UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 19, 2012
SUBURBAN PROPANE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
| Delaware | 1-14222 | 22-3410353 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) | ||
| 240 Route 10 West Whippany, NJ |
07981 | |||
| (Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code (973) 887-5300
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| x | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01. | Entry into a Material Definitive Agreement |
On July 19, 2012, Suburban Propane Partners, L.P., a Delaware limited partnership (“Suburban”) entered into a third amendment (“Amendment No. 3”) to the Contribution Agreement, dated as of April 25, 2012, as amended on June 15, 2012 and July 6, 2012, with Inergy, L.P., a Delaware limited partnership (“NRGY”), Inergy GP, LLC, a Delaware limited liability company, and Inergy Sales & Service, Inc., a Delaware corporation. Amendment No. 3 provides that up to approximately $87.1 million (subject to adjustment in connection with the completion of Suburban’s exchange offers for certain of NRGY’s outstanding senior unsecured notes) of the cash consideration to be delivered by Suburban to NRGY pursuant to the Contribution Agreement shall be effected and satisfied by Suburban delivering, or causing to be delivered, to Inergy up to 2,048,282 additional Suburban common units (the “Additional Equity Consideration”). Any Additional Equity Consideration issued pursuant to the preceding sentence will be issued and registered in connection with a registration statement on Form S-1 filed by Suburban. Amendment No. 3 also provides that NRGY will distribute ninety-nine percent (99%) of any and all Equity Consideration (as defined in Amendment No. 3) to its unitholders and will retain one percent (1%) of any and all Equity Consideration.
A copy of Amendment No. 3 is attached hereto as Exhibit 2.1 and incorporated by reference into this Item 1.01.
| Item 7.01. | Regulation FD Disclosure. |
The consummation of Suburban’s acquisition of NRGY’s retail propane business is conditioned, among other things, upon the receipt of required governmental consents, approvals, orders and authorizations, including the expiration or termination of the applicable waiting period under Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). Suburban and NRGY filed the required antitrust documents relating to acquisition under the HSR Act with the Federal Trade Commission and the Department of Justice. On June 15, 2012, Suburban and NRGY received notification of the early termination of the HSR waiting period.
As previously disclosed on April 26, 2012, we entered into a commitment letter on April 25, 2012 with certain of our lenders who are party to our existing amended and restated credit agreement, pursuant to which such lenders committed to provide (i) in the aggregate, subject to the satisfaction of certain conditions precedent, up to $250.0 million senior secured 364-day incremental term loan facility (the “364-Day Facility”) and (ii) an increase in the aggregate, subject to the satisfaction of certain conditions precedent, of our existing revolving credit facility under the credit agreement from $250.0 million to $400.0 million. We expect to draw $150.0 million on the 364-Day Facility on the closing date of the acquisition, which, together with available cash, will be used for the purposes of funding cash consideration in the exchange offers, as well as the costs and expenses associated with the exchange offers and costs and expenses associated with the consummation of our acquisition of NRGY’s retail propane business. We intend to repay such borrowings with an equity financing in the future, subject to market conditions. The updated unaudited pro forma condensed combined financial information included in Item 9.01 hereto reflects our assumption that we will draw $150.0 million on the 364-Day Facility on the closing date of the acquisition.
| Item 9.01. | Financial Statements and Exhibits. |
| (b) | Pro forma financial information |
On May 3, 2012, Suburban filed a Current Report on Form 8-K that included in Exhibit 99.3 unaudited pro forma condensed combined financial information as of and for the six months ended March 24, 2012 and for the year ended September 24, 2011. This unaudited pro forma condensed combined financial information was prepared to give effect to the acquisition of NRGY’s retail propane business. Such unaudited pro forma condensed combined financial information was updated in Exhibit 99.2 of our Current Report on Form 8-K filed on June 15, 2012.
On July 6, 2012, Suburban announced that it further increased the interest rates on the notes being offered to NRGY noteholders in the exchange offers for their NRGY notes and further increased the cash consent payment being offered to the NRGY noteholders in connection with the related consent solicitations. Such unaudited pro forma condensed combined financial information was updated in Exhibit 99.2 of our Current Report on Form 8-K filed on July 6, 2012.
