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): August 14, 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):
| ¨ | 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 8.01 | Other Events |
On August 20, 2012, Suburban Propane Partners, L.P. (“Suburban”) issued a press release announcing the closing of an underwritten public equity offering (the “Offering”) and the repayment in full of $225 million drawn on its senior secured 364-day incremental term loan facility (the “364-Day Facility”) on August 14, 2012. This press release also announced the underwriters’ exercise of their over-allotment option in connection with the Offering. In addition, the press release also reported that the board of directors of Inergy, L.P.’s (“NRGY”) general partner had declared record and distribution dates for the previously announced spin-off to NRGY’s unitholders of 99% of the Suburban common units that NRGY had received on August 1, 2012 in connection with Suburban’s acquisition of NRGY’s retail propane operations. A copy of the press release is attached as Exhibit 99.1 to this report and is incorporated by reference herein.
| 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 (the “Inergy Propane Acquisition”). Such unaudited pro forma condensed combined financial information was updated in Exhibit 99.2 to 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 to our Current Report on Form 8-K filed on July 6, 2012.
On July 19, 2012, Suburban announced that it entered into a third amendment (the “Amendment No. 3”) to the Contribution Agreement, dated as of April 25, 2012, as amended on June 15, 2012 and July 6, 2012, with NRGY, Inergy GP, LLC, a Delaware limited liability company, and Inergy Sales & Service, Inc., a Delaware corporation. Amendment No. 3 provided 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”). 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, was filed as Exhibit 99.2 to our Current Report on Form 8-K filed on July 19, 2012. In addition, such unaudited pro forma condensed combined financial information assumed a draw of $150.0 million on the 364-Day Facility on the closing date of the acquisition.
On July 30, 2012 Suburban filed a Current Report on Form 8-K that included in Exhibit 99.1 updated unaudited pro forma condensed combined financial information to take account for an increase in the amount of cash consideration to be paid to tendering NRGY noteholders and a decrease in the value of Additional Equity Consideration to be issued on the closing date of the acquisition.
On August 1, 2012, Suburban consummated the Inergy Propane Acquisition and drew $225 million on its 364-Day Facility. In addition, on August 2, 2012, Suburban filed a Current Report on Form 8-K that included in Exhibit 99.1 its Fiscal 2012 Third Quarter Financial Results. Suburban filed as Exhibit 99.1 to its Current Report on Form 8-K on August 6, 2012 updated unaudited pro forma condensed combined financial information as of and for the nine months ended June 23, 2012 and for the year ended September 24, 2011 reflecting (i) the consummation of the Inergy Propane Acquisition and (ii) a draw of $225.0 million on the 364-Day Facility on the closing date of the Inergy Propane Acquisition.
On August 14, 2012, Suburban consummated the Offering of 6,300,000 common units representing limited partner interests in Suburban. Suburban received approximately $226.5 million of net proceeds from the Offering (after considering underwriter commissions and other estimated offering expenses). Suburban used the net proceeds from the Offering to repay in full the $225 million drawn on the 364-Day Facility. On August 15, 2012, Suburban received notice from the underwriters that they were exercising their over-allotment option to purchase an additional 945,000 common units in connection with the Offering. Suburban will receive approximately $34.1 million of net proceeds from the underwriters’ exercise of the over-allotment option (after considering underwriter commissions and other estimated offering expenses). Suburban expects the
delivery of the additional common units to occur on August 20, 2012, subject to customary closing conditions. Attached as Exhibit 99.2 hereto is updated unaudited pro forma condensed combined financial information as of and for the nine months ended June 23, 2012 and for the year ended September 24, 2011 reflecting (i) the consummation of the Offering, (ii) the repayment in full of the $225 million drawn on the 364-Day Facility and (iii) the closing of the over-allotment option in connection with the Offering. 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 Inergy Propane Acquisition had occurred on the dates indicated, nor are they necessarily indicative of our future operating results or financial position.
