UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 28, 1996
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 16 OF THE SECURITIES EXCHANGE
ACT OF 1934
for the transition period from ______ to ______
Commission File Number: 1-14222
-------
SUBURBAN PROPANE PARTNERS, L.P.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3410353
- ---------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
240 Route 10 West, Whippany, NJ 07981
- ----------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
(201)887-5300
- ----------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Units New York Stock Exchange
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for each shorter period that the Registrant
was required to file such reports), and (2) had been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K [ ].
The aggregate market value as of December 16, 1996 of the Registrant's Common
Units held by non-affiliates of the Registrant, based on the reported
closing price of such units on the New York Stock Exchange on such date,
was approximately $409,687,500. At December 16, 1996 there were outstanding
21,562,500 Common Units and 7,163,750 Subordinated Units.
Documents Incorporated by Reference: None
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO ANNUAL REPORT
ON FORM 10-K
PART I Page
ITEM 1. BUSINESS............................................... 1
ITEM 2. PROPERTIES............................................. 5
ITEM 3. LEGAL PROCEEDINGS...................................... 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.... 6
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS AND
RELATED UNITHOLDER MATTERS............................. 6
ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA....... 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......... 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............ 14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................... 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..... 15
ITEM 11. EXECUTIVE COMPENSATION................................. 17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT......................................... 22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......... 23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.................................... 24
Signatures......................................................
<PAGE>
PART I
ITEM 1. BUSINESS.
General
Suburban Propane Partners, L.P. (the "Partnership"), a publicly traded
Delaware limited partnership was formed on December 19, 1995. The Partnership
conducts its business principally through its subsidiary, Suburban Propane, L.P.
(the "Operating Partnership"), a Delaware limited partnership. The Partnership
and the Operating Partnership were formed to acquire and operate the propane
business and assets of the Suburban Propane Division of Quantum Chemical
Corporation (the "Predecessor Company"), then owned by Hanson PLC ("Hanson"). In
addition, Suburban Sales and Service, Inc. (the "Service Company"), a subsidiary
of the Operating Partnership, was formed to acquire and operate the service work
and appliance and propane equipment parts businesses of the Predecessor Company.
The Partnership, the Operating Partnership and the Service Company are
collectively referred to hereinafter as the "Partnership Entities". The
Partnership Entities commenced operations on March 5, 1996 upon consummation of
an initial public offering of Common Units representing limited partner
interests in the Partnership, the private placement of $425 million aggregate
principal amount of Senior Notes and the transfer of all the propane assets
(excluding the net accounts receivable balance) of the Predecessor Company to
the Operating Partnership and Service Company.
Suburban Propane GP, Inc. (the "General Partner") is a wholly-owned
subsidiary of Quantum Chemical Corporation ("Quantum") and serves as the general
partner of the Partnership and the Operating Partnership. Both the General
Partner and Quantum are indirect wholly-owned subsidiaries of Millennium
Chemicals Inc. ("Millennium") which was formed as a result of Hanson's demerger
in October 1996. The General Partner holds a 1% general partner interest in the
Partnership and a 1.0101% general partner interest in the Operating Partnership.
In addition, the General Partner owns a 24.4% limited partner interest in the
Partnership. This limited partner interest is evidenced by subordinated units
representing limited partner interests in the Partnership. The General Partner
has delegated to the Partnership's Board of Supervisors all management powers
over the business and affairs of the Partnership Entities that the General
Partner possesses under applicable law.
The Partnership Entities are engaged in the retail and wholesale
marketing of propane and related appliances and services. The Partnership
believes it is the third largest retail marketer of propane in the United
States, serving more than 730,000 active residential, commercial, industrial and
agricultural customers from 352 customer service centers in 41 states. The
Partnership's operations are concentrated in the east and west coast regions of
the United States. The retail propane sales volume of the Partnership was
approximately 567 million gallons during the fiscal year ended September 28,
1996. Based on industry statistics, the Partnership believes that its retail
propane sales volume constitutes approximately 6% of the domestic retail market
for propane.
History of the Partnership's Operations
The Predecessor Company had been continuously engaged in the retail propane
business since 1928 and had been owned by Quantum since 1983. During the 1980s,
the Predecessor Company grew rapidly through acquisitions and strengthened its
position as a leader in the industry. In September 1993, Quantum was acquired by
a wholly-owned subsidiary of Hanson. On March 5, 1996, the Partnership acquired
the business and assets of the Predecessor Company and commenced operating as a
public entity.
<PAGE>
Business Strategy
The Partnership's strategy is to expand its operations and increase its
retail market share in selected markets both through the acquisition of other
propane distributors and through internal growth. Acquisitions will be an
important element of growth for the Partnership, as the retail propane industry
is mature and overall demand for propane is expected to involve little growth
for the foreseeable future. During the year ended September 28, 1996, the
Partnership acquired 17 propane distributors for a total consideration of $31.7
million.
In order to facilitate the Partnership's acquisition strategy, the Operating
Partnership has entered into certain bank credit facilities, consisting of a
$100 million Acquisition Facility and a $75 million Working Capital Facility.
The Partnership also has registered 3,000,000 additional Common Units for use as
acquisition consideration. The Partnership is unable to predict the size, number
or timing of future acquisitions.
In addition to pursuing expansion through acquisitions, the Partnership
intends to pursue internal growth at its existing customer service centers. In
furtherance of this strategy, the Partnership has increased its efforts to
acquire new customers, to retain existing customers and to sell additional
products and services to its customers. The Partnership employs a nationwide
sales organization and has initiated a comprehensive customer retention program.
By retaining more of its existing customers and continuing to seek new
customers, the Partnership believes it can increase its customer base and
improve its profitability.
Industry Background and Competition
Propane, a by-product of natural gas processing and petroleum refining, is a
clean-burning energy source recognized for its transportability and ease of use
relative to alternative forms of stand-alone energy sources. Retail propane use
falls into three broad categories: (i) residential and commercial applications,
(ii) industrial applications and (iii) agricultural uses. In the residential and
commercial markets, propane is used primarily for space heating, water heating,
clothes drying and cooking. Industrial customers primarily use propane as a
motor fuel burned in internal combustion engines that power over-the-road
vehicles, forklifts and stationary engines, to fire furnaces, as a cutting gas
and in other process applications. In the agricultural market, propane is
primarily used for tobacco curing, crop drying, poultry brooding and weed
control. In its wholesale operations, the Partnership sells propane principally
to large industrial end-users and other propane distributors.
Propane is extracted from natural gas or oil wellhead gas at processing
plants or separated from crude oil during the refining process. Propane is
normally transported and stored in a liquid state under moderate pressure or
refrigeration for ease of handling in shipping and distribution. When the
pressure is released or the temperature is increased, it is usable as a
flammable gas. Propane is colorless and odorless; an odorant is added to allow
its detection. Propane is clean burning, producing negligible amounts of
pollutants when consumed.
Based upon information provided by the Energy Information Agency, propane
accounts for approximately three to four percent of household energy consumption
in the United States. Propane competes primarily with electricity and fuel oil
as an energy source, principally on the basis of price, availability and
portability. Each retail distribution outlet operates in its own competitive
environment because retail marketers tend to locate in close proximity to
customers in order to lower the cost of providing service. The typical retail
distribution outlet generally has an effective marketing radius of approximately
50 miles although in certain rural areas the marketing radius may be extended by
a satellite office.
<PAGE>
Products, Services and Marketing
The Partnership distributes propane through a nationwide retail distribution
network consisting of 352 customer service centers in 41 states. The
Partnership's operations are concentrated primarily in the east and west coast
regions of the United States. In fiscal 1996, the Partnership served more than
730,000 active customers. Approximately two-thirds of the Partnership's retail
propane volume is sold during the six-month peak heating season from October
through March, as many customers use propane for heating purposes. Typically,
customer service centers are found in suburban and rural areas where natural gas
is not readily available. Generally, such locations consist of an office,
appliance showroom, warehouse and service facilities, with one or more 18,000 to
30,000 gallon storage tanks on the premises. Most of the Partnership's
residential customers receive their propane supply pursuant to an automatic
delivery system which eliminates the customer's need to make an affirmative
purchase decision. From its customer service centers, the Partnership also
sells, installs and services equipment related to its propane distribution
business, including heating and cooking appliances and, at some locations,
propane fuel systems for motor vehicles.
The Partnership sells propane primarily to six markets: residential,
commercial, industrial (including engine fuel), agricultural, other retail users
and wholesale. Approximately 75.0% of the gallons sold by the Partnership in
fiscal 1996 were to retail customers (29.1% to residential customers, 24.9% to
commercial customers, 9.8% to industrial customers (including 7.8% to engine
fuel customers), 4.6% to agricultural customers and 6.6% to other retail users)
and approximately 25.0% were to wholesale customers. Sales to residential
customers in fiscal 1996 accounted for approximately 57% of the Partnership's
gross profit on propane sales, reflecting the higher-margin nature of this
segment of the market. No single customer accounted for 10% or more of the
Partnership's revenues during fiscal year 1996.
Retail deliveries of propane are usually made to customers by means of
bobtail and rack trucks. Propane is pumped from the bobtail truck, which
generally holds 2,200 gallons of propane, into a stationary storage tank on the
customer's premises. The capacity of these tanks ranges from approximately 100
gallons to approximately 1,200 gallons, with a typical tank having a capacity of
300 to 400 gallons. The Partnership also delivers propane to retail customers in
portable cylinders, which typically have a capacity of 5 to 35 gallons. When
these cylinders are delivered to customers, empty cylinders are picked up for
replenishment at the Partnership's distribution locations or are refilled in
place. The Partnership also delivers propane to certain other bulk end users of
propane in larger trucks known as transports (which have an average capacity of
approximately 9,000 gallons). End users receiving transport deliveries include
industrial customers, large-scale heating accounts, such as local gas utilities
which use propane as a supplemental fuel to meet peak load deliverability
requirements, and large agricultural accounts which use propane for crop drying.
Propane is generally transported from refineries, pipeline terminals, storage
facilities (including the Partnership's storage facilities in Hattiesburg,
Mississippi and Elk Grove, California), and coastal terminals to the
Partnership's customer service center by a combination of the Partnership's own
highway transport fleet, common carriers, owner-operators and railroad tank
cars. See " Item 2-Properties ".
In its wholesale operations, the Partnership principally sells propane to
large industrial end-users and other propane distributors. This market segment
includes customers who use propane to fire furnaces, as a cutting gas and in
other process applications. Other wholesale customers may include local gas
utility customers who use propane as a supplemental fuel to meet peak load
deliverability requirements.
<PAGE>
Propane Supply
The Partnership's propane supply is purchased from over 70 oil companies and
natural gas processors at more than 190 supply points located in the United
States and Canada. The Partnership also makes purchases on the spot market. The
Partnership purchased over 92% of its propane supplies from domestic suppliers
during fiscal 1996. Most of the propane purchased by the Partnership in fiscal
1996 was purchased pursuant to one year agreements subject to annual renewal,
but the percentage of contract purchases may vary from year to year as
determined by the Partnership. Supply contracts generally provide for pricing in
accordance with posted prices at the time of delivery or the current prices
established at major storage points, and some contracts include a pricing
formula that typically is based on such market prices. Some of these agreements
provide maximum and minimum seasonal purchase guidelines. The Partnership uses a
number of interstate pipelines, as well as railroad tank cars and delivery
trucks to transport propane from suppliers to storage and distribution
facilities.
Supplies of propane from the Partnership's sources historically have been
readily available. In the fiscal year ended September 28, 1996, Shell Oil
Company ("Shell") and Exxon Corporation ("Exxon") provided approximately 17% and
11%, respectively, of the Partnership's total domestic propane supply. The
Partnership believes that, if supplies from either Shell or Exxon were
interrupted, it would be able to secure adequate propane supplies from other
sources without a material disruption of its operations. Aside from Shell or
Exxon, no single supplier provided more than 10% of the Partnership's total
domestic propane supply in the fiscal year ended September 28, 1996.
The Partnership operates large storage facilities in Mississippi and
California and smaller storage facilities in other locations and has rights to
use storage facilities in additional locations. The Partnership's storage
facilities allow the Partnership to buy and store large quantities of propane
during periods of low demand, which generally occur during the summer months.
The Partnership believes its storage facilities help ensure a more secure supply
of propane during periods of intense demand or price instability.
Trademarks and Tradenames
The Partnership utilizes a variety of trademarks and tradenames which it
owns, including "Suburban Propane(R)" and "The Clear Choice(TM)". The
Partnership regards its trademarks, tradenames and other proprietary rights as
valuable assets and believes that they have significant value in the marketing
of its products.
<PAGE>
Government Regulation
The Partnership is subject to various federal, state and local
environmental, health and safety laws and regulations. Generally, these laws
impose limitations on the discharge of pollutants and establish standards for
the handling of solid and hazardous wastes. These laws include the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), the Clean Air Act, the Occupational
Safety and Health Act, the Emergency Planning and Community Right to Know Act,
the Clean Water Act and comparable state statutes. CERCLA, also known as the
"Superfund" law, imposes joint and several liability without regard to fault or
the legality of the original conduct on certain classes of persons that are
considered to have contributed to the release or threatened release of a
"hazardous substance" into the environment. Propane is not a hazardous substance
within the meaning of CERCLA, however, the Partnership owns real property where
such hazardous substances may exist.
The Partnership has been named as a de minimis potentially responsible party
in connection with a predecessor's arranging for the shipment of waste oil to
the Purity Oil Superfund Site in Malaga, California. The Partnership, as part of
the de minimis group, entered into a negotiated Administrative Consent Order in
January 1994 regarding soil remediation at the site pursuant to which the
Partnership paid approximately $192,000. Negotiations are continuing with
respect to groundwater contamination at the site, although the Partnership
believes it has adequately reserved for the likely settlement amount of such
negotiation and that such amount will not be material. The Partnership believes
it has adequately reserved for other environmental remediation projects and,
based on information currently available to the Partnership, such projects are
not expected to have a material adverse effect on the Partnership's financial
condition or results of operation.
National Fire Protection Association Pamphlets No. 54 and No. 58, which
establish rules and procedures governing the safe handling of propane, or
comparable regulations, have been adopted as the industry standard in all of the
states in which the Partnership operates. In some states these laws are
administered by state agencies, and in others they are administered on a
municipal level. With respect to the transportation of propane by truck, the
Partnership is subject to regulations promulgated under the Federal Motor
Carrier Safety Act. These regulations cover the transportation of hazardous
materials and are administered by the United States Department of
Transportation. The Partnership conducts ongoing training programs to help
ensure that its operations are in compliance with applicable safety regulations.
The Partnership maintains various permits that are necessary to operate some of
its facilities, some of which may be material to its operations. The Partnership
believes that the procedures currently in effect at all of its facilities for
the handling, storage and distribution of propane are consistent with industry
standards and are in compliance in all material respects with applicable laws
and regulations.
Future developments, such as stricter environmental, health or safety laws
and regulations thereunder, could affect Partnership operations. It is not
anticipated that the Partnership's compliance with or liabilities under
environmental, health and safety laws and regulations, including CERCLA, will
have a material adverse effect on the Partnership. To the extent that there are
any environmental liabilities unknown to the Partnership or environmental,
health or safety laws or regulations are made more stringent, there can be no
assurance that the Partnership's results of operations will not be materially
and adversely affected.
Employees
As of September 28, 1996, the Partnership had 3,377 full time employees, of
whom 439 were general and administrative (including fleet maintenance
personnel), 127 were sales, 145 were transportation and product supply and 2,666
were customer service center employees. Approximately 183 of such employees are
represented by 12 different local chapters of labor unions. The Partnership
believes that its relations with both its union and non-union employees are
satisfactory. From time to time, the Partnership hires temporary workers to meet
peak seasonal demands.
<PAGE>
ITEM 2. PROPERTIES.
The Partnership currently owns approximately 70% of the 352 customer service
centers that it operates and leases the balance of its retail locations from
third parties. In addition, the Partnership owns and operates a 187 million
gallon underground storage facility in Hattiesburg, Mississippi, and a 22
million gallon refrigerated, above-ground storage facility in Elk Grove,
California.
The Partnership also owns approximately 8.6% of the common stock of the
Dixie Pipeline Company ("Dixie Pipeline"), which owns and operates a propane gas
pipeline that runs from Mont Belvieu, Texas, to Apex, North Carolina.
The transportation of propane requires specialized equipment. The trucks and
railroad tank cars utilized for this purpose carry specialized steel tanks that
maintain the propane in a liquefied state. As of September 28, 1996, the
Partnership had a fleet of approximately 100 transport truck tractors, of which
approximately 49% are owned by the Partnership, and 722 railroad tank cars, of
which approximately 9% are owned by the Partnership. In addition, the
Partnership utilizes approximately 1,900 bobtail and rack trucks, of which
approximately 96% are owned by the Partnership and approximately 1,400 other
delivery and service vehicles, of which approximately 77% are owned by the
Partnership. The balance of such vehicles that are not owned by the Partnership
are leased. As of September 28, 1996, the Partnership owned approximately
873,000 customer storage tanks with typical capacities of 300 to 400 gallons and
approximately 67,000 portable cylinders with typical capacities of 5 to 35
gallons.
The Partnership believes that it has satisfactory title to or valid rights
to use all of its material properties and, although some of such properties are
subject to liabilities and leases and, in certain cases, liens for taxes not yet
due and payable and immaterial encumbrances, easements and restrictions, the
Partnership does not believe that any such burdens will materially interfere
with the continued use of such properties by the Partnership in its business,
taken as a whole.
ITEM 3. LEGAL PROCEEDINGS.
Litigation
A number of personal injury, property damage and products liability suits
are pending or threatened against the Partnership. In general, these lawsuits
have arisen in the ordinary course of the Partnership's business and involve
claims for actual damages, and in some cases, punitive damages. Although any
litigation is inherently uncertain, based on past experience, the information
currently available to it, the availability of insurance coverage and the amount
of its current reserves, the Partnership does not believe that these pending or
threatened litigation matters will have a material adverse effect on its results
of operations or its financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders of the
Partnership, through the solicitation of proxies or otherwise , during the
fiscal year ended September 28, 1996.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS AND RELATED UNITHOLDER
MATTERS.
The Common Units, representing limited partner interests in the
Partnership, are listed and traded on the New York Stock Exchange under the
symbol SPH. The Common Units began trading on February 29, 1996, at an initial
public offering price of $20.50 per Common Unit. As of December 11, 1996 there
were 685 registered Common Unitholders of record. The following table sets
forth, for the periods indicated, the high and low sale prices per Common Unit,
as reported on the New York Stock Exchange, and the amount of cash distributions
paid per Common Unit
Common Unit Price Range
High Low Cash Distribution
---- --- Paid
----
1996 Fiscal Year
Second Quarter (beginning March 5, 1996) $20.88 $20.50 $0.16*
Third Quarter 20.75 19.75 0.50
Fourth Quarter 21.75 19.63 0.50
*Prorated distribution.
There is no established public trading market for the Partnership's
Subordinated Units, representing limited partner interests, all of which are
held by the General Partner.
The Partnership makes quarterly distributions to its partners in an
aggregate amount equal to its Available Cash (as defined) for such quarter.
Available Cash generally means all cash on hand at the end of the fiscal quarter
plus all additional cash on hand as a result of borrowings and purchases of
additional limited partner units (APUs) subsequent to the end of such quarter
less cash reserves established by the Board of Supervisors in its reasonable
discretion for future cash requirements.
The Partnership is a publicly traded limited partnership that is not
subject to federal income tax. Instead, Unitholders are required to report their
allocable share of the Partnership's earnings or loss, regardless of whether the
Partnership makes distributions.
<PAGE>
ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.
