EX-99.3

EX-99.3 5 d346688dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On April 25, 2012, Suburban Propane Partners, L.P. (“Suburban”) entered into a definitive agreement (the “Contribution Agreement”) with Inergy, L.P. (“Inergy”), Inergy GP, LLC and Inergy Sales and Service, Inc. (“Inergy Sales”) to acquire the sole membership interest in Inergy Propane, LLC, including certain wholly-owned subsidiaries of Inergy Propane, LLC, and certain assets of Inergy Sales (such interests and assets collectively, “Inergy Propane”) for a total acquisition value of approximately $1.8 billion (the “Inergy Propane Acquisition”). At the time of the closing of the Inergy Propane Acquisition, and following certain pre-closing transactions, Inergy Propane will consist of the retail propane assets and operations of Inergy.

Prior to closing, Inergy Propane will transfer its interest in certain subsidiaries, as well as all of its rights and interests in the assets and properties of its wholesale propane supply, marketing and distribution business, and its rights and interest in the assets and properties of its West Coast natural gas liquids business, to Inergy. These assets and operations will not be part of the Inergy Propane business at the time of the transfer of the membership interest in Inergy Propane, LLC to Suburban and will not be part of the Inergy Propane Acquisition. Following the acquisition, Inergy Propane, LLC, including its wholly-owned subsidiaries that are part of the Inergy Propane Acquisition will become subsidiaries of Suburban.

Suburban is acquiring Inergy Propane for total consideration of approximately $1.8 billion, consisting of: (i) $1.0 billion of newly issued Suburban senior notes and $200.0 million in cash; and, (ii) $600.0 million of new Suburban common units, which will be distributed to Inergy and Inergy Sales, all but $6.0 million of which will subsequently be distributed by Inergy to its unitholders.

Pursuant to the Contribution Agreement, Suburban and its wholly-owned subsidiary Suburban Energy Finance Corporation will conduct an offer to exchange any and all of the outstanding unsecured 7% Senior Notes due 2018 and 6⁷/8% Senior Notes due 2021 issued by Inergy, L.P. and Inergy Finance Corp., which have an aggregate principal amount outstanding of $1.2 billion (collectively, the “Inergy Notes”), for a combination of $1.0 billion in aggregate principal amount of new unsecured 7% Senior Notes due 2018 and 6⁷/8% Senior Notes due 2021 (collectively, the “SPH Notes”) issued by Suburban and Suburban Energy Finance Corporation and $200.0 million in cash (the “Offer to Exchange”). In connection with the Offer to Exchange, Suburban is soliciting consents to amend the Inergy Notes and the indentures governing the Inergy Notes. The proposed amendments, with respect to each series of the Inergy Notes, which require the consent of a majority in outstanding principal amount of such series of Inergy Notes, would (i) delete in their entirety substantially all the restrictive covenants, (ii) modify the covenants regarding mergers and consolidations and (iii) eliminate certain events of default. Subject to certain conditions, holders of Inergy Notes who consent by the consent date will receive a cash payment of $3.75 per each $1,000 principal amount of Inergy Notes as to which a holder delivers a valid consent.

In connection with the Inergy Propane Acquisition and concurrently with the Offer to Exchange, Suburban will seek equity financing of approximately $250.0 million for the purposes of funding the cash consideration in the Offer to Exchange, as well as the costs and expenses associated with the Offer to Exchange and costs and expenses associated with the consummation of the Inergy Propane Acquisition. Any net proceeds not so applied will be used for general partnership purposes.

On April 25, 2012 Suburban also entered into a commitment letter with certain lenders who are party to the Partnership’s existing credit agreement pursuant to which such lenders committed to provide Suburban with a $250.0 million senior secured 364-day incremental term loan facility (the “364-Day Facility”). The 364-Day Facility will be available in the event that the equity financing transaction is not consummated by the closing of the Inergy Propane Acquisition.

The following unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Inergy Propane Acquisition by Suburban and has been prepared for informational purposes only. The unaudited pro forma condensed combined financial information is based upon the historical consolidated financial statements and notes thereto of Suburban and Inergy Propane and should be read in conjunction with the:

•

audited annual financial statements and the accompanying notes of Suburban Propane Partners, L.P. included in the Annual Report on Form 10-K for the fiscal year ended September 24, 2011, and the unaudited condensed consolidated financial statements and accompanying notes included in the Quarterly Report on Form 10-Q for the quarterly period ended March 24, 2012; and

•

audited historical financial statements and accompanying notes of Inergy Propane, LLC as of September 30, 2011 and 2010, and for each of the three years in the period ended September 30, 2011, and the unaudited interim historical financial statements and accompanying notes for the six months ended March 31, 2012 and 2011.