| (d) | Exhibits: |
| 99.1 | Press Release issued by Suburban Propane Partners, L.P. related to the Closing of the Offering, Exercise of Over-Allotment Option, Repayment of the 364-Day Facility and Distribution of Spin-Off Units | |
| 99.2 | 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: August 20, 2012 | By: | /s/ Michael A. Stivala | ||||
| Name: | Michael A. Stivala | |||||
| Title: | Chief Financial Officer | |||||
EXHIBIT INDEX
| Exhibit |
||
| 99.1 | Press Release issued by Suburban Propane Partners, L.P. related to the Closing of the Offering, Exercise of Over-Allotment Option, Repayment of the 364-Day Facility and Distribution of Spin-Off Units | |
| 99.2 | Unaudited Pro Forma Condensed Combined Financial Information | |
EXHIBIT 99.1
Suburban Propane Partners, L.P. Announces Closing of Public Offering of Common Units, Exercise of Over-Allotment Option, Repayment of 364-day Incremental Term Loan Facility and Distribution of Spin-Off Units
WHIPPANY, N.J., Aug. 20, 2012 — Suburban Propane Partners, L.P. (NYSE: SPH) (“Suburban”), a nationwide distributor of propane, fuel oil and related products and services, as well as a marketer of natural gas and electricity, announced today that its underwritten public offering of 6,300,000 common units representing limited partner interests in Suburban was closed on August 14, 2012 (the “Initial Closing Date”). The offering was priced at $37.61 per common unit. Wells Fargo Securities, BofA Merrill Lynch, Citigroup, Credit Suisse, Deutsche Bank Securities, Goldman, Sachs & Co., J.P. Morgan and Raymond James acted as joint book-running managers of the offering. Stifel Nicolaus Weisel acted as co-manager of the offering.
On the Initial Closing Date, Suburban received approximately $226.5 million of net proceeds from the offering (after considering underwriter commissions and other estimated offering expenses). Also on the Initial Closing Date, Suburban used the net proceeds from the offering to repay its borrowing of $225 million on August 1, 2012 under its 364-day incremental term loan facility (the “364-Day Facility”) provided under the First Amendment to its Amended and Restated Credit Agreement (the “Credit Agreement”), dated August 1, 2012, incurred in connection with its acquisition of Inergy, L.P.’s (“Inergy”) retail propane operations on that date. The Credit Agreement provides for the reinstatement and increase from $150.0 million to $250.0 million of the existing uncommitted incremental term facility under the Credit Agreement upon repayment of the 364-Day Facility.
On August 15, 2012, the underwriters gave notice of the exercise of their over-allotment option to purchase from Suburban an additional 945,000 common units representing limited partner interests in Suburban at a price of $37.61 per common unit. Suburban will receive approximately $34.1 million of net proceeds from the underwriters’ exercise of the over-allotment option (after considering underwriter commissions and other estimated offering expenses) upon the delivery of the additional common units, which is expected to occur on August 20, 2012, subject to customary closing conditions.
The remaining net proceeds from the offering, including the proceeds from the underwriters’ purchase of 945,000 additional common units pursuant to the over-allotment option in connection with the offering, will be used for working capital and general partnership purposes.
An electronic copy of the prospectus supplement and the accompanying base prospectus may be obtained at no charge on the website for the Securities and Exchange Commission (the “SEC”) at: http://www.sec.gov/Archives/edgar/data/1005210/000119312512347959/d392012d424b5.htm.
On August 17, 2012, Inergy announced that the board of directors of Inergy’s general partner had declared August 29, 2012 as the record date, and September 14, 2012 as the distribution date, for the previously announced spin-off to Inergy’s unitholders of
14,058,418 of the aggregate 14,200,422 Suburban common units acquired by Inergy on August 1, 2012 in connection with Suburban’s acquisition of Inergy’s retail propane operations.
About Suburban Propane Partners, L.P.
Suburban Propane Partners, L.P. is a publicly-traded master limited partnership listed on the New York Stock Exchange, and is headquartered in Whippany, New Jersey. Suburban serves the energy needs of its residential, commercial, industrial and agricultural customers in 41 states.