The following table presents selected condensed consolidated historical
and pro forma financial data of the Partnership and the Predecessor Company
(amounts in thousands, except per Unit data):
<TABLE>
<CAPTION>
Partnership (a) Predecessor Company (b) (c)
--------------------------------------- ---------------------------------------------------------
Pro Forma Year March 5, October 1,
Year Ended (d) Ended 1996 1995 Year Ended Twelve Months Ended
-------------- Sept 28, through through ---------- -------------------
Sept 28, 1996 Sept 28, March 4, Sept 30, October 1, Sept 30,
1996 (Combined) 1996 1996 1995 1994 1993 1992
---- ---------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data
Revenues................ $ 707,946 $ 707,946 $ 323,947 $ 383,999 $ 633,620 $ 677,767 $ 678,992 $ 637,463
Gross Profit ........... 330,254 330,254 150,746 179,508 314,724 347,227 332,016 323,927
Depreciation and
Amortization ........... 35,862 35,862 21,046 14,816 34,055 34,300 37,706 34,373
Operating Income
(Loss) ................. 58,332 58,332 (3,464) 61,796 55,544 75,490 58,149 29,972
Interest Expense,
Net .................... 31,197 17,171 17,171 -- -- -- -- --
Cumulative
Effect of Changes
in Accounting
Principles (e) ......... -- -- -- -- -- -- -- 87,800
Provision for
Income Taxes ........... 250 28,294 147 28,147 25,299 33,644 26,733 12,653
Net Income (Loss) ...... 26,885 12,867 (20,782) 33,649 30,245 41,846 31,523 (70,328)
Net Income (Loss)
per Unit (f)............ $ 0.92 $ -- $ (0.71) $ -- -- -- -- --
Balance Sheet Data
(end of period)
Current Assets.......... $ 120,692 $ 120,692 $ 120,692 -- $ 78,846 $ 88,566 $ 124,033 $ 146,001
Total Assets ........... 807,424 807,424 807,424 -- 736,459 755,053 599,939 617,712
Current Liabilities .... 101,826 101,826 101,826 -- 69,872 74,555 70,772 86,332
Long-term Debt ......... 428,229 428,229 428,229 -- -- -- -- --
Other Long-term
Liabilities ............ $ 112,690 $ 112,690 $ 112,690 -- $ 108,352 $ 120,946 $ 107,824 $ 107,878
Predecessor
Equity ................. -- -- -- -- 558,235 559,552 421,344 423,502
Partners' Capital -
General Partner ........ 3,567 3,286 3,286 -- -- -- -- --
Partners' Capital -
Limited Partners ....... 174,790 161,393 161,393 -- -- -- -- --
Other Data
EBITDA (g).............. $ 94,194 $ 94,194 $ 17,582 $ 76,612 $ 89,599 $ 109,790 $ 95,855 $ 64,345
Capital Expenditures (h)
Maintenance............. $ 25,885 $ 25,885 $ 16,089 $ 9,796 $ 21,359 $ 17,839 $ 31,679 $ 11,539
Acquisition ............ $ 28,529 $ 28,529 $ 15,357 $ 13,172 $ 5,817 $ 1,448 $ -- $ --
Retail Propane
Gallons Sold ........... 566,900 566,900 257,029 309,871 527,269 568,809 563,291 552,097
<FN>
<PAGE>
(a) The Partnership acquired the propane business and assets of the Predecessor
Company on March 5, 1996 (the Closing Date). Solely for purposes of
comparing the results of operations of the Partnership for the year ended
September 28, 1996 with those of the Predecessor Company in the prior year
periods, the statement of operations data for the year ended September 28,
1996 is comprised of the combined statements of operations of the
Predecessor Company for the period October 1, 1995 to March 4, 1996 and the
Partnership for the period March 5, 1996 to September 28, 1996. There are
no material differences in the basis of assets and liabilities between the
Partnership and the Predecessor Company.
(b) The Predecessor Company's financial data for the fiscal 1994 and 1995
periods may not be comparable to the twelve months ended September 30, 1992
and 1993 due to the application of purchase accounting adjustments in
connection with Hanson's acquisition of Quantum on September 30, 1993.
(c) In connection with Hanson's acquisition of Quantum on September 30, 1993,
the Predecessor Company changed its fiscal year ending December 31 to a
52-53 week fiscal year ending on the Saturday nearest to September 30. The
new fiscal year includes the full October through March heating season.
Prior to the change in fiscal year, the heating season was split between
two fiscal years. Solely for purposes of comparing the Predecessor Company
operating results to fiscal 1994 and 1995, the statement of operations data
of the Predecessor Company has been combined for the following periods:
January 1 to September 30, 1992 with the corresponding data for the period
from October 1, 1991 to December 31, 1991 (the "twelve months ended
September 30, 1992"); and January 1 to September 30, 1993 with the
corresponding data for the period from October 1, 1992 to December 31, 1992
(the "twelve months ended September 30, 1993").
(d) For a description of the assumptions used in preparing the Partnership's
pro forma financial and operating data, see "Unaudited Pro Forma Financial
Information of Suburban Propane Partners, L.P.," included in Item 14(a)1 in
this Form 10-K.
(e) Effective October 1, 1991, the Predecessor Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS No. 106," and SFAS No.
109, "Accounting for Income Taxes" ("SFAS No. 109"). The Predecessor
Company elected to immediately recognize the obligation for the SFAS No.
106 benefits, resulting in a cumulative effect charge to earnings of
$53,100, net of income taxes of $32,900. The adoption of SFAS No. 109
resulted in a cumulative effect charge to earnings of $34,700.
(f) Net income (loss) per Unit is computed by dividing the limited partners'
interest in net income (loss) by the number of Units outstanding.
(g) Defined as operating income plus depreciation and amortization. EBITDA
should not be considered as an alternative to net income (as an indicator
of operating performance) or as an alternative to cash flow (as a measure
of liquidity or ability to service debt obligations) and is not in
accordance with nor superior to generally accepted accounting principles
but provides additional information for evaluating the Partnership's
ability to pay the Minimum Quarterly Distribution.
(h) The Partnership's capital expenditures fall generally into two categories:
(i) maintenance capital expenditures, which include expenditures for repair
and replacement of property, plant and equipment, and (ii) acquisition
capital expenditures, which include expenditures related to the acquisition
of retail propane operations and a portion of the purchase price allocated
to intangibles associated with such acquired businesses.
</FN>
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following is a discussion of the historical and pro forma financial
condition and results of operations of the Predecessor Company and the
Partnership. The discussion should be read in conjunction with the historical
and pro forma consolidated financial statements and notes thereto included
elsewhere in this Form 10-K. Since the Operating Partnership and Service Company
account for substantially all of the assets, revenues and earnings of the
Partnership, a separate discussion of the Partnership's results of operations
from other sources is not presented.
General
The Partnership is engaged in the retail and wholesale marketing of propane
and related appliances and services. The Partnership is the third largest retail
marketer of propane in the United States, serving more than 730,000 active
residential, commercial, industrial and agricultural customers from 352 customer
service centers in 41 states. The Partnership's annual retail propane sales
volume were approximately 567 million, 527 million and 569 million gallons
during the fiscal year ended September 28, 1996, September 30, 1995 and October
1, 1994, respectively.
The retail propane business of the Partnership consists principally of
transporting propane purchased on the contract and spot markets, primarily from
major oil companies, to its retail distribution outlets and then to storage
tanks located on the customers' premises. In the residential and commercial
markets, propane is primarily used for space heating, water heating, clothes
drying and cooking purposes. Industrial customers primarily use propane as a
motor fuel burned in internal combustion engines that power over-the-road
vehicles, forklifts and stationary engines, to fire furnaces, as a cutting gas
and in other process applications. In the agricultural market propane is
primarily used for tobacco curing, crop drying, poultry brooding and weed
control. In its wholesale operations, the Partnership sells propane principally
to large industrial end-users and other propane distributors.
The retail propane distribution business is seasonal because of propane's
primary use for heating in residential and commercial buildings. Historically,
approximately two-thirds of the Partnership's retail propane volume is sold
during the six-month peak heating season of October through March. Consequently,
sales and operating profits are concentrated in the Partnership's first and
second fiscal quarters. Cash flows from operations, therefore, are greatest
during the second and third fiscal quarters when customers pay for propane
purchased during the winter heating season. To the extent necessary, the
Partnership will reserve cash from the second and third quarters for
distribution to Unitholders in the first and fourth fiscal quarters.
The retail propane business is a "margin-based" business where the level of
profitability is largely dependent on the difference between retail sales prices
and product cost. The unit cost of propane is subject to volatile changes as a
result of product supply or other market conditions. Propane unit cost changes
can occur rapidly over a short period of time and can impact retail margins. The
Partnership's unit cost of propane in the fiscal year ended September 28, 1996
was substantially higher than product costs in the fiscal years ended September
30, 1995 and 1994, respectively, and, consequently, the Partnership's retail
gross margins declined from the levels achieved in the 1995 and 1994 fiscal
years.
<PAGE>
Selected Quarterly Historical and Pro Forma Financial Data
(in thousands)
The following historical pro forma quarterly financial data for periods
prior to the Partnership formation were derived from the historical statements
of operations of the Predecessor Company for the period October 1, 1994 through
March 4, 1996 and reflect the effects of the Partnership formation as if the
formation had been completed in its entirety as of the beginning of the periods
presented.
The pro forma quarterly financial data do not purport to present the results
of operations of the Partnership had the Partnership formation actually been
completed as of the beginning of the periods presented. In addition, the pro
forma quarterly financial data are not necessarily indicative of the results of
future operations of the Partnership and should be read in conjunction with the
consolidated financial statements and notes thereto, appearing elsewhere in this
Form 10-K.
Fiscal year ended September 28, 1996
Pro Forma Pro Forma
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Revenues $190,679 $259,992 $130,590 $126,685
Gross Profit 93,384 116,654 62,578 57,638
Operating Income (Loss) 26,396 44,337 (3,262) (9,139)
Net Income (Loss) 18,103 36,493 (10,576) (17,135)
EBITDA 35,113 53,280 5,721 80
Retail Gallons Sold 157,592 204,991 102,896 101,421
Fiscal year ended September 30, 1995
Pro Forma
- -------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Revenues $185,163 $217,699 $122,275 $108,483
Gross Profit 91,017 107,693 62,641 53,373
Operating Income (Loss) 25,624 40,122 (2,177) (8,025)
Net Income (Loss) 17,386 31,884 (10,415) (15,606)
EBITDA 34,141 48,559 6,225 674
Retail Gallons Sold 150,830 183,452 101,404 91,583
<PAGE>
Analysis of Historical Results of Operations
The Partnership acquired the propane business and assets of Suburban Propane
on March 5, 1996. Solely for purposes of comparing the results of operations of
the Partnership for the year ended September 28, 1996 with those of the
Predecessor Company in the prior year period, the statement of operations data
for the year ended September 28, 1996 is comprised of the combined statements of
operations of the Predecessor Company for the period October 1, 1995 to March 4,
1996 and the Partnership for the period March 5, 1996 to September 28, 1996.
Fiscal Year 1996 Compared to Fiscal Year 1995
REVENUES. Revenues increased $74.3 million or 11.7% to $707.9 million in
fiscal 1996 as compared to $633.6 million in fiscal 1995. The overall increase
is primarily attributable to higher retail volumes and wholesale volumes coupled
with increased retail and wholesale selling prices. Retail gallons sold
increased 7.5% or 39.6 million gallons to 566.9 million gallons as compared to
527.3 million gallons in fiscal 1995, while wholesale gallons sold increased
4.6% or 8.2 million gallons to 189.0 million gallons compared to 180.7 million
in the prior year. The increase in gallons sold is due to the colder
temperatures in all sections of the country, except for the West region.
GROSS PROFIT. Gross profit increased $15.5 million or 4.9% to $330.3 million
for fiscal 1996 compared to $314.7 million in the prior year. The increase in
gross profit principally resulted from higher retail propane volumes partially
offset by lower retail margins resulting from increased product costs. It is
expected that product costs will remain at higher than historical levels with an
associated impact on retail margins at least through the end of the first
quarter of fiscal 1997.
OPERATING EXPENSES. Operating expenses increased $6.1 million or 3.1% to
$203.4 million for fiscal year 1996 as compared to $197.3 million in the prior
year. Operating expenses increased due to higher delivery costs associated with
the higher volumes and higher maintenance and product costs. Operating expenses
are expected to remain at higher than historical levels at least through the end
of the first quarter of fiscal 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, including the management fee charged to the Predecessor
Company, increased $4.8 million or 17.3% to $32.6 million for fiscal 1996
compared to $27.8 million in the prior year. Expenses increased due to a
nonrecurring charge of $2.3 million incurred in the fourth quarter as a result
of certain employee terminations. The increase is also attributable to higher
expenditures for the implementation of new employee training and customer
satisfaction programs.
OPERATING INCOME AND EBITDA. Operating income increased $2.8 million or 5.0%
to $58.3 million for fiscal 1996 compared to $55.5 million in the prior year.
EBITDA increased $4.6 million or 5.1% to $94.2 million. The increase is
primarily attributable to the higher volume of retail gallons sold partially
offset by lower retail margins and an increase in operating and general and
administrative expenses. EBITDA should not be considered as an alternative to
net income (as in indicator of operating performance) or as an alternative to
cash flow (as a measure of liquidity or ability to service debt obligations) but
provides additional information for evaluating the Partnership's ability to pay
the Minimum Quarterly Distribution.
<PAGE>
Fiscal Year 1995 Compared to Fiscal Year 1994
REVENUES. Revenues decreased $44.2 million or 6.5% to $633.6 million in
fiscal year 1995 compared to $677.8 million in fiscal year 1994. The overall
decrease is primarily attributed to lower retail volume as gallons decreased
41.5 million gallons or 7.3% to 527.3 million gallons in fiscal year 1995
compared to 568.8 million gallons in fiscal year 1994. Wholesale gallons
declined 8.4 million gallons or 4.4% to 180.7 million gallons for the period
compared to 189.1 million gallons in the prior period. The decline in retail and
wholesale gallons was primarily due to lower demand resulting from temperatures
that were approximately 9% warmer than the prior fiscal year.
Other revenues decreased $1.5 million or 2.3% to $63.5 million in 1995
compared to $65.0 million for the prior year primarily due to a decline in
appliance sales revenue.
GROSS PROFIT. Gross profit decreased $32.5 million or 9.4% to $314.7 million
in 1995 compared to $347.2 million in the prior year. The decline is
attributable to a decline in retail volume discussed above of 41.5 million
gallons or 7.3%, and a decline in average retail margins of 4.4%. The decline in
average retail margins was primarily attributable to a 10% decline in the volume
of higher margin gallons sold to residential customers for home heating.
OPERATING EXPENSES. Operating expenses decreased $12.6 million or 6.0% to
$197.3 million in 1995 compared to $209.9 million in 1994. The decrease is
primarily attributable to a $11.3 million or 8.3% reduction in employment and
benefit costs. The Predecessor Company was able to reduce employment due to
improved delivery and service efficiencies.
OPERATING INCOME AND EBITDA. Operating income decreased $20.0 million or
26.5% to $55.5 million in 1995 compared to $75.5 million in 1994. EBITDA
decreased $20.2 million or 18.4% to $89.6 million in 1995 compared to $109.8
million in 1994. This reduction is primarily attributable to the lower volume of
gallons sold and lower retail margins, partially offset by lower employment and
benefit costs. EBITDA should not be considered as an alternative to net income
(as an indicator of operating performance) or as an alternative to cash flow (as
a measure of liquidity or ability to service debt obligations) but provides
additional information for evaluating the Partnership's ability to pay the
Minimum Quarterly Distribution.
<PAGE>
Liquidity and Capital Resources
The Partnership believes that approximately $29.0 million of maintenance
capital expenditures will be required in fiscal year 1997 for repair and
replacement of property, plant and equipment. The Partnership expects to fund
these capital expenditures from cash flow from operations or from borrowings
under the Working Capital Facility.
Due to the seasonal nature of the propane business, cash flows from
operating activities are greater during the winter and spring seasons as
customers pay for propane purchased during the heating season. For fiscal 1996,
net cash provided by operating activities increased $5.5 million to $59.2
million compared to $53.7 million in fiscal 1995. The increase is primarily
attributable to an aggregate increase in accounts payable, accrued interest and
expenses and other noncurrent liabilities totaling $53.9 million partially
offset by an increase in accounts receivable, inventories, prepaid expenses and
decreased net income totaling $50.0 million arising from an increase in the cost
and volume of gallons sold and operating under the Partnership structure for
seven months of fiscal 1996.
Net cash used in investing activities was $52.4 million for fiscal 1996,
reflecting $25.9 million in capital expenditures and $28.5 million of payments
for acquisitions, offset by net proceeds of $2.0 million from the sale of
property, plant and equipment. Net cash used in investing activities was $22.3
million for fiscal 1995, consisting of capital expenditures of $21.4 million and
acquisition payments of $5.8 million, offset by proceeds from the sale of
property and equipment of $4.9 million. The increase in cash used for
acquisition activities of $22.7 million primarily results from the Partnership's
business strategy to expand its operations and increase its retail market share
through selective acquisitions of other propane distributors as well as through
internal growth.
For fiscal year 1995, net cash provided by operating activities decreased
$23.4 million or 30.3% to $53.7 million compared to $77.1 million for fiscal
year 1994 due primarily to decreases of $11.6 million in net income and $5.6
million due to changes in accrued liabilities.
Net cash used in investing activities was $22.3 million for fiscal year
1995, reflecting $21.4 million in capital expenditures and $5.8 million of
payments for the acquisition of new customer service centers offset by net
proceeds of $4.9 million from the sale of marginal performing customer service
locations and other property and equipment. Net cash used in investing
activities was $16.1 million in fiscal year 1994, consisting of capital
expenditures of $17.8 million and acquisition payments of $1.4 million, offset
by proceeds from the sale of property and equipment of $3.1 million.
<PAGE>
Prior to March 5, 1996, the Predecessor Company's cash accounts had been
managed on a centralized basis by HM Holdings, Inc. ("HM Holdings"), a
wholly-owned affiliate of Hanson. Accordingly, cash receipts and disbursements
relating to the operations of Suburban Propane were received or funded by HM
Holdings. Net cash provided by financing activities, which are reflected as an
increase in predecessor equity, was $25.8 million during the five months ended
March 5, 1996 compared to $31.6 million of cash used by (reduction of
predecessor equity) during the year ended September 30, 1995.
In March 1996, the Operating Partnership issued $425.0 million aggregate
principal amount of Senior Notes with an interest rate of 7.54% for net cash
proceeds of $418.8 million. Also, the Partnership, by means of an initial public
offering and the exercise of an overallotment option by the underwriters, issued
21,562,500 Common Units for net cash proceeds of $413.6 million. The net
proceeds of the Notes and Common Units issuance (which totaled $832.4 million),
less a $5.6 million closing price adjustment paid by Quantum in connection with
the transactions and $97.7 million reflecting the retention of net accounts
receivable by Quantum, were used to acquire the propane assets from Quantum, pay
off the intercompany payables and make a special distribution to the General
Partner.
The Operating Partnership has Bank Credit Facilities consisting of a $100.0
million acquisition facility and a $75.0 million working capital facility which
are unsecured and on a equal and ratable basis with the Operating Partnership's
obligations under the Senior Notes. At September 28, 1996, there were no amounts
outstanding under the Bank Credit Facilities.
The Partnership will make distributions in an amount equal to all of its
Available Cash approximately 45 days after the end of each fiscal quarter to
holders of record on the applicable record dates. The Partnership has made
distributions on August 13, 1996 for the partial fiscal quarter ended March 30,
1996 and the quarter ended June 29, 1996 and on November 12, 1996 for the
quarter ended September 28, 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Partnership's Consolidated Financial Statements and the Reports of
Independent Accountants thereon and the Supplementary Financial Information
listed on the accompanying Index to Financial Statement Schedules are hereby
incorporated by reference. See Item 7 for Selected Quarterly Financial Data.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Partnership Management
The Partnership Agreement provides that all management powers over the
business and affairs of the Partnership are exclusively vested in its Board of
Supervisors and, subject to the direction of the Board of Supervisors, the
officers of the Partnership. No Unitholder has any management power over the
business and affairs of the Partnership or actual or apparent authority to enter
into contracts on behalf of, or to otherwise bind, the Partnership. Three
independent Elected Supervisors, two Appointed Supervisors and two Management
Supervisors serve on the Board of Supervisors pursuant to the terms of the
Partnership Agreement.
At least two of the Elected Supervisors will serve on the Audit Committee
with the authority to review, at the request of the Board of Supervisors,
specific matters as to which the Board of Supervisors believes there may be a
conflict of interest in order to determine if the resolution of such conflict
proposed by the Board of Supervisors is fair and reasonable to the Partnership.
Any matters approved by the Audit Committee will be conclusively deemed to be
fair and reasonable to the Partnership, approved by all partners of the
Partnership and not a breach by the General Partner or the Board of Supervisors
of any duties they may owe the Partnership or the Unitholders. In addition, the
Audit Committee will review external financial reporting of the Partnership,
will recommend engagement of the Partnership's independent accountants and will
review the Partnership's procedures for internal auditing and the adequacy of
the Partnership's internal accounting controls.
Board of Supervisors and Executive Officers of the Partnership
The following table sets forth certain information with respect to the
members of the Board of Supervisors and executive officers of the Partnership as
of December 16, 1996. Officers are elected for one-year terms and Supervisors
are elected or appointed for three-year terms.