The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give pro forma effect to events that are (1) directly attributable to the Inergy Propane Acquisition and related financing, (2) factually supportable, and (3) with respect to the statements of operations, are expected to have a continuing impact on the combined results of Suburban. Although Suburban has entered into the Contribution Agreement with Inergy, there is no guarantee that the Inergy Propane Acquisition will be completed in the manner contemplated or at all. The unaudited pro forma condensed combined statements of operations have been prepared assuming the Inergy Propane Acquisition had been completed on September 26, 2010, the first day of Suburban’s 2011 fiscal year. The unaudited pro forma condensed combined balance sheet has been prepared assuming the Inergy Propane Acquisition had been completed on March 24, 2012, the last day of Suburban’s 2012 second fiscal quarter. The unaudited pro forma condensed combined financial information has been adjusted with respect to certain aspects of the Inergy Propane Acquisition to reflect:

•

the consummation of the Inergy Propane Acquisition;

•

exclusion of historical assets and liabilities of Inergy Propane, LLC not acquired or assumed as part of the acquisition and changes in certain revenues and expenses resulting from the exclusion of these assets and liabilities;

•

re-measurement of the assets and liabilities of Inergy Propane (as disclosed in more detail below) to record their preliminary estimated fair values at the date of the closing of the acquisition and adjustment of certain expenses resulting therefrom;

•

additional indebtedness, including, but not limited to, debt issuance costs and interest expense, incurred in connection with the exchange of Inergy Notes for the SPH Notes;

•

additional indebtedness, including, but not limited to, debt issuance costs and interest expense incurred in connection with borrowings under the 364-Day Facility;

•

no tax adjustments were made as Suburban is a publicly traded master limited partnership and has no substantial federal or state income tax liability.

The unaudited pro forma condensed combined financial information was prepared in accordance with the acquisition method of accounting. The pro forma information presented, including allocation of the purchase price, is based on preliminary estimates of fair values of assets acquired and liabilities assumed in connection with the Inergy Propane Acquisition. These preliminary estimates are based on available information and certain assumptions that may be revised as additional information becomes available.

The final purchase price allocation for the Inergy Propane Acquisition will be dependent upon the finalization of asset and liability valuations, which may depend in part on prevailing market rates and conditions, as well as the final form of financing that Suburban will utilize to effect the Inergy Propane Acquisition. Any final adjustments may be materially different from the preliminary estimates, and may result in a change to the unaudited pro forma condensed combined financial information presented in the Offer to Exchange.

We believe that the assumptions used to derive the unaudited pro forma condensed combined financial information are reasonable given the information available; however, such assumptions are subject to change and the effect of any such change could be material. The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not intended to represent or be indicative of the consolidated results of operations that would have been reported had the Inergy Propane Acquisition been completed as of or for the periods presented, nor are they necessarily indicative of future results.

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF MARCH 24, 2012 (*)

(in thousands)


	Historical Suburban Propane Partners, L.P. (2)		Historical Inergy Propane, LLC (3)		Elimination of Assets Not Acquired and Liabilities Not Assumed (4)			Reclassifications (5)			Financing Activities		Other Pro Forma Adjustments			Pro Forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	96,202	$	11,800	$	(1,248	)	$	—		$	11,150	$	—	(6)	$	117,904
Accounts receivable, less allowance for doubtful accounts		106,843		161,200		(80,138	)							—			187,905
Inventories		67,287		88,300		(46,896	)							—			108,691
Assets from price risk management activities		—		14,100		(14,100	)							—			—
Other current assets		12,199		10,000		(8,050	)					3,750		—	(7)		17,899

Total current assets		282,531		285,400		(150,432	)		—			14,900		—			432,399

Property, plant and equipment, net		330,452		658,200		(185,817	)							141,715	(8)		944,550
Other intangible assets, net		14,582		306,600		(4,646	)							78,595	(9)		395,131
Receivable from Inergy Midstream, L.P.		—		300		(300	)							—			—
Goodwill		277,651		336,500		(379	)							386,169	(10)		999,941
Other assets		26,262		2,000		(1,463	)					14,850		—	(11)		41,649

Total assets	$	931,478	$	1,589,000	$	(343,037	)	$	—		$	29,750	$	606,479		$	2,813,670

