UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1996
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 16 OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from ______ to ______
Commission File Number: 1-14222
SUBURBAN PROPANE PARTNERS, L.P.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3410353
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
240 Route 10 West, Whippany, NJ 07981
- - --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
(201) 887-5300
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for each shorter period that the Registrant
was required to file such reports), and (2) had been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of March 30, 1996:
Suburban Propane Partners, L.P. - 21,562,500 Common Units
- 7,163,750 Subordinated Units
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO FORM 10-Q
Part 1 Financial Information Page
----
Item 1 - Financial Statements
Suburban Propane Partners, L.P. and Subsidiaries
------------------------------------------------
Condensed Consolidated Balance Sheet as of March 30, 1996 3
Condensed Consolidated Statement of Operations from
March 5, 1996 through March 30, 1996 4-5
Condensed Consolidated Statement of Cash Flows from
March 5, 1996 through March 30, 1996 6-7
Condensed Consolidated Statement of Partners' Capital
from March 5, 1996 through March 30, 1996 8
Notes to Condensed Consolidated Financial Statements 9-16
Suburban Propane division of Quantum Chemical Corporation
---------------------------------------------------------
(Predecessor)
-------------
Condensed Consolidated Balance Sheet as of 3
September 30, 1995
Condensed Consolidated Statement of
Operations from October 1, 1995
through March 4, 1996 and October 1, 1994
through April 1, 1995. 4-5
Condensed Consolidated Statement of
Cash Flows from October 1, 1995
through March 4, 1996 and October 1, 1994
through April 1, 1995. 6-7
Notes to Condensed Consolidated Financial Statements 9-16
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 17-20
Part 2 Other Information
Item 5 - Other 21
Item 6 - Exhibits and Reports on Form 8-K 21
Signatures 22
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
SEPTEMBER 30,
MARCH 30, 1995
1996 (PREDECESSOR)
--------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 90,594 $ 136
Accounts receivable, less allowance for
doubtful accounts of $122 and $3,162,
respectively 60,836 41,045
Inventories 27,122 36,663
Prepaid expenses and other current assets 6,118 1,002
------------ -------------
Total current assets 184,670 78,846
Property, plant and equipment, net 366,242 363,805
Net prepaid pension cost 46,049 44,713
Goodwill and other intangible assets 252,325 239,909
Other assets 9,281 9,186
------------ -------------
Total assets $ 858,567 $ 736,459
============ =============
LIABILITIES AND PARTNERS' CAPITAL/
PREDECESSOR EQUITY
Current liabilities:
Accounts payable $ 32,280 $ 22,298
Due to affiliate, net 36,175 -
Accrued employment and benefit costs 22,774 19,975
Accrued insurance 4,460 4,470
Customer deposits and advances 3,832 8,501
Other current liabilities 11,809 9,097
------------ ------------
Total current liabilities 111,330 64,341
Long-term debt 425,000 -
Postretirement benefits obligation 82,639 83,098
Accrued insurance 16,183 18,569
Other liabilities 12,017 12,216
------------ --------------
Total liabilities 647,169 178,224
Predecessor equity - 558,235
Partners' capital:
General partner 4,228 -
Limited partners' 207,170 -
------------ -------------
Total partners' capital/predecessor equity 211,398 558,235
------------ -------------
Total liabilities and partners' capital/
predecessor equity $ 858,567 $ 736,459
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
(unaudited)
December 30, 1995 December 30, 1995 December 30, 1994
through March 5, 1996 through through
March 4, 1996 through March 30, 1996 April 1, 1995
(Predecessor) March 30, 1996 (Combined) (Predecessor)
------------- --------------- ---------- -------------
<S> <C> <C> <C> <C>
Revenues
Propane $181,924 $ 61,929 $ 243,853 $ 202,655
Other 11,396 4,743 16,139 15,044
-------- -------- --------- ---------
193,320 66,672 259,992 217,699
Costs and expenses
Cost of sales 107,196 36,142 143,338 110,006
Operating 38,358 17,183 55,541 52,853
Depreciation and amortization 6,100 2,843 8,943 8,437
Selling, general and administrative expenses 5,751 1,567 7,318 5,506
Management fee 515 - 515 775
--------- -------- --------- ---------
157,920 57,735 215,655 177,577
Income before interest expense and income taxes 35,400 8,937 44,337 40,122