Position With the
Name Age Partnership
- --------------------------- --- --------------------------------------
Mark A. Alexander.......... 38 President and Chief Executive Officer;
Member of the Board of Supervisors
(Management Supervisor)
David R. Feheley........... 48 Senior Vice President -- Operations;
Member of the Board of Supervisors
(Management Supervisor)
Charles T. Hoepper......... 47 Senior Vice President and Chief Financial
Officer
Michael M. Keating......... 43 Vice President -- Human Resources and
Administration
Kevin T. McIver............ 42 Vice President, General Counsel and
Secretary
Thomas A. Nunan............ 63 Vice President -- Sales
Anthony M. Simonowicz...... 45 Vice President -- Business Development
George H. Hempstead, III... 53 Member of the Board of Supervisors
(Appointed Supervisor)
Robert E. Lee.............. 40 Member of the Board of Supervisors
(Appointed Supervisor)
John Hoyt Stookey.......... 66 Member of the Board of Supervisors
(Chairman and Elected Supervisor)
Harold R. Logan, Jr........ 52 Member of the Board of Supervisors
(Elected Supervisor)
Dudley C. Mecum............ 61 Member of the Board of Supervisors
(Elected Supervisor)
<PAGE>
Mr. Alexander serves as President and Chief Executive Officer and as a
Management Supervisor of the Partnership. Prior to October 1, 1996, he served as
Executive Vice Chairman and Chief Executive Officer of the Partnership. Mr.
Alexander was Senior Vice President -- Corporate Development of Hanson
Industries (Hanson's management division in the United States) from 1995 until
March 4, 1996, where he was responsible for mergers and acquisitions, real
estate and divestitures, and was Vice President of Acquisitions from 1989 to
1995. He was an Associate Director of Hanson from 1993 and a Director of Hanson
Industries from June 1995 until March 4, 1996.
Mr. Feheley serves as Senior Vice President -- Operations of the Partnership
and was appointed a Management Supervisor on October 1, 1996. Mr. Feheley was
Senior Vice President -- Operations of Suburban Propane from September 1995
until March 4, 1996 and was an Area Vice President from October 1990 to
September 1995.
Mr. Hoepper serves as Senior Vice President and Chief Financial Officer of
the Partnership. He served as Vice President and Chief Financial Officer of the
Partnership from March 5, 1996 to July 31, 1996. Mr. Hoepper was Vice President
and Chief Financial Officer of Suburban Propane from October 1994 until March
1996 and was Controller of Suburban Propane from July 1991 to October 1994. He
was employed at MCI Corporation as Director -- Finance and Accounting from 1988
to 1991.
Mr. Keating serves as Vice President -- Human Resources and Administration
of the Partnership. Mr. Keating was Director of Human Resources at Hanson
Industries from 1993 to July 1996 and was Director of Human Resources and
Corporate Personnel at Quantum from 1989 to 1993.
Mr. McIver serves as Vice President, General Counsel and Secretary of the
Partnership. He served as General Counsel and Secretary of the Partnership from
March 1996 to August 1996. Mr. McIver was General Counsel of Suburban Propane
from October 1994 until March 1996 and was chief counsel of Suburban Propane
from 1984.
Mr. Nunan serves as Vice President -- Sales of the Partnership. Mr. Nunan
was Vice President -- Sales of Suburban Propane from October 1990 until March
1996. He is currently a director of the National Propane Gas Association.
Mr. Simonowicz serves as Vice President -- Business Development of the
Partnership. Mr. Simonowicz was Vice President -- Business Development of
Suburban Propane from September 1995 until March 1996 and was Director --
Financial Planning and Analysis from 1991 to September 1995. Mr. Simonowicz was
employed as Controller at Lifecodes Corporation (a genetic identification and
research company), then a subsidiary of Quantum, from 1989 to 1991.
Mr. Stookey is an Elected Supervisor and Chairman of the Board of
Supervisors of the Partnership. He has been the non-executive Chairman and a
director of Quantum from the time it was acquired by Hanson on September 30,
1993 to October 31, 1995. From 1986 to September 30, 1993, he was the Chairman,
President and Chief Executive Officer of Quantum. He is also a director of
United States Trust Company of New York, ACX Technologies, Inc., Chesapeake
Corporation and Cypress Amax Minerals Company. Mr. Stookey served from 1989 to
1993 as an executive officer of Petrolane Incorporated, Petrolane Finance Corp.,
and QJV Corp., which companies were reorganized in July 1993 under the U.S.
Bankruptcy Code. These companies were affiliates of Quantum at the time of such
reorganization.
Mr. Logan is an Elected Supervisor of the Partnership. Mr. Logan is
Executive Vice President, Chief Financial Officer and Treasurer as well as a
Director of TransMontaigne Oil Company (a holding company formed to purchase
companies engaged in the marketing and distribution of petroleum products). From
1987 to 1995 he served as Senior Vice President of Finance and a Director of
Associated Natural Gas Corporation (an independent gatherer and marketer of
natural gas, natural gas liquids and crude oil which in 1994 was acquired by
Panhandle Eastern Corporation).
<PAGE>
Mr. Mecum is an Elected Supervisor. Mr. Mecum is Chairman of Mecum
Associates Inc. (management consultants). Mr. Mecum was a partner of G.L.
Ohrstrom & Co. (A sponsor of and investor in leveraged buyouts) from 1989 to
June, 1996. He is also a director of Travelers Group, Inc., Travelers/Aetna P&C
Corp., Lyondell Petrochemical Company, Fingerhut Companies, Inc., Dyncorp,
Vicorp Restaurants, Inc. and Metris Industries, Inc.
Mr. Hempstead serves as an Appointed Supervisor of the Partnership. He is
also Vice President and Secretary and a Director of the General Partner. He has
served as Senior Vice President, Law and Administration of Millennium since
October 1996, as Senior Vice President, Law and Administration of Hanson
Industries from June 1995 to September 1996 as well as Senior Vice President and
General Counsel of Hanson Industries from 1993 to 1995 and General Counsel of
Hanson Industries from 1982 to 1993. He was an Associate Director of Hanson from
1990 to September 1996 and a Director of Hanson Industries from 1986 to
September 1996. He joined Hanson Industries in 1976. Mr. Hempstead is also a
director of Smith Corona Corporation.
Mr. Lee serves as an Appointed Supervisor of the Partnership. He is also
the President and a Director of the General Partner. He has served as President,
Chief Operating Officer and a Director of Millennium since October 1996 and was
a Senior Vice President and Chief Operating Officer of Hanson Industries from
June 1995 until September 1996. He was Vice President and Chief Financial
Officer of Hanson Industries from 1992 to June 1995 and Vice President and
Treasurer from 1990 to 1992. He was an Associate Director of Hanson from 1992 to
September 1996 and a Director of Hanson Industries from June 1995 to September
1996. He joined Hanson Industries in 1982.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth a summary of all compensation awarded or paid
to or earned by the chief executive officer and the four other most highly
compensated executive officers of the Partnership in fiscal 1996 (the
Partnership's first year as a reporting company under Section 13(a) or 15(d) of
the Securities Exchange Act of 1934). The compensation set forth below for the
portion of fiscal 1996 prior to March 5, 1996 and for fiscal 1995, reflects
services rendered by the four named executive officers (other than Mr.
Alexander) to the Predecessor Company. Mr. Alexander, who joined the Partnership
on March 5, 1996, was not employed by the Predecessor Company. Mr. Alexander's
salary amount set forth below reflects the base salary amount paid from March 5,
1996 through the end of the 1996 fiscal year.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------- ----------------------
Restricted
Name and Unit All Other (5)
Principal Position Year Salary ($) Bonus ($)(2) Award(s)($)(3) Compensation ($)
------------------ ---- ---------- ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Mark A. Alexander 1996 196,538 20,417 3,000,000 1,610
Executive Vice Chairman and
Chief Executive Officer
Salvatore M. Quadrino (1) 1996 275,000 12,030 2,500,000 (4) 499,750
President 1995 225,000 0 4,500
Charles T. Hoepper 1996 145,000 7,250 500,000 149,350
Vice President and Chief Financial Officer 1995 135,000 0 2,950
Kevin T. McIver 1996 138,000 6,210 325,000 143,140
Vice President and General Counsel 1995 131,553 0 3,962
David R. Feheley 1996 135,000 7,425 500,000 139,050
Senior Vice President - Operations 1995 106,000 0 2,319
<FN>
(1) Mr. Quadrino resigned as President of the Partnership and as a member of its
Board of Supervisors on October 1, 1996. Pursuant to the terms of his
resignation, Mr. Quadrino is entitled to continue to receive through March 4,
1999 a salary of $275,000 per year and, subject to certain restrictions, medical
and dental benefits and life insurance coverage with a face amount of $825,000.
Mr. Alexander replaced Mr. Quadrino as President of the Partnership effective
October 1, 1996.
(2) Bonuses are reported for the year earned, regardless of the
year paid. The bonus program is based on the achievement of pre-determined
business and/or financial performance objectives measured in operating profit
and return on capital employed. Due to the negative impact on Suburban Propane's
results of operations resulting from the warm winter in fiscal year 1995, no
bonuses were paid to executive officers employed by Suburban for such fiscal
year.
<PAGE>
(3) The Restricted Units were issued on March 5, 1996 (at the consummation of
the Partnership's initial public offering) under the Partnership's 1996
Restricted Unit Plan. The aggregate dollar value was computed by multiplying the
number of Restricted Units granted by $20.50, the initial public offering price
of the Common Units. The Restricted Units are subject to a bifurcated vesting
procedure such that: (i) 25% of the units vest in equal amounts on each of March
5, 1999, 2001 and 2003 (or upon a "change of control" of the Partnership); and
(ii) the remaining 75% vest automatically upon, and in the same proportion as,
the conversion of the Subordinated Units to Common Units, which conversion
cannot commence prior to April 1999 under the Partnership Agreement (or upon a
"change of control" of the Partnership). Until such Restricted Units vest, their
holders will not be entitled to any distributions or allocations of income and
loss, nor shall they have any voting or other rights with respect to such Common
Units. At September 28, 1996, the number of Restricted Units and the aggregate
value thereof (calculated at a per Unit price of $21.75, the closing price of a
Common Unit on September 27, 1996 as reported on the New York Stock Exchange)
were 146,341 ($3,182,917) for Mr. Alexander, 121,951 ($2,652,434) for Mr.
Quadrino, 24,391 ($530,504) for Mr. Hoepper, 15,854 ($344,825) for Mr. McIver
and 24,391 ($530,504) for Mr. Feheley. See footnote 4 below.
(4) This award was forfeited with the resignation of Salvatore M. Quadrino.
(5) Amounts for fiscal 1996 include one-time success fee payments made by
Hanson awarded in connection with the consummation of the Partnership's initial
public offering and matching contributions under the Suburban Propane Retirement
Savings and Investment Plan and in the case of Mr. McIver, premium payments
relating to the Suburban Propane Executive Death Benefit Plan. The amounts of
the success fees were $450,000, $145,000, $138,000 and $135,000 to Messrs.
Quadrino, Hoepper, McIver and Feheley. Mr. Quadrino's compensation amount also
includes certain benefits in connection with his termination of employment.
</FN>
</TABLE>
Retirement Benefits
The following table sets forth the annual benefits upon retirement at age 65
in 1996, without regard to statutory maximums, for various combinations of final
average earnings and lengths of service which may be payable to Messrs.
Alexander, Quadrino, Hoepper, McIver, and Feheley under the Pension Plan for
Eligible Employees of Suburban Propane, L.P. and Subsidiaries and the Suburban
Propane Company Supplemental Executive Retirement Plan. Each such plan has been
assumed by the Partnership and each such person will be credited for service
earned under such plan to date. Messrs. Alexander, Quadrino, Hoepper, McIver,
and Feheley have 7 months, 6 years, 5 years, 14 years, and 20 years service
under the plans.
<PAGE>
<TABLE>
<CAPTION>
Pension Plan
Annual Benefit for Years of Credited Service Shown (2)
Final 5-Year (1)
Average Earnings 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years
- ---------------- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 8,147 16,294 24,440 32,587 40,734 48,881 57,028
$200,000 16,897 33,794 50,690 67,587 84,484 101,381 118,278
$300,000 25,647 51,294 76,940 102,587 128,234 153,881 179,528
$400,000 34,397 68,794 103,190 137,587 171,984 206,381 240,778
$500,000 43,147 86,294 129,440 172,587 215,734 258,881 302,028
<FN>
1) The Plans' definition of earnings consists of base pay only.
2) Annual Benefits are computed on the basis of straight life annuity
amounts. The pension benefit is calculated as follows:
the sum of (a) plus (b)multiplied by (c) where (a) is that portion of final
average earnings up to 125% of social security Covered Compensation times
1.4% and (b) is that portion of final average earnings in excess of 125% of
social security Covered Compensation times 1.75% and (c) is credited
service up to a maximum of 35 years.
</FN>
</TABLE>
In addition, certain additional retirement and life insurance benefits are
payable to Mr. McIver pursuant to two Suburban Propane executive plans that were
in effect prior to Quantum's acquisition of Suburban Propane in 1983. Under the
Suburban Propane Deferred Compensation Plan, Mr. McIver is entitled, subject to
certain conditions set forth in the Plan, which include remaining in the
Partnership's employ until retirement, to receive a retirement supplement of
approximately $21,000 per year for a ten-year period subsequent to retirement.
Under the Suburban Propane Executive Death Benefit Plan, $100,000 of life
insurance proceeds are payable to Mr. McIver's estate, subject to the terms and
conditions of the Plan, which include remaining in the employ of the Partnership
until retirement.
Supplemental Executive Retirement Plan
The Partnership has adopted a non-qualified, unfunded supplemental
retirement plan known as the Supplemental Executive Retirement Plan. The purpose
of the Plan is to provide certain executive officers with a level of retirement
income from the Partnership, without regard to statutory maximums. Under the
Plan, a participant's annual benefit, assuming retirement at age 65, is equal to
(a) 1.4% of the participant's Average Final Compensation not in excess of 125%
of Covered Compensation plus (b) 1.75% of the participant's Average Final
Compensation in excess of 125% of Covered Compensation times (c) the
participant's years of benefit service with the Partnership (not to exceed 35)
minus (d) the Pension Offset. The defined terms in this paragraph will have the
same meanings as in the Plan or in the Partnership's qualified Retirement Plan.
Messrs. Alexander, Hoepper and Feheley currently participate in this Plan.
<PAGE>
Restricted Unit Plan
The Partnership has adopted a restricted unit plan (the "Restricted Unit
Plan") for executives, managers and Elected Supervisors of the Partnership. The
summary of the Restricted Unit Plan contained herein does not purport to be
complete and is qualified in its entirety by reference to the Restricted Unit
Plan, which has been filed as an exhibit to the Partnership's Registration
Statement on Form S-1 (Registration No. 33-80605).
Rights to acquire authorized but unissued Common Units of the Partnership
with an aggregate value of $15.0 million are available under the Restricted Unit
Plan for purposes of calculating the value of these Unit grants, a value of
$20.50 (the initial public offering price of the Common Units) has been
utilized. As of September 30, 1996, rights to acquire Common Units with an
aggregate value of $10.5 million (the "Initial Units") have been granted,
subject to the vesting conditions described below and subject to other customary
terms and conditions, as follows: (i) rights to acquire Common Units with an
aggregate value of $3.0 million have been allocated to Mr. Alexander, (ii)
rights to acquire Common Units with an aggregate value of $2.5 million were
allocated to Mr. Quadrino, but have been forfeited upon Mr. Quadrino's
resignation, (iii) rights to acquire Common Units with an aggregate value of
$4.1 million were allocated to other participants in the Plan who are officers
or managers of the Partnership's business, as determined by the Board of
Supervisors or a compensation committee thereof, and (iv) rights to acquire
Common Units with an aggregate value of $0.9 million were allocated among the
three Elected Supervisors.
The right to acquire the remaining $7.0 million of the $15.0 million
aggregate value of Initial Units have been reserved and may be allocated or
issued in the future to executives and managers on such terms and conditions
(including vesting conditions) as are described below or as the Board of
Supervisors, or a compensation committee thereof, shall determine. Without the
consent of the General Partner, such awards to executives or managers cannot be
made to prior award recipients except on terms and conditions substantially
identical to the awards previously received. Each Elected Supervisor
subsequently appointed or elected will receive rights to acquire Common Units
with a value of $0.3 million on the same terms and conditions as those granted
to the three initial Elected Supervisors.
The Initial Units are subject to a bifurcated vesting procedure such that
(i) twenty-five percent of the Initial Units will vest over time (or upon a
"change of control" of the Partnership as defined in the Restricted Unit Plan,
if earlier) with one-third of such units vesting at the end of the third, fifth
and seventh anniversaries of the consummation of the Partnership's initial
public offering, and (ii) the remaining seventy-five percent of the Initial
Units will vest automatically upon, and in the same proportions as, the
conversion of the Subordinated Units to Common Units (or upon a "change of
control" of the Partnership as defined in the Restricted Unit Plan, if earlier).
<PAGE>
Upon vesting in accordance with the terms and conditions of the Restricted
Unit Plan, Common Units allocated to a plan participant will be issued to such a
participant. Until such allocated, but unissued, Common Units have vested and
have been issued to a participant, such participant shall not be entitled to any
distributions or allocations of income or loss and shall not have any voting or
other rights in respect of such Common Units.
The issuance of the Common Units pursuant to the Restricted Unit Plan is
intended to serve as a means of incentive compensation for performance and not
primarily as an opportunity to participate in the equity appreciation in respect
of the Common Units. Therefore, no consideration will be payable by the plan
participants upon vesting and issuance of the Common Units.
Employment Agreements
The Partnership entered into employment agreements (the "Employment
Agreements") with Mr. Alexander and Quadrino (each, an "Executive") which became
effective March 5, 1996. The summary of such Employment Agreements contained
herein does not purport to be complete and is qualified in its entirety by
reference to the Employment Agreements. On October 1, 1996, Mr. Quadrino
resigned as President of the Partnership and, pursuant to his Employment
Agreement, will be paid $22,916 per month through March 1999.
Mr. Alexander's Employment Agreement has an initial term of three years but
automatically renews for successive one-year periods, unless earlier terminated
by the Partnership or by Mr. Alexander or otherwise terminated in accordance
with the Employment Agreement. The Employment Agreement for Mr. Alexander
provides for an initial base salary of $350,000. In addition, Mr. Alexander may
earn a bonus up to 100% of annual base salary for services rendered based upon
certain performance criteria. The Employment Agreement also provides for the
opportunity to participate in benefit plans made available to other senior
executives and senior managers of the Partnership, including the Restricted Unit
Plan. The Partnership also provides Mr. Alexander with term life insurance with
a face amount equal to three times his annual base salary. Mr. Alexander will
also participate in a non-qualified supplemental retirement plan which provides
retirement income which could not be provided under the Partnership's qualified
plans by reason of limitations contained in the Internal Revenue Code. If a
"change of control" (as defined in the Employment Agreement) of the Partnership
occurs and within six months prior thereto or at any time subsequent to a change
of control the Partnership terminates the Executive's employment without "cause"
(other than pursuant to a non-renewal) or the Executive resigns with "good
reason," then the Executive will generally be entitled to (i) a lump sum
severance payment equal to three times the sum of his annual base salary in
effect as of the date of termination and the average of bonuses earned during
the three prior fiscal years, (ii) the maximum bonus paid or payable with
respect to any of the three preceding fiscal years, and (iii) medical benefits
for three years from the date of such termination. The Employment Agreement
provides that if any payment received by the Executive is subject to the 20%
federal excise tax under Section 4999 of the Code, the payment will be grossed
up to permit the Executive to retain a net amount on an after-tax basis equal to
what he would have received had the excise tax not been payable.
Severance Protection Plan For Key Executives
The Partnership has adopted a Severance Protection Plan which provides the
Partnership's officers and key employees with employment protection for one year
following a "change of control" as defined in the plan. This plan provides for
severance payments equal to sixty-five weeks of base pay and target bonus
following a change of control for such officers and key employees.
<PAGE>
Compensation of Supervisors
Mr. Stookey will receive annual compensation of $75,000 for his services to
the Partnership. The other two Elected Supervisors will receive $15,000 per
year, plus $1,000 per meeting of the Board of Supervisors or committee thereof
attended. In addition, the Elected Supervisors participate in the Restricted
Unit Plan and have received Unit Awards with a value of $0.3 million. All
Elected Supervisors will receive reimbursement of reasonable out-of-pocket
expenses incurred in connection with meetings of the Board of Supervisors. The
Partnership does not expect to pay any additional remuneration to its employees
(or employees of any of its affiliates) or employees of the General Partner or
any of its affiliates for serving as members of the Board of Supervisors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information as of December 2, 1996
regarding the beneficial ownership of Common and Subordinated Units by each
person or group known by the Partnership (based upon filings under Section 13(d)
or (g) under The Securities Exchange Act of 1934) to own beneficially more than
5% thereof, each member of the Board of Supervisors, each executive officer
named in the Summary Compensation table and all members of the Board of
Supervisors and executive officers as a group. Each individual or entity listed
below has sole voting and investment power over the Units reported, except as
noted below.
Suburban Propane, L.P.