LIABILITIES AND PARTNERS’ CAPITAL/ MEMBER’S EQUITY
Current liabilities:
Accounts payable	$	34,208	$	114,100	$	(113,509	)	$	(566	)	$	—	$	—		$	34,233
Accrued employment and benefit costs		14,832		—		—			2,607					—			17,439
Customer deposits and advances		34,968		26,800		—			4,046					—			65,814
Short-term borrowings and current portion of long-term borrowings		—		4,200		(97	)		(4,103	)		250,000		—	(12)		250,000
Liabilities from price risk management activities		—		5,100		(5,100	)							—			—
Other current liabilities		27,241		28,800		(18,473	)		(1,984	)				—			35,584

Total current liabilities		111,249		179,000		(137,179	)		—			250,000		—			403,070

Long-term borrowings		348,277		12,500		(1,879	)		(10,621	)		995,500		—	(13)		1,343,777
Accrued insurance		41,218		—		—								—			41,218
Other liabilities		54,501		14,100		(14,100	)		10,621					—			65,122

Total liabilities		555,245		205,600		(153,158	)		—			1,245,500		—			1,853,187

Partners’ capital/member’s equity		376,233		1,383,400								584,250		(1,383,400	)(14)		960,483

Total liabilities and partners’ capital/member’s equity	$	931,478	$	1,589,000	$	(153,158	)	$	—		$	1,829,750	$	(1,383,400	)	$	2,813,670

(*)

Suburban Propane Partners, L.P. uses a 52/53 week fiscal year which ends on the last Saturday in September and its fiscal quarters are generally 13 weeks in duration. Inergy Propane, LLC uses a fiscal year end which ends on September 30. Accordingly, the second fiscal quarter ended on March 24, 2012 for Suburban and March 31, 2012 for Inergy Propane.

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED MARCH 24, 2012 (*)

(in thousands, except per unit amounts)


	Historical Suburban Propane Partners, L.P. (2)			Historical Inergy Propane, LLC (3)			Elimination of Assets Not Acquired and Liabilities Not Assumed (4)			Reclassifications (5)			Financing Activities			Other Pro Forma Adjustments			Pro Forma Combined
Revenues
Propane	$	524,115		$	928,600		$	(423,046	)	$	—		$	—		$	—		$	1,029,669
Fuel oil and other refined fuels		74,729			—			—			77,372						—			152,101
Other		58,668			291,700			(179,614	)		(77,372	)					—			93,382

		657,512			1,220,300			(602,660	)		—			—			—			1,275,152
Costs and expenses
Cost of products sold		391,975			930,100			(562,228	)								—			759,847
Operating and administrative expenses		163,688			146,400			(20,028	)								—			290,060
Loss on disposal of assets		—			3,600			2									—			3,602
Depreciation and amortization		15,434			57,400			(21,872	)								9,983	(15)		60,945

		571,097			1,137,500			(604,126	)		—			—			9,983			1,114,454

Operating income		86,415			82,800			1,466			—			—			(9,983	)		160,698
Loss on debt extinguishment		(507	)		—			—									—			(507	)
Interest expense, net		(13,263	)		(600	)		34						(42,231	)		—	(16)		(56,060	)
Other income		—			1,400			(1,293	)								—			107

Income before (benefit from) provision for income taxes		72,645			83,600			207			—			(42,231	)		(9,983	)		104,238
(Benefit from) provision for income taxes		(160	)		—			(43	)								—			(203	)

Net income (loss)	$	72,805		$	83,600		$	250		$	—		$	(42,231	)	$	(9,983	)	$	104,441

Income per Common Unit—basic	$	2.05																	$	2.11

Weighted average number of units outstanding—basic		35,588															13,893	(14)		49,481

Income per Common Unit—diluted	$	2.03																	$	2.10

Weighted average number of units outstanding—diluted		35,808															13,893	(14)		49,701

(*)	Suburban Propane Partners, L.P. uses a 52/53 week fiscal year which ends on the last Saturday in September and its fiscal quarters are generally 13 weeks in duration. Inergy Propane, LLC uses a fiscal year end which ends on September 30. Accordingly, the second

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED SEPTEMBER 24, 2011 (*)

(in thousands, except per unit amounts)