On July 19, 2012, Suburban entered into Amendment No. 3, as described above. Attached as Exhibit 99.1 hereto is updated unaudited pro forma condensed combined financial information reflecting the terms of Amendment No. 3, specifically the issuance of the Additional Equity Consideration and the decrease in cash consideration paid. In addition, the updated unaudited pro forma condensed combined financial information assumes that we will draw $150.0 million on the
364-Day Facility on the closing date of the acquisition. This updated pro forma financial information replaces the previously provided pro forma financial information in its entirety. This unaudited pro forma condensed combined financial information is provided for illustrative purposes only and does not purport to represent what our actual results of operations or financial position would have been if the acquisition of NRGY’s retail propane business had occurred on the dates indicated, nor are they necessarily indicative of our future operating results or financial position.
| (d) | Exhibits: |
| 2.1 | Third Amendment to Contribution Agreement dated as of July 19, 2012 by and among Inergy, L.P., Inergy GP, LLC, Inergy Sales and Service, Inc. and Suburban Propane Partners, L.P. | |
| 99.1 | Unaudited Pro Forma Condensed Combined Financial Information | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SUBURBAN PROPANE PARTNERS, L.P. | ||||||||
| Date: July 19, 2012 | By: | /s/ Michael A. Stivala | ||||||
| Name: | Michael A. Stivala | |||||||
| Title: | Chief Financial Officer | |||||||
EXHIBIT INDEX
| Exhibit |
||
| 2.1 | Third Amendment to Contribution Agreement dated as of July 19, 2012 by and among Inergy, L.P., Inergy GP, LLC, Inergy Sales and Service, Inc. and Suburban Propane Partners, L.P. | |
| 99.1 | Unaudited Pro Forma Condensed Combined Financial Information | |
Exhibit 2.1
THIRD AMENDMENT
TO
CONTRIBUTION AGREEMENT
JULY 19, 2012
This Third Amendment (this “Third Amendment”), effective as of the date hereof, to the Contribution Agreement dated as of April 25, 2012, as amended on June 15, 2012 and July 6, 2012 (the “Contribution Agreement”), is made and entered into by and among Inergy, L.P., a Delaware limited partnership (“NRGY”), Inergy GP, LLC, a Delaware limited liability company and the general partner of NRGY, Inergy Sales & Service, Inc., a Delaware corporation, and Suburban Propane Partners, L.P., a Delaware limited partnership (“Acquirer”). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Contribution Agreement.
WHEREAS, the Parties desire to amend the Contribution Agreement pursuant to Sections 5.14(b) and 10.1 thereof to memorialize their agreement to permit the Acquirer to use a combination of cash and equity for payment for the Cash Consideration in accordance with the terms and conditions set forth herein;
NOW, THEREFORE, the Contribution Agreement is hereby amended as follows:
| 1. | Section 2.4(b)(v) shall be replaced in its entirety as follows: |
(v) Cash Consideration. The Cash Consideration; provided, that the payment of the portion of the Cash Consideration represented by the Exchange Offer Cash Consideration, if any, shall be effected and satisfied by Acquirer delivering, or causing to be delivered, the Additional Equity Consideration but only to the extent that the aggregate value of such Additional Equity Consideration is equal to the amount of the Exchange Offer Cash Consideration.
| 2. | The second sentence of Section 5.22(b) shall be replaced in its entirety as follows: |
“Effective as of 12:01 am Eastern time on the Contribution Closing Date (or, with respect to Transferred Leave Employees, the date such employee returns to active service), each Propane Group Employee and Transferred Leave Employee shall be eligible to participate in the employee benefit plans provided by Acquirer and its Affiliates (the “Suburban Benefit Plans”) on the same terms and conditions as similarly situated employees of Acquirer and its Affiliates.”
| 3. | The following definitions shall be added to Exhibit A to the Contribution Agreement: |
“Additional Equity Consideration” means a number of Suburban Common Units derived by dividing (a) the Exchange Offer Cash Consideration by (b) $42.50, rounded to the nearest whole Suburban Common Unit; provided that the aggregate number of such additional Suburban Common Units shall not exceed 2,048,282.
“Exchange Offer Cash Consideration” means $200,000,000 less the Exchange Offer Cash Adjustment.