Forward-Looking Statements
This press release includes forward-looking statements. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that Suburban expects, believes or anticipates will or may occur in the future are forward-looking statements, including statements regarding the offering, the use of proceeds of the offering, the Credit Agreement and the spin-off of its common units by Inergy. These statements reflect Suburban’s expectations or forecasts based on assumptions made by Suburban. These statements are subject to risks including those relating to market conditions, financial performance and results, prices and demand for natural gas and oil and other important factors that could cause actual results to differ materially from our forward-looking statements. These risks are further described in Suburban’s reports filed with the SEC.
Any forward-looking statement speaks only as of the date on which such statement is made and Suburban undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF SUBURBAN
On August 1, 2012 (the “Acquisition Date”), the Partnership completed the acquisition of the sole membership interest in Inergy Propane, LLC, including certain wholly-owned subsidiaries of Inergy Propane, LLC, and the assets of Inergy Sales and Service, Inc. (“Inergy Sales”). The acquired interests and assets are collectively referred to as “Inergy Propane.” As of the Acquisition Date, Inergy Propane consisted of the former retail propane assets and operations of Inergy, L.P. (“Inergy”).
The acquisition of Inergy Propane (the “Inergy Propane Acquisition”) was consummated pursuant to a definitive agreement dated April 25, 2012, as amended on June 15, 2012, July 6, 2012 and July 19, 2012 with Inergy, Inergy GP, LLC and Inergy Sales (the “Contribution Agreement”). Prior to the Acquisition Date, Inergy Propane transferred 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 were not included as part of the Inergy Propane business at the time of the transfer of the membership interests in Inergy Propane to the Partnership and were not part of the Inergy Propane Acquisition. On the Acquisition Date, Inergy Propane and its remaining wholly-owned subsidiaries acquired became subsidiaries of the Partnership. The results of operations of Inergy Propane will be included in the Partnership’s results of operations beginning on the Acquisition Date.
Upon contribution, transfer, assignment, and delivery of the acquired interests and acquired assets to Suburban, Suburban issued and delivered to Inergy and Inergy Sales, as consideration in connection with the Inergy Propane Acquisition, an aggregate of 14,200,422 newly issued 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 307,835 Suburban common units determined by dividing (a) the Inergy Cash Consideration of $13.1 million (as defined below) by (b) $42.50, rounded to the nearest whole Suburban common unit. Inergy Sales will distribute any and all Suburban common units it received 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 had an aggregate principal amount outstanding of $1,200.0 million, for a combination of up to $1,000.0 million 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”).
At the expiration of the Exchange Offers, Suburban had received tenders from holders representing approximately 98.09% of the total outstanding principal amount of the 2018 Inergy Notes, and tenders from holders representing approximately 99.74% of the total outstanding principal amount of the 2021 Inergy Notes. Based on the results of the Exchange Offers, the Exchange Offer Cash Consideration due to tendering noteholders was $184.7 million. Pursuant to the Contribution Agreement, the Partnership was required to provide Inergy with Additional Equity Consideration for the amount of Inergy Notes not tendered in the Exchange Offers, which amounted to $13.1 million (the “Inergy Cash Consideration”).
Pursuant to the Contribution Agreement, Suburban paid $65.0 million in aggregate cash consent payments to tendering Inergy noteholders in connection with the Exchange Offers and Inergy paid $36.5 million to Suburban in cash at the Acquisition Date.
The preliminary fair value of the purchase price for Inergy Propane is $1,896.9 million, consisting of: (i) $1,000.0 million in aggregate principal amount of newly issued SPH Notes with a fair value of $1,075.0 million, and $184.8 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; (iii) new Suburban common units with a fair value of $590.0 million, which were distributed to Inergy and Inergy Sales, all but $5.9 million of which will subsequently be distributed by Inergy to its unitholders; and (iv) less $17.9 million of net cash received from Inergy at the Acquisition Date pursuant to the Contribution Agreement, which includes the $36.5 million discussed in the preceding paragraph, net of amounts owed to Inergy by the Partnership at the Acquisition Date.
On April 25, 2012, we entered into a commitment letter (the “Bank Commitment Letter”) with certain of our lenders who are party to our existing 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 (the “Commitment Increase”). On the Acquisition Date we drew $225.0 million on the 364-Day Facility, which, together with available cash, was 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.