	Historical Suburban Propane Partners, L.P. (2)			Historical Inergy Propane, LLC (3)			Elimination of Assets Not Acquired and Liabilities Not Assumed (4)			Reclassifications (5)			Financing Activities			Other Pro Forma Adjustments			Pro Forma Combined
Revenues
Propane	$	929,492		$	1,461,900		$	(602,294	)	$	—		$	—		$	—		$	1,789,098
Fuel oil and other refined fuels		139,572			—			—			128,300						—			267,872
Other		121,488			486,800			(294,082	)		(128,300	)					—			185,906

		1,190,552			1,948,700			(896,376	)		—			—			—			2,242,876
Costs and expenses
Cost of products sold		678,719			1,424,100			(822,250	)								—			1,280,569
Operating and administrative expenses		330,977			285,800			(28,713	)								—			588,064
Severance charge		2,000			—			—									—			2,000
Loss on disposal of assets		—			10,800			113									—			10,913
Depreciation and amortization		35,628			117,200			(42,700	)								18,809	(15)		128,937

		1,047,324			1,837,900			(893,550	)		—			—			18,809			2,010,483

Operating income		143,228			110,800			(2,826	)		—			—			(18,809	)		232,393
Interest expense, net		(27,378	)		(1,500	)		100						(84,462	)		—	(16)		(113,240	)
Other income		—			200			—									—			200

Income before provision for income taxes		115,850			109,500			(2,726	)		—			(84,462	)		(18,809	)		119,353
Provision for income taxes		884			500			(100	)								—			1,284

Net income (loss)	$	114,966		$	109,000		$	(2,626	)	$	—		$	(84,462	)	$	(18,809	)	$	118,069

Income per Common Unit—basic	$	3.24																	$	2.39

Weighted average number of units outstanding—basic		35,525															13,893	(14)		49,418

Income per Common Unit—diluted	$	3.22																	$	2.38

Weighted average number of units outstanding—diluted		35,723															13,893	(14)		49,616

(*)

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(in thousands of dollars, except per unit data)

Note 1. The unaudited pro forma condensed combined financial information was prepared based on the preliminary valuation of the purchase price of $1,800,000 and allocation to the identifiable assets acquired and liabilities assumed. The purchase price was determined and allocated for accounting purposes as follows:


Consideration:
Cash consideration to Inergy noteholders pursuant to the Offer to Exchange	$	200,000
Cash consideration to Inergy noteholders for consent fees pursuant to the Offer to Exchange		4,500
Suburban senior notes issued to Inergy noteholders, net of the consent fees		995,500
Suburban common units issued to Inergy		600,000

	$	1,800,000

Preliminary purchase price allocation:
Current assets	$	134,968
Property, plant and equipment		614,098
Other intangible assets		380,549
Goodwill		722,290
Other assets		537
Current liabilities		(41,821	)
Non-current liabilities		(10,621	)

	$	1,800,000

Pursuant to the Contribution Agreement, the purchase price is subject to adjustment for working capital and certain liabilities of Inergy Propane that are being assumed by Suburban in the Inergy Propane Acquisition. These liabilities consist primarily of non-interest bearing obligations due under non-competition agreements between Inergy Propane and the sellers of retail propane companies acquired by Inergy Propane in the past, as well as certain other accrued liabilities. The actual amounts of these adjustments will depend on the fair value of the working capital and the fair value of the assumed liabilities on the closing date of the Inergy Propane Acquisition.

In addition, on the closing date of the Inergy Propane Acquisition, Inergy will provide Suburban with cash in an amount equal to the amount of accrued and unpaid interest on the Inergy Notes through the closing date of the Inergy Propane Acquisition, which Suburban will distribute to the Inergy noteholders on the settlement date.

Note 2. Represents the historical consolidated results of operations and financial position of Suburban.

Note 3. Represents the historical consolidated results of operations and financial position of Inergy Propane, LLC.

Note 4. Reflects the elimination of the historical consolidated results of operations, assets and liabilities of Inergy Propane not to be acquired by Suburban.

Note 5. Reflects reclassifications of amounts included on Inergy Propane’s financial statements to conform to Suburban’s presentation.

Note 6. Reflects pro forma adjustments to cash and cash equivalents as follows:


Gross proceeds from borrowings under 364-Day Facility	$	250,000
Cash payments to Inergy noteholders pursuant to the Offer to Exchange		(200,000	)
Cash payments to Inergy noteholders for consent fees pursuant to the Offer to Exchange		(4,500	)
Payment of debt origination costs		(18,600	)
Payment of acquisition related costs		(15,750	)

	$	11,150

Note 7. Reflects pro forma adjustments to record estimated debt issuance costs in conjunction with the 364-Day Facility.