- ----------------------
Name Amount and nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------- ------------------- --------
Common Units Mark A. Alexander 13,000 .060%
Salvatore M. Quadrino 10,000 .046%
Charles T. Hoepper 2,000 .009%
Kevin T. McIver 1,000 .005%
David R. Feheley 3,000 .014%
George H. Hempstead, III 0 --
Robert E. Lee 1,300 .006%
John Hoyt Stookey 10,000 .046%
Harold R. Logan, Jr. 2,500 .012%
Dudley C. Mecum 0 --
All Members of the Board
of Supervisors and Executive
Officers as a Group (12 persons) 47,300 .219%
Subordinated Units Millennium Chemicals Inc. 7,163,750 100.0%
99 Wood Avenue South
Iselin, New Jersey 08830
<PAGE>
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Partnership's directors and
executive officers to file initial reports of ownership and reports of changes
in ownership of the Company's Common Units with the Securities and Exchange
Commission. Directors and executive officers are required to furnish the
Partnership with copies of all Section 16(a) forms that they file. Based on a
review of these filings, the Partnership notes that Mr. Stookey inadvertently
failed to report by March 15, 1996, his ownership of 10,000 Common Units. The
relevant filing indicating his ownership of the Common Units was made on April
8, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Rights of the General Partner
The General Partner owns all of the Subordinated Units, representing an
aggregate 24.4% limited partner interest in the Partnership. Quantum owns 100%
of the capital stock of the General Partner. Through the General Partner's
ability, as general partner, to control the election of the two Appointed
Supervisors of the Partnership, its right as general partner to approve certain
Partnership actions, its ownership of all of the outstanding Subordinated Units
and its right to vote the Subordinated Units as a separate class on certain
matters, the General Partner and its affiliates have the ability to exercise
significant influence regarding management of the Partnership.
Computer Services Agreement with Quantum
The Partnership has entered into a Computer Services Agreement (the
"Computer Services Agreement") with Quantum to utilize Quantum's mainframe
computer, which receives data and generates customer bills, reports and
information regarding the retail sales of the Partnership. Pursuant to such
agreement, the Partnership is permitted to utilize the Quantum mainframe through
March 1999 and in consideration therefor, the Partnership will pay Quantum a
monthly fee of $30,500 (the "Initial Monthly Fee"), subject to adjustment on
March 1, 1997 to an amount equal to the lesser of (x) Quantum cost for such
computer services and (y) 125% of the Initial Monthly Fee. The Partnership
believes these amounts are no higher than would have been paid to a third party
vendor for such services. The Partnership is also required to reimburse Quantum
for certain out-of-pocket expenses. Quantum will have the right to terminate the
Computer Services Agreement (a) at any time subsequent to September 5, 1997 upon
six months prior notice to the Partnership or (b) upon 45 days prior notice to
the Partnership in the event that the mainframe is contracted to be purchased by
a third party for such party's use or for use by another party. Subsequent to
March 5, 1997, the Partnership will have the right to terminate the Computer
Services Agreement upon 60 days prior notice to Quantum.
Distribution Support Agreement
The Partnership and the General Partner have entered into the Distribution
Support Agreement which is intended to enhance the Partnership's ability to make
the Minimum Quarterly Distribution on the Common Units during the Subordination
Period. Pursuant to the Distribution Support Agreement, the General Partner has
agreed to contribute cash, in exchange for Additional Partnership Units ("APUs")
to enable the Partnership to distribute the Minimum Quarterly Distribution up to
a maximum of approximately $44.3 million. Millennium (the "APU Guarantor") has
agreed pursuant to the Distribution Support Agreement to guarantee the General
Partner's APU contribution obligation. The Unitholders have no independent right
separate and apart from the Partnership to enforce the General Partner's or the
APU Guarantor's obligations under the Distribution Support Agreement.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. Financial Statements
See "Index to Financial Statements" set forth on Page F-1.
2. Financial Statement Schedule.
See "Index to Financial Statement Schedule" set forth on page S-1.
3. Exhibits
See "Index to Exhibits" set forth on page E-1.
(b) Reports on Form 8-K
During the last quarter of the 1996 fiscal year, the Partnership filed
no Current Reports on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Suburban Propane Partners, L.P.
By: /s/ Mark A. Alexander
--------------------------------------
Mark A. Alexander
President, Chief Executive Officer and
Management Supervisor
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ DAVID R. FEHELEY Management Supervisor December 19, 1996
- --------------------
(David R. Feheley)
/s/ GEORGE H. HEMPSTEAD, III Appointed Supervisor December 19, 1996
- ----------------------------
(George H. Hempstead, III)
/s/ ROBERT E. LEE Appointed Supervisor December 19, 1996
- -----------------
(Robert E. Lee)
/s/ JOHN HOYT STOOKEY Elected Supervisor December 19, 1996
- ---------------------
(John Hoyt Stookey)
/s/ HAROLD R. LOGAN, JR. Elected Supervisor December 19, 1996
- ------------------------
(Harold R. Logan, Jr.)
/s/ DUDLEY C. MECUM Elected Supervisor December 19, 1996
- -------------------
(Dudley C. Mecum)
/s/ CHARLES T. HOEPPER Senior Vice President and December 19, 1996
- ---------------------- Chief Financial Officer
(Charles T. Hoepper) of Suburban Propane
Partners, L.P. (Principal
Financial Officer and Principal
Accounting Officer)
<PAGE>
INDEX TO EXHIBITS
The exhibits listed on this Exhibit Index are filed as part of this report.
Exhibits required to be filed by Item 601 of Regulation S-K which are not listed
are not applicable.
Exhibit
Number Description
------ -----------
* 3.1 Amended and Restated Agreement of Limited Partnership of the
Partnership dated as of March 4, 1996.
* 3.2 Amended and Restated Agreement of Limited Partnership of the
Operating Partnership dated as of March 4, 1996.
* 10.1 Credit Agreement dated as of February 28, 1996
among the Operating Partnership, Chemical Bank, as
administrative agent, and certain banks.
* 10.2 Note Agreement dated as of February 28, 1996 among certain
investors and the Operating Partnership relating to $425 million
aggregate principal amount of 7.54% Senior Notes due
June 30, 2011.
* 10.3 Contribution, Conveyance and Assumption Agreement dated as of
March 4, 1996 among the Partnership, the Operating Partnership,
Quantum, the General Partner and the Service Company.
* 10.4 Computer Services Agreement dated as of March 5, 1996 between
Quantum and the Operating Partnership.
* 10.5 Distribution Support Agreement dated as of March 5, 1996
among the Partnership, the General Partner and Millennium.
* 10.6 Employment Agreement dated as of March 5, 1996 between the
Partnership, the Operating Partnership and Mr. Alexander.
* 10.7 Employment Agreement dated as of March 5, 1996 between the
Partnership, the Operating Partnership and Mr. Quadrino.
* 10.8 The Partnership's 1996 Restricted Unit Plan.
* 10.9 Form of Unit Grant Agreement pursuant to the Partnership's 1996
Restricted Unit Plan.
** 10.10 First Amendment dated as of September 23, 1996 to the Credit
Agreement dated as of February 28, 1996 among the Operating
Partnership, Chemical Bank, as administrative agent, and certain
banks.
** 10.11 The Partnership Supplemental Executive Retirement Plan
(effective as of March 5, 1996).
E-1
<PAGE>
Exhibit
Number Description
------ -----------
** 10.12 The Partnership's Severance Protection Plan dated September 1996.
** 21.1 Listing of Subsidiaries of the Partnership.
** 23.1 Consent of Independent Accountants.
** 27.1 Financial Data Schedule.
- --------------------------------------------------------------------------------
* Incorporated by reference to the same numbered Exhibit to the Partnership's
Current Report Form 8-K filed April 29, 1996.
** Filed herewith.
E-2
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Page
----
Reports of Independent
Accountants............................................ F-2
Consolidated Balance Sheets-September 28, 1996 and
September 30, 1995 (Predecessor)....................... F-4
Consolidated Statements of Operations -
March 5, 1996 through September 28, 1996
October 1, 1995 through March 4, 1996 (Predecessor)
Years Ended September 28, 1996(Combined),
September 30, 1995(Predecessor)and
October 1, 1994(Predecessor)......................... F-5
Consolidated Statements of Cash Flows March 5, 1996
through September 28, 1996, October 1, 1995
through March 4, 1996 (Predecessor), Years Ended
September 28, 1996 (Combined), September 30, 1995 (Predecessor)
and October 1, 1994 (Predecessor).................... F-7
Consolidated Statement of Partners' Capital -
March 5, 1996 through September 28, 1996............. F-9
Notes to Consolidated Financial Statements............. F-10
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Supervisors and Unitholders of
Suburban Propane Partners, L.P.
In our opinion, the consolidated financial statements listed in the
indices referred to under Item 14(a) 1 and 2 and appearing on pages F-1 and S-1
present fairly, in all material respects, the financial position of Suburban
Propane Partners, L.P. and its subsidiaries (the "Partnership") at September 28,
1996, and the results of its operations and its cash flows for the period March
5, 1996 to September 28, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Morristown, NJ
October 21, 1996
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
Quantum Chemical Corporation
In our opinion, the financial statements listed in the indices referred to
under Item 14(a) 1 and 2 and appearing on pages F-1 and S-1 present fairly, in
all material respects, the financial position of the Suburban Propane division
of Quantum Chemical Corporation at September 30, 1995, and the results of its
operations and its cash flows for the period October 1, 1995 to March 4, 1996
and each of the two years in the period ended September 30, 1995, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Morristown, NJ
October 21, 1996
F-3
<PAGE>
<TABLE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
September 30,
September 28, 1995
1996 (Predecessor)
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 18,931 $ 136
Accounts receivable, less allowance for doubtful
accounts of $3,312 and $3,162, respectively 55,021 41,045
Inventories 40,173 36,663
Prepaid expenses and other current assets 6,567 1,002
------------- -------------
Total current assets 120,692 78,846
Property, plant and equipment, net 374,013 363,805
Net prepaid pension cost 47,514 44,713
Goodwill and other intangible assets, net 255,948 239,909
Other assets 9,257 9,186
------------- -------------
Total assets $ 807,424 $ 736,459
============= =============
LIABILITIES AND PARTNERS' CAPITAL/
PREDECESSOR EQUITY
Current liabilities:
Accounts payable $ 40,730 $ 22,298
Accrued employment and benefit costs 25,389 19,975
Accrued insurance 5,280 4,470
Customer deposits and advances 8,242 8,501
Accrued interest 8,222 -
Other current liabilities 13,963 9,097
------------- -------------
Total current liabilities 101,826 64,341
Long-term debt 428,229 -
Postretirement benefits obligation 81,374 83,098
Accrued insurance 19,456 18,569
Other liabilities 11,860 12,216
------------- -------------
Total liabilities 642,745 178,224
============= =============
Commitments and contingencies
Predecessor equity - 558,235
Partners' capital:
Common unitholders 129,283 -
Subordinated unitholder 40,100 -
General Partner 3,286 -
Unearned compensation (7,990) -
------------- -------------
Total partners' capital/predecessor equity 164,679 558,235
------------- -------------
Total liabilities and partners' capital/
predecessor equity $ 807,424 $ 736,459
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
( in thousands, except per Unit amounts)
October 1, 1995 October 1, 1995
through March 5, 1996 through
September 28, 1996 through March 4, 1996
(Combined) September 28, 1996 (Predecessor)
---------- ------------------ -------------
<S> <C> <C> <C>
Revenues
Propane $ 641,679 $ 289,058 $ 352,621
Other 66,267 34,889 31,378
------ ------ ------
707,946 323,947 383,999
Costs and expenses
Cost of sales 377,692 173,201 204,491
Operating 203,426 114,436 88,990
Depreciation and amortization 35,862 21,046 14,816
Selling, general and administrative
expenses 31,344 18,728 12,616
Management fee 1,290 0 1,290
------ ------ ------
649,614 327,411 322,203
Income (loss) before interest expense
and income taxes 58,332 (3,464) 61,796
Interest expense, net 17,171 17,171 0
Income (loss) before provision
for income taxes 41,161 (20,635) 61,796
Provision for income taxes 28,294 147 28,147
------ ------ ------
Net income (loss) $ 12,867 $ (20,782) $ 33,649
======= ======= =======
General Partner's interest in net loss $ (416)
-------
Limited Partners' interest in net loss $ (20,366)
=======
Net loss per Unit $ (0.71)
=======
Weighted average number of Units outstanding 28,726
-------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
( in thousands)
Year Ended
---------------------------------------------------------
September 28, 1996 September 30, 1995 October 1, 1994
(Combined) (Predecessor) (Predecessor)
---------- ------------- -------------
<S> <C> <C> <C>
Revenues
Propane $ 641,679 $ 570,064 $ 612,757
Other 66,267 63,556 65,010
------ ------ ------
707,946 633,620 677,767
Costs and expenses
Cost of sales 377,692 318,896 330,540
Operating 203,426 197,348 209,879
Depreciation and amortization 35,862 34,055 34,300
Selling, general and administrative
expenses 31,344 24,677 24,058
Management fee 1,290 3,100 3,500
----- ----- -----
649,614 578,076 602,277
Income before interest expense and
income taxes 58,332 55,544 75,490
Interest expense, net 17,171 0 0
------ ------ ------
Income before provision for income taxes 41,161 55,544 75,490
Provision for income taxes 28,294 25,299 33,644
------ ------ ------
Net income $ 12,867 $ 30,245 $ 41,846
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
October 1, 1995 October 1, 1995
through March 5, 1996 through
September 28, 1996 through March 4, 1996
(Combined) September 28, 1996 (Predecessor)
---------- ------------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 12,867 $ (20,782) $ 33,649
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operations:
Depreciation 28,920 16,887 12,033
Amortization 6,942 4,159 2,783
(Gain) on disposal of property, plant and
equipment (241) (156) (85)
Changes in operating assets and liabilities, net of
acquisitions and dispositions:
(Increase)/decrease in accounts receivable (13,976) 42,667 (56,643)
(Increase)/decrease in inventories (3,510) (6,339) 2,829
(Increase) in prepaid expenses and
other current assets (5,565) (3,691) (1,874)
Increase in accounts payable 18,432 9,097 9,335
Increase in accrued employment
and benefit costs 5,754 3,451 2,303
Increase in accrued interest 8,222 8,222 --
Increase/(decrease) in other accrued liabilities 5,417 8,947 (3,530)
Other noncurrent assets (2,872) (1,669) (1,203)
Deferred credits and other noncurrent liabilities (1,194) 2,168 (3,362)
------ ----- ------
Net cash provided by (used in) operating activities 59,196 62,961 (3,765)
------ ------ ------
Cash flows from investing activities:
Capital expenditures (25,885) (16,089) (9,796)
Acquisitions (28,529) (15,357) (13,172)
Proceeds from the sale of property, plant
and equipment 2,000 997 1,003
----- --- -----
Net cash used in investing activities (52,414) (30,449) (21,965)
------- ------- -------
Cash flows from financing activities:
Cash activity with parent, net 25,799 -- 25,799
Proceeds from settlement with former parent 5,560 5,560 --
Proceeds from debt placement 425,000 425,000 --
Proceeds from Common Unit offering 413,569 413,569 --
Debt placement and credit agreement expenses (6,224) (6,224) --
Cash distribution to General Partner (832,345) (832,345) --
Partnership distribution (19,346) (19,346) --
------- ------- ------
Net cash provided by (used in) financing activities 12,013 (13,786) 25,799
------ ------- ------
Net increase in cash and cash equivalents 18,795 18,726 69
Cash and cash equivalents at beginning of period 136 205 136
--- --- ---
Cash and cash equivalents at end of period $ 18,931 $ 18,931 $ 205
========= ========= ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 10,550 $ 10,550 $ --
========= ========= ========
Non cash investing and financing activities
Assets acquired by incurring note payable $ 3,528 $ 3,528 $ --
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
September 28, 1996 September 30, 1995 October 1, 1994
(Combined) (Predecessor) (Predecessor)
---------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 12,867 $ 30,245 $ 41,846
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation 28,920 27,746 28,050
Amortization 6,942 6,309 6,250
(Gain)/loss on disposal of property, plant
and equipment (241) (1,492) 114
Changes in operating assets and liabilities,
net of acquisitions and dispositions:
(Increase)/decrease in accounts receivable (13,976) 6,173 3,555
(Increase)/decrease in inventories (3,510) 2,692 11,027
(Increase)/decrease in prepaid expenses
and other current assets (5,565) 693 933
Increase/(decrease) in accounts payable 18,432 878 (7,180)
Increase/(decrease) in accrued employment
and benefit costs 5,754 (1,199) 3,110
Increase in accrued interest 8,222 -- --
Increase/(decrease) in other accrued liabilities 5,417 (4,362) (3,962)
Other noncurrent assets (2,872) (1,372) (1,181)
Deferred credits and other noncurrent liabilities (1,194) (12,594) (5,495)
------ ------- ------
Net cash provided by operating activities 59,196 53,717 77,067
------ ------ ------
Cash flows from investing activities:
Capital expenditures (25,885) (21,359) (17,839)
Acquisitions (28,529) (5,817) (1,448)
Proceeds from the sale of property, plant
and equipment 2,000 4,859 3,161
----- ----- -----
Net cash used in investing activities (52,414) (22,317) (16,126)
------- ------- -------
Cash flows from financing activities:
Cash activity with parent, net 25,799 (31,562) (68,093)
Proceeds from settlement with former parent 5,560 -- --
Proceeds from debt placement 425,000 -- --
Proceeds from Common Unit offering 413,569 -- --
Debt placement and credit agreement expenses (6,224) -- --
Cash distribution to General Partner (832,345) -- --
Partnership distribution (19,346) -- --
------- ------- -------
Net cash provided by (used in) financing activities 12,013 (31,562) (68,093)
------ ------- -------
Net increase (decrease) in cash and cash equivalents 18,795 (162) (7,152)
Cash and cash equivalents at beginning of period 136 298 7,450
----- ----- -----
Cash and cash equivalents at end of period $ 18,931 $ 136 $ 298
========= ======== =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 10,550 $ -- $ --
Non cash investing and financing activities
Assets acquired by incurring note payable $ 3,528 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<CAPTION>
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(in thousands)
Unearned Total
Number of Units General Compensation Partners'
Common Subordinated Common Subordinated Partner Restricted Units Capital
------ ------------ ------ ------------ ------- ---------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 5, 1996 - - - - - - -
Contribution in connection
with formation of the
Partnership and issuance
of Common Units 21,562 7,164 $ 150,488 $ 49,890 $ 4,089 $ 204,467
Quarterly distribution (14,239) (4,720) (387) (19,346)
Unamortized restricted Unit
compensation 8,330 $ (7,990) 340
Net loss - - (15,296) (5,070) (416) - (20,782)
------- ------- ------- ------ ------ ------- --------
Balance at September 28, 1996 21,562 7,164 $ 129,283 $ 40,100 $ 3,286 $ (7,990) $ 164,679
====== ===== ========= ========= ======= ========= =========
</TABLE>
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 28, 1996
(Dollars in thousands)
1. Partnership Organization and Formation
Suburban Propane Partners, L.P. (the "Partnership") was formed on December 19,
1995 as a Delaware limited partnership. The Partnership and its subsidiary,
Suburban Propane, L.P. (the "Operating Partnership"), were formed to acquire and
operate the propane business and assets of the Suburban Propane Division of
Quantum Chemical Corporation (the "Predecessor Company"). In addition, Suburban
Sales & Service, Inc. (the "Service Company"), a subsidiary of the Operating
Partnership, was formed to acquire and operate the service work and appliance
and parts businesses of the Predecessor Company. The Partnership, the Operating
Partnership and the Service Company are collectively referred to hereinafter as
the "Partnership Entities." The Partnership Entities commenced operations on
March 5, 1996 (the "Closing Date") upon consummation of an initial public
offering of 18,750,000 Common Units representing limited partner interests in
the Partnership (the "Common Units"), the private placement of $425,000
aggregate principal amount of Senior Notes due 2011 issued by the Operating
Partnership (the "Senior Notes") and the transfer of all the propane assets
(excluding the net accounts receivable balance) of the Predecessor Company to
the Operating Partnership and the Service Company. On March 25, 1996, the
underwriters of the Partnership's initial public offering exercised an
overallotment option to purchase an additional 2,812,500 Common Units.
Suburban Propane GP, Inc. (the "General Partner") is a wholly-owned subsidiary
of Quantum Chemical Corporation ("Quantum") and serves as the general partner of
the Partnership and the Operating Partnership. Both the General Partner and
Quantum are indirect wholly-owned subsidiaries of Millennium Chemicals Inc.
("Millennium") which was formed as a result of Hanson PLC's (the "Parent
Company") demerger in October 1996. The General Partner holds a 1% general
partner interest in the Partnership and a 1.0101% general partner interest in
the Operating Partnership. In addition, the General Partner owns a 24.4% limited
partner interest in the Partnership. This limited partner interest is evidenced
by 7,163,750 Subordinated Units representing limited partner interests in the
Partnership. The General Partner has delegated to the Partnership's Board of
Supervisors all management powers over the business and affairs of the
Partnership Entities that the General Partner possesses under applicable law.