1
On August 14, 2012 we sold 6,300,000 common units in a public offering at a price of $37.61 per unit realizing proceeds of approximately $226.5 million, net of underwriting commissions and other offering expenses. Also on August 14, 2012, we used the net proceeds from the offering to repay in full the borrowings under the 364-Day Facility.
On August 15, 2012, the underwriters gave notice of the exercise of their over-allotment option to purchase from Suburban an additional 945,000 common units at a price of $37.61 per common unit. We will receive approximately $34.1 million of net proceeds from the underwriters’ exercise of the over-allotment option, net of underwriting commissions and other estimated offering expenses upon the delivery of the additional common units, which is expected to occur on August 20, 2012, subject to customary closing conditions. The remaining net proceeds from the offering, including the proceeds from the underwriters’ purchase of 945,000 additional common units pursuant to the over-allotment option in connection with the offering, will be used for working capital and general partnership purposes.
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. 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 June 23, 2012, as amended; 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, which is included in Suburban’s Current Report on Form 8-K dated May 3, 2012, and the unaudited interim historical financial statements and accompanying notes for the nine months ended June 30, 2012 and 2011, which is included in Suburban’s Current Report on Form 8-K dated August 6, 2012. |
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. 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 June 23, 2012, the last day of Suburban’s 2012 third 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 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 Acquisition 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 issuance of 6,300,000 common units on August 14, 2012 and expected issuance of 945,000 common units on August 20, 2012; and |
| • | the repayment in full of borrowings under the 364-Day Facility. |
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.
2
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. 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 herein.
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.
3
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 23, 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 |
$ | 115,804 | $ | 3,500 | $ | 4,685 | $ | — | $ | (5,399 | ) | $ | — | (6) | $ | 118,590 | ||||||||||||
| Accounts receivable, less allowance for doubtful accounts |
62,478 | 111,100 | (68,268 | ) | — | 105,310 | ||||||||||||||||||||||
| Inventories |
52,331 | 79,000 | (40,922 | ) | — | 90,409 | ||||||||||||||||||||||
| Assets from price risk management activities |
— | 40,600 | (40,600 | ) | — | — | ||||||||||||||||||||||
| Other current assets |
18,555 | 8,800 | (6,886 | ) | — | 20,469 | ||||||||||||||||||||||
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| Total current assets |
249,168 | 243,000 | (151,991 | ) | — | (5,399 | ) | — | 334,778 | |||||||||||||||||||
| Property, plant and equipment, net |
327,212 | 638,200 | (177,426 | ) | 153,324 | (7) | 941,310 | |||||||||||||||||||||
| Other intangible assets, net |
13,913 | 298,200 | (4,473 | ) | 86,822 | (8) | 394,462 | |||||||||||||||||||||
| Receivable from Inergy Midstream, L.P. |
— | 100 | (100 | ) | — | — | ||||||||||||||||||||||
| Goodwill |
277,651 | 336,500 | (379 | ) | 546,319 | (9) | 1,160,091 | |||||||||||||||||||||
| Other assets |
28,120 | 2,100 | (1,351 | ) | 18,444 | — | (10) | 47,313 | ||||||||||||||||||||
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| Total assets |
$ | 896,064 | $ | 1,518,100 | $ | (335,720 | ) | $ | — | $ | 13,045 | $ | 786,465 | $ | 2,877,954 | |||||||||||||
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| LIABILITIES AND PARTNERS’ CAPITAL/ MEMBER’S EQUITY |
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| Current liabilities: |
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| Accounts payable |
$ | 26,309 | $ | 89,000 | $ | (88,836 | ) | $ | (155 | ) | $ | — | $ | — | $ | 26,318 | ||||||||||||
| Accrued employment and benefit costs |
12,371 | — | — | 3,652 | — | 16,023 | ||||||||||||||||||||||