“Initial Equity Consideration” means a number of Suburban Common Units derived by dividing (a) $600,000,000 by (b) the Issue Price, rounded to the nearest whole Suburban Common Unit.
| 4. | The following definitions contained in Exhibit A to the Contribution Agreement shall be replaced in their entirety: |
“Cash Consideration” means the Exchange Offer Cash Consideration and the cash adjustments pursuant to Section 2.4(a)(xvi), Section 2.5 and Section 5.4.
“Equity Consideration” means the Initial Equity Consideration plus the Additional Equity Consideration.
“NRGY Retained Units” means a number of Suburban Common Units derived by multiplying the Equity Consideration by one percent (1%), rounded to the nearest whole Suburban Common Unit.
| 5. | This Third Amendment together with the Contribution Agreement supersedes all other agreements among the Parties relating to the matters discussed herein and therein. |
| 6. | This Third Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which, when taken together, shall constitute one agreement. Delivery by any Party of an executed signature page of this Third Amendment by email or facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. |
| 7. | Except as expressly set forth herein, nothing herein shall affect, limit, amend, supplement or otherwise modify (i) the Contribution Agreement or (ii) the conditions to the Exchange Offer as set forth in the Exchange Offer Documents. |
| 8. | The provisions set forth in Article IX of the Contribution Agreement are incorporated herein by reference. |
2
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by its respective duly authorized officers as of the date first above written.
| CONTRIBUTOR PARTIES: | ||
| INERGY, L.P. | ||
| By: | Inergy GP, LLC, its general partner | |
| By: | /s/ John J. Sherman | |
| John J. Sherman | ||
| President and Chief Executive Officer | ||
| INERGY GP, LLC | ||
| By: | /s/ John J. Sherman | |
| John J. Sherman | ||
| President and Chief Executive Officer | ||
| INERGY SALES & SERVICE, INC. | ||
| By: | /s/ John J. Sherman | |
| John J. Sherman | ||
| President and Chief Executive Officer | ||
| ACQUIRER: | ||
| SUBURBAN PROPANE PARTNERS, L.P. | ||
| By: | /s/ Michael J. Dunn, Jr. | |
| Michael J. Dunn, Jr. | ||
| President and Chief Executive Officer | ||
Signature Page to the Third Amendment to Contribution Agreement
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF SUBURBAN
On April 25, 2012, Suburban entered into a Contribution Agreement, as amended on June 15, 2012, July 6, 2012 and July 19, 2012 (the “Contribution Agreement”), with Inergy, L.P., a Delaware limited partnership (“Inergy”), Inergy GP, LLC, a Delaware limited liability company (“NRGY GP”), and Inergy Sales & Service, Inc., a Delaware corporation (“Inergy Sales”).
The Contribution Agreement provides that Inergy and NRGY GP will contribute to Suburban 100% of the limited liability company interests (the “Inergy Propane Interests”) in Inergy Propane, LLC, a Delaware limited liability company, which at the closing of the transaction will hold only the following interests: (i) 100% of the limited partner interests in Liberty Propane, L.P., a Delaware limited partnership (“Liberty Propane”), which in turn owns 100% of the limited liability company interests in Liberty Propane Operations, LLC, a Delaware limited liability company (“Liberty Operations”); and (ii) 100% of the limited liability company interests in Liberty Propane GP, LLC, a Delaware limited liability company (“Liberty Propane GP”), which in turn owns 100% of the general partner interest in Liberty Propane (collectively with the Inergy Propane Interests, these interests are referred to herein as the “Acquired Interests”). Inergy will also contribute certain assets of Inergy Sales to Suburban (the “Acquired Assets”). Prior to the closing date of the Inergy Propane Acquisition, certain subsidiaries of Inergy Propane, LLC, which will not be contributed pursuant to the Contribution Agreement, will be distributed by Inergy Propane, LLC to Inergy. Following the closing of the Inergy Propane Acquisition (as defined below), Inergy Propane, Liberty Propane, Liberty Operations and Liberty Propane GP will be indirect wholly-owned subsidiaries of Suburban.