Interest expense - 1,985 1,985 -
--------- -------- --------- ---------
Income before provision for income taxes 35,400 6,952 42,352 40,122
Provision for income taxes 16,124 21 16,145 18,276
--------- -------- --------- ---------
Net income $ 19,276 $ 6,931 $ 26,207 $ 21,846
========= ======== ========= =========
General partner's interest in net income $ 139
---------
Limited partners' interest in net income $ 6,792
=========
Net income per Unit $ 0.24
=========
Weighted average number of Units outstanding 28,726
---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
(unaudited)
October 1, 1995 October 1, 1995 October 1, 1994
through March 5, 1996 through through
March 4, 1996 through March 30, 1996 April 1, 1995
(Predecessor) March 30, 1996 (Combined) (Predecessor)
-------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues
Propane $ 352,621 $ 61,929 $ 414,550 $ 367,555
Other 31,378 4,743 36,121 35,307
----------- ----------- ----------- -----------
383,999 66,672 450,671 402,862
Costs and expenses
Cost of sales 204,491 36,142 240,633 204,152
Operating 88,990 17,183 106,173 103,054
Depreciation and amortization 14,816 2,843 17,659 16,954
Selling, general and administrative expenses 12,616 1,567 14,183 11,406
Management fee 1,290 - 1,290 1,550
----------- ----------- ----------- -----------
322,203 57,735 379,938 337,116
Income before interest expense and income taxes 61,796 8,937 70,733 65,746
Interest expense, net - 1,985 1,985 -
----------- ----------- ----------- -----------
Income before provision for income taxes 61,796 6,952 68,748 65,746
Provision for income taxes 28,147 21 28,168 29,947
----------- ----------- ----------- -----------
Net income $ 33,649 $ 6,931 $ 40,580 $ 35,799
=========== =========== ============ ===========
General partner's interest in net income $ 139
-----------
Limited partners' interest in net income $ 6,792
===========
Net income per Unit $ 0.24
===========
Weighted average number of Units outstanding 28,726
-----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
December 30, 1995 December 30, 1995 December 30, 1994
through March 5, 1996 through through
March 4, 1996 through March 30, 1996 April 1, 1995
(Predecessor) March 30, 1996 (Combined) (Predecessor)
------------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net Income $ 19,276 $ 6,931 $ 26,207 $ 21,846
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 4,947 2,239 7,186 6,849
Amortization 1,153 604 1,757 1,588
(Gain) loss on disposal of property, plant and
equipment (62) (9) (71) 16
Changes in operating assets and liabilities, net
of acquistions and dispositions:
(Increase) decrease in accounts receivable (21,177) 36,852 15,675 3,782
Decrease in inventories 7,833 6,712 14,545 13,947
(Increase) decrease in prepaid expenses and
other current assets (653) (3,242) (3,895) 933
Increase (decrease) in accounts payable 337 647 984 (10,009)
Increase in due to affiliate -- 41,735 41,735 --
Increase in accrued employment and
benefit costs 4,643 496 5,139 1,025
Increase (decrease) in other accrued liabilities 201 1,563 1,764 (2,638)
Other noncurrent assets (1,199) (228) (1,427) 26
Deferred credits and other noncurrent liabilities (1,562) 318 (1,244) (2,199)
--------- --------- --------- ---------
Net cash provided by operating activities 13,737 94,618 108,355 35,166
--------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures (3,388) (2,428) (5,816) (6,626)
Acquistions (9,628) (1,947) (11,575) (736)
Proceeds from sale of property, plant and
equipment, net 443 146 589 1,333
--------- --------- --------- ---------
Net cash used for investing activities (12,573) (4,229) (16,802) (6,029)
--------- --------- --------- ---------
Cash flows from financing activities:
Cash activity with parent, net (1,078) -- (1,078) (28,943)
Proceeds from debt placement -- 425,000 425,000 --
Proceeds from offering-net -- 413,569 413,569 --
Debt placement and credit agreement expenses -- (6,224) (6,224) --
Cash distribution to general partner -- (832,345) (832,345) --
--------- --------- --------- ---------
Net cash used for financing activities (1,078) -- (1,078) (28,943)
--------- --------- --------- ---------
Net increase in cash 86 90,389 90,475 194
Cash and cash equivalents at beginning of period 119 205 119 78
--------- --------- --------- ---------
Cash and cash equivalents at end of period $ 205 $ 90,594 $ 90,594 $ 272
========= ========= ========= =========
</TABLE>
The accompanying notes are an intergral part of these condensed consolidated
financial statements.