| Customer deposits and advances |
36,634 | 34,900 | 8 | 3,844 | — | 75,386 | ||||||||||||||||||||||
| Short-term borrowings and current portion of long-term borrowings |
— | 4,000 | (88 | ) | (3,912 | ) | — | — | ||||||||||||||||||||
| Liabilities from price risk management activities |
— | 13,500 | (13,500 | ) | — | — | ||||||||||||||||||||||
| Other current liabilities |
35,770 | 32,900 | (19,953 | ) | (3,429 | ) | 9,927 | (11) | 55,215 | |||||||||||||||||||
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| Total current liabilities |
111,084 | 174,300 | (122,369 | ) | — | — | 9,927 | 172,942 | ||||||||||||||||||||
| Long-term borrowings |
348,331 | 12,000 | (1,874 | ) | (10,126 | ) | 1,075,043 | — | (12) | 1,423,374 | ||||||||||||||||||
| Accrued insurance |
43,604 | — | — | — | 43,604 | |||||||||||||||||||||||
| Other liabilities |
55,515 | 14,100 | (14,100 | ) | 10,126 | — | 65,641 | |||||||||||||||||||||
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| Total liabilities |
558,534 | 200,400 | (138,343 | ) | — | 1,075,043 | 9,927 | 1,705,561 | ||||||||||||||||||||
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| Partners’ capital/member’s equity |
337,530 | 1,317,700 | 834,863 | (1,317,700 | ) (13) | 1,172,393 | ||||||||||||||||||||||
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| Total liabilities and partners’ capital/member’s equity |
$ | 896,064 | $ | 1,518,100 | $ | (138,343 | ) | $ | — | $ | 1,909,906 | $ | (1,307,773 | ) | $ | 2,877,954 | ||||||||||||
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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 third fiscal quarter ended on June 23, 2012 for Suburban and June 30, 2012 for Inergy Propane. |
4
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 23, 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 |
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| Revenues |
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| Propane |
$ | 666,796 | $ | 1,132,300 | $ | (530,224 | ) | $ | — | $ | — | $ | — | $ | 1,268,872 | |||||||||||||
| Fuel oil and other refined fuels |
92,262 | — | — | 96,328 | — | 188,590 | ||||||||||||||||||||||
| Other |
78,055 | 402,500 | (258,858 | ) | (96,328 | ) | — | 125,369 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
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|
|
|||||||||||||||
| 837,113 | 1,534,800 | (789,082 | ) | — | — | — | 1,582,831 | |||||||||||||||||||||
| Costs and expenses |
||||||||||||||||||||||||||||
| Cost of products sold |
480,751 | 1,162,600 | (726,328 | ) | — | 917,023 | ||||||||||||||||||||||
| Operating and administrative expenses |
242,835 | 217,900 | (31,101 | ) | (3,700 | ) | — | 425,934 | ||||||||||||||||||||
| Acquisition-related charges |
5,950 | — | — | 3,700 | (9,650 | ) (14) | — | |||||||||||||||||||||
| Loss on disposal of assets |
— | 5,800 | (20 | ) | — | 5,780 | ||||||||||||||||||||||
| Depreciation and amortization |
23,906 | 87,500 | (34,188 | ) | 15,929 | (15) | 93,147 | |||||||||||||||||||||
|
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|
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|
|
|
|
|
|
|
|
|||||||||||||||
| 753,442 | 1,473,800 | (791,637 | ) | — | — | 6,279 | 1,441,884 | |||||||||||||||||||||
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|
|
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|
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|
|
|||||||||||||||
| Operating income |
83,671 | 61,000 | 2,555 | — | — | (6,279 | ) | 140,947 | ||||||||||||||||||||
| Loss on debt extinguishment |
(507 | ) | — | — | — | (507 | ) | |||||||||||||||||||||
| Interest expense, net |
(19,742 | ) | (1,000 | ) | 148 | (50,432 | ) | — | (16) | (71,026 | ) | |||||||||||||||||
| Other income |
— | 1,400 | (1,244 | ) | — | 156 | ||||||||||||||||||||||
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|
|||||||||||||||
| Income before (benefit from) provision for income taxes |
63,422 | 61,400 | 1,459 | — | (50,432 | ) | (6,279 | ) | 69,570 | |||||||||||||||||||
| (Benefit from) provision for income taxes |
(60 | ) | (100 | ) | (20 | ) | — | (180 | ) | |||||||||||||||||||
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|
|
|||||||||||||||
| Net income (loss) |
$ | 63,482 | $ | 61,500 | $ | 1,479 | $ | — | $ | (50,432 | ) | $ | (6,279 | ) | $ | 69,750 | ||||||||||||
|