The Partnership Entities are, and the Predecessor Company was, engaged in the
retail and wholesale marketing of propane and related appliances and services.
The Partnership believes it is the third largest retail marketer of propane in
the United States, serving more than 730,000 active residential, commercial,
industrial and agricultural customers from 352 Customer Service Centers in 41
states. The Partnership's operations are concentrated in the east and west coast
regions of the United States. The retail propane sales volume of the Partnership
was approximately 567 million gallons during the fiscal year ended September 28,
1996. Based on industry statistics, the Partnership believes that its retail
propane sales volume constitutes approximately 6% of the domestic retail market
for propane.
2. Basis of Presentation and Summary of Significant Accounting Policies
BASIS OF PRESENTATION. The consolidated financial statements present the
consolidated financial position, results of operations and cash flows of the
Partnership Entities, and the Predecessor Company for periods prior to the
Closing Date. All significant intercompany transactions and accounts have been
eliminated.
FISCAL PERIOD. The Partnership and the Predecessor Company's fiscal year ends
on the last Saturday nearest to September 30. Because the Partnership
commenced operations on the Closing Date, the accompanying statements of
operations and
F-10
<PAGE>
cash flows present the consolidated results of operations and cash flows of the
Partnership for the period March 5, 1996 to September 28, 1996 and the results
of operations and cash flows of the Predecessor Company for the period October
1, 1995 to March 4, 1996 and the two fiscal years ended September 30, 1995.
Solely for purposes of comparing the results of operations of the Partnership
for the year ended September 28, 1996 with those of the Predecessor Company in
the prior year periods, the statement of operations date for the year ended
September 28, 1996 is comprised of the combined statements of operations of the
Predecessor Company for the period October 1, 1995 to March 4, 1996 and the
Partnership for the period March 5, 1996 to September 28, 1996.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS. The Partnership considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents. The carrying amount approximates fair value because of the short
maturity of these instruments.
REVENUE RECOGNITION. Sales of propane are recognized at the time product is
shipped or delivered to the customer. Revenue from the sale of propane,
appliances and equipment is recognized at the time of sale or installation.
Revenue from repairs and maintenance is recognized upon completion of the
service.
INVENTORIES. Inventories are stated at the lower of cost or market. Cost is
determined using a weighted average method for propane and a specific
identification basis for appliances.
PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost.
Depreciation is determined for related groups of assets under the straight-line
method based upon their estimated useful lives as follows:
Buildings 40 Years
Building and land improvements 10-20 Years
Transportation equipment 5-30 Years
Storage facilities 30 Years
Equipment, primarily tanks and cylinders 3-40 Years
Expenditures for maintenance and routine repairs are expensed as incurred.
GOODWILL AND OTHER INTANGIBLE ASSETS. Goodwill and other intangible assets are
comprised of the following:
September 28, September 30,
1996 1995 (Predecessor)
------------- ------------------
Goodwill $265,292 $251,784
Debt Origination Costs 6,224 0
Other, principally noncompete agreements 4,003 754
-------- --------
275,519 252,538
Less: Accumulated amortization 19,571 12,629
-------- --------
$255,948 $239,909
======== ========
Goodwill represents the excess of the purchase price over the fair value of net
assets acquired and is being amortized on a straight-line basis over forty years
from the date of acquisition.
F-11
<PAGE>
Debt origination costs represent the costs incurred in connection with the
placement of the $425,000 of Senior Notes which is being amortized on a straight
line basis over 15 years.
The Partnership periodically evaluates goodwill for impairment by calculating
the anticipated future cash flows attributable to its operations. Such expected
cash flows, on an undiscounted basis, are compared to the carrying values of the
tangible and intangible assets, and if impairment is indicated, the carrying
value of goodwill is adjusted. In the opinion of management, no impairment of
goodwill exists (see "New Pronouncement" below).
ACCRUED INSURANCE. Accrued insurance represents the estimated costs of known and
anticipated or unasserted claims under the Partnership's general and product,
workers' compensation and automobile insurance policies. Accrued insurance
provisions for unasserted claims arising from unreported incidents are based on
an analysis of historical claims data. For each claim, the Partnership records a
self-insurance provision up to the estimated amount of the probable claim or the
amount of the deductible, whichever is lower. Claims are generally settled
within 5 years of origination.
INCOME TAXES. As discussed in Note 1, the Partnership Entities consist of two
limited partnerships, the Partnership and the Operating Partnership, and one
corporate entity, the Service Company. For federal and state income tax
purposes, the earnings attributable to the Partnership and Operating Partnership
are included in the tax returns of the individual partners. As a result, no
recognition of income tax expense has been reflected in the Partnership's
consolidated financial statements relating to the earnings of the Partnership
and Operating Partnership. The earnings attributable to the Service Company are
subject to federal and state income taxes. Accordingly, the Partnership's
consolidated financial statements reflect income tax expense related to the
Service Company's earnings. Net earnings for financial statement purposes may
differ significantly from taxable income reportable to unitholders as a result
of differences between the tax basis and financial reporting basis of assets and
liabilities and the taxable income allocation requirements under the Partnership
agreement.
<PAGE>
For federal income tax purposes, the Predecessor Company was included in the
consolidated tax return of a United States affiliate of the Parent Company. The
Predecessor Company's tax assets, liabilities, expenses and benefits result from
the tax effect of its transactions determined as if the Predecessor Company
filed a separate income tax return. The Predecessor Company's income taxes were
paid by an affiliate of the Parent Company in which income tax expense was
credited through an intercompany account included in the accompanying balance
sheets as predecessor equity.
Income taxes are provided based on the provisions of Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes," which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements and tax returns in different
years. Under this method, deferred income tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
UNIT-BASED COMPENSATION. The Partnership accounts for Unit-based compensation in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and related interpretations. Upon issuance of Units
under the plan, unearned compensation equivalent to the market value of the
restricted Units is charged at the date of grant. The unearned compensation is
amortized ratably over the restricted periods. The unamortized unearned
compensation value is shown as a reduction of partners' capital in the
accompanying consolidated balance sheet.
The Partnership adopted the disclosure-only option of SFAS No. 123, "Accounting
for Stock-Based Compensation"("SFAS No. 123") as of September 28, 1996. If
the accounting provisions of SFAS No. 123 had been adopted as of the beginning
of fiscal 1995, the effect on 1995 net earnings would not be material. Further,
based upon the current and anticipated use of restricted units, the
Partnership believes the impact of SFAS No. 123 would not be material in any
future period.
F-12
<PAGE>
NET INCOME (LOSS) PER UNIT. Net income (loss) per Unit is computed by dividing
net income (loss), after deducting the General Partner's 2% interest, by the
weighted average number of outstanding Common Units and Subordinated Units.
RECLASSIFICATIONS. Certain prior period balances have been reclassified to
conform with the current period presentation.
NEW PRONOUNCEMENT. On March 5, 1996, the Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No.
121"). This statement requires impairment losses to be recorded on long-lived
assets used in operations and certain identifiable intangible assets when
indications of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
Adoption of SFAS No. 121 did not have an impact on the financial statements.
3. Supplemental Unaudited Pro Forma Financial Information
The following unaudited pro forma condensed consolidated statements of
operations for the years ended September 28, 1996 and September 30, 1995 were
derived from the historical statements of operations of the Predecessor Company
for the period October 1, 1994 through March 4, 1996 and the consolidated
statement of operations of the Partnership from March 5, 1996 through September
28, 1996. The unaudited pro forma condensed consolidated statements of
operations were prepared to reflect the effects of the Partnership formation as
if it had been completed in its entirety as of the beginning of the periods
presented. However, these statements do not purport to present the results of
operations of the Partnership had the partnership formation actually been
completed as of the beginning of the periods presented. In addition, the
unaudited pro forma condensed consolidated financial statements of operations
are not necessarily indicative of the results of future operations of the
Partnership.
Year Ended
September 28, September 30,
1996 1995
------------- -------------
Revenues
Propane $641,679 $570,064
Other 66,267 63,556
-------- --------
707,946 633,620
Cost and Expenses
Cost of sales 377,692 318,896
Operating 203,426 197,348
Depreciation and amortization 35,862 34,055
Selling, general and administrative expenses 32,634 27,777
-------- --------
649,614 578,076
Income before interest expense and income taxes 58,332 55,544
Interest expense, net 31,197 32,045
-------- --------
Income before provision for income taxes 27,135 23,499
Provision for income taxes 250 250
-------- --------
Net income $ 26,885 $ 23,249
======== ========
General Partner's interest in net income $ 538 $ 465
-------- --------
Limited Partners' interest in net income $ 26,347 $ 22,784
======== ========
Net income per Unit $ 0.92 $ 0.79
======== ========
Weighted average number of Units outstanding 28,726 28,726
======== ========
F-13
<PAGE>
Significant pro forma adjustments reflected in the above data include the
following for each of the years presented:
1. The elimination of management fees paid by the Predecessor Company to an
affiliate of its former Parent Company.
2. The addition of the estimated incremental general and administrative costs
associated with the Partnership operating as a publicly traded
partnership.
3. An adjustment to interest expense to reflect the interest expense
associated with the Senior Notes and Bank Credit Facilities.
4. The elimination of the provision for income taxes, as income taxes will be
borne by the Partners and not the Partnership, except for corporate
income taxes related to the Service Company.
4. Distributions of Available Cash
The Partnership makes distributions to its partners with respect to each fiscal
quarter of the Partnership in an aggregate amount equal to its Available Cash
for such quarter. Available Cash generally means, with respect to any fiscal
quarter of the Partnership, all cash on hand at the end of such quarter less the
amount of cash reserves established by the Board of Supervisors in its
reasonable discretion for future cash requirements. These reserves are retained
for the proper conduct of the Partnership's business, the payment of debt
principal and interest and for distributions during the next four quarters.
Distributions by the Partnership in an amount equal to 100% of its Available
Cash will generally be made 98% to the Common and Subordinated Unitholders and
2% to the General Partner, subject to the payment of incentive distributions in
the event Available Cash exceeds the Minimum Quarterly Distribution ($.50) on
all units. To the extent there is sufficient Available Cash, the holders of
Common Units have the right to receive the Minimum Quarterly Distribution, plus
any arrearages, prior to the distribution of Available Cash to holders of
Subordinated Units. Common Units will not accrue arrearages for any quarter
after the Subordination Period (as defined below) and Subordinated Units will
not accrue any arrearages with respect to distributions for any quarter.
The Subordination Period will generally extend until the first day of any
quarter beginning after March 31, 2001 in respect of which (a) distributions of
Available Cash from Operating Surplus on the Common Units and the Subordinated
Units with respect to each of the three consecutive four-quarter periods
immediately preceding such date equaled or exceeded the sum of the Minimum
Quarterly Distribution on all of the outstanding Common Units and Subordinated
Units during such periods, (b) the Adjusted Operating Surplus generated during
each of the three consecutive four-quarter periods immediately preceding such
date equaled or exceeded the sum of the Minimum Quarterly Distribution on all of
the outstanding Common Units and Subordinated Units and related distribution on
the General Partner interest in the Partnership during such periods, and (c)
there are no outstanding Common Unit Arrearages. Upon expiration of the
Subordination Period, all remaining Subordinated Units will convert into Common
Units on a one-for-one basis and will thereafter participate pro rata with the
other Common Units in distributions of Available Cash.
For the seven month period ended September 28, 1996, the Partnership paid
$19,346 in Minimum Quarterly Distributions on all outstanding Common Units and
Subordinated Units for the partial quarter ended March 30, 1996 and the quarter
ended June 29, 1996. The Partnership paid the Minimum Quarterly Distribution of
$14,363 on all outstanding Common Units and Subordinated Units for the quarter
ended September 28, 1996 on November 12, 1996. The distributions were paid to
all holders of record on the applicable quarter end record date.
5. Related Party Transactions
The Predecessor Company's cash accounts were managed on a centralized basis by
an affiliate of the former Parent Company. Accordingly, cash receipts and
disbursements were received by or made through the affiliate company. Cash
transactions between or on behalf of the Predecessor Company are included in the
accompanying balance sheet in the predecessor equity account.
F-14
The Predecessor Company was also provided management, treasury, insurance,
employee benefits, tax and accounting services by an affiliate of the former
Parent Company. As consideration for the services provided by the affiliate, the
Predecessor Company was charged an annual management fee based on a percentage
of revenue. In the opinion of management, the management fee allocation
represented a reasonable estimate of the cost of services provided by the
affiliate on behalf of the Predecessor Company. However, the fee was not
necessarily indicative of the level of expenses which might have been incurred
by the Predecessor Company operating on a stand-alone basis. Management fees for
the period October 1, 1995 to March 4, 1996 and the years ended September 30,
1995 and October 1, 1994 were $1,290, $3,100 and $3,500, respectively.
Pursuant to the Contribution, Conveyance and Assumption Agreement dated as of
March 4, 1996, between Quantum and the Partnership (the "Contribution
Agreement"), Quantum retained ownership of the Predecessor Company's accounts
receivable, net of allowance for doubtful accounts, as of the Closing Date. The
Partnership retained from the net proceeds of the Common Unit offering cash in
an amount equal to the net book value of such accounts receivable. In accordance
with the Contribution Agreement, the Partnership had agreed to collect such
accounts receivable on behalf of Quantum which amounted to $97,700 as of the
Closing Date. As of September 28, 1996, the Operating Partnership had satisfied
its obligation to Quantum under such arrangement.
The Predecessor was provided computerized information services by Quantum .
Charges related to these services, included in selling, general and
administrative expenses in the accompanying statements of operations, were $148,
$1,731 and $2,081 for the period October 1, 1995 to March 4, 1996 and the years
ended September 30, 1995 and October 1, 1994, respectively.
Pursuant to a Computer Services Agreement (the "Services Agreement") dated as of
the Closing Date between Quantum and the Partnership, Quantum permits the
Partnership to utilize Quantum's mainframe computer for the generation of
customer bills, reports and information regarding the Partnership's retail
sales. For the seven months ended September 28, 1996, the Partnership incurred
expenses of $218 under the Services Agreement.
6. Selected Balance Sheet Information
Inventories consist of:
September 28, September 30,
1996 1995(Predecessor)
---------- -----------------
Propane $ 36,213 $ 33,474
Appliances 3,960 3,189
-------- --------
$ 40,173 $ 36,663
======== ========
The Partnership enters into contracts to buy propane for supply purposes. Such
contracts generally have terms of less than one year, with propane costs based
on market prices at the date of delivery.
F-15
<PAGE>
Property, plant and equipment consist of:
September 28, September 30,
1996 1995 (Predecessor)
------------- ------------------
Land and improvements $ 29,462 $ 27,964
Buildings and improvements 43,909 39,966
Transportation equipment 48,470 42,489
Storage facilities 16,836 15,561
Equipment, primarily tanks and cylinders 321,323 294,892
-------- --------
460,000 420,872
Less: accumulated depreciation 85,987 57,067
-------- --------
$374,013 $363,805
======== ========
7. Long-Term Debt and Bank Credit Facilities
Long-term debt consists of:
September 28,
1996
-------------
Senior Notes, 7.54%, due
June 30, 2011 $425,000
Note Payable, 8%, due
in Annual Installments through 2006 3,528
-----------
428,528
Less: current portion 299
-----------
$428,229
===========
On the Closing Date, the Operating Partnership issued $425,000 of Senior Notes
with an annual interest rate of 7.54%. The Operating Partnership's obligations
under the Senior Note Agreement are unsecured and will rank on an equal and
ratable basis with the Operating Partnership's obligations under the Bank Credit
Facilities discussed below. The Senior Notes will mature June 30, 2011, and
require semiannual interest payments which commenced June 30, 1996. The Note
Agreement requires that the principal be paid in equal annual payments of
$42,500 starting June 30, 2002.
The Bank Credit Facilities consist of a $100,000 acquisition facility (the
"Acquisition Facility") and a $75,000 working capital facility (the "Working
Capital Facility"). The Operating Partnership's obligations under the Bank
Credit Facilities are unsecured on an equal and ratable basis with the Operating
Partnership's obligations under the Senior Notes. The Bank Credit Facilities
will bear interest at a rate based upon either LIBOR, Chemical Bank's prime rate
or the Federal Funds effective rate plus 1/2 of 1% and in each case, plus a
margin. In addition, an annual fee (whether or not borrowings occur), is payable
quarterly ranging from 0.125% to 0.375% based upon certain financial tests.
The Working Capital Facility will expire on March 1, 1999. The Acquisition
Facility will expire on March 1, 2003. Any loans outstanding under the
Acquisition Facility after March 1, 1999 will require equal quarterly principal
payments over a four year period. No amounts were outstanding under the Bank
Credit Facilities as of September 28, 1996.
The fair value of the Partnership's long-term debt is estimated based on the
current rates offered to the Partnership for debt of the same remaining
maturities. The carrying value of the Partnership's long-term debt approximates
its fair market value.
The Senior Note Agreement and Bank Credit Facilities contains various
restrictive and affirmative covenants applicable to the Operating Partnership,
including (a) maintenance of certain financial tests, (b) restrictions on the
incurrence of additional indebtedness, and (c) restrictions on certain liens,
investments, guarantees, loans, advances, payments, mergers, consolidations,
distributions, sales of assets and other transactions. For the period March 5,
1996 to September 28, 1996, interest expense was $18,772.
8. Restricted Unit Plan
The Partnership adopted the 1996 Restricted Unit Award Plan (the "Restricted
Unit Plan") which authorizes the issuance of Common Units with an aggregate
value of $15,000 (731,707 Common Units valued at the initial public offering
price of $20.50 per Unit) to executives, managers and Elected Supervisors of the
Partnership. Units issued under the Restricted Unit Plan are subject to a
bifurcated vesting procedure such that (a) twenty-five percent of the issued
Units will vest over time with one-third of such units vesting at the end of
each of the third, fifth and seventh anniversaries of the issuance date, and (b)
the remaining seventy-five percent of the Units will vest automatically upon,
and in the same proportions as, the conversion of Subordinated Units to Common
Units. Restricted Unit Plan participants are not eligible to receive quarterly
distributions or vote their respective Units until vested. Restrictions
generally limit the sale or transfer of the Units during the restricted periods.
The value of the restricted Unit is established by the market price of the
Common Unit at the date of grant.
As of and for the seven months ended September 28, 1996, a total of 388,533
restricted Common Units were awarded. For the seven months ended September 28,
1996, the Partnership amortized $340 of compensation expense.
9. Postretirement Pension Plans and Other Postemployment Benefits
Concurrent with the Partnership formation, employees of the Predecessor Company
became employees of the Partnership and the Partnership assumed the Predecessor
Company's employee-related liabilities.
Defined Benefit Plans
Prior to the Partnership formation, employees of the Predecessor Company
participated in two noncontributory defined benefit pension plans with
contributions being made by Quantum and the assets being maintained in the
Hanson America Inc. Master Trust. Subsequent to the Partnership formation, the
two defined benefit plans were merged and the plan assets were transferred into
a separate trust maintained by the Partnership. The trusts' assets consist
primarily of common stock, fixed income securities and real estate. Included in
the Hanson America Inc. Master Trust were Hanson ordinary shares and sponsored
American Depository Receipts which, at market value, comprised 2.5% of the
trust's assets at September 30, 1995. As of September 28, 1996, the trust
maintained by the Partnership included Hanson ordinary shares which, at market
value, comprised 1.9% of the trust's assets.
The benefits for the plan are based on years of service and the employee's
salary at or near retirement. Contributions to the defined benefit plan are made
by the Partnership in accordance with the Employee Retirement Income Security
Act of 1974 minimum funding standards plus additional amounts which may be
determined from time-to-time.
The following table sets forth the plans' actuarial assumptions:
September 28, September 30,
1996 1995
(Predecessor)
------------- -------------
Weighted-average discount rate 7.75% 7.5%
Average rate of compensation increase 4.25% 4.3%
Weighted-average expected long-term rate of
return on plan assets 9.0% 9.0%
<PAGE>
F-17
The following table sets forth the plans' funded status and net prepaid
pension cost:
September 28, 1996 September 30, 1995 (Predecessor)
Plan Whose Plan Whose
Assets Accumulated
Exceed Benefits
Accumulated Exceed
Benefits Assets
Actuarial present value of benefit obligation
Vested benefit obligation $ 122,786 $ 103,731 $ 8,316
Non-vested benefit obligation 5,859 5,564 563
--------- --------- ---------
Accumulated benefit obligation $ 128,645 $ 109,295 $ 8,879
========= ========= =========
Projected benefit obligation $140,535 $ 121,698 $ 9,589
Plan assets at fair value 172,773 158,425 7,674
--------- --------- ---------
Plan assets in excess of (less than) projected
benefit obligation 32,238 36,727 (1,915)
Unrecognized net loss 15,276 9,371 530
--------- --------- ---------
Net prepaid pension cost $ 47,514 $ 46,098 $ (1,385)
========= ========= =========
The net periodic pension income includes the following:
<TABLE>
Year Ended
<CAPTION>
Period March 5, 1996 Period October 1, September 30, October 1,
to September 28, 1995 to March 4, 1995 1994
1996 1996 (Predecessor) (Predecessor) (Predecessor)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service cost-benefits earned
during the period $ 2,616 $ 1,869 $ 4,322 $ 4,989
Interest cost on projected benefit
obligation 5,748 4,106 9,308 9,573
Actual return on plan assets (10,233) (7,310) (14,180) (15,664)
Net amortization and deferral 310 221 - -
--------- --------- --------- ---------
Net periodic pension income $ (1,559) $ (1,114) $ (550) $ (1,102)
========= ========= ========= =========
</TABLE>
Defined Contribution Pension Plans
The Partnership has defined contribution plans covering most employees.