6
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
October 1, 1995 October 1, 1995 October 1, 1994
through March 5, 1996 through through
March 4, 1996 through March 30, 1996 April 1, 1995
(Predecessor) March 30, 1996 (Combined) (Predecessor)
------------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net Income $ 33,649 $ 6,931 $ 40,580 $ 35,799
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 12,033 2,239 14,272 13,787
Amortization 2,783 604 3,387 3,167
Gain on disposal of property, plant and
equipment (85) (9) (94) (61)
Changes in operating assets and liabilities, net
of acquistions and dispositions:
(Increase) decrease in accounts receivable (56,643) 36,852 (19,791) (19,367)
Decrease in inventories 2,829 6,712 9,541 12,674
(Increase) decrease in prepaid expenses and
other current assets (1,874) (3,242) (5,116) 477
Increase (decrease) in accounts payable 9,335 647 9,982 (3,041)
Increase in due to affiliate -- 41,735 41,735 --
Increase (decrease) in accrued employment
and benefit costs 2,303 496 2,799 (5,219)
(Decrease) increase in other accrued liabilities (3,530) 1,563 (1,967) (6,997)
Other noncurrent assets (1,203) (228) (1,431) 230
Deferred credits and other noncurrent liabilities (3,362) 318 (3,044) (2,069)
--------- --------- --------- ---------
Net cash (used for) provided by operating
activities (3,765) 94,618 90,853 29,380
--------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures (9,796) (2,428) (12,224) (12,406)
Acquistions (13,172) (1,947) (15,119) (2,395)
Proceeds from sale of property, plant and
equipment, net 1,003 146 1,149 3,705
--------- --------- --------- ---------
Net cash used for investing activities (21,965) (4,229) (26,194) (11,096)
--------- --------- --------- ---------
Cash flows from financing activities:
Cash activity with parent, net 25,799 -- 25,799 (18,310)
Proceeds from debt placement -- 425,000 425,000 --
Proceeds from offering-net -- 413,569 413,569 --
Debt placement and credit agreement expenses -- (6,224) (6,224) --
Cash distribution to general partner -- (832,345) (832,345) --
--------- --------- --------- ---------
Net cash provided by (used for) financing
activities 25,799 -- 25,799 (18,310)
--------- --------- --------- ---------
Net increase (decrease) in cash 69 90,389 90,458 (26)
Cash and cash equivalents at beginning of period 136 205 136 298
--------- --------- --------- ---------
Cash and cash equivalents at end of period $ 205 $ 90,594 $ 90,594 $ 272
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
7
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(IN THOUSANDS)
(UNAUDITED)
Total
Number of Units General Partners'
Common Subordinated Common Subordinated Partner Capital
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 4, 1996 -- -- -- -- -- --
Contribution in connection
with formation of the
Partnership and issuance
of Common Units 21,562 7,164 $150,488 $ 49,890 $ 4,089 $204,467
Net income -- -- 5,101 1,691 139 6,931
---------------------------------------------------------------------------------------
Balance at March 30, 1996 21,562 7,164 $155,589 $ 51,581 $ 4,228 $211,398
=======================================================================================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
8
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. PARTNERSHIP ORGANIZATION AND FORMATION
--------------------------------------
Suburban Propane Partners, L.P. (the "Partnership") was formed on December 19,
1995 as a Delaware limited partnership. The Partnership and its subsidiary,
Suburban Propane, L.P. (the "Operating Partnership"), were formed to acquire and
operate the propane business and assets of the Suburban Propane Division of
Quantum Chemical Corporation (the "Predecessor Company"). In addition, Suburban
Sales & Service, Inc. (The "Service Company"), a subsidiary of the Operating
Partnership, was formed to acquire and operate the service work and appliance
and parts sales businesses of the Predecessor Company. The Partnership, the
Operating Partnership and the Service Company are collectively referred to
hereinafter as the "Partnership Entities". The Partnership Entities commenced
operations on March 5, 1996 (the "Closing Date"), upon consummation of an
initial public offering of 18,750,000 Common Units representing limited partner
interests in the Partnership (the "Common Units"), the private placement of
$425,000 aggregate principal amount of Senior Notes due 2011 issued by the
Operating Partnership (the "Senior Notes") and the transfer of all the propane
assets (excluding the net accounts receivable balance - See Note 3) of the
Predecessor Company to the Operating Partnership and the Service Company. On
March 25, 1996, the underwriters of the Partnership's initial public offering
exercised an overallotment option to purchase an additional 2,812,500 Common
Units. The Operating Partnership and Service Company are, and the Predecessor
Company was, engaged in the retail and wholesale marketing of propane and
related appliances and services.
Suburban Propane GP, Inc. (the "General Partner") is a wholly-owned subsidiary
of Quantum Chemical Corporation ("Quantum") and serves as the general partner of
the Partnership and the Operating Partnership. Both the General Partner and
Quantum are indirect wholly-owned subsidiaries of Hanson PLC ("Hanson"). The
General Partner holds a 1% general partner interest in the Partnership and a
1.0101% general partner interest in the Operating Partnership. In addition, the
General Partner owns a 24.4% limited partner interest in the Partnership. This
limited partner interest is evidenced by subordinated units representing limited
partner interests in the Partnership. The General Partner has delegated to the
Board of Supervisors all management powers over the business and affairs of the
Partnership Entities that the General Partner possesses under applicable law.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
Basis of Presentation. The condensed consolidated financial statements include
the accounts of the Partnership Entities. All significant inter-company
transactions and accounts have been eliminated . The accompanying condensed
consolidated financial statements are unaudited and have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. They include all adjustments which the Partnership considers
necessary for a fair statement of the
9
<PAGE>
results for the interim period presented. Such adjustments consisted only of
normal recurring items unless otherwise disclosed. These financial statements
should be read in conjunction with the Predecessor Company financial statements
contained in Amendment No. 4 to the Partnership's Form S-1 Registration
Statement (Registration No. 33-80605) filed with the Commission on February 28,
1996. Due to the seasonal nature of the Partnership's propane business, the
results of operations for interim periods are not necessarily indicative of the
results to be expected for a full year.