|
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|
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|
|||||||||||||||
| Income per Common Unit - basic |
$ | 1.78 | $ | 1.22 | ||||||||||||||||||||||||
|
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|
|
|
|||||||||||||||||||||||||
| Weighted average number of units outstanding - basic |
35,616 | 21,446 | (13) | 57,062 | ||||||||||||||||||||||||
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|
|
|
|||||||||||||||||||||||||
| Income per Common Unit - diluted |
$ | 1.77 | $ | 1.22 | ||||||||||||||||||||||||
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|
|
|
|
|||||||||||||||||||||||||
| Weighted average number of units outstanding - diluted |
35,794 | 21,446 | (13) | 57,240 | ||||||||||||||||||||||||
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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 third fiscal quarter ended on June 23, 2012 for Suburban and June 30, 2012 for Inergy Propane. |
5
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 | ||||||||||||||||||||
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|
|||||||||||||||
| 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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|
|||||||||||||||
| 1,047,324 | 1,837,900 | (893,550 | ) | — | — | 18,809 | 2,010,483 | |||||||||||||||||||||
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|
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| Operating income |
143,228 | 110,800 | (2,826 | ) | — | — | (18,809 | ) | 232,393 | |||||||||||||||||||
| Interest expense, net |
(27,378 | ) | (1,500 | ) | 100 | (67,242 | ) | — | (16) | (96,020 | ) | |||||||||||||||||
| Other income |
— | 200 | — | — | 200 | |||||||||||||||||||||||
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| Income before provision for income taxes |
115,850 | 109,500 | (2,726 | ) | — | (67,242 | ) | (18,809 | ) | 136,573 | ||||||||||||||||||
| Provision for income taxes |
884 | 500 | (100 | ) | — | 1,284 | ||||||||||||||||||||||
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|
|||||||||||||||
| Net income (loss) |
$ | 114,966 | $ | 109,000 | $ | (2,626 | ) | $ | — | $ | (67,242 | ) | $ | (18,809 | ) | $ | 135,289 | |||||||||||
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|
|||||||||||||||
| Income per Common Unit - basic |
$ | 3.24 | $ | 2.37 | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Weighted average number of units outstanding - basic |
35,525 | 21,446 | (13) | 56,971 | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Income per Common Unit - diluted |
$ | 3.22 | $ | 2.37 | ||||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||
| Weighted average number of units outstanding - diluted |
35,723 | 21,446 | (13) | 57,169 | ||||||||||||||||||||||||
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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. |
6
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 $1,896,860 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 |
$ | 184,761 | ||
| Cash consideration to Inergy noteholders for consent payment pursuant to the consent solicitations |
65,000 | |||
| SPH Notes issued to Inergy noteholders (par value of $1,000,000) |
1,075,042 | |||
| Initial Equity Consideration (see Note 13) |
577,237 | |||
| Additional Equity Consideration (see Note 13) |
12,791 | |||
| Cash received from Inergy pursuant to the Contribution Agreement |
(17,971 | ) | ||
|
|
|
|||
| $ | 1,896,860 | |||
|
|
|
|||
| Preliminary purchase price allocation: |
||||
| Current assets |
$ | 91,009 | ||
| Property, plant and equipment |
614,098 | |||
| Other intangible assets |
380,549 | |||
| Goodwill |
882,439 | |||
| Other assets |
749 | |||
| Current liabilities |
(61,858 | ) | ||
| Non-current liabilities |
(10,126 | ) | ||
|
|
|
|||
| $ | 1,896,860 | |||
|
|
|
Pursuant to the Contribution Agreement, the cash consideration for Inergy Propane is subject to adjustment for the working capital of Inergy Propane.
In addition, on the Acquisition Date, Inergy provided Suburban with cash in an amount equal to the amount of accrued and unpaid interest on the Inergy Notes through the Acquisition Date, which Suburban distributed to the Inergy noteholders participating in the Exchange Offers on the Acquisition 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.