Contributions and costs are a percent of the participating employees'
compensation. These amounts totaled $1,103, $788, $1,774 and $1,554 for the
seven months ended September 28, 1996, the five months ended March 4, 1996 and
the years ended September 30, 1995 and October 1, 1994, respectively.
F-18
<PAGE>
Postretirement Benefits Other Than Pensions
The Partnership provides postretirement health care and life insurance benefits
for certain retired employees. The Partnership employees hired prior to July
1993 are eligible for such benefits if they reach a specified retirement age
while working for the Partnership.
The Partnership does not fund its postretirement benefit plan. The following
table presents the plan's accrued postretirement benefit cost included in the
accompanying balance sheets at September 28, 1996 and September 30, 1995:
September 28, September 30,
1996 1995
(Predecessor)
------------- -------------
Retirees $ 76,769 $ 71,429
Fully eligible active plan participants 2,160 2,268
Other active plan participants 11,776 14,077
------ ------
Accumulated postretirement benefit obligation 90,705 87,774
Unrecognized net loss (5,660) (1,431)
------ ------
Accrued postretirement benefit cost 85,045 86,343
Less: current portion 3,671 3,245
------ ------
Noncurrent liability $ 81,374 $ 83,098
====== ======
The net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
Year Ended
Period March 5, 1996 Period October 1, September 30, October 1,
to September 28, 1995 to March 4, 1995 1994
1996 1996 (Predecessor) (Predecessor) (Predecessor)
------------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Service cost $ 473 $ 338 $ 730 $ 813
Interest cost 918 656 1,174 1,613
-------- -------- ------- --------
Net periodic postretirement
benefit cost $ 1,391 $ 994 $ 1,904 $ 2,426
======== ====== ======= ========
</TABLE>
The accumulated postretirement benefit obligation was based on a 11%, 12% and
13%, increase in the cost of covered health care benefits for 1996, 1995 and
1994, respectively. This rate is assumed to decrease gradually to 6% in 2003 and
to remain at that level thereafter. Increasing the assumed health care cost
trend rates by 1.0% in each year would increase the Partnership's accumulated
postretirement benefit obligation as of September 28, 1996 by $3,365 and the
aggregate of service and interest components of net periodic postretirement
benefit cost for the combined twelve months ended September 28, 1996 by $14.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 8.0% and 7.5% at September 28, 1996 and
September 30, 1995, respectively.
10. Partners' Capital and Predecessor Equity
Partners' capital consists of 21,562,500 Common Units representing a 73.6%
limited partner interest, 7,163,750 Subordinated Units representing a 24.4%
limited partner interest (owned by the General Partner), and a 2% General
Partner interest.
<PAGE>
F-19
On August 29, 1996, the Partnership filed with the Securities and Exchange
Commission a shelf registration statement on Form S-1 to register 3,000,000
Common Units representing limited partner interests in the Partnership. The
registration statement was declared effective September 23, 1996. The Common
Units may be issued from time-to-time by the Partnership in connection with the
Partnership's acquisition of other businesses, properties or securities in
business combination transactions.
The predecessor equity account reflects the Predecessor Company's activity
between an affiliate of the former Parent Company for the period October 1, 1995
to March 4, 1996 and for the years ended September 30, 1995 and October 1, 1994.
An analysis of the predecessor equity is as follows:
<TABLE>
<CAPTION>
Period October 1, Year Ended
1995 to March 4, September 30, October 1,
1996 1995 1994
---------------- ------------- ----------
<S> <C> <C> <C>
Beginning balance $ 558,235 $ 559,552 $ 585,799
---------- ---------- ----------
Net income 33,649 30,245 41,846
---------- ---------- ----------
Cash transfers, net (26,236) (99,845) (159,305)
Amounts paid or accrued by parent on behalf of
the Predecessor Company, net 52,035 68,283 91,212
---------- ---------- ----------
Cash activity with parent, net 25,799 (31,562) (68,093)
---------- ---------- ----------
Ending balance $ 617,683 $ 558,235 $ 559,552
========== ========== ==========
</TABLE>
The predecessor equity account was non-interest bearing with no repayment terms
and included $449,749, $265,625 and $349,291 in intercompany payables at March
4, 1996, September 30, 1995 and October 1, 1994, respectively.
11. Income Taxes
As discussed in Note 2, the Partnership's earnings for federal and state income
tax purposes is included in the tax returns of the individual partners.
Accordingly, no recognition has been given to income taxes in the accompanying
financial statements of the Partnership except for earnings of the Service
Company which are subject to federal and state income taxes. The information
presented below relates to the Predecessor Company.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
Period October 1, Year Ended
1995 to March 4, September 30, October 1,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 20,516 $ 18,458 $ 27,798
State 5,809 5,216 7,855
--------- --------- ---------
$ 26,325 $ 23,674 $ 35,653
Deferred 1,822 1,625 (2,009)
--------- --------- ---------
Total provision for income taxes $ 28,147 $ 25,299 $ 33,644
========= ========= =========
</TABLE>
F-20
<PAGE>
The net deferred tax liability, reflected in the intercompany balances included
in the accompanying balance sheet at September 30, 1995 as predecessor equity,
is as follows:
Gross Deferred Tax Assets
Reserves and accruals $ 26,898
Post retirement benefits 34,981
Intangible assets 6,414
Other 589
-----------
Total gross deferred tax assets $ 68,882
-----------
Gross Deferred Tax Liabilities
Property, plant and equipment $ (111,037)
Prepaid pension asset (17,312)
Safe harbor leases (4,341)
-----------
Total gross deferred tax liabilities $ (132,690)
-----------
Net deferred tax liability $ (63,808)
===========
A reconciliation of the statutory federal tax rate to the Predecessor Company's
effective tax rate follows:
<TABLE>
<CAPTION>
Period Year Ended
October 1, 1995 September 30, October 1,
to March 4, 1996 1995 1994
---------------- ------------- ----------
<S> <C> <C> <C>
Statutory federal tax rate 35.0% 35.0% 35.0%
Difference in tax rate due to:
State income taxes, net of federal income tax benefit 6.0% 6.0% 6.0%
Goodwill 4.1% 4.1% 2.9%
Other, net 0.5% 0.5% 0.7%
------ ------ ------
Effective tax rate 45.6% 45.6% 44.6%
====== ====== ======
</TABLE>
12. Commitments and Contingencies
Commitments
The Partnership leases certain property, plant and equipment for various periods
under noncancelable leases. Rental expense under operating leases was $7,844,
$5,603, $11,563 and $8,468 for the seven months ended September 28, 1996, the
five months ended March 4, 1996 and for the years ended September 30, 1995 and
October 1, 1994, respectively.
Future minimum rental commitments under noncancelable operating lease agreements
as of September 28, 1996 are as follows:
Fiscal Year
-----------
1997 $10,401
1998 6,517
1999 4,886
2000 2,650
2001 and thereafter 7,307
F-21
Contingencies
The Partnership is involved in various legal actions which have arisen in the
normal course of business, including those relating to commercial transactions
and product liability. It is the opinion of management, based on the advice of
legal counsel, that the ultimate resolution of these matters will not have a
material adverse effect on the Partnership's financial position or future
results of operations.
F-22
<PAGE>
Index to Financial Statement Schedules
Suburban Propane Partners, L.P. and Subsidiaries
Schedule 11 Valuation and Qualifying Accounts for the period March 5, 1996
through September 28, 1996, October 1, 1995 through March 4, 1996
and for the years ended September 30, 1995 and October 1, 1994
<PAGE>
Schedule II
<TABLE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<CAPTION>
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance at Charged to Deductions Balance
Beginning Cost / Other (Amounts at End
of Period Expenses Additions Charged Off) of Period
--------- -------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Year Ended October 1, 1994
- --------------------------
Allowance for doubtful accounts $ 2,982 $ 4,415 $ -- $ (3,935) $ 3,462
========= ========= ======= ========= =========
Accumulated amortization:
Goodwill $ -- $ 6,250 $ -- $ -- $ 6,250
Other Intangibles $ -- $ -- $ -- $ -- $ --
--------- --------- ------- --------- ----------
Total $ -- $ 6,250 $ -- $ -- $ 6,250
========= ========= ======= ========= ==========
Year Ended September 30, 1995
- -----------------------------
Allowance for doubtful accounts $ 3,462 $ 3,140 $ -- $ (3,440) $ 3,162
========= ========= ======= ========= ==========
Accumulated amortization:
Goodwill $ 6,250 $ 6,309 $ -- $ -- $ 12,559
Other intangibles $ -- $ 70 $ -- $ -- $ 70
--------- --------- ------- --------- ---------
Total $ 6,250 $ 6,379 $ -- $ -- $ 12,629
========= ========= ======= ========= =========
October 1, 1995 to March 4, 1996
- --------------------------------
Allowance for doubtful accounts $ 3,162 $ 1,510 $ -- $ (1,510) $ 3,162
========= ========= ======= ========= =========
Accumulated amortization:
Goodwill $ 12,559 $ 2,714 $ -- $ -- $ 15,273
Other intangibles $ 70 $ 69 $ -- $ -- $ 139
--------- --------- ------- --------- ---------
Total $ 12,629 $ 2,783 $ -- $ -- $ 15,412
========= ========= ======= ========= =========
March 5, 1996 to September 28, 1996
- -----------------------------------
Allowance for doubtful accounts $ 3,162 $ 1,790 $ -- $ (1,640) $ 3,312
========= ========= ======= ========= =========
Accumulated amortization:
Goodwill $ 15,273 $ 3,716 $ -- $ -- $ 18,989
Other intangibles $ 139 $ 443 $ -- $ -- $ 582
--------- --------- ------- --------- ---------
Total $ 15,412 $ 4,159 $ -- $ -- $ 19,571
========= ========= ======= ========= =========
</TABLE>
S-2
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-10197) of Suburban Propane Partners, L.P. of our
reports dated October 21, 1996 appearing on pages F-2 and F-3 of this Annual
Report on Form 10-K. We also consent to the application of such reports to the
Financial Statement Schedule listed under Item 14(a) 2 of this Form 10-K when
such schedule is read in conjunction with the financial statements referred to
in our reports. The audits referred to in such reports also included this
schedule.
PRICE WATERHOUSE LLP
Morristown, NJ
December 23, 1996
EXHIBIT 10.10
-------------
FIRST AMENDMENT dated as of September 23, 1996 (this
"Amendment") to the Credit Agreement dated as of February
28, 1996 (the "Agreement"), among the financial
institutions party thereto (the "Lenders"), THE CHASE
MANHATTAN BANK, a New York banking corporation ("Chase"),
as agent for the Lenders (in such capacity, the
"Administrative Agent") and BANK OF AMERICA, ILLINOIS, as
Co-Agent.
The Borrower has requested that certain definitions and financial covenants
contained in the Agreement be amended as set forth herein. The Borrower has also
requested that the Agreement be amended to permit the Borrower to obtain credit
in the form of Swingline Loans at any time and from time to time prior to the
Working Capital Maturity Date. The Administrative Agent and the Lenders are
willing to so amend the Agreement and Chase is willing to extend credit to the
Borrower in the form of Swingline Loans, in each case pursuant to the terms and
subject to the conditions set forth herein.
Capitalized terms used but not defined herein shall have the meanings assigned
to them in the Agreement.
Accordingly, in consideration of the mutual agreements herein contained and
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendments to Definitions and Financial Covenants.
- ---------- --------------------------------------------------
(a) Section 1.01 of the Agreement is hereby amended by:
(i) Adding the following new definitions in their proper alphabetical order:
"Amendment Effective Date" shall mean the date on which the conditions to
effectiveness specified in Section 4 of the First Amendment to this
Agreement shall have been satisfied.
"Interest Rate Agreement" shall mean any fully matched interest rate swap
entered into with the intent to protect the Borrower against fluctuations in
interest rates and entered into as a bona fide hedging arrangement and not for
purposes of investment or speculation. "Investment" shall mean, as applied to
any person, any direct or indirect purchase or other acquisition by such person
of stock or other securities of any person, or any direct or indirect loan,
advance or capital contribution by such person to any other person, any other
item which would be classified as an "investment" on a balance sheet of such
person prepared in accordance with GAAP, including without limitation any direct
or indirect contribution by such person of property or assets to a joint
venture, partnership or other business entity in which such person retains an
interest (it being understood that a direct or indirect purchase or other
acquisition by such person of assets of any other person (other than stock or
other securities) shall not constitute an "Investment" for purposes of this
Agreement).
(ii) Deleting from the definition of "Leverage Ratio" the words "half
of"; and deleting from such definition the word "eight" and
replacing it with "four."
(iii) Deleting therefrom the definition of "Permitted Investments."
(b) Section 6.04 of the Agreement is hereby deleted in its entirety and
replaced with the following new Section 6.04:
SECTION 6.04. Investments, Loans and Advances. Directly or indirectly
purchase or own any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, any person, or make or
permit to remain outstanding any loan or advance to, or guarantee,
endorse or otherwise be or become contingently liable, directly or
indirectly, in connection with the obligations of any person, or make
any other Investment, except:
(a) Investments (i) arising out of loans and advances to employees
incurred in the ordinary course of business, (ii) arising out of
extensions of trade credit or advances to third parties in the
ordinary course of business and (iii) acquired by reason of the
exercise of customary creditors' rights upon default or pursuant
to the bankruptcy, insolvency or reorganization of a debtor;
(b) Guarantees that constitute Indebtedness to the extent permitted
by Sections 6.01, 6.12 and 6.13 and other Guarantees that are not
Guarantees of Indebtedness and are undertaken in the ordinary
course of business;
(c) Investment in (collectively, "Cash Equivalents")
(i) marketable obligations issued or unconditionally
guaranteed by the United States of America, or issued by
any agency thereof and backed by the full faith and credit
of the United States of America, in each case maturing
within one year or less from the date of acquisition
thereof,
(ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of
any such state or any public instrumentality thereof
maturing within one year from the date of acquisition
thereof and having as at such date the highest rating
obtainable from either Standard & Poor's Rating Group or
Moody's Investors Service, Inc.,
(iii) commercial paper maturing no more than 270 days from the
date of creation thereof and having as at the date of
acquisition thereof one of the two highest ratings
obtainable from either Standard & Poor's Rating Group or
Moody's Investors Service, Inc.,
(iv) certificates of deposit maturing one year or less from the date of
acquisition thereof issued by commercial banks incorporated under the laws of
the United States of America or any state thereof or the District of Columbia or
Canada or issued by the United States branch of any commercial bank organized
under the laws of any country in Western Europe or Japan, with capital and
stockholders' equity of at least $500,000,000 (or the equivalent in the currency
of such country), (A) the commercial paper or other short term unsecured debt
obligations of which are as at such date are rated either A-2 or better (or
comparably if the rating system is changed) by Standard & Poor's Rating Group or
Prime-2 or better (or comparably if the rating system is changed) by Moody's
Investors Service, Inc. or (B) the long-term debt obligations of which are as at
such date rated either A or better (or comparably if the rating system is
changed) by Standard & Poor's Rating Group or A-2 or better (or comparably if
the rating system is changed) by Moody's Investors Service, Inc. ("Permitted
Banks"),
(v) Eurodollar time deposits having a maturity of less than
270 days from the date of acquisition thereof purchased
directly from any Permitted Bank,
(vi) bankers' acceptances eligible for rediscount under
requirements of The Board of Governors of the Federal
Reserve System and accepted by Permitted Banks, and
(vii) obligations of the type described in clauses (i), (ii), (iii),
(iv) or (v) above purchased from a securities dealer designated as a
"primary dealer" by the Federal Reserve Bank of New York or from a
Permitted Bank as counterparty to a written repurchase agreement obligating
such counterparty to repurchase such obligations not later than 14 days
after the purchase thereof and which provides that the obligations which
are the subject thereof are held for the benefit of the Borrower or a
Subsidiary by a custodian which is a Permitted Bank and which is not a
counterparty to the repurchase agreement in question;
(d) liabilities with respect to any Interest Rate Agreements; and
(e) investments made by a Subsidiary in the Borrower.
(c) Clause (1) of Section 6.01 of the Agreement is hereby deleted in its
entirety and replaced with the following provision:
"(1) Indebtedness incurred by the Borrower (i) to finance the acquisitions,
improvements or repairs (to the extent such improvements and repairs may be
capitalized on the books of the Borrower in accordance with GAAP) of, or
additions to, the property and assets of the Borrower, or (ii) to replace,
extend, renew, refund or refinance any such Indebtedness, provided that the
aggregate principal amount of Indebtedness incurred in connection with any such
replacement, extension, renewal, refunding or refinancing shall not exceed the
outstanding principal amount of Indebtedness so replaced, extended, renewed,
refunded or refinanced; and provided, further, that the aggregate principal
amount of Indebtedness incurred under this clause (1) and outstanding at any
time shall not exceed (A) $25,000,000 plus (B) an amount equal to the aggregate
net proceeds received by the Borrower as consideration for the issuance by the
Borrower of additional partnership interests or as a capital contribution in
each case for the purpose of financing such acquisitions, improvements, repairs
or additions less (C) any amount of excess proceeds used to permanently reduce
the Acquisition Loan Commitments pursuant to Section 2.09(b)."
(d) Section 6.02 of the Agreement is hereby amended by deleting the word
"and" at the end of clause (1) thereof, by removing the period at the
end of clause (m) thereof and replacing it with a semicolon and by
adding at the end thereof the following new clauses (n) and (o):
"(n) any Lien created to secure all or any part of the purchase price, or
to secure Indebtedness (other than Indebtedness permitted under clauses (b) and
(l) of Section 6.01) incurred or assumed to pay all or any part of the purchase
price or cost of construction, of property acquired or constructed by the
Borrower or a Subsidiary after the date hereof, provided that (i) any such Lien
shall be confined solely to the item or items of such property (or improvement
therein) so acquired or constructed and, if required by the terms of the
instrument creating such Lien, other property (or improvement thereon) which is
an improvement to such acquired or constructed property, (ii) any such Lien
shall be created contemporaneously with, or within 10 Business Days after, the
acquisition or construction of such property, and (iii) such Lien does not
exceed an amount equal to 85% (100% in the case of Capital Lease Obligations) of
the Board of Supervisors of the Borrower) at the time of acquisition thereof;
and
(o) Liens securing Indebtedness (including interests of lessors under
Capital Lease Obligations) permitted by Section 6.01, so long as immediately
after giving effect thereto, the aggregate amount of the Indebtedness secured by
such Liens shall not exceed 2.5% of Total Assets (as defined in the Note
Agreement)."
(e) Section 6.09(b) of the Agreement is hereby amended by adding the
following provision after the phrase "waives any condition precedent or default"
in the next to last line thereof:
", or entails the incurrence of additional Indebtedness by the Borrower
under the Notes, the Note Agreement, any Refinancing Notes or any
Refinancing Note Agreement (provided that subsequent to such additional
Indebtedness, the Borrower shall remain in compliance with Sections
6.11, 6.12, 6.13 and 6.15 hereof and provided further that such
additional Indebtedness shall be on terms and conditions no more
restrictive than the terms and conditions contained in the Note
Agreement)"
(f) Section 6.12 of the Agreement is hereby amended by deleting the chart
contained therein and replacing it with the following chart:
Quarter Ending During the Period Leverage Ratio
-------------------------------- --------------
Effective Date - March 31, 1998 5.25 to 1.00
April 1, 1998 - March 31, 1999 4.75 to 1.00
April 1, 1999 - March 31, 2000 4.50 to 1.00
Thereafter 4.25 to 1.00
SECTION 2. Amendments to Add Swingline Facility.
(a) The first sentence of the preamble of the Agreement is hereby amended by
deleting the word "and" at the end of clause (a) thereof and adding at
the end thereof the following:
"and (c) Swingline Loans at any time and from time to time on or after
the Amendment Effective Date and prior to the Working Capital Maturity
Date, in an aggregate principal amount at any time outstanding not
exceeding $5,000,000."
(b) The third sentence of the preamble of the Agreement is hereby amended by
adding the phrase, "and Swingline Loans" after the phrase, "Working
Capital Loans."