Note 8. Reflects pro forma adjustments to record property, plant and equipment at estimated fair value as follows:


To record estimated fair value of Inergy Propane property, plant and equipment	$	614,098
Eliminate historical net book value of Inergy Propane property, plant and equipment		(472,383	)

	$	141,715

Note 9. Reflects pro forma adjustments to record other intangible assets at estimated fair value as follows:


Allocation of purchase price to customer relationships	$	363,000
Allocation of purchase price to tradenames		2,200
Allocation of purchase price to non-competes		15,349
Eliminate historical cost of Inergy Propane’s other intangible assets		(301,954	)

	$	78,595

Note 10. Reflects pro forma adjustments to remove Inergy Propane’s historical goodwill of $336,121 and to record goodwill of $722,290 representing the excess of the net purchase price over the preliminary fair values of the net assets acquired and liabilities assumed. Such goodwill principally comprises buyer-specific synergies and assembled workforce.

Note 11. Reflects pro forma adjustments to record estimated debt issuance costs in conjunction with the issuance of $1,000,000 in aggregate principal amount of SPH Notes.

Note 12. Reflects borrowings under the 364-Day Facility.

Note 13. Reflects the issuance of $1,000,000 in aggregate principal amount of SPH Notes, net of discount. The discount reflects the total cash payment of $3.75 per each $1,000 principal amount of Inergy Notes, of which there is $1,200,000 aggregate principal amount outstanding to be paid by Suburban to Inergy noteholders that deliver a valid consent in connection with the Offer to Exchange.

Note 14. Reflects total pro forma adjustments to partners’ capital accounts as follows:


	Suburban Common Units (in thousands)		Suburban Common Unitholders / Member’s Equity
Elimination of historical Inergy Propane member’s capital			$	(1,383,400	)
Issuance of Suburban common units to Inergy and Inergy Sales pursuant to the Contribution Agreement		13,893		600,000
Acquisition related costs				(15,750	)

		13,893	$	(799,150	)

In accordance with the Contribution Agreement, the number of Suburban common units to be issued to Inergy and Inergy Sales in the aggregate is determined by dividing $600,000 by the average of the high and low sales prices of Suburban’s common units for the twenty consecutive trading days ending on the day prior to the execution of the Contribution Agreement, which was determined to be $43.1885, resulting in 13,893 common units.

The fair value of the Suburban common units to be issued to Inergy and Inergy Sales on the closing date of the Inergy Propane Acquisition will be used for the final purchase price allocation for the Inergy Propane Acquisition, which may be different than the $600,000 reflected in the preliminary purchase price allocation and pro forma adjustment above. If the fair value of Suburban’s common units on the closing date of the Inergy Propane Acquisition are 10% higher or lower than the preliminary fair value used for the preliminary valuation of the total purchase price of the Inergy Propane Acquisition, goodwill will increase (if higher) or decrease (if lower) by $60,000 in the final purchase price allocation.

Note 15. Reflects pro forma adjustments to depreciation and amortization expense as follows:


	For the six months ended March 24, 2012			For the year ended September 24, 2011
Eliminate historical depreciation and amortization expense of Inergy Propane	$	(35,528	)	$	(74,500	)
Depreciation and amortization expense reflecting preliminary allocation of the purchase price:
Depreciation expense on allocated property, plant and equipment (5 to 40 years)		25,551			53,389
Amortization expense of customer list intangibles (10 years)		18,150			36,300
Amortization expense of non-compete agreement intangibles (5 years)		1,535			550
Amortization expense of tradename intangibles (4 years)		275			3,070

	$	9,983		$	18,809

Note 16. Reflects pro forma adjustments to interest expense as follows:


	For the six months ended March 24, 2012		For the year ended September 24, 2011
Interest on SPH Notes	$	34,688	$	69,375
Interest on borrowings under 364-Day Facility		4,375		8,750
Amortization of discount on SPH Notes		300		601
Amortization of debt issuance costs		2,868		5,736

	$	42,231	$	84,462

Borrowings under the 364-Day Facility bear interest at prevailing interest rates based upon 3-month LIBOR, which was approximately 0.5% as of March 24, 2012, plus 300 basis points. Accordingly, interest expense on borrowings of $250,000 for the full term of the facility would approximate $8,750 using an interest rate of 3.5%. If the 3-month LIBOR increased or decreased by 12.5 basis points from the rate as of March 24, 2012, interest expense would increase or decrease by $313.