Upon contribution, transfer, assignment, and delivery of the Acquired Interests and Acquired Assets to Suburban, Suburban will issue and deliver to Inergy and Inergy Sales, as consideration in connection with the Inergy Propane Acquisition, subject to certain adjustments, an aggregate of up to 15,940,869 newly issued Suburban common units (the “Equity Consideration”). The Equity Consideration consists of (i) the “Initial Equity Consideration” which is equal to 13,892,587 Suburban common units, and (ii) the “Additional Equity Consideration” which is equal to a number of Suburban common units determined by dividing (a) the Inergy Cash Consideration (as defined below) by (b) $42.50, rounded to the nearest whole Suburban common unit; provided that the aggregate amount of Additional Equity Consideration shall not exceed 2,048,282 Suburban common units. Inergy Sales will distribute any and all Suburban common units it receives in connection with the Inergy Propane Acquisition to Inergy. Thereafter, in connection with the Inergy Propane Acquisition and pursuant to the Contribution Agreement, Inergy will distribute ninety-nine percent (99%) of any and all Equity Consideration received to its unitholders and will retain one percent (1%) of any and all Equity Consideration.
Pursuant to the Contribution Agreement, Suburban and its wholly-owned subsidiary Suburban Energy Finance Corp. commenced a private offer to exchange (the “Exchange Offers”) any and all of the outstanding unsecured 7% Senior Notes due 2018 (the “2018 Inergy Notes”) and 6 7/8% Senior Notes due 2021 (the “2021 Inergy Notes”, and together with the 2018 Inergy Notes, the “Inergy Notes”) issued by Inergy and Inergy Finance Corp., which have an aggregate principal amount outstanding of $1.2 billion, for a combination of up to $1.0 billion in aggregate principal amount of new unsecured 7 1/2% Senior Notes due 2018 and 7 3/8% Senior Notes due 2021, respectively, issued by Suburban and Suburban Energy Finance Corp. (collectively, the “SPH Notes”) and up to $200.0 million in cash to be paid to tendering noteholders (the “Exchange Offer Cash Consideration”). Pursuant to the Contribution Agreement, we must pay Inergy the difference, if any, between $200.0 million and the actual Exchange Offer Cash Consideration paid in accordance with the terms of the Exchange Offers (such payment, the “Inergy Cash Consideration”). Suburban will satisfy the Inergy Cash Consideration solely by delivering to Inergy the Additional Equity Consideration.
The Contribution Agreement provides that Suburban will offer $65.0 million in aggregate cash consent payments in connection with the Exchange Offers and that Inergy will pay $36.5 million to Suburban in cash at the acquisition closing date.
As of July 12, 2012, the consent date for the Exchange Offers, Suburban had received tenders and consents from holders representing approximately 96.75% of the total outstanding principal amount of the 2018 Inergy Notes, and tenders and consents from holders representing approximately 88.75% of the total outstanding principal amount of the 2021 Inergy Notes. As a result, the minimum tender condition has been satisfied with respect to the Exchange Offers and requisite consents have been received for both series of Inergy Notes. As of the date hereof, no additional tenders of Inergy Notes or consents have been received. Based on the results of the Exchange Offers as of the date hereof, the Exchange Offer Cash Consideration due to tendering Inergy noteholders was $112,948,000 and the Inergy Cash Consideration due to Inergy was $87,052,000. The Inergy Cash Consideration will be satisfied by the issuance of the Additional Equity Consideration. The Exchange Offers expire on July 26, 2012 (the “Expiration Date”), subject to extension. Any additional tenders received prior to the Expiration Date (as it may be extended) will increase the Exchange Offer Cash Consideration paid to tendering noteholders and decrease the Inergy Cash Consideration. Accordingly, because the Inergy Cash Consideration will be satisfied solely through issuance of Additional Equity Consideration, any decrease in the Inergy Cash Consideration will reduce the number of Suburban common units issued as Additional Equity Consideration. Assuming that no additional tenders are received pursuant to the Exchange Offers subsequent to the date hereof, Inergy (i) will receive 15,940,869 Suburban common units, (ii) will subsequently distribute 15,781,460 of such Suburban common units to its unitholders as of the Record Date, pro rata, and (iii) will retain 1% of such common units, or 159,409 Suburban common units.