Fiscal Period. The Partnership's fiscal periods end on the last Saturday of the
quarter. Accordingly, the accompanying condensed consolidated results of
operations for the Partnership are for the period March 5, 1996 (date at which
Partnership operations commenced) to March 30, 1996.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents. The Partnership considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
Revenue Recognition. Sales of propane are recognized at the time product is
shipped or delivered to the customer. Revenue from the sale of propane
appliances and equipment is recognized at the time of sale or installation.
Revenue from repairs and maintenance is recognized upon completion of the
service.
Inventories. Inventories are stated at the lower of cost or market. Cost is
determined using a weighted average method for propane and a specific
identification basis for appliances.
Property, Plant and Equipment. Property, plant and equipment are stated at cost.
When plant and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the accounts and any gains or losses
are reflected in operations. Depreciation of property, plant and equipment is
computed using the straight-line method over the estimated service lives which
range from three to forty years.
Accumulated depreciation at March 30, 1996 and September 30, 1995 was $71,340
and $57,067, respectively.
Intangible assets. Intangible assets are comprised of the following at March 30,
1996:
Goodwill $259,618
Debt origination costs 6,224
Other, principally noncompete agreements 2,499
-----------
268,341
Less: Accumulated amortization 16,016
-----------
$252,325
===========
10
<PAGE>
Goodwill represents the excess of the purchase price over the fair market value
of net assets acquired and is being amortized on a straight-line basis over
forty years from the date of acquisition.
Debt origination costs represent the costs incurred in connection with the
placement of the $425,000 of Senior Notes (see Note 6) which is being amortized
on a straight-line basis over 15 years.
Income Taxes. As discussed in Note 1, the Partnership Entities consist of two
limited partnerships, the Partnership and the Operating Partnership, and one
corporate entity, the Service Company. For federal and state income tax
purposes, the earnings attributed to the Partnership and Operating Partnership
are included in the tax returns of the individual partners. As a result, no
recognition of income tax expense has been reflected in the Partnership's
consolidated financial statements relating to the earnings of the Partnership
and Operating Partnership. The earnings attributed to the Service Company are
subject to federal and state income taxes. Accordingly, the Partnership's
consolidated financial statements reflect income tax expense related to the
Service Company's earnings.
Net Income Per Unit. Net income per unit is computed by dividing net income,
after deducting the General Partner's 2% interest by the weighted average number
of outstanding Common Units and Subordinated Units.
Reclassifications: Certain prior period balances have been reclassified to
conform with the current period presentation.
3. DISTRIBUTIONS OF AVAILABLE CASH
-------------------------------
The Partnership will make distributions to its partners 45 days after the end of
each fiscal quarter in an aggregate amount equal to its Available Cash for such
quarter. Available Cash generally means all cash on hand at the end of the
fiscal quarter plus all additional cash on hand as a result of borrowings and
purchases of additional limited partner units (APUs) subsequent to the end of
such quarter less cash reserves established by the Board of Supervisors in its
reasonable discretion for future cash requirements. The Partnership has not made
a distribution to Unitholders for the partial fiscal quarter ended March 30,
1996. The Partnership expects to make a distribution with respect to the fiscal
quarter ending June 29, 1996 to holders of record as of July 26, 1996. The
minimum Quarterly Distribution and Target Distribution levels for said fiscal
quarter will be increased proportionately to reflect the fact that a
distribution was not made for the partial fiscal quarter ended March 30, 1996.
4. RELATED PARTY TRANSACTIONS
--------------------------
Pursuant to the Contribution, Conveyance and Assumption Agreement dated as of
March 4, 1996, between Quantum and the Partnership (the "Contribution
Agreement") Quantum retained ownership of the Predecessor Company's accounts
receivable, net of allowance for doubtful accounts, as of the Closing Date. The
Partnership retained from the net proceeds of the Common Unit offering cash in
an amount equal to the net book value of such accounts receivable. In accordance
with the Contribution Agreement, the Partnership has agreed to collect such
accounts receivable on behalf of Quantum which amounted to $97,700 as of the
Closing Date. As of March 30, 1996, the Operating Partnership had collected
$78,000 in accounts receivable and remitted $29,400 to Quantum, resulting in a
liability to Quantum of $48,600 as of March 30, 1996.