7
Note 6. Reflects pro forma adjustments to cash and cash equivalents as follows:
| Net proceeds from issuance of common units on August 14, 2012 |
$ | 226,465 | ||
| Net proceeds from expected issuance of common units on August 20, 2012 |
34,120 | |||
| Cash received from Inergy pursuant to the Contribution Agreement |
17,971 | |||
| Cash payments to Inergy noteholders pursuant to the Exchange Offers |
(184,761 | ) | ||
| Cash payments to Inergy noteholders for consent payment pursuant to the consent solicitations |
(65,000 | ) | ||
| Payment of debt origination costs |
(18,444 | ) | ||
| Payment of acquisition-related costs |
(15,750 | ) | ||
|
|
|
|||
| $ | (5,399 | ) | ||
|
|
|
Note 7. 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 |
(460,774 | ) | ||
|
|
|
|||
| $ | 153,324 | |||
|
|
|
Note 8. 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 |
(293,727 | ) | ||
|
|
|
|||
| $ | 86,822 | |||
|
|
|
Note 9. Reflects pro forma adjustments to remove Inergy Propane’s historical goodwill of $336,121 and to record goodwill of $882,439 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 10. 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 11. Reflects pro forma adjustments to record other current liabilities at estimated fair value as follows:
| To record estimated fair value of Inergy Propane other current liabilities |
$ | 19,445 | ||
| Eliminate historical cost of Inergy Propane’s other current liabilities |
(9,518 | ) | ||
|
|
|
|||
| $ | 9,927 | |||
|
|
|
Note 12. Reflects the issuance of $1,000,000 in aggregate principal amount of SPH Notes with an aggregate fair value of $1,075,043.
8
Note 13. 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 |
$ | (1,317,700 | ) | |||||
| Issuance of common units (Initial Equity Consideration) |
13,893 | 577,237 | ||||||
| Issuance of common units (Additional Equity Consideration) |
308 | 12,791 | ||||||
| Issuance of common units on August 14, 2012 |
6,300 | 226,465 | ||||||
| Expected issuance of common units on August 20, 2012 |
945 | 34,120 | ||||||
| Acquisition-related costs |
(15,750 | ) | ||||||
|
|
|
|
|
|||||
| 21,446 | $ | (482,837 | ) | |||||
|
|
|
|
|
|||||
In accordance with the Contribution Agreement, the number of Suburban common units 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 issued to Inergy as Additional Equity Consideration is determined by dividing the Inergy Cash Consideration by $42.50. The Inergy Cash Consideration was $13,083, which results in the issuance of 308 additional common units.
The pro forma adjustment regarding the 14,201 Suburban common units 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 31, 2012, which was the last reported closing price prior to the Acquisition Date.
Note 14. Reflects pro forma adjustments for the removal of direct incremental acquisition-related costs reflected in the historical statement of operations for the Inergy Propane Acquisition.
Note 15. Reflects pro forma adjustments to depreciation and amortization expense as follows:
| For the nine months ended June 30, 2012 |
For the year ended September 24, 2011 |
|||||||
| Eliminate historical depreciation and amortization expense of Inergy Propane |
$ | (53,312 | ) | $ | (74,500 | ) | ||
| Depreciation and amortization expense reflecting preliminary allocation of the purchase price: |
||||||||
| Depreciation expense on property, plant and equipment (5 to 40 years) |
39,301 | 53,389 | ||||||
| Amortization expense of customer list intangibles (10 years) |
27,225 | 36,300 | ||||||
| Amortization expense of non-compete agreement intangibles |
2,302 | 3,070 | ||||||
| Amortization expense of tradename intangibles (4 years) |
413 | 550 | ||||||
|
|
|
|
|
|||||
| $ | 15,929 | $ | 18,809 | |||||
|
|
|
|
|
|||||
9
Note 16. Reflects pro forma adjustments to interest expense as follows:
| For the nine months ended June 30, 2012 |
For the year ended September 24, 2011 |
|||||||
| Interest on SPH Notes, net of premium |
$ | 48,315 | $ | 64,419 | ||||
| Amortization of debt issuance costs |
2,117 | 2,823 | ||||||
|
|
|
|
|
|||||
| $ | 50,432 | $ | 67,242 | |||||
|
|
|
|
|
|||||
10