The transactions described above that are contemplated by the terms of the Contribution Agreement are referred to herein as the “Inergy Propane Acquisition.” The Acquired Interests and Acquired Assets are collectively referred to herein as “Inergy Propane.”
As of July 18, 2012, the preliminary fair value of the purchase price for Inergy Propane was $1,860.8 million, consisting of: (i) $1.0 billion of newly issued SPH Notes and $112.9 million in cash to Inergy noteholders pursuant to the Exchange Offers; (ii) $65.0 million in cash to the Inergy noteholders for the consent payments pursuant to the Consent Solicitations; and (iii) $719.4 million of new Suburban common units, which will be distributed to Inergy and Inergy Sales, all but $7.2 million of which will subsequently be distributed by Inergy to its unitholders. The preliminary fair value of the purchase price is net of the $36.5 million of cash to be received from Inergy upon closing of the Inergy Propane Acquisition pursuant to the Contribution Agreement Amendment.
On April 25, 2012, we entered into a commitment letter (the “Bank Commitment Letter”) with certain of our lenders who are party to the Credit Agreement (as defined herein) pursuant to which such lenders committed to provide (i) in the aggregate, subject to the satisfaction of certain conditions precedent, up to $250.0 million senior secured 364-day incremental term loan facility (the “364-Day Facility”) and (ii) an increase in the aggregate, subject to the satisfaction of certain conditions precedent, of our existing revolving credit facility under the Credit Agreement from $250.0 million to $400.0 million (the “Commitment Increase”). We expect to draw $150.0 million on the 364-Day Facility on the Acquisition Closing Date, which, together with available cash, will be used for the purposes of paying (i) the Exchange Offer Cash Consideration, (ii) costs and fees related to the Exchange Offers, and (iii) costs and expenses related to the Inergy Propane Acquisition. We intend to repay such borrowings with an equity financing in the future, subject to market conditions. The following pro form financial information reflects borrowings of $150.0 million under the 364-Day Facility.
The following unaudited pro forma condensed combined financial information of Suburban has been prepared to illustrate the effect of the Inergy Propane Acquisition on us 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. for the fiscal year ended September 24, 2011, and the unaudited condensed consolidated financial statements and accompanying notes for the quarterly period ended March 24, 2012, both of which are included in this prospectus; 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, both of which are included in this prospectus. |
1
The historical consolidated financial information has been adjusted in the following 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 (including completion of the Exchange Offers assuming that no Inergy Notes are tendered subsequent to the consent date and $150 million of borrowings under the 364-Day Facility as described above); |
| • | exclusion of historical assets and liabilities of Inergy Propane, LLC not acquired or assumed as part of the Inergy Propane 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 Inergy Propane 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 borrowing 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 this prospectus.
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.
2
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 |
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| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 96,202 | $ | 11,800 | $ | (1,248 | ) | $ | — | $ | (24,298 | ) | $ | — | (6) | $ | 82,456 | |||||||||||
| 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 | ) | 2,250 | — | (7) | 16,399 | ||||||||||||||||||||
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| Total current assets |
282,531 | 285,400 | (150,432 | ) | — | (22,048 | ) | — | 395,451 | |||||||||||||||||||
| 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 | ) | 447,028 | (10) | 1,060,800 | |||||||||||||||||||||
| Other assets |
26,262 | 2,000 | (1,463 | ) | 14,850 | — | (11) | 41,649 | ||||||||||||||||||||
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| Total assets |
$ | 931,478 | $ | 1,589,000 | $ | (343,037 | ) | $ | — | $ | (7,198 | ) | $ | 667,338 | $ | 2,837,581 | ||||||||||||
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| LIABILITIES AND PARTNERS’ CAPITAL/ MEMBER’S EQUITY |
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| Current liabilities: |
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| 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 | ) | 150,000 | — | (12) | 150,000 | ||||||||||||||||||
| Liabilities from price risk management activities |
— | 5,100 | (5,100 | ) | — | — | ||||||||||||||||||||||
| Other current liabilities |
27,241 | 28,800 | (18,473 | ) | (1,984 | ) | — | 35,584 | ||||||||||||||||||||
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| Total current liabilities |
111,249 | 179,000 | (137,179 | ) | — | 150,000 | — | 303,070 | ||||||||||||||||||||
| Long-term borrowings |