11
<PAGE>
At March 30, 1996, the Partnership's consolidated balance sheet reflects a
$36,200 payable due to Quantum (classified as "Due to affiliate, net")
representing the $48,600 of the Predecessor Company accounts receivable balances
collected but not yet remitted to Quantum as described above offset by $12,400
of amounts due from Quantum principally related to expenditures made by the
Partnership on behalf of Quantum related to the Partnership formation and a
closing price adjustment in accordance with the Contribution Agreement.
Pursuant to a Computer Services Agreement dated as of the Closing Date between
Quantum and the Partnership, Quantum permits the Partnership to utilize
Quantum's mainframe computer for the generation of customer bills, reports and
information regarding the Partnership's retail sales. For the partial fiscal
quarter ended March 30, 1996, the Partnership incurred expenses of $31 under the
Services Agreement.
Subsequent Event. During April 1996 and through May 6, 1996, the Operating
Partnership remitted $49,000 to Quantum relating to accounts receivable of the
Predecessor Company collected by the Partnership on behalf of Quantum .
5. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Partnership leases certain property, plant and equipment for various periods
under noncancelable leases. Rental expense under operating leases was $6,679 for
the six months ended March 30, 1996.
The Partnership is involved in various legal actions which have arisen in the
normal course of business including those relating to commercial transactions
and product liability. It is the opinion of management, based on the advice of
legal counsel, that the ultimate resolution of these matters will not have a
material adverse effect on the Partnership's financial position or future
results of operations.
6. LONG-TERM DEBT
--------------
On the Closing Date, the Operating Partnership issued $425,000 of Senior Notes
with an annual interest rate of 7.54%. The Operating Partnership's obligations
under the Senior Note Agreement are unsecured and will rank on an equal and
ratable basis with the Operating Partnership's obligations under the Bank Credit
Facilities discussed in Note 7 below. The Senior Notes will mature June 30,
2011, and require semiannual interest payments commencing June 30, 1996. The
Note Agreement requires that the principal be paid in equal annual payments of
$42,500 starting June 30, 2002.
The Senior Note Agreement contains various restrictive and affirmative covenants
applicable to the Operating Partnership, including (i) maintenance of certain
financial tests, (ii) restrictions on the incurrence of additional indebtedness,
and (iii) restrictions on certain liens, investments, guarantees, loans,
advances, payments, mergers, consolidations, distributions, sales of assets and
other transactions.
12
<PAGE>
7. BANK CREDIT FACILITIES
----------------------
The Bank Credit Facilities consist of a $100,000 acquisition facility
("Acquisition Facility") and a $75,000 working capital facility ("The Working
Capital Facility"). The Operating Partnership's obligations under the Bank
Credit Facilities are unsecured on an equal and ratable basis with the Operating
Partnership's obligations under the Senior Notes. The Bank Credit Facilities
will bear interest at a rate based upon either LIBOR, Chemical Bank's prime rate
or the Federal Funds effective rate plus 1/2 of 1% and in each case, plus a
margin. In addition, an annual fee (whether or not borrowings occur), is payable
quarterly ranging from 0.125% to 0.375% based upon certain financial tests. The
Credit Agreement governing the Acquisition Facility and Working Capital Facility
contains covenants generally similar to those contained in the Senior Note
Agreement.
The Working Capital Facility will expire on March 1, 1999. The Acquisition
Facility will expire on March 1, 2003. Any loans outstanding under the
Acquisition Facility after March 1, 1999 will require equal quarterly principal
payments over a four year period.
8. UNAUDITED PRO FORMA FINANCIAL INFORMATION
-----------------------------------------
The accompanying unaudited pro forma condensed consolidated statements of
operations for the three and six months ended March 30, 1996 and April 1, 1995
were derived from the historical statements of operations of the Predecessor
Company for the periods October 1, 1994 through April 1, 1995 and October 1,
1995 through March 4, 1996 and the condensed consolidated statement of
operations of the Partnership from March 5, 1996 through March 30, 1996. The pro
forma condensed consolidated statements of operations were prepared to reflect
the effects of Partnership formation as if it had been completed in its entirety
as of the beginning of the periods presented. However, these statements do not
purport to present the results of operations of the Partnership had the
partnership formation actually been completed as of the beginning of the periods
presented. In addition, the pro forma condensed consolidated statements of
operations are not necessarily indicative of the results of future operations of
the Partnership and should be read in conjunction with the historical condensed
consolidated financial statements of the Predecessor Company and the Partnership
appearing elsewhere in this Quarterly Report on Form 10-Q.
