses, partially offset by lower selling, 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. NINE MONTHS ENDED JUNE 29, 1996 - ------------------------------- COMPARED TO NINE MONTHS ENDED JULY 1, 1995 - ------------------------------------------ REVENUES Revenues increased 10.7% or $56.2 million to $581.3 million for the nine months ended June 29, 1996 as compared to $525.1 million for the nine months ended July 1, 1995. The overall increase is primarily attributable to higher retail volumes and wholesale volumes coupled with increased retail and wholesale selling prices. Retail gallons sold increased 6.8% or 29.8 million gallons to 465.5 million gallons as compared to 435.7 million gallons for the nine months ended July 1, 1995, while wholesale gallons sold increased 3.8% or 5.6 million gallons to 153.6 million gallons compared to 148.0 million in the prior period. The increase in gallons sold is due to the colder temperatures in all sections of the country, except for the West. GROSS PROFIT Gross profit increased 4.3% or $11.2 million to $272.6 million for the nine months ended June 29, 1996 compared to $261.4 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. OPERATING EXPENSES Operating expenses increased 2.5% or $3.8 million to $155.7 million for the nine months ended June 29, 1996 as compared to $151.9 million for the nine months ended July 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 11.2% or $2.3 million to $22.8 million for the nine months ended June 29, 1996 compared to $20.5 million for the nine months ended July 1, 1995. Expenses increased due to higher employee incentive costs, expenditures for employee training and new customer satisfaction programs. OPERATING INCOME AND EBITDA Operating income increased 6.1% or $3.9 million to $67.5 million in the nine months ended June 29, 1996 compared to $63.6 million in the prior period. EBITDA increased 5.8% or $5.2 million to $94.1 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 June 29, 1996, net cash used in operating activities increased $54.8 million to $23.5 million compared to $31.3 million provided by operating activities in the three months ended July 1, 1995. Such increase was primarily due to $41.7 million of cash remitted to Quantum during the quarter principally reflecting cash collected by the Partnership during the second quarter on Predecessor Company accounts receivable which were retained by Quantum and a $14.6 million decrease in accounts receivable activity also attributable to the retention of the closing date accounts receivable by Quantum. Net cash used in investing activities was $10.4 million for the three months ended June 29, 1996 consisting of capital expenditures of $6.4 million and acquisition payments of $4.2 million, offset by proceeds from the sale of property, plant and equipment of $0.2 million. Net cash used in investing activities was $5.5 million for the three months ended July 1, 1995 consisting of capital expenditures of $4.8 million and acquisition payments of $2.2 million, offset by proceeds from the sale of property, plant and equipment of $1.5 million. For the nine months ended June 29, 1996, net cash provided by operating activities increased $6.6 million to $67.3 million compared to $60.7 million for nine months ended July 1, 1995. The increase is primarily attributable to an aggregate increase in accounts payable, accrued expenses and other liabilities of $36.3 million partially offset by an increase in accounts receivable, prepaid expenses and decreased net income and inventories totaling $28.5 million arising from an increase in the cost and volume of gallons sold and costs of operating as a publicly traded partnership. Net cash used in investing activities was $36.6 million for the nine months ended June 29, 1996, reflecting $18.6 million in capital expenditures and $19.3 million of payments for acquisitions offset by net proceeds of $1.3 million from the sale of property, plant and equipment. Net cash used in investing activities was $16.6 million for the nine months ended July 1, 1995, consisting of capital expenditures of $17.3 million and acquisition payments of $4.6 million, offset by proceeds from the sale of property and equipment of $5.2 million. The increase in cash used for acquisition activities of $13.1 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. 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 provided by financing activities, which are reflected as a increase in division invested capital, was $25.8 million during the five months ended March 5, 1996 compared to $44.2 million of cash used by (reduction of division invested capital) during the nine month period ended July 1, 1995. Net cash provided by financing activities was $5.6 million for the three months ended June 29, 1996. Such amount represents the closing price adjustment received from Quantum in connection with the Partnership's initial public offering. 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 total $832.4 million), less the $5.6 million closing price adjustment discussed above and $97.7 million reflecting the retention of the Predecessor Company net accounts receivable by Quantum, were 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 initial distribution of $.66 per unit is payable on August 13, 1996 to all unitholders of record as of July 26, 1996. The initial distribution includes a pro rata distribution for the period March 5, 1996 to March 31, 1996 in addition to the regular Partnership distribution for the Partnership's third fiscal quarter ended June 29, 1996. 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 August 6, 1996 regarding the appointment of Dudley C. Mecum as an Elected Supervisor of the Board of Supervisors. (B) Form 8-K None 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: August 9, 1996 By /s/ Charles T. Hoepper ---------------------- Charles T. Hoepper Senior Vice President, Chief Financial Officer and Chief Accounting Officer EXHIBIT INDEX Exhibit No. Description - ----------- ----------- (27) Financial Data Schedule (99) Press Release, dated August 6, 1996, regarding the appointment of Dudley C. Mecum as an Elected Supervisor of the Board of Supervisors. 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 9-MOS SEP-30-1995 JUN-29-1996 62,251 0 52,045 3,162 23,288 141,871 443,410 78,635 814,423 76,484 425,000 0 0 0 200,822 814,423 581,261 581,261 308,645 464,379 0 3,162 9,236 58,235 28,231 30,004 0 0 0 30,004 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, L.P. ELECTS DUDLEY C. MECUM ------------------------------------------------------ TO BOARD OF SUPERVISORS ----------------------- Whippany, New Jersey, August 6, 1996 -- Suburban Propane Partners, L.P. (NYSE:SPH) has elected Dudley C. Mecum to the Company's Board of Supervisors. Mr. Mecum is a partner of G.L.Ohrstrom,Inc., a New York-based leveraged buy out group. In the past, Mr. Mecum has served as Group Vice President of Combustion Engineering, Inc., as Senior Partner of KPMG Peat Marwick, LLP., Assistant Secretary of the US Army - Installation and Logistics Department of Defense, and Assistant Director for Management and Organization for the Office of Management and Budget. "We are very pleased Dudley Mecum has agreed to serve as an elected supervisor on our board," said Mark A. Alexander, Suburban Propane's Executive Vice Chairman. "We will benefit from his diverse and extensive management expertise and board experience." Mr. Mecum's other board appointments include Travelers Group, Inc., Travelers/Aetna Property & Casualty Corporation, Lyondell Petrochemical Company, Fingerhut Companies, Inc., DynCorp, Vicorp Restaurants, Inc., Roper Industries, Inc. and Harrow Industries, Inc. Mr. Mecum holds a B.A. degree from Ohio Wesleyan University and an M.B.A. from Harvard Business School. Suburban Propane Partners, L.P. is a publicly traded partnership listed on the New York Stock Exchange. Headquartered in Whippany, New Jersey, Suburban Propane has been in the retail propane business since 1928 and is the nation's third largest propane gas marketer. The Company serves more than 700,000 active residential, commercial, industrial and agricultural customers through more than 350 sales and service centers in more than 40 states. Suburban Propane successfully completed a 21.6 million unit initial public offering in March 1996. -----END PRIVACY-ENHANCED MESSAGE-----