(c) Section 1.01 of the Agreement is hereby amended by:
(i) Adding the following new definitions in their proper alphabetical
order:
"Applicable Percentage" of any lender at any time shall mean the
percentage of the aggregate Working Capital Commitments of all
Lenders represented by such Lender's Working Capital Commitment.
In the event the Working Capital Commitments shall have expired
or been terminated, the Applicable Percentages shall be
determined on the basis of the Working Capital Commitments most
recently in effect prior to such expiration or termination,
giving effect to any assignments pursuant to Section 9.06.
"Swingline Commitment" shall mean the commitment of the Swingline
Lender to make loans pursuant to Section 2.22, as the same may be
reduced from time to time pursuant to Section 2.09.
"Swingline Exposure" shall mean at any time the aggregate
principal amount at such time of all outstanding Swingline Loans.
The Swingline Exposure of any Lender at any time shall equal its
Applicable Percentage of the aggregate Swingline Exposure at such
time.
"Swingline Lender" shall mean The Chase Manhattan Bank, in its
capacity as the Swingline lender. Unless the context clearly
indicates otherwise, the term "Lenders" shall include the
Swingline Lender.
"Swingline Loan" shall mean any loan made by the Swingline Lender
pursuant to Section 2.22.
(ii) Deleting the word "and" from the end of clause (a) of the
definition of "Interest Period" and inserting the following
provision at the end of clause (b):
"and (c) as to any borrowing of Swingline Loans, the period
commencing on the date of such borrowing and ending on the date
that is seven Business Days thereafter, or such other period as
shall be determined by The Chase Manhattan Bank and agreed to by
the Borrower"
(iii) Deleting the definition of "Required Lenders" in its entirety and
replacing it with the following definition:
"Required Lenders" shall mean, at any time, Lenders having Loans,
Swingline Exposures and unused Commitments representing at least
51% of the sum of all Loans outstanding, Swingline Exposures and
unused Commitments at such time.
(iv) Adding the phrase ", plus the aggregate amount at such time of
such Lender's Swingline Exposure" to the end of the definition of
"Working Capital Exposure."
(d) Section 2.04(a) of the Agreement is hereby amended by deleting the
word "and" at the end of clause (a) and adding to the end thereof the
following:
"and (c) in the case of a Swingline Loan, on the last day of the
Interest Period applicable to such Loan or, if earlier, on the Working
Capital Maturity Date."
(e) Section 2.09(a) of the Agreement is hereby amended by inserting the
phrase "and Swingline Commitment" immediately after the phrase "Working
Capital Commitments" in the seventh line thereof.
(f) Section 2.12 of the Agreement is hereby amended by adding the phrase
"(and Swingline Loans)" immediately after each reference to "Working
Capital Borrowings" therein.
(g) Section 2.18(a) of the Agreement is hereby amended by adding the
following parenthetical after the phrase "Each such payment" in the
fourth line thereof:
"(other than principal of and interest on Swingline Loans, which shall
be paid directly to the Swingline Lender except as otherwise provided in
Section 2.22(e))"
(h) Section 2.20(b) of the Agreement is hereby amended (i) by adding the
words "and the Swingline Lender" immediately after the words
"Administrative Agent" in the eleventh line thereof and (ii) by adding
the words "amounts owed to it in respect of its Swingline Exposure and"
immediately after the word "including" in the parenthetical in clause
(ii) of the proviso.
(i) The following shall be inserted in the Agreement as a new Section 2.22:
SECTION 2.22. Swingline Loans.
(a) Swingline Commitment. Subject to the terms and conditions and relying
upon the representations and warranties herein set forth, the Swingline Lender
agrees to make loans to the Borrower at any time and from time to time on and
following the Amendment Effective Date and until the earlier of the Working
Capital Maturity Date and the termination of the Working Capital Commitments in
accordance with the terms hereof, in an aggregate principal amount at any time
outstanding that will not result in (i) the aggregate outstanding principal
amount of all Swingline Loans exceeding $5,000,000 or (ii) the Working Capital
Exposure of any Lender exceeding its Working Capital Commitment. Each Swingline
Loan shall be in a principal amount that is an integral multiple of $500,000 and
not less than $1,000,000. The Swingline Commitment may be terminated or reduced
from time to time as provided herein. Within the foregoing limits, the Borrower
may borrow, pay or prepay and reborrow Swingline Loans hereunder, subject to the
terms, conditions and limitations set forth herein.
(b) Swingline Loans. The Borrower shall notify the Administrative Agent in
writing or by telecopy (or by telephone promptly confirmed in writing or by
telecopy), not later than 11:00 a.m., New York City time, on the day of a
proposed Swingline Loan. Such notice shall be delivered on a Business Day, shall
irrevocable and shall refer to this Agreement and shall specify the requested
date (which shall be a Business Day) and amount of such Swingline Loan. The
Administrative Agent will promptly advise the Swingline Lender of any notice
received from the Borrower pursuant to this paragraph (b). The Swingline Lender
shall make each Swingline Loan available to the Borrower by means of a credit to
the general deposit account of such Borrower with the Swingline Lender by 3:00
p.m. on the date such Swingline loan is so requested.
(c) Prepayment. The Borrower shall have the right at any time and from time
to time to prepay any Swingline loan, in whole or in part, upon giving written
or telecopy notice (or telephonic notice promptly confirmed by written or
telecopy notice) to the Swingline Lender and to the Administrative Agent before
12:00 (noon), New York City time, on the date of prepayment, provided that all
or any portion of a Swingline Loan borrowed and prepaid on the same date shall
be deemed to have been outstanding for one day.
(d) Interest. Subject to the provisions of Section 2.07, each Swingline
Loan shall bear interest at the Alternate Base Rate or such lower rate as shall
be determined by The Chase Manhattan Bank from time to time.
(e) Participations. If the Borrower does not fully repay a Swingline Loan
on or prior to the last day of the Interest Period with respect thereto, the
Swingline Lender may by written notice given to the Administrative Agent not
later than 10:00 a.m., New York City time, on any Business Day require the
Lenders to acquire participations on such Business Day in all or a portion of
the Swingline Loans outstanding. Such notice shall specify the aggregate amount
of Swingline Loans in which the Lenders will participate. The Administrative
Agent will, promptly upon receipt of such notice, give notice to each Lender,
specifying in such notice such Lender's Applicable Percentage of such Swingline
Loan or Loans. In furtherance of the foregoing, each Lender hereby absolutely
and unconditionally agrees, upon receipt of notice as provided above, to pay to
the Administrative Agent, for the account of the Swingline Lender, such Lender's
Applicable percentage of such Swingline Loan or Loans. Each such payment shall,
for all purposes hereof, be deemed to be an ABR Working Capital Loan to which
interest at the rate provided for in Section 2.07 will apply. Each Lender
acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or an Event of Default, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever. Each Lender shall comply with its obligations under this paragraph
by wire transfer of immediately available funds, in the same manner as provided
in Section 2.02(c) with respect to Loans made by such Lender (and Section
2.02(c) shall apply, mutatis mutandis, to the payment obligations of the
Lenders) and the Administrative Agent shall promptly pay to the Swingline Lender
the amounts so received by it from the Lenders. The Administrative Agent shall
notify the Borrower of any participations in any Swingline Loan acquired
pursuant to this paragraph and thereafter payments in respect of such Swingline
Loan shall be made to the Administrative Agent and not to the Swingline Lender.
Any amounts received by the Swingline Lender from the Borrower (or other party
on behalf of the Borrower) in respect of a Swingline Loan following receipt by
the Swingline Lender of the proceeds of a sale of participations therein shall
be promptly remitted to the Administrative Agent; any such amounts received by
the Administrative agent shall be promptly remitted by the Administrative Agent
to the Lenders that shall have made their payments pursuant to this paragraph
and to the Swingline Lender, as their interests may appear. The purchase of
participations in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrower (or other party liable for obligations of the Borrower) of any
default in the payment thereof.
(j) The preamble to Article IV is hereby amended by adding the phrase, "and
of the Swingline Lender to make Swingline Loans" immediately after the phrase,
"obligations of the Lenders to make Loans."
(k) Section 4.01(a) of the Agreement is hereby amended by:
(i) adding the phrase, "and each borrowing of Swingline Loans"
immediately after the parenthetical in the first sentence
thereof.
(ii) adding the words "or borrowing of Swingline Loans" immediately
after the word "Borrowing" in clauses (i), (ii) and (iii)
thereof.
(iii) adding the words "or Section 2.22(b), as applicable" at the
end of clause (i) thereof.
(l) Section 9.04 of the Agreement is hereby amended by adding immediately
after the word "Loans" in clause (a)(ii) thereof the words "(and Swingline
Loans)."
SECTION 3. Representations and Warranties.
The Borrower represents and warrants to each of the Lenders, the Administrative
Agent and the Co-Agent that:
(a) Before and after giving effect to this Amendment, the representations
and warranties set forth in Article III of the Agreement are true and correct in
all material respects with the same effect as if made on the date hereof, except
to the extent such representations and warranties expressly relate to an earlier
date.
(b) Before and after giving effect to this Amendment, no Event of Default
or Default has occurred and is continuing.
SECTION 4. Conditions to Effectiveness.
This Amendment shall become effective on the date that the Administrative Agent
shall have received duly executed counterparts of this Amendment that, when
taken together, bear the signatures of the Borrower and the Required Lenders.
SECTION 5. Agreement.
Except as specifically stated herein, the provisions of the Agreement are and
shall remain in full force and effect. As used therein, the terms "Agreement,"
"herein," "hereunder," "hereinafter, "hereto," "hereof" and words of similar
import shall, unless the context otherwise requires, refer to the Agreement as
amended hereby.
SECTION 6. Applicable Law.
THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
SECTION 7. Counterparts.
This Amendment may be executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall constitute but
one contract.
SECTION 8. Expenses.
The Borrower agrees to reimburse the Administrative Agent for its reasonable
out-of-pocket expenses in connection with this Amendment, including the
reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel
for the Administrative Agent.
SECTION 9. The Borrower hereby acknowledges that as of the Amendment Effective
Date Credit Lyonnais Cayman Island Branch hereby assigns its interest under the
Agreement and the other Loan Documents to Credit Lyonnais New York Branch.
Accordingly, each of the Loan Documents is hereby amended by deleting each
reference to "Credit Lyonnais Cayman Island Branch" and substituting, in lieu
thereof and where appropriate, "Credit Lyonnais New York Branch."
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their respective authorized officers as of the day and year first
written above.
SUBURBAN PROPANE, L.P.
By:/s/ Robert M. Plante
Name: Robert M. Plante
Title: Treasurer
THE CHASE MANHATTAN BANK,
individually and as Administrative
Agent and Swingline Lender,
By:/s/ Peter M. Ling
Name: Peter M. Ling
Title: Vice President
EXHIBIT 10.11
-------------
SUBURBAN PROPANE, L.P.
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
(Effective as of March 5, 1996)
<PAGE>
Suburban Propane, L.P.
Supplemental Executive Retirement Plan
(Effective as of March 5, 1996)
Contents
Section Page
- ------- ----
Article I. The Plan
1.1 Establishment of the Plan 1
1.2 Purpose 1
Article II. Definitions
2.1 Average Final Compensation 1
2.2 Board of Supervisors 1
2.3 Committee 1
2.4 Compensation 1
2.5 Deferred Retirement Date 2
2.6 Early Retirement Date 2
2.7 Employer 2
2.8 Normal Retirement Date 2
2.9 MLP 2
2.10 Participant 2
2.11 Partnership 2
2.12 Pension Offset 2
2.13 Plan 2
2.14 Qualified Plan 2
2.15 Retirement Date 2
Article III. Participation
3.1 Participation 3
3.2 Continuation of Participation 3
Article IV. Retirement Date
4.1 Normal Retirement Date 3
4.2 Deferred Retirement Date 4
4.3 Early Retirement Date 4
i
<PAGE>
Suburban Propane, L.P.
Supplemental Executive Retirement Plan
(Effective as of March 5, 1996)
Contents
Section Page
- ------- ----
Article V. Retirement Benefits
5.1 Normal Retirement Benefit 4
5.2 Deferred Retirement Benefit 4
5.3 Early Retirement Benefit 5
5.4 Disability Retirement Benefit 5
5.5 Adjusted Age and Benefit Service 6
Article VI. Death Benefits
6.1 Prior to Retirement 6
6.2 After Retirement 6
Article VII. In Event of Termination of Employment
7.1 Termination Prior to Retirement 6
7.2 Termination after Eligibility for Retirement 7
Article VIII. Time and Form of Benefit Payment
8.1 Normal Form of Benefit 7
8.2 Optional Forms of Benefit 7
Article IX. Provision of Benefits
9.1 Participant Contributions 7
9.2 Funding 7
Article X. Administration of the Plan
10.1 Powers and Duties of the Committee 8
ii
<PAGE>
Suburban Propane, L.P.
Supplemental Executive Retirement Plan
(Effective as of March 5, 1996)
Contents
Section Page
- ------- ----
Article XI. Miscellaneous
11.1 Prohibition Against Encumbrance 8
11.2 Right of Participant 8
11.3 Change in Control 8
Article XII. Amendment or Termination of the Plan
12.1 Amendment 10
12.2 Termination 11
Schedule A Participants
iii
<PAGE>
Article I. The Plan
1.1 Establishment of the Plan
Suburban Propane, L.P., a Delaware limited partnership (the "Partnership"),
hereby establishes an unfunded supplemental retirement plan for select employees
("Participants") of the Partnership, which plan shall be known as the "Suburban
Propane, L.P. Supplemental Executive Retirement Plan" (the "Plan"). The Plan is
effective as of March 5, 1996.
1.2 Purpose
The purpose of the Plan is to provide Participants with a minimum level of
retirement income from the Partnership, in addition to other sources of capital
accumulation. The Plan is intended to be a non-qualified, deferred compensation
plan for a "select group of management or highly compensated employees" as that
term is used in the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
This Plan incorporates and replaces any agreement or arrangement between the
Participant and the Partnership with regard to non-qualified supplemental
retirement benefits that may be in existence prior to the effective date herein.
Article II. Definitions
Except as otherwise defined herein, each capitalized term shall have the meaning
set forth in the Pension Plan for Eligible Employees of Suburban Propane, L.P.
(the "Qualified Plan").
2.1 "Average Final Compensation" shall mean the highest average annual
Compensation for the 60 consecutive months in the last 120 months of Benefit
Service affording the highest such average, or during all months of Benefit
Service if less than 60. Any administrative procedure adopted relative to the
calculation of Average Final Compensation for the Qualified Plan shall apply to
this Plan.
2.2 "Board of Supervisors" shall mean the Board of Supervisors of the
Partnership, except as otherwise specifically stated.
2.3 "Committee" shall mean the Compensation Committee of the Board of
Supervisors.
2.4 "Compensation" shall have the same meaning as in the Qualified Plan,
except that Compensation shall be determined without regard to the dollar
limitations on the amount of pay taken into account, which limitations are set
forth in Section 1.13 of the Qualified Plan.
2.5 "Deferred Retirement Date" shall mean the first day of the month
coincident with or immediately following the date a Participant retires after
his or her Normal Retirement Date pursuant to the provisions of Section 4.2
(Deferred Retirement Date).
2.6 "Early Retirement Date" shall mean the first day of the month
coincident with or immediately following the date a Participant retires prior to
his or her Normal Retirement Date pursuant to the provisions of Section 4.3
(Early Retirement Date).
2.7 "Employer" shall mean the Partnership.
2.8 "Normal Retirement Date" shall mean the first day of the month
immediately following the later of: (a) the Participant's sixty-fifth (65th)
birthday, or (b) the fifth (5th) anniversary of the date the Participant becomes
a Member of the Qualified Plan.
2.9 "MLP" shall mean Suburban Propane Partners, L.P., a Delaware limited
partnership.
2.10 "Participant" shall mean a person who has become a participant in this
Plan pursuant to Section 3.1, who is entitled to benefits hereunder.
Participants shall be limited to a "select group of management or highly
compensated employees" as that term is used in ERISA.
2.11 "Partnership" shall mean Suburban Propane, L.P., a Delaware limited
partnership.
2.12 "Pension Offset" shall mean the amount of the monthly Accrued Benefit
payable as of the determination date (reduced to reflect commencement of the
benefit payable hereunder prior to Normal Retirement Date) to the Participant
under the Qualified Plan in the form of a Single Life Annuity, multiplied by
twelve.
2.13 "Plan" shall mean the Suburban Propane, L.P. Supplemental Executive
Retirement Plan.
2.14 "Qualified Plan" shall mean the Pension Plan for Eligible Employees of
Suburban Propane, L.P.
2.15 "Retirement Date" shall mean the Early Retirement Date, the Normal
Retirement Date, or the Deferred Retirement Date, whichever is applicable.
<PAGE>
Article III. Participation
3.1 Participation
Participants will be limited to individuals who, on or after March 5, 1996 are
listed in Schedule A hereto.
3.2 Continuation of Participation
(a) A person who has become a Participant in accordance with Section 3.1
shall, except as provided in subsection (b) below, continue as a Participant as
long as he or she continues in the employment of the Employer and thereafter as
long as he or she is entitled to benefits under the Plan.
(b) Subject to the provisions of Section 11.3 (Change in Control), the
Committee may, in its sole discretion, remove a Participant from active
participation in the Plan if the Participant is no longer an Executive Officer
of the Partnership. In this event, any benefits accrued under this Plan will be
vested and payable at the Participant's Retirement Date in accordance with
Article IV. Notwithstanding anything herein to the contrary, if a Participant's
employment is terminated for cause or mismanagement, as determined by the
Committee, or if the Participant is convicted of a felony, or if the
Participant's employment terminates prior to retirement as provided in Section
7.1, all rights under this Plan shall be forfeited.
(c) Subject to the provisions of Section 11.3 (Change in Control), after a
Participant commences retirement benefits in accordance with Article V, the
Committee, in its sole discretion, may cease payment of benefits under this Plan
if the Committee determines that the Participant is acting in bad faith against
the Partnership or the MLP or has filed any legal suits, complaints, or
grievances against the Partnership or the MLP in any court of law, tribunal, or
with any federal, state, or municipal agency.
Article IV. Retirement Date
4.1 Normal Retirement Date
A Participant who retires on his or her Normal Retirement Date shall be entitled
to a benefit as determined in accordance with Section 5.1 (Normal Retirement
Benefits).
4.2 Deferred Retirement Date
A Participant whose employment with the Partnership continues beyond his or her
Normal Retirement Date and whose entitlement to benefits under the Plan has not
been forfeited in accordance with subsection (b) of Section 3.2 (Continuation of
Participation), shall retire on a Deferred Retirement Date and shall be entitled
to a benefit in accordance with Section 5.2 (Deferred Retirement Benefit).
4.3 Early Retirement Date
A Participant who has attained age 55 and is credited with 10 or more years of
Eligibility Service may retire at an Early Retirement Date. In such case, the
Participant shall be entitled to a benefit as determined under Section 5.3
(Early Retirement Benefit).
Article V. Retirement Benefits
5.1 Normal Retirement Benefit
The annual amount of the Normal Retirement Benefit payable hereunder shall be
equal to:
(a) 1.4% of Participant's Average Final Compensation not in excess of 125% of
Covered Compensation; plus (b) 1.75% of Participant's Average Final Compensation
in excess of 125% of Covered Compensation; times (c) Participant's years of
Benefit Service (not to exceed 35); minus (d) the Pension Offset.
A Participant's Normal Retirement Benefit shall commence on his or her Normal
Retirement Date provided his or her Qualified Plan Benefit commences on such
date.
5.2 Deferred Retirement Benefit
If a Participant remains in employment after his or her Normal Retirement Date
and is entitled to a benefit in accordance with Section 4.2 (Deferred Retirement
Date), benefit payments shall be postponed until the Participant's actual
retirement on the Deferred Retirement Date. At such Deferred Retirement Date,
and provided the Qualified Plan Benefit then commences, the Participant shall be
entitled to the benefit determined under Section 5.1 based on Benefit Service to
the Deferred Retirement Date.
5.3 Early Retirement Benefit
A Participant retiring prior to his or her Normal Retirement Date, as provided
in Section 4.3 (Early Retirement Date), shall be entitled to receive a benefit,
commencing on such Normal Retirement Date, equal to the amount determined under
Section 5.1 based on his or her Average Final Compensation and Benefit Service,
with each determined on such Early Retirement Date.
In lieu of such benefit commencing on the Normal Retirement Date, the
Participant may elect to have such benefit commence on the first day of any
month following his or her Early Retirement Date, provided he or she elects to
commence the Qualified Plan Benefit on the same date. In such case, the
Participant's benefit shall be reduced by 5/12 of one percent for each month by
which such Early Retirement Date precedes the first day of the calendar month
following his or her 62nd birthday. 5.4 Disability Retirement Benefit
A Participant who is entitled to a disability pension under Section 4.05 of the
Qualified Plan, shall continue to be credited with Eligibility Service and
Benefit Service hereunder. Upon attaining his or her Normal Retirement Date,
such Participant shall be entitled to a benefit calculated in accordance with
Section 5.1 hereunder, based on his or her Average Final Compensation at the
time he or she ceases to receive salary continuation payments on account of
disability.