13
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 30 April 1
------------------------------
1996 1995
---- ----
Revenues
Propane $ 243,853 $ 202,655
Other 16,139 15,044
--------- ---------
259,992 217,699
Costs and Expenses
Cost of sales 143,338 110,006
Operating 55,541 52,853
Depreciation and amortization 8,943 8,437
Selling, general and administrative expenses 7,833 6,281
--------- ---------
215,655 177,577
Income before interest expenses and income taxes 44,337 40,122
Interest expense, net 7,781 8,175
Income before provision for income taxes 36,556 31,947
Provision for income taxes 63 63
--------- --------
Net income $ 36,493 $ 31,884
========= ========
General partner's interest in net income $730 $638
---- ----
Limited partners' interest in net income $35,763 $31,246
======= =======
Net income per Unit $1.24 $1.09
===== =====
Weighted average number of Units outstanding 28,726 28,726
====== ======
14
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended
March 30 April 1
---------------------------
1996 1995
---- ----
Revenues
Propane $ 414,550 $ 367,555
Other 36,121 35,307
--------- ---------
450,671 402,862
Costs and Expenses
Cost of sales 240,633 204,152
Operating 106,173 103,054
Depreciation and amortization 17,659 16,954
Selling, general and administrative expenses 15,473 12,956
--------- ---------
379,938 337,116
Income before interest expenses and income taxes 70,733 65,746
Interest expense, net 16,011 16,350
Income before provision for income taxes 54,722 49,396
Provision for income taxes 126 126
-------- ---------
Net income $ 54,596 $ 49,270
======== =========
General partner's interest in net income $1,092 $985
------ ----
Limited partners' interest in net income $53,504 $48,285
======= =======
Net income per Unit $1.86 $1.68
===== =====
Weighted average number of Units outstanding 28,726 28,726
====== ======
15
<PAGE>
9. UNAUDITED PRO FORMA FINANCIAL INFORMATION - CONTINUED
-----------------------------------------------------
Significant pro forma adjustments reflected in the above data include the
following:
1. For the three and six month periods ended March 30, 1996 and April 1, 1995,
the elimination of management fees paid by the Predecessor Company to HM
Holdings, Inc.
2. For the three and six month periods ended March 30, 1996 and April 1, 1995,
the addition of the estimated incremental general and administrative costs
associated with the partnership operating as a publicly traded partnership.
3. For the three and six month periods ended March 30, 1996 and April 1, 1995,
an adjustment to interest expense to reflect the interest expense
associated with the Senior Notes and Bank Credit facilities.
4. For the three and six month periods ended March 30, 1996, and April 1,
1995, the elimination of the provision for income taxes, as income taxes
will be borne by the Partners and not the Partnership, except for corporate
income taxes related to the Service Company.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 30, 1996
- - ---------------------------------
COMPARED TO THREE MONTHS ENDED APRIL 1, 1995
- - --------------------------------------------
REVENUES
Revenues increased 19.4% or $42.3 million to $260.0 million for the three months
ended March 30, 1996 as compared to $217.7 million for the three months ended
April 1, 1995. The overall increase is primarily attributable to higher retail
volumes as gallons increased 11.7% to 205.0 million gallons as compared to 183.5
million gallons for the three months ended April 1, 1995. Propane sold to
residential and commercial customers increased 11.4% or 14.6 million gallons due
to colder than normal temperatures in all sections of the country, except for
the West. Wholesale gallons increased 17.8% or 10.6 million gallons to 70.2
million gallons compared to 59.6 million in the prior period due to the colder
temperatures and higher demand resulting from low industry-wide inventory
levels. Revenues also increased due to higher retail and wholesale selling
prices necessitated by increased product costs.
GROSS PROFIT
Gross profit increased 8.3% or $9.0 million to $116.7 million for the three
months ended March 30, 1996 compared to $107.7 million in the prior period. The
increase in gross profit primarily resulted from higher retail propane volumes
partially offset by lower retail margins due to product cost increases which
were not fully passed on to retail customers.
OPERATING EXPENSES
Operating expenses increased 5.1% or $2.7 million to $55.6 million for the three
months ended March 30, 1996 as compared to $52.9 million for the three months
ended April 1, 1995. The increase in operating expenses is principally due to
higher retail and wholesale volumes and the severe weather conditions on the
East Coast, which resulted in higher delivery costs including payroll and
vehicle operating expenses coupled with higher equipment maintenance and fuel
costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, General and Administrative expenses increased 33% or $1.8 million to
$7.3 million for the three months ended March 30, 1996 compared to $5.5 million
for the three months ended April 1, 1995. Expenses increased due to higher
employee incentive costs, expenditures for employee training and new customer
satisfaction programs coupled with higher general and administrative costs
associated with operating as a publicly traded Partnership.
OPERATING INCOME AND EBITDA
Operating income increased 10.5% or $4.2 million to $44.3 million in the three
months ended March 30, 1996 compared to $40.1 million in the prior period.
EBITDA increased 9.7% or $4.7 million
17
<PAGE>
to $53.3 million. This increase is primarily attributable to the higher
volume of retail gallons sold partially offset by lower retail margins and an
increase in operating and administrative expenses. EBITDA should not be
considered as an alternative to net income (as an indicator of operating
performance) or as an alternative to cash flow (as a measure of liquidity or
ability to service debt obligations) but provides additional information for
evaluating the Partnership's ability to distribute the Minimum Quarterly
Distribution.