348,277 | 12,500 | (1,879 | ) | (10,621 | ) | 1,000,000 | — | (13) | 1,348,277 | ||||||||||||||||||
| Accrued insurance |
41,218 | — | — | — | 41,218 | |||||||||||||||||||||||
| Other liabilities |
54,501 | 14,100 | (14,100 | ) | 10,621 | — | 65,122 | |||||||||||||||||||||
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| Total liabilities |
555,245 | 205,600 | (153,158 | ) | — | 1,150,000 | — | 1,757,687 | ||||||||||||||||||||
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| Partners’ capital/member’s equity |
376,233 | 1,383,400 | 703,661 | (1,383,400 | )(14) | 1,079,894 | ||||||||||||||||||||||
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| Total liabilities and partners’ capital/member’s equity |
$ | 931,478 | $ | 1,589,000 | $ | (153,158 | ) | $ | — | $ | 1,853,661 | $ | (1,383,400 | ) | $ | 2,837,581 | ||||||||||||
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| (*) | 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. |
3
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 | (41,930 | ) | — | (16) | (55,759 | ) | |||||||||||||||||
| Other income |
— | 1,400 | (1,293 | ) | — | 107 | ||||||||||||||||||||||
|
|
|
|
|
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|
|
|
|
|
|
|
|
|||||||||||||||
| Income before (benefit from) provision for income taxes |
72,645 | 83,600 | 207 | — | |
(41,930 |
) |
(9,983 | ) | 104,539 | ||||||||||||||||||
| (Benefit from) provision for income taxes |
(160 | ) | — | (43 | ) | — | (203 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net income (loss) |
$ | 72,805 | $ | 83,600 | $ | 250 | $ | — | $ | (41,930 | ) | $ | (9,983 | ) | $ | 104,742 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Income per Common Unit — basic |
$ | 2.05 | $ | 2.03 | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Weighted average number of units outstanding — basic |
35,588 | 15,941 | (14) | 51,529 | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Income per Common Unit — diluted |
$ | 2.03 | $ | 2.02 | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Weighted average number of units outstanding — diluted |
35,808 | 15,941 | (14) | 51,749 | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| (*) | 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. |
4
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 | |||||||||||||||||||||
|
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|
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|
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|
|
|
|||||||||||||||
| 1,047,324 | 1,837,900 | (893,550 | ) | — | — | 18,809 | 2,010,483 | |||||||||||||||||||||
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|
|
|||||||||||||||
| Operating income |
143,228 | 110,800 | (2,826 | ) | — | — | (18,809 | ) | 232,393 | |||||||||||||||||||
| Interest expense, net |
(27,378 | ) | (1,500 | ) | 100 | (83,861 | ) | — | (16) | (112,639 | ) | |||||||||||||||||
| Other income |
— | 200 | — | — | 200 | |||||||||||||||||||||||
|
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|
|
|||||||||||||||
| Income before provision for income taxes |
115,850 | 109,500 | (2,726 | ) | — | (83,861 | ) | (18,809 | ) | 119,954 | ||||||||||||||||||
| Provision for income taxes |
884 | 500 | (100 | ) | — | 1,284 | ||||||||||||||||||||||
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|
|
|
|
|
|||||||||||||||
| Net income (loss) |
$ | 114,966 | $ | 109,000 | $ | (2,626 | ) | $ | — | $ | (83,861 | ) | $ | (18,809 | ) | $ | 118,670 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Income per Common Unit — basic |
$ | 3.24 | $ | 2.31 | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Weighted average number of units outstanding — basic |
35,525 | 15,941 | (14) | 51,466 | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Income per Common Unit — diluted |
$ | 3.22 | $ | 2.30 | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Weighted average number of units outstanding — diluted |
35,723 | 15,941 | (14) | 51,664 | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| (*) | 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. |
5
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(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 $1,860,859 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 Exchange Offers |
$ | 112,948 | ||
| Cash consideration to Inergy noteholders for consent payment pursuant to the Consent Solicitations |
65,000 | |||
| SPH Notes issued to Inergy noteholders |
1,000,000 | |||
| Initial Equity Consideration (see Note 14) |
626,972 | |||
| Additional Equity Consideration (see Note 14) |
92,439 | |||
| Cash consideration from Inergy pursuant to the Contribution Agreement |
(36,500 | ) | ||
|
|
|
|||
| $ | 1,860,859 | |||
|
|
|
| Preliminary purchase price allocation: |
||||
| Current assets |
$ | 134,968 | ||
| Property, plant and equipment |
614,098 | |||
| Other intangible assets |
380,549 | |||
| Goodwill |
783,149 | |||
| Other assets |
537 | |||
| Current liabilities |
(41,821 | ) | ||
| Non-current liabilities |
(10,621 | ) | ||
|
|
|
|||
| $ | 1,860,859 | |||
|
|
|
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 participating in the Exchange Offers on the Acquisition Closing 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.