A Participant who is receiving disability benefits under the long-term
disability plan and satisfies the requirements for an Early Retirement Benefit
in accordance with Section 5.3 hereunder, shall be entitled to commence payment
of his or her Disability Retirement Benefit prior to Normal Retirement Date in
accordance with Section 5.3, provided the Participant elects to commence his or
her Qualified Plan Benefit on such date. For purposes of the preceding sentence,
the benefit amount shall be determined on the basis of the Participant's Average
Final Compensation and Benefit Service on the date prior to the date benefits
commence.
If the Participant's benefits under the Employer's long-term disability plan are
discontinued prior to Normal Retirement Date and the Participant does not return
to service with the Partnership or an Affiliate, he or she will be entitled to
receive an Early Retirement Benefit calculated in accordance with Section 5.3,
provided he or she then satisfies the eligibility requirements for such benefit
and provided the Participant elects to commence his or her Qualified Plan
Benefit on such date.
5.5 Adjusted Age and Benefit Service
The Committee may, in its sole discretion, determine an adjusted Benefit Service
and/or an adjusted age for the Participant. The adjusted Benefit Service may be
1, 2, 3, 4, or 5 years more than the actual Benefit Service (subject to the 35
years maximum for Benefit Service). The adjusted age may be 1, 2, 3, 4, or 5
years more than his or her actual age.
In determining the amount of pension in accordance with this Article V, a
Participant's adjusted age and adjusted Benefit Service shall be used as if they
were his or her actual age and Benefit Service. However, under no circumstances
shall benefits commence under this Plan prior to commencement of benefits under
the Qualified Plan.
Article VI. Death Benefits
6.1 Prior to Retirement
Upon the death of a Participant prior to retirement, his or her surviving
spouse, if any, shall be entitled to a benefit hereunder if such surviving
spouse is entitled to a benefit under the Qualified Plan. The amount and form
(including commencement date) of the benefit payable to the surviving spouse
shall be calculated in the same manner as the spouse's Pension provided for in
Section 4.6 of the Qualified Plan, however, on the basis of the formula set
forth in Section 5.1 herein.
6.2 After Retirement
There is no benefit payable under the Plan in the event of the Participant's
death after payment of the retirement benefit has commenced unless an option is
in effect in accordance with Section 8.2 (Optional Forms of Benefits).
<PAGE>
Article VII. In Event of Termination of Employment
7.1 Termination Prior to Retirement
Subject to Section 11.3 ("Change of Control"), if a Participant's employment
with the Partnership ceases for any reason and he is not eligible for a benefit
under the provisions of Article IV (Retirement Date), or Article VI (Death
Benefits), or Section 5.4 (Disability Benefits) no benefits shall become payable
to such Participant under this Plan.
7.2 Termination after Eligibility for Retirement
A Participant whose employment with the Company ceases for any reason other than
death and who is eligible to retire under the provisions of Article IV
(Retirement Date), shall be deemed to have retired or to have been retired by
the Company and shall be entitled to the appropriate benefits, subject to any
possible forfeiture of benefits pursuant to Section 3.2.
Article VIII. Time and Form of Benefit Payment
8.1 Normal Form of Benefit
Except as otherwise provided in Section 8.2, the retirement benefit shall be
payable as a monthly annuity as of the first day of each calendar month for the
life of the Participant with benefits ceasing upon the Participant's death.
8.2 Optional Forms of Benefit
If a Participant is entitled to a benefit from the Qualified Plan, the benefit
under this Plan may be paid in the same form as the Qualified Plan's benefit is
payable so long as the Committee approval is secured. If such form of payment is
other than a Single Life Annuity, the amount of pension otherwise payable under
this Plan shall be adjusted in the same manner that benefits are to be adjusted
under the Qualified Plan.
Article IX. Provision of Benefits
9.1 Participant Contributions
Participants shall make no contributions under the Plan.
9.2 Funding
Benefit payments from the Plan will be made from the general assets of the
Partnership in accordance with such arrangements as the Partnership may deem
necessary and proper to fulfill its agreement hereunder.
Article X. Administration of the Plan
10.1 Powers and Duties of the Committee
The Committee, in addition to all the powers and duties specified in the various
provisions of the Plan, shall have the exclusive right to interpret the Plan and
to decide any matter arising in connection with the administration of the Plan.
<PAGE>
Article XI. Miscellaneous
11.1 Prohibition Against Encumbrance
Except in the case of a court order which meets the requirements of a "qualified
domestic relations order" as defined in Section 414(p) of the Internal Revenue
Code of 1986, no benefit under the Plan shall be alienated, assigned, disposed
of, or in any manner encumbered while in the possession and control of the
Partnership or the Employer. If the interest of any Participant or Participant's
beneficiary would, but for this Section 11.1, cease in whole or in part to be
enjoyed by such individual, the Committee, in its sole discretion, may direct
that the funds constituting such interest be withheld or it may expend from such
funds for the direct maintenance and support of the Participant, such
Participant's spouse, children, or their dependents as, in the Committee's sole
discretion, it deems fit and proper.
11.2 Right of Participant
Neither the adoption of the Plan nor its operation shall in any way affect the
right and power of the Partnership to dismiss or otherwise terminate the
employment, or change the terms of employment, or amount of compensation, of any
Participant at any time for any reason.
11.3 Change in Control
The Plan will terminate effective on the close of business 30 days following a
Change in Control, as hereinafter defined. Upon such Change in Control, Section
12.1 shall become null and void. Additionally, each Participant will be deemed
retired pursuant to Section 5.1, based on Benefit Service through such Plan
termination date. A lump sum payment equivalent to the present value of each
Participant's benefit payable under this Plan, utilizing the lesser of the prime
rate of interest at Chase Manhattan Bank as of the date of a Change in Control
or 8%, whichever is less, as the discount rate to determine the present value of
accrued benefits, shall be paid as soon as practical following such date of a
Change in Control, but in no event later than 90 days. All other actuarial
assumptions to be utilized shall be those in effect as at the last actuarial
valuation of the Qualified Plan prior to such Change in Control.
For purposes of this Section 11.3 "Change in Control" means the occurrence
during the term of the Plan of:
(i) an acquisition (other than directly from the MLP) of Common Units,
Subordinated Units or voting equity interests of the MLP ("Voting Securities")
by any "Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")),
other than the MLP, HM Holdings, Inc. or any of their affiliates, immediately
after which such Person has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) or more than twenty five percent (25%)
of the combined voting power of the MLP's then outstanding Units; provided,
however, that in determining whether a Change of Control has occurred, Units
which are acquired in a 'Non-Control Acquisition' (as hereinafter defined) shall
not constitute an acquisition which would cause a Change of Control. A
"Non-Control Acquisition" shall mean an acquisition by (i) an employee benefit
plan (or a trust forming a part thereof) maintained by (A) the MLP or the
Partnership or (B) any corporation, partnership or other Person of which a
majority of its voting power or its voting equity securities or equity interest
is owned, directly or indirectly, by the MLP (for purposes of this definition, a
"Subsidiary"),
(ii) the MLP or its Subsidiaries, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(ii) approval by the partners of the MLP of (A) a merger, consolidation or
reorganization involving the MLP, unless (x) the holders of Units immediately
before such merger, consolidation or reorganization own, directly or indirectly
immediately following such merger, consolidation or reorganization, at least
sixty percent (60%) of the combined voting power of the outstanding Units of the
entity resulting from such merger, consolidation or reorganization (the
"Surviving Entity") in substantially the same proportion as their ownership of
the Units immediately before such merger, consolidation or reorganization, and
(y) no person or entity (other than the MLP, any Subsidiary, any employee
benefit plan (or any trust forming a part thereof) maintained by the MLP, the
Partnership, the Surviving Entity, or any Person who, immediately prior to such
merger, consolidation or reorganization had Beneficial Ownership of more than
twenty five percent (25%) of the then outstanding Units), has Beneficial
Ownership of more than twenty five percent (25%) of the combined voting power of
the Surviving Entity's then outstanding voting securities; (B) a complete
liquidation or dissolution of the MLP; or (C) the sale or other disposition of
50% or more of the net assets of the MLP to any Person (other than a transfer to
a Subsidiary). A transaction described in clauses (x) or (y) of subsection (A)
hereof shall be referred to as a "Non-Control Transaction;" or
(iii) A Qualified Owner or Qualified Owners (as defined below) not
having, in the aggregate, Beneficial Ownership of at least 50.1%
of the capital stock of the General Partner (as defined in the
Amended and Restated Agreement of Limited Partnership of Suburban
Propane Partners, L.P.) (by vote and value). For purposes of this
Section 11.3, "Qualified Owner" shall mean (a) Quantum Chemical
Corporation, (b) SCM Chemicals Inc. or (c) the publicly-traded
person that owns (or that owned at any time after the date
hereof), directly or indirectly, 50.1% of the issued and
outstanding stock of Quantum Chemical Corporation or SCM
Chemicals Inc.
Notwithstanding the foregoing, a Change of Control shall not be deemed to occur
solely because any Person (the "Subject Person") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the MLP which, by reducing the
number of Voting Securities outstanding, increases the proportional number of
units Beneficially Owned by the Subject Person, provided that if a Change of
Control would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the MLP, and after such acquisition by the
MLP, the Subject Person becomes the Beneficial Owner of any additional Voting
Securities which increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change of Control
shall occur.
Article XII. Amendment or Termination of the Plan
12.1 Amendment
The Board of Supervisors reserves the right at any time and from time to time,
to modify or amend, in whole or in part, any or all of the provisions of the
Plan but no such amendment shall adversely affect any Participant's or
Participant's beneficiary's rights to benefits accrued under the Plan prior the
effective date of the amendment.
12.2 Termination
The Board of Supervisors shall have the right to terminate the Plan at any time
provided that such action shall not adversely affect any Participant's or
Participant's beneficiary rights to benefits accrued under the Plan prior to
such action.
<PAGE>
Schedule A
Participants in
Suburban Propane, L.P.
Supplemental Executive Retirement Plan
Mark A. Alexander, Executive Vice Chairman
Effective October 1, 1996:
Charles T. Hoepper, Senior Vice President
David R. Feheley, Senior Vice President
EXHIBIT 10.12
-------------
September 1996
SUBURBAN PROPANE, L.P.
SEVERANCE PROTECTION PLAN
The Board of Supervisors of Suburban Propane Partners, L.P. (the
"Partnership") and Suburban Propane, L.P. ("Suburban") has adopted a program
(referred to herein as the "Severance Protection Plan" or the "Plan") designed
to protect certain key executives from the effects of an actual or possible
Change in Control (as defined below), and thereby to enable Suburban to obtain
the continued availability of such executives' services, managerial skills and
business experience upon the threat or actual occurrence of a Change in Control.
An employee of Suburban or any of its subsidiaries who participates in
the Long Term Incentive Plan or the 1996 Restricted Unit Plan (or who has
participated in either such plan during any of the three years prior to the
Change in Control or, if he or she was hired during such period, Suburban agreed
that he or she would participate therein) is eligible for benefits under this
Severance Protection Plan unless otherwise provided by written agreement between
such employee and Suburban.
An eligible employee will become entitled to benefits under the Plan if
there is a loss of his or her employment within one year following a Change in
Control. In such event, the employee will be entitled to receive (in lieu of any
other severance benefits to which he or she may be entitled) a lump-sum benefit
equal to the product of sixty-five (65) times 1/52 of the sum of the employee's
base annual salary and target bonus as of the date of the Change in Control (but
not lower than the sum of such amounts at any time during the period beginning
one year prior to the Change in Control and ending on the employee's termination
date). The benefit shall be paid within 30 days following the employee's
termination of employment.
Each eligible employee who becomes entitled to receive benefits under
the Plan shall be paid an annual incentive bonus award, as described below, with
respect to each year or portion thereof during the period beginning the first
full year preceding a Change in Control and ending on the date such employee
loses his or her employment, subject to the terms and conditions of the
applicable incentive bonus plan. The annual incentive bonus award with respect
to such year or portion thereof shall be the greater of (a) the amount of any
such bonus award actually granted to such employee with respect to such period,
and (b) the amount of the award, if any, that would have been granted to such
employee with respect to such period under the applicable incentive bonus plan
(if such employee was eligible for such plan at any time) as such plan was in
effect with respect to bonuses granted for the full year preceding the Initial
Year (the "Prior Year") and based upon such employee's target bonus for the
Prior Year (or the agreed-upon target bonus if such employee becomes eligible
for such plan thereafter). In making any calculation under Subsection (b) of
this paragraph with respect to any period, (x) such employee's personal
performance award level cannot be lower than the lower of (i) the limitation in
the plan, as in effect for the Prior Year, that ties such employee's personal
performance to the financial achievement award level for the Company and such
employee's division, if applicable, for that period, and (ii) such employee's
highest personal performance award level with respect to the three years prior
to the Initial Year, if such employee received any award with respect to such
years; (y) such employee's bonus with respect to any partial year of service
shall be a fraction of the bonus such employee would have received for the full
year, the numerator of which shall be the number of full and partial months of
service during such period and the denominator of which shall be 12; and (z) the
determination of Suburban's financial achievements shall be made without taking
into account any provision of such plan that gives discretion to any person to
increase or reduce such award, except to the extent that it is necessary to make
a discretionary change as a result of the occurrence of unusual circumstances
(e.g., a change in general accounting practices, a change in the accounting or
financing practices of Suburban or extraordinary charges or credits), and,
without such discretionary change, the targets or measures of Suburban's
financial performance would be distorted and thus the bonuses would be
inequitable. The determination of the necessity for such change, and the change
required, shall be based upon the opinion of Suburban's outside counsel or a
nationally recognized accounting firm selected by Suburban. Any bonus payable
under this paragraph with respect to any full year of service prior to the date
such employee loses his or her employment shall be made on or before 30 days
after such date, or the December 1st first occurring after such employee's last
full year of service, whichever is later; any such bonus with respect to a
partial year of service must be made on or before the March 1st first occurring
after the date such employee loses his or her employment.
An employee shall be deemed to have lost his or her employment if (a)
the employee's employment is terminated by Suburban or its successor (unless
such termination is due to willful malfeasance in office) or (b) the employee's
employment is terminated by the employee following (i) a diminution of the
employee's authority, duties, responsibilities or status, (ii) a reduction in
the employee's base annual salary or a failure to provide the employee with the
opportunity to participate, on terms no less favorable than those existing
immediately prior to the Change in Control, in any incentive bonus, savings,
pension or other employee benefit plan of Suburban in effect immediately prior
to the Change in Control (or plans and benefits which are, in the aggregate, no
less favorable to Change in Control) or (iii) a requirement, without the
employee's consent, that the employee be based more than 35 miles from his or
her present office location. The term "willful malfeasance in office" shall
require a finding with respect to the circumstances under consideration that the
employee did not act in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of Suburban.
For purposes of this Plan, the term "Change in Control" means:
(i) an acquisition (other than directly from the Partnership) of Common
Units, Subordinated Units or voting equity interests of the Partnership ("Voting
Securities") by any "Person" (as the term person is used for purposes of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than the Partnership, HM Holdings, Inc. or any of their affiliates
or successors, immediately after which such Person has "Beneficial Ownership"
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than twenty five percent (25%) of the combined voting power of the Partnership's
then outstanding Units; provided, however, that in determining whether a Change
of Control has occurred, Units which are acquired in a 'Non-Control Acquisition'
(as hereinafter defined) shall not constitute an acquisition which would cause a
Change of Control. A "Non-Control Acquisition" shall mean an acquisition by (i)
an employee benefit plan (or a trust forming a part thereof) maintained by (A)
Suburban Propane, L.P. or the Partnership or (B) any corporation, partnership or
other Person of which a majority of its voting power or its voting equity
securities or equity interest is owned, directly or indirectly, by the
Partnership (for purposes of this definition, a "Subsidiary"), (ii) the
Partnership or its Subsidiaries, or (iii) any Person in connection with a
"Non-Control Transaction" (as hereinafter defined);
(ii) approval by the partners of the Partnership of (A) a merger,
consolidation or reorganization involving the Partnership, unless (x) the
holders of Units immediately before such merger, consolidation or reorganization
own, directly or indirectly immediately following such merger, consolidation or
reorganization, at least sixty percent (60%) of the combined voting power of the
outstanding Units of the entity resulting from such merger, consolidation or
reorganization (the "Surviving Entity") in substantially the same proportion as
their ownership of the Units immediately before such merger, consolidation or
reorganization, and (y) no person or entity (other than the Partnership, any
Subsidiary, any employee benefit plan (or any trust forming a part thereof)
maintained by Suburban Propane, L.P., the Partnership, the Surviving Entity, or
any Person who, immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of more than twenty five percent (25%)
of the then outstanding Units), has Beneficial Ownership of more than twenty
five percent (25%) of the combined voting power of the Surviving Entity's then
outstanding voting securities; (B) a complete liquidation or dissolution of the
Partnership; or (C) the sale or other disposition of 50% or more of the net
assets of the Partnership to any Person (other than a transfer to a Subsidiary).
A transaction described in clauses (x) or (y) of subsection (A) hereof shall be
referred to as a "Non-Control Transaction;" or
(iii) A Qualified Owner or Qualified Owners (as defined below) not having,
in the aggregate, Beneficial Ownership of at least 50.1% of the capital stock of
the General Partner (by vote and value). For purposes of this Section 2.7,
"Qualified Owner" shall mean (a) Quantum Chemical Corporation, (b) SCM Chemicals
Inc. or (c) the publicly-traded person that owns (or that owned at any time
after March 5, 1996), directly or indirectly, 50.1% of the issued and
outstanding stock of Quantum Chemical Corporation or SCM Chemicals Inc.
Notwithstanding the foregoing, a Change of Control shall not be deemed
to occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting Securities
as a result of the acquisition of Voting Securities by the Partnership which, by
reducing the number of Voting Securities outstanding, increases the proportional
number of units Beneficially Owned by the Subject Person, provided that if a
Change of Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Partnership, and after
such acquisition by the Partnership, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change of Control shall occur.
Suburban shall also pay all legal fees and expenses incurred by an
eligible employee as a result of such employee's enforcement of any right or
benefit under this Plan, unless a court or arbitrator finds such employee's
challenge was without merit, in which case, Suburban and such employee shall
each bear their respective costs and expenses.
The Plan administrator and named fiduciary of this Plan shall be the
Benefits Administration Committee (the "Committee") of Suburban. The Committee
shall have absolute discretionary authority to determine eligibility for
benefits under the Plan and to otherwise construe the terms of the Plan. All
benefits under the Plan shall be paid out of the general assets of Suburban, and
no eligible employee shall have any interest in any specific asset of Suburban
as a result of participation in the Plan. The receipt of a benefit hereunder
shall not cause an eligible employee to be treated as an employee of the Company
for any purpose beyond the date of the eligible employee's actual termination of
employment. The Plan year shall be coincident with Suburban's fiscal year.
This Plan may be amended, modified or terminated by the Compensation
Committee of Suburban's Board of Supervisors except that any termination and any
adverse amendment or modification of this Plan shall not be effective for a
period of one year after written notice thereof has been circulated generally to
the participants in the Plan. If Suburban shall merge with or consolidate with
another corporation, or transfer, sell or lease all or substantially all of its
assets to another corporation or other entity, Suburban will require that such
successor entity assume the obligations of Suburban hereunder, and this Plan
shall be binding upon such entity whether or not expressly assumed by such
entity.
EXHIBIT 21.1
------------
SUBSIDIARIES OF SUBURBAN PROPANE PARTNERS, L.P.
Suburban Propane, L.P., a Delaware limited partnership
Suburban Sales & Service, Inc., a Delaware corporation
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the financial
statements contained in the body of the
accompanying Form 10-K and is qualified
in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-TYPE> 12-MOS
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-28-1996
<EXCHANGE-RATE> 1
<CASH> 18,931
<SECURITIES> 0
<RECEIVABLES> 58,333
<ALLOWANCES> 3,312
<INVENTORY> 40,173
<CURRENT-ASSETS> 120,692
<PP&E> 460,000
<DEPRECIATION> 85,987
<TOTAL-ASSETS> 807,424
<CURRENT-LIABILITIES> 101,826
<BONDS> 428,229
0
0
<COMMON> 0
<OTHER-SE> 164,679
<TOTAL-LIABILITY-AND-EQUITY> 807,424
<SALES> 707,946
<TOTAL-REVENUES> 707,946
<CGS> 377,692
<TOTAL-COSTS> 581,118
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,300
<INTEREST-EXPENSE> 17,171
<INCOME-PRETAX> 41,161
<INCOME-TAX> 28,294
<INCOME-CONTINUING> 12,867
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,867
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