SIX MONTHS ENDED MARCH 30, 1996
- - -------------------------------
COMPARED TO SIX MONTHS ENDED APRIL 1, 1995
- - ------------------------------------------
REVENUES
Revenues increased 11.9% or $47.8 million to $450.7 million for the six months
ended March 30, 1996 as compared to $402.9 million for the six months ended
April 1, 1995. The overall increase is primarily attributable to higher retail
volumes as gallons increased 8.5% or 28.3 million gallons to 362.6 million
gallons as compared to 334.3 million gallons for the six months ended April 1,
1995. Propane sold to residential and commercial customers increased 10.0% or
22.5 million gallons due to colder than normal temperatures in all sections of
the country, except for the West. Wholesale gallons increased 3.6% or 4.2
million gallons to 120.6 million gallons compared to 116.4 million gallons in
the prior period due to the colder temperatures and higher demand resulting from
low industry-wide inventory levels. Revenues also increased due to higher retail
and wholesale selling prices necessitated by increased product costs.
GROSS PROFIT
Gross profit increased 5.7% or $11.3 million to $210.0 million for the six
months ended March 30, 1996 compared to $198.7 million in the prior period. The
increase in gross profit principally resulted from higher retail propane volumes
partially offset by lower retail margins resulting from increased product costs
which were not fully passed on to customers.
OPERATING EXPENSES
Operating expenses increased 3.0% or $3.1 million to $106.2 million for the six
months ended March 30, 1996 as compared to $103.1 million for the six months
ended April 1, 1995. Operating expenses increased due to higher delivery costs
associated with the higher volumes, higher maintenance and fuel costs and a $0.5
million non-recurring expense related to a fire at an underground storage
facility in November 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, General and Administrative expenses increased 24% or $2.8 million to
$14.2 million for the six months ended March 30, 1996 compared to $11.4 million
for the six months ended April 1, 1995. Expenses increased due to higher
employee incentive costs, expenditures for employee training, new customer
satisfaction programs and higher general and administrative costs associated
with operating as a publicly traded Partnership.
18
<PAGE>
OPERATING INCOME AND EBITDA
Operating income increased 7.6% or $5.0 million to $70.7 million in the six
months ended March 30, 1996 compared to $65.7 million in the prior period.
EBITDA increased 6.9% or $5.7 million to $88.4 million. This increase is
primarily attributable to the higher volume of retail gallons sold partially
offset by lower retail margins and an increase in operating and general and
administrative expenses. EBITDA should not be considered as an alternative to
net income (as an indicator of operating performance) or as an alternative to
cash flow (as a measure of liquidity or ability to service debt obligations) but
provides additional information for evaluating the Partnership's ability to
distribute the Minimum Quarterly Distribution.
LIQUIDITY AND CAPITAL RESOURCES
Due to the seasonal nature of the propane business, cash flows from operating
activities are greater during the winter and spring seasons as customers pay for
propane purchased during the heating season. For the three months ended March
30, 1996, net cash provided by operating activities increased $73.2 million to
$108.4 million compared to $35.2 million in the three months ended April 1,
1995. The increase was primarily attributable to an additional $60.5 million of
net cash provided from accounts receivable activity including the Predecessor
Company accounts receivable and subsequent collections by the Partnership of
said retained receivables in excess of cash remitted to Quantum. In addition,
accounts payable increased by $11.0 million reflecting an increase in the cost
and volume of gallons sold.
Net cash used in investing activities was $16.8 million for the three months
ended March 30, 1996 consisting of capital expenditures of $5.8 million and
acquisition payments of $11.6 million, offset by proceeds from the sale of
property, plant and equipment of $ .6 million. Net cash used in investing
activities was $6.0 million for the three months ended April 1, 1995 consisting
of capital expenditures of $6.6 million and acquisition payments of $0.7
million, offset by proceeds from the sale of property, plant and equipment of
$1.3 million. The increase in cash used for acquisition activities of $10.9
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 the six months ended March 30, 1996, net cash provided by operating
activities increased $61.5 million to $90.9 million compared to $29.4 million
for six months ended April 1, 1995. The increase is primarily attributable to an
increase in "Due to affiliate, net" of $41.7 million principally reflecting the
collection of Predecessor Company accounts receivable on behalf of Quantum
discussed above and an increase in accounts payable of $13.0 million due to an
increase in the cost and volume of propane sold.
Net cash used in investing activities was $26.2 million for the six months ended
March 30, 1996, reflecting $12.2 million in capital expenditures and $15.1
million of payments for acquisitions offset by net proceeds of $1.1 million from
the sale of property, plant and equipment. Net cash used in investing activities
was $11.0 million for the six months ended April 1, 1995, consisting of capital
expenditures of $12.4 million and acquisition payments of $2.4 million, offset
by proceeds from the sale of property and equipment of $3.7 million.