6
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(in thousands of dollars, except per unit data)
Note 6. Reflects pro forma adjustments to cash and cash equivalents as follows:
| Gross proceeds from borrowings under 364-Day Facility |
$ | 150,000 | ||
| Cash consideration from Inergy pursuant to the Contribution Agreement |
36,500 | |||
| Cash payments to Inergy noteholders pursuant to the Exchange Offers |
(112,948 | ) | ||
| Cash payments to Inergy noteholders for consent payment pursuant to the consent solicitations |
(65,000 | ) | ||
| Payment of debt origination costs |
(17,100 | ) | ||
| Payment of acquisition-related costs |
(15,750 | ) | ||
|
|
|
|||
| $ | (24,298 | ) | ||
|
|
|
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 $783,149 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. The fair value of the SPH Notes to be issued to Inergy noteholders 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 $1,000,000 reflected in the preliminary purchase price allocation and pro forma adjustment above.
7
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(in thousands of dollars, except per unit data)
Note 14. Reflects total pro forma adjustments to partners’ capital accounts as follows:
| Suburban Common Units |
Suburban Common Unitholders / Member’s Equity |
|||||||
| (in thousands) | ||||||||
| Elimination of historical Inergy Propane member’s capital |
$ | (1,383,400 | ) | |||||
| Issuance of Suburban common units (Initial Equity Consideration) |
13,893 | 626,972 | ||||||
| Additional issuance of Suburban common units (Additional Equity Consideration) |
2,048 | 92,439 | ||||||
| Acquisition-related costs |
(15,750 | ) | ||||||
|
|
|
|
|
|||||
| 15,941 | $ | (679,739 | ) | |||||
|
|
|
|
|
|||||
In accordance with the Contribution Agreement, the number of Suburban common units to be issued to Inergy and Inergy Sales as Initial Equity Consideration 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 number of additional units to be issued to Inergy as Additional Equity Consideration is determined by dividing the Inergy Cash Consideration by $42.50. On July 18, 2012, the Inergy Cash Consideration was estimated to be $87,052, which results in the issuance of 2,048 additional common units. A decrease in the Inergy Cash Consideration will result in a decrease in cash and cash equivalents and a corresponding decrease in partners’ capital.
The pro forma adjustment regarding the 15,941 Suburban common units to be issued to Inergy and Inergy Sales was determined based on the reported closing price of a Suburban common unit on the New York Stock Exchange on July 18, 2012. The fair value of the Suburban common units 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 amounts 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 $71,941 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 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 | |||||
|
|
|
|
|
|||||
8
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(in thousands of dollars, except per unit data)
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 |
$ | 37,187 | $ | 74,375 | ||||
| Interest on borrowings under the 364-Day Facility |
2,625 | 5,250 | ||||||
| Amortization of debt issuance costs |
2,118 | 4,236 | ||||||
|
|
|
|
|
|||||
| $ | 41,930 | $ | 83,861 | |||||
|
|
|
|
|
|||||
Borrowing under the 364-Day Facility bears interest at prevailing interest rates based upon 3-month LIBOR, which was approximately 0.5% as of July 18, 2012, plus 300 basis points. Accordingly, interest expense on borrowing of $150,000 for the full term of the 364-Day Facility would approximate $5,250 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 July 18, 2012, annual interest expense would increase or decrease by $188.
9