19
<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 the Predecessor Company were received or funded by HM
Holdings. Net cash used by financing activities which are reflected as a
decrease in division invested capital, was $1.1 million during the three months
ended March 30, 1996 compared to $28.9 million in the prior period. Net cash
provided by financing activities, which are reflected as a increase in division
invested capital, was $25.8 million for the six months ended March 30, 1996
compared to $18.3 million of net disbursements (reduction of division invested
capital) in 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 Units issuance (which totals $832.4 million), less
$5.6 million reflecting a closing price adjustment to adjust division invested
capital to $623.2 million immediately prior to the Partnership formation and
$97.7 million reflecting the retention of the Predecessor Company net accounts
receivable by Quantum, was used to acquire the propane assets from Quantum, pay
off the intercompany payables and make a special distribution to the General
Partner.
The Partnership will make distributions in an amount equal to all of its
Available Cash approximately 45 days after the end of each fiscal quarter to
holders of record on the applicable record dates. The first distribution is
scheduled to occur on August 13, 1996 and reflect distributions for the period
March 5, 1996 through June 29, 1996.
20
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
PART II
ITEM 5. OTHER INFORMATION - NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule
(99) Press Release, dated March 28, 1996, regarding the
appointment of Harold R. Logan, Jr. as an elected Supervisor
of the Board of Supervisors.
(B) Form 8-K
On April 27, 1996, the Partnership filed a Form 8-K
reporting on Other Events relating to the Partnership's
initial public offering of the Common Units and the
Operating Partnership's private placement of the Senior
Notes and for the purpose of filing certain Exhibits
relating to said transactions.
21
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1934, THE REGISTRANT HAS
CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED:
SUBURBAN PROPANE PARTNERS, L.P.
DATE: MAY 13, 1996 BY /s/ CHARLES T. HOEPPER
---------------------------------------
CHARLES T. HOEPPER
VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND
CHIEF ACCOUNTING OFFICER
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
(27) Financial Data Schedule
(99) Press Release, dated March 28, 1996, regarding the
appointment of Harold R. Logan, Jr. as an elected Supervisor
of the Board of Supervisors.
23
<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-Q and is qualified in its
entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-30-1996
<CASH> 90,594
<SECURITIES> 0
<RECEIVABLES> 60,958
<ALLOWANCES> 122
<INVENTORY> 27,122
<CURRENT-ASSETS> 184,670
<PP&E> 437,582
<DEPRECIATION> 71,340
<TOTAL-ASSETS> 858,567
<CURRENT-LIABILITIES> 111,330
<BONDS> 425,000
0
0
<COMMON> 0
<OTHER-SE> 211,398
<TOTAL-LIABILITY-AND-EQUITY> 858,567
<SALES> 450,671
<TOTAL-REVENUES> 450,671
<CGS> 240,633
<TOTAL-COSTS> 346,806
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 122
<INTEREST-EXPENSE> 1,985
<INCOME-PRETAX> 68,748
<INCOME-TAX> 28,168
<INCOME-CONTINUING> 40,580
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,580
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
SUBURBAN PROPANE
One Suburban Plaza * 240 Route 10 West * P.O. Box 206 * Whippany, NJ 07981-0206
Office 201-887-5300
Contact: Mark Alexander
Executive Vice Chairman
Suburban Propane Partners, L.P.
201-887-5300
For Immediate Release
---------------------
SUBURBAN PROPANE PARTNERS ELECTS HAROLD R. LOGAN, JR. TO
--------------------------------------------------------
BOARD OF SUPERVISORS
--------------------
Whippany, New Jersey - March 28, 1996 - Suburban Propane Partners, L.P.,
(NYSE:SPH) announced today that Harold R. Logan, Jr. has been elected to the
Company's Board of Supervisors.
Mr. Logan, 51, is Executive Vice President, Chief Financial Officer and a
director of Denver-based TransMontaigne Oil Company. TransMontaigne is engaged
in the marketing and distribution of gasoline, jet fuel and natural gas.
Previously, Mr. Logan served as Senior Vice President of Finance and as a
director of Associated Natural Gas Corporation, an independent gatherer and
marketer of natural gas, natural gas liquids and crude oil, which was acquired
by Panhandle Eastern Corporation in 1994.
Mark A. Alexander, Suburban Propane's Executive Vice Chairman, in making the
announcement said, "We are very pleased that Hal Logan has agreed to serve as an
Elected Supervisor on our Board. We will benefit significantly from Hal's
diverse and extensive hands-on management experience in the energy industry as
we enter new markets."
Suburban Propane Partners is one of the country's leading propane gas companies
and is engaged in the retail and wholesale marketing of propane in the United
States. The Company's Master Limited Partnership Units began trading on the New
York Stock Exchange on February 29, 1996.
